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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13D
(RULE 13d-101)
UNDER THE SECURITIES EXCHANGE ACT OF 1934
Quest Medical, Inc.
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(Name of Issuer)
Common Stock, $.05 Par Value Per Share
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(Title of Class of Securities)
748346 10 3
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(CUSIP Number)
Thomas C. Thompson
President and Chief Executive Officer
Quest Medical, Inc.
One Allentown Parkway
Allen, Texas 75002
(972) 390-9800
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
February 21, 1997
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(Date of Event which Requires Filing of This Statement)
(Continued on following pages)
(Page 1 of 21 Pages)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Note. Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom copies
are to be sent.
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The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
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CUSIP NO. 748346 10 3 13D PAGE 2 OF 21 PAGES
1 NAME OF REPORTING PERSON
S.S. OR IRS. IDENTIFICATION NO. OF ABOVE PERSON
Robert L. Swisher, Jr.
S.S. No. ###-##-####
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
7 SOLE VOTING POWER
500,000(1)
8 SHARED VOTING POWER
9 SOLE DISPOSITIVE POWER
500,000(1)
10 SHARED DISPOSITIVE POWER
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
500,000(1)
12 CHECK BOX IF THAT AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
[ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.9%(2)
14 TYPE OF REPORTING PERSON
IN
(1) Mr. Swisher holds a warrant to purchase 100,000 shares of Quest Medical,
Inc. Common Stock, par value $.05 per share, which became exercisable as
of February 21, 1997. Mr. Swisher owns directly 400,000 shares of such
Common Stock.
(2) The total number of outstanding shares of Quest Medical, Inc. Common
Stock have been increased pursuant to Rule 13d-3(d)(1)(i) to include the
100,000 shares subject to a warrant held by Mr. Swisher, which became
exercisable on February 21, 1997.
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ITEM 1. SECURITY AND ISSUER
The class of securities to which this statement relates is the
Common Stock, par value $.05 per share (the "Common Stock"), of Quest
Medical, Inc., a Texas corporation (the "Issuer"). The Issuer's
principal executive offices are located at One Allentown Parkway, Allen,
Texas 75002.
ITEM 2. IDENTITY AND BACKGROUND
This statement is being filed on behalf of Robert L. Swisher,
Jr., a resident of the State of Texas. Mr. Swisher's business address
is 5005 LBJ Freeway, Suite 1130, Dallas, Texas 75244. Mr. Swisher is a
private investor engaged in a variety of business endeavors. Mr. Swisher
is a United States citizen.
Mr. Swisher has not, during the last five years, been convicted
in a criminal proceeding. Mr. Swisher has not, during the last five
years, been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction that has subjected him to
a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state
securities laws or finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
In consideration for a loan in the amount of $2,000,000 made by
Mr. Swisher to the Issuer, on February 21, 1997 the Issuer issued to Mr.
Swisher a warrant to purchase a total of 100,000 shares of Common Stock
at an exercise price of $6.50 per share (the "Warrant"). The Warrant
became exercisable in full on the date of issue and is exercisable for a
five year period thereafter.
Mr. Swisher owns directly 400,000 shares of Common Stock, which
were acquired on January 17, 1997.
ITEM 4. PURPOSE OF TRANSACTION
Mr. Swisher acquired the Warrant in connection with his
$2,000,000 loan to the Issuer described in Item 3 above as additional
consideration for such loan. Mr. Swisher may attempt to dispose of
shares of Common Stock (subject to transfer restrictions imposed by the
Warrant and federal and state securities laws) in the open market, in
privately negotiated transactions, by gift, or otherwise.
Mr. Swisher does not have any present plans or proposals that
would result in or relate to the occurrence of the events described in
Items 4(a) - (j).
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ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) As of the close of business on February 21, 1997, Mr.
Swisher owns directly 400,000 shares of Common Stock and owns the right
to acquire 100,000 shares of Common Stock pursuant to the Warrant.
Therefore, Mr. Swisher beneficially owns (within the meaning of Rule
13d-3(d)(1)) 500,000 shares of Common Stock, which represents
approximately 5.9% of the issued and outstanding shares of Common Stock
(as calculated in accordance with such rule), based on 8,315,080 shares
of Common Stock issued and outstanding (as represented in the Issuer's
Form 10-QSB for the quarter ended September 30, 1996).
