<PAGE>
PROXY STATEMENT
MEDICAL DEVICE TECHNOLOGIES, INC.
9171 TOWNE CENTRE DRIVE
SUITE 355
SAN DIEGO, CA 92122
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON
MAY 23, 1997
TO THE SHAREHOLDERS:
Notice is hereby given that the annual meeting of shareholders (the "Annual
Meeting") of Medical Device Technologies, Inc., a Utah corporation (the
"Company") has been called for and will be held at 10:30 a.m., Pacific Daylight
Savings Time, on Friday, May 23, 1997, at 9171 Towne Centre Drive, Third Floor
Conference Room, San Diego, CA 92122 for the following purposes:
1. To elect (i) each of Mr. Don L. Arnwine and Mr. Scott A. Weisman to the
Board of Directors until the annual meeting of shareholders to be held in the
year 1999 and (ii) to elect each of Dr. Bradley and Mr. Glasgow until the annual
meeting of shareholders to be held in the year 2000; and until each of their
respective successors shall have been elected and qualified.
2. To ratify the Board of Directors' appointment of BDO Seidman, LLP to
serve as the Company's independent certified public accountants for the current
calendar year;
3. To vote to merge the Company with and into Medical Device Technologies,
Inc., a Delaware corporation.
4. To vote to adopt a stock option plan providing for the issuance of up to
1,500,000 shares of the Company's common stock to officers, directors, employees
and consultants to the Company.
5. To consider and transact such other business as may properly come before
the Annual Meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on April 7, 1997 as
the record date for the determination of the shareholders entitled to notice of,
and to vote at, the Annual Meeting or any adjournments thereof. The list of
shareholders entitled to vote at the Annual Meeting will be available for the
examination of any shareholder at the Company's offices at 9171 Towne Centre
Drive, Suite 355, San Diego, CA 92122, for ten (10) days prior to May 23, 1997.
By Order of the Board of Directors
/s/ M. Lee Hulsebus
-------------------
M. Lee Hulsebus, President and
Chief Executive Officer
Dated: , 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE FILL IN, SIGN, AND
DATE THE PROXY SUBMITTED HEREWITH AND RETURN IT IN THE ENCLOSED STAMPED
ENVELOPE. THE GIVING OF SUCH PROXY WILL NOT AFFECT YOUR RIGHT TO REVOKE SUCH
PROXY PRIOR TO ITS EXERCISE UPON WRITTEN NOTICE TO THE PRESIDENT OF THE COMPANY
OR BY VOTING IN PERSON SHOULD YOU LATER DECIDE TO ATTEND THE MEETING. THE
ENCLOSED PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS.
<PAGE>
MEDICAL DEVICE TECHNOLOGIES, INC.
PROXY STATEMENT
GENERAL
This proxy statement is furnished by the Board of Directors of MEDICAL
DEVICE TECHNOLOGIES, INC., a Utah corporation (the "Company"), with offices
located at 9171 Towne Centre Drive, Suite 355, San Diego, CA 92122, in
connection with the solicitation of proxies to be used at the annual meeting of
shareholders of the Company to be held on May 23, 1997, and at any postponements
or continuations thereof (the "Annual Meeting"). This proxy statement will be
mailed to shareholders beginning approximately, 1997. If the proxy submitted
herewith, and also attached hereto as Annex A, is properly executed and
returned, the shares represented thereby will be voted at the Annual Meeting as
instructed on the proxy.
Unless properly executed and returned, proxies forwarded to those
shareholders who hold their voting securities in "street name" will be voted FOR
the election of Mr. Arnwine and Mr. Weisman to the Board of Directors until the
annual meeting of shareholders to be held in the year 1999, and the election of
Dr. Bradley and Mr. Glasgow until the annual meeting of shareholders to be held
in the year 2000; and FOR the ratification of the Board of Directors'
appointment of BDO Seidman, LLP as the independent certified public accountants
of the Company for the current calendar year. Notwithstanding the foregoing, any
proxy may be revoked by a shareholder prior to its exercise upon written notice
to the President of the Company, or by a shareholder voting in person at the
Annual Meeting.
An "abstention" on any proposal will be counted as present for purposes of
determining whether a quorum of shares is present at the Annual Meeting with
respect to the proposal on which the abstention is noted. Abstentions will be
counted as a vote "against" such proposal, except in the case of the election of
directors where an abstention will not be counted as a vote and will not affect
the outcome of the election. Under the Rules of the New York Stock Exchange,
proposals 1 and 2 are considered "discretionary" proposals, which means that
brokers who hold Company shares in "street name" for customers are authorized to
vote on such proposals on behalf of their customers unless expressly advised to
the contrary (the Rules of the New York Stock Exchange apply to the Company for
determining whether or not a proposal is "discretionary"). However, each other
proposal is considered a "non-discretionary" proposal, which means that such
brokers are not authorized to vote on such proposals without specific voting
instructions as to such proposal. Therefore, "broker nonvotes" on such
non-discretionary proposals will not be counted as present for purposes of
determining whether a quorum of shares is present at the Annual Meeting.
The Board of Directors does not know of any matter to be proposed for
action at the Annual Meeting other than those described in this proxy statement.
If other matters properly come before the Annual Meeting, the persons named in
the accompanying proxy will act in accordance with their best judgment. None of
the matters to be presented at the Annual Meeting will entitle any shareholder
of the Company to appraisal rights.
The cost of preparing, assembling and mailing the notice of the Annual
Meeting, proxy statement, the enclosed annual report and proxy will be borne by
the Company. In addition to solicitation of the proxies by use of the mails,
some of the officers and regular employees of the Company, without extra
remuneration, may solicit proxies personally or by telephone, telegraph, or
cable. The Company may also request brokerage houses, nominees, custodians and
fiduciaries to forward soliciting material to the beneficial owners of stock
held of record. The Company will reimburse such persons for their expenses in
forwarding soliciting material.
2
<PAGE>
VOTING SECURITIES AND
PRINCIPAL HOLDERS THEREOF
The Board of Directors has fixed the close of business on April 7, 1997 as
the record date (the "Record Date") for the determination of shareholders
entitled to notice of, and to vote at, the Annual Meeting. Only shareholders on
the Record Date will be able to vote at the Annual Meeting. Each holder of
record of the Company's common stock, par value $.15 per share (the "Common
Stock") will be entitled to one vote for each share of Common Stock held, and
each holder of record of the Company's 6% cumulative convertible Series A
preferred stock, par value $.01 per share (the "Preferred Stock"), will be
entitled to four (4) votes for each share of Preferred Stock held, which is the
number of shares of Common Stock into which a share of Preferred Stock is
convertible. All outstanding shares of Preferred Stock vote on an "as converted"
basis and the holders of shares of the Preferred Stock vote together with the
holders of shares of the Common Stock as a single class on all matters submitted
to the holders of the Common Stock.
As of the Record Date, there were shares of the Common Stock issued and
outstanding and shares of the Preferred Stock issued and outstanding. Holders of
the Common Stock and the Preferred Stock are entitled to vote on each of the
matters specified in Items 1, 2, 3 and 4 of the Notice of the Annual Meeting.
Unless otherwise indicated herein, a majority of the votes represented by shares
present or represented by proxy at the Annual Meeting is required for approval
of each matter which will be submitted to shareholders.
Management of the Company knows of no business other than those matters
specified in Items 1, 2, 3 and 4 of the Notice of Annual Meeting which will be
presented for consideration at the Annual Meeting. If any other matter is
properly presented, it is the intention of the persons named in the enclosed
proxy to vote in accordance with their best judgment.
3
<PAGE>
The following table sets forth certain information, as of [date of notice],
1997, known to the Company regarding beneficial ownership of the Company's
Common Stock and Preferred Stock by (i) any holder of more than five percent of
the outstanding shares of Common Stock or Preferred Stock; (ii) the Company's
directors; (iii) the Company's officers; and (iv) the Company's directors and
officers as a group:
<TABLE>
<CAPTION>
Shares of Percentage(%) Percentage of
Shares of Percentage(%) Preferred Stock of Preferred Common Stock and
Common Stock of Common Stock Beneficially Stock Preferred Stock
Name and Address Beneficially Outstanding Owned Outstanding Outstanding(3)
of Beneficial Owner Owned(1)(2)
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
M. Lee Hulsebus 467,638(4) 5.85% 0 0 3.58%
c/o Medical Device
Technologies,Inc.
9171 Towne Centre Drive
Suite 355
San Diego, CA 92122
Arthur E. Bradley, D.D.S. 58,600 *(5) 0 0 *(5)
c/o Medical Device
Technologies, Inc.
9171 Towne Centre Drive
Suite 355
San Diego, CA 92122
Thomas E. Glasgow 154,330(6) 1.98% 0 0 1.19%
c/o Medical Device
Technologies, Inc.
9171 Towne Centre Drive
Suite 355
San Diego, CA 92122
Don L. Arnwine 39,296(7) *(5) 0 0 *(5)
c/o Medical Device
Technologies, Inc.
9171 Towne Centre Drive
Suite 355
San Diego, CA 92122
William A. Clarke 3,750 *(5) 0 0 *(5)
c/o Medical Device
Technologies, Inc.
9171 Towne Centre Drive
Suite 355
San Diego, CA 92122
Scott A. Weisman 3,125 *(5) 0 0 *(5)
c/o Josephthal Lyon & Ross
Incorporated
200 Park Avenue
New York, NY 10166
Edward C. Hall 22,013(8) *(5) 0 0 *(5)
c/o Medical Device
Technologies, Inc.
9171 Towne Centre Drive
Suite 355
San Diego, CA 92122
Steven W. Kenney 87,700(9) 1.13% 0 0 *(5)
c/o Medical Device
Technologies, Inc.
9171 Towne Centre Drive
Suite 355
San Diego, CA 92122
Richard E. Sloan 31,440(10) *(5) 0 0 *(5)
c/o Medical Device
Technologies, Inc.
9171 Towne Centre Drive
Suite 355
San Diego, CA 92122
All officers and 871,017 11.29% 0 0 6.78%
directors as a group,
(7) persons (4)(6)(7)(8)(9)
</TABLE>
4
<PAGE>
(1) The shares of Common Stock or Preferred Stock owned by each person or
by the group, and the shares included in the total number of shares of Common
Stock or Preferred Stock outstanding, have been adjusted in accordance with Rule
13d-3 under the Securities Exchange Act of 1934, as amended, to reflect the
ownership of shares issuable upon exercise of outstanding options, warrants or
other common stock or preferred stock equivalents which are exercisable within
60 days. As provided in such Rule, such shares issuable to any holder are deemed
outstanding for the purpose of calculating such holder's beneficial ownership
but not any other holder's beneficial ownership.
(2) Gives effect to the Company's 1-for-5 reverse common stock split in
September, 1981, its 1-for-30 reverse stock split in November, 1990, its 1-for-6
reverse stock split in January, 1994, and its 1-for-2 reverse stock split in
June, 1996.
(3) The percentage in this column reflects a beneficial holder's percentage
of voting power in the Company. Such percentage is calculated by (i) obtaining
the sum of the number of shares of Common Stock beneficially owned by a holder
plus the number of shares of Preferred Stock, on an as converted basis,
beneficially owned by such holder, and (ii) dividing such sum by the sum of the
Common Stock issued and outstanding as of plus the Preferred Stock, on an as
converted basis, issued and outstanding as of .
(4) Includes 150,000 warrants exercisable at $.80 per share to acquire
150,000 shares of Common Stock, and 100,000 warrants exercisable at $2.00 per
share to acquire 100,000 shares of Common Stock.
(5) Holdings represent less than 1% of the Company's issued and outstanding
shares.
(6) Includes 79,380 warrants, 60,000 of which are exercisable at $1.26 per
share to acquire 60,000 shares of Common Stock and 19,380 of which are
exercisable at $1.29 per share to acquire 19,380 shares of Common Stock and
12,500 warrants exercisable at $2.00 per share to acquire 12,500 shares of
Common Stock.
(7) Includes 9,921 warrants exercisable at $1.26 per share to acquire 9,921
shares of Common Stock.
(8) Includes 6,250 warrants exercisable at $.80 per share to acquire 6,250
shares of Common Stock.
(9) Includes 25,000 warrants exercisable at $2.00 per share to acquire
25,000 shares of Common Stock.
(10) Includes 9,375 warrants exercisable at $.80 per share to acquire 9,375
shares of Common Stock.
5
<PAGE>
PROPOSAL NO. 1:
General
- -------
The Board of Directors consisted of seven (7), six (6), five (5) and six
(6) persons at each of the fiscal years ended December 31, 1993, 1994, 1995 and
1996, respectively. The Company has a classified Board of Directors which is
divided into three classes, with the term of office of each Director in a given
class serving a three-year term and until their successors are elected and
qualified. Directors are elected by a plurality of the votes cast by the shares
entitled to vote in the election.
Mr. Don L. Arnwine and Mr. Scott A. Weisman are the nominees for election
to the Board of Directors to serve for a three-year term which is deemed to have
commenced in the year 1996 and terminating upon the Company's annual meeting of
shareholders to be held in the year 1999. Arthur E. Bradley, D.D.S. and Mr.
Thomas E. Glasgow are also nominees for election to the Board of Directors to
serve for a three-year term commencing on the date of the Annual Meeting and
terminating upon the Company's annual meeting of shareholders to be held in the
year 2000.
The Board of Directors recommends a vote FOR the election as directors of
the nominees named herein. Unless properly executed and returned by the
shareholder giving the proxy, the proxies forwarded to those shareholders who
hold their voting securities in "street name" will be voted "FOR" the election
of the nominees named above as directors. If any of the nominees should
subsequently become unavailable for election, the persons voting the
accompanying proxy may in their discretion vote for a substitute.
Board of Directors
The Board of Directors has the responsibility for establishing broad
corporate policies. Although in their capacity as Board members they are not
involved in day-to-day operating details, members of the Board are kept informed
of the Company's business by various reports and documents sent to them as well
as by operating and financial reports made available at Board meetings. The
Board of Directors held one (1) regular meeting and six (6) special meetings,
none of which were postponed or continued, in 1996. All of the members of the
Board attended at least seventy five percent of the Board meetings in 1996.
