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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-SB
General Form For Registration of Securities of
Small Business Issuers Under Section 12(b)
or 12(g) of the Securities and Exchange Act of 1934
UNIVERSAL MEDICAL SYSTEMS, INC.
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(Name of Small Business Issuer in Its Charter)
NEVADA 13-3422108
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
14155 58TH STREET NORTH
CLEARWATER, FLORIDA 34620
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(Address of Principal Offices) (Zip Code)
(813) 535-2022
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(Issuer's Telephone Number, Including Area Code)
Securities to Be registered Under Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
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Common Stock, par value $.001 OTC Bulletin Board
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Securities to be registered under Section 12(g) of the Act:
None
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(Title of Class)
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(Title of Class)
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TABLE OF CONTENTS
<TABLE>
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ITEM PAGE
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1. DESCRIPTION OF BUSINESS 3
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION 16
3. DESCRIPTION OF PROPERTY 17
4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT 18
5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS 20
6. EXECUTIVE COMPENSATION 23
7. EXECUTIVE RELATIONSHIPS AND RELATED
TRANSACTIONS 24
8. LEGAL PROCEEDINGS 25
9. MARKET FOR COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS 25
10. RECENT SALES OF UNREGISTERED SECURITIES 26
11. DESCRIPTION OF SECURITIES 30
12. INDEMNIFICATION OF DIRECTORS AND OFFICERS 37
13. FINANCIAL STATEMENTS 40
14. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE 40
15. FINANCIAL STATEMENTS AND EXHIBITS 41
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ITEM 1. DESCRIPTION OF BUSINESS
HISTORY
Universal Medical Systems, Inc. ("Company"), was formed in the State of
Nevada in January, 1987, under the name Asset Development Corporation. In
June, 1987, the Company merged with Joe Franklin Productions, Inc., a Delaware
Corporation, and changed its name to Joe Franklin Productions, Inc. Joe
Franklin Productions, Inc., was engaged in the production and distribution of
memorabilia products, and subsequently discontinued its business activities in
December, 1991.
In November, 1995, the Company acquired Medhealth Imaging, Inc., a Florida
Corporation, through a stock transaction whereby the Florida Corporation was
merged into the Company's wholly owned subsidiary formed in Nevada in
September, 1995, and as part of such acquisition, the Company's name was
changed from Joe Franklin Productions, Inc., to Universal Medical Systems,
Inc., and the officers and directors of Medhealth Imaging, Inc., became the
officers and directors of the Company.
Effective January 1, 1996, the Company acquired Medical High Technology
International, Inc., a Florida Corporation, through a stock transaction whereby
the Florida Corporation was merged into the Company's wholly owned subsidiary
formed in Florida in February, 1996, and as part of such merger, the Company's
subsidiary changed its name from MHTI Acquisition Corp. to Medical High
Technology International, Inc. In July, 1996, in a share exchange the Company
acquired as wholly owned subsidiaries Life Sciences, Inc., a Connecticut
Corporation, Biometrix, Inc., a Connecticut Corporation, and Biometrix, Inc., a
New Hampshire Corporation. The Company also has two other wholly owned
subsidiaries, American Med Pharm, Inc., a Delaware Corporation, and King of
Nostalgia, Inc., a New York Corporation, these last two subsidiaries being
inactive.
The Company's common shares are currently being traded on the OTC Bulletin
Board under the "UMSI" Symbol. Just prior to the Medhealth Imaging, Inc.,
acquisition, there was a 35 to 1 reverse split of the Company's shares of
common stock.
GENERAL
The Company is a manufacturer of medical and health care high
technological diagnostic and treatment systems, including: A. Systems currently
being manufactured and sold: COMPUTER TOMOGRAPHIC SCANNER AND SIMULATOR (CT-SIM
SYSTEM) - a proprietary, radiation therapy computer tomographic (CT) simulator
system which provides a three-dimensional view of tumors to assist physicians
in planning radiation treatments; and B. Systems scheduled for manufacture and
sale
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during the latter part of calendar year 1997: (i) NEAR-INFRARED OPTICAL IMAGING
SYSTEM -a proprietary imaging system for the early detection of cancer; (ii)
SPINAL INJURY MANAGEMENT SYSTEM - a proprietary spinal injury management system
for diagnosis, assessment and rehabilitation of spinal injuries; and, (iii)
PULSE VOLUME RECORDER AND UP-DATE PROGRAM -a new generation Pulse Volume
Recorder (PVR) device which is in the final stages of development and will
incorporate the accuracy of the PVR, telecommunications capabilities and other
technical enhancements; and an Up-Date Program for existing PRV's which will
provide automated report generation capabilities.
Currently, the Company generates revenues from sales of its CT-SIM System
and maintenance contracts on installed CT-SIM Systems. The Company anticipates
receiving revenues from sales of certain of its other medical products
beginning the fourth quarter of fiscal 1997.
Through its wholly owned subsidiary Medical High Technology International,
Inc. (MHTI) the Company designs and manufactures proprietary, radiation-therapy
computer tomographic (CT) simulator systems providing a three-dimensional view
of tumors to assist physicians in planning radiation treatment for cancer
patients. Through its wholly owned subsidiary Medhealth Imaging, Inc.
(Medhealth) the Company is developing, and plans to market in the latter part
of calendar year 1997, proprietary spinal injury management systems for the
diagnosis, assessment, and rehabilitation of spinal injuries; and, optical
imaging (non x-ray) systems for sensing changes (i.e. tumors) within the human
body. Life Sciences, Inc., a Connecticut Corporation and wholly owned
subsidiary of the Company, currently is developing a new generation pulse
volume recorder for extremely accurate diagnosis of vascular diseases.
The Company's primary focus is to market on a world wide basis its
existing proprietary and advanced medical device technology products through
distributor companies and to perform support services for its products.
Universal's new product development strategy is the identification of medical
companies and university or hospital based research projects with short and
long term commercial potential. The Company intends to acquire the rights to
other medical technologies in exchange for further research and development
combined with commercialization and royalties. The Company recognizes the
potential for world wide markets, including the United States, for its
products. Generally, the Company's domestic products must receive United
States Food and Drug Administration ("FDA") clearance for new and advanced
medical device technology prior to marketing the same in the United States.
However, passage of the FDA Export Reform Act of 1996, introduced changes to
Chapter VIII of the Food, Drug and Cosmetics Act (the "Act") allowing
manufacturers of uncleared products to now export. These uncleared products
may be exported to any country in the world, under Section 802 of the Act, as
an alternative to export
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under Section 801(e)(2) of the Act, as long as the product is manufactured in
conformance with Good Manufacturing Practices or meet international standards.
However, some foreign countries have regulatory authorities comparable to the
FDA, whose regulations must be met prior to the Company selling its products in
such countries. Still other foreign countries rely on the FDA to approve the
Company's products for marketing prior to their sale in such countries.
With emphasis on new, proprietary technologies, the Company's growth plan
calls for a continuing program of acquisitions, licensing, corporate
partnering, research and development, along with internal growth of its
portfolio companies in the burgeoning global healthcare field.
PRINCIPAL PRODUCTS
CURRENT REVENUE GENERATING PRODUCTS
COMPUTER TOMOGRAPHIC SCANNER AND SIMULATOR (CT-SIM). The Company's
subsidiary, Medical High Technology International, Inc. (MHTI) designs,
manufactures and sells a unique computer tomographic (CT) based radiation
therapy treatment simulator designated as the CT-SIM System. The CT-SIM
System, which has been cleared for marketing in the United States by the United
States Food and Drug Administration (FDA), integrates a CT scanner, radiation
therapy simulator and treatment planning system; providing a three-dimensional
look at tumors to assist physicians in planning radiation treatment for cancer
patients. The CT-SIM System can transfer shaped portal designs onto a patient
using a laser to provide accurate markings for treatment. The system's
treatment planning system (optional) is also based on a user friendly computer
platform. Thus, in one integrated system, therapists can localize a tumor with
fourth generation CT precision, plan treatment using a three dimensional
planning system, and simulate for beam location and portal marking.
Radiation therapy treats cancer by beaming a concentrated dose of
radiation (usually generated by linear accelerator) at the cancerous tumor.
The goal of radiation therapy is to radiate the tumor with as minimal damage as
possible to surrounding healthy tissue. This is accomplished with highly
accurate targeting and careful planning prior to actual treatment.
As both a CT scanner and radiotherapy simulator, the CT-SIM System
provides the physician with high quality scans in the intended treatment
position. On these images, a three dimensional target volume may be defined
and then passed on to physicians for dose calculations.
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A CT-SIM System improves the simulation process by allowing more precise
outlining of the tumor and critical structures within the patient. CT images
give the physician a precise anatomical map of the patient accurate to 1.0mm.
The CT-SIM System then transfers these images electronically over a network to
another computer (treatment planning) for radiation beam alignment and dose
calculations.
After the physician approves the set of beams targeted at the tumor, this
information is passed back over the network on the CT-SIM System so that the
intended treatment fields may be marked on the patient's skin with a computer
controlled laser pointer. The CT-SIM System performs this process
mathematically, using sophisticated computer algorithms, which greatly enhances
the accuracy of the simulation process. Hence, a greater area of the tumor can
be radiated while minimizing damage to surrounding healthy tissues. For
verification, a film can be generated to compare to port films, i.e. a digital
"SIM film", providing the physician with a reconstructed divergent view of the
field.
MHTI recently introduced an enlarged aperture for its CT-SIM System with
an opening of 91.5 centimeters, designed especially for radiotherapy
positioning. Prior models used 48 and 69 centimeter apertures. The larger
gantry opening affords easier positioning of the patient and allows all
curative external beam patients to be imaged and simulated, using three
dimensional treatment protocols. MHTI's latest configuration of the CT-SIM
System is a network system allowing mailbox communication with third party
treatment planning computers from those oncology centers choosing to use
treatment planning systems of other providers. MHTI, within the latter part of
this fiscal year, intends to seek FDA clearance to market its enlarged aperture
CT-SIM System in the United States.
The Total Simulation Market is spread over 1,800 cancer treatment
facilities in the U.S. and another 1,900 similar centers abroad. It is
estimated that between 35%-50% of this market will purchase CT simulators over
the next 10 years, primarily because the standard of care for radiotherapy will
include this new technology along with three dimensional treatment planning
systems and in the larger comprehensive cancer centers the CT Simulator makes
their personnel more efficient. Currently, with less than 100 CT simulator
systems of all types installed worldwide, over thirty of which have been
installed by MHTI, the market potential for CT-SIM, is regarded as excellent by
the Company.
In 1993, CT simulation was only 10% of the simulation market and will be
the fastest growing market segment in the 90's. This growth is expected to top
35% in 1997 when worldwide market demand, estimated to be in excess of $1.0
billion, will be at its highest due to two factors. First, the demand for CT
imaging in radiotherapy is growing along with the demand for three dimensional
treatment planning computers used for three dimensional, stereotactic, and
conformal treatments. Second,
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networking technologies in radiotherapy are on the rise with the trend toward
non-proprietary computer systems.
Patient databases, imaging databases, and electronic charting are the
foundation for open networks; and, CT simulation has supported open network
communications since 1992. Hence, the conservative growth of CT simulation in
1993 and an estimated growth of 18% through 1997.
Foreign market expansion is crucial to the Company's growth since overseas
medical centers care for twice as many patients as their U.S. counterparts.
Without legislative issues to reduce reimbursements or restrictive government
guidelines for new technologies, expanding the Company's overseas markets is
the focal point of MHTI's sales efforts.
The Company's CT-SIM System sells for $600,000-$800,000 per unit. MHTI
expects to generate sales in excess of $4.5 million in fiscal year, 1997.
Backlog as of March 31, 1997, amounted to $717,375, including one unit destined
for M.D. Anderson Cancer Center, Orlando, Florida and CT-SIM maintenance
service. Service revenues to be generated for fiscal 1997 are estimated to be
$1 million.
FUTURE REVENUE GENERATING PRODUCTS
Through its subsidiary, Medhealth Imaging, Inc. (Medhealth), the Company
develops and market proprietary diagnostic imaging systems which are primarily
used for early detection of cancer and has acquired a proprietary product used
for the diagnosis, assessment and rehabilitation of upper and lower spinal
injuries.
NEAR-INFRARED OPTICAL IMAGING SYSTEM (TRANSILLUMINATION). Medhealth
Imaging, Inc.'s proprietary Near-infrared optical imaging system marketed under
the name, Medimage System, is principally used in the detection of breast
cancer and is used as an adjunct to mammography. While mammography, a
photographic film technique that exposes such film to x-rays, is the most
widely accepted form of breast cancer detection in this country, its use
remains both controversial and, in some instances, uncomfortable. The
controversy is caused by the harmful impact of X-rays, and the resulting risk
verses the reward of detection.
Breast cancer is a worldwide health problem; and, according to American
Cancer Society (ACS) estimates, one out of nine women will develop breast
cancer. Accordingly, the ACS recommends that over 56 million women in the
United States should be examined routinely for breast cancer. Early detection
and proper diagnosis of cancerous tumors is the key to survival. Generally,
breast cancer causes death in women by spreading cancer to other body locations
usually before detection. As the disease spreads, the chances of survival
drastically decline and treatment becomes no
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longer an effective option. Early detection and proper treatment provide the
only known method of preventing or limiting the spreading of the cancer and
resulting death.
In mammography, electrically generated x-rays pass through the breast and
expose an industrial photographic film. The resulting two dimensional image
represents the density of the breast's tissue examined, the greater the density
the darker the images. The amount of darkness is directly proportional to the
intensity of the x-rays. The images clarity is dependent upon the intensity of
the x-rays and the pathological density of tissue within the breast as well as
the breast size of different women. The x-ray intensity must be limited since
x-rays are a known carcinogenic factor. Pathological density can vary from
translucent (fat tissue) to dense (glandular tissue), with a continuous range
in between.
Mammography's overall accuracy is estimated to be about 93%. However, for
tumors less than one centimeter, the sensitivity ratio is much less and its
accuracy range declines to about 70%. Mammography can not detect all breast
cancers and it is estimated that in about 25% of cases, it can not identify
cancerous tumors. Consequently, radiologists and other medical practitioners
are not capable of effectively diagnosing small early malignant tumor images
through routine mammography procedures. The medical community currently has
accepted certain limitations and radiation (x-ray) dosage levels since there
are no other available or alternative techniques to replace x-ray machines.
Mammography can not detect cancerous growths that have not yet formed a
detectable mass, since images generated via x-rays include the inherent
limitations of density of breast tissue, women's breast size and x-ray
intensity. It is known that cancerous cells shed dead cells as the cancer
grows. This debris can cause calcification which may provide a method for
detecting a breast cancer before a mass is formed. Thus, the identification of
such calcification and interpretation of their size and pattern of formation is
of great significance when a mammogram is interpreted.
All available medical data clearly indicates the current limitations of
the mammography technique in detecting breast tumors due to limited images
produced on industrial photographic films which often translate into different
opinions and varying interpretations by medical practitioners. As stated
above, because mammography is a density dependent technique, some cancer cell
growth can not be seen using mammography. For example, if a cancerous growth
is surrounded by dense tissue, the absorption difference between the tumor and
the surrounding tissue may not be seen on industrial photographic films since
radiation reaching the film is controlled by the prevailing surrounding tissue.
Additionally, the size of the breast may obscure the tumor.
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Mammography image interpretation rests primarily on calcification present
in the cancerous growth breast cells and density patterns of the tissue in the
breast. However, there are many interpretive difficulties, among other
factors, when diagnosing a breast tumor, especially a relatively small tumor
via mammography. The most obvious factors are: (1) density dependency, which
can obscure a cancerous growth; (2) the contrast range of the film, i.e. the
range of the x-ray intensity which is seen as the film is exposed to increasing
amounts of x-rays; and, (3) two dimensional view.
The Company has developed a system which utilizes light in the
Near-Infrared Spectrum (which has no side effects) to illuminate the breast and
detect the growth of vascular structures. The system relies on hemoglobin and
skin being selectively penetrable to visible and near-infrared light. Since
tumors, like all living cells, require the body's circulatory system to nourish
them, a physician detecting unusual levels of vascular growth would immediately
suspect a tumor's presence. More importantly, these blood vessels frequently
reveal potential problem areas earlier than through the use of conventional
mammography. Since light is not a known carcinogen, unlike x-rays, women may
safely be checked for breast cancer more frequently, potentially leading to
earlier detection and a greater likelihood of being cured. In most cases,
using the Medhealth Near-Infrared Optical Imaging System requires less
examination time than conventional mammography and is considerably more
comfortable for the patient. The cost of the Company's system is comparable to
a conventional mammography density imaging system, i.e., in the $40,000 to
$50,000 range.
The Near-Infrared Optical Imaging System using near-infrared light, is the
core proprietary technology of Medhealth. This system contains a high
intensity light source that produces up to 450 watts of controlled incandescent
light. The light source has three output ports which are coupled to a
trifurcated (three into one) fiber optic cable. The fiber optic cable
terminates in a probe assembly which contains a mechanical iris to further
regulate the output intensity. Near-infrared filters of various frequencies
are used inside the probes to restrict its light output to narrow bands outside
the normal human vision range. The system camera contains a solid state image
detector which is highly sensitive in the near-infrared portion of the visible
light spectrum. By applying the above named technique, the desired body part
is transilluminated from the beginning of the examination and the operator can
view the image on the video monitor and align the patient and probe as needed
to produce clear images. Patient data, test data and view labels are then
superimposed into the video images to insure proper identification. The
standard set of bilateral exam views are captured on computer disk in a
digitized form for reading by the physician. Since there is no harmful
radiation involved, questionable areas may be re-scanned from various angles
and with different light sources. Tissue densities and structure formations
can be represented in color from a palette of 64 possibilities. This computer
system can store thousands of images for comparison studies and the
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digitized images may be transmitted by phone lines for review and consultation.
The Company is in the preliminary stages of developing a fully digitized
transillumination system utilizing a laser as a near-infrared light source in
lieu of an incandescent light.
Using the Company's transillumination system, focal areas of increased
absorptions and changes in patient blood vessel patterns associated with areas
of cancerous tumor growth, termed vascular abnormalities, become electronically
visible. Since the transillumination procedure uses no harmful radiation, the
Company's system can be used as frequently as required to monitor "at risk"
patients.
The transillumination system, which the Company intends to sell for
$35,000 to $45,000, has not been cleared for marketing in the United States by
the FDA. In the next year, the Company intends to submit for FDA clearance its
new digitized laser transillumination system. Pending such approval, the two
principal sources of sales would be United States hospitals which can test the
system through clinical utilization (hospitals having an investigative review
board) and foreign markets through distributors and the establishment of
licensing programs. The Far East, in particular, could be a significant
market. In China, optical systems have been utilized for a number of years,
with published studies in that country dating back almost ten years.
Medhealth's transillumination system allows images to be transmitted anywhere
in the world for purposes of analysis and interpretation by physicians.
Although the system is principally intended to be used for the detection of
breast cancer, its capabilities allow its use in the detection of prostrate,
ovarian, lymphatic and testicular cancer. Further, the system may be used to
monitor breast implant leakage. The Company estimates a worldwide market for
the transillumination system in excess of $1.0 Billion in sales to physicians
and hospitals. Medhealth currently has no backlog for this product.
SPINAL INJURY MANAGEMENT SYSTEM. Medhealth has acquired advanced
proprietary technology to address the diagnosis, assessment and rehabilitation
of cervical (neck) and lumbar (back) spinal injuries. This product is unique
in its ability to provide high accuracy, objective diagnostic testing and
rehabilitation of injuries at an affordable cost. Cervical testing involves
the use of computer monitored sensors to measure bilateral strength and track
the position of the neck and head. The computer collects detailed information
for display comparisons of cervical balance and extremity strength. The sensor
arrangement allows highly accurate evaluation of cervical balance throughout
the rotation range of the neck. All of the patient information is gathered by
the computer, which will not accept false data. For the lumbar testing, the
system measures the strength ratio of the lumbar extensor group (lower back
muscles) which protects the lumbar spine. Chronic weakness, present in most of
the population, is responsible for many injuries in this area. Medhealth
injury management testing produces specific measurements of strength throughout
the range of motion from full flexion to full extension. Strength imbalances
and abnormalities are displayed
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graphically and stored in the computer for comparison during rehabilitation.
This system provides extensive documentation of the patient's test results and
rehabilitation status in both graphic and numeric forms. A narrative version
of the result is provided to minimize the physician's time spent handling case
paperwork.
The spinal injury management system, which the Company intends to sell for
$30,000 to $40,000, has not been cleared for marketing in the United States by
the FDA. In the next year, the Company intends to submit the spinal injury
management system for FDA clearance. Upon receiving FDA clearance for
marketing in the United States, the Company intends to market the spinal injury
management system to physical therapists, orthopods, chiropractors and primary
care facilities. Primary patient care, insurance claims and workmen's
compensation are major application areas of this system. The Company estimates
the market for this system to exceed $1.0 billion worldwide. The Company
currently has no backlog for this product.
PULSE VOLUME RECORDER. In July, 1996, the Company acquired Life Sciences,
Inc., a Connecticut Corporation, and two Biometrix, Inc., corporations, one a
Connecticut Corporation and the other a New Hampshire Corporation. According to
Dr. Manfred Asrican, founder and president of Life Sciences, Inc., a
Connecticut Corporation, within the next year the Company intends to introduce
a new generation Pulse Volume Recorder (PVR) device, which will incorporate the
accuracy of the PVR, telecommunications capability and other technical
enhancements. In addition, a PVR up-date program has been instituted to
provide automated patient report generation capabilities, thus eliminating the
need to cut and paste individual patient reports. The telecommunications
capability will allow remote diagnostic centers consultation capabilities with
larger medical centers. The PVR up-date will be marketed to physicians and
hospitals at a unit cost of approximately $10,000.
The Company's new generation PVR will be marketed to physicians and
hospitals at a unit cost of $16,500 to $18,500. The worldwide market for the
PVR is estimated to be $85 million. Calendar year 1997 sales for Life
Sciences' PVR systems are estimated at $2 million. Life Sciences currently has
no backlog for this product.
DISTRIBUTION.
The Company currently has developed marketing relationships with medical
dealers and distributors both in the United States and in many foreign
countries to market its products. The Company is in the process of expanding
its distributor network for its products both in the United States and in
foreign countries through distribution and dealer agreements and strategic
alliances. The Company has an agreement with the JMK Group, Inc., based in New
York City and Vancouver, Canada, which assists in the licensing, joint venture,
marketing, distribution and production of the Company's products throughout
Asia, including Japan, China, Korea
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and Taiwan. Through the efforts of JMK Group, Inc., the Company recently
shipped three CT-SIM Systems to Taiwan.
In addition, the Company currently has distributors in Belarus, China,
Croatia, Czech Republic, Hong Kong, Hungary, Italy, Japan, Korea, Poland,
Taiwan, United Arab Emirates, United Kingdom, Belgium, Sweden, Norway, and
Finland.
COMPETITION.
Competition in the sale of most of the Company's products is intense. The
Company competes with a large number of firms having greater financial
resources than the Company. Many of these companies have long histories of
manufacturing and marketing high quality products.
Medhealth's Near-Infrared Imaging System as an adjunct to mammography does
not directly compete with such modality. The Company knows of no competing
optical systems being manufactured today. Because of mammography's density
dependence and therein its limitations, the Company believes that optical
imaging is a viable adjunct to mammography. With the introduction of
Medhealth's digitized laser optical imaging system expected in the later part
of 1997, the Company's product should gain technological leadership in the
market place.
The Company considers its major competition for its Medhealth spinal
injury management system to be Arthur Jones, who is best known for developing
the Nautilus system of athletic exercise equipment. Mr. Jones markets his
spinal injury management system under the Medx label and it is estimated that
Medx has placed over 500 systems (both back and cervical) in the field to date.
Although the Medx systems are known for their extremely high prices, Medx has
recently developed a stripped down version of its lumbar system selling for
approximately $25,000. Significant competitive factors in spinal injury
management systems include price, reliability, quality of service, diagnostic
features and patient improvement. The Company's management is of the opinion
that it will be competitive in all these factors.
Currently, diagnostic companies are adding simulation functions to their
CT units. MHTI has established a niche in the market where conventional
simulators cannot produce comparable CT image quality and the modified
diagnostic CT units cannot perform vital CT simulation functions. Picker
Medical is the market leader in CT simulators, using a technology which they
adopted by modifying their diagnostic cat scanners. In addition to Picker,
which distributes the Varian product, potential competitors for the MHTI's
CT-SIM System include General Electric, Siemens Medical Systems, Inc.,
Shimarlyer, Phillips Medical Systems International, B.V. and Toshiba Medical.
Today, only Picker has FDA pre-market approval. MHTI's lack of funds and
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distribution channels, coupled with Picker's well established name, enabled
Picker to dominate the market for CT scanners despite MHTI's head start in the
field. However, the Company believes that its newest digitized laser CT-SIM
System which is planned to be introduced in the later part of 1997, along with
CT-SIM System's reliability and MHTI's quality of service, will enable MHTI to
regain a significant market share.
Life Sciences, Inc.'s non-invasive Pulse Volume Recorder (PVR) will
compete with alternative instrumentation, doppler ultrasound and color imaging.
Such competing modalities are generally more expensive than PVR system and are
not likely to be used in a physician's office. PVR type instruments are sold
to physicians by a number of companies including Parks Medical, Inc., Unetix,
and Imex.
MANUFACTURING
The CT-SIM System is manufactured by MHTI at its plant in Clearwater,
Florida. The Company's other products likewise will be manufactured at the
MHTI facilities.
Currently, there are no material suppliers of the off the shelf parts and
services used in the manufacture of the CT-SIM System or the Company's other
products. Any number of supply sources are available to the Company should any
one or more of its current suppliers terminate its relationship with the
Company. Some of the component parts for the CT-SIM System contain software;
however, the Company pays no royalties to the manufacturers of such component
parts for the use of such software.
In April, 1996, the Company and its subsidiary, MHTI, entered into a joint
technology agreement with Dynacs Engineering, Inc., a worldwide high-technology
engineering firm. As a result of such agreement, Dynacs has become the
software development arm for the Company's products. The Company owns the
software developed by Dynacs for the Company.
Dynacs' clients have included NASA, the Department of Defense, the
European Space Agency, the U.S. Air Force, Phillips Laboratory, and McDonald
Douglas. Dynacs has worked on the International Space Station Alpha program
and was extensively involved in the development of docking and berthing systems
for both the U.S. and European space systems.
RESEARCH AND DEVELOPMENT
The life cycle of high technological products has become increasingly
shorter resulting in the Company's need to expend increasing amounts of time
and capital to continually upgrade its products and for the development of new
products. The Company seeks to control research and development expenditures
by entering into
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collaborative arrangements with other pharmaceutical, medical device, and
healthcare companies to share research and development expenditures. The
Company anticipates that such arrangements may involve its granting exclusive
or semi exclusive rights to sell specific products to specified market segments
or particular geographic territories for royalties, joint ventures, future
co-marketing or other financial interests. The Company, after identifying a
specific field, will establish market testing protocols, select testing
institutions and prepare and summarize test data. The Company, at this time,
intends to target its research and development to cancer diagnostic products
including developing completely its digitized transillumination system using a
laser visible light source, and CT imaging equipment by refining its CT-SIM
System having a 91.5 centimeter opening. During the year ended June 30, 1996,
the Company spent $99,000 on research and development and spent an additional
$347,000 on research and development for the six month period ended December
31, 1996, in addition to an estimated 6,000 accompanying man hours. None of
the Company's distributors and customers contributed to the cost of the
Company's research and development programs.
PERSONNEL
The Company and its various subsidiaries employ 43 full time individuals
in sales, services, marketing, and administration all of whom are located in
the Company's Clearwater, Florida facilities. At full production, the Company
expects to employ up to 70 individuals. The Company has five year employment
agreements with Myron A. Baker, its Chairman of the Board of Directors, CEO and
President, Guy Zani, Jr., its Director, Chief Financial Officer, and Treasurer,
and Dennis D. Cole, its Director, Secretary and General Counsel. Pursuant to
such employment agreements each officer is paid an annual salary of $120,000,
plus bonuses awarded from time to time by the Company's Board of Directors,
receives annual paid vacations, use of a company vehicle, is reimbursed for out
of pocket expenses incurred for and on behalf of the Company and participates
in fringe benefit programs the Company has for all employees. After three (3)
years, the Company or the officer may terminate the employment agreement upon
three (3) months prior notice. Upon termination, the employee is retained as a
consultant to the Company through December 31, 2000, at an annual salary equal
to one-half of the officer's salary during the last twelve (12) months of his
employment. Further, if the officer becomes disabled or dies prior to December
31, 2000, he or his heirs and estate will continue to receive such consultant
compensation until December 31, 2000. The employment agreements have a
non-disclosure of trade secrets provision which survives the agreement's
termination for three (3) years. The Company's subsidiaries all have two or
three year employment agreements with their executive officers.
14
<PAGE> 15
GOVERNMENTAL REGULATION
The United States Food and Drug Administration (FDA) has regulatory
authority over the development, manufacture, sale and use of all medical,
biomedical and pharmaceutical products for medical application in the U.S. The
research, preclinical development, clinical trials, product manufacture and
marketing to be conducted by the Company is subject to regulation by the FDA
and similar health authorities in foreign countries. Preclinical testing in
the United States is generally conducted in the laboratory to evaluate the
potential safety and efficacy of a product designed for use in humans. Before
clinical testing can begin, the results of these tests must be submitted to the
FDA as part of either an Investigational New Drug Application ("IND") for a
drug or an Investigational Device Exemption ("IDE") for a device. Typically,
clinical testing involves a three phase process.
New medical devices and products must undergo the FDA review and approval
process in order to be registered and listed as an approved medical device or
product for specific medical applications. It is anticipated that the Company
has applied for and will continue to apply for, and hopes to receive, the FDA's
clearance for the sale of its products in the United States. The FDA has
continuous regulatory authority with respect to quality control and inspection
of the materials, manufacturing, packaging, sterilization and distribution of
any medical device. In addition to FDA regulatory authority, there can be
state and local government regulatory jurisdiction. The Company intends to
comply with all laws, rules, and regulations of all U.S. and foreign
jurisdictions. However, there is no assurance that the Company will be able
to obtain FDA or other governmental approvals for its future products and
technologies. Any future failure to obtain, or delay in obtaining, such
approvals could adversely affect the ability of the Company to market its
proposed products. Furthermore, even if such regulatory approvals are
obtained, a marketed drug, biological compound or medical device and its
manufacture are subject to continuous review and discovery of previously
unknown problems that may result in restrictions on such products including
withdrawal of the product from the marketplace.
Some foreign countries have regulatory authorities comparable to the FDA,
whose regulations must be met prior to the Company selling its products in such
countries. The Company intends to comply with such regulations so as to obtain
clearance to market its products in such countries on a timely and as needed
basis. Still other foreign countries rely on the FDA to approve the Company's
products for marketing prior to their sale in such countries.
The Company complies with all governmental environmental laws, rules and
regulations at its Clearwater, Florida facilities. The Company's manufacturing
facilities do not generate hazardous or toxic waste. The Company and its
subsidiaries do not require permitting under the provisions of governmental
laws, rules and regulations.
15
<PAGE> 16
As a result, the Company incurs no material cost in complying with
environmental laws, rules and regulations of governments and their
administrative agencies.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
From December, 1991, until the acquisition of Medhealth Imaging, Inc., in
November, 1995, the Company had ceased business activity. To overcome its weak
financial position and substantial illiquidity in fiscal 1996, which ended June
30, 1996, the Company, through the private placement of its securities in
December, 1995, January, 1996, April, 1996, October, 1996, and again in
January, 1997, obtained $1,991,000 for working capital purposes. In July,
1996, the Company encumbered substantially all its assets when borrowing from a
non-affiliated lender an additional $600,000 for working capital purposes.
Without such working capital infusions, the Company would have incurred
difficulty in meeting its obligations.
A primary concern of management during the fiscal year ending June 30,
1997 and thereafter, is the procurement of an adequate amount of appropriate
long-term and permanent capital to support the existing and planned operations.
Presently (March 1997), the Company is affecting the private placement of an
approximate $1,500,000 convertible debenture bond issue, the proceeds of which
are expected to meet immediate needs. Additional and permanent funds will be
required in order for the Company to properly execute its business plan and
avoid delays in meeting its obligations. The Company expects to initiate
public offerings of its securities during the fiscal year ending June 30, 1997
and 1998 to obtain the permanent capital needed to support its operations.
The net result of all operating, capital raising and financing activities
was the generation of $298,000 of cash, increasing the Company's cash to
$301,000 as of June 30, 1996. Net working capital was $638,000 as of the end
of fiscal 1996.
The Company's current ratio, quick ratio (a measure of its ability to pay
off current liabilities without relying on the sale of inventories), and, debt
to worth ratio (a measure of the financing provided by the Company's creditors
as compared to the contribution by security holders) as of the end of fiscal
1996, were 1.18, 0.16, and 2.65, respectively.
The Company's principal long term commitments, as of the end of fiscal
1996, consist of obligations under a real estate lease. Subsequent to the end
of fiscal 1996, and in August 1996, the Company encumbered substantially all of
its assets to a nonaffiliated lender for a $600,000 loan which is payable
monthly over the next one
16
<PAGE> 17
year.
Because of its limited capital, during fiscal 1997, the Company has
planned to limit its research and development to perfecting its completely
digitized laser light source transillumination system and to refining its
CT-SIM System having 91.5 centimeter aperture or opening. Capital expenditures
for such research and development are estimated to be $350,000 for fiscal 1997.
During fiscal 1997, the Company does not expect to purchase or sell plant
and equipment, other than in the ordinary course of business. However, the
Company's growth plan calls for a continuing program of acquisitions to obtain
new technologies. Currently, the Company is negotiating marketing rights for,
or the acquisition of, Nova Therapeutic Systems, Inc., a Delaware Corporation,
a company which owns the patent for a radiosurgical device; i.e., a cobalt
scalpel, used to destroy cancerous tumors in the human body by delivering a
beam of high energy to the focused point of cancerous tissue. Nova's cobalt
scalpel has been cleared for marketing in the United States by the FDA. If such
an acquisition were to occur in fiscal 1997, it is possible the Company would
acquire plant and equipment as part of such a transaction.
Management believes that during the next twelve months cash generated by
operating activities and cash and cash equivalents on deposit with financial
institutions will be insufficient for its capital and operating needs for its
existing operations. It is imperative the Company raise additional capital
through the public offering or private placement of its securities or obtaining
additional debt financing.
ITEM 3. DESCRIPTION OF PROPERTY
MHTI operates from facilities leased from a non-affiliated party in the
same business industrial complex. The premises consist of 40,000 square feet of
floor space, of which 26,000 square feet is dedicated to warehouse space, 9,000
square feet to production and manufacturing, and the remaining 5,000 square
feet to administrative offices and conference rooms. The lease has 15 years
remaining, including options to renew. The MHTI's annual rent is $244,400,
subject to 3% annual increase and a $275,000 penalty for early termination
during the first two years. MHTI's lease is guaranteed by the Company.
The Company's administrative offices were located in facilities leased
from a non-affiliated party, which facilities are located in the ICOT
business-industrial complex in Clearwater, Florida. The Company has relocated
its administrative offices from the leased premises in the ICOT
business-industrial complex to the MHTI facilities. The Company is attempting
to sublet the leased premises in the ICOT business-industrial complex for the
remaining term of the lease. The ICOT lease has 1 1/2 years remaining at an
annual rent of $55,200, subject to 3% increase every six months.
17
<PAGE> 18
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 31, 1997, the number of shares,
of the Company's Common and Convertible Preferred Stock, owned and the
percentage so owned by (i) each person (including any group) known to the
Company to be the beneficial owner of more than five percent of the outstanding
Common and Convertible Preferred Stock, (ii) each director and/or officer of
the Company, and (iii) all the Company's directors and officers as a group.
The number of shares owned are those "beneficially owned" as determined under
the rules of the Security and Exchange Commission, including any shares of
Common or Convertible Preferred Stock as to which a person has sole or shared
voting power or investment power and any shares of Common or Convertible
Preferred Stock which the person has the right to acquire within 60 days
through the exercise of any option, warrant or right.
<TABLE>
<CAPTION>
Name and Amount and
Address of Nature of
Title of Beneficial Beneficial Percent of
Class Owner Owner Class
- - -------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Common Stock Myron A. Baker (1) 1,046,723 9.2%
Common Stock Guy Zani, Jr. 917,166 8.0%
Common Stock Dennis D. Cole (2) 985,536 8.6%
Series C Convertible Sudha Agarwal 600,000 100.0%
Preferred Stock(3) 626 North 164th Street
Omaha, NE 68118
Series D Convertible Sam M. Beckerman 100,000 26.0%
Preferred Stock (4) 4925 Collins Ave.
Apt. 7-E
Miami Beach, Florida
33140
</TABLE>
18
<PAGE> 19
<TABLE>
<S> <C> <C> <C>
Henry Chua 50,000 12.0%
925 Collins Ave.
Apt. 6-E
Miami Beach, Florida
33140
Murray Beckerman 50,000 12.0%
655 Third Avenue
New York, NY 10017
J. Douglas Cox 50,000 12.0%
1150 Shore Road
Cape Elizabeth, Maine
04107
Mitchell L. Reisman 25,000 6.0%
19 Oliver Pl.
Staten Island, NY
10314
Isidore A. Becker 100,000 26.0%
10155 Collins Avenue
Bal Harbour, Florida
33154
Series E Convertible Manfred Asrican 637,000 97.3%
Preferred Stock (5) 74 Holly Hill Lane
#200
Greenwich, Connecticut
06830
All Directors and
Officers as a
group (3 people)(1)(2) 2,949,425 25.8%
</TABLE>
- - --------------------------
(1) Includes shares owned by Mr. Baker's wife, Vera F. Baker, and the Vera F.
Baker Trust.
(2) Includes shares owned by Mr. Cole's wife, Linda S. Cole, his son, Jason C.
Cole, and the Linda S. Cole Irrevocable Trust.
19
<PAGE> 20
(3) Each share of Series C Convertible Preferred Stock has a stated value of
$1.00 per share, the same voting rights as a share of the Company's common
stock and is convertible into the Company's common stock six (6) months after
the date of issuance which conversion date may be extended by the Holders
thereof for an additional six (6) months. The rate of conversion is one share
of common stock for each share of Series C Convertible Preferred Stock.
(4) Each share of Series D Convertible Preferred Stock has a stated value of
$1.00 per share, the same voting rights as a share of the Company's common
stock, and is convertible into the Company's common stock at anytime beginning
six months after the date of issuance; i.e. April 18, 1996, for a period of two
(2) years, upon which date the shares are automatically converted to the
Company's common stock. Each share of preferred stock, at its stated value,
shall be convertible into shares of the Company's common stock at a price per
share of common stock of $1.50 per share or seventy-five percent (75.5%) of the
average closing bid price of the Company's common stock on any recognized
exchange for ten (10) consecutive trading days prior to the conversion date,
whichever is less.
(5) Each share of Series E Convertible Preferred Stock has the stated value of
$1.00 per share, the same voting rights as a share of the Company's common
stock, and is convertible into the Company's common stock at anytime after the
average closing bid price of the Company's common stock on any recognized stock
exchange reaches $6.00 per share for a period of ten consecutive trading days;
or, whenever the Company authorizes the conversion; provided on January 1,
1997, all shares of Series E Convertible Preferred Stock not already converted
into the Company's common stock are automatically converted into common shares.
The number of common shares to be issued in exchange for each preferred share
shall be determined by dividing the Series E Convertible Preferred Stock's
stated value into the average closing bid price of the Company's common stock
on any recognized stock exchange for ten consecutive trading days prior to the
conversion date.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS.
The following table sets forth the name, age, and position of each current
director and executive officer of the Company:
20
<PAGE> 21
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Myron A. Baker 67 Chairman of the Board, Chief
Executive Officer and President
Dennis D. Cole 48 Vice President, Secretary,
General Counsel and Director
Guy Zani, Jr. 53 Chief Financial Officer, Treasurer
and Director
</TABLE>
- - --------------------------------------
Myron A. Baker
Mr. Baker has been a Director and Chairman of the Company since completion
of the merger between Medhealth Imaging and Joe Franklin Productions in November
1995. Prior to this, Mr. Baker was co-founder and a board member of Medhealth
Imaging, Inc., which is now a subsidiary of the Company, since its inception in
1993. Mr. Baker has over 30 years of management experience with companies such
as Dresser Industries, Fairchild Camera Instrumentation and Healthcare Systems.
Mr. Baker's past experience includes joint ventures, licensing programs and
dealer networks throughout the world. Mr. Baker holds a B.A. from the
Kensington School of Business.
Dennis D. Cole
Mr. Cole has been a Director, Vice President, Secretary and General
Counsel of the Company since completion of the merger between Medhealth Imaging
and Joe Franklin Productions in November 1995. Mr. Cole joined Medhealth
Imaging in 1993 and served as its vice president and corporate counsel. Mr.
Cole has 20 years of business law experience specializing in corporate
securities, real estate and tax law. Mr. Cole is a graduate of Yale University
with a B.A. degree and received his Doctor of Jurisprudence, Cum Laude, from
Indiana University in 1976.
Guy Zani, Jr.
Mr. Zani has been a Director, CFO and Treasurer of the Company since
completion of the merger between Medhealth Imaging and Joe Franklin Productions
in November 1995. Prior to this, Mr. Zani was a co-founder of Medhealth
Imaging, Inc., which is now a subsidiary of the Company, since its inception in
1993. Mr. Zani has over 25 years of business experience including 14 years
with General Foods in various positions in marketing and finance. Mr. Zani
holds a B.S. degree in Marketing from Florida Southern College and an M.B.A. in
Finance from Adelphi University.
21
<PAGE> 22
Scientific Advisory Committee
At the discretion of the Board of Directors, the Company intends to
establish a Scientific Advisory Committee of not less than one nor more than
seven persons who will be appointed by the Board of Directors, but not
including members of the Board. The purpose of the Committee is to consult
with the Officers and Directors of the Company concerning factors affecting the
Company and to provide assistance with respect to proposed technology,
business, direction and progress of the Company. Management of the Company
anticipates that Committee members will be qualified medical, scientific and
other professionals who will be able to review, evaluate and otherwise assist
the Company with various projects. Members of the Committee will serve at the
pleasure of the Board of Directors and will receive compensation as
determined by the Board. Finally, the by-laws of the Company also provide
for indemnification of Scientific Advisory Committee members to the same extent
as Officers, Directors and employees of the Company. As of the date of this
Form 10-SB, the Board has discussed such advisory assignments with certain
professionals, however, it has not yet selected any members to serve on the
Scientific Advisory Committee.
22
<PAGE> 23
ITEM 6. EXECUTIVE COMPENSATION.
The Table below sets forth the cash compensation including salaries,
bonuses, contributions to retirement plans, premiums paid on health and dental
insurance plans and disability insurance plans, paid by the Company for the
year ended June 30, 1996, to and for the benefit of, each executive officer.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
======================================================================================================
ANNUAL
COMPENSATION LONG-TERM
AWARDS COMPENSATION (2)
====================================================== ==============================================
AWARDS PAYOUTS
Name and ======================= ======= All
Principal Fiscal Restricted Stock LTIP Other
Position Year Salary(1) Bonus(2) Other Stock(1) Options/SAR Payouts Compensation
- - -------- ------ --------- -------- ----- ---------- ----------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MYRON A. BAKER 1996 $21,900 0 0 200,000 0 0 0
Chairman, Chief
Executive Officer,
President
DENNIS D. COLE 1996 $21,900 0 0 200,000 0 0 0
Vice President,
Secretary,
General Counsel,
and Director
GUY ZANI, JR. 1996 $21,900 0 0 200,000 0 0 0
Chief Financial
Officer, Treasurer
and Director
</TABLE>
(1) The Company has not established any long term compensation program
for employees, including stock option plan, stock bonus plan and stock
appreciation rights plan and no stock options or bonus stock has awarded to any
employee other than as set forth in the above table.
(2) Does not include some personal use, if any of Company vehicles, the value
of which is unattainable, which in the Company's opinion would be immaterial.
23
<PAGE> 24
EMPLOYMENT CONTRACTS
The Company has entered into employment agreements with Myron A. Baker,
Guy Zani, Jr. and Dennis D. Cole ("Officers") as of November, 1995, which may be
terminated upon 90 days notice either by the Company or the Officers anytime
after December 31, 1998. Pursuant to such employment agreements each officer is
paid an annual salary of $120,000, plus bonuses awarded from time to time by the
Company's Board of Directors, receives annual paid vacations, a company vehicle,
is reimbursed for out of pocket expenses incurred for and on behalf of the
Company and participates in fringe benefit programs the Company has for all
employees. After three (3) years, the Company or the officer may terminate the
employment agreement upon three (3) months prior notice. Upon termination, the
employee is retained as a consultant to the Company through December 31, 2000,
at an annual salary equal to one-half of the officer's salary during the last
twelve (12) months of his employment. Further, if the officer becomes disabled
or dies prior to December 31, 2000, he or his heirs and estate will continue to
receive such consultant compensation until December 31, 2000. The employment
agreements have a non-disclosure of trade secrets provision which survives the
agreement's termination for three (3) years.
DIRECTORS FEES
The Company's Directors, who are all salaried employees of the Company,
receive no fees for their attendance at each meeting of the Board of Directors,
Annual Shareholders Meeting and committee meetings. The Directors are
reimbursed for their travel, lodging and food expense incurred when attending
such meetings, if such meetings are held in a location in excess of twenty-five
(25) miles from the principal place of business of the Company in Clearwater,
Florida. Directors are also reimbursed for their travel, lodging and food
expenses incurred when traveling on behalf of the Company when requested to do
so by an officer of the Company or by the Board of Directors.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has not entered into transactions during the last two years
with any director, officer, nominee for an election as a director, controlling
shareholder nor within the last five years with promoters, or any member of
their immediate families (includes spouse, parents, children, siblings, and
in-laws) nor is any such transaction proposed except as follows:
In November 1995, the Company acquired and merged with Medhealth Imaging,
Inc., a Florida Corporation, through a stock transaction whereby the Florida
Corporation was merged into the Company's wholly owned subsidiary formed in
Nevada in September, 1995. Messrs Baker, Zani and Cole were officers,
directors
24
<PAGE> 25
and shareholders of the Florida Corporation prior to the acquisition and merger
and became officers, directors and shareholders of the Company. Messrs Baker,
Zani and Cole and members of their families received 912,723, 772,166 and
834,384, of the Company's common shares, respectively, in such transaction.
ITEM 8. LITIGATION
On August 14, 1996, the Company was sued in Lee County, Florida, Circuit
Court by Southwest Florida Equipment, Inc., for return of a $100,000 deposit on
a CT Simulator System ordered from the Company, a notice of revocation having
been sent to the Company allegedly within the time revocation of such purchase
was permitted by the contract between the parties. Southwest Florida
Equipment, Inc., seeks not only return of its $100,000 but also prejudgment
interest and costs. The Company believes it has meritorious defenses to some
or all of Southwest Florida Equipment, Inc.'s claims.
ITEM 9. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
MARKET INFORMATION ON COMMON STOCK
The Company's common stock trades on the NASDAQ Bulletin Board under the
symbol: "UMSI". The Company has no other registered securities. The Company's
various classes of convertible preferred shares are not listed on an exchange.
The table below gives the market high and low sales prices for the
Company's common stock for the quarters in the fiscal years ended June 30, 1995
and 1996 and the first two quarters of fiscal year 1997 (quarters ended
September 30, 1996 and December 31, 1996). The prices were furnished by
Bloomberg Business News.
Market Price
<TABLE>
<CAPTION>
Fiscal Year: 1995 1996 1997
---- ---- ----
Quarter
Ended High Low High Low High Low
- - ----- ---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C>
September 30......... 1/16 1/16 1 7/8 1 1/2 2 3/8 1 3/16
December 31.......... 1 1/2 2 7/16 1 7/16 2 7/16 1 7/16
March 31............. 1/16 1/16 1 3/4 1 1/4
June 30 ............. 1/16 1/16 2 1/4 2
</TABLE>
25
<PAGE> 26
HOLDERS OF RECORD
As of March 31, 1997, there were 1,345 holders of record of the Company's
11,406,164 issued and outstanding shares of Common Stock.
DIVIDENDS
No cash dividends have been paid by the Company on its common stock nor
does the Company anticipate paying cash dividends in the near future. Other
than Nevada statutory limitations denying the payment of dividends when the
Company, as a result of paying such dividends would not be able to pay its
debts as they come due, or when the Company's total liabilities and preferences
to preferred shareholders exceed total assets, there are no restrictions that
limit the Company's ability to pay dividends on its common stock nor is it
likely that such restrictions will exist in the future.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
ACQUISITION OF MEDHEALTH IMAGING, INC.
In November, 1995, the Company acquired Medhealth Imaging, Inc., a Florida
Corporation, through a stock transaction whereby the Florida Corporation was
merged into the Company's wholly owned subsidiary formed in Nevada in
September, 1995, and as part of such acquisition, the Company's name was
changed from Joe Franklin Productions, Inc., to Universal Medical Systems,
Inc., and the officers and directors of Medhealth Imaging, Inc., became the
officers and directors of the Company. The Company issued 3,576,181 shares of
its common stock to the Shareholders of Medhealth Imaging, Inc., in exchange
for 100% ownership of Medhealth Imaging, Inc.
PRIVATE PLACEMENT OF SECURITIES
In December, 1995, in reliance on Regulation D, Section 505, the Company
sold 200,000 Units, each Unit consisting of one share of its common stock and
one Redeemable Class B Common Stock Purchase Warrant, at $1.00 per Unit, to
accredited investors. The Company received $200,000 from the sale of such
securities.
PRIVATE PLACEMENT OF SECURITIES
In January, 1996, in reliance on Regulation D, Section 504, the Company
offered 500,000 Units consisting of one share of its common stock and one
Redeemable Class A Common Stock Purchase Warrant, at $2.00 per Unit. First
26
<PAGE> 27
Madison Securities, Inc., was the Underwriter on a best efforts basis of this
private offering of the Units. All such Units were sold to accredited
investors. The Offering was for a minimum of $200,000 and a maximum of
$1,000,000. The Company received a gross of $458,000 from the sale of such
Units.
The Company paid the Underwriter a non accountable expense allowance equal
to three percent (3.0%) of the total proceeds of the offering in addition to a
ten percent (10.0%) underwriting commission and discount. Further, the Company
retained the Underwriter and Jonathan Daniels & Company (JDC), an affiliate of
the Underwriter, as its financial consultants for a period of 36 months. Under
the terms of the agreement, the Underwriter and JDC, to the extent reasonably
required in the conduct of the Company's business, has agreed to evaluate the
Company's managerial and financial requirements; assist in the preparation of
budgets and business plans; advise with regard to sales planning and
activities; evaluate financial requirements and assist in financial
arrangements. The Underwriter and JDC will make available to the Company
qualified personnel for this purpose. The consulting fee is payable annually,
in advance, on the first day of each year during the three year term of the
agreement, in three equal installments of $25,000.
The Company also agreed that, for a period of three years and until
January 1999, if the Underwriter participates in any merger, consolidation or
other transaction which the Underwriter has brought to the Company, including
if it makes an acquisition of all or substantially all of the assets or stock
of a publicly held company and pays for the acquisition, in whole or
substantially all, with shares of the Company's securities, then the Company
will pay for the Underwriter's services an amount equal to 5% of the first $5
million involved in the transaction, 4% of the second $4 million, 3% of the
next $6 million, and 2% of the excess over $15 million.
The Underwriter was granted the option of designating an individual to
serve on the Company's Board of Directors for a period of two years. The
Underwriter has not advised the Company whether it will exercise such option
or, if so, who it will designate. Upon designation of an individual to the
Company's Board of Directors, such individual shall be compensated in the same
manner as are non-employee Company directors.
The Underwriters and Company agreed that the Underwriter will receive a
five percent commission upon the exercise or conversion of the Warrants.
ACQUISITION OF MEDICAL HIGH TECHNOLOGY INTERNATIONAL, INC.
Effective January, 1996, the Company acquired Medical High Technology
International, Inc., a Florida Corporation, through a stock transaction whereby
the
27
<PAGE> 28
Florida Corporation was merged into the Company's wholly owned subsidiary
formed in Florida in February, 1996, and as part of such merger, the Company's
subsidiary changed its name from MHTI Acquisition Corp. to Medical High
Technology International, Inc. The Company issued 1,000,000 shares of its
Series B Convertible Preferred Stock in exchange for 100% ownership of Medical
High Technology International, Inc.; and subsequent to the effective date of
the acquisition, the Company issued 50,000 Class 1A Common Stock Purchase
Warrants in full satisfaction of certain indebtedness owing by Medical High
Technology International, Inc., prior to such acquisition.
PRIVATE PLACEMENT OF SECURITIES
In April, 1996, in reliance on Regulation D, Section 505, the Company sold
407,500 Units, each Unit consisting of one share of its Series D Convertible
Preferred Stock and one Redeemable Class D Common Stock Purchase Warrant, at an
average of $.69 per Unit. The Company received $282,500 from the sale of such
securities.
GRANT OF OPTIONS
In May, 1996, the Company entered into a Consulting Agreement with H.B.L.
Associates whereby the Company granted to each, Larry Erber and Matthew Gillio
Enterprises, a Florida Limited Partnership, an option to purchase 500,000
shares of the Company's common stock in exchange for their services in the
Company's capital raising activities. The exercise price of each option is
$.01 per share. In each calendar year, the holders have piggyback registration
rights and demand registration rights for the shares underlying 42% of the
total options initially granted. The Company pays all of the Consultant's
expenses incurred for and on the Company's behalf.
In July, 1996, the Company issued an option to purchase 450,000 shares of
the Company's Common Stock to Lawrence H. Katz, Attorney at Law, for services
rendered and to be rendered for and on behalf of the Company. The options are
earned by dividing fees for services rendered by fifty percent (50.0%) of the
average closing bid price of the Company's common stock on the last ten (10)
trading days of the month in which the fees were incurred and multiplying the
results by three (3). The exercise price of each option is $.01 per share.
In each calendar year, for earned options, the holder has piggy back
registration rights and demand registration rights, for the shares underlying
earned options. The Company pays all of Mr. Katz's expenses incurred for and on
the Company's behalf.
28
<PAGE> 29
ACQUISITION OF LIFE SCIENCES, INC. AND BIOMETRIX, INC.
In July, 1996, in exchange for 650,000 shares of the Company's Series E
Convertible Preferred Stock, the Company acquired as wholly owned subsidiaries
Life Sciences, Inc., Biometrix, Inc., a Connecticut Corporation and Biometrix,
Inc., a New Hampshire Corporation.
PRIVATE PLACEMENT OF SECURITIES
In October, 1996, in reliance on Regulation D, Section 505, the Company
sold 600,000 Units, each Unit consisting of one share of its Series C
Convertible Preferred Stock and one Redeemable Class C Common Stock Purchase
Warrant, at $1.00 per Unit, to accredited investors. The Company received
$600,000 from the sale of such securities.
FINANCIAL ADVISORY AGREEMENT
In September, 1996, the Company entered into a financial advisory
agreement with Sands Brothers & Co., Ltd. whereby Sands Brothers & Co., Ltd.,
was appointed the Company's exclusive financial advisor with respect to
corporate finance, merger and acquisition and financial service matters for a
period of three (3) years. Pursuant to this Agreement the Company pays Sands
Brothers & Co., Ltd. $12,000 per calendar quarter, a transaction fee equal to
five percent of the consideration payable by the Company in any acquisition
transaction and an equity participation in the surviving entity in an amount
mutually agreeable by the parties. Sands Brothers & Co., Ltd. was granted a
right of first refusal to underwrite or place any financing transaction of the
Company and to have the Company use its best efforts to elect its designee to
the Company's Board of Directors. Further, as consideration of Sands Brothers
& Co., Ltd. entering into such financial advisory agreement, the Company issued
to it Warrants to purchase 1,266,599 shares of the Company's common stock. The
exercise price of each Warrant is $2.00 per share (subject to adjustment in
certain events), which Warrants are exercisable until 5:30PM, New York Time, on
September 12, 2001. Sands Brothers & Co., Ltd. has the right to have the
Warrants and/or the underlying shares registered as part of any Company
registration of securities (piggy back right) and the one time right to have
the same registered upon demand.
APPOINTMENT OF EXCLUSIVE PLACEMENT AGENT
In October, 1996, the Company entered into an agreement with Sands Brother
& Co., Ltd., whereby Sands Brothers & Co., Ltd. was appointed exclusive
placement agent for the private placement of up to $1.5 million of the
Company's securities on a
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<PAGE> 30
best efforts basis. Further, Sands Brother & Co., Ltd. is to assist in the
Company's arrangement of capital lease, operating lease or equipment lease
financing and commercial, institutional or bank debt financing. Sands Brothers
& Co., Ltd. will receive a commission equal to ten percent of the aggregate
proceeds derived from such financing, non-accountable expense allowance equal
to three percent of such aggregate proceeds, and Warrants to purchase a number
of shares of the Company's common stock to be determined at a rate of 100,000
Warrants for each $1.0 million of financing consummated by the Company. Such
Warrants will be exercisable for five (5) years, commencing with their
issuance, at a price per share equal to the lower of the share price in the
private placement, the conversion price per share of preferred stock on the
date of exercise of the Warrants or the exercise price of the Warrants issued
to Sands Brothers & Co., Ltd. in September, 1996.
PRIVATE PLACEMENT OF SECURITIES
In January, 1997, in reliance on Regulation D, Section 505, the Company
sold Four Percent (4%) Unsecured Convertible Debentures, due January 1, 2001,
at $1.00 per debenture, to accredited investors. The Company received $500,000
from the sale of such securities. In connection with this private placement
the Compay issued 250,000 Warrants to GEM, LTD. and 250,000 Warrants to Rajan
Anant Joshi for services rendered. Each Warrant entitles the holder to
purchase one share of Common Stock of the Company for an exercise price of
$1.43750 per share. The Warrants' Expiration Date is January 9, 2002.
PRIVATE PLACEMENT OF SECURITIES
In March, 1997, in reliance on Regulation D, Section 505, the Company sold
40,000 Units consisting of two (2) shares of its common stock and one (1)
Redeemable Class E Common Stock Purchase Warrant, at $2.80 per Unit. All such
Units were sold to accredited investors. The Company received $112,000 from
the sale of such Units.
ITEM 11. DESCRIPTION OF SECURITIES
COMMON STOCK
The Company is authorized to issue 25,000,000 shares of common stock,
$.001 par value per share, of which there are presently, as of March 31, 1997,
11,406,164 shares issued and outstanding. All outstanding shares are validly
issued, fully paid and nonassessable.
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All shares of the Company's common stock have equal voting rights when
validly issued and outstanding and have one vote per share on all matters to be
voted upon by stockholders. Cumulative voting in the election of directors is
not allowed. Holders of a majority of the outstanding shares of common stock
whether present in person or by proxy constitute a quorum at all meetings of
stockholders.
The shares of the Company's common stock have no preemptive or conversion
rights, no redemption or sinking fund provisions, and are not liable for
further call or assessment. Subject to preference provisions of its
outstanding preferred stock, each share of the Company's common stock is
entitled to share ratably in any assets available for distribution to the
holders of its equity securities upon the Company's liquidation.
Holders of the Company's common stock are entitled to receive dividends
when and as declared by the Company's Board of Directors out of funds legally
available therefor. Any such dividends may be paid in cash, property or shares
of the Company's common stock. The Company has not paid any cash dividends
since its inception and presently anticipates that earnings, if any, will be
retained for future development of the Company's business, and that no
dividends on its common stock will be declared in the foreseeable future.
CLASS 1A COMMON STOCK PURCHASE WARRANTS
Subsequent to its acquisition of Medical High Technology International,
Inc., in January 1996, the Company issued to Pfizer Medical Systems, Inc., a
Warrant to purchase 50,000 shares of the Company's common stock, $.001 par
value, at an exercise price of $1.00 per share exercisable at anytime after
January 25, 1996 through 11:59PM January 31, 1999. The Class 1A Common Stock
Purchase Warrants cannot be redeemed by the Company.
REDEEMABLE CLASS A COMMON STOCK PURCHASE WARRANTS
As part of the Company's January 1996, private placement of its
securities, the Company sold 599,450 Redeemable Class A Common Stock Purchase
Warrants. Each Class A Warrant entitles the holder to purchase one share of the
Company's common stock at a price of $3.00 per share, exercisable at anytime
after January 3, 1996 until 11:59PM EST on January 3, 1998. The Company may
redeem the Redeemable Class A Common Stock Purchase Warrants after January 3,
1998, at a price of $.01 per Warrant upon 20 days prior written notice if the
average closing bid quotation of the Company's common stock on any recognized
stock exchange has been at least 120% of the exercise price of the Warrants
during the 20 consecutive days ending the third day prior to the day notice of
redemption is given to the Warrant
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Holders.
REDEEMABLE CLASS B COMMON STOCK PURCHASE WARRANTS
As part of the Company's December, 1995, private placement of its
securities, the Company sold 200,000 Redeemable Class B Common Stock Purchase
Warrants. Each Class B Warrant entitles the holder to purchase one share of
the Company's common stock at a price of $3.00 per share, exercisable at
anytime after December 28, 1995 until 11:59PM EST on December 31, 1997. The
Company may redeem the Redeemable Class B Common Stock Purchase Warrants after
June 30, 1997, at a price of $.01 per Warrant upon 20 days prior written notice
if the average closing bid quotation of the Company's common stock on any
recognized stock exchange has been at least 120% of the exercise price of the
Warrants during the 20 consecutive days ending on the third day prior to the
day notice of redemption is given the Warrant Holders.
REDEEMABLE CLASS C COMMON STOCK PURCHASE WARRANTS
As part of the Company's October, 1996, private placement of its
securities, the Company sold 600,000 Redeemable Class C Common Stock Purchase
Warrants. Each Class C Common Stock Purchase Warrant entitles the holder to
purchase one share of the Company's common stock at a price of $1.50 per share,
exercisable at anytime after October 5, 1996, until 11:59PM EST on September
30, 2001. The Company may redeem the Redeemable Class C Common Stock Purchase
Warrants after June 30, 1998, at a price of $.01 per Warrant upon 20 days prior
written notice if the average closing bid quotation of the Company's common
stock on any recognized stock exchange has been at least 120% of the exercise
price of the Warrants during the 20 consecutive days ending on the third day
prior to the day notice of redemption is given the Warrant Holders.
REDEEMABLE CLASS D COMMON STOCK PURCHASE WARRANTS
As part of the Company's April, 1996, private placement of its securities,
the Company sold 407,500 Redeemable Class D Common Stock Purchase Warrants. Each
Class D Warrant entitles the holder to purchase one share of the Company's
common stock at a price of $3.00 per share, exercisable at anytime after March
31, 1996, until 11:59PM EST on June 30, 1998. The Company may redeem the
Redeemable Class D Common Stock Purchase Warrants after June 30, 1997, at a
price of $.01 per Warrant upon 20 days prior written notice if the average
closing bid quotation of the Company's common stock on any recognized stock
exchange has been at least 120% of the exercise price of the Warrants during the
20 consecutive days ending on the third day prior to the day notice of
redemption is given the
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Warrant Holders.
REDEEMABLE CLASS E COMMON STOCK PURCHASE WARRANTS
As part of the Company's March, 1997, private placement of its securities,
the Company sold 40,000 Redeemable Class E Common Stock Purchase Warrants.
Each Class E Warrant entitles the holder to purchase one share of the Company's
common stock at a price of $3.00 per share, exercisable at anytime after March
15, 1997, until 11:59PM on March 15, 2000. The Company may redeem the
Redeemable Class E Common Stock Purchase Warrants after June 30, 1998, at a
price of $.01 per Warrant upon 20 days prior written notice if the average
closing bid quotation of the Company's common stock on any recognized stock
exchange has been at least 120% of the exercise price of the Warrants during
the 20 consecutive days ending on the third day prior to the day notice of
redemption is given the Warrant Holders.
COMMON STOCK PURCHASE WARRANTS
In September, 1996, in conjunction with the execution of a financial
advisory agreement with Sands Brothers & Co., a Delaware Corporation ("Sands
Brothers"), the Company issued non-redeemable Warrants to purchase 1,266,599
shares of the Company's common stock. Each Warrant entitles the holder to
purchase 1 share of the Company's common stock at a price of $2.00 per share,
exercisable at any time from September 12, 1996, until 5PM New York time on
September 12, 2001, after which date the unexercised Warrants expire. The
Warrants have piggy back and demand registration rights, antidilution
provisions, and upon exercise holders have the right to receive, in addition
to the shares of common stock, the same property, assets, rights, evidence of
indebtedness, securities or any other thing of value distributed by the Company
to its shareholders prior to the exercise of the Warrants.
COMMON STOCK PURCHASE WARRANTS
In January, 1997, in conjunction with the Private Placement of 500,000
Four Percent (4%) Unsecured Convertible Debentures, the Company issued 250,000
common stock purchase warrants to GEM, LTD. and 250,000 of such warrants to
Rajan Anant Joshi, each warrant entitling the holder to purchase one share of
the Company's common stock for an exercise price of $1.43750 per share. The
warrants are exercisable from their date of issuance through January 9, 2002.
The Warrants have demand registration rights and antidilution provisions.
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PREFERRED STOCK
The Company is authorized to issue 10,000,000 shares of Preferred Stock,
$.0001 par value per share. The Company's Board of Directors is authorized to
prescribe, fix or alter the classes, series, designations, preferences, voting
power, limitations, restrictions and relative rights of each class or series.
Pursuant to such authority the Company's Board of Directors has authorized the
issuance of and caused to be issued 600,000 Series C Convertible Preferred
Shares, 407,500 Series D Convertible Preferred Shares, and 650,000 Series E
Convertible Preferred Shares. All outstanding preferred shares are validly
issued, fully paid and nonassessable.
SERIES C CONVERTIBLE PREFERRED STOCK
Holders of the Company's Series C Convertible Preferred Stock are entitled
to receive, when and as declared by the Company's Board of Directors, out of
funds legally available therefore, cash dividends on an annual compounded basis
equal to twenty percent (20%) of the subscription price for such stock;
however, after six (6) months following the date of issuance the dividend rate
shall be adjusted to an annual compounded basis equal to ten percent (10%) of
the subscription price for such stock. The Series C Convertible Preferred
Stock has one vote per share and has the same voting rights as the Company's
common shares.
The Series C Convertible Preferred Stock has a stated value of $1.00 per
share, and each share is convertible into the Company's common stock six (6)
months after the date of issuance or the holder may elect to extend the
conversion date for an additional six (6) months. The rate of conversion is
one share of common stock for each share of preferred stock converted.
The Series C Convertible Preferred Stock has a liquidation preference to
the Company's common shares of $1.00 per share, plus any declared and unpaid
dividends thereof. Such liquidation preference is in parity with that of the
Company's Series B Convertible Preferred Stock, Series D Convertible Preferred
Stock and Series E Convertible Preferred Stock. The Series C Convertible
Preferred Stock has no redemption or sinking fund provisions.
SERIES D CONVERTIBLE PREFERRED STOCK
Holders of the Company's Series D Convertible Preferred Stock are entitled
to receive, when and as declared by the Company's Board of Directors, out of
funds legally available therefore, cash dividends on an annual compounded basis
equal to ten percent (10.0%) of the subscription price for such stock. The
Series D Convertible Preferred Stock has one vote per share and has the same
voting rights as
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the Company's common shares.
The Series D Convertible Preferred Stock has a stated value of $1.00 per
share and each share is convertible into the Company's common stock beginning
six (6) months after the date of issuance for a period of two years, at which
time such preferred shares not previously converted are automatically converted
into shares of the Company's common stock. Each share of Series D Convertible
Preferred Stock, at its stated value shall be convertible to shares of the
Company's common stock at a price per share of such common stock of $1.50 or
seventy-five percent (75.0%) of the average closing bid price for the Company's
common stock over the consecutive ten (10) trading days prior to conversion,
whichever is less.
The Series D Convertible Preferred Stock has a liquidation preference to
the Company's common shares of $1.00 per share, plus any declared and unpaid
dividends thereon. Such liquidation preference is in parity with that of the
Company's Series B Convertible Preferred Stock, and Series E Convertible
Preferred Stock. The Series D Convertible Preferred Stock has no redemption or
sinking fund provisions.
SERIES E CONVERTIBLE PREFERRED STOCK
Holders of the Company's Series E Convertible Preferred Stock are entitled
to receive dividends only when and as declared by the Company's Board of
Directors, out of funds legally available therefore. The Series E Convertible
Preferred Stock has one vote per share and has the same voting rights as the
Company's common shares.
The Series E Convertible Preferred Stock has a stated value of $1.00 per
share and each share is convertible into the Company's common stock at anytime
after the average closing bid price of the Company's common stock on any
recognized stock exchange reaches an average of $6.00 per share for a period of
ten consecutive trading days; or, whenever the Company authorizes the
conversion. Further, on January 1, 1997, all shares of Series E Convertible
Preferred Stock not already converted into the Company's common stock, are
automatically converted into common shares. In all cases of Series E
Convertible Preferred Stock conversion into the Company's common stock, the
number of common shares to be issued in exchange for each preferred share shall
be determined by dividing the Series E Convertible Preferred Stock's stated
value into the average closing bid price of the Company's common stock on any
recognized stock exchange over ten consecutive trading days prior to the
conversion date.
The Series E Convertible Preferred Stock has a liquidation preference to
the Company's common shares of $1.00 per share, plus any declared and unpaid
dividends thereon. Such liquidation preference is in parity with that of the
Company's
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Series B Convertible Preferred Stock and Series D Convertible Preferred Stock.
The Series E Convertible Preferred Stock has no redemption or sinking fund
provisions.
4% UNSECURED CONVERTIBLE DEBENTURES
The Company's 4% Unsecured Convertible Debentures currently outstanding
are due January 1, 2001, and bear interest at the rate of 4% per annum, payable
quarterly, in arrears, on April 1, July 1, October 1, and January 1 of each
year, with interest calculated on a 360 day year. Over due principal and
interest bears interest at 14% per annum until paid. The conversion price for
each Debenture in effect on any conversion date shall be the LESSER of X OR Y:
where X is the GREATER of (a) [$F] or (b) [C] / [( { C/F } + 3.00)/ 2] (where C
= the average per share market value (generally the closing bid price per share
of the Company's common stock on the Over-The-Counter Bulletin Board or other
stock exchange where such stock is listed) for the five (5) Trading Days
immediately preceding the conversion date and F = the per share market value on
the trading day immediately preceding the original issue date; and Y = 70% of
the average per share market value for the five (5) trading days immediately
preceding the conversion date. The Debentures conversion rights have
anti-dilutive provisions and require the Company to give to Debenture holders at
least 30 calendar days prior written notice to the applicable record or
effective date of its intent to declare a dividend or other distribution, redeem
its common stock, authorize the grant of rights or warrants to subscribe for or
purchase its capital stock, or if the approval of stockholders will be required
in connection with any reclassification of its common stock, any consolidation
or merger, any sale or transfer of substantially all of its assets or compulsory
share exchange whereby the common stock is converted into securities, cash or
property or the voluntary or involuntary dissolution, liquidation, or winding up
of the Company's affairs. Further, if at anytime conditions arise by reason of
the Company's actions which might materially or adversely affect the Debenture
holders rights (different than or distinguished from the effect generally on
rights of holders of any class of the Company's common stock); or, if at anytime
such conditions are expected to arise the Company is required to give Debenture
Holders notice thereof at least 30 calendar days prior to the effective date of
such action. Thereupon, the anti-dilutive adjustment; if any, of the Debentures
conversion price will be determined by appraisal. A default occurs under the
Debentures upon nonpayment of interest or principal, if the Company defaults in
the payment of any of its obligations under any mortgage, indenture or
instrument which exceed $50,000, if the Company's common stock is delisted from
the Over-The-Counter Bulletin Board or other national securities exchange or
market or is suspended from trading thereon and shall not have its common stock
relisted or suspension lifted within five days; or, the Company is a party to
any merger or consolidation or shall dispose of substantially all of its assets
or shall redeem more than a de minimis amount of its outstanding Common Stock.
Upon default, Debenture Holders may accelerate all amounts due
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pursuant to the Debentures. The Debentures have no other redemption features,
sinking fund requirements, or other provisions giving or limiting the rights of
Debenture Holders. In February, 1997, $460,000, out of the total of $500,000,
of these convertible debentures were converted into 292,558 shares of the
Company's common stock, leaving $40,000 in unconverted debentures.
TRANSFER AGENT
American Stock Transfer & Trust Company, 40 Wall Street, 46th Floor, New
York, New York 10005, acts as Transfer Agent for the Company's securities.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation provide that pursuant to the
provisions of Nevada Revised Statute 78.751, the Company will indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, except an action by or in the right
of the Company, by reason of the fact that he was a director, officer, employee
or agent of the Company, or is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses, including attorney' fees,
judgments, fines and amounts paid in settlement actually and reasonable incurred
by him in connection with the action, suit or proceeding if he acted in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalents, does not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonable believed to be in or not opposed to the best
interests of the Company, and that, with respect to any criminal action or
proceeding, he had responsible cause to believe that his conduct was unlawful.
The Company will indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Company to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including amounts paid in
settlement and attorney's fees actually and reasonable incurred by him in
connection with the defense or settlement of the action or suit if he acted in
good faith and in a manner which he reasonably believed to be in or not
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opposed to the best interests of the Company. Indemnification may not be made
for any claim, issue or matter as to which such a person has been adjudged by a
court of competent jurisdiction, after exhaustion of all appeals therefrom, to
be liable to the Company or for amounts paid in settlement to the Company,
unless and only to the extent that the court in which the action or suit was
brought or other court of competent jurisdiction determines upon application
that in view of all the circumstances of the case, the person is fairly and
reasonably entitled to indemnity for such expenses as the court deems proper.
To the extent that a director, officer, employee or agent of the Company
has been successful on the merits or otherwise in defense of any action, suit
or proceeding referred to above or in defense of any claim, issue or matter
therein, he must be indemnified by the Company against expenses, including
attorneys' fees, actually and reasonable incurred by him in connection with the
defense.
Any indemnification as set out above, unless ordered by a court or
advanced by the Company, must be made by the Company only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances. The determination
must be made:
(a) By the stockholders;
(b) By the board of directors by majority vote of a quorum consisting of
directors who were not parties to the action, suit or proceeding;
(c) If a majority vote of a quorum consisting of directors who were not
parties to the action, suit or proceeding so orders, by independent
counsel in a written opinion; or
(d) If a quorum consisting of directors who were not parties to the
action, suit or proceeding cannot be obtained, by independent legal
counsel in a written opinion.
The expenses of officers and directors incurred in defending a civil or
criminal action, suit or proceeding must be paid by the Company as they are
incurred and in advance of the final disposition of the action, suit or
proceeding, upon receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he is not entitled to be indemnified by the
Company. The provisions of the foregoing do not affect any rights to
advancement of expenses to which corporate personnel other than directors or
officers may be entitled under any contract or otherwise by law.
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The Company is authorized by its Articles of Incorporation to purchase and
maintain insurance or make other financial arrangements on behalf of any person
who is or was a director, officer, employee or agent of the Company, or is or
was serving at the request of the Company as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise for any liability asserted against him and liability and expenses
incurred by him in his capacity as a director, officer, employee or agent, or
arising out of his status as such, whether or not the Company has the authority
to indemnify him against such liability and expenses. The other financial
arrangements made by the Company may include the following:
(a) The creation of a trust fund.
(b) The establishment of a program of self-insurance.
(c) The securing of its obligation of indemnification by granting
a security interest or other lien on any Company assets.
(d) The establishment of a letter of credit, guaranty or surety.
No financial arrangement may provide protection for a person adjudged by a
court of competent jurisdiction, after exhaustion of all appeals therefrom, to
be liable for intentional misconduct, fraud or a knowing violation of law,
except with respect to the advancement of expenses or indemnification ordered
by the court.
Any insurance or other financial arrangement made on behalf of a person
may be provided by the Company or any other person approved by the board of
directors, even if all or part of the other person's stock or other securities
is owned by the Company.
In the absence of fraud; (a) The decision of the board of directors as to
the propriety of the terms and conditions of any insurance or other financial
arrangement made and the choice of the person to provide the insurance or other
financial arrangement is conclusive; and, (b) The insurance or other financial
arrangement:
(1) Is not void or voidable; and,
(2) Does not subject any director approving it to personal liability for
his action; even if a director approving the insurance or other
financial arrangement is a beneficiary of the insurance or other
financial arrangement.
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The Company's Articles of Incorporation further provide that "No director
or officer of the Company shall be personally liable to the Company or its
stockholders for damages for his acts or omissions resulting in his breach of
fiduciary duty as a director or officer, except if such acts or omissions
involve: (a) intentional misconduct, fraud or a knowing violation of the law;
or (b) the payment of dividends in violation of Nevada Revised Statute 78.300
(distribution may not be made if, after giving effect thereto the Company would
not be able to pay its debts as they become due in the usual course of
business; or the Company's total assets would be less than the sum of its total
liabilities plus the amount needed upon the Company's dissolution to satisfy
preferential rights of Shareholders).
ITEM 13. FINANCIAL STATEMENTS
The response to Item 13., is submitted as a separate section of this Form
10-SB.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There has been no change of accountants or reported disagreement on any
matter of accounting principles or procedures or financial statement
disclosures in fiscal years ended June 30, 1995 and 1996.
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ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit Page No.
- - ----------- -------------------------------------------- --------
<S> <C> <C>
a(1) and The financial statements are filed as a
a(2) separate section of this Form 10-SB
a(3) Exhibits required to be filed by
Item 601 of Regulation S-B
2(a) Plan of Acquisition of
Medhealth Imaging, Inc.
2(b) Plan of Acquisition of
Medical High Technology International, Inc.
2(c) Plan of Acquisition of Life Sciences,
Inc., Biometrix, Inc.
3(i)(a) Articles of Incorporation
3(i)(b) Amendment of Articles of Incorporation
3(i)(c) Amendment of Articles of Incorporation
3(ii) Amended By-Laws
4(a) Form of Company's Common Stock Certificate
4(b) Instrument Defining Rights of Series C
Convertible Preferred Stockholders
4(c) Form of Company's Series C Convertible
Preferred Stock Certificate
4(d) Instruments Defining Rights of
Series D Convertible Preferred
Stockholders
</TABLE>
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<TABLE>
<S> <C>
4(e) Form of Company's Series D Convertible
Preferred Stock Certificate
4(f) Instruments Defining Rights of
Series E Convertible Preferred Stockholders
4(g) Form of Company's Series E Convertible
Preferred Stock Certificate
4(h) Warrant Agreement dated January 25, 1996,
between the Company and Dennis D. Cole
concerning the Class 1A Common Stock
Purchase Warrant Holders
4(i) Form of Company's Class 1A Common Stock
Purchase Warrant
4(j) Warrant Agreement dated January 22, 1996,
between the Company and American Stock
Transfer & Trust Co., concerning the
Redeemable Class A Common
Stock Purchase Warrant Holders
4(k) Form of Company's Redeemable Class A
Common Stock Purchase Warrant
4(l) Warrant Agreement dated December 29, 1995,
between the Company and Dennis D. Cole
concerning the Redeemable
Class B Common Stock Purchase
Warrant Holders
4(m) Form of Company's Redeemable Class B
Common Stock Purchase Warrant
4(n) Warrant Agreement dated October 5, 1996,
between the Company and Dennis C. Cole
concerning the Redeemable
Class C Common Stock Purchase
Warrant Holders
4(o) Form of Company's Redeemable Class C
Common Stock Purchase Warrant
</TABLE>
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<TABLE>
<S> <C>
4(p) Warrant Agreement dated April 1, 1996,
between the Company and Dennis D. Cole
concerning the Redeemable Class D
Common Stock Purchase
Warrant Holders
4(q) Form of Company's Redeemable Class D
Common Stock Purchase Warrant
4(r) Warrant Agreement dated March 14, 1997,
between the Company and Dennis D. Cole
concerning the Redeemable Class E Common
Stock Purchase Warrants
4(s) Form of Company's Redeemable Class E
Common Stock Purchase Warrants
4(t) Form of 4% Convertible
Debenture Holders Purchase Agreement
4(u) Form of 4% Convertible Debenture
4(v) Stock Option Agreement dated as of May 1,
1996, between the Company and Larry Erber
4(w) Stock Option Agreement dated as of May 1,
1996, between the Company and Matthew Gillio
Enterprises, Ltd.
4(x) Stock Option Agreement dated as of July 8,
1996, between the Company and Lawrence
H. Katz, Attorney at Law
4(y) Addendum to Option Agreement dated as of July
8, 1996, between the Company and Lawrence H.
Katz, Attorney at Law
4(z) Common Stock Purchase Warrant Agreement
dated September 12, 1996, between
the Company and Sands Brothers & Co.,
Ltd.
</TABLE>
43
<PAGE> 44
<TABLE>
<S> <C>
4(a)(a) Form of Company's Warrant Certificate issued
pursuant to September 12, 1996, Agreement
with Sands Brothers & Co., Ltd.
4(b)(b) Form of Company's Warrant Certificate issued
pursuant to September 12, 1996, Agreement
with Mark Hollo.
4(c)(c) Common Stock Purchase Warrant Agreement
dated January 9, 1997, between
the Company and GEM, LTD.
4(d)(d) Common Stock Purchase Warrant Agreement
dated January 9, 1997, between the Company
and Rajan Anant Joshi
10(a) Contract dated June 12, 1995, between the
Company and JMK Group, Inc.
10(b)(i) Lease Agreement dated May 7, 1987, between
R.F. Properties, Ltd. and Medical High
Technology International, Inc.
10(b)(ii) Addendum to Lease dated February 1, 1996,
between the Company, Medical High Technology
International, Inc. and John B. Pickford, as
Ancillary Trustee for the First National Bank
of Chicago, as Trustee
10(c) Lease Agreement dated March 5, 1996, between
the Company and ICOT Center, Ltd.
10(d) Employment Agreement, dated November 10,
1995, between the Company and Myron A.
Baker
10(e) Employment Agreement, dated November 10,
1995, between the Company and Guy Zani, Jr.
10(f) Employment Agreement, dated November 10,
1995, between the Company and Dennis D. Cole
</TABLE>
44
<PAGE> 45
<TABLE>
<S> <C>
10(g) Contract dated May 17, 1996, between the
Company and Dynacs Engineering, Inc.
10(h) Agreement dated September 12, 1996, between
the Company and Sands Brothers & Co., Ltd.
10(i) Agreement dated October 1, 1996, between
the Company and Sands Brothers & Co., Ltd.
10(j) Amendment to Agreement dated October 1,
1996, between the Company and Sands
Brothers & Co., Ltd.
21 Subsidiaries of the Company
</TABLE>
45
<PAGE> 46
REPORT ON FORM 10-SB
ITEM 13, ITEM 15(a)
FINANCIAL STATEMENTS LIST OF FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
AS OF SIX MONTHS ENDED DECEMBER 31, 1996, AND 1995
AND FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
UNIVERSAL MEDICAL SYSTEMS, INC.
AND SUBSIDIARIES
CLEARWATER, FLORIDA
46
<PAGE> 47
UNIVERSAL MEDICAL SYSTEMS, INC.
And Subsidiaries
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 & 1995
<PAGE> 48
[ALESSANDRI & ALESSANDRI, P.A., CERTIFIED PUBLIC ACCOUNTANTS LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
Universal Medical Systems, Inc. and Subsidiaries
Clearwater, Florida
We have audited the accompanying consolidated balance sheets of
Universal Medical Systems, Inc. and Subsidiaries, as of June 30, 1996 and 1995,
and the related consolidated statements of operations, stockholders' equity,
and cash flows for the years then ended. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Universal Medical Systems, Inc. and Subsidiaries, at June 30, 1996
and 1995, and the consolidated results of their operations and their cash flows
for the years then ended in conformity with generally accepted accounting
principles.
/s/ Alessandri & Alessandri, P.A.
August 29, 1996 (except as to Note 17 for
which the date is April 10,1997)
Tampa, Florida
<PAGE> 49
UNIVERSAL MEDICAL SYSTEMS, INC. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 & 1995
-----------------------------------------------------------------------------
ASSETS
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash $ 301,012 $ 2,869
Accounts Receivable (less allowance for doubtful amounts of $10,000) 267,137
Marketable Security, at approximate market value 3,620
Inventory 3,616,629
Other 10,536
----------- -----------
Total Current Assets 4,198,934 2,869
EQUIPMENT
Equipment, at cost (less accumulated depreciation of $20,994) 501,072 124,000
OTHER ASSETS
Deposits 89,224
Other 115,600
----------- -----------
TOTAL $ 4,904,830 $ 126,869
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable $ 1,253,044 $ 882,011
Accounts Payable and Accrued Liabilities 1,046,362 210,940
Customer Deposits 964,050
Deferred Revenue 258,750
Other 38,271
----------- -----------
Total Current Liabilities 3,560,477 1,092,951
----------- -----------
COMMITMENTS & CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred Stock - 10,000,000 shares authorized; $.0001 par value
1,407,500 shares issued 3,407,500
Common Stock - 25,000,000 shares of $.001 par value per share
authorized; 7,692,372 & 5,196,000 shares issued
and outstanding 7,692 5,196
Additional Paid-In Capital 2,120,036 497,120
Retained Earnings (Deficit) (4,190,875) (1,468,398)
----------- -----------
Total Stockholders' Equity 1,344,353 (966,082)
----------- -----------
TOTAL $ 4,904,830 $ 126,869
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 50
UNIVERSAL MEDICAL SYSTEMS, INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1996 & 1995
- - -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
------------ ---------
<S> <C> <C>
REVENUES $ 684,211
Cost of Sales 480,780
-----------
Gross Margin 203,431
-----------
OPERATING EXPENSES:
Selling, General & Administrative 2,533,016 $ 167,801
Depreciation 20,994
Research & Development 99,418
----------- -----------
Total 2,653,428 (167,801)
----------- -----------
NET LOSS FROM OPERATIONS (2,449,997)
OTHER ITEMS:
Interest Expense (203,557) (116,572)
Unrealized Loss from Marketable Security (68,784)
Miscellaneous - Net (139)
----------- -----------
NET LOSS $(2,722,477) $ (284,373)
=========== ===========
Earnings (Loss) Per Share $ (0.50) $ (0.05)
Weighted Average Common Shares 5,454,650 5,608,633
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 51
UNIVERSAL MEDICAL SYSTEMS, INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1996 and 1995
- - -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Retained
Preferred Stock Common Stock Paid in Earnings
Shares $ Shares $ Capital (Loss)
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1994 5,196,000 $ 5,196 $ 279,295 ($1,184,025)
Net Loss (284,373)
Contribution of Capital 217,825
----------------------------------------------------------------------------
Balance, June 30, 1995 0 0 5,196,000 5,196 497,120 (1,468,398)
Adjustments to reflect the reverse
purchase acquisition of Universal
Medical Systems, Inc. :
Surrender of MII Common Shares (5,196,000) (5,196)
Issuance of UMSI shares to MII shareholders 3,576,170 3,576
Shares retained by prior UMSI shareholders 688,833 689
Proceeds from sale of common stock 733,200 733 474,797
Issuance of Preferred Stock for:
Acquisition 1,000,000 3,000,000
Sale 407,500 407,500 (125,000)
Issuance of Common Shares for:
Services 1,751,724 1,752 499,037
Payment of Interest 36,250 36 27,464
Settlement of Disagreement 402,195 402 301,497
Officers Services 390,000 390 350,235
Conversion of Debentures 114,000 114 94,886
Net Loss (2,722,477)
----------------------------------------------------------------------------
Balance, June 30, 1996 1,407,500 $3,407,500 7,692,372 $ 7,692 $2,120,036 (4,190,875)
============================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 52
UNIVERSAL MEDICAL SYSTEMS, INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1996 & 1995
- - --------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM (TO) OPERATING ACTIVITIES:
Net Income (Loss) From Operations: $(2,722,477) $ (284,373)
Add: Non-Cash Items
Depreciation and Amortization 20,994
Unrealized Loss from Marketable Security 68,784
Compensation & Expenses paid in Common Stock 1,275,803
Increase (Decrease) in Assets and Liabilities:
Receivables 40,117
Inventory (33,664)
Deposits (50,000)
Accounts Payable & Other Accrued Liabilities 322,881 43,531
Customer Deposits 513,000
----------- -----------
Net Cash From (To) Operating Activities (564,562) (240,842)
----------- -----------
CASH FLOWS FROM (TO) INVESTING ACTIVITIES:
Purchase of Equipment (16,973)
Cash Acquired in Acquisition 45,328
----------- -----------
Net Cash From (To) Investing Activities 28,355 0
----------- -----------
CASH FLOWS FROM (TO) FINANCING ACTIVITIES:
Proceeds From Sale of:
Preferred Stock 282,500
Common Stock 475,530
Proceeds from Sale of Debentures 95,000
Proceeds from Borrowings 27,500 25,829
Repayment of Debt (46,180)
Deferred Financing Costs (10,000)
Contribution Capital 217,825
----------- -----------
Net Cash From (To) Financing Activities 824,350 243,654
----------- -----------
Increase (Decrease) in Cash 288,143 2,812
Cash Balance, July 1 2,869 57
----------- -----------
Cash Balance, June 30 $ 291,012 $ 2,869
=========== ===========
Supplemental Disclosures:
Interest Paid $ 72,081 $ 458
Income Taxes $ 0 $ 0
</TABLE>
See Notes To Consolidated Financial Statements.
<PAGE> 53
UNIVERSAL MEDICAL SYSTEMS, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
- - ------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND HISTORY
Universal Medical Systems, Inc. ("Company"), was formed under the laws
of the State of Nevada on January 14, 1987 as Asset Development Corporation. On
June 26, 1987 Joe Franklin Productions, Inc., was formed under the laws of the
State of Delaware, and merged with Asset Development Corporation which changed
its name to Joe Franklin Productions, Inc. In October, 1995, in connection with
the acquisition of Medhealth Imaging, Inc., the name of the corporation was
changed from Joe Franklin Productions, Inc., to Universal Medical Systems, Inc.
Since formation in 1987, the Company planned to enter the
entertainment production and marketing industry, with a concentration on the
production, repackaging and distribution of nostalgia and memorabilia products.
In August 1990, the Company entered the facsimile services business providing
world-wide facsimile transmission and receiving capabilities on high-speed
digital communications technology, which business was terminated on or about
December 1, 1991.
In August 1992, the Company entered into an agreement with
Commonwealth Asset Management Corp., to commence the active operation of its
intended business in the entertainment production and marketing industry. In
October 1993, the Company entered into an agreement with Sports Heros, Inc.,
King of Nostalgia, Inc., Entertainment Heros, Inc., and Entertainment Legends,
L.P. The agreement provided for the entities to market, distribute, sell,
license, and lease or rent the "Joe Franklin Memorabilia". The latter consisted
of, in general, sound and feature films, records, photographs, prints,
magazines, radio memorabilia and other original and one-of-a-kind items. In
addition, the agreement provided for the entities to purchase, acquire, market,
sell, license, lease, rent or otherwise enter into other nostalgic
entertainment memorabilia transactions, and to develop and implement other
related revenue producing articles.
On or about December 1, 1991 the Company terminated its business in
the entertainment production and marketing industry. On August 1, 1995, the
Company entered into an "Agreement and Plan of Merger with Medhealth Imaging,
Inc.
Medhealth Imaging, Inc., was formed under the laws of the State of
Florida on February 8, 1993, and was a wholly owned subsidiary of Medhealth
Service Corporation, a Nevada corporation until October 1, 1993. At such time,
Medhealth Imaging, Inc., was spun-off from Medhealth Service Corporation.
Medhealth Imaging, Inc., is a manufacturer, developer, and marketer of
proprietary medical diagnostic devices, and was inactive until the fiscal year
ending June 30, 1996.
NOTE 2 - BASIS OF ACCOUNTING
The consolidated financial statements of the Company includes the
accounts of the Company and its wholly owned subsidiaries, Medhealth Imaging,
Inc. ("MII") and Medical High Technology
<PAGE> 54
International, Inc. ("MHTI"). All significant intercompany accounts and
transactions have been eliminated in consolidation.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue Recognition
The Company, through its subsidiary MHTI recognizes revenues
upon the shipment of products and repair parts, and product service. As to the
latter, revenue from service contracts is deferred and recognized ratably
during the applicable year(s).
Allowance for Doubtful Amounts
An allowance for doubtful amounts is provided when it appears
that realization of the receivable has become questionable.
Marketable securities
Marketable securities are carried at their approximate market
values.
Inventories
Inventories are carried at average acquisition cost, not in
excess of market.
Equipment and Leasehold Improvements
Equipment and leasehold improvements are carried at
acquisition cost. Repairs and maintenance which do not extend the useful life
are charged to expense when incurred, and improvements and betterments which
extend the useful life are capitalized. Depreciation with respect to equipment
is calculated using the straight-line method over the estimated lives which
generally range from five to ten years. Leasehold improvements are amortized
ratably over the term of the lease.
Income Taxes
The provision (benefit) for income taxes is based on the
pre-tax earnings (loss) reported in the consolidated balance sheet, adjusted
for transactions that may never enter into the computation of income taxes
payable. A deferred tax liability or asset is recognized for the estimated
future tax effect attributable to temporary differences in the recognition of
income and expenses for financial statement and income tax purposes. A
valuation allowance is provided in the event that the tax benefits are not
expected to be realized.
<PAGE> 55
Earnings (Loss) Per Share
Earnings (loss) per common share is based upon the weighted
average number of common shares outstanding during the periods. The common
shares issuable under convertible preferred stock and warrants have not been
included in the determination of loss per common share as they would be
anti-dilutive.
Economic and Concentration Risk
The business(s) of the Company is primarily in the
development, manufacturing, and /or marketing of medical devices to customers
in the United States of America and certain foreign countries. The Company may
encounter risk from competitors who have significantly greater resources; from
general and/or regional economic changes; and, from technological breakthroughs
which are commonplace in the medical industry. Revenues of the Company are
presently concentrated in one medical device product and service thereof,
generally used by the hospital industry. Other medical devices are in various
stages of development, some of which may require approval of the U.S. Food and
Drug Administration before sales can occur.
NOTE 4 - ACQUISITION OF MEDHEALTH IMAGING, INC.
On August 1, 1995, the Company entered into "Agreement and Plan of
Merger" with MII under the terms of which the Company completed a one for
thirty-five reverse split of all of its issued and outstanding common shares
with the result that the issued and outstanding warrants after the reverse
split totaled 705,823, and the Company issued 3,576,170 (post-split) common
shares to the shareholders of MII to complete the acquisition. The officers and
directors of MII became the officers and directors of the Company. Retroactive
effect has been given to the common share reverse split throughout the
financial statements.
For financial reporting purposes, this transaction was accounted for
as a reverse purchase acquisition under which the companies were recapitalized
to include the historical financial information of MII. The assets and
liabilities of the Company were valued at net book value.
NOTE 5 - ACQUISITION OF MEDICAL HIGH TECHNOLOGY, INC.
Effective January 1, 1996, the Company entered into an agreement with
MHTI under which the Company designated and issued 1,000,000 of its preferred
shares identified as "Series B" for all of the outstanding common stock of
MHTI. For financial reporting purposes the acquisition was accounted for as a
purchase. The purchase price did not exceed the revalued net assets of MHTI.
The Board of Directors of the Company designated the Preferred Stock
Series B with rights and preferences of (1) a per share stated value of $3.00;
(2) the same voting rights as the common shares; (3) the shares may be
converted into common shares of the Company at any time the common shares have
traded at $6.00 per share for ten or more consecutive days, at any time the
Company authorizes the conversion, all the preferred shares must be converted
within one year; and, (4) all conversions of the preferred shares into common
shares shall be in the ratio which the per share price of the common share
bears to the $3.00 preferred stock per share value.
<PAGE> 56
NOTE 6 - MARKETABLE SECURITY
The marketable security consists of 72,404 common shares of Sports
Heros, Inc., which had a carrying value of $72,404. At June 30, 1996, the
Company charged operations with $68,784 to reflect the approximate market value
and estimated permanent impairment of value of the security.
<TABLE>
<S> <C>
NOTE 7 - INVENTORIES
Inventories are comprised of:
Parts, components, and sub-assemblies $ 3,294,237
Systems work in progress 322,392
-----------
$ 3,616,629
-----------
NOTE 8 - EQUIPMENT
Equipment is comprised of the following:
Office equipment and furniture $ 180,603
Tools and equipment 196,131
Demonstration and
research and development 124,000
Leasehold improvements 21,332
-----------
522,066
Less-accumulated depreciation (20,994)
-----------
$ 501,072
-----------
</TABLE>
NOTE 9 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities were comprised as follows:
<TABLE>
<CAPTION>
6/30/96 6/30/95
---------- ----------
<S> <C> <C>
Accounts payable:
Trade $ 348,938 $ 61,939
Officers 11,362 40,050
Employees 5,655
Accrued payroll:
Officers 271,145
Employees 76,156
Accrued payroll taxes 20,734
Accrued interest 231,227 108,951
Other accrued liabilities 81,145
---------- ----------
Total $1.046,362 $ 210,940
---------- ----------
</TABLE>
<PAGE> 57
NOTE 10 - NOTES PAYABLE
Notes payable totaling $394,863, include a note having an unpaid
balance of $269,863 which is past due, and the remainder totaling $125,000 (of
which $15,000 is due to an officer) are due on demand. The notes payable bear
interest at the per annum rates of 10% and 11%. The aforementioned note payable
having a balance of $269,863 also has the personal guarantee of the three
officers and directors of the Company.
Three additional notes payable have an unpaid balance as of June 30,
1996 aggregating $858,181, and bear interest at per annum rates ranging from
12% to 16%. The notes are all past due and one of the notes having an unpaid
balance of $657,599 also has the personal guarantee of an officer/director.
Such note was the subject of a legal action for collection, which the Company
has resolved (See Note 17).
NOTE 11 - INCOME TAXES
The provision (benefit) for income taxes differs from the amount of
income tax determined by applying the applicable United States statutory
federal income tax rate to pre-tax income as a result of the following
differences at June 30.
<TABLE>
<CAPTION>
1996 1995
------------- ---------
<S> <C> <C>
Income tax provision (benefit) - 34% $ (597,000) $ (256,000)
Increase (decrease) in rates resulting from
State income taxes (64,000) (27,000)
Valuation allowance for recognized deferred
tax assets 661,000 283,000
----------- ----------
Effective tax rates $ 0 $ 0
----------- ----------
</TABLE>
On a consolidated basis, the Company had deferred tax assets of
approximately $1,699,000. In addition, the deferred tax assets maybe reduced as
a result of net operating loss carryforwards which will not be available due to
changes in control caused by the mergers, and the issuance of substantial
additional stock. All of the deferred tax assets result primarily from unused
net operating losses.
The Company will need to realize significant profits to utilize the
losses, all of which may not be available as noted previously, and may be
further limited due to the organization, capitalization, and acquisition costs
incurred. Because of these uncertainties, a valuation allowance was established
in the same amounts as the deferred tax assets because the benefit is more than
likely than not to be lost.
Accumulated net operating losses aggregating $4,996,000 expire in
varying amounts through 2011 as shown below.
<PAGE> 58
<TABLE>
<S> <C>
2006 $ 324,000
2007 10,000
2009 1,580,000
2010 753,000
2011 2,329,000
</TABLE>
NOTE 12 - COMMON STOCK, PREFERRED STOCK, & WARRANTS
Common Stock - The Company has authorized common stock of 25,000,000
shares with a per share par value of $.001. At June 30, 1996, common shares
totaling 7,692,372 were issued and outstanding. Each common share bears one
vote, and dividends are available when declared by the Board of Directors.
Preferred Stock - The Company has authorized preferred stock of
10,000,000 shares with a par value of $.0001 per share.
<TABLE>
<S> <C>
Series A Convertible Preferred Stock, $.0001 par value, 1,000,000 shares
authorized, no shares issued or outstanding 0
Series B Convertible Preferred Stock, $.0001 par value per share,
$3.00 per share stated value, 1,500,000 shares designated,
1,000,000 shares issued and outstanding $3,000,000
Series C Convertible Preferred Stock, $.0001 par value, 300,000
shares designated, $1.00 per share stated value,
no shares issued or outstanding 0
Series D Convertible Preferred Stock, $.0001 par value, 1,000,000
shares designated, $1.00 per stated value, 407,500
shares issued and outstanding 407,500
----------
$3,407,500
----------
</TABLE>
Series B Convertible Preferred Stock
The Board of Directors established this series of preferred stock with
1,500,000 shares designated, $.0001 par value, and without dividends. This
series was used to acquire all of the common stock of MHTI. The shares were
recorded at their stated and preference value of $3.00 per share. The revalued
net assets of MHTI were equal to the preference value.
The holders of each share of the Series B Convertible Preferred Stock
have one vote for each share held with respect to each matter requiring a vote
by the Company's common shareholders. The Series B shares must be converted
into common shares of the Company within one year from the issue date (February
18, 1996) of the Series B, and may be converted at any time provided the common
shares of the Company have sold for $6.00 per share for a period of ten
consecutive days,
<PAGE> 59
or the Company authorizes the conversion. The number of common shares to be
received upon conversion shall be based upon the ratio of the $3.00 per share
stated value of the Series B to the average per share trading amount of each
common share for the fifteen trading days prior to the date of conversion. The
Series B Convertible Preferred Stock must be converted by February 17, 1997. As
of February 17, 1997 the 1,100,000 shares of the Series B were converted into
1,645,311 shares.
Series D Convertible Preferred Stock
This series of Convertible Preferred Stock was established by the
Board of Directors of the Company to be issued in connection with a private
placement. A total of 1,000,000 shares of Series D was authorized, with a par
value of $.0001 and a stated and preference value of $1.00 per share. The
Series D Convertible Preferred Stock are eligible to receive annual dividends
of 10% of the subscription price when such dividends are declared by the Board
of Directors of the Company.
The Series D Convertible Preferred Stock carry the same per share
voting rights as the Company's common stock, and must be converted into common
shares within two years (at various dates between April and June 1998) from
date of issuance of the Series D. Conversion of the Series D shall be at the
ratio which the Series D $1.00 per share stated value bears to the lesser of
$1.50 per common share or 75% of average per share bid price of the common
stock for the ten trading days prior to the date of conversion.
Warrants - The Company has issued warrants to purchase common stock
totaling 1,256,950 shares, of which 1,206,950 are exerciseable at $3.00 per
share and expire at various dates through June 30,1998. The remaining 50,000
warrants are exerciseable at $.50 per share and expire January 31, 1999. In
September 1996, the Company issued warrants for purchase of 1,266,599 common
shares.
NOTE 13 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the notes payable of the Company approximates
the fair value of such instruments based upon management's best estimate of
interest rates which would be available to the Company for similar obligations
as of June 30, 1996. In addition, the carrying value of trade receivables and
payables, including accrued liabilities, are believed to approximate their fair
value. Management also asserts that the carrying amounts of assets are
recoverable from operations.
NOTE 14 - LEASE COMMITMENTS
The Company leases its office and manufacturing facilities under leases
which expire in 1998 and 2001, and which require monthly lease payments ranging
from $25,000 to $27,898. Aggregate annual lease payments for the next five
years are shown below.
<TABLE>
<CAPTION>
Year ending Amount
<S> <C>
6/30/97 $305,000
6/30/98 316,000
6/30/99 269,000
6/30/00 272,000
</TABLE>
<PAGE> 60
6/30/01 160,000
Rent expense charged to operations for the fiscal years ended June 30,
1996 and 1995 was $204,057 and $2,300, respectively.
NOTE 15 - REVENUES AND DEVELOPMENT STAGE
The consolidated statement of operations for the year ended June 30,
1996 includes the accounts of MHTI (see Note 5) for the period from January 1,
1996 (date of acquisition for financial reporting purposes) to June 30, 1996.
The reported revenues of $684,000 for the year ended June 30, 1996 represent
those of MHTI since date of acquisition, and are comprised of approximately
$446,000 from equipment service contracts and $238,000 from parts sales. Cost
of the revenues from service revenues and parts sales totaled $481,000. There
were no product sales during the period. In addition, as of June 30, 1996 the
accounts receivable of MHTI totaled $267,137, of which $172,500 was due from
one customer with respect to the purchase of a product.
Prior to the acquisition of MHTI, the Company was considered to be in
the development stage.
.
NOTE 16 - ADDITIONAL CASH FLOW INFORMATION
The non-cash effect of the acquisition of MHTI is summarized below.
<TABLE>
<S> <C>
Increase in Assets:
Accounts receivable $ 307,254
Inventory 4,943,553
Equipment 351,453
Deposits 39,232
Other 5,600
----------
Total $5,647,092
----------
Increase in Liabilities:
Notes payable $ 344,709
Accounts payable & accruals 1,560,768
Customer deposits 451,050
Deferred revenue 245,237
----------
Total 2,601,764
Change in Stockholders' Equity 3,000,000
----------
Total $5,601,764
----------
Cash Acquired $ 45,328
----------
</TABLE>
<PAGE> 61
Other noncash transactions occurring during the year ended June 30,
1996 are as shown below.
<TABLE>
<S> <C>
Cancellation of accrued royalties $1,060,000
Cancellation of note payable 275,025
Issuance of common stock for:
Services (1,751,724 shares) 500,789
Payment of interest (36,250 shares) 27,500
Note payable extension & share replacement (402,195 shares) 301,899
Officers services (390,000 shares) 350,625
Conversion of debentures (114,000 shares) 95,000
</TABLE>
NOTE 17 - SUBSEQUENT EVENTS
Effective July 1, 1996, the Company entered into an agreement, under
which it acquired all of the outstanding stock of Life Sciences, Inc., and
Biometrix, Inc., (related entities) for 650,000 shares of its Series E
Convertible Preferred Stock and a cash payment of $50,000. The acquired
entities are developers and manufacturers of certain medical devices. As of
June 30, 1996 the acquired companies had assets totaling approximately $42,000
and liabilities totaling approximately$758,000.
In December 1996, the Company was in the process of renegotiating the
acquisition transaction occasioned by certain alleged misrepresentations. The
minimum asset and liabilities that the Company expects to retain from the
transaction is a certain customer list to which the Company has ascribed a
$50,000 carrying amount, a $70,000 bank debt, and either the corporations
themselves or the right to the names of the corporations. The Company expects
that the seller will retain the $50,000 cash payment and the 650,000 shares of
Series E Convertible Preferred Shares of the Company.
In July 1996, the Company entered into a revolving financing agreement
with a maximum amount of $1,500,000. The agreement expires on July 1997, and
the Company pledged the accounts receivable, equipment, and inventory as
collateral.
In July 1996 the holder of a promissory note payable of a predecessor
entity having an unpaid principal balance of $657,599 and accumulated unpaid
interest of $130,116 as of June 30, 1996 initiated a legal action for
collection. On April 27, 1997, the creditor issued instructions to its legal
counsel to dismiss the legal action because certain payments had been received
and an extension of the note payable had been arranged. The Company issued
250,000 of its restricted common shares to the creditor in February 1996; paid
$100,000 each in December 1996, January 1997, and March 1997; and, executed a
new installment note payable in the amount of $546,969, with interest at 12%
per annum on April 1, 1997, which is due in quarterly installments of
$19,763.61 through April 1,1998. Two officers and directors of the Company
co-signed the installment note payable. In addition, the Company issued 152,195
of its restricted common shares to three shareholders of a
<PAGE> 62
predecessor entity, in replacement of their investment in such entity.
NOTE 18 - COMMITMENTS AND CONTINGENCIES
The Company has entered into arrangements with certain entities for
various services. A summary of such arrangements is presented below.
In addition to its internally developed marketing and distributing
relationships with medical dealers and distributors, the Company has entered
into an arrangement with an entity to provide representation throughout the
area commonly referred to as the Pacific Basin.
The Company has entered into agreements with two entities to provide
capital raising services. The entities will be paid via an option agreement
under which the entities can acquire 500,000 shares of the common shares of the
Company at $.01 per share. Further, a maximum of forty-two percent of the
shares have demand registration rights with expenses to be paid by the Company.
Certain legal services are being provided to the Company by an
attorney whose fees are being paid via the issuance of common shares. A maximum
of 450,000 of the common shares of the Company will be sold to the attorney at
$.01 per share. The number of shares to be made available to the attorney from
time to time is to be determined by dividing the fees for services rendered by
fifty percent of the average closing bid price of the common shares for the
last ten trading days.
The Company has entered into a financial advisory agreement with an
investment banking company for services regarding mergers and acquisitions, and
related financial matters, for a period of three years ending September 1998.
The Company is to pay the investment banker (1) $12,000 per calendar quarter;
(2) provide a first refusal to place any financing of the Company; (3) the
Company is to use its best efforts to cause a designee of the investment banker
on its Board of Directors; (4) warrants to purchase 1,266,599 common shares of
the Company at $2.00 per share which are exercisable through September 12,2001;
and, (5) the investment banker has been given the right to have the warrants
and/or underlying shares registered either on demand or as part of a Company
registration of securities.
The Company has also entered into another agreement with the same
investment banker, under the terms of which the investment banker has been
appointed the exclusive placement agent for a private placement of up to $1.5
million of securities of the Company on a best efforts basis, and other forms
of financings. The investment banker is to receive for its services (1) a ten
percent commission of the aggregate proceeds from any financing; (2) a
non-accountable expense allowance of three percent of the aggregate proceeds of
any financing; (3) warrants to purchase common shares of the Company, the
number of warrants to be at the rate of 100,000 warrants for each $1,000,000 of
financing arranged by the investment banker, which warrants will be exercisable
for a period of five years from date of issuance at a per share price which
shall be the lower of (a) the share price in a private placement; (b) the
conversion price of preferred stock on the date of the warrants; or, (c) the
$2.00 per share exercise price of the warrants issued in September 1996.
<PAGE> 63
The Company and its three officers agreed to three year employment
contracts in November 1995, which contracts provide for an annual salary of
$120,000 to each officer plus bonuses as may be approved by the Board of
Directors. In addition, the officers are to receive paid vacations, a company
vehicle, and other fringe benefit programs which are available to all employees
of the Company. In the event of termination, the officer, or his heirs, is to
receive one-half of the annual salary until December 31, 2000.
A subsidiary of the Company was named in a legal action in August 1996
with respect to a dispute over a $100,000 deposit regarding a product order.
Company legal counsel believes that the Company has meritorious defenses to
some or all of the claim(s).
NOTE 19 - PRO-FORMA FINANCIAL INFORMATION (UNAUDITED)
The following Condensed Pro-forma Combined Statement of Operations
shown below for the years ended June 30, 1996 and 1995 have been prepared as
though the acquisitions discussed in Notes 4 and 5 had occurred as of the
beginning of the respective periods.
<TABLE>
<CAPTION>
Years Ended
June 30, 1996 June 30, 1995
----------- -----------
<S> <C> <C>
Revenues $ 1,890,898 $ 1,631,939
Cost of revenues 964,180 499,261
----------- -----------
Gross margin 926,718 1,132,678
Operating expenses 3,328,812 1,549,705
----------- -----------
Net Income (Loss) $(2,402,094) $ (417,027)
----------- -----------
Earnings (loss) per share $ (.44) $ (.08)
----------- -----------
Weighted average number of shares 5,454,650 5,608,633
----------- -----------
</TABLE>
<PAGE> 64
UNIVERSAL MEDICAL SYSTEMS, INC.
And Subsidiaries
CONSOLIDATED FINANCIAL STATEMENTS - Unaudited
DECEMBER 31, 1996
<PAGE> 65
UNIVERSAL MEDICAL SYSTEMS, INC. and Subsidiaries
CONSOLIDATED BALANCE SHEETS - Unaudited
DECEMBER 31, 1996
- - --------------------------------------------------------------------------------
ASSETS
<TABLE>
<CAPTION>
CURRENT ASSETS
<S> <C>
Cash $ 54,202
Accounts Receivable (less allowance for doubtful amounts of $10,000) 1,062,887
Marketable Security, at approximate market value
Inventory 3,014,582
Other 3,654
-----------
Total Current Assets 4,135,325
EQUIPMENT
Equipment, at cost (less accumulated depreciation of $53,334) 568,298
OTHER ASSETS
Deposits 42,321
Other 155,600
-----------
TOTAL $ 4,901,544
===========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable $ 1,558,700
Accounts Payable and Accrued Liabilities 1,635,782
Customer Deposits 498,650
Accrued Sales Commissions 482,574
Deferred Revenue 292,705
Other 19,410
-----------
Total Current Liabilities 4,487,821
-----------
LONG-TERM DEBT
Capitalized Lease Obligation 15,291
COMMITMENTS & CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred Stock - 10,000,000 shares authorized; $.0001 par value
2,757,500 shares issued. 4,957,500
Common Stock - 25,000,000 shares of $.001 par value per share
authorized; 9,149,272 & 5,196,146 shares issued
and outstanding 9,149
Additional Paid-In Capital 2,566,275
Retained Earnings (Deficit) (7,134,492)
-----------
Total Stockholders' Equity 398,432
-----------
TOTAL $ 4,901,544
===========
</TABLE>
See Notes to Consolidated Financial Statement
<PAGE> 66
UNIVERSAL MEDICAL SYSTEMS, INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS - Unaudited
FOR THE YEARS ENDED DECEMBER 31, 1996 & 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
REVENUES $ 3,076,981
Cost of Sales 1,920,420
-----------
Gross Margin 1,156,561
OPERATING EXPENSES:
Selling, General & Administrative 3,544,755 $ 208,067
Depreciation 32,430
Research & Development 345,645
----------- ----------
Total 3,922,830 208,067
----------- ----------
NET LOSS FROM OPERATIONS (2,766,269) (208,067)
OTHER ITEMS:
Interest Income 1,431 478
Interest Expense (178,779) (80,798)
----------- ----------
NET LOSS $(2,943,617) $ (288,387)
=========== ==========
Earnings (Loss) Per Share $ (0.32) $ (0.05)
Weighted Average Common Shares 9,093,184 5,767,740
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 67
UNIVERSAL MEDICAL SYSTEMS, INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - Unaudited
FOR THE SIX MONTHS ENDED DECEMBER 31, 1996
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Retained
Preferred Stock Common Stock Paid in Earnings
Shares $ Shares $ Capital (Loss)
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1996 1,407,500 $3,407,500 7,692,372 $ 7,692 $2,120,036 (4,190,875)
Issuance of Preferred Stock:
Acquisitions 750,000 950,000 (300,000)
Issuance of Common Shares for:
Services 688,000 688 451,442
Officers 300,000 300 113,700
Employee 208,500 209 83,192
Sale of Preferred Stock 600,000 600,000 (50,000)
Issuance of Common Stock:
Sales 50,000 50 62,435
Services 210,400 210 85,470
Net Loss (2,943,617)
---------------------------------------------------------------------------------
Balance, December 31, 1996 2,757,500 $4,957,500 9,149,272 $ 9,149 $2,566,275 $(7,134,492)
=================================================================================
</TABLE>
See Notes to Consolidated Statements
<PAGE> 68
UNIVERSAL MEDICAL SYSTEMS, INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - Unaudited
FOR THE SIX MONTHS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------------
Retained
Preferred Stock Common Stock Paid in Earnings
Shares $ Shares $ Capital (Loss)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1995 0 $0 5,196,000 $5,196 $497,120 ($1,468,398)
Adjustments to reflect the reverse
purchase acquisition of Universal
Medical Systems, Inc.
Surrender of MII Communities (5,196,000) (5,196)
Issuance of UMSI shares to MII shareholders 3,576,170 3,576
Shares retained by prior UMSI shareholders 688,833 689
Shares issued for Services
Issuance of Common Stock for: 502,893 503
Services 138,250 138 10,109
Sales 200,000 200 99,800
Employees 90,000 90 12,496
Net Loss
(288,387)
-----------------------------------------------------------------------------------------
Balance, December 31, 1995 0 $0 5,196,146 $5,196 $619,525 ($1,756,785)
=========================================================================================
</TABLE>
<PAGE> 69
UNIVERSAL MEDICAL SYSTEMS, INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS - Unaudited
FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 & 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
----------- ---------
<S> <C> <C>
CASH FLOWS FROM (TO) OPERATING ACTIVITIES:
Net Income (Loss) From Operations: $(2,943,617) $(288,387)
Add: Non-Cash Items
Depreciation and Amortization 32,430
Unrealized Loss from Marketable Security 3,620
Design & Patent Rights 717,296
Compensation Paid in Common Stock 735,211
Increase (Decrease) in Assets and Liabilities:
Receivables 795,750
Inventory (602,047)
Deposits (13,785)
Accounts Payable & Accrued Liabilities 591,688 288,404
----------- ---------
Net Cash From (To) Operating Activities (1,043,290) 17
----------- ---------
CASH FLOWS FROM (TO) INVESTING ACTIVITIES:
Purchase of Equipment (99,646) (7,640)
----------- ---------
Net Cash From (To) Investing Activities (99,646) (7,640)
----------- ---------
CASH FLOWS FROM (TO) FINANCING ACTIVITIES:
Proceeds From Sale of:
Preferred Stock 550,000
Common Stock 62,485 100,000
Proceeds from Borrowings 665,371
Repayment of Debt (381,730)
----------- ---------
Net Cash From (To) Financing Activities 896,126 100,000
----------- ---------
Increase (Decrease) in Cash (246,810) 92,377
CASH BALANCE, JULY 1 301,012 100
----------- ---------
CASH BALANCE, DECEMBER 31 $ 54,202 $ 92,477
=========== =========
SUPPLEMENTAL DISCLOSURES:
Interest Paid $ 106,924 $ 15,060
Income Taxes $ 0 $ 0
</TABLE>
See Notes to Consolidated Financial Statement
<PAGE> 70
UNIVERSAL MEDICAL SYSTEMS, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
- - --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND HISTORY
Universal Medical Systems, Inc.("Company"), was formed under the laws
of the State of Nevada on January 14, 1987 as Asset Development Corporation. On
June 26, 1987 Joe Franklin Productions, Inc., was formed under the laws of the
State of Delaware, and merged with Asset Development Corporation which changed
its name to Joe Franklin Productions, Inc. In October, 1995, in connection
with the acquisition of Medhealth Imaging, Inc., the name of the corporation
was changed from Joe Franklin Productions, Inc., to Universal Medical Systems,
Inc.
Since formation in 1987, the Company planned to enter the entertainment
production and marketing industry, with a concentration on the production,
repackaging and distribution of nostalgia and memorabilia products. In August
1990, the Company entered the facsimile services business providing world-wide
facsimile transmission and receiving capabilities on high-speed digital
communications technology, which business was terminated on or about December
1, 1991.
In August 1992, the Company entered into an agreement with Commonwealth
Asset Management Corp., to commence the active operation of its intended
business in the entertainment production and marketing industry. In October
1993, the Company entered into an agreement with Sports Heros, Inc., King of
Nostalgia, Inc., Entertainment Heros, Inc., and Entertainment Legends, L.P.
The agreement provided for the entities to market, distribute, sell, license,
and lease or rent the "Joe Franklin Memorabilia". The latter consisted of, in
general, sound and feature films, records, photographs, prints, magazines,
radio memorabilia and other original and one-of-a-kind items. In addition, the
agreement provided for the entities to purchase, acquire, market, sell,
license, lease, rent or otherwise enter into other nostalgic entertainment
memorabilia transactions, and to develop and implement other related revenue
producing articles.
On or about December 1, 1991 the Company terminated its business in the
entertainment production and marketing industry. On August 1, 1995, the
Company entered into an "Agreement and Plan of Merger with Medhealth Imaging,
Inc.
Medhealth Imaging, Inc., was formed under the laws of the State of
Florida on February 8, 1993, and was a wholly owned subsidiary of Medhealth
Service Corporation, a Nevada corporation until October 1, 1993. At such time,
Medhealth Imaging, Inc., was spun-off from Medhealth Service Corporation.
Medhealth Imaging, Inc., is a manufacturer, developer, and marketer of
proprietary medical diagnostic devices, and was inactive until the fiscal year
ending June 30, 1996.
NOTE 2 - BASIS OF ACCOUNTING
The consolidated financial statements of the Company as of December 31,
1996 and for the six months then ended includes the accounts of the Company and
its wholly owned subsidiaries,
<PAGE> 71
Medhealth Imaging, Inc. ("MII"), Medical High Technology International, Inc.
("MHTI"), Life Sciences, Inc., and Biometrix, Inc. The consolidated financial
statements as of December 31, 1995 include the accounts of the Company and MII,
as MHTI was not acquired until January 1, 1996. All significant intercompany
accounts and transactions have been eliminated in consolidation.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue Recognition
The Company, through its subsidiary MHTI recognizes revenues
upon the shipment of products and repair parts, and product service. As to the
latter, revenue from service contracts is deferred and recognized ratably
during the applicable year(s).
Allowance for Doubtful Amounts
An allowance for doubtful amounts is provided when it appears that
realization of the receivable has become questionable.
Marketable securities
Marketable securities are carried at their approximate market
values.
Inventories
Inventories are carried at average acquisition cost, not in excess
of market.
Equipment and Leasehold Improvements
Equipment and leasehold improvements are carried at acquisition
cost. Repairs and maintenance which do not extend the useful life are charged
to expense when incurred, and improvements and betterments which extend the
useful life are capitalized. Depreciation with respect to equipment is
calculated using the straight-line method over the estimated lives which
generally range from five to ten years. Leasehold improvements are amortized
ratably over the term of the lease.
Income Taxes
The provision (benefit) for income taxes is based on the pre-tax
earnings (loss) reported in the consolidated balance sheet, adjusted for
transactions that may never enter into the computation of income taxes payable.
A deferred tax liability or asset is recognized for the estimated future tax
effect attributable to temporary differences in the recognition of income and
expenses for financial statement and income tax purposes. A valuation
allowance is provided in the event that the
<PAGE> 72
tax benefits are not expected to be realized.
Earnings (Loss) Per Share
Earnings (loss) per common share is based upon the weighted
average number of common shares outstanding during the periods. The common
shares issuable under convertible preferred stock and warrants have not been
included in the determination of loss per common share as they would be
anti-dilutive.
Economic and Concentration Risk
The business(s) of the Company is primarily in the development,
manufacturing, and /or marketing of medical devices to customers in the United
States of America and certain foreign countries. The Company may encounter
risk from competitors who have significantly greater resources; from general
and/or regional economic changes; and, from technological breakthroughs which
are commonplace in the medical industry. Revenues of the Company are presently
concentrated in one medical device product and service thereof, generally used
by the hospital industry. Other medical devices are in various stages of
development, some of which may require approval of the U.S. Food and Drug
Administration before sales can occur.
NOTE 4 - ACQUISITION OF MEDHEALTH IMAGING, INC.
On August 1, 1995, the Company entered into "Agreement and Plan of
Merger" with MII under the terms of which the Company completed a one for
thirty-five reverse split of all of its issued and outstanding common shares
with the result that the issued and outstanding warrants after the reverse
split totaled 705,823, and the Company issued 3,576,170 (post-split) common
shares to the shareholders of MII to complete the acquisition. The officers
and directors of MII became the officers and directors of the Company.
Retroactive effect has been given to the common share reverse split throughout
the financial statements.
For financial reporting purposes, this transaction was accounted for
as a reverse purchase acquisition under which the companies were recapitalized
to include the historical financial information of MII. The assets and
liabilities of the Company were valued at net book value.
NOTE 5 - ACQUISITION OF MEDICAL HIGH TECHNOLOGY, INC.
Effective January 1, 1996, the Company entered into an agreement with
MHTI under which the Company designated and issued 1,000,000 of its preferred
shares identified as "Series B" for all of the outstanding common stock of
MHTI. For financial reporting purposes the acquisition was accounted for as a
purchase. The purchase price did not exceed the revalued net assets of MHTI.
The Board of Directors of the Company designated the Preferred Stock -
Series B with rights and preferences of (1) a per share stated value of $3.00;
(2) the same voting rights as the common shares; (3) the shares may be
converted into common shares of the Company at any time the common shares have
traded at $6.00 per share for ten or more consecutive days, at any time the
Company
<PAGE> 73
authorizes the conversion, all the preferred shares must be converted within
one year; and, (4) all conversions of the preferred shares into common shares
shall be in the ratio which the per share price of the common share bears to
the $3.00 preferred stock per share value.
NOTE 6 - ACQUISITION OF BIOMETRIX
Effective July 1, 1996, the Company entered into an agreement, under
which it acquired all of the outstanding stock of Life Sciences, Inc., and
Biometrix, Inc., (related entities) for 650,000 shares of its Series E
Convertible Preferred Stock and $50,000 in a cash payment. The acquired
entities are developers and manufacturers of certain medical devices. As of
June 30, 1996 the acquired companies had assets totaling approximately $42,000,
and liabilities aggregating approximately $758,000 of which $160,000 were
included in the acquisition transaction.
As of December 31, 1996, the Company was in the process of renegotiating
the acquisition transaction occasioned by certain alleged misrepresentations.
The minimum asset and liabilities that the Company expects to retain from the
transaction is a certain customer list to which the Company has ascribed a
$50,000 carrying amount, and a $70,000 bank debt. The Company expects that
seller will retain the $50,000 cash payment and the 650,000 shares of Series E
Convertible Preferred Shares of the Company. Such preferred shares were
required to be converted into common shares of the Company as of January 1,
1997. For financial statement reporting purposes, the Company has recognized
a charge of $717,296 as of December 31, 1996 as a result of the renegotiation.
In addition, the conversion of the 650,000 Series E Convertible Preferred
Shares into 357,143 common shares of the Company, due to occur January 1, 1997,
has been deferred pending resolution of the matter. The Company does not
expect to incur further costs with respect to the matter.
NOTE 7 - MARKETABLE SECURITY
The marketable security consists of 72,404 common shares of Sports Heros,
Inc., which had a carrying value of $72,404. At June 30, 1996, the Company
charged operations with $68,784 to reflect the approximate market value and
estimated permanent impairment of value of the security. As of December 31,
1996, the marketable security was determined to be of no value and its carrying
value was accordingly adjusted.
This space intentionally left blank.
<PAGE> 74
NOTE 8 - ACCOUNTS RECEIVABLE
Accounts receivable at December 31, 1996 were comprised as follows:
<TABLE>
<S> <C>
Trade receivables $1,062,448
Employees 10,439
----------
1,072,887
----------
Less - Allowance for doubtful
amounts (10,000)
----------
$1,062,887
----------
</TABLE>
NOTE 9 - INVENTORIES
Inventories at December 31, 1996 are comprised of:
<TABLE>
<S> <C>
Parts, components, and sub-assemblies $2,856,020
Systems work in progress 158,562
----------
$3,014,582
----------
</TABLE>
NOTE 10 - EQUIPMENT
Equipment at December 31, 1996 is comprised of the following:
<TABLE>
<S> <C>
Office equipment and furniture $270,058
Tools and equipment 196,131
Demonstration and
research and development 124,000
Leasehold improvements 31,443
--------
621,632
Less-accumulated depreciation (53,334)
--------
$568,298
--------
</TABLE>
This space intentionally left blank.
<PAGE> 75
NOTE 11 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities at December 31, 1996 and 1995
were comprised as follows:
<TABLE>
<CAPTION>
12/31/96 12/31/95
---------- ----------
<S> <C> <C>
Accounts payable:
Trade $ 940,285 $ 121,046
Officers 11,466 115,112
Employees 14,412
Accrued payroll:
Officers 227,083
Employees 89,889
Accrued payroll taxes 24,155
Accrued interest 190,082 174,689
Other accrued liabilities 138,410
---------- ----------
Total $1,635,782 $ 410,847
---------- ----------
</TABLE>
NOTE 12 - NOTES PAYABLE
<TABLE>
<S> <C>
At December 31, 1996, notes payable consisted of the following:
Note payable with a non-bank lender due December 15, 1996 with
interest at 36% per annum, and having accounts receivable,
inventories, and equipment as collateral - in default. $300,000
Note payable to an individual, past due, with interest
at 11% per annum, and the personal guarantee of
three officers and directors as collateral 200,228
Note payable to an individual, past due, with interest
at 16% per annum 150,000
Note payable to an institution, past due, with interest
at 12% per annum, co-signed by an officer/director 657,599
Note payable to an institution, past due, with interest
at 12% 50,582
Note payable to bank, past due, with interest at the rate
1 1/2% above the prime bank rate and having as
collateral certain real property of an individual 70,000
</TABLE>
<PAGE> 76
<TABLE>
<S> <C>
Capitalized lease obligation due in monthly payments
of $2,323 through February 1999, with interest at
10% per annum 29,013
Notes payable of less than $50,000 each due to individuals,
due on demand, and bearing interest at 11% per annum 116,569
----------
1,573,991
Less - long-term portion of capitalized lease obligation (15,291)
----------
$1,558,700
----------
</TABLE>
NOTE 13 - INCOME TAXES
The provision (benefit) for income taxes differs from the amount of
income tax determined by applying the applicable United States statutory
federal income tax rate to pre-tax income as a result of the following
differences at December 31, 1996.
<TABLE>
<S> <C>
Income tax provision (benefit) - 34% $(1,039,000)
Increase (decrease) in rates resulting from
State income taxes (111,000)
Valuation allowance for recognized deferred
tax assets 1,150,000
-----------
Effective tax rates $ 0
-----------
</TABLE>
On a consolidated basis, the Company has deferred tax assets of
approximately $2,738,000. The deferred tax assets maybe reduced as a result of
net operating loss carryforwards which will bot be available due to changes in
control caused by the mergers, and the issuance of substantial additional
stock. All of the deferred tax assets result primarily from unused net
operating losses.
The Company will need to realize significant profits to utilize the
losses, all of which may not be available as noted previously, and may be
further limited due to the organization, capitalization, and acquisition costs
incurred. Because of these uncertainties, a valuation allowance was
established in the same amounts as the deferred tax assets because the benefit
is more likely than not to be lost.
Accumulated net operating losses aggregating $5,607,000 expire in
varying amounts through 2012 as shown below.
<TABLE>
<S> <C>
2006 $ 324,000
2007 10,000
2009 1,580,000
2010 753,000
2011 2,329,000
2012 3,056,000
</TABLE>
<PAGE> 77
NOTE 14 - COMMON STOCK, PREFERRED STOCK, & WARRANTS
Common Stock - The Company has authorized common stock of 25,000,000
shares with a per share par value of $.001. At December 31, 1996, common
shares totaling 9,149,272 were issued and outstanding. Each common share has
one vote, and may receive dividends when such are declared by the Board of
Directors.
Preferred Stock - The Company has authorized preferred stock of
10,000,000 shares with a par value of $.0001 per share. At December 31, 1996,
the following series of preferred stock were authorized and outstanding where
indicated.
<TABLE>
<S> <C>
Series A Convertible Preferred Stock,
$.0001 par value, 1,000,000 shares
authorized, no shares issued or outstanding None
Series B Convertible Preferred Stock, $.0001
par value per share, $3.00 per share stated value,
1,500,000 shares designated, 1,100,000 shares
issued and outstanding. $3,300,000
Series C Convertible Preferred Stock, $.0001
par value, 300,000 shares designated, $1.00
per share stated value, 600,000 shares issued &
outstanding. 600,000
Series D Convertible Preferred Stock, $.0001
par value, 1,000,000 shares designated, $1.00
per stated value, 407,500 shares issued and
outstanding. 407,500
Series E Convertible Preferred Stock, $.0001
par value, 750,000 shares designated, $1.00
per share stated value, 650,000 shares issued. 650,000
----------
$4,307,500
----------
</TABLE>
Series B Convertible Preferred Stock
The Board of Directors established this series of
preferred stock with 1,500,000 shares designated, $.0001 par value, and without
dividends. One million shares of this series was used to acquire all of the
common stock of MHTI. The shares were recorded at their stated and preference
value of $3.00 per share. The revalued net assets of MHTI were equal to the
preference value. An additional 100,000 shares were issued to a business
acquaintance. The preference and stated value amount of $300,000 for these
shares was charged against equity.
<PAGE> 78
The holders of each share of the Series B Convertible Preferred Stock
have one vote for each share held with respect to each matter requiring a vote
by the Company's common shareholders. The Series B shares must be converted
into common shares of the Company within one year from the issue date of the
Series B, and may be converted at any time provided the common shares of the
Company have sold for $6.00 per share for a period of ten consecutive days, or
the Company authorizes the conversion. The number of common shares to be
received upon conversion shall be based upon the ratio of the $3.00 per share
stated value of the Series B to the average per share trading amount of each
common share for the fifteen trading days prior to the date of conversion. The
Series B Convertible Preferred Stock must be converted by February 17, 1997.
As of March 15, 1997, the Series B Convertible Preferred Stock were converted
into approximately 1,645,311 common shares.
Series C Convertible Preferred Stock
The Board of Directors established this series of preferred stock with
300,000 shares designated, with a $.0001 per share stated value and a per share
liquidation preference of $1.00 per share. The shares were sold to raise funds
for operations.
The holders of each share of Series C Convertible Preferred Stock are
entitled to receive dividends of 20% of the subscription price of the stock on
an annual compounded basis when such dividends are declared by the Board of
Directors of the Company. The dividend rate automatically adjusts to 10% six
months after the date of issuance of the shares.
Each share of the Series C Convertible Preferred Stock maybe converted
into one share of the common stock of the Company six months after the date of
issuance of the Series C. The holder of the Series C has the right to extend
the conversion right for an additional six months. Each share of the Series C
has one vote per share and has the same voting rights as the common shares.
Series D Convertible Preferred Stock
This series of Convertible Preferred Stock was established
by the Board of Directors of the Company to be issued in connection with a
private placement. A total of 1,000,000 shares of Series D was authorized,
with a par value of $.0001 and a stated and preference value of $1.00 per share.
The Series D Convertible Preferred Stock carry the same per share voting
rights as the Company's common stock, and must be converted into common shares
within two years (at various dates between April and June 1998) from date of
issuance of the Series D. Conversion of the Series D shall be at the ratio
which the Series D $1.00 per share stated value bears to the lesser of $1.50
per common share or 75% of average per share bid price of the common stock for
the ten trading days prior to the date of conversion.
Series E Convertible Preferred Stock
This series of Convertible Preferred Stock was established
by the Board of Directors of the Company to be issued in connection with
certain acquisitions. A total of 750,000 shares of Series E was authorized,
with a par value of $.0001, and a stated and preference value of $1.00 per
share.
<PAGE> 79
The Series E Convertible Preferred Stock has the same voting rights of
one vote per share as do the common shares; is not entitled to receive
dividends unless declared by the Board of Directors; and , has a preference
value of $1.00 per share in distributions upon liquidation. In addition, the
Series E shares maybe converted into common shares at any time the common
shares of the Company have traded for at least ten days at a price of not less
than $6.00 per share, or at any time the Company authorizes conversion. The
Series E shares automatically convert to common shares on February 1, 1997. As
of March 15, 1997 the conversion of the Series E shares has not been effected.
Warrants - The Company has issued warrants to purchase common stock
totaling 2,523,549 as of December 31, 1996, and has issued an additional
540,000 warrants as of March 15, 1997. The warrants are exercisable at per
share amounts ranging from $1.00 to $3.00 per share and expire at various dates
through January 2002.
NOTE 15 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the notes payable of the Company approximates
the fair value of such instruments based upon management's best estimate of
interest rates which would be available to the Company for similar obligations
as of December 31, 1996. In addition, the carrying value of trade receivables
and payables, including accrued liabilities, are believed to approximate their
fair value. Management asserts that the carrying amounts of assets are
recoverable from operations.
NOTE 16 - LEASE COMMITMENTS
The Company leases its office and manufacturing facilities under leases
which expire in 1998 and 2001, and which require monthly lease payments ranging
from $22,000 to $26,000. Aggregate annual lease payments for the next five
years are shown below.
<TABLE>
<CAPTION>
Year ending Amount
----------- ------
<S> <C>
12/31/97 $309,000
12/31/98 293,000
12/31/99 266,000
12/31/00 274,000
12/31/01 23,000
</TABLE>
Rent expense charged to operations for the fiscal years ended December
31, 1996 and 1995 was $159,000 and $163,000, respectively.
NOTE 17 - REVENUES AND DEVELOPMENT STAGE
The consolidated statement of operations for the six month period ended
December 31, 1996 includes the accounts of MHTI, which was acquired effective
January 1, 1996. The reported
<PAGE> 80
revenues of $3,076,981 for the six month period ended December 31, 1996
represent those of MHTI and are comprised of approximately $2,427,850 from
product sales and $649,131 from equipment service contracts and parts sales.
In addition, as of December 31, 1996, the accounts receivable of MHTI totaled
$1,061,987 of which $219,000 was due from one customer and which amount was
backed by an irrevocable letter of credit.
Prior to the acquisition of MHTI, the Company was considered to be in
the development stage.
.
NOTE 18 - ADDITIONAL CASH FLOW INFORMATION
Non-cash transactions occurring during the six months ended December 31,
1996 are as shown below.
<TABLE>
<S> <C>
Issuance of common stock for:
services (1,406,900) $735,211
Issuance of preferred stock for
acquisitions 950,000
Customer list obtained in acquisition 50,000
Note payable from acquisition 70.000
</TABLE>
NOTE 19 - SUBSEQUENT EVENTS
In January 1997, the Company issued $500,000 of convertible debentures
for $500,000 and 500,000 warrants to purchase common shares to brokers. In
February 1997, $460,000 of the convertible debentures were converted into
292,558 common shares.
In March 1997, the Company sold 40,000 units in a private placement,
receiving a total of $112,000. Each unit consisted of two shares of common
stock, and one warrant to purchase a share of common stock at a purchase price
of $3.00 with an exercise period of three years. The minimum subscription was
for 10,000 units, at a price of $2.80 per unit.
In July 1996 the holder of a promissory note payable of a predecessor
entity having an unpaid principal balance of $657,599 and accumulated unpaid
interest of $130,116 as of June 30, 1996 initiated a legal action for
collection. On April 27, 1997, the creditor issued instructions to its legal
counsel to dismiss the legal action because certain payments had been received
and an extension of the note payable had been arranged. The Company issued
250,000 of its restricted common shares to the creditor in February 1996; paid
$100,000 each in December 1996, January 1997, and March 1997; and, executed a
new installment note payable in the amount of $546,969, with interest at 12%
per annum on April 1, 1997, which is due in quarterly installments of
$19,763.61 through April 1,1998. Two officers and directors of the Company
co-signed the installment note payable. In
<PAGE> 81
addition, the Company issued 152,195 of its restricted common shares to three
shareholders of a predecessor entity, in replacement of their investment in
such entity.
NOTE 20 - COMMITMENTS AND CONTINGENCIES
The Company has entered into arrangements with certain entities for
various services. A summary of such arrangements is presented below.
In addition to its internally developed marketing and distributing
relationships with medical dealers and distributors, the Company has entered
into an arrangement with an entity to provide representation throughout the
area commonly referred to as the Pacific Basin.
The Company has entered into agreements with two entities to provide
capital raising services. The entities will be paid via an option agreement
under which the entities can acquire 500,000 shares of the common shares of the
Company at $.01 per share. Further, a maximum of forty-two percent of the
shares have demand registration rights with expenses to be paid by the Company.
Certain legal services are being provided to the Company by an attorney
whose fees are being paid via the issuance of common shares. A maximum of
450,000 of the common shares of the Company will be sold to the attorney at
$.01 per share. The number of shares to be made available to the attorney from
time to time is to be determined by dividing the fees for services rendered by
fifty percent of the average closing bid price of the common shares for the
last ten trading days.
The Company has entered into a financial advisory agreement with an
investment banking company for services regarding mergers and acquisitions, and
related financial matters, for a period of three years ending September 1998.
The Company is to pay the investment banker (1) $12,000 per calendar quarter;
(2) provide a first refusal to place any financing of the Company; (3) the
Company is to use its best efforts to cause a designee of the investment banker
on its Board of Directors; (4) warrants to purchase 1,266,599 common shares of
the Company at $2.00 per share which are exercisable through September 12,2001;
and, (5) the investment banker has been given the right to have the warrants
and/or underlying shares registered either on demand or as part of a Company
registration of securities.
The Company has also entered into another agreement with the same
investment banker, under the terms of which the investment banker has been
appointed the exclusive placement agent for a private placement of up to $1.5
million of securities of the Company on a best efforts basis, and other forms
of financings. The investment banker is to receive for its services (1) a ten
percent commission of the aggregate proceeds from any financing; (2) a
non-accountable expense allowance of three percent of the aggregate proceeds of
any financing; (3) warrants to purchase common shares of the Company, the
number of warrants to be at the rate of 100,000 warrants for each $1,000,000 of
financing arranged by the investment banker, which warrants will be exercisable
for a period of five years from date of issuance at a per share price which
shall be the lower of (a) the share price in a private placement; (b) the
conversion price of preferred stock on the date of the warrants; or, (c) the
<PAGE> 82
$2.00 per share exercise price of the warrants issued in September 1996.
The Company and its three officers agreed to three year employment
contracts in November 1995, which contracts provide for an annual salary of
$120,000 to each officer plus bonuses as may be approved by the Board of
Directors. In addition, the officers are to receive paid vacations, a company
vehicle, and other fringe benefit programs which are available to all employees
of the Company. In the event of termination, the officer, or his heirs, is to
receive one- half of the annual salary until December 31, 2000.
A subsidiary of the Company was named in a legal action in August 1996
with respect to a dispute over a $100,000 deposit regarding a product order.
Company legal counsel believes that the Company has meritorious defenses to
some or all of the claim(s).
NOTE 21 - PRO-FORMA FINANCIAL INFORMATION
The following Condensed Pro-forma Combined Statement of Operations
shown below for the six months ended December 31, 1995 has been prepared as
though the acquisitions discussed in Notes 4 and 5 had occurred as of the
beginning of the period.
<TABLE>
<CAPTION>
June 30, 1995
-------------
<S> <C>
Revenues $ 1,206,409
Cost of revenues 501,809
------------
Gross margin 704,600
Operating expenses 780,102
Other (income) expense 31,972
------------
Net Income $ (107,474)
------------
</TABLE>
<PAGE> 83
In accordance with Section 12 of the Securities and Exchange Act of 1934,
the Registrant caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
Universal Medical Systems, Inc.,
a Nevada Corporation
By: /s/ Myron A. Baker
----------------------------------
Myron A. Baker, Chairman of the
Board, Chief Executive Officer and
President
Dated: April 2, 1997
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this Registration Statement has been signed by the following persons on behalf
of the registrant and in the capacities and on the dated indicated.
<TABLE>
<CAPTION>
Signature Title Date
- - ------------- ---------------------------------- ------
<S> <C> <C>
Chairman of the Board of
Directors, Chief Executive Officer
/s/ Myron A. Baker and President April 2, 1997
- - ----------------------- -------------
Myron A. Baker
Director, Chief Financial Officer,
/s/ Guy Zani, Jr. and Treasurer April 2, 1997
- - ----------------------- -------------
Guy Zani, Jr.
Director, Secretary and
/s/ Dennis D. Cole General Counsel April 2, 1997
- - ----------------------- -------------
Dennis D. Cole
</TABLE>
<PAGE> 1
EXHIBIT 2(a)
================================================================================
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
JOE FRANKLIN PRODUCTIONS, INC.
AND
MEDHEALTH IMAGING, INC.
