As filed with the Securities and Exchange Commission on May 23, 1996
Registration No. 333-3184
Securities and Exchange Commission
Washington, D.C. 20549
AMENDMENT NO. 1
to
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
_____________________
MEDJET INC.
(Name of small business issuer in its charter)
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<S> <C> <C>
Delaware 3841 22-3283541
(State or jurisdiction of (Primary Standard (IRS Employer
incorporation or Industrial Identification No.)
organization) Classification
Code Number)
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1090 King Georges Post Road, Suite 301
Edison, New Jersey 08837
(908) 738-3990
(908) 738-3984 (fax)
(Address and telephone number of principal executive offices and principal
place of business)
EUGENE I. GORDON
President
Medjet Inc.
1090 King Georges Post Road, Suite 301
Edison, New Jersey 08837
(908) 738-3990
(908) 738-3984 (fax)
(Name, address and telephone number of agent for service)
Please send a copy of all communications to:
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JANE E. JABLONS, ESQ. STUART NEUHAUSER, ESQ.
Kelley Drye & Warren LLP Bernstein & Wasserman, LLP
101 Park Avenue 950 Third Avenue
New York, New York 10178 New York, New York 10022
(212) 808-7800 (212) 826-0730
(212) 808-7897 (fax) (212) 371-4730 (fax)
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Approximate date of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the offering. [ ] _____
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] ____
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
If any of the Securities being registered on this Form are to be
offered on a delayed or continual basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [X]
___________________________
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CALCULATION OF REGISTRATION FEE
Title of
Each
Class of
Securities Dollar Amount
Being to be Per
Registered Registered Security(1) Price(1) Fee(1)(5)
<S> <C> <C> <C> <C>
Units, each $8,000,000 $5.00 $8,000,000 $2,758.62
consisting of
one share of
Common Stock
and one
Class A
Warrant
Common Stock, -- -- -- --
par value
$.001 per
share,
included in
the Units
Class A -- -- -- --
Warrants
included in
the Units
Common Stock $16,000,000 $10.00 $16,000,000 $5,517.24
underlying
Class A
Warrants(2)
Underwriter's $160 $.001 $160 $.06
Options(3)
Units $1,320,000 $8.25 $1,320,000 $2,758.62
underlying
Underwriter's
Options(4)
Common Stock -- -- -- --
included in
Units
underlying
Underwriter's
Options
Class A -- -- -- --
Warrants
included in
Units
underlying
Underwriter's
Options
Common $2,640,000 $16.50 $2,640,000 $910.34
Stock
underlying
Warrants
included in
Units
underlying
Underwriter's
Options
Total $27,960,160 $16.50 $27,960,160 $9,641.43
Registration
Fee
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(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457 of the Securities Act.
(2) Pursuant to Rule 416, there are also being registered hereby such
additional indeterminate number of shares of Common Stock as may
become issuable by reason of stock splits, stock dividends,
anti-dilution adjustments and similar adjustments as set forth in
the provisions of the Warrants and the Underwriter's Option
Agreement.
(3) The maximum amount to be delivered to the Underwriter at the
closing of this Offering.
(4) The maximum amount issuable upon exercise of the Underwriter's
Options.
(5) Previously paid.
_______________________________________________
The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that
this registration statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until this registration
statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
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MEDJET INC.
CROSS-REFERENCE SHEET
Form SB-2 Item Number and Caption Heading in Prospectus
<S> <C> <C>
1. Front of Registration
Statement and Outside Front
Cover of Prospectus . . . . . . Outside Front Cover of Prospectus
2. Inside Front and Outside Back Inside Front and Outside Back Cover
Cover Pages of Prospectus . . . Pages of Prospectus
3. Summary Information and Risk
Factors . . . . . . . . . . . . Prospectus Summary; Risk Factors
4. Use of Proceeds . . . . . . . . Use of Proceeds
5. Determination of Offering
Price . . . . . . . . . . . . . Risk Factors; Underwriting
6. Dilution . . . . . . . . . . . Dilution; Risk Factors
7. Selling Security Holders. . . . Not Applicable
8. Plan of Distribution. . . . . . Outside Front Cover Page of
Prospectus; Underwriting
9. Legal Proceedings . . . . . . . Business
10. Directors, Executive Officers,
Promoters and Control Persons . Risk Factors; Management
11. Security Ownership of Certain
Beneficial Owners and
Management. . . . . . . . . . . Principal Stockholders
12. Description of Securities . . . Description of Securities
13. Interests of Named Experts and
Counsel . . . . . . . . . . . . Legal Matters; Experts
14. Disclosure of Commission
Position on Indemnification
for Securities Act Liabilities Description of Securities
15. Organization Within Last Five
Years . . . . . . . . . . . . . Business; Certain Transactions
16. Description of Business . . . . Business
17. Management's Discussion and
Analysis or Plan of Operation . Plan of Operation
18. Description of Property . . . . Prospectus Summary; Risk Factors;
Plan of Operation; Business
19. Certain Relationships and
Related Transactions. . . . . . Certain Transactions
20. Market for Common Equity and Risk Factors; Dilution; Management;
Related Stockholder Matters . . Shares Eligible for Future Sale
21. Executive Compensation. . . . . Management
22. Financial Statements. . . . . . Financial Statements
23. Changes In and Disagreements
with Accountants on Accounting
and Financial Disclosure. . . . Not Applicable
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, DATED MAY 23, 1996
PROSPECTUS
MEDJET INC.
1,200,000 Units - Minimum Offering
1,600,000 Units - Maximum Offering
Each Unit Consisting of One Share of Common Stock
and One Class A Redeemable Common Stock Purchase Warrant
Medjet Inc., a Delaware corporation (the "Company"), hereby offers
through Patterson Travis, Inc. (the "Underwriter") up to 1,600,000 Units
(the "Units") to be sold on a "best-efforts" basis, subject to the sale of
a minimum of 1,200,000 Units. Each Unit consists of one share of common
stock, $.001 par value (the "Shares" or "Common Stock") and one redeemable
Common Stock Purchase Warrant to purchase one share of Common Stock at
$10.00 for 18 months commencing on the date that is three months following
the date funds in escrow are released by the escrow agent (the "Closing
Date"), which period may be extended by mutual agreement between the
Company and the Underwriter (the "Class A Warrants" or the "Warrants").
The Common Stock and the Class A Warrants will become separable on the date
(the "Separation Date") which is the earlier of three months following the
Closing Date or such earlier date as may be agreed to by the Company and
the Underwriter. The Units, Common Stock and Warrants are sometimes
collectively referred to as the "Securities." Pending the sale of a
minimum of 1,200,000 Units, all proceeds will be held in an escrow account
with Continental Stock Transfer & Trust Company (the "Escrow Agent").
(continued on following page)
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE
SUBSTANTIAL DILUTION. SEE "RISK FACTORS" BEGINNING ON PAGE 10 AND
"DILUTION."
_________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)
<S> <C> <C> <C>
Per Unit ............... $5.00 $.45(4) $4.55
Total Minimum(3) ....... $6,000,000 $600,000 $5,400,000
Total Maximum(3) ....... $8,000,000 $717,500 $7,282,500
(1) Does not include additional compensation to the Underwriter,
including (i) options (the "Underwriter's Options") to purchase
such number of Units as shall equal 10% of the number of Units sold
at an exercise price of $8.25 per Unit for a period of four years,
commencing one year from the date of this Prospectus, each unit
consisting of one share of Common Stock and one redeemable Common
Stock Purchase Warrant exercisable at $16.50 per share (which,
other than with respect to the exercise price, is identical to the
Warrants contained in the Units offered hereby) and (ii) a
non-accountable expense allowance of $180,000 (if the minimum
number of Units is sold) and $240,000 (if the maximum number of
Units is sold). The Company has also agreed to indemnify the
Underwriter against certain liabilities, including liabilities
under the Securities Act of 1933, as amended (the "Securities
Act"). See "Underwriting."
(continued on following page)
PATTERSON TRAVIS, INC.
_________________
The date of this Prospectus is ______________, 1996.
<PAGE>
(continued from previous page)
If a minimum of 1,200,000 Units are not sold by ________, 1996 (which
may be extended to _____________, 1996 upon the mutual agreement between
the Company and the Underwriter), all funds received will be refunded to
subscribers in full without interest or deductions (unless the Offering
is extended for such additional 90-day period, in which case interest will
be paid for the extension period). If the minimum number of Units is
sold prior to ______________, 1996 (or ______________, 1996, if so
extended), the Offering will continue until the earlier of ____________,
1996 (or _______________, 1996, as applicable) or until the maximum
number of Units offered hereby is sold. The Units, Common Stock and
Warrants will be separately transferable commencing on the Separation
Date. All of the Units offered hereby are being sold by the Company.
The Company is in the development stage and has not yet sold any products
or generated any revenues. The Company believes that it will require
additional capital before it reaches profitability, of which there can
be no assurance.
The Warrants are redeemable by the Company for $.01 per warrant
on 30 days' written notice, if the market price of the Common Stock equals
or exceeds $13.00 for any 10 consecutive trading days within a period of
30 trading days ending within five years prior to the date of the notice
of redemption. See "Description of Securities -- Warrants." Prior to this
Offering, there has been no public market for the Units, the Common Stock
or the Warrants, and there can be no assurance that a public market will
develop. The initial public offering price of the Units has been
arbitrarily determined by agreement between the Company and the Underwriter
and is not related to the Company's earnings, assets, book value or any
other established criteria of value. See "Risk Factors" and
"Underwriting."
The Company is seeking to have the Units approved for trading on
the Nasdaq SmallCap Market ("Nasdaq") under the sumbol "MJETU," and the
Common Stock and the Warrants approved for trading under the symbols
"MJETC" and "MJETW," respectively.
(continued from previous page)
(2) Before deducting expenses (including legal, accounting and filing
fees and printing and engraving) payable by the Company, estimated
at $337,000, excluding the non-accountable expense allowance to the
Underwriter referred to above.
(3) The Units are being offered on a "best-efforts" basis, subject to
the sale of a minimum of 1,200,000 Units. Pending the sale of a
minimum of 1,200,000 Units, all proceeds of the Offering will be
deposited in a non-interest-bearing escrow account with the Escrow
Agent. Unless a minimum of 1,200,000 Units are sold by ________,
1996, or by ________, 1996 if extended upon agreement between the
Company and the Underwriter (and after the expiration of an
additional 10 business days to permit clearance of the funds in
escrow), the Offering will terminate and all funds collected will
be promptly returned to the subscribers without deduction or
interest (unless the Offering is extended for such additional
90-day period, in which case interest will be paid for the
extension period). If the minimum number of Units are sold prior
to _______________________, 1996 (or ______________________, 1996,
if so extended), the Offering will continue until the earlier of
_____________________, 1996 (or _______________________, 1996, as
applicable) or until the maximum number of Units offered hereby is
sold. During the escrow period, subscribers will not be entitled
to a return of their subscriptions. See "Underwriting."
(4) Reflects average underwriting commission of 8.97%, based on a
commission of 10% ($.50 per Unit) for the first 1,300,000 Units and
4.5% ($.225 per Unit) for each additional Unit.
The Units are being offered when, as and if delivered to and
accepted by the Underwriter and subject to approval of certain legal
matters by its counsel and subject to certain other conditions,
including the right to reject orders in whole or in part. It
is anticipated that delivery of the Units will be made upon transfer of the
proceeds of the Offering payable to the Company and held in escrow by the
Escrow Agent for the Company's account.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell
or the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form SB-2 (together with all
amendments thereto, the "Registration Statement") under the Securities Act
with respect to the Securities offered by this Prospectus. This Prospectus
does not contain all of the information set forth in the Registration
Statement and the exhibits filed therewith, certain portions of which have
been omitted as permitted by the rules and regulations of the Commission.
For further information with respect to the Company and the Securities
offered hereby, reference is hereby made to the Registration Statement and
to the exhibits filed therewith. Statements contained in this Prospectus
regarding the contents of any contract or other document referred to are
not necessarily complete and, in each instance, reference is made to the
copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being deemed to be qualified in
its entirety by such reference. However, all material elements of each
such contract or other document are set forth in this Prospectus. The
Registration Statement, including all exhibits thereto, may be inspected
without charge at the principal office of the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at
the Commission's regional offices located at Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and at
Seven World Trade Center, 13th Floor, New York, New York 10048. Copies of
such material may be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549,
upon the payment of prescribed fees.
SPECIAL STANDARDS FOR UNITS SOLD IN CALIFORNIA
EACH CALIFORNIA INVESTOR, AND EACH TRANSFEREE THEREOF WHO ALSO IS A
CALIFORNIA INVESTOR, MUST HAVE AN ANNUAL GROSS INCOME OF AT LEAST $65,000 AND
A NET WORTH, EXCLUSIVE OF HOME, FURNISHINGS AND AUTOMOBILES, OF AT LEAST
$250,000, OR IN THE ALTERNATIVE, A NET WORTH, EXCLUSIVE OF HOME, FURNISHINGS
AND AUTOMOBILES, OF AT LEAST $500,000. IN ADDITION, AN INVESTOR'S TOTAL
PURCHASE MAY NOT EXCEED 10% OF SUCH INVESTOR'S NET WORTH.
______________________________________
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE UNITS, THE
COMMON STOCK AND THE WARRANTS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE
NASDAQ SMALLCAP MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
<PAGE>
PROSPECTUS SUMMARY
The following is a summary of certain information contained in this
Prospectus and is qualified in its entirety by the detailed information and
financial statements, including the notes thereto, appearing elsewhere in
this Prospectus. Unless otherwise indicated, the information in this
Prospectus (i) assumes that the initial public offering price for the Units
will be $5.00 and (ii) has been adjusted to reflect a 2.226043597-for-1
stock split of the Company's Common Stock effected immediately prior to the
date of this Prospectus. See "Description of Securities." Unless
otherwise indicated, no effect is given in this Prospectus to (i) the
shares of Common Stock reserved for issuance upon the exercise of the
Warrants included in the Units, (ii) the shares of Common Stock reserved
for issuance upon the exercise of options granted to the Underwriter for
nominal consideration and the Warrants included therein or (iii) the shares
of Common Stock reserved for issuance pursuant to the Company's stock
option plan. See "Description of Securities," "Underwriting" and
"Management -- 1994 Stock Option Plan." For definitions of certain terms
and abbreviations used in this Prospectus, see the "Glossary" at page 51.
The Company
Medjet Inc. (the "Company"), founded in December 1993, has developed a
proprietary surgical device known as a keratome, which utilizes a hair-thin
(approximately 30 microns in diameter) circular beam of supersonic velocity
water. The waterjet beam substitutes for a conventional metal or diamond
blade scalpel and in combination with other elements of the device is
capable of shaving thin, shaped layers from the cornea of the eye, a
procedure known as lamellar keratoplasty. The keratome is used to treat
diseases of the cornea as well as to correct vision deficiencies such as
nearsightedness ("myopia"), farsightedness ("hyperopia") and astigmatism by
excising layers, either parallel or shaped, of the cornea in order to
reshape the cornea to achieve proper focusing. In combination with a
template of prescribed dimensions, the shape of the layer to be removed can
be determined in advance.
The Company believes that its keratome can be used to treat corneal
disease in a procedure known as hydro-therapeutic keratoplasty ("HTK"), in
which diseased corneal tissue is removed and the remaining corneal tissue
may be reshaped to provide proper focusing. About 45,000 corneal
procedures, including full transplants and partial removals, are performed
annually in the United States. The Company believes that the same
keratome, through a procedure known as hydro-refractive keratoplasty
("HRK"), has the potential to reduce or eliminate a patient's dependence on
eyeglasses or contact lenses by modifying the shape of the cornea to
correct vision deficiencies. Based upon feasibility studies and limited
animal testing conducted by the Company, the Company believes that its
waterjet scalpel cuts more precisely and smoothly than the sharpest metal,
diamond or laser scalpel and that, as a result, HRK may result, once
approved, in a safer, more accurate and more stable corneal adjustment that
is less painful for patients than other refractive surgical procedures
currently available. The Company anticipates that HRK will also be
competitively priced with, or cost less than, such other procedures. The
Company has not yet tested its HRK Keratome on live human eyes but has
tested its waterjet keratome on approximately 1,000 porcine and rabbit
corneas, 25 human cadaver eyes and 22 live rabbits. The Company began
construction in March 1996 of a keratome designed for use in surgery on
non-human primates and humans in a clinical setting. Due to funding
limitations, the Company has not yet constructed a full prototype.
The Company's keratome, which consists of a waterjet nozzle and a
device known as a globe fixation device (to align and fix the eye in place
relative to the template during surgery), is intended to be used with a
miniature high pressure water storage element and related equipment, which
together produce the water beam; a scanning mechanism to move the water
beam across the cornea; a device to regulate and control the action of the
water beam; a force transducer to monitor the water beam status; and a
template designed to support and shape the eye during surgery. The
keratome will be placed on the patient's eye during the surgical procedure.
The Company believes that the keratome, when used in HTK (the "HTK
Keratome"), would be used similarly to other keratomes but would allow for
the removal of layers of corneal tissue of a predetermined shape and
thickness with a higher degree of accuracy as well as producing a more
cleanly cut surface of the stroma, the main layer of the cornea. The
Company intends to seek approval from the United States Food and Drug
Administration ("FDA") to market the HTK Keratome. The HTK Keratome is
intended to become the first commercially available product using the
Company's waterjet technology and would be both an early source of income
for the Company and the basis for additional applications for FDA-approved
uses of the keratome.
The next and possibly more commercially valuable use of the keratome
is for refractive surgery through HRK. Subsequent to the approval and
marketing of the HTK Keratome, the Company intends to seek FDA approval to
market the keratome for HRK (the "HRK Keratome"). In the United States,
more than 145 million people wear either eyeglasses or contact lenses and,
each year, approximately two million people who have not previously
suffered from refractive disorders are informed by their doctors that they
are in need of refractive correction. Over $13 billion is spent annually
in the United States for corrective eyewear products. Approximately 29
million Americans wear contact lenses, primarily for cosmetic or
convenience reasons. The number of people in the United States newly
electing to wear contact lenses is over one million per year. This large
and growing population of contact lens wearers is the largest potential
market for refractive surgery, including HRK. Studies indicate that
approximately 60% of persons electing refractive surgery are contact lens
wearers. However, there can be no assurance that eyeglass or contact lens
wearers will elect to undergo surgery.
Upon regulatory approval of the HRK Keratome, the Company intends to
market the HRK Keratome to individual ophthalmologists and groups of
ophthalmologists for the treatment of patients in a clinical setting. The
Company expects to derive a significant part of its revenues from leasing
the keratome, to be returned by the ophthalmologist to the Company after
each procedure for sterilization, routine maintenance and recharging
(although there is no assurance that the Company will ever obtain any
revenues from the HRK Keratome). The Company believes that by retaining
control over the sterilization process and performing any necessary
maintenance itself, the efficacy, safety and reliability of the keratome
will be enhanced. In addition, the Company believes that the leasing
arrangement will be attractive to ophthalmologists, because they will be
able to maintain a supply of keratomes on hand, thereby eliminating the
down time that would otherwise be required for the sterilization process.
The Company intends to sell the other components of the keratome, including
the disposable, single-use template designed for each particular use as
instructed by the surgeon.
The Company believes that its proprietary waterjet technology may have
additional surgical applications. However, the Company has not conducted
any studies of such applications to date.
The Company has sought to protect its proprietary interest in the HRK
Keratome by applying for patents in the United States and corresponding
patents abroad. In September 1994, a U.S. patent application was filed in
the name of Dr. Eugene I. Gordon and two employees of the Company, as
inventors, which application was assigned to the Company. The U.S. patent
application, as allowed for issuance, covers a method and device for use in
the HRK Keratome, including use of a template for corneal shaping and
holding, during use of a waterjet keratome device. A corresponding
international application has been filed, pursuant to the Patent
Cooperation Treaty ("PCT"), with designation of all member countries
foreign to the United States, including but not limited to Japan, the
members of the European Patent Office, Canada, Mexico, Australia, Russia,
China and Brazil. The PCT filing has been published and separate patent
applications have been or will be filed pursuant to the PCT filing. In
addition, for countries not currently part of the PCT, patent applications
have also been filed in Israel, Taiwan and South Africa. A prior U.S.
patent application, filed in April 1994, is currently pending and relates
to topographic corneal mapping, which has utility for surgery utilizing the
HRK Keratome.
The Company is in the development stage and has not sold any products
or generated any revenues as of the date of this Prospectus. To date, the
Company's research and development activities have been limited to
constructing and testing experimental versions of the keratome and
conducting a limited number of feasibility studies using porcine, rabbit
and human cadaver eyes and live animals to prove that a hair-thin beam of
water can smoothly incise and shape the anterior surface of the cornea and
that the cornea will heal properly after the surgery. No human clinical
trials have been performed to date.
The FDA has regulatory authority over the manufacture, labeling,
distribution and promotion of the keratome. The first phase of the
Company's FDA approval strategy involves seeking approval for the HTK
Keratome. The Company believes the HTK Keratome will be considered for
approval for marketing by the FDA through a Section 510(k) pre-market
notification ("510(k) notification") procedure, and it is the intent of the
Company to file such notification with the FDA in the second half of 1996
to obtain approval for the HTK Keratome. Although there can be no
assurance that this will prove to be the case, approval of the 510(k)
notification should enable the Company to commence its marketing efforts
sooner than if the Company had to submit to the FDA a pre-market approval
("PMA") application, which typically is a much more complex submission
requiring lengthy human clinical trials. See "Risk Factors -- No Assurance
of FDA and Other Regulatory Approval" and "Business -- U.S. Government
Regulation."
The second phase of the Company's FDA approval strategy relates to the
HRK Keratome. Although the Company believes that the HRK Keratome will be
considered for approval for marketing by the FDA through a 510(k)
notification based upon the similarities of the keratome between the HTK
use and the HRK use, obtaining such approval of the HRK Keratome is
somewhat more complicated than for HTK. There can be no assurance that
either the HTK use or the HRK use will be approved for marketing by the
FDA. The differences between the two uses are found in the components,
other than the waterjet scalpel, which comprise the keratome. For the HRK
Keratome, the Company may be required to show that the procedure is
effective, stable and does not decrease visual acuity to any significant
extent.
The Company believes that, based on three features of the HRK
Keratome, it will be considered for 510(k) notification by the FDA. First,
there are no known or anticipated physical or chemical processes that would
impact on the safety of the HRK procedure. The waterjet keratome cuts by
mechanisms similar to that of conventional scalpels (although at speeds of
more than 100 times greater), except that the Company believes that HRK
would not produce certain side effects incident to other refractive surgery
procedures. Such side effects include the inferior cut produced by the
oscillating blade used in conventional keratomes, and the potential
carcinogenic effects, dehydration from overheating and high amplitude shock
waves to the eye resulting from the high energy, pulsed radiation used in a
procedure known as photo-refractive keratotomy ("PRK"). PRK could
represent the strongest competition to HRK. As a result of the anticipated
safety issues, the FDA approval process for PRK involved numerous clinical
studies on human eyes and took several years to complete. The Company
believes that the FDA approval process for the HRK Keratome should be
shorter and entail fewer clinical studies in light of the higher safety and
lack of anticipated side effects, in comparison to other previously
approved products.
The second feature of the HRK Keratome is the benign nature of the
waterjet cut. While a conventional scalpel tears the lamellae (layers of
the stroma) and PRK completely or partially destroys the surface lamellae,
the waterjet beam has a unique cutting action which separates the various
lamellae prior to cutting the targeted tissue, thereby preserving the
integrity of the remaining lamellae and both localizing and minimizing the
damage to the lamellae generally. The healing process following a waterjet
cut is expected to be less traumatic than that following a conventional
scalpel cut or a PRK cut.
The third feature of the HRK Keratome is that the portion of the
corneal tissue targeted for removal is extracted in a single piece similar
to a contact lens. The Company is developing and experimenting with an in-
vitro model which would allow intact removal of the targeted portion of
corneal tissue and comparison to the expected refraction, in effect
producing a definitive model of the relationship between the template shape
and the refractive result. The efficacy requirement of such
experimentation is to demonstrate validity in humans of the in-vitro model,
a less demanding requirement than demonstrating validity on live human
eyes. The Company believes that the clinical studies would be primarily
directed toward validating this model and that the 510(k) notification
process would be relatively short and consist of tests on a limited number
of live eyes.
The Company may distribute its products internationally. Distribution
of the Company's products in countries other than the United States may be
subject to regulation in those countries. In some countries, the
regulations governing such distribution are less burdensome than in the
United States and the Company may pursue marketing its products in such
countries prior to receiving approval from the FDA. The Company will
endeavor to obtain the necessary government approvals in those foreign
countries where the Company decides to manufacture, market and sell its
products. See "Business -- Foreign Government Regulation."
With the net proceeds of this Offering, the Company intends to
continue the research and development of its keratome and related
manufacturing processes and to commence human clinical trials of the HRK
Keratome. See "Plan of Operation." If the HTK Keratome or the HRK
Keratome is approved for marketing in the United States, the Company will
be required to establish a marketing organization and production
facilities, which will require additional financing. No assurance can be
given that the Company's research and development efforts will be
successfully completed, that the HTK Keratome or HRK Keratome will prove to
be safe and effective in correcting vision, that the HTK Keratome or HRK
Keratome will be approved for marketing by the FDA or any other regulatory
agency, or that the HTK Keratome or HRK Keratome or any other product
developed by the Company will be commercially successful.
The Company was incorporated under the laws under the State of
Delaware in December 1993. Its offices are located at 1090 King Georges
Post Road, Suite 301, Edison, New Jersey 08837; its telephone number is
(908) 738-3990. The Company has elected Subchapter "S" status pursuant to
Section 1362 of the Internal Revenue Code of 1986, as amended (the "Code"),
which status will terminate upon the Closing Date.
</TABLE>
<TABLE>
<CAPTION>
The Offering
<S> <C>
Securities Offered . . . . A minimum of 1,200,000 Units and a
maximum of 1,600,000 Units at $5.00
per Unit, each Unit consisting of
one share of Common Stock and one
Warrant. The shares of Common
Stock and Warrants offered as Units
become detachable and separately
transferable on the date (the
"Separation Date") which is the
earlier of three months following
the date on which the proceeds of
this Offering are first paid to the
Company (the "Closing Date") or
such earlier date as may be agreed
to by the Company and the
Underwriter. See "Description of
Securities."
Warrants . . . . . . . . . The Warrants will be exercisable at
$10.00 per share for 18 months
commencing on the date which is
three months following the Closing
Date, which period may be extended
by mutual agreement between the
Company and the Underwriter. The
Warrants will be redeemable at $.01
per Warrant if the market price of
the Common Stock equals or exceeds
$13.00 for 10 consecutive trading
days within a period of 30
consecutive trading days ending
within 5 days of the notice of
redemption. See "Description of
Securities -- Warrants."
Common Stock Outstanding
prior to the Offering(1) . 2,744,349 shares
Common Stock to be
Outstanding
after the Offering(1). . . 3,944,349 shares if the minimum is
sold and 4,344,349 if the maximum
is sold.
Use of Proceeds. . . . . . Research and development of the HTK
Keratome and the HRK Keratome,
human clinical trials, repayment of
indebtedness, working capital and
general corporate purposes. See
"Use of Proceeds."
Risk Factors . . . . . . . An investment in the Units involves
a high degree of risk and immediate
substantial dilution. See "Risk
Factors" at page 10 and "Dilution."
Proposed Nasdaq Trading
Symbol (2) . . . . . . . . Units: MJETU
Common Stock: MJETC
Class A Warrants: MJETW
</TABLE>
____________________________
(1) Unless otherwise indicated, no effect is given to (i) 1,200,000 or
1,600,000 shares reserved for issuance upon the exercise of the
Warrants included in the minimum and maximum number of Units,
respectively, (ii) 240,000 or 320,000 shares reserved for issuance
upon the exercise of the minimum and maximum number of
Underwriter's Options and the Warrants included therein,
respectively, and (iii) 200,000 shares reserved for issuance
pursuant to stock options available for grant under the Company's
1994 Stock Option Plan, as amended (the "Stock Option Plan"),
55,651 shares reserved for issuance pursuant to stock options which
have been granted under the Stock Option Plan as of the date of
this Prospectus and 110,000 shares reserved for issuance pursuant
to outstanding warrants. Gives effect to a stock split ratio of
2.226043597-for-1 effected in connection with the Offering.
(2) Application will be made for the quotation of the Securities on
Nasdaq. See "Risk Factors -- No Assurance of Public Trading Market
or Continued Nasdaq Inclusion."
Risk Factors
In addition to the other information contained in this Prospectus, the
discussion of risk factors which begins on page 10 hereof should be
considered carefully in evaluating an investment in the Securities. The
risks of investing in the Securities include the following factors: No
Revenues; Uncertain Profitability; Development Stage Company; History of
Losses; Ability to Continue as a Going Concern; Dependence on Proceeds of
this Offering; Need for Future Financing; Dependence Upon Key Officer;
Attraction and Retention of Key Personnel; Uncertainty of Market
Acceptance; Reliance on Single Technology; Dependence on Patents and
Proprietary Rights; Competitive Technologies, Procedures and Companies; No
Manufacturing Experience; Dependence on Third Parties; No Sales or
Marketing Experience; Risk of Product Liability Litigation; Potential
Unavailability of Insurance; Surgical Risks; No Assurance of FDA and Other
Regulatory Approval; International Sales and Operations Risks; Broad
Discretion in Application of Proceeds; Control by Current Stockholders;
Immediate Dilution; Disparity of Consideration Paid by Investors;
Repayments to Management from Proceeds of Offering; Future Sale of
Unregistered Securities; Registration Rights; Effect of Future Exercise of
Options and Warrants; Loss of Warrants through Redemption; Need for Current
Prospectus and State Blue Sky Registration in Connection with Exercise of
Warrants; Underwriter as Market Maker; Best-Efforts Offering; Escrow of
Investors' Funds; No Dividends; Adverse Impact on Common Stock of Issuance
of Preferred Stock; Anti-Takeover Provisions; Arbitrary Determination of
Offering Prices; Possible Volatility of Stock Price; No Assurance of Public
Trading Market or Continued Nasdaq Inclusion; and Risk of Low-Priced
Securities.
Summary Financial Information
The following summary financial information is derived from the
Company's unaudited financial statements at March 31, 1996 included
elsewhere in this Prospectus and should be read in conjunction with, and
are qualified in their entirety by reference to, such financial statements
and the notes thereto, and in conjunction with "Plan of Operation."
<TABLE>
<CAPTION>
March 31, 1996
As Adjusted(1)
Summary Balance Sheet Data: Actual Minimum Maximum
<S> <C> <C> <C>
Working capital (deficiency) . . $(460,445) $4,265,575 $6,088,075
Total assets . . . . . . . . . . 352,707 4,728,727 6,551,227
Total liabilities. . . . . . . . 527,301 177,301 177,301
Stockholder's equity (deficit) . (174,594) 4,668,426 6,373,926
</TABLE>
__________________________
(1) Adjusted to give effect to (i) the sale of the minimum and maximum
number of Units in this Offering at $5.00 per Unit and the net
proceeds to the Company of approximately $4,883,000, if the minimum
number of Units is sold, and $6,705,500 if the maximum number of
Units is sold, therefrom, (ii) the repayment from such net proceeds
of $350,000 of indebtedness outstanding at March 31, 1996 and (iii)
payment of $156,980 of expenses in this Offering which was
reflected as an asset, "Deferred Offering Costs," in the Company's
unaudited financial statements at March 31, 1996. See "Use of
Proceeds."
<PAGE>
RISK FACTORS
The purchase of the Securities offered hereby involves a high degree
of risk. Before subscribing for the Securities, each prospective investor
should consider carefully the following risk factors, as well as the other
information contained in this Prospectus.
No Revenues; Uncertain Profitability; Development Stage Company;
History of Losses. Since its inception, the Company has been principally
engaged in developmental and organizational activities. To date, the
Company has generated no revenues from operations. No revenues are
expected from operations until, and only if, the Company begins commercial
marketing of its keratome or other products, which is not expected to occur
before the third quarter of 1997. In addition, commercial marketing of the
Company's products in the U.S. will be contingent upon obtaining FDA
approval and possibly the approval of other governmental agencies. The
approval procedure will be extremely time consuming, expensive and
uncertain. Accordingly, there can be no assurance that the Company will be
able to generate sufficient revenues to operate on a profitable basis in
the future.
The Company, which was founded in December 1993, is in the development
stage, and its business is subject to all of the risks inherent in the
establishment of a new business enterprise. The likelihood of the success
of the Company must be considered in light of the problems, expenses,
complications and delays frequently encountered in connection with the
formation of a new business, the development of new products, the
competitive and regulatory environment in which the Company may be
operating, and the possibility that its activities will not result in the
development of any commercially viable products. There can be no assurance
that the Company's activities will ultimately result in the development of
commercially saleable or useful products.
The Company has experienced annual operating losses and negative
operating cash flow since inception. At December 31, 1995, the Company had
an accumulated deficit of approximately $964,676. Unless and until the
Company's product development and marketing activities are successful and
its products are sold, of which there can be no assurance, the Company will
not have revenues to apply to operating expenses and the Company will
continue to incur losses. Additionally, as a result of the start-up nature
of its business and the fact that it has not commercially marketed any
products, the Company can be expected to sustain substantial operating
losses in the future. See "Use of Proceeds" and "Plan of Operation."
Ability to Continue as a Going Concern. The report of the Company's
independent auditors dated January 15, 1996, and with respect to Note A(2),
Note B(6) and Note I, which are dated March 22, 1996, on the Company's
financial statements for the period from December 16, 1993 (Date of
Inception) to December 31, 1995, includes an explanatory paragraph
expressing substantial doubt with respect to the Company's ability to
continue as a going concern. The financial statements do not contain any
adjustments that might result from the outcome of this uncertainty. See
"Use of Proceeds" and "Plan of Operation."
Dependence on Proceeds of this Offering; Need for Future Financing.
The Company is dependent on the proceeds of this Offering to fund current
working capital needs, additional research, development, engineering and
testing of its products, establishment of manufacturing and marketing
capabilities and to fund the governmental approval process. It anticipates
that the net proceeds of this Offering are sufficient to meet its cash
requirements for approximately 24 months following this Offering if the
Company's 510(k) notification is approved, or approximately 36 months if
such approval is not received. The Company believes that, in order to
proceed with the research, development and marketing currently planned, it
will require additional capital before it reaches profitability and
positive cash flows, if at all. As a result, the Company will be required
to raise additional funds through public or private financing or grants
that may be available for its research and development. There can be no
assurance that the Company will be able to obtain additional financing on
terms favorable to it or its stockholders, if at all. If adequate funds
are not available to satisfy short-term or long-term capital requirements,
the Company may be required to reduce substantially, or eliminate, certain
areas of its product development activities, limit its operations
significantly, or otherwise modify its business strategy. The failure of
the Company to obtain acceptable financing would have a material adverse
effect on the operations of the Company. Other than this Offering, the
Company has no current plans, understandings or commitments to raise any
additional financing. Additional financing may result in dilution for then
current shareholders. See "Use of Proceeds" and "Plan of Operation."
Dependence Upon Key Officer; Attraction and Retention of Key
Personnel. The business of the Company is highly dependent upon the active
participation of its founder and President, Dr. Eugene I. Gordon. The loss
or unavailability to the Company of Dr. Gordon would have a materially
adverse effect on the Company's business prospects and potential earning
capacity. The recruitment of skilled scientific personnel is critical to
the Company's success. There can be no assurance that it will be able to
continue to attract such personnel in the future. In addition, the
Company's anticipated growth and expansion into areas and activities
requiring additional expertise, clinical testing, governmental approvals,
production and marketing are expected to place increased demands upon the
Company's financial resources and corporate structure. These demands, if
they arise, are expected to require the addition of new management
personnel and the development of additional expertise by existing
management. See "Use of Proceeds" and "Plan of Operation."
Uncertainty of Market Acceptance; Reliance on Single Technology.
Acceptance of the Company's keratome is difficult to predict and will
require substantial marketing efforts and the expenditure of significant
funds. There can be no assurance that the HRK Keratome will be accepted by
the medical community once it is approved. Market acceptance of the
Company's keratome will depend in large part upon the Company's ability to
demonstrate the operational advantages, safety and cost-effectiveness of
the keratome compared to other refractive surgical techniques. Failure of
the keratome to achieve market acceptance will have a material adverse
effect on the Company's financial condition and results of operations. See
"Business -- Markets."
At present, the Company's only product (although still in development
stage) is its keratome, and the Company expects that its keratome will be,
if and when commercially available, its sole product for an indefinite
period of time. The Company's present narrow focus on a particular
technology makes the Company vulnerable to the development of superior
competing products and changes in technology that could eliminate the need
for the Company's products. There can be no assurance that significant
changes in the foreseeable future in the need for the Company's products or
the desirability of those products, will not occur. See "Risk Factors --
Dependence on Patents and Proprietary Rights" and "Business -- Patents."
Dependence on Patents and Proprietary Rights. The Company's success
will depend in part on whether it successfully obtains and maintains patent
protection for its products, preserves its trade secrets and operates
without infringing the proprietary rights of third parties.
The Company has sought to protect its proprietary interest in the
keratome by applying for patents in the United States and corresponding
patents abroad. The Company has been notified by the United States Patent
and Trademark Office (the "PTO") that its patent application covering the
Company's keratome has been allowed for issuance. There can be no
assurance that any other patent will be issued to the Company, that any
patents owned by or issued to the Company, or that may issue to the Company
in the future, will provide a competitive advantage or will afford
protection against competitors with similar technology, or that competitors
of the Company will not circumvent, or challenge the validity of, any
patents issued to the Company. There also can be no assurance that any
patents issued to or licensed by the Company will not be infringed upon or
designed around by others or would prevail in a legal challenge, that
others will not obtain patents that the Company will need to license or
design around, that the keratome or any other potential product of the
Company will not inadvertently infringe upon the patents of others, or that
others will not manufacture the Company's patented products upon expiration
of such patents. There can be no assurance that existing or future patents
of the Company will not be invalidated. Moreover, there can be no
assurance that the Company's non-disclosure agreements and other safeguards
will protect its proprietary information and trade secrets or provide
adequate remedies for the Company in the event of unauthorized use or
disclosure of such information, or that others will not be able to
independently develop such information. As is the case with the Company's
patent rights, the enforcement by the Company of its non-disclosure
agreements can be lengthy and costly, with no guarantee of success.
The Company received a license from the New Jersey Institute of
Technology ("NJIT") for the patent rights under a patent application
assigned to it by Dr. Gordon and two other individuals relating to a
refractive correction procedure based on the use of an isotonic waterjet,
in a manner similar to photorefractive keratectomy ("PRK"). Such patent
application was subsequently denied by the PTO and on February 15, 1996,
the Company gave notice to NJIT of its intent to terminate such license
agreement effective August 15, 1996. The Company believes that its current
work relating to HTK and HRK do not infringe any patents or proprietary
rights (including those of NJIT) of third parties.
If the Company becomes involved with patent infringement litigation,
either to enforce the Company's patents or defend against patent
infringement suits, such litigation would be lengthy and expensive, and if
it occurs, would divert Company resources from planned uses. Further, any
adverse outcome in such litigation could have a material adverse effect on
the Company. If any of the Company's products are found to infringe upon
the patents or proprietary rights of another party, the Company may be
required to obtain licenses under such patents or proprietary rights of
such other party. No assurance can be given that any such licenses would
be made available on terms acceptable to the Company, if at all. In
addition, patent applications filed in foreign countries and patents
granted in such countries are subject to laws, rules and procedures which
differ from those in the United States. Patent protection in such
countries may be different from patent protection provided by United States
laws and may not be as favorable to the Company. There can be no assurance
that the Company's program of patent protection, including the internal
security of its proprietary information, and non-disclosure agreements will
be sufficient to protect the Company's proprietary technology from
competitors. See "Business -- Patents and Proprietary Rights."
Competitive Technologies, Procedures and Companies. The Company is
engaged in a rapidly evolving field. The HRK Keratome will compete with
other presently existing forms of treatment for vision disorders, including
eyeglasses, contact lenses, corneal transplants, other refractive surgery
procedures and other technologies under development. There can be no
assurance that persons whose vision can be corrected with eyeglasses or
contact lenses will elect to undergo the HRK surgical procedure when such
non-surgical vision correction alternatives are available.
There are many companies, both public and private, universities and
research laboratories engaged in activities relating to research on other
vision correction alternatives, including RK, PRK, KIS and various forms of
corneal inserts. Competition from these companies, universities and
laboratories is intense and is expected to increase.
The Company is not aware of any commercial entity, other than itself,
involved in the development of a waterjet scalpel for use in refractive
surgery, although it is aware of ongoing research at many companies and
institutions into a wide variety of procedures for corneal adjustment, as
noted above. Many of these companies and institutions have substantially
greater resources, research and development staffs and facilities, as well
as greater experience in research and development, obtaining regulatory
approval and manufacturing and marketing medical device products than the
Company, and represent significant long-term competition for the Company.
In addition to those mentioned above, other recently developed
technologies or procedures are, or may in the future be, the basis of
competitive products. There can be no assurance that the Company's
competitors will not succeed in developing technologies, procedures or
products that are more effective or economical than those being developed
by the Company or that would render the Company's technology and proposed
products obsolete or noncompetitive. Furthermore, if the Company is
permitted to commence commercial sales of products, it will also be
competing with respect to manufacturing efficiency and marketing
capabilities, areas in which the Company has no experience. See "Risk
Factors -- No Manufacturing Experience; Dependence on Third Parties" and "-
- - No Sales or Marketing Experience" and "Business -- Competition."
No Manufacturing Experience; Dependence on Third Parties. The Company
has no volume manufacturing capacity or experience in manufacturing medical
devices or other products. To be successful, the Company's proposed
products must be manufactured in commercial quantities in compliance with
regulatory requirements at acceptable costs. Production in clinical or
commercial-scale quantities may involve technical challenges for the
Company. Establishing its own manufacturing capabilities would require
significant scale-up expenses and additions to facilities and personnel.
The Company may consider seeking collaborative arrangements with other
companies to manufacture certain of its potential products, including the
HRK Keratome and the disposable templates to be used in connection
therewith. There can be no assurance that the Company will be able to
obtain necessary regulatory approvals on a timely basis or at all. Delays
in receipt of or failure to receive such approvals or loss of previously
received approvals would have a material adverse effect on the Company's
business, financial condition and results of operations. There can be no
assurance that the Company will be able to develop clinical or commercial-
scale manufacturing capabilities at acceptable costs or enter into
agreements with third parties with respect to these activities. If the
Company is dependent upon third parties for the manufacture of its proposed
products, then the Company's profit margins and its ability to develop and
deliver such products on a timely basis may be adversely affected.
Moreover, there can be no assurance that such parties will perform
adequately, and any failures by third parties may delay the submission of
products for regulatory approval, impair the Company's ability to deliver
products on a timely basis, or otherwise impair the Company's competitive
position. See "Business -- Markets."
No Sales or Marketing Experience. The Company intends to market and
sell the keratome in the United States and certain foreign countries, if
and when regulatory approval is obtained, through a direct sales force or a
combination of a direct sales force and distributors. The Company
currently has no marketing organization and has never sold a product.
Establishing sufficient marketing and sales capability will require
significant resources. There can be no assurance that the Company will be
able to recruit and retain skilled sales management, direct salespersons or
distributors, or that the Company's sales effort will be successful. To
the extent that the Company enters into distribution arrangements for the
sale of its products, the Company will be dependent on the efforts of third
parties. There can be no assurance that such efforts will be successful.
See "Business -- The HRK Keratome" and "-- Markets."
Risk of Product Liability Litigation; Potential Unavailability of
Insurance. The testing, manufacture, marketing and sale of medical devices
entail the inherent risk of liability claims or product recalls. As a
result, the Company faces a risk of exposure to product liability claims
and/or product recalls in the event that the use of its keratome or other
future potential products are alleged to have caused injury. In addition
to testing, manufacturing and marketing the keratome, the Company intends
to lease the keratome and provide sterilization and maintenance services
for the keratome, which may enhance the Company's exposure to product
liability claims. There can be no assurance that the Company will avoid
significant liability in spite of the precautions taken to minimize
exposure to avoid product liability claims. Prior to the commencement of
clinical testing, the Company intends to procure product liability
insurance. It is expected that such insurance will be in the amount of $1
million per claim with an annual aggregate limit of $20 million. After any
commercialization of its products, the Company will seek to obtain an
appropriate increase in its coverage. However, there can be no assurance
that adequate insurance coverage will be available at an acceptable cost,
if at all. Consequently, a product liability claim, product recall or
other claims with respect to uninsured liabilities or in excess of insured
liabilities could have a material adverse effect on the business or
financial condition of the Company. See "Business -- Product Liability
Insurance."
Surgical Risks. There can be no assurance that the HRK System will be
successful in providing reliable refractive correction. As with all
surgical procedures, the procedures for which the Company's products are
intended entail certain inherent risks, including error in the location of
the incision due to movement of the eye, defective equipment or human
error, infection or other injury resulting in partial or total loss of
vision. Such injury could expose the Company to product liability or other
claims. There can be no assurance that the Company's product liability
insurance in effect from time to time will be sufficient to cover any such
claim in part or in whole. Any such claim could adversely impact the
commercialization of the Company's products and could have a material
adverse effect on the business or financial condition of the Company.
No Assurance of FDA and Other Regulatory Approval. As a medical
device, the Company's keratome is subject to regulation by the FDA under
the Federal Food, Drug, and Cosmetic Act (the "FD&C Act") and implementing
regulations. Pursuant to the FD&C Act, the FDA regulates, among other
things, the development, manufacture, labeling, distribution, and promotion
of the keratome in the United States.
The Company believes, based on approvals granted to other keratomes,
that the HTK Keratome, and subsequently the HRK Keratome, will be
considered by the FDA for approval through a Section 510(k) procedure, a
much shorter and less extensive process than the alternative PMA procedure.
See "Plan of Operation." However, there can be no assurance that the
Company will obtain approval to market the HTK Keratome, or the HRK
Keratome, pursuant to a 510(k) notification, or that in order to obtain
such approval, the Company will not be required to submit extensive
clinical data or meet additional FDA requirements that may substantially
delay the 510(k) approval process and add to the Company's expenses.
Moreover, such approval, if obtained, may be subject to conditions with
respect to the marketing or manufacturing of the HTK Keratome that may
impede the Company's ability to market and/or manufacture such product.
See "Business -- U.S. Government Regulation."
If Section 510(k) treatment is not available for the HTK Keratome or
the HRK Keratome, the Company will seek approval through a PMA, typically a
more complex submission which usually includes the results of clinical
studies, and preparing an application is a detailed and time-consuming
process. Once a PMA application has been submitted, the FDA's review may
be lengthy and may include requests for additional data. Furthermore,
there can be no assurance that a PMA application will be approved by the
FDA. See "Business -- The Company."
The process of obtaining required regulatory clearances or approvals
can be time-consuming and expensive, and compliance with the FDA's Good
Manufacturing Practices ("GMP") regulations and other regulatory
requirements can be burdensome. Moreover, there can be no assurance that
the required regulatory clearances will be obtained, and such clearances,
if obtained, may include significant limitations on the uses of the product
in question. In addition, changes in existing regulations or guidelines or
the adoption of new regulations or guidelines could make regulatory
compliance by the Company more difficult in the future. The failure to
comply with applicable regulations could result in fines, delays or
suspensions of clearances, seizures or recalls of products, operating
restrictions and criminal prosecutions, and would have a material adverse
effect on the Company. See "Business -- U.S. Government Regulation."
Distribution of the Company's products in countries outside the United
States may be subject to regulation in those countries. Foreign regulatory
requirements vary widely from country to country. In addition, export
sales of medical devices that have not received FDA marketing clearance are
generally subject to FDA export permit requirements. There can be no
assurance that the Company will be able to obtain the approvals necessary
to market the keratome or any other product outside the United States.
International Sales and Operations Risks. The Company initially plans
to sell the keratome and any future products to customers outside of the
United States. However, the Company may begin manufacturing or operating
activities outside of the United States. A number of risks are inherent in
international transactions. International sales and operations may be
limited or disrupted by the imposition of the regulatory approval process,
government controls, export license requirements, political instability,
price controls, trade restrictions, changes in tariffs or difficulties in
staffing and managing international operations. Foreign regulatory
agencies have or may establish product standards different from those in
the United States, and any inability to obtain foreign regulatory approvals
on a timely basis could have an adverse effect on the Company's
international business and its financial condition and results of
operations. Additionally, the Company's business, financial condition and
results of operations may be adversely affected by fluctuations in currency
exchange rates, increases in duty rates and difficulties in obtaining
export licenses. There can be no assurance that the Company will be able
to successfully commercialize the keratome or any future product in any
foreign market. See "Business -- Marketing and Sales."
Broad Discretion in Application of Proceeds. Approximately $833,000,
or 17.1%, of the estimated $4,883,000 of net proceeds from the sale of the
minimum number of Units offered hereby, or approximately $1,005,500, or
15.0%, of the estimated $6,705,500 of net proceeds from the sale of the
maximum number of Units offered hereby, will be applied to working capital
and general corporate purposes. Accordingly, the Company's management will
have broad discretion as to the use of these proceeds. See "Use of
Proceeds."
Control by Current Stockholders. Upon consummation of this Offering,
the Company's current stockholders will own 2,744,349 shares of Common
Stock (without giving effect to 55,651 shares of Common Stock reserved for
issuance pursuant to outstanding options under the Stock Option Plan and
110,000 shares of Common Stock reserved for issuance pursuant to
outstanding warrants), representing approximately 69.5% of the issued and
outstanding shares if the minimum number of Units are sold and
approximately 63.1% of the issued and outstanding shares if the maximum
number of Units are sold. Accordingly, the current stockholders will be
able to elect all the Company's directors and generally direct the affairs
of the Company. The control of the Company by these persons could impede
or prevent a change of control of the Company. As a result, potential
future purchasers might not seek to complete a proposed purchase of the
Company. See "Management," "Principal Stockholders" and "Description of
Securities -- Common Stock."
Immediate Dilution; Disparity of Consideration Paid by Investors. If
the minimum number of Units are sold, upon consummation of this Offering,
purchasers of the Units offered hereby will experience immediate and
substantial dilution in the net tangible book value of their investment in
the Company of $3.816, or approximately 76.3%, per share. If the maximum
number of Units are sold, this dilution will be $3.533 per share, or
approximately 70.7%. Dr. Gordon and certain other current stockholders of
the Company acquired their shares of Common Stock at a nominal price.
Additional dilution to future net tangible book value per share may occur
upon the exercise of the Warrants to be issued to the Underwriter and
options that may be issued pursuant to the Stock Option Plan. See
"Dilution," "Management -- 1994 Stock Option Plan" and "Underwriting."
Repayments to Management from Proceeds of Offering. After the
consummation of this Offering, the Company intends to repay an aggregate
principal amount of $150,000 of indebtedness to Eugene I. Gordon, who is
President, Chairman of the Board and a principal stockholder of the
Company, and $50,000 of indebtedness to each of Steven G. Cooperman, a
Director of the Company, and Sanford J. Hillsberg, who has been elected to
serve as a Director of the Company upon consummation of the Offering.
Thus, purchasers of the Units offered hereby are advised that such members
of the Company's management will personally benefit from the consummation
of this Offering. See "Use of Proceeds," "Management" and " Certain
Transactions."
Future Sale of Unregistered Securities; Registration Rights. After
the Offering, the Company will have outstanding 2,744,349 shares of Common
Stock (without giving effect to (i) 1,600,000 shares of Common Stock
reserved for issuance upon the exercise of the Warrants included in the
maximum number of Units, (ii) 320,000 shares of Common Stock reserved for
issuance upon the exercise of the maximum number of Underwriter's Options
and the Warrants included therein, (iii) 255,651 shares of Common Stock
reserved for issuance pursuant to the Stock Option Plan and (iv) 110,000
shares of Common Stock reserved for issuance pursuant to outstanding
warrants), all of which are "restricted securities" within the meaning of
Rule 144 under the Securities Act. As of the date of this Prospectus,
options to purchase 55,651 shares of Common Stock have been granted
pursuant to the Stock Option Plan and warrants to purchase 110,000 shares
of Common Stock have been granted. The Company has agreed with the
Underwriter that options with respect to the 200,000 shares under the Stock
Option Plan which have not yet been granted as of the date of this
Prospectus shall, upon grant vest no earlier than one year from the date of
grant.
The Company has granted certain piggyback registration rights to
certain of its existing stockholders with respect to 788,026 shares. The
holders of all of such shares have agreed to waive such registration rights
for a period of two years. Shares issuable upon exercise of stock options
granted under the Stock Option Plan may be registered under the Securities
Act commencing 24 months after the Closing Date or such earlier date as
consented to by the Underwriter. All of the shares of Common Stock
issuable in connection with the Underwriter's Options (as defined herein),
including the Common Stock contained in the Units and the Common Stock
issuable upon exercise of the Warrants, may, at the request of the
Underwriter (as defined herein) be registered by the Company for sale to
the public. The sale or the availability for sale of any or all of such
shares of Common Stock or other Securities could adversely affect the
market price of the Securities prevailing from time to time. See
"Management -- 1994 Stock Option Plan," "Shares Eligible for Future Sale"
and "Underwriting."
Effect of Future Exercise of Options and Warrants. Sales of the
Company's Common Stock upon exercise of options may have a depressive
effect on the price of the Units, the Common Stock and the Warrants, and
issuance of additional Common Stock upon the exercise of options, the
Warrants, the Underwriter's Options or otherwise will also dilute the
proportionate ownership of the then current stockholders of the Company.
The Company has agreed with the Underwriter not to issue shares of Common
Stock without the Underwriter's prior written consent during the 24-month
period following the Closing Date, other than pursuant to the Stock Option
Plan and the Warrants. The Company has further agreed with the Underwriter
that during the 12-month period commencing 12 months after the Closing
Date, it will not issue shares of Common Stock at a price less that the
then "Market Price" thereof, other than pursuant to the Stock Option Plan.
"Market Price" is defined as (i) the average closing bid price, for any 10
consecutive trading days within a period of 30 consecutive trading days
ending within five days prior to the date of issuance of the Common Stock,
as reported by the National Association of Securities Dealers, Inc.
Automated Quotation System or (ii) the average of the last reported sale
price, for the 10 consecutive business days ending within five days of the
date of issuance of the Common Stock, on the primary exchange on which the
Common Stock is traded, if the Common Stock is traded on a national
securities exchange. See "Management -- 1994 Stock Option Plan" and
"Description of Securities."
Loss of Warrants through Redemption. The Warrants are subject to
redemption by the Company. Redemption of the Warrants could force the
holders to exercise the Warrants and pay the exercise prices at a time when
it may be disadvantageous for the holders to do so, to sell the Warrants at
the current market price when they might otherwise wish to hold the
Warrants or to accept the redemption price, which may be substantially less
than the market value of the Warrants at the time of redemption. The
holders of the Warrants will automatically forfeit their rights to purchase
the shares of Common Stock issuable upon exercise of such Warrants unless
the Warrants are exercised before they are redeemed. The holders of
Warrants will not possess any rights as stockholders of the Company unless
and until their Warrants are exercised. See "Description of Securities --
Warrants."
Need for Current Prospectus and State Blue Sky Registration in
Connection with Exercise of Warrants. The Company will be able to issue
shares of its Common Stock upon exercise of the Warrants only if there is a
then current prospectus relating to the Common Stock issuable upon the
exercise of the Warrants under an effective registration statement filed
with the Commission, and only if such Common Stock is then qualified for
sale or exempt from qualification under applicable state securities laws of
the jurisdictions in which the various holders of Warrants reside. There
can be no assurance that the Company will be able to meet these
requirements. The failure of the Company to meet these requirements may
deprive the Warrants of their value and cause the resale or disposition of
Common Stock issued upon the exercise of the Warrants to become unlawful.
See "Description of Securities."
Underwriter as Market Maker. A significant amount of the Units that
are to be sold in this Offering may be sold to customers of the
Underwriter. These customers subsequently may engage in transactions for
the sale or purchase of such securities through or with the Underwriter.
Although it has no legal obligation to do so, the Underwriter has indicated
that it intends to act as a market-maker and otherwise effect transactions
in the securities offered hereby. To the extent the Underwriter acts as a
market-maker in the Units, Common Stock or Warrants, it may be a dominating
influence in those markets. The degree of participation in those markets
by the Underwriter may significantly affect the price and liquidity of the
Company's securities. The Underwriter may discontinue these activities at
any time or from time to time. The Company cannot ensure that broker-
dealers other than the Underwriter will make a market in the Company's
securities. In the event that other broker-dealers fail to make a market
in the Company's securities, the possibility exists that the market for and
the liquidity of the Company's securities could be adversely affected,
which in turn could affect stockholders' ability to trade the Company's
securities.
Further, unless granted an exemption by the Commission pursuant to
Rule 10b-6 under the Securities Exchange Act of 1934 (the "Exchange Act"),
the Underwriter may be prohibited from engaging in any market making
activities with regard to the Company's securities for the period of from
two to nine business days prior to the exercise of the Underwriter's
Options or if it is soliciting the exercise of the Warrants. As a result,
the Underwriter may be unable to continue to provide a market for the
Company's securities during certain periods, which may adversely affect the
price and liquidity of the securities. See "Underwriting."
Best-Efforts Offering; Escrow of Investors' Funds. This Offering is
being made on a "best-efforts, all-or-none" basis with respect to 1,200,000
Units and on a "best efforts" basis with respect to an additional 400,000
Units. There can be no assurance that any of the Units will be sold. The
Underwriter is offering the Company's Units for a period of 90 days
expiring __________________________, 1996, which may be extended up to an
additional 90 days to _______________________, 1996 by mutual agreement
between the Company and the Underwriter. Pending the sale of the minimum
of 1,200,000 Units offered hereby, all proceeds will be held in escrow for
as long as 90 days and returned without interest or deduction (unless the
Offering is extended for such additional 90-day period, in which case
interest will be paid for the extension period) in the event 1,200,000
Units are not sold within the Offering period. Investors, therefore, will
not have the use of any subscription funds during the subscription period.
See "Underwriting."
No Dividends. The Company has paid no dividends since its inception
and does not intend to pay dividends in the foreseeable future. Any
earnings which the Company may realize in the foreseeable future will be
retained to finance the growth of the Company. See "Dividend Policy."
Adverse Impact on Common Stock of Issuance of Preferred Stock; Anti-
Takeover Provisions. The Board of Directors of the Company has the
authority to issue up to 1,000,000 shares of preferred stock in one or more
series and to determine the number of shares in each series, as well as the
designations, preferences, rights and qualifications or restrictions of
those shares, without any further vote or action by the stockholders of the
Company. The rights of the holders of Common Stock will be subject to, and
may be adversely affected by, the rights of the holders of any preferred
stock that may be issued in the future, including that the market price of
the Common Stock may be adversely impacted upon the issuance of a series of
preferred stock with voting and/or distribution rights superior to those of
the Common Stock. The issuance of preferred stock could have the effect of
making it more difficult for a third party to acquire a majority of the
outstanding voting stock of the Company. In addition, the Company will,
upon consummation of this Offering, be subject to the anti-takeover
provisions of Section 203 of the Delaware General Corporation Law. In
general, this statute prohibits a publicly-held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is
approved in a prescribed manner. See "Description of Securities --
Preferred Stock" and "Description of Securities -- Anti-Takeover Effects of
Delaware Law."
