<PAGE> 1
PAGE 1 OF 23
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
to
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 W. 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)
SEPTEMBER 20, 1999
(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 secs. 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 sec. 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 23 pages
<PAGE> 2
PAGE 2 OF 23
CUSIP No. 74762K30
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NOS. OF REPORTING PERSON
ROBERT W. GAINES - SS# ###-##-####
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER
NUMBER OF SHARES
BENEFICIALLY OWNED BY EACH 2,034,635
REPORTING PERSON -------------------------------------------
WITH 8. SHARED VOTING POWER
-0-
--------------------------------------------
9. SOLE DISPOSITIVE POWER
2,034,635
--------------------------------------------
10. SHARED DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,034,635
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
[ ]
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
40.22%
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON
IN
Page 2 of 23 pages
<PAGE> 3
PAGE 3 OF 23
CUSIP No. 74762K30
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER
NUMBER OF SHARES
BENEFICIALLY 1,800,000
OWNED BY EACH --------------------------------------------
REPORTING PERSON 8. SHARED VOTING POWER
WITH
-0-
--------------------------------------------
9. SOLE DISPOSITIVE POWER
1,800,000
--------------------------------------------
10. SHARED DISPOSITIVE POWER
-0-
- -------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
- -------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
[ ]
- -------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
37.28%
- -------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON
OO
Page 3 of 23 pages
<PAGE> 4
PAGE 4 OF 23
AMENDMENT NO. 1
to
SCHEDULE 13D
This Amendment No. 1 to Schedule 13D is filed on behalf of Millenium
Medical Systems, LLC, an Illinois limited liability company ("Millenium") and
Robert Gaines, the sole member of Millenium (collectively, the "Reporting
Persons") for the purpose of reporting transactions by the Reporting Persons in
the common stock, no par value ("Shares") of Quantech Ltd. ("Quantech"). On
September 20, 1999, Millenium exercised warrants to purchase 454,545 Shares at
an exercise price of $1.10 per Share. At the time when Millenium exercised the
warrants, Millenium owned warrants to purchase 1,800,000 Shares (the "Millenium
Warrants"). Following the September 20, 1999 exercise, there are 1,345,455
Shares remaining that Millenium may purchase pursuant to the Millenium Warrants.
The 454,545 Shares and the 1,345,455 Shares that Millenium may purchase pursuant
to the Millenium Warrants represent 37.28% of the Shares outstanding as of
September 20, 1999, calculated in accordance with Rule 13d-3 of the Securities
Exchange Act of 1934, as amended.
Pursuant to Rule 13d-3, Robert Gaines is deemed to beneficially own the
454,545 Shares and the Millenium Warrants. In addition, on September 21, 1999,
Gaines, on his own behalf, acquired warrants to purchase 175,000 Shares at an
exercise price of $1.25 per Share (the "Gaines Warrants"). In addition to the
Gaines Warrants, Robert Gaines individually owns (i) 5,000 Shares, (ii) 11,963
shares of Series A Convertible Preferred Stock, which currently may be converted
to 47,852 Shares and (iii) currently exercisable warrants to purchase 6,783
Shares at an exercise price of $0.75 per Share. By virtue of these holdings,
Gaines individually owns 234,635 Shares, or 7.20% of the current Shares
outstanding, and beneficially owns 2,034,635 Shares, or 40.22% of the Shares
outstanding, calculated in accordance with Rule 13d-3.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The sole source of consideration for the Shares that Millenium
acquired upon exercise of the Millenium Warrants is certain
services performed by Millenium pursuant to a Research and
Development Services Agreement between Millenium and Quantech
dated as of November 13, 1998 (the "Services Agreement"),
which is attached as Exhibit A to the original Schedule 13D,
which was filed on November 20, 1998. The Services Agreement
provides that Millenium will provide certain specified
research and development services to Quantech in exchange for
the Millenium Warrants, at an exercise price of $1.10 per
Share, a price which was greater than the fair market value of
the Shares on the date of issuance of the Millenium Warrants.
Gaines acquired the Gaines Warrants and all of his prior
holdings of Shares and warrants through the use of his
personal funds.
ITEM 4. PURPOSE OF TRANSACTION.
Millenium has acquired the Shares as consideration for certain
services Millenium performed pursuant to the Services
Agreement, for investment purposes only and not with the
purpose of changing or influencing the control of Quantech.
