<PAGE>
________________________________________________________________________________
________________________________________________________________________________
FORM 8-A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(B) OR (G) OF THE
SECURITIES EXCHANGE ACT OF 1934
MEDICAL DEVICE TECHNOLOGIES, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
UTAH 58-1475517
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(STATE OF INCORPORATION (I.R.S. EMPLOYER
OR ORGANIZATION) IDENTIFICATION NO.)
9171 TOWNE CENTRE DRIVE, SUITE 355, SAN DIEGO, CA 92122
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NONE
IF THIS FORM RELATES TO THE REGISTRATION OF A CLASS OF DEBT SECURITIES AND IS
EFFECTIVE UPON FILING PURSUANT TO GENERAL INSTRUCTION A.(C)(1), PLEASE CHECK THE
FOLLOWING BOX.
[_]
IF THIS FORM RELATES TO THE REGISTRATION OF A CLASS OF DEBT SECURITIES AND IS TO
BECOME EFFECTIVE SIMULTANEOUSLY WITH THE EFFECTIVENESS OF A CONCURRENT
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 PURSUANT TO GENERAL
INSTRUCTION A.(C)(2), PLEASE CHECK THIS BOX.
[_]
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
% SERIES A CONVERTIBLE PREFERRED STOCK, PAR VALUE $.01 PER SHARE
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(TITLE OF CLASS)
REDEEMABLE COMMON STOCK PURCHASE WARRANTS
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(TITLE OF CLASS)
________________________________________________________________________________
________________________________________________________________________________
<PAGE>
ITEM 1. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
-------------------------------------------------------
See "Description of Securities" in Medical Device Technologies, Inc.'s
(the "Company") Amendment No. 1 to its Registration Statement on Form
S-1 filed pursuant to the Securities Act of 1933, as amended, as filed
with the Securities and Exchange Commission on May 23, 1996, File No.
333-02727 (the "Registration Statement"). The Registration Statement
is incorporated herein by reference.
ITEM 2. EXHIBITS.
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<TABLE>
<CAPTION>
EXHIBIT
DOCUMENT DESCRIPTION NO.
- -------- ----------- -------
<S> <C> <C>
**(a) Revised Form of Underwriting Agreement Exhibit A
by and between the Company and the
Representative
**(b) Form of Certificate of Designation Exhibit B
with respect to the __% Cumulative
Convertible Series A Preferred Stock
* (c) Articles of Incorporation of Gold 3.1
Probe, Inc., a Utah corporation, filed
February 6, 1980
* (d) Certificate of Amendment to the Articles 3.2
of Incorporation of Gold Probe, Inc.,
filed January 27, 1982
* (e) Certificate of Amendment to the Articles 3.3
of Incorporation of Hailey Energy
Corporation, filed October 26, 1986
* (f) Certificate of Amendment to the Articles 3.4
of Incorporation of Hailey Energy
Corporation, filed November 2, 1990
* (g) Certificate of Amendment to the Articles 3.5
of Incorporation of Hailey Energy
Corporation, filed November 17, 1992
***(h) Certificate of Amendment to the Articles 3.6
of Incorporation of Cytoprobe Corporation,
filed May 18, 1995
***(i) Certificate of Amendment to the Articles 3.7
of Incorporation of Medical Device
Technologies, Inc., filed December 14, 1995
****(j) Certificate of Amendment to the Articles 3.8
of Incorporation of Medical Device
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Technologies, Inc., filed January 17, 1996
****(k) Certificate of Amendment to the Articles 3.9
of Incorporation of Medical Device
Technologies, Inc., filed January 19, 1996
* (l) By-Laws of Medical Device Technologies, Inc. 3.10
**(m) Form of specimen certificate for Exhibit C
__% Cumulative Convertible Series A
Preferred Stock
**(n) Revised Form of Representative's Warrant Exhibit D
Agreement, including form of Specimen
Certificate for Representative's Warrant
**(o) Form of Redeemable Warrant Agreement Exhibit E
by and between the Company and Continental
Stock Transfer and Trust Company, including
a form of specimen certificate for the
Redeemable Warrants
</TABLE>
_____________________
* All Exhibit Numbers relate to Exhibits incorporated by reference to
the Exhibit Volume filed with the Company's Registration Statement at
the exhibit number set forth opposite such documents.
** Included herewith.
*** Incorporated by reference from the Company's Form 8-K
Report dated January 15, 1996 (File No. 0-12365).
**** Incorporated by reference from the Company's Form 8-K
Report dated January 31, 1996 (File No. 0-12365).
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of Section 12 of the Securities Act of 1934,
the Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized.
MEDICAL DEVICE TECHNOLOGIES, INC.
By: /s/ M. Lee Hulsebus
--------------------------------------
M. Lee Hulsebus, Chief Executive
Officer, President and Chairman
of the Board
Dated: June 5, 1996
<PAGE>
OHS DRAFT
6/3/96
EXHIBIT A
[Form of Underwriting Agreement - Subject to Client Review]
1,400,000 SHARES OF SERIES A ___% CUMULATIVE
CONVERTIBLE PREFERRED STOCK AND
1,400,000 REDEEMABLE WARRANTS
MEDICAL DEVICE TECHNOLOGIES, INC.
UNDERWRITING AGREEMENT
----------------------
New York, New York
, 1996
FIRST ALLIED SECURITIES, INC.
As Representative of the
Several Underwriters listed on Schedule A hereto
200 Park Avenue
24th Floor
New York, New York 10166
Ladies and Gentlemen:
Medical Device Technologies, Inc., a Utah corporation (the "Company")
confirms its agreement with First Allied Securities, Inc. ("First Allied") and
each of the underwriters named in Schedule A hereto (collectively, the
"Underwriters," which term shall also include any underwriter substituted as
hereinafter provided in Section 11), for whom First Allied is acting as
-------
representative (in such capacity, First Allied shall hereinafter be referred to
as "you" or the "Representative"), with respect to the sale by the Company and
the purchase by the Underwriters, acting severally and not jointly, of the
respective numbers of shares of the Company's Series A ___% Cumulative
Convertible preferred stock, $.01 par value per share ("Preferred Stock") and
Common Stock purchase warrants (the "Redeemable Warrants"), each Redeemable
Warrant to purchase ____ shares of Common Stock, set forth in Schedule A hereto.
<PAGE>
The shares of Preferred Stock and Redeemable Warrants will be separately
tradeable upon issuance and are hereinafter referred to as the "Firm
Securities."
Each Redeemable Warrant is exercisable to purchase ___ additional
shares of Common Stock at an exercise price of $__________ [150% of the
conversion price of Preferred Stock] per share commencing __________, 1997 [13
months from the date of the Prospectus], until 5:30 p.m. New York time on
__________, 1999 [36 months from the date immediately preceding the date of the
Prospectus]; at which time the Redeemable Warrants shall expire. The Redeemable
Warrants may be redeemed by the Company on 30 days' prior written notice, at
five cents ($.05) per Redeemable Warrant, at any time after ________________
1997 [16 months from the date of the Prospectus] provided that the average
closing bid price for the Common Stock as reported by the NASD through NASDAQ,
if the Common Stock is then traded on the over-the-counter market (or the
average closing sale price, if the Common Stock is then traded on the NASDAQ
National Market or a national securities exchange) equals or exceeds $________
per share [200% of the conversion price of the Preferred Stock] for any twenty
(20) trading days within a period of thirty (30) consecutive trading days ending
with the fifth trading day prior to the date of the Notice of Redemption.
Upon your request, as provided in Section 2(b) of this Agreement, the
-------
Company shall also sell to the Underwriters, acting severally and not jointly,
up to an additional 210,000 shares of Preferred Stock and/or 210,000 Redeemable
Warrants for the purpose of covering over-allotments, if any (the "Option
Securities"). The Company also proposes to issue and sell to you warrants (the
"Representative's Warrants") pursuant to the Representative's Warrant Agreement
(the "Representative's Warrant Agreement") for the purchase of up to (i) an
additional 140,000 shares of Preferred Stock or ____ shares of common stock,
$.15 par value per share of the Company ("Common Stock") or any combination
thereof and/or (ii) 140,000 Redeemable Warrants. The shares of Preferred Stock
and/or Common Stock and/or Redeemable Warrants issuable upon exercise of the
Representative's Warrants are hereinafter referred to as the "Representative's
Securities." The Firm Securities, the Option Securities, the Representative's
Warrants and the Representative's Securities (collectively, hereinafter referred
to as the "Securities") are more fully described in the Registration Statement
and the Prospectus referred to below.
1. Representations and Warranties of the Company. The Company
---------------------------------------------
represents and warrants to, and agrees with, each of the Underwriters as of the
date hereof, and as of the Closing Date (hereinafter defined) and the Option
Closing Date (hereinafter defined), if any, as follows:
(a) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement, and an
amendment or amendments thereto, on Form S-1 (No. 333-02727), including any
related preliminary prospectus ("Preliminary Prospectus"), for the registration
of the Firm Securities and the Option Securities under the Securities Act of
1933, as amended (the "Act"), which registration statement and amendment or
amendments have been prepared by the Company in conformity with the requirements
of the Act, and the rules and regulations (the "Regulations") of the Commission
under the Act. The Company will promptly file a further amendment to said
registration
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<PAGE>
statement in the form heretofore delivered to the Underwriters and will not,
file any other amendment thereto to which the Underwriters shall have objected
in writing after having been furnished with a copy thereof. Except as the
context may otherwise require, such registration statement, as amended, on file
with the Commission at the time the registration statement becomes effective
(including the prospectus, financial statements, schedules, exhibits and all
other documents filed as a part thereof or incorporated therein (including, but
not limited to those documents or information incorporated by reference therein)
and all information deemed to be a part thereof as of such time pursuant to
paragraph (b) of Rule 430(A) of the Regulations)), is hereinafter called the
"Registration Statement", and the form of prospectus in the form first filed
with the Commission pursuant to Rule 424(b) of the Regulations, is hereinafter
called the "Prospectus." For purposes hereof, "Rules and Regulations" mean the
rules and regulations adopted by the Commission under either the Act or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as applicable.
(b) Neither the Commission nor any state regulatory authority has
issued any order preventing or suspending the use of any Preliminary Prospectus,
the Registration Statement or Prospectus or any part of any thereof and no
proceedings for a stop order suspending the effectiveness of the Registration
Statement or any of the Company's securities have been instituted or are pending
or to the Company's knowledge, threatened. Each of the Preliminary Prospectus,
the Registration Statement and Prospectus at the time of filing thereof
conformed with the requirements of the Act and the Rules and Regulations, and
none of the Preliminary Prospectus, the Registration Statement or Prospectus at
the time of filing thereof contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein and necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, except that this representation and warranty does not
apply to statements made in reliance upon and in conformity with written
information furnished to the Company with respect to the Underwriters by or on
behalf of the Underwriters expressly for use in such Preliminary Prospectus,
Registration Statement or Prospectus.
(c) When the Registration Statement becomes effective and at all
times subsequent thereto up to the Closing Date and each Option Closing Date, if
any, and during such longer period as the Prospectus may be required to be
delivered in connection with sales by the Underwriters or a dealer, the
Registration Statement and the Prospectus will contain all statements which are
required to be stated therein in accordance with the Act and the Rules and
Regulations, and will conform to the requirements of the Act and the Rules and
Regulations; neither the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto, will contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, provided, however, that this
-------- -------
representation and warranty does not apply to statements made or statements
omitted in reliance upon and in conformity with information furnished to the
Company in writing with respect to the Underwriters by or on behalf of any
Underwriter expressly for use in the Preliminary Prospectus, Registration
Statement or Prospectus or any amendment thereof or supplement thereto.
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<PAGE>
(d) Each of the Company and its subsidiary, ICP Corporation, a
Utah corporation (the "Subsidiary") has been duly organized and is validly
existing as a corporation in good standing under the laws of the state of its
incorporation. Except as disclosed in the Prospectus, neither the Company nor
the Subsidiary owns an interest in any corporation, partnership, trust, joint
venture or other business entity. Each of the Company and the Subsidiary is duly
qualified and licensed and in good standing as a foreign corporation in each
jurisdiction in which its ownership or leasing of any properties or the
character of its operations requires such qualification or licensing. Each of
the Company and the Subsidiary has all requisite corporate power and authority,
and each has obtained any and all necessary authorizations, approvals, orders,
licenses, certificates, franchises and permits of and from all governmental or
regulatory officials and bodies (including, without limitation, those having
jurisdiction over environmental or similar matters), to own or lease its
properties and conduct its business as described in the Prospectus; each of the
Company and the Subsidiary is and has been doing business in compliance with all
such authorizations, approvals, orders, licenses, certificates, franchises and
permits and all federal, state and local laws, rules and regulations; and
neither received any notice of proceedings relating to the revocation or
modification of any such authorization, approval, order, license, certificate,
franchise, or permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would materially and adversely affect
the condition, financial or otherwise, or the earnings, position, prospects,
value, operation, properties, business or results of operations of the Company
or the Subsidiary. The disclosures in the Registration Statement concerning the
effects of federal, state and local laws, rules and regulations on each of the
Company's and the Subsidiary's business as currently conducted and as
contemplated are correct in all material respects and do not omit to state a
material fact necessary to make the statements contained therein not misleading
in light of the circumstances in which they were made.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus, under "Capitalization" and
"Description of Securities" and will have the adjusted capitalization set forth
therein on the Closing Date and the Option Closing Date, if any, based upon the
assumptions set forth therein, and the Company is not a party to or bound by any
instrument, agreement or other arrangement providing for it to issue any capital
stock, rights, warrants, options or other securities, except for this Agreement,
the Representative's Warrant Agreement, the Warrant Agreement (as defined in
Section 1(ii)) and as described in the Prospectus. The Securities and all other
securities issued or issuable by the Company conform or, when issued and paid
for, will conform, in all respects to all statements with respect thereto
contained in the Registration Statement and the Prospectus. All issued and
outstanding securities of the Company and the Subsidiary have been duly
authorized and validly issued and are fully paid and non-assessable and the
holders thereof have no rights of rescission with respect thereto, and are not
subject to personal liability by reason of being such holders; and none of such
securities were issued in violation of the preemptive rights of any holders of
any security of the Company or the Subsidiary or similar contractual rights
granted by the Company or the Subsidiary. The Securities are not and will not
be subject to any preemptive or other similar rights of any stockholder, have
been duly authorized and, when issued, paid for and delivered in accordance with
the terms hereof, will be validly issued, fully paid and non-assessable and will
conform to the description thereof contained in the Prospectus; the holders
thereof will not be subject to any liability solely as such holders; all
corporate action
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<PAGE>
required to be taken for the authorization, issue and sale of the Securities has
been duly and validly taken; and the certificates representing the Securities
will be in due and proper form. Upon the issuance and delivery pursuant to the
terms hereof of the Securities to be sold by the Company hereunder, the
Underwriters or the Representative, as the case may be, will acquire good and
marketable title to such Securities free and clear of any lien, charge, claim,
encumbrance, pledge, security interest, defect or other restriction or equity of
any kind whatsoever.
(f) The consolidated financial statements, including the related
notes and schedules thereto, included in the Registration Statement, each
Preliminary Prospectus and the Prospectus fairly present the financial position,
income, changes in cash flow, changes in stockholders' equity, and the results
of operations of the Company at the respective dates and for the respective
periods to which they apply and the pro forma financial information included in
the Registration Statement and Prospectus presents fairly on a basis consistent
with that of the audited financial statements included therein, what the
Company's pro forma capitalization would have been for the respective periods
and as of the respective dates to which they apply after giving effect to the
adjustments described therein. Such financial statements have been prepared in
conformity with generally accepted accounting principles and the Rules and
Regulations, consistently applied throughout the periods involved. There has
been no adverse change or development involving a material prospective change in
the condition, financial or otherwise, or in the earnings, position, prospects,
value, operation, properties, business, or results of operations of the Company
or the Subsidiary whether or not arising in the ordinary course of business,
since the date of the financial statements included in the Registration
Statement and the Prospectus and the outstanding debt, the property, both
tangible and intangible, and the business of the Company or the Subsidiary
conform in all material respects to the descriptions thereof contained in the
Registration Statement and the Prospectus. Financial information set forth in
the Prospectus under the headings "Summary Financial Data," "Selected Financial
Data," "Capitalization," and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," fairly present, on the basis stated in the
Prospectus, the information set forth therein, have been derived from or
compiled on a basis consistent with that of the audited financial statements
included in the Prospectus.
(g) Each of the Company and the Subsidiary (i) has paid all
federal, state, local, and foreign taxes for which it is liable, including, but
not limited to, withholding taxes and amounts payable under Chapters 21 through
24 of the Internal Revenue Code of 1986 (the "Code"), and has furnished all
information returns it is required to furnish pursuant to the Code, (ii) has
established adequate reserves for such taxes which are not due and payable, and
(iii) does not have any tax deficiency or claims outstanding, proposed or
assessed against it.
(h) No transfer tax, stamp duty or other similar tax is payable
by or on behalf of the Underwriters in connection with (i) the issuance by the
Company of the Securities, (ii) the purchase by the Underwriters of the
Securities from the Company and the purchase by the Representative of the
Representative's Warrants from the Company, (iii) the consummation by the
Company of any of its obligations under this Agreement or the Representative's
Warrant Agreement, or (iv) resales of the Shares in connection with the
distribution contemplated hereby.
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<PAGE>
(i) The Company maintains insurance policies, including, but not
limited to, general liability, product liability and property insurance, which
insures the Company and its employees, against such losses and risks generally
insured against by comparable businesses. The Company (A) has not failed to
give notice or present any insurance claim with respect to any matter, including
but not limited to the Company's business, property or employees, under the
insurance policy or surety bond in a due and timely manner, (B) does not have
any disputes or claims against any underwriter of such insurance policies or
surety bonds or has not failed to pay any premiums due and payable thereunder,
or (C) has not failed to comply with all conditions contained in such insurance
policies and surety bonds. There are no facts or circumstances under any such
insurance policy or surety bond which would relieve any insurer of its
obligation to satisfy in full any valid claim of the Company.
(j) There is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding (including, without
limitation, those having jurisdiction over environmental or similar matters),
domestic or foreign, pending or threatened against (or circumstances that may
give rise to the same), or involving the properties or business of, the Company
or the Subsidiary which (i) questions the validity of the capital stock of the
Company or the Subsidiary, this Agreement, the Representative's Warrant
Agreement, the Consulting Agreement (as defined herein) or of any action taken
or to be taken by the Company pursuant to or in connection with this Agreement,
the Representative's Warrant Agreement or the Consulting Agreement, (ii) is
required to be disclosed in the Registration Statement which is not so disclosed
(and such proceedings as are summarized in the Registration Statement are
accurately summarized in all material respects), or (iii) might materially and
adversely affect the condition, financial or otherwise, or the earnings,
position, prospects, stockholders' equity, value, operation, properties,
business or results of operations of the Company or the Subsidiary.
(k) The Company has full legal right, power and authority to
authorize, issue, deliver and sell the Securities, enter into this Agreement,
the Representative's Warrant Agreement, the Warrant Agreement and the Consulting
Agreement and to consummate the transactions provided for in such agreements;
and this Agreement, the Representative's Warrant Agreement, the Warrant
Agreement and the Consulting Agreement have each been duly and properly
authorized, executed and delivered by the Company. Each of this Agreement, the
Representative's Warrant Agreement, the Warrant Agreement and the Consulting
Agreement constitutes a legal, valid and binding agreement of the Company
enforceable against the Company in accordance with its terms, except (i) as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws affecting
creditors' rights generally, (ii) as enforceability of any indemnification or
contribution provisions may be limited under applicable laws or the public
policies underlying such laws and (iii) that the remedies of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceedings may be brought. None of the Company's issue and sale of the
Securities, execution or delivery of this Agreement, the Representative's
Warrant Agreement, the Warrant Agreement or the Consulting Agreement, its
performance hereunder and thereunder, its consummation of the transactions
contemplated herein and therein, or the conduct of its business as described in
the Registration Statement, the Prospectus, and any amendments or supplements
thereto, conflicts with or will conflict with or results or will result in any
breach
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<PAGE>
or violation of any of the terms or provisions of, or constitutes or will
constitute a default under, or result in the creation or imposition of any lien,
charge, claim, encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever upon, any property or assets
(tangible or intangible) of the Company pursuant to the terms of, (i) the
articles of incorporation or by-laws of the Company, (ii) any license, contract,
indenture, mortgage, deed of trust, voting trust agreement, stockholders
agreement, note, loan or credit agreement or any other agreement or instrument
to which the Company is a party or by which it is or may be bound or to which
any of its properties or assets (tangible or intangible) is or may be subject,
or any indebtedness, or (iii) any statute, judgment, decree, order, rule or
regulation applicable to the Company of any arbitrator, court, regulatory body
or administrative agency or other governmental agency or body (including,
without limitation, those having jurisdiction over environmental or similar
matters), domestic or foreign, having jurisdiction over the Company or any of
its activities or properties.
(l) Except as described in the Prospectus, no consent, approval,
authorization or order of, and no filing with, any court, regulatory body,
government agency or other body, domestic or foreign, is required for the
issuance of the Shares pursuant to the Prospectus and the Registration
Statement, the issuance of the Representative's Warrants, the performance of
this Agreement, the Representative's Warrant Agreement, the Warrant Agreement
and the Consulting Agreement and the transactions contemplated hereby and
thereby, including without limitation, any waiver of any preemptive, first
refusal or other rights that any entity or person may have for the issue and/or
sale of any of the Shares, or the Representative's Warrants, except such as have
been or may be obtained under the Act or may be required under state securities
or Blue Sky laws in connection with the Underwriters' purchase and distribution
of the Shares, and the Representative's Warrants to be sold by the Company
hereunder.
(m) All executed agreements, contracts or other documents or
copies of executed agreements, contracts or other documents filed as exhibits to
the Registration Statement to which each of the Company or the Subsidiary is a
party or by which it may be bound or to which any of its assets, properties or
business may be subject have been duly and validly authorized, executed and
delivered by the Company or the Subsidiary, and constitute the legal, valid and
binding agreements of the Company or the Subsidiary, enforceable against the
Company or the Subsidiary, in accordance with their respective terms. The
descriptions in the Registration Statement of agreements, contracts and other
documents are accurate in all material respects and fairly present the
information required to be shown with respect thereto by Form S-1, and there are
no contracts or other documents which are required by the Act to be described in
the Registration Statement or filed as exhibits to the Registration Statement
which are not described or filed as required, and the exhibits which have been
filed are in all material respects complete and correct copies of the documents
of which they purport to be copies.
(n) Subsequent to the respective dates as of which information is
set forth in the Registration Statement and Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, the Company has not
(i) issued any securities or incurred any liability or obligation, direct or
contingent, for borrowed money, (ii) entered into any transaction other than in
the ordinary course of business, or (iii) declared or paid any dividend or made
any other distribution on or in respect of its capital stock of any class, and
there has not been any change in the capital stock, or any material change in
the debt (long or short term) or liabilities
- 7 -
<PAGE>
or material adverse change in or affecting the general affairs, management,
financial operations, stockholders' equity or results of operations of the
Company.
(o) No default exists in the due performance and observance of
any term, covenant or condition of any license, contract, indenture, mortgage,
installment sale agreement, lease, deed of trust, voting trust agreement,
stockholders agreement, partnership agreement, note, loan or credit agreement,
purchase order, or any other agreement or instrument evidencing an obligation
for borrowed money, or any other material agreement or instrument to which the
Company is a party or by which the Company may be bound or to which the property
or assets (tangible or intangible) of the Company is subject or affected.
(p) The Company 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
employment practices, terms and conditions of employment and wages and hours.
There are no pending investigations involving the Company 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 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
any predecessor entity, and none has ever occurred. No representation question
exists respecting the employees of the Company, and no collective bargaining
agreement or modification thereof is currently being negotiated by the Company.
No grievance or arbitration proceeding is pending under any expired or existing
collective bargaining agreements of the Company. No labor dispute with the
employees of the Company exists, or is imminent.
(q) Except as described in the Prospectus, the Company does not
maintain, sponsor or contribute to any program or arrangement that is an
"employee pension benefit plan," an "employee welfare benefit plan," or a
"multiemployer plan" as such terms are defined in Sections 3(2), 3(1) and 3(37),
--------
respectively, of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") ("ERISA Plans"). The Company does not maintain or contribute, now or
at any time previously, to a defined benefit plan, as defined in Section 3(35)
-------
of ERISA. No ERISA Plan (or any trust created thereunder) has engaged in a
"prohibited transaction" within the meaning of Section 406 of ERISA or Section
------- -------
4975 of the Code, which could subject the Company to any tax penalty on
prohibited transactions and which has not adequately been corrected. Each ERISA
Plan is in compliance with all reporting, disclosure and other requirements of
the Code and ERISA as they relate to any such ERISA Plan. Determination letters
have been received from the Internal Revenue Service with respect to each ERISA
Plan which is intended to comply with Code Section 401(a), stating that such
-------
ERISA Plan and the attendant trust are qualified thereunder. The Company has
never completely or partially withdrawn from a "multiemployer plan."
(r) Neither the Company nor any of its employees, directors,
stockholders, partners, or affiliates (within the meaning of the Rules and
Regulations) of any of the foregoing has taken or will take, directly or
indirectly, any action designed to or which has constituted or which might be
expected to cause or result in, under the Exchange Act, or otherwise,
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<PAGE>
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities or otherwise.
(s) Except as otherwise disclosed in the Prospectus, none of the
patents, patent applications, trademarks, service marks, trade names and
copyrights, and licenses and rights to the foregoing presently owned or held by
the Company or the Subsidiary are in dispute so far as known by the Company or
are in any conflict with the right of any other person or entity. Each of the
Company and the Subsidiary (i) owns or has the right to use, free and clear of
all liens, charges, claims, encumbrances, pledges, security interests, defects
or other restrictions or equities of any kind whatsoever, all patents,
trademarks, service marks, trade names and copyrights, technology and licenses
and rights with respect to the foregoing, used in the conduct of its business as
now conducted or proposed to be conducted without infringing upon or otherwise
acting adversely to the right or claimed right of any person, corporation or
other entity under or with respect to any of the foregoing and (ii) is not
obligated or under any liability whatsoever to make any payment by way of
royalties, fees or otherwise to any owner or licensee of, or other claimant to,
any patent, trademark, service mark, trade name, copyright, know-how, technology
or other intangible asset, with respect to the use thereof or in connection with
the conduct of its business or otherwise.
