UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. )*
QUANTECH LTD.
(Name of Issuer)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of Class of Securities)
74762K108
(CUSIP Number)
William B. Sawch, Esq.
The Perkin-Elmer Corporation
761 Main Avenue
Norwalk, CT 06859
(203) 762-1000
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
DECEMBER 16, 1997
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Note: Six copies of this statement, including all exhibits, should be filed
with Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
Page 1 of 10
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SCHEDULE 13D
CUSIP No. 74762K108 Page 2 of 10 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
The Perkin-Elmer Corporation
06-0490270
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(A) [ ]
(B) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
WC, OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(D) OR 2(E) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
New York
NUMBER OF 7 SOLE VOTING POWER
SHARES 28,000,000
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 0
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 28,000,000
PERSON WITH 10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
28,000,000
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
35.4%
14 TYPE OF REPORTING PERSON
CO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 2 of 10
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Item 1. Security and Issuer.
This statement relates to shares of Common Stock, par value $.01 per
share (the "Issuer Common Stock"), of Quantech Ltd., a Minnesota corporation
(the "Issuer"). The principal executive offices of the Issuer are located at
1419 Energy Park Drive, St. Paul, Minnesota, 55108.
Item 2. Identity and Background.
This statement is being filed by The Perkin-Elmer Corporation ("Perkin-
Elmer"). The principal offices of Perkin-Elmer are located at 761 Main Avenue,
Norwalk, Connecticut, 06859. Perkin-Elmer is principally engaged in the
business of developing, manufacturing and marketing life science and analytical
instrument systems.
The name, address, present principal occupation or employment, and
citizenship of each director and executive officer of Perkin-Elmer are set
forth on Schedule I hereto and are incorporated herein by reference.
During the past five years, neither Perkin-Elmer nor, to the knowledge
of Perkin-Elmer, any of its directors or executive officers: (i) has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or (ii) was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to,
federal or state securities laws or finding any violation with respect to such
laws.
Item 3. Source and Amount of Funds or Other Consideration.
As more fully described in Item 4 of this Statement, the Issuer has
issued to Perkin-Elmer a warrant to purchase from the Issuer up to 28,000,000
shares of Issuer Common Stock, subject to anti-dilution adjustments (the
"Warrant"). The exercise price for each share of Issuer Common stock subject
to the Warrant will be equal to 95% of the average of the last sale price of
the Issuer Common Stock for each of the 25 consecutive trading days immediately
preceding the date of the first notice of exercise of the Warrant provided to
Issuer by Perkin-Elmer. If Perkin-Elmer were to exercise the Warrant in full,
the funds required to purchase the shares of Issuer Common Stock issuable upon
such exercise would be $4.62 million (based upon an exercise date of December
16, 1997 and an exercise price on such date of $0.165). It is currently
anticipated that such funds would be provided from Perkin-Elmer's working
capital or by borrowings from sources yet to be determined.
Page 3 of 10
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Item 4. Purpose of Transaction.
Perkin-Elmer and the Issuer entered into a Technology
Development/License Agreement dated December 16, 1997 (the "License Agreement")
under which Perkin-Elmer will provide technical assistance to Issuer towards
completion of its medical diagnostic system. In exchange, Issuer will provide
Perkin-Elmer with exclusive licenses to certain Issuer technology for use
outside of Issuer's core area of non-nucleic medical diagnostics. Concurrently
with and as a condition to the execution and delivery of the License Agreement,
the Issuer issued the Warrant to Perkin-Elmer.
Except as described herein and in Item 6 below, neither Perkin-Elmer
nor, to the knowledge of Perkin-Elmer, any of its directors or executive
officers has any present plan or proposal which relates to, or could result in,
any of the events referred to in paragraphs (a) through (j), inclusive, of Item
4 of Schedule 13D. However, Perkin-Elmer will continue to review the business
of the Issuer and may in the future propose that the Issuer take one or more of
such actions.
Item 5. Interest in Securities of Issuer.
(a), (b) In the event Perkin-Elmer were to exercise the Warrant in
full, Perkin-Elmer would be entitled to purchase (subject to receipt of any
necessary regulatory approvals) 28,000,000 shares of Issuer Common Stock
(subject to anti-dilution adjustments). If Perkin-Elmer were to exercise the
Warrant, it would have sole power to vote and sole power to direct the
disposition of the shares of Issuer Common Stock issued thereby. Based on the
number of shares of Issuer Common Stock reported as outstanding on December 16,
1997, the shares issuable upon the full exercise of the Warrant (the "Warrant
Shares") would represent 35.4% of all outstanding shares of Issuer Common
Stock, after giving effect to the dilutive effect of the Warrant Shares.
As of the date of this filing, neither Perkin-Elmer nor, to the
knowledge of Perkin-Elmer, any of its directors or executive officers
beneficially owns any shares of Issuer Common Stock.
(c) Except as stated in Item 4 above, there have not been any
transactions in the Common Stock effected by or for the account of Perkin-Elmer
or, to the knowledge of Perkin-Elmer, any of its directors or executive
officers, during the past 60 days.
(d) In the event that Perkin-Elmer were to exercise the Warrant, no
person, other than Perkin-Elmer, would have the right to receive or the power
to direct the receipt of dividends from, or the proceeds from the sale of,
shares of Issuer Common Stock then owned by Perkin-Elmer for its own account.
(e) Not applicable.
Page 4 of 10
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Item 6. Contracts, Arrangements, Undertakings or Relationships with Respect to
Securities of the Issuer.
Under the terms of the License Agreement, Perkin-Elmer has agreed not
to purchase any shares of Issuer Common Stock, other than shares issuable upon
exercise of the Warrant, without the prior permission of the Board of Directors
of the Issuer. Except as set forth in response to this Item 6 and Items 3, 4
and 5 hereof, neither Perkin-Elmer nor, to the knowledge of Perkin-Elmer, any
of its directors or executive officers, has any contracts, arrangements,
understandings or relationships (legal or otherwise) with any person with
respect to any securities of the Issuer, including, but not limited to,
transfer or voting of any securities of the Issuer, finder's fees, joint
ventures, loan or option arrangements, puts or calls, guarantees of profits,
division of profits or loss or the giving or withholding of proxies.
Item 7. Material to Be Filed as Exhibits.
Exhibit 1. Technology Development/License Agreement dated December 16,
1997 between Quantech Ltd. and The Perkin-Elmer Corporation.
Exhibit 2. Warrant dated as of December 16, 1997 issued by Quantech
Ltd. to The Perkin-Elmer Corporation.
Page 5 of 10
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
THE PERKIN-ELMER CORPORATION
By: /s/ Mark C. Rogers
-----------------------------
Mark C. Rogers
Senior Vice President
Dated: December 22, 1997
Page 6 of 10
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SCHEDULE I
The following table sets forth the name, residence or business address,
present principal occupation or employment of each of the executive officers
and directors of Perkin-Elmer. Unless otherwise indicated, the address of each
person listed below is the business address of Perkin-Elmer, 761 Main Avenue,
Norwalk, Connecticut, 06859, and, unless otherwise indicated, each person
listed below is a citizen of the United States of America.
Directors
Mr. Joseph F. Abely, Jr.
Retired Chairman and
Chief Executive Officer
Sea-Land Corporation
1210 Corbin Street
Elizabeth, New Jersey 07207
Mr. Richard H. Ayers
176 Sewall Road
Wolfeboro, New Hampshire 03894
Mr. Jean-Luc Belingard
Director General
F. Hoffmann-La Roche, Ltd.
Roche Diagnostics Systems
Postfach - Grenzacherstrasse 124
4002 Basel, Switzerland
Mr. Belingard is a French citizen.
Dr. Robert H. Hayes
Professor
Harvard Business School
Morgan Hall T-35
Boston, Massachusetts 02163
Mr. Georges C. St. Laurent, Jr.