6
<PAGE>
The Directors, nominees and executive officers of the Company are listed
below, followed by a brief description of their business experience during the
past five years:
<TABLE>
<CAPTION>
Term
Name Age Position Expires
<S> <C> <C> <C>
- -------------------------------------------------------------------------------
M. Lee Hulsebus(1)(2) 58 Chairman of the Board, 1998
Chief Executive Officer
and President
Don L. Arnwine(2)(3)(4) 64 Director 1996
Arthur E. Bradley, D.D.S.(4) 63 Director 1997
Thomas E. Glasgow(1)(2)(3)(4) 43 Director 1997
William A. Clarke(5) 58 Director 1998
Scott A. Weisman(6) 42 Director 1996
Stephen W. Kenney 46 Vice President of Sales
and Marketing
Edward C. Hall(3) 56 Chief Financial Officer
and Secretary
Richard E. Sloan 47 Vice President of New
Business Development
</TABLE>
(1) Member of the Nominating Committee of the Board of Directors.
(2) Member of the Compensation Committee of the Board of Directors.
(3) Member of the Audit Committee of the Board of Directors.
(4) Director is being nominated for re-election to the Board of Directors
by the shareholders.
(5) In June, 1996, the other members of the Board of Directors appointed
Mr. Clarke to the class of the Board of Directors whose term expires at the
annual meeting of shareholders in 1998.
(6) In August, 1996, the other members of the Board of Directors appointed
Mr. Weisman to the class of the Board of Directors whose term expired in 1996.
Mr. Weisman is being nominated for re-election to the Board of Directors by the
shareholders.
7
<PAGE>
M. Lee Hulsebus has been Chairman of the Board, Chief Executive Officer and
President of the Company since August, 1994 and has been in the health care
field for 31 years. From January, 1992 until he joined the Company in August,
1994, he was the President and owner of his own health care consulting firm.
From August, 1993 to November, 1993 Mr. Hulsebus also served as Chief Executive
Officer of InCoMed Corporation, then a small California-based medical products
company. From January, 1990 to January, 1992, Mr. Hulsebus also served as
President of Sports Support, Inc., a sports medicine company. From 1988 until
1990, he served as Medical Group president for Teleflex, Inc. For 22 years prior
to that, Mr. Hulsebus was employed by Becton-Dickinson & Co. and C.R. Bard,
Inc., both of which are leading companies in the health care industry.
Don L. Arnwine has served as a Director of the Company since March, 1995.
Since 1988, Mr. Arnwine has been President of Arnwine Associates of Irving,
Texas, a company that provides advisory services to the health care industry.
Mr. Arnwine served as Chairman and Chief Executive Officer from 1985 until 1988,
of Voluntary Hospitals of America (VHA), a company he joined in 1982. Prior to
joining VHA, Mr. Arnwine served as President and Chief Executive Officer of
Charleston Area Medical Center, a 1000-bed regional facility care center in the
State of West Virginia. Mr. Arnwine holds a B.S. degree in Business
Administration from Oklahoma Central State University and a Masters degree in
Hospital Management from Northwestern University.
Arthur E. Bradley, D.D.S. has been a Director of the Company since 1986.
Dr. Bradley has been a practicing dentist in Hattiesburg, Mississippi since
1961. Dr. Bradley has been involved for his own account in real estate
investments for twenty years and has been active in oil and gas investments for
fifteen years. Dr. Bradley graduated from the University of Mississippi at
Hattiesburg and obtained his degree in Dentistry from Loyola University Dental
School.
Thomas E. Glasgow has been a Director of the Company since November 1994.
From April, 1992 to the present, Mr. Glasgow has been President and co-owner of
Integrated Trade Systems ("ITS"), a Chicago, Illinois company. Mr. Glasgow and
another individual purchased ITS from its parent company in 1992. ITS is a
logistics management company specializing in the development and marketing of
import and export document generation systems. From March, 1994 to the present,
Mr. Glasgow has also been the President and owner of Automation Information
Management, a software applications company. From January, 1989 through March,
1992, Mr. Glasgow was a Vice President with and consultant to Wharton Resource
Group, a strategic management company specializing in the development of early
stage companies. Prior to these activities, he was a director and Vice President
with Federal Express Corporation for 11 years.
8
<PAGE>
William A. Clarke has been a Director of the Company since August 16, 1996.
Since 1967, Mr. Clarke held various positions with Johnson & Johnson, Inc., a
public medical products company. Most recently, since 1995, Mr. Clarke has
served as a consultant to Johnson & Johnson, Inc. Prior to that time, from 1986
through 1995, Mr. Clarke was president of Johnson & Johnson Medical, Inc., a
subsidiary of Johnson & Johnson, Inc., with approximately 6,000 employees.
Edward C. Hall has been the Company's Secretary since April, 1996 and its
Chief Financial Officer since March 15, 1996. Mr. Hall has also been a financial
consultant to the Company since March 1995. From 1994 through the present, Mr.
Hall was a consultant to high technology companies in the San Diego area where
he provided strategic, financing, planning, analytical, administrative, and
system design support. Since 1991, he has acted as an interim chief financial
officer and has provided financial and turnaround consulting services to a wide
variety of high technology and other companies in California and the Southwest.
His experience includes positions and assignments for medical, pharmaceutical,
broadband and wireless communications, specialty and mail order retailing, and
aerospace manufacturing firms.
Stephen W. Kenney has been the Company's Vice President of Sales and
Marketing since January, 1995 and has twenty-one years of health care industry
experience. From December 1993 to November 1994 Mr. Kenney served as chief
operating officer of Cardio Vista, a private medical products company
headquartered in Southern California. From April 1989 to December 1993 he served
as chairman and chief executive officer of AMBIS, Inc., a private research
instrumentation company based in San Diego, California. From 1987 to 1989, Mr.
Kenney served as vice president of sales and marketing of Digivision, Inc., also
headquartered in San Diego, California. Prior to that, Mr. Kenney held various
management positions with Ivac Corporation and American Hospital Supply, both of
which are public companies.
Richard E. Sloan has been Vice President of New Business Development since
March, 1996. Mr. Sloan was also a consultant to the Company from August 1995 to
March 1996. From March, 1995 to July, 1995, Mr. Sloan served as Chief Executive
Officer of WorldWide Products, Inc., a private Los Angeles based development and
marketing firm that distributes pharmaceutical products to plastic surgeons and
dermatologists. Prior thereto, from March, 1992 to March, 1995, he served as
corporate marketing director and general manager for Industrial Products of
UniFET Incorporated, a private company based in San Diego, California involved
in the development of sensor-based medical products. From December, 1989 through
March, 1992, Mr. Sloan managed his own mergers and acquisition business with
First Pacific Group, located in Carlsbad, CA which provided investment and
financial services to privately-held companies primarily in southern California.
Prior to that time, Mr. Sloan held various management positions at each of
Baxter and Ivac, each of which is a public company.
Scott A. Weisman who is being nominated to serve as a Director of the
Company, has been the Director of Investment Banking of Josephthal Lyon & Ross
Incorporated and a member of the Board of Directors of Josephthal Lyon & Ross
Incorporated since March, 1993. Since 1996, Mr. Weisman has also been a Senior
Managing Director of Josephthal Lyon & Ross Incorporated. Before joining
Josephthal Lyon & Ross Incorporated in 1993, Mr. Weisman, commencing in 1985,
was a partner specializing in corporate securities law at the law firm of Kelley
Drye & Warren in New York City.
9
<PAGE>
Compliance with Section 16(a) of the Exchange Act
- -------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of its Common
Stock, to file reports of ownership and changes in ownership with the Securities
and Exchange Commission (the "Commission") and the National Association of
Securities Dealers, Inc. Officers, directors and greater than ten percent
shareholders are required by the Commission to furnish the Company with copies
of all Section 16(a) forms that they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no reports on Form 5
were required for those persons, the Company believes that during 1995 all
filing requirements applicable to its officers, directors and greater than ten
percent shareholders were complied with.
Executive Compensation
- ----------------------
The following table sets forth the cash compensation paid by the Company to
executive officers of the Company, whose total annual salary and bonus exceeded
$100,000, for the years ended December 31, 1994, 1995 and 1996.
10
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
--------------------------------------------------------------------------------------------
Name and Year Salary($) Bonus($) Other Annual Restricted Options/SARs LTIP All Other
Principal Position Compensation ($) Stock (#) (1) Payouts Compens-
Awards($) ($) ation
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
M. Lee Hulsebus, 1996 $162,000 $ 8,100 $ - 0 - $ 23,438 100,000 $ - 0 - $10,665(2)
Chairman of the Board,
Chief Executive Officer
and President(1)
1995 $162,000 $ - 0 - $ - 0 - $ 71,094 150,000 $ - 0 - $ - 0 -
1994 $ 54,000 $ - 0 - $ - 0 - $ 43,489 100,000 $ - 0 - $ - 0 -
B. Roland Freasier, Jr.(3) 1996 $120,000 $ - 0 - $ - 0 - $ 12,500 37,500 $ - 0 - $ - 0 -
1995 $120,000 $ - 0 - $ - 0 - $ 68,750 - 0 - $ - 0 - $ - 0 -
1994 $120,000 $ - 0 - $ - 0 - $ 22,917 75,000 $ - 0 - $ - 0 -
Stephen W. Kenney, 1996 $110,000 $ 5,400 $ - 0 - $ 11,133 70,000 $ - 0 - $ - 0 -
Vice President of
Marketing and Sales(4)
1995 $110,000 $ - 0 - $ - 0 - $ 41,250 37,500 $ - 0 - $ - 0 -
Richard E. Sloan(5) 1996 $108,000 $ - 0 - $ - 0 - $ 5,566 42,500 $ - 0 - $ - 0 -
Vice President of
New Business Development
</TABLE>
11
<PAGE>
(1) In August, 1994, the Company entered into an exclusive four year term
employment agreement with Mr. M. Lee Hulsebus. Under his employment agreement,
Mr. Hulsebus is to serve as the Company's Chief Executive Officer and President
and receive a base salary of $162,000 per annum. He also received one hundred
twenty five thousand (125,000) shares of the Company's Common Stock which vests
on January 2, 1997. In addition, Mr. Hulsebus received 100,000 common stock
purchase warrants which are exercisable over a five (5) year period ending
August 31, 1999 at $2.00 per share. In addition, in 1994, the Company entered
into a severance agreement with Mr. Hulsebus. Such severance agreement provides,
among other things, that in the event a change in control of the Company occurs
or Mr. Hulsebus is involuntarily terminated, suffers a disability while employed
by the Company or dies while employed by the Company, then Mr. Hulsebus is
entitled to receive certain benefits from the Company. Such benefits may include
some or all of the following: an amount based on Mr. Hulsebus' base salary as
provided for in Mr. Hulsebus' employment agreement, an amount based on the bonus
paid or payable to Mr. Hulsebus as provided for in Mr. Hulsebus' employment
agreement, the right to receive Common Stock that shall vest immediately, the
right to exercise any warrants or stock options held by or granted to Mr.
Hulsebus under Mr. Hulsebus' employment agreement or any stock option plan of
the Company or both, health insurance and disability insurance. Mr. Hulsebus
will not receive any benefits if Mr. Hulsebus voluntarily terminates his
employment with the Company or the Company terminates Mr. Hulsebus "for cause",
which is defined as the conviction of Mr. Hulsebus after appeal of a felony. On
August 2, 1996, the Board of Directors extended the term of Mr. Hulsebus'
employment agreement and severance agreement for an additional one (1) year
period, or until August 31, 1999.
(2) Represents the fair market value of stock issued for services rendered
as Chairman of the Board.
(3) Mr. Freasier resigned as a director of the Company in January 1996. In
March, 1996, the Company terminated the services of Mr. Freasier pursuant to a
termination agreement which also provided for mutual general releases. Under the
terms of the termination agreement, Mr. Freasier received 100,000 shares of the
Company's Common Stock, which vested on August 31, 1996, and 75,000 common stock
purchase warrants, which are exercisable at a price of $2.00 per share from June
24, 1996 through August 31, 1999. The termination agreement with Mr. Freasier
also provides for Mr. Freasier to receive 29 monthly payments of $10,000,
commencing on April 1, 1996 and ending August 31, 1998, and 37,500 common stock
purchase warrants which are exercisable from August 31, 1998 through August 31,
2001, at a price of $.80 per share. In addition, as a result of his termination,
Mr. Freasier only received $30,000 of his $120,000 annual salary for 1996.
12
<PAGE>
(4) In January, 1995, the Company entered into an exclusive three-year
employment agreement with Mr. Stephen W. Kenney under which he is to serve as
the Company's Vice President of Marketing and Sales. Mr. Kenney receives a base
salary of $110,000 per annum. He also received fifty thousand (50,000) shares of
the Company's Common Stock, which vested on January 2, 1997, and is entitled to
receive warrants to purchase thirty seven thousand five hundred (37,500) shares
of the Company's Common stock at $2.00 per share. One-third (1/3) of the
warrants were issued in January, 1996, and one-third (1/3) of the warrants are
to be issued on each of January 4, 1997 and 1998. The warrants are exercisable
for a period of five years from the date of issuance.
(5) In March, 1996, the Company entered into an exclusive employment
agreement with Mr. Richard E. Sloan under which he is to serve as the Company's
Vice President of New Business Development. Mr. Sloan receives a base salary of
$108,000 per annum. He is also entitled to receive an aggregate of twenty five
thousand (25,000) shares of the Company's Common Stock, 12,500 shares of which
on March 15, 1997 and the remaining 12,500 shares on March 15, 1998. In
addition, Mr. Sloan is entitled to receive warrants to purchase thirty seven
thousand five hundred (37,500) shares of the Company's Common Stock at $.80 per
share. One-quarter (1/4) of the warrants are to be issued on March 15 of each of
1997, 1998, 1999 and 2000. The warrants are exercisable for a period of six (6)
years from the date of issuance.