Dated as of August 1, 1995
================================================================================
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
PRELIMINARY MATTERS
SECTION
<TABLE>
<S> <C> <C>
1.1. Formation of Wholly-Owned JFP Subsidiary........................................................2
1.2. Reverse Split of JFP Common Stock...............................................................2
ARTICLE II
THE MERGER
SECTION
2.1. Meeting of JFP's Stockholders...................................................................3
2.2. The Merger......................................................................................3
2.3. Conversion of Outstanding Shares................................................................5
2.4. Voting Rights...................................................................................6
2.5. By-laws........................................................................................10
2.6. Directors and Officers.........................................................................10
2.7. Stock Transfer Books...........................................................................10
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF MEDHEALTH
SECTION
3.1. Due Organization; Power; Qualification, etc....................................................10
3.2. Authorization and Validity of Agreement........................................................11
3.3. No Conflict or Violation.......................................................................11
3.4. Consents and Approvals.........................................................................12
3.5. Capitalization.................................................................................13
3.6. Restrictions on Disposition....................................................................13
3.7. Nature of Business.............................................................................14
3.8. Financial Statements; No Material Adverse Change...............................................14
3.9. Title to Properties............................................................................15
3.10. Party to Agreements............................................................................15
3.11. Other Agreements, Leases, Joint Ventures, etc..................................................15
3.12. Litigation.....................................................................................16
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
3.13. Tax Matters....................................................................................16
3.14. Operations in Ordinary Course..................................................................16
3.15. Negative Covenants.............................................................................16
3.16. Records Service................................................................................17
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF JFP
SECTION
4.1. Due Organization; Power; Qualification, etc....................................................17
4.2. Authorization and Validity of Agreement........................................................17
4.3. Vote of MII Shareholders.......................................................................18
4.4. Completion of Preliminary Matters..............................................................18
4.5. No Conflict or Violation.......................................................................19
4.6. Consents and Approvals.........................................................................19
4.7. Capitalization.................................................................................20
4.8. Shares.........................................................................................20
4.9. Financial Statements; No Material Adverse Change...............................................20
4.10. Title to Properties............................................................................21
4.11. Party to Agreements............................................................................22
4.12. Other Agreements, Leases, Joint Ventures, etc..................................................22
4.13. Litigation.....................................................................................22
4.14. Tax Matters....................................................................................23
4.15. SEC Form 10-Q's and Form 10-K's................................................................23
ARTICLE V
COVENANTS OF JFP
SECTION
5.1. Conduct of JFP.................................................................................23
5.2. Access to Information..........................................................................25
5.3. Vote...........................................................................................25
ARTICLE VI
COVENANTS OF MEDHEALTH
SECTION
6.1. Conduct of Medhealth...........................................................................26
6.2. Access to Information..........................................................................26
</TABLE>
-ii-
<PAGE> 4
ARTICLE VII
OTHER AGREEMENTS
SECTION
<TABLE>
<S> <C> <C>
7.1. Best Efforts...................................................................................27
7.2. Notification of Certain Matters................................................................27
7.3. Further Assurances.............................................................................28
7.4. Payment of Existing Liabilities................................................................28
7.5. Payment of Expenses............................................................................29
7.6. Finders and Consultants........................................................................30
7.7. Conditions Subsequent to Merger................................................................30
7.8. NASDAQ Listing.................................................................................31
7.9. JFP Venture with Sports Heroes, Inc............................................................32
7.10. Joe Franklin...................................................................................32
ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION
8.1. Conditions to the Obligations of Each Party....................................................33
8.2. Conditions to the Obligation of JFP............................................................33
8.3. Conditions to the Obligation of Medhealth......................................................36
ARTICLE IX
TERMINATION
SECTION
9.1. Termination....................................................................................39
9.2. Effect of Termination..........................................................................40
ARTICLE X
MISCELLANEOUS
SECTION
10.1. Notices........................................................................................40
10.2. Survival.......................................................................................41
10.3. Amendment......................................................................................41
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C> <C>
10.4. Waiver.........................................................................................41
10.5. Successors and Assigns.........................................................................42
10.6. Governing Law..................................................................................42
10.7. Integration....................................................................................42
10.8. Headings and References........................................................................42
10.9. Counterparts; Effectiveness....................................................................43
</TABLE>
SIGNATURES43
-iv-
<PAGE> 6
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of August 1, 1995, (this
"Agreement") by and among JOE FRANKLIN PRODUCTIONS, INC., a Nevada corporation
("JFP") and MEDHEALTH IMAGING, INC., a Florida corporation ("Medhealth").
WHEREAS, JFP is a corporation duly organized and in good standing under
the laws of the State of Nevada, having been incorporated on January 14, 1987
under the name "Asset Development Corporation", and Joe Franklin Productions,
Inc., a Delaware corporation organized on June 26, 1987 having merged into Asset
Development Corporation and Asset Development Corporation having then changed
its name to Joe Franklin Productions, Inc.; and
WHEREAS, Medhealth is a corporation duly organized and in good standing
under the laws of the State of Florida having been incorporated on February 8,
1993, and was a wholly owned subsidiary of Medhealth Service Corporation, a
Nevada corporation until October 1, 1993 when Medhealth was spun-off from
Medhealth Service Corporation; and
WHEREAS, the parties hereto desire to effect the Merger of Medhealth
with and into a wholly owned subsidiary corporation of JFP to be formed in the
State of Nevada as hereinafter provided, on the terms and conditions hereinafter
set forth and in accordance with the applicable laws of the State of Nevada and
of the State of Florida; and
<PAGE> 7
WHEREAS, the Board of Directors of each of JFP and Medhealth have
determined that the Merger contemplated hereby is fair to and in the best
interests of JFP and its shareholders and Medhealth and its shareholders;
NOW THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
ARTICLE I
PRELIMINARY MATTERS
SECTION 1.1. Formation of Wholly-Owned JFP Subsidiary. Upon execution
of this Agreement, JFP will take all action necessary and cause the
incorporation in Nevada of a new wholly owned subsidiary corporation of JFP to
be named (if available) "Medhealth Imaging, Inc. ("MII") whose Board of
Directors will ratify the Merger and the approval and adoption of this
Agreement. MII shall be authorized to issue 1,000 shares of common stock of the
par value of $.001 per share of which 100 shares shall be duly issued and
outstanding in the name of JFP at the Effective Time of the Merger.
SECTION 1.2. Reverse Split of JFP Common Stock. At the Effective Time
of the Merger, JFP shall have completed a one for thirty-five (1:35) reverse
split of all issued and outstanding shares of common stock so, as a result of
the reverse split, the total number of issued and outstanding shares of common
stock of JFP, inclusive of the shares of common stock underlying the issued and
outstanding warrants, will be approximately 705,823.
-2-
<PAGE> 8
ARTICLE II
THE MERGER
SECTION 2.1. Meeting of JFP's Stockholders. JFP will take all action
necessary in accordance with applicable law to convene a meeting of its
stockholders (the "Special Meeting") as promptly as practicable after the date
hereof to consider and vote upon the Merger. The Board of Directors of JFP,
subject to its fiduciary duties as advised by counsel, will recommend that JFP's
stockholders vote in favor of the Merger and the approval and adoption of this
Agreement.
SECTION 2.2. The Merger. (a) At the Effective Time, the Merger shall
occur in accordance with the Nevada Revised Statutes of the State of Nevada
("Nevada Law") whereupon the separate existence of Medhealth shall cease,
Medhealth shall be merged into MII and MII shall be the surviving corporation
(the "Surviving Corporation").
(b) When the Merger has been effected, the Surviving Corporation shall
thereupon and thereafter possess all the rights, privileges, immunities and
franchises of a public as well as of a private nature, of Medhealth and MII (the
"Constituent Corporations"); all property, real, personal and mixed, and all
debts due on whatever account and all choses in action, and all and every other
interest, of or belonging to or due each of the Constituent Corporations shall
be vested in the Surviving Corporation without further act or deed; and the
title to any real estate, or any interest therein, vested in Medhealth and MII
or the Surviving Corporation shall not revert or be in any way impaired by
reason of the Merger. The Surviving Corporation shall thenceforth be responsible
and liable for all the liabilities and obligations of each of the Constituent
Corporations so merged; any claim existing or action or proceeding pending by or
against any of the Constituent Corporations
-3-
<PAGE> 9
may be prosecuted as if the Merger had not taken place, or the Surviving
Corporation may be substituted in its place. The Surviving Corporation shall
have all the rights, privileges, immunities and powers and shall be subject to
all the duties and liabilities of a corporation organized under the laws of the
State of Nevada; and neither the rights of creditors nor any liens upon the
respective properties of the Constituent Corporations and the Surviving
Corporation shall be impaired by the Merger; all with the effect set forth in
the law of the State of Nevada.
(c) As soon as practicable after all of the conditions set forth herein
have been satisfied or waived, JFP, Medhealth and MII will file, or cause to be
filed, with the Secretary of State of the State of Nevada a certificate of
merger for the Merger in accordance with Nevada Law (the "Certificate of
Merger"). The Merger shall become effective at the time such filing is made or
at such other time as is set forth in the Certificate of Merger (the "Effective
Time").
(d) From and after the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, powers and franchises and be subject to all
of the restrictions, disabilities and duties of Medhealth and MII, all as
provided under Nevada Law.
(e) The laws which are to govern MII as the Surviving Corporation are
Nevada Law. The certificate of incorporation of the Surviving Corporation shall
be the certificate of incorporation of MII, and the by-laws of the Surviving
Corporation shall be the by-laws of MII, until the same shall be further amended
or altered in accordance with the provisions thereof and Nevada Law.
-4-
<PAGE> 10
SECTION 2.3. Conversion of Outstanding Shares.
(a) At the Effective Time:
(i) Each share of the common stock, par value $.001 per share,
of Medhealth issued and outstanding on the Effective Time of the Merger shall,
by virtue of the Merger, and without any further consideration, automatically be
converted into and become .68392 (sixty-eight and three hundred ninety-two one
hundredth) of a share of the common stock, par value $.001 per share, of JFP. No
fractional shares will be issued and all share amounts will be rounded to the
next lowest whole number.
(ii) Prior to the Effective Time of the Merger, each holder of
an outstanding certificate representing shares of Medhealth common stock shall
deliver same, together with an investment letter in the form annexed hereto as
Exhibit "A" to counsel for Medhealth who shall hold same in escrow, and, upon
said counsel's receipt of certificates representing at least 80% of the issued
and outstanding common stock of Medhealth, together with investment letters
signed by the holders thereof, he shall deliver and surrender same to JFP, or an
agent appointed by it, and thereafter, upon the Effective Time of the Merger,
such holder shall be entitled to receive in exchange therefore a certificate
representing the number of shares of common stock of JFP into which the shares
of Medhealth, theretofore represented by the certificate so surrendered, shall
have been converted and changed. It shall be condition to such delivery that the
certificates so surrendered shall be properly endorsed or be otherwise in proper
form for transfer and that the person requesting such delivery shall pay any
required transfer or other taxes.
-5-
<PAGE> 11
(iii) All authorized shares of common stock of MII, whether
issued or unissued, shall continue unchanged as shares of common stock of the
Surviving Corporation, and all authorized shares of common stock of JFP, whether
issued before or, as contemplated hereby, after the Effective Time of the Merger
shall continue unchanged as shares of common stock of JFP.
SECTION 2.4. Voting Rights. (a) In accordance with the laws of the
State of Nevada and of the State of Florida, the holder of each share of the
common stock of Medhealth and MII is entitled to vote upon the adoption of this
Agreement of Merger and Plan of Reorganization, each such share being entitled
to one (1) vote. The approval of the holders of a majority of the outstanding
shares of common stock of Medhealth and of the holders of a majority of the
outstanding shares of common stock of MII, is required. Notwithstanding that all
outstanding common stock of MII shall be held by JFP, it is agreed that the
shareholders of JFP shall be entitled to vote upon the matters herein set forth,
and that the vote of the holders of a majority of the outstanding shares of
common stock of JFP shall be required.
(b) Special Meetings of the shareholders of Medhealth, JFP and MII
shall be called and held in accordance with the laws of their respective states
of incorporation as soon as may be practicable after the execution of this
Agreement for the purpose of voting upon the approval and adoption of this
Agreement.
(c) JFP shall include in its notice to its shareholders of the Special
Meeting that the purposes of the meeting are (1) to authorize its Officers to
execute and file a Certificate of Amendment of its Certificate of Incorporation
whereby the name Joe Franklin Productions, Inc. shall
-6-
<PAGE> 12
be changed (if available) to Universal Medical Systems, Inc.; (2) to authorize a
one for thirty-five (1:35) reverse split of all issued and outstanding shares of
common stock resulting in a pro-rata reduction of the number of the issued and
outstanding shares; and (3) to adopt and approve this Agreement of Merger and
Plan of Reorganization.
(d) Medhealth shall include in its notice to its shareholders of the
Special Meeting to be called to consider the adoption of this Agreement that
all shares of common stock of JFP to be received by them hereunder in exchange
for their shares of common stock of Medhealth is to be received and acquired,
and shall be deemed upon the Effective Time of the Merger, to have been
acquired for investment purposes only and not for the purpose of resale or with
a view to the distribution of any thereof. Each shareholder of Medhealth shall
be notified that he shall be required to execute and deliver, together with his
outstanding stock certificate, an investment letter, in form and substance
satisfactory to JFP and its counsel, and in the form annexed hereto as Exhibit
"A", in which such shareholder represents that the shares of JFP common stock
that such shareholder will receive upon consummation of the Merger are not
being acquired with a view to the distribution thereof, and agrees not to sell,
transfer or otherwise dispose of any interest in such shares except in
compliance with the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder, and unless and until there shall be an
effective registration statement covering such sale, transfer or other
disposition, or JFP shall have received either an opinion of its counsel or an
opinion of counsel satisfactory to JFP to the effect that any such proposed
sale, transfer or other disposition may be effected without such violation.
-7-
<PAGE> 13
Further, each shareholder of Medhealth shall be notified that each
certificate representing capital stock of JFP to be issued pursuant to this
Agreement shall bear on its face a legend in substantially the following form:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933. The shares have been acquired for
investment and may not be sold, transferred of assigned in the absence
of an effective registration statement for these shares under the
Securities Act of 1933 or an opinion of the Company's counsel that
registration is not required under such Act."
(e) Notwithstanding the provisions of this Agreement, shareholders of
JFP, Medhealth and MII who have not voted in favor of the Merger or consented
thereto in writing and have demanded appraisal rights, shall have all such
appraisal rights or dissenting shareholder rights as may be provided under the
laws of the respective states of incorporation, and the respective Directors
and Officers of the corporations hereto shall do all things required by said
laws to notify said shareholders of their respective appraisal rights.
Accordingly, and notwithstanding the provisions of Section "2.3. (a)(i)
of Article II", shares of common stock of Medhealth held by any shareholder of
Medhealth who shall have advised Medhealth of his dissent, and who shall have
perfected his appraisal rights as a dissenting shareholder pursuant to the laws
of the State of Florida and who, at the Effective Time of the Merger, shall not
have withdrawn such notice, shall not be deemed to receive shares of JFP, and
shall not be entitled to the rights, privileges or participation thereof or to
JFP common shares. If
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after the Effective Time such holder fails to perfect or withdraws or loses his
right to appraisal, such common shares shall thereupon be deemed to have been
converted into and to represent the right to receive, at the Effective Time, the
shares of common stock of JFP pursuant to the terms of subsection (a)(i) of this
Section 2.3, without any interest thereon or addition thereto. Medhealth shall
give JFP prompt notice of any demands received by Medhealth for appraisal of
shares, and JFP shall have the right to participate in all negotiations and
proceedings with respect to such demands. Medhealth shall not, except with the
prior written consent of JFP, make any payment with respect to, or settle or
offer to settle, any such demands.
(f) If this Agreement is approved and adopted by the shareholders of
Medhealth, JFP and MII, as provided herein, that fact shall be certified on
this Agreement by the Secretary of each of Medhealth, JFP and MII, and this
Agreement so adopted, approved, certified, executed and acknowledged by and on
behalf of Medhealth, JFP and MII shall, if the Merger is not abandoned or
terminated as herein permitted, be submitted for filing and recording in
accordance with Nevada Law and as may be required under the laws of the State
of Florida.
(g) This Agreement shall become effective on the date and at the time
when this Agreement, duly certified, signed, sealed and acknowledged, is filed
in the office of the Secretary of State of the State of Nevada and becomes
effective pursuant of Nevada Law. Counsel for Medhealth, JFP and MII shall
mutually agree upon the date and time on which this Agreement shall be
submitted for filing to the Secretary of State of State of Nevada, which date
shall be no later than thirty (30) days after the requisite shareholder
approvals have been obtained, unless further extended by mutual agreement.
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<PAGE> 15
(vii) take any other action that would cause any of
the representations and warranties made in this Agreement not to remain true
and correct; or
(viii) commit itself to do any of the foregoing.
SECTION 5.2. Access to Information. From and after the date hereof and
subject to the execution of such confidentiality agreements as JFP shall
reasonably require, JFP will give Medhealth and its counsel, financial advisors,
auditors and other authorized representatives reasonable access to the offices,
properties, books and records of JFP and will instruct JFP's employees, counsel,
financial advisors and financing sources to cooperate with any such person in
its investigation of JFP.
SECTION 5.3. Vote. From and after the date hereof, JFP will, to the
extent required by applicable law or as otherwise reasonably requested by
Medhealth and in accordance with Nevada Law and its certificate of incorporation
and By-laws, use its efforts to take all action necessary or helpful to secure a
vote of shareholders in favor of the Merger and to approve this Agreement.
ARTICLE VI
COVENANTS OF MEDHEALTH
Medhealth agrees that:
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SECTION 6.1. Conduct of Medhealth. From and after the date of this
Agreement and until the Effective Time, Medhealth shall conduct its business
solely in the ordinary course consistent with past practice and, without the
prior written consent of JFP, will not, except as required or permitted pursuant
to the terms hereof or as may occur in the ordinary course of business
consistent with past practice:
(i) make any change in its Certificate of Incorporation; or
(ii) take any other action that would cause any of the
representations and warranties made in this Agreement not to remain true and
correct; or
(iii) commit itself to do any of the foregoing.
SECTION 6.2. Access to Information. From and after the date hereof and
subject to the execution of such confidentiality agreements as Medhealth shall
reasonably require, Medhealth will give JFP and its counsel, financial advisors,
auditors and other authorized representatives reasonable access to the offices,
properties, books and records of Medhealth and will instruct Medhealth's
employees, counsel, financial advisors and financing sources to cooperate with
any such person in its investigation of Medhealth.
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ARTICLE VII
OTHER AGREEMENTS
The parties hereto agree that:
SECTION 7.1. Best Efforts. Upon the terms and subject to the conditions
set forth in this Agreement, each party shall use its best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement as promptly as
possible.
SECTION 7.2. Notification of Certain Matters. Each party to this
Agreement will give prompt notice to the other parties hereof of:
(i) any notice or other communication from any person or
entity alleging that the consent of such person or entity is or may be required
in connection with the transactions contemplated by this Agreement;
(ii) any notice or other communication from any governmental
or regulatory agency or authority in connection with the transactions
contemplated by this Agreement;
(iii) any action, suit, claim, investigation or proceeding
commenced or, to its knowledge, threatened against, relating to or involving or
otherwise affecting JFP on the one hand, or Medhealth on the other hand, which
is reasonably likely to affect materially the transactions contemplated by this
Agreement;
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(iv) the occurrence, or failure to occur, of any event or
change in circumstances where such occurrence or failure to occur would be
likely to cause any representation or warranty contained in this Agreement to be
untrue and inaccurate in any material respect at any time from the date hereof
to the Effective Time; and
(v) any material failure of such party to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder.
No such notification shall affect the representations or warranties of the
parties or the conditions to the obligations of the parties hereunder.
SECTION 7.3. Further Assurances. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of Medhealth or MII, any deeds,
bills of sale, assignments or assurances and to take and do in the name and on
behalf of Medhealth or MII any other actions and things to vest, perfect or
confirm of record or otherwise in the Surviving Corporation any and all right,
title and interest in, to and under any of the rights, properties or assets of
Medhealth acquired or to be acquired by the Surviving Corporation as a result
of, or in connection with, the Merger.
SECTION 7.4. Payment of Existing Liabilities. JFP has certain existing
liabilities in the amount of $21,514.13 enumerated in Exhibit "F" annexed hereto
(the "Enumerated Liabilities") which taken together with estimated additional
existing liabilities not exceeding $40,000 in amount (the "Additional
Liabilities") constitutes, to the best knowledge of JFP, all of JFP's
liabilities as of
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the date hereof. As additional consideration for the conversion of the issued
and outstanding shares of common stock of Medhealth into common shares of JFP,
Medhealth has agreed to pay all of the Enumerated Liabilities on or prior to the
Effective Time of the Merger with the exception that concurrently herewith
payment of the following Enumerated Liabilities shall be made: (1) $2,000 to
Burton R. Abrams, C.P.A. (2) $1,670 to Lehman, Newman, Gleit & Rubin and (3)
$5,562.75 to American Stock Transfer & Trust Company. All of such payments are
non-refundable and non-reimbursable whether or not the Merger is consummated.
SECTION 7.5. Payment of Expenses. In connection with the transactions
contemplated by this Agreement and whether or not the Merger is consummated,
from and after the date hereof and without the execution of any further
instrument, Medhealth will pay (1) all attorney's fees of JFP's counsel, Doros &
Brescia, P.C. ("D&B") which shall not exceed $25,000 in amount plus all
disbursements incurred payable upon billing of which $10,000 has heretofore been
paid by Medhealth to D&B, (2) all accountant's fees of JFP's accountant(s) to be
selected for the preparation of the required JFP Form 10-Q's and Form 10-K's and
all tax returns which shall not exceed $10,000 in amount of which $2,000 shall
be paid by Medhealth concurrently herewith and the balance upon billing after
completion of the work and (3) all miscellaneous expenses including blue sky
fees in connection with the transactions contemplated herein. In addition,
concurrently herewith Medhealth shall pay to Ray Vahab, Jonathan Daniels &
Company, the sum of $3,500 for the balance of consulting fees due and payable to
date and $750 to Doros & Brescia, P.C. on account of expenses to be advanced by
them.
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SECTION 7.6. Finders and Consultants. (a) This Agreement is made, and
the negotiations leading to it were initiated with the assistance of both Mr.
Ray Vahab and Mr. Ronald J. Brescia (the "Consultants"). In consideration for
consulting services rendered in connection with the transactions contemplated
herein and after taking into effect the dilution of the common shares as a
result of the proposed reverse split and subsequent thereto Mr. Ray Vahab
("Vahab") will receive 235,274 shares and Mr. Ronald J. Brescia ("Brescia") will
receive 188,219 shares of the fully paid and nonassessable common stock of JFP
(collectively the "Consulting Fee Shares").
(b) The Consulting Fee Shares shall be included in a Form S-8
Registration Statement (the "Registration Statement") with Vahab and Brescia as
selling shareholders to be prepared by JFP and filed by JFP with the SEC within
ninety (90) days from the Effective Time of the Merger and JFP will use its best
efforts to have such Registration Statement declared effective until the earlier
of when all of the Consulting Fee Shares are sold or become capable of being
publicly sold without registration under the 1933 Act. All expenses incurred in
such registration shall be paid by JFP including, without limitation, printing
expenses, fees and disbursements of counsel for Medhealth, expenses of any
audits to which Medhealth shall agree or which shall be necessary to comply with
registration requirements, all registration and filing fees under federal and
state laws.
SECTION 7.7. Conditions Subsequent to Merger. If required, no later
than fifteen (15) days after the Effective Time of the Merger counsel for
Medhealth shall cooperate with and assist counsel for JFP and MII in the
preparation and filing with the Securities and Exchange Commission, of Form D,
to be filed pursuant to Regulation D promulgated under Section 3(b) of the
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Securities Act of 1933, as amended, in said counsels' joint reliance upon the
exemption from registration requirements afforded with respect to Regulation D
and the securities of JFP to be issued hereunder; and in all other respects said
counsel shall cooperate with each other in order to insure that the provisions
and intent of this Agreement are carried out.
SECTION 7.8. NASDAQ Listing. Both JFP and Medhealth acknowledge that it
is the intent of both parties that, following completion of the acquisition
described herein, the directors and officers of JFP will pursue immediately all
steps required to make application to NASDAQ and or the American Stock Exchange
("Amex") so the shares of common stock of JFP may be traded on the NASDAQ and/or
the Amex exchange. Thirty (30%) percent of the 3,576,170 shares of JFP common
stock to be issued to the Medhealth shareholders hereunder constituting
1,072,851 common shares (the "JFP/Medhealth Escrowed Shares") shall be held in
escrow with stock power signature guaranteed with Doros & Brescia, P.C. as
escrow agent. In the event that on or prior to two years from the date of
closing of the transactions contemplated herein the shares of common stock of
JFP are approved, listed and trading on NASDAQ and/or the Amex as required
hereinabove (or such other association or exchange as may be mutually agreed in
writing between all of the respective parties hereto), the JFP/Medhealth
Escrowed Shares shall be returned to the holders thereof. In the event that the
NASDAQ and/or Amex approval, listing and trading does not occur on or prior to
the expiration of such two year period, the Medhealth Escrowed Shares shall be
released from escrow and delivered to JFP for cancellation and reissuance to the
pre-acquisition shareholders of JFP. During the first two years following the
Effective Time of the Merger no additional shares of common stock including,
without limitation, warrants, options or any other securities convertible into
common shares shall be issued without the written consent of JFP's consultant,
Jonathan
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Daniels & Company, Inc. ("JD"). During such period, the record holders, not the
escrow agent, shall have the right to vote the JFP/Medhealth Escrowed Shares.
SECTION 7.9. JFP Venture with Sports Heroes, Inc. Medhealth
acknowledges that it has been advised that King of Nostalgia, Inc., a New York
corporation and wholly-owned subsidiary of JFP, and Entertainment Heroes, Ltd.,
a Delaware corporation and wholly-owned subsidiary of Sports Heroes, Inc.
("SHI"), are the general partners of Entertainment Legends, L.P., a New Jersey
limited partnership with JFP, SHI and Lawrence A. Grossberg ("Grossberg") as its
limited partners, all as more fully set forth in agreements annexed hereto as
Exhibit "F" including a finders fee agreement between JFP and Grossberg
(concerning the JFP venture with SHI (the "Finders Fee Agreement"). Arising out
of such agreements there is issued and outstanding in the name of JFP share
certificate No. 523 for 87,404 restricted common shares of SHI of which 15,000
SHI common shares are in the process of being transferred by JFP to Grossberg as
payment, in part, of his finders fee pursuant to the Finders Fee Agreement
which, when completed, will leave JFP a share balance of 72,404.
SECTION 7.10. Joe Franklin. Medhealth acknowledges that it has been
advised that by letter dated October 5, 1994, Joe Franklin tendered his
resignation as an officer and director of JFP and has requested that JFP change
its name by dropping the name "Joe Franklin". Medhealth further acknowledges
that Joe Franklin is a party to an Employment Agreement dated September 25,
1992, between JFP and Joe Franklin, a copy of which is annexed hereto as Exhibit
"G". In lieu of $3,846.20 in salary arrears due under the Employment Agreement
from JFP to Joe Franklin for the period March 25, 1993 to August 11, 1993, both
dates inclusive, in consideration of payment thereof
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JFP issued to Joe Franklin Warrant No. 101 to purchase on or after August 12,
1993, and on or prior to July 31, 1998, but not thereafter, an aggregate of
600,000 shares of common stock of JFP at a purchase price of $.75 (75(cent)) per
share. Since August 11, 1993, no salary payments have been made to Joe Franklin.
ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.1. Conditions to the Obligations of Each Party. The
obligations of JFP and Medhealth to consummate the Merger are subject to (a) the
approval of the Merger and this Agreement at the Special Meeting by the
affirmative vote of at least the holders of a majority of the Shares outstanding
on the record date of such Special Meeting; (b) the absence of any statute, rule
or regulation which makes consummation of the Merger illegal or otherwise
prohibited or any order, decree, injunction or judgment enjoining the
consummation of the Merger, and (c) the receipt of an opinion of counsel to JFP,
in form and substance reasonably satisfactory to JFP and Medhealth, as to the
validity of the Merger under Florida and Nevada Law.
SECTION 8.2. Conditions to the Obligation of JFP. The obligation of JFP
to consummate the Merger is subject to the satisfaction or waiver of the
following further conditions:
(a) Medhealth shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the
Effective Time;
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(b) the representations and warranties of Medhealth contained in this
Agreement and in any certificate or other writing delivered by Medhealth
pursuant hereto shall be true in all material respects at and as of the
Effective Time as if made at and as of such time (other than any inaccuracies in
such representations or warranties that are attributable to JFP);
(c) receipt by JFP of a certificate signed by an executive officer of
Medhealth to the effect set forth in paragraphs (a) and (b) of this Section; and
(d) no action or proceeding shall have been commenced or threatened for
the purpose of obtaining an injunction, order or damages before any court or
governmental agency or other regulatory or administrative agency or commission,
domestic or foreign, which JFP shall on advice of counsel, reasonably determine
would (1) result in the imposition of material limitations on the ability of JFP
or Medhealth effectively to consummate the Merger, (2) have the effect of
rendering the Merger violative of any applicable law, or (3) have a material
adverse effect on the business, assets or financial condition of the Surviving
Corporation.
(e) there shall have been delivered to JFP and MII the opinion of
counsel for Medhealth, satisfactory in form and substance to counsel for JFP and
MII, to the effect that (1) Medhealth is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Florida being the
state of its incorporation and has the corporate power to own its property and
to carry on its business as presently being conducted and has qualified to
transact business in all other states requiring qualification therein, (2) that
all necessary corporate proceedings of Medhealth as set forth herein have been
duly taken to authorize and enable the
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Merger and the exchange of the shares provided for herein, (3) that this
Agreement has been duly executed and delivered by the Directors of Medhealth and
has been approved and adopted by the holders of at least a majority of the
outstanding shares of common stock of Medhealth at a Special Meeting duly called
for such purpose, and therefore constitutes the legal, valid and binding
obligation of Medhealth in accordance with its terms, (4) that this Agreement
does not, and the carrying out of the transactions herein provided for will not,
to the best of such counsel's knowledge, violate or conflict with any statute,
charter or their corporate restriction to which Medhealth is subject or any
agreement or instrument to which Medhealth is a part or by which it is bound,
(5) that the delivery of the shares of common stock of JFP to the shareholders
of Medhealth pursuant to this Agreement is exempted from the registration
requirements under the Securities Act of 1933, as amended, by reasons of the
applicability of Section 4(2) of the Act and/or Regulation D promulgated under
Section 3(b) of the Act, and (6) that the transactions herein provided for will
not result in the recognition of taxable gain to the shareholders of Medhealth
or to Medhealth upon the transfer of their stock of Medhealth in exchange solely
for stock of JFP, nor in the recognition of taxable gain to JFP, MII, or their
shareholders upon said transfer, by reasons of the transaction qualifying as a
tax-free reorganization under the Internal Revenue Code of 1954, as amended.
(f) counsel for JFP and MII, and counsel for Medhealth, shall have
mutually determined that the provisions of the Blue Sky Laws of the various
jurisdictions herein the shareholders of Medhealth reside have been complied
with, or shall have received "no-action letters", or shall have otherwise
determined and/or filed with such jurisdictions all such documents and paid all
such fees required in order to obtain an exemption from the registration
requirements
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of the various jurisdictions, and shall have delivered to the parties hereto
their written opinion to such effect.
(g) counsel for JFP and MII and counsel for Medhealth shall have
determined the delivery of the shares of common stock to JFP to the shareholders
of Medhealth pursuant to this Agreement is exempted from registration afforded
under Rule 505 of Regulation D promulgated under Section 3(b) of the Securities
Act of 1933, as amended.
SECTION 8.3. Conditions to the Obligation of Medhealth. The obligation
of Medhealth to consummate the Merger is subject to the satisfaction or waiver
of the following further conditions:
(a) JFP shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the
Effective Time;
(b) the representations and warranties of JFP contained in this
Agreement and in any certificate or other writing delivered by JFP pursuant
hereto shall be true in all material respects at and as of the Effective Time as
if made at and as of such time;
(c) receipt by Medhealth of a certificate signed by an executive
officer of JFP to the effect set forth in paragraphs (a) and (b) of this
Section;
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(d) the holders of not more than 5% of the outstanding shares of common
stock shall have exercised their appraisal rights in the Merger in accordance
with Florida and Nevada Law;
(e) no action or proceeding shall have been commenced or threatened for
the purpose of obtaining an injunction, order or damages before any court or
governmental agency or other regulatory or administrative agency or commission,
domestic or foreign, which Medhealth shall on advice of counsel, reasonably
determine would (1) result in the imposition of material limitations on the
ability of JFP or Medhealth effectively to consummate the Merger, (2) have the
effect of rendering the Merger violative of any applicable law, or (3) have a
material adverse effect on the business, assets or financial condition of the
Surviving Corporation.
(f) there shall have been delivered to counsel for Medhealth the
opinion of counsel for JFP and MII, satisfactory in form and substance to
counsel to Medhealth, to the effect that (1) JFP and MII are each corporations
duly organized, validly existing, and in good standing under the laws of the
State of Nevada being the state of their incorporations, (2) that all necessary
corporate proceedings of JFP and MII as set forth herein have been duly taken to
authorize and enable the Merger and the exchange of the shares provided for
herein, (3) that this Agreement has been duly executed and delivered by the
Directors of JFP, and adopted by the holders of at least a majority of the
outstanding shares of common stock of JFP at a Special Meeting duly called for
such purpose, and therefore constitutes the legal, valid and binding obligation
of JFP and of MII in accordance with its terms, (4) that the shares of common
stock of JFP when delivered to the shareholders of Medhealth pursuant to this
Agreement does not, and the carrying out of the transactions herein provided for
will not, to the best of such counsel's knowledge, violate or conflict with any
statute,
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charter or their corporate restriction to which JFP is subject or any agreement
or instrument to which JFP is a part or by which it is bound, (5) that the
delivery of the shares of common stock of JFP to the shareholders of Medhealth
pursuant to this Agreement is exempted from the registration requirements under
the Securities Act of 1933, as amended, by reasons of the applicability of
Section 4(2) of the Act and/or Regulation D promulgated under Section 3(b) of
the Act, and (6) that the transactions herein provided for will not result in
the recognition of taxable gain to the shareholders of Medhealth or to Medhealth
upon the transfer of their stock of Medhealth in exchange solely for stock of
JFP, nor in the recognition of taxable gain to JFP, MII, or their shareholders
upon said transfer, by reasons of the transaction qualifying as a tax-free
reorganization under the Internal Revenue Code of 1954, as amended.
(g) counsel for JFP and MII, and counsel for Medhealth, shall have
mutually determined that the provisions of the Blue Sky Laws of the various
jurisdictions wherein the shareholders of Medhealth reside have been complied
with, or shall have received "no-action letters", or shall have otherwise
determined and/or filed with such jurisdictions all such documents and paid all
such fees required in order to obtain an exemption from the registration
requirements of the various jurisdictions, and shall have delivered to the
parties hereto their written opinion to such effect.
(h) counsel for JFP and MII and counsel for Medhealth shall have
determined the delivery of the shares of common stock of JFP to the shareholders
of Medhealth pursuant to this Agreement is exempted from registration afforded
under Rule 505 of Regulation D promulgated under Section 3(b) of the Securities
Act of 1933, as amended.
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ARTICLE IX
TERMINATION
SECTION 9.1. Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time:
(a) by mutual written consent of JFP and Medhealth after approval of
their respective Board of Directors; or
(b) by either JFP or Medhealth after approval of the Board of Directors
of JFP or Medhealth, as the case may be, if the Merger has not been consummated
on or before October 16, 1995; provided, however, that neither party may
terminate this Agreement pursuant to this clause (b) if the failure of such
party to fulfill any of its obligations under this Agreement shall have been the
reason that the Merger shall not have been consummated on or before said date.
(c) any party shall have the right to abandon the Merger in the event
that any of the representations and warranties herein contained shall not be
true, or in the event that all obligations and agreements herein to be performed
shall not have been complied with, no later than two (2) days prior to the
Effective Time of the Merger.
(d) the Merger contemplated by this Agreement shall be abandoned and
terminated in the event that the requisite shareholder approvals shall not have
been obtained as to all matters requiring such approvals hereunder.
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(e) notwithstanding approval of this Agreement by the shareholders of
the parties hereto, the merger may be abandoned or terminated on or before the
Effective Time by the mutual agreement of the Board of Directors of JFP,
Medhealth and MII.
SECTION 9.2. Effect of Termination. If this Agreement is terminated
pursuant to Section 9.1, this Agreement shall become void and of no effect with
no liability on the part of any party hereto.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including facsimile or similar
writing) and shall be given:
(a) if to JFP to:
Joe Franklin Productions, Inc.
c/o Doros & Brescia, P.C.
1140 Avenue of the Americas
New York, New York 10036
Facsimile: (212) 575-2842
Attention: Ronald J. Brescia, Esq.
(b) if to Medhealth to:
Medhealth Imaging, Inc.
13825 Icot Boulevard, Suite 613
Clearwater, Florida 34620
Facsimile: (813) 535-3566
Attention: Dennis D. Cole, Esq.
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or such other address or facsimile number as such party may hereafter specify by
notice to the other party hereto. Each such notice, request or other
communication shall be effective (i) if given by facsimile, when such facsimile
is transmitted to the facsimile number specified in this Section and the
appropriate confirmation is provided, (ii) if given via United States mail,
three days after such notice is deposited in the mail in a postage pre-paid
envelope, or (iii) if given by any other means, when delivered at the address
specified in this Section.
SECTION 10.2. Survival. All representations, warranties, agreements and
covenants contained herein shall survive the Effective Time of the Merger.
SECTION 10.3. Amendment. Subject to applicable law, any provision of
this Agreement may be amended by the parties hereto, by action of each of their
respective Boards of Directors of by their respective officers duly authorized
by such Board of Directors, at any time prior to the Effective Time. Any
amendment to this Agreement shall be in writing signed by all the parties
hereto.
SECTION 10.4. Waiver. (a) At any time prior to the Effective Time,
Medhealth on the one hand, and JFP on the other hand, may (i) extend the time
for the performance of any agreement of the other party of parties hereto, (ii)
waive any accuracy in the representations and warranties contained herein or in
any document delivered pursuant hereto, or (iii) waive compliance with any
agreement or condition contained herein. Any agreement on the part of any party
to any such extension or waiver shall be effective only if set forth in a
writing signed on behalf of such party and delivered to the other parties.
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(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.
SECTION 10.5. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that no party may assign
or otherwise transfer any of its rights under this Agreement without the consent
of the other parties hereto.
SECTION 10.6. Governing Law. This Agreement shall be construed in
accordance with and governed by the internal laws of the State of Nevada without
regard to principles of conflict of laws.
SECTION 10.7. Integration. This Agreement embodies the entire agreement
and understanding among the parties hereto and supersedes all prior agreements
and understandings relating to the subject matter hereof.
SECTION 10.8. Headings and References. The headings of the Articles and
Sections of this Agreement are inserted for convenience only and shall not
constitute a part hereof. When the context so requires in this Agreement, the
masculine gender shall include the feminine and/or neuter and the singular
number includes the plural and visa versa.
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SECTION 10.9. Counterparts; Effectiveness. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by the other party hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
JOE FRANKLIN PRODUCTIONS, INC.
/s/ GARY PAPERMAN
-----------------------------------------
By: Gary Paperman
Title: President
MEDHEALTH IMAGING, INC.
/s/ MYRON A. BAKER
-----------------------------------------
By: Myron A. Baker
Title: President
-43-
<PAGE> 34
INVESTMENT INTENT LETTER
Joe Franklin Productions, Inc.
Dear Sir:
In connection with a certain Agreement and Plan of Merger dated August
1, 1995 (the "Agreement") by and among Joe Franklin Productions, Inc., a Nevada
corporation (the "Company") and Medhealth Imaging, Inc., a Florida corporation
("Medhealth") which Agreement provides, among other things, for a merger of
Medhealth with and into a wholly-owned subsidiary corporation of JFP to be
incorporated in the State of Nevada and named, if available, Medhealth Imaging,
Inc. ("MII") and for the exchange of each share of Medhealth common stock, part
value $.001 per share, issued and outstanding at the Effective Time of the
Merger into .68392 (sixty-eight and three hundred ninety-two/one hundredth) of a
share of JFP common stock, par value $.001 per share, I hereby represent and
warrant to you as follows:
I have been advised by you that the common shares of JFP which I will
acquire (the "Shares") and the common shares of JFP which will be acquired by
the other shareholders of Medhealth pursuant to the terms of the Agreement, are
not being registered under the Securities Act of 1933, as amended, on the basis
of the exemption afforded under Regulation D, promulgated under 3(b) of the said
Act.
I hereby represent, warrant and agree that the Shares to be acquired by
me, as relates to their transferability by me, shall bear an appropriate
restrictive legend on the certificate to be received by me.
I hereby further represent to you that I am acquiring the Shares for
investment for my own account and not with a view to resell, transfer, or
otherwise distribute the Shares; that I do not intend to divide my participation
with others or to resell, transfer, or otherwise dispose of all or any part of
the Shares unless and until I determine at some future date that changed
circumstances, not now in contemplation, make such disposition advisable; and
that in no event will I attempt to resell, transfer or otherwise dispose of all
or any part of the Shares unless and until the Shares have been included in an
effective registration statement under the Securities Act of 1933 or you have
received an opinion of counsel satisfactory to you to the effect that any such
proposed resale, transfer or other disposition may be effected without such
registration.
EXHIBIT "A"
<PAGE> 35
I acknowledge that you have made available to me financial and other
data related to you and your business, and that you are relying upon my
representations contained in this letter.
Very truly yours,
---------------------------------
(Signature)
---------------------------------
(Signature)
Dated: _____________, 1995
[Please print names exactly as it
appears on the face of your Medhealth
Imaging, Inc. stock certificate. If more
than one name appears, all persons must
sign this letter.]
----------------------------------
(Print Name)
----------------------------------
(Print Name)
-2-
<PAGE> 36
George Freedman
Certified Public Accountant
- - --------------------------------------------------------------------------------
May 17, 1995
Medhealth Imaging, Inc.
13825 Icot Blvd., #613
Clearwater, FL 34620
Gentlemen:
I have audited the accompanying Balance Sheet of Medhealth Imaging, Inc. as of
the period ending March 31, 1995 and the related Statement of Income, Profit and
Loss for the period then ended. These financial statements are the
responsibility of the corporation's management. My responsibility is to express
an opinion on these statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amount and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly in all
material respects the financial position of Medhealth Imaging, Inc. at March 31,
1995 and the results of operations then ended in conformity with generally
accepted accounting principles.
Respectfully submitted,
/s/ GEORGE FREEDMAN
George Freedman
- - --------------------------------------------------------------------------------
15 Overhill Road Monsey New York 10952
EXHIBIT "B"
<PAGE> 37
MEDHEALTH IMAGING, INC.
BALANCE SHEET
AS OF MARCH 31, 1995
<TABLE>
<CAPTION>
TOTAL
MII
<S> <C>
CURRENT ASSETS
CASH 9,840
ACCOUNTS RECEIVABLE 5,334
INVENTORY 172,558
OTHER CURRENT ASSETS 11,563
---------
TOTAL CURRENT ASSETS 199,295
NON-CURRENT ASSESTS
PROPERTY & EQUIPMENT 5,000,000
INVESTMENT IN SUBSIDIARY0
DESIGN & PATENT RIGHTS 1,192,091
---------
TOTAL NON-CURRENT ASSETS 6,192,091
TOTAL ASSETS 6,391,386
=========
CURRENT LIABILITIES
ACCOUNTS PAYABLE 69,926
ACCRUED EXPENSES 58,680
NOTES PAYABLE 21,380
OTHER CURRENT LIABILITIES 16,656
---------
TOTAL CURRENT LIABILITIES 166,642
EXCESS OF NET ASSETS
OVER PURCHASE PRICE 20,151
LONG TERM NOTES PAYABLE 2,000,000
---------
TOTAL LIABILITIES 2,186,793
STOCKHOLDER'S LIABILITY
COMMON STOCK 5,196
PAID-IN-CAPITAL 4,692,163
RETAINED EARNINGS (492,766)
---------
TOTAL STOCKHOLDER EQUITY 4,204,593
---------
TOTAL LIABILITIES
SHAREHOLDER EQUITY 6,391,386
=========
</TABLE>
<PAGE> 38
MEDHEALTH IMAGING, INC.
BALANCE SHEET
AS OF MARCH 31, 1995
<TABLE>
<CAPTION>
MII QUADNA ADJUSTMENT TOTAL
3/31/95 3/31/95 MII
<S> <C> <C> <C> <C>
CURRENT ASSETS
CASH 2,965 6,875 0 9,840
ACCOUNTS RECEIVABLE 0 5,334 0 5,334
INVENTORY 124,000 48,558 0 172,558
OTHER CURRENT ASSETS 0 11,563 0 11,563
--------- --------- ---------- ---------
TOTAL CURRENT ASSETS 126,965 72,330 0 199,295
NON-CURRENT ASSESTS
PROPERTY & EQUIPMENT 0 5,000,000 0 5,000,000
INVESTMENT IN SUBSIDIARY 3,000,000 0 (3,000,000) 0
DESIGN & PATENT RIGHTS 1,192,091 0 0 1,192,091
--------- --------- ---------- ---------
TOTAL NON-CURRENT ASSETS 4,192,091 5,000,000 (3,000,000) 6,192,091
TOTAL ASSETS 4,319,056 5,072,330 (3,000,000) 6,391,386
--------- --------- ---------- ---------
CURRENT LIABILITIES
ACCOUNTS PAYABLE 36,377 33,549 0 69,926
ACCRUED EXPENSES 40,050 18,630 0 58,680
NOTES PAYABLE 21,380 0 0 21,380
OTHER CURRENT LIABILITIES 16,656 0 0 16,656
--------- --------- ---------- ---------
TOTAL CURRENT LIABILITIES 114,463 52,179 0 166,642
EXCESS OF NET ASSETS
OVER PURCHASE PRICE 0 0 20,151 20,151
LONG TERM NOTES PAYABLE 0 2,000,000 0 2,000,000
--------- --------- ---------- ---------
TOTAL LIABILITIES 114,463 2,052,179 20,151 2,186,793
STOCKHOLDER'S LIABILITY
COMMON STOCK 5,196 0 0 5,196
PAID-IN-CAPITAL 4,692,163 3,020,151 (3,020,151) 4,692,163
RETAINED EARNINGS (492,766) 0 0 (492,766)
--------- --------- ---------- ---------
TOTAL STOCKHOLDER EQUITY 4,204,593 3,020,151 (3,020,151) 4,204,593
--------- --------- ---------- ---------
TOTAL LIABILITIES
SHAREHOLDER EQUITY 4,319,056 5,072,330 (3,000,000) 6,391,386
========= ========= ========== =========
</TABLE>
<PAGE> 39
MEDHEALTH IMAGING, INC.
STATEMENT OF PROFIT & LOSS
FOR THE SIX MONTHS ENDED MARCH 31, 1995
<TABLE>
<CAPTION>
MII QUADNA TOTAL MII
-------- -------- ---------
<S> <C> <C> <C>
Sales $ 0 $680,488 $680,488
Cost of Sales 0 343,449 343,449
-------- -------- --------
Gross Profit 0 337,039 337,039
Commissions 0 0 0
Product Development 0 0 0
General and
Administrative Expense 16,000 250,560 266,560
Interest Expense 0 86,479 86,479
-------- -------- --------
TOTAL EXPENSE 16,000 337,039 353,039
-------- -------- --------
NET PROFIT (LOSS) $(16,000) $ 0 $(16,000)
======== ======== ========
</TABLE>
<PAGE> 40
MEDHEALTH IMAGING, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1995
NOTE 1-ACQUISITION AND CORPORATE STRUCTURE
MEDHEALTH Imaging, Inc. is a Florida corporation incorporated on February
8, 1993, and was a wholly-owned subsidiary of of MEDHEALTH Service Corporation,
a Nevada corporation. On October 1, 1993, MEDHEALTH Imaging, INC. was spun-off
as a separate, private corporation, from Medhealth Service Corporation.
MEDHEALTH Imaging, Inc. addresses the medical diagnostic market through
its proprietary transillumination system. This can be used for taking scans of
the breast to locate anomalies that might be present, sometimes with the aid of
photosensitive dyes to enhance the image.
On March 18, 1994 the Company acquired the rights to a Cervical Injury
Management System of 200,000 shares of MEDHEALTH Imaging, Inc. common stock,
thus expanding its product offerings into the cervical injury diagnosis and
rehabilitation area.
Patent and patent applications exist for both systems. Until now, the
company has generated minimal sales, and generated a modest loss. However, the
company has shifted its emphasis from research and development stage to the
aggressive marketing stage of its product lines.
On March 15, 1994, MEDHEALTH Imaging, Inc. contracted with Jireh Ventures,
Inc., a Florida corporation, to acquire the fee simple interest in the Quadna
Four Seasons Resort located in Aitkin County, Minnesota. The resort has an MAI
appraisal of $5,000,000 with title being conveyed subject to an indebtedness of
$2,000,000. The consideration given to Jireh Ventures, Inc. was 3,000,000 shares
of MEDHEALTH Imaging, Inc. common stock. The resort is a recreational complex
with skiing and snowmobiling in Winter and swimming, fishing, boating and golf
in Summer.
NOTE 2 - ACCOUNTING POLICIES
Inventories-Inventories are carried at cost not in excess of market.
Revenue Recognition-Revenues for services rendered and sales for products
sold are recognized using the actual basis at the time the service is
rendered or the product is delivered.
Adjustment-The investment in subsidiary account is eliminated against the
capital accounts of the subsidiary per generally accepted accounting
principles.
Income Tax-The company has a tax carry forward of approximately $415,000
which may be used in part to offset profit in future years.
<PAGE> 41
Patent and Design Rights-The cost of product and design rights will be
amortized upon the commencement of sales on a straight-line basis of
the respective items, which is less than the statutory life of each
patent.
NOTE 3-PROPERTY
Property consists of a resort in Aitkin County, Minnesota. The property has
an MAI appraisal value of 5,000,000 and is subject to an existing mortgage in
the amount of $2,000,000. The net carrying value is the value of the 3,000,000
shares of common stock, in the opinion of management, issued in exchange for the
property.
NOTE 4-COMMON STOCK
The company has one class of common stock, with each share to one vote, and
will receive dividends, when and as declared by the Board of Directors.
NOTE 5-DEVELOPEMENT STAGE COMPANY
The company had been considered to be in the development stage through
March 31, 1995, but has shifted its emphasis to an aggressive marketing of its
product lines.
NOTE 6-LEASE COMMITMENTS
The company does not presently have any long term lease obligations.
NOTE 7-ADJUSTMENTS
In the opinion of management, all adjustments, if any, have been made which
are necessary for a fair statement of the results of the interim periods.
<PAGE> 42
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1994 Commission File No. 0-16525
JOE FRANKLIN PRODUCTIONS, INC.
-----------------------------------------------------
(Exact Name of registrant as specified in its charter)
Nevada 13-3422108
- - -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
44-37 Douglaston Parkway, Douglaston New York 11363
- - -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (718) 631-4040
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days,
Yes X No
--- ---
COMMON STOCK OUTSTANDING AS OF MARCH 31, 1994 - 24,103,792, SHARES.
EXHIBIT "D"
<PAGE> 43
JOE FRANKLIN PRODUCTIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
March 31, June 30,
1994 1993
----------- -----------
<S> <C> <C>
Current Assets:
Cash $ -0- $ -0-
----------- -----------
TOTAL CURRENT ASSETS $ -0- $ -0-
----------- -----------
LIABILITIES AND (DEFICIT IN ASSETS)
Current Liabilities:
Accrued expenses $ 30,452 $ 43,766
-0- -0-
----------- -----------
TOTAL CURRENT LIABILITIES 30,452 43,766
----------- -----------
(Deficit in Assets):
Common stock, $.001 par value, authorized
25,000,000 shares, issued and outstanding
24,103,792 and 22,283,792 shares 24,104 24,104
Additional paid - in capital 1,069,328 957,349
(Deficit) (1,123,884) (1,025,219)
----------- -----------
(30,452) (43,766)
TOTAL LIABILITIES AND (DEFICITS IN ASSETS) $ -0- $ -0-
=========== ===========
</TABLE>
See notes to financial statements
<PAGE> 44
JOE FRANKLIN PRODUCTIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Period For the three months For the nine months
January 14, 1987 ended March 31, ended March 31,
(inception) to -------------------- ----------------------
March 31, 1994 1994 1993 1994 1993
-------------- ---- ---- ----- ----
<S> <C> <C> <C> <C> <C>
Revenues $ 49,672 $ -0- $ -0- $ -0- $ -0-
------------ ---------- ---------- ---------- --------
Costs and Expenses:
Festival expenses 27,500 -0- -0- -0- -0-
Merger expenses 21,155 -0- -0- -0- -0-
General and administrative 1,249,925 11,408 11,884 98,665 36,12
expenses
Interest expense 18,904 -0- -0- -0- -0-
------------ ---------- ---------- ---------- --------
1,317,484 11,408 11,884 98,665 36,12
------------ ---------- ---------- ---------- --------
Net (Loss) Before Extraordinary
Credit (1,267,812) (11,408) (11,884) (98,665) (36,12
Extraordinary Credit:
Gain on debt restructuring 243,928 -0- -0- -0- 87,08
------------ ---------- ---------- ---------- --------
(Note 3c)
Net Income (Loss) $ (1,023,884) $ (11,408) $ (11,884) $ (98,665) $ 50,955
------------ ---------- ---------- ---------- --------
Net Income (Loss) per share (0.06) (0.00) (0.00) (0.00) (0.0)
Weighted Average Shares 17,462,937 24,103,792 24,103,792 24,103,792 24,103,7
Outstanding ============ ========== ========== ========== ========
</TABLE>
<PAGE> 45
JOE FRANKLIN PRODUCTIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the nine
For the period from months ended
January 14, 1987 March 31,
(inception) to ------------
March 31, 1994 1994 1993
-------------- ---- ----
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS:
Cash flows from operating activities:
Net earnings $(1,023,884) $(98,665) $ 50,955
----------- -------- --------
Adjustment to reconcile income to net cash
provided by operating activities:
Depreciation 3,133 -0- -0-
Shares issued for services 289,496
Change in assets and liabilities:
Increase (decrease) in accrued expenses 30,452 (13,314) (106,459)
----------- -------- --------
TOTAL ADJUSTMENTS 323,081 (13,314) (106,459)
NET CASH (USED)/PROVIDED BY OPERATIONS (700,803) (111,979) (55,504)
----------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Additions) deletions to fixed assets (3,133) -0- -0-
----------- -------- --------
NET CASH (USED) IN INVESTING ACTIVITIES (3,133) -0- -0-
----------- -------- --------
CASH FLOW FROM FINANCING ACTIVITIES:
Increase (decrease) in due to shareholders -0- -0- -0-
Proceeds from sale of common stock 600,148 -0- -0-
Capital distribution to shareholders (100,000) -0- 53,684
Additional paid in capital 203,788 111,979 1,820
----------- -------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 703,936 -0- 55,504
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS -0- -0- -0-
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD -0- -0- -0-
----------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD -0- -0- -0-
=========== ======== =========
CASH PAID FOR INTEREST AND TAXES -0- -0- -0-
=========== ======== =========
NON-CASH FINANCING ACTIVITIES:
Conversion of debt for common stock 174,944 -0- -0-
Common stock issued for services $ 289,496 $-0- $-0-
=========== ======== =========
</TABLE>
See notes to financial statements
<PAGE> 46
JOE FRANKLIN PRODUCTIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED MARCH 31, 1994
(UNAUDITED)
1. BASIS OF PRESENTATION
Reference is made to the report on Form 10-k for the year ended June
30, 1993.
The financial statements of the periods ended March 31, 1994 and 1993
are unaudited and include all adjustments which, in the opinion of
management, are necessary to a fair statement of the results of
operations for the periods then ended. All such adjustments are of a
normal recurring nature. The results of the company's operation for
an interim period are not necessarily indicative of the results of the
Company's operation for a full fiscal year.
2. DESCRIPTION OF COMPANY
The company was formed to be an entertainment production and marketing
company concentration on the production, repackaging and distribution
of nostalgia and memorabilia products.
3. SIGNIFICANT ACCOUNTING POLICIES
a. Financial statements are prepared on an accrual basis.
b. The collection consists of the nostalgia collection of
artifacts, posters, films, records, etc. which
have been collected by Mr. Joe Franklin during his career.
The collection has been recorded -0- value as the accounting
practices of the Staff of the Securities and Exchange
Commission does not permit a valuation to be used in light of
the fact that Mr. Franklin does not have an auditable
carryover basis for his collection.
Future expenditures will be recorded at cost and amortized
over the estimated useful life of the property.
c. Per share data has been computed based on average number of
shares.
d. Issuance of common stock for services have been valued at the
estimated value of the services performed.
<PAGE> 47
ITEM 1. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULT OF OPERATIONS
Results of Operations - Three months and nine months ended March 31, 1994
The Company is in the development stage. Accordingly, it has no revenues and
has incurred various expenses.
Liquidity and Capital Resources
The Company's present liquidity and capital resources are limited to its cash
on hand. Such cash is insufficient to enable the Company to develop its
business plans.
<PAGE> 48
PART II
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
<PAGE> 49
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registration has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
JOE FRANKLIN PRODUCTIONS, INC.
By:/s/ Gary Paperman, PRESIDENT
-----------------------------------
Gary Paperman, President
<PAGE> 50
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR
15(D) OF THE SECURITIES AND EXCHANGE
ACT OF 1934
For Quarter Ended December 31, 1993 Commission File No. 0-16525
JOE FRANKLIN PRODUCTIONS, INC.
-----------------------------------------------------------------
(Exact Name of registrant as specified in its charter)
Nevada 13-3422108
- - ------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
44-37 Douglaston Parkway, Douglaston New York 11363
- - ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (718) 631-4040
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days,
Yes X No
----- ----
COMMON STOCK OUTSTANDING AS OF DECEMBER 31, 1993 - 24,103,792, SHARES.
<PAGE> 51
JOE FRANKLIN PRODUCTIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
December 31, June 30, 1993
1993 1993
----------- -----------
<S> <C> <C>
Current Assets:
Cash $ -0- $ -0-
----------- -----------
TOTAL CURRENT ASSETS $ -0- $ -0-
=========== ===========
LIABILITIES AND (DEFICIT IN ASSETS)
Current Liabilities:
Accrued expenses $ 30,452 $ 43,766
----------- -----------
-0- -0-
TOTAL CURRENT LIABILITIES 30,452 43,766
----------- -----------
(Deficit in Assets):
Common stock, $.001 par value, authorized
25,000,000 shares, issued and outstanding
24,103,792 and 22,283,792 shares 24,104 24,104
Additional paid - in capital 1,057,920 957,349
(Deficit) (1,112,476) (1,025,219)
----------- -----------
(30,452) (43,766)
----------- -----------
TOTAL LIABILITIES AND (DEFICITS IN ASSETS) $ -0- $ -0-
=========== ===========
</TABLE>
See notes to financial statements
<PAGE> 52
JOE FRANKLIN PRODUCTIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Period
January 14, 1987 For the three months For the six months
(inception) to ended December 31, ended December 31,
December 31, 1993 1993 1992 1993 1992
----------------- ----- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues $ 49,672 $ -0- $ -0- $ -0- $-0-
------------ ------------ ------------ ------------ ----
Costs and Expenses:
Festival expenses 27,500 -0- -0- -0- -0-
Merger expenses 21,155 -0- -0- -0- -0-
General and administrative 1,238,517 30,336 22,643 87,257 24,?
expenses
Interest expense 18,904 -0- -0- -0- -0-
------------ ------------ ------------ ------------ ----
1,306,076 30,336 22,643 87,257 24, ?
------------ ------------ ------------ ------------ ----
Net (Loss) Before Extraordinary
Credit (1,256,404) (30,336) (22,643) (87,257) (24, ?
Extraordinary Credit:
Gain on debt restructuring 243,928 -0- 87,082 -0- 87, ?
------------ ------------ ------------ ------------ ----
(Note 3c)
Net Income (Loss) $ (1,012,476) $ (30,336) $ 64,439 $ (87,257) $62, ?
------------ ------------ ------------ ------------ ----
Net Income (Loss) per share (0.06) (0.00) (0.00) (0.00) (0)
Weighted Average Shares 17,224,343 24,103,792 24,103,792 24,103,792 23,193, ?
============ ============ ============ ============ ====
Outstanding
</TABLE>
<PAGE> 53
JOE FRANKLIN PRODUCTIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the nine
For the period from months ended
January 14, 1987 December 31,
(inception) to ------------
December 31, 1993 1993 1992
----------------- ---- ----
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS:
Cash flows from operating activities:
Net earnings $(1,012,476) $ (87,257) $ 62,839
------------ ---------- ----------
Adjustment to reconcile income to net cash
provided by operating activities:
Depreciation 3,133 -0- -0-
Shares issued for services 289,496
Change in assets and liabilities:
Increase (decrease) in accrued expenses 30,452 (13,314) (107,959)
------------ ---------- ----------
TOTAL ADJUSTMENTS 323,081 (13,314) (107,959)
NET CASH (USED)/PROVIDED BY OPERATIONS (689,395) (100,571) (45,120)
------------ ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Additions) deletions to fixed assets (3,133) -0- -0-
------------ ---------- ----------
NET CASH (USED) IN INVESTING ACTIVITIES (3,133) -0- -0-
------------ ---------- ----------
CASH FLOW FROM FINANCING ACTIVITIES:
Increase (decrease) in due to shareholders -0- -0- -0-
Proceeds from sale of common stock 600,148 -0- -0-
Capital distribution to shareholders (100,000) -0- -0-
Additional paid in capital 192,380 100,571 45,120
------------ ---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 692,528 -0- 45,120
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS -0- -0- -0-
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD -0- -0- -0-
------------ ---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD -0- -0- -0-
============ ========== ==========
CASH PAID FOR INTEREST AND TAXES -0- -0- -0-
============ ========== ==========
NON-CASH FINANCING ACTIVITIES:
Conversion of debt for common stock 174,944 -0- -0-
Common stock issued for services $ 289,496 $ -0- $ -0-
============ ========== ==========
</TABLE>
See notes to financial statements
<PAGE> 54
JOE FRANKLIN PRODUCTIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1993
(UNAUDITED)
1. BASIS OF PRESENTATION
Reference is made to the report on Form 10-k for the year ended June
30, 1993.
The financial statements of the periods ended December 31, 1993 and
1992 are unaudited and include all adjustments which, in the opinion
of management, are necessary to a fair statement of the results of
operations for the periods then ended. All such adjustments are of a
normal recurring nature. The results of the company's operation for
an interim period are not necessarily indicative of the results of the
Company's operation for a full fiscal year.
2. DESCRIPTION OF COMPANY
The company was formed to be an entertainment production and marketing
company concentration on the production, repackaging and distribution
of nostalgia and memorabilia products.
3. SIGNIFICANT ACCOUNTING POLICIES
a. Financial statements are prepared on an accrual basis.
b. The collection consists of the nostalgia collection of
artifacts, posters, films, records, etc. which have been
collected by Mr. Joe Franklin during his career. The
collection has been recorded -0- value as the accounting
practices of the Staff of the Securities and Exchange
Commission does not permit a valuation to be used in light of
the fact that Mr. Franklin does not have an auditable
carryover basis for his collection.
Future expenditures will be recorded at cost and amortized
over the estimated useful life of the property.
c. Per share data has been computed based on average number of
shares.
d. Issuance of common stock for services have been valued at the
estimated value of the services performed.
<PAGE> 55
ITEM 1. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULT OF OPERATIONS
Results of Operations - Three months and six months ended December 31, 1993
The Company is in the development stage. Accordingly, it has no revenues and
has incurred various expenses.
Liquidity and Capital Resources
The Company's present liquidity and capital resources are limited to its cash
on hand. Such cash is insufficient to enable the Company to develop its
business plans.
<PAGE> 56
PART II
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
<PAGE> 57
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registration has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
JOE FRANKLIN PRODUCTIONS, INC.
By: /s/ Gary Paperman, PRESIDENT
-------------------------------
Gary Paperman, President
<PAGE> 58
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1993 Commission File No. 0-16525
JOE FRANKLIN PRODUCTIONS, INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 13-3422108
- - ------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
44-37 Douglaston Parkway, Douglaston New York 11363
- - ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (718) 631-4040
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days,
Yes X No
---- -----
COMMON STOCK OUTSTANDING AS OF SEPTEMBER 30, 1993 - 24,103,792, SHARES.
<PAGE> 59
JOE FRANKLIN PRODUCTIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
September 30, June 30,
1993 1993
---------- -----------
<S> <C> <C>
Current Assets:
Cash $ -0- $ -0-
---------- -----------
TOTAL CURRENT ASSETS $ -0- $ -0-
========== ==========
LIABILITIES AND (DEFICIT IN ASSETS)
Current Liabilities:
Accrued expenses $ 32,452 $ 43,766
---------- -----------
TOTAL CURRENT LIABILITIES 32,452 43,766
---------- -----------
(Deficit in Assets):
Common stock, $.001 par value, authorized
25,000,000 shares, issued and outstanding
24,103,792 and 22,283,792 shares 24,104 24,104
Additional paid - in capital 1,025,584 957,349
(Deficit) (1,082,140) (1,025,219)
---------- -----------
(32,452) (43,766)
---------- -----------
TOTAL LIABILITIES AND (DEFICITS IN ASSETS) $ -0- $ -0-
========== ==========
</TABLE>
See notes to financial statements
<PAGE> 60
JOE FRANKLIN PRODUCTIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the
period from
January 14, 1987 For the three months
(inception) to ended September 30,
September 30, 1993 1993 1992
------------------ ---- ----
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS:
Cash flows from operating activities:
Net earnings $(982,140) $(56,921) $ (1,600)
--------- --------- ---------
Adjustment to reconcile income to net cash
provided by operating activities:
Depreciation 3,133 -0- -0-
Shares issued for services 289,496 -0- -0-
Contribution to Capital 160,044 68,235 -0-
Change in assets and liabilities:
Increase (decrease) in accrued expenses 32,452 (11,314) 1,600
--------- --------- ---------
TOTAL ADJUSTMENTS 485,125 56,921 1,600
NET CASH (USED)/PROVIDED BY OPERATIONS (497,015) -0- -0-
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Additions) deletions to fixed assets (3,133) -0- -0-
--------- --------- ---------
NET CASH (USED) IN INVESTING ACTIVITIES (3,133) -0- -0-
--------- --------- ---------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock 600,148 -0- -0-
Capital distribution to shareholders (100,000) -0- -0-
--------- --------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 500,148 -0- -0-
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS -0- -0- -0-
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD -0- -0- -0-
========= ========= =========
CASH AND CASH EQUIVALENTS AT END OF PERIOD -0- -0- -0-
========= ========= =========
CASH PAID FOR INTEREST AND TAXES -0- -0- -0-
========= ========= =========
NON-CASH FINANCING ACTIVITIES:
Conversion of debt for common stock $ 174,944 $ -0- $ -0-
========= ========= =========
Common stock issued for services $ 289,496 $ -0- $ -0-
========= ========= =========
</TABLE>
<PAGE> 61
JOE FRANKLIN PRODUCTIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Period
January 14, 1987 For the three months
(inception) to ended September 30,
September 30, 1993 1993 1992
------------------ ---- ----
<S> <C> <C> <C>
Revenues $ 49,672 $ -0- $ -0-
------------ ------------ ----------
Costs and Expenses:
Festival expenses 27,500 -0- -0-
Merger expenses 21,155 -0- -0-
General and administrative
expenses 1,208,181 56,921 1,600
Interest expense 18,904 -0- -0-
------------ ------------ ----------
1,275,740 56,921 1,600
------------ ------------ ----------
NET (LOSS) BEFORE EXTRAORDINARY
CREDIT (1,226,068) (56,921) (1,600)
Extraordinary Credit:
Gain on debt restructuring
(Note 3c) 243,928 -0- -0-
------------ ------------ ----------
NET INCOME (LOSS) $ (982,140) $ (56,921) $ (1,600)
============ ============ ==========
NET INCOME (LOSS) PER SHARE $ (0.06) $ (0.00) $ (0.00)
============ ============ ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING 16,967,966 24,103,792 22,283,792
============ ============ ==========
</TABLE>
See notes to financial statements
<PAGE> 62
JOE FRANKLIN PRODUCTIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED SEPTEMBER 30, 1993
(UNAUDITED)
1. BASIS OF PRESENTATION
Reference is made to the report on Form 10-k for the year ended June
30, 1993.
The financial statements of the periods ended September 30, 1993 and
1992 are unaudited and include all adjustments which, in the opinion
of management, are necessary to a fair statement of the results of
operations for the periods then ended. All such adjustments are of a
normal recurring nature. The results of the company's operation for
an interim period are not necessarily indicative of the results of the
Company's operation for a full fiscal year.
2. DESCRIPTION OF COMPANY
The company was formed to be an entertainment production and marketing
company concentration on the production, repackaging and distribution
of nostalgia and memorabilia products.
3. SIGNIFICANT ACCOUNTING POLICIES
a. Financial statements are prepared on an accrual basis.
b. The collection consists of the nostalgia collection of
artifacts, posters, films, records, etc. which have been
collected by Mr. Joe Franklin during his career. The
collection has been recorded -0- value as the accounting
practices of the Staff of the Securities and Exchange
Commission does not permit a valuation to be used in light of
the fact that Mr. Franklin does not have an auditable
carryover basis for his collection.
Future expenditures will be recorded at cost and amortized
over the estimated useful life of the property.
c. Per share data has been computed based on average number of
shares.
d. Issuance of common stock for services have been valued at the
estimated value of the services performed.
<PAGE> 63
ITEM 1. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULT OF OPERATIONS
Results of Operations - Three months ended
September 30, 1993 and September 30, 1992
The Company is in the development stage. Accordingly, it has no revenues and
has incurred various expenses.
Liquidity and Capital Resources
The Company's present liquidity and capital resources are limited to its cash
on hand. Such cash is insufficient to enable the Company to develop its
business plans.
<PAGE> 64
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registration has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
JOE FRANKLIN PRODUCTIONS, INC.
By: /s/ Gary Paperman, PRESIDENT
---------------------------------------
Gary Paperman, President
<PAGE> 65
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 1993 COMMISSION FILE NUMBER 0-16525
JOE FRANKLIN PRODUCTIONS, INC.
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 13-3422108
- - --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4437 Douglaston Parkway
Douglaston, New York 11363
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (718) 631-4040
--------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
None None
- - ------------------- ---------------------
Securities registered pursuant to Section 12(g) of the Act:
Common Stock -- $.001 Par Value
-------------------------------
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
The number of shares of the voting stock of the registrant outstanding
as of November 12, 1993 was 24,103,792 shares of common stock. The aggregate
market value of the common stock held by non-affiliates of the registrant on
such date was approximately $1,526,773.00 based upon the average of the bid and
asked prices of the common stock, as reported in the over-the-counter NASD
Electronic Bulletin Board.
<PAGE> 66
PART I
Item 1. Business
(a) General Development of Business.
Joe Franklin Productions, Inc. (the "Company") was an entertainment
production marketing company engaged in production and distribution of
memorabilia products relating to nostalgia.
From August, 1990 to on or about December 1, 1991, the Company was also
engaged in the development of a facsimile services business (the "Fax Services")
providing world-wide facsimile transmission and receiving capabilities on
high-speed digital communications technology.
The Company ceased the active operation of its business including,
without limitation, the Fax Services on or about December 1, 1991.
On or about August 3, 1992 the Company commenced active operation of
its business with the signing of an Agreement dated August 3, 1992 between the
Company, certain of its principals and Commonwealth Asset Management Corp.
An Agreement dated October 29, 1993 (the "Agreement") was also entered
into between the Company, Sports Heroes, Inc. ("SHI"), a Delaware and NASDAQ
listed public company located at 550 Kinderkamack Road, Oradell, New Jersey
07649, King of Nostalgia, Inc. ("KNI"), a New York corporation formed on October
29, 1993 and a wholly-owned subsidiary of the Company located at 4437 Douglaston
Parkway, Douglaston, New York 11363, Entertainment Heroes, Ltd. ("EHL"), a
Delaware corporation and a wholly-owned subsidiary of SHI located at 550
Kinderkamack Road, Oradell, New Jersey 07649 and Entertainment Legends, L.P.
(the "Partnership"), a New Jersey limited partnership located at 550
Kinderkamack Road, Oradell, New Jersey 07649.
<PAGE> 67
The Agreement provides for the formation of the Partnership to engage
in the following business activities: (i) to market, distribute, sell, license,
lease or rent the "Joe Franklin Memorabilia" consisting of but not limited to
silent, sound and feature films, records, photographs, prints, magazines, radio
memorabilia and other original and one-of-a-kind items (the "Memorabilia")
and/or reproductions of the Memorabilia, (ii) to purchase, acquire, market,
sell, license, lease, rent or otherwise deal in other entertainment memorabilia
relating to nostalgia and (iii) to develop and implement such other revenue
producing entertainment products from the Memorabilia and other purchased and/or
acquired memorabilia.
KNI and EHL are the general partners of the Partnership and the
Company, SHI and an unaffiliated third party are the limited partners of the
Partnership.
The Agreement also provides, in part, that (i) the Company is to
receive 5% of the Partnership's gross revenues and, as a limited partner of the
Partnership, 44.1% of 99% of the Partnership's profits and losses, SHI is to
receive, as a limited partner of the Partnership, 51% of 99% of the
Partnership's profits and losses and an unaffiliated third party is to receive,
as a limited partner of the Partnership, 4.9% of 99% of the Partnership's
profits and losses, (ii) the Company shall concurrently therewith deliver a Bill
of Sale for the sale, assignment and transfer to the Partnership of the
Memorabilia which Bill of Sale is to be delivered into escrow with the Company's
attorneys and released from escrow pursuant to the Agreement and an Escrow
Agreement and (iii) in consideration thereof, SHI shall concurrently therewith
issue
-3-
<PAGE> 68
share certificates for 200,000 restricted shares of SHI common stock, $.001 par
value (the "Shares"), 185,000 shares issued to the Company and, in consideration
for legal services rendered in this transaction by the law firm of Doros &
Brescia, P.C., the Company's attorneys, 13,500 shares issued to a member of the
law firm and 1,500 shares issues to an associate of the law firm, which Share
certificates are to be delivered into escrow with SHI's attorneys and released
from escrow pursuant to the Agreement and an Escrow Agreement and (iv) such
other terms and conditions as more fully set forth in the Agreement.
Pursuant to the Agreement, on October 29, 1993 the Company delivered
into escrow with the Company's attorneys a Bill of Sale for the sale, assignment
and transfer to the Partnership of the Memorabilia and shortly thereafter,
delivered the Memorabilia to the Partnership.
The Agreement also provides, in part, that the Agreement shall be
abandoned and terminated if any of the following events shall occur:
a. In the event the required approval of the Agreement by the
Company's shareholders is not obtained within 30 days from the
date of the Agreement.
b. In the event the required independent appraisal values the
Memorabilia at less than $1,000,000, then for a period of 10
days from the appraisal date SHI shall have the option to
abandon and terminate the Agreement.
c. In the event SHI does receive approval of the Agreement by its
lender, Belgrave Investment Trust, N.V. and SHI's Board of
Directors within seven (7) business days from the date of the
Agreement.
By an Amendment dated November 18, 1993, which amended the Agreement,
in part, the time for the Company to obtain approval of the Agreement by the
Company's shareholders was extended to December 18, 1993. At a special meeting
of the Company's shareholders held on December 17, 1993 at 10:00 a.m. at the
Company's offices the Company's
-4-
<PAGE> 69
shareholders approved the Agreement.
Also by the Amendment dated November 18, 1993 and by further Amendment
dated December 20, 1993 the time for SHI to obtain approval of its lender,
Belgrave Investment Trust, N.V., and its Board of Directors was extended to
January 31, 1994. To date the Company has not received the required written
notice from SHI as to whether such approvals were obtained.
In the event the Agreement is abandoned and terminated for any of the
foregoing events, the 200,000 shares of SHI common stock being held in escrow
shall be released from escrow and returned to SHI and all right, title and
interest to the Shares shall revert to SHI and the Bill of Sale for the
Memorabilia shall be released from escrow and returned to the Company, all
right, title and interest to the Memorabilia shall revert to the Company and the
Memorabilia shall be returned to the Company.
The Company conducts business from its principal executive office at
4437 Douglaston Parkway, Douglaston, New York 11363.
Joe Franklin Productions, Inc. filed its certificate of incorporation
under the name "Asset Development Corporation" with the State of Nevada on
January 14, 1987, and thereafter Joe Franklin Productions, Inc., a Delaware
corporation organized on June 26, 1987, merged into Asset Development
Corporation and Asset Development Corporation changed its name to Joe Franklin
Productions, Inc.
The Company is a development state enterprise. Since the
-5-
<PAGE> 70
Company ceased the active operation of its business on or about December 1,
1991, the Company has not received any revenues from its operations nor has it
received any revenues from the Partnership's operations.
In addition, the Company will seek to engage in other businesses
related to the entertainment industry including, without limitation, those
relating to memorabilia and nostalgia.
(b) Financial Information About Industry Segments.
Financial information concerning the Company's business is included and
incorporated by reference in Part II and Part IV of this Form 10-K. Because the
Company is still in the development stage, the industry segments in which the
Company engages are not separately stated.
(c) Narrative Description of Business.
The Company is engaged in the business of entertainment memorabilia
relating to nostalgia as a party to the Agreement wherein the Company is a
limited partner of the Partnership whose business is the marketing of the Joe
Franklin Memorabilia and other acquired entertainment memorabilia relating to
nostalgia. The Company's wholly-owned subsidiary, KNI, serves as a general
partner of the Partnership.
Under the terms of the Agreement, the Company is transferring, subject
to certain conditions in the Agreement including without limitation, the
provisions in the Agreement relating to the abandonment and termination of the
Agreement, all of its right, title and interest in the Joe Franklin Memorabilia
to the Partnership.
-6-
<PAGE> 71
The Joe Franklin Memorabilia was amassed during Joe Franklin's 35-year
show business career and contains many one-of-a-kind items and includes rare
films dating back to the silent film era, silent and short subjects, two-reel
silent films, feature films, photographs, phonograph records, posters, lobby
cards and other memorabilia items. Among these items are original programs for
the film classic "Gone with the Wind," one of the world's foremost archive
collections of Eddie Cantor phonograph records and photographs, films featuring
Lon Chaney, Boris Karlof and the rare film "Chaplin's Art of Comedy" staring
Charlie Chaplin and original one-of-a-kind color posters for the films "The
Jolson Story" and "Jolson Sings Again". Joe Franklin, known as the "King of
Nostalgia" to his fans, will be involved with the Partnership when requested and
subject to certain conditions in projects aimed toward sharing this collection
with the consuming public and other collectors. The market for memorabilia and
nostalgia items continues to grow as many Americans literally try to hold on to
a piece of their past. In addition, the Company believes that the unique
collection of Joe Franklin Memorabilia will enable the Partnership to compete
successfully in this growing industry.
As a limited partner of the Partnership, the Company is entitled to
receive 44.1% of 99% of the Partnership's profits and losses and as a general
partner, KNI is entitled to receive 49% of 1% of the Partnership's profits and
losses. In addition, the Company is receiving, subject to certain conditions, up
to 185,000 restricted shares of SHI's common stock and 5% of the Partnership's
gross revenues.
Under the terms of the Agreement, the Company has reserved the right to
reproduce and/or borrow any of the films included in the Joe
-7-
<PAGE> 72
Franklin Memorabilia prior to any such films being sold or delivered out of the
possession of the Partnership and to use such films and to edit and re-edit the
films in any manner and to take extracts thereof for any purpose including,
without limitation, use of the films for the Company's business, and the
copyright and/or trademark of the content.
The films contained in the Joe Franklin Collection were at one time
protected by the copyright laws of the United States. Neither the Company, the
Partnership nor Joe Franklin has copyright protection for any of the films
contained in the collection. Moreover, the Company believes that the copyright
protection for a majority of the older films in the Joe Franklin Collection may
have expired due to the passage of time and the failure to renew the copyrights.
As such, these films are considered to be in the public domain and anyone in
lawful possession of a negative or print may use the film. There is no assurance
that the Company will be able to use the films for commercial purposes at any
time. If the Company determines that it is able to use the films within the Joe
Franklin Collection as authorized by the Agreement, it may repackage the films
utilizing in some manner the Joe Franklin name and image. It is contemplated
that if repackaging of films is undertaken, such distribution would include the
home video market and would feature introductions by Joe Franklin.
Magazine Publication. In December 1989, Company entered into an
agreement with UGIC Enterprises, Inc. ("UGIC") for the publication by UGIC of a
magazine, the principal subject matter of which is nostalgia. The title is "Joe
Franklin's Nostalgia" and includes therein certain editorial material under Joe
Franklin's byline, as well as utilizing materials from the Joe Franklin
Collection. In consideration of the
-8-
<PAGE> 73
rights granted to UGIC, the Company has been granted a 35% royalty interest in
the profits of UGIC (as more fully described in the agreement). Additionally, if
UGIC wishes to sell the magazine, the Company shall be entitled to receive 35%
of the net proceeds therefrom. UGIC has ceased production of the magazine in
fiscal 1991, accordingly there have been no profits to accrue.
General. The Company intends to also engage in businesses which do not
conflict with the Partnership's business . Such businesses include, without
limitation, publication of any and all newsletters and/or magazines, production
and syndication of any and all radio, broadcast, television, cable, microwave
cable, video products and/or movies, publication and distribution of greeting
cards and books and theatrical productions and the marketing of the films
included in the Joe Franklin Memorabilia, which businesses have been expressly
reserved under the Agreement as businesses in which the Company may engage.
Radio and television host Joe Franklin is a director of the Company. He
recently retired after 43 years as the host of his television talk show the Joe
Franklin Show. Thousands of radio listeners currently tune into his weekly radio
"Memory Lane" broadcasts on WOR and WBBR. The general public have come to equate
Joe Franklin with "Memory Lane" nostalgia. Based on the visibility, knowledge
and mass appeal of Joe Franklin, the Company believes it is well positioned to
engage in many phases of the nostalgia and related entertainment product
industry.
Competition. The Company competes with other nostalgia/memorabilia
entertainment production and distribution
-9-
<PAGE> 74
companies, other memorabilia manufacturers, suppliers, sales organizations,
producers and film distributors that have substantially greater financial
resources and more extensive experience and facilities to market and promote
their respective business.
Employees. The Company has no full-time employees working due to the
lack of working capital.
Item 2. Properties.
The Company does not own any property. The Company utilizes for a
nominal monthly charge an executive office provided by Commonwealth Asset
Management Corp., located at 44-37 Douglaston Parkway, Douglaston, New York
11363.
Item 3. Legal Proceedings.
The Company is not involved in any material legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
The Agreement requires approval of the Company's shareholders. A
Special Meeting of Shareholders of the Company was called for December 17, 1993
at 10:00 A.M. at the Company's offices to consider and vote upon the approval or
rejection of the Agreement. At such shareholder's meeting the Agreement was
approved.
-10-
<PAGE> 75
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
The common stock of the Company (the "Common Stock") is traded in the
over-the-counter market and since July 1990 has been quoted through the
over-the-counter NASD Electronic Bulletin Board under the symbol: "3FNJD." At
the current time, there is a limited public market for the Common Stock and
trading is sporadic and limited. The following table sets forth, for the periods
indicated, the high and low bid and asked quotations for the Common Stock during
the two most recent fiscal years as reported on the National Daily Quotation
Service "pink sheets." The prices represent quotations between dealers, without
adjustment for retail mark up, mark down or commission, and do not necessarily
represent actual transactions.
<TABLE>
<CAPTION>
Bid Asked
-------------- ----------------
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
Fiscal 1991
-----------
1st Quarter .04 .02 5/32 .10
2nd Quarter 1/8 .02 5/8 .10
3rd Quarter 1/8 .02 5/8 .20
4th Quarter .02 .02 .20 .20
Fiscal 1992
-----------
1st Quarter .02 .02 .20 .20
2nd Quarter 1/16 .02 1/4 .20
3rd Quarter .02 .02 .20 .20
4th Quarter .02 .02 .20 .20
</TABLE>
-11-
<PAGE> 76
<TABLE>
<S> <C> <C> <C> <C>
Fiscal 1993
-----------
1st Quarter 1/16 1/32 5/16 5/32
2nd Quarter 1/8 1/32 1/2 5/32
3rd Quarter .09 1/32 1/4 1/8
4th Quarter 1/16 .01 3/16 .04
</TABLE>
The Company has not paid any cash dividends on its Common Stock since
its incorporation and it is anticipated that, for the foreseeable future,
earnings, if any, will continue to be retained for use in its business.
As of November 12, 1993, the approximate number of record holders of
the Company's Common Stock was 141. The number of record holders of Company
Warrants is two.
Item 6. Selected Financial Data.
The following selected financial data for the five years ended June 30,
1993 is derived from the financial statements of the Company. The data presented
in the table below should be read in conjunction with the financial statements,
related notes and other financial information included elsewhere in this Report.
(In thousands - except per share amounts)
<TABLE>
<CAPTION>
For the year ended
June 30,
-------------------------------------------
1993 1992 1991 1990 1989
------ ------ ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenues $ -- $ -- $ 9 $ 1 $ 12
====== ====== ===== ===== =====
Net (loss) before
extraordinary credit $ (92) $ (10) $(325) $(199) $ 297)
====== ====== ===== ===== =====
Net (loss) per share
before extraordinary credit $ (.00) $ (.00) $(.02) $(.01) $(.02)
====== ====== ===== ===== =====
</TABLE>
-12-
<PAGE> 77
<TABLE>
<S> <C> <C> <C> <C> <C>
Total assets at period
end $ -- $ -- $ -- $ -- $ --
====== ====== ===== ===== =====
Long-term obligations
at period end $ -- $ -- $ -- $ -- $ --
====== ====== ===== ===== =====
Dividends None None None None None
====== ====== ===== ===== =====
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operation.
The Company is a development-stage enterprise that has depended
primarily upon loans, the sale of equity and recent contributions to capital
made by Commonwealth Asset Management Corp. to finance its operations. During
the Company's fiscal year ending June 30, 1993 Commonwealth Asset Management
Corp. advanced to the Company $92,000 for operating expenses and payments made
in settlement of Company liabilities, which amount was contributed to the
capital of the Company.
Liquidity and Capital Resources
The Company's working capital deficiency decreased from $182,000 at
June 30, 1992 to $44,000 at June 30, 1993. The net loss for the year ended June
30, 1993 before extraordinary credit of $92,000 was substantially funded by its
shareholder Commonwealth Asset Management Corp. To date, the Company has been
dependent on outside financing. The Company has had no sources of outside
financing other than the exercise of warrants, stockholder loans and
contributions to capital by Commonwealth Asset Management Corp.
The Company has no material commitments for capital expenditures as of
June 30, 1993.
-13-
<PAGE> 78
The Company will require substantial additional capital to implement
the business plan of the Company. It cannot be determined when the Company will
obtain such capital to fund the implementation of the business plan.
Impact of Inflation
Because the Company reflects price escalation in its quotations to its
customers and in its estimation of costs for materials and labor, management of
the Company believes that inflation will not have any material impact on the
business of the Company.
Item 8. Financial Statements and Supplementary Data.
The financial statements and schedules listed in the accompanying Index
to Financial Statements are attached hereto and files as a part of this Report
under Item 14 on Pages F-1 through F-12.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
On November 10, 1993, the client/auditor relationship between Feldman
Radin & Co., P.C. and the Company ended as the accounting firm informed the
Registrant that it was not independent until its prior fees had been paid.
Feldman Radin & Co., P.C.'s report on the financial statements for the
years ended June 30, 1992 and 1991 were modified as the Company's financial
condition raised substantial doubt about its ability to continue as a going
concern.
-14-
<PAGE> 79
The change of accountants was approved by the Company's Board of
Directors.
There were no disagreements with the former accountants on any matter
of accounting principals or practices, financial statement disclosure or
auditing scope or procedure.
On November 10, 1993 the Company engaged as its certifying accountants
Abrams & Sprung, 515 Madison Avenue, New York, New York 10022.
-15-
<PAGE> 80
PART III
Item 10. Directors and Executive Officers of the Registrant.
The Company's bylaws provide that the number of members of the Board of
Directors shall be between seven and fifteen as determined from time to time by
the Board of Directors. On October 22, 1990, a resolution was approved by the
Board of Directors changing the number of directors from three to seven. The
members of the Board of Directors serve until the next annual meeting of the
shareholders of the Company and until their respective successors are elected
and qualified. On August 3, 1992 the Company and certain major shareholders
entered into an agreement the ("Agreement") whereby Commonwealth Asset
Management Corp. ("Commonwealth") agreed among other things to acquire
13,000,000 shares of the Company's common stock. The Agreement provided in part
that all former executives retire as officers, directors and employees of the
Company with the exception that under the Agreement Joe Franklin will remain as
a Company director. As such, the names, ages and positions of the Company's
directors and executive officers as of December 31, 1992 are listed below:
<TABLE>
<CAPTION>
Name Age Position(s) with the Company First Elected
- - ---- --- ---------------------------- -------------
<S> <C> <C> <C>
Joe Franklin 62 Director 1987
Gary Paperman 42 President, Director, Secretary 1992
and Treasurer
</TABLE>
Joe Franklin has been a Director of the Company since 1987. From 1987
to August 1989, Mr. Franklin also served as Chairman of the Board of the
Company. Mr. Franklin has been a
-16-
<PAGE> 81
radio and television host for over forty years on such programs as "Memory
Lane", a weekly radio broadcast and "The Joe Franklin Show", a nightly
television talk show.
Gary Paperman has been President, Director, Secretary and Treasurer of
the Company since 1992. In addition, Mr. Paperman is the President of
Commonwealth Asset Management Corp., an investment firm in New York.
Item 11. Executive Compensation.
No executive officer of the Company received any cash compensation from
the Company during the fiscal year ended June 30, 1993. In lieu of $3,846.20 in
salary for the salary period March 25, 1993 to August 11, 1993, Joe Franklin
received a Warrant for the purchase of 600,000 shares of the Company's common
stock on a net exercise basis at seventy-five cents ($.75) per share exercisable
on or prior to July 31, 1998.
For the fiscal year ended June 30, 1993 the Company had no business
operations or employees.
On August 3, 1992 the Company and certain major shareholders entered
into an agreement (the "Agreement") whereby Commonwealth Asset Management Corp.
("Commonwealth") agreed among other things to acquire 13,000,000 shares of the
Company's common stock. The Agreement provided in part that executive
compensation due to Jonathan Braun would be settled in full by a payment by
Commonwealth to Jonathan Braun of $5,000 in full settlement thereof and
executive compensation due Dr. Julia Sladek would be settled
-17-
<PAGE> 82
in full by a payment by Commonwealth to Dr. Julia Sladek of $22,500.00. All
former executives waived their executive compensation, if any, and have signed
general releases to the Company to such effect.
All former executives have retired as officers, directors and employees
of the company with the exception that under the Agreement Joe Franklin remained
as a Company Director as on October 21, 1992 and entered into an Employment and
Performance Agreement providing for a $10,000 per annum salary commencing six
months from the date of execution of the Employment and Performance Agreement.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth as of November 12, 1993 the beneficial
ownership of the Company's Common Stock by (i) all persons known by the Company
to beneficially own more than 5% of the outstanding shares of the Company's
Common Stock, (ii) each director of the Company and (iii) all officers and
directors of the Company as a group.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Beneficial Ownership (1)(2) Beneficial Ownership of Class
- - --------------------------- -------------------- --------
<S> <C> <C>
Commonwealth Asset Management Corp. 13,000,000 54%
4437 Douglaston Parkway
Douglaston, New York 11363
Joe Franklin 970,000 4%
Joe Franklin Productions, Inc.
1775 Broadway - 7th Floor
New York, New York 10019
All Officers and Directors 970,000 4%
</TABLE>
-18-
<PAGE> 83
(1) Unless otherwise noted, the Company believes that all persons named in
the table have sole voting and investment power with respect to all
shares of Common Stock owned by them.
(2) Includes outstanding Warrant No. 102 dated August 12, 1993 issued to
Joe Franklin for the purchase of 570,000 common shares at seventy-five
cents ($.75) per share exercisable at any time through July 31, 1998.
Item 13. Certain Relationships and Related Transactions.
On August 3, 1992 the Company and certain major shareholders entered
into agreement (the "Agreement") whereby Commonwealth Asset Management Corp.
("Commonwealth") agreed among other things to acquire 13,000,000 shares of the
Company's common stock (the "Shares"), in the following manner: 9,700,000 shares
of common stock from Dr. Julia Sladek out of the total of 10,700,000 issued and
outstanding in her name leaving a balance of 1,000,000 shares of common stock
issued and outstanding in the name of Dr. Julia Sladek, 1,650,000 shares of
common stock from Moshe H. Ovadya out of a total of 1,800,000 shares of common
stock issued and outstanding in his name leaving a balance of 150,000 shares of
common stock issued in the name of Moshe M. Ovadya and 1,650,000 shares of
common stock from Cem M. Ovadya out of a total of 1,800,000 shares of common
stock issued and outstanding in his name leaving a balance of 150,000 shares of
common stock issued and outstanding in his name.
In addition, the Agreement provides that in consideration for certain
services as finders provided by Robert C. Galler ("Galler") and Karen Moore
("Moore") on behalf of the Company and Commonwealth, Galler received 1,000,000
restricted shares of the Company's common stock and Moore received 500,000
restricted shares of the Company's common stock.
On October 21, 1992 Joe Franklin and the Company entered into
-19-
<PAGE> 84
an Employment and performance Agreement whereby Joe Franklin was employed by the
Company for seven years at a salary of $10,000 per annum commencing six months
from the date thereof and is required to devote as much time to the business
affairs of the company as may be required to perform his duties thereunder.
-20-
<PAGE> 85
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) The following documents are filed as part of this report on Form 10-K.
1. Financial Statements
Independent Auditors' Report
Balance Sheets
Statements of Operations
Statements of Shareholders' Equity
Statements of Cash Flows
Notes to Financial Statements.
2. Schedules to Financial Statements
All schedules are omitted, as the information is not required, is not
material or is otherwise furnished.
3. Exhibits
The following exhibits are being filed with this Annual Report on Form
10-K and/or are incorporation by reference therein in accordance with the
designated footnote references.
3.1 Amended Articles of Incorporation (1).
3.2 Amended By Laws (2).
22. List of Subsidiaries of the Registrant:
King of Nostalgia, Inc.
- - -------------------------
(1) Filed with the Company's 1989 Annual Report on Form 10-K and
incorporated by reference.
(2) Filed with the Company's Post-Effective Amendment No. 2 dated September
17, 1987 to Registration Statement on Form S-18 and incorporated by
reference.
(b) Reports on Form 8-K
Not applicable.
-21-
<PAGE> 86
JOE FRANKLIN PRODUCTIONS, INC.
INDEX TO FINANCIAL STATEMENTS
The following Financial Statements of Joe Franklin Productions, Inc.
are included in Item 8:
<TABLE>
<S> <C>
Independent Auditors' Report F-2
Financial Statements:
Balance Sheets - June 30, 1993 and 1992 F-3
Statements of Operations - Cumulative January 14, 1987 F-4
(Inception) through June 30, 1993;
years ended June 30, 1993, 1992 and 1991
Statements of Stockholders' Equity (Deficiency) - F-5
Years ended June 30, 1993, 1992 and 1991
Statements of Cash Flows - Cumulative January 14, 1987 F-6 - F-7
(Inception) through June 30, 1993;
years ended June 30, 1993, 1992 and 1991
Notes to Financial Statements F-8 - F-12
</TABLE>
ALL OTHER SCHEDULES ARE OMITTED BECAUSE THEY ARE INAPPLICABLE, NOT REQUIRED, OR
THE INFORMATION IS INCLUDED ELSEWHERE IN THE FINANCIAL STATEMENTS OR NOTES
THERETO.
F-1
<PAGE> 87
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Joe Franklin Productions, Inc.
Douglaston, New York
We have audited the accompanying balance sheet of Joe Franklin Productions, Inc.
(a development stage enterprise) as of June 30, 1993, and the related statements
of operations, stockholders' equity, (deficiency) and cash flows for the year
then ended, and for the period from January 14, 1987 (inception) to June 30,
1993. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit. The Company's financial statements as of and for
the year ended June 30, 1992 and 1991, and for the period January 14, 1987
(inception) through June 30, 1992 were audited by other auditors whose report,
dated October 30, 1992, on those statements included an explanatory paragraph
which raised substantial doubt about the Company's ability to continue as a
going concern. The financial statements for the period January 14, 1987
(inception) through June 30, 1992 reflect total revenues and net loss of $49,672
and $962,897, respectively, of the related totals. The other auditors' report
has been furnished to us, and our opinion, insofar as it relates to the amounts
included for such prior period, is based solely on the report of such other
auditors.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audit and the report of other auditors, such
financial statements present fairly, in all material aspects, the financial
position of Joe Franklin Productions, Inc. as of June 30, 1993, and the results
of its operations and its cash flows for the year then ended, and for the period
from January 14, 1987 (inception) to June 30, 1993, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note B to the financial
statements, the Company has suffered recurring losses from operations and has a
net capital deficiency that raises substantial doubt about its ability to
continue as a going concern. In the past, management and major shareholders have
funded the Company's operations; however continued support cannot be assured.
/s/ Abrams & Sprung
Abrams & Sprung
Certified Public Accountants
New York, New York
November 22, 1993, except for Note H
which is dated December 17, 1993
F-2
<PAGE> 88
JOE FRANKLIN PRODUCTIONS, INC.
(A Development Stage Enterprises)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30, June 30,
1993 1992
----------- -----------
<S> <C> <C>
Current Assets:
Cash $ -- $ --
----------- -----------
TOTAL CURRENT ASSETS $ -- $ --
=========== ===========
LIABILITIES AND (DEFICIT IN ASSETS)
Current Liabilities:
Accrued expenses (Note C) $ 43,766 $ 139,411
Due to shareholders -- 42,942
----------- -----------
TOTAL CURRENT LIABILITIES 43,766 182,353
----------- -----------
(Deficit in Assets):
Common stock, $.001 par value,
authorized 25,000,000 shares, issued
and outstanding 24,103,792 and
22,283,792 shares 24,104 22,284
Additional paid - in capital 957,349 858,260
(Deficit) (1,025,219) (1,062,897)
----------- -----------
(43,766) (182,353)
----------- -----------
TOTAL LIABILITIES AND (DEFICIT IN ASSETS) $ -- $ --
=========== ===========
</TABLE>
See notes to financial statements
F-3
<PAGE> 89
JOE FRANKLIN PRODUCTIONS, INC.
(A Development Stage Enterprise)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Period
January 14, 1987 Year ended June 30,
(inception) to ----------------------------------------------------
June 30, 1993 1993 1992 1991
---------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 49,672 $ -- $ -- $ 8,802
------------ ------------ ------------ ------------
Costs and Expenses:
Festival expenses 27,500 -- -- --
Merger expenses 21,155 -- -- --
General and administrative expenses 1,151,260 92,346 9,885 333,456
Interest expense 18,904 -- -- --
------------ ------------ ------------ ------------
1,218,819 92,346 9,885 333,456
------------ ------------ ------------ ------------
NET (LOSS) BEFORE EXTRAORDINARY CREDIT (1,169,147) (92,346) (9,885) (324,654)
Extraordinary Credit:
Gain on debt restructuring (Note A) 243,928 130,024 -- --
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ (925,219) $ 37,678 $ (9,885) $ (324,654)
============ ============ ============ ============
NET INCOME (LOSS) PER SHARE
Before extraordinary credit $ (0.07) $ (0.00) $ (0.00) $ (0.02)
Extraordinary credit 0.01 0.00 0.00 0.00
============ ============ ============ ============
NET INCOME (LOSS) PER SHARE $ (0.06) $ (0.00) $ (0.00) $ (0.02)
============ ============ ============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING 16,691,740 23,952,125 22,283,792 17,431,026
============ ============ ============ ============
</TABLE>
See notes to financial statements
F-4
<PAGE> 90
JOE FRANKLIN PRODUCTIONS, INC.
(A Development Stage Enterprise)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>
Common Stock Unearned
------------------------------ Additional Portion of
$.001 par Paid - In Accumulated Stock Issued
Shares Issued Value Capital Deficit For Services
------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE AT JUNE 30, 1990 14,738,050 $ 14,738 $ 553,125 $ (728,358) $ (15,000)
ISSUANCE OF COMMON STOCK:
For cash 2,393,333 2,393 93,447 -- --
For services 3,986,409 3,987 130,410 -- 15,000
Conversion of debt 1,166,000 1,166 81,278 -- --
NET LOSS FOR THE PERIOD -- -- -- (324,654) --
---------- ----------- ----------- ----------- -----------
BALANCE AT JUNE 30, 1991 22,283,792 22,284 858,260 (1,053,012) --
NET LOSS FOR THE PERIOD -- -- -- (9,885) --
---------- ----------- ----------- ----------- -----------
BALANCE AT JUNE 30, 1992 22,283,792 22,284 858,260 (1,062,897) --
CONTRIBUTION TO CAPITAL
(Note A) -- -- 91,809 -- --
ISSUANCE OF COMMON STOCK:
For services 1,820,000 1,820 7,280 -- --
NET INCOME FOR THE PERIOD -- -- -- 37,678 --
---------- ----------- ----------- ----------- -----------
BALANCE AT JUNE 30, 1993 24,103,792 $ 24,104 $ 957,349 $(1,025,219) $ --
========== =========== =========== =========== ===========
</TABLE>
See notes to financial statements
F-5
<PAGE> 91
JOE FRANKLIN PRODUCTIONS, INC.
(A Development Stage Enterprise)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the
period from
January 14, 1987 Year ended June 30,
(inception) to -----------------------------------
June 30, 1993 1993 1992 1991
---------------- --------- --------- ---------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS:
Cash flows from operating
activities:
Net Income/(Loss) $(925,219) $ 37,678 $ (9,885) $(324,654)
--------- --------- --------- ---------
Adjustments to reconcile
income (loss) to net
cash provided by (used in)
operating activities:
Depreciation 3,133 -- -- --
Shares issued for
services 289,496 9,100 -- 134,396
Contribution to capital 91,809 91,809 -- --
Change in assets and
liabilities:
Increase (decrease) in
accrued expenses 43,766 (138,587) 9,849 17,326
--------- --------- --------- ---------
TOTAL ADJUSTMENTS 428,204 37,678 9,849 151,722
--------- --------- --------- ---------
NET CASH (USED)/
PROVIDED BY OPERATIONS (497,015) -- (36) (172,932)
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
(Additions) deletions to
fixed assets (3,133) -- -- --
--------- --------- --------- ---------
NET CASH (USED) IN
INVESTING ACTIVITIES (3,133) -- -- --
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Increase (decrease) due
to shareholders -- -- -- (20,375)
Proceeds from sale of
common stock 600,148 -- -- 193,285
Capital distribution to
shareholders (100,000) -- -- --
--------- --------- --------- ---------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 500,148 -- -- 172,910
--------- --------- --------- ---------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS -- -- (36) (22)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR -- -- 36 58
--------- --------- --------- ---------
</TABLE>
F-6
<PAGE> 92
JOE FRANKLIN PRODUCTIONS, INC.
(A Development Stage Enterprise)
STATEMENTS OF CASH FLOWS
continued
<TABLE>
<S> <C> <C> <C> <C>
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ -- $ -- $ -- $ 36
========= ========= ========= =========
CASH PAID FOR INTEREST AND
TAXES $ -- $ -- $ -- $ --
========= ========= ========= =========
ON-CASH FINANCING
ACTIVITIES:
Conversion of debt for
common stock $ 174,944 $ -- $ -- $ --
========= ========= ========= =========
Common stock issued for
services $ 289,496 $ 9,100 $ -- $ 134,396
========= ========= ========= =========
</TABLE>
See notes for financial statements
F-7
<PAGE> 93
JOE FRANKLIN PRODUCTIONS, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
A. ORGANIZATION OF THE COMPANY
The Company was formed to be an entertainment production and marketing company
concentrating on the production, repackaging and distribution of nostalgia and
memorabilia products. From August 1990 to on or about December 1, 1991, the
Company had also been engaged in the development of a facsimile services
business providing world-wide facsimile transmission and receiving capabilities
on high-speed digital communications technology.
As of December 1, 1991, the Company had ceased the development of the
aforementioned business lines due to the lack of cash and capital resources.
On August 3, 1992, the Company, certain major shareholders and Commonwealth
Asset Management Corp., "Commonwealth", entered into an agreement whereby
Commonwealth acquired 13,000,000 shares or 58.3% of the Company's outstanding
common stock. The agreement provided that all former executives retire as
officers, directors and employees of the Company except that Joe Franklin would
remain as a Company director. Commonwealth agreed to pay negotiated settlements
of liabilities including the transfer of the assets of the Company's facsimile
services business in exchange for the settlement of certain debts to
shareholders. The Company agreed to issue 1,500,000 shares of common stock as
finders fees to two individuals for their services and 320,000 shares of common
stock for legal services rendered in this transaction.
Since the date of the agreement Commonwealth has advanced funds to operate the
business of the Company in the form of marketing, consulting, professional fees
and other general and administrative expenses. The Company has no bank account
and uses an executive office provided by Commonwealth at a nominal monthly
charge. All of the operating expenses funded by Commonwealth and payments made
in settlement of liabilities were recorded as capital contributions to the
Company.
On October 29, 1993, the Company entered into an agreement with Sports Heroes,
Inc. to form a new marketing entity, to engage in the marketing of entertainment
memorabilia including the Joe Franklin Collection (See subsequent events Note
H).
F-8
<PAGE> 94
JOE FRANKLIN PRODUCTIONS, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
B. SIGNIFICANT ACCOUNTING POLICIES
1. The Company's financial statements have been presented on the basis
that it is a going concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of
business.
The Company has incurred net losses of $925,219 from January 14, 1987
through June 30, 1993. In addition, the Company has a working capital
deficiency of $43,766 and a deficiency in assets of $43,766 as of June
30, 1993. Accordingly, continued existence is dependent upon the
Company's ability to resolve its liquidity problem, principally by
obtaining additional equity capital or debt financing, neither of which
can be assured.
2. The Joe Franklin collection consists of the nostalgia collection of
artifacts, posters, films, records, etc. which have been collected by
Mr. Franklin during his career. The collection was transferred to the
Company at the time of the Company's organization by Mr. Franklin for a
$100,000 note. The collection has been recorded at $-0- value as the
accounting practices of the staff of Securities and Exchange Commission
do not permit a valuation to be used in light of the fact that Mr.
Franklin does not have an auditable carryover basis of his collection.
Future expenditures will be recorded at cost and amortized over the
estimated useful life of the property.
3. Furniture has been recorded at cost and is being depreciated over seven
years on an accelerated method of accounting. The furniture was
disposed of and written off in fiscal 1990.
4. Per share data has been computed based on the weighted average number
of shares outstanding.
5. Issuance of common stock for services have been valued at the estimated
value of service performed.
6. Certain amounts in the accompanying financial statements have been
reclassified to conform to the 1993 presentation.
F-9
<PAGE> 95
JOE FRANKLIN PRODUCTIONS, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
C. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
June 30,
-----------------------
1993 1992
-------- --------
<S> <C> <C>
Professional fees due $ 25,017 $ 82,107
Accrued salary - Joe Franklin 2,500 --
Other 16,249 57,304
-------- --------
$ 43,766 $139,411
======== ========
</TABLE>
D. INCOME TAXES
Because of a prior change of ownership, the loss carryforward has been
restricted as required by the Internal Revenue Code Section 382. The utilization
of the loss carryforward, which totals approximately $1,000,000, is limited to
$15,000 per year. However, it is believed that the inventory has a substantial
built in gain. Any gain on the sale of such inventory may also be sheltered by
the loss carryforward.
E. COMMON STOCK
1. In August 1990, the Company granted to a major shareholder an option to
purchase 4,000,000 shares of common stock at $.06 per share. As of
November 1, 1990, the shareholder exercised the options to purchase
665,742 shares of common in exchange for $39,945 owed to the
shareholder as of June 30, 1990. The shareholder assigned his rights to
exercise 850,000 options, which such options have been exercised. The
balance of 2,484,258 options were canceled as a result of the August 3,
1992 agreement (Note A).
2. In August 1990, two investors contributed $27,000 each to capital for a
total of 1,800,000 shares of common stock. Such monies have been used
solely for the development of a new business. "The Fax Exchange," which
was a division of the Company.
3. Additionally, the Company has entered into two-year consulting
agreements with the same investors at $8,000 per month each through
August 1992 in consideration of their full-time
F-10
<PAGE> 96
JOE FRANKLIN PRODUCTIONS, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
E. COMMON STOCK (continued)
3. (continued)
employment. The Company issued an additional 900,000 shares each for
services rendered which have been valued at an aggregate of $54,000.
The Company has the option to repurchase 900,000 shares of common stock
for $1.00 from each employee under certain circumstances. The
consulting agreements were terminated as a result of the August 3, 1992
agreement (Note A).
4. In October 1990, the Company's President exchanged $35,000 of accrued
compensation due for 350,000 shares of common stock.
5. In October and December 1990, individuals invested $21,000 and $16,000
for 350,000 and 160,000 shares of common stock, respectively.
6. During December 1990, the Company issued 487,000 shares of common stock
for services rendered to the Company, which have been valued at
$20,000.
7. During the year ending June 30, 1991, the Company issued 1,700,000
shares of common stock for services rendered by the principal
shareholder and officer of the Company. Approximately $50,000 has been
expensed for the issuance of such shares.
8. In connection with the August 3, 1992 agreement (Note A) 1,820,000
shares of common stock were issued for finders fees and for legal
services and have been valued at $9,100.
F. WARRANTS AND OPTIONS OUTSTANDING
The Company had two classes of warrants outstanding, Class A and Class B which
expired on June 4, 1991.
The Company has sold to the underwriter warrants exercisable at $.6955 per
warrant through June 3, 1992.
See Note H for additional warrants outstanding.
F-11
<PAGE> 97
JOE FRANKLIN PRODUCTIONS, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
G. COMMITMENT
On October 21, 1992 Joe Franklin and the Company entered into an Employment and
performance Agreement whereby Joe Franklin is to be employed by the Company for
seven years at a salary of $10,000 per annum commencing six months from the date
of the agreement and is required to devote as much time to the business affairs
of the Company as may be required to perform his duties thereunder.
H. SUBSEQUENT EVENTS
On August 11, 1993, the Company issued a Warrant to Joe Franklin in exchange for
the release by Mr. Franklin of all accrued salary due him through that date in
the amount of $3,846. The Warrantholder is entitled to purchase 600,000 shares
of common stock of the Company prior to July 31, 1998 at seventy five cents
($.75) per share.
On October 29, 1993, the Company entered into an agreement with Sports Heroes,
Inc. (SHI), its newly formed subsidiary (KNI) and a wholly-owned newly formed
subsidiary of the Company (EHL). The agreement provides for the formation of a
Partnership to engage in the marketing of entertainment memorabilia including
the Joe Franklin Collection. KNI and EHL are the general partners of the
Partnership and the Company, SHI and an unaffiliated third party are the limited
partners of the Partnership.
The agreement also provides, in part, that the Company is to receive 5% of the
Partnership's gross revenues and, as a limited partner of the Partnership, 44.1%
of 99% of the Partnership's profits and losses, SHI is to receive, as a limited
partner of the Partnership, 51% of 99% of the Partnership's profits and losses
and the unaffiliated third party is to receive, as a limited partner of the
Partnership, 4.9% of 99% of the Partnership's profits and losses. The Company is
to transfer to the Partnership, the Joe Franklin Collection in exchange for up
to 200,000 restricted shares of SHI common stock. 15,000 of such restricted
shares are to be issued to the Company's law firm for legal services rendered.
The agreement further provides that SHI shall have the option to terminate the
agreement in the event an independent appraisal values the Joe Franklin
Collection at less than $1,000,000. The agreement may also be terminated in the
event SHI does not receive approval of its Board of Directors and its principal
lender prior to January 20, 1994. On December 17, 1993 the Company's
shareholders approved the agreement.
F-12
<PAGE> 98
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of The Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
JOE FRANKLIN PRODUCTION, INC.
By: /s/ Gary Paperman, President
-----------------------------------------
Gary Paperman, President
Date: January 25, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
President Chief Executive January 25, 1994
/s/ Gary Paperman Officer Treasurer,
- - ------------------------ Secretary and Director
Gary Paperman
/s/ Joe Franklin Director January 25, 1994
- - ------------------------
Joe Franklin
</TABLE>
<PAGE> 99
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1993 Commission File No. 0-16525
JOE FRANKLIN PRODUCTIONS, INC.
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 13-3422108
- - --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
44-37 Douglaston Parkway, Douglaston New York 11363
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (718) 631-4040
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days,
Yes X No
----- -----
COMMON STOCK OUTSTANDING AS OF MARCH 31, 1993 - 24,103,792, SHARES.
<PAGE> 100
JOE FRANKLIN PRODUCTIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
March 31, June 30,
1993 1992
----------- -----------
<S> <C> <C>
Current Assets:
Cash $ -0- $ -0-
----------- -----------
TOTAL CURRENT ASSETS $ -0- $ -0-
----------- -----------
LIABILITIES AND (DEFICIT IN ASSETS)
Current Liabilities:
Accrued expenses $ 32,952 $ 139,411
Due to shareholder 42,942 42,942
----------- -----------
TOTAL CURRENT LIABILITIES 75,894 182,353
----------- -----------
(Deficit in Assets):
Common stock, $.001 par value, authorized
25,000,000 shares, issued and outstanding
24,103,792 and 22,283,792 shares 24,104 22,284
Additional paid - in capital 911,944 858,260
(Deficit) (1,011,942) (1,062,897)
----------- -----------
(75,894) (182,353)
----------- -----------
TOTAL LIABILITIES AND (DEFICITS IN ASSETS) $ -0- $ -0-
=========== ===========
</TABLE>
See notes to financial statements
<PAGE> 101
JOE FRANKLIN PRODUCTIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Period For the three months For the nine months
January 14, 1987 ended March 31, ended March 31,
(inception) to ------------------------------ ------------------------------
March 31, 1993 1993 1992 1993 1992
---------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues $ 49,672 $ -0- $ -0- $ -0- $ -0-
------------ ------------ ------------ ------------ ------------
Costs and Expenses:
Festival expenses 27,500 -0- -0- -0- -0-
Merger expenses 21,155 -0- -0- -0- -0-
General and administrative
expenses 1,095,041 11,884 1,221 36,127 5,766
Interest expense 18,904 -0- -0- -0- -0-
------------ ------------ ------------ ------------ ------------
1,162,600 11,884 1,122 36,127 5,766
------------ ------------ ------------ ------------ ------------
NET (LOSS) BEFORE EXTRAORDINARY
CREDIT (1,112,928) (11,884) (1,221) (36,127) (5,766)
Extraordinary Credit:
Gain on debt restructuring
(Note 3c) 200,986 -0- -0- 87,082 -0-
------------ ------------ ------------ ------------ ------------
NET INCOME (LOSS) $ (911,942) $ (11,884) $ (1,221) $ 50,955 $ (5,766)
------------ ------------ ------------ ------------ ------------
NET INCOME (LOSS) PER SHARE $ (.04) $ (.00) $ (.00) $ (.00) $ (.00)
============ ============ ============ ============ ============
WEIGHTED AVERAGE SHARES
OUTSTANDING 24,103,792 24,103,792 22,283,792 24,103,792 22,283,792
============ ============ ============ ============ ============
</TABLE>
<PAGE> 102
JOE FRANKLIN PRODUCTIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the For the nine
period from months ended
January 14, 1987 March 31,
(inception) to ---------------------------
March 31, 1993 1993 1992
--------- -------- -------
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS:
Cash flows from operating activities:
Net earnings $(911,942) $ 50,955 $(5,766)
--------- -------- -------
Adjustment to reconcile income to net cash
provided by operating activities:
Depreciation 3,133 -0- -0-
Change in assets and liabilities:
Increase (decrease) in accrued expenses 7,952 (106,459) (5,766)
--------- -------- -------
TOTAL ADJUSTMENTS 11,085 (106,459) (5,766)
NET CASH (USED)/PROVIDED BY OPERATIONS (900,857) (55,504) -0-
--------- -------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Additions) deletions to fixed assets (3,133) -0- -0-
--------- -------- -------
NET CASH (USED) IN INVESTING ACTIVITIES (3,133) -0- -0-
--------- -------- -------
CASH FLOW FROM FINANCING ACTIVITIES:
Increase (decrease) in long-term debt -0- -0- -0-
Increase (decrease) in due to shareholders 42,942 -0- -0-
Proceeds from sale of common stock 905,544 -0- -0-
Capital distribution to shareholders (100,000) -0- -0-
Additional paid in capital 53,684 53,684 -0-
Capital stock issued and outstanding 1,820 1,820 -0-
--------- -------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 903,990 55,504 -0-
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS -0- -0- -0-
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD -0- -0- -0-
--------- -------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD -0- -0- -0-
========= ======== =======
CASH PAID FOR INTEREST AND TAXES -0- -0- -0-
========= ======== =======
NON-CASH FINANCING ACTIVITIES:
Conversion of debt for common stock $ 174,944 -0- -0-
========= ======== =======
</TABLE>
See notes to financial statements
<PAGE> 103
JOE FRANKLIN PRODUCTIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED MARCH 31, 1993
(UNAUDITED)
1. BASIS OF PRESENTATION
Reference is made to the report on Form 10-k for the year ended June
30, 1992.
The financial statements of the periods ended March 31, 1993 and 1992
are unaudited and include all adjustments which, in the opinion of
management, are necessary to a fair statement of the results of
operations for the periods then ended. All such adjustments are of a
normal recurring nature. The results of the company's operation for an
interim period are not necessarily indicative of the results of the
Company's operation for a full fiscal year.
2. DESCRIPTION OF COMPANY
The company was formed to be an entertainment production and marketing
company concentration on the production, repackaging and distribution
of nostalgia and memorabilia products.
3. SIGNIFICANT ACCOUNTING POLICIES
a. Financial statements are prepared on an accrual basis.
b. The collection consists of the nostalgia collection of
artifacts, posters, films, records, etc. which have been
collected by Mr. Joe Franklin during his career. The
collection has been recorded -0- value as the accounting
practices of the Staff of the Securities and Exchange
Commission does not permit a valuation to be used in light of
the fact that Mr. Franklin does not have an auditable
carryover basis for his collection.
Future expenditures will be recorded at cost and amortized
over the estimated useful life of the property.
c. Per share data has been computed based on average number of
shares.
d. Issuance of common stock for services have been valued at the
estimated value of the services performed.
<PAGE> 104
ITEM 1. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT
OF OPERATIONS
Results of Operations - Three months and nine months ended March 31, 1993.
The Company is in the development stage. Accordingly, it has no revenues and has
incurred various expenses.
Liquidity and Capital Resources
The Company's present liquidity and capital resources are limited to its cash on
hand. Such cash is insufficient to enable the Company to develop its business
plans.
<PAGE> 105
PART II
ITEM 1. LEGAL PROCEEDINGS
Yes. Proskauer, Rose, Goetz & Mendelson V. Joe Franklin
Productions, Inc. (the "Company") Civil Court of the City of
New York, New York (the "Action") seeking recovery of
approximately $10,000 for legal services provided to the
Company. The action was settled on April 26, 1993 for the sum
of $2,000, payment of which has been made by the Company.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
<PAGE> 106
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registration has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
JOE FRANKLIN PRODUCTIONS, INC.
By: /s/ Gary Paperman, PRESIDENT
-----------------------------------------
Gary Paperman, President
<PAGE> 107
JFP List of Agreements
1. Agreement dated October 29, 1993 between Joe Franklin
Productions, Inc., Sports Heroes, Inc. et. al. (the
"Agreement")
2. Amendment to the Agreement dated November 18, 1993
3. Second Amendment to the Agreement dated December 20, 1993
4. Third Amendment to the Agreement dated August 15, 1994
5. Finders Agreement dated August 2, 1993 between Joe Franklin
Productions, Inc. and Lawrence A. Grossberg
6. Employment Agreement dated September 25, 1992 between Joe
Franklin Productions, Inc. and Joe Franklin
EXHIBIT "E"
<PAGE> 108
ENUMERATED LIABILITIES
<TABLE>
<S> <C>
American Stock Transfer & Trust Company $ 5,562.75
Doros & Brescia, P.C. 12,281.38
Burton R. Abrams, C.P.A. 2,000.00
Lehman, Newman & Gleit 1,670.00
----------
$21,514.13
</TABLE>
EXHIBIT "F"
<PAGE> 109
EMPLOYMENT AND PERFORMANCE AGREEMENT
AGREEMENT made the 25th day of September, 1992 between JOE FRANKLIN
(hereinafter called the "Executive") and JOE FRANKLIN PRODUCTIONS, INC., a
Nevada corporation (hereinafter called the "Company").
WHEREAS, Executive is a radio and television personality, nationally
syndicated newspaper columnist and author: and
WHEREAS, the Company deems it to be in its best interests to employ the
Executive due to Executive's unique experience and expertise in the
entertainment industry, and the Executive wishes to be employed by the Company
on the terms and conditions set forth below;
NOW THEREFORE, in consideration of the mutual premises herein
contained, the Company and the Executive agree as follows:
1. Employment
(a) The Company hereby employs the Executive as its Consultant
and Advisor and the Executive hereby accepts such employment, upon the terms and
conditions herein set forth:
(b) Executive's duties shall be as a senior executive of the
Company, and shall be subject to such policies and directions as may be
established or given by the Company's Board of Directors from time to time. The
Executive shall devote as much of his entire business time to the business and
affairs of the Company as may be required to perform his duties hereunder but in
any event not less than fifty (50%) percent of his entire business time. The
EXHIBIT "G"
<PAGE> 110
Executive and the Company agree that Executive shall be permitted to retain his
current position with WWOR as a radio and television talk show host (the "Host
Positions"), during the term of this Agreement.
2. Term
(a) The term of this Agreement shall be for a period of seven
(7) years commencing on the date hereof and terminating seven (7) years from
such date ("Termination Date") and shall thereafter continue at will terminable
on ninety (90) days written notice (the "Termination Notice") certified mail
return receipt requested by either party to the other which notice may be given
prior to the Termination Date provided that the effective date of termination
set forth in the Termination Notice is after the Termination Date.
(b) The Termination Notice shall be sent to the parties as
provided in Paragraph 10 herein.
3. Compensation; Other Benefits
(a) As compensation for the services hereunder during the term
of this Agreement, the Company shall pay to the Executive, and the Executive
shall accept, a salary of Ten Thousand and 00/100 ($10,000) Dollars per annum
during the term of this Agreement. Such salary shall be payable bi-monthly in
accordance with the customary payroll practices, subject to any deductions or
withholding required by applicable law. Executive hereby agrees to
-2-
<PAGE> 111
waive and forego all salary during the first six (6) months from the date of the
execution of this Agreement.
(b) The Board of Directors of the Company shall review the
Executive's compensation and benefits at least once each year, and may, in its
sole discretion, increase the Executive's salary and/or award performance
bonuses to the Executive.
(c) Provided that the Executive shall at all times have
fulfilled his obligations under this Agreement, in addition to the salary
payable pursuant to paragraph 3(a) hereof, the Executive shall be entitled
during the term of this Agreement, to receive or participate in all corporate
benefit programs, if any, including programs relating to the granting of
incentive stock options, commensurate with the status of other senior executives
of comparable rank of the Company, should such benefit programs be subsequently
adopted by the Company.
4. Expenses
The Company shall reimburse the Executive for all reasonable travel and
other out-of-pocket expenses and disbursements which may be incurred by the
Executive in the performance of the services hereunder, upon presentation by the
Executive of expense statements or vouchers and such other supporting
information that the Company may customarily require of the Executive.
Notwithstanding the foregoing, the Executive shall not incur any expenses
exceeding $1,000 in amount without the receiving prior permission of the
Company.
-3-
<PAGE> 112
5. Vacation
The Executive shall be entitled to annual paid vacations of two (2)
weeks per year. Such vacation will be taken from time to time during the year as
shall be consistent with the requirements of the Company and the Executive.
6. Termination
(a) The Company shall have the right to terminate this
Agreement and the employment of the Executive hereunder by written notice to the
Executive at any time during the term hereof (i) in the event of the disability
of the Executive (as the term "disability" is defined in paragraph (b) below);
(ii) for cause (as the term "cause" is defined in paragraph (c) below). Said
Notice shall be given in accordance with paragraph 10 herein.
(b) As used herein, the term "disability" shall mean inability
or incapacity of the Executive due to absence or illness to perform his duties
to the Company for a period of two (2) or more consecutive months.
(c) As used herein, the term "cause" includes embezzlement,
theft or other criminal act under either Federal or state law constituting a
felony, or failure to comply with the terms and conditions of this Agreement
which failure shall continue for a period of seven (7) days after the Board of
Directors gives written notice to the Executive specifying in detail the acts or
omissions considered to constitute such failure to comply.
-4-
<PAGE> 113
(d) Termination of this Agreement and the Executive's
employment thereunder shall not, except if such termination is for cause,
adversely affect any right of the Executive to receive any salary, benefits or
other compensation to which the Executive become entitled prior to the date of
termination.
7. Trade Secrets
The Executive hereby acknowledges that, as a result of his employment
hereunder, he will be privy to various confidential business matters and trade
secrets relating to the Companies businesses and proposed businesses. Executive
agrees that all such trade secrets, marketing programs, business contacts, or
customer lists, including but not limited to the Company's Nostalgia and
Memorabilia library (the "Library") which Library includes, but is not limited,
to the following items: Silent and sound films, two-reeler silent and sound
films, feature films, vintage phonograph records (78S, 45S and 33S) recordings,
posters, prints, lobby cards, sheet music, one of a kind posters, theater stage
and vaudeville memorabilia, bound volumes of newspapers, show business magazines
circa 1906-1940, network radio memorabilia, antique postcards and baseball
collectibles, and any other information or documentation to which he may become
privy as a result of his employment hereunder (collectively, "Trade Secrets"),
are the property of the Company and that he will not, at any time during the
term of this Agreement or thereafter, directly or indirectly,
-5-
<PAGE> 114
disclose or divulge, sell or allow to be used, or utilize in any shape, form or
manner whatsoever, such Trade Secrets whether by identical duplication of such
Trade Secret, or by attempting to utilize any substantially similar version of
the same, in any manner other than pursuant to his employment hereunder. The
Executive acknowledges that the breach or threatened breach of this paragraph
may cause irreparable harm to the Company and, as such, damages to compensate
the Company for such breach or threatened breach are inadequate as a matter of
law, and therefore, the Executive agrees that in the event of a breach or
threatened breach of the provisions of this paragraph, the Company shall be
entitled to seek injunctive relief to prevent such breach or threatened breach
and any other remedies available to it at law or equity.
If any provisions of this paragraph are deemed by a court to be
unenforceable, whether as a matter of public policy, reasonableness, or for any
reason whatsoever, the Executive agrees that it is the intent of the parties to
enforce the spirit of such provisions to the fullest extent permitted by law,
and that any court adjudicating such provisions shall take cognizance of the
fact that such was the intent of the parties at the time of the making of this
Agreement.
8. Representation and Warranties of Joe Franklin
Executive hereby represents and warrants that he intends to retain his
Host Positions with WWOR radio and television during the term of this Agreement
and shall use his best efforts at all
-6-
<PAGE> 115
times to retain the Host Positions during the term of this Agreement.
9. Arbitration
Any dispute, controversy or claim arising under or in relation to this
Agreement or any modification thereof, shall be settled by arbitration which
shall be held in the City of New York in accordance with the laws of the State
of New York and the rules then obtaining of the American Arbitration
Association. The parties hereto consent to the jurisdiction of the Supreme Court
of the State of New York or the United States District Court for the Southern
District of New York and further consent that any process or notice or other
application to any court or a Judge thereof, may be served within or without the
State of New York or Southern District of New York by certified mail to the
addresses listed in Paragraph 9 herein or by personal service, provided a
reasonable time for appearance is allowed. Judgment upon the award rendered by
the arbitrator(s) may be entered in any state or Federal court having
jurisdiction thereof.
Anything herein to the contrary notwithstanding, in the event of the
breach or threatened breached by any party bound by this Agreement of any of
such party's obligations hereunder, it is acknowledged that the other parities
bound by this Agreement will not have an adequate remedy at law and shall be
entitled in any court of competent jurisdiction to such equitable and injunctive
relief as may be available.
-7-
<PAGE> 116
10. Notices
All notices under this Agreement must be in writing, and if to the
Company, will be duly given only if delivered by hand, or if addressed and
mailed by certified mail, return receipt requested, to the Company c/o
Commonwealth Asset Management Corp., 44-37 Douglaston Parkway, Douglaston, New
York 11363, Attention: Mr. Gary Paperman, President or such other address as the
Company may hereafter designate by such notice; or if to the Executive, will be
duly given only if delivered by hand, or if addressed and mailed by certified
mail, return receipt requested, to the Executive at 300 West 43rd Street, New
York, New York 10036 or such other address as the Executive may hereafter
designate by written notice.
11. Waiver of Breach
The waiver by either party of a breach by the other party of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach by such party.
12. Successors and Assigns
This Agreement shall inure to the benefit of and be binding upon the
Company, its successors and assigns, and upon the Executive, his heirs,
executors, administrators, and legal representatives.
13. Governing Law
This Agreement shall be construed in accordance with the laws of the
State of New York.
-8-
<PAGE> 117
14. Entire Agreement
This instrument contains the entire agreement of the parties and
supersedes and revokes any prior Employment Agreements made between the Company
and the Executive. It may not be changed or terminated orally, but may be
changed only by an agreement in writing signed by the party against whom
enforcement or any waiver, change, modification, extension, discharge or
termination is sought.
15. Severability
Invalidity, illegality or unenforceability of any provision hereof
shall not in any way effect, impair, invalidate, or render unenforceable any
other provision hereof.
16. Survival
All of the provisions of paragraphs 7 and 8 hereof shall survive any
termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
JOE FRANKLIN PRODUCTIONS, INC.
By:
-----------------------------------------
Its Authorized Officer
/s/ Joe Franklin
--------------------------------------------
Joe Franklin
-9-
<PAGE> 118
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 25th day of September, 1992 before me personally came Gary
Paperman to me known and who, being duly sworn by me did depose and say that he
is the President of Joe Franklin Productions, Inc., the corporation described in
and which executed the foregoing instrument; that he resides at Douglaston, New
York 11362; that he knows the seal of said corporation; that the seal affixed to
the foregoing instrument is such corporation seal; that it was so affixed by
order of the Board of Directors of said corporation; and that he signed his name
thereto by like order.
-----------------------------------
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 25th day of September, 1992 before me personally came Joe
Franklin to me known and known to me to be the person described in and who
executed the foregoing instrument and he duly acknowledged to me that he
executed the same.
/s/ Vincent M. Lentini
-----------------------------------
Notary Public
[SEAL]
-10-
<PAGE> 1
EXHIBIT 2(b)
ACQUISITION AGREEMENT
This Acquisition Agreement ("Agreement") is made this 2nd day of February 1996,
by and among Universal Medical Systems, Inc., a Nevada corporation, having its
principal office at 13825 Icot Boulevard Suite 613, Clearwater, Florida 34620
("UMSI"), MHTI Acquisition Corporation, a corporation to be formed under the
laws of the State of Florida as a wholly owned subsidiary corporation of UMSI,
whose principal office will be located at 13825 Icot Boulevard Suite 613,
Clearwater, Florida 34620 ("MHTIAC"), Medical High Technology, Inc., a Florida
corporation having its principal office located at 14155 58th Street North,
Clearwater, Florida 34620 ("MHTI"), and the following named Shareholders of
MHTI whose address is c/o MHTI 14155 58th Street North, Clearwater, Florida
34620, which shareholders are hereinafter sometimes referred to as the
"Shareholders".
<TABLE>
<CAPTION>
Number of
Name of Shares Owned
Shareholder and Address Common Preferred
- - ----------------------- ------ ---------
<S> <C> <C>
Jerome P. Shields 495
James N. Marsh 495
Ronald D. Brewer 495
Brian F. Heidtman 15
Transmillennial Resource Corporation 1,385 225,224
</TABLE>
RECITALS:
WHEREAS: The Shareholders are the owners of record of all of the
issued and outstanding shares of common and preferred stock of MHTI;
WHEREAS: UMSI is a corporation duly organized and in good standing
under the laws of the State of Nevada, having been incorporated on January 14,
1987;
WHEREAS: MHTI is a corporation duly organized and in good standing
under the laws of the State of Florida, having been incorporated on January 18,
1982;
WHEREAS: The parties hereto desire to effect a merger of MHTI with
and into a wholly owned subsidiary corporation of UMSI to be formed in the
State of Florida as hereinafter provided, on the terms and conditions
hereinafter set forth and in accordance with the applicable laws of the State
of Florida; and
WHEREAS: The parties hereto desire that this transaction constitute
a tax-free reorganization within the meaning of Section 368 (a)(1)(A), or other
applicable section, of the Internal Revenue Code.
In consideration of the above premises, for the consideration set
forth below, and subject to the terms and conditions set forth below, the
parties agree as follows:
<PAGE> 2
ACQUISITION AGREEMENT - Page 2 of 11
Section I. Formation of Wholly Owned Subsidiary Corporation of
UMSI. Upon execution of this Agreement, UMSI will take all action necessary
and cause the incorporation in Florida of a new wholly owned subsidiary
corporation of UMSI to be named (if available) "MHTI Acquisition Corporation"
("MHTIAC") whose Board of Directors will ratify, approve and adopt this
Agreement. MHTIAC shall be authorized to issue 1,000 shares of common stock
with a par value of $.001 per share of which 100 shares shall be duly issued
and outstanding in the name of UMSI at the time of closing.
Section II. Exchange of Stock. On the closing date, as fixed
below, the Shareholders shall deliver to MHTIAC certificates representing all
of the issued and outstanding shares of the common and preferred stock of MHTI,
duly endorsed. In exchange, UMSI shall deliver to the Shareholders, at
closing, certificates representing one million (1,000,000) shares of the
preferred stock of UMSI, such shares to be issued pro-rata to the Shareholders
based upon the percentage share holdings of each Shareholder of MHTI shares of
common stock. No fractional shares will be issued. One hundred thousand
(100,000) shares of the UMSI preferred stock to be issued to shareholder
Transmillennial Resource Corporation shall be returned by Transmillennial
Resource corporation to UMSI who will then deliver these 100,000 shares of UMSI
preferred stock to the current landlord for MHTI as part of the consideration
for the landlord agreeing to modify or amend the existing lease between
landlord and MHTI.
Section III. Merger of MHTI and MHTIAC.
(a) The delivery by the Shareholders of all the issued
and outstanding shares of common and preferred stock of MHTI to MHTIAC in
exchange for shares of preferred stock of UMSI shall result in a merger of MHTI
with and into MHTIAC, whereupon the separate existence of MHTI shall cease,
MHTI shall be merged into MHTIAC, and MHTIAC shall be the surviving corporation
(the "Surviving Corporation").
(b) As soon as practicable after closing, UMSI, MHTI and
MHTIAC will file, or cause to be filed, with the Secretary of State of the
State of Florida a certificate of merger for the merger of MHTI and MHTIAC, in
accordance with Florida law.
(c) From and after the date of closing and filing of the
certificate of merger, MHTIAC as the Surviving Corporation, shall possess all
the rights, privileges, powers and franchises and be subject to all of the
restrictions, disabilities and duties of MHTI and MHTIAC, as provided under
Florida law.
(d) The laws which are to govern MHTIAC as the surviving
corporation are Florida law. The certificate of incorporation of the Surviving
Corporation shall be the certificate of incorporation of MHTIAC, and the
by-laws of the Surviving Corporation shall be the by-laws of MHTIAC, until the
same shall be further amended or modified in accordance with the provisions of
Florida law.
<PAGE> 3
ACQUISITION AGREEMENT - Page 3 of 11
Section IV. Voting Rights.
(a) In accordance with the laws of the State of Florida,
the holder of each share of the common and preferred stock of MHTI and the
common stock of MHTIAC is entitled to vote upon the adoption of this Agreement,
including the plan of merger and reorganization included herein, each such
share being entitled to one (1) vote. The approval of the holders of a
majority of the outstanding shares of common and preferred stock of MHTI and of
the holders of a majority of the outstanding shares of common stock of MHTIAC
is required.
(b) Special meetings of the shareholders of MHTI and
MHTIAC shall be called and held in accordance with the laws of the State of
Florida as soon as may be practicable after the execution of this Agreement for
the purpose of voting upon the approval and adoption of this Agreement.
(c) Notwithstanding the provisions of this Agreement,
shareholders of MHTI who have not voted in favor of the merger of MHTI with and
into MHTIAC or consented thereto in writing and have demanded appraisal rights,
shall have all such appraisal rights or dissenting shareholder rights as may be
provided under the laws of the State of Florida, and the directors and officers
and MHTI shall do all things required by said laws to notify said shareholders
of their respective appraisal rights.
Section V. Approval by Respective Boards of Directors. By
execution of this Agreement below, the respective officers of UMSI and MHTI
acknowledge, confirm and verify that this Agreement has been approved by the
Boards of Directors of UMSI and MHTI.
Section VI. Approval by Board of Directors and Shareholders of
MHTIAC. UMSI as the sole and only shareholder of MHTIAC, represents and
warrants that on or before the date of closing this Agreement will be approved
and adopted by the Board of Directors of MHTIAC and at MHTIAC's special meeting
of shareholders called for the purpose of acting upon the approval and adoption
of this Agreement, UMSI will vote all of its shares or capital stock of MHTIAC
in favor of the approval and adoption of this Agreement or in lieu thereof will
cause this Agreement to be approved by written consent of the shareholders of
MHTIAC.
Section VI. Closing. The closing of the exchange of shares of
stock shall take place on or before February 16, 1996, at the offices of UMSI,
subject to extension or change by mutual agreement of the parties.
<PAGE> 4
ACQUISITION AGREEMENT - Page 4 of 11
Section VII. Warranties and Covenants of Shareholders. The
Shareholders jointly and severally represent, warrant, and covenant as follows:
(a) Each of the Shareholders is the owner of record of
the number of fully paid and nonassessable shares of the common and preferred
stock of MHTI set forth opposite his or her name below:
<TABLE>
<CAPTION>
Number of Shares Owned
Shareholder Common Preferred
----------- ------ ---------
<S> <C> <C>
Jerome P. Shields 495
James N. Marsh 495
Ronald D. Brewer 495
Brian F. Heidtman 15
Transmillennial Resource Corp. 1,385 225,224
----- -------
Total: 2,885 225,224
</TABLE>
(b) As of the date of this Agreement, MHTI is authorized
to issue 250,000 common shares, of which 2,885 shares are issued and
outstanding; and MHTI is authorized to issue 225,400 preferred shares, of which
225,224 shares are issued and outstanding. No options or warrants are
currently outstanding for the purchase of any shares of MHTI.
(c) MHTI is duly incorporated and authorized to do
business under the laws of the State of Florida.
(d) MHTI has the power and authority to carry on its
business as currently conducted, and holds, or is duly licensed under, all
patents, trademarks, trade names, copy-rights, licenses, processes, and
formulas necessary for the operation of its business as currently conducted,
free and clear of all liens, encumbrances, and claims of any kind.
(e) The balance sheet and income statement of MHTI
attached as Exhibit "A" and incorporated herein by this reference, fully and
accurately reflect respectively the financial condition of the corporation as
of December 31, 1995, and the operations of the corporation for the period
ending December 31, 1995.
(f) No transactions, other than in the ordinary and usual
course of business, have been engaged in by MHTI from December 31, 1995, to the
date of this Agreement, and there has been no material adverse change in the
financial or operating condition of MHTI since December 31, 1995.
<PAGE> 5
ACQUISITION AGREEMENT - Page 5 of 11
(g) Except as set forth on Exhibit "B", attached hereto
and incorporated herein by this reference, as of the date of this Agreement
MHTI is not, and as of the closing date MHTI will not be, in default under any
contract or agreement, or under the order or decree of any court. To the best
knowledge of the Shareholders there are no actions or proceedings pending or
threatened against MHTI as of the date of this Agreement, and neither the
execution and delivery of this Agreement nor the consummation of the
transaction contemplated in this Agreement will conflict with, result in the
breach of, or accelerate the performance required by any contract or agreement
to which MHTI or any of the Shareholders is now a party.
(h) There are no dividends declared and unpaid on any of
the common shares of common or preferred stock of MHTI.
(i) MHTI is not a party to any contract or agreement, and
is not subject to any other restriction, materially and adversely affecting its
business, property, or assets.
(j) MHTI has good and marketable title to all assets
reflected on the balance sheet included in Exhibit "A", which assets are "as
is" and "where is".
(k) Attached as Exhibit "C", and incorporated herein by
this reference, is an accurate list of all insurance policies in effect with
respect to the business and property of MHTI as of the date of this Agreement.
Insurance, or comparable coverage, shall be kept in effect until the closing
date.
(l) Attached as Exhibit "D", and incorporated herein by
this reference, is an accurate list of every lease to which MHTI is a party,
together with the terms of each lease.
(m) Attached as Exhibit "E", and incorporated herein by
this reference, is an accurate list of accounts and notes receivable by MHTI as
of the date of this Agreement.
(n) Attached as Exhibit "F, and incorporated herein by
this reference, is an accurate itemization of the liabilities of MHTI as of the
date of this Agreement.
(o) All of the holders of common stock of MHTI have
consented to the transfer of all of the issued and outstanding shares of
preferred stock of MHTI pursuant to the terms of this Agreement, as evidenced
by the written consent of the holders of all issued and outstanding shares of
common stock of MHTI, which written consent is attached hereto as Exhibit "G",
and incorporated herein by this reference.
(p) The Shareholders, officers and directors of MHTI have
informed UMSI of the on-going cash flow needs of MHTI in order that UMSI can
include these cash flow needs in plans for funding the on-going operations of
MHTI.
<PAGE> 6
ACQUISITION AGREEMENT - Page 6 of 11
Section VIII. Interim Operations; Additional Covenants of
Shareholders. The Shareholders represent, warrant, and covenant that MHTI will
not enter into any transaction, prior to the closing date, other than in the
ordinary course of business, and that the Shareholders will take any action
that is necessary to insure that MHTI will not enter into any such
transactions, and in particular will not, without the prior written consent of
UMSI:
(a) Create or incur any indebtedness other than unsecured
current liabilities incurred in the ordinary course of business;
(b) Grant or permit to arise any mortgage, security
interest, lien, or encumbrance of any kind;
(c) Sell or otherwise dispose of any of its assets other
than merchandise inventories sold in the ordinary course of business:
(d) Declare or pay any dividends, or repurchase or redeem
any of its shares, or establish a sinking fund or other reserve for such
purpose;
(e) Issue, sell, or grant options for the sale of any of
its shares, whether or not previously authorized or issued;
(f) Expend any funds for capital additions or
improvements other than ordinary expenditures for maintenance, repairs, and
replacements.
(g) Acquire an interest in any other business enterprise,
whether for cash or in exchange for the stock or other securities of MHTI; or
(h) Increase the compensation paid to any of its
officers, directors, or employees above the level paid on the date of this
Agreement or agree to pay to any of its officers, directors or employees any
bonus, severance pay, or pension, whether under an existing compensation or
deferred compensation plan, or otherwise.
Section IX. Covenants of UMSI as to Stock. UMSI represents,
covenants, and warrants as follows:
(a) As of the date of this Agreement, UMSI is authorized
to issue, in the aggregate, twenty-five million (25,000,000) shares of common
stock, with a par value of $.001 per share, of which not more than 5,500,000
shares are issued and outstanding. As of the date of this Agreement, UMSI is
authorized to issue, in the aggregate, ten million (10,000,000) shares of
preferred stock, with a par value of $.001 per share, of which no shares are
issued and outstanding.
(b) Between the date of this Agreement and the closing
date, UMSI will not without the prior written consent of the Shareholders,
recapitalize, reclassify, or increase its presently authorized common stock.
<PAGE> 7
ACQUISITION AGREEMENT - Page 7 of 11
(c) The one million (1,000,000) shares of preferred stock
of UMSI to be issued to the Shareholders in exchange for all of the issued and
outstanding shares of common stock of MHTI shall include the following rights
and privileges.
(i) Each share of preferred stock shall have a
stated value of $3.00, but shall have no guaranteed dividend or interest.
(ii) The holders of preferred stock shall have the
same voting rights at all meetings of shareholders of UMSI as the holders of
common shares of stock of UMSI.
(iii) The preferred shares of stock may be
converted to shares of common stock of UMSI when any one of the following
events occurs:
A. At any time after the common shares
of stock of UMSI are trading at $6.00 per share over ten (10) consecutive
trading days.
