<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
QUANTECH LTD.
(Name of Issuer)
COMMON STOCK, NO PAR VALUE PER SHARE
(Title of Class of Securities)
74762K30
(CUSIP Number of Class of Securities)
Robert Gaines
Millenium Medical Systems, LLC
640 N. LaSalle Drive, Suite 282
Chicago, IL 60610
(312) 664-3580
with a copy to:
Steven H. Sneiderman, Esq.
Hahn Loeser & Parks LLP
3300 BP America Bldg.
200 Public Square
Cleveland, Ohio 44114
(216) 621-0150
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
NOVEMBER 13, 1998
(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 that is the subject of this Schedule 13D, and is filing this
schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check
the following box [ ].
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Section 240.13d-7(b) 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).
(Continued on following page(s))
Page 1 of 29 pages
<PAGE> 2
CUSIP No. 74762K30
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C>
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NOS. OF REPORTING PERSON
ROBERT GAINES - SS# 298 -36-1081
- - ---------------------------------------------------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
- - ---------------------------------------------------------------------------------------------------------------------------
3. SEC USE ONLY
- - ---------------------------------------------------------------------------------------------------------------------------
4. SOURCE OF FUNDS
PF
- - ---------------------------------------------------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
NOT APPLICABLE. [ ]
- - ---------------------------------------------------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
U.S. AMERICAN
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
7. SOLE VOTING POWER
NUMBER OF SHARES
BENEFICIALLY OWNED BY EACH 1,859,635
REPORTING PERSON ---------------------------------------------------------------------------------------
WITH 8. SHARED VOTING POWER
-0-
---------------------------------------------------------------------------------------
9. SOLE DISPOSITIVE POWER
1,859,635
---------------------------------------------------------------------------------------
10. SHARED DISPOSITIVE POWER
-0-
- - ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C>
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,859,635
- - ---------------------------------------------------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
[ ]
- - ---------------------------------------------------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
41.51%
- - ---------------------------------------------------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON
IN
</TABLE>
Page 2 of 29 pages
<PAGE> 3
CUSIP No. 74762K30
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C>
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NOS. OF REPORTING PERSON
MILLENIUM MEDICAL SYSTEMS, LLC - FEIN #34 -4258398
- - ---------------------------------------------------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
- - ---------------------------------------------------------------------------------------------------------------------------
3. SEC USE ONLY
- - ---------------------------------------------------------------------------------------------------------------------------
4. SOURCE OF FUNDS
WC
- - ---------------------------------------------------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
NOT APPLICABLE. [ ]
- - ---------------------------------------------------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
ILLINOIS
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
7. SOLE VOTING POWER
NUMBER OF SHARES
BENEFICIALLY OWNED BY EACH 1,800,000
REPORTING PERSON ---------------------------------------------------------------------------------------
WITH 8. SHARED VOTING POWER
-0-
---------------------------------------------------------------------------------------
9. SOLE DISPOSITIVE POWER
1,800,000
---------------------------------------------------------------------------------------
10. SHARED DISPOSITIVE POWER
-0-
- - ---------------------------------------------------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,800,000
- - ---------------------------------------------------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
[ ]
- - ---------------------------------------------------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
40.68%
- - ---------------------------------------------------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON
OO
</TABLE>
Page 3 of 29 pages
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SCHEDULE 13D
This Schedule 13D is filed on behalf of Millenium Medical Systems, LLC,
an Illinois limited liability company ("Millenium"), for the purpose of
reporting the acquisition by Millenium on November 13, 1998 of warrants to
purchase 1,800,000 shares of the common stock, no par value per share, of
Quantech Ltd. ("Quantech"), which are currently exercisable at an exercise price
of $1.10 per share (the "Warrants"). The shares issuable upon exercise of the
Warrants represent 40.68% of the common stock outstanding of Quantech. In
addition to the Warrants, Robert Gaines, the sole member of Millenium
("Gaines"), currently owns (i) 5,000 shares of the common stock of Quantech,
(ii) 11,963 shares of Series A Convertible Preferred Stock, which currently may
be converted to 47,852 shares of common stock of Quantech (the "Series A
Shares") and (iii) currently exercisable warrants to purchase 6,783 shares of
the common stock of Quantech (the "Prior Warrants") at an exercise price of
$0.75 per share (Gaines and Millenium are hereinafter referred to jointly as
the "Reporting Persons"). The common stock, Series A Shares and the Prior
Warrants to acquire common stock other than the Warrants owned by Gaines
individually represent 2.23% of the common stock outstanding of Quantech. This
Schedule 13D filing reflects the beneficial ownership of Quantech common stock
owned by the Reporting Persons, which in the aggregate represents 41.51% of the
common stock outstanding of Quantech.
Pursuant to General Instruction C of Schedule 13D, the information
called for by Items 2-6, inclusive, of this Schedule 13D has been given with
respect to both Millenium and Gaines, the sole member and the person ultimately
in control of Millenium.
