EXHIBIT 10.4
MEDICAL SCIENCE SYSTEMS, INC.
AGENCY AGREEMENT
Fine Equities, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
June 15, 1999
Gentlemen:
Medical Science Systems, Inc., a Texas corporation (the "Company"),
proposes to offer for sale to purchasers qualifying as "accredited investors"
under Rule 501(a) of Regulation D of the Securities Act of 1933, as amended (the
"Securities Act"), in a private placement, up to $5,000,000 in aggregate
purchase price of the Company's Series A Preferred Stock, no par value
("Shares"). A minimum of $2,500,000 in aggregate purchase price of Shares
("Minimum Offering") and a maximum of $5,000,000 in aggregate purchase price of
Shares ("Maximum Offering") will be sold in the offering at a price of $2.50 per
Share. The Shares will be offered on a "best efforts" basis. The Shares are
being offered pursuant to the Private Placement Memorandum dated April 14, 1999
(the "Offering Memorandum") and related documents in accordance with Section
4(2) of the Securities Act and Regulation D promulgated thereunder.
Fine Equities, Inc. is sometimes referred to herein as the
"Placement Agent." The Offering Memorandum (including the exhibits thereto), as
it may be amended from time to time, and the form of proposed subscription
agreement between the Company and each subscriber (the "Subscription Agreement")
and the exhibits, if any, which are part of the Offering Memorandum and
Subscription Agreement are collectively referred to herein as the "Offering
Documents."
The Company will prepare and deliver to the Placement Agent a
reasonable number of copies of the Offering Documents in form and substance
satisfactory to counsel to the Placement Agent.
Each prospective investor subscribing to purchase Shares (each, a
"Subscriber") will be required to deliver, among other things, a Subscription
Agreement and a confidential investor questionnaire ("Questionnaire") in the
form to be provided to offerees. Capitalized terms used herein, unless otherwise
defined or unless the context otherwise indicates, shall have the same meanings
provided in the Offering Documents.
1. APPOINTMENT OF PLACEMENT AGENT.
(a) You are hereby appointed exclusive Placement Agent of the
Company (subject to your right to have Selected Dealers, as defined in Section
1(c) hereof, participate in the Offering) for the duration of the Offering (the
"Offering Period") herein specified for the purposes of assisting the Company in
finding qualified Subscribers pursuant to the offering (the "Offering")
described in the Offering Documents. The "Offering Period" shall commence on the
day the Offering Documents are first made available to you by the Company for
delivery in connection with the offering for sale of the Shares and shall
continue until the earlier to occur of (i) the sale of all of the Maximum
Offering or (ii) July 14, 1999 (unless extended for a period of 30 days under
circumstances specified in the Offering Memorandum). If the Minimum Offering is
not sold prior to the end of the Offering Period, the Offering will be
terminated and all funds received from Subscribers will be returned, without
interest and without any deduction. The day that the Offering Period terminates
is hereinafter referred to as the "Termination Date."
(b) Subject to the performance by the Company of all of its
obligations to be performed under this Agreement and to the completeness and
accuracy of all representations and warranties of the Company contained in this
Agreement, Fine Equities, Inc. hereby accepts such agency and agrees to use its
best efforts to assist the Company in finding qualified Subscribers pursuant to
the Offering described in the Offering Documents. It is understood that the
Placement Agent has no commitment to sell the Shares. Your agency hereunder is
not terminable by the Company except upon termination of the Offering Period.
(c) You may engage other persons, selected by you in your
discretion, that are members of the National Association of Securities Dealers,
Inc., ("NASD") and that have executed a Selected Dealers Agreement substantially
in the form attached hereto as Schedule A, to assist you in the Offering (each
such person being hereinafter referred to as a "Selected Dealer") and you may
allow such persons such part of the compensation and payment of expenses payable
to you hereunder as you shall determine. Each Selected Dealer shall be required
to agree in writing to comply with the provisions of, and to make the
representations, warranties and covenants contained in, this Section 1.
(d) Subscriptions for Shares shall be evidenced by the
execution by subscribers of a Subscription Agreement. No Subscription Agreement
shall be effective unless and until it is accepted by the Company. Until the
Closing (as defined herein), all subscription funds received shall be held as
described in the Subscription Agreement. The Placement Agent shall not have any
obligation to independently verify the accuracy or completeness of any
information contained in any Subscription Agreement or the authenticity,
sufficiency, or validity of any check delivered by any prospective investor in
payment for Shares.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Placement Agent and each Selected Dealer, if any,
as follows:
(a) SECURITIES LAW COMPLIANCE. The Offering Documents conform
in all respects with the requirements of Section 4(2) of the Securities Act and
Regulation D promulgated thereunder and with the requirements of all other
published rules and regulations of
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the Securities and Exchange Commission (the "Commission") currently in effect
relating to "private offerings" to "accredited investors" of the type
contemplated by the Company. The Offering Documents will not contain an untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances in which
they were made, not misleading. If at any time prior to the completion of the
Offering or other termination of this Agreement any event shall occur as a
result of which it might become necessary to amend or supplement the Offering
Documents so that they do not include any untrue statement of any material fact
or omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances then existing, not misleading, the
Company will promptly notify you and will supply you with amendments or
supplements correcting such statement or omission. The Company will also provide
the Placement Agent for delivery to all offerees and purchasers and their
representatives, if any, any information, documents and instruments which the
Placement Agent deems necessary to comply with applicable state and federal law.
(b) ORGANIZATION. Each of the Company and the Subsidiaries (as
hereinafter defined) is a corporation duly organized, validly existing and in
good standing under the laws of its state or country of organization and has all
requisite corporate power and authority to own and lease its properties, to
carry on its business as currently conducted and as proposed to be conducted, to
execute and deliver this Agreement and to carry out the transactions
contemplated by this Agreement, as appropriate and is duly licensed or qualified
to do business as a foreign corporation in each jurisdiction in which the
conduct of its business or ownership or leasing of its properties requires it to
be so qualified.
(c) CAPITALIZATION. The authorized, issued and outstanding
capital stock of the Company prior to the consummation of the transactions
contemplated hereby is as set forth in the Offering Documents. All issued and
outstanding shares of the Company are validly issued, fully paid and
nonassessable and have not been issued in violation of the preemptive rights of
any stockholder of the Company. All prior sales of securities of the Company
were either registered under the Act and applicable state securities laws or
exempt from such registration, and no security holder has any rescission rights
with respect thereto.