(t) Each of the Company and the Subsidiary owns and has the
unrestricted right to use all trade secrets, know-how (including all other
unpatented and/or unpatentable proprietary or confidential information, systems
or procedures), inventions, designs, processes, works of authorship, computer
programs and technical data and information (collectively herein "intellectual
property") that are material to the development, manufacture, operation and sale
of all products and services sold or proposed to be sold by the Company, free
and clear of and without violating any right, lien, or claim of others,
including without limitation, former employers of its employees, former and
current employers of each member of the Company's Scientific Advisory Board or
members of the Company's Scientific Advisory Board; provided, however, that the
possibility exists that other persons or entities, completely independently of
the Company, or its employees or agents, could have developed trade secrets or
items of technical information similar or identical to those of the Company.
(u) The Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property stated
in the Prospectus, to be owned or leased by it free and clear of all liens,
charges, claims, encumbrances, pledges, security interests, defects, or other
restrictions or equities of any kind whatsoever, other than those referred to in
the Prospectus and liens for taxes not yet due and payable.
(v) BDO Seidman, LLP ("BDO") whose report is filed with the
Commission as a part of the Registration Statement, are independent certified
public accountants as required by the Act and the Rules and Regulations.
(w) The Company has caused to be duly executed legally binding
and enforceable agreements pursuant to which all officers and directors have
agreed not to, directly or indirectly, offer to sell, sell, grant any option for
the sale of, assign, transfer, pledge, hypothecate, distribute or otherwise
encumber or dispose of any shares of Common Stock or
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<PAGE>
securities convertible into, exercisable or exchangeable for or evidencing any
right to purchase or subscribe for any shares of Common Stock (either pursuant
to Rule 144 of the Rules and Regulations or otherwise) or dispose of any
beneficial interest therein for a period of not less than thirteen (13) months
following the effective date of the Registration Statement without the prior
written consent of the Representative. The Company will cause the Transfer
Agent, as defined below, to mark an appropriate legend on the face of stock
certificates representing all of such securities and to place "stop transfer"
orders on the Company's stock ledgers.
(x) Except as described in the Prospectus under "Underwriting,"
there are no claims, payments, issuances, arrangements or understandings,
whether oral or written, for services in the nature of a finder's or origination
fee with respect to the sale of the Securities hereunder or any other
arrangements, agreements, understandings, payments or issuance with respect to
the Company or any of its officers, directors, stockholders, partners, employees
or affiliates that may affect the Underwriters' compensation, as determined by
the National Association of Securities Dealers, Inc. ("NASD").
(y) The Preferred Stock and the Redeemable Warrants have been
approved for quotation on the Nasdaq SmallCap Market ("Nasdaq").
(z) Neither the Company nor any of its officers, employees,
agents, or any other person acting on behalf of the Company, 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 assist the Company in
connection with any actual or proposed transaction) which (a) might subject the
Company, 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 materially adverse effect on the assets,
business or operations of the Company, or (c) if not continued in the future,
might adversely affect the assets, business, operations or prospects of the
Company. The Company's internal accounting controls are sufficient to cause the
Company to comply with the Foreign Corrupt Practices Act of 1977, as amended.
(aa) Except as set forth in the Prospectus, no officer, director
or stockholder of the Company, or any "affiliate" or "associate" (as these terms
are defined in Rule 405 promulgated under the Rules and Regulations) of any of
the foregoing persons or entities 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 (B) purchases from or sells or furnishes to the Company any
goods or services, or (ii) a beneficial interest in any contract or agreement to
which the Company is a party or by which it may be bound or affected. Except as
set forth in the Prospectus under "Certain Transactions," there are no existing
agreements, arrangements, understandings or transactions, or proposed
agreements, arrangements, understandings or transactions, between or among the
Company and any officer, director, or Principal Stockholder
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<PAGE>
(as such term is defined in the Prospectus) of the Company or any partner,
affiliate or associate of any of the foregoing persons or entities.
(bb) Any certificate signed by any officer of the Company, and
delivered to the Underwriters or to Underwriters' Counsel (as defined herein)
shall be deemed a representation and warranty by the Company to the Underwriters
as to the matters covered thereby.
(cc) The minute books of the Company have been made available to
the Underwriters and contains a complete summary of all meetings and actions of
the directors, stockholders, audit committee, compensation committee and any
other committee of the Board of Directors of the Company, respectively, since
the time of its incorporation, and reflects all transactions referred to in such
minutes accurately in all material respects.
(dd) Except and to the extent described in the Prospectus, no
holders of any securities of the Company or of any options, warrants or other
convertible or exchangeable securities of the Company have the right to include
any securities issued by the Company in the Registration Statement or any
registration statement to be filed by the Company or to require the Company to
file a registration statement under the Act and no person or entity holds any
anti-dilution rights with respect to any securities of the Company.
(ee) The Company has as of the effective date of the Registration
Statement (i) entered into an employment agreement with each of M. Lee Hulsebus,
Steven W. Kenney, Edward C. Hall and Richard E. Sloan, in the form filed as
Exhibits ___, ___, ___, and ___, respectively, to the Registration Statement and
(ii) purchased term key-man insurance on the life of M. Lee Hulsebus, in the
amount of $1,000,000, which policy names the Company as the sole beneficiary
thereof.
(ff) The conversion of all the outstanding shares of Series I
Convertible Preferred Stock of the Company as set forth in the Prospectus has
been duly authorized by the Company and the shareholders of the Company in
accordance with all agreements, documents, understandings and instruments
affecting the rights, duties, responsibilities, obligations and/or privileges of
holders of Series I Convertible Preferred Stock or to which the Company is
bound, including without limitation, the Company's articles of incorporation and
the Company's by-laws; and upon the consummation of the Offering, without any
further action of any shareholders of the Company, every share of Series I
Convertible Preferred Stock of the Company will simultaneously convert into one
validly issued, fully paid and nonassessable share of Preferred Stock.
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<PAGE>
(gg) The Company has entered into a financial advisory and
consulting agreement substantially in the form filed as Exhibit ___ to the
Registration Statement (the "Consulting Agreement") with the Representative,
with respect to the rendering of consulting services by the Representative to
the Company. The Consulting Agreement has been duly and validly authorized by
the Company and constitutes a valid and legally binding agreement of the
Company, enforceable against the Company in accordance with its terms.
(hh) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter 92-198,
-------
An Act Relating to Disclosure of Doing Business with Cuba, and the Company
- ---------------------------------------------------------
further agrees that if it or any affiliate commences engaging in business with
the government of Cuba or with any person or affiliate located in Cuba after the
date the Registration Statement becomes or has become effective with the
Commission or with the Florida Department of Banking and Finance (the
"Department"), whichever date is later, or if the information reported or
incorporated by reference in the Prospectus, if any, concerning the Company's,
or any affiliate's, business with Cuba or with any person or affiliate located
in Cuba changes in any material way, the Company will provide the Department
notice of such business or change, as appropriate, in a form acceptable to the
Department.
(ii) The Company has entered into a warrant agreement
substantially in the form filed as Exhibit 4.3 to the Registration Statement
(the "Warrant Agreement") with Continental Stock Transfer & Trust Company, as
Warrant Agent and Registrar, in form and substance satisfactory to the
Representative, with respect to the Redeemable Warrant providing for the payment
of commissions contemplated by Section 4(x) herein.
-------
2. Purchase, Sale and Delivery of the Securities and
-------------------------------------------------
Representative's Warrants.
- -------------------------
(a) On the basis of the representations, warranties, covenants
and agreements herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to sell to each Underwriter, and each Underwriter,
severally and not jointly, agrees to purchase from the Company at a price of
$__________ [91% of the initial public offering price] per share of Preferred
Stock and $_______ [91% of the initial public offering price] per Redeemable,
that number of Firm Securities set forth in Schedule A opposite the name of such
Underwriter, plus any additional number of Firm Securities which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 11 hereof.
- -------
(b) In addition, on the basis of the representations, warranties,
covenants and agreements herein contained, but subject to the terms and
conditions herein set forth, the Company hereby grants an option to the
Underwriters, severally and not jointly, to purchase all or any part of an
additional 210,000 shares of Preferred Stock at a price of $__________ [91% of
the initial public offering price] per share of Preferred Stock and/or
additional 210,000 Redeemable Warrants at a price of $__________ [91% of the
initial public offering price] per Redeemable Warrant. The option granted
hereby will expire 45 days after (i) the date the Registration Statement becomes
effective, if the Company has elected not to rely on Rule 430A under the Rules
and Regulations, or (ii) the date of this Agreement if the Company has elected
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<PAGE>
to rely upon Rule 430A under the Rules and Regulations, and may be exercised in
whole or in part from time to time only for the purpose of covering over-
allotments which may be made in connection with the offering and distribution of
the Firm Securities upon notice by the Representative to the Company setting
forth the number of Option Securities as to which the several Underwriters are
then exercising the option and the time and date of payment and delivery for any
such Option Securities. Any such time and date of delivery (an "Option Closing
Date") shall be determined by the Representative, but shall not be later than
seven full business days after the exercise of said option, nor in any event
prior to the Closing Date, as hereinafter defined, unless otherwise agreed upon
by the Representative and the Company. Nothing herein contained shall obligate
the Underwriters to make any over-allotments. No Option Securities shall be
delivered unless the Firm Securities shall be simultaneously delivered or shall
theretofore have been delivered as herein provided.
(c) Payment of the purchase price for, and delivery of
certificates for, the Firm Securities shall be made at the offices of First
Allied Securities, Inc. at 200 Park Avenue, 24th Floor, New York, New York
10166, or at such other place as shall be agreed upon by the Representative and
the Company. Such delivery and payment shall be made at 10:00 a.m. (New York
City time) on __________, 1996 or at such other time and date as shall be agreed
upon by the Representative and the Company, but not less than three (3) nor more
than seven (7) full business days after the effective date of the Registration
Statement (such time and date of payment and delivery being herein called
"Closing Date"). In addition, in the event that any or all of the Option
Securities are purchased by the Underwriters, payment of the purchase price for,
and delivery of certificates for, such Option Securities shall be made at the
above mentioned office of the Representative or at such other place as shall be
agreed upon by the Representative and the Company on each Option Closing Date as
specified in the notice from the Representative to the Company. Delivery of the
certificates for the Firm Securities and the Option Securities, if any, shall be
made to the Underwriters against payment by the Underwriters, severally and not
jointly, of the purchase price for the Firm Securities and the Option
Securities, if any, to the order of the Company for the Firm Securities and the
Option Securities, if any, by New York Clearing House funds. In the event such
option is exercised, each of the Underwriters, acting severally and not jointly,
shall purchase that proportion of the total number of Option Securities then
being purchased which the number of Firm Securities set forth in Schedule A
hereto opposite the name of such Underwriter bears to the total number of Firm
Securities, subject in each case to such adjustments as the Representative in
its discretion shall make to eliminate any sales or purchases of fractional
shares. Certificates for the Firm Securities and the Option Securities, if any,
shall be in definitive, fully registered form, shall bear no restrictive legends
and shall be in such denominations and registered in such names as the
Underwriters may request in writing at least two (2) business days prior to the
Closing Date or the relevant Option Closing Date, as the case may be. The
certificates for the Firm Securities and the Option Securities, if any, shall be
made available to the Representative at such office or such other place as the
Representative may designate for inspection, checking and packaging no later
than 9:30 a.m. on the last business day prior to Closing Date or the relevant
Option Closing Date, as the case may be.
(d) On the Closing Date, the Company shall issue and sell to the
Representative Representative's Warrants at a purchase price of $.001 per
warrant, which
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<PAGE>
warrants shall entitle the holders thereof to purchase (i) an aggregate of
140,000 shares of Preferred Stock or __________ shares of Common Stock or any
combination thereof and/or (ii) 140,000 Redeemable Warrants. The
Representative's Warrants shall be exercisable for a period of forty-eight (48)
months commencing twelve (12) months from the effective date of the Registration
Statement at a price equaling one hundred twenty percent (120%) of the initial
public offering price of the Preferred Stock and the Redeemable Warrants. The
Representative's Warrant Agreement and form of Warrant Certificate shall be
substantially in the form filed as Exhibit 4.2 to the Registration Statement.
Payment for the Representative's Warrants shall be made on the Closing Date.
3. Public Offering of the Shares. As soon after the Registration
-----------------------------
Statement becomes effective as the Representative deems advisable, the
Underwriters shall make a public offering of the Preferred Stock and the
Redeemable Warrants (other than to residents of or in any jurisdiction in which
qualification of the Preferred Stock and the Redeemable Warrants is required and
has not become effective) at the price and upon the other terms set forth in the
Prospectus. The Representative may from time to time increase or decrease the
public offering price after distribution of the Preferred Stock and the
Redeemable Warrants has been completed to such extent as the Representative, in
it discretion deems advisable. The Underwriters may enter into one of more
agreements as the Underwriters, in each of their sole discretion, deem advisable
with one or more broker-dealers who shall act as dealers in connection with such
public offering.
4. Covenants and Agreements of the Company. The Company covenants
---------------------------------------
and agrees with each of the Underwriters as follows:
(a) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly as practicable and will not at any time, whether before or after the
effective date of the Registration Statement, file any amendment to the
Registration Statement or supplement to the Prospectus or file any document
under the Act or Exchange Act before termination of the offering of the Shares
by the Underwriters of which the Representative shall not previously have been
advised and furnished with a copy, or to which the Representative shall have
objected or which is not in compliance with the Act, the Exchange Act or the
Rules and Regulations.
(b) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Representative and confirm the notice in
writing, (i) when the Registration Statement, as amended, becomes effective, if
the provisions of Rule 430A promulgated under the Act will be relied upon, when
the Prospectus has been filed in accordance with said Rule 430A and when any
post-effective amendment to the Registration Statement becomes effective, (ii)
of the issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding, suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of the Preliminary
Prospectus or the Prospectus, or any amendment or supplement thereto, or the
institution of proceedings for that purpose, (iii) of the issuance by the
Commission or by any state securities commission of any proceedings for the
suspension of the qualification of any of the Securities for offering or sale in
any jurisdiction or of the initiation, or the threatening, of any proceeding for
that purpose, (iv) of the receipt of
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<PAGE>
any comments from the Commission; and (v) of any request by the Commission for
any amendment to the Registration Statement or any amendment or supplement to
the Prospectus or for additional information. If the Commission or any state
securities commission authority shall enter a stop order or suspend such
qualification at any time, the Company will make every effort to obtain promptly
the lifting of such order.
(c) The Company shall file the Prospectus (in form and substance
satisfactory to the Representative) or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission pursuant to Rule
424(b)(1) (or, if applicable and if consented to by the Representative, pursuant
to Rule 424(b)(4)) not later than the Commission's close of business on the
earlier of (i) the second business day following the execution and delivery of
this Agreement and (ii) the fifteenth business day after the effective date of
the Registration Statement.
(d) The Company will give the Representative notice of its
intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement to the
Prospectus (including any revised prospectus which the Company proposes for use
by the Underwriters in connection with the offering of the Securities which
differs from the corresponding prospectus on file at the Commission at the time
the Registration Statement becomes effective, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) of the Rules and
Regulations), and will furnish the Representative with copies of any such
amendment or supplement a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file any such prospectus to
which the Representative or Orrick, Herrington & Sutcliffe ("Underwriters'
Counsel"), shall object.
(e) The Company shall endeavor in good faith, in cooperation with
the Representative, at or prior to the time the Registration Statement becomes
effective, to qualify the Securities for offering and sale under the securities
laws of such jurisdictions as the Representative may designate to permit the
continuance of sales and dealings therein for as long as may be necessary to
complete the distribution, and shall make such applications, file such documents
and furnish such information as may be required for such purpose; provided,
--------
however, the Company shall not be required to qualify as a foreign corporation
- -------
or file a general or limited consent to service of process in any such
jurisdiction. In each jurisdiction where such qualification shall be effected,
the Company will, unless the Representative agrees that such action is not at
the time necessary or advisable, use all reasonable efforts to file and make
such statements or reports at such times as are or may reasonably be required by
the laws of such jurisdiction to continue such qualification.
(f) During the time when a prospectus is required to be delivered
under the Act, the Company shall use all reasonable efforts to comply with all
requirements imposed upon it by the Act and the Exchange Act, as now and
hereafter amended and by the Rules and Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings in
the Securities in accordance with the provisions hereof and the Prospectus, or
any amendments or supplements thereto. If at any time when a prospectus
relating to the Securities is required to be delivered under the Act, any event
shall have occurred as a result
- 15 -
<PAGE>
of which, in the opinion of counsel for the Company or Underwriters' Counsel,
the Prospectus, as then amended or supplemented, includes an untrue statement of
a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is necessary
at any time to amend the Prospectus to comply with the Act, the Company will
notify the Representative promptly and prepare and file with the Commission an
appropriate amendment or supplement in accordance with Section 10 of the Act,
-------
each such amendment or supplement to be satisfactory to Underwriters' Counsel,
and the Company will furnish to the Underwriters copies of such amendment or
supplement as soon as available and in such quantities as the Underwriters may
request.
(g) As soon as practicable, but in any event not later than 45
days after the end of the 12-month period beginning on the day after the end of
the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company shall make
generally available to its security holders, in the manner specified in Rule
158(b) of the Rules and Regulations, and to the Representative, an earnings
statement which will be in the detail required by, and will otherwise comply
with, the provisions of Section 11(a) of the Act and Rule 158(a) of the Rules
-------
and Regulations, which statement need not be audited unless required by the Act,
covering a period of at least 12 consecutive months after the effective date of
the Registration Statement.
(h) During a period of seven years after the date hereof, the
Company will furnish to its stockholders, as soon as practicable, annual reports
(including financial statements audited by independent public accountants) and
unaudited quarterly reports of earnings, and will deliver to the Representative:
i) concurrently with furnishing such quarterly reports to its
stockholders, statements of income of the Company for each quarter in
the form furnished to the Company's stockholders and certified by the
Company's principal financial or accounting officer;
ii) concurrently with furnishing such annual reports to its
stockholders, a balance sheet of the Company as at the end of the
preceding fiscal year, together with statements of operations,
stockholders' equity, and cash flows of the Company for such fiscal
year, accompanied by a copy of the certificate thereon of independent
certified public accountants;
iii) as soon as they are available, copies of all reports
(financial or other) mailed to stockholders;
iv) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, the
NASD or any securities exchange;
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<PAGE>
v) every press release and every material news item or article of
interest to the financial community in respect of the Company, or its
affairs which was released or prepared by or on behalf of the Company;
and
vi) any additional information of a public nature concerning the
Company (and any future subsidiary) or its businesses which the
Representative may request.
During such seven-year period, if the Company has an active
subsidiary, the foregoing financial statements will be on a consolidated basis
to the extent that the accounts of the Company and its subsidiary are
consolidated, and will be accompanied by similar financial statements for any
significant subsidiary which is not so consolidated.
(i) The Company will maintain a Transfer Agent and Warrant Agent
and, if necessary under the jurisdiction of incorporation of the Company, a
Registrar (which may be the same entity as the Transfer Agent) for its Preferred
Stock, Common Stock and Redeemable Warrants.
(j) The Company will furnish to the Representative or on the
Representative's order, without charge, at such place as the Representative may
designate, copies of each Preliminary Prospectus, the Registration Statement and
any pre-effective or post-effective amendments thereto (two of which copies will
be signed and will include all financial statements and exhibits), the
Prospectus, and all amendments and supplements thereto, including any prospectus
prepared after the effective date of the Registration Statement, in each case as
soon as available and in such quantities as the Representative may request.
(k) On or before the effective date of the Registration
Statement, the Company shall provide the Representative with true copies of duly
executed, legally binding and enforceable agreements pursuant to which for a
period of thirteen (13) months from the effective date of the Registration
Statement, all officers and directors agree that each will not directly or
indirectly, issue, offer to sell, sell, grant an option for the sale of, assign,
transfer, pledge, hypothecate, distribute or otherwise encumber or dispose of
any shares of Common Stock or securities convertible into, exercisable or
exchangeable for or evidencing any right to purchase or subscribe for any shares
of Common Stock (either pursuant to Rule 144 of the Rules and Regulations or
otherwise) or dispose of any beneficial interest therein without the prior
written consent of the Representative (collectively, the "Lock-up Agreements").
On or before the Closing Date, the Company shall deliver instructions to the
Transfer Agent authorizing it to place appropriate legends on the certificates
representing the securities subject to the Lock-up Agreements and to place
appropriate stop transfer orders on the Company's ledgers. During the thirteen
(13) month period commencing with the effective date of the Registration
Statement (the "Lockup Period"), the Company shall not, without the prior
written consent of the Representative, sell, contract or offer to sell, issue,
transfer, assign, pledge, hypothecate, distribute, or otherwise dispose of,
directly or indirectly, any shares of Common Stock or any options, rights or
warrants with respect to any shares of Common Stock. During the Lockup Period,
the Company (i) shall not amend any material employment agreement, including,
but not limited to the employment agreements referenced in Section 1(ee) herein,
-------
and filed as
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<PAGE>
exhibits to the Registration Statement, (ii) shall not amend any option
agreement or other agreement providing compensation to any officer, director or
principal stockholder and (iii) shall not file any registration statement with
the Securities and Exchange Commission without the prior written consent of the
Representative.
(l) Neither the Company, nor any of its officers, directors,
stockholders, nor any of their respective affiliates (within the meaning of the
Rules and Regulations) will take, directly or indirectly, any action designed
to, or which might in the future reasonably be expected to cause or result in,
stabilization or manipulation of the price of any securities of the Company.
(m) The Company shall apply the net proceeds from the sale of the
Securities in the manner, and subject to the conditions, set forth under "Use of
Proceeds" in the Prospectus. Except as described in the Prospectus, no portion
of the net proceeds will be used, directly or indirectly, to acquire any
securities issued by the Company.
(n) The Company shall timely file all such reports, forms or
other documents as may be required (including, but not limited to, a Form SR as
may be required pursuant to Rule 463 under the Act) from time to time, under the
Act, the Exchange Act, and the Rules and Regulations, and all such reports,
forms and documents filed will comply as to form and substance with the
applicable requirements under the Act, the Exchange Act, and the Rules and
Regulations.
(o) The Company shall furnish to the Representative as early as
practicable prior to each of the date hereof, the Closing Date and each Option
Closing Date, if any, but no later than two (2) full business days prior
thereto, a copy of the latest available unaudited interim financial statements
of the Company (which in no event shall be as of a date more than thirty (30)
days prior to the date of the Registration Statement) which have been read by
the Company's independent public accountants, as stated in its letter to be
furnished pursuant to Section 6(i) hereof.
-------
(p) The Company shall cause the Common Stock and the Redeemable
Warrants to be quoted on Nasdaq and for a period of seven (7) years from the
date hereof and shall cause the Preferred Stock to be quoted on Nasdaq for a
period of thirteen (13) months from the date hereof, and use its best efforts to
maintain the Nasdaq quotation of the Common Stock, the Preferred Stock and the
Redeemable Warrants to the extent outstanding.
(q) For a period of five (5) years from the Closing Date, the
Company shall furnish to the Representative at the Representative's request and
at the Company's sole expense, (i) daily consolidated transfer sheets relating
to the Common Stock, the Preferred Stock and the Redeemable Warrants, (ii) the
list of holders of all of the Company's securities and (iii) a Blue Sky "Trading
Survey" for secondary sales of the Company's securities prepared by counsel to
the Company.
(r) As soon as practicable, (i) but in no event more than 5
business days before the effective date of the Registration Statement, file a
Form 8-A with the Commission
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<PAGE>
providing for the registration under the Exchange Act of the Securities and (ii)
but in no event more than 30 days from the effective date of the Registration
Statement, take all necessary and appropriate actions to be included in Standard
and Poor's Corporation Descriptions and Moody's OTC Manual and to continue such
inclusion for a period of not less than seven (7) years.
(s) The Company hereby agrees that it will not for a period of
twelve (12) months from the effective date of the Registration Statement, adopt,
propose to adopt or otherwise permit to exist any employee, officer, director,
consultant or compensation plan or arrangement permitting the grant, issue or
sale of any shares of Common Stock or other securities of the Company (i) in an
amount greater than an aggregate of __________ (ii) at an exercise or sale price
per share less than the greater of (a) the initial public offering price of the
Shares set forth herein and (b) the fair market value of the Common Stock on the
date of grant or sale, (iii) to any direct or indirect beneficial holder on the
date hereof of more than 10% of the issued and outstanding shares of Common
Stock, (iv) with the payment for such securities with any form of consideration
other than cash, (v) upon payment of less than the full purchase or exercise
price for such shares of Common Stock or other securities of the Company on or
before the date of issuance, or (vi) the existence of stock appreciation rights,
phantom options or similar arrangements.
(t) Until the completion of the distribution of the Securities,
the Company shall not without the prior written consent of the Representative
and Underwriters' Counsel, issue, directly or indirectly, any press release or
other communication or hold any press conference with respect to the Company or
its activities or the offering contemplated hereby, other than trade releases
issued in the ordinary course of the Company's business consistent with past
practices with respect to the Company's operations.
(u) For a period equal to the lesser of (i) seven (7) years from
the date hereof, and (ii) the sale to the public of the Representative's
Securities, the Company will not take any action or actions which may prevent or
disqualify the Company's use of Form S-1 (or other appropriate form) for the
registration under the Act of the Representative's Securities.
(v) For a period of three (3) years after the effective date of
the Registration Statement, the Representative shall have the right to designate
one (1) individual to attend meetings of the Company's Board of Directors (the
"Board"). The Company shall notify the Representative of each meeting of the
Board and the Company shall send to such individual all notices and other
correspondence and communications sent by the Company to members of the Board.