ITEM 1. SECURITY AND ISSUER.
Security: common stock, no par value
(Cusip No. 74762K30)
Issuer: Quantech Ltd.
1419 Energy Park Drive
St. Paul, MN 55108
ITEM 2. IDENTITY AND BACKGROUND.
(A) NAME
The Reporting Persons are:
Millenium, an Illinois limited liability company, and
Gaines, an individual and a citizen of the United
States.
(B) RESIDENCE OR BUSINESS ADDRESS
The Principal Business Address of each of Millenium and
Gaines is:
640 N. LaSalle Drive, Suite 282
Chicago, IL 60610
Page 4 of 29 pages
<PAGE> 5
(C) PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND THE NAME,
PRINCIPAL BUSINESS AND ADDRESS OF ANY CORPORATION OR OTHER
ORGANIZATION IN WHICH SUCH EMPLOYMENT IS CONDUCTED.
The principal business of Millenium is to provide medical
research and development services. This business is currently
conducted by Millenium solely at its principal business
address located at 640 N. LaSalle Drive, Suite 282, Chicago,
IL 60610.
Gaines is an orthopedic surgeon who offers medical services
through his office located at the University of Missouri
Health Sciences Center, One Hospital Drive, Columbia, MO
65212. Gaines is also a material participant in the business
and affairs of Millenium.
(D) During the last five years, neither Millenium nor Gaines has
been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors).
(E) During the last five years, neither Millenium nor Gaines 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.
(F) CITIZENSHIP
Gaines is a citizen of the United States.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The consideration for the Warrants acquired by Millenium is the
Agreement of Millenium to provide certain services pursuant to a
Research and Development Services Agreement between Millenium and
Quantech dated as of November 13, 1998 (the "Services Agreement").
The services to be provided by Millenium under the Services
Agreement shall be funded initially by a capital contribution to
Millenium by Gaines in the amount of $2.0 million, all of which
shall consist of the personal funds of Gaines. The Services
Agreement provides that Millenium will provide certain specified
research and development services to Quantech in exchange for the
issuance of the Warrants, having an exercise price of $1.10 per
share, a price which was greater than the fair market value of the
common stock of Quantech on the date of issuance of the Warrants.
All of the prior purchases of Quantech securities by Gaines were
funded with his personal funds.
Page 5 of 29 pages
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ITEM 4. PURPOSE OF TRANSACTION.
Millenium has acquired the Warrants for investment purposes only
and not with the purpose of changing or influencing the control of
Quantech. Prior to the acquisition of the Warrants by Millenium,
Gaines had personally acquired the shares of the common stock of
Quantech, the Series A Shares (see Item 5(c) below) and the Prior
Warrants (see Item 5(c) below), solely for investment purposes.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(A) The aggregate number of shares of common stock, no par value,
of Quantech beneficially owned in the aggregate by Millenium
and by the sole member of Millenium, Gaines, is 1,859,635
shares, which represents 41.51% of the common stock
outstanding of Quantech. Of this amount, Millenium itself
beneficially owns 1,800,000 shares of common stock which may
be acquired upon exercise of the Warrants, representing
40.68 % of the common stock outstanding, and Gaines
individually beneficially owns 59,635 shares of common stock,
representing 2.23% of the common stock outstanding and also
beneficially owns the common stock of Quantech beneficially
owned by Millenium.
(B) With respect to the shares of the common stock of Quantech
identified in Item 5(a) above, Gaines, either individually or
through Millenium, has the sole power to vote or to direct
the vote and the sole power to dispose or to direct the
disposition of all the shares.
(C) This is Millenium's initial filing on Schedule 13D. On
November 5, 1998, Gaines acquired 11,963 Series A Shares
(convertible into 47,852 shares of common stock of Quantech)
and the currently exercisable Prior Warrants to purchase
6,783 shares of the common stock of Quantech at an exercise
price of $0.75 per share in exchange for $ 35,889 in
principal amount of Convertible Subordinated Notes of
Quantech held by Gaines.
(D) Gaines will have the right to receive or the power to direct
the receipt of dividends from, or the proceeds from the sale
of, all the securities.
(E) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
Not applicable.
Page 6 of 29 pages
<PAGE> 7
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Research and Development Services Agreement between Millenium
Medical Systems, LLC and Quantech Ltd., dated as of November 13,
1998.
Page 7 of 29 pages
<PAGE> 8
SCHEDULE 13D
SIGNATURE PAGE
After reasonable inquiry and to the best of his knowledge and belief,
the undersigned certifies that the information set forth in this statement is
true, complete and correct.
DATED: November 23, 1998
/s/ Robert Gaines
---------------------------------------------
Robert Gaines, individually
Page 8 of 29 pages
<PAGE> 9
SCHEDULE 13D
SIGNATURE PAGE
After reasonable inquiry and to the best of his knowledge and belief,
the undersigned certifies that the information set forth in this statement is
true, complete and correct.