Arbitrary Determination of Offering Prices. The initial offering
price of the Units and the exercise and redemption price of the Warrants
were arbitrarily determined by negotiations between the Company and the
Underwriter and bear no relationship to the Company's asset value, book
value, net worth, results of operations or any other generally accepted
criteria of value. See "Underwriting."
Possible Volatility of Stock Price. The market prices for securities
of medical device companies have been highly volatile. Announcements
regarding the results of regulatory approval filings, clinical studies or
other testing, technological innovations or new commercial products by a
Company or its competitors, proposed government regulations, developments
concerning proprietary rights or public concern as to safety of technology
have historically had, and are expected to continue to have, a significant
impact on the market prices of the securities of medical device companies.
The trading price of the Common Stock could also be subject to significant
fluctuations in response to variations in the Company's operating results.
See "Business -- Competition."
No Assurance of Public Trading Market or Continued Nasdaq Inclusion.
Prior to this Offering, there has been no established trading market for
the Securities and there is no assurance that a regular trading market for
the Securities will develop after the consummation of this Offering. If a
trading market does develop for the Securities offered hereby, there can be
no assurance that it will be sustained.
Application will be made for the quotation of the Securities on The
Nasdaq SmallCap Market ("Nasdaq"), and it is anticipated that, on the
Closing Date, the Securities will be quoted on Nasdaq. If for any reason
the Securities are not eligible for continued quotation on Nasdaq,
purchasers of the Securities may have difficulty selling the Securities.
In order to qualify for continued quotation on Nasdaq, a company, among
other things, must have at least $2,000,000 in total assets and $1,000,000
in total capital and surplus, a public float of at least 100,000 shares
having a market value of at least $200,000 and a minimum bid price of $1.00
per share (which minimum bid price requirement is waived if the company
maintains at least $2,000,000 in total capital and surplus and $1,000,000
in market value of its public float).
If the Company is unable to satisfy the requirements for continued
quotation on Nasdaq, of which there can be no assurance, the Securities
offered hereby would be quoted in the over-the-counter market in the
National Quotation Bureau ("NQB") "Pink Sheets" or on the National
Association of Securities Dealers ("NASD") OTC Electronic Bulletin Board, a
NASD-sponsored and operated inter-dealer automated quotation system for
equity securities not quoted on Nasdaq. In such event, the prices and
liquidity of the Securities could be adversely affected and the trading of
the Securities could be subject to the so-called "penny stock" rules.
Further, the removal or delisting of the Securities from Nasdaq may cause
the Company to experience difficulty in obtaining subsequent financing and
may result in a loss in coverage of the Securities by brokers and the
financial press. See "Risk Factors -- Risk of Low-Priced Securities."
Risk of Low-Priced Securities. The Commission has adopted regulations
which generally define a "penny stock" to be any equity security that has a
market price (as defined in the regulations) of less than $5.00 per share
and that is not traded on a national stock exchange, Nasdaq or The Nasdaq
National Market System. If at some time in the future the Units offered
hereby are removed or delisted from Nasdaq, they may become subject to
rules of the Commission that impose additional sales practice requirements
on broker-dealers effecting transactions in penny stocks. In most
instances, unless the purchaser is either (i) an institutional accredited
investor, (ii) the issuer, (iii) a director, officer, general partner or
beneficial owner of more than 5% of any class of equity security of the
issuer of the penny stock that is the subject of the transaction or (iv) an
established customer of the broker-dealer, the broker-dealer must make a
special suitability determination for the purchaser of such securities and
have received the purchaser's prior written consent to the transaction.
Additionally, for any transaction involving a penny stock, the rules of the
Commission require, among other things, the delivery, prior to the
transaction, of a disclosure schedule prepared by the Commission relating
to the penny stock market and the risks associated therewith. The broker-
dealer also must disclose the commissions payable to both the broker-dealer
and its registered representative and current quotations for the
securities. Finally, among other requirements, monthly statements must be
sent to the purchaser of the penny stock disclosing recent price
information for the penny stock held in the purchaser's account and
information on the limited market in penny stocks. Consequently, the penny
stock rules may restrict the ability of broker-dealers to sell the
Securities and may affect the ability of purchasers in this Offering to
sell the Securities in the secondary market. See "Risk Factors -- No
Assurance of Public Trading Market or Continued Nasdaq Inclusion."
<PAGE>
USE OF PROCEEDS
The estimated net proceeds from the sale of the minimum number of
Units offered hereby, after deducting the underwriting discount of $600,000
and other expenses of the Offering, estimated to be $517,000, will be
approximately $4,883,000. The estimated net proceeds from the sale of the
maximum number of Units offered hereby, after deducting the underwriting
discount of $717,500 and other expenses of the Offering, estimated to be
$577,000, will be approximately $6,705,500. The Company currently intends
to initially allocate the net proceeds of this Offering as follows:
<TABLE>
<CAPTION>
Approximate Percent
Application of Proceeds Amount of Proceeds of Net Proceeds
Minumum Maximum Minimum Maximum
<S> <C> <C> <C> <C>
Research and development(1) . . $3,050,000 $4,500,000 62.5% 67.1%
Human clinical trials(2). . . . 500,000 500,000 10.2 7.5
Repayment of indebtedness(3). . 450,000 450,000 9.2 6.7
Patent filings(4) . . . . . . . 50,000 150,000 1.0 3.7
Working capital and general
corporate purposes. . . . . . 833,000 1,105,500 17.1 15.0
---------- ---------- ---- ----
Total $4,883,000 $6,705,500 100.0% 100.0%
========== ========== ====== ======
========== ========== ====== ======
</TABLE>
________________________
(1) Includes trials involving rabbit eyes, generation of data at the
Company's Edison, New Jersey laboratory, payments for the use of
laboratory facilities at the University (as defined herein),
salaries of officers and other employees and payments to
consultants engaged in research and development.
(2) Includes payments to hospitals or other institutions at which
operations on humans will be conducted.
(3) Includes four loans to the Company from Mrs. Jan Wernick in an
aggregate principal amount of $200,000, which bear interest at the
rate of 12% per annum and are due and payable on or after December
31, 1996. Mrs. Wernick's husband is affiliated with the
Underwriter as the manager of its New York office. Also includes
five loans to the Company from Eugene I. Gordon in an aggregate
principal amount of $150,000, which bear interest at the rate of 7%
per annum and are due and payable upon demand; and two loans to the
Company, one from each of Steven G. Cooperman and Sanford J.
Hillsberg, each in the principal amount of $50,000, which bear
interest at the rate of 8% per annum and are due and payable on the
earlier of (a) written demand made any time on or after January 31,
1997 or (b) the consummation of this Offering. Drs. Gordon and
Cooperman are directors and stockholders of the Company. Mr.
Hillsberg will begin serving as a director upon the consummation of
the Offering and is a stockholder of the Company. All such loans
were made after September 30, 1995 and were used for various
purposes, including research costs, payroll and other expenses.
See "Certain Transactions" and "Underwriting."
(4) The amount of proceeds to be applied to patent filings in the event
of the sale of the maximum number of Units offered hereby reflects
the costs associated with the filing of additional patent
applications by the Company.
The initial application of the net proceeds of this Offering
represents the Company's estimates based upon current business and economic
conditions. Although the Company does not contemplate material changes in
the proposed allocation of the use of proceeds, to the extent that the
Company finds that an adjustment is required by reason of existing business
conditions, the amounts shown may be adjusted among the uses indicated
above.
The Company has limited cash and working capital and is dependent on
the net proceeds of this Offering for the continuation and expansion of the
Company's operations. The Company believes that the net proceeds of this
Offering will be sufficient for the Company to conduct its proposed
business for at least the 24-month period following this Offering; however,
there can be no assurance that such net proceeds will be sufficient to
finance the Company's operations for such period. The Company believes
that it will require additional capital before it reaches profitability and
positive cash flow, if at all. See "Risk Factors -- Dependence on Proceeds
of this Offering -- Need for Future Financing" and "Plan of Operation."
To the extent that the Company's expenditures are less than projected,
the resulting balances will be used for the purposes set forth above and/or
for other general working capital expenses. The net proceeds of this
Offering that are not expended immediately will be deposited in interest-
bearing accounts, or invested in money market investments, certificates of
deposit or similar short-term, low-risk investments. Any additional
proceeds received upon the exercise of the Underwriter's Options, as well
as from the foregoing short-term investments, will be added to working
capital.
<PAGE>
DILUTION
The difference between the initial public offering price per share of
Common Stock and the pro forma net tangible book value per share after this
Offering constitutes the dilution to investors in this Offering. Net
tangible book value per share is determined by dividing the net tangible
book value of the Company (total tangible assets less total liabilities) by
the number of outstanding shares of Common Stock. At March 31, 1996, the
Company had a net tangible book value of $(372,777), or $(.14) per share.
After the sale of the minimum of 1,200,000 Units (less underwriting
commissions and estimated expenses of this Offering), the pro forma net
tangible book value of the Company at March 31, 1996 would have been
$4,668,426, or $1.184 per share, representing an immediate increase in net
tangible book value of $1.324 per share to the existing shareholders and an
immediate dilution of $3.816 (76.3%) per share to new investors.
After the sale of the maximum of 1,600,000 Units (less underwriting
commissions and estimated expenses of this Offering), the pro forma net
tangible book value of the Company at March 31, 1996 would have been
$6,373,926, or $1.467 per share, representing an immediate increase in net
tangible book value of $1.607 per share to the existing shareholders and an
immediate dilution of $3.533 (70.7%) per share to new investors.
The following table illustrates the foregoing information with respect
to dilution to new investors on a per-share basis if the minimum number of
Units is sold:
<TABLE>
<S> <C> <C>
Public offering price per share(1) . . . . . . . . . . $5.00
Net tangible book value per share before Offering. . . $(.14)
Increase per share attributable to new investors . . . 1.324
-----
As adjusted, net tangible book value per share
after Offering(2). . . . . . . . . . . . . . . . . . . 1.184
-----
Dilution per share to public investors . . . . . . . . $3.816
======
</TABLE>
_________________
(1) Does not attribute any value to the Warrants.
(2) Does not include funds that may be received upon the exercise of
the Warrants.
The following table illustrates the foregoing information if the maximum
number of Units is sold:
<TABLE>
<S> <C> <C>
Public offering price per share(1) . . . . . . . . . . $5.00
Net tangible book value per share before Offering. . . $(.14)
Increase per share attributable to new investors . . . 1.607
-----
As adjusted, net tangible book value per share
after Offering(2) . . . . . . . . . . . . . . . . . . 1.467
-----
Dilution per share to public investors . . . . . . . . $3.533
======
</TABLE>
________________________
(1) Does not attribute any value to the Warrants.
(2) Does not include funds that may be received upon the exercise of
the Warrants.
The following tables set forth, at March 31, 1996, with respect to the
(a) Company's existing stockholders and (b) purchasers of the Units offered
hereby, a comparison of the number of shares of Common Stock acquired from
the Company, the total consideration paid (but attributing no value to the
Warrants) and the average price per share of Common Stock if the minimum or
maximum number of Units are sold.
<TABLE>
<CAPTION>
Average Price
Shares Purchased Total Consideration per Share
Minimum Offering Number Percent Amount Percent
<S> <C> <C> <C> <C> <C>
Existing
Stockholders. . . $2,744,349 70.0% $ 966,824 14% $ .352
New Investors . . . 1,200,000 30.0 6,000,000 86 5.000
--------- ---- --------- --
Total . . . . . . 3,944,349 100% $6,966,824 100%
========= ==== ========== ====
</TABLE>
<TABLE>
<CAPTION>
Average Price
Shares Purchased Total Consideration per Share
Maximum Offering Number Percent Amount Percent
<S> <C> <C> <C> <C> <C>
Existing
Stockholders. . . $2,744,349 63.0% $ 966,824 11% $ .352
New Investors . . . 1,600,000 37.0 8,000,000 89 5.000
--------- ---- --------- --
Total . . . . . . 4,344,349 100% $8,966,824 100%
========= ==== ========== ====
</TABLE>
<PAGE>
CAPITALIZATION
The following tables set forth the capitalization of the Company as of
March 31, 1996, as adjusted to give effect to (i) the sale of the minimum
and maximum number of Units and the application of the estimated net
proceeds therefrom, (ii) the repayment of $350,000 of indebtedness,
including interest, outstanding at March 31, 1996, from the net proceeds
received by the Company and (iii) a 2.226043597-for-1 stock split of the
Company's Common Stock effected immediately prior to the date of this
Prospectus. See "Financial Statements," "Use of Proceeds" and
"Description of Securities."
<TABLE>
<CAPTION>
Assuming 1,200,000 Units are sold:
At March 31, 1996
Actual Adjustment As Adjusted
<S> <C> <C> <C>
Notes payable . . . . . . . . . . . $ 350,000 $ (350,000) $ -0-
======= ========
Stockholders' equity:
Common Stock, $.001 par value,
7,000,000 shares authorized;
2,744,349 shares issued and
outstanding; 3,944,349 shares
as adjusted(1). . . . . . . . . . $ 2,744 $ 1,200 $ 3,944
Additional paid-in capital. . . . 964,080 3,700,402 4,664,482
Deficit accumulated during
the development state(2). . . . . (1,141,418) 1,141,418 0
----------- ----------
Total capitalization. . . . . . . . $ (174,594) $4,668,426
=========== ==========
</TABLE>
________________________
(1) Unless otherwise indicated, no effect is given to (i) 1,200,000
shares of Common Stock reserved for issuance upon the exercise of
the 1,200,000 Warrants included in the Units, (ii) 240,000 reserved
for issuance upon the exercise of the Underwriter's Options and the
Warrants included therein, (iii) 200,000 shares reserved for
issuance pursuant to stock options available for grant under the
Stock Option Plan, 55,651 shares of Common Stock reserved for
issuance upon the exercise of outstanding options under the Stock
Option Plan and 110,000 shares reserved for issuance pursuant to
outstanding warrants and (iv) payment of $156,980 of expenses in
this Offering which was reflected as an asset, "Deferred Offering
Costs," in the Company's unaudited financial statements at March
31, 1996. See "Description of Securities" and "Underwriting."
(2) Upon completion of the Offering, the Company's status will change
from an "S" corporation to a "C" corporation. Accordingly, the
deficits accumulated during the development stage are charged
against additional paid in capital.
<TABLE>
<CAPTION>
Assuming 1,600,000 Units are sold:
At March 31, 1996
Actual Adjustment As Adjusted
<S> <C> <C> <C>
Notes payable . . . . . . . . . . . $ 350,000 $ (350,000) $ -0-
========== ==========
Stockholders' equity:
Common Stock, $.001 par value,
7,000,000 shares authorized;
2,744,349 shares issued and
outstanding; 4,344,349 shares
as adjusted(1). . . . . . . . . . $ 2,744 $ 1,600 $ 4,344
Additional paid-in capital. . . . 964,080 5,405,502 6,369,582
Deficit accumulated during
the development state(2). . . . . (1,141,418) 1,141,418 0
----------- ---------
Total capitalization. . . . . . . . $ (174,594) $6,474,936
============ ==========
</TABLE>
________________________
(1) Unless otherwise indicated, no effect is given to (i) 1,600,000
shares of Common Stock reserved for issuance upon the exercise of
the 1,600,000 Warrants included in the Units, (ii) 320,000 reserved
for issuance upon the exercise of the Underwriter's Options and the
Warrants included therein, (iii) 200,000 shares reserved for
issuance pursuant to stock options available for grant under the
Stock Option Plan, 55,651 shares of Common Stock reserved for
issuance upon the exercise of outstanding options under the Stock
Option Plan and 110,000 shares reserved for issuance pursuant to
outstanding warrants and (iv) payment of $156,980 of expenses in
this Offering which was reflected as an asset, "Deferred Offering
Costs," in the Company's unaudited financial statements at March
31, 1996. See "Description of Securities" and "Underwriting."
(2) Upon completion of the Offering, the Company's status will change
from an "S" corporation to a "C" corporation. Accordingly, the
deficits accumulated during the development stage are charged
against additional paid in capital.
DIVIDEND POLICY
The Company has not paid dividends on its Common Stock since its
inception and does not expect to pay any cash or other dividends in the
foreseeable future. Earnings of the Company, if any, are expected to be
retained for use in expanding the Company's business. The payment of
dividends is within the discretion of the Board of Directors of the Company
and will depend upon the Company's earnings, if any, capital requirements,
financial condition and such other factors as are considered relevant by
the Board of Directors.
PLAN OF OPERATION
Operation for the Next Twelve Months
For the next 12 months, the Company intends to continue testing and
developing the HTK Keratome and the HRK Keratome. If the Company's animal
testing program in the United States continues to succeed, the Company
intends to have discussions with FDA officials and then initiate clinical
testing programs on blind human eyes at one site in the United States and
at four sites outside the United States. The Company anticipates that its
first keratome suitable for use in human clinical trials will be completed
early in the third quarter of 1996. The clinical test sites selected by
the Company are located in Israel, Germany, Mexico and the Dominican
Republic. The Company estimates that the cost of conducting clinical
trials at each site will be approximately $50,000. However, there can be no
assurance that such actions will be taken within such time periods.
510(k) Notification
In an effort to expedite the regulatory approval process for the HRK
Keratome, the Company intends to submit to the FDA a Section 510(k)
notification with respect to the HTK Keratome within approximately six
months of the Closing Date. The Company's application will be based on the
HTK Keratome's similarity to other FDA-approved keratomes. See "Business -
U.S. Government Regulation." A successful 510(k) notification generally
results in FDA approval within six to 12 months. However, there can be no
assurance that the Company's 510(k) notification will be approved on a
timely basis or at all.
Cash Requirements
If the Company's 510(k) notification for the HTK Keratome is approved
by the FDA in the first half of 1997, the Company estimates that the net
proceeds of this Offering will be sufficient to fund its operations for
approximately 24 months after the Closing Date, without taking into account
operating cash flow, if any. In that event, the Company intends to make
expenditures to establish a manufacturing facility as well as to hire
marketing staff. If the Company's 510(k) notification is not approved
within such period, the Company estimates that the net proceeds from this
Offering will be sufficient to fund its operations for approximately 36
months. In that event, the Company plans to conduct human clinical trials
during such period for the purpose of accumulating sufficient clinical data
to obtain FDA approval of the HTK Keratome. The FDA process can be
expensive, uncertain and lengthy; accordingly, the Company may require
additional financing prior to obtaining FDA approval of the HTK Keratome.
Clinical Trials and Product Research and Development
The Company intends to use approximately $0.5 million of the net
proceeds of this Offering to initiate and conduct human clinical trials
involving blind eyes or eyes scheduled to be removed for other reasons, and
approximately $3.1 million, if the minimum number of Units is sold, or
approximately $4.5 million, if the maximum number of Units is sold, for
research and development of the HRK Keratome. These amounts include the
salaries of the employees who will be conducting research and development
of the HRK Keratome, monitoring the progress of clinical testing and
preparing applications and other filings with regulatory authorities.
Laboratory Facilities
The Company currently leases a 4,982 square foot facility in Edison,
New Jersey for its research and development operations, which the Company
believes will be adequate for research and development of the keratome
prior to its commercialization. The Company believes that nearby space
suitable for a manufacturing facility is in adequate supply.
Number of Employees
The Company currently employs nine individuals on a full-time basis
and one individual on a part-time basis, as well as one medical consultant,
one marketing consultant and two strategic planning and business
development consultants. After the consummation of this Offering, the
Company intends to increase its laboratory staff to 10 persons. If and
when the HTK Keratome receives FDA approval, the Company intends to employ
additional individuals in connection with the manufacturing and marketing
of the HRK Keratome.
<PAGE>
BUSINESS
The Company
The Company, founded in December 1993, has developed a proprietary
surgical device known as a keratome, which utilizes a hair-thin
(approximately 30 microns in diameter) circular beam of supersonic velocity
water. The waterjet beam substitutes for a conventional metal or diamond
blade scalpel and in combination with other elements of the device is
capable of shaving thin, shaped layers from the cornea of the eye, a
procedure known as lamellar keratoplasty. The keratome is used to treat
diseases of the cornea as well as to correct vision deficiencies such as
nearsightedness ("myopia"), farsightedness ("hyperopia") and astigmatism by
excising layers, either parallel or shaped, of the cornea in order to
reshape the cornea to achieve proper focusing. In combination with a
template of prescribed dimensions, the shape of the layer to be removed can
be determined in advance.
The Company believes that its keratome can be used to treat corneal
disease in a procedure known as hydro-therapeutic keratoplasty ("HTK"), in
which diseased corneal tissue is removed and the remaining corneal tissue
may be reshaped to provide proper focusing. About 45,000 corneal
procedures, including full transplants and partial removals, are performed
annually in the United States. The Company believes that the same
keratome, through a procedure known as hydro-refractive keratoplasty
("HRK"), has the potential to reduce or eliminate a patient's dependence on
eyeglasses or contact lenses by modifying the shape of the cornea to
correct vision deficiencies. Based upon feasibility studies and limited
animal testing conducted by the Company, the Company believes that its
waterjet scalpel cuts more precisely and smoothly than the sharpest metal,
diamond or laser scalpel and that, as a result, HRK may result, once
approved, in a safer, more accurate and more stable corneal adjustment that
is less painful for patients than other refractive surgical procedures
currently available. The Company anticipates that HRK will also be
competitively priced with, or cost less than, such other procedures. The
Company has not yet tested its HRK Keratome on live human eyes but has
tested its waterjet keratome on approximately 1,000 porcine and rabbit
corneas, 25 human cadaver eyes and 22 live rabbits. The Company began
construction in March 1996 of a keratome designed for use in surgery on
non-human primates and humans in a clinical setting. Due to funding
limitations, the Company has not yet constructed a full prototype.
The Company's keratome, which consists of a waterjet nozzle and a
device known as a globe fixation device (to align and fix the eye in place
relative to the template during surgery), is intended to be used with a
miniature high pressure water storage element and related equipment, which
together produce the water beam; a scanning mechanism to move the water
beam across the cornea; a device to regulate and control the action of the
water beam; a force transducer to monitor the water beam status; and a
template designed to support and shape the eye during surgery. The
keratome will be placed on the patient's eye during the surgical procedure.
The following diagram illustrates the Company's keratome:
[CONTINUED ON NEXT PAGE]
<PAGE>
[DIAGRAM OF MICROSCOPE WITH WATERJET KERATOME]
<PAGE>
The Company believes that the keratome, when used in HTK (the "HTK
Keratome"), would be used similarly to other keratomes but would allow for
the removal of layers of corneal tissue of a predetermined shape and
thickness with a higher degree of accuracy as well as producing a more
cleanly cut surface of the stroma, the main layer of the cornea. The
Company intends to seek approval from the United States Food and Drug
Administration ("FDA") to market the HTK Keratome. The HTK Keratome is
intended to become the first commercially available product using the
Company's waterjet technology and would be both an early source of income
for the Company and the basis for additional applications for FDA-approved
uses of the keratome.
The next and possibly more commercially valuable use of the keratome
is for refractive surgery through HRK. Subsequent to the approval and
marketing of the HTK Keratome, the Company intends to seek FDA approval to
market the keratome for HRK (the "HRK Keratome"). In the United States,
more than 145 million people wear either eyeglasses or contact lenses and,
each year, approximately two million people who have not previously
suffered from refractive disorders are informed by their doctors that they
are in need of refractive correction. Over $13 billion is spent annually
in the United States for corrective eyewear products. Approximately 29
million Americans wear contact lenses, primarily for cosmetic or
convenience reasons. The number of people in the United States newly
electing to wear contact lenses is over one million per year. This large
and growing population of contact lens wearers is the largest potential
market for refractive surgery, including HRK. Studies indicate that
approximately 60% of persons electing refractive surgery are contact lens
wearers. However, there can be no assurance that eyeglass or contact lens
wearers will elect to undergo surgery.
Upon approval of the HRK Keratome, the Company intends to market the
HRK Keratome to individual ophthalmologists and groups of ophthalmologists
for the treatment of patients in a clinical setting. The Company expects
to derive a significant part of its revenues from leasing the keratome, to
be returned by the ophthalmologist to the Company after each procedure for
sterilization, routine maintenance and recharging. The Company believes
that by retaining control over the sterilization process and performing any
necessary maintenance itself, the efficacy, safety and reliability of the
keratome will be enhanced. In addition, the Company believes that the
leasing arrangement will be attractive to ophthalmologists, because they
will be able to maintain a supply of keratomes on hand, thereby eliminating
the down time that would otherwise be required for the sterilization
process. The Company intends to sell the other components of the keratome,
including the disposable, single-use template designed for each particular
use as instructed by the surgeon.
The Company believes that its proprietary waterjet technology may have
additional surgical applications. However, the Company has not conducted
any studies of such applications to date.
The Company has sought to protect its proprietary interest in the HRK
Keratome by applying for patents in the United States and corresponding
patents abroad. In September 1994, a U.S. patent application was filed in
the name of Dr. Eugene I. Gordon and two employees of the Company, as
inventors, which application was assigned to the Company. The U.S. patent
application, as allowed for issuance, covers a method and device for use in
the HRK Keratome, including use of a template for corneal shaping and
holding, during use of a waterjet keratome device. A corresponding
international application has been filed, pursuant to the Patent
Cooperation Treaty ("PCT"), with designation of all member countries
foreign to the United States, including but not limited to Japan, the
members of the European Patent Office, Canada, Mexico, Australia, Russia,
China and Brazil. The PCT filing has been published and separate patent
applications have been or will be filed pursuant to the PCT filing. In
addition, for countries not currently part of the PCT, patent applications
have also been filed in Israel, Taiwan and South Africa. A prior U.S.
patent application, filed in April 1994, is currently pending and relates
to topographic corneal mapping, which has utility for surgery utilizing the
HRK Keratome.
The Company is in the development stage and has not sold any products
or generated any revenues as of the date of this Prospectus. To date, the
Company's research and development activities have been limited to
constructing and testing experimental versions of the keratome and
conducting a limited number of feasibility studies using porcine, rabbit
and human cadaver eyes and live animals to prove that a hair-thin beam of
water can smoothly incise and shape the anterior surface of the cornea and
that the cornea will heal properly after the surgery. No human clinical
trials have been performed to date.
The FDA has regulatory authority over the manufacture, labeling,
distribution and promotion of the keratome. The first phase of the
Company's FDA approval strategy involves seeking approval for the HTK
Keratome. The Company believes the HTK Keratome will be considered for
approval for marketing by the FDA through a Section 510(k) pre-market
notification ("510(k) notification") procedure, and it is the intent of the
Company to file such notification with the FDA in the second half of 1996
to obtain approval for the HTK Keratome. Although there can be no
assurance that this will prove to be the case, approval of the 510(k)
notification should enable the Company to commence its marketing efforts
sooner than if the Company had to submit to the FDA a pre-market approval
("PMA") application. In order to obtain FDA clearance of a 510(k)
notification, a company must prove its device is substantially similar to a
marketed product. PMA applications must demonstrate, among other matters,
that the device is safe and effective. Although human clinical trial data
is sometimes required to be submitted with a 510(k) notification, a PMA
application is typically a more complex submission which usually includes
the results of clinical studies, and preparing an application is a detailed
and time-consuming process. Once a PMA application has been submitted, the
FDA's review may be lengthy and may include requests for additional data.
See "-- U.S. Government Regulation" and "Risk Factors -- No Assurance of
FDA and Other Regulatory Approval."
The second phase of the Company's FDA approval strategy relates to the
HRK Keratome. Although the Company believes that the HRK Keratome will be
considered for approval for marketing by the FDA through a 510(k)
notification based upon the similarities of the keratome between the HTK
use and the HRK use, obtaining such approval of the HRK Keratome is
somewhat more complicated than for HTK. There can be no assurance that
either the HTK use or the HRK use will be approved for marketing by the
FDA. The differences between the two uses are found in the components,
other than the waterjet scalpel, which comprise the keratome. For the HRK
Keratome, the Company may be required to show that the procedure is
effective, stable and does not decrease visual acuity to any significant
extent.
The Company believes that, based on three features of the HRK
Keratome, it will be considered for 510(k) notification by the FDA. First,
there are no known or anticipated physical or chemical processes that would
impact on the safety of the HRK procedure. The waterjet keratome cuts by
mechanisms similar to that of conventional scalpels (although at speeds of
more than 100 times greater), except that the Company believes that HRK
would not produce certain side effects incident to other refractive surgery
procedures. Such side effects include the inferior cut produced by the
oscillating blade used in conventional keratomes, and the potential
carcinogenic effects, dehydration from overheating and high amplitude shock
waves to the eye resulting from the high energy, pulsed radiation used in a
procedure known as photo-refractive keratotomy ("PRK"). PRK could
represent the strongest competition to HRK. As a result of the anticipated
safety issues, the FDA approval process for PRK involved numerous clinical
studies on human eyes and took several years to complete. The Company
believes that the FDA approval process for the HRK Keratome should be
shorter and entail fewer clinical studies in light of the higher safety and
lack of anticipated side effects, in comparison to other previously
approved products.
The second feature of the HRK Keratome is the benign nature of the
waterjet cut. While a conventional scalpel tears the lamellae (layers of
the stroma) and PRK completely or partially destroys the surface lamellae,
the waterjet beam has a unique cutting action which separates the various
lamellae prior to cutting the targeted tissue, thereby preserving the
integrity of the remaining lamellae and both localizing and minimizing the
damage to the lamellae generally. The healing process following a waterjet
cut is expected to be less traumatic than that following a conventional
scalpel cut or a PRK cut.
The third feature of the HRK Keratome is that the portion of the
corneal tissue targeted for removal is extracted in a single piece similar
to a contact lens. The Company is developing and experimenting with an in-
vitro model which would allow intact removal of the targeted portion of
corneal tissue and comparison to the expected refraction, in effect
producing a definitive model of the relationship between the template shape
and the refractive result. The efficacy requirement of such
experimentation is to demonstrate validity in humans of the in-vitro model,
a less demanding requirement than demonstrating validity on live human
eyes. The Company believes that the clinical studies would be primarily
directed toward validating this model and that the 510(k) notification
process would be relatively short and consist of tests on a limited number
of live eyes.
The Company may distribute its products internationally. Distribution
of the Company's products in countries other than the United States may be
subject to regulation in those countries. In some countries, the
regulations governing such distribution are less burdensome than in the
United States and the Company may pursue marketing its products in such
countries prior to receiving approval from the FDA. The Company will
endeavor to obtain the necessary government approvals in those foreign
countries where the Company decides to manufacture, market and sell its
products. See "-- Foreign Government Regulation."
With the net proceeds of this Offering, the Company intends to
continue the research and development of its keratome and related
manufacturing processes and to commence human clinical trials of the HRK
Keratome. See "Plan of Operation." If the HTK Keratome or the HRK
Keratome is approved for marketing in the United States, the Company will
be required to establish a marketing organization and production
facilities, which will require additional financing. No assurance can be
given that the Company's research and development efforts will be
successfully completed, that the HTK Keratome or HRK Keratome will prove to
be safe and effective in correcting vision, that the HTK Keratome or HRK
Keratome will be approved for marketing by the FDA or any other regulatory
agency, or that the HTK Keratome or HRK Keratome or any other product
developed by the Company will be commercially successful.
The Company was incorporated under the laws under the State of
Delaware in December 1993. Its offices are located at 1090 King Georges
Post Road, Suite 301, Edison, New Jersey 08837; its telephone number is
(908) 738-3990. The Company has elected Subchapter "S" status pursuant to
Section 1362 of the Internal Revenue Code of 1986, as amended (the "Code"),
which status will terminate upon the Closing Date.
Refractive Disorders and Correction
The human eye consists of a hollow, flexible globe approximately 25
millimeters in diameter, which is filled with a vitreous fluid. The
optical part of the eye functions much like an automatic focus video
camera, incorporating a variable focus lens system (the fixed focus cornea
and the variable focus internal lens) which adjusts the sharpness of the
image on the retina, a variable aperture system (the iris) which regulates
the amount of light falling on the retina, and a sensory array (the retina)
which converts the focused image into electrical signals which are
transmitted through the optic nerve to the brain for image processing and
storage to achieve the best image. Approximately 70% of the focusing power
of the eye resides in the cornea. The precise focusing power of the cornea
is a function of the curvature of the anterior corneal surface. The
internal lens of the eye also has focusing power and the ability to adjust
its focusing power to achieve the best focus for near or far objects;
however, its ability to so adjust is limited and tends to decrease with
age, ultimately disappearing.
Most common refractive problems result from an inability of the
optical system of the eye to focus images on the retina properly with
normal accommodation. The extent of this inability to focus is known as
refractive error. For instance, in the nearsighted eye, light rays from an
object at a distance of 20 feet focus in front of the retina, because the
curvature of the cornea is too great. People with uncorrected myopia see
nearby objects clearly, but distant objects appear blurry, even with
accommodation. Conversely, in the uncorrected farsighted eye, light rays
from an object at a distance of 20 feet focus behind the retina because the
curvature of the cornea is too low. People with hyperopia see distant
objects clearly, but may need correction so that nearby objects do not
appear blurry. In the astigmatic eye, the curvature of the cornea is not
uniform. This lack of uniform curvature makes it impossible for a person
to focus clearly on an object at any distance without correction.
Refractive power is measured in diopters. The current ophthalmic
measurement technology and the techniques for manufacturing eyeglasses and
contact lenses produce a refractive correction that is within +/- 1/4
diopter of the optimum value for ideal vision. This residual error is
generally viewed as acceptable for all purposes by ophthalmologists.
Vision disorders are currently treated primarily by eyeglasses,
contact lenses or surgery, all of which compensate for the existing
refractive error. Among the surgical techniques available to treat vision
disorders are radial keratotomy ("RK"), PRK and keratomileusis in situ
("KIS"). In RK, PRK and KIS, the object of the surgery is to change the
shape of the anterior corneal surface, thereby eliminating or reducing
refractive error.
RK is a surgical procedure used to correct myopia in which steel or
diamond knives are used to make a series of deep, perpendicular cuts in a
radial configuration around the periphery of the cornea outside the vision
zone. The incisions cause a flattening of the cornea and eliminate or
reduce small to moderate amounts of myopia. Tangential cuts are used to
correct moderate astigmatism, a technique known as astigmatic keratotomy.
PRK uses energy from a type of ultraviolet laser, known as an "excimer
laser," to correct various types of refractive disorders by changing the
curvature of the anterior corneal surface. The excimer laser emits
ultraviolet light in very short, high energy pulses and "photoablates," or
vaporizes, part of the anterior corneal surface to achieve a new curvature.
PRK has been approved for use in the United States by the FDA for the
correction of low to moderate myopia (i.e., under 6 diopters).
KIS, which is also known as refractive lamellar keratoplasty ("RLK")
or automated lamellar keratoplasty ("ALK"), involves using an automated
metal or diamond scalpel in a microkeratome to cut and pull back a corneal
flap (consisting of the epithelium, the Bowman's layer and a portion of the
stroma) and to then shave away a portion of the exposed stromal area of the
cornea in a second cut, thereby changing the corneal curvature after the
flap is replaced. Light ablation system for in-situ keratomileusis
("LASIK"), an investigational procedure under FDA review, with FDA approval
anticipated by the Company to be at least one year away, combines elements
of KIS and PRK. In the LASIK technique, the corneal flap is pulled back,
and photoablation is performed directly on the exposed stromal surface to
change its curvature. In both KIS and LASIK, the hinged flap is reset as
close as possible to its original position, where it adheres to the
underlying stroma.
RK and PRK produce corrections that are usually not optimum, typically
leaving the eye within +/- 1 diopter of optimum, but sometimes worse.
The corrections generally are not stable to within 1 diopter. This leaves
the patient able to function without eyeglasses or contact lenses but not
with the best possible vision and not under all conditions. The accuracy of
KIS is generally poorer, but it is typically used to correct larger myopia
and is more stable. See "-- Competition."
The HRK Keratome
General
The HRK Keratome uses a single, hair-thin, supersonic water beam with
a diameter of approximately 30 microns to incise corneal material and a
disposable, custom-made template to support and shape the cornea during
surgery. Other parts of the HRK Keratome include a miniature high pressure
water storage element and related equipment, which together produce the
water beam; a scanning mechanism to move the water beam across the cornea;
a device to regulate and control the action of the water beam; a force
transducer to monitor the water beam status; and a template designed to
support and shape the eye during surgery. The HRK Keratome will be placed
on the patient's eye during the surgical procedure. Once the HRK Keratome
is placed into position on the eye (directly over the area to be incised),
to which it is attached by a globe fixation device ( a suction device to
align and fix the eye in place relative to the template and waterjet parts
during surgery), the surgical cut takes less than one second.
The total water volume used during the procedure, including the amount
necessary to check the waterjet beam and its performance, is less than a
few drops. Involuntary motions of the eye, including saccadic movement in
which the eye makes minute, constant side-to-side movements to assist in
imaging, have no impact during HRK because the eye is fixed to the HRK
Keratome during the procedure. The template for any procedure will be
constructed according to the specification provided by the ophthalmologist
and will be provided to the surgeon with the HRK Keratome.
HRK, with the HRK Keratome, can be done in three methods. In the
first method, a shaped slice of corneal tissue is removed without damage to
the rest of the cornea. The shape and size of the removed portion
corresponds to the error in refractive power of the cornea to be corrected,
having the effect of the permanent removal of the equivalent of a contact
lens. In the other two methods, a hinged flap is cut into the cornea and
the underlying tissue is reshaped before the flap is replaced. The Company
believes that the first method, without the creation of a flap (which the
Company believes allows more opportunity for infection, requires more
surgical skill, offers the potential for irregular astigmatism and results
in a more complex healing process), is the simplest and safest and
initially intends to seek FDA approval with respect to that method alone.
Status
To date the Company has spent approximately $1,100,000 on research and
development of the HTK Keratome and the HRK Keratome. Research and
development activities have consisted of developing, designing and
constructing two experimental versions of the Company's keratome, and,
since July 1994, conducting feasibility studies on approximately 1,000
porcine and rabbit corneas, on approximately 25 human cadaver eyes and on
22 live rabbits. The purpose of the feasibility studies was to determine
if the water beam could smoothly incise and shape the anterior surface of
the cornea and to determine if the incised eye would heal. The Company has
been highly satisfied with the results of the feasibility studies conducted
to date. Specifically, the Company, using light and electron microscopes
and post incision casts, has compared the cuts made by the waterjet scalpel
with cuts made by scalpels and lasers in other refractive surgical
procedures. The Company believes that the cuts made by the waterjet
scalpel are cleaner than those made by conventional scalpels and lasers.
The Company has found the corneal flaps created by the HRK Keratome to be
extremely close to parallel, as desired, and of the desired thickness
(approximately 140 microns). The Company also found the shape of the cut
stromal bed to be the desired spherical shape and the restored flap to fit
the stromal bed with no discernable disparity in size or alignment. The
Company's studies have also shown that HRK incisions (resections) heal with
much less wound healing response and haze than results from PRK incisions.
Pre-clinical research and development is being conducted by the
Company directly and, on the Company's behalf, by the University of
Medicine and Dentistry of New Jersey in Newark, New Jersey (the
"University"). The Company maintains a laboratory for its experiments at
the University's animal facility and has access to certain University
diagnostic equipment. The Company has agreed to pay the University $40,000
per year from July 1994 to June 1997 in order to use such facilities for
its research and development. Dr. Eugene I. Gordon, the President of the
Company, is an adjunct professor of ophthalmology at the University. The
Company's agreement with the University calls for tests on 40 dutch belted
rabbits and 40 cats with post-operative follow-up and, subsequently,
microscope studies on enucleated eyes. The tests are carried out by
Company personnel under the supervision of Prof. Marco Zarbin, M.D., the
Chairman of the University's Department of Ophthalmology, who serves as the
principal investigator.
The Company began construction in March 1996 of a keratome designed
for use in surgery on non-human primates and humans in a clinical setting.
Due to funding limitations, the Company has not yet constructed the
manufacturing equipment for making specifically designed templates. The
Company believes that the technology for producing specifically designed
templates exists and that the Company will be able to produce such
equipment or license others to do so. However, there can be no assurance
that the Company will be able to do so at all or in a timely and cost-
effective manner.
Patents
The Company has sought to protect its proprietary interest in the HRK
Keratome by applying for patents in the United States and corresponding
patents abroad. In September 1994, a U.S. patent application was filed in
the name of Dr. Eugene I. Gordon and two employees of the Company, as
inventors, which application was assigned to the Company. The U.S. patent
application, as allowed for issuance, covers a method and device for use in
the HRK Keratome, including use of a template for corneal shaping and
holding, during use of a waterjet keratome device. A corresponding
international application has been filed, pursuant to the Patent
Cooperation Treaty ("PCT"), with designation of all member countries
foreign to the United States, including but not limited to Japan, the
members of the European Patent Office, Canada, Mexico, Australia, Russia,
China and Brazil. The PCT filing has been published and separate patent
applications have been or will be filed pursuant to the PCT filing. In
addition, for countries not currently part of the PCT, patent applications
have also been filed in Israel, Taiwan and South Africa. A prior U.S.
patent application, filed in April 1994, is currently pending and relates
to topographic corneal mapping, which has utility for surgery utilizing the
HRK Keratome.
U.S. Government Regulation
The components of the Company's HTK Keratome and HRK Keratome are
medical devices. Accordingly, the Company is subject to the relevant
provisions and regulations of the FD&C Act, under which the FDA regulates
the manufacturing, labeling, distribution, and promotion of medical devices
in the United States. The FD&C Act requires manufacturers of medical
devices to, among other things, comply with labeling requirements and
manufacture devices in accordance with prescribed GMPs, which require
companies to manufacture and test their products, exercise quality control
and maintain related documentation in a prescribed manner. The FD&C Act
and regulations thereunder also require all medical device manufacturers
and distributors to register with the FDA annually, to provide the FDA with
a list of those medical devices which they distribute commercially and to
report death or serious injuries alleged to have been associated with the
use of their products, as well as product malfunctions that would likely
cause or contribute to death or serious injury if the malfunction were to
recur. Certain medical devices not cleared for marketing in the United
States are required to have FDA approval before they are exported. The FDA
frequently inspects medical device manufacturing and distribution
facilities and has broad authority to order recalls of medical devices,
seize noncomplying medical devices, enjoin and/or impose civil penalties on
manufacturers and distributors marketing non-complying medical devices and
criminally prosecute violators.
Pursuant to the FD&C Act, the FDA classifies medical devices intended
for human use into three classes: Class I, Class II and Class III. In
general, Class I devices are those products for which the FDA determines
that safety and effectiveness can be reasonably assured through the FD&C
Act general controls relating to such matters as adulteration, misbranding,
registration, notification, record keeping and GMP. Class II devices are
those products for which the FDA determines that the general controls in
the FD&C Act alone are insufficient to provide a reasonable assurance of
safety and effectiveness. The FDA has promulgated special controls
applicable to Class II devices, including, but not limited to, performance
standards, postmarket surveillance, patient registries and specific testing
guidelines. Class III devices are devices for which the FDA has
insufficient information to conclude that either general FD&C Act controls
or special controls would be sufficient to assure safety and effectiveness,
and which are life-supporting, life-sustaining, of substantial importance
in preventing impairment of human health (e.g., a diagnostic device to
detect a life-threatening illness) or present a potential unreasonable risk
of illness or injury. Class III devices must undergo a rigorous pre-market
approval process, as described below.
The FD&C Act provides that, unless exempted by regulation, medical
devices may not be commercially distributed in the United States unless
they have been approved or cleared by the FDA. There are two review
procedures by which medical devices can receive such approval or clearance.
Some products may qualify for clearance under a 510(k) notification.
Pursuant to that procedure, the manufacturer submits to the FDA a pre-
market notification that it intends to begin marketing its product. The
notification must demonstrate that the product is substantially equivalent
to another legally marketed product (i.e., that it has the same intended
use and that it is as safe and effective as, and does not raise different
questions of safety and effectiveness than does, a legally marketed
device). In some cases, the 510(k) notification must include data from
human clinical studies. In March 1995, the FDA issued a draft guidance
document in connection with 510(k) notifications for medical devices,
"Addendum: How to Submit a Premarket Notification [(510(k)]," which states
that clinical data is not needed for most devices cleared by the 510(k)
process. However, the Company anticipates that the FDA will require
submission of human clinical trial data in connection with the Company's
510(k) notification.
A successful 510(k) notification will result in the issuance of an
approval letter from the FDA in which the FDA acknowledges the substantial
equivalence of the reviewed device to a legally marketed device and clears
the reviewed device for marketing to the public. Under FDA regulations,
the FDA has a 90-day period to respond to a 510(k) notification, although
such response has been known to take longer.
The Company intends to file a 510(k) notification with the FDA within
approximately six months of the Closing Date, in which the Company will
seek to demonstrate that the HTK Keratome is substantially equivalent to
the currently available keratome having a metal or diamond scalpel used for
lamellar keratoplasty. Under current FDA regulations, a keratome is
defined as a device for shaving thin layers from the cornea and is
classified as a Class I device. The Company will seek to demonstrate that,
for the purpose of making lamellar, or substantially lamellar, corneal
incisions, the waterjet scalpel and template included in the HTK Keratome
are substantially similar to a keratome with a metal or diamond scalpel.
There can be no assurance that the Company will obtain 510(k)
premarket notification clearance to market the HTK Keratome or,
subsequently, the HRK Keratome in a timely manner, or at all, that the
Company's device will be classified as a Class I device, or that, in order
to obtain 510(k) clearance, the Company will not be required to submit
additional data or meet additional FDA requirements that may substantially
delay the 510(k) process and add to the Company's expenses. Moreover, such
510(k) notification approval, if obtained, may impose conditions on the
Company with respect to the marketing or manufacturing of which may impede
the Company's ability to market and/or manufacture the HTK Keratome or the
HRK Keratome. There can be no assurance that the Company will be able to
obtain necessary regulatory approvals or clearances on a timely basis or at
all. Delays in receipt of or failure to receive such approvals, the loss
of previously received approvals, or failure to comply with existing or
future regulatory requirements will have a material adverse effect on the
Company.
In addition to laws and regulations enforced by the FDA, the Company's
products may also be subject to labelling laws and regulations enforced by
the Federal Trade Commission. The Company is also subject to government
regulations applicable to all businesses, including, but not limited to,
regulations related to occupational health and safety, workers' benefits
and environmental protection.
Foreign Government Regulation
Sales of medical devices outside the United States are subject to
foreign regulatory requirements that vary widely from country to country.
The time required to obtain approvals required by foreign countries may be
longer or shorter than that required for FDA approval, and requirements for
licensing may differ from FDA requirements. Export sales of investigational
devices that have not received FDA marketing clearance generally are
subject to FDA export permit requirements. Material failure to comply with
any applicable regulatory requirements could have a material adverse effect
on the Company.
Markets
In the United States, more than 145 million people wear either
eyeglasses or contact lenses, and each year, approximately two million
people who have not previously suffered from refractive disorders are
informed by their doctors that they are in need of refractive correction.
Over $13 billion is spent annually in the United States for corrective
eyewear products. Studies indicate that approximately 29 million Americans
wear contact lenses, primarily for cosmetic or convenience reasons. The
number of people in the United States newly electing to wear contact lenses
is over one million per year. This large and growing population of contact
lens wearers is the largest potential market for refractive surgery,
including HRK. Studies indicate that approximately 60% of persons electing
refractive surgery are contact lens wearers. However, there can be no
assurance that eyeglass or contact lens wearers will elect to undergo
surgery.
The only refractive surgery techniques generally available in the
United States today are RK, PRK and automated lamellar keratoplasty, or
ALK. The Company believes that approximately 7 million RK procedures (each
"procedure" being performed on a single eye) have been performed worldwide,
and approximately 1.5 million in the United States, in the last 15 years.
The Company believes that approximately 5,000 PRK procedures have been
performed in the United States, with a total of several hundred thousand
worldwide. The American Society of Cataract and Refractive Surgeons has
estimated that the number of PRK procedures performed in the United States
will grow to over 1 million annually within the next few years. The
Company estimates that 5,000 ALK procedures are performed in the United
States each year by approximately 100 surgeons and that approximately 350
ALK microkeratomes have been sold in total.
The Company anticipates that the initial market for the HRK Keratome
will be ophthalmologists, many of whom already are familiar with PRK, RK
and ALK. The American Medical Association estimates that there are
currently 15,000 ophthalmologists in the United States, of which 12,000 are
in private practice and 3,000 are associated with hospitals, teaching
institutions and the military.
The degree to which the Company's HRK Keratome can penetrate the
potential market of ophthalmologists will depend on a variety of factors,
including, but not limited to, acceptance by the medical community and the
public of the HRK Keratome and alternative technologies. None of these
factors is under the control of the Company. There is presently no data
available to the Company to determine what percentage HRK will have of the
market for refractive surgery.
Competition
If approved by the FDA and other regulatory authorities, HRK using the
Company's HRK Keratome will compete with other treatments for refractive
problems, including eyeglasses, contact lenses, other refractive surgery
procedures (such as RK, PRK and ALK), and other technologies under
development, such as LASIK, refractive intraocular lenses (lenses which are
inserted into the eye behind the cornea), intrastromal lenses (lenses which
are inserted into the stroma), corneal rings (transparent circles of
acrylic which are inserted within the cornea outside the vision zone in
order to correct the curvature of the corneal surface) and injection of
hydrogel materials into layers of corneal tissue to change the curvature of
the cornea. The healthcare field is characterized by rapid technological
change. At any time, competitors may develop and bring to market new
products or surgical techniques with vision correction capabilities
superior to those of the HRK Keratome or which would otherwise render the
HRK Keratome obsolete.
Generally, refractive surgical techniques are considered to be
"elective" surgery and are typically not reimbursed under healthcare
insurance policies in the United States. However, in certain countries
outside the United States, such as China, the costs of refractive surgery
are paid by the government, because it is believed that such surgery is,
over time, less costly than glasses or contact lenses. It can be expected
that many individuals will choose to forego refractive surgery, if not
reimbursed, and instead obtain eyeglasses or contact lenses, which are
covered under some healthcare insurance plans and are considerably less
expensive than refractive surgery in the short term.
Other companies, most of which are larger and better financed than the
Company, are engaged in refractive surgery research. Two companies, Summit
Technology, Inc. ("Summit") and VISX Inc. ("VISX"), have completed Phase
III clinical studies in the United States to evaluate PRK for the treatment
of myopia. Both companies have received a PMA. In addition to Summit and
VISX, there are a number of other large entities that currently market and
sell laser systems overseas for use in refractive surgery, including
Aesculap-Meditec GmbH, Chiron-Technolas and Schwind, each of Germany, and
Nidek of Japan. Many of these companies have substantially greater
financial, technical and human resources than the Company and may be better
equipped to develop, manufacture and market their technologies. In
addition, many of these companies have extensive experience in preclinical
testing and human clinical studies. Certain of these companies may develop
and introduce products or processes competitive with or superior to those
of the Company. Furthermore, if the Company is permitted to commence
commercial sales of products, it will also be competing with respect to
manufacturing efficiency and marketing capabilities, areas in which the
Company has no experience.
The Company's competition will be determined in part by those
refractive surgery technologies that are ultimately approved for sale by
regulatory authorities. The relative speed at which the Company is able to
develop the HRK Keratome, complete the necessary governmental and
regulatory approval processes, and manufacture and market commercial
quantities thereof will be important competitive factors.
Although the HRK Keratome is still in the early stages of development
and has neither been tested on live human eyes nor received the regulatory
approval necessary for sale, the Company believes that it has the potential
to effectively compete with other refractive surgical techniques because of
its relative simplicity, safety, efficacy and reduced risk of significant
pain. Each of these factors is discussed below.
Simplicity. The Company's keratome is designed to allow ophthalmic
surgeons to perform HTK and HRK with relative ease. In the HRK Keratome,
the waterjet is controlled by a switch, the eye is aligned and fixed in
place during the procedure by means of the globe fixation device and the
template is used to determine exactly how much of the corneal tissue is
excised. Accordingly, whereas procedures such as ALK and LASIK are
difficult and require that the ophthalmic surgeon possess a high level of
surgical skill, the HRK procedure is largely automatic and, accordingly,
the ophthalmologist will not be required to operate manually on the cornea
or perform manual adjustments or calculations in connection with the
surgery. Further, the fact that the eye is fixed in place during the HRK
procedure eliminates the surgical risk of error due to the natural saccadic
movement of the human eye in which the eye makes minute, constant side-to-
side movements to assist in imaging.
Safety. HRK is designed to minimize invasiveness and trauma to the
cornea. Unlike RK, but like ALK, HRK does not require deep incisions into
the cornea with the potential for perforation and weakening of the cornea.
Unlike PRK, the Company's HRK procedure does not result in heating the
cornea, nor does it hydrate or dehydrate the corneal tissue. PRK also has
the potential to lacerate the stromal surface, expose the eye to
potentially carcinogenic ultraviolet light and free radicals, produce high
amplitude acoustic pulses which sometimes cause subretinal hemorrhages or
leave a residue of scar tissue and haze, all of which can have negative
effects on the cornea and the patient's ability to see properly or at all.
Unlike ALK, the Company's procedure does not require high intraocular
pressure ("IOP") with its attendant risk of inducing glaucoma or retinal
detachment. ALK also poses a risk of residual metal chips in the flap-
stroma interface from the blade edge. In addition, because HRK is largely
automatic and requires no manual adjustments or calculations or control by
software, the Company believes that HRK has the potential to promote more
consistent outcomes.
Efficacy. Efficacy refers to the ability of a surgical technique to
achieve the desired result with a minimum of adverse side effects.
Studies have shown that RK does not regularly achieve optimum vision
correction; residual refractive error can be as large as +/- 1 diopter,
sometimes with some small loss in visual acuity. RK has been reported to
cause adverse side effects, such as halo (i.e., appearance of a bright spot
with a surrounding area of confusion) and glare, and to result in diurnal
fluctuations in refractive correction and unstable post-operative
correction due to weakening of the cornea from the multiple corneal
incisions. Such weakening often results in progress toward hyperopia over
a period of up to 10 years following the surgery, with changes as large as
several diopters in patients with moderate to high myopia before the
surgery. A significant number of RK procedures are repeated as a result of
inaccurate correction. There is also a higher risk of post-operative
infections from RK than PRK, due to the number and depth of the incisions
made.
Studies have shown that when PRK is used on patients with low to
moderate myopia, the post-operative refractive correction is not
predictable within +/- 1 diopter. Generally, the range of inaccuracy varies
directly with the degree of attempted change. Following PRK surgery, some
patients' vision has been reported to regress toward myopia over a period
of approximately one year following the surgery and some patients report
haze. The Company believes that these inaccuracies and instability are the
result of the photoablation process, which causes a variety of wound-
healing responses which are difficult to predict. As with RK, the achieved
correction following PRK is adequate, in most cases, to allow a patient to
perform typical daily functions, such as driving, without vision
assistance; however, optimum vision correction is not typically achieved
without the use of eyeglasses or contact lenses. Furthermore, patients
undergoing PRK generally require a period ranging from several days to two
weeks before vision is restored, whereas vision is generally restored in
patients undergoing RK or ALK within a short time or immediately following
those procedures. In up to 5.0% of PRK procedures, permanent loss of
visual acuity (as much as two lines or more on the standard eye chart) has
been reported. Subretinal hemorrhages, induced in the operated eye by the
procedure sometimes occur and have been reported to have caused blindness
in a very small percentage of PRK patients. Based on experimental data,
LASIK appears to be comparable to PRK with respect to post-operative
refractive error but more stable as a result of a more predictable wound-
healing response. However, it has the potential for flap-related problems.
ALK is generally regarded as highly inaccurate but useful for
correcting high myopia and hyperopia and is reasonably stable. Studies
have shown that in some cases, the epithelium under the flap will
regenerate after the ALK procedure, requiring removal of the flap and/or
cleaning of the interface. Accurate realignment of the flap after such
procedure is difficult and can produce irregular astigmatism.
HRK is similar to PRK, but the Company believes it will allow more
accurate correction of high and low myopia, hyperopia and astigmatism. The
expected accuracy of the Company's HRK procedure is based on the use of a
custom template to flatten and shape the stroma, so as to reliably shave
the proper amount of tissue to achieve the desired correction. However,
the Company has not yet conducted human clinical trials and, accordingly,
the Company has not yet demonstrated that in live human eyes, the
mechanical properties of the stroma are similar enough that a given
template will consistently shave exactly the same amount of tissue. The
Company also anticipates that the cleanness of the HRK incisions, together
with the fact that the epithelium is not scraped off during HRK, may result
in a lower incidence of post-operative infections. However, no assurances
can be given that the safety and efficacy of HRK anticipated by the Company
will be realized.
Reduced Risk of Significant Pain. The Company anticipates that
patients who undergo HRK utilizing the HRK Keratome will not experience
significant pain. The pain following refractive surgery through PRK is
primarily due to the scraping off from the cornea of a portion of the
epithelium, which contains most of the nerve endings in the cornea. Less
pain is associated with merely cutting through the epithelium in a limited
region, such as in RK and ALK. In the Company's HRK procedure, only a
small cut is made into the epithelium, similar to that made in ALK and
possibly more cleanly, which the Company anticipates should result in
minimal pain.
In addition to the competitive factors listed above, HRK is expected
to be less costly than PRK, because of the high costs of the laser
equipment and laser facility necessary for PRK, and to be competitively
priced with, or less costly than, other refractive surgery procedures.
Litigation
The Company is not a party to any pending litigation, nor is it aware
of any litigation threatened against it. The Company is involved in a
contract dispute in which the amount in controversy is less than $35,000.
Employees
As of May 1, 1996, the Company had nine full-time employees, all of
whom, including its President, were engaged in research and development
activities, and one part-time employee. As of such date, the Company also
had consulting arrangements with one medical consultant, one marketing
consultant and two strategic planning and business development consultants.
The Company's ability to design, develop, manufacture, market and sell its
products successfully will depend to a large extent on its ability to
attract and retain qualified personnel, for which competition is or may be
intense. None of the Company's employees are represented by a union. The
Company believes that its relations with its employees are satisfactory.
Facilities
The Company leases approximately 4,982 square feet of research and
development and office space in Edison, New Jersey. The term of the lease
expires in March 1999. The base rent is $57,440 per year. The Company
believes that nearby space suitable for a manufacturing facility is in
adequate supply.
Product Liability Insurance
The use of medical devices, both in clinical and commercial settings,
entails the risk of allegations of product liability, and there can be no
assurance that substantial product liability claims will not be asserted
against the Company. The Company does not now have any product liability
insurance, but it expects to obtain such insurance prior to the
commencement of clinical testing. It is expected that such insurance will
be in the amount of $1 million per claim with an annual aggregate limit of
$20 million. After any commercialization of its products, the Company will
seek to obtain an appropriate increase in its coverage. However, there can
be no assurance that adequate insurance coverage will be available at an
acceptable cost, if at all. Consequently, a material product liability
claim or other material claims with respect to uninsured liabilities or in
excess of insured liabilities would have a material adverse effect on the
Company.