Such individual shall be reimbursed for all out-of-pocket expenses incurred in
connection with his attendance of meetings of the Board.
(w) During the period that any Shares of Preferred Stock are
issued and outstanding, the Company agrees it shall not issue any securities
whatsoever with rights, preferences or provisions senior to those attached to
the Preferred Stock, as set forth in the Certificate of Designation of Rights,
Preferences and Privileges, filed as Exhibit ___ to the Registration Statement.
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<PAGE>
(x) Commencing one year from the date hereof, to pay the
Representative a commission equal to five percent (5%) of the exercise price of
the Redeemable Warrants, payable on the date of the exercise thereof on the
terms provided in the Warrant Agreement. The Company shall not solicit the
exercise of any Redeemable Warrant other than through the Representative. The
Representative will not be entitled to any warrant solicitation fee unless the
Representative provides bona fide services in connection with any warrant
solicitation and the investor designates, in writing, that the Representative is
entitled to such fee.
5. Payment of Expenses.
-------------------
(a) The Company hereby agrees to pay on each of the Closing Date
and the Option Closing Date (to the extent not paid at the Closing Date) all
expenses and fees (other than fees of Underwriters' Counsel, except as provided
in (iv) below) incident to the performance of the obligations of the Company
under this Agreement and the Representative's Warrant Agreement, including,
without limitation, (i) the fees and expenses of accountants and counsel for the
Company, (ii) all costs and expenses incurred in connection with the
preparation, duplication, printing, (including mailing and handling charges)
filing, delivery and mailing (including the payment of postage with respect
thereto) of the Registration Statement and the Prospectus and any amendments and
supplements thereto and the printing, mailing (including the payment of postage
with respect thereto) and delivery of this Agreement, the Agreement Among
Underwriters, the Selected Dealer Agreements, and related documents, including
the cost of all copies thereof and of the Preliminary Prospectuses and of the
Prospectus and any amendments thereof or supplements thereto supplied to the
Underwriters and such dealers as the Underwriters may request, in quantities as
hereinabove stated, (iii) the printing, engraving, issuance and delivery of the
Securities including, but not limited to, (x) the purchase by the Underwriters
of the Shares and the purchase by the Representative of the Representative's
Warrants from the Company, (y) the consummation by the Company of any of its
obligations under this Agreement and the Representative's Warrant Agreement, and
(z) resale of the Shares by the Underwriters in connection with the distribution
contemplated hereby, (iv) the qualification of the Securities under state or
foreign securities or "Blue Sky" laws and determination of the status of such
securities under legal investment laws, including the costs of printing and
mailing the "Preliminary Blue Sky Memorandum," the "Supplemental Blue Sky
Memorandum" and "Legal Investments Survey," if any, and disbursements and fees
of counsel in connection therewith, (v) costs and expenses in connection with
due diligence investigations, including but not limited to the fees of any
independent counsel or consultant retained, (vi) fees and expenses of the
transfer agent and registrar, (vii) applications for assignments of a rating of
the Securities by qualified rating agencies, (viii) the fees payable to the
Commission and the NASD, and (ix) the fees and expenses incurred in connection
with the quotation of the Securities on Nasdaq and any other exchange.
(b) If this Agreement is terminated by the Underwriters in
accordance with the provisions of Section 6 or Section 12, the Company shall
------- -------
reimburse and indemnify the Representative for all of its actual out-of-pocket
expenses, including the fees and disbursements of Underwriters' Counsel, less
any amounts already paid pursuant to Section 5(c) hereof.
-------
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<PAGE>
(c) The Company further agrees that, in addition to the expenses
payable pursuant to subsection (a) of this Section 5, it will pay to the
-------
Representative on the Closing Date by certified or bank cashier's check or, at
the election of the Representative, by deduction from the proceeds of the
offering contemplated herein a non-accountable expense allowance equal to three
percent (3%) of the gross proceeds received by the Company from the sale of the
Firm Securities, $__________ of which has been paid to date. In the event the
Representative elects to exercise the over-allotment option described in Section
-------
2(b) hereof, the Company agrees to pay to the Representative on the Option
Closing Date (by certified or bank cashier's check or, at the Representative's
election, by deduction from the proceeds of the Option Securities) a non-
accountable expense allowance equal to three percent (3%) of the gross proceeds
received by the Company from the sale of the Option Securities.
6. Conditions of the Underwriters' Obligations. The obligations of
-------------------------------------------
the Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the date hereof and
as of the Closing Date and each Option Closing Date, if any, with respect to the
Company as if it had been made on and as of the Closing Date or each Option
Closing Date, as the case may be; the accuracy on and as of the Closing Date or
Option Closing Date, if any, of the statements of the officers of the Company
made pursuant to the provisions hereof; and the performance by the Company on
and as of the Closing Date and each Option Closing Date, if any, of its
covenants and obligations hereunder and to the following further conditions:
(a) The Registration Statement shall have become effective not
later than 12:00 Noon, New York time, on the date of this Agreement or such
later date and time as shall be consented to in writing by the Representative,
and, at Closing Date and each Option Closing Date, if any, no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been instituted or shall
be pending or contemplated by the Commission and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of Underwriters' Counsel. If the Company has elected to
rely upon Rule 430A of the Rules and Regulations, the price of the Preferred
Stock and the Redeemable Warrants and any price-related information previously
omitted from the effective Registration Statement pursuant to such Rule 430A
shall have been transmitted to the Commission for filing pursuant to Rule 424(b)
of the Rules and Regulations within the prescribed time period, and prior to
Closing Date the Company shall have provided evidence satisfactory to the
Representative of such timely filing, or a post-effective amendment providing
such information shall have been promptly filed and declared effective in
accordance with the requirements of Rule 430A of the Rules and Regulations.
(b) The Representative shall not have advised the Company that
the Registration Statement, or any amendment thereto, contains an untrue
statement of fact which, in the Representative's opinion, is material, or omits
to state a fact which, in the Representative's opinion, is material and is
required to be stated therein or is necessary to make the statements therein not
misleading, or that the Prospectus, or any supplement thereto, contains an
untrue statement of fact which, in the Representative's opinion, is material, or
omits to state a fact which, in the Representative's opinion, is material and is
required to be stated therein or
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<PAGE>
is necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(c) On or prior to the Closing Date, the Representative shall
have received from Underwriters' Counsel, such opinion or opinions with respect
to the organization of the Company, the validity of the Securities, the
Representative's Warrants, the Registration Statement, the Prospectus and other
related matters as the Representative may request and Underwriters' Counsel
shall have received such papers and information as they request to enable them
to pass upon such matters.
(d) At Closing Date, the Underwriters shall have received the
favorable opinion of King & Isaacson, Utah corporate counsel to the Company,
dated the Closing Date, addressed to the Underwriters and in form and substance
satisfactory to Underwriters' Counsel, to the effect that:
i) each of the Company and the Subsidiary (A) has been duly
organized and is validly existing as a corporation in good standing
under the laws of its jurisdiction, (B) is duly qualified and licensed
and in good standing as a foreign corporation in each jurisdiction in
which its ownership or leasing of any properties or the character of
its operations requires such qualification or licensing, and (C) has
all requisite corporate power and authority; and the Company has
obtained any and all necessary authorizations, approvals, orders,
licenses, certificates, franchises and permits of and from all
governmental or regulatory officials and bodies (including, without
limitation, those having jurisdiction over environmental or similar
matters), to own or lease its properties and conduct its business as
described in the Prospectus. The disclosures in the Registration
Statement concerning the effects of federal, state and local laws,
rules and regulations on the Company's and the Subsidiary's business
as currently conducted and as contemplated are correct in all material
respects and do not omit to state a fact necessary to make the
statements contained therein not misleading in light of the
circumstances in which they were made.
ii) The Preferred Stock, the Redeemable Warrants, the
Representative's Warrants and the Representative's Shares to be sold
by the Company hereunder and under the Representative's Warrant
Agreement are not and will not be subject to any preemptive or other
similar rights of any stockholder, have been duly authorized and, when
issued, paid for and delivered in accordance with the terms hereof,
will be validly issued, fully paid and non-assessable and conform to
the description thereof contained in the Prospectus; the holders
thereof will not be subject to any liability solely as such holders;
all corporate action required to be taken for the authorization, issue
and sale of the Preferred Stock, the Redeemable Warrants, the
Representative's Warrants and the Representative's Shares has been
duly and validly taken; and the certificates representing the Shares
and the Redeemable Warrants and the Representative's Warrants are in
due and proper form. The Redeemable Warrants and the Representative's
Warrants constitute valid and binding obligations of the Company to
issue and sell, upon exercise
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<PAGE>
thereof and payment therefor, the number and type of securities of the
Company called for thereby. Upon the issuance and delivery pursuant to
this Agreement and the Representative's Warrant Agreement of the
Preferred Stock, the Redeemable Warrants and the Representative's
Warrants, respectively, to be sold by the Company, the Underwriters
and the Representative, respectively, will acquire good and marketable
title to the Shares and Representative's Warrants free and clear of
any pledge, lien, charge, claim, encumbrance, pledge, security
interest, or other restriction or equity of any kind whatsoever. No
transfer tax is payable by or on behalf of the Underwriters in
connection with (A) the issuance by the Company of the Shares, (B) the
purchase by the Underwriters and the Representative of the Shares and
the Representative's Warrants, respectively, from the Company, (C) the
consummation by the Company of any of its obligations under this
Agreement or the Representative's Warrant Agreement, or (D) resales of
the Shares in connection with the distribution contemplated hereby.
(e) At Closing Date, the Underwriters shall have received the
favorable opinion of Zukerman Gore & Brandeis, LLP, counsel to the Company,
dated the Closing Date, addressed to the Underwriters and in form and substance
satisfactory to Underwriters' Counsel, to the effect that:
i) each of the Company and the Subsidiary (A) has been duly
organized and is validly existing as a corporation in good standing
under the laws of its jurisdiction, (B) is duly qualified and licensed
and in good standing as a foreign corporation in each jurisdiction in
which its ownership or leasing of any properties or the character of
its operations requires such qualification or licensing, and (C) has
all requisite corporate power and authority; and the Company has
obtained any and all necessary authorizations, approvals, orders,
licenses, certificates, franchises and permits of and from all
governmental or regulatory officials and bodies (including, without
limitation, those having jurisdiction over environmental or similar
matters), to own or lease its properties and conduct its business as
described in the Prospectus; each of the Company and the Subsidiary is
and has been doing business in material compliance with all such
authorizations, approvals, orders, licenses, certificates, franchises
and permits and all federal, state and local laws, rules and
regulations; neither the Company, nor the Subsidiary has received any
notice of proceedings relating to the revocation or modification of
any such authorization, approval, order, license, certificate,
franchise, or permit which, singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would materially
adversely affect the business, operations, condition, financial or
otherwise, or the earnings, business affairs, position, prospects,
value, operation, properties, business or results of operations of the
Company or the Subsidiary. The disclosures in the Registration
Statement concerning the effects of federal, state and local laws,
rules and regulations on the Company's and the Subsidiary's business
as currently conducted and as contemplated are correct in all material
respects and do not omit to state a fact necessary to make the
statements contained therein not misleading in light of the
circumstances in which they were made.
- 23 -
<PAGE>
ii) to the best of such counsel's knowledge, the Company does not
own an interest in any other corporation, partnership, joint venture,
trust or other business entity;
iii) the Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus, and any amendment or
supplement thereto, under "Capitalization" and "Description of
Securities," and the Company is not a party to or bound by any
instrument, agreement or other arrangement providing for it to issue
any capital stock, rights, warrants, options or other securities,
except for this Agreement, the Representative's Warrant Agreement, the
Warrant Agreement and as described in the Prospectus. The Securities,
and all other securities issued or issuable by the Company conform in
all material respects to all statements with respect thereto contained
in the Registration Statement and the Prospectus. All issued and
outstanding securities of the Company have been duly authorized and
validly issued and are fully paid and non-assessable; the holders
thereof have no rights of rescission with respect thereto, and are not
subject to personal liability by reason of being such holders; and
none of such securities were issued in violation of the preemptive
rights of any holders of any security of the Company. The Securities,
the Representative's Warrants and the Representative's Shares to be
sold by the Company hereunder and under the Representative's Warrant
Agreement are not and will not be subject to any preemptive or other
similar rights of any stockholder, have been duly authorized and, when
issued, paid for and delivered in accordance with the terms hereof,
will be validly issued, fully paid and non-assessable and conform to
the description thereof contained in the Prospectus; the holders
thereof will not be subject to any liability solely as such holders;
all corporate action required to be taken for the authorization, issue
and sale of the Securities, has been duly and validly taken; and the
certificates representing the Securities are in due and proper form.
The Representative's Warrants and Redeemable Warrants constitute valid
and binding obligations of the Company to issue and sell, upon
exercise thereof and payment therefor, the number and type of
securities of the Company called for thereby. Upon the issuance and
delivery pursuant to this Agreement, the Representative's Warrant
Agreement and the Warrant Agreement of the Securities to be sold by
the Company, the Underwriters and the Representative, respectively,
will acquire good and marketable title to the Securities free and
clear of any pledge, lien, charge, claim, encumbrance, pledge,
security interest, or other restriction or equity of any kind
whatsoever. No transfer tax is payable by or on behalf of the
Underwriters in connection with (A) the issuance by the Company of the
Securities, (B) the purchase by the Underwriters and the
Representative of the Securities and the Representative's Securities,
respectively, from the Company, (C) the consummation by the Company of
any of its obligations under this Agreement, the Representative's
Warrant Agreement, or the Warrant Agreement or (D) resales of the
Securities and the Representative's Securities in connection with the
distribution contemplated hereby.
- 24 -
<PAGE>
iv) The conversion of all the outstanding shares of Series I
Convertible Preferred Stock of the Company as set forth in the
Prospectus has been duly authorized by the Company and the
shareholders of the Company in accordance with all agreements,
documents, understandings and instruments affecting the rights,
duties, responsibilities, obligations and/or privileges of holders of
Series I Convertible Preferred Stock or to which the Company is bound,
including without limitation, the Company's articles of incorporation,
as amended and the Company's by-laws; and upon the consummation of the
Offering, without any further action of any shareholders of the
Company, every share of Series I Convertible Preferred Stock of the
Company will simultaneously convert into one validly issued, fully
paid and nonassessable share of Preferred Stock.
v) the Registration Statement is effective under the Act, and, if
applicable, filing of all pricing information has been timely made in
the appropriate form under Rule 430A, and no stop order suspending the
use of the Preliminary Prospectus, the Registration Statement or
Prospectus or any part of any thereof or suspending the effectiveness
of the Registration Statement has been issued and no proceedings for
that purpose have been instituted or are pending or, to the best of
such counsel's knowledge, threatened or contemplated under the Act;
vi) each of the Preliminary Prospectus, the Registration
Statement, and the Prospectus and any amendments or supplements
thereto (other than the financial statements and other financial and
statistical data included therein, as to which no opinion need be
rendered) comply as to form in all material respects with the
requirements of the Act and the Rules and Regulations.
vii) to the best of such counsel's knowledge, (A) there are no
agreements, contracts or other documents required by the Act to be
described in the Registration Statement and the Prospectus and filed
as exhibits to the Registration Statement other than those described
in the Registration Statement (or required to be filed under the
Exchange Act if upon such filing they would be incorporated, in whole
or in part, by reference therein) and the Prospectus and filed as
exhibits thereto, and the exhibits which have been filed are correct
copies of the documents of which they purport to be copies; (B) the
descriptions in the Registration Statement and the Prospectus and any
supplement or amendment thereto of contracts and other documents to
which the Company is a party or by which it is bound, including any
document to which the Company is a party or by which it is bound,
incorporated by reference into the Prospectus and any supplement or
amendment thereto, are accurate in all material respects and fairly
represent the information required to be shown by Form S-1; (C) there
is not pending or threatened against the Company any action,
arbitration, suit, proceeding, inquiry, investigation, litigation,
governmental or other proceeding (including, without limitation, those
having jurisdiction over environmental or similar matters), domestic
or foreign, pending or threatened against (or circumstances that may
give rise to the same), or involving the properties or business of the
Company which (x) is required to be disclosed in the Registration
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<PAGE>
Statement which is not so disclosed (and such proceedings as are
summarized in the Registration Statement are accurately summarized in
all material respects), (y) questions the validity of the capital
stock of the Company or this Agreement or the Representative's Warrant
Agreement, or of any action taken or to be taken by the Company
pursuant to or in connection with any of the foregoing; (D) no statute
or regulation or legal or governmental proceeding required to be
described in the Prospectus is not described as required; and (E)
there is no action, suit or proceeding pending, or threatened, against
or affecting the Company before any court or arbitrator or
governmental body, agency or official (or any basis thereof known to
such counsel) in which there is a reasonable possibility of an adverse
decision which may result in a material adverse change in the
condition, financial or otherwise, or the earnings, position,
prospects, stockholders' equity, value, operation, properties,
business or results of operations of the Company, which could
adversely affect the present or prospective ability of the Company to
perform its obligations under this Agreement or the Representative's
Warrant Agreement or which in any manner draws into question the
validity or enforceability of this Agreement or the Representative's
Warrant Agreement;
viii) the Company has full legal right, power and authority to
enter into each of this Agreement, the Representative's Warrant
Agreement, the Warrant Agreement and the Consulting Agreement and to
consummate the transactions provided for therein; and each of this
Agreement. the Representative's Warrant Agreement, the Warrant
Agreement and the Consulting Agreement has been duly authorized,
executed and delivered by the Company. Each of this Agreement, the
Representative's Warrant Agreement, the Warrant Agreement and the
Consulting Agreement assuming due authorization, execution and
delivery by each other party thereto constitutes a legal, valid and
binding agreement 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 or other laws of general application relating to or
affecting enforcement of creditors' rights and the application of
equitable principles in any action, legal or equitable, and except as
rights to indemnity or contribution may be limited by applicable law),
and none of the Company's execution or delivery of this Agreement, the
Representative's Warrant Agreement, the Warrant Agreement and the
Consulting Agreement its performance hereunder or thereunder, its
consummation of the transactions contemplated herein or therein, or
the conduct of its business as described in the Registration
Statement, the Prospectus, and any amendments or supplements thereto,
or the conversion of the Series I Convertible Preferred Stocks as set
forth in the Registration Statement, the Prospectus and any amendments
or supplements thereto, conflicts with or will conflict with or
results or will result in any breach or violation of any of the terms
or provisions of, or constitutes or will constitute a default under,
or result in the creation or imposition of any lien, charge, claim,
encumbrance, pledge, security interest, defect or other restriction or
equity of any kind whatsoever upon, any property or assets (tangible
or intangible) of the Company pursuant to the terms of, (A) the
certificate of incorporation or by-laws
- 26 -
<PAGE>
of the Company, (B) any license, contract, indenture, mortgage, deed
of trust, voting trust agreement, stockholders agreement, note, loan
or credit agreement or any other agreement or instrument to which the
Company is a party or by which it is or may be bound or to which any
of its respective properties or assets (tangible or intangible) is or
may be subject, or any indebtedness, or (C) any statute, judgment,
decree, order, rule or regulation applicable to the Company of any
arbitrator, court, regulatory body or administrative agency or other
governmental agency or body (including, without limitation, those
having jurisdiction over environmental or similar matters), domestic
or foreign, having jurisdiction over the Company or any of its
activities or properties.
ix) except as described in the Prospectus, no consent, approval,
authorization or order of, and no filing with, any court, regulatory
body, government agency or other body (other than such as may be
required under Blue Sky laws, as to which no opinion need be rendered)
is required in connection with the issuance of the Shares pursuant to
the Prospectus, the issuance of the Representative's Warrants, and the
Registration Statement, the performance of this Agreement, the
Representative's Warrant Agreement, the Warrant Agreement or the
Consulting Agreement and the transactions contemplated hereby and
thereby;
x) the properties and business of the Company conform in all
material respects to the description thereof contained in the
Registration Statement and the Prospectus; and the Company has good
and marketable title to, or valid and enforceable leasehold estates
in, all items of real and personal property stated in the Prospectus
to be owned or leased by it, in each case free and clear of all liens,
charges, claims, encumbrances, pledges, security interests, defects or
other restrictions or equities of any kind whatsoever, other than
those referred to in the Prospectus and liens for taxes not yet due
and payable;
xi) to the best knowledge of such counsel, the Company is not in
breach of, or in default under, any term or provision of any license,
contract, indenture, mortgage, installment sale agreement, deed of
trust, lease, voting trust agreement, stockholders' agreement,
partnership agreement, note, loan or credit agreement or any other
agreement or instrument evidencing an obligation for borrowed money,
or any other agreement or instrument to which the Company is a party
or by which the Company may be bound or to which the property or
assets (tangible or intangible) of the Company is subject or affected;
and the Company is not in violation of any term or provision of its
certificate of incorporation by-laws, or in violation of any
franchise, license, permit, judgment, decree, order, statute, rule or
regulation;
xii) the statements in the Prospectus under "BUSINESS,"
"MANAGEMENT," "PRINCIPAL STOCKHOLDERS," "CERTAIN TRANSACTIONS,"
"DESCRIPTION OF SECURITIES," and "SHARES ELIGIBLE FOR FUTURE SALE"
have been reviewed by such counsel, and
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<PAGE>
insofar as they refer to statements of law, descriptions of statutes,
licenses, rules or regulations or legal conclusions, are correct in
all material respects;
xiii) the Shares have been accepted for quotation on Nasdaq;
xiv) the persons listed under the caption "PRINCIPAL
STOCKHOLDERS" in the Prospectus are the respective "beneficial owners"
(as such phrase is defined in regulation 13d-3 under the Exchange Act)
of the securities set forth opposite their respective names thereunder
as and to the extent set forth therein;
xv) except as described in the Prospectus, no person,
corporation, trust, partnership, association or other entity has the
right to include and/or register any securities of the Company in the
Registration Statement, require the Company to file any registration
statement or, if filed, to include any security in such registration
statement;
xvi) except as described in the Prospectus, there are no claims,
payments, issuances, arrangements or understandings for services in
the nature of a finder's or origination fee with respect to the sale
of the Securities hereunder or financial consulting arrangement or any
other arrangements, agreements, understandings, payments or issuances
that may affect the Underwriters' compensation, as determined by the
NASD;
xvii) assuming due execution by the parties thereto other than
the Company, the Lockup Agreements hereof are legal, valid and binding
obligations of parties thereto, enforceable against the party and any
subsequent holder of the securities subject thereto in accordance with
its terms (except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting enforcement of creditors'
rights and the application of equitable principles in any action,
legal or equitable, and except as rights to indemnity or contribution
may be limited by applicable law); and
xviii) except as described in the Prospectus, the Company does
not (A) maintain, sponsor or contribute to any ERISA Plans, (B)
maintain or contribute, now or at any time previously, to a defined
benefit plan, as defined in Section 3(35) of ERISA, and (C) has never
-------
completely or partially withdrawn from a "multiemployer plan".
Such counsel shall state that such counsel has participated in
conferences with officers and other representatives of the Company and
representatives of the independent public accountants for the Company at which
conferences such counsel made inquiries of such officers, representatives and
accountants and discussed the contents of the Preliminary Prospectus, the
Registration Statement, the Prospectus, and related matters were discussed and,
although such counsel is not passing upon and does not assume any responsibility
for the accuracy,
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<PAGE>
completeness or fairness of the statements contained in the Preliminary
Prospectus, the Registration Statement and Prospectus, on the basis of the
foregoing, no facts have come to the attention of such counsel which lead them
to believe that either the Registration Statement or any amendment thereto, at
the time such Registration Statement or amendment became effective or the
Preliminary Prospectus or Prospectus or amendment or supplement thereto as of
the date of such opinion contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading (it being understood that such
counsel need express no opinion with respect to the financial statements and
schedules and other financial and statistical data included in the Preliminary
Prospectus, the Registration Statement or Prospectus).
Such opinion shall not state that it is to be governed or qualified
by, or that it is otherwise subject to, any treatise, written policy or other
document relating to legal opinions, including, without limitation, the Legal
Opinion Accord of the ABA Section of Business Law (1991), or any comparable
State bar accord.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States and
jurisdictions in which they are admitted, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance satisfactory to Underwriters' Counsel) of
other counsel acceptable to Underwriters' Counsel, familiar with the applicable
laws; (B) as to matters of fact, to the extent they deem proper, on certificates
and written statements of responsible officers of the Company, and certificates
or other written statements of officers of departments of various jurisdictions
having custody of documents respecting the corporate existence or good standing
of the Company, provided that copies of any such statements or certificates
shall be delivered to Underwriters' Counsel if requested. The opinion of such
counsel for the Company shall state that the opinion of any such other counsel
is in form satisfactory to such counsel and that the Representative and they are
justified in relying thereon.
(f) At Closing Date, the Underwriters shall have received the
favorable opinion of Davis, Bujold & Streck, special patent counsel to the
Company, dated the Closing Date, addressed to the Underwriters and in form and
substance satisfactory to Underwriters' Counsel, to the effect that:
i) To the best of our knowledge, after due inquiry, except as
described in the Prospectus, each of the Company and the Subsidiary
owns or has the right to use, free and clear of all liens,
encumbrances, pledges, security interests, defects or other
restrictions or equities of any kind whatsoever, the Patents and
Licensees.
ii) To the best of our knowledge, after due inquiry, there is
no claim, action, or opposition pending, threatened or potential,
which affects or could affect the rights of any of the Company or the
Subsidiary with respect to any trademarks, service marks, copyrights,
service names, trade names, patents, patent applications or licenses
used in, or required for, the conduct of the Company's or the
Subsidiary's business, and all trademarks, service marks,
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copyrights, service names, tradenames and patents, owned or licensed
to the Company or the Subsidiary, are valid.
iii) To the best of our knowledge, after due inquiry, except as
described in the Prospectus, none of the Company nor the Subsidiary is
under any obligation to pay royalties or fees to any third party with
respect to any material, technology or intellectual properties
developed, employed, licensed or used by the Company or the
Subsidiary.
iv) To the best of our knowledge, after due inquiry, the
statements in the Prospectus under the headings, "RISK FACTORS -
Patents and Intellectual Property Rights" and "BUSINESS - Patents and
Intellectual Property Rights", are accurate in all material respects,
fairly represent the information disclosed therein and do not omit to
state any fact necessary to make the statements made therein complete
and accurate.
v) To the best of our knowledge, after due inquiry, the
statements in the Registration Statement and Prospectus do not contain
any untrue statement of a material fact with respect to the
intellectual property position of any of the Company or the
Subsidiary, or omit to state any material fact relating to the
intellectual property position of any of the Company or the Subsidiary
which is required to be stated in the Registration Statement and the
Prospectus or is necessary to make the statements therein not
misleading.