(d) WARRANTS, PREEMPTIVE RIGHTS, ETC. Except for the warrants
to purchase shares of the Company's common stock, no par value ("Common Stock")
to be issued to you or your designees in consideration for your acting as
Placement Agent hereunder (the "Agent's Warrants"), and except as set forth in
or contemplated by the Offering Documents, there are not, nor will there be
immediately after the Closing (as hereinafter defined), any outstanding
warrants, options, agreements, convertible securities, preemptive rights to
subscribe for or other commitments pursuant to which the Company is, or may
become, obligated to issue any shares of its capital stock or other securities
of the Company and this Offering will not cause any anti-dilution adjustments to
such securities or commitments except as reflected in the Offering Documents.
(e) SUBSIDIARIES AND INVESTMENTS. The Company has no
subsidiaries other than Medical Science Systems France E.U., a French
corporation, and Medical Science Systems Laboratory Services, Inc., a Delaware
corporation (the "Delaware Subsidiary")
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(collectively, the "Subsidiaries"). The Company does not own, directly or
indirectly, any capital stock or other equity ownership or proprietary interests
in any other corporation, association, trust, partnership, joint venture or
other entity. The Company owns all of the capital stock of the Subsidiaries, and
there are no warranties, options, agreements, convertible securities, preemptive
rights to subscribe for or other commitments pursuant to which any of the
Subsidiaries may become obligated to issue any shares of its capital stock or
any other securities to any person other than the Company.
(f) FINANCIAL STATEMENTS. The financial information contained
in the Offering Documents is accurate in all material respects. The Company's
Form 10-KSB for the year ended December 31, 1998 contains the Company's (i)
Balance Sheets at December 31, 1998 (the "Balance Sheet Date"), (ii) Statements
of Operations for each of the last two years ending December 31, 1997 and
December 31, 1998, and (iii) Statements of Cash Flows for each of the last two
years ending December 31, 1997 and December 31, 1998 (such financial statements
attached to the Offering Documents hereinafter referred to collectively as the
"Financial Statements"). The Financial Statements have been prepared in
conformity with generally accepted accounting principles consistently applied
and show all material liabilities, absolute or contingent, of the Company
required to be recorded thereon and present fairly the financial position and
results of operations of the Company as of the dates and for the periods
indicated.
(g) ABSENCE OF CHANGES. Other than as set forth in the
Offering Documents, since the Balance Sheet Date, neither the Company nor any
Subsidiary has incurred any liabilities or obligations, direct or contingent,
not in the ordinary course of business, or entered into any transaction not in
the ordinary course of business, which is material to the business of the
Company and the Subsidiaries, taken as a whole, and there has not been any
change in the capital stock of, or any incurrence of long-term debt by, the
Company or any Subsidiary, or any issuance of options, warrants or other rights
to purchase the capital stock of the Company or any Subsidiary, or any adverse
change or any development involving, so far as the Company can now reasonably
foresee, a prospective adverse change in the condition (financial or otherwise),
net worth, results of operations, business, key personnel or properties which
would be material to the business or financial condition of the Company or any
Subsidiary, and neither the Company nor any Subsidiary has become a party to,
and neither the business nor the property of the Company or any Subsidiary has
become the subject of, any material litigation whether or not in the ordinary
course of business.
(h) TITLE. Each of the Company and the Subsidiaries has good
and valid title to all properties and assets, owned by it, free and clear of all
liens, charges, encumbrances or restrictions, except such as are not materially
significant or important in relation to the Company's and the Subsidiaries'
business, taken as a whole; all of the material leases and subleases under which
each of the Company and the Subsidiaries is the lessor or sublessor of
properties or assets or under which each of the Company and the Subsidiaries
holds properties or assets as lessee or sublessee are in full force and effect,
and neither the Company nor any Subsidiary is in default in any material respect
with respect to any of the terms or provisions of any of such leases or
subleases, and no material claim has been asserted by anyone adverse to rights
of the Company or any Subsidiary as lessor, sublessor, lessee or sublessee under
any of the leases or subleases mentioned above, or affecting or questioning the
right of the Company or any
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Subsidiaries to continued possession of the leased or subleased premises or
assets under any such lease or sublease. The Company owns or leases all such
properties as are necessary to its operations as now conducted and to be
conducted, as presently planned.
(i) PROPRIETARY RIGHTS. Each of the Company and the
Subsidiaries owns or possesses adequate and enforceable rights to use all
patents, patent applications, trademarks, service marks, copyrights, trade
secrets, processes, formulations, technology or know-how used or proposed to be
used in the conduct of its business as described in or contemplated by the
Offering Documents (the "Proprietary Rights"). Other than as set forth in the
Offering Documents, neither the Company nor any Subsidiary has received any
notice of any claims, nor does it have any knowledge of any threatened claims,
and knows of no facts which would form the basis of any claim, asserted by any
person to the effect that the sale or use of any product or process now used or
offered by the Company or any Subsidiary or proposed to be used or offered by
the Company or any Subsidiary infringes on any patents or infringes upon the use
of any such Proprietary Rights of another person and, to the best of the
Company's knowledge, no others have infringed the Company's or any Subsidiary's
Proprietary Rights.
(j) LITIGATION. Other than as set forth in the Offering
Documents, there is no material action, suit, investigation, customer complaint,
claim or proceeding at law or in equity by or before any arbitrator,
governmental instrumentality or other agency now pending or, to the knowledge of
the Company, threatened against the Company or any Subsidiary the adverse
outcome of which would materially adversely affect the Company's or any
Subsidiary's business or prospects. Neither the Company nor any Subsidiary is
subject to any judgment, order, writ, injunction or decree of any Federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign which would materially adversely
affect the Company's or any Subsidiary's business or prospects.
(k) NON-DEFAULTS; NON-CONTRAVENTION. Neither the Company nor
any Subsidiary is in violation of or default under, nor will the execution and
delivery of this Agreement or any of the Offering Documents, the Escrow
Agreement or the Agent's Warrants or consummation of the transactions
contemplated herein or therein result in a violation of or constitute a default
in the performance or observance of any obligation (i) under its Articles of
Incorporation, or its By-laws, or any indenture, mortgage, contract, material
purchase order or other agreement or instrument to which the Company or any
Subsidiary is a party or by which it or its property is bound or affected (all
of which are listed on Schedule 2(k) to this Agreement) or (ii) with respect to
any material order, writ, injunction or decree of any court of any Federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, and there exists no condition,
event or act which constitutes, nor which after notice, the lapse of time or
both, could constitute a default under any of the foregoing, which in either
case would have a material adverse effect on the business, financial condition
or prospects of the Company or any Subsidiary, other than violations, breaches
or defaults as may result from the issuance of shares of Common Stock prior to
the Company's Articles of Incorporation being amended to increase the authorized
number of shares of Common Stock to a number sufficient to allow the issuance of
all of the Company's Common Stock currently reserved for issuance, including the
Common Stock to be issued upon conversion of the shares.