Gaines has purchased the Gaines Warrants solely for investment
purposes.
Page 4 of 23 pages
<PAGE> 5
PAGE 5 OF 23
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) The aggregate number of Shares that Millenium and
Gaines beneficially own, in the aggregate, is
2,034,635 Shares, which represent 40.22% of the
Shares outstanding. Of this amount, Millenium owns
1,800,000 Shares, representing 37.28% of the Shares
outstanding. Gaines individually owns 234,635 Shares,
representing 7.20% of the Shares outstanding, and
beneficially owns 2,034,635 Shares, representing
40.22% of the Shares outstanding.
(b) With respect to the Shares identified in Item 5(a)
above, Gaines, himself 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) During the past 60 days, Gaines exercised, on behalf
of Millenium, 454,545 Shares of the 1,800,000 Shares
that were exercisable pursuant to the Millenium
Warrants and purchased, on his own behalf, the Gaines
Warrants.
(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 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit A - Notice of Exercise, dated September 20,
1999, to purchase, on behalf of Millenium,
454,545 Shares for $1.10 per Share.
Exhibit B - Agreement and Letter of Investment
Intent, dated September 21, 1999, to
purchase, on behalf of Gaines individually,
warrants to purchase 175,000 Shares for
$1.25 per Share.
Page 5 of 23 pages
<PAGE> 6
PAGE 6 OF 23
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: December 1, 1999
/s/ Robert Gaines
----------------------------
Robert Gaines, individually
Page 6 of 23 pages
<PAGE> 7
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: December 1, 1999
MILLENIUM MEDICAL SYSTEMS, LLC
By: /s/ Robert Gaines
-----------------------------
Robert Gaines, Member
Page 7 of 23 pages
<PAGE> 8
Exhibit A
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, 454,545 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:
Millenium Medical Systems, LLC
Date: September 20, 1999 By: /s/ Robert Gaines
----------------------------------
Dr. Robert Gaines, Managing Member
*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> 9
Exhibit B
QUANTECH LTD.
AGREEMENT AND LETTER OF INVESTMENT INTENT
Dr. Robert Gaines (the "Investor") hereby submits the undersigned's check
payable to "Quantech Ltd." in the amount of $10,000 in full payment for the
purchase of a Warrant, attached hereto as Exhibit A, to purchase 175,000 shares
of Quantech Common Stock as of September 21, 1999. By execution of this
Agreement and Letter of Investment Intent, the undersigned acknowledges that the
Company is relying upon the accuracy and completeness of the representations
contained herein in complying with its obligations under applicable securities
laws.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Investor that:
(a) This Agreement has been duly authorized by all necessary
corporate action on behalf of the Company, has been duly executed and
delivered by an authorized officer of the Company, and is a valid and
binding agreement on the part of the Company. All corporate action
necessary to the authorization, issuance, and delivery of the Warrant
has been taken on or prior to the date hereof.
(b) The Company is duly organized, validly existing and in
good standing, and possesses all requisite corporate power and
authority to own and lease its assets and property and carry on its
business in all material respects as such business is now conducted.
(c) The Warrant, when issued and delivered to the Investor,
will be duly authorized, validly issued and outstanding, fully paid,
nonassessable and free and clear of all pledges, liens, encumbrances
and restrictions.
(d) There are no legal actions, suits, arbitrations, or other
legal, administrative, or governmental proceedings or investigations
pending or, to the knowledge of the Company, threatened against the
Company or its property or business.
(e) Except as disclosed in the Confidential Private Placement
Memorandum dated May 24, 1999 and the exhibits attached thereto
(collectively, the "Offering Materials"), the Company owns or has
exclusive right to use, free and clear of all liens, claims, and
restrictions, all patents, patent applications, licenses, trademarks,
service marks, trade names, copyrights, trade secrets, software
licenses, or similar intellectual property rights necessary for use in
the conduct of its business and, to the best of Company's knowledge,
it does not infringe upon intellectual property rights of another and
has not received any notice of conflict with the asserted intellectual
property rights of others.
2. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. In connection with,
and in consideration of, the issuance of the Securities to the Investor, the
Investor hereby represents and
1
<PAGE> 10
warrants to the Company and its officers, directors, employees, agents and
shareholders that the Investor:
(a) Has conducted an independent due diligence investigation of
the Company, its financial status and its risks and has been
given a copy of the Offering Materials and has read such
Offering Materials, including the Risk Factors contained
therein.