<PAGE>
MANAGEMENT
Executive Officers and Directors
The following table sets forth certain information with respect to the
executive officers, directors and nominees for director of the Company:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Eugene I. Gordon, Ph.D. 65 President and Chairman
of the Board
Thomas M. Handschiegel 49 Vice President for Finance and
Human Resources
Steven G. Cooperman, M.D. 54 Director
Sanford J. Hillsberg* 47 Director
Steven Katz, Ph.D.** 51 Director
</TABLE>
_____________________
*Mr. Hillsberg was elected as a director to begin serving upon the
consummation of this Offering.
*Mr. Katz was elected as a director to begin serving 30 days after the
Closing Date.
Prior to the commencement of the Offering, the Company intends to
elect one additional person to the Board of Directors of the Company. Such
person will not be an officer or employee of the Company.
Dr. Eugene I. Gordon is the founder and President of the Company and
has been a Director and Chairman of the Board since its inception in
December 1993. He is an inventor of the Company's HRK Keratome technology.
From 1987 to 1988, Dr. Gordon served as Senior Vice President and Director
of the Research Laboratories for Hughes Aircraft Co. of Malibu, California.
Dr. Gordon has served as an adjunct professor in the Department of
Ophthalmology at the University of Medicine and Dentistry of New Jersey
since 1994, and was a professor in the Department of Electrical and
Computer Engineering at the New Jersey Institute of Technology from 1990 to
1995. Dr. Gordon was Laboratory Director for AT&T Bell Laboratories and
the founder of Lytel Incorporated, a manufacturer of lasers and optical
transmission subsystems which is a wholly-owned subsidiary of AMP
Incorporated. Dr. Gordon has done extensive research on laser and opto-
electronic systems, is a named inventor under approximately 70 U.S. patents
and has published widely on those subjects. Dr. Gordon has a Ph.D. in
physics from the Massachusetts Institute of Technology. He is a member of
the National Academy of Engineering and has been awarded the Edison Medal
of the Institute of Electrical and Electronic Engineers, among a number of
other prestigious awards.
Dr. Steven G. Cooperman has been a Director of the Company since
September 1994. Dr. Cooperman was engaged in the private practice of
ophthalmology and ophthalmic surgery in Beverly Hills, California from 1972
to his retirement in 1989. Since his retirement, Dr. Cooperman has been
active as a private investor. He is the founder of the American
Intraocular Implant Society (now known as the American Society for Cataract
and Refractive Surgery), has served on the teaching staff of the Jules
Stein Eye Institute and has lectured widely on phacoemulsification and
intraocular lens implant surgery. Dr. Cooperman received his M.D. from the
Northwestern University Medical School.
Thomas M. Handschiegel has been an executive officer of the Company
since March 1996. Mr. Handschiegel has been a Certified Public Accountant
since 1980. From November 1995 to March 1996, he served as Senior Managing
Director of Gruntal & Co. Incorporated. From 1994 to November 1995, Mr.
Handschiegel was self-employed as an independent financial consultant.
From 1993 to 1994, he served as Senior Vice President and Division
Financial Officer, Industry Services Group for Cowen & Company. From 1989
to 1993, he served as Vice President, Comptroller and Chief Accounting
Officer for Discount Corporation of New York. Mr. Handschiegel received a
B.B.A. in Accounting from Loyola University (Chicago) in 1969.
Sanford J. Hillsberg has agreed to serve as a director of the Company
upon the consummation of this Offering. Mr. Hillsberg has been engaged in
the private practice of corporate law since 1973 and is currently the
managing partner of Troy & Gould Professional Corporation. From 1983 to
1993, he served as a director and Vice President of Medco Research Inc., a
publicly-traded pharmaceutical research and development company. Mr.
Hillsberg received his J.D. from Harvard Law School.
Dr. Steven Katz has agreed to serve as a director of the Company
commencing 30 days after the Closing Date. Dr. Katz is the President,
Chief Executive Officer, Chairman of the Board and a founder of Ortec
International, Inc., a publicly-traded company which has developed
proprietary technology to create natural replacement skin. He has been
employed by Ortec International, Inc. and a predecessor since 1991. Dr.
Katz has also been a professor of Economics and Finance at Bernard Baruch
College in New York City since 1972. He has a Ph.D. in Finance and
Statistics as well as an M.B.A. and M.S. in Operations Research, both from
New York University.
All directors hold office until the next annual meeting of
stockholders and the election and qualification of their successors.
Executive officers are elected by the Board of Directors to hold office for
such term as may be prescribed by the Board of Directors.
The Board of Directors has established a Stock Option Committee which
administers the Stock Option Plan. The Stock Option Committee is currently
composed of one member, Dr. Gordon, and, upon the closing of the Offering,
will be composed of two members, Dr. Cooperman and Mr. Hillsberg.
Key Employees
The following individuals are key employees of the Company:
Victor Taret has served as Director of Regulatory Affairs of the
Company since 1995. His responsibilities include technical supervision of
all clinical trials and the FDA application process. Prior to joining the
Company, Dr. Taret served in various capacities at Oculon Corporation in
Cambridge, Massachusetts, a development stage company which was developing
a non-surgical treatment for cataracts, including as a Section Head for
Clinical Research and Development from 1992 to 1995, a Project Leader from
1990 to 1992 and a Research Scientist from 1989 to 1990. Dr. Taret
received a B.S. in Physics and Biology from Odessa State University (in the
former USSR) in 1977, a Ph.D. in Physics from Brandeis University in 1985
and performed two years of post-doctoral research at the Massachusetts
Institute of Technology from 1986 to 1987.
Peretz M. Feder has served as Vice President for Biological Studies
and Applications and Comptroller of the Company since 1994. His
responsibilities include safety and efficacy of the Company's animal
studies. Prior to joining the Company, Mr. Feder served for five years as
Vice President of Research and Development and later as General Manager for
Photon Imaging Corporation, where his responsibilities included imaging
science for hard copy printer design, optical and fiber optics design, and
manufacturing. Mr. Feder received an M.S. in electrical engineering from
Columbia University in 1981.
Directors' Compensation
Directors who are officers or employees of the Company receive no
additional compensation for service as members of the Board of Directors or
committees thereof. Outside directors will be reimbursed for out-of-pocket
expenses incurred in connection with attendance of meetings of the Board of
Directors. Upon consummation of the Offering and upon each election as
director thereafter, outside directors will receive options under the Stock
Option Plan to purchase 4,000 shares of Common Stock with an exercise price
equal to the fair market value per share of the Common Stock on the date of
grant and which shall vest one year after the date of grant if such
director has served as such for that full year.
Employment Agreements
Effective as of March 15, 1996, the Company entered into an employment
agreement with Eugene I. Gordon as President, for an initial term of three
years. The agreement provides for a base compensation of $125,000 per year
and bonuses and other additional compensation as may be determined by the
Board of Directors (without the participation of Dr. Gordon) in its sole
discretion. The Board of Directors (without the participation of Dr.
Gordon) may also increase such base compensation in its sole discretion.
The agreement may be terminated for cause and contains proprietary
information, invention and non-competition provisions which prohibit
disclosure of any of the Company's proprietary information and preclude
competition with the Company for two years after termination of employment.
The Company has procured life insurance in the amount of $500,000 to
compensate it for the loss, through death, of Dr. Gordon, who is 65 years
old. The Company is seeking to increase such coverage (i) in connection
with the Offering, to $1 million compensation and (ii) in accordance with
the employment agreement, for the loss through disability as well as death
of Dr. Gordon. However, there can be no assurance that the Company will be
able to obtain such additional coverage at an acceptable cost or at all.
Effective as of March 18, 1996, the Company entered into an employment
agreement with Thomas M. Handschiegel as Vice President for Finance and
Human Resources, for an indefinite term. The agreement provides for a base
compensation of $95,000 per year. The agreement may be terminated by
either party at any time upon two weeks' prior notice and contains
proprietary information, invention and non-competition provisions which
prohibit disclosure of any of the Company's proprietary information and
preclude competition with the Company for two years after termination of
employment.
Executive Compensation
The following table sets forth the aggregate compensation paid to the
Company's Chief Executive Officer in 1995. No other executive officer of
the Company was paid any other compensation from the period of the
Company's inception through December 31, 1995.
<TABLE>
<CAPTION>
Summary Compensation Table
Name and Principal Position Year Salary Bonus Other Compensation
<S> <C> <C> <C> <C>
Eugene I. Gordon, Ph.D. . . . . 1995 $96,400 -- $66,700(1)
</TABLE>
_______________________
(1) Consists entirely of deferred 1994 salary.
The Stock Option Committee intends to make a grant of 10,000 stock
options under the Stock Option Plan effective upon the Closing Date to Mr.
Handschiegel, which will vest, as to 25%, one year from the date of grant
and, as to the remainder, ratably over the following three-year period.
1994 Stock Option Plan
The Stock Option Plan has been adopted by the Company's Board of
Directors and approved by its stockholders. The Underwriting Agreement
restricts the Company from granting, after the date of this Prospectus,
options to purchase more than 200,000 shares of Common Stock under the
Stock Option Plan, and from registering any shares covered by the Stock
Option Plan, without the prior written consent of the Underwriter, until 24
months after the Closing Date. Upon expiration of that period, the Company
intends to file a registration statement on Form S-8 covering all shares
issuable upon the exercise of stock options that may be granted under the
Stock Option Plan.
Administration. The Stock Option Plan is administered by the Stock
Option Committee of the Board of Directors. The Stock Option Committee
interprets the terms, and establishes administrative regulations to further
the purposes, of the Stock Option Plan, authorizes awards to eligible
participants, determines vesting schedules and takes any other action
necessary for the proper implementation of the Stock Option Plan. Members
of the Stock Option Committee must be "disinterested" within the meaning of
Rule 16b-3 under the Exchange Act.
Participation. Under the Stock Option Plan, options to purchase
shares of Common Stock of the Company may be granted only to employees
(including officers) and directors of the Company or individuals who are
rendering services to the Company as consultants, advisors or other
independent contractors.
Shares Available for Awards. 255,651 shares of Common Stock of the
Company have been reserved for issuance under the Stock Option Plan,
subject to adjustment for stock splits, stock dividends, recapitalizations
and similar events. Such shares may consist in whole or in part of
authorized and unissued shares or treasury shares. In the event that any
outstanding option for any reason expires or is terminated or canceled
and/or shares of Common Stock subject to repurchase are repurchased by the
Company, the shares allocable to the unexercised portion of such option or
repurchased shares, may again be subject to an option grant.
Notwithstanding the foregoing, any such shares shall be made subject to a
new option only if the grant of such new option and the issuance of such
shares pursuant to such new option would not cause the Stock Option Plan or
any option granted under the Stock Option Plan to contravene Rule 16b-3
under the Exchange Act.
Awards. The Stock Option Plan authorizes grants of either incentive
stock options ("ISOs"), as defined in Section 422 of the Code, or non-
statutory (nonqualified) stock options. Under the Stock Option Plan, all
options must be granted, if at all, within 10 years from the earlier of the
date the Stock Option Plan is adopted by Board of Directors or the date the
Stock Option Plan is approved by the stockholders of the Company. The
Stock Option Committee shall set, including by amendment of an option, the
time or times within which each option shall be exercisable or the event or
events upon the occurrence of which all or a portion of each option shall
be exercisable and the term of each option; provided, however, that (i) no
option shall be exercisable after the expiration of 10 years after the date
such option is granted and (ii) no ISO granted to an Optionee who at the
time the option is granted owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company within the
meaning of Section 422(b)(6) of the Code (a "Ten Percent Owner Optionee")
shall be exercisable after the expiration of five years after the date such
option is granted. The Company has agreed with the Underwriter not to
issue shares of common Stock without the Underwriter's prior written
consent, during the 24 months following the Closing Date, other than
pursuant to the Stock Option Plan. As of the date of this Prospectus, non-
statutory stock options to purchase a total of 26,712 shares of Common
Stock have been granted to Steven G. Cooperman, a director of the Company,
and ISOs to purchase an additional 28,938 shares of Common Stock have been
granted to employees of the Company. The Company has agreed with the
Underwriter that it will not issue options to purchase more than 200,000
shares of Common Stock during the 24-month period following the Closing
Date without the Underwriter's prior written consent, and that of such
number, it will not issue options to purchase more than 50,000 shares of
Common Stock at less than fair market value on the date of grant. The
Company has also agreed with the Underwriter that the options with respect
to the 200,000 shares under the Stock Option Plan which have not yet been
granted as of the date of this Prospectus shall vest no earlier than one
year from the date of grant.
Stock Options. The Stock Option Plan provides that (i) the exercise
price per share for an ISO shall not be less than the fair market value, as
determined by the Stock Option Committee, of a share of Common Stock on the
date of the granting of the option; and (ii) no ISO granted to a Ten
Percent Owner Optionee shall have an exercise price per share less than
110% of the fair market value, as determined by the Stock Option Committee,
of a share of Common Stock on the date of the granting of the option.
Notwithstanding the foregoing, an option may be granted with an exercise
price lower than the minimum exercise price set forth above if such option
is granted pursuant to an assumption or substitution for another option in
a manner qualifying within the provisions of Section 424(a) of the Code.
Federal Income Tax Consequences. The federal income tax consequences
of awards granted pursuant to the Stock Option Plan under the Code, and the
regulations thereunder are summarized below.
The grant of a stock option will create no immediate tax consequences
for the participant or the Company. The participant will have no taxable
income upon exercising an ISO (except that an alternative minimum tax may
apply), and the Company will not receive a deduction when an ISO is
exercised. If the participant does not dispose of the shares acquired on
exercise of an ISO within the two-year period beginning on the day after
the grant of the ISO or within one year after the transfer of the shares to
the participant, the gain or loss on a subsequent sale will be a capital
gain or loss. If the participant disposes of the shares within the two-
year or one-year period described above, the participant generally will
realize ordinary income, and the Company will be entitled to a
corresponding deduction. Upon exercising a non-statutory stock option, the
participant must recognize ordinary income in an amount equal to the
difference between the exercise price and the fair market value of the
Common Stock on the exercise date, unless the shares are subject to certain
restrictions. The Company will receive a deduction for the same amount on
the exercise date (or the date the restrictions lapse).
With respect to other awards granted under the Stock Option Plan that
are settled in cash or shares of Common Stock that are either transferable
or not subject to a substantial risk of forfeiture, the participant must
recognize ordinary income in an amount equal to the cash or the fair market
value of the shares received. With respect to other awards granted under
the Stock Option Plan that are settled in shares of Common Stock that are
subject to restrictions as to transferability and subject to a substantial
risk of forfeiture, the participant must recognize ordinary income in an
amount equal to the fair market value of the shares received at the first
time the shares become transferable or not subject to a substantial risk of
forfeiture, whichever occurs earlier. The Company will receive a deduction
for the amount recognized as income by the participant, subject to the
provisions of Section 162(m) of the Code, which provides for a possible
denial of a tax deduction to the Company for compensation for any of the
five most highly compensated executive officers in excess of $1 million in
any year.
The tax treatment upon disposition of shares acquired under the Stock
Option Plan will depend on how long the shares have been held. In the case
of shares acquired through exercise of an option, the tax treatment will
also depend on whether or not the shares were acquired by exercising an
ISO. There will be no tax consequences to the Company upon the disposition
of shares acquired under the Stock Option Plan, except that the Company may
receive a deduction in the case of disposition of shares acquired under an
ISO before the applicable holding period has been satisfied.
Scientific Advisory Board
The Company has recently formed a Scientific Advisory Board to advise
and consult with management and the Board of Directors of the Company at
such times as the Board of Directors shall require on matters relating to
the refractive surgical device industry. Members of the Advisory Board may
be employed on a full-time basis by employers other than the Company, and
may have commitments to, or consulting or advisory contracts with, other
entities that may limit their availability to the Company. The Board of
Directors has not to date convened a meeting of the Scientific Advisory
Board, but members of the Scientific Advisory Board have provided
consulting and other services to the Company from time to time. The
members of the Scientific Advisory Board are Stephen G. Slade, M.D., a
member of the clinical faculty in the Department of Ophthalmology at the
University of Texas Medical School; David M. Dillman, M.D., a specialist in
cataract and refractive surgery; Marco Zarbin, M.D., the Chairman of the
Department of Ophthalmology at the University of Medicine and Dentistry of
New Jersey; and Theo Seiler, M.D., a Professor at Universitats Klinikum
Carl Gustav Carus in Dresden, Germany.
Consultants
The Company has retained Joseph F. Carroll, III as a consultant, to
assist and advise the Company in connection with market studies related to
the HRK Keratome. The Company does not pay Mr. Carroll a consulting fee.
As compensation for services rendered, and to be rendered, in the period
from April 1994 to April 1998, the Company issued 33,391 shares of Common
Stock to Mr. Carroll in April 1994, which vest ratably over a four-year
period.
The Company has also retained Dr. Joseph Calderone as a consultant, to
assist and advise the Company with respect to medical issues associated
with refractory surgery and clinical examination of animals under study.
The Company does not pay Dr. Calderone a consulting fee. As compensation
for services rendered, and to be rendered, in the period from April 1994 to
April 1998, the Company issued 33,391 shares of Common Stock to Dr.
Calderone, which vest ratably over a four-year period.
The Company has also retained Dr. Steven G. Cooperman, a director of
the Company, as a consultant, to assist and advise the Company with respect
to strategic planning and business development. The Company does not pay
Dr. Cooperman a consulting fee. As compensation for services rendered, the
Company issued warrants to purchase 100,172 shares of Common Stock, with an
exercise price of $6.70 per share, 25% of which shall vest at the
completion of each year of service until fully vested.
The Company has also retained Sanford J. Hillsberg, a director of the
Company, as a consultant, to assist and advise the Company with respect to
strategic planning and business development. The Company does not pay Dr.
Cooperman a consulting fee. As compensation for services rendered, the
Company issued warrants to purchase 8,904 shares of Common Stock, with an
exercise price of $6.70 per share, 25% of which shall vest at the
completion of each year of service until fully vested.
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of May 1, 1996
with respect to the beneficial ownership of shares of Common Stock by (i)
each person known by the Company to be the beneficial owner of more than
five percent of the outstanding shares of Common Stock, (ii) each executive
officer, director and nominee for director of the Company and (iii) all
executive officers and directors of the Company as a group:
<TABLE>
<CAPTION>
Percentage of Outstanding of Common
Name and Address Number of
of Beneficial Owner Shares(1) Before Offering After Offering
Minimum Maximum
<S> <C> <C> <C> <C>
Eugene I. Gordon 1,782,689 65.0% 45.2% 41.0%
1090 King Georges Post
Road Suite 301
Edison, NJ 08837
Thomas M. Handschiegel -0- -- -- --
1090 King Georges Post
Road Suite 301
Edison, NJ 08837
Steven G. Cooperman(2) 92,381 3.4 2.3 2.1
201 Beagling Hill Circle
Fairfield, Ct 06430
Sanford G. Cooperman(3) 20,776 * * *
201 Beagling Hill Circle
Fairfield, Ct 06430
Steven Katz -0- -- -- --
8000 Cooper Avenue
Building 28
Glendale, NY 11355
All Executive officers 1,895,846 69.1 48.0 43.6
and directors of the
Company as a group
(3 persons)(3)
</TABLE>
________________
* Represents holdings of less than one percent.
(1) All shares owned directly unless otherwise noted.
(2) Includes 12,243 shares of Common Stock which Mr. Cooperman has the
right to acquire through the exercise of options within 60 days of
May 1, 1996.
(3) Mr. Hillsberg will begin serving as a director of the Company upon
the consummation of the Offering. Mr. Katz will begin serving as a
director of the Company 30 days after the Closing Date.
CERTAIN TRANSACTIONS
Between September 1995 and December 1995, Eugene I. Gordon, President
and Chairman of the Board made five unsecured loans to the Company in an
aggregate principal amount of $150,000, which bear interest at the rate of
7% per annum and are due and payable on demand. A portion of the proceeds
of this Offering will be used for repayment of such indebtedness. See "Use
of Proceeds."
In February 1996, Steven G. Cooperman, a Director of the Company, made
an unsecured loan to the Company in the principal amount of $50,000, which
bears interest at the rate of 8% per annum and is due and payable on the
earlier of (a) written demand made any time on or after January 31, 1997 or
(b) the consummation of this Offering. A portion of the proceeds of this
Offering will be used for repayment of such indebtedness. See "Use of
Proceeds."
In February 1996, Sanford Hillsberg, a nominee for Director of the
Company, made an unsecured loan to the Company in the principal amount of
$50,000, which bears interest at the rate of 8% per annum and is due and
payable on the earlier of (a) written demand made any time on or after
January 31, 1997 or (b) the consummation of this Offering. A portion of
the proceeds of this Offering will be used for repayment of such
indebtedness. See "Use of Proceeds."
Each such loan was made, and all future transactions of a similar
nature will be made, on terms no less favorable to the Company than other
loans available from unaffiliated parties.
DESCRIPTION OF SECURITIES
The authorized capital of the Company consists of 7,000,000 shares of
Common Stock, par value $.001 per share and 1,000,000 shares of Preferred
Stock, par value $.01 per share (the "Preferred Stock"). As of the date of
this Prospectus, 2,744,349 shares of Common Stock are currently issued and
outstanding to approximately 25 holders, and no shares of preferred stock
have been issued or are outstanding (without giving effect to 55,651 shares
of Common Stock reserved for issuance pursuant to outstanding options under
the Stock Option Plan and 110,000 shares of Common Stock reserved for
issuance pursuant to outstanding warrants). There will be 3,944,349 shares
of Common Stock and 1,200,000 Warrants issued and outstanding after giving
effect to the sale of the minimum number of Units offered hereby and
4,344,349 shares of Common Stock and 1,600,000 Warrants issued and
outstanding after giving effect to the maximum number of Units offered
hereby (without giving effect to 55,651 shares of Common Stock reserved for
issuance pursuant to outstanding options under the Stock Option Plan and
110,000 shares of Common Stock reserved for issuance pursuant to
outstanding warrants).
Immediately prior to the date of this Prospectus, the Company will
effect a 2.226043597-for-1 split of its Common Stock. The information
contained in this Prospectus has been adjusted to give effect to such stock
split.
Preferred Stock
The Company's Board of Directors has the authority to issue shares of
Preferred Stock in one or more series and to fix the rights, preferences,
privileges and restrictions thereof, including dividend rights, dividend
rates, conversion rights, voting rights, terms of redemption (including
sinking fund provisions), redemption prices and liquidation preferences and
the number of shares constituting and the designation of any such series,
without approval by the stockholders. The Company's Board of Directors
currently does not have any plans to issue any shares of Preferred Stock.
The Company has agreed with the Underwriter not to issue shares of capital
stock without the Underwriter's prior written consent during the 24-month
period following the Closing Date, other than pursuant to the Stock Option
Plan and the Warrants.
Certain Effects of Authorized and Unissued Stock
There are currently 3,890,000 unissued and unreserved shares of Common
Stock and 1,000,000 unissued and unreserved shares of Preferred Stock.
These additional shares may be issued for a variety of proper corporate
purposes, including future public or private offerings to raise additional
capital or facilitate acquisitions. The Company has agreed with the
Underwriter not to issue shares of Common Stock without the Underwriter's
prior written consent during the 24-month period following the Closing
Date, other than in connection with the Stock Option Plan and the Warrants.
One of the effects of the existence of unissued and unreserved shares
of Common Stock and Preferred Stock may be to enable the Company's Board of
Directors to discourage an attempt to change control of the Company (by
means of a tender offer, proxy contest or otherwise) and thereby to protect
the continuity of the Company's management. The issuance of shares of
Preferred Stock, whether or not related to any attempt to effect change in
control, may adversely affect the rights of the holders of shares of Common
Stock.
Units
Each Unit consists of one share of Common Stock and one Class A
Warrant. The shares of Common Stock and the Warrants offered as Units
become detachable and separately transferable commencing on the date (the
"Separation Date") which is the earlier of three months after the Closing
Date or such earlier date as may be agreed upon by the Company and the
Underwriter.
Common Stock
The holders of Common Stock are entitled to one vote per share for the
election of directors and with respect to all other matters to be voted on
by stockholders. Shares of Common Stock do not have cumulative voting
rights. Therefore, the holders of more than 50% of such shares voting for
the election of directors can elect all of the directors if they choose to
do so and, in that event, the holders of the remaining shares will not be
able to elect any directors. The holders of Common Stock are entitled to
receive dividends when, as and if declared by the Board of Directors out of
legally available funds. See "Dividend Policy." In the event of
liquidation, dissolution or winding up of the Company, the holders of
Common Stock are entitled to share ratably in all assets remaining
available for distribution to them after payment of liabilities and after
provision has been made for each class of stock, if any, having preference
over the Common Stock. Holders of shares of Common Stock, as such, have no
conversion, preemptive or other subscription rights, and there are no
redemption provisions applicable to the Common Stock.
Warrants
Each Class A Warrant entitles the holder to purchase, at a price of
$10.00, one share of Common Stock for a period of 18 months commencing on
the date that is three months following the Closing Date, which period may
be extended by mutual agreement between the Company and the Underwriter,
unless redeemed by the Company prior to such expiration date. The exercise
price of the Warrants and the number of shares of Common Stock or other
securities or property to be obtained upon exercise of the Warrants, are
subject to adjustment under certain circumstances, including, but not
limited to, certain sales by the Company of its shares of Common Stock for
a price per share less than the then market price of the Common Stock, or
issuance by the Company of any shares of its Common Stock as a dividend, or
subdivision or combination of the Company's outstanding shares of Common
Stock into a greater or lesser number of shares. Reference is hereby made
to the complete text of the form of Warrant Agreement filed as an exhibit
to the Registration Statement of which this Prospectus forms a part.
The Class A Warrants are redeemable by the Company in whole but not in
part for $.01 per Warrant, upon 30 days' prior written notice, if the
market price of the Common Stock equals or exceeds $13.00 per share. In
the event that the Company gives notice of its intention to redeem the
Warrants, holders would be forced to exercise their Warrants or accept the
redemption price. For purposes of redemption, market price means (i) the
average closing bid price for any 10 consecutive trading days within a
period of 30 consecutive trading days, ending within five days of the date
of the notice of redemption, of the Common Stock as reported by Nasdaq or
(ii) the average of the last reported sale price for the 10 consecutive
business days ending within five days of the date of the notice of
redemption, on the primary exchange on which the Common Stock is traded, if
the Common Stock is traded on a national securities exchange.
The Warrants may be exercised by filling out and signing the
appropriate notice of exercise form attached to the Warrant and mailing or
delivering it (together with the Warrant) to Continental Stock Transfer &
Trust Company of New York, New York, the Warrant Agent, in time to reach
the Warrant Agent prior to the time fixed for termination or redemption of
the Warrants, accompanied by payment of the full warrant exercise price.
The holders of the Warrants are not entitled to vote, receive
dividends, or exercise any of the rights of the holders of shares of Common
Stock for any purpose until the Warrants have been duly exercised and
payment of the Warrant exercise price has been made. Although it is
anticipated that the Warrants will commence trading on Nasdaq commencing on
the Separation Date, there can be no assurance that a trading market for
the Warrants will ever develop.
For the life of the Warrants, the holders are given the opportunity to
profit from the rise, if any, in the market price of the Common Stock at
the expense of the remaining holders of the Common Stock. However, during
the outstanding period of the Warrants, the Company might be deprived of
favorable opportunities to secure additional equity capital for its
business, since holders of Warrants may be expected to exercise their
Warrants at a time when the Company would be able to obtain equity capital
by a public sale of new securities on terms more favorable than those
provided in the Warrants.
Certain General Corporation Law Provisions
A Delaware statute prevents an "interested stockholder" (defined
generally as a person owning 15% or more of a corporation's voting stock)
from engaging in a "business combination" with the Delaware corporation for
three years following the date on which the person became an interested
stockholder unless, with certain exceptions, the transaction is approved by
the Company's Board of Directors and the vote of two-thirds of the
outstanding shares not owned by such interested stockholder. This statute
could have the effect of discouraging, delaying or preventing hostile
takeovers, including those that might result in the payment of a premium
over market price for the Common Stock, or changes in control or management
of the Company.
Transfer and Warrant Agent
The transfer agent for the Common Stock and the warrant agent for the
Warrants is Continental Stock Transfer & Trust Company, whose address is 2
Broadway, New York, New York 10004.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of the Offering, the Company will have
outstanding 3,944,349 shares of Common Stock if the minimum number of Units
are sold, and 4,344,349 shares of Common Stock if the maximum number of
shares are sold (without giving effect to 55,651 shares of Common Stock
reserved for issuance pursuant to outstanding options under the Stock
Option Plan and 110,000 shares of Common Stock reserved for issuance
pursuant to outstanding warrants). In addition, the Company will have
reserved (i) 1,600,000 shares of Common Stock for issuance upon the
exercise of the Warrants included in the maximum number of Units, (ii)
320,000 shares of Common Stock for issuance upon the exercise of the
maximum number of Options granted to the Underwriter and the Warrants
included therein, (iii) 255,651 shares of Common Stock for issuance
pursuant to the Stock Option Plan and (iv) 110,000 shares of Common Stock
for issuance pursuant to outstanding warrants. Of such outstanding shares,
the shares underlying the Units sold in connection with the Offering will
become freely tradeable in the United States without restriction under the
Securities Act after the Separation Date, except that shares underlying the
Units purchased by an "affiliate" of the Company, within the meaning of the
rules and regulations adopted under the Securities Act, may be subject to
resale restrictions. The remaining outstanding shares and any shares
issued pursuant to the Stock Option Plan of the Company are "restricted
securities," as that term is defined under such rules and regulations, and
may not be sold unless they are registered under the Securities Act or sold
in accordance with Rule 144 under the Securities Act or another applicable
exemption from such registration requirement.
In general, under Rule 144, beginning 90 days after the date of this
Prospectus, subject to certain conditions with respect to the manner of
sale, the availability of current public information concerning the Company
and other matters, each of the existing stockholders who has beneficially
owned shares of Common Stock for at least two years will be entitled to
sell within any three-month period that number of such shares which does
not exceed the greater of 1% of the total number of then outstanding shares
of Common Stock or the average weekly trading volume of shares of Common
Stock during the four calendar weeks preceding the date on which notice of
the proposed sale is sent to the Commission. Moreover, each of the
existing stockholders who is not deemed to be an affiliate of the Company
at the time of the proposed sale, who is not deemed to be such an affiliate
during the three months preceding the time of the proposed sale and who has
beneficially owned his shares of Common Stock for at least three years will
be entitled to sell such shares under Rule 144 without regard to such
volume limitations. All of the shares of Common Stock held by the existing
stockholders will be eligible for sale under Rule 144 after December 31,
1997. Approximately 71.7% of such shares are presently held by affiliates
of the Company and, therefore, would not presently be eligible for sale
under Rule 144 without regard to such volume limitations.
The Company and its executive officers, directors and stockholders
have agreed that, for a period of 24 months after the Closing Date, they
will not dispose of any securities held by them under Rule 144 or otherwise
without the prior written consent of the Company and the Underwriter.
Prior to the Offering, there has been no public market for the Units
or underlying Common Stock and Warrants, and no assurance can be given that
such a market will develop or, if it develops, that it will be sustained
after the Offering or that the purchasers of the Units will be able to
resell such Units at a price higher than the initial public offering price
or otherwise.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, Patterson Travis, Inc. (the "Underwriter") has agreed to use its
best efforts to offer the Units for sale to the public at a purchase price
of $5.00 per Unit. The Units are offered on a "best-efforts" basis,
subject to the sale of a minimum of 1,200,000 Units. The Underwriter has
made no commitment to purchase or take down all or any part of the Units
offered hereby. The Underwriter has agreed to use its best efforts to find
purchasers for the Units offered hereby within a period of 90 days ending
__________, 1996, subject to an extension by mutual agreement between the
Underwriter and the Company for an additional period of 90 days ending
_______, 1996 (and an additional period of 10 business days thereafter to
permit clearance of the funds in escrow). The Underwriter will promptly
send to each subscriber confirmation of the subscriber's subscription with
instructions to forward his funds to the order of the Escrow Agent. All
proceeds from this Offering will be deposited in an escrow account
maintained by the Escrow Agent at Chemical Bank. If a minimum of 1,200,000
Units are not sold by _____________, 1996, (or if extended upon the
agreement between the Company and the Underwriter, by ____________, 1996)
and the Offering is canceled, all monies held in the escrow account will be
promptly returned to the subscribers without interest or deduction (unless
the Offering is extended for an additional 90 days, in which case interest
will be paid for the extension period). During the escrow period
subscribers will not be entitled to a refund of their subscription. Upon
completion of the sale of a minimum of 1,200,000 Units, all funds in the
escrow account will be released to the Company.
The Company has agreed to pay to the Underwriter a non-accountable
expense allowance equal to 3% of the gross proceeds of this Offering upon
the closing of this Offering.
The Underwriter proposes to offer the Units to the public at the
offering price set forth on the cover page. The Underwriter has informed
the Company that it will not confirm sales to any accounts over which it
exercises discretionary authority. The Company has agreed to pay the
Underwriter a commission for the first 1,300,000 Units sold equalling 10.0%
of the public offering price thereof and a commission for the remaining
300,000 Units sold equalling 4.5% of the public offering price thereof. In
addition, the Company has agreed to pay the Underwriter a commission of
8.0% of the exercise price of all Warrants exercised beginning one year
after the date hereof as the result of solicitation made by the
Underwriter. A commission for Warrant exercise will not be paid if (i) the
market price of the Common Stock is lower than the exercise price; (ii) the
Warrants are held in a discretionary account; (iii) disclosure of the
compensation arrangements have not been made in documents provided to the
holder of Warrants both as part of this Offering and at the time of
exercise; or (iv) the exercise of Warrants is unsolicited. An exercise of
Warrants will be presumed to be unsolicited pursuant to (iv) above unless
the holder has indicated in writing that the transaction was solicited and
has designated the broker/dealer that is to receive compensation for the
exercise.
The Underwriter may allow to selected dealers who are members of the
National Association of Securities Dealers, Inc., and such dealers may
reallow, a concession not in excess of $.50 per Unit to certain other
dealers, including the Underwriter. The Underwriter has informed the
Company that it will not confirm sales to any accounts over which it
exercises discretionary authority.
The initial offering price of the Units and the exercise and
redemption price of the Warrants were arbitrarily determined by
negotiations between the Company and the Underwriter. Among factors
considered in determining such prices were the history of and the prospects
for the field in which the Company competes, the ability and expertise of
the Company's management, the prospects for future earnings of the Company,
the present state of the Company's development, the general condition of
the securities markets at the time of the Offering and the recent market
prices of and the demand for publicly traded common stock of generally
comparable companies.
Conditioned upon the sale of a minimum of 1,200,000 Units, the Company
has also agreed to sell to the Underwriter, for a nominal consideration, on
the basis of one Unit for each ten Units sold, options (the "Underwriter's
Options") for the purchase of up to 160,000 Units. Each of the
Underwriter's Options is exercisable to purchase one Unit at $8.25 at any
time during a period of four years commencing one year from the date of
this Prospectus. The Units will each consist of one share of Common Stock
and one Class A 18-month Warrant to purchase one share of Common Stock at
an exercise price of $16.50. The Underwriter's Options require, under
certain circumstances, the Company to register the Common Stock underlying
such Options for sale to the public. The Underwriter's Options are
nontransferable for a period of one year except to officers of the
Underwriter or the selling group. The exercise price of the Underwriter's
Options and the number of Units covered thereby are subject to adjustment
to protect the holders against dilution in certain events. The Class A
Warrants contained in the Units are redeemable by the Company for $.01 per
Warrant if the market price for the Common Stock equals or exceeds $21.45
within a period of any 10 consecutive trading days within a period of 30
trading days ending within five days prior to the date of the notice of
redemption.
The Company has agreed with the Underwriter not to issue shares of
Common Stock without the Underwriter's prior written consent during the 24-
month period following the Closing Date, other than pursuant to options
which have been or will be granted under the Stock Option Plan and pursuant
to the Warrants. The Company has further agreed that during the 12-month
period commencing 12 months after the Closing Date, it will not issue
options for shares of Common Stock at an exercise price less than the then
"Market Price" thereof. "Market Price" is defined as (i) the average
closing bid price, for any 10 consecutive trading days within a period of
30 consecutive trading days ending within five days prior to the date of
issuance of the Common Stock, as reported by Nasdaq or (ii) the average of
the last reported sale price, for the 10 consecutive business days ending
within five days of the date of issuance of the Common Stock, on the
primary exchange on which the Common Stock is traded, if the Common Stock
is traded on a national securities exchange. The Company also has agreed
with the Underwriter not to issue shares of preferred stock without the
Underwriter's prior written consent during the 24-month period following
the Closing Date.
The Company and its executive officers, directors and stockholders
have agreed that, for a period of 24 months after the Closing Date, they
will not dispose of any securities held by them under Rule 144 or otherwise
without the prior written consent of the Company and the Underwriter.
Pursuant to a letter agreement dated January 25, 1996, the Underwriter
has arranged bridge financing for the Company from Mrs. Jan Wernick in the
amount of $50,000 per month, not to exceed an aggregate of $200,000, with
interest payable at the rate of 12%. Mrs. Wernick's husband is affiliated
with the Underwriter as the manager of its New York office. All amounts
outstanding under such bridge financing, which was $200,000 at May 6, 1996,
become due and payable upon the Closing Date. A portion of the proceeds of
this Offering will be used for repayment of such indebtedness. See "Use of
Proceeds."
The Underwriting Agreement provides that the Underwriter shall have
the right to designate one member to the Board of Directors of the Company
for a period of three years after the closing of this Offering. Dr. Steven
Katz has been designated by the Underwriter to serve as a Director.
The Company and the Underwriter have agreed in the Underwriting
Agreement to indemnify each other against certain liabilities, including
liabilities under the Securities Act. Insofar as indemnification for
liabilities arising under the Securities Act may be provided to officers,
directors or controlling persons of the Company, such indemnification, in
the opinion of the Commission, is against public policy and therefore
unenforceable.
LEGAL MATTERS
The legality of the Securities offered and certain legal matters
relating to this Offering (other than matters relating to patent law and
regulatory matters relating to the FDA) will be passed upon for the Company
by Kelley Drye & Warren LLP, New York, New York. Matters relating to
United States patent law will be passed upon for the Company by Graham &
James LLP, New York, New York. Regulatory matters relating to the FDA will
be passed upon for the Company by Dean E. Snyder, Esquire, Northfield,
Illinois. Bernstein & Wasserman, LLP, New York, New York, has acted as
counsel for the Underwriter in connection with this Offering.
EXPERTS
The financial statements of the Company included in this Prospectus at
December 31, 1993, 1994 and 1995 and for the years ended December 31, 1993,
1994 and 1995 and the period from December 16, 1993 (inception) through
December 31, 1995, have been audited by Rosenberg Rich Baker Berman &
Company, P.A., independent certified public accountants, as set forth in
their reports thereon appearing elsewhere herein and are included in
reliance upon such reports given upon the authority of such firm as experts
in accounting and auditing.
<PAGE>
GLOSSARY
As used in this Prospectus, the following terms have the following
meanings:
ALK. See Keratomileusis in situ.
Accommodation is the ability of the internal lens of the eye to adjust
its shape, and hence its refractive power, in order to achieve best focus.
Accommodation diminishes and ultimately disappears in mature adults.
Astigmatism is a result of a nonuniformity in the curvature of the
cornea. This causes a blurring of vision in the uncorrected eye because of
its inability to achieve a single point focus.
Bowman's layer is the layer of the cornea between the epithelium and
the stroma.
Cornea is the curved, transparent, outermost surface of the eye and
serves as a window through which light can pass. It is the primary
focusing element of the optical system of the eye.
Epithelium is the outer regenerative layer of the cornea.
Emmetropia is a condition in which the eyes focus optimally and no
vision correction is required. In emmetropia, the focusing system of the
eye is not myopic, hyperopic or astigmatic.
FDA means the United States Food and Drug Administration.
FD&C Act means the Federal Food, Drug, and Cosmetic Act and
implementing regulations.
Hydro-refractive keratoplasty (HRK) is a refractive surgical procedure
which utilizes an ultra-fine beam of water traveling at supersonic speeds
as a scalpel. The waterjet scalpel, in conjunction with a template, is
used to reshape the anterior surface of the cornea, thereby correcting
refractive disorders or errors.
Hydro-theraputic keratoplasty (HTK) is a theraputic procedure which
utilizes an ultra-fine beam of water traveling at supersonic speeds as a
scalpel. The waterjet scalpel, in conjunction with a template, is used to
remove diseased tissue from the cornea.
Hyperopia is farsightedness, which occurs when the cornea is too flat
for the depth of the eye.
Internal lens is an element of the optical system of the eye which
changes or accommodates its refractive power to achieve best focus.
Intraocular pressure ("IOP") is the internal gauge pressure of the
liquid within the eye globe.
Keratectomy is a surgical procedure in which a portion of the cornea
is removed in order to modify its refractive power.
Kerato- is a prefix meaning cornea.
Keratome is a surgical device employed in keratoplasty to shave thin
layers from the anterior surface of the cornea. One of the components of a
keratome is a cutting instrument, consisting of a diamond, metal, laser or
waterjet scalpel, which actually makes the incision across the cornea.
Keratomileusis is a refractive surgical procedure in which the cornea
is carved or shaved in order to modify its curvature.
Keratomileusis in situ ("KIS"), also known as refractive lamellar
keratoplasty ("RLK") or automated lameller keratoplasty ("ALK"), is a
refractive surgical procedure in which a keratome with a metal or diamond
scalpel is used to shave away a portion of the intact stromal bed after a
flap has been formed by the keratome to gain access to the stroma.
Keratoplasty is any surgical modification of the cornea.
Keratotomy is a surgical incision into the cornea, which is
approximately perpendicular to the surface of the eye.
LASIK is a combination of KIS to make a flap and PRK to shape the
stomal bed. LASIK stands for "Light Ablation System for In-Situ
Keratomileusis."
Myopia is nearsightedness, a focusing deficiency which occurs when the
cornea is too spherical for the depth of the eye.
Photoablation is a process which uses high intensity pulsed light to
remove a thin surface layer of the
cornea.
Photorefractive keratectomy (PRK) is a refractive surgical procedure
using a particular type of pulsed laser, known as an excimer laser, to
remove by photoablation many very thin layers of tissue of locally variable
thickness from the cornea in order to modify its curvature.
Pre-Market Approval Application (PMA) is an application to seek
approval from the FDA to market a product under Section 515 of the FD&C
Act.
Pre-Market Notification Application refers to an application to seek
approval from the FDA to market a product (without obtaining a PMA) under
Section 510(k) of the FD&C Act.
RLK. See Keratomileusis in situ.
Radial keratotomy (RK) is a refractive surgical procedure utilizing a
diamond or metal scalpel in which radial incisions are made in the
periphery of the cornea, outside of the vision zone, producing a flattening
of the cornea due to a redistribution of stresses in the cornea. The
incisions are approximately perpendicular to the surface of the eye.
Refraction refers to the passage of light rays from one optical
medium, such as air, into a second optical medium, such as the cornea,
which passage is accompanied by the bending of light rays at the interface.
The amount of bending depends on the direction of the light rays relative
to the surface normal direction.
Refractive error is the amount of deviation from emmetropia in the
focusing system of the eye. It is measured in diopters.
Refractive surgery is surgery of which the purpose is to alter the
refraction of light passing into the cornea in order to change the focusing
strength of the cornea. This is accomplished by modifying the anterior
curvature of the corneal surface.
Sclera is the opaque white of the eye surrounding the cornea. It
constitutes the main structure of the eye.
Stroma is the main layer of the cornea, constituting about 80% of its
thickness, which is responsible for most of its mechanical and optical
properties. It is a complex structure, composed of about 70% water.
Vision zone is a circular region within the cornea through which all
of the light ultimately reaching the retina passes.
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS
<S> <C>
Page
Independent Auditors' Report F-2
Balance Sheets as of March 31, 1996 (Unaudited) and
December 31, 1995 F-3
Statements of Operations for the three months ended
March 31, 1996 and 1995 (Unaudited) and for the
years ended December 31, 1995 and 1994 and the
period from December 16, 1993 (inception) to
March 31, 1996 (Unaudited) F-5
Statement of Stockholders' Equity as of March 31, 1996
(Unaudited) and December 31, 1995 and 1994 F-7
Statements of Cash Flows for the three months ended
March 31, 1996 and 1995 (Unaudited) and for the
years ended December 31, 1995 and 1994 and the
period from December 16, 1993 (inception) to
March 31, 1996 (Unaudited) F-8
Notes to the Financial Statements F-12
</TABLE>
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and
Stockholders of Medjet Inc.
(A Development Stage Company)
1090 King Georges Post Road
Suite 301
Edison, New Jersey 08837
We have audited the accompanying balance sheet of Medjet Inc. (A
Development Stage Company) as of December 31, 1995 and the related
statements of operations, stockholders' equity and cash flows for the years
then ended December 31, 1995 and 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Medjet Inc. (A
Development Stage Company) as of December 31, 1995 and the results of its
operations and its cash flows for the years then ended December 31, 1995
and 1994 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. The Company continues to be
in the development stage as of December 31, 1995 and has incurred a net
loss of $677,385 for the year ended December 31, 1995 and has incurred
losses since inception of $964,676. These factors, among others as
discussed in Note A to the financial statements, raise substantial doubt
about the Company's ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note A. The 1995
financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
Maplewood, New Jersey
January 15, 1996, except as to Note A(2), Note B(5) and (6), Note E, Note
H, Note I and Note J which are dated May 21, 1996.
</AUDIT-REPORT>
<TABLE>
<CAPTION>
MEDJET INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
ASSETS
March Pro-Forma March December
31, 1996 Adjustments 31, 1996 31, 1995
----------- ----------- ----------- --------
(Unaudited) (Unaudited)
(Pre-Pro- (Post-Pro-
Forma Forma
Adjustments) Adjustments)
CURRENT ASSETS:
<S> <C> <C> <C> <C>
Cash and cash
equivalents $ 60,660 - $ 60,660 $ 57,678
Marketable securities,
at cost - - - -
Interest receivable - - - -
Prepaid expenses 6,196 - 6,196 2,543
Prepaid income taxes - - - -
-------- --- -------- --------
66,856 66,856 60,221
PROPERTY, PLANT & EQUIPMENT:
Leasehold improvements 1,620 - 1,620 -
Ophthalmic equipment 29,688 - 29,688 29,688
Office furniture 10,011 - 10,011 8,781
Lab furniture 2,851 - 2,851 2,851
Computer equipment 26,892 - 26,892 20,487
Optical equipment 20,144 - 20,144 19,207
Waterjet equipment 35,794 - 35,794 32,497
Software 5,025 - 5,025 3,640
Mechanical equipment 2,313 - 2,313 2,313
Electronic equipment 2,874 - 2,874 1,169
-------- --- -------- --------
137,212 - 137,212 120,633
Less - Accumulated
depreciation 54,981 - 54,981 47,127
-------- --- -------- --------
82,231 - 82,231 73,506
-------- --- -------- --------
DEFERRED OFFERING COSTS 156,980 - 156,980 36,263
-------- --- -------- --------
ORGANIZATION COSTS - Less
accumulated amortization
of $14,531 in 1996,
$12,661 in 1995 and $5,183
in 1994 22,856 - 22,856 24,726
PATENT - Less accumulated
amortization of $1,058
in 1996, $772 in 1995
and $208 in 1994 18,347 - 18,347 18,633
SECURITY DEPOSITS 5,437 - 5,437 3,702
-------- --- -------- --------
$352,707 - $352,707 $217,051
======== === ======== ========
</TABLE>
See Notes to the Financial Statements.
<TABLE>
<CAPTION>
MEDJET INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
March Pro-Forma March December
31, 1996 Adjustments 31, 1996 31, 1995
------------ ----------- ----------- ---------
(Unaudited) (Unaudited)
(Pre-Pro- (Post-Pro-
Forma Forma
Adjustments) Adjustments)
CURRENT LIABILITIES:
<S> <C> <C> <C> <C>
Accounts payable $ 171,783 - $ 171,783 $ 64,753
Accrued interest payable 5,368 - 5,368 -
Notes payable 200,000 - 200,000 -
Notes payable - officer 150,000 - 150,000 150,000
Income taxes payable 150 - 150 150
Accrued officer's salary - - - -
----------- --------- --------- ---------
527,301 - 527,301 214,903
STOCKHOLDERS' EQUITY
(DEFICIT):
Common stock, $.001
par value, 7,000,000
shares authorized,
2,744,349 2,744,349
and 2,314,457 shares
(post-split) issued and
outstanding in 1996,
1995 and 1994,
respectively 2,744 - 2,744 2,352
Preferred Stock, $.01
par value, 1,000,000
shares authorized, no
shares issued - - - -
Additional paid in
capital 964,080 (1,141,418)(1) (177,338) 964,472
Accumulated deficit
during development
stage (1,141,418) 1,141,418(1) - (964,676)
----------- --------- --------- ---------
(174,594) - (174,594) 2,148
----------- --------- --------- ---------
$ 352,707 - $352,707 $217,051
============ ========= ========= =========
</TABLE>
Pro-Forma Adjustment
(1) Upon completion of the Initial Public Offering (see "Subsequent Event"
note) the Company's status changes from an "S" corporation to a "C"
corporation. Accordingly, the deficits accumulated during the
development stage are charged against additional paid in capital.
See Notes to the Financial Statements.
<TABLE>
<CAPTION>
MEDJET INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED)
AND YEARS ENDED DECEMBER 31, 1995 AND 1994, AND THE PERIOD FROM
DECEMBER 16, 1993 (DATE OF INCEPTION) TO MARCH 31, 1996 (UNAUDITED)
FOR THE THREE FOR THE THREE DECEMBER 16, 1993
MONTHS ENDED MONTHS ENDED (INCEPTION) TO
MARCH 31, 1996 MARCH 31, 1995 MARCH 31, 1996
-------------- -------------- -----------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
NET SALES $ - $ - $ -
----------- ----------- ------------
EXPENSES:
Officer's
salary 28,867 24,100 191,967
Consultant
fees 7,000 26,850 93,100
Other
salaries 80,429 44,638 427,125
Professional
fees 2,280 - 50,695
Rent 6,105 6,663 47,884
Mechanical
supplies 7,417 18,711 65,793
Depreciation 7,854 6,791 54,981
Ophthalmology
research 2,700 804 22,349
Insurance 1,147 - 14,400
Amortization 2,156 1,998 15,589
Travel 1,625 2,366 21,956
Payroll taxes 11,704 8,998 50,079
Optical
supplies 392 633 5,938
Telephone 1,462 1,213 11,146
Miscellaneous
expenses,
fees and
taxes 3,184 2,184 17,576
Advertising - 402 3,104
Biological
supplies 800 1,202 10,530
Freight 1,352 1,603 8,765
Office
supplies 1,363 477 7,189
Employee
welfare 1,038 1,199 12,741
Electrical
supplies 794 896 3,837
Chemical
supplies 396 956 5,055
Payroll
processing
fees 182 178 1,710
Bank charges 61 - 649
Postage 160 93 1,195
Blueprinting
and
photostats 502 125 4,874
Security
system 204 - 546
Membership
fees - 45 90
----------- ----------- ------------
171,174 153,125 1,150,863
----------- ----------- ------------
OTHER INCOME
(EXPENSE):
Interest
income - 6,074 15,263
Interest
expense (5,368) - (5,368)
LOSS BEFORE
INCOME
TAXES (176,542) (147,051) (1,140,968)
STATE INCOME
TAXES 200 - 450
----------- ----------- ------------
NET LOSS $(176,742) $ (147,051) $(1,141,418)
=========== =========== ============
NET LOSS
PER SHARE $ (.06) $ (.05) $ (.44)
=========== =========== ============
WEIGHTED
AVERAGE
COMMON SHARES
OUTSTANDING 2,744,349 2,700,200 2,580,440
=========== =========== ============
</TABLE>
See Notes to the Financial Statements.
<TABLE>
<CAPTION>
MEDJET INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED)
AND YEARS ENDED DECEMBER 31, 1995 AND 1994, AND THE PERIOD FROM
DECEMBER 16, 1993 (DATE OF INCEPTION) TO MARCH 31, 1996 (UNAUDITED)
(CONTINUED)
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- -----------------
<S> <C> <C>
NET SALES $ - $ -
----------- -----------
EXPENSES:
Officer's salary 96,400 66,700
Consultant fees 29,850 56,250
Other salaries 302,774 43,922
Professional fees 26,689 21,726
Rent 24,066 17,713
Mechanical supplies 40,994 17,382
Depreciation 32,321 14,806
Ophthalmology research 7,874 11,775
Insurance 7,672 5,581
Amortization 8,042 5,391
Travel 15,566 4,765
Payroll taxes 34,015 4,360
Optical supplies 1,985 3,561
Telephone 6,186 3,498
Miscellaneous expenses,
fees and taxes 11,125 3,267
Advertising 762 2,342
Biological supplies 7,609 2,121
Freight 5,636 1,777
Office supplies 4,063 1,763
Employee welfare 10,303 1,400
Electrical supplies 1,715 1,328
Chemical supplies 3,643 1,016
Payroll processing fee 812 716
Bank charges 20 568
Postage 598 437
Blueprinting and photostats 4,182 190
Security system 166 176
Membership fees 45 45
----------- -----------
685,113 294,576
----------- -----------
OTHER INCOME (EXPENSES):
Interest income 7,928 7,335
Interest expense - -
LOSS BEFORE INCOME
TAXES (677,185) (287,241)
STATE INCOME TAXES 200 50
----------- -----------
NET LOSS $ (677,385) $ (287,291)
=========== ===========
NET LOSS PER SHARE $ (.25) $ (.12)
=========== ===========
WEIGHTED AVERAGE
COMMON SHARES
OUTSTANDING 2,713,707 2,364,989
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
MEDJET INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
PERIOD FROM DECEMBER 16, 1993 (DATE OF INCEPTION)
TO MARCH 31, 1996 (UNAUDITED)
COMMON PRICE TOTAL
SHARES PER CONSIDERATION
DATE DESCRIPTION ISSUED SHARE PAID
- ---- ----------- ------- ------ -------------
<S> <C> <C> <C> <C>
March 12, 1994 Share Issuance 800,000 $ .10 $ 80,000
April 21, 1994 Share Issuance 15,000 .10 1,500
May 1, 1994 Share Issuance 63,000 .10 6,300
May 25, 1994 Share Issuance 50,000 1.00 50,000
May 31, 1994 Share Issuance 25,000 1.00 25,000
June 6, 1994 Share Issuance 50,000 1.00 50,000
June 7, 1994 Share Issuance 50,000 1.00 50,000
June 13, 1994 Share Issuance 25,000 1.00 25,000
June 20, 1994 Share Issuance 25,000 1.00 25,000
July 28, 1994 Share Issuance 25,000 1.00 25,000
September 23, 1994 Share Issuance 45,002 6.00 270,012
October 20, 1994 Share Issuance 20,501 6.00 123,008
October 28, 1994 Share Issuance 2,500 6.00 15,000
November 10, 1994 Share Issuance 14,500 6.00 87,000
November 16, 1994 Share Issuance 2,501 6.00 15,004
Net Loss, Year
Ended December
31, 1994 - -
--------- --------
Balance,
December 31, 1994 1,213,004 847,824
August 8, 1995 Share Issuance 5,000 6.00 30,000
August 28, 1995 Share Issuance 4,000 6.00 24,000
September 21, 1995 Share Issuance 5,000 6.00 30,000
September 29, 1995 Share Issuance 5,000 6.00 30,000
December 31, 1995 Share Issuance 833 6.00 5,000
December 31, 1995 Stock Split
2.2260435971
for 1 Share
Outstanding 1,511,512 - -
Net Loss, Year
Ended
December 31, 1995 - - -
--------- --------
Balance, December
31, 1995 2,744,349 $966,824
Net Loss, Three
Months Ended
March 31, 1996 - - -
--------- --------
Balance, March
31, 1996 (Unaudited) 2,744,349 $966,824
========= ========
</TABLE>
See Notes to the Financial Statements.
<TABLE>
<CAPTION>
MEDJET INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
PERIOD FROM DECEMBER 16, 1993 (DATE OF INCEPTION)
TO MARCH 31, 1996 (UNAUDITED)
COMMON
STOCK PAID
($.001 PAR IN ACCUMULATED
DATE DESCRIPTION VALUE CAPITAL DEFICIT
- ---- ----------- ---------- ------- -----------
<S> <C> <C> <C> <C>
March 12, 1994 Share Issuance $ 800 $ 79,200 $ -
April 21, 1994 Share Issuance 15 1,485 -
May 1, 1994 Share Issuance 63 6,237 -
May 25, 1994 Share Issuance 50 49,950 -
May 31, 1994 Share Issuance 25 24,975 -
June 6, 1994 Share Issuance 50 49,950 -
June 7, 1994 Share Issuance 50 49,950 -
June 13, 1994 Share Issuance 25 24,975 -
June 20, 1994 Share Issuance 25 24,975 -
July 28, 1994 Share Issuance 25 24,975 -
September 23, 1994 Share Issuance 45 269,967
October 20, 1994 Share Issuance 21 122,987 -
October 28, 1994 Share Issuance 2 14,998 -
November 10, 1994 Share Issuance 15 86,985 -
November 16, 1994 Share Issuance 2 15,002 -
Net Loss, Year
Ended December
31, 1994 - - (287,291)
------ ---------- ------------
Balance, December
31, 1994 1,213 846,611 (287,291)
August 8, 1995 Share Issuance 5 29,995 -
August 28, 1995 Share Issuance 4 23,996 -
September 21, 1995 Share Issuance 5 29,995 -
September 29, 1995 Share Issuance 5 29,995 -
December 31, 1995 Share Issuance 1 4,999 -
December 31, 1995 Stock Split
2.2260435971
for 1 Share
Outstanding 1,511 (1,511) -
Net Loss, Year
Ended December
31, 1995 - - (677,385)
------ ---------- ------------
Balance, December
31, 1995 $2,744 $ 964,080 $ (964,676)
Net Loss, Three
Months Ended March 31, 1996 - - (176,742)
------ ---------- ------------
Balance, March 31, 1996 (Unaudited) $2,744 $ 964,080 $(1,141,418)
====== ========== ============
</TABLE>
See Notes to the Financial Statements.