B. UMSI authorizes the conversion of
the preferred shares of stock to common shares of stock.
C. One year following the closing date,
all remaining shares of preferred stock, not already converted to shares of
common stock of UMSI, automatically shall be converted to shares of common
stock of UMSI.
D. In all cases, the number of shares
of UMSI common stock to be issued pursuant to the above described conversion
options shall be determined based upon the average bid price for shares of
common stock of UMSI over the fifteen (15) trading days prior to the conversion
date. For example, if the average bid price over the fifteen (15) trading days
prior to the conversion date is $1.00 per share then each share of preferred
stock would be converted into three (3) shares of common stock; if the average
bid price is $3.00 per share then each share of preferred stock would be
converted into one (1) share of common stock.
(d) Each certificate representing a share of preferred
stock of UMSI to be issued pursuant to this Agreement shall bear on its face a
legend in substantially the following form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933. the shares have
been acquired for investment and may not be sold, transferred
or assigned in the absence of an effective registration
statement for these shares under the Securities Act of 1933 or
an opinion of the Company's legal counsel that registration is
not required under such Act."
(e) UMSI will not at any time prior to the conversion of
all of the UMSI preferred shares issue any capital stock of any class which has
superior or prior rights to be preferred as to dividends or as to the
distribution of assets upon voluntary or involuntary liquidation, dissolution
or winding up.
<PAGE> 8
ACQUISITION AGREEMENT - Page 8 of 11
(f) In the case of any capital reorganization or any
reclassification of the UMSI common stock or in the case of consolidation or
merger of UMSI or the conveyance of all or substantially all of the assets of
UMSI to another corporation, the stated value of UMSI preferred shares shall
thereafter be adjusted so that the UMSI preferred shares shall be convertible
into the number of shares of stock, or other securities or property, to which a
holder of the number of shares of UMSI common stock deliverable upon
conversion of the preferred shares would have been entitled upon such
reorganization, reclassification, consolidation, merger or conveyance.
Section X. Conditions Precedent to Obligations of UMSI and
MHTIAC. The obligations of UMSI and MHTIAC under this Agreement are subject
to the following conditions:
(a) There shall be tendered for exchange by the
Shareholders at the closing, certificates representing all of the issued and
outstanding shares of the common and preferred stock of MHTI in a form approved
by counsel for UMSI.
(b) The representations of the Shareholders contained
herein shall be true as of the closing date, and the Shareholders shall execute
and deliver to UMSI a certificate to that effect in form and substance
satisfactory to counsel for UMSI.
(c) All directors and officers of MHTI shall tender their
resignations effective as of the closing date.
(d) Neither the inventories nor operating assets of MHTI
shall have been substantially damaged or destroyed.
(e) The obligation of MHTI to Pfizer Medical systems,
Inc. shall be restructured on terms and conditions satisfactory to UMSI and
MHTIAC.
(f) The lease for the premises presently occupied by MHTI
shall be restructured on terms and conditions satisfactory to UMSI and MHTIAC.
(g) MHTI shall execute employment agreements with the
present employees of MHTI on terms and conditions satisfactory to MHTI, UMSI
and MHTIAC.
(h) UMSI and MHTIAC shall have received an opinion of
legal counsel to UMSI, satisfactory in form and substance to UMSI and MHTIAC,
to the effect that (i) all necessary corporate proceedings of UMSI and MHTIAC
have been duly taken to authorize and enable the exchange of the shares as
provided for herein, (ii) the delivery of the shares of preferred stock of UMSI
to the Shareholders of MHTI in exchange for their shares of common and
preferred stock of MHTI being delivered to MHTIAC pursuant to this Agreement is
exempted from the registration requirements under the Securities Act of
<PAGE> 9
ACQUISITION AGREEMENT - Page 9 of 11
1933, as amended, by reason of the applicability of Section 4(2) of the Act,
Regulation D promulgated under Section 3(b) of the Act, or any other exemption
provided for under the Act, and (ii) the transactions herein provided for will
not result in the recognition of taxable gain to the Shareholders of MHTI upon
the transfer of their stock of MHTI in exchange solely for stock of UMSI, nor
in the recognition of taxable gain to UMSI, or its shareholders, or MHTIAC upon
said transfer, by reason of the transaction qualifying as a tax-free
reorganization under the Internal Revenue Code.
Section XI. Conditions Precedent to Obligations of Shareholders;
Non taxability of Exchange. The obligation of the Shareholders under this
Agreement to deliver to UMSI their shares of the common and preferred stock of
MHTI is subject to the following conditions:
(a) No Shareholder shall have received prior to closing
an opinion from legal counsel to the effect that the exchange of their shares
of MHTI common and preferred stock for shares of preferred stock of UMSI under
the terms of this Agreement does not constitute a tax-free reorganization
within the meaning of Section 368(a)(1)(A) of the Internal Revenue Code.
(b) As of the closing UMSI shall make available funds in
the amount of $250,000 for MHTIAC corporate operating expenses.
Section XII. Investment Intent. Each of the Shareholders
represents that the shares of stock of UMSI being acquired by him or her under
this Agreement are being acquired for investment purposes only, and not with a
view to reselling the same or dividing participation with others. Each
Shareholder represents that he or she has no present intent to resell or
otherwise dispose of all or any part of such shares.
Section XIII. Access to Records and Information
(a) UMSI, and its counsel, accountants, engineers, and
other representatives, shall have the right at all times during ordinary
business hours to inspect all of the properties, books, and records of MHTI,
and the Shareholders shall cooperate with and furnish to UMSI and its
representatives, all such information and documents with respect to the affairs
of MHTI as UMSI or its representatives may reasonably request.
(b) The Shareholders, and their counsel, accountants,
engineers, and other representatives, shall have the right at all times during
ordinary business hours to inspect all of the properties, books and records of
UMSI, and UMSI shall cooperate with and furnish to the Shareholders and their
representatives, all such information and documents with respect to the affairs
of UMSI as the Shareholders or their representatives may reasonably request.
<PAGE> 10
ACQUISITION AGREEMENT - Page 10 of 11
Section XIV. Accounting. For accounting purposes, this
transaction shall be deemed to have occurred as of December 31, 1995.
Section XV. Limitation on Liability of MHTI Shareholders. UMSI
and MHTIAC hereby agree and acknowledge that any and all liability of the
shareholders of MHTI related to the accuracy of the warranties, representations
and covenants set forth herein, including but not limited to the warranties,
representations and covenants set forth in Section VII above, shall be subject
to a cumulative deductible in the amount of $25,000 and shall not exceed the
aggregated stated value of the preferred stock.
Section XV. Notices. All notices required or permitted to be
given under this Agreement shall be deemed duly given when delivered personally
or sent by registered or certified mail, postage prepaid, properly addressed to
the party to receive such notice, at the addresses specified above.
Section XVI. Entire Agreement. This Agreement constitutes the
entire agreement between the parties; there are no agreements, warranties, or
representations, express or implied, except those expressly set forth herein.
All agreements, representations, and warranties contained in this Agreement
shall apply as of the closing date and shall survive the closing of this
Agreement.
Section XVII. Modification. This Agreement may not be amended or
modified, except by written agreement of the parties.
Section XVIII. Binding Effect. This Agreement shall bind and inure
to the benefit of the parties and their heirs, legal representatives,
successors, and assigns.
Section XIX. Governing Law. This Agreement shall be construed
under and governed by the laws of the State of Florida.
Section XXX. Counterparts. This Agreement may be executed in
multiple counterparts and on facsimile paper and by facsimile transmission as
necessary. when each of the parties has signed and delivered at least one such
counterpart, each counterpart will be deemed an original and, when taken
together with the other signed counterparts, shall constitute one fully
executed copy of this Agreement, which shall be binding upon and effective as
to the parties according to its terms.
<PAGE> 11
ACQUISITION AGREEMENT - Page 11 of 11
IN WITNESS WHEREOF, this Agreement has been executed in one or more
duplicate original counter-parts at Clearwater, Florida on the date first above
written.
UNIVERSAL MEDICAL SYSTEMS, INC.
By: /s/ Myron A. Baker
----------------------------------------
Myron A. Baker, Chairman, & CEO
MEDICAL HIGH TECHNOLOGY INTERNATIONAL, INC.
By: /s/ Jerome P. Shields
----------------------------------------
Jerome P. Shields, President
/s/ Jerome P. Shields
- - -------------------------------------------
JEROME P. SHIELDS
/s/ James D. Marsh
- - -------------------------------------------
JAMES D. MARSH
/s/ Ronald D. Brewer
- - -------------------------------------------
RONALD D. BREWER
/s/ Brian F. Heidtman
- - -------------------------------------------
BRIAN F. HEIDTMAN
TRANSMILLENNIAL RESOURCE CORPORATION
By /s/ Chuck Broes
-----------------------------------------
Chuck Broes, President
<PAGE> 12
EXHIBIT "A"
<PAGE> 13
Date: Medical High Technology International, Inc.
Dec. 31, 1995 Page: 1
Balance Sheet
EXHIBIT "A"
<TABLE>
<CAPTION>
For All Departments
As of December 31, 1995
<S> <C>
Current Assets
Cash $ 45,328.31
Def. Receivable Related Party 44,892.38
Accounts Receivable - Trade 316,977.72
Reserve for Bad Debts (10,000.00)
Employee Receivables 282.51
Inventory - Systems 96,058.62
Inventory - Parts 583,526.01
Prepaid Expenses 3,485.45
Tax Refund Receivable (6.19)
Total Current Assets $1,080,544.81
Property & Equipment
Furniture & Equipment $ 265,524.66
Tools & Equipment 191,449.10
Leasehold Improvements 21,332.06
Accumulated Depreciation (426,852.47)
Total Property & Equipment $ 51,453.35
Other Assets
Deposits $ 39,231.80
Expense Advances - Permanent 5,600.00
Total Other Assets $ 44,831.80
Total Assets $1,176,829.96
Current Liabilities
Accounts Payable $ 188,641.48
Direct Deposit Payable - P/R 4,151.87
Customer Deposits 451,050.00
Deferred Revenue 245,236.88
Estimated Warranty Liability 8,333.26
Note Payable - Current 150,000.00
Loans From Stockholders 21,613.96
Loans From Related Party 50,000
Sales Tax Payable 137.69
Local Taxes Payable 256.68
Federal Income Tax Withheld 6,872.23
F I C A Payable 3,819.72
State Income Tax Withheld 742.86
Commissions Payable 192.00
Other Accrued Liabilities 83,538.28
Accrued Payroll 189,020.01
S/T Accrued Rent Expense 10,164.00
</TABLE>
<PAGE> 14
Date: Medical High Technology International, Inc.
Dec. 31, 1995 Page: 2
Balance Sheet
EXHIBIT "A"
<TABLE>
<CAPTION>
For All Departments
As of December 31, 1995
<S> <C>
Total Current Liabilities $ 1,413,770.92
Long Term Liabilities
Accrued Royalties $ 1,059,815.63
Long Term Debt 123,095.37
L/T Accrued Rent Expense 5,082.00
Total Liabilities $ 2,601,763.92
Stockholders' Equity
Common Stock $ 2,885.00
Additional Pain-In Capital 48,543.96
Preferred Stock At Par 225,224.00
Retained Earnings (1,902,899.19)
Net Profit / (Loss) 201,312.27
Total Stockholders' Equity $(1,424,933.96)
Total Liabilities & Equity $ 1,176,829.96
</TABLE>
<PAGE> 15
Date: Medical High Technology International, Inc.
Dec. 31, 1995 Page: 1
Profit and Loss Statement
For All Departments
For the period December 1, 1995 to December 31, 1995
<TABLE>
<CAPTION>
Current Period Year To Date
Amount Amount
<S> <C> <C>
Sales Income
Labor Revenue $71,990.37 $ 439,642.13
Parts Sales 2,190.00 135,650.00
0600 System Sales .00 525,000.00
Travel Revenue .00 1,120.00
Freight Revenue (35.92) 15,895.64
Other Income 3.75 66.47
Net Sales $74,148.20 $1,117,374.24
Cost of Sales
Cost of Labor $26,538.65 $ 140,453.14
Cost of Parts 606.31 24,263.80
Cost - 0600 Systems .00 163,178.31
Cost of Sales - Travel 7,185.20 31,683.90
Cost of Sales - Meals 1,261.33 4,257.83
Cost of Sales - Freight 1,880.75 21,116.76
Cost of Sales - Warranties (833.37) (4,166.72)
Cost of Sales - Other 1,394.10 5,608.20
Cost of Sales - Inv. Shrinkage (3,278.46) (10.,020.25)
Shop Supplies & Expense 13.57 473.40
Cost of Royalties - Pfizer .00 51,305.60
Total Cost of Sales $34,768.08 $ 428,153.97
Gross Profit $39,380.12 $ 689,220.27
Selling, G & A Expenses
Auto Expense $ 5,546.86 $ 29,040.56
Bank Charges 30.00 562.71
Books & Periodicals .00 42.79
Business Meals 966.50 3,254.27
Depreciation Expense 1,301.00 6,505.00
Dues & Subscriptions .00 269.95
Education Expense .00 158.00
Entertainment Expense .00 59.96
Insurance - General 356.72 1,783.60
Insurance - Group 9,277.92 28.071.11
Insurance - Workman's Comp. 2,421.49 4,472.51
Legal & Accounting 2,218.00 9.536.00
Maintenance & Repairs 1,857.01 5,357.46
Office Expense & Supplies 524.09 1.096.51
Postage & Shipping 92.08 927.62
Promotion Expense 576.28 9,234.35
Research & Development 690.07 690.07
</TABLE>
<PAGE> 16
Date: Medical High Technology International, Inc.
Dec. 31, 1995 Page: 2
Profit and Loss Statement
For All Departments
For the period December 1, 1995 to December 31, 1995
<TABLE>
<CAPTION>
Current Period Year To Date
Amount Amount
<S> <C> <C>
Rent - Building 25,657.11 128,285.55
Rent - Equipment 176.60 1,096.73
Salaries & Wages 40,542.63 189,742.42
Sales/Marketing Expense 783.96 1,760.37
Taxes & Licenses 1,989.84 9,809.20
Taxes - Payroll 3,631.75 22,999.24
Telephone & Telegraph 2,148.31 8,693.38
Travel - Sales 2,679.08 3,026.48
Utilities 1,382.16 6,829.61
Total Selling, G & A Expenses $104,799,46 $473,305.45
Net Income From Operations $(65,419.34) $215,914.82
Other Income And Expense
Interest Income $80.49 $ 216.88
Interest Expense 3,767.06 14,235.43
Total Other Income / Expense $ 3,686.57 $ 14,018.55
Net Income Before Tax (69,105.91) $201,896.27
Late Income Tax .00 584.00
Net Income / (Loss) (69,105.91) $201,312.27
</TABLE>
<PAGE> 17
Dec. 31, 1995 5:22 PM Page 1
Medical High Technology International, Inc.
STATEMENT OF CASH FLOWS
For the period 12/01/95 to 12/31/95
<TABLE>
<CAPTION>
-----Current Year Figures-----
<S> <C>
Cash Flow from operating activities
Net Income (Loss) (69,105.91)
Charges not using Cash
Depreciation - Florida 1,293.33
Depreciation - North Dakota 7.67
Change in Current Assets
Short-Term Investments .00
Net Receivables
Del. Receivable Related Party 105,400.00
Employee Receivables (33.45)
Expense Advances - Temporary 300.00
A/R - Florida 55,068.78
A/R - Maryland (5,416.67)
A/R - New York (.02)
A/R - Texas (15,427.15)
A/R - MHTI International (226.93)
A/R - New Jersey 2,500.00
Inventory
Inventory - Systems (10,705.16)
Inventory - Parts 2,455.05
Inventory - R & D (4,573.65)
Prepaid Expenses
Deposits 6.00
Change in Current Liabilities
Accounts Payable
Accounts Payable (14,867.29)
Notes Payable (Current) .00
Current Maturities of Long-term Debt .00
Taxes Payable
Local Taxes Payable 5.63
Federal Income Tax Withheld 1,610.20
F I C A Payable 351.42
Sales Tax - Florida 10.50
Accrued Taxes - Florida 26.14
State Tax W/H - North Dakota 51.64
State Tax W/H - New Jersey 107.23
Leases Payable (Current)
L/T Accrued Rent Expense (847.00)
Other Current Liabilities
Accounts Receivable -Deferred 60,706.94
Customer Deposits (5,400.00)
Deferred Revenue (104,142.49)
Estimated Warranty Liability (833.37)
Other Accrued Liabilities (2,517.66)
---------------
Total Cash Flow from operating activities (4,196.22)
Cash Flow from investing activities
Long-Term Investments .00
Property, Plant & Equipment
Accumulated Depreciation 1,301.00
</TABLE>
<PAGE> 18
Dec. 31, 1995 Page 2
STATEMENT OF CASH FLOWS
For the period 12/01/95 to 12/31/95
<TABLE>
<CAPTION>
-----Current Year Figures-----
<S> <C>
Depreciation - Florida (1,293.99)
Depreciation - North Dakota (7.67)
.00
Intangible Assets .00
Other Assets .00
----------
Total Cash Flow from investing activities .00
Cash Flow from financing activities
Long-Term Debt
Loans From Stockholders 1,271.23
N/P - Landlord (23,483.03)
Common Stock .00
Preferred Stock .00
Additional Paid-in Capital - Common .00
Retained Earnings .00
----------
Total Cash Flow from financing activities (22,211.80)
----------
Net Increase (Decrease) in Cash (26,408.02)
==========
Beginning Cash Balance 71,736.33
Net Increase (Decrease) in Cash (26,408.02)
----------
Ending Cash Balance 45,328.31
==========
</TABLE>
<PAGE> 19
Medical High Technology International, Inc.
Notes to Financial Statements
December 31, 1996
Refer to the attached schedules of inter-company balances between Theratronics
International, Ltd and MHTI. These amounts are still being resolved between
the companies and some of the items may be in dispute.
<PAGE> 20
MEMORANDUM
DATE: February 8, 1996
TO: Jerome P. Shields
FROM: Beth A. Bruck
RE: TIL/MHTI Intercompany Balances
Beginning with the statement sent to us by Ogilvy Renault, I have done an
analysis of the balances of the intercompany accounts as follows:
<TABLE>
<CAPTION>
Owed to TIL from MHTI:
<S> <C>
Promissory note $ 50,000.00
Interest 25,606.74
St. Joe's Tampa final payment 105,400.00
Credit Memo 2417 (330.87)
Upgrade costs for Victoria TX 50,000.00
230,675.87
Owed to MHTI from TIL:
Balance from TIL statement 123,482.13
Interest on insurance payment 7,216.78
Invoices not shown on TIL schedule:
10050 8/31/94 Frt 41.25
10077 9/30/94 Citizen's install 20,000.00
10100 1/1/95 Frt & Vat 462.56
10162 5/10/95 Frt 240.74
Invoice 9976 PO 26755C6 correct amount 5,016.30
Add back credits of unknown origin 694.37
Meicor trade A/Registration Statement 36,828.79
Interest due from Meicor on 50K note 2,569.50
Tax impact of Meicor transaction 108,600.00
-----------
305,152.42
-----------
NET AMOUNT DUE TO MHTI FROM TIL $ 74,476.55
-----------
</TABLE>
<PAGE> 21
THERATRONICS INTERNATIONAL LIMITED
Statement of Account
M.H.T.I.
<TABLE>
<S> <C>
Amounts Owed to Theratronics by M.H.T.I.
Promissory note (due April 1995) $ 50,000.00
Accrued interest on promissory note 22.500.00
Invoice 3276.1-Final 20% due upon customer acceptance 105,400.00
Credit memo 2417 - Customs clearing charges on replacement cables (330.87)
Upgrade costs on #16 unit (Victoria) which
were to be performed free 50,000.00
-----------
TOTAL $227,569.13
Amounts Owed to M.H.T.I. by Theratronics
Insurance claim reimbursement $ 41,692.38
M.H.T.I. Invoices:
P. O. 26756c6 - Service work for Gent Belgium (C. Clearey) 5,000.00
P.O. 23124c6 - ISOLINK, ETHERNET interface, St. Joseph, Texas 8,000.00
10088 812.59
10048 210.64
10044 - Service work July 14 30/94 (15.5 days @ $278/day) 9,443.75
10016 - CTT 1591RC 1.5 M HU X ray tube #87375 20,628.64
10017 (4,216.00)
10006 152.71
10004 69.03
9994 136.36
9987 59.17
9983 - Freight to Carrollton, TX, plus 10% administration charge 2,817.19
9984 179.47
9972 - CTT 1591RC X-ray tube, St. Barnabas Medical Centre 18,128.80
9974 243.16
9968 - Installation CT-Sim 20,000.00
9966 297.53
9912B (242.33)
9918B (330.87)
9948B (121.17)
9958 118.80
9959 870.86
9957 31.52
-----------
TOTAL $123,482.13
Net Amount Owing to Theratronics from M.H.T.I. $104,087.00
===========
</TABLE>
<PAGE> 22
EXHIBIT "B"
<PAGE> 23
EXHIBIT "B"
None
<PAGE> 24
EXHIBIT "C" AND EXHIBIT "D"
<PAGE> 25
EXHIBIT "C"
<TABLE>
<CAPTION>
Workers' Compensation Insurance:
<S> <C> <C> <C>
FL - FCCI Mutual Insurance 001-WC96A-23464 1/1/96 - 12/31/96
MD - Injured Workers Insurance Fund 582808-1 1/1/96 - 12/31/96
TX - Texas Workers Compensation Ins. Fund SBP-0001039429-950127 1/27/96 - 1/27/97
ND - Workers Compensation Bureau 11079-9 11/1/95 - 10/31/96
NJ - The Travelers 6UB 707K790695 12/1/95 - 11/30/96
</TABLE>
EXHIBIT "D"
Leases
John B. Pickford as Ancillary Trustee, etc. - Building lease
Miscellaneous contracts for services with various termination clauses.
<PAGE> 26
EXHIBIT "E"
<PAGE> 27
[MHTI LOGO]
EXHIBIT "E"
- - --------------------------------------------------------------------------------
Medical High Technology International,
- - --------------------------------------------------------------------------------
Inc. - 14155 58th Street N., Clearwater,
Florida, 34620
Phone: (813)531-5688
ACCOUNTS RECEIVABLE - DECEMBER 31, 1995
<TABLE>
<S> <C>
Beth Israel Hospital $ 11,436.00
Beth Israel Medical Center 59,400.00
Citizens Medical Center 13.500.00
Magnetic Resonance Imagers 2,050.84
Med-Tek International, Ltd. 2,784.41
Misc. International 67,955.65
Misc. Domestic 37,000.00
National MD (1,090.50)
St. Joseph Hospital 1,449.15
Univ. of Maryland Hospital 10,833.34
V. A. Medical Center 11,413.86
-----------
Total $216,732.75
Reserve for bad debt (10,000.00)
-----------
Total per Financial Stmt. $206,732.75
===========
Due from related Party ( Theratronics International, Ltd.) $44,892.38
Advances due from various employees - short term 282.51
long term travel adv. 5,600.00
</TABLE>
<PAGE> 28
EXHIBIT "F"
<PAGE> 29
EXHIBIT "F"
[MHTI LOGO]
- - --------------------------------------------------------------------------------
- Medical High Technology International, Inc. -
- - --------------------------------------------------------------------------------
14155 58th Street N., Clearwater, Florida 34620
Phone: (813)535-7095 Fax:(813)531-5688
<TABLE>
<CAPTION>
ACCOUNTS PAYABLE - DECEMBER 31, 1995
<S> <C> <C> <C>
A 2 J Laser $ 3,340.00 Protocision Machine $ 2,470.00
A-A Electric 409.25 Mattew S. Blum (86.25)
Ace Hardware 55.29 Medical Alignment Sys. 956.40
American Paging 98.32 Modular Mailing 8.48
American Plastics 471.14 National Dust Control 128.40
AT&T 1,136.19 National Manufacturing 1,521.60
Avnet Computer 1.567.63 Bell Atlantic 33.87
Basetec Office Supply 79.33 Newark Electronics 190.49
Bitec Southeast 28.05 Nicholas Mason 555.53
Boley, Inc. 340.23 North American Van 3,474.82
CAC - United Healthcare 2,432.74 North Tampa Photo. 149.92
Chester Electronics Supply 62.41 Northwest Airlines 120.60
Columbia Scientific 12,000.00 Numonics Corp. 1.966.00
Communication Specialties 220.00 Paralan 827.62
Computer Support Products 825.00 Pearson Thomas 5,495.72
Control Concepts 1,161.02 Pilot Airfreight 1,470.22
Crenio, Inc. 4,454.58 Buccaneer Blueprint 19.09
Daniel Galvacky 146.26 Pinellas Cty Utilities 374.33
Danka 507.05 Florida Office Mart 292.65
ABCC 312.83 PixieLink 2,900.00
Davis Baldwin 9,846.66 Printcraft 57.78
DHL Airways, Inc. 948.95 Professional Comm. 35.75
Dunlee -Ray Tubes 14,342.00 LEP Profit 73.25
Emery Worldwide 276.90 Provident 250.23
Enviro-Safe Coatings 845.00 Ron Brewer 3,279.83
Federal Express 15.50 Ron Gill 354.09
Fiberglass Coatings 522.25 ServTronics 302.06
Florida Power 903.84 Source of Supply 341.62
Frantz Imaging 8,677.56 Sourch Research 598.63
Gates/FA 380.00 Speedy, Inc. 175.10
General Communications 56.00 Strawberry Tree 296.50
GTE Florida 396.63 Theratronics 27,250.00
Hewlett Packard 395.00 Thomas Monkus 2,511.72
Hamilton Hallmark 83.00 Todd Hanson 929.09
Impression Technology 1,291.10 Tri-County Packing 1,732.40
Integrated Power Designs 498.73 UDT Sensors 12,786.41
Bronstein, Carlson, Gleim 518.00 Ultra-Cal, Inc. 6,061.25
James N. March 4,549.37 United Airlines 55.78
Jerome P. Shields 2,599.85 United Health & Life 5,661.03
John Ondash 90.00 United Parcel 430.42
John Krawczyk 295.45 US West Paging 25.68
Lewis, Birch & Ricardo 853.51 Varian Associates 2,332.91
Maiden Brook Water 22.31 Browning-Ferris 103.99
</TABLE>
<PAGE> 30
EXHIBIT "F"
[MHTI LOGO]
Accounts Payable
Page 2
<TABLE>
<S> <C>
Wes-Garde 90.65
William Beyer 360.00
Wyle Enclosures 8,543.00
Yellow Freight 4,164.36
Zephyrhills 253.19
Pergamon Press 1.083.75
Clean Harbors 615.00
Best Mfg. 339.00
Tektronix 400.10
Hill Mfg. 43.78
Air Cartage 11.65
Mail Marketing 63.46
Airline Profession Svc. 467.84
Hevia, Beagles 3,500.00
Digital Equipment 490.00
F-D-C Reports 315.00
CIF/RTK/PPC 1.00
Visiplex Instruments 252.01
TNT Skypak 639.10
Texas Dept. of Health 100.00
Lace, Inc. 330.25
DHL Airways 7.80
-------------
Total $ 188,641.48
=============
</TABLE>
Also see Exhibit "A" for additional liabilities listed on balance sheet.
<PAGE> 31
EXHIBIT "G"
<PAGE> 32
WRITTEN CONSENT OF HOLDERS OF COMMON STOCK
This Written Consent is executed effective the 2nd day of February
1996, by the undersigned, being all the holders of issued and outstanding
shares of common stock of Medical High Technology International, In., a Florida
corporation.
WHEREAS: All the holders of issued and outstanding shares of common
and preferred stock of Medical High Technology International, Inc. ("MHTI")
have approved and adopted an Acquisition Agreement and plan of merger with
Universal Medical Systems, Inc. and its wholly subsidiary MHTI Acquisition
Corporation under the terms of which all of the issued and outstanding shares
of common and preferred stock of MHTI will be delivered to MHTI Acquisition
Corporation in exchange for shares of preferred stock of Universal Medical
Systems, Inc. resulting in a merger of MHTI with and into MHTI Acquisition
Cororation;
WHEREAS: Subparagraph H of Article Four of the Articles of Amendment
to the Articles of Incorporation of Medical High Technology International, Inc.
provides that shares of preferred stock of MHTI may not be transferred without
the prior written consent of all the holders of common stock; and
WHEREAS: All the holders of common stock of MHTI desire to give
their prior written consent to the transfer to MHTI Acquisition Corporation of
all the issued and outstanding shares of preferred stock of MHTI, pursuant to
the terms and provisions of the Acquisition Agreement referenced above.
THEREFORE, the undersigned, being all the holders of all the issued
and outstanding shares of common stock of MHTI hereby consent to the transfer
of all issued and outstanding shares of preferred stock of MHTI to Universal
Medical Systems, Inc. pursuant to the terms and provisions of the Acquisition
Agreement by and among MHTI, MHTI Acquisition Corporation and Universal Medical
Systems, Inc.
/s/ JEROME P. SHIELDS /s/ JAMES N. MARSH
- - ------------------------------------- ------------------------------------
JEROME P. SHIELDS JAMES N. MARSH
/s/ RONALD D. BREWER /s/ BRIAN F. HEIDTMAN
- - ------------------------------------- ------------------------------------
RONALD D. BREWER BRIAN F. HEIDTMAN
TRANSMILLENNIAL RESOURCE CORPORATION
By: /s/ Executive Vice President TMRC
----------------------------------
EXHIBIT "G"
<PAGE> 1
EXHIBIT 2(c)
ACQUISITION AGREEMENT
This Acquisition Agreement ("Agreement") is made the 24th day of May,
1996, by and among UNIVERSAL MEDICAL SYSTEMS, INC., a Nevada corporation, whose
principal office is located at 13825 Icot Boulevard Suite 613, Clearwater,
Florida 34620 ("UMSI"), LIFE SCIENCES, INC., a Connecticut corporation,
BIOMETRIX, INC., a Connecticut corporation, and BIOMETRIX, INC., a New Hampshire
corporation, whose address is 75 Holly Hill Lane, #200, Greenwich, Connecticut
06830 (hereinafter sometimes collectively referred to as "LSI"), and MANFRED
ASRICAN, whose address is 75 Holly Hill Lane, #200, Greenwich, Connecticut 06830
(hereinafter sometimes referred to as "ASRICAN" OR "SHAREHOLDER").
RECITALS:
WHEREAS: Asrican is the owner of record of all of the issued and
outstanding shares of common stock of LSI, and LSI has no issued or outstanding
shares of preferred stock or other securities;
WHEREAS: UMSI is a corporation duly organized and in good standing under
the laws of the State of Nevada;
WHEREAS: Life Sciences, Inc. is a corporation duly organized and in good
standing under the laws of the State of Connecticut;
WHEREAS: Biometrix, Inc., a Connecticut corporation, is a corporation
duly organized and in good standing under the laws of the State of Connecticut;
WHEREAS: Biometrix, Inc., a New Hampshire corporation, is a corporation
duly organized and in good standing under the laws of the State of New
Hampshire;
WHEREAS: The parties hereto desire to effect an acquisition by UMSI of
Life Sciences, Inc., Biometrix, Inc., a Connecticut corporation, and Biometrix,
Inc., a New Hampshire corporation, whereby Life Sciences, Inc., Biometrix, Inc.,
a Connecticut corporation, and Biometrix, Inc., a New Hampshire corporation,
will become wholly owned subsidiary corporations of UMSI;
WHEREAS: The parties hereto desire that this transaction constitute a
stock-for-stock tax-free exchange, a type B reorganization, as defined by
Section 368(1)(A through G) of the Internal Revenue Code.
In consideration of the above premises, for the consideration set forth
below, and subject to the terms and conditions set forth below, the parties
agree as follows:
Section I. Exchange of Stock. On the closing date, as defined below,
the Shareholder shall deliver to UMSI certificates representing all of the
issued and outstanding shares of LSI, duly endorsed. In exchange, UMSI shall
deliver to the Shareholders, at closing, certificates representing Six Hundred
Thirty-Seven Thousand (637,000) shares of Series "E" Convertible Preferred Stock
of UMSI. In addition, at closing, UMSI shall deliver to LSI for further delivery
to Dr. Mark Mitnick a certificate representing Six Thousand Five Hundred (6,500)
shares of Series "E" Convertible Preferred Stock of UMSI and UMSI shall
<PAGE> 2
deliver to LSI for further delivery to Dr. Steve Poling a certificate
representing Six Thousand Five Hundred (6,500) shares of Series "E" Convertible
Preferred Stock.
Section II. Approval by Shareholder(s) of LSI.
By execution of this Agreement below, LSI and Asrican confirm and
acknowledge that this Agreement has been approved and adopted by the holder, or
holders, of all the issued and outstanding shares of stock of LSI.
Section III. Approval by Boards of Directors of UMSI and LSI. By
execution of this Agreement below, the respective officers of UMSI and LSI
acknowledge, confirm and verify that this Agreement has been approved by the
Boards of Directors of UMSI and LSI.
Section IV. Closing. The closing of the exchange of shares of stock,
and acquisition of LSI by UMSI, shall take place on July 1, 1996, at the offices
of LSI, or other mutually agreeable location, subject to extension or change by
agreement of the parties.
Section V. Warranties and Covenants of LSI and Shareholder. LSI and
the Shareholders jointly and severally represent, warrant, and covenant as
follows:
(a) Asrican (Shareholder) is the owner of record of all the
issued and outstanding shares of stock of LSI.
(b) As of the date of this Agreement, except for the shares of
common stock issued to Shareholder, LSI has not issued any shares of preferred
stock, options, warrants or any other rights to securities of LSI to any other
party.
(c) Life Sciences, Inc. is duly incorporated and authorized to
do business under the laws of the State of Connecticut.
(d) Biometrix, Inc., a Connecticut corporation, is duly
incorporated and authorized to business under the laws of the State of
Connecticut.
(e) Biometrix, Inc., a New Hampshire corporation, is duly
incorporated and authorized to do business under the laws of the State of New
Hampshire.
(f) LSI has the power and authority to carry on its business as
currently conducted, and holds, or is duly licensed under, all patents,
trademarks, trade names, copy-rights, licenses, processes, and formulas
necessary for the operation of its business as currently conducted, free and
clear of all liens, encumbrances, and claims of any kind.
(g) The balance sheet and income statement of LSI attached as
Exhibit "A" and incorporated herein by this reference, fully and accurately
reflect respectively the financial condition of the corporation as of December
31, 1995, and the operations of the corporation for the period ending December
31, 1995.
(h) No transactions, other than in the ordinary and usual
course of business, have been engaged in by LSI from December 31, 1995, to the
date of this Agreement, and there has been no material adverse change in the
financial or operating condition of LSI since December 31, 1995.
<PAGE> 3
(i) As of the date of this Agreement LSI is not, and as of the
closing date LSI will not be, in default under any contract or agreement, or
under the order or decree of any court. To the best knowledge of the
Shareholders there are no actions or proceedings pending or threatened against
LSI as of the date of this Agreement, and neither the execution and delivery of
this Agreement nor the consummation of the transaction contemplated in this
Agreement will conflict with, result in the breach of, or accelerate the
performance required by any contract or agreement to which LSI or any of the
Shareholders is now a party.
(j) There are no dividends declared and unpaid on any of the
shares of stock of LSI.
(k) LSI is not a party to any contract or agreement, and is not
subject to any other restriction, materially and adversely affecting its
business, property, or assets.
(l) LSI has good and marketable title to all assets reflected
on the balance sheet included in Exhibit "A", which assets are "as is" and
"where is".
(m) Attached as Exhibit "B", and incorporated herein by this
reference, is an accurate list of all insurance policies in effect with respect
to the business and property of LSI as of the date of this Agreement. Insurance,
or comparable coverage, shall be kept in effect until the closing date.
(n) Attached as Exhibit "C", and incorporated herein by this
reference, is an accurate list of every lease to which LSI is a party, together
with the terms of each lease.
(o) Attached as Exhibit "D", and incorporated herein by this
reference, is an accurate list of accounts and notes receivable by LSI as of the
date of this Agreement.
(p) Attached as Exhibit "E", and incorporated herein by this
reference, is an accurate itemization of the liabilities of LSI as of the date
of this Agreement.
(q) The Shareholder, officers and directors of LSI have
informed UMSI of the on-going cash flow needs of LSI in order that UMSI can
include these cash flow needs in plans for funding the on-going operations of
LSI.
(r) LSI and Asrican have been fully released from any
non-compete agreement which they, or any of them, may have entered into
previously with a corporation known as Healthwatch.
Section VI. Interim Operations; Additional Covenants of LSI and
Shareholders.
LSI and the Shareholder represent, warrant, and covenant that LSI will
not enter into any transaction, prior to the closing date, other than in the
ordinary course of business, and that LSI and the Shareholder will take any
action that is necessary to insure that LSI will not enter into any such
transactions, and in particular will not, without the prior written consent of
UMSI:
(a) Create or incur any indebtedness other than unsecured
current liabilities incurred in the ordinary course of business;
<PAGE> 4
(b) Grant or permit to arise any mortgage, security interest,
lien, or encumbrance of any kind;
(c) Sell or otherwise dispose of any of its assets other than
merchandise inventories sold in the ordinary course of business;
(d) Declare or pay any dividends, or repurchase or redeem any
of its shares, or establish a sinking fund or other reserve for such purpose;
(e) Issue, sell, or grant options for the sale of any of its
shares, whether or not previously authorized or issued;
(f) Expend any funds for capital additions or improvements
other than ordinary expenditures for maintenance, repairs, and replacements;
(g) Acquire an interest in any other business enterprise,
whether for cash or in exchange for the stock or other securities of LSI; or
(h) Increase the compensation paid to any of its officers,
directors, or employees above the level paid on the date of this Agreement or
agree to pay to any of its officers, directors or employees any bonus, severance
pay, or pension, whether under an existing compensation or deferred compensation
plan, or otherwise.
Section VII. Covenants of UMSI as to Stock. UMSI represents, covenants,
and warrants as follows:
(a) As of the date of this Agreement, UMSI is authorized to
issue, in the aggregate, twenty-five million (25,000,000) shares of common
stock, with a par value of $.001 per share, of which not more than seven million
five hundred thousand (7,500,000) shares are issued and outstanding. As of the
date of this Agreement, UMSI is authorized to issue, in the aggregate, ten
million (10,000,000) shares of preferred stock, with a par value of $.001 per
share, of which not more than three million five hundred thousand (3,500,000)
shares are issued and outstanding.
(b) The six hundred fifty thousand (637,000) shares of Series
"E" Convertible Preferred Stock of UMSI to be issued to the Shareholder in
exchange for all of the issued and outstanding shares of common stock of LSI and
the thirteen thousand (13,000) shares of Series "E" Convertible Preferred Stock
to be issued to Dr. Mark Mitnick and Dr. Steve Poling (6,500 shares each) shall
include the following rights and privileges:
(i) Each share of preferred stock shall have a stated
value of $1.00, but shall have no guaranteed dividend or interest.
(ii) The holders of preferred stock shall have the same
voting rights at all meetings of shareholders of UMSI as the holders of common
shares of stock of UMSI.
(iii) The preferred shares of stock may be converted to
shares of common stock of UMSI when any one of the following events occurs:
A. At any time after the common shares of stock
of UMSI are trading at $6.00 per share over ten (10) consecutive trading days.
<PAGE> 5
B. UMSI authorizes the conversion of the
preferred shares of stock to common shares of stock.
C. Six (6) months following the closing date,
all remaining shares of preferred stock, not already converted to shares of
common stock of UMSI, automatically shall be converted to shares of common stock
of UMSI.
D. In all cases, the number of shares of UMSI
common stock to be issued pursuant to the above described conversion options
shall be determined based upon the average bid price for shares of common stock
of UMSI over the ten (10) trading days prior to the conversion date. For
example, if the average bid price over the ten (10) trading days prior to the
conversion date is $1.00 per share then each share of preferred stock would be
converted into one (1) share of common stock; if the average bid price is $3.00
per share then three shares of preferred stock would be converted into one (1)
share of common stock.
(c) Each certificate representing a share of preferred stock of
UMSI to be issued pursuant to this Agreement shall bear on its face a legend in
substantially the following form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933. The shares have been
acquired for investment and may not be sold, transferred or
assigned in the absence of an effective registration statement for
these shares under the Securities Act of 1933 or an opinion of the
Company's legal counsel that registration is not required under
such Act."
Section VIII. Conditions Precedent to Obligations of UMSI. The
obligations of UMSI under this Agreement are subject to the following
conditions:
(a) There shall be tendered for exchange by the Shareholder at
the closing, certificates representing all of the issued and outstanding shares
of stock of LSI in a form approved by counsel for UMSI.
(b) The representations of LSI and the Shareholder contained
herein shall be true as of the closing date, and LSI and the Shareholder shall
execute and deliver to UMSI a certificate to that effect in form and substance
satisfactory to counsel for UMSI.
(c) All directors and officers of LSI shall tender their
resignations effective as of the closing date.
(d) Neither the inventories nor operating assets of LSI shall
have been substantially damaged or destroyed.
(e) UMSI shall have received an opinion of legal counsel to
UMSI, satisfactory in form and substance to UMSI, to the effect that (i) all
necessary corporate proceedings of UMSI and LSI have been duly taken to
authorize and enable the exchange of the shares as provided for herein, (ii) the
delivery of the shares of preferred stock of UMSI to the Shareholders of LSI in
exchange for their shares of all issued and outstanding
<PAGE> 6
stock of LSI being delivered to UMSI pursuant to this Agreement is exempted from
the registration requirements under the Securities Act of 1933, as amended, by
reason of the applicability of Section 4(2) of the Act, Regulation D promulgated
under Section 3(b) of the Act, or any other exemption provided for under the
Act, and (iii) the transactions herein provided for will not result in the
recognition of taxable gain to the Shareholders of LSI upon the transfer of
their stock in LSI in exchange solely for stock of UMSI, nor in the recognition
of taxable gain to UMSI, or its shareholders upon said transfer, by reason of
the transaction qualifying as a tax-free reorganization under the Internal
Revenue Code.
Section IX. Investment Intent. Each of the Shareholders represents that
the shares of stock of UMSI being acquired by him or her under this Agreement
are being acquired for investment purposes only, and not with a view to
reselling the same or dividing participation with others. Each Shareholder
represents that he or she has no present intent to resell or otherwise dispose
of all or any part of such shares.
Section X. Access to Records and Information.
(a) UMSI, and its counsel, accountants, engineers, and other
representatives, shall have the right at all times during ordinary business
hours to inspect all of the properties, books, and records of LSI, and the
Shareholders shall cooperate with and furnish to UMSI and its representatives,
all such information and documents with respect to the affairs of LSI as UMSI or
its representatives may reasonably request.
(b) The Shareholder, and his counsel, accountants, engineers,
and other representatives, shall have the right at all times during ordinary
business hours to inspect all of the properties, books, and records of UMSI, and
UMSI shall cooperate with and furnish to the Shareholder and his
representatives, all such information and documents with respect to the affairs
of UMSI as the Shareholder or his representatives may reasonably request.
Section XI. Employment of Manfred Asrican, Repayment of Advances,
Royalty Agreement and Funds to Cover Expenses of Connecticut Office. UMSI agrees
that the following actions will be taken following the closing:
(a) Manfred Asrican ("Asrican") will be elected a director of
LSI and will be appointed President of LSI for a term of three (3) years.
(b) UMSI shall reimburse Asrican the total sum of Two Hundred
Fifty-Two Thousand and No/100 Dollars ($252,000) for advances made previously by
Asrican to LSI, which sum will be paid to Asrican in installments of Seven
Thousand and No/100 Dollars ($7,000) each month during the three (3) year period
commencing on the date of closing. Payment of this total sum, plus the $50,000
sum described in Section XIV below, is the total amount which UMSI, or LSI, will
reimburse to Asrican for advances or loans he may have made previously to LSI.
(c) Ascrican shall be entitled to a royalty on all LSI sales as
follows:
(i) Five percent (5%) of the first one million in sales,
with a minimum guarantee of $5,000 per month for the first six (6) months
following closing.
(ii) Seven and a half percent (7.5%) of the second
million in sales.
<PAGE> 7
(iii) Ten percent (10%) of sales over three million
dollars ($3,000,000).
(iv) The above royalty will be paid for sales made during
the thirty-six (36) months following the date of closing; thereafter, a royalty
of five percent (5%) will be paid on all LSI sales for an additional period of
five (5) years.
(v) The terms of the royalty described above will
incorporated into a separate royalty agreement to be executed by LSI and
Ascrican and approved by UMSI.
(d) Following closing, UMSI agrees to make funds available, as
may be necessary, to cover the operating costs of the LSI office in Connecticut,
which funds shall be up to Five Thousand and No/100 Dollars ($5,000) per month.
Section XII. LSI Debt. LSI and the Shareholder agree that as of the
date of closing the only indebtedness of LSI will be debt to vendors and banks
not to exceed in the aggregate the sum of $160,000. LSI and the Shareholder also
agree that as of the date of closing there will no indebtedness or other
obligations of LSI to Dr. Mark Mitnick and Dr. Steve Poling, except delivery of
the share certificates referenced above.
Section XIII. Advances by UMSI Prior to Closing. UMSI may, but shall not
be required to, make advances or loans of funds to or for the benefit of LSI
prior to the date of closing upon terms and conditions satisfactory to UMSI and
its legal counsel.
Section XIV. Payment to Asrican (Shareholder). Upon execution of this
Agreement by all parties, UMSI shall pay to Asrican (Shareholder) the sum of
Fifty Thousand and No/100 Dollars ($50,000), which sum shall represent partial
reimbursement to Asrican of funds loaned or advanced by Asrican to LSI. In the
event this transaction is not closed on July 1, 1996, or other closing date as
extended by agreement of all the parties, due to a breach of any of the
warranties or covenants of LSI or Shareholder as set forth herein, then Asrican
and LSI shall repay immediately to UMSI the $50,000 payment described in this
Section XIV as well as any and all advances as described in Section XIII.
Section XV. Notices. All notices required or permitted to be given
under this Agreement shall be deemed duly given when delivered personally or
sent by registered or certified mail, postage prepaid, properly addressed to the
party to receive such notice, at the addresses specified above.
Section XVI. Entire Agreement. This Agreement constitutes the entire
agreement between the parties; there are no agreements, warranties, or
representations, express or implied, except those expressly set forth herein.
All agreements, representations, and warranties contained in this Agreement
shall apply as of the closing date and shall survive the closing of this
Agreement.
Section XVII. Modification. This Agreement may not be amended or
modified, except by written agreement of the parties.
Section XVIII. Binding Effect. This Agreement shall bind and inure to the
benefit of the parties and their heirs, legal representatives, successors, and
assigns.
<PAGE> 8
Section XIX. Governing Law. This agreement shall be construed under and
governed by the laws of the State of Florida, which is the state in which the
principal office of UMSI is located.
Section XX. Counterparts. This agreement may be executed in multiple
counterparts and on facsimile paper and by facsimile transmission as necessary.
When each of the parties has signed and delivered at least one such counterpart,
each counterpart will be deemed an original and, when taken together with the
other signed counterparts, shall constitute one fully executed copy of this
Agreement, which shall be binding upon and effective as to the parties according
to its terms.
IN WITNESS WHEREOF, this Agreement has been executed in one or more
duplicate original counter-parts as of the date first above written.
UNIVERSAL MEDICAL SYSTEMS, INC.
By: /s/Myron A. Baker
------------------------------
Myron A. Baker, Chairman & CEO
LIFE SCIENCES, INC.
By: /s/Manfred Asrican
------------------------------
Manfred Asrican, President
BIOMETRIX, INC., a Connecticut corporation,
By: /s/Manfred Asrican
------------------------------
Manfred Asrican, President
BIOMETRIX, INC., a New Hampshire corporation,
By: /s/Manfred Asrican
------------------------------
Manfred Asrican, President
SHAREHOLDER:
/s/Manfred Asrican
- - ----------------------------------
MANFRED ASRICAN
<PAGE> 1
EXHIBIT 3(i)(a)
FILING FEE: $75.00
BY: CORPORATION TRUST COMPANY
of NEVADA
ONE EAST FIRST STREET
RENO, NEVADA 89501
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
JAN 14 1987
SECRETARY OF STATE
/S/
NO. _____________________
ARTICLES OF INCORPORATION
OF
ASSET DEVELOPMENT CORPORATION
FIRST. The name of the corporation is
ASSET DEVELOPMENT CORPORATION
SECOND. Its principal office in the State of Nevada is located at One
East First Street, Reno, Washoe County, Nevada 89501. The name and address of
its resident agent is The Corporation Trust Company of Nevada, One East First
Street, Reno, Nevada 89501.
THIRD. The nature of the business, or objects or purposes proposed to
be transacted, promoted or carried on are:
To engage in any lawful activity and to manufacture, purchase or
otherwise acquire, invest in, own, mortgage, pledge, sell, assign and transfer
or otherwise dispose of, trade, deal in and deal with goods, wares and
merchandise and personal property of every class and description.
<PAGE> 2
FOURTH. The amount of the total authorized capital stock of the
corporation is Twenty-Five Thousand Dollars ($25,000.00) consisting of
twenty-five million (25,000,000) Common shares of stock of the par value of One
Mil ($.001) each.
FIFTH. The governing board of this corporation shall be known as
directors, and the number of directors may from time to time be increased or
decreased in such manner as shall be provided by the by-laws of this
corporation, provided that the number of directors shall not be reduced to less
than three (3), except that in cases where all the shares of the corporation are
owned beneficially and of record by either one or two stockholders, the number
of directors may be less than three (3) but not less than the number of
stockholders.
The initial number of stockholders shall be one (1).
The name and post-office address of the first board of directors, which
shall be one (1) in number, is as follows:
NAME POST-OFFICE ADDRESS
Victor E. Stewart, Atty. 220 East 65th Street
Suite 6M
New York, New York, 10021
SIXTH. The capital stock, after the amount of the subscription price,
or par value, has been paid in shall not be subject to assessment to pay the
debts of the corporation.
- 2 -
<PAGE> 3
SEVENTH. The name and post-office address of each of the incorporators
signing the articles of incorporation are as follows:
NAME POST-OFFICE ADDRESS
Richard B. Goldstein 1633 Broadway
New York, New York 10019
David J. Roche 1633 Broadway
New York, New York 10019
Kalin L. Wynn 1633 Broadway
New York, New York 10019
EIGHTH. The corporation is to have perpetual existence.
NINTH. In furtherance, and not in limitation of the powers conferred
by statute, the board of directors is expressly authorized:
Subject to the by-laws, if any, adopted by the stockholders, to make,
alter or amend the by-laws of the corporation.
To fix the amount to be reserved as working capital over and above its
capital stock paid in, to authorize and cause to be executed mortgages and liens
upon the real and personal property of this corporation.
By resolution passed by a majority of the whole board, to designate one
(1) or more committees, each committee to consist of one (1) or more of the
directors of the corporation, which, to the extent provided in the resolution or
in the by-laws of the corporation, shall have and may exercise the powers of the
- 3 -
<PAGE> 4
board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it. Such committee or committees shall have such name
or names as may be stated in the by-laws of the corporation or as may be
determined from time to time by resolution adopted by the board of directors.
When and as authorized by the affirmative vote of stockholders holding
stock entitling them to exercise at least a majority of the voting power given
at a stockholders' meeting called for that purpose, or when authorized by the
written consent of the holders of at least a majority of the voting stock issued
and outstanding, the board of directors shall have power and authority at any
meeting to sell, lease or exchange all of the property and assets of the
corporation, including its good will and its corporate franchises, upon such
terms and conditions as its board of directors deem expedient and for the best
interests of the corporation.
TENTH. Meetings of stockholders may be held outside the State of
Nevada, if the by-laws so provide. The books of the corporation may be kept
(subject to any provision contained in the statutes) outside the State of Nevada
at such place or places as may be designated from time to time by the board of
directors or in the by-laws of the corporation.
ELEVENTH. This corporation reserves the right to amend, alter, change or
repeal any provision contained in the
- 4 -
<PAGE> 5
articles of incorporation, in the manner now or hereafter prescribed by statute,
or by the articles of incorporation, and all rights conferred upon stockholders
herein are granted subject to this reservation.
WE, THE UNDERSIGNED, being each of the incorporators herinbefore named,
for the purpose of forming a corporation pursuant to the General Corporation Law
of the State of Nevada, do make and file these articles of incorporation, hereby
declaring and certifying that the facts herein stated are true, and accordingly
have hereunto set our hands this 12th day of January, 1987.
/s/ Richard B. Goldstein
------------------------
Richard B. Goldstein
/s/ David J. Roche
------------------------
David J. Roche
/s/ Kalin L. Wynn
------------------------
Kalin L. Wynn
STATE OF NEW YORK )
) SS.
COUNTY OF NEW YORK )
On this 12th day of January, 1987, before me, a Notary Public, personally
appeared Richard B. Goldstein, David J. Roche and Kalin L. Wynn, who severally
acknowledged that they executed the above instrument.
/s/
------------------------
Richard P.
Notary Public
- 5 -
<PAGE> 1
EXHIBIT 3(i)(b)
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA CERTIFICATE OF AMENDMENT
NOV O3 1995 OF THE ARTICLES OF INCORPORATION
No. 2.59-87
/s/ Dean Heller OF
DEAN HELLER, SECRETARY
OF STATE JOE FRANKLIN PRODUCTIONS, INC.
I, the undersigned, Gary Paperman, being respectively the President and
Secretary of Joe Franklin Productions, Inc., do hereby certify:
1. The name of the corporation is Joe Franklin Productions, Inc.
2. The Articles of Incorporation of Joe Franklin Productions, Inc.
was filed by the Secretary of State of the State of Nevada on January 14, 1987.
3. The Certificate of Incorporation is amended to change the name of
the corporation from Joe Franklin Productions, Inc. to Universal Medical
Systems, Inc.. Paragraph FIRST of the Certificate of Incorporation is
hereby amended to read as follows:
FIRST: The name of the corporation is Universal Medical Systems, Inc.
4. This Amendment to the Articles of Incorporation of Joe Franklin
Productions, Inc. was authorized by the unanimous vote of the Board of Directors
followed by the affirmative vote of a majority of holders of the issued and
outstanding shares entitled to vote thereon at a meeting of the shareholders.
<PAGE> 2
IN WITNESS WHEREOF, the undersigned has executed and signed the
Certificate this 25th day of October, 1995.
/s/ Gary Paperman, PRESIDENT
----------------------------
Gary Paperman, President
/s/ Gary Paperman, SECRETARY
----------------------------
Gary Paperman, Secretary
-2-
<PAGE> 3
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK)
On this 26th day of October, 1995 before me personally came Gary Paperman
to me known and who, being duly sworn by me did depose and say that he is the
President and Secretary of Joe Franklin Productions, Inc., a Nevada corporation,
the corporation described in and which executed the foregoing instrument; that
he resides in Douglaston, New York 11362; that he knows the seal of said
corporation; that the seal affixed to the foregoing instrument is such
corporation seal; that it was so affixed by order of the Board of Directors of
said corporation; and that he signed his name thereto by like order.
/s/
-----------------------------------
Notary Public
RONALD J.
NOTARY PUBLIC, State of New York
No. 30-5441625
Qualified in Nassau County
Commission Expires 9/30/96
-3-
<PAGE> 1
EXHIBIT 3(i)(c)
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA CERTIFICATE OF AMENDMENT
APR 15 1996 OF THE ARTICLES OF INCORPORATION
OF
DEAN HELLER SECRETARY
OF STATE UNIVERSAL MEDICAL SYSTEMS, INC.
/s/ Dean Heller
No. 259-87
Pursuant to Nevada Revised Statutes Sections 78.385 and 78.390, the
undersigned, Myron A. Baker and Dennis D. Cole, President and Secretary
respectively of Universal Medical Systems, Inc., do hereby certify:
1. The name of the corporation is Universal Medical Systems, Inc.
(the "Corporation").
2. The Articles of Incorporation for the Corporation were filed with
the Secretary of State of the State of Nevada on January 14, 1987.
3. The following amendment of the Articles of Incorporation was
adopted by the directors and shareholders of the Corporation on February 2,
1996, in the manner prescribed by Section 78.390 of the Nevada Revised Statutes.
4. The number of shares of the corporation outstanding at the time of
adoption was 5,171,146; and the number of shares entitled to vote on the
amendment was 5,171,146.
5. The designation and number of outstanding shares of each class
entitled to vote on the amendment as a class were as follows:
<TABLE>
<CAPTION>
Class Number of Shares
----- ----------------
<S> <C>
Common 5,171,146
</TABLE>
6. The number of shares voted for, or consenting to, the amendment
was 3,497,582; and the number of shares voted against the amendment was zero
(0). The amendment was approved and adopted by the affirmative vote, or written
consent, of 67.64% of all issued and outstanding shares of stock of the
Corporation.
7. Amendment of the Articles of Incorporation of the Corporation:
Paragraph FOURTH of the Articles of Incorporation is hereby amended to read as
follows:
"FOURTH. The total number of shares of all classes of stock which
this corporation is authorized to issue is as follows:
A. This corporation is authorized to issue Twenty-Five
Million (25,000,000) shares of Common Stock of a par value of $.001 (one mil)
each; and
<PAGE> 2
B. This corporation is authorized to issue Ten Million
(10,000,000) shares of Preferred Stock of a par value of $.0001 (one/tenth mil)
each.
C. The board of directors of this corporation is
authorized to prescribe, fix or alter the classes, series, designations
preferences, voting powers, limitations, restrictions and relative rights of
each class or series of stock of the corporation."
8. This Amendment to the articles of incorporation of Universal
Medical Systems, Inc was authorized by the unanimous vote of the board of
directors followed by the affirmative vote, or written consent, of a majority of
holders of the issued and outstanding shares entitled to vote thereon.
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Amendment this 22nd day of January, 1996.
/s/ Myron A. Baker
-------------------------------
Myron A. Baker
Chairman, CEO and President
/s/ Dennis D. Cole
-------------------------------
Dennis D. Cole
Vice President and Secretary
STATE OF FLORIDA )
) ss:
COUNTY OF PINELLAS )
The foregoing instrument was acknowledged before me this 22nd day of
January, 1996, by Myron A. Baker and Dennis D. Cole, President and Secretary
respectively of Universal Medical Systems, Inc., a Nevada corporation, who are
personally known to to and who did not take an oath.
/s/ Emily A. Baber
---------------------------
Notary Public
Printed, typed or stamped name: /s/ Emily A. Baber
My commission expires: [NOTARY SEAL] Emily A. Baber
My Commission CC303871
Expires Aug. 01, 1997
Bonded by ANB
800-852-5878
<PAGE> 1
EXHIBIT 3(ii)
AMENDMENT IN THE ENTIRETY
OF
BY-LAWS
OF
UNIVERSAL MEDICAL SYSTEMS, INC.
A NEVADA CORPORATION
ARTICLE I
OFFICES
SECTION 1. PRINCIPAL OFFICE.
The principal office of this Corporation shall be at: 13825 Icot
Boulevard, Suite 613, Clearwater, Florida 34620.
SECTION 2. ADDITIONAL OFFICE.
The Corporation may also maintain an office or offices at such other
place or places within or without the State of Florida, as the Board of
Directors may from time to time designate.
SECTION 3. CHANGE OF OFFICE.
The principal office of the Corporation may from time to time be changed
and altered by Resolution by the Board of Directors.
ARTICLE II
MEETING OF SHAREHOLDERS
SECTION 1. ANNUAL MEETINGS.
The Annual meeting of the holders of common stock of this Corporation
shall be held on the last Monday in October of each year provided the same does
not fall on
<PAGE> 2
a holiday, and if it does, then the following Tuesday, commencing with October
27, 1997.
SECTION 2. SPECIAL MEETINGS.
Special meetings of the Shareholders be held when directed by the
President or the Board of Directors, or when requested in writing by the
Shareholders who hold at ten percent (10%) of the outstanding stock having the
right and entitled to vote at such meeting, or as provided by law. A meeting
requested by Shareholders shall be called for a date not more than seventy (70)
days after the request is made; provided that notice therefor shall be given not
less than ten (10) nor more than sixty (60) days before the meeting date. The
call for the meeting shall be issued by the Secretary or by the President,
unless the President, Board of Directors or Shareholders requesting the calling
of the meeting shall designate another person so to do. A Notice for a
Shareholder Special Meeting shall include the date, time, place and purpose(s)
of such meeting.
SECTION 3. PLACE.
Meetings of Shareholders may be held at a place either within or without
the State of Nevada. Unless otherwise directed by the Board of Directors,
meetings of the Shareholders shall be held at the principal offices of the
Corporation in the State of Florida. The place at which a meeting is to be held
shall be designated in the Notice of the Meeting.
SECTION 4. NOTICE OF ANNUAL MEETING.
Notice in writing shall be given by the Secretary or by the Assistant
Secretary or by the Chief Executive Officer, if one has been named, or by the
President or any Vice
<PAGE> 3
President of all meetings of Shareholders, to the holders of the stock having
the right and entitled to vote at such meeting, and said notice shall be mailed
to each Shareholder at such Shareholder's address as shown upon the stock
transfer books, or other records of the Corporation. Such notice shall state the
date, the time, and the place and purpose of said meeting, and must be mailed
not less than ten (10) nor more than sixty (60) days before the date for such
meeting. If any Shareholder shall transfer any of his stock after notice, it
shall not be necessary to notify the transferee.
SECTION 5. WAIVER OF NOTICE AND VALIDATION.
By written consent of any Shareholder either before, at, or after such
meeting, the minimum time required for giving notice of such meeting may be
waived as to such Shareholder. Any Shareholder may waive notice of any meeting
either before, at, or after such meeting.
SECTION 6. RECORD DATE.
For purposes of determining Shareholders of record who have the right to
and are entitled to notice of and to vote at the meeting of Shareholders or any
adjournment thereof or entitled to receive payment of any distribution dividend
or in order to make a determination of Shareholders for any other purpose the
Board of Directors may close the stock transfer books of the Corporation for a
period not in excess of seventy (70) days. If the stock transfer books shall be
closed for the purpose of determining Shareholders entitled to notice of, or to
vote at, a meeting of Shareholders, such books shall be closed at least ten (10)
days immediately preceding such meeting. In lieu of closing the stock transfer
books, the Board of Directors may fix, in advance, a date as the record date for
any such determination of Shareholders, such date in any
<PAGE> 4
case to be not more than seventy (70) days prior to the date on which the
particular action requiring such determination of Shareholders is to be taken.
In no event may a record date fixed by the Board of Directors be a date
preceding the date upon which the resolution fixing the record date is adopted.
If the stock transfer books are not closed and no record date is fixed for the
determination of Shareholders entitled to notice or to vote at a meeting of
Shareholders or Shareholders entitled to receive payment of a distribution, the
date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such distribution is adopted, as
the case may be, shall be the record date for such determination of
Shareholders. When a determination of Shareholders entitled to vote at any
meeting of Shareholders has been made as provided in this Section, such
determination shall apply to any adjournment thereof, unless the Board of
Directors fixes a new record date under this section for the adjourned meeting;
or, such meeting is adjourned to a date more than 120 days after the date fixed
for the original meeting.
SECTION 7. VOTING.
Each Shareholder having the right and entitled to vote at a meeting of
Shareholders shall be entitled, at such meeting and upon each proposal presented
at such meeting, to one vote for each share of stock having the right and
entitled to vote at such meeting, recorded in his name on the books of the
Corporation, on the record date fixed as provided in Section 6 of this Article,
or if no such record date was fixed, on the day of the meeting. Shares of its
own stock owned by another Corporation the majority of the voting stock of which
is owned or controlled by this Corporation and shares of this Corporation's own
stock held by this Corporation in a
<PAGE> 5
fiduciary capacity shall not be voted, directly or indirectly, or counted as
outstanding for the purpose of any Shareholder's vote.
SECTION 8. OMISSION OF MEETING.
If the Annual Meeting of the Shareholders be not held as herein provided
on the date herein specified, the election of Directors may be held at any
special meeting thereafter called pursuant to these By-Laws.
SECTION 9. ORGANIZATION.
Meetings of the Shareholders shall be presided over by the Chief
Executive Officer, or, if he is not present, then by the President, or, if he is
not present, by a Vice President, if a Vice President has been elected, or, if
neither the President or Vice President is present, by a Chairman to be chosen
by a majority of the Shareholders entitled to vote who are present in person or
by proxy at the meeting. The Secretary of the Corporation, or in his absence
an Assistant Secretary, shall act as Secretary of every meeting, but if neither
is present, the meeting may choose any person to act as Secretary of the
meeting.
At all meetings of Shareholders, the order of business may be generally
as follows:
1. Calling meeting to order.
2. Proof of the giving of Notice of Meeting or Waiver thereof, and
determination of quorum.
3. Reading of Minutes of previous meeting.
4. Reports of Officers.
5. Reports of Committees.
6. Unfinished business.
<PAGE> 6
7. New business, election of Directors, if Annual meeting.
8. Adjournment.
SECTION 10. ADJOURNMENT.
Any Shareholders' meeting at which a quorum is present in person or by
proxy, may be adjourned from day to day or from time to time by the vote of the
holders of the majority of the stock having the right and entitled to vote at
such meeting. In case there be no quorum present on the day fixed for any
Shareholders' meeting, by vote of the holders of a majority of the stock present
in person or by proxy having the right and entitled to vote thereat, such
meeting may be adjourned from time to time until a quorum be obtained, or may be
adjourned sine die. At any adjourned meeting at which a quorum shall be present
in person or by proxy, any business may be transacted which might have been
transacted at the original meeting. It shall not be necessary to give any notice
of the date, time or place of an adjourned meeting or of the business to be
transacted thereat if such is announced at the meeting before an adjournment is
taken; provided, that if a new record date is or must be fixed then notice of
the adjourned meeting shall be given.
SECTION 11. QUORUM.
The presence of the holders of at least a majority of the outstanding
stock having the right and entitled to vote at any meeting, either in person or
by proxy, shall be necessary to constitute a quorum at any Shareholders'
meeting. If a quorum is present, the affirmative vote of a majority of the
shares represented at a meeting and entitled to vote on the subject matter shall
be the act of the shareholders. Shares of its own stock owned by another
Corporation the majority of the voting stock of which
<PAGE> 7
is owned or controlled by this Corporation, and shares of the Corporation's own
stock held by this Corporation in a fiduciary capacity shall not be counted as
outstanding for the purpose of any quorum.
SECTION 12. PROXIES.
At any meeting of Shareholders or any adjournment thereof, any
Shareholder of record having the right and entitled to vote thereat may be
represented and vote by a proxy appointed by an instrument, in writing,
including a telegram, cablegram, photographic, photostatic or equivalent
reproduction of an instrument, signed by the Shareholder or his
attorney-in-fact. Before any such written proxy is voted, it shall be filed with
the Secretary. In the event that any such instrument shall designate two or more
persons to act as proxies, a majority of such persons present at the meeting,
or, if only one be present, that one, shall have all of the powers conferred by
the instrument upon all the persons so designated unless the instrument shall
otherwise provide; but if the proxy holders present at a meeting are equally
divided as to the right and manner of voting in any particular case, then voting
of shares covered by such proxy shall be prorated. Any question as to the
validity, sufficiency or effectiveness of any such written instrument purporting
to appoint a proxy or proxies, shall be submitted to the Shareholders present or
represented at said meeting, and the vote of the holders of a majority of the
stock entitled to vote thereat shall be conclusive upon all such questions. No
such written instrument dated more than eleven months before the date fixed for
the meeting or meetings at which it is offered, shall be accepted or effectual
to permit the proxy therein named to vote at such meeting or any adjournment
thereof, unless such instrument, on its face, shall
<PAGE> 8
name a longer period of time for which it is to remain in force. If the
appointment instrument expressly provides, any proxy holder may appoint, in
writing, a substitute to act in his place.
ARTICLE III
DIRECTORS
SECTION 1. FUNCTION.
The business of this Corporation shall be managed and its corporate
powers exercised by the Board of Directors.
SECTION 2. NUMBER.
The Board of Directors shall consist of four members. The provisions of
this Section relating to the number of Directors constituting the Board of
Directors maybe amended, changed or altered.
SECTION 3. QUALIFICATION.
All of the members of the Board of Directors shall be natural persons at
least 18 years of age. It shall not be necessary that a Director be a
Shareholder of the Corporation.
SECTION 4. ELECTION AND TERM.
The Directors shall be chosen at the Annual Meeting of the Shareholders
by a plurality of the votes cast at such election. The term of office of such
Directors shall be for one year, from the date of the Annual Meeting of
Shareholders at which elected until the date of the next succeeding Annual
Meeting of the Shareholders and such Directors shall hold office until the
election and qualification of their successors. The Board of Directors may elect
by a vote of a majority of its members, and from its own
<PAGE> 9
number, a Chairman of the Board, to preside at its meetings.
SECTION 5. VACANCIES.
Any vacancy in the Board of Directors, or committee of the Board of
Directors of the Corporation, caused by an increase in the number of the
Directors or number of Directors serving on a committee, or by death,
resignation, disqualification or other cause, may be filled by the remaining
Director or Directors in office, although less than a quorum, by the affirmative
vote of a majority thereof, and the person so chosen to fill any such vacancy
shall hold office until the next Annual meeting of the Shareholders, and until
his successor shall have been elected and shall have been qualified.
SECTION 6. REMOVAL.
Any Director shall be subject to removal with or without cause at any
time by vote of a majority of the stock represented and having the right and
entitled to vote at any duly convened meeting of Shareholders at which a quorum
is present.
SECTION 7. ANNUAL AND REGULAR MEETINGS.
Immediately after the Annual meeting of the Shareholders, there shall be
held the Annual meeting of the Board of Directors to elect Officers of the
Corporation for the ensuing year, and to transact other business brought before
the meeting. Regular meetings of the Board of Directors shall be those held at
specified intervals during the year. Regular meetings, if held, shall be held on
such stated date, time and place, as the Directors shall direct, or in the
absence of such Directors, on such stated date, time and place as may be
directed by the Chairman of the Board of Directors, the Chief Executive Officer
if one has been named, and if not, then by the President. In
<PAGE> 10
case the day appointed for a regular meeting falls upon a legal holiday, such
meeting shall be held on the next succeeding business day, at the same time and
place.
SECTION 8. SPECIAL MEETINGS.
Special meetings of the Board of Directors may be called at any time by
the Chief Executive Officer, if one has been named and if not, then by the
President, Chairman of the Board of Directors or by a majority of the Directors.
SECTION 9. PLACE OF MEETING.
Any meeting of the Board of Directors may be held either within or
without the State of Florida. Unless otherwise directed by the Board of
Directors, the Annual meeting of the Board of Directors shall be held at the
principal offices of the Corporation in the State of Florida. Regular and
Special Meetings of the Board of Directors shall be held at said principal
offices of the Corporation in the State of Florida, or at such other place as
may be appointed by the vote or written consent of a majority of the Directors,
or in the absence of such vote or written consent, at such place as may be
appointed by the Officers or Directors calling such meeting.
SECTION 10. OMISSION OF MEETING.
If the Annual meeting of the Board of Directors be not held as herein
provided on the date herein specified, the election of Officers may be held at
any meeting held thereafter pursuant to these By-Laws.
SECTION 11. ADJOURNMENTS.
Any meeting of the Board of Directors at which a quorum is present, may
be adjourned from day to day or from time to time, or place to place by a vote
of a majority of the Directors present and voting at such meeting. In case there
be no
<PAGE> 11
quorum present on the day fixed for any meeting of the Board of Directors, by
vote of a majority of the Directors present and voting at such meeting, the same
may be adjourned from time to time and place to place until a quorum be
obtained, or may be adjourned sine die. At any adjourned meeting at which a
quorum shall be present, any business may be transacted which might have been
transacted at the original meeting. It shall not be necessary to give notice of
the date, time and place of an adjourned meeting or of the business to be
transacted thereat other than by announcement at the meeting at which the
adjournment is taken. If no such announcement is made at the meeting then notice
shall be required.
SECTION 12. QUORUMS.
The presence of a majority of all the Directors shall be necessary at any
meeting of the Board of Directors to constitute a quorum to transact business.
The act of a majority of the Directors present and voting at a meeting when a
quorum is present shall be the act of the Board of Directors.
SECTION 13. NOTICE OF MEETINGS.
Notice of the time, date and place of a Special Meeting of the Board of
Directors, in writing, shall be given to each Director by the Chairman of the
Board of Directors, or, Secretary or by the Assistant Secretary or by the Chief
Executive Officer, President or any Vice President of all the meetings of the
Board of Directors. Said Notice may be given by telegraphic message, or by
leaving such written notice in an envelope addressed to him or her at his or her
residence or place of business, or such notice may be given by mailing the same
to such Director at his or her address as shown on the records of the
Corporation, and such notice, if served on such Director as
<PAGE> 12
herein provided other than by mail, must be served at least two days before the
time appointed for the meeting. Such notice shall state the date, time, place
and purpose(s) of the meeting; provided, regular meetings of the Board of
Directors may be held without notice of the date, time, place or purpose of such
meetings.
SECTION 14. WAIVER OF NOTICE AND VALIDATION.
By written consent of any Director, either before at or after such
meeting, the minimum time required for giving notice of such meeting, or any
other matter required to be contained in any written notice of a meeting, may be
waived as to such Director. Any Director may waive notice of any meeting either
before, at or after such meeting. Attendance of a director at a meeting shall
constitute a wavier of notice of such meeting and a waiver of any and all
objections to the place, time and date of such meeting or the manner in which it
was called or convened, except when a Director states, at the beginning of the
meeting or promptly upon arrival at the meeting any objection to the transaction
of business because the meeting is not lawfully called or convened.
SECTION 15. EXECUTIVE COMMITTEE.
The Board of Directors shall have the power, by resolution adopted by a
majority of all the Directors of the Corporation, to designate from among its
members an executive committee, which committee may have and may exercise all of
the powers of the Board of Directors, except such committee shall not have the
powers to approve or recommend to Shareholders actions or proposals required by
law to be approved by Shareholders; fill vacancies on the Board of Directors or
any committee thereof; adopt, amend or repeal the By-Laws; authorize or
approve the reacquisition
<PAGE> 13
of shares unless pursuant to a general formula or method specified by the Board
of Directors; authorize or approve the issuance or sale or contract for the sale
of shares; or, determine the designation and relative rights, preferences and
limitations of a voting group except the Board of Directors may authorize a
committee (or a senior executive officer of the Corporation) to do so within
limits specifically prescribed by the Board of Directors; unless powers of the
executive committee are expressly limited by resolution adopted by the Board of
Directors. The executive committee shall keep regular minutes of all business
transacted by it, and of all actions taken in connection with the affairs of the
Corporation, and said business and actions shall be subject to revision,
election, and approval by the Board of Directors of the Corporation; provided,
that the Board of Directors shall have no power to revise, alter or disapprove
any lawful action of the executive committee to the prejudice of third parties.
SECTION 16. OTHER COMMITTEES.
The Board of Directors may also appoint from among its members such other
committees as the Board of Directors may determine, which committees shall in
each case consist of no less than two (2) Directors who serve at the pleasure of
the Board of Directors, and which committees shall have such powers and duties
as shall from time to time be prescribed by the Board of Directors. A majority
of the members of any committee may fix its rules of procedure. All action by
any committee shall be reported to the Board of Directors at a meeting
succeeding such action and shall be subject to revision, alteration, and
approval by the Board of Directors; provided that the Board of Directors shall
have no power to revise, alter or disapprove any lawful
<PAGE> 14
action of any committee to the prejudice of third parties. The Board of
Directors, by resolution, may designate one or more directors as alternate
members of any such committee who may act in the place and stead of any absent
member or members at any meeting of such committee.
SECTION 17. ACTION TAKEN WITHOUT FORMAL MEETING.
Anything herein to the contrary not withstanding, the Board of Directors
or the executive committee, may take any action required or permitted to be
taken by them without a meeting if written consent to said action, signed by all
of the members of the Board of Directors or executive committee, as the case may
be, is filed in the minutes of the proceedings of the Directors or committee
prior to the taking of such action.
SECTION 18. ADVISORY BOARD.
The Board of Directors of this Corporation may appoint individuals who
may, but need not be, Directors, officers, or employees of this Corporation to
serve as members of an Advisory Board of Directors of one or more operating
divisions or subsidiaries of this Corporation and may fix fees or compensation
for attendance at meetings of any such Advisory Boards. The members of any such
Advisory Board may adopt and from time to time may amend rules and regulations
for the conduct of their meetings and shall keep minutes of their meetings which
minutes shall be submitted to the Board of Directors of this Corporation. The
term of office of any member of the Advisory Board of Directors shall be at the
pleasure of the Board of Directors of this Corporation and shall expire the day
of the next succeeding Annual Meeting of the Shareholders of this Corporation.
The function of any such Advisory
<PAGE> 15
Board of Directors shall be to advise the Board of Directors with respect to the
affairs of the operating divisions and subsidiaries of this Corporation to which
it is appointed.
SECTION 19. TITLES.
The Board of Directors of this Corporation may from time to time confer
on the employees of this Corporation, including employees of operating divisions
and subsidiaries of this Corporation, or discontinue, the title of Chief
Executive Officer, President, Chief Operating Officer, Vice President,
Secretary, Chief Financial Officer, Treasurer and any other titles deemed
appropriate. The designation of any such official titles for employees so
assigned shall not be permitted to conflict in any way with any executive or
administrative authority established from time to time by this Corporation. Any
employee so designated as an officer of an operating division or subsidiary
shall have authority, responsibilities, and duties with respect to his operating
division or subsidiary corresponding to those normally vested in the comparable
officer of this Corporation by these By-Laws, subject to such limitations as may
be imposed by the Board of Directors of this Corporation.
SECTION 20. COMPENSATION OF DIRECTORS.
The Board of Directors shall fix the compensation of the members of the
Board Of Directors.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS, ELECTION AND TERMS OF OFFICE.
The principal officers of the Corporation shall be a President, a
Secretary and a Treasurer, and from time to time, the Board of Directors may
elect a Chief Executive
<PAGE> 16
Officer, Chief Operating Officer, one or more Vice Presidents, Chief Financial
Officer and such Assistant Secretaries, Assistant Treasurers and such other
officer, agents and employees as it may deem proper. One person may hold more
than one office in the Corporation. All of said officers shall be chosen
annually by the Board of Directors at the Annual Meeting thereof by a majority
of the votes cast and shall hold their respective offices from the date of the
Annual Meeting of the Board of Directors at which elected until the date of the
next succeeding Annual Meeting of the Board of Directors and such officers shall
hold their respective offices until their respective successors are chosen and
qualified in their stead. In its discretion, the Board of Directors may delegate
to the Chief Executive Officer or President the power to appoint one or more
officers or assistant officers and may leave unfilled for any period of time any
office of the Corporation. The Board of Directors shall have the power to create
and to fill by appointment, for such term as they may see fit, such additional
Assistant Secretaries, Assistant Treasurers and other officers as it may see
fit, and to prescribe such duties for them to perform as may be deemed
necessary. The Board of Directors may also appoint or authorize the appointment
of such agents and factors and prescribe or authorize the prescribing of such
duties for them to perform as to the Board may deem advisable.
SECTION 2. REMOVAL.
The Chief Executive Officer, President, any Vice President, the Secretary
and the Treasurer, and all other officers and agents of the Corporation shall be
subject to removal at any time, with or without cause, by the affirmative vote
of a majority of the Directors present at any duly convened meeting of the Board
of Directors at which
<PAGE> 17
a quorum is present. All officers, agents and employees, other than those
elected or appointed by the Board of Directors, shall hold office at the
discretion of the committee or the officer appointing them. Any officer or
assistant officer, if appointed by another officer, may be removed, at any time,
with or without cause, by the appointing officer.
SECTION 3. VACANCIES.
Any vacancy occurring in the office of the Chief Executive Officer,
President, any Vice President, the Secretary or the Treasurer of the Corporation
shall be filled by the Board of Directors for the remainder of the year and
until their successors are duly elected and qualified.
SECTION 4. CHIEF EXECUTIVE OFFICER.
The Board of Directors may create the office known as Chief Executive
Officer. The Chief Executive Officer shall be the highest ranking officer of the
Corporation and shall have the powers of the President as set out in these
By-Laws, and such other powers and duties as established from time to time by
the Board of Directors and/or as provided by Law. In the event that the Board
of Directors of this Corporation shall create the office of Chief Executive
Officer, then the President shall be the Chief Operating Officer of the
Corporation and shall have the powers and perform such duties as may be
delegated to him by the Board of Directors or in the absence of such action by
the Board, then by the Chief Executive Officer. In case of the death, absence or
inability of the Chief Executive Officer to act, except as may be expressly
limited by action of the Board of Directors, and unless and until the Board of
Directors has appointed a new Chief Executive Officer, the President shall
perform the duties
<PAGE> 18
and exercise the powers of the Chief Executive Officer following such death of
the Chief Executive Officer or during the absence or inability of the Chief
Executive Officer to act.
SECTION 5. PRESIDENT.
Unless the Board of Director's create the office of Chief Executive
Officer, the President shall be the Chief Executive Officer of the Corporation
subject to the directions of and limitations imposed by the Board of Directors,
and shall perform all the duties and have all the power usually pertaining and
attributed by law or otherwise to the office of the President of the Corporation
except as may be expressly limited by the Board of Directors. The President
shall coordinate and supervise the activities of all other officers of the
Corporation. The President shall from time to time call special meetings of the
Board of Directors when he deems it necessary to do so; or, whenever the
requisite number of members of the Board of Directors shall request him, in
writing, so to do. He shall preside at all meetings of the Shareholders. The
President, unless some other person is thereunto expressly authorized by
resolution of the Board of Directors, shall sign all certificates of stock,
execute all contracts, deeds, notes, mortgages, bonds and other instruments and
papers in the name of the Corporation and on its behalf, subject, however, to
the control when exercised of the Board of Directors. He shall, at each Annual
Meeting of the Shareholders, present a report of the business and affairs of the
Corporation, and shall from time to time, whenever requested, report to the
Board all matters within his knowledge which the interest of the Corporation may
require be brought to the notice of the Directors. The President shall have the
power to employ and terminate the employment of all such
<PAGE> 19
subordinate officers, agents, clerks and other employees not herein provided to
be elected by the Board, as he may find necessary to transact the business of
the Corporation, and shall have the right to fix the compensation thereof.
SECTION 6. VICE PRESIDENTS.
The Vice Presidents shall have the powers and perform such duties as may
be delegated to them respectively, by the Board of Directors or in the absence
of such action by the Board, then by the President. In case of the death,
absence or inability of the President to act, except as may be expressly limited
by action of the Board of Directors, and unless and until the Board of Directors
has appointed a President Pro Tempore, any Vice President may, and any one of
them expressly designated by the Board of Directors shall perform the duties and
exercise the powers of the President following such death of the President or
during the absence or inability of the President to act; and, concurrently with
the President, shall at all times have the power to sign all certificates of
stock, execute all contracts, deeds, notes, mortgages, bonds and other
instruments and documents in the name of the Corporation on its behalf which the
President is authorized to do, but subject to the control and authority at all
times of the Board of Directors.
SECTION 7. PRESIDENT PRO TEMPORE.
In case of the death, absence or inability of the President to take
action, the Board of Directors, in its discretion, may appoint a President Pro
Tempore who shall exercise the powers and duties of the President until the
return of the President or until the President is again able to act, or until a
successor to the President has been duly elected.
<PAGE> 20
SECTION 8. SECRETARY.
The Secretary shall keep the Minutes of all meetings of the Shareholders
and the Board of Directors in a book or books to be kept for such purposes and,
also, when so requested, the Minutes of all meetings of committees in a book or
books to be kept for such purposes. He shall attend to giving and serving of all
notices, and he shall have charge of all books and papers of the Corporation,
except those hereinafter directed to be in the charge of the Treasurer, or
except as otherwise expressly directed by the Board of Directors. He shall keep
the stock certificate book or books. The Secretary shall be the custodian of the
seal of the Corporation. The Secretary shall sign with the President, or with a
Vice President, all certificates of stock as the Secretary of this Corporation
and as such Secretary, affix or cause to be affixed thereto the seal of the
Corporation. The Secretary may sign as Secretary of the Corporation, with the
President, or with a Vice President, in the name of the Corporation and on its
behalf, all contracts, deeds, mortgages, bonds, notes and other papers,
instruments and documents, except as otherwise expressly provided by the Board
of Directors, and as such Secretary shall affix the seal of the Corporation
thereto. Under the direction of the Board of Directors or the President, the
Secretary shall perform such other duties as may be prescribed by the Board of
Directors or the President.
SECTION 9. ASSISTANT SECRETARY.
The Assistant Secretary shall have such powers and perform such duties as
may be delegated to him by the Board of Directors or the President and, in case
of the
<PAGE> 21
death, absence or inability of the Secretary to act, whether temporary or not,
he may exercise the powers and duties of the Secretary. The Assistant Secretary
may, together with the President or with a Vice President, sign certificates of
stock, contracts and other instruments and documents involving the carrying on
of the business of the Corporation which the Secretary is authorized to sign,
which power shall be concurrent with the power of the Secretary.
SECTION 10. TREASURER.
The Treasurer shall have the custody of all the funds and securities of
the Corporation, except as may be otherwise provided by the Board of Directors,
and he shall make such disposition of the funds and other assets of the
Corporation as he may be directed by the Board of Directors. He shall keep or
cause to be kept a record of all money received and paid out, and all vouchers
and receipts given therefor, and all other financial transactions of this
Corporation. He shall have general charge of all financial books, vouchers and
papers belonging to the Corporation or pertaining to its business. He shall
render an account of the Corporation's funds at each Annual Meeting of the Board
of Directors and at such other meetings as may be requested, and he shall make
an Annual statement of the finances of this Corporation. If at any time there is
a person designated as Comptroller of the Corporation, the Treasurer may
delegate to such Comptroller such duties and powers as to the Treasurer may deem
proper. The Treasurer shall perform such other duties as are usually incident by
law or otherwise to the office of the Treasurer, and as he may be directed or
required by the Board of Directors or the President.
SECTION 11. ASSISTANT TREASURER.
<PAGE> 22
The Assistant Treasurer shall have such powers and shall perform such
duties as may be delegated to him by the Board of Directors or the President or
the Treasurer; and in case of the death, absence or inability of the Treasurer
to act, he may exercise the powers and duties of the Treasurer.
SECTION 12. SUBORDINATE OFFICERS.
In all cases where the duties of subordinate officers and the duties of
agents or employees of the Corporation are not specifically prescribed by the
By-Laws or resolution of the Board of Directors, such officers, agents and
employees shall obey the orders and instructions of the President. The President
may, with or without the consent of the Board of Directors, suspend or remove
any subordinate officer, agent or clerk or other servant of the Corporation who
has not been elected to such office by the Board of Directors.
ARTICLE V
FUNDS OF THE CORPORATION
SECTION 1. DEPOSIT.
All monies of the Corporation or under its charge deposited in any bank
or other place of deposit shall be deposited to the credit of the Corporation in
its corporate name, unless otherwise expressly directed by the Board of
Directors.
SECTION 2. EVIDENCE OF INDEBTEDNESS.
All bonds, notes, mortgages and other evidences of indebtedness of the
Corporation shall be signed by the President, or by a Vice President or by the
President Pro Tempore, in case such has been appointed and all such instruments
signed by other than the President shall also be attested by the Secretary or
the
<PAGE> 23
Assistant Secretary, and no such instrument shall be valid or binding without
being so signed.
SECTION 3. CHECKS.
All checks or warrants drawn upon funds of the Corporation shall be in
such form and signed and countersigned as the Board of Directors may by
resolution direct.
ARTICLE VI
SEAL
The seal of this Corporation shall be circular and shall have inscribed
thereon the name of the Corporation and such other words and figures and in such
design as may be prescribed by the Board of Directors, and may be facsimile,
engraved, printed or an impression, or other type seal.
ARTICLE VII
STOCK
SECTION 1. AUTHORIZED ISSUANCE.
This Corporation may issue the shares of stock authorized by its Articles
of Incorporation and none other.
SECTION 2. CERTIFICATES OF STOCK.
Certificates of stock shall be numbered and registered in the order in
which they are issued. They shall be signed by the President or Vice President,
and by the Secretary or Assistant Secretary, and the seal of the Corporation
shall be affixed thereto. All stock certificates shall be bound in a book, and
shall be issued in consecutive order therefrom, and on the margin of the stub of
each certificate shall be entered in the name of the person to whom such
certificate is issued, the number
<PAGE> 24
of shares issued, and the date thereof.
SECTION 3. ISSUANCE OF STOCK.
The stock of the Corporation may be issued for consideration consisting
of any tangible or intangible property or benefit to the Corporation, including
cash, promissory notes, services performed, promises to perform services
evidenced by a written contract or other securities of the Corporation.
SECTION 4. LIEN ON STOCK.
The Corporation shall have a first lien on all of the shares of its
capital stock at any time issued and outstanding and upon all distributions
declared on the same for any indebtedness of the respective Shareholders to the
Corporation. Any stock certificate issued by the Corporation shall have
inscribed on the reverse side thereof the following notation, viz:
"This stock certificate is issued subject to a lien held by the
Corporation issuing the same for any indebtedness owed by the
owner of the stock evidenced hereby to the Corporation."
SECTION 5. FORM OF STOCK CERTIFICATE.
It shall not be necessary to set forth in any stock certificate the
provisions of the Certificate of Incorporation showing the class or classes of
stock authorized to be issued and the distinguishing characteristics thereof,
nor the provisions of any By-Laws, nor of any Agreement adopted by the
Corporation, restricting the transfer of shares of stock. Those provisions may
either (a) be summarized on the face or back of the certificate, or (b) be
incorporated by reference made on the face or back of the certificate, the
reference stating that a copy of the provisions, certified by an officer of the
Corporation, will be furnished by the Corporation or its transfer agent, without
<PAGE> 25
costs, to and upon request of the certificate holder, or party directly in
interest.
SECTION 6. TRANSFER.
(a) Transfers of stock shall be made only on the books of the Corporation
by the holder, in person, or by an attorney-in-fact under a power of attorney
duly executed by such Shareholder and filed with the Secretary with written
direction for the transfer, upon surrender of the original certificate for such
shares and upon the payment of all indebtedness by such Shareholder to the
Corporation, and the possession of a Certificate of Stock (as between the holder
and the Corporation) shall not be regarded as evidence of ownership of the same
in any person other than the registered owner until the transfer thereof is duly
made on the books of the Corporation. No transfer of stock shall be valid
against this Corporation until it shall have been effected and registered upon
the Corporation's books in the manner herein provided.
(b) On the transfer of any shares, each certificate shall be receipted
for and such receipt shall be attached to the margin or stub of such certificate
in the certificate book. When such certificate is delivered by the Corporation
by registered mail or certified mail, the return receipt of such registered or
certified mail shall be sufficient as the receipt herein provided for. All
certificates exchanged or surrendered to the Corporation shall be cancelled by
the Secretary or Assistant Secretary and affixed in their original places in the
certificate book, and no new certificates shall be issued until the certificates
for which it is exchanged have been cancelled and returned to their original
place in said book, except as provided in Section 7, of this Article pertaining
to lost or destroyed certificates.
<PAGE> 26
(c) If any holder of any stock of the Corporation shall have entered into
an agreement with any other holder of any stock of the Corporation or with the
Corporation, or both, relating to a sale or sales or transfer of any shares of
stock of the Corporation, or wherein or whereby any restriction or condition is
imposed or placed upon or in connection with the sale or transfer of any shares
of stock of the Corporation, and if a duly executed or certified copy thereof
shall have been filed with the Secretary of the Corporation, none of the shares
of stock covered by such agreement or to which it relates, of any such
contracting Shareholder, shall be transferred upon the books of the Corporation
until there has been filed with the Secretary of the Corporation, a certificate
of compliance with such agreement, and any evidence, of any kind or quality, of
compliance with the terms of such agreement which the Secretary deems
satisfactory or sufficient shall be conclusive upon all parties interested;
provided, however, that neither the Corporation nor any Director, officer,
employee or transfer agent thereof shall be liable for transferring or effecting
or permitting the transfer of any such shares of stock contrary to or
inconsistent with the terms of any such agreement, in the absence of proof of
willful disregard thereof or fraud, bad faith or gross negligence on the part of
the party to be charged; provided, further that the Certificate of the
Secretary, under the seal of the Corporation, bearing the date of its issuance
by the Secretary, certifying that such an agreement is or is not on file with
the Secretary, shall be conclusive as to such fact so certified for a period of
five days from the date of such certificate, with respect to the rights of any
innocent purchaser or transferee for value of any such shares without actual
notice of the existence of any such restrictive agreement.
<PAGE> 27
SECTION 7. LOST CERTIFICATES.
Any Shareholder claiming a certificate of stock to be lost or destroyed
shall make affidavit or affirmation of the fact and the fact that he is the
owner and holder thereof, and give notice of the loss or destruction of same in
such manner as the Board of Directors may require, and shall give the
Corporation a bond of indemnity in form, amount and with one or more sureties
satisfactory to the Board of Directors, which amount shall be at least double
the par value of all the shares of stock represented by such certificate,
payable as may be required by the Board of Directors to protect the Corporation
and any person injured by the issuance of the new certificate from any liability
or expense which it or they may be put to or incur by reason of the original
certificate remaining outstanding whereupon the President or Vice President and
the Secretary or Assistant Secretary may cause to be issued a new certificate in
the same tenor as the one alleged to be lost or destroyed, but always subject to
approval of the Board of Directors.
SECTION 8. STOCK TRANSFER BOOK.
The Corporation shall keep at its office in the State of Florida, or in
the office of its transfer agent or registrar wherever located, a book (or
books, if more than one kind, class or series of stock is outstanding), to be
known as the Stock Transfer Book, containing the names of all Shareholders
alphabetically arranged, with the address of every Shareholder, showing the
number of shares of each kind, class and/or series of stock held of record by
each Shareholder. If the stock book is kept in the offices of the transfer
agent, the Corporation shall keep at its office in the State of Florida copies
of the stock lists prepared from the stock transfer book and sent to it from
<PAGE> 28
time to time by the transfer agent. The stock transfer book or books shall show
the current status, but if the transfer agent is located somewhere else, a
reasonable time, shall be allowed for transit of mail. The stock transfer books
or other records of the Corporation indicating an alphabetical list of the names
of all Shareholders entitled to notice of such meeting, arranged by voting group
with the address of, and the number, class and series, if any, of the shares
held by each, shall be available for inspection by any Shareholder for a period
of ten (10) days prior to the meeting or such shorter time as exists between the
record date and the meeting and continuing through the meeting at the
Corporation's principal address, place identified in the meeting notice; or, at
the office of the Corporation's transfer agent or registrar. Provided that the
shareholder demands in good faith and for a proper purpose; and, describes with
reasonable particularity his purpose and the records he desires to inspect and,
the records are directly connected to his purpose, a Shareholder, his agent or
attorney is entitled, on written demand, to inspect the Shareholder list during
regular business hours and at his expense during the period it is available for
inspection. The original stock transfer books shall be prima facie evidence as
to who are the Shareholders entitled to examine such list or transfer books or
to vote at any meeting of Shareholder.
ARTICLE VIII
FISCAL YEAR
SECTION 1. DESIGNATION.
The fiscal year of the Corporation shall, by resolution, be determined by
the Board of Directors.
<PAGE> 29
ARTICLE IX
AMENDMENT OF BY-LAWS
SECTION 1. BY THE DIRECTORS.
These By-Laws may be replaced, altered, amended, added to or modified by
a majority vote of the Directors present and voting at any Annual or Regular
Meeting of the Board of Directors at which a quorum is present, without notice;
or at any Special Meeting of the Board of Directors at which a quorum is present
if notice that a proposal would be presented at the Special Meeting for repeal,
alternation, amendment, adding to, or modifying the By-Laws is included in the
notice of the meeting, unless waived in writing by a majority of the Directors.
ARTICLE X
AMENDMENT TO ARTICLES OF INCORPORATION
The Articles of Incorporation may be amended by a majority vote of the
Shareholders of the Corporation present at a special or general meeting of the
Shareholders at which a quorum is present, called for such expressed purpose,
after proper notice of said meeting has been given to all Shareholders in
writing, or without said notice in the event that majority of the Shareholders
of the Corporation shall waive said notice in writing. The Articles of
Incorporation may be amended by the Board of Directors without Shareholder
action to the extent provided by Law.
<PAGE> 30
I HEREBY CERTIFY that the foregoing is a full, true and correct copy of
the Amendment in the Entirety of the By-Laws of UNIVERSAL MEDICAL SYSTEMS, INC.
----------------------------
Myron A. Baker, as President
----------------------------
Dennis D. Cole, as Secretary
Dated: February ____, 1997.
<PAGE> 1
EXHIBIT 4(a)
NUMBER UNIVERSAL MEDICAL SYSTEMS, INC. SHARES
UM 0498 INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
UM0000498 07760
COMMON STOCK SEE REVERSE FOR
CERTAIN DEFINITIONS
CUSIP 913734 10 9
THIS CERTIFIES that
0000010256
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, PAR VALUE $.001 PER
SHARE, OF
UNIVERSAL MEDICAL SYSTEMS, INC.
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this Certificate properly endorsed. This Certificate
is not valid unless countersigned and registered by the Transfer Agent and
Registrar.
IN WITNESS WHEREOF, said corporation has caused this Certificate to be signed
in facsimile by its duly authorized officers, and its Corporate Seal to be
affixed in facsimile.
Dated:
07760000258 RGX
/s/ /s/
Secretary [UNIVERSAL MEDICAL SYSTEMS, INC. SEAL] President
COUNTERSIGNED AND REGISTERED
AMERICAN STOCK TRANSFER & TRUST COMPANY
(NEW YORK, NY) TRANSFER AGENT
BY AND REGISTRANT
/s/
AUTHORIZED SIGNATURE
<PAGE> 2
UNIVERSAL MEDICAL SYSTEMS, INC.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -_____ Custodian_______
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right under Uniform Gifts to
of survivorship and not as Minors
tenants in common
ACT _________
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received, _________ hereby sell, assign, and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_______________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated ________________________
___________________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME AS WRITTEN UPON THE FACE OF THIS
CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER
Signature(s) Guaranteed:
____________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY
AN ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION
PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
<PAGE> 1
EXHIBIT 4(b)
UNIVERSAL MEDICAL SYSTEMS, INC.
CERTIFICATE OF DESIGNATION
SERIES C CONVERTIBLE PREFERRED STOCK
Pursuant to Section 78.195
of the Nevada Revised Statutes
The following resolution was duly adopted by the Board of Directors of
Universal Medical Systems, Inc., a Nevada corporation (the "Corporation"),
pursuant to provisions of Section 78.195 of the Nevada Revised Statutes, on
October 5, 1996:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Corporation by Article Four of the Corporation's Articles of
Incorporation, as amended, and pursuant to the provisions of Section 78.195 of
the Nevada Revised Statutes, a Series of Preferred Stock of the Corporation be,
and it hereby is, created out of the authorized but unissued shares of the
capital stock of the Corporation, such series to be designated Series C
Convertible Preferred Stock (the "Series C Preferred Stock"), to consist of
1,500,000 shares, par value $.0001 per share, of which the preferences and
relative and other rights, and the qualifications, limitations or restrictions
thereof, shall be (in addition to those set forth in the Corporation's Articles
of Incorporation, as amended) as follows:
1. CERTAIN DEFINITIONS. Unless the context otherwise requires, the
terms defined in this paragraph 1 shall have, for all purposes of this
resolution, the meanings herein specified.
COMMON STOCK. The term "Common Stock" shall mean all shares
now or hereafter authorized of the Corporation's presently authorized class of
Common Stock, par value $.001 per share, which has the right (subject always to
prior rights of any class or series of Preferred Stock) to participate in the
distribution of the assets and earnings of the Corporation without limit as to
the per share amount.
CONVERSION DATE. The term "Conversion Date" shall have the
meaning set forth in paragraph 4 below.
CURRENT MARKET PRICE. The term "Current Market Price" shall
have the meaning set forth in paragraph 4 below.
EFFECTIVE DATE. The term "Effective Date" shall mean the
effective date of the filing of this Certificate of Designation with the
Secretary of State of the State of Nevada.
ISSUE DATE. The term "Issue Date" shall mean, as to any
share of Series C Preferred Stock, the date such share is issued by the
Corporation to any holder thereof.
<PAGE> 2
JUNIOR STOCK. The term "Junior Stock" shall mean any class
or series of stock (including Common Stock) of the Corporation not entitled to
receive any dividends in any dividend period unless all dividends, if any,
required to have been paid or declared and set apart for payment on shares of
preferred stock shall have been so paid or declared and set apart for payment,
and not entitled to receive any assets upon liquidation, dissolution or winding
up of the affairs of the Corporation until all preferred stock shall have
received the entire amount to which such stock is entitled upon such
liquidation, dissolution or winding up.
PARITY STOCK. The term "Parity Stock" shall mean any class
or series of stock of the Corporation entitled to receive payment of dividends,
if any, on a parity basis with the Series C Preferred Stock or entitled to
receive assets upon liquidation, dissolution or winding up of the affairs of the
Corporation on a parity basis with the Series C Preferred Stock. Parity Stock
for the purpose of entitlement to receive assets upon liquidation, dissolution
or winding up of the affairs of the Corporation include, but is not limited to,
Series A, Series B, Series D and Series E Preferred Stock
SENIOR STOCK. The term "Senior Stock" shall mean any class
or Series of stock of the Corporation authorized by the Board of Directors
ranking senior to the Series C Preferred Stock in respect of the right to
receive dividends or in respect of the right to participate in any distribution
upon liquidation, dissolution or wind up of the affairs of the Corporation.
SERIES A PREFERRED STOCK. The term "Series A Preferred
Stock" shall mean the 1,000,000 shares of Series A Convertible Preferred Stock
issued, or to be issued, in connection with a Section 505 offering of shares of
preferred stock of the Corporation and the related Certificate of Designation
for said shares of preferred stock. Holders of Series A Preferred Stock are
entitled to receive a ten percent (10%) cumulative (but non-compounding)
dividend on the liquidation amount of their preferred shares, payable
semi-annually in arrears out of earnings legally available therefore, and are
entitled to a liquidation preference up to the full amount of $5.00 per share,
plus any accrued but unpaid dividends. Holders of Series A Preferred Stock do
not have any voting rights, except with respect to certain matters required by
Nevada General Corporation Law. As of the date of the adoption of this
Certificate of Designation by the Board of Directors of the Corporation, no
shares of Series A Preferred Stock have been issued.
SERIES B PREFERRED STOCK. The term "Series B Preferred
Stock" shall mean the 1,500,000 shares of Series B Convertible Preferred Stock
authorized by the Board of Directors of the Corporation of which 1,000,000
shares were issued in connection with the acquisition by Corporation of Medical
High Technology International, Inc. The holders of Series B Preferred Stock are
not entitled to receive any cash dividend, unless and until a dividend is
declared by the Board of Directors for holders of Series B Preferred Stock out
of any funds legally available therefor. Holders of Series B Preferred Stock are
entitled to a liquidation preference up to the full amount of $3.00 per share,
plus any declared but unpaid dividends. The Series B Preferred Stock carry the
same per share voting rights as Common Stock.
<PAGE> 3
SERIES D PREFERRED STOCK. The term "Series D Preferred
Stock" shall mean the 1,000,000 shares of Series D Convertible Preferred Stock
authorized by the Board of Directors of the Corporation on April 1, 1996. The
holders of Series D Preferred Stock
SERIES E PREFERRED STOCK. The term "Series E Preferred
Stock" shall mean the 750,000 shares of Series E Convertible Preferred Stock
authorized by the Board of Directors of the Corporation. The holders of Series E
Preferred Stock are not entitled to receive any cash dividend, unless and until
a dividend is declared by the Board of Directors for holders of Series E
Preferred Stock out of any funds legally available therefor. Holders of Series E
Preferred Stock are entitled to a liquidation preference up to the full amount
of $1.00 per share, plus any declared but unpaid dividends. The Series E
Preferred Stock carry the same per share voting rights as Common Stock.
STATED VALUE. The Stated Value of each share of Series C
Preferred Stock shall be $1.00.
2. DIVIDENDS. The Series C Preferred Stock shall entitle the holder
of record thereof as of any record date therefor to receive, when and as
declared by the Board of Directors, out of any funds legally available therefor,
cash dividends on an annual compounded basis equal to twenty percent (20%) of
the Subscription Price per annum, such dividends to be payable semi-annually in
arrears on each January 1 and July 1; however, after six (6) months following
the date of issuance of the shares of Series C Preferred Stock the dividend rate
shall be adjusted to an annual compounded basis equal to ten percent (10%) of
the subscription price. The dividend may be paid in equity at the exclusive
option of the holder.
3. DISTRIBUTIONS UPON LIQUIDATION, DISSOLUTION OR WINDING UP. In the
event of any voluntary or involuntary liquidation, dissolution or other winding
up of the affairs of the Corporation, before any distribution or payment shall
be made to the holders of Junior Stock, the holders of the Series C Preferred
Stock shall be entitled to be paid the Stated Value per share with respect to
all outstanding Series C Preferred Stock owned by them, plus any declared and
unpaid dividends thereon, if any. Such amount shall be paid in cash or in
property taken at its fair value, or both, at the election of the Board of
Directors. If such payment shall have been made in full to the holders of the
Series C Preferred Stock and to the holders of any other Senior Stock or Parity
Stock, the remaining assets and funds of the Corporation shall be distributed
among the holders of Junior Stock, according to their respective shares. If,
upon any such liquidation, dissolution or other winding up of the affairs of the
Corporation, the net assets of the Corporation distributable among the holders
of all outstanding shares of the Series C Preferred Stock and holders of all
outstanding shares of any Senior Stock or Parity Stock shall be insufficient to
permit the payment in full to such holder of the preferential amounts to which
they are entitled, then the entire net assets of the Corporation shall be
distributed pro-rata among the holders of all outstanding shares of the Series
D, Series B. Series A and Series E Preferred Stock, and the holders of all
outstanding shares of Parity Stock ratably in proportion to the full amounts to
which they would otherwise respectively be entitled.
<PAGE> 4
4. CONVERSION RIGHTS.
a. OPTIONAL CONVERSION. A holder of shares of Series
C Preferred Stock may convert all or part of such shares into shares of the
Common Stock of the Corporation at any time beginning six (6) months after the
date of issuance: A holder of Series C Preferred Stock may extend the conversion
period for an additional period of six (6) months by giving written notice to
the Corporation of such election to extend the conversion period.
b. AUTOMATIC CONVERSION. If not previously converted
by the holder, all shares of Series C Preferred Stock automatically will be
converted to shares of Common Stock of the Corporation at the end of six (6)
months after the date of issuance, or at the end of twelve (12) months if the
holder exercises the right to extend the conversion period.
c. CONVERSION PROCEDURE. In all cases of conversion
of shares of Series C Preferred Stock into shares of Common Stock, the number of
shares of Common Stock to be issued in exchange for shares of Series C Preferred
Stock shall be one share of Common Stock for each share of Series C Preferred
Stock (one for one 1:1 conversion ratio).
d. DELIVERY OF SHARES. The Corporation shall not be
obligated to issue to any holder of shares of Series C Preferred Stock
certificates evidencing the shares of Common Stock issuable upon any conversion
unless certificates evidencing the shares of Series C Preferred Stock are
delivered to the Corporation or its transfer agent, or unless such holder
provides to the Corporation or its transfer agent reasonable assurances as to
the loss, theft or destruction of such certificates and agrees with respect
thereto to indemnify the Corporation and its transfer agent and, if requested,
provides such bond as reasonably may be requested by the Company and its
transfer agent. The holder of any shares of Series C Preferred Stock may
exercise the conversion rights described above by (i) delivering to the
Corporation a conversion notice in writing setting forth the number of shares of
Series C Preferred Stock to be converted, (ii) surrendering to the Corporation
or its transfer agent the certificate or certificates for the shares of Series C
Preferred Stock to be converted, (iii) furnishing appropriate endorsements and
transfer documents if required by the Corporation or its transfer agent and (iv)
paying any transfer or similar tax if required. Such date is referred to herein
as the "Conversion Date". The person in whose name the certificate of
certificates for Common Stock are to be issued shall be deemed to have become a
holder of record of such Common Stock on the applicable Conversion Date. Upon a
surrender of shares of Series C Preferred Stock that are converted in part, the
Corporation or its transfer agent shall issue to the holder a new certificate
representing the unconverted portion of the shares of Series C Preferred Stock
surrendered.
e. FRACTIONAL INTERESTS. The Corporation will not
issue fractional shares of Common Stock upon conversion of shares of Series C
Preferred Stock. Instead the Corporation, in its discretion, may either pay a
cash adjustment in respect of such fractional interest or round up to the next
whole number the number of shares of Common Stock to be issued upon conversion.
<PAGE> 5
f. TAXES. The Corporation shall pay all documentary,
stamp, transfer or other transactional taxes attributable to the issuance or
delivery of shares of Common Stock upon conversion of any Series C Preferred
Stock; provided that the Corporation shall not be required to pay any taxes
which may be payable in respect of any transfer involved in the issuance or
delivery of any certificate for such Series C Preferred Stock in a name other
than that of the holder of the Series C Preferred Stock in respect of which such
shares are being issued.
g. RESERVE SHARES. The Corporation shall reserve at
all times so long as any Series C Preferred Stock remains outstanding, free from
preemptive rights, out of either or both of its treasury stock or its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the Series C Preferred Stock, sufficient shares of Common Stock to
provide for the conversion of all outstanding Series C Preferred Stock.
h. GOVERNMENT APPROVALS. If any shares of Common
Stock to be reserved for the purpose of conversion of Series C Preferred Stock
require registration with or approval of any governmental authority under any
Federal or state law before such shares may be validly issued or delivered upon
conversion, then the Corporation will in good faith and as expeditiously as
possible endeavor to secure such registration or approval, as the case may be.
If, and so long as, any Common Stock into which the Series C Preferred Stock is
then convertible is listed on any national securities exchange, the Corporation
will, if permitted by the rules of such exchange, list and keep listed on such
exchange, upon official notice of issuance, all shares of such Common Stock
issuable upon conversion.
i. VALID ISSUE. All shares of Common Stock which may be
issued upon conversion of the Series C Preferred Stock will, upon issuance by
the Corporation, be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens and charges with respect to the issuance thereof; and
the Corporation shall take no action which will cause a contrary result.
j. RESTRICTIVE LEGEND. Each certificate representing a
share of Series C Preferred Stock shall bear on its face a legend in
substantially the following form:
"The shares represented by this certificate
have not been registered under the Securities
Act of 1933. The shares have been acquired
for investment and may not be sold,
transferred or assigned in the absence of an
effective registration statement for these
shares under the Securities Act of 1933 or
an opinion of legal counsel that registration
is not required under such Act."
5. VOTING RIGHTS. The Series C Preferred Stock shall carry the
same per share voting rights as Common Stock.
<PAGE> 6
6. TWO-THIRDS VOTE TO CHANGE RIGHTS, PREFERENCES, AND POWERS. So
long as any shares of Series C Preferred Stock are outstanding, the Corporation
shall not, without the affirmative vote at a meeting (the notice of which shall
state the general character of the matters to be submitted thereat), or the
written consent with or without a meeting of the holders of at least 66 and 2/3%
(two-third percent) of the then outstanding shares of Series C Preferred Stock:
a. increase the authorized amount of Series C Preferred
Stock; or
b. amend, alter or repeal any of the rights,
preferences or powers of the outstanding Series C Preferred Stock fixed herein
or determined by the Board of Directors for any shares of Series C Preferred
Stock as herein authorized; so as adversely to affect the rights, preferences or
powers of the Series C Preferred Stock or its holders, or
c. sell, lease or convey all, or substantially all, of
the property or business of the Corporation; or
d. merge or consolidate with or into any other
corporation or corporations, unless the corporation surviving or resulting from
such merger or consolidation will have after such merger or consolidation no
class of stock either authorized or outstanding ranking prior to the Series C
Preferred Stock, except as regards the Series A, Series B, Series D or Series E
Preferred Stock or Senior Stock referred to herein, as to dividends or assets
except the same number of shares of Series C Preferred Stock with the same
rights, preferences and powers as the Series C Preferred Stock, and unless each
holder of Series C Preferred Stock at the time of such merger or consolidation
and in connection therewith shall continue to hold (in the case of a merger in
which the Corporation is the surviving corporation) his shares of Series C
Preferred Stock, or (in the case of a consolidation or a merger of the
Corporation into some other corporation) shall receive the same number of shares
of Series C Preferred Stock, with the same rights, preferences and powers, of
such resulting corporation; or
e. amend or repeal any of the provisions of this
paragraph 6.
7. NO PRE-EMPTIVE RIGHTS. No holder of the Series C Preferred Stock
of the Corporation shall be entitled, as of right, to purchase or subscribe for
any part of the unissued stock of the Corporation or of any stock of the
Corporation to be issued by reason of any increase of the authorized capital
stock of the Corporation, or to purchase or subscribe for any bonds,
certificates of indebtedness, debentures or other securities convertible into or
carrying options or warrants to purchase stock or other securities of the
Corporation or to purchase or subscribe for any stock of the Corporation
purchased by the Corporation or by its nominee or nominees, or to have any other
pre-emptive rights now or hereafter defined by the laws of the State of Nevada.
Except, in the event securities of the Corporation are issued for consideration
less than that paid by the holder of Series C Preferred Stock for the shares of
Series C Preferred Stock issued to the holder, similar securities as those
issued by the Corporation shall be made available to the holder upon the same
terms and condtions as issued to the third party or parties, in order that the
holder's percentage interest of the issued and outstanding shares of the
Corporation shall not be
<PAGE> 7
negatively diluted. This exception shall not apply to securities issued to
non-officer employees of the Corporation.
8. EXCLUSION OF OTHER RIGHTS. Except as may otherwise by required by
law, the shares of Series C Preferred Stock shall not have any preferences or
relative, participating, optional or other special rights, other than those
specifically set forth in this resolution (as such resolution may be amended
from time to time) and in the Articles of Incorporation of the Corporation, as
amended, and the shares of Series C Preferred Stock shall have no pre-emptive or
subscription rights.
9. HEADINGS OF SUBDIVISIONS. The headings of the various subdivisions
hereof are for convenience of reference only and shall not affect the
interpretation of any of the provisions hereto.
10. SEVERABILITY OF PROVISIONS. If any right, preference or limitation
of the Series C Preferred Stock set forth in this resolution (as such resolution
may be amended from time to time) is invalid, unlawful or incapable of being
enforced by reason of any rule of law or public policy, all other rights,
preferences and limitations set forth in this resolution (as so amended) which
can be given effect without the invalid, unlawful or unenforceable right,
preference or limitation shall, nevertheless, remain in full force and effect,
and no right, preference or limitation herein set forth shall be deemed
dependent upon any other such right, preference or limitation unless expressly
so stated herein.
11. STATUS OF RE-ACQUIRED SHARES. Shares of Series C Preferred Stock
which have been issued and converted or re-acquired in any manner shall (upon
compliance with any applicable provisions of the laws of the State of Nevada)
have the status of authorized and unissued shares of Preferred Stock issuable in
series, but undesignated as to series, and may be redesignated and reissued by
resolution of the Board of Directors of this Corporation.
IN WITNESS WHEREOF, UNIVERSAL MEDICAL SYSTEMS, INC. has caused this
Certificate of Designation to be made and signed by its Chairman, CEO and
President and by its Secretary, respectively, this 5th day of October, 1996.
/s/ Myron A. Baker
- - ---------------------------
Myron A. Baker
Chairman, CEO and President
/s/ Dennis D. Cole
- - ---------------------------
Dennis D. Cole
Secretary
<PAGE> 1
EXHIBIT 4(c)
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
[PICTURE]
NUMBER SHARES
212
SEE LEGENDS ENDORSED ON REVERSE SIDE
SERIES "C" CONVERTIBLE
UNIVERSAL MEDICAL SYSTEMS, INC. PREFERRED STOCK
AUTHORIZED CAPITAL STOCK
25,000,000 COMMON SHARES $.001 PAR VALUE
10,000,000 PREFERRED SHARES $.0001 PAR VALUE
THIS CERTIFIES THAT ____________________________________________is the owner of
________________________________________ fully paid and non-assessable Shares of
THE PREFERRED SHARES OF UNIVERSAL MEDICAL SYSTEMS, INC.
transferable only on the books of the Corporation by the holder hereof in person
or by duly authorized Attorney upon surrender of this Certificate properly
endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and to be sealed with the Seal of the
Corporation this _____________ day of ________________ A.D. 19 ________________.
/s/ /s/
- - ----------------------------- -------------------------------
SECRETARY PRESIDENT
[CORPORATE SEAL]
<PAGE> 2
FOR VALUE RECEIVED, _______________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
________________________________________________________________________________
__________________________________________________________________________Shares
represented by the within Certificate and do hereby irrevocably constitute and
appoint
________________________________________________________________________Attorney
to transfer the said Shares on the books of the within named Corporation with
full power of substitution in the premises.
Dated ______________________ 19____.
In presence of
_______________________________
_______________________________
NOTICE. THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE. IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
The shares represented by this certificate
have not been registered under the Securities
Act of 1933. The shares have been acquired
for investment and may not be sold,
transferred or assigned in the absence of an
effective registration statement for these
shares under the Securities Act of 1933 or an
opinion of the Company's legal counsel that
registration is not required under such Act.
This corporation is authorized to issue more than one class of stock or more
than one series of any class. The voting powers, designations, preferences,
limitations, restrictions and relative rights of the various classes of stock or
series thereof and the qualifications, limitations or restrictions of such
rights are prescribed or fixed by the board of directors of the corporation.
Pursuant to Nevada Revised Statutes 78.195, the corporation shall furnish to any
stockholder, upon request and without charge, a copy of any statement or summary
setting forth in full or summarizing the voting powers, designations,
preferences, limitations, restrictions and relative rights of the various
classes of stock of the corporation or series thereof. A copy of such statement
or summary may be obtained from the Secretary of the corporation.
<PAGE> 1
EXHIBIT 4(d)
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA UNIVERSAL MEDICAL SYSTEMS, INC.
SEP 24 1996 CERTIFICATE OF DESIGNATION
No. C259-87
/s/ Dean Heller SERIES D CONVERTIBLE PREFERRED STOCK
DEAN HELLER, SECRETARY
OF STATE Pursuant to Section 78.195
of the Nevada Revised Statutes
The following resolution was duly adopted by the Board of Directors of
Universal Medical Systems, Inc., a Nevada corporation (the "Corporation"),
pursuant to provisions of Section 78.195 of the Nevada Revised Statutes, on
April 1, 1996:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Corporation by Article Four of the Corporation's Articles of
Incorporation, as amended, and pursuant to the provisions of Section 78.195 of
the Nevada Revised Statutes, a Series of Preferred Stock of the Corporation be,
and it hereby is, created out of the authorized but unissued shares of the
capital stock of the Corporation, such series to be designated Series D
Convertible Preferred Stock (the "Series D Preferred Stock"), to consist of
1,000,000 shares, par value $.0001 per share, of which the preferences and
relative and other rights, and the qualifications, limitations or restrictions
thereof, shall be (in addition to those set forth in the Corporation's Articles
of Incorporation, as amended) as follows:
1. Certain Definitions. Unless the context otherwise requires, the
terms defined in this paragraph 1 shall have, for all purposes of this
resolution, the meanings herein specified.
Common Stock. The term "Common Stock" shall mean all shares
now or hereafter authorized of the Corporation's presently authorized class of
Common Stock, par value $.001 per share, which has the right (subject always to
prior rights of any class or series of Preferred Stock) to participate in the
distribution of the assets and earnings of the Corporation without limit as to
the per share amount.
Conversion Date. The term "Conversion Date" shall have the
meaning set forth in paragraph 4 below.
Current Market Price. The term "Current Market Price" shall
have the meaning set forth in paragraph 4 below.
Effective Date. The term "Effective Date" shall mean the
effective date of the filing of this Certificate of Designation with the
Secretary of State of the State of Nevada.
Issue Date. The term "Issue Date" shall mean, as to any
share of Series D Preferred Stock, the date such share is issued by the
Corporation to any holder thereof.
<PAGE> 2
Junior Stock. The term "Junior Stock shall mean any class
or series of stock (including Common Stock) of the Corporation not entitled to
receive any dividends in any dividend period unless all dividends, if any,
required to have been paid or declared and set apart for payment on shares of
preferred stock shall have been so paid or declared and set apart for payment,
and not entitled to receive any assets upon liquidation, dissolution or winding
up of the affairs of the Corporation until all preferred stock shall have
received the entire amount to which such stock is entitled upon such
liquidation, dissolution or winding up.
Parity Stock. The term "Parity Stock" shall mean any class
or series of stock of the Corporation entitled to receive payment of dividends,
if any, on a parity basis with the Series D Preferred Stock or entitled to
receive assets upon liquidation, dissolution or winding up of the affairs of the
Corporation on a parity basis with the Series D Preferred Stock. Parity Stock
for the purpose of entitlement to receive assets upon liquidation, dissolution
or winding up of the affairs of the Corporation include, but is not limited to,
Series A and Series B Preferred Stock
Senior Stock. The term "Senior Stock" shall mean any class
or Series of stock of the Corporation authorized by the Board of Directors
ranking senior to the Series D Preferred Stock in respect of the right to
receive dividends or in respect of the right to participate in any distribution
upon liquidation, dissolution or wind up of the affairs of the Corporation.
Series A Preferred Stock. The term "Series A Preferred
Stock" shall mean the 1,000,000 shares of Series A Convertible Preferred Stock
issued, or to be issued, in connection with a Section 505 offering of shares of
preferred stock of the Corporation and the related Certificate of Designation
for said shares of preferred stock. Holders of Series A Preferred Stock are
entitled to receive a ten percent (10%) cumulative (but noncompounding) dividend
on the liquidation amount of their preferred shares, payable semiannually in
arrears out of earnings legally available therefore, and are entitled to a
liquidation preference up to the full amount of $5.00 per share, plus any
accrued but unpaid dividends. Holders of Series A Preferred Stock do not have
any voting rights, except with respect to certain matters required by Nevada
General Corporation Law.
Series B Preferred Stock. The term "Series B Preferred
Stock" shall mean the 1,500,000 shares of Series B Convertible Preferred Stock
authorized by the Board of Directors of the Corporation of which 1,000,000
shares were issued in connection with the acquisition by Corporation of Medical
High Technology International, Inc. The holders of Series B Preferred Stock are
not entitled to receive any cash dividend, unless and until a dividend is
declared by the Board of Directors for holders of Series B Preferred Stock out
of any funds legally available therefor. Holders of Series B Preferred Stock are
entitled to a liquidation preference up to the full amount of $3.00 per share,
plus any declared but unpaid dividends. The Series B Preferred Stock carry the
same per share voting rights as Common Stock.
Series C Preferred Stock. As of the date of the
authorization of this Certificate of Designation by the Board of Directors of
the Corporation, no certificate of designation for Series C Preferred Stock has
been authorized by the Board of Directors of the Corporation.
<PAGE> 3
Stated Value. The Stated Value of each share of Series
D Preferred Stock shall be $1.00.
2. Dividends. The Series D Preferred Stock shall entitle the holder
of record thereof as of any record date therefor to receive, when and as
declared by the Board of Directors, out of any funds legally available therefor,
cash dividends on an annual compounded basis equal to ten percent (10%) of the
Subscription Price per annum, such dividends to be payable semi-annually in
arrears on each January 1 and July 1.
If the dividends on the Series D Preferred Stock for any dividend period
shall not have been declared upon or paid or set apart in full for the Series D
Preferred Stock for any semiannual period, the aggregate deficiency shall be
cumulative, and shall be fully paid or set apart for payment before any
dividends shall be paid upon or set apart for payment for any class of Junior
Stock of the Corporation. No dividends shall be paid upon, or declared and set
apart for, any shares of Series D Preferred Stock or any shares of any other
class or series of stock of the Corporation if the Board of Directors of the
Corporation shall have failed to declare and pay in full all accumulated
dividends required to be paid to the holders of all outstanding shares of the
Series D Preferred Stock for all past semi-annual periods.
For each semi-annual period, the Board of Directors shall declare, to the
extent legally permissible, the dividend to which holders of shares of Series D
Preferred Stock are entitled, including all accumulated dividends. In the event
that full dividends are not paid or made available to the holders of all
outstanding shares of Series D Preferred Stock, and funds available shall be
insufficient to permit payment in full to all such holders of the preferential
amounts to which they are then entitled, the entire amount available for payment
of dividends shall be distributed pro-rata among the holders of the Series D
Preferred Stock and all Parity Stock ratable in proportion to the full amount to
which they would otherwise be respectively entitled.
3. Distributions Upon Liquidation, Dissolution or Winding Up. In the
event of any voluntary or involuntary liquidation, dissolution or other winding
up of the affairs of the Corporation, before any distribution or payment shall
be made to the holders of Junior Stock, the holders of the Series D Preferred
Stock shall be entitled to be paid the Stated Value per share with respect to
all outstanding Series D Preferred Stock owned by them, plus any declared and
unpaid dividends thereon, if any. Such amount shall be paid in cash or in
property taken at its fair value, or both, at the election of the Board of
Directors. If such payment shall have been made in full to the holders of the
Series D Preferred Stock and to the holders of any other Senior Stock or Parity
Stock, the remaining assets and funds of the Corporation shall be distributed
among the holders of Junior Stock, according to their respective shares. If,
upon any such liquidation, dissolution or other winding up of the affairs of the
Corporation, the net assets of the Corporation distributable among the holders
of all outstanding shares of the Series D Preferred Stock and holders of all
outstanding shares of any Senior Stock or Parity Stock shall be insufficient to
permit the payment in full to such holder of the preferential amounts to which
they are entitled, then the entire net assets of the Corporation shall be
distributed pro-rata among the holders of all outstanding shares of the Series D
Preferred Stock, the holders of all outstanding shares of Series A Preferred
Stock, and the holders of all outstanding shares of Parity Stock ratably in
proportion to the full amounts to which they would otherwise respectively be
entitled.
<PAGE> 4
4. Conversion Rights.
a. Optional Conversion. A holder of shares of Series
D Preferred Stock may convert all or part of such shares into shares of the
Common Stock of the Corporation at any time beginning six (6) months after the
date of issuance for a period of two years also from the date of issuance.
b. Automatic Conversion. If not previously converted
by the holder, all shares of Series D Preferred Stock automatically will be
converted to shares of Common Stock of the Corporation at the end of two (2)
years after the date of issuance.
c. Conversion Procedure. In all cases of conversion
of shares of Series D Preferred Stock into shares of Common Stock, the number of
shares of Common Stock to be issued in exchange for shares of Series D Preferred
Stock shall be determined as follows: The rate of conversion shall be $1.00
Stated Value of each share of Series D Preferred Stock convertible to shares of
Common Stock at a price per share of Common Stock of $1.50 per share or
seventy-five percent (75%) of the average bid price for shares of Common Stock
over the ten (10) trading days prior to conversion, whichever is less.
d. Delivery of Shares. The Corporation shall not be
obligated to issue to any holder of shares of Series D Preferred Stock
certificates evidencing the shares of Common Stock issuable upon any conversion
unless certificates evidencing the shares of Series D Preferred Stock are
delivered to the Corporation or its transfer agent, or unless such holder
provides to the Corporation or its transfer agent reasonable assurances as to
the loss, theft or destruction of such certificates and agrees with respect
thereto to indemnify the Corporation and its transfer agent and, if requested,
provides such bond as reasonably may be requested by the Company and its
transfer agent. The holder of any shares of Series D Preferred Stock may
exercise the conversion rights described above by (i) delivering to the
Corporation a conversion notice in writing setting forth the number of shares of
Series D Preferred Stock to be converted, (ii) surrendering to the Corporation
or its transfer agent the certificate or certificates for the shares of Series D
Preferred Stock to be converted, (iii) furnishing appropriate endorsements and
transfer documents if required by the Corporation or its transfer agent and (iv)
paying any transfer or similar tax if required. Such date is referred to herein
as the "Conversion Date". The person in whose name the certificate of
certificates for Common Stock are to be issued shall be deemed to have become a
holder of record of such Common Stock on the applicable Conversion Date. Upon a
surrender of shares of Series D Preferred Stock that are converted in part, the
Corporation or its transfer agent shall issue to the holder a new certificate
representing the unconverted portion of the shares of Series D Preferred Stock
surrendered.
e. Fractional Interests. The Corporation will not
issue fractional shares of Common Stock upon conversion of shares of Series D
Preferred Stock. Instead the Corporation, in its discretion, may either pay a
cash adjustment in respect of such fractional interest or round up to the next
whole number the number of shares of Common Stock to be issued upon conversion.
f. Taxes. The Corporation shall pay all documentary,
stamp, transfer or other transactional taxes attributable to the issuance or
delivery of shares of
<PAGE> 5
Common Stock upon conversion of any Series D Preferred Stock; provided that the
Corporation shall not be required to pay any taxes which may be payable in
respect of any transfer involved in the issuance or delivery of any certificate
for such Series D Preferred Stock in a name other than that of the holder of the
Series D Preferred Stock in respect of which such shares are being issued.
g. Reserve Shares. The Corporation shall reserve at
all times so long as any Series D Preferred Stock remains outstanding, free from
preemptive rights, out of either or both of its treasury stock or its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the Series D Preferred Stock, sufficient shares of Common Stock to
provide for the conversion of all outstanding Series D Preferred Stock.
h. Government Approvals. If any shares of Common
Stock to be reserved for the purpose of conversion of Series D Preferred Stock
require registration with or approval of any governmental authority under any
Federal or state law before such shares may be validly issued or delivered upon
conversion, then the Corporation will in good faith and as expeditiously as
possible endeavor to secure such registration or approval, as the case may be.
If, and so long as, any Common Stock into which the Series D Preferred Stock is
then convertible is listed on any national securities exchange, the Corporation
will, if permitted by the rules of such exchange, list and keep listed on such
exchange, upon official notice of issuance, all shares of such Common Stock
issuable upon conversion.
i. Valid Issue. All shares of Common Stock which may be
issued upon conversion of the Series D Preferred Stock will, upon issuance by
the Corporation, be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens and charges with respect to the issuance thereof; and
the Corporation shall take no action which will cause a contrary result.
j. Restrictive Legend. Each certificate representing a
share of Series D Preferred Stock shall bear on its face a legend in
substantially the following form:
"The shares represented by this certificate
have not been registered under the Securities
Act of 1933. The shares have been acquired
for investment and may not be sold, transferred
or assigned in the absence of an effective
registration statement for these shares under
the Securities Act of 1933 or an opinion of
legal counsel that registration is not required
under such Act."
5. Voting Rights. The Series D Preferred Stock shall carry the
same per share voting rights as Common Stock.
6. Two-Thirds Vote to Change Rights, Preferences, and Powers. So
long as any shares of Series D Preferred Stock are outstanding, the Corporation
shall not, without the affirmative vote at a meeting (the notice of which shall
state the general character of the matters to be submitted thereat), or the
written consent with or without a meeting of the
<PAGE> 6
holders of at least 66 and 2/3% (two-third percent) of the then outstanding
shares of Series D Preferred Stock:
a. increase the authorized amount of Series D Preferred
Stock; or
b. amend, alter or repeal any of the rights,
preferences or powers of the outstanding Series D Preferred Stock fixed herein
or determined by the Board of Directors for any shares of Series D Preferred
Stock as herein authorized; so as adversely to affect the rights, preferences or
powers of the Series D Preferred Stock or its holders, or
c. sell, lease or convey all, or substantially all, of
the property or business of the Corporation; or
d. merge or consolidate with or into any other
corporation or corporations, unless the corporation surviving or resulting from
such merger or consolidation will have after such merger or consolidation no
class of stock either authorized or outstanding ranking prior to the Series D
Preferred Stock, except as regards the Series A, Series B Preferred Stock or
Senior Stock referred to herein, as to dividends or assets except the same
number of shares of Series D Preferred Stock with the same rights, preferences
and powers as the Series D Preferred Stock, and unless each holder of Series D
Preferred Stock at the time of such merger or consolidation and in connection
therewith shall continue to hold (in the case of a merger in which the
Corporation is the surviving corporation) his shares of Series D Preferred
Stock, or (in the case of a consolidation or a merger of the Corporation into
some other corporation) shall receive the same number of shares of Series D
Preferred Stock, with the same rights, preferences and powers, of such resulting
corporation; or
e. amend or repeal any of the provisions of this
paragraph 6.
7. No Pre-emptive Rights. No holder of the Series D Preferred Stock
of the Corporation shall be entitled, as of right, to purchase or subscribe for
any part of the unissued stock of the Corporation or of any stock of the
Corporation to be issued by reason of any increase of the authorized capital
stock of the Corporation, or to purchase or subscribe for any bonds,
certificates of indebtedness, debentures or other securities convertible into or
carrying options or warrants to purchase stock or other securities of the
Corporation or to purchase or subscribe for any stock of the Corporation
purchased by the Corporation or by its nominee or nominees, or to have any other
pre-emptive rights now or hereafter defined by the laws of the State of Nevada.
8. Exclusion of Other Rights. Except as may otherwise by required by
law, the shares of Series D Preferred Stock shall not have any preferences or
relative, participating, optional or other special rights, other than those
specifically set forth in this resolution (as such resolution may be amended
from time to time) and in the Articles of Incorporation of the Corporation, as
amended, and the shares of Series D Preferred Stock shall have no pre-emptive
subscription rights.
<PAGE> 7
9. Headings of Subdivisions. The headings of the various subdivisions
hereof are for convenience of reference only and shall not affect the
interpretation of any of the provisions hereto.
10. Severability of Provisions. If any right, preference or limitation
of the Series D Preferred Stock set forth in this resolution (as such resolution
may be amended from time to time) is invalid, unlawful or incapable of being
enforced by reason of any rule of law or public policy, all other rights,
preferences and limitations set forth in this resolution (as so amended) which
can be given effect without the invalid, unlawful or unenforceable right,
preference or limitation shall, nevertheless, remain in full force and effect,
and no right, preference or limitation herein set forth shall be deemed
dependent upon any other such right, preference or limitation unless expressly
so stated herein.
11. Status of Re-acquired Shares. Shares of Series D Preferred Stock
which have been issued and converted or re-acquired in any manner shall (upon
compliance with any applicable provisions of the laws of the State of Nevada)
have the status of authorized and unissued shares of Preferred Stock issuable in
series, but undesignated as to series, and may be redesignated and reissued by
resolution of the Board of Directors of this Corporation.
IN WITNESS WHEREOF, UNIVERSAL MEDICAL SYSTEMS, INC. has caused this
Certificate of Designation to be made and signed by its Chairman, CEO and
President and by its Secretary, respectively, this 1st day of April, 1996.
/s/ Myron A. Baker
- - ----------------------------
Myron A. Baker
Chairman, CEO and President
/s/ Dennis D. Cole
- - ----------------------------
Dennis D. Cole
Secretary
<PAGE> 8
STATE OF FLORIDA )
) SS:
COUNTY OF PINELLAS )
The foregoing Certificate of Designation Series D Convertible Preferred
Stock was acknowledged before me this 1st day of April, 1996, by Myron A. Baker
and Dennis D. Cole, President and Secretary respectively of Universal Medical
Systems, Inc., a Nevada corporation, who are personally known to me and who did
not take an oath.
/s/ Beth A. Bruck
-----------------
Notary Public
Printed, typed or stamped name:
My commission expires: 6/26/98 [NOTARY STAMP FOR BETH A. BRUCK]
<PAGE> 1
EXHIBIT 4(f)
UNIVERSAL MEDICAL SYSTEMS, INC.
CERTIFICATE OF DESIGNATION
SERIES E CONVERTIBLE PREFERRED STOCK
Pursuant to Section 78.195
of the Nevada Revised Statutes
The following resolution was duly adopted by the Board of Directors of
Universal Medical Systems, Inc., a Nevada corporation (the "Corporation"),
pursuant to provisions of Section 78.195 of the Nevada Revised Statutes, on July
1, 1996:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Corporation by Article Four of the Corporation's Articles of
Incorporation, as amended, and pursuant to the provisions of Section 78.195 of
the Nevada Revised Statutes, a Series of Preferred Stock of the Corporation be,
and it hereby is, created out of the authorized but unissued shares of the
capital stock of the Corporation, such series to be designated Series E
Convertible Preferred Stock (the "Series E Preferred Stock"), to consist of
750,000 shares, par value $.0001 per share, of which the preferences and
relative and other rights, and the qualifications, limitations or restrictions
thereof, shall be (in addition to those set forth in the Corporation's Articles
of Incorporation, as amended) as follows:
1. Certain Definitions. Unless the context otherwise requires, the
terms defined in this paragraph 1 shall have, for all purposes of this
resolution, the meanings herein specified.
Common Stock. The term "Common Stock" shall mean all shares
now or hereafter authorized of the Corporation's presently authorized class of
Common Stock, par value $.001 per share, which has the right (subject always to
prior rights of any class or series of Preferred Stock) to participate in the
distribution of the assets and earnings of the Corporation without limit as to
the per share amount.
Conversion Date. The term "Conversion Date" shall have the
meaning set forth in paragraph 4 below.
Current Market Price. The term "Current Market Price" shall
have the meaning set forth in paragraph 4 below.
Effective Date. The term "Effective Date" shall mean the
effective date of the filing of this Certificate of Designation with the
Secretary of State of the State of Nevada.
Issue Date. The term "Issue Date" shall mean, as to any
share of Series E Preferred Stock, the date such share is issued by the
Corporation to any holder thereof.
<PAGE> 2
Junior Stock. The term "Junior Stock" shall mean any class
or series of stock (including Common Stock) of the Corporation not entitled to
receive any dividends in any dividend period unless all dividends, if any,
required to have been paid or declared and set apart for payment on shares of
preferred stock shall have been so paid or declared and set apart for payment,
and not entitled to receive any assets upon liquidation, dissolution or winding
up of the affairs of the Corporation until all preferred stock shall have
received the entire amount to which such stock is entitled upon such
liquidation, dissolution or winding up.
Parity Stock. The term "Parity Stock" shall mean any class
or series of stock of the Corporation entitled to receive payment of dividends,
if any, on a parity basis with the Series E Preferred Stock or entitled to
receive assets upon liquidation, dissolution or winding up of the affairs of the
Corporation on a parity basis with the Series E Preferred Stock. Parity Stock
for the purpose of entitlement to receive assets upon liquidation, dissolution
or winding up of the affairs of the Corporation include, but is not limited to,
Series A, Series B, and Series D Preferred Stock
Senior Stock. The term "Senior Stock" shall mean any class
or Series of stock of the Corporation authorized by the Board of Directors
ranking senior to the Series E Preferred Stock in respect of the right to
receive dividends or in respect of the right to participate in any distribution
upon liquidation, dissolution or wind up of the affairs of the Corporation.
Series A Preferred Stock. The term "Series A Preferred
Stock" shall mean the 1,000,000 shares of Series A Convertible Preferred Stock
issued, or to be issued, in connection with a Section 505 offering of shares of
preferred stock of the Corporation and the related Certificate of Designation
for said shares of preferred stock. Holders of Series A Preferred Stock are
entitled to receive a ten percent (10%) cumulative (but non-compounding)
dividend on the liquidation amount of their preferred shares, payable
semi-annually in arrears out of earnings legally available therefore, and are
entitled to a liquidation preference up to the full amount of $5.00 per share,
plus any accrued but unpaid dividends. Holders of Series A Preferred Stock do
not have any voting rights, except with respect to certain matters required by
Nevada General Corporation Law.
Series B Preferred Stock. The term "Series B Preferred
Stock" shall mean the 1,500,000 shares of Series B Convertible Preferred Stock
authorized by the Board of Directors of the Corporation of which 1,000,000
shares were issued in connection with the acquisition by Corporation of Medical
High Technology International, Inc. The holders of Series B Preferred Stock are
not entitled to receive any cash dividend, unless and until a dividend is
declared by the Board of Directors for holders of Series B Preferred Stock out
of any funds legally available therefor. Holders of Series B Preferred Stock are
entitled to a liquidation preference up to the full amount of $3.00 per share,
plus any declared but unpaid dividends. The Series B Preferred Stock carry the
same per share voting rights as Common Stock.
Series C Preferred Stock. As of the date of the
authorization of this Certificate of Designation by the Board of Directors of
the Corporation, no certificate of designation for Series C Preferred Stock has
been authorized by the Board of Directors of the Corporation.
<PAGE> 3
Series D Preferred Stock. the term "Series D Preferred
Stock" shall mean the 1,000,000 shares of Series D Convertible Preferred Stock
authorized by the Board of Directors of the Corporation. The holders of Series D
Preferred Stock are entitled to receive, when and as declared by the Board of
Directors, out of any funds legally available therefore, cash dividends on an
annual compounded basis equal to ten percent (10%) of the subscription price per
annum, such dividends to be payable semi-annually in arrears on each January 1
and July 1. Holders of Series D Preferred Stock are entitled to a liquidation
preference up to the full amount of $1.00 per share, plus any declared but
unpaid dividends. the Series D Preferred Stock carry the same per share voting
rights as Common Stock.
Stated Value. The Stated Value of each share of Series E
Preferred Stock shall be $1.00.
2. Dividends. The Series E Preferred Stock shall not entitle the
holder of record thereof as of any record date therefor to receive any cash
dividend, unless and until a dividend is declared by the Board of Directors for
holders of Series E Preferred Stock out of any funds legally available therefor.
3. Distributions Upon Liquidation, Dissolution or Winding Up. In the
event of any voluntary or involuntary liquidation, dissolution or other winding
up of the affairs of the Corporation, before any distribution or payment shall
be made to the holders of Junior Stock, the holders of the Series E Preferred
Stock shall be entitled to be paid the Stated Value per share with respect to
all outstanding Series E Preferred Stock owned by them, plus any declared and
unpaid dividends thereon, if any. Such amount shall be paid in cash or in
property taken at its fair value, or both, at the election of the Board of
Directors. If such payment shall have been made in full to the holders of the
Series E Preferred Stock and to the holders of any other Senior Stock or Parity
Stock, the remaining assets and funds of the Corporation shall be distributed
among the holders of Junior Stock, according to their respective shares. If,
upon any such liquidation, dissolution or other winding up of the affairs of the
Corporation, the net assets of the Corporation distributable among the holders
of all outstanding shares of the Series E Preferred Stock and holders of all
outstanding shares of any Senior Stock or Parity Stock shall be insufficient to
permit the payment in full to such holder of the preferential amounts to which
they are entitled, then the entire net assets of the Corporation shall be
distributed pro-rata among the holders of all outstanding shares of the Series E
Preferred Stock, the holders of all outstanding shares of Series A Preferred
Stock, Series B Preferred Stock, Series D Preferred Stock, and the holders of
all outstanding shares of Parity Stock ratably in proportion to the full amounts
to which they would otherwise respectively be entitled.
4. Conversion Rights.
a. Optional Conversion. A holder of shares of Series E
Preferred Stock may convert all or part of such shares into shares of the Common
Stock of the Corporation (i) at any time after shares of Common Stock of the
Corporation are trading at, $6.00 per share over ten (10) consecutive trading
days or (ii) at any time the Corporation authorizes the conversion of the Series
E Preferred Stock into shares of Common Stock of the Corporation.