13
<PAGE>
In addition, in March, 1996, the Company entered into a non-exclusive
employment agreement with Mr. Edward C. Hall under which he is to serve as the
Company's Chief Financial Officer. Mr. Hall receives a base salary of $60,000
per annum based upon a three day work week. In the event that Mr. Hall's
services are required by the Company in excess of three days per week, Mr. Hall
is to be compensated at the same rate as when we was a consultant to the
Company, $600 per day. Mr. Hall is also entitled to receive an aggregate of
twelve thousand five hundred (12,500) shares of the Company's Common Stock,
6,250 shares of which on March 15, 1997, and the remaining 6,250 shares on March
15, 1998. In addition, Mr. Hall is entitled to receive warrants to purchase
twenty five thousand (25,000) shares of the Company's Common Stock at $.80 per
share. One-quarter (1/4) of the warrants are to be issued on March 15 of each of
1997, 1998, 1999 and 2000. The warrants are exercisable for a period of six (6)
years from the date of issuance.
Under each of their contracts, Messrs. Hulsebus, Kenney, Sloan and Hall may
receive bonuses or other additional compensation consisting of cash, stock or
stock purchase rights as may be determined from time to time by the Board of
Directors.
There are no family relationships among any Directors or executive
officers.
14
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
-------------------------------------
<TABLE>
<CAPTION>
Percent of Total
Options/SARs
Granted Exercise of
Options/SARs to Employees in Base Price
Name Granted(1) Fiscal Year ($/Sh)(1) Expiration Date
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
M. Lee Hulsebus 100,000 33.6% $ .80/sh 8/01/03
B. Roland Freasier, Jr. (2) 37,500 12.6% $ .80/sh 8/31/01
Stephen W. Kenney 70,000 23.5% $ .80/sh 8/01/03
Richard E. Sloan 42,500 14.3% $ .80/sh 8/01/03
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION SAR VALUES
----------------------------
<TABLE>
<CAPTION>
Value of Unexercised
Number of In-the-Money
Unexercised Options/SARs
Shares Acquired Options/SARs at at FY-End
Acquired Value FY-EndExercisable/ Exercisable
Name on Exercise Realized($) Unexercisable(1) /Unexercisable(1)
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
M. Lee Hulsebus - 0 - - 0 - 250,000/100,000 $0/$0
B. Roland Freasier, Jr.(2) - 0 - - 0 - 75,000/37,500 $0/$0
Stephen W. Kenney - 0 - - 0 - 25,000/82,500 $0/$0
Richard E. Sloan - 0 - - 0 - 9,375/33,125 $0/$0
</TABLE>
(1) Includes Warrants.
(2) Resigned as a director of the Company in January 1996, and resigned as
executive vice president and an employee in March 1996.
15
<PAGE>
Board Classification and Committees
- -----------------------------------
The Company adopted a classified Board of Directors in April 1995. The
Board of Directors consists of six members divided into three classes, with each
Director in a given class serving a three-year term. Having a classified Board
of Directors may be viewed as inhibiting a change in control of the Company and
having possible anti-takeover effects. Officers of the Company serve at the
discretion of the Board of Directors, subject to existing employment agreements.
The Company has an Audit Committee, a Compensation Committee and a
Nominating Committee. The Audit Committee reviews the engagement of the
independent accountants, reviews and approves the scope of the annual audit
undertaken by the independent accountants and reviews the independence of the
accounting firm. The Audit Committee also reviews the audit and non-audit fees
of the independent accountants and the adequacy of the Company's internal
control procedures. The Audit Committee is presently comprised of Don L.
Arnwine, Thomas E. Glasgow and Edward C. Hall. The Audit Committee held no
meetings during 1996. The Compensation Committee reviews compensation issues
relating to executive management and makes recommendations with respect thereto
to the Board of Directors. The Compensation Committee is presently comprised of
M. Lee Hulsebus, Don L. Arnwine and Thomas E. Glasgow. The Compensation
Committee held two (2) meetings in 1996. The Nominating Committee selects
individuals to be nominated as directors and officers of the Company. The
members of the Nominating Committee are M. Lee Huslebus and Thomas E. Glasgow.
The Nominating Committee held two (2) meetings in 1996. The Nominating Committee
will consider nominees made by the shareholders at the meeting.
Each member of the Board of Directors who is not an officer or employee of
the Company receives shares of Common Stock at the rate of 15,000 shares per
annum, payable quarterly. The Company reimburses its Directors for travel
expenses incurred in connection with meetings of the Board of Directors or
committee meetings attended.
16
<PAGE>
PROPOSAL NO. 2:
RATIFICATION OF SELECTION
OF BDO SEIDMAN, LLP
AS INDEPENDENT AUDITORS
The Board of Directors has selected the firm of BDO Seidman, LLP to serve
as independent certified public accountants and to audit the Company's financial
statements for 1997. The firm of BDO Seidman, LLP audited the Company's
financial statements for the year ended 1996. The Company is advised that
neither the firm nor any of its partners has any material direct or indirect
relationship with the Company. The Board of Directors considers BDO Seidman, LLP
to be well qualified for the function of serving as the Company's auditors. The
Utah Revised Business Corporation Act does not require the approval of the
selection of auditors by the Company's shareholders, but in view of the
importance of the financial statements to shareholders, the Board of Directors
deems it desirable that they pass upon its selection of auditors. In the event
the shareholders disapprove of the selection, the Board of Directors will
consider the selection of other auditors. The Board of Directors recommends that
you vote in favor of the above proposal in view of the familiarity of BDO
Seidman, LLP with the Company's financial and other affairs due to its previous
service as auditors for the Company.
A representative of BDO Seidman, LLP is expected to be present at the
Annual Meeting with the opportunity to make a statement if he desires to do so,
and is expected to be available to respond to appropriate questions.
The Board of Directors recommends a vote FOR the ratification of selection
of BDO Seidman, LLP as independent auditors. Unless properly executed and
returned by the shareholder giving the proxy, proxies forwarded to those
shareholders who hold their voting securities in "street name" will be voted
"FOR" the ratification of the selection by the Board of Directors of BDO
Seidman, LLP as the Company's independent certified public accountants for the
year 1997.
17
<PAGE>
PROPOSAL NO. 3:
MERGER OF COMPANY WITH AND INTO
MEDICAL DEVICE TECHNOLOGIES, INC.,
A DELAWARE CORPORATION
On January 24, 1997, the Company's Board of Directors adopted a resolution
approving a plan of merger (the "Plan of Merger"), a copy of which is attached
hereto as Annex B, pursuant to which the Company would merge (the "Merger") with
and into Medical Device Technologies, Inc. (Delaware), a Delaware corporation
("MDT Delaware"), a wholly-owned subsidiary of the Company. MDT Delaware is a
newly formed corporation that has been created for the sole purpose of effecting
the Merger and consequently, since its formation on [insert date], has not
engaged in any business activity whatsoever. The sole purpose of the Merger is
to change the Company's state of incorporation from Utah to Delaware.
Accordingly, the Plan of Merger provides that, in the event the Merger is
approved by a majority of the shares eligible to vote on the Merger, each issued
and outstanding share of Common Stock and Preferred Stock of the Company will be
converted into one share of common stock and one share of preferred stock of MDT
Delaware, respectively, on the effective date of the Merger (the "Effective
Date"). The shares of common stock and preferred stock of MDT Delaware will be
identical in every respect to the shares of Common Stock and Preferred Stock of
the Company, respectively, except that such shares will represent ownership in
MDT Delaware, which, upon consummation of the Merger, will be the
successor-in-interest to all of the business, assets and the liabilities of the
Company. Consequently, commencing on the Effective Date, the Company will cease
to exist and MDT Delaware will engage in business activities identical to those
of the Company. Thus, the proposed Merger, if approved, will merely change the
state of incorporation of the Company and will cause certain other changes of a
legal nature with respect to the Company's Certificate of Incorporation, such as
the number of authorized shares of common stock, as more fully described below.
The business, management and location of the principal office of the Company
will remain the same, and the directors and the officers of the Company will
become directors and officers of MDT Delaware.
Recommendation of the Board; Reasons for the Merger. The Company's Board of
Director recommends that you vote FOR the Merger. In reaching its decision to
approve and recommend the Merger, a number of factors were considered by the
Company's Board of Directors including, but not limited to, the following:
18
<PAGE>
- As a consequence of being the chosen state of incorporation for more
publicly traded companies than any other state, Delaware has a well established
body of legal precedent in matters of corporate law relative to public
companies. This will provide a greater degree of predictability with respect to
corporate legal affairs.
- Delaware's legislative and judiciary are experienced and sophisticated in
matters of corporate law and have historically been responsive to changing
business needs. As a consequence, Delaware has historically been at the
forefront of evolving legal principles in the corporate arena.
- Prompt and efficient corporate filing and administrative procedures and
moderate corporate taxes.
Similarities between the Utah Revised Business Corporation Act (the "Utah
Act") and the Delaware General Business Corporation Law (the "Delaware Act").
The Delaware Act, as is the case with the Utah Act, provides companies with the
ability to adopt a number of measures that are designed to reduce the Company's
vulnerability to unwanted takeovers, unsolicited business combinations and
changes in control, such as a staggered Board of Directors, adoption of a
Shareholder Rights Plan and the issuance of preferred stock, the rights,
performances and privileges of which may be determined by the Board of
Directors.
Despite the Board of Directors's belief as to the benefits to shareholders
of the Merger, the Delaware Act, as is the case with the Utah Act, may be
disadvantageous to the extent that it has the effect of discouraging a future
takeover attempt which is not approved by the Board of Directors, but which a
majority of the shareholders may deem to be in their best interests or in which
shareholders may receive a substantial premium for their shares over the then
current market value or over their cost basis in such shares. As a result of
such effects of the reincorporation proposal, shareholders who might wish to
participate in a tender offer may not have an opportunity to do so.
19
<PAGE>
Certificate of Incorporation and By-Laws of MDT Delaware. The certificate
of incorporation of MDT Delaware, a copy of which is attached hereto as Annex C,
will maintain the Company's name as "Medical Device Technologies, Inc." As the
business activities of MDT Delaware will be identical to those of the Company,
the Board of Directors believes that no change of its name is necessary. The
certificate of incorporation of MDT Delaware will also provide for 50,000,000
authorized shares of common stock, whereas the Company's present Utah Articles
of Incorporation has 100,000,000 authorized shares of Common Stock. The number
of authorized shares of preferred stock of MDT Delaware, 10,000,000, will be the
same as the number of authorized shares of Preferred Stock as is currently
provided for in the Company's Utah Articles of Incorporation. Upon the Effective
Date, the number of outstanding shares of Common Stock and Preferred Stock of
MDT Utah will be identical to the number of outstanding shares of common stock
and preferred stock, respectively, of MDT Delaware, as the shares of MDT
Delaware owned by MDT Utah prior to the Merger will be cancelled and be returned
to the treasury stock of MDT Delaware upon the Effective Date. As the franchise
taxes levied by the State of Delaware increase proportionately with the number
of shares authorized, the Board of Directors believes that a reduction in the
number of authorized shares of Common Stock is desirable, as it significantly
lowers franchise taxes. Furthermore, although it is important for MDT Delaware
to have an adequate number of authorized shares, it is equally important that
the number of authorized shares not be unreasonable taking into account the
capital structure of the Company. The Board of Directors believes that
50,000,000 authorized shares of common stock are sufficient, given that
approximately shares of common stock are issued and outstanding as of the record
date.
20
<PAGE>
The certificate of incorporation of MDT Delaware will also state the par
value of the common stock as $.0001 and the par value of the preferred stock as
$.0001, whereas the par value of the Company's Common Stock and Preferred Stock
is $.15 and $.01, respectively. Reducing the par value of the Common Stock and
Preferred Stock will allow MDT Delaware to pay lower franchise taxes, without
otherwise posing any disadvantages.
The by-laws of MDT Delaware, a copy of which is attached hereto as Annex D,
will be different from the by-laws of the Company with respect to certain minor
aspects of corporate governance.
Dividends. The Merger will have no effect on (i) the right of the Company's
shareholders to receive dividends if, when and as declared by the board of
directors, (ii) the amount of such dividends payable to the Company's
shareholders, or (iii) the manner in which such dividends are paid. The Company
does not presently have any defaults in principal or interest, or dividends in
arrears with respect to any of its securities.
21
<PAGE>
Compliance with Merger Requirements of each of the Utah Act and the
Delaware Act. In connection with the Merger, each of the Company and MDT
Delaware must comply with the requirements of the Utah Act and the Delaware Act.
With respect to the requirements of the Utah Act, such Act requires that
the Company's Board of Directors, before the date of the Annual Meeting, adopt
the Plan of Merger, a copy of which is attached hereto as Annex B, which sets
forth, among other things, the terms and conditions of the Merger and the manner
of converting the shares of the Company into shares of MDT Delaware. The
Company's Board of Directors must also recommend the Merger to the shareholders
and a copy of the Plan of Merger must accompany the notice of the Annual
Meeting.
In addition, in the event that the Merger is approved by the Company's
shareholders, the Utah Act requires that the surviving corporation, MDT
Delaware, file a certificate of merger (the "Merger Certificate") with the state
of Utah. The Merger Certificate is comprised of the Plan of Merger and a
statement of the total number of shareholder votes cast for and against the
Merger. The Utah Act also requires that MDT Delaware maintain a registered agent
in Utah to accept service of process for any cause of action regarding the Utah
corporation.
22
<PAGE>
With respect to the Delaware Act, such Act requires that each of the Board
of Directors of the Company and MDT Delaware adopt a resolution approving a
written agreement of merger (the "Merger Agreement"), a copy of which is
attached hereto as Annex B. Shareholder approval of the Merger is required under
the Delaware Act, however, MDT Utah, as the sole stockholder of MDT Delaware
prior to the Effective Date, has agreed to vote in favor of the Merger. In the
event that the Merger is approved by the shareholders of MDT Utah, the Delaware
Act further requires that MDT Delaware file the Merger Agreement with the State
of Delaware.
Assuming the Merger is consummated, subsequent to the Effective Date, MDT
Delaware will file an application to qualify to do business in California and
any other states where the Company is required to qualify to do business.
Certain Tax Consequences of the Merger. Generally, the transaction
contemplated by the Merger will not be taxable to current shareholders of the
Company for federal, state and local income tax purposes.