DATED: November 23, 1998
MILLENIUM MEDICAL SYSTEMS, LLC
By: /s/ Robert Gaines
--------------------------------------------
Robert Gaines, Member
Page 9 of 29 pages
<PAGE> 10
EXHIBIT A
---------
RESEARCH AND DEVELOPMENT SERVICES AGREEMENT
-------------------------------------------
THIS RESEARCH AND DEVELOPMENT SERVICES AGREEMENT (the "Agreement")
entered into as of the 13th day of November, 1998 by and between Millenium
Medical Systems, LLC , an Illinois limited liability company ("MMS") and
Quantech, Ltd., a Minnesota corporation ("Quantech").
RECITALS
--------
WHEREAS, Quantech is in the process of completing development of its
multi-test, critical care DBx Emergency Department Medical Diagnostic System
(the "System") and requires significant research and development activities in
order to complete the development of the System;
WHEREAS, one of the principals of MMS, Dr. Robert W. Gaines ("Gaines"),
has valuable experience in the utilization and development of such diagnostic
systems; and
WHEREAS, Quantech wishes to engage, and MMS is willing to provide, the
research and development services described herein.
1. TERM. Quantech will engage MMS on the terms and conditions set
forth herein from the date of this Agreement through December
31, 1999 (the "Term") and may be extended for a term mutually
agreeable to the parties hereto.
2. SCOPE OF WORK. MMS will perform product development and
program management consulting services, as an independent
contractor, in the research and development of the commercial
version of the System for Quantech, as described in Appendix A
- R&D Services and in accordance with the budget agreed to by
the parties (the "Budget") and any subsequently Quantech
approved revisions to same (collectively with the consulting
services described in Section 3 below, the "Services").
3. CONSULTING SERVICES. In addition to the foregoing, MMS and/or
Gaines shall provide such consulting services with respect to
any aspect of the business of Quantech related to the services
provided hereunder as may be reasonably requested by the
management of Quantech. Such services may be rendered either
by telephone or in person. There shall be no fee charged to
Quantech for services provided pursuant to this paragraph 5 by
MMS and/or Gaines.
Page 10 of 29 pages
<PAGE> 11
4. SPECIFIC RESPONSIBILITIES OF GAINES.
(a) The parties agree that the involvement of
Gaines in conducting the research and
development services described herein is an
express condition precedent to Quantech's
retention of MMS to provide said services.
Gaines agrees personally to perform such
services, and to participate in all such
meetings, conferences, conference calls and
other activities, as may be reasonably
requested by the officers and directors of
Quantech including, without limitation,
those responsibilities identified on
Appendix A - R&D Services attached hereto.
Gaines agrees to perform a minimum of
forty-five (45) hours per month of such
services pursuant to this Agreement.
(b) Notwithstanding the foregoing, Quantech
acknowledges that Gaines' services during
the term of this Agreement shall not
constitute a full- time engagement, and that
Gaines will have duties and responsibilities
to other individuals and entities during the
term of this Agreement which are not in
competition, directly or indirectly with
Quantech. Subject to the preceding sentence,
Quantech agrees that Gaines may perform his
duties during the term of this Agreement at
such times, places and frequencies as are
necessary so that such duties will not
unreasonably interfere with his duties and
responsibilities to other individuals and
entities.
5. COMPENSATION. As compensation in full for the Services rendered to
Quantech hereunder, Quantech will issue Warrants to purchase 1,800,000 shares of
common stock of Quantech at an exercise price of $1.10 per share, in the form
attached hereto as Exhibit A (the "Warrant").
6. BUDGET ISSUES. Quantech acknowledges and agrees that MMS shall be
funded with $2,000,000 of initial capital contributions by its Members and,
accordingly, has prepared the Budget to account for the proper expenditure of
those funds. In the event of required revisions, either in the approved budget
or the required time to complete the Services defined, MMS will, as soon as such
information becomes available, advise Quantech of the nature and amount of the
anticipated cost and/or time revisions, and recommended Service, Budget and
Schedule adjustments. Quantech and MMS will negotiate in good faith to resolve
any issues requiring such revisions. Upon agreement regarding the required
revisions, Quantech will, in a timely manner, make the necessary arrangements to
provide MMS with written approval of the revisions and the additional funding
and/or time, if required. Notwithstanding the foregoing, nothing contained
herein shall require MMS to expend any funds beyond those specified in the
Budget without its prior written consent.
