EXHIBIT 4.2
Medical Science Systems, Inc.
Warrant
Dated: June 15, 1999
THIS CERTIFIES THAT Fine Equities, Inc. (herein sometimes called the
"Holder") is entitled to purchase from Medical Science Systems, Inc., a Texas
corporation (hereinafter called the "Company"), at the prices and during the
periods as hereinafter specified, up to one million (1,000,000) shares of the
Company's common stock, no par value per share ("Common Stock"). This Warrant
(the "Warrant" and, together with any successor warrants, the "Warrants") is
exercisable at an exercise price of $0.50 per share, subject to adjustment, at
any time from the first anniversary of the date hereof until June 15, 2004. This
issuance of this Warrant shall cancel and supersede that certain Warrant, dated
June 15, 1999, to purchase up to 756,000 shares of the Company's Common Stock at
an exercise price of $0.50 per share.
This Warrant to purchase 1,000,000 shares of Common Stock, subject to
adjustment in accordance with Section 8 of this Warrant (the "Warrant Shares"),
was originally issued pursuant to an agency agreement among the Company and Fine
Equities, Inc. as placement agent (the "Placement Agent") in connection with a
private offering (the "Offering") of shares of Series of A Preferred Stock, no
par value per share ("Series A Preferred Stock"), through the Placement Agent,
in consideration of $100.00 received for the Warrant.
Except as specifically otherwise provided herein, the Common Stock
issuable upon exercise of the Warrant shall be the same class of Common Stock as
the currently outstanding Common Stock of the Company and the Common Stock
issuable upon conversion of the Series A Preferred Stock as described in the
Confidential Private Placement Memorandum, dated June 15, 1999, and any
supplements thereto, except that the holder shall have registration rights under
the Securities Act of 1933, as amended (the "Act"), for the Warrant Shares as
more fully described in Section 6 of this Warrant. The Company will list the
Warrant Shares on the Nasdaq SmallCap Market and/or such other exchange or
market as the Common Stock may then be listed or quoted prior to exercise of the
Warrant.
1. The rights represented by this Warrant shall be exercised at the
prices, subject to adjustment in accordance with Section 8 of this Warrant ("the
"Exercise Price"), and during the periods as follows:
(a) Between June 15, 2000 and June 15, 2004 inclusive, the Holder
shall have the option to purchase Warrant Shares hereunder at a price of $0.50
per share. For purposes of the adjustments under Section 8 hereof, the Per Share
Exercise Price shall be deemed to be $0.50, subject to further adjustment as
provided in such Section 8; and
(b) After June 15, 2004 the Holder shall have no right to purchase
any Warrant Shares hereunder.
2. (a) The rights represented by this Warrant may be exercised at any time
within the period above specified, in whole or in part, by (i) the surrender of
this Warrant (with the purchase form at the end hereof properly executed) at the
principal executive office of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the Holder at the address of
the Holder appearing on the books of the Company); and (ii) payment to the
Company of the exercise price then in effect for the number of Warrant Shares
specified in the above-mentioned purchase form together with applicable stock
transfer taxes, if any. This Warrant shall be deemed to have been exercised, in
whole or in part to the extent specified, immediately prior to the close of
business on the date this Warrant is surrendered and payment is made in
accordance with the foregoing provisions of this Section 2, and the person or
persons in whose name or names the certificates for Warrant Shares shall be
issuable upon such exercise shall become the holder or holders of record of such
Warrant Shares at that time and date. The certificates for the
Warrant Shares so purchased shall be delivered to the Holder as soon as
practicable but not later than ten (10) days after the rights represented by
this Warrant shall have been so exercised.
(b) At any time during the period above specified, during which
this Warrant may be exercised, the Holder may, at its option, exchange this
Warrant, in whole or in part (a "Warrant Exchange"), into the number of Warrant
Shares determined in accordance with this Section (b), by surrendering this
Warrant at the principal office of the Company, accompanied by a notice stating
such Xxxxxx's intent to effect such exchange, the number of Warrant Shares into
which this Warrant is to be exchanged and the date on which the Holder requests
that such Warrant Exchange occur (the "Notice of Exchange"). The Warrant
Exchange shall take place on the date specified in the Notice of Exchange or, if
later, the date the Notice of Exchange is received by the Company (the "Exchange
Date"). Certificates for the Warrant Shares issuable upon such Warrant Exchange
and, if applicable, a new Warrant of like tenor evidencing the balance of the
Warrant Shares remaining subject to this Warrant, shall be issued as of the
Exchange Date and delivered to the Holder within seven (7) days following the
Exchange Date. In connection with any Warrant Exchange, this Warrant shall
represent the right to subscribe for and acquire the number of Warrant Shares
(rounded to the next highest integer) equal to (x) the number of Warrant Shares
specified by the Holder in its Notice of Exchange up to the maximum number of
Warrant Shares subject to this Warrant (the "Total Number") less (y) the number
of Warrant Shares equal to the quotient obtained by dividing (A) the product of
the Total Number and the existing Exercise Price by (B) the Fair Market Value.