The following is a summary of certain of the United States federal income
tax consequences of the Merger.
a. The Merger will constitute a tax-free reorganization under the Internal
Revenue Code of 1986, as amended (the "Code"), and the Company and MDT Delaware
will each be a party to the reorganization;
b. No income, gain, or loss will be recognized by either the Company or MDT
Delaware as a result of the consummation of the Merger;
c. No income, gain, or loss will be recognized by either shareholders of
the Company or shareholders of MDT Delaware as a result of the consummation of
the Merger; and
d. The adjusted tax basis of MDT Delaware's common stock and preferred
stock received by a shareholder of the Company pursuant to the Merger will be
the same as the adjusted tax basis of the shares of Common Stock and Preferred
Stock of the Company.
23
<PAGE>
For federal income tax purposes, a corporation with net operating losses
which undergoes an ownership change as defined in Section 382 of the Code
generally is subjected to an annual limitation on the amount of such losses
which may be used to offset taxable income recognized after an ownership change.
More specifically, under Code Section 382, a corporation's ability to offset
taxable income with pre-change losses is limited in any year subsequent to the
ownership change to any amount equal to the product of the value of the
corporation on the date of the ownership change multiplied by the applicable
long-term tax-exempt rate. In general, the value of the corporation is
determined by reference to the fair market value of the corporation's
outstanding stock immediately prior to the ownership change.
Upon the consummation of the Merger, a change in ownership of the Company
will not occur for purposes of Code Section 382. Consequently, the Company will
not be subject to an annual limitation on the amount of such losses which may be
used to offset taxable income recognized after the ownership change.
Neither the Company nor MDT Delaware has requested a formal tax opinion of
its accountants or its counsel, or requested any ruling from the Internal
Revenue Service, with respect to these matters.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY. DUE TO THE INDIVIDUAL NATURE OF TAX CONSEQUENCES, SHAREHOLDERS
ARE URGED TO CONSULT THEIR TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO
THEM OF THE OFFER, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL OR OTHER TAX
LAWS.
Accounting Treatment of the Merger. The Merger, if consummated as proposed,
will not receive any special treatment for accounting and financial reporting
purposes as the Merger is merely a re-incorporation of the Company into the
State of Delaware. After the consummation of the Merger, the results of
operations of the Company will be included in the consolidated financial
statements of MDT Delaware. No goodwill will be recorded on the financial
statements of MDT Delaware in connection with the Merger.
The Board or Directors recommends that you vote FOR the merger of the
Company with and into MDT Delaware.
24
<PAGE>
PROPOSAL NO. 4:
ADOPTION OF STOCK OPTION PLAN
On January 24, 1997 the Board of Directors adopted a stock option plan (the
"Option Plan") attached hereto as Annex E, which provides for the grant to
employees, directors, officers, consultants and others, stock options to
purchase up to 1,500,000 shares of Common Stock consisting both of "incentive
stock options" within the meaning of Section 422 of the United States Internal
Revenue Code of 1986, as amended (the "Code") and non-statutory stock options.
The Option Plan is intended to qualify under Rule 16b-3 of the Securities
Exchange Act of 1934, as amended. Incentive stock options are issuable only to
employees of the Company, while non-statutory options may be issued to
non-employees, consultants and others, as well as to employees of the Company.
The Company believes it is in the Company's best interests to adopt the Option
Plan so as to enable the Company to have the ability to provide incentives to
key individuals, from time to time, in connection with such individuals'
performance on behalf of the Company.
The Option Plan is administered by the Board of Directors unless and until
the Board delegates administration to a Committee, which Committee may be
abolished at any time. The Board of Directors, or a Committee subsequently
appointed by the Board, will determine those individuals who shall receive
options, the time period during which the options may be partially or fully
exercised, the number of shares of Common Stock that may be purchased under each
option, and the option price. Outside directors of the Company are not eligible
to be granted options under the Option Plan.
The per share exercise price of an incentive stock option may not be less
than 100% of the fair market value of the Common Stock on the date the option is
granted, and the exercise price of a non-statutory option may not be less than
85% of the fair market value of the Common Stock on the date the option is
granted. No person shall be eligible to be granted options covering more than
two hundred fifty thousand (250,000) shares of Common Stock in any twelve (12)
month period, subject to adjustment as a result of stock splits, mergers or
similar events. No person who owns, directly or indirectly, at the time of the
granting of an incentive stock option, more than 10% of the total combined
voting power of all classes of stock of the Company shall be eligible to receive
any incentive stock options under the Plan unless the option price is at least
110% of the fair market value of the Common Stock subject to the option,
determined on the date of the grant. Non-statutory options are not subject to
this limitation.
No incentive stock options may be transferred by an optionee other than by
will or the laws of descent and distribution, and during the lifetime of an
optionee, the option will be exercisable only by the optionee. In the event of
termination of employment other than by death or disability, the optionee may
exercise an option (to the extent that the option was exercisable on the date of
termination) within such period of time ending the earlier of (i) two (2) months
after such termination, or (ii) the expiration of the term of the option as set
forth in the optionee's option agreement. Upon termination of employment as
result of disability, the optionee may exercise an option (to the extent that
the option was exercisable on the date of termination) within such period of
time ending the earlier of (i) six (6) months thereafter, or (ii) the expiration
of the term of the option as set forth in the optionee's option agreement. Upon
termination of employment of an optionee by reason of death, the option remains
exercisable (to the extent that the option was exercisable on the date of
termination) within such period of time ending the earlier of (i) twelve (12)
months thereafter, or (ii) the expiration of the term of the option as set forth
in the optionee's option agreement.
The Board of Directors recommends that you vote FOR the adoption of the
Company's Stock Option Plan.
25
<PAGE>
SHAREHOLDERS PROPOSALS
Proposals of shareholders intended to be presented at the 1998 annual
meeting must be received in writing, by the President of the Company at its
offices by December 1, 1997, in order to be considered for inclusion in the
Company's proxy statement relating to that meeting.
By Order of the Board of Directors
/s/ M. Lee Hulsebus
----------------------------------------
M. Lee Hulsebus, Chief Executive Officer
26
<PAGE>
ANNEXES
PROXY.................................................................A
AGREEMENT AND PLAN OF MERGER..........................................B
CERTIFICATE OF INCORPORATION..........................................C
BY-LAWS...............................................................D
1997 STOCK OPTION PLAN................................................E
27
<PAGE>
ANNEX A
MEDICAL DEVICE TECHNOLOGIES, INC.
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS
The undersigned hereby appoints and as proxies (the "Proxies"), each with
power of substitution and resubstitution, to vote all shares of common stock,
$.15 par value per share, and all shares of 6% cumulative convertible Series A
preferred stock, par value $.01 per share, of Medical Device Technologies, Inc.,
a Utah corporation (the "Company"), held of record by the undersigned on April
7, 1997 at the Annual Meeting of Stockholders to be held at 9171 Towne Centre
Drive, Third Floor Conference Room, San Diego, CA 92122 on Friday, May 23, 1997
at 10:30 a.m., Pacific Daylight Savings Time, or at any adjournments thereof, as
directed below, and in their discretion on all other matters coming before the
meeting or any adjournments thereof.
Please mark boxes / / in blue or black ink.
Proposal 1. Election of four (4) Directors: Mr. Don L. Arnwine and
Mr.Scott A. Weisman, Arthur E. Bradley, D.D.S. and Mr. Thomas E. Glasgow:
(Mark only ONE of the two boxes relative to this Proposal)
/ / VOTE FOR all nominees named above except those who may be named on this
line: ___________________________________
/ / VOTE WITHHELD as to all nominees named above
Proposal 2. Proposal to ratify appointment by the Company's Board of
Directors of BDO Seidman, LLP as the Company's independent certified public
accountants for the current calendar year:
FOR / / AGAINST / / ABSTAIN / /
Proposal 3. Proposal to merge the Company with and into Medical Device
Technologies, Inc., a Delaware corporation:
FOR / / AGAINST / / ABSTAIN / /
Proposal 4. Proposal to adopt a stock option plan providing for the
issuance of up to 1,500,000 shares of the Company's common stock to officers,
directors, employees and consultants to the Company:
FOR / / AGAINST / / ABSTAIN / /
In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
When properly executed, this Proxy will be voted as directed. Unless
properly executed and returned, Proxies forwarded to those shareholders who hold
their voting securities in "street name" will be voted "FOR" Proposals 1 and 2.
Please mark, date, sign and return this Proxy promptly in the enclosed
envelope.
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney or executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Dated: ___________________, 1997
X_______________________________
Signature
X_______________________________
Print Name(s)
X_______________________________
Signature, if held jointly
28
<PAGE>
ANNEX B
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (hereinafter called the "Merger
Agreement") is made as of January 24, 1997, by and between Medical Device
Technologies, Inc., a Utah corporation ("MDT Utah"), and Medical Device
Technologies, Inc. (Delaware), a Delaware corporation ("MDT Delaware"). MDT Utah
and MDT Delaware are sometimes referred to as the "Constituent Corporations."
The authorized capital stock of MDT Utah consists of one hundred
million (100,000,000) shares of Common Stock, fifteen cents ($.15) par value,
and ten million (10,000,000) shares of Preferred Stock, one cent ($.01) par
value, of which two million one hundred forty thousand (2,140,000) shares are
designated as 6% Cumulative Convertible Series A Preferred Stock. The authorized
capital stock of MDT Delaware consists of fifty million (50,000,000) shares of
Common Stock, one one-thousandth of a cent ($.0001) par value, ten million
(10,000,000) shares of Preferred Stock, one one-thousandth of a cent ($.0001)
par value, of which two million one hundred forty thousand (2,140,000) shares
are designated as 6% Cumulative Convertible Series A Preferred Stock.
The directors of the Constituent Corporations deem it advisable and to
the advantage of said corporations that MDT Utah merge into MDT Delaware upon
the terms and conditions herein provided.
NOW, THEREFORE, the parties do hereby adopt the plan of reorganization
encompassed by this Merger Agreement and do hereby agree that MDT Utah shall
merge into MDT Delaware on the following terms, conditions and other provisions:
29
<PAGE>
I. TERMS AND CONDITIONS
1.1 Merger. MDT Utah shall be merged with and into MDT Delaware (the
"Merger"), and MDT Delaware shall be the surviving corporation (the "Surviving
Corporation") effective upon the date when this Merger Agreement is filed with
the Secretary of State of the State of Delaware (the "Effective Date").
1.2 Succession. On the Effective Date, MDT Delaware shall continue its
corporate existence under the laws of the State of Delaware, and the separate
existence and corporate organization of MDT Utah, except insofar as it may be
continued by operation of law, shall be terminated and cease.
1.3 Transfer of Assets and Liabilities. On the Effective Date, the
rights, privileges, powers and franchises, both of a public as well as of a
private nature, of each of the Constituent Corporations shall be vested in and
possessed by the Surviving Corporation, subject to all of the disabilities,
duties and restrictions of or upon each of the Constituent Corporations; and all
and singular rights, privileges, powers and franchises of each of the
Constituent Corporations, and all property, real, personal and mixed, of each of
the Constituent Corporations, and all debts due to each of the Constituent
Corporations on whatever account, and all things in action or belonging to each
of the Constituent Corporations shall be transferred to and vested in the
Surviving Corporation; and all property, rights, privileges, powers and
franchises, and all and every other interest, shall be thereafter the property
of the Surviving Corporation as they were of the Constituent Corporations, and
the title to any real estate vested by deed or otherwise in either of the
Constituent Corporations shall not revert or be in any way impaired by reason of
the Merger; provided, however, that the liabilities of the Constituent
Corporations and of their shareholders, directors and officers shall not be
affected and all rights of creditors and all liens upon any property of either
of the Constituent Corporations shall be preserved and unimpaired, and any claim
existing or action or proceeding pending by or against either of the Constituent
Corporations may be prosecuted to judgment as if the Merger had not taken place
except as they may be modified with the consent of such creditors and debts,
liabilities and duties of or upon each of the Constituent Corporations shall
attach to the Surviving Corporation, and may be enforced against it to the same
extent as if such debts, liabilities and duties had been incurred or contracted
by it.
30
<PAGE>
1.4 Conversion of Capital Stock of MDT Utah and MDT Delaware. On the
Effective Date, by virtue of the Merger and without any further action on the
part of the Constituent Corporations or their shareholders, (i) each share of
Common Stock of MDT Utah issued and outstanding immediately prior thereto shall
be changed and converted into one fully paid and nonassessable share of the
Common Stock of MDT Delaware; (ii) each share of Common Stock of MDT Delaware
issued and outstanding immediately prior thereto shall be canceled and returned
to the status of authorized but unissued shares; and (iii) each share of 6%
Cumulative Convertible Series A Preferred Stock of MDT Utah issued and
outstanding immediately prior thereto shall be changed and converted into one
fully paid and nonassessable share of 6% Cumulative Convertible Series A
Preferred Stock of MDT Delaware.
1.5 Stock Certificates. On and after the Effective Date, all of the
outstanding certificates which prior to that time represented shares of the
Common Stock or of the Preferred Stock of MDT Utah shall be deemed for all
purposes to evidence ownership of and to represent the shares of MDT Delaware
into which the shares of MDT Utah represented by such certificates have been
converted as herein provided and shall be so registered on the books and records
of the Surviving Corporation or its transfer agents. The registered owner of any
such outstanding stock certificate shall, until such certificate shall have been
surrendered for transfer or conversion or otherwise accounted for to the
Surviving Corporation or its transfer agent, have and be entitled to exercise
any voting and other rights with respect to and to receive any dividend and
other distributions upon the shares of MDT Delaware evidenced by such
outstanding certificate as above provided.
1.6 Employee Benefit Plans. On the Effective Date, the Surviving
Corporation shall assume all obligations of MDT Utah under any and all employee
benefit plans in effect as of such date with respect to which employee rights or
accrued benefits are outstanding as of such date and shall adopt and continue in
effect all such employee benefit plans upon the same terms and conditions as
were in effect immediately prior to the Merger.
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II. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 Certificate of Incorporation and Bylaws. The Certificate of
Incorporation and Bylaws of MDT Delaware in effect on the Effective Date shall
continue to be the Certificate of Incorporation and Bylaws of the Surviving
Corporation.
2.2 Directors. The directors of MDT Utah immediately preceding the
Effective Date shall become the directors of the Surviving Corporation on and
after the Effective Date to serve until the expiration of their terms and until
their successors are elected and qualified.