(g) At Closing Date, the Underwriters shall have received the
favorable opinion of Strasburger & Price, LLP, special patent counsel to the
Company, dated the Closing Date, addressed to the Underwriters and in form and
substance satisfactory to Underwriters' Counsel, to the effect that:
i) To the best of our knowledge, after due inquiry, except as
described in the Prospectus, each of the Company and the Subsidiary
owns or has the right to use, free and clear of all liens,
encumbrances, pledges, security interests, defects or other
restrictions or equities of any kind whatsoever, the Patents and
Licensees.
ii) To the best of our knowledge, after due inquiry, there is
no claim, action, or opposition pending, threatened or potential,
which affects or could affect the rights of any of the Company or the
Subsidiary with respect to any trademarks, service marks, copyrights,
service names, trade names, patents, patent applications or licenses
used in, or required for, the conduct of the Company's or the
Subsidiary's business, and all trademarks, service marks, copyrights,
service names, tradenames and patents, owned or licensed to the
Company or the Subsidiary, are valid.
iii) To the best of our knowledge, after due inquiry, except as
described in the Prospectus, none of the Company nor the Subsidiary is
under any
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<PAGE>
obligation to pay royalties or fees to any third party with respect to
any material, technology or intellectual properties developed,
employed, licensed or used by the Company or the Subsidiary.
iv) To the best of our knowledge, after due inquiry, the
statements in the Prospectus under the headings, "RISK FACTORS -
Patents and Intellectual Property Rights" and "BUSINESS - Patents and
Intellectual Property Rights", are accurate in all material respects,
fairly represent the information disclosed therein and do not omit to
state any fact necessary to make the statements made therein complete
and accurate.
v) To the best of our knowledge, after due inquiry, the
statements in the Registration Statement and Prospectus do not contain
any untrue statement of a material fact with respect to the
intellectual property position of any of the Company or the
Subsidiary, or omit to state any material fact relating to the
intellectual property position of any of the Company or the Subsidiary
which is required to be stated in the Registration Statement and the
Prospectus or is necessary to make the statements therein not
misleading.
(h) At Closing Date, the Underwriters shall have received the
favorable opinion of Hyman, Phelps & McNamara, P.C., special patent counsel to
the Company, dated the Closing Date, addressed to the Underwriters and in form
and substance satisfactory to Underwriters' Counsel, to the effect that:
i) the statements in the Prospectus under "RISK FACTORS-
Government Regulations" and "BUSINESS-Government Regulations" have
been reviewed by such counsel, and insofar as they refer to statements
of law, descriptions of statutes, licenses, rules or regulations or
legal conclusions, are correct in all material respects and do not
omit to state a fact necessary to make the statements contained
therein not misleading;
ii) to the best of such counsel's knowledge, after due inquiry,
the Company is in compliance in all material respects with all
federal, state and local laws, rules, orders, regulations (including,
but not limited to, the Federal Food, Drug and Cosmetic Act, and rules
and regulations promulgated thereunder and otherwise by the Food and
Drug Administration) respecting the production, use, testing,
manufacturing, labeling, distribution and marketing of products,
compounds or drugs;
iii) to the best of such counsel's knowledge, after due inquiry,
there have not been and there are no lawsuits or regulatory
proceedings brought by or before the Federal Food and Drug
Administration (the "FDA") pending or threatened, affecting the
Company or any of its existing or proposed products;
iv) to the best of such counsel's knowledge, after due inquiry,
there is no action, suit, proceeding, inquiry, investigation,
litigation or governmental
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<PAGE>
proceeding, domestic or foreign, pending or threatened (or
circumstances that may give rise to the same) involving the Company's
production, use, testing, manufacturing or marketing of any of its
existing or proposed products, which (i) questions the authority of
the Company to produce, use, test, manufacture or market any of its
existing or proposed products, (ii) questions the completeness or
accuracy of data generated by any clinical trials being conducted by
or on behalf of the Company, (iii) is required to be disclosed in the
Prospectus which is not so disclosed, or (iv) might materially and
adversely affect the condition, financial or otherwise, or the
earnings, prospects, value, operations or business of the Company; and
(v) to the best of such counsel's knowledge after due inquiry,
the Registration Statement and the Prospectus do not contain any
untrue statement of a material fact relating to the Company or any of
its existing or proposed products, or omit to state any material fact
relating to the Company or any of its existing or proposed products
which is required to be stated in the Registration Statement and the
Prospectus or is necessary to make the statements therein not
misleading.
(i) At Closing Date, the Underwriters shall have received the
favorable opinion of Robert E. Meshel, Esq., general counsel to the Company,
dated the Closing Date, addressed to the Underwriters and in form and substance
satisfactory to Underwriter's counsel, to the effect that:
(i) the statements in the Prospectus under "RISK FACTORS -
Litigation" and "BUSINESS - Legal Proceedings" have
been reviewed by such counsel, are true and correct as
of the date of Prospectus and the date hereof, and do
not omit to state a fact necessary to make the
statements contained therein not misleading.
(ii) to the best of such counsel's knowledge after due
inquiry, the Registration Statement and the Prospectus
do not contain any untrue statement of material fact
relating to the Company, or omit to state any material
fact relating to the Company which is required to be
stated in the Registration Statement and the Prospectus
or is necessary to make the statements therein not
misleading.
(j) At each Option Closing Date, if any, the Underwriters shall
have received the favorable opinion of each of King & Isaacson; Zukerman Gore &
Brandeis, LLP; Davis, Bujold & Streck; Straburger & Price, LLP; Hyman, Phelps &
McNamara, P.C. and Robert E. Meshel, Esq., dated the Option Closing Date,
addressed to the Underwriters and in form and substance satisfactory to
Underwriters' Counsel confirming as of Option Closing Date the respective
statements made by each of King & Isaacson; Zukerman Gore & Brandeis, LLP;
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<PAGE>
Davis, Bujold & Streck; Straburger & Price, LLP; Hyman, Phelps & McNamara, P.C.
and Robert E. Meshel, Esq.,in their respective opinions delivered on the Closing
Date.
(k) On or prior to each of the Closing Date and the Option
Closing Date, if any, Underwriters' Counsel shall have been furnished such
documents, certificates and opinions as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in
subsection (c) of this Section 6, or in order to evidence the accuracy,
-------
completeness or satisfaction of any of the representations, warranties or
conditions of the Company, or herein contained.
(l) Prior to each of the Closing Date and each Option Closing
Date, if any, (i) there shall have been no material adverse change nor
development involving a prospective change in the condition, financial or
otherwise, prospects, stockholders' equity or the business activities of the
Company, whether or not in the ordinary course of business, from the latest
dates as of which such condition is set forth in the Registration Statement and
Prospectus; (ii) there shall have been no transaction, not in the ordinary
course of business, entered into by the Company, from the latest date as of
which the financial condition of the Company is set forth in the Registration
Statement and Prospectus which is materially adverse to the Company; (iii) the
Company shall not be in default under any provision of any instrument relating
to any outstanding indebtedness; (iv) the Company shall not have issued any
securities (other than the Securities); the Company shall not have declared or
paid any dividend or made any distribution in respect of its capital stock of
any class; and there has not been any change in the capital stock of the
Company, or any material change in the debt (long or short term) or liabilities
or obligations of the Company (contingent or otherwise); (v) no material amount
of the assets of the Company shall have been pledged or mortgaged, except as set
forth in the Registration Statement and Prospectus; (vi) no action, suit or
proceeding, at law or in equity, shall have been pending or threatened (or
circumstances giving rise to same) against the Company, or affecting any of its
properties or business before or by any court or federal, state or foreign
commission, board or other administrative agency wherein an unfavorable
decision, ruling or finding may adversely affect the business, operations,
prospects or financial condition or income of the Company, except as set forth
in the Registration Statement and Prospectus; and (vii) no stop order shall have
been issued under the Act and no proceedings therefor shall have been initiated,
threatened or contemplated by the Commission.
(m) At each of the Closing Date and each Option Closing Date, if
any, the Underwriters shall have received a certificate of the Company signed by
the principal executive officer and by the chief financial or chief accounting
officer of the Company, dated the Closing Date or Option Closing Date, as the
case may be, to the effect that each of such persons has carefully examined the
Registration Statement, the Prospectus and this Agreement, and that:
i) The representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the Closing
Date or the Option Closing Date, as the case may be, and the Company
has complied with all agreements and covenants and satisfied all
conditions contained in this Agreement on its part to be performed or
satisfied at or prior to such Closing Date or Option Closing Date, as
the case may be;
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<PAGE>
ii) No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued, and no
proceedings for that purpose have been instituted or are pending or,
to the best of each of such person's knowledge, after due inquiry are
contemplated or threatened under the Act;
iii) The Registration Statement and the Prospectus and, if any,
each amendment and each supplement thereto, contain all statements and
information required to be included therein, and none of the
Registration Statement, the Prospectus nor any amendment or supplement
thereto includes any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading and neither the Preliminary
Prospectus nor any supplement thereto included any untrue statement of
a material fact or omitted to state any material fact required to be
stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading; and
iv) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, (a) the
Company has not incurred up to and including the Closing Date or the
Option Closing Date, as the case may be, other than in the ordinary
course of its business, any material liabilities or obligations,
direct or contingent; (b) the Company has not paid or declared any
dividends or other distributions on its capital stock; (c) the Company
has not entered into any transactions not in the ordinary course of
business; (d) there has not been any change in the capital stock of
the Company or any material change in the debt (long or short-term) of
the Company; (e) the Company has not sustained any material loss or
damage to its property or assets, whether or not insured; (g) there is
no litigation which is pending or threatened (or circumstances giving
rise to same) against the Company, or any affiliated party of any of
the foregoing which is required to be set forth in an amended or
supplemented Prospectus which has not been set forth; and (h) there
has occurred no event required to be set forth in an amended or
supplemented Prospectus which has not been set forth.
References to the Registration Statement and the Prospectus in this subsection
(g) are to such documents as amended and supplemented at the date of such
certificate.
(n) By the Closing Date, the Underwriters will have received
clearance from the NASD as to the amount of compensation allowable or payable to
the Underwriters, as described in the Registration Statement.
(o) At the time this Agreement is executed, the Underwriters
shall have received a letter, dated such date, addressed to the Underwriters in
form and substance satisfactory (including the non-material nature of the
changes or decreases, if any, referred to in clause (iii) below) in all respects
to the Underwriters and Underwriters' Counsel, from BDO:
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<PAGE>
i) confirming that they are independent certified public
accountants with respect to the Company within the meaning of the Act
and the applicable Rules and Regulations;
ii) stating that it is their opinion that the financial
statements and supporting schedules of the Company as of December 31,
1994 and 1995 and for the years then ended, and for the period from
inception (June 1, 1992) through December 31, 1995 included in the
Registration Statement comply as to form in all material respects with
the applicable accounting requirements of the Act and the Rules and
Regulations thereunder and that the Representative may rely upon the
opinion of BDO with respect to such financial statements and
supporting schedules included in the Registration Statement;
iii) stating that, on the basis of a limited review which
included a reading of the latest available unaudited interim financial
statements of the Company, a reading of the latest available minutes
of the stockholders and board of directors and the various committees
of the boards of directors of the Company, consultations with officers
and other employees of the Company responsible for financial and
accounting matters and other specified procedures and inquiries,
nothing has come to their attention which would lead them to believe
that (A) the pro forma financial information contained in the
Registration Statement and Prospectus does not comply as to form in
all material respects with the applicable accounting requirements of
the Act and the Rules and Regulations or is not fairly presented in
conformity with generally accepted accounting principles applied on a
basis consistent with that of the audited financial statements of the
Company or the unaudited pro forma financial information included in
the Registration Statement, (B) the unaudited financial statements and
supporting schedules of the Company included in the Registration
Statement do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the Rules and
Regulations or are not fairly presented in conformity with generally
accepted accounting principles applied on a basis substantially
consistent with that of the audited financial statements of the
Company included in the Registration Statement, or (C) at a specified
date not more than five (5) days prior to the effective date of the
Registration Statement, there has been any change in the capital stock
of the Company, any change in the long-term debt of the Company, or
any decrease in the stockholders' equity of the Company or any
decrease in the net current assets or net assets of the Company as
compared with amounts shown in the December 31, 1995 balance sheets
included in the Registration Statement, other than as set forth in or
contemplated by the Registration Statement, or, if there was any
change or decrease, setting forth the amount of such change or
decrease, and (D) during the period from December 31, 1995 to a
specified date not more than five (5) days prior to the effective date
of the Registration Statement, there was any decrease in net revenues
or net earnings of the Company or increase in net earnings per common
share of the Company, in each case as compared with the corresponding
period beginning January 1, 1995 other
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<PAGE>
than as set forth in or contemplated by the Registration Statement,
or, if there was any such decrease, setting forth the amount of such
decrease;
iv) setting forth, at a date not later than five (5) days prior
to the date of the Registration Statement, the amount of liabilities
of the Company (including a break-down of commercial paper and notes
payable to banks);
v) stating that they have compared specific dollar amounts,
numbers of shares, percentages of revenues and earnings, statements
and other financial information pertaining to the Company set forth in
the Prospectus in each case to the extent that such amounts, numbers,
percentages, statements and information may be derived from the
general accounting records, including work sheets, 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; and
vi) statements as to such other matters incident to the
transaction contemplated hereby as the Representative may request.
(p) At the Closing Date and each Option Closing Date, if any, the
Underwriters shall have received from BDO a letter, dated as of the Closing Date
or the Option Closing Date, as the case may be, to the effect that they reaffirm
the statements made in the letter furnished pursuant to subsection (i) of this
----------
Section hereof except that the specified date referred to shall be a date not
- -------
more than five days prior to the Closing Date or the Option Closing Date, as the
case may be, and, if the Company has elected to rely on Rule 430A of the Rules
and Regulations, to the further effect that they have carried out procedures as
specified in clause (v) of subsection (i) of this Section with respect to
---------- -------
certain amounts, percentages and financial information as specified by the
Representative and deemed to be a part of the Registration Statement pursuant to
Rule 430A(b) and have found such amounts, percentages and financial information
to be in agreement with the records specified in such clause (v).
(q) The Company shall have delivered to the Representative a
letter from BDO addressed to the Company stating that they have not during the
immediately preceding two year period brought to the attention of the Company's
management any "weakness" as defined in Statement of Auditing Standards No. 60
"Communication of Internal Control Structure Related Matters Noted in an Audit,"
in any of the Company's internal controls.
(r) On each of the Closing Date and Option Closing Date, if any,
there shall have been duly tendered to the Representative for the several
Underwriters' accounts the appropriate number of Securities.
(s) No order suspending the sale of the Securities in any
jurisdiction designated by the Representative pursuant to subsection (e) of
Section 4 hereof shall have been
- -------
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<PAGE>
issued on either the Closing Date or the Option Closing Date, if any, and no
proceedings for that purpose shall have been instituted or shall be
contemplated.
(t) On or before the Closing Date, the Company shall have
executed and delivered to the Representative, (i) the Representative's Warrant
Agreement substantially in the form filed as Exhibit 4.2 to the Registration
Statement in final form and substance satisfactory to the Representative, and
(ii) the Representative's Warrants in such denominations and to such designees
as shall have been provided to the Company.
(u) On or before the Closing Date the Company shall have executed
and delivered to the Warrant Agent, the Warrant Agreement substantially in the
form filed as Exhibit 4.3 to the Registration Statement, in final form and
substance satisfactory to the Representative.
(v) On or before the Closing Date, the Company shall have
executed and delivered to the Representative, the Consulting Agreement
substantially in the form filed as Exhibit 10.8 to the Registration Statement in
final form and substance satisfactory to the Representative.
(w) On or before the Closing Date, the Securities shall have been
duly approved for quotation on Nasdaq, subject to official notice of issuance.
(x) On or before the Closing Date, there shall have been
delivered to the Representative all of the Lock-up Agreements, in form and
substance satisfactory to Underwriters' Counsel.
If any condition to the Underwriters' obligations hereunder to be
fulfilled prior to or at the Closing Date or the relevant Option Closing Date,
as the case may be, is not so fulfilled, the Representative may terminate this
Agreement or, if the Representative so elects, it may waive any such conditions
which have not been fulfilled or extend the time for their fulfillment.
7. Indemnification.
---------------
(a) The Company, agrees to indemnify and hold harmless each of
the Underwriters (for purposes of this Section 7 "Underwriter" shall include the
-------
officers, directors, partners, employees, agents and counsel of the Underwriter,
including specifically each person who may be substituted for an Underwriter as
provided in Section 11 hereof), and each person, if any, who controls the
-------
Underwriter ("controlling person") within the meaning of Section 15 of the Act
-------
or Section 20(a) of the Exchange Act, from and against any and all losses,
-------
claims, damages, expenses or liabilities, joint or several (and actions,
proceedings, investigations, inquiries, and suits in respect thereof),
whatsoever (including but not limited to any and all costs and expenses
whatsoever reasonably incurred in investigating, preparing or defending against
such action, proceeding, investigation, inquiry or suit, commenced or
threatened, or any claim whatsoever), as such are incurred, to which the
Underwriter or such controlling person may become subject under the Act, the
Exchange Act or any other statute or at common law or otherwise or under the
laws of foreign countries, arising out of or based upon (A) any untrue
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<PAGE>
statement or alleged untrue statement of a material fact contained (i) in any
Preliminary Prospectus, the Registration Statement or the Prospectus (as from
time to time amended and supplemented); (ii) in any post-effective amendment or
amendments or any new registration statement and prospectus in which is included
securities of the Company issued or issuable upon exercise of the Securities; or
(iii) in any application or other document or written communication (in this
Section 7 collectively called "application") executed by the Company or based
- -------
upon written information furnished by the Company filed, delivered or used in
any jurisdiction in order to qualify the Securities under the securities laws
thereof or filed with the Commission, any state securities commission or agency,
Nasdaq or any other securities exchange, (B) the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to make
the statements therein not misleading (in the case of the Prospectus, in the
light of the circumstances under which they were made), or (C) any breach of any
representation, warranty, covenant or agreement of the Company contained herein
or in any certificate by or on behalf of the Company or any of its officers
delivered pursuant hereto unless, in the case of clause (A) or (B) above, such
statement or omission was made in reliance upon and in conformity with written
information furnished to the Company with respect to any Underwriter by or on
behalf of such Underwriter expressly for use in any Preliminary Prospectus, the
Registration Statement or any Prospectus, or any amendment thereof or supplement
thereto, or in any application, as the case may be.
The indemnity agreement in this subsection (a) shall be in addition to
any liability which the Company may have at common law or otherwise.
(b) Each of the Underwriters agrees severally, but not jointly,
to indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the Registration Statement, and each other person, if
any, who controls the Company within the meaning of the Act, to the same extent
as the foregoing indemnity from the Company to the Underwriters but only with
respect to statements or omissions, if any, made in any Preliminary Prospectus,
the Registration Statement or Prospectus or any amendment thereof or supplement
thereto or in any application made in reliance upon, and in strict conformity
with, written information furnished to the Company with respect to any
Underwriter by such Underwriter expressly for use in such Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment thereof or
supplement thereto or in any such application, provided that such written
information or omissions only pertain to disclosures in the Preliminary
Prospectus, the Registration Statement or Prospectus directly relating to the
transactions effected by the Underwriters in connection with this Offering. The
Company acknowledges that the statements with respect to the public offering of
the Securities set forth under the heading "Underwriting" and the stabilization
legend in the Prospectus have been furnished by the Underwriters expressly for
use therein and constitute the only information furnished in writing by or on
behalf of the Underwriters for inclusion in the Prospectus.
The indemnity agreement in this subsection (b) shall be in addition to
any liability which the Underwriters may have at common law or otherwise.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, suit or proceeding, such
- -------
indemnified party shall, if
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<PAGE>
a claim in respect thereof is to be made against one or more indemnifying
parties under this Section 7, notify each party against whom indemnification is
-------
to be sought in writing of the commencement thereof (but the failure so to
notify an indemnifying party shall not relieve it from any liability which it
may have under this Section 7 except to the extent that it has been prejudiced
-------
in any material respect by such failure or from any liability which it may have
otherwise). In case any such action, investigation, inquiry, suit or proceeding
is brought against any indemnified party, and it notifies an indemnifying party
or parties of the commencement thereof, the indemnifying party or parties will
be entitled to participate therein, and to the extent it may elect by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party. Notwithstanding the
foregoing, the indemnified party or parties shall have the right to employ its
or their own counsel in any such case but the fees and expenses of such counsel
shall be at the expense of such indemnified party or parties unless (i) the
employment of such counsel shall have been authorized in writing by the
indemnifying parties in connection with the defense of such action at the
expense of the indemnifying party, (ii) the indemnifying parties shall not have
employed counsel reasonably satisfactory to such indemnified party to have
charge of the defense of such action within a reasonable time after notice of
commencement of the action, or (iii) such indemnified party or parties shall
have reasonably concluded that there may be defenses available to it or them
which are different from or additional to those available to one or all of the
indemnifying parties (in which case the indemnifying parties shall not have the
right to direct the defense of such action, investigation, inquiry, suit or
proceeding on behalf of the indemnified party or parties), in any of which
events such fees and expenses of one additional counsel shall be borne by the
indemnifying parties. In no event shall the indemnifying parties be liable for
fees and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action, investigation, inquiry, suit or proceeding or separate but
similar or related actions, investigations, inquiries, suits or proceedings in
the same jurisdiction arising out of the same general allegations or
circumstances. Anything in this Section 7 to the contrary notwithstanding, an
-------
indemnifying party shall not be liable for any settlement of any claim or action
effected without its written consent; provided, however, that such consent was
-------- -------
not unreasonably withheld. An indemnifying party will not, without the prior
written consent of the indemnified parties, settle compromise or consent to the
entry of any judgment with respect to any pending or threatened claim, action,
investigation, inquiry, suit or proceeding in respect of which indemnification
or contribution may be sought hereunder (whether or not the indemnified parties
are actual or potential parties to such claim or action), unless such
settlement, compromise or consent (i) includes an unconditional release of each
indemnified party form all liability arising out of such claim, action, suit or
proceeding and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.
(d) In order to provide for just and equitable contribution in
any case in which (i) an indemnified party makes claim for indemnification
pursuant to this Section 7, 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 7 provide for indemnification in such
-------
case, or (ii) contribution under
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<PAGE>
the 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, investigations,
inquiries, suits or proceedings 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 the contributing
party and the Underwriters are the indemnified party, the relative benefits
received by the Company on the one hand, and the Underwriters, 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
underwriting discounts received by the Underwriters hereunder, in each case as
set forth in the table on the Cover Page of the Prospectus. 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
Underwriters, 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, investigations, inquiries,
suits or proceedings in respect thereof) referred to above in this subdivision
(d) shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action, claim, investigation, inquiry, suit or proceeding. Notwithstanding the
provisions of this subdivision (d) the Underwriters shall not be required to
contribute any amount in excess of the underwriting discount applicable to the
Securities purchased by the Underwriters hereunder. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
-------
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7, each person,
-------
if any, who controls the Company within the meaning of the Act, each officer of
the Company who has signed the Registration Statement, and each director of the
Company shall have the same rights to contribution as the Company, subject in
each case to this subparagraph (d). Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit, inquiry,
investigation or proceeding against such party in respect to which a claim for
contribution may be made against another party or parties under this
subparagraph (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 subparagraph (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.
8. Representations and Agreements to Survive Delivery. All
--------------------------------------------------
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto,
shall be deemed to be representations, warranties
- 40 -
<PAGE>
and agreements at the Closing Date and the Option Closing Date, as the case may
be, and such representations, warranties and agreements of the Company and the
indemnity agreements contained in Section 7 hereof, shall remain operative and
-------
in full force and effect regardless of any investigation made by or on behalf of
any Underwriter, the Company, any controlling person of any Underwriter or the
Company, and shall survive termination of this Agreement or the issuance and
delivery of the Securities to the Underwriters and the Representative, as the
case may be.
9. Effective Date.
--------------
(a) This Agreement shall become effective at 10:00 a.m., New York
City time, on the next full business day following the date hereof, or at such
earlier time after the Registration Statement becomes effective as the
Representative, in its discretion, shall release the Securities for sale to the
public; provided, however, that the provisions of Sections 5, 7 and 10 of this
-------- ------- --------
Agreement shall at all times be effective. For purposes of this Section 9, the
-------
Securities to be purchased hereunder shall be deemed to have been so released
upon the earlier of dispatch by the Representative of telegrams to securities
dealers releasing such shares for offering or the release by the Representative
for publication of the first newspaper advertisement which is subsequently
published relating to the Securities.
10. Termination.
-----------
(a) Subject to subsection (b) of this Section 10, the
-------
Representative shall have the right to terminate this Agreement, after the date
hereof, (i) if any domestic or international event or act or occurrence has
materially disrupted, or in the Representative's opinion will in the immediate
future materially adversely disrupt the financial markets; or (ii) any material
adverse change in the financial markets shall have occurred; or (iii) if trading
generally shall have been suspended or materially limited on or by, as the case
may be, any of the New York Stock Exchange, the American Stock Exchange, the
National Association of Securities Dealers, Inc., the Boston Stock Exchange, the
Chicago Board of Trade, the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange, the Commission or any other government authority having
jurisdiction; or (iv) if trading of any of the securities of the Company shall
have been suspended, or any of the securities of the Company shall have been
delisted, on any exchange or in any over-the-counter market; or (v) if the
United States shall have become involved in a war or major hostilities, or if
there shall have been an escalation in an existing war or major hostilities or a
national emergency shall have been declared in the United States; or (vi) if a
banking moratorium has been declared by a state or federal authority; or (vii)
if a moratorium in foreign exchange trading has been declared; or (viii) if the
Company or the Subsidiary shall have sustained a loss material or substantial to
the Company or the Subsidiary by fire, flood, accident, hurricane, earthquake,
theft, sabotage or other calamity or malicious act which, whether or not such
loss shall have been insured, will, in the Representative's opinion, make it
inadvisable to proceed with the delivery of the Securities; or (viii) if there
shall have occurred any outbreak or escalation of hostilities or any calamity or
crisis or there shall have been such a material adverse change in the conditions
or prospects of the Company, or such material adverse change in the general
market, political or economic conditions, in the United States or elsewhere as
in the Representative's judgment would make
- 41 -
<PAGE>
it inadvisable to proceed with the offering, sale and/or delivery of the
Securities or (ix) if M. Lee Hulsebus shall no longer serve the Company in his
present capacity.