Former Chief Executive Officer
Western Bank
12655 S.W. Center Street, Suite 500
Beaverton, OR 97005
Page 7 of 10
<PAGE>
Dr. Carolyn W. Slayman
Deputy Dean for Academic and Scientific Affairs
Yale University School of Medicine
Department of Genetics, I-310 SHM
333 Cedar Street
New Haven, Connecticut 06520
Mr. Orin R. Smith
Chairman and Chief Executive Officer
Engelhard Corporation
101 Wood Avenue
Iselin, New Jersey 08830-0770
Mr. Tony L. White
Chairman, President and
Chief Executive Officer
The Perkin-Elmer Corporation
Executive Officers
Mr. Tony L. White
Chairman, President and
Chief Executive Officer
The Perkin-Elmer Corporation
Mr. Manuel A. Baez
Senior Vice President and President,
Analytical Instruments Division
The Perkin-Elmer Corporation
Dr. Peter Barrett
Vice President
The Perkin-Elmer Corporation
Mr. Ugo D. DeBlasi
Corporate Controller
The Perkin-Elmer Corporation
Page 8 of 10
<PAGE>
Dr. Michael W. Hunkapiller
Senior Vice President and President,
Applied Biosystems Division
The Perkin-Elmer Corporation
Applied Biosystems Division
850 Lincoln Centre Drive
Foster City, California 94404
Mr. Joseph E. Malandrakis
Vice President
The Perkin-Elmer Corporation
Dr. Mark C. Rogers
Senior Vice President, Corporate Development
and Chief Technology Officer
The Perkin-Elmer Corporation
Mr. William B. Sawch
Senior Vice President, General Counsel
and Secretary
The Perkin-Elmer Corporation
Mr. Dennis L. Winger
Senior Vice President, Chief Financial Officer
and Treasurer
The Perkin-Elmer Corporation
Page 9 of 10
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EXHIBIT INDEX
Exhibit 1. Technology Development/License Agreement dated December 16, 1997
between Quantech Ltd. and The Perkin-Elmer Corporation.
Exhibit 2. Warrant dated as of December 16, 1997 issued by Quantech Ltd. to The
Perkin-Elmer Corporation.
Page 10 of 10
<PAGE>
EFFECTIVE DATE: 16 December 1997
PARTIES:
Quantech, Ltd. ("Quantech")
a Minnesota corporation
1419 Energy Park Drive
Saint Paul, Minnesota 55108
The Perkin Elmer Corporation ("PE")
a New York corporation
761 Main Avenue
Norwalk, Connecticut 06589-0001
RECITALS:
A. Quantech is the successor in interest of Spectrum Diagnostics,
S.p.A. ("Spectrum") under a certain License, Sublicense and Purchase
Agreement between Spectrum and the Serono Companies (defined below) dated 7
November 1991, as amended by an Amendment to License Agreement dated 31
October 1997 (collectively, the "Serono Agreement", a copy of which is
attached hereto as Exhibit A).
B. Quantech desires PE's technical assistance in conducting research
and development of products utilizing SPR Technology (defined below) and
wishes to grant PE a license under the Serono Technology and Quantech
Intellectual Property (defined below).
C. PE desires to acquire such a license from Quantech to enable it
to make, use and sell devices incorporating SPR Technology.
The Parties therefore agree as follows:
1. DEFINITIONS
As used herein, the following words shall have the designated
meanings:
1.1. "Affiliate" means a Person who, directly or indirectly, controls,
is controlled by, or is under common control with the specified
entity.
1.2. "Calendar Quarter" means each three-month period ending March 31,
June 30, September 30 and December 31.
1.3. "Consumable" means parts incorporating or designed to utilize SPR
Technology on which chemical analysis is conducted. It is to be
<PAGE>
understood that Consumables shall not include any Instrument
necessary for conducting the chemical analysis.
1.4. "Instrument" means read-out instruments incorporating or designed
to utilize SPR Technology which are used to conduct chemical
analysis.
1.5. "Joint Invention" means any invention made jointly by at least
one employee or Assignor of each party. Assignors are defined as
non-employees who are required to assign inventions to a party.
1.6. "Licensed Products" means any Licensed Consumable or Licensed
Instrument
1.7. "Licensed Consumable" means any Consumable which (i) but for the
license granted herein, the manufacture, use or sale of which
would infringe any Patent Rights; or (ii) is produced through the
use of or otherwise incorporates Quantech Intellectual Property
which has been disclosed to PE.
1.8. "Licensed Instrument" means any Instrument which (i) but for the
license granted herein, the manufacture, use or sale of which
would infringe any Patent Rights; or (ii) is produced through the
use of or otherwise incorporates Quantech Intellectual Property
which has been disclosed to PE.
1.9. "Medical Diagnostics" means those fields, applications and
products which: (i) under current laws and regulations as of the
Effective Date, require United States Food and Drug
Administration approval for sale or distribution or would require
such approval if the application or product incorporating the
application or field were to be sold in the United States; and/or
(ii) are useful in veterinary medicine for the treatment of
animals.
1.10. "Net Sales" means PE's gross receipts from sales of Licensed
Products, less actual transportation costs, taxes, and credits
for returns.
1.11. "Nucleic Acid Diagnostics" means Medical Diagnostics which
involve the identification and/or quantification of nucleic
acids.
1.12. "Patent Rights" means those patents and patent applications
listed on Exhibit B, together with any continuations,
continuations-in-part, divisions, reissues and/or extensions
thereof and any foreign counterparts to such patents and
applications.
1.13. "PE Intellectual Property" means PE's proprietary information
(including, but not limited to, data, substances, processes,
materials, formulae, know-how, trade secrets, computer programs,
software, firmware, inventions other than Joint Inventions, and
patents) relating to SPR Technology which PE develops or in which
PE acquires an interest during the term of this Agreement, but
excluding any information which PE is prevented from disclosing
to Quantech under an obligation of confidentiality to a third
party.
1.14. "PE License" means those licenses granted by Quantech to PE in
Section 2 below.
<PAGE>
1.15. "PE Sublicensee" means a third party to which PE has granted a
sublicense under Section 2 to manufacture Licensed Products and
to sell such manufactured Licensed Products to a party other than
PE.
1.16. "PE Sublicensee Royalties" means all monies received by PE from
a PE Sublicensee under an agreement sublicensing the rights
granted to PE in this Agreement, less any monies received from
the PE Sublicensee solely to compensate PE for research or
consulting services.
1.17. "Person" shall mean any natural person, corporation,
partnership, trust, joint venture or other entity.
1.18. "Quantech Intellectual Property" means Quantech's proprietary
information (including, but not limited to, data, substances,
processes, materials, formulae, know how, trade secrets, computer
programs, software, firmware, and inventions) relating to SPR
Technology which exists as of the Effective Date of this
Agreement or which Quantech develops or in which Quantech
acquires an interest during the term of this Agreement.
1.19. "Quantech License" means that license granted by PE to Quantech
in Section 3 below.
1.20. "Royalty Year" means a calendar year except that the first
Royalty Year shall be that period of time between the Effective
Date of this Agreement and 31 December 1998.
1.21. "Royalty-Bearing Instrument" means any Licensed Instrument which
does not utilize a new Consumable for each sample. In the case of
an instrument that combines licensed and unlicensed technologies,
the royalty shall apply uniquely to the SPR detector portion of
the instrument. The detector includes a grating-coupled SPR,
optics, and a sample holder.
1.22. "Serono Companies" means, collectively, Laboratoires Serono
S.A., the successor in interest of Serono Diagnostic S.A., and
Applied Research Systems ARS Holding N.V.
1.23. "Serono Royalties" means 15% of the Total Royalties.
1.24. Serono Technology means the products and intellectual property
that are the subject of the Serono Agreement.
1.25. "SPR" means surface plasmon resonance.
1.26. "SPR Technology" means the use of thin conductive films on a
surface or surfaces of a grating or other diffracting substrate
to conduct chemical analysis.
1.27. "Territory" means the world.
1.28. "Total Royalties" means the sum of the Consumable Royalties,
Instrument Royalties and Sublicense Royalties defined in Section
5.2 of this Agreement.