<PAGE> 4
b. Automatic Conversion. If not previously converted by
the holder, all shares of Series E Preferred Stock automatically will be
converted to shares of Common Stock of the Corporation as of February 1, 1997.
c. Conversion Procedure. In all cases of conversion of
shares of Series E Preferred Stock into shares of Common Stock, the number of
shares of Common Stock to be issued in exchange for shares of Series E Preferred
Stock shall be determined based upon the average bid price for shares of Common
Stock over the ten (10) trading days prior to the conversion date. For example,
if the average bid price over the ten (10) trading days prior to the conversion
date is $1.00 per share, then each share of Series E Preferred Stock would be
converted into one (1) share of Common Stock; if the average bid price is $3.00
per share, then three (3) shares of Series E Preferred Stock would be converted
into one (1) share of Common Stock.
d. Delivery of Shares. The Corporation shall not be
obligated to issue to any holder of shares of Series E Preferred Stock
certificates evidencing the shares of Common Stock issuable upon any conversion
unless certificates evidencing the shares of Series E Preferred Stock are
delivered to the Corporation or its transfer agent, or unless such holder
provides to the Corporation or its transfer agent reasonable assurances as to
the loss, theft or destruction of such certificates and agrees with respect
thereto to indemnify the Corporation and its transfer agent and, if requested,
provides such bond as reasonably may be requested by the Company and its
transfer agent. The holder of any shares of Series E Preferred Stock may
exercise the conversion rights described above by (i) delivering to the
Corporation a conversion notice in writing setting forth the number of shares of
Series E Preferred Stock to be converted, (ii) surrendering to the Corporation
or its transfer agent the certificate or certificates for the shares of Series E
Preferred Stock to be converted, (iii) furnishing appropriate endorsements and
transfer documents if required by the Corporation or its transfer agent and (iv)
paying any transfer or similar tax if required. Such date is referred to herein
as the "Conversion Date". The person in whose name the certificate of
certificates for Common Stock are to be issued shall be deemed to have become a
holder of record of such Common Stock on the applicable Conversion Date. Upon a
surrender of shares of Series E Preferred Stock that are converted in part, the
Corporation or its transfer agent shall issue to the holder a new certificate
representing the unconverted portion of the shares of Series E Preferred Stock
surrendered.
e. Fractional Interests. The Corporation will not issue
fractional shares of Common Stock upon conversion of shares of Series E
Preferred Stock. Instead the Corporation, in its discretion, may either pay a
cash adjustment in respect of such fractional interest or round up to the next
whole number the number of shares of Common Stock to be issued upon conversion.
f. Taxes. The Corporation shall pay all documentary,
stamp, transfer or other transactional taxes attributable to the issuance or
delivery of shares of Common Stock upon conversion of any Series E Preferred
Stock; provided that the Corporation shall not be required to pay any taxes
which may be payable in respect of any transfer involved in the issuance or
delivery of any certificate for such Series E Preferred
<PAGE> 5
Stock in a name other than that of the holder of the Series E Preferred Stock in
respect of which such shares are being issued.
g. Reserve Shares. The Corporation shall reserve at all
times so long as any Series E Preferred Stock remains outstanding, free from
preemptive rights, out of either or both of its treasury stock or its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the Series E Preferred Stock, sufficient shares of Common Stock to
provide for the conversion of all outstanding Series E Preferred Stock.
h. Governmental Approvals. If any shares of Common
Stock to be reserved for the purpose of conversion of Series E Preferred Stock
require registration with or approval of any governmental authority under any
Federal or state law before such shares may be validly issued or delivered upon
conversion, then the Corporation will in good faith and as expeditiously as
possible endeavor to secure such registration or approval, as the case may be.
If, and so long as, any Common Stock into which the Series E Preferred Stock is
then convertible is listed on any national securities exchange, the Corporation
will, if permitted by the rules of such exchange, list and keep listed on such
exchange, upon official notice of issuance, all shares of such Common Stock
issuable upon conversion.
i. Valid Issue. All shares of Common Stock which may be
issued upon conversion of the Series E Preferred Stock will, upon issuance by
the Corporation, be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens and charges with respect to the issuance thereof; and
the Corporation shall take no action which will cause a contrary result.
j. Restrictive Legend. Each certificate representing a
share of Series E Preferred Stock shall bear on its face a legend in
substantially the following form:
"The shares represented by this certificate
have not been registered under the
Securities Act of 1933. The shares have been
acquired for investment and may not be sold,
transferred or assigned in the absence of an
effective registration statement for these
shares under the Securities Act of 1933 or
an opinion of legal counsel that
registration is not required under such
Act."
5. Voting Rights. The Series E Preferred Stock shall carry the same
per share voting rights as Common Stock.
6. Two-Thirds Vote to Change Rights, Preferences, and Powers. So long
as any shares of Series E Preferred Stock are outstanding, the Corporation shall
not, without the affirmative vote at a meeting (the notice of which shall state
the general character of the matters to be submitted thereat), or the written
consent with or without a meeting of the holders of at least 66 and 2/3%
(two-third percent) of the then outstanding shares of Series E Preferred Stock:
<PAGE> 6
a. increase the authorized amount of Series E Preferred
Stock; or
b. amend, alter or repeal any of the rights,
preferences or powers of the outstanding Series E Preferred Stock fixed herein
or determined by the Board of Directors for any shares of Series E Preferred
Stock as herein authorized; so as adversely to affect the rights, preferences or
powers of the Series E Preferred Stock or its holders, or
c. sell, lease or convey all, or substantially all, of
the property or business of the Corporation; or
d. merge or consolidate with or into any other
corporation or corporations, unless the corporation surviving or resulting from
such merger or consolidation will have after such merger or consolidation no
class of stock either authorized or outstanding ranking prior to the Series E
Preferred Stock, except as regards the Series A, Series B. and Series D
Preferred Stock or Senior Stock referred to herein, as to dividends or assets
except the same number of shares of Series E Preferred Stock with the same
rights, preferences and powers as the Series E Preferred Stock, and unless each
holder of Series E Preferred Stock at the time of such merger or consolidation
and in connection therewith shall continue to hold (in the case of a merger in
which the Corporation is the surviving corporation) his shares of Series E
Preferred Stock, or (in the case of a consolidation or a merger of the
Corporation into some other corporation) shall receive the same number of shares
of Series E Preferred Stock, with the same rights, preferences and powers, of
such resulting corporation; or
e. amend or repeal any of the provisions of this
paragraph 6.
7. No Pre-emptive Rights. No holder of the Series E Preferred Stock
of the Corporation shall be entitled, as of right, to purchase or subscribe for
any part of the unissued stock of the Corporation or of any stock of the
Corporation to be issued by reason of any increase of the authorized capital
stock of the Corporation, or to purchase or subscribe for any bonds,
certificates of indebtedness, debentures or other securities convertible into or
carrying options or warrants to purchase stock or other securities of the
Corporation or to purchase or subscribe for any stock of the Corporation
purchased by the Corporation or by its nominee or nominees, or to have any other
pre-emptive rights now or hereafter defined by the laws of the State of Nevada.
8. Exclusion of Other Rights. Except as may otherwise by required by
law, the shares of Series E Preferred Stock shall not have any preferences or
relative, participating, optional or other special rights, other than those
specifically set forth in this resolution (as such resolution may be amended
from time to time) and in the Articles of Incorporation of the Corporation, as
amended, and the shares of Series E Preferred Stock shall have no pre-emptive or
subscription rights.
9. Headings of Subdivisions. The headings of the various subdivisions
hereof are for convenience of reference only and shall not affect the
interpretation of any of the provisions hereto.
<PAGE> 7
10. Severability of Provisions. If any right, preference or limitation
of the Series E Preferred Stock set forth in this resolution (as such resolution
may be amended from time to time) is invalid, unlawful or incapable of being
enforced by reason of any rule of law or public policy, all other rights,
preferences and limitations set forth in this resolution (as so amended) which
can be given effect without the invalid, unlawful or unenforceable right,
preference or limitation shall, nevertheless, remain in full force and effect,
and no right, preference or limitation herein set forth shall be deemed
dependent upon any other such right, preference or limitation unless expressly
so stated herein.
11. Status of Re-acquired Shares. Shares of Series E Preferred Stock
which have been issued and converted or re-acquired in any manner shall (upon
compliance with any applicable provisions of the laws of the State of Nevada)
have the status of authorized and unissued shares of Preferred Stock issuable in
series, but undesignated as to series, and may be redesignated and reissued by
resolution of the Board of Directors of this Corporation.
IN WITNESS WHEREOF, UNIVERSAL MEDICAL SYSTEMS, INC. has caused this
Certificate of Designation to be made and signed by its Chairman, CEO and
President and by its Secretary, respectively, this 1st day of July, 1996.
/s/ Myron A. Baker
- - ---------------------------
Myron A. Baker
Chairman, CEO and President
/s/ Dennis D. Cole
- - ---------------------------
Dennis D. Cole
Secretary
STATE OF FLORIDA )
) ss:
COUNTY OF PINELLAS )
The foregoing Certificate of Designation Series E Convertible Preferred
Stock was acknowledged before me this 1st day of July, 1996, by Myron A. Baker
and Dennis D. Cole, President and Secretary respectively of Universal Medical
Systems, Inc., a Nevada corporation, who are personally known to me and who did
not take an oath.
/s/ Beth A Bruck
----------------
Notary Public
Printed, typed or stamped name:
[NOTARY STAMP
FOR BETH A. BRUCK]
My commission expires: 6-26-98
<PAGE> 1
EXHIBIT 4(f)
UNIVERSAL MEDICAL SYSTEMS, INC.
CERTIFICATE OF DESIGNATION
SERIES E CONVERTIBLE PREFERRED STOCK
Pursuant to Section 78.195
of the Nevada Revised Statutes
The following resolution was duly adopted by the Board of Directors of
Universal Medical Systems, Inc., a Nevada corporation (the "Corporation"),
pursuant to provisions of Section 78.195 of the Nevada Revised Statutes, on July
1, 1996:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Corporation by Article Four of the Corporation's Articles of
Incorporation, as amended, and pursuant to the provisions of Section 78.195 of
the Nevada Revised Statutes, a Series of Preferred Stock of the Corporation be,
and it hereby is, created out of the authorized but unissued shares of the
capital stock of the Corporation, such series to be designated Series E
Convertible Preferred Stock (the "Series E Preferred Stock"), to consist of
750,000 shares, par value $.0001 per share, of which the preferences and
relative and other rights, and the qualifications, limitations or restrictions
thereof, shall be (in addition to those set forth in the Corporation's Articles
of Incorporation, as amended) as follows:
1. Certain Definitions. Unless the context otherwise requires, the
terms defined in this paragraph 1 shall have, for all purposes of this
resolution, the meanings herein specified.
Common Stock. The term "Common Stock" shall mean all shares
now or hereafter authorized of the Corporation's presently authorized class of
Common Stock, par value $.001 per share, which has the right (subject always to
prior rights of any class or series of Preferred Stock) to participate in the
distribution of the assets and earnings of the Corporation without limit as to
the per share amount.
Conversion Date. The term "Conversion Date" shall have the
meaning set forth in paragraph 4 below.
Current Market Price. The term "Current Market Price" shall
have the meaning set forth in paragraph 4 below.
Effective Date. The term "Effective Date" shall mean the
effective date of the filing of this Certificate of Designation with the
Secretary of State of the State of Nevada.
Issue Date. The term "Issue Date" shall mean, as to any
share of Series E Preferred Stock, the date such share is issued by the
Corporation to any holder thereof.
<PAGE> 2
Junior Stock. The term "Junior Stock" shall mean any class
or series of stock (including Common Stock) of the Corporation not entitled to
receive any dividends in any dividend period unless all dividends, if any,
required to have been paid or declared and set apart for payment on shares of
preferred stock shall have been so paid or declared and set apart for payment,
and not entitled to receive any assets upon liquidation, dissolution or winding
up of the affairs of the Corporation until all preferred stock shall have
received the entire amount to which such stock is entitled upon such
liquidation, dissolution or winding up.
Parity Stock. The term "Parity Stock" shall mean any class
or series of stock of the Corporation entitled to receive payment of dividends,
if any, on a parity basis with the Series E Preferred Stock or entitled to
receive assets upon liquidation, dissolution or winding up of the affairs of the
Corporation on a parity basis with the Series E Preferred Stock. Parity Stock
for the purpose of entitlement to receive assets upon liquidation, dissolution
or winding up of the affairs of the Corporation include, but is not limited to,
Series A, Series B, and Series D Preferred Stock
Senior Stock. The term "Senior Stock" shall mean any class
or Series of stock of the Corporation authorized by the Board of Directors
ranking senior to the Series E Preferred Stock in respect of the right to
receive dividends or in respect of the right to participate in any distribution
upon liquidation, dissolution or wind up of the affairs of the Corporation.
Series A Preferred Stock. The term "Series A Preferred
Stock" shall mean the 1,000,000 shares of Series A Convertible Preferred Stock
issued, or to be issued, in connection with a Section 505 offering of shares of
preferred stock of the Corporation and the related Certificate of Designation
for said shares of preferred stock. Holders of Series A Preferred Stock are
entitled to receive a ten percent (10%) cumulative (but non-compounding)
dividend on the liquidation amount of their preferred shares, payable
semi-annually in arrears out of earnings legally available therefore, and are
entitled to a liquidation preference up to the full amount of $5.00 per share,
plus any accrued but unpaid dividends. Holders of Series A Preferred Stock do
not have any voting rights, except with respect to certain matters required by
Nevada General Corporation Law.
Series B Preferred Stock. The term "Series B Preferred
Stock" shall mean the 1,500,000 shares of Series B Convertible Preferred Stock
authorized by the Board of Directors of the Corporation of which 1,000,000
shares were issued in connection with the acquisition by Corporation of Medical
High Technology International, Inc. The holders of Series B Preferred Stock are
not entitled to receive any cash dividend, unless and until a dividend is
declared by the Board of Directors for holders of Series B Preferred Stock out
of any funds legally available therefor. Holders of Series B Preferred Stock are
entitled to a liquidation preference up to the full amount of $3.00 per share,
plus any declared but unpaid dividends. The Series B Preferred Stock carry the
same per share voting rights as Common Stock.
Series C Preferred Stock. As of the date of the
authorization of this Certificate of Designation by the Board of Directors of
the Corporation, no certificate of designation for Series C Preferred Stock has
been authorized by the Board of Directors of the Corporation.
<PAGE> 3
Series D Preferred Stock. the term "Series D Preferred
Stock" shall mean the 1,000,000 shares of Series D Convertible Preferred Stock
authorized by the Board of Directors of the Corporation. The holders of Series D
Preferred Stock are entitled to receive, when and as declared by the Board of
Directors, out of any funds legally available therefore, cash dividends on an
annual compounded basis equal to ten percent (10%) of the subscription price per
annum, such dividends to be payable semi-annually in arrears on each January 1
and July 1. Holders of Series D Preferred Stock are entitled to a liquidation
preference up to the full amount of $1.00 per share, plus any declared but
unpaid dividends. the Series D Preferred Stock carry the same per share voting
rights as Common Stock.
Stated Value. The Stated Value of each share of Series E
Preferred Stock shall be $1.00.
2. Dividends. The Series E Preferred Stock shall not entitle the
holder of record thereof as of any record date therefor to receive any cash
dividend, unless and until a dividend is declared by the Board of Directors for
holders of Series E Preferred Stock out of any funds legally available therefor.
3. Distributions Upon Liquidation, Dissolution or Winding Up. In the
event of any voluntary or involuntary liquidation, dissolution or other winding
up of the affairs of the Corporation, before any distribution or payment shall
be made to the holders of Junior Stock, the holders of the Series E Preferred
Stock shall be entitled to be paid the Stated Value per share with respect to
all outstanding Series E Preferred Stock owned by them, plus any declared and
unpaid dividends thereon, if any. Such amount shall be paid in cash or in
property taken at its fair value, or both, at the election of the Board of
Directors. If such payment shall have been made in full to the holders of the
Series E Preferred Stock and to the holders of any other Senior Stock or Parity
Stock, the remaining assets and funds of the Corporation shall be distributed
among the holders of Junior Stock, according to their respective shares. If,
upon any such liquidation, dissolution or other winding up of the affairs of the
Corporation, the net assets of the Corporation distributable among the holders
of all outstanding shares of the Series E Preferred Stock and holders of all
outstanding shares of any Senior Stock or Parity Stock shall be insufficient to
permit the payment in full to such holder of the preferential amounts to which
they are entitled, then the entire net assets of the Corporation shall be
distributed pro-rata among the holders of all outstanding shares of the Series E
Preferred Stock, the holders of all outstanding shares of Series A Preferred
Stock, Series B Preferred Stock, Series D Preferred Stock, and the holders of
all outstanding shares of Parity Stock ratably in proportion to the full amounts
to which they would otherwise respectively be entitled.
4. Conversion Rights.
a. Optional Conversion. A holder of shares of Series E
Preferred Stock may convert all or part of such shares into shares of the Common
Stock of the Corporation (i) at any time after shares of Common Stock of the
Corporation are trading at, $6.00 per share over ten (10) consecutive trading
days or (ii) at any time the Corporation authorizes the conversion of the Series
E Preferred Stock into shares of Common Stock of the Corporation.
<PAGE> 4
b. Automatic Conversion. If not previously converted by
the holder, all shares of Series E Preferred Stock automatically will be
converted to shares of Common Stock of the Corporation as of February 1, 1997.
c. Conversion Procedure. In all cases of conversion of
shares of Series E Preferred Stock into shares of Common Stock, the number of
shares of Common Stock to be issued in exchange for shares of Series E Preferred
Stock shall be determined based upon the average bid price for shares of Common
Stock over the ten (10) trading days prior to the conversion date. For example,
if the average bid price over the ten (10) trading days prior to the conversion
date is $1.00 per share, then each share of Series E Preferred Stock would be
converted into one (1) share of Common Stock; if the average bid price is $3.00
per share, then three (3) shares of Series E Preferred Stock would be converted
into one (1) share of Common Stock.
d. Delivery of Shares. The Corporation shall not be
obligated to issue to any holder of shares of Series E Preferred Stock
certificates evidencing the shares of Common Stock issuable upon any conversion
unless certificates evidencing the shares of Series E Preferred Stock are
delivered to the Corporation or its transfer agent, or unless such holder
provides to the Corporation or its transfer agent reasonable assurances as to
the loss, theft or destruction of such certificates and agrees with respect
thereto to indemnify the Corporation and its transfer agent and, if requested,
provides such bond as reasonably may be requested by the Company and its
transfer agent. The holder of any shares of Series E Preferred Stock may
exercise the conversion rights described above by (i) delivering to the
Corporation a conversion notice in writing setting forth the number of shares of
Series E Preferred Stock to be converted, (ii) surrendering to the Corporation
or its transfer agent the certificate or certificates for the shares of Series E
Preferred Stock to be converted, (iii) furnishing appropriate endorsements and
transfer documents if required by the Corporation or its transfer agent and (iv)
paying any transfer or similar tax if required. Such date is referred to herein
as the "Conversion Date". The person in whose name the certificate of
certificates for Common Stock are to be issued shall be deemed to have become a
holder of record of such Common Stock on the applicable Conversion Date. Upon a
surrender of shares of Series E Preferred Stock that are converted in part, the
Corporation or its transfer agent shall issue to the holder a new certificate
representing the unconverted portion of the shares of Series E Preferred Stock
surrendered.
e. Fractional Interests. The Corporation will not issue
fractional shares of Common Stock upon conversion of shares of Series E
Preferred Stock. Instead the Corporation, in its discretion, may either pay a
cash adjustment in respect of such fractional interest or round up to the next
whole number the number of shares of Common Stock to be issued upon conversion.
f. Taxes. The Corporation shall pay all documentary,
stamp, transfer or other transactional taxes attributable to the issuance or
delivery of shares of Common Stock upon conversion of any Series E Preferred
Stock; provided that the Corporation shall not be required to pay any taxes
which may be payable in respect of any transfer involved in the issuance or
delivery of any certificate for such Series E Preferred
<PAGE> 5
Stock in a name other than that of the holder of the Series E Preferred Stock in
respect of which such shares are being issued.
g. Reserve Shares. The Corporation shall reserve at all
times so long as any Series E Preferred Stock remains outstanding, free from
preemptive rights, out of either or both of its treasury stock or its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the Series E Preferred Stock, sufficient shares of Common Stock to
provide for the conversion of all outstanding Series E Preferred Stock.
h. Governmental Approvals. If any shares of Common
Stock to be reserved for the purpose of conversion of Series E Preferred Stock
require registration with or approval of any governmental authority under any
Federal or state law before such shares may be validly issued or delivered upon
conversion, then the Corporation will in good faith and as expeditiously as
possible endeavor to secure such registration or approval, as the case may be.
If, and so long as, any Common Stock into which the Series E Preferred Stock is
then convertible is listed on any national securities exchange, the Corporation
will, if permitted by the rules of such exchange, list and keep listed on such
exchange, upon official notice of issuance, all shares of such Common Stock
issuable upon conversion.
i. Valid Issue. All shares of Common Stock which may be
issued upon conversion of the Series E Preferred Stock will, upon issuance by
the Corporation, be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens and charges with respect to the issuance thereof; and
the Corporation shall take no action which will cause a contrary result.
j. Restrictive Legend. Each certificate representing a
share of Series E Preferred Stock shall bear on its face a legend in
substantially the following form:
"The shares represented by this certificate
have not been registered under the
Securities Act of 1933. The shares have been
acquired for investment and may not be sold,
transferred or assigned in the absence of an
effective registration statement for these
shares under the Securities Act of 1933 or
an opinion of legal counsel that
registration is not required under such
Act."
5. Voting Rights. The Series E Preferred Stock shall carry the same
per share voting rights as Common Stock.
6. Two-Thirds Vote to Change Rights, Preferences, and Powers. So long
as any shares of Series E Preferred Stock are outstanding, the Corporation shall
not, without the affirmative vote at a meeting (the notice of which shall state
the general character of the matters to be submitted thereat), or the written
consent with or without a meeting of the holders of at least 66 and 2/3%
(two-third percent) of the then outstanding shares of Series E Preferred Stock:
<PAGE> 6
a. increase the authorized amount of Series E Preferred
Stock; or
b. amend, alter or repeal any of the rights,
preferences or powers of the outstanding Series E Preferred Stock fixed herein
or determined by the Board of Directors for any shares of Series E Preferred
Stock as herein authorized; so as adversely to affect the rights, preferences or
powers of the Series E Preferred Stock or its holders, or
c. sell, lease or convey all, or substantially all, of
the property or business of the Corporation; or
d. merge or consolidate with or into any other
corporation or corporations, unless the corporation surviving or resulting from
such merger or consolidation will have after such merger or consolidation no
class of stock either authorized or outstanding ranking prior to the Series E
Preferred Stock, except as regards the Series A, Series B. and Series D
Preferred Stock or Senior Stock referred to herein, as to dividends or assets
except the same number of shares of Series E Preferred Stock with the same
rights, preferences and powers as the Series E Preferred Stock, and unless each
holder of Series E Preferred Stock at the time of such merger or consolidation
and in connection therewith shall continue to hold (in the case of a merger in
which the Corporation is the surviving corporation) his shares of Series E
Preferred Stock, or (in the case of a consolidation or a merger of the
Corporation into some other corporation) shall receive the same number of shares
of Series E Preferred Stock, with the same rights, preferences and powers, of
such resulting corporation; or
e. amend or repeal any of the provisions of this
paragraph 6.
7. No Pre-emptive Rights. No holder of the Series E Preferred Stock
of the Corporation shall be entitled, as of right, to purchase or subscribe for
any part of the unissued stock of the Corporation or of any stock of the
Corporation to be issued by reason of any increase of the authorized capital
stock of the Corporation, or to purchase or subscribe for any bonds,
certificates of indebtedness, debentures or other securities convertible into or
carrying options or warrants to purchase stock or other securities of the
Corporation or to purchase or subscribe for any stock of the Corporation
purchased by the Corporation or by its nominee or nominees, or to have any other
pre-emptive rights now or hereafter defined by the laws of the State of Nevada.
8. Exclusion of Other Rights. Except as may otherwise by required by
law, the shares of Series E Preferred Stock shall not have any preferences or
relative, participating, optional or other special rights, other than those
specifically set forth in this resolution (as such resolution may be amended
from time to time) and in the Articles of Incorporation of the Corporation, as
amended, and the shares of Series E Preferred Stock shall have no pre-emptive or
subscription rights.
9. Headings of Subdivisions. The headings of the various subdivisions
hereof are for convenience of reference only and shall not affect the
interpretation of any of the provisions hereto.
<PAGE> 7
10. Severability of Provisions. If any right, preference or limitation
of the Series E Preferred Stock set forth in this resolution (as such resolution
may be amended from time to time) is invalid, unlawful or incapable of being
enforced by reason of any rule of law or public policy, all other rights,
preferences and limitations set forth in this resolution (as so amended) which
can be given effect without the invalid, unlawful or unenforceable right,
preference or limitation shall, nevertheless, remain in full force and effect,
and no right, preference or limitation herein set forth shall be deemed
dependent upon any other such right, preference or limitation unless expressly
so stated herein.
11. Status of Re-acquired Shares. Shares of Series E Preferred Stock
which have been issued and converted or re-acquired in any manner shall (upon
compliance with any applicable provisions of the laws of the State of Nevada)
have the status of authorized and unissued shares of Preferred Stock issuable in
series, but undesignated as to series, and may be redesignated and reissued by
resolution of the Board of Directors of this Corporation.
IN WITNESS WHEREOF, UNIVERSAL MEDICAL SYSTEMS, INC. has caused this
Certificate of Designation to be made and signed by its Chairman, CEO and
President and by its Secretary, respectively, this 1st day of July, 1996.
/s/ Myron A. Baker
- - ---------------------------
Myron A. Baker
Chairman, CEO and President
/s/ Dennis D. Cole
- - ---------------------------
Dennis D. Cole
Secretary
STATE OF FLORIDA )
) ss:
COUNTY OF PINELLAS )
The foregoing Certificate of Designation Series E Convertible Preferred
Stock was acknowledged before me this 1st day of July, 1996, by Myron A. Baker
and Dennis D. Cole, President and Secretary respectively of Universal Medical
Systems, Inc., a Nevada corporation, who are personally known to me and who did
not take an oath.
/s/ Beth A Bruck
----------------
Notary Public
Printed, typed or stamped name:
[NOTARY STAMP
FOR BETH A. BRUCK]
My commission expires: 6-26-98
<PAGE> 8
EXHIBIT 4(G)
<PAGE> 9
EXHIBIT 4(g)
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
[PICTURE]
NUMBER SHARES
119
SEE LEGENDS ENDORSED ON REVERSE SIDE
SERIES E CONVERTIBLE
UNIVERSAL MEDICAL SYSTEMS, INC. PREFERRED STOCK
AUTHORIZED CAPITAL STOCK
25,000,000 COMMON SHARES $.001 PAR VALUE
10,000,000 PREFERRED SHARES $.0001 PAR VALUE
THIS CERTIFIES THAT ____________________________________________is the owner of
________________________________________ fully paid and non-assessable Shares of
THE PREFERRED SHARES OF UNIVERSAL MEDICAL SYSTEMS, INC.
transferable only on the books of the Corporation by the holder hereof in person
or by duly authorized Attorney upon surrender of this Certificate properly
endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and to be sealed with the Seal of the
Corporation this _____________ day of ________________ A.D. 19 ________________.
/s/ /s/
- - ----------------------------- -------------------------------
SECRETARY PRESIDENT
[SEAL]
<PAGE> 10
FOR VALUE RECEIVED, _______________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
________________________________________________________________________________
__________________________________________________________________________Shares
represented by the within Certificate and do hereby irrevocably constitute and
appoint
________________________________________________________________________Attorney
to transfer the said Shares on the books of the within named Corporation with
full power of substitution in the premises.
Dated ______________________ 19____.
In presence of
________________________________
________________________________
NOTICE. THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE. IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
The shares represented by this certificate
have not been registered under the Securities
Act of 1933. The shares have been acquired for
investment and may not be sold, transferred or
assigned in the absence of an effective
registration statement for these shares under
the Securities Act of 1933 or an opinion of
the Company's legal counsel that registration
is not required under such Act.
This corporation is authorized to issue more than one class of stock or more
than one series of any class. The voting powers, designations, preferences,
limitations, restrictions and relative rights of the various classes of stock or
series thereof and the qualifications, limitations or restrictions of such
rights are prescribed or fixed by the board of directors of the corporation.
Pursuant to Nevada Revised Statutes 78.195, the corporation shall furnish to any
stockholder, upon request and without charge, a copy of any statement or summary
setting forth in full or summarizing the voting powers, designations,
preferences, limitations, restrictions and relative rights of the various
classes of stock of the corporation or series thereof. A copy of such statement
or summary may be obtained from the Secretary of the corporation.
<PAGE> 1
EXHIBIT 4(g)
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
[PICTURE]
NUMBER SHARES
119
SEE LEGENDS ENDORSED ON REVERSE SIDE
SERIES E CONVERTIBLE
UNIVERSAL MEDICAL SYSTEMS, INC. PREFERRED STOCK
AUTHORIZED CAPITAL STOCK
25,000,000 COMMON SHARES $.001 PAR VALUE
10,000,000 PREFERRED SHARES $.0001 PAR VALUE
THIS CERTIFIES THAT ____________________________________________is the owner of
________________________________________ fully paid and non-assessable Shares of
THE PREFERRED SHARES OF UNIVERSAL MEDICAL SYSTEMS, INC.
transferable only on the books of the Corporation by the holder hereof in person
or by duly authorized Attorney upon surrender of this Certificate properly
endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and to be sealed with the Seal of the
Corporation this _____________ day of ________________ A.D. 19 ________________.
/s/ /s/
- - ----------------------------- -------------------------------
SECRETARY PRESIDENT
[SEAL]
<PAGE> 2
FOR VALUE RECEIVED, _______________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
________________________________________________________________________________
__________________________________________________________________________Shares
represented by the within Certificate and do hereby irrevocably constitute and
appoint
________________________________________________________________________Attorney
to transfer the said Shares on the books of the within named Corporation with
full power of substitution in the premises.
Dated ______________________ 19____.
In presence of
________________________________
________________________________
NOTICE. THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE. IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
The shares represented by this certificate
have not been registered under the Securities
Act of 1933. The shares have been acquired for
investment and may not be sold, transferred or
assigned in the absence of an effective
registration statement for these shares under
the Securities Act of 1933 or an opinion of
the Company's legal counsel that registration
is not required under such Act.
This corporation is authorized to issue more than one class of stock or more
than one series of any class. The voting powers, designations, preferences,
limitations, restrictions and relative rights of the various classes of stock or
series thereof and the qualifications, limitations or restrictions of such
rights are prescribed or fixed by the board of directors of the corporation.
Pursuant to Nevada Revised Statutes 78.195, the corporation shall furnish to any
stockholder, upon request and without charge, a copy of any statement or summary
setting forth in full or summarizing the voting powers, designations,
preferences, limitations, restrictions and relative rights of the various
classes of stock of the corporation or series thereof. A copy of such statement
or summary may be obtained from the Secretary of the corporation.
<PAGE> 1
EXHIBIT 4(h)
WARRANT AGREEMENT
THIS WARRANT AGREEMENT (this "Agreement") is entered into this 25th day
of January, 1996, by and between Universal Medical Systems, Inc., a Nevada
corporation, whose address is 13825 Icot Boulevard Suite 613, Clearwater,
Florida 34620 (the "Company"), and Dennis D. Cole, Esq., whose address is 13825
Icot Boulevard Suite 613, Clearwater, Florida 34620, as Warrant Agent (the
"Warrant Agent").
Premises
A. The Company has proposed to issue Class 1A Common Stock Purchase
Warrants as hereinafter described (the "Warrants") to purchase Shares of the
Company's $.001 par value common stock at an exercise price of one and no/100
dollars ($1.00) per share.
B. The Company wishes the Warrant Agent to act on behalf of the Company,
and the Warrant Agent is willing to act in connections with the issuance,
division, transfer, exchange, and exercise of Warrants.
Agreement
In consideration of the foregoing and for the purpose of defining the
terms and provisions of the Warrants and the respective rights and obligations
thereunder of the Company and the registered owners of the Warrants (the
"Holders"), the Company and the Warrant Agent hereby agree as follows:
Section 1. Appointment of Warrant Agent. The Company hereby appoints
the Warrant Agent to act as agent for the Company in accordance with the
instructions hereinafter in this Agreement set forth, and the Warrant Agent
hereby accepts such appointment.
Section 2. Transferability and Form of Warrant.
2.1 Registration. The Warrant shall be numbered and shall be
registered in a Warrant register as they are issued. The Company and the Warrant
Agent shall be entitled to treat the Holder of any Warrant as the owner in fact
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to or interest in such Warrant on the part of any other person, and
shall not be liable for any registration or transfer of Warrants which are
registered or to be registered in the name of a fiduciary or the nominee of a
fiduciary unless made with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration or transfer, or
with knowledge of such facts that its participation therein amounts to bad
faith.
2.2 Transfer. The Warrants are fully transferable. Warrants
shall be transferable only on the books of the Company maintained at the office
of the Warrant Agent in the city of Clearwater, State of Florida, on delivery
thereof duly endorsed by Holder or by his duly authorized attorney or
representative, or accompanied by proper evidence of succession, assignment, or
authority to transfer. In all cases of transfer by an attorney, the original
letter of attorney, duly approved, or an official copy thereof, duly certified,
shall be
<PAGE> 2
deposited and remain with the Warrant Agent. In case of transfer by executors,
administrators, guardians, or other legal representatives, duly authenticated
evidence of their authority shall be produced, and may be required to be
deposited and remain with the Warrant Agent in its discretion. On any
registration of transfer, the Warrant Agent shall countersign and deliver a new
Warrant or Warrants to the person entitled thereto.
2.3 Form of Warrants. The text of the Warrant and of the form of
election to purchase Shares shall be substantially as set forth in Exhibit "A"
attached hereto. The price per Share and the number of Shares issuable on
exercise of Warrants are as indicated on the face of each Warrant. The Warrants
shall be executed on behalf of the Company by the manual or facsimile signature
of the present or any future secretary or assistant secretary of the Company.
Warrants shall be dated as of the date of countersignature thereof by the
Warrant Agent either on initial issuance or on division, exchange, substitution,
or transfer.
Section 3. Countersignature of Warrants. The Warrants shall be
countersigned by the Warrant Agent (or any successor to the Warrant Agent then
acting as Warrant Agent under this Agreement) and shall not be valid for any
purpose unless so countersigned. Warrants may be countersigned, however, by the
Warrant Agent (or by its successor as Warrant Agent) and may be delivered by the
Warrant Agent, notwithstanding that the persons whose manual or facsimile
signatures appearing thereon as proper officers of the Company shall have ceased
to be such officers at the time of such countersignature, issuance, or delivery.
The Warrant Agent shall, on written instructions of the president or the
secretary of the Company, countersign, issue, and deliver Warrants entitling the
Holders thereof to purchase the Shares provided for in the instructions and
shall countersign and deliver Warrants as otherwise provided in this Agreement.
Section 4. Exchange of Warrants. The Warrants may be exchanged for
another Warrant or Warrants entitling the Holder thereof to purchase a like
aggregate number of Shares as the Warrant or Warrants surrendered then entitle
him to purchase. Any Holder of a Warrant desiring to exchange Warrants shall
make such request in writing delivered to the Warrant Agent, and shall
surrender, properly endorsed, the Warrant or Warrants to be so exchanged.
Thereupon, the Warrant Agent shall countersign and deliver to the person
entitled thereto a Warrant or Warrants, as the case may be, as so requested.
Section 5. Term of Warrants; Exercise of Warrants. Each Holder shall
have the right, which may be exercised beginning at 12:00 a.m. on January 25,
1996, and expiring at 11:59 p.m., Florida time on January 31, 1999, to purchase
from the Company the number of fully paid and non-assessable Shares to which the
Holder may at the time be entitled to purchase pursuant to such Warrants,
subject to the conditions set forth in this paragraph, on surrender to the
Company at the principal office in the city of Clearwater, Florida of the
Warrant Agent with the form of election to purchase on the reverse thereof duly
completed and signed, and on payment to the Warrant Agent for the account of the
Company of the Warrant Price as defined and determined in accordance with the
provisions of Sections 9 and 10 hereof, for the number of Shares in respect of
which such Warrants are then exercised. Payment of the Warrant Price shall be
made in cash or by cashier's check.
2
<PAGE> 3
Subject to subsections 5.1 and 5.2 of this section, on such surrender of
Warrants, and payment of the Warrant Price as aforesaid, the Company shall
issue and cause to be delivered with all reasonable dispatch to or on the
written order of the Holder and in such name or names as the Holder may
designate, a certificate or certificates for the number of full Shares so
purchased on the exercise of such Warrants. No fractional Shares shall be
issuable on such surrender. Such certificate or certificates shall be deemed to
have been issued and any person so designated to be named therein shall be
deemed to have become a Holder of Record of such Shares as of the date of the
surrender of such Warrants and payment of the Warrant Price, as aforesaid;
provided, however, that if, at the date of surrender of such Warrants and
payment of such Warrant Price, the transfer books for the Shares or other class
of stock purchasable on the exercise of such Warrants shall be closed, the
certificates for the Shares in respect of which such Warrants are then
exercised shall be issuable as of the date on which such books shall next be
opened (whether before or after expiration of the exercise period) and until
such date the Company shall be under no duty to deliver any certificate for
such Shares; provided further, however, the transfer books of record, unless
otherwise required by law, shall not be closed at any one time for a period
longer than 60 days. The right of purchase represented by the Warrants shall be
exercisable, at the election of the Holders thereof, either in full or from
time-to-time in part and, in the event that any Warrant is exercised in respect
of less than all of the Shares specified therein at any time prior to the date
of expiration of the Warrants, a new Warrant or Warrants will be issued for the
remaining number of Shares, and the Warrant Agent is hereby irrevocably
authorized to countersign and to deliver the required new Warrants pursuant to
the provisions of this section and of Section 3 hereof and the Company, whether
required by the Warrant Agent, will supply the Warrant Agent with Warrants duly
executed on behalf of the Company for such purpose.
5.1 The Warrants may not be exercised by the Holders in the
absence of an effective registration statement under the Securities Act of 1933,
as amended (the "Securities Act"), and registration or qualification under
applicable state blue sky laws pertaining to the Shares issuable on exercise of
the Warrants or there is an available exemption from such federal or state
registration requirements.
5.2 If the Company is required to file a registration statement
in accordance with the provisions of subsection 5.1, the Company shall take all
steps reasonably necessary to permit the exercise of the Warrants and the
issuance of the Shares under the applicable state securities laws of those
states in which the Warrants were originally issued by the Company. The Company
will take such reasonable steps which it determines, in its sole discretion,
are necessary to permit the exercise of Warrants and the issuance of
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<PAGE> 4
the Shares under the laws of any other state in which a Holder then resides on
the written request to do so by such Holder, but in no event shall the Company
be required to consent to the general service of process in any state other
than those states in which the Warrants were originally issued. Holders who
reside in any state where the Company cannot, with the exercise of reasonable
diligence and without consenting to general service of process, obtain
qualification for the exercise of the Warrants and the issuance of the Shares
may not, as a result thereof, be able to exercise their Warrants, and the
Company is under no obligation to make such exercise possible in such
circumstances. In the event that the Company determines to proceed with the
qualification of the exercise of the Warrants and the issuance of the Shares
under the securities laws of a particular state, then the exercise of such
Warrants shall not be effective and the Shares shall not be issued until such
qualification becomes effective. The costs of obtaining such state
qualification shall be borne by the Company.
5.3 The Company shall promptly notify the Warrant Agent of the
effective date of any registration statement which the Company is required to
file under subsection 5.1 and the date on which the Shares become qualified or
registered under the state securities laws of any state in which the Company
obtains qualification or registration with respect to such Shares The Warrant
Agent shall not issue any Shares with respect to any Warrant surrendered for
exercise unless such Warrants are surrendered and received by the Warrant Agent
during a period that the registration statement is effective. Furthermore, the
Warrant Agent shall not issue any Shares on the exercise of any Warrants
received from a Holder who is a resident of a state with respect to which the
Shares issuable on exercise of the Warrants are not qualified or registered.
Section 6. Payment of Taxes. The Company will pay all documentary stamp
taxes, if any, attributable to the initial issuance of Shares issuable on the
exercise of Warrants; provided, however, that the Company shall not be required
to pay any tax or taxes which may be payable in respect of any transfer involved
in the issuance or delivery of any Warrants or certificates for Shares.
Section 7. Mutilated or Missing Warrants. In case any of the Warrants
shall be mutilated, lost, stolen, or destroyed, the company may at its
discretion issue and the Warrant Agent shall countersign and deliver in exchange
and substitution for and on cancellation of the mutilated Warrant, or in lieu of
and as substitution for the Warrant lost, stolen, or destroyed, a new Warrant of
like tenor and representing an equivalent right or interest; but only upon
receipt of evidence satisfactory to the Company and the Warrant Agent of such
loss, theft, or destruction of such Warrant and indemnity, if requested, also
satisfactory to them. Applicants for such substitute Warrants shall also comply
with such other reasonable regulations and pay such other reasonable charges as
the Company or the Warrant Agent may prescribe.
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<PAGE> 5
Section 8. Reservation of Shares; Redemption of Warrants.
8.1 Reservation of Shares. There shall, at all times, be
reserved, out of the authorized and unissued Shares a number of Shares
sufficient to provide for the exercise of the rights of purchase represented
by the outstanding Warrants. The transfer agent for the Shares and every
subsequent transfer agent for any Shares of the Company's stock issuable on
the exercise of any of the rights of purchase aforesaid will be irrevocably
authorized and directed at all times to reserve such number of authorized and
issued shares as shall be requisite for such purpose. The Company will keep a
copy of this Agreement on file with the transfer agent for the Shares and with
every subsequent transfer agent for any Shares of the Company's capital stock
issuable on the exercise of the rights of purchase represented by the Warrants.
The Warrant Agent is hereby irrevocably authorized to requisition from
time-to-time from such transfer agent, stock certificates required to honor
outstanding Warrants on exercise thereof in accordance with the terms of this
Agreement. The Company will supply such transfer agent with duly executed
stock certificates for such purpose and will provide or otherwise make
available any cash which may be payable as provided in Section 11 hereof. All
Warrants surrendered in the exercise of the rights thereby evidenced shall be
canceled by the Warrant Agent and shall thereafter be delivered to the Company.
Promptly after the date of expiration of the Warrants, the Warrant Agent shall
certify to the Company the total aggregate amount of Warrants then outstanding,
and thereafter no Shares shall be subject to reservation in respect of such
Warrants.
8.2 Redemption of Warrants. There are no provisions for
redemption of the Warrants by the Company.
Section 9. Warrant Price. The price at which Shares shall be
purchasable on exercise of the Warrants shall be one and no/100 dollars ($1.00)
per Share.
Section 10. Adjustment of Warrant Price and Number of Shares. The number
and kind of securities purchasable on the exercise of each Warrant and the
Warrant Price shall be subject to adjustment to reflect or account for any
forward or reverse splits of the Company's common stock, stock or cash dividend,
or recapitalization which occurs during the exercise period and before the
Expiration Date.
10.1 Preservation of Purchase Rights on Reclassification,
Consolidation, Etc. In case of any consolidation of the company with or merger
of the Company into another corporation or in case of any sale or conveyance to
another corporation of the property of the Company as an entirety or
substantially as an entirety, the Company or such successor or purchasing
corporation, as the case may be, shall execute with the Warrant Agent an
agreement that each Holder of a Warrant shall have the right thereafter on
payment of the Warrant Price in effect immediately prior to such action to
purchase on exercise of each Warrant the kind and amount of Shares and other
securities and property which he would
5
<PAGE> 6
have owned or have been entitled to receive after the happening of such
consolidation, merger, sale, or conveyance had such Warrant been exercised
immediately prior to such action. The Company shall mail by first class mail,
postage prepaid, to the Holder of each Warrant notice of the execution of any
such agreement. The provisions of this subsection 10.1 shall similarly apply to
successive consolidations, mergers, sales, or conveyances. The Warrant Agent
shall be under no duty or responsibility to determine the correctness of any
provisions contained in any such agreement relating either to the kind or
amount of shares of stock or other securities or property receivable on
exercise of Warrants or with respect to the method employed and provided
therein for any adjustments.
Section 11. Fractional Interests. The Company shall not be required to
issue fractional Shares on the exercise of Warrants. If more than one Warrant
shall be presented for exercise in full at the same time by the same Holder,
the number of full Shares which shall be issuable on the exercise thereof shall
be computed on the basis of the aggregate number of Shares represented by the
Warrants so presented. If any fraction of a Share would, except for the
provisions of this Section 11, be issuable on the exercise of any Warrant (or
specified portion thereof), the Company shall pay an amount in cash equal to
the current value of such fraction computed on the basis of (i) the closing bid
price of the Company's common stock as reported by the National Quotation
Bureau, Inc., on its "pink sheets" or "electronic bulletin board" or, if the
common stock is reported by NASDAQ, the closing bid price reported by NASDAQ,
on the last business day prior to the date of exercise, if the Shares are
traded in the over-the-counter market, or (ii) the last reported sales price of
the Shares on the national stock exchange on which the shares are listed on the
last business day prior to the date of exercise on which such a sale shall have
been effected, if the Shares are listed on such an exchange.
Section 12. No Right as Shareholders; Notice to Warrant Holders. Nothing
contained in this Agreement or in any of the Warrants shall be construed as
conferring on the Holders or their transferees the right to vote or to receive
dividends or to consent or to receive notice as shareholders in respect of the
meeting of shareholders for the election of directors of the Company or any
other matter, or any rights whatsoever as Shareholders of the Company.
Section 13. Disposition of Proceeds on Exercise of Warrants; Inspection
of Warrant Agreement. The Warrant Agent shall account promptly to the Company
with respect to Warrants exercised and concurrently pay to the Company all
moneys received by the Warrant Agent for the purchase of the Company's Shares
through the exercise of such Warrants. The Warrant Agent shall keep copies of
this Agreement and any notices given or received hereunder available for
inspection by Holders of Warrants during normal business hours at its principal
office in the city of Clearwater, State of Florida. The Company shall supply the
Warrant Agent, from time-to-time, with such numbers of copies of this Agreement
as the Warrant Agent may request.
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<PAGE> 7
Section 14. Merger or Consolidation or Change of Name of Warrant Agent.
Any corporation into which the Warrant Agent may be merged or with which it may
be consolidated, or any corporation resulting from any merger or consolidation
to which the Warrant Agent shall be a party, or any corporation succeeding to
the corporate trust business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto; provided, that such
corporation would be eligible for appointment as a successor Warrant Agent under
the provisions of Section 16 hereof. In case at the time such successor to the
Warrant Agent shall succeed to the agency created by this Agreement, any of the
Warrants shall have been countersigned but not delivered, any successor to the
Warrant Agent may adopt the countersignature of the original Warrant Agent and
deliver such Warrants so countersigned; and in case at that time any of the
Warrants shall not have been countersigned, any successor to the Warrant Agent
may countersign such Warrants either in the name of the predecessor Warrant
Agent or in the name of the successor Warrant Agent, and in all such cases,
Warrants shall have the full force provided in the Warrants and in this
Agreement. In case at any time the name of the Warrant Agent shall be changed
and at such time any of the Warrants shall have been countersigned but not
delivered, the Warrant Agent may adopt the countersignature under its prior name
and deliver Warrants so countersigned; and in case at that time any of the
Warrants shall not have been countersigned, the Warrant Agent may countersign
such Warrants either in its prior name or in its changed name; and in all such
cases such Warrants shall have the full force provided in the Warrants and in
this Agreement.
Section 15. Concerning the Warrant Agent. The Warrant Agent undertakes
the duties and obligations imposed by this Agreement on the following terms and
conditions, by all of which the Company and the Holders of Warrants, by their
acceptance thereof shall be bound:
15.1 The statements contained herein and in the Warrants shall be
taken as statements of the Company, and the Warrant Agent assumes no
responsibility for the correctness of any of the same except such as describe
the Warrant Agent or action taken by it. The Warrant Agent assumes no
responsibility with respect to the distribution of the Warrants except as herein
otherwise provided.
15.2 The Warrant Agent shall not be responsible for any failure
of the Company to comply with any of the covenants contained in this Agreement
or in the Warrants to be compiled with by the Company.
15.3 The Warrant Agent may execute and exercise any of the rights
or powers hereby vested in it or perform any duty hereunder either itself or by
or through its attorney, agents or employees, and the Warrant Agent shall not be
answerable or accountable for any act, default, neglect, or misconduct of any
such attorney, agents, or employees or for any loss to the Company resulting
from such neglect or misconduct; provided, reasonable care shall have been
exercised in the selection and continued employment thereof.
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15.4 The Warrant Agent may consult at any time with legal counsel
satisfactory to it (who may be counsel for the Company) and the Warrant Agent
shall incur no liability or responsibility to the Company or to any Holder of
any Warrant in respect of any action taken, suffered, or omitted by it hereunder
in good faith and in accordance with the opinion or the advise of such counsel.
15.5 Whenever in the performance of its duties under this
Agreement the Warrant Agent shall deem it necessary or desirable that any fact
or matter be proved or established by the Company prior to taking or suffering
any action hereunder; such fact or matter (unless other evidence in respect
thereof be herein specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by the president or a vice
president, or the treasurer, or the secretary of the Company and delivered to
the Warrant Agent; and such certificate shall be full authorization to the
Warrant Agent for any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance on such certificate.
15.6 The Company agrees to pay the Warrant Agent reasonable
compensation for all services rendered by Warrant Agent in the execution of this
Agreement, to reimburse the Warrant Agent for all expenses, taxes, and
governmental charges and other charges of any kind and nature incurred by the
Warrant Agent in the execution of this Agreement, and to indemnify the Warrant
Agent and save it harmless against any and all liabilities, including judgments,
costs, and counsel fees, for anything done or omitted by the Warrant Agent in
the execution of this Agreement, except as a result of the Warrant Agent's
negligence or bad faith.
15.7 The Warrant Agent shall be under no obligation to institute
any action, suit, or legal proceeding or to take any other action likely to
involve expense unless the Company or one or more Holders of Warrants shall
furnish the Warrant Agent with reasonable security and indemnity for any costs
and expenses which may be incurred, but this provision shall not affect the
power of the Warrant Agent to take such action as the Warrant Agent may consider
proper, whether with or without any such security or indemnity. All rights of
action under this Agreement or under any of the Warrants may be enforced by the
Warrant Agent without the possession of any of the Warrants or the production
thereof at any trial or other proceeding relative thereto, and any such action,
suit, or proceeding instituted by the Warrant Agent, and any recovery of
judgment shall be for the ratable benefit of the Holders of Warrants, as their
respective rights or interest may appear.
15.8 The Warrant Agent and any stockholder, director, officer, or
employee of the Warrant Agent may buy, sell, or deal in any of the Warrants or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to or otherwise act as fully and freely as though it were not Warrant
Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from
acting in any other capacity for the Company or for any other legal entity.
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15.9 The Warrant Agent shall act hereunder solely as agent, and
its duties shall be determined solely by the provisions hereof. The Warrant
shall not be liable for anything which it may do or refrain from doing in
connection with this Agreement, except for its own negligence or bad faith.
15.10 The Warrant Agent will not incur any liability or
responsibility to the Company or to any Holder of any Warrant for any action
taken in reliance on any notice, resolution, waiver, consent, order,
certificate, or other paper, document, or instrument reasonably believed by it
to be genuine and to have been signed, sent, or presented by the proper party or
parties.
15.11 The Warrant Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Warrant Agent) or in respect of the
validity or execution of any Warrant (except its countersignature thereof); nor
shall the Warrant Agent by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any Shares
(or other stock) to be issued pursuant to this Agreement or any Warrant or as to
whether any Shares (or other stock) will when issued be validly issued, fully
paid, and non-assessable or as to the Warrant Price, or the number or kind or
amount of Shares or other securities or other property issuable on exercise of
any Warrant.
15.12 The Warrant Agent is hereby authorized and directed to
accept the instructions with respect to the performance of its duties hereunder
from the chairman of the board or the president or a vice president or the
secretary or the treasurer of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and shall not be liable
for any action taken by it in good faith in accordance with instructions of any
such officer.
Section 16. Change of Warrant Agent. The Warrant Agent may resign and be
discharged from its duties under this Agreement by giving to the Company 30 days
notice in writing. The Warrant Agent may be removed by like notice to the
Warrant Agent from the Company. If the Warrant Agent shall resign or be removed
or shall otherwise become incapable of acting, the Company shall appoint a
successor to the Warrant Agent. If the Company shall fail to make such
appointment within a period of 30 days after such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Warrant Agent or by the Holder or a Warrant (who shall with such
notice submit his Warrant for inspection by the Company), then the Holder of any
Warrant may apply to any court of competent jurisdiction for the appointment of
a successor to the Warrant Agent. Any successor Warrant Agent, whether appointed
by the Company or such a court, shall be a bank, trust company, or securities
transfer agency, in good standing, incorporated under the laws of the states of
California, Delaware, New Jersey, New York, Nevada or Utah or of the United
States of America. After appointment the successor Warrant Agent shall be vested
with the same powers, rights, duties, and responsibilities as if it had been
originally named as Warrant Agent without further act or deed; but the former
Warrant Agent shall deliver and transfer to the successor Warrant Agent any
property at the
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time held by it hereunder, and execute and deliver any further assurance,
conveyance, act, or deed necessary for the purpose. Failure to file any notice
provided for in this section 16; however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Warrant
Agent or the appointment of the successor Warrant Agent, as the case may be.
In the event of such resignation or removal, the successor Warrant Agent shall
mail, first class, to each Holder, written notice of such removal or
resignation and the name and address of such successor Warrant Agent.
Section 17. Identity of Transfer Agent. Forthwith on the appointment of
any subsequent Transfer Agent for the Company's Shares, or any other Shares of
the Company's capital stock issuable on the exercise of the rights of purchase
represented by the Warrants, the company will file with the Warrant Agent a
statement setting forth the name and address of such Transfer Agent.
Section 18. Notices. Any notice pursuant to this Agreement by the
Company or by the Holder of any Warrant to the Warrant Agent, or by the Warrant
Agent or by the Holder of any Warrant to the Company, shall be in writing and
shall be deemed to have been duly given if delivered or mailed certified mail,
return receipt requested (a) if to the Company to Universal Medical Systems,
Inc., 13825 Icot Boulevard Suite 613, Clearwater, Florida 34620 and (b) if to
the Warrant Agent, to its main office: Dennis D. Cole, Esq., 13825 Icot
Boulevard Suite 613, Clearwater, Florida 34620. Each party hereto may from
time-to-time change the address to which notices to it are to be delivered or
mailed hereunder by notice in writing to the other party.
Section 19. Supplements and Amendments. The Company and the Warrant
Agent may from time-to-time supplement or amend this Agreement, without the
approval of any Holders of Warrants, in order to cure any ambiguity or to
correct or supplement any provision contained herein or to make any other
provisions in regard to matters or questions arising hereunder which the
Company and the Warrant Agent may deem necessary or desirable and which shall
not be inconsistent with the provisions of the Warrants and which shall not
adversely affect the interest of the Holders of the Warrants. In this regard,
but not by way of limitation, establishing an earlier date of exercise without
a change in the expiration date of the Warrants set forth in Section 5 or
extending the period for exercise without a change in the date on which the
Warrants are first exercisable set forth in Section 5 shall not be deemed to
adversely affect the interests of the Holders.
Section 20. Successors. All the covenants and provisions of this
Agreement by or for the benefit of each party shall be binding upon and shall
inure to the benefit of the parties hereto and to their respective successors
and assigns hereunder.
Section 21. Merger or Consolidation of the Company. The Company will not
merge or consolidate with or into any other corporation unless the corporation
resulting from such merger or consolidation (if not the Company) shall expressly
assume, by supplemental agreement satisfactory in form to the Warrant agent and
executed and delivered to the Warrant Agent, the due and punctual performance
and observance of each and every covenant and condition of this Agreement to be
performed and observed by the Company.
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Section 22. Applicable Law. This Agreement and each Warrant issued
hereunder shall be deemed to be a contract made under the laws of the State of
Nevada and for all purposes shall be construed in accordance with the laws of
said State.
Section 23. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give any person or corporation other than the Company, the
Warrant Agent, and the Holders of the Warrants any legal or equitable right,
remedy, or claim under this Agreement; but this Agreement shall be for the
sole and exclusive benefit of the Company, the Warrant Agent, and the Holders of
the Warrants.
Section 24. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
Section 25. Captions. The captions of the sections and subsections of
this Agreement have been inserted for convenience only and shall have no
substantive effect.
IN WITNESS WHEREOF: the parties hereto have caused this Agreement to be
duly executed all as of the date first above written.
Universal Medical Systems, Inc.
By:/s/ Myron A. Baker
-----------------------------
Myron A. Baker
Chairman & CEO
Dennis D. Cole, Esq.
By:/s/ Dennis D. Cole
-----------------------------
Dennis D. Cole, Esq.
<PAGE> 1
EXHIBIT 4(i)
EXERCISABLE AFTER 12:00 A.M. ON JANUARY 25, 1996
VOID AFTER 11:59 P.M. JANUARY 31, 1999
COMMON STOCK PURCHASE WARRANT (CLASS 1A)
CLASS 1A WARRANT NUMBER NUMBER OF WARRANTS
1 *50,000*
UNIVERSAL MEDICAL SYSTEMS, INC.
This Certifies That, FOR VALUE RECEIVED PFIZER MEDICAL SYSTEMS, INC.
or registered assigns, (the "Holder") is the owner of the number of Class 1A
Common Stock Purchase Warrants ("Class 1A Warrants") specified above. Each Class
1A Warrant initially entitles the Holder to purchase, subject to the terms and
conditions set forth in this Warrant Certificate and the Warrant Agreement
(Class 1A Warrants), as hereinafter defined, one fully-paid and nonassessable
share of Common Stock $0.001 par value, of Universal Medical Systems, Inc. a
Nevada corporation, (the "Company") at any time between January 25, 1996, and
the Expiration Date (as hereinafter defined), upon the presentation and
surrender of this Warrant Certificate with the Form of Exercise on the reverse
side hereof duly executed at the principal office of Dennis D. Cole, Esq., as
Warrant Agent, or his substitute (the "Warrant Agent") accompanied by payment in
lawful money of the United States of America in cash or by official bank or
certified check payable to the Company of $1.00 per share.
This Warrant Certificate and each Class 1A Warrant represented hereby are
issued pursuant to and are subject in all respects to the terms and conditions
set forth in the Warrant Agreement (the "Warrant Agreement") between the Company
and the Warrant Agent. A copy of the Warrant Agreement is on file at the
principal office of the Warrant Agent, currently located at 13825 Icot Boulevard
Suite 613, Clearwater, Florida 34620.
Each Class 1A Warrant represented hereby is exercisable at the option of
the registered holder, but no fractional shares of Common Stock will be issued.
In the case of the exercise of less than all the Class 1A Warrants represented
hereby, the Company shall cancel this Warrant Certificate upon the surrender
hereof and shall execute and deliver a new Warrant Certificate(s) of like tenor,
which the Warrant Agent shall issue for the balance of such Class 1A Warrant.
The Term "Expiration Date: shall mean 11:59 P.M. (Florida time) on
January 31, 1999, or such earlier date as the Class 1A Warrants shall be
redeemed. If such date shall in the State of Florida be a holiday or a day on
which banks are authorized to close, the Expiration Date shall Mean 11:59 P.M.
(Florida time) the next following date which in the State of Florida is not a
holiday or a day in which banks are authorized to close.
This Class 1A Warrant may not be exercised unless a registered statement
under the Securities Act of 1933, as amended, and under the applicable state
securities law with respect to such securities, is effective or there is an
available an exemption from such Federal and State registration requirements and
the Company may have an obligation to file a registration statement to permit
exercise of this Class 1A Warrant. This Class 1A Warrant shall not be
exercisable by a Registered Holder in any state where such exercise would be
unlawful.
ADDITIONAL PROVISIONS OF THIS CLASS 1A WARRANT ARE CONTAINED ON THE REVERSE
HEREOF.
Dated: January 25, 1996 By:/s/
-----------------------------
President
Attest:/s/
-----------------------------
Secretary
pg 1 of 2
<PAGE> 2
1. EXERCISE OF THE WARRANT. This Class 1A Warrant may be exercised by the
holder, in whole at any time or in part from time to time prior the Expiration
Date, by the surrender of this Warrant Certificate (with the Form of Exercise
below duly executed) at the principal office of Warrant Agent together with
proper payment of the Exercise Price of the proportionate part thereof if this
Class 1A Warrant is exercised in part. Payment for shares of Common Stock
issuable upon exercise of the Class 1A Warrants ("Warrant Shares") shall be made
by check payable to the order of the Company. If this warrant Certificate is
exercised in part, this Class 1A Warrant must be exercised for the number of
whole Warrant Shares, and the Holder is entitled to receive a new Warrant
Certificate covering the number of whole Warrant Shares in respect of which this
Class 1A Warrant has not been exercised. Upon such surrender of this Class 1A
Warrant, the Company will (a) issue a certificate(s) in the name of the Holder
for the largest number of whole Warrant Shares to which the Holder shall be
entitled and, if this Class 1A Warrant is exercised in whole in lieu of any
fractional Warrant Share to which the Holder shall be entitled, cash equal to
the fair value of such fractional share (determined in accordance with the
Warrant Agreement), and (b) deliver the other securities and properties
receivable upon the exercise of the Class 1A Warrant, or the proportionate part
thereof if this Class 1A Warrant is exercised in part, pursuant to the
provisions of the Warrant Agreement.
2. RESERVATION OF WARRANT SHARES. The Company agrees that prior to the
Expiration Date, it will at all times have authorized and in reserve, and will
keep available, solely for issuance or delivery upon the exercise of this Class
1A Warrant, the Warrant Shares and other securities and properties as from time
to time shall be receivable on the exercise of this Class 1A Warrant, free and
clear of all restriction on sale or transfer and free and clear of all
preemptive rights.
3. PROTECTION AGAINST DILUTION. These Warrants contain Anti-Dilutive Rights, as
described in Section 10 of the Warrant Agreement.
4. FULLY-PAID SHARES. The Company agrees that the Warrant Shares delivered on
the exercise of this Class 1A Warrant, shall at the time of such delivery, be
validly issued, outstanding and fully-paid
5. LOSS, ETC OF WARRANT. Upon receipt of evidence satisfactory to the Company of
the loss, theft, destruction or mutilation of this Warrant, and indemnity
reasonably satisfactory to the Company, if lost, stolen or destroyed, and upon
surrender and cancellation of this Warrant Certificate if mutilated, and upon
reimbursement of the Company's reasonable incidental expenses, the Company shall
execute and deliver the Holder a new Class 1A Warrant of like date, tenor and
denomination.
6. COMBINATION, SPLIT UP OR EXCHANGE AND TRANSFER. Subject to the provisions of
the Warrant Agreement this Warrant Certificate may be (a) exchanged for another
Warrant Certificate(s) in any denominations (whole shares only) entitling the
Holder to purchase a like number of Warrant Shares or (b) presented for transfer
at the office of the Warrant Agent, by the Holder or his assigns, in person or
by attorney duly authorized in writing, in the manner provided in the Warrant
Agreement. Upon any such transfer, a new Warrant Certificate(s) of different
denominations evidencing in a aggregate the right to purchase a like number of
Warrant Shares shall be issued to the transferee upon Surrender of this Warrant
Certificate in accordance with instructions set forth in the Assignment set
forth below or furnished to the agent.
7. WARRANT HOLDER NOT STOCKHOLDER. Except as otherwise provided herein and in
the Warrant Agreement, this Class 1A Warrant does not confer upon the Holder
any right to vote or to consent or to receive notice as a stockholder, of the
Company, as stockholder prior to the exercise hereof.
8. HEADINGS. The headings of this Warrant Certificate have been inserted as
matter of convenience and shall not affect the construction hereof.
9. APPLICABLE LAW. This Class 1A Warrant shall be governed by and construed in
accordance with the laws of the State of Nevada.
FORM OF EXERCISE
TO WARRANT AGENT:
The undersigned Holder other the within Class 1A Warrants, Hereby (1) exercises
his rights to purchase shares of Common Stock, par value $0 001 per share of
Universal Medical Systems, Inc., which the undersigned is entitle to purchase
under the terms of the within Class 1A Warrant, and (2) makes payment in full
for the number of shares of Common Stock so purchased by payment of $_____.
Please issue the Certificate for Shares of Common Stock in the name of, and pay
any cash for any fractional share to:
_______________________________________________________________________________
Print or Type Name
_______________________________________________________________________________
Social Security or other Identifying Number
_______________________________________________________________________________
Street Address
_______________________________________________________________________________
City State Zip Code
_______________________________________________________________________________
and, if said number of shares shall not be all the shares purchasable hereunder,
please issue a new Warrant Certificate(s) for the unexercised portion of the
within Class 1A Warrant to:
_______________________________________________________________________________
Print or Type Name
_______________________________________________________________________________
Social Security or other Identifying Number
_______________________________________________________________________________
Street Address
_______________________________________________________________________________
City State Zip Code
Dated______________________ _______________________________________
Signature
(Signature must conform in all
respect to the name of Holder as
specified the face of the Warrants.)
pg 2 of 2
<PAGE> 1
EXHIBIT 4(j)
WARRANT AGREEMENT
THIS WARRANT AGREEMENT (this "Agreement") is entered into this 22nd day
of January, 1996, by and between Universal Medical Systems, Inc., a Nevada
corporation, whose address is 13825 Icot Boulevard Suite 613, Clearwater,
Florida 34620 (the "Company"), and American Stock Transfer & Trust Company,
whose address is 40 Wall Street, 46th Floor, New York, New York 10005, as
Warrant Agent (the "Warrant Agent").
Premises
A. The Company has proposed to issue Redeemable Class A Common Stock
Purchase Warrants as hereinafter described (the "Warrants") to purchase Shares
of the Company's $.001 par value common stock at an exercise price of three and
no/100 dollars ($3.00) per share.
B. The Company wishes the Warrant Agent to act on behalf of the Company,
and the Warrant Agent is willing to act in connections with the issuance,
division, transfer, exchange, and exercise of Warrants.
Agreement
In consideration of the foregoing and for the purpose of defining the
terms and provisions of the Warrants and the respective rights and obligations
thereunder of the Company and the registered owners of the Warrants (the
"Holders"), the Company and the Warrant Agent hereby agree as follows:
Section 1. Appointment of Warrant Agent. The Company hereby appoints
the Warrant Agent to act as agent for the Company in accordance with the
instructions hereinafter in this Agreement set forth, and the Warrant Agent
hereby accepts such appointment.
Section 2. Transferability and Form of Warrant.
2.1 Registration. The Warrant shall be numbered and shall be
registered in a Warrant register as they are issued. The Company and the Warrant
Agent shall be entitled to treat the Holder of any Warrant as the owner in fact
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to or interest in such Warrant on the part of any other person, and
shall not be liable for any registration or transfer of Warrants which are
registered or to be registered in the name of a fiduciary or the nominee of a
fiduciary unless made with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration or transfer, or
with knowledge of such facts that its participation therein amounts to bad
faith.
2.2 Transfer. The Warrants are fully transferable. Warrants
shall be transferable only on the books of the Company maintained at the office
of the Warrant Agent in the city of New York, State of New York, on delivery
thereof duly endorsed by Holder or by his duly authorized attorney or
representative, or accompanied by proper evidence of succession, assignment, or
authority to transfer. In all cases of transfer by an attorney, the original
letter of attorney, duly approved, or an official copy thereof, duly certified,
shall be
<PAGE> 2
deposited and remain with the Warrant Agent. In case of transfer by executors,
administrators, guardians, or other legal representatives, duly authenticated
evidence of their authority shall be produced, and may be required to be
deposited and remain with the Warrant Agent in its discretion. On any
registration of transfer, the Warrant Agent shall countersign and deliver a new
Warrant or Warrants to the person entitled thereto.
2.3 Form of Warrants. The text of the Warrant and of the form of
election to purchase Shares shall be substantially as set forth in Exhibit "A"
attached hereto. The price per Share and the number of Shares issuable on
exercise of Warrants are as indicated on the face of each Warrant. The Warrants
shall be executed on behalf of the Company by the manual or facsimile signature
of the present or any future secretary or assistant secretary of the Company.
Warrants shall be dated as of the date of countersignature thereof by the
Warrant Agent either on initial issuance or on division, exchange, substitution,
or transfer.
Section 3. Countersignature of Warrants. The Warrants shall be
countersigned by the Warrant Agent (or any successor to the Warrant Agent then
acting as Warrant Agent under this Agreement) and shall not be valid for any
purpose unless so countersigned. Warrants may be countersigned, however, by the
Warrant Agent (or by its successor as Warrant Agent) and may be delivered by the
Warrant Agent, notwithstanding that the persons whose manual or facsimile
signatures appearing thereon as proper officers of the Company shall have ceased
to be such officers at the time of such countersignature, issuance, or delivery.
The Warrant Agent shall, on written instructions of the president or the
secretary of the Company, countersign, issue, and deliver Warrants entitling the
Holders thereof to purchase the Shares provided for in the instructions and
shall countersign and deliver Warrants as otherwise provided in this Agreement.
Section 4. Exchange of Warrants. The Warrants may be exchanged for
another Warrant or Warrants entitling the Holder thereof to purchase a like
aggregate number of Shares as the Warrant or Warrants surrendered then entitle
him to purchase. Any Holder of a Warrant desiring to exchange Warrants shall
make such request in writing delivered to the Warrant Agent, and shall
surrender, properly endorsed, the Warrant or Warrants to be so exchanged.
Thereupon, the Warrant Agent shall countersign and deliver to the person
entitled thereto a Warrant or Warrants, as the case may be, as so requested.
Section 5. Term of Warrants; Exercise of Warrants. Each Holder shall
have the right, which may be exercised beginning at 12:00 a.m. on January 3,
1996, and expiring at 11:59 p.m., New York time on November January 3, 1998, to
purchase from the Company the number of fully paid and non-assessable Shares to
which the Holder may at the time be entitled to purchase pursuant to such
Warrants, subject to the conditions set forth in this paragraph, on surrender to
the Company at the principal office in the city of New York, New York of the
Warrant Agent with the form of election to purchase on the reverse thereof duly
completed and signed, and on payment to the Warrant Agent for the account of the
Company of the Warrant Price as defined and determined in accordance with the
provisions of Sections 9 and 10 hereof, for the number of Shares in respect of
which such Warrants are then exercised. Payment of the Warrant Price shall be
made in cash or by cashier's check.
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<PAGE> 3
Subject to subsections 5.1 and 5.2 of this section, on such surrender of
Warrants, and payment of the Warrant Price as aforesaid, the Company shall issue
and cause to be delivered with all reasonable dispatch to or on the written
order of the Holder and in such name or names as the Holder may designate, a
certificate or certificates for the number of full Shares so purchased on the
exercise of such Warrants. No fractional Shares shall be issuable on such
surrender. Such certificate or certificates shall be deemed to have been issued
and any person so designated to be named therein shall be deemed to have become
a Holder of Record of such Shares as of the date of the surrender of such
Warrants and payment of the Warrant Price, as aforesaid; provided, however, that
if, at the date of surrender of such Warrants and payment of such Warrant Price,
the transfer books for the Shares or other class of stock purchasable on the
exercise of such Warrants shall be closed, the certificates for the Shares in
respect of which such Warrants are then exercised shall be issuable as of the
date on which such books shall next be opened (whether before or after
expiration of the exercise period) and until such date the Company shall be
under no duty to deliver any certificate for such Shares; provided further,
however, the transfer books of record, unless otherwise required by law, shall
not be closed at any one time for a period longer than 60 days. The right of
purchase represented by the Warrants shall be exercisable, at the election of
the Holders thereof, either in full or from time-to-time in part and, in the
event that any Warrant is exercised in respect of less than all of the Shares
specified therein at any time prior to the date of expiration of the Warrants, a
new Warrant or Warrants will be issued for the remaining number of Shares, and
the Warrant Agent is hereby irrevocably authorized to countersign and to deliver
the required new Warrants pursuant to the provisions of this section and of
Section 3 hereof and the Company, whether required by the Warrant Agent, will
supply the Warrant Agent with Warrants duly executed on behalf of the Company
for such purpose.
5.1 The Warrants may not be exercised by the Holders in the
absence of an effective registration statement under the Securities Act of 1933,
as amended (the "Securities Act"), and registration or qualification under
applicable state blue sky laws pertaining to the Shares issuable on exercise of
the Warrants or there is an available exemption from such federal or state
registration requirements.
5.2 If the Company is required to file a registration statement
in accordance with the provisions of subsection 5.1, the Company shall take all
steps reasonably necessary to permit the exercise of the Warrants and the
issuance of the Shares under the applicable state securities laws of those
states in which the Warrants were originally issued by the Company. The Company
will take such reasonable steps which it determines, in its sole discretion, are
necessary to permit the exercise of Warrants and the issuance of
3
<PAGE> 4
the Shares under the laws of any other state in which a Holder then resides on
the written request to do so by such Holder, but in no event shall the Company
be required to consent to the general service of process in any state other than
those states in which the Warrants were originally issued. Holders who reside in
any state where the Company cannot, with the exercise of reasonable diligence
and without consenting to general service of process, obtain qualification for
the exercise of the Warrants and the issuance of the Shares may not, as a result
thereof, be able to exercise their Warrants, and the Company is under no
obligation to make such exercise possible in such circumstances. In the event
that the Company determines to proceed with the qualification of the exercise of
the Warrants and the issuance of the Shares under the securities laws of a
particular state, then the exercise of such Warrants shall not be effective and
the Shares shall not be issued until such qualification becomes effective. The
costs of obtaining such state qualification shall be borne by the Company.
5.3 The Company shall promptly notify the Warrant Agent of the
effective date of any registration statement which the Company is required to
file under subsection 5.1 and the date on which the Shares become qualified or
registered under the state securities laws of any state in which the Company
obtains qualification or registration with respect to such Shares. The Warrant
Agent shall not issue any Shares with respect to any Warrant surrendered for
exercise unless such Warrants are surrendered and received by the Warrant Agent
during a period that the registration statement is effective. Furthermore, the
Warrant Agent shall not issue any Shares on the exercise of any Warrants
received from a Holder who is a resident of a state with respect to which the
Shares issuable on exercise of the Warrants are not qualified or registered.
Section 6. Payment of Taxes. The Company will pay all documentary stamp
taxes, if any, attributable to the initial issuance of Shares issuable on the
exercise of Warrants; provided, however, that the Company shall not be required
to pay any tax or taxes which may be payable in respect of any transfer involved
in the issuance or delivery of any Warrants or certificates for Shares.
Section 7. Mutilated or Missing Warrants. In case any of the Warrants
shall be mutilated, lost, stolen, or destroyed, the company may at its
discretion issue and the Warrant Agent shall countersign and deliver in exchange
and substitution for and on cancellation of the mutilated Warrant, or in lieu of
and as substitution for the Warrant lost, stolen, or destroyed, a new Warrant of
like tenor and representing an equivalent right or interest; but only upon
receipt of evidence satisfactory to the Company and the Warrant Agent of such
loss, theft, or destruction of such Warrant and indemnity, if requested, also
satisfactory to them. Applicants for such substitute Warrants shall also comply
with such other reasonable regulations and pay such other reasonable charges as
the Company or the Warrant Agent may prescribe.
4
<PAGE> 5
Section 8. Reservation of Shares; Redemption of Warrants.
8.1 Reservation of Shares. There shall, at all times, be
reserved, out of the authorized and unissued Shares a number of Shares
sufficient to provide for the exercise of the rights of purchase represented by
the outstanding Warrants. The transfer agent for the Shares and every subsequent
transfer agent for any Shares of the Company's stock issuable on the exercise of
any of the rights of purchase aforesaid will be irrevocably authorized and
directed at all times to reserve such number of authorized and issued shares as
shall be requisite for such purpose. The Company will keep a copy of this
Agreement on file with the transfer agent for the Shares and with every
subsequent transfer agent for any Shares of the Company's capital stock issuable
on the exercise of the rights of purchase represented by the Warrants. The
Warrant Agent is hereby irrevocably authorized to requisition from time-to-time
from such transfer agent, stock certificates required to honor outstanding
Warrants on exercise thereof in accordance with the terms of this Agreement. The
Company will supply such transfer agent with duly executed stock certificates
for such purpose and will provide or otherwise make available any cash which may
be payable as provided in Section 11 hereof. All Warrants surrendered in the
exercise of the rights thereby evidenced shall be canceled by the Warrant Agent
and shall thereafter be delivered to the Company. Promptly after the date of
expiration of the Warrants, the Warrant Agent shall certify to the Company the
total aggregate amount of Warrants then outstanding, and thereafter no Shares
shall be subject to reservation in respect of such Warrants.
8.2 Redemption of Warrants. Any time after January 3, 1998, the
Company may redeem the Warrants at a price of $.01 per Warrant at any time upon
20 days prior written notice if the average closing bid quotation of the Common
Stock has been at least 120% of the exercise price of the Warrants during the 20
consecutive days ending on the third day prior to the day on which notice of
redemption is given to the Warrant Holders.
Section 9. Warrant Price. The price at which Shares shall be
purchasable on exercise of the Warrants shall be three and no/100 dollars
($3.00) per Share.
Section 10. No adjustment of Warrant Price and Number of Shares. The
number and kind of securities purchasable on the exercise of each Warrant and
the Warrant Price shall not be subject to anti-dilutive adjustment for any
reason, whatsoever, including but not limited to, forward or reverse splits of
the Company's common stock, stock or cash dividend, or recapitalization.
10.1 Preservation of Purchase Rights on Reclassification,
Consolidation, Etc. In case of any consolidation of the company with or merger
of the Company into another corporation or in case of any sale or conveyance to
another corporation of the property of the Company as an entirety or
substantially as an entirety, the Company or such successor or purchasing
corporation, as the case may be, shall execute with the Warrant Agent an
agreement that each Holder of a Warrant shall have the right thereafter on
payment of the Warrant Price in effect immediately prior to such action to
purchase on exercise of each Warrant the kind and amount of Shares and other
securities and property which he would
5
<PAGE> 6
have owned or have been entitled to receive after the happening of such
consolidation, merger, sale, or conveyance had such Warrant been exercised
immediately prior to such action. The Company shall mail by first class mail,
postage prepaid, to the Holder of each Warrant notice of the execution of any
such agreement. The provisions of this subsection 10.1 shall similarly apply to
successive consolidations, mergers, sales, or conveyances. The Warrant Agent
shall be under no duty or responsibility to determine the correctness of any
provisions contained in any such agreement relating either to the kind or amount
of shares of stock or other securities or property receivable on exercise of
Warrants or with respect to the method employed and provided therein for any
adjustments.
Section 11. Fractional Interests. The Company shall not be required to
issue fractional Shares on the exercise of Warrants. If more than one Warrant
shall be presented for exercise in full at the same time by the same Holder, the
number of full Shares which shall be issuable on the exercise thereof shall be
computed on the basis of the aggregate number of Shares represented by the
Warrants so presented. If any fraction of a Share would, except for the
provisions of this Section 11, be issuable on the exercise of any Warrant (or
specified portion thereof), the Company shall pay an amount in cash equal to the
current value of such fraction computed on the basis of (i) the closing bid
price of the Company's common stock as reported by the National Quotation
Bureau, Inc., on its "pink sheets" or "electronic bulletin board" or, if the
common stock is reported by NASDAQ, the closing bid price reported by NASDAQ, on
the last business day prior to the date of exercise, if the Shares are traded in
the over-the-counter market, or (ii) the last reported sales price of the Shares
on the national stock exchange on which the shares are listed on the last
business day prior to the date of exercise on which such a sale shall have been
effected, if the Shares are listed on such an exchange.
Section 12. No Right as Shareholders; Notice to Warrant Holders. Nothing
contained in this Agreement or in any of the Warrants shall be construed as
conferring on the Holders or their transferees the right to vote or to receive
dividends or to consent or to receive notice as shareholders in respect of the
meeting of shareholders for the election of directors of the Company or any
other matter, or any rights whatsoever as Shareholders of the Company.
Section 13. Disposition of Proceeds on Exercise of Warrants; Inspection
of Warrant Agreement. The Warrant Agent shall account promptly to the Company
with respect to Warrants exercised and concurrently pay to the Company all
moneys received by the Warrant Agent for the purchase of the Company's Shares
through the exercise of such Warrants. The Warrant Agent shall keep copies of
this Agreement and any notices given or received hereunder available for
inspection by Holders of Warrants during normal business hours at its principal
office in the city of New York, state of New York. The Company shall supply the
Warrant Agent, from time-to-time, with such numbers of copies of this Agreement
as the Warrant Agent may request.
6
<PAGE> 7
Section 14. Merger or Consolidation or Change of Name of Warrant Agent.
Any corporation into which the Warrant Agent may be merged or with which it may
be consolidated, or any corporation resulting from any merger or consolidation
to which the Warrant Agent shall be a party, or any corporation succeeding to
the corporate trust business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto; provided, that such
corporation would be eligible for appointment as a successor Warrant Agent under
the provisions of Section 16 hereof. In case at the time such successor to the
Warrant Agent shall succeed to the agency created by this Agreement, any of the
Warrants shall have been countersigned but not delivered, any successor to the
Warrant Agent may adopt the countersignature of the original Warrant Agent and
deliver such Warrants so countersigned; and in case at that time any of the
Warrants shall not have been countersigned, any successor to the Warrant Agent
may countersign such Warrants either in the name of the predecessor Warrant
Agent or in the name of the successor Warrant Agent, and in all such cases,
Warrants shall have the full force provided in the Warrants and in this
Agreement. In case at any time the name of the Warrant Agent shall be changed
and at such time any of the Warrants shall have been countersigned but not
delivered, the Warrant Agent may adopt the countersignature under its prior name
and deliver Warrants so countersigned; and in case at that time any of the
Warrants shall not have been countersigned, the Warrant Agent may countersign
such Warrants either in its prior name or in its changed name; and in all such
cases such Warrants shall have the full force provided in the Warrants and in
this Agreement.
Section 15. Concerning the Warrant Agent. The Warrant Agent undertakes
the duties and obligations imposed by this Agreement on the following terms and
conditions, by all of which the Company and the Holders of Warrants, by their
acceptance thereof shall be bound:
15.1 The statements contained herein and in the Warrants shall be
taken as statements of the Company, and the Warrant Agent assumes no
responsibility for the correctness of any of the same except such as describe
the Warrant Agent or action taken by it. The Warrant Agent assumes no
responsibility with respect to the distribution of the Warrants except as herein
otherwise provided.
15.2 The Warrant Agent shall not be responsible for any failure
of the Company to comply with any of the covenants contained in this Agreement
or in the Warrants to be compiled with by the Company.
15.3 The Warrant Agent may execute and exercise any of the rights
or powers hereby vested in it or perform any duty hereunder either itself or by
or through its attorney, agents or employees, and the Warrant Agent shall not be
answerable or accountable for any act, default, neglect, or misconduct of any
such attorney, agents, or employees or for any loss to the Company resulting
from such neglect or misconduct; provided, reasonable care shall have been
exercised in the selection and continued employment thereof.
7
<PAGE> 8
15.4 The Warrant Agent may consult at any time with legal counsel
satisfactory to it (who may be counsel for the Company) and the Warrant Agent
shall incur no liability or responsibility to the Company or to any Holder of
any Warrant in respect of any action taken, suffered, or omitted by it hereunder
in good faith and in accordance with the opinion or the advise of such counsel.
15.5 Whenever in the performance of its duties under this
Agreement the Warrant Agent shall deem it necessary or desirable that any fact
or matter be proved or established by the Company prior to taking or suffering
any action hereunder; such fact or matter (unless other evidence in respect
thereof be herein specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by the president or a vice
president, or the treasurer, or the secretary of the Company and delivered to
the Warrant Agent; and such certificate shall be full authorization to the
Warrant Agent for any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance on such certificate.
15.6 The Company agrees to pay the Warrant Agent reasonable
compensation for all services rendered by Warrant Agent in the execution of this
Agreement, to reimburse the Warrant Agent for all expenses, taxes, and
governmental charges and other charges of any kind and nature incurred by the
Warrant Agent in the execution of this Agreement, and to indemnify the Warrant
Agent and save it harmless against any and all liabilities, including judgments,
costs, and counsel fees, for anything done or omitted by the Warrant Agent in
the execution of this Agreement, except as a result of the Warrant Agent's
negligence or bad faith.
15.7 The Warrant Agent shall be under no obligation to institute
any action, suit, or legal proceeding or to take any other action likely to
involve expense unless the Company or one or more Holders of Warrants shall
furnish the Warrant Agent with reasonable security and indemnity for any costs
and expenses which may be incurred, but this provision shall not affect the
power of the Warrant Agent to take such action as the Warrant Agent may consider
proper, whether with or without any such security or indemnity. All rights of
action under this Agreement or under any of the Warrants may be enforced by the
Warrant Agent without the possession of any of the Warrants or the production
thereof at any trial or other proceeding relative thereto, and any such action,
suit, or proceeding instituted by the Warrant Agent, and any recovery of
judgment shall be for the ratable benefit of the Holders of Warrants, as their
respective rights or interest may appear.
15.8 The Warrant Agent and any stockholder, director, officer, or
employee of the Warrant Agent may buy, sell, or deal in any of the Warrants or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to or otherwise act as fully and freely as though it were not Warrant
Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from
acting in any other capacity for the Company or for any other legal entity.
8
<PAGE> 9
15.9 The Warrant Agent shall act hereunder solely as agent, and
its duties shall be determined solely by the provisions hereof. The Warrant
shall not be liable for anything which it may do or refrain from doing in
connection with this Agreement, except for its own negligence or bad faith.
15.10 The Warrant Agent will not incur any liability or
responsibility to the Company or to any Holder of any Warrant for any action
taken in reliance on any notice, resolution, waiver, consent, order,
certificate, or other paper, document, or instrument reasonably believed by it
to be genuine and to have been signed, sent, or presented by the proper party or
parties.
15.11 The Warrant Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Warrant Agent) or in respect of the
validity or execution of any Warrant (except its countersignature thereof); nor
shall the Warrant Agent by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any Shares
(or other stock) to be issued pursuant to this Agreement or any Warrant or as to
whether any Shares (or other stock) will when issued be validly issued, fully
paid, and non-assessable or as to the Warrant Price, or the number or kind or
amount of Shares or other securities or other property issuable on exercise of
any Warrant.
15.12 The Warrant Agent is hereby authorized and directed to
accept the instructions with respect to the performance of its duties hereunder
from the chairman of the board or the president or a vice president or the
secretary or the treasurer of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and shall not be liable
for any action taken by it in good faith in accordance with instructions of any
such officer.
Section 16. Change of Warrant Agent. The Warrant Agent may resign and be
discharged from its duties under this Agreement by giving to the Company 30 days
notice in writing. The Warrant Agent may be removed by like notice to the
Warrant Agent from the Company. If the Warrant Agent shall resign or be removed
or shall otherwise become incapable of acting, the Company shall appoint a
successor to the Warrant Agent. If the Company shall fail to make such
appointment within a period of 30 days after such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Warrant Agent or by the Holder or a Warrant (who shall with such
notice submit his Warrant for inspection by the Company), then the Holder of any
Warrant may apply to any court of competent jurisdiction for the appointment of
a successor to the Warrant Agent. Any successor Warrant Agent, whether appointed
by the Company or such a court, shall be a bank, trust company, or securities
transfer agency, in good standing, incorporated under the laws of the states of
California, Delaware, New Jersey, New York, Nevada or Utah or of the United
States of America. After appointment the successor Warrant Agent shall be vested
with the same powers, rights, duties, and responsibilities as if it had been
originally named as Warrant Agent without further act or deed; but the former
Warrant Agent shall deliver and transfer to the successor Warrant Agent any
property at the
9
<PAGE> 10
time held by it hereunder, and execute and deliver any further assurance,
conveyance, act, or deed necessary for the purpose. Failure to file any notice
provided for in this section 16; however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Warrant
Agent or the appointment of the successor Warrant Agent, as the case may be. In
the event of such resignation or removal, the successor Warrant Agent shall
mail, first class, to each Holder, written notice of such removal or resignation
and the name and address of such successor Warrant Agent.
Section 17. Identity of Transfer Agent. Forthwith on the appointment of
any subsequent Transfer Agent for the Company's Shares, or any other Shares of
the Company's capital stock issuable on the exercise of the rights of purchase
represented by the Warrants, the company will file with the Warrant Agent a
statement setting forth the name and address of such Transfer Agent.
Section 18. Notices. Any notice pursuant to this Agreement by the
Company or by the Holder of any Warrant to the Warrant Agent, or by the Warrant
Agent or by the Holder of any Warrant to the Company, shall be in writing and
shall be deemed to have been duly given if delivered or mailed certified mail,
return receipt requested (a) if to the Company to Universal Medical Systems,
Inc., 13825 Icot Boulevard, #613, Clearwater, Florida 34620 and (b) if to the
Warrant Agent, to its main office: American Stock Transfer & Trust Company, 40
Wall Street, 46th Floor, New York, New York 10005. Each party hereto may from
time-to-time change the address to which notices to it are to be delivered or
mailed hereunder by notice in writing to the other party.
Section 19. Supplements and Amendments. The Company and the Warrant
Agent may from time-to-time supplement or amend this Agreement, without the
approval of any Holders of Warrants, in order to cure any ambiguity or to
correct or supplement any provision contained herein or to make any other
provisions in regard to matters or questions arising hereunder which the Company
and the Warrant Agent may deem necessary or desirable and which shall not be
inconsistent with the provisions of the Warrants and which shall not adversely
affect the interest of the Holders of the Warrants. In this regard, but not by
way of limitation, establishing an earlier date of exercise without a change in
the expiration date of the Warrants set forth in Section 5 or extending the
period for exercise without a change in the date on which the Warrants are first
exercisable set forth in Section 5 shall not be deemed to adversely affect the
interests of the Holders.
Section 20. Successors. All the covenants and provisions of this
Agreement by or for the benefit of each party shall be binding upon and shall
inure to the benefit of the parties hereto and to their respective successors
and assigns hereunder.
Section 21. Merger or Consolidation of the Company. The Company will not
merge or consolidate with or into any other corporation unless the corporation
resulting from such merger or consolidation (if not the Company) shall expressly
assume, by supplemental agreement satisfactory in form to the Warrant agent and
executed and delivered to the Warrant Agent, the due and punctual performance
and observance of each and every covenant and condition of this Agreement to be
performed and observed by the Company.
10
<PAGE> 11
Section 22. Applicable Law. This Agreement and each Warrant issued
hereunder shall be deemed to be a contract made under the laws of the State of
Nevada and for all purposes shall be construed in accordance with the laws of
said State.
Section 23. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give any person or corporation other than the Company, the
Warrant Agent, and the Holders of the Warrants any legal or equitable right,
remedy, or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Warrant Agent, and the Holders of the
Warrants.
Section 24. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
Section 25. Captions. The captions of the sections and subsections of
this Agreement have been inserted for convenience only and shall have no
substantive effect.
IN WITNESS WHEREOF: the parties hereto have caused this Agreement to be
duly executed all as of the date first above written.
Universal Medical Systems, Inc.
By:/s/
----------------------------------
Duly Authorized Officer
American Stock Transfer
& Trust Company
By:/s/
----------------------------------
Duly Authorized Officer
11
<PAGE> 1
EXHIBIT 4(k)
EXERCISABLE AFTER 12:00 A.M. ON JANUARY 3, 1996
VOID AFTER 11:59 P.M. JANUARY 3, 1998
REDEEMABLE CLASS A COMMON STOCK PURCHASE WARRANT
REDEEMABLE CLASS A WARRANT NUMBER NUMBER OF WARRANTS
____ ____
UNIVERSAL MEDICAL SYSTEMS, INC.
This Certifies That, FOR VALUE RECEIVED ______________
or registered assigns, (the "Holder") is the owner of the number of Redeemable
Class A Common Stock Purchase Warrants ("Class A Warrants") specified above.
Each Class A Warrant initially the Holder to purchase, subject to the terms and
conditions set forth in this Warrant Certificate and the Warrant Agreement
(Class A Warrants), as hereinafter defined, one fully-paid and nonassessable
share of Common Stock $0.001 par value, of Universal Medical Systems, Inc. a
Nevada corporation, (the "Company") at any time between January 3, 1996, and the
Expiration Date (as hereinafter defined), upon the presentation and surrender of
this Warrant Certificate with the Form of Exercise on the reverse side hereof
duly executed at the principal office of American Stock Transfer & Trust
Company, as Warrant Agent, or its substitute (the "Warrant Agent") accompanied
by payment in lawful money of the United States of America in cash or by
official bank or certified check payable to the Company of $3.00 per share.
This Warrant Certificate and each Class A Warrant represented hereby are
issued pursuant to and are subject in all respects to the terms and conditions
set forth in the Warrant Agreement (the "Warrant Agreement") between the Company
and the Warrant Agent. A copy of the Warrant Agreement is on file at the
principal office of the Warrant Agent, currently located at 40 Wall Street, 46th
Floor, New York, New York 10005.
Each Class A Warrant represented hereby is exercisable at the option of
the registered holder, but no fractional shares of Common Stock will be issued.
In the case of the exercise of less than all the Class A Warrants represented
hereby, the Company shall cancel this Warrant Certificate upon the surrender
hereof and shall execute and deliver a new Warrant Certificate(s) of like tenor,
which the Warrant Agent shall issue for the balance of such Class A Warrant.
The Term "Expiration Date: shall mean 11:59 P.M. (New York time) on
January 3, 1998 or such earlier date as the Class A Warrants shall be redeemed.
If such date shall in the State of New York be a holiday or a day on which banks
are authorized to close, the Expiration Date shall Mean 11:59 P.M. (New York
time) the next following date which in the State of New York is not a holiday or
a day in which banks are authorized to close.
This Class A Warrant may not be exercised unless a registered statement
under the securities Act of 1933, as amended, and under the applicable state
securities law with respect to such securities is effective or there is an
available exemption from such Federal and State registration requirements and
the Company may have an obligation to file a registration statements to permit
exercise of this Class A Warrant. This Class A Warrant shall not be exercisable
by a Registered Holder in any state where such exercise would be unlawful.
ADDITIONAL PROVISIONS OF THIS CLASS 1A WARRANT ARE CONTAINED ON THE REVERSE
HEREOF.
Dated: By:
---------------------------
President
Attest:
---------------------------
Secretary
EXHIBIT "A"
pg 1 of 2
<PAGE> 2
1. EXERCISE OF THE WARRANT. This Class A Warrant may be exercised by the holder,
in whole at any time or in part from time to time prior the Expiration Date, by
the surrender of this Warrant Certificate (with the Form of Exercise below duly
executed) at the principal office of Warrant Agent, together with proper payment
of the Exercise Price of the proportionate part thereof if this Class A Warrant
is exercised in part. Payment for shares of Common Stock issuable upon exercise
of the Class A Warrants ("Warrant Shares") shall be made by check payable to the
order of the Company. If this warrant Certificate is exercised in part, this
Class A Warrant must be exercised for the number of whole Warrant Shares, and
the Holder is entitled to receive a new Warrant Certificate covering the number
of whole Warrant Shares in respect of which this Class A Warrant has not been
exercised. Upon such surrender of this Class A Warrant, the Company will (a)
issue a certificate(s) in the name of the Holder for the largest number of whole
Warrant Shares to which the Holder shall be entitled and, if this Class A
Warrant is exercised in whole in lieu of any fractional Warrant Share to which
the Holder shall be entitled, cash equal to the fair value of such fractional
share (determined in accordance with the Warrant Agreement), and (b) deliver the
other securities and properties receivable upon the exercise of the Class A
Warrant, or the proportionate part thereof if this Class A Warrant is exercised
in part, pursuant to the provisions of the Warrant Agreement.
2. RESERVATION OF WARRANT SHARES. The Company agrees that prior to the
Expiration Date, it will at all times have authorized and in reserve, and will
keep available, solely for issuance or delivery upon the exercise of this Class
A Warrant, the Warrant Shares and other securities and properties as from time
to time shall be receivable on the exercise of its Class A Warrant, free and
clear of all restriction on sale or transfer and free and clear of all
preemptive rights.
3. PROTECTION AGAINST DILUTION. These Warrants contain no Anti-Dilutive Rights.
4. FULLY-PAID SHARES. The Company agrees that the Warrant Shares delivered on
the exercise of this Class A Warrant, shall at the time of such delivery, be
validly issued, outstanding and fully-paid.
5. LOSS, ETC OF WARRANT. Upon receipt of evidence satisfactory to the Company of
the loss, theft, destruction or mutilation of this Warrant, and indemnity
reasonably satisfactory to the Company, if lost, stolen or destroyed, and upon
surrender and cancellation of this Warrant Certificate if mutilated, and upon
reimbursement of the Company's reasonable incidental expenses, the Company shall
execute and deliver the Holder a new Class A Warrant of like date, tenor and
denomination.
6. COMBINATION, SPLIT UP OR EXCHANGE AND TRANSFER. Subject to the provisions of
the Warrant Agreement this Warrant Certificate may be (a) exchanged for another
Warrant Certificate(s) in any denominations (whole shares only) entitling the
Holder to purchase a like number of Warrant Shares or (b) presented for transfer
at the office of the Warrant Agent, by the Holder or his assigns, in person or
by attorney duly authorized in writing, in the manner provided in the Warrant
Agreement. Upon any such transfer, a new Warrant Certificate(s) of different
denominations evidencing in a aggregate the right to purchase a like number of
Warrant Shares shall be issued to the transferee upon Surrender of this Warrant
Certificate in accordance with instructions set forth in the Assignment set
forth below or furnished to the agent.
7. WARRANT HOLDER NOT STOCKHOLDER. Except as otherwise herein and in the Warrant
Agreement, this Class A Warrant does not confer upon the Holder any right to
vote or to consent or to receive notice as a stockholder, of the Company, as
stockholder prior to the exercise hereof.
8. HEADINGS. The headings of this Warrant Certificate have been inserted as
matter of convenience and shall not affect the construction hereof.
9. APPLICABLE LAW. This Class A Warrant shall be governed by and construed in
accordance with the laws of the State of Nevada.
FORM OF EXERCISE
TO WARRANT AGENT:
The undersigned Holder other the within Class A Warrants, Hereby (1) exercises
his rights to purchase shares of Common Stock, par value $0.001 per share of
Universal Medical Systems, Inc., which the undersigned is entitle to purchase
under the terms of the within Class A Warrant, and (2) makes payment in full for
the number of shares of Common Stock so purchased by payment of $_________.
Please issue the Certificate for Shares of Common Stock in the name of, and pay
any cash for any fractional share to:
_______________________________________________________________________________
Print or Type Name
_______________________________________________________________________________
Social Security or other Identifying Number
_______________________________________________________________________________
Street Address
_______________________________________________________________________________
City State Zip Code
_______________________________________________________________________________
and, if said number of shares shall not be all the shares purchasable hereunder,
please issue a new Warrant Certificate(s) for the unexercised portion of the
within Class A Warrant to:
_______________________________________________________________________________
Print or Type Name
_______________________________________________________________________________
Social Security or other Identifying Number
_______________________________________________________________________________
Street Address
_______________________________________________________________________________
City State Zip Code
Dated:__________________ ______________________________________
Signature
(Signature must conform in all
respect to the name of Holder as
specified on the face of the
Warrants.)
pg 2 of 2
<PAGE> 1
EXHIBIT 4(l)
WARRANT AGREEMENT
THIS WARRANT AGREEMENT (this "Agreement") is entered into this 29th day
of December, 1995, by and between UNIVERSAL MEDICAL SYSTEMS, INC., a Nevada
corporation, whose address is 13825 Icot Boulevard Suite 613, Clearwater,
Florida 34620 (the "Company"), and DENNIS D. COLE, ESQ., whose address is 13825
Icot Boulevard Suite 613, Clearwater, Florida 34620, as Warrant Agent (the
"Warrant Agent").
Premises
A. The Company has proposed to issue Redeemable Class B Common Stock
Purchase Warrants as hereinafter described (the "Warrants") to purchase Shares
of the Company's $.001 par value common stock at an exercise price of three and
no/100 dollars ($3.00) per share.
B. The Company wishes the Warrant Agent to act on behalf of the Company,
and the Warrant Agent is willing to act in connections with the issuance,
division, transfer, exchange, and exercise of Warrants.
Agreement
In consideration of the foregoing and for the purpose of defining the
terms and provisions of the Warrants and the respective rights and obligations
thereunder of the Company and the registered owners of the Warrants (the
"Holders"), the Company and the Warrant Agent hereby agree as follows:
Section 1. Appointment of Warrant Agent. The Company hereby appoints
the Warrant Agent to act as agent for the Company in accordance with the
instructions hereinafter in this Agreement set forth, and the Warrant Agent
hereby accepts such appointment.
Section 2. Transferability and Form of Warrant.
2.1 Registration. The Warrant shall be numbered and shall be
registered in a Warrant register as they are issued. The Company and the Warrant
Agent shall be entitled to treat the Holder of any Warrant as the owner in fact
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to or interest in such Warrant on the part of any other person, and
shall not be liable for any registration or transfer of Warrants which are
registered or to be registered in the name of a fiduciary or the nominee of a
fiduciary unless made with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration or transfer, or
with knowledge of such facts that its participation therein amounts to bad
faith.
2.2 Transfer. The Warrants are fully transferable. Warrants
shall be transferable only on the books of the Company maintained at the office
of the Warrant Agent in the City of Clearwater, State of Florida, on delivery
thereof duly endorsed by Holder or by his duly authorized attorney or
representative, or accompanied by proper evidence of succession, assignment, or
authority to transfer. In all cases of transfer by an attorney, the original
letter of attorney, duly approved, or an official copy thereof, duly certified,
shall be
<PAGE> 2
deposited and remain with the Warrant Agent. In case of transfer by executors,
administrators, guardians, or other legal representatives, duly authenticated
evidence of their authority shall be produced, and may be required to be
deposited and remain with the Warrant Agent in its discretion. On any
registration of transfer, the Warrant Agent shall countersign and deliver a new
Warrant or Warrants to the person entitled thereto.
2.3 Form of Warrants. The text of the Warrant and of the form of
election to purchase Shares shall be substantially as set forth in Exhibit "A"
attached hereto. The price per Share and the number of Shares issuable on
exercise of Warrants are as indicated on the face of each Warrant. The Warrants
shall be executed on behalf of the Company by the manual or facsimile signature
of the present or any future secretary or assistant secretary of the Company.
Warrants shall be dated as of the date of countersignature thereof by the
Warrant Agent either on initial issuance or on division, exchange, substitution,
or transfer.
Section 3. Countersignature of Warrants. The Warrants shall be
countersigned by the Warrant Agent (or any successor to the Warrant Agent then
acting as Warrant Agent under this Agreement) and shall not be valid for any
purpose unless so countersigned. Warrants may be countersigned, however, by the
Warrant Agent (or by its successor as Warrant Agent) and may be delivered by the
Warrant Agent, notwithstanding that the persons whose manual or facsimile
signatures appearing thereon as proper officers of the Company shall have ceased
to be such officers at the time of such countersignature, issuance, or delivery.
The Warrant Agent shall, on written instructions of the president or the
secretary of the Company, countersign, issue, and deliver Warrants entitling the
Holders thereof to purchase the Shares provided for in the instructions and
shall countersign and deliver Warrants as otherwise provided in this Agreement.
Section 4. Exchange of Warrants. The Warrants may be exchanged for
another Warrant or Warrants entitling the Holder thereof to purchase a like
aggregate number of Shares as the Warrant or Warrants surrendered then entitle
him to purchase. Any Holder of a Warrant desiring to exchange Warrants shall
make such request in writing delivered to the Warrant Agent, and shall
surrender, properly endorsed, the Warrant or Warrants to be so exchanged.
Thereupon, the Warrant Agent shall countersign and deliver to the person
entitled thereto a Warrant or Warrants, as the case may be, as so requested.
Section 5. Term of Warrants; Exercise of Warrants. Each Holder shall
have the right, which may be exercised beginning at 12:00 a.m. on December 29,
1995, and expiring at 11:59 p.m., Florida time on December 31, 1997, to purchase
from the Company the number of fully paid and non-assessable Shares to which the
Holder may at the time be entitled to purchase pursuant to such Warrants,
subject to the conditions set forth in this paragraph, on surrender to the
Company at the principal office in the City of Clearwater, State of Florida of
the Warrant Agent with the form of election to purchase on the reverse thereof
duly completed and signed, and on payment to the Warrant Agent for the account
of the Company of the Warrant Price as defined and determined in accordance with
the provisions of Sections 9 and 10 hereof, for the number of Shares in respect
of which such Warrants are then exercised. Payment of the Warrant Price shall be
made in cash or by cashier's check.
2
<PAGE> 3
Subject to subsections 5.1 and 5.2 of this section, on such surrender of
Warrants, and payment of the Warrant Price as aforesaid, the Company shall issue
and cause to be delivered with all reasonable dispatch to or on the written
order of the Holder and in such name or names as the Holder may designate, a
certificate or certificates for the number of full Shares so purchased on the
exercise of such Warrants. No fractional Shares shall be issuable on such
surrender. Such certificate or certificates shall be deemed to have been issued
and any person so designated to be named therein shall be deemed to have become
a Holder of Record of such Shares as of the date of the surrender of such
Warrants and payment of the Warrant Price, as aforesaid; provided, however, that
if, at the date of surrender of such Warrants and payment of such Warrant Price,
the transfer books for the Shares or other class of stock purchasable on the
exercise of such Warrants shall be closed, the certificates for the Shares in
respect of which such Warrants are then exercised shall be issuable as of the
date on which such books shall next be opened (whether before or after
expiration of the exercise period) and until such date the Company shall be
under no duty to deliver any certificate for such Shares; provided further,
however, the transfer books of record, unless otherwise required by law, shall
not be closed at any one time for a period longer than 60 days. The right of
purchase represented by the Warrants shall be exercisable, at the election of
the Holders thereof, either in full or from time-to-time in part and, in the
event that any Warrant is exercised in respect of less than all of the Shares
specified therein at any time prior to the date of expiration of the Warrants, a
new Warrant or Warrants will be issued for the remaining number of Shares, and
the Warrant Agent is hereby irrevocably authorized to countersign and to deliver
the required new Warrants pursuant to the provisions of this section and of
Section 3 hereof and the Company, whether required by the Warrant Agent, will
supply the Warrant Agent with Warrants duly executed on behalf of the Company
for such purpose.
5.1 The Warrants may not be exercised by the Holders in the
absence of an effective registration statement under the Securities Act of 1933,
as amended (the "Securities Act"), and registration or qualification under
applicable state blue sky laws pertaining to the Shares issuable on exercise of
the Warrants or there is an available exemption from such federal or state
registration requirements.
5.2 If the Company is required to file a registration statement
in accordance with the provisions of subsection 5.1, the Company shall take all
steps reasonably necessary to permit the exercise of the Warrants and the
issuance of the Shares under the applicable state securities laws of those
states in which the Warrants were originally issued by the Company. The Company
will take such reasonable steps which it determines, in its sole discretion, are
necessary to permit the exercise of Warrants and the issuance of
3
<PAGE> 4
the Shares under the laws of any other state in which a Holder then resides on
the written request to do so by such Holder, but in no event shall the Company
be required to consent to the general service of process in any state other than
those states in which the Warrants were originally issued. Holders who reside in
any state where the Company cannot, with the exercise of reasonable diligence
and without consenting to general service of process, obtain qualification for
the exercise of the Warrants and the issuance of the Shares may not, as a result
thereof, be able to exercise their Warrants, and the Company is under no
obligation to make such exercise possible in such circumstances. In the event
that the Company determines to proceed with the qualification of the exercise of
the Warrants and the issuance of the Shares under the securities laws of a
particular state, then the exercise of such Warrants shall not be effective and
the Shares shall not be issued until such qualification becomes effective. The
costs of obtaining such state qualification shall be borne by the Company.
5.3 The Company shall promptly notify the Warrant Agent of the
effective date of any registration statement which the Company is required to
file under subsection 5.1 and the date on which the Shares become qualified or
registered under the state securities laws of any state in which the Company
obtains qualification or registration with respect to such Shares. The Warrant
Agent shall not issue any Shares with respect to any Warrant surrendered for
exercise unless such Warrants are surrendered and received by the Warrant Agent
during a period that the registration statement is effective. Furthermore, the
Warrant Agent shall not issue any Shares on the exercise of any Warrants
received from a Holder who is a resident of a state with respect to which the
Shares issuable on exercise of the Warrants are not qualified or registered.
Section 6. Payment of Taxes. The Company will pay all documentary stamp
taxes, if any, attributable to the initial issuance of Shares issuable on the
exercise of Warrants; provided, however, that the Company shall not be required
to pay any tax or taxes which may be payable in respect of any transfer involved
in the issuance or delivery of any Warrants or certificates for Shares.
Section 7. Mutilated or Missing Warrants. In case any of the Warrants
shall be mutilated, lost, stolen, or destroyed, the company may at its
discretion issue and the Warrant Agent shall countersign and deliver in exchange
and substitution for and on cancellation of the mutilated Warrant, or in lieu of
and as substitution for the Warrant lost, stolen, or destroyed, a new Warrant of
like tenor and representing an equivalent right or interest; but only upon
receipt of evidence satisfactory to the Company and the Warrant Agent of such
loss, theft, or destruction of such Warrant and indemnity, if requested, also
satisfactory to them. Applicants for such substitute Warrants shall also comply
with such other reasonable regulations and pay such other reasonable charges as
the Company or the Warrant Agent may prescribe.
4
<PAGE> 5
Section 8. Reservation of Shares; Redemption of Warrants.
8.1 Reservation of Shares. There shall, at all times, be
reserved, out of the authorized and unissued Shares a number of Shares
sufficient to provide for the exercise of the rights of purchase represented by
the outstanding Warrants. The transfer agent for the Shares and every subsequent
transfer agent for any Shares of the Company's stock issuable on the exercise of
any of the rights of purchase aforesaid will be irrevocably authorized and
directed at all times to reserve such number of authorized and issued shares as
shall be requisite for such purpose. The Company will keep a copy of this
Agreement on file with the transfer agent for the Shares and with every
subsequent transfer agent for any Shares of the Company's capital stock issuable
on the exercise of the rights of purchase represented by the Warrants. The
Warrant Agent is hereby irrevocably authorized to requisition from time-to-time
from such transfer agent, stock certificates required to honor outstanding
Warrants on exercise thereof in accordance with the terms of this Agreement. The
Company will supply such transfer agent with duly executed stock certificates
for such purpose and will provide or otherwise make available any cash which may
be payable as provided in Section 11 hereof. All Warrants surrendered in the
exercise of the rights thereby evidenced shall be canceled by the Warrant Agent
and shall thereafter be delivered to the Company. Promptly after the date of
expiration of the Warrants, the Warrant Agent shall certify to the Company the
total aggregate amount of Warrants then outstanding, and thereafter no Shares
shall be subject to reservation in respect of such Warrants.
8.2 Redemption of Warrants. Any time after June 30, 1997, the
Company may redeem the Warrants at a price of $.01 per Warrant at any time upon
20 days prior written notice if the average closing bid quotation of the Common
Stock has been at least 120% of the exercise price of the Warrants during the 20
consecutive days ending on the third day prior to the day on which notice of
redemption is given to the Warrant Holders.
Section 9. Warrant Price. The price at which Shares shall be
purchasable on exercise of the Warrants shall be three and no/100 dollars
($3.00) per Share.
Section 10. No adjustment of Warrant Price and Number of Shares. The
number and kind of securities purchasable on the exercise of each Warrant and
the Warrant Price shall not be subject to anti-dilutive adjustment for any
reason, whatsoever, including but not limited to, forward or reverse splits of
the Company's common stock, stock or cash dividend, or recapitalization.
10.1 Preservation of Purchase Rights on Reclassification,
Consolidation, Etc. In case of any consolidation of the company with or merger
of the Company into another corporation or in case of any sale or conveyance to
another corporation of the property of the Company as an entirety or
substantially as an entirety, the Company or such successor or purchasing
corporation, as the case may be, shall execute with the Warrant Agent an
agreement that each Holder of a Warrant shall have the right thereafter on
payment of the Warrant Price in effect immediately prior to such action to
purchase on exercise of each Warrant the kind and amount of Shares and other
securities and property which he would
5
<PAGE> 6
have owned or have been entitled to receive after the happening of such
consolidation, merger, sale, or conveyance had such Warrant been exercised
immediately prior to such action. The Company shall mail by first class mail,
postage prepaid, to the Holder of each Warrant notice of the execution of any
such agreement. The provisions of this subsection 10.1 shall similarly apply to
successive consolidations, mergers, sales, or conveyances. The Warrant Agent
shall be under no duty or responsibility to determine the correctness of any
provisions contained in any such agreement relating either to the kind or amount
of shares of stock or other securities or property receivable on exercise of
Warrants or with respect to the method employed and provided therein for any
adjustments.
Section 11. Fractional Interests. The Company shall not be required to
issue fractional Shares on the exercise of Warrants. If more than one Warrant
shall be presented for exercise in full at the same time by the same Holder, the
number of full Shares which shall be issuable on the exercise thereof shall be
computed on the basis of the aggregate number of Shares represented by the
Warrants so presented. If any fraction of a Share would, except for the
provisions of this Section 11, be issuable on the exercise of any Warrant (or
specified portion thereof), the Company shall pay an amount in cash equal to the
current value of such fraction computed on the basis of (i) the closing bid
price of the Company's common stock as reported by the National Quotation
Bureau, Inc., on its "pink sheets" or "electronic bulletin board" or, if the
common stock is reported by NASDAQ, the closing bid price reported by NASDAQ, on
the last business day prior to the date of exercise, if the Shares are traded in
the over-the-counter market, or (ii) the last reported sales price of the Shares
on the national stock exchange on which the shares are listed on the last
business day prior to the date of exercise on which such a sale shall have been
effected, if the Shares are listed on such an exchange.
Section 12. No Right as Shareholders; Notice to Warrant Holders. Nothing
contained in this Agreement or in any of the Warrants shall be construed as
conferring on the Holders or their transferees the right to vote or to receive
dividends or to consent or to receive notice as shareholders in respect of the
meeting of shareholders for the election of directors of the Company or any
other matter, or any rights whatsoever as Shareholders of the Company.
Section 13. Disposition of Proceeds on Exercise of Warrants; Inspection
of Warrant Agreement. The Warrant Agent shall account promptly to the Company
with respect to Warrants exercised and concurrently pay to the Company all
moneys received by the Warrant Agent for the purchase of the Company's Shares
through the exercise of such Warrants. The Warrant Agent shall keep copies of
this Agreement and any notices given or received hereunder available for
inspection by Holders of Warrants during normal business hours at its principal
office in the City of Clearwater, State of Florida. The Company shall supply the
Warrant Agent, from time-to-time, with such numbers of copies of this Agreement
as the Warrant Agent may request.
6
<PAGE> 7
Section 14. Merger or Consolidation or Change of Name of Warrant Agent.
Any corporation into which the Warrant Agent may be merged or with which it may
be consolidated, or any corporation resulting from any merger or consolidation
to which the Warrant Agent shall be a party, or any corporation succeeding to
the corporate trust business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto; provided, that such
corporation would be eligible for appointment as a successor Warrant Agent under
the provisions of Section 16 hereof. In case at the time such successor to the
Warrant Agent shall succeed to the agency created by this Agreement, any of the
Warrants shall have been countersigned but not delivered, any successor to the
Warrant Agent may adopt the countersignature of the original Warrant Agent and
deliver such Warrants so countersigned; and in case at that time any of the
Warrants shall not have been countersigned, any successor to the Warrant Agent
may countersign such Warrants either in the name of the predecessor Warrant
Agent or in the name of the successor Warrant Agent, and in all such cases,
Warrants shall have the full force provided in the Warrants and in this
Agreement. In case at any time the name of the Warrant Agent shall be changed
and at such time any of the Warrants shall have been countersigned but not
delivered, the Warrant Agent may adopt the countersignature under its prior name
and deliver Warrants so countersigned; and in case at that time any of the
Warrants shall not have been countersigned, the Warrant Agent may countersign
such Warrants either in its prior name or in its changed name; and in all such
cases such Warrants shall have the full force provided in the Warrants and in
this Agreement.
Section 15. Concerning the Warrant Agent. The Warrant Agent undertakes
the duties and obligations imposed by this Agreement on the following terms and
conditions, by all of which the Company and the Holders of Warrants, by their
acceptance thereof shall be bound:
15.1 The statements contained herein and in the Warrants shall be
taken as statements of the Company, and the Warrant Agent assumes no
responsibility for the correctness of any of the same except such as describe
the Warrant Agent or action taken by it. The Warrant Agent assumes no
responsibility with respect to the distribution of the Warrants except as herein
otherwise provided.
15.2 The Warrant Agent shall not be responsible for any failure
of the Company to comply with any of the covenants contained in this Agreement
or in the Warrants to be compiled with by the Company.
15.3 The Warrant Agent may execute and exercise any of the rights
or powers hereby vested in it or perform any duty hereunder either itself or by
or through its attorney, agents or employees, and the Warrant Agent shall not be
answerable or accountable for any act, default, neglect, or misconduct of any
such attorney, agents, or employees or for any loss to the Company resulting
from such neglect or misconduct; provided, reasonable care shall have been
exercised in the selection and continued employment thereof.
7
<PAGE> 8
15.4 The Warrant Agent may consult at any time with legal counsel
satisfactory to it (who may be counsel for the Company) and the Warrant Agent
shall incur no liability or responsibility to the Company or to any Holder of
any Warrant in respect of any action taken, suffered, or omitted by it hereunder
in good faith and in accordance with the opinion or the advise of such counsel.
15.5 Whenever in the performance of its duties under this
Agreement the Warrant Agent shall deem it necessary or desirable that any fact
or matter be proved or established by the Company prior to taking or suffering
any action hereunder; such fact or matter (unless other evidence in respect
thereof be herein specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by the president or a vice
president, or the treasurer, or the secretary of the Company and delivered to
the Warrant Agent; and such certificate shall be full authorization to the
Warrant Agent for any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance on such certificate.
15.6 The Company agrees to pay the Warrant Agent reasonable
compensation for all services rendered by Warrant Agent in the execution of this
Agreement, to reimburse the Warrant Agent for all expenses, taxes, and
governmental charges and other charges of any kind and nature incurred by the
Warrant Agent in the execution of this Agreement, and to indemnify the Warrant
Agent and save it harmless against any and all liabilities, including judgments,
costs, and counsel fees, for anything done or omitted by the Warrant Agent in
the execution of this Agreement, except as a result of the Warrant Agent's
negligence or bad faith.
15.7 The Warrant Agent shall be under no obligation to institute
any action, suit, or legal proceeding or to take any other action likely to
involve expense unless the Company or one or more Holders of Warrants shall
furnish the Warrant Agent with reasonable security and indemnity for any costs
and expenses which may be incurred, but this provision shall not affect the
power of the Warrant Agent to take such action as the Warrant Agent may consider
proper, whether with or without any such security or indemnity. All rights of
action under this Agreement or under any of the Warrants may be enforced by the
Warrant Agent without the possession of any of the Warrants or the production
thereof at any trial or other proceeding relative thereto, and any such action,
suit, or proceeding instituted by the Warrant Agent, and any recovery of
judgment shall be for the ratable benefit of the Holders of Warrants, as their
respective rights or interest may appear.
15.8 The Warrant Agent and any stockholder, director, officer, or
employee of the Warrant Agent may buy, sell, or deal in any of the Warrants or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to or otherwise act as fully and freely as though it were not Warrant
Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from
acting in any other capacity for the Company or for any other legal entity.
8
<PAGE> 9
15.9 The Warrant Agent shall act hereunder solely as agent, and
its duties shall be determined solely by the provisions hereof. The Warrant
shall not be liable for anything which it may do or refrain from doing in
connection with this Agreement, except for its own negligence or bad faith.
15.10 The Warrant Agent will not incur any liability or
responsibility to the Company or to any Holder of any Warrant for any action
taken in reliance on any notice, resolution, waiver, consent, order,
certificate, or other paper, document, or instrument reasonably believed by it
to be genuine and to have been signed, sent, or presented by the proper party or
parties.
15.11 The Warrant Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Warrant Agent) or in respect of the
validity or execution of any Warrant (except its countersignature thereof); nor
shall the Warrant Agent by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any Shares
(or other stock) to be issued pursuant to this Agreement or any Warrant or as to
whether any Shares (or other stock) will when issued be validly issued, fully
paid, and non-assessable or as to the Warrant Price, or the number or kind or
amount of Shares or other securities or other property issuable on exercise of
any Warrant.
15.12 The Warrant Agent is hereby authorized and directed to
accept the instructions with respect to the performance of its duties hereunder
from the chairman of the board or the president or a vice president or the
secretary or the treasurer of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and shall not be liable
for any action taken by it in good faith in accordance with instructions of any
such officer.
Section 16. Change of Warrant Agent. The Warrant Agent may resign and be
discharged from its duties under this Agreement by giving to the Company 30 days
notice in writing. The Warrant Agent may be removed by like notice to the
Warrant Agent from the Company. If the Warrant Agent shall resign or be removed
or shall otherwise become incapable of acting, the Company shall appoint a
successor to the Warrant Agent. If the Company shall fail to make such
appointment within a period of 30 days after such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Warrant Agent or by the Holder or a Warrant (who shall with such
notice submit his Warrant for inspection by the Company), then the Holder of any
Warrant may apply to any court of competent jurisdiction for the appointment of
a successor to the Warrant Agent. Any successor Warrant Agent, whether appointed
by the Company or such a court, shall be a bank, trust company, or securities
transfer agency, in good standing, incorporated under the laws of the states of
California, Delaware, Florida, New Jersey, New York, Nevada or Utah or of the
United States of America. After appointment the successor Warrant Agent shall be
vested with the same powers, rights, duties, and responsibilities as if it had
been originally named as Warrant Agent without further act or deed; but the
former Warrant Agent shall deliver and transfer to the successor Warrant Agent
any property at the
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<PAGE> 10
time held by it hereunder, and execute and deliver any further assurance,
conveyance, act, or deed necessary for the purpose. Failure to file any notice
provided for in this section 16; however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Warrant
Agent or the appointment of the successor Warrant Agent, as the case may be. In
the event of such resignation or removal, the successor Warrant Agent shall
mail, first class, to each Holder, written notice of such removal or resignation
and the name and address of such successor Warrant Agent.
Section 17. Identity of Transfer Agent. Forthwith on the appointment of
any subsequent Transfer Agent for the Company's Shares, or any other Shares of
the Company's capital stock issuable on the exercise of the rights of purchase
represented by the Warrants, the company will file with the Warrant Agent a
statement setting forth the name and address of such Transfer Agent.
Section 18. Notices. Any notice pursuant to this Agreement by the
Company or by the Holder of any Warrant to the Warrant Agent, or by the Warrant
Agent or by the Holder of any Warrant to the Company, shall be in writing and
shall be deemed to have been duly given if delivered or mailed certified mail,
return receipt requested (a) if to the Company to Universal Medical Systems,
Inc., 13825 Icot Boulevard, Suite 613, Clearwater, Florida 34620 and (b) if to
the Warrant Agent, to his main office: Dennis D. Cole, Esq., 13825 Icot
Boulevard Suite 613, Clearwater, Florida 34620. Each party hereto may from
time-to-time change the address to which notices to it are to be delivered or
mailed hereunder by notice in writing to the other party.
Section 19. Supplements and Amendments. The Company and the Warrant
Agent may from time-to-time supplement or amend this Agreement, without the
approval of any Holders of Warrants, in order to cure any ambiguity or to
correct or supplement any provision contained herein or to make any other
provisions in regard to matters or questions arising hereunder which the Company
and the Warrant Agent may deem necessary or desirable and which shall not be
inconsistent with the provisions of the Warrants and which shall not adversely
affect the interest of the Holders of the Warrants. In this regard, but not by
way of limitation, establishing an earlier date of exercise without a change in
the expiration date of the Warrants set forth in Section 5 or extending the
period for exercise without a change in the date on which the Warrants are first
exercisable set forth in Section 5 shall not be deemed to adversely affect the
interests of the Holders.
Section 20. Successors. All the covenants and provisions of this
Agreement by or for the benefit of each party shall be binding upon and shall
inure to the benefit of the parties hereto and to their respective successors
and assigns hereunder.
Section 21. Merger or Consolidation of the Company. The Company will not
merge or consolidate with or into any other corporation unless the corporation
resulting from such merger or consolidation (if not the Company) shall expressly
assume, by supplemental agreement satisfactory in form to the Warrant agent and
executed and delivered to the Warrant Agent, the due and punctual performance
and observance of each and every covenant and condition of this Agreement to be
performed and observed by the Company.
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<PAGE> 11
Section 22. Applicable Law. This Agreement and each Warrant issued
hereunder shall be deemed to be a contract made under the laws of the State of
Nevada and for all purposes shall be construed in accordance with the laws of
said State.
Section 23. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give any person or corporation other than the Company, the
Warrant Agent, and the Holders of the Warrants any legal or equitable right,
remedy, or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Warrant Agent, and the Holders of the
Warrants.
Section 24. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
Section 25. Captions. The captions of the sections and subsections of
this Agreement have been inserted for convenience only and shall have no
substantive effect.
IN WITNESS WHEREOF: the parties hereto have caused this Agreement to be
duly executed all as of the date first above written.
UNIVERSAL MEDICAL SYSTEMS, INC.
By:/s/ Myron A. Baker
---------------------------
Myron A. Baker
Chairman & CEO
DENNIS D. COLE, ESQ.
By:/s/ Dennis D. Cole
---------------------------
Dennis D. Cole
11
<PAGE> 1
EXHIBIT 4(m)
EXERCISABLE AFTER 12:00 A.M. ON DECEMBER 29, 1995
VOID AFTER 11:59 P.M. DECEMBER 31, 1997
REDEEMABLE CLASS B COMMON STOCK PURCHASE WARRANT
REDEEMABLE CLASS B WARRANT NUMBER NUMBER OF WARRANTS
---- *----*
UNIVERSAL MEDICAL SYSTEMS, INC.
This Certifies That, FOR VALUE RECEIVED,______________
or registered assigns, (the "Holder") is the owner of the number of Redeemable
Class B Common Stock Purchase Warrants ("Class B Warrants") specified above.
Each Class B Warrant initially entitles the Holder to purchase, subject to the
terms and conditions set forth in this Warrant Certificate and the Warrant
Agreement (Class B Warrants), as hereinafter defined, one fully-paid and
nonassessable share of Common Stock $0.001 par value, of Universal Medical
Systems, Inc. a Nevada corporation, (the "Company") at any time between December
29, 1995, and the Expiration Date (as hereinafter defined), upon the
presentation and surrender of this Warrant Certificate with the Form of Exercise
on the reverse side hereof duly executed at the principal office of Dennis D.
Cole, Esq., as Warrant Agent, or his substitute (the "Warrant Agent")
accompanied by payment in lawful money of the United States of America in cash
or by official bank or certified check payable to the Company of $3.00 per
share.
This Warrant Certificate and each Class B Warrant represented hereby are
issued pursuant to and are subject in all respects to the terms and conditions
set forth in the Warrant Agreement (the "Warrant Agreement") between the Company
and the Warrant Agent. A copy of the Warrant Agreement is on file at the
principal office of the Warrant Agent, currently located at 13825 Icot Boulevard
Suite 613, Clearwater, Florida 34620.
Each Class B Warrant represented hereby is exercisable at the option of
the registered holder, but no fractional shares of Common Stock will be issued.
In the case of the exercise of less than all the Class B Warrants represented
hereby, the Company shall cancel this Warrant Certificate upon the surrender
hereof and shall execute and deliver a new Warrant Certificate(s) of like tenor,
which the Warrant Agent shall issue for the balance of such Class B Warrant.
The Term "Expiration Date: shall mean 11:59 P.M. (Florida time) on
December 31, 1997, or such earlier date as the Class B Warrants shall be
redeemed. If such date shall in the State of Florida be a holiday or a day on
which banks are authorized to close, the Expiration Date shall Mean 11:59 P.M.
(Florida time) the next following date which in the State of Florida is not a
holiday or a day in which banks are authorized to close.
This Class B Warrant may not be exercised unless a registered statement
under the Securities Act of 1933, as amended, and under the applicable state
securities law with respect to such securities, is effective or there is an
available an exemption from such Federal and State registration requirements and
the Company may have an obligation to file a registration statement to permit
exercise of this Class B Warrant. This Class B Warrant shall not be exercisable
by a Registered Holder in any state where such exercise would be unlawful.
ADDITIONAL PROVISIONS OF THIS CLASS B WARRANT ARE CONTAINED ON THE REVERSE
HEREOF.
Dated: December 29, 1995 By:
------------------------------
President
Attest:
------------------------------
Secretary
EXHIBIT "A"
pg 1 of 2
<PAGE> 1
EXHIBIT 4(n)
WARRANT AGREEMENT
THIS WARRANT AGREEMENT (this "Agreement") is entered into this 5th day of
October, 1996, by and between UNIVERSAL MEDICAL SYSTEMS, INC., a Nevada
corporation, whose address is 13825 Icot Boulevard Suite 613, Clearwater,
Florida 34620 (the "Company"), and DENNIS D. COLE, Esq., whose address is 13825
Icot Boulevard Suite 613, Clearwater, Florida 34620, as Warrant Agent (the
"Warrant Agent").
Premises
A. The Company has proposed to issue Redeemable Class C Common Stock
Purchase Warrants as hereinafter described (the "Warrants") to purchase Shares
of the Company's $.001 par value common stock at an exercise price of One and
50/100 Dollars ($1.50) per share.
B. The Company wishes the Warrant Agent to act on behalf of the Company,
and the Warrant Agent is willing to act in connections with the issuance,
division, transfer, exchange, and exercise of Warrants.
Agreement
In consideration of the foregoing and for the purpose of defining the
terms and provisions of the Warrants and the respective rights and obligations
thereunder of the Company and the registered owners of the Warrants (the
"Holders"), the Company and the Warrant Agent hereby agree as follows:
Section 1. Appointment of Warrant Agent. The Company hereby appoints
the Warrant Agent to act as agent for the Company in accordance with the
instructions hereinafter in this Agreement set forth, and the Warrant Agent
hereby accepts such appointment.
Section 2. Transferability and Form of Warrant.
2.1 Registration. The Warrant shall be numbered and shall be
registered in a Warrant register as they are issued. The Company and the Warrant
Agent shall be entitled to treat the Holder of any Warrant as the owner in fact
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to or interest in such Warrant on the part of any other person, and
shall not be liable for any registration or transfer of Warrants which are
registered or to be registered in the name of a fiduciary or the nominee of a
fiduciary unless made with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration or transfer, or
with knowledge of such facts that its participation therein amounts to bad
faith.
<PAGE> 2
2.2 Transfer. The Warrants are fully transferable. Warrants
shall be transferable only on the books of the Company maintained at the office
of the Warrant Agent in the City of Clearwater, State of Florida, on delivery
thereof duly endorsed by Holder or by his duly authorized attorney or
representative, or accompanied by proper evidence of succession, assignment, or
authority to transfer. In all cases of transfer by an attorney, the original
letter of attorney, duly approved, or an official copy thereof, duly certified,
shall be deposited and remain with the Warrant Agent. In case of transfer by
executors, administrators, guardians, or other legal representatives, duly
authenticated evidence of their authority shall be produced, and may be required
to be deposited and remain with the Warrant Agent in its discretion. On any
registration of transfer, the Warrant Agent shall countersign and deliver a new
Warrant or Warrants to the person entitled thereto.
2.3 Form of Warrants. The text of the Warrant and of the form of
election to purchase Shares shall be substantially as set forth in Exhibit "A"
attached hereto. The price per Share and the number of Shares issuable on
exercise of Warrants are as indicated on the face of each Warrant. The Warrants
shall be executed on behalf of the Company by the manual or facsimile signature
of the present or any future secretary or assistant secretary of the Company.
Warrants shall be dated as of the date of countersignature thereof by the
Warrant Agent either on initial issuance or on division, exchange, substitution,
or transfer.
Section 3. Countersignature of Warrants. The Warrants shall be
countersigned by the Warrant Agent (or any successor to the Warrant Agent then
acting as Warrant Agent under this Agreement) and shall not be valid for any
purpose unless so countersigned. Warrants may be countersigned, however, by the
Warrant Agent (or by its successor as Warrant Agent) and may be delivered by the
Warrant Agent, notwithstanding that the persons whose manual or facsimile
signatures appearing thereon as proper officers of the Company shall have ceased
to be such officers at the time of such countersignature, issuance, or delivery.
The Warrant Agent shall, on written instructions of the president or the
secretary of the Company, countersign, issue, and deliver Warrants entitling the
Holders thereof to purchase the Shares provided for in the instructions and
shall countersign and deliver Warrants as otherwise provided in this Agreement.
Section 4. Exchange of Warrants. The Warrants may be exchanged for
another Warrant or Warrants entitling the Holder thereof to purchase a like
aggregate number of Shares as the Warrant or Warrants surrendered then entitle
him to purchase. Any Holder of a Warrant desiring to exchange Warrants shall
make such request in writing delivered to the Warrant Agent, and shall
surrender, properly endorsed, the Warrant or Warrants to be so exchanged.
Thereupon, the Warrant Agent shall countersign and deliver to the person
entitled thereto a Warrant or Warrants, as the case may be, as so requested.
Section 5. Term of Warrants; Exercise of Warrants. Each Holder shall
have the right, which may be exercised beginning at 12:00 a.m. on October 5,
1996, and expiring at 11:59 p.m., Florida time on September 30, 2001, to
purchase from the Company the number of fully paid and non-assessable Shares to
which the Holder may at the time be entitled to purchase pursuant to such
Warrants, subject to the conditions set forth in this paragraph, on surrender to
the Company at the principal office in the City of Clearwater, State of Florida
of
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<PAGE> 3
the Warrant Agent with the form of election to purchase on the reverse thereof
duly completed and signed, and on payment to the Warrant Agent for the account
of the Company of the Warrant Price as defined and determined in accordance with
the provisions of Sections 9 and 10 hereof, for the number of Shares in respect
of which such Warrants are then exercised. Payment of the Warrant Price shall be
made in cash or by cashier's check. Subject to subsections 5.1 and 5.2 of this
section, on such surrender of Warrants, and payment of the Warrant Price as
aforesaid, the Company shall issue and cause to be delivered with all reasonable
dispatch to or on the written order of the Holder and in such name or names as
the Holder may designate, a certificate or certificates for the number of full
Shares so purchased on the exercise of such Warrants. No fractional Shares shall
be issuable on such surrender. Such certificate or certificates shall be deemed
to have been issued and any person so designated to be named therein shall be
deemed to have become a Holder of Record of such Shares as of the date of the
surrender of such Warrants and payment of the Warrant Price, as aforesaid;
provided, however, that if, at the date of surrender of such Warrants and
payment of such Warrant Price, the transfer books for the Shares or other class
of stock purchasable on the exercise of such Warrants shall be closed, the
certificates for the Shares in respect of which such Warrants are then exercised
shall be issuable as of the date on which such books shall next be opened
(whether before or after expiration of the exercise period) and until such date
the Company shall be under no duty to deliver any certificate for such Shares;
provided further, however, the transfer books of record, unless otherwise
required by law, shall not be closed at any one time for a period longer than 60
days. The right of purchase represented by the Warrants shall be exercisable, at
the election of the Holders thereof, either in full or from time-to-time in part
and, in the event that any Warrant is exercised in respect of less than all of
the Shares specified therein at any time prior to the date of expiration of the
Warrants, a new Warrant or Warrants will be issued for the remaining number of
Shares, and the Warrant Agent is hereby irrevocably authorized to countersign
and to deliver the required new Warrants pursuant to the provisions of this
section and of Section 3 hereof and the Company, whether required by the Warrant
Agent, will supply the Warrant Agent with Warrants duly executed on behalf of
the Company for such purpose.
5.1 The Warrants may not be exercised by the Holders in the
absence of an effective registration statement under the Securities Act of 1933,
as amended (the "Securities Act"), and registration or qualification under
applicable state blue sky laws pertaining to the Shares issuable on exercise of
the Warrants or there is an available exemption from such federal or state
registration requirements.
5.2 If the Company is required to file a registration statement
in accordance with the provisions of subsection 5.1, the Company shall take all
steps reasonably necessary to permit the exercise of the Warrants and the
issuance of the Shares under the applicable state securities laws of those
states in which the Warrants were originally issued by the Company. The Company
will take such reasonable steps which it determines, in its sole discretion, are
necessary to permit the exercise of Warrants and the issuance of the Shares
under the laws of any other state in which a Holder then resides on the written
request to do so by such Holder, but in no event shall the Company be required
to consent to the general service of process in any state other than those
states in which the Warrants
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<PAGE> 4
were originally issued. Holders who reside in any state where the Company
cannot, with the exercise of reasonable diligence and without consenting to
general service of process, obtain qualification for the exercise of the
Warrants and the issuance of the Shares may not, as a result thereof, be able to
exercise their Warrants, and the Company is under no obligation to make such
exercise possible in such circumstances. In the event that the Company
determines to proceed with the qualification of the exercise of the Warrants and
the issuance of the Shares under the securities laws of a particular state, then
the exercise of such Warrants shall not be effective and the Shares shall not be
issued until such qualification becomes effective. The costs of obtaining such
state qualification shall be borne by the Company.
5.3 The Company shall promptly notify the Warrant Agent of the
effective date of any registration statement which the Company is required to
file under subsection 5.1 and the date on which the Shares become qualified or
registered under the state securities laws of any state in which the Company
obtains qualification or registration with respect to such Shares. The Warrant
Agent shall not issue any Shares with respect to any Warrant surrendered for
exercise unless such Warrants are surrendered and received by the Warrant Agent
during a period that the registration statement is effective. Furthermore, the
Warrant Agent shall not issue any Shares on the exercise of any Warrants
received from a Holder who is a resident of a state with respect to which the
Shares issuable on exercise of the Warrants are not qualified or registered.
Section 6. Payment of Taxes. The Company will pay all documentary stamp
taxes, if any, attributable to the initial issuance of Shares issuable on the
exercise of Warrants; provided, however, that the Company shall not be required
to pay any tax or taxes which may be payable in respect of any transfer involved
in the issuance or delivery of any Warrants or certificates for Shares.
Section 7. Mutilated or Missing Warrants. In case any of the Warrants
shall be mutilated, lost, stolen, or destroyed, the company may at its
discretion issue and the Warrant Agent shall countersign and deliver in exchange
and substitution for and on cancellation of the mutilated Warrant, or in lieu of
and as substitution for the Warrant lost, stolen, or destroyed, a new Warrant of
like tenor and representing an equivalent right or interest; but only upon
receipt of evidence satisfactory to the Company and the Warrant Agent of such
loss, theft, or destruction of such Warrant and indemnity, if requested, also
satisfactory to them. Applicants for such substitute Warrants shall also comply
with such other reasonable regulations and pay such other reasonable charges as
the Company or the Warrant Agent may prescribe.
Section 8. Reservation of Shares; Redemption of Warrants.
8.1 Reservation of Shares. There shall, at all times, be
reserved, out of the authorized and unissued Shares a number of Shares
sufficient to provide for the exercise of the rights of purchase represented by
the outstanding Warrants. The transfer agent for the Shares and every subsequent
transfer agent for any Shares of the Company's stock issuable on the exercise of
any of the rights of purchase aforesaid will be irrevocably authorized and
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<PAGE> 5
directed at all times to reserve such number of authorized and issued shares as
shall be requisite for such purpose. The Company will keep a copy of this
Agreement on file with the transfer agent for the Shares and with every
subsequent transfer agent for any Shares of the Company's capital stock issuable
on the exercise of the rights of purchase represented by the Warrants. The
Warrant Agent is hereby irrevocably authorized to requisition from time-to-time
from such transfer agent, stock certificates required to honor outstanding
Warrants on exercise thereof in accordance with the terms of this Agreement. The
Company will supply such transfer agent with duly executed stock certificates
for such purpose and will provide or otherwise make available any cash which may
be payable as provided in Section 11 hereof. All Warrants surrendered in the
exercise of the rights thereby evidenced shall be canceled by the Warrant Agent
and shall thereafter be delivered to the Company. Promptly after the date of
expiration of the Warrants, the Warrant Agent shall certify to the Company the
total aggregate amount of Warrants then outstanding, and thereafter no Shares
shall be subject to reservation in respect of such Warrants.
8.2 Redemption of Warrants. Any time after June 30, 1997, the
Company may redeem the Warrants at a price of $.01 per Warrant at any time upon
20 days prior written notice if the average closing bid quotation of the Common
Stock has been at least 120% of the exercise price of the Warrants during the 20
consecutive days ending on the third day prior to the day on which notice of
redemption is given to the Warrant Holders.
Section 9. Warrant Price. The price at which Shares shall be
purchasable on exercise of the Warrants shall be One and 50/100 dollars ($1.50)
per Share.
Section 10. No adjustment of Warrant Price and Number of Shares. The
number and kind of securities purchasable on the exercise of each Warrant and
the Warrant Price shall not be subject to anti-dilutive adjustment for any
reason, whatsoever, including but not limited to, forward or reverse splits of
the Company's common stock, stock or cash dividend, or recapitalization. Except,
in the event securities of the Company are issued for consideration less than
that paid by the Holder of the Warrant in connection with the subscription made
by the Holder for Units of securities including Series "C" Preferred Stock and
Warrants, similar securities as those issued by the Company shall be made
available to the Holder upon the same terms and conditions as issued to any
third party in order that the Holder's percentage interest in the issued and
outstanding shares of the Company shall not be negatively diluted. This
provision shall not apply to securities issued to employees of the Company.
10.1 Preservation of Purchase Rights on Reclassification,
Consolidation, Etc. In case of any consolidation of the company with or merger
of the Company into another corporation or in case of any sale or conveyance to
another corporation of the property of the Company as an entirety or
substantially as an entirety, the Company or such successor or purchasing
corporation, as the case may be, shall execute with the Warrant Agent an
agreement that each Holder of a Warrant shall have the right thereafter on
payment of the Warrant Price in effect immediately prior to such action to
purchase on exercise of each Warrant the kind and amount of Shares and other
securities and property which he would have owned or have been entitled to
receive after the happening of such consolidation, merger, sale, or conveyance
had such Warrant been exercised immediately prior to such
5
<PAGE> 6
action. The Company shall mail by first class mail, postage prepaid, to the
Holder of each Warrant notice of the execution of any such agreement. The
provisions of this subsection 10.1 shall similarly apply to successive
consolidations, mergers, sales, or conveyances. The Warrant Agent shall be under
no duty or responsibility to determine the correctness of any provisions
contained in any such agreement relating either to the kind or amount of shares
of stock or other securities or property receivable on exercise of Warrants or
with respect to the method employed and provided therein for any adjustments.
Section 11. Fractional Interests. The Company shall not be required to
issue fractional Shares on the exercise of Warrants. If more than one Warrant
shall be presented for exercise in full at the same time by the same Holder, the
number of full Shares which shall be issuable on the exercise thereof shall be
computed on the basis of the aggregate number of Shares represented by the
Warrants so presented. If any fraction of a Share would, except for the
provisions of this Section 11, be issuable on the exercise of any Warrant (or
specified portion thereof), the Company shall pay an amount in cash equal to the
current value of such fraction computed on the basis of (i) the closing bid
price of the Company's common stock as reported by the National Quotation
Bureau, Inc., on its "pink sheets" or "electronic bulletin board" or, if the
common stock is reported by NASDAQ, the closing bid price reported by NASDAQ, on
the last business day prior to the date of exercise, if the Shares are traded in
the over-the-counter market, or (ii) the last reported sales price of the Shares
on the national stock exchange on which the shares are listed on the last
business day prior to the date of exercise on which such a sale shall have been
effected, if the Shares are listed on such an exchange.
Section 12. No Right as Shareholders; Notice to Warrant Holders. Nothing
contained in this Agreement or in any of the Warrants shall be construed as
conferring on the Holders or their transferees the right to vote or to receive
dividends or to consent or to receive notice as shareholders in respect of the
meeting of shareholders for the election of directors of the Company or any
other matter, or any rights whatsoever as Shareholders of the Company.
Section 13. Disposition of Proceeds on Exercise of Warrants; Inspection
of Warrant Agreement. The Warrant Agent shall account promptly to the Company
with respect to Warrants exercised and concurrently pay to the Company all
moneys received by the Warrant Agent for the purchase of the Company's Shares
through the exercise of such Warrants. The Warrant Agent shall keep copies of
this Agreement and any notices given or received hereunder available for
inspection by Holders of Warrants during normal business hours at its principal
office in the City of Clearwater, State of Florida. The Company shall supply the
Warrant Agent, from time-to-time, with such numbers of copies of this Agreement
as the Warrant Agent may request.
