Exhibit 4.2
WARRANT
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN A FORM REASONABLY
SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, THIS WARRANT MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT.
IN VERITAS MEDICAL DIAGNOSTICS, INC.
Warrant To Purchase Common Stock
Warrant No.: MEP-001 Number of Shares: 350,000
Date of Issuance: September 7, 2005
IN VERITAS MEDICAL DIAGNOSTICS, INC., a Colorado corporation (the "Company"),
hereby certifies that, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, MONTGOMERY EQUITY PARTNERS, LTD
("Montgomery"), the registered holder hereof or its permitted assigns, is
entitled, subject to the terms set forth below, to purchase from the Company
upon surrender of this Warrant, at any time or times on or after the date
hereof, but not after 11:59 P.M. Eastern Time on the Expiration Date (as defined
herein) Three Hundred Fifty Thousand (350,000) fully paid and nonassessable
shares of Common Stock (as defined herein) of the Company (the "Warrant Shares")
at the exercise price per share provided in Section 1(b) below or as
subsequently adjusted; provided, however, that in no event shall the holder be
entitled to exercise this Warrant for a number of Warrant Shares in excess of
that number of Warrant Shares which, upon giving effect to such exercise, would
cause the aggregate number of shares of Common Stock beneficially owned by the
holder and its affiliates to exceed 4.99% of the outstanding shares of the
Common Stock following such exercise, except within sixty (60) days of the
Expiration Date. For purposes of the foregoing proviso, the aggregate number of
shares of Common Stock beneficially owned by the holder and its affiliates shall
include the number of shares of Common Stock issuable upon exercise of this
Warrant with respect to which the determination of such proviso is being made,
but shall exclude shares of Common Stock which would be issuable upon (i)
exercise of the remaining, unexercised Warrants beneficially owned by the holder
and its affiliates and (ii) exercise or conversion of the unexercised or
unconverted portion of any other securities of the Company beneficially owned by
the holder and its affiliates (including, without limitation, any convertible
notes or preferred stock) subject to a limitation on conversion or exercise
analogous to the limitation contained herein. Except as set forth in the
preceding sentence, for purposes of this paragraph, beneficial ownership shall
be calculated in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended. For purposes of this Warrant, in determining the number of
outstanding shares of Common Stock a holder may rely on the number of
outstanding shares of Common Stock as reflected in (1) the Company's most recent
Form 10-QSB or Form 10-KSB, as the case may be, (2) a more recent public
announcement by the Company or (3) any other notice by the Company or its
transfer agent setting forth the number of shares of Common Stock outstanding.
Upon the written request of any holder, the Company shall promptly, but in no
event later than one (1) Business Day following the receipt of such notice,
confirm in writing to any such holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of Common Stock shall
be determined after giving effect to the exercise of Warrants (as defined below)
by such holder and its affiliates since the date as of which such number of
outstanding shares of Common Stock was reported.
Section 1.
(a) This Warrant is the common stock purchase warrant (the "Warrant") issued
pursuant to the Securities Purchase Agreement (the "Securities Purchase
Agreement") dated the date hereof by and between the Company and Montgomery.
(b) Definitions. The following words and terms as used in this Warrant shall
have the following meanings:
(i) "Approved Stock Plan" means any employee benefit plan which has been
approved by the Board of Directors of the Company, pursuant to which the
Company's securities may be issued to any employee, officer, director, or
consultants for services provided to the Company as set forth in Schedule 4(k)
of the Securities Purchase Agreement.
(ii) "Business Day" means any day other than Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized or required by law
to remain closed.
(iii) "Closing Bid Price" means the closing bid price of Common Stock as quoted
on the Principal Market (as reported by Bloomberg Financial Markets
("Bloomberg") through its "Volume at Price" function).
(iv) "Common Stock" means (i) the Company's common stock, par value $0.001 per
share, and (ii) any capital stock into which such Common Stock shall have been
changed or any capital stock resulting from a reclassification of such Common
Stock.
(v) "Event of Default" means an event of default under the Securities Purchase
Agreement.
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(vi) "Excluded Securities" means, provided such security is issued at a price
which is greater than or equal to the arithmetic average of the Closing Bid
Prices of the Common Stock for the ten (10) consecutive trading days immediately
preceding the date of issuance, any of the following: (a) any issuance by the
Company of securities in connection with a strategic partnership or a joint
venture (the primary purpose of which is not to raise equity capital), (b) any
issuance by the Company of securities as consideration for a merger or
consolidation or the acquisition of a business, product, license, or other
assets of another person or entity and (c) options to purchase shares of Common
Stock, provided (I) such options are issued after the date of this Warrant to
employees of the Company within thirty (30) days of such employee's starting his
employment with the Company, and (II) the exercise price of such options is not
less than the Closing Bid Price of the Common Stock on the date of issuance of
such option.