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(l) TAXES. Each of the Company and the Subsidiaries has filed
all Federal, state, local and foreign tax returns which are required to be filed
by it and all such returns are true and correct in all material respects. Each
of the Company and the Subsidiaries has paid all taxes pursuant to such returns
or pursuant to any assessments received by it or which it is obligated to
withhold from amounts owing to any employee, creditor or third party. Each of
the Company and the Subsidiaries has properly accrued all taxes required to be
accrued. The tax returns of the Company and each Subsidiary have never been
audited by any state, local or Federal authorities. Neither the Company nor any
Subsidiary has waived any statute of limitations with respect to taxes or agreed
to any extension of time with respect to any tax assessment or deficiency.
(m) COMPLIANCE WITH LAWS; LICENSES, ETC. Other than as set
forth in the Offering Documents, neither the Company nor any Subsidiary has
received notice of any violation of or noncompliance with any Federal, state,
local or foreign, laws, ordinances, regulations and orders applicable to its
business which has not been cured, the violation of, or noncompliance with
which, would have a materially adverse effect on the business or operations of
the Company or any Subsidiary. Each of the Company and the Subsidiaries has all
licenses and permits and other governmental certificates, authorizations and
permits and approvals (collectively, "Licenses") required by every Federal,
state and local government or regulatory body for the operation of its business
as currently conducted and the use of its properties, except where the failure
to be licensed would not have a material adverse effect on the business of the
Company or any Subsidiary. The Licenses are in full force and effect and no
violations are or have been recorded in respect of any License and no proceeding
is pending or threatened to revoke or limit any thereof.
(n) AUTHORIZATION OF AGREEMENT, ETC. This Agreement has been
duly and validly authorized, executed and delivered by the Company and the
execution, delivery and performance by the Company of this Agreement, the
Subscription Agreement, and the Escrow Agreement have been duly authorized by
all requisite corporate action by the Company and when delivered, constitute or
will constitute the legal, valid and binding obligations of the Company,
enforceable in accordance with their respective terms.
(o) AUTHORIZATION OF SHARES, ETC. The issuance, sale and
delivery of the Shares and the Agent's Warrants have been duly authorized by all
requisite corporate action of the Company. When so issued, sold and delivered,
the Shares and the Agent's Warrants will be duly executed, issued and delivered
and will constitute valid and legal obligations of the Company enforceable in
accordance with their respective terms and, in each case, will not be subject to
preemptive or any other similar rights of the stockholders of the Company or
others.
(p) AUTHORIZATION OF RESERVED SHARES. Assuming approval by the
Company's stockholders of the conversion of the Shares and assuming approval by
the stockholders 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 the issuance of all shares of Common Stock reserved for
issuance, including, the Common Stock to be issued upon conversion of the
Shares, and upon the effectiveness of such amendment, when issued and
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delivered, the shares of Common Stock issuable upon conversion of the Shares
will be validly issued and outstanding, fully paid and nonassessable. The
Company will use all reasonable efforts to promptly obtain the foregoing
approvals. When issued, sold, paid for and delivered, the shares of Common Stock
issuable upon conversion of the Shares and exercise of the Agent's Warrants (the
"Reserved Shares") will be validly issued and outstanding, fully paid and
nonassessable, and not subject to preemptive or any other similar rights of the
stockholders of the Company or others.
(q) EXEMPTION FROM REGISTRATION. Assuming (i) the accuracy of
the information provided by the respective subscribers in the Subscription
Agreement and (ii) that the Placement Agent has complied in all material
respects with the provisions of Regulation D promulgated under the Securities
Act, the offer and sale of the Shares pursuant to the terms of this Agreement
are exempt from the registration requirements of the Securities Act and the
rules and regulations promulgated thereunder (the "Regulations"). The Company is
not disqualified from the exemption under Regulation D by virtue of the
disqualifications contained in Rule 505(b)(2)(iii) or Rule 507 promulgated
thereunder.
(r) REGISTRATION RIGHTS. Other than as set forth in the
Offering Documents, except with respect to holders of the Shares and the Agent's
Warrants, no person has any right to cause the Company to effect the
registration under the Securities Act of any securities of the Company.
(s) BROKERS. Neither the Company nor any of its officers,
directors, employees or stockholders has employed any broker or finder in
connection with the transactions contemplated by this Agreement other than the
Placement Agent.
(t) TITLE TO SHARES. Assuming approval by the Company's
stockholders of the conversion of the Shares and assuming approval by the
stockholders 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 the issuance of all shares of Common Stock reserved for
issuance, including, the Common Stock to be issued upon conversion of the
Shares, and upon the effectiveness of such amendment, when issued and delivered,
the shares of Common Stock issuable upon conversion of the Shares will be
validly issued and outstanding, fully paid and nonassessable. The Company will
use all reasonable efforts to promptly obtain the foregoing approvals. When
certificates representing the securities comprising the Shares and the Reserved
Shares shall have been duly delivered to the purchasers and payment shall have
been made therefor, the several purchasers shall have good and valid title to
the Shares and the Reserved Shares free and clear of all liens, encumbrances and
claims whatsoever (with the exception of claims arising or through the acts of
the purchasers and except as arising from applicable federal and state
securities laws), and the Company shall have paid all taxes, if any, in respect
of the original issuance thereof.
(u) RIGHT OF FIRST REFUSAL. No person, firm or other business
entity is a party to any agreement, contract or understanding, written or oral
entitling such party to a right of first refusal with respect to the Company.
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(v) SECURITIES EXCHANGE ACT COMPLIANCE. The Company has filed
with the Securities and Exchange Commission ("SEC") on a timely basis all
filings required of a company whose securities have been registered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). All
information contained in such filings is true, accurate and complete in all
material respects. The Company covenants to maintain the registration of its
Common Stock under the Exchange Act and to make all filings thereunder on a
timely basis. For the purpose of this paragraph, filings pursuant to Rule 12b-25
of the Exchange Act shall be deemed timely.
(w) NON-AFFILIATED DIRECTORS. The Company's Board of Directors
has not less than two directors who are independent from, and unaffiliated with,
management of the Company.