Section 14. Merger or Consolidation or Change of Name of Warrant Agent.
Any corporation into which the Warrant Agent may be merged or with which it may
be consolidated, or any corporation resulting from any merger or consolidation
to which the Warrant Agent shall be a party, or any corporation succeeding to
the corporate trust business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties
6
<PAGE> 7
hereto; provided, that such corporation would be eligible for appointment as a
successor Warrant Agent under the provisions of Section 16 hereof. In case at
the time such successor to the Warrant Agent shall succeed to the agency created
by this Agreement, any of the Warrants shall have been countersigned but not
delivered, any successor to the Warrant Agent may adopt the countersignature of
the original Warrant Agent and deliver such Warrants so countersigned; and in
case at that time any of the Warrants shall not have been countersigned, any
successor to the Warrant Agent may countersign such Warrants either in the name
of the predecessor Warrant Agent or in the name of the successor Warrant Agent,
and in all such cases, Warrants shall have the full force provided in the
Warrants and in this Agreement. In case at any time the name of the Warrant
Agent shall be changed and at such time any of the Warrants shall have been
countersigned but not delivered, the Warrant Agent may adopt the
countersignature under its prior name and deliver Warrants so countersigned; and
in case at that time any of the Warrants shall not have been countersigned, the
Warrant Agent may countersign such Warrants either in its prior name or in its
changed name; and in all such cases such Warrants shall have the full force
provided in the Warrants and in this Agreement.
Section 15. Concerning the Warrant Agent. The Warrant Agent undertakes
the duties and obligations imposed by this Agreement on the following terms and
conditions, by all of which the Company and the Holders of Warrants, by their
acceptance thereof shall be bound:
15.1 The statements contained herein and in the Warrants shall be
taken as statements of the Company, and the Warrant Agent assumes no
responsibility for the correctness of any of the same except such as describe
the Warrant Agent or action taken by it. The Warrant Agent assumes no
responsibility with respect to the distribution of the Warrants except as herein
otherwise provided.
15.2 The Warrant Agent shall not be responsible for any failure
of the Company to comply with any of the covenants contained in this Agreement
or in the Warrants to be compiled with by the Company.
15.3 The Warrant Agent may execute and exercise any of the rights
or powers hereby vested in it or perform any duty hereunder either itself or by
or through its attorney, agents or employees, and the Warrant Agent shall not be
answerable or accountable for any act, default, neglect, or misconduct of any
such attorney, agents, or employees or for any loss to the Company resulting
from such neglect or misconduct; provided, reasonable care shall have been
exercised in the selection and continued employment thereof.
15.4 The Warrant Agent may consult at any time with legal counsel
satisfactory to it (who may be counsel for the Company) and the Warrant Agent
shall incur no liability or responsibility to the Company or to any Holder of
any Warrant in respect of any action taken, suffered, or omitted by it hereunder
in good faith and in accordance with the opinion or the advise of such counsel.
7
<PAGE> 8
15.5 Whenever in the performance of its duties under this
Agreement the Warrant Agent shall deem it necessary or desirable that any fact
or matter be proved of established by the Company prior to taking or suffering
any action hereunder; such fact of matter (unless other evidence in respect
thereof be herein specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by the president or a vice
president, or the treasurer, or the secretary of the Company and delivered to
the Warrant Agent; and such certificate shall be full authorization to the
Warrant Agent for an, action taken or suffered in good faith by it under the
provisions of this Agreement in reliance on such certificate.
15.6 The Company agrees to pay the Warrant Agent reasonable
compensation for all services rendered by Warrant Agent in the execution of this
Agreement to reimburse the Warrant Agent for all expenses, taxes, and
governmental charges and other charges of any kind and nature incurred by the
Warrant Agent in the execution of thin Agreement, and to indemnify the Warrant
Agent and save it harmless against any and all liabilities, including judgments,
costs, and counsel fees, for anything done or omitted by the Warrant Agent in
the execution of this Agreement, except as a result of the Warrant Agent's
negligence or bad faith.
15.7 The Warrant Agent shall be under no obligation to institute
any action, suit, or legal proceeding or to take any other action likely to
involve expense unless the Company or one or more Holders of Warrants shall
furnish the Warrant Agent with reasonable security and indemnity for any costs
and expenses which may be incurred, but this provision shall not affect the
power of the Warrant Agent to take such action as the Warrant Agent may consider
proper, whether with or without any such security or indemnity. All rights of
action under this Agreement or under any of the Warrants may be enforced by the
Warrant Agent without the possession of any of the Warrants or the production
thereto at any trial or other proceeding relative thereto, and any such action,
suit, or proceeding instituted by the Warrant Agent, and any recovery of
judgment shall be for the ratable benefit of the Holders of Warrants, as their
respective rights or interest may appear.
15.8 The Warrant Agent and any stockholder, director, officer, or
employee of the Warrant Agent may buy, sell, or deal in any of the Warrants or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to or otherwise act as fully and freely as though it were not Warrant
Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from
acting in any other capacity for the Company or for any other legal entity.
15.9 The Warrant Agent shall act hereunder solely as agent, and
its duties shall be determined solely by the provisions hereof. The Warrant
shall not be liable to anything which it may do or refrain from doing in
connection with this Agreement, except for its own negligence or bad faith.
15.10 The Warrant Agent will not incur any liability or
responsibility to the Company or to any Holder of any Warrant for any action
taken in reliance on any notice, resolution, waiver, consent, order,
certificate, or other paper, document, or instrument reasonably believed by it
to be genuine and to have been signed, sent, or presented by the proper party or
parties.
8
<PAGE> 9
15.11 The Warrant Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Warrant Agent) or in respect of the
validity or execution of any Warrant (except its countersignature thereof); nor
shall the Warrant Agent by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any Shares
(or other stock) to be issued pursuant to this Agreement or any Warrant or as to
whether any Shares (or other stock) will when issued be validly issued, fully
paid, and non-assessable or as to the Warrant Price, or the number or kind or
amount of Shares or other securities or other property issuable on exercise of
any Warrant.
15.12 The Warrant Agent is hereby authorized and directed to
accept the instructions with respect to the performance of its duties hereunder
from the chairman of the board or the president or a vice president or the
secretary or the treasurer of the Company, and to apply to such officers advice
or instructions in connection with its duties, and shall not be liable for any
action taken by it in good faith in accordance with instructions of any such
officer.
Section 16. Change of Warrant Agent. The Warrant Agent may resign and be
discharged from its duties under this Agreement by giving to the Company 30 days
notice in writing. The Warrant Agent may be removed by like notice to the
Warrant Agent from the Company. If the Warrant Agent shall resign or be removed
or shall otherwise become incapable of acting, the Company shall appoint a
successor to the Warrant Agent. If the Company shall fail to make such
appointment within a period of 30 days after such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Warrant Agent or by the Holder or a Warrant (who shall with such
notice submit his Warrant for inspection by the Company), then the Holder of any
Warrant may apply to any court of competent jurisdiction for the appointment of
a successor to the Warrant Agent. Any successor Warrant Agent, whether appointed
by the Company or such a court, shall be a bank, trust company, or securities
transfer agency, in good standing, incorporated under the laws of the states of
California, Delaware, Florida, New Jersey, New York, Nevada or Utah or of the
United States of America. After appointment the successor Warrant Agent shall be
vested with the same powers, rights, duties, and responsibilities as if it had
been originally named as Warrant Agent without further act or deed; but the
former Warrant Agent shall deliver and transfer to the successor Warrant Agent
any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act, or deed necessary for the purpose. Failure
to file any notice provided for in this section 16; however, or any defect
therein, shall not affect the legality or validity of the resignation or removal
of the Warrant Agent or the appointment of the successor Warrant Agent, as the
case may be. In the event of such resignation or removal, the successor Warrant
Agent shall mail, first class, to each Holder, written notice of such removal or
resignation and the name and address of such successor Warrant Agent.
Section 17. Identity of Transfer Agent. Forthwith on the appointment of
any subsequent Transfer Agent for the Company's Shares, or any other Shares of
the Company's capital stock issuable on the exercise of the rights of purchase
represented by the Warrants, the company will file with the Warrant Agent a
statement setting forth the name and address of such Transfer Agent.
9
<PAGE> 10
Section 18. Notices. Any notice pursuant to this Agreement by the
Company or by the Holder of any Warrant to the Warrant Agent, or by the Warrant
Agent or by the Holder of any Warrant to the Company, shall be in writing and
shall be deemed to have been duly given if delivered or mailed certified mail,
return receipt requested (a) if to the Company to Universal Medical Systems,
Inc., 13825 Icot Boulevard, Suite 613, Clearwater, Florida 34620 and (b) if to
the Warrant Agent, to his main office: Dennis D. Cole, Esq., 13825 Icot
Boulevard Suite 613, Clearwater, Florida 34620. Each party hereto may from
time-to-time change the address to which notices to it are to be delivered or
mailed hereunder by notice in writing to the other party.
Section 19. Supplements and Amendments. The Company and the Warrant
Agent may from time-to-time supplement or amend this Agreement, without the
approval of any Holders of Warrants, in order to cure any ambiguity or to
correct or supplement any provision contained herein or to make any other
provisions in regard to matters or questions arising hereunder which the Company
and the Warrant Agent may deem necessary or desirable and which shall not be
inconsistent with the provisions of the Warrants and which shall not adversely
affect the interest of the Holders of the Warrants. In this regard, but not by
way of limitation, establishing an earlier date of exercise without a change in
the expiration date of the Warrants set forth in Section 5 or extending the
period for exercise without a change in the date on which the Warrants are first
exercisable set forth in Section 5 shall not be deemed to adversely affect the
interests of the Holders.
Section 20. Successors. All the covenants and provisions of this
Agreement by or for the benefit of each party shall be binding upon and shall
inure to the benefit of the parties hereto and to their respective successors
and assigns hereunder.
Section 21. Merger or Consolidation of the Company. The Company will not
merge or consolidate with or into any other corporation unless the corporation
resulting from such merger or consolidation (if not the Company) shall expressly
assume, by supplemental agreement satisfactory in form to the Warrant agent and
executed and delivered to the Warrant Agent, the due and punctual performance
and observance of each and every covenant and condition of this Agreement to be
performed and observed by the Company.
Section 22. Applicable Law. This Agreement and each Warrant issued
hereunder shall be deemed to be a contract made under the laws of the State of
Nevada and for all purposes shall be construed in accordance with the laws of
said State.
Section 23. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give any person or corporation other than the Company, the
Warrant Agent, and the Holders of the Warrants any legal or equitable right,
remedy, or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Warrant Agent, and the Holders of the
Warrants.
Section 24. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
10
<PAGE> 11
Section 25. Captions. The captions of the sections and subsections of
this Agreement have been inserted for convenience only and shall have no
substantive effect.
IN WITNESS WHEREOF: the parties hereto have caused this Agreement to be
duly executed all as of the date first above written.
UNIVERSAL MEDICAL SYSTEMS, INC.
By:/s/Myron A. Baker
---------------------------
Myron A. Baker
Chairman & CEO
DENNIS D. COLE, ESQ.
By:/s/Dennis D. Cole
---------------------------
Dennis D. Cole
11
<PAGE> 12
EXERCISABLE AFTER 12:00 A.M. ON OCTOBER 5, 1996
VOID AFTER 11:59 P.M. SEPTEMBER 30,2001
REDEEMABLE CLASS C COMMON STOCK PURCHASE WARRANT
REDEEMABLE CLASS C WARRANT NUMBER NUMBER OF WARRANTS
UNIVERSAL MEDICAL SYSTEMS, INC.
This Certifies That, FOR VALUE RECEIVED,
or registered assigns, (the "Holder") is the owner of the number of Redeemable
Class C Common Stock Purchase Warrants ("Class C Warrants") specified above.
Each Class C Warrant initially entitles the Holder to purchase, subject to the
terms and conditions set forth in this Warrant Certificate and the Warrant
Agreement (Class C Warrants), as hereinafter defined, one fully-paid and
nonassessable share of Common Stock $0.001 par value, of Universal Medical
Systems, Inc. a Nevada corporation, (the "Company") at any time between October
5, 1996, and the Expiration Date (as hereinafter defined), upon the presentation
and surrender of this Warrant Certificate with the Form of Exercise on the
reverse side hereof duly executed at the principal office of Dennis D. Cole,
Esq., as Warrant Agent, or his substitute (the 'Warrant Agent") accompanied by
payment in lawful money of the United States of America in cash or by official
bank or certified check payable to the Company of $1.50 per share.
This Warrant Certificate and each Class C Warrant represented hereby are
issued pursuant to and are subject in all respects to the terms and conditions
set forth in the Warrant Agreement (the "Warrant Agreement") between the Company
and the Warrant Agent. A copy of the Warrant Agreement is on file at the
principal office of the Warrant Agent, currently located at 13825 Icot Boulevard
Suite 613, Clearwater, Florida 34620.
Each Class C Warrant represented hereby is exercisable at the option of
the registered holder, but no fractional shares of Common Stock will be issued.
In the case of the exercise of less than all the Class C Warrants represented
hereby, the Company shall cancel this Warrant Certificate upon the surrender
hereof and shall execute and deliver a new Warrant Certificate(s) of like tenor,
which the Warrant Agent shall issue for the balance of such Class C Warrant.
The Term "Expiration Date: shall mean 11:59 P.M. (Florida time) on
September 30, 2001, or such earlier date as the Class C Warrants shall be
redeemed. If such date shall in the State of Florida be a holiday or a day on
which banks are authorized to close, the Expiration Date shall Mean 11:59 P.M.
(Florida time) the next following date which in the State of Florida is not a
holiday or a day in which banks are authorized to close.
This Class C Warrant may not be exercised unless a registered statement
under the Securities Act of 1933, as amended, and under the applicable state
securities law with respect to such securities, is effective or there is an
available an exemption from such Federal and State registration requirements and
the Company may have an obligation to file a registration statement to permit
exercise of this Class C Warrant. This Class C Warrant shall not be exercisable
by a Registered Holder in any state where such exercise would be unlawful.
ADDITIONAL PROVISIONS OF THIS CLASS C WARRANT ARE CONTAINED ON THE REVERSE
HEREOF.
Dated: October 5, 1996 By:/s/
---------------------------------
President
Attest:/s/
---------------------------------
Secretary
EXHIBIT "A"
pg 1 of 2
<PAGE> 13
1. EXERCISE OF THE WARRANT. This Warrant may be exercised by the holder, in
whole at any time or in part from time to time prior the Expiration Date, by the
surrender of this Warrant Certificate (with the Form of Exercise below duly
executed) at the principal office of Warrant Agent, together with proper payment
of the Exercise Price of the proportionate part thereof if this Class C Warrant
is exercised in part. Payment for shares of Common Stock issuable upon exercise
of the Class C Warrants ("Warrant Shares") shall be made by check payable to the
order of the Company. If this warrant Certificate is exercised in part, this
Class C Warrant must be exercised for the number of whole Warrant Shares, and
the Holder is entitled to receive a new Warrant Certificate covering the number
of whole Warrant Shares in respect of which this Class C Warrant has not been
exercised. Upon such surrender of this Class C Warrant, the Company will (a)
issue a certificate(s) in the name of the Holder for the largest number of whole
Warrant Shares to which the Holder shall be entitled and, if this Class C
Warrant is exercised in whole in lieu of any fractional Warrant Share to which
the Holder shall be entitled, cash equal to the fair value of such fractional
share (determined in accordance with the Warrant Agreement), and (b) deliver the
other securities and properties receivable upon the exercise of the Class C
Warrant, or the proportionate part thereof if this Class C Warrant is exercised
in part, pursuant to the provisions of the Warrant Agreement.
2. RESERVATION OF WARRANT SHARES. The Company agrees that prior to the
Expiration Date, it will at all times have authorized and in reserve, and will
keep available, solely for issuance or delivery upon the exercise of this Class
C Warrant, the Warrant Shares and other securities and properties as from time
to time shall be receivable on the exercise of this Class C Warrant, free and
clear of all restriction on sale or transfer and free and clear of all
preemptive rights.
3. PROTECTION AGAINST DILUTION. Refer to paragraph 8 of Summary of Private
Placement dated October 5, 1996.
4. FULLY-PAID SHARES. The Company agrees that the Warrant Shares delivered on
the exercise of this Class C Warrant, shall at the time of such delivery, be
validly issued, outstanding and fully-paid.
5. LOSS, ETC OF WARRANT. Upon receipt of evidence satisfactory to the Company of
the loss, theft, destruction or mutilation of this Warrant, and indemnity
reasonably satisfactory to the Company, if lost, stolen or destroyed, and upon
surrender and cancellation of this Warrant Certificate if mutilated, and upon
reimbursement of the Company's reasonable incidental expenses, the Company shall
execute and deliver the Holder a new Class C Warrant of like date, tenor and
denomination.
6. COMBINATION, SPLIT UP OR EXCHANGE AND TRANSFER. Subject to the provisions of
the Warrant Agreement this Warrant Certificate may be (a) exchanged for another
Warrant Certificate(s) in any denominations (whole shares only) entitling the
Holder to purchase a like number of Warrant Shares or (b) presented for transfer
at the office of the Warrant Agent, by the Holder or his assigns, in person or
by attorney duly authorized in writing, in the manner provided in the Warrant
Agreement. Upon any such transfer, a new Warrant Certificate(s) of different
denominations evidencing in a aggregate the right to purchase a like number of
Warrant Shares shall be issued to the transferee upon Surrender of this Warrant
Certificate in accordance with instructions set forth in the Assignment set
forth below or furnished to the agent.
7. WARRANT HOLDER NOT STOCKHOLDER. Except as otherwise provided herein and in
the Warrant Agreement, this Class C Warrant does not confer upon the Holder any
right to vote or to consent or to receive notice as a stockholder, of the
Company, as stockholder prior to the exercise hereof.
8. HEADINGS. The headings of this Warrant Certificate have been inserted as
matter of convenience and shall not affect the construction hereof.
9. APPLICABLE LAW. This Class C Warrant shall be governed by and construed in
accordance with the laws of the State of Nevada.
FORM OF EXERCISE
TO WARRANT AGENT:
The undersigned Holder of the within Class C Warrants, Hereby (1) exercises his
rights to purchase shares of Common Stock, par value $0.001 per share of
Universal Medical Systems, Inc., which the undersigned is entitled to purchase
under the terms of the within Class C Warrant, and (2) makes payment in full for
the number of shares of Common Stock so purchased by payment of $_______.
Please issue the Certificate for Shares of Common Stock in the name of, and pay
any cash for any fractional share to:
_______________________________________________________________________________
Print or Type Name
_______________________________________________________________________________
Social Security or other Identifying Number
_______________________________________________________________________________
Street Address
_______________________________________________________________________________
City State Zip Code
_______________________________________________________________________________
and, if said number of shares shall not be all the shares purchasable hereunder,
please issue a new Warrant Certificate(s) for the unexercised portion of the
within Class C Warrant to:
_______________________________________________________________________________
Print or Type Name
_______________________________________________________________________________
Social Security or other Identifying Number
_______________________________________________________________________________
Street Address
_______________________________________________________________________________
City State Zip Code
_______________________________________________________________________________
Dated:____________ ______________________________________________________
Signature
(Signature must conform in all respect to the name of
Holder as specified on the face of the Warrants.)
pg 2 of 2
<PAGE> 1
EXHIBIT 4(o)
EXERCISABLE AFTER 12:00 A.M. ON OCTOBER 5, 1996
VOID AFTER 11:59 P.M. SEPTEMBER 30, 2001
REDEEMABLE CLASS C COMMON STOCK PURCHASE WARRANT
REDEEMABLE CLASS C WARRANT NUMBER NUMBER OF WARRANTS
UNIVERSAL MEDICAL SYSTEMS, INC.
This Certifies That, FOR VALUE RECEIVED,
or registered assigns, (the "Holder") is the owner of the number of Redeemable
Class C Common Stock Purchase Warrants ("Class C Warrants") specified above.
Each Class C Warrant initially entitles the Holder to purchase, subject to the
terms and conditions set forth in this Warrant Certificate and the Warrant
Agreement (Class C Warrants), as hereinafter defined, one fully-paid and
nonassessable share of Common Stock $0.001 par value, of Universal Medical
Systems, Inc. a Nevada corporation, (the "Company") at any time between October
5, 1996, and the Expiration Date (as hereinafter defined), upon the presentation
and surrender of this Warrant Certificate with the Form of Exercise on the
reverse side hereof duly executed at the principal office of Dennis D. Cole,
Esq., as Warrant Agent, or his substitute (the "Warrant Agent") accompanied by
payment in lawful money of the United States of America in cash or by official
bank or certified check payable to the Company of $1.50 per share.
This Warrant Certificate and each Class C Warrant represented hereby are
issued pursuant to and are subject in all respects to the terms and conditions
set forth in the Warrant Agreement (the "Warrant Agreement") between the Company
and the Warrant Agent. A copy of the Warrant Agreement is on file at the
principal office of the Warrant Agent, currently located at 13825 Icot Boulevard
Suite 613, Clearwater, Florida 34620.
Each Class C Warrant represented hereby is exercisable at the option of
the registered holder, but no fractional shares of Common Stock will be issued.
In the case of the exercise of less than all the Class C Warrants represented
hereby, the Company shall cancel this Warrant Certificate upon the surrender
hereof and shall execute and deliver a new Warrant Certificate(s) of like tenor,
which the Warrant Agent shall issue for the balance of such Class C Warrant.
The Term "Expiration Date: shall mean 11:59 P.M. (Florida time) on
September 30, 2001, or such earlier date as the Class C Warrants shall be
redeemed. If such date shall in the State of Florida be a holiday or a day on
which banks are authorized to close, the Expiration Date shall Mean 11:59 P.M.
(Florida time) the next following date which in the State of Florida is not a
holiday or a day in which banks are authorized to close.
This Class C Warrant may not be exercised unless a registered statement
under the Securities Act of 1933, as amended, and under the applicable state
securities law with respect to such securities, is effective or there is an
available an exemption from such Federal and State registration requirements and
the Company may have an obligation to file a registration statement to permit
exercise of this Class C Warrant. This Class C Warrant shall not be exercisable
by a Registered Holder in any state where such exercise would be unlawful.
ADDITIONAL PROVISIONS OF THIS CLASS C WARRANT ARE CONTAINED ON THE REVERSE
HEREOF.
Dated: October 5, 1996 By: /s/
----------------------
President
Attest: /s/
----------------------
Secretary
<PAGE> 2
1. EXERCISE OF THE WARRANT. This Class C Warrant may be exercised by the holder,
in whole at any time or in part from time to time prior the Expiration Date, by
the surrender of this Warrant Certificate (with the Form of Exercise below duly
executed) at the principal office of Warrant Agent, together with proper payment
of the Exercise Price of the proportionate part thereof if this Class C Warrant
is exercised in part. Payment for shares of Common Stock issuable upon exercise
of the Class C Warrants ("Warrant Shares") shall be made by check payable to the
order of the Company. If this warrant Certificate is exercised in part, this
Class C Warrant must be exercised for the number of whole Warrant Shares, and
the Holder is entitled to receive a new Warrant Certificate covering the number
of whole Warrant Shares in respect of which this Class C Warrant has not been
exercised Upon such surrender of this Class C Warrant, the Company will (a)
issue a certificate(s) in the name of the Holder for the largest number of whole
Warrant Shares to which the Holder shall be entitled and, if this Class C
Warrant is exercised in whole in lieu of any fractional Warrant Share to which
the Holder shall be entitled, cash equal to the fair value of such fractional
share (determined in accordance with the Warrant Agreement), and (b) deliver the
other securities and properties receivable upon the exercise of the Class C
Warrant, or the proportionate part thereof if this Class C Warrant is exercised
in part, pursuant to the provisions of the Warrant Agreement.
2. RESERVATION OF WARRANT SHARES. The Company agrees that prior to the
Expiration Date, it will at all times have authorized and in reserve, and will
keep available, solely for issuance or delivery upon the exercise of this Class
C Warrant, the Warrant Shares and other securities and properties as from time
to time shall be receivable on the exercise of this Class C Warrant, free and
clear of all restriction on sale or transfer and free and clear of all
preemptive rights.
3. PROTECTION AGAINST DILUTION. Refer to paragraph 8 of Summary of Private
Placement dated October 5, 1996.
4. FULLY-PAID SHARES. The Company agrees that the Warrant Shares delivered on
the exercise of this Class C Warrant. shall at the time of such delivery, be
validly issued, outstanding and fully-paid.
5. LOSS, ETC OF WARRANT. Upon receipt of evidence satisfactory to the Company of
the loss, theft, destruction or mutilation of this Warrant, and indemnity
reasonably satisfactory to the Company, if lost, stolen or destroyed, and upon
surrender and cancellation of this Warrant Certificate if mutilated, and upon
reimbursement of the Company's reasonable incidental expenses, the Company shall
execute and deliver the Holder a new Class C Warrant of like date, tenor and
denomination.
6. COMBINATION, SPLIT UP OR EXCHANGE AND TRANSFER. Subject to the provisions of
the Warrant Agreement this Warrant Certificate may be (a) exchanged for another
Warrant Certificate(s) in any denominations (whole shares only) entitling the
Holder to purchase a like number of Warrant Shares or (b) presented for transfer
at the office of the Warrant Agent, by the Holder or his assigns, in person or
by attorney duly authorized in writing, in the manner provided in the Warrant
Agreement. Upon any such transfer, a new Warrant Certificate(s) of different
denominations evidencing in a aggregate the right to purchase a like number of
Warrant Shares shall be issued to the transferee upon Surrender of this Warrant
Certificate in accordance with instructions set forth in the Assignment set
forth below or furnished to the agent.
7. WARRANT HOLDER NOT STOCKHOLDER. Except as otherwise provided herein and in
the Warrant Agreement, this Class C Warrant does not confer upon the Holder any
right to vote or to consent or to receive notice as a stockholder, of the
Company, as stockholder prior to the exercise hereof.
8. HEADINGS. The headings of this Warrant Certificate have been inserted as
matter of convenience and shall not affect the construction hereof.
9. APPLICABLE LAW. This Class C Warrant shall be governed by and construed in
accordance with the laws of the State of Nevada.
FORM OF EXERCISE
TO WARRANT AGENT:
The undersigned Holder of the within Class C Warrants, Hereby (1) exercises his
rights to purchase shares of Common Stock, par value $0.001 per share of
Universal Medical Systems, Inc., which the undersigned is entitled to purchase
under the terms of the within Class C Warrant, and (2) makes payment in full for
the number of shares of Common Stock so purchased by payment of $ ___________.
Please issue the Certificate for Shares of Common Stock in the name of, and pay
any cash for any fractional share to:
________________________________________________________________________________
Print or Type Name
________________________________________________________________________________
Social Security or other Identifying Number
________________________________________________________________________________
Street Address
________________________________________________________________________________
City State Zip Code
________________________________________________________________________________
and, if said number of shares shall not be all the shares purchasable hereunder,
please issue a new Warrant Certificate(s) for the unexercised portion of the
within Class C Warrant to:
________________________________________________________________________________
Print or Type Name
________________________________________________________________________________
Social Security or other Identifying Number
________________________________________________________________________________
Street Address
________________________________________________________________________________
City State Zip Code
________________________________________________________________________________
Dated _______________ _______________________________________
Signature
(Signature must conform in all respect
to the name of Holder as specified on
the face of the Warrants.)
<PAGE> 1
EXHIBIT 4(p)
WARRANT AGREEMENT
THIS WARRANT AGREEMENT (this "Agreement") is entered into this 1st day of
April, 1996, by and between UNIVERSAL MEDICAL SYSTEMS, INC., a Nevada
corporation, whose address is 13825 Icot Boulevard Suite 613, Clearwater,
Florida 34620 (the "Company"), and DENNIS D. COLE, ESQ., whose address is 13825
Icot Boulevard Suite 613, Clearwater, Florida 34620, as Warrant Agent (the
"Warrant Agent").
Premises
A. The Company has proposed to issue Redeemable Class D Common Stock
Purchase Warrants as hereinafter described (the "Warrants") to purchase Shares
of the Company's $.001 par value common stock at an exercise price of three and
no/100 dollars ($3.00) per share.
B. The Company wishes the Warrant Agent to act on behalf of the Company,
and the Warrant Agent is willing to act in connections with the issuance,
division, transfer, exchange, and exercise of Warrants.
Agreement
In consideration of the foregoing and for the purpose of defining the
terms and provisions of the Warrants and the respective rights and obligations
thereunder of the Company and the registered owners of the Warrants (the
"Holders"), the Company and the Warrant Agent hereby agree as follows:
Section 1. Appointment of Warrant Agent. The Company hereby appoints
the Warrant Agent to act as agent for the Company in accordance with the
instructions hereinafter in this Agreement set forth, and the Warrant Agent
hereby accepts such appointment.
Section 2. Transferability and Form of Warrant.
2.1 Registration. The Warrant shall be numbered and shall be
registered in a Warrant register as they are issued. The Company and the Warrant
Agent shall be entitled to treat the Holder of any Warrant as the owner in fact
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to or interest in such Warrant on the part of any other person, and
shall not be liable for any registration or transfer of Warrants which are
registered or to be registered in the name of a fiduciary or the nominee of a
fiduciary unless made with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration or transfer, or
with knowledge of such facts that its participation therein amounts to bad
faith.
2.2 Transfer. The Warrants are fully transferable. Warrants
shall be transferable only on the books of the Company maintained at the office
of the Warrant Agent in the City of Clearwater, State of Florida, on delivery
thereof duly endorsed by Holder or by his duly authorized attorney or
representative, or accompanied by proper evidence of succession, assignment, or
authority to transfer. In all cases of transfer by an attorney, the original
letter of attorney, duly approved, or an official copy thereof, duly certified,
shall be
<PAGE> 2
deposited and remain with the Warrant Agent. In case of transfer by executors,
administrators, guardians, or other legal representatives, duly authenticated
evidence of their authority shall be produced, and may be required to be
deposited and remain with the Warrant Agent in its discretion. On any
registration of transfer, the Warrant Agent shall countersign and deliver a new
Warrant or Warrants to the person entitled thereto.
2.3 Form of Warrants. The text of the Warrant and of the form
of election to purchase Shares shall be substantially as set forth in Exhibit
"A" attached hereto. The price per Share and the number of Shares issuable on
exercise of Warrants are as indicated on the face of each Warrant. The Warrants
shall be executed on behalf of the Company by the manual or facsimile signature
of the present or any future secretary or assistant secretary of the Company.
Warrants shall be dated as of the date of countersignature thereof by the
Warrant Agent either on initial issuance or on division, exchange, substitution,
or transfer.
Section 3. Countersignature of Warrants. The Warrants shall be
countersigned by the Warrant Agent (or any successor to the Warrant Agent then
acting as Warrant Agent under this Agreement) and shall not be valid for any
purpose unless so countersigned. Warrants may be countersigned, however, by the
Warrant Agent (or by its successor as Warrant Agent) and may be delivered by the
Warrant Agent, notwithstanding that the persons whose manual or facsimile
signatures appearing thereon as proper officers of the Company shall have ceased
to be such officers at the time of such countersignature, issuance, or delivery.
The Warrant Agent shall, on written instructions of the president or the
secretary of the Company, countersign, issue, and deliver Warrants entitling the
Holders thereof to purchase the Shares provided for in the instructions and
shall countersign and deliver Warrants as otherwise provided in this Agreement.
Section 4. Exchange of Warrants. The Warrants may be exchanged for
another Warrant or Warrants entitling the Holder thereof to purchase a like
aggregate number of Shares as the Warrant or Warrants surrendered then entitle
him to purchase. Any Holder of a Warrant desiring to exchange Warrants shall
make such request in writing delivered to the Warrant Agent, and shall
surrender, properly endorsed, the Warrant or Warrants to be so exchanged.
Thereupon, the Warrant Agent shall countersign and deliver to the person
entitled thereto a Warrant or Warrants, as the case may be, as so requested.
Section 5. Term of Warrants; Exercise of Warrants. Each Holder shall
have the right, which may be exercised beginning at 12:00 a.m. on April 1, 1996,
and expiring at 11:59 p.m., Florida time on June 30, 1998, to purchase from the
Company the number of fully paid and non-assessable Shares to which the Holder
may at the time be entitled to purchase pursuant to such Warrants, subject to
the conditions set forth in this paragraph, on surrender to the Company at the
principal office in the City of Clearwater, State of Florida of the Warrant
Agent with the form of election to purchase on the reverse thereof duly
completed and signed, and on payment to the Warrant Agent for the account of the
Company of the Warrant Price as defined and determined in accordance with the
provisions of Sections 9 and 10 hereof, for the number of Shares in respect of
which such Warrants are then exercised. Payment of the Warrant Price shall be
made in cash or by cashier's check.
2
<PAGE> 3
Subject to subsections 5.1 and 5.2 of this section, on such surrender of
Warrants, and payment of the Warrant Price as aforesaid, the Company shall issue
and cause to be delivered with all reasonable dispatch to or on the written
order of the Holder and in such name or names as the Holder may designate, a
certificate or certificates for the number of full Shares so purchased on the
exercise of such Warrants. No fractional Shares shall be issuable on such
surrender. Such certificate or certificates shall be deemed to have been issued
and any person so designated to be named therein shall be deemed to have become
a Holder of Record of such Shares as of the date of the surrender of such
Warrants and payment of the Warrant Price, as aforesaid; provided, however, that
if, at the date of surrender of such Warrants and payment of such Warrant Price,
the transfer books for the Shares or other class of stock purchasable on the
exercise of such Warrants shall be closed, the certificates for the Shares in
respect of which such Warrants are then exercised shall be issuable as of the
date on which such books shall next be opened (whether before or after
expiration of the exercise period) and until such date the Company shall be
under no duty to deliver any certificate for such Shares; provided further,
however, the transfer books of record, unless otherwise required by law, shall
not be closed at any one time for a period longer than 60 days. The right of
purchase represented by the Warrants shall be exercisable, at the election of
the Holders thereof, either in full or from time-to-time in part and, in the
event that any Warrant is exercised in respect of less than all of the Shares
specified therein at any time prior to the date of expiration of the Warrants, a
new Warrant or Warrants will be issued for the remaining number of Shares, and
the Warrant Agent is hereby irrevocably authorized to countersign and to deliver
the required new Warrants pursuant to the provisions of this section and of
Section 3 hereof and the Company, whether required by the Warrant Agent, will
supply the Warrant Agent with Warrants duly executed on behalf of the Company
for such purpose.
5.1 The Warrants may not be exercised by the Holders in the
absence of an effective registration statement under the Securities Act of 1933,
as amended (the "Securities Act"), and registration or qualification under
applicable state blue sky laws pertaining to the Shares issuable on exercise of
the Warrants or there is an available exemption from such federal or state
registration requirements.
5.2 If the Company is required to file a registration statement
in accordance with the provisions of subsection 5.1, the Company shall take all
steps reasonably necessary to permit the exercise of the Warrants and the
issuance of the Shares under the applicable state securities laws of those
states in which the Warrants were originally issued by the Company. The Company
will take such reasonable steps which it determines, in its sole discretion, are
necessary to permit the exercise of Warrants and the issuance of
3
<PAGE> 4
the Shares under the laws of any other state in which a Holder then resides on
the written request to do so by such Holder, but in no event shall the Company
be required to consent to the general service of process in any state other than
those states in which the Warrants were originally issued. Holders who reside in
any state where the Company cannot, with the exercise of reasonable diligence
and without consenting to general service of process, obtain qualification for
the exercise of the Warrants and the issuance of the Shares may not, as a result
thereof, be able to exercise their Warrants, and the Company is under no
obligation to make such exercise possible in such circumstances. In the event
that the Company determines to proceed with the qualification of the exercise of
the Warrants and the issuance of the Shares under the securities laws of a
particular state, then the exercise of such Warrants shall not be effective and
the Shares shall not be issued until such qualification becomes effective. The
costs of obtaining such state qualification shall be borne by the Company.
5.3 The Company shall promptly notify the Warrant Agent of the
effective date of any registration statement which the Company is required to
file under subsection 5.1 and the date on which the Shares become qualified or
registered under the state securities laws of any state in which the Company
obtains qualification or registration with respect to such Shares. The Warrant
Agent shall not issue any Shares with respect to any Warrant surrendered for
exercise unless such Warrants are surrendered and received by the Warrant Agent
during a period that the registration statement is effective. Furthermore, the
Warrant Agent shall not issue any Shares on the exercise of any Warrants
received from a Holder who is a resident of a state with respect to which the
Shares issuable on exercise of the Warrants are not qualified or registered.
Section 6. Payment of Taxes. The Company will pay all documentary
stamp taxes, if any, attributable to the initial issuance of Shares issuable on
the exercise of Warrants; provided, however, that the Company shall not be
required to pay any tax or taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any Warrants or certificates for Shares.
Section 7. Mutilated or Missing Warrants. In case any of the Warrants
shall be mutilated, lost, stolen, or destroyed, the company may at its
discretion issue and the Warrant Agent shall countersign and deliver in exchange
and substitution for and on cancellation of the mutilated Warrant, or in lieu of
and as substitution for the Warrant lost, stolen, or destroyed, a new Warrant of
like tenor and representing an equivalent right or interest; but only upon
receipt of evidence satisfactory to the Company and the Warrant Agent of such
loss, theft, or destruction of such Warrant and indemnity, if requested, also
satisfactory to them. Applicants for such substitute Warrants shall also comply
with such other reasonable regulations and pay such other reasonable charges as
the Company or the Warrant Agent may prescribe.
4
<PAGE> 5
Section 8. Reservation of Shares; Redemption of Warrants.
8.1 Reservation of Shares. There shall, at all times, be
reserved, out of the authorized and unissued Shares a number of Shares
sufficient to provide for the exercise of the rights of purchase represented by
the outstanding Warrants. The transfer agent for the Shares and every subsequent
transfer agent for any Shares of the Company's stock issuable on the exercise of
any of the rights of purchase aforesaid will be irrevocably authorized and
directed at all times to reserve such number of authorized and issued shares as
shall be requisite for such purpose. The Company will keep a copy of this
Agreement on file with the transfer agent for the Shares and with every
subsequent transfer agent for any Shares of the Company's capital stock issuable
on the exercise of the rights of purchase represented by the Warrants. The
Warrant Agent is hereby irrevocably authorized to requisition from time-to-time
from such transfer agent, stock certificates required to honor outstanding
Warrants on exercise thereof in accordance with the terms of this Agreement. The
Company will supply such transfer agent with duly executed stock certificates
for such purpose and will provide or otherwise make available any cash which may
be payable as provided in Section 11 hereof. All Warrants surrendered in the
exercise of the rights thereby evidenced shall be canceled by the Warrant Agent
and shall thereafter be delivered to the Company. Promptly after the date of
expiration of the Warrants, the Warrant Agent shall certify to the Company the
total aggregate amount of Warrants then outstanding, and thereafter no Shares
shall be subject to reservation in respect of such Warrants.
8.2 Redemption of Warrants. Any time after June 30, 1997, the
Company may redeem the Warrants at a price of $.01 per Warrant at any time upon
20 days prior written notice if the average closing bid quotation of the Common
Stock has been at least 120% of the exercise price of the Warrants during the 20
consecutive days ending on the third day prior to the day on which notice of
redemption is given to the Warrant Holders.
Section 9. Warrant Price. The price at which Shares shall be
purchasable on exercise of the Warrants shall be three and no/100 dollars
($3.00) per Share.
Section 10. No adjustment of Warrant Price and Number of Shares. The
number and kind of securities purchasable on the exercise of each Warrant and
the Warrant Price shall not be subject to anti-dilutive adjustment for any
reason, whatsoever, including but not limited to, forward or reverse splits of
the Company's common stock, stock or cash dividend, or recapitalization.
10.1 Preservation of Purchase Rights on Reclassification,
Consolidation, Etc. In case of any consolidation of the company with or merger
of the Company into another corporation or in case of any sale or conveyance to
another corporation of the property of the Company as an entirety or
substantially as an entirety, the Company or such successor or purchasing
corporation, as the case may be, shall execute with the Warrant Agent an
agreement that each Holder of a Warrant shall have the right thereafter on
payment of the Warrant Price in effect immediately prior to such action to
purchase on exercise of each Warrant the kind and amount of Shares and other
securities and property which he would
5
<PAGE> 6
have owned or have been entitled to receive after the happening of such
consolidation, merger, sale, or conveyance had such Warrant been exercised
immediately prior to such action. The Company shall mail by first class mail,
postage prepaid, to the Holder of each Warrant notice of the execution of any
such agreement. The provisions of this subsection 10.1 shall similarly apply to
successive consolidations, mergers, sales, or conveyances. The Warrant Agent
shall be under no duty or responsibility to determine the correctness of any
provisions contained in any such agreement relating either to the kind or amount
of shares of stock or other securities or property receivable on exercise of
Warrants or with respect to the method employed and provided therein for any
adjustments.
Section 11. Fractional Interests. The Company shall not be required to
issue fractional Shares on the exercise of Warrants. If more than one Warrant
shall be presented for exercise in full at the same time by the same Holder, the
number of full Shares which shall be issuable on the exercise thereof shall be
computed on the basis of the aggregate number of Shares represented by the
Warrants so presented. If any fraction of a Share would, except for the
provisions of this Section 11, be issuable on the exercise of any Warrant (or
specified portion thereof), the Company shall pay an amount in cash equal to the
current value of such fraction computed on the basis of (i) the closing bid
price of the Company's common stock as reported by the National Quotation
Bureau, Inc., on its "pink sheets" or "electronic bulletin board" or, if the
common stock is reported by NASDAQ, the closing bid price reported by NASDAQ, on
the last business day prior to the date of exercise, if the Shares are traded in
the over-the-counter market, or (ii) the last reported sales price of the Shares
on the national stock exchange on which the shares are listed on the last
business day prior to the date of exercise on which such a sale shall have been
effected, if the Shares are listed on such an exchange.
Section 12. No Right as Shareholders; Notice to Warrant Holders.
Nothing contained in this Agreement or in any of the Warrants shall be construed
as conferring on the Holders or their transferees the right to vote or to
receive dividends or to consent or to receive notice as shareholders in respect
of the meeting of shareholders for the election of directors of the Company or
any other matter, or any rights whatsoever as Shareholders of the Company.
Section 13. Disposition of Proceeds on Exercise of Warrants; Inspection
of Warrant Agreement. The Warrant Agent shall account promptly to the Company
with respect to Warrants exercised and concurrently pay to the Company all
moneys received by the Warrant Agent for the purchase of the Company's Shares
through the exercise of such Warrants. The Warrant Agent shall keep copies of
this Agreement and any notices given or received hereunder available for
inspection by Holders of Warrants during normal business hours at its principal
office in the City of Clearwater, State of Florida. The Company shall supply the
Warrant Agent, from time-to-time, with such numbers of copies of this Agreement
as the Warrant Agent may request.
6
<PAGE> 7
Section 14. Merger or Consolidation or Chase of Name of Warrant Agent.
Any corporation into which the Warrant Agent may be merged or with which it may
be consolidated, or any corporation resulting from any merger or consolidation
to which the Warrant Agent shall be a party, or any corporation succeeding to
the corporate trust business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto; provided, that such
corporation would be eligible for appointment as a successor Warrant Agent under
the provisions of Section 16 hereof. In case at the time such successor to the
Warrant Agent shall succeed to the agency created by this Agreement, any of the
Warrants shall have been countersigned but not delivered, any successor to the
Warrant Agent may adopt the countersignature of the original Warrant Agent and
deliver such Warrants so countersigned; and in case at that time any of the
Warrants shall not have been countersigned, any successor to the Warrant Agent
may countersign such Warrants either in the name of the predecessor Warrant
Agent or in the name of the successor Warrant Agent, and in all such cases,
Warrants shall have the full force provided in the Warrants and in this
Agreement. In case at any time the name of the Warrant Agent shall be changed
and at such time any of the Warrants shall have been countersigned but not
delivered, the Warrant Agent may adopt the countersignature under its prior name
and deliver Warrants so countersigned; and in case at that time any of the
Warrants shall not have been countersigned, the Warrant Agent may countersign
such Warrants either in its prior name or in its changed name; and in all such
cases such Warrants shall have the full force provided in the Warrants and in
this Agreement.
Section 15. Concerning the Warrant Agent. The Warrant Agent undertakes
the duties and obligations imposed by this Agreement on the following terms and
conditions, by all of which the Company and the Holders of Warrants, by their
acceptance thereof shall be bound:
15.1 The statements contained herein and in the Warrants shall
be taken as statements of the Company, and the Warrant Agent assumes no
responsibility for the correctness of any of the same except such as describe
the Warrant Agent or action taken by it. The Warrant Agent assumes no
responsibility with respect to the distribution of the Warrants except as herein
otherwise provided.
15.2 The Warrant Agent shall not be responsible for any failure
of the Company to comply with any of the covenants contained in this Agreement
or in the Warrants to be compiled with by the Company.
15.3 The Warrant Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either itself
or by or through its attorney, agents or employees, and the Warrant Agent shall
not be answerable or accountable for any act, default, neglect, or misconduct of
any such attorney, agents, or employees or for any loss to the Company resulting
from such neglect or misconduct; provided, reasonable care shall have been
exercised in the selection and continued employment thereof.
7
<PAGE> 8
15.4 The Warrant Agent may consult at any time with legal
counsel satisfactory to it (who may be counsel for the Company) and the Warrant
Agent shall incur no liability or responsibility to the Company or to any Holder
of any Warrant in respect of any action taken, suffered, or omitted by it
hereunder in good faith and in accordance with the opinion or the advise of such
counsel.
15.5 Whenever in the performance of its duties under this
Agreement the Warrant Agent shall deem it necessary or desirable that any fact
or matter be proved or established by the Company prior to taking or suffering
any action hereunder; such fact or matter (unless other evidence in respect
thereof be herein specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by the president or a vice
president, or the treasurer, or the secretary of the Company and delivered to
the Warrant Agent; and such certificate shall be full authorization to the
Warrant Agent for any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance on such certificate.
15.6 The Company agrees to pay the Warrant Agent reasonable
compensation for all services rendered by Warrant Agent in the execution of this
Agreement, to reimburse the Warrant Agent for all expenses, taxes, and
governmental charges and other charges of any kind and nature incurred by the
Warrant Agent in the execution of this Agreement, and to indemnify the Warrant
Agent and save it harmless against any and all liabilities, including judgments,
costs, and counsel fees, for anything done or omitted by the Warrant Agent in
the execution of this Agreement, except as a result of the Warrant Agent's
negligence or bad faith.
15.7 The Warrant Agent shall be under no obligation to institute
any action, suit, or legal proceeding or to take any other action likely to
involve expense unless the Company or one or more Holders of Warrants shall
furnish the Warrant Agent with reasonable security and indemnity for any costs
and expenses which may be incurred, but this provision shall not affect the
power of the Warrant Agent to take such action as the Warrant Agent may consider
proper, whether with or without any such security or indemnity. All rights of
action under this Agreement or under any of the Warrants may be enforced by the
Warrant Agent without the possession of any of the Warrants or the production
thereof at any trial or other proceeding relative thereto, and any such action,
suit, or proceeding instituted by the Warrant Agent, and any recovery of
judgment shall be for the ratable benefit of the Holders of Warrants, as their
respective rights or interest may appear.
15.8 The Warrant Agent and any stockholder, director, officer,
or employee of the Warrant Agent may buy, sell, or deal in any of the Warrants
or other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to or otherwise act as fully and freely as though it were not Warrant
Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from
acting in any other capacity for the Company or for any other legal entity.
8
<PAGE> 9
15.9 The Warrant Agent shall act hereunder solely as agent, and
its duties shall be determined solely by the provisions hereof. The Warrant
shall not be liable for anything which it may do or refrain from doing in
connection with this Agreement, except for its own negligence or bad faith.
15.10 The Warrant Agent will not incur any liability or
responsibility to the Company or to any Holder of any Warrant for any action
taken in reliance on any notice, resolution, waiver, consent, order,
certificate, or other paper, document, or instrument reasonably believed by it
to be genuine and to have been signed, sent, or presented by the proper party or
parties.
15.11 The Warrant Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Warrant Agent) or in respect of the
validity or execution of any Warrant (except its countersignature thereof); nor
shall the Warrant Agent by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any Shares
(or other stock) to be issued pursuant to this Agreement or any Warrant or as to
whether any Shares (or other stock) will when issued be validly issued, fully
paid, and non-assessable or as to the Warrant Price, or the number or kind or
amount of Shares or other securities or other property issuable on exercise of
any Warrant.
15.12 The Warrant Agent is hereby authorized and directed to
accept the instructions with respect to the performance of its duties hereunder
from the chairman of the board or the president or a vice president or the
secretary or the treasurer of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and shall not be liable
for any action taken by it in good faith in accordance with instructions of any
such officer.
Section 16. Change of Warrant Agent. The Warrant Agent may resign and
be discharged from its duties under this Agreement by giving to the Company 30
days notice in writing. The Warrant Agent may be removed by like notice to the
Warrant Agent from the Company. If the Warrant Agent shall resign or be removed
or shall otherwise become incapable of acting, the Company shall appoint a
successor to the Warrant Agent. If the Company shall fail to make such
appointment within a period of 30 days after such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Warrant Agent or by the Holder or a Warrant (who shall with such
notice submit his Warrant for inspection by the Company), then the Holder of any
Warrant may apply to any court of competent jurisdiction for the appointment of
a successor to the Warrant Agent. Any successor Warrant Agent, whether appointed
by the Company or such a court, shall be a bank, trust company, or securities
transfer agency, in good standing, incorporated under the laws of the states of
California, Delaware, Florida, New Jersey, New York, Nevada or Utah or of the
United States of America. After appointment the successor Warrant Agent shall be
vested with the same powers, rights, duties, and responsibilities as if it had
been originally named as Warrant Agent without further act or deed; but the
former Warrant Agent shall deliver and transfer to the successor Warrant Agent
any property at the
9
<PAGE> 10
time held by it hereunder, and execute and deliver any further assurance,
conveyance, act, or deed necessary for the purpose. Failure to file any notice
provided for in this section 16; however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Warrant
Agent or the appointment of the successor Warrant Agent, as the case may be. In
the event of such resignation or removal, the successor Warrant Agent shall
mail, first class, to each Holder, written notice of such removal or resignation
and the name and address of such successor Warrant Agent.
Section 17. Identity of Transfer Agent. Forthwith on the appointment of
any subsequent Transfer Agent for the Company's Shares, or any other Shares of
the Company's capital stock issuable on the exercise of the rights of purchase
represented by the Warrants, the company will file with the Warrant Agent a
statement setting forth the name and address of such Transfer Agent.
Section 18. Notices. Any notice pursuant to this Agreement by the
Company or by the Holder of any Warrant to the Warrant Agent, or by the Warrant
Agent or by the Holder of any Warrant to the Company, shall be in writing and
shall be deemed to have been duly given if delivered or mailed certified mail,
return receipt requested (a) if to the Company to Universal Medical Systems,
Inc., 13825 Icot Boulevard, Suite 613, Clearwater, Florida 34620 and (b) if to
the Warrant Agent, to his main office: Dennis D. Cole, Esq., 13825 Icot
Boulevard Suite 613, Clearwater, Florida 34620. Each party hereto may from
time-to-time change the address to which notices to it are to be delivered or
mailed hereunder by notice in writing to the other party.
Section 19. Supplements and Amendments. The Company and the Warrant
Agent may from time-to-time supplement or amend this Agreement, without the
approval of any Holders of Warrants, in order to cure any ambiguity or to
correct or supplement any provision contained herein or to make any other
provisions in regard to matters or questions arising hereunder which the Company
and the Warrant Agent may deem necessary or desirable and which shall not be
inconsistent with the provisions of the Warrants and which shall not adversely
affect the interest of the Holders of the Warrants. In this regard, but not by
way of limitation, establishing an earlier date of exercise without a change in
the expiration date of the Warrants set forth in Section 5 or extending the
period for exercise without a change in the date on which the Warrants are first
exercisable set forth in Section 5 shall not be deemed to adversely affect the
interests of the Holders.
Section 20. Successors. All the covenants and provisions of this
Agreement by or for the benefit of each party shall be binding upon and shall
inure to the benefit of the parties hereto and to their respective successors
and assigns hereunder.
Section 21. Merger or Consolidation of the Company. The Company will
not merge or consolidate with or into any other corporation unless the
corporation resulting from such merger or consolidation (if not the Company)
shall expressly assume, by supplemental agreement satisfactory in form to the
Warrant agent and executed and delivered to the Warrant Agent, the due and
punctual performance and observance of each and every covenant and condition of
this Agreement to be performed and observed by the Company.
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<PAGE> 11
Section 22. Applicable Law. This Agreement and each Warrant issued
hereunder shall be deemed to be a contract made under the laws of the State of
Nevada and for all purposes shall be construed in accordance with the laws of
said State.
Section 23. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give any person or corporation other than the Company, the
Warrant Agent, and the Holders of the Warrants any legal or equitable right,
remedy, or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Warrant Agent, and the Holders of the
Warrants.
Section 24. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
Section 25. Captions. The captions of the sections and subsections of
this Agreement have been inserted for convenience only and shall have no
substantive effect.
IN WITNESS WHEREOF: the parties hereto have caused this Agreement to be
duly executed all as of the date first above written.
UNIVERSAL MEDICAL SYSTEMS, INC.
By: /s/ Myron A. Baker
-------------------
Myron A. Baker
Chairman & CEO
DENNIS D. COLE, ESQ.
By: /s/ Dennis D. Cole
-------------------
Dennis D. Cole
11
<PAGE> 1
EXHIBIT 4(q)
EXERCISABLE AFTER 12:00 A.M. ON APRIL 1, 1996
VOID AFTER 11:59 P.M. JUNE 30, 1998
REDEEMABLE CLASS D COMMON STOCK PURCHASE WARRANT
REDEEMABLE CLASS D WARRANT NUMBER NUMBER OF WARRANTS
_____ *_____*
UNIVERSAL MEDICAL SYSTEMS, INC.
This Certifies That, FOR VALUE RECEIVED, _____________________________
or registered assigns, (the "Holder") is the owner of the number of Redeemable
Class D Common Stock Purchase Warrants ("Class D Warrants") specified above.
Each Class D Warrant initially entitles the Holder to purchase, subject to the
terms and conditions set forth in this Warrant Certificate and the Warrant
Agreement (Class D Warrants), as hereinafter defined, one fully-paid and
nonassessable share of Common Stock $0.001 par value, of Universal Medical
Systems, Inc. a Nevada corporation, (the "Company") at any time between April 1,
1996, and the Expiration Date (as hereinafter defined), upon the presentation
and surrender of this Warrant Certificate with the Form of Exercise on the
reverse side hereof duly executed at the principal office of Dennis D. Cole,
Esq., as Warrant Agent, or his substitute (the "Warrant Agent") accompanied by
payment in lawful money of the United States of America in cash or by official
bank or certified check payable to the Company of $1.00 per share.
This Warrant Certificate and each Class D Warrant represented hereby are
issued pursuant to and are subject in all respects to the terms and conditions
set forth in the Warrant Agreement (the "Warrant Agreement") between the Company
and the Warrant Agent. A copy of the Warrant Agreement is on file at the
principal office of the Warrant Agent, currently located at 13825 Icot Boulevard
Suite 613, Clearwater, Florida 34620.
Each Class D Warrant represented hereby is exercisable at the option of
the registered holder, but no fractional shares of Common Stock will be issued.
In the case of the exercise of less than all the Class D Warrants represented
hereby, the Company shall cancel this Warrant Certificate upon the surrender
hereof and shall execute and deliver a new Warrant Certificate(s) of like tenor,
which the Warrant Agent shall issue for the balance of such Class D Warrant.
The Term "Expiration Date: shall mean 11:59 P.M. (Florida time) on June
30, 1998, or such earlier date as the Class D Warrants shall be redeemed. If
such date shall in the State of Florida be a holiday or a day on which banks are
authorized to close, the Expiration Date shall Mean 11:59 P.M. (Florida time)
the next following date which in the State of Florida is not a holiday or a day
in which banks are authorized to close.
This Class D Warrant may not be exercised unless a registered statement
under the Securities Act of 1933, as amended, and under the applicable state
securities law with respect to such securities, is effective or there is an
available an exemption from such Federal and State registration requirements and
the Company may have an obligation to file a registration statement to permit
exercise of this Class D Warrant. This Class D Warrant shall not be exercisable
by a Registered Holder in any state where such exercise would be unlawful.
ADDITIONAL PROVISIONS OF THIS CLASS D WARRANT ARE CONTAINED ON THE REVERSE
HEREOF.
Dated: By:
---------- ----------------------------
President
Attest:
----------------------------
Secretary
EXHIBIT "A"
<PAGE> 1
EXHIBIT 4(r)
WARRANT AGREEMENT
THIS WARRANT AGREEMENT (this "Agreement") is entered into this 14th day
of March, 1997, by and between UNIVERSAL MEDICAL SYSTEMS, INC., a Nevada
corporation, whose address is 13825 Icot Boulevard Suite 613, Clearwater,
Florida 34620 (the "Company"), and DENNIS D. COLE, ESQ., whose address is 13825
Icot Boulevard Suite 613, Clearwater, Florida 34620, as Warrant Agent (the
"Warrant Agent").
Premises
A. The Company has proposed to issue Redeemable Class E Common Stock
Purchase Warrants as hereinafter described (the "Warrants") to purchase Shares
of the Company's $.001 par value common stock at an exercise price of Three and
No/100 Dollars ($3.00) per share.
B. The Company wishes the Warrant Agent to act on behalf of the Company,
and the Warrant Agent is willing to act in connections with the issuance,
division, transfer, exchange, and exercise of Warrants.
Agreement
In consideration of the foregoing and for the purpose of defining the
terms and provisions of the Warrants and the respective rights and obligations
thereunder of the Company and the registered owners of the Warrants (the
"Holders"), the Company and the Warrant Agent hereby agree as follows:
Section 1. Appointment of Warrant Agent. The Company hereby appoints
the Warrant Agent to act as agent for the Company in accordance with the
instructions hereinafter in this Agreement set forth, and the Warrant Agent
hereby accepts such appointment.
Section 2. Transferability and Form of Warrant.
2.1 Registration. The Warrant shall be numbered and shall be
registered in a Warrant register as they are issued. The Company and the Warrant
Agent shall be entitled to treat the Holder of any Warrant as the owner in fact
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to or interest in such Warrant on the part of any other person, and
shall not be liable for any registration or transfer of Warrants which are
registered or to be registered in the name of a fiduciary or the nominee of a
fiduciary unless made with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration or transfer, or
with knowledge of such facts that its participation therein amounts to bad
faith.
<PAGE> 2
2.2 Transfer. The Warrants are fully transferable. Warrants
shall be transferable only on the books of the Company maintained at the office
of the Warrant Agent in the City of Clearwater, State of Florida, on delivery
thereof duly endorsed by Holder or by his duly authorized attorney or
representative, or accompanied by proper evidence of succession, assignment, or
authority to transfer. In all cases of transfer by an attorney, the original
letter of attorney, duly approved, or an official copy thereof, duly certified,
shall be deposited and remain with the Warrant Agent. In case of transfer by
executors, administrators, guardians, or other legal representatives, duly
authenticated evidence of their authority shall be produced, and may be required
to be deposited and remain with the Warrant Agent in its discretion. On any
registration of transfer, the Warrant Agent shall countersign and deliver a new
Warrant or Warrants to the person entitled thereto.
2.3 Form of Warrants. The text of the Warrant and of the form
of election to purchase Shares shall be substantially as set forth in Exhibit
"A" attached hereto. The price per Share and the number of Shares issuable on
exercise of Warrants are as indicated on the face of each Warrant. The Warrants
shall be executed on behalf of the Company by the manual or facsimile signature
of the present or any future secretary or assistant secretary of the Company.
Warrants shall be dated as of the date of countersignature thereof by the
Warrant Agent either on initial issuance or on division, exchange, substitution,
or transfer.
Section 3. Countersignature of Warrants. The Warrants shall be
countersigned by the Warrant Agent (or any successor to the Warrant Agent then
acting as Warrant Agent under this Agreement) and shall not be valid for any
purpose unless so countersigned. Warrants may be countersigned, however, by the
Warrant Agent (or by its successor as Warrant Agent) and may be delivered by the
Warrant Agent, notwithstanding that the persons whose manual or facsimile
signatures appearing thereon as proper officers of the Company shall have ceased
to be such officers at the time of such countersignature, issuance, or delivery.
The Warrant Agent shall, on written instructions of the president or the
secretary of the Company, countersign, issue, and deliver Warrants entitling the
Holders thereof to purchase the Shares provided for in the instructions and
shall countersign and deliver Warrants as otherwise provided in this Agreement.
Section 4. Exchange of Warrants. The Warrants may be exchanged for
another Warrant or Warrants entitling the Holder thereof to purchase a like
aggregate number of Shares as the Warrant or Warrants surrendered then entitle
him to purchase. Any Holder of a Warrant desiring to exchange Warrants shall
make such request in writing delivered to the Warrant Agent, and shall
surrender, properly endorsed, the Warrant or Warrants to be so exchanged.
Thereupon, the Warrant Agent shall countersign and deliver to the person
entitled thereto a Warrant or Warrants, as the case may be, as so requested.
Section 5. Term of Warrants; Exercise of Warrants. Each Holder shall
have the right, which may be exercised beginning at 12:00 a.m. on March 15,
1997, and expiring at 11:59 p.m., Florida time on March 15, 2000, to purchase
from the Company the number of fully paid and non-assessable Shares to which the
Holder may at the time be entitled to purchase pursuant to such Warrants,
subject to the conditions set forth in this paragraph, on surrender to the
Company at the principal office in the City of Clearwater, State of Florida of
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<PAGE> 3
the Warrant Agent with the form of election to purchase on the reverse thereof
duly completed and signed, and on payment to the Warrant Agent for the account
of the Company of the Warrant Price as defined and determined in accordance with
the provisions of Sections 9 and 10 hereof, for the number of Shares in respect
of which such Warrants are then exercised. Payment of the Warrant Price shall be
made in cash or by cashier's check. Subject to subsections 5.1 and 5.2 of this
section, on such surrender of Warrants, and payment of the Warrant Price as
aforesaid, the Company shall issue and cause to be delivered with all reasonable
dispatch to or on the written order of the Holder and in such name or names as
the Holder may designate, a certificate or certificates for the number of full
Shares so purchased on the exercise of such Warrants. No fractional Shares shall
be issuable on such surrender. Such certificate or certificates shall be deemed
to have been issued and any person so designated to be named therein shall be
deemed to have become a Holder of Record of such Shares as of the date of the
surrender of such Warrants and payment of the Warrant Price, as aforesaid;
provided, however, that if, at the date of surrender of such Warrants and
payment of such Warrant Price, the transfer books for the Shares or other class
of stock purchasable on the exercise of such Warrants shall be closed, the
certificates for the Shares in respect of which such Warrants are then exercised
shall be issuable as of the date on which such books shall next be opened
(whether before or after expiration of the exercise period) and until such date
the Company shall be under no duty to deliver any certificate for such Shares;
provided further, however, the transfer books of record, unless otherwise
required by law, shall not be closed at any one time for a period longer than 60
days. The right of purchase represented by the Warrants shall be exercisable, at
the election of the Holders thereof, either in full or from time-to-time in part
and, in the event that any Warrant is exercised in respect of less than all of
the Shares specified therein at any time prior to the date of expiration of the
Warrants, a new Warrant or Warrants will be issued for the remaining number of
Shares, and the Warrant Agent is hereby irrevocably authorized to countersign
and to deliver the required new Warrants pursuant to the provisions of this
section and of Section 3 hereof and the Company, whether required by the Warrant
Agent, will supply the Warrant Agent with Warrants duly executed on behalf of
the Company for such purpose.
5.1 The Warrants may not be exercised by the Holders in the
absence of an effective registration statement under the Securities Act of 1933,
as amended (the "Securities Act"), and registration or qualification under
applicable state blue sky laws pertaining to the Shares issuable on exercise of
the Warrants or there is an available exemption from such federal or state
registration requirements.
5.2 If the Company is required to file a registration statement
in accordance with the provisions of subsection 5.1, the Company shall take all
steps reasonably necessary to permit the exercise of the Warrants and the
issuance of the Shares under the applicable state securities laws of those
states in which the Warrants were originally issued by the Company. The Company
will take such reasonable steps which it determines, in its sole discretion, are
necessary to permit the exercise of Warrants and the issuance of the Shares
under the laws of any other state in which a Holder then resides on the written
request to do so by such Holder, but in no event shall the Company be required
to consent to the general service of process in any state other than those
states in which the Warrants
3
<PAGE> 4
were originally issued. Holders who reside in any state where the Company
cannot, with the exercise of reasonable diligence and without consenting to
general service of process, obtain qualification for the exercise of the
Warrants and the issuance of the Shares may not, as a result thereof, be able to
exercise their Warrants, and the Company is under no obligation to make such
exercise possible in such circumstances. In the event that the Company
determines to proceed with the qualification of the exercise of the Warrants and
the issuance of the Shares under the securities laws of a particular state, then
the exercise of such Warrants shall not be effective and the Shares shall not be
issued until such qualification becomes effective. The costs of obtaining such
state qualification shall be borne by the Company.
5.3 The Company shall promptly notify the Warrant Agent of the
effective date of any registration statement which the Company is required to
file under subsection 5.1 and the date on which the Shares become qualified or
registered under the state securities laws of any state in which the Company
obtains qualification or registration with respect to such Shares. The Warrant
Agent shall not issue any Shares with respect to any Warrant surrendered for
exercise unless such Warrants are surrendered and received by the Warrant Agent
during a period that the registration statement is effective. Furthermore, the
Warrant Agent shall not issue any Shares on the exercise of any Warrants
received from a Holder who is a resident of a state with respect to which the
Shares issuable on exercise of the Warrants are not qualified or registered.
Section 6. Payment of Taxes. The Company will pay all documentary
stamp taxes, if any, attributable to the initial issuance of Shares issuable on
the exercise of Warrants; provided, however, that the Company shall not be
required to pay any tax or taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any Warrants or certificates for Shares.
Section 7. Mutilated or Missing Warrants. In case any of the Warrants
shall be mutilated, lost, stolen, or destroyed, the company may at its
discretion issue and the Warrant Agent shall countersign and deliver in exchange
and substitution for and on cancellation of the mutilated Warrant, or in lieu of
and as substitution for the Warrant lost, stolen, or destroyed, a new Warrant of
like tenor and representing an equivalent right or interest; but only upon
receipt of evidence satisfactory to the Company and the Warrant Agent of such
loss, theft, or destruction of such Warrant and indemnity, if requested, also
satisfactory to them. Applicants for such substitute Warrants shall also comply
with such other reasonable regulations and pay such other reasonable charges as
the Company or the Warrant Agent may prescribe.
Section 8. Reservation of Shares; Redemption of Warrants.
8.1 Reservation of Shares. There shall, at all times, be
reserved, out of the authorized and unissued Shares a number of Shares
sufficient to provide for the exercise of the rights of purchase represented by
the outstanding Warrants. The transfer agent for the Shares and every subsequent
transfer agent for any Shares of the Company's stock issuable on the exercise of
any of the rights of purchase aforesaid will be irrevocably authorized and
4
<PAGE> 5
directed at all times to reserve such number of authorized and issued shares as
shall be requisite for such purpose. The Company will keep a copy of this
Agreement on file with the transfer agent for the Shares and with every
subsequent transfer agent for any Shares of the Company's capital stock issuable
on the exercise of the rights of purchase represented by the Warrants. The
Warrant Agent is hereby irrevocably authorized to requisition from time-to-time
from such transfer agent, stock certificates required to honor outstanding
Warrants on exercise thereof in accordance with the terms of this Agreement. The
Company will supply such transfer agent with duly executed stock certificates
for such purpose and will provide or otherwise make available any cash which may
be payable as provided in Section 11 hereof. All Warrants surrendered in the
exercise of the rights thereby evidenced shall be canceled by the Warrant Agent
and shall thereafter be delivered to the Company. Promptly after the date of
expiration of the Warrants, the Warrant Agent shall certify to the Company the
total aggregate amount of Warrants then outstanding, and thereafter no Shares
shall be subject to reservation in respect of such Warrants.
8.2 Redemption of Warrants. Any time after June 30, 1998, the
Company may redeem the Warrants at a price of $.01 per Warrant at any time upon
20 days prior written notice if the average closing bid quotation of the Common
Stock has been at least 120% of the exercise price of the Warrants during the 20
consecutive days ending on the third day prior to the day on which notice of
redemption is given to the Warrant Holders.
Section 9. Warrant Price. The price at which Shares shall be
purchasable on exercise of the Warrants shall be Three and No/100 dollars
($3.00) per Share.
Section 10. No adjustment of Warrant Price and Number of Shares. The
number and kind of securities purchasable on the exercise of each Warrant and
the Warrant Price shall not be subject to anti-dilutive adjustment for any
reason, whatsoever, including but not limited to, forward or reverse splits of
the Company's common stock, stock or cash dividend, or recapitalization.
10.1 Preservation of Purchase Rights on Reclassification,
Consolidation, Etc. In case of any consolidation of the company with or merger
of the Company into another corporation or in case of any sale or conveyance to
another corporation of the property of the Company as an entirety or
substantially as an entirety, the Company or such successor or purchasing
corporation, as the case may be, shall execute with the Warrant Agent an
agreement that each Holder of a Warrant shall have the right thereafter on
payment of the Warrant Price in effect immediately prior to such action to
purchase on exercise of each Warrant the kind and amount of Shares and other
securities and property which he would have owned or have been entitled to
receive after the happening of such consolidation, merger, sale, or conveyance
had such Warrant been exercised immediately prior to such action. The Company
shall mail by first class mail, postage prepaid, to the Holder of each Warrant
notice of the execution of any such agreement. The provisions of this subsection
10.1 shall similarly apply to successive consolidations, mergers, sales, or
conveyances. The Warrant Agent shall be under no duty or responsibility to
determine the correctness of any
5
<PAGE> 6
provisions contained in any such agreement relating either to the kind or amount
of shares of stock or other securities or property receivable on exercise of
Warrants or with respect to the method employed and provided therein for any
adjustments.
Section 11. Fractional Interests. The Company shall not be required to
issue fractional Shares on the exercise of Warrants. If more than one Warrant
shall be presented for exercise in full at the same time by the same Holder, the
number of full Shares which shall be issuable on the exercise thereof shall be
computed on the basis of the aggregate number of Shares represented by the
Warrants so presented. If any fraction of a Share would, except for the
provisions of this Section 11, be issuable on the exercise of any Warrant (or
specified portion thereof), the Company shall pay an amount in cash equal to the
current value of such fraction computed on the basis of (i) the closing bid
price of the Company's common stock as reported by the National Quotation
Bureau, Inc., on its "pink sheets" or "electronic bulletin board" or, if the
common stock is reported by NASDAQ, the closing bid price reported by NASDAQ, on
the last business day prior to the date of exercise, if the Shares are traded in
the over-the-counter market, or (ii) the last reported sales price of the Shares
on the national stock exchange on which the shares are listed on the last
business day prior to the date of exercise on which such a sale shall have been
effected, if the Shares are listed on such an exchange.
Section 12. No Right as Shareholders; Notice to Warrant Holders.
Nothing contained in this Agreement or in any of the Warrants shall be construed
as conferring on the Holders or their transferees the right to vote or to
receive dividends or to consent or to receive notice as shareholders in respect
of the meeting of shareholders for the election of directors of the Company or
any other matter, or any rights whatsoever as Shareholders of the Company.
Section 13. Disposition of Proceeds on Exercise of Warrants; Inspection
of Warrant Agreement. The Warrant Agent shall account promptly to the Company
with respect to Warrants exercised and concurrently pay to the Company all
moneys received by the Warrant Agent for the purchase of the Company's Shares
through the exercise of such Warrants. The Warrant Agent shall keep copies of
this Agreement and any notices given or received hereunder available for
inspection by Holders of Warrants during normal business hours at its principal
office in the City of Clearwater, State of Florida. The Company shall supply the
Warrant Agent, from time-to-time, with such numbers of copies of this Agreement
as the Warrant Agent may request.
Section 14. Merger or Consolidation or Change of Name of Warrant Agent.
Any corporation into which the Warrant Agent may be merged or with which it may
be consolidated, or any corporation resulting from any merger or consolidation
to which the Warrant Agent shall be a party, or any corporation succeeding to
the corporate trust business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties
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<PAGE> 7
hereto; provided, that such corporation would be eligible for appointment as a
successor Warrant Agent under the provisions of Section 16 hereof. In case at
the time such successor to the Warrant Agent shall succeed to the agency created
by this Agreement, any of the Warrants shall have been countersigned but not
delivered, any successor to the Warrant Agent may adopt the countersignature of
the original Warrant Agent and deliver such Warrants so countersigned; and in
case at that time any of the Warrants shall not have been countersigned, any
successor to the Warrant Agent may countersign such Warrants either in the name
of the predecessor Warrant Agent or in the name of the successor Warrant Agent,
and in all such cases, Warrants shall have the full force provided in the
Warrants and in this Agreement. In case at any time the name of the Warrant
Agent shall be changed and at such time any of the Warrants shall have been
countersigned but not delivered, the Warrant Agent may adopt the
countersignature under its prior name and deliver Warrants so countersigned; and
in case at that time any of the Warrants shall not have been countersigned, the
Warrant Agent may countersign such Warrants either in its prior name or in its
changed name; and in all such cases such Warrants shall have the full force
provided in the Warrants and in this Agreement.
Section 15. Concerning the Warrant Agent. The Warrant Agent undertakes
the duties and obligations imposed by this Agreement on the following terms and
conditions, by all of which the Company and the Holders of Warrants, by their
acceptance thereof shall be bound:
15.1 The statements contained herein and in the Warrants shall
be taken as statements of the Company, and the Warrant Agent assumes no
responsibility for the correctness of any of the same except such as describe
the Warrant Agent or action taken by it. The Warrant Agent assumes no
responsibility with respect to the distribution of the Warrants except as herein
otherwise provided.
15.2 The Warrant Agent shall not be responsible for any failure
of the Company to comply with any of the covenants contained in this Agreement
or in the Warrants to be compiled with by the Company.
15.3 The Warrant Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either itself
or by or through its attorney, agents or employees, and the Warrant Agent shall
not be answerable or accountable for any act, default, neglect, or misconduct of
any such attorney, agents, or employees or for any loss to the Company resulting
from such neglect or misconduct; provided, reasonable care shall have been
exercised in the selection and continued employment thereof.
15.4 The Warrant Agent may consult at any time with legal
counsel satisfactory to it (who may be counsel for the Company) and the Warrant
Agent shall incur no liability or responsibility to the Company or to any Holder
of any Warrant in respect of any action taken, suffered, or omitted by it
hereunder in good faith and in accordance with the opinion or the advise of such
counsel.
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<PAGE> 8
15.5 Whenever in the performance of its duties under this
Agreement the Warrant Agent shall deem it necessary or desirable that any fact
or matter be proved or established by the Company prior to taking or suffering
any action hereunder; such fact or matter (unless other evidence in respect
thereof be herein specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by the president or a vice
president, or the treasurer, or the secretary of the Company and delivered to
the Warrant Agent; and such certificate shall be full authorization to the
Warrant Agent for any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance on such certificate.
15.6 The Company agrees to pay the Warrant Agent reasonable
compensation for all services rendered by Warrant Agent in the execution of this
Agreement, to reimburse the Warrant Agent for all expenses, taxes, and
governmental charges and other charges of any kind and nature incurred by the
Warrant Agent in the execution of this Agreement, and to indemnify the Warrant
Agent and save it harmless against any and all liabilities, including judgments,
costs, and counsel fees, for anything done or omitted by the Warrant Agent in
the execution of this Agreement, except as a result of the Warrant Agent's
negligence or bad faith.
15.7 The Warrant Agent shall be under no obligation to institute
any action, suit, or legal proceeding or to take any other action likely to
involve expense unless the Company or one or more Holders of Warrants shall
furnish the Warrant Agent with reasonable security and indemnity for any costs
and expenses which may be incurred, but this provision shall not affect the
power of the Warrant Agent to take such action as the Warrant Agent may consider
proper, whether with or without any such security or indemnity. All rights of
action under this Agreement or under any of the Warrants may be enforced by the
Warrant Agent without the possession of any of the Warrants or the production
thereof at any trial or other proceeding relative thereto, and any such action,
suit, or proceeding instituted by the Warrant Agent, and any recovery of
judgment shall be for the ratable benefit of the Holders of Warrants, as their
respective rights or interest may appear.
15.8 The Warrant Agent and any stockholder, director, officer,
or employee of the Warrant Agent may buy, sell, or deal in any of the Warrants
or other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to or otherwise act as fully and freely as though it were not Warrant
Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from
acting in any other capacity for the Company or for any other legal entity.
15.9 The Warrant Agent shall act hereunder solely as agent, and
its duties shall be determined solely by the provisions hereof. The Warrant
shall not be liable for anything which it may do or refrain from doing in
connection with this Agreement, except for its own negligence or bad faith.
15.10 The Warrant Agent will not incur any liability or
responsibility to the Company or to any Holder of any Warrant for any action
taken in reliance on any notice, resolution, waiver, consent, order,
certificate, or other paper, document, or instrument reasonably believed by it
to be genuine and to have been signed, sent, or presented by the proper party or
parties.
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15.11 The Warrant Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Warrant Agent) or in respect of the
validity or execution of any Warrant (except its countersignature thereof); nor
shall the Warrant Agent by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any Shares
(or other stock) to be issued pursuant to this Agreement or any Warrant or as to
whether any Shares (or other stock) will when issued be validly issued, fully
paid, and non-assessable or as to the Warrant Price, or the number or kind or
amount of Shares or other securities or other property issuable on exercise of
any Warrant.
15.12 The Warrant Agent is hereby authorized and directed to
accept the instructions with respect to the performance of its duties hereunder
from the chairman of the board or the president or a vice president or the
secretary or the treasurer of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and shall not be liable
for any action taken by it in good faith in accordance with instructions of any
such officer.
Section 16. Change of Warrant Agent. The Warrant Agent may resign and
be discharged from its duties under this Agreement by giving to the Company 30
days notice in writing. The Warrant Agent may be removed by like notice to the
Warrant Agent from the Company. If the Warrant Agent shall resign or be removed
or shall otherwise become incapable of acting, the Company shall appoint a
successor to the Warrant Agent. If the Company shall fail to make such
appointment within a period of 30 days after such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Warrant Agent or by the Holder or a Warrant (who shall with such
notice submit his Warrant for inspection by the Company), then the Holder of any
Warrant may apply to any court of competent jurisdiction for the appointment of
a successor to the Warrant Agent. Any successor Warrant Agent, whether appointed
by the Company or such a court, shall be a bank, trust company, or securities
transfer agency, in good standing, incorporated under the laws of the states of
California, Delaware, Florida, New Jersey, New York, Nevada or Utah or of the
United States of America. After appointment the successor Warrant Agent shall be
vested with the same powers, rights, duties, and responsibilities as if it had
been originally named as Warrant Agent without further act or deed; but the
former Warrant Agent shall deliver and transfer to the successor Warrant Agent
any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act, or deed necessary for the purpose. Failure
to file any notice provided for in this section 16; however, or any defect
therein, shall not affect the legality or validity of the resignation or removal
of the Warrant Agent or the appointment of the successor Warrant Agent, as the
case may be. In the event of such resignation or removal, the successor Warrant
Agent shall mail, first class, to each Holder, written notice of such removal or
resignation and the name and address of such successor Warrant Agent.
Section 17. Identity of Transfer Agent. Forthwith on the appointment of
any subsequent Transfer Agent for the Company's Shares, or any other Shares of
the Company's capital stock issuable on the exercise of the rights of purchase
represented by the Warrants, the company will file with the Warrant Agent a
statement setting forth the name and address of such Transfer Agent.
9
<PAGE> 10
Section 18. Notices. Any notice pursuant to this Agreement by the
Company or by the Holder of any Warrant to the Warrant Agent, or by the Warrant
Agent or by the Holder of any Warrant to the Company, shall be in writing and
shall be deemed to have been duly given if delivered or mailed certified mail,
return receipt requested (a) if to the Company to Universal Medical Systems,
Inc., 13825 Icot Boulevard, Suite 613, Clearwater, Florida 34620 and (b) if to
the Warrant Agent, to his main office: Dennis D. Cole, Esq., 13825 Icot
Boulevard Suite 613, Clearwater, Florida 34620. Each party hereto may from
time-to-time change the address to which notices to it are to be delivered or
mailed hereunder by notice in writing to the other party.
Section 19. Supplements and Amendments. The Company and the Warrant
Agent may from time-to-time supplement or amend this Agreement, without the
approval of any Holders of Warrants, in order to cure any ambiguity or to
correct or supplement any provision contained herein or to make any other
provisions in regard to matters or questions arising hereunder which the Company
and the Warrant Agent may deem necessary or desirable and which shall not be
inconsistent with the provisions of the Warrants and which shall not adversely
affect the interest of the Holders of the Warrants. In this regard, but not by
way of limitation, establishing an earlier date of exercise without a change in
the expiration date of the Warrants set forth in Section 5 or extending the
period for exercise without a change in the date on which the Warrants are first
exercisable set forth in Section 5 shall not be deemed to adversely affect the
interests of the Holders.
Section 20. Successors. All the covenants and provisions of this
Agreement by or for the benefit of each party shall be binding upon and shall
inure to the benefit of the parties hereto and to their respective successors
and assigns hereunder.
Section 21. Merger or Consolidation of the Company. The Company will
not merge or consolidate with or into any other corporation unless the
corporation resulting from such merger or consolidation (if not the Company)
shall expressly assume, by supplemental agreement satisfactory in form to the
Warrant agent and executed and delivered to the Warrant Agent, the due and
punctual performance and observance of each and every covenant and condition of
this Agreement to be performed and observed by the Company.
Section 22. Applicable Law . This Agreement and each Warrant issued
hereunder shall be deemed to be a contract made under the laws of the State of
Nevada and for all purposes shall be construed in accordance with the laws of
said State.
Section 23. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give any person or corporation other than the Company, the
Warrant Agent, and the Holders of the Warrants any legal or equitable right,
remedy, or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Warrant Agent, and the Holders of the
Warrants.
Section 24. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
10
<PAGE> 11
Section 25. Captions. The captions of the sections and subsections of
this Agreement have been inserted for convenience only and shall have no
substantive effect.
IN WITNESS WHEREOF: the parties hereto have caused this Agreement to be
duly executed all as of the date first above written.
UNIVERSAL MEDICAL SYSTEMS, INC.
By: /s/ Myron A. Baker
------------------
Myron A. Baker
Chairman & CEO
DENNIS D. COLE, ESQ.
By: /s/ Dennis D. Cole
------------------
Dennis D. Cole
11
<PAGE> 12
EXERCISABLE AFTER 12:00 A.M. ON MARCH 15, 1997
VOID AFTER 11:59 P.M. MARCH 15, 2000
REDEEMABLE CLASS E COMMON STOCK PURCHASE WARRANT
REDEEMABLE CLASS E WARRANT NUMBER NUMBER OF WARRANTS
*** ***
UNIVERSAL MEDICAL SYSTEMS, INC.
This Certifies That, FOR VALUE RECEIVED, _______________________
or registered assigns, (the "Holder') is the owner of the number of Redeemable
Class E Common Stock Purchase Warrants ("Class E Warrants") specified above.
Each Class E Warrant initially entitles the Holder to purchase, subject to the
terms and conditions set forth in this Warrant Certificate and the Warrant
Agreement (Class E Warrants), as hereinafter defined, one fully-paid and
nonassessable share of Common Stock $0.001 par value, of Universal Medical
Systems, Inc. a Nevada corporation, (the "Company") at any time between February
25, 1997, and the Expiration Date (as hereinafter defined), upon the
presentation and surrender of this Warrant Certificate with the Form of Exercise
on the reverse side hereof duly executed at the principal office of Dennis D.
Cole, Esq., as Warrant Agent, or his substitute (the "Warrant Agent")
accompanied by payment in lawful money of the United States of America in cash
or by official bank or certified check payable to the Company of $3.00 per
share.
This Warrant Certificate and each Class E Warrant represented hereby are
issued pursuant to and are subject in all respects to the terms and conditions
set forth in the Warrant Agreement (the "Warrant Agreement") between the Company
and the Warrant Agent. A copy of the Warrant Agreement is on file at the
principal office of the Warrant Agent, currently located at 13825 Icot Boulevard
Suite 613, Clearwater, Florida 34620.
Each Class E Warrant represented hereby is exercisable at the option of
the registered holder, but no fractional shares of Common Stock will be issued.
In the case of the exercise of less than all the Class E Warrants represented
hereby, the Company shall cancel this Warrant Certificate upon the surrender
hereof and shall execute and deliver a new Warrant Certificate(s) of like tenor,
which the Warrant Agent shall issue for the balance of such Class E Warrant.
The Term "Expiration Date: shall mean 11:59 P.M. (Florida time) on March
15, 2000, or such earlier date as the Class E Warrants shall be redeemed. If
such date shall in the State of Florida be a holiday or a day on which banks are
authorized to close, the Expiration Date shall Mean 11:59 P.M. (Florida time)
the next following date which in the State of Florida is not a holiday or a day
in which banks are authorized to close.
This Class E Warrant may not be exercised unless a registration statement
under the Securities Act of 1933, as amended, and under the applicable state
securities law with respect to such securities, is effective or there is
available an exemption from such Federal and State registration requirements and
the Company may have an obligation to file a registration statement to permit
exercise of this Class E Warrant. This Class E Warrant shall not be exercisable
by a Registered Holder in any state where such exercise would be unlawful.
ADDITIONAL PROVISIONS OF THIS CLASS E WARRANT ARE CONTAINED ON THE REVERSE
HEREOF.
Dated: March 14, 1997 By:__________________________
President
Attest:__________________________
Secretary
pg 1 of 2
EXHIBIT "A"
<PAGE> 13
1. EXERCISE OF THE WARRANT. This Class E Warrant may be exercised by holder, in
whole at any time or in part from time to time prior to the Expiration Date, by
the surrender of this Warrant Certificate (with the Form of Exercise below duly
executed) at the principal office of Warrant Agent, together with proper payment
of the Exercise Price of the proportionate part thereof if this Class E Warrant
is exercised in part. Payment for shares of Common Stock issuable upon exercise
of the Class E Warrants ("Warrant Shares") shall be made by check payable to the
order of the Company. It this warrant Certificate is exercised in part, this
Class E Warrant must be exercised for the number of whole Warrant Shares, and
the Holder is entitled to receive a new Warrant Certificate covering the number
of whole Warrant Shares in respect of which this Class E Warrant has not been
exercised. Upon such surrender of this Class E Warrant, the Company will (a)
issue a certificate(s) in the name of the Holder for the largest number of whole
Warrant Shares to which the Holder shall be entitled and, if this Class E
Warrant is exercised in whole in lieu of any fractional Warrant Share to which
the Holder shall be entitled, cash equal to the fair value of such fractional
share (determined in accordance with the Warrant Agreement), and (b) deliver the
other securities and properties receivable upon the exercise of the Class E
Warrant, or the proportionate part thereof if this Class E Warrant is exercised
in part, pursuant to the provisions of the Warrant Agreement.
2. RESERVATION OF WARRANT SHARES. The Company agrees that prior to the
Expiration Data, it will at all times have authorized and in reserve, and will
keep available, solely for issuance or delivery upon the exercise of this Class
E Warrant the Warrant Shares and other securities and properties as from time to
time shall be receivable on the exercise of this Class E Warrant, free and clear
of all restriction on sale or transfer and free and clear of all preemptive
rights.
3. PROTECTION AGAINST DILUTION. These Warrants contain no Anti-Dilutive Rights.
4. FULLY-PAID SHARES. The Company agrees that the Warrant Shares delivered on
the exercise of this Class E Warrant, shall at the time of such delivery, be
validly issued, outstanding and fully-paid.
5. LOSS, ETC OF WARRANT. Upon receipt of evidence satisfactory to the Company of
the loss, theft, destruction or mutilation of this Warrant, and indemnity
reasonably satisfactory to the Company, it lost, stolen or destroyed, and upon
surrender and cancellation of the Warrant Certificate it mutilated, and upon
reimbursement of the Company's reasonable incidental expenses, the Company shall
execute and deliver to the Holder a new Class E Warrant of like date, tenor and
denomination.
6. COMBINATION, SPLIT UP OR EXCHANGE AND TRANSFER. Subject to the provisions of
the Warrant Agreement this Warrant Certificate may be (a) exchanged for another
Warrant Certificate(s) in any denominations (whole shares only) entitling the
Holder to purchase a like number of Warrant Shares or (b) presented for transfer
at the office of the Warrant Agent, by the Holder or his assigns, in person or
by attorney duly authorized in writing, in the manner provided in the Warrant
Agreement. Upon any such transfer, a new Warrant Certificate(s) of different
denominations evidencing in a aggregate the right to purchase a like number of
Warrant Shares shall be issued to the transferee upon Surrender or this Warrant
Certificate in accordance with instructions set forth in the Assignment set
forth below or furnished to the agent.
7. WARRANT HOLDER NOT STOCKHOLDER. Except as otherwise provided herein and in
the Warrant Agreement, this Class E Warrant does not confer upon the Holder any
right to vote or to consent or to receive notice as a stockholder, of the
Company, as stockholder prior to the exercise hereof.
8. HEADINGS. The headings of this Warrant Certificate have been inserted as
matter of convenience and shall not affect the construction hereof.
9. APPLICABLE LAW. This Class E Warrant shall be governed by and construed in
accordance with the laws of the State of Nevada.
FORM OF EXERCISE
TO WARRANT AGENT:
The undersigned Holder of the within Class E Warrants, Hereby (1) exercises his
rights to purchase shares of Common Stock, par value $0.001 per share of
Universal Medical Systems, Inc., which the undersigned is entitled to purchase
under the terms of the within Class E Warrant, and (2) makes payment in full for
the number of shares of Common Stock so purchased by payment of $ ___________.
Please issue the Certificate for Shares of Common Stock in the name of, and pay
any cash for any fractional share to:
________________________________________________________________________________
Print or Type Name
________________________________________________________________________________
Social Security or other Identifying Number
________________________________________________________________________________
Street Address
________________________________________________________________________________
City State Zip Code
________________________________________________________________________________
and, if said number of shares shall not be all the shares purchasable hereunder,
please issue a new Warrant Certificate(s) for the unexercised portion of the
within Class E Warrant to:
________________________________________________________________________________
Print or Type Name
________________________________________________________________________________
Social Security or other Identifying Number
________________________________________________________________________________
Street Address
________________________________________________________________________________
City State Zip Code
________________________________________________________________________________
Dated: ______________ _____________________________________
Signature
(Signature must conform in all respect
to the name of Holder as specified on
the face of the Warrants.)
pg 2 of 2
<PAGE> 1
EXHIBIT 4(s)
EXERCISABLE AFTER 12:00 A.M. ON MARCH 15, 1997
VOID AFTER 11:59 P.M. MARCH 15, 2000
REDEEMABLE CLASS E COMMON STOCK PURCHASE WARRANT
REDEEMABLE CLASS E WARRANT NUMBER NUMBER OF WARRANTS
*** ***
UNIVERSAL MEDICAL SYSTEMS, INC.
This Certifies That, FOR VALUE RECEIVED, _______________________
or registered assigns, (the "Holder") is the owner of the number of Redeemable
Class E Common Stock Purchase Warrants ("Class E Warrants") specified above.
Each Class E Warrant initially entitles the Holder to purchase, subject to the
terms and conditions set forth in this Warrant Certificate and the Warrant
Agreement (Class E Warrants), as hereinafter defined, one fully-paid and
nonassessable share of Common Stock $0.001 par value, of Universal Medical
Systems, Inc. a Nevada corporation, (the "Company") at any time between February
25, 1997, and the Expiration Date (as hereinafter defined), upon the
presentation and surrender of this Warrant Certificate with the Form of Exercise
on the reverse side hereof duly executed at the principal office of Dennis D.
Cole, Esq., as Warrant Agent, or his substitute (the "Warrant Agent")
accompanied by payment in lawful money of the United States of America in cash
or by official bank or certified check payable to the Company of $3.00 per
share.
This Warrant Certificate and each Class E Warrant represented hereby are
issued pursuant to and are subject in all respects to the terms and conditions
set forth in the Warrant Agreement (the "Warrant Agreement") between the Company
and the Warrant Agent. A copy of the Warrant Agreement is on file at the
principal office of the Warrant Agent, currently located at 13825 Icot Boulevard
Suite 613, Clearwater, Florida 34620.
Each Class E Warrant represented hereby is exercisable at the option of
the registered holder, but no fractional shares of Common Stock will be issued.
In the case of the exercise of less than all the Class E Warrants represented
hereby, the Company shall cancel this Warrant Certificate upon the surrender
hereof and shall execute and deliver a new Warrant Certificate(s) of like tenor,
which the Warrant Agent shall issue for the balance of such Class E Warrant.
The Term "Expiration Date: shall mean 11:59 P.M. (Florida time) on March
15, 2000, or such earlier date as the Class E Warrants shall be redeemed. If
such date shall in the State of Florida be a holiday or a day on which banks are
authorized to close, the Expiration Date shall Mean 11:59 P.M. (Florida time)
the next following date which in the State of Florida is not a holiday or a day
in which banks are authorized to close.
This Class E Warrant may not be exercised unless a registration statement
under the Securities Act of 1933, as amended, and under the applicable state
securities law with respect to such securities, is effective or there is
available an exemption from such Federal and State registration requirements and
the Company may have an obligation to file a registration statement to permit
exercise of this Class E Warrant. This Class E Warrant shall not be exercisable
by a Registered Holder in any state where such exercise would be unlawful.
ADDITIONAL PROVISIONS OF THIS CLASS E WARRANT ARE CONTAINED ON THE REVERSE
HEREOF.
Dated: March 14, 1997 By:__________________________
President
Attest:__________________________
Secretary
pg 1 of 2
EXHIBIT "A"
<PAGE> 2
1. EXERCISE OF THE WARRANT. This Class E Warrant may be exercised by holder, in
whole at any time or in part from time to time prior to the Expiration Date, by
the surrender of this Warrant Certificate (with the Form of Exercise below duly
executed) at the principal office of Warrant Agent, together with proper payment
of the Exercise Price of the proportionate part thereof if this Class E Warrant
is exercised in part. Payment for shares of Common Stock issuable upon exercise
of the Class E Warrants ("Warrant Shares") shall be made by check payable to the
order of the Company. It this warrant Certificate is exercised in part, this
Class E Warrant must be exercised for the number of whole Warrant Shares, and
the Holder is entitled to receive a new Warrant Certificate covering the number
of whole Warrant Shares in respect of which this Class E Warrant has not been
exercised. Upon such surrender of this Class E Warrant, the Company will (a)
issue a certificate(s) in the name of the Holder for the largest number of whole
Warrant Shares to which the Holder shall be entitled and, if this Class E
Warrant is exercised in whole in lieu of any fractional Warrant Share to which
the Holder shall be entitled, cash equal to the fair value of such fractional
share (determined in accordance with the Warrant Agreement), and (b) deliver the
other securities and properties receivable upon the exercise of the Class E
Warrant, or the proportionate part thereof if this Class E Warrant is exercised
in part, pursuant to the provisions of the Warrant Agreement.
2. RESERVATION OF WARRANT SHARES. The Company agrees that prior to the
Expiration Data, it will at all times have authorized and in reserve, and will
keep available, solely for issuance or delivery upon the exercise of this Class
E Warrant the Warrant Shares and other securities and properties as from time to
time shall be receivable on the exercise of this Class E Warrant, free and clear
of all restriction on sale or transfer and free and clear of all preemptive
rights.
3. PROTECTION AGAINST DILUTION. These Warrants contain no Anti-Dilutive Rights.
4. FULLY-PAID SHARES. The Company agrees that the Warrant Shares delivered on
the exercise of this Class E Warrant, shall at the time of such delivery, be
validly issued, outstanding and fully-paid.
5. LOSS, ETC OF WARRANT. Upon receipt of evidence satisfactory to the Company of
the loss, theft, destruction or mutilation of this Warrant, and indemnity
reasonably satisfactory to the Company, it lost, stolen or destroyed, and upon
surrender and cancellation of this Warrant Certificate it mutilated, and upon
reimbursement of the Company's reasonable incidental expenses, the Company shall
execute and deliver to the Holder a new Class E Warrant of like date, tenor and
denomination.
6. COMBINATION, SPLIT UP OR EXCHANGE AND TRANSFER. Subject to the provisions of
the Warrant Agreement this Warrant Certificate may be (a) exchanged for another
Warrant Certificate(s) in any denominations (whole shares only) entitling the
Holder to purchase a like number of Warrant Shares or (b) presented for transfer
at the office of the Warrant Agent, by the Holder or his assigns, in person or
by attorney duly authorized in writing, in the manner provided in the Warrant
Agreement. Upon any such transfer, a new Warrant Certificate(s) of different
denominations evidencing in a aggregate the right to purchase a like number of
Warrant Shares shall be issued to the transferee upon Surrender or this Warrant
Certificate in accordance with instructions sat forth in the Assignment set
forth below or furnished to the agent.
7. WARRANT HOLDER NOT STOCKHOLDER. Except as otherwise provided herein and in
the Warrant Agreement, this Class E Warrant does not confer upon the Holder any
right to vote or to consent or to receive notice as a stockholder, of the
Company, as stockholder prior to the exercise hereof.
8. HEADINGS. The headings of this Warrant Certificate have been inserted as a
matter of convenience and shall not affect the construction hereof.
9. APPLICABLE LAW. This Class E Warrant shall be governed by and construed in
accordance with the laws of the State of Nevada.
FORM OF EXERCISE
TO WARRANT AGENT:
The undersigned Holder of the within Class E Warrants, Hereby (1) exercises his
rights to purchase shares of Common Stock, par value $0.001 per share of
Universal Medical Systems, Inc., which the undersigned is entitled to purchase
under the terms of the within Class E Warrant, and (2) makes payment in full for
the number of shares of Common Stock so purchased by payment of $ ___________.
Please issue the Certificate for Shares of Common Stock in the name of, and pay
any cash for any fractional share to:
________________________________________________________________________________
Print or Type Name
________________________________________________________________________________
Social Security or other Identifying Number
________________________________________________________________________________
Street Address
________________________________________________________________________________
City State Zip Code
________________________________________________________________________________
and, if said number of shares shall not be all the shares purchasable hereunder,
please issue a new Warrant Certificate(s) for the unexercised portion of the
within Class E Warrant to:
________________________________________________________________________________
Print or Type Name
________________________________________________________________________________
Social Security or other Identifying Number
________________________________________________________________________________
Street Address
________________________________________________________________________________
City State Zip Code
________________________________________________________________________________
Dated: ______________ _____________________________________
Signature
(Signature must conform in all respect
to the name of Holder as specified on
the face of the Warrants.)
pg 2 of 2
<PAGE> 1
EXHIBIT 4(t)
===============================================================================
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
By and Between
Universal Medical Systems, Inc
and
Dated as of December 31, 1996
_________________________________
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I CERTAIN DEFINITIONS ...................................... 1
ARTICLE II PURCHASE OF DEBENTURES ................................... 3
ARTICLE III REPRESENTATIONS AND WARRANTIES ........................... 4
ARTICLE IV OTHER AGREEMENTS OF THE PARTIES .......................... 10
ARTICLE V CONDITIONS PRECEDENT TO CLOSING........................... 15
ARTICLE VI TERMINATION............................................... 17
ARTICLE VII MISCELLANEOUS ............................................ 19
Exhibit A Form of Convertible Debenture
Exhibit B Form of Escrow Agreement
Exhibit C Form of Opinion of Dennis D. Cole, counsel for the Company
Exhibit D Conversion Procedures
Schedule 3.1(a) Subsidiaries
Schedule 3.1(c) Capitalization
Schedule 3.1(f) Required Consents and Approvals
Schedule 3.1(g) Litigation
</TABLE>
<PAGE> 3
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT, dated as of December 31, 1996
(this "Agreement"), by and between Universal Medical Systems, Inc., a Nevada
corporation (the "Company"), and Vikram Chatwal (the "Purchaser").
WHEREAS, the Company desires to issue and sell to the Purchaser and the
Purchaser desires to acquire certain of the Company's 4% Convertible Debentures,
due January 1, 2001 (the "Convertible Debentures"), each in the form of Exhibit
A attached hereto.
IN CONSIDERATION of the mutual covenants and agreements set forth herein
and for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
I CERTAIN DEFINITIONS
Certain Definitions. As used in this Agreement, and unless the context
requires a different meaning, the following terms have the meanings indicated:
"Affiliate" means, with respect to any Person, any Person that, directly
or indirectly, controls, is controlled by or is under common control with such
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlled by" and "under common control
with") shall mean the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities or by contract or otherwise.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the State of
New York are authorized or required by law or other government actions to close.
"Closing" shall have the meaning set forth in Section 2.1(b).
"Closing Date" shall have the meaning set forth in Section 2.1(b).
"Code" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations thereunder as in effect on the date hereof.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, par value $.001 per
share.
<PAGE> 4
"Debentures" means the principal face amount of Convertible Debentures to
be purchased by the Purchaser pursuant to the terms and conditions of this
Agreement as specified at the foot of this Agreement.
"Disclosure Materials" means the disclosure package delivered to the
Purchaser in connection with the offering by the Company of the Debentures and
the Schedules to this Agreement furnished by or on behalf of the Company
pursuant to Section 3.1.
"Escrow Agent" means Bryan Cave LLP.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GEM" means GEM Advisors, Inc.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
encumbrance, charge or security interest of any kind in or on such asset or the
revenues or income thereon or therefrom.
"Material Adverse Effect" shall have the meaning set forth in Section
3.1(a).
"NASD" means the National Association of Securities Dealers, Inc.
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Purchase Price" shall have the meaning set forth in Section 2.1(a).
"Required Approvals" shall have the meaning set forth in Section 3.1(f).
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiaries" shall have the meaning set forth in Section 3.1(a).
"Underlying Shares" means the shares of Common Stock into which the
Debentures are convertible in accordance with the terms thereof.
2
<PAGE> 5
II. PURCHASE OF DEBENTURES
2.1. Purchase of Debentures; Closing. Subject to the terms and
conditions herein set forth, the Company shall issue and sell to the Purchaser,
and the Purchaser shall purchase from the Company, on the Closing Date, the
Debentures at a price per (the "Purchase Price") equal to the aggregate face
value thereof (the "Purchase Price"). The Debentures shall be issued in such
denominations of $1,000 and any integral multiple of $1,000 as set forth at the
foot of the Agreement.
The closing of the purchase and sale of the Debentures (the "Closing")
shall take place at the offices of the Escrow Agent, 245 Park Avenue, 40th
Floor, New York, NY 10167. The Closing shall be deemed to occur when (a) this
Agreement has been executed by both the Purchaser and the Company, (B) an escrow
agreement substantially in the form of Exhibit B attached hereto has been
executed by the Purchaser, the Company and the Escrow Agent (the "Escrow
Agreement"), (c) payment of the Purchase Price shall have been made by the
Purchaser, by wire transfer of good funds in United States Dollars, to the
Escrow Agent in accordance with and subject to the terms and conditions of the
Escrow Agreement, (d) the Company shall have delivered or caused to be delivered
to the Escrow Agent the opinion of counsel provided for in Section 6.1(a) hereof
(the "Opinion") and (e) the Company shall have delivered to the Escrow Agent the
warrant provided for in Section 3.1(i) hereof. In no event shall the Closing
occur later than December 31, 1996. The date of the Closing is hereinafter
referred to as the "Closing Date".
At the Closing, the Escrow Agent, in accordance with the terms and
conditions of the Escrow Agreement, shall deliver to the Company the Purchase
Price for the Debentures (less the placement fee payable to GEM as contemplated
in Section 3.1 hereof against delivery to the Escrow Agent, as agent for the
Purchaser, of the Debentures registered in the name of the Purchaser. As soon
thereafter as practicable, but in no event later than three (3) business days,
the Escrow Agent shall mail or deliver the Debentures and the Opinion as
provided in the Escrow Agreement and the Escrow Agent shall deliver the warrant
as provided in Section 3.1 hereof.
III. REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchaser as follows:
(a) Organization and Qualification. The Company is a
corporation, duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, with the requisite corporate
power and authority to own and use its properties and
3
<PAGE> 6
assets and to carry on its business as currently conducted. The Company has no
subsidiaries other than as set forth in the Disclosure Documents or in Schedule
3.1(a) (collectively, the "Subsidiaries"). Each of the Subsidiaries is a
corporation, duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, with the full corporate power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Each of the Company and the Subsidiaries is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, could not reasonably be
expected to have, individually or in the aggregate, a material adverse effect on
the results of operations, assets, prospects, or financial condition of the
Company and the Subsidiaries, taken as a whole (a "Material Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated hereby and otherwise to carry out its obligations hereunder and
thereunder. The execution and delivery of this Agreement and the Escrow
Agreement by the Company and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
action on the part of the Company. Each of this Agreement and the Escrow
Agreement has been duly executed and delivered by the Company and constitutes
the valid and binding obligation of the Company enforceable against the Company
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application.
(c) Capitalization. The authorized, issued and outstanding
capital stock of the Company and each of the Subsidiaries is set forth in
Schedule 3.1(c), No shares of Common Stock are entitled to preemptive or similar
rights. Except as specifically disclosed in Schedule 3.l(c), there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or, except as a result of
the purchase and sale of the Debentures hereunder, securities, rights or
obligations convertible into or exchangeable for, or giving any person any right
to subscribe for or acquire any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its respective certificate of incorporation, bylaws or other charter
documents.
(d) Issuance of Debentures. The Debentures have been duly and
validly authorized for issuance, offer and sale pursuant to this Agreement and,
when issued and delivered as provided hereunder against payment in accordance
with the terms hereof, shall be valid and binding obligations of the Company
enforceable in accordance with their terms. The
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Company has and at all times while the Debentures are outstanding will maintain
an adequate reserve of shares of Common Stock to enable it to perform its
obligations under this Agreement and the Debentures. When issued in accordance
with the terms hereof and the Debentures, the Underlying Shares will be duly
authorized, validly issued, fully paid and nonassessable.
(e) No Conflicts. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not and will not (i) conflict
with or violate any provision of its certificate of incorporation or bylaws or
(ii) subject to obtaining the consents referred to in Section 3.1(f), conflict
with, or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company is a party, or (iii) to the knowledge of the
Company result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company is subject (including Federal and state securities laws and
regulations), or by which any property or asset of the Company is bound or
affected, except in the case of each of clauses (ii) and (iii), such conflicts,
defaults, terminations, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, have a Material Adverse Effect.
The business of the Company is not being conducted in violation of any law,
ordinance or regulation of any governmental authority, except for violations
which, individually or in the aggregate, do not have a Material Adverse Effect.
(f) Consents and Approvals. Except as specifically set forth in
Schedule 3.1(f), neither the Company nor any Subsidiary is required to obtain
any consent, waiver, authorization or order of, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of this Agreement, other than the making
of the applicable blue-sky filings under state securities laws, and other than,
in all cases, where the failure to obtain such consent, waiver, authorization or
order, or to give or make such notice or filing, would not materially impair or
delay the ability of the Company to effect the Closing and deliver to the
Purchaser the Debentures free and clear of all Liens (collectively, the
"Required Approvals").
(g) Litigation; Proceedings. Except as specifically disclosed
in the Disclosure Materials or in Schedule 3.1(g), there is no action, suit,
notice of violation, proceeding or investigation pending or, to the best
knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries or any of their respective properties before or by any court,
governmental or administrative agency or regulatory authority (Federal, State,
county, local or foreign) which (i) relates to or challenges the legality,
validity or enforceability of this Agreement or the Debentures (ii) could,
individually or in the aggregate, have a Material Adverse Effect or (iii) could,
individually or in the aggregate, materially impair the ability of the Company
to perform fully on a timely basis its obligations under this Agreement.
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<PAGE> 8
(h) No Default or Violation. Neither the Company nor any
Subsidiary (i) is in default under or in violation of any indenture, loan or
credit agreement or any other agreement or instrument to which it is a party or
by which it or any of its properties is bound, except such conflicts or defaults
as do not have a Material Adverse Effect, (ii) is in violation of any order of
any court, arbitrator or governmental body, except for such violations as do not
have a Material Adverse Effect, or (iii) is in violation of any statute, rule or
regulation of any governmental authority which could (individually or in the
aggregate) (x) adversely affect the legality, validity or enforceability of this
Agreement, (y) have a Material Adverse Effect or (z) adversely impair the
Company's ability or obligation to perform fully on a timely basis its
obligations under this Agreement.
(i) Certain Fees. No fees or commission will be payable by the
Company to any broker, finder, investment banker to bank with respect to the
consummation of the transactions contemplated hereby except that the Company has
agreed to pay to GEM at the Closing, as compensation for its services in
connection with the sale of the Debentures, a placement fee (the "Placement
Fee") in cash, equal to 5% of the Purchase Price. In addition, the Company has
agreed to issue to GEM at the Closing a warrant (the "Warrant") to purchase such
number of shares of Common Stock as shall equal the Purchase Price of each
Debenture. The Warrant shall be exercisable in whole or in part at any time and
from time to time commencing on the issuance date and terminating five years
thereafter at an exercise price equal to the closing bid price of a share of
Common Stock on the day immediately preceding the Closing Date.
(j) Disclosure Materials. The Disclosure Materials do not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(k) Private Offering. Neither the Company nor any Person acting
on its behalf has taken or will take any action (including, without limitation,
any offering of any securities of the Company under circumstances which would
require the integration of such offering with the offering of the Debentures or
the Underlying Shares under the Securities Act) which might subject the
offering, issuance or sale of the Debentures or the Underlying Shares to the
registration requirements of Section 5 of the Securities Act.
(1) Not a Reporting Company; Eligibility to use Exemption under
504b. The Company is not subject to the reporting requirements of Section 13 or
Section
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<PAGE> 9
l5d of the Exchange Act. The Company has not issued more than $500,000.00 of
securities pursuant to Rule 504 in the last twelve months. The Company is
eligible to issue securities exempt from registration pursuant to Rule 504 of
Regulation D of the Securities Act of 1933.
3.2. Representations and Warranties of the Purchaser. The Purchaser
hereby represents and warrants to the Company as follows:
(a) Organization; Authority. The Purchaser is a corporation
duly and validly existing and in good standing under the laws of the
jurisdiction of its incorporation. The Purchaser has the requisite power and
authority to enter into and to consummate the transactions contemplated hereby
and otherwise to carry out its obligations hereunder and thereunder. The
purchase of the Debentures by the Purchaser hereunder has been duly authorized
by all necessary action on the part of the Purchaser. Each of this Agreement and
the Escrow Agreement has been duly executed and delivered by the Purchaser or on
its behalf and constitutes the valid and legally binding obligation of the
Purchaser, enforceable against the Purchaser in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights generally and to general principles of equity.
(b) Investment Intent. The Purchaser is acquiring the
Debentures and the Underlying Shares for its own account (and/or on behalf of
managed accounts who are purchasing solely for their own accounts for
investment) for investment purposes only and not with a view to or for
distributing or reselling such Debentures or Underlying Shares or any part
thereof or interest therein, without prejudice, however, to the Purchaser's
right, subject to the provisions of this Agreement, at all times to sell or
otherwise dispose of all or any part of such Debentures or Underlying Shares in
compliance with applicable State securities laws and under an exemption from
registration under Rule 504(b) of the Securities Act of 1933.
(c) Purchaser Status. At the time the Purchaser (and any
account for which it is purchasing) was offered the Debentures, it (and any
account for which it is purchasing) was, and at the date hereof, it (and any
account for which it is purchasing) is, and at the Closing Date, it (and any
account for which it is purchasing) will be, an "accredited investor" as defined
in Rule 501(a) under the Securities Act.
(d) Experience of Purchaser. The Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Debentures, and has so
evaluated the merits and risks of such investment.
(e) Ability of Purchaser to Bear Risk of Investment. The
Purchaser is able to bear the economic risk of an investment in the Debentures
and, at the present time, is able to afford a complete loss of such investment.
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<PAGE> 10
(f) Prohibited Transactions. The Debentures to be purchased by
the Purchaser are not being acquired, directly or indirectly, with the assets of
any "employee benefit plan", within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended.
(g) Access to Information. The Purchaser acknowledges receipt
of the Disclosure Materials and further acknowledges that it has been afforded
(i) the opportunity to ask such questions as it has deemed necessary of, and to
receive answers from, representatives of the Company concerning the terms and
conditions of the offering of the Debentures and the merits and risks of
investing in the Debentures; (ii) access to information about the Company and
the Company's financial condition, results of operations, business, properties,
management and prospects sufficient to enable it to evaluate its investment in
the Common Stock; and (iii) the opportunity to obtain such additional
information which the Company possesses or can acquire without unreasonable
effort or expense that is necessary to make an informed investment decision with
respect to the Debentures and to verify the accuracy and completeness of the
information contained in the Disclosure Materials.
(h) Reliance. The Purchaser understands and acknowledges that
(i) the Debentures are being offered and sold, and the Underlying Shares are
being offered, to it without registration under the Securities Act in a private
placement that is exempt from the registration provisions of the Securities Act
and (ii) the availability of such exemption, depends in part on, and that the
Company will rely upon the accuracy and truthfulness of, the foregoing
representations and the Purchaser hereby consents to such reliance.
3.3. The Company acknowledges and agrees that the Purchaser makes no
representation or warranty with respect to the transactions contemplated hereby
other than those specifically set forth in Section 3.2 hereof.
IV. OTHER AGREEMENTS OF THE PARTIES
4.1. Manner of Offering. The Debentures are being issued pursuant to
Rule 504(b) of Regulation D of the Securities Act of 1933. The Debentures and
the Underlying Shares will be exempt from restrictions on transfer, and will
carry no restrictive legend. The Company will use its best efforts to insure
that no actions are taken that would jeopardize the availability of the
exemption from registration under Rule 504(b) for the Debentures and the
Underlying Shares. Notwithstanding the foregoing, if the Company shall take any
action or any event shall occur, the effect of which would be to cause the
Underlying Shares to be issued upon conversion of any then outstanding
Debentures to be restricted securities (as such term is defined in Rule 144
promulgated under the 1933 Act), the Company agrees to immediately file with the
Commission and cause to become effective as soon as practicable a registration
statement which would permit the public resale of such Underlying Shares in such
states of the United States as
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<PAGE> 11
the holders thereof shall reasonably request. All costs and expenses of such
registration shall be borne by the Company.
4.2. Furnishing of Information. As long as the Purchaser owns Debentures
or Underlying Shares, the Company will promptly furnish to it all annual and
quarterly reports comparable to those required by Section 13(a) or 15(d) of the
Exchange Act.
4.3. Notice of Certain Events. The Company shall (i) advise the Purchaser
promptly after obtaining knowledge thereof, and, if requested by the Purchaser,
confirm such advice in writing, of (A) the issuance by any state securities
commission of any stop order suspending the qualification or exemption from
qualification of the Debentures or the Common Stock for offering or sale in any
jurisdiction, or the initiation of any proceeding for such purpose by any state
securities commission or other regulatory authority, or (B) any event that makes
any statement of a material fact made in the Disclosure Materials untrue or that
requires the making of any additions to or changes in the Disclosure Materials
in order to make the statements therein, in the light of the circumstances under
which they are made, not misleading, (ii) use its best efforts to prevent the
issuance of any stop order or order suspending the qualification or exemption
from qualification of the Debentures or the Common Stock under any state
securities or Blue Sky laws, and (iii) if at any time any state securities
commission or other regulatory authority shall issue an order suspending the
qualification or exemption from qualification of the Debentures or the Common
Stock under any such laws, use its best efforts to obtain the withdrawal or
lifting of such order at the earliest possible time.
4.4. Copies and Use of Disclosure Materials. The Company shall furnish
the Purchaser, without charge, as many copies of the Disclosure Materials, and
any amendments or supplements thereto, as the Purchaser may reasonably request.
The Company consents to the use of the Disclosure Materials, and any amendments
and supplements thereto, by the Purchaser in connection with resales of the
Debentures or the Underlying Shares other than pursuant to an effective
registration statement.
4.5. Modification to Disclosure Materials. If any event shall occur as a
result of which, in the reasonable judgment of the Company or the Purchaser, it
becomes necessary or advisable to amend or supplement the Disclosure Materials
in order to make the statements therein, in the light of the circumstances at
the time the Disclosure Materials were delivered to the Purchaser, not
misleading, or if it is necessary to amend or supplement the Disclosure
Materials to comply with applicable law, the Company shall promptly prepare an
appropriate amendment or supplement to the Disclosure Materials (in form and
substance reasonably satisfactory to the Purchaser) so that (i) as so amended or
supplemented the Disclosure Materials will not include an untrue statement of
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances existing at the time it is
delivered to Purchaser, not misleading and (ii) the Disclosure Materials will
comply with applicable law.
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4.6. Blue Sky Laws. The Company shall cooperate with the Purchaser in
connection with the qualification of the Debentures and the Underlying Shares
under the securities or Blue Sky laws of such jurisdictions as the Purchaser may
request and to continue such qualification at all times through the third
anniversary of the Closing Date; provided, however, that neither the Company nor
its Subsidiaries shall be required in connection therewith to qualify as a
foreign corporation where they are not now so qualified.
4.7. Integration. The Company shall not and shall use its best efforts
to ensure that no Affiliate shall sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in Section 2 of
the Securities Act) that would be integrated with the offer or sale of the
Debentures or the Underlying Shares in a manner that would require the
registration under the Securities Act of the sale of the Debentures or
Underlying Shares to the Purchaser.
4.8. Furnishing of Rule 144A Materials. The Company shall, for so long
as any of the Debentures or Underlying Shares remain outstanding and during any
period in which it is not subject to Section 13 or 15(d) of the Exchange Act,
make available to any registered holder of Debentures or Underlying Shares in
connection with any sale thereof and any prospective purchaser of such
Debentures or Underlying Shares from such Person, the following information in
accordance with Rule 144A(d)(4) under the Securities Act: a brief statement of
the nature of the business of the Company and the products and services it
offers and the Company's most recent audited balance sheet and profit and loss
and retained earnings statements, and similar audited financial statements for
such part of the two preceding fiscal years as the Company has been in
operation.
4.9. Solicitation Materials. The Company shall not (i) distribute any
offering materials in connection with the offering and sale of the Debentures or
Underlying Shares other than the Disclosure Materials and any amendments and
supplements thereto prepared in compliance herewith or (ii) solicit any offer to
buy or sell the Debentures or Underlying Shares by means of any form of general
solicitation or advertising.
4.10. Right of First Refusal. The Company shall not directly or
indirectly, without the prior consent of the Purchaser, offer, sell, grant any
option to purchase, or otherwise dispose (or announce any offer, sale, grant or
any option to purchase or other disposition) of any of its or its Affiliates
equity or equity-equivalent securities (a "Subsequent Sale") for a period of 90
days after Closing Date, except (i) the granting of options to employees,
officers and directors under, and the issuance of shares upon exercise of
options granted under, any stock option plan heretofore or hereinafter adopted
by the Company; (ii) shares issued upon exercise of any currently outstanding
warrants and upon conversion of any currently outstanding convertible preferred
stock disclosed in Schedule 3.1 and (iii) shares of Common Stock issued upon
conversion of Debentures in accordance herewith, unless (A) the Company provides
the Purchaser a written notice (the "Subsequent Financing Notice") of its
intention to effect such Subsequent Financing, which Subsequent Financing Notice
shall describe in reasonable detail
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<PAGE> 13
the proposed terms of such Subsequent Financing and the amount of proceeds
intended to be raised thereunder and (B) the Purchaser shall not have notified
the Company within forty-eight (48) hours of its receipt of the Subsequent
Financing Notice of its willingness to enter into good faith negotiations to
provide (or to cause its sole designee to provide) financing to the Company on
substantially the terms set forth in the Subsequent Financing Notice. If the
Purchaser shall fail to notify the Company of its intention to enter into such
negotiations within such forty-eight (48) hour period, the Company may effect
the Subsequent Financing substantially upon the terms set forth in the
Subsequent Financing Notice; provided, that the Company shall provide the
Purchaser with a second Subsequent Financing Notice, and the Purchaser shall
again have the right of first refusal set forth above in this paragraph (a), if
the Subsequent Financing subject to the initial Subsequent Financing Notice
shall not have been consummated for any reason on the terms set forth in such
Subsequent Financing Notice within 30 days after the date of the initial
Subsequent Financing Notice.
From the date hereof through the Closing Date, the Company shall not and
shall cause the Subsidiaries not to, without the consent of the Purchaser, (i)
amend its Certificate of Incorporation, bylaws or other charter documents so as
to adversely affect any rights of the Purchaser; (ii) split, combine or
reclassify its outstanding capital stock; (iii) declare, authorize, set aside or
pay any dividend or other distribution with respect to the Common Stock; (iv)
redeem, repurchase or offer to repurchase or otherwise acquire shares of its
Common Stock; or (v) enter into any agreement with respect to any of the
foregoing.
4.11. Listing of Underlying Shares. The Company shall take all steps
necessary to cause the Underlying Shares to be approved for listing on the NASD
Electronic Bulletin Board (or other national securities exchange or market on
which the Common Stock is listed) no later than the first day after which
Debentures may be converted hereunder by the Purchaser, and shall provide to the
Purchaser evidence of such listing.
4.12. Conversion Procedures. Exhibit D attached hereto sets forth the
procedures with respect to the conversion of the Debentures, including the forms
of conversion notice to be provided upon conversion, instructions as to the
procedures for conversion, the form of legal opinion, if necessary, that shall
be rendered by the Company's counsel to the Company's transfer agent and such
other information and instructions as may be reasonably necessary to enable the
Purchaser to exercise its right of conversion smoothly and expeditiously.
V. CONDITIONS PRECEDENT TO CLOSING
5.1. Conditions Precedent to Obligations of the Purchaser. The
obligation of the Purchaser to purchase the Debentures is subject to the
satisfaction or waiver by the Purchaser, at or prior to the Closing, of each of
the following conditions:
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(a) Legal Opinion. The Purchaser shall have received the legal
opinion, addressed to it and dated the Closing Date, of Dennis D. Cole, Esq.,
counsel for the Company, substantially in the form of EXHIBIT C;
(b) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company contained herein shall be true and
correct in all material respects as of the date when made and as of the Closing
Date as though made at that time (except that representations and warranties
that are made as of a specific date need be true in all material respects only
as of such date);
(c) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing;
(d) No Material Adverse Effect. Since the date of the financial
statements included in the Company's last filed Quarterly Report on Form 10-Q,
no event which had a Material Adverse Effect shall have occurred which is not
disclosed in the Disclosure Materials;
(e) No Prohibitions. The purchase of and payment for the
Debentures (and upon conversion thereof, the Underlying Shares) hereunder (i)
shall not be prohibited or enjoined (temporarily or permanently) by any
applicable law or governmental regulation and (ii) shall not subject the
Purchaser to any penalty, or in its reasonable judgment, other onerous condition
under or pursuant to any applicable law or governmental regulation that would
materially reduce the benefits to the Purchaser of the purchase of the
Debentures or the Underlying Shares (provided, however, that such regulation,
law or onerous condition was not in effect in such form at the date of this
Agreement);
(f) Company Certificates. The Purchaser shall have received a
certificate, dated the Closing Date, signed by the Secretary or an Assistant
Secretary of the Company and certifying (i) that attached thereto is a true,
correct and complete copy of (A) the Company's Certificate of Incorporation, as
amended to the date thereof, (B) the Company's By-Laws, as amended to the date
thereof, and (C) resolutions duly adopted by the Board of Directors of the
Company authorizing the execution and delivery of this Agreement and the
issuance and sale of the Debentures and the Underlying Shares and (ii) the
incumbency of officers executing this Agreement;
(g) No Suspensions of Trading in Common Stock. Trading in the
Common Stock shall not have been suspended by the Commission or the NASD or
other exchange or market on which the Common Stock is listed or quoted (except
for any suspension of trading of limited duration solely to permit dissemination
of material information regarding the Company);
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(h) Required Approvals. All Required Approvals shall have been
obtained; and
6.2. Conditions Precedent to Obligations of the Company. The obligation
of the Company to issue and sell the Debentures hereunder is subject to the
satisfaction or waiver by the Company, at or to the Closing, of each of the
following conditions:
(a) Accuracy of the Purchaser's Representations and Warranties.
The representations and warranties of the Purchaser shall be true and correct in
all material respects as of the date when made and as of the Closing Date as
though made at that time (except that representations and warranties that are
made as of a specific date need be true in all material respects only as of such
date);
(b) Performance by the Purchaser. The Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by it at or prior to the Closing; and
(c) No Prohibitions. The sale of the Debentures (and upon
conversion thereof, the Underlying Shares) hereunder (i) shall not be prohibited
or enjoined (temporarily or permanently) by any applicable law or governmental
regulation and (ii) shall not subject the Company to any penalty, or in its
reasonable judgment, any other onerous condition under or pursuant to any
applicable law or governmental regulation that would materially reduce the
benefits to the Company of the sale of Debentures or the Underlying Shares to
the Purchaser (provided, however, that such regulation, law or onerous condition
was not in effect in such form at the date of this Agreement).
VII. TERMINATION
7.1. Termination by Mutual Consent. This Agreement may be terminated at
any time prior to Closing by the mutual consent of the Company and the
Purchaser.
7.2. Termination by the Company or the Purchaser. This Agreement may be
terminated prior to Closing by either the Company or the Purchaser, by giving
written notice of such termination to the other party, if:
(a) the Closing shall not have occurred by December 31, 1996;
provided that the terminating party is not then in material breach of its
obligations under this Agreement in any manner that shall have caused the
failure referred to in this paragraph (a);
(b) there shall be in effect any statute, rule, law or regulation
that prohibits the consummation of the Closing or if the consummation of the
Closing would violate
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<PAGE> 16
any non-appealable final judgment, order, decree, ruling or injunction of any
court of or governmental authority having competent jurisdiction; or
(c) there shall have been an amendment to Regulation D or an
interpretive release promulgated or issued thereunder, which, in the reasonable
judgment of the terminating party, would materially adversely affect the
transactions contemplated hereby.
7.3. Termination by the Company. This Agreement may be terminated prior
to Closing by the Company, by giving notice of such termination to the
Purchaser, if the Purchaser has materially breached any representation,
warranty, covenant or agreement contained in this Agreement and such breach is
not cured within five business days following receipt by the Purchaser of notice
of such breach.
7.4. Termination by the Purchaser. This Agreement may be terminated prior
to Closing by the Purchaser, by giving notice of such termination to the
Company, if:
(a) the Company has breached any representation, warranty,
covenant or agreement contained in this Agreement and such breach is not cured
within five business days following receipt by the Company of notice of such
breach;
(b) there has occurred an event since the date of the latest
financial statements included in the Disclosure Materials which could reasonably
be expected to have a Material Adverse Effect and which is not disclosed in the
Disclosure Materials; or
(c) trading in the Common Stock has been suspended by the
Commission or the NASD or other exchange or market on which the Common Stock is
listed or quoted (except for any suspension of trading of limited duration
solely to permit dissemination of material information regarding the Company).
VIII. MISCELLANEOUS
8.1. Fees and Expenses Each party shall pay the fees and expenses of
its advisers, counsel, accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement. The Company shall pay all
stamp and other taxes and duties levied in connection with the issuance of the
Debentures (and upon conversion thereof, the Underlying Shares) pursuant hereto.
The Purchaser shall be responsible for its own tax liability that may arise as a
result of the investment hereunder or the transactions contemplated by this
Agreement. Whether or not the transactions contemplated by this Agreement are
consummated or this Agreement is terminated, the Company shall pay (i) all
costs, expenses, fees and all taxes incident to and in connection with: (A) the
preparation, printing and distribution of the Disclosure Materials and all
amendments and supplements thereto (including, without limitation,
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<PAGE> 17
financial statements and exhibits), and all preliminary and final Blue Sky
memoranda and all other agreements, memoranda, correspondence and other
documents prepared and delivered in connection herewith (B) the issuance and
delivery of the Debentures and, upon conversion thereof, the Underlying Shares,
(C) the qualification of the Debentures and, upon conversion thereof, the
Underlying Shares for offer and sale under the securities or Blue Sky laws of
the several states (including, without limitation, the fees and disbursements of
the Purchasers' counsel relating to such registration or qualification), (D)
furnishing such copies of the Disclosure Materials and all amendments and
supplements thereto, as may reasonably be requested for use in connection, with
resales of the Debentures and, upon conversion thereof, the Underlying Shares,
and (E) the preparation of the Debentures and, upon conversion thereof,
certificates for the Underlying Shares (including, without limitation, printing
and engraving thereof), (ii) all fees and expenses of the counsel and
accountants of the Company and (iii) all expenses and listing fees in connection
with the application for quotation of the Underlying Shares in the OTC Bulletin
Board.
8.2. Entire Agreement; Amendments. This Agreement, together with the
Exhibits, Annexes and Schedules hereto, contain the entire understanding of the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, with respect to such matters.
8.3. Notices. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be deemed to have been received
(a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct
answer back received), telecopy or facsimile (with transmission confirmation
report) at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be:
If to the Company:
Universal Medical Systems, Inc.
13825 Icot Blvd., Suite 613
Clearwater, FL 34620
With copies to:
Dennis D. Cole, Esq.
13825 Icot Blvd., Suite 613
Clearwater, FL 34620
15
<PAGE> 18
If to the Purchaser:
Vikraim Chatwal
300 East 93rd St. Apt QH
New York, NY 10128
With copies to:
or such other address as may be designated in writing hereafter, in the same
manner, by such person.
8.4. Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
both the Company and the Purchaser, or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter.
8.5. Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
8.6. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
Neither the Company nor the Purchaser may assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other. The
assignment by a party of this Agreement or any rights hereunder shall not affect
the obligations of such party under this Agreement.
8.7. No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
8.8. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to the principles of conflicts of law thereof.
8.9. Survival. The representations and warranties of the Company and the
Purchaser contained in Article III and the agreements and covenants of the
parties contained in Article IV and this Article VII shall survive the Closing
(or any earlier termination of this Agreement) and any conversion of Debentures
hereunder.
16
<PAGE> 19
8.10. Counterpart Signatures. This Agreement may be executed in two or
more counterparts, all of which when taken together shall be considered one and
the same agreement and shall become effective when counterparts have been signed
by each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
8.11. Publicity. The Company and the Purchaser shall consult with each
other in issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby and neither party shall issue
any such press release or otherwise make any such public statement without the
prior written consent of the other, which consent shall not be unreasonably
withheld or delayed.
8.12. Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
8.13. Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Purchaser
will be entitled to specific performance of the obligations of the Company under
this Agreement and the Company will be entitled to specific performance of the
obligations of the Purchaser hereunder with respect to the subsequent transfer
of Debentures and the Underlying Shares. Each of the Company and the Purchaser
agrees that monetary damages would not be adequate compensation for any loss
17
<PAGE> 20
incurred by reason of any breach of its obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance of
any such obligation the defense that a remedy at law would be adequate.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first indicated above.
Company:
Universal Medical Systems, Inc.
By: /s/ Myron A. Baker
-------------------------
Name: Myron A. Baker
Title: President & CEO
Purchaser:
Vikram Chatnal
By: /s/ Vikram Chatnal
-------------------------
Name:
Title:
By:
--------------------------
Aggregate Principal Face Amount of
Debentures To be Purchased: 50,000
To Be Issued in Denominations of
$1,000 or Integral Multiples Thereof
As Follows: 1 X 50,000
18
<PAGE> 21
SCHEDULE 3.1(A) - SUBSIDIARIES
The following is a list of the Subsidiaries of Universal Medical Systems,
Inc. and the state or jurisdiction of incorporation or organization of each
(each subsidiary is wholly owned by Universal Medical Systems, Inc.):
1. Medhealth Imaging, Inc., a Nevada corporation
2. Medical High Technology International, Inc., a Florida corporation
3. Life Sciences, Inc., a Connecticut corporation
4. Biometrix, Inc., a Connecticut corporation
5. Biometrix, Inc., a New Hampshire corporation
6. American Med Pharm, Inc., a Delaware corporation
7. King of Nostalgia, Inc., a New York corporation
<PAGE> 22
SCHEDULE 3.1 C - CAPITALIZATION
A. Authorized Shares:
1. Common Stock - 25 million shares authorized par value of $.001
2. Preferred Stock - 10 million shares authorized par value of $.0001
B. Issued and Outstanding Shares, Warrants and Options
<TABLE>
<S> <C>
1. Common Stock: 9,208,872
2. Debentures: 0
3. Preferred "A" Class: 0
4. Preferred "B" Class: 1,100,000
5. Preferred "C" Class: 500,000
6. Preferred "D" Class: 407,500
7. Preferred "E" Class: 650,000
8. Warrants - A: 200,000
9. Warrants - B: 50,000
10. Warrants - C: 599,450
11. Warrants - D: 407,500
12. Warrants - E: 1,299,599
13. Options: 1,450,000
</TABLE>
<PAGE> 23
SCHEDULE 3.1(F) - REQUIRED CONSENTS AND APPROVALS
None required
<PAGE> 24
SCHEDULE 3.1(G) - LITIGATION
1. Whitestar Management, Inc. v. Medhealth Imaging, Inc.
Thirteenth Judicial Circuit, Hillsborough County, Florida
Case No.: 95-07248 - amount of claim: $25,000
2. Southwest Florida Equipment, Inc. v. Medical High Technology
International, Inc.
Twentieth Judicial Circuit, Lee County, Florida
Case No.: 96-6179 - amount of claim: $100,000
Both of the above cases are in the process of being settled.
<PAGE> 25
EXHIBIT A
No. _____
US$ _____
4% CONVERTIBLE DEBENTURE DUE JANUARY 1, 2001
THIS DEBENTURE is one of a duly authorized issue of Debentures of
Universal Medical Systems, Inc., a Nevada corporation having a principal place
of business at 13825 Icot Blvd., Suite 613, Clearwater, FL 34620 (the
"Company"), designated as its 4% Convertible Debentures, Due January 1, 2001
(the "Debentures"), in an aggregate principal amount of up to US$500,000.
FOR VALUE RECEIVED, the Company promises to pay to [ ], or registered
assigns (the "Holder"), the principal sum of ____________ Thousand Dollars
(US$______), on January 1, 2001 (the "Maturity Date") and to pay interest to the
Holder on the principal sum, at the rate of 4% per annum, payable quarterly, in
arrears on April 1, July 1, October 1 and January 1 of each year, (each, an
"Interest Payment Date"), commencing April 1, 1997. Interest shall accrue daily
commencing on the Original Issue Date (as defined in Section 6) until payment in
full of the principal sum, together with all accrued and unpaid interest, has
been made or duly provided for. Interest shall be calculated on the basis of a
360-day year. Interest due and payable hereunder will be paid on each Interest
Payment Date to the person in whose name this Debenture is registered on the
records of the Company regarding registration and transfers of the Debentures
(the "Debenture Register") on the first business day prior to each the Interest
Payment Date; provided, however, that the Company's obligation to a transferee
of this Debenture arises only if such transfer, sale or other disposition is
made in accordance with the terms and conditions hereof and of the Convertible
Debenture Purchase Agreement, dated as of December ______, 1996, as amended from
time to time (the "Purchase Agreement"), executed by the original Holder. Any
overdue principal and interest as provided herein shall bear interest at the
rate of 14% per annum. The principal of, and interest on, this Debenture are
payable in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts, at the
address of the Holder last appearing on the Debenture Register. A transfer of
the right to receive principal and interest under this Debenture shall be
transferable only through an appropriate entry in the Debenture Register as
provided herein.
1. This Debenture is subject to the following additional provisions:
(a) The Debentures are issuable in denominations of One
Thousand Dollars (US$1000.00) and integral multiples of one thousand dollars
(US$1000.00) in excess thereof. The Debentures are exchangeable for an equal
aggregate principal amount of Debentures of different authorized denominations,
as requested by the Holder surrendering the
<PAGE> 26
same but shall not be issuable in denominations of less than integral multiples
of One Thousand Dollars (US$1000.00). No services charge will be made for such
registration of transfer or exchange.
(b) If any interest or principal due hereunder is subject to
any withholding tax under the income tax or other applicable laws of the United
States, the Company will pay to the Holder, in addition to the payments
otherwise due hereunder, such additional amount as is necessary to provide that
the net amount actually received by the Holder (free and clear of any such
withholding tax, whether assessed against the Company or the Holder) will equal
the full amount the Holder would have received had such withholding tax not been
assessed.
2. Events of Default. "Event of Default", wherever used herein, means any
one of the following events (whatever the reason and whether it shall be
voluntary or involuntary or effected by operation of law or pursuant to any
judgment, decree or order of any court, or any order, rule or regulation of any
administrative or governmental body):
(a) any default in the payment of the principal of or interest
on this Debenture as and when the same shall become due and payable either at
the Maturity Date, by acceleration or otherwise;
(b) the Company shall fail to observe or perform any other
covenant, agreement or warranty contained in, or otherwise commit any breach of,
this Debenture, and such failure or breach shall not have been remedied within
30 days after the date on which notice of such failure or breach shall have been
given;
(c) the occurrence of any event or breach or default by the
Company under the Purchase Agreement;
(d) the Company or any of its subsidiaries shall commence a
voluntary case under the United States Bankruptcy Code as now or hereafter in
effect or any successor thereto (the "Bankruptcy Code"); or an involuntary case
is commenced against the Company under the Bankruptcy Code and the petition is
not controverted within 30 days, or is not dismissed within 60 days, after
commencement of the case; or a "custodian" (as defined in the Bankruptcy Code)
is appointed for, or takes charge of, all or any substantial part of the
property of the Company or the Company commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction whether now or
hereafter in effect relating to the Company or there is commenced against the
Company any such proceeding which remains undismissed for a period of 60 days;
or the Company is adjudicated insolvent or bankrupt; or any order of relief or
other order approving any such case or proceeding is entered; or the Company
suffers any appointment of any custodian or the like for it or any substantial
part of its property which continues undischarged or unstayed for a period of 60
days; or the Company makes a general assignment for the benefit of creditors; or
the Company shall fail to pay, or shall state that it is unable to pay, or shall
be unable to pay, its debts generally as they become due; or the Company
2
<PAGE> 27
shall call a meeting of its creditors with a view to arranging a composition or
adjustment of its debts; or the Company shall by any act or failure to act
indicate its consent to, approval of or acquiescence in any of the foregoing; or
any corporate or other action is taken by the Company for the purpose of
effecting any of the foregoing;
(e) the Company shall default in any of its obligations under
any mortgage, indenture or instrument under which there may be issued, or by
which there may be secured or evidenced, any indebtedness of the Company in an
amount exceeding Fifty Thousand Dollars ($50,000), whether such indebtedness now
exists or shall hereafter be created and such default shall result in such
indebtedness becoming or being declared due and payable prior to the date on
which it would otherwise become due and payable;
(f) the Company shall have its Common Stock (as defined in
Section 6) delisted from the OTCBB or other national securities exchange or
market on which such Common Stock is listed for trading or suspended from
trading thereon, and shall not have its Common Stock relisted or have such
suspension lifted, as the case may be, within five days; or
(g) the Company shall be a party to any merger or consolidation
(irrespective of whether it is the survivor) or shall dispose of all or
substantially all of its assets in one or more transactions, or shall redeem
more than a de minimis amount of its outstanding shares of Common Stock.
If any Event of Default occurs and is continuing, and in every such case, then
so long as such Event of Default shall then be continuing the Holder may, by
notice to the Company, declare the full principal amount of this Debenture,
together with all accrued but unpaid interest to the date of acceleration, to
be, whereupon the same shall become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
waived by the Company, notwithstanding anything herein contained to the
contrary, and the Holder may immediately and without expiration of any grace
period enforce any and all of its rights and remedies hereunder and all other
remedies available to it under applicable law. Such declaration may be rescinded
and annulled by Holder at any time prior to payment hereunder. No such
rescission or annulment shall affect any subsequent Event of Default or impair
any right consequent thereon.
3. Conversion.
(a) This Debenture shall be convertible into shares of Common Stock at
the Conversion Ratio, at the option of the Holder in whole or in part at any
time after the Original Issue Date. Any conversion under this Section 3(a) shall
be of a minimum principal amount of $1000.00 of Debentures. The Holder shall
effect conversions by surrendering the Debentures (or such portions thereof) to
be converted to the Company, together with the form of conversion notice
attached hereto as Exhibit A (the "Holder Conversion Notice") in the manner set
forth in Section 3(i). Each Holder Conversion Notice shall specify the
principal amount of Debentures to be converted and the date on which such
conversion is to be effected (the "Holder
3
<PAGE> 28
Conversion Date"). Subject to Section 3(c), each Holder Conversion Notice, once
given, shall be irrevocable. If the Holder is converting less than all of the
principal amount represented by the Debenture(s) tendered by the Holder with the
Holder Conversion Notice, the Company shall promptly deliver to the Holder a new
Debenture for such principal amount as has not been converted.
(b) This Debenture shall be convertible into shares of Common Stock at
the Conversion Ratio, at the option of the Company in whole or in part at the
Maturity Date; provided, however, that the Company is not permitted to deliver a
Company Conversion Notice (as defined below) within 10 days of issuing any press
release or other public statement relating to such conversion. The Company shall
effect such conversion by delivering to the Holder a written notice in the form
attached hereto as Exhibit B (the "Company Conversion Notice"), which Company
Conversion Notice, once given, shall be irrevocable. Each Company Conversion
Notice shall specify the principal amount of Debentures to be converted. Any
such conversion by the Company shall be subject to Section 4.13 of the Purchase
Agreement. The Company shall give such Company Conversion Notice in accordance
with Section 3(i) below at least two Trading Days before the Maturity Date (such
date is hereinafter referred to as the "Company Conversion Date). Any such
conversion shall be effected on a pro rata basis among all holders of
Debentures. Upon the conversion of the principal balance of the Debentures
pursuant to a Company Conversion Notice, the Holder shall surrender its
Debentures at the office of the Company or of any transfer agent for the
Debentures or Common Stock. If the Company is converting less than the aggregate
principal amount of all Debentures, the Company shall, upon conversion of such
Debentures subject to such Company Conversion Notice and receipt of the
Debentures surrendered for conversion, deliver to the Holder, and each other
such holder of Debentures full payment in immediately available funds of the
principal balance of and accrued interest on the portion of the Debentures that
have not been converted. Each of a Holder Conversion Notice and a Company
Conversion Notice is sometimes referred to herein as a "Conversion Notice," and
each of a "Holder Conversion Date" and a "Company Conversion Date" is sometimes
referred to herein as a "Conversion Date."
(c) Not later than three Trading Days after the Conversion Date, the
Company will deliver to the Holder (i) a certificate or certificates which shall
be free of restrictive legends and trading restrictions (other than those then
required by law), representing the number of shares of Common Stock being
acquired upon the conversion of Debentures and (ii) Debentures in principal
amount equal to the principal amount of Debentures not converted; provided,
however that the Company shall not be obligated to issue certificates evidencing
the shares of Common Stock issuable upon conversion of any Debentures, until
Debentures are either delivered for conversion to the Company or any transfer
agent for the Debentures or Common Stock, or the Holder notifies the Company
that such Debentures have been lost, stolen or destroyed and provides a bond (or
other adequate security reasonably acceptable to the Company) satisfactory to
the Company to indemnify the Company from any loss incurred by it in connection
therewith. The Company shall, upon request of the Holder, use its best efforts
to deliver any certificate or certificates required to be delivered by the
Company under this Section 3(c) electronically through the Depository Trust
Corporation or another established
4
<PAGE> 29
clearing corporation performing similar functions. In the case of a conversion
pursuant to a Holder Conversion Notice, if such certificate or certificates are
not delivered by the date required under this Section 3(c), the Holder shall be
entitled by written notice to the Company at any time on or before its receipt
of such certificate or certificates thereafter, to rescind such conversion, in
which event the Company shall immediately return the Debentures tendered for
conversion.