(vii) "Expiration Date" means the date three (3) years from the Issuance Date of
this Warrant or, if such date falls on a Saturday, Sunday or other day on which
banks are required or authorized to be closed in the City of New York or the
State of New York or on which trading does not take place on the Principal
Exchange or automated quotation system on which the Common Stock is traded (a
"Holiday"), the next date that is not a Holiday.
(viii) "Issuance Date" means the date hereof.
(ix) "Options" means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities.
(x) "Other Securities" means (i) those options and warrants of the Company
issued prior to, and outstanding on, the Issuance Date of this Warrant, (ii) the
shares of Common Stock issuable on exercise of such options and warrants,
provided such options and warrants are not amended after the Issuance Date of
this Warrant and (iii) the shares of Common Stock issuable upon exercise of this
Warrant.
(xi) "Person" means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
(xii) "Principal Market" means the New York Stock Exchange, the American Stock
Exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, whichever is
at the time the principal trading exchange or market for such security, or the
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg or, if no bid or sale information is reported for such
security by Bloomberg, then the average of the bid prices of each of the market
makers for such security as reported in the "pink sheets" by the National
Quotation Bureau, Inc.
(xiii) "Securities Act" means the Securities Act of 1933, as amended.
(xiv) "Warrant" means this Warrant and all Warrants issued in exchange, transfer
or replacement thereof.
(xv) "Warrant Exercise Price" shall be $0.001 or as subsequently adjusted as
provided in Section 8 hereof, but in no event below par value of the Common
Stock.
(xvi) "Warrant Shares" means the shares of Common Stock issuable at any time
upon exercise of this Warrant.
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(c) Other Definitional Provisions.
(i) Except as otherwise specified herein, all references herein (A) to the
Company shall be deemed to include the Company's successors and (B) to any
applicable law defined or referred to herein shall be deemed references to such
applicable law as the same may have been or may be amended or supplemented from
time to time.
(ii) When used in this Warrant, the words "herein", "hereof", and "hereunder"
and words of similar import, shall refer to this Warrant as a whole and not to
any provision of this Warrant, and the words "Section", "Schedule", and
"Exhibit" shall refer to Sections of, and Schedules and Exhibits to, this
Warrant unless otherwise specified.
(iii) Whenever the context so requires, the neuter gender includes the masculine
or feminine, and the singular number includes the plural, and vice versa.
Section 2. Exercise of Warrant.
(a) Subject to the terms and conditions hereof, this Warrant may be exercised by
the holder hereof then registered on the books of the Company, pro rata as
hereinafter provided, at any time on any Business Day on or after the opening of
business on such Business Day, commencing with the first day after the date
hereof, and prior to 11:59 P.M. Eastern Time on the Expiration Date (i) by
delivery of a written notice, in the form of the subscription notice attached as
Exhibit A hereto (the "Exercise Notice"), of such holder's election to exercise
this Warrant, which notice shall specify the number of Warrant Shares to be
purchased, payment to the Company of an amount equal to the Warrant Exercise
Price(s) applicable to the Warrant Shares being purchased, multiplied by the
number of Warrant Shares (at the applicable Warrant Exercise Price) as to which
this Warrant is being exercised (plus any applicable issue or transfer taxes)
(the "Aggregate Exercise Price") in cash or wire transfer of immediately
available funds and the surrender of this Warrant (or an indemnification
undertaking with respect to this Warrant in the case of its loss, theft or
destruction) to a common carrier for overnight delivery to the Company as soon
as practicable following such date ("Cash Basis") or (ii) by delivering an
Exercise Notice and in lieu of making payment of the Aggregate Exercise Price in
cash or wire transfer, elect instead to receive upon such exercise the "Net
Number" of shares of Common Stock determined according to the following formula
(the "Cashless Exercise"):
Net Number = (A x B) - (A x C)
-----------------
B
For purposes of the foregoing formula:
A = the total number of Warrant Shares with respect to which
this Warrant is then being exercised.
B = the Closing Bid Price of the Common Stock on the date of
exercise of the Warrant.
C = the Warrant Exercise Price then in effect for the
applicable Warrant Shares at the time of such exercise.
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In the event of any exercise of the rights represented by this Warrant in
compliance with this Section 2, the Company shall on or before the fifth (5th)
Business Day following the date of receipt of the Exercise Notice, the Aggregate
Exercise Price and this Warrant (or an indemnification undertaking with respect
to this Warrant in the case of its loss, theft or destruction) and the receipt
of the representations of the holder specified in Section 6 hereof, if requested
by the Company (the "Exercise Delivery Documents"), and if the Common Stock is
DTC eligible, credit such aggregate number of shares of Common Stock to which
the holder shall be entitled to the holder's or its designee's balance account
with The Depository Trust Company; provided, however, if the holder who
submitted the Exercise Notice requested physical delivery of any or all of the
Warrant Shares, or, if the Common Stock is not DTC eligible then the Company
shall, on or before the fifth (5th) Business Day following receipt of the
Exercise Delivery Documents, issue and surrender to a common carrier for
overnight delivery to the address specified in the Exercise Notice, a
certificate, registered in the name of the holder, for the number of shares of
Common Stock to which the holder shall be entitled pursuant to such request.