3. CLOSING; PLACEMENT AND FEES.
(a) CLOSING. Provided the Minimum Offering shall have been
subscribed for and funds representing the sale thereof shall have cleared, a
closing (the "Initial Closing") shall take place at the offices of the Placement
Agent, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ within ten (10) days following
the Termination Date which date (the "Closing Date") may be accelerated or
adjourned by agreement between the Company and the Placement Agent). At the
Initial Closing, payment for the Shares issued and sold by the Company shall be
made against delivery of certificates representing the Shares. In addition,
subsequent Closings (if applicable) may be scheduled at the discretion of the
Company and Placement Agent, each of which shall be deemed a "Closing"
hereunder.
(b) CONDITIONS TO PLACEMENT AGENT'S OBLIGATIONS. The
obligations of the Placement Agent hereunder will be subject to the accuracy of
the representations and warranties of the Company herein contained as of the
date hereof and as of each Closing Date, to the performance by the Company of
its obligations hereunder and to the following additional conditions:
(i) DUE QUALIFICATION OR EXEMPTION. (A) The offering
contemplated by this Agreement will become qualified or be exempt from
qualification under the securities laws of the several states pursuant to
paragraph 4(e) below not later than the Closing Date, and (B) at the Closing
Date no stop order suspending the sale of the Shares shall have been issued, and
no proceeding for that purpose shall have been initiated or threatened;
(ii) NO MATERIAL MISSTATEMENTS. Neither the Blue Sky
qualification materials nor the Offering Memorandum, or any supplement thereto,
will contain an untrue statement of a fact which is material, or omits to state
a fact, which is material and is required to be stated therein, or is necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading;
(iii) COMPLIANCE WITH AGREEMENTS. The Company will have
complied with all agreements and satisfied all conditions on its part to be
performed or satisfied hereunder at or prior to each Closing;
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(iv) CORPORATE ACTION. The Company will have taken all
necessary corporate action, including, without limitation, obtaining the
approval of the Company's board of directors, for the execution and delivery of
this Agreement, the performance by the Company of its obligations hereunder and
the offering contemplated hereby;
(v) OPINION OF COUNSEL. The Placement Agent shall receive
the opinion of Fulbright & ▇▇▇▇▇▇▇▇, dated the Closing(s), substantially to the
effect that:
(A) each of the Company and the Delaware
Subsidiary has been duly organized and is validly existing and in good standing
under the laws of the State of Texas and Delaware, respectively, and has the
requisite corporate power and authority to own or hold its properties and
conduct its business as now conducted;
(B) all of the issued and outstanding shares of
capital stock of the Delaware Subsidiary have been duly authorized and validly
issued and are fully paid and nonassessable, and all of the issued and
outstanding shares of the capital stock of the Delaware Subsidiary are owned by
the Company free and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity;
(C) each of this Agreement, the Escrow Agreement
(as hereinafter defined), the Subscription Agreement and the Agent's Warrants
has been duly authorized, executed and delivered by the Company, and constitutes
the valid and binding obligation of the Company, enforceable against it in
accordance with its terms, subject to any applicable bankruptcy, insolvency or
other laws affecting the rights of creditors generally and to general equitable
principles;
(D) Except for the Shares and Agent's Warrants to
be issued as contemplated by this Agreement and any options issued pursuant to,
or capital stock issuable upon conversion of any option issued pursuant to, the
Company's employee stock option plan or the Company's employee stock purchase
plan, to such counsel's knowledge, there are no outstanding warrants, options,
agreements, convertible securities, preemptive rights or other commitments
pursuant to which the Company is, or may become, obligated to issue any shares
of its capital stock or other securities of the Company other than as set forth
in the Offering Documents. The Shares have been duly authorized, validly issued
and when issued in accordance with the terms of the Offering Memorandum and this
Agreement, will be fully paid and nonassessable. Assuming approval by the
Company's stockholders of the conversion of the Shares and assuming the
Company's Articles of Incorporation are amended to increase the number of
authorized shares, the issuance of the Reserved Shares has been duly authorized,
and, upon issuance in accordance with the terms of the Articles of
Incorporation, the Reserved Shares will be fully paid and nonassessable and not
subject to preemptive or any other similar rights;
(E) assuming (i) the accuracy of the information
provided by the Subscribers in the Subscription Agreement and (ii) that the
Placement Agent has complied in all material respects with the requirements of
section 4(2) of the Securities Act (and
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the provisions of Regulation D promulgated thereunder), the offer and sale of
the Shares is exempt from the registration requirements of Section 5 of the
Securities Act;
(F) THE EXECUTION, DELIVERY AND PERFORMANCE BY THE
COMPANY OF THIS AGREEMENT AND THE OFFERING DOCUMENTS AND THE CONSUMMATION BY THE
COMPANY OF THE TRANSACTIONS CONTEMPLATED THEREBY DO NOT VIOLATE ANY PROVISION OF
ANY APPLICABLE FEDERAL, STATE OR, TO OUR KNOWLEDGE, LOCAL LAW, RULE OR
REGULATION (PROVIDED, THAT, WE EXPRESS NO OPINION WITH RESPECT TO REGISTRATION
UNDER APPLICABLE STATE SECURITIES OR BLUE SKY LAWS OR EXEMPTIONS THEREFROM OF
OFFERS AND SALES OF THE SHARES (INCLUDING THE AGENT'S WARRANTS AND RESERVED
SHARES)) OR ANY PROVISION OF THE COMPANY'S ARTICLES OF INCORPORATION, AS
AMENDED, OR BYLAWS, AND DO NOT CONFLICT WITH OR CONSTITUTE, WITH OR WITHOUT THE
PASSAGE OF TIME OR THE GIVING OF NOTICE, A DEFAULT UNDER THE PROVISIONS OF ANY
JUDGMENT, WRIT, DECREE OR ORDER KNOWN TO US OR OF ANY MATERIAL AGREEMENT OR
INSTRUMENT WHICH WAS FILED AS AN EXHIBIT TO OR INCORPORATED BY REFERENCE TO THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998, TO
WHICH THE COMPANY IS A PARTY OR BY WHICH IT IS BOUND (ALL OF WHICH ARE LISTED ON
SCHEDULE 2(K) TO THIS AGREEMENT); AND
(G) To our knowledge, there are no claims,
actions, suits, investigations or proceedings before or by any arbitrator,
court, governmental authority or instrumentality pending or currently threatened
against or affecting the Company or involving the properties of the Company
which might materially and adversely affect the business, properties or
financial condition of the Company or which might materially adversely affect
the transactions or other acts contemplated by this Agreement or the validity or
enforceability of this Agreement, except as set forth in or contemplated by the
Offering Documents.