<PAGE>
2. LICENSE TO PE
2.1. EXCLUSIVE PE LICENSE. Subject to the terms and conditions of
this Agreement, Quantech hereby grants to PE an exclusive license
(the "Exclusive PE License") under the Serono Technology and
Quantech Intellectual Property upon the terms and conditions of
this Agreement to make, have made for it, use, and sell Licensed
Products throughout the Territory for all fields, but excluding
1) Medical Diagnostics 2)any confidential information of a third
party which Quantech is prevented from disclosing to PE under an
obligation of confidentiality to a third party or 3) any license
(other than the Serono Agreement) Quantech obtains under a third
party's technology unless that license permits Quantech to
sublicense to PE the third party's technology.
2.2. NON-EXCLUSIVE PE LICENSE. Subject to the terms and conditions of
this Agreement, Quantech hereby grants to PE a non-exclusive
license (the "Non-exclusive PE License") under the Serono
Technology and Quantech Intellectual Property upon the terms and
conditions of this Agreement to make, have made for it, use, and
sell Licensed Products throughout the Territory for Nucleic Acid
Diagnostics, but excluding 1)any confidential information of a
third party which Quantech is prevented from disclosing to PE
under an obligation of confidentiality to a third party or 2) any
license (other than the Serono Agreement) Quantech obtains under
a third party's technology unless that license permits Quantech
to sublicense to PE the third party's technology.
2.3. PE'S RIGHT TO SUBLICENSE. PE shall have the right to sublicense
its rights under the Exclusive PE License and the Non-exclusive
PE License (collectively, the "PE License"), provided that no
such sublicense shall be granted unless Quantech has first
approved the terms of the sublicense agreement, which approval
shall not be withheld unreasonably.
3. LICENSE TO QUANTECH
3.1. QUANTECH LICENSE. Subject to the terms and conditions of this
Agreement, PE hereby grants to Quantech a non-terminable,
royalty-free exclusive license (the "Quantech License") under any
PE Intellectual Property which arises from a joint development
effort with Quantech to make, have made for it, use, and sell
Licensed Products throughout the Territory for Medical
Diagnostics. Quantech and PE agree to negotiate in good faith a
license of commensurate scope for any PE Intellectual Property
which does not arise from a joint development effort with
Quantech and any other proprietary technology under which
Quantech would need to be licensed to exploit the Quantech
License and under which PE has the right to grant a license or
sublicense.
3.2. QUANTECH'S RIGHT TO SUBLICENSE. Quantech shall have the right to
sublicense its rights under the Quantech License, provided that
no such sublicense shall be granted unless PE has first approved
the terms of the
<PAGE>
sublicense agreement, which approval shall not be withheld
unreasonably.
4. TECHNICAL ASSISTANCE
4.1. TECHNICAL ASSISTANCE TO PE. Within thirty days after the
effective date of this Agreement, Quantech shall deliver to PE
such documentation as is reasonably available reflecting the
Quantech Intellectual Property. Quantech shall provide technical
assistance to PE upon PE's reasonable request to enable PE to
manufacture the Licensed Products, but excluding 1)any
confidential information of a third party which Quantech is
prevented from disclosing to PE under an obligation of
confidentiality to a third party or 2) any license (other than
the Serono Agreement) Quantech obtains under a third party's
technology unless that license permits Quantech to sublicense to
PE the third party's technology.
While Quantech will strive to provide such technical assistance
promptly, there may be occasions when Quantech does not have
available to it suitably qualified and/or experienced personnel
capable of providing such technical assistance or when such
personnel cannot reasonably be spared from their regular duties,
and PE acknowledges that Quantech cannot and does not warrant
that it will be able to provide such technical assistance at the
particular times requested by PE.
4.2. TECHNICAL ASSISTANCE TO QUANTECH. PE will keep Quantech apprised
of the development of any PE Intellectual Property under which
Quantech is licensed in the Quantech License.
4.3. OWNERSHIP OF INVENTIONS. Each party shall own an undivided one-
half interest in Joint Inventions. Each inventor shall assign
all rights in a Joint Invention to Quantech and Quantech shall
assign (and hereby does assign) an undivided one-half interest in
each such Joint Invention to PE. If either party deems it
appropriate, the parties shall retain mutually acceptable patent
counsel to render an opinion as to the patentability of a Joint
Invention and to prepare, file, and prosecute such patent
applications as may reasonably be required to provide protection
for such Joint Inventions. With respect to Joint Inventions, PE
shall not grant any license under its rights therein to any third
party to make, have made, use or sell Medical Diagnostics and
Quantech shall not grant any license under its rights therein to
any third party to make, have made, use or sell products which
are not Medical Diagnostics. Should either party choose to bring
suit for infringement by a third party of any patent in a Joint
Invention, the party bringing suit shall have the right to join
the other party as a party to the suit to the extent required by
law, provided the party bringing suit must indemnify, defend and
hold the other party harmless against any costs, fees, damages,
liabilities or other expenses relating thereto. The parties
agree to execute and exchange upon request such
<PAGE>
documents as may be necessary or desirable to carry out the
provisions of this Section 4.3.
5. ROYALTIES AND REPORTS
5.1. QUANTECH DEVELOPMENT PHASES. Exhibit C defines four phases of
Quantech product development, designated Phase I, Phase II, Phase
III and Phase IV, and, for each such Phase, the areas of PE
expertise with respect to which Quantech seeks PE's assistance.
Quantech will notify PE upon completion of each Phase. Royalties
provided in section 5.2 will be reduced upon completion of a
Phase if the Phase is completed with PE's assistance. If
Quantech completes a Phase due to its incorporation of any PE
Intellectual Property into its products or by relying on the PE
expertise for that phase, then either of these events will
conclusively determine that PE's assistance enabled Quantech to
complete that Phase.
5.2. ROYALTIES. PE shall pay Total Royalties on sales of Licensed
Products as follows:
a) PE shall pay Consumable Royalties of 12% of PE's Net Sales
of Licensed Consumables. If Quantech completes Phase I (as
determined under Section 5.1), such Consumable Royalties
shall be decreased to 10%. If Quantech completes Phase II
(as determined under Section 5.1), such Consumable
Royaltiess shall be decreased to 8%. If Quantech completes
Phase III (as determined under Section 5.1), such Consumable
Royalties shall be decreased to 7%. If Quantech completes
Phase IV (as determined under Section 5.1), such Consumable
Royalties shall be decreased to 6%. PE shall also have the
option to reduce the Consumable Royalties to a minimum of 6%
of PE's Net Sales of Licensed Consumables by paying a
Royalty Reduction Fee of $750,000 for each percentage point
of reduction, with the reduced royalty rate taking effect
from the first day of the Calendar Quarter following the
Calendar Quarter in which PE pays the Royalty Reduction Fee.
b) PE shall pay Instrument Royalties on PE's Net Sales of
Royalty-Bearing Instruments at a rate equal to one half the
percentage applied in determining the Consumable Royalties
under Section 5.2 a).
c) PE shall pay Sublicense Royalties of 15% of all PE
Sublicensee Royalties.
5.3. MINIMUM ROYALTIES. PE does not need to make any minimum payments
to Quantech for any of the first three Royalty Years. At the
beginning of the fourth Royalty year, and for every Royalty Year
thereafter, the Minimum Royalty shall be $500,000 for a given
year. If the cumulative
<PAGE>
Total Royalties payable under Section 5.2 during the term of this
Agreement, including any Deficiency Payment (defined below), are
less than the cumulative Minimum Royalty at the end of any Royalty
Year, PE shall pay, with the payment for the last Calendar Quarter
for such Royalty Year, a non-refundable Deficiency Payment in an
amount sufficient to bring the total payments to Quantech up to the
cumulative Minimum Royalty. If PE shall not make a sufficient and
timely Deficiency Payment, Quantech may notify PE of its failure to
reach the cumulative Minimum Royalty . If PE shall fail to pay a
sufficient Deficiency Payment within two months of Quantech's notice,
PE's license rights granted in Section 2 shall immediately terminate.
PE shall not have any right to a refund of any payments made under
this Section 5.3 upon termination of this Agreement.