(b) Mr. Swisher has the sole power to vote or direct the vote
of, and the sole power to dispose or direct the disposition of, the
400,000 shares of Common Stock he owns directly. Mr. Swisher does not
have the power to vote or direct the vote of, or the power to dispose or
direct the disposition of, the 100,000 shares of Common Stock underlying
the Warrant unless and until the Warrant is exercised to acquire such
shares. The responses to Items (7) through (11) of the portions of the
cover page of this Schedule 13D that relate to beneficial ownership of
shares of Common Stock are incorporated herein by reference.
(c) Mr. Swisher purchased the 400,000 shares of Common Stock
he owns directly on January 17, 1997. Mr. Swisher has not sold any
shares of Common Stock during the past 60 days.
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
Mr. Swisher may not sell, transfer or assign the Warrant or
shares of Common Stock issued upon exercise of the Warrant in the
absence of (a) an effective registration statement under the Securities
Act of 1933, as amended, or the securities act of any state, or (b) an
opinion of counsel satisfactory to the Issuer to the effect that such
registration is not required. Pursuant to the terms of the Warrant, Mr.
Swisher is entitled to demand and incidental registration rights for the
shares of Common Stock issued upon exercise of the Warrant.
The foregoing is only a summary of certain provisions of the
Warrant and is qualified in its entirety by reference to the Warrant, a
copy of which is filed as Exhibit A hereto and incorporated herein by
reference.
To the best knowledge of the undersigned, there are no other
contracts, arrangements, understandings or relationships (legal or
otherwise) between the
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undersigned and any person with respect to any securities of the Issuer,
including but not limited to transfer or voting of any of the
securities, finder's fees, joint ventures, loan or option agreement,
puts or calls, guarantees of profits, division of profits or loss, or
the giving or withholding of proxies, other than those contained in the
Warrant.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit A - Quest Medical, Inc. Common Stock Purchase Warrant, dated
February 21, 1997, by Quest Medical, Inc. for the benefit
of Robert L. Swisher, Jr..
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated as of February 21, 1997.
/s/ ROBERT L. SWISHER, JR.
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Robert L. Swisher, Jr.
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INDEX TO EXHIBITS
EXHIBIT
NO. ITEM
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99.A Quest Medical, Inc. Common Stock Purchase Warrant, dated
February 21, 1997, by Quest Medical, Inc. for the benefit
of Robert L. Swisher, Jr..
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EXHIBIT A
Warrant
(See Attached)
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THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES ACT OF ANY STATE (COLLECTIVELY, THE "ACTS").
NEITHER THIS WARRANT NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT WITH RESPECT HERETO UNDER ALL OF THE APPLICABLE ACTS, OR
AN OPINION OF COUNSEL SATISFACTORY TO QUEST MEDICAL, INC. TO THE EFFECT THAT
SUCH REGISTRATIONS ARE NOT REQUIRED.
QUEST MEDICAL, INC.
COMMON STOCK PURCHASE WARRANT
THIS IS TO CERTIFY THAT, QUEST MEDICAL, INC., a Texas corporation (the
"Company"), hereby grants to Robert L. Swisher, Jr., a Warrant to purchase
100,000 shares of the duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock, $.05 par value, of the Company (the
"Common Stock"), at a purchase price per share of $6.50 (the "Exercise Price"),
and to exercise the other appurtenant rights, powers and privileges hereinafter
set forth. The number of shares of the Common Stock purchasable hereunder and
the Exercise Price are subject to adjustment in accordance with Article III
hereof. This Warrant shall expire at 5:00 p.m., Dallas, Texas time, on
February 21, 2002 (the "Maturity").
Certain capitalized terms used in this Warrant are defined in Article V
hereof.
ARTICLE I
EXERCISE OF WARRANT
1.1 Method of Exercise. This Warrant may be exercised in whole or in
part at any time or from time to time on or after the date hereof and prior to
Maturity on any date that is a Business Day. To exercise this Warrant, in
whole or part, the holder hereof shall deliver to the Company, at the Warrant
Office designated in Section 2.1, (a) a written notice in the form of the
Subscription Notice attached as Exhibit A hereto, stating therein the election
of such holder to exercise this Warrant in the manner provided in the
Subscription Notice, (b) payment in full of the Exercise Price (in the manner
described below) for all Warrant Shares purchased hereunder, and (c) this
Warrant. This Warrant shall be deemed to be exercised on the date of receipt
by the Company of the Subscription Notice, accompanied by payment for the
Warrant Shares and surrender of this Warrant, as aforesaid, and such date is
referred to herein as the "Exercise Date". Upon such exercise, the Company
shall promptly issue and deliver to such holder a certificate for the full
number of the Warrant Shares purchased by such holder hereunder, against the
receipt by
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the Company of the total Exercise Price payable for all the Warrant Shares so
purchased. Payment of the Exercise Price will be made by either (i) certified
or official bank check, (ii) cancellation of any debt owed by the Company to
the holder hereof, or (iii) surrendering of Warrant Shares or other shares of
Common Stock valued at Current Market Value. If the holder surrenders a
combination of cash, cancellation of any debt, or Warrant Shares or other
shares of Common Stock, the holder will specify the respective number of
Warrant Shares to be purchased with each form of consideration, and the
foregoing provisions will be applied to each form of consideration with the
same effect as if this Warrant were being separately exercised with respect to
each form of consideration. The Person in whose name the certificate(s) for
Common Stock is to be issued shall be deemed to have become a holder of record
of such Common Stock on the Exercise Date. If this Warrant has been exercised
in part, the Company will deliver to the holder a new Warrant evidencing the
rights of such holder to purchase a number of Warrant Shares with respect to
which this Warrant has not been exercised, which new Warrant will, in all other
respects, be identical with this Warrant, or, at the option of the Company,
appropriate notation may be made on this Warrant and this Warrant returned to
such holder.