(b) If this Agreement is terminated by the Representative in
accordance with the provisions of Section 10(a) the Company shall promptly
-------
reimburse and indemnify the Representative for all of its actual out-of-pocket
expenses, including the fees and disbursements of counsel for the Underwriters
(less amounts previously paid pursuant to Section 5(c) above). Notwithstanding
-------
any contrary provision contained in this Agreement, if this Agreement shall not
be carried out within the time specified herein, or any extension thereof
granted to the Representative, by reason of any failure on the part of the
Company to perform any undertaking or satisfy any condition of this Agreement by
it to be performed or satisfied (including, without limitation, pursuant to
Section 6 or Section 12) then, the Company shall promptly reimburse and
- ------- -------
and indemnify the Representative for all of its actual out-of-pocket expenses,
including the fees and disbursements of counsel for the Underwriters (less
amounts previously paid pursuant to Section 5(c) above). In addition, the
-------
Company shall remain liable for all Blue Sky counsel fees and expenses and
filing fees. Notwithstanding any contrary provision contained in this Agreement,
any election hereunder or any termination of this Agreement (including, without
limitation, pursuant to Sections 6, 10, 11 and 12 hereof), and whether or not
--------
this Agreement isotherwise carried out, the provisions of Section 5 and Section
------- -------
7 shall not be in any way affected by such election or termination or failure to
carry out the terms of this Agreement or any part hereof.
11. Substitution of the Underwriters. If one or more of the
--------------------------------
Underwriters shall fail (otherwise than for a reason sufficient to justify the
termination of this Agreement under the provisions of Section 6, Section 10 or
------- -------
Section 12 hereof) to purchase the Securities which it or they are obligated to
- -------
purchase on such date under this Agreement (the "Defaulted Securities"), the
Representative shall have the right, within 24 hours thereafter, to make
arrangement for one or more of the non-defaulting Underwriters, or any other
underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth; if, however, the Representative shall not have completed such
arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of
the total number of Firm Securities to be purchased on such date, the
non-defaulting Underwriters shall be obligated to purchase the full
amount thereof in the proportions that their respective underwriting
obligations hereunder bear to the underwriting obligations of all non-
defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the
total number of Firm Securities, this Agreement shall terminate
without liability on the part of any non-defaulting Underwriters.
No action taken pursuant to this Section shall relieve any defaulting
-------
Underwriter from liability in respect of any default by such Underwriter under
this Agreement.
In the event of any such default which does not result in a
termination of this Agreement, the Representative shall have the right to
postpone the Closing Date for a period not
- 42 -
<PAGE>
exceeding seven days in order to effect any required changes in the Registration
Statement or Prospectus or in any other documents or arrangements.
12. Default by the Company. If the Company shall fail at the Closing
----------------------
Date or at any Option Closing Date, as applicable, to sell and deliver the
number of Securities which it is obligated to sell hereunder on such date, then
this Agreement shall terminate (or, if such default shall occur with respect to
any Option Securities to be purchased on an Option Closing Date, the
Underwriters may at the Representative's option, by notice from the
Representative to the Company, terminate the Underwriters' obligation to
purchase Option Securities from the Company on such date) without any liability
on the part of any non-defaulting party other than pursuant to Section 5,
-------
Section 7 and Section 10 hereof. No action taken pursuant to this Section shall
- ------- ------- -------
relieve the Company from liability, if any, in respect of such default.
13. Notices. All notices and communications hereunder, except as
-------
herein otherwise specifically provided, shall be in writing and shall be deemed
to have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be directed to the
Representative at 200 Park Avenue, 24th Floor, New York, New York 10166,
Attention: Scott A. Weisman, Esq., with a copy to Orrick, Herrington &
Sutcliffe, 666 Fifth Avenue, New York, New York 10103, Attention: Lawrence B.
Fisher, Esq. Notices to the Company shall be directed to the Company at 9171
Towne Centre Drive, Suite 355, San Diego, California 92122, Attention: M. Lee
Hulsebus, President and Chief Executive Officer, with a copy to Zukerman Gore &
Brandeis, L.L.P., 900 Third Avenue, New York, New York 10022, Attention:
Clifford A. Brandeis, Esq.
14. Parties. This Agreement shall inure solely to the benefit of and
-------
shall be binding upon, the Underwriters, the Company and the controlling
persons, directors and officers referred to in Section 7 hereof, and their
-------
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provisions herein
contained. No purchaser of Securities from any Underwriter shall be deemed to
be a successor by reason merely of such purchase.
15. Construction. This Agreement shall be governed by and construed
------------
and enforced in accordance with the laws of the State of New York without giving
effect to the choice of law or conflict of laws principles.
16. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
17. Entire Agreement; Amendments. This Agreement and the
----------------------------
Representative's Warrant Agreement constitute the entire agreement of the
parties hereto and supersede all prior written or oral agreements,
understandings and negotiations with respect to the subject matter hereof. This
Agreement may not be amended except in a writing, signed by the Representative
and the Company.
- 43 -
<PAGE>
If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement between
us.
Very truly yours,
MEDICAL DEVICE TECHNOLOGIES, INC.
By:____________________________________
M. Lee Hulsebus
President and Chief Executive Officer
Confirmed and accepted as of
the date first above written.
FIRST ALLIED SECURITIES, INC.
For itself and as Representative
of the several Underwriters named
in Schedule A hereto.
By:____________________________________
Name:
Title:
- 44 -
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
Number of Shares Number of Redeemable
Name of Underwriters to be Purchased Warrants to be Purchased
- -------------------- --------------- -------------------------
<S> <C> <C>
First Allied Securities, Inc. ...
---------- ----------
Total....................... 1,400,000 1,400,000
========== ==========
</TABLE>
<PAGE>
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
MEDICAL DEVICE TECHNOLOGIES, INC.
To the Division of Corporations and
Commercial Code of the State of Utah:
Pursuant to the Provisions of Section 16-10a-602(4) of the Utah Business
Corporation Act, Medical Device Technologies, Inc. (the "Corporation") submits
the following amendment to its Articles of Incorporation.
FIRST: The Articles of Incorporation of the Corporation are amended to add
the following to Article IV thereof:
The rights, preferences and designations of the authorized and unissued
shares of the Corporation's preferred stock shall hereafter be as follows:
SECTION 1. Designation. _____________________________(________) shares
of preferred stock are hereby designated as __% Cumulative Convertible Series A
Preferred Stock ("Preferred Stock"). The rights, preferences, privileges and
qualifications, limitations and restrictions of the Preferred Stock are set
forth in Sections 2 through 6 of this certificate of amendment (this
"Certificate"). The rights, preferences, privileges and qualifications,
limitations and restrictions of the remaining shares of Preferred Stock shall be
determined by the Corporation's board of directors (the "Board of Directors"),
from time to time after the date of this Certificate, pursuant to the provisions
of Article IV of the Corporation's Articles of Incorporation.
SECTION 2. Dividends. The holders of the Preferred Stock are entitled to
receive if, when and as declared by the Board of Directors out of funds legally
available therefor, cumulative dividends, payable solely in common stock of the
Corporation, par value $.15 per share (the "Common Stock") at the rate of __%
per annum of the liquidation value of the Preferred Stock (the "Liquidation
Value"). The Liquidation Value shall be equal to $5.00. The dividend is
payable semi-annually on June 30 and December 31 of each year, commencing June
30, 1996. Dividends shall be paid to the holders of record as of a date, not
more than thirty (30) days prior to the dividend payment date, as may be fixed
by the Board of Directors (the "Dividend Declaration Date"). Dividends accrue
from the first day of the semi-annual period in which such dividend may be
payable, except with respect to the first semi-annual dividend which shall
accrue
<PAGE>
from the date of issuance of the Preferred Stock. Each holder of Preferred
Stock shall receive shares of Common Stock equal to the quotient of (i) __% of
the Liquidation Value of the Preferred Stock divided by (ii) the average ten
(10) day moving average closing bid price of the Common Stock during the thirty
(30) trading days immediately prior to the Dividend Declaration Date (the "Stock
Dividend Price"); provided, however, that in no event shall the Stock Dividend
-------- -------
Price ever exceed $1.50 per share or be less than $.70 per share.
No dividends may be paid on any shares of capital stock ranking junior to
the Preferred Stock unless and until all declared but unpaid dividends on the
Preferred Stock have been declared and paid in full.
SECTION 3. Conversion. The holders of the Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each outstanding share of Preferred
----------------
Stock will be convertible, at the option of the holder, at any time commencing
on ___________, 1996 (the "Conversion Date"). Each share of Preferred Stock is
convertible into _____________ (__) shares of Common Stock. The conversion price
of the Common Stock issuable upon conversion of the Preferred Stock shall be
equal to $____ per share of Common Stock (the "Conversion Price"), subject to
adjustment pursuant to paragraphs (d) and (e) of this Section 3. All accrued but
unpaid Common Stock dividends shall be paid upon conversion.
(b) Automatic Conversion. Unless earlier converted, all the
--------------------
outstanding shares of Preferred Stock will be automatically converted into
Common Stock without any action by the holders thereof on ________, 1997 (the
"Automatic Conversion Date").
(c) Mechanics of Conversion. Any holder of Preferred Stock who
-----------------------
wishes to convert the same into shares of Common Stock pursuant to paragraph (a)
of this Section 3, must surrender the certificate therefor, at the office of the
Corporation or of any transfer agent for such stock, and give written notice to
the Corporation at such office that he elects to convert the same. Such notice
shall not be required if the conversion is automatic under paragraph (b) of this
Section 3. The Corporation shall, as soon as practicable thereafter, issue to
such holder of Preferred Stock, a certificate for the number of shares of Common
Stock to which he shall be entitled as aforesaid. Such conversion shall be
deemed to have been made upon the surrender of the certificate for the shares of
Preferred Stock to be converted, and the person entitled to receive the shares
of Common Stock issuable upon such conversion shall be
2
<PAGE>
treated for all purposes as the record holder of such shares of Common Stock at
and after such time.
(d) Adjustments to Conversion Price for Stock Dividends and for
-----------------------------------------------------------
Combinations or Subdivisions of Common Stock. If the Corporation at any time or
- --------------------------------------------
from time to time while shares of Preferred Stock are issued and outstanding
shall declare or pay, without consideration, any dividend on the Common Stock
payable in Common Stock, or shall effect a subdivision of the outstanding shares
of Common Stock into a greater number of shares of Common Stock (by stock split,
reclassification or otherwise than by payment of a dividend in Common Stock or
in any right to acquire Common Stock), or if the outstanding shares of Common
Stock shall be combined or consolidated, by reclassification or otherwise, into
a lesser number of shares of Common Stock, then the Conversion Price for
Preferred Stock in effect immediately before such event shall, concurrently with
the effectiveness of such event, be proportionately decreased or increased, as
appropriate. If the Corporation shall declare or pay, without consideration,
any dividend on the Common Stock payable in any right to acquire Common Stock
for no consideration, then the Corporation shall be deemed to have made a
dividend payable in Common Stock in an amount of shares equal to the maximum
number of shares issuable upon exercise of such rights to acquire Common Stock.
(e) Adjustments for Reclassification and Reorganization. If the
---------------------------------------------------
Common Stock issuable upon conversion of the Preferred Stock shall be changed
into the same or a different number of shares of any other class or classes of
stock, whether by capital reorganization, reclassification or otherwise (other
than a subdivision or combination of shares provided for in paragraph (d) of
this Section 3), the Conversion Price then in effect shall, concurrently with
the effectiveness of such reorganization or reclassification, be proportionately
adjusted so that the Preferred Stock shall be convertible into, in lieu of the
number of shares of Common Stock which the holders would otherwise have been
entitled to receive, a number of shares of such other class or classes of stock
equivalent to the number of shares of Common Stock that would have been subject
to receipt by the holders upon conversion of the Preferred Stock immediately
before that change.
(f) No Impairment. The Corporation will not, by amendment of
-------------
its Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issuance or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all of the provisions of
this Section 3 and in the taking of all such action as may be
3
<PAGE>
necessary or appropriate in order to protect the Conversion Rights of the
holders of the Preferred Stock against impairment. The provisions of this
paragraph (f) may be waived by the affirmative vote of the holders of at least a
majority of the then outstanding shares of Preferred Stock voting together as a
single class and taken in advance of any action that would conflict with this
paragraph (f).
(g) Notice of Adjustments. Upon the occurrence of each
---------------------
adjustment or readjustment of any Conversion Price pursuant to this Section 3,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Preferred Stock a notice setting forth such adjustment or readjustment
and showing in detail the facts upon which such adjustment or readjustment is
based.
(h) Notices of Record Date. If the Corporation shall propose
----------------------
at any time: (i) to declare any dividend or distribution upon its Common Stock,
whether in cash, property, stock or other securities, other than a regular cash
dividend out of earnings or earned surplus or a dividend as to which adjustment
of the Conversion Price will be made under paragraph (d) of this Section 3; (ii)
to offer for subscription pro rata to the holders of any class or series of its
stock any additional shares of stock of any class or series or other rights;
(iii) to effect any reclassification or recapitalization of its Common Stock
outstanding involving a change in the Common Stock other than one as to which
adjustments of the Conversion Price will be made under paragraph (d) of this
Section 3; or (iv) to merge or consolidate with or into any other corporation,
or sell all or substantially all of its assets, or to liquidate, dissolve or
wind up; then, in connection with such event, the Corporation shall send to the
holders of the Preferred Stock;
(1) at least ten (10) days' prior written notice of the date on
which a record shall be taken for such dividend,
distribution or subscription rights (and specifying the date
on which the holders of Common Stock shall be entitled
thereto) or for determining rights to vote, if any, in
respect of the matters referred to in clauses (iii) and (iv)
above; and
(2) in the case of the matters referred to in clauses (iii) and
(iv) above, at least ten (10) days' prior written notice of
the date when the same shall take place (and specifying the
date on which the holders of Common Stock shall be entitled
to exchange their Common Stock for securities or other
4
<PAGE>
property deliverable upon the occurrence of such event).
(i) Issue Taxes. The Corporation shall pay any and all issue and
-----------
other taxes that may be payable in respect of any issue or delivery of shares of
Common Stock on conversion of Preferred Stock pursuant hereto; provided,
--------
however, that the Corporation shall not be obligated to pay any transfer taxes
- -------
resulting from any transfer requested by any holder in connection with any such
conversion.
(j) Reservation of Stock Issuable Upon Conversion. The Corporation
---------------------------------------------
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Preferred Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Preferred Stock, the
Corporation will take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose, including, without limitation, engaging in best
efforts to obtain the requisite stockholder approval of any necessary amendment
to its Articles of Incorporation.
(k) Fractional Shares. No fractional share shall be issued upon the
-----------------
conversion of any share or shares of Preferred Stock. All shares of Common
Stock (including fractions thereof) issuable upon conversion of more than one
share of Preferred Stock by a holder thereof shall be aggregated for purposes of
determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion
would result in the issuance of a fractional share of Common Stock, such
fractional share shall be rounded up to the nearest whole share.
(l) Notices. Any notice required by the provisions of this Section 3
-------
to be given to the holders of shares of Preferred Stock shall be deemed given if
deposited in the United States mail, postage prepaid, and addressed to each
holder of record at his address appearing on the books of the Corporation.
SECTION 4. Voting Rights. Each holder of shares of Preferred Stock will
be entitled to the number of votes equal to the number of shares of Common Stock
into which such holder's shares of Preferred Stock could be converted at the
time of the vote, will have voting rights equal to the voting rights of such
number of shares of Common Stock voting together with the Common Stock as a
single class on all matters submitted to the holders
5
<PAGE>
of Common Stock and shall be entitled to notice of any stockholders' meeting.
Any fractional voting rights resulting from the above formula (after aggregating
all shares of Common Stock into which shares of Preferred Stock held by a single
holder are converted) will be disregarded.
SECTION 5. Liquidation Preference. The holders of shares of Preferred
Stock will be entitled to receive, in the event of any liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, out of or to
the extent of the net assets of the Corporation legally available for such
distribution, before any distributions are made with respect to any Common Stock
or any stock ranking junior to the Preferred Stock, $_____ per share, plus any
declared but unpaid dividends (the "Liquidation Preference"). After payment of
the full amount of the Liquidation Preference, the holders of shares of
Preferred Stock will not be entitled to any further participation in any
distribution of assets by the Corporation.
Upon any such liquidation, dissolution or winding up, such preferential
amounts with respect to the Preferred Stock and any class or series ranking on a
parity with the Preferred Stock if not paid in full shall be distributed pro
rata in accordance with the aggregate preferential amounts of the Preferred
Stock and such other classes or series of stock, if any. So long as any shares
of Preferred Stock are issued and outstanding, the Corporation shall not issue
any securities with rights, preferences or provisions senior to the Preferred
Stock.
SECTION 6. Restrictions and Limitations.
(a) Shares of Preferred Stock acquired by the Corporation by
reason of purchase, conversion, redemption or otherwise shall be retired and
shall become authorized but unissued shares of Preferred Stock, which may be
reissued as part of a new series of Preferred Stock hereafter created under
Article IV of the Corporation's Articles of Incorporation.
(b) So long as shares of Preferred Stock remain outstanding, the
Corporation shall not, without the affirmative vote of the holders of at least a
majority of the then outstanding shares of Preferred Stock voting together as a
separate class, amend the terms of this Certificate. The holders of the
outstanding shares of the Preferred Stock shall be entitled to vote as a
separate class upon a proposed amendment of the Articles of Incorporation if the
amendment would alter or change the powers, preferences or special rights of the
shares of Preferred Stock so as to affect them adversely.
SECOND: The Board of Directors of the Company duly adopted a resolution
at a meeting duly convened on ___________, 1996 at which a quorum was present
and acting throughout to amend the
6
<PAGE>
Articles of Incorporation of the Company as set forth herein.
THIRD: Pursuant to Article IV of the Articles of Incorporation, no
shareholder action is required to adopt the foregoing amendment.
FOURTH: The Articles of Incorporation of the Corporation shall not
otherwise be changed, amended or modified by this Certificate.
IN WITNESS WHEREOF, Medical Device Technologies, Inc. has caused this
Certificate to be signed by its President and attested by its Secretary this
____ day of _________, 1996.
MEDICAL DEVICE TECHNOLOGIES, INC.
By:______________________________
M. Lee Hulsebus, President
Attest:
- -----------------------------
Edward C. Hall, Secretary
7
<PAGE>
NUMBER SHARES
MDT MEDICAL DEVICE TECHNOLOGIES, INC.
CUSIP
INCORPORATED UNDER THE LAWS SEE REVERSE FOR
OF THE STATE OF UTAH CERTAIN DEFINITIONS
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE % CUMULATIVE CONVERTIBLE
SERIES A PREFERRED STOCK OF THE PAR VALUE OF $.001 PER SHARE OF
----------------- ------------------
- ---------------------- MEDICAL DEVICE TECHNOLOGIES, INC. -----------------------
----------------- ------------------
TRANSFERABLE ON THE BOOKS OF THE CORPORATION BY THE HOLDER HEREOF IN PERSON OR
BY DULY AUTHORIZED ATTORNEY, UPON SURRENDER OF THIS CERTIFICATE, PROPERLY
ENDORSED.
THIS CERTIFICATE IS NOT VALID UNTIL COUNTERSIGNED BY THE TRANSFER AGENT.
WITNESS THE FACSIMILE SEAL OF THE CORPORATION AND THE FACSIMILE SIGNATURES
OF ITS DULY AUTHORIZED OFFICERS.
DATED:
SECRETARY MEDICAL DEVICE TECHNOLOGIES, INC. PRESIDENT
CORPORATE
SEAL
1980
UTAH
COUNTERSIGNED:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
(JERSY CITY, N.J.) TRANSFER AGENT
BY
AUTHORIZED OFFICER
<TABLE>
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
AMERICAN BANKNOTE COMPANY PRODUCTION COORDINATOR DEE FERTIG - 215-850-2197
680 BLAIR MILL ROAD PROOF OF MAY 21, 1996
HORSHAM, PA 19044 MEDICAL DEVICE TECHNOLOGIES, INC.
215-567-3480 H 44180bk1
- ------------------------------------------------------------------------------------------------------------------
SALES PERSON- R JOHNS 212-557-9100 OPR. LR NEW
- ------------------------------------------------------------------------------------------------------------------
/home/larryt/inprogress/home 13/MEDICAL 44180 /net/banknote/home 13/M
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF AND
THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR
RIGHTS.
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:
<TABLE>
<S> <C>
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 of under Uniform Gifts to Minors
survivorship and not as tenants Act _____________
in common (State)
Additional abbreviations may also be used through not in the above list.
</TABLE>
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
irrevocable constitute and appoint
_______________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Company 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 THE CERTIFICATE IN
EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
Signatures(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 17 Ad-15.
<TABLE>
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<S> <C>
AMERICAN BANKNOTE COMPANY PRODUCTION COORDINATOR DEE FERTIG - 215-850-2197
680 BLAIR MILL ROAD PROOF OF MAY 21, 1996
HORSHAM, PA 19044 MEDICAL DEVICE TECHNOLOGIES, INC.
215-567-3480 H 44180BK1
- ------------------------------------------------------------------------------------------------------------------
SALES PERSON- R. JOHNS 212-557-9100 OPR. LR NEW
- ------------------------------------------------------------------------------------------------------------------
/home/larryt/inprogress/home 13/MEDICAL 44180 /net/banknote/home 13/M
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
OHS DRAFT
5/22/96
[FORM OF REPRESENTATIVE'S WARRANT AGREEMENT]
[Subject to Client Review]
________________________________________________________________________________
MEDICAL DEVICE TECHNOLOGIES, INC.
AND
FIRST ALLIED SECURITIES, INC.
_____________
REPRESENTATIVE'S
WARRANT AGREEMENT
DATED AS OF ________, 1996
________________________________________________________________________________
<PAGE>
REPRESENTATIVE'S WARRANT AGREEMENT dated as of _______, 1996 between
MEDICAL DEVICE TECHNOLOGIES, INC., a Delaware corporation (the "Company") and
FIRST ALLIED SECURITIES, INC. ("FAS") (FAS is hereinafter referred to variously
as the "Holder" or the "Representative").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company proposes to issue to the Representative or its
designees warrants ("Warrants") to purchase up to (a) an aggregate 140,000
shares of $.01 par value per share __% Series A Cumulative Convertible preferred
stock of the Company ("Preferred Stock"); or up to [_____] shares of $.15 par
value per share common stock of the Company ("Common Stock"); or any combination
of such securities at the exercise prices set forth herein; and/or 140,000
Redeemable Warrants ("Redeemable Warrants"), each Redeemable Warrant to purchase
___ shares of Common Stock; and
WHEREAS, the Representative has agreed pursuant to the underwriting
agreement (the "Underwriting Agreement") dated as of the date hereof between the
Representative and the Company to act as the Representative in connection with
the Company's proposed public offering of up to 1,400,000 shares of Preferred
Stock at a public offering price of $[____] per share of Preferred Stock and
1,400,000 Redeemable Warrants (the "Public Warrants") at a public offering price
of $___ per Redeemable Warrant (the "Public Offering") pursuant to a
registration statement on Form S-1 (File No. ____) (the "Registration
Statement"); and
WHEREAS, the Warrants to be issued pursuant to this Agreement will be
issued on the Closing Date (as such term is defined in the Underwriting
Agreement) by the Company
<PAGE>
to the Representative in consideration for, and as part of the Representative's
compensation in connection with, the FAS acting as the Representative pursuant
to the Underwriting Agreement;
NOW, THEREFORE, in consideration of the premises, the payment by the
Representative to the Company of an aggregate of one hundred and forty dollars
and zero cents ($140.00), the agreements herein set forth and other good and
valuable consideration, hereby acknowledged, the parties hereto agree as
follows:
1. Grant. The Holder is hereby granted the right to purchase, at any
-----
time from _______, 1997 [one year from the effective date of the registration
statement], until 5:30 P.M., New York time, on _______, 2001 [five years from
the effective date of the registration statement], (a) up to an aggregate of
140,000 shares of Preferred Stock (the "Preferred Shares") at an initial
exercise price (subject to adjustment as provided in Section 8 hereof) of $____
-------
per share of Preferred Stock [120% of the initial public offering price per
share], or in the event the Preferred Stock has been redeemed by the Company or
has been automatically converted into Common Stock up to [____] shares (subject
to adjustment as provided in Section 8 hereof) of Common Stock (the "Common
-------
Shares") at an initial exercise price (subject to adjustment as provided in
Section 8 hereof) of $__________ per share of Common Stock (120% of the initial
- -------
public offering price per share of the Preferred Stock divided by the then
current Conversion Price, as defined in and calculated pursuant to that certain
Certificate of Designation (the "Certificate of Designation") of __% Series A
Cumulative Convertible Preferred Stock of Medical Device Technologies, Inc.,
dated as of ____________, 1996 and filed with the Secretary of State of the
State of Delaware, or any combination of such Common Shares and/or Preferred
Shares at such exercise prices set forth herein, all subject to the terms and
conditions of this Agreement, provided, however, the Preferred Stock has not
-------- -------
been redeemed or automatically
2
<PAGE>
converted in Common Stock and/or (b) 140,000 Redeemable Warrants at an initial
exercise price (subject to adjustment as provided in Section 8 hereof) of $___
-------
per Redeemable Warrant [120% of the initial public offering price per Redeemable
Warrant in the public offering, subject to the terms of this Agreement.