2.3 Officers. The officers of MDT Utah immediately preceding the
Effective Date shall become the officers of the Surviving Corporation on and
after the Effective Date to serve at the pleasure of its Board of Directors.
III. MISCELLANEOUS
3.1 Further Assurances. From time to time, and when required by the
Surviving Corporation or by its successors and assigns, there shall be executed
and delivered on behalf of MDT Utah such deeds and other instruments, and there
shall be taken or caused to be taken by it such further and other action, as
shall be appropriate or necessary in order to vest or perfect in or to conform
of record or otherwise, in the Surviving Corporation the title to and possession
of all the property, interests, assets, rights, privileges, immunities, powers,
franchises and authority of MDT Utah and otherwise to carry out the purposes of
this Merger Agreement, and the officers and directors of the Surviving
Corporation are fully authorized in the name and on behalf of MDT Utah or
otherwise to take any and all such action and to execute and deliver any and all
such deeds and other instruments.
3.2 Amendment. At any time before or after approval by the shareholders
of MDT Utah, this Merger Agreement may be amended in any manner (except that,
after the approval of the Merger Agreement by the shareholders of MDT Utah, the
principal terms may not be amended without the further approval of the
shareholders of MDT Utah) as may be determined in the judgment of the respective
Board of Directors of MDT Delaware and MDT Utah to be necessary, desirable, or
expedient in order to clarify the intention of the parties hereto or to effect
or facilitate the purpose and intent of this Merger Agreement.
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3.3 Conditions to Merger. The obligation of the Constituent
Corporations to effect the transactions contemplated hereby is subject to
satisfaction of the following conditions (any or all of which may be waived by
either of the Constituent Corporations in its sole discretion to the extent
permitted by law):
(a) the Merger shall have been approved by the shareholders of MDT Utah in
accordance with applicable provisions of the Utah Business Corporation Act;
(b) MDT Utah, as sole stockholder of MDT Delaware, shall have approved the
Merger in accordance with the General Corporation Law of the State of Delaware;
and
(c) any and all consents, permits, authorizations, approvals, and orders
deemed in the sole discretion of MDT Utah to be material to consummation of the
Merger shall have been obtained.
3.4 Abandonment or Deferral. At any time before the Effective Date,
this Merger Agreement may be terminated and the Merger may be abandoned by the
Board of Directors of either MDT Utah or MDT Delaware or both, notwithstanding
the approval of this Merger Agreement by the shareholders of MDT Utah or MDT
Delaware, or the consummation of the Merger may be deferred for a reasonable
period of time if, in the opinion of the Boards of Directors of MDT Utah and MDT
Delaware, such action would be in the best interest of such corporations. In the
event of termination of this Merger Agreement, this Merger Agreement shall
become void and of no effect and there shall be no liability on the part of
either Constituent Corporation or its Board of Directors or shareholders with
respect thereto, except that MDT Utah shall pay all expenses incurred in
connection with the Merger or in respect of this Merger Agreement or relating
thereto.
3.5 Counterparts. In order to facilitate the filing and recording of
this Merger Agreement, the same may be executed in any number of counterparts,
each of which shall be deemed to be an original.
3.6 Agreement for Service of Process. The Surviving Corporation, from
and after the Effective Date, agrees that it may be sued and served with process
in the State of Utah at 9171 Towne Centre Drive, Suite 355, San Diego,
California 92122, in any proceeding for the enforcement of any obligation of MDT
Utah and in any proceeding for the enforcement of the rights of a dissenting
shareholder of MDT Utah against the Surviving Corporation. The Surviving
Corporation irrevocably appoints the Secretary of State of the State of Utah as
its agent to accept service of process in any such proceeding.
3.7 Governing Law. This Agreement and the legal relations between the
parties shall be governed by and construed in accordance with the laws of the
State of Delaware, except to the extent that Utah law applies to the Merger.
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IN WITNESS WHEREOF, this Merger Agreement, having first been duly
approved by the Board of Directors of MDT Utah and MDT Delaware, is hereby
executed on behalf of each said corporation and attested by their respective
officers thereunto duly authorized.
MEDICAL DEVICE TECHNOLOGIES, INC.
A Utah corporation
By:_____________________________________
M. Lee Hulsebus
President and Chief Executive Officer
MEDICAL DEVICE TECHNOLOGIES, INC. (DELAWARE)
A Delaware corporation
By:_____________________________________
M. Lee Hulsebus
President and Chief Executive Officer
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ANNEX C
CERTIFICATE OF INCORPORATION
OF
MEDICAL DEVICE TECHNOLOGIES, INC. (DELAWARE)
ARTICLE I - NAME
The name of the corporation is Medical Device Technologies, Inc.
(Delaware) (the "Corporation").
ARTICLE II - REGISTERED AGENT
The address of the Corporation's registered office in the
State of Delaware is One Rodney Square, 10th Floor, Tenth and King Streets, in
the City of Wilmington, County of New Castle, 19801. The name of the
Corporation's registered agent at such address is RL&F Service Corp.
ARTICLE III - PURPOSE
The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
ARTICLE IV - STOCK
(a) The total number of shares of stock which the Corporation
shall have authority to issue is 60,000,000 shares, consisting of 50,000,000
shares of Common Stock, par value $.0001 per share ("Common Stock") and
10,000,000 shares of Preferred Stock, par value $.0001 per share ("Preferred
Stock").
(b) Shares of Preferred Stock may be issued in one or more
series, from time to time, with each such series to consist of such number of
shares and to have such voting powers, full or limited, or no voting powers, and
such designations, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions thereof, as
shall be stated in the resolution or resolutions providing for the issuance of
such series adopted by the Board of Directors of the Corporation, and the Board
of Directors is hereby expressly vested with authority, to the full extent now
or hereafter provided by law, to adopt any such resolution or resolutions.
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The authority of the Board with respect to each series shall include, but
not be limited to, determination of the following:
(i) The number of shares constituting that series and the distinctive
designation of that series;
(ii) The dividend rate on the shares of that series, whether dividends
shall be cumulative, and, if so, from which date or dates, and the relative
rights of priority, if any, of payment of dividends on shares of that series;
(iii) Whether that series shall have voting rights, in addition to the
voting rights provided by law, and, if so, the terms of such voting rights;
(iv) Whether that series shall have conversion privileges, and, if so, the
terms and conditions of such conversion, including provision for adjustment of
the conversion rate in such events as the Board of Directors shall determine;
(v) Whether or not the shares of that series shall be redeemable, and, if
so, the terms and conditions of such redemption, including the date or date upon
or after which they shall be redeemable, and the amount per share payable in
case of redemption, which amount may vary under different conditions and at
different redemption dates;
(vi) Whether that series shall have a sinking fund for the redemption or
purchase of shares of that series, and, if so, the terms and amount of such
sinking fund;
(vii) The rights of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, and the
relative rights of priority, if any, of payment of shares of that series;
(viii) Any other relative rights, preferences and limitations of that
series.
(c) 6% Cumulative Convertible Series A Preferred Stock.
(i) Designation. Two Million One Hundred Forty Thousand (2,140,000) shares
of preferred stock are hereby designated as 6% 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 this paragraph (c).
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(ii) Dividends. The holders of the Preferred Stock are entitled to receive
if, when and as declared by the Corporation's Board of Directors out of funds
legally available therefor, cumulative dividends, payable solely in Common
Stock, at the rate of 6% 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;
provided, however, that the first dividend payment shall be on August 31, 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 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) 6% 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 $3.00 per share or be less than $1.20 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.
(iii) Conversion. The holders of the Preferred Stock shall have conversion
rights as follows (the "Conversion Rights"):
I. Right to Convert. Each outstanding share of Preferred Stock will be
convertible, at the option of the holder, at any time commencing on October 22,
1996 (the "Conversion Date"). Each share of Preferred Stock is convertible into
four (4) shares of Common Stock (the "Conversion Ratio"). The conversion price
of the Common Stock issuable upon conversion of the Preferred Stock shall be
equal to $1.25 per share of Common Stock (the "Conversion Price"), subject to
adjustment pursuant to paragraphs 4 and 5 of this Section (iii). All accrued but
unpaid Common Stock dividends shall be paid upon conversion.
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1. 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 July 24, 1997 (the "Automatic
Conversion Date").
2. Mechanics of Conversion. Any holder of Preferred Stock who wishes to
convert the same into shares of Common Stock pursuant to paragraph 1 of this
Section (iii), 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 2 of this
Section (iii). 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 of such shares of Common
Stock at and after such time.
3. Adjustments to Conversion Ratio 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 Ratio 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. Upon any
adjustment to the Conversion Ratio pursuant to this Section (iii)4, the
Conversion Price will be proportionately decreased or increased, as appropriate.
4. 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 4 of this Section
(iii), the Conversion Ratio 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. Upon any adjustment to the Conversion Ratio pursuant to this
Section (iii)5, the Conversion Price will be proportionately decreased or
increased, as appropriate.
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5. 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 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 (iii) and in the taking of all such action as may be
necessary or appropriate in order to protect the Conversion Rights of the
holders of the Preferred Stock against impairment. 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.
The provisions of this paragraph 6 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 6.
6. Notice of Adjustments. Upon the occurrence of each adjustment or
readjustment of the Conversion Price and/or Conversion Ratio pursuant to this
Section (iii), 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.
7. 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 and/or Conversion Ratio will be made under paragraph 4 of this
Section (iii); (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 and/or Conversion Ratio
will be made under paragraph 4 of this Section (iii); 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:
8. 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
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a. 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 property
deliverable upon the occurrence of such event).
8. 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.
9. 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.
10. 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.
11. Notices. Any notice required by the provisions of this Section (iii) 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.
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(iv) 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 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.
(v) 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, $5.00 per share of the Preferred Stock,
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.
(vi) Restrictions and Limitations.
12. 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.
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13. 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.
ARTICLE V - INCORPORATOR
The name and mailing address of the incorporator of the Corporation is
C. Stephen Bigler, P.O. Box 551, Wilmington, DE 19899.
ARTICLE VI - DIRECTORS
1. The number of directors of the Corporation shall be not less than (4)
nor more than nine (9) directors, the exact number of directors to be determined
from time to time by resolution adopted by the Board of Directors.
2. Except as may be otherwise provided in the terms of any one or more
classes of Preferred Stock issued by the Corporation, at the first meeting of
shareholders of the Corporation at which this provision is approved by the
shareholders holding a majority of the shares of the Corporation issued and
outstanding (the "initial meeting"), the directors shall be divided into three
classes designed Class I, Class II and Class III, with each class consisting, as
nearly as may be possible, of one-third of the total number of directors
constituting the entire Board of Directors. At the initial meeting, directors of
Class I shall be elected to hold office for a term expiring on the date of the
first annual meeting of shareholders held following the initial meeting, and
directors of Class II shall be elected to hold office for a term expiring on the
date of the second annual meeting of shareholders held following the initial
meeting, and directors of Class III shall be elected to hold office for a term
expiring on the date of the third annual meeting of shareholders held following
the initial meeting. At each annual meeting of shareholders at which this
provision is effective, beginning at the first annual meeting of shareholders
held following the initial meeting, successors to the class of directors whose
term expires at that annual meeting shall be elected for a three-year term. If
the number of directors is changed, any increase or decrease shall be
apportioned by the directors then in office among the classes as to maintain the
number of directors in each class as nearly equal as possible, and any
additional directors of any class elected to fill a vacancy resulting from an
increase in such class shall hold office for a term that shall coincide with the
remaining term of that class, but in no case will a decrease in the number of
directors shorten the term of any incumbent director. A director shall hold
office until the annual meeting for the year in which his term expires and until
his successor shall be elected and shall qualify, subject, however, to prior
death, resignation, retirement, disqualification or removal from office. Any
vacancy on the Board of Directors, however, resulting, may only be filled by a
majority of the directors then in office, even if less than a quorum, or by a
sole remaining director. Any director elected to fill a vacancy shall hold
office for a term that shall coincide with the term of the class to which such
director shall have been elected. No holder of shares of Common Stock entitled
to vote in the election of directors shall be entitled to cumulative voting.
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3. Unless and to the extent provided in the By-laws of the Corporation, the
election of directors of the Corporation need not be by written ballot.
4. In furtherance and not in limitation of the powers conferred upon it by
law, the Board of Directors is expressly authorized to adopt, repeal, alter or
amend the By-laws of the Corporation.
ARTICLE VII - LIMITATION OF LIABILITY
To the fullest extent that the General Corporation Law of the State of
Delaware or any other law of the State of Delaware as it exists on the date
hereof or as it may hereafter be amended permits the limitation or elimination
of the liability of directors, no director of the Corporation shall be liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director. No amendment to, or modification or repeal of, this Article
VII shall apply to or have any effect on the liability or alleged liability of
any director of the Corporation for or with respect to acts or omissions of such
director occurring prior to such amendment, modification or repeal.
ARTICLE VIII - AMENDMENT
The Corporation reserves the right to amend, alter or repeal any provision
contained in this Certificate of Incorporation in the manner now or hereinafter
prescribed by statute, and all rights conferred upon stockholders herein are
subject to this reservation.
------------------------------
Incorporator
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ANNEX D
BY-LAWS
OF
MEDICAL DEVICE TECHNOLOGIES, INC. (DELAWARE)
A Delaware Corporation
ARTICLE I
OFFICES
Section 1. The principal office of the Corporation shall be located at
9171 Towne Centre Drive, Suite 355, San Diego, California 92122. The Corporation
may have such other offices, either within or without the State of Delaware as
the Board of Directors may designate or as the business of the Corporation may
require from time to time.
The registered office of the Corporation required by the Delaware
General Corporation Law to be maintained in the State of Delaware may be changed
from time to time by the Board of Directors.
ARTICLE II STOCKHOLDERS Section 1. Annual Meeting. The annual meeting of
stockholders shall be held at the principal office of the Corporation at 9171
Towne Center Drive, Suite 355, San Diego, California 92122, or at such other
places or at times as the Board of Directors may, from time to time, determine.