(d)(i) The Conversion Price for each Debenture in effect on any
Conversion Date shall be the LESSER of X OR Y: where X is the GREATER of (a)[$
F] or (b)[ C ] / [ ( { C / F }+3.00 ) / 2 ] (where C = the average Per Share
Market Value for the five (5) Trading Days immediately preceding the Conversion
Date and F = the Per Share Market Value on the Trading Day immediately preceding
the Original issue Date); and Y = 70% of the average Per Share Market Value for
the five (5) Trading Days immediately preceding the Conversion Date.
(ii) If the Company, at any time while any Debentures are outstanding,
(a) shall pay a stock dividend or otherwise make a distribution or distributions
on shares of its Junior Securities payable in shares of its capital stock
(whether payable in shares of its Common Stock or of capital stock of any
class), (b) subdivide outstanding shares of Common Stock into a larger number of
shares, (c) combine outstanding shares of Common Stock into a smaller number of
shares, or (d) issue by reclassification of shares of Common Stock any shares of
capital stock of the Company, the Conversion Price designated in Section
3(d)(i) shall be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock of the Company outstanding before such event
and of which the denominator shall be the number of shares of Common Stock
outstanding after such event. Any adjustment made pursuant to this Section
3(d)(ii) shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision, combination or re-classification.
(iii) If the Company, at any time while any Debentures are outstanding,
shall issue rights or warrants to all holders of Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price per share less than
the Per Share Market Value of Common Stock at the record date mentioned below,
the Conversion Price designated in Section 3(d)(i) shall be multiplied by a
fraction, of which the denominator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding on the date of issuance of such
rights or warrants plus the number of additional shares of Common Stock offered
for subscription or purchase, and of which the numerator shall be the number of
shares of Common Stock (excluding treasury shares, if any) outstanding on the
date of issuance of such rights or warrants plus the number of shares which the
aggregate offering price of the total number of shares so offered would purchase
at such Per Share Market Value. Such adjustment shall be made whenever such
rights or warrants are issued, and shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
rights or warrants. However, upon the expiration of any right or warrant to
purchase Common Stock the issuance of which resulted in an adjustment in the
Initial Conversion Price designated in Section 3(d)(i) pursuant to this Section
3(d)(iii), if any such right or warrant shall expire and shall not have
5
<PAGE> 30
been exercised, the Conversion Price designated in Section 3(d)(i) shall
immediately upon such expiration be recomputed and effective immediately upon
such expiration be increased to the price which it would have been (but
reflecting any other adjustments in the Initial Conversion Price made pursuant
to the provisions of this Section 5 after the issuance of such rights or
warrants) had the adjustment of the Initial Conversion Price made upon the
issuance of such rights or warrants been made on the basis of offering for
subscription or purchase only that number of shares of Common Stock actually
purchased upon the exercise of such rights or warrants actually exercised.
(iv) If the Company, at any time while Debentures are outstanding, shall
distribute to all holders of Common Stock (and not to holders of Debentures)
evidences of its indebtedness or assets or rights or warrants to subscribe for
or purchase any security (excluding those referred to in Section 3(d)(iii)
above) then in each such case the Conversion Price at which each Debenture shall
thereafter be convertible shall be determined by multiplying the Conversion
Price in effect immediately prior to the record date fixed for determination of
stockholders entitled to receive such distribution by a fraction of which the
denominator shall be the Per Share Market Value of Common Stock determined as of
the record date mentioned above, and of which the numerator shall be such Per
Share Market Value of the Common Stock on such record date less the then fair
market value at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of Common Stock
as determined by the Board of Directors in good faith; provided, however that in
the event of a distribution exceeding ten percent (10%) of the net assets of the
Company, such fair market value shall be determined by a nationally recognized
or major regional investment banking firm or firm of independent certified
public accountants of recognized standing (which may be the firm that regularly
examines the financial statements of the Company) (an "Appraiser") selected in
good faith by the holders of a majority of the principal amount of the
Debentures then outstanding; and provided, further that the Company, after
receipt of the determination by such Appraiser shall have the right to select an
additional Appraiser, in which case the fair market value shall be equal to the
average of the determinations by each such Appraiser. In either case the
adjustments shall be described in a statement provided to the Holder and all
other holders of Debentures of the portion of assets or evidences of
indebtedness so distributed or such subscription rights applicable to one share
of Common Stock. Such adjustment shall be made whenever any such distribution is
made and shall become effective immediately after the record date mentioned
above.
(v) All calculations under this Section 3 shall be made to the nearest
cent or the nearest 1/l00th of a share, as the case may be.
(vi) Whenever the Conversion Price is adjusted pursuant to Section
3(d)(ii),(iii) or (iv), the Company shall promptly mail to the Holder and to
each other holder of Debentures, a notice setting forth the Conversion Price
after such adjustment and setting forth a brief statement of the facts requiring
such adjustment.
6
<PAGE> 31
(vii) In case of any reclassification of the Common Stock, any
consolidation or merger of the Company with or into another person, the sale or
transfer of all or substantially all of the assets of the Company or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, then each holder of Debentures then
outstanding shall have the right thereafter to convert such Debentures only into
the shares of stock and other securities and property receivable upon or deemed
to be held by holders of Common Stock following such reclassification,
consolidation, merger, sale, transfer or share exchange, and the Holder shall be
entitled upon such event to receive such amount of securities or property as the
shares of the Common Stock into which such Debentures could have been converted
immediately prior to such reclassification, consolidation, merger, sale,
transfer or share exchange would have been entitled. The terms of any such
consolidation, merger, sale, transfer or share exchange shall include such terms
so as to continue to give to the Holder the right to receive the securities or
property set forth in this Section 5(d)(vii) upon any conversion following such
consolidation, merger, sale, transfer or share exchange. This provision shall
similarly apply to successive reclassifications, consolidations, mergers, sales,
transfers or share exchanges.
(viii) If:
(A) the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
(B) the Company shall declare a special nonrecurring
cash dividend on or a redemption of its Common Stock; or
(C) the Company shall authorize the granting to all
holders of the Common Stock rights or warrants to subscribe for or purchase any
shares of capital stock of any class or of any rights; or
(D) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock of
the Company (other than a subdivision or combination of the outstanding shares
of Common Stock), any consolidation or merger to which the Company is a party,
any sale or transfer of all or substantially all of the assets of the Company,
or any compulsory share exchange whereby the Common Stock is converted into
other securities, cash or property; or
(E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding-up of the affairs of the
Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of Debentures, and shall cause to be mailed to the
Holder and each other holder of Debentures at their last addresses as it shall
appear upon the Debenture Register, at least 30 calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
7
<PAGE> 32
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined, or (y) the date on which such reclassification, consolidation,
merger, sale, transfer, share exchange, dissolution, liquidation or winding-up
is expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding-up; provided, however, that the failure to
mail such notice or any defect therein or in the mailing thereof shall not
affect the validity of the corporate action required to be specified in such
notice.
If at any time conditions shall arise by reason of action taken by the
Company which in the opinion of the Board of Directors are not adequately
covered by the other provisions hereof and which might materially and adversely
affect the rights of the Holder and all other holders of Debentures (different
than or distinguished from the effect generally on rights of holders of any
class of the Company's capital stock) or if at any time any such conditions are
expected to arise by reason of any action contemplated by the Company, the
Company shall, at least 30 calendar days prior to the effective date of such
action, mail a written notice to each holder of Debentures briefly describing
the action contemplated and the material adverse effects of such action on the
rights of such holders and an Appraiser selected by the holders of majority in
principal amount of the outstanding Debentures shall give its opinion as to the
adjustment, if any (not inconsistent with the standards established in this
Section 5), of the Conversion Price (including, if necessary, any adjustment as
to the securities into which Debentures may thereafter be convertible) and any
distribution which is or would be required to preserve without diluting the
rights of the holders of Debentures; provided, however, that the Company, after
receipt of the determination by such Appraiser, shall have the right to select
an additional Appraiser, in which case the adjustment shall be equal to the
average of the adjustments recommended by each such Appraiser. The Board of
Directors shall make the adjustment recommended forthwith upon the receipt of
such opinion or opinions or the taking of any such action contemplated, as the
case may be; provided, however, that no such adjustment of the Conversion Price
shall be made which in the opinion of the Appraiser(s) giving the aforesaid
opinion or opinions would result in an increase of the Conversion Price to more
than the Conversion Price then in effect.
(e) The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued Common Stock solely for the purpose
of issuance upon conversion of Debentures as herein provided, free from
preemptive rights or any other actual contingent purchase rights of persons
other than the holders of Debentures, such number of shares of Common Stock as
shall be issuable (taking into account the adjustments and restrictions of
Section 3(b) and Section 3(d) hereof) upon the conversion of the aggregate
principal amount of all outstanding Debentures. The Company covenants that all
shares of Common Stock that shall be so issuable shall, upon issue, be duly and
validly authorized, issued and fully paid and nonassessable.
8
<PAGE> 33
(f) Upon a conversion hereunder the Company shall not be required to
issue stock certificates representing fractions of shares of Common Stock, but
may if otherwise permitted, make a cash payment in respect of any final fraction
of a share based on the Per Share Market Value at such time. If the Company
elects not to, or is unable to, make such a cash payment, the Holder shall be
entitled to receive, in lieu of the final fraction of a share, one whole share
of Common Stock.
(g) The issuance of certificates for shares of Common Stock on conversion
of Debentures shall be made without charge to the Holder for any documentary
stamp or similar taxes that may be payable in respect of the issue or delivery
of such certificate, provided that the Company shall not be required to pay any
tax that may be payable in respect of any transfer involved in the issuance and
delivery of any such certificate upon conversion in a name other than that of
the Holder and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
(h) Debentures converted into Common Stock shall be canceled.
(i) Each Holder Conversion Notice shall be given by facsimile and by
mail, postage prepaid, addressed to the Chief Financial Officer of the Company
at the facsimile telephone number and address of the principal place of business
of the Company. Each Company Conversion Notice shall be given by facsimile and
by mail, postage prepaid, addressed to each holder of Debentures at the
facsimile telephone number and address of such holder appearing on the books of
the Company or provided to the Company by such holder for the purpose of such
Company Conversion Notice, or if no such facsimile telephone number or address
appears or is so provided, at the principal place of business of the holder. Any
such notice shall be deemed given and effective upon the earliest to occur of
(i) receipt of such facsimile at the facsimile telephone number specified in
this Section 5(j), (ii) five days after deposit in the United States mails or
(iii) upon actual receipt by the party to whom such notice is required to be
given.
4. Definitions. For the purposes hereof, the following terms shall
have the following meanings:
"Business Day" means any day of the year on which commercial banks are
not required or authorized to be closed in New York City.
"Common Stock" means shares now or hereafter authorized of the class of
Common Stock, $0.001 par value, of the Company and stock of any other class into
which such shares may hereafter have been reclassified or changed.
9
<PAGE> 34
"Conversion Ratio" means, at any time, a fraction, of which the numerator
is the principal amount represented by any Debenture plus accrued but unpaid
interest, and of which the denominator is the Conversion Price at such time.
"Junior Securities" means the Common Stock, all other equity securities
of the Company and all other debt that is subordinated to the Debtors by its
terms.
"Original Issue Date" shall mean the date of the first issuance of this
Debenture regardless of the number transfers hereof.
"Per Share Market Value" means on any particular date (a) the closing bid
price per share of the Common Stock on such date on the Over-The-Counter
Bulletin Board ("OTCBB") or other stock exchange on which the Common Stock has
been listed or if there is no such price on such date, then the last bid price
on such exchange on the date nearest preceding such date, or (b) if the Common
Stock is not listed on OTCBB or any stock exchange, the closing bid price for a
share of Common Stock in the over-the-counter market, as reported by the NASD at
the close of business on such date, or (c) if the Common Stock is not quoted by
the NASD, the closing bid price for a share of Common Stock in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices), or (d) if the Common Stock is no longer publicly traded the
fair market value of a share of Common Stock as determined by an Appraiser (as
defined in Section 5(d)(iv) above) selected in good faith by the holders of a
majority of principal amount of outstanding Debentures; provided, however, that
the Company, after receipt of the determination by such Appraiser, shall have
the right to select an additional Appraiser, in which case, the fair market
value shall be equal to the average of the determinations by each such
Appraiser.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Trading Day" means (a) a day on which the Common Stock is traded on the
OTCBB or principal stock exchange on which the Common Stock has been listed, or
(b) if the Common Stock is not listed on the OTCBB or any stock exchange, a day
on which the Common Stock is traded in the over-the-counter market, as reported
by the NASD, or (c) if the Common Stock is not quoted on the NASD, a day on
which the Common Stock is quoted in the over-the-counter market as reported by
the National Quotation Bureau Incorporated (or any similar organization or
agency succeeding its functions of reporting prices).
5. Except as expressly provided herein, no provision of this Debenture
shall alter or impair the obligation of the Company, which is absolute and
unconditional, to pay the principal of, and interest on, this Debenture at the
time, place, and rate, and in the coin or currency, herein prescribed. This
Debenture is a direct obligation of the Company. This Debenture ranks pari passu
with all other Debentures now or hereafter issued under the terms set forth
herein.
10
<PAGE> 35
6. The Company may not prepay any portion of the outstanding principal
amount on the Debentures.
7. This Debenture shall not entitle the Holder to any of the rights of a
stockholder of the Company, including without limitation, the right to vote, to
receive dividends and other distributions, or to receive any notice of, or to
attend, meetings of stockholders or any other proceedings of the Company, unless
and to the extent converted into shares of Common Stock in accordance with the
terms hereof.
8. If this Debenture shall be mutilated, lost, stolen or destroyed, the
Company shall execute and deliver, in exchange and substitution for and upon
cancellation of a mutilated Debenture, or in lieu of or in substitution for a
lost, stolen or destroyed debenture, a new Debenture for the principal amount of
this Debenture so mutilated, lost, stolen or destroyed but only upon receipt of
evidence of such loss, theft or destruction of such Debenture, and of the
ownership hereof, and indemnity, if requested, all reasonably satisfactory to
the Company.
9. This Debenture shall be governed by and construed in accordance with
the laws of the State of New York, without giving effect to conflicts of laws
thereof.
10. All notices or other communications hereunder shall be given, and
shall be deemed duly given and received, if given, in the manner set forth in
Section 3(i).
11. Any waiver by the Company or the Holder a breach of any provision of
this Debenture shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Debenture. The failure of the Company or the Holder to insist upon strict
adherence to any term of this Debenture on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Debenture. Any waiver
must be in writing.
12. If any provision of this Debenture is invalid, illegal or
unenforceable, the balance of this Debenture shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances.
13. Whenever any payment or other obligation hereunder shall be due on a
day other than a Business Day, such payment shall be made on the next succeeding
Business Day
11
<PAGE> 36
(or, if such next succeeding Business Day falls in the next calendar month, the
preceding Business Day in the appropriate calendar month).
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer "thereunto duly authorized as of the date first above
indicated.
Universal Medical Systems, Inc.
Attest:____________________ ________________________________
Name: Dennis D. Cole
Title: Vice President, General Counsel,
Secretary
12
<PAGE> 37
EXHIBIT A
NOTICE OF CONVERSION AT
THE ELECTION OF HOLDER
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert the above Debenture No.____
into shares of Common Stock, par value U.S.$0.001 per share (the "Common
Stock"), of Universal Medical Systems, Inc., (the "Company") according to the
conditions hereof, as of the date written below. If shares are to be issued in
the name of a person other than undersigned, the undersigned will pay all
transfer taxes payable with respect thereto and is delivering herewith such
certificates and opinions as reasonably requested by the Company in accordance
therewith. No fee will be charged to the Holder for any conversion, except for
such transfer taxes, if any.
Conversion calculations: ___________________________________________
Date to Effect Conversion
___________________________________________
Principal Amount of Debentures to be
Converted
___________________________________________
Applicable Conversion Price
___________________________________________
Signature
___________________________________________
Name:
___________________________________________
Address:
<PAGE> 38
EXHIBIT B
NOTICE OF CONVERSION
AT THE ELECTION OF THE COMPANY
The undersigned in the name and on behalf of Universal Medical Systems, Inc.,
(the "Company") hereby notifies the addressee hereof that the Company hereby
elects to exercise its right to convert the above Debenture No.____ into shares
of Common Stock, $0.001 par value per share (the "Common Stock"), of the Company
according to the conditions hereof, as of the date written below. No fee will be
charged to the Holder for any conversion hereunder, except for such transfer
taxes, if any, which may be incurred by the Company if shares are to be issued
in the name of a person other than the person to whom this notice is addressed.
Conversion calculations: ___________________________________________
Date to Effect Conversion
___________________________________________
Principal Amount of Debentures to be
Converted
___________________________________________
Applicable Conversion Price
___________________________________________
Signature
___________________________________________
Name:
___________________________________________
Address:
<PAGE> 39
EXHIBIT B
ESCROW AGREEMENT
ESCROW AGREEMENT (this "Agreement"), dated as of_____, 1996, by and among
Universal Medical Systems, Inc., a Nevada corporation (the "Company"), Bryan
Cave LLP (the "Escrow Agent") and the party who has executed this Agreement as
the Purchaser (the "Purchaser").
RECITALS
The Purchaser has entered into a Convertible Debenture Purchase
Agreement, dated as of the date hereof (the "Purchase Agreement"), pursuant to
which the Purchaser has agreed to purchase certain debentures of the Company's
4% Convertible Debentures due January 1, 2001 (the "Debentures").
A. The Escrow Agent is willing to act as escrow agent pursuant to the
terms of this Agreement with respect to the Purchase Price (as defined in the
Purchase Agreement) to be paid for the Debentures and the delivery of the
Debentures registered in the name of the Purchaser as set forth in the Purchase
Agreement (the "Debentures Certificates" and, together with the Ancillary
Closing Documents (as defined below), the Purchase Price and the Warrant, the "
Consideration").
B. Upon the closing of the transaction contemplated by the Purchase
Agreement (the "Closing") and the occurrence of an event described in Section 2
below, the Escrow Agent shall cause the distribution of the Consideration in
accordance with the terms of this Agreement.
C. All capitalized terms used but not defined herein shall have the
meanings ascribed thereto in the Purchase Agreement.
NOW, THEREFORE, IT IS AGREED:
1. DEPOSIT OF CONSIDERATION. (a) The Purchaser shall deposit with the
Escrow Agent a copy of the Purchase Agreement and this Escrow Agreement or a
counterpart thereof, each executed by the Purchaser, and the Purchase Price. The
Company shall deliver to the Escrow Agent (i) the Purchase Agreement or a
counterpart thereof signed by the Company, (ii) this Escrow Agreement or a
counterpart thereof signed by the Company, (iii) the Debentures, registered in
the name of the Purchaser, and (iv) wiring instructions for transfer of the
Purchase Price by the Escrow Agent into an account specified by the Company for
such purpose. In addition, the Company shall deposit or cause to be deposited
with the Escrow Agent an opinion of the Company's counsel addressed to the
Purchaser in the form of Exhibit C attached to the
<PAGE> 40
Purchase Agreement and the Company Certificates (such opinion and the Company
Certificates being hereinafter referred to as the "Ancillary Closing
Documents"), as well as the Warrant.
(i) The Purchase Price shall be delivered by the
Purchaser to the Escrow Agent by wire transfer to the following account:
Bankers Trust Company
280 Park Avenue
New York, NY 10017
Account # 429-14-898
Account Name: Bryan Cave LLP
ABA No.: 021-001-033
Reference:_________________
Purchaser
(ii) The Debentures shall be delivered by the
Company to the Escrow Agent at its address for notice indicated in Section 5(a).
(b) Until termination of this Agreement as set forth in Section 2,
all additional Consideration paid by or which becomes payable between the
Company and the Purchaser shall be deposited with the Escrow Agent.
(c) The Escrow Agent agrees to hold the Consideration received by
it in accordance with the terms and conditions set forth herein until it has
received all of the consideration;
(d) The Purchaser and the Company understand that all
Consideration delivered to the Escrow Agent pursuant to Section 1(a) shall be
held in escrow in a non-interest bearing IOLA account until the Closing. The
Purchase Price will be returned promptly to the Purchaser if all of the
Consideration is not received on or before December 31, 1996. After all of the
Consideration has been received by the Escrow Agent, the parties hereto hereby
authorize and instruct the Escrow Agent to promptly effect the Closing.
(e) At the Closing, Escrow Agent is authorized to pay to GEM in
accordance with its instructions, an amount equal to the Placement Fee (the "GEM
Payment").
2. TERMS OF ESCROW.
(a) The Escrow Agent shall hold the Consideration in escrow until
the earlier to occur of (i) the receipt by the Escrow Agent of all of the
Consideration or (ii) the receipt by the Escrow Agent of a notice, executed by
each of the Company and the Purchaser, stating that the Purchase Agreement has
been terminated or otherwise directing the disposition of the Consideration.
2
<PAGE> 41
(b) If the Escrow Agent receives the items referenced in clause
(i) of Section 2(a) prior to its receipt of the notice referenced in clause (ii)
of Section 2(a), then, the Escrow Agent shall deliver as soon as practicable,
but in no event later than three (3) business days, the Debentures and the
Ancillary Closing Documents executed by the Company to the Purchaser and shall
deliver immediately to the Company the Purchase Price (less the GEM Payment) and
the GEM Payment and the Warrant to GEM in accordance with its instructions.
(c) If the Escrow Agent receives the notice referenced in clause
(ii) of Section 2(a) prior to its receipt of the items referenced in clause (i)
of Section 2(a), then the Escrow Agent shall promptly deliver the Purchase
Price, Debentures, Ancillary Closing Documents and Warrant as specified in such
notice. The parties agree that if such notice is silent as to the delivery of
such items, the Escrow Agent shall promptly upon receipt of such notice return
(i) the Purchase Price to the Purchaser, (ii) the Debentures and the Warrant to
the Company and (iii) the Ancillary Closing Documents to the party that
delivered the same.
(d) If the Escrow Agent, prior to delivering or causing to be
delivered the Consideration in accordance herewith, receives notice of
objection, dispute, or other assertion in accordance with any of the provisions
of this Agreement, the Escrow Agent shall continue to hold the Consideration
until such time as the Escrow Agent shall receive (i) written instructions
jointly executed by the Purchaser and the Company, directing distribution of
such Consideration, or (ii) a certified copy of a judgment, order or decree of a
court of competent jurisdiction, final beyond the right of appeal, directing the
Escrow Agent to distribute said Consideration to any party hereto or as such
judgment, order or decree shall otherwise specify (including any such order
directing the Escrow Agent to deposit the Consideration into the court rendering
such order, pending determination of any dispute between any of the parties). In
addition, the Escrow Agent shall have the right to deposit any of the
Consideration with a court of competent jurisdiction without liability to any
party if said dispute is not resolved within 30 days of receipt of any such
notice of objection, dispute or otherwise.
3. DUTIES AND OBLIGATIONS OF THE ESCROW AGENT.
(a) The parties hereto agree that the duties and obligations of
the Escrow Agent are only such as are herein specifically provided and no other.
The Escrow Agent's duties are as a depositary only, and the Escrow Agent shall
incur no liability whatsoever, except as a direct result of its willful
misconduct or gross negligence.
(b) The Escrow Agent may consult with counsel of its choice, and
shall not be liable for any action taken, suffered or omitted by it in
accordance with the advice of such counsel.
(c) The Escrow Agent shall not be bound in any way by the terms of
any other agreement to which the Purchaser and the Company are parties, whether
or not it has knowledge thereof, and the Escrow Agent shall not in any way be
required to determine whether
3
<PAGE> 42
or not any other agreement has been complied with by the Subscriber and the
Company, or any other party thereto. The Escrow Agent shall not be bound by any
modification, amendment, termination, cancellation, rescission or supersession
of this Agreement unless the same shall be in writing and signed jointly by each
of the Subscriber and the Company, and agreed to in writing by the Escrow Agent.
(d) If the Escrow Agent shall be uncertain as to its duties or
rights hereunder or shall receive instructions, claims or demands which, in its
opinion, are in conflict with any of the provisions of this Agreement, it shall
be entitled to refrain from taking any action, other than to keep safely all
property held in escrow, until it shall jointly be directed otherwise in writing
by the Purchaser and the Company or by a final judgment of a court of competent
jurisdiction.
(e) The Escrow Agent shall be fully protected in relying upon any
written notice, demand, certificate or document which it, in good faith,
believes to be genuine. The Escrow Agent shall not be responsible for the
sufficiency or accuracy of the form, execution, validity or genuineness of
documents or securities now or hereafter deposited hereunder, or of any
endorsement thereon, or for any lack of endorsement thereon, or for any
description therein; nor shall the Escrow Agent be responsible or liable in any
respect on account of the identity, authority or rights of the persons executing
or delivering or purporting to execute or deliver any such document, security or
endorsement.
(f) The Escrow Agent shall not be required to institute legal
proceedings of any kind and shall not be required to defend any legal
proceedings which may be instituted against it or in respect of the
Consideration.
(g) If the Escrow Agent at any time, in its sole discretion, deems
it necessary or advisable to relinquish custody of the Consideration, it may do
so by delivering the same to any other escrow agent mutually agreeable to the
Purchaser and the Company and, if no such escrow agent shall be selected within
three days of the Escrow Agent's notification to the Purchaser and the Company
of its desire to so relinquish custody of the Consideration, then the Escrow
Agent may do so by delivering the Consideration (a) to any bank or trust company
in the County, City and State of new York, which is willing to act as escrow
agent thereunder in place and instead of the Escrow Agent, or (b) to the clerk
or other proper officer of a court of competent jurisdiction as may be permitted
by law. The fee of any such bank or trust company or court officer shall be
borne by the Company. Upon such delivery, the Escrow Agent shall be discharged
from any and all responsibility or liability with respect to the Consideration
and the Company and the Purchaser shall promptly pay to the Escrow Agent all
monies which may be owed it for its services hereunder, including, but not
limited to, reimbursement of its out-of-pocket expenses pursuant to paragraph
(i) below.
(h) This Agreement shall not create any fiduciary duty on the
Escrow Agent's part to the Purchaser or the Company, nor disqualify the Escrow
Agent from
4
<PAGE> 43
representing either party hereto in any dispute with the other, including any
dispute with respect to the Consideration. The parties understand that the
Escrow Agent has acted and will continue to act as counsel to GEM.
(i) The reasonable out-of-pocket expenses paid or incurred by the
Escrow Agent in the administration of its duties hereunder, including, but not
limited to, postage, all outside counsel to the Escrow Agent and advisors' and
agents' fees and all taxes or other governmental charges, if any, shall be paid
by the Company.
4. INDEMNIFICATION.
(a) The Purchaser and the Company, jointly and severally, hereby
indemnify and hold the Escrow Agent harmless from and against any and all
losses, damages, taxes, liabilities and expenses that may be incurred by the
Escrow Agent, arising out of or in connection with its acceptance of appointment
as the Escrow Agent hereunder and/or the performance of its duties pursuant to
this Agreement, including, but not limited to, all legal costs and expenses of
the Escrow Agent incurred defending itself against any claim or liability in
connection with its performance hereunder, provided that the Escrow Agent shall
not be entitled to any indemnity for any losses, damages, taxes, liabilities or
expenses that directly result from its willful misconduct or gross negligence.
5. MISCELLANEOUS.
(a) All notices, requests, demands and other communications
hereunder shall be in writing, with copies to all the other parties hereto, and
shall be deemed to have been duly given when (i) if delivered by hand, upon
receipt, (ii) if sent by telecopier, upon receipt of proof of sending thereof,
(iii) if sent by Express Mail, Federal Express or other express delivery service
(receipt requested), the next business day or (iv) if mailed by first-class
registered or certified mail, return receipt requested, postage prepaid, upon
receipt, in each case if delivered to the following addresses
(i) If to the Company:
Universal Medical Systems, Inc.
13825 Icot Blvd.,Suite 613
Clearwater, FL 34620
(ii) If to the Purchaser:
At the address set forth in the Purchase Agreement
(iii) If to the Escrow Agent:
5
<PAGE> 44
Bryan Cave LLP
245 Park Avenue
New York, NY 10167
Attn: Steven A. Saide, Esq.
or at such other address as any of the parties to this Agreement may hereafter
designate in the manner set forth above to the others.
(b) This Agreement shall be construed and enforced in accordance
with the law of the State of New York applicable to contracts entered into and
performed entirely within California.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed the day and year first above written.
PURCHASER:
___________________________
By:________________________
Name:
Title:
Universal Medical Systems, Inc.
By:________________________
Name: Dennis D. Cole
Title: Vice President, General Counsel,
Secretary
Bryan Cave LLP
___________________________
Escrow Agent
6
<PAGE> 45
EXHIBIT C
December ____, 1996
[Name and Address of Purchaser]
RE: UNIVERSAL MEDICAL SYSTEMS, INC. CONVERTIBLE
DEBENTURES
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section 5.1 of the
Convertible Debenture Purchase Agreement, dated as of December _____, 1996 (the
"Purchase Agreement"), by and between Universal Medical Systems, Inc., a Nevada
corporation (the "Company"), pursuant to which the Company is issuing
Convertible Debentures (the "Debentures") in the aggregate principal amount of
up to $500,000 which are convertible into shares of Common Stock of the Company
at the conversion ratio set forth in the Debentures. Capitalized terms used and
not otherwise defined herein shall have the meanings given them in the Purchase
Agreement.
I am the Vice President, Secretary and General Counsel of the Company. I
have acted as counsel to the Company in connection with the issuance and sale of
the Debentures. I am familiar with the business and corporate proceedings of the
Company.
In connection with this opinion, I have examined:
1. The Purchase Agreement;
2. The Debentures;
3. The Certificate of Incorporation and By-laws of the Company, as
amended to the date hereof;
4. Records of proceedings and actions of the Board of Directors of
the Company relating to the transactions contemplated by the
Purchase Agreement.
I have also investigated such questions of law, including, without limitation,
Rule 504 of Regulation D ("Rule 504") promulgated under the Securities Act of
1933, as amended (the "Securities Act"), and examined, such additional corporate
records of the Company and such other documents, agreements and
<PAGE> 46
[Name of Purchaser]
December ____, 1996
Page 2
instruments as I have deemed necessary or appropriate for the purposes of
rendering this opinion.
Based upon and subject to the foregoing, it is my opinion that:
1. The Company is a corporation, duly incorporated, validly existing
and in good standing under the laws of Nevada, with the requisite corporate
power and authority to own and use its properties and assets and to carry on its
business as currently conducted.
2. The Company has the requisite corporate power and authority to
enter into and to consummate the transactions contemplated by the Purchase
Agreement and otherwise to carry out its obligations thereunder.
3. The execution and delivery of the Purchase Agreement by the
Company and the consummation by it of the transactions contemplated thereby have
been duly authorized by all necessary action on the part of the Company. The
Purchase Agreement has been duly executed and delivered by the Company and
constitutes the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application.
4. The authorized, issued and outstanding capital stock of the
Company and each subsidiary thereof are as set forth in the Purchase Agreement.
No shares of the common stock of the Company, par value $.001 per share (the
"Common Stock"), are entitled to preemptive or similar rights. Except as
disclosed in the Purchase Agreement, there are no outstanding options, warrants,
script rights to subscribe to, calls or commitments of any character whatsoever
relating to, or, except as a result of the purchase and sale of the Debentures
under the Purchase Agreement, securities, rights or obligations convertible into
or exchangeable for, or giving any person any right to subscribe for or acquire
any shares of Common Stock, or contracts, commitments, understandings, or
arrangements by which the Company or any subsidiary thereof is or may become
bound to issue additional shares of Common Stock, or securities or rights
convertible or exchangeable into shares of Common Stock.
<PAGE> 47
[Name of Purchaser]
December ____, 1996
Page 3
5. The Debentures have been duly authorized, and when paid for in
accordance with the terms of the Purchase Agreement, shall be validly issued and
shall constitute valid and binding obligations of the Company enforceable in
accordance with their terms except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application.
6. When issued in accordance with the terms of the Purchase
Agreement, the shares of Common Stock into which the Debentures are convertible
in accordance with the terms of the Purchase Agreement will be duly authorized,
validly issued, fully paid and nonassessable.
7. The Company is an "eligible issuer" as such term is defined
pursuant to Rule 504(a) in that the Company is not (1) a reporting company, (2)
an investment company (whether or not registered under the Investment Company
Act of 1940, or (3) a development stage company with no specific business plan
or purpose.
8. The total sale of the Debentures will not exceed $500,000 and the
Company has not issued any securities within the last twelve (12) calendar
months pursuant to Regulation D.
9. When the Debentures are converted into shares of common stock by
the holders of the Debentures, pursuant to Rule 504 such shares will be free
trading in nature and may be freely or otherwise transferred without any
restrictions by nonaffiliates of the Company.
10. The execution, delivery and performance of the Purchase Agreement
by the Company and the consummation by the Company of the transactions
contemplated thereby do not and will not (i) conflict with or violate any
provision of its certificate of incorporation or bylaws or (ii) conflict with,
require the consent of any party to, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Company is a party, or to
our knowledge result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company is subject
<PAGE> 48
[Name of Purchaser]
December ____, 1996
Page 4
(including Federal and state securities laws and regulations), or by which any
property or asset of the Company is bound or affected. To our knowledge, the
business of the Company is not being conducted in violation of any law,
ordinance or regulation of any governmental authority.
I am a member of the Bar of the State of _____ and am not licensed or
admitted to practice law in any other jurisdiction. I express no opinion with
respect to the laws of any jurisdiction other than the Federal laws of the
United States of America, including the Federal securities laws thereof. In so
far as any of the opinions expressed above are governed by Nevada law, I have
relied upon the most current compilation of Nevada law in general and upon
Nevada Revised Statutes Chapters 78 and 90 specifically.
The opinions expressed herein are solely for your benefit and may not be
relied upon by any other person without our prior written consent.
Very truly yours,
Dennis D. Cole
<PAGE> 49
EXHIBIT D
NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert the above Debenture No.
____________, into shares of Common Stock, par value U.S.$0.001 per share (the
"Common Stock"), of Universal Medical Systems, Inc., (the "Company") according
to the conditions hereof, as of the date written below. If shares are to be
issued in the name of a person other than undersigned, the undersigned will pay
all transfer taxes payable with respect thereto and is delivering herewith such
certificates and opinions as reasonably requested by the Company in accordance
therewith. No fee will be charged to the Holder for any conversion, except for
such transfer taxes, if any.
Conversion calculations: ________________________________________
Date to Effect Conversion
________________________________________
Principal Amount of Debentures to be
Converted
________________________________________
Applicable Conversion Price
________________________________________
Signature
________________________________________
Name:
________________________________________
Address:
<PAGE> 1
EXHIBIT 4(u)
No. 1
US$ 100,000
4% CONVERTIBLE DEBENTURE DUE JANUARY 1, 2001
THIS DEBENTURE is one of a duly authorized issue of Debentures of
Universal Medical Systems, Inc., a Nevada corporation having a principal place
of business at 13825 Icot Blvd., Suite 613, Clearwater, FL 34620 (the
"Company"), designated as its 4% Convertible Debentures, Due January 1, 2001
(the "Debentures"), in an aggregate principal amount of up to US$500,000.
FOR VALUE RECEIVED, the Company promises to pay to ,
or registered assigns (the "Holder"), the principal sum of One Hundred Thousand
Dollars (US$100,000), on January 1, 2001 (the "Maturity Date") and to pay
interest to the Holder on the principal sum, at the rate of 4% per annum,
payable quarterly, in arrears on April 1, July 1, October 1 and January 1 of
each year, (each, an "Interest Payment Date"), commencing April 1, 1997.
Interest shall accrue daily commencing on the Original Issue Date (as defined in
Section 6) until payment in full of the principal sum, together with all accrued
and unpaid interest, has been made or duly provided for. Interest shall be
calculated on the basis of a 360-day year. Interest due and payable hereunder
will be paid on each Interest Payment Date to the person in whose name this
Debenture is registered on the records of the Company regarding registration and
transfers of the Debentures (the "Debenture Register") on the first business day
prior to each the Interest Payment Date; provided, however, that the Company's
obligation to a transferee of this Debenture arises only if such transfer, sale
or other disposition is made in accordance with the terms and conditions hereof
and of the two Convertible Debenture Purchase Agreements, each dated as of
December 31, 1996, as amended from time to time (the "Purchase Agreement"),
executed by the original Holder. Any overdue principal and interest as provided
herein shall bear interest at the rate of 14% per annum. The principal of, and
interest on, this Debenture are payable in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts, at the address of the Holder last appearing on the
Debenture Register. A transfer of the right to receive principal and interest
under this Debenture shall be transferable only through an appropriate entry in
the Debenture Register as provided herein.
1. This Debenture is subject to the following additional provisions:
(a) The Debentures are issuable in denominations of One
Thousand Dollars (US$1000.00) and integral multiples of one thousand dollars
(US$1000.00) in excess thereof. The Debentures are exchangeable for an equal
aggregate principal amount of Debentures of different authorized denominations,
as requested by the Holder surrendering the
<PAGE> 2
same but shall not be issuable in denominations of less than integral multiples
of One Thousand Dollars (US$1000.00). No services charge will be made for such
registration of transfer or exchange.
(b) If any interest or principal due hereunder is subject to any
withholding tax under the income tax or other applicable laws of the United
States, the Company will pay to the Holder, in addition to the payments
otherwise due hereunder, such additional amount as is necessary to provide that
the net amount actually received by the Holder (free and clear of any such
withholding tax, whether assessed against the Company or the Holder) will equal
the full amount the Holder would have received had such withholding tax not been
assessed.
2. Events of Default. "Event of Default", wherever used herein, means any
one of the following events (whatever the reason and whether it shall be
voluntary or involuntary or effected by operation of law or pursuant to any
judgment, decree or order of any court, or any order, rule or regulation of any
administrative or governmental body):
(a) any default in the payment of the principal of or interest on
this Debenture as and when the same shall become due and payable either at the
Maturity Date, by acceleration or otherwise;
(b) the Company shall fail to observe or perform any other
covenant, agreement or warranty contained in, or otherwise commit any breach of,
this Debenture, and such failure or breach shall not have been remedied within
30 days after the date on which notice of such failure or breach shall have been
given;
(c) the occurrence of any event or breach or default by the
Company under the Purchase Agreement;
(d) the Company or any of its subsidiaries shall commence a
voluntary case under the United States Bankruptcy Code as now or hereafter in
effect or any successor thereto (the "Bankruptcy Code"); or an involuntary case
is commenced against the Company under the Bankruptcy Code and the petition is
not controverted within 30 days, or is not dismissed within 60 days, after
commencement of the case; or a "custodian" (as defined in the Bankruptcy Code)
is appointed for, or takes charge of, all or any substantial part of the
property of the Company or the Company commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction whether now or
hereafter in effect relating to the Company or there is commenced against the
Company any such proceeding which remains undismissed for a period of 60 days;
or the Company is adjudicated insolvent or bankrupt; or any order of relief or
other order approving any such case or proceeding is entered; or the Company
suffers any appointment of any custodian or the like for it or any substantial
part of its property which continues undischarged or unstayed for a period of 60
days; or the Company makes a general assignment for the benefit of creditors; or
the Company shall fail to pay, or shall state that it is unable to pay, or shall
be unable to pay, its debts generally as they become due; or the Company
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<PAGE> 3
shall call a meeting of its creditors with a view to arranging a composition or
adjustment of its debts; or the Company shall by any act or failure to act
indicate its consent to, approval of or acquiescence in any of the foregoing; or
any corporate or other action is taken by the Company for the purpose of
effecting any of the foregoing;
(e) the Company shall default in any of its obligations under any
mortgage, indenture or instrument under which there may be issued, or by which
there may be secured or evidenced, any indebtedness of the Company in an amount
exceeding Fifty Thousand Dollars ($50,000), whether such indebtedness now exists
or shall hereafter be created and such default shall result in such indebtedness
becoming or being declared due and payable prior to the date on which it would
otherwise become due and payable;
(f) the Company shall have its Common Stock (as defined in Section
6) delisted from the OTCBB or other national securities exchange or market on
which such Common Stock is listed for trading or suspended from trading thereon,
and shall not have its Common Stock relisted or have such suspension lifted, as
the case may be, within five days; or
(g) the Company shall be a party to any merger or consolidation
(irrespective of whether it is the survivor) or shall dispose of all or
substantially all of its assets in one or more transactions, or shall redeem
more than a de minimis amount of its outstanding shares of Common Stock.
If any Event of Default occurs and is continuing, and in every such case, then
so long as such Event of Default shall then be continuing the Holder may, by
notice to the Company, declare the full principal amount of this Debenture,
together with all accrued but unpaid interest to the date of acceleration, to
be, whereupon the same shall become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
waived by the Company, notwithstanding anything herein contained to the
contrary, and the Holder may immediately and without expiration of any grace
period enforce any and all of its rights and remedies hereunder and all other
remedies available to it under applicable law. Such declaration may be rescinded
and annulled by Holder at any time prior to payment hereunder. No such
rescission or annulment shall affect any subsequent Event of Default or impair
any right consequent thereon.
3. Conversion.
(a) This Debenture shall be convertible into shares of Common Stock at
the Conversion Ratio, at the option of the Holder in whole or in part at any
time after the Original Issue Date. Any conversion under this Section 3(a) shall
be of a minimum principal amount of $1000.00 of Debentures. The Holder shall
effect conversions by surrendering the Debentures (or such portions thereof) to
be converted to the Company, together with the form of conversion notice
attached hereto as Exhibit A (the "Holder Conversion Notice") in the manner set
forth in Section 3(i). Each Holder Conversion Notice shall specify the principal
amount of Debentures to be converted and the date on which such conversion is to
be effected (the "Holder
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<PAGE> 4
Conversion Date"). Subject to Section 3(c), each Holder Conversion Notice, once
given, shall be irrevocable. If the Holder is converting less than all of the
principal amount represented by the Debenture(s) tendered by the Holder with the
Holder Conversion Notice, the Company shall promptly deliver to the Holder a new
Debenture for such principal amount as has not been converted.
(b) This Debenture shall be convertible into shares of Common Stock at
the Conversion Ratio, at the option of the Company in whole or in part at the
Maturity date; provided, however, that the Company is not permitted to deliver a
Company Conversion Notice (as defined below) within 10 days of issuing any press
release or other public statement relating to such conversion. The Company shall
effect such conversion by delivering to the Holder a written notice in the form
attached hereto as Exhibit B (the "Company Conversion Notice"), which Company
Conversion Notice, once given, shall be irrevocable. Each Company Conversion
Notice shall specify the principal amount of Debentures to be converted. Any
such conversion by the Company shall be subject to Section 4.13 of the Purchase
Agreement. The Company shall give such Company Conversion Notice in accordance
with Section 3(i) below at least two Trading Days before the Maturity Date (such
date is hereinafter referred to as the "Company Conversion Date". Any such
conversion shall be effected on a pro rata basis among all holders of
Debentures. Upon the conversion of the principal balance of the Debentures
pursuant to a Company Conversion Notice, the Holder shall surrender its
Debentures at the office of the Company or of any transfer agent for the
Debentures or Common Stock. If the Company is converting less than the aggregate
principal amount of all Debentures, the Company shall, upon conversion of such
Debentures subject to such Company Conversion Notice and receipt of the
Debentures surrendered for conversion, deliver to the Holder, and each other
such holder of Debentures full payment in immediately available funds of the
principal balance of and accrued interest on the portion of the Debentures that
have not been converted. Each of a Holder Conversion Notice and a Company
Conversion Notice is sometimes referred to herein as a "Conversion Notice," and
each of a "Holder Conversion Date" and a "Company Conversion Date" is sometimes
referred to herein as a "Conversion Date."
(c) Not later than three Trading Days after the Conversion Date, the
Company will deliver to the Holder (i) a certificate or certificates which shall
be free of restrictive legends and trading restrictions (other than those then
required by law), representing the number of shares of Common Stock being
acquired upon the conversion of Debentures and (ii) Debentures in principal
amount equal to the principal amount of Debentures not converted; provided,
however that the Company shall not be obligated to issue certificates evidencing
the shares of Common Stock issuable upon conversion of any Debentures, until
Debentures are either delivered for conversion to the Company or any transfer
agent for the Debentures or Common Stock, or the Holder notifies the Company
that such Debentures have been lost, stolen or destroyed and provides a bond (or
other adequate security reasonably acceptable to the Company) satisfactory to
the Company to indemnify the Company from any loss incurred by it in connection
therewith. The Company shall, upon request of the Holder, use its best efforts
to deliver any certificate or certificates required to be delivered by the
Company under this Section 3(c) electronically through the Depository Trust
Corporation or another established
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<PAGE> 5
clearing corporation performing similar functions. In the case of a conversion
pursuant to a Holder Conversion Notice, if such certificate or certificates not
delivered by the date required under this Section 3(c), the Holder shall be
entitled by written notice to the Company at any time on or before its receipt
of such certificate or certificates thereafter, to rescind such conversion, in
which event the Company shall immediately return the Debentures tendered for
conversion.
(d)(i) The Conversion Price for each Debenture in effect on any
Conversion Date shall be the LESSER of X OR Y: where X is the GREATER of (a) [$
F] or (b) [ C ] / [ ( { C / F }+3.00 ) / 2 ] (where C = the average Per Share
Market Value for the five (5) Trading Days immediately preceding the Conversion
Date and F = the Per Share Market Value on the Trading Day immediately preceding
the Original issue Date); and Y = 70% of the average Per Share Market Value for
the five (5) Trading Days immediately preceding the Conversion Date.
(ii) If the Company, at any time while any Debentures are outstanding,
(a) shall pay a stock dividend or otherwise make a distribution or distributions
on shares of its Junior Securities payable in shares of its capital stock
(whether payable in shares of its Common Stock or of capital stock of any
class), (b) subdivide outstanding shares of Common Stock into a larger number of
shares, (c) combine outstanding shares of Common Stock into a smaller number of
shares, or (d) issue by reclassification of shares of Common Stock any shares of
capital stock of the Company, the Conversion Price designated in Section 3(d)(i)
shall be multiplied by a fraction of which the numerator shall be the number of
shares of Common Stock of the Company outstanding before such event and of which
the denominator shall be the number of shares of Common Stock outstanding after
such event. Any adjustment made pursuant to this Section 3(d)(ii) shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.
(iii) If the Company, at any time while any Debentures are outstanding,
shall issue rights or warrants to all holders of Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price per share less than
the Per Share Market Value of Common Stock at the record date mentioned below,
the Conversion Price designated in Section 3(d)(i) shall be multiplied by a
fraction, of which the denominator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding on the date of issuance of such
rights or warrants plus the number of additional shares of Common Stock offered
for subscription or purchase, and of which the numerator shall be the number of
shares of Common Stock (excluding treasury shares, if any) outstanding on the
date of issuance of such rights or warrants plus the number of shares which the
aggregate offering price of the total number of shares so offered would purchase
at such Per Share Market Value. Such adjustment shall be made whenever such
rights or warrants are issued, and shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
rights or warrants. However, upon the expiration of any right or warrant to
purchase Common Stock the issuance of which resulted in an adjustment in the
Initial Conversion Price designated in Section 3(d)(i) pursuant to this Section
3(d)(iii), if any such right or warrant shall expire and shall not have
5
<PAGE> 6
been exercised, the Conversion Price designated in Section 3(d)(i) shall
immediately upon such expiration be recomputed and effective immediately upon
such expiration be increased to the price which it would have been (but
reflecting any other adjustments in the Initial Conversion Price made pursuant
to the provisions of this Section 5 after the issuance of such rights or
warrants) had the adjustment of the Initial Conversion Price made upon the
issuance of such rights or warrants been made on the basis of offering for
subscription or purchase only that number of shares of Common Stock actually
purchased upon the exercise of such rights or warrants actually exercised.
(iv) If the Company, at any time while Debentures are outstanding, shall
distribute to all holders of Common Stock (and not to holders of Debentures)
evidences of its indebtedness or assets or rights or warrants to subscribe for
or purchase any security (excluding those referred to in Section 3(d)(iii)
above) then in each such case the Conversion Price at which each Debenture shall
thereafter be convertible shall be determined by multiplying the Conversion
Price in effect immediately prior to the record date fixed for determination of
stockholders entitled to receive such distribution by a fraction of which the
denominator shall be the Per Share Market Value of Common Stock determined as of
the record date mentioned above, and of which the numerator shall be such Per
Share Market Value of the Common Stock on such record date less the then fair
market value at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of Common Stock
as determined by the Board of Directors in good faith; provided, however that in
the event of a distribution exceeding ten percent (10%) of the net assets of the
Company, such fair market value shall be determined by a nationally recognized
or major regional investment banking firm or firm of independent certified
public accountants of recognized standing (which may be the firm that regularly
examines the financial statements of the Company) (an "Appraiser") selected in
good faith by the holders of a majority of the principal amount of the
Debentures then outstanding; and provided, further that the Company, after
receipt of the determination by such Appraiser shall have the right to select an
additional Appraiser, in which case the fair market value shall be equal to the
average of the determinations by each such Appraiser. In either case the
adjustments shall be described in a statement provided to the Holder and all
other holders of Debentures of the portion of assets or evidences of
indebtedness so distributed or such subscription rights applicable to one share
of Common Stock. Such adjustment shall be made whenever any such distribution is
made and shall become effective immediately after the record date mentioned
above.
(v) All calculations under this Section 3 shall be made to the nearest
cent or the nearest 1/lOOth of a share, as the case may be.
(vi) Whenever the Conversion Price is adjusted pursuant to Section
3(d)(ii),(iii) or (iv), the Company shall promptly mail to the Holder and to
each other holder of Debentures, a notice setting forth the Conversion Price
after such adjustment and setting forth a brief statement of the facts requiring
such adjustment.
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<PAGE> 7
(vii) In case of any reclassification of the Common Stock, any
consolidation or merger of the Company with or into another person, the sale or
transfer of all or substantially all of the assets of the Company or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, then each holder of Debentures then
outstanding shall have the right thereafter to convert such Debentures only into
the shares of stock and other securities and property receivable upon or deemed
to be held by holders of Common Stock following such reclassification,
consolidation, merger, sale, transfer or share exchange, and the Holder shall be
entitled upon such event to receive such amount of securities or property as the
shares of the Common Stock into which such Debentures could have been converted
immediately prior to such reclassification, consolidation, merger, sale,
transfer or share exchange would have been entitled. The terms of any such
consolidation, merger, sale, transfer or share exchange shall include such terms
so as to continue to give to the Holder the right to receive the securities or
property set forth in this Section 5(d)(vii) upon any conversion following such
consolidation, merger, sale, transfer or share exchange. This provision shall
similarly apply to successive reclassifications, consolidations, mergers, sales,
transfers or share exchanges.
(viii) If:
(A) the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
(B) the Company shall declare a special nonrecurring
cash dividend on or a redemption of its Common Stock; or
(C) the Company shall authorize the granting to all
holders of the Common Stock rights or warrants to subscribe for or purchase any
shares of capital stock of any class or of any rights; or
(D) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock of
the Company (other than a subdivision or combination of the outstanding shares
of Common Stock), any consolidation or merger to which the Company is a party,
any sale or transfer of all or substantially all of the assets of the Company,
or any compulsory share exchange whereby the Common Stock is converted into
other securities, cash or property; or
(E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding-up of the affairs of the
Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of Debentures, and shall cause to be mailed to the
Holder and each other holder of Debentures at their last addresses as it shall
appear upon the Debenture Register, at least 30 calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
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<PAGE> 8
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined, or (y) the date on which such reclassification, consolidation,
merger, sale, transfer, share exchange, dissolution, liquidation or winding-up
is expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding-up; provided, however, that the failure to
mail such notice or any defect therein or in the mailing thereof shall not
affect the validity of the corporate action required to be specified in such
notice.
If at any time conditions shall arise by reason of action taken by the
Company which in the opinion of the Board of Directors are not adequately
covered by the other provisions hereof and which might materially and adversely
affect the rights of the Holder and all other holders of Debentures (different
than or distinguished from the effect generally on rights of holders of any
class of the Company's capital stock) or if at any time any such conditions are
expected to arise by reason of any action contemplated by the Company, the
Company shall, at least 30 calendar days prior to the effective date of such
action, mail a written notice to each holder of Debentures briefly describing
the action contemplated and the material adverse effects of such action on the
rights of such holders and an Appraiser selected by the holders of majority in
principal amount of the outstanding Debentures shall give its opinion as to the
adjustment, if any (not inconsistent with the standards established in this
Section 5), of the Conversion Price (including, if necessary, any adjustment as
to the securities into which Debentures may thereafter be convertible) and any
distribution which is or would be required to preserve without diluting the
rights of the holders of Debentures; provided, however, that the Company, after
receipt of the determination by such Appraiser, shall have the right to select
an additional Appraiser, in which case the adjustment shall be equal to the
average of the adjustments recommended by each such Appraiser. The Board of
Directors shall make the adjustment recommended forthwith upon the receipt of
such opinion or opinions or the taking of any such action contemplated, as the
case may be; provided, however, that no such adjustment of the Conversion Price
shall be made which in the opinion of the Appraiser(s) giving the aforesaid
opinion or opinions would result in an increase of the Conversion Price to more
than the Conversion Price then in effect.
(e) The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued Common Stock solely for the purpose
of issuance upon conversion of Debentures as herein provided, free from
preemptive rights or any other actual contingent purchase rights of persons
other than the holders of Debentures, such number of shares of Common Stock as
shall be issuable (taking into account the adjustments and restrictions of
Section 3(b) and Section 3(d) hereof) upon the conversion of the aggregate
principal amount of all outstanding Debentures. The Company covenants that all
shares of Common Stock that shall be so issuable shall, upon issue, be duly and
validly authorized, issued and fully paid and nonassessable.
8
<PAGE> 9
(f) Upon a conversion hereunder the Company shall not be required to
issue stock certificates representing fractions of shares of Common Stock, but
may if otherwise permitted, make a cash payment in respect of any final fraction
of a share based on the Per Share Market Value at such time. If the Company
elects not to, or is unable to, make such a cash payment, the Holder shall be
entitled to receive, in lieu of the final fraction of a share, one whole share
of Common Stock.
(g) The issuance of certificates for shares of Common Stock on conversion
of Debentures shall be made without charge to the Holder for any documentary
stamp or similar taxes that may be payable in respect of the issue or delivery
of such certificate, provided that the Company shall not be required to pay any
tax that may be payable in respect of any transfer involved in the issuance and
delivery of any such certificate upon conversion in a name other than that of
the Holder and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
(h) Debentures converted into Common Stock shall be canceled.
(i) Each Holder Conversion Notice shall be given by facsimile and by
mail, postage prepaid, addressed to the Chief Financial Officer of the Company
at the facsimile telephone number and address of the principal place of business
of the Company. Each Company Conversion Notice shall be given by facsimile and
by mail, postage prepaid, addressed to each holder of Debentures at the
facsimile telephone number and address of such holder appearing on the books of
the Company or provided to the Company by such holder for the purpose of such
Company Conversion Notice, or if no such facsimile telephone number or address
appears or is so provided, at the principal place of business of the holder. Any
such notice shall be deemed given and effective upon the earliest to occur of
(i) receipt of such facsimile at the facsimile telephone number specified in
this Section 5(j),(ii) five days after deposit in the United States mails or
(iii) upon actual receipt by the party to whom such notice is required to be
given.
4. Definitions. For the purposes hereof, the following terms shall have
the following meanings:
"Business Day" means any day of the year on which commercial banks are
not required or authorized to be closed in New York City.
"Common Stock" means shares now or hereafter authorized of the class of
Common Stock, $0.001 par value, of the Company and stock of any other class into
which such shares may hereafter have been reclassified or changed.
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<PAGE> 10
"Conversion Ratio" means, at any time, a fraction, of which the numerator
is the principal amount represented by any Debenture plus accrued but unpaid
interest, and of which the denominator is the Conversion Price at such time.
"Junior Securities" means the Common Stock, all other equity securities
of the Company and all other debt that is subordinated to the Debtors by its
terms.
"Original Issue Date" shall mean the date of the first issuance of this
Debenture regardless of the number transfers hereof.
"Per Share Market Value" means on any particular date (a) the closing bid
price per share of the Common Stock on such date on the Over-The-Counter
Bulletin Board ("OTCBB") or other stock exchange on which the Common Stock has
been listed or if there is no such price on such date, then the last bid price
on such exchange on the date nearest preceding such date, or (b) if the Common
Stock is not listed on OTCBB or any stock exchange, the closing bid price for a
share of Common Stock in the over-the-counter market, as reported by the NASD at
the close of business on such date, or (c) if the Common Stock is not quoted by
the NASD, the closing bid price for a share of Common Stock in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices), or (d) if the Common Stock is no longer publicly traded the
fair market value of a share of Common Stock as determined by an Appraiser (as
defined in Section 5(d)(iv) above) selected in good faith by the holders of a
majority of principal amount of outstanding Debentures; provided, however, that
the Company, after receipt of the determination by such Appraiser, shall have
the right to select an additional Appraiser, in which case, the fair market
value shall be equal to the average of the determinations by each such
Appraiser.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Trading Day" means (a) a day on which the Common Stock is traded on the
OTCBB or principal stock exchange on which the Common Stock has been listed, or
(b) if the Common Stock is not listed on the OTCBB or any stock exchange, a day
on which the Common Stock is traded in the over-the-counter market, as reported
by the NASD, or (c) if the Common Stock is not quoted on the NASD, a day on
which the Common Stock is quoted in the over-the-counter market as reported by
the National Quotation Bureau Incorporated (or any similar organization or
agency succeeding its functions of reporting prices).
5. Except as expressly provided herein, no provision of this Debenture
shall alter or impair the obligation of the Company, which is absolute and
unconditional, to pay the principal of, and interest on, this Debenture at the
time, place, and rate, and in the coin or currency, herein prescribed. This
Debenture is a direct obligation of the Company. This Debenture ranks pari passu
with all other Debentures now or hereafter issued under the terms set forth
herein.
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6. The Company may not prepay any portion of the outstanding principal
amount on the Debentures.
7. This Debenture shall not entitle the Holder to any of the rights of a
stockholder of the Company, including without limitation, the right to vote, to
receive dividends and other distributions, or to receive any notice of, or to
attend, meetings of stockholders or any other proceedings of the Company, unless
and to the extent converted into shares of Common Stock in accordance with the
terms hereof.
8. If this Debenture shall be mutilated, lost, stolen or destroyed, the
Company shall execute and deliver, in exchange and substitution for and upon
cancellation of a mutilated Debenture, or in lieu of or in substitution for a
lost, stolen or destroyed debenture, a new Debenture for the principal amount of
this Debenture so mutilated, lost, stolen or destroyed but only upon receipt of
evidence of such loss, theft or destruction of such Debenture, and of the
ownership hereof, and indemnity, if requested, all reasonably satisfactory to
the Company.
9. This Debenture shall be governed by and construed in accordance with
the laws of the State of New York, without giving effect to conflicts of laws
thereof.
10. All notices or other communications hereunder shall be given, and
shall be deemed duly given and received, if given, in the manner set forth in
Section 3(i).
11. Any waiver by the Company or the Holder a breach of any provision of
this Debenture shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Debenture. The failure of the Company or the Holder to insist upon strict
adherence to any term of this Debenture on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Debenture. Any waiver
must be in writing.
12. If any provision of this Debenture is invalid, illegal or
unenforceable, the balance of this Debenture shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances.
13. Whenever any payment or other obligation hereunder shall be due on a
day other than a Business Day, such payment shall be made on the next succeeding
Business Day
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(or, if such next succeeding Business Day falls in the next calendar month, the
preceding Business Day in the appropriate calendar month).
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized as of the date first above
indicated.
Universal Medical Systems, Inc.
Attest: /s/ Myron A. Baker
------------------- ----------------------
Name: Myron A. Baker
Title: President & CEO
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<PAGE> 13
EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert the above Debenture No.
_____________ into shares of Common Stock, par value U.S.$0.001 per share (the
Common Stock"), of Universal Medical Systems, Inc., (the Company") according to
the conditions hereof, as of the date written below. If shares are to be issued
in the name of a person other than undersigned, the undersigned will pay all
transfer taxes payable with respect thereto and is delivering herewith such
certificates and opinions as reasonably requested by the Company in accordance
therewith. No fee will be charged to the Holder for any conversion, except for
such transfer taxes, if any.
Conversion calculations: ______________________________________________
Date to Effect Conversion
______________________________________________
Principal Amount of Debentures to be Converted
______________________________________________
Applicable Conversion Price
______________________________________________
Signature
______________________________________________
Name:
______________________________________________
Address:
<PAGE> 14
EXHIBIT B
NOTICE OF CONVERSION
AT THE ELECTION OF THE COMPANY
The undersigned in the name and on behalf of Universal Medical Systems, Inc.,
(the "Company") hereby notifies the addressee hereof that the Company hereby
elects to exercise its right to convert the above Debenture No. ______ into
shares of Common Stock, $0.001 par value per share (the "Common Stock"), of the
Company according to the conditions hereof, as of the date written below. No fee
will be charged to the Holder for any conversion hereunder, except for such
transfer taxes, if any, which may be incurred by the Company if shares are to be
issued in the name of a person other than the person to whom this notice is
addressed.
Conversion calculations: ______________________________________________
Date to Effect Conversion
______________________________________________
Principal Amount of Debentures to be Converted
______________________________________________
Applicable Conversion Price
______________________________________________
Signature
______________________________________________
Name:
______________________________________________
Address:
<PAGE> 1
EXHIBIT 4(v)
STOCK OPTION AGREEMENT
AGREEMENT made as of the 1st day of May, 1996, by and between UNIVERSAL
MEDICAL SYSTEMS, INC, a Nevada corporation, having its office and principal
place of business located at 13825 Icot Boulevard, Suite 613, Clearwater,
Florida 34620 (the "COMPANY") and Larry Erber having his office and principal
place of business located C/O HBL Enterprises, 50 Broad Street, New York, New
York 10004 (the "HOLDER").
WITNESSETH:
WHEREAS, on the 1st day of May, 1996, pursuant to an Agreement between the
COMPANY, and H.B.L. Associates, Inc., of even date, the COMPANY'S Board of
Directors granted an option to Holder to purchase 500,000 shares of the
authorized but unissued Common Stock of the COMPANY, $.001 par value ("Stock")
at an exercise price equal to $.01 per share; a copy of said Agreement being
attached hereto and incorporated by reference herein; and,
WHEREAS, the Parties desire to set forth the terms and conditions of such
option;
NOW, THEREFORE, in consideration of the foregoing and of the terms and
conditions herein contained, the parties hereto agree as follows:
1. DEFINITIONS. As used herein, the following terms have the meanings
hereinafter set forth unless the context clearly indicates to the contrary:
1.1 "ACT" shall mean the Securities Act of 1933.
1.2. "AGREEMENT" shall mean the Agreement dated May 1, 1996,
executed by and between the COMPANY and H.B.L. Associates.
1.3. "BOARD" shall mean the Board of Directors of the Company.
1.4. "COMPANY" shall mean Universal Medical Systems, Inc., a Nevada
Corporation.
1.5. "DATE OF GRANT" shall mean the 1st day of May, 1996.
1.6. "EXERCISE PERIOD" shall mean anytime after the DATE OF GRANT
and upon earning rights to the option, or a portion thereof.
1.7. "EXERCISE PRICE" shall mean the purchase price for each share
of stock subject to this Option; to wit: $.01 per share.
<PAGE> 2
1.8. "HOLDER" shall mean the person identified hereinabove having
the right to exercise the option granted hereunder.
1.9. "OPTION" shall mean the right to purchase stock granted under
the provisions of this Agreement.
1.10. "STOCK" shall mean the COMPANY'S common stock, par value $.001
per share.
1.11. "STOCK OPTION AGREEMENT" shall mean this Agreement.
2. GRANT OF OPTION. Subject to the terms and conditions of the AGREEMENT,
the terms of Subparagraph 4.4.3 thereof being incorporated by reference herein,
the COMPANY hereby grants to the HOLDER the right and option to purchase all or
any part of an aggregate of 500,000 shares of STOCK for the EXERCISE PRICE on
the terms and conditions herein set forth.
3. EXERCISE OF OPTION. The OPTION shall be exercisable during the EXERCISE
PERIOD; provided, this OPTION shall be exercisable in whole or in part but not
as to less than 5,000 shares of Stock, unless the number of shares of STOCK as
to which this OPTION is exercisable is less than 5,000 at anytime or from time
to time during the EXERCISE PERIOD.
4. METHOD OF EXERCISE OF OPTION. The OPTION shall be exercised by delivery
to the COMPANY, as its principal place of business in Clearwater, Florida, of
(i) the written Notice of Exercise in the form attached hereto as Exhibit A,
which is incorporated herein by reference, specifying the number of shares of
STOCK with respect to which the OPTION is being exercised and signed by the
person exercising the OPTION as provided herein; and, (ii) payment in full of
the purchase price. Upon acceptance of such Notice and receipt of payment in
full the COMPANY shall cause to be issued a certificate representing the shares
of STOCK purchased. The HOLDER shall not have any of the rights of a stockholder
with respect to the STOCK covered by the OPTION until the date of issuance of a
stock certificate to him for such shares of STOCK. The certificates or
certificates for the STOCK as to which the OPTION shall have been so exercised
shall be registered in the name of the person or persons so exercising the
OPTION, and shall be delivered as aforesaid to or upon written order of the
person or persons exercising the OPTION. In the event the OPTION is being
exercised by any person or persons other than the HOLDER, the notice shall be
accompanied by appropriate proof of the right of such person or persons to
exercise the OPTION.
5. TRANSFER AND ASSIGNMENT OF OPTION. This OPTION and the rights and
privileges conferred in whole or in part hereby, may not be transferred,
assigned, pledged; or, hypothecated in any way (whether by operation of law,
except pursuant
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<PAGE> 3
to the laws of descent and distribution, or otherwise) unless registered under
the ACT; or, in the opinion of counsel satisfactory to the COMPANY an exemption
from registration under the ACT is available to such transaction. COMPANY shall
pay all costs incurred by the HOLDER in such transaction including but not
limited to legal fees. The OPTION shall not be subject to levy and execution,
attachment or similar process. Upon any attempt to transfer, assign, pledge,
hypothecate, or, otherwise dispose of the OPTION or any right or privilege
conferred hereby, contrary to the provisions hereof, or upon the levy and
execution, attachment or similar process on the OPTION and the rights and
privileges conferred under this STOCK OPTION AGREEMENT, this OPTION and the
rights and privileges conferred hereby shall immediately become null and void.
6. ISSUANCE OF SHARES. COMPANY shall be obligated to sell and issue STOCK
pursuant to this OPTION and in accordance with the terms hereof but not before
the STOCK with respect to which the OPTION is being exercised is effectively
registered or exempt from registration under the ACT in the opinion of counsel
for the COMPANY. The BOARD may require, as a condition to the sale of STOCK on
the exercise of the OPTION, that the person exercising the OPTION give to
COMPANY such documents, including such appropriate investment representations as
may be required by counsel for the COMPANY, and such additional agreements and
documents as the BOARD shall determine to be in the best interests of the
COMPANY.
7. RESTRICTIONS ON TRANSFERABILITY OF SECURITIES AND REGISTRATION RIGHTS.
The HOLDER hereby agrees that unregistered shares of STOCK ("Restricted
Securities") issued upon exercise of the OPTION, in whole or in part, shall not
be transferable except upon the conditions specified in this Section 7., which
conditions are intended to insure compliance with the provisions of the ACT, or,
in the case of Paragraph 7.12. hereof, to assist in an orderly distribution.
The HOLDER shall cause any proposed transferee of the Restricted Securities held
by the HOLDER to agree to take and hold such securities subject to the
provisions and upon the conditions specified in this Section 7.
7.1. CERTAIN DEFINITIONS. As used in this Section 7, the following
terms shall have the following respective meanings.
7.1.1. "COMMISSION" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the
ACT.
7.1.2. "REGISTRABLE SECURITIES" means (i) shares of STOCK
issued or issuable pursuant to the exercise of the earned OPTION;
and, (ii) any Common Stock issued in respect of the Shares or other
securities which were issued pursuant to the conversion of the
shares of STOCK
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<PAGE> 4
upon any stock split, stock dividend, recapitalization, or similar
event.
7.1.3. The terms "REGISTER", "REGISTERED" and "REGISTRATION"
refer to a registration effected by preparing and filing a
registration statement in compliance with the ACT, and the
declaration or ordering of the effectiveness of such registration
statement.
7.1.4. "REGISTRATION EXPENSES" shall mean all expenses
incurred by the COMPANY in complying with Paragraph 7.4. hereof,
including, without limitation, all disbursements of filing fees,
printing expenses, fees and disbursements of counsel for the
COMPANY, reasonable fees and disbursements of counsel for the
selling HOLDERS, blue sky fees and expenses, and accountants'
expenses, including without limitation, any special audits incident
to or required by any such registration (but excluding the
compensation of regular employees of the COMPANY and any accounting,
audit or legal expenses the COMPANY would incur under the Securities
and Exchange Act of 1934, which shall be paid in any event by the
COMPANY).
7.1.5. "SELLING EXPENSES" shall mean all underwriting
discounts and selling commissions applicable to the sale of
Registrable Securities and any other securities of the COMPANY being
sold in the same registration as the Registrable Securities by the
HOLDER and, in the case of a registration pursuant to Paragraph
7.4., the expense of any special audits incident to or required by
such registration (but excluding the compensation of regular
employees of the COMPANY which shall be paid in any event by the
COMPANY).
7.2. RESTRICTIVE LEGEND; NOTATION ON STOCK BOOKS. Each certificate
representing (i) the Restricted Securities; or, (ii) any other securities
issued in respect to the Restricted Securities or issued upon conversion
of the Restricted Securities upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar event, shall (unless
otherwise permitted by the provisions of Paragraph 7.3.) be stamped or
otherwise imprinted with legends substantially in the form set forth in
Section 10. hereof. In addition, the COMPANY shall make a notation
regarding the restrictions on transfer of the Restricted Securities, and
any Restricted Securities shall be transferred on the books of the COMPANY
only if transferred or sold pursuant to an effective registration
statement under the ACT covering such securities or pursuant to and in
compliance with Paragraph 7.3.
7.3. NOTICE OF PROPOSED TRANSFERS. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply
in all respects with the provisions of this Paragraph 7.3. Prior to any
proposed
4
<PAGE> 5
transfer of any Restricted Securities (other than under circumstances
described in Paragraph 7.4. hereof), the HOLDER thereof shall give written
notice to the COMPANY of such HOLDER'S intention to effect such transfer.
Each such notice shall describe the manner and circumstances of the
proposed transfer in sufficient detail, and, if requested by the COMPANY
shall be accompanied by, at the HOLDER'S option, either (i) an unqualified
written opinion of legal counsel who shall be reasonably satisfactory to
the COMPANY addressed to the COMPANY and reasonably satisfactory in form
and substance to the COMPANY'S counsel, to the effect that the proposed
transfer of the Restricted Securities may be effected without registration
under the ACT; or, (ii) a "no action" letter from the COMMISSION to the
effect that the transfer of such securities without registration will not
result in a recommendation by the staff of the COMMISSION that action be
taken with respect thereto, whereupon the HOLDER of such Restricted
Securities shall be entitled to transfer such Restricted Securities in
accordance with the terms of the notice delivered by the HOLDER to the
COMPANY. Each certificate evidencing the Restricted Securities transferred
as above provided shall bear the appropriate restrictive legend set forth
in Paragraph 7.2. and Section 10., except that such certificate shall not
bear such restrictive legend if the opinion of counsel or no action letter
referred to above is to the further effect that such legend is not
required in order to establish compliance with the provisions of the ACT.
7.4. COMPANY REGISTRATION.
7.4.1. If the COMPANY shall determine to register any of its
securities either for its own account or the account of a security
holder or holders exercising their respective demand registration
rights, if applicable, other than a registration relating solely to
employee benefit plans, or a registration relating solely to a
transaction pursuant to Rule 145 promulgated by the COMMISSION under
the ACT, or a registration statement on Form S-2, or a registration
on any registration form which does not permit secondary sales or
does not include substantially the same information as would be
required to be included in a registration statement covering the
sale of Registrable Securities, the COMPANY will:
(i) promptly give to each HOLDER written notice thereof
(which shall include a list of the jurisdictions in which the
COMPANY intends to attempt to qualify such securities under
the applicable blue sky or other state securities laws); and,
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in
any underwriting involved therein, all the Registrable
Securities specified in a written request or requests, made
within 15 days after the giving
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<PAGE> 6
of such written notice from the COMPANY, by any HOLDER or
HOLDERS, except as set forth hereinbelow,
7.4.2. UNDERWRITING. If the registration of which the COMPANY
gives notice is for a registered public offering involving an
underwriting, the COMPANY shall so advise the HOLDERS as a part of
the written notice given pursuant to Paragraph 7.4.1. (i). In such
event the right of any HOLDER to registration pursuant to this
Paragraph 7.4. shall be conditioned upon such HOLDER'S participation
in such underwriting and the inclusion of such HOLDER'S Registrable
Securities in the underwriting to the extent provided herein. All
HOLDERS proposing to distribute their securities through such
underwriting shall (together with the COMPANY) enter into an
underwriting agreement in customary form with the underwriter or
underwriters selected for underwriting by the COMPANY and on the
terms and conditions set forth by the COMPANY and the underwriter.
Notwithstanding any other provision of this Paragraph 7.4., if the
underwriter reasonably determines that marketing factors require a
limitation on the number of shares to be underwritten, the
underwriter may (subject to the allocation priority set forth
below) exclude some or all Registrable Securities from such
registration and underwriting. The COMPANY shall advise all HOLDERS
requesting registration, of the number of Registrable Securities
that may be included in the registration and underwriting and
allocate, pro rata, among HOLDERS of the Registrable Securities such
permitted number of Registrable Securities. Any Registrable
Securities or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
7.5. EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
this Section 7. shall be borne by the COMPANY and Selling Expenses shall
be borne by the HOLDER; provided however, that if any jurisdiction in
which the securities shall be qualified shall require that expenses
incurred in connection with the qualification of the securities in that
jurisdiction be borne by the selling shareholders, then such expenses
shall be payable by the selling shareholders pro rata, to the extent
required by such jurisdiction. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
a registration exclusively of the Registrable Securities shall be borne by
the COMPANY and Selling Expenses shall be borne by the HOLDER.
7.6. REGISTRATION PROCEDURES. In the case of each registration
affected by the COMPANY pursuant to this Section 7., the COMPANY will keep
each HOLDER advised in writing as to the initiation of each registration
and as
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<PAGE> 7
to the completion thereof. At its expense the COMPANY will:
7.6.1. Keep such registration effective for a period of 120
days or until the HOLDER or HOLDERS have completed the distribution
described in the registration statements relating thereto, whichever
first occurs; and,
7.6.2. Furnish such number of prospectuses and other documents
incident thereto as a HOLDER from time to time may reasonably
request.
7.7. INDEMNIFICATION.
7.7.1. The COMPANY will indemnify each HOLDER, with respect to
which registration, qualification or compliance has been effected
pursuant to this Section 7., against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material
fact contained in any prospectus, offering circular or other
document (including any related registration statement, notification
or the like) incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, or any violation by
the COMPANY of any rule or regulation promulgated under the ACT
applicable to the COMPANY and relating to action or inaction
required of the COMPANY in connection with any such registration,
qualification or compliance, and will reimburse each such HOLDER,
for any legal and other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage,
liability or action, including the same on Appeal; provided, that
the COMPANY will not be liable in any such case to the extent that
any such claim, loss, damage, liability or expense arises out of or
is based upon written information furnished to the COMPANY by an
instrument duly executed by such HOLDER and stated to be
specifically for use therein.
7.7.2. Each HOLDER will, if securities held by him are
included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the
COMPANY, each of its directors and officers, each legal counsel and
independent accountant of the COMPANY, each underwriter, if any, of
the COMPANY'S securities covered by such a registration statement,
each person who controls the COMPANY or such underwriter within the
meaning of the ACT, and each other such HOLDER against all claims,
losses, damages and liabilities (or actions in respect thereof)
arising out of or based on any untrue
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<PAGE> 8
statement (or alleged untrue statement) of a material fact contained
in any such registration statement, prospectus, offering circular or
other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and will reimburse
the COMPANY and such HOLDERS, directors, officers, persons,
underwriters and control persons for any legal or any other expenses
reasonably incurred in connection with investigation or defending
any such claim, loss, damage, liability or action, including the
same on Appeal, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission
(or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the COMPANY by
an instrument duly executed by such HOLDER and stated to be
specifically for use therein.
7.7.3. Each party entitled to indemnification under this
Paragraph 7.7. (the "Indemnified Party") shall give notice to the
party required to provide indemnification (the "Indemnifying Party")
promptly after such Indemnified Party has actual knowledge of any
claim as to which indemnity may be sought, and shall permit the
Indemnifying Party to assume the defense of any such claims or any
litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or
any litigation resulting therefrom, shall be approved by the
Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense
at such Indemnified Party's expense. The failure of any Indemnified
Party to give notice as provided herein shall relieve the
Indemnifying Party of its obligations under this Paragraph 7.7. only
if such failure is prejudicial to the ability of the Indemnifying
Party to defend such action, and such failure shall in no event
relieve the Indemnifying Party of any liability that it may have to
any Indemnified Party otherwise than under this Paragraph 7.7. No
Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant
or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation.
7.8. INFORMATION BY HOLDER. Each HOLDER of securities included in
any registration shall furnish to the COMPANY such information regarding
such HOLDER and the distribution proposed by such HOLDER as the COMPANY
may request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Section 7.
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<PAGE> 9
7.9. LIMITATIONS ON REGISTRATION OF ISSUES OF SECURITIES. Any
registration rights given by the COMPANY to any HOLDER or prospective
HOLDER of its securities shall be consistent with the registration rights
in this Section 7. and with the rights of the HOLDERS provided in this
Agreement.
7.10. RULE 144 REPORTING. With a view to making available the
benefits of certain rules and regulations of the Commission which may
permit the sale of the Restricted Securities to the public without
registration, the COMPANY agrees to:
7.10.1. Make and keep public information available as those
terms are understood and defined in Rule 144 under the ACT, at all
times.
7.10.2. Use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the
COMPANY under the ACT and the Securities and Exchange Act of 1934,
as amended;
7.11. TRANSFER OF REGISTRATION RIGHTS. The rights to cause the
COMPANY to register securities of the COMPANY under Paragraph 7.4. may be
assigned to a transferee of any of the Restricted Shares which are not
sold to the public; provided, that the COMPANY is given written notice at
the time of or within a reasonable time after said transfer, stating the
name and address of said transferee and identifying the securities with
respect to which such registration rights are being assigned.
7.12. "MARKET STAND-OFF" AGREEMENT. If requested by the COMPANY and
an underwriter of Common Stock (or other securities) of the COMPANY, the
HOLDER agrees not to sell or otherwise transfer or dispose of any Common
Stock (or other securities) of the COMPANY held during the ninety (90) day
period following the effective date of a registration statement of the
COMPANY filed under the ACT. Such agreement shall be in writing in form
satisfactory to the COMPANY and such underwriter. The COMPANY may impose
stop-transfer instructions with respect to the shares (or securities)
subject to the foregoing restrictions until the end of said (90) day
period.
8. DEMAND REGISTRATION. In lieu of HOLDER'S piggy back right set forth in
Section 7. as to the STOCK issuable upon exercise of the OPTION, the HOLDER may
demand the COMPANY in each fiscal year of this Stock Option Agreement to cause
to be registered under the ACT a percentage of the STOCK issuable upon the
exercise of the OPTION, such percentage of SHARES being equal to the results
obtained when the highest U.S. income tax bracket is added to the medicare tax
rate (currently 2.9%). COMPANY shall pay all Registration Expenses ( as defined
in Subparagraph 7.1.4.). and HOLDERS shall pay all Selling Expenses (as defined
in Subparagraph
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<PAGE> 10
7.1.5.) incurred or to be incurred by the COMPANY in such registration. In any
registration statement filed by the COMPANY pursuant hereto the provisions of
Paragraph 7.7. shall apply.
9. ADJUSTMENTS TO STOCK ISSUABLE UPON EXERCISE OF OPTION.
9.1. An appropriate and proportionate adjustment shall be made in
the maximum number and/or kind of securities allocated to this OPTION,
without change in the aggregate purchase price applicable to the
unexercised portion of the outstanding OPTION, but with a corresponding
adjustment in the price for each share of STOCK or other unit of any
security covered by this OPTION upon the COMPANY'S issuance of New
Securities. New Securities shall mean any common stock or preferred stock
of the COMPANY, whether now authorized or not, and rights, options or
warrants to purchase said common stock or preferred stock, and securities
of any type whatsoever that are, or may become, convertible into said
common stock or preferred stock; provided, New Securities does not include
(i) securities issued pursuant to any COMPANY Employee Stock Bonus Plan or
Warrants or options outstanding on the DATE OF GRANT or options issued,
after the DATE OF GRANT pursuant to any COMPANY Stock Option Plan (ii)
securities offered to the public pursuant to a registration statement
under the ACT or pursuant to an exemption under the ACT; (iii) securities
issued pursuant to the acquisition of another entity by the COMPANY,
purchase of substantially all of another entity's assets; or, any other
reorganization whereby the COMPANY owns more or less than fifty percent
(50.0%) of the voting power of a corporation; (iv) up to twenty percent
(20.0%) of the bonus STOCK issued to employees of the COMPANY; (v)
securities issued in satisfaction, in whole or in part of the COMPANY'S
indebtedness; (vi) securities issued in conjunction with capital raising
activities for services rendered to the COMPANY. Except as provided for in
this Section 9. if the outstanding shares of STOCK of the COMPANY are
increased, decreased, changed into or exchanged for a different number or
kind of STOCK or securities of the COMPANY or stock of a different par
value or without par value, through reorganization, recapitalization,
reclassification, stock dividend, stock split; or, reverse stock split,
the appropriate and proportionate adjustment shall be made hereunder,
9.2. Upon the effective date of the dissolution or liquidation of
the COMPANY, or of a reorganization, merger or consolidation of the
COMPANY with one or more corporations or entities in which the COMPANY
will not survive as an independent, publicly owned corporation, or of a
transfer of substantially all the property or more than eighty percent
(80.0%) of the then outstanding STOCK of the COMPANY to another
corporation or entity, any OPTION granted hereunder shall be exercisable
until the effective date of such event and terminate and be of no further
force or effect on such effective date
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<PAGE> 11
unless provision be made, in writing, in connection with such
transaction for the assumption of this OPTION, or the substitution of
this OPTION of new options covering the shares of a successor
corporation, or a parent or subsidiary thereof, with appropriate
adjustments as to number and kind of stock and prices, in which event
this OPTION or the new options substituted therefor, shall continue in
the manner and under the terms so provided. In the event of such
dissolution, liquidation, reorganization, merger, consolidation,
transfer of assets or transfer of STOCK, and if provision is not made
in such transaction for the assumption of this OPTION or the
substitution for this OPTION of new options covering the shares of a
successor corporation or a parent or subsidiary thereof, then the
HOLDER shall be entitled, prior to the effective date of any such
transaction, to purchase the full number of shares of STOCK under this
OPTION which he would otherwise have been entitled to purchase during
the remaining term of such OPTION. Upon the first purchase of shares of
STOCK pursuant to a tender offer or exchange offer, other then by the
COMPANY, for all or any part of the STOCK, the HOLDER shall be
entitled, prior to the termination date of any such tender offer, to
purchase the full number of shares of STOCK under this OPTION which he
otherwise would have been entitled to purchase during the remaining
term of such OPTION.
9.3. Adjustments under this Section 9. shall be made by the
COMPANY'S Board of Directors, whose determination as to what adjustments
shall be made, and the extent thereof, shall be final, binding and
conclusive. No fractional shares of STOCK shall be issued hereunder or any
such adjustment.
10. STOP TRANSFER ORDERS AND RESTRICTIVE LEGENDS. The COMPANY shall not be
required (i) to transfer on its books any Restricted Securities issued upon the
exercise of this OPTION or any rights associated therewith which shall have been
sold or transferred in violation of the provisions set forth in this Agreement;
or, (ii) to treat as owner of such Restricted Securities or to accord the right
to vote as such owner or to pay dividends or to register such Restricted
Securities to any transferee to whom any such Restricted Securities have be so
transferred. The COMPANY may place stop transfer orders with its transfer agent
against the transfer of Restricted Securities issued upon the exercise of the
OPTION in violation of the provisions of this Agreement. Further, certificates
evidencing Restricted Securities issued upon the exercise of the OPTION shall
bear the following restrictive legend:
"The shares represented by this certificate have been acquired for
investment and have not been registered under the Securities Act of
1933, as amended ("ACT"). the shares may not be sold or transferred
or an exemption therefrom under the "ACT".
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11. MISCELLANEOUS.
11.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations, warranties, covenants, indemnifications and agreements
made by any party in this Agreement, or in any exhibit, schedule,
certificate, document or list delivered by any such party pursuant hereto
shall survive the effective date of the transactions contemplated hereby.
Each party hereto shall be entitled to rely upon the representations and
warranties of the other party or parties.
11.2. PERFORMANCE. In the event of a default on the part of the
COMPANY, the HOLDER shall have the right, in addition to any other
remedies which may be available, to obtain specific performance of the
terms of this STOCK OPTION AGREEMENT. Should any party default in the
performance of the terms and conditions of this STOCK OPTION AGREEMENT or
any other agreement referred to herein which results in the filing of a
lawsuit for damages, or other remedy, or should HOLDER file suit for
specific performance, the prevailing party in such lawsuit shall be
entitled to recover reasonable attorneys' fees and court costs from the
losing party, including the same on appeal.
11.3. BENEFIT AND ASSIGNMENT. This Agreement shall be binding upon
the respective legal representatives, successors and permitted assigns of
the parties hereto.
11.4. EFFECT AND CONSTRUCTION OF THIS AGREEMENT. This STOCK OPTION
AGREEMENT, the AGREEMENT and the exhibits and schedules hereto embody the
entire agreement and understanding between the parties and supersede any
and all prior agreements, arrangements, and understandings relating to
matters provided for herein. In the event of a conflict between the terms
of this STOCK OPTION AGREEMENT and the AGREEMENT, the provisions of the
AGREEMENT shall control. The captions are for convenience only and will
not control or effect the meaning or construction of the provisions of
this STOCK OPTION AGREEMENT. This STOCK OPTION AGREEMENT may be executed
in one or more counterparts and all such counterparts shall constitute one
and the same instrument. The singular shall include the plural, the plural
shall include the singular and one gender shall include all genders. If
any provision of this STOCK OPTION AGREEMENT shall be held to be invalid
or unenforceable by a Court of competent jurisdiction, such invalidity or
unenforceability shall attach only to such provisions and shall not in any
way affect, effect, or render invalid or unenforceable any other provision
of this STOCK OPTION AGREEMENT and this STOCK OPTION AGREEMENT shall be
carried out as if such invalid or unenforceable provision were not
contained herein.
11.5. COOPERATION. Subject to the terms and conditions herein
provided, each of the parties hereto shall use its best efforts to take,
or cause to be taken, such action to execute and deliver, or cause to be
executed and
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delivered, such additional documents and instruments and to do, or cause
to be done, all things necessary, proper or advisable under the provisions
of this Agreement and under applicable law to consummate and make
effective the transactions contemplated by this STOCK OPTION AGREEMENT.
11.6. NOTICES. All notices required or permitted hereunder shall be
in writing and shall be deemed to be properly given when personally
delivered to the party entitled to receive the notice or when sent by
certified or registered mail, postage prepaid and properly addressed to
the party entitled to receive such notice at the address stated above:
11.7. WAIVER, DISCHARGE, ETC. This Agreement may not be released,
discharged, abandoned, changed or modified in any manner, except by an
instrument in writing signed on behalf of each of the parties hereto and
in the case of the COMPANY by its duly authorized officers or
representatives. The failure of any party hereto to enforce at any time
any of the provisions of this Agreement shall in no way be construed to be
a waiver of any such provision, nor in any way to effect the validity of
this Agreement or any part thereof or the right of any party thereafter to
enforce each and every such provision. No waiver of any breach of this
Agreement shall be held to be a waiver of any other or subsequent breach.
11.8. RIGHTS OF PERSONS NOT PARTIES. Nothing contained in this
Agreement shall be deemed to create rights in persons not parties hereto,
other than the successors and permitted assigns of the parties hereto.
11.9. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida unless such
laws conflict with Nevada statutory provisions in which case such
statutory provisions would apply, without reference to Florida's conflict
of laws provision.
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IN WITNESS WHEREOF the Parties have executed this instrument as of the
date and year above written.
Universal Medical System, Inc.,
a Florida Corporation
By:
- - ----------------------------------- ---------------------------------------
Witness Myron A. Baker, CEO and
President
Attested:
- - ----------------------------------- ---------------------------------
Witness Printed Name Dennis D. Cole, as Secretary and
General Counsel
- - -----------------------------------
Witness
- - -----------------------------------
Witness Printed Name
By:
- - ----------------------------------- ------------------------------
Witness Larry Erber
- - -----------------------------------
Witness Printed Name
- - -----------------------------------
Witness
- - -----------------------------------
Witness Printed Name
14
<PAGE> 1
EXHIBIT 4(w)
STOCK OPTION AGREEMENT
AGREEMENT made as of the 1st day of May, 1996, by and between UNIVERSAL
MEDICAL SYSTEMS, INC, a Nevada corporation, having its office and principal
place of business located at 13825 Icot Boulevard, Suite 613, Clearwater,
Florida 34620 (the "COMPANY") and Matthew Gillio Enterprises, Ltd., a Florida
Limited Partnership having its office and principal place of business located
at 2809 Jacana Court, Longwood, Florida 32779 (the "HOLDER").
WITNESSETH:
WHEREAS, on the 1st day of May, 1996, pursuant to an Agreement between the
COMPANY, and H.B.L. Associates, Inc., of even date, the COMPANY'S Board of
Directors granted an option to Holder to purchase 500,000 shares of the
authorized but unissued Common Stock of the COMPANY, $.001 par value ("Stock")
at an exercise price equal to $.01 per share; a copy of said Agreement being
attached hereto and incorporated by reference herein; and,
WHEREAS, the Parties desire to set forth the terms and conditions of such
option;
NOW, THEREFORE, in consideration of the foregoing and of the terms and
conditions herein contained, the parties hereto agree as follows:
1. DEFINITIONS. As used herein, the following terms have the meanings
hereinafter set forth unless the context clearly indicates to the contrary:
1.1 "ACT" shall mean the Securities Act of 1933.
1.2. "AGREEMENT" shall mean the Agreement dated May 1, 1996,
executed by and between the COMPANY and H.B.L. Associates.
1.3. "BOARD" shall mean the Board of Directors of the Company.
1.4. "COMPANY" shall mean Universal Medical Systems, Inc., a Nevada
Corporation.
1.5. "DATE OF GRANT" shall mean the 1st day of May, 1996.
1.6. "EXERCISE PERIOD" shall mean anytime after the DATE OF GRANT
and upon earning rights to the option, or a portion thereof.
1.7. "EXERCISE PRICE" shall mean the purchase price for each share
of stock subject to this Option; to wit: $.01 per share.
<PAGE> 2
1.8. "HOLDER" shall mean the person identified hereinabove having
the right to exercise the option granted hereunder.
1.9. "OPTION" shall mean the right to purchase stock granted under
the provisions of this Agreement.
1.10. "STOCK" shall mean the COMPANY'S common stock, par value $.001
per share.
1.11. "STOCK OPTION AGREEMENT" shall mean this Agreement.
2. GRANT OF OPTION. Subject to the terms and conditions of the AGREEMENT,
the terms of Subparagraph 4.4.3 thereof being incorporated by reference herein,
the COMPANY hereby grants to the HOLDER the right and option to purchase all or
any part of an aggregate of 500,000 shares of STOCK for the EXERCISE PRICE on
the terms and conditions herein set forth.
3. EXERCISE OF OPTION. The OPTION shall be exercisable during the EXERCISE
PERIOD; provided, this OPTION shall be exercisable in whole or in part but not
as to less than 5,000 shares of Stock, unless the number of shares of STOCK as
to which this OPTION is exercisable is less than 5,000 at anytime or from time
to time during the EXERCISE PERIOD.
4. METHOD OF EXERCISE OF OPTION. The OPTION shall be exercised by delivery
to the COMPANY, as its principal place of business in Clearwater, Florida, of
(i) the written Notice of Exercise in the form attached hereto as Exhibit A,
which is incorporated herein by reference, specifying the number of shares of
STOCK with respect to which the OPTION is being exercised and signed by the
person exercising the OPTION as provided herein; and, (ii) payment in full of
the purchase price. Upon acceptance of such Notice and receipt of payment in
full the COMPANY shall cause to be issued a certificate representing the shares
of STOCK purchased. The HOLDER shall not have any of the rights of a stockholder
with respect to the STOCK covered by the OPTION until the date of issuance of a
stock certificate to him for such shares of STOCK. The certificates or
certificates for the STOCK as to which the OPTION shall have been so exercised
shall be registered in the name of the person or persons so exercising the
OPTION, and shall be delivered as aforesaid to or upon written order of the
person or persons exercising the OPTION. In the event the OPTION is being
exercised by any person or persons other than the HOLDER, the notice shall be
accompanied by appropriate proof of the right of such person or persons to
exercise the OPTION.
5. TRANSFER AND ASSIGNMENT OF OPTION. This OPTION and the rights and
privileges conferred in whole or in part hereby, may not be transferred,
assigned, pledged; or, hypothecated in any way (whether by operation of law,
except pursuant
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<PAGE> 3
to the laws of descent and distribution, or otherwise) unless registered under
the ACT; or, in the opinion of counsel satisfactory to the COMPANY an exemption
from registration under the ACT is available to such transaction. COMPANY shall
pay all costs incurred by the HOLDER in such transaction including but not
limited to legal fees. The OPTION shall not be subject to levy and execution,
attachment or similar process. Upon any attempt to transfer, assign, pledge,
hypothecate, or, otherwise dispose of the OPTION or any right or privilege
conferred hereby, contrary to the provisions hereof, or upon the levy and
execution, attachment or similar process on the OPTION and the rights and
privileges conferred under this STOCK OPTION AGREEMENT, this OPTION and the
rights and privileges conferred hereby shall immediately become null and void.
6. ISSUANCE OF SHARES. COMPANY shall be obligated to sell and issue STOCK
pursuant to this OPTION and in accordance with the terms hereof but not before
the STOCK with respect to which the OPTION is being exercised is effectively
registered or exempt from registration under the ACT in the opinion of counsel
for the COMPANY. The BOARD may require, as a condition to the sale of STOCK on
the exercise of the OPTION, that the person exercising the OPTION give to
COMPANY such documents, including such appropriate investment representations as
may be required by counsel for the COMPANY, and such additional agreements and
documents as the BOARD shall determine to be in the best interests of the
COMPANY.
7. RESTRICTIONS ON TRANSFERABILITY OF SECURITIES AND REGISTRATION RIGHTS.
The HOLDER hereby agrees that unregistered shares of STOCK ("Restricted
Securities") issued upon exercise of the OPTION, in whole or in part, shall not
be transferable except upon the conditions specified in this Section 7., which
conditions are intended to insure compliance with the provisions of the ACT, or,
in the case of Paragraph 7.12. hereof, to assist in an orderly distribution.
The HOLDER shall cause any proposed transferee of the Restricted Securities held
by the HOLDER to agree to take and hold such securities subject to the
provisions and upon the conditions specified in this Section 7.
7.1. CERTAIN DEFINITIONS. As used in this Section 7, the following
terms shall have the following respective meanings.
7.1.1. "COMMISSION" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the
ACT.
7.1.2. "REGISTRABLE SECURITIES" means (i) shares of STOCK
issued or issuable pursuant to the exercise of the earned OPTION;
and, (ii) any Common Stock issued in respect of the Shares or other
securities which were issued pursuant to the conversion of the
shares of STOCK
3
<PAGE> 4
upon any stock split, stock dividend, recapitalization, or similar
event.
7.1.3. The terms "REGISTER", "REGISTERED" and "REGISTRATION"
refer to a registration effected by preparing and filing a
registration statement in compliance with the ACT, and the
declaration or ordering of the effectiveness of such registration
statement.
7.1.4. "REGISTRATION EXPENSES" shall mean all expenses
incurred by the COMPANY in complying with Paragraph 7.4. hereof,
including, without limitation, all disbursements of filing fees,
printing expenses, fees and disbursements of counsel for the
COMPANY, reasonable fees and disbursements of counsel for the
selling HOLDERS, blue sky fees and expenses, and accountants'
expenses, including without limitation, any special audits incident
to or required by any such registration (but excluding the
compensation of regular employees of the COMPANY and any accounting,
audit or legal expenses the COMPANY would incur under the Securities
and Exchange Act of 1934, which shall be paid in any event by the
COMPANY).
7.1.5. "SELLING EXPENSES" shall mean all underwriting
discounts and selling commissions applicable to the sale of
Registrable Securities and any other securities of the COMPANY being
sold in the same registration as the Registrable Securities by the
HOLDER and, in the case of a registration pursuant to Paragraph
7.4., the expense of any special audits incident to or required by
such registration (but excluding the compensation of regular
employees of the COMPANY which shall be paid in any event by the
COMPANY).
7.2. RESTRICTIVE LEGEND; NOTATION ON STOCK BOOKS. Each certificate
representing (i) the Restricted Securities; or, (ii) any other securities
issued in respect to the Restricted Securities or issued upon conversion
of the Restricted Securities upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar event, shall (unless
otherwise permitted by the provisions of Paragraph 7.3.) be stamped or
otherwise imprinted with legends substantially in the form set forth in
Section 10. hereof. In addition, the COMPANY shall make a notation
regarding the restrictions on transfer of the Restricted Securities, and
any Restricted Securities shall be transferred on the books of the COMPANY
only if transferred or sold pursuant to an effective registration
statement under the ACT covering such securities or pursuant to and in
compliance with Paragraph 7.3.
7.3. NOTICE OF PROPOSED TRANSFERS. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply
in all respects with the provisions of this Paragraph 7.3. Prior to any
proposed
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<PAGE> 5
transfer of any Restricted Securities (other than under circumstances
described in Paragraph 7.4. hereof), the HOLDER thereof shall give written
notice to the COMPANY of such HOLDER'S intention to effect such transfer.
Each such notice shall describe the manner and circumstances of the
proposed transfer in sufficient detail, and, if requested by the COMPANY
shall be accompanied by, at the HOLDER'S option, either (i) an unqualified
written opinion of legal counsel who shall be reasonably satisfactory to
the COMPANY addressed to the COMPANY and reasonably satisfactory in form
and substance to the COMPANY'S counsel, to the effect that the proposed
transfer of the Restricted Securities may be effected without registration
under the ACT; or, (ii) a "no action" letter from the COMMISSION to the
effect that the transfer of such securities without registration will not
result in a recommendation by the staff of the COMMISSION that action be
taken with respect thereto, whereupon the HOLDER of such Restricted
Securities shall be entitled to transfer such Restricted Securities in
accordance with the terms of the notice delivered by the HOLDER to the
COMPANY. Each certificate evidencing the Restricted Securities transferred
as above provided shall bear the appropriate restrictive legend set forth
in Paragraph 7.2. and Section 10., except that such certificate shall not
bear such restrictive legend if the opinion of counsel or no action letter
referred to above is to the further effect that such legend is not
required in order to establish compliance with the provisions of the ACT.
7.4. COMPANY REGISTRATION.
7.4.1. If the COMPANY shall determine to register any of its
securities either for its own account or the account of a security
holder or holders exercising their respective demand registration
rights, if applicable, other than a registration relating solely to
employee benefit plans, or a registration relating solely to a
transaction pursuant to Rule 145 promulgated by the COMMISSION under
the ACT, or a registration statement on Form S-2, or a registration
on any registration form which does not permit secondary sales or
does not include substantially the same information as would be
required to be included in a registration statement covering the
sale of Registrable Securities, the COMPANY will:
(i) promptly give to each HOLDER written notice thereof
(which shall include a list of the jurisdictions in which the
COMPANY intends to attempt to qualify such securities under
the applicable blue sky or other state securities laws); and,
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in
any underwriting involved therein, all the Registrable
Securities specified in a written request or requests, made
within 15 days after the giving
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<PAGE> 6
of such written notice from the COMPANY, by any HOLDER or
HOLDERS, except as set forth hereinbelow,
7.4.2. UNDERWRITING. If the registration of which the COMPANY
gives notice is for a registered public offering involving an
underwriting, the COMPANY shall so advise the HOLDERS as a part of
the written notice given pursuant to Paragraph 7.4.1. (i). In such
event the right of any HOLDER to registration pursuant to this
Paragraph 7.4. shall be conditioned upon such HOLDER'S participation
in such underwriting and the inclusion of such HOLDER'S Registrable
Securities in the underwriting to the extent provided herein. All
HOLDERS proposing to distribute their securities through such
underwriting shall (together with the COMPANY) enter into an
underwriting agreement in customary form with the underwriter or
underwriters selected for underwriting by the COMPANY and on the
terms and conditions set forth by the COMPANY and the underwriter.
Notwithstanding any other provision of this Paragraph 7.4., if the
underwriter reasonably determines that marketing factors require a
limitation on the number of shares to be underwritten, the
underwriter may (subject to the allocation priority set forth
below) exclude some or all Registrable Securities from such
registration and underwriting. The COMPANY shall advise all HOLDERS
requesting registration, of the number of Registrable Securities
that may be included in the registration and underwriting and
allocate, pro rata, among HOLDERS of the Registrable Securities such
permitted number of Registrable Securities. Any Registrable
Securities or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
7.5. EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
this Section 7. shall be borne by the COMPANY and Selling Expenses shall
be borne by the HOLDER; provided however, that if any jurisdiction in
which the securities shall be qualified shall require that expenses
incurred in connection with the qualification of the securities in that
jurisdiction be borne by the selling shareholders, then such expenses
shall be payable by the selling shareholders pro rata, to the extent
required by such jurisdiction. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
a registration exclusively of the Registrable Securities shall be borne by
the COMPANY and Selling Expenses shall be borne by the HOLDER.
7.6. REGISTRATION PROCEDURES. In the case of each registration
effected by the COMPANY pursuant to this Section 7., the COMPANY will keep
each HOLDER advised in writing as to the initiation of each registration
and as
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<PAGE> 7
to the completion thereof. At its expense the COMPANY will:
7.6.1. Keep such registration effective for a period of 120
days or until the HOLDER or HOLDERS have completed the distribution
described in the registration statements relating thereto, whichever
first occurs; and,
7.6.2. Furnish such number of prospectuses and other documents
incident thereto as a HOLDER from time to time may reasonably
request.
7.7. INDEMNIFICATION.
7.7.1. The COMPANY will indemnify each HOLDER, with respect to
which registration, qualification or compliance has been effected
pursuant to this Section 7., against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material
fact contained in any prospectus, offering circular or other
document (including any related registration statement, notification
or the like) incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, or any violation by
the COMPANY of any rule or regulation promulgated under the ACT
applicable to the COMPANY and relating to action or inaction
required of the COMPANY in connection with any such registration,
qualification or compliance, and will reimburse each such HOLDER,
for any legal and other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage,
liability or action, including the same on Appeal; provided, that
the COMPANY will not be liable in any such case to the extent that
any such claim, loss, damage, liability or expense arises out of or
is based upon written information furnished to the COMPANY by an
instrument duly executed by such HOLDER and stated to be
specifically for use therein.
7.7.2. Each HOLDER will, if securities held by him are
included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the
COMPANY, each of its directors and officers, each legal counsel and
independent accountant of the COMPANY, each underwriter, if any, of
the COMPANY'S securities covered by such a registration statement,
each person who controls the COMPANY or such underwriter within the
meaning of the ACT, and each other such HOLDER against all claims,
losses, damages and liabilities (or actions in respect thereof)
arising out of or based on any untrue
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<PAGE> 8
statement (or alleged untrue statement) of a material fact contained
in any such registration statement, prospectus, offering circular or
other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and will reimburse
the COMPANY and such HOLDERS, directors, officers, persons,
underwriters and control persons for any legal or any other expenses
reasonably incurred in connection with investigation or defending
any such claim, loss, damage, liability or action, including the
same on Appeal, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission
(or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the COMPANY by
an instrument duly executed by such HOLDER and stated to be
specifically for use therein.
7.7.3. Each party entitled to indemnification under this
Paragraph 7.7. (the "Indemnified Party") shall give notice to the
party required to provide indemnification (the "Indemnifying Party")
promptly after such Indemnified Party has actual knowledge of any
claim as to which indemnity may be sought, and shall permit the
Indemnifying Party to assume the defense of any such claims or any
litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or
any litigation resulting therefrom, shall be approved by the
Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense
at such Indemnified Party's expense. The failure of any Indemnified
Party to give notice as provided herein shall relieve the
Indemnifying Party of its obligations under this Paragraph 7.7. only
if such failure is prejudicial to the ability of the Indemnifying
Party to defend such action, and such failure shall in no event
relieve the Indemnifying Party of any liability that it may have to
any Indemnified Party otherwise than under this Paragraph 7.7. No
Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant
or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation.
7.8. INFORMATION BY HOLDER. Each HOLDER of securities included in
any registration shall furnish to the COMPANY such information regarding
such HOLDER and the distribution proposed by such HOLDER as the COMPANY
may request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Section 7.
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<PAGE> 9
7.9. LIMITATIONS ON REGISTRATION OF ISSUES OF SECURITIES. Any
registration rights given by the COMPANY to any HOLDER or prospective
HOLDER of its securities shall be consistent with the registration rights
in this Section 7. and with the rights of the HOLDERS provided in this
Agreement.
7.10. RULE 144 REPORTING. With a view to making available the
benefits of certain rules and regulations of the Commission which may
permit the sale of the Restricted Securities to the public without
registration, the COMPANY agrees to:
7.10.1. Make and keep public information available as those
terms are understood and defined in Rule 144 under the ACT, at all
times.
7.10.2. Use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the
COMPANY under the ACT and the Securities and Exchange Act of 1934,
as amended;
7.11. TRANSFER OF REGISTRATION RIGHTS. The rights to cause the
COMPANY to register securities of the COMPANY under Paragraph 7.4. may be
assigned to a transferee of any of the Restricted Shares which are not
sold to the public; provided, that the COMPANY is given written notice at
the time of or within a reasonable time after said transfer, stating the
name and address of said transferee and identifying the securities with
respect to which such registration rights are being assigned.
7.12. "MARKET STAND-OFF" AGREEMENT. If requested by the COMPANY and
an underwriter of Common Stock (or other securities) of the COMPANY, the
HOLDER agrees not to sell or otherwise transfer or dispose of any Common
Stock (or other securities) of the COMPANY held during the ninety (90) day
period following the effective date of a registration statement of the
COMPANY filed under the ACT. Such agreement shall be in writing in form
satisfactory to the COMPANY and such underwriter. The COMPANY may impose
stop-transfer instructions with respect to the shares (or securities)
subject to the foregoing restrictions until the end of said (90) day
period.
8. DEMAND REGISTRATION. In lieu of HOLDER'S piggy back right set forth in
Section 7. as to the STOCK issuable upon exercise of the OPTION, the HOLDER may
demand the COMPANY in each fiscal year of this Stock Option Agreement to cause
to be registered under the ACT a percentage of the STOCK issuable upon the
exercise of the OPTION, such percentage of SHARES being equal to the results
obtained when the highest U.S. income tax bracket is added to the medicare tax
rate (currently 2.9%). COMPANY shall pay all Registration Expenses ( as defined
in Subparagraph 7.1.4.). and HOLDERS shall pay all Selling Expenses (as defined
in Subparagraph
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7.1.5.) incurred or to be incurred by the COMPANY in such registration. In any
registration statement filed by the COMPANY pursuant hereto the provisions of
Paragraph 7.7. shall apply.
9. ADJUSTMENTS TO STOCK ISSUABLE UPON EXERCISE OF OPTION.
9.1. An appropriate and proportionate adjustment shall be made in
the maximum number and/or kind of securities allocated to this OPTION,
without change in the aggregate purchase price applicable to the
unexercised portion of the outstanding OPTION, but with a corresponding
adjustment in the price for each share of STOCK or other unit of any
security covered by this OPTION upon the COMPANY'S issuance of New
Securities. New Securities shall mean any common stock or preferred stock
of the COMPANY, whether now authorized or not, and rights, options or
warrants to purchase said common stock or preferred stock, and securities
of any type whatsoever that are, or may become, convertible into said
common stock or preferred stock; provided, New Securities does not include
(i) securities issued pursuant to any COMPANY Employee Stock Bonus Plan or
Warrants or options outstanding on the DATE OF GRANT or options issued,
after the DATE OF GRANT pursuant to any COMPANY Stock Option Plan (ii)
securities offered to the public pursuant to a registration statement
under the ACT or pursuant to an exemption under the ACT; (iii) securities
issued pursuant to the acquisition of another entity by the COMPANY,
purchase of substantially all of another entity's assets; or, any other
reorganization whereby the COMPANY owns more or less than fifty percent
(50.0%) of the voting power of a corporation; (iv) up to twenty percent
(20.0%) of the bonus STOCK issued to employees of the COMPANY; (v)
securities issued in satisfaction, in whole or in part of the COMPANY'S
indebtedness; (vi) securities issued in conjunction with capital raising
activities for services rendered to the COMPANY. Except as provided for in
this Section 9. if the outstanding shares of STOCK of the COMPANY are
increased, decreased, changed into or exchanged for a different number or
kind of STOCK or securities of the COMPANY or stock of a different par
value or without par value, through reorganization, recapitalization,
reclassification, stock dividend, stock split; or, reverse stock split,
the appropriate and proportionate adjustment shall be made hereunder,
9.2. Upon the effective date of the dissolution or liquidation of
the COMPANY, or of a reorganization, merger or consolidation of the
COMPANY with one or more corporations or entities in which the COMPANY
will not survive as an independent, publicly owned corporation, or of a
transfer of substantially all the property or more than eighty percent
(80.0%) of the then outstanding STOCK of the COMPANY to another
corporation or entity, any OPTION granted hereunder shall be exercisable
until the effective date of such event and terminate and be of no further
force or effect on such effective date
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unless provision be made, in writing, in connection with such
transaction for the assumption of this OPTION, or the substitution of
this OPTION of new options covering the shares of a successor
corporation, or a parent or subsidiary thereof, with appropriate
adjustments as to number and kind of stock and prices, in which event
this OPTION or the new options substituted therefor, shall continue in
the manner and under the terms so provided. In the event of such
dissolution, liquidation, reorganization, merger, consolidation,
transfer of assets or transfer of STOCK, and if provision is not made
in such transaction for the assumption of this OPTION or the
substitution for this OPTION of new options covering the shares of a
successor corporation or a parent or subsidiary thereof, then the
HOLDER shall be entitled, prior to the effective date of any such
transaction, to purchase the full number of shares of STOCK under this
OPTION which he would otherwise have been entitled to purchase during
the remaining term of such OPTION. Upon the first purchase of shares of
STOCK pursuant to a tender offer or exchange offer, other then by the
COMPANY, for all or any part of the STOCK, the HOLDER shall be
entitled, prior to the termination date of any such tender offer, to
purchase the full number of shares of STOCK under this OPTION which he
otherwise would have been entitled to purchase during the remaining
term of such OPTION.
9.3. Adjustments under this Section 9. shall be made by the
COMPANY'S Board of Directors, whose determination as to what adjustments
shall be made, and the extent thereof, shall be final, binding and
conclusive. No fractional shares of STOCK shall be issued hereunder or any
such adjustment.
10. STOP TRANSFER ORDERS AND RESTRICTIVE LEGENDS. The COMPANY shall not be
required (i) to transfer on its books any Restricted Securities issued upon the
exercise of this OPTION or any rights associated therewith which shall have been
sold or transferred in violation of the provisions set forth in this Agreement;
or, (ii) to treat as owner of such Restricted Securities or to accord the right
to vote as such owner or to pay dividends or to register such Restricted
Securities to any transferee to whom any such Restricted Securities have be so
transferred. The COMPANY may place stop transfer orders with its transfer agent
against the transfer of Restricted Securities issued upon the exercise of the
OPTION in violation of the provisions of this Agreement. Further, certificates
evidencing Restricted Securities issued upon the exercise of the OPTION shall
bear the following restrictive legend:
"The shares represented by this certificate have been acquired for
investment and have not been registered under the Securities Act of
1933, as amended ("ACT"). the shares may not be sold or transferred
or an exemption therefrom under the "ACT".
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11. MISCELLANEOUS.
11.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations, warranties, covenants, indemnifications and agreements
made by any party in this Agreement, or in any exhibit, schedule,
certificate, document or list delivered by any such party pursuant hereto
shall survive the effective date of the transactions contemplated hereby.
Each party hereto shall be entitled to rely upon the representations and
warranties of the other party or parties.
11.2. PERFORMANCE. In the event of a default on the part of the
COMPANY, the HOLDER shall have the right, in addition to any other
remedies which may be available, to obtain specific performance of the
terms of this STOCK OPTION AGREEMENT. Should any party default in the
performance of the terms and conditions of this STOCK OPTION AGREEMENT or
any other agreement referred to herein which results in the filing of a
lawsuit for damages, or other remedy, or should HOLDER file suit for
specific performance, the prevailing party in such lawsuit shall be
entitled to recover reasonable attorneys' fees and court costs from the
losing party, including the same on appeal.
11.3. BENEFIT AND ASSIGNMENT. This Agreement shall be binding upon
the respective legal representatives, successors and permitted assigns of
the parties hereto.
11.4. EFFECT AND CONSTRUCTION OF THIS AGREEMENT. This STOCK OPTION
AGREEMENT, the AGREEMENT and the exhibits and schedules hereto embody the
entire agreement and understanding between the parties and supersede any
and all prior agreements, arrangements, and understandings relating to
matters provided for herein. In the event of a conflict between the terms
of this STOCK OPTION AGREEMENT and the AGREEMENT, the provisions of the
AGREEMENT shall control. The captions are for convenience only and will
not control or effect the meaning or construction of the provisions of
this STOCK OPTION AGREEMENT. This STOCK OPTION AGREEMENT may be executed
in one or more counterparts and all such counterparts shall constitute one
and the same instrument. The singular shall include the plural, the plural
shall include the singular and one gender shall include all genders. If
any provision of this STOCK OPTION AGREEMENT shall be held to be invalid
or unenforceable by a Court of competent jurisdiction, such invalidity or
unenforceability shall attach only to such provisions and shall not in any
way affect, effect, or render invalid or unenforceable any other provision
of this STOCK OPTION AGREEMENT and this STOCK OPTION AGREEMENT shall be
carried out as if such invalid or unenforceable provision were not
contained herein.
11.5. COOPERATION. Subject to the terms and conditions herein
provided, each of the parties hereto shall use its best efforts to take,
or cause to be taken, such action to execute and deliver, or cause to be
executed and
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<PAGE> 13
delivered, such additional documents and instruments and to do, or cause
to be done, all things necessary, proper or advisable under the provisions
of this Agreement and under applicable law to consummate and make
effective the transactions contemplated by this STOCK OPTION AGREEMENT.
11.6. NOTICES. All notices required or permitted hereunder shall be
in writing and shall be deemed to be properly given when personally
delivered to the party entitled to receive the notice or when sent by
certified or registered mail, postage prepaid and properly addressed to
the party entitled to receive such notice at the address stated above:
11.7. WAIVER, DISCHARGE, ETC. This Agreement may not be released,
discharged, abandoned, changed or modified in any manner, except by an
instrument in writing signed on behalf of each of the parties hereto and
in the case of the COMPANY by its duly authorized officers or
representatives. The failure of any party hereto to enforce at any time
any of the provisions of this Agreement shall in no way be construed to be
a waiver of any such provision, nor in any way to effect the validity of
this Agreement or any part thereof or the right of any party thereafter to
enforce each and every such provision. No waiver of any breach of this
Agreement shall be held to be a waiver of any other or subsequent breach.
11.8. RIGHTS OF PERSONS NOT PARTIES. Nothing contained in this
Agreement shall be deemed to create rights in persons not parties hereto,
other than the successors and permitted assigns of the parties hereto.
11.9. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida unless such
laws conflict with Nevada statutory provisions in which case such
statutory provisions would apply, without reference to Florida's conflict
of laws provision.
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<PAGE> 14
IN WITNESS WHEREOF the Parties have executed this instrument as of the
date and year above written.
Universal Medical System, Inc.,
a Florida Corporation
By:
- - ----------------------------------- ---------------------------------------
Witness Myron A. Baker, CEO and
President
Attested:
- - ----------------------------------- ---------------------------------
Witness Printed Name Dennis D. Cole, as Secretary and
General Counsel
- - -----------------------------------
Witness
- - -----------------------------------
Witness Printed Name Matthew Gillio Enterprises, Ltd.,
a Florida Limited Partnership
By:
- - ----------------------------------- ------------------------------
Witness Matthew Gillio, General
Partner
- - -----------------------------------
Witness Printed Name
- - -----------------------------------
Witness
- - -----------------------------------
Witness Printed Name
14
<PAGE> 1
EXHIBIT 4(x)
STOCK OPTION AGREEMENT
AGREEMENT made as of the 8th day of July, 1996, by and between UNIVERSAL
MEDICAL SYSTEMS, INC, a Nevada corporation, having its office and principal
place of business located at 13825 Icot Boulevard, Suite 613, Clearwater,
Florida 34620 (the "COMPANY") and Lawrence H. Katz, Attorney at Law, having his
office and principal place of business located at 341 N. Maitland Avenue, Suite
120, Maitland, Florida 32751 (the "HOLDER").
WITNESSETH:
WHEREAS, on the 8th day of July, 1996, the COMPANY'S Board of Directors
granted an option to Holder to purchase 450,000 shares of the authorized but
unissued Common Stock of the COMPANY, $.001 par value ("Stock") at an exercise
price equal to $.01 per share; and,
WHEREAS, the Parties desire to set forth the terms and conditions of such
option;
NOW, THEREFORE, in consideration of the foregoing and of the terms and
conditions herein contained, the parties hereto agree as follows:
1. DEFINITIONS. As used herein, the following terms have the meanings
hereinafter set forth unless the context clearly indicates to the contrary:
1.1 "ACT" shall mean the Securities Act of 1933.
1.2. "AGREEMENT" shall mean the Agreement dated July 8, 1996,
executed by and between the COMPANY and HOLDER.
1.3. "BOARD" shall mean the Board of Directors of the Company.
1.4. "COMPANY" shall mean Universal Medical Systems, Inc., a Nevada
Corporation.
1.5. "DATE OF GRANT" shall mean the 8th day of July, 1996.
1.6. "EXERCISE PERIOD" shall mean anytime after the DATE OF GRANT
and upon earning rights to the option, or a portion thereof.
1.7. "EXERCISE PRICE" shall mean the purchase price for each share
of stock subject to this Option; to wit: $.01 per share.
1.8. "HOLDER" shall mean the person identified hereinabove having
the
<PAGE> 2
right to exercise the option granted hereunder.
1.9. "OPTION" shall mean the right to purchase stock granted under
the provisions of this Agreement.
1.10. "STOCK" shall mean the COMPANY'S common stock, par value $.001
per share.
1.11. "STOCK OPTION AGREEMENT" shall mean this Agreement.
2. GRANT OF OPTION. Subject to the terms and conditions of the AGREEMENT,
the terms of Subparagraph 4.4.3 thereof being incorporated by reference herein,
the COMPANY hereby grants to the HOLDER the right and option to purchase all or
any part of an aggregate of 450,000 shares of STOCK for the EXERCISE PRICE on
the terms and conditions herein set forth.
3. EXERCISE OF OPTION. The OPTION shall be exercisable during the EXERCISE
PERIOD; provided, this OPTION shall be exercisable in whole or in part but not
as to less than 5,000 shares of Stock, unless the number of shares of STOCK as
to which this OPTION is exercisable is less than 5,000 at anytime or from time
to time during the EXERCISE PERIOD.
4. METHOD OF EXERCISE OF OPTION. The OPTION shall be exercised by delivery
to the COMPANY, as its principal place of business in Clearwater, Florida, of
(i) the written Notice of Exercise in the form attached hereto as Exhibit A,
which is incorporated herein by reference, specifying the number of shares of
STOCK with respect to which the OPTION is being exercised and signed by the
person exercising the OPTION as provided herein; and, (ii) payment in full of
the purchase price. Upon acceptance of such Notice and receipt of payment in
full the COMPANY shall cause to be issued a certificate representing the shares
of STOCK purchased. The HOLDER shall not have any of the rights of a stockholder
with respect to the STOCK covered by the OPTION until the date of issuance of a
stock certificate to him for such shares of STOCK. The certificates or
certificates for the STOCK as to which the OPTION shall have been so exercised
shall be registered in the name of the person or persons so exercising the
OPTION, and shall be delivered as aforesaid to or upon written order of the
person or persons exercising the OPTION. In the event the OPTION is being
exercised by any person or persons other than the HOLDER, the notice shall be
accompanied by appropriate proof of the right of such person or persons to
exercise the OPTION.
5. TRANSFER AND ASSIGNMENT OF OPTION. This OPTION and the rights and
privileges conferred in whole or in part hereby, may not be transferred,
assigned, pledged; or, hypothecated in any way (whether by operation of law,
except pursuant to the laws of descent and distribution, or otherwise) unless
registered under the ACT;
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<PAGE> 3
or, in the opinion of counsel satisfactory to the COMPANY an exemption from
registration under the ACT is available to such transaction. COMPANY shall pay
all costs incurred by the HOLDER in such transaction including but not limited
to legal fees. The OPTION shall not be subject to levy and execution,
attachment or similar process. Upon any attempt to transfer, assign, pledge,
hypothecate, or, otherwise dispose of the OPTION or any right or privilege
conferred hereby, contrary to the provisions hereof, or upon the levy and
execution, attachment or similar process on the OPTION and the rights and
privileges conferred under this STOCK OPTION AGREEMENT, this OPTION and the
rights and privileges conferred hereby shall immediately become null and void.
6. ISSUANCE OF SHARES. COMPANY shall be obligated to sell and issue STOCK
pursuant to this OPTION and in accordance with the terms hereof but not before
the STOCK with respect to which the OPTION is being exercised is effectively
registered or exempt from registration under the ACT in the opinion of counsel
for the COMPANY. The BOARD may require, as a condition to the sale of STOCK on
the exercise of the OPTION, that the person exercising the OPTION give to
COMPANY such documents, including such appropriate investment representations as
may be required by counsel for the COMPANY, and such additional agreements and
documents as the BOARD shall determine to be in the best interests of the
COMPANY.
7. RESTRICTIONS ON TRANSFERABILITY OF SECURITIES AND REGISTRATION RIGHTS.
The HOLDER hereby agrees that unregistered shares of STOCK ("Restricted
Securities") issued upon exercise of the OPTION, in whole or in part, shall not
be transferable except upon the conditions specified in this Section 7., which
conditions are intended to insure compliance with the provisions of the ACT, or,
in the case of Paragraph 7.12. hereof, to assist in an orderly distribution.
The HOLDER shall cause any proposed transferee of the Restricted Securities held
by the HOLDER to agree to take and hold such securities subject to the
provisions and upon the conditions specified in this Section 7.
7.1. CERTAIN DEFINITIONS. As used in this Section 7, the following
terms shall have the following respective meanings.
7.1.1. "COMMISSION" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the
ACT.
7.1.2. "REGISTRABLE SECURITIES" means (i) shares of STOCK
issued or issuable pursuant to the exercise of the earned OPTION;
and, (ii) any Common Stock issued in respect of the Shares or other
securities which were issued pursuant to the conversion of the
shares of STOCK upon any stock split, stock dividend,
recapitalization, or similar event.
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<PAGE> 4
7.1.3. The terms "REGISTER", "REGISTERED" and "REGISTRATION"
refer to a registration effected by preparing and filing a
registration statement in compliance with the ACT, and the
declaration or ordering of the effectiveness of such registration
statement.
7.1.4. "REGISTRATION EXPENSES" shall mean all expenses
incurred by the COMPANY in complying with Paragraph 7.4. hereof,
including, without limitation, all disbursements of filing fees,
printing expenses, fees and disbursements of counsel for the
COMPANY, reasonable fees and disbursements of counsel for the
selling HOLDERS, blue sky fees and expenses, and accountants'
expenses, including without limitation, any special audits incident
to or required by any such registration (but excluding the
compensation of regular employees of the COMPANY and any accounting,
audit or legal expenses the COMPANY would incur under the Securities
and Exchange Act of 1934, which shall be paid in any event by the
COMPANY).
7.1.5. "SELLING EXPENSES" shall mean all underwriting
discounts and selling commissions applicable to the sale of
Registrable Securities and any other securities of the COMPANY being
sold in the same registration as the Registrable Securities by the
HOLDER and, in the case of a registration pursuant to Paragraph
7.4., the expense of any special audits incident to or required by
such registration (but excluding the compensation of regular
employees of the COMPANY which shall be paid in any event by the
COMPANY).
7.2. RESTRICTIVE LEGEND; NOTATION ON STOCK BOOKS. Each certificate
representing (i) the Restricted Securities; or, (ii) any other securities
issued in respect to the Restricted Securities or issued upon conversion
of the Restricted Securities upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar event, shall (unless
otherwise permitted by the provisions of Paragraph 7.3.) be stamped or
otherwise imprinted with legends substantially in the form set forth in
Section 10. hereof. In addition, the COMPANY shall make a notation
regarding the restrictions on transfer of the Restricted Securities, and
any Restricted Securities shall be transferred on the books of the COMPANY
only if transferred or sold pursuant to an effective registration
statement under the ACT covering such securities or pursuant to and in
compliance with Paragraph 7.3.
7.3. NOTICE OF PROPOSED TRANSFERS. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply
in all respects with the provisions of this Paragraph 7.3. Prior to any
proposed transfer of any Restricted Securities (other than under
circumstances described in Paragraph 7.4. hereof), the HOLDER thereof
shall give written notice to the
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<PAGE> 5
COMPANY of such HOLDER'S intention to effect such transfer. Each such
notice shall describe the manner and circumstances of the proposed
transfer in sufficient detail, and, if requested by the COMPANY shall be
accompanied by, at the HOLDER'S option, either (i) an unqualified written
opinion of legal counsel who shall be reasonably satisfactory to the
COMPANY addressed to the COMPANY and reasonably satisfactory in form and
substance to the COMPANY'S counsel, to the effect that the proposed
transfer of the Restricted Securities may be effected without
registration under the ACT; or, (ii) a "no action" letter from the
COMMISSION to the effect that the transfer of such securities without
registration will not result in a recommendation by the staff of the
COMMISSION that action be taken with respect thereto, whereupon the
HOLDER of such Restricted Securities shall be entitled to transfer such
Restricted Securities in accordance with the terms of the notice
delivered by the HOLDER to the COMPANY. Each certificate evidencing the
Restricted Securities transferred as above provided shall bear the
appropriate restrictive legend set forth in Paragraph 7.2. and Section
10., except that such certificate shall not bear such restrictive legend
if the opinion of counsel or no action letter referred to above is to the
further effect that such legend is not required in order to establish
compliance with the provisions of the ACT.
7.4. COMPANY REGISTRATION.
7.4.1. If the COMPANY shall determine to register any of its
securities either for its own account or the account of a security
holder or holders exercising their respective demand registration
rights, if applicable, other than a registration relating solely to
employee benefit plans, or a registration relating solely to a
transaction pursuant to Rule 145 promulgated by the COMMISSION under
the ACT, or a registration statement on Form S-2, or a registration
on any registration form which does not permit secondary sales or
does not include substantially the same information as would be
required to be included in a registration statement covering the
sale of Registrable Securities, the COMPANY will:
(i) promptly give to each HOLDER written notice thereof
(which shall include a list of the jurisdictions in which the
COMPANY intends to attempt to qualify such securities under
the applicable blue sky or other state securities laws); and,
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in
any underwriting involved therein, all the Registrable
Securities specified in a written request or requests, made
within 15 days after the giving of such written notice from
the COMPANY, by any HOLDER or HOLDERS, except as set forth
hereinbelow,
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<PAGE> 6
7.4.2. UNDERWRITING. If the registration of which the COMPANY
gives notice is for a registered public offering involving an
underwriting, the COMPANY shall so advise the HOLDERS as a part of
the written notice given pursuant to Paragraph 7.4.1. (i). In such
event the right of any HOLDER to registration pursuant to this
Paragraph 7.4. shall be conditioned upon such HOLDER'S participation
in such underwriting and the inclusion of such HOLDER'S Registrable
Securities in the underwriting to the extent provided herein. All
HOLDERS proposing to distribute their securities through such
underwriting shall (together with the COMPANY) enter into an
underwriting agreement in customary form with the underwriter or
underwriters selected for underwriting by the COMPANY and on the
terms and conditions set forth by the COMPANY and the underwriter.
Notwithstanding any other provision of this Paragraph 7.4., if the
underwriter reasonably determines that marketing factors require a
limitation on the number of shares to be underwritten, the
underwriter may (subject to the allocation priority set forth
below) exclude some or all Registrable Securities from such
registration and underwriting. The COMPANY shall advise all HOLDERS
requesting registration, of the number of Registrable Securities
that may be included in the registration and underwriting and
allocate, pro rata, among HOLDERS of the Registrable Securities such
permitted number of Registrable Securities. Any Registrable
Securities or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
7.5. EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
this Section 7. shall be borne by the COMPANY and Selling Expenses shall
be borne by the HOLDER; provided however, that if any jurisdiction in
which the securities shall be qualified shall require that expenses
incurred in connection with the qualification of the securities in that
jurisdiction be borne by the selling shareholders, then such expenses
shall be payable by the selling shareholders pro rata, to the extent
required by such jurisdiction. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
a registration exclusively of the Registrable Securities shall be borne by
the COMPANY and Selling Expenses shall be borne by the HOLDER.
7.6. REGISTRATION PROCEDURES. In the case of each registration
affected by the COMPANY pursuant to this Section 7., the COMPANY will keep
each HOLDER advised in writing as to the initiation of each registration
and as to the completion thereof. At its expense the COMPANY will:
7.6.1. Keep such registration effective for a period of 120
days
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<PAGE> 7
or until the HOLDER or HOLDERS have completed the distribution
described in the registration statements relating thereto, whichever
first occurs; and,
7.6.2. Furnish such number of prospectuses and other documents
incident thereto as a HOLDER from time to time may reasonably
request.
7.7. INDEMNIFICATION.
7.7.1. The COMPANY will indemnify each HOLDER, with respect to
which registration, qualification or compliance has been effected
pursuant to this Section 7., against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material
fact contained in any prospectus, offering circular or other
document (including any related registration statement, notification
or the like) incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, or any violation by
the COMPANY of any rule or regulation promulgated under the ACT
applicable to the COMPANY and relating to action or inaction
required of the COMPANY in connection with any such registration,
qualification or compliance, and will reimburse each such HOLDER,
for any legal and other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage,
liability or action, including the same on Appeal; provided, that
the COMPANY will not be liable in any such case to the extent that
any such claim, loss, damage, liability or expense arises out of or
is based upon written information furnished to the COMPANY by an
instrument duly executed by such HOLDER and stated to be
specifically for use therein.
7.7.2. Each HOLDER will, if securities held by him are
included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the
COMPANY, each of its directors and officers, each legal counsel and
independent accountant of the COMPANY, each underwriter, if any, of
the COMPANY'S securities covered by such a registration statement,
each person who controls the COMPANY or such underwriter within the
meaning of the ACT, and each other such HOLDER against all claims,
losses, damages and liabilities (or actions in respect thereof)
arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any
omission (or alleged omission) to state therein a
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<PAGE> 8
material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse the
COMPANY and such HOLDERS, directors, officers, persons,
underwriters and control persons for any legal or any other
expenses reasonably incurred in connection with investigation or
defending any such claim, loss, damage, liability or action,
including the same on Appeal, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written
information furnished to the COMPANY by an instrument duly executed
by such HOLDER and stated to be specifically for use therein.
7.7.3. Each party entitled to indemnification under this
Paragraph 7.7. (the "Indemnified Party") shall give notice to the
party required to provide indemnification (the "Indemnifying Party")
promptly after such Indemnified Party has actual knowledge of any
claim as to which indemnity may be sought, and shall permit the
Indemnifying Party to assume the defense of any such claims or any
litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or
any litigation resulting therefrom, shall be approved by the
Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense
at such Indemnified Party's expense. The failure of any Indemnified
Party to give notice as provided herein shall relieve the
Indemnifying Party of its obligations under this Paragraph 7.7. only
if such failure is prejudicial to the ability of the Indemnifying
Party to defend such action, and such failure shall in no event
relieve the Indemnifying Party of any liability that it may have to
any Indemnified Party otherwise than under this Paragraph 7.7. No
Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant
or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation.
7.8. INFORMATION BY HOLDER. Each HOLDER of securities included in
any registration shall furnish to the COMPANY such information regarding
such HOLDER and the distribution proposed by such HOLDER as the COMPANY
may request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Section 7.
7.9. LIMITATIONS ON REGISTRATION OF ISSUES OF SECURITIES. Any
registration rights given by the COMPANY to any HOLDER or prospective
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<PAGE> 9
HOLDER of its securities shall be consistent with the registration rights
in this Section 7. and with the rights of the HOLDERS provided in this
Agreement.
7.10. RULE 144 REPORTING. With a view to making available the
benefits of certain rules and regulations of the Commission which may
permit the sale of the Restricted Securities to the public without
registration, the COMPANY agrees to:
7.10.1. Make and keep public information available as those
terms are understood and defined in Rule 144 under the ACT, at all
times.
7.10.2. Use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the
COMPANY under the ACT and the Securities and Exchange Act of 1934,
as amended;
7.11. TRANSFER OF REGISTRATION RIGHTS. The rights to cause the
COMPANY to register securities of the COMPANY under Paragraph 7.4. may be
assigned to a transferee of any of the Restricted Shares which are not
sold to the public; provided, that the COMPANY is given written notice at
the time of or within a reasonable time after said transfer, stating the
name and address of said transferee and identifying the securities with
respect to which such registration rights are being assigned.
7.12. "MARKET STAND-OFF" AGREEMENT. If requested by the COMPANY and
an underwriter of Common Stock (or other securities) of the COMPANY, the
HOLDER agrees not to sell or otherwise transfer or dispose of any Common
Stock (or other securities) of the COMPANY held during the ninety (90) day
period following the effective date of a registration statement of the
COMPANY filed under the ACT. Such agreement shall be in writing in form
satisfactory to the COMPANY and such underwriter. The COMPANY may impose
stop-transfer instructions with respect to the shares (or securities)
subject to the foregoing restrictions until the end of said (90) day
period.
8. DEMAND REGISTRATION. In lieu of HOLDER'S piggy back right set forth in
Section 7. as to the STOCK issuable upon exercise of the OPTION, the HOLDER may
demand the COMPANY in each fiscal year of this Stock Option Agreement to cause
to be registered under the ACT a percentage of the STOCK issuable upon the
exercise of the OPTION, such percentage of SHARES being equal to the results
obtained when the highest U.S. income tax bracket is added to the medicare tax
rate (currently 2.9%). COMPANY shall pay all Registration Expenses ( as defined
in Subparagraph 7.1.4.) and HOLDERS shall pay all Selling Expenses (as defined
in Subparagraph 7.1.5.) incurred or to be incurred by the COMPANY in such
registration. In any registration statement filed by the COMPANY pursuant
hereto the provisions of
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Paragraph 7.7. shall apply.
9. ADJUSTMENTS TO STOCK ISSUABLE UPON EXERCISE OF OPTION.
9.1. An appropriate and proportionate adjustment shall be made in
the maximum number and/or kind of securities allocated to this OPTION,
without change in the aggregate purchase price applicable to the
unexercised portion of the outstanding OPTION, but with a corresponding
adjustment in the price for each share of STOCK or other unit of any
security covered by this OPTION upon the COMPANY'S issuance of New
Securities. New Securities shall mean any common stock or preferred stock
of the COMPANY, whether now authorized or not, and rights, options or
warrants to purchase said common stock or preferred stock, and securities
of any type whatsoever that are, or may become, convertible into said
common stock or preferred stock; provided, New Securities does not include
(i) securities issued pursuant to any COMPANY Employee Stock Bonus Plan or
Warrants or options outstanding on the DATE OF GRANT or options issued,
after the DATE OF GRANT pursuant to any COMPANY Stock Option Plan (ii)
securities offered to the public pursuant to a registration statement
under the ACT or pursuant to an exemption under the ACT; (iii) securities
issued pursuant to the acquisition of another entity by the COMPANY,
purchase of substantially all of another entity's assets; or, any other
reorganization whereby the COMPANY owns more or less than fifty percent
(50.0%) of the voting power of a corporation; (iv) up to twenty percent
(20.0%) of the bonus STOCK issued to employees of the COMPANY; (v)
securities issued in satisfaction, in whole or in part of the COMPANY'S
indebtedness; (vi) securities issued in conjunction with capital raising
activities for services rendered to the COMPANY. Except as provided for in
this Section 9. if the outstanding shares of STOCK of the COMPANY are
increased, decreased, changed into or exchanged for a different number or
kind of STOCK or securities of the COMPANY or stock of a different par
value or without par value, through reorganization, recapitalization,
reclassification, stock dividend, stock split; or, reverse stock split,
the appropriate and proportionate adjustment shall be made hereunder,
9.2. Upon the effective date of the dissolution or liquidation of
the COMPANY, or of a reorganization, merger or consolidation of the
COMPANY with one or more corporations or entities in which the COMPANY
will not survive as an independent, publicly owned corporation, or of a
transfer of substantially all the property or more than eighty percent
(80.0%) of the then outstanding STOCK of the COMPANY to another
corporation or entity, any OPTION granted hereunder shall be exercisable
until the effective date of such event and terminate and be of no further
force or effect on such effective date unless provision be made, in
writing, in connection with such transaction for the assumption of this
OPTION, or the substitution of this OPTION of new
10
<PAGE> 11
options covering the shares of a successor corporation, or a parent or
subsidiary thereof, with appropriate adjustments as to number and kind
of stock and prices, in which event this OPTION or the new options
substituted therefor, shall continue in the manner and under the terms
so provided. In the event of such dissolution, liquidation,
reorganization, merger, consolidation, transfer of assets or transfer
of STOCK, and if provision is not made in such transaction for the
assumption of this OPTION or the substitution for this OPTION of new
options covering the shares of a successor corporation or a parent or
subsidiary thereof, then the HOLDER shall be entitled, prior to the
effective date of any such transaction, to purchase the full number of
shares of STOCK under this OPTION which he would otherwise have been
entitled to purchase during the remaining term of such OPTION. Upon
the first purchase of shares of STOCK pursuant to a tender offer or
exchange offer, other than by the COMPANY, for all or any part of the
STOCK, the HOLDER shall be entitled, prior to the termination date of
any such tender offer, to purchase the full number of shares of STOCK
under this OPTION which he otherwise would have been entitled to
purchase during the remaining term of such OPTION.
9.3. Adjustments under this Section 9. shall be made by the
COMPANY'S Board of Directors, whose determination as to what adjustments
shall be made, and the extent thereof, shall be final, binding and
conclusive. No fractional shares of STOCK shall be issued hereunder or any
such adjustment.
10. STOP TRANSFER ORDERS AND RESTRICTIVE LEGENDS. The COMPANY shall not be
required (i) to transfer on its books any Restricted Securities issued upon the
exercise of this OPTION or any rights associated therewith which shall have been
sold or transferred in violation of the provisions set forth in this Agreement;
or, (ii) to treat as owner of such Restricted Securities or to accord the right
to vote as such owner or to pay dividends or to register such Restricted
Securities to any transferee to whom any such Restricted Securities have be so
transferred. The COMPANY may place stop transfer orders with its transfer agent
against the transfer of Restricted Securities issued upon the exercise of the
OPTION in violation of the provisions of this Agreement. Further, certificates
evidencing Restricted Securities issued upon the exercise of the OPTION shall
bear the following restrictive legend:
"The shares represented by this certificate have been acquired for
investment and have not been registered under the Securities Act of
1933, as amended ("ACT"). the shares may not be sold or transferred
or an exemption therefrom under the "ACT".
11. MISCELLANEOUS.
11.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations,
11
<PAGE> 12
warranties, covenants, indemnifications and agreements made by any party
in this Agreement, or in any exhibit, schedule, certificate, document or
list delivered by any such party pursuant hereto shall survive the
effective date of the transactions contemplated hereby. Each party hereto
shall be entitled to rely upon the representations and warranties of
the other party or parties.
11.2. PERFORMANCE. In the event of a default on the part of the
COMPANY, the HOLDER shall have the right, in addition to any other
remedies which may be available, to obtain specific performance of the
terms of this STOCK OPTION AGREEMENT. Should any party default in the
performance of the terms and conditions of this STOCK OPTION AGREEMENT or
any other agreement referred to herein which results in the filing of a
lawsuit for damages, or other remedy, or should HOLDER file suit for
specific performance, the prevailing party in such lawsuit shall be
entitled to recover reasonable attorneys' fees and court costs from the
losing party, including the same on appeal.
11.3. BENEFIT AND ASSIGNMENT. This Agreement shall be binding upon
the respective legal representatives, successors and permitted assigns of
the parties hereto.
11.4. EFFECT AND CONSTRUCTION OF THIS AGREEMENT. This STOCK OPTION
AGREEMENT, the AGREEMENT and the exhibits and schedules hereto embody the
entire agreement and understanding between the parties and supersede any
and all prior agreements, arrangements, and understandings relating to
matters provided for herein. In the event of a conflict between the terms
of this STOCK OPTION AGREEMENT and the AGREEMENT, the provisions of the
AGREEMENT shall control. The captions are for convenience only and will
not control or effect the meaning or construction of the provisions of
this STOCK OPTION AGREEMENT. This STOCK OPTION AGREEMENT may be executed
in one or more counterparts and all such counterparts shall constitute one
and the same instrument. The singular shall include the plural, the plural
shall include the singular and one gender shall include all genders. If
any provision of this STOCK OPTION AGREEMENT shall be held to be invalid
or unenforceable by a Court of competent jurisdiction, such invalidity or
unenforceability shall attach only to such provisions and shall not in any
way affect, effect, or render invalid or unenforceable any other provision
of this STOCK OPTION AGREEMENT and this STOCK OPTION AGREEMENT shall be
carried out as if such invalid or unenforceable provision were not
contained herein.
11.5. COOPERATION. Subject to the terms and conditions herein
provided, each of the parties hereto shall use its best efforts to take,
or cause to be taken, such action to execute and deliver, or cause to be
executed and delivered, such additional documents and instruments and to
do, or cause to
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<PAGE> 13
be done, all things necessary, proper or advisable under the provisions
of this Agreement and under applicable law to consummate and make
effective the transactions contemplated by this STOCK OPTION AGREEMENT.
11.6. NOTICES. All notices required or permitted hereunder shall be
in writing and shall be deemed to be properly given when personally
delivered to the party entitled to receive the notice or when sent by
certified or registered mail, postage prepaid and properly addressed to
the party entitled to receive such notice at the address stated above:
11.7. WAIVER, DISCHARGE, ETC. This Agreement may not be released,
discharged, abandoned, changed or modified in any manner, except by an
instrument in writing signed on behalf of each of the parties hereto and
in the case of the COMPANY by its duly authorized officers or
representatives. The failure of any party hereto to enforce at any time
any of the provisions of this Agreement shall in no way be construed to be
a waiver of any such provision, nor in any way to effect the validity of
this Agreement or any part thereof or the right of any party thereafter to
enforce each and every such provision. No waiver of any breach of this
Agreement shall be held to be a waiver of any other or subsequent breach.
11.8. RIGHTS OF PERSONS NOT PARTIES. Nothing contained in this
Agreement shall be deemed to create rights in persons not parties hereto,
other than the successors and permitted assigns of the parties hereto.
11.9. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida unless such
laws conflict with Nevada statutory provisions in which case such
statutory provisions would apply, without reference to Florida's conflict
of laws provision.
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<PAGE> 14
IN WITNESS WHEREOF the Parties have executed this instrument as of the
date and year above written.