1.2 Fractional Shares. In lieu of any fractional shares of Common
Stock which would otherwise be issuable upon exercise of this Warrant, the
Company shall issue a certificate for the next higher number of whole shares of
Common Stock for any fraction of a share which is one-half or greater. No
shares will be issued for less than one-half of a share of Common Stock.
ARTICLE II
WARRANT OFFICE; TRANSFER
2.1 Warrant Office. The Company shall maintain an office for certain
purposes specified herein (the "Warrant Office"), which office shall initially
be the Company's office at One Allentown Parkway, Allen, Texas 75002 and may
subsequently be such other office of the Company or of any transfer agent of
the Common Stock in the continental United States as to which written notice
has previously been given to the holder of this Warrant. The Company shall
maintain, at the Warrant Office, a register for the Warrant, in which the
Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each permitted
assignee of the rights of the registered owner hereof.
2.2 Ownership of Warrant. The Company may deem and treat the person
in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any
notice to the contrary, until presentation of this Warrant for registration of
transfer as provided in this Article II.
2.3 Restrictions on Exercise and Transfer of Warrants. The Company
agrees to maintain at the Warrant Office books for the registration and
transfer of this Warrant. Subject to the restrictions on transfer of Warrants
in this Section 2.3, the Company, from time to time, shall register the
transfer of this Warrant in such books upon surrender of this Warrant at the
Warrant Office properly endorsed or accompanied by appropriate instruments of
transfer and written
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instructions for transfer satisfactory to the Company. Upon any such transfer,
a new Warrant shall be issued to the transferee and the surrendered Warrant
shall be canceled by the Company.
(a) Restrictions in General. This Warrant shall not be
exercisable or transferable and the related shares of Common Stock
issuable upon exercise of this Warrant (the "Warrant Shares") shall not
be transferable except upon the conditions specified in this Section
2.3, which conditions, among other things, are intended to insure
compliance with the provisions of the Securities Act in respect of the
exercise or transfer of this Warrant or transfer of such Warrant Shares.
The registered holder of this Warrant agrees that it will neither (i)
transfer this Warrant prior to delivery to the Company of the opinion of
counsel referred to in, and to the effect described in, clause (i) of
Section 2.3(b), or until registration hereof under the Securities Act
and any applicable state securities or blue sky laws, (ii) exercise this
Warrant prior to delivery to the Company of the opinion of counsel
referred to in, and to the effect described in, clause (i) of Section
2.3(b), or until registration of the related Warrant Shares under the
Securities Act and any applicable state securities or blue sky laws have
become effective, nor (iii) transfer such Warrant Shares prior to
delivery to the Company of the opinion of counsel referred to in, and to
the effect described in, clause (i) of Section 2.3(b), or until
registration of such Warrant Shares under the Securities Act and any
applicable state securities or blue sky laws have become effective.
(b) Statement of Intention to Exercise; Opinion of Counsel.