If the day so designated falls upon a legal holiday then the meeting shall be
held upon the first business day thereafter. The Secretary shall serve
personally or by mail a written notice thereof, not less than ten (10) nor more
than sixty (60) days previous to such meeting, addressed to each stockholder at
his address as it appears on the stock book; but at any meeting at which all
stockholders shall be present, or of which all stockholders not present have
waived notice in writing, the giving of notice as above required may be
dispensed with.
Section 2. Special Meetings. Special meetings of stockholders other
than those regulated by statute, may be called at any time by a majority of the
Directors. Notice of such meeting stating the place, day and hour and the
purpose for which it is called, shall be served personally or by mail, not less
than ten (10) nor more than sixty (60) days before the date set for such
meeting. If mailed, notice shall be directed to a stockholder at his address as
it appears on the stock book; but at any meeting at which all stockholders shall
be present, or of which stockholders not present have waived notice in writing,
the giving of notice as above described may be dispensed with. The Board of
Directors shall also, in like manner, call a special meeting of stockholders
whenever so requested in writing by stockholders representing not less than
twenty percent (20%) of the capital stock of the Corporation entitled to vote at
the meeting. The President may in his direction call a special meeting of
stockholders upon ten (10) days notice. No business other than that specified in
the call for the meeting shall be transacted at any special meeting of the
stockholders, except upon the unanimous consent of all the stockholders entitled
to notice thereof.
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Section 3. Fixing Date for Determination of Stockholders of Record. In
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which record date: (1) in the case of determination of
stockholders entitled to vote at any meeting of stockholders or adjournment
thereof, shall, unless otherwise required by law, not be more than sixty nor
less than ten days before the date of such meeting; (2) in the case of
determination of stockholders entitled to express consent to corporate action in
writing without a meeting, shall not be more than ten days from the date upon
which the resolution fixing the record date is adopted by the Board of
Directors; and (3) in the case of any other action, shall not be more than sixty
days prior to such other action. If no record date is fixed: (1) the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held; (2) the record date
for determining stockholders entitled to express consent to corporate action in
writing without a meeting, when no prior action of the Board of Directors is
required by law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
Corporation in accordance with applicable law, or, if prior action by the Board
of Directors is required by law, shall be at the close of business on the day on
which the Board of Directors adopts the resolution taking such prior action; and
(3) the record date for determining stockholders for any other purpose shall be
at the close of business on the day on which the Board of Directors adopts the
resolution relating thereto. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
Section 4. Voting. At all meetings of the stockholder of record having
the right to vote, subject to the provisions of Section 3, each stockholder of
the Corporation is entitled to one (1) vote for each share of stock having
voting power standing in the name of such stockholder on the books of the
Corporation. Votes may be cast in person or by written authorized proxy.
Section 5. Proxy. Each proxy must be executed in writing by the
stockholder of the Corporation or his duly authorized attorney. Such proxy shall
be filed with the Secretary of the Corporation before or at the time of the
meeting. No proxy shall be valid after the expiration of thirty-six (36) months
from the date of its execution unless it shall have specified therein a longer
duration.
Every proxy shall be revocable at the discretion of the person
executing it or of his personal representatives or assigns.
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Section 6. Voting of Shares by Certain Holders. Shares standing in the
name of another corporation may be voted by such officer, agent or proxy as the
by-laws of such corporation may prescribe, or, in the absence of such provision,
as the Board of Directors of such corporation may determine.
Shares held by an administrator, executor, guardian or conservator may
be voted by him either in person or by proxy without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into his name if authority as to do
be contained in an appropriate order of the Court by which such receiver was
appointed.
A stockholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to the Corporation or held by it in a
fiduciary capacity shall not be voted, directly or indirectly, at any meeting,
and shall not be counted in determining the total number of outstanding shares
at any given time.
Section 7. Election of Directors. At each election for Directors, every
stockholder entitled to vote at such election shall have the right to vote, in
person or by proxy, the number of shares owned by him for as many persons as
there are Directors to be elected and for whose election he has a right to vote.
There shall be no cumulative voting.
Section 8. Quorum. A majority of the outstanding shares of the Corporation
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of the stockholders.
If a quorum shall not be present or represented, the stockholders
entitled to vote thereat, present in person or by proxy, shall have the power to
adjourn the meeting, from time to time, until a quorum shall be present or
represented. At such rescheduled meeting at which a quorum shall be present or
represented any business or any specified item of business may be transacted
which might have been transacted at the meeting as originally notified.
The number of votes or consents of the holders of any class of stock
having voting power which shall be necessary for the transaction of any business
or any specified item of business at any meeting of stockholders, or the giving
of any consent, shall be a majority of the outstanding shares of the Corporation
entitled to vote, represented in person or by proxy.
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Section 9. Informal Action by Stockholders. Any action required to be
taken at a meeting of the stockholders, or any other action which may be taken
at a meeting of the stockholders, may be taken without a meeting if a consent in
writing setting forth the action so taken shall be signed by a majority of the
stockholders entitled to vote with respect to the subject matter thereof.
Section 10. Inspectors of Election. The Corporation may, and shall if
required by law, in advance of any meeting of stockholders, appoint one or more
inspectors of election, who may be employees of the Corporation, to act at the
meeting or any adjournment thereof and to make a written report thereof. The
Corporation may designate one or more persons as alternate inspectors to replace
any inspector who fails to act. In the event that no inspector so appointed or
designated is able to act at a meeting of stockholders, the person presiding at
the meeting shall appoint one or more inspectors to act at the meeting. Each
inspector, before entering upon the discharge of his or her duties, shall take
and sign an oath to execute faithfully the duties of inspector with strict
impartiality and according to the best of his or her ability. The inspector or
inspectors so appointed or designated shall (i) ascertain the number of shares
of capital stock of the Corporation outstanding and the voting power of each
such share, (ii) determine the shares of capital stock of the Corporation
represented at the meeting and the validity of proxies and ballots, (iii) count
all votes and ballots, (iv) determine and retain for a reasonable period a
record of the disposition of any challenges made to any determination by the
inspectors, and (v) certify their determination of the number of shares of
capital stock of the Corporation represented at the meeting and such inspectors'
count of all votes and ballots. Such certification and report shall specify such
other information as may be required by law. In determining the validity and
counting of proxies and ballots cast at any meeting of stockholders of the
Corporation, the inspectors may consider such information as is permitted by
applicable law. No person who is a candidate for an office at an election may
serve as an inspector at such election.
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Section 11. Conduct of Meetings. The date and time of the opening and
the closing of the polls for each matter upon which the stockholders will vote
at a meeting shall be announced at the meeting by the person presiding over the
meeting. The Board of Directors of the Corporation may adopt by resolution such
rules and regulations for the conduct of the meeting of stockholders as it shall
deem appropriate. Except to the extent inconsistent with such rules and
regulations as adopted by the Board of Directors, the chairman of any meeting of
stockholders shall have the right and authority to prescribe such rules,
regulations and procedures and to do all such acts as, in the judgment of such
chairman, are appropriate for the proper conduct of the meeting. Such rules,
regulations or procedures, whether adopted by the Board of Directors or
prescribed by the chairman of the meeting, may include, without limitation, the
following: (i) the establishment of an agenda or order of business for the
meeting; (ii) rules and procedures for maintaining order at the meeting and the
safety of those present; (iii) limitations on attendance at or participation in
the meeting to stockholders of record of the Corporation, their duly authorized
and constituted proxies or such other persons as the chairman of the meeting
shall determine; (iv) restrictions on entry to the meeting after the time fixed
for the commencement thereof; and (v) limitations on the time allotted to
questions or comments by participants. Unless and to the extent determined by
the Board of Directors or the chairman of the meeting, meetings of stockholders
shall not be required to be held in accordance with the rules of parliamentary
procedure.
ARTICLE III
DIRECTORS
Section 1. Number. The affairs and business of this Corporation shall be
managed by a Board of Directors. The first Board of Directors shall consist of
six (6) members. Thereafter the number of Directors may be increased to not more
than nine (9) by resolution of the Board of Directors. Directors need not be
residents of the State of Delaware and need not be stockholders of the
Corporation.
Section 2. Election. The Directors shall be elected at each annual
meeting of the stockholders, but if any such annual meeting is not held, or the
Directors are not elected thereat, the Directors may be elected at any special
meeting of the stockholders held for that purpose.
Section 3. Term of Office. The term of office of each of the Directors
shall be three (3) years, which shall continue until his successor has been
elected and qualified, subject to Section 8 hereof.
Section 4. Duties. The Board of Directors shall have the control and
general management of the affairs and business of the Corporation. Such
Directors shall in all cases act as a Board, except as herein provided in
Section 11, regularly convened, by a majority, and may adopt such rules and
regulations for the conduct of meetings and the management of the Corporation,
as may be deemed proper, so long as it is not inconsistent with these By-laws
and the laws of the State of Delaware.
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Section 5. Directors' Meetings. Regular meetings of the Board of Directors
shall be held immediately following the annual meeting of the stockholders, and
at such other time and places as the Board of Directors may determine. Special
meetings of the Board of Directors may be called by the President, or upon the
written request of two (2) Directors.
Section 6. Notice of Meetings. Notice of meetings other than the regular
annual meeting shall be given by service upon each Director in person, or by
mailing to him at his last known address, at least three (3) days before the
date therein designated for such meeting, including the day of mailing, of a
written or printed notice thereof specifying the time and place of such meeting,
and the business to be brought before the meeting, and no business other than
that specified in such notice shall be transacted at any special meeting. At any
Directors' meeting at which a quorum of the Board of Directors shall be present
(although held without notice), any and all business may be transacted which
might have been duly called if a quorum of the Directors waive or are willing to
waive the notice requirements of such meeting.
Any Directors may waive notice of any meeting in accordance with applicable
law. The attendance of a Director at a meeting shall constitute a waiver of
notice of such meeting except where a Director attends a meeting for the express
purpose of objecting to the transaction of any business because the meeting is
not lawfully convened or called.
Section 7. Voting. At all meetings of the Board of Directors, each Director
is to have one (1) vote. The act of a majority of the Directors present at a
meeting at which a quorum is present shall be the act of the Board of Directors.
Section 8. Vacancies. Vacancies in the Board occurring between annual
meetings shall be filled for the unexpired portion of the term by a vote of the
majority of the remaining Directors.
Section 9. Removal of Directors. Any one or more of the Directors may be
removed, with or without cause, at any time, by a vote of the stockholders
holding a majority of the stock, at any special meeting called for that purpose.
Section 10. Quorum. The number of Directors who shall be present at any
meeting of the Board of Directors in order to constitute a quorum for the
transaction of any business or any specified item of business shall be a
majority.
The number of votes of Directors that shall be necessary for the
transaction of any business of any specified item of business at any meeting of
the Board of Directors shall be a majority.
If a quorum shall not be present at any meeting of the Board of Directors,
those present may adjourn the meeting, from time to time, until a quorum shall
be present.
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Section 11. Executive and Other Committees. By resolution of the Board of
Directors and at their option, the Directors may designate an Executive
Committee which includes at least three (3) Directors, to manage and direct the
daily affairs of the Corporation. Said Executive Committee shall have and may
exercise all of the authority that is vested in the Board of Directors as if the
Board of Directors were regularly convened, except that the Executive Committee
shall not have authority to amend these By-laws.
At all meetings of the Executive Committee, each member of said committee
shall have one (1) vote and the act of a majority of the members present at a
meeting at which a quorum is present shall be the act of the Executive
Committee.
The number of Executive Committee members who shall be present at any
meeting of the Executive Committee in order to constitute a quorum for the
transaction of business or any specified item of business shall be a majority.
The number of votes of Executive Committee members that shall be necessary
for the transaction of any business or any specified item of business at any
meeting of the Executive Committee shall be a majority.
In addition to the Executive Committee, the Board of Directors may
designate one or more additional committees, each committee to consist of one or
more of the Directors of the Corporation. The Board of Directors may designate
one or more Directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of the committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in place of any such absent or disqualified
member. Any such committee, to the extent permitted by law and to the extent
provided in the resolution of the Board of Directors, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require it.
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Section 12. Compensation. By resolution of the Board of Directors, the
Directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors or each may be paid a stated salary as Director. No such
payment shall preclude any Director from serving the Corporation in any other
capacity and receiving compensation therefor.
Section 13. Presumption of Assent. A Director of the Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent is entered in the minutes of the meeting or unless he shall file his
written dissent to such action with the person acting as the Secretary of the
meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the Corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a Director
who voted in favor of such action.
Section 14. Telephonic Meetings Permitted. Members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting thereof by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
by-law shall constitute presence in person at such meeting.
Section 15. Action by Written Consent of Directors. Unless otherwise
restricted by the certificate of incorporation or these by-laws, any action
required or permitted to be taken at any meeting of the Board of Directors, or
of any committee thereof, may be taken without a meeting if all members of the
Board of Directors or such committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board of Directors or such committee.
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ARTICLE IV
OFFICERS
Section 1. Number. The officers of the Corporation shall be: President,
Vice-President, Secretary, and Treasurer, and such assistant Secretaries as the
President shall determine. Any officer may hold more than one (1) office.
Section 2. Election. All officers of the Corporation shall be elected
annually by the Board of Directors at its meeting held immediately following the
meeting of stockholders, and shall hold office for the term of one (1) year or
until their successors are duly elected. Officers need not be members of the
Board of Directors.
The Board may appoint such other officers, agents and employees as it shall
deem necessary who shall have such authority and shall perform such duties as,
from time to time, shall be prescribed by the Board.
Section 3. Duties of Officers. The duties and powers of the officers of the
Corporation shall be as follows:
PRESIDENT
The President shall, when present, preside at all meetings of the
stockholders and Directors. He shall present at each annual meeting of the
stockholders and Directors, a report of the condition of the business of the
Corporation. He shall cause to be called regular and special meetings of the
stockholders and Directors in accordance with these By-laws. He shall appoint
and remove, employ and discharge, and fix the compensation of all agents,
employees, and clerks of the Corporation other than the duly appointed officers,
subject to the approval of the Board of Directors. He shall sign and make all
contracts and agreements in the name of the Corporation, subject to the approval
of the Board of Directors. He shall see that the books, reports, statements and
certificates required by the statutes are properly kept, made and filed
according to law. He shall sign all certificates of stock, notes, drafts, or
bills of exchange, warrants or other orders for the payment of money duly drawn
by the Treasurer; and he shall enforce these By-laws and perform all the duties
incident to the position and office, and which are required by law.