<TABLE>
<CAPTION>
MEDJET INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED)
AND YEARS ENDED DECEMBER 31, 1995 AND 1994, AND THE PERIOD FROM
DECEMBER 16, 1993 (DATE OF INCEPTION), TO MARCH 31, 1996 (UNAUDITED)
FOR THE THREE FOR THE THREE DECEMBER 16, 1993
MONTHS ENDED MONTHS ENDED (INCEPTION) TO
MARCH 31, 1996 MARCH 31, 1995 MARCH 31, 1996
-------------- -------------- -----------------
(Unaudited) (Unaudited) (Unaudited)
CASH FLOWS FROM
OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net loss $(176,742) $(147,051) $(1,141,418)
Adjustments to Reconcile
Net Loss to Net Cash Used
by Operating Activities:
Depreciation and
amortization 10,010 8,789 70,570
(Increase) Decrease in
interest receivable - (4,663) -
(Increase) Decrease in
prepaid income taxes - - -
(Increase) in prepaid
expenses (3,653) (3,779) (6,196)
(Decrease) Increase in
accounts payable (13,687) 407 14,803
Increase in accrued
interest payable 5,368 - 5,368
Increase in income taxes
payable - - 150
Increase (Decrease)
in accrued officer's
salary - (18,000) -
---------- ---------- ------------
Net Cash Used by
Operating Activities (178,704) (164,297) (1,056,723)
---------- ---------- ------------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Cash (purchases) redemption
of marketable securities - 320,605 -
Cash purchases of property
and equipment (16,579) (16,937) (137,212)
Cash purchase of
organization costs - - (37,387)
Cash purchase of patents - - (19,405)
Cash payments for security
deposits (1,735) - (4,437)
---------- ---------- ------------
Net Cash Provided (Used) by
Investing Activities (18,314) 303,668 (199,441)
---------- ---------- ------------
</TABLE>
See Notes to the Financial Statements.
<TABLE>
<CAPTION>
MEDJET INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED)
AND YEARS ENDED DECEMBER 31, 1995 AND 1994, AND THE PERIOD FROM
DECEMBER 16, 1993 (DATE OF INCEPTION), TO MARCH 31, 1996 (UNAUDITED)
(CONTINUED)
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- -----------------
CASH FLOWS FROM
OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $(677,385) $(287,291)
Adjustments to reconcile
Net Loss to Net Cash Used
by Operating Activities:
Depreciation and
amortization 40,363 20,197
(Increase) Decrease in
interest receivable 2,877 (2,877)
(Increase) Decrease in
prepaid income taxes 25 (25)
(Increase) in prepaid
expenses (2,543) -
(Decrease) Increase in
accounts payable (3,016) 31,506
Increase in accrued
interest payable - -
Increase in income taxes
payable 150 -
Increase (Decrease) in
accrued officer's salary (66,700) 66,700
---------- ----------
Net Cash Used by
Operating Activities (706,229) (171,790)
---------- ----------
CASH FLOW FROM
INVESTING ACTIVITIES:
Cash (purchases) redemption
of marketable securities 320,605 (320,605)
Cash purchase of property
and equipment (43,918) (76,715)
Cash purchase of
organization costs - (37,387)
Cash purchase of patents (10,716) (8,689)
Cash payments for security
deposits - (3,702)
---------- ----------
Net Cash Provided (Used) by
Investing Activities 265,971 (447,098)
---------- ----------
</TABLE>
See Notes to the Financial Statements.
<TABLE>
<CAPTION>
MEDJET INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED)
AND YEARS ENDED DECEMBER 31, 1995 AND 1994, AND THE PERIOD FROM
DECEMBER 16, 1993 (DATE OF INCEPTION), TO MARCH 31, 1996 (UNAUDITED)
FOR THE THREE FOR THE THREE DECEMBER 16, 1993
MONTHS ENDED MONTHS ENDED (INCEPTION) TO
MARCH 31, 1996 MARCH 31, 1995 MARCH 31, 1996
-------------- -------------- -----------------
(Unaudited) (Unaudited) (Unaudited)
CASH FLOWS FROM FINANCING
ACTIVITIES (CONTINUED):
<S> <C> <C> <C>
Proceeds from issuance
of common stock $ - $ - $ 966,824
Proceeds from officer loan - - 156,000
Repayment of officer loan - - (6,000)
Proceeds from notes payable 200,000 - 200,000
-------- -------- -----------
Net Cash Provided by
Financing Activities 200,000 - 1,316,824
-------- -------- -----------
NET INCREASE
(DECREASE) IN CASH 2,982 139,371 60,660
CASH AND CASH
EQUIVALENTS - BEGINNING
OF PERIOD 57,678 228,936 -
-------- -------- -----------
CASH AND CASH
EQUIVALENTS - END
OF PERIOD $ 60,660 $368,307 $ 60,660
======== ======== ===========
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW INFORMATION:
Cash Paid During the
Year For:
Income taxes $ - $ - $ 200
======== ======== ===========
SUPPLEMENTAL DISCLOSURES OF
NON-CASH FINANCING ACTIVITIES:
Increase in Accounts
Payable for Accrual
of Deferred Charges $120,717 $ - $ 156,980
======== ======== ===========
</TABLE>
See Notes to the Financial Statements.
<TABLE>
<CAPTION>
MEDJET INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED)
AND YEARS ENDED DECEMBER 31, 1995 AND 1994, AND THE PERIOD FROM
DECEMBER 16, 1993 (DATE OF INCEPTION), TO MARCH 31, 1996 (UNAUDITED)
(CONTINUED)
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- -----------------
CASH FLOWS FROM FINANCING
ACTIVITIES (CONTINUED):
<S> <C> <C>
Proceeds from issuance
of common stock $ 119,000 $847,824
Proceeds from officer loan 150,000 6,000
Repayment of officer loan - (6,000)
Proceeds from notes payable - -
---------- ---------
Net Cash Provided by
Financing Activities 269,000 847,824
---------- ---------
NET INCREASE
(DECREASE) IN CASH (171,258) 228,936
CASH AND CASH EQUIVALENTS
- BEGINNING OF PERIOD 228,936 -
---------- ---------
CASH AND CASH
EQUIVALENTS - END
OF PERIOD $ 57,678 $228,936
========== =========
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash Paid During the Year For:
Income taxes $ 125 $ 75
========== =========
SUPPLEMENTAL DISCLOSURES OF
NON-CASH FINANCING ACTIVITIES:
Increase in Accounts
Payable for Accrual
of Deferred Charges $ 36,263 $ -
========== =========
</TABLE>
MEDJET INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
NOTE A - NATURE OF ORGANIZATION AND BASIS OF PRESENTATION:
(1) Nature of Organization:
Medjet Inc. (the Company) is a development stage company
incorporated in the State of Delaware on December 16, 1993. The Company
was organized to engage in the design, development, production and sales of
refractive corneal correction technology and equipment.
(2) Basis of Presentation:
The Company is a development stage enterprise and has neither
realized any operating revenue nor has any assurance of realizing any
future operating revenue. Successful future operations depend upon the
successful development and marketing of the refractive corneal correction
technology and equipment. During the period required to successfully
develop and market a commercial product, the Company will require
additional funds for operations. Substantial additional financing may be
required to continue and complete the development of refractive corneal
correction technology and equipment, obtain regulatory approval and market
the product. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to
these matters include (1) an initial public offering of a minimum of
1,200,000 units or a maximum of 1,600,000 units ("Units"), with each Unit
consisting of (i) one share of Medjet common stock, and (ii) one 18-month
warrant to purchase one common share at an exercise price of $10 per share,
(2) securing interim short-term financing until such time as the planned
initial public offering is completed, (3) reducing the level of research
and administrative expenses, including the deferment of officers' salaries
until such time as additional equity financing is completed, and (4)
considering additional private placements of equity securities in the event
the initial public offering is not completed. The Units are expected to be
offered for sale to the public at $5 per Unit and will be sold on a best
efforts, all or none, basis with respect to the first 1,200,000 Units and
on a best efforts basis with respect to the additional 400,000 Units and
will continue for a period of up to 180 days. There is no assurance that
the offering will be successful. Management believes that the net proceeds
of the offering, if successful, will be sufficient to meet the Company's
anticipated cash requirements for a period of approximately 24 months
following the offering. Between December 31, 1995 and March 31, 1996, the
Company obtained two $50,000 bridge loans arranged for by the Company's
underwriter. Both of the bridge loans bear interest at 12% per annum and
are payable at the earlier of (a) December 31, 1996 or (b) the closing of
an equity or debt financing for not less than $1,000,000 or (c) the closing
of any sale of the Company's securities. During that time, the Company
also obtained two additional $50,000 loans which bear interest at 8% per
annum and are payable at the earlier of (a) January 31, 1997 or (b) the
closing of an equity or debt financing for not less than $1,000,000 or (c)
the closing of any sale of the Company's securities. The accompanying
financial statements do not include any adjustments that might result from
the outcome of the aforementioned uncertainty.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(1) Cash and Equivalents:
For the purpose of the statement of cash flows, cash equivalents
include all highly liquid treasury bill instruments with original
maturities of three months or less.
(2) Marketable Securities:
Marketable securities are treasury bills stated at cost which
approximates market at December 31, 1994.
(3) Deferred Offering Costs:
Deferred offering costs consist of expenses incurred to date with
respect to a public offering which the Company is pursuing. These costs
will be charged against the proceeds of such offering or, in the event the
offering is unsuccessful, against operations in the period in which the
offering is aborted.
(4) Property, Plant and Equipment:
Property, plant and equipment are recorded at cost. Depreciation
is computed using primarily accelerated methods based upon the estimated
useful lives of the assets which range from 5 to 7 years. Repairs and
maintenance which do not extend the useful lives of the related assets are
expensed as incurred.
(5) Amortization:
Organizational costs are being amortized over sixty months on a
straight-line basis. Total amortization in 1996 (to date), 1995 and 1994
was $1,870, $7,478 and $5,183, respectively.
Patents are being amortized over seventeen years on a straight-
line basis. These costs will be expensed if and when it is concluded that
nonapproval or no future economic benefits are probable. Total amortization
in 1996 (to date), 1995 and 1994 was $286, $564 and $208, respectively.
(6) Net Loss Per Share:
Net loss per share is computed by dividing net loss by the
weighted average number of shares of Common Stock outstanding during the
year after giving effect to a 2.226043597 to 1 stock split of the Company's
Common Stock on the effective date based on the minimum number of units to
be sold in the offering.
(7) Income Taxes:
The Company, with the consent of its shareholders, has elected to
be an "S" Corporation under the Internal Revenue Code. Instead of paying
Federal corporate income taxes, the shareholders of an "S" Corporation are
taxed individually on their proportionate share of the Company's taxable
income. Therefore, no provision or liability for Federal income taxes has
been included in these financial statements.
In accordance with the provision of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No.
109"), deferred tax assets and liabilities are recognized for the estimated
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases for State purposes only. Deferred tax assets and
liabilities are measured using enacted tax rates in effect for the years in
which those temporary differences are expected to be recovered or settled.
Under SFAS No. 109, the effect on deferred tax assets and liabilities of a
change in state tax rates is recognized in income in the period that
includes the enactment date.
(8) Reclassification:
Certain accounts in the prior year's financial statements have
been reclassified for comparative purposes to conform with presentation in
the current year's financial statements.
NOTE C - EQUITY TRANSACTIONS:
The Company's founder and President, Dr. Eugene I. Gordon ("Dr.
Gordon"), and three other original investors were initially issued stock
(pre-split) of the Company as follows between March 12, 1994 and May 1,
1994:
<TABLE>
<CAPTION>
Price
Shares per
Issued share Total
------ ------- -----
<S> <C> <C> <C>
Dr. Gordon, President 800,000 $.10 $80,000
Other Original Investors (3) 78,000 $.10 7,800
------- -------
878,000 $87,800
======= =======
</TABLE>
The sale of these securities was exempt from registration under
Section 4(2) of the Securities Act of 1933 ("the Act").
Pursuant to a first private placement offering that commenced May
25, 1994 and concluded July 28, 1994, the Company sold an aggregate of
250,000 shares (pre-split) at $1 per share ($250,000). The sale of these
securities was exempt from registration under Rule 506, Regulation D of the
Act.
Pursuant to a second private placement offering that commenced
September 23, 1994 and concluded November 16, 1994, the Company sold an
aggregate of 85,004 shares (pre-split) at $6 per share ($510,024). The
sale of these securities was exempt from registration under Rule 506,
Regulation D of the Act.
On September 30, 1994, the Company adopted its 1994 Stock Option
Plan ("the Plan"). The Plan provides that certain options granted
thereunder are intended to qualify as "incentive stock options" within the
meaning of Section 422A of the Internal Revenue Code of 1986, while non-
qualified options may also be granted under the Plan. The Plan provides
for authorization of up to 25,000 shares. The option price per share of
Common Stock purchasable under an incentive stock option shall be
determined at the time of grant but shall be not less than 100% of the fair
market value of the Common Stock on such date, or, in the case of a 10%
Stockholder, the option price per share shall be no less than 110% of the
fair market value of the Common Stock on the date an Incentive Stock Option
is granted to such 10% Stockholder.
Pursuant to a third private placement offering that commenced
August 8, 1995 and concluded October 31, 1995, the Company offered an
additional 85,000 shares (pre-split) of which an aggregate of 19,833 shares
(pre-split) have been sold through December 31, 1995 at $6 per share
($118,988). The sale of these securities was exempt from registration
under Rule 506, Regulation D of the Act.
On December 31, 1995, 833 additional common shares (pre-split)
were issued to Dr. Gordon at $6 per share ($5,000), bringing his total
share holdings of the Company's Common Stock to be 800,833 shares (pre-
split) at December 31, 1995.
NOTE D - DEVELOPMENT STAGE OPERATIONS:
The Company was formed December 16, 1993. Operations since then
have consisted primarily of raising capital, locating and acquiring
equipment, obtaining qualified staff, installing and testing equipment and
experimenting, testing and developing the procedures necessary to produce
positive results and to lay the foundation for specific development for
manufacturing and FDA approvals.
NOTE E - NOTES PAYABLE
Between December 31, 1995 and March 31, 1996, the Company
obtained two $50,000 bridge loans arranged for by the Company's
underwriter. Both of the bridge loans bear interest at 12% per annum and
are payable at the earlier of (a) December 31, 1996 or (b) the closing of
an equity or debt financing for not less than $1,000,000 or (c) the closing
of any sale of the Company's securities. During that time, the Company
also obtained two additional $50,000 loans which bear interest of 8% per
annum and are payable at the earlier of (a) January 31, 1997 or (b) the
closing of an equity or debt financing for not less than $1,000,000 or (c)
the closing of any sale of the Company's securities. The accompanying
financial statements do not include any adjustments that might result from
the outcome of the aforementioned uncertainty.
NOTE F - NOTES PAYABLE - OFFICER:
Loans made to the Company by the officer bear interest at 7% per
annum, are payable upon demand and are unsecured.
NOTE G - RETIREMENT PLAN:
The Company sponsors a qualified 401(k) plan covering
substantially all full time employees under which eligible employees can
defer a portion of their annual compensation. At the present time, the
Company makes no matching contributions to the plan.
NOTE H - INCOME TAXES:
The income tax provision is comprised of the following at March
31, 1996 (unaudited) and December 31 of each of 1995 and 1994:
<TABLE>
<S> <C> <C> <C>
State current provision $200 $200 $ 50
==== ==== ====
</TABLE>
The Company's total deferred tax asset and valuation allowance at
March 31, 1996 (unaudited) and December 31 of each of 1995 and 1994 are as
follows:
<TABLE>
<S> <C> <C> <C>
Total deferred tax asset $ 95,972 $ 80,083 $ 26,133
Less valuation allowance (95,972) (80,083) (26,133)
--------- --------- ---------
Net deferred tax asset $ - $ - $ -
========= ========= =========
</TABLE>
The Company has available a $889,815 net operating loss carry
forward which may be used to reduce future state taxable income available
through December 31, 2002.
NOTE I - OPERATING LEASE:
The Company leases its building and office space.
The following is a schedule by years of future minimum lease
payments as of March 31, 1996 under operating leases that have initial or
remaining non-cancelable lease terms in excess of one year.
<TABLE>
<CAPTION>
For the Year Ended March 31,
----------------------------
<S> <C>
1997 57,444
1998 59,069
1999 64,764
--------
Total Minimum Lease Payments Required $181,277
========
</TABLE>
Rent expense under the operating lease totaled $6,105, $24,066
and $17,713 at March 31, 1996 (unaudited), December 31, 1995 and 1994,
respectively.
The lease also contains provisions for contingent rental payments
based upon increases in taxes, insurance and common area maintenance
expense.
NOTE J - SUBSEQUENT EVENTS:
On April 3, 1996, the Company filed with the SEC a registration
statement to sell and issue 1,200,000 units under a minimum offering or
1,600,000 units under a maximum offering consisting of one share of Common
Stock and one redeemable Class A Common Stock purchase warrant.
All costs associated with this offering will be deferred and
deducted from the proceeds from the sale of stock. If the Company does not
complete this offering, such costs will be charged to expense.
On the effective date of the registration, the Company will give
effect to a 2.226043597 to 1 stock split of its Common Stock on all shares
of Common Stock outstanding based on the minimum number of units to be sold
in the offering.
During April and May 1996, the Company obtained additional bridge
financing in the amount of $100,000. In exchange for the $100,000, the
Company executed in favor of the lender two promissory notes, each in the
amount of $50,000. The notes accrue interest at 12% per annum and are due
on the earlier of (i) December 31, 1996 or (ii) the closing date of this
offering or (iii) the closing of an equity or debt financing for not less
than $1,000,000.
<PAGE>
<TABLE>
<S> <C>
No dealer, sales representative or
other individual has been authorized
to give any information or to make
any representation not contained in 1,200,000 UNITS - MINIMUM OFFERING
this Prospectus in connection with
this offering other than those 1,600,000 UNITS - MAXIMUM OFFERING
contained in this Prospectus and,
if given or made, such information
or representation must not be relied Each Unit Consisting of One Share
upon as having been authorized by the of Common Stock and One Class A
Company or the Underwriters. This Redeemable Common
Prospectus does not constitute an Stock Purchase Warrant
offer to sell or solicitation of an
offer to buy the Common Stock by
anyone in any jurisdiction in which
such offer or solicitation is not
authorized or in which the person
making such offer or solicitation
is not qualified to do so or to any
person to whom it is unlawful to make
such offer or solicitation. Neither
the delivery of this Prospectus nor
any sale made hereunder shall under
any circumstances create an implication
that the information contained herein
is correct as of any time subsequent
to its date.
_________ MEDJET INC.
TABLE OF CONTENTS
Page
----
Additional Information 4
Prospectus Summary 5
Risk Factors 10
Use of Proceeds 19
Dilution 21
Capitalization 23
Dividend Policy 24 ____________________
Plan of Operation 24
Business 26 PROSPECTUS
Management 38 ____________________
Principal Stockholders 44
Certain Transactions 45
Description of Securities 45
Shares Eligible for Future Sale 47 PATTERSON TRAVIS, INC.
Underwriting 48
Legal Matters 50 _________, 1996
Experts 50
Glossary 51
Index to Financial Statements F-1
_________
Until _____________, 1996 [25 days after
the date of this Prospectus], all dealers
effecting transactions in the registered
securities, whether or not participating
in this distribution, may be required to
deliver a Prospectus. This delivery
requirement is in addition to the
obligation of dealers to deliver
a Prospectus when acting as an
underwriter and with respect to their
unsold allotments or subscriptions.
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
As permitted by Section 145 of the Delaware General Corporation Law
("GCL"), the Company's Certificate of Incorporation (the "Certificate")
provides that no Director shall be personally liable to the Company or any
stockholder for monetary damages for breach of fiduciary duty as a
Director, except for liability: (i) arising from payment of dividends or
approval of a stock purchase in violation of Section 174 of the GCL; (ii)
for any breach of the duty of loyalty to the Company or its stockholders;
(iii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; or (iv) for any action from which
the Director derived an improper personal benefit. While the Certificate
provides protection from awards for monetary damages for breaches of the
duty of care, it does not eliminate the Director's duty of care.
Accordingly, the Certificate will not affect the availability of equitable
remedies, such as an injunction, based on a Director's breach of the duty
of care. The provisions of the Certificate described above apply to
officers of the Company only if they are Directors of the Company and are
acting in their capacity as Directors, and does not apply to officers of
the Company who are not Directors.
In addition, the Company's By-Laws provide that the Company shall
indemnify its officers and Directors, employees and agents, to the fullest
extent permitted by the GCL. Under the GCL, directors and officers as well
as employees and individuals may be indemnified against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement in
connection with specified actions, suits or proceedings, whether civil,
criminal, administrative or investigative (other than an action by or in
the right of the corporation as a derivative action) if they acted in good
faith and in a manner they reasonably believed to be in or not opposed to
the best interests of the corporation, and with respect to any criminal
action or proceeding, had no reasonable cause to believe their conduct was
unlawful.
The Company has entered into indemnification agreements with its
officers and directors which provide for indemnification in favor of such
officers and directors by the Company to the fullest extent permitted by
the GCL.
Reference is made to Section 6 of the Form of Underwriting Agreement
(to be filed as Exhibit 1.1 to this Registration Statement) which provides
for indemnification of the Company's officers, Directors and controlling
persons by the Underwriters against certain civil liabilities, including
liabilities under the Securities Act of 1933, as amended (the "Securities
Act").
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, MAY BE PERMITTED TO DIRECTORS, OFFICERS
OR PERSONS CONTROLLING THE COMPANY PURSUANT TO THE FOREGOING PROVISIONS,
THE COMPANY HAS BEEN INFORMED THAT, IN THE OPINION OF THE SECURITIES AND
EXCHANGE COMMISSION, SUCH INDEMNIFICATION IS AGAINST PUBLIC POLICY AS
EXPRESSED IN SUCH ACT AND IS THEREFORE UNENFORCEABLE.
The Company is seeking a Director and Officer Liability Insurance
Policy, under which each Director and certain officers of the Company would
be insured against certain liabilities.
Item 25. Other Expenses of Issuance and Distribution.
The following expenses in connection with the issuance and
distribution of the securities being registered hereby (which exclude the
Underwriter's non-accountable expense allowance) will be borne by the
Company.
<TABLE>
<S> <C>
Registration Fee $ 9,641
Transfer Agent and Registrar Fee* 9,000
NASD Filing Fee 3,296
NASDAQ Listing Fee 10,000
Printing Costs* 10,000
Legal Fees* 210,000
Accounting Fees* 30,000
Blue Sky Fees and Expenses* 55,000
Miscellaneous* 63
--------
Total $337,000
========
</TABLE>
____________________________
*Estimated
Item 26. Recent Sales of Unregistered Securities.
Described below are all securities which have been issued by the
Company since December 16, 1993 (the date of the Company's inception)
without registration under the Act. There were no underwriting discounts
or commissions paid in connection with the issuance of any such securities.
1. Between March 12 and May 1, 1994, the Company sold 800,000
shares (pre-split) of Common Stock to Eugene I. Gordon, 48,000 shares (pre-
split) of Common Stock to Peretz Feder, and 15,000 shares (pre-split) of
Common Stock to each of Joseph Calderone, Jr. and Joseph Carroll, III (an
aggregate of 878,000 shares) at a purchase price of $.10 per share (an
aggregate purchase price of $87,800). The sale of these securities was
exempt from registration under Section 4(2) of the Act, because no public
offering was involved.
2. Between May 25, 1994 and July 28, 1994, the Company sold 25,000
shares (pre-split) of Common Stock to each of 10 investors (an aggregate of
250,000 shares) at a purchase price of $1.00 per share (an aggregate
purchase price of $250,000). The sale of these securities was exempt from
registration under Rule 506, Regulation D of the Act.
3. Between September 23, 1994 and November 16, 1994, the Company
sold an aggregate of 85,004 shares (pre-split) of its Common Stock to nine
investors at a purchase price of $6.00 per share (an aggregate purchase
price of $510,024). The sale of these securities was exempt from
registration under Rule 506, Regulation D of the Act.
4. Between August 8, 1995 and September 29, 1995, the Company sold
an aggregate of 19,000 shares (pre-split) of its Common Stock to four
investors at a purchase price of $6.00 per share (an aggregate purchase
price of $114,000). The sale of these securities was exempt from
registration under Rule 506, Regulation D of the Act.
5. On December 31, 1995, the Company sold 833 shares (pre-split)
of its Common Stock to Eugene I. Gordon at a purchase price of $6.00 per
share (an aggregate purchase price of $5,000). The sale of these
securities was exempt from registration under Section 4(2) of the Act,
because no public offering was involved.
Item 27. Exhibits.
The following is a list of all Exhibits filed as a part of this
Registration Statement.
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
- ------- -------
<S> <C>
*1.1 Form of Underwriting Agreement.
*1.2 Form of Escrow Agreement by and among the Registrant, the
Underwriter and the Escrow Agent.
1.3 Form of Selected Dealers Agreement.
*3.1 Amended and Restated Certificate of Incorporation of the
Registrant.
*3.2 By-Laws of the Registrant.
*4.1 Form of Certificate evidencing the shares of Common Stock.
*4.2 Form of Certificate evidencing the Units.
*4.3 Form of Certificate evidencing the Class A Warrants (included in
Exhibit 4.5).
*4.4 Form of Underwriter's Option Agreement.
*4.5 Form of Warrant Agreement for the Class A Warrants.
4.6 Form of Subscription Agreement for the Units.
*5.1 Opinion of Kelley Drye & Warren LLP.
*10.1 Employment Agreement between the Registrant and Eugene I. Gordon,
dated as of March 15, 1996.
10.2 Employment Agreement between the Registrant and Thomas
Handschiegel, dated as of March 18, 1996.
10.3 Consulting Agreement between the Registrant and Joseph F. Carroll
III, dated as of April , 1994.
10.4 Consulting Agreement between the Registrant and Joseph P.
Calderone, Jr., dated as of April 1, 1994.
*10.6 The Medjet Inc. 1994 Stock Option Plan, as amended.
10.7 Promissory Note from the Registrant in favor of Eugene Gordon in
the principal amount of $25,000, dated October 27, 1995.
10.8 Promissory Note from the Registrant in favor of Eugene Gordon in
the principal amount of $25,000, dated November 13, 1995.
10.9 Promissory Note from the Registrant in favor of Eugene Gordon in
the principal amount of $25,000, dated November 30, 1995.
10.10 Promissory Note from the Registrant in favor of Eugene Gordon in
the principal amount of $25,000, dated December 18, 1995.
10.11 Promissory Note from the Registrant in favor of Eugene Gordon in
the principal amount of $50,000, dated December 30, 1995.
10.12 Promissory Note from the Registrant in favor of Jan Wernick in the
principal amount of $50,000, dated February 6, 1996.
10.13 Promissory Note from the Registrant in favor of Steven G.
Cooperman in the principal amount of $50,000, dated February 26,
1996.
10.14 Promissory Note from the Registrant in favor of Sanford J.
Hillsberg in the principal amount of $50,000, dated February 26,
1996.
10.15 Promissory Note from the Registrant in favor of Jan Wernick in the
principal amount of $50,000, dated March 14, 1996.
10.16 Agreement of Lease between the Registrant and Linpro Edison Land
Limited, dated May 13, 1994.
10.17 First Amendment to Lease between the Registrant and BCE
Associates, L.P., dated February 28, 1996.
*10.18 Promissory Note from the Registrant in favor of Jan Wernick in the
principal amount of $50,000, dated April 15, 1996.
*10.19 Promissory Note from the Registrant in favor of Jan Wernick in the
principal amount of $50,000, dated May 6, 1996.
*10.20 Form of Consulting Agreement between the Registrant and Steven G.
Cooperman, dated as of _______, 1996.
*10.21 Form of Consulting Agreement between the Registrant and Sanford J.
Hillsberg, dated as of _______, 1996.
*23.1 Consent of Rosenberg Rich Baker Berman and Company.
*23.2 Consent of Kelley Drye & Warren LLP (included in Exhibit 5.1).
23.3 Consent of Graham & James LLP.
*23.4 Consent of Dean E. Snyder, Esquire.
24.1 Power of Attorney (included on signature page).
*27 Financial Data Schedule
</TABLE>
_______________________
* Filed herewith.
Unless otherwise indicated, all exhibits were previously filed.
Item 28. Undertakings.
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act"), may be permitted
to directors, officers and controlling persons of the Company, the Company
has been advised that, in the opinion of the Securities and Exchange
Commission (the "Commission"), such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Company of expenses incurred or paid by a
director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
(b) The Company hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include a prospectus required by Section 10(a)(3)
of the Securities Act;
(ii) To reflect in the prospectus any facts or events
which, individually or in the aggregate, represent a fundamental change in
the information set forth in this Registration Statement. Notwithstanding
the foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement;
(iii) To include any additional or changed material
information on the plan of distribution.
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement of the securities offered, and the offering
of such securities at that time to be the initial bona fide offering.
(3) To file a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering.
(4) For purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and
contained in the form of prospectus filed by the Company pursuant to Rule
424(b)(1) or (4), or 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time it was declared
effective.
(5) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(c) The Company will provide to the underwriter at the closing
specified in the underwriting agreement certificates in such denominations
and registered in such names as required by the underwriter to permit
prompt delivery to each purchaser.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form SB-2 and authorized this
amendment to the registration statement to be signed on its behalf by the
undersigned, in the City of New York, State of New York, on May 21, 1996.
MEDJET INC.
By: /s/ Eugene I. Gordon
____________________________________
Eugene I. Gordon
President and Chairman of the Board
In accordance with the requirements of the Securities Act of 1933,
this amendment to the registration statement has been signed by the
following persons in the capacities and on the dates stated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Eugene I. Gordon
_______________________________ President and May 21, 1996
Eugene I. Gordon Chairman of the
Board (Principal
Executive Officer)
/s/ Thomas M. Handschiegel
________________________________ Chief Financial Officer May 21, 1996
Thomas M. Handschiegel and Vice President for
Finance and Human
Resources (Principal
Financial and Accounting
Officer)
*
_______________________________ Director May 21, 1996
Steven G. Cooperman
*By: /s/ Thomas M. Handschiegel
__________________________
Attorney-in-Fact
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
Exhibit
Number Exhibit Sequentially
Numbered Page
<S> <C>
*1.1 Form of Underwriting Agreement.
*1.2 Form of Escrow Agreement by and among
the Registrant, the Underwriter and
the Escrow Agent.
1.3 Form of Selected Dealers Agreement.
*3.1 Amended and Restated Certificate of
Incorporation of the Registrant.
*3.2 By-Laws of the Registrant.
*4.1 Form of Certificate evidencing the
shares of Common Stock.
*4.2 Form of Certificate evidencing the Units.
*4.3 Form of Certificate evidencing the
Class A Warrants (included in Exhibit 4.5).
*4.4 Form of Underwriter's Option Agreement.
*4.5 Form of Warrant Agreement for the
Class A Warrants.
4.6 Form of Subscription Agreement for the Units.
*5.1 Opinion of Kelley Drye & Warren LLP.
*10.1 Employment Agreement between the Registrant
and Eugene I. Gordon, dated as of
March 15, 1996.
10.2 Employment Agreement between the Registrant
and Thomas Handschiegel, dated as of
March 18, 1996.
10.3 Consulting Agreement between the Registrant
and Joseph F. Carroll, III, dated as of
April ____, 1994.
10.4 Consulting Agreement between the Registrant and
Joseph P. Calderone, Jr., dated as of
April 1, 1994.
*10.6 The Medjet Inc. 1994 Stock Option Plan,
as amended.
10.7 Promissory Note from the Registrant in favor
of Eugene Gordon in the principal amount of
$25,000, dated October 27, 1995.
10.8 Promissory Note from the Registrant in favor
of Eugene Gordon in the principal amount of
$25,000, dated November 13, 1995.
10.9 Promissory Note from the Registrant in favor
of Eugene Gordon in the principal amount of
$25,000, dated November 30, 1995.
10.10 Promissory Note from the Registrant in favor
of Eugene Gordon in the principal amount of
$25,000, dated December 18, 1995.
10.11 Promissory Note from the Registrant in favor
of Eugene Gordon in the principal amount of
$50,000, dated December 30, 1995.
10.12 Promissory Note from the Registrant in favor
of Jan Wernick in the principal amount of
$50,000, dated February 6, 1996.
10.13 Promissory Note from the Registrant in favor
of Steven G. Cooperman in the principal
amount of $50,000, dated February 26, 1996.
10.14 Promissory Note from the Registrant in favor
of Sanford J. Hillsberg in the principal
amount of $50,000, dated February 26, 1996.
10.15 Promissory Note from the Registrant in favor
of Jan Wernick in the principal amount of
$50,000, dated March 14, 1996.
10.16 Agreement of Lease between the Registrant
and Linpro Edison Land Limited, dated
May 13, 1994.
10.17 First Amendment to Lease between the
Registrant and BCE Associates, L.P.,
dated February 28, 1996.
*10.18 Promissory Note from the Registrant in favor
of Jan Wernick in the principal amount of
$50,000, dated April 15, 1996.
*10.19 Promissory Note from the Registrant in favor
of Jan Wernick in the principal amount of
$50,000, dated May 6, 1996.
*10.20 Form of Consulting Agreement between the
Registrant and Steven G. Cooperman, dated as
of _______, 1996.
*10.21 Form of Consulting Agreement between the
Registrant and Sanford J. Hillsberg, dated as
of _______, 1996.
*23.1 Consent of Rosenberg Rich Baker Berman and
Company.
*23.2 Consent of Kelley Drye & Warren LLP
(included in Exhibit 5.1).
23.3 Consent of Graham & James LLP.
*23.4 Consent of Dean E. Snyder, Esquire.
24.1 Power of Attorney (included on signature page).
*27 Financial Data Schedule
</TABLE>
_______________________
* Filed herewith.
Unless otherwise indicated, all exhibits were previously filed.
1,200,000 Units - Minimum
1,600,000 Units - Maximum
(Each Unit consisting of one share of Common Stock, par
value $.001
per share and one Class A Redeemable Common Stock
Purchase Warrant,
each exercisable to purchase one share of Common Stock)
MEDJET INC.
UNDERWRITING AGREEMENT
New York,
New York
___________, 1996
Patterson Travis, Inc.
One Battery Park Plaza
New York, NY 10004
Medjet Inc., a Delaware corporation (the "Company"),
proposes to sell an aggregate of 1,600,000 Units (each Unit
consisting of one share of Common Stock, par value $.001 per
share ("Common Stock") and one Class A Redeemable Common Stock
Purchase Warrant ("Warrants") to purchase one share of Common
Stock at $10.00 per share for a period of eighteen (18) months
commencing three (3) months from the date the funds in escrow are
released by the Escrow Agent (as defined below), subject to
redemption, in certain instances, of which the first 1,200,000
Units shall be offered on a "best efforts, all-or-none basis" and
thereafter the remaining 400,000 Units shall be offered on a
"best efforts basis", to the public through you (the
"Underwriter") as exclusive agent of the Company.
Unless the context otherwise requires, the aggregate of
1,600,000 shares of Common Stock and Warrants to be sold by the
Company, and the 1,600,000 shares of Common Stock and the
1,600,000 Warrants, are herein called the "Units." The Common
Stock to be outstanding after giving effect to the sale of the
Units are herein called the "Shares." The Shares and Warrants
included in the Units are herein collectively called the
"Securities."
You have advised the Company that you desire to sell
the Units. The Company confirms the agreements made by it with
respect to the sale of the Units by the Underwriter as follows:
1. Representations and Warranties of the Company. The
Company represents and warrants to, and agrees with you that:
(a) A registration statement (File No. 333-3184)
on Form SB-2 relating to the public offering of the Units,
including a form of prospectus subject to completion, copies of
which have heretofore been delivered to you, has been prepared in
conformity with the requirements of the Securities Act of 1933,
as amended (the "Act"), and the rules and regulations (the "Rules
and Regulations") of the Securities and Exchange Commission (the
"Commission") thereunder, and has been filed with the Commission
under the Act and one or more amendments to such registration
statement may have been so filed. After the execution of this
Agreement, the Company will file with the Commission either
(i) if such registration statement, as it may have been amended,
has been declared by the Commission to be effective under the
Act, a prospectus in the form most recently included in an
amendment to such registration statement (or, if no such
amendment shall have been filed, in such registration statement),
with such changes or insertions as are required by Rule 430A
under the Act or permitted by Rule 424(b) under the Act and as
have been provided to and approved by you prior to the execution
of this Agreement, or (ii) if such registration statement, as it
may have been amended, has not been declared by the Commission to
be effective under the Act, an amendment to such registration
statement, including a form of prospectus, a copy of which
amendment has been furnished to and approved by you prior to the
execution of this Agreement. As used in this Agreement, the term
"Registration Statement" means such registration statement, as
amended at the time when it was or is declared effective,
including all financial schedules and exhibits thereto and
including any information omitted therefrom pursuant to Rule 430A
under the Act and included in the Prospectus (as hereinafter
defined); the term "Preliminary Prospectus" means each prospectus
subject to completion filed with such registration statement or
any amendment thereto (including the prospectus subject to
completion, if any, included in the Registration Statement or any
amendment thereto at the time it was or is declared effective);
and the term "Prospectus" means the prospectus first filed with
the Commission pursuant to Rule 424(b) under the Act, or, if no
prospectus is required to be filed pursuant to said Rule 424(b),
such term means the prospectus included in the Registration
Statement; except that if such registration statement or
prospectus is amended or such prospectus is supplemented, after
the effective date of such registration statement, the terms
"Registration Statement" and "Prospectus" shall include such
registration statement and prospectus as so amended, and the term
"Prospectus" shall include the prospectus as so supplemented, or
both, as the case may be.
(b) The Commission has not issued any order
preventing or suspending the use of any Preliminary Prospectus.
At the time the Registration Statement becomes effective and at
all times subsequent thereto up to and on the Closing Date (as
hereinafter defined) (i) the Registration Statement and
Prospectus will in all respects conform to the requirements of
the Act and the Rules and Regulations; and (ii) neither the
Registration Statement nor the Prospectus will include any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make statements
therein not misleading; provided, however, that the Company makes
no representations, warranties or agreements as to information
contained in or omitted from the Registration Statement or
Prospectus in reliance upon, and in conformity with, written
information furnished to the Company by or on behalf of the
Underwriter specifically for use in the preparation thereof. It
is understood that the statements set forth in the Prospectus on
page __ with respect to stabilization, the paragraph under the
heading "Underwriting" relating to concessions to certain
dealers, and the identity of counsel to the Underwriter under the
heading "Legal Matters" and the amount under Blue Sky Fees and
Expenses under Item 25 of Part II of the Registration Statement
constitute for purposes of this Section and Section 6(b) the only
information furnished in writing by or on behalf of the
Underwriter for inclusion in the Registration Statement and
Prospectus, as the case may be.
(c) The Company has no subsidiaries. The Company
has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of
Delaware with full corporate power and authority to own its
properties and conduct its business as described in the
Prospectus and is duly qualified or licensed to do business as a
foreign corporation and is in good standing in each other
jurisdiction in which the nature of its business or the character
or location of its properties requires such qualification, except
where the failure to so qualify will not materially adversely
affect its business, properties or financial condition.
(d) The authorized, issued and outstanding capital
stock of the Company, including the predecessors of the Company,
as of the date of the Prospectus is as set forth in the
Prospectus under "Capitalization"; the shares of issued and
outstanding capital stock of the Company set forth thereunder
have been duly authorized, validly issued and are fully paid and
nonassessable; except as set forth in the Prospectus, no options,
warrants, or other rights to purchase, agreements or other
obligations to issue, or agreements or other rights to convert
any obligation into, any shares of capital stock of the Company
have been granted or entered into by the Company; and the capital
stock conforms to all statements relating thereto contained in
the Registration Statement and Prospectus.
(e) The Units and the Shares are duly authorized,
and when issued and delivered pursuant to this Agreement, will be
duly authorized, validly issued, fully paid and nonassessable and
free of preemptive rights of any security holder of the Company.
Neither the filing of the Registration Statement nor the offering
or sale of the Units as contemplated in this Agreement gives rise
to any rights, other than those which have been waived or
satisfied, for or relating to the registration of any shares of
Common Stock, except as described in the Registration Statement.
The Warrants have been duly authorized and, when issued and
delivered pursuant to this Agreement, will have been duly
executed, issued and delivered and will constitute valid and
legally binding obligations of the Company enforceable in
accordance with their terms, except as enforceability may be
limited by bankruptcy, insolvency or other laws affecting the
right of creditors generally or by general equitable principles,
and holders thereof will be entitled to the benefits provided by
the warrant agreement pursuant to which such Warrants are to be
issued (the "Warrant Agreement"), which will be substantially in
the form filed as an exhibit to the Registration Statement. The
shares of Common Stock issuable upon exercise of the Warrants
have been reserved for issuance upon the exercise of the Warrants
and when issued in accordance with the terms of the Warrants and
Warrant Agreement, will be duly and validly authorized, validly
issued, fully paid and non-assessable, and free of preemptive
rights and no personal liability will attach to the ownership
thereof. The Warrant Agreement has been duly authorized and,
when executed and delivered pursuant to this Agreement, will have
been duly executed and delivered and will constitute the valid
and legally binding obligation of the Company enforceable in
accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency or other laws affecting the
rights of creditors generally or by general equitable principles.
The Shares and the Warrants contained in the Underwriter's
Options (as defined in the Registration Statement) have been duly
authorized and, when duly issued and delivered, such Shares and
Warrants will constitute valid and legally binding obligations of
the Company enforceable in accordance with their terms and
entitled to the benefits provided by the Underwriter s Options,
except as enforceability may be limited by bankruptcy, insolvency
or other laws affecting the rights of creditors generally or by
general equitable principles and the indemnification contained in
paragraph 7 of the Underwriter's Options may be unenforceable.
The shares of Common Stock included in the Underwriter's Options
(and the shares of Common Stock issuable upon exercise of the
Warrants included therein) when issued and sold, will be duly
authorized, validly issued, fully paid and non-assessable and
free of preemptive rights and no personal liability will attach
to the ownership thereof.
(f) This Agreement and the Underwriter's Options
have been duly and validly authorized, executed, and delivered by
the Company. The Company has full power and authority to
authorize, issue, and sell the Units to be sold by it hereunder
on the terms and conditions set forth herein, and no consent,
approval, authorization or other order of any governmental
authority is required in connection with such authorization,
execution and delivery or in connection with the authorization,
issuance, and sale of the Units or the Underwriter's Options,
except such as may be required under the Act, state securities
laws or by the National Association of Securities Dealers, Inc.
(The "NASD").
(g) Except as described in the Prospectus, or which
would not have a material adverse effect on the condition
(financial or otherwise), business prospects, net worth or
properties of the Company taken as a whole (a "Material Adverse
Effect"), the Company is not in violation, breach, or default of
or under, and consummation of the transactions herein
contemplated and the fulfillment of the terms of this Agreement
will not conflict with, or result in a breach or violation of,
any of the terms or provisions of, or constitute a default under,
or result in the creation or imposition of any lien, charge, or
encumbrance upon any of the property or assets of the Company
pursuant to the terms of, any material indenture, mortgage, deed
of trust, loan agreement, or other agreement or instrument to
which the Company is a party or by which the Company may be bound
or to which any of the property or assets of the Company is
subject, nor will such action result in any violation of the
provisions of the articles of incorporation or the by-laws of the
Company, as amended, or any statute or any order, rule or
regulation applicable to the Company of any court or of any
regulatory authority or other governmental body having
jurisdiction over the Company.
(h) Subject to the qualifications stated in the
Prospectus, the Company has good and marketable title to all
properties and assets described in the Prospectus as owned by it,
free and clear of all liens, charges, encumbrances or
restrictions, except such as are not materially significant or
important in relation to its business; all of the material leases
and subleases under which the Company is the lessor or sublessor
of properties or assets or under which the Company holds
properties or assets as lessee or sublessee as described in the
Prospectus are in full force and effect, and, except as described
in the Prospectus, the Company is not in default in any material
respect with respect to any of the terms or provisions of any of
such leases or subleases, and, to the best knowledge of the
Company, no claim has been asserted by anyone adverse to rights
of the Company as lessor, sublessor, lessee, or sublessee under
any of the leases or subleases mentioned above, or affecting or
questioning the right of the Company to continued possession of
the leased or subleased premises or assets under any such lease
or sublease except as described or referred to in the Prospectus;
and the Company owns or leases all such properties described in
the Prospectus as are necessary to its operations as now
conducted and, except as otherwise stated in the Prospectus, as
proposed to be conducted as set forth in the Prospectus.
(i) Rosenberg Rich Baker Berman & Company, P.A. who
have given their report on certain financial statements filed
with the Commission as a part of the Registration Statement, are
with respect to the Company, independent public accountants
within the meaning of the Act and the Rules and Regulations.
(j) The financial statements, and schedules
together with related notes, set forth in the Prospectus or the
Registration Statement present fairly the financial position and
results of operations and changes in cash flow position of the
Company on the basis stated in the Registration Statement, at the
respective dates and for the respective periods to which they
apply. Said statements and schedules and related notes have been
prepared in accordance with generally accepted accounting
principles applied on a basis which is consistent during the
periods involved except as disclosed in the Prospectus and
Registration Statement. The information set forth under the
caption "Selected Financial Data" in the Prospectus fairly
present, on the basis stated in the Prospectus, the information
included therein.
(k) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus
and except as otherwise disclosed or contemplated therein, the
Company has not incurred any liabilities or obligations, direct
or contingent, not in the ordinary course of business, or entered
into any transaction not in the ordinary course of business,
which would have a Material Adverse Effect, and there has not
been any change in the capital stock of, or any incurrence of
long-term debt by, the Company or any issuance of options,
warrants or other rights to purchase the capital stock of the
Company or any material adverse change or any development
involving, so far as the Company can now reasonably foresee a
prospective adverse change in the condition (financial or other),
net worth, results of operations, business, key personnel or
properties of them which would have a Material Adverse Effect.
(l) Except as set forth in the Prospectus, there is
not now pending or, to the knowledge of the Company, threatened,
any action, suit or proceeding to which the Company is a party
before or by any court or governmental agency or body, which
might result in a Material Adverse Effect on the Company, nor are
there any actions, suits or proceedings related to environmental
matters or related to discrimination on the basis of age, sex,
religion or race; and no labor disputes involving the employees
of the Company exist or to the knowledge of the Company are
threatened which might be expected to have a Material Adverse
Effect.
(m) Except as disclosed in the Prospectus, the
Company has filed all necessary federal, state, and foreign
income and franchise tax returns required to be filed as of the
date hereof (taking into account all extensions of time to file)
and has paid all taxes shown as due thereon; and there is no tax
deficiency which has been asserted against the Company.
(n) Except as disclosed in the Registration
Statement, the Company has sufficient licenses, permits, and
other governmental authorizations currently necessary for the
conduct of its business or the ownership of its properties as
described in the Prospectus and is in all material respects
complying therewith and owns or possesses adequate rights to use
all material patents, patent applications, trademarks, service
marks, trade-names, trademark registrations, service mark
registrations, copyrights, and licenses necessary for the conduct
of such business and had not received any notice of conflict with
the asserted rights of others in respect thereof. To the best
knowledge of the Company, none of the activities or business of
the Company or its subsidiaries are in violation of, or cause the
Company or its subsidiaries to violate, any law, rule,
regulation, or order of the United States, any state, county, or
locality, or of any agency or body of the United States or of any
state, county or locality, the violation of which would have a
Material Adverse Effect.
(o) The Company has not, directly or indirectly, at
any time (i) made any contributions to any candidate for
political office, or failed to disclose fully any such
contribution in violation of law or (ii) made any payment to any
state, federal or foreign governmental officer or official, or
other person charged with similar public or quasi-public duties,
other than payments or contributions required or allowed by
applicable law. The Company's internal accounting controls and
procedures are sufficient to cause the Company to comply in all
material respects with the Foreign Corrupt Practices Act of 1977,
as amended.
(p) On the Closing Date (as hereinafter defined)
all transfer or other taxes, (including franchise, capital stock
or other tax, other than income taxes, imposed by any
jurisdiction) if any, which are required to be paid in connection
with the sale and transfer of the Units hereunder will have been
fully paid or provided for by the Company and all laws imposing
such taxes will have been complied with in all material respects.
(q) All contracts and other documents of the
Company which are, under the Rules and Regulations, required to
be filed as exhibits to the Registration Statement have been so
filed.
(r) Intentionally Omitted.
(s) The Company has not entered into any agreement
pursuant to which any person is entitled either directly or
indirectly to compensation from the Company for services as a
finder in connection with the proposed public offering other than
as described in the Registration Statement, including under the
caption Litigation .
(t) Except as disclosed in the Prospectus, no
officer, director, or stockholder of the Company or its
subsidiaries has any NASD affiliation.
(u) No other firm, corporation or person has any
rights to underwrite an offering of any of the Company's
securities.
2. Employment of the Underwriter; Payment and Delivery
On the basis of the representations and warranties herein
contained, but subject to the terms and conditions herein set
forth:
(a) The Company hereby employs the Underwriter as
its exclusive agent to sell for its account 1,600,000 Units, the
first 1,200,000 Units on a "best efforts, all-or-none" basis, and
the remaining 400,000 Units on a "best efforts" basis, at a price
of $5.00 per Unit. The Underwriter agrees to use its best
efforts as agent, promptly after receipt of written notice of the
Effective Date to sell the 1,600,000 Units subject to the terms,
provisions and conditions hereinafter mentioned, for a period of
not less than ninety (90) calendar days, which may be extended up
to an additional ninety (90) calendar days with the consent of
the Company and the Underwriter. The period during which the
Units are offered shall hereinafter be referred to as the
"Offering Period". In the event that less than 1,200,000 Units
are sold during the Offering Period, this offering will not be
completed, will be withdrawn, none of the Units will be sold
during the Offering Period (as such may be extended) and all
proceeds will be promptly returned in full by the Escrow Agent
(as defined below), without interest (except for interest to be
paid relating to any extension beyond the initial 90 days of the
offering period, as described in the Registration Statement) or
deduction to subscribers, not more than ten (10) business days
following the expiration of said Offering Period.
(b) All proceeds from subscriptions shall be
deposited promptly into a non-interest bearing escrow account to
be maintained with____________Bank which account is operated by
Continental Stock Transfer & Trust Company ( "Escrow Agent").
All subscriber's checks shall be made payable to "Continental
Stock Transfer & Trust Company as Escrow Agent for MEDJET INC."
All subscription proceeds will be transmitted to the Escrow Agent
no later than noon of the next business day following receipt for
deposit into the escrow account.
(c) If a minimum of 1,200,000 Units are sold, the
Company agrees to issue or have the Units issued in such names
and denominations as may be specified by the Underwriter and to
deliver the Units on the Closing Date against payment to the
Company at $4.50 per Unit for the first 1,300,000 Units sold and
$4.775 per Unit for the remaining Units sold, less the
non-accountable expense allowance as set forth below.
(d) If a minimum of 1,200,000 Units are sold, the
Underwriter shall be entitled to receive as compensation (i) a
commission of $.50 per Unit for the first 1,300,000 Units sold
and $.225 per Unit for the remaining Units sold, which
compensation the Underwriter shall be entitled to receive and
retain from the proceeds of the sale of the Units prior to
transmittal of payment to the Company by the Escrow Agent as
indicated in paragraph (c) above; and (ii) $.15 per Unit with
respect to all Units sold as a non-accountable expense allowance,
which compensation the Underwriter shall be entitled to receive
and have retained from the proceeds of the sale of the Units
prior to the transmittal of payment to the Company by the Escrow
Agent.
(e) You shall use your best efforts to require that
payments made by purchasers of Units to broker/dealers for Units
sold shall be made payable, in cash or by certified or official
bank check, to "Continental Stock Transfer & Trust Company as
Escrow Agent for MEDJET INC." and will thereafter be delivered to
the escrow agent, by twelve o'clock noon of the next business day
following receipt at the full public offering price of $5.00 per
Unit, together with the name, social security or employer
identification number of, and number of Units purchased by, each
subscriber.
(f) Upon closing of the minimum offering, the
release of funds in the Escrow Account shall be made by wire
transfers or certified or official bank checks against delivery
of the Units and the Underwriter s Options to the Underwriter.
Such payment and delivery shall be made at the offices of
Bernstein & Wasserman, LLP, 950 Third Avenue, New York, NY 10022
(or at such other place as may be designated by agreement between
the Underwriter and the Company) at the earlier of (a) a mutually
agreed upon date and time following collection by the Escrow
Agent of a minimum of $6,000,000 in offering proceeds or (b) ten
(10) business days after the expiration of the Offering Period,
such date and time as fixed hereunder for such payment and
delivery being herein called the "Closing Date". Certificates for
the Units, Common Stock, Warrants and Underwriter s Options so to
be delivered will be in such denominations and registered in such
names as you request not less than five (5) full business days
prior to the Closing Date, and will be made available to you for
inspection, checking and packaging at your offices, not less than
one (1) full business day prior to the Closing Date.
3. Covenants of the Company. The Company covenants and
agrees with the Underwriter that:
(a) The Company will use its best efforts to cause
the Registration Statement to become effective. If required, the
Company will file the Prospectus and any amendment or supplement
thereto with the Commission in the manner and within the time
period required by Rule 424(b) under the Act. Upon notification
from the Commission that the Registration Statement has become
effective, the Company will so advise the Underwriter and will
not at any time, whether before or after the Effective Date, file
any amendment to the Registration Statement or supplement to the
Prospectus of which the Underwriter shall not previously have
been advised and furnished with a copy or to which the
Underwriter or its counsel shall have reasonably objected in
writing or which is not in compliance with the Act and the Rules
and Regulations. At any time prior to the later of (A) the
completion by the Underwriter of the distribution of the Units
contemplated hereby (but in no event more than nine months after
the date on which the Registration Statement shall have become or
been declared effective) and (B) 25 days after the date on which
the Registration Statement shall have become or been declared
effective, the Company will prepare and file with the Commission,
promptly upon the Underwriter's request, any amendments or
supplements to the Registration Statement or Prospectus which, in
the opinion of counsel to the Company and the Underwriter, may be
reasonably necessary or advisable in connection with the
distribution of the Units.
As soon as the Company is advised thereof, the Company will
advise the Underwriter, and provide the Underwriter copies of any
written advice, of the receipt of any comments of the Commission,
of the effectiveness of any post-effective amendment to the
Registration Statement, of the filing of any supplement to the
Prospectus or any amended Prospectus, of any request made by the
Commission for an amendment of the Registration Statement or for
supplementing of the Prospectus or for additional information
with respect thereto, of the issuance by the Commission or any
state or regulatory body of any stop order or other order or
threat thereof suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of any
preliminary prospectus, or of the suspension of the qualification
of the Units for offering in any jurisdiction, or of the
institution of any proceedings for any of such purposes, and will
use its best efforts to prevent the issuance of any such order,
and, if issued, to obtain as soon as possible the lifting
thereof.
[The Company has caused to be delivered to the Underwriter
copies of each Preliminary Prospectus, and the Company has
consented and hereby consents to the use of such copies for the
purposes permitted by the Act]. The Company authorizes the
Underwriter and dealers to use the Prospectus in connection with
the sale of the Units for such period as in the opinion of
counsel to the Underwriter and the Company the use thereof is
required to comply with the applicable provisions of the Act and
the Rules and Regulations. In case of the happening, at any time
within such period as a Prospectus is required under the Act to
be delivered in connection with sales by the Underwriter or
dealer, of any event of which the Company has knowledge and which
materially affects the Company or the securities of the Company,
or which in the opinion of counsel for the Company and counsel
for the Underwriter should be set forth in an amendment of the
Registration Statement or a supplement to the Prospectus in order
to make the statements therein not then misleading, in light of
the circumstances existing at the time the Prospectus is required
to be delivered to a purchaser of the Units or in case it shall
be necessary to amend or supplement the Prospectus to comply with
law or with the Rules and Regulations, the Company will notify
the Underwriter promptly and forthwith prepare and furnish to the
Underwriter copies of such amended Prospectus or of such
supplement to be attached to the Prospectus, in such quantities
as the Underwriter may reasonably request, in order that the
Prospectus, as so amended or supplemented, will not contain any
untrue statement of a material fact or omit to state any material
facts necessary in order to make the statements in the
Prospectus, in the light of the circumstances under which they
are made, not misleading. The preparation and furnishing of any
such amendment or supplement to the Registration Statement or
amended Prospectus or supplement to be attached to the Prospectus
shall be without expense to the Underwriter, except that in case
the Underwriter is required, in connection with the sale of the
Units to deliver a Prospectus nine months or more after the
effective date of the Registration Statement, the Company will
upon request of and at the expense of the Underwriter, amend or
supplement the Registration Statement and Prospectus and furnish
the Underwriter with reasonable quantities of prospectuses
complying with Section 10(a)(3) of the Act.
The Company will comply with the Act, the Rules and
Regulations and the Securities Exchange Act of 1934 (the
"Exchange Act") and the rules and regulations thereunder in
connection with the offering and issuance of the Units.
(b) The Company will furnish such information as
may be required and will otherwise cooperate and use its best
efforts to qualify to register the Units for sale under the
securities or "blue sky" laws of such jurisdictions as the
Underwriter may reasonably designate and will make such
applications and furnish such information as may be required for
that purpose and to comply with such laws, provided the Company
shall not be required to qualify as a foreign corporation or a
dealer in securities or to execute a general consent of service
of process in any jurisdiction in any action other than one
arising out of the offering or sale of the Units. The Company
will, from time to time, prepare and file such statements and
reports as are or may be required to continue such qualification
in effect for so long a period as the counsel to the Company and
the Underwriter deem reasonably necessary, but not for a period
of less than three (3) years.
(c) If the sale of the Units provided for herein is
not consummated as a result of the Company s actions or failure
to take such actions as the Underwriter believes are reasonably
required to complete the transaction, the Company shall pay all
costs and expenses incurred by it which are incident to the
performance of the Company's obligations hereunder, including but
not limited to, all of the expenses itemized in Section 8,
including the accountable expenses of the Underwriter which shall
not exceed $150,000 (including the reasonable fees and expenses
of counsel to the Underwriter)provided, however, that if the
Company files a registration statement or signs a letter of
intent, or any other agreement involving transactions
contemplated by this Agreement, with another NASD member firm
within a period of twelve (12) months from the termination of
this offering, the Company shall pay the Underwriter promptly an
aggregate of $300,000 (less any amount previously paid pursuant
to this paragraph). If the sale of the Units provided herein is
not consummated and the reasons therefore are reasonably related
to a Material Adverse Effect on the Company, the Company shall
pay the Underwriter promptly $100,000. In the event of the sale
or merger of the Company, any significant subsidiary or any
significant assets thereof (hereinafer, a Transaction ) from the
date hereof prior to the Closing Date and the closing of the
public offering contemplated hereby does not occur, the Company
shall pay the Underwriter, as long as the Underwriter is
diligently attempting to close the offering, three hundred
thousand dollars ($300,000).
(d) The Company will use its best efforts (i) to
cause a registration statement under the Securities Exchange Act
of 1934 to be declared effective concurrently with the completion
of this offering and will notify you in writing immediately upon
the effectiveness of such registration statement, and (ii) to
obtain and keep current a listing in the Standard & Poors or
Moody's OTC Industrial Manual for a period of five (5) years from
the Effective Date.