5.4. STATUS REPORTS. If PE shall not have begun selling Licensed
Products within one year of the Effective Date of this Agreement,
at the end of each Calendar Quarter thereafter PE shall deliver
to Quantech a Statement of Intent signed by a duly authorized
employee of PE (initially Enrico Picozza) stating that PE is
continuing to pursue commercialization of Licensed Products. The
obligation to provide such quarterly Statements of Intent shall
terminate upon the earlier of the first royalty payment under
Section 5.2 or the payment of the Deficiency Payment under
Section 5.3. If PE shall fail to timely deliver a Statement of
Intent, Quantech may notify PE of this failure. If PE fails to
deliver the Statement of Intent within two months of Quantech's
notice, PE's license rights granted in Section 2 shall
immediately terminate.
5.5. REPORTS AND PAYMENTS. Within thirty (30) days after the end of
each Calendar Quarter, PE shall provide Quantech with a written
report itemizing the number of Licensed Consumables and the
number of Licensed Instruments sold, the Net Sales price of each
Licensed Product and a calculation of the Royalty for such
Calendar Quarter. Quantech shall respond in writing to confirm
agreement with reported sales and proposed payments which will
cause PE to pay to the Serono Companies the Serono Royalty and
pay to Quantech the balance of the Total Royalties then due,
until such time as Quantech notifies PE in writing that its
royalty obligations to the Serono Companies has ended, after
which time PE shall pay the entire Total Royalties directly to
Quantech. If PE elects to pay any Royalty Reduction Fee under
Section 5.2 or any Deficiency Payment under Section 5.3, PE shall
pay to the Serono Companies the Serono Royalty on such payments
and pay to Quantech the balance of any such payments, unless
Quantech has previously notified PE in writing that its royalty
obligations to the Serono Companies has ended.
5.6. RECORDS. PE agrees to keep accurate written records sufficient
in detail to enable the royalties payable under this Agreement by
PE to be determined and verified. Such records for a particular
calendar year shall
<PAGE>
be retained by PE for a period consistent with its then corporate
record retention policy.
5.7. AUDIT OF RECORDS. Upon reasonable notice and during regular
business hours, PE shall make available such records for audit by
an independent accountant selected by Quantech to verify the
accuracy of the reports provided to Quantech. Such audits shall
be at the expense of Quantech, provided, however, that if any
such audit reveals underpayment of royalties by the greater of
$50,000 or 10% then PE shall pay the cost of such audit.
6. STOCK WARRANT AND FUTURE PURCHASES
6.1. STOCK WARRANT. PE will be granted a stock purchase warrant (the
"Warrant Agreement") in the form attached hereto as Exhibit D
upon execution of this Agreement for a number of shares of
Quantech's Common Stock equal to that reflected in Section 7 of
the Letter of Intent between PE and Quantech dated 30 October
1997.
6.2. FUTURE PURCHASES. PE agrees not to purchase any Quantech stock
in addition to that provided in the stock warrant of Section 6.1
unless it has received prior permission from Quantech's board.
7. TERM AND TERMINATION
7.1. TERM. Unless license rights are otherwise terminated under
provisions of this Article 5, royalties owed pursuant to this
Agreement shall continue until the expiration of all Patent
Rights, after which the PE License shall be deemed fully paid-up.
7.2. TERMINATION. If either party breaches any of the material terms,
conditions or agreements of this Agreement, then the other party
may terminate this Agreement, at its option and without prejudice
to any of its other legal and equitable rights and remedies, by
giving the breaching party thirty (30) days notice in writing,
particularly specifying the breach. Such notice of termination
shall not be effective if the other party cures the specified
breach within such thirty (30) day period, or, in the case of
breaches not reasonably curable within such thirty (30) days, if
such party commences the cure thereof within such thirty (30)
days and diligently thereafter prosecutes such cure.
7.3. SURVIVAL. Without limitation, termination of this Agreement
shall not relieve PE from its obligation to make all royalty
payments and reports, including a terminal report, provided for
herein. Quantech shall have the right to make a final audit
within 60 days after receiving PE's terminal report.
7.4. SALE OF INVENTORY. Upon termination of the Licenses pursuant to
Section 7.2, PE shall cease production of Licensed Products. PE
shall be permitted to sell its inventory of Licensed Products,
and shall provide
<PAGE>
Quantech with a terminal royalty report within 30 days after the
last such sale of Licensed Products.
7.5. SUBLICENSES. Termination of this Agreement shall cause
sublicenses granted hereunder to revert to Quantech.
7.6. END-USER LICENSES. - Any license to end users will remain in
effect upon termination of this agreement and at no additional
payment by the end user.
8. CONFIDENTIALITY
8.1. INTELLECTUAL PROPERTY. The parties acknowledge that the Quantech
Intellectual Property licensed by Quantech to PE, and the PE
Intellectual Property is proprietary and confidential. The
parties respectively agree, therefore, to make all commercially
reasonable efforts to preserve the confidentiality of such
information. Notwithstanding the foregoing, a party may disclose
such information as follows:
a) If that party can show the particular item of information is
generally available to the public or becomes generally
available to the public through no act or failure to act of
such party;
b) If disclosure is required by any applicable government
agency, regulation, or statute;
c) If prior written consent is obtained from the other party;
or
d) If that party can show it possessed such information prior
to disclosure thereof to such party by the other.
8.2. DISCLOSURE OF AGREEMENT. Neither party may make any public
announcement regarding this Agreement or otherwise disclose the
terms of this Agreement without the prior approval of the other
party except as required by law.
9. PE'S REPRESENTATIONS AND WARRANTIES
9.1. RIGHT TO GRANT LICENSE. PE represents and warrants to Quantech
that it has the full and unrestricted right to enter into this
Agreement and to grant the license set forth in Section 3.
9.2. PRODUCT LIABILITY. PE hereby agrees to indemnify, defend and
hold Quantech harmless from and against any and all claims,
actions, liabilities, damages, losses, costs and expenses,
including reasonable attorneys' fees, in connection with any
product liability claims arising in connection with this License
Agreement or any Licensed Products it manufactures, has
manufactured, uses or sells hereunder.
9.3. LIMITATION OF REPRESENTATIONS. Nothing in this Agreement shall
be construed as (i) a warranty or representation by PE that any
Licensed
<PAGE>
Product or any process practiced under the Quantech License does
not infringe any patents of third persons; or (ii) a requirement
that PE file any patent application, secure any patent, maintain
any patent in force, or bring or prosecute actions or suits against
third parties for infringement of any patent; or (iii) granting by
implication, estoppel, or otherwise any license other than that
specifically granted herein.
9.4. DISCLAIMER OF WARRANTIES. THE WARRANTY SET FORTH ABOVE IS
PROVIDED ONLY TO QUANTECH AND IS IN LIEU OF ALL OTHER WARRANTIES,
EXPRESS OR IMPLIED, WHICH ARE HEREBY DISCLAIMED AND EXCLUDED BY
PE WITH RESPECT TO THE LICENSED PRODUCTS, INCLUDING WITHOUT
LIMITATION, ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, NON-INFRINGEMENT AND WARRANTIES ARISING FROM
COURSE OF DEALING OR USAGE OF TRADE. NO AGENT, EMPLOYEE OR
REPRESENTATIVE OF PE HAS ANY AUTHORITY TO BIND PE TO ANY
AFFIRMATION, REPRESENTATION OR WARRANTY EXCEPT AS STATED IN THIS
WRITTEN WARRANTY POLICY.
10. QUANTECH'S REPRESENTATIONS AND WARRANTIES
10.1. RIGHT TO GRANT LICENSE. Quantech represents and warrants to PE
that, aside from the restrictions on it set forth in the Serono
Agreement, it has the full and unrestricted right to enter into
this Agreement and to grant the licenses set forth in Section 2.
10.2. PRODUCT LIABILITY. Quantech hereby agrees to indemnify, defend
and hold PE harmless from and against any and all claims,
actions, liabilities, damages, losses, costs and expenses,
including reasonable attorneys' fees, in connection with any
product liability claims arising in connection with this License
Agreement or any Licensed Products it manufactures, has
manufactured, uses or sells hereunder.