The registered holder of this Warrant, by its acceptance hereof, agrees
that prior to any exercise or transfer of this Warrant or any transfer
of the related Warrant Shares, said holder will deliver to the Company a
statement setting forth either said holder's intention with respect to
the retention or disposition of any Warrant Shares, or the intention of
said holder's prospective transferee with respect to its retention or
disposition of this Warrant or of said Warrant Shares (whichever is
involved in such transfer), in either such case, together with a signed
copy of the opinion of said holder's counsel, or such other counsel as
shall be acceptable to the Company, as to the necessity or non-necessity
for registration under the Securities Act and any applicable state
securities or blue sky laws in connection with such exercise or such
transfer. The following provisions shall then apply:
(i) If, in the opinion of said holder's counsel,
concurred in by counsel to the Company, the proposed exercise or
transfer of this Warrant or the proposed transfer of such Warrant
Shares may be effected without registration under the Securities
Act and any applicable state securities or blue sky laws of this
Warrant or such Warrant Shares, as the case may be, then the
registered holder of this Warrant shall be entitled to exercise
or transfer this Warrant or to transfer such Warrant Shares in
accordance with the statement of intention delivered by said
holder to the Company.
(ii) If, in the opinion of said counsel, concurred in by
counsel to the Company, either the proposed exercise or transfer
of this Warrant or the proposed
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transfer of such Warrant Shares may not be effected without
registration under the Securities Act and any applicable state
securities or blue sky laws of this Warrant or such Warrant
Shares, as the case may be, the registered holder of this Warrant
shall not be entitled to exercise or transfer this Warrant or to
transfer such Warrant Shares, as the case may be, until such
registration is effected.
2.4 Expenses of Delivery of Warrants. The Company shall pay all
expenses, taxes (other than transfer taxes) and other charges payable in
connection with the preparation, issuance and delivery of Warrants and related
Warrant Shares hereunder.
2.5 Compliance with Securities Laws. The holder hereof understands
and agrees that the following restrictions and limitations shall be applicable
to all Warrant Shares and resales or other transfers of such Warrant Shares
pursuant to the Securities Act:
(a) The holder hereof agrees that the Warrant Shares shall not
be sold or otherwise transferred unless the Warrant Shares are
registered under the Securities Act and state securities laws or are
exempt therefrom.
(b) A legend in substantially the following form has been or
will be placed on the certificate(s) evidencing the Warrant Shares:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or any state securities
act. The shares have been acquired for investment and may not be sold,
transferred, pledged or hypothecated unless (i) they shall have been
registered under the Securities Act of 1933, as amended, and any
applicable state securities act, or (ii) Quest Medical, Inc. shall have
been furnished with an opinion of counsel, satisfactory to counsel for
Quest Medical, Inc., that registration is not required under any of such
acts."
(c) Stop transfer instructions have been or will be imposed
with respect to the Warrant Shares so as to restrict resale or other
transfer thereof, subject to this Section 2.5.
ARTICLE III
ANTI-DILUTION PROVISIONS
3.1 Adjustment of Exercise Price and Number of Warrant Shares. The
Exercise Price shall be subject to adjustment from time to time as hereinafter
provided in this Article III. Upon each adjustment of the Exercise Price, the
registered holder of the Warrant shall thereafter be entitled to purchase, at
the Exercise Price resulting from such adjustment, the number of shares of the
Common Stock (calculated to the nearest whole share pursuant to Section 1.2)
obtained by multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of shares of the Common Stock purchasable pursuant
hereto immediately prior to such adjustment and dividing the product thereof by
the Exercise Price resulting from such adjustment.
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(a) Exercise Price Adjustments. The Exercise Price shall be subject
to adjustment from time to time as follows:
(i) Stock Dividends. If the number of shares of Common Stock
outstanding at any time after the date of this Warrant is increased by a
stock dividend payable in shares of Common Stock or by a subdivision or
split-up of shares of Common Stock, then immediately after the record
date fixed for the determination of holders of Common Stock entitled to
receive such stock dividend or the effective date of such subdivision or
split-up, as the case may be, the Exercise Price shall be appropriately
adjusted so that the adjusted Exercise Price shall bear the same
relation to the Exercise Price in effect immediately prior to such
adjustment as the total number of shares of Common Stock outstanding
immediately prior to such action shall bear to the total number of
shares of Common Stock outstanding immediately after such action.
(ii) Combination of Stock. If the number of shares of Common
Stock outstanding at any time after the date of issuance of this Warrant
is decreased by a combination of the outstanding shares of Common Stock,
then, immediately after the effective date of such combination, the
Exercise Price shall be appropriately adjusted so that the adjusted
Exercise Price shall bear the same relation to the Exercise Price in
effect immediately prior to such adjustment as the total number of
shares of Common Stock outstanding immediately prior to such action
shall bear to the total number of shares of Common Stock outstanding
immediately after such action.