Universal Medical System, Inc.,
a Florida Corporation
/s/ Jennifer L. Jerger By: /s/ Myron A. Baker
- - ----------------------------------- ---------------------------------------
Witness Myron A. Baker, CEO and
President
Jennifer L. Jerger Attested: /s/ Dennis D. Cole
- - ----------------------------------- ---------------------------------
Witness Printed Name Dennis D. Cole, as Secretary and
/s/ Matthew L. Szynkiewicz General Counsel
- - -----------------------------------
Witness
Matthew L. Szynkiewicz
- - -----------------------------------
Witness Printed Name
/s/ Marilyn Wordell By: /s/ Lawrence H. Katz
- - ----------------------------------- ------------------------------
Witness Lawrence H. Katz
Marilyn Wordell
- - -----------------------------------
Witness Printed Name
/s/ Rosalyn Bill
- - -----------------------------------
Witness
Rosalyn Bill
- - -----------------------------------
Witness Printed Name
14
<PAGE> 1
EXHIBIT 4(y)
ADDENDUM TO OPTION AGREEMENT
DATED AS OF JULY 8, 1996
BETWEEN
UNIVERSAL MEDICAL SYSTEMS, INC. ("COMPANY")
(A NEVADA CORPORATION)
AND
LAWRENCE H. KATZ, ATTORNEY AT LAW ("HOLDER")
The above referenced Option Agreement ("Agreement") is hereby amended by
the addition of the following:
Holder shall earn the options granted pursuant to the Agreement by
performing services to and for the Company's benefit, including services
performed prior to July 8, 1996, based upon the following formula:
Multiply each of the Holder's monthly statements for services
rendered during the month covered by each such statement by the
percentage of each such monthly fees to be paid by the grant of
options under the Agreement (not to exceed 75.0% of such monthly
fees). Divide the results obtained by fifty percent (50.0%) of the
average closing bid price of the Company's common stock on the last
ten (10) trading days of the month in which the fees were earned and
multiply the results by three (3).
IN WITNESS WHEREOF, the parties have executed this instrument as of July
8, 1996.
Universal Medical System, Inc.,
a Nevada Corporation
/s/ Jennifer L. Jerger By: /s/ Myron A. Baker
- - ------------------------------- ----------------------------------
Witness Myron A. Baker, CEO and President
/s/ Jennifer L. Jerger Attest: /s/ Dennis D. Cole
- - ------------------------------- ------------------------------
Witness Printed Name Dennis D. Cole, as Secretary
and General Counsel
/s/ Matthew L. Szywkiewicz
- - -------------------------------
Witness
/s/ MATTHEW L. SZYWKIEWICZ
- - -------------------------------
Witness Printed Name
<PAGE> 2
/s/ Jennifer L. Jerger
- - -------------------------------
Witness
/s/ Jennifer L. Jerger /s/ Dennis D. Cole
- - ------------------------------- ---------------------------------
Witness Printed Name Dennis D. Cole, as Secretary and
General Counsel
(CORPORATE SEAL)
/s/ Matthew L. Szywkiewicz
- - -------------------------------
Witness
/s/ MATTHEW L. SZYWKIEWICZ
- - -------------------------------
Witness Printed Name
/s/ Marilyn Wordell /s/ Lawrence H. Katz
- - ------------------------------- ---------------------------------
Witness Lawrence H. Katz
/s/ MARILYN WORDELL
- - -------------------------------
Witness Printed Name
/s/ Rosalyn Bill
- - -------------------------------
Witness
/s/ Rosalyn Bill
- - -------------------------------
Witness Printed Name
<PAGE> 1
EXHIBIT 4(z)
WARRANT AGREEMENT dated as of September 12, 1996 between Universal Medical
Systems, Inc. a Nevada corporation (the "Company") and Sands Brothers & Co.,
Ltd., a Delaware corporation (hereinafter referred to variously as the "Holder"
or "Sands Brothers").
WITNESSETH:
WHEREAS, the Company and Sands Brothers have entered into a certain
financial advisory agreement of even date herewith (hereinafter the "Advisory
Agreement"), pursuant to which Sands Brothers is entitled to receive certain
compensation, including, among other things, warrants ("Warrants") to purchase
1,266,599 shares of the Company's common stock, no par value per share ("Common
Stock"), upon and subject to the terms and conditions of the Advisory
Agreement.
NOW, THEREFORE, in consideration of the premises, the payment by the Holder
to the Company of TWENTY FIVE ($25.00) DOLLARS, the agreements herein set forth
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agrees as follows:
I. Grant. The Holder is hereby granted the right to purchase, at
any time from September 12, 1996, until 5:30 p.m., New York time, on September
12, 2001, up to an aggregate of 1,266,599 shares of Common Stock at the initial
exercise price per share (subject to adjustment as provided in Section 8
hereof) as provided in Section 6 hereof.
2. Warrant Certificates. The Warrant certificates (the "Warrant
Certificates") delivered and to be delivered pursuant to this Agreement shall
be in the form set forth in Exhibit A attached hereto and made a part hereof,
with such appropriate insertions, omissions, substitutions, and other
variations as required or permitted by this Agreement.
3. Exercise of Warrant.
<PAGE> 2
Section 3.1 Method of Exercise. The Warrants initially are exercisable at
an initial exercise price (subject to adjustment as provided in Section 8
hereof) per share of Common Stock set forth in Section 6 hereof payable by
certified or official bank check in New York Clearing House funds, subject to
adjustment as provided in Section 8 hereof. Upon surrender of a Warrant
Certificate with the annexed Form of Election to Purchase duly executed,
together with payment of the Exercise Price (as hereinafter defined) for the
shares of Common Stock purchased at the Company's principal offices in Florida
(presently located at 13825 Icot Boulevard, Suite 613, Clearwater, FL 34620)
the registered holder of a Warrant Certificate ("Holder" or "Holders") shall be
entitled to receive a certificate or certificates for the shares of Common
Stock so purchased. The purchase rights represented by each Warrant
Certificate are exercisable at the option of the Holder thereof, in whole or in
part (but not as to fractional shares of the Common Stock underlying the
Warrants). Warrants may be exercised to purchase all or part of the shares of
Common Stock represented thereby. In the case of the purchase of less than all
the shares of Common Stock purchasable under any Warrant Certificate, the
Company shall cancel said Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate of like tenor for the
balance of the shares of Common Stock.
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<PAGE> 3
Section 3.2 Exercise by Surrender of Warrant.
(a) In addition to the method of payment set forth in Section
3.1 and in lieu of any cash payment required thereunder, the Holder(s) of the
Warrants shall have the right at any time and from time to time exercise the
Warrants in full or in part by surrendering the Warrant Certificate in the
manner specified in Section 3.1 in exchange for the number of shares of Common
Stock equal to the product of (x) the number of shares to which the Warrants
are being exercised multiplied by (y) a fraction, the numerator of which is the
Market Price (as defined in Section 8.1 (vi) hereof) of the Common Stock less
the Exercise Price and the denominator of which is such Market Price.
(b) Solely for the purposes of this Section 3.2, Market Price
shall be calculated either (i) on the date on which the form of election
attached hereto is deemed to have been sent to the Company pursuant to
Section 13 hereof ("Notice Date") or (ii) as the average of the Market Price
for each of the five trading days preceding the Notice Date, whichever of (i)
or (ii) is greater.
4. Issuance of Certificates. Upon the exercise of the
Warrants, the issuance of certificates for shares of Common Stock or
other securities, properties or rights underlying such Warrants, shall be made
forthwith (and in any event such issuance shall be made within five (5)
business days thereafter) without charge to the Holder thereof including,
without limitation, any tax which may be payable in respect of the issuance
thereof, and such certificates shall (subject to the provisions of Sections 5
and 7 hereof) be issued in the name of, or in such names as may be directed by,
the Holder thereof; provided, however, that the Company shall not be required
to pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any such certificates in a name other than that of the
Holder and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the
3
<PAGE> 4
satisfaction of the Company that such tax has been paid.
The Warrant Certificates and the certificates representing the shares of
Common Stock (and/or other securities, property or rights issuable upon
exercise of the Warrants) shall be executed on behalf of the Company by the
manual or facsimile signature of the then present Chairman or Vice Chairman of
the Board of Directors or President or Vice President of the Company under its
corporate seal reproduced thereon, attested to by the manual or facsimile
signature of the then present Secretary or Assistant Secretary of the Company.
Warrant Certificates shall be dated the date of execution by the Company upon
initial issuance, division, exchange, substitution or transfer.
5. Restriction On Transfer of Warrants. The Holder of a Warrant
Certificate, by its acceptance thereof, covenants and agrees that the Warrants
are being acquired as an investment and not with a view to the distribution
thereof.
6. Exercise Price.
Section 6.1 Initial and Adjusted Exercise Price. Except as otherwise
provided in Section 8 hereof, the initial exercise price of each Warrant shall
be $2.00 per share of Common Stock. The adjusted exercise price shall be the
price which shall result from time to time from any and all adjustments of the
initial exercise price in accordance with the provisions of Section 8 hereof.
Section 6.2 Exercise Price. The term "Exercise Price" herein shall
mean the initial exercise price or the adjusted exercise price, depending upon
the context.
7. Registration Rights.
Section 7.1 Registration Under the Securities Act of 1933. The
Warrants and the shares of Common Stock issuable upon exercise of the
Warrants and any of the other securities issuable upon exercise of the Warrants
have not been registered under the Securities Act of 1933, as amended (the
"Act") for public resale. Upon exercise, in part or in whole, of the Warrants,
certificates representing the shares of Common Stock and any other securities
issuable upon
4
<PAGE> 5
exercise of the Warrants (collectively, the "Warrant Securities") shall bear
the following legend:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended ("Act") for public resale,
and may not be offered or sold except pursuant to (i) an effective
registration statement under the Act, (ii) to the extent applicable, Rule
144 under the Act (or any similar rule under such Act relating to the
disposition of securities), or (iii) an opinion of counsel, if such
opinion shall be reasonably satisfactory to counsel to the issuer, that an
exemption from registration under such Act is available.
Section 7.2 Piggyback Registration. If, at any time during the five
year period commencing after the date hereof, the Company proposes to register
any of its securities under the Act (other than in connection with a merger or
pursuant to Form S-8, S4 or comparable registration statement) it will give
written notice by registered mail, at least thirty (30) days prior to the
filing of each registration statement, to Sands Brothers and to all other
Holders of the Warrants and/or the Wan-ant Securities of its intention to do
so. If Sands Brothers or other Holders of the Warrants and/or Warrant
Securities notify the Company within twenty (20) days after receipt of any such
notice of its or their desire to include any such securities in such proposed
registration statement, the Company shall afford Sands Brothers and such
Holders of the Warrants and/or Warrant Securities the opportunity to have any
such Warrant Securities registered under such registration statement.
Section 7.3 Demand Registration.
(a) At any time during the term of this Warrant, the Holders of
the Warrants and/or Warrant Securities representing a "Majority" (as
hereinafter defined) of such securities (assuming the exercise of all of the
Warrants) shall have the right (which right is in addition to the registration
rights under Section 7.2 hereof), exercisable by written notice to the Company,
to have the Company prepare and file with the Commission, on one occasion, a
registration statement and such other documents, including a prospectus, as may
be necessary in the opinion of both counsel
5
<PAGE> 6
for the Company and counsel for Sands Brothers and Holders, in order to comply
with the provisions of the Act, so as to permit a public offering and sale of
their respective Warrant Securities for nine (9) consecutive months by such
Holders and any other Holders of the Warrants and/or Warrant Securities who
notify the Company within ten (10) days after receiving notice from the Company
of such request.
(b) The Company covenants and agrees to give written notice of any
registration request under this Section 7.3 by any Holder or Holders to all
other registered Holders of the Warrants and the Warrant Securities within (10)
days from the date of the receipt of any such registration request.
(c) Notwithstanding anything to the contrary contained herein, if the
Company shall not have filed a registration statement for the Warrant
Securities within the time period specified in Section 7.4(a) hereof pursuant
to the written notice specified in Section 7.3(a) of a Majority of the Holders
of the Warrants and/or Warrant Securities, the Company agrees that upon the
written notice of election of a Majority of the Holders of the Warrants and/or
Warrant Securities it shall repurchase (i) any and all Warrant Securities at
higher of the Market Price (as defined in Section 8.1 (vi)) per share of Common
Stock on (x) the date of the notice sent pursuant to Section 7.3(a) or (y) the
expiration of the period in Section 7.4(a) and (ii) any and all Warrants at
such Market Price less the exercise price of such Warrant. Such repurchase
shall be in immediately available funds and shall close within two (2) days
after the later of (i) the expiration of the period specified in Section 7.4(a)
or (ii) the delivery of the written notice of election specified in this
Section 7.3(d).
Section 7.4 Covenants of the Company With Respect to Registration. In
connection with any registration under Section 7.2 or 7.3 hereof, the Company
covenants and agrees as follows:
(a) The Company shall use its best efforts to file a registration
statement within sixty (60) days of receipt of any demand therefor, shall use
its best efforts to have any registration
6
<PAGE> 7
statements declared effective at the earliest possible time, and shall furnish
the Holder desiring to sell Warrant Securities such number of prospectuses as
shall reasonably be requested.
(b) The Company shall pay all costs (excluding any underwriting or
selling commissions or other charges of any broker-dealer acting on behalf of
Holders), fees and expenses in connection with all registration statements
filed pursuant to Sections 7.2 and 7.3(a) hereof including, without limitation,
the Company's legal and accounting fees, printing expenses, blue sky fees and
expenses. If the Company shall fail to comply with the provisions of Section
7.4(a), the Company shall, in addition to any other equitable or other relief
available to the Holder(s), be liable for any or all damages due to loss of
profit sustained by the Holder(s) requesting registration of its Warrant
Securities.
(c) The Company will take all necessary action which may be required
in qualifying or registering the Warrant Securities included in a registration
statement for offering and sale under the securities or blue sky laws of the
state requested by the Holder.
(d) The Company shall indemnify the Holder(s) of the Warrant
Securities to be sold pursuant to any registration statement and each person,
if any, who controls such Holder within the meaning of Section 15 of the Act or
Section 20(a) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which any of them may become subject under the Act,
the Exchange Act or otherwise, arising from such registration statement.
(e) Nothing contained in this Agreement shall be construed as
requiring the Holder(s) to exercise their Warrants prior to the initial filing
of any registration statement or the effectiveness thereof.
(f) The Company shall not permit the inclusion of any securities
other than the Warrant Securities to be included in any registration statement
filed pursuant to Section 7.3 hereof,
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<PAGE> 8
or permit any other registration statement to be or remain effective during the
effectiveness of a registration statement filed pursuant to Section 7.3 hereof,
without the prior written consent of the Holders of the Warrants and Warrant
Securities representing a Majority of such securities (assuming an exercise of
all of the Warrants).
(g) The Company shall furnish to each Holder participating in the
offering and to each underwriter, if any, a signed counterpart, addressed to
such Holder or underwriter, of (i) an opinion of counsel to the Company, dated
the effective date of such registration statement (and, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under the underwriting agreement), and (ii) a "cold comfort" letter
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering; a letter dated the date
of the closing under the underwriting agreement) signed by the independent
public accountants who have issued a report on the Company's financial
statements included in such registration statement, in each case covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) arid, in the case of such accountants' letter,
with respect to agents subsequent to the date of such financial statements, are
as customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offering of
securities.
(h) The Company shall as soon as practicable after the effective date
of the registration statement, and in any event within 15 months thereafter,
make "generally available to its security holders" (within the meaning of Rule
158 under the Act) an earnings statement (which need not be audited) complying
with Section 11(a) of the Act and covering a period of at least 12 consecutive
months beginning after the effective date of the registration agreement.
(i) The Company shall deliver promptly to each Holder participating
in the offering requesting the correspondence and memoranda described below and
the managing underwriter copies of all correspondence between the Commission
and the Company, its counsel or
8
<PAGE> 9
auditors and all memoranda relating to discussions with the Commission or its
staff with respect to the registration statement and permit the Holder and
underwriter to do such investigation, upon reasonable advance notice, with
respect to information contained in or omitted from the registration statement
as it deems reasonably necessary to comply with applicable securities laws or
rules of the National Association of Securities Dealers, Inc. ("NASD"). Such
investigation shall include access to books, records and properties and
opportunities to discuss the business of the Company with its officers and
independent auditors, all to such reasonable extent and at such reasonable
times and as often as any such Holder shall reasonably request as it deems
necessary to comply with applicable securities laws or NASD rules.
(j) In addition to the Warrant Securities, upon the written request
therefor by any Holder(s), the Company shall include in the registration
statement any other securities of the Company held by such Holder(s) as of the
date of filing of such registration statement, including without limitation,
restricted shares of Common Stock, options, warrants or any other securities
convertible into shares of Common Stock.
(k) For purposes of this Agreement, the term "Majority" in
reference to the Holders of Warrants or Warrant Securities, shall mean
in excess of fifty percent (50%) of the then outstanding Warrants or Warrant
Securities that (i) are not held by the Company, an affiliate, officer,
creditor, employee or agent thereof or any of their respective affiliates,
members of their family, persons acting as nominees or in conjunction therewith
or (ii) have not been resold to the public pursuant to a registration statement
filed with the Commission under the Act.
8. Adjustments to Exercise and Number of Securities.
Section 8.1 Computation of Adjusted Exercise Price. Except as Hereinafter
provided, in case the Company shall at any time after the date hereof issue or
sell any shares of Common Stock (other than the issuances or sales referred to
in Section 8.7 hereof), including shares held in the Company's treasury and
shares of Common Stock issued upon the exercise of any options, rights or
9
<PAGE> 10
warrants, to subscribe for shares of Common Stock and shares of Common Stock
issued upon the direct or indirect conversion or exchange of securities for
shares of Common Stock, for a consideration per share less than the Exercise
Price in effect immediately prior to the issuance or sale of such shares or the
"Market Price" (as defined in Section 8.1 (vi) hereof) per share of Common
Stock on the date immediately prior to the issuance or sale of such shares, or
without consideration, then forthwith upon such issuance or sale, the Exercise
Price shall (until another such issuance or sale) be reduced to the price
(calculated to the nearest full cent) equal to the quotient derived by dividing
(A) an amount equal to the sum of (X) the product of (a) the lower of (i) the
Exercise Price in effect immediately prior to such issuance or sale and (ii) the
Market Price per share of Common Stock on the date immediately prior to the
issuance or sale of such shares, in either event, reduced, but not to a number
which is below .001, by the positive difference, if any, between the (u) Market
Price per share of Common Stock on the date immediately prior to the issuance
or sale and (v) the amount per share received in connection with such issuance
or sale, multiplied by (b) the total number of shares of Common Stock
outstanding immediately prior to such issuance or sale, plus (Y) the aggregate
of the amount of all consideration, if any, received by the Company upon such
issuance or sale, by (B) the total number of shares of Common Stock outstanding
immediately after such issuance or sale; provided, however, that in no event
shall the Exercise Price be adjusted pursuant to this computation to an amount
in excess of the Exercise Price in effect immediately prior to such
computation, except in the case of a combination of outstanding shares of
Common Stock, as provided by Section 8.3 thereof.
For the purposes of this Section 8 the term Exercise Price shall mean the
Exercise Price per share of Common Stock set forth in Section 6 hereof, as
adjusted from time to time pursuant to the provisions of this Section 8.
For the purposes of any computation to be made in accordance with this
Section 8.1, the following provisions shall be applicable:
10
<PAGE> 11
(i) In case of the issuance or sale or shares of Common Stock for a
consideration part or all of which shall be cash, the amount of the cash
consideration therefor shall be deemed to be the amount of cash received by the
Company for such shares (or, if shares of Common Stock are offered by the
Company for subscription, the subscription price, or, if either of such
securities shall be sold to underwriters or dealers for public offering without
a subscription offering, the initial public offering price) before deducting
therefrom any compensation paid or discount allowed in the sale, underwriting
or purchase thereof by underwriters or dealers or others performing similar
services, or any expenses incurred in connection therewith and less any amounts
payable to security holders or any affiliate thereof, including without
limitation, any employment agreement, royalty, consulting agreement, covenant
not to compete, earned or contingent payment right or similar arrangement,
agreement or understanding, whether oral or written; all such amounts shall be
valued at the aggregate amount payable thereunder whether such payments are
absolute or contingent and irrespective of the period or uncertainty of
payment, the rate of interest, if any, or the contingent nature thereof.
(ii) In case of the issuance or sale (otherwise then as a dividend or
other distribution on any stock of the Company) of shares of Common Stock for a
consideration part or all of which shall be other than cash, the amount of the
consideration therefor other than cash shall be deemed to be the value of such
consideration as determined in good faith by the Board of Directors of the
Company.
(iii) Shares of Common Stock issuable by way of dividend or other
distribution on any stock of the Company shall be deemed to have been issued
immediately after the opening of business on the day following the record date
for the determination of stockholders entitled to receive such dividend or
other distribution and shall be deemed to have been issued without
consideration.
11
<PAGE> 12
(iv) The reclassification of securities of the Company other than
shares of Common Stock shall be deemed to involve the issuance of such shares
of Common Stock for a consideration other than cash immediately prior to the
close of business on the date fixed for the determination of security holders
entitled to receive such shares, and the value of the consideration allocable
to such shares of Common Stock shall be determined as provided in subsection
(ii) of this Section 8.1.
(v) The number of shares of Common Stock at any one time outstanding
shall include the aggregate number of shares issued or issuable (subject to
readjustment upon the actual issuance thereof) upon the exercise of options,
rights, warrants and upon the conversion or exchange of convertible or
exchangeable securities.
(vi) As used herein, the phase "Market Price" at any date shall be
deemed to be the last reported sale price, or, in case no such reported sale
takes place on such day, the average of the last reported sale prices for the
last three (3) trading days, in either case as officially reported by the
principal securities exchange on which the Common Stock is listed or admitted
to trading, or, if the Common Stock is not listed or admitted to trading on any
national securities exchange, the average closing bid price as furnished by the
NASD through NASDAQ or similar organization if NASDAQ is no longer reporting
such information, or if the Common stock is not quoted on NASDAQ, as
determined in good faith by resolution of the Board of Directors of the
Company, based on the best information available to it.
Section 8.2 Options, Rights, Warrants and Convertible and Exchangeable
Securities. In case the Company shall at any time after the date hereof issue
options, rights or warrants to subscribe for shares of Common Stock, or issue
any securities convertible into or exchangeable for shares of Common Stock, for
a consideration per share less than the Exercise Price in effect or the Market
Price immediately prior to the issuance of such options, rights or warrants, or
such convertible or exchangeable securities, or without consideration, the
exercise Price in effect
12
<PAGE> 13
immediately prior to the issuance of such options, rights or warrants, or such
convertible or exchangeable securities, as the case may be, shall be reduced to
a price determined by making a computation in accordance with the provisions of
Section 8.1 hereof, provided that:
(l) The aggregate maximum number of shares of Common Stock, as the case
may be, issuable under such options, rights or warrants shall be deemed to be
issued and outstanding at the time such options, rights or warrants were
issued, and for a consideration equal to the minimum purchase price per share
provided for in such options, rights or warrants at the time of issuance, plus
the consideration (determined in the same manner as consideration received on
the issue or sale of shares in accordance with the terms of the Warrants), if
any, received by the Company for such options, rights or warrants.
(m) The aggregate maximum number of shares of Common Stock issuable upon
conversion or exchange of any convertible or exchangeable securities shall be
deemed to be issued and outstanding at the time of issuance of such securities,
and for a consideration equal to the consideration (determined in the same
manner as consideration received on the issue or sale of shares of Common Stock
in accordance with the terms of the Warrants) received by the Company for such
securities, plus the minimum consideration, if any, receivable by the Company
upon the conversion or exchange thereof.
(n) If any change shall occur in the price per share provided for in
any of the options, rights or warrants referred to in subsection (a) of this
Section 8.2, or in the price per share at which the securities referred to in
subsection (b) of this Section 8.2 are convertible or exchangeable, such
options, rights or warrants or conversion or exchange rights, as the case may
be, shall be deemed to have expired or terminated on the date when such price
change became effective in respect of shares not theretofore issued pursuant to
the exercise or conversion or exchange thereof, and the Company shall be deemed
to have issued upon such date new options, rights or warrants or convertible or
exchangeable securities at the new price in respect of the
13
<PAGE> 14
number shares issuable upon the exercise of such options, rights or warrants or
the conversion or exchange of such convertible or exchangeable securities.
Section 8.3 Subdivision and Combination. In case the Company shall at any
time subdivide or combine the outstanding shares of Common Stock, the Exercise
Price shall forthwith be proportionately decreased in the case of subdivision
or increased in the case of combination.
Section 8.4 Adjustment in Number of Securities. Upon each adjustment of
the Exercise Price pursuant to the provisions of this Section 8, the number of
Securities issuable upon the exercise of each Warrant shall be adjusted to the
nearest full amount by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment by the number of Warrant Securities
issuable upon exercise of the Warrants immediately prior to such adjustment and
dividing the product so obtained by the adjusted Exercise Price.
Section 8.5 Definition of Common Stock. For the purpose of this
Agreement, the term "Common Stock" shall mean (i) the class of stock designated
as Common Stock in the Certificate of Incorporation of the Company as may be
amended as of the date hereof, or (ii) any other class of stock resulting from
successive changes or reclassifications of such Common Stock consisting solely
of changes in par value, or from par value to no par value, or from no par
value to par value. In the event that the Company shall after the date hereof
issue securities with greater or superior voting rights than the shares of
Common Stock outstanding as of the date hereof, the Holder, at its option, may
receive upon exercise of any Warrant either shares of Common Stock or a like
number of such securities with greater or superior voting rights.
Section 8.6 Merger or Consolidation. In case of any consolidation of the
Company with, or merger of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger which does not result
in any reclassification or change of the outstanding Common Stock), the
corporation formed by such consolidation or merger shall execute and deliver to
the Holder a supplemental warrant agreement providing that the holder of each
14
<PAGE> 15
Warrant then outstanding or to be outstanding shall have the right thereafter
(until the expiration of such Warrant) to receive, upon exercise of such
warrant, the kind and amount of shares of stock and other securities and
property receivable upon such consolidation or merger, by a holder of the
number of shares of Common Stock of the Company for which such warrant might
have been exercised immediately prior to such consolidation, merger, sale or
transfer. Such supplemental warrant agreement shall provide for adjustments
which shall be identical to the adjustments provided in Section 8. The above
provision of this Subsection shall similarly apply to successive consolidations
or mergers.
Section 8.7 No Adjustment of Exercise Price in Certain Cases. No
adjustment of the Exercise Price shall be made:
(a) Upon the issuance or sale of the Warrants or the shares
of Common Stock issuable upon the exercise of the Warrants; or
(b) If the amount of said adjustment shall be less than 2
cents ($.02) per Security, provided, however, that in such case any
adjustment that would otherwise be required then to be made shall be carried
forward and shall be made at the time of and together with the next subsequent
adjustment which, together with any adjustment so carried forward, shall amount
to at least 2 cents ($.02) per Security.
Section 8.8 Dividends and Other Distributions. In the event that the
Company shall at any time prior to the exercise of all Warrants declare a
dividend (other than a dividend consisting solely of shares of Common Stock) or
otherwise distribute to its stockholders any assets, property, rights,
evidences of indebtedness, securities (other than shares of Common Stock),
whether issued by the Company or by another, or any other thing of value, the
Holders of the unexercised Warrants shall thereafter be entitled, in addition
to the shares of Common Stock or other securities and property receivable upon
the exercise thereof, to receive, upon the exercise of such Warrants, the same
property, assets, rights, evidences of indebtedness, securities or any other
thing of value that they
15
<PAGE> 16
would have been entitled to receive at the time of such dividend or
distribution as if the Warrants had been exercised immediately prior to such
dividend or distribution. At the time of any such dividend or distribution,
the Company shall make appropriate reserves to ensure the timely performance of
the provisions of this Subsection 8.8.
9. Exchange and Replacement of Warrant Certificates. Each Warrant
Certificate is exchangeable without expense, upon the surrender thereof by the
registered Holder at the principal executive office of the Company, for a new
Warrant Certificate of like tenor and date representing in the aggregate the
right to purchase the same number of Securities in such denominations as shall
be designated by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of any Warrant Certificate, and, in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrants, if
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
10. Elimination of Fractional Interests. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
upon the exercise of the Warrants, nor shall it be required to issue scrip or
pay cash in lieu of fractional interests, it being the intent of the parties
that all fractional interests shall be eliminated by rounding any fraction up
to the nearest whole number of shares of Common Stock or other securities,
properties or rights.
11. Reservation and Listing of Securities. The Company shall at all
times reserve and keep available out of its authorized shares of Common Stock,
solely for the purpose of issuance upon the exercise of the Warrants, such
number of shares of Common Stock or other securities, properties or rights as
shall be issuable upon the exercise thereof. The Company covenants and agrees
that, upon exercise of the Warrants and payment of the Exercise Price therefor,
all shares of
16
<PAGE> 17
Common Stock and other securities issuable upon such exercise shall be duly and
validly issued, fully paid, non-assessable and not subject to the preemptive
rights of any stockholder. As long as the Warrants shall be outstanding, the
Company shall use its best efforts to cause all shares of Common Stock issuable
upon the exercise of the Warrants to be listed (subject to official notice of
issuance) on all securities exchanges on which the Common Stock issued to the
public in connection herewith may then be listed and/or quoted NASDAQ.
12. Notice to Warrant Holders. Nothing contained in this Agreement
shall be construed as conferring upon the Holders the right to vote or to
consent or to receive notice as a stockholder in respect of any meetings of
stockholders for the election of directors or any other mariner, or as having
any rights whatsoever as a stockholder of the Company. If, however, at any
time prior to the expiration of the Warrants and their exercise, any of the
following events shall occur:
(a) the Company shall take a record of the holders of its shares of
Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or distribution
payable otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or
(b) the Company shall offer to all the holders of its Common Stock
any additional shares of capital stock of the Company or securities convertible
into or exchange for shares of capital stock of the Company, or any option,
right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety shall be
proposed; then, in any one or more of said events, the Company shall give
notice of such event at least fifteen (15) days prior to the date fixed as a
record date or the date of the closing the transfer books for the
17
<PAGE> 18
determination of the stockholders entitled to such dividend, distribution,
convertible or exchangeable securities or subscription rights, or entitled to
vote on such proposed dissolution, liquidation, winding up or sale. Such
notice shall specify such record date or the date of closing the transfer
books, as the case may be. Failure to give such notice or any defect therein
shall not affect the validity of any action taken in connection with the
declaration or payment of any such dividend, or the issuance of any convertible
or exchangeable securities, or subscription rights, options or warrants, or any
proposed dissolution, liquidation, winding up or sale.
13. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
duly made when delivered, or mailed by registered or certified mail, return
receipt requested:
(a) If to the Holders, Sands Brothers & Co., Ltd., 90 Park Avenue,
39th Floor, New York, New York 10016 as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Section 3 hereof
or to such other address as the Company may designate by notice to the Holders.
14. Supplements and Amendments. Except as otherwise expressly
provided herein, the provisions of this Agreement may be amended or waived at
any time only by the written agreement of the parties hereto. Any waiver,
permit, consent or approval of kind or character on the part of each Company or
the Holder of any provisions or conditions of this Agreement must be made in
writing and shall be effective only to the extent specifically set forth in
such writing.
15. Successors. All the covenants and provisions of this Agreement
shall be binding upon and inure the benefit of the Company, the Holder and their
respective successors and assigns hereunder.
16. Governing. Submission to Jurisdiction. This Agreement and each
Warrant Certificate issued hereunder shall be deemed to be a contract made
under the laws of the State of New York and for all the purposes shall be
construed in accordance with the laws of said
18
<PAGE> 19
State without giving effect to the rules of said State governing the conflicts
of laws.
The Company and the Holder hereby agree that any action, proceeding or
claim against it arising out of, or relating in any way to, this Agreement
shall be brought and enforced in the courts of the State of New York
or of the United States of America for the Southern District of New York, and
irrevocably submits to such jurisdiction, which jurisdiction shall be
exclusive. The Company, and the Holder hereby irrevocably waive any objection
to such exclusive jurisdiction or inconvenient forum. Any such process or
summons to be served upon any of the Company and the Holder (at the option of
the party bringing such action, proceeding or claim) may be served by
transmitting a copy thereof, by registered or certified mail, return receipt
requested, postage prepaid, addressed to it at the address as set forth in
Section 13 hereof. Such mailing shall be deemed personal service and shall be
legal and binding upon the party so served in any action, proceeding or claim.
The Company and the Holder agree that the prevailing party(ies) in any such
action or proceeding shall be entitled to recover from the other party(ies) all
of its/their reasonable legal costs and expenses relating to such action or
proceeding and/or incurred in connection with the preparation therefor.
17. Entire Agreement: Modification. This Agreement and the Purchase
Agreement (to the extent portions thereof are referred to herein) contain the
entire understanding between the parties hereto with respect to the subject
matter hereof and may not be modified or amended except by a writing duly
signed by the party against whom enforcement of the modification or amendment
is sought.
18. Severability. If any provision of this Agreement shall be held
to be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision of this Agreement.
19. Captions. The caption headings of the Sections of this Agreement
are for convenience of reference only and are not intended, nor should they be
construed as, a part of this
19
<PAGE> 20
Agreement and shall be given no substantive effect.
20. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
Holder any legal or equitable right, remedy or claim under this Agreement; and
this Agreement shall be for the sole and exclusive benefit of the Company and
the Holder.
21. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same Agreement.
20
<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
[SEAL]
UNIVERSAL MEDICAL SYSTEMS, INC.
By:
-------------------------------------
Title:
Attest:
Secretary
SANDS BROTHERS & CO., LTD
By:
-------------------------------------
Authorized Officer
21
<PAGE> 22
EXHIBIT A-1
FORM OF WARRANT CERTIFICATE
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT
AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, SEPTEMBER 12, 2001
No. SB-l 1,266,599 Warrants
WARRANTS CERTIFICATE
This Warrant Certificate certifies that ______________ , or registered
assigns, is the registered holder of 1,266,599 Warrants to purchase initially,
at any time from September 12, 1996, until 5:30 p.m. New York time on September
12, 2001 ("Expiration Date"), up to 1,266,599 fully-paid and non-assessable
shares of common stock, no par value per share ("Common Stock") of UNIVERSAL
MEDICAL SYSTEMS, INC., a Nevada corporation (the "Company"), at an initial
exercise price, subject to adjustment in certain events (the "Exercise Price"),
of $2.00 per share of Common Stock, upon surrender of this Warrant Certificate
and payment of the Exercise Price at an office or agency of the Company, or by
surrender of this Warrant Certificate in lieu of cash payment, but subject to
the conditions set forth herein and in the warrant agreement dated as of
September 12, 1996 between the Company and Sands Brothers & Co., Ltd. (the
"Warrant Agreement"). Payment of the Exercise Price shall be made by certified
or official bank check in New York Clearing House funds payable to the order of
the Company.
No Warrant may be exercised after 5:30 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, hereby shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of
this instrument and is hereby referred to for a description of the rights,
obligations, duties and immunities thereunder of the Company and the holders
(the words "holders" or "holder" meaning the registered holders or registered
holder) of the Warrants.
-A-1-
<PAGE> 23
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the type and/or number of the Company's
securities issuable thereupon may, subject to certain conditions, be adjusted.
In such event, the Company will, at the request of the holder, issue a new
Warrant Certificate evidencing the adjustment in the Exercise Price and the
number and/or type of securities issuable upon the exercise of the Warrants;
provided, however, that the failure of the Company to issue such new Warrant
Certificates shall not in any way change, alter, or otherwise impair, the
rights of the holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like
number of Warrants shall be issued to the transferee(s) in exchange for this
Warrant Certificate, subject to the limitations provided herein and in the
Warrant Agreement, without any charge except for any tax in other governmental
charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such numbered unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings to them in the Warrant Agreement.
-A-2-
<PAGE> 24
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of September 12, 1996.
UNIVERSAL MEDICAL SYSTEMS, INC.
[SEAL] By:
----------------------------
Title:
Attest:
Secretary
-A-3-
<PAGE> 25
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase________________ shares of
Common Stock at an exercise price of $________ per share and herewith tenders
in payment for such Securities a certified or official bank check payable in
New York Clearing House Funds to the order of________________ in the amount of
$______ , all in accordance with the terms hereof. The undersigned requests
that a certificate for such Securities be registered in the name
of_______________whose address is _______________ and that such Certificate be
delivered to____________ whose address is_______________.
Signature
-----------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
--------------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
-A-4-
<PAGE> 26
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.2]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ______ shares of Common
Stock in accordance with the terms of Section 3.2 of that certain Warrant
Agreement dated as of September 12, 1996 between UNIVERSAL MEDICAL
SYSTEMS, INC. and SANDS BROTHERS & CO., LTD. The Undersigned requests that a
certificate for such Securities be registered in the name of
__________________whose address is ________________and that such Certificate be
delivered to__________________whose address is___________________.
Signature
------------------------------
(Signature must conform in all respects
to name of holder as specified on
the face of the Warrant Certificate.)
---------------------------------------
(Insert Social Security or Other
ldentifying Number of Holder)
-A-5-
<PAGE> 27
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder desires
to transfer the Warrant Certificate.)
FOR VALUE RECEIVED_________________ here sells, assigns and transfers
unto
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________________________
Attorney, to transfer the within Warrant Certificate on the books of the
within-named Company, with full power of substitution.
Dated:
Signature:
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
(Insert Social Security or other
Identifying Number of Assignee)
-A-6-
<PAGE> 28
ACTUAL WARRANT FOLLOWS:
-A-7-
<PAGE> 29
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT
AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, SEPTEMBER 12, 2001
No. SB-1 633,300 Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that Sands Brothers & Co., Ltd., or
registered assigns, is the registered holder of 633,300 Warrants to purchase
initially, at any time from September 12, 1996, until 5:30 p.m. New York time
on September 12, 2001 ("Expiration Date"), up to 633,300 fully-paid and
non-assessable shares of common stock, no par value ("Common Stock") of
UNIVERSAL MEDICAL SYSTEMS, INC., a Nevada corporation (the "Company"), at an
initial exercise price, subject to adjustment in certain events (the "Exercise
Price"), of $2.00 per share upon surrender of this Warrant Certificate and
payment of the Exercise Price at an office or agency of the Company, or by
surrender of this Warrant Certificate in lieu of cash payment, but subject to
the conditions set forth herein and in the warrant agreement dated as of
September 12, 1996 between the Company and Sands Brothers & Co., Ltd. (the
"Warrant Agreement"). Payment of the Exercise Price shall be made by certified
or official bank check in New York Clearing House funds payable to the order of
the Company.
No Warrant may be exercised after 5:30 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, hereby shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of
this instrument and is hereby referred to for a description of the rights,
obligations, duties and immunities thereunder of the Company and the holders
(the words "holders" or "holder" meaning the registered holders or registered
holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the type and/or number of the Company's
securities issuable thereupon may, subject to certain conditions, be adjusted.
In such event, the Company will, at the request of the holder, issue a new
Warrant Certificate evidencing the adjustment in the
<PAGE> 30
Exercise Price and the number and/or type of securities issuable upon the
exercise of the Warrants; provided, however, that the failure of the Company to
issue such new Warrant Certificates shall not in any way change, alter, or
otherwise impair, the rights of the holder as set forth in the Warrant
Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like
number of Warrants shall be issued to the transferee(s) in exchange for this
Warrant Certificate, subject to the limitations provided herein and in the
Warrant Agreement, without any charge except for any tax in other governmental
charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such numbered unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings to them in the Warrant Agreement.
2
<PAGE> 31
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of September 12, 1996.
UNIVERSAL MEDICAL SYSTEMS, INC.
[SEAL] By:
----------------------------
Title:
Attest:
Secretary
3
<PAGE> 32
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase________________ shares of
Common Stock at an exercise price of $________ per share and herewith tenders
in payment for such Securities a certified or official bank check payable in
New York Clearing House Funds to the order of________________ in the amount of
$______ , all in accordance with the terms hereof. The undersigned requests
that a certificate for such Securities be registered in the name
of_______________whose address is _______________ and that such Certificate be
delivered to____________whose address is_______________.
Signature
-----------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
--------------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
4
<PAGE> 33
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.2]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ______ shares of Common
Stock in accordance with the terms of Section 3.2 of that certain Warrant
Agreement dated as of September 12, 1996 between UNIVERSAL MEDICAL SYSTEMS,
INC. and SANDS BROTHERS & CO., LTD. The Undersigned requests that a
certificate for such Securities be registered in the name of
__________________whose address is ________________and that such Certificate be
delivered to__________________whose address is___________________.
Signature
------------------------------
(Signature must conform in all respects
to name of holder as specified on
the face of the Warrant Certificate.)
---------------------------------------
(Insert Social Security or Other
ldentifying Number of Holder)
5
<PAGE> 34
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder desires
to transfer the Warrant Certificate.)
FOR VALUE RECEIVED_________________ here sells, assigns and transfers
unto
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________________________
Attorney, to transfer the within Warrant Certificate on the books of the
within-named Company, with full power of substitution.
Dated:
Signature:
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
(Insert Social Security or other
Identifying Number of Assignee)
6
<PAGE> 35
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT
AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, SEPTEMBER 12, 2001
No. SB-2 633,299 Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that Mark G. Hollo, or registered
assigns, is the registered holder of 633,299 Warrants to purchase initially, at
any time from September 12, 1996, until 5:30 p.m. New York time on September
12, 2001 ("Expiration Date"), up to 633,299 fully-paid and non-assessable
shares of common stock, no par value ("Common Stock") of UNIVERSAL MEDICAL
SYSTEMS, INC., a Nevada corporation (the "Company"), at an initial exercise
price, subject to adjustment in certain events (the "Exercise Price"), of $2.00
per share upon surrender of this Warrant Certificate and payment of the
Exercise Price at an office or agency of the Company, or by surrender of this
Warrant Certificate in lieu of cash payment, but subject to the conditions set
forth herein and in the warrant agreement dated as of September 12, 1996
between the Company and Sands Brothers & Co., Ltd. (the "Warrant Agreement").
Payment of the Exercise Price shall be made by certified or official bank check
in New York Clearing House funds payable to the order of the Company.
No Warrant may be exercised after 5:30 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, hereby shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of
this instrument and is hereby referred to for a description of the rights,
obligations, duties and immunities thereunder of the Company and the holders
(the words "holders" or "holder" meaning the registered holders or registered
holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the type and/or number of the Company's
securities issuable thereupon may, subject to certain conditions, be adjusted.
In such event, the Company will, at the request of the holder, issue a new
Warrant Certificate evidencing the adjustment in the
<PAGE> 36
Exercise Price and the number and/or type of securities issuable upon the
exercise of the Warrants; provided, however, that the failure of the Company to
issue such new Warrant Certificates shall not in any way change, alter, or
otherwise impair, the rights of the holder as set forth in the Warrant
Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like
number of Warrants shall be issued to the transferee(s) in exchange for this
Warrant Certificate, subject to the limitations provided herein and in the
Warrant Agreement, without any charge except for any tax in other governmental
charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such numbered unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings to them in the Warrant Agreement.
2
<PAGE> 37
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of September 12, 1996.
UNIVERSAL MEDICAL SYSTEMS, INC.
[SEAL] By:
----------------------------
Title:
Attest:
Secretary
3
<PAGE> 38
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase________________ shares of
Common Stock at an exercise price of $________ per share and herewith tenders
in payment for such Securities a certified or official bank check payable in
New York Clearing House Funds to the order of________________ in the amount of
$______ , all in accordance with the terms hereof. The undersigned requests
that a certificate for such Securities be registered in the name
of_______________whose address is _______________ and that such Certificate be
delivered to____________whose address is_______________.
Signature
-----------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
--------------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
4
<PAGE> 39
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.2]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ______ shares of Common
Stock in accordance with the terms of Section 3.2 of that certain Warrant
Agreement dated as of September 12, 1996 between UNIVERSAL MEDICAL SYSTEMS,
INC. and SANDS BROTHERS & CO., LTD. The Undersigned requests that a
certificate for such Securities be registered in the name of
__________________whose address is ________________and that such Certificate be
delivered to__________________whose address is___________________.
Signature
------------------------------
(Signature must conform in all respects
to name of holder as specified on
the face of the Warrant Certificate.)
---------------------------------------
(Insert Social Security or Other
ldentifying Number of Holder)
5
<PAGE> 40
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder desires
to transfer the Warrant Certificate.)
FOR VALUE RECEIVED_________________ here sells, assigns and transfers
unto
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________________________
Attorney, to transfer the within Warrant Certificate on the books of the
within-named Company, with full power of substitution.
Dated:
Signature:
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
(Insert Social Security or other
Identifying Number of Assignee)
6
<PAGE> 1
EXHIBIT 4(a)(a)
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT
AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, SEPTEMBER 12, 2001
No. SB-1 633,300 Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that Sands Brothers & Co., Ltd., or
registered assigns, is the registered holder of 633,300 Warrants to purchase
initially, at any time from September 12, 1996, until 5:30 p.m. New York time
on September 12, 2001 ("Expiration Date"), up to 633,300 fully-paid and
non-assessable shares of common stock, no par value ("Common Stock") of
UNIVERSAL MEDICAL SYSTEMS, INC. a Nevada corporation (the "Company"), at an
initial exercise price, subject to adjustment in certain events (the "Exercise
Price"), of $2.00 per share upon surrender of this Warrant Certificate and
payment of the Exercise Price at an office or agency of the Company, or by
surrender of this Warrant Certificate in lieu of cash payment, but subject to
the conditions set forth herein and in the warrant agreement dated as of
September 12, 1996 between the Company and Sands Brothers & Co., Ltd. (the
"Warrant Agreement"). Payment of the Exercise Price shall be made by certified
or official bank check in New York Clearing House funds payable to the order of
the Company.
No Warrant may be exercised after 5:30 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, hereby shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of
this instrument and is hereby referred to for a description of the rights,
obligations, duties and immunities thereunder of the Company and the holders
(the words "holders" or "holder" meaning the registered holders or registered
holder) of the Warrants.
<PAGE> 2
The Warrant Agreement provides that upon the occurrence of certain events
the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants;
provided, however, that the failure of the Company to issue such new Warrant
Certificates shall not in any way change, alter, or otherwise impair, the
rights of the holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like
number of Warrants shall be issued to the transferee(s) in exchange for this
Warrant Certificate, subject to the limitations provided herein and in the
Warrant Agreement, without any charge except for any tax in other governmental
charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such numbered unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in
the Warrant Agreement shall have the meanings to them in the Warrant Agreement.
2
<PAGE> 3
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed under its corporate seal.
Dated as of September 12, 1996.
UNIVERSAL MEDICAL SYSTEMS, INC.
[SEAL] BY:
-------------------------------------
Title:
Attest:
Secretary
3
<PAGE> 4
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase___ shares of Common Stock
at an exercise price of $___ per share and herewith tenders in payment for such
Securities a certified or official bank check payable in New York Clearing
House Funds to the order _____of in the amount of $_____, all in accordance with
the terms hereof. The undersigned requests that a certificate for such
Securities be registered in the name of whose address is __________________ and
that such Certificate be delivered to ___________________ whose address
is _________________.
SIGNATURE
-----------------------------------
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate.)
--------------------------------------------
(Insert Social Security or Other Identifying
Number of Holder)
4
<PAGE> 5
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.2]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase shares of Common
Stock in accordance with the terms of Section 3.2 of that certain Warrant
Agreement dated as of September 12, 1996 between UNIVERSAL MEDICAL SYSTEMS,
INC. and SANDS BROTHERS & CO., LTD. The Undersigned requests that a
certificate for such Securities be registered in the name of _______________
whose address is ___________________ and that such Certificate be delivered to
__________________ whose address is ________________.
Signature
---------------------------------------
(Signature must conform in all respects to
name of holder as specified on the face of the
Warrant Certificate.)
-----------------------------------------------
(Insert Social Security or Other Identifying
Number of Holder)
5
<PAGE> 6
(FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder desires to
transfer the Warrant Certificate.)
FOR VALUE RECEIVED ______________ here sells, assigns and transfers
unto
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ________________ Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: Signature:
(Signature must conform in all respects to
name of holder as specified on the face of the
Warrant Certificate.)
(Insert Social Security or other Identifying
Number of Assignee)
6
<PAGE> 1
EXHIBIT 4(b)(b)
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT
AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, SEPTEMBER 12, 2001
No. SB-2 633,299 Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that Mark G. Hollo or registered assigns,
is the registered holder of 633,299 Warrants to purchase initially, at any time
from September 12, 1996, until 5:30 p.m. New York time on September 12, 2001
("Expiration Date"), up to 633,200 fully-paid and non-assessable shares of
common stock, no par value ("Common Stock") of UNIVERSAL MEDICAL SYSTEMS, INC.
a Nevada corporation (the "Company"), at an initial exercise price, subject to
adjustment in certain events (the "Exercise Price"), of $2.00 per share upon
surrender of this Warrant Certificate and payment of the Exercise Price at an
office or agency of the Company, or by surrender of this Warrant Certificate in
lieu of cash payment, but subject to the conditions set forth herein and in the
warrant agreement dated as of September 12, 1996 between the Company and Sands
Brothers & Co., Ltd. (the "Warrant Agreement"). Payment of the Exercise Price
shall be made by certified or official bank check in New York Clearing House
funds payable to the order of the Company.
No Warrant may be exercised after 5:30 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, hereby shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of
this instrument and is hereby referred to for a description of the rights,
obligations, duties and immunities thereunder of the Company and the holders
(the words "holders" or "holder" meaning the registered holders or registered
holder) of the Warrants.
<PAGE> 2
The Warrant Agreement provides that upon the occurrence of certain events
the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants;
provided, however, that the failure of the Company to issue such new Warrant
Certificates shall not in any way change, alter, or otherwise impair, the
rights of the holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like
number of Warrants shall be issued to the transferee(s) in exchange for this
Warrant Certificate, subject to the limitations provided herein and in the
Warrant Agreement, without any charge except for any tax in other governmental
charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such numbered unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in
the Warrant Agreement shall have the meanings to them in the Warrant Agreement.
2
<PAGE> 3
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed under its corporate seal.
Dated as of September 12, 1996.
UNIVERSAL MEDICAL SYSTEMS, INC.
[SEAL] BY:
-------------------------------------
Title:
Attest:
Secretary
3
<PAGE> 4
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase___ shares of Common Stock
at an exercise price of $___ per share and herewith tenders in payment for such
Securities a certified or official bank check payable in New York Clearing
House Funds to the order of _______ in the amount of $_____, all in accordance
with the terms hereof. The undersigned requests that a certificate for such
Securities be registered in the name of ______________________ whose address is
__________________ and that such Certificate be delivered to __________________
whose address is _________________.
SIGNATURE
-----------------------------------
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate.)
--------------------------------------------
(Insert Social Security or Other Identifying
Number of Holder)
4
<PAGE> 5
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.2]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase shares of Common
Stock in accordance with the terms of Section 3.2 of that certain Warrant
Agreement dated as of September 12, 1996 between UNIVERSAL MEDICAL SYSTEMS,
INC. and SANDS BROTHERS & CO., LTD. The Undersigned requests that a
certificate for such Securities be registered in the name of _______________
whose address is ___________________ and that such Certificate be delivered to
__________________ whose address is ________________.
Signature
---------------------------------------
(Signature must conform in all respects to
name of holder as specified on the face of the
Warrant Certificate.)
-----------------------------------------------
(Insert Social Security or Other Identifying
Number of Holder)
5
<PAGE> 6
(FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder desires to
transfer the Warrant Certificate.)
FOR VALUE RECEIVED ______________ here sells, assigns and transfers
unto
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ________________ Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: Signature:
(Signature must conform in all respects to
name of holder as specified on the face of the
Warrant Certificate.)
(Insert Social Security or other Identifying
Number of Assignee)
6
<PAGE> 1
EXHIBIT 4(c)(c)
Void after 5:00 p.m., Florida Time on January 9, 2002
Warrant to Purchase 250,000 Shares of Common Stock
----------------------------
WARRANT TO PURCHASE COMMON STOCK
OF
UNIVERSAL MEDICAL SYSTEMS, INC.
----------------------------
THIS WARRANT AND THE SHARES OF COMMON STOCK
ISSUABLE PURSUANT TO THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED UNLESS
REGISTERED UNDER THE ACT OR AN EXEMPTION FROM
SUCH REGISTRATION IS AVAILABLE
FOR VALUE RECEIVED, Universal Medical Systems, Inc., a Nevada corporation
(the "Company"), grants the following rights to GEM, LTD., whose address is
4 New Burlington Street, W1X 1FE, London.
ARTICLE 1. DEFINITIONS. As used herein, the following terms shall have the
following meanings, unless the context shall otherwise require:
(a) "Common Stock" shall mean the common stock, par value $.001 per
share, the Company.
(b) "Corporate Office" shall mean the office of the Company
(or its successor) at which at any particular time its principal business shall
be administered, which office is located at the date hereof at 13825 Icot
Blvd., Suite 613, Clearwater, FL 34620.
<PAGE> 2
(c) "Exercise Date" shall mean any date upon which the Holder
shall give the Company a Notice of Exercise.
(d) "Exercise Price" shall mean the price to be paid to the Company for
each share of Common Stock to be purchased upon exercise of this Warrant in
accordance with the terms hereof which shall be $1.43750 (i.e., the closing bid
price on the day immediately preceding the issuance of this Warrant).
(e) "Expiration Date" shall mean 5:00 p.m. (Florida time) on
January 9, 2002.
(f) "SEC" shall mean the United States Securities and Exchange
Commission.
(g) "Transfer Agent" shall mean American Stock Transfer &
Trust Company, as the Company's transfer agent, or its authorized successor,
as such.
ARTICLE 2. EXERCISE.
2.1 Exercise of Warrant. This Warrant shall entitle Holder to
purchase up to 250,000 shares of Common Stock (the "Shares") at the Exercise
Price. This Warrant shall be exercisable at any time and from time to time
prior to the Expiration Date (the "Exercise Period"). This Warrant and the
right to purchase Shares hereunder shall expire and become void at the
Expiration Date.
2.2 Manner of Exercise.
(a) Holder may exercise this Warrant at any time and
from time to time during the Exercise Period, in whole or in part (but not in
denominations of fewer than 25,000 shares, except upon an exercise of this
Warrant with respect to the remaining balance of shares purchasable hereunder
at the time of exercise), by delivering to the Company at its corporate Office
(i) a duly executed Notice of Exercise in substantially the form attached as
Appendix 1 hereto and (ii) a bank cashier's or certified check for the
aggregate Exercise Price of the shares of Common Stock being purchased.
2
<PAGE> 3
(b) From time to time upon exercise of this Warrant, in whole
or in part, in accordance with its terms, the Company will cause the
Transfer Agent to countersign and deliver stock certificates to the Holder
representing the number of Shares being purchased pursuant to such
exercise, subject to adjustment as described herein.
(c) Promptly following any exercise of this Warrant, if the
Warrant has not been fully exercised and has not expired, the Company will
deliver to the Holder a new Warrant for the balance of the Shares covered
hereby.
2.3 Termination. All rights of the Holder in this Warrant,
to the extent they have not been exercised, shall terminate on the Expiration
Date.
2.4 No Rights Prior to Exercise. Prior to its exercise
pursuant to Section 2.2. above, this Warrant shall not entitle the Holder to
any voting or other rights as holder of shares of Common Stock.
2.5 Adjustments. In case of any reclassification, capital
reorganization, stock dividend or other change of outstanding shares of Common
Stock, or in case of any consolidation or merger of the Company with or into
another corporation (other than a consolidation or merger in which the
Company is the continuing corporation and which does not result in any
reclassification, capital reorganization, stock dividend or other change of
outstanding shares or Common Stock), or in case of any sale or conveyance to
another corporation of the property of the Company as, or substantially as, an
entirety (other than a sale/leaseback, mortgage or other financing
transaction), the Company shall cause effective provision to be made so that
the Holder shall have the right thereafter, by exercising this Warrant, to
purchase the kind and number of shares of stock or other securities or property
(including cash) receivable upon such reclassification, capital reorganization,
stock dividend or other change, consolidation, merger, sale or conveyance as
the Holder would have been entitled to receive had the Holder exercised this
Warrant in full immediately before such reclassification, capital
reorganization, stock dividend or other change, consolidation, merger, sale or
conveyance. Any such provision shall include provision for adjustments that
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Section 2.5. The foregoing provisions shall similarly apply to
successive reclassifications, capital reorganizations, stock dividends and
other changes of outstanding shares of Common Stock and to successive
consolidations, mergers, sales or conveyances.
3
<PAGE> 4
2.6 Fractional Shares. No fractional shares shall be issuable upon
exercise or conversion of this Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole share. If a fractional share
interest arises upon any exercise or conversion of the Warrant, the Company
shall eliminate such fractional share interest by paying Holder the amount
computed by multiplying the fractional interest by the closing bid price of a
full share of the Company's Common Stock on the date of the Notice of Exercise.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 Representations and Warranties. The Company hereby represents
and warrants to the Holder as follows:
(a) All Shares which may be issued upon the exercise of the
purchase right represented by this Warrant shall, upon issuance, be duly
authorized, validly issued, fully-paid and nonassessable, and free of any liens
and encumbrances except for restrictions on transfer provided for herein or
under applicable federal and state securities laws, and not subject to any
preemptive rights.
(b) The Company is a corporation duly organized and validly
existing under the laws of the State of Nevada, and has the full power and
authority to issue this Warrant and to comply with the terms hereof. The
execution, delivery and performance by the Company of its obligations under
this Warrant, including, without limitation, the issuance of the Shares upon
any exercise of the Warrant have been duly authorized by all necessary
corporate action. This Warrant has been duly executed and delivered by the
Company and is a valid and binding obligation of the Company, enforceable in
accordance with its terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization or similar laws affecting enforceability
of creditors' rights generally and except as the availability of the remedy of
specific enforcement, injunctive relief or other equitable relief is subject to
the discretion of the court before which any proceeding therefor may be brought.
(c) The Company is not subject to or bound by any provision
of any certificate or articles of incorporation or by-laws, mortgage, deed of
trust, lease, note, bond, indenture, other instrument or agreement, license,
permit, trust, custodianship, other restriction or any applicable provision of
any law, statute, rule, regulation, judgment, order, writ, injunction or decree
of
4
<PAGE> 5
any court, governmental body, administrative agency or arbitrator which could
prevent or be violated by or under which there would be a default (or right of
termination) as a result of the execution, delivery and performance by the
Company of this Warrant.
ARTICLE 4. REGISTRATION UNDER THE ACT.
(a) Demand Request. (i) If at any time on and after the date
hereof, (i) the Company shall become subject to the reporting requirements of
Section 13 or Section 15 of the Securities Exchange Act of 1934, then
simultaneous with becoming subject thereto or as soon thereafter as
practicable, or (ii) upon the written request therefore (the "Demand Request"),
from the Holder, the Company shall prepare and file with the SEC a registration
statement under the Act covering the Shares and/or any securities issued in
lieu or substitution thereof (collectively, the "Registrable Securities") which
are the subject of such request and shall use its best efforts to cause such
registration statement to become effect.
(ii) If at the time of the Demand Request the Company is in
the process of preparing a registration statement under the Act relating to an
underwritten public offering, then the Company shall have the right to cause
the Holder to include the Registrable Securities in such registration statement
unless if in the good faith judgment of the managing underwriter of such public
offering the inclusion of such securities would interfere with the successful
marketing of the securities being underwritten. To the extent only a portion
of the Registrable Securities held by a Holder is included in the underwritten
public offering, a registration statement covering those Registrable Securities
which are excluded from the underwritten public offering will be filed with 120
days of the consummation of the underwritten public offering.
The obligation of the Company this paragraph (a) shall be
limited to two registration statements.
(b) Right to Postpone, Etc. Notwithstanding the foregoing, the
Company shall be entitled to postpone for up to six (6) months the filing of
any registration statement otherwise required to be prepared and filed by the
Company pursuant to Section 4 (b) if at the time the Company receives a request
for registration the Board of Directors of the Company determines, in its
reasonable business judgment, that the filing of such registration statement
and the offering of the shares of Registrable Stock pursuant thereto would
interfere
5
<PAGE> 6
with any financing, acquisition, corporate reorganization or other material
transaction by the Company, and the Company promptly gives the holders notice
of such determination and postponement. If the Company shall so postpone the
filing of a registration statement, the Holder shall have the right to withdraw
the request for registration by giving written notice, signed by the Holder, to
the Company within fifteen (15) days after receipt of the Company's notice of
postponement, and, in the event of such withdrawal, such request shall not be
deemed a request for registration which may be made pursuant to this Section 4.
The Company's right to postpone the filing of a registration statement as
provided herein may only be exercised by the Company once during any twelve
(12) consecutive month period. If requested by Holder, the Company shall enter
into customary agreements (including underwriting agreements with the
underwriter selected by the holder in connection with a Demand Request,
provided such underwriter is reasonably acceptable to the Company) and the
Company shall take all related actions as the Holder, or as the underwriter
selected by the Holder, reasonably request in order to expedite or facilitate
the disposition of the Registrable Securities included in a registration
statement filed with the SEC.
(c) Registration Procedures. If and whenever the Company is
required by the provisions of paragraph (a) above to effect the registration of
Registrable Securities under the Act, the Company will:
(i) prepare and file with the SEC a registration
statement with respect to such securities, and use its best efforts to cause
such registration statement to become and remain effective for such period as
may be reasonably necessary to effect the sale of such securities, not to
exceed nine months;
(ii) prepare and file with the SEC such amendments to
such registration statement and supplements to the prospectus contained therein
as may be necessary to keep such registration statement effective for such
period as may be reasonably necessary to effect the sale of such securities,
not to exceed nine months;
(iii) furnish to the Holder and to the underwriter of
the securities being registered, if any, such reasonable number of copies of
the registration statement, preliminary prospectus, final prospectus and such
other documents as such underwriter may reasonably request in order to
facilitate the public offering of such securities;
6
<PAGE> 7
(iv) notify the Holder, promptly after it shall
receive notice thereof, of the time when such registration statement has become
effective or a supplement to any prospectus forming a part of such registration
statement has been filed;
(v) notify the Holder promptly of any request by the
SEC for the amending of supplementing of such registration statement or
prospectus or for additional information;
(vi) prepare and file with the SEC, promptly upon the
request of the Holder, any amendments or supplements to such registration
statement or prospectus which, in the opinion of counsel for the holder (and
concurred in by counsel for the Company), is required under the Act or the
rules and regulations thereunder in connection with the distribution of the
Registrable Securities by the Holder;
(vii) prepare and promptly file with the SEC and
promptly notify the Holder of the filing of such amendment or supplement to
such registration statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to such
securities is required to be delivered under the Act, any event shall be
occurred as the result of which any such prospectus or any other prospectus as
then in effect would include an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances in which they were made, not misleading; and
(viii) advise the Holder, promptly after it shall
receive notice or obtain knowledge thereof, of the issuance of any stop order
by the SEC suspending the effectiveness of such registration statement or the
initiation or threatening of any proceeding for that purpose and promptly use
its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued.
(d) Expenses.
(i) With respect to any registration requested
pursuant to Section 4 (a) all fees, costs and expenses of and incidental to
such registration, inclusion and pubic offering (as specified in paragraph
(iii) below) in connection therewith shall be borne by the Company.
7
<PAGE> 8
(ii) The fees, costs and expenses of registration
above shall include, without limitation, all registration, filing, and NASD
fees, printing expenses, and fees and disbursements of counsel and accountants
for the Company. Fees and disbursements of counsel and accountants for the
selling security holders and any other expenses incurred b the selling security
holders not expressly included above shall be borne by the selling security
holders.
(e) Indemnification.
(i) The Company shall indemnify and hold harmless
the Holder, its directors and officers, and any underwriter (as defined in the
Act) for such holder and each person, if any, who controls such holder or such
underwriter within the meaning of the Act, from and against, and will reimburse
such holder and each such underwriter and controlling person with respect to,
any and all loss, damage, liability, cost and expense to which such holder or
any such underwriter or controlling person may become subject under the Act or
otherwise, insofar as such losses, damages, liabilities, costs or expenses are
caused by any untrue statement or alleged untrue statement of any material fact
contained in such registration statement, any prospectus contained therein or
any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided, however, that
the Company will not be liable in any such case to the extent that any such
loss, damage, liability, cost or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by the Holder, such underwriter
or such controlling person in writing specifically for use in the preparation
thereof.
(ii) As a condition of the Company's obligation under
this Article 4, the Holder will indemnify and hold harmless the Company, its
directors and officers, any controlling person and any underwriter from and
against, and will reimburse the Company, its directors and officers, any
controlling person and any underwriter with respect to, any and all loss,
damage, liability, cost or expense to which the Company or any controlling
person and/or any underwriter may become subject under the Act or otherwise,
insofar as such losses, damages, liabilities, costs or expenses are caused by
any untrue statement or alleged untrue statement of any material fact contained
in such registration statement, any prospectus contained therein or any
amendment or
8
<PAGE> 9
supplement thereto, or arise out of or are based upon any the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was so made in reliance upon and in strict conformity with
written information furnished by or on behalf of the Holder specifically for
use in the preparation thereof.
(iii) Promptly after receipt by an indemnified part
pursuant to the provisions of paragraph (i) or (ii) of this Article 4 of notice
of the commencement of any action involving the subject matter of the foregoing
indemnity provisions such indemnified party, if a claim thereof is to be made
against the indemnifying party pursuant to the provisions of said paragraph (i)
or (ii), promptly notify the indemnifying party of the commencement thereof;
but the omission to so notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than
hereunder. In case such action is brought against any indemnified party and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party shall have the right to participate in, and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party,
provided, however, if the defendants in any action include both the indemnified
party and the indemnifying party and the indemnified party shall have
reasonably concluded that there may be legal defenses available to it and/or
other indemnified parties which are different from or in addition to those
available to the indemnified party, or if there is a conflict of interest
which would prevent counsel for the indemnifying party from also representing
the indemnified party, the indemnified party or parties have the right to
select separate counsel to participate in the defense of such action on behalf
of such indemnified party or parties. After notice from the indemnifying party
to such indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party pursuant to the
provisions of said paragraph (i) or (ii) for any legal or other expense
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation, unless (A) the
indemnified party shall have employed counsel in accordance with the provisions
of the preceding sentence, (B) the indemnifying part shall not have employed
counsel satisfactory to the indemnified party to represent the
9
<PAGE> 10
indemnified party within a reasonable time after the notice of the commencement
of the action or (C) the indemnifying party has authorized the employment of
counsel for the indemnified party at the expense of the indemnifying party.
The Company's agreements with respect to Warrants or the Shares in this
Article 4 shall continue in effect regardless of the exercise and surrender of
this Warrant.
ARTICLES. MISCELLANEOUS.
5.1 Transfer. This Warrant may not be transferred or assigned, in
whole or in part, at any time, except in compliance with applicable federal and
state securities laws by the transferor and transferee (including, without
limitation, the delivery of an investment representation letter and a legal
opinion reasonably satisfactory to the Company, provided that this Warrant may
not be transferred or assigned such that either the Holder or any transferee
will, following such transfer or assignment, hold a Warrant for the right to
purchase fewer than 25,000 shares.
5.2 Transfer Procedure. Subject to the provisions of
Section 5.1, Holder may transfer or assign this Warrant by giving the Company
notice setting forth the name, address and taxpayer identification number of
the transferee or assignee, if applicable (the "Transferee") and surrendering
this Warrant to the Company for reissuance to the Transferee (and the Holder,
in the event of a transfer or assignment of this Warrant in part). (Each of the
persons or entities in whose name any such new Warrant shall be issued is
herein referred to as a "Holder).
5.3 Loss, Theft. Destruction or Mutilation. If this Warrant shall
become mutilated or defaced or be destroyed, lost or stolen, the Company shall
execute and deliver a new Warrant in exchange for and upon surrender and
cancellation of such mutilated or defaced Warrant or, in lieu of and in
substitution for such Warrant so destroyed, lost or stolen, upon the Holder
filing with the Company evidence satisfactory to it that such Warrant has been
so mutilated, defaced, destroyed, lost or stolen. However, the Company shall
be entitled, as a condition to the execution and delivery of such new Warrant,
to demand indemnity satisfactory to it and payment of the expenses and charges
incurred in connection with the delivery of such new Warrant. Any Warrant so
surrendered to the Company shall be cancelled.
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<PAGE> 11
5.4 Notices. All notices and other communications from the Company
to the Holder or vice versa shall be deemed delivered and effective when given
personally, by facsimile transmission and confirmed in writing or mailed by
first-class registered or certified mail, postage prepaid at such address
and/or facsimile number as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or the Holder from time
to time.
5.5 Waiver. This Warrant and any term hereof may be changed,
waived, or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
5.6 Governinq Law. This Warrant shall be governed by and construed
in accordance with the laws of the State of Nevada, the state of the Company's
incorporation, without giving effect to its principles regarding conflicts of
law.
Dated: January 9, 1997
UNIVERSAL MEDICAL SYSTEMS, INC.
By: /s/ Myron A. Baker
-----------------------------
Myron A. Baker
Chairman & CEO
ATTEST
/s/ Dennis D. Cole
- - ----------------------------
Dennis D. Cole
Vice President and Secretary
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<PAGE> 12
APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase ________ shares of the Common
Stock of Universal Medical Systems, Inc. pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full.
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name as is specified below:
-----------------------------
(Name)
-----------------------------
-----------------------------
(Address)
3. The undersigned represents it is acquiring the shares solely for
its own account and not as a nominee for any other party and not with a view
toward the resale or distribution thereof except in compliance with applicable
securities laws.
-------------------------
(Signature)
- - -------------------
(Date)
<PAGE> 1
EXHIBIT 4(d)(d)
Void after 5:00 p.m., Florida Time on January 9, 2002
Warrant to Purchase 250,000 Shares of Common Stock
----------------------------
WARRANT TO PURCHASE COMMON STOCK
OF
UNIVERSAL MEDICAL SYSTEMS, INC.
----------------------------
THIS WARRANT AND THE SHARES OF COMMON STOCK
ISSUABLE PURSUANT TO THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED UNLESS
REGISTERED UNDER THE ACT OR AN EXEMPTION FROM
SUCH REGISTRATION IS AVAILABLE
FOR VALUE RECEIVED, Universal Medical Systems, Inc., a Nevada corporation
(the "Company"), grants the following rights to RAJAN ANANT JOSHI, whose address
is 80-15 41st Avenue, King George Building, #507, Elmhurst, New York 11373.
ARTICLE 1. DEFINITIONS. As used herein, the following terms shall have the
following meanings, unless the context shall otherwise require:
(a) "Common Stock" shall mean the common stock, par value $.001 per
share, the Company.
(b) "Corporate Office" shall mean the office of the Company (or its
successor) at which at any particular time its principal business shall be
administered, which office is located at the date hereof at 13825 Icot Blvd.,
Suite 613, Clearwater, FL 34620.
<PAGE> 2
(c) "Exercise Date" shall mean any date upon which the Holder
shall give the Company a Notice of Exercise.
(d) "Exercise Price" shall mean the price to be paid to the Company for
each share of Common Stock to be purchased upon exercise of this Warrant in
accordance with the terms hereof which shall be $1.43750 (i.e., the closing bid
price on the day immediately preceding the issuance of this Warrant).
(e) "Expiration Date" shall mean 5:00 p.m. (Florida time) on
January 9, 2002.
(f) "SEC" shall mean the United States Securities and Exchange
Commission.
(g) "Transfer Agent" shall mean American Stock Transfer &
Trust Company, as the Company's transfer agent, or its authorized successor,
as such.
ARTICLE 2. EXERCISE.
2.1 Exercise of Warrant. This Warrant shall entitle Holder to
purchase up to 250,000 shares of Common Stock (the "Shares") at the Exercise
Price. This Warrant shall be exercisable at any time and from time to time
prior to the Expiration Date (the "Exercise Period"). This Warrant and the
right to purchase Shares hereunder shall expire and become void at the
Expiration Date.
2.2 Manner of Exercise.
(a) Holder may exercise this Warrant at any time and
from time to time during the Exercise Period, in whole or in part (but not in
denominations of fewer than 25,000 shares, except upon an exercise of this
Warrant with respect to the remaining balance of shares purchasable hereunder
at the time of exercise), by delivering to the Company at its corporate Office
(i) a duly executed Notice of Exercise in substantially the form attached as
Appendix 1 hereto and (ii) a bank cashier's or certified check for the
aggregate Exercise Price of the shares of Common Stock being purchased.
2
<PAGE> 3
(b) From time to time upon exercise of this Warrant, in whole
or in part, in accordance with its terms, the Company will cause the
Transfer Agent to countersign and deliver stock certificates to the Holder
representing the number of Shares being purchased pursuant to such
exercise, subject to adjustment as described herein.
(c) Promptly following any exercise of this Warrant, if the
Warrant has not been fully exercised and has not expired, the Company will
deliver to the Holder a new Warrant for the balance of the Shares covered
hereby.
2.3 Termination. All rights of the Holder in this Warrant,
to the extent they have not been exercised, shall terminate on the Expiration
Date.
2.4 No Rights Prior to Exercise. Prior to its exercise
pursuant to Section 2.2. above, this Warrant shall not entitle the Holder to
any voting or other rights as holder of shares of Common Stock.
2.5 Adjustments. In case of any reclassification, capital
reorganization, stock dividend or other change of outstanding shares of Common
Stock, or in case of any consolidation or merger of the Company with or into
another corporation (other than a consolidation or merger in which the
Company is the continuing corporation and which does not result in any
reclassification, capital reorganization, stock dividend or other change of
outstanding shares or Common Stock), or in case of any sale or conveyance to
another corporation of the property of the Company as, or substantially as, an
entirety (other than a sale/leaseback, mortgage or other financing
transaction), the Company shall cause effective provision to be made so that
the Holder shall have the right thereafter, by exercising this Warrant, to
purchase the kind and number of shares of stock or other securities or property
(including cash) receivable upon such reclassification, capital reorganization,
stock dividend or other change, consolidation, merger, sale or conveyance as
the Holder would have been entitled to receive had the Holder exercised this
Warrant in full immediately before such reclassification, capital
reorganization, stock dividend or other change, consolidation, merger, sale or
conveyance. Any such provision shall include provision for adjustments that
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Section 2.5. The foregoing provisions shall similarly apply to
successive reclassifications, capital reorganizations, stock dividends and
other changes of outstanding shares of Common Stock and to successive
consolidations, mergers, sales or conveyances.
3
<PAGE> 4
2.6 Fractional Shares. No fractional shares shall be issuable upon
exercise or conversion of this Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole share. If a fractional share
interest arises upon any exercise or conversion of the Warrant, the Company
shall eliminate such fractional share interest by paying Holder the amount
computed by multiplying the fractional interest by the closing bid price of a
full share of the Company's Common Stock on the date of the Notice of Exercise.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 Representations and Warranties. The Company hereby represents
and warrants to the Holder as follows:
(a) All Shares which may be issued upon the exercise of the
purchase right represented by this Warrant shall, upon issuance, be duly
authorized, validly issued, fully-paid and nonassessable, and free of any liens
and encumbrances except for restrictions on transfer provided for herein or
under applicable federal and state securities laws, and not subject to any
preemptive rights.
(b) The Company is a corporation duly organized and validly
existing under the laws of the State of Nevada, and has the full power and
authority to issue this Warrant and to comply with the terms hereof. The
execution, delivery and performance by the Company of its obligations under
this Warrant, including, without limitation, the issuance of the Shares upon
any exercise of the Warrant have been duly authorized by all necessary
corporate action. This Warrant has been duly executed and delivered by the
Company and is a valid and binding obligation of the Company, enforceable in
accordance with its terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization or similar laws affecting enforceability
of creditors' rights generally and except as the availability of the remedy of
specific enforcement, injunctive relief or other equitable relief is subject to
the discretion of the court before which any proceeding therefor may be brought.
(c) The Company is not subject to or bound by any provision
of any certificate or articles of incorporation or by-laws, mortgage, deed of
trust, lease, note, bond, indenture, other instrument or agreement, license,
permit, trust, custodianship, other restriction or any applicable provision of
any law, statute, rule, regulation, judgment, order, writ, injunction or decree
of
4
<PAGE> 5
any court, governmental body, administrative agency or arbitrator which could
prevent or be violated by or under which there would be a default (or right of
termination) as a result of the execution, delivery and performance by the
Company of this Warrant.
ARTICLE 4. REGISTRATION UNDER THE ACT.
(a) Demand Request. (i) If at any time on and after the date
hereof, (i) the Company shall become subject to the reporting requirements of
Section 13 or Section 15 of the Securities Exchange Act of 1934, then
simultaneous with becoming subject thereto or as soon thereafter as
practicable, or (ii) upon the written request therefore (the "Demand Request"),
from the Holder, the Company shall prepare and file with the SEC a registration
statement under the Act covering the Shares and/or any securities issued in
lieu or substitution thereof (collectively, the "Registrable Securities") which
are the subject of such request and shall use its best efforts to cause such
registration statement to become effect.
(ii) If at the time of the Demand Request the Company is in
the process of preparing a registration statement under the Act relating to an
underwritten public offering, then the Company shall have the right to cause
the Holder to include the Registrable Securities in such registration statement
unless if in the good faith judgment of the managing underwriter of such public
offering the inclusion of such securities would interfere with the successful
marketing of the securities being underwritten. To the extent only a portion
of the Registrable Securities held by a Holder is included in the underwritten
public offering, a registration statement covering those Registrable Securities
which are excluded from the underwritten public offering will be filed with 120
days of the consummation of the underwritten public offering.
The obligation of the Company this paragraph (a) shall be
limited to two registration statements.
(b) Right to Postpone, Etc. Notwithstanding the foregoing, the
Company shall be entitled to postpone for up to six (6) months the filing of
any registration statement otherwise required to be prepared and filed by the
Company pursuant to Section 4 (b) if at the time the Company receives a request
for registration the Board of Directors of the Company determines, in its
reasonable business judgment, that the filing of such registration statement
and the offering of the shares of Registrable Stock pursuant thereto would
interfere
5
<PAGE> 6
with any financing, acquisition, corporate reorganization or other material
transaction by the Company, and the Company promptly gives the holders notice
of such determination and postponement. If the Company shall so postpone the
filing of a registration statement, the Holder shall have the right to withdraw
the request for registration by giving written notice, signed by the Holder, to
the Company within fifteen (15) days after receipt of the Company's notice of
postponement, and, in the event of such withdrawal, such request shall not be
deemed a request for registration which may be made pursuant to this Section 4.
The Company's right to postpone the filing of a registration statement as
provided herein may only be exercised by the Company once during any twelve
(12) consecutive month period. If requested by Holder, the Company shall enter
into customary agreements (including underwriting agreements with the
underwriter selected by the holder in connection with a Demand Request,
provided such underwriter is reasonably acceptable to the Company) and the
Company shall take all related actions as the Holder, or as the underwriter
selected by the Holder, reasonably request in order to expedite or facilitate
the disposition of the Registrable Securities included in a registration
statement filed with the SEC.
(c) Registration Procedures. If and whenever the Company is
required by the provisions of paragraph (a) above to effect the registration of
Registrable Securities under the Act, the Company will:
(i) prepare and file with the SEC a registration
statement with respect to such securities, and use its best efforts to cause
such registration statement to become and remain effective for such period as
may be reasonably necessary to effect the sale of such securities, not to
exceed nine months;
(ii) prepare and file with the SEC such amendments to
such registration statement and supplements to the prospectus contained therein
as may be necessary to keep such registration statement effective for such
period as may be reasonably necessary to effect the sale of such securities,
not to exceed nine months;
(iii) furnish to the Holder and to the underwriter of
the securities being registered, if any, such reasonable number of copies of
the registration statement, preliminary prospectus, final prospectus and such
other documents as such underwriter may reasonably request in order to
facilitate the public offering of such securities;
6
<PAGE> 7
(iv) notify the Holder, promptly after it shall
receive notice thereof, of the time when such registration statement has become
effective or a supplement to any prospectus forming a part of such registration
statement has been filed;
(v) notify the Holder promptly of any request by the
SEC for the amending of supplementing of such registration statement or
prospectus or for additional information;
(vi) prepare and file with the SEC, promptly upon the
request of the Holder, any amendments or supplements to such registration
statement or prospectus which, in the opinion of counsel for the holder (and
concurred in by counsel for the Company), is required under the Act or the
rules and regulations thereunder in connection with the distribution of the
Registrable Securities by the Holder;
(vii) prepare and promptly file with the SEC and
promptly notify the Holder of the filing of such amendment or supplement to
such registration statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to such
securities is required to be delivered under the Act, any event shall be
occurred as the result of which any such prospectus or any other prospectus as
then in effect would include an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances in which they were made, not misleading; and
(viii) advise the Holder, promptly after it shall
receive notice or obtain knowledge thereof, of the issuance of any stop order
by the SEC suspending the effectiveness of such registration statement or the
initiation or threatening of any proceeding for that purpose and promptly use
its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued.
(d) Expenses.
(i) With respect to any registration requested
pursuant to Section 4 (a) all fees, costs and expenses of and incidental to
such registration, inclusion and pubic offering (as specified in paragraph
(iii) below) in connection therewith shall be borne by the Company.
7
<PAGE> 8
(ii) The fees, costs and expenses of registration
above shall include, without limitation, all registration, filing, and NASD
fees, printing expenses, and fees and disbursements of counsel and accountants
for the Company. Fees and disbursements of counsel and accountants for the
selling security holders and any other expenses incurred b the selling security
holders not expressly included above shall be borne by the selling security
holders.
(e) Indemnification.
(i) The Company shall indemnify and hold harmless
the Holder, its directors and officers, and any underwriter (as defined in the
Act) for such holder and each person, if any, who controls such holder or such
underwriter within the meaning of the Act, from and against, and will reimburse
such holder and each such underwriter and controlling person with respect to,
any and all loss, damage, liability, cost and expense to which such holder or
any such underwriter or controlling person may become subject under the Act or
otherwise, insofar as such losses, damages, liabilities, costs or expenses are
caused by any untrue statement or alleged untrue statement of any material fact
contained in such registration statement, any prospectus contained therein or
any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided, however, that
the Company will not be liable in any such case to the extent that any such
loss, damage, liability, cost or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by the Holder, such underwriter
or such controlling person in writing specifically for use in the preparation
thereof.
(ii) As a condition of the Company's obligation under
this Article 4, the Holder will indemnify and hold harmless the Company, its
directors and officers, any controlling person and any underwriter from and
against, and will reimburse the Company, its directors and officers, any
controlling person and any underwriter with respect to, any and all loss,
damage, liability, cost or expense to which the Company or any controlling
person and/or any underwriter may become subject under the Act or otherwise,
insofar as such losses, damages, liabilities, costs or expenses are caused by
any untrue statement or alleged untrue statement of any material fact contained
in such registration statement, any prospectus contained therein or any
amendment or
8
<PAGE> 9
supplement thereto, or arise out of or are based upon any the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was so made in reliance upon and in strict conformity with
written information furnished by or on behalf of the Holder specifically for
use in the preparation thereof.
(iii) Promptly after receipt by an indemnified part
pursuant to the provisions of paragraph (i) or (ii) of this Article 4 of notice
of the commencement of any action involving the subject matter of the foregoing
indemnity provisions such indemnified party, if a claim thereof is to be made
against the indemnifying party pursuant to the provisions of said paragraph (i)
or (ii), promptly notify the indemnifying party of the commencement thereof;
but the omission to so notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than
hereunder. In case such action is brought against any indemnified party and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party shall have the right to participate in, and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party,
provided, however, if the defendants in any action include both the indemnified
party and the indemnifying party and the indemnified party shall have
reasonably concluded that there may be legal defenses available to it and/or
other indemnified parties which are different from or in addition to those
available to the indemnified party, or if there is a conflict of interest
which would prevent counsel for the indemnifying party from also representing
the indemnified party, the indemnified party or parties have the right to
select separate counsel to participate in the defense of such action on behalf
of such indemnified party or parties. After notice from the indemnifying party
to such indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party pursuant to the
provisions of said paragraph (i) or (ii) for any legal or other expense
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation, unless (A) the
indemnified party shall have employed counsel in accordance with the provisions
of the preceding sentence, (B) the indemnifying part shall not have employed
counsel satisfactory to the indemnified party to represent the
9
<PAGE> 10
indemnified party within a reasonable time after the notice of the commencement
of the action or (C) the indemnifying party has authorized the employment of
counsel for the indemnified party at the expense of the indemnifying party.
The Company's agreements with respect to Warrants or the Shares in this
Article 4 shall continue in effect regardless of the exercise and surrender of
this Warrant.
ARTICLES. MISCELLANEOUS.
5.1 Transfer. This Warrant may not be transferred or assigned, in
whole or in part, at any time, except in compliance with applicable federal and
state securities laws by the transferor and transferee (including, without
limitation, the delivery of an investment representation letter and a legal
opinion reasonably satisfactory to the Company, provided that this Warrant may
not be transferred or assigned such that either the Holder or any transferee
will, following such transfer or assignment, hold a Warrant for the right to
purchase fewer than 25,000 shares.
5.2 Transfer Procedure. Subject to the provisions of Section 5.1,
Holder may transfer or assign this Warrant by giving the Company notice
setting forth the name, address and taxpayer identification number of the
transferee or assignee, if applicable (the "Transferee") and surrendering this
Warrant to the Company for reissuance to the Transferee (and the Holder, in
the event of a transfer or assignment of this Warrant in part). (Each of the
persons or entities in whose name any such new Warrant shall be issued is
herein referred to as a "Holder").
5.3 Loss, Theft, Destruction or Mutilation. If this Warrant shall
become mutilated or defaced or be destroyed, lost or stolen, the Company shall
execute and deliver a new Warrant in exchange for and upon surrender and
cancellation of such mutilated or defaced Warrant or, in lieu of and in
substitution for such Warrant so destroyed, lost or stolen, upon the Holder
filing with the Company evidence satisfactory to it that such Warrant has been
so mutilated, defaced, destroyed, lost or stolen. However, the Company shall
be entitled, as a condition to the execution and delivery of such new Warrant,
to demand indemnity satisfactory to it and payment of the expenses and charges
incurred in connection with the delivery of such new Warrant. Any Warrant so
surrendered to the Company shall be cancelled.
10
<PAGE> 11
5.4 Notices. All notices and other communications from the Company
to the Holder or vice versa shall be deemed delivered and effective when given
personally, by facsimile transmission and confirmed in writing or mailed by
first-class registered or certified mail, postage prepaid at such address
and/or facsimile number as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or the Holder from time
to time.
5.5 Waiver. This Warrant and any term hereof may be changed,
waived, or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
5.6 Governinq Law. This Warrant shall be governed by and construed
in accordance with the laws of the State of Nevada, the state of the Company's
incorporation, without giving effect to its principles regarding conflicts of
law.
Dated: January 9, 1997
UNIVERSAL MEDICAL SYSTEMS, INC.
By: /s/ Myron A. Baker
-----------------------------
Myron A. Baker
Chairman & CEO
ATTEST
/s/ Dennis D. Cole
- - ----------------------------
Dennis D. Cole
Vice President and Secretary
11
<PAGE> 1
EXHIBIT 10(a)
AGREEMENT
THE FOLLOWING IS AN AGREEMENT BY AND BETWEEN THE JMK GROUP, INC.
(HERINAFTER REFERRED TO AS "JMK"), AND MEDHEALTH IMAGING, INC. (HEREINAFTER
REFERRED TO AS "M11"), AND IS FOR THE PURPOSE OF DEFINING THE RELATIONSHIP
BETWEEN THE PARTIES.
WHEREAS: JMK is engaged in various business activities in the Far
East;
WHEREAS: JMK has the ability to identify certain potential strategic
partners for Mill in the Far East: and
WHEREAS: MII seeks to develop a strategic partnership relationships in
the Far East.
Now, therefore, JMK and MII agree as follows:
1. MII hereby retains JMK as its representative to identify and
introduce to MII potential strategic partners for marketing, production, and
distribution of MII's products and systems in the identified market. JMK is
hereby retained by MII for a period of one (1) year commencing as of the date
of this Agreement as set forth below, which period may be extended by the
mutual written agreement of JMK and MII.
2. It is understood that any agreement developed with a strategic
partner which is identified by or introduced by JMK to MII is subject to the
terms of this agreement. This includes, but is not limited to, Joint Ventures,
Marketing Agreements, Production Agreements, Investment Banking Agreements, or
any other agreement.
<PAGE> 2
Page 2 of 2, agreement-JMK/MII
3. MII hereby agrees to compensate JMK as follows:
TEN PERCENT (10%) CONSUTOING FEE IS TO BE PAID TO JMK WITHIN
FIVE DAYS FROM THE DATE ANY FUNDS ARE RECEIVED BY MII PURSUANT TO THE TERMS OF
ANY AGREEMENT WITH A STRATETIC PARTNER AS DESCRIBED ABOVE.
SUCH COMPENSATION IS TO BE PAID BY MII TO JMK FOR WHATEVER
PERIOD IS INCLUDED IN ANY AGREEMENT WITH A STRATETIC PARTNER, EVEN IF SUCH
PERIOD INCLUDED IN THE AGREEMENT EXCEEDS THE ONE (1) YEAR CONSULTING PERIOD, OR
ANY EXTENSION THEREOF, AS DESCRIBED ABOVE.
4. JMK shall function as a consultant, and therefore, all expenses
incurred by JMK in its relationship with MII are the responsibility of JMK,
unless otherwise agreed to in writing by MII.
Dated this 12th day of June, 1995
JMK GROUP, INC. MEDHEALTH IMAGING, INC.
By: /s/ By: /s/
----------------------------- ---------------------------------
<PAGE> 1
EXHIBIT 10(b)(i)
LEASE
THIS LEASE AGREEMENT, made and entered into this 7th day of May, 1987,
by and between R. F. PROPERTIES, LIMITED, hereinafter called "Lessor", and
MEDICAL HIGH TECHNOLOGY INTERNATIONAL, INC. hereinafter called "Lessee".
WITNESSETH:
In consideration of the mutual covenants of the respective parties, as
herein provided, and the strict, prompt, and punctual performance of each of
the covenants by the Lessee on his part, agreed and covenanted to be performed,
the Lessor agrees to lease to Lessee the property described below:
A 40,000 square foot building on Lot 7 (4.33 acres) in the Rubin ICOT
Center. Interior finishes to be built out in accordance with plans by
David John Oertel, Architect, dated April 20, 1987 and revised April
25, 1987, attached hereto as Exhibit A.
Lessor guarantees said building and other items covered by the plans
and specifications against defective workmanship and/or materials for a period
of one (1) year from the date of occupancy of said building, and Lessor does
further agree, at its own cost and expense to repair or replace any items
occasioned by defective workmanship and/or materials during said one (1) year
period.
Save and except for the aforesaid one (1) year guarantee against
defective materials and/or workmanship, the Lessee shall from the beginning of
the term of this lease have and hold the demised premises as they shall then be
without any liability or obligation on the part of the Lessor for making any
alterations, improvements, or repairs of any kind on or about said demised
premises for the term of the within lease or any renewal thereof and the Lessee
agrees to maintain the demised premises and all parts thereof in a good and
sufficient state of repair.
<PAGE> 2
Page 2 of 21
Rental Period. The term of this lease shall be for ten (10) years
which term will commence on the 1st day of July, 1987, or when ready for
occupancy, and shall continue until midnight on the 30th day of June, 1997.
Rental. In the first year, Lessee shall pay as rent to the Lessor the
sum of Two Hundred Twenty Thousand ($220,000.00) Dollars. Said rental shall be
payable in regular monthly payments of Eighteen Thousand Three Hundred Thirty
Three and 33/100 ($18,333.33) Dollars per month, payable the first day of each
month in advance, commencing the first day of occupancy# .
In addition to the monthly rent, Lessee agrees to pay all sales or use
taxes required on the rental payments. It is hereby agreed that if any
installment of rent or any other sum due from Lessee is not received by Lessor
within seven (7) days after such amount shall be due, Lessee shall pay to
Lessor a late charge equal to six (6) percent of such overdue amount. Rental
payments shall be delinquent if not paid within seven (7) days of the date due.
Rental for the years subsequent to the initial year of this lease
shall over the preceding twelve month period, in the Consumer Price Index
(United States - All Urban Consumers - All Items - 1967=100) published by the
Bureau of Labor Statistics of the United States Department of Labor or
comparable substitute if this becomes unavailable, provided, however, said
percentage increase shall not be greater than ten (10%) percent for each year.
#Lessor agrees to a rent abatement of fifty percent (50%) for each month during
the first year of this lease.
<PAGE> 3
Page 3 of 21
Security Deposit. The Lessee has deposited with the Lessor the sum of
$30,000.00 as security for the full and faithful performance by the Lessee of
all the terms, covenants and conditions of this lease. The security deposit
shall be returned to the Lessee at the expiration of this lease less any sums
required therefrom to enforce the terms of this lease. Lessor shall have the
right to apply any part of the deposit to cure any default of the Lessee, and
if the Lessor does so, Lessee shall upon demand deposit with Lessor the amount
so applied to restore the security to the original sum deposited within five
(5) days after receipt of demand therefore.
Use. The premises are leased to Lessee solely for the following use
and no other use can be made of the premises during the term without written
consent of the Lessor:
Manufacturing, sales and service of electronic products for the
medical field. No use considered hazardous by Lessor's insuror will
be permitted.
Lessee shall not use or occupy the demised premises or knowingly
permit the demised premises to be used or occupied contrary to any statute,
rule, order, ordinance, requirement or regulation applicable thereto or in any
manner which would violate any certificate of occupancy affecting the same, or
which would cause structural injury to the improvements or cause the value or
usefulness of the demised premises or any part thereof substantially to
deminish (reasonable wear and tear excepted) or which would constitute a public
or private nuisance or waste, and Lessee agrees that it will, promptly upon
discovery of any such use, take all necessary steps to compel the
discontinuance of such use.
Taxes and Assessments. Lessee covenants and agrees to pay and
discharge before delinquency thereof and before penalties shall accrue thereon,
all taxes and assessments on the premises, including improvements thereof, due
and payable during the term of
<PAGE> 4
Page 4 of 21
this lease and any renewals thereof, unless the same are being contested in
good faith by Lessee, in which event Lessee must deposit the amount of taxes or
bond same with the appropriate governmental taxing authority. In such event
payment shall be made by Lessee promptly after all contested proceedings are
completed; provided, however, that all taxes and assessments during the first
and last years of the lease, as defined, shall be apportioned equitably between
Lessor and Lessee commencing upon the date that the Certificate of Occupancy is
issued. Then Lessor shall, upon that date, make all appropriate arrangements
with the local taxing authorities to have all real estate tax and assessments
bills payable by Lessee under this section sent directly to the Lessee at its
address specified in accordance with the section relating to notices set forth
herein.
At the option of Lessor, Lessee shall pay to Lessor the known or
estimated yearly real estate taxes and assessments levied or to be levied
against the demised premises in monthly payments equal to one-twelfth (1/12) of
the known or estimated yearly real estate taxes and assessments levied or to be
levied against the demised premises. If the total monthly payments, as made
under this paragraph, shall exceed the amounts of payments necessary for said
taxes and assessments, such excess shall be credited on subsequent monthly
payments of the same nature, but if the total of such monthly payments so made
under this paragraph shall be insufficient to pay such taxes and assessments
when due, then the Lessee shall pay to the Lessor such amount as may be
necessary to make up the deficiency.
If at any time during the term of this lease, under the laws of the
state or any political subdivision thereof in which the demised premises are
situated, a tax or excise on rents or other tax, however described, is levied
or assessed by said state or political subdivision against the Lessor or the
annual or monthly rent expressly reserved under this lease, the Lessee
covenants to pay and discharge such tax or excise on rents or other tax but
only to the extent of the amount thereof which is lawfully
<PAGE> 5
Page 5 of 21
assessed or imposed upon the Lessor and which was so assessed or imposed as a
direct result of the Lessor's ownership of the demised premises, or of this
lease, or of the rentals accruing under this lease, it being the intention of
the parties hereto that the rent to be paid hereunder shall be paid to the
Lessor absolutely net without deduction of any nature whatsoever, foreseeable
or unforeseeable, except as in this lease otherwise expressly provided.
Nothing herein contained shall require the Lessee to pay any estate,
inheritance, succession, capital, levy or transfer tax of the Lessor, or any
income, excess profits tax of Lessor.
Lessee covenants to furnish Lessor within thirty (30) days after the
date upon which any such imposition is payable by the Lessee, as in this
paragraph provided, official receipts of the appropriate taxing authority or
other proof satisfactory to Lessor, evidencing the payment thereof.
Utilities. Lessee shall pay or cause to be paid all charges for
water, sewer, gas, electricity, light, heat, power, telephone or all other
utility services used, rendered or supplied to or in connection with the
premises during the term of this lease and any renewals thereof, commencing
upon the issuance of the Certificate of Occupancy or conditional Certificate of
Occupancy on the premises. If these charges are not paid when due and Lessor
is required to pay same, they will be added to the subsequent month's rent and
shall be collectible from Lessee in the same manner as rent. Lessor shall not
be liable for damages to Lessee's business and/or inventory or for any other
claim by Lessee resulting from an interruption in utility services if such
damage or business interruption or inventory loss is not caused by the
negligence of the Lessor or its agents or employees or any other individual
under its direction. Lessee shall pay and hold the Lessor harmless from and on
account of all claims for occupational license, personal property taxes or
other obligations attributable to the operation of the Lessee's business on the
premises.
<PAGE> 6
Page 6 of 21
Repairs. Save and except as is otherwise expressly provided herein,
the Lessee covenants throughout the term of this lease and any renewal terms,
at the Lessee's sole cost and expense, to take good care of the demised
premises, including the building and improvements now or at any time erected
thereon, the equipment, fixtures, motors and machinery thereof, and the
sidewalks, curbs, roadways, parking areas and fences, if any, and to keep the
same in good order and condition, and shall promptly at the Lessee's own cost
and expense make all necessary repairs, interior and exterior, structural and
non-structural. All such repairs made by the Lessee shall be equal in quality
and class to the original work and the plans for such repairs shall be approved
in writing by Lessor prior to commencement of the repairs. The Lessee shall
keep and maintain all portions of the demised premises and the sidewalks
adjoining the same in a clean and orderly condition, free of accumulation of
dirt and rubbish. The Lessee shall maintain all landscaping, keeping same neat
and properly trimmed and fertilized and agrees to pay for any assessment levied
to property owners for common area maintenance and any charges for street
lighting.
Abandonment or Vacation of Premises. If the Lessee shall abandon or
vacate said premises before the end of the term of this lease, the Lessor may,
at his option, forthwith cancel this lease or it may enter said premises as the
agent of the Lessee, by force or otherwise, without being liable in any way
therefore, and relet the premises with or without any furniture or equipment
that may be therein, as the agent of the Lessee, at such price and upon such
terms and for such duration of time as the Lessor may determine, and receive
the rent therefor, applying the same to the payment of the rent due by these
presents, and if the full rental herein provided shall not be realized by
Lessor over and above the expenses to Lessor in such re-letting, the said
Lessee shall pay any deficiency, and if more than the full rent is realized
Lessor will pay to said Lessee the excess on demand.
<PAGE> 7
Page 7 of 21
Indemnity-Liability Insurance. Lessee covenants and agrees to
indemnify and save Lessor harmless from and against any and all claims for
damages or injuries to good, wares, merchandise and property, and for any
personal injury or loss of life in, upon, or about the demised premises.
The Lessee covenants to provide on or before the commencement date of
the term herein and keep in force during the term of this lease, a
comprehensive liability policy of insurance, insuring the Lessor and Lessee
against any liability whatsoever occasioned by accident on or about the demised
premises or any appurtenances thereto. Such policy shall be written by an
insurance company with a Best rating of A+ in the amount of One Million Dollars
($1,000,000.00) in respect of any one person, and in the amount of One Million
Dollars ($1,000,000.00) in respect of any one accident and One Million Dollars
($1,000,000.00) for property damage. If during the term of this Lease the
Lessor reasonably believes this coverage is inadequate, Lessor may require that
the coverage be increased. The Lessee shall provide the Lessor with
Certificates of such insurance coverage at the beginning of each year during
the Lease term.
Fire & Extended Coverage Insurance. Lessor shall obtain during the
term of this Lease and any renewals thereof, fire and extended coverage
insurance, insuring all the improvements in an amount which will insure the
replacement value of the improvements and which is not less than the amount of
any mortgages on the premises. Such fire and extended coverage insurance
policies shall be in the name of the Lessor, Lessor's mortgagee, and Lessee as
their respective interests may appear. The Lessee shall pay the cost of such
insurance at the beginning of each lease year during the term of this lease.
The Lessee shall comply with all safety engineering recommendations
and requirements due to city, county, state or insurance company regulations
that might affect the insurability in any manner of the Lessor or any Lessee in
the premises.
<PAGE> 8
Page 8 of 21
The Lessee shall insure the contents of said building owned by Lessee,
for the benefit of Lessee, against loss or damage by fire, windstorm or other
casualties such amount as Lessee may desire and Lessee agrees that such
policies shall contain a waiver of subrogation clause as to Lessor. The Lessee
waives, releases and discharges Lessor from all claims or demand whatsoever
which Lessee may have or acquire in the future, arising out of damage to or
destruction of Lessee's contents occasioned by fire or extended coverage risk
whether such claim or demand may arise because of the negligence of Lessor, its
agents or employees, or otherwise, and Lessee agrees to look to insurance
coverage only in the event of such loss.
Intent of Parties. It being the intention and purpose of the
respective parties hereto that this lease shall be a "Net Lease" to the Lessor,
all cost or expense of whatever character or kind, general and special,
ordinary and extraordinary, foreseen and unforeseen and of every kind and
nature whatsoever that may be necessary in or about the operation of said
demised premises, and the Lessee's authorized use thereof during the entire
term of this Lease shall be paid by Lessee and all provisions of this Lease
relating to expenses are to be construed in light of such intention and purpose
to construe this lease as a "Net Lease."
Observance of Laws and Ordinances. Lessee agrees to observe, comply
with and execute promptly at its expense during the term hereof, all laws,
rules, requirements, orders, directives, codes, ordinances and regulations of
governmental authorities and agencies and of insurance carriers which relate to
its use or occupancy of the demised premises. In addition the Lessee agrees to
abide by all Restrictive Covenants (Exhibit "B") hereto attached.
Lessee shall comply with all governmental and other laws, rules,
regulations, codes or statutes, including but not limited to federal, state,
county and municipal, as they relate to storage, use, and disposal of any
substance, whether toxic or
<PAGE> 9
Page 9 of 21
non-toxic, whether such substance is a natural substance. In the event Lessee
should violate any such laws, rules, regulations, codes or statutes, the same
shall constitute a default under this lease. In addition to the remedies for
default specified in this lease, Lessee shall indemnify and hold Lessor
harmless from any and all damages, direct or indirect, which might be caused as
a result of said default, whether said damages arise during the term of this
tenancy or whether said damages arise after the termination hereof, and
regardless of whether said lease is terminated voluntarily or involuntarily.
Said indemnity shall include any and all costs incurred by Lessor, including
any attorney's fees, in either enforcing this indemnity or defending claims
resulting from Lessee's default hereunder.
Lessor's Consent Required. The Lessee shall not assign this lease,
nor sub-let the premises, or any part thereof nor use the same, or any part
thereof, nor permit the same, or any part thereof, to be used for any other
purpose than as above stipulated, nor make any alterations therein, or
additions thereto without the prior written consent of the Lessor. No such
assignment or subleasing shall relieve the Lessee from any of the Lessee's
obligations in this lease contained nor shall any assignment or transfer of
this lease be effective unless the assignee or transferee shall, at the time of
such assignment or transfer, assume in writing all the terms, covenants and
conditions of this lease thereafter to be performed by the Lessee and shall
agree in writing to be bound thereby. Lessee agrees to pay on behalf of Lessor
any and all costs of Lessor, including reasonable attorney's fees, occasioned
by such assignment or transfer. Lessor agrees that it will not unreasonably
withhold its consent to such assignment or sublease, provided that the
conditions set forth in this paragraph have been complied with by Lessee and
provided further that Lessee be not in default in other terms and conditions of
this lease, and provided Lessor reasonably believes the assignee is a
financially responsible entity.
<PAGE> 10
Page 10 of 21
Lessor's Property. All permanent alterations, additions and
improvements that have become a part of the realty and which have been or will
be installed by either party upon the premises during the terms of the lease
and which, in any manner, are affixed to the floors, walls or ceilings, shall
become the property of the Lessor and at the termination of this lease shall be
surrendered with the premises as a part thereof. However, at Lessor's option,
Lessee shall removal all such alterations, additions, improvements and fixtures
and the premises shall be restored to their original condition at Lessee's
expense. Lessee may (if not in default hereunder) prior to the expiration of
the lease (as the same may be renewed or extended) remove all non permanent
fixtures and equipment which it has placed in premises, provided Lessee
restores premises to the same condition it was in at the installation thereof.
The said Lessee hereby pledges and assigns to the Lessor all the
furniture, fixtures, goods and chattels of said Lessee, which shall or may be
brought or put on said premises as security for the payment of the rent herein
reserved, and the Lessee agrees that the said lien may be enforced by distress,
foreclosure or otherwise at the election of the said Lessor, and does hereby
agree to pay Lessor's attorney's fee incurred in enforcing this provision
(including appellate fees, if any), together with all costs and charges
therefore incurred or paid by the Lessor.
Risk of Loss. All personal property placed or moved in the premises
shall be at the risk of the Lessee or owner thereof. The Lessor shall not be
responsible or liable to the Lessee for any loss or damage that may be
occasioned by or through the act or omissions of persons occupying adjoining
premises or any part of the premises adjacent to or connected with the premises
hereby leased or any part of the building of which the leased premises are a
part or for any loss or damage resulting to Lessee or its property from
bursting, stopped up or leaking water, gas, sewer or steam pipes unless the
same is due to the negligence of the Lessor.
<PAGE> 11
Page 11 of 21
Right of Entry. The Lessor, or any of his agents, shall have the
right to enter said premises during all reasonable hours, to examine the same
to make such repairs, additions or alterations as may be deemed necessary for
the safety, comfort or preservation thereof, or of said building, or to exhibit
said premises, and to put or keep upon the doors or windows thereof a notice
"FOR RENT" at any time within ninety (90) days before the expiration of this
lease. The right of entry shall likewise exist for the purposes of removing
placards, signs, fixtures, alterations, or additions, which do not conform to
this agreement, or to the rules and regulations or restrictive covenants of the
Industrial Park within which the demised premises are located.
Restoring Premises to Original Condition. Lessee hereby accepts the
premises in the condition they are in at the beginning of the lease term and
agrees to maintain said premises in the same condition, order and repair as
they are in at the commencement of said term, and to return the premises to
their original condition at the expiration of the term, excepting only
reasonable wear and tear arising from the use thereof under this agreement.
The Lessee agrees to make good to said Lessor immediately upon demand, any
damage to water apparatus or electric lights or any fixture, appliances or
appurtenances of said premises, or of the walls, floor or roof of the building,
caused by any act or neglect of Lessee or of any person or persons in the
employ or under the control of the Lessee.
Destruction by Fire. If the premises shall be partially damaged by
fire or other casualty, the damages shall be repaired by and at the expense of
the Lessor and the rent until such repairs are made shall be apportioned
according to the part of the demised premises which is usable by the Lessee.
Said repairs shall be made promptly except that no penalty shall accrue for
reasonable delay which may arise by reason of adjustment of insurance on the
part of the Lessor and/or Lessee and for reasonable delay on account of labor
problems or any other cause beyond the Lessor's control. If
<PAGE> 12
Page 12 of 21
the premises are totally damaged or rendered wholly untenable by fire or other
casualty, rent shall abate until restoration or rebuilding and the Lessor shall
promptly restore or rebuild the same on condition, however, that if at any
time, during the last two (2) years of the term hereof, the demised premises
are totally damaged or rendered wholly untenable by fire or other casualty,
then Lessor shall have the right and option of terminating this lease as of the
date of such casualty or cause within sixty (60) days thereafter by giving
written notice to the Lessee and any rents or other payments shall be prorated
as of the effective date of such termination and proportionately refunded to
Lessee or paid to Lessor as the case may be.
For the purpose of paying the cost of repairs, replacement or
rebuilding, Lessor, its mortgagees (to the extent the mortgagees on the
property so allow), and Lessee shall make available all net sums received by
them under insurance policies covering such loss in reimbursement for work and
materials actually incorporated in the premises.
Eminent Domain. If the whole or any part of the premises hereby
leased shall be taken by any public authority under power of eminent domain
then the term of this lease shall cease on the part so taken from the day the
possession of the part shall be acquired for any public purpose and the rent
shall e paid up to that day and if such portion of the demised premises is so
taken as to destroy the usefulness of the premises for the purpose for which
the premises where leased, then from that day the Lessee shall have the right
to either terminate this lease or to continue in possession of the remainder of
the same under the terms herein provided, except that the rent shall be reduced
in proportion to the amount of the premises taken. The parties agree that the
Lessee shall not be entitled to any damage by reason of the taking of this
leasehold.
Bankruptcy-Insolvency. Lessee agrees that if the estate created
hereby shall be taken upon execution, attachment, or any
<PAGE> 13
Page 13 of 21
other process of law, or if Lessee makes any assignment of the Lessee's
property for the benefit of creditors, or if Lessee shall file a voluntary
petition in bankruptcy or apply for reorganization or any extension agreement
with its creditors under the bankruptcy or other federal or state law now in
force or hereafter enacted and any such execution, attachment, order,
assignment, or action be not vacated or set aside within thirty (30) days
thereafter, then Lessor may, if it so elects, upon ten (10) days written notice
to Lessee, terminate this lease, or Lessor, at Lessor's option, shall have the
right to pursue such other remedies as may be allowed at law or in equity
against the Lessee and any and all other parties who may be liable.
Subordination, Attornment and Estoppel Certificate
(a) Subordination. This lease and the rights of the Lessee hereunder
are hereby made subject and subordinate to all bona fide mortgages now or
hereafter placed upon the said premises by the Lessor or any other owner,
provided however that such mortgages will not cover the equipment and furniture
or furnishings on the premises owned by the Lessee. This lease is also subject
to and subordinate to all matters of record affecting the real property of
which these premises are a part.
(b) Attornment. If any mortgagee shall succeed to the interest of
Lessor by reason of the exercise of its rights under such mortgage (or the
acceptance of voluntary conveyance in lieu thereof) however caused, then such
successor may, at its option, succeed to the interest of Lessor under this
lease; and in such event, the Lessee shall thereupon attorn to such successor
and become bound directly to such successor in interest to Lessor to perform
and observe all the Lessee's obligations under this lease without the necessity
of the execution of any further instrument.
(c) Estoppel Certificate. Lessee shall at any time upon not less
than ten (10) days' prior notice from Lessor execute, acknowledge and deliver
to Lessor a statement in writing (i)
<PAGE> 14
Page 14 of 21
certifying that this lease and any modification is in full force and effect;
(ii) acknowledging that there are not, to Lessee's knowledge, any uncured
defaults on the part of Lessor hereunder, or specifying such defaults if any
are claimed; and (iii) acknowledging the subordination and attornment
provisions referred to above.
Default. If Lessee defaults in the payment of rent or if Lessee
defaults in the prompt performance of the terms, covenants, and conditions of
this lease, Lessor shall give Lessee fifteen (15) days written notice to
rectify any such defaults. After fifteen (15) days, if not corrected, Lessor
may immediately enter on the leased premises and repossess the same as of its
former estate, and expel Lessee and those claiming under Lessee, and remove
their effects without being deemed guilty of any manner of trespass and without
prejudice to any remedies which might otherwise be used for arrears of rent or
preceding breach of covenant. Such property may be moved and stored in a
public warehouse or elsewhere at the cost and for the account of Lessee.
Should Lessor elect to re-enter as herein provided or should it take possession
pursuant to legal proceedings or pursuant to any notice provided for by law, it
may either terminate this lease or it may from time to time, without
terminating this lease, make such alterations and repairs as may be necessary
in order to relet the premises, and relet said premises or any part thereof for
such term and at such rental and terms as Lessor may deem advisable; upon each
such reletting all rentals received by Lessor from such reletting shall be
applied first, to the payment of any indebtedness other than rent due hereunder
from Lessee to Lessor; second, to the payment of any costs and expenses of such
reletting, including brokerage fees and attorney's fees and costs of such
alterations and repairs; third, to the payment of rent due and unpaid
hereunder, and the residue, if any, shall be held by the Lessor and applied in
payment of future rent as the same may become due and payable hereunder. If
such rentals received from
<PAGE> 15
Page 15 of 21
such reletting during any month be less than that to be paid during that month
by Lessee hereunder, Lessee shall pay any such deficiency to Lessor. No such
re-entry or taking possession of said premises by Lessor shall be construed as
an election on its part to terminate this lease unless a written notice of such
intention be given to Lessee. Notwithstanding any such reletting without
termination, Lessor may at any time thereafter elect to terminate this lease
for such previous breach. Should Lessor at any time terminate this lease for
any breach, in addition to any other remedies it may have, it may recover from
Lessee all damages it may incur by reason of such breach, including the cost of
recovering the leased premises, reasonable attorney's fees, and including the
worth at the time of such termination of the excess, if any, of the amount of
rent and charges equivalent to rent reserved in this lease for the remainder of
the stated term over the then reasonable rental value of the leased premises
for the remainder of the stated term. In case suit shall be brought for
recovery of possession of the leased premises, for the recovery of rent or any
other amount due under the provisions of this lease, or because of the breach
of any other covenants herein contained on the part of Lessee to be kept or
performed, and a breach shall be established, Lessee shall pay to Lessor all
expenses Lessor incurred therefor, including a reasonable attorney's fee for
trial and appellate legal services.
The specified remedies to which the Lessor may resort under the terms
of this lease are cumulative and are not intended to be exclusive of any other
remedies or means of redress to which the Lessor may be lawfully entitled in
case of any breach or threatened breach by the Lessee of any provision of this
lease. The failure of the Lessor to insist in any one or more cases upon the
strict performance of any of the covenants of this lease or to exercise any
option herein contained shall not be construed as a waiver or relinquishment
for the future of such covenant or option. A receipt by the Lessor of rent
with knowledge of the
<PAGE> 16
Page 16 of 21
breach of any covenant hereof (other than the payment of rent) shall not be
deemed a waiver of such breach and no waiver by the Lessor of any provisions in
this lease shall be deemed to have been made unless expressed in writing and
signed by the Lessor. In addition to the other remedies in this lease
provided, the Lessor shall be entitled to the restraint by injunction of the
violation, or attempted or threatened violation of the covenants, conditions or
provisions of this lease.
Notice. All notices, demand, and communications hereunder to the
Lessee or the Lessor shall be served or given by U. S. Mail (registered), and
if intended for the Lessor, the same shall be addressed to the Lessor at the
following address: 5590 Ulmerton Road, Clearwater, FL 33520; and if intended
for the Lessee, the same shall be addressed to the Lessee at the following
address: 14155 - 58th Street North, Clearwater, FL 33520, or to such other
addresses are hereinafter designated by either party, or their successors in
interest, by notice in writing, sent by U. S. Registered Mail to such
designated addresses. Any such notice shall be effective as of the date
stamped by the post office once the envelope is received by addressee.
Indemnity. The Lessee agrees to indemnify and save harmless the
Lessor against and from any and all claims by or on behalf of any person or
persons, firm or firms, corporation or corporations, arising from the conduct
or management of or from any work or thing whatsoever done in or about the
demised premises, and will further indemnify and save the Lessor harmless
against and from any and all claims arising during the initial term of this
lease or any renewal term from any condition of the building or the demised
premises or any street, curb or sidewalk adjoining the demised premises, or of
any passageways or spaces therein or appurtenant thereto or arising from any
breach or default on the part of the Lessee in the performance of any covenant
or agreement on the part of the Lessee to be performed, pursuant to the terms
of this lease, or arising from any act of negligence of the
<PAGE> 17
Page 17 of 21
Lessee, or its agents, contractors, servants, employees or licensees, or
arising from any accident, injury or damage whatsoever caused to any person,
firm or corporation occurring during the initial term of this lease or any
renewal thereof, in or about the demised premises, or upon or under the
sidewalks and the land adjacent thereto, and from and against all costs,
reasonable attorney's fees, expenses and liabilities incurred in or about any
such claim or action or proceeding brought thereon; and in case any action or
proceeding be brought against the Lessor by reason of any such claim, the
Lessee upon notice from the Lessor covenants to resist or defend such action or
proceeding by counsel reasonably satisfactory to Lessor.
Control. It is covenanted between the Lessor and Lessee that the
Lessee shall have full, complete and exclusive control and possession of the
leased premises, and that, therefore, the Lessee shall be exclusively
responsible and liable to any third parties by reason of any damage or personal
injury of any kind, whether occasioned by any breach or default caused by the
Lessee.
Applicable Law. The laws of the State of Florida shall govern the
validity, performance and enforcement of this lease. The invalidity or
unenforceability of any provision of the lease will not affect or impair any
other provision.
Gender. Wherever used, "Lessor" and "Lessee" shall be deemed to
include the heirs, personal representatives, successors, sublessees, assigns
and purchasers of substantially all of the assets of said parties unless the
context excludes such construction. The Lessor's obligations shall bind it
only with respect to breaches occurring during the ownership.
Separability. Each and every covenant and agreement contained in this
lease shall for all purposes be construed to be a separate and independent
covenant and agreement, and the breach of any covenant or agreement contained
herein by either party shall in no way or manner discharge or relieve the other
party from its obligation to perform each and every covenant and agreement
herein.
<PAGE> 18
Page 18 of 21
No Liens Created by Lessee. Lessee shall not allow the estate of
Lessor in the leased premises to become subject to any lien, charge or
encumbrance whatsoever. The Lessee shall not suffer or permit any mechanics'
liens to be filed against the demised premises or any part thereof by reason of
work, labor, services or materials supplied or claims to have been supplied to
the Lessee or anyone holding the demised premises or any part thereof through
or under the Lessee. If any such mechanics' lien shall at any time be filed
against the demised premises, the Lessee shall cause the same to be discharged
of record within thirty (30) days after the date of filing the same. If the
Lessee shall fail to discharge such mechanic's lien within such period, then in
addition to any other right or remedy of the Lessor, the Lessor may, but shall
not be obligated to, discharge the same either by paying the amount claimed to
be due or by procuring the discharge of such lien by deposit in court or by
giving security or in such other manner as is, or may be, prescribed by law.
Any amount paid by the Lessor for any of the aforesaid purposes, and all
reasonable counsel fees, in or about procuring the discharges of such lien,
with all necessary disbursements in connection therewith, with interest thereon
at the prevailing prime rate as published by Citibank plus two (2) points from
the date of payment, shall be repaid by the Lessee to the Lessor on demand, and
if unpaid may be treated as additional rent. Nothing herein contained shall
imply any consent or agreement on the part of the Lessor to subject the
Lessor's estate to liability under any mechanics' lien law.
Miscellaneous.
A. Lessee shall, at his own cost, make such improvements on the
premises and perform such acts and do such things as shall be lawfully required
by any public body having jurisdiction over said property, in order to comply
with sanitary requirements, fire hazard requirements, and other similar
requirements designated to protect the public.
<PAGE> 19
Page 19 of 21
B. The Lessor shall have the unrestricted right of assigning this
lease at any time, and in the event of such assignment, the Lessor shall be
relieved of all liabilities hereunder.
C. It is understood and agreed between the parties hereto that
time is of the essence of this contract and this applies to all terms and
conditions contained herein.
D. The Lessee agrees at any time and from time to time upon not
less than fifteen (15) days prior written request by the Lessor to execute,
acknowledge and deliver to Lessor a statement in writing certifying that this
lease is unmodified and in full force and effect (or if there have been
modifications that the same is in full force and effect as modified and stating
the modifications), and the dates to which the basic rent and other charges
have been paid in advance, if any, it being intended that any such statement
delivered pursuant to this paragraph may be relied upon by any prospective
purchaser of the fee or mortgagee or assignee of any mortgage upon the fee of
the demised premises.
Option to Purchase: Lessor grants to Lessee an option to purchase the
property described in Exhibit "A" with the improvements constructed thereon for
a price, payable in cash, as described below. The closing date will be at the
end of the fifth year of occupancy. Should it become necessary to adjust the
purchase closing date to coincide with the Lessor's loan expiration date,
Lessor has the option to adjust the closing date of the sale to a date either
120 days prior to or subsequent to the end of the fifth year of occupancy. The
conveyance from Lessor to Lessee will be by General Warranty Deed containing
full covenants of warranty. Lessor will provide the Lessee, at Lessor's
expense, title insurance on said property subject to easements, restrictions
and reservations of record then in existence. Lessor will be responsible for
the costs of State documentary stamps and surtax to be affixed to the Warranty
Deed.
<PAGE> 20
Page 20 of 21
Lessee will be responsible for the costs of recording the Warranty Deed and any
costs relating to financial arrangements for the purchase. Lessee must notify
Lessor of its intent to exercise the option to purchase by providing said
notice in writing no later than nine (9) months prior to the end of the fifth
year of occupancy.
<TABLE>
<S> <C>
Closing at end of Year Option Price
---------------------- ------------
5 $2,300,000.00
</TABLE>
IN WITNESS WHEREOF, the parties have signed the aforegoing lease the day and
year first mentioned. Signed in the presence of:
<TABLE>
<S> <C> <C>
Lessor: R. F. Properties, Limited a
Florida limited partnership
By: Leslie A. Rubin Limited,
/s/ Robert P. McLoone General Partner
- - -------------------------------
/s/ Rosalie M. White By: /s/ Leslie A. Rubin,
- - ------------------------------- -----------------------------
As to Lessor Leslie A. Rubin, General
Partner
Lessee: MEDICAL HIGH TECHNOLOGY
/s/ Beth A. Brunt INTERNATIONAL, INC.
- - -------------------------------
/s/ Charlene A. Burnes By: /s/ Jerome P. Shields
- - ------------------------------- -----------------------------
As to Lessee Jerome P. Shields, President
/s/ Beth A. Brunt By: /s/ Ronald D. Brewer
- - ------------------------------- -----------------------------
Ronald D. Brewer,
Vice President
/s/ Charlene Burnes
- - -------------------------------
As to Lessee
/s/ Beth A. Brunt By: /s/ James Nelson Marsh
- - ------------------------------- -----------------------------
James Nelson Marsh,
Vice President
/s/ Charlene Burnes
- - -------------------------------
As to Lessee
</TABLE>
<PAGE> 21
21 of 21
Guaranty: The Lessee as well as Jerome P. Shields, Ronald D. Brewer,
and James Nelson March, as individuals, hereby unconditionally guarantee the
payment and performance of all obligations of Lessee pursuant to this lease.
The liability of the Guarantors under this Guaranty shall be primary,
direct and immediate and not conditional or contingent upon pursuit by Lessor,
of any remedies it may have against the Lessee, its successors and assigns,
with respect to said lease, whether pursuant to the terms thereof or by law.
The Guarantors agree that in the event this Guaranty shall be enforced
by suit or otherwise, the Guarantors will reimburse Lessor, upon demand, for
all expenses incurred in connection therewith, including without limitation,
attorney's fees incurred by Lessor.
<TABLE>
<S> <C> <C>
GUARANTOR: JEROME P. SHIELDS
/s/ Beth A. Brunt
- - -------------------------------
By: /s/ Jerome P. Shields
-----------------------------
/s/ Charlene Burnes
- - -------------------------------
As to Guarantor
GUARANTOR: RONALD D. BREWER
/s/ Beth A. Brunt
- - -------------------------------
By: /s/ Ronald D. Brewer
-----------------------------
/s/ Charlene Burnes
- - -------------------------------
As to Guarantor
GUARANTOR: JAMES NELSON MARSH
/s/ Beth A. Brunt
- - -------------------------------
By: /s/ James Nelson Marsh
-----------------------------
/s/ Charlene Burnes
- - -------------------------------
As to Guarantor
</TABLE>
<PAGE> 22
[FIRST CHICAGO BANK LETTERHEAD]
November 17, 1988
Mr. Michael C. Rausch
The Adwell Corporation
P. O. Box 1107
Jacksonville, IL 62651
Dear Mike:
Re: Cummings/Bergquist Trusts # 3540 to 3544 inclusive
In connection with the insurance coverages carried by the tenants of the
Florida properties, we are still in need of the following:
REO 90093-006 - 8810 Enterprise Blvd., Largo, Fla.
Tenant: United Parcel Service, Inc.
1. Workers' Compensation Insurance
2. Auto/Truck Liability Insurance
REO 90095-001 - 5733 Myerlake Circle, Clearwater, Fla.
Tenant: Tadiran Electronic Industries, Inc.
1. Workers' Compensation Insurance
REO 90096-009 - 14044 Icot Blvd., Clearwater, Fla.
Tenant: Consulting Engineering Associates, Inc.
1. Workers' Compensation Insurance
REO 90097-007 - 14155 58th St. North, Clearwater, Fla.
Tenant: Medical High Technology Internatl., Inc.
1. Comprehensive General Liability Insurance
2. Workers' Compensation Insurance
Please contact the tenants again and request that certificates of insurance be
issued. In regards to the comprehensive general liability insurance coverages,
the following should be shown as additional insureds: John R. Grimes,
individually, and The First National Bank of Chicago, not individually but
solely as Trustee under Trust Numbers 3540 to 3544 inclusive, and all
beneficiaries and agents thereunder.
Thank you for your cooperation in this matter.
Very truly yours,
/s/ Bonnie J. Wayne
----------------------
Bonnie J. Wayne
Real Estate Management
(312) 732-6869
<PAGE> 23
[RUBIN DEVELOPMENT CORPORATION LETTERHEAD]
April 22, 1988
Mr. Jerome P. Shields, President
MEDICAL HIGH TECHNOLOGY, INC.
14155 - 58th Street North
Clearwater, Florida 34620
RE: Building Sale
Dear Mr. Shields:
On April 21, 1988, we completed a transaction where your building was sold to
an investment group. The new owners, management agent and address is as
follows:
Trust of First National Bank of Chicago, As Trustee
Michael C. Rausch, Local Managing Agent
P.O. Box 3488
Clearwater Beach, Florida 34630-8488
(813) 443-2400
Within the next few days, you should receive a letter from Mr. Rausch covering
other specific items. In the meantime, please forward your rental checks to
the above address. Make checks payable to Michael C. Rausch - Agent.
We thank you for your cooperation in this matter.
Very truly yours,
RUBIN DEVELOPMENT CORPORATION
/s/ Leslie A. Rubin
- - -------------------
Leslie A. Rubin
President
LAR:iwd
<PAGE> 1
EXHIBIT 10(b)(ii)
ADDENDUM TO LEASE
This Addendum to Lease ("Addendum") is made and entered into as of the 1st day
of February, 1996, by and among John B. Pickford, as Ancillary Trustee for the
First National Bank of Chicago as Trustee, (hereinafter called "Lessor"),
Medical High Technology International, Inc., a Florida corporation,
(hereinafter called "Lessee"), Universal Medical Systems, Inc., a Nevada
corporation, (hereinafter called "Guarantor").
Recitals:
WHEREAS: Lessee entered into a Lease dated May 7, 1987, with R. F.
Properties, Limited, as Lessor, for the lease of that certain parcel of real
property and improvements located thereon described as "A 40,000 square foot
building on Lot 7 (4.33 acres) in the Rubin ICOT Center" (hereinafter sometimes
referred to as the "premises");
WHEREAS: On or about April 21, 1988, the interest of Lessor in the
leased property or premises was sold, transferred and conveyed to First
National Bank of Chicago, As Trustee, and
WHEREAS: Lessor and Lessee now desire to amend, modify and change
certain terms and provisions of the Lease by entering into this Addendum to
Lease.
NOW, THEREFORE, in consideration of the mutual covenants of the
respective parties, as herein provided, Lessor, Lessee and Guarantor agree as
follow:
1. Amendment of Lease. The Lease dated the 7th day of May,
1987, is hereby amended, changed and modified as set forth herein:
A. Rental Period. The term of the lease shall be for a
period of five (5) years which term will commence on the 1st day of February,
1996, and shall continue until midnight on the 31st day of January, 2001.
B. Rental. During the first year, commencing on February
1, 1996, Lessee shall pay as rent to the Lessor the sum of Two Hundred
Forty-Four Thousand Four Hundred Dollars ($244,400). Said rental shall be
payable in regular monthly payments of Twenty Thousand Three Hundred Sixty-Six
and 66/100 Dollars ($20,366.66) per month, payable the first day of each month
in advance, commencing February 1, 1996.
In addition to the monthly rent, Lessee agrees to pay all sales or use
taxes required on the rental payments, if any. It is hereby agreed that if any
installment of rent or any other sum due from Lessee is not received by Lessor
within ten (10) days after such amount shall be due, Lessee shall pay to Lessor
a late charge equal to six percent (6%) of such overdue amount. Rental
payments shall be delinquent if not paid within ten (10) days
<PAGE> 2
of the date due. Rental for the years beginning February 1, 1997, shall be
increased each year by three percent (3%).
C. Waiver of Landlord's Lien. In the event that Lessee
finances its business in any manner during the term of the Lease, including but
not limited to any line of credit, term loan, letter of credit, or financing of
the purchase of equipment, furniture, or fixtures to be located and used on the
leased property, and a lender requests the Lessor to subordinate its statutory
landlord's lien, or security or pledge as described in paragraph "Lessor's
Property" on page 10 of the Lease, to such financing, the Lessor shall comply
with such request and shall execute and deliver, without undue delay, any
requested documents related to such subordination.
D. Release of Guaranties. The Guaranties of Jerome P.
Shields, Ronald D. Brewer and James Nelson Marsh are hereby released, revoked
and cancelled.
E. Reaffirmation of Terms of Lease. Except as amended,
changed or modified as set forth herein, the terms and provisions of the Lease
originally dated the 7th day of May, 1987, are hereby reaffirmed.
2. Cancellation, Termination and Release of Promissory Note,
Security Agreement, UCC-1 Financing Statements and Stipulated Judgment.
Lessor hereby cancels, terminates and releases: (a) the Promissory Note
executed by Lessee, as "Borrower", dated June 1, 1994, in the original
principal amount of $339,696.88, (b) the Security Agreement executed by Lessee,
as "Debtor", dated June 1, 1994, which secures the aforementioned promissory
note, (c) the UCC-1 Financing Statement filed in the Office of the Clerk of
Pinellas County, Florida on July 11, 1994 in OFF. REC. BK. 8723, PG 1362, (d)
the UCC-1 Financing Statement filed in the Office of the Florida Secretary of
State on July 20, 1994, as document number 940000146450, and (e) any stipulated
judgement executed by Lessee for the benefit of Lessor. Lessor hereby agrees to
promptly deliver to Lessee the original Promissory Note marked cancelled or
terminated, copies of executed terminations of the UCC-1 Financing Statements
filed in the Office of the Clerk of Pinellas County, Florida and Office of the
Florida Secretary of State, and any stipulated judgment marked cancelled,
terminated or released.
3. Additional Rent or Penalty Rent. Lessee agrees to timely pay
all rental payments on the due date for each payment but, in any event, not
later than within the ten (10) day grace period as described in paragraph 1B
above. Lessor and Lessee agree that in the event Lessee defaults in the timely
payment of rental payments and Lessee fails, after appropriate notice, to cure
the default by paying Lessor the rental payment or payments and applicable late
charge or charges, Lessee will be liable to Lessor for Additional Rent or
Penalty Rent in the amount of $275,000, which amount shall be reduced (or
reverse amortize) each and every month for a period of twenty-four (24) months
by the amount of $11,458.33 for each month that Lessee makes payment of the
applicable monthly amount. At the end of twenty-four (24) months the entire
$275,000 Additional Rent or Penalty Rent shall be fully reverse amortized and
be reduced to zero.
<PAGE> 3
4. Issuance and Delivery of Shares of Preferred Stock of
Universal Medical Systems, Inc. to Lessor. Universal Medical Systems, Inc., a
Nevada corporation, ("UMSI") agrees to cause to have issued and delivered to
Lessor, on or before February 29, 1996, one hundred thousand (100,000) shares
of preferred stock of UMSI. These shares of preferred stock shall have the
following rights and privileges:
A. Each share of preferred stock shall have a stated
value of $3.00, but shall have no guaranteed dividend or interest.
B. The holders of preferred stock shall have the same
voting rights at all meetings of shareholders of UMSI as the holders of common
shares of stock of UMSI.
C. The preferred shares of stock may be converted to
shares of common stock of UMSI when any one of the following events occurs:
(i) At any time after the common shares of stock
of UMSI are trading at $6.00 per share over ten (10) consecutive trading days.
(ii) At any time UMSI authorizes the conversion of
the preferred shares of stock to common shares of stock.
(iii) One year following the date of issuance, all
remaining shares of preferred stock, not already converted to shares of common
stock of UMSI, automatically shall be converted to shares of common stock of
UMSI.
(iv) In all cases, the number of shares of UMSI
common stock to be issued pursuant to the above described conversion options
shall be determined based upon the average bid price for shares of common stock
of UMSI over the fifteen (15) trading days prior to the conversion date. For
example if the average bid price over the fifteen (15) trading days prior to
the conversion date is $1.00 per share, then each share of preferred stock
would be converted into three (3) shares of common stock; if the average bid
price is $3.00 per share, then each share of preferred stock would be converted
into one (1) share of common stock.
(v) UMSI shall have the right to repurchase, or
redeem, all of the 100,000 shares of preferred stock, or any common shares to
which they may be converted, at a price of $300,000 at any time for a period of
twenty-four (24) months from the date of issuance. In the event UMSI exercises
this right to repurchase or redeem upon payment of $300,00, then the Additional
Rent or Penalty Rent provision described in paragraph 3, shall be terminated
and the amount of $275,000 shall be deemed fully reverse amortized.
5. Guaranty by Universal Medical Systems, Inc. Lessor agrees and
acknowledges that the guaranties of Jerome P. Shields, Ronald D. Brewer and
James
<PAGE> 4
Nelson Marsh as set forth on page 21 of the Lease dated the 7th day of May,
1987, are released, revoked and cancelled. Universal Medical Systems, Inc.
("Guarantor") hereby unconditionally guarantees the payment and performance of
all obligations of Lessee pursuant to the Lease dated May 7, 1987, as amended
herein. The liability of the Guarantor under this Guaranty shall be primary,
direct and immediate and not conditional or contingent upon pursuit by Lessor
of any remedies it may have against the Lessee, its successors and assigns,
with respect to said lease, whether pursuant to the terms thereof or by law.
The Guarantor agrees that in the event this Guaranty shall be enforced by suit
or otherwise, the Guarantor will reimburse Lessor, upon demand, for all
expenses incurred in connection therewith, including without limitation,
attorney's fees incurred by Lessor.
6. Entire Agreement. This Addendum to Lease comprises the entire
understanding or agreement among the parties, and supersedes all previous
arrangements, agreements, understandings and representations, written or oral,
among the parties with respect to the Lease dated the 7th of May, 1987, and the
amendment or modification thereof. None of the terms of this Addendum to Lease
shall be amended or modified except in writing signed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to
Lease to be executed by their duly authorized officers or representatives all
as of the day and year first above written.
LESSOR:
/s/ John B. Pickford
- - --------------------------------------------------
John B. Pickford, as Ancillary Trustee
for The First National Bank of Chicago, as Trustee
LESSEE:
MEDICAL HIGH TECHNOLOGY INTERNATIONAL, INC.
By: /s/ Jerome P. Shields
----------------------------------------------
Jerome P. Shields, President
GUARANTOR:
UNIVERSAL MEDICAL SYSTEMS, INC.
By: /s/ Myron A. Baker
----------------------------------------------
Myron A. Baker, Chairman & CEO
<PAGE> 1
EXHIBIT 10(c)
ICOT CENTER LEASE
This lease ("Lease") is made this 5th day of March, 1996, by and between ICOT
CENTER, LTD., a Florida limited partnership ("Landlord"), whose address is
13630-58th Street North, Suite #110; Clearwater, Florida 34620, and UNIVERSAL
MEDICAL SYSTEMS INC. whose address is 13825 Icot Blvd, Suite 613, Clearwater,
FL 34620.
1. TERM: Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord the following property ("Premises"): 13825 ICOT BLVD. SUITE 613,
CLEARWATER, FL 34620, totaling approximately 4,800 square feet of finished
office space for a term commencing on the 1ST day of MARCH, 1996 and ending on
JULY 31, 1998.
2. RENT: Tenant agrees to pay to Landlord without demand, deduction or
offset, together with all sales and use taxes levied upon the use and occupancy
of the Premises, at the address of Landlord hereinabove set forth or at such
place as Landlord may in writing designate, an annual rent of $55,200.00, plus
applicable sales tax thereon in monthly installments. Tenant shall pay the
first monthly installment of $4,600.00 (and any pro-rated amounts) on the
execution hereof. The rent payable for the years subsequent to the initial
year of the Lease shall be set forth in the Special Provisions attached hereto.
All rent is payable in advance, on the first day of each month and without
demand, deduction or offset. If any monthly payment of rent is not received by
Landlord within five (5) days from the date it is due, a "late charge" of six
(6%) of such payment shall be due to Landlord as additional rent and to
compensate Landlord administratively for its having to receive and handle
moneys untimely paid.
3. USE: Tenant shall use and occupy the Premises only for general office
use and for absolutely no other purpose. No use considered hazardous by
Landlord's insurer shall be permitted.
4. DELAY: If Landlord is unable to deliver possession of the Premises on
the anticipated date of the commencement of the term (see paragraph 1), because
the occupant refuses to give up possession, or for any other reason whatsoever,
Landlord shall not be liable for failure to deliver possession on said date,
but the rent payable shall be abated until Landlord tenders possession to
Tenant. The termination date of the Lease shall not be extended as a result
thereof.
5. SECURITY DEPOSIT: Tenant has delivered to Landlord the sum of
$4,300.00 as a security deposit for the full and faithful performance by Tenant
of the terms hereof, such deposit to be returned, less any sums required to
enforce the terms of this Lease, to Tenant after Tenant has vacated the
Premises and upon the full and timely performance by Tenant of the provisions
of the Lease on its part to be performed. Tenant may not under any
circumstances use the security deposit as rent. Landlord shall have the right
to apply any part of the deposit to cure any non-performance by Tenant and if
Landlord does so, Tenant shall upon demand, deposit with Landlord the amount so
applied, in order to restore the deposit to its original amount.
6. UTILITIES SERVICE AND TAXES: Landlord will only pay for reasonable
and customary water consumption, and sewer charges for washroom facilities.
Tenant shall pay for all other utilities, including, but not limited to, all
other water and sewer charges and electricity. Landlord shall not be liable
for damages to Tenant's business and/or inventory or for any other claim by or
through Tenant resulting from an interruption in utility services. Landlord
will pay all real property taxes and assessments.
7. ASSIGNMENT AND SUBLEASE: Neither Tenant nor Tenant's legal
representatives or successors in interest, by operation of law or otherwise,
may assign this Lease, or sublet or permit all or any part of the Premises to
be used by any other party, without the prior written consent of Landlord in
each instance. Landlord agrees that it will not unreasonably withhold or delay
its consent to such a subletting or such
<PAGE> 2
an assignment. Despite any such assignment or subletting, Tenant shall
continue to remain completely liable for the performance of all of the
obligations of Tenant under this Lease. Landlord, at its option, may prescribe
the substance and form of such assignment or sublease documents.
In the event of the transfer and assignment by Landlord of its interest in this
Lease and/or sale of the building containing the Premises, either of which it
may do at its sole option, Landlord shall thereby be released from any further
obligations hereunder, and Tenant agrees to look solely at Landlord's successor
in interest for performance of such obligations.
8. DEFAULT: Tenant will become in default of the Lease if;
(a) Rent or additional rent (which term shall mean all moneys not
designated as "rent" in the Lease but which are nevertheless payable by Tenant
to Landlord under the terms and provisions of the Lease) is not paid within
three (3) days after written notice of default from Landlord; or
(b) Tenant shall have failed to cure a default in the performance
of any obligation of Tenant under the Lease (except the payment of rent and
additional rent) within ten (10) days after written notice thereof from
Landlord; or
(c) A petition in bankruptcy shall be filed by Tenant or if Tenant
shall make a general assignment for the benefit for creditors; or
(d) A petition in bankruptcy shall be filed against Tenant and
such proceeding is not vacated within thirty (30) days; or
(e) The Premises become and remain vacant for a period of ten (10)
consecutive days during the term of the Lease; or
(f) The Premises are used for some purpose other than the
authorized use; or
(g) The Lease is in any way mortgaged or encumbered; or
(h) The Premises or any portion thereof is assigned or sublet
without the prior written consent of the Landlord.
9. REMEDIES: In the event of any default or breach hereof by Tenant,
Landlord may (but shall not be obligated to) at any time thereafter, with or
without notice or demand and without limiting Landlord in the exercise of any
right or remedy which Landlord may have by reason of such default or breach:
(a) Terminate Tenant's right to possession of the Premises by any
lawful means, in which case this Lease shall terminate and Tenant shall
immediately surrender possession of the Premises to Landlord. In such event
Landlord shall be entitled to recover from Tenant all damages incurred by
Landlord by reason of Tenant's default, including accrued rent, the cost of
recovering possession of the Premises, expenses of reletting, including
necessary renovation and alteration of the Premises, reasonable attorney's
fees, and any real estate commission actually paid;
(b) Reenter and take possession of the Premises and relet or
attempt to relet same for Tenant's account, holding Tenant liable in damages
for all expenses incurred by Landlord in any such reletting and for any
difference between the amount of rents received from such reletting and those
due and payable under the terms hereof. In the event Landlord relets the
Premises, Landlord shall have the right to lease the Premises or portions
thereof for such periods of time and such rentals and for such use and upon
such covenants and conditions as Landlord, in its sole discretion, may elect,
and Landlord may make such repairs and improvements to the Premises as Landlord
may deem necessary. Landlord shall be entitled to bring such actions or
proceedings for the recovery of any deficits due to Landlord as it may deem
advisable, without being obliged to wait until the end of the term, and
commencement or maintenance of any one or more actions shall not bar Landlord
from bringing other or subsequent actions for further accruals, nor shall
anything done by Landlord pursuant to this Subparagraph 9 (b) limit or prohibit
Landlord's right at any time to pursue other remedies of Landlord hereunder;
(c) Declare all rents and charges due hereunder immediately due
and payable, and thereupon all such rents and fixed charges to the end of the
term shall be accelerated, and Landlord may, at once, take action to collect
the same by distress or
2
<PAGE> 3
otherwise. In the event of acceleration of rents and other charges due
hereunder which cannot be exactly determined as of the date of acceleration
and/or judgment, the amount of such rent and charges shall be determined by
Landlord in a reasonable manner based on information such as previous
fluctuations in the Consumer Price Index and the like;
(d) Perform any of Tenant's obligations on behalf of Tenant in
such manner as Landlord shall deem reasonable, including payment of any moneys
necessary to perform such obligation or obtain legal advice, and all expenses
necessary to compensate Landlord for all detriment caused by Tenant's failure
to perform which in the ordinary course would be likely to result therefrom,
shall be immediately due and payable from Tenant to Landlord, with interest at
the highest rate allowed by law ("Default Rate"); such performance by Landlord
shall not cure the default of Tenant hereunder and Landlord may proceed to
pursue any or all remedies available to Landlord on account of Tenant's
default; if necessary, Landlord may enter upon the Premises after ten (10)
days' prior written notice to Tenant (except in case of emergency, in which
case no notice shall be required), perform any of Tenant's obligations of which
Tenant is in default; and/or
(e) Pursue any other remedy now or hereafter available to Landlord
under state or federal laws or judicial decisions. Unpaid installments of rent
and other unpaid monetary obligations of Tenant under the terms hereof shall
bear interest from the date due at the Default Rate.
10. REPAIRS, ALTERATIONS AND ADDITIONS: Tenant shall take good care of
and maintain in a good condition the Premises and the fixtures, equipment and
furnishings therein and, at Tenant's sole cost, shall make all repairs
necessary to keep them in good working order and condition. It is Tenant's
sole responsibility to maintain, repair and replace, whether interior or
exterior, all glass and doors in or on the Premises. The heating and air
conditioning system shall be under the control of Tenant and Tenant agrees that
all operation and upkeep will be at Tenant's expense, except for repairs or
replacements. During the term of this Lease and any extension thereof, Tenant
shall enter into and maintain a service agreement with a licensed air
conditioning contractor, providing routine maintenance to the air conditioning
equipment. A copy of this maintenance agreements shall be provided to Landlord
within thirty (30) days after the commencement of the term of this Lease.