(e) For so long as the Company is a reporting
company under either Section 12(g) or 15(d) of the Securities
Exchange Act of 1934, the Company, at its expense, will furnish
to its stockholders an annual report (including financial
statements audited by independent public accountants), in
reasonable detail and at its expense, will furnish to the
Underwriter during the period ending five (5) years from the date
hereof, (i) as soon as practicable after the end of each fiscal
year, but no earlier than the filing of such information with the
Commission, a balance sheet of the Company and any of its
subsidiaries as at the end of such fiscal year, together with
statements of income, surplus and cash flow of the Company and
any subsidiaries for such fiscal year, all in reasonable
detail and accompanied by a copy of the certificate or report
thereon of independent accountants; (ii) as soon as practicable
after the end of each of the first three fiscal quarters of each
fiscal year, but no earlier than the filing of such information
with the Commission, consolidated summary financial information
of the Company for such quarter in reasonable detail; (iii) as
soon as they are publicly available, a copy of all reports
(financial or other) mailed to security holders; (iv) as soon as
they are available, a copy of all non-confidential reports and
financial statements furnished to or filed with the Commission or
any securities exchange or automated quotation system on which
any class of securities of the Company is listed; and (v) such
other information as you may from time to time reasonably
request. In addition, the Company shall deliver to the
Underwriter for a three (3) year period following the effective
date, copies of all transfer sheets relating to the Company's
securities.
(f) In the event the Company has an active
subsidiary or subsidiaries, such financial statements referred to
in subsection (e) above will be on a consolidated basis to the
extent the accounts of the Company and its subsidiary or
subsidiaries are consolidated in reports furnished to its
stockholders generally.
(g) The Company will deliver to the Underwriter at
or before the Closing Date two signed copies of the Registration
Statement including all financial statements and exhibits filed
therewith, and of all amendments thereto, and will deliver to the
Underwriter such number of conformed copies of the Registration
Statement, including such financial statements but without
exhibits, and of all amendments thereto, as the Underwriter may
reasonably request. [The Company will deliver to or upon the
Underwriter's order, from time to time until the effective date
of the Registration Statement, as many copies of any Preliminary
Prospectus filed with the Commission prior to the effective date
of the Registration Statement as the Underwriter may reasonably
request.] The Company will deliver to the Underwriter on or
promptly after the effective date of the Registration Statement
and thereafter for so long as a Prospectus is required to be
delivered under the Act, from time to time, as many copies of the
Prospectus, in final form, or as thereafter amended or
supplemented, as the Underwriter may from time to time reasonably
request.
(h) The Company will deliver to the Underwriter as
soon as it is practicable copies of all reports filed with the
Commission under the Exchange Act.
(i) The Company will apply the net proceeds from
the sale of the Units substantially for the purposes set forth
under "Use of Proceeds" in the Prospectus, and will file such
reports with the Commission with respect to the sale of the Units
and the application of the proceeds therefrom as may be required
pursuant to Rule 463 under the Act.
(j) The Company will promptly prepare and file with
the Commission any amendments or supplements to the Registration
Statement, Preliminary Prospectus or Prospectus and take any
other action, which in the opinion of counsel to the Underwriter
and counsel to the Company, may be reasonably necessary or
advisable in connection with the distribution of the Units, and
will use its best efforts to cause the same to become effective
as promptly as possible.
(k) The Company will reserve and keep available
that maximum number of its authorized but unissued securities
which are issuable upon exercise of the Warrants and
Underwriter s Options and warrants thereunder outstanding from
time to time.
(l) For a period of twenty-four (24) months from
the Closing Date, no officers or directors, nor any shareholder
of the Company's securities prior to the offering, as well as all
holders of restricted securities of the Company, will, directly
or indirectly, offer, sell (including any short sale), grant any
option for the sale of, transfer or gift (except for estate
planning or charitable transfers or other privates sales,
provided the transferees agree to be bound by the same
restrictions on transfer), acquire any option to dispose of, or
otherwise dispose of any shares of capital stock without the
prior written consent of the Underwriter, other than as set forth
in the Registration Statement. In order to enforce this
covenant, the Company shall impose stop-transfer instructions
with respect to the shares owned by such persons prior to the
offering until the end of such period (subject to any exceptions
to such limitation on transferability set forth in the
Registration Statement). In addition, all such persons shall
waive any of their registration rights with respect to all such
securities for such twenty-four (24) month period. In addition,
the Company agrees not to file any other registration statement
(excluding a registration statement on Form S-8 or successor form
so long as the shares of Common Stock offered thereby are also
subject to this paragraph 3(l)) to register any securities of the
Company for such twenty-four (24) month period, and will not
grant any future registration rights without the prior written
consent of the Underwriter for the same twenty-four (24) month
period. If necessary to comply with any applicable Blue-sky Law,
the shares held by such shareholders will be escrowed, as
required by such Blue-sky Laws. In addition, the Company shall
not issue any shares of its capital stock (or securities
convertible into capital stock) for a twenty four (24) month
period following the Closing Date other than (i) pursuant to the
Warrants, (ii) pursuant to the options already granted under the
Company s stock option plan, and (iii) options to purchase up to
200,000 shares of Common Stock under employee stock option plans
in accordance with the succeeding sentence, and (iv) Common Stock
issued on or after the first anniversary of the Closing Date for
consideration at least equal to the Market Price as defined below
in this paragraph (l). The Company may grant options to purchase
up to 200,000 (150,000 if only 1,200,000 Units are sold) shares
of Common Stock under employee stock option plans to the
Company s employees, officers, directors or other consultants or
advisors during the twenty-four (24) month period following the
Closing Date without the prior written consent of the
Underwriter; provided that the shares underlying such options do
not vest until one (1) year following the grant of such options.
The grant of additional options during such period will require
the Underwriter's prior written consent. Of the options to
purchase such 200,000 shares, the Company may not grant options
for 50,000 shares at exercise prices which are less than the
Market Price at the date of the grant without the prior written
consent of the Underwriter.
For purposes of this Agreement, Market Price shall mean (i)
the average closing bid price for any ten (10) consecutive
trading days within a period of thirty (30) consecutive trading
days ending within five (5) days prior to the date of issuance of
the Common Stock as reported by the National Association of
Securities Dealers, Inc. Automatic Quotation System, or (ii) the
last reported sale price, for ten (10) consecutive business days
ending within five (5) days of the date of issuance on the
primary exchange on which the Common Stock is traded, if the
Common Stock is traded on a national securities exchange.
(m) Upon completion of this offering, the Company
will make all filings required, including registration under the
Securities Exchange Act of 1934, to obtain the listing of the
Units, Common Stock and Class A Warrants in the NASDAQ system,
and will use its best efforts to effect and maintain such listing
for at least five years from the date of this Agreement to the
extent that the Company has at least 300 record holders of Common
Stock.
(n) Except for the transactions contemplated by
this Agreement, the Company represents that it has not taken and
agrees that it will not take, directly or indirectly, any action
designed to or which has constituted or which might reasonably be
expected to cause or result in the stabilization or manipulation
of the price of the Units, Shares, or the Warrants or to
facilitate the sale or resale of the Securities.
(o) On the Closing Date and simultaneously with the
delivery of the Units, the Company shall execute and deliver to
you the Underwriter s Options. The Underwriter s Options will be
substantially in the form filed as an Exhibit to the Registration
Statement.
(p) Intentionally omitted.
(q) Upon the Closing Dates, the Company will have
in force key person life insurance on the life of Eugene Gordon,
in the amount of not less than $1,000,000.00 and will use its
best efforts to maintain such insurance during the three year
period commencing with the First Closing Date.
(r) So long as any Warrants are outstanding and the
exercise price of the Warrants is less than the market price of
the Common Stock, the Company shall use its best efforts to cause
post-effective amendments, if required by the Act, to the
Registration Statement to become effective in compliance with the
Act and without any lapse of time between the effectiveness of
any such post-effective amendments and cause a copy of each
Prospectus, as then amended, to be delivered to each holder of
record of a Warrant and to furnish to the Underwriter and each
dealer as many copies of each such Prospectus as such Underwriter
or dealer may reasonably request. The Company shall not call for
redemption any of the Warrants unless a registration statement
covering the securities underlying the Warrants has been declared
effective by the Commission and remains current at least until
the date fixed for redemption.
(s) For a period of five (5) years from the
Effective Date, the Company, at its expense, shall cause its
regularly engaged independent certified public accountants to
review (but not audit) the Company's financial statements for
each of the first three (3) fiscal quarters prior to the
announcement of quarterly financial information and the filing of
the Company's 10-Q quarterly report, provided that the Company
shall not be required to file a report of such accountants
relating to such review with the Commission.
(t) The Underwriter shall have the right to request
the Company to use its best efforts to nominate one (1) nominee
of the Underwriter for election to the Board of Directors for
three (3) years following the Effective Date, and in each case
the Company will use its best efforts to cause such nominee to be
elected to the Board of Directors. Until such time as the
Underwriter exercises its right to require the Company to use its
best efforts to cause a nominee of the Underwriter to be elected
to the Board of Directors and until such time as such nominee
begins to serve on the Board of Directors, the Company agrees to
allow a representative designated by the Underwriter from time to
time to receive timely, written notice of all Board of Directors
meetings and notice of all telephonic Board meetings and the
right to attend all Board meetings and participate in all
telephonic Board meetings. The Underwriter shall also have the
right to obtain copies of the minutes from all Board of Directors
meetings for three (3) years following the Effective Date of the
Registration Statement, whether or not a representative of the
Underwriter attends or participates in any such Board meeting.
The Company agrees to reimburse the Underwriter immediately upon
the Underwriter's request therefor of any reasonable travel and
lodging expenses directly incurred by the Underwriter in
connection with its representative attending Company Board
meetings on the same basis for other Board members. In addition,
the Company shall compensate such representative as it does all
other outside directors of the Company.
(u) Intentionally omitted.
(v) The Company agrees to pay the Underwriter a
Warrant Solicitation fee of 8.0% of the exercise price of any of
the Warrants exercised beginning one (1) year after the Effective
Date if (a) the Market Price of the Company's Common Stock on the
date the Warrant is exercised in greater than the exercise price
of the Warrant, (b) the exercise of the Warrant is solicited by
the Underwriter and the Underwriter is designated in writing by
the holder of such Warrant as the soliciting broker, (c) the
Warrant is not held in a discretionary account, (d) disclosure of
the compensation arrangement is made upon the sale and exercise
of the Warrants, (e) soliciting the exercise is not in violation
of Rule 10b-6 under the Securities Exchange Act of 1934, and (f)
solicitation of the exercise is in compliance with the NASD
Notice to Members 81-38 (September 22, 1981).
(w) Intentionally omitted.
(x) Intentionally omitted.
(y) On or prior to the date hereof, the Company
shall have entered into an employment agreement with Eugene
Gordon on terms and conditions satisfactory to the Underwriter.
4. Conditions of Underwriters' Obligation. The
obligations of the Underwriter to perform its obligations
hereunder are subject to the accuracy (as of the date hereof, and
as of the Closing Date) of and compliance with the
representations and warranties of the Company herein, to the
performance by the Company of its obligations hereunder, and to
the following conditions:
(a) The Registration Statement shall have become
effective and you shall have received notice thereof not later
than 10:00 a.m., New York time, on the day following the date of
this Agreement, or at such later time or on such later date as to
which the Underwriter may agree in writing; on or prior to the
Closing Date no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings
for that or a similar purpose shall have been instituted or shall
be pending or, to the Underwriter's knowledge or to the knowledge
of the Company, shall be contemplated by the Commission; any
request on the part of the Commission for additional information
shall have been complied with to the satisfaction of the
Commission; and no stop order shall be in effect denying or
suspending effectiveness of such qualification nor shall any stop
order proceedings with respect thereto be instituted or pending
or threatened. If required, the Prospectus shall have been filed
with the Commission in the manner and within the time period
required by Rule 424(b) under the Act.
(b) (A) At the Closing Date, you shall have
received the opinion, dated as of the Closing Date, of Kelley
Drye & Warren, counsel for the Company, in form and substance
satisfactory to counsel for the Underwriter, to the effect that:
(i) The Company has been duly incorporated and
is validly existing as a corporation in good standing under the
laws of the State of Delaware, with all requisite corporate power
and authority to own its properties and conduct its business as
described in the Registration Statement and Prospectus and, to
its knowledge, is duly qualified or licensed to do business as a
foreign corporation and is in good standing in each other
jurisdiction in which the ownership or leasing of its properties
or conduct of its business requires such qualification except
where the failure to qualify or be licensed will not have a
Material Adverse Effect;
(ii) the authorized capitalization of the
Company as of the date of the prospectus is as set forth under
"Capitalization" in the Prospectus; all shares of the Company's
outstanding capital stock have been duly authorized, validly
issued, fully paid and non-assessable and conform in all material
respects to the description thereof contained in the Prospectus;
to such counsel's knowledge the outstanding shares of capital
stock of the Company have not been issued in violation of the
preemptive rights of any shareholder and the shareholders of the
Company do not have any preemptive rights or other rights to
subscribe for or to purchase, nor are there any restrictions upon
the voting or transfer of any of the capital stock except as
provided in the Prospectus; the Common Stock, the Warrants, the
Underwriter s Options, and the Warrant Agreement conform in all
material respects to the respective descriptions thereof
contained in the Prospectus; the Shares have been, and the shares
of Common Stock to be issued upon exercise of the Warrants and
the Underwriter s Options, upon issuance in accordance with the
terms of such Warrants, the Warrant Agreement and Underwriter s
Options will have been duly authorized and, when issued and
delivered in accordance with their respective terms and
applicable Delaware law, will be duly and validly issued, fully
paid, non-assessable, free of preemptive rights and no personal
liability will attach to the ownership thereof; all prior sales
by the Company of the Company's securities have been made in
compliance with or under an exemption from registration under the
Act and applicable state securities laws; a sufficient number of
shares of Common Stock has been reserved for issuance upon
exercise of the Warrants and Underwriter s Options (giving effect
to the conversion ratio in effect on the Closing Date) and to the
best of such counsel's knowledge, neither the filing of the
Registration Statement nor the offering or sale of the Units as
contemplated by this Agreement gives rise to any registration
rights other than (i) those which have been waived or satisfied
for or relating to the registration of any shares of Common Stock
or (ii) those contained in the Underwriter s Options.
(iii) this Agreement, the Underwriter s Options,
and the Warrant Agreement have been duly and validly authorized,
executed, and delivered by the Company;
(iv) the certificates evidencing the shares of
Common Stock comply with the Delaware General Corporation Law;
the Warrants will be exercisable for shares of Common Stock in
accordance with the terms of the Warrants and the Warrant
Agreement and at the prices therein provided for;
(v) except as otherwise disclosed in the
Registration Statement, such counsel knows of no pending or
threatened legal or governmental proceedings to which the Company
is a party which would materially adversely affect the business,
property, financial condition, or operations of the Company; or
which question the validity of the Securities, this Agreement,
the Warrant Agreement, or the Underwriter s Options, or of any
action taken or to be taken by the Company pursuant to this
Agreement, the Warrant Agreement, or the Underwriter s Options;
to such counsel's knowledge there are no governmental proceedings
or regulations required to be described or referred to in the
Registration Statement which are not so described or referred to;
(vi) the execution and delivery of this
Agreement, the Underwriter s Options, or the Warrant Agreement
and the incurrence of the obligations herein and therein set
forth and the consummation of the transactions herein or therein
contemplated, will not result in a breach or violation of, or
constitute a default under the certificate or articles of
incorporation or by-laws of the Company, or to the best knowledge
of counsel, in the performance or observance of any material
obligations, agreement, covenant, or condition contained in any
bond, debenture, note, or other evidence of indebtedness or in
any material contract, indenture, mortgage, loan agreement,
lease, joint venture, or other agreement or instrument to which
the Company is a party or by which they or any of their
properties is bound or in violation of any order, rule,
regulation, writ, injunction, or decree of any government,
governmental instrumentality, or court, domestic or foreign, the
result of which would have a Material Adverse Effect;
(vii) the Registration Statement has become
effective under the Act, and to the best of such counsel's
knowledge, (a) no stop order suspending the effectiveness of the
Registration Statement is in effect, and (b) no proceedings for
that purpose have been instituted or are pending before, or
threatened by, the Commission; the Registration Statement and the
Prospectus (except for (i) the financial statements and other
financial data and (ii) certain information relating to patent
law and regulatory matters relating to the Federal Food and Drug
Administration) contained therein, or omitted therefrom, as to
which such counsel need express no opinion) as of the Effective
Date comply as to form in all material respects with the
applicable requirements of the Act and the Rules and Regulations;
(viii) in the course of preparation of the
Registration Statement and the Prospectus such counsel has
participated in conferences with the President of the Company
with respect to the Registration Statement and Prospectus and
such discussions did not disclose to such counsel any information
which gives such counsel reason to believe that the Registration
Statement or any amendment thereto at the time it became
effective contained any untrue statement of a material fact
required to be stated therein or omitted to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus or any
supplement thereto contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make
statements therein, in light of the circumstances under which
they were made, not misleading (except, in the case of both the
Registration Statement and any amendment thereto and the
Prospectus and any supplement thereto, for the financial
statements, notes thereto and other financial information
(including without limitation, the pro forma financial
information) and schedules contained therein, as to which such
counsel need express no opinion);
(ix) except for the exceptions set forth in
paragraph (vii) above, all descriptions in the Registration
Statement and the Prospectus, and any amendment or supplement
thereto, of contracts and other agreements to which the Company
is a party are accurate and fairly present in all material
respects the information required to be shown, and such counsel
is familiar with all contracts and other agreements referred to
in the Registration Statement and the Prospectus and any such
amendment or supplement or filed as exhibits to the Registration
Statement, and such counsel does not know of any contracts or
agreements to which the Company is a party of a character
required to be summarized or described therein or to be filed as
exhibits thereto which are not so summarized, described or filed;
(x) no authorization, approval, consent, or
license of any governmental or regulatory authority or agency is
necessary in connection with the authorization, issuance,
transfer, sale, or delivery of the Units by the Company, in
connection with the execution, delivery, and performance of this
Agreement by the Company or in connection with the taking of any
action contemplated herein, or the issuance of the Underwriter s
Options or the Securities underlying the Underwriter s Options,
other than registrations or qualifications of the Units under
applicable state or foreign securities or Blue Sky laws and
registration under the Act and the NASD; and
(xi) the Units, Common Stock and Warrants have
been duly authorized for quotation on the National Association of
Securities Dealers, Inc. Automatic Quotation System.
(xii) Except as disclosed in the Registration
Statement, to the best knowledge of such counsel, the Company has
sufficient licenses, permits, and other governmental
authorizations currently necessary for the conduct of its
business or the ownership of its properties as described in the
Prospectus and is in all material respects complying therewith.
To the best knowledge of such counsel, the business of the
Company is not in violation of, or will not cause the Company to
violate any law, rule, regulation, or order of the United States,
any state, county, or locality, or of any agency or body of the
United States, or of any state, county, or locality, the
violation of which would have a Material Adverse Effect and are
in compliance with all rules and regulations pertaining to the
business of the Company.
Such opinion shall also cover such matters incident to the
transactions contemplated hereby as the Underwriter or counsel
for the Underwriter shall reasonably request. In rendering such
opinion, such counsel may rely upon certificates of any officer
of the Company or public officials as to matters of fact; and may
rely as to all matters of law other than the law of the United
States or of the State of Delaware upon opinions of counsel
satisfactory to the Underwriter, in which case the opinion shall
state that they have no reason to believe that the Underwriter
and they are not entitled to so rely.
(B) At the Closing Date, you shall have received
the opinion of Graham & James, special patent counsel, in form
and substance satisfactory to you, identifying any patent
searches conducted with respect to the Company s patent
applications and providing that the description in the
Registration Statement with respect to the status of such patent
applications is accurate, that the Company owns the entire right,
title and interest in and to such applications as described in
the Prospectus and has not received any notice of conflict with
the asserted rights of others in respect thereof and that the
statements on the Prospectus under the captions "Prospectus
Summary-The Company", "Risk Factors-Dependence on Patents and
Proprietary Rights" and"Business-Patent Application" are true and
correct.
(C) At the Closing Date, you shall have received
the opinion of Dean E. Snyder, Esq., special regulatory counsel,
in form and substance satisfactory to you, providing that (i) the
description in the Registration Statement regarding the FDA and
governmental regulation related thereto is true, complete and
accurate in all material respects including those statements
relating thereto contained in the following sections: Prospectus
Summary -- The Company , Risk Factors -- FDA Regulation," Plan
of Operation -- 510(k) Notification," Business -- The Company,"
Business -- U.S. Government Regulation and Business -- Foreign
Government Regulation and (ii) where any conclusion with respect
to likely treatment of the Company's products by the FDA is
stated in the Prospectus, after reasonable investigation,
reasonable bases exist for such conclusion and the conclusion is
reasonable to the extent qualified in the Prospectus, there being
no qualifications known other than those described in the
Prospectus.
(c) All corporate proceedings and other legal
matters relating to this Agreement, the Registration Statement,
the Prospectus and other related matters shall be satisfactory to
or approved by Bernstein & Wasserman, LLP, counsel to the
Underwriter.
(d) The Underwriter shall have received a letter
prior to the effective date of the Registration Statement and
again on and as of the Closing Date from Rosenberg Rich Baker
Berman & Company, independent public accountants for the Company,
substantially in the form reasonably acceptable to the
Underwriter.
(e) At the Closing Date, (i) the representations
and warranties of the Company contained in this Agreement shall
be true and correct in all material respects with the same effect
as if made on and as of the Closing Date and the Company shall
have performed all of its obligations hereunder and satisfied all
the conditions on its part to be satisfied at or prior to such
Closing Date; (ii) the Registration Statement and the Prospectus
and any amendments or supplements thereto shall contain all
statements which are required to be stated therein in accordance
with the Act and the Rules and Regulations, and shall in all
material respects conform to the requirements thereof, and
neither the Registration Statement nor the Prospectus nor any
amendment or supplement thereto shall contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading; (iii) there shall have been, since the
respective dates as of which information is given, no material
adverse change, or to the Company's knowledge, any development
involving a prospective material adverse change, in the business,
properties, condition (financial or otherwise), results of
operations, capital stock, long-term or short-term debt, or
general affairs of the Company from that set forth in the
Registration Statement and the Prospectus, except changes which
the Registration Statement and Prospectus indicate might occur
after the effective date of the Registration Statement, and the
Company shall not have incurred any material liabilities or
entered into any material agreement not in the ordinary course of
business other than as referred to in the Registration Statement
and Prospectus; (iv) except as set forth in the Prospectus, no
action, suit, or proceeding at law or in equity shall be pending
or threatened against the Company which would be required to be
set forth in the Registration Statement, and no proceedings shall
be pending or threatened against the Company before or by any
commission, board, or administrative agency in the United States
or elsewhere, wherein an unfavorable decision, ruling, or finding
would materially and adversely affect the business, property,
condition (financial or otherwise), results of operations, or
general affairs of the Company and (v) the Underwriter shall have
received, at the Closing Date, a certificate signed by each of
the President and the principal operating officer of the Company,
dated as of the Closing Date, evidencing compliance with the
provisions of this subsection (e).
(f) Intentionally Omitted.
(g) After the first Closing Date (if the maximum
offering has not been achieved) the obligations of the
Underwriter to purchase and pay for any additional Units will be
subject (as of the date hereof and of the such other Closing
Dates) to the following additional conditions:
(i) The Registration Statement shall remain
effective at such Closing Dates, and no stop order suspending the
effectiveness thereof shall have been issued and no proceedings
for that purpose shall have been instituted or shall be pending,
or, to your knowledge or the knowledge of the Company, shall be
contemplated by the Commission, and any reasonable request on the
part of the Commission for additional information shall have been
complied with to the satisfaction of the Commission.
(ii) At each such Closing Date there shall have
been delivered to you the signed opinions of Kelley Drye &
Warren, and Graham & James, counsel and special counsel to the
Company, respectively, dated as of such Closing Date, in form and
substance reasonably satisfactory to Bernstein & Wasserman, LLP,
counsel to the Underwriter, which opinions shall be substantially
the same in scope and substance as the opinions furnished to you
at the initial Closing Date pursuant to Sections 4(b) hereof,
except that such opinions, where appropriate, shall cover the
additional Units.
(iii) At such Closing Dates there shall have been
delivered to you a certificate of the President and the principal
operating officer of the Company, dated such Closing Dates, in
form and substance reasonably satisfactory to Bernstein &
Wasserman, LLP, counsel to the Underwriter, substantially the
same in scope and substance as the certificate furnished to you
at the initial Closing Date pursuant to Section 4(e) hereof.
(iv) At each such Closing Date there shall have
been delivered to you a letter in form and substance satisfactory
to you from Rosenberg Rich Baker Berman & Company, P.A. dated
such Closing Date and addressed to the Underwriter confirming the
information in their letter referred to in Section 4(d) hereof
and stating that nothing has come to their attention during the
period from the ending date of their review referred to in said
letter to a date not more than five business days prior to such
Closing Date, which would require any change in said letter if it
were required to be dated such Closing Date.
(v) All proceedings taken at or prior to each
such Closing Date in connection with the sale and issuance of the
additional Units shall be reasonably satisfactory in form and
substance to you, and you and Bernstein & Wasserman, LLP, counsel
to the Underwriter, shall have been furnished with all such
documents, certificates, and opinions as you may reasonably
request in connection with this transaction in order to evidence
the accuracy and completeness of any of the representations,
warranties or statements of the Company or its compliance with
any of the covenants or conditions contained herein.
(h) No action shall have been taken by the
Commission or the NASD the effect of which would make it
improper, at any time prior to a Closing Date (unless cured by
the Company within ten (10) business days of notice to the
Company of such action), for members of the NASD to execute
transactions (as principal or agent) in the Units, Common Stock
or the Warrants and no proceedings for the taking of such action
shall have been instituted or shall be pending, or, to the
knowledge of the Underwriter or the Company, shall be
contemplated by the Commission or the NASD. The Company
represents that at the date hereof it has no knowledge that any
such action is in fact contemplated by the Commission or the
NASD.
(i) If any of the conditions herein provided for in
this Section shall not have been fulfilled in all material
respects as of the date indicated, this Agreement and all
obligations of the Underwriter under this Agreement may be
canceled at, or at any time prior to, each Closing Date by the
Underwriter notifying the Company of such cancellation in writing
or by telegram at or prior to the applicable Closing Date. Any
such cancellation shall be without liability of the Underwriter
to the Company.
5. Conditions of the Obligations of the Company. The
obligation of the Company to sell and deliver the Units is
subject to the following conditions:
(a) The Registration Statement shall have become
effective not later than 10:00 a.m. New York time, on the day
following the date of this Agreement, or on such later date as
the Company and the Underwriter may agree in writing.
(b) At each Closing Date, no stop orders suspending
the effectiveness of the Registration Statement shall have been
issued under the Act or any proceedings therefor initiated or
threatened by the Commission.
If the conditions to the obligations of the Company provided
for in this Section have been fulfilled on the initial Closing
Date but are not fulfilled after the initial Closing Date and
prior to any subsequent Closing Date, then only the obligation of
the Company to sell and deliver the Units on any subsequent
Closing Date shall be affected.
6. Indemnification.
(a) The Company agrees (i) to indemnify and hold
harmless the Underwriter and each person, if any, who controls
the Underwriter within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act against any losses, claims,
damages, or liabilities, joint or several (which shall, for all
purposes of this Agreement, include, but not be limited to, all
reasonable costs of defense and investigation and all reasonable
attorneys' fees), to which such Underwriter or such controlling
person may become subject, under the Act or otherwise, and
(ii) to reimburse, as incurred, the Underwriter and such
controlling persons for any legal or other expenses reasonably
incurred in connection with investigating, defending against or
appearing as a third party witness in connection with any losses,
claims, damages, or liabilities; insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) relate to
and arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
(A) the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, (B) any blue
sky application or other document executed by the Company
specifically for that purpose containing written information
specifically furnished by the Company and filed in any state or
other jurisdiction in order to qualify any or all of the Units
under the securities laws thereof (any such application, document
or information being hereinafter called a "Blue Sky
Application"), or arise out of or are based upon the omission or
alleged omission to state in the Registration Statement, any
Preliminary Prospectus, Prospectus, or any amendment or
supplement thereto, or in any Blue Sky Application, a material
fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that the
Company will not be required to indemnify the Underwriter and any
controlling person or be liable in any such case to the extent,
but only to the extent, that any such loss, claim, damage, or
liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission is made
in reliance upon and in conformity with written information
furnished to the Company by or on behalf of the Underwriter
specifically for use in the preparation of the Registration
Statement or any such amendment or supplement thereof or any such
Blue Sky Application or any such Preliminary Prospectus or the
Prospectus or any such amendment or supplement thereto, provided,
further that the indemnity with respect to any Preliminary
Prospectus shall not be applicable on account of any losses,
claims, damages, liabilities, or litigation arising from the sale
of Units to any person if the misstatement or omission was
corrected in the Prospectus but a copy of the Prospectus was not
delivered to such person by the Underwriter in accordance with
this Agreement at or prior to the written confirmation of the
sale to such person. This indemnity will be in addition to any
liability which the Company may otherwise have.
(b) The Underwriter will indemnify and hold
harmless the Company, each of its directors, each nominee (if
any) for director named in the Prospectus, each of its officers
who have signed the Registration Statement and each person, if
any, who controls the Company within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act, against any losses,
claims, damages, or liabilities (which shall, for all purposes of
this Agreement, include, but not be limited to, all costs of
defense and investigation and reasonable attorneys' fees) to
which the Company or any such director, nominee, officer, or
controlling person may become subject under the Act or otherwise,
insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or
omission or alleged omission was made in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, or any Blue Sky Application in
reliance upon and in conformity with written information
furnished to the Company by the Underwriter specifically for use
in the preparation thereof and for any violation by the
Underwriter in the sale of such Units of any applicable state or
federal law or any rule, regulation or instruction thereunder
relating to violations based on unauthorized statements by
Underwriter or its representative, provided that such violation
is not based upon any violation of such law, rule, or regulation
or instruction by the party claiming indemnification or
inaccurate or misleading information furnished by the Company or
its representatives, including information furnished to the
Underwriter as contemplated herein. This indemnity agreement will
be in addition to any liability which the Underwriter may
otherwise have.
(c) Promptly after receipt by an indemnified party
under this Section of notice of the commencement of any action,
such indemnified party will, if a claim in respect thereof is to
be made against the indemnifying party under this Section, notify
in writing the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not
relieve it from any liability which it may have to any
indemnified party otherwise than under this Section unless the
omission so to notify prejudices the indemnifying party. In case
any such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to
the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, subject
to the provisions herein stated, with counsel reasonably
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section for any legal
or other expenses subsequently incurred by such indemnified party
in connection with the defense thereof other than reasonable
costs of investigation. The indemnified party shall have the
right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of
such counsel shall not be at the expense of the indemnifying
party if the indemnifying party has assumed the defense of the
action with counsel reasonably satisfactory to the indemnified
party; provided that the reasonable fees and expenses of such
counsel shall be at the expense of the indemnifying party if
(i) the employment of such counsel has been specifically
authorized in writing by the indemnifying party or (ii) the named
parties to any such action (including any impleaded parties)
include both the indemnified party and the indemnifying party and
in the reasonable judgment of the counsel to the indemnified
party, there is a conflict of interest between the indemnifying
party and the indemnified party in the conduct of the defense (in
which case the indemnifying party shall not have the right to
assume the defense of such action on behalf of such indemnified
party, it being understood, however, that the indemnifying party
shall not, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one
separate firm of attorneys for the indemnified party, which firm
shall be designated in writing by the indemnified party). No
settlement of any action against an indemnified party shall be
made without the consent of the indemnified party, which shall
not be unreasonably withheld in light of all factors of
importance to such indemnified party. If it is ultimately
determined that indemnification is not permitted, then an
indemnified party will return all monies advanced to the
indemnifying party with interest thereon.
7. Contribution. In order to provide for just and
equitable contribution under the Act in any case in which the
indemnification provided in Section 6 hereof is requested but it
is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case,
notwithstanding the fact that the express provisions of Section 6
provide for indemnification in such case, then the Company and
the Underwriter shall contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject (which shall,
for all purposes of this Agreement, include, but not be limited
to, all reasonable costs of defense and investigation and all
reasonable attorneys' fees) (after contribution from others) such
proportional amount of such losses, claims, damages, or
liabilities represented by the percentage that the underwriting
discount per Unit appearing on the cover page of the Prospectus
plus all other compenation paid to the Underwriter bears to the
public offering price appearing thereon and the Company shall be
responsible for the remaining portion, provided, however, that if
such allocation is not permitted by applicable law, then
allocated in such proportion as is appropriate to reflect
relative benefits but also the relative fault of the Company and
the Underwriter and controlling persons, in the aggregate, in
connection with the statements or omissions which resulted in
such damages and other relevant equitable considerations shall
also be considered. The relative fault shall be determined by
reference to, among other things, whether in the case of an
untrue statement of a material fact or the omission to state a
material fact, such statement or omission relates to information
supplied by the Company or the Underwriter and the parties'
relative intent, knowledge, access to information, and
opportunity to correct or prevent such untrue statement or
omission. The Company and the Underwriter agree that it would
not be just and equitable if the respective obligations of the
Company and the Underwriter to contribute pursuant to this
Section 7 were to be determined by pro rata or per capita
allocation of the aggregate damages or by any other method of
allocation that does not take account of the equitable
considerations referred to in this Section 7. No person guilty of
a fraudulent misrepresentation (within the meaning of
Section 1(f) of the Act) shall be entitled to contribution from
any person who is not guilty of such fraudulent
misrepresentation. As used in this paragraph, the word "Company"
includes any officer, director, or person who controls the
Company within the meaning of Section 15 of the Act. If the full
amount of the contribution specified in this paragraph is not
permitted by law, then the Underwriter and each person who
controls the Underwriter shall be entitled to contribution from
the Company, its officers, directors, and controlling persons,
and the Company, its officers, directors, and controlling persons
shall be entitled to contribution from the Underwriter to the
full extent permitted by law. The foregoing contribution
agreement shall in no way affect the contribution liabilities of
any persons having liability under Section 11 of the Act other
than the Company and the Underwriter. No contribution shall be
requested with regard to the settlement of any matter from any
party who did not consent to the settlement; provided, however,
that such consent shall not be unreasonably withheld in light of
all factors of importance to such party.
8. Costs and Expenses.
(a) Whether or not this Agreement becomes effective
or the sale of the Units by the Underwriter is consummated, the
Company will pay all costs and expenses incident to the
performance of this Agreement by the Company including, but not
limited to, the fees and expenses of counsel to the Company and
of the Company's accountants; the costs and expenses incident to
the preparation, printing, filing, and distribution under the Act
of the Registration Statement (including the financial statements
therein and all amendments and exhibits thereto), Preliminary
Prospectus, and the Prospectus, as amended or supplemented, the
fee of the NASD in connection with the filing required by the
NASD relating to the offering of the Units contemplated hereby;
all documented expenses, including reasonable fees and
disbursements of counsel to the Underwriter, in connection with
the qualification of the Units under the state securities or blue
sky laws which the Underwriter shall designate (which legal fees
(not including filing fees or expenses) shall not exceed
$35,000); the cost of printing and furnishing to the Underwriter
copies of the Registration Statement, each Preliminary
Prospectus, if applicable, the Prospectus, this Agreement, and
the Blue Sky Memorandum, any fees relating to the listing of the
Units, Common Stock, and Warrants on NASDAQ or any other
securities exchange; the cost of printing the certificates
representing the securities comprising the Units; the fees of
the transfer agent and warrant agent, reasonable and traditional
advertising costs, meetings and presentation costs; reasonable
fees to due diligence experts, if any, incurred by the
Underwriter for intellectual property matters not to exceed
$25,000; and reasonable costs of bound volumes and prospectus
memorabilia. The Company shall pay any and all taxes (including
any transfer, franchise, capital stock, or other tax imposed by
any jurisdiction) on sales of the Units hereunder. The Company
will also pay all costs and expenses incident to the furnishing
of any amended Prospectus or of any supplement to be attached to
the Prospectus as called for in Section 3(a) of this Agreement
except as otherwise set forth in said Section.
(b) In addition to the foregoing expenses the
Company shall at the Closing Date pay to the Underwriter a
non-accountable expense allowance equal to 3.0% of the gross
proceeds received from the sale of all Units sold. In the event
the transactions contemplated hereby are not consummated by
reason of any action by the Underwriter (except if such
prevention is based upon a breach by the Company of any covenant,
representation, or warranty contained herein or because any other
condition to the Underwriter's obligations hereunder required to
be fulfilled by the Company is not fulfilled other than because
the Underwriter failed to take an action necessary to such
fulfillment) the Company shall not be liable for any expenses of
the Underwriter, including the Underwriter's legal fees. In the
event the transactions contemplated hereby are not consummated by
reason of the Company s actions or failure to take such actions
as the Underwriter believes are reasonably required to complete
the transaction contemplated herein, the Company shall be liable
for the actual accountable out-of-pocket expenses of the
Underwriter, including reasonable legal fees which shall not
exceed $150,000 (less any amount previously paid or payable
pursuant to the next sentence). In the event the transactions
contemplated hereby are not consummated due to a material adverse
change in the business or financial results, prospects or
condition of the Company or to adverse market conditions, the
Company shall be liable for the actual out-of-pocket expenses of
the Underwriter, including reasonable legal fees, not to exceed
in the aggregate $100,000. As described in paragraph 3(c), if
the Company files a registration statement or signs a letter of
intent, or any other agreement involving transactions
contemplated by this Agreement, with another NASD member firm
within a period of twelve (12) months from the termination of
this offering, the Company shall pay the Underwriter promptly an
aggregate of $300,000 (less any amount previously paid pursuant
to this paragraph). As described in paragraph 3(c), in the event
of the sale or merger of the Company, any significant subsidiary
or any significant assets thereof (hereinafter, a Transaction )
from the date hereof prior to the Closing Date and the closing of
the public offering contemplated hereby does not occur, the
Company shall pay the Underwriter, as long as the Underwriter is
diligently attempting to close the offering, three hundred
thousand dollars ($300,000).
(c) Except as disclosed in the Registration
Statement, including under the caption Litigation, no person is
entitled to the Company s knowledge, either directly or
indirectly to compensation from the Company, from the Underwriter
or from any other person for services as a finder in connection
with the proposed offering, and the Company agrees to indemnify
and hold harmless the Underwriter, against any losses, claims,
damages, or liabilities, joint or several (which shall, for all
purposes of this Agreement, include, but not be limited to, all
costs of defense and investigation and all reasonable attorneys'
fees), to which the Underwriter or person may become subject
insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon the
claim of any person (other than an employee of the party claiming
indemnity) or entity that he or it is entitled to a finder's fee
in connection with the proposed offering by reason of such
person's or entity's influence or prior contact with the
indemnifying party.
9. Effective Date. The Agreement shall become effective
upon its execution except that the Underwriter may, at its
option, delay its effectiveness until 11:00 a.m., New York time
on the first full business day following the effective date of
the Registration Statement, or at such earlier time on such
business day after the effective date of the Registration
Statement as the Underwriter in its discretion shall first
commence the initial public offering of the Units. This Agreement
may be terminated by the Underwriter at any time before it
becomes effective as provided above, except that Sections 3(c),
6, 7, 8, 12, 13, 14, and 15 shall remain in effect
notwithstanding such termination.
10. Termination.
(a) After this Agreement becomes effective, this
Agreement, except for Sections 3(c), 6, 7, 8, 12, 13, 14, and 15
hereof, may be terminated at any time prior to the Closing Date,
by the Underwriter if in the Underwriter's reasonable judgment it
is impracticable to offer for sale or to enforce contracts made
by the Underwriter for the resale of the Units agreed to be
purchased hereunder by reason of (i) the Company having sustained
a material loss, whether or not insured, by reason of fire,
earthquake, flood, accident, or other calamity, or from any labor
dispute or court or government action, order, or decree,
(ii) trading in securities on Nasdaq having been suspended or
limited, (iii) material governmental restrictions having been
imposed on trading in securities generally (not in force and
effect on the date hereof), (iv) a banking moratorium having been
declared by federal or New York state authorities, (v) an
outbreak of major international hostilities involving the United
States or other substantial national or international calamity
having occurred, (vi) a pending or threatened legal or
governmental proceeding or action relating generally to the
Company's business, or a notification having been received by the
Company of the threat of any such proceeding or action, which
would materially adversely affect the Company; (vii) except as
contemplated by the Prospectus, the Company is merged with or
consolidated into or acquired by another company or group or
there exists a binding legal commitment for the foregoing or any
other material change of ownership or control occurs; (viii) the
adoption of a federal law, rule or regulation which, in the
reasonable belief of the Underwriter, would have a material
adverse impact on the business or financial condition of the
Company, (ix) any material adverse change in the financial or
securities markets beyond normal market fluctuations having
occurred since the date of this Agreement, or (x) any material
adverse change having occurred, since the respective dates of
which information is given in the Registration Statement and
Prospectus, in the earnings, business prospects, or general
condition of the Company, financial or otherwise, whether or not
arising in the ordinary course of business.
(b) If the Underwriter elects to prevent this
Agreement from becoming effective or to terminate this Agreement
as provided in this Section 10, the Company shall be promptly
notified by the Underwriter, by telephone or telegram, confirmed
by letter.
11. Underwriter s Options. At or before the Closing
Date, the Company will sell the Underwriter or its designees for
a consideration of $.001 per option and upon the terms and
conditions set forth in the form of the Underwriter s Options
annexed as an exhibit to the Registration Statement,
Underwriter s Options to purchase a number of Units equal to 10%
of the Units sold hereunder on such Closing Date up to an
aggregate of 160,000 Units. In the event of conflict in the
terms of this Agreement and the Underwriter s Options with
respect to language relating to the Underwriter s Options, the
language of the Underwriter s Options shall control.
12. Covenants of the Underwriter. You covenant and
agree with the Company as follows:
(a) Compliance with Laws. In connection with the
offer and sale of Units, you shall comply with any applicable
requirements of the Act, the Exchange Act, the NASD and the
applicable state securities or "blue sky" laws, and the rules and
regulations thereunder.
(b) Accuracy of Information. No information
supplied by you for use in the Registration Statement,
Preliminary Prospectus, Prospectus or Blue Sky Application will
contain any untrue statements of a material fact or omit to state
any material fact necessary to make such information not
misleading.
(c) No Additional Information. You will not give
any information or make any representation in connection with the
offering of the Units other than that contained in the
Prospectus.
(d) Sale of Units. You shall act as Sales Agent
and solicit, directly or through Selected Dealers, purchasers of
the Units only in the jurisdictions in which you have been
advised by the Company that such solicitation can be made, and in
which you or the soliciting Selected Dealer, as the case may be,
are qualified to so act.
13. Representations, Warranties and Agreements to
Survive Delivery. The respective indemnities, agreements,
representations, warranties, and other statements of the Company
and the Underwriter and the undertakings set forth in or made
pursuant to this Agreement will remain in full force and effect
until three years from the date of this Agreement, regardless of
any investigation made by or on behalf of the Underwriter, the
Company, or any of its officers or directors or any controlling
person and will survive delivery of and payment of the Units and
the termination of this Agreement.
14. Notice. Any communications specifically required
hereunder to be in writing, if sent to the Underwriter, will be
mailed, delivered, or telecopied and confirmed to them at
Patterson Travis, Inc., One Battery Park Place, 2nd Fl., New
York, NY 10004, with a copy sent to Bernstein & Wasserman, LLP,
950 Third Avenue, New York, NY 10022, Attention: Stuart
Neuhauser, Esq., or if sent to the Company, will be mailed,
delivered, or telecopied and confirmed to it at 1090 King Georges
Post Road, Suite 301, Edison, NJ 08837, Attention: Eugene Gordon
with a copy sent to Kelley Drye & Warren, 101 Park Avenue, New
York, NY 10178 Attention: Jane E. Jablons, Esq. Notice shall be
deemed to have been duly given if mailed or transmitted by any
standard form of telecommunication.
15. Parties in Interest. The Agreement herein set forth
is made solely for the benefit of the Underwriter, the Company,
any person controlling the Company or the Underwriter, and
directors of the Company, nominees for directors (if any) named
in the Prospectus, its officers who have signed the Registration
Statement, and their respective executors, administrators,
successors, assigns and no other person shall acquire or have any
right under or by virtue of this Agreement. The term "successors
and assigns" shall not include any purchaser, as such purchaser,
from the Underwriter of the Units.
16. Applicable Law. This Agreement will be governed by,
and construed in accordance with, of the laws of the State of
New York applicable to agreements made and to be entirely
performed within New York.
17. Counterparts. This Agreement may be executed in one
or more counterparts each of which shall be deemed to constitute
an original and shall become effective when one or more
counterparts have been signed by each of the parties hereto and
delivered to the other parties (including by fax, followed by
original copies by overnight mail).
18. Entire Agreement; Amendments. This Agreement
constitutes the entire agreement of the parties hereto and
supersedes all prior written or oral agreements, understandings,
and negotiations with respect to the subject matter hereof. This
Agreement may not be amended except in writing, signed by the
Underwriter and the Company.
If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return this agreement, whereupon
it will become a binding agreement between the Company and the
Underwriter in accordance with its terms.
Very truly yours,
Medjet Inc.
By: __________________________
Its
The foregoing Underwriting Agreement is hereby
confirmed and accepted as of the date first above written.
Patterson Travis, Inc.
By: _________________________
Its
ESCROW AGREEMENT (PUBLIC OFFERING)
AGREEMENT made this __________ day of __________________, 19__ by
and among the Issuer and the Underwriter whose names and addresses appear
on the Information Sheet (as defined herein) attached to this Agreement and
Continental Stock Transfer & Trust Company (the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, the Issuer has filed with the Securities and Exchange
Commission (the "Commission") a registration statement (the "Registration
Statement") covering a proposed public offering of its securities as
described on the Information Sheet;
WHEREAS, the Underwriter proposes to offer the Securities, as
agent for the Issuer, for sale to the public on a "best efforts, all or
none" basis with respect to the Minimum Securities Amount and Minimum
Dollar Amount and at the price per share or other unit all as set forth on
the Information Sheet;
WHEREAS, the Issuer and the Underwriter propose to establish an
escrow account (the "Escrow Account"), to which subscription monies which
are received by the Escrow Agent from the Underwriter in connection with
such public offering are to be credited, and the Escrow Agent is willing to
establish the Escrow Account on the terms and subject to the conditions
hereinafter set forth; and
WHEREAS, the Escrow Agent has an agreement with Chemical Bank to
establish a special bank account (the "Bank Account") into which the
subscription monies, which are received by the Escrow Agent from the
Underwriter and credited to the Escrow Account, are to be deposited;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, the parties hereto hereby agree as follows:
1. Information Sheet. Each capitalized term not otherwise
defined in this Agreement shall have the meaning set forth for such term on
the information sheet which is attached to this Agreement and is
incorporated by reference herein and made a part hereof (the "Information
Sheet").
2. Establishment of the Bank Account.
2.1 (a) The Escrow Agent shall establish a
non-interest-bearing bank account at the branch of Chemical Bank selected
by the Escrow Agent, and bearing the designation set forth on the
Information Sheet (heretofore defined as the "Bank Account"). The purpose
of the Bank Account is for (a) the deposit of all subscription monies
(checks, cash or wire transfers) which are received by the Underwriter from
prospective purchasers of the Securities and are delivered by the
Underwriter to the Escrow Agent, (b) the holding of amounts of subscription
monies which are collected through the banking system, and (c) the
disbursement of collected funds, all as described herein.
(b) If the Offering Period shall be extended by an
Extension Period (as defined below) as set forth below, the Escrow Agent
shall take any necessary or appropriate action to cause the Bank Account to
be converted into an interest bearing bank account, accruing interest on
all Escrow Amounts (as defined below) deposited therein commencing on the
first day of the Extension Period, with respect to Escrow Amounts already
deposited, or on the date of deposit, with respect to Escrow Amounts
deposited during the Extension Period. All disbursements of the Escrow
Amounts in accordance with Article 4 hereof shall include disbursement of
interest, if any, as may have accrued on such funds.
2.2 On or before the date of the initial deposit in the Bank
Account pursuant to this Agreement, the Underwriter shall notify the Escrow
Agent in writing of the effective date of the Registration Statement
("Effective Date"), and the Escrow Agent shall not be required to accept
any amounts for credit to the Escrow Account or for deposit in the Bank
Account prior to its receipt of such notification.
2.3 The Offering Period, which shall be deemed to commence on
the Effective Date, shall consist of the number of calendar days or
business days set forth on the Information Sheet. The Offering Period
shall be extended by an Extension Period only if the Escrow Agent shall
have received written notice thereof at least five (5) business days prior
to the expiration of the Offering Period. The Extension Period, which
shall be deemed to commence on the next calendar day following the
expiration of the Offering Period, shall consist of the number of calendar
days or business days set forth on the Information Sheet. The last day of
the Offering Period, or the last day of the Extension Period (if the Escrow
Agent has received written notice thereof as hereinabove provided), is
referred to herein as the "Termination Date". Except as provided in
Section 4.3 hereof, after the Termination Date the Underwriter shall not
deposit, and the Escrow Agent shall not accept, any additional amounts
representing payments by prospective purchasers.
3. Deposits to the Bank Account.
3.1 The Underwriter shall promptly deliver to the Escrow
Agent all monies which it receives from prospective purchasers of the
Securities, which monies shall be in the form of checks, cash, or wire
transfers. Upon the Escrow Agent's receipt of such monies, they shall be
credited to the Escrow Account. All checks delivered to the Escrow Agent
shall be made payable to "Continental Stock Transfer & Trust Company, as
Escrow Agent for the offering by [the Issuer]". Any check payable other
than to the Escrow Agent as required hereby shall be returned to the
prospective purchaser, or if the Escrow Agent has insufficient information
to do so, then to the Underwriter (together with any Subscription
Information, as defined below or other documents delivered therewith) by
noon of the next business day following receipt of such check by the Escrow
Agent, and such check shall be deemed not to have been delivered to the
Escrow Agent pursuant to the terms of this Agreement.
3.2 Promptly after receiving subscription monies as described
in Section 3.1, the Escrow Agent shall deposit the same into the Bank
Account. Amounts of monies so deposited are hereinafter referred to as
"Escrow Amounts". The Escrow Agent shall cause Chemical Bank to process
all Escrow Amounts for collection through the banking system.
Simultaneously with each deposit to the Escrow Account, the Underwriter (or
the Issuer, if such deposit is made by the Issuer) shall inform the Escrow
Agent in writing of the name and address of the prospective purchaser, the
amount of Securities subscribed for by such purchaser, and the aggregate
dollar amount of such subscription (collectively, the "Subscription
Information").
3.3 The Escrow Agent shall not be required to accept for
credit to the Escrow Account or for deposit into the Bank Account checks
which are not accompanied by the appropriate Subscription Information.
Wire transfers and cash representing payments by prospective purchasers
shall not be deemed deposited in the Escrow Account until the Escrow Agent
has received in writing the Subscription Information required with respect
to such payments.
3.4 The Escrow Agent shall not be required to accept in the
Escrow Account any amounts representing payments by prospective purchasers,
whether by check, cash or wire, except during the Escrow Agent's regular
business hours.
3.5 Only those Escrow Amounts, which have been deposited in
the Bank Account and which have cleared the banking system and have been
collected by the Escrow Agent, are herein referred to as the "Fund".
3.6 If the proposed offering is terminated before the
Termination Date, the Escrow Agent shall refund any portion of the Fund
prior to disbursement of the Fund in accordance with Article 4 hereof upon
instructions in writing signed by both the Issuer and the Underwriter.
4. Disbursement from the Bank Account.
4.1 Subject to Section 4.3 below, if by the close of regular
banking hours on the Termination Date the Escrow Agent determines that the
amount in the Fund is less than the Minimum Dollar Amount or the Minimum
Securities Amount, as indicated by the Subscription Information submitted
to the Escrow Agent, then in either such case, the Escrow Agent shall
promptly refund to each prospective purchaser the amount of payment
received from such purchaser which is then held in the Fund or which
thereafter clears the banking system, without interest thereon or deduction
therefrom, by drawing checks on the Bank Account for the amounts of such
payments and transmitting them to the purchasers. In such event, the
Escrow Agent shall promptly notify the Issuer and the Underwriter of its
distribution of the Fund.
4.2 Subject to Section 4.3 below, if at any time up to the
close of regular banking hours on the Termination Date, the Escrow Agent
determines that the amount in the Fund is at least equal to the Minimum
Dollar Amount and represents the sale of not less than the Minimum
Securities Amount, the Escrow Agent shall promptly notify the Issuer and
the Underwriter of such fact in writing. The Escrow Agent shall promptly
disburse the Fund, by drawing checks on the Bank Account in accordance with
instructions in writing signed by both the Issuer and the Underwriter as to
the disbursement of the Fund, promptly after it receives such instructions.
4.3 Upon disbursement of the Fund pursuant to the terms of
this Article 4, the Escrow Agent shall be relieved of all further
obligations and released from all liability under this Agreement. It is
expressly agreed and understood that in no event shall the aggregate amount
of payments made by the Escrow Agent exceed the amount of the Fund.
5. Rights, Duties and Responsibilities of Escrow Agent. It
is understood and agreed that the duties of the Escrow Agent are purely
ministerial in nature, and that:
5.1 The Escrow Agent shall notify the Underwriter, on a daily
basis, of the Escrow Amounts which have been deposited in the Bank Account
and of the amounts, constituting the Fund, which have cleared the banking
system and have been collected by the Escrow Agent.
5.2 The Escrow Agent shall not be responsible for or be
required to enforce any of the terms or conditions of the underwriting
agreement or any other agreement between the Underwriter and the Issuer nor
shall the Escrow Agent be responsible for the performance by the
Underwriter or the Issuer of their respective obligations under this
Agreement.
5.3 The Escrow Agent shall not be required to accept from the
Underwriter (or the Issuer) any Subscription Information pertaining to
prospective purchasers unless such Subscription Information is accompanied
by checks, cash, or wire transfers meeting the requirements of Section 3.1,
nor shall the Escrow Agent be required to keep records of any information
with respect to payments deposited by the Underwriter (or the Issuer)
except as to the amount of such payments; however, the Escrow Agent shall
notify the Underwriter within a reasonable time of any discrepancy between
the amount set forth in any Subscription Information and the amount
delivered to the Escrow Agent therewith. Such amount need not be accepted
for deposit in the Escrow Account until such discrepancy has been resolved.
5.4 The Escrow Agent shall be under no duty or responsibility
to enforce collection of any check delivered to it hereunder. The Escrow
Agent, within a reasonable time, shall return to the Underwriter any check
received which is dishonored, together with the Subscription Information,
if any, which accompanied such check.
5.5 The Escrow Agent shall be entitled to rely upon the
accuracy, act in reliance upon the contents, and assume the genuineness of
any notice, instruction, certificate, signature, instrument or other
document which is given to the Escrow Agent pursuant to this Agreement
without the necessity of the Escrow Agent verifying the truth or accuracy
thereof. The Escrow Agent shall not be obligated to make any inquiry as to
the authority, capacity, existence or identity of any person purporting to
give any such notice or instructions or to execute any such certificate,
instrument or other document.
5.6 If the Escrow Agent is uncertain as to its duties or
rights hereunder or shall receive instructions with respect to the Bank
Account, the Escrow Amounts or the Fund which, in its sole determination,
are in conflict either with other instructions received by it or with any
provision of this Agreement, it shall be entitled to hold the Escrow
Amounts, the Fund, or a portion thereof, in the Bank Account pending the
resolution of such uncertainty to the Escrow Agent's sole satisfaction, by
final judgment of a court or courts of competent jurisdiction or otherwise;
or the Escrow Agent, at its sole option, may deposit the Fund (and any
other Escrow Amounts that thereafter become part of the Fund) with the
Clerk of a court of competent jurisdiction in a proceeding to which all
parties in interest are joined. Upon the deposit by the Escrow Agent of
the Fund with the Clerk of any court, the Escrow Agent shall be relieved of
all further obligations and released from all liability hereunder.
5.7 The Escrow Agent shall not be liable for any action taken
or omitted hereunder, or for the misconduct of any employee, agent or
attorney appointed by it, except in the case of willful misconduct or gross
negligence. The Escrow Agent shall be entitled to consult with counsel of
its own choosing and shall not be liable for any action taken, suffered or
omitted by it in accordance with the advice of such counsel.
5.8 The Escrow Agent shall have no responsibility at any time
to ascertain whether or not any security interest exists in the Escrow
Amounts, the Fund or any part thereof or to file any financing statement
under the Uniform Commercial Code with respect to the Fund or any part
thereof.
6. Amendment; Resignation. This Agreement may be altered or
amended only with the written consent of the Issuer, the Underwriter and
the Escrow Agent. The Escrow Agent may resign for any reason upon three
(3) business days' written notice to the Issuer and the Underwriter.
Should the Escrow Agent resign as herein provided, it shall not be required
to accept any deposit, make any disbursement or otherwise dispose of the
Escrow Amounts or the Fund, but its only duty shall be to hold the Escrow
Amounts until they clear the banking system and the Fund for a period of
not more than five (5) business days following the effective date of such
resignation, at which time (a) if a successor escrow agent shall have been
appointed and written notice thereof (including the name and address of
such successor escrow agent) shall have been given to the resigning Escrow
Agent by the Issuer, the Underwriter and such successor escrow agent, then
the resigning Escrow Agent shall pay over to the successor escrow agent the
Fund, less any portion thereof previously paid out in accordance with this
Agreement; or (b) if the resigning Escrow Agent shall not have received
written notice signed by the Issuer, the Underwriter and a successor escrow
agent, then the resigning Escrow Agent shall promptly refund the amount in
the Fund to each prospective purchaser, without interest thereon or
deduction therefrom, and the resigning Escrow Agent shall promptly notify
the Issuer and the Underwriter in writing of its liquidation and
distribution of the Fund; whereupon, in either case, the Escrow Agent shall
be relieved of all further obligations and released from all liability
under this Agreement. Without limiting the provisions of Section 8 hereof,
the resigning Escrow Agent shall be entitled to be reimbursed by the Issuer
and the Underwriter for any expenses incurred in connection with its
resignation, transfer of the Fund to a successor escrow agent or
distribution of the Fund pursuant to this Section 6.
7. Representations and Warranties. The Issuer and the
Underwriter hereby jointly and severally represent and warrant to the
Escrow Agent that:
7.1 No party other than the parties hereto and the
prospective purchasers have, or shall have, any lien, claim or security
interest in the Escrow Amounts or the Fund or any part thereof.
7.2 No financing statement under the Uniform Commercial Code
is on file in any jurisdiction claiming a security interest in or
describing (whether specifically or generally) the Escrow Amounts or the
Fund or any part thereof.
7.3 The Subscription Information submitted with each deposit
shall, at the time of submission and at the time of the disbursement of the
Fund, be deemed a representation and warranty that such deposit represents
a bona fide payment by the purchaser described therein for the amount of
Securities set forth in such Subscription Information.
7.4 All of the information contained in the Information Sheet
is, as of the date hereof, and will be, at the time of any disbursement of
the Fund, true and correct.
8. Fees and Expenses. The Escrow Agent shall be entitled to
the Escrow Agent Fees set forth on the Information Sheet, payable as and
when stated therein. In addition, the Issuer and the Underwriter jointly
and severally agree to reimburse the Escrow Agent for any reasonable
expenses incurred in connection with this Agreement, including, but not
limited to, reasonable counsel fees. Upon receipt of the Minimum Dollar
Amount, the Escrow Agent shall have a lien upon the Fund to the extent of
its fees for services as Escrow Agent.
