Exhibit 10.17
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT.
THIS WARRANT AND THE SHARES PURCHASABLE HEREUNDER ARE SUBJECT TO RESTRICTIONS ON
TRANSFER AS SET FORTH HEREIN.
WARRANT TO PURCHASE
588,235 SHARES
OF COMMON STOCK OF
HEALTHSCIENCES GROUP, INC.
(Void after February 24, 2008)
This certifies that Castlerigg Master Investments, Ltd. or its permitted assigns
(collectively, the "Holder"), for value received, is entitled to purchase from
HEALTHSCIENCES GROUP, INC., a Colorado corporation (the "Company"), subject to
the terms set forth below, 588,235 fully paid and nonassessable shares (subject
to adjustment as provided herein) (the "Warrant Shares") of the common stock,
par value $0.001 per share, of the Company ("Common Stock") for cash at a price
per share of $1.25 (the "Exercise Price") (subject to adjustment as provided
herein), subject to the provisions of Section 1.1 of this Warrant, at any time
or from time to time up to and including 5:00 p.m. (Eastern Time) on the 5TH
anniversary from the date hereof, such day being referred to herein as the
"Expiration Date," upon surrender to the Company at its principal office (or at
such other location as the Company may advise the Holder in writing) of this
Warrant properly endorsed with the Form of Subscription attached hereto duly
filled in and signed and upon payment of the aggregate Exercise Price for the
number of shares for which this Warrant is being exercised determined in
accordance with the provisions hereof. The Warrant Shares, when issued, may not
be registered under the Securities Act of 1933 (the "Act"), and may be
restricted within the meaning of Regulation D of such Act. The Exercise Price is
subject to adjustment as provided in Section 3 of this Warrant. This Warrant is
issued pursuant to that certain Securities Purchase Agreement, between the
Company and the Holder. All capitalized terms not defined herein shall have the
meanings provided in the Securities Purchase Agreement. This Warrant is issued
subject to the following terms and conditions:
Exercise; Issuance of Certificates.
General. This Warrant is exercisable at the option of the Holder of
record on or prior to the Expiration Date, at any time or from time to time for
all or any part of the Warrant Shares (but not for a fraction of a share), which
may be purchased hereunder, as that number may be adjusted pursuant to Section 3
of this Warrant. The Company agrees that the Warrant Shares purchased under this
Warrant shall be and are deemed to be issued to the Holder as the record owner
of such Warrant Shares as of the close of business on the date on which this
Warrant shall have been surrendered, properly endorsed, the completed and
executed Form of Subscription delivered, and payment made for such Warrant
Shares. Certificates for the Warrant Shares so purchased, together with any
other securities or property to which the Holder is entitled upon such exercise,
shall be delivered to the Holder by the Company at the Company's expense as soon
as practicable after the rights represented by this Warrant have been so
exercised. In case of a purchase of less than all the Warrant Shares which may
be purchased under this Warrant, the Company shall cancel this Warrant and
execute and deliver to the Holder within a reasonable time a new Warrant or
Warrants of like tenor for the balance of the Warrant Shares purchasable under
the Warrant surrendered upon such purchase. Each stock certificate so delivered
shall be registered in the name of the Holder.
1.2 Consideration The Exercise Price shall be payable at the time of exercise.
The Exercise Price may be paid in cash (by cashiers' check or wire transfer) or
by: (i) surrender of shares of Common Stock of the Company already owned by the
Holder, having a Market Price (as defined below) equal to the Exercise Price per
share; or (ii) upon surrender of the Warrant at the principal office of the
Company together with notice of election. In the event of exercise by surrender
of shares of this Warrant, the Company shall issue Holder a number of Warrant
Shares computed using the following formula:
X = Y (A-B)/A
1
where: X = the number of Warrant Shares to be issued to Holder (not to exceed
the number of Shares set forth on the cover page of this Warrant Agreement, as
adjusted pursuant to the provisions of Section 6 of this Warrant Agreement).
Y = the number of Warrant Shares for which the Warrant is being exercised.
A = the Market Price of one Share (for purposes of this Section 1.2), the
"Market Price" shall be defined as the closing price on the exchange on which
the Common Stock traded for the trading day prior to the date of exercise of
this Warrant Agreement; provided if the Common Stock does not trade on any
exchange, the Market Price shall equal the closing bid price in the
over-the-counter market for the trading day prior to the date of exercise of
this Warrant Agreement, as reported by the National Association of Securities
Dealers Automated Quotation System; and, provided further, that if the common
stock is not quoted or listed by any organization, the fair value of the common
stock, as determined by the Board of Directors of the Company, whose
determination shall be conclusive, shall be used).
B = the Exercise Price.