Upon delivery of the Exercise Notice and Aggregate Exercise Price referred to in
clause (i) or (ii) above the holder of this Warrant shall be deemed for all
corporate purposes to have become the holder of record of the Warrant Shares
with respect to which this Warrant has been exercised. In the case of a dispute
as to the determination of the Warrant Exercise Price, the Closing Bid Price or
the arithmetic calculation of the Warrant Shares, the Company shall promptly
issue to the holder the number of Warrant Shares that is not disputed and shall
submit the disputed determinations or arithmetic calculations to the holder via
facsimile within one (1) Business Day of receipt of the holder's Exercise
Notice.
(b) If the holder and the Company are unable to agree upon the determination of
the Warrant Exercise Price or arithmetic calculation of the Warrant Shares
within one (1) day of such disputed determination or arithmetic calculation
being submitted to the holder, then the Company shall immediately submit via
facsimile (i) the disputed determination of the Warrant Exercise Price or the
Closing Bid Price to an independent, reputable investment banking firm or (ii)
the disputed arithmetic calculation of the Warrant Shares to its independent,
outside accountant. The Company shall cause the investment banking firm or the
accountant, as the case may be, to perform the determinations or calculations
and notify the Company and the holder of the results no later than forty-eight
(48) hours from the time it receives the disputed determinations or
calculations. Such investment banking firm's or accountant's determination or
calculation, as the case may be, shall be deemed conclusive absent manifest
error.
(c) Unless the rights represented by this Warrant shall have expired or shall
have been fully exercised, the Company shall, as soon as practicable and in no
event later than five (5) Business Days after any exercise and at its own
expense, issue a new Warrant identical in all respects to this Warrant exercised
except it shall represent rights to purchase the number of Warrant Shares
purchasable immediately prior to such exercise under this Warrant exercised,
less the number of Warrant Shares with respect to which such Warrant is
exercised.
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(d) No fractional Warrant Shares are to be issued upon any pro rata exercise of
this Warrant, but rather the number of Warrant Shares issued upon such exercise
of this Warrant shall be rounded up or down to the nearest whole number.
(e) If the Company or its Transfer Agent shall fail for any reason or for no
reason to issue to the holder within ten (10) days of receipt of the Exercise
Delivery Documents, a certificate for the number of Warrant Shares to which the
holder is entitled or to credit the holder's balance account with The Depository
Trust Company for such number of Warrant Shares to which the holder is entitled
upon the holder's exercise of this Warrant, the Company shall, in addition to
any other remedies under this Warrant or the Placement Agent Agreement or
otherwise available to such holder, pay as additional damages in cash to such
holder on each day the issuance of such certificate for Warrant Shares is not
timely effected an amount equal to 0.025% of the product of (A) the sum of the
number of Warrant Shares not issued to the holder on a timely basis and to which
the holder is entitled, and (B) the Closing Bid Price of the Common Stock for
the trading day immediately preceding the last possible date which the Company
could have issued such Common Stock to the holder without violating this Section
2.
(f) If within ten (10) days after the Company's receipt of the Exercise Delivery
Documents, the Company fails to deliver a new Warrant to the holder for the
number of Warrant Shares to which such holder is entitled pursuant to Section 2
hereof, then, in addition to any other available remedies under this Warrant or
the Placement Agent Agreement, or otherwise available to such holder, the
Company shall pay as additional damages in cash to such holder on each day after
such tenth (10th) day that such delivery of such new Warrant is not timely
effected in an amount equal to 0.25% of the product of (A) the number of Warrant
Shares represented by the portion of this Warrant which is not being exercised
and (B) the Closing Bid Price of the Common Stock for the trading day
immediately preceding the last possible date which the Company could have issued
such Warrant to the holder without violating this Section 2.
Section 3. Covenants as to Common Stock. The Company hereby covenants and
agrees as follows:
(a) This Warrant is, and any Warrants issued in substitution for or replacement
of this Warrant will upon issuance be, duly authorized and validly issued.
(b) All Warrant Shares which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued, fully paid
and nonassessable and free from all taxes, liens and charges with respect to the
issue thereof.
(c) During the period within which the rights represented by this Warrant may be
exercised, the Company will at all times have authorized and reserved at least
one hundred percent (100%) of the number of shares of Common Stock needed to
provide for the exercise of the rights then represented by this Warrant and the
par value of said shares will at all times be less than or equal to the
applicable Warrant Exercise Price. If at any time the Company does not have a
sufficient number of shares of Common Stock authorized and available, then the
Company shall call and hold a special meeting of its stockholders within sixty
(60) days of that time for the sole purpose of increasing the number of
authorized shares of Common Stock.
