Exhibit 10.21
HEALTH SCIENCES GROUP, INC.
NEITHER THIS WARRANT NOR THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, PLEDGED OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SECURITIES UNDER THE ACT OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
Warrant Date:
2,000,000 Shares August 1, 2003
HEALTH SCIENCES GROUP, INC.
WARRANT CERTIFICATE
HEALTH SCIENCES GROUP, INC., a Colorado corporation ("HEALTH SCIENCES
GROUP, INC."), certifies that, for value received, Blue and Gold Enterprises,
LLC., or registered assigns (the "Holder"), is the owner of a Warrant of HEALTH
SCIENCES GROUP, INC. (the "Warrant"). The Warrant entitles the Holder to
purchase from HEALTH SCIENCES GROUP, INC. at any time prior to the Expiration
Date (as defined below) up to 2,000,000 shares of Common Stock of HEALTH
SCIENCES GROUP, INC. This Warrant is issued pursuant to a Consulting Agreement
of even date, between Xxxxxx Xxxxxx and HEALTH SCIENCES GROUP, INC. The exercise
price for the Warrant shall range from $1.25 to $2.75 per share of Common Stock
(the "Exercise Price"), in tranches pursuant to the vesting formula set forth
below .
1
Vesting; Expiration Date; Exercise
Vesting. The Warrant granted hereunder shall be subject to vesting, i.e., become
exercisable by satisfying the following Performance Benchmarks as a condition to
the vesting or exercisability of the Warrant, assuming Xxxxxx Xxxxxx is
rendering his services under his Consulting Agreement as of the vesting dates:
(a) First Tranche of Warrant at $1.25. The Warrant for
500,000 shares shall be exercisable at a price of
$1.25 per share, and shall vest, i.e., become
exercisable free of forfeiture, after Xxxxxx Xxxxxx
has continuously served in his capacity as advisor or
member of the Board of Health Sciences Group, Inc.
("HESG") under his Consulting Agreement for a period
of 90 days from the date of his Consulting Agreement
and Xxxxx Xxxxx under his Employment Agreement with
HESG dated as of August 11, 2003 ("Employment
Agreement") completed the Operational Plan as
provided in the Employment Agreement for Quality
Botanical Ingredients, Inc. ("QBI") to the approval
of the Board, within 90 days of the date of his
Employment Agreement.
(b) Second Tranche of Warrant at $1.75. The Warrant for
up to 500,000 shares shall be exercisable at a price
of $1.75 per share, and shall vest to the extent of
achievement of the QBI operating income milestones
for the quarter ended December 31, 2003, as follows:
if QBI's operating income for the quarter is at least
$125,000, Warrants for 125,000 shares shall vest and
thereafter, for each increment of $25,000 of QBI
operating income for the quarter an additional
125,000 Warrants for shares shall vest until a
maximum of 500,000 Warrants exercisable at $1.75 per
share shall vest, if the QBI operating income reaches
$200,000 for the quarter. Operating income increments
of less than $25,000 shall be rounded up or down to
the nearest $25,000 number.
(c) Warrant at $2.25.
(i) Third Tranche of the Warrant for shares
shall vest and be exercisable at $2.25 per
share in amounts which correspond to the
applicable percentage of revenue growth for
HESG for the year ended December 31, 2004
over the prior year as shown in the
following table:
Percentage Year Over Year Revenue Growth for 2004
-----------------------------------------------------------------------
7% 11% 15% 19% 23%
------------ ------------- ------------- ------------ -------------
Number Vested 20,000 30,000 40,000 50,000 60,000
Cumulative Vested 20,000 50,000 90,000 140,000 200,000
Revenue growth percentages in between the
percentage numbers set forth in the table
shall be rounded up or down to the next
nearest number in the table.
(ii) Fourth Tranche of the Warrant for shares
shall vest and be exercisable at $2.25 per
share in amounts which correspond to the
applicable operating income percentage of
revenue ("Operating Margin") for the year
ended 2004 for HESG, as shown in the
following table:
Percentage Operating Margin for 2004
-----------------------------------------------------------------------
4% 5% 6% 7% 8%
------------ ------------- ------------- ------------ -------------
Number Vested 40,000 50,000 60,000 70,000 80,000
Cumulative Vested 40,000 90,000 150,000 220,000 300,000
(d) WARRANT AT $2.75.