7. MANNER OF PERFORMANCE. MMS represents that it has the requisite
expertise, ability and legal right to render the Services and will perform the
Services in an efficient manner. MMS will abide by all laws, rules and
regulations that apply to the performance of the Services, including applicable
requirements regarding equal employment opportunity and the provisions of
Executive Order 11246 and related rules. Each of MMS's employees or
subcontractors performing Services will have the expertise to perform assigned
Services in an efficient manner. MMS and employees or subcontractors of MMS when
on Quantech's premises will comply with their policies with respect
Page 11 of 29 pages
<PAGE> 12
to conduct of visitors. Quantech represents and warrants to MMS that it has
disclosed, in writing, to MMS all facts pertaining to Quantech, its business and
activities, that may cause certain laws or regulations to apply to MMS because
of the unique nature of Quantech's business.
8. CONFIDENTIALITY. During the term of this Agreement, MMS will acquire
and create confidential information respecting the intimate confidential affairs
of Quantech ("Information"). Accordingly, MMS agrees not to disclose at any time
to any person or entity any such Information without the prior written consent
of Quantech. However, the foregoing will not restrict MMS from using or
disclosing any:
(a) Information that constitutes part of the public domain;
(b) Information rightfully made available to MMS by or
through a third party;
(c) Information required to be disclosed to MMS by a valid
court order;
(d) Information that has been developed by MMS independently
of the services rendered hereunder; and
(e) Information that is not included within the Services
definition which is to be developed by MMS and agreed to
by Quantech.
MMS also agrees that it will deliver all Information received by it from
Quantech, or created during the course of rendering the Services hereunder,
relative to MMS's proposed work effort, to Quantech upon termination of this
Agreement, at Quantech's written request. MMS's undertaking(s) under this
Section 8 shall survive the termination of this Agreement, so long as MMS has
been compensated for all services rendered and expenses incurred in the
course of rendering the services hereunder.
MMS shall also maintain confidential the nature and scope of the Services
being provided by MMS to Quantech hereunder. MMS will not, without the prior
written consent of Quantech, disclose in any media, advertising or other
means of general distribution the nature of MMS's relationship with Quantech
or the nature of any services provided by MMS to Quantech.
9. CONFLICTS OF INTEREST. MMS represents that it has advised Quantech
prior to the date of signing this Agreement of any relationship with third
parties, which would present a conflict of interest with the rendering of the
Services, or which reasonably would prevent MMS from carrying out the terms of
this Agreement. MMS will advise Quantech of any such conflicting relationships
that arise during the term of this Agreement. Quantech will then have the option
to terminate this Agreement without further liability. Quantech acknowledges
that MMS has disclosed the fact that MMS employs subcontractors which serve
other clientele who are also engaged in medical product development, which is
acceptable to Quantech. However, in this regard, MMS agrees that it will not
represent or provide Services for any person or entity the scope of which covers
specific information relevant to Quantech's specific field of business as
disclosed to MMS.
10. RELATIONSHIPS WITH OTHERS. During the term of this Agreement and
for a period of one (1) year after its termination date, MMS will not perform
services relative to the development of any work effort for other medical
companies falling within the specific field of business of Quantech as disclosed
to MMS.
Page 12 of 29 pages
<PAGE> 13
11. INDEPENDENT CONTRACTOR. The parties acknowledge that each of them
is acting as an independent contractor and not an employee or agent of the other
in the exercise of its rights and performance of its duties hereunder. Nothing
in this Agreement shall render either party, or any of its respective agents or
employees, except as previously agreed to by such party, an employee or agent of
the other party, nor authorize or empower such party or its respective agents or
employees to speak for, represent or obligate the other party in any way.
12. OWNERSHIP OF DEVELOPMENTS. All written materials and other works
which may be subject to copyright and all discoveries and ideas (including but
not limited to any computer software code and related comments) which are made,
conceived or developed by MMS in the performance of the Services hereunder and
which are an integral part of the core work effort described in Appendix A shall
be Quantech's property. All said studies, discoveries and ideas are herein
referred to as "Developments". In regard to such Developments, MMS agrees to
maintain the same confidentiality in accordance with Section 8 of this
Agreement. In regard to any discoveries and ideas (including computer software)
which may be made, conceived or developed by MMS in the performance of the
Services hereunder and which are not part of the core work effort, said
inventions, discoveries and ideas shall be considered Quantech's property only
upon MMS's written acknowledgement and agreement thereto. Nothing herein shall
prevent MMS from utilizing and otherwise exploiting the studies, discoveries,
ideas and other technology in MMS's possession or otherwise available to MMS
prior to the date of this Agreement (herein collectively referred to as
"Existing Expertise"); provided, however, that to the extent MMS utilizes
Existing Expertise in the services to be performed under this Agreement for
Quantech, MMS agrees not to utilize the same Existing Expertise in the field in
a manner detrimental to Quantech.