10.3. LIMITATION OF REPRESENTATIONS. Nothing in this Agreement shall
be construed as (i) a warranty or representation by Quantech as
to the validity or scope of any Patent Rights or that any
Licensed Product or any process practiced under the PE License
does not infringe any patents of third persons; or (ii) a
requirement that Quantech file any patent application, secure any
patent, maintain any patent in force, or bring or prosecute
actions or suits against third parties for infringement of any
patent; or (iii) granting by implication, estoppel, or otherwise
any license other than that specifically granted herein.
10.4. DISCLAIMER OF WARRANTIES. THE WARRANTY SET FORTH ABOVE IS
PROVIDED ONLY TO PE AND IS IN LIEU OF ALL OTHER WARRANTIES,
EXPRESS OR IMPLIED, WHICH ARE HEREBY DISCLAIMED AND EXCLUDED BY
QUANTECH, WITH RESPECT TO THE PATENT RIGHTS, QUANTECH KNOW-HOW OR
ANY LICENSED PRODUCTS, INCLUDING WITHOUT LIMITATION, ANY WARRANTY
OF
<PAGE>
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
NON-INFRINGEMENT AND WARRANTIES ARISING FROM COURSE OF DEALING OR
USAGE OF TRADE. NO AGENT, EMPLOYEE OR REPRESENTATIVE OF QUANTECH
HAS ANY AUTHORITY TO BIND QUANTECH TO ANY AFFIRMATION,
REPRESENTATION OR WARRANTY EXCEPT AS STATED IN THIS WRITTEN
WARRANTY POLICY.
11. LITIGATION
11.1. CHARGES OF PE INFRINGEMENT. If notice is received by either
party charging that any Licensed Product(s) made by, made for,
used by or sold by PE infringes any patent, copyright, trade
secret, intellectual property, or other proprietary right of such
third party, the party receiving such notice will promptly notify
the other party to this Agreement. PE and Quantech agree to
enter into discussions, and where necessary, to work out, if
possible, a mutually acceptable change in such Licensed
Product(s) to avoid such alleged infringement. If no such
mutually satisfactory change can be worked out, PE and Quantech
agree to collaborate and enter into discussions with such third
party for the purpose of negotiating a settlement. If no
settlement can be agreed upon, PE shall have the right but not
the obligation to defend any suit for infringement brought
against it by the third party. If PE shall elect not to defend
such an infringement suit, PE shall promptly notify Quantech to
that effect and Quantech shall thereafter have the right but not
the obligation to defend the suit.
11.2. CHARGES OF THIRD PARTY INFRINGEMENT. If either party knows or
has reason to believe that any rights in any Joint Invention or
any rights under the Patent Rights, Quantech Intellectual
Property or PE Intellectual Property licensed hereunder is being
infringed directly, by inducement, or contributorily by a third
party, the party possessing such knowledge or belief shall
promptly notify the other party thereof. Except for infringement
of any Serono Technology, Quantech shall have the first right to
commence judicial proceedings for its own benefit to attempt to
stop such infringement but shall not be obligated to do so. If,
within one hundred eighty (180) days after first obtaining such
knowledge or belief concerning infringement, Quantech has failed
either to stop such infringement or to initiate judicial
proceedings, or if Quantech in writing so authorizes PE, PE shall
have the right to initiate for its own benefit such judicial
proceedings in its own name provided, however, that PE shall
indemnify, defend and hold Quantech harmless against any costs,
fees, damages, liabilities or other expenses relating thereto.
The party initiating judicial proceedings shall be entitled to
retain any award resulting therefrom.
11.3. VALIDITY AND CONSTRUCTION. If a judgment or decree is entered
in any proceeding in which the validity or infringement of any
claim of any Patent Rights is in issue, which judgment or decree
is not appealed or further appealable (such judgment or decree
being hereinafter referred to as an
<PAGE>
"Irrevocable Judgment"), the validity of and/or construction placed
upon any such claim by the Irrevocable Judgment shall thereafter be
followed. If there are two or more conflicting Irrevocable Judgments
with respect to the same claim, the decision of the higher court
shall be followed, If an Irrevocable Judgment holds one or more
of the Patent Rights or any claims thereof to be invalid or
unenforceable, PE hereby agrees, in consideration of its freedom
to make, use and sell Licensed Products prior to such Irrevocable
Judgment without fear of suit by Quantech, and of Quantech's
refraining from bringing suit against PE for infringement, and
regardless of whatever action PE might take subsequent to such
Irrevocable Judgment, that it shall not be entitled to the retention
or return of any royalties, Deficiency Payment or Minimum Royalty
Payment payable or paid by PE to Quantech hereunder prior to the
date of such Irrevocable Judgment.
12. MISCELLANEOUS PROVISIONS
12.1. TRADEMARKS. Nothing in this Agreement shall be deemed to grant
either party any right to use any trademark owned by the other
party in connection with the sales of the party's products.
12.2. MARKING. PE shall use all commercially reasonable efforts to
see to it that all Licensed products sold shall be appropriately
marked with the applicable patent number(s) of the Patent Rights,
in conformity with applicable law.
12.3. LIMITATION OF REMEDIES. QUANTECH SHALL HAVE NO LIABILITY TO ANY
PERSON FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL OR SPECIAL DAMAGES
OF ANY DESCRIPTION, WHETHER ARISING OUT OF WARRANTY OR CONTRACT,
NEGLIGENCE OR OTHER TORT, OR OTHERWISE, INCLUDING, WITHOUT
LIMITATION, ANY DAMAGES RESULTING FROM LOST PROFITS OR LOST
BUSINESS OPPORTUNITY.
12.4. SURVIVAL. All of the representations, warranties, and
indemnifications made in this Agreement and all terms and
provisions hereof intended to be observed and performed by the
parties after the termination hereof, including the obligations
of confidentiality, shall survive such termination and continue
thereafter in full force and effect.
12.5. COMPLETE AGREEMENT. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter
described in this Agreement and shall supersede all previous
negotiations, commitments or writings regarding such subject
matter.
12.6. WAIVER, DISCHARGE, ETC. This Agreement may not be released,
discharged, abandoned, changed or modified in any manner, except
by an instrument in writing signed on behalf of each of the
parties to this Agreement by their duly authorized
representatives. The failure of either party to enforce at any
time any of the provisions of this Agreement shall
<PAGE>
in no way be construed to be a waiver of any such provision, nor
in any way to affect the validity of this Agreement or any part of
it or the right of either party after any such failure to enforce
each and every such provision. No waiver of any breach of this
Agreement shall be held to be a waiver of any other or subsequent
breach.
12.7. APPLICABLE LAW. This Agreement shall be governed by, and
interpreted in accordance with the laws of the State of New York.
12.8. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties to this Agreement and
their successors or assigns, provided that, except as otherwise
provided herein, the rights and obligations of either party under
this Agreement may not be assigned without the written consent of
the other party. Either party, however, may assign its rights and
obligations to an entity succeeding to substantially all of its
assets and business or business unit.
12.9. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
one or more counterparts, all of which shall be considered one
and the same agreement, and shall become a binding agreement when
one or more counterparts have been signed by each party and
delivered to the other party.
12.10. TITLES AND HEADINGS; CONSTRUCTION. The titles and headings to
Sections herein are inserted for the convenience of reference
only and are not intended to be a part of or to affect the
meaning or interpretation of this Agreement. This Agreement
shall be construed without regard to any presumption or other
rule requiring construction hereof against the party causing this
Agreement to be drafted.
12.11. BENEFIT. Nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties to this
Agreement or their respective successors or assigns, any rights,
remedies, obligations or liabilities under or by reason of this
Agreement.
12.12. NOTICES. Any notice or other communication required or
permitted under this Agreement shall be in writing and shall be
deemed to have been given, when received, if personally delivered
or delivered by telegram, telex or facsimile, or, when deposited,
if placed in the U.S. Mails for delivery by registered or
certified mail, return receipt requested, postage prepaid and
addressed to the appropriate party at the addresses set forth on
the first page of this Agreement. Addresses may be changed by
written notice given pursuant to the provisions of this
paragraph; however, any such notice shall not be effective, if
mailed, until five (5) working days after depositing in the U.S.