1.3 Record Ownership. To the extent permitted by applicable law, the person in
whose name any certificate for shares of Common Stock or other evidence of
ownership of any other security is issued upon exercise of the Warrant shall for
all purposes be deemed to have become the holder of record of such shares or
other security on the date of delivery of the subscription form, irrespective of
the date of delivery of such certificate or other evidence of ownership,
notwithstanding that the transfer books of the Company shall then be closed or
that such certificates or other evidence of ownership shall not then actually
have been delivered to such person.
1.4 Regulatory Problem. The Holder shall not exercise or exchange the Warrant
for shares of Common Stock if after giving effect to such exercise or exchange
the Holder reasonably determines that such exercise would violate any law or
regulation or any requirement of any governmental authority applicable to Holder
or its affiliates.
Shares to be Fully Paid. The Company covenants and agrees that all
Warrant Shares, will, upon issuance and payment of the applicable Exercise
Price, be duly authorized, validly issued, fully paid and nonassessable, and
free of all liens and encumbrances, except for restrictions on transfer provided
for herein or under applicable federal and state securities laws.
Adjustment of Exercise Price and Number of Shares.
3.1 Adjustment for Reorganization, Consolidation, Merger, etc. The Exercise
Price and the number of Warrant Shares shall be proportionately adjusted from
time to time upon the occurrence of an increase in the number of shares of
Common Stock outstanding by a stock dividend payable in shares of Common Stock
or a subdivision or split-up of shares of Common Stock, a decrease in the number
of shares of Common Stock outstanding by a combination of outstanding shares of
Common Stock, any capital reorganization or any reclassification of Common
Stock, or the consolidation, merger, combination or exchange of shares with
another entity, or the divisive reorganization of the Company. Upon each
adjustment of the Exercise Price, the Holder of this Warrant shall thereafter be
entitled to purchase, at the Exercise Price resulting from such adjustment, the
number of shares obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment, and dividing the product
thereof by the Exercise Price resulting from such adjustment. The number of
Shares purchasable upon the exercise of each Warrant is subject to adjustment
from time to time upon the occurrence of any of the events enumerated below:
In case the Company (i) consolidates with or merges into any other entity and is
not the continuing or surviving entity of such consolidation or merger, or (ii)
permits any other entity to consolidate with or merge into the Company and the
Company is the continuing or surviving Company but, in connection with such
consolidation or merger, the Common Stock is changed into or exchanged for
common stock or other securities of any other entity or cash or any other
assets, or (iii) transfers all or substantially all of its properties and assets
to any other entity, or (iv) effects a reorganization or reclassification of the
equity of the Company in such a way that holders of Common Stock shall be
entitled to receive stock, securities, cash or assets with respect to or in
exchange for Common Stock, then, and in each such case, proper provision shall
be made so that, upon the exercise of this Warrant at any time after the
consummation of such consolidation, merger, transfer, reorganization or
reclassification, the Holder shall be entitled to receive (at the aggregate
Exercise Price in effect for Common Stock issuable upon such exercise of this
Warrant immediately prior to such consummation), in lieu of Common Stock
issuable upon such exercise of this Warrant prior to such consummation, the
stock and other securities, cash and assets to which such Holder would have been
entitled upon such consummation if such Holder had so exercised this Warrant
immediately prior thereto.
3.2 Adjustments for Certain Issuances of Securities The Exercise Price shall
also be subject to adjustment in accordance with Section 4(g) of the Securities
Purchase Agreement.
Registration. The Warrant Shares shall be subject to registration at
the expense of the Company pursuant to the Registration Rights Agreement between
the Company and the Holder dated as of the date hereof.
Voting Rights. Nothing contained in this Warrant shall be construed as
conferring upon the Holder the right to vote or to consent to or receive notice
as a shareholder of the Company on any other matters or any rights whatsoever as
a shareholder of the Company.
Compliance with Securities Act: Transferability of Warrant, Disposition
of Shares of Common Stock.
Compliance with Securities Act. The Holder, by acceptance hereof,
agrees that this Warrant and the Warrant Shares to be issued upon exercise
hereof are being acquired for investment and that it will not offer, sell, or
otherwise dispose of this Warrant or any Warrant Shares except under
circumstances which will not result in a violation of the Securities Act or any
applicable state securities laws. This Warrant and all Warrant Shares (unless
registered under the Act) shall be stamped or imprinted with a legend in
substantially the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED OR THE SECURITIES OR BLUE SKY LAWS OF ANY STATE. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION
STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED,
OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT.