Tenant shall not make any alterations, additions or improvements to the
Premises without the prior written consent of the Landlord.
11. LIENS: Tenant, at Tenant's sole expense, shall cause any lien filed
against the real property of which the Premises are a part, for work or
materials claimed to have been furnished to Tenant, to be discharged of record
within ten (10) days after notice thereof. The interest of Landlord shall not
be subject to liens for improvements made by Tenant in and to the Premises.
Tenant shall notify every contractor making such improvements of the provision
set forth in the immediately preceding sentence. The parties agree to execute,
acknowledge and deliver without charge a Memorandum of Lease in recordable form
containing a confirmation that the interest of the Landlord shall not be
subject to liens for improvements made by Tenant to the Premises.
12. SIGNS, ADVERTISING AND PERMITS: All signs shall be installed at
Tenant's sole expense and shall precisely conform to specifications and
locations prescribed and approved by Landlord according to the Sign Standard
Agreement attached hereto. No other signs or advertising shall be placed on
the Premises or in windows by Tenant. All required licenses and permits
pertaining to Tenant's use and occupancy of the Premises shall be obtained at
Tenant's sole expense.
13. NOTIFICATION: As required by Section 404.056(8), Florida Statutes,
Landlord notified Tenant as follows: "RADON GAS - Radon is a naturally
occurring radioactive gas that, when it has accumulated in a building in
sufficient quantities, may present health risks to persons who are exposed to
it over time. Levels of radon that exceed Federal and State
3
<PAGE> 4
Guidelines have been found in buildings in Florida. Additional information
regarding radon and radon testing may be obtained from your county health
unit."
14. REQUIREMENTS OF LAW: Tenant at its expense shall observe and comply
with (a) all laws, rules, codes, orders, regulations, etc., of any governmental
authority having jurisdiction with respect to the Premises or the use of
occupancy thereof including, without limitation, environmental regulations and
the Americans with Disabilities Act of 1990 ("ADA"); (b) all requirements of
the Board of Fire Underwriters, or any other similar body affecting the
Premises; and (c) all Rules and Regulations promulgated from time to time by
Landlord. Tenant shall not use the Premises in a manner which will increase
the rate of fire insurance of Landlord over that in effect prior to the Lease.
15. SUBORDINATION: This Lease is subject and subordinate in all respects
to all matters of record and all mortgages, any of which may now or hereafter
be placed on or affect such leases and/or real property of which the Premises
are a part, or any part of such real property, and/or Landlord's interest or
estate therein, and to each advance made and/or hereafter to be made under such
mortgages, and to all renewals, modifications, consolidations, replacements and
extensions thereof and all substitutions therefor. This paragraph shall be
self-operative and no further instrument of subordination shall be required.
In confirmation of such subordination, Tenant shall execute and deliver
promptly any certificate that Landlord and/or any mortgagee and/or their
respective successors in interest may request within ten (10) days.
16. DAMAGE AND DESTRUCTION: If the Premises are damaged or destroyed so
that the Premises are rendered wholly untenantable, the rent shall be
proportionately paid up to the time of the casualty and thenceforth shall cease
until the date when the Premises have been repaired or restored by Landlord.
If the Premises shall be partially damaged or partially destroyed, the damages
shall be repaired by and at the expense of the Landlord and the rent, until
such repairs are made, shall be apportioned according to the part of the
Premises which are useable by Tenant. Landlord shall not be liable for any
inconvenience or annoyance to Tenant resulting from such destruction or damage
or the repair thereof, and shall not be liable for any delay in restoring the
Premises. If, anything to the contrary above in this Paragraph 16
notwithstanding, the Premises are damaged or destroyed as a result of the
wrongful or negligent act of Tenant or any person on the Premises with Tenant's
consent, there shall be no apportionment or abatement of rent.
17. CONDEMNATION: If the whole or any substantial (more than 25%) part of
the Premises shall be condemned by eminent domain for any public or
quasi-public purpose, this Lease shall terminate on the date of the vesting of
title, and Tenant shall have no claim against Landlord for the value of any
unexpired portion of the term of the Lease, nor shall Tenant be entitled to any
part of the condemnation award. If less than a substantial part of the
Premises is condemned, this Lease shall not terminate, but rent shall abate in
proportion to the portion of the Premises condemned.
18. RIGHT OF ENTRY: Landlord or its agents or contractors may enter the
Premises at any reasonable time for the purposes of inspection or making such
repairs as Landlord deems necessary or desirable with advance notice to Tenant
and without interference to Tenant's daily business activities, except for
emergencies. Landlord may show the Premises to prospective purchasers or
mortgagees, and during the six (6) months prior to expiration of the Lease, to
prospective tenants.
19. INDEMNITY: Tenant shall indemnify, defend and save Landlord harmless
from and against any liability or expense arising from the use or occupation of
the Premises by Tenant, or anyone on or about the Premises with Tenant's
permission. Tenant shall provide on or before the commencement date and keep
in force during the Lease term a comprehensive liability policy of insurance
insuring Tenant and Landlord against any liability whatsoever occasioned by
accident on or about the Premises. Such
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<PAGE> 5
policy shall be written by an insurance company authorized to do business in
Florida and having a Best's rating of "A" in the amount of One Million Dollars
combined single limit bodily injury and property damage. Evidence of such
insurance shall be delivered to Landlord by Tenant.
20. END OF TERM: At the end of the Lease term, Tenant shall vacate and
surrender the Premises to Landlord, broom clean, and in as good condition as
they were at the beginning of the term, ordinary wear and tear, and damage by
fire and the elements excepted, and Tenant shall remove all of the Tenant's
moveable property therefrom. All property, furniture, fixtures, equipment,
installations and additions which remain in or on the Premises after Tenant has
vacated shall be considered abandoned by Tenant and, at the option of ll, may
either be retained as Landlord's property or may be removed by Landlord at
Tenant's expense. All alterations, additions, improvements and fixtures,
anything in this particular paragraph to the contrary notwithstanding, which
have been or will be installed by either party in or upon the Premises during
the term of the Lease, and which, in any manner are attached to the floors,
walls or ceilings, shall be and become the property of Landlord and at the
termination or expiration of this Lease shall be surrendered with the Premises
as a part thereof. Alternatively, Landlord may elect to have Tenant return the
Premises to their original condition prior to any buildout thereof by either
party.
21. HOLDING OVER: Any holding over after the expiration of the Lease term
or any extended term shall be construed to be a tenancy from month to month at
double the rents herein specified (prorated on a monthly basis) and shall
otherwise be on the terms herein specified so far as applicable.
22. NOTICES: Any notice by either party to the other shall be in writing
and mailed by registered or certified mail, return receipt requested, to the
address set forth, or to such other address as either party may hereafter
designate in writing. Each notice shall be deemed given on the next business
day following the date of mailing. Any notice by Landlord to Tenant shall be
deemed given if personally delivered to Tenant at the Premises.
23. RISK OF LOSS: All personal property placed or moved in the Premises
shall be at the sole risk of Tenant or the owner thereof.
24. FORCE MAJEURE: Whenever a period of time is herein prescribed by
action to be taken by Landlord, Landlord shall not be liable, or responsible
for and there shall be excluded from the computation for any such period of
time, any delays due to acts of God or any other causes of any kind whatsoever
which are beyond the control of the Landlord.
25. VENUE: The parties hereto agree that any and all suits for any and
every breach of this Lease shall be instituted and maintained only in those
courts of competent jurisdiction in the county or municipality in which the
Premises are located.
26. CORPORATE TENANCY: If Tenant is a corporation, the undersigned
officer of Tenant hereby warrants and certifies to Landlord that Tenant is a
corporation in good standing and is authorized to do business in the State of
Florida. The undersigned officer of Tenant hereby further warrants and
certifies to Landlord that he or she, as such officer, is authorized and
empowered to bind the corporation to the terms of this Lease by his or her
signature thereto. Landlord, before it accepts and delivers this Lease, may
require Tenant to supply it with a certified copy of the corporate resolution
authorizing the execution of this Lease by Tenant.
27. NO ORAL AGREEMENTS; SUCCESSOR INTERESTS: The agreements contained in
the Lease set forth the entire understanding and contract of the parties, shall
be binding upon and shall inure to the benefit of the respective heirs,
successors,
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<PAGE> 6
assigns and legal representatives of the parties hereto and shall and may not
be changed or terminated orally.
IN WITNESS WHEREOF, the parties have executed the Lease as of the day and year
first above written.
<TABLE>
<S> <C>
WITNESSES: TENANT:
UNIVERSAL MEDICAL SYSTEMS, INC.
/s/ Susan Helton BY: /s/ Gary Zarie
- - --------------------------------- --------------------------------
/s/ TITLE: CFO
- - --------------------------------- -----------------------------
DATE: 3/7/96
-------------------------------
WITNESSES: LANDLORD:
ICOT CENTER, LTD.
By its Agent Westfalia Realty, Inc.
/s/ BY: /s/ Scott Makela
- - --------------------------------- --------------------------------
Scott Makela, Asst. Vice-
President
/s/ Stacy Booth TITLE:
- - --------------------------------- -----------------------------
DATE: 3/18/96
</TABLE> ------------------------------
6
<PAGE> 7
AGENCY DISCLOSURE FORM
RE: Lease Agreement by and between ICOT CENTER, LTD. ("Landlord") and
UNIVERSAL MEDICAL SYSTEMS, INC.
Pursuant to Florida Statute, Ch. 475, Westfalia Realty makes the following
disclosures:
I. In the above transaction, Westfalia Realty, Inc. represents:
<TABLE>
<S> <C> <C>
(a) The Tenant/Lessee/Buyer exclusively
----------
X (b) The Landlord/Lessor/Seller exclusively
----------
(c) The Tenant/Lessee/Buyer and Landlord/Lessor/Seller
---------- jointly and such dual agency is expressly
consented to by the parties by their execution
hereof.
</TABLE>
II. In the above transaction, Westfalia Realty, Inc. shall receive its
compensation from:
<TABLE>
<S> <C> <C>
(a) The Landlord/Lessee/Buyer exclusively
----------
X (b) The Landlord/Lessor/Seller exclusively
----------
(c) Both the Tenant/Lessor/Buyer and
----------
Landlord/Lessor/Seller and such payments is expressly consented to by the
parties by their execution hereof.
</TABLE>
The parties named below acknowledge, agree with and consent to the
representative and compensation disclosed above.
<TABLE>
<S> <C>
WITNESSES: TENANT:
UNIVERSAL MEDICAL SYSTEMS, INC.
/s/ Susan Helton BY: /s/
- - --------------------------------- --------------------------------
/s/ TITLE: CFO
- - --------------------------------- -----------------------------
DATE: 3/7/96
------------------------------
WITNESSES: LANDLORD:
ICOT CENTER, LTD.
By its Agent Westfalia Realty, Inc.
/s/ BY: /s/ Scott Makela
- - --------------------------------- --------------------------------
Scott Makela, Asst. Vice-
President
/s/ Stacy Booth TITLE:
- - --------------------------------- -----------------------------
DATE: 3/18/96
------------------------------
</TABLE>
NOTICE TO BUYER
Additional expenses (e.g. attorney's fees, taxes, title, insurance, escrow fees,
documentation fees, discount points, survey charges, mortgage transfer or
service fee, engineering inspections fees, or insurance) may be incurred
by Buyer prior to or at the time of closing. Please consult
your counsel for more information regarding your
specific transaction.
<PAGE> 8
SPECIAL PROVISIONS
Attached to and forming a part of the Lease Agreement by and between ICOT
CENTER, LTD. ("Landlord") and UNIVERSAL MEDICAL SYSTEMS, INC. ("Tenant"),
Landlord and Tenant hereby agree to the following:
Rent for the subsequent years shall be as follows:
<TABLE>
<S> <C>
3/1/96 - 7/31/96 $4,600.00 per month plus sales tax
8/1/96 - 7/31/97 $4,784.00 per month plus sales tax
8/1/97 - 7/31/98 $4,975.36 per month plus sales tax
</TABLE>
This lease is a name change from the original lease dated July 12, 1994. The
original term of the lease has not changed.
<PAGE> 9
ICOT CENTER
SIGN STANDARD AGREEMENT
Tenant signage shall be at the Tenant's sole expense with the prior approval of
the Landlord. It has been designed to provide a professional and coordinated
appearance throughout the ICOT Center office complex.
The Tenant company name can occupy an area of up to 12" high x 41" wide on the
sign face. The sign can be provided by Landlord. The standard typeface is
Helvetica Medium which provides crisp and highly readable letters and numerals.
The sign will be centered over the Tenant's main entrance.
Print sizes available are:
<TABLE>
<S> <C>
Single Line: 4 inch height and up to 12 letters of space
Double Line: 4 inch height and up to 24 letters of space
Triple Line: 3 inch height and up to 48 letters of space
</TABLE>
Print color will be the color of the paint used on the building to which the
signage will be attached.
An outside directory and mail box label with the Tenant's suite number and
company name will be provided and installed by Landlord, at Tenant's expense.
<PAGE> 1
EXHIBIT 10(d)
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") made this 10th day of
November, 1995, between UNIVERSAL MEDICAL SYSTEMS, INC, a Nevada corporation,
with its principal office located at 13825 Icot Boulevard, Suite 613,
Clearwater, Florida 34620 ("Company") and MYRON A. BAKER whose address is 13825
Icot Boulevard, Suite 613, Clearwater, Florida 34620 ("Employee").
Recitals:
Whereas: Employee has been serving as a principal executive officer
of the Company and/or the Company's subsidiaries;
Whereas: Employee's leadership, expertise, experience and service
have constituted a major factor in the successful growth and development of the
Company and its subsidiaries;
Whereas: The Company desires to employ and retain the unique
experience, ability, background and services of Employee as a principal
executive officer of the Company. The Company also desires to retain Employee's
services in an advisory and consulting capacity and to prevent any other
competitive business from securing his services and utilizing his experience,
background and know-how; and
Whereas: The terms, conditions and undertakings of this Agreement
were submitted to and duly approved and authorized by the Company's Board of
Directors at a meeting held on November 10, 1995.
It is, therefore, agreed:
1. Employment.
(a) Executive Employment. The Company employs Employee and
Employee accepts employment in a principal executive and managerial capacity
commencing upon execution of this Agreement and continuing through December 31,
2000. ("Executive Employment"). After December 31, 1998, however, either
Employee or Company may at any time terminate Employee's Executive Employment
on three months prior written notice to the other party, as the case may be.
(b) Advisory Period. If Employee's Executive Employment is
terminated as provided in paragraph (a) above, the Company shall still retain
Employee as an advisor and consultant through December 31, 2000 ("Advisory
Period").
<PAGE> 2
2. Duties. During the period of Executive Employment, Employee
shall devote full time to such employment. If elected, Employee shall serve as
a director and officer of the Company and/or any of its subsidiaries or
affiliates and shall perform duties customarily incident to such offices and
all other duties the Board of Directors may from time to time assign to
Employee. Employee shall be entitled to annual vacations in a manner
commensurate with his status as a principal executive, which shall not be less
than the annual vacation period to which he is presently entitled.
3. Executive Salary. During the period of Executive Employment
the Company shall pay to Employee a salary ("Executive Salary") to be fixed by
the Board of Directors from time to time during that period. In no event,
however, shall Employee's Executive Salary be less than one hundred twenty
thousand and no/100 dollars ($120,000.00) annually. Employee shall be paid
with the same frequency as are other executives of the Company. In addition to
all other remuneration provided for in this Agreement, if Employee serves at
any time as a director of the Company, or of any of its subsidiaries or
affiliates, he shall be entitled to receive the same Director's Fee for such
services as that received by the other directors.
4. Advisory Compensation.
(a) Payment and Services. During the Advisory Period, the
Company shall pay to Employee an annual compensation equal to one-half of his
Executive Salary during the last 12-month period of his employment ("Advisory
Compensation"), to be paid in equal monthly installments on or about the middle
of each month. While receiving such Advisory Compensation, Employee shall at
all reasonable times, to the extent his physical and mental condition permits,
be available to consult with and advise the Company's officers, directors and
other representatives. If Employee's physical or mental condition prevents him
from fulfilling his consulting or advisory duties, he shall still be paid the
Advisory Compensation during the entire Advisory Period.
(b) Location. Employee shall not be required, without his
consent, to render advisory services at any place other than the Tampa, Florida
metropolitan area or the city of his residence if he moves out of the Tampa,
Florida area.
(c) Restriction. During the Advisory Period, Employee shall
be deemed to be an independent contractor. He shall be permitted to engage in
any business and perform any service for his own account, provided that such
business or service shall not be in competition with, or be for a company that
is in competition with, the Company or its subsidiaries or affiliates.
<PAGE> 3
5. Trade Secrets and Confidential Information. During the period
of this Employment Agreement, Employee may have access to, and become familiar
with, various trade secrets and confidential information belonging to Company,
and/or subsidiaries or affiliates of the Company, including, but not limited
to, documents and other information regarding Company's technology, equipment
and products, sales methods, pricing and costs, as well as information
pertaining to Company's customers. Employee acknowledges that all such
information is highly confidential and constitutes trade secrets. Employee
also acknowledges that such confidential information and trade secrets are
owned and shall continue to be owned solely by Company. During the term of
employment and for thirty-six (36) months after such employment terminates for
any reason, regardless of whether termination is initiated by Company or
Employee, Employee agrees not to use, communicate, reveal or otherwise make
available such information for any purpose whatsoever, or to divulge such
information to any person, partnership, corporation or entity other than the
Company or persons expressly designated by the Company, unless Employee is
compelled to disclose it by judicial process.
6. Death. If Employee dies between the date of this Agreement
and December 31, 2000, compensation payments shall continue. Such payments
shall be made to Employee's widow, or if she does not survive him, to his
estate, in equal monthly installments. The total of such payments shall equal
the Advisory Compensation provided for in paragraph 4(a) above. Such payments
shall commence with the month following Employee's date of death.
7. Disability. If Employee becomes disabled during the period of
his Executive Employment , his Executive Salary shall continue at the same rate
that it was on the date of such disability. If such disability continues for a
period of four (4) consecutive months, the Company, at its option, may
thereafter, upon written notice to Employee or his personal representative,
terminate his Executive Employment. In such event the Advisory Period shall
commence immediately upon such termination of Executive Employment and shall
continue until December 31, 2000 regardless of the disability. If Employee
receives disability payments from insurance policies paid for by the Company,
the payments to Employee during any period of disability shall be reduced by
the amount of disability payments received by Employee under any such insurance
policy or policies. For the purpose of this Agreement, disability shall mean
mental or physical illness or condition rendering Employee incapable of
performing his normal duties with the Company.
8. Expenses. The Company recognizes that Employee will have to
incur certain out-of-pocket expenses related to his services and that it will
be extremely difficult to account for such expenses. It is understood that
Employee's compensation is intended to cover all such out-of-pocket expenses.
The Company, however, shall reimburse Employee for any specific expenditures
incurred for travel, lodging, entertainment, and the like. During the Advisory
Period the Company shall reimburse Employee for all reasonable expenses
incurred by Employee incident to the rendering of advisory and consultant
services.
<PAGE> 4
9. Employee Benefits. This Agreement shall not be in lieu of any
rights, benefits or privileges to which Employee may be entitled as an employee
of the Company under any retirement, pension, profit-sharing, insurance,
medical, hospitalization or other plans which may now be in effect or which may
hereafter be adopted by the Company. Employee shall have the same rights and
privileges to participate in such plans and benefits as any other employee of
the Company during his period of employment.
10. Automobile. The Company recognizes Employee's need for an
automobile for business purposes, and that the need for an automobile is for a
continuous period of twenty-four hours each day, as the Employee is on call for
the Company's business at all times. Therefore, the Company shall provide
Employee with an automobile, including all related maintenance, repairs,
insurance and other costs, or an automobile allowance. The automobile, or
automobile allowance, shall be comparable to those which the Company provides
its other principal executives.
11. Nontransferability. Neither Employee, his wife, nor their
estates or personal representatives, shall have any right to commute,
anticipate, encumber or dispose of any payment under this Agreement. Such
payments and accompanying rights are nonassignable and nontransferable, except
as otherwise specifically provided in this Agreement.
12. Binding effect. This Agreement shall inure to the benefit of
and be binding upon the Company, its successors and assigns, including, without
limitation, any person, partnership, company or corporation which may acquire
substantially all of the Company's assets or business or with or into which the
Company may be liquidated, consolidated, merged or otherwise combined. In
addition, this Agreement shall inure to the benefit of and be binding upon
Employee, his heirs, distributees and personal representatives. If payments
become payable to Employee's surviving widow and she dies prior to December 31,
2000, the payments shall still continue to be made to her estate until that
date.
13. Waiver. The failure of either party to insist in any one or
more instances upon performance of any term or condition of this Agreement
shall not be construed as a waiver of its future performance. The obligations
of either party with respect to such term, covenant or condition shall continue
in full force and effect.
14. Notices. Any notice given hereunder shall be in writing and
delivered or mailed by registered or certified mail, return receipt requested,
to the addresses for the respective parties as set forth above. Either party
may, by notice as provided above, designate a different address. Any such
notice shall be effective on the date of receipt.
<PAGE> 5
15. Entire Agreement. This Agreement supersedes all previous
agreements between the Company and Employee and contains the entire
understanding and agreement between the parties with respect to its subject
matter. This Agreement cannot be amended, modified or supplemented in any
respect except by a subsequent written agreement entered into by both parties.
16. Headings. Headings in this Agreement are for convenience only
and shall not be used to interpret or construe its provisions.
17. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Florida.
18. Counterparts. This Agreement may be executed in two more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the day and year first above written.
UNIVERSAL MEDICAL SYSTEMS, INC. EMPLOYEE
By: /s/ Guy Zani, Jr. /s/ Myron A. Baker
--------------------------- -----------------------------
GUY ZANI, JR. Myron A. Baker
Chief Financial Officer
<PAGE> 6
ADDENDUM TO EMPLOYMENT AGREEMENT
This Addendum to Employment Agreement is made this 19th day of
December, 1995, by and between Universal Medical Systems, Inc. ("Company") and
Myron A. Baker ("Employee").
Employee agrees that for the calendar year 1996, Employee shall be
paid the sum of $84,000.00 as an annual salary and the difference between the
sum of $84,000.00 and the annual salary provided for pursuant to paragraph 3 of
the Employment Agreement dated November 11, 1995, shall be accrued.
UNIVERSAL MEDICAL SYSTEMS, INC. EMPLOYEE
By: /s/ Guy Zani, Jr. /s/ Myron A. Baker
--------------------------- -----------------------------
GUY ZANI, JR. Myron A. Baker
Chief Financial Officer
<PAGE> 1
EXHIBIT 10(e)
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") made this 10th day of
November, 1995, between UNIVERSAL MEDICAL SYSTEMS, INC, a Nevada corporation,
with its principal office located at 13825 Icot Boulevard, Suite 613,
Clearwater, Florida 34620 ("Company") and GUY ZANI, JR. whose address is 13825
Icot Boulevard, Suite 613, Clearwater, Florida 34620 ("Employee").
Recitals:
Whereas: Employee has been serving as a principal executive officer
of the Company and/or the Company's subsidiaries;
Whereas: Employee's leadership, expertise, experience and service
have constituted a major factor in the successful growth and development of the
Company and its subsidiaries;
Whereas: The Company desires to employ and retain the unique
experience, ability, background and services of Employee as a principal
executive officer of the Company. The Company also desires to retain Employee's
services in an advisory and consulting capacity and to prevent any other
competitive business from securing his services and utilizing his experience,
background and know-how; and
Whereas: The terms, conditions and undertakings of this Agreement
were submitted to and duly approved and authorized by the Company's Board of
Directors at a meeting held on November 10, 1995.
It is, therefore, agreed:
1. Employment.
(a) Executive Employment. The Company employs Employee and
Employee accepts employment in a principal executive and managerial capacity
commencing upon execution of this Agreement and continuing through December 31,
2000. ("Executive Employment"). After December 31, 1998, however, either
Employee or Company may at any time terminate Employee's Executive Employment
on three months prior written notice to the other party, as the case may be.
(b) Advisory Period. If Employee's Executive Employment is
terminated as provided in paragraph (a) above, the Company shall still retain
Employee as an advisor and consultant through December 31, 2000 ("Advisory
Period").
<PAGE> 2
2. Duties. During the period of Executive Employment, Employee
shall devote full time to such employment. If elected, Employee shall serve as
a director and officer of the Company and/or any of its subsidiaries or
affiliates and shall perform duties customarily incident to such offices and
all other duties the Board of Directors may from time to time assign to
Employee. Employee shall be entitled to annual vacations in a manner
commensurate with his status as a principal executive, which shall not be less
than the annual vacation period to which he is presently entitled.
3. Executive Salary. During the period of Executive Employment
the Company shall pay to Employee a salary ("Executive Salary") to be fixed by
the Board of Directors from time to time during that period. In no event,
however, shall Employee's Executive Salary be less than one hundred twenty
thousand and no/100 dollars ($120,000.00) annually. Employee shall be paid
with the same frequency as are other executives of the Company. In addition to
all other remuneration provided for in this Agreement, if Employee serves at
any time as a director of the Company, or of any of its subsidiaries or
affiliates, he shall be entitled to receive the same Director's Fee for such
services as that received by the other directors.
4. Advisory Compensation.
(a) Payment and Services. During the Advisory Period, the
Company shall pay to Employee an annual compensation equal to one-half of his
Executive Salary during the last 12-month period of his employment ("Advisory
Compensation"), to be paid in equal monthly installments on or about the middle
of each month. While receiving such Advisory Compensation, Employee shall at
all reasonable times, to the extent his physical and mental condition permits,
be available to consult with and advise the Company's officers, directors and
other representatives. If Employee's physical or mental condition prevents him
from fulfilling his consulting or advisory duties, he shall still be paid the
Advisory Compensation during the entire Advisory Period.
(b) Location. Employee shall not be required, without his
consent, to render advisory services at any place other than the Tampa, Florida
metropolitan area or the city of his residence if he moves out of the Tampa,
Florida area.
(c) Restriction. During the Advisory Period, Employee shall
be deemed to be an independent contractor. He shall be permitted to engage in
any business and perform any service for his own account, provided that such
business or service shall not be in competition with, or be for a company that
is in competition with, the Company or its subsidiaries or affiliates.
<PAGE> 3
5. Trade Secrets and Confidential Information. During the period
of this Employment Agreement, Employee may have access to, and become familiar
with, various trade secrets and confidential information belonging to Company,
and/or subsidiaries or affiliates of the Company, including, but not limited
to, documents and other information regarding Company's technology, equipment
and products, sales methods, pricing and costs, as well as information
pertaining to Company's customers. Employee acknowledges that all such
information is highly confidential and constitutes trade secrets. Employee
also acknowledges that such confidential information and trade secrets are
owned and shall continue to be owned solely by Company. During the term of
employment and for thirty-six (36) months after such employment terminates for
any reason, regardless of whether termination is initiated by Company or
Employee, Employee agrees not to use, communicate, reveal or otherwise make
available such information for any purpose whatsoever, or to divulge such
information to any person, partnership, corporation or entity other than the
Company or persons expressly designated by the Company, unless Employee is
compelled to disclose it by judicial process.
6. Death. If Employee dies between the date of this Agreement
and December 31, 2000, compensation payments shall continue. Such payments
shall be made to Employee's widow, or if she does not survive him, to his
estate, in equal monthly installments. The total of such payments shall equal
the Advisory Compensation provided for in paragraph 4(a) above. Such payments
shall commence with the month following Employee's date of death.
7. Disability. If Employee becomes disabled during the period of
his Executive Employment , his Executive Salary shall continue at the same rate
that it was on the date of such disability. If such disability continues for a
period of four (4) consecutive months, the Company, at its option, may
thereafter, upon written notice to Employee or his personal representative,
terminate his Executive Employment. In such event the Advisory Period shall
commence immediately upon such termination of Executive Employment and shall
continue until December 31, 2000 regardless of the disability. If Employee
receives disability payments from insurance policies paid for by the Company,
the payments to Employee during any period of disability shall be reduced by
the amount of disability payments received by Employee under any such insurance
policy or policies. For the purpose of this Agreement, disability shall mean
mental or physical illness or condition rendering Employee incapable of
performing his normal duties with the Company.
8. Expenses. The Company recognizes that Employee will have to
incur certain out-of-pocket expenses related to his services and that it will
be extremely difficult to account for such expenses. It is understood that
Employee's compensation is intended to cover all such out-of-pocket expenses.
The Company, however, shall reimburse Employee for any specific expenditures
incurred for travel, lodging, entertainment, and the like. During the Advisory
Period the Company shall reimburse Employee for all reasonable expenses
incurred by Employee incident to the rendering of advisory and consultant
services.
<PAGE> 4
9. Employee Benefits. This Agreement shall not be in lieu of any
rights, benefits or privileges to which Employee may be entitled as an employee
of the Company under any retirement, pension, profit-sharing, insurance,
medical, hospitalization or other plans which may now be in effect or which may
hereafter be adopted by the Company. Employee shall have the same rights and
privileges to participate in such plans and benefits as any other employee of
the Company during his period of employment.
10. Automobile. The Company recognizes Employee's need for an
automobile for business purposes, and that the need for an automobile is for a
continuous period of twenty-four hours each day, as the Employee is on call for
the Company's business at all times. Therefore, the Company shall provide
Employee with an automobile, including all related maintenance, repairs,
insurance and other costs, or an automobile allowance. The automobile, or
automobile allowance, shall be comparable to those which the Company provides
its other principal executives.
11. Nontransferability. Neither Employee, his wife, nor their
estates or personal representatives, shall have any right to commute,
anticipate, encumber or dispose of any payment under this Agreement. Such
payments and accompanying rights are nonassignable and nontransferable, except
as otherwise specifically provided in this Agreement.
12. Binding effect. This Agreement shall inure to the benefit of
and be binding upon the Company, its successors and assigns, including, without
limitation, any person, partnership, company or corporation which may acquire
substantially all of the Company's assets or business or with or into which the
Company may be liquidated, consolidated, merged or otherwise combined. In
addition, this Agreement shall inure to the benefit of and be binding upon
Employee, his heirs, distributees and personal representatives. If payments
become payable to Employee's surviving widow and she dies prior to December 31,
2000, the payments shall still continue to be made to her estate until that
date.
13. Waiver. The failure of either party to insist in any one or
more instances upon performance of any term or condition of this Agreement
shall not be construed as a waiver of its future performance. The obligations
of either party with respect to such term, covenant or condition shall continue
in full force and effect.
14. Notices. Any notice given hereunder shall be in writing and
delivered or mailed by registered or certified mail, return receipt requested,
to the addresses for the respective parties as set forth above. Either party
may, by notice as provided above, designate a different address. Any such
notice shall be effective on the date of receipt.
<PAGE> 5
15. Entire Agreement. This Agreement supersedes all previous
agreements between the Company and Employee and contains the entire
understanding and agreement between the parties with respect to its subject
matter. This Agreement cannot be amended, modified or supplemented in any
respect except by a subsequent written agreement entered into by both parties.
16. Headings. Headings in this Agreement are for convenience only
and shall not be used to interpret or construe its provisions.
17. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Florida.
18. Counterparts. This Agreement may be executed in two more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the day and year first above written.
UNIVERSAL MEDICAL SYSTEMS, INC. EMPLOYEE
By: /s/ Myron A. Baker /s/ Guy Zani, Jr.
--------------------------- -----------------------------
Myron A. Baker GUY ZANI, JR.
Chairman & CEO
<PAGE> 6
ADDENDUM TO EMPLOYMENT AGREEMENT
This Addendum to Employment Agreement is made this 19th day of
December, 1995, by and between Universal Medical Systems, Inc. ("Company") and
Guy Zani, Jr. ("Employee").
Employee agrees that for the calendar year 1996, Employee shall be
paid the sum of $84,000.00 as an annual salary and the difference between the
sum of $84,000.00 and the annual salary provided for pursuant to paragraph 3 of
the Employment Agreement dated November 11, 1995, shall be accrued.
UNIVERSAL MEDICAL SYSTEMS, INC. EMPLOYEE
By: /s/ Myron A. Baker /s/ Guy Zani, Jr.
--------------------------- -----------------------------
Myron A. Baker Guy Zani, Jr.
Chairman & CEO
<PAGE> 1
EXHIBIT 10(f)
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") made this 10th day of
November, 1995, between UNIVERSAL MEDICAL SYSTEMS, INC, a Nevada corporation,
with its principal office located at 13825 Icot Boulevard, Suite 613,
Clearwater, Florida 34620 ("Company") and DENNIS D. COLE, whose address is
13825 Icot Boulevard, Suite 613, Clearwater, Florida 34620 ("Employee").
Recitals:
Whereas: Employee has been serving as a principal executive officer
of the Company and/or the Company's subsidiaries;
Whereas: Employee's leadership, expertise, experience and service
have constituted a major factor in the successful growth and development of the
Company and its subsidiaries;
Whereas: The Company desires to employ and retain the unique
experience, ability, background and services of Employee as a principal
executive officer of the Company. The Company also desires to retain Employee's
services in an advisory and consulting capacity and to prevent any other
competitive business from securing his services and utilizing his experience,
background and know-how; and
Whereas: The terms, conditions and undertakings of this Agreement
were submitted to and duly approved and authorized by the Company's Board of
Directors at a meeting held on November 10, 1995.
It is, therefore, agreed:
1. Employment.
(a) Executive Employment. The Company employs Employee and
Employee accepts employment in a principal executive and managerial capacity
commencing upon execution of this Agreement and continuing through December 31,
2000. ("Executive Employment"). After December 31, 1998, however, either
Employee or Company may at any time terminate Employee's Executive Employment
on three months prior written notice to the other party, as the case may be.
(b) Advisory Period. If Employee's Executive Employment is
terminated as provided in paragraph (a) above, the Company shall still retain
Employee as an advisor and consultant through December 31, 2000 ("Advisory
Period").
<PAGE> 2
2. Duties. During the period of Executive Employment, Employee
shall devote full time to such employment. If elected, Employee shall serve as
a director and officer of the Company and/or any of its subsidiaries or
affiliates and shall perform duties customarily incident to such offices and
all other duties the Board of Directors may from time to time assign to
Employee. Employee shall be entitled to annual vacations in a manner
commensurate with his status as a principal executive, which shall not be less
than the annual vacation period to which he is presently entitled.
3. Executive Salary. During the period of Executive Employment
the Company shall pay to Employee a salary ("Executive Salary") to be fixed by
the Board of Directors from time to time during that period. In no event,
however, shall Employee's Executive Salary be less than one hundred twenty
thousand and no/100 dollars ($120,000.00) annually. Employee shall be paid
with the same frequency as are other executives of the Company. In addition to
all other remuneration provided for in this Agreement, if Employee serves at
any time as a director of the Company, or of any of its subsidiaries or
affiliates, he shall be entitled to receive the same Director's Fee for such
services as that received by the other directors.
4. Advisory Compensation.
(a) Payment and Services. During the Advisory Period, the
Company shall pay to Employee an annual compensation equal to one-half of his
Executive Salary during the last 12-month period of his employment ("Advisory
Compensation"), to be paid in equal monthly installments on or about the middle
of each month. While receiving such Advisory Compensation, Employee shall at
all reasonable times, to the extent his physical and mental condition permits,
be available to consult with and advise the Company's officers, directors and
other representatives. If Employee's physical or mental condition prevents him
from fulfilling his consulting or advisory duties, he shall still be paid the
Advisory Compensation during the entire Advisory Period.
(b) Location. Employee shall not be required, without his
consent, to render advisory services at any place other than the Tampa, Florida
metropolitan area or the city of his residence if he moves out of the Tampa,
Florida area.
(c) Restriction. During the Advisory Period, Employee shall
be deemed to be an independent contractor. He shall be permitted to engage in
any business and perform any service for his own account, provided that such
business or service shall not be in competition with, or be for a company that
is in competition with, the Company or its subsidiaries or affiliates.
<PAGE> 3
5. Trade Secrets and Confidential Information. During the period
of this Employment Agreement, Employee may have access to, and become familiar
with, various trade secrets and confidential information belonging to Company,
and/or subsidiaries or affiliates of the Company, including, but not limited
to, documents and other information regarding Company's technology, equipment
and products, sales methods, pricing and costs, as well as information
pertaining to Company's customers. Employee acknowledges that all such
information is highly confidential and constitutes trade secrets. Employee
also acknowledges that such confidential information and trade secrets are
owned and shall continue to be owned solely by Company. During the term of
employment and for thirty-six (36) months after such employment terminates for
any reason, regardless of whether termination is initiated by Company or
Employee, Employee agrees not to use, communicate, reveal or otherwise make
available such information for any purpose whatsoever, or to divulge such
information to any person, partnership, corporation or entity other than the
Company or persons expressly designated by the Company, unless Employee is
compelled to disclose it by judicial process.
6. Death. If Employee dies between the date of this Agreement
and December 31, 2000, compensation payments shall continue. Such payments
shall be made to Employee's widow, or if she does not survive him, to his
estate, in equal monthly installments. The total of such payments shall equal
the Advisory Compensation provided for in paragraph 4(a) above. Such payments
shall commence with the month following Employee's date of death.
7. Disability. If Employee becomes disabled during the period of
his Executive Employment , his Executive Salary shall continue at the same rate
that it was on the date of such disability. If such disability continues for a
period of four (4) consecutive months, the Company, at its option, may
thereafter, upon written notice to Employee or his personal representative,
terminate his Executive Employment. In such event the Advisory Period shall
commence immediately upon such termination of Executive Employment and shall
continue until December 31, 2000 regardless of the disability. If Employee
receives disability payments from insurance policies paid for by the Company,
the payments to Employee during any period of disability shall be reduced by
the amount of disability payments received by Employee under any such insurance
policy or policies. For the purpose of this Agreement, disability shall mean
mental or physical illness or condition rendering Employee incapable of
performing his normal duties with the Company.
8. Expenses. The Company recognizes that Employee will have to
incur certain out-of-pocket expenses related to his services and that it will
be extremely difficult to account for such expenses. It is understood that
Employee's compensation is intended to cover all such out-of-pocket expenses.
The Company, however, shall reimburse Employee for any specific expenditures
incurred for travel, lodging, entertainment, and the like. During the Advisory
Period the Company shall reimburse Employee for all reasonable expenses
incurred by Employee incident to the rendering of advisory and consultant
services.
<PAGE> 4
9. Employee Benefits. This Agreement shall not be in lieu of any
rights, benefits or privileges to which Employee may be entitled as an employee
of the Company under any retirement, pension, profit-sharing, insurance,
medical, hospitalization or other plans which may now be in effect or which may
hereafter be adopted by the Company. Employee shall have the same rights and
privileges to participate in such plans and benefits as any other employee of
the Company during his period of employment.
10. Automobile. The Company recognizes Employee's need for an
automobile for business purposes, and that the need for an automobile is for a
continuous period of twenty-four hours each day, as the Employee is on call for
the Company's business at all times. Therefore, the Company shall provide
Employee with an automobile, including all related maintenance, repairs,
insurance and other costs, or an automobile allowance. The automobile, or
automobile allowance, shall be comparable to those which the Company provides
its other principal executives.
11. Nontransferability. Neither Employee, his wife, nor their
estates or personal representatives, shall have any right to commute,
anticipate, encumber or dispose of any payment under this Agreement. Such
payments and accompanying rights are nonassignable and nontransferable, except
as otherwise specifically provided in this Agreement.
12. Binding effect. This Agreement shall inure to the benefit of
and be binding upon the Company, its successors and assigns, including, without
limitation, any person, partnership, company or corporation which may acquire
substantially all of the Company's assets or business or with or into which the
Company may be liquidated, consolidated, merged or otherwise combined. In
addition, this Agreement shall inure to the benefit of and be binding upon
Employee, his heirs, distributees and personal representatives. If payments
become payable to Employee's surviving widow and she dies prior to December 31,
2000, the payments shall still continue to be made to her estate until that
date.
13. Waiver. The failure of either party to insist in any one or
more instances upon performance of any term or condition of this Agreement
shall not be construed as a waiver of its future performance. The obligations
of either party with respect to such term, covenant or condition shall continue
in full force and effect.
14. Notices. Any notice given hereunder shall be in writing and
delivered or mailed by registered or certified mail, return receipt requested,
to the addresses for the respective parties as set forth above. Either party
may, by notice as provided above, designate a different address. Any such
notice shall be effective on the date of receipt.
<PAGE> 5
15. Entire Agreement. This Agreement supersedes all previous
agreements between the Company and Employee and contains the entire
understanding and agreement between the parties with respect to its subject
matter. This Agreement cannot be amended, modified or supplemented in any
respect except by a subsequent written agreement entered into by both parties.
16. Headings. Headings in this Agreement are for convenience only
and shall not be used to interpret or construe its provisions.
17. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Florida.
18. Counterparts. This Agreement may be executed in two more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the day and year first above written.
UNIVERSAL MEDICAL SYSTEMS, INC. EMPLOYEE
By: /s/ Myron A. Baker /s/ Dennis D. Cole
--------------------------- -----------------------------
Myron A. Baker DENNIS D. COLE
Chairman & CEO
<PAGE> 6
ADDENDUM TO EMPLOYMENT AGREEMENT
This Addendum to Employment Agreement is made this 19th day of
December, 1995, by and between Universal Medical Systems, Inc. ("Company") and
Dennis D. Cole ("Employee").
Employee agrees that for the calendar year 1996, Employee shall be
paid the sum of $84,000.00 as an annual salary and the difference between the
sum of $84,000.00 and the annual salary provided for pursuant to paragraph 3 of
the Employment Agreement dated November 11, 1995, shall be accrued.
UNIVERSAL MEDICAL SYSTEMS, INC. EMPLOYEE
By: /s/ Myron A. Baker /s/ Dennis D. Cole
--------------------------- -----------------------------
Myron A. Baker Dennis D. Cole
Chairman & CEO
<PAGE> 1
EXHIBIT 10(g)
AGREEMENT
THIS AGREEMENT BETWEEN DYNACS ENGINEERING CO., INC. AND UNIVERSAL
MEDICAL SYSTEMS, INC., IS TO COVER THE GOODS AND SERVICES OUTLINED
IN THE FOLLOWING EIGHT TASK DESCRIPTIONS, WITH COMPENSATION BASED
ON THE SCHEDULE OF PAYMENTS AS DEFINED IN THIS DOCUMENT.
1. TASK 1: DIGITAL CAMERA SELECTION - We will evaluate various options
for digital cameras that have response in the near infrared region.
Our preliminary analyses have shown that cameras range from about $800
upward. The resolutions we will examine are in the range 512x512 to
1024x1024. We believe that the 1K x 1K picture would be the maximum
we need to consider at this point, based on the knowledge we have of
the post-processing we intend to do.
2. TASK 2: IMAGE ACQUISITION SOFTWARE - The image from the digital
camera will be acquired and pre-processed for display by this
software. Controls will include the frame rate on the camera, image
size, bits/pixel etc. The acquired image will then be stored in a
standard format or be displayed on the screen. This task will result
in the minimal "prototype" digital unit.
3. TASK 3: GRAPHICAL OPERATOR INTERFACE SOFTWARE - This software will
allow the operator to perform the following functions:
<TABLE>
<S> <C>
a) Enter patient data into a database
b) Bring up patient data from the database
c) Initiate a "scan"
d) Set up various parameters related to the scan
e) Save the generated images
f) Produce reports
g) Browse a set of 10 sequential images backwards & forwards
h) Produce printed or film plotted copies of the image
i) Produce a video tape version of the scans
j) Perform the various post-processing steps identified in Task 5
</TABLE>
4. TASK 4: IMAGE POST-PROCESSING SOFTWARE - This task will involve the
design and implementation of various post- processing techniques
including magnification (zoom), Image enhancement, Edge detection,
Segmentation and Volume measurements. Image enhancement will be
performed using state-of-the-art techniques such as wavelet
enhancement. During this work, we will interact with clinical groups
at USF if necessary to refine the process and get feedback from
radiologists. We also have radiology consultants on our staff that
will provide input for this task.
5. TASK 5: OUTPUT SOFTWARE - This task will involve building the
necessary interfaces for output of the image to both hardcopy and
video. In both cases the patient data will be preprinted on the
image, including name, patient ID, scan date, etc. This will help in
the archiving of the data.
6. TASK 6: HARDWARE/SOFTWARE INTEGRATION AND TEST - This will be the
final stage of the development including testing of the various
interfaces at the system level. All the sensors, cards and other
components will be integrated with the software and the system as a
whole will be tested. At the end of
1
<PAGE> 2
this task, a completed system will be delivered that will include all
components except for the patient fixture.
7. TASK 7: PATIENT FIXTURE DESIGN AND FABRICATION - In consultation with
UMSI staff, an appropriate imaging fixture for breast imaging will be
designed. We plan to utilize an outside consultant for the mechanical
design of the fixture. Fabrication of the fixture will be done at an
outside facility. Costs for the consultant are included in this
proposal, but the fabrication costs are not. The goals of the design
will be the following:
a) Maximize patient comfort
b) Ensure that the camera and light source positions are fixed so as
to ensure reproducible results
c) Fix the field of view so that absolute size measurements are
possible from the resulting image
8. TASK 8: DOCUMENTATION - This task will cover the documentation for
all of the tasks above. Documents to be prepared include an
architectural design, software detailed design and a complete
operator's manual.
SCHEDULE
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------
TASK MONTHS FROM START
- - -------------------------------------------------------------------------------------------
1 2 3 4 5 6 7
- - -------------------------------------------------------------------------------------------
<S> <C>
Digital Camera Selection -----*
- - -------------------------------------------------------------------------------------------
Image Acquisition S/W --------------*
- - -------------------------------------------------------------------------------------------
Graphical Operator Interface ---------------------------------*
- - -------------------------------------------------------------------------------------------
Image Post Processing ------------------------------*
- - -------------------------------------------------------------------------------------------
Image Output ------------*
- - -------------------------------------------------------------------------------------------
H/W & S/W Integration ------------*
- - -------------------------------------------------------------------------------------------
Patient Fixture Desn. & Fab. -------------------*
- - -------------------------------------------------------------------------------------------
Documentation ----------------------------------------*
- - -------------------------------------------------------------------------------------------
</TABLE>
PROPOSED PROGRESS MILESTONES AND PAYMENT SCHEDULE:
Selection of digital camera, start of image acquisition software (1 month)
Acquisition of cameras, computer hardware and software, start of Graphical
Operator Interface (2 months)
A prototype digital system with a minimal GUI and no post processing
(3 months);
A completed software package with the full GUI and post processing (6 months)
and
Completed system prototype including the fixture and documentation (7
months)
2
<PAGE> 3
<TABLE>
<CAPTION>
Milestone: Date: Cash: Stock:
<S> <C>
Contract Start Date: May 8, 1996 $ 39,036.00 $13,000.00
Travel: $ 3,000.00
Total of Advance: $ 42,036.00
Selection of Camera: June 5, 1996 $ 39,036.00 $13,000.00
Equipment purchase disbursement: Computer H/W $ 14,000.00
Software: $ 4,000.00
Cameras: $ 3,000.00
Related H/W $ 2,000.00
Total of Payment: $ 62,036.00
Prototype Delivery: August 14, 1996 $ 58,554.00 $19,500.00
Disbursement for Consultant: $ 15,000.00 (Estimated)
Total of Payment: $ 73,554.00
Software Completion: October 9, 1996 $ 58,551.00 $19,500.00
Total Cash: $236,177.00
Total Stock: $ 65,000.00
Grand Total: $301,177.00
</TABLE>
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------
TASK MTS4 HRS MTS5 HRS MTS6 HRS ESTIMATED COST
- - ------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Task 1: Digital Camera Selection 0 80 80 $ 10,594
- - ------------------------------------------------------------------------------------------------------------
Task 2: Image Acquisition 150 150 0 $ 16,730
- - ------------------------------------------------------------------------------------------------------------
Task 3: Graphical Operator Interface 550 550 80 $ 67,161
- - ------------------------------------------------------------------------------------------------------------
Task 4: Image Post Processing 500 400 500 $ 86,167
- - ------------------------------------------------------------------------------------------------------------
Task 5: Image Output 160 80 0 $ 13,070
- - ------------------------------------------------------------------------------------------------------------
Task 6: H/W & S/W Integration/Test 160 160 0 $ 17,845
- - ------------------------------------------------------------------------------------------------------------
Task 7: Patient Fixture 0 0 80 $ 5,819
- - ------------------------------------------------------------------------------------------------------------
Task 8: Documentation 480 300 0 $ 42,792
- - ------------------------------------------------------------------------------------------------------------
LABOR TOTAL 2000 1720 740 $ 260,177
- - ------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------
Equipment
- - ------------------------------------------------------------------------------------------------------------
Computer Hardware $ 14,000
- - ------------------------------------------------------------------------------------------------------------
Software $ 4,000
- - ------------------------------------------------------------------------------------------------------------
Cameras $ 3,000
- - ------------------------------------------------------------------------------------------------------------
Other h/w $ 2,000
- - ------------------------------------------------------------------------------------------------------------
Travel $ 3,000
- - ------------------------------------------------------------------------------------------------------------
Fabrication at cost
- - ------------------------------------------------------------------------------------------------------------
Consultant (Task 7 Estimate only) $ 15,000
- - ------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------
TOTAL FIRM FIXED PRICE
(W/O FABRICATION) $ 301,177
- - ------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 4
It is understood that should the task descriptions change due to Universal
Medical System, Inc.'s evaluation of the prototype unit or additional
functionality requirements be identified by Universal Medical Systems, Inc. the
additional goods and services will be billed at a mutually agreed upon rate.
<TABLE>
<S> <C>
FOR UNIVERSAL MEDICAL SYSTEMS, INC. FOR DYNACS ENGINEERING CO., INC.
NAME: /s/ Guy Zani, Jr. NAME: /s/
----------------------------- ---------------------------
TITLE: CFO TITLE:
---------------------------- --------------------------
DATE: 5/17/96 DATE: 5/15/96
----------------------------- ---------------------------
</TABLE>
4
<PAGE> 1
EXHIBIT 10(h)
[SANDS BROTHERS & CO., LTD. LETTERHEAD]
September 12, 1996
Universal Medical Systems, Inc.
13825 Icot Boulevard, Suite 613
Clearwater, Florida 34620
Attn: Dennis D. Cole
Vice President - General Counsel
Dear Mr. Cole:
This is to confirm our understanding that Sands Brothers & Co., Ltd. ("Sands
Brothers") has been engaged as exclusive financial adviser and consultant to
Universal Medical Systems, Inc., its subsidiaries and affiliates (collectively
the "Company") with respect to corporate finance, merger and acquisition and
financial services matters, for a three year period commencing with your
acceptance of this agreement.
For purposes of this agreement, the term "Acquisition Transaction"
means (i) any merger, consolidation, reorganization or other business
combination pursuant to which the businesses of a third party are combined with
that of the Company, (ii) the acquisition, directly or indirectly, by the
Company of all or a substantial portion of the assets or common equity of a
third party by way of negotiated purchase or otherwise or (iii) the
acquisition, directly or indirectly, by a third party of all or a substantial
portion of the assets or common equity of the Company by way of negotiated
purchase or otherwise, which in the case of clause (i) (ii) or (iii) has been
directly or indirectly initiated by Sands Brothers. In addition, for purposes
of this agreement, the term "Financing Transaction" means a public or private
placement, offering, syndication or other sale of equity or debt securities of
the Company or other on-balance sheet or off-balance sheet corporate finance
transaction of the Company.
Revision date: 10/20/93
<PAGE> 2
Mr. Dennis D. Cole
September 12, 1996
Page -2-
A. FINANCIAL ADVISORY SERVICES
The Company hereby retains Sands Brothers to perform consulting
services related to corporate finance and financial services matters. In this
regard, Sands Brothers shall devote such business, time and attention to
matters on which the Company shall request its services, as shall be determined
by Sands Brothers in its discretion. All services shall be rendered by Sands
Brothers in New York City unless otherwise determined by Sands Brothers. The
fee for such services shall be an initial payment of $12,000 and $12,000 per
calendar quarter in advance, commencing on October 1, 1996, which fee shall
accrue until initial bridge financing contemplated herein is consummated, in
addition to any other compensation and reimbursement of expenses described
herein. Anything contained herein to the contrary notwithstanding, in Sands
Brothers' sole discretion, such fee may be paid in warrants and/or shares of
Common Stock of the Company upon such terms and conditions as may be mutually
be agreed upon.
During the term of this agreement, Sands Brothers shall provide the
Company with such regular and customary financial advisory services as is
reasonably requested by the Company, provided that Sands Brothers shall not be
required to undertake duties not reasonably within the scope of the financial
advisory services in which it is generally engaged. In performance of its
duties, Sands Brothers shall provide the Company with the benefits of its best
judgment and efforts. It is understood and acknowledged by the parties that
the value of Sands Brothers' advice is not measurable in a quantitative manner,
and Sands Brothers shall be obligated to render advice, upon the request of the
Company, in good faith, as shall be determined by Sands Brothers, but shall not
be obligated to spend any specific amount of time in doing so. Sands Brothers'
duties may include, but will not necessarily be limited to:
(i) advice regarding formation of corporate goals and their
implementation.
(ii) advice regarding the financial structure of the Company, its
divisions or subsidiaries or any programs and projects
undertaken by the Company;
(iii) advice regarding the securing, when necessary and if possible,
of financing (other than with respect to a Financing
Transaction);
(iv) advice regarding corporate organization, personnel and
selection of needed specialty skills; and
(v) review of possible joint venture, merger, acquisition or
similar proposals for the Company (other than with respect to
an Acquisition Transaction).
The Company acknowledges that Sands Brothers or its affiliates are in
the business of providing financial advisory services (of all types
contemplated by this agreement) to
Revision date: 09/12/96
<PAGE> 3
Mr. Dennis D. Cole
September 12, 1996
Page -3-
others. Nothing herein continued shall be construed to limit or restrict Sands
Brothers in conducting such business with respect to others, or in rendering
such advice to others.
B. ACQUISITION TRANSACTION
In connection with a proposed Acquisition Transaction, Sands Brothers'
financial advisory services will include the following: (i) assistance in the
evaluation of a third party from a financial point of view, (ii) assistance and
advice with respect to the form and structure of the Acquisition Transaction
and the financing thereof, (iii) conducting discussions and negotiations
regarding an Acquisition Transaction and (iv) providing other related financial
advice and assistance as the Company may reasonably request in connection with
an Acquisition Transaction.
For purpose of this agreement, "Consideration" means the aggregate
value, whether in cash, securities, assumption (or purchase subject to) of debt
or liabilities (including, without limitation, indebtedness for borrowed money,
pension liabilities and guarantees), or other property, obligations or
services, paid or payable directly or indirectly (in escrow or otherwise) or
otherwise assumed in connection with an Acquisition Transaction. The value of
such Consideration shall be determined as follows:
(a) the value of securities, liabilities, obligations, property
and services shall be the fair market value as we shall
mutually agree upon at the date of the closing of the
Acquisition Transaction; and
(b) the value of indebtedness, including indebtedness assumed,
shall be the face amount.
If the Consideration payable in an Acquisition Transaction includes
contingent payments to be calculated by reference to uncertain future
occurrences, such as future financial or business performance, then any fees of
Sands Brothers relating to such consideration shall be payable at the earlier
of (i) the receipt of such Consideration or (ii) the time that the amount of
such Consideration can be determined.
In connection with our services, you agree, if during the period Sands
Brothers is retained by you or, within two years thereafter, whether or not
this letter agreement has been terminated by you prior to the expiration of its
term, an Acquisition Transaction is consummated with a third party, or the
Company enters into a definitive agreement with a third party, which at any
time thereafter results in an Acquisition Transaction, you will pay Sands
Brothers a transaction fee of (i) cash in an amount equal to five (5%) percent
of the Consideration paid or payable in connection with such Acquisition
Transaction and (ii) an equity participation in the surviving entity of the
Acquisition Transaction, in an amount and upon such terms and conditions as may
be mutually agreed upon by the parties.
Revision date: 09/12/96
<PAGE> 4
Mr. Dennis D. Cole
September 12, 1996
Page -4-
C. FINANCING TRANSACTION
The Company hereby grants Sands Brothers the right of first refusal to
underwrite or place any Financing Transaction (excluding sales to employees) of
the Company, or any subsidiary or successor of the Company, during the term
hereof. It is understood that if such a proposed financing is offered to Sands
Brothers, Sands Brothers shall have thirty (30) days in which to determine
whether or not to accept such offer and, if Sands Brothers refuses, and
provided that such a financing is consummated (a) with another underwriter or
placement agent upon the same terms and conditions as those offered to Sands
Brothers and (b) within six months after the end of the aforesaid thirty (30)
day period, this right of first refusal shall thereafter be forfeited and
terminated; provided, however, if the financing is not consummated under the
conditions of clauses (a) and (b) above, then the right of first refusal shall
once again be reinstated under the same terms and conditions set forth in this
Section C.
It is contemplated by the parties hereto upon execution hereof, to
organize a bridge financing in an aggregate amount of approximately $1,100,000
to $1,500,000. Subsequently, and upon listing in NASDAQ by the Company, the
parties hereto further agree to organize a financing of the Company's
securities, in an approximate aggregate amount of $8,000,000 to $10,000,000.
In addition, you agree if, during the period Sands Brothers is
retained by you or, within two years thereafter, whether or not this letter
agreement has been terminated by you prior to the expiration of its term a
Financing Transaction is consummated with a third party financing source
directly or indirectly introduced by Sands Brothers ("Financing Source"), or
the Company enters into a definitive agreement with a Financing Source, which
at any time thereafter results in a Financing Transaction, you will pay Sands
Brothers a financing fee equal to the usual and customary fee paid to Sands
Brothers for such a transaction of similar size and structure to that of the
Financing Transaction.
D. BOARD DESIGNATION
So long as this agreement remains in effect, the Company will, at
Sands Brothers' option and if so requested by Sands Brothers, recommend and use
its best efforts to elect a designee of Sands Brothers, which designee shall be
Mark G. Hollo, at the option of Sands Brothers, either as a member of or a
nonvoting advisor to its Board of Directors, such designee, if elected or
appointed, shall attend meetings of the Board and receive no more or less
compensation than is paid to other non-management directors of the Company and
shall be entitled to receive reimbursement for all reasonable costs incurred in
attending such meetings, including, but not limited to, food, lodging and
transportation.
Revision date: 09/12/96
<PAGE> 5
Mr. Dennis D. Cole
September 12, 1996
Page -5-
To the extent permitted by law, the Company hereby agrees to indemnify
Sands Brothers and its designee for the actions of such designee as a director
of the Company. In the event the Company maintains a liability insurance
policy affording coverage for the acts of its officers and directors, it hereby
agrees, if possible, to include each of Sands Brothers and its designee as an
insured under such policy.
If Sands Brothers does not exercise its option to designate a member
of or advisor to the Company's Board of Directors, Sands Brothers shall
nonetheless have the right to send a representative (who need not be the same
individual from meeting to meeting) to observe each meeting of the Board of
Directors. The Company agrees to give Sands Brothers notice of each such
meeting and to provide Sands Brothers with an agenda and minutes of the meeting
no later than it gives such notice and provides such items to the directors.
E. EQUITY PARTICIPATION
In consideration of Sands Brothers agreeing to provide these services
and upon execution of this agreement, the Company shall issue to Sands Brothers
and/or its designee(s), warrants (the "Warrants") to purchase an amount of
shares of the Company's Common Stock equal to nine percent of the issued and
outstanding shares on a fully diluted basis.
The Warrants will be exercisable for a five year period commencing on
the date hereof (the "Warrant Exercise Term"). The Warrants shall be initially
exercisable at a price per share of Common Stock equal to $2.00 per share of
Common Stock and shall be exercisable at any time and from time to time, in
whole or in part, during the Warrant Exercise Team.
The Warrants shall contain such terms and conditions as are
satisfactory in form and substance to Sands Brothers, the Company and their
respective counsel, including, without limitation, anti-dilution and
registration provisions.
At any time during the Warrant Exercise Term, Sands Brothers and/or
its designee(s) (or the then holders of a majority of the Shares underlying the
Warrants) shall have the right to require the Company to prepare and file one
new Registration Statement, if then required under the Securities Act of 1933,
as amended (the "Act"), covering all or any portion of the Warrants and/or the
shares of Common Stock underlying the Warrants (the "Warrant Securities"). The
Company shall bear all expenses incurred in the preparation and filing of such
Registration Statement, except the holders of the Warrants shall pay any
underwriting discounts or commissions and the expenses of their own legal
counsel.
Revision date: 09/12/96
<PAGE> 6
Mr. Dennis D. Cole
September 12, 1996
Page -6-
In addition, if at any time during the five years after date hereof,
the Company shall prepare and file one or more Registration Statements under
the Act, including, without limitation, Form S-8 (but excluding Form S-4 or
successor forms), with respect to a public offering of equity or debt
securities of the Company held by its shareholders or employees and
consultants, the Company will include in any such Registration Statement such
information as may be required to permit a public offering of the Warrants or
the shares of Common Stock underlying the Warrants held by Sands Brothers
and/or its designee(s) as may be requested. The Company shall bear all fees
and expenses incurred by the Company in connection with the preparation and
filing of such Post-Effective Amendment or new Registration Statement. In the
event of such a proposed registration, the Company shall furnish the then
holders of the Warrant Securities with not less than thirty (30) days written
notice prior to the proposed date of filing of such Registration Statement.
Such notice shall continue to be given by the Company to such holders of
outstanding Warrant Securities until such time as all of the Warrant Securities
have been registered. The holders of the Warrant Securities shall exercise the
"piggy- back" rights provided for herein by giving written notice, within
twenty (20) days of the receipt of the Company's notice of its intention to
file a Registration Statement.
F. GENERAL
In addition to any fees that may be payable to Sands Brothers under
this agreement, the Company agrees to reimburse Sands Brothers, upon requests
made from time to time, for all of its reasonable out-of-pocket expenses
incurred in connection with its disbursements of its legal counsel in
connection with the preparation and negotiation of this agreement, whether or
not this letter agreement has been terminated by the Company prior to the
expiration of its term.
If, in connection with any services or matters that are the subject of
this agreement, Sands Brothers becomes involved as party to any action or legal
proceeding, the Company agrees to reimburse Sands Brothers for the reasonable
legal fees and disbursements of counsel and other expenses (including the cost
of investigation and preparation) incurred by Sands Brothers. The Company also
agree to indemnify and holds Sands Brothers harmless against any losses,
claims, damages or liabilities, joint or several, to which Sands Brothers may
become subject in connection with the services which are the subject of this
agreement, provided, however, that the Company shall not be liable under the
foregoing indemnity agreement in respect of any loss, claim, damage or
liability to the extent that a court having jurisdiction shall have determined
by a final judgment that such loss, claim, damage or liability resulted from
the willful misfeasance or gross negligence of Sands Brothers. The provisions
of this paragraph shall survive the expiration of the period of this agreement
set forth in the first paragraph hereof. The Company's agreements in this
paragraph shall, upon the same terms and conditions, extend to and inure to the
benefit of each person, if any, who may be deemed to control Sands Brothers.
Revision date: 09/12/96
<PAGE> 7
Mr. Dennis D. Cole
September 12, 1996
Page -7-
This letter constitutes the entire understanding of the parties with
respect to the subject matter hereof and may not be altered or amended except
in writing and signed by both parties. This agreement shall be governed by and
construed under the laws of the State of New York without regard to principles
of conflicts of laws thereof. Neither the execution and delivery of this
letter by the Company nor the consummation of the transactions contemplated
hereby will, directly or indirectly, with or without the giving of notice or
lapse of time, or both (i) violate any provisions of the Certificate of
Incorporation or By-laws of the Company, or (ii) violate, or be in conflict
with, or constitute a default under, any agreement, lease, mortgage, debt or
obligation of the Company or require the payment, any prepayment or other
penalty with respect thereto.
This letter agreement may be terminated at any time by the Company
upon (i) thirty days prior written notice to Sands Brothers and (ii) the
payment by the Company to Sands Brothers in the amount equal to the product of
(x) $3,000 and (y) the number of remaining months of the term of this letter
agreement, inclusive of the month in which such termination is being made.
If the foregoing correctly sets forth the terms of our agreement,
kindly to indicate by signing and returning the enclosed copy of this letter.
Very truly yours,
SANDS BROTHERS & CO., LTD.
By: /s/ Mark G. Hollo
------------------------------------
Mark G. Hollo,
Managing Director
Accepted and Agreed
this 19th day of September, 1996
UNIVERSAL MEDICAL SYSTEMS, INC.
By: /s/ Myron A. Baker
-----------------------------------
Myron A. Baker, Chairman & CEO
Attest: /s/ Dennis D. Cole
-------------------------------
Dennis D. Cole
Vice President, General
Counsel & Secretary
Revision date: 09/12/96
<PAGE> 1
EXHIBIT 10(i)
Universal Medical Systems, Inc.
13825 Icot Boulevard, Suite 613
Clearwater, Florida 34620
October 1, 1996
Sands Brothers & Co., Ltd.
90 Park Avenue
New York, New York 10016
Gentlemen:
The undersigned, Universal Medical Systems, Inc., a Nevada corporation
(the "Company"), proposes to offer for sale, in a private placement, a minimum
of $1,000,000 (the "Minimum Amount") and up to a maximum aggregate amount of
$1,500,000 (the "Maximum Amount") in any combination of (i) shares of the
Company's common stock, no par value (the "Common Stock"), at a price per share
to be agreed upon by the Company and Sands Brothers & Co., Ltd. ("Sands
Brothers" or the "Placement Agent"); (ii) shares of the Company's Series A
Convertible Preferred Stock, [$ ___ ] par value (the "Preferred Stock"), at a
price per share to be agreed upon by the Company and Sands Brothers or (iii)
debt securities (the "Debt Securities") on such terms and conditions to be
mutually agreed upon by the Company and Sands Brothers. The parties may
hereinafter mutually agree to increase the Maximum Amount of the Offering. The
Common Stock, Preferred Stock and the Debt Securities are collectively referred
to herein as the "Securities."
Additionally, the Company also seeks to utilize Sands Brothers to arrange
capital lease, operating lease or equipment lease financing transactions on
behalf of the Company or any form of commercial, institutional or bank debt
financing transactions reasonably acceptable to the Company (hereinafter,
collectively "Other Financing"). The Securities to be offered pursuant to the
Offering Documents (as hereinafter defined) and Other Financing transactions to
be consummated are sometimes hereinafter referred to collectively as the
"Financing" or the "Offering."
The initial closing (the "Initial Closing") of the Financing shall not
occur until the Company has, in any combination, received and accepted
subscriptions for the purchase of Securities and/or consummated Other Financing
transactions in amounts equal to or in excess of the Minimum Amount.
The Securities will be offered pursuant to those terms and conditions
acceptable to you and your counsel as reflected in the final form of
Confidential Private Placement Memorandum of the Company (together with the
exhibits and any supplements thereto, the "Memorandum"). The Securities will be
offered pursuant to the
<PAGE> 2
Memorandum in accordance with Regulation D and/or Regulation S promulgated under
the Securities Act of 1933, as amended (the "Securities Act").
Each prospective investor subscribing to purchase Securities
("Subscriber") will be required to deliver, among other things, a subscription
agreement ("Subscription Agreement") and an investment suitability questionnaire
("Questionnaire") in the forms to be provided, representing and warranting,
among other things, that such Subscriber is an "accredited investor" as such
term is defined in Regulation D and is not a "U.S. Person" as such term is
defined in Regulation S. as the case may be.
The Memorandum and the form of proposed Subscription Agreement between
the Company and each Subscriber and the exhibits which are part of the
Memorandum and/or the Subscription Agreement are referred to herein collectively
as the "Offering Documents."
The Securities will be offered for minimum subscription amounts of
$100,000; on a "best efforts, all-or-none" basis as to the Minimum, and a "best
efforts" basis for all amounts in excess of the Minimum, exclusively by Sands
Brothers; provided, however, that the Company and the Placement Agent may, in
their discretion, accept subscriptions for a lesser amount from a Subscriber.
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
the Placement Agent and its counsel, which Offering Documents shall include
certified financial statements for such periods as may be required.
Capitalized terms used herein, unless otherwise defined or unless the
context otherwise indicates, shall have the same meanings provided in the
Memorandum.
1. Appointment of Placement Agent. You are hereby appointed exclusive
Placement Agent of the Company during the offering period herein specified (the
"Offering Period") for the purposes of assisting the Company on a "best efforts"
basis in finding qualified Subscribers for the purchase of Securities and to
identify potential sources to engage in Other Financing transactions with the
Company in connection with the Offering. The Offering Period shall commence on
the date of delivery and acceptance by the Placement Agent of the Memorandum
("Commencement Date") and shall continue until the earlier to occur of (i) the
sale of the Maximum Amount; or (ii) 90 days from the Commencement Date (as the
same may be extended by the Placement Agent for an additional 60 days or another
period to be determined by mutual consent of the Placement Agent and the
Company). If the Minimum Amount is not sold prior to the end of the Offering
Period, the Offering will be terminated and all finds received from Subscribers
2
<PAGE> 3
and held in a special non-interest bearing account (the "Account") at Republic
National Bank, New York, New York (the "Bank") will be returned, without
deduction or accrued interest thereon. You hereby accept such agency and agree
to assist the Company in finding qualified Subscribers for the purchase of
Securities and to identify potential sources to engage in Other Financing
transactions with the Company in connection with the Offering. Your agency
hereunder is not terminable by the Company except upon termination of the
Offering.
As part of the Placement Agent's exclusive representation of the Company
with respect to the Offering, the Placement Agent shall assist the Company in
identifying potential investors and sources of Other Financing and shall on
behalf of the Company, contact such potential investors and other potential
investors as the Company may designate. In addition, the Placement Agent shall
assist the Company in structuring, negotiating and effecting the Offering. The
Company agrees that, during the course of the engagement hereunder, neither it,
nor any of its management, nor any of its affiliates, shall initiate any
discussions with third parties with respect to the Offering and to the extent
any of such persons receives an inquiry from any third parties concerning the
Offering or any other financing related to the Company, they will promptly
identify to the Placement Agent the name of such person and the date of such
initial contact.
2. Representations and Warranties of the Company. The Company
represents and warrants as follows:
(a) Securities Law Compliance. The Offering Documents, upon delivery,
will conform an all respects with the requirements of the Securities Act and
Regulation D and Regulation S promulgated thereunder and with the requirements
of all other published rules and regulations of the United States Securities and
Exchange Commission (the "Commission") currently in effect relating to "private
offerings" and/or "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 a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The Offering Documents will not be amended or supplemented
and no amendment or supplement thereto will be made without the prior consent of
the Placement Agent.
(b) Organization. The Company, and each of the companies under its
control (each a "Subsidiary", and collectively, the "Subsidiaries"), is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation 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. The Company
3
<PAGE> 4
and each Subsidiary is duly qualified to do business in the states or
jurisdictions set forth on Schedule 2(b). Except as set forth in Schedule 2(b),
there is no jurisdiction in which the conduct of the Company's or Subsidiary's
business or ownership or leasing of its properties requires it to be qualified
to do business as a foreign corporation, except where such qualifications have
been obtained or the failure to be so qualified would not have a material
adverse effect on the business, financial condition or prospects of the Company
or such Subsidiary. The Company has all requisite power and authority to execute
and deliver this Agreement and to carry out the transactions contemplated by
this Agreement.
(c) Capitalization.
(i) The authorized, issued and outstanding capital stock of the
Company prior to the consummation of the Initial Closing of the transactions
contemplated by the Offering is set forth on Schedule 2(c)(i) hereto. Each such
share is validly paid, fully paid and nonassessable. Except as set forth on
Schedule 2(c)(i), there are no other classes of capital stock or other
securities authorized by the Company.
(ii) The authorized, issued and outstanding capital stock of the
Company immediately upon the consummation of the Initial Closing, or each
Subsequent Closing, as the case may be, shall be as set forth on Schedule
2(c)(ii) hereto, such Schedule to be recalibrated by the Company to reflect the
sale of Securities at the Initial Closing and at each Subsequent Closing.
(iii) The Company has no obligation (contingent or otherwise) to
pay any dividend or make any other distribution in respect of any of its capital
stock. The Company is not a party to and there exist no voting trusts or
agreements, stockholders' agreements, pledge agreements, buy-sell agreements,
rights of first refusal or proxies relating to any securities of the Company
(whether or not the Company is a party thereto). All of the outstanding
securities of the Company were issued, in all material respects, in compliance
with all applicable federal and state securities laws. The Company has no
obligation (contingent or otherwise) to repurchase, redeem or otherwise acquire
any shares of its capital stock.
(iv) The stockholders of record and the holders of
subscriptions, warrants, options, preemptive rights, convertible securities and
other rights (contingent or otherwise) to purchase or otherwise acquire equity
securities of the Company, and the number of shares of capital stock of the
Company and the number of such subscriptions, warrants, options, preemptive
rights, convertible securities and other such rights held by each, are as set
forth in Schedule 2(c)(iv) hereto. The designations, powers, preferences,
rights, privileges, qualifications, limitations and
4
<PAGE> 5
restrictions in respect of each class and series of authorized capital stock of
the Company are as set forth in the Certificate of Incorporation and all such
designations, powers, preferences, rights, privileges, qualifications,
limitations and restrictions are valid, binding and enforceable in accordance
with all applicable laws (subject, as to enforcement, to the discretion of the
courts in awarding equitable relief and to applicable bankruptcy,
reorganization, insolvency, moratorium and similar laws affecting the rights of
creditors generally). Except as disclosed in Schedule 2(c)(iv), no person owns
of record, or is known to the Company to own beneficially, any share of capital
stock of the Company; no subscription, warrant, option, preemptive right,
convertible security, agreement or other right (contingent or otherwise) to
purchase or otherwise acquire equity securities of the Company is authorized or
outstanding; and there is no commitment by the Company to issue shares,
subscriptions, warrants, options, preemptive rights, convertible securities or
other such rights or to distribute to holders of any of its equity securities
any evidence of indebtedness or asset, other than the warrants issued to Sands
Brothers in connection with, and as part of the terms of the Memorandum and this
Agreement (the "Placement Agent Warrants") as governed by the Warrant Agreement
to be entered into between Sands Brothers and the Company (the "Warrant
Agreement," a form of which is attached hereto as Exhibit A). An appropriate
number of shares of the Common Stock have been reserved for issuance upon the
conversion or exercise, as the case may be, of any of the securities referred to
in this Section.
(d) INTENTIONALLY OMITTED
(e) Subsidiaries and Investments. Except as set forth in Schedule 2(e)
hereto, the Company does not own, directly or indirectly, any capital stock, or
other equity ownership or proprietary interest, in any other corporation,
association, trust, partnership, joint venture or other entity. Each Subsidiary
is wholly owned by the Company.
(f) Financial Statements. The audited consolidated balance sheet of
the Company as of June 30 , 1996 (the "____ Balance Sheet") and the related
consolidated statements of operations, shareholders equity and statements of
cash flow for the fiscal year ended June 30 , 1996 certified by Alessandri &
Alessandri, P.A. and the unaudited consolidated balance sheet (the "____ Balance
Sheet") of the Company as of _________ __ , 1996 (the "Balance Sheet Date"), and
the related unaudited consolidated statements of operations, shareholders equity
and statements of cash flow for the period ending _________ __ , 1996
(collectively, the "Financial Statements"), have heretofore been delivered to
the Placement Agent. Except as may be otherwise indicated therein, the Financial
Statements have been prepared in conformity with Generally Accepted Accounting
Principles consistently applied and
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present fairly the financial position and results of operations of the Company
as of the dates and for the periods indicated. Except as may be otherwise
indicated herein, the Financial Statements of the Company as of the dates
indicated, and for the periods then ended, present fairly the financial position
and results of operations of the Company (and its Subsidiaries) as of the dates
and for the periods indicated.
(g) Keeping of Records and Books of Account. The Company has
maintained and shall continue to maintain adequate records and books of account,
in which complete entries will be made in accordance with Generally Accepted
Accounting Principles, consistently applied, reflecting all financial
transactions of the Company and in which, for each fiscal year, all proper
reserves for depreciation, depletion, obsolescence, amortization, taxes, bad
debts and other purposes in connection with its business shall be made. The
records and books of account of the Company are in good order and have been
properly maintained in all material respects.
(h) Access to Corporate Documents. The minute books of the Company and
of its Subsidiaries have been made available to the Placement Agent and contain
a complete summary of all meetings and actions of the directors and stockholders
of the Company or of its Subsidiaries, respectively, since the time of their
respective incorporation and reflect all transactions referred to in such
minutes accurately in all respects.
(i) Absence of Undisclosed Liabilities. The Company has no material
outstanding claims, liabilities, obligations or indebtedness, contingent or
otherwise, whether asserted or unasserted, except as set forth in the _______
Balance Sheet, the _______ Balance Sheet, or referred to in any of the notes
thereto. All liabilities of the Company and its Subsidiaries incurred subsequent
to the Balance Sheet Date have been incurred in the ordinary course of business
and do not involve borrowings which individually exceed $5,000 and which do not
exceed $10,000 in the aggregate. Neither the Company nor its Subsidiaries is in
default in respect of the terms or conditions of any indebtedness.
(j) Absence of Changes. Since the Balance Sheet Date, the Company and
its Subsidiaries have operated in the ordinary course of business consistent
with past practice. Since the Balance Sheet Date, and except as set forth in
Schedule 2(j) hereto, there has not occurred (i) any change in the financial
condition, results of operations, assets, liabilities or business of the Company
or any Subsidiary which, in the aggregate, was materially adverse; (ii) any
asset or property of the Company or any Subsidiary being made subject to a lien
of any kind in an amount exceeding $5,000 or exceeding $10,000 in the aggregate,
other than liens for current taxes, assessments or governmental charges or
levies on property not yet due and delinquent; (iii) any waiver of any valuable
right
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<PAGE> 7
of the Company or of any Subsidiary, or the cancellation of any debt or claim
exceeding $5,000 held by the Company or any Subsidiary; (iv) any payment of
dividends on, or other distributions with respect to, or any direct or indirect
redemption or acquisition of, any shares of the capital stock of the Company, or
any agreement or commitment therefor; (v) any issuance of any stock, bonds or
other securities of the Company or of any Subsidiary; (vi) any sale, assignment
or transfer of any tangible or intangible assets of the Company or of any
Subsidiary, except, with respect to tangible assets, in the ordinary course of
business and not exceeding $5,000 in the aggregate; (vii) any loan by the
Company or by any Subsidiary, including loans to any officer, director, employee
or stockholder of the Company or any Subsidiary, or any agreement or commitment
therefor; (viii) any damage, destruction or loss (whether or not covered by
insurance) affecting the assets, property or business of the Company or any
Subsidiary in any respect; (ix) any changes in the identity of any of the
Company's (or any of the Subsidiary's) officers or directors, or any increase,
direct or indirect, in the compensation paid or payable to any officer,
director, key employee or key agent of the Company or any Subsidiary including,
without limitation, any increase in the number of options granted or to be
granted to purchase shares of Common Stock; (x) any change in the accounting
methods or practices followed by the Company or any Subsidiary or any change in
depreciation or amortization policies or rates theretofore adopted; (xi) any
change in the employment of key personnel of the Company or of any Subsidiary;
(xii) any satisfaction or discharge of any lien, claim or encumbrance or payment
of any obligation by the Company or by any Subsidiary, except in the ordinary
course of its business and which is not material to the assets, properties,
financial condition, operating results or business of the Company or any
Subsidiary (as such business is presently conducted and as it is proposed to be
conducted, as the same shall be described in the Memorandum); (xiii) any change
or amendment to a material contract or arrangement by which the Company or any
Subsidiary or any of its/their respective assets or properties is bound or
subject; (xiv) any incurrence, assumption or guarantee by the Company or by any
Subsidiary of any material obligation for borrowed money, except for current
liabilities incurred in the ordinary course of business; (xv) any material
change in the manner of business or operations of the Company or any Subsidiary;
(xvi) any transaction except in the ordinary course of business or as otherwise
contemplated hereby; (xvii) to the best of the Company's knowledge, any other
event or condition of any character which can reasonably be expected to
materially and adversely affect the assets, properties, financial condition,
operating results or business of the Company or of any Subsidiary (as such
business is presently conducted and as it is proposed to be conducted, as the
same shall be described in the Memorandum); or (xviii) any commitment
(contingent or otherwise) to do any of the foregoing.
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<PAGE> 8
(k) Accounts Receivable. The accounts receivable of the Company
reflected on the _____ Balance Sheet, and all accounts receivable of the Company
arising since the Balance Sheet Date, are not subject to discount (other than
discounts and allowances provided by normal trade terms), rebate or offset and
have arisen from bona fide transactions in the ordinary course of business.
(1) Title to Properties; Encumbrances.
(i) Except for properties and assets reflected in the ________
Balance Sheet or acquired since the Balance Sheet Date which have been sold or
otherwise disposed of in the ordinary course of business since such date, the
Company and each of its Subsidiaries has good, valid and marketable title to (A)
all of its properties and assets (personal, tangible and intangible), including,
without limitation, all the properties and assets reflected in the ________
Balance Sheet, except as indicated in the notes thereto; and (B) all the
properties and assets purchased or otherwise acquired by the Company or by any
Subsidiary since the Balance Sheet Date; in each case clear of all encumbrances,
liens, claims, charges or other restrictions of whatever kind or character,
except for (1) liens reflected in the _________ Balance Sheet and (2) liens for
current taxes, assessments or governmental charges or levies on property not yet
due and delinquent.
(ii) The Company and its Subsidiaries own no real property. To the
best of the Company's knowledge after due inquiry, there are no condemnation,
environmental, zoning or other land use regulation proceedings, either
instituted or planned to be instituted, which would adversely affect the use or
operation of the Company's and its Subsidiaries; properties and assets for their
respective intended uses and purposes or the value of such properties, and the
Company and its Subsidiaries have not received notice of any special assessment
proceedings which would affect such properties and assets.
(m) Condition of Equipment, Machinery and Fixtures. The equipment,
machinery and fixtures utilized by the Company and its Subsidiaries in the
conduct of their business are in good operating condition and are fit for their
intended purpose.
(n) Leased Property. Each real property and personal property lease or
sublease to which the Company or any of its Subsidiaries is a party is valid and
binding and is in full force and effect; all rent and other sums, and charges
payable by the Company or by each Subsidiary as lessee or sublessee thereunder,
are current through the last day of the immediately preceding calendar month; no
notice of default or termination under any lease is outstanding; no termination
event or condition or uncured default on the part of the Company or any
Subsidiary, or the
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<PAGE> 9
landlord, exists under any lease; the Company and its Subsidiaries currently
occupy or use the premises leased pursuant to the real property leases; and no
event has occurred and no condition exists which with the giving of notice or
the lapse of time or both, would constitute such a default or termination event
or condition. Neither the Company, nor its Subsidiaries, nor any of the officers
or directors of the Company or of its Subsidiaries has any ownership, financial
or other interest in the landlord under any real property lease. Each lease was
negotiated on an arm's-length basis.
(o) Inventories. All inventory reflected in the ____ Balance Sheet of
the Company and of its Subsidiaries and all inventory acquired by the Company
and by its Subsidiaries subsequent to the Balance Sheet Date, were acquired and
have been maintained in accordance with the regular business practices of the
relevant entity, consists of items of quality and quantity reasonably expected
to be useable or saleable in the ordinary course of business consistent with
past practice, are valued in accordance with United States Generally Accepted
Accounting Principles, and such inventory which is known or reasonably believed
to be obsolete or slow moving has been adequately reserved to reduce such
inventory to net realizable value. Subject to amounts reserved therefor on the
Financial Statements, the values at which all inventories of the Company and of
its Subsidiaries (collectively, the "Inventories") are carried on the Financial
Statements reflect the historical inventory valuation policy of the Company and
of its Subsidiaries of stating such Inventories. at the lower of cost
(determined on the first-in, first-out method) or market value and all
Inventories are valued such that the Company and its Subsidiaries will earn
its/their customary gross margins thereon. The Company has good and marketable
title to the Inventories free and clear of all encumbrances. The Inventories do
not consist of any items held on consignment. The Company is under no obligation
or liability with respect to accepting returns of items of Inventory or
merchandise in the possession of its customers other than in the ordinary course
of business consistent with past practice. No clearances or extraordinary sale
of the Inventories has been conducted since the Balance Sheet Date. Neither the
Company or any of its Subsidiaries has manufactured Inventory for sale which is
not of a quality and quantity usable in the ordinary course of business
consistent with past practice and within a reasonable period of time nor has the
Company or any of its Subsidiaries changed the price of any Inventory except (i)
for reductions to reflect any reduction in the cost thereof to the Company or to
any of its Subsidiaries; (ii) for reductions and increases responsive to normal
competitive conditions and consistent with the Company's or the Subsidiaries'
past sales practices; and (iii) to reflect any increase in the cost thereof to
the Company or to the Subsidiaries. The Inventories are in good and merchantable
condition in all material respects, are suitable
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<PAGE> 10
and usable for the purposes for which they are intended and are in a condition
such that they can be sold in the ordinary course of business consistent with
past practice.
(p) Patents, Trademarks and Copyrights, Etc. The Company and its
Subsidiaries own or are licensed or otherwise entitled to use all patents,
trademarks, trade names, service marks, copyrights, technology, know-how,
processes and other intellectual property used in the conduct of its business as
currently conducted and as proposed to be conducted. The Company and its
Subsidiaries have received no notice of any claims, have no knowledge of any
threatened claims, and know 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 infringes on any
patents or infringes upon the use of any such trademarks, trade names, service
marks, copyrights, technology, know-how, processes or other intellectual
property of another person or challenges or questions the validity or
effectiveness of any such license or agreement. The sale and use of any such
products and processes by the Company and its Subsidiaries, and the use of any
such patents, trademarks, trade names, service marks, copyrights, technology,
know-how, processes or other intellectual property by the Company and its
Subsidiaries, does not infringe on the rights of any person.
(q) Litigation. There is no 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 threatened against
or affecting the Company or any Subsidiary, nor, to the best of the Company's
knowledge, does there exist any basis therefor. 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. The Company agrees to
promptly notify the Placement Agent of the commencement of any litigation or
proceedings against the Company or any Subsidiaries or any of its/their
respective officers or directors in connection with the sale of the transaction
contemplated in the Offering Documents.
(r) Non-Defaults; Non-Contravention. Except as set forth in Schedule
2(r) hereto, neither the Company nor its Subsidiaries is in default in the
performance or observance of any obligation (i) under its Certificate of
Incorporation, as amended, or its By-laws, or any indenture, mortgage, contract,
purchase order or other agreement or instrument to which the Company is a party
or by which it or any of its property is bound or affected; or (ii) with respect
to any 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
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constitutes, nor which after notice, the lapse of time or both, would
constitute, a default under any of the foregoing.
(s) Employment of Officers, Employees and Consultants. To the best of
the Company's knowledge, no third party may assert any valid claim against the
Company or its Subsidiaries with respect to the (i) continued employment by, or
association with, the Company or its Subsidiaries of any of its present
officers, employees or consultants; or (ii) the use by the Company or its
Subsidiaries of any information which the Company or its Subsidiaries would be
prohibited from using under any prior agreements or arrangements or any laws
applicable to unfair competition, trade secrets or proprietary information.
(t) Taxes. The Company and its Subsidiaries have filed all federal,
state, local and foreign tax returns which are required to be filed by them, and
all such returns are true and correct in all material respects. The Company and
its Subsidiaries have paid all taxes pursuant to such returns or pursuant to any
assessments received by them and have withheld all amounts which they are
obligated to withhold from amounts owing to any employee, creditor or third
party. The tax returns of the Company and of its Subsidiaries have never been
audited by any state, local or federal authorities. The Company and its
Subsidiaries have not waived any statute of limitations with respect to taxes or
agreed to any extension of time with respect to any tax assessment or
deficiency. All tax elections have been made by the Company and its Subsidiaries
in accordance with generally accepted practices. No deficiency assessment with
respect to or proposed adjustment of the Company's and its Subsidiaries federal,
state, county or local taxes is pending or, to the best of the Company's
knowledge, threatened. There is no tax lien, whether imposed by any federal,
state, county or local taxing authority, outstanding against the assets,
properties or business of the Company or of its Subsidiaries. Neither the
Company nor any of its Subsidiaries nor any of its/their respective present or
former stockholders has ever filed an election pursuant to Section 1362 of the
Internal Revenue Code of 1986, as amended (the "Code"), that the Company or any
of its Subsidiaries be taxed as an S corporation.
(u) Agreements. Except as set forth in Schedule 2(u) hereto, neither
the Company nor any Subsidiary is a party to any written or oral contract not
made in the ordinary course of business and, whether or not made in the ordinary
course business, neither the Company nor any Subsidiary is a party to any
written or oral (i) collective bargaining agreement or any other contract with
any labor union; (ii) contract for the future purchase of fixed assets or for
the future purchase of materials, supplies or equipment in excess of $10,000;
(iii) contract for the employment of any officer, key employee or other key
person on a full-time basis or any contract with any person on a consulting
basis
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requiring the payment of any amount in the future; (iv) bonus, pension,
profit-sharing, vacation, deferred compensation, retirement, stock purchase,
stock option, hospitalization, health, medical insurance, life insurance,
disability insurance or similar plan, contract or understanding in effect with
respect to employees, or any other employee benefit plan, including, without
limitation, any employee benefit plan" as defined in Section 3(1) of the
Employee Retirement Income Security Act of 1974 and the rules and regulations
thereunder, as amended from time to time (collectively, "ERISA"), to which the
Company or any Subsidiary contributes or is a party, or is bound, or under which
it may have liability and under which employees or former employees of the
Company or any Subsidiary (or their beneficiaries) are eligible to participate
or derive a benefit; (v) agreement, indenture or other instrument relating to
the borrowing of money or to the mortgaging, pledging or otherwise placing a
lien on any assets of the Company or of any Subsidiary; (vi) guaranty of any
obligation for borrowed money or otherwise; (vii) agreement or other commitment
for capital expenditures in excess of $10,000; (viii) contract or agreement
under which the Company or any Subsidiary is obligated to pay any broker's fees,
finder's fees or any such similar fees, to any third party other than in
conjunction with the transactions contemplated by this Agreement; (ix) sales
agency, marketing, distributorship or continuing brokerage agreements or
franchises between the Company or any Subsidiary and any other person; (x)
partnership or joint venture agreement of any kind to which the Company or any
Subsidiary or their assets may be bound; (xi) licenses to or from others with
respect to the business or assets of the Company or any Subsidiary; (xii)
contracts or commitments limiting the freedom of the Company or any Subsidiary
or any of their officers or employees to compete with respect to the business of
the Company or any Subsidiary in any geographic area or with any person or
otherwise restricting the conduct of the Company's business or that of any
Subsidiary; (xiii) contract, agreement, arrangement, or understanding with
respect to the sale of the business of the Company or of any Subsidiary or of a
substantial portion of the Company's or any Subsidiary's assets to any third
party, including any option agreement for any such sale or disposition; or (xiv)
contract, agreement, arrangement or understanding which is material to the
business of the Company or to the business of any Subsidiary or which is
material to, and which a prudent investor would need to review in order to make
an informed investment decision with respect to the purchase of the Securities
offered pursuant to the Offering Documents. Each material purchase contract of
the Company or of any of its Subsidiaries is valid and binding on the Company or
on such Subsidiary, and neither the Company nor any of its Subsidiaries has
received notice that any such contract is not binding on any party thereto. The
Company and its Subsidiaries have performed in all material respects all
obligations to have been performed on such contracts through the date hereof,
and neither the Company nor any Subsidiary is in default in any
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<PAGE> 13
material respect under any such contract. Each material contract of the Company
or of any of its Subsidiaries is valid and binding on the Company or the
respective Subsidiary and the Company or the respective Subsidiary has not
received notice that any such contract is not binding on any party thereto. The
Company and each of its Subsidiaries has performed in all material respects all
obligations to have been performed on such contracts through the date hereof and
the Company and each of its Subsidiaries is not in default in any material
respect under any such contract.
(v) Compliance with Laws; Environmental Matters, Licenses, Etc. The
Company and its Subsidiaries have received no notice of any violation of, or
noncompliance with, any federal, state, local or foreign laws, ordinances,
regulations or orders (including, without limitation, those relating to
environmental protection, occupational safety and health and other labor laws,
ERISA, federal drug laws, federal securities laws, equal employment opportunity,
consumer protection, credit reporting, "truth-in-lending," and warranties and
trade practices) applicable to its business or the business of any Subsidiary,
the violation of, or noncompliance with which, would have a material adverse
effect on the Company's business or operations, or that of any Subsidiary, and
the Company knows of no facts or set of circumstances which would give rise to
such a notice. The Company and its Subsidiaries have 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 their business and the use of their
properties. 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. The Company and its Subsidiaries have
not received any written opinion or memorandum from legal counsel providing that
it/they has taken any action which has resulted in, or is reasonably likely to
result in, the Company or any of its Subsidiaries incurring any liability which
may be material to its/their respective business, prospects, financial
condition, operations, property or affairs. The Company and its Subsidiaries
shall comply with all applicable laws, rules, regulations and orders, the
noncompliance with which could materially adversely affect its/their respective
business or condition, financial or otherwise.
(w) Authorization of Agreement, Etc. Each of this Agreement, the
Offering Documents and all other agreements or documents required to be executed
and delivered by the Company in connection with the Offering (collectively the
"Ancillary Documents") has been or will be duly executed and delivered by the
Company and the execution, delivery and performance by the Company of this
Agreement and the Ancillary Documents has been duly authorized by all requisite
corporate action by the Company; and each constitutes, or will constitute, the
legal, valid and binding
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obligation of the Company, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization, usury
or other similar laws affecting the enforcement of creditors' rights generally.
The execution, delivery and performance of this Agreement and the issuance, sale
and delivery of the Securities, and the issuance and delivery of the shares of
Common Stock issuable upon conversion of the Preferred Stock and/or the Debt
Securities and upon exercise of the Placement Agent Warrants (the "Reserved
Shares") will not (i) violate any provision of law or statute or any order of
any court or other agency of government binding on the Company or its
Subsidiaries; or (ii) conflict with or result in any breach of any of the terms,
conditions or provisions of, or constitute (with due notice or lapse of time or
both) a default under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of the Company or of
its Subsidiaries under the Certificate of Incorporation, as amended, or By-Laws
of the Company or of its Subsidiaries or any indenture, mortgage, lease
agreement or other agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which it or any of its property is bound or
affected, except for such conflict, breach or default as to which requisite
waivers or consents shall have been obtained by the Company or by its
Subsidiaries and delivered to the Subscribers by the time of Closing.
(x) Authorization of Securities and Placement Agent Warrants.
The issuance, sale and delivery of the Securities and the Placement Agent
Warrants have been duly authorized by all requisite corporate action of the
Company, and when so issued, sold and delivered, (i) the Preferred Stock and/or
the Common Stock, as the case may be, will be validly issued and outstanding,
duly executed and delivered, fully paid and nonassessable, free and clear of all
liens, charges, claims, encumbrances, restrictions or preemptive or any other
similar rights and the Company shall have paid all taxes, if any, in respect of
the issuance thereof; (ii) the Placement Agent Warrants will be validly issued
and outstanding, duly executed, issued and delivered, fully paid and
nonassessable, free and clear of all liens, charges, claims, encumbrances,
restrictions or preemptive or any other similar rights and the Company shall
have paid all taxes, if any, in respect of the issuance thereof; and (iii)
neither the Preferred Stock and/or the Common Stock, as the case may be, nor the
Placement Agent Warrants will be subject to preemptive or any other similar
rights of the shareholders of the Company or others which rights shall not have
been waived prior to the time of acceptance by the Company of the first
Subscriber's Subscription Agreement. The offer and sale of the Securities is
exempt from the registration requirements of the Securities Act and the rules
and regulations promulgated thereunder and the Securities will be issued in
compliance with all applicable federal securities laws.
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(y) Authorization of Reserved Shares. The issuance, sale and delivery
by the Company of the Reserved Shares have been duly authorized by all requisite
corporate action of the Company, and the Reserved Shares have been duly reserved
for issuance upon conversion of the Preferred Stock and/or the Debt Securities
and exercise of all or any of the Placement Agent Warrants and when so issued,
sold and delivered, the Reserved Shares will be validly issued and outstanding,
duly executed, issued and delivered, fully paid and nonassessable, free and
clear of all liens, charges, claims, encumbrances, restrictions or preemptive or
any other similar rights and the Company shall have paid all taxes, if any, in
respect of the issuance thereof and the Reserved Shares will not be subject to
any preemptive or any other similar rights of the shareholders of the Company or
others which rights shall not have been waived prior to the time of acceptance
by the Company of the first Subscriber's Subscription Agreement.
(z) Related Transactions. Except as set forth on Schedule 2(z) hereto,
no current or former shareholder, director, officer or employee of the Company,
nor any affiliate of any such person, is presently, or since the inception of
the Company has been, directly or indirectly, through his, her or its
affiliation with any other person or entity, a party to any loan from the
Company or from any of its Subsidiaries.
(AA) Registration Rights. Except as may exist with respect to the
holders of the Securities and the Placement Agent Warrants, (i) no person or
entity has any right to cause the Company to effect the registration under the
Securities Act of any securities of the Company and (ii) no person or entity
holds any anti-dilution or "piggy back" rights with respect to any securities of
the Company.
(BB) Salaries and Bonuses. Schedule 2 (BB) hereto contains a true and
complete list of all current officers, directors and employees of the Company
and of its Subsidiaries who received during the fiscal year ended June 30, 1996
remuneration from the Company or from any of its Subsidiaries in excess of
$25,000, together with the current aggregate base salary rate for each such
person.
(CC) Insurance. All insurable assets and properties of the Company and
its Subsidiaries are insured, for the benefit of the Company and its
Subsidiaries, against all risks usually insured against by persons owning or
operating similar properties in the localities where such properties are
located, through insurance policies all of which are in full force and effect.
The Company and each Subsidiary are insured, for their benefit, against all
claims relating to their services to the same extent that the risks of such
claims are usually insured against by persons providing
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<PAGE> 16
similar services. Each of the insurance policies referred to in this Section is
issued by an insurer of recognized responsibility, and neither the Company nor
its Subsidiaries has received any notice or threat of the cancellation or
nonrenewal of any such policy. The Company will make available to the Placement
Agent, upon its request, a list of all insurance coverage carried by the Company
or its Subsidiaries, the carrier and the terms and amount of coverage.
(DD) Employee Benefit Plans.
(i) Welfare Plans. Each welfare plan of the Company and its
Subsidiaries is in compliance with the applicable provisions of ERISA and
the Internal Revenue Code of 1986, as amended (the "Code"). The Company
and each Subsidiary have no contingent, future or other obligations or
liabilities under or with respect to any welfare plan which provides for
the continuation of benefits at the expense of the Company or any
Subsidiary after retirement or other termination of employment.
(ii) Pension Plans. Each pension plan of the Company and of each
Subsidiary is in compliance with the applicable provisions of
ERISA and the Code including, without limitation, any applicable
minimum funding requirements. There have been no reportable events
within the meaning of Section 4043 of ERISA with respect to any
pension plan. In the event of the termination of all pension
plans, the Company and each Subsidiary would have no liability
under Sections 4062, 4063 or 4064 of ERISA.
(iii) Effect of Transactions. The execution and delivery of this
Agreement by the Company and the consummation of the transactions
contemplated hereby will not involve any prohibited transactions
with respect to the Company or any of its Subsidiaries within the
meaning of ERISA.
(EE) Brokers. The Company has not, nor have any of its Subsidiaries, or
any of its/their respective officers, directors, employees or shareholders,
employed any broker or finder in connection with the transactions contemplated
by this Agreement, other than Sands Brothers.
(FF) No Material Chances. Since the Balance Sheet Date, there has not
been any change in the condition, financial or otherwise, of the Company or of
any of its Subsidiaries, which could adversely affect the ability of the Company
or the ability of any of its Subsidiaries to conduct its operations to be
described in the Offering Documents and neither the Company nor any of its
Subsidiaries have incurred any material liabilities or obligations, direct or
contingent, not in the ordinary course of business since
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<PAGE> 17
such Balance Sheet Date.
(GG) Issuance of Other Securities. Except as set forth in this
Agreement, there are no preemptive or other rights to subscribe for or purchase,
or any restriction upon the voting or transfer of, any shares of Common Stock or
any other securities of the Company, under the Certificate of Incorporation or
ByLaws, or any agreement or other outstanding instrument to which the Company or
any of its Subsidiaries is a party or by which it/they is bound. Except for the
Securities and the Placement Agent Warrants or as set forth in this Agreement,
neither the Company nor any of its Subsidiaries has outstanding any option,
warrant, convertible security, or other right permitting or requiring it to
issue, or others to purchase or convert any obligation into, shares of Common
Stock or any other securities of the Company, and neither the Company nor any of
its Subsidiaries has agreed to issue or sell any shares of Common Stock or any
other securities of the Company.
(HH) No Consents. No permit, consent, approval, authorization, order or
filing with any court or governmental authority is required to consummate the
transactions contemplated by this Agreement, except that the offer and sale of
the Securities in certain jurisdictions may be subject to the provisions of the
securities or Blue Sky laws of such jurisdictions.
(II) Information. The Company and its Subsidiaries shall provide the
holders of the Securities with the information, if any, specified in the
Memorandum.
(JJ) Restrictive Agreements Prohibited. Neither the Company nor any of
its Subsidiaries shall become a party to any agreement which by its terms
restricts the Company's performance of this Agreement.
(KK) Change in Nature of Business. The Company and its Subsidiaries
shall not, without the prior approval of a majority of their Board of Directors,
make any material change in the nature of its/their respective businesses as the
same shall be set forth in the Memorandum.
(LL) Corporate Existence. The Company and its Subsidiaries shall
maintain their corporate existence, rights and franchises in full force and
effect.
(MM) Title to Securities. When certificates representing the Securities
shall have been duly delivered to the Subscribers, payment therefore will become
due, and to the extent such payment shall have been made therefor, the several
Subscribers shall have good and marketable title to the Securities free and
clear of all liens, encumbrances and claims whatsoever, and the Company shall
have paid all taxes, if any, in respect of the issuance thereof.
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<PAGE> 18
(NN) Employee Relations. Each of the Company and its subsidaries has
generally enjoyed a satisfactory employer-employee relationship with its
employees and is in compliance with all federal, state, local, and foreign laws
and regulations respecting employment and employement practices, terms and
conditions of employment and wages and hours. There are no pending
investigations involving the Company or any of its subsidiaries by the U.S.
Department of Labor, or any other governmental agency responsible for the
enforcement of such federal, state, local, or foreign laws and regulations.
There is no unfair labor practice charge or complaint against the Company or its
Subsidaries pending before the National Labor Relations Board or any strike,
picketing, boycott, dispute, slowdown or stoppage pending or threatened against
or involving the Company or its Subsidaries, or any predecessor entity, and none
has ever occurred. Nor representation question exists respecting the employees
of the Company or the employees of any of its Subsidaries, and no collective
bargaining agreement or modification therof is currently being negotiated by the
Company or its Subsidiaries. No grievance or arbitration proceeding is pending
under any expired or existing collective bargaining agreements of the Company or
any or its Subsidiaries. No labor dispute with the employees of the Company or
its Subsidiaries exists, or, is imminent.
(00) Foreign Corrupt Practices Act. None of the Company, its
Subsidiaries nor to their knowledge any of their respective officers, employees,
agents or any other person acting on behalf of the Company or any of its
Subsidiaries has, directly or indirectly, given or agreed to give any money,
gift or similar benefit (other than legal price concessions to customers in the
ordinary course of business) to any customer, supplier, employee or agent of a
customer or supplier, or official or employee of any governmental agency
(domestic or foreign) or instrumentality of any government (domestic or foreign)
or any political party or candidate for office (domestic or foreign) or other
person who was, is, or may be in a position to help or hinder the business of
the Company or the business of any of its Subsidiaries (or to assist the Company
or any of its Subsidiaries in connection with any actual or proposed
transaction) which (a) might subject the Company or any of its Subsidiaries, or
any other such person, to any damage or penalty in any civil, criminal or
governmental litigation or proceeding (domestic or foreign); (b) if not given in
the past, might have had a material adverse effect on the assets, business or
operations of the Company or of any of its Subsidiaries; or (c) if not continued
in the future, might adversely affect the assets, business, operations or
prospects of the Company and of its Subsidiaries, taken as a whole. The Company
believes that its and its Subsidiaries' international accounting controls are
sufficient to cause the Company and its Subsidiaries to comply with the Foreign
Corrupt Practices Act of 1977, as amended.
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<PAGE> 19
(PP) Affiliations. Except as set forth in Schedule 2(PP) hereto, no
officer, director or shareholder of the Company or officer, director or
shareholder of any of its Subsidiaries, or any "affiliate" or "associate" (as
these terms are defined in Rule 405 promulgated under the Rules and Regulations)
of any such person or entity or of the Company or its Subsidiaries, has or has
had, either directly or indirectly (i) an interest in any person or entity which
(A) furnishes or sells services or products which are furnished or sold or are
proposed to be furnished or sold by the Company or its Subsidiaries; or (B)
purchases from or sells or furnishes to the Company or any of its Subsidiaries
any goods or services; or (ii) a beneficiary interest in any contract or
agreement to which the Company or any of its Subsidiaries is a party or by which
it may be bound or affected. Except as set forth in Schedule 2(PP) hereto, there
are no existing agreements, arrangements, understandings or transactions, or
proposed agreements, arrangements, understandings or transactions, between or
among the Company or any of its Subsidiaries, and any officer, director, or
principal stockholder of the Company or any of its Subsidiaries, or any
affiliate or associate of any such person or entity.
(QQ) Corporate Representations. Any certificate signed by any officer
of the Company or by an officer of any of the Company's Subsidiaries and
delivered to the Placement Agent or to the Placement Agent's counsel pursuant to
this Agreement, shall be deemed a representation and warranty by the Company and
by any of its Subsidiaries to the Placement Agent as to the matters covered
thereby.
(RR) Escrow Arrangements. Pursuant to paragraph 3(e)(i) hereof, if the
Initial Closing does not take place before the termination of the Offering
Period, the Company will instruct the Bank to return the funds to the
Subscribers without any deduction or interest thereon.
(SS) Confidential Arrangements. The Company and its Subsidiaries agree
to take reasonable precautions in protecting the confidentiality, privacy and
security of the business contacts identified by the Placement Agent by taking
appropriate administrative and managerial action, and to use its/their
respective best efforts to prevent disclosure of such property information to
any all persons and entities. The Company and each of its Subsidiaries agree
that, without the expressed written consent of the Placement Agent, it/they will
not initiate, respond or otherwise abide any contract with any person, company,
institution, professional association, nor other entity to which it has been
introduced or with whom it has become acquainted in the course of doing business
with the other party. The Company and each of its Subsidiaries agrees to hold
completely confidential the
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<PAGE> 20
name, address, telephone, telex, facsimile number, account or other business
number of such contact as may be introduced by the Placement Agent. The above
restrictions apply to any subsequent follow up, repeated or extended or
renegotiation transactions related to the Offering regardless of the results of
the Offering.
(TT) Disclosure. Neither this Agreement nor any other document,
certificate or written statement to be furnished to the Subscribers by or on
behalf of the Company in connection with the transactions contemplated hereby,
including the Offering Documents, contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary in
order to make the statements contained herein and therein not misleading. There
is no fact known to the Company which adversely affects the business operations,
affairs, prospects, conditions, properties or assets of the Company or of its
Subsidiaries (hereinafter "Material Facts") which has not been set forth in this
Agreement. To the extent Material Facts become known to the Company subsequent
to the date hereof, such facts will be set forth in the Memorandum and/or in the
other documents, certificates or statements furnished to the Subscribers by or
on behalf of the Company pursuant hereto.
3. Representations, Warranties and Placement Agent. The P1acement
Agent represents, warrants and covenants as follows:
(a) Authorization of Agreement, Etc. This Agreement has been duly and
validly authorized, executed and delivered by or on behalf of the Placement
Agent.
(b) Compliance with the Securities Act. The Placement Agent will not
knowingly take any action which will result in the Securities being offered or
sold in a manner which does not comply with the provisions of Regulation D and
Regulation S under the Securities Act.
(c) Compliance with Offering Documents. The Placement Agent will offer
the Securitles in accordance with the Offering Documents and will deliver the
Offering Documents to each Subscriber before accepting a signed copy of the
Subscription Agreement or payment for any Securities.
(d) Compliance with Laws of Jurisdictions. The Placement Agent will
offer the Securities only in those jurisdictions in which it is permitted to
sell the Securities pursuant to the laws of said jurisdiction, and the Placement
Agent may arrange for the Securities to be offered by a broker/dealer or
offshore facilitator.
(e) Escrow Arrangements.
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<PAGE> 21
(i) The Placement Agent will promptly deposit funds received from
Subscribers in the Account with the Bank and hold the funds in accordance with
the terms of this Agreement and hold the Offering Documents for the benefit of
the Subscribers and the Company. The Bank shall release funds from such Account
only upon receipt of instruction executed by each of the Placement Agent and the
Company. If the Initial Closing does not take place before the termination of
the Offering Period, the Placement Agent will instruct the Bank to return the
funds to the Subscribers without any deduction or interest thereon.
(ii) In the event the Placement Agent has deposited funds from any
Subscriber into the Account and the Company exercises its right to reject such
Subscriber's funds, in whole or in part, the Placement Agent shall be entitled
to payment by the Company of a sum equal to the fees and expenses due by the
terms of this Agreement and entitled to issuance by the Company of the Placement
Agent Warrants that the Placement Agent would have received pursuant to
sub-paragraphs 4(d) and 4(e) of this Agreement.
4. Closing; Placement and Fees.
(a) Closing. The Initial Closing of the Financing shall take place at
the offices of counsel for the Placement Agent, 90 Park Avenue, New York, New
York 10016, at a time and date agreed upon between the Placement Agent and the
Company upon the (i) receipt of Subscription Agreements and related documents in
form and substance satisfactory to the Company and the Placement Agent and (ii)
delivery of documentation evidencing the consummation of Other Financing
transactions which, in the cases of (i) or (ii) individually, or in the
aggregate (in any combination), are equal to or are in excess of the Minimum
Amount. At the Initial Closing, payment for the Securities shall be made against
delivery of certificates representing the Securities sold. All proceeds received
from the sale of the Securities sold after the Initial Closing date will
continue to be deposited in the Account maintained with the Bank. Following the
Initial Closing date, the Placement Agent will continue to assist the Company in
locating qualified Subscribers and potential sources of Other Financing during
the remainder of the Offering Period. If a Subsequent Closing (as defined in the
Memorandum) does not take place within the Offering Period pursuant to the terms
of the Offering, the Placement Agent will return the funds to the additional
Subscribers, without deduction or interest thereon. Any Subsequent Closing will
be made on the same terms as the Initial Closing, as set forth in this Section
4(a).
(b) Procedures at Closing. At the Initial Closing:
(i) The Placement Agent on behalf of itself and the
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<PAGE> 22
Subscribers shall receive the opinion of Dennis D. Cole, Esq. ("Company
Counsel"), dated the Initial Closing date, to the effect that:
(A) the Company and each of its Subsidiaries is duly organized
and validly existing and in good standing under the laws of its incorporation,
has all requisite power and authority necessary to own or hold its properties
and conduct its business as described in the Ancillary Documents and is duly
qualified as a corporation for the transaction of business and is in good
standing in each jurisdiction where the failure to be so qualified might have a
material and adverse impact upon the Company or upon any of its Subsidiaries;
(B) the Company has full right, power and authority to enter
into this Agreement and to perform all of its obligations hereunder or
contemplated hereby or by any of the Ancillary Documents; the Company has full
right, power and authority to issue, sell and deliver the Securities, the
Placement Agent Warrants and the Reserved Shares; this Agreement and the
Ancillary Documents have been duly authorized, executed and delivered by the
Company and are valid and legally binding obligations of the Company, each
enforceable in accordance with their respective terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors rights generally;
(C) the authorized capital stock of the Company as of the
Initial Closing (not giving effect to the transactions contemplated by this
Agreement) consists of the capital stock described in Schedule 2(c)(i) of this
Agreement, and except as set forth in Schedule 2(c)(iv) of this Agreement, there
are no outstanding warrants (other than the Placement Agent 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 Common Stock or any OTHER capital stock or other securities of the
Company; all of the issued shares of capital stock of the Company have been duly
and validly authorized and issued, are fully paid and nonassessable; and the
Reserved Shares issuable upon conversion of the Preferred Stock and/or the Debt
Securities or upon exercise of the Placement Agent Warrants been duly reserved,
and when issued, will be validly issued, fully paid and nonassessable and not
subject to preemptive or any other similar rights;
(D) the Offering Documents (except as to the financial
statements and other financial information set forth in the Offering Documents
or incorporated by reference therein, as to which no opinion is expressed) and
any amendment or supplement thereto prior to the termination of the Offering, do
not contain any untrue statement of a material fact or omit to state a material
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<PAGE> 23
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances under which they were made;
(E) the Company has complied with the requirements of the
Securities Act and Regulation D and Regulation promulgated thereunder and with
the requirements of all other published rules and regulations of the Commission
currently in effect relating to "private offerings" and/or "accredited
investors" of the type made by the Company and the issuance and sale of the
Securities is exempt from registration under the Securities Act;
(F) neither the execution and delivery of this Agreement, nor
compliance with the terms hereof, nor the consummation of the transactions
herein contemplated, has, nor will, conflict with, result in a breach of, or
constitute a default under the Certificate of Incorporation or By-laws of the
Company or of any of its Subsidiaries, or any material contract, instrument or
document to which the Company or any of its Subsidiaries is a party, or by which
any of its properties is bound;
(G) no approval or consent of any court, board or governmental
agency, instrumentality or authority of the United States or of any state having
jurisdiction or authority over the Company or its Subsidiaries not duly obtained
is required for the valid authorization, issuance, sale and delivery of the
Securities (or the Reserve Shares) and the components thereof, other than that
required under the United States state "blue sky" laws; and
(H) there are no claims, actions, suits, investigations or
proceedings before or by any arbitrator, court, governmental authority or
instrumentality pending or threatened against or affecting the Company or of any
of its Subsidiaries or involving the Company's or any of its Subsidiaries'
properties which might adversely affect the business, properties or financial
condition of the Company or any of its Subsidiaries, or which might 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.
(ii) At the Closing, the Placement Agent will have received a signed
letter from Alessandri & Alessandri, P.A. confirming that such firm is an
independent public accountant within the meaning of the Securities Act and
stating that: (i) insofar as reported on by such firm, in their opinion, the
financial statements of the Company included in the Memorandum (including,
without limitation, the Financial Statements) comply as to form in all material
respects with the applicable accounting requirements of the Securities Act; (ii)
on the basis of procedures and inquiries (not constituting an examination in
accordance with generally accepted auditing standards) consisting of a reading
of
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<PAGE> 24
the last available financial statements of the Company, inquiries of officers of
the Company responsible for financial and accounting matters as to the
transactions and events subsequent to the Balance Sheet Date, and a reading of
the minutes of meetings of the shareholders, the Board of Directors of the
Company and any committees of the Board of Directors, as set forth in the minute
books of the Company, nothing has come to their attention which, in their
judgment, would indicate that (A) during the period from the Balance Sheet Date
to a specified date not more than five (5) business days prior to the date of
such letter, there have been any material decreases in net current assets or net
assets as compared with amounts shown in such Financial Statements or material
decreases in net sales or in total or per share net loss compared with the
corresponding period in the preceding year or any change in the capitalization
or long-term debt of the Company or of any of its Subsidiaries, except in all
cases as set forth in or contemplated by the Memorandum; and (B) the unaudited
interim financial statements of the Company, if any, appearing in the
Memorandum, are not presented in conformity with Generally Accepted Accounting
Principles and Practices on a basis substantially consistent with the audited
financial statements included in the Memorandum; and (iii) they have compared
specific dollar amounts, numbers of shares, numerical data, percentages of
revenues and earnings, and other financial information pertaining to the Company
set forth in the Memorandum (with respect to all dollar amounts, numbers of
shares, percentages and other financial information contained in the Memorandum,
to the extent that such amounts, numbers, percentages and information may be
derived from the general accounting records of the Company, and excluding any
questions requiring an interpretation by legal counsel) with the results
obtained from the application of specified readings, inquiries and other
appropriate procedures (which procedures do not constitute an examination in
accordance with generally accepted auditing standards) set forth in the letter,
and found them to be in agreement.
(iii) Counsel for the Placement Agent and Company Counsel shall receive
certificates from the Company, signed by the President or a Vice President
thereof, certifying (A) that the representations and warranties contained in
Section 2 hereof are true and accurate at the Initial Closing (and at each
Subsequent Closing) with the same effect as though expressly made at the Initial
Closing (and at each Subsequent Closing); and (B) that attached thereto is (1) a
true and correct copy of resolutions adopted by the Company's Board of Directors
authorizing (i) the execution, delivery and performance of this Agreement and
the Ancillary Documents, and (ii) the issuance of the Securities, the Placement
Agent Warrants and the Reserved Shares, and certifying that such resolutions
have not been modified, rescinded or amended and are in full force and effect;
and (2) a true and correct copy of a resolution adopted by the Company's Board
of Directors and by
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<PAGE> 25
each of the Company's Subsidiaries, authorizing the execution, delivery and
performance of each document to which it is a party, and that such resolutions
have not been modified, rescinded or amended and are in full force and effect.
(iv) There shall be delivered on behalf of each Subscriber one
copy of the Subscription Agreement signed by each Subscriber and one copy of the
Questionnaire signed by each Subscriber.
(v) The Placement Agent shall have received certificates of
good standing of the Company, dated as of a recent date, from the Secretary of
State of the jurisdiction of its incorporation and certificates of good standing
of each of the Company's Subsidiaries, dated as of a recent date, by the
Secretary of State of the jurisdictions of incorporation of the Subsidiaries.
(vi) At the Initial Closing and at each subsequent Closing, the
Placement Agent shall instruct the Bank to pay to the Company out of the funds
on deposit in the Account, as such funds are received from Subscribers whose
Subscriptions have been accepted.
(vii) At each Subsequent Closing, the Placement Agent shall
receive certificates of the Company signed by the Chief Executive Officer and
the Chief Financial Officer thereof, in form and substance satisfactory to its
counsel, substantially the same in scope and substance as the certificates
furnished to the Placement Agent and the Company at the Initial Closing pursuant
to this Section except that such certificates, where appropriate, shall cover
the financing purchased and sold at each Subsequent Closing.
(c) Blue Sky. Where appropriate, counsel for the Placement Agent shall
prepare a summary blue sky survey stating the extent to which and the conditions
upon which offers and sales of the Securities may be made in certain
jurisdictions. Blue Sky applications shall be made in such states and
jurisdictions as shall be requested by the Placement Agent. 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 and of its
Subsidiaries set forth herein; (iii) the representations and warranties of the
Placement Agent set forth herein; and (iv) the representations of the Company
and of its Subsidiaries set forth in the certificate to be delivered at the
Initial Closing pursuant to paragraph 4(b)(iii) hereof.
(d) Placement Fee and Expenses. At the Initial Closing (and at each
Subsequent Closing) as provided in paragraph 4(a) above, the Company shall pay
to the Placement Agent a commission equal to
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<PAGE> 26
ten (10%) percent of the aggregate proceeds derived from the Financing. In
addition, the Company shall pay the Placement Agent a non-accountable and
non-refundable expense allowance, equal to three (3%) percent of the aggregate
proceeds derived from the Financing. Prior to or from the proceeds of the
Initial Closing, the Company shall pay all Placement Agent's expenses with the
proposed Offering, including, but not reasonable counsel expenses, disbursements
and fees, reasonable accountant expenses, disbursements and fees, filing fees,
business and environmental investigatory expenses, printing costs, postage and
mailing expenses with respect to the transmission of the Offering and Ancillary
Documents, registrar and transfer agent fees any, and counsel fees of the
qualification of the blue sky laws of the states gnate. The Company also shall
fees, issue and transfer taxes, if Placement Agent in connection wit Securities
under the securities or which the Placement Agent shall designate pay for the
costs of placing "tombstone advertisements" in any publications which may be
selected by the Placement Agent, all costs and expenses in connection with the
establishment and maintenance of the Account referred to in paragraph 1 of this
Agreement, and all other costs and expenses incident to the performance of its
obligations hereunder which are not otherwise specifically provided for in this
paragraph 4(d), including the cost of transaction memorabilia determined at the
reasonable discretion of the Placement Agent.
(e) Issuance of Placement Agent Warrants. with the Initial Closing as
provided in paragraph 4 (a) above and at each Subsequent Closing thereafter),
the Company Simultaneously (a) above (and at each Subsequent Closing thereafter)
the Company, shall issue to the Placement Agent or its designee pursuant to the
terms and conditions of the Warrant Agreement, Placement Agent Warrants to
purchase that number of shares of Common Stock at a rate of 100,000 warrants for
each $1 million of Financing consummated (adjusted pro-rata in accordance with
such rates to the extent Sands Brothers sells between the Minimum and the
Maximum). The Placement Agent Warrants shall be exercisable for five (5) years,
commencing upon the date of their issuance, at a price per share equal to the
lower of (i) the share price of the Common Stock as contemplated in the
Memorandum, (ii) the share price of the Preferred Stock as contemplated in the
Memorandum, (iii) the conversion price per share of the Preferred Stock on the
date of exercise of the Placement Agent Warrants or (iv) the exercise price of
the warrants issued to Sands Brothers pursuant to the financial advisory letter
agreement between Sands Brothers and the Company dated September 12, 1996;
provided, however, such price shall be adjusted for any share splits, share
dividends and similar transactions. The Placement Agent Warrants shall be in the
form attached hereto as Exhibit B, and will be governed by the terms of the
Warrant Agreement attached hereto as Exhibit A. The Placement Agent Warrants
shall contain demand and piggyback registration rights, antidilution provisions
and such other terms and conditions as the
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<PAGE> 27
Placement Agent is accustomed to receiving in similar transactions. The
certificates representing the Placement Agent Warrants will be in such
denominations and such names as the Placement Agent may request prior to each
closing.
(f) Delivery of Documents. At each Subsequent Closing, there shall be
delivered an update of the documents delivered pursuant to this Section 4.
(g) Intentionally Omitted
(h) Intentionally Omitted.
(i) Intentionally Omitted.
(j) Placement Agents Decision Not to Proceed, Etc. If the Placement
Agent decides not to proceed with the Offering because of a breach by the
Company or by its Subsidiaries of its/their representations, warranties, or
covenants in this Agreement, or as a result of adverse changes in the affairs of
the Company or of ITS Subsidiaries, the Company shall be obligated to pay Sands
Brothers the sum of One Hundred and Fifty Thousand ($150,000) Dollars.
(k) Payments to Offshore Facilitator. At the Initial Closing, or at
any Subsequent Closing thereafter, the Company may further be obligated:
(i) with respect to the Common Stock, to make payment to a
third party offshore facilitator to the extent that such
facilitator is responsible for the sale of Common Stock. The fee
due such facilitator(s) for the sale of such shares shall be
determined by means of negotiation between the Placement Agent and
the facilitator; provided, however, that any fee due the
facilitator shall In no way affect any amounts due and owing the
Placement Agent under the terms and conditions of this Agreement;
(ii) with respect to the Preferred Stock, to make payment to a
third party offshore facilitator to the extent that such
facilitator is responsible for the sale of such Preferred Stock.
The fee due such facilitator for the sale of such Preferred Stock
shall be determined by means of negotiation between the Placement
Agent and the facilitator; provided, however, that any fee due the
facilitator shall in no way affect any amounts due and owing the
Placement Agent under the terms and conditions of this Agreement;
(iii) with respect to the Debt Securities, to make payment to a
third party offshore facilitator to the
27
<PAGE> 28
extent that such facilitator is responsible for the sale of such
Debt Securities. The fee due such facilitator for the sale of such
Debt Securities shall be determined by means of negotiation
between the Placement Agent and the facilitator; provided,
however, that any fee due the facilitator shall in no way affect
any amounts due and owing the Placement Agent under the terms and
conditions of this Agreement; and
(iv) any fee due a third party offshore facilitator pursuant to
this Section 4(k) shall in no event be greater than 5% of the
aggregate purchase price of the Securities sold.
5. Covenants of the Company.
(a) Amendments and Supplements. The Company covenants and agrees that,
until the Offering contemplated by the Offering Documents has been completed or
terminated, if there shall occur any event relating to or affecting, among other
things, the Company, any of its Subsidiaries, or the proposed operations of the
Company or of any of its Subsidiaries as described in the Offering Documents, as
a result of which it is necessary, in the opinion of the Placement Agent and its
counsel or Company Counsel, to amend or supplement the Offering Documents in
order that the Offering Documents will not contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, the Company shall immediately prepare and furnish to the
Placement Agent a reasonable number of copies of an appropriate amendment of or
supplement to the Offering Documents, in form and substance satisfactory to the
Placement Agent and its counsel.
(b) Use of Proceeds. The net proceeds of the Offering of the
Securities will be used by the Company, as more fully described in the
Memorandum, for the purposes to be set forth in the Memorandum.
(c) Expenses of Offering. The Company shall be responsible for, and
shall bear all expenses directly and necessarily incurred in connection with the
proposed financing, including, but not limited to, the costs of preparing,
printing and filing the Offering and Ancillary Documents to be used in
connection with the Offering contemplated hereby and all amendments and
supplements thereto; preparing, printing and delivering exhibits to the Offering
and Ancillary Documents; preparing, printing and delivering all Placement Agent
and selling documents, including, but not limited to, this Agreement and the
blue sky memorandum, the Share certificates, the Placement Agent Warrant
certificates, blue sky fees, filing fees and the fees and disbursements of the
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Placement Agent's counsel and the other fees and expenses set forth above. As
promptly as practicable after the final Closing date, the Company shall prepare,
at its own expense, hard cover "bound volumes" relating to the Offering and will
distribute such volumes to the individuals designated by counsel to the
Placement Agent.
(d) Reservation of Common Stock. The Company will reserve and keep
available the maximum number of its authorized but unissued Reserved Shares
which are issuable upon conversion of the Preferred Stock and/or the Debt
Securities and exercise of the Placement Agent Warrants.
(e) Intentionally Omitted.
(f) No Senior Securities. In the event any Securities are sold
hereunder, the Company shall not, without the approval of the holder(s) of at
least a majority-in-interest of such shares then outstanding, by vote or written
consent, authorize, issue or enter into any agreement providing for the issuance
(contingent or otherwise) of any equity securities (or any securities
convertible into or exchangeable for any equity securities) that are senior to
or on a parity with the Securities and Reserved Shares as to dividends or
liquidation rights.
(g) Early Termination by the Company. Anything contained herein to the
contrary notwithstanding, in the event that, following the date of this
Agreement until the termination of the Offering Period, the Company desires to
terminate this Agreement for any reason, Sands Brothers has the right, but not
the obligation, to agree to such early termination upon both (i) the payment by
the Company to Sands Brothers of a sum equal to the placement fees and expenses,
and (ii) the delivery to Sands Brothers of the Placement Agent Warrants, that
Sands Brothers would have received pursuant to paragraphs 4(d) and 4(e) of this
Agreement had the Maximum Amount been sold but for the early termination of this
Agreement.
(h) No Initial Closing. Anything set forth herein to the contrary
notwithstanding, in the event that, for any reason other than (i) termination
hereof by the Company in accordance with the terms of Section 5(g) above or (ii)
termination hereof by the Placement Agent in accordance with Section 4(j) above,
an Initial Closing does not occur in accordance with the terms provided herein,
no amounts shall be payable further to Sands Brothers hereunder, except for
reimbursement of the reasonable out-of-pocket expenses incurred by Sands
Brothers prior to the expiration date of the Offering Period. In no event shall
Sands Brothers be responsible for any of the Company's fees, costs or expenses
and the Company shall pay all expenses of the Offering and the preparation of
the Offering and Ancillary Documents. The Company shall reimburse Sands Brothers
for any out-of-pocket expenses
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<PAGE> 30
(including, but not limited to, reasonable counsel fees and expenses) which
Sands Brothers may incur in connection with the enforcement of its rights
hereunder.
(i) Financial Advisory Agreement. Reference is hereby made to that
certain letter agreement, dated September 12, 1996, between the Company and the
Placement Agent ("Financial Advisory Agreement"), which is specifically
incorporated herein by this reference. The Company hereby acknowledges that all
terms and conditions of the Financial Advisory Agreement shall continue in
effect following the execution, as well as any early termination, of this
Agreement, including, without limitation, the right of first refusal provisions
with respect to financing transactions, the fees payable to the Placement Agent
upon consummation of acquisition transactions, the right of a designee of the
Placement Agent to act as a member of the Company's Board of Directors and the
Placement Agent's agreement to provide financial advisory services and to earn
compensation in connection therewith.
(j) Financing Sources. The Company will provide to the Placement Agent
a list of each of its present financing sources, with such list to be amended
for a period of one year from the date of termination of the Offering if, and
when, the Company is approached by, or has any contact with, any potential
financing sources ("Company Sources").
(k) Placement Agent Sources. For a period of one year from the date of
this Agreement, the Placement Agent shall keep a list of the names of all its
sources of potential financing ("Placement Agent Sources" and together with the
Company Sources collectively, the "Sources") for the Company, which list may be
furnished to the Company and amended from time to time by the Placement Agent at
its discretion. The Company agrees, in the event it directly or indirectly
receives financing in any form or nature whatsoever from any Source, that it
will fully compensate the Placement Agent under the terms and conditions of this
Agreement to the same extent as if the Placement Agent itself had obtained such
financing from such Source.
(l) No Finder's Fee. The Company represents and warrants to the
Placement Agent that it is not obligated to pay a finders' fee to any one in
connection with the introduction of the Company to Sands Brothers.
6. Indemnification.
(a) Terms of Indemnification. The Company agrees to indemnify and hold
harmless the Placement Agent and its agents, stockholders, officers and
directors, and each person, if any, who controls the Placement Agent, as
follows:
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<PAGE> 31
(i) against any and all loss, liability, claim, damage and
expense whatsoever arising out of any untrue statement or alleged untrue
statement of a fact contained in the Offering Documents or the omission
or alleged omission therefrom of a fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, unless such untrue statement or omission was
made in the Offering or Ancillary Documents in reliance upon and in
conformity with information furnished in writing to the Company in
connection therewith by the Placement Agent expressly for use therein;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever to the extent of the aggregate amount paid in
settlement of any litigation, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission or any such
alleged untrue statement or omission; and
(iii) against any and all expense whatsoever incurred in
investigating, preparing or defending against any litigation, commenced
or threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or omission,
to the extent that any such expense is not paid under clause (i) or (ii)
above.
(b) Indemnity under Securities Laws. The Company agrees to indemnify
and hold harmless the Placement Agent and its agents, and each person, if any,
who controls the Placement Agent, 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 herein.
(c) If any action is brought against the Placement Agent or any of its
officers, directors, stockholders, employees, agents, advisors, consultants and
counsel or any controlling persons of the Placement Agent (each, an "Indemnified
Party" and collectively, "Indemnified Parties"), in respect of which indemnity
may be sought against the Company pursuant to Sections 6(a) or 6(b) above, each
such Indemnified Party shall promptly notify the Company (the "Indemnifying
Party") in writing of the institution of such action (but the failure to so
notify shall not relieve the Indemnifying Party from any liability it may have
under this Section 6 unless such failure results in the imposition of a default
judgment which cannot be reopened) and the Indemnifying Party shall promptly
assume the defense of such action, including the employment of counsel
reasonably satisfactory to each such Indemnified Party and payment of expenses.
Each such Indemnified Party shall have the
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<PAGE> 32
right to employ its own counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of each such Indemnified Party unless the
employment of such counsel shall have been authorized in writing by the
Indemnifying Party in connection with the defense of such action or the
Indemnifying Party shall have not have promptly employed counsel reasonably
satisfactory to each such Indemnified Party to have charge of the defense of
such action or each such Indemnified Party shall have reasonably concluded that
there may be one or more legal defenses available to it or them or to other
Indemnified Parties which are different from or additional to those available to
one or more of the Indemnifying Parties and it would be inappropriate for the
same counsel to represent both parties due to actual or potential differing
interests between them, in any of which events such fees and Indemnifying Party
shall not have the right to direct the defense of such action on behalf of each
Indemnified Party. Anything in this Section 6(c) to the contrary
notwithstanding, the Indemnifying Party shall not be liable for any settlement
of any such claim or action effected without its written consent, which consent
shall not be unreasonably withheld. The Company agrees to promptly notify the
Placement Agent of the commencement of any litigation or proceedings against the
Company or any of its officers or directors in connection with the sale of the
Securities or the Memorandum.
(d) Contribution. In order to provide for just and equitable
contribution in any case in which (i) an indemnified party makes a claim for
indemnification pursuant to this Section 6, but it is judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case; notwithstanding the fact
that the express provisions of this Section 6 provide for indemnification in
such case; or (ii) contribution under the Securities Act may be required on the
part of any indemnified party, then each indemnifying party shall contribute to
the amount paid as a result of such losses, claims, damages, expenses or
liabilities (or actions in respect thereof) (A) in such proportion as is
appropriate to reflect the relative benefits received by each of the
contributing parties, on the one hand, and the party to be indemnified on the
other hand, from the Offering of the Securities; or (B) if the allocation
provided by clause (A) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of each of the contributing
parties, on the one hand, and the party to be indemnified on the other hand, in
connection with the statements or omissions that resulted in such losses,
claims, damages, expenses or liabilities, as well as any other relevant
equitable considerations. In any case where the Company is a contributing party
and the Placement Agent is the indemnified
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<PAGE> 33
party, the relative benefits received by the Company on the one hand, and the
Placement Agent, on the other, shall be deemed to be in the same proportion as
the total net proceeds from the Offering of the Securities (before deducting
expenses) bear to the total Placement Agent commissions received by the
Placement Agent hereunder, in each case as set forth in the table on the cover
page of the Memorandum. Relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company, or by the Placement Agent, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, expenses or
liabilities (or actions in respect thereof) referred to above in this subsection
(d), shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating, preparing or
defending any such action or claim. Notwithstanding the provisions of this
subsection (d), the Placement Agent shall not be required to contribute any
amount in excess of the Placement Agent commissions applicable to the Securities
placed by the Placement Agent hereunder. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 6, each person, if
any, who controls the Company within the meaning of the Securities Act, each
officer of the Company who has signed the Memorandum, and each director of the
Company shall have the same rights to contribution as the Company, subject in
each case to this subsection (d). Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect to which a claim for contribution may
be made against another party or parties under this subsection (d), notify such
party or parties from whom contribution may be sought, but the omission so to
notify such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have hereunder or
otherwise than under this subsection (d), or to the extent that such party or
parties were not adversely affected by such omission. The contribution agreement
set forth above shall be in addition to any liabilities which any indemnifying
party may have at common law or otherwise.
7. Miscellaneous.
(a) General. Sands Brothers' obligation to proceed with the Offering
is conditioned upon Sands Brothers' due diligence investigation of the Company.
The Company shall supply Sands Brothers' with such financial statements,
contracts and other corporate records and documents as may be requested of it.
In
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<PAGE> 34
addition, Sands Brothers shall be fully informed by the Company of any events
which might have a material affect on the financial condition of the Company or
of any of its Subsidiaries. If, in the opinion of Sands Brothers, the condition
of the Company, or the condition of any of its Subsidiaries, financial or
otherwise, and its/their prospects are affected in a material and/or adverse
manner and do no fulfill the expectation of Sands Brothers, it shall have the
sole discretion to review and determine its continued interest in the Offering.
(b) Survival. Any termination of the Offering without consummation
thereof shall be without obligation on the part of any party except that the
provisions of Sections 4(j), 5(c), 5(g), 5(h) and 5(i) hereof and the
indemnification provisions provided in Section 6 hereof shall survive any
termination and shall survive each Closing. Notwithstanding anything provided
herein to the contrary, the provisions of Section 4(d) and 4(e) hereof shall
survive the termination of the Offering Period and shall remain in full force
and effect with respect to all Sources who invest, or commit to invest, in the
Company at any time during the twelve month period commencing the day that the
Offering Period terminates. Additionally, the Placement Agent shall be entitled
to also retain its non-accountable and non-refundable expense allowance to the
extent it has been paid prior to the date of termination.
(c) Representations, Warranties and Covenants to Survive Delivery. The
respective representations, warranties, indemnities, agreements, covenants and
other statements of the Company and its Subsidiaries, and where appropriate,
its/their respective principal stockholders, shall survive execution of this
Agreement and delivery of the Securities and the termination of this Agreement.
(d) 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.
(e) Governing Law. This Agreement shall be governed by and construed
in accordance with the law of the State of New York. The parties hereby agree:
(i) in any legal proceeding brought in connection with this Agreement or the
transactions contemplated hereby, to irrevocably submit to the nonexclusive in
personal jurisdiction of (A) any state or federal court of competent
jurisdiction sitting in the State of New York, County of New York; or (B) in the
event that any party is a defendant in any legal proceeding in which it seeks to
join the other as a third party defendant, then, any state or federal court in
which such proceeding has properly been brought, and consents to suit therein;
and (ii) to waive any objection they may now or hereafter have to
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<PAGE> 35
the venue of such proceeding in any such court or that such proceeding was
brought in an inconvenient court.
(f) Notices. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given when delivered personally, receipt
acknowledged, or five (5) days after being sent by registered or certified mail,
return receipt requested, postage prepaid. All notices shall be made to the
parties at the addresses designated above, or at such other or different
addresses which a party may subsequently provide with notice thereof, and to
their respective legal counsel, as follows:
(i) If to the Placement Agent, to:
Sands Brothers & Co., Ltd.
90 Park Avenue
New York, NY 10016
Attn: Mr. Mark G. Hollo
Managing Director
- with a copy to -
Littman Krooks & Roth, P.C.
120 West 45th Street
New York, NY 10036
Attn: Mitchell C. Littman, Esq.
or to such other person or address as the Placement Agent shall furnish the
Company in writing.
(ii) If to the Company, to:
Universal Medical Systems, Inc.
13825 Icot Boulevard, Suite 613
Clearwater, Florida 34620
- with a copy to -
Company Counsel:
Dennis D. Cole, Esq.
13825 Icot Boulevard, Suite 613
Clearwater, FL 34620
or to such other person or address as the Company shall furnish the Placement
Agent in writing.
(g) Counterparts. This Agreement may be signed in counterparts with
the same effect as if both parties had signed one and the same instrument.
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(h) Reimbursement. Notwithstanding the non-occurrence of an Initial
Closing, or any other condition, in no event shall the Placement Agent be
responsible for any of the Company's fees, costs or expenses; however, the
Company shall reimburse the Placement Agent for any out-of-pocket expenses
(including, but not limited to, reasonable counsel fees and expense) which the
Placement Agent may incur in connection with the enforcement of its rights
hereunder.
(i) Form of Signature. The parties hereto agree to accept a facsimile
transmission copy of their respective signatures as evidence of their respective
actual signatures to this Agreement; provided however, that each party who
produces a facsimile signature agrees, by the express terms hereof, to place,
immediately after transmission of his or her signature by fax, a true and
correct original copy of his or her signature in overnight mail to the address
of the other party.
(j) Modification. This Agreement (i) may only be modified by a written
instrument which is executed by both parties thereto, (ii) constitutes the
entire agreement between the parties, and (iii) shall be binding upon and inure
to the benefit of both parties hereto and their respective successor and
assignees.
(k) Non-Circumvention. Each of the Company and the Placement Agent each
agree that no effort shall be made to circumvent the terms and conditions of
this Agreement or gain a fee, commission, remuneration, consideration or benefit
whatsoever. With respect to any attempt at circumvention of this Agreement, the
injured party is entitled to seek any and all legal remedies, fees or
compensation equal to those received or committed or agreed to be paid pursuant
to the terms of this Agreement as the same are due and payable to the
circumvented party under the terms of this Agreement.
(l) Good Faith. Each of the Company and the Placement Agent understand
that this Agreement is a reciprocal and mutual one and both warrant, covenant,
and promise that it will act in good faith toward each other in the performance
of this Agreement and in other matters.
(m) Further Services. The Placement Agent shall, if requested by the
Company, testify in, and shall prepare and assist in the preparation of
testimony for, any judicial or administrative proceeding in respect of the
services performed by the Placement Agent hereunder. With respect thereto, the
Company shall pay, in addition to the fees and expenses payable to the Placement
Agent hereunder, for the time required to expend by the Placement Agent at its
standard hourly rates as then in effect, together with reasonable out-of-pocket
expenses, but not limited to, fees and expenses of its legal counsel.
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(n) Waiver of Breach. The waiver by either the Placement Agent or the
Company of any provision of this Agreement shall not be construed as a waiver of
any subsequent breach hereof.
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,
UNIVERSAL MEDICAL SYSTEMS, INC.
By: /s/ Myron A. Baker
---------------------------------
Name: Myron A. Baker
--------------------------
Title: Chairman & CEO
-------------------------
Agreed:
SANDS BROTHERS & CO., LTD.
By: /s/
-------------------------
Name:/s/
Title: Managing Director
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LIST OF SCHEDULES
SCHEDULE 2(b) Organization
SCHEDULE 2(c) Capitalization
SCHEDULE 2(e) Subsidiaries and Investments
SCHEDULE 2(j) Absence of Changes
SCHEDULE 2(r) Non Defaults; Non Contravention
SCHEDULE 2(u) Agreements
SCHEDULE 2(z) Related Transactions
SCHEDULE 2(BB) Salaries and Bonuses
SCHEDULE 2(PP) Affiliations
LIST OF EXHIBITS
Exhibit A Warrant Agreement
Exhibit B Placement Agent Warrants
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<PAGE> 1
EXHIBIT 10(j)
Universal Medical Systems, Inc.
13825 Icot Boulevard, Suite 613
Clearwater, Florida 34620
December 16, 1996
Sands Brothers & Co., Ltd.
90 Park Avenue
New York, New York 10016
Re: Amendment No. 1 to Selling Agreement
Gentlemen:
The undersigned, Universal Medical Systems, Inc., a Nevada corporation
(the "Company"), hereby agrees that the Selling Agreement ("Selling Agreement")
dated October 1, 1996 between the Company and Sands Brothers & Co., Ltd. ("Sands
Brothers"), as placement agent, is hereby amended as follows (capitalized terms
used herein having the meanings ascribed to them in the Selling Agreement):
1. The Maximum Offering is hereby increased from $1,500,000 to
$10,000,000.
2. Other Financing shall include written commitment(s), subject only
to customary conditions to closing (a "Commitment" or the "Commitments"), for
the types of financing contemplated by Other Financing as currently set forth in
the Selling Agreement. Accordingly, the obligation to pay Sands Brothers its
compensation under the Selling Agreement shall vest at the time the party
issuing the Commitment is ready, willing and able to consummate the Other
Financing transaction.
<PAGE> 2
Except as provided herein, the Selling Agreement remains in full force
and effect.
Very truly yours,
UNIVERSAL MEDICAL SYSTEMS, INC.
By: /s/ Dennis D. Cole
------------------------------------------
Name: Dennis D. Cole
------------------------------------
Title: Vice President and General Counsel
-----------------------------------
Agreed:
SANDS BROTHERS & CO., LTD.
By: /s/
---------------------------------
Name: /s/
Title: Senior Managing Director
2
<PAGE> 1
EXHIBIT 21
Subsidaries of the Company
The following is a list of all the Company's subsidaries, the state or
jurisdiction of incorporation or organization of each, and the names under which
such subsidaries due business:
1. Medhealth Imaging, Inc., a Florida Corporation
2. Medical High Technology International, Inc., a Florida Corporation
3. Life Sciences, Inc., a Connecticut Corporation
4. Biometrix, Inc., a Connecticut Corporation
5. Biometrix, Inc., a New Hampshire Corporation
6. American Med Pharm, Inc., a Delaware Corporation
7. King of Nostalgia, Inc., a New York Corporation