(iii) Mergers, etc. In case of any consolidation of the Company
with or the merger of the Company with or into any other Person or of
the sale, lease or other transfer of all or substantially all of the
assets or capital stock of the Company to any other Person, this Warrant
shall, after such consolidation, merger, sale, lease or other transfer,
be exercisable for the number of shares of stock or other securities or
property to which the Common Stock issuable (at the time of such
consolidation, merger, sale, lease or other transfer) upon exercise of
this Warrant would have been entitled to receive upon such
consolidation, merger, sale, lease or other transfer if such exercise
had taken place; and in any such case, if necessary, the provisions set
forth herein with respect to the rights and interests thereafter of the
holder of this Warrant shall be appropriately adjusted so as to be
applicable, as nearly as may reasonably be, to any shares of stock or
other securities or property thereafter deliverable on the exercise of
this Warrant. In case of any distribution by the Company of any
security of the Company (including rights or warrants to subscribe for
any such securities, but excluding Common Stock and any securities
referred to in Section 3.1(a)(ii)), evidences of its indebtedness, cash
or other assets to all of the holders of its Common Stock, then in each
such case the Exercise Price in effect thereafter shall be determined by
multiplying the Exercise Price in effect immediately prior thereto by a
fraction, (i) the numerator of which shall be the total number of
outstanding shares of
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Common Stock multiplied by the Current Market Price on the record date
mentioned below, less the fair market value (as determined in good faith
by the Board of Directors) of the securities, evidences of its
indebtedness, cash or other assets distributed by the Company, and (ii)
the denominator of which shall be the total number of outstanding shares
of Common Stock multiplied by the Current Market Price. Such adjustment
shall become effective as of the record date for the determination of
stockholders entitled to receive such distribution.
(iv) Rounding of Calculations; Minimum Adjustment. All
calculations under this Section 3.1(a) and under Section 3.1(b) shall be
made to the nearest cent or to the nearest whole share (as provided in
Section 1.2), as the case may be. Any provision of this Section 3.1 to
the contrary notwithstanding, no adjustment in the Exercise Price shall
be made if the amount of such adjustment would be less than $0.25, but
any such amount shall be carried forward and an adjustment with respect
thereto shall be made at the time of and together with any subsequent
adjustment which, together with such amount and any other amount or
amounts so carried forward, shall aggregate $0.25 or more. In case the
Company shall at any time issue shares of Common Stock in any
transaction described in Section 3.1(a)(i) or 3.1(a)(ii), such amount of
$0.25 per share (as theretofore increased or decreased, if such amount
shall have been adjusted in accordance with the provisions of this
Section 3.1(a)(iv)) shall forthwith be proportionately increased in the
case of a transaction described in Section 3.1(a)(ii) or decreased in
the case of a transaction described in Section 3.1(a)(i) so as
appropriately to reflect such transaction.
(v) Timing of Issuance of Additional Common Stock Upon Certain
Adjustments. In any case in which the provisions of this Section 3.1(a)
shall require that an adjustment shall become effective immediately
after a record date for an event, the Company may defer until the
occurrence of such event issuing to the holder of this Warrant after
such record date and before the occurrence of such event the additional
shares of Common Stock or other property issuable or deliverable upon
exercise by reason of the adjustment required by such event over and
above the shares of Common Stock or other property issuable or
deliverable upon such exercise before giving effect to such adjustment;
provided, however, that the Company upon request shall deliver to such
holder a due bill or other appropriate instrument evidencing such
holder's right to receive such additional shares or other property, and
such cash, upon the occurrence of the event requiring such adjustment.
(b) Current Market Price. The Current Market Price shall mean, as
of any date, the average of the following prices, as applicable, for the ten
consecutive Trading Days immediately prior to such date, (i) the average of the
high and low sales prices of the Common Stock on such Trading Days as reported
on the composite tape for the principal national securities exchange on which
the Common Stock may then be listed, or (ii) if the Common Stock shall not be
so listed on any such Trading Day, the closing sales
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price of Common Stock in the over-the-counter market as reported by the
National Association of Securities Dealers Automated Quotations System
("NASDAQ") for National Market Issues, or (iii) if the Common Stock
shall not be included in the NASDAQ National Market System on any such
Trading Day, the average of the representative bid and asked prices at
the end of such Trading Day in such market as reported by NASDAQ, or
(iv) if there be no such representative prices reported by NASDAQ, the
average of the lowest bid and highest asked prices at the end of such
Trading Day in the over-the-counter market as reported by the National
Quotation Bureau, Inc., or any successor organization. For purposes of
determining Current Market Price, the term "Trading Day" shall mean a
day on which an amount greater than zero can be calculated with respect
to the Common Stock under any one or more of the foregoing categories
(i), (ii), (iii) and (iv). If the Current Market Price cannot be
determined under any of the foregoing methods, Current Market Price
shall mean the fair value per share of Common Stock on such date
determined by the Board of Directors in good faith, irrespective of any
accounting treatment.