Accredited Investor; Access to Information. Holder represents and
warrants that as of the date hereof Holder is an accredited investor within the
meaning of Rule 501 of Regulation D promulgated under the Act. Holder has had
the opportunity to ask questions of, and to receive answers from, appropriate
executive officers of the Company with respect to the terms and conditions of
the transactions contemplated hereby and with respect to the business, affairs,
financial condition and results of operations of the Company. Holder has had
access to such financial and other information as is necessary in order for
Holder to make a fully informed decision as to investment in the Company, and
has had the opportunity to obtain any additional information necessary to verify
any of such information to which Holder has had access.
Warrant Transferable. Subject to compliance with applicable federal and
state securities laws under which this Warrant was issued, this Warrant and all
rights hereunder are transferable, in whole or in part, without charge to the
Holder (except for transfer taxes), upon surrender of this Warrant properly
endorsed; provided, however, that the Holder shall notify the Company in writing
in advance of any proposed transfer and shall not transfer this Warrant or any
rights hereunder to any person or entity which, in the sole judgment of the
Company's board of directors, is then engaged in a business that is in
competition with the Company, or is otherwise engaged in an effort to acquire
control of the Company. As promptly as practicable but in any event within ten
(10) Business Days of receipt of such properly endorsed Warrant, the Company
shall issue, register and deliver to the Holder thereof a new Warrant or
Warrants of like kind and tenor representing in the aggregate the right to
purchase the same number of Warrant Shares that could be purchased pursuant to
the Warrant being transferred. Holder shall pay Company's reasonable costs
incurred in effectuating such transfer.
Disposition of Warrant Shares. With respect to any offer, sale, or
other disposition of the Warrant, or any Warrant Shares if such shares are not
registered and freely tradable under the Act when issued, the Holder hereof and
each subsequent Holder of this Warrant agrees to give written notice to the
Company prior thereto, describing briefly the manner thereof, together with a
written opinion of such holder's counsel, if reasonably requested by the
Company, to the effect that such offer, sale or other disposition may be
effected without registration or qualification (under the Act as then in effect
or any federal or state law then in effect) of the Warrant or Warrant Shares, as
the case may be, and indicating whether or not under the Act certificates for
the Warrant or Warrant Shares to be sold or otherwise disposed of require any
restrictive legend as to applicable restrictions on transferability in order to
insure compliance with the Act. Promptly upon receiving such written notice and
opinion, the Company, as promptly as practicable, shall notify the Holder that
such Holder may sell or otherwise dispose of the Warrant or Warrant Shares, all
in accordance with the terms of the notice delivered to the Company. If a
determination has been made pursuant to this subparagraph 6.4 that the opinion
of the counsel for the Holder is not reasonably satisfactory to the Company, the
Company shall so notify the Holder promptly after such determination has been
made. Notwithstanding the foregoing, the Warrant or Warrant Shares may be
offered, sold or otherwise disposed of in accordance with Rule 144 under the
Act, provided that the Company shall have been furnished with such information
as the Company may request to provide reasonable assurance that the provisions
of Rule 144 have been satisfied. Each certificate representing the Warrant or
Warrant Shares thus transferred (except a transfer pursuant to Rule 144) shall
bear a legend as to the applicable restrictions on transferability in order to
insure compliance with the Act, unless in the aforesaid opinion of counsel for
the Holder, such legend is not required in order to insure compliance with the
Act. The Company may issue stop transfer instructions to its transfer agent in
connection with such restrictions.
Limitation on Warrant Shares Notwithstanding anything else herein to the
contrary, the Holder of this Warrant may not exercise any Warrant to the extent
that after such conversion, the number of shares of Common Stock owned by the
Holder and its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion of the
Debentures and any unexercised Warrants), would result in ownership by the
Holder and its affiliates of 4.99% or more of the Company's issued and
outstanding shares of Common Stock following such exercise. In the event that
the Holder owns both Debentures and Warrants which would otherwise result in
ownership of 4.99% or more of the Company's issued and outstanding shares of
Common Stock but for the prior sentence, then the Warrants shall be deemed to
not be exercisable to the extent necessary to allow conversion of the Debentures
to the maximum extent possible and still permit the Holder's ownership to remain
below 4.99%. This restriction shall be binding upon any transferee of the
Warrant from any Holder. The preceding shall not interfere with the Holder's
right to exercise this Warrant over time which in the aggregate totals more than
4.99% of the then outstanding shares of Common Stock so long as such Holder and
its affiliates do not own more than 4.99% of the then outstanding Common Stock
at any given time.
Modification and Waiver. This Warrant and any provision hereof may be
changed, waived, discharged, or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
Notices. Any notice, request, or other document required or permitted
to be given or delivered to the Holder hereof or the Company shall be delivered
or shall be sent by certified mail, postage prepaid, or by facsimile with
confirmation of transmission to the parties at the address set forth in the
Securities Purchase Agreement, or such other address as either may from time to
time provide to the other.