"Fair Market Value" shall mean first, if there is a trading market as indicated
in Subsection (i) below for the shares of Common Stock, such Fair Market Value
of the Common Stock and if there is no such trading market in the Common Stock,
then Fair Market Value shall have the meaning indicated in Subsections (ii)
through (iii) below:
(i) If the Common Stock is listed on a domestic or foreign
securities exchange or admitted to unlisted trading privileges on such exchange
or listed for trading on the Nasdaq National Market or the Nasdaq SmallCap
Market, the Fair Market Value shall be the average of the last reported sale
prices or the average of the means of the last reported bid and asked prices of
the Common Stock on such exchange or market for the ten (10) business days
ending on the last business day prior to the Exchange Date; or
(ii) If the Common Stock is not so listed or admitted to
unlisted trading privileges, the Fair Market Value shall be the average of the
means of the last reported bid and asked prices of the Common Stock for the ten
(10) business days ending on the last business day prior to the Exchange Date;
or
(iii) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so reported, the
Fair Market Value shall be an amount, not less than book value thereof as at the
end of the most recent fiscal year of the Company ending prior to the Exchange
Date, determined in such reasonable manner as may be prescribed by the Board of
Directors of the Company.
3. This Warrant and the Warrant Shares may be transferred, sold, assigned
or hypothecated so long as any such assignment shall be effected by the Holder
(i) executing the form of assignment at the end hereof and (ii) surrendering
this Warrant for cancellation at the office or agency of the Company referred to
in Section 2 hereof, whereupon the Company shall issue, in the name or names
specified by the Holder (including the Holder) a new Warrant or Warrants of like
tenor and representing in the aggregate rights to purchase the same number of
Warrant Shares as are purchasable hereunder.
4. The Company covenants and agrees that all shares of Common Stock which
may be issued upon exercise of the Warrant, upon issuance and payment therefor
in accordance with the terms of this Warrant, will be duly and validly issued,
fully paid and nonassessable and no personal liability will attach to the holder
thereof solely by reason of being such holder. The Company further covenants and
agrees that during the periods within which this Warrant may be exercised,
assuming approval of an amendment to the Company's Articles of Incorporation
increasing the number of authorized shares of Common Stock to a number
sufficient to allow for the issuance of all shares of Common Stock reserved for
issuance, the Company will at all times have authorized and reserved a
sufficient number of shares of its Common Stock to provide for the exercise of
this Warrant.
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5. This Warrant shall not entitle the Holder to any voting rights or any
other rights, or subject the Holder to any liabilities, as a stockholder of the
Company.
6. (a) If any Majority Holder (as defined below) shall give notice to the
Company at any time to the effect that such holder desires to register under the
Securities Act of 1933, as amended (the "Act"), any of the Warrant Shares under
such circumstances that a public distribution (within the meaning of the Act) of
any such securities will be involved then the Company will promptly, at its own
expense, but no later than four weeks after receipt of such notice, file a
registration statement to the end that the Warrant Shares may be publicly sold
under the Act as promptly as practicable thereafter and the Company will use its
best efforts to cause such registration to become and remain effective
(including the taking of such steps as are necessary to obtain the removal of
any stop order); provided, that such Majority Holder shall furnish the Company
with appropriate information in connection therewith as the Company may
reasonably request in writing. A Majority Holder may request the filing of a
registration statement under the Act on one occasion during the period beginning
on the date hereof through June 15, 2004. The Majority Holder may request the
registration of the Warrant Shares in connection with a request made pursuant to
this Section 6(a) prior to acquisition of the Warrant Shares issuable upon
exercise of the Warrant and even though the Majority Holder has not given notice
of exercise of the Warrant. Such registration rights may be exercised by the
Majority Holder prior to or subsequent to the exercise of the Warrant.