Mails or when actually received, whichever occurs first.
12.13. SEVERABILITY. If any provision of this Agreement is held
invalid by a court of competent jurisdiction, the remaining
provisions shall nonetheless be enforceable according to their
terms. Further, if any provision is held to be overbroad as
written, such provision shall be deemed amended to narrow its
application to the extent necessary to make the provision
<PAGE>
enforceable according to applicable law and shall be enforced as
amended.
12.14. EXECUTION OF FURTHER DOCUMENTS. Each party agrees to execute
and deliver without further consideration any further
applications, licenses, assignments or other documents, and to
perform such other lawful acts as the other party may reasonably
require to fully secure and/or evidence the rights or interests
herein.
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF QUANTECH
1. ADDITIONAL REPRESENTATIONS AND WARRANTIES. Quantech represents and
warrants to PE as follows:
a) ORGANIZATION. Quantech is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Minnesota and has all requisite power and authority to carry on its
business as now conducted and to enter into, perform and carry out
the terms of the Warrant Agreement.
b) DUE AUTHORIZATION. The execution, delivery and performance by
Quantech of this Agreement and the Warrant Agreement have been duly
authorized by all requisite corporate action, and this Agreement
and the Warrant Agreement are the valid and binding obligations of
Quantech enforceable in accordance with their respective terms,
except to the extent that enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditor's rights generally and
by general principles of equity (regardless of whether such
enforcement is considered in a proceeding in equity or at law).
The execution, delivery and performance of this Agreement and the
Warrant Agreement, the consummation of the transactions
contemplated hereby and thereby, and the performance by Quantech of
its obligations hereunder and thereunder, do not and will not (a)
conflict with or violate any provision of the Articles of
Incorporation or By-laws of Quantech, (b) violate or conflict with
any law, ordinance, rule, or regulation, or any judgment, order,
writ, injunction, decree, or similar command of any court,
administrative, or governmental agency or other body, (c) violate
or conflict with the terms of, or result in the acceleration of any
indebtedness or obligation of Quantech under, or result in a breach
of, or constitute a default under, any indenture, mortgage, deed of
trust, agreement, or instrument to which Quantech is a party or by
which Quantech or any of its assets or properties is bound or
affected, (d) result in the creation or imposition of any
<PAGE>
lien of any nature upon any of the assets or properties of Quantech,
or (e) constitute an event permitting the termination of any agreement,
license or other right of Quantech.
c) NO CONSENT OR APPROVAL. No consent of any person and no approval
or authorization of, or declaration or filing with, any
governmental or regulatory authority is required for the valid
authorization, execution and delivery by Quantech of, or the
performance by Quantech of its obligations under, this Agreement
and the Warrant Agreement.
d) CAPITALIZATION. The aggregate number of shares that Quantech has
the authority to issue shall be 250 million, which have a par value
of $0.01 per share solely for the purpose of a statute or
regulation imposing a tax or fee based upon the capitalization of
Quantech, and which consist of 200 million common shares and 50
million undesignated shares. The Quantech Board of Directors are
authorized to establish from the undesignated shares one or more
classes or series of shares, to designate each such class or series
and to fix the relative rights and preferences of each such class
or series. As of the date of this Agreement, Quantech has no
outstanding preferred stock or rights to obtain preferred stock and
the number of shares of Common Stock outstanding or issuable upon
exercise of options or warrants, conversion of debt instruments or
pursuant to any other agreement of any character or nature under
which Quantech is, or may become, obligated to issue or to transfer
any shares of its capital stock of any kind, does not exceed 92
million shares.
- 15 -
<PAGE>
PERKIN ELMER/QUANTECH LICENSE AGREEMENT
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed in the manner appropriate to each, effective as of the date first
above written.
Quantech Ltd. The Perkin-Elmer Corporation
/s/ Greg Freitag /s/ Mark C. Rogers
By:------------------------- By:------------------------------
Greg Freitag Mark C. Rogers
Name:----------------------- Name:-------------------------
COO and CFO Senior Vice President
Title:---------------------- Title:------------------------
-16-
<PAGE>
The securities represented by this certificate have not been registered
under either the Securities Act of 1933, as amended (the "1933 Act"), or
applicable state securities laws. They may not be sold, offered for sale
or transferred in the absence of an effective registration under the 1933
Act and the applicable state securities laws or an opinion of counsel
satisfactory in form and substance to counsel for the Company that such
transaction will not result in a prohibited transaction under the 1933 Act
or the applicable state securities laws.
PE-1
WARRANT
To Purchase 28,000,000 Shares of Common Stock
of
Quantech Ltd.
THIS CERTIFIES THAT, for good and valuable consideration, The Perkin-Elmer
Corporation ("PE") or its registered assigns is entitled to subscribe for
and purchase from Quantech Ltd., a Minnesota corporation (the "Company"),
at any time from and after the date hereof to and including December 16,
2002, Twenty-Eight Million (28,000,000) fully paid and nonassessable shares
of the Common Stock of the Company at the Warrant Exercise Price (defined
below), subject to the antidilution provisions of Section 5 of this
Warrant. Reference is made to this Warrant in the Agreement executed by
PE and the Company dated December 16, 1997.
The "Warrant Exercise Price" shall be equal to 95% of the average of the
last sale price of the Company's Common Stock for each of the 25
consecutive trading days immediately preceding the date of the first notice
of exercise of this warrant provided to the Company by PE. The number of
shares subject to this Warrant and, after the Warrant Exercise Price is
established, the Warrant Exercise Price shall be proportionally adjusted to
reflect any stock dividend or any subdivision or combination of shares
effected by the Company subsequent to the date of issuance of this Warrant
as provided in Section 5 herein.
The shares which may be acquired upon exercise of this Warrant are referred
to herein as the "Warrant Shares." As used herein, the term "Holder" means
PE, any party who acquires all or a part of this Warrant as a registered
transferee of PE, or any record holder or holders of the Warrant Shares
issued upon exercise, whether in whole or in part, of the Warrant. The
term "Common Stock" means and includes the Company's presently authorized
common stock, par value $.01 per share, together with any other equity
securities that may be issued by the Company in connection therewith or in
substitution therefore.
This Warrant is subject to the following provisions, terms and conditions:
1. Exercise; Transferability.
1
<PAGE>
(a) The rights represented by this Warrant may be exercised by the Holder
hereof, in whole or in part (but not as to a fractional share of Common
Stock), by written notice of exercise (in the form attached hereto)
delivered to the Company at the principal office of the Company prior to
the expiration of this Warrant and accompanied or preceded by the surrender
of this Warrant along with payment of the Warrant Exercise Price for such
shares.
(b) This Warrant is transferable in whole or in part, subject to
applicable federal and state securities laws and regulations. This Warrant
may not be sold, transferred, assigned, hypothecated or divided into two or
more Warrants of smaller denominations, nor may any Warrant shares issued
pursuant to exercise of this Warrant be transferred, except as provided in
Section 7 hereof.
2. Exchange and Replacement. Subject to Sections 1 and 7 hereof, this
Warrant is exchangeable upon the surrender hereof by the Holder to the
Company at its office for new Warrants of like tenor and date representing
in the aggregate the right to purchase the number of Warrant Shares
purchasable hereunder, each of such new Warrants to represent the right to
purchase such number of Warrant Shares (not to exceed the aggregate total
number purchasable hereunder) as shall be designated by the Holder at the
time of such surrender. Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction, or mutilation of this
Warrant, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and upon surrender and cancellation
of this Warrant, if mutilated, the Company will make and deliver a new
Warrant of like tenor, in lieu of this Warrant. This Warrant shall be
promptly canceled by the Company upon the surrender hereof in connection
with any exchange or replacement. The Company shall pay all expenses,
taxes (other than stock transfer taxes), and other charges payable in
connection with the preparation, execution, and delivery of Warrants
pursuant to this Section 2.