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VICE-PRESIDENT
During the absence or inability of the President to render and perform his
duties or exercise his powers, as set forth in these By-laws or in the acts
under which the Corporation is organized, the same shall be performed and
exercised by the Vice-President; and when so acting, he shall have all the
powers and be subject to all the responsibilities hereby given to or imposed
upon such President.
SECRETARY
The Secretary shall keep the minutes of the meetings of the Board of
Directors and of the stockholders in appropriate books, provided for that
purpose. He shall give and serve all notices of the Corporation. He shall be
custodian of the records and of the corporate seal and affix the latter when
required. He shall keep the stock and transfer books in the manner prescribed by
law, so as to show at all times the amount of capital stock issued and
outstanding; the manner and the time compensation for the same was paid; the
names of the owners thereof, alphabetically arranged; the number of shares owned
by each; the time at which each person became such owner; and the amount paid
thereon; and keep such stock and transfer books open daily during the business
hours of the office of the Corporation, subject to the inspection of any
stockholder of the Corporation, and permit such stockholder to make extracts
from said books to the extent prescribed by law. He shall sign all certificates
of stock. He shall present to the Board of Directors at their stated meetings,
all communications addressed to him officially by the President or any officer
or stockholder of the Corporation; and he shall attend to all correspondence and
perform all the duties incident to the office of Secretary.
TREASURER
The Treasurer shall have the care and custody of and be responsible for all
the funds and securities of the Corporation, and deposit all such funds in the
name of the Corporation in such bank or banks, trust company or trust companies
or safe deposit vaults as the Board of Directors may designate. He shall exhibit
at all reasonable times his books and accounts to any Director or stockholder of
the Corporation upon application at the office of the Corporation during
business hours. He shall render a statement of the conditions of the finances of
the Corporation at each regular meeting of the Board of Directors, and at such
other times as shall be required of him, and a full financial report at the
annual meeting of the stockholders. He shall keep, at the office of the
Corporation, correct books of account of all its business and transactions and
such other books of account as the Board of Directors may require. He shall do
and perform all duties appertaining to the office of Treasurer. The Treasurer
shall, if required by the Board of Directors, give to the Corporation such
security or bond for the faithful discharge of his duties as the Board may
direct. He shall perform such other duties as from time to time may be assigned
to him by the President or by the Directors.
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Section 4. Bond. The Treasurer shall, if required by the Board of
Directors, give to the Corporation such security for the faithful discharge of
his duties as the Board may direct.
Section 5. Vacancies, How Filled. All vacancies in any office shall be
filled by the Board of Directors without undue delay, either at its regular
meeting or at a meeting specifically called for that purpose. In the case of
absence of any officer of the Corporation or for any reason that the Board of
Directors may deem sufficient, the Board may, except as specifically otherwise
provided in these By-laws, delegate the power or duties of such officers to any
other officer or Director for the time being, provided, a majority of the entire
Board concur therein.
Section 6. Compensation of Officers. The officers shall receive such salary
or compensation as may be determined by the Board of Directors.
Section 7. Removal of Officers. The Board of Directors may remove any
officer, by a majority vote, at any time with or without cause.
ARTICLE V
CERTIFICATES OF STOCK
Section 1. Description of Stock Certificates. The certificates of stock
representing shares shall be in such form as shall be determined by the
Directors and shall be numbered and registered in the order in which they are
issued. They shall be bound in a book and shall be issued in consecutive order
therefrom, and in the margin thereof shall be entered the name of the person
owning the shares therein represented, with the number of shares and the date
thereof. Such certificates shall exhibit the holder's name, number of shares and
date of issue. They shall be signed by the President or Vice President, and
countersigned by the Secretary or Treasurer and sealed with the Seal of the
Corporation.
Section 2. Transfer of Stock. The stock of the Corporation shall be
assignable and transferable on the books of the Corporation only by the person
in whose name it appears on said books, his legal representatives or by his duly
authorized agent. In case of transfer by attorney, the power of attorney, duly
executed and acknowledged, shall be deposited with the Secretary. In all cases
of transfer, the former certificate must be surrendered up and canceled before a
new certificate may be issued. No transfer shall be made upon the books of the
Corporation within ten (10) days next preceding the annual meeting of the
stockholders.
Section 3. Lost Certificates. If a stockholder shall claim to have lost or
destroyed a certificate or certificates of stock issued by the Corporation, the
Board of Directors may, at its discretion, direct a new certificate or
certificates to be issued, upon the making of an affidavit of that fact by the
person claiming the certificate of stock to be lost or destroyed, and upon the
deposit of a bond or other indemnity in such form and with such sureties if any
that the Board may require.
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ARTICLE VI
SEAL
Section 1. Seal. Seal. The corporate seal shall have the name of the
Corporation inscribed thereon and shall be in such form as may be approved from
time to time by the Board of Directors.
ARTICLE VII
DIVIDENDS
Section 1. When Declared. The Board of Directors shall by vote declare
dividends from the funds of the Corporation lawfully available therefor
whenever, in their opinion, the condition of the Corporation's affairs will
render it expedient for such dividends to be declared.
Section 2. Reserve. The Board of Directors may set aside, out of the net
profits of the Corporation available for dividends, such sum or sums (before
payment of any dividends) as the Board, in their absolute discretion, think
proper as a reserve fund, to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the Corporation, or for such other
purpose as the Directors shall think conducive to the interest of the
Corporation, and they may abolish or modify any such reserve in the manner in
which it was created.
ARTICLE VIII
INDEMNIFICATION
Section 1. Right to Indemnification. The Corporation shall indemnify and
hold harmless, to the fullest extent permitted by applicable law as it presently
exists or may hereafter be amended, any person (an "Indemnitee") who was or is
made or is threatened to be made a party or is otherwise involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative (a
"proceeding"), by reason of the fact that he, or a person for whom he is the
legal representative, is or was a Director or officer of the Corporation or,
while a Director or officer of the Corporation, is or was serving at the request
of the Corporation as a Director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust, enterprise or nonprofit
entity, including service with respect to employee benefit plans, against all
liability and loss suffered and expenses (including attorneys' fees) reasonably
incurred by such Indemnitee. Notwithstanding the preceding sentence, except as
otherwise provided in paragraph (c) of this Article, the Corporation shall be
required to indemnify an Indemnitee in connection with a proceeding (or part
thereof) commenced by such Indemnitee only if the commencement of such
proceeding (or part thereof) by the Indemnitee was authorized by the Board of
Directors of the Corporation.
Section 2. Prepayment of Expenses. The Corporation shall pay the expenses
(including attorneys' fees) incurred by an Indemnitee in defending any
proceeding in advance of its final disposition, provided, however, that, to the
extent required by law, such payment of expenses in advance of the final
disposition of the proceeding shall be made only upon receipt of an undertaking
by the Indemnitee to repay all amounts advanced if it should be ultimately
determined that the Indemnitee is not entitled to be indemnified under this
Article or otherwise.
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Section 3. Claims. If a claim for indemnification or payment of expenses
under this Article is not paid in full within sixty days after a written claim
therefor by the Indemnitee has been received by the Corporation, the Indemnitee
may file suit to recover the unpaid amount of such claim and, if successful in
whole or in part, shall be entitled to be paid the expense of prosecuting such
claim. In any such action the Corporation shall have the burden of proving that
the Indemnitee is not entitled to the requested indemnification or payment of
expenses under applicable law.
Section 4. Nonexclusivity of Rights. The rights conferred on any Indemnitee
by this Article shall not be exclusive of any other rights which such Indemnitee
may have or hereafter acquire under any statute, provision of the certificate of
incorporation, these by-laws, agreement, vote of stockholders or disinterested
Directors or otherwise.
Section 5. Other Sources. The Corporation's obligation, if any, to
indemnify or to advance expenses to any Indemnitee who was or is serving at its
request as a Director, officer, employee or agent of another corporation,
partnership, joint venture, trust, enterprise or nonprofit entity shall be
reduced by any amount such Indemnitee may collect as indemnification or
advancement of expenses from such other corporation, partnership, joint venture,
trust, enterprise or non-profit enterprise.
Section 6. Amendment or Repeal. Any repeal or modification of the foregoing
provisions of this Article shall not adversely affect any right or protection
hereunder of any Indemnitee in respect of any act or omission occurring prior to
the time of such repeal or modification.
Section 7. Other Indemnification and Prepayment of Expenses. This Article
shall not limit the right of the Corporation, to the extent and in the manner
permitted by law, to indemnify and to advance expenses to persons other than
Indemnitees when and as authorized by appropriate corporate action.
ARTICLE IX
AMENDMENTS
Section 1. Amendment of By-laws. These By-laws may be altered or repealed,
and new by-laws made, by the Board of Directors, but the stockholders may make
additional by-laws and may alter and repeal any by-laws whether adopted by them
or otherwise.
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ANNEX E
MEDICAL DEVICE TECHNOLOGIES, INC.
1997 STOCK OPTION PLAN
ADOPTED JANUARY 24, 1997
SUBJECT TO APPROVAL BY THE SHAREHOLDERS
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees of and Consultants to the Company, and its Affiliates, may be given an
opportunity to purchase stock of the Company.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees of or Consultants to the Company or its
Affiliates, to secure and retain the services of new Employees and Consultants,
and to provide incentives for such persons to exert maximum efforts for the
success of the Company and its Affiliates.
(c) The Company intends that the Options issued under the Plan shall, in
the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either Incentive Stock Options or Nonstatutory Stock Options. All Options shall
be separately designated Incentive Stock Options or Nonstatutory Stock Options
at the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.
2. DEFINITIONS.
(a) "Affiliate" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a Committed appointed by the Board in accordance with
subsection 3(c) of the Plan.
(e) "Company" means Medical Device Technologies, Inc., a Utah corporation.
(f) "Consultant" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services, and who is compensated
for such services, provided that the term "Consultant" shall not include
Directors who are paid only a Director's fee by the Company, or who are not
compensated by the Company for their services as Directors.
(g) "Continuous Status as an Employee or Consultant" means the employment
or relationship as a Consultant is not interrupted or terminated. The Board, in
its sole discretion, may determine whether Continuous Status as an Employee or
Consultant shall be considered interrupted in the case of: (i) any leave of
absence approved by the Board, including sick leave, military leave, or any
other personal leave; or (ii) transfers between locations of the Company or
between the Company, Affiliates or their successors.
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(h) "Covered Employee" means the Chief Executive Officer and the five (5)
other highest compensated officers of the Company.
(i) "Director" means a member of the Board.
(j) "Disinterested Person" means a Director who either: (i) was not during
the one (1) year prior to service as an administrator of the Plan granted or
awarded equity securities pursuant to the Plan or any other plan of the Company
or any of its affiliates entitling the participants therein to acquire equity
securities of the Company or any of its affiliates except as permitted by Rule
16b-3(c)(2)(i); or (ii) is otherwise considered to be a "disinterested person"
in accordance with Rule 16b-3(c)(2)(i), or any other applicable rules,
regulations or interpretations of the Securities and Exchange Commission.
(k) "Employee" means any person, including Officers and Directors, employed
by the Company or any affiliate of the Company. Neither service as a Director
nor payment of a Director's fee by the Company shall be sufficient to constitute
"employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(m) "Fair Market Value" means, as of any date, the value of the common
stock of the Company determined as follows:
(i) If the common stock is listed on any established stock exchange or a
national market system, including without limitation, the National Market System
of the National Association of Securities Dealers, Inc. Automated Quotation
("NASDAQ") System, the Fair Market Value of a share of common stock shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in common stock) on the last market trading day prior
to the day of determination, as reported in THE WALL STREET JOURNAL or such
other source as the Board deems reliable;
(ii) If the common stock is quoted on the NASDAQ System (not on the
National Market System thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a share of common stock shall be the mean between the bid and asked prices for
the common stock on the last market trading day prior to the day of
determination, as reported in THE WALL STREET JOURNAL or such other source as
the Board deems reliable;
(iii) In the absence of an established market for the common stock, the
Fair Market Value shall be determined in good faith by the Board.
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(n) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "Nonstatutory Stock Option" means an Option not intended to qualify as
an Incentive Stock Option.
(p) "Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(q) "Option" means a stock option granted pursuant to the Plan.
(r) "Option Agreement" means a written agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. Each
Option Agreement shall be subject to the terms and conditions of the Plan.
(s) "Optionee" means an Employee or Consultant who holds an outstanding
Option.
(t) "Outside Director" means a Director who either: (i) is not a current
employee of the Company or an "affiliated corporation" (as defined in the
Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an affiliated corporation receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an affiliated corporation at
any time, and is not currently receiving compensation for personal services in
any capacity other than as a Director; or (ii) is otherwise considered an
"Outside Director" for purposes of Section 162(m) of the Code.
(u) "Plan" means this 1997 Stock Option Plan.
(v) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16(b)-3, as in effect when discretion is being exercised with respect to
the Plan.
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3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(i) To determine from time to time which of the persons eligible under the
Plan shall be granted Options; when and how each Option shall be granted;
whether an Option will be an Incentive Stock Option or a Nonstatutory Stock
Option; the provisions of each Option granted (which need not be identical),
including the time or times such Option may be exercised in whole or in part;
and the number of shares for which an Option shall be granted to each such
person.
(ii) To construe and interpret the Plan and Options granted under it, and
to establish, amend and revoke rules and regulations for its administration. The
Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan or in any Option Agreement, in a manner and to the
extent it shall deem necessary or expedient to make the Plan fully effective.
(iii) To amend the Plan as provided in Section 11.
(iv) Generally, to exercise such powers and to perform such acts as the
Board deems necessary or expedient to promote the best interests of the Company.