It is expressly understood that this Agreement entitles the
Representative to ten percent (10%) of the number of securities offered to the
public on an as converted basis, that is, [_____] shares of Common Stock
(subject to adjustment as provided in Section 8 hereof). Therefore, in the case
-------
of the Warrants to purchase shares of Preferred Stock, each share of Preferred
Stock purchased hereunder will reduce the number of Preferred Shares purchasable
by the Representative by one and will reduce the number of Common Shares
purchasable by the Representative by _____ (subject to adjustment as provided in
Section 8 hereof). Similarly, each share of Common Stock purchased hereunder
- -------
will reduce the number of Preferred Shares purchasable by the Representative by
_____share and will reduce the number of Common Shares purchasable by the
Representative by one (subject to adjustment as provided in Section 8 hereof).
-------
Except as set forth herein, the Preferred Shares issuable upon exercise of the
Warrants are in all respects identical to the shares of Preferred Stock being
purchased by the Underwriters for resale to the public pursuant to the terms and
provisions of the Underwriting Agreement and the Common Shares are in all
respects identical to the shares of Common Stock issuable upon conversion of the
shares of Preferred Stock being purchased by the several Underwriters for resale
to the public pursuant to the terms and provisions of the Underwriting
Agreement. The Preferred Shares and/or the Common Shares and the Redeemable
Warrants issuable upon exercise of the Warrants are hereinafter referred to
collectively as the "Principal Securities."
3
<PAGE>
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.
-------------------
(S)3.1 Method of Exercise. Except as otherwise set forth in Section
------------------ -------
3.2 hereof, the Warrants initially are exercisable in whole or in part, at an
aggregate initial exercise price (subject to adjustment as provided in Section 8
-------
hereof) per Preferred Share and/or Common Share and/or Redeemable Warrant 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), payable by certified or official bank check in New
York Clearing House funds, for the Principal Securities purchased at the
Company's principal offices in California (presently located at 9171 Towne
Centre Drive, Suite 355, San Diego, California 92122) the registered holder of a
Warrant Certificate ("Holder" or "Holders") shall be entitled to receive a
certificate or certificates for the Principal Securities 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 Preferred Shares and/or Common Shares and/or Redeemable Warrants
underlying the Warrants). Warrants may be exercised to purchase all or part of
the shares of Preferred Shares and/or Common Shares and/or Redeemable Warrants
represented thereby. In the case of the purchase of less than all the Principal
Securities purchasable under any Warrant Certificate, the Company shall cancel
said Warrant Certificate upon the surrender thereof and
4
<PAGE>
shall execute and deliver a new Warrant Certificate of like tenor for the
balance of the Principal Securities purchasable thereunder.
(S)3.2 Exercise by Surrender of Warrant. 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 to 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 equal to the product of (x) the number of Shares as to
which the Warrants are being exercised multiplied by (y) a fraction, the
numerator of which is the Market Price (as defined in Section 3.3 below) of the
-------
Shares less the Exercise Price and the denominator of which is such Market
Price. Solely for the purposes of this paragraph, Market Price shall be
calculated either (i) on the date which the form of election attached hereto is
deemed to have been sent to the Company pursuant to Section 16 hereof ("Notice
-------
Date") or (ii) as the average of the Market Prices for each of the five trading
days preceding the Notice Date, whichever of (i) or (ii) is greater.
(S)3.3 Definition of Market Price. As used herein, the phrase "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 Preferred
Stock or Common Stock, as the case may be, is listed or admitted to trading or
by the Nasdaq SmallCap Market ("NSM") or Nasdaq National Market ("NNM") as the
case may be, or, if the Preferred Stock or Common Stock, as the case may be, is
not listed or admitted to trading on any national securities exchanged or quoted
by NSM or NNM, the average closing bid price as furnished by the NASD through
NSM or NNM or similar organization if NSM or
5
<PAGE>
NNM is no longer reporting such information, or if the Preferred Stock or Common
Stock, as the case may be, is not quoted on NSM or NNM, as determined in good
faith by resolution of the Board of Directors of the Company, based on the best
information available to it.
4. Issuance of Certificates. Upon the exercise of the Warrants, the
------------------------
issuance of certificates for the Principal Securities, shares of Preferred Stock
and/or Redeemable Warrants and/or other securities, properties or rights
underlying such Warrants, shall be made forthwith (and in any event 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 satisfaction of the Company that such tax has been paid.
The Warrant Certificates and the certificates representing Principal
Securities underlying the Warrants (and/or other securities, property or rights
issuable upon the exercise of the Warrants) shall be executed on behalf of the
Company by the manual or facsimile signature of the then Chairman or Vice
Chairman of the Board of Directors or President or Vice President of the
Company. Warrant Certificates shall be dated the date of execution by the
Company upon initial issuance, division, exchange, substitution or transfer.
6
<PAGE>
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; that the Warrants may not be sold, transferred, assigned, hypothecated
or otherwise disposed of, in whole or in part, for a period of one (1) year from
the date hereof, except to officers of the Representative.
6. Exercise Price.
--------------
(S)6.1 Initial and Adjusted Exercise Price. Except as otherwise
-----------------------------------
provided in Section 8 hereof, the initial exercise price of each Warrant shall
-------
be (a) $____ [120% of the initial public offering price per share of Preferred
Stock] per share of Preferred Stock, (b) $______ per share of Common Stock [120%
of the initial public offering price per share of the Preferred Stock divided by
the then current Conversion Price for Common Stock] and (c) $___ [120% of the
initial public offering price per Redeemable Warrant] per Redeemable Warrant.
The adjusted exercise price shall be the price for Preferred Stock and Common
Stock and/or Redeemable Warrants, respectively, 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 and the provisions of the Certificate of
-------
Designation, as applicable.
(S)6.2 Exercise Price. The term "Exercise Price" herein shall mean
--------------
the initial exercise price or the adjusted exercise price, depending upon the
context or unless otherwise specified.
7. Registration Rights.
-------------------
(S)7.1 Registration Under the Securities Act of 1933. The Warrants,
---------------------------------------------
the Principal Securities, 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"). Upon exercise, in part or
7
<PAGE>
in whole, of the Warrants, certificates representing the Principal Securities
underlying the Warrants, and any of the other securities issuable upon 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"), 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.
(S)7.2 Piggyback Registration. If, at any time commencing after the
----------------------
effective date of the offering and expiring seven (7) years thereafter, 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) it will give written notice by
registered mail, at least thirty (30) days prior to the filing of each such
registration statement, to the Representative and to all other Holders of the
Warrants and/or the Warrant Securities of its intention to do so. If the
Representative or other Holders of the Warrants and/or Warrant Securities notify
the Company within twenty (20) business 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 the Representative and such Holders of the
Warrants and/or Warrant Securities the opportunity to have any such Warrant
Securities registered under such registration statement.
Notwithstanding the provisions of this Section 7.2, the Company shall
-------
have the right at any time after it shall have given written notice pursuant to
this Section 7.2 (irrespective of whether a written request for inclusion of any
-------
such securities shall have been
8
<PAGE>
made) to elect not to file any such proposed registration statement, or to
withdraw the same after the filing but prior to the effective date thereof.
If the registration, of which the Company gives notice, is for a
registered public offering involving an underwriting, the Company shall so
advise the Representative and all other Holders of the Warrants and the Warrant
Securities as a part of the written notice given pursuant to this Section 7.2.
-------
In such event, the right of the Holders to participate in such registration
pursuant to this Section 7.2 shall be conditioned upon the Holders'
-------
participation in such underwriting and the inclusion of the Holders' Warrant
Securities in the underwriting to the extent provided herein. The Holders shall
(together with the Company and the other holders of securities of the Company
with contractual registration rights to participate therein in distributing
their securities through such underwriting) enter into an underwriting agreement
in customary form with the representative of the underwriters selected by the
Company.
If the representative of underwriters advises the Company in writing
that marketing factors require a limitation on the number of shares to be
underwritten, such representative may (subject to the limitations set forth
below) exclude any or all Warrant Securities from, or limit the number of
Warrant Securities to be included in, the registration and underwriting. The
Company shall so advise all holders of securities requesting registration, and
the number of securities that are entitled to be included in the registration
and underwriting shall be allocated first to the Company for securities being
sold for its own account, second to the Holders pro rata and thereafter among
such other holders pro rata in proportion to the number of securities as to
which they had originally requested registration. If any such holder does not
agree to the terms of any such underwriting, he shall be excluded therefrom by
written notice from the Company or the underwriter. If securities are so
9
<PAGE>
withdrawn from the registration and if the number of Warrant Securities to be
included in such registration was previously reduced as a result of marketing
factors, the Company shall then offer (subject to the availability of a
reasonable amount of time to make such offer before the commencement of a
distribution) to all persons who have retained the right to include securities
in the registration the right to include additional securities in the
registration in an aggregate amount equal to the number of securities so
withdrawn, with such securities to be allocated among the persons requesting
additional inclusion pro rata in proportion to the number of securities as to
which they had originally requested such registration.
(S)7.3 Demand Registration.
-------------------
(a) At any time commencing after the effective date of the offering
and expiring five (5) years thereafter, 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 for the Company and counsel for the Representative 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
10
<PAGE>
Warrants and the Warrant Securities within ten (10) days from the date of the
receipt of any such registration request.
(c) In addition to the registration rights under Section 7.2 and
-------
subsection (a) of this Section 7.3, at any time commencing after the date hereof
-------
and expiring five (5) years thereafter, any Holder of Warrants and/or Warrant
Securities shall have the right, exercisable by written request to the Company,
to have the Company prepare and file, on one occasion, with the Commission a
registration statement so as to permit a public offering and sale for nine (9)
consecutive months by any such Holder of its Warrant Securities provided,
however, that the provisions of Section 7.4(b) hereof shall not apply to any
-------
such registration request and registration and all costs incident thereto shall
be at the expense of the Holder or Holders making such request.
(d) 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 shall have the option, upon the
written notice of election of a Majority of the Holders of the Warrants and/or
Warrant Securities, to repurchase (i) any and all Warrant Securities at the
higher of the Market Price per share of Preferred Stock or Common Stock and per
Redeemable Warrant, as the case may be, on (x) the date of the notice sent
pursuant to Section 7.3(a) or (y) the expiration of the period specified 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
11
<PAGE>
period specified in Section 7.4(a) or (ii) the delivery of the written notice of
-------
election specified in this Section 7.3(d).
-------
(S)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 thirty (30) days of receipt of any demand therefor, shall use
its best efforts to have any registration statements declared effective at the
earliest possible time, and shall furnish each Holder desiring to sell Warrant
Securities such number of prospectuses as shall reasonably be requested.
(b) The Company shall pay all costs (excluding fees and expenses of
Holder(s)' counsel and any underwriting or selling commissions), 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. The
Holder(s) will pay all costs, fees and expenses in connection with any
registration statement filed pursuant to Section 7.3(c).
-------
(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 such
states as reasonably are requested by the Holder(s), provided that the Company
shall not be obligated to execute or file any general consent to service of
process or to qualify as a foreign corporation to do business under the laws of
any such jurisdiction.
12
<PAGE>
(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 Holders 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 but only to
the same extent and with the same effect as the provisions pursuant to which the
Company has agreed to indemnify each of the Underwriters contained in Section 7
-------
of the Underwriting Agreement.
(e) The Holder(s) of the Warrant Securities to be sold pursuant to a
registration statement, and their successors and assigns, shall severally, and
not jointly, indemnify the Company, its officers and directors and each person,
if any, who controls the Company within the meaning of Section 15 of the Act or
-------
Section 20(a) of the Exchange Act, against all loss, claim, damage or expense or
- -------
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which they may become
subject under the Act, the Exchange Act or otherwise, arising from information
furnished by or on behalf of such Holders, or their successors or assigns, for
specific inclusion in such registration statement to the same extent and with
the same effect as the provisions contained in Section 7 of the Underwriting
-------
Agreement pursuant to which the Underwriters have agreed to indemnify the
Company.
(f) 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.
13
<PAGE>
(g) 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, 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.
(h) 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) and, in the case of such accountants' letter,
with respect to events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities.
(i) 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
14
<PAGE>
(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 statement.
(j) The Company shall deliver promptly to each Holder participating in
the offering requesting the correspondence and memoranda described below and to
the managing underwriters, copies of all correspondence between the Commission
and the Company, its counsel or auditors and all memoranda relating to
discussions with the Commission or its staff with respect to the registration
statement and permit each Holder and underwriters 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 or underwriter shall
reasonably request.
(k) The Company shall enter into an underwriting agreement with the
managing underwriters selected for such underwriting by Holders holding a
Majority of the Warrant Securities requested to be included in such
underwriting, which may be the Representative. Such agreement shall be
satisfactory in form and substance to the Company, each Holder and such managing
underwriters, and shall contain such representations, warranties and covenants
by the Company and such other terms as are customarily contained in agreements
of that type used by the managing underwriter. The Holders shall be parties to
any underwriting agreement relating to an underwritten sale of their Warrant
Securities and may, at their option, require that any or all the
representations, warranties and covenants of the Company to or for the
15
<PAGE>
benefit of such underwriters shall also be made to and for the benefit of such
Holders. Such Holders shall not be required to make any representations or
warranties to or agreements with the Company or the underwriters except as they
may relate to such Holders and their intended methods of distribution.
(l) 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 Preferred Stock, Common Stock, options, warrants or any
other securities convertible into shares of Common Stock.
(m) 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 (assuming
exercise of all of the Warrants and conversion of all Preferred Shares) 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 and (ii) have not been resold to
the public pursuant to a registration statement filed with the Commission under
the Act.
8. Adjustments to Exercise Price and Number of Securities.
------------------------------------------------------
(S)8.1 Subdivision and Combination. In case the Company shall at any
---------------------------
time subdivide or combine the outstanding shares of Preferred Stock or Common
Stock, the Exercise Price shall forthwith be proportionately decreased in the
case of subdivision or increased in the case of combination.
(S)8.2 Stock Dividends and Distributions. In case the Company shall
---------------------------------
pay a dividend in, or make a distribution of, shares of Preferred Stock, or
Common Stock, the
16
<PAGE>
Exercise Price shall forthwith be proportionately decreased. An adjustment made
pursuant to this Section 8.2 shall be made as of the record date for the subject
-------
stock dividend or distribution. [Specifically excluded from this Section 8
--------
shall be the ____ percent (__%) dividend, payable to all purchasers of Preferred
Stock in the Public Offering] .
(S)8.3 Adjustment in Number of Securities. Upon each adjustment of
----------------------------------
the Exercise Price pursuant to the provisions of this Section 8, the number of
-------
Warrant Securities issuable upon the exercise at the adjusted Exercise Price 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.
(S)8.4 Definition of Common Stock and Preferred Stock. (a) For the
----------------------------------------------
purpose of this Agreement, the term "Common Stock" shall mean (i) the class of
stock designated as Common Stock in the Articles 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.
(b) For the purpose of this Agreement, the term "Preferred
Stock" shall mean the Preferred Stock purchased by the Underwriters for resale
to the public in the Public Offering pursuant to the terms of the Underwriting
Agreement, as such Preferred Stock is more particularly described in the
Certificate of Designation incorporated therein, as the same may be amended from
time to time. The Preferred Shares issuable upon exercise of the
Representative's Warrants shall be identical to the Preferred Stock described in
the Certificate
17
<PAGE>
of Designation [except that such Preferred Shares cannot be redeemed.] In the
event of any change after the date hereof in the conversion ratio (or effective
conversion price) or, the time period for conversion of, or the number or class
of securities issuable upon conversion of, the Preferred Stock, the Holder of
any Representative's Warrant shall receive upon exercise thereof Preferred
Shares with a conversion ratio (and an effective conversion price) equal to the
conversion ratio (and an effective conversion price) then in effect for,
convertible for such number and class of securities as would be issuable upon
the conversion of, and convertible for such period of time as, Preferred Stock
issued and outstanding on the date hereof after giving effect to such change.
In addition, in the event that the Company grants to the holders of Preferred
Stock upon the exercise thereof any benefits or inducements not set forth in the
Certificate of Designation, the Holder shall be entitled to receive such benefit
or inducement upon the exercise by such Holder of any Representative's Warrant
to purchase Preferred Shares.
(S)8.5 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 or Preferred
Stock or other securities issuable upon exercise of the Warrants or conversion
of the Preferred Stock), or in the case of any sale or conveyance to another
person, corporation or other entity of the property of the Company as an
entirety or substantially as an entirety, then, as a condition of such
consolidation, merger, sale or conveyance, the Company or such successor or
purchasing entity, as the case may be, 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 Warrant then outstanding or
18
<PAGE>
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.
(S)8.6 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, the Redeemable
Warrants or the shares of Preferred Stock or the shares of Common
Stock issuable upon the exercise of (i) the Warrants, or (ii) the
Redeemable Warrants; or
(b) If the amount of said adjustment shall be less than ten
cents (10c) per Warrant 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 ten cents (10c) per Warrant
Security.
(S)8.7. Adjustment of Redeemable Warrants' Exercise Price. With
-------------------------------------------------
respect to any of the Redeemable Warrants whether or not the Redeemable Warrants
have been exercised (or are exercisable) and whether or not the Redeemable
Warrants are issued and outstanding, the Redeemable Warrant exercise price and
the number of shares of Common Stock underlying
19
<PAGE>
such Redeemable Warrants shall be automatically adjusted in accordance with
Section 8 of the Warrant Agreement between the Company and Continental Stock
- -------
Transfer & Trust Company dated as of the date hereof (the "Redeemable Warrant
Agreement"), upon the occurrence of any of the events described therein.
Thereafter, the underlying Redeemable Warrants shall be (exercisable at such
adjusted Redeemable Warrant exercise price for such adjusted number of
underlying shares of Common Stock or other securities, properties or rights.
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 Warrant 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 Preferred
Stock or Common Stock or Redeemable Warrants, as the case may be, upon the
exercise of the Warrants or the shares of Common Stock issuable upon exercise of
the Redeemable Warrants underlying the Warrants, nor shall it be required to
issue scrip or pay cash in lieu of fractional interests, it being the
20
<PAGE>
intent of the parties that all fractional interests shall be eliminated by
rounding any fraction up to the nearest whole number of shares of Preferred
Stock or Common Stock or Redeemable Warrants, as the case may be, 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 and
Redeemable Warrants, such number of shares of Preferred Stock and Common Stock
or other securities, properties or rights as shall be issuable upon conversion
thereof. The Company covenants and agrees that, upon exercise of the Warrants
and payment of the Exercise Price therefor as applicable, and/or the subsequent
conversion of the Preferred Shares, all shares of Preferred Stock and 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. The Company further covenants and agrees that, upon exercise
of the Redeemable Warrants underlying the Warrants and payment of the respective
Redeemable Warrant exercise price therefor, all shares of Common Stock and other
securities issuable upon such exercises shall be duly and validly issued, fully
paid, non-assessable and not subject to the pre-emptive rights of any
stockholder. As long as the Warrants shall be outstanding, the Company shall
use its best efforts to cause all shares of Preferred Stock and Common Stock and
Redeemable Warrants issuable upon the exercise of the Warrants and Redeemable
Warrants and all shares of Common Stock issuable upon conversion of the
Preferred Shares to be listed (subject to official notice of issuance) on all
securities exchanges on which the Preferred Stock and/or Common Stock and/or the
Redeemable Warrants issued to the public in connection herewith may then be
listed and/or quoted on NSM or NNM.
21
<PAGE>
12. Notices 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 matter, 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 exchangeable 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 written notice
of such event at least fifteen (15) days prior to the date fixed as a record
date or the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
22
<PAGE>
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. Redeemable Warrants.
-------------------
The form of the certificate representing Redeemable Warrants (and the
form of election to purchase shares of Common Stock upon the exercise of
Redeemable Warrants and the form of assignment printed on the reverse thereof)
shall be substantially as set forth in Exhibit "A" to the Redeemable Warrant
Agreement. Each Redeemable Warrant issuable upon exercise of the Warrants shall
evidence the right to initially purchase ___ fully paid and non assessable
shares of Common Stock at an initial purchase price of $____ [150% of the
Conversion Price of the Preferred Stock] per share commencing __________, 1997
[13 months from the date of the Prospectus] until 5:30 p.m. New York time on
__________, 1999 [36 months from the date of the Prospectus] at which time the
Redeemable Warrants, unless the exercise period has been extended, shall expire.
The exercise price of the Redeemable Warrants and the number of shares of Common
Stock issuable upon the exercise of the Redeemable Warrants are subject to
adjustment, whether or not the Warrants have been exercised and the Redeemable
Warrants have been issued, in the manner and upon the occurrence of the events
set forth in Section 8 of the Redeemable Warrant Agreement, which is hereby
-------
incorporated herein by reference and made a part hereof as if set forth in its
entirety herein. Subject to the provisions of this Agreement and upon issuance
of the Redeemable
23
<PAGE>
Warrants underlying the Warrants, each registered holder of such Redeemable
Warrant shall have the right to purchase from the Company (and the Company shall
issue to such registered holders) up to the number of fully paid and non-
assessable shares of Common Stock (subject to adjustment as provided herein and
in the Redeemable Warrant Agreement), free and clear of all preemptive rights of
stockholders, provided that such registered holder complies with the terms
governing exercise of the Redeemable Warrant set forth in the Redeemable Warrant
Agreement, and pays the applicable exercise price, determined in accordance with
the terms of the Redeemable Warrant Agreement. Upon exercise of the Redeemable
Warrants, the Company shall forthwith issue to the registered holder of any such
Redeemable Warrant in his name or in such name as may be directed by him,
certificates for the number of shares of Common Stock so purchased. Except as
otherwise provided in this Agreement, the Redeemable Warrants underlying the
Warrants shall be governed in all respects by the terms of the Redeemable
Warrant Agreement. The Redeemable Warrants shall be transferable in the manner
provided in the Redeemable Warrant Agreement, and upon any such transfer, a new
Redeemable Warrant Certificate shall be issued promptly to the transferee. The
Company covenants to, and agrees with the Holder(s) that without the prior
written consent of the Holder(s), which will not be unreasonably withheld, the
Redeemable Warrant Agreement will not be modified, amended, canceled, altered or
superseded, and that the Company will send to each Holder, irrespective of
whether or not the Warrants have been exercised, any and all notices required by
the Redeemable Warrant Agreement to be sent to holders of Redeemable Warrants.
24
<PAGE>
14. Notices.
-------
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly made and sent when
delivered, or mailed by registered or certified mail, return receipt requested:
(a) If to the registered Holder of the Warrants, to the address
of such Holder 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.
15. Supplements and Amendments. The Company and the Representative
--------------------------
may from time to time supplement or amend this Agreement without the approval of
any holders of Warrant Certificates (other than the Representative) in order to
cure any ambiguity, to correct or supplement any provision contained herein
which may be defective or inconsistent with any provisions herein, or to make
any other provisions in regard to matters or questions arising hereunder which
the Company and the Representative may deem necessary or desirable and which the
Company and the Representative deem shall not adversely affect the interests of
the Holders of Warrant Certificates.
16. Successors. All the covenants and provisions of this Agreement
----------
shall be binding upon and inure to the benefit of the Company, the Holders and
their respective successors and assigns hereunder.
17. Termination. This Agreement shall terminate at the close of
-----------
business on _______, 2003. Notwithstanding the foregoing, the indemnification
provisions of Section 7 shall survive such termination until the close of
-------
business on _______, 2009.
25
<PAGE>
18. Governing Law; 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 purposes shall be construed
in accordance with the laws of said State without giving effect to the rules of
said State governing the conflicts of laws.
The Company, the Representative and the Holders 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, the Representative and the Holders 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, the Representative
and the Holders (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
set forth in Section 3 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, the Representative and the Holders 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.
19. Entire Agreement; Modification. This Agreement (including the
------------------------------
Underwriting Agreement to the extent portions thereof are referred to herein)
contains the entire understanding between the parties hereto with respect to the
subject matter hereof and
26
<PAGE>
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.
20. 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.
21. 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 Agreement and shall be given no substantive effect.
22. Benefits of this Agreement. Nothing in this Agreement shall be
--------------------------
construed to give to any person or corporation other than the Company and the
Representative and any other registered Holder(s) of the Warrant Certificates or
Warrant Securities any legal or equitable right, remedy or claim under this
Agreement; and this Agreement shall be for the sole benefit of the Company and
the Representative and any other registered Holders of Warrant Certificates or
Warrant Securities.
23. 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 instrument.
27
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
MEDICAL DEVICE TECHNOLOGIES, INC.
By:_______________________________________________
M. Lee Hulsebus
President
Attest:
__________________________
FIRST ALLIED SECURITIES, INC.
By:_______________________________________________
Name:
Title:
28
<PAGE>
EXHIBIT A
[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, __________, 2001
No. W- _______ Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that __________, or registered
assigns, is the registered holder of _____________ Warrants to purchase
initially, at any time from __________, 1997 [one year from the effective date
of the Registration statement] until 5:30 p.m. New York time on ___________,
2001 [five years from the effective date of the Registration Statement]
("Expiration Date"), up to (a) __________ fully-paid and non-assessable shares
of preferred stock, ("Preferred Stock") of MEDICAL DEVICE TECHNOLOGIES, INC., a
Delaware corporation (the "Company"), (or, in accordance with the Warrant
Agreement, such number of shares of Common Stock, other securities and/or
property of the Company into which a share of preferred stock has been
converted) (collectively "Preferred Stock") at the initial exercise price,
subject to adjustment in certain events of $____ [120% of the initial public
offering price per share of Preferred Stock] per share of Preferred Stock, or up
to ____ fully-paid and non-assessable shares of Common Stock, par value $.001
per share, of the Company (the "Common Stock"), at the initial exercise price,
subject to adjustment in certain events of $____ [120% of the initial public
offering price per share of Preferred Stock divided by the Conversion Price] per
share, or any combination of such Common Stock and/or Convertible Preferred
Stock and/or ___ Redeemable Warrants (one Redeemable Warrant entitling the owner
to purchase ___ fully-paid and non-assessable shares of Common Stock) at the
initial exercise price, subject to adjustment in certain events of $___ [120% of
the initial public offering price
A-1
<PAGE>
per Redeemable Warrant] per Redeemable Warrant upon surrender of this Warrant
Certificate and payment of the Preferred Exercise Price and/or the Common
Exercise Price, as the case may be, at an office or agency of the Company, but
subject to the conditions set forth herein and in the warrant agreement dated as
of ____________, 1996 between the Company and FIRST ALLIED SECURITIES, INC.