13. DISCLOSURE AND TRANSFER OF DEVELOPMENTS. MMS will disclose promptly
to Quantech each Development, and upon Quantech's request and at Quantech's sole
expense, MMS will assist Quantech, or its designee, in filing legal suit or
applications for such. MMS shall be compensated for all services and time
required of MMS, its employees or agents, hereunder at MMS's prevailing rates
and shall be reimbursed for all expenses incurred. Additionally, at MMS's
option, Quantech may be required to deposit with MMS an amount equal to thirty
percent (30%) of MMS's anticipated charges for time, services and expenses for
such assistance.
14. REPRESENTATIONS AND WARRANTIES OF QUANTECH. Quantech hereby
represents and warrants to MMS as follows:
(a) ORGANIZATION, STANDING, ETC., OF QUANTECH. Quantech
is a corporation duly organized, validly existing,
and in good standing under the laws of the State of
Minnesota and has all requisite corporate power and
authority to own its assets and to carry on its
business as presently conducted. Quantech has all
requisite corporate power and authority to execute
and deliver, and perform its obligations under, this
Agreement and to consummate the transactions
contemplated hereby.
(b) AUTHORIZATION AND EXECUTION. The execution and
delivery of this Agreement and the other agreements
contemplated hereby and the performance by Quantech
of this Agreement and the consummation by Quantech of
the transactions contemplated hereby have been duly
validly authorized by all necessary corporate action
on the part of Quantech, including, without
limitation, full disclosure of potential
Page 13 of 29 pages
<PAGE> 14
conflicts of interest to Quantech's Board of
Directors. A certified copy of such corporate action
of Quantech shall be delivered to MMS concurrently
with the execution of this Agreement. This Agreement
has been duly and validly executed and delivered by
Quantech and constitutes a legal, valid and binding
agreement of Quantech enforceable against Quantech in
accordance with its terms.
(c) ABSENCE OF CONFLICTS. The execution and delivery by
Quantech of this Agreement and the other agreements
contemplated hereby, the performance by Quantech of
its obligations hereunder and thereunder and the
consummation by Quantech of the transactions
contemplated hereby will not (i) conflict with or
result in any violation of any provision of the
Certificate of Incorporation of Quantech or its
By-laws, each as amended to date; (ii) conflict with,
result in any violation of breach of, constitute a
default under, give rise to any right of termination
or acceleration (with or without notice or the lapse
of time or both) pursuant to, or result in being
declared void or voidable, any term or provision of
any note, bond, mortgage, indenture, lease, license,
contract or other instrument to which Quantech is a
party or by which any of its properties or assets are
or may be bound; (iii) violate any term of any
applicable law, rule or regulation applicable to
Quantech or its respective properties or assets; or
(iv) result in the creation of, or impose on Quantech
the obligation to create, any lien or incumbrance
upon any properties or assets of Quantech.
(d) VALID ISSUANCE. The shares of common stock to be
issued pursuant to the Warrant will be, when issued
in accordance with the terms and conditions of the
Warrant, duly authorized, validly issued, fully paid
and non-assessable and not subject to preemptive
rights created by statute, Quantech's Certificate of
Incorporation or By-laws or any agreement to which
Quantech is a party or is bound.
(e) SECURITIES REPORTS. Quantech has filed and delivered
to MMS complete copies of all the forms, reports,
statements and other documents required to be filed
with the Securities and Exchange Commission since
January 1, 1998 by Quantech or any of its
subsidiaries including, without limitation (i) all
Annual Reports on Form 10-KSB, (ii) all Quarterly
Reports on Form 10-QSB, (iii) all proxy statements
related to the meetings of the Shareholders of
Quantech (whether annual or special), (iv) all
Current Reports on Form 8-K, (v) all other reports,
registration statements or private placement
memoranda, and (vi) all amendments and supplements to
all such reports and registration statements or
private placement memoranda (collectively, the
"Securities Reports"). The Securities Reports did not
at the time they were filed contain any untrue
statement of a material fact or omit to state a
material fact required to be stated therein or
necessary in order to make the statements therein,
Page 14 of 29 pages
<PAGE> 15
in the light of the circumstances under which they
were made, not misleading.
(f) ABSENCE OF ADVERSE CHANGES OR EVENTS. Since June 30,
1998, there has been no change in or effect on or
related to Quantech that is, or is reasonably likely
to be, materially adverse to the business, assets,
results of operations or financial condition of
Quantech and its subsidiaries taken as a whole,
except as has been disclosed in the Securities
Reports since June 30, 1998 and prior to the date
hereof.
(g) FINANCIAL STATEMENTS. Each of the consolidated
financial statements of Quantech and its subsidiaries
for the year ended June 30, 1998 and for the most
recent fiscal quarter (including in each case, the
notes thereto) included in the Securities Reports was
prepared in accordance with the rules and regulations
of the Securities and Exchange Commission and GAAP)
(except in the case of unaudited statements as
permitted by Form 10-QSB under the Securities
Exchange Act of 1934, as amended) applied on a
consistent basis throughout the periods (except as
may be indicated in the notes thereto) and each
fairly presented in all material respects the
consolidated financial position, consolidated results
of operation and consolidated cash flow of Quantech
and its subsidiaries at the respective dates thereof
and for the respected periods indicated therein
(subject, in the case of unaudited statements to
normal year-end audit adjustments in conformity with
GAAP).