In the event the registration statement is not filed within the period
specified herein and in the event the registration statement is not declared
effective under the Act prior to June 15, 2004, then, at the holders' request,
the Company shall purchase the Warrant from the holder for a per share price
equal to the difference between (i) the Fair Market Value of the Common Stock on
the date of notice multiplied by the number of shares of Common Stock issuable
upon exercise of the Warrant and (ii) the per share purchase price of the
Warrant. All costs and expenses of the registration statement under this
paragraph 6(a) shall be borne by the Company, except that the holders shall bear
the fees of their own counsel and any underwriting discounts or commissions
applicable to any of the securities sold by them.
The Company will maintain such registration statement current under the
Act for a period of at least six months (and for up to an additional three
months if requested by the Holder) from the effective date thereof.
The term "Majority Holder" as used in this Section 6 shall mean the holder
of greater than 50% of the Warrant Shares and shall include any owner or
combination of owners of such securities, which ownership shall be calculated by
determining the number of Warrant Shares held by such owner or owners as well as
the number of shares then issuable upon exercise of the Warrant(s).
(b) At any time prior to June 15, 2006, if the Company shall
determine to proceed with the actual preparation and filing of a registration
statement under the Act in connection with the proposed offer and sale of any of
its securities by it or any of its security holders (other than a registration
statement on Form S-4, S-8 or similar limited purpose form), then the Company
will give written notice of its determination to all record holders of the
Warrants and Warrant Shares. Upon the written request from any record holder or
holders (the "Requesting Holder(s)"), within twenty (20) days after receipt of
any such notice from the Company, the Company will, except as herein provided,
cause all the Warrant Shares of such Requesting Holder(s) to be included in such
registration statement, all to the extent requisite to permit the sale or other
disposition by the prospective seller or sellers of the Warrant Shares at the
Company's expense to be so registered; provided, further, that nothing herein
shall prevent the Company from, at any time, abandoning or delaying any
registration. If any registration pursuant to this Section 6(b) shall be
underwritten in whole or in part, the Company may require that the Warrant
Shares requested for inclusion pursuant to this Section 6(b) be included in the
underwriting on the same terms and conditions as the securities otherwise being
sold through the underwriters. In the event that the Warrant Shares requested
for inclusion pursuant to this Section 6(b) together with any other shares which
have similar piggyback registration rights (such shares and the Warrant Shares
being collectively referred to as the "Requested Stock") would constitute more
than 15% of the total number of shares to be included in a proposed underwritten
public offering, and if in the good faith judgment of the managing underwriter
of such public offering the inclusion of all of the Requested Stock originally
covered by a request for registration would reduce the number of shares to be
offered by the Company or interfere with the successful
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marketing of the shares of stock offered by the Company, the number of shares of
Requested Stock otherwise to be included in the underwritten public offering may
be reduced pro rata (by number of shares) among the holders thereof requesting
such registration or excluded in their entirety if so required by the
underwriter.
All costs and expenses of the registration statement under this
paragraph 6(b) shall be borne by the Company, except that the holders shall bear
the fees of their own counsel and any underwriting discounts or commissions
applicable to any of the securities sold by them.
(c) Whenever pursuant to Section 6 a registration statement relating
to any Warrant Shares is filed under the Act, amended or supplemented, the
Company shall (i) supply prospectuses and such other documents as the Holder may
request in order to facilitate the public sale or other disposition of the
Warrant Shares, (ii) use its best efforts to register and qualify any of the
Warrant Shares for sale in such states as such Holder designates, (iii) furnish
indemnification in the manner provided in Section 7 hereof, (iv) notify each
Holder of Warrant Shares at any time when a prospectus relating thereto is
required to be delivered under the Act, of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, contains an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading and, at the request of any such Holder, prepare and
furnish to such Holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Warrant Shares, such prospectus shall not
included an untrue statement of a material fact or omit to state material fact
required to be stated therein or necessary to make the statements therein not
misleading and (v) do any and all other acts and things which may be necessary
or desirable to enable such Holders to consummate the public sale or other
disposition of the Warrant Shares. The Holder shall furnish appropriate
information in connection therewith and indemnification as set forth in Section
7.
(d) The Company shall not permit the inclusion of any securities
other than the Warrant Shares to be included in any registration statement filed
pursuant to Section 6(a) hereof without the prior written consent of the
Majority Holder.