(b) Has had such opportunity to ask questions of, and receive
answers from, the Company, or an agent of the Company,
concerning the terms and conditions of the investment and the
business and affairs of the Company, and to obtain any
additional information necessary to verify such information,
as the Investor considers necessary or advisable in order to
form a decision concerning an investment in the Company.
(c) Realizes that an investment in the Warrants represents a
speculative investment involving a high degree of risk.
(d) Can bear the economic risk of an investment in the Warrants
for an indefinite period of time, can afford to sustain a
complete loss of such investment, has no need for liquidity in
connection with the investment, and can afford to hold the
Warrants indefinitely.
(e) Realizes that neither the Warrants or the Shares of Common
Stock issuable upon exercise of the Warrant (collectively, the
"Securities") have been registered for sale under the
Securities Act of 1933, as amended (the "Act") or applicable
state securities laws (the "State Laws") and may be sold only
pursuant to registration under the Act and State Laws or an
opinion of counsel that such registration is not required.
(f) Is experienced and knowledgeable in financial and business
matters, capable of evaluating the merits and risks of
investing in the Securities, and does not need or desire the
assistance of a knowledgeable representative to aid in the
evaluation of such risks (or, in the alternative, has a
knowledgeable representative whom such investor has used in
connection with a decision as to whether to purchase the
Securities).
3. INVESTMENT INTENT. The Investor has been advised that the
Securities have not been registered under the Act or the relevant State Laws but
are being offered, and will be offered, and sold pursuant to exemptions from the
Act and State Laws, and that the Company's reliance upon such exemptions is
predicated in part on the Investor's representations contained herein. The
Investor represents and warrants that the Securities are being purchased for the
Investor's own account and for long term investment and without the intention of
reselling or redistributing the Securities, that the Investor has made no
agreement with others regarding any of the Securities, and that the Investor's
financial condition is such that it is not likely that it will be necessary for
the Investor to dispose of any of the Securities in the foreseeable future. The
Investor represents and
2
<PAGE> 11
warrants that the Investor has a financial net worth or anticipated income such
that a sale of such Securities need not be made in the foreseeable future to
satisfy any financial obligation of which the Investor is, or contemplates,
becoming subject. The Investor is aware that (i) in the view of the Securities
and Exchange Commission, a purchase of Securities with an intent to resell by
reason of any foreseeable specific contingency or anticipated change in market
values, or any change in the liquidation or settlement of any loan obtained for
the acquisition of any of the Securities and for which the Securities were or
may be pledged as security would represent an intent inconsistent with the
investment representations set forth above and (ii) the transferability of the
Securities is restricted and (A) requires the written consent of the Company
and, in the event the Company is effecting a public offering of its shares, the
managing underwriter of such offering, and (B) will be further restricted by a
legend placed on the certificate(s) representing the Securities containing
substantially the following language:
"The securities represented by this certificate have not been
registered under either 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."
The Investor further represents and agrees that if, contrary to the
Investor's foregoing intentions, the Investor should later desire to dispose of
or transfer any of the Securities in any manner, the Investor shall not do so
without first obtaining (i) an opinion of counsel satisfactory to the Company
that such proposed disposition or transfer may be made lawfully without the
registration of such Securities pursuant to the Act and applicable State Laws
and an agreement by the transferee to be bound by the terms and restrictions of
this Agreement, or (ii) registration of such Securities (it being expressly
understood that the Company shall not have any obligation to register such
Securities except as set forth in the Warrant and New Warrant.
4. RESIDENCE. The Investor represents and warrants that the Investor is
a bona fide resident of, or if an entity is organized or incorporated under the
laws of, and is domiciled in, the state identified on the signature page hereof
and that the Shares are being purchased by the Investor in the Investor's name
solely for the Investor's own beneficial interest and not as nominee for, on
behalf of, for the beneficial interest of, or with the intention to transfer to,
any other person, trust, or organization, (except as specifically set forth in
paragraph 10 of this Agreement).