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(d) If at any time after the date hereof the Company shall file a registration
statement, the Company shall include the Warrant Shares issuable to the holder,
pursuant to the terms of this Warrant and shall maintain, so long as any other
shares of Common Stock shall be so listed, such listing of all Warrant Shares
from time to time issuable upon the exercise of this Warrant; and the Company
shall so list on each national securities exchange or automated quotation
system, as the case may be, and shall maintain such listing of, any other shares
of capital stock of the Company issuable upon the exercise of this Warrant if
and so long as any shares of the same class shall be listed on such national
securities exchange or automated quotation system.
(e) The Company will not, by amendment of its Articles of Incorporation or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities, or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant. The Company will not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the Warrant
Exercise Price then in effect, and (ii) will take all such actions as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares of Common Stock upon the exercise of this
Warrant.
(f) This Warrant will be binding upon any entity succeeding to the Company by
merger, consolidation or acquisition of all or substantially all of the
Company's assets.
Section 4. Taxes. The Company shall pay any and all taxes, except any applicable
withholding, which may be payable with respect to the issuance and delivery of
Warrant Shares upon exercise of this Warrant.
Section 5. Warrant Holder Not Deemed a Stockholder. Except as otherwise
specifically provided herein, no holder, as such, of this Warrant shall be
entitled to vote or receive dividends or be deemed the holder of shares of
capital stock of the Company for any purpose, nor shall anything contained in
this Warrant be construed to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the holder of this Warrant of the Warrant
Shares which he or she is then entitled to receive upon the due exercise of this
Warrant. In addition, nothing contained in this Warrant shall be construed as
imposing any liabilities on such holder to purchase any securities (upon
exercise of this Warrant or otherwise) or as a stockholder of the Company,
whether such liabilities are asserted by the Company or by creditors of the
Company. Notwithstanding this Section 5, the Company will provide the holder of
this Warrant with copies of the same notices and other information given to the
stockholders of the Company generally, contemporaneously with the giving thereof
to the stockholders.
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Section 6. Representations of Holder. The holder of this Warrant, by the
acceptance hereof, represents that it is acquiring this Warrant and the Warrant
Shares for its own account for investment only and not with a view towards, or
for resale in connection with, the public sale or distribution of this Warrant
or the Warrant Shares, except pursuant to sales registered or exempted under the
Securities Act; provided, however, that by making the representations herein,
the holder does not agree to hold this Warrant or any of the Warrant Shares for
any minimum or other specific term and reserves the right to dispose of this
Warrant and the Warrant Shares at any time in accordance with or pursuant to a
registration statement or an exemption under the Securities Act. The holder of
this Warrant further represents, by acceptance hereof, that, as of this date,
such holder is an "accredited investor" as such term is defined in Rule
501(a)(1) of Regulation D promulgated by the Securities and Exchange Commission
under the Securities Act (an "Accredited Investor"). Upon exercise of this
Warrant the holder shall, if requested by the Company, confirm in writing, in a
form satisfactory to the Company, that the Warrant Shares so purchased are being
acquired solely for the holder's own account and not as a nominee for any other
party, for investment, and not with a view toward distribution or resale and
that such holder is an Accredited Investor. If such holder cannot make such
representations because they would be factually incorrect, it shall be a
condition to such holder's exercise of this Warrant that the Company receive
such other representations as the Company considers reasonably necessary to
assure the Company that the issuance of its securities upon exercise of this
Warrant shall not violate any United States or state securities laws.
Section 7. Ownership and Transfer.
(a) The Company shall maintain at its principal executive offices (or such other
office or agency of the Company as it may designate by notice to the holder
hereof), a register for this Warrant, in which the Company shall record the name
and address of the person in whose name this Warrant has been issued, as well as
the name and address of each transferee. The Company may treat the person in
whose name any Warrant is registered on the register as the owner and holder
thereof for all purposes, notwithstanding any notice to the contrary, but in all
events recognizing any transfers made in accordance with the terms of this
Warrant.
Section 8. Adjustment of Warrant Exercise Price and Number of Shares. The
Warrant Exercise Price and the number of shares of Common Stock issuable upon
exercise of this Warrant shall be adjusted from time to time as follows:
(a) Adjustment of Warrant Exercise Price and Number of Shares upon Issuance of
Common Stock. If and whenever on or after the Issuance Date of this Warrant, the
Company issues or sells, or is deemed to have issued or sold, any shares of
Common Stock (other than (i) Excluded Securities and (ii) shares of Common Stock
which are issued or deemed to have been issued by the Company in connection with
an Approved Stock Plan or upon exercise or conversion of the Other Securities)
for a consideration per share less than a price (the "Applicable Price") equal
to the Warrant Exercise Price in effect immediately prior to such issuance or
sale, then immediately after such issue or sale the Warrant Exercise Price then
in effect shall be reduced to an amount equal to such consideration per share.