(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 or by surrender of this Warrant Certificate.
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, limitation
of 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 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 or 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.
A-2
<PAGE>
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of ___________, 1996
[SEAL] MEDICAL DEVICE TECHNOLOGIES, INC.
By:________________________________
M. Lee Hulsebus
President
A-3
<PAGE>
[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 Preferred Stock;
[_] _______________________ shares of Common Stock;
[_] _______________________ Redeemable Warrants;
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 Medical Device
Technologies, Inc., in the amount of $____, all in accordance with the terms of
Section 3.1 of the Representative's Warrant Agreement dated as of _____, 1996
between Medical Device Technologies, Inc., and First Allied Securities, Inc.
The undersigned requests that a certificate or certificates, as the case may be,
for such Securities be registered in the name of
___________________________________ whose address is _____________________ and
that such certificate or certificates be delivered to _________________________
whose address is ________________________.
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 Holder)
A-4
<PAGE>
[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 Preferred Stock;
[_] _______________________ shares of Common Stock;
[_] _______________________ Redeemable Warrants;
in accordance with the terms of Section 3.2 of the Representative's Warrant
Agreement dated as of _________, 1996 between Medical Device Technologies, Inc.,
and First Allied Securities, Inc. The undersigned requests that a certificate
or certificates, as the case may be, for such Securities be registered in the
name of ___________________________________ whose address is
_____________________ and that such certificate or certificates be delivered to
_________________________ whose address is ________________________.
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 Holder)
A-5
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED ____________________________________ hereby 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>
OHS Draft
5/22/96
================================================================================
MEDICAL DEVICE TECHNOLOGIES, INC.
AND
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
________________
WARRANT AGREEMENT
DATED AS OF ______________, 1996
================================================================================
<PAGE>
WARRANT AGREEMENT, dated this ___ day of ________ 1996 [the effective date
of the Registration Statement], by and between MEDICAL DEVICE TECHNOLOGIES,
INC., a Utah corporation (the "Company"), and CONTINENTAL STOCK TRANSFER & TRUST
COMPANY, a New York corporation.
WITNESSETH:
WHEREAS, in connection with (i) the offering to the public of up to
1,400,000 shares (the "Shares") of the Company's preferred stock, par value $.01
per share, and up to 1,400,000 redeemable common stock purchase warrants (the
"Warrants"), each Warrant entitling the holder thereof to purchase ___ Shares of
Common Stock par value $.15 per share, (ii) the sale by certain selling security
holders of the Company (the "Selling Security Holders") of 247,500 shares of
Preferred Stock and 247,500 Warrants (and the _______ Shares underlying such
Warrants), (iii) the over-allotment option granted to First Allied Securities,
Inc., as representative of the several underwriters (the "Representative") in
the public offering referred to above, to purchase up to an additional 210,000
Shares and/or an additional 210,000 Warrants (the "Over-Allotment Option"), and
(iv) the sale to the Underwriter or its designees of warrants (the
"Representative's Warrants") to purchase up to 140,000 Shares and/or 140,000
Warrants, the Company will issue up to 1,997,500 Warrants (subject to increase
as provided herein and in the Representative's Warrant Agreement (as such term
is defined in Section 1(u) hereof));
-------
WHEREAS, the Company desires to provide for the issuance of certificates
representing the Warrants; and
WHEREAS, the Company desires the Warrant Agent (as defined in Section 1(x)
-------
hereof) to act on behalf of the Company, and the Warrant Agent is willing to so
act, in
<PAGE>
connection with the issuance, registration, transfer and exchange of
certificates representing the Warrants and the exercise of the Warrants.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
hereinafter set forth and for the purpose of defining the terms and provisions
of the Warrants and the certificates representing the Warrants and the
respective rights and obligations thereunder of the Company, the Underwriter,
the holders of certificates representing the Warrants and the Warrant Agent, the
parties hereto agree as follows:
SECTION 1. Definitions. As used herein, the following terms shall have
-----------
the following meanings, unless the context shall otherwise require:
(a) "Act" shall mean the Securities Act of 1933, as amended.
(b) "Change of Shares" shall have the meaning assigned to such term
in Section 8(a)(i) of this Agreement.
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(c) "Commission" shall mean the Securities and Exchange Commission.
(d) "Common Stock" shall mean stock of the Company of any class,
whether now or hereafter authorized, which has the right to participate in the
voting and in the distribution of earnings and assets of the Company without
limit as to amount or percentage.
(e) "Company" shall have the meaning assigned to such term in the
first (1st) paragraph of this Agreement.
(f) "Corporate Office" shall mean the office of the Warrant Agent
at which at any particular time its principal business in New York, New York,
shall be administered, which office is located on the date hereof at 2 Broadway,
New York, New York 10004.
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<PAGE>
(g) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
(h) "Exercise Date" shall mean, subject to the provisions of
Section 5(b) hereof, as to any Warrant, the date on which the Warrant Agent
- -------
shall have received both (i) the Warrant Certificate representing such Warrant,
with the exercise form the reon duly executed by the Registered Holder (as
defined in Section 1(o) hereof) thereof or his attorney duly authorized in
-------
writing, and (ii) payment in cash or by check made payable to the Warrant Agent
for the account of the Company of an amount in lawful money of the United States
of America equal to the applicable Purchase Price (as defined in Section 1(l)
-------
hereof).
(i) "Initial Warrant Exercise Date" shall mean __________, 1996
[thirteen (13) months after the effective date of the Registration Statement].
(j) "Initial Warrant Redemption Date" shall mean __________, 1996
[the date sixteen (16) months after the effective date of the Registration
Statement].
(k) "NASD" shall mean the National Association of Securities
Dealers, Inc.
(l) "Purchase Price" shall mean, subject to modification and
adjustment as provided in Section 8 hereof, __________ dollars ($__________) per
-------
Share [150% of the conversion price of the Preferred Stock].
(m) "Over-Allotment Option" shall have the meaning assigned to such
term in the first (1st) WHEREAS clause of this Agreement.
(n) "Redemption Date" shall mean the date (which may not occur
before the Initial Warrant Redemption Date) fixed for the redemption of the
Warrants in accordance with the terms hereof.
3
<PAGE>
(o) "Registered Holder" shall mean the person in whose name any
certificate representing the Warrants shall be registered on the books
maintained by the Warrant Agent pursuant to Section 6(b) hereof.
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(p) "Selling Security Holders" shall have the meaning assigned to
such term in the first (1st) WHEREAS clause of this Agreement.
(q) "Shares" shall have the meaning assigned to such term in the
first (1st) WHEREAS clause of this Agreement,
(r) "Subsidiary" or "Subsidiaries" shall mean any corporation or
corporations, as the case may be, of which stock having ordinary power to elect
a majority of the board of directors of such corporation or corporations
(regardless of whether or not at the time the stock of any other class or
classes of such corporation shall have or may have voting power by reason of the
happening of any contingency) is at the time directly or indirectly owned by the
Company or by one or more Subsidiaries, or by the Company and one or more
Subsidiaries.
(s) "Transfer Agent" shall mean Continental Stock Transfer & Trust
Company, New York, New York, or its authorized successor.
(t) "Representative" shall have the meaning assigned to such term
in the first (1st) WHEREAS clause of this Agreement.
(u) "Representative's Warrant Agreement" shall mean the agreement
dated as of _______________, 1996 [the effective date of the Registration
Statement] between the Company and the Underwriter relating to and governing the
terms and provisions of the Representative's Warrants.
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<PAGE>
(v) "Representative's Warrants" shall have the meaning assigned to
such term in the first (1st) WHEREAS clause of this Agreement.
(w) "Underwriting Agreement" shall mean the underwriting agreement
dated _______________, 1996 [the effective date of the Registration Statement]
between the Company and the Underwriter relating to the purchase for resale to
the public of 1,400,000 Shares and 1,400,000 Warrants (without giving effect to
the Over-Allotment Option).
(x) "Warrant Agent" shall mean Continental Stock Transfer & Trust
Company, New York, New York or its authorized successor.
(y) "Warrant Certificate" shall mean a certificate representing
each of the Warrants substantially in the form annexed hereto as Exhibit A.
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(z) "Warrant Expiration Date" shall mean, unless the Warrants are
redeemed as provided in Section 9 hereof prior to such date, 5:00 p.m. (New York
-------
time) on __________, 1999 [the day before the 3rd anniversary of the effective
date of the Registration Statement], or, if such date shall in the State of New
York be a holiday or a day on which banks are authorized to close, then 5:00
p.m. (New York time) on the next following day which in the State of New York is
not a holiday or a day on which banks are authorized to close, subject to the
Company's right, prior to the Warrant Expiration Date, with the consent of the
Underwriter, to extend such Warrant Expiration Date on five (5) business days
prior written notice to the Registered Holders.
(aa) "Warrants" shall have the meaning assigned to such term in the
first (1st) WHEREAS clause of this Agreement.
SECTION 2. Warrants and Issuance of Warrant Certificates.
---------------------------------------------
5
<PAGE>
(a) Each Warrant shall initially entitle the Registered Holder of
the Warrant Certificate representing such Warrant to purchase at the Purchase
Price therefor from the Initial Warrant Exercise Date until the Warrant
Expiration Date one (1) share of Common Stock upon the exercise thereof, subject
to modification and adjustment as provided in Section 8 hereof.
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(b) Upon execution of this Agreement, Warrant Certificates
representing 1,647,500 Warrants to purchase up to an aggregate of _________
shares of Common Stock (subject to modification and adjustment as provided in
Section 8 hereof), including 247,500 Warrants in the names of the Selling
- -------
Security Holders, shall be executed by the Company and delivered to the Warrant
Agent.
(c) Upon exercise of the Over-Allotment Option, in whole or in
part, Warrant Certificates representing up to 210,000 Warrants to purchase up to
an aggregate of _______ shares of Common Stock (subject to modification and
adjustment as provided in Section 8 hereof) shall be executed by the Company and
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delivered to the Warrant Agent.
(d) Upon exercise of the Representative's Warrants, Warrant
Certificates representing up to 140,000 Warrants to purchase up to an aggregate
of _______ shares of Common Stock (subject to modification and adjustment as
provided in Section 8 hereof and in the Representative's Warrant Agreement),
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shall be countersigned, issued and delivered by the Warrant Agent upon written
order of the Company signed by its Chairman of the Board, President or a Vice
President and by its Treasurer or an Assistant Treasurer or its Secretary or an
Assistant Secretary.
(e) From time to time, up to the Warrant Expiration Date, the
Warrant Agent shall countersign and deliver Warrant Certificates in required
denominations of one or
6
<PAGE>
whole number multiples thereof to the person entitled thereto in connection with
any transfer or exchange permitted under this Agreement. No Warrant
Certificates shall be issued except (i) Warrant Certificates initially issued
hereunder, (ii) Warrant Certificates issued upon any transfer or exchange of
Warrants, (iii) Warrant Certificates issued in replacement of lost, stolen,
destroyed or mutilated Warrant Certificates pursuant to Section 7 hereof, (iv)
-------
Warrant Certificates issued pursuant to the Representative's Warrant Agreement
(including Warrants in excess of the 140,000 Warrants issued as a result of the
antidilution provisions contained in the Representative's Warrant Agreement),
and (v) at the option of the Company, Warrant Certificates in such form as may
be approved by its Board of Directors, to reflect any adjustment or change in
the Purchase Price, the number of shares of Common Stock purchasable upon the
exercise of a Warrant or the redemption price therefor.
SECTION 3. Form and Execution of Warrant Certificates.
------------------------------------------
(a) The Warrant Certificates shall be substantially in the form
annexed hereto as Exhibit A (the provisions of which are hereby incorporated
-------
herein) and may have such letters, numbers or other marks of identification or
designation and such legends, summaries or endorsements printed, lithographed or
engraved thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
law or with any rule or regulation made pursuant thereto or with any rule or
regulation of any stock exchange on which the Warrants may be listed, or to
conform to usage. The Warrant Certificates shall be dated the date of issuance
thereof (whether upon initial issuance, transfer, exchange or in lieu of
mutilated, lost, stolen or destroyed Warrant Certificates).
7
<PAGE>
(b) Warrant Certificates shall be executed on behalf of the Company
by its Chairman of the Board, President or any Vice President and by its
Treasurer or an Assistant Treasurer or its Secretary or an Assistant Secretary,
by manual signatures or by facsimile signatures printed thereon, and shall have
imprinted thereon a facsimile of the Company's seal. Warrant Certificates shall
be manually countersigned by the Warrant Agent and shall not be valid for any
purpose unless so countersigned. In case any officer of the Company who shall
have signed any of the Warrant Certificates shall cease to be such officer of
the Company before the date of issuance of the Warrant Certificates or before
countersignature by the Warrant Agent and issue and delivery thereof, such
Warrant Certificates, nevertheless, may be countersigned by the Warrant Agent
and issued and delivered with the same force and effect as though the officer of
the Company who signed such Warrant Certificates had not ceased to hold such
office.
SECTION 4. Exercise.
--------
(a) Warrants in denominations of one or whole number multiples
thereof may be exercised commencing at any time on or after the Initial Warrant
Exercise Date, but not after the Warrant Expiration Date, upon the terms and
subject to the conditions set forth herein (including the provisions set forth
in Sections 5 and 9 hereof) and in the applicable Warrant Certificate. A Warrant
--------
shall be deemed to have been exercised immediately prior to the close of
business on the Exercise Date, provided that the Warrant Certificate
representing such Warrant, with the exercise form thereon duly executed by the
Registered Holder thereof or his attorney duly authorized in writing, together
with payment in cash or by check made payable to the Warrant Agent for the
account of the Company of an amount in lawful money of the United States of
America equal to the applicable Purchase Price, have been received
8
<PAGE>
by the Warrant Agent. The person entitled to receive the securities deliverable
upon such exercise shall be treated for all purposes as the holder of such
securities as of the close of business on the Exercise Date. As soon as
practicable on or after the Exercise Date and in any event within five (5)
business days after such date, the Warrant Agent, on behalf of the Company,
shall cause to be issued to the person or persons entitled to receive the same a
Common Stock certificate or certificates for the shares of Common Stock
deliverable upon such exercise, and the Warrant Agent shall deliver the same to
the person or persons entitled thereto. Upon the exercise of any Warrants, the
Warrant Agent shall promptly notify the Company in writing of such fact and of
the number of securities delivered upon such exercise and, subject to Section
-------
4(b) hereof, shall cause all payments in cash or by check made payable to the
order of the Company in respect of the Purchase Price to be deposited promptly
in the Company's bank account or delivered to the Company.
(b) At any time upon the exercise of any Warrants after __________,
1997 [the 1st anniversary of the effective date of the Registration Statement],
the Warrant Agent shall, on a daily basis, within two (2) business days after
any such exercise, notify the Underwriter or its successors or assigns of the
exercise of any such Warrants and shall, on a weekly basis (subject to
collection of funds constituting the tendered Purchase Price, but in no event
later than five (5) business days after the last day of the calendar week in
which such funds were tendered), remit to the Underwriter or its successors or
assigns an amount equal to five percent (5%) of the Purchase Price of such
Warrants being then exercised unless the Underwriter or its successors or
assigns shall have notified the Warrant Agent that the payment of such amount
with respect to any such Warrant is violative of the rules and regulations
promulgated under the Exchange Act, the rules and regulations of the NASD or
9
<PAGE>
applicable state securities or "blue sky" laws, or the Warrants are those
underlying the Representative's Warrants, in any of which events the Warrant
Agent shall have to pay such amount to the Company; provided, however, that the
-------- -------
Warrant Agent shall not be obligated to pay any amounts pursuant to this Section
-------
4(b) during any week that such amounts payable are less than one thousand
dollars ($1,000) and the Warrant Agent's obligation to make such payments shall
be suspended until the amount payable aggregates one thousand dollars ($1,000),
and provided further, that, in any event, any such payment (regardless of
amount) shall be made not less frequently than monthly.
(c) The Company shall not be obligated to issue any fractional
share interests or fractional warrant interests upon the exercise of any Warrant
or Warrants, nor shall it be obligated to issue scrip or pay cash in lieu of
fractional interests. Any fraction equal to or greater than one-half (1/2) shall
be rounded up to the next full share or Warrant, as the case may be. Any
fraction less than one-half shall be eliminated.
SECTION 5. Reservation of Shares, Listing, Payment of Taxes, etc.
------------------------------------------------------
(a) The Company covenants that it will at all times reserve and
keep available out of its authorized Common Stock, solely for the purpose of
issuance upon the exercise of Warrants, such number of shares of Common Stock as
shall then be issuable upon the exercise of all outstanding Warrants. The
Company covenants that, upon exercise of the Warrants and payment of the
Purchase Price for the shares of Common Stock underlying the Warrants, all
shares of Common Stock which shall be issuable upon such exercise shall be duly
and validly issued, fully paid, non-assessable, free from all preemptive or
similar rights, and free from all taxes, liens and charges with respect to the
issuance thereof, and that upon issuance such shares shall be listed or quoted
on each securities
10
<PAGE>
exchange, if any, on which the other shares of outstanding Common Stock are then
listed or quoted, or if not then so listed or quoted on each place (whether the
Nasdaq Stock Market, Inc., the NASD Over-the-Counter Bulletin Board, the
National Quotation Bulletin Board "Pink Sheets" or otherwise) on which the other
shares of outstanding Common Stock are listed or quoted.
(b) The Company covenants that if any securities reserved for the
purpose of exercise of Warrants hereunder require registration with, or approval
of, any governmental authority under any federal securities law before such
securities may be validly issued or delivered upon such exercise, then the
Company will file a registration statement under the federal securities laws or
a post-effective amendment to a registration statement, use its best efforts to
cause the same to become effective, keep such registration statement current
while any of the Warrants are outstanding and deliver a prospectus which
complies with Section 10(a)(3) of the Act, to the Registered Holder exercising
the Warrant (except, if in the opinion of counsel to the Company, such
registration is not required under the federal securities law or if the Company
receives a letter from the staff of the Commission stating that it would not
take any enforcement action if such registration is not effected). The Company
will use its best efforts to obtain appropriate approvals or registrations under
the state "blue sky" securities laws of all states in which Registered Holders
reside. Warrants may not be exercised by, nor may shares of Common Stock be
issued to, any Registered Holder in any state in which such exercise would be
unlawful.
(c) The Company shall pay all documentary, stamp or similar taxes
and other governmental charges that may be imposed with respect to the issuance
of Warrants, or the issuance or delivery of any shares of Common Stock upon
exercise of the Warrants;
11
<PAGE>
provided, however, that if shares of Common Stock are to be delivered in a name
- -------- -------
other than the name of the Registered Holder of the Warrant Certificate
representing any Warrant being exercised, then no such delivery shall be made
unless the person requesting the same has paid to the Warrant Agent the amount
of transfer taxes or charges incident thereto, if any.
(d) The Warrant Agent is hereby irrevocably authorized as the
Transfer Agent to requisition from time to time certificates representing shares
of Common Stock or other securities required upon exercise of the Warrants, and
the Company will comply with all such requisitions.
SECTION 6. Exchange and Registration of Transfer.
-------------------------------------
(a) Warrant Certificates may be exchanged for other Warrant
Certificates representing an equal aggregate number of Warrants or may be
transferred in whole or in part. Warrant Certificates to be so exchanged shall
be surrendered to the Warrant Agent at its Corporate Office, and the Company
shall execute and the Warrant Agent shall countersign, issue and deliver in
exchange therefor the Warrant Certificate or Certificates which the Registered
Holder making the exchange shall be entitled to receive.
(b) The Warrant Agent shall keep, at such office, books in which,
subject to such reasonable regulations as it may prescribe, it shall register
Warrant Certificates and the transfer thereof. Upon due presentment for
registration of transfer of any Warrant Certificate at such office, the Company
shall execute and the Warrant Agent shall issue and deliver to the transferee or
transferees a new Warrant Certificate or Certificates representing an equal
aggregate number of Warrants.
(c) With respect to any Warrant Certificates presented for
registration of transfer, or for exchange or exercise, the subscription or
assignment form, as the case may
12
<PAGE>
be, on the reverse thereof shall be duly endorsed or be accompanied by a written
instrument or instruments of subscription or assignment, in form satisfactory to
the Company and the Warrant Agent, duly executed by the Registered Holder
thereof or his attorney duly authorized in writing.
(d) No service charge shall be made for any exchange or
registration of transfer of Warrant Certificates. However, the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection therewith.
(e) All Warrant Certificates surrendered for exercise or for
exchange shall be promptly cancelled by the Warrant Agent.
(f) Prior to due presentment for registration or transfer thereof,
the Company and the Warrant Agent may deem and treat the Registered Holder of
any Warrant Certificate as the absolute owner thereof of each Warrant
represented thereby (notwithstanding any notations of ownership or writing
thereon made by anyone other than the Company or the Warrant Agent) for all
purposes and shall not be affected by any notice to the contrary.
SECTION 7. Loss or Mutilation. Upon receipt by the Company and the
------------------
Warrant Agent of evidence satisfactory to them of the ownership of and the loss,
theft, destruction or mutilation of any Warrant Certificate and (in the case of
loss, theft or destruction) of indemnity satisfactory to them, and (in case of
mutilation) upon surrender and cancellation thereof, the Company shall execute
and the Warrant Agent shall countersign and deliver in lieu thereof a new
Warrant Certificate representing an equal number of Warrants. Applicants
13
<PAGE>
for a substitute Warrant Certificate shall also comply with such other
reasonable regulations and pay such other reasonable charges as the Warrant
Agent may prescribe.
SECTION 8. Adjustment of Purchase Price and Number of Shares of Common
-----------------------------------------------------------
Stock Deliverable.
- -----------------
(a) (i) Except as hereinafter provided, in the event the Company
shall, at any time or from time to time after the date hereof, sell any shares
of Common Stock for a consideration per share less than the Purchase Price or
issue any shares of Common Stock as a stock dividend to the holders of Common
Stock, or subdivide or combine the outstanding shares of Common Stock into a
greater or lesser number of shares (any such sale, issuance, subdivision or
combination being herein called a "Change of Shares"), then, and thereafter upon
each further Change of Shares, the Purchase Price for the Warrants (whether or
not the same shall be issued and outstanding) in effect immediately prior to
such Change of Shares shall be changed to a price (including any applicable
fraction of a cent to the nearest cent) determined by dividing (A) the sum of
(x) the total number of shares of Common Stock outstanding immediately prior to
such Change of Shares, multiplied by the Purchase Price in effect immediately
prior to such Change of Shares, and (y) the consideration, if any, received by
the Company upon such sale, issuance, subdivision or combination by (B) the
total number of shares of Common Stock outstanding immediately after such Change
of Shares; provided, however, that in no event shall the Purchase Price be
-------- -------
adjusted pursuant to this computation to an amount in excess of the Purchase
Price in effect immediately prior to such computation, except in the case of a
combination of outstanding shares of Common Stock.
For the purposes of any adjustment to be made in accordance with this
Section 8(a)(i) the following provisions shall be applicable:
- -------
14
<PAGE>
(A) In case of the issuance or sale of shares of Common Stock
(or of other securities deemed hereunder to involve the issuance or sale of
shares of Common Stock) for a consideration part or all of which shall be cash,
the amount of the cash portion of the consideration therefor deemed to have been
received by the Company shall be (i) the subscription price, if shares of Common
Stock are offered by the Company for subscription, or (ii) the 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),
if such securities are sold to underwriters or dealers for public offering
without a subscription offering, or (iii) the gross amount of cash actually
received by the Company for such securities, in any other case.
(B) In case of the issuance or sale (otherwise than as a
dividend or other distribution on any stock of the Company, and otherwise than
on the exercise of options, rights or warrants or the conversion or exchange of
convertible or exchangeable securities) of shares of Common Stock (or of other
securities deemed hereunder to involve the issuance or sale 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 deemed to have been
received by the Company shall be the value of such consideration as determined
in good faith by the Board of Directors of the Company on the basis of a record
of values of similar property or services.
(C) 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
15
<PAGE>
shareholders entitled to receive such dividend or other distribution and shall
be deemed to have been issued without consideration.
(D) The reclassification of securities of the Company other
than shares of Common Stock into securities including 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 (B) of this Section 8(a)(i).
-------
(E) The number of shares of Common Stock at any one time
outstanding shall be deemed to include the aggregate maximum number of shares
issuable (subject to readjustment upon the actual issuance thereof) upon the
exercise of options, rights or warrants and upon the conversion or exchange of
convertible or exchangeable securities.
(ii) Upon each adjustment of the Purchase Price pursuant to this
Section 8, the number of shares of Common Stock purchasable upon the exercise of
- -------
each Warrant shall be the number derived by multiplying the number of shares of
Common Stock purchasable immediately prior to such adjustment by the Purchase
Price in effect prior to such adjustment and dividing the product so obtained by
the applicable adjusted Purchase Price.