(vi) OPINION OF FRENCH COUNSEL. The Placement Agent shall
receive the opinion of French counsel, dated the Closing(s), substantially to
the effect that:
(A) Medical Science Systems France E.U. (the
"French Subsidiary") has been duly organized and is validly existing and in good
standing under the laws of France and has the requisite corporate power and
authority to own or hold its properties and conduct its business as now
conducted; and
(B) all of the issued and outstanding shares of
capital stock of the French Subsidiary have been duly authorized and validly
issued and are fully paid and nonassessable and all of the issued and
outstanding shares of the capital stock of the French Subsidiary are owned by
the Company free and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity.
(vii) OPINION OF PATENT COUNSEL. The Placement Agent shall
receive the opinion of ▇▇▇▇▇, ▇▇▇▇ and ▇▇▇▇▇, the patent counsel to the Company,
dated the Closing(s), in form satisfactory to the Placement Agent.
(viii) The Placement Agent shall receive a certificate of the
Company, signed by the President and Secretary thereof, that the representations
and warranties
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contained in Section 2 hereof are true and accurate in all material respects at
such Closing with the same effect as though expressly made at such Closing.
(ix) The Placement Agent shall receive a copy of a duly
executed escrow agreement in the form previously delivered to you (the "Escrow
Agreement) with United States Trust Company of New York.
(x) The Placement Agent shall receive the agreements
described in Section 4(j) which agreements shall be in full force and effect.
(xi) Within two days after each Closing, the Placement
Agent shall receive copies of all letters from the Company to the investors
transmitting the Shares and shall receive a letter from the Company confirming
transmittal of the securities to the investors.
(c) BLUE SKY. A summary blue sky survey shall be prepared by
counsel to the Placement Agent stating the extent to which and the conditions
upon which offers and sales of the Shares may be made in certain jurisdictions.
It is understood that such survey may be based on or rely upon (i) the
representations of each Subscriber set forth in the Subscription Agreement
delivered by such Subscriber, (ii) the representations, warranties and
agreements of the Company set forth in Section 2 of this Agreement, (iii) the
representations and warranties of the Placement Agent, and (iv) the
representations of the Company set forth in the certificate to be delivered at
each Closing pursuant to paragraph (vi) of Section 3(b).
(d) PLACEMENT FEE AND EXPENSES. Simultaneously with payment
for and delivery of the Shares at each Closing as provided in paragraph 3(a)
above, the Company shall at such Closing pay to the Placement Agent (i) a
commission equal to ten percent (10%) of the aggregate purchase price of the
Shares sold and (ii) any expenses incurred by the Placement Agent that are
described in Section 4(b), except as set forth below. At each Closing, the
Company shall also pay all reasonable fees and expenses of ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇,
counsel to the Placement Agent, and all expenses (not to exceed ten thousand
dollars ($10,000)) in connection with the qualification of the Shares under the
securities or Blue Sky laws of the states which the Placement Agent shall
designate. The Company will, at each Closing, issue to you or your designees
(which may include any Selected Dealer or any officer of the Placement Agent or
a Selected Dealer) the Agent's Warrants in the form annexed hereto as Exhibit 1
to purchase such number of shares of Common Stock equal to 10% of the number of
shares of Common Stock underlying the Shares sold in the Offering. The Agent's
Warrants will be exercisable for a period of four years from the first
anniversary of the Initial Closing of the Offering.
(e) BRING DOWN OPINIONS AND CERTIFICATES. If there is more
than one Closing, then at each such Closing there shall be delivered to the
Placement Agent updated opinions and certificates as described in (v), (vi) and
(vii) of Section 3(b) above, respectively.
(f) NO ADVERSE CHANGES. There shall not have occurred, at any
time prior to the Closing or if applicable, any additional Closing, (i) any
domestic or international event, act or occurrence which has materially
disrupted, or in the Placement Agent's opinion will in the immediate future
materially disrupt, the securities markets; (ii) a general suspension of, or a
11
general limitation on prices for, trading in securities on the New York Stock
Exchange or the American Stock Exchange or in the over-the-counter market; (iii)
any outbreak of major hostilities or other national or international calamity;
(iv) any banking moratorium declared by a state or federal authority; (v) any
moratorium declared in foreign exchange trading by major international banks or
other persons; (vi) any material interruption in the mail service or other means
of communication within the United States; (vii) any material adverse change in
the business, properties, assets, results of operations, or financial condition
of the Company; or (viii) any change in the market for securities in general or
in political, financial, or economic conditions which, in the Placement Agent's
reasonable judgment, makes it inadvisable to proceed with the offering, sale,
and delivery of the Shares.
(g) CAPITALIZATION. As of the Closing Date, the Company shall
not have more the 7,127,440 shares of Common Stock outstanding, including any
and all securities with equivalent rights to the Common Stock, shares of Common
Stock or any other securities with equivalent rights, issuable upon exercise of
options, warrants and other contract rights, securities convertible directly or
indirectly into shares of Common Stock or such other security having equivalent
rights; provided, however, that the shares of Common Stock issuable upon
exercise of the Agent's Warrants shall be excluded from this provision.
4. COVENANTS OF THE COMPANY.
(a) USE OF PROCEEDS. The net proceeds of the Offering will be
used by the Company substantially as set forth in the Offering Memorandum. The
Company shall not use any of the proceeds from the Offering to repay any
indebtedness of the Company, including but not limited to indebtedness to any
current executive officers, directors or principal stockholders of the Company.
(b) EXPENSES OF OFFERING. The Company shall be responsible
for, and shall bear all expenses directly incurred in connection with, the
proposed Offering including, but not limited to, (i) reasonable legal fees
(including those of counsel to the Placement Agent and the Company); (ii)
printing, duplication and other costs of preparing the Offering Documents and
all amendments, supplements and exhibits thereto in such quantities as the
Placement Agent reasonably deems necessary; (iii)costs of preparing and
delivering the Agency Agreement and the blue sky memorandum, Share and Reserved
Share certificates, and all other placement agent and selling documents,
including, but not limited to, all postage, mailing, express charges and other
expenses as directed by the Placement Agent; and (iv) expenses in connection
with blue sky registrations, including, but not limited to, filing fees, legal
expenses, registrar and transfer agent fees, accounting fees, issue and transfer
taxes, expenses of the Placement Agent's counsel and the fees and disbursements
of counsel in connection with blue sky matters; provided however that such legal
fees for blue sky matters are not to exceed $10,000 (the "Company Expenses").