Upon each such adjustment of the Warrant Exercise Price hereunder, the number of
Warrant Shares issuable upon exercise of this Warrant shall be adjusted to the
number of shares determined by multiplying the Warrant Exercise Price in effect
immediately prior to such adjustment by the number of Warrant Shares issuable
upon exercise of this Warrant immediately prior to such adjustment and dividing
the product thereof by the Warrant Exercise Price resulting from such
adjustment.
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(b) Effect on Warrant Exercise Price of Certain Events. For purposes of
determining the adjusted Warrant Exercise Price under Section 8(a) above, the
following shall be applicable:
(i) Issuance of Options. If after the date hereof, the Company in any manner
grants any Options and the lowest price per share for which one share of Common
Stock is issuable upon the exercise of any such Option or upon conversion or
exchange of any convertible securities issuable upon exercise of any such Option
is less than the Applicable Price, then such share of Common Stock shall be
deemed to be outstanding and to have been issued and sold by the Company at the
time of the granting or sale of such Option for such price per share. For
purposes of this Section 8(b)(i), the lowest price per share for which one share
of Common Stock is issuable upon exercise of such Options or upon conversion or
exchange of such Convertible Securities shall be equal to the sum of the lowest
amounts of consideration (if any) received or receivable by the Company with
respect to any one share of Common Stock upon the granting or sale of the
Option, upon exercise of the Option or upon conversion or exchange of any
convertible security issuable upon exercise of such Option. No further
adjustment of the Warrant Exercise Price shall be made upon the actual issuance
of such Common Stock or of such convertible securities upon the exercise of such
Options or upon the actual issuance of such Common Stock upon conversion or
exchange of such convertible securities.
(ii) Issuance of Convertible Securities. If the Company in any manner issues or
sells any convertible securities and the lowest price per share for which one
share of Common Stock is issuable upon the conversion or exchange thereof is
less than the Applicable Price, then such share of Common Stock shall be deemed
to be outstanding and to have been issued and sold by the Company at the time of
the issuance or sale of such convertible securities for such price per share.
For the purposes of this Section 8(b)(ii), the lowest price per share for which
one share of Common Stock is issuable upon such conversion or exchange shall be
equal to the sum of the lowest amounts of consideration (if any) received or
receivable by the Company with respect to one share of Common Stock upon the
issuance or sale of the convertible security and upon conversion or exchange of
such convertible security. No further adjustment of the Warrant Exercise Price
shall be made upon the actual issuance of such Common Stock upon conversion or
exchange of such convertible securities, and if any such issue or sale of such
convertible securities is made upon exercise of any Options for which adjustment
of the Warrant Exercise Price had been or are to be made pursuant to other
provisions of this Section 8(b), no further adjustment of the Warrant Exercise
Price shall be made by reason of such issue or sale.
(iii) Change in Option Price or Rate of Conversion. If the purchase price
provided for in any Options, the additional consideration, if any, payable upon
the issue, conversion or exchange of any convertible securities, or the rate at
which any convertible securities are convertible into or exchangeable for Common
Stock changes at any time, the Warrant Exercise Price in effect at the time of
such change shall be adjusted to the Warrant Exercise Price which would have
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been in effect at such time had such Options or convertible securities provided
for such changed purchase price, additional consideration or changed conversion
rate, as the case may be, at the time initially granted, issued or sold and the
number of Warrant Shares issuable upon exercise of this Warrant shall be
correspondingly readjusted. For purposes of this Section 8(b)(iii), if the terms
of any Option or convertible security that was outstanding as of the Issuance
Date of this Warrant are changed in the manner described in the immediately
preceding sentence, then such Option or convertible security and the Common
Stock deemed issuable upon exercise, conversion or exchange thereof shall be
deemed to have been issued as of the date of such change. No adjustment pursuant
to this Section 8(b) shall be made if such adjustment would result in an
increase of the Warrant Exercise Price then in effect.
(c) Effect on Warrant Exercise Price of Certain Events. For purposes of
determining the adjusted Warrant Exercise Price under Sections 8(a) and 8(b),
the following shall be applicable:
(i) Calculation of Consideration Received. If any Common Stock, Options or
convertible securities are issued or sold or deemed to have been issued or sold
for cash, the consideration received therefore will be deemed to be the net
amount received by the Company therefore. If any Common Stock, Options or
convertible securities are issued or sold for a consideration other than cash,
the amount of such consideration received by the Company will be the fair value
of such consideration, except where such consideration consists of marketable
securities, in which case the amount of consideration received by the Company
will be the market price of such securities on the date of receipt of such
securities. If any Common Stock, Options or convertible securities are issued to
the owners of the non-surviving entity in connection with any merger in which
the Company is the surviving entity, the amount of consideration therefore will
be deemed to be the fair value of such portion of the net assets and business of
the non-surviving entity as is attributable to such Common Stock, Options or
convertible securities, as the case may be. The fair value of any consideration
other than cash or securities will be determined jointly by the Company and the
holders of Warrants representing at least two-thirds (b) of the Warrant Shares
issuable upon exercise of the Warrants then outstanding. If such parties are
unable to reach agreement within ten (10) days after the occurrence of an event
requiring valuation (the "Valuation Event"), the fair value of such
consideration will be determined within five (5) Business Days after the tenth
(10th) day following the Valuation Event by an independent, reputable appraiser
jointly selected by the Company and the holders of Warrants representing at
least two-thirds (b) of the Warrant Shares issuable upon exercise of the
Warrants then outstanding. The determination of such appraiser shall be final
and binding upon all parties and the fees and expenses of such appraiser shall
be borne jointly by the Company and the holders of Warrants.