(b) 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 (determined as provided in Section 8(a)(i)
-------
hereof and as provided below) less than the
16
<PAGE>
Purchase Price in effect immediately prior to the issuance of such options,
rights or warrants, or such convertible or exchangeable securities, or without
consideration (including the issuance of any such securities by way of dividend
or other distribution), the Purchase Price for the Warrants (whether or not the
same shall be issued and outstanding) in effect 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 the computation in accordance with the provisions of
Section 8(a)(i) hereof, provided that:
- -------
(A) The aggregate maximum number of shares of Common Stock, as
the case may be, issuable or that may become issuable under such options, rights
or warrants (assuming exercise in full even if not then currently exercisable or
currently exercisable in full) shall be deemed to be issued and outstanding at
the time such options, rights or warrants were issued, 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, if any, received by
the Company for such options, rights or warrants; provided, however, that upon
-------- -------
the expiration or other termination of such options, rights or warrants, if any
thereof shall not have been exercised, the number of shares of Common Stock
deemed to be issued and outstanding pursuant to this subsection (A) (and for the
purposes of subsection (E) of Section 8(a)(i) hereof) shall be reduced by the
-------
number of shares as to which options, warrants and/or rights shall have expired,
and such number of shares shall no longer be deemed to be issued and
outstanding, and the Purchase Price then in effect shall forthwith be readjusted
and thereafter be the price that it would have been had adjustment been made on
the basis of the issuance only of the shares actually issued plus the
17
<PAGE>
shares remaining issuable upon the exercise of those options, rights or warrants
as to which the exercise rights shall not have expired or terminated
unexercised.
(B) The aggregate maximum number of shares of Common Stock
issuable or that may become issuable upon conversion or exchange of any
convertible or exchangeable securities (assuming conversion or exchange in full
even if not then currently convertible or exchangeable in full) shall be deemed
to be issued and outstanding at the time of issuance of such securities, for a
consideration equal to the consideration received by the Company for such
securities, plus the minimum consideration, if any, receivable by the Company
upon the conversion or exchange thereof; provided, however, that upon the
-------- -------
termination of the right to convert or exchange such convertible or exchangeable
securities (whether by reason of redemption or otherwise), the number of shares
of Common Stock deemed to be issued and outstanding pursuant to this subsection
(B) (and for the purposes of subsection (E) of Section 8(a)(i) hereof) shall be
-------
reduced by the number of shares as to which the conversion or exchange rights
shall have expired or terminated unexercised, and such number of shares shall no
longer be deemed to be issued and outstanding, and the Purchase Price then in
effect shall forthwith be readjusted and thereafter be the price that it would
have been had adjustment been made on the basis of the issuance only of the
shares actually issued plus the shares remaining issuable upon conversion or
exchange of those convertible or exchangeable securities as to which the
conversion or exchange rights shall not have expired or terminated unexercised.
(C) 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(b), or in the price per share or ratio at which the securities
-------
referred to in subsection (B) of this
18
<PAGE>
Section 8(b) are convertible or exchangeable, such options, rights or warrants
- -------
or conversion or exchange rights, as the case may be, to the extent not
theretofore exercised, 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.
(c) In case of any reclassification or change of outstanding shares
of Common Stock issuable upon exercise of the Warrants (other than a change in
par value, or from par value to no par value, or from no par value to par value
or as a result of a subdivision or combination), or in case of any consolidation
or merger of the Company with or into another corporation (other than a merger
with a Subsidiary in which merger the Company is the continuing corporation and
which does not result in any reclassification or change of the then outstanding
shares of Common Stock or other capital stock issuable upon exercise of the
Warrants), 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, then, as
a condition of such reclassification, change, consolidation, merger, sale or
conveyance, the Company, or such successor or purchasing corporation, as the
case may be, shall make lawful and adequate provision whereby the Registered
Holder of each Warrant then outstanding shall have the right thereafter to
receive on exercise of such Warrant the kind and amount of securities and
property receivable upon such reclassification, change, consolidation, merger,
sale or conveyance by a holder of the number of securities issuable upon
exercise of such Warrant immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance and shall forthwith file at the
Corporate Office of the Warrant Agent a statement
19
<PAGE>
signed by its Chairman of the Board, President or a Vice President and by its
Treasurer or an Assistant Treasurer or its Secretary or an Assistant Secretary
evidencing such provision. Such provisions shall include provision for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in Sections 8(a) and 8(b) hereof. The above provisions
--------
of this Section 8(c) shall similarly apply to successive reclassifications and
-------
changes of shares of Common Stock and to successive consolidations, mergers,
sales or conveyances.
(d) Irrespective of any adjustments or changes in the Purchase
Price or the number of shares of Common Stock purchasable upon exercise of the
Warrants, the Warrant Certificates theretofore and thereafter issued shall,
unless the Company shall exercise its option to issue new Warrant Certificates
pursuant to Section 2(e) hereof, continue to express the Purchase Price per
-------
share and the number of shares purchasable thereunder as the Purchase Price per
share and the number of shares purchasable thereunder were expressed in the
Warrant Certificates when the same were originally issued.
(e) After each adjustment of the Purchase Price pursuant to this
Section 8, the Company will promptly prepare a certificate signed by the
- -------
Chairman of the Board, President, or a Vice President and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary of the Company
setting forth: (i) the Purchase Price as so adjusted, (ii) the number of shares
of Common Stock purchasable upon exercise of each Warrant, after such
adjustment, and (iii) a brief statement of the facts accounting for such
adjustment. The Company will promptly file such certificate with the Warrant
Agent and cause a brief summary thereof to be sent by ordinary first class mail
to each Registered Holder at his last address as it shall appear on the registry
books of the Warrant Agent. No
20
<PAGE>
failure to mail such notice nor any defect therein or in the mailing thereof
shall affect the validity thereof except as to the holder to whom the Company
failed to mail such notice, or except as to the holder whose notice was
defective. The affidavit of an officer of the Warrant Agent or the Secretary or
an Assistant Secretary of the Company that such notice has been mailed shall, in
the absence of fraud, be prima facie evidence of the facts stated therein.
(f) No adjustment of the Purchase Price shall be made as a result
of or in connection with (A) the issuance or sale of shares of Common Stock
pursuant to options, warrants, stock purchase agreements and convertible or
exchangeable securities outstanding or in effect on the date hereof, (B) the
issuance or sale of shares of Common Stock upon the exercise of any "incentive
stock options" (as such term is defined in the Internal Revenue Code of 1986, as
amended), whether or not such options were outstanding on the date hereof, or
(C) the issuance or sale of shares of Common Stock if the amount of said
adjustment shall be less than ten cents ($.10); 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 that shall amount, together with any adjustment so carried
forward, to at least ten cents ($.10). In addition, Registered Holders shall
not be entitled to cash dividends paid by the Company prior to the exercise of
any Warrant or Warrants held by them.
SECTION 9. Redemption.
----------
(a) Commencing on the Initial Warrant Redemption Date, the Company
may (but only with the prior written consent of the Underwriter), on thirty (30)
days' prior written notice, redeem all of the Warrants at a redemption price of
ten cents ($.10) per
21
<PAGE>
Warrant; provided, however, that before any such call for redemption of Warrants
-------- -------
can take place, the (i) closing bid price for the Common Stock, as reported by
the National Association of Securities Dealers Automated Quotation System, or
(ii) if not so quoted, as reported by any other recognized quotation system on
which the Common Stock is quoted, shall have for any twenty (20) trading days
within a period of thirty (30) consecutive trading days ending on the tenth
(10th) trading day prior to the date on which the notice contemplated by
Sections 9(b) and 9(c) hereof is given, equalled or exceeded __________ dollars
- --------
($__________) [200% of the conversion price of the Preferred Stock] per share of
Common Stock (subject to adjustment in the event of any stock splits or other
similar events as provided in Section 8 hereof).
-------
(b) In case the Company shall exercise its right to redeem all of
the Warrants, it shall give or cause to be given notice to the Registered
Holders of the Warrants, by mailing to such Registered Holders a notice of
redemption, first class, postage prepaid, at their last address as shall appear
on the records of the Warrant Agent. Any notice mailed in the manner provided
herein shall be conclusively presumed to have been duly given whether or not the
Registered Holder receives such notice. Not less than five (5) business days
prior to the mailing to the Registered Holders of the Warrants of the notice of
redemption, the Company shall deliver or cause to be delivered to the
Underwriter or its successors or assigns a similar notice telephonically and
confirmed in writing, together with a list of the Registered Holders (including
their respective addresses and number of Warrants beneficially owned by them) to
whom such notice of redemption has been or will be given.
(c) The notice of redemption shall specify (i) the redemption
price, (ii) the date fixed for redemption, which shall in no event be less than
thirty (30) days after the
22
<PAGE>
date of mailing of such notice, (iii) the place where the Warrant Certificates
shall be delivered and the redemption price shall be paid, (iv) that the
Underwriter or its successors or assigns is the Company's exclusive warrant
solicitation agent and shall receive the commission contemplated by Section 4(b)
-------
hereof, and (v) that the right to exercise the Warrant shall terminate at 5:00
p.m. (New York time) on the business day immediately preceding the date fixed
for redemption. The date fixed for the redemption of the Warrants shall be the
"Redemption Date" for purposes of this Agreement. No failure to mail such
notice nor any defect therein or in the mailing thereof shall affect the
validity of the proceedings for such redemption except as to a holder (A) to
whom notice was not mailed or (B) whose notice was defective. An affidavit of
the Warrant Agent or the Secretary or Assistant Secretary of the Company that
notice of redemption has been mailed shall, in the absence of fraud, be prima
facie evidence of the facts stated therein.
(d) Any right to exercise a Warrant shall terminate at 5:00 p.m.
(New York time) on the business day immediately preceding the Redemption Date.
The redemption price payable to the Registered Holders shall be mailed to such
persons at their addresses of record.
(e) The Company shall indemnify the Underwriter and each person, if
any, who controls the Underwriter within the meaning of Section 15 of the Act or
Section 20(a) of the 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 out of the
registration statement or prospectus referred to in Section 5(b) hereof to the
-------
same extent and with the same effect (including the provisions regarding
23
<PAGE>
contribution) as the provisions pursuant to which the Company has agreed to
indemnify the Underwriter contained in Section 7 of the Underwriting Agreement.
(f) Five (5) business days prior to the Redemption Date, the
Company shall furnish to the Underwriter (i) an opinion of counsel to the
Company, dated such date and addressed to the Underwriter, and (ii) a "cold
comfort" letter dated such date addressed to the Underwriter, signed by the
independent public accountants who have issued a report on the Company's
financial statements included in the registration statement referred to in
Section 5(b) hereof, in each case covering substantially the same matters with
- -------
respect to such registration statement (and the prospectus included therein)
and, in the case of such accountants' letter, with respect to events subsequent
to the date of such financial statements, as are customarily covered in opinions
of issuer's counsel and in accountants' letters delivered to underwriters in
underwritten public offerings of securities, including, without limitation,
those matters covered in Sections 6(d) and (i) of the Underwriting Agreement.
(g) The Company shall as soon as practicable after the Redemption
Date, and in any event within fifteen (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 twelve (12) consecutive
months beginning after the Redemption Date.
(h) The Company shall deliver within five (5) business days prior
to the Redemption Date copies of all correspondence between the Commission and
the Company, its counsel or auditors and all memoranda relating to discussions
with the Commission or its staff with respect to the registration statement
referred to in Section 5(b) hereof and permit the Underwriter to do such
-------
investigation, upon reasonable advance notice, with respect to
24
<PAGE>
information contained in or omitted from the registration statement as it deems
reasonably necessary to comply with applicable securities laws or the rules of
the 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 the Underwriter shall reasonably request.
SECTION 10. Concerning the Warrant Agent.
----------------------------
(a) The Warrant Agent acts hereunder as agent and in a ministerial
capacity for the Company and the Underwriter, and its duties shall be determined
solely by the provisions hereof. The Warrant Agent shall not, by issuing and
delivering Warrant Certificates or by any other act hereunder, be deemed to make
any representations as to the validity or value or authorization of the Warrant
Certificates or the Warrants represented thereby or of any securities or other
property delivered upon exercise of any Warrant or whether any stock issued upon
exercise of any Warrant is fully paid and non-assessable.
(b) The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of Warrant Certificates to make or cause to be made
any adjustment of the Purchase Price provided in this Agreement, or to determine
whether any fact exists which may require any such adjustment, or with respect
to the nature or extent of any such adjustment, when made, or with respect to
the method employed in making the same. It shall not (i) be liable for any
recital or statement of fact contained herein or for any action taken, suffered
or omitted by it in reliance on any Warrant Certificate or other document or
instrument believed by it in good faith to be genuine and to have been signed or
presented by the proper party or parties, (ii) be responsible for any failure on
the part of the
25
<PAGE>
Company to comply with any of its covenants and obligations contained in this
Agreement or in any Warrant Certificate, or (iii) be liable for any act or
omission in connection with this Agreement except for its own gross negligence
or willful misconduct.
(c) The Warrant Agent may at any time consult with counsel
satisfactory to it (who may be counsel for the Company or the Underwriter) and
shall incur no liability or responsibility for any action taken, suffered or
omitted by it in good faith in accordance with the opinion or advice of such
counsel.
(d) Any notice, statement, instruction, request, direction, order
or demand of the Company shall be sufficiently evidenced by an instrument signed
by the Chairman of the Board of Directors, President or any Vice President
(unless other evidence in respect thereof is herein specifically prescribed).
The Warrant Agent shall not be liable for any action taken, suffered or omitted
by it in accordance with such notice, statement, instruction, request,
direction, order or demand.
(e) The Company agrees to pay the Warrant Agent reasonable
compensation for its services hereunder and to reimburse it for its reasonable
expenses hereunder; the Company further agrees to indemnify the Warrant Agent
and hold it harmless against any and all losses, expenses and liabilities,
including judgments, costs and counsel fees, for anything done or omitted by the
Warrant Agent in the execution of its duties and powers hereunder except losses,
expenses and liabilities arising as a result of the Warrant Agent's gross
negligence or willful misconduct.
(f) The Warrant Agent may resign its duties and be discharged from
all further duties and liabilities hereunder (except liabilities arising as a
result of the Warrant Agent's own gross negligence or willful misconduct), after
giving thirty (30) days' prior
26
<PAGE>
written notice to the Company. At least fifteen (15) days prior to the date
such resignation is to become effective, the Warrant Agent shall cause a copy of
such notice of resignation to be mailed to the Registered Holder of each Warrant
Certificate at the Company's expense. Upon such resignation the Company shall
appoint in writing a new warrant agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after it has been notified in
writing of such resignation by the resigning Warrant Agent, then the Registered
Holder of any Warrant Certificate may apply to any court of competent
jurisdiction for the appointment of a new warrant agent. Any new warrant agent,
whether appointed by the Company or by such a court, shall be a bank or trust
company having a capital and surplus, as shown by its last published report to
its stockholders, of not less than ten million dollars ($10,000,000) or a stock
transfer company doing business in New York, New York. After acceptance in
writing of such appointment by the new warrant agent is received by the Company,
such new warrant agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named herein as the warrant agent,
without any further assurance, conveyance, act or deed; but if for any reason it
shall be necessary or expedient to execute and deliver any further assurance,
conveyance, act or deed, the same shall be done at the expense of the Company
and shall be legally and validly executed and delivered by the resigning Warrant
Agent. Not later than the effective date of any such appointment, the Company
shall file notice thereof with the resigning Warrant Agent and shall forthwith
cause a copy of such notice to be mailed to the Registered Holder of each
Warrant Certificate.
(g) Any corporation into which the Warrant Agent or any new warrant
agent may be converted or merged, any corporation resulting from any
consolidation to
27
<PAGE>
which the Warrant Agent or any new warrant agent shall be a party, or any
corporation succeeding to the corporate trust business of the Warrant Agent or
any new warrant agent shall be a successor warrant agent under this Agreement
without any further act, provided that such corporation is eligible for
appointment as successor to the Warrant Agent under the provisions of the
preceding paragraph. Any such successor warrant agent shall promptly cause
notice of its succession as warrant agent to be mailed to the Company and to the
Registered Holders of each Warrant Certificate.
(h) The Warrant Agent, its subsidiaries and affiliates, and any of
its or their officers or directors, may buy and hold or sell Warrants or other
securities of the Company and otherwise deal with the Company in the same manner
and to the same extent and with like effect as though it were not Warrant Agent.
Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.
(i) The Warrant Agent shall retain for a period of two (2) years
from the date of exercise any Warrant Certificate received by it upon such
exercise.
SECTION 11. Modification of Agreement.
-------------------------
The Warrant Agent and the Company may by supplemental agreement make any
changes or corrections in this Agreement (a) that they shall deem appropriate to
cure any ambiguity or to correct any defective or inconsistent provision or
manifest mistake or error herein contained, or (b) that they may deem necessary
or desirable and which shall not adversely affect the interests of the holders
of Warrant Certificates; provided, however, that this Agreement shall not
-------- -------
otherwise be modified, supplemented or altered in any respect except with the
consent in writing of the Registered Holders holding not less than sixty-six
28
<PAGE>
and two-thirds percent (66-2/3%) of the Warrants then outstanding; provided,
--------
further, that no change in the number or nature of the securities purchasable
- -------
upon the exercise of any Warrant, and no change that increases the Purchase
Price of any Warrant, other than such changes as are specifically set forth in
this Agreement as originally executed, shall be made without the consent in
writing of each Registered Holders affected by such change. In addition, this
Agreement may not be modified, amended or supplemented without the prior written
consent of the Underwriter or its successors or assigns, other than to cure any
ambiguity or to correct any defective or inconsistent provision or manifest
mistake or error herein contained or to make any such change that the Warrant
Agent and the Company deem necessary or desirable and which shall not adversely
affect the interests of the Underwriter or its successors or assigns.
SECTION 12. Notices.
-------
All notices, requests, consents and other communications hereunder shall be
in writing and shall be deemed to have been made when delivered or mailed first-
class postage prepaid or delivered to a telegraph office for transmission, if to
the Registered Holder of a Warrant Certificate, at the address of such holder as
shown on the registry books maintained by the Warrant Agent; if to the Company
at Medical Device Technologies, Inc., 598 Broadway, New York, New York 10012,
Attention: M. Lee Hulsebus, President and Chief Executive Officer, or at such
other address as may have been furnished to the Warrant Agent in writing by the
Company; and if to the Warrant Agent, at its Corporate Office. Copies of any
notice delivered pursuant to this Agreement shall be delivered to First Allied
Securities, Inc., 200 Park Avenue, New York, New York, 10166, Attention: Scott
A. Weisman, Esq.,
29
<PAGE>
or at such other address as may have been furnished to the Company and the
Warrant Agent in writing.
SECTION 13. Governing Law.
-------------
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York without giving effect to conflicts of laws rules
or principals.
SECTION 14. Binding Effect.
--------------
This Agreement shall be binding upon and inure to the benefit of the
Company, the Warrant Agent and their respective successors and assigns and the
holders from time to time of Warrant Certificates or any of them. Except as
hereinafter stated, nothing in this Agreement is intended or shall be construed
to confer upon any other person any right, remedy or claim or to impose upon any
other person any duty, liability or obligation. The Underwriter is, and shall
at all times irrevocably be deemed to be, a third-party beneficiary of this
Agreement, with full power, authority and standing to enforce the rights granted
to it hereunder.
SECTION 15. Counterparts.
------------
This Agreement may be executed in several counterparts, which taken
together shall constitute a single document.
30
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
MEDICAL DEVICE TECHNOLOGIES, INC. CONTINENTAL STOCK TRANSFER
& TRUST COMPANY
As Warrant Agent
By: _______________________ By: ______________________
Name: M. Lee Hulsebus Name:
Title: President and Chief Title:
Executive Officer
31
<PAGE>
EXHIBIT A
---------
No. W ___________ VOID AFTER ____________________, 1999
_________ WARRANTS
REDEEMABLE WARRANT CERTIFICATE TO
PURCHASE SHARES OF COMMON STOCK
MEDICAL DEVICE TECHNOLOGIES, INC.
CUSIP _____
THIS CERTIFIES THAT, FOR VALUE RECEIVED
or registered assigns (the "Registered Holder") is the owner of the number of
Redeemable Warrants (the "Warrants") specified above. Each Warrant initially
entitles the Registered Holder to purchase, subject to the terms and conditions
set forth in this Certificate and the Warrant Agreement (as hereinafter
defined), ____ fully paid and non-assessable shares of Common Stock, $.15 par
value per share, of Medical Device Technologies, Inc., a Utah corporation (the
"Company"), at any time from _____________, 1997 [thirteen (13) months after the
effective date of the Registration Statement] and prior to the Expiration Date
(as hereinafter defined) upon the presentation and surrender of this Warrant
Certificate with the Subscription Form on the reverse hereof duly executed, at
the corporate office of Continental Stock Transfer & Trust Company, 2 Broadway,
New York, New York 10004, as Warrant Agent, or its successor (the "Warrant
Agent"), accompanied by payment of $____ [150% of the conversion price of the
Preferred Stock], subject to adjustment (the "Purchase Price"), in lawful money
of the United States of America in cash or by check made payable to the Warrant
Agent for the account of the Company.
This Warrant Certificate and each 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"), dated __________, 1996
[the effective date of the Registration Statement], by and between the Company
and the Warrant Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price and the number of shares of Common Stock subject
to purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional interests will be issued. In the case of
the exercise of less than all the Warrants represented hereby, the Company
shall cancel this Warrant Certificate upon the surrender hereof and shall
execute and deliver a new Warrant Certificate or Warrant
A-1
<PAGE>
Certificates of like tenor, which the Warrant Agent shall countersign, for the
balance of such Warrants.
The term "Expiration Date" shall mean 5:00 p.m. (New York time) on
__________, 1999 [the day before the 3rd anniversary of the effective date of
the Registration Statement]. If such date shall in the State of New York be a
holiday or a day on which banks are authorized to close, then the Expiration
Date shall mean 5:00 p.m. (New York time) the next following day which in the
State of New York is not a holiday or a day on which banks are authorized to
close.
The Company shall not be obligated to deliver any securities pursuant to
the exercise of this Warrant unless a registration statement under the
Securities Act of 1933, as amended (the "Act"), with respect to such securities
is effective or an exemption thereunder is available. The Company has
covenanted and agreed that it will file a registration statement under the
Federal securities laws, use its best efforts to cause the same to become
effective, to keep such registration statement current, if required under the
Act, while any of the Warrants are outstanding, and deliver a prospectus which
complies with Section 10(a)(3) of the Act to the Registered Holder exercising
this Warrant. This Warrant shall not be exercisable by a Registered Holder in
any state where such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by the
Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon due presentment and payment of any tax or other
charge imposed in connection therewith or incident thereto, for registration of
transfer of this Warrant Certificate at such office, a new Warrant Certificate
or Warrant Certificates representing an equal aggregate number of Warrants will
be issued to the transferee in exchange therefor, subject to the limitations
provided in the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any rights of a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends or
other distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided in the Warrant Agreement.
Subject to the provisions of the Warrant Agreement, this Warrant may be
redeemed at the option of the Company, at a redemption price of $.05 per
Warrant, at any time commencing __________, 1997 [thirteen (13) months from the
effective date of the Registration Statement], provided that the closing bid
price for the Company's Common Stock, as reported by the National Association of
Securities Dealers Automated Quotation System (or, if not so quoted, as reported
by any other recognized quotation system on which the price of the Common Stock
is quoted), shall have, for any twenty (20) trading days within a period of
thirty (30) consecutive trading days ending on the tenth (10th) trading day
prior to the date on which the Notice of Redemption (as defined below) is given,
equalled or
A-2
<PAGE>
exceeded $__________ [200% of the conversion price of the Preferred Stock] per
share (subject to adjustment in the event of any stock splits or other similar
events). Notice of redemption (the "Notice of Redemption") shall be given not
later than the thirtieth (30th) day before the date fixed for redemption, all as
provided in the Warrant Agreement. On and after the date fixed for redemption,
the Registered Holder shall have no rights with respect to this Warrant except
to receive the $.05 per Warrant upon surrender of this Certificate.
Under certain circumstances, First Allied Securities, Inc., shall be
entitled to receive an aggregate of four percent of the Purchase Price of the
Warrants represented hereby.
Prior to due presentment for registration of transfer hereof, the Company
and the Warrant Agent may deem and treat the Registered Holder as the absolute
owner hereof and of each Warrant represented hereby (notwithstanding any
notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary, except as provided in the
Warrant Agreement.
This Warrant Certificate shall be governed by and construed in accordance
with the laws of the State of New York without giving effect to conflicts of
laws.
This Warrant Certificate is not valid unless countersigned by the Warrant
Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed, manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.
Dated: ___________, 1996
MEDICAL DEVICE TECHNOLOGIES, INC.
[SEAL]
By: ________________________________
Name: M. Lee Hulsebus
Title: President and
Chief Executive Officer
By: ________________________________
Name:
Title:
COUNTERSIGNED:
CONTINENTAL STOCK TRANSFER &
TRUST COMPANY, as Warrant Agent
By: _________________________
Authorized Officer
A-3
<PAGE>
SUBSCRIPTION FORM
-----------------
To Be Executed by the Registered Holder
in Order to Exercise Warrant
The undersigned Registered Holder hereby irrevocably elects to exercise
_____ Warrants represented by this Warrant Certificate, and to purchase the
securities issuable upon the exercise of such Warrants, and requests that
certificates for such securities shall be issued in name of
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
_______________________________
_______________________________
_______________________________
_______________________________
(please print or type name and address)
and be delivered to
_______________________________
_______________________________
_______________________________
(please print or type name and address)
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
IMPORTANT: PLEASE COMPLETE THE FOLLOWING:
1. The exercise of this Warrant was
solicited by First Allied Securities,
Inc.,
[_]
2. The exercise of this Warrant was
solicited by
_____________________________ [_]
A-4
<PAGE>
3. If the exercise of this Warrant was
not solicited, please check the
following box [_]
Dated:________________________________
X_____________________________________
--------------------------------------
Address
--------------------------------------
Social Security or Taxpayer
Identification Number
--------------------------------------
Signature Guaranteed
--------------------------------------
A-5
<PAGE>
ASSIGNMENT
----------
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, __________________________, hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER
__________________________________
__________________________________
__________________________________
(please PRINT or TYPE name and address)
________________________ of the Warrants represented by this Warrant
Certificate, and hereby irrevocably constitutes and appoints
____________________ Attorney to transfer this Warrant Certificate on the books
of the Company, with full power of substitution in the premises.
Dated: _______________________ X__________________________
___________________________
Signature Guaranteed
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER AND MUST BE
GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF THE
AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE,
MIDWEST STOCK EXCHANGE OR BOSTON STOCK EXCHANGE.
A-6