(c) Statement Regarding Adjustments. Whenever the Exercise
Price shall be adjusted as provided in Section 3.1(a), and upon each
change in the number of shares of the Common Stock issuable upon
exercise of this Warrant, the Company shall forthwith file, at the
office of any transfer agent for this Warrant and at the principal
office of the Company, a statement showing in detail the facts requiring
such adjustment and the Exercise Price and new number of shares issuable
that shall be in effect after such adjustment, and the Company shall
also cause a copy of such statement to be given to the holder of this
Warrant. Each such statement shall be signed by the Company's chief
financial or accounting officer.
(d) Treasury Stock. For the purposes of this Section 3.1, the
sale or other disposition of any Common Stock of the Company theretofore
held in its treasury shall be deemed to be an issuance thereof.
3.2 Costs. The Company shall pay all documentary, stamp, transfer or
other transactional taxes attributable to the issuance or delivery of Warrant
Shares upon exercise of this Warrant; provided, however, that the Company 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
shares in a name other than that of the holder of this Warrant in respect of
which such shares are being issued.
3.3 Reservations of Shares. The Company shall reserve at all times
so long as this Warrant remains outstanding, free from preemptive rights, out
of its treasury Common Stock or its authorized but unissued shares of Common
Stock, or both, solely for the purposes of effecting the exercise of this
Warrant, sufficient shares of Common Stock to provide for the exercise hereof.
3.4 Valid Issuance. All shares of Common Stock which may be issued
upon exercise of this Warrant will upon issuance by the Company be duly and
validly issued, fully paid and
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nonassessable and free from all taxes, liens and charges with respect to the
issuance thereof attributable to any act or omission by the Company, and the
Company shall take no action which will cause a contrary result (including
without limitation, any action which would cause the Exercise Price to be less
than the par value, if any, of the Common Stock).
ARTICLE IV
REGISTRATION
4.1. Demand Registration. Subject to the terms and conditions hereof,
on one occasion no less than 60 days from the date hereof, the holder of this
Warrant may request in writing registration of all, but not part, of the
Registrable Stock on Form S-3 and in accordance with the provisions of Rule 415
promulgated under the Securities Act (a "Demand Registration"). The request
for a Demand Registration shall specify the intended method of distribution of
the shares. If, in the good faith judgment of the Company, the filing of such
registration statement would interfere with any material transaction then being
pursued by the Company or other material, pending development, the Company will
notify the holder of such transaction and the Company and the holder will work
together in good faith to identify the earliest possible time that the
registered filing could be made, and the Company will file the registration
statement on that date. The Company will use its best efforts to keep the
registration statement effective and to file such post-effective amendments to
the registration statement as are necessary to keep such registration statement
effective without lapse until the sale of all of the shares of Registrable
Stock or the expiration of this Warrant, whichever is earlier. If a
registration statement is filed, the holder will provide the Company with three
business days' prior written notice before the holder sells any shares under
the registration statement so that the Company can determine whether filing a
post-effective amendment or making a public disclosure is necessary.
4.2 Right to Piggyback. If the Company proposes to register any of
its securities on the Company's or any other holder's behalf under the
Securities Act (other than pursuant to the Demand Registration or registration
solely in connection with an employee benefit or stock ownership plan or a
merger or acquisition using Form S-4) and the registration form to be used may
be used for the registration of Registrable Stock (a "Piggyback Registration"),
the Company will give prompt written notice to the holder of its intention to
effect such a registration. Subject to Sections 4.3 below, the Company will
include in such registration all shares of Registrable Stock with an aggregate
Current Market Value of no less than $100,000 which the holder requests the
Company to include in such registration by written notice given to the Company
within 15 days after the date of sending of the Company's notice. The holders
of Registrable Stock will be entitled to unlimited Piggyback Registrations.
4.3 Priority on Registrations. If a Piggyback Registration relates
to an underwritten public offering of equity securities by the Company or any
holders of the Company's securities and the managing underwriters advise the
Company in writing that in their opinion the number of securities requested to
be included in such registration would interfere with the successful marketing
of such securities, the Company will include in such registration (i) first,
the securities
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proposed to be sold by the Company, and (ii) second, other securities requested
to be included in such registration (including the Registrable Stock), pro rata
among the holders of such other securities on the basis of the number of shares
owned by each such holder.