(ii) Integrated Transactions. In case any Option is issued in connection with
the issue or sale of other securities of the Company, together comprising one
integrated transaction in which no specific consideration is allocated to such
Options by the parties thereto, the Options will be deemed to have been issued
for a consideration of $.01.
(iii) Treasury Shares. The number of shares of Common Stock outstanding at any
given time does not include shares owned or held by or for the account of the
Company, and the disposition of any shares so owned or held will be considered
an issue or sale of Common Stock.
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(iv) Record Date. If the Company takes a record of the holders of Common Stock
for the purpose of entitling them (1) to receive a dividend or other
distribution payable in Common Stock, Options or in convertible securities or
(2) to subscribe for or purchase Common Stock, Options or convertible
securities, then such record date will be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.
(d) Adjustment of Warrant Exercise Price upon Subdivision or Combination of
Common Stock. If the Company at any time after the date of issuance of this
Warrant subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, any Warrant Exercise Price in effect immediately prior
to such subdivision will be proportionately reduced and the number of shares of
Common Stock obtainable upon exercise of this Warrant will be proportionately
increased. If the Company at any time after the date of issuance of this Warrant
combines (by combination, reverse stock split or otherwise) one or more classes
of its outstanding shares of Common Stock into a smaller number of shares, any
Warrant Exercise Price in effect immediately prior to such combination will be
proportionately increased and the number of Warrant Shares issuable upon
exercise of this Warrant will be proportionately decreased. Any adjustment under
this Section 8(d) shall become effective at the close of business on the date
the subdivision or combination becomes effective.
(e) Distribution of Assets. If the Company shall declare or make any dividend or
other distribution of its assets (or rights to acquire its assets) to holders of
Common Stock, by way of return of capital or otherwise (including, without
limitation, any distribution of cash, stock or other securities, property or
options by way of a dividend, spin off, reclassification, corporate
rearrangement or other similar transaction) (a "Distribution"), at any time
after the issuance of this Warrant, then, in each such case:
(i) any Warrant Exercise Price in effect immediately prior to the close of
business on the record date fixed for the determination of holders of Common
Stock entitled to receive the Distribution shall be reduced, effective as of the
close of business on such record date, to a price determined by multiplying such
Warrant Exercise Price by a fraction of which (A) the numerator shall be the
Closing Sale Price of the Common Stock on the trading day immediately preceding
such record date minus the value of the Distribution (as determined in good
faith by the Company's Board of Directors) applicable to one share of Common
Stock, and (B) the denominator shall be the Closing Sale Price of the Common
Stock on the trading day immediately preceding such record date; and
(ii) either (A) the number of Warrant Shares obtainable upon exercise of this
Warrant shall be increased to a number of shares equal to the number of shares
of Common Stock obtainable immediately prior to the close of business on the
record date fixed for the determination of holders of Common Stock entitled to
receive the Distribution multiplied by the reciprocal of the fraction set forth
in the immediately preceding clause (i), or (B) in the event that the
Distribution is of common stock of a company whose common stock is traded on a
national securities exchange or a national automated quotation system, then the
holder of this Warrant shall receive an additional warrant to purchase Common
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Stock, the terms of which shall be identical to those of this Warrant, except
that such warrant shall be exercisable into the amount of the assets that would
have been payable to the holder of this Warrant pursuant to the Distribution had
the holder exercised this Warrant immediately prior to such record date and with
an exercise price equal to the amount by which the exercise price of this
Warrant was decreased with respect to the Distribution pursuant to the terms of
the immediately preceding clause (i).
(f) Certain Events. If any event occurs of the type contemplated by the
provisions of this Section 8 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features), then the Company's
Board of Directors will make an appropriate adjustment in the Warrant Exercise
Price and the number of shares of Common Stock obtainable upon exercise of this
Warrant so as to protect the rights of the holders of the Warrants; provided,
except as set forth in section 8(d),that no such adjustment pursuant to this
Section 8(f) will increase the Warrant Exercise Price or decrease the number of
shares of Common Stock obtainable as otherwise determined pursuant to this
Section 8.