(i) Fifth Tranche of the Warrant for shares
shall vest and be exercisable at $2.75 per
share in amounts which correspond to the
applicable percentage of revenue growth for
HESG for the year ended December 31, 2005
over the prior year as shown in the
following table:
Percentage Year Over Year Revenue Growth for 2005
-----------------------------------------------------------------------
11% 14% 17% 20% 23%
------------ ------------- ------------- ------------ -------------
Number Vested 20,000 30,000 40,000 50,000 60,000
Cumulative Vested 20,000 50,000 90,000 140,000 200,000
Revenue growth percentages in between the percentage
numbers set forth in the table shall be rounded up or
down to the next nearest number in the table.
(ii) Sixth Tranche of the Warrants for shares shall vest
and be exercisable at $2.75 per share in amounts
which correspond to the applicable operating income
percentage of revenue ("Operating Margin") for the
year ended 2005 for HESG, as shown in the following
table:
Percentage Operating Margin for 2005
-----------------------------------------------------------------------
8% 9% 10% 11% 12%
------------ ------------- ------------- ------------ -------------
Number Vested 40,000 50,000 60,000 70,000 80,000
Cumulative Vested 40,000 90,000 150,000 220,000 300,000
For purposes of the Performance Benchmarks set forth in this Section 1.1, salary
increases and bonuses to Xxxx Xxxxxxx and Xxxx Xxxxxx in amounts in excess of
current salary and the expensing of stock options shall not be deemed charges
against income in determining operating margin, nor shall non-recurring charges
such as inventory write-downs or corporate overhead charges from the Company to
QBI for the QBI 12/31/03 milestone set forth in (b) above.
(e) OTHER ACCELERATING EVENTS AND REDEMPTION OF WARRANTS.
(i) Provided Xxxxxx Xxxxxx has continuously
rendered the services required under his
Consulting Agreement up to the date of the
occurrence of an Accelerating Event, as
defined below in this subsection (i),
500,000 shares shall vest and be exercisable
at $1.25 per share, and 500,000 shares shall
vest and become exercisable at $1.75 per
share, regardless of the non-achievement of
the Performance Benchmarks, if HESG's Common
Stock trades at a closing price as reported
in the OTC market or on a National
Securities Exchange, as applicable, at $3.00
per share or higher for 5 consecutive
trading days at an average volume of 100,000
shares per day over the 5 day period
("Accelerating Event"), in which case
(assuming HESG is then current under all of
its reporting obligations under the
Securities Exchange Act of 1934 for the 90
day period) HESG shall have the right to
redeem the Warrant for these 1,000,000
shares at $.01 per share, if Holder has not
exercised the Warrant for these 1,000,000
shares within 90 days of written notice of
redemption provided to him by HESG, and
provided that a registration statement as to
the shares underlying the Warrant is in
effect.
(ii) Provided Xxxxxx Xxxxxx has continuously
rendered the services required under his
Consulting Agreement up to the date of the
occurrence of an Accelerating Event, as
defined below in this subsection (ii),
500,000 shares shall vest and be exercisable
at $2.25 per share and 500,000 shares shall
vest and be exercisable at $2.75 per share,
regardless of the non-achievement of the
Performance Benchmarks if the HESG Common
Stock trades at a closing price as reported
in the OTC Market or on a National
Securities Exchange, as applicable, at $4.00
per share or higher for 5 consecutive
trading days at an average volume of 100,000
shares per day over the 5 day period
("Accelerating Event"), in which case
(assuming HESG is then current under all of
its reporting obligations under the
Securities Exchange Act of 1934 for the 90
day period) HESG shall have the right to
redeem the Warrant for these 1,000,000
shares for $.01 per share, if Holder has not
exercised the Warrant for these 1,000,000
shares within 90 days of written notice of
redemption provided to him by HESG, and
provided that a registration statement as to
the shares underlying the Warrant is in
effect.