PARAGRAPHS 5 IS REQUIRED IN CONNECTION WITH THE EXEMPTIONS FROM THE ACT
AND STATE LAWS BEING RELIED ON BY THE COMPANY WITH RESPECT TO THE OFFER AND SALE
OF THE SECURITIES. ALL OF SUCH INFORMATION WILL BE KEPT CONFIDENTIAL, AND WILL
BE REVIEWED ONLY BY THE COMPANY, AND ITS COUNSEL. The Investor agrees to furnish
any additional information which the Company, and its counsel, deems necessary
in order to verify the responses set forth below.
3
<PAGE> 12
5. ACCREDITED STATUS. The Investor represents and warrants that the
Investor is and entity all of whose equity owners an individual with a net
worth, or a joint net worth together with his or her spouse, in excess of
$1,000,000. (In calculating net worth, you may include equity in personal
property and real estate, including your principal residence, cash, short term
investments, stock and securities. Equity in personal property and real estate
should be based on the fair market value of such property minus debt secured by
such property).
6. ENTITIES. If the Investor is an entity, the individual signing on
behalf of such entity and the entity jointly and severally agree and certify
that:
(a) the Investor was not organized for the specific purpose of
acquiring the Shares; and
(b) this Agreement has been duly authorized by all necessary
action on the part of the Investor, has been duly executed by
an authorized officer or representative of the Investor, and
is a legal, valid, and binding obligation of the Investor
enforceable in accordance with its terms.
7. MISCELLANEOUS.
(a) Title Is to Be Held by Dr. Robert Gaines.
(b) The Investor agrees that the Investor understands the meaning
and legal consequences of the agreements, representations and
warranties contained herein, agrees that such agreements,
representations and warranties shall survive and remain in
full force and effect after the execution hereof and payment
for the Securities, and further agrees to indemnify and hold
harmless the Company, each current and future officer,
director, employee, agent and shareholder from and against any
and all loss, damage or liability due to, or arising out of, a
breach of any agreement, representation or warranty of the
Investor contained herein.
(c) This Agreement shall be interpreted in accordance with
Minnesota law.
(d) This Agreement and the rights and obligations of the parties
hereunder shall not be assignable, in whole or in part, by any
party without the prior written consent of the other party,
and neither this Agreement nor any provision hereof may be
amended, modified, waived or discharged without the written
consent of the party against whom enforcement of such
amendment, modification, waiver, or discharge is sought.
(e) This Agreement, including the exhibits attached hereto,
constitutes the entire agreement of the parties relative to
the subject matter hereof and supersedes any and all other
agreements and understandings, whether written or oral,
relative to the matters discussed herein.
(f) This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
4
<PAGE> 13
/s/ Dr. Robert W. Gaines
---------------------------
Dr. Robert W. Gaines
Orthapaedic Surgery
One Hospital Drive
Columbia, MO 65212
Missouri is State of Residence or Organization
ACCEPTANCE:
Quantech Ltd. hereby accepts this as of September 21, 1999.
QUANTECH LTD.
By
---------------------------------------------
Gregory G. Freitag, Chief Financial Officer
and Chief Operating Officer
5
<PAGE> 14
EXHIBIT A
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 175,000 SHARES OF COMMON STOCK
OF
QUANTECH LTD.
September 21, 1999
(issuance date)
THIS CERTIFIES THAT, Dr. Robert Gaines ("Gaines"), or his 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, 175,000 fully paid and nonassessable shares of the Common Stock of
the Company at the price of $1.25 per share (the "Warrant Exercise Price"),
subject to the antidilution provisions of this Warrant. Reference is made to
this Warrant in the Agreement and Letter of Investment Intent dated
September 21,1999, by and between the Company and Gaines (the "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 Gaines,
any party who acquires all or a part of this Warrant as a registered transferee
of Gaines, 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 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.
A-1
<PAGE> 15
(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;
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 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
A-2
<PAGE> 16
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 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
A-3
<PAGE> 17
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.
6. NO VOTING RIGHTS. This Warrant shall not entitle the Holder to any
voting rights or other rights as a shareholder of the Company.
A-4
<PAGE> 18
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 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)
A-5
<PAGE> 19
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.
(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
A-6
<PAGE> 20
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 Warrant Shares, the Holder of this
Warrant may designate one (1) person to act as an observer to the
Company's Board of Directors.
A-7
<PAGE> 21
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_____________________________
Gregory G. Freitag, CFO & COO
A-8
<PAGE> 22
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> 23
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:
_______________________________
_______________________________