(g) Notices.
(i) Immediately upon any adjustment of the Warrant Exercise Price, the Company
will give written notice thereof to the holder of this Warrant, setting forth in
reasonable detail, and certifying, the calculation of such adjustment.
(ii) The Company will give written notice to the holder of this Warrant at least
ten (10) days prior to the date on which the Company closes its books or takes a
record (A) with respect to any dividend or distribution upon the Common Stock,
(B) with respect to any pro rata subscription offer to holders of Common Stock
or (C) for determining rights to vote with respect to any Organic Change (as
defined below), dissolution or liquidation, provided that such information shall
be made known to the public prior to or in conjunction with such notice being
provided to such holder.
(iii) The Company will also give written notice to the holder of this Warrant at
least ten (10) days prior to the date on which any Organic Change, dissolution
or liquidation will take place, provided that such information shall be made
known to the public prior to or in conjunction with such notice being provided
to such holder.
Section 9. Purchase Rights; Reorganization, Reclassification, Consolidation,
Merger or Sale.
(a) In addition to any adjustments pursuant to Section 8 above, if at any time
the Company grants, issues or sells any Options, Convertible Securities or
rights to purchase stock, warrants, securities or other property pro rata to the
record holders of any class of Common Stock (the "Purchase Rights"), then the
holder of this Warrant will be entitled to acquire, upon the terms applicable to
such Purchase Rights, the aggregate Purchase Rights which such holder could have
acquired if such holder had held the number of shares of Common Stock acquirable
upon complete exercise of this Warrant immediately before the date on which a
record is taken for the grant, issuance or sale of such Purchase Rights, or, if
no such record is taken, the date as of which the record holders of Common Stock
are to be determined for the grant, issue or sale of such Purchase Rights.
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(b) Any recapitalization, reorganization, reclassification, consolidation,
merger, sale of all or substantially all of the Company's assets to another
Person or other transaction in each case which is effected in such a way that
holders of Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Stock is referred to herein as an "Organic Change." Prior to
the consummation of any (i) sale of all or substantially all of the Company's
assets to an acquiring Person or (ii) other Organic Change following which the
Company is not a surviving entity, the Company will secure from the Person
purchasing such assets or the successor resulting from such Organic Change (in
each case, the "Acquiring Entity") a written agreement (in form and substance
satisfactory to the holders of Warrants representing at least two-thirds (iii)
of the Warrant Shares issuable upon exercise of the Warrants then outstanding)
to deliver to each holder of Warrants in exchange for such Warrants, a security
of the Acquiring Entity evidenced by a written instrument substantially similar
in form and substance to this Warrant and satisfactory to the holders of the
Warrants (including an adjusted warrant exercise price equal to the value for
the Common Stock reflected by the terms of such consolidation, merger or sale,
and exercisable for a corresponding number of shares of Common Stock acquirable
and receivable upon exercise of the Warrants without regard to any limitations
on exercise, if the value so reflected is less than any Applicable Warrant
Exercise Price immediately prior to such consolidation, merger or sale). Prior
to the consummation of any other Organic Change, the Company shall make
appropriate provision (in form and substance satisfactory to the holders of
Warrants representing a majority of the Warrant Shares issuable upon exercise of
the Warrants then outstanding) to insure that each of the holders of the
Warrants will thereafter have the right to acquire and receive in lieu of or in
addition to (as the case may be) the Warrant Shares immediately theretofore
issuable and receivable upon the exercise of such holder's Warrants (without
regard to any limitations on exercise), such shares of stock, securities or
assets that would have been issued or payable in such Organic Change with
respect to or in exchange for the number of Warrant Shares which would have been
issuable and receivable upon the exercise of such holder's Warrant as of the
date of such Organic Change (without taking into account any limitations or
restrictions on the exercisability of this Warrant).
Section 10. Lost, Stolen, Mutilated or Destroyed Warrant. If this Warrant is
lost, stolen, mutilated or destroyed, the Company shall promptly, on receipt of
an indemnification undertaking (or, in the case of a mutilated Warrant, the
Warrant), issue a new Warrant of like denomination and tenor as this Warrant so
lost, stolen, mutilated or destroyed.
Section 11. Notice. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Warrant must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of receipt is received by the sending party transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one Business Day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall be:
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If to Montgomery: Montgomery Equity Partners, Ltd.
101 Hudson Street - Suite 3700
Jersey City, NJ 07302
Attention: Mark A. Angelo
Telephone: (201) 985-8300
Facsimile: (201) 985-8266
With Copy to: David Gonzalez, Esq.
101 Hudson Street - Suite 3700
Jersey City, NJ 07302
Telephone: (201) 985-8300
Facsimile: (201) 985-8266
If to the Company, to: Sichenzia Ross Friedman Ference LLP
1065 Avenue of the Americas
New York, NY 10018
Attention: Richard Friedman, Esq.