(e) The Company shall furnish to each Holder participating in the
offering and to each underwriter, if any, a signed counterpart, addressed to
such Holder or underwriter, of (i) an opinion of counsel to the Company, dated
the effective date of such registration statement (or, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under the underwriting agreement), and (ii) if such registration
includes an underwritten public offering, a "cold comfort" letter dated the
effective date of such registration statement and dated the date of the closing
under the underwriting agreement signed by the independent public accountants
who have issued a report on the Company's financial statements included in such
registration statement, in each case covering substantially the same matters
with respect to such registration statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to events
subsequent to the date of such financial statements, as are reasonably and
customarily covered in opinions of issuer's counsel and in accountants' letters
delivered to underwriters in underwritten public offerings of securities.
(f) The Company shall deliver promptly to each Holder participating
in the offering requesting the correspondence and memoranda described below and
to the managing underwriter copies of all correspondence between the Commission
and the Company, its counsel or auditors and all memoranda relating to
discussions with the Commission or its staff with respect to the registration
statement and permit each Holder and underwriter to do such investigation, upon
reasonable advance notice, with respect to information contained in or omitted
from the registration statement as it deems reasonable necessary to comply with
applicable securities laws or rules of the National Association of Securities
Dealers, Inc. ("NASD"). Such investigation shall include access to
non-confidential books, records and properties and opportunities to discuss the
business of the Company with its officers and independent auditors, all to such
reasonable extent and at such reasonable times as any such Holder shall
reasonably request.
7. (a) Whenever pursuant to Section 6 a registration statement relating to
the Warrant Shares is filed under the Act, amended or supplemented, the Company
will indemnify and hold harmless each holder of the Warrant Shares covered by
such registration statement, amendment or supplement (such holder being
hereinafter called
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the "Distributing Holder"), and each person, if any, who controls (within the
meaning of the Act) the Distributing Holder, and each underwriter (within the
meaning of the Act) of such securities and each person, if any, who controls
(within the meaning of the Act) any such underwriter, against any losses,
claims, damages or liabilities, joint or several, to which the Distributing
Holder, any such controlling person or any such underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any such registration statement or any preliminary prospectus or final
prospectus constituting a part thereof or any amendment or supplement thereto,
or arise out of or are based upon the omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading; and will reimburse the Distributing Holder and each such controlling
person and underwriter for any legal or other expenses reasonably incurred by
the Distributing Holder or such controlling person or underwriter in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Company will not be liable in any such case
to the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in said registration statement, said preliminary
prospectus, said final prospectus or said amendment or supplement in reliance
upon and in conformity with written information furnished in writing by such
Distributing Holder specifically for use in the preparation thereof.
(b) Each Distributing Holder agrees, severally but not jointly, to
indemnify and hold harmless the Company against any losses, claims, damages or
liabilities to which the Company may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities arise out of or are based
upon any untrue or alleged untrue statement of any material fact contained in
said registration statement, said preliminary prospectus, said final prospectus
or said amendment or supplement, or arise out of or are based upon the omission
or the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent that such untrue statement or alleged
untrue statement or omission or alleged omission was made in said registration
statement, said preliminary prospectus, said final prospectus or said amendment
or supplement in reliance upon and in conformity with written information
furnished in writing by such Distributing Holder specifically for use in the
preparation thereof; except that the maximum amount which may be recovered from
the Distributing Holder pursuant to this Section 7 or otherwise shall be limited
to the amount of net proceeds received by the Distributing Holder from the sale
of the Warrant Shares.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying
party, give the indemnifying party notice of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than under this
Section 7.
(d) In case any such action is brought against any indemnified
party, and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 7 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation.
8. The Exercise Price in effect at any time and the number and kind of
securities purchasable upon the exercise of the Warrant shall be subject to
adjustment from time to time upon the happening of certain events as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into
a greater number of shares or (iii) combine or reclassify its outstanding shares
of Common Stock into a smaller number of shares, the Exercise Price in effect at
the time of the record date for such dividend or distribution or of the
effective date of such subdivision, combination or reclassification shall be
adjusted so that it shall equal the
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price determined by multiplying the Exercise Price by a fraction, the
denominator of which shall be the number of shares of Common Stock outstanding
after giving effect to such action and the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such action.
Such adjustment shall be made successively whenever any event listed above shall
occur.