4.4 Registration Procedures. Whenever the holder requests that any
Registrable Stock be registered pursuant to this Warrant, the Company will use
its best efforts to effect the registration and the sale of such Registrable
Stock in accordance with the intended method of distribution thereof and will:
(a) use its best efforts to cause the registration statement
filed to become and remain effective for the period of time specified in
Section 4.1 for a Demand Registration and three (3) months subsequent to
the effective date for a Piggyback Registration;
(b) prepare and file with the Securities and Exchange
Commission such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be
necessary to comply with the provisions of the Securities Act;
(c) furnish to the holder such number of copies of such
registration statement, each amendment and supplement thereto, the
prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as the holder may
reasonably request in order to facilitate the disposition of the
Registrable Stock;
(d) use reasonable efforts to register or qualify such
Registrable Stock under the other securities or blue sky laws of such
jurisdictions as the holder reasonably requests in writing within ten
days following the original filing of such registration statement, and
do any and all other acts and things which may be reasonably necessary
to enable the holder to consummate the disposition in such jurisdictions
of the Registrable Stock, provided that the Company will not be required
to (without limitation) (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for
this subparagraph, (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction;
(e) notify the holder at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the
happening of any event as a result of which the prospectus included in
such registration statement contains an untrue statement of a material
fact or omits any fact necessary to make the statements therein not
misleading, and, at the request of the holder, the Company will prepare
a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Stock, such prospectus
will not contain an untrue statement of a material fact or omit to state
any fact necessary to make the statements therein not misleading;
(f) cause all such Registrable Stock to be listed on each
securities exchange on which Common Stock of the Company is then listed
and to be qualified for trading on
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each system on which similar Common Stock of the Company are from time
to time qualified;
(g) in the event of the issuance of any stop order suspending
the effectiveness of a registration statement, or of any order
suspending or preventing the use of any related prospectus or suspending
the qualification of any Registrable Stock included in such registration
statement for sale in any jurisdiction, the Company will use reasonable
efforts promptly to obtain the withdrawal of such order; and
(h) pay all registration expenses incurred in connection with
all Demand and Piggyback Registrations (excluding discounts and
commissions, which shall be paid by the selling shareholders out of the
proceeds of the offering).
4.5 Participation in Underwritten Registrations. The holder may not
participate in any registration hereunder which is underwritten unless the
holder (a) agrees to sell on the basis provided in any underwriting
arrangements approved by the Company, and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such underwriting arrangements.
4.6 Termination. The registration rights granted to the holder
pursuant to this Article IV shall terminate and be of no force or effect, at
such time and to the extent that as the Registrable Stock becomes eligible for
sale under Rule 144 under the Securities Act.
ARTICLE V
TERMS DEFINED
As used in this Warrant, unless the context otherwise requires, the
following terms have the respective meanings set forth below or in the Section
indicated:
Board of Directors -- the Board of Directors of the Company.
Business Day -- any day that NASDAQ is open for trading.
Common Stock -- shall mean and include the Company's Common Stock, par
value $.05 per share, authorized on the date of the original issue of this
Warrant and shall also include (i) in case of any reorganization,
reclassification, consolidation, merger, share exchange or sale, transfer or
other disposition of assets of the character referred to in Section 3.1(a)(iii)
hereof, the stock, securities or assets provided for in such Section
3.1(a)(iii), and (ii) any other shares of common stock of the Company into
which such shares of Common Stock may be converted.
Company -- Quest Medical, Inc., a Texas corporation, and any other
corporation assuming or required to assume the obligations undertaken in
connection with this Warrant.
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Current Market Price -- as defined in Section 3.1(b).
Outstanding -- when used with reference to Common Stock at any date,
all issued shares of Common Stock (including, without duplication, shares
deemed issued pursuant to Article III) at such date, except shares then held in
the treasury of the Company.
Maturity -- 5:00 p.m., Dallas, Texas time, on February 21, 2002.
NASDAQ -- as defined in Section 3.1(b).
Person -- any individual, corporation, partnership, trust,
organization, association or other entity or individual.
Registrable Stock -- all Common Stock issuable upon exercise of the
Warrant owned and held by the holder thereof, other than Common Stock which is
eligible for sale under Rule 144 of the Securities Act.
Securities Act -- the Securities Act of 1933 and the rules and
regulations thereunder, all as the same shall be in effect at the time.
Trading Day -- as defined in Section 3.1(b).
Warrant -- this Warrant and any successor or replacement Warrant
delivered in accordance with Section 2.3 or 6.8.
Warrant Office -- as defined in Section 2.1.