If the Private Placement is not completed for any reason,
except if such prevention is based upon a breach by the Company of any covenant,
representation or warranty contained herein, the Company shall not be liable for
the Placement Agent expenses. If the Private Placement is not completed because
the Company prevents it or because of a breach by
12
the Company of any such covenants, representations or warranties, the Company
shall remain liable for such expenses and the Placement Agent shall receive the
Agent's Warrants.
(c) AUTHORIZATION AND RESERVATION OF COMMON STOCK. The Company
shall reserve and keep available that maximum number of its authorized but
unissued shares of Common Stock which are issuable upon conversion of the Shares
and exercise of the Agent's Warrants. The Company has taken all necessary
actions to cause (other than obtaining stockholder approval of the conversion of
the Shares), and will use its reasonable best efforts to cause, the issuance,
sale and delivery by the Company of the shares of Common Stock issuable upon
conversion of the Shares and exercise of the Agent's Warrants to be duly
authorized by all requisite corporate action of the Company. The Reserved Shares
have been duly reserved for issuance upon conversion of all or any of the Shares
and exercise of the Agent's Warrants. The foregoing is subject to approval by
the Company's stockholders 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 the issuance of such Shares of Common Stock reserved
for issuance, including, the Common Stock to be issued upon conversion of the
Shares, and the filing and effectiveness of such amendment.
(d) REQUIRED REGISTRATION. The Company agrees to prepare and
file with the SEC thirty (30) days after the Closing Date of the Offering a
registration statement under the Securities Act covering the resale of the
shares of Common Stock issuable upon conversion of the Shares, subject to the
approval by the Company's shareholders. Such registration statement filed with
the SEC pursuant to this section shall become and remain effective until the
earlier of (i) 2 years from the date of effectiveness thereof or (ii) the date
when all such securities are sold which have been registered pursuant to such
registration statement.
(e) NOTIFICATION. The Company shall notify the Placement Agent
immediately, and in writing, (A) when any event shall have occurred during the
period commencing on the date hereof and ending on the later of the last Closing
or the Termination Date as a result of which the Offering Documents would
include any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, and (B) of the receipt of any notification with respect to the
modification, rescission, withdrawal or suspension of the qualification or
registration of the Shares, or of any exemption from such registration or
qualification, in any jurisdiction. The Company will use its reasonable best
efforts to prevent the issuance of any such modification, rescission, withdrawal
or suspension and, if any such modification, rescission, withdrawal or
suspension is issued and you so request, to obtain the lifting thereof as
promptly as possible.
(f) BLUE SKY. The Company will use its reasonable best efforts
to qualify or register the Shares for offering and sale under, or establish an
exemption from such qualification or registration under, the securities or "blue
sky" laws of such jurisdictions as you may reasonably request; provided however,
that the Company will not be obligated to qualify as a dealer in securities in
any jurisdiction in which it is not so qualified. The Company will not
consummate any sale of Shares in any jurisdiction in which it is not so
qualified or in any manner in which such sale may not be lawfully made.
13
(g) FORM D FILING. The Company shall file five copies of a
Notice of Sales of Securities on Form D with the Securities and Exchange
Commission (the "Commission") no later than 15 days after the first sale of the
Shares. The Company shall file promptly such amendments to such Notices on Form
D as shall become necessary and shall also comply with any filing requirement
imposed by the laws of any state or jurisdiction in which offers and sales are
made. The Company shall furnish the Placement Agent with copies of all such
filings.
(h) PRESS RELEASES, ETC. The Company shall not, during the
period commencing on the date hereof and ending on the later of the last Closing
or the Termination Date, issue any press release or other communication, or hold
any press conference with respect to the Company, its financial condition,
results of operations, business, properties, assets, or liabilities, or the
Offering, without the prior notice to and review by the Placement Agent.
(i) FORM 10-QSB The Company will provide to the Placement
Agent, promptly upon the filing thereof with the Commission (and in any event no
later than 5 days of such filing), a copy of its Quarterly Report in Form 10-QSB
for the three month period ended March 31, 1999 and copies of all other reports
filed under the Securities and Exchange Act of 1934, as amended, and rules
promulgated thereunder, prior to each Closing.
(j) RESTRICTIONS ON ISSUANCE OF SECURITIES. Prior to the
Closing Date, the Company will not, without the prior written consent of the
Placement Agent, issue additional shares of Common Stock or grant any warrants,
options or other securities of the Company.
(k) TRANSFER OF SHARES OF COMMON STOCK BY CERTAIN INDIVIDUALS.
The Company covenants that ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ will each individually agree that he will not directly or indirectly
offer, sell, transfer, pledge, assign, hypothecate or otherwise encumber ninety
percent (90%) of his shares of Common Stock or other securities convertible for
the Common Stock regardless of whether owned by him individually or
collectively, or otherwise dispose of any interest therein under Rule 144 of the
Securities Act or otherwise, from February 24, 1999 until twelve (12) months
following the Closing Date of the Offering. However, the above-mentioned
individuals may transfer their shares of Common Stock by gift or in a private
transaction, if the done or transferee agrees in writing to be bound to the same
provisions stated herein.
14
5. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless the
Placement Agent and each Selected Dealer, if any, and their respective
shareholders, directors, officers, agents and controlling persons (an
"Indemnified Party") against any and all loss, liability, claim, damage and
expense whatsoever (and all actions in respect thereof), and to reimburse the
Placement Agent for reasonable legal fees and related expenses as incurred
(including, but not limited to the costs of giving testimony or furnishing
documents in response to a subpoena or otherwise, and the costs of
investigating, preparing or defending any such action or claim whether or not in
connection with litigation in which the Placement Agent is a party), arising out
of any untrue statement or alleged untrue statement of a material fact contained
in the Offering Documents or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; PROVIDED, HOWEVER,
that the Company will not be liable in any such case, and the Placement Agent
agrees to indemnify the Company, to the extent, but only to the extent, that any
such loss, liability, claim, damage or expense arises out of or is based upon an
untrue or alleged statement or omission made in reliance upon and conformity
with written information furnished to the Company by or on behalf of the
Placement Agent specifically for use in the preparation of the Offering
Documents, which information consists solely of the manner of distribution of
the Shares as set forth in the Offering Memorandum under "Plan of Distribution."