3. Issuance of the Warrant Shares.
(a) The Company agrees that the shares of Common Stock purchased hereby
shall be and are deemed to be issued to the Holder as of the close of
business on the date on which this Warrant shall have been exercised and
the payment made for such Warrant Shares as aforesaid. Subject to the
provisions of the next section, certificates for the Warrant Shares so
purchased shall be delivered to the Holder within a reasonable time, not
exceeding ten (10) days, after the rights represented by this Warrant shall
have been so exercised, and, unless this Warrant has expired, a new Warrant
representing the right to purchase the number of Warrant Shares, if any,
with respect to which this Warrant shall not then have been exercised shall
also be delivered to the Holder within such time. The Company shall pay
all expenses, taxes (including stock transfer taxes), and other charges
payable in connection with the preparation, execution, and delivery of
Warrants pursuant to this Section 3.
(b) Notwithstanding the foregoing, however, the Company shall not be
required to deliver any certificate for Warrant Shares upon exercise of
this Warrant except in accordance
2
<PAGE>
with exemptions from the applicable securities registration requirements or
registrations under applicable securities laws. Nothing herein, however,
shall obligate the Company to effect registrations under federal or state
securities laws, except as provided in Section 9. If registrations are not
in effect and if exemptions are not available when the Holder seeks to
exercise the Warrant, the Warrant exercise period will be extended, if need
be, to prevent the Warrant from expiring, until such time as either
registrations become effective or exemptions are available, and the Warrant
shall then remain exercisable for a period of at least 30 calendar days
from the date the Company delivers to the Holder written notice of the
availability of such registrations or exemptions. The Holder agrees to
execute such documents and make such representations, warranties, and
agreements as may be reasonably required solely to comply with the
exemptions relied upon by the Company, or the registrations made, for the
issuance of the Warrant Shares.
4. Covenants of the Company.
(a) The Company covenants and agrees that all Warrant Shares will, upon
issuance, be duly authorized and issued, fully paid, nonassessable, and
free from all taxes, liens, and charges with respect to the issue thereof.
The Company further covenants and agrees that during the period within
which the rights represented by this Warrant may be exercised, the Company
will at all times have authorized and reserved for the purpose of issue or
transfer upon exercise of the subscription rights evidenced by this Warrant
a sufficient number of shares of Common Stock to provide for the exercise
of the rights represented by this Warrant.
(b) The Company covenants and agrees that during the term of this Warrant
and for so long thereafter as may be required under any applicable law it
will, at the same time and in the same manner, deliver to the Holders any
and all communications that may otherwise be delivered to the holders of
any other class of securities of the Company.
5. Antidilution Adjustments. The provisions of this Warrant are subject
to adjustment as provided in this Section 5.
(a) After the determination of the Warrant Exercise Price, the Warrant
Exercise Price shall be adjusted from time to time such that in case the
Company shall hereafter:
(i) pay any dividends on any class of stock of the Company payable
in Common Stock or securities convertible into Common Stock;
(ii) subdivide its then outstanding shares of Common Stock into a
greater number of shares; or
(iii) combine outstanding shares of Common Stock, by
reclassification or otherwise;
3
<PAGE>
then, in any such event, the Warrant Exercise Price in effect immediately
prior to such event shall (until adjusted again pursuant hereto) be
adjusted immediately after such event to a price (calculated to the nearest
full cent) determined by dividing (a) the number of shares of Common Stock
outstanding immediately prior to such event, multiplied by the then
existing Warrant Exercise Price, by (b) the total number of shares of
Common Stock outstanding immediately after such event (including in each
case the maximum number of shares of Common Stock issuable in respect of
any securities convertible into Common Stock), and the resulting quotient
shall be the adjusted Warrant Exercise Price per share. An adjustment made
pursuant to this Subsection shall become effective immediately after the
record date in the case of a dividend or distribution and shall become
effective immediately after the effective date in the case of a
subdivision, combination or reclassification. If, as a result of an
adjustment made pursuant to this Subsection, the Holder of any Warrant
thereafter surrendered for exercise shall become entitled to receive shares
of two or more classes of capital stock or shares of Common Stock and other
capital stock of the Company, the Board of Directors (whose determination
shall be conclusive) shall determine in good faith the allocation of the
adjusted Warrant Exercise Price between or among shares of such classes of
capital stock or shares of Common Stock and other capital stock. All
calculations under this Subsection shall be made to the nearest cent or to
the nearest 1/100 of a share, as the case may be. In the event that at any
time as a result of an adjustment made pursuant to this Subsection the
holder of any Warrant thereafter surrendered for exercise shall become
entitled to receive any shares of the Company other than shares of Common
Stock, thereafter the Warrant Exercise Price of such other shares so
receivable upon exercise of any Warrant shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable
to the provisions with respect to Common Stock contained in this Section.
(b) Prior to the date the Warrant Exercise Price is established, the
number of Warrant Shares subject to this Warrant shall be proportionally
adjusted to reflect any stock dividend or any subdivision or combination of
shares effected by the Company. After the Warant Exercise Price is
established and upon each adjustment of the Warrant Exercise Price pursuant
to Section 5(a) above, the Holder of each Warrant shall thereafter (until
another such adjustment) be entitled to purchase at the adjusted Warrant
Exercise Price the number of shares, calculated to the nearest full share,
obtained by multiplying the number of shares specified in such Warrant (as
adjusted as a result of all adjustments in the Warrant Exercise Price in
effect prior to such adjustment) by the Warrant Exercise Price in effect
prior to such adjustment and dividing the product so obtained by the
adjusted Warrant Exercise Price.
(c) In case of any consolidation or merger to which the Company is a party
or in case of any sale or conveyance to another corporation of the property
of the Company as an entirety or substantially as an entirety, or in the
case of any statutory exchange of securities with another corporation
(including any exchange effected in connection with a merger of a third
corporation into the Company), there shall be no adjustment under
Subsection (a) of this Section above but the Holder of each Warrant then
outstanding shall have the right thereafter to convert such Warrant into
the kind and amount of shares of stock and other securities and property
which he
4
<PAGE>
would have owned or have been entitled to receive immediately after such
consolidation, merger, statutory exchange, sale or conveyance had such
Warrant been converted immediately prior to the effective date of such
consolidation, merger, statutory exchange, sale or conveyance and in any
such case, if necessary, appropriate adjustment shall be made in the
application of the provisions set forth in this Section with respect to the
rights and interests thereafter of any Holders of the Warrant, to the end
that the provisions set forth in this Section shall thereafter
correspondingly be made applicable, as nearly as may reasonably be, in
relation to any shares of stock and other securities and property
thereafter deliverable on the exercise of the Warrant. The provisions of
this Subsection shall similarly apply to successive consolidations,
mergers, statutory exchanges, sales or conveyances.
(d) Upon any adjustment of the Warrant Exercise Price, then and in each
such case, the Company shall give written notice thereof, by first-class
mail, postage prepaid, addressed to the Holder as shown on the books of the
Company, which notice shall state the Warrant Exercise Price resulting from
such adjustment and the increase or decrease, if any, in the number of
shares of Common Stock purchasable at such price upon the exercise of this
Warrant, setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based.
6. No Voting Rights. This Warrant shall not entitle the Holder to any
voting rights or other rights as a shareholder of the Company.
7.Transfer of Warrant or Resale of the Warrant Shares.
(a) No Holder shall transfer or otherwise dispose of the Warrant or the
Warrant Shares evidenced thereby except pursuant to (i) an effective
registration statement under the 1933 Act, (ii) Rule 144 under the 1933 Act
(or any similar rule under the Act relating to the disposition of
securities), or (iii) an opinion of counsel, satisfactory to counsel for
the Company (which approval will not be unreasonably withheld or delayed)
that an exemption from registration under the 1933 Act is available for
such transfer or other disposition. Notwithstanding the foregoing, an
appropriate legend may be endorsed on this Warrant or the certificates for
such Warrant Shares following such transfer or other disposition respecting
restrictions upon transfer thereof necessary or advisable in the reasonable
opinion of counsel to the Company to prevent further transfers which would
be in violation of Section 5 of the 1933 Act and applicable state
securities laws. In addition, the prospective transferee or purchaser
shall execute such documents and make such representations, warranties, and
agreements as may, in the reasonable opinion of counsel to the Company, be
required solely to comply with the exemptions relied upon by the Company
for such transfer or other disposition of the Warrant or Warrant Shares.