Telephone: (212) 930-9700
Facsimile: (212) 930-9725
With a copy to: In Veritas Medical Diagnostics, inc.
The Green House
Beechwood Business Park North
Inverness - Scotland L2 IV2 3BL
Telephone: +44 (0) 1463667347
Facsimile: +44 (0) 1463667310
If to a holder of this Warrant, to it at the address and facsimile number set
forth on Exhibit C hereto, with copies to such holder's representatives as set
forth on Exhibit C, or at such other address and facsimile as shall be delivered
to the Company upon the issuance or transfer of this Warrant. Each party shall
provide five days' prior written notice to the other party of any change in
address or facsimile number. Written confirmation of receipt (A) given by the
recipient of such notice, consent, facsimile, waiver or other communication, (or
(B) provided by a nationally recognized overnight delivery service shall be
rebuttable evidence of personal service, receipt by facsimile or receipt from a
nationally recognized overnight delivery service in accordance with clause (i),
(ii) or (iii) above, respectively.
Section 12. Date. The date of this Warrant is set forth on page 1 hereof. This
Warrant, in all events, shall be wholly void and of no effect after the close of
business on the Expiration Date, except that notwithstanding any other
provisions hereof, the provisions of Section 8(b) shall continue in full force
and effect after such date as to any Warrant Shares or other securities issued
upon the exercise of this Warrant.
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Section 13. Amendment and Waiver. Except as otherwise provided herein, the
provisions of the Warrants may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of the holders of
Warrants representing at least two-thirds of the Warrant Shares issuable upon
exercise of the Warrants then outstanding; provided that, except for Section
8(d), no such action may increase the Warrant Exercise Price or decrease the
number of shares or class of stock obtainable upon exercise of any Warrant
without the written consent of the holder of such Warrant.
Section 14. Descriptive Headings; Governing Law. The descriptive headings of the
several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. The corporate laws of the
State of Colorado shall govern all issues concerning the relative rights of the
Company and its stockholders. All other questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
the internal laws of the State of New Jersey, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of New
Jersey or any other jurisdictions) that would cause the application of the laws
of any jurisdictions other than the State of New Jersey. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in Hudson County and the United States District Court for the
District of New Jersey, for the adjudication of any dispute hereunder or in
connection herewith or therewith, or with any transaction contemplated hereby or
discussed herein, and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
Section 15. Waiver of Jury Trial. AS A MATERIAL INDUCEMENT FOR EACH PARTY HERETO
TO ENTER INTO THIS WARRANT, THE PARTIES HERETO HEREBY WAIVE ANY RIGHT TO TRIAL
BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS WARRANT AND/OR ANY
AND ALL OF THE OTHER DOCUMENTS ASSOCIATED WITH THIS TRANSACTION.
SIGNATURE PAGE TO FOLLOW
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed as of
the date first set forth above.
IN VERITAS MEDICAL DIAGNOSTICS, INC.
By: /s/ John Fuller
-------------------------
Name: John Fuller
Title: Chief Executive Officer
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EXHIBIT A TO WARRANT
EXERCISE NOTICE
TO BE EXECUTED
BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT
IN VERITAS MEDICAL DIAGNOSTICS, INC.
The undersigned holder hereby exercises the right to purchase
______________ of the shares of Common Stock ("Warrant Shares") of In Veritas
Medical Diagnostics, Inc., a Colorado corporation (the "Company"), evidenced by
the attached Warrant (the "Warrant"). Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the Warrant.
Specify Method of exercise by check mark:
1. ___ Cash Exercise
(a) Payment of Warrant Exercise Price. The holder shall pay the Aggregate
Exercise Price of $______________ to the Company in accordance with the
terms of the Warrant.
(b) Delivery of Warrant Shares. The Company shall deliver to the holder
_________ Warrant Shares in accordance with the terms of the Warrant.
2. ___ Cashless Exercise
(a) Payment of Warrant Exercise Price. In lieu of making payment of the
Aggregate Exercise Price, the holder elects to receive upon such exercise
the Net Number of shares of Common Stock determined in accordance with the
terms of the Warrant.
(b) Delivery of Warrant Shares. The Company shall deliver to the holder
_________ Warrant Shares in accordance with the terms of the Warrant.
Date: _______________ __, ______
Name of Registered Holder
By:
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Name:
---------------------------------------
Title:
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EXHIBIT B TO WARRANT
FORM OF WARRANT POWER
FOR VALUE RECEIVED, the undersigned does hereby assign and transfer to
________________, Federal Identification No. __________, a warrant to purchase
____________ shares of the capital stock of In Veritas Medical Diagnostics,
Inc., a Colorado corporation, represented by warrant certificate no. _____,
standing in the name of the undersigned on the books of said corporation. The
undersigned does hereby irrevocably constitute and appoint ______________,
attorney to transfer the warrants of said corporation, with full power of
substitution in the premises.
Dated:
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By:
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Name:
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Title:
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