(b) The Company agrees to indemnify and hold harmless an
Indemnified Party to the same extent as the foregoing indemnity, against any and
all loss, liability, claim, damage and expense whatsoever directly arising out
of the exercise by any person of any right under the Securities Act or the
Exchange Act or the securities or Blue Sky laws of any state on account of
violations of the representations, warranties or agreements set forth in Section
2 hereof.
(c) Promptly after receipt by a person entitled to
indemnification pursuant to the foregoing subsection (a) or (b) (an "indemnified
party") under this Section of notice of the commencement of any action, the
indemnified party will, if a claim in respect thereof is to be made against the
Company under this Section, notify in writing the Company of the commencement
thereof; but the omission so to notify the Company will not relieve it from any
liability which it may have to the indemnified party otherwise than under this
Section. In case any such action is brought against an indemnified party, and it
notifies the Company of the commencement thereof, the Company 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, subject to
the provisions herein stated, with counsel reasonably satisfactory to the
indemnified party, and after notice from the Company to the indemnified party of
its election so to assume the defense thereof, the Company will not be liable to
the indemnified party under this Section for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation. The indemnified party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the Company if the Company has assumed the
defense of the action with counsel reasonably satisfactory to the indemnified
party; provided that the fees and expenses of such counsel shall be
15
at the expense of the Company if (i) the employment of such counsel has been
specifically authorized in writing by the Company or (ii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party or parties and the Company and, in the judgment of the indemnified party,
it is advisable for the indemnified party or parties to be represented by
separate counsel (in which case the Company shall not have the right to assume
the defense of such action on behalf of the indemnified party or parties), it
being understood, however, that the Company shall not, in connection with any
one such action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the reasonable fees and expenses of more than one separate firm of
attorneys for the indemnified party or parties. No settlement of any action
against an indemnified party shall be made without the consent of the
indemnified party, which shall not be unreasonably withheld in light of all
factors of importance to the indemnified party.
16
6. CONTRIBUTION.
To provide for just and equitable contribution, if (i) an indemnified party
makes a claim for indemnification pursuant to Section (5) but it is found in a
final judicial determination, not subject to further appeal, that such
indemnification may not be enforced in such case, even though this Agreement
expressly provides for indemnification in such case, or (ii) any indemnified or
indemnifying party seeks contribution under the Securities Act, the Exchange
Act, or otherwise, then the Company (including for this purpose any contribution
made by or on behalf of any officer, director, employee or agent for the
Company, or any controlling person of the Company), on the one hand, and the
Placement Agent and any Selected Dealers (including for this purpose any
contribution by or on behalf of an indemnified party), on the other hand, shall
contribute to the losses, liabilities, claims, damages, and expenses whatsoever
to which any of them may be subject, in such proportions as are appropriate to
reflect the relative benefits received by the Company, on the one hand, and the
Placement Agent and the Selected Dealers, on the other hand; provided, however,
that if applicable law does not permit such allocation, then other relevant
equitable considerations such as the relative fault of the Company and the
Placement Agent and the Selected Dealers in connection with the facts which
resulted in such losses, liabilities, claims, damages, and expenses shall also
be considered. In no case shall the Placement Agent or a Selected Dealer be
responsible for a portion of the contribution obligation in excess of the
compensation received by it pursuant to Section 3 hereof or the Selected Dealer
Agreement, as the case may be. No person guilty of a fraudulent
misrepresentation shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation. For purposes of this Section 6,
each person, if any, who controls the Placement Agent or a Selected Dealer
within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act and each officer, director, stockholder, employee and agent of the
Placement Agent or a Selected Dealer, shall have the same rights to contribution
as the Placement Agent or the Selected Dealer, and each person, if any who
controls the Company within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Exchange Act and each officer, director, employee and agent
of the Company, shall have the same rights to contribution as the Company,
subject in each case to the provisions of this Section 6. Anything in this
Section 6 to the contrary notwithstanding, no party shall be liable for
contribution with respect to the settlement of any claim or action effected
without its written consent. This Section 6 is intended to supersede any right
to contribution under the Securities Act, the Exchange Act, or otherwise.
7. Miscellaneous.
(a) SURVIVAL. Any termination of the Offering without
consummation thereof shall be without obligation on the part of any party except
that the indemnification provided in Section 5 hereof and the contribution
provided in Section 6 hereof shall survive any termination and shall survive the
Closing Date for a period of two years and except as otherwise specifically set
forth herein.
(b) REPRESENTATIONS, WARRANTIES AND COVENANTS TO SURVIVE
DELIVERY. The respective representations, warranties, indemnities, agreements,
covenants and other statements of the Company as of the date hereof shall
survive execution of this Agreement and delivery of the Shares and the
termination of this Agreement for a period of two years.
17
(c) NO OTHER BENEFICIARIES. This Agreement is intended for the
sole and exclusive benefit of the parties hereto and their respective successors
and controlling persons, and no other person, firm or corporation shall have any
third-party beneficiary or other rights hereunder.
(d) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the law of the State of New York without regard to
conflict of law provisions.
(e) COUNTERPARTS. This Agreement may be signed in counterparts
with the same effect as if both parties had signed one and the same instrument.
(f) NOTICES. Any communications specifically required
hereunder to be in writing, if sent to the Placement Agent, will be mailed,
delivered and confirmed to it at Fine Equities, Inc., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Att: ▇. ▇▇▇▇▇ Fine, with a copy to ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Att: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq. and if sent
to the Company, will be mailed, delivered or telegraphed and confirmed to it at
Medical Science Systems, Inc., ▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, Att: ▇▇▇▇▇▇ ▇▇▇▇▇, with a copy to Fulbright & ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Att: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
(g) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the parties with respect to the matters herein referred and
supersedes all prior agreements and understandings, written and oral, between
the parties with respect to the subject matter hereof, including, but not
limited to, the letter of intent between the parties hereto dated February 24,
1999. Neither this Agreement nor any term hereof may be changed, waived or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver or termination is sought.
If you find the foregoing is in accordance with our understanding,
kindly sign and return to us a counterpart hereof, whereupon this instrument
along with all counterparts will become a binding agreement between us.
Very truly yours,
MEDICAL SCIENCE SYSTEMS, INC.
By: _______________________________
Title:
Agreed:
FINE EQUITIES, INC.
18
By: ________________________
Authorized Officer
19
SCHEDULE A
MEDICAL SCIENCE SYSTEMS, INC.