(h) FUNDAMENTAL CORPORATE CHANGE. As of the date of this
Agreement, Quantech has not entered into any
agreements, arrangements or understandings, and is
not involved in any negotiations or discussions,
related to a merger or consolidation in which
Quantech would not be the surviving entity or any
transaction pursuant to which the shares of the
common stock of Quantech would no longer be publicly
traded.
15. MISCELLANEOUS PROVISIONS AND AGREEMENTS.
(a) AMENDMENTS; WAIVER. This Agreement cannot be modified
or amended except by written instrument executed by
all parties. No waiver of compliance with any
provision or condition hereof and no consent provided
for herein shall be effective unless evidenced by an
instrument in writing duly executed by the
appropriate party. No delay on the part of any party
in exercising any right, power or privilege shall
operate as a waiver thereof.
(b) BINDING EFFECT; NO ASSIGNMENT. This Agreement shall
be binding upon and inure to the benefit of the
parties and their respective successors and permitted
assigns. Neither this Agreement nor the rights and
obligations of any party hereunder shall be
assignable by any party without the prior written
consent of the other party hereunder.
Page 15 of 29 pages
<PAGE> 16
(c) HEADINGS. The headings used herein are for
convenience of reference only and do not form a part
hereof and do not in any way modify, interpret or set
forth the intentions of the parties.
(d) ENTIRE AGREEMENT. This Agreement contains the entire
agreement among the parties hereto with respect to
the transactions contemplated herein and supersede
all previous written or oral negotiations,
commitments and writings.
(e) COUNTERPARTS. This Agreement may be executed by the
parties hereto in separate counterparts, each of
which when so executed and delivered shall be an
original, but all such counterparts shall together
constitute one and the same instrument.
(f) APPLICABLE LAW. This Agreement shall be governed by
and construed and enforced in accordance with the
laws of the State of Illinois.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
MILLENIUM MEDICAL SYSTEMS, LLC
By: /s/ Robert Gaines
---------------------------------------
Dr. Robert W. Gaines, Managing
Member
QUANTECH, LTD.
By: /s/ Gregory G. Freitag
---------------------------------------
Gregory G. Freitag, Chief Operating
Officer
Page 16 of 29 pages
<PAGE> 17
APPENDIX A
----------
1. R&D PROGRAM DEFINITION
Quantech, Ltd. (Quantech) is in the process of completing commercial
development of its proprietary DBx Emergency Department Clinical Diagnostic
System for regulatory clearance and market delivery early in year 2000.
The DBx System consists chiefly of two types of medical devices:
1. A durable medical device in the form of a countertop
electronic instrument, enabling a trained operator to test a
patient's whole blood sample, from a standard collection tube,
for a menu of clinically significant analytes.
2. A disposable medical device in the form of a plastic
cartridge, containing the required chemical substances and
machine-readable labeling, to enable the instrument to process
the sample in the disposable and quantitatively report the
presence of the targeted analyte.
2. SCOPE OF SERVICES
Millenium Medical Systems, LLC (MMS) will, under exclusive contract
from Quantech, perform the required research and development, technical and
clinical medical consulting, and program and budget management services in
sufficient advanced time to achieve the following milestones and provide the
following deliverables, or portion thereof as described below:
MILESTONE A: DECEMBER 1998 - ASSAY DEVELOPMENT INSTRUMENTS
Purchase, assembly and testing of (3) Version 2.5 Assay Development
Instruments per current Quantech technical specifications.
MILESTONE B: JANUARY 1999 - BETA-1 PROTOTYPE SYSTEM
Hardware and software engineering for technical specification of the
Beta-1 Prototype System, Version 2.75, per Quantech performance
requirements. Sourcing, purchase, assembly and testing of (1) prototype
system per Quantech performance requirements. The system consists of
the DBx instrumentation and assay disposables, but does not include the
DBx biosensor and associated analytical chemistry.
MILESTONE C: JUNE 1999 - CLINICAL BETA SITE SYSTEMS
Hardware and software engineering for technical specification of the
Clinical Beta Site Systems, Version 3.0, per Quantech performance
requirements. Sourcing and purchase of parts and components for (10)
prototype systems per Quantech performance requirements. The systems
consist of the DBx instrumentation and assay disposables, but does not
include the DBx biosensor and associated analytical chemistry.
Page 17 of 29 pages
<PAGE> 18
It is anticipated that the following activities/items will require
additional R&D Budget and additional funding by Quantech for
completion:
1. Assembly and testing of the Clinical Beta Site Systems.
2. Technical specifications and documentation for FDA Quality
Systems Requirements (QSR).