Expiration Date. The Warrant shall expire on three (3) years from date or dates
(the "Expiration Date,") of the vesting of the respective Warrant tranches as
set forth in paragraph 1.1 above. After the Expiration Date(s), the Warrant
shall expire and be of no further force or effect.
Manner of Exercise. The Warrant is exercisable by delivery to HEALTH SCIENCES
GROUP, INC. of the following (the "Exercise Documents"): (a) this Certificate
(b) a written notice of election to exercise the Warrant; and (c) payment of the
Exercise Price in cash, by check in good funds, or by wire. Within 10 days
following receipt of the foregoing, HEALTH SCIENCES GROUP, INC. shall execute
and deliver to the Holder: (a) a certificate or certificates representing the
aggregate number of shares of Common Stock purchased by the Holder, and (b) if
less than all of the shares covered by the Warrant evidenced by this Certificate
is exercised, a new certificate evidencing the Warrant not so exercised shall be
provided to Holder.
Adjustments of Exercise Price and Number and Kind of Conversion Shares
In the event that HEALTH SCIENCES GROUP, INC. shall at any time hereafter (a)
pay a dividend in Common Stock or securities convertible into Common Stock; (b)
subdivide or split its outstanding Common Stock; (c) combine its outstanding
Common Stock into a smaller number of shares; (d) spin-off to its shareholders a
subsidiary or operating-business unit; then the number of shares to be issued
immediately after the occurrence of any such event shall be adjusted so that the
Holder thereafter may receive the number of shares of Common Stock or the
equivalent value it would have owned immediately following such action if it had
exercised the Warrant immediately prior to such action and the Exercise Price
shall be adjusted to reflect such proportionate increases or decreases in the
number of shares.
In case of any reclassification of the outstanding shares of Common Stock (other
than a change covered by Section 2.1 hereof or a change which solely affects the
par value of such shares) or in the case of any merger or consolidation or
merger in which HEALTH SCIENCES GROUP, INC. is not the continuing corporation
and which results in any reclassification or capital reorganization of the
outstanding shares), the Holder shall have the right thereafter (until the
Expiration Date) to receive upon the exercise hereof, for the same aggregate
Exercise Price payable hereunder immediately prior to such event, the kind and
amount of shares of stock or other securities or property receivable upon such
reclassification, capital reorganization, merger or consolidation, by a Holder
of the number of shares of Common Stock obtainable upon the exercise of the
Warrant immediately prior to such event; and if any reclassification also
results in a change in shares covered by Section 2.1, then such adjustment shall
be made pursuant to both this Section 2.2 and Section 2.1. The provisions of
this Section 2.2 shall similarly apply to successive reclassifications, capital
reorganizations and mergers or consolidations, sales or other transfers.
Transfer. Subject to compliance with applicable securities laws, the Warrant is
transferable on the books of HEALTH SCIENCES GROUP, INC. maintained for such
purpose by HEALTH SCIENCES GROUP, INC. in person, or by duly authorized
attorney, upon surrender of this Certificate properly endorsed and upon payment
of any necessary transfer tax or other governmental charge imposed upon such
transfer. If less than all of the Warrant evidenced by this Certificate is
transferred, HEALTH SCIENCES GROUP, INC. will, upon transfer, execute and
deliver to the Holder a new certificate evidencing the Warrant not so
transferred.
Reservation of Shares. HEALTH SCIENCES GROUP, INC. shall at all times reserve
and keep available out of its authorized but unissued shares of Common Stock,
such number of shares of Common Stock as shall from time to time be issuable
upon exercise of the Warrant. If at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to permit the exercise
of the Warrant, HEALTH SCIENCES GROUP, INC. shall promptly seek such corporate
action as may necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
Certificate as to Adjustments. In each case of any adjustment in the Exercise
Price, or number or type of shares issuable upon exercise of the Warrant, the
Chief Financial Officer of HEALTH SCIENCES GROUP, INC. shall compute such
adjustment in accordance with the terms of the Warrant and prepare a certificate
setting forth such adjustment and showing in detail the facts upon which such
adjustment is based, including a statement of the adjusted Exercise Price.