PRIVATE PLACEMENT SELLING AGREEMENT
New York, New York
April 12, 199
Fine Equities
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
1. Medical Science Systems, Inc. (the "Company") is offering for
sale on a "best efforts" basis, up to $5,000,000 in aggregate selling price of
shares of Series A Preferred Stock, no par value per share ("Shares"). The
Shares and the terms under which they are to be offered for sale by the Company
are more particularly described in the Confidential Private Placement Memorandum
dated April 14, 1999 (the "Offering Memorandum") and the form of subscription
agreement between the Company and each subscriber (the "Subscription
Agreement"), the exhibits to the Offering Memorandum and the Subscription
Agreement, and any other documents delivered to subscribers (herein,
collectively the "Offering Documents"). Fine Equities, Inc. (the "Placement
Agent") has agreed to act as exclusive placement agent to the Company for the
purpose of assisting the Company in finding subscribers who satisfy the
requirements set forth in the Offering Documents and more particularly in the
Subscription Agreement (herein, "Qualified Subscribers") pursuant to the
offering ("Private Placement") described in the Offering Documents.
2. The Shares are to be offered to a limited number of subscribers
by the Company at the price per Share set forth in the Offering Documents (the
"Subscription Price"), in accordance with the terms of offering thereof set
forth in the Offering Documents.
3. We are extending the right, subject to the terms and conditions
hereof, to assist the Company in finding Qualified Subscribers to purchase a
portion of the Shares, to certain dealers who are actually engaged in the
investment banking or securities business and who are members in good standing
of the National Association of Securities Dealers, Inc. (the "NASD") (such
dealers who shall agree to assist in locating Qualified Subscribers for Shares
hereunder being herein called "Selected Dealers"), at the Subscription Price,
for which they will receive a commission of ____% of the Subscription Price for
Shares purchased by Qualified Subscribers presented to the Company by them. The
Selected Dealers have agreed to comply with the provisions of all applicable
Rules of Fair Practice of the NASD. We may be included among the Selected
Dealers.
1
4. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the Private Placement of the
Shares.
5. If you desire to present to the Company any Qualified Subscribers
for Shares, your application should reach us promptly by telephone or telegraph
at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇. ▇▇▇▇▇ Fine,
telephone number (▇▇▇) ▇▇▇-▇▇▇▇. We reserve the right to reject subscriptions in
whole or in part, to make allotments and to close the subscription books at any
time without notice. The Shares allotted to the Qualified Subscribers presented
by you will be confirmed, subject to the terms and conditions of this Agreement.
6. The privilege of assisting the Company in finding Qualified
Subscribers for the Shares is extended to you only so long as the Company may
lawfully sell the Shares to residents in the state in which any such Qualified
Subscribers reside pursuant to the terms of the Offering Documents.
7. Any Shares offered under the terms of this Agreement and the
Offering Documents may only be offered and sold subject to the securities or
blue sky laws of the various states or other jurisdictions.
You agree to advise us from time to time, upon request, of the
number of sets of Offering Documents delivered to qualified subscribers by you
hereunder at the time of such request.
No expenses shall be charged to Selected Dealers.
Neither you nor any other person is or has been authorized to give
any information or to make any representation in connection with the offer or
sale of the Shares other than as contained in the Offering Documents.
8. On becoming a Selected Dealer, and in assisting the Company in
finding Qualified Subscribers for the Shares, you agree to comply with all the
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act") specifically with respect to the requirements of Regulation D thereunder.
You confirm that you are familiar with Rules 501 and 502 under the 1933 Act
relating to the limitations on the manner in which a private placement may be
conducted pursuant to Regulation D under the 1933 Act.
9. Upon request, you will be informed as to the states and other
jurisdictions in which we have been advised that the Shares have been qualified
or are exempt from registration requirements for offer and sale under the
respective securities or blue sky laws of such states and other jurisdictions,
but we do not assume any obligation or responsibility as to the right of any
Selected Dealer to offer the Shares in any state or other jurisdiction or as to
the eligibility of the Shares for sale therein. We will, if requested, file a
Further State Notice in respect of the Shares pursuant to Article 23-A of the
General Business Law of the State of New York.
2
10. No Selected Dealer is authorized to act as our agent or an agent
of the Company or otherwise to act on our behalf in assisting the Company in
finding Qualified Subscribers or otherwise or to furnish any information or make
any representation except as contained in the Offering Documents.
11. Nothing will constitute the Selected Dealers an association or
other separate entity or partners with us, or with each other, but you will be
responsible for your share of any liability or expense based on any claim to the
contrary. We shall not be under any liability for or in respect of value,
validity or form of the Shares or the delivery of the Shares, or the performance
by anyone of any agreement on its part, or the qualification of the Shares for
offer or sale under the laws of any jurisdiction, or for or in respect of any
other matter relating to this Agreement, except for lack of good faith and for
obligations expressly assumed by us in this Agreement and no obligation on our
part shall be implied herefrom. The foregoing provisions shall not be deemed a
waiver of any liability imposed under the federal securities laws.
12. Payment for the Shares subscribed for hereunder is to be made by
Qualified Subscribers at the Subscription Price during the term of the Private
Placement set forth in the Offering Documents at the office of Fine Equities,
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, by a certified or official bank
check, payable to the order of [Escrow Agent name and account].
13. Notice to us should be addressed to Fine Equities, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇. ▇▇▇▇▇ Fine. Notices to you shall
be deemed to have been duly given if mailed to you at the address to which this
letter is addressed.
14. If you desire to assist the Company in finding Qualified
Subscribers pursuant to the terms set forth above, please confirm your
application by signing and returning to us your confirmation on the duplicate
copy of this letter enclosed herewith, even though you may have previously
advised us thereof by telephone or telegraph. Our signature hereon may be by
facsimile.
Very truly yours,
FINE EQUITIES, INC.
By: ________________________________
Authorized Officer
3
Fine Equities, Inc.
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We hereby present to Medical Science Systems, Inc. (the "Company")
Qualified Subscribers for $______ of Shares in accordance with the terms and
conditions stated in the foregoing letter. We hereby acknowledge receipt of the
Offering Documents referred to in the first paragraph thereof relating to said
Shares. We confirm that we are a dealer actually engaged in the investment
banking or securities business and that we are a member in good standing of the
National Association of Securities Dealers, Inc. (the "NASD"). We hereby agree
to comply with all of the applicable provisions of the Rules of Fair Practice of
the NASD.
Firm:_________________________________
By: __________________________________
Authorized Officer
Dated:________________________