3. Biosensor parts, assembly, packaging and labeling
4. Final system software validation, verification and
documentation.
5. Travel/Misc. Expenses
3. SPECIFIC RESPONSIBILITIES OF DR. GAINES
A. GENERAL MANAGEMENT: P&L responsibility of MMS on behalf of its
Members.
B. PROGRAM BUDGET MANAGEMENT: Development and approval of the
initial Program Budget. Monitoring of the approved program
budget on a bi-weekly basis. Coordination with the contract
Program Manager regarding amount and schedule of expenditures.
C. PROGRAM DESIGN REVIEWS: Participation in formal Design Reviews
regarding system operator interface design and medical staff
training requirements.
D. CLINICAL APPLICATIONS CONSULTING: Formal consulting regarding
current clinical test menu requirements and future system
applications.
E. CLINICAL EVALUATOR LIAISON: Identification, recruitment and
coordination of clinical site evaluators for Beta Unit FDA
evaluations.
F. CLINICAL ADVISORY BOARD LIAISON: Identification and
recruitment of advisory panel members. Facilitation of
advisory panel sessions with Quantech Management.
Page 18 of 29 pages
<PAGE> 19
EXHIBIT A - WARRANT AGREEMENT
-----------------------------
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<PAGE> 20
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK UNDERLYING THIS WARRANT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES
LAWS AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, OFFERED, PLEDGED OR OTHERWISE
DISTRIBUTED FOR VALUE UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER
SUCH ACT AND SUCH LAWS COVERING SUCH SECURITIES OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT, OFFER, PLEDGE OR OTHER DISTRIBUTION FOR VALUE IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT AND SUCH LAWS.
WARRANT
-------
To Purchase 1,800,000 Shares of Common Stock
of
QUANTECH LTD.
November 13, 1998
(issuance date)
THIS CERTIFIES THAT, in consideration for services to be rendered
pursuant to the Service Agreement defined below, Millenium Medical Systems, LLC
(the "Vendor"), or its registered assigns, is entitled to subscribe for and
purchase from Quantech Ltd., a Minnesota corporation (the "Company"), at any
time after the issuance date of this Warrant, to and including the five-year
anniversary of the issuance date of this Warrant, 1,800,000 fully paid and
nonassessable shares of the Common Stock of the Company at the price of $1.10
per share (the "Warrant Exercise Price"), subject to the antidilution provisions
of this Warrant. Reference is made to this Warrant in the Research and
Development Services Agreement dated November 13, 1998, by and between the
Company and the Vendor (the "Service Agreement"). 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 the Vendor, any party who
acquires all or a part of this Warrant as a registered transferee of the Vendor,
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, no par value, and
shall also include any capital stock of any class of the Company hereafter
authorized which shall not be limited to a fixed sum or percentage in respect of
the rights of the Holders thereof to participate in dividends or in the
distribution of assets upon the voluntary or involuntary liquidation,
dissolution, or winding up of the Company.
This Warrant is subject to the following provisions, terms and
conditions:
1. EXERCISE; TRANSFERABILITY.
(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
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<PAGE> 21
to the expiration of this Warrant and accompanied or preceded by the surrender
of this Warrant along with a check in 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 L 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;
provided, however, that if the Agent shall be such Holder, an agreement of
indemnity by such Holder shall be sufficient for all purposes of this SECTION 2.
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 Warrant Shares 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 surrendered 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 fifteen (15) 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.
(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 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 120 calendar days
from the date the Company
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<PAGE> 22
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 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. 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.
5. ANTIDILUTION ADJUSTMENTS. The provisions of this Warrant are subject
to adjustment as provided in this SECTION 5.
(a) 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;
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 the maximum number of shares of Common
Stock issuable in respect of any securities convertible into Common Stock
described in 5(a)(i) above), 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 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) in good faith shall determine 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
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<PAGE> 23
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 5.
(b) 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 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) If and whenever the Company shall issue or sell any shares of its
Common Stock for a consideration per share less than the Warrant Exercise Price,
except for Common Stock issued pursuant to outstanding option and warrants, in
effect immediately prior to the time of such issue or sale of the Common Stock,
then, forthwith upon such issue or sale, the Warrant Exercise Price shall be
reduced to such lower price.
(e) 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 or other securities 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.
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<PAGE> 24
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. NOTICE OF TRANSFER OF WARRANT OR RESALE OF THE WARRANT SHARES.