9. Indemnification and Contribution.
9.1 The Issuer and the Underwriter (collectively referred to
as the "Indemnitors") jointly and severally agree to indemnify the Escrow
Agent and its officers, directors, employees, agents and shareholders
(collectively referred to as the "Indemnitees") against, and hold them
harmless of and from, any and all loss, liability, cost, damage and
expense, including without limitation, reasonable counsel fees, which the
Indemnitees may suffer or incur by reason of any action, claim or
proceeding brought against the Indemnitees arising out of or relating in
any way to this Agreement or any transaction to which this Agreement
relates, unless such action, claim or proceeding is the result of the
willful misconduct or gross negligence of the Indemnitees.
9.2 If the indemnification provided for in Section 9.1 is
applicable, but for any reason is held to be unavailable, the Indemnitors
shall contribute such amounts as are just and equitable to pay, or to
reimburse the Indemnitees for, the aggregate of any and all losses,
liabilities, costs, damages and expenses, including counsel fees, actually
incurred by the Indemnitees as a result of or in connection with, and any
amount paid in settlement of, any action, claim or proceeding arising out
of or relating in any way to any actions or omissions of the Indemnitors.
9.3 The provisions of this Article 9 shall survive any
termination of this Agreement, whether by disbursement of the Fund,
resignation of the Escrow Agent or otherwise.
10. Governing Law and Assignment. This Agreement shall be
construed in accordance with and governed by the laws of the State of New
York and shall be binding upon the parties hereto and their respective
successors and assigns; provided, however, that any assignment or transfer
by any party of its rights under this Agreement or with respect to the
Escrow Amounts or the Fund shall be void as against the Escrow Agent unless
(a) written notice thereof shall be given to the Escrow Agent; and (b) the
Escrow Agent shall have consented in writing to such assignment or
transfer.
11. Notices. All notices required to be given in connection
with this Agreement shall be sent by registered or certified mail, return
receipt requested, or by hand delivery with receipt acknowledged, or by the
Express Mail service offered by the United States Post Office, and
addressed, if to the Issuer or the Underwriter, at their respective
addresses set forth on the Information Sheet, and if to the Escrow Agent,
at its address set forth above, to the attention of the Trust Department.
12. Severability. If any provision of this Agreement or the
application thereof to any person or circumstance shall be determined to be
invalid or unenforceable, the remaining provisions of this Agreement or the
application of such provision to persons or circumstances other than those
to which it is held invalid or unenforceable shall not be affected thereby
and shall be valid and enforceable to the fullest extent permitted by law.
13. Execution in Several Counterparts. This Agreement may be
executed in several counterparts or by separate instruments, and all of
such counterparts and instruments shall constitute one agreement, binding
on all of the parties hereto.
14. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings (written or
oral) of the parties in connection therewith.
IN WITNESS WHEREOF, the undersigned have executed this Agreement
as of the day and year first above written.
THE ISSUER CONTINENTAL STOCK TRANSFER
& TRUST COMPANY
By:___________________________ By:___________________________
THE UNDERWRITER
By:___________________________
<PAGE>
ESCROW AGREEMENT INFORMATION SHEET
1. The Issuer
Name Medjet Inc.
Address 1090 King Georges Post Road, Suite 301, Edison, NJ 08837
State of incorporation of organization Delaware
2. The Underwriter
Name Patterson Travis, Inc.
Address One Battery Park Plaza, New York, NY 10004
State of incorporation of organization
3. The Securities
Description of the Securities to be offered (e.g., shares of or
warrants for common stock, debentures, units consisting shares and
warrants, etc.) Units consisting of one share of common stock, par
value $.001 per share, and one warrant to purchase one share of
common stock
Offering price per share/unit/other $5.00 per Unit
4. Minimum Amounts Required for Disbursement of the Escrow Account
Aggregate dollar amount which must be collected before the Escrow
Account may be disbursed to the Issuer ("Minimum Dollar Amount")
$6,000,000
Total amount of securities which must be subscribed for before the
Escrow Account may be disbursed to the Issuer ("Minimum Securities
Amount") 1,200,000
5. Plan of Distribution of the Securities
Offering Period: 90 calendar days
Extension Period, if any; 90 calendar days
Collection Period, if any None business days
6. Title of Escrow Account: Continental Stock Transfer & Trust
Company, Escrow Agent for Medjet Inc.
7. Escrow Agent Fees
Amount due on execution of the Escrow Agreement $750 and
$750 upon completion of the escrow
Fee for each check disbursed pursuant to the terms of the Escrow
Agreement: $ N/A
Fee for each check returned pursuant to the terms of the Escrow
Agreement: $ N/A
Fee for each additional closing $ $500
Fee for conversion of Bank Account to interest-bearing account
[to be determined]
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
MEDJET INC.
The undersigned, Eugene I. Gordon, hereby certifies that:
1. He is the President of the corporation referred to herein.
2. Such corporation is a corporation duly organized and validly
existing under the General Corporation Law of the State of Delaware, as
amended (the "Law").
3. The name of such corporation is Medjet Inc.
4. The date on which the original certificate of incorporation of such
corporation was filed with the Secretary of State of the State of Delaware
is December 16, 1993.
5. This Amended and Restated Certificate of Incorporation (i) amends
the certificate of incorporation of such corporation so as to increase the
number of shares of common stock which such Corporation has authority to
issue and to authorize the issuance of preferred stock by such corporation
and (ii) integrates into one instrument all of the provisions of such
certificate of incorporation, as so amended, which are effective and
operative.
6. This Amended and Restated Certificate of Incorporation was duly
adopted on May 2, 1996, in accordance with Sections 242 and 245 of the Law
and the applicable provisions of such certificate of incorporation by an
affirmative vote of the holders of a majority of the outstanding shares of
common stock of such corporation.
7. The provisions of such certificate of incorporation, as so amended
and restated, are as follows:
FIRST: The name of the Corporation is Medjet Inc.
SECOND: The address of the Corporation's registered office in the
State of Delaware is The Corporation Trust Company, 1209 Orange Street,
City of Wilmington, County of New Castle. The name of its registered agent
at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: The aggregate number of shares of capital stock which the
Corporation shall have authority to issue is 8,000,000, of which 7,000,000
shall be shares of common stock, par value $.001 per share (the "Common
Stock"), and 1,000,000 shall be shares of preferred stock, par value $.01
per share (the "Preferred Stock"). Shares of the Preferred Stock may be
issued in one or more series. The number of shares included in any series
of Preferred Stock and the full or limited voting powers, if any,
designations, preferences and relative, participating, optional and other
special rights, and the qualifications, limitations or restrictions, of
Preferred Stock or any series of Preferred Stock shall be stated in the
resolution or resolutions providing for the issuance of Preferred Stock or
such series of Preferred Stock adopted by the Board of Directors of the
Corporation (the "Board").
FIFTH: Elections of directors need not be by ballot unless the By-
Laws of the Corporation shall so provide.
SIXTH: The Board of Directors of the Corporation may make By-Laws and
from time to time may alter, amend or repeal By-Laws.
SEVENTH: A director of the Corporation shall not be personally liable
to the Corporation or its shareholders for monetary damages for breach of
fiduciary duty as a director except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Section 174 of the Delaware
General Corporation Law, or (iv) for any transaction from which the
director derived any improper personal benefit.
IN WITNESS WHEREOF, the undersigned has signed this Amended and
Restated Certificate of Incorporation on this 13th day of May, 1996.
/s/ Eugene I. Gordon
_____________________________
Eugene I. Gordon, President
ATTEST:
/s/ Thomas M. Handschiegel
_________________________________
Thomas M. Handschiegel, Secretary
BY-LAWS
OF
MEDJET INC.
ARTICLE I
Offices
SECTION 1. Offices. The Corporation shall maintain its registered
office in the State of Delaware at 1209 Orange Street, in the City of
Wilmington, New Castle County and its resident agent at such address is The
Corporation Trust Company. The Corporation may also have offices in such
other places in the United States or elsewhere as the Board of Directors
may, from time to time, appoint or as the business of the Corporation may
require.
ARTICLE II
Stockholders
SECTION 1. Annual Meetings. Annual meetings of the stockholders of
the Corporation for the election of Directors and for such other business
as may be conducted at such meeting shall be held on such date, at such
time and at such place within or without the State of Delaware as the Board
of Directors shall determine by resolution and set forth in the notice of
the meeting. In the event the Board of Directors fails to so determine the
time, date and place for the annual meeting, it shall be held, beginning in
1994, at the principal office of the Corporation at 11:00 a.m. on the third
Monday in March of each year.
SECTION 2. Special Meetings. Special meetings of the stockholders of
the Corporation for any purpose may be called by resolution of the Board of
Directors, the Chairman of the Board, if one is elected, or the President
and shall be called by the Chairman of the Board, if one is elected, the
President or the Secretary upon the written request of at least twenty-five
percent in interest of the stockholders entitled to vote at such meeting.
Notice of each special meeting shall be given in accordance with Section 3
of this Article II.
SECTION 3. Notice of Meetings. Written notice of each meeting of the
stockholders of the Corporation shall be given not less than ten (10) nor
more than sixty (60) days before the date of any such meeting to each
stockholder of record entitled to vote thereat and shall be mailed to or
delivered personally to each stockholder at his address as it appears on
the records of the Corporation. The notice shall state the place, date and
time of the meeting and, in the case of a special meeting, the purposes for
which the meeting is called. Except where prohibited by law, the
Certificate of Incorporation or these By-Laws, business not set forth in
the notice of meeting may also be transacted at such meeting, provided only
that such business properly comes before the meeting.
SECTION 4. Quorum. Except as otherwise required by law, the
Certificate of Incorporation or these By-Laws, the presence, in person or
by proxy, at any meeting of the stockholders, of the holders of a majority
of the outstanding shares of stock of the Corporation entitled to vote
thereat shall constitute a quorum thereof.
SECTION 5. Adjourned Meetings. Whether or not a quorum shall be
present at any meeting of the stockholders, a majority of the stockholders
of the Corporation entitled to vote at such meeting, present in person or
by proxy, may adjourn the meeting to another time, place and date without
notice other than by announcement at the meeting so adjourned. Any
business may be transacted at any adjourned meeting that could have been
transacted at the meeting originally noticed, but only those stockholders
entitled to vote at the meeting originally noticed shall be entitled to
vote at any adjourned meeting. If the adjournment is for more than thirty
(30) days from the date of the meeting originally noticed, or if a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at
the adjourned meeting.
SECTION 6. Organization. The Chairman of the Board, if one is
elected, or, in his absence or the vacancy of such office, the President of
the Corporation shall preside at all meetings of the stockholders. In the
absence of the Chairman of the Board and the President, the holders of a
majority of the shares of the Corporation, present in person or by proxy,
entitled to vote thereat shall elect a Chairman.
The Secretary of the Corporation shall act as Secretary of all
meetings of the stockholders, and in his absence, the Chairman of the
Board, if one is elected, or the President, may appoint a person to act as
Secretary of such meeting.
A complete list of stockholders entitled to vote at any meeting of the
stockholders, arranged in alphabetical order, showing the address of each
stockholder and the number of shares registered in the name of each
stockholder shall be open to the examination of any stockholder, for any
purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting either at a place
within the city where the meeting is to be held, which shall be specified
in the notice of the meeting, or if not so specified, of the place where
the meeting is to be held. The list shall also be produced and kept at the
meeting and may be inspected by any stockholder who is present.
SECTION 7. Voting. Each stockholder shall be entitled to one vote,
in person or by proxy, for each share of the capital stock of the
Corporation registered in his name. Upon the demand of any stockholder
entitled to vote at any meeting, the vote upon any matter before such
meeting shall be by written ballot. Directors shall be elected by a
plurality of the vote. All other matters shall be authorized by majority
vote unless otherwise required by these By-Laws, the Certificate of
Incorporation or by law.
SECTION 8. Inspectors. The Chairman presiding at any meeting of
stockholders shall have the power, in his discretion, to appoint one or
more persons to act as Inspectors, to receive, canvass and report the votes
cast by stockholders at such meeting, but no candidate for the office of
director shall be appointed as inspector at any meeting for the election of
directors. If any person so appointed fails to appear or act, the vacancy
may be filled by appointment in like manner.
SECTION 9. Consent of Stockholders in Lieu of Meeting. Unless
otherwise provided in the Certificate of Incorporation, any action required
to be taken or which may be taken at any annual or special meeting of the
stockholders of the Corporation, may be taken without a meeting, without
prior notice and without a vote, if a consent in writing, setting forth the
action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted. Prompt notice of corporate action
taken without a meeting by less than unanimous written consent shall be
given to those stockholders who have not consented in writing.
ARTICLE III
Board of Directors
SECTION 1. Powers. The property, business and affairs of the
Corporation shall be managed and controlled by its Board of Directors. The
Board shall exercise all of the powers of the Corporation except such as
are by law, the Certificate of Incorporation or these By-Laws conferred
upon or reserved to the stockholders.
SECTION 2. Number and Term of Office. The number of directors
constituting the entire Board of Directors shall not be less than one nor
more than nine. The initial Board of Directors shall be designated in the
incorporator's statement of organization and shall serve until the first
annual meeting of stockholders and until their successors shall be elected
and qualified or until their earlier resignation or removal. Thereafter,
within the limits specified above, the number of directors shall be fixed
from time to time by resolution of the Board of Directors.
SECTION 3. Resignations. Any director or member of a committee of
the Board may resign at any time. Such resignation shall be made in
writing and shall take effect at the time specified therein, and if no time
is specified, at the time of its receipt by the Chairman of the Board, if
one is elected, President or Secretary. The acceptance of a resignation
shall not be necessary to make it effective.
SECTION 4. Removal. Any director or the entire Board of Directors
may be removed either for or without cause at any time by the affirmative
note of the holders of a majority of all of the shares of stock outstanding
and entitled to vote for the election of directors at any annual or special
meeting of stockholders called for that purpose. Vacancies thus created
may be filled at the meeting held for the purpose of removal by the
affirmata vote of a majority of the stockholders entitled to vote for
directors, or if not so filled, by the directors as provided in Section 5
of this Article III.
SECTION 5. Vacancies and Newly Created Directorships. Vacancies in
the office of any directors or member of a committee of the Board of
Directors and newly created directorships may be filled by a majority vote
of the remaining directors in office. Any director so chosen shall hold
office for the unexpired term of his predecessor and until his successor
shall be elected and qualify or until his earlier resignation or removal.
However, the directors may not fill the vacancy created by removal of a
director by electing the director so removed.
SECTION 6. Place of Meeting. The Board of Directors may hold its
meetings at such places and times as the Board of Directors from time to
time shall determine.
SECTION 7. Regular Meetings. No notice shall be required for any
regular meeting of the Board of Directors; however, if the time or place
of any regular meeting shall be changed, notice shall be given to each
Director at least two days before the meeting.
SECTION 8. Special Meetings. Special meetings of the Board of
Directors shall be called by the Chairman of the Board, if one is elected,
the President or by the Secretary on the written request of any two
directors and shall be held at such place as may be determined by the
directors or as shall be stated in the notice of the meeting.
SECTION 9. Quorum, Voting and Adjournment. A majority of the entire
Board of Directors or of any committee of the Board of Directors shall
constitute a quorum for the transaction of business at any meeting of the
Board of Directors or committee thereof. The vote of the majority of the
directors present at any meeting of the Board of Directors or committee at
which a quorum is present shall be the act of the Board of Directors or
committee. If at any meeting of the Board or committee there is less than
a quorum present, a majority of those present may adjourn the meeting from
time to time.
SECTION 10. Organization. The Chairman of the Board, if one is
elected, or, in his absence or the vacancy of such office, the President,
shall preside at all meetings of the Board of Directors. In the absence of
the Chairman of the Board and the President, a Chairman shall be elected by
the Directors present. The Secretary of the Corporation shall act as
Secretary of all meetings of the Directors. In the absence of the
Secretary, the Chairman may appoint any person to act as Secretary of the
meeting.
SECTION 11. Committees. The Board of Directors may, by resolution
passed by a majority of the Board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation.
The Board may designate one or more directors as alternate members of any
committee, to replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of a member of a
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent specified by resolution of the Board, shall have
and may exercise all the powers and authority of the Board of Directors in
the management of the business and the affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority to
amend the Certificate of Incorporation, adopt an agreement of merger or
consolidation, recommend to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets,
recommend to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, or amend these By-Laws; and unless otherwise
expressly provided, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock.
SECTION 12. Conference Telephone Meetings. Unless otherwise
restricted by the Certificate of Incorporation or by these By-Laws, the
members of the Board of Directors or any committee thereof, may participate
in a meeting of the Board or committee, by means of conference telephone or
similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation
shall constitute presence in person at such meeting.
SECTION 13. Action Without a Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors, or any
committee thereof, may be taken without a meeting if all members of the
Board or committee, as the case may be, consent thereto in writing.
SECTION 14. Compensation. Directors shall be entitled to receive and
be paid for their services such compensation as the Board of Directors may
determine. Any director may serve the Corporation in any other capacity as
an officer, agent or otherwise, and receive compensation therefor.
ARTICLE IV
Officers
SECTION 1. Officers. The officers of the Corporation shall be a
President, a Secretary and a Treasurer, all of whom shall be elected by the
Board of Directors. In addition, the Board of Directors may elect a
Chairman of the Board, one or more Vice Presidents, one or more Assistant
Secretaries and one or more Assistant Treasurers. The initial officers
shall be elected at the first meeting of the Board of Directors and,
thereafter at the organization meeting of the Board after each annual
meeting of the stockholders. All officers shall hold office at the
pleasure of the Board of Directors. Officers may, but need not, be
Directors. Any number of offices may be held by the same person. In
addition to the powers and duties of the officers of the Corporation as set
forth in these By-Laws, the officers shall have such authority and shall
perform such duties as from time to time may be determined by the Board of
Directors.
SECTION 2. Resignation and Removal. All officers, agents and
employees shall be subject to removal, for or without cause, at any time by
the Board of Directors. The removal of an officer without cause shall be
without prejudice to his contractual rights, if any. Any officer of the
Corporation may resign at any time in the same manner prescribed for the
resignation of directors of the Corporation as set forth in Section 3 of
Article III of these By-Laws.
SECTION 3. Vacancies. Any vacancy caused by the death, resignation
or removal of any officer may be filled by the Board of Directors.
SECTION 4. Powers and Duties of the Chairman of the Board. The
Chairman of the Board, if one is elected, must be a director of the
Corporation and shall be the chief executive officer of the Corporation.
Subject to the control of the Board of Directors, the Chairman of the Board
shall have general charge and control of all its business and affairs and
shall perform all duties incident to the office of Chairman of the Board.
He shall preside at all meetings of the stockholders and the Board of
Directors and shall have such other powers and perform such other duties as
may from time to time be assigned to him by these By-Laws or by the Board
of Directors.
SECTION 5. Powers and Duties of the President. In the absence,
disability or refusal of the Chairman of the Board to act, or the vacancy
of such office, the President shall be the chief executive officer of the
Corporation and, subject to the control of the Board of Directors, shall
have general charge and control of all its operations and shall perform all
duties incident to the office of President. He shall preside at all
meetings of the stockholders and the Board of Directors, in the absence of
the Chairman of the Board and shall have such other powers and perform such
other duties as may from time to time be assigned to him by the Board of
Directors or the Chairman of the Board.
SECTION 6. Powers and Duties of the Vice Presidents. Each Vice
President, if any are elected, (of whom one or more may be designated
Executive Vice President) shall have such powers and perform such duties as
may from time to time be assigned to him by the Board of Directors, the
Chairman of the Board, if one is elected, or the President.
SECTION 7. Powers and Duties of the Secretary. The Secretary shall
keep the minutes of all meetings of the Board of Directors and the
stockholders in books provided for that purpose; he shall cause all notices
of the Corporation to be given; he shall have custody of the corporate seal
of the Corporation and shall affix the same to such documents and other
papers as the Board of Directors or the President shall authorize and
direct; he shall have charge of the stock certificate books, transfer books
and stock ledgers and such other books and papers as the Board of Directors
or the President shall direct. He shall perform all duties incident to the
office of Secretary and shall also have such other powers and shall perform
such other duties as may from time to time be assigned to him by these
By-Laws or the Board of Directors, the Chairman of the Board, if one is
elected, or the President.
SECTION 8. Powers and Duties of the Treasurer. The Treasurer shall
have custody of all funds, securities, evidences of indebtedness and other
valuables of the Corporation and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation. He shall
deposit all moneys and other valuables to the credit of the Corporation in
such depositaries as the Board of Directors may designate. He shall
disburse the funds of the Corporation as may be ordered by the Board of
Directors, or the President and shall render to the President and Board of
Directors upon their request, a report of the financial condition of the
Corporation. The Treasurer shall perform all duties incident to the office
of Treasurer and shall also have such other powers and shall perform such
other duties as may from time to time be assigned to him by the Board of
Directors, the Chairman of the Board, if one is elected, or the President.
SECTION 9. Additional Officers. The Board of Directors may elect
such other officers including a Controller, Assistant Treasurers, Assistant
Secretaries and Assistant Controllers, as they deem advisable and such
officers shall have such authority and shall perform such duties as may
from time to time be assigned to them by the Board of Directors, the
Chairman of the Board, if one is elected, or the President.
SECTION 10. Giving of Bond by Officers. All officers of the
Corporation, if required to do so by the Board of Directors, shall furnish
bonds to the Corporation for the faithful performance of their duties, in
such penalties and with such conditions and security as the Board shall
require.
SECTION 11. Ownership of Stock of Another Corporation. The Chairman
of the Board, if one is elected, the President or the Treasurer or such
other officer as shall be authorized by the Board of Directors shall have
power and authority on behalf of the Corporation to attend and to vote at
any meetings of stockholders of any corporation in which the Corporation
may hold stock, and shall possess and may exercise any and all of the
rights, powers and privileges incident to the ownership of such stock at
any such meetings; and shall have power and authority to execute and
deliver proxies and consents on behalf of this Corporation in connection
with the exercise by this Corporation of the rights and powers incident to
the ownership of such stock.
SECTION 12. Compensation of Officers. The officers of the
Corporation shall be entitled to receive such compensation for their
services as shall from time to time be determined by the Board of
Directors.
SECTION 13. Contracts and Other Documents. The President or
Treasurer, or such other officer or officers as may from time to time be
authorized by the Board of Directors shall have power to sign and execute
on behalf of the Corporation deeds, conveyances and contracts, and any and
all other documents requiring execution by the Corporation.
SECTION 14. Delegation of Duties. The Board of Directors may
delegate to another officer the powers or duties of any officer, in case of
such officer's absence, disability or refusal to exercise such powers or
perform such duties.
ARTICLE V
Stock-Seal-Fiscal Year
SECTION 1. Certificates For Shares of Stock. The shares of the
Corporation shall be represented by certificates, which shall be numbered
and shall be in such form as the Board of Directors may, from time to time
prescribe; provided that the Board of Directors may provide by resolution
that some or all of any or all classes or series of its stock shall be
uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
Corporation. Notwithstanding the adoption of such a resolution by the
Board of Directors, every holder of stock represented by certificates and
upon request every holder of uncertificated shares shall be entitled to
have a certificate signed by, or in the name of the Corporation by the
Chairman of the Board, if one is elected, or the President or a
Vice-President, and by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary representing the number of shares
registered in certificate form. Any or all the signatures on the
certificate may be a facsimile. The Board of Directors shall have power to
appoint one or more transfer agents or registrars for the transfer or
registration of certificates of stock of any class, and may require that
stock certificates shall be countersigned by one or more such transfer
agents or registrars. If any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent or registrar at the
date of issue. The name of the person owning the shares represented
thereby with the number of such shares and the date of issue thereof shall
be entered on the books of the Corporation.
Except as hereinafter provided, all certificates surrendered to the
Corporation for transfer shall be canceled, and no new certificates shall
be issued until former certificates for the same number of shares have been
surrendered.
SECTION 2. Lost, Stolen or Destroyed Certificates. A new certificate
for shares of stock may be issued in the place of any certificate
previously issued by the Corporation, alleged to have been lost, stolen,
destroyed or mutilated. The Board of Directors may, in their discretion,
require the owner of the lost, stolen, destroyed or mutilated certificate
to give to the Corporation an affidavit, setting forth, to the best of his
knowledge and belief, the time, place and circumstances of the loss, theft,
destruction or mutilation, and a bond or other indemnification in such sums
as the Board of Directors may direct to indemnify the Corporation against
any claim that may be made against it with respect to the alleged loss,
theft, destruction or mutilation of any such certificate or the issuance of
a new certificate.
SECTION 3. Transfer of Shares. Shares of stock of the Corporation
shall be transferred on the books of the Corporation by the holder thereof,
in person or by his duly authorized attorney or legal representative, upon
surrender and cancellation of certificates for the number of shares of
stock to be transferred, except as provided in the preceding section.
SECTION 4. Regulations. The Board of Directors shall have power and
authority to make such rules and regulations as it may deem necessary or
proper concerning the issue, transfer and registration of certificates for
shares of stock of the Corporation.
SECTION 5. Record Date. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of
stock or for the purpose of any other lawful action, the Board of Directors
may fix a record date, which shall not be more than sixty (60) nor less
than ten (10) days before the date of such meeting, nor more than sixty
(60) days prior to any other action.
If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders
shall be at the close of business on the day next preceding the day on
which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held; the record
date for determining stockholders entitled to express consent to corporate
action in writing without a meeting, when no prior action by the Board of
Directors is necessary, shall be the day on which the first written consent
is expressed; and the record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto. A determination
of stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the
adjourned meeting.
SECTION 6. Dividends. Subject to the provisions of the Certificate
of Incorporation, the Board of Directors shall have power to declare and
pay dividends upon shares of stock of the Corporation out of funds legally
available therefor.
Subject to the provisions of the Certificate of Incorporation,
dividends declared upon the stock of the Corporation shall be payable on
such date or dates as the Board of Directors shall determine.
SECTION 7. Corporate Seal. The seal of the Corporation shall be
circular in form and shall bear the name of the Corporation around the
circumference and the State and year of incorporation.
SECTION 8. Fiscal Year. The fiscal year of the Corporation shall end
on December 31st of each year or such other twelve consecutive months as
the Board of Directors, from time to time, by resolution shall determine.
ARTICLE VI
Miscellaneous Provisions
SECTION 1. Notice. Whenever any written notice is required to be
given by law, the Certificate of Incorporation of the Corporation or these
By-Laws, such notice, if mailed, shall be deemed to be sufficiently given
if it is written or printed and deposited in the United States mail,
postage prepaid, addressed to the person entitled to such notice at his
address as it appears on the books and records of the Corporation. Such
notice may also be sent by telegram. The mailing of such notice or posting
of such telegram, as the case may be, shall constitute due notice, which
shall be deemed to have been given on the day of such mailing or posting.
SECTION 2. Waivers of Notice. Whenever any notice is required to be
given by law, the Certificate of Incorporation or these By-Laws, a written
waiver of notice, signed by the person entitled to the notice, whether
before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of
notice of such meeting, unless the person attends the meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of,
any meeting of the stockholders, directors, or members of a committee of
the Board need be specified in any written waiver of notice.
SECTION 5. Indemnification of Directors, Officers and Employees. The
Corporation shall indemnify, to the fullest extent permitted by law,
members of the Board, its officers, employees and agents any and all
persons whom it shall have power to indemnify against any and all expenses,
liabilities or other matters.
ARTICLE VII
These By-Laws may be altered, amended or repealed, or new By-Laws may
be adopted, by the Board of Directors at any regular or special meeting by
the affirmative vote of a majority of the Board. By-Laws adopted by the
Board of Directors may be altered, amended or repealed by the stockholders
of the Corporation.
<PAGE>
[Form of Face of Common Stock Certificate]
Number ________ Shares _______
MEDJET INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
This certifies that
is the owner of
Fully paid and non-assessable shares of $.001 par value each of common
stock of
MEDJET INC.
transferable on the books of the corporation in person or by attorney upon
surrender of this certificate duly endorsed or assigned. This certificate
and the shares represented hereby are subject to the laws of the State of
Delaware, and to the Certificate of Incorporation and Bylaws of the
Corporation, as now or hereafter amended. This certificate is not valid
until countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Corporation and the
facsimile signatures of its duly authorized officers.
MEDJET INC.
By: /s/ Eugene I. Gordon
----------------------------
President
By: /s/ Thomas Handschiegel
----------------------------
Secretary
Dated:
Countersigned:
Continental Stock Transfer & Trust Company
Transfer Agent
By:
Authorized Signature
<PAGE>
[Form of Back of Common Stock Certificate]
The following abbreviations, when used in the inscription
on the face of this certificate, shall be construed as though they were
written out in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - ___Custodian ___
TEN ENT - as tenants by (Cust) (Minor)
the entireties
JT TEN - as joint tenants with under Uniform Gifts to Minors
right of survivorship and Act _________
not as tenants in common (State)
Additional abbreviations may also be used though not in
the above list.
For Value Received, ______________ hereby sell, assign and
transfer unto
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
____________________________________________________________________ Shares
of the stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint _____________________________ Attorney
to transfer the said stock on the books of the within named Corporation
with full power of substitution in the premises.
Dated ____________________
________________________________
Notice: the signature to this
assignment must correspond with
the name as written upon the
face of the certificate in every
particular, without alteration
or enlargement or any change
whatsoever.
The Corporation will furnish to any stockholder, upon request and without
charge, a full statement of the designations, relative rights, preferences
and limitations of the shares of each class and series authorized to be
issued, so far as the same have been determined, and of the authority, if
any, of the Board to divide the shares into classes or series and to
determine and change the relative rights, preferences and limitations of
any class or series. Such request may be made to the Secretary of the
Corporation or to the Transfer Agent named on this Certificate.
The signature to the assignment must correspond to the name as written upon
the face of this certificate in every particular, without alteration or
enlargement or any change whatsoever, and must be guaranteed by a
commercial bank or trust company or a member firm of a national or regional
or other recognized stock exchange in conformance with a signature
guarantee medallion program.
[Form of Face of Unit Certificate]
Number ________ Units _______
MEDJET INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
This certifies that
is the owner of
(the "Registered Holder") is the owner of the number of Units specified
above, transferable only on the books of Medjet Inc. (the "Corporation") by
the Registered Holder thereof in person or by his or her duly authorized
attorney, on surrender of this Unit Certificate properly endorsed.
Each Unit consists of one (1) share of the Corporation's common stock,
par value $.001 per share (the "Common Stock"), and one (1) Class A
redeemable common stock purchase warrant (the "Warrants") to purchase one
(1) share of Common stock for $10.00 per share (subject to adjustment) at
any time on or after (i) _______________ and before 5:00 p.m. New York time
on __________, ____ (the "Expiration Date"). The terms of the Warrants are
governed by a Warrant Agreement dated as of ___________, 1996 (the "Warrant
Agreement") between the Company and Continental Stock Transfer & Trust
Company, as Warrant Agent (the "Warrant Agent"), and are subject to the
terms and provisions contained therein, all of which terms and provisions
the Registered Holder of this Unit Certificate consents to by acceptance
hereof. Copies of the Warrant Agreement are on file at the office of the
Warrant Agent at 2 Broadway, New York, NY 10004 and are available to any
Registered Holder on written request and with out cost. The Warrant shall
be void unless exercised before 5:00 P.M., New York time, on the Expiration
Date.
This certificate is not valid unless countersigned and registered by
the Transfer Agent, Warrant and Registrar of the Corporation.
The Warrants and the shares of Common Stock of the Corporation
represented by this Unit Certificate shall be nondetachable and not
separately transferable until the earlier of __________________ or such
earlier date as shall be determined by Patterson Travis, Inc. and Medjet
Inc. (the "Separation Date").
IN WITNESS WHEREOF, the Corporation has caused this Unit Certificate
to be duly executed, manually or by facsimile, by two of its officers
thereunto duly authorized and a facsimile of its corporate seal to be
imprinted herein.
MEDJET INC.
By: /s/ Eugene I. Gordon
____________________
President
By: /s/ Thomas Handschiegel
_______________________
Secretary
Dated:
Countersigned:
Continental Stock Transfer & Trust Company
Transfer Agent
By: _______________________
Authorized Signature
<PAGE>
[Form of Back of Unit Certificate]
The Corporation will furnish without charge to each stockholder who so
requests, the designations, powers, preferences and relative,
participating, optional or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights. Any such request may be made to the Corporation
or to the Transfer Agent.
WARRANT PROVISIONS
This certificate certifies that for value received the
Registered Holder hereby is entitled, at any time on or after _____________
or such earlier dated as Patterson Travis, Inc. and Medjet Inc. shall
determine that the Warrants and Common Stock which comprise the Units shall
be separately transferable (the "Separation Date") to exchange each Unit
represented by this Unit Certificate for one Common Stock certificate
representing one share of Common Stock and one Warrant Certificate
representing one Warrant upon surrender of this Unit certificate to the
Transfer Agent at the office of the Transfer Agent together with any
documentation required by such Transfer Agent. At any time on or after
______________ and before 5:00 P.M., New York time on the Expiration Date,
upon surrender of the Warrant Certificate at the office of the Warrant
Agent for the Warrants, with the Subscription Form on the reverse side
thereof completed and duly executed and accompanied by payment, in cash or
check payable to the warrant Agent for the account of the Corporation, the
Registered Holder of such Warrant Certificated shall be entitled to
purchase from the Corporation one share of Common Stock of the Corporation
for each Warrant represented by the Warrant Certificate, which shares shall
be fully paid and non-assessable, at the exercise price of $10.00 per
share. The exercise price and the number of shares purchasable upon
exercise of each Warrant are subject to adjustment and the Warrants are
redeemable by the Corporation, each upon the occurrence of certain events
set forth in the Warrant Agreement.
After 5:00 P.M., New York time, on _________________, the
Warrant shall become null and void and of no value.
REFERENCE IS MADE TO THE WARRANT AGREEMENT REFERRED TO ON
THE REVERSE SIDE HEREOF AND THE PROVISIONS OF SUCH WARRANT AGREEMENT SHALL
FOR ALL PURPOSES HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH ON THE FORM
OF THIS CERTIFICATE.
The Warrant shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to
conflicts of laws provisions.
The following abbreviations, when used in the inscription
on the face of this certificate, shall be construed as though they were
written out in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - ___Custodian ___
TEN ENT - as tenants by the (Cust) (Minor)
entireties
JT TEN - as joint tenants with under Uniform Gifts to Minors
right of under Uniform Act ____________
Gifts to Minors survivorship (State)
and not as tenants in common
Additional abbreviations may also be used though not in
the above list.
For Value Received, ______________ hereby sell, assign and
transfer unto
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
__________________________________________ Units represented by the within
Certificate, and do hereby irrevocably constitute and appoint
_________________________________________________________________ Attorney
to transfer the said Unit(s) on the books of the within named Corporation
with full power of substitution in the premises.
Dated ____________________
_______________________________________
Notice: the signature to this assignment
must correspond with the name as written
upon the face of the certificate in every
particular, without alteration or
enlargement or any change whatsoever.
The signature to the assignment must be guaranteed by a commercial bank or
trust company or a member firm of a national or regional or other
recognized stock exchange in conformance with a signature guarantee
medallion program.
Option to Purchase
_________Units
MEDJET INC.
UNIT PURCHASE OPTION
Dated: ________, 1996
THIS CERTIFIES that PATTERSON TRAVIS, INC., One Battery Park Plaza,
New York, NY 10005 (hereinafter sometimes referred to as the "Holder"), is
entitled to purchase from Medjet Inc., a Delaware corporation (hereinafter
referred to as the "Company"), at the prices and during the periods as
hereinafter specified, up to _______ Units ("Units") consisting of the
Company's common stock and warrants to purchase the Company's common stock.
Each Unit consists of one (1) share of the Company's common stock, $.001
par value, as now constituted ("Common Stock") and one (1) Class A
Redeemable Common Stock Purchase Warrant to purchase one (1) share of
Common Stock as now constituted at an exercise price of $16.50 per share
("Class A Warrants" or "Warrants"). The Class A Warrants are exercisable
until __________.
The Units have been registered under a Registration Statement on
Form SB-2 (File No. 333-3184) declared effective by the Securities and
Exchange Commission on ____________, 1996 (the "Registration Statement").
This Option (the "Option") to purchase ________ Units (the "Option Units")
was originally issued pursuant to an underwriting agreement between the
Company and Patterson Travis, Inc., as underwriter (the "Underwriter"), in
connection with a public offering of up to 1,600,000 Units (the "Public
Units") through the Underwriter, in consideration of $.001 per Option Unit.
Except as specifically otherwise provided herein, the Common Stock and
the Warrants issued pursuant to this Option shall bear the same terms and
conditions as described under the caption "Description of Securities" in
the Registration Statement, and the Warrants shall be governed by the terms
of the Warrant Agreement dated as of ________, 1996 executed in connection
with such public offering (the "Warrant Agreement"), and except that (i)
the holder shall have registration rights under the Securities Act of 1933,
as amended (the "Act"), for the Option, the Common Stock and the Warrants
included in the Units, and the shares of Common Stock underlying the
Warrants, as more fully described in paragraph 6 of this Option, (ii) the
exercise price for the Class A Warrants included in this Option is $16.50,
and (iii) the Warrants underlying this Option are redeemable by the Company
if the market price of the Common Stock equals or exceeds $21.45. In the
event of any reduction of the exercise price of the Warrants included in
the Public Units, the same percentage changes to the Warrants included in
the Option Units shall be simultaneously effected.
1. The rights represented by this Option shall be exercised at the
prices, subject to adjustment in accordance with paragraph 8 of this
Option, and during the periods as follows:
(a) Between ______, 1997 and _______, 2001, inclusive, the
Holder shall have the option to purchase Units hereunder at a price of
$8.25 per Unit (subject to adjustment pursuant to paragraph 8 hereof) (the
"Exercise Price").
(b) After __________, 2001 (five (5) years from the Effective
Date), the Holder shall have no right to purchase any Units hereunder.
2. The rights represented by this Option may be exercised at any
time within the period above specified, in whole or in part, by (i) the
surrender of this Option (with the purchase form at the end hereof properly
executed) at the principal executive office of the Company (or such other
office or agency of the Company as it may designate by notice in writing to
the Holder at the address of the Holder appearing on the books of the
Company); (ii) payment to the Company of the Exercise Price then in effect
for the number of Units specified in the above-mentioned purchase form
together with applicable stock transfer taxes, if any; and (iii) delivery
to the Company of a duly executed agreement signed by the person(s)
designated in the purchase form to the effect that such person(s) agree(s)
to be bound by the provisions of paragraph 6 and subparagraphs (b), (c) and
(d) of paragraph 7 hereof. This Option shall be deemed to have been
exercised, in whole or in part to the extent specified, immediately prior
to the close of business on the earliest date that both this Option is
surrendered and payment is made in accordance with the foregoing provisions
of this paragraph 2, and other provisions are complied with and the person
or persons in whose name or names the certificates for shares of Common
Stock and Warrants shall be issuable upon such exercise shall become the
holder or holders of record of such Common Stock and Warrants at that time
and date. The Common Stock and Warrants and the certificates for the
Common Stock and Warrants so purchased shall be delivered to the Holder
within a reasonable time, not exceeding ten (10) days, after the rights
represented by this Option shall have been so exercised.
3. For a period of one (1) year from the Effective Date, this Option
shall not be transferred, sold, assigned, or hypothecated, except that it
may be transferred to successors of the Holder, and may be assigned in
whole or in part to any person who is an officer of the Holder during such
period. Any such assignment shall be effected by the Holder (i) executing
the form of assignment at the end hereof and (ii) surrendering this Option
for cancellation at the office or agency of the Company referred to in
paragraph 2 hereof, accompanied by a certificate (signed by an officer of
the Holder if the Holder is a corporation), stating that each transferee is
a permitted transferee under this paragraph 3 hereof; whereupon the Company
shall issue, in the name or names specified by the Holder (including the
Holder) a new Option or Options of like tenor and representing in the
aggregate rights to purchase the same number of Units as are purchasable
hereunder.
4. The Company covenants and agrees that all shares of Common Stock
which may be issued as part of the Units purchased hereunder and the Common
Stock which may be issued upon exercise of the Warrants will, upon
issuance, be duly and validly issued, fully paid and nonassessable, and no
personal liability will attach to the holder thereof. The Company further
covenants and agrees that during the periods within which this Option may
be exercised, the Company will at all times have authorized and reserved a
sufficient number of shares of its Common Stock to provide for the exercise
of this Option and that it will have authorized and reserved a sufficient
number of shares of Common Stock for issuance upon exercise of the Warrants
included in the Units.
5. This Option shall not entitle the Holder to any voting, dividend,
or other rights as a stockholder of the Company.
6. (a) During the period set forth in paragraph l(a) hereof, the
Company shall advise the Holder or its transferee, by written notice at
least 30 days prior to the filing of any post-effective amendment to the
Registration Statement or of any new registration statement or post-
effective amendment thereto under the Act covering any securities of the
Company, for its own account or for the account of others (other than a
registration statement on Form S-4 or S-8 or any successor forms thereto),
and will for a period of seven (7) years from the effective date of the
Registration Statement, upon the request of the Holder, include in any such
post-effective amendment or registration statement, such information as may
be required to permit a public offering of, all or any of the Units
underlying the Option, the Common Stock, or Warrants included in the Units
or the Common Stock issuable upon the exercise of the Warrants (the
"Registrable Securities"). The Company shall supply prospectuses and such
other documents as the Holder may reasonably request in order to facilitate
the public sale or other disposition of the Registrable Securities, use its
reasonable efforts to register and qualify any of the Registrable
Securities for sale in such states as such Holder designates provided that
the Company shall not be required to qualify as a foreign corporation or a
dealer in securities or execute a general consent to service of process in
any jurisdiction in any action and do any and all other acts and things
which may be reasonably necessary or desirable to enable such Holders to
consummate the public sale or other disposition of the Registrable
Securities, and furnish indemnification in the manner provided in paragraph
7 hereof. The Holder shall furnish information and indemnification as set
forth in paragraph 7 except that the maximum amount which may be recovered
from the Holder shall be limited to the amount of proceeds received by the
Holder from the sale of the Registrable Securities. The Company shall use
its best efforts to cause the managing underwriter or underwriters of a
proposed underwritten offering to permit the holders of Registrable
Securities requested to be included in the registration to include such
securities in such underwritten offering on the same terms and conditions
as any similar securities of the Company included therein. Notwithstanding
the foregoing, if the managing underwriter or underwriters of such offering
advises the holders of Registrable Securities that the total amount of
securities which they intend to include in such offering is such as to
materially and adversely affect the success of such offering, then the
amount of securities to be offered for the accounts of holders of
Registrable Securities shall be eliminated, reduced, or limited to the
extent necessary to reduce the total amount of securities to be included in
such offering to the amount, if any, recommended by such managing
underwriter or underwriters (any such reduction or limitation in the total
amount of Registrable Securities to be included in such offering to be
borne by the holders of Registrable Securities proposed to be included
therein pro rata). The Holder will pay its own legal fees and expenses and
any underwriting discounts and commissions on the securities sold by such
Holder and shall not be responsible for any other expenses of such
registration.
(b) If any 50% holder (as defined below) shall give notice to
the Company at any time during the period set forth in paragraph l(a)
hereof, to the effect that such holder desires to register under the Act,
the Units, or any of the underlying securities contained in the Units
underlying the Option under such circumstances that a public distribution
(within the meaning of the Act) of any such securities will be involved,
then the Company will promptly, but no later than 60 days after receipt of
such notice, file a post-effective amendment to the current Registration
Statement or a new registration statement pursuant to the Act, to the end
that the Units and/or any of the securities underlying the Units may be
publicly sold under the Act as promptly as practicable thereafter and the
Company will use its best efforts to cause such registration to become and
remain effective for a period of 120 days (including the taking of such
steps as are reasonably necessary to obtain the removal of any stop order);
provided that such holder shall furnish the Company with appropriate
information in connection therewith as the Company may reasonably request
in writing. The 50% holder (which for purposes hereof shall mean any
direct or indirect transferee of such holder provided it owns at least 50%
of the Option) may, at its option, request the filing of a post-effective
amendment to the current Registration Statement or a new registration
statement under the Act with respect to the Registrable Securities on only
one occasion during the term of this Option. The Holder may at its option
request the registration of any of the securities underlying the Option in
a registration statement made by the Company as contemplated by Section
6(a) or in connection with a request made pursuant to this Section 6(b)
prior to acquisition of the Units issuable upon exercise of the Option and
even though the Holder has not given notice of exercise of the Option. The
50% holder may, at its option, request such post-effective amendment or new
registration statement during the described period with respect to the
Units as a unit, or separately as to the Common Stock and/or Warrants
included in the Units and/or the Common Stock issuable upon the exercise of
the Warrants, and such registration rights may be exercised by the 50%
holder prior to or subsequent to the exercise of the Option. Within ten
business days after receiving any such notice pursuant to this subsection
(b) of paragraph 6, the Company shall give notice to the other holders of
the Options, advising that the Company is proceeding with such post-
effective amendment or registration statement and offering to include
therein the securities underlying the Options of the other holders. Each
holder electing to include its Registrable Securities in any such offering
shall provide written notice to the Company within twenty (20) days after
receipt of notice from the Company. The failure to provide such notice to
the Company shall be deemed conclusive evidence of such holder's election
not to include its Registrable Securities in such offering. Each holder
electing to include its Registrable Securities shall furnish the Company
with such appropriate information (relating to the intentions of such
holders) in connection therewith as the Company shall reasonably request in
writing. All costs and expenses of such post-effective amendment or new
registration statement shall be borne by the Company, except that the
holders shall bear the fees of their own counsel and any underwriting
discounts or commissions applicable to any of the securities sold by them.
The Company shall be entitled to postpone the filing of any
registration statement pursuant to this Section 6(b) otherwise required to
be prepared and filed by it if (i) the Company is engaged in a material
acquisition, reorganization, or divestiture, (ii) the Company is currently
engaged in a self-tender or exchange offer and the filing of a registration
statement would cause a violation of Rule 10b-6 under the Securities
Exchange Act of 1934, (iii) the Company is engaged in an underwritten
offering and the managing underwriter has advised the Company in writing
that such a registration statement would have a material adverse effect on
the consummation of such offering; (iv) for the period of the financial
statements called for in such filing, the Company has only unaudited
financial statements, unless the underwriter agrees that such filing need
not include audited financial statements or (v) the Company is subject to
an underwriter's lock-up as a result of an underwritten public offering and
such underwriter has refused in writing, the Company's request to waive
such lock-up. In the event of such postponement, the Company shall be
required to file the registration statement pursuant to this Section 6(b),
within 60 days of the consummation of the event requiring such
postponement.
The Company will use its best efforts to maintain such
registration statement or post-effective amendment current under the Act
for a period of 120 days (and for up to an additional three months if
requested by the Holder) from the effective date thereof. The Company
shall supply prospectuses, and such other documents as the Holder may
reasonably request in order to facilitate the public sale or other
disposition of the Registrable Securities, use its best efforts to register
and qualify any of the Registrable Securities for sale in such states as
such holder designates, provided that the Company shall not be required to
qualify as a foreign corporation or a dealer in securities or execute a
general consent to service of process in any jurisdiction in any action and
furnish indemnification in the manner provided in paragraph 7 hereof. The
demand registration rights granted hereunder will expire no later than five
(5) years from the effective date of this offering.
(c) The term "50% holder" as used in this paragraph 6 shall
mean the holder of more than 50% of the Common Stock and the Warrants
underlying the Option, as if exercised, (considered in the aggregate) and
shall include any owner or combination of owners of such securities, which
ownership shall be calculated by determining the number of shares of Common
Stock held by such owner or owners as well as the number of shares then
issuable upon exercise of the Warrants.
7. (a) Whenever pursuant to paragraph 6 a registration statement
relating to any shares of Common Stock or Warrants issued or issuable upon
the exercise of any Options, is filed under the Act, or is amended or
supplemented, the Company will indemnify and hold harmless each holder of
the securities covered by such registration statement, amendment, or
supplement (such holder being hereinafter called the "Distributing
Holder"), and each person, if any, who controls (within the meaning of the
Act) the Distributing Holder, and each underwriter (within the meaning of
the Act) of such securities and each person, if any, who controls (within
the meaning of the Act) any such underwriter, against any losses, claims,
damages, or liabilities, joint or several, to which the Distributing
Holder, any such controlling person or any such underwriter may become
subject, under the Act or otherwise, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in any such registration statement or any preliminary
prospectus or final prospectus constituting a part thereof or any amendment
or supplement thereto, or which arise out of or are based upon the omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading; and will reimburse the
Distributing Holder and each such controlling person and underwriter for
any legal or other expenses reasonably incurred by the Distributing Holder
or such controlling person or underwriter in connection with investigating
or defending any such loss, claim, damage, liability, or action; provided,
however, that the Company will not be liable in any such case to the extent
that any such loss, claim, damage, or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in said registration statement, said preliminary prospectus,
said final prospectus, or said amendment or supplement in reliance upon and
in conformity with written information furnished by such Distributing
Holder or any other Distributing Holder, for use in the preparation
thereof; provided, further, that the indemnity with respect to any
preliminary prospectus shall not be applicable on account of any losses,
claims, damages, liabilities, or litigation arising from the sale of such
securities to any person if the misstatement or omission was corrected in
the final prospectus related thereto but such final prospectus was not
delivered by the Distributing Holder to such person at or prior to sale of
such securities.
(b) Each Distributing Holder will indemnify and hold harmless
the Company, each of its directors, each of its officers who have signed
said registration statement and such amendments and supplements thereto,
each person, if any, who controls the Company (within the meaning of the
Act) and each other Distributing Holder, if any, against any losses,
claims, damages, or liabilities, joint and several, to which the Company or
any such director, officer, or controlling person may become subject, under
the Act or otherwise, insofar as such losses, claims, damages, or
liabilities arise out of or are based upon any untrue or alleged untrue
statement of any material fact contained in said registration statement,
said preliminary prospectus, said final prospectus, or said amendment or
supplement, or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to
the extent, but only to the extent that such untrue statement or alleged
untrue statement or omission or alleged omission was made in said
registration statement, said preliminary prospectus, said final prospectus,
or said amendment or supplement in reliance upon and in conformity with
written information furnished by such Distributing Holder for use in the
preparation thereof; and will reimburse the Company or any such director,
officer, or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such
loss, claim, damage, liability, or action.
(c) Promptly after receipt by an indemnified party under this
paragraph 7 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against any
indemnifying party, give the indemnifying party notice of the commencement
thereof; but the omission so to notify the indemnifying party will not
unless it is prejudiced thereby relieve it from any liability which it may
have to any indemnified party otherwise than under this Paragraph 7.
(d) In case any such action is brought against any indemnified
party, and it notifies an indemnifying party of the commencement thereof,
the indemnifying party will be entitled to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party under this paragraph 7 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof.
8. The Exercise Price in effect at any time and the number and kind
of securities purchasable upon the exercise of this Option shall be subject
to adjustment from time to time upon the happening of certain events as
follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock
into a greater number of shares, or (iii) combine or reclassify its
outstanding shares of Common Stock into a smaller number of shares, the
Exercise Price in effect at the time of the record date for such dividend
or distribution or of the effective date of such subdivision, combination
or reclassification shall be adjusted so that it shall equal the price
determined by multiplying the Exercise Price by a fraction, the denominator
of which shall be the number of shares of Common Stock outstanding after
giving effect to such action, and the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such
action. Notwithstanding anything to the contrary contained in the Warrant
Agreement, in the event an adjustment to the Exercise Price is effected
pursuant to this Subsection (a) (and a corresponding adjustment to the
number of Option Units is made pursuant to Subsection (d) below), the
exercise price of the Warrants shall be adjusted so that it shall equal the
price determined by multiplying the exercise price of the Warrants by a
fraction, the denominator of which shall be the number of shares of Common
Stock outstanding immediately after giving effect to such action and the
numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such action. In such event, there shall
be no adjustment to the number of shares of Common Stock or other
securities issuable upon exercise of the Warrants. Such adjustment shall
be made successively whenever any event listed above shall occur.
(b) In case the Company shall fix a record date for the
issuance of rights or warrants to all holders of its Common Stock entitling
them to subscribe for or purchase shares of Common Stock (or securities
convertible into Common Stock) at a price (the "Subscription Price") (or
having a conversion price per share) less than the current market price of
the Common Stock (as defined in Subsection (e) below) on the record date
mentioned below, the Exercise Price shall be adjusted so that the same
shall equal the price determined by multiplying the number of shares then
comprising an Option Unit by the product of the Exercise Price in effect
immediately prior to the date of such issuance multiplied by a fraction,
the numerator of which shall be the sum of the number of shares of Common
Stock outstanding on the record date mentioned below and the number of
additional shares of Common Stock which the aggregate offering price of the
total number of shares of Common Stock so offered (or the aggregate
conversion price of the convertible securities so offered) would purchase
at such current market price per share of the Common Stock, and the
denominator of which shall be the sum of the number of shares of Common
Stock outstanding on such record date and the number of additional shares
of Common Stock offered for subscription or purchase (or into which the
convertible securities so offered are convertible). Such adjustment shall
be made successively whenever such rights or warrants are issued and shall
become effective immediately after the record date for the determination of
shareholders entitled to receive such rights or warrants; and to the extent
that shares of Common Stock are not delivered (or securities convertible
into Common Stock are not delivered) after the expiration of such rights or
warrants the Exercise Price shall be readjusted to the Exercise Price which
would then be in effect had the adjustments made upon the issuance of such
rights or warrants been made upon the basis of delivery of only the number
of shares of Common Stock (or securities convertible into Common Stock)
actually delivered.
(c) In case the Company shall hereafter distribute to the
holders of its Common Stock evidences of its indebtedness or assets
(excluding cash dividends or distributions and dividends or distributions
referred to in Subsection (a) above) or subscription rights or warrants
(excluding those referred to in Subsection (b) above), then in each such
case the Exercise Price in effect thereafter shall be determined by
multiplying the number of shares then comprising an Option Unit by the
product of the Exercise Price in effect immediately prior thereto
multiplied by a fraction, the numerator of which shall be the total number
of shares of Common Stock outstanding multiplied by the current market
price per share of Common Stock (as defined in Subsection (e) below), less
the fair market value per share (as determined by the Company's Board of
Directors) of said assets or evidences of indebtedness so distributed or of
such rights or warrants, and the denominator of which shall be the total
number of shares of Common Stock outstanding multiplied by such current
market price per share of Common Stock. Such adjustment shall be made
successively whenever such a record date is fixed. Such adjustment shall
be made whenever any such distribution is made and shall become effective
immediately after the record date for the determination of shareholders
entitled to receive such distribution.
(d) Intentionally omitted.
(e) For the purpose of any computation under Subsections (b) or
(c)above, the current market price per share of Common Stock at any date
shall be deemed to be the average of the daily closing prices for 20
consecutive business days before such date. The closing price for each day
shall be the last sale price regular way or, in case no such reported sale
takes place on such day, the average of the last reported bid and asked
prices regular way, in either case on the principal national securities
exchange on which the Common Stock is admitted to trading or listed, or if
not listed or admitted to trading on such exchange, the average of the
highest reported bid and lowest reported asked prices as reported by
NASDAQ, or other similar organization if NASDAQ is no longer reporting such
information, or if not so available, the fair market price as determined by
the Board of Directors.
(f) No adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or decrease of at least
ten cents ($0.10) in such price; provided, however, that any adjustments
which by reason of this Subsection (f) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment
required to be made hereunder. All calculations under this Section 8 shall
be made to the nearest cent or to the nearest one-tenth of a share, as the
case may be. Anything in this Section 8 to the contrary notwithstanding,
the Company shall be entitled, but shall not be required, to make such
changes in the Exercise Price, in addition to those required by this
Section 8, as it shall determine, in its sole discretion, to be advisable
in order that any dividend or distribution in shares of Common Stock, or
any subdivision, reclassification or combination of Common Stock, hereafter
made by the Company shall not result in any Federal income tax liability to
the holders of Common Stock or securities convertible into Common Stock
(including Warrants issuable upon exercise of this Option).
(g) Whenever the Exercise Price is adjusted, as herein
provided, the Company shall promptly, but no later than 10 days after any
request for such an adjustment by the Holder, cause a notice setting forth
the adjusted Exercise Price and adjusted number of Option Units issuable
upon exercise of this Option and, if requested, information describing the
transactions giving rise to such adjustments, to be mailed to the Holder,
at the address set forth herein, and shall cause a certified copy thereof
to be mailed to its transfer agent, if any. The Company may retain a firm
of independent certified public accountants selected by the Board of
Directors (who may be the regular accountants employed by the Company) to
make any computation required by this Section 8, and a certificate signed
by such firm shall be conclusive evidence of the correctness of such
adjustment.
(h) In the event that at any time, as a result of an adjustment
made pursuant to Subsection (a) above, the Holder thereafter shall become
entitled to receive any shares of the Company, other than Common Stock,
thereafter the number of such other shares so receivable upon exercise of
this Option 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 the Common Stock contained in Subsections (a) to (f), inclusive
above.
9. No adjustment pursuant to Section 8 hereof to the Exercise Price
of the Option will be made, however,
(i) upon the sale or exercise of any Warrants, including
without limitation the sale or exercise of any of the Warrants comprising
the Option; or
(ii) upon the sale of any shares of Common Stock included in
the Units in the Company's initial public offering, including, without
limitation, shares sold upon the exercise of any over-allotment option
granted to the Underwriters in connection with such offering; or
(iii) upon the issuance or sale of Common Stock or
Convertible Securities (as defined in the Warrant Agreement) upon the
exercise of any rights or warrants to subscribe for or purchase, or any
options for the purchase of, Common Stock or Convertible Securities,
whether or not such rights, warrants, or options were outstanding on the
date of the original sale of the Warrants or were thereafter issued or
sold; or
(iv) upon the issuance or sale of Common Stock upon
conversion or exchange of any Convertible Securities, whether or not any
adjustment in the Exercise Price was made or required to be made upon the
issuance or sale of such Convertible Securities and whether or not such
Convertible Securities were outstanding on the date of the original sale of
the Warrants or were thereafter issued or sold; or
(v) upon the issuance or sale of Common Stock or
Convertible Securities in a private placement unless the issuance or sale
price is less than 85% of the fair market value of the Common Stock on the
date of issuance, in which case the adjustment shall only be for the
difference between 85% of the fair market value and the issue or sale
price;
(vi) upon the issuance or sale of Common Stock or
Convertible Securities to (a) shareholders of any corporation which merges
into the Company or from which the Company acquires assets and some or all
of the consideration consists of equity securities of the Company, in
proportion to their stock holdings of such corporation immediately prior to
the acquisition or (b) to any corporation or person from which the Company
acquires assets but only if no adjustment is required pursuant to any other
provision of this Section 9; or
(vii) upon the issuance or sale of (i) up to 200,000 options
for the purchase Common Stock to employees, officers, directors, advisors
or consultants under the Stock Option Plan or (ii) Common Stock issued upon
the exercise of options granted under the Stock Option Plan.