Governing Law; Waiver of Jury Trial.
Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Colorado as applied to agreements
executed and performed in such state. Each of the parties consents to the
exclusive jurisdiction of the federal courts whose districts encompass any part
of the City of New York or the state courts of the State of New York sitting in
the City of New York in connection with any dispute arising under this Warrant
and hereby waives, to the maximum extent permitted by law, any objection,
including any objection based on forum non coveniens, to the bringing of any
such proceeding in such jurisdictions. The Company shall reimburse the Holder
for any reasonable legal fees and disbursements incurred by the Holder in
enforcement of or protection of any of its rights under this Warrant.
9.2 Waiver of Jury Trial. BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY
RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE
LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR
DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO
ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER
THIS AGREEMENT OR ANY DOCUMENTS RELATED HERETO.
Exchange of Warrant.
Lost Warrant. The Company represents and warrants to the Holder hereof
that upon receipt of evidence reasonably satisfactory to the Company of the
loss, theft, destruction, or mutilation of this Warrant and, in the case of any
such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of the Warrant, the Company will, at the Company's
expense, make and deliver a new Warrant, of like tenor, in lieu of the lost,
stolen, destroyed or mutilated Warrant.
10.2 Exchange. The Holder may exchange this Warrant at its option, upon
presentation and surrender of this Warrant to Company, for other Warrants of
different denominations, entitling the Holder to purchase in the aggregate the
same number of Warrant Shares. A Warrant may be divided or combined with other
Warrants that carry the same rights, upon presentation thereof at the principal
office of the Company, together with written notice specifying the names and
denominations in which new Warrants are to be issued and signed by the holder
thereof. In order to effect an exchange permitted by this Section 10.2, the
Holder shall deliver to the Company this Warrant accompanied by a written
request signed by the Holder specifying the number and denominations of the
Warrant or the Warrants to be issued in such exchange and the names in which the
Warrant or Warrants are to be issued. As promptly as practicable but in any
event within ten (10) Business Days of receipt of such a request, the Company
shall, without charge, issue, register and deliver to the Holder each Warrant to
be issued in such exchange.
Fractional Shares. No fractional shares shall be issued upon exercise
of this Warrant. The Company shall, in lieu of issuing any fractional share, pay
the Holder entitled to such fraction a sum in cash equal to such fraction
(calculated to the nearest 1/100th of a share) multiplied by the then effective
Exercise Price on the date the Form of Subscription is received by the Company.
Successors and Assigns. This Warrant and the rights evidenced hereby
shall inure to the benefit of and be binding upon the successors and assigns of
the Company and successors and permitted assigns of the Holder. The provisions
of this Warrant are intended to be for the benefit of all Holders from time to
time of this Warrant, and shall be enforceable by any such Holder.
13. Preparation of Warrant. The Company prepared this Warrant solely on its
behalf. Each party to this Warrant acknowledges that: (i) the party had the
advice of, or sufficient opportunity to obtain the advice of, legal counsel
separate and independent of legal counsel for any other party hereto; (ii) the
terms of the transactions contemplated by this Warrant are fair and reasonable
to such party; and (iii) such party has voluntarily entered into the
transactions contemplated by this Warrant without duress or coercion. Each party
further acknowledges that such party was not represented by the legal counsel of
any other party hereto in connection with the transactions contemplated by this
Warrant, nor was he or it under any belief or understanding that such legal
counsel was representing his or its interests. Each party agrees that no
conflict, omission or ambiguity in this Warrant, or the interpretation thereof,
shall be presumed, implied or otherwise construed against any other party to
this Warrant on the basis that such party was responsible for drafting this
Warrant.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by
its officer, thereunto duly authorized as of May____, 2003.
COMPANY:
HEALTH SCIENCES GROUP, INC.,
a Colorado corporation
By: _______________________________
Its: _______________________________
FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To: HEALTHSCIENCES GROUP, INC.
The undersigned, the holder of the attached Common Stock Warrant, hereby
irrevocably elects to exercise the purchase right represented by such Warrant
for, and to purchase thereunder, _____________shares of Common Stock of
HEALTHSCIENCES GROUP, INC. (the "Company") and herewith makes payment of
$_________ therefor.
The undersigned represents that it is acquiring such Common Stock for its own
account for investment and not with a view to or for sale in connection with any
distribution thereof. The undersigned requests that certificates for such shares
be issued in the name of, and delivered to, _____________________whose address
is ______________
---------------------------------------------------------------------.
DATED: _________________
-----------------------------------------
(Signature must conform in all respects to name of Holder as specified on the
face of the Warrant)
Name: _________________________________
Title: _________________________________