(b) No adjustment in the Exercise Price shall be required unless
such adjustment would require an increase or decrease of at least five cents
($0.05) in such price; provided, however, that any adjustments which by reason
of this Subsection (b) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment required to be made hereunder.
All calculations under this Section 8 shall be made to the nearest cent or to
the nearest one-hundredth of a share, as the case may be. Anything in this
Section 8 to the contrary notwithstanding, the Company shall be entitled, but
shall not be required, to make such changes in the Exercise Price, in addition
to those required by this Section 8, as it shall determine, in its sole
discretion, to be advisable in order that any dividend or distribution in shares
of Common Stock, or any subdivision, reclassification or combination of Common
Stock, hereafter made by the Company shall not result in any Federal Income tax
liability to the holders of Common Stock or securities convertible into Common
Stock.
(c) Whenever the Exercise Price is adjusted, as herein provided, the
Company shall promptly but no later than 10 days after any request for such an
adjustment by the Holder, cause a notice setting forth the adjusted Exercise
Price and adjusted number of Warrant Shares issuable upon exercise of each
Warrant and, if requested, information describing the transactions giving rise
to such adjustments, to be mailed to the Holders, at the address set forth
herein, and shall cause a certified copy thereof to be mailed to its transfer
agent, if any. The Company may retain a firm of independent certified public
accountants selected by the Board of Directors (who may be the regular
accountants employed by the Company) to make any computation required by this
Section 8, and a certificate signed by such firm shall be conclusive evidence of
the correctness of such adjustment.
(d) In the event that at any time, as a result of an adjustment made
pursuant to Subsection (a) above, the Holder of this Warrant thereafter shall
become entitled to receive any shares of the Company, other than Common Stock,
thereafter the number of such other shares so receivable upon exercise of this
Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in Subsections (a) to (c), inclusive above.
(e) In case any event shall occur as to which the other provisions
of this Section 8 are not strictly applicable but as to which the failure to
make any adjustment would not fairly protect the purchase rights represented by
this Warrant in accordance with the essential intent and principles hereof then,
in each such case, the Holder(s) of Warrant(s) representing the right to
purchase a majority of the Warrant Shares may appoint a firm of independent
public accountants reasonably acceptable to the Company, which shall give their
opinion as to the adjustment, if any, on a basis consistent with the essential
intent and principles established herein, necessary to preserve the purchase
rights represented by the Warrant. Upon receipt of such opinion, the Company
will promptly mail a copy thereof to the Holder of this Warrant and shall make
the adjustments described therein. The fees and expenses of such independent
public accountants shall be borne by the Company.
9. This Agreement shall be governed by and in accordance with the laws of
the State of New York, without giving effect to the principles of conflicts of
law thereof.
IN WITNESS WHEREOF, Medical Science Systems, Inc. has caused this Warrant
to be signed by its duly authorized officers under its corporate seal, and this
Warrant to be dated June 15, 1999.
MEDICAL SCIENCE SYSTEMS, INC.
By:______________________________
(Corporate Seal)
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Attest:
______________________________
____________, Secretary
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PURCHASE FORM
(To be signed only upon exercise of the Warrant)
The undersigned, the holder of the foregoing Warrant, hereby irrevocably
elects to exercise the purchase rights represented by such Warrant for, and to
purchase thereunder, shares of Common Stock, no par value per share, of Medical
Science Systems, Inc. and herewith makes payment of $___ therefor.
Dated: __________
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name: _____________________________________________
(Please type or print in block letters)
Address: _____________________________________________
Signature: ____________________________________________
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WARRANT EXCHANGE
The undersigned, pursuant to the provisions of the foregoing Warrant,
hereby elects to exchange its Warrant for ________shares of Common Stock, no par
value per share, of Medical Science Systems, Inc., pursuant to the Warrant
Exchange provisions of the Warrant.
Dated: ____________
Print Name: __________________________
Address: __________________________
Signature: __________________________
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TRANSFER FORM
(To be signed only upon transfer of the Warrant)
For value received, the undersigned hereby sells, assigns and
transfers unto _____________ the right to purchase shares of Common Stock, no
par value per share, of Medical Science Systems, Inc. represented by the
foregoing Warrant to the extent of ______ shares , and appoints __________
attorney to transfer such rights on the books of Medical Science Systems, Inc.,
with full power of substitution in the premises.
Dated: ___________
FINE EQUITIES, INC.
By: _________________________________
_________________________________
Address
In the presence of:
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