10. This Agreement shall be governed by and in accordance with the
laws of the State of New York.
IN WITNESS WHEREOF, Medjet Inc. has caused this Option to be signed by
its duly authorized officers under its corporate seal, and this Option to
be dated _____________________, 1996.
MEDJET INC.
By:______________________________
Its
(Corporate Seal)
<PAGE>
PURCHASE FORM
(To be signed only upon exercise of option)
THE UNDERSIGNED, the holder of the foregoing Option, hereby
irrevocably elects to exercise the purchase rights represented by such
Option for, and to purchase thereunder,
____ Units of Medjet Inc., each Unit consisting of one share of $.001
Par Value Common Stock and one Class A Redeemable Common Stock Purchase
Warrant, and herewith makes payment of $______________ therefor, and
requests that the Warrants and certificates for shares of Common Stock be
issued in the name(s) of, and delivered to ________________________ whose
address(es) is (are)_________________________________________.
_______________________
Dated:
<PAGE>
TRANSFER FORM
(To be signed only upon transfer of the Option)
For value received, the undersigned hereby sells, assigns, and
transfers unto _________________________________ the right to purchase
Units represented by the foregoing Option to the extent of _____ Units, and
appoints _________________________________ attorney to transfer such rights
on the books of Medjet Inc., with full power of substitution in the
premises.
Dated:
By:___________________________
Address:
______________________________
______________________________
______________________________
In the presence of:
WARRANT AGREEMENT
AGREEMENT, dated as of this ____ day of _______ 1996, by and between
MEDJET INC., a Delaware corporation ("Company"), and Continental Stock
Transfer & Trust Company, as Warrant Agent (the "Warrant Agent").
WITNESSETH:
WHEREAS, in connection with a public offering of up to 1,600,000 units
("Units"), each unit consisting of one (1) share of the Company's Common
Stock, $.001 par value ("Common Stock") and one (1) Class A Redeemable
Common Stock Purchase Warrant ("Class A Warrant" or "Warrant") pursuant to
an underwriting agreement (the "Underwriting Agreement") dated ______, 1996
between the Company and Patterson Travis, Inc. ("Patterson"), and the
issuance to Patterson or its designees of Underwriter's Options to purchase
up to _______ additional Units (the "Underwriter's Options"), the Company
will issue up to _________ Class A Warrants;
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer, exchange and redemption of the Warrants,
the issuance of certificates representing the Warrants, the exercise of the
Warrants, and the rights of the holders thereof;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth and for the purpose of defining the terms
and provisions of the Warrants and the certificates representing the
Warrants and the respective rights and obligations thereunder of the
Company, the holders of certificates representing the Warrants and the
Warrant Agent, the parties hereto agree as follows:
1. Definitions. As used herein, the following terms shall have the
following meanings, unless the context shall otherwise require:
(a) "Common Stock" shall mean the common stock of the Company
of which at the date hereof consists of _________ authorized shares, $.001
par value, and shall also include any capital stock of any class of the
Company thereafter authorized which shall not be limited to a fixed sum or
percentage in respect to the rights of the holders thereof to participate
in dividends and in the distribution of assets upon the voluntary
liquidation, dissolution, or winding up of the Company; provided, however,
that the shares issuable upon exercise of the Warrants shall include (i)
only shares of such class designated in the Company's Certificate of
Incorporation as Common Stock on the date of the original issue of the
Warrants, or (ii) in the case of any reclassification, change,
consolidation, merger, sale, or conveyance of the character referred to in
Section 9(c) hereof, the stock, securities, or property provided for in
such section, or (iii) in the case of any reclassification or change in the
outstanding shares of Common Stock issuable upon exercise of the Warrants
as a result of a subdivision or combination or consisting of a change in
par value, or from par value to no par value, or from no par value to par
value, such shares of Common Stock as so reclassified or changed.
(b) "Corporate Office" shall mean the office of the Warrant
Agent (or its successor) at which at any particular time its principal
business shall be administered, which office is located at the date hereof
at ___________________, New York, NY 10005.
(c) "Exercise Date" shall mean, as to any Warrant, the first
business day on which the Warrant Agent shall have received both (a) the
Warrant Certificate representing such Warrant, with the exercise form
thereon duly executed by the Registered Holder thereof or his attorney duly
authorized in writing, and (b) payment in cash, or by official bank or
certified check made payable to the Company, of an amount in lawful money
of the United States of America equal to the applicable Purchase Price.
(d) "Initial Warrant Exercise Date" shall mean ________, 1996.
(e) "Purchase Price" shall mean the purchase price per share to
be paid upon exercise of each Warrant in accordance with the terms hereof,
which price shall be $10.00 per share (except as set forth in paragraph
2(e) hereof), subject to adjustment from time to time pursuant to the
provisions of Section 9 hereof, and subject to the Company's right, in its
sole discretion, to reduce the Purchase Price upon notice to all
warrantholders.
(f) "Redemption Price" shall mean the price at which the
Company may, at its option, redeem the Warrants, in accordance with the
terms hereof, which price shall be $0.01 per Warrant.
(g) "Registered Holder" shall mean as to any Warrant and as of
any particular date, the person in whose name the certificate representing
the Warrant shall be registered on that date on the books maintained by the
Warrant Agent pursuant to Section 6.
(h) "Transfer Agent" shall mean Continental Stock Transfer &
Trust Company, as the Company's transfer agent, or its authorized
successor, as such.
(i) "Warrant Expiration Date" shall mean 5:00 P.M. (New York
time) on _____, ____ or the Redemption Date as defined in Section 8,
whichever is earlier; provided that if such date shall in the State of New
York be a holiday or a day on which banks are authorized or required to
close, then 5:00 P.M. (New York time) on the next following day which in
the State of New York is not a holiday or a day on which banks are
authorized or required to close. Upon notice to all warrantholders the
Company shall have the right to extend the warrant expiration date.
2. Warrants and Issuance of Warrant Certificates.
(a) A Warrant initially shall entitle the Registered Holder of
the Warrant representing such Warrant to purchase one share of Common Stock
upon the exercise thereof, in accordance with the terms hereof, subject to
modification and adjustment as provided in Section 9.
(b) Upon execution of this Agreement, Warrant Certificates
representing the number of Warrants sold pursuant to the Underwriting
Agreement shall be executed by the Company and delivered to the Warrant
Agent. Upon written order of the Company signed by its President or
Chairman or a Vice President and by its Secretary or an Assistant
Secretary, the Warrant Certificates shall be countersigned, issued, and
delivered by the Warrant Agent.
(c) From time to time, up to the Warrant Expiration Date, the
Transfer Agent shall countersign and deliver stock certificates in required
whole number denominations representing up to an aggregate of _________
shares of Common Stock, subject to adjustment as described herein, upon the
exercise of Warrants in accordance with this Agreement.
(d) From time to time, up to the Warrant Expiration Date, the
Warrant Agent shall countersign and deliver Warrant Certificates in
required whole number denominations to the persons entitled thereto in
connection with any transfer or exchange permitted under this Agreement;
provided that no Warrant Certificates shall be issued except (i) those
initially issued hereunder, (ii) those issued on or after the Initial
Warrant Exercise Date, upon the exercise of fewer than all Warrants
represented by any Warrant Certificate, to evidence any unexercised
Warrants held by the exercising Registered Holder, (iii) those issued upon
any transfer or exchange pursuant to Section 6; (iv) those issued in
replacement of lost, stolen, destroyed, or mutilated Warrant Certificates
pursuant to Section 7; (v) those issued pursuant to the Underwriter's
Options; and (vi) those issued at the option of the Company, in such form
as may be approved by its Board of Directors, to reflect any adjustment or
change in the Purchase Price, the number of shares of Common Stock
purchasable upon exercise of the Warrants or the Redemption Price therefor
made pursuant to Section 9 hereof.
(e) Pursuant to the terms of the Underwriter's Options,
Patterson may purchase up to _______ Units, which include up to _______
Class A Warrants. The Class A Warrants underlying the Underwriter's
Options are exercisable at $16.50.
3. Form and Execution of Warrant Certificates.
(a) The Class A Warrant Certificates shall be substantially in
the form annexed hereto as Exhibit A (the provisions of which are hereby
incorporated herein) and may have such letters, numbers, or other marks of
identification or designation and such legends, summaries, or endorsements
printed, lithographed, or engraved thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this
Agreement, or as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any
stock exchange on which the Warrants may be listed, or to conform to usage
or to the requirements of Section 2(b). The Warrant Certificates shall be
dated the date of issuance thereof (whether upon initial issuance,
transfer, exchange, or in lieu of mutilated, lost, stolen, or destroyed
Warrant Certificates) and issued in registered form. Warrant Certificates
shall be numbered serially with the letter W.
(b) Warrant Certificates shall be executed on behalf of the
Company by its Chairman of the Board, President, or any Vice President and
by its Secretary or an Assistant Secretary, by manual signatures or by
facsimile signatures printed thereon, and shall have imprinted thereon a
facsimile of the Company's seal. Warrant Certificates shall be manually
countersigned by the Warrant Agent and shall not be valid for any purpose
unless so countersigned. In case any officer of the Company who shall have
signed any of the Warrant Certificates shall cease to be an officer of the
Company or to hold the particular office referenced in the Warrant
Certificate before the date of issuance of the Warrant Certificates or
before countersignature by the Warrant Agent and issue and delivery
thereof, such Warrant Certificates may nevertheless be countersigned by the
Warrant Agent, issued and delivered with the same force and effect as
though the person who signed such Warrant Certificates had not ceased to be
an officer of the Company or to hold such office. After countersignature
by the Warrant Agent, Warrant Certificates shall be delivered by the
Warrant Agent to the Registered Holder without further action by the
Company, except as otherwise provided by Section 4 hereof.
4. Exercise. (a) Each Class A Warrant may be exercised by the
Registered Holder thereof at any time on or after the Initial Warrant
Exercise Date, but not after the Warrant Expiration Date, upon the terms
and subject to the conditions set forth herein and in the applicable
Warrant Certificate. A Warrant shall be deemed to have been exercised
immediately prior to the close of business on the Exercise Date and the
person entitled to receive the securities deliverable upon such exercise
shall be treated for all purposes as the holder of those securities upon
the exercise of the Warrant as of the close of business on the Exercise
Date. As soon as practicable on or after the Exercise Date the Warrant
Agent shall deposit the proceeds in an interest bearing account received
from the exercise of a Warrant and shall notify the Company in writing of
the exercise of the Warrants. Promptly following, and in any event within
five days after the date of such notice from the Warrant Agent, the Warrant
Agent, on behalf of the Company, shall cause to be issued and delivered by
the Transfer Agent, to the person or persons entitled to receive the same,
a certificate or certificates for the securities deliverable upon such
exercise (plus a certificate for any remaining unexercised Warrants of the
Registered Holder), unless prior to the date of issuance of such
certificates the Company shall instruct the Warrant Agent to refrain from
causing such issuance of certificates pending clearance of checks received
in payment of the Purchase Price pursuant to such Warrants. Upon the
exercise of any Warrant and clearance of the funds received, the Warrant
Agent shall promptly remit the payment received for the Warrant (the
"Warrant Proceeds") to the Company or as the Company may direct in writing.
(b) If, subsequent to_______ 1997,in respect of the exercise of
any Warrant, (i) the market price of the Company's Common Stock is greater
than the then Purchase Price of the Warrants, (ii) the exercise of the
Warrant was solicited by a member of the National Association of Securities
Dealers, Inc. ("NASD") and such member was designated in writing by the
holder of such Warrant as having solicited such Warrant, (iii) the Warrant
was not held in a discretionary account, (iv) disclosure of compensation
arrangements was made both at the time of the original offering and at the
time of exercise and (v) the solicitation of the exercise of the Warrant
was not in violation of Rule 10b-6 (as such rule or any successor rule may
be in effect as of such time of exercise) promulgated under the Securities
Exchange Act of 1934, as amended, then the Warrant Agent, simultaneously
with the distribution of proceeds to the Company received upon exercise of
the Warrant(s) so exercised shall, on behalf of the Company, pay from the
proceeds received upon exercise of the Warrant(s), a fee of 8% of the
Purchase Price to Patterson (of which 1% may be reallowed to the dealer who
solicited the exercise, which may also be Patterson). Within five days
after exercise, the Warrant Agent shall send Patterson a copy of the
reverse side of each Warrant exercised. Patterson shall reimburse the
Warrant Agent, upon request, for its reasonable expenses relating to
compliance with this Section. In addition, Patterson and the Company may
at any time during business hours, examine the records of the Warrant
Agent, including its ledger of original Warrant Certificates returned to
the Warrant Agent upon exercise of Warrants. The provisions of this
paragraph may not be modified, amended or deleted without the prior written
consent of Patterson.
5. Reservation of Shares; Listing; Payment of Taxes, etc.
(a) The Company covenants that it will at all times reserve and
keep available out of its authorized Common Stock, solely for the purpose
of issue upon exercise of Warrants, such number of shares of Common Stock
as shall then be issuable upon the exercise of all outstanding Warrants.
The Company covenants that all shares of Common Stock which shall be
issuable upon exercise of the Warrants shall, at the time of delivery, be
duly and validly issued, fully paid, nonassessable, and free from all
taxes, liens, and charges with respect to the issue thereof, (other than
those which the Company shall promptly pay or discharge) and that upon
issuance such shares shall be listed on each national securities exchange
or eligible for inclusion in each automated quotation system, if any, on
which the other shares of outstanding Common Stock of the Company are then
listed or eligible for inclusion.
(b) The Company covenants that if any securities to be reserved
for the purpose of exercise of Warrants hereunder require registration
with, or approval of, any governmental authority under any federal
securities law before such securities may be validly issued or delivered
upon such exercise, then the Company will in good faith and as
expeditiously as reasonably possible, endeavor to secure such registration
or approval and will use its reasonable efforts to obtain appropriate
approvals or registrations under state "blue sky" securities laws,
provided, however, that the Company shall not be required to qualify as a
foreign corporation or a dealer in securities or to execute a general
consent of service of process in any jurisdiction. With respect to any
such securities, however, Warrants may not be exercised by, or shares of
Common Stock issued to, any Registered Holder in any state in which such
exercise would be unlawful.
(c) The Company shall pay all documentary, stamp, or similar
taxes and other governmental charges that may be imposed with respect to
the issuance of Warrants, or the issuance, or delivery of any shares upon
exercise of the Warrants; provided, however, that if the shares of Common
Stock are to be delivered in a name other than the name of the Registered
Holder of the Warrant Certificate representing any Warrant being exercised,
then no such delivery shall be made unless the person requesting the same
has paid to the Warrant Agent the amount of transfer taxes or charges
incident thereto, if any.
(d) The Warrant Agent is hereby irrevocably authorized to
requisition the Company's Transfer Agent from time to time for certificates
representing shares of Common Stock issuable upon exercise of the Warrants,
and the Company will authorize the Transfer Agent to comply with all such
proper requisitions. The Company will file with the Warrant Agent a
statement setting forth the name and address of the Transfer Agent of the
Company for shares of Common Stock issuable upon exercise of the Warrants.
6. Exchange and Registration of Transfer.
(a) Warrant Certificates may be exchanged for other Warrant
Certificates representing an equal aggregate number of Warrants of the same
class or may be transferred in whole or in part. Warrant Certificates to
be exchanged shall be surrendered to the Warrant Agent at its Corporate
Office, and upon satisfaction of the terms and provisions hereof, the
Company shall execute and the Warrant Agent shall countersign, issue, and
deliver in exchange therefor the Warrant Certificate or Certificates which
the Registered Holder making the exchange shall be entitled to receive.
(b) The Warrant Agent shall keep at its office books in which,
subject to such reasonable regulations as it may prescribe, it shall
register Warrant Certificates and the transfer thereof in accordance with
its regular practice. Upon due presentment for registration of transfer of
any Warrant Certificate at such office, the Company shall execute and the
Warrant Agent shall issue and deliver to the transferee or transferees a
new Warrant Certificate or Certificates representing an equal aggregate
number of Warrants.
(c) With respect to all Warrant Certificates presented for
registration or transfer, or for exchange or exercise, the subscription
form on the reverse thereof shall be duly endorsed, or be accompanied by a
written instrument or instruments of transfer and subscription, in form
satisfactory to the Company and the Warrant Agent, duly executed by the
Registered Holder or his attorney-in-fact duly authorized in writing.
(d) A service charge may be imposed on the Registered Holder by
the Warrant Agent for any exchange or registration of transfer of Warrant
Certificates. In addition, the Company may require payment by such holder
of a sum sufficient to cover any tax or other governmental charge that may
be imposed in connection therewith.
(e) All Warrant Certificates surrendered for exercise or for
exchange in case of mutilated Warrant Certificates shall be promptly
canceled by the Warrant Agent and thereafter retained by the Warrant Agent
until termination of this Agreement or resignation as Warrant Agent, or
disposed of or destroyed, at the direction of the Company.
(f) Prior to due presentment for registration of transfer
thereof, the Company and the Warrant Agent may deem and treat the
Registered Holder of any Warrant Certificate as the absolute owner thereof
and of each Warrant represented thereby (notwithstanding any notations of
ownership or writing thereon made by anyone other than a duly authorized
officer of the Company or the Warrant Agent) for all purposes and shall not
be affected by any notice to the contrary. The Warrants which are being
publicly offered in Units with shares of Common Stock pursuant to the
Underwriting Agreement will be detachable from the Common Stock and
transferable separately therefrom upon the earlier of (i) three (3) months
from the Escrow Release Date (as defined in the Company's Registration
Statement on Form SB-2 No. 333-3184) or upon agreement between the Company
and Patterson.
7. Loss or Mutilation. Upon receipt by the Company and the Warrant
Agent of evidence satisfactory to them of the ownership of and loss, theft,
destruction, or mutilation of any Warrant Certificate and (in case of loss,
theft, or destruction) of indemnity satisfactory to them, and (in the case
of mutilation) upon surrender and cancellation thereof, the Company shall
execute and the Warrant Agent shall (in the absence of notice to the
Company and/or Warrant Agent that the Warrant Certificate has been acquired
by a bona fide purchaser) countersign and deliver to the Registered Holder
in lieu thereof a new Warrant Certificate of like tenor representing an
equal aggregate number of Warrants. Applicants for a substitute Warrant
Certificate shall comply with such other reasonable regulations and pay
such other reasonable charges as the Warrant Agent may prescribe.
8. Redemption.
(a) Subject to the provisions of paragraph 2(e) hereof, on not
less than thirty (30) days notice given at any time after the Initial
Warrant Exercise Date, the Warrants may be redeemed, at the option of the
Company, at a redemption price of $0.01 per Warrant, provided that the
Market Price (defined below)of the Common Stock receivable upon exercise of
the Class A Warrant shall equal or exceed $13.00 ($21.45 in the case of the
Warrants included in the Underwriter's Option) (the "Target Price"),
subject to adjustment as set forth in Section 8(f) below. Market Price for
the purpose of this Section 8 shall mean (i) the average closing bid price
for any ten (10) consecutive trading days within a period of thirty (30)
consecutive trading days ending within five (5) days prior to the date of
the notice of redemption, which notice shall be mailed no later than five
days thereafter, of the Common Stock as reported by the National
Association of Securities Dealers, Inc. Automatic Quotation System or (ii)
the average of the last reported sale price, for ten (10) consecutive
business days, ending within five (5) days of the date of the notice of
redemption, which notice shall be mailed no later than five days
thereafter, on the primary exchange on which the Common Stock is traded, if
the Common Stock is traded on a national securities exchange.
(b) If the conditions set forth in Section 8(a) are met, and
the Company desires to exercise its right to redeem the Class A Warrants,
it shall mail a notice of redemption to each of the Registered Holders of
the Warrants to be redeemed, first class, postage prepaid, not later than
the thirtieth day before the date fixed for redemption, at their last
address as shall appear on the records maintained pursuant to Section 6(b).
Any notice mailed in the manner provided herein shall be conclusively
presumed to have been duly given whether or not the Registered Holder
receives such notice.
(c) The notice of redemption shall specify (i) the redemption
price, (ii) the date fixed for redemption, (iii) the place where the
Warrant Certificates shall be delivered and the redemption price paid, and
(iv) that the right to exercise the Warrant shall terminate at 5:00 P.M.
(New York time) on the business day immediately preceding the date fixed
for redemption. The date fixed for the redemption of the Class A Warrant
shall be the Redemption Date. No failure to mail such notice nor any
defect therein or in the mailing thereof shall affect the validity of the
proceedings for such redemption except as to a Registered Holder (a) to
whom notice was not mailed or (b) whose notice was defective. An affidavit
of the Warrant Agent or of the Secretary or an Assistant Secretary of the
Company that notice of redemption has been mailed shall, in the absence of
fraud, be prima facie evidence of the facts stated therein.
(d) Any right to exercise a Warrant shall terminate at 5:00
P.M. (New York time) on the business day immediately preceding the
Redemption Date. On and after the Redemption Date, Holders of the Warrants
shall have no further rights except to receive, upon surrender of the
Warrant prior to the Redemption Date, the Redemption Price.
(e) From and after the Redemption Date specified for, the
Company shall, at the place specified in the notice of redemption, upon
presentation and surrender to the Company by or on behalf of the Registered
Holder thereof of one or more Warrant Certificates evidencing Warrants to
be redeemed, deliver or cause to be delivered to or upon the written order
of such Holder a sum in cash equal to the redemption price of each such
Warrant. From and after the Redemption Date and upon the deposit or
setting aside by the Company of a sum sufficient to redeem all the Warrants
called for redemption, such Warrants shall expire and become void and all
rights hereunder and under the Warrant Certificates, except the right to
receive payment of the redemption price, shall cease.
(f) If the shares of the Company's Common Stock are subdivided
or combined into a greater or smaller number of shares of Common Stock, the
Target Price shall be proportionally adjusted by the ratio which the total
number of shares of Common Stock outstanding immediately prior to such
event bears to the total number of shares of Common Stock to be outstanding
immediately after such event.
9. Adjustment of Exercise Price and Number of
Shares of Common Stock or Warrants.
(a) Subject to the exceptions referred to in Section 9(g)
below, in the event the Company shall, at any time or from time to time
after the date hereof, sell any shares of Common Stock for a consideration
per share less than the Market Price of the Common Stock (as defined in
Section 8) (calculated as of the date prior to the date of the sale) or
issue any shares of Common Stock as a stock dividend to the holders of
Common Stock, or subdivide or combine the outstanding shares of Common
Stock into a greater or lesser number of shares (any such sale, issuance,
subdivision, or combination being herein called a "Change of Shares"),
then, and thereafter upon each further Change of Shares, the Purchase Price
in effect immediately prior to such Change of Shares shall be changed to a
price (including any applicable fraction of a cent) determined by
multiplying the Purchase Price in effect immediately prior thereto by a
fraction, the numerator of which shall be the sum of the number of shares
of Common Stock outstanding immediately prior to the Change of Shares and
the number of shares of Common Stock which the aggregate consideration
received (determined as provided in subsection 9(f)below) for the issuance
of such additional shares would purchase at such current market price per
share of Common Stock, and the denominator of which shall be the number of
shares of Common Stock outstanding immediately after the Change of Shares.
Such adjustment shall be made successively whenever such an issuance is
made.
Upon each adjustment of the Purchase Price pursuant to this
Section 9, the total number of shares of Common Stock purchasable upon the
exercise of each Warrant shall (subject to the provisions contained in
Section 9(b) hereof) be such number of shares (calculated to the nearest
tenth) purchasable at the Purchase Price in effect immediately prior to
such adjustment multiplied by a fraction, the numerator of which shall be
the Purchase Price in effect immediately prior to such adjustment and the
denominator of which shall be the Purchase Price in effect immediately
after such adjustment.
(b) The Company may elect, upon any adjustment of the Purchase
Price hereunder, to adjust the number of Warrants outstanding, in lieu of
the adjustment in the number of shares of Common Stock purchasable upon the
exercise of each Warrant as hereinabove provided, so that each Warrant
outstanding after such adjustment shall represent the right to purchase one
share of Common Stock. Each Warrant held of record prior to such
adjustment of the number of Warrants shall become that number of Warrants
(calculated to the nearest tenth) determined by multiplying the number one
by a fraction, the numerator of which shall be the Purchase Price in effect
immediately prior to such adjustment and the denominator of which shall be
the Purchase Price in effect immediately after such adjustment. Upon each
adjustment of the number of Warrants pursuant to this Section 9, the
Company shall, as promptly as practicable, cause to be distributed to each
Registered Holder of Warrant Certificates on the date of such adjustment
Warrant Certificates evidencing, subject to Section 10 hereof, the number
of additional Warrants to which such Holder shall be entitled as a result
of such adjustment or, at the option of the Company, cause to be
distributed to such Holder in substitution and replacement for the Warrant
Certificates held by him prior to the date of adjustment (and upon
surrender thereof, if required by the Company) new Warrant Certificates
evidencing the number of Warrants to which such Holder shall be entitled
after such adjustment.
(c) After the date hereof, in case of any reclassification,
capital reorganization, or other change of outstanding shares of Common
Stock, or in case of any consolidation or merger of the Company with or
into another corporation (other than a consolidation or merger in which the
Company is the continuing corporation and which does not result in any
reclassification, capital reorganization, or other change of outstanding
shares of Common Stock), (or in case of any sale or conveyance to another
corporation of all or substantially all of the assets of the Company (other
than a sale/leaseback, mortgage, or other financing transaction)), the
Company shall cause effective provision to be made so that each holder of a
Warrant then outstanding shall have the right thereafter, by exercising
such Warrant, to purchase the kind and number of shares of stock or other
securities or property (including cash) receivable upon such
reclassification, capital reorganization, or other change, consolidation,
merger, sale, or conveyance by a holder of the number of shares of Common
Stock that might have been purchased upon exercise of such Warrant
immediately prior to such reclassification, capital reorganization, or
other change, consolidation, merger, sale, or conveyance. Any such
provision shall include provision for adjustments that shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Section 9. The Company shall not effect any such consolidation, merger, or
sale unless prior to or simultaneously with the consummation thereof, the
successor (if other than the Company) resulting from such consolidation or
merger or the corporation purchasing assets or other appropriate
corporation or entity shall assume, by written instrument executed and
delivered to the Warrant Agent, the obligation to deliver to the holder of
each Warrant such shares of stock, securities, or assets as, in accordance
with the foregoing provisions, such holders may be entitled to purchase and
the other obligations under this Agreement. The foregoing provisions shall
similarly apply to successive reclassification, capital reorganizations,
and other changes of outstanding shares of Common Stock and to successive
consolidations, mergers, sales, or conveyances.
(d) Irrespective of any adjustments or changes in the Purchase
Price or the number of shares of Common Stock purchasable upon exercise of
the Warrants, the Warrant Certificates theretofore and thereafter issued
shall, unless the Company shall exercise its option to issue new Warrant
Certificates pursuant to Section 2(d) hereof, continue to express the
Purchase Price per share, the number of shares purchasable thereunder, and
the Redemption Price therefor as the Purchase Price per share, and the
number of shares purchasable and the Redemption Price therefore were
expressed in the Warrant Certificates when the same were originally issued.
(e) After each adjustment of the Purchase Price pursuant to
this Section 9, the Company will promptly prepare a certificate signed by
the Chairman or President, and by the Treasurer or an Assistant Treasurer
or the Secretary or an Assistant Secretary, of the Company setting forth:
(i) the Purchase Price as so adjusted, (ii) the number of shares of Common
Stock purchasable upon exercise of each Warrant after such adjustment, and,
if the Company shall have elected to adjust the number of Warrants, the
number of Warrants to which the registered holder of each Warrant shall
then be entitled, and the adjustment in Redemption Price resulting
therefrom, and (iii) a brief statement of the facts accounting for such
adjustment. The Company will promptly file such certificate with the
Warrant Agent and cause a brief summary thereof to be sent by ordinary
first class mail to Patterson and to each registered holder of Warrants at
his last address as it shall appear on the registry books of the Warrant
Agent. No failure to mail such notice nor any defect therein or in the
mailing thereof shall affect the validity thereof except as to the holder
to whom the Company failed to mail such notice, or except as to the holder
whose notice was defective and who is prejudiced thereby. The affidavit of
an officer of the Warrant Agent or the Secretary or an Assistant Secretary
of the Company that such notice has been mailed shall, in the absence of
fraud, be prima facie evidence of the facts stated therein.
(f) For purposes of Section 9(a) and 9(b) hereof, the following
provisions (i) to (vii) shall also be applicable:
(i) The number of shares of Common Stock outstanding
at any given time shall include shares of Common Stock owned or held by or
for the account of the Company and the sale or issuance of such treasury
shares or the distribution of any such treasury shares shall not be
considered a Change of Shares for purposes of said sections.
(ii) No adjustment of the Purchase Price shall be made
unless such adjustment would require an increase or decrease of at least
$.10 in such price; provided that any adjustments which by reason of this
subsection (ii) are not required to be made shall be carried forward and
shall be made at the time of and together with the next subsequent
adjustment which, together with any adjustment(s) so carried forward, shall
require an increase or decrease of at least $.10 in the Purchase Price then
in effect hereunder.
(iii) After the date hereof, in case of (1) the sale by
the Company for cash of any rights or warrants to subscribe for or
purchase, or any options for the purchase of, either Common Stock or any
securities convertible into or exchangeable for Common Stock without the
payment of any further consideration other than cash, if any (such
convertible or exchangeable securities being herein called "Convertible
Securities"), or (2) the issuance by the Company, without the receipt by
the Company of any consideration therefor, of any rights or warrants to
subscribe for or purchase, or any options for the purchase of, either
Common Stock or Convertible Securities, in each case, if (and only if) the
consideration payable to the Company upon the exercise of such rights,
warrants, or options shall consist of cash, whether or not such rights,
warrants, or options, or the right to convert or exchange such Convertible
Securities, are immediately exercisable, and the price per share for which
Common Stock is issuable upon the exercise of such rights, warrants, or
options or upon the conversion or exchange of such Convertible Securities
(determined by dividing (x) the minimum aggregate consideration payable to
the Company upon the exercise of such rights, warrants, or options, plus
the consideration received by the Company for the issuance or sale of such
rights, warrants, or options, plus, in the case of such Convertible
Securities, the minimum aggregate amount of additional consideration, if
any, other than such Convertible Securities, payable upon the conversion or
exchange thereof, by (y) the total maximum number of shares of Common Stock
issuable upon the exercise of such rights, warrants, or options or upon the
conversion or exchange of such Convertible Securities issuable upon the
exercise of such rights, warrants, or options) is less than the Market
Price of the Common Stock on the date of the issuance or sale (calculated
as of the date prior to the date of sale)of such rights, warrants, or
options, then the total maximum number of shares of Common Stock issuable
upon the exercise of such rights, warrants, or options or upon the
conversion or exchange of such Convertible Securities (as of the date of
the issuance or sale of such rights, warrants, or options) shall be deemed
to be outstanding shares of Common Stock for purposes of Sections 9(a) and
9(b) hereof and shall be deemed to have been sold for cash in an amount
equal to such price per share.
(iv) In case of the sale by the Company for cash of any
Convertible Securities, whether or not the right of conversion or exchange
thereunder is immediately exercisable, and the price per share for which
Common Stock is issuable upon the conversion or exchange of such
Convertible Securities (determined by dividing (x) the total amount of
consideration received by the Company for the sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration,
if any, other than such Convertible Securities, payable upon the conversion
or exchange thereof, by (y) the total maximum number of shares of Common
Stock issuable upon the conversion or exchange of such Convertible
Securities determined as of the date of issuance) is less than the Market
Price of the Common Stock on the date of the sale of such Convertible
Securities (calculated as of the date prior to the date of sale), then the
total maximum number of shares of Common Stock issuable upon the conversion
or exchange of such Convertible Securities (as of the date of the sale of
such Convertible Securities) shall be deemed to be outstanding shares of
Common Stock for purposes of Sections 9(a) and 9(b) hereof and shall be
deemed to have been sold for cash in an amount equal to such price per
share.
(v) In case the Company shall modify the rights of
conversion, exchange, or exercise of any of the securities referred to in
subsection (iii) above or any other securities of the Company convertible,
exchangeable, or exercisable for shares of Common Stock, for any reason
other than an event that would require adjustment to prevent dilution, so
that the consideration per share received by the Company after such
modification is less than the Market Price on the date prior to such
modification (calculated as of the date prior to the date of sale), the
Purchase Price to be in effect after such modification shall be determined
by multiplying the Purchase Price in effect immediately prior to such event
by a fraction, of which the numerator shall be the number of shares of
Common Stock outstanding plus the number of shares of Common Stock which
the aggregate consideration receivable by the Company for the securities
affected by the modification would purchase at the Market Price (calculated
as of the date prior to the date of sale)and of which the denominator shall
be the number of shares of Common Stock outstanding on such date plus the
number of shares of Common Stock to be issued upon conversion, exchange, or
exercise of the modified securities at the modified rate. Such adjustment
shall become effective as of the date upon which such modification shall
take effect.
(vi) On the expiration of any such right, warrant, or
option or the termination of any such right to convert or exchange any such
Convertible Securities, the Purchase Price then in effect hereunder shall
forthwith be readjusted to such Purchase Price as would have obtained (a)
had the adjustments made upon the issuance or sale of such rights,
warrants, options, or Convertible Securities been made upon the basis of
the issuance of only the number of shares of Common Stock theretofore
actually delivered (and the total consideration received therefor) upon the
exercise of such rights, warrants, or options or upon the conversion or
exchange of such Convertible Securities and (b) had adjustments been made
on the basis of the Purchase Price as adjusted under clause (a) for all
transactions (which would have affected such adjusted Purchase Price) made
after the issuance or sale of such rights, warrants, options, or
Convertible Securities.
(vii) In case of the sale (other than pursuant to the
Stock Option Plan or the Warrants)for cash of any shares of Common Stock,
any Convertible Securities, any rights or warrants to subscribe for or
purchase, or any options for the purchase of, Common Stock or Convertible
Securities, the consideration received by the Company therefore shall be
deemed to be the gross sales price therefor without deducting therefrom any
expense paid or incurred by the Company or any underwriting discounts or
commissions or concessions paid or allowed by the Company in connection
therewith.
(g) No adjustment to the Purchase Price of the Warrants or to
the number of shares of Common Stock purchasable upon the exercise of each
Warrant will be made, however,
(i) upon the sale or exercise of the Warrants,
including without limitation the sale or exercise of any of the Warrants
comprising the Underwriter's Options; or
(ii) upon the sale of any shares of Common Stock in the
Company's initial public offering, including, without limitation, shares
sold upon the exercise of any over-allotment option granted to the
Underwriters in connection with such offering; or
(iii) upon the issuance or sale of Common Stock or
Convertible Securities upon the exercise of any rights or warrants to
subscribe for or purchase, or any options for the purchase of, Common Stock
or Convertible Securities, whether or not such rights, warrants, or options
were outstanding on the date of the original sale of the Warrants or were
thereafter issued or sold; or
(iv) upon the issuance or sale of Common Stock upon
conversion or exchange of any Convertible Securities, whether or not any
adjustment in the Purchase Price was made or required to be made upon the
issuance or sale of such Convertible Securities and whether or not such
Convertible Securities were outstanding on the date of the original sale of
the Warrants or were thereafter issued or sold; or
(v) upon the issuance or sale of Common Stock or
Convertible Securities in a private placement unless the issuance or sale
price is less than 85% of the fair market value of the Common Stock on the
date of issuance, in which case the adjustment shall only be for the
difference between 85% of the fair market value and the issue or sale
price;
(vi) upon the issuance or sale of Common Stock or
Convertible Securities to (a) shareholders of any corporation which merges
into the Company or from which the Company acquires assets and some or all
of the consideration consists of equity securities of the Company, in
proportion to their stock holdings of such corporation immediately prior to
the acquisition or (b) to any corporation or person from which the Company
acquires assets but only if no adjustment is required pursuant to any other
provision of this Section 9; or
(vii) upon the issuance or sale of (i) up to 200,000
options for the purchase Common Stock to employees, officers, directors,
advisors or consultants under the Stock Option Plan or (ii) Common Stock
issued upon the exercise of options granted under the Stock Option Plan.
(h) As used in this Section 9, the term "Common Stock" shall
mean and include the Company's Common Stock authorized on the date of the
original issue of the Units and shall also include any capital stock of any
class of the Company thereafter 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 and in the distribution of assets upon the
voluntary liquidation, dissolution, or winding up of the Company; provided,
however, that the shares issuable upon exercise of the Warrants shall
include only shares of such class designated in the Company's Certificate
of Incorporation as Common Stock on the date of the original issue of the
Units, or (i)in the case of any reclassification, change, consolidation,
merger, sale, or conveyance of the character referred to in Section 9(c)
hereof, the stock, securities, or property provided for in such section or,
(ii)in the case of any reclassification or change in the outstanding shares
of Common Stock issuable upon exercise of the Warrants as a result of a
subdivision or combination or consisting of a change in par value, or from
par value to no par value, or from no par value to par value, such shares
of Common Stock as so reclassified or changed.
(i) Any determination as to whether an adjustment in the
Purchase Price in effect hereunder is required pursuant to Section 9, or as
to the amount of any such adjustment, if required, shall be binding upon
the holders of the Warrants and the Company if made in good faith by the
Board of Directors of the Company.
(j) Intentionally omitted.
10. Fractional Warrants and Fractional Shares.
(a) If the number of shares of Common Stock purchasable upon
the exercise of each Warrant is adjusted pursuant to Section 9 hereof, the
Company nevertheless shall not be required to issue fractions of shares,
upon exercise of the Warrants or otherwise, or to distribute certificates
that evidence fractional shares. With respect to any fraction of a share
called for upon any exercise hereof, the Company shall pay to the Holder an
amount in cash equal to such fraction multiplied by the current market
value of such fractional share, determined as follows:
(i) If the Common Stock is listed on a National
Securities Exchange or admitted to unlisted trading privileges on such
exchange or listed for trading on the NASDAQ Quotation System, the current
value shall be the last reported sale price of the Common Stock on such
exchange on the last business day prior to the date of exercise of this
Warrant or if no such sale is made on such day, the average of the closing
bid and asked prices for such day on such exchange; or
(ii) If the Common Stock is not listed or admitted to
unlisted trading privileges, the current value shall be the mean of the
last reported bid and asked prices reported by the National Quotation
Bureau, Inc. on the last business day prior to the date of the exercise of
this Warrant; or
(iii) If the Common Stock is not so listed or admitted
to unlisted trading privileges and bid and asked prices are not so
reported, the current value shall be an amount determined in such
reasonable manner as may be prescribed by the Board of Directors of the
Company.
11. Warrant Holders Not Deemed Stockholders. No holder of Warrants
shall, as such, be entitled to vote or to receive dividends or be deemed
the holder of Common Stock that may at any time be issuable upon exercise
of such Warrants for any purpose whatsoever, nor shall anything contained
herein be construed to confer upon the holder of Warrants, as such, any of
the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action
(whether upon any recapitalization, issue or reclassification of stock,
change of par value or change of stock to no par value, consolidation,
merger, or conveyance or otherwise), or to receive notice of meetings, or
to receive dividends or subscription rights, until such Holder shall have
exercised such Warrants and been issued shares of Common Stock in
accordance with the provisions hereof.
12. Rights of Action. All rights of action with respect to this
Agreement are vested in the respective Registered Holders of the Warrants,
and any Registered Holder of a Warrant, without consent of the Warrant
Agent or of the holder of any other Warrant, may, in his own behalf and for
his own benefit, enforce against the Company his right to exercise his
Warrants for the purchase of shares of Common Stock in the manner provided
in the Warrant Certificate and this Agreement.
13. Agreement of Warrant Holders. Every holder of a Warrant, by his
acceptance thereof, consents and agrees with the Company, the Warrant Agent
and every other holder of a Warrant that:
(a) The Warrants are transferable only on the registry books of
the Warrant Agent by the Registered Holder thereof in person or by his
attorney duly authorized in writing and only if the Warrant Certificates
representing such Warrants are surrendered at the office of the Warrant
Agent, duly endorsed or accompanied by a proper instrument of transfer
satisfactory to the Warrant Agent and the Company in their sole discretion,
together with payment of any applicable transfer taxes; and
(b) The Company and the Warrant Agent may deem and treat the
person in whose name the Warrant Certificate is registered as the holder
and as the absolute, true, and lawful owner of the Warrants represented
thereby for all purposes, and neither the Company nor the Warrant Agent
shall be affected by any notice or knowledge to the contrary, except as
otherwise expressly provided in Section 7 hereof.
14. Cancellation of Warrant Certificates. If the Company shall
purchase or acquire any Warrant or Warrants, the Warrant Certificate or
Warrant Certificates evidencing the same shall thereupon be delivered to
the Warrant Agent and canceled by it and retired. The Warrant Agent shall
also cause to be cancelled Common Stock following exercise of any or all of
the Warrants represented thereby or delivered to it for transfer, split up,
combination, or exchange.
15. Concerning the Warrant Agent. The Warrant Agent acts hereunder
as agent and in a ministerial capacity for the Company, and its duties
shall be determined solely by the provisions hereof. The Warrant Agent
shall not, by issuing and delivering Warrant Certificates or by any other
act hereunder be deemed to make any representations as to the validity,
value, or authorization of the Warrant Certificates or the Warrants
represented thereby or of any securities or other property delivered upon
exercise of any Warrant or whether any stock issued upon exercise of any
Warrant is fully paid and nonassessable.
The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of Warrant Certificates to make or cause to be
made any adjustment of the Purchase Price or the Redemption Price provided
in this Agreement, or to determine whether any fact exists which may
require any such adjustments, or with respect to the nature or extent of
any such adjustment, when made, or with respect to the method employed in
making the same. It shall not (i) be liable for any recital or statement
of facts contained herein or for any action taken, suffered, or omitted by
it in reliance on any Warrant Certificate or other document or instrument
believed by it in good faith to be genuine and to have been signed or
presented by the proper party or parties, (ii) be responsible for any
failure on the part of the Company to comply with any of its covenants and
obligations contained in this Agreement or in any Warrant Certificate, or
(iii) be liable for any act or omission in connection with this Agreement
except for its own negligence or wilful misconduct.
The Warrant Agent may at any time consult with counsel
satisfactory to it (who may be counsel for the Company) and shall incur no
liability or responsibility for any action taken, suffered or omitted by it
in good faith in accordance with the opinion or advice of such counsel.
Any notice, statement, instruction, request, direction, order, or
demand of the Company shall be sufficiently evidenced by an instrument
signed by the Chairman of the Board, President, any Vice President, its
Secretary, or Assistant Secretary (unless other evidence in respect thereof
is herein specifically prescribed). The Warrant Agent shall not be liable
for any action taken, suffered or omitted by it in accordance with such
notice, statement, instruction, request, direction, order, or demand
believed by it to be genuine.
The Company agrees to pay the Warrant Agent reasonable
compensation for its services hereunder and to reimburse it for its
reasonable expenses hereunder; it further agrees to indemnify the Warrant
Agent and save it harmless against any and all losses, expenses, and
liabilities, including judgments, costs, and counsel fees, for anything
done or omitted by the Warrant Agent in the execution of its duties and
powers hereunder except losses, expenses, and liabilities arising as a
result of the Warrant Agent's negligence or wilful misconduct.
The Warrant Agent may resign its duties and be discharged from
all further duties and liabilities hereunder (except liabilities arising as
a result of the Warrant Agent's own negligence or wilful misconduct), after
giving 30 days' prior written notice to the Company. At least 15 days
prior to the date such resignation is to become effective, the Warrant
Agent shall cause a copy of such notice of resignation to be mailed to the
Registered Holder of each Warrant Certificate at the Company's expense.
Upon such resignation, or any inability of the Warrant Agent to act as such
hereunder, the Company shall appoint a new warrant agent in writing. If
the Company shall fail to make such appointment within a period of 15 days
after it has been notified in writing of such resignation by the resigning
Warrant Agent, then the Registered Holder of any Warrant Certificate may
apply to any court of competent jurisdiction for the appointment of a new
warrant agent. Any new warrant agent, whether appointed by the Company or
by such a court, shall be a bank or trust company having a capital and
surplus, as shown by its last published report to its stockholders, of not
less than $10,000,000 or a stock transfer company. After acceptance in
writing of such appointment by the new warrant agent is received by the
Company, such new warrant agent shall be vested with the same powers,
rights, duties, and responsibilities as if it had been originally named
herein as the Warrant Agent, without any further assurance, conveyance,
act, or deed; but if for any reason it shall be necessary or expedient to
execute and deliver any further assurance, conveyance, act, or deed, the
same shall be done at the expense of the Company and shall be legally and
validly executed and delivered by the resigning Warrant Agent. Not later
than the effective date of any such appointment the Company shall file
notice thereof with the resigning warrant Agent and shall forthwith cause a
copy of such notice to be mailed to the Registered Holder of each Warrant
Certificate.
Any corporation into which the Warrant Agent or any new warrant
agent may be converted or merged or any corporation resulting from any
consolidation to which the Warrant Agent or any new warrant agent shall be
a party or any corporation succeeding to the trust business of the Warrant
Agent shall be a successor warrant agent under this Agreement without any
further act, provided that such corporation is eligible for appointment as
successor to the Warrant Agent under the provisions of the preceding
paragraph. Any such successor warrant agent shall promptly cause notice of
its succession as warrant agent to be mailed to the Company and to the
Registered Holder of each Warrant Certificate.
The Warrant Agent, its subsidiaries and affiliates, and any of
its or their officers or directors, may buy and hold or sell Warrants or
other securities of the Company and otherwise deal with the Company in the
same manner and to the same extent and with like effects as though it were
not Warrant Agent. Nothing herein shall preclude the Warrant Agent from
acting in any other capacity for the Company or for any other legal entity.
16. Modification of Agreement. The Warrant Agent and the Company may
by supplemental agreement make any changes or corrections in this Agreement
(i) that they shall deem appropriate to cure any ambiguity or to correct
any defective or inconsistent provision or manifest mistake or error herein
contained; or (ii) that they may deem necessary or desirable and which
shall not adversely affect the interests of the holders of Warrant
Certificates; provided, however, that this Agreement shall not otherwise be
modified, supplemented, or altered in any respect except with the consent
in writing of the Registered Holders of Warrant Certificates representing
not less than 50% of the Warrants then outstanding; and provided, further,
that no change in the number or nature of the securities purchasable upon
the exercise of any Warrant, or the Purchase Price therefor, or the
acceleration of the Warrant Expiration Date, shall be made without the
consent in writing of the Registered Holder of the Warrant Certificate
representing such Warrant, other than such changes as are specifically
prescribed by this Agreement as originally executed or are made in
compliance with applicable law. In addition, the Company and Patterson may
by supplemental agreement extend the Warrant Expiration Date without the
consent of the Registered Holders.
17. Notices. All notices, requests, consents, and other
communications hereunder shall be in writing and shall be deemed to have
been made when delivered or mailed first class registered or certified
mail, postage prepaid as follows: if to the Registered Holder of a Warrant
Certificate, at the address of such holder as shown on the registry books
maintained by the Warrant Agent; if to the Company, 1090 King Georges Road,
Suite 301, Edison, NJ 08837, Attention: President, with a copy sent to the
Law Offices of Kelley Drye & Warren, 101 Park Avenue, New York, NY 10178,
Attention: Jane E. Jablons, Esq.; or at such other address as may have been
furnished to the Warrant Agent in writing by the Company; and if to the
Warrant Agent, at its corporate office.
18. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without reference to
principles of conflict of laws.
19. Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the Company and, the Warrant Agent and their respective
successors and assigns, and the holders from time to time of Warrant
Certificates. Nothing in this Agreement is intended or shall be construed
to confer upon any other person any right, remedy, or claim, in equity or
at law, or to impose upon any other person any duty, liability, or
obligation.
20. Termination. This Agreement shall terminate at the close of
business on the Warrant Expiration Date of all the Warrants or such earlier
date upon which all Warrants have been exercised, except that the Warrant
Agent shall account to the Company for cash held by it and the provisions
of Section 15 hereof shall survive such termination.
21. Counterparts. This Agreement may be executed in several
counterparts, which taken together shall constitute a single document.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
MEDJET INC.
By:______________________________
Its
CONTINENTAL STOCK TRANSFER &
TRUST COMPANY
By:______________________________
Its
Authorized Officer
<PAGE>
EXHIBIT A
[Form of Face of Class A Warrant Certificate]
No. W ___________ Class A Warrants
Void after ______, ____
STOCK PURCHASE WARRANT CERTIFICATE FOR PURCHASE OF COMMON STOCK
MEDJET INC.
This certifies that For Value Received
or registered assigns (the "Registered Holder") is the owner of the number
of Class A Redeemable Common Stock Purchase Warrants ("Warrants") specified
above. Each Warrant initially entitles the Registered Holder to purchase,
subject to the terms and conditions set forth in this Certificate and the
Warrant Agreement (as hereinafter defined), one fully paid and
nonassessable share of Common Stock, $.001 par value ("Common Stock"), of
MEDJET INC., a Delaware corporation (the "Company"), at any time between
the Initial Warrant Exercise Date (as herein defined) and the Expiration
Date (as hereinafter defined), upon the presentation and surrender of this
Warrant Certificate with the Subscription Form on the reverse hereof duly
executed, at the corporate office of Continental STOCK TRANSFER & TRUST
COMPANY, as Warrant Agent, or its successor (the "Warrant Agent"),
accompanied by payment of $10.00 ("Purchase Price") in lawful money of the
United States of America in cash or by official bank or certified check
made payable to Medjet Inc.
This Warrant Certificate and each Warrant represented hereby are
issued pursuant to and are subject in all respects to the terms and
conditions set forth in the Warrant Agreement (the "Warrant Agreement")
dated _________, 1996, by and between the Company and the Warrant Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Common Stock
subject to purchase upon the exercise of each Warrant represented hereby
are subject to modifications or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional shares of Common Stock will be issued.
In the case of the exercise of less than all the Warrants represented
hereby, the Company shall cancel this Warrant Certificate upon the
surrender hereof and shall execute and deliver a new Warrant Certificate or
Warrant Certificates of like tenor, which the Warrant Agent shall
countersign, for the balance of such Warrants.
The term "Initial Warrant Exercise Date" shall mean __________, 1996.
The term "Expiration Date" shall mean 5:00 p.m. (New York time on
______,____, or such earlier date as the Warrants shall be redeemed. If
such date shall in the State of New York be a holiday or a day on which the
banks are authorized to close, then the Expiration Date shall mean 5:00
p.m. (New York time) the next following day which in the State of New York
is not a holiday or a day on which banks are authorized to close.
The Company shall not be obligated to deliver any securities pursuant
to the exercise of this Warrant unless a registration statement under the
Securities Act of 1933, as amended, with respect to such securities is
effective. The Company has covenanted and agreed that it will file a
registration statement and will use its best efforts to cause the same to
become effective and to keep such registration statement current while any
of the Warrants are outstanding. This Warrant shall not be exercisable by
a Registered Holder in any state where such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by
the Registered Holder at the corporate office of the Warrant Agent, for a
new Warrant Certificate or Warrant Certificates of like tenor representing
an equal aggregate number of Warrants, each of such new Warrant
Certificates to represent such number of Warrants as shall be designated by
such Registered Holder at the time of such surrender. Upon due presentment
with any transfer fee in addition to any tax or other governmental charge
imposed in connection therewith, for registration of transfer of this
Warrant Certificate at such office, a new Warrant Certificate or Warrant
Certificates representing an equal aggregate number of Warrants will be
issued to the transferee in exchange therefor, subject to the limitations
provided in the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the
Registered Holder shall not be entitled to any rights of a stockholder of
the Company, including, without limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided in the Warrant
Agreement.
This Warrant may be redeemed at the option of the Company, at a
redemption price of $.01 per Warrant at any time after the Separation Date
(as defined in the Warrant Agreement), provided the Market Price (as
defined in the Warrant Agreement) for the securities issuable upon exercise
of such Warrant shall exceed $13.00 per share. Notice of redemption shall
be given not later than the thirtieth day before the date fixed for
redemption, all as provided in the Warrant Agreement. On and after the
date fixed for redemption, the Registered Holder shall have no rights with
respect to this Warrant except to receive the $.01 per Warrant upon
surrender of this Certificate prior to the Redemption Date (as defined in
the Warrant Agreement).
Prior to due presentment for registration of transfer hereof, the
Company and the Warrant Agent may deem and treat the Registered Holder as
the absolute owner hereof and of each Warrant represented hereby
(notwithstanding any notations of ownership or writing hereon made by
anyone other than a duly authorized officer of the Company or the Warrant
Agent) for all purposes and shall not be affected by any notice to the
contrary.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of Delaware.
This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or in facsimile by two (2) of its officers
thereunto duly authorized and a facsimile of its corporate seal to be
imprinted hereon.
MEDJET INC.
By:______________________________
Its
By:_______________________________
Its
Date:_____________________________
[Seal]
Countersigned:
Continental Stock Transfer & Trust Company
as Warrant Agent
By:______________________________
Its
Authorized Officer
<PAGE>
[Form of Reverse of Class A Warrant Certificate]
SUBSCRIPTION FORM
To Be Executed by the Registered Holder in Order to Exercise Warrants
THE UNDERSIGNED REGISTERED HOLDER hereby irrevocably elects to
exercise _____ Warrants represented by this Warrant Certificate, and to
purchase the securities issuable upon the exercise of such Warrants, and
requests that certificates for such securities shall be issued in the name
of
____________________________________________
(please insert social security or other identifying number)
and be delivered to
____________________________________________
____________________________________________
____________________________________________
____________________________________________
(please print or type name and address)
and if such number of Warrants shall not be all the Warrants evidenced by
this Warrant Certificate, that a new Warrant Certificate for the balance of
such Warrants be registered in the name of, and delivered to, the
Registered Holder at the address stated below:
____________________________________________
____________________________________________
____________________________________________
(Address)
_________________________________
(Date)
_________________________________
(Taxpayer Identification Number)
Soliciting Broker:_________________________________
Signature Guaranteed
<PAGE>
ASSIGNMENT
To Be Executed by the Registered Holder in Order to Assign Warrants
FOR VALUE RECEIVED, hereby sells, assigns, and transfers unto
____________________________________________
(please insert social security or other identifying number)
____________________________________________
____________________________________________
____________________________________________
____________________________________________
(please print or type name and address)
of the Warrants represented by this Warrant Certificate, and hereby
irrevocably constitutes and appoints _________________________________
Attorney to transfer this Warrant Certificate on the books of the Company,
with full power of substitution in the premises.
_________________________________
(Date)
Signature Guaranteed
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO
THE NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND
MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION (AS DEFINED IN RULE 17AD-15
UNDER THE SECURITIES AND EXCHANGE ACT OF 1934) WHICH MAY INCLUDE A
COMMERCIAL BANK OR TRUST COMPANY, SAVINGS ASSOCIATION, CREDIT UNION OR A
MEMBER FIRM OF THE AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE,
PACIFIC STOCK EXCHANGE OR MIDWEST STOCK EXCHANGE.
May 21, 1996
Medjet Inc.
1090 King Georges Post Road, Suite 301
Edison, New Jersey 08837
Gentlemen:
We have acted as special counsel to Medjet Inc., a Delaware
corporation (the "Company"), in connection with the proposed public
offering of up to 1,600,000 units (the "Units"), each Unit consisting of
one share (collectively, the "Shares") of the Company's common stock, par
value $.001 per share (the "Common Stock"), and one warrant (collectively,
the "Warrants") to purchase one share of Common Stock (collectively, the
"Warrant Shares," and, together with the Units, the Shares and the
Warrants, the "Securities") as described in the Registration Statement on
Form SB-2 filed by the Company with the Securities and Exchange Commission
(the "Commission") pursuant to the Securities Act of 1933, as amended (the
"Act"), to which this opinion constitutes an exhibit (the "Registration
Statement"). As such counsel, you have requested our opinion as to the
matters described herein relating to the Securities. All capitalized terms
used but not defined herein shall have the meanings assigned to them in the
Registration Statement.
We have examined: the Company's Certificate of Incorporation and
By-Laws, in each case as amended and restated through the date hereof;
minutes of the Company's corporate proceedings through the date hereof, as
made available to us by officers of the Company; an executed copy of the
Registration Statement and all exhibits thereto in the form filed with the
Commission; and such matters of law deemed necessary by us in order to
deliver the within opinion. In the course of our examination, we have
assumed the genuineness of all signatures, the authority of all signatories
to sign on behalf of their principals, if any, the authenticity of all
documents submitted to us as original documents and the conformity to
original documents of all documents submitted to us as certified or
photostatic copies. As to certain factual matters, we have relied upon
information furnished to us by officers of the Company.
Based on the foregoing and solely in reliance thereon, it is our
opinion that:
1. The Units and the Warrants have been duly authorized and,
upon issuance against payment therefor as contemplated by the Registration
Statement, will be validly issued.
2. The Shares and the Warrant Shares have been duly authorized
and, upon issuance of the Units against payment therefor as contemplated by
the Registration Statement, the Shares will be validly issued, fully paid
and non-assessable.
3. Upon issuance of the Units as contemplated by the
Registration Statement, and assuming (a) due countersignature by the
Warrant Agent for the Warrants, (b) due execution and delivery by the
Company and the Warrant Agent of the Warrant Agreement and (c) that the
Warrant Agreement is a valid and binding obligation of the Warrant Agent,
the Warrants will constitute valid and binding obligations of the Company
enforceable in accordance with their terms, subject to (i) bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium, receivership
and similar state or federal laws affecting the rights and remedies of
creditors generally, (ii) general principles of equity whether applied in a
proceeding in equity or at law and (iii) the enforceability of any
provision therein providing for specific performance, injunctive relief or
other equitable remedies, regardless of whether such enforceability is
considered in a proceeding in equity or at law.
4. Upon issuance of the Units as contemplated by the
Registration Statement, and upon payment therefor upon exercise of the
Warrants, the Warrant Shares will be validly issued, fully paid and non-
assessable.
We hereby consent to the filing of this letter as an exhibit to
the Registration Statement and to the reference to it in the Prospectus
included therein under the caption "Legal Matters." In giving such
consent, we do not admit that we are in the category of persons whose
consent is required under Section 7 of the Act.
Very truly yours,
Kelley Drye & Warren LLP
By: /s/ M. Ridgway Barker
A Partner
EMPLOYMENT AGREEMENT
AGREEMENT (Agreement) dated as of March 15, 1996, between Medjet Inc.,
a Delaware corporation (the Employer), and Eugene I. Gordon (the Employee).
W I T N E S S E T H:
WHEREAS, Employer desires the services of Employee, and Employee
desires to provide services to Employer, each upon the terms and conditions
set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, the parties agree as follows:
1. Employment. Employer hereby employs Employee and Employee
hereby accepts employment upon the terms and conditions hereinafter set
forth.
2. Term. Unless sooner terminated in accordance with the
provisions of Paragraph 7 hereof, the term of this Agreement shall begin on
the date hereof, and shall terminate on the third anniversary date of such
date.
3. Compensation.
(a) Employer shall pay Employee a base salary at the rate of
$125,000 per year (the Base Salary), payable semi-monthly or in accordance
with Employer's customary practice from time to time, for the term of this
Agreement. The Base Salary may be increased in the sole discretion of the
Board of Directors from time to time (without the participation of
Employee).