(a) Subject to the sale, assignment, hypothecation, or other transfer
restrictions set forth in SECTION 1 hereof, the Holder, by acceptance hereof,
agrees to give written notice to the Company before transferring this Warrant or
transferring any Warrant Shares of such Holder's intention to do so, describing
briefly the manner of any proposed transfer. Promptly upon receiving such
written notice, the Company shall present copies thereof to the Company's
counsel and to counsel to the original purchaser of this Warrant. If in the
opinion of each such counsel the proposed transfer may be effected without
registration or qualification (under any federal or state securities laws), the
Company, as promptly as practicable, shall notify the Holder of such opinion,
whereupon the Holder shall be entitled to transfer this Warrant or to dispose of
Warrant Shares received upon the previous exercise of this Warrant, all in
accordance with the terms of the notice delivered by the Holder to the Company;
provided that an appropriate legend may be endorsed on this Warrant or the
certificates for such Warrant Shares respecting restrictions upon transfer
thereof necessary or advisable in the opinion of counsel and satisfactory to the
Company to prevent further transfers which would be in violation of Section 5 of
the Securities Act of 1933, as amended (the "ACT") and applicable state
securities laws; and provided further that the prospective transferee or
purchaser shall execute such documents and make such representations,
warranties, and agreements as may be required solely to comply with the
exemptions relied upon by the Company for the transfer or disposition of the
Warrant or Warrant Shares.
(b) If in the opinion of either of the counsel referred to in this
SECTION 7, the proposed transfer or disposition of this Warrant or such Warrant
Shares described in the written notice given pursuant to 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
opinion of both such counsel, are permitted by law.
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 Fair Market Value (as defined in SECTION
10) 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.
9. REGISTRATION RIGHTS.
(a) If at any time prior to the end of the two-year period following
complete exercise of this Warrant or the seven-year anniversary of the issuance
date of this Warrant, whichever occurs earlier, the Company proposes to register
under the 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
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<PAGE> 25
SECTION 3(b) of the Act, any of its securities, it will give written notice to
all Holders of this Warrant, any Warrants issued pursuant to SECTION 2 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.
(b) Further, on a one-time basis only, provided Form S-3, or such
successor form as may be adopted, is available, during the term of this Warrant,
upon request by the Holder or Holders of a majority in interest of this Warrant,
of any Warrants issued pursuant to Section 2 and/or Section 3(a) hereof, and of
any Warrant Shares, the Company will promptly take all necessary steps to
register or qualify, under the 1933 Act and the securities laws of such states
as the holders may reasonably request, such number of Warrant Shares issued and
to be issued upon exercise 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
Paragraph (b) for such period as may be reasonably necessary for such Holder or
Holders of 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 applicable law. Notwithstanding the foregoing,
if in the reasonable opinion of the managing underwriter of any proposed
financing by the Company a registration of the Warrant Shares pursuant to this
Paragraph (b) would adversely affect the proposed financing, then the Company
shall not be obligated to register any portion of the Warrant Shares until such
time as the managing underwriter deems it would no longer adversely impact the
proposed financing.
(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), 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. Fees
and disbursements of special counsel and accountants for the selling Holders,
underwriting discounts and commissions, and transfer taxes for selling Holders
and any other expenses relating to the sale of securities by the selling Holders
not expressly included above shall be borne by the selling Holders.
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<PAGE> 26
(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 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 Statement, and each person, if any, who controls the Company,
within the meaning of Section 15 of the 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.
(e) The registration rights described in this SECTION 9 shall terminate
as to any holder when all such holder's Warrant Shares are eligible for resale
under Rule 144 (or successor rule) of the Act.
10. WARRANT CALL.
(a) At any time after the Fair Market Value of the Company's Common
Stock has traded at $6.00 or more per share, the Company shall have the right
to provide notice to the Holder that the exercise period of the Warrant will
terminate sixty-one (61) days after such notice is sent to the Holder by
certified mail or nationally recognized overnight courier service.
(b) "Fair Market Value" of a share of Common Stock as of a particular
date (the "Determination Date") shall mean:
(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 thirty (30) business
days immediately preceding the Determination Date.
(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 of
the mean of the closing bid prices reported for the thirty (30)
business days immediately preceding the Determination Date, and
(iii) If the Company's Common Stock is not traded on an
exchange or on the Nasdaq National Market, Nasdaq SmallCap Market or
other over-the-counter market, then the price established in good faith
by the Board of Directors.
11. BOARD OBSERVER. Until such time as the Warrant Shares represent
less than 7.5% of the outstanding Common Stock of the Company, such
outstanding shares to include the
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<PAGE> 27
Warrant Shares, the Holder of this Warrant may designate one (1) person
to act as an observer to the Company's Board of Directors.
IN WITNESS WHEREOF, Quantech Ltd. has caused this Warrant to be signed
by its duly authorized officer as of the date first above written.
QUANTECH LTD.
By /s/ Gregory G. Freitag
------------------------------
Gregory G. Freitag, CFO & COO
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<PAGE> 28
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: _______________ -----------------------------------
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 company,
partnership, trust or other entity, PLEASE indicate your position(s) and
title(s) with such entity.
Page 28 of 29 pages
<PAGE> 29
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:
---------------------------------
---------------------------------
Page 29 of 29 pages