HEALTH SCIENCES GROUP, INC. shall promptly send (by facsimile and by either
first class mail, postage prepaid or overnight delivery) a copy of each such
certificate to the Holder.
Loss or Mutilation. Upon receipt of evidence reasonably satisfactory to HEALTH
SCIENCES GROUP, INC. of the ownership of and the loss, theft, destruction or
mutilation of this Certificate, and of indemnity reasonably satisfactory to it,
and (in the case of mutilation) upon surrender and cancellation of the Warrant,
HEALTH SCIENCES GROUP, INC. will execute and deliver in lieu thereof a new
Certificate of like tenor as the lost, stolen, destroyed or mutilated
Certificate.
Representations and Warranties of HEALTH SCIENCES GROUP, INC.. HEALTH SCIENCES
GROUP, INC. hereby represents and Warrant to Holder that:
Due Authorization. All corporate action on the part of HEALTH SCIENCES GROUP,
INC., its officers, directors and shareholders necessary for (a) the
authorization, execution and delivery of, and the performance of all obligations
of HEALTH SCIENCES GROUP, INC. under this Warrant, and (b) the authorization,
issuance, reservation for issuance and delivery of all of the Common Stock
issuable upon exercise of this Warrant, has been duly taken. This Warrant
constitute a valid and binding obligation of HEALTH SCIENCES GROUP, INC.
enforceable in accordance with their terms, subject, as to enforcement of
remedies, to applicable bankruptcy, insolvency, moratorium, reorganization and
similar laws affecting creditors' rights generally and to general equitable
principles.
Organization. HEALTH SCIENCES GROUP, INC. is a corporation duly organized,
validly existing and in good standing under the laws of the State referenced in
the first paragraph of this Certificate and has all requisite corporate power to
own, lease and operate its property and to carry on its business as now being
conducted and as currently proposed to be conducted.
Valid Issuance of Stock. Any shares of Common Stock issued upon exercise of this
Warrant will be duly and validly issued, fully paid and non-assessable.
Governmental Consents. All consents, approvals, orders, authorizations or
registrations, qualifications, declarations or filings with any federal or state
governmental authority on the part of HEALTH SCIENCES GROUP, INC. required in
connection with the consummation of the transactions contemplated herein have
been obtained.
Notices of Record Date.
In case:
HEALTH SCIENCES GROUP, INC. shall take a record of the holders of its Common
Stock (or other stock or securities at the time receivable upon the exercise of
this Warrant), for the purpose of entitling them to receive any dividend or
other distribution, or any right to subscribe for or purchase any shares of
stock of any class or any other securities or to receive any other right; or
of any consolidation or merger of HEALTH SCIENCES GROUP, INC. with or into
another corporation, any capital reorganization of HEALTH SCIENCES GROUP, INC.,
any reclassification of the capital stock of HEALTH SCIENCES GROUP, INC., or any
conveyance of all or substantially all of the assets of HEALTH SCIENCES GROUP,
INC. to another corporation in which holders of HEALTH SCIENCES GROUP, INC.'s
stock are to receive stock, securities or property of another corporation; or of
any voluntary dissolution, liquidation or winding-up of HEALTH SCIENCES GROUP,
INC.; or
of any redemption or conversion of all outstanding Common Stock; then, and in
each such case, HEALTH SCIENCES GROUP, INC. will mail or cause to be mailed to
the Holder a notice specifying, as the case may be, (a) the date on which a
record is to be taken for the purpose of such dividend, distribution or right,
or (b) the date on which such reorganization, reclassification, consolidation,
merger, conveyance, dissolution, liquidation, winding-up, redemption or
conversion is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock or (such stock or securities as at the
time are receivable upon the exercise of this Warrant), shall be entitled to
exchange their shares of Common Stock (or such other stock or securities), for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation or
winding-up. HEALTH SCIENCES GROUP, INC. shall use all reasonable efforts to
ensure such notice shall be delivered at least 15 days prior to the date therein
specified.