Warrant Shares -- shall mean the shares of Common Stock purchased or
purchasable by the registered holder of this Warrant or the permitted assignees
of such holder upon exercise thereof pursuant to Article I hereof.
ARTICLE VI
MISCELLANEOUS
6.1 Entire Agreement. This Warrant contains the entire agreement
between the holder hereof and the Company with respect to the shares
purchasable upon exercise hereof and the related transactions, and supersedes
all prior arrangements or understanding with respect thereto.
6.2 Governing Law. This Warrant shall be governed by and construed
in accordance with the laws of the State of Texas.
6.3 Waiver and Amendment. Any term or provision of this Warrant may
be waived at any time by the party which is entitled to the benefits thereof
and any term or provision of this Warrant may be amended or supplemented at any
time by agreement of the holder hereof and the
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<PAGE> 13
Company, except that any waiver of any term or condition, or any amendment or
supplementation, of this Warrant must be in writing. A waiver of any breach or
failure to enforce any of the terms or conditions of this Warrant shall not in
any way effect, limit or waive a party's rights hereunder at any time to
enforce strict compliance thereafter with every term or condition of this
Warrant.
6.4 Illegality. In the event that any one or more of the provisions
contained in this Warrant shall be determined to be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in any other respect and the remaining
provisions of this Warrant shall not, at the election of the party for whom the
benefit of the provision exists, be in any way impaired.
6.5 Copy of Warrant. A copy of this Warrant shall be filed among the
records of the Company.
6.6 Notice. Any notice or other document required or permitted to be
given or delivered to the holder hereof shall be delivered at, or sent by
certified or registered mail to such holder at, the last address shown on the
books of the Company maintained at the Warrant Office for the registration of
this Warrant or at any more recent address of which the holder hereof shall
have notified the Company in writing. Any notice or other document required or
permitted to be given or delivered to the Company, other than such notice or
documents required to be delivered to the Warrant Office, shall be delivered
at, or sent by certified or registered mail to, the office of the Company at
One Allentown Parkway, Allen, Texas 75002 or such other address within the
continental United States of America as shall have been furnished by the
Company to the holder of this Warrant.
6.7 Limitation of Liability; Not Shareholders. No provision of this
Warrant shall be construed as conferring upon the holder hereof the right to
vote, consent, receive dividends or receive notices other than as herein
expressly provided in respect of meetings of shareholders for the election of
directors of the Company or any other matter whatsoever as a shareholder of the
Company. No provision hereof, in the absence of affirmative action by the
holder hereof to purchase shares of Common Stock, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the purchase price of any shares of Common Stock
or as a shareholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
6.8 Exchange, Loss, Destruction, etc. of Warrant. Upon receipt of
evidence satisfactory to the Company of the loss, theft, mutilation or
destruction of this Warrant, and in the case of any such loss, theft or
destruction upon delivery of a bond of indemnity in such form and amount as
shall be reasonably satisfactory to the Company, or in the event of such
mutilation upon surrender and cancellation of this Warrant, the Company will
make and deliver a new Warrant of like tenor, in lieu of such lost, stolen,
destroyed or mutilated Warrant. Any Warrant issued under the provisions of
this Section 6.8 in lieu of any Warrant alleged to be lost, destroyed or
stolen, or in lieu of any mutilated Warrant, shall constitute an original
contractual obligation on the part of the Company. This Warrant shall be
promptly canceled by the Company upon the
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surrender hereof in connection with any exchange or replacement. The holder of
this Warrant shall pay all taxes and all other expenses and charges payable in
connection with the preparation, execution and delivery of Warrants pursuant to
this Section 6.8.
6.9 Headings. The Article and Section and other headings herein are
for convenience only and are not a part of this Warrant and shall not affect
the interpretation thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in
its name.
Dated: February 21, 1997.
QUEST MEDICAL, INC.
By: /F. Robert Merrill, III/
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<PAGE> 16
EXHIBIT A TO WARRANT
SUBSCRIPTION NOTICE
The undersigned, the holder of the foregoing Warrant, hereby elects to
exercise purchase rights represented by said Warrant for, and to purchase
thereunder _________________ shares of the Common Stock covered by said Warrant
and herewith makes payment in full therefor pursuant to Section 1.1 of such
Warrant as follows: ___________________________, and requests (a) that
certificates for such shares (and any securities or other property issuable
upon such exercise) be issued in the name of, and delivered to,
____________________________________________________ and (b) if such shares
shall not include all of the shares issuable as provided in said Warrant, that
a new Warrant of like tenor and date for the balance of the shares issuable
thereunder be delivered to the undersigned.
------------------------------------
Dated:
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