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members (the "Committee"), all of the members
of which Committee shall be Disinterested Persons and may also be, in the
discretion of the Board, Outside Directors. If administration is delegated to a
Committee, the Committee shall have, in connection with the administration of
the Plan, the powers theretofore possessed by the Board (and references in this
Plan to the Board shall thereafter be to the Committee), subject, however, to
such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish the Committee at
any time and revest in the Board the administration of the Plan. Notwithstanding
anything in this Section 3 to the contrary, the Board or the Committee may
delegate to a committee of one or more members of the Board the authority to
grant Options to eligible persons who: (1) are not then subject to subject to
Section 16 of the Exchange Act; and/or (2) are either (i) not then Covered
Employees and are not expected to be Covered Employees at the time of
recognition of income resulting from such Option, or (ii) not persons with
respect to whom the Company wishes to comply with Section 162(m) of the Code.
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(d) Any requirement that an administrator of the Plan be a Disinterested
Person shall not apply if the Board or the Committee expressly declares that
such requirement shall not apply. Any Disinterested Person shall otherwise
comply with the requirements of Rule 16b-3.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 10 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to Options shall not
exceed in the aggregate one million five hundred thousand (1,500,000) shares of
the Company's common stock. If any Option shall for any reason expire or
otherwise terminate, in whole or in part, without having been exercised in full,
the stock not purchased under such Option shall revert to and again become
available for issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to Employees. Nonstatutory
Stock Options may be granted only to Employees or Consultants.
(b) A Director shall in no event be eligible for the benefits of the Plan
unless at the time discretion is exercised in the selection of the Director as a
person to whom Options may be granted, or in the determination of the number of
shares which may be covered by Options granted to the Director: (i) the Board
has delegated its discretionary authority over the Plan to a Committee which
consists solely of Disinterested Persons; or (ii) the Plan otherwise complies
with requirements of Rule 16b-3. The Board shall otherwise comply with the
requirements of Rule 16b-3. This subsection 5(b) shall not apply if the Board or
Committee expressly declares that it shall not apply.
(c) No person shall be eligible for the grant of an Incentive Stock Option
if, at the time of grant, such person owns (or is deemed to own pursuant to
Section 424(d) of the Code) stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or of any of
its Affiliates unless the exercise price of such Incentive Stock Option is at
least one hundred ten percent (110%) of the Fair Market Value of such stock at
the date of grant and the Option is not exercisable after the expiration of five
(5) years from the date of grant.
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(d) Subject to the provisions of Section 10 relating to adjustments upon
changes in stock, no person shall be eligible to be granted Options covering
more than two hundred fifty thousand (250,000) shares of the Company's common
stock in any twelve (12) month period.
(e) Notwithstanding any other provision, Outside Directors are not eligible
to be granted Options under the Plan.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) Term. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
(b) Price. The exercise price of each Incentive Stock Option shall be not
less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted. The exercise price of
each Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
of the Fair Market Value of the stock subject to the Option on the date the
Option is granted.
(c) Consideration. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either: (i) in cash at the time the Option is exercised; or (ii) at
the discretion of the Board or the Committee, either at the time of the grant or
exercise of the Option, (A) by delivery to the Company of other common stock of
the Company, (b) according to a deferred payment or other arrangement (which may
include, without limiting the generality of the foregoing, the use of other
common stock of the Company) with the person to whom the Option is granted or to
whom the Option is transferred pursuant to subsection 6(d), or (C) in any other
form of legal consideration that may be acceptable to the Board.
In the case of any deferred payment arrangement, interest shall be payable
at least annually and shall be charged at the minimum rate of interest necessary
to avoid the treatment as interest, under any applicable provisions of the Code,
of any amounts other than amounts stated to be interest under the deferred
payment arrangement.
(d) Transferability. An incentive Stock Option shall not be transferable
except by will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of the person to whom the Incentive Stock Option
is granted only by such person. A Nonstatutory Stock Option shall not be
transferable except by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order satisfying the requirements of
Rule 16b-3 and the rules thereunder (a "QDRO"), and shall be exercisable during
the lifetime of the person to whom the Option is granted only by such person or
any transferee pursuant to a QDRO. The person to whom the Option is granted may,
by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the Optionee,
shall thereafter be entitled to exercise the Option.
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(e) Vesting. The total number of shares of stock subject to an Option may,
but need not, be allotted in periodic installments (which may, but need not, be
equal). The Option Agreement may provide that from time to time during each of
such installment periods, the Option may become exercisable ("vest") with
respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The provisions of this
subsection 6(e) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.
(f) Securities Law Compliance. The Company may require any Optionee, or any
person to whom an Option is transferred under subsection 6(d), as a condition of
exercising any such Option: (1) to give written assurances satisfactory to the
Company as to the Optionee's knowledge and experience in financial and business
matters and/or to employ a purchaser representative reasonably satisfactory to
the Company who is knowledgeable and experienced in financial and business
matters, and that he or she is capable of evaluating, alone or together with the
purchaser representative, the merits and risks of exercising the Option; and (2)
to give written assurances satisfactory to the Company stating that such person
is acquiring the stock subject to the Option for such person's own account and
not with any present intention of selling or otherwise distributing the stock.
The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if: (i) the issuance of the shares upon the
exercise of the Option has been registered under a then currently effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"); or (ii) as to any particular requirement, a determination is
made by counsel for the Company that such requirements need not be met in the
circumstances under the then applicable securities laws. The Company may, upon
advice of counsel to the Company, place legends on stock certificates issued
under the Plan as such counsel deems necessary or appropriate in order to comply
with applicable securities laws, including, but not limited to, legends
restricting the transfer of the stock.
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(g) Termination of Employment or Relationship as a Consultant. In the event
an Optionee's Continuous Status as an Employee or Consultant terminates (other
than upon the Optionee's death or disability), the Optionee may exercise his or
her Option (to the extent that the Optionee was entitled to exercise it at the
date of termination) but only within such period of time ending on the earlier
of: (i) the date two (2) months after the termination of the Optionee's
Continuous Status as an Employee or Consultant (or such longer or shorter period
specified in the Option Agreement); or (ii) the expiration of the term of the
Option as set forth in the Option Agreement. If, after termination, the Optionee
does not exercise his or her Option within the time specified in the Option
Agreement, the Option shall terminate, and the shares covered by such Option
shall revert to and again become available for issuance under the Plan.
(h) Disability of Optionee. In the event an Optionee's Continuous Status as
an Employee or Consultant terminates as a result of the Optionee's disability,
the Optionee may exercise his or her Option (to the extent that the Optionee was
entitled to exercise it at the date of termination), but only within such period
of time ending on the earlier of: (i) the date six (6) months following such
termination (or such longer or shorter period specified in the Option
Agreement); or (ii) the expiration of the term of the Option as set forth in the
Option Agreement. If, at the date of termination, the Optionee is not entitled
to exercise his or her entire Option, the shares covered by the unexercisable
portion of the Option shall revert to and again become available for issuance
under the Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified herein, the Option shall terminate, and the
shares covered by such Option shall revert to and again become available for
issuance under the Plan.
(i) Death of Optionee. In the event of the death of an Optionee during, or
within a period specified in the Option after the termination of, the Optionee's
Continuous Status as an Employee or Consultant, the Option may be exercised (to
the extent the Optionee was entitled to exercise the Option at the date of
death) by the Optionee's Estate, by a person who acquired the right to exercise
the Option by bequest or inheritance or by a person designated to exercise the
Option upon the Optionee's death pursuant to subsection 6(d), but only within
the period ending on the earlier of: (i) the date twelve (12) months following
the date of death (or such longer or shorter period specified in the Option
Agreement); or (ii) the expiration of the term of such Option as set forth in
the Option Agreement. If, at the time of death, the Optionee was not entitled to
exercise his or her entire Option, the shares covered by the unexercisable
portion of the Option shall revert to and again become available for issuance
under the Plan. If, after death, the Option is not exercised within the time
specified herein, the Option shall terminate, and the shares covered by such
Option shall revert to and again become available for issuance under the Plan.
(j) Early Exercise. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee or Consultant to
exercise the Option as to any part or all of the shares subject to the Option
prior to the full vesting of the Option. Any unvested shares so purchased may be
subject to a repurchase right in favor of the Company or to any other
restriction the Board determines to be appropriate.
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(k) Withholding. To the extent provided by the terms of an Option
Agreement, the Optionee may satisfy any Federal, State or local tax withholding
obligation relating to the exercise of such Option by any of the following means
or by a combination of such means: (1) tendering a cash payment; (2) authorizing
the Company to withhold shares from the shares of the common stock otherwise
issuable to the participant as a result of the exercise of the Option; or (3)
delivering to the Company owned and unencumbered shares of the common stock of
the Company.
7. COVENANTS OF THE COMPANY.
(a) During the terms of the Options, the Company shall keep available at
all times the number of shares of stock required to satisfy such Options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Options; provided, however,
that this undertaking shall not require the Company to register under the
Securities Act either the Plan, any Option or any stock issued or issuable
pursuant to any such Option. If, after reasonable efforts, the Company is unable
to obtain from any such regulatory commission or agency the authority which
counsel for the Company deems necessary for the lawful issuance and sale of
stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such Options unless and until
such authority is obtained.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.
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9. MISCELLANEOUS.
(a) The Board shall have the power to accelerate the time at which an
Option may first be exercised or the time during which an Option or any part
thereof will vest pursuant to subsection 6(e), notwithstanding the provisions in
the Option stating the time at which it may first be exercised or the time
during which it will vest.
(b) Neither an Optionee nor any person to whom an Option is transferred
under subsection 6(d) shall be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares subject to such Option unless and
until such person has satisfied all requirements for exercise of the Option
pursuant to its terms.
(c) Throughout the term of any Option, the Company shall deliver to the
holder of such Option, not later than one hundred twenty (120) days after the
close of each of the Company's fiscal years during the Option term, a balance
sheet and an income statement. This section shall not apply when issuance is
limited to key employees whose duties in connection with the Company assure them
access to equivalent information.
(d) Nothing in the Plan or any instrument executed or Option granted
pursuant thereto shall confer upon any Employee, Consultant or Optionee any
right to continue in the employ of the Company or any Affiliate (or to continue
acting as a Consultant) or shall affect the right of the Company or any
Affiliate to terminate the employment or relationship as a Director of
Consultant of any Employee, Consultant or Optionee with or without cause.
(e) To the extent that the aggregate Fair Market Value (determined at the
time of grant) of stock with respect to which Incentive Stock Options granted
after 1986 are exercisable for the first time by any Optionee during any
calendar year under all plans of the Company and its Affiliates exceeds one
hundred thousand dollars ($100,000), the Options or portions thereof which
exceed such limit (according to the order in which they were granted) shall be
treated as Nonstatutory Stock Options.
(f) (i) The Board or the Committee shall have the authority to effect, at
any time and from time to time: the downward repricing of any outstanding
Options under the Plan; and/or with the consent of the affected holders of
Options, the cancellation of any outstanding Options and the grant in
substitution therefor of new Options under the Plan covering the same or
different numbers of shares of Common Stock, but having an exercise price per
share not less than eighty-five percent (85%) of the Fair Market Value (one
hundred percent (100%) of the Fair Market Value in the case of an Incentive
Stock Option or, in the case of a ten percent (10%) stockholder (as defined in
subsection 5(c), not less than one hundred and ten percent (110%) of the Fair
Market Value) per share of common stock on the new grant date.
(ii) Shares subject to an Option canceled under this subsection 9(f) shall
continue to be counted against the maximum award of Options permitted to be
granted pursuant to subsection 5(d) of the Plan. The repricing of an Option
under this subsection 9(f), resulting in a reduction of the exercise price,
shall be deemed to be a cancellation of the original Option and the grant of a
substitute Option; in the event of such repricing, both the original and the
substituted Options shall be counted against the maximum awards of Options
permitted to be granted pursuant to subsection 5(d) of the Plan. The provisions
of this subsection 9(f) shall be applicable only to the extent required by
Section 162(m) of the Code.
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10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any Option (through merger, consolidation, reorganization, recapitalization,
stock dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or otherwise), the Plan will be appropriately adjusted in the
class(es) and maximum number of shares subject to the Plan pursuant to
subsection 4(a) and the maximum number of shares subject to award to any person
during any twelve (12) month period pursuant to subsection 5(d), and the
outstanding Options will be appropriately adjusted in the class(es) and number
of shares and price per share of stock subject to such outstanding Options.
(b) In the event of: (1) a dissolution, liquidation or sale of
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; or (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise, then to the extent permitted by applicable law: (i) any
surviving corporation shall assume any Options outstanding under the Plan or
shall substitute similar Options for those outstanding under the Plan, or (ii)
such Options shall continue in full force and effect. In the event any surviving
corporation refuses to assume or continue such Options, or to substitute similar
options for those outstanding under the Plan, then, with respect to Options held
by persons then performing services as Employees, Directors or Consultants, the
time during which such Options may be exercised shall be accelerated and the
Options terminated if not exercised prior to such event.
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11. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 10 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(ii) Increase the number of shares reserved for Options under the Plan;
(ii) Modify the requirements as to eligibility for participation in the
Plan (to the extent such modification requires stockholder approval in order for
the Plan to satisfy the requirements of Section 422 of the Code); or
(iii) Modify the Plan in any other way if such modification requires
stockholder approval in order for the Plan to satisfy the requirements of
Section 422 of the Code or to comply with the requirements of Rule 16b-3.
(b) The Board may in its sole discretion submit any other amendment to the
Plan for stockholder approval, including, but not limited to, amendments to the
Plan intended to satisfy the requirements of Section 162(m) of the Code and the
regulations promulgated thereunder regarding the exclusion of performance based
compensation from the limit on corporate deductibility of compensation paid to
certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide Optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or Incentive Stock Options granted under it into
compliance therewith.
(d) Rights and obligations under any Option granted before amendment of the
Plan shall not be altered or impaired by any amendment of the Plan unless: (i)
the Company requests the consent of the person to whom the Option was granted;
and (ii) such person consents in writing.
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12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on January 24, 2007 which shall be within
ten (10) years from the date the Plan is adopted by the Board or approved by the
stockholders of the Company, whichever is earlier. No Options may be granted
under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Option granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the person to whom the Option was granted.
13. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no Options
granted under the Plan shall be exercised unless and until the Plan has been
approved by the stockholders of the Company, which approval shall be within
twelve (12) months before or after the date the Plan is adopted by the Board,
and, if required, an appropriate permit has been issued by the Commissioner of
Corporations of the State of Utah.
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