(b) If in the reasonable opinion of counsel to the Company, the proposed
transfer or disposition of this Warrant or such Warrant Shares referred to
in this Section 7 may not be effected without registration or qualification
of this Warrant or such Warrant Shares, the Company shall promptly give
written notice thereof to the Holder, and the Holder will limit its
activities in respect to such as, in the reasonable opinion of such
counsel, are permitted by law.
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8. Fractional Shares. Fractional shares shall not be issued upon the
exercise of this Warrant, but in any case where the holder would, except
for the provisions of this Section, be entitled under the terms hereof to
receive a fractional share, the Company shall, upon the exercise of this
Warrant for the largest number of whole shares then called for, pay a sum
in cash equal to the sum of (a) the excess, if any, of the Market Price of
such fractional share over the proportional part of the Warrant Exercise
Price represented by such fractional share, plus (b) the proportional part
of the Warrant Exercise Price represented by such fractional share. For
purposes of this Section, the term "Market Price" with respect to shares of
Common Stock of any class or series means:
(i) if the Company's Common Stock is traded on an exchange or is
quoted on the NASDAQ National Market, then the average closing or last
sale prices, respectively, reported for the ten (10) business days
immediately preceding exercise of the Warrant,
(ii) if the Company's Common Stock is not traded on an exchange or
on the NASDAQ National Market but is traded on the NASDAQ SmallCap
Market or other over-the-counter market, then the average closing bid
and asked prices reported for the ten (10) business days immediately
preceding the exercise of the Warrant, and
(iii) if the Company's Common Stock is not traded on an exchange,
the NASDAQ National Market, or the NASDAQ SmallCap Market or other
over-the-counter market, then the price established in good faith by
the Company's Board of Directors.
9. Registration Rights.
(a) If prior to December 15, 2004 the Company proposes to register
under the 1933 Act (except by a Form S-4 or Form S-8 Registration Statement
or any successor forms thereto) or qualify for a public distribution under
Section 3(b) of the 1933 Act, any of its securities, it will give written
notice to all Holders of this Warrant, any Warrants issued pursuant to
Section 2 and/or Section 3(a) hereof, and any Warrant Shares of its
intention to do so and, on the written request of any such Holder given
within twenty (20) days after receipt of any such notice (which request
shall specify the interest in this Warrant or the Warrant Shares intended
to be sold or disposed of by such Holder and describe the nature of any
proposed sale or other disposition thereof), the Company will use its best
efforts to cause all such Warrant Shares, the Holders of which shall have
requested the registration or qualification thereof, to be included in such
registration statement proposed to be filed by the Company; provided,
however, that if a greater number of Warrant Shares is offered for
participation in the proposed offering than in the reasonable opinion of
the managing underwriter of the proposed offering can be accommodated
without adversely affecting the proposed offering, then the amount of
Warrant Shares proposed to be offered by such Holders for registration, as
well as the number of securities of any other selling shareholders
participating in the registration, shall be proportionately reduced to a
number deemed satisfactory by the managing underwriter.
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(b) Further, provided Form S-3, or such successor form as may be adopted
is available, during the term of this Warrant and for a period of two years
thereafter and for a maximum of three (3) times, upon request by the Holder
or Holders of a majority in interest of the Warrant Shares represented by
(i) this Warrant, (ii) any Warrants issued pursuant to Section 2 and/or
Section 3(a) hereof, and (iii) any Warrant Shares issued upon exercise of
(i) or (ii) above, the Company will promptly take all necessary steps to
register or qualify under the 1993 Act and the securities laws of such
states as the holders may reasonably request this Warrant and such number
of Warrant Shares issued and to be issued upon conversion of the Warrants
requested by such Holders in their request to the Company. The Company
shall keep effective and maintain any registration, qualification,
notification, or approval specified in this Subsection (b) for such period
as may be reasonably necessary for such Holder or Holders of such Warrants
and/or such Warrant Shares to dispose thereof and from time to time shall
amend or supplement the prospectus used in connection therewith to the
extent necessary in order to comply with the applicable law.
(c) With respect to each inclusion of securities in a registration
statement pursuant to this Section 9, the Company shall bear the following
fees, costs, and expenses: all registration, filing and NASD fees,
printing expenses, fees and disbursements of counsel and accountants for
the Company, fees and disbursements of counsel for the underwriter or
underwriters of such securities (if the Company is required to bear such
fees and disbursements), fees and disbursements of one counsel to the
selling Holders (not to exceed $10,000), all internal expenses, the
premiums and other costs of policies of insurance against liability arising
out of the public offering, and legal fees and disbursements and other
expenses of complying with state securities laws of any jurisdictions in
which the securities to be offered are to be registered or qualified.
Except as provided above, fees and disbursements of counsel and accountants
for the selling Holders, underwriting discounts and commissions, and
transfer taxes (except as provided in Section 3) for selling Holders and
any other expenses of the selling Holders relating to the sale of
securities by the selling Holders not expressly included above shall be
borne by the selling Holders;
(d) The Company hereby indemnifies each of the Holders of this Warrant and
of any Warrant Shares, and the officers and directors, if any, who control
such Holders, within the meaning of Section 15 of the 1933 Act, against all
losses, claims, damages, and liabilities caused by (1) any untrue statement
or alleged untrue statement of a material fact contained in any
Registration Statement or Prospectus (and as amended or supplemented if the
Company shall have furnished any amendments thereof or supplements
thereto), any Preliminary Prospectus or any state securities law filings;
(2) any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading except insofar as such losses, claims, damages or
liabilities are caused by any untrue statement or omission contained in
information furnished in writing to the Company by such Holder expressly
for use therein; and each such Holder by its acceptance hereof severally
agrees that it will indemnify and hold harmless the Company, each of its
officers who signs such Registration
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Statement, and each person, if any, who controls the Company, within the
meaning of Section 15 of the 1933 Act, with respect to losses, claims,
damages or liabilities which are caused by any untrue statement or omission
contained in information furnished in writing to the Company by such Holder
expressly for use therein.
10. Governing Law. This Warrant shall be governed and construed in
accordance with the internal laws of the State of New York without regard
to conflicts of laws principles thereof.
IN WITNESS WHEREOF, Quantech Ltd. has caused this Warrant to be signed by
its duly authorized officer and this Warrant to be dated December 16, 1997.
"Company"
Quantech Ltd.
By /S/ GREGORY G. FREITAG
Gregory G. Freitag,
Chief Financial Officer
and Chief Operating Officer
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To: Quantech Ltd.
NOTICE OF EXERCISE OF WARRANT --
To Be Executed by the Registered Holder
in Order to Exercise the Warrant
The undersigned hereby irrevocably elects to exercise the attached Warrant
to purchase for cash, ---------------- of the shares issuable upon the
exercise of such Warrant, and requests that certificates for such shares
(together with a new Warrant to purchase the number of shares, if any, with
respect to which this Warrant is not exercised) shall be issued in the name
of
--------------------------------
(Print Name)
Please insert social security
or other identifying number
of registered holder of
certificate ( )
----------------------
Address:
--------------------------------
--------------------------------
Date: , 19
--------- --------------------------------
Signature*
*The signature on the Notice of Exercise of Warrant must correspond to the
name as written upon the face of the Warrant in every particular without
alteration or enlargement or any change whatsoever. When signing on behalf
of a corporation, partnership, trust or other entity, PLEASE indicate your
position(s) and title(s) with such entity.
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ASSIGNMENT FORM
To be signed only upon authorized transfer of Warrants.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
unto the right to purchase
-----------------------------------------------
the securities of Quantech Ltd. to which the within Warrant relates and
appoints , attorney, to transfer said right on the
--------------------
books of Quantech Ltd. with full power of substitution in the premises.
Dated:
------------------
- ------------------------------------------
(Signature)
Address:
-----------------------------------
-----------------------------------
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