Severability. If any term, provision, covenant or restriction of the Warrant is
held by a court of competent jurisdiction to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions of the
Warrant shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
Notices. All notices, requests, consents and other communications required
hereunder shall be in writing and by first class mail or by registered or
certified mail, postage prepaid, return receipt requested, and (other than in
connection with the exercise of the Warrant) shall be deemed to have been duly
made when received or, if sent registered or certified mail, postage prepaid,
return receipt requested, on the third day following deposit in the mails: if
addressed to the Holder, at the last address of such Holder on the books of
HEALTH SCIENCES GROUP, INC.; and if addressed to HEALTH SCIENCES GROUP, INC. at
0000 Xxxxxx Xxxxx, 0xx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000 or such other
address as HEALTH SCIENCES GROUP, INC. may designate in writing.
No Rights as Shareholder. The Holder shall have no rights as a shareholder of
HEALTH SCIENCES GROUP, INC. with respect to the shares issuable upon exercise of
the Warrant until the receipt by HEALTH SCIENCES GROUP, INC. of all of the
Exercise Documents. Except as may be provided by Section 2 of this Certificate,
no adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date HEALTH SCIENCES GROUP, INC. receives all of
the Exercise Documents.
HEALTH SCIENCES GROUP, INC.
By: __________________________________
_________________________Officer
EXHIBIT "A"
NOTICE OF EXERCISE
(To be signed only upon exercise of the Warrant)
To: HEALTH SCIENCES GROUP, INC.
The undersigned hereby elects to purchase shares of Common Stock (the
"Warrant Shares") of HEALTH SCIENCES GROUP, INC. ("HEALTH SCIENCES GROUP,
INC."), pursuant to the terms of the enclosed warrant certificate (the
"Certificate"). The undersigned tenders herewith payment of the exercise price
pursuant to the terms of the Certificate.
The undersigned hereby represents and Warrant to, and agrees with, HEALTH
SCIENCES GROUP, INC. as follows:
1. Holder is acquiring the Warrant Shares for its own account, for
investment purposes only.
2. Holder understands that an investment in the Warrant Shares involves
a high degree of risk, and Holder has the financial ability to bear the economic
risk of this investment in the Warrant Shares, including a complete loss of such
investment. Holder has adequate means for providing for its current financial
needs and has no need for liquidity with respect to this investment.
3. Holder has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of an investment
in the Warrant Shares and in protecting its own interest in connection with this
transaction.
4. Holder understands that the Warrant Shares have not been registered
under the Securities Act or under any state securities laws. Holder is familiar
with the provisions of the Securities Act and Rule 144 thereunder and
understands that the restrictions on transfer on the Warrant Shares may result
in Holder being required to hold the Warrant Shares for an indefinite period of
time.
5. Holder agrees not to sell, transfer, assign, gift, create a security
interest in, or otherwise dispose of, with or without consideration
(collectively, "Transfer") any of the Warrant Shares except pursuant to an
effective registration statement under the Securities Act or an exemption from
registration. As a further condition to any such Transfer, except in the event
that such Transfer is made pursuant to an effective registration statement under
the Securities Act, if in the reasonable opinion of counsel to HEALTH SCIENCES
GROUP, INC. any Transfer of the Warrant Shares by the contemplated transferee
thereof would not be exempt from the registration and prospectus delivery
requirements of the Securities Act, HEALTH SCIENCES GROUP, INC. may require the
contemplated transferee to furnish HEALTH SCIENCES GROUP, INC. with an
investment letter setting forth such information and agreements as may be
reasonable requested by HEALTH SCIENCES GROUP, INC. to ensure compliance by such
transferee with the Securities Act.
Each certificate evidencing the Warrant Shares will bear the following
legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY APPLICABLE STATE SECURITIES LAWS
AND MAY NOT BE EXERCISED, SOLD, PLEDGED OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE ACT OR UNLESS AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
Number of Warrant Exercised: ______________
Net Exercise ____ Yes ___ No
Dated:
[Name]