(b) Employee shall be entitled to such bonuses and other
compensation as determined by the Employer's Board of Directors from time
to time, provided, however, that Employee shall not participate in such
determination.
4. Duties. Employee shall perform such duties and services as set
forth on Schedule 1 and such other duties and services as may be reasonably
assigned to him by Employer. Employee shall perform well and faithfully
such duties and responsibilities, wherever they may be required.
5. Expenses. Employer will reimburse Employee, in accordance with
Employer's customary practice from time to time, for all reasonable and
necessary expenses incurred by him for or on behalf of Employer in the
performance of his duties hereunder.
6. Insurance and Other Employee Benefits. Employee shall be
entitled to participate in any medical insurance coverage or other benefits
offered by Employer to its employees during the term of this Agreement.
7. Termination.
(a) This Agreement shall terminate prior to the termination date
set forth in Paragraph 2 hereof upon the following terms and conditions.
(i) If Employee dies or suffers a permanent
Disability (as hereinafter defined), this
Agreement shall terminate effective upon his
death or when his Disability is deemed to have
become permanent. If the Employee is unable to
perform his normal duties for Employer because
of Disability for a period of at least six
consecutive months, or for shorter periods
totalling more than six months during any
consecutive twelve month period during the term
of this Agreement, the Employer may deem such
Disability to have become permanent. Any such
determination of permanent Disability shall be
made by a Reputable Physician. For the
purposes of this Agreement, the term Disability
shall mean the physical or mental illness or
incapacity of Employee, such that in the
judgment of a Reputable Physician, the Employee
shall be unable to perform his duties of
employment and a Reputable Physician shall mean
a physician chosen by Employer, subject to the
consent of Employee or his legal representative
which shall not be unreasonably withheld or
delayed.
(ii) If Employer reasonably determines to remove
Employee from his duties because of Cause (as
defined below), this Agreement shall terminate
and Employee shall be removed from his
position effective on the date specified by
Employer. The term Cause shall mean any of
the following: (A) commission of a willful act
of dishonesty in the course of the Employee's
duties hereunder which significantly injures
the Employer, (B) conviction by a court of
competent jurisdiction of a crime constituting
a felony or conviction in respect of any
dishonest or fraudulent act relating to the
Employee's duties as an executive officer of
the Employer, (C) the Employee's continued,
habitual intoxication or performance under the
influence of controlled substances during
working hours, after the Employer shall have
provided written notice to the Employee and
given the Employee 30 days within which to
commence rehabilitation with respect thereto,
and the Employee shall have failed to commence
such rehabilitation, (D) frequent or extended,
and unjustifiable (not as a result of
incapacity or Disability) absenteeism
resulting in a material failure by the
Employee in the performance of his duties
hereunder and which shall not have been cured
within 90 days after the Employer shall have
advised the Employee in writing of its
intention to terminate the Employee's
employment in accordance with the provisions
of this Paragraph 7, in the event such
condition shall not have been cured, (E)
willfully engaging in any illegal act which
has the potential for material injury to the
Employer, or (F) breach of any of Executive's
fiduciary duties to the Employer.
(b) Any controversy or dispute arising out of or relating to any
termination of Employee's employment shall be settled by arbitration in
accordance with the Rules of the American Arbitration Association by one or
more arbitrators appointed in accordance with the Rules. The arbitration
shall be held in the City and State of New York unless the parties agree to
another locality. Judgment upon the award rendered may be entered in any
court having jurisdiction thereof. The cost of the arbitration shall be
borne by the parties in such proportion as the arbitrator(s) shall direct,
with such arbitrator(s) to give due consideration to the fault of the
parties.
(c) Upon any termination pursuant to this Paragraph 7, all rights
of Employee under this Agreement shall cease to be effective as of the date
of termination, Employee shall be removed from his position and, to the
extent permitted by law, Employee shall have no right to receive any
payments or benefits hereunder except for (i) the Base Salary then in
effect payable pursuant to Paragraph 3 hereof up to the date of termination
or in the case of termination pursuant to Section 7(a)(i), for the balance
of the term of this Agreement, plus (ii) reimbursement of expenses incurred
in accordance with Paragraph 5 hereof prior to the date of termination to
the extent not previously reimbursed by Employer.
8. Proprietary Information, Inventions, Non-Competition and Non-
Solicitation Agreement. Employee acknowledges that in the course of
performing his employment duties for Employer, Employee will be exposed to
confidential and trade secret information of Employer, including but not
limited to information relating to Employer's business, its research or
engineering activities, its manufacturing processes, its trade secrets, its
sources of supply, and its plans or contemplated actions, and may be
exposed to information confidential to customers of Employer. Accordingly,
Employee shall execute and be bound by Employer's Proprietary Information,
Inventions, Non-Competition and Non-Solicitation Agreement, attached hereto
as Exhibit A (the Proprietary Information Agreement).
9. Notices. Any notice required or permitted to be given under
this Agreement shall be sufficient if in writing, and if sent by courier
service or registered mail, in the case of the Employee, to his residence
address set forth at the foot of this Agreement (or such other address as
the Employee may specify in a written notice to the Employer), and in the
case of the Employer, to its principal office, with a copy to Jane E.
Jablons, Esq., Kelley Drye & Warren, 101 Park Avenue, New York, New York
10178.
10. Benefits. This Agreement shall inure to the benefit and shall
be binding upon the parties hereto and their respective successors and
assigns. The provisions of this Agreement shall survive termination of
this Agreement.
11. Entire Agreement. This Agreement, together with the
Proprietary Information Agreement, constitutes the entire agreement and
understanding of the parties with respect to the subject matter hereof. It
may not be changed orally but only by an agreement in writing signed by the
party against whom enforcement of any waiver, change, modification,
extension, or discharge is sought.
12. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
13. Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New Jersey.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
MEDJET INC.
By: /s/ Eugene I. Gordon
______________________________
Name:Eugene I. Gordon
Title:President
/s/ Eugene I. Gordon
______________________________
Eugene I. Gordon
Home Address:
1535 Coles Avenue
Mountainside, New Jersey
07092-1311
SSN:
<PAGE>
SCHEDULE 1
1. Name of Employee: Eugene I. Gordon
2. Capacity and Title: President
3. Duties: ____________________________________
____________________________________
____________________________________
MEDJET INC.
1994 STOCK OPTION PLAN
1. Purpose. The purpose of the Plan is to attract, retain and
reward persons providing services to Medjet Inc., a Delaware corporation,
and any successor corporation thereto (collectively referred to as the
"Company"), and any present or future parent and/or subsidiary corporations
of such corporation (all of which along with the Company being individually
referred to as a "Participating Company" and collectively referred to as
the "Participating Company Group"), and to motivate such persons to
contribute to the growth and profits of the Participating Company Group in
the future. For purposes of the Plan, a parent corporation and a subsidiary
corporation shall be as defined in Sections 424(e) and 424(f) of the
Internal Revenue Code of 1986, as amended (the "Code").
2. Administration.
(a) Administration by Board and/or Committee. The Plan shall
be administered by the Board of Directors of the Company (the "Board")
and/or by a duly appointed committee of the Board having such powers as
shall be specified by the Board. Any subsequent references herein to the
Board shall also mean the committee if such committee has been appointed
and, unless the powers of the committee have been specifically limited, the
committee shall have all of the powers of the Board granted herein,
including, without limitation, the power to terminate or amend the Plan at
any time, subject to the terms of the Plan and any applicable limitations
imposed by law. All questions of interpretation of the Plan or of any
options granted under the Plan (an "Option") shall be determined by the
Board, and such determinations shall be final and binding upon all persons
having an interest in the Plan and/or any Option.
(b) Options Authorized. Options may be either incentive
stock options as defined in Section 422 of the Code ("Incentive Stock
Options") or non-statutory (nonqualified) stock options.
(c) Authority of Officers. Any officer of a Participating
Company shall have the authority to act on behalf of the Company with
respect to any matter, right, obligation, or election which is the
responsibility of or which is allocated to the Company herein, provided the
officer has apparent authority with respect to such matter, right,
obligation, or election.
(d) Disinterested Administration. With respect to the
participation in the Plan of officers or directors of the Company subject
to Section 16 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Plan shall be administered by the Board in compliance
with the "disinterested administration" requirement of Rule 16b-3, as
promulgated under the Exchange Act and amended from time to time or any
successor rule or regulation ("Rule 16b-3").
Page 1 of 42
3. Eligibility.
(a) Eligible Persons. Options may be granted only to
employees (including officers) and directors of the Participating Company
Group or to individuals who are rendering services as consultants,
advisors, or other independent contractors to the Participating Company
Group. The Board shall, in its sole discretion, determine which persons
shall be granted Options (an "Optionee"). Eligible persons may be granted
more than one (1) Option.
(b) Directors Serving on Committee. If a committee of the
Board has been established to administer the Plan in compliance with the
"disinterested administration" requirement of Rule 16b-3, no member of such
committee, while a member, shall be eligible to be granted an Option.
(c) Restrictions on Option Grants. A director of a
Participating Company may only be granted a non-statutory stock option
unless the director is also an employee of the Participating Company Group.
An individual who is rendering services as a consultant, advisor, or other
independent contractor may only be granted a non-statutory stock option.
4. Shares Subject to Option. Options shall be for the purchase of
shares of the authorized but unissued common stock or treasury shares of
common stock of the Company (the "Stock"), subject to adjustment as
provided in paragraph 10 below. The maximum number of shares of Stock which
may be issued under the Plan shall be twenty-five thousand (25,000) shares.
In the event that any outstanding Option for any reason expires or is
terminated or canceled and/or shares of Stock subject to repurchase are
repurchased by the Company, the shares allocable to the unexercised portion
of such Option, or such repurchased shares, may again be subject to an
Option grant. Notwithstanding the foregoing any such shares shall be made
subject to a new Option only if the grant of such new Option and the
issuance of such shares pursuant to such new Option would not cause the
Plan or any Option granted under the Plan to contravene Rule 16b-3.
5. Time for Granting Options. All Options shall be granted, if at
all, within ten (10) years from the earlier of the date the Plan is adopted
by the Board or the date the Plan approved by the stockholders of the
Company.
6. Terms, Conditions and Form of Options. Subject to the provisions
of the Plan, the Board shall determine for each Option (which need not be
identical) the number of shares of Stock for which the Option shall be
granted, the exercise price of the Option, the timing and terms of
exercisability and vesting of the Option, the time of expiration of the
Option, the effect of the Optionee's termination of employment or service,
whether the Option is to be treated as an Incentive Stock Option or as a
non-statutory stock option, the method for satisfaction of any tax
withholding obligation arising in connection with Option, including by the
withholding or delivery of shares of stock, and all other terms and
conditions of the Option not inconsistent with the Plan. Options granted
pursuant to the Plan shall be evidenced by written agreements specifying
the number of shares of Stock covered thereby, in such form as the Board
shall from time to time establish, which agreements may incorporate all or
any of the terms of the Plan by reference and shall comply with and be
subject to the following terms and conditions:
Page 2 of 42
(a) Exercise Price. The exercise price for each Option shall
be established in the sole discretion of the Board; provided, however, that
(i) the exercise price per share for an Incentive Stock Option shall be not
less than the fair market value, as determined by the Board, of a share of
Stock on the date of the granting of the Option; and (ii) no Incentive
Stock Option granted to an Optionee who at the time the Option is granted
owns stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of a Participating Company within the
meaning of Section 422(b)(6) of the Code (a "Ten Percent Owner Optionee")
shall have an exercise price per share less than one hundred ten percent
(110%) of the fair market value, as determined by the Board, of a share of
Stock on the date of the granting of the Option. Notwithstanding the
foregoing, an Option (whether an Incentive Stock Option or a non-statutory
stock option) may be granted with an exercise price lower than the minimum
exercise price set forth above if such Option is granted pursuant to an
assumption or substitution for another option in a manner qualifying with
the provisions of Section 424(a) of the Code.
(b) Exercise Period of Options. The Board shall have the
power to set, including by amendment of an Option, the time or times within
which each Option shall be exercisable or the event or events upon the
occurrence of which all or a portion of each Option shall be exercisable
and the term of each Option; provided, however, that (i) no Option shall be
exercisable after the expiration of ten (10) years after the date such
Option is granted, and (ii) no Incentive Stock Option granted to a Ten
Percent Owner Optionee shall be exercisable after the expiration of five
(5) years after the date such Option is granted.
(c) Payment of Exercise Price.
(i) Forms of Payment Authorized. Payment of the
exercise price for the number of shares of Stock being purchased pursuant
to any Option shall be made (1) in cash, by check, or cash equivalent, (2)
by tender to the Company of shares of the Company's stock owned by the
Optionee having a fair market value, as determined by the Board (but
without regard to any restrictions on transferability applicable to such
stock by reason of federal or state securities laws or agreements with an
underwriter for the Company), not less than the exercise price, (3) by the
Optionee's recourse promissory note in a form approved by the Company, (4)
by the assignment of the proceeds of a sale of some or all of the shares
being acquired upon the exercise of the Option (including, without
limitation, through an exercise complying with the provisions of Regulation
T as promulgated from time to time by the Board of Governors of the Federal
Reserve System), or (5) by any combination thereof. The Board may at any
time or from time to time grant Options which do not permit all of the
foregoing forms of consideration to be used in payment of the exercise
price and/or which otherwise restrict one or more forms of consideration.
(ii) Tender of Company Stock. Notwithstanding the
foregoing, an Option may not be exercised by tender to the Company of
shares of the Company's stock to the extent such tender of stock would
constitute a violation of the provisions of any law, regulation and/or
agreement restricting the redemption of the Company's stock or, if in the
opinion of Company counsel, might impair the ability of purchasers of stock
from the Company from taking full advantage of the provisions of Section
1202 of the Code relating to capital gains treatment of stock issued by the
Company. Unless otherwise provided by the Board, an Option may not be
exercised by tender to the Company of shares of the Company's stock unless
such shares of the Company's stock either have been owned by the Optionee
for more than six (6) months or were not acquired, directly or indirectly,
from the Company.
Page 3 of 42
(iii) Promissory Notes. No promissory note shall be
permitted if an exercise using a promissory note would be a violation of
any law. Any permitted promissory note shall be due and payable not more
than four (4) years after the Option is exercised, but in any event upon
the termination of Optionee's employment or consulting relationship, as the
case may be, with the Company, if earlier. The Optionee shall be required
to make, from time to time, mandatory prepayments on such promissory note
in an amount equal to fifty percent (50%) of the difference between the
aggregate Option exercise price and the aggregate proceeds from the sale of
the shares of Stock. Such mandatory prepayments shall be made within ten
(10) days after the sale of shares of Stock. Interest shall be payable at
least annually and be at least equal to the minimum interest rate necessary
to avoid imputed interest pursuant to all applicable sections of the Code.
The Board shall have the authority to permit or require the Optionee to
secure any promissory note used to exercise an Option with the shares of
Stock acquired on exercise of the Option and/or with other collateral
acceptable to the Company. Unless otherwise provided by the Board, in the
event the Company at any time is subject to the regulations promulgated by
the Board of Governors of the Federal Reserve System or any other
governmental entity affecting the extension of credit in connection with
the Company's securities, any promissory note shall comply with such
applicable regulations, and the Optionee shall pay the unpaid principal and
accrued interest, if any, to the extent necessary to comply with such
applicable regulations.
(iv) Assignment of Proceeds of Sale. The Company
reserves, at any and all times, the right, in the Company's sole and
absolute discretion, to establish, decline to approve and/or terminate any
program and/or procedures for the exercise of Options by means of an
assignment of the proceeds of a sale of some or all of the shares of Stock
to be acquired upon such exercise.
7. Standard Forms of Stock Option Agreement.
(a) Incentive Stock Options. Unless otherwise provided for by
the Board at the time an Option is granted, an Option designated as an
"Incentive Stock Option" shall comply with and be subject to the terms and
conditions set forth in the form of incentive stock option agreement
attached hereto as Exhibit A and incorporated herein by reference.
(b) Non-statutory Stock Options. Unless otherwise provided
for by the Board at the time an Option is granted, an Option designated as
a "Non-statutory Stock Option" shall comply with and be subject to the
terms and conditions set forth in the forms of non-statutory stock option
agreement attached hereto as Exhibit B and incorporated herein by
reference.
(c) Standard Term for Options. Unless otherwise provided for
by the Board in the grant of an Option, any Option granted hereunder shall
be exercisable for a term of ten (10) years.
Page 4 of 42
8. Authority to Vary Terms. The Board shall have the authority from
time to time to vary the terms of either of the standard forms of Stock
Option Agreement described in paragraph 7 above either in connection with
the grant or amendment of an individual Option or in connection with the
authorization of a new standard form or forms; provided, however, that the
terms and conditions of such revised or amended standard form or forms of
stock option agreement shall be in accordance with the terms of the Plan.
Such authority shall include, but not by way of limitation, the authority
to grant Options which are not immediately exercisable.
9. Fair Market Value Limitation. To the extent that the aggregate
fair market value (determined at the time the Option is granted) of stock
with respect to which Incentive Stock Options are exercisable by an
Optionee for the first time during any calendar year (under all stock
option plans of the Company, including the Plan) exceeds One Hundred
Thousand Dollars ($100,000), such Options shall be treated as non-statutory
stock options. This paragraph shall be applied by taking Incentive Stock
Options into account in the order in which they were granted.
10. Effect of Change in Stock Subject to Plan. Appropriate
adjustments shall be made in the number and class of shares of Stock
subject to the Plan and to any outstanding Options and in the exercise
price of any outstanding Options in the event of a stock dividend, stock
split, reverse stock split, recapitalization, combination,
reclassification, or like change in the capital structure of the Company.
In the event a majority of the shares which are of the same class as
the shares that are subject to outstanding Options are exchanged for,
converted into, or otherwise become (whether or not pursuant to a Transfer
of Control (as defined below)) shares of another corporation (the "New
Shares"), the Company may unilaterally amend the outstanding Options to
provide that such Options are exercisable for New Shares. In the event of
any such amendment, the number of shares and the exercise price of the
outstanding Options shall be adjusted in a fair and equitable manner.
11. Dissolution, Sale, etc. In the event of the proposed dissolution
or liquidation of the Company, or in the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, the Options will terminate
immediately prior to the consummation of such proposed action, unless
otherwise provided by the Board. The Board may, in the exercise of its
sole discretion, in such instances declare that any Option shall terminate
as of a date fixed by the Board and give each Optionee the right to
exercise his Option as to all or any part of the Stock, including shares to
which the Option would not otherwise be exercisable.
12. Provision of Information. Each Optionee shall be given access to
information concerning the Company equivalent to that information generally
made available to the Company's common stockholders generally.
13. Options Non-Transferable. During the lifetime of the Optionee,
the Option shall be exercisable only by the Optionee. No Option shall be
assignable or transferable by the Optionee, except by will or by the laws
of descent and distribution.
Page 5 of 42
14. Termination or Amendment of Plan or Options. The Board,
including any duly appointed committee of the Board, may terminate or amend
the Plan or any Option at any time; provided, however, that without the
approval of the Company's stockholders, there shall be (a) no increase in
the total number of shares of Stock covered by the Plan (except by
operation of the provisions of paragraph 10 above), (b) no change in the
class eligible to receive Incentive Stock Options and (c) no expansion in
the class eligible to receive non-statutory stock options. In addition to the
foregoing, the approval of the Company's stockholders shall be sought for any
amendment to the Plan for which the Board deems stockholder approval necessary
in order to comply with Rule 16b-3. In any event, no amendment may adversely
affect any then outstanding Option or any unexercised portion thereof, without
the consent of the Optionee, unless such amendment is required to enable an
Option designated as an Incentive Stock Option to qualify as an Incentive
Stock Option.
IN WITNESS WHEREOF, the undersigned President of the Company certifies
that the foregoing Medjet Inc. 1994 Stock Option Plan was duly adopted by
the Board of Directors of the Company on the 30th day of September 1994.
/s/ Eugene I. Gordon
___________________________
PLAN HISTORY
September 30, 1994 Board of Directors adopts the Medjet Inc. 1994
Employee Stock Option Plan (the "Initial Plan")
with a share reserve of twenty-five thousand
shares.
May 27, 1995 Stockholders approve the Initial Plan with a share
reserve of twenty-five thousand shares.
Page 6 of 42
EXHIBIT A
STANDARD FORM OF
MEDJET INC.
INCENTIVE STOCK OPTION AGREEMENT
Page 7 of 42
THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE
OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE
EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
MEDJET INC.
INCENTIVE STOCK OPTION AGREEMENT
THIS INCENTIVE STOCK OPTION AGREEMENT (the "Option Agreement") is made
and entered into as of ______________ 199__, by and between Medjet Inc., a
Delaware corporation (the "Company"), and ____________________(the
"Optionee").
The Company granted to the Optionee an option to purchase certain
shares of common stock of the Company, in the manner and subject to the
provisions of this Option Agreement (the "Option"). If the Optionee (and
the Optionee's spouse, if married) does not execute and return this Option
Agreement to the Company within sixty (60) days of the date first written
above, the Option shall terminate and be without further force and effect.
1. Definitions:
(a) "Date of Option Grant" shall mean ______________.
(b) "Number of Option Shares" shall mean the __________
shares of common stock of the Company as adjusted from time to time
pursuant to paragraph 9 below.
(c) "Exercise Price" shall mean $____ per share as adjusted
from time to time pursuant to paragraph 9 below.
(d) "Initial Vesting Date" shall be the last day of the
calendar month in which occurs the date one (1) year after the Date of
Option Grant.
(3) Determination of "Vested Percentage":
<TABLE>
<CAPTION>
Vested Percentage
<S> <C>
Prior to Initial Vesting Date 0%
On Initial Vesting Date, provided 25%
the Optionee is continuously
employed by a Participating Company
from the Date of Option Grant until
the Initial Vesting Date
Plus
For each full month of the Optionee's 2.0834%
continuous employment by a Participating
Company from the Initial Vesting Date up
to the next 36 months
In no event shall the Vested Percentage
exceed 100%.
</TABLE>
Page 8 of 42
(f) "Option Term Date" shall mean the date ten (10) years
after the Date of Option Grant.
(g) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(h) "Company" shall mean Medjet Inc., a Delaware corporation,
and any successor corporation thereto.
(i) "Participating Company" shall mean (i) the Company and
(ii) any present or future parent and/or subsidiary corporation of the
Company while such corporation is a parent or subsidiary of the Company.
For purposes of this Option Agreement, a parent corporation and a
subsidiary corporation shall be as defined in sections 424(e) and 424(f) of
the Code.
(j) "Participating Company Group" shall mean at any point in
time all corporations collectively which are then a Participating Company.
(k) "Plan" shall mean the Medjet Inc. 1994 Stock Option Plan.
2. Status of the Option. This Option is intended to be an
incentive stock option as described in section 422 of the Code, but the
Company does not represent or warrant that this Option qualifies as such.
The Optionee should consult with the Optionee's own tax advisors regarding
the tax effects of this Option and the requirements necessary to obtain
favorable income tax treatment under section 422 of the Code, including,
but not limited to, holding period requirements.
3. Administration. All questions of interpretation concerning
this Option Agreement shall be determined by the Board of Directors of the
Company (the "Board") and/or by a duly appointed committee of the Board
having such powers as shall be specified by the Board. Any subsequent
references herein to the Board shall also mean the committee if such
committee has been appointed and, unless the powers of the committee have
been specifically limited, the committee shall have all of the powers of
the Board granted in the Plan, including, without limitation, the power to
terminate or amend the Plan at any time, subject to the terms of the Plan
and any applicable limitations imposed by law. All determinations by the
Board shall be final and binding upon all persons having an interest in the
Option. Any officer of a Participating Company shall have the authority to
act on behalf of the Company with respect to any matter, right, obligation,
or election which is the responsibility of or which is allocated to the
Company herein, provided the officer has apparent authority with respect to
such matter, right, obligation, or election.
Page 9 of 42
4. Exercise of the Option.
(a) Right to Exercise. The Option shall not be exercisable
prior to the Initial Vesting Date. At any time after the Initial Vesting
Date, the Option shall be exercisable only as to the Vested Percentage
After three (3) years from the Initial Vesting Date, this Option shall be
exercisable in full. Exercise of this Option shall be subject to the
Optionee's agreement that any shares purchased upon exercise are subject to
the Company's repurchase rights set forth in paragraph 11 and paragraph 12
below. Notwithstanding the foregoing, except as provided in paragraph 16
below, the aggregate fair market value of the stock with respect to which
the Optionee may exercise the Option for the first time during any calendar
year, together with any other incentive stock options which are exercisable
for the first time during any such year, as determined in accordance with
section 422(d) of the Code, shall not exceed One Hundred Thousand Dollars
($100,000). Such limitation on exercise described in section 422(d) of the
Code shall be referred to in this Option Agreement as the "$100,000
Exercise Limitation". Furthermore, notwithstanding the foregoing, the
Option may be exercised only in multiples of one hundred (100) shares
unless all shares subject to the Option are being exercised; provided,
however, that the foregoing restriction shall not apply so as to prevent an
exercise (i) following the Optionee's termination of employment as set
forth in paragraph 7 below or (ii) permitted by the Board pursuant to
paragraph 11 of the Plan. In addition to the foregoing, in the event that
the adoption of the Plan or any amendment of the Plan is subject to the
approval of the Company's stockholders in order for the Option to comply
with the requirements of Rule 16b-3, promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the Option shall not
be exercisable prior to such stockholder approval if the Optionee is
subject to Section 16(b) of the Exchange Act, unless the Board, in its sole
discretion, approves the exercise of the Option prior to such stockholder
approval.
(b) Method of Exercise. Exercise of the Option must be by
written notice to the Company which must state the election to exercise the
Option, the number of shares for which the Option is being exercised and
such other representations and agreements as to the Optionee's investment
intent with respect to such shares as may be required pursuant to the
provisions of this Option Agreement. The written notice must be signed by
the Optionee and must be delivered in person, by certified or registered
mail, return receipt requested, or by facsimile transmission, to the Chief
Financial Officer of the Company, or other authorized representative of the
Participating Company Group, prior to the termination of the Option as set
forth in paragraph 6 below, accompanied by (i) full payment of the exercise
price for the number of shares being purchased and (ii) an executed copy,
if required herein, of the then current forms of escrow and security
agreements referenced below.
(c) Payment of Exercise Price.
(i) Forms of Payment Authorized. Payment of the exercise
price for the number of shares for which the Option is being exercised
shall be made
Page 10 of 42
(A) in cash, by check, or cash equivalent;
(B) by tender to the Company of shares of the Company's
common stock owned by the Optionee having a fair market value, as
determined by the Board, not less than the exercise price, which either
have been owned by the Optionee for more than six (6) months or were not
acquired, directly or indirectly, from the Company;
(C) if expressly authorized by the Company at the time
of Option exercise, in its sole discretion, by the Optionee's recourse
promissory note in a form approved by the Company;
(D) by Immediate Sales Proceeds, as defined below;
(E) by any combination of the foregoing.
(ii) Tender of Company Stock. Notwithstanding the foregoing,
the Option may not be exercised by tender to the Company of shares of the
Company's common stock to the extent such tender of stock would constitute
a violation of the provisions of any law, regulation and/or agreement
restricting the redemption of the Company's common stock or, if in the
opinion of Company counsel, might impair the ability of purchasers of stock
from the Company from taking full advantage of the provisions of Section
1202 of the Code relating to capital gains treatment of stock issued by the
Company. Unless otherwise provided by the Board, an Option may not be
exercised by tender to the Company of shares of the Company's common stock
unless such shares of the Company's stock either have been owned by the
Optionee for more than six (6) months or were not acquired, directly or
indirectly, from the Company.
(iii) Promissory Note. Unless otherwise specified by the
Board at the time the Option is granted, a promissory note permitted in
accordance with clause (c)(i)(C) above shall not exceed the amount
permitted by law to be paid by a promissory note and shall be a full
recourse note in a form satisfactory to the Company, with principal payable
four (4) years after the date the Option is exercised but in any event upon
the termination of Optionee's employment with the Company, if earlier. The
Optionee shall be required to make, from time to time, mandatory
prepayments on such promissory note in an amount equal to fifty percent
(50%) of the difference between the aggregate Option exercise and the
aggregate proceeds form the sale of shares of Stock. Such mandatory
prepayments shall be made within ten (10) days after the sale of shares of
Stock. Interest on the principal balance of the promissory note shall be
payable in annual installments at the minimum interest rate necessary to
avoid imputed interest pursuant to all applicable sections of the Code.
Such recourse promissory note shall be secured by the shares of stock
acquired pursuant to the then current form of security agreement as
approved by the Company. In the event the Company at any time is subject to
the regulations promulgated by the Board of Governors of the Federal
Reserve System or any other governmental entity affecting the extension of
credit in connection with the Company's securities, any promissory note
shall comply with such applicable regulations, and the Optionee shall pay
the unpaid principal and accrued interest, if any, to the extent necessary
to comply with such applicable regulations. Except as the Company in its
sole discretion shall determine, the Optionee shall pay the unpaid
principal balance of the promissory note and any accrued interest thereon
upon termination of the Optionee's employment with the Participating
Company Group for any reason, with or without cause.
Page 11 of 42
(iv) Immediate Sales Proceeds. "Immediate Sales Proceeds"
shall mean the assignment in form acceptable to the Company of the proceeds
of a sale of some or all of the shares acquired upon the exercise of the
Option pursuant to a program and/or procedure approved by the Company
(including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System). The Company reserves, at any and
all times, the right, in the Company's sole and absolute discretion, to
decline to approve any such program and/or procedure.
(d) Tax Withholding. At the time the Option is exercised, in
whole or in part, or at any time thereafter as requested by the Company,
the Optionee hereby authorizes payroll withholding and otherwise agrees to
make adequate provision for foreign, federal and state tax withholding
obligations of the Company, if any, which arise in connection with the
Option, including, without limitation, obligations arising upon (i) the
exercise, in whole or in part, of the Option, (ii) the transfer, in whole
or in part, of any shares acquired on exercise of the Option, or (iii) the
operation of any law or regulation providing for the imputation of
interest, or (iv) the lapsing of any restriction with respect to any shares
acquired on exercise of the Option. The Optionee is cautioned that the
Option is not exercisable unless the Company's withholding obligations are
satisfied. Accordingly, the Optionee may not be able to exercise the Option
when desired even though the Option is vested and the Company shall have no
obligation to issue a certificate for such shares.
(e) Certificate Registration. Except in the event the exercise
price is paid by Immediate Sales Proceeds, the certificate or certificates
for the shares as to which the Option is exercised shall be registered in
the name of the Optionee, or, if applicable, the heirs of the Optionee.
(f) Restrictions on Grant of the Option and Issuance of Shares.
The grant of the Option and the issuance of the shares upon exercise of the
Option shall be subject to compliance with all applicable requirements of
federal, state or foreign law with respect to such securities. The Option
may not be exercised if the issuance of shares upon such exercise would
constitute a violation of any applicable federal, state or foreign
securities laws or other law or regulations or if the Company is then an
"S" corporation pursuant to Code Section 1362, if such exercise would
terminate such "S" corporation election. In addition, the Option may not
be exercised unless (i) a registration statement under the Securities Act
of 1933, as amended (the "Securities Act"), shall at the time of exercise
of the Option be in effect with respect to the shares issuable upon
exercise of the Option or (ii) in the opinion of legal counsel to the
Company, the shares issuable upon exercise of the Option may be issued in
accordance with the terms of an applicable exemption from the registration
requirements of the Securities Act. THE OPTIONEE IS CAUTIONED THAT THE
OPTION MAY NOT BE EXERCISABLE UNLESS THE FOREGOING CONDITIONS ARE
SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION
WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. Questions concerning this
restriction should be directed to the Chief Financial Officer of the
Company. As a condition to the exercise of the Option, the Company may
require the Optionee to satisfy any qualifications that may be necessary or
appropriate, to evidence compliance with any applicable law or regulation
and to make any representation or warranty with respect thereto as may be
requested by the Company.
Page 12 of 42
(g) Fractional Shares. The Company shall not be required to
issue fractional shares upon the exercise of the Option.
5. Non-Transferability of the Option; Non-Alienation of Benefits.
The Option may be exercised during the lifetime of the Optionee only by the
Optionee and may not be assigned or transferred in any manner except by
will or by the laws of descent and distribution. Following the death of the
Optionee, the Option, to the extent unexercised and exercisable by the
Optionee on the date of death, may be exercised by the Optionee's legal
representative or by any person empowered to do so under the deceased
Optionee's will or under the then applicable laws of descent and
distribution.
Except with the prior written consent of the Company, subject to the
foregoing, or as otherwise provided herein, no right or benefit under this
Option Agreement shall be subject to anticipation, alienation, sale,
assignment, pledge, encumbrance or charge, and any attempt to anticipate,
alienate, sell, assign, pledge, encumber or charge the same without such
consent, if applicable, shall be void. Except with such consent, no right
or benefit under this Option Agreement shall in any manner be liable for or
subject to the debts, contracts, liabilities or torts of the person
entitled to such benefit. Except to the extent previously approved by the
Company in writing, or as otherwise provided herein, if the Optionee should
become bankrupt or attempt to anticipate, alienate, sell, assign, pledge,
encumber or charge any right or benefit hereunder, then such right or
benefit shall cease and terminate, and in such event, the Company may hold
or apply the same or any part thereof for the benefit of the Optionee, the
Optionee's spouse, children or other dependents, or any of them, in such
manner and in such proportion as the Company may in its sole determination
deem proper.
6. Termination of the Option. The Option shall terminate and may
no longer be exercised on the first to occur of (a) the Option Term Date as
defined above, (b) the last date for exercising the Option following
termination of employment as described in paragraph 7 below, or (c)
dissolution, liquidation, sale, merger or other event contemplated by
paragraph 11 of the Plan to the extent provided by the Board pursuant to
such paragraph 11.
7. Termination of Employment.
(a) Termination Other Than by Death or Disability. Except as
otherwise provided below, if the Optionee ceases to be an employee of the
Participating Company Group for any reason, except death or disability
within the meaning of section 422(c) of the Code, the Option, to the extent
unexercised and exercisable by the Optionee on the date on which the
Optionee ceased to be an employee, may be exercised by the Optionee within
sixty (60) days (which may be extended by an additional thirty (30) days at
the Board's discretion, if the Optionee's employment is terminated without
Cause, as hereafter defined) after the date on which the Optionee's
employment terminated, but in any event no later than the Option Term Date.
Page 13 of 42
(b) Termination by Death or Disability. Except as otherwise
provided below, if the Optionee's employment with the Company is terminated
because of the death or disability of the Optionee within the meaning of
section 422(c) of the Code, the Option, to the extent unexercised and
exercisable by the Optionee on the date on which the Optionee ceased to be
an employee, may be exercised by the Optionee (or the Optionee's legal
representative) at any time prior to the expiration of twelve (12) months
from the date on which the Optionee's employment terminated, but in any
event no later than the Option Term Date. The Optionee's employment shall
be deemed to have terminated on account of death if the Optionee dies
within sixty (60) days after the Optionee's termination of employment.
(c) Limitations on Exercise After Termination. Except as
provided in this paragraph 7, the Option shall terminate and may not be
exercised after the Optionee ceases to be an employee of the Participating
Company Group. Furthermore, the Board may at any time after the Optionee's
termination of employment cancel the Option with respect to all or a
portion of the shares otherwise remaining exercisable under the Option, if
the Company finds or has found that the Optionee:
(i) Engaged in willful, deliberate or gross misconduct
toward the Company;
(ii) Has violated the terms of any confidentiality
agreement or obligation between the Optionee and the Company;
(iii) Has accepted employment with an entity which the
Company determines is in a business that could result in compromising any
confidentiality agreement or obligation between the Optionee and the
Company; or
(iv) Been terminated for Cause (as defined in paragraph
11 (b)).
(d) Employee and Termination of Employment Defined. For
purposes of this paragraph 7, the term "employee" shall mean any person,
including officers and directors, employed by a Participating Company or
performing services for a Participating Company as a director, consultant,
advisor or other independent contractor. For purposes of this paragraph 7,
the Optionee's employment shall be deemed to have terminated if the
Optionee ceases to be employed by a Participating Company (whether upon an
actual termination of employment or upon the Optionee's employer ceasing to
be a Participating Company). The Optionee's employment shall not be deemed
to have terminated merely because of a change in the capacity in which the
Optionee serves as an employee, provided that there is no interruption or
termination of the Optionee's service as an employee. (THE OPTIONEE IS
CAUTIONED THAT IF THE OPTION IS EXERCISED MORE THAN THREE (3) MONTHS AFTER
THE DATE ON WHICH THE OPTIONEE'S EMPLOYMENT (OTHER THAN AS A DIRECTOR,
CONSULTANT, ADVISOR OR OTHER INDEPENDENT CONTRACTOR) TERMINATED, THE OPTION
MAY CEASE TO BE AN INCENTIVE STOCK OPTION. THE OPTIONEE SHOULD CONSULT WITH
THE OPTIONEE'S OWN TAX ADVISORS AS TO THE TAX CONSEQUENCES OF ANY SUCH
DELAYED EXERCISE.)
Page 14 of 42
(e) Extension if Exercise Prevented by Law. Notwithstanding
the foregoing, if the exercise of the Option within the applicable time
periods set forth above is prevented by the provisions of paragraph 4(f)
above, the Option shall remain exercisable until three (3) months after the
date the Optionee is notified by the Company that the Option is
exercisable, but in any event no later than the Option Term Date. The
Company makes no representation as to the tax consequences of any such
delayed exercise. The Optionee should consult with the Optionee's own tax
advisors as to the tax consequences to the Optionee of any such delayed
exercise.
(f) Extension if Optionee Subject to Section 16(b).
Notwithstanding the foregoing, if the exercise of the Option within the
applicable time periods set forth above would subject the Optionee to suit
under Section 16(b) of the Exchange Act, the Option shall remain
exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which the Optionee would no longer be subject to such
suit, (ii) the one hundred and ninetieth (190th) day after the Optionee's
termination of employment, or (iii) the Option Term Date. The Company makes
no representation as to the tax consequences of any such delayed exercise.
The Optionee should consult with the Optionee's own tax advisors as to the
tax consequences to the Optionee of any such delayed exercise.
(g) Leave of Absence. For purposes hereof, the Optionee's
employment with the Participating Company Group shall not be deemed to
terminate if the Optionee takes any military leave, sick leave, or other
bona fide leave of absence approved by the Company of ninety (90) days or
less. In the event of a leave in excess of ninety (90) days, the Optionee's
employment shall be deemed to terminate on the ninety-first (91st) day of
the leave unless the Optionee's right to reemployment with the
Participating Company Group remains guaranteed by statute or contract.
Notwithstanding the foregoing, unless otherwise designated by the Company
(or required by law) a leave of absence shall not be treated as employment
for purposes of determining the Optionee's Vested Percentage.
8. Dissolution, Liquidation, Sale or Merger. The Optionee
acknowledges that it understands the provisions of paragraph 11 of the
Plan.
9. Effect of Change in Stock Subject to the Option. Appropriate
adjustments shall be made in the number, exercise price and class of shares
of stock subject to the Option in the event of a stock dividend, stock
split, reverse stock split, recapitalization, combination,
reclassification, or like change in the capital structure of the Company.
In the event a majority of the shares which are of the same class as the
shares that are subject to the Option are exchanged for, converted into, or
otherwise become (whether or not pursuant to an Ownership Change) shares of
another corporation (the "New Shares"), the Company may unilaterally amend
the Option to provide that the Option is exercisable for New Shares. In the
event of any such amendment, the number of shares and the exercise price
shall be adjusted in a fair and equitable manner.
Page 15 of 42
10. Rights as a Stockholder or Employee. The Optionee shall have
no rights as a stockholder with respect to any shares covered by the Option
until the date of the issuance of a certificate or certificates for the
shares for which the Option has been exercised. No adjustment shall be made
for dividends or distributions or other rights for which the record date is
prior to the date such certificate or certificates are issued, except as
provided in paragraph 9 above. Nothing in the Option shall confer upon the
Optionee any right to continue in the employ of a Participating Company or
interfere in any way with any right of the Participating Company Group to
terminate the Optionee's employment at any time.
11. Share Repurchase Option For Termination For Cause.
(a) Share Repurchase Option. In the event the Optionee's
employment with the Participating Company Group is terminated for Cause (as
defined in paragraph 11(b) below) the Company shall have the right to
repurchase any or all of the Option Shares under the terms and subject to
the conditions set forth in this paragraph 11 (the "Cause Share Repurchase
Option").
(b) Cause Defined. For purposes of this Agreement, "Cause"
shall mean the good faith determination made by a majority of the Board
that either of the following events have occurred: (i) substantial
malfeasance by the Optionee towards any Participating Company, or (ii)
substantial failure by Optionee to perform the duties of his employment and
such failure is continuing after 15 days' written notice to Optionee
thereof.
(c) Exercise of Cause Share Repurchase Option. The Company
may exercise the Cause Share Repurchase Option by written notice to the
Optionee within six (6) months after such termination of employment (or
exercise of the Option, if later). If the Company fails to give notice
within such six (6) month period, the Cause Share Repurchase Option shall
terminate unless the Company and the Optionee have extended the time for
the exercise of the Cause Share Repurchase Option.
(d) Payment for Option Shares and Return of Shares. Payment
by the Company to the Optionee shall be made in cash within thirty (30)
days after the date of the mailing of the written notice of exercise of the
Cause Share Repurchase Option. For purposes of the foregoing, cancellation
of any indebtedness of the Optionee to any Participating Company shall be
treated as payment to the Optionee in cash to the extent of the unpaid
principal and any accrued interest canceled. The purchase price per Option
Share being repurchased by the Company shall be an amount equal to the
Optionee's original cost per Option Share, as adjusted pursuant to
paragraph 9 above (the "Repurchase Price"). The Option Shares being
repurchased shall be delivered to the Company by the Optionee at the same
time as the delivery of the Repurchase Price to the Optionee.
(e) Assignment of Cause Share Repurchase Option. The Company
shall have the right to assign the Cause Share Repurchase Option at any
time, whether or not such option is then exercisable, to one (1) or more
persons as may be selected by the Company.
Page 16 of 42
(f) Ownership Change. Any and all new, substituted or
additional securities or other property to which the Optionee is entitled
by reason of his or her ownership of Option Shares shall be immediately
subject to the Cause Share Repurchase Option and included in the term
"Option Shares" for all purposes of the Cause Share Repurchase Option with
the same force and effect. While the aggregate Repurchase Price shall
remain the same after such ownership change, the Repurchase Price per
Option Share upon exercise of the Cause Share Repurchase Option following
such ownership change shall be appropriately adjusted.
12. Right of First Refusal.
(a) Right of First Refusal. Except as provided in paragraph
12(f) below, in the event the Optionee proposes to sell, pledge, or
otherwise transfer any Option Shares (the "Transfer Shares") to any person
or entity, including, without limitation, any stockholder of the
Participating Company Group, the Company shall have the right to repurchase
the Transfer Shares under the terms and subject to the conditions set forth
in this paragraph 12 (the "Right of First Refusal").
(b) Notice of Proposed Transfer. Prior to any proposed
transfer of the Transfer Shares, the Optionee shall give a written notice
(the "Transfer Notice") to the Company describing fully the proposed
transfer, including the number of Transfer Shares, the name and address of
the proposed transferee (the "Proposed Transferee") and, if the transfer is
voluntary, the proposed transfer price and containing such information
necessary to show the bona fide nature of the proposed transfer. In the
event of a bona fide gift or involuntary transfer, the proposed transfer
price shall be deemed to be the fair market value of the Transfer Shares as
determined by the Company in good faith. In the event the Optionee proposes
to transfer any Transfer Shares to more than one (1) Proposed Transferee,
the Optionee shall provide a separate Transfer Notice for the proposed
transfer to each Proposed Transferee. The Transfer Notice shall be signed
by both the Optionee and the Proposed Transferee and must constitute a
binding commitment of the Optionee and the Proposed Transferee for the
transfer of the Transfer Shares to the Proposed Transferee subject only to
the Right of First Refusal.
(c) Exercise of Right of First Refusal. The Company shall
have the right to purchase all, but not less than all, of the Transfer
Shares (except as the Company and the Optionee otherwise agree) at the
purchase price and on the terms set forth in the Transfer Notice by
delivery to the Optionee of a notice of exercise of the Right of First
Refusal within thirty (30) days after the date the Transfer Notice is
delivered to the Company. The Company's exercise or failure to exercise the
Right of First Refusal with respect to any proposed transfer described in a
Transfer Notice shall not affect the Company's right to exercise the Right
of First Refusal with respect to any proposed transfer described in any
other Transfer Notice, whether or not such other Transfer Notice is issued
by the Optionee or issued by a person other than the Optionee with respect
to a proposed transfer to the same Proposed Transferee. If the Company
exercises the Right of First Refusal, the Company and the Optionee shall
thereupon consummate the sale of the Transfer Shares to the Company on the
terms set forth in the Transfer Notice within sixty (60) days after the
date the Transfer Notice is delivered to the Company (unless a longer
period is offered by the Proposed Transferee); provided, however, that in
the event the Transfer Notice provides for the payment for the Transfer
Shares other than in cash, the Company shall have the option of paying for
the Transfer Shares by the present value cash equivalent of the
consideration described in the Transfer Notice as reasonably determined by
the Company. For purposes of the foregoing, cancellation of any
indebtedness of the Optionee to any Participating Company shall be treated
as payment to the Optionee in cash to the extent of the unpaid principal
and any accrued interest canceled.
Page 17 of 42
(d) Failure to Exercise Right of First Refusal. If the
Company fails to exercise the Right of First Refusal in full within the
period specified in paragraph 12(c) above, the Optionee may conclude a
transfer to the Proposed Transferee of the Transfer Shares on the terms and
conditions described in the Transfer Notice, provided such transfer occurs
not later than ninety (90) days following delivery to the Company of the
Transfer Notice and further provided that if the Company is then an "S"
corporation pursuant to Code Section 1362, such transfer would not
terminate such "S" corporation election or increase the total number of
shareholders of the company. The Company shall have the right to demand
further assurances from the Optionee and the Proposed Transferee (in a form
satisfactory to the Company) that the transfer of the Transfer Shares was
actually carried out on the terms and conditions described in the Transfer
Notice. No Transfer Shares shall be transferred on the books of the Company
until the Company has received such assurances, if so demanded, and has
approved the proposed transfer as bona fide. Any proposed transfer on terms
and conditions different from those described in the Transfer Notice, as
well as any subsequent proposed transfer by the Optionee, shall again be
subject to the Right of First Refusal and shall require compliance by the
Optionee with the procedure described in this paragraph 12.
(e) Transferees of Transfer Shares. All transferees of the
Transfer Shares or any interest therein, other than the Company, shall be
required as a condition of such transfer to agree in writing (in a form
satisfactory to the Company) that such transferee shall receive and hold
such Transfer Shares or interests subject to the provisions of this
paragraph 12 providing for the Right of First Refusal with respect to any
subsequent transfer. Any sale or transfer of any shares acquired upon
exercise of the Option shall be void unless the provisions of this
paragraph 12 are met.
(f) Transfers Not Subject to Right of First Refusal. The
Right of First Refusal shall not apply to a transfer of Transfer Shares to
the Optionee's ancestors, descendants, or spouse or to a trustee solely for
the benefit of the Optionee or the Optionee's ancestors, descendants, or
spouse, or to a charitable institution; provided, however, that if the
Company is then an "S" corporation pursuant to Code Section 1362, such
transfer would not terminate such "S" corporation election nor increase the
total number of shareholders of the company and further provided that such
transferee shall agree in writing (in a form satisfactory to the Company)
to take the stock subject to all the terms and conditions of this paragraph
12 providing for a Right of First Refusal with respect to any subsequent
transfer.
Page 18 of 42
(g) Assignment of Right of First Refusal. The Company shall
have the right to assign the Right of First Refusal at any time, whether or
not the Optionee has attempted a transfer, to one (1) or more persons as
may be selected by the Company.
(h) Early Termination of Right of First Refusal. The other
provisions of this paragraph 12 notwithstanding, the Right of First Refusal
shall terminate, and be of no further force and effect, upon the existence
of a public market for the class of shares subject to the Right of First
Refusal. A "public market" shall be deemed to exist if (x) such stock is
listed on a national securities exchange (as that term is used in the
Exchange Act) or (y) such stock is traded on the over-the-counter market
and prices therefor are published daily on business days in a recognized
financial journal.
13. Escrow.
(a) Establishment of Escrow. To ensure that shares subject
to the Cause Share Repurchase Option, the Right of First Refusal and/or
security for any promissory note will be available for repurchase, the
Company may require the Optionee to deposit the certificate or certificates
evidencing the shares which the Optionee purchases upon exercise of the
Option with the Company or other escrow agent designated by the Company
under the terms and conditions of escrow and security agreements approved
by the Company. If the Company does not require such deposit as a condition
of exercise of the Option, or if the Company releases the certificate or
certificates from escrow prior to the lapsing of all such restrictions
and/or security interest, the Company reserves the right at any time to
require the Optionee to so deposit the certificate or certificates in
escrow. The Company shall bear the expenses of the escrow.
(b) Delivery of Shares to Optionee. As soon as practicable
after the expiration of the Cause Share Repurchase Option and the Right of
First Refusal, and after full repayment on any promissory note secured by
the shares in escrow, the escrow agent shall deliver to the Optionee the
shares no longer subject to such restrictions and no longer security for
any promissory note.
(c) Notices and Payments. In the event the shares held in
escrow are subject to the Company's exercise of the Cause Share Repurchase
Option or the Right of First Refusal, the notices required to be given to
the Optionee shall be given to the escrow agent and any payment required to
be given to the Optionee shall be given to the escrow agent. Within thirty
(30) days after payment by the Company, the escrow agent shall deliver the
shares which the Company has purchased to the Company and shall deliver the
payment received from the Company to the Optionee.
14. Stock Dividends Subject to Option Agreement. If, from time to
time, there is any stock dividend, stock split, or other change in the
character or amount of any of the outstanding stock of the corporation the
stock of which is subject to the provisions of this Option Agreement, then
in such event any and all new, substituted or additional securities to
which the Optionee is entitled by reason of the Optionee's ownership of the
shares acquired upon exercise of the Option shall be immediately subject to
the Cause Share Repurchase Option, the Right of First Refusal, and/or any
security interest held by the Company with the same force and effect as the
shares subject to the Cause Share Repurchase Option, the Right of First
Refusal, and such security interest immediately before such event.
Page 19 of 42
15. Notice of Sales Upon Disqualifying Disposition. The Optionee
shall dispose of the shares acquired pursuant to the Option only in
accordance with the provisions of this Option Agreement. In addition, the
Optionee shall promptly notify the Chief Financial Officer of the Company
if the Optionee disposes of any of the shares acquired pursuant to the
Option within one (1) year from the date the Optionee exercises all or part
of the Option or within two (2) years of the date of grant of the Option.
Until such time as the Optionee disposes of such shares in a manner
consistent with the provisions of this Option Agreement, the Optionee shall
hold all shares acquired pursuant to the Option in the Optionee's name (and
not in the name of any nominee) for the one-year period immediately after
exercise of the Option and the two-year period immediately after grant of
the Option. At any time during the one-year or two-year periods set forth
above, the Company may place a legend or legends on any certificate or
certificates representing shares acquired pursuant to the Option requesting
the transfer agent for the Company's stock to notify the Company of any
such transfers. The obligation of the Optionee to notify the Company of any
such transfer shall continue notwithstanding that a legend has been placed
on the certificate or certificates pursuant to the preceding sentence.
16. Exception To $100,000 Exercise Limitation. Notwithstanding
any other provision of this Option Agreement, if compliance with the
$100,000 Exercise Limitation as set forth in paragraph 4(a) above will
result in the exercisability of any Vested Percentage of Option Shares
being delayed more than thirty (30) days beyond the vesting date for such
shares, the Option shall be deemed to be two (2) options. The first option
shall be for the maximum number of shares subject to the Option that can
comply with the $100,000 Exercise Limitation without causing the Option to
be unexercisable as to Vested Shares. The second option, which shall not be
treated as an incentive stock option as described in section 422(b) of the
Code, shall be for the balance of the shares subject to the Option and
shall be exercisable on the same terms and at the same time as set forth in
this Option Agreement; provided, however, that the fifth sentence of
paragraph 4(a) above shall not apply to the second option. Unless the
Optionee specifically elects to the contrary in the Optionee's written
notice of exercise, the first option shall be deemed to be exercised first
to the maximum possible extent and then the second option shall be deemed
to be exercised.
17. Legends. The Company may at any time place legends
referencing the Cause Share Repurchase Option set forth in paragraph 11
above, the Right of First Refusal set forth in paragraph 12 above, and any
applicable federal, state or foreign securities law restrictions on all
certificates representing shares of stock subject to the provisions of this
Option Agreement. The Optionee shall, at the request of the Company,
promptly present to the Company any and all certificates representing
shares acquired pursuant to the Option in the possession of the Optionee in
order to carry out the provisions of this paragraph. Unless otherwise
specified by the Company, legends placed on such certificates may include,
but shall not be limited to, the following:
Page 20 of 42
(a) "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS
MADE IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY
RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES
REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF SUCH ACT."
(b) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO A FOR CAUSE SHARE REPURCHASE OPTION IN FAVOR OF THE CORPORATION OR ITS
ASSIGNEE SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE
REGISTERED HOLDER, OR SUCH HOLDER'S PREDECESSOR IN INTEREST, A COPY OF
WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS CORPORATION."
(c) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO A RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION OR ITS
ASSIGNEE SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE
REGISTERED HOLDER, OR SUCH HOLDER'S PREDECESSOR IN INTEREST, A COPY OF
WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS CORPORATION."
(d) "THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY
THE CORPORATION TO THE REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE
STOCK OPTION AS DEFINED IN SECTION 422 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED ("ISO"). IN ORDER TO OBTAIN THE PREFERENTIAL TAX TREATMENT
AFFORDED TO ISOs, THE SHARES SHOULD NOT BE TRANSFERRED PRIOR TO TWO YEARS
AFTER GRANT OF THE ISO AND ONE YEAR AFTER EXERCISE OF THE ISO. SHOULD THE
REGISTERED HOLDER ELECT TO TRANSFER ANY OF THE SHARES PRIOR THERETO AND
FOREGO ISO TAX TREATMENT, THE TRANSFER AGENT FOR THE SHARES SHALL NOTIFY
THE CORPORATION IMMEDIATELY. THE REGISTERED HOLDER SHALL HOLD ALL SHARES
PURCHASED UNDER THE INCENTIVE STOCK OPTION IN THE REGISTERED HOLDER'S NAME
(AND NOT IN THE NAME OF ANY NOMINEE) PRIOR TO THIS DATE OR UNTIL
TRANSFERRED AS DESCRIBED ABOVE."
18. Initial Public Offering. The Optionee hereby agrees that in
the event of an initial public offering of stock made by the Company
pursuant to an effective registration statement filed under the Securities
Act, the Optionee shall not offer, sell, contract to sell, pledge,
hypothecate, grant any option to purchase or make any short sale of, or
otherwise dispose of any shares of stock of the Company or any rights to
acquire stock of the Company for such period of time from and after the
effective date of such registration statement as may be established by the
underwriter for such initial public offering; provided, however, that such
period of time shall not exceed two hundred seventy (270) days from the
effective date of the registration statement to be filed in connection with
such initial public offering. The foregoing limitation shall not apply to
shares registered in the initial public offering under the Securities Act.
The Optionee shall be subject to this paragraph provided and only if the
officers and directors of the Company are also subject to similar
arrangements.
Page 21 of 42
19. Binding Effect. This Option Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
heirs, executors, administrators, successors and assigns.
20. Termination or Amendment. The Board, including any duly
appointed committee of the Board, may terminate or amend the Plan and/or
the Option at any time; provided, however, that no such termination or
amendment may adversely affect the Option or any unexercised portion hereof
without the consent of the Optionee unless such amendment is required to
enable the Option to qualify as an Incentive Stock Option.
21. Integrated Agreement. The Option Agreement, together with the
Plan, constitutes the entire understanding and agreement of the Optionee
and the Participating Company Group with respect tot he subject matter
contained herein, and there are no agreements, understandings,
restrictions, representations, or warranties among the Optionee and the
Company other than those as set forth or provided for herein. To the
extent contemplated herein, the provisions of this Option Agreement shall
survive any exercise of the Option and shall remain in full force and
effect.
22. Applicable Law. This Option Agreement shall be governed by
the laws of the State of New Jersey as such laws are applied to agreements
between New Jersey residents entered into and to be performed entirely
within the State of New Jersey.
MEDJET INC.
By: ____________________________________
Title: _________________________________
Page 22 of 42
The Optionee represents that the Optionee is familiar with the terms
and provisions of this Option Agreement, including the Cause Share
Repurchase Option set forth in paragraph 11 and the Right of First Refusal
set forth in paragraph 12 and hereby accepts the Option subject to all of
the terms and provisions thereof. The Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board
upon any questions arising under this Option Agreement. The undersigned
acknowledges receipt of a copy of the Plan.
OPTIONEE
Date: ___________________________ _____________________________
The undersigned, being the spouse of the above-named Optionee, does
hereby acknowledge that the undersigned has read and is familiar with the
provisions of the above Option Agreement, and the undersigned hereby agrees
thereto and joins therein to the extent, if any, that the agreement and
joinder of the undersigned may be necessary.
OPTIONEE
Date: ___________________________ _____________________________
Page 23 of 42
EXHIBIT B
STANDARD FORM OF
MEDJET INC.
NON-STATUTORY STOCK OPTION AGREEMENT
Page 24 of 42
THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT
AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933.
MEDJET INC.
NON-STATUTORY STOCK OPTION AGREEMENT
THIS NON-STATUTORY STOCK OPTION AGREEMENT (the "Option
Agreement") is made and entered into as of ________________, 199__, by and
between Medjet Inc., a Delaware corporation (the "Company"), and
_________________________________ (the "Optionee").
The Company granted to the Optionee an option to purchase certain
shares of common stock of the Company, in the manner and subject to the
provisions of this Option Agreement (the "Option"). If the Optionee (and
the Optionee's spouse, if married) does not execute and return this Option
Agreement to the Company within sixty (60) days of the date first written
above, the Option shall terminate and be without further force and effect.
1. Definitions:
(a) "Date of Option Grant" shall mean _______________.
(b) "Number of Option Shares" shall mean _____________
shares of common stock of the Company as adjusted from time to time
pursuant to paragraph 9 below.
(c) "Exercise Price" shall mean $____________ per share as
adjusted from time to time pursuant to paragraph 9 below.
(d) "Initial Vesting Date" shall be the last day of the
calendar month in which occurs the date one (1) year after (check one):
______ the Date of Option Grant.
______ ________________________ (specify other date).
Page 25 of 42
(e) Determination of "Vested Percentage":
<TABLE>
<CAPTION>
Vested Percentage
<S> <C>
Prior to Initial Vesting Date 0%
On Initial Vesting Date, provided
the Optionee is continuously
employed by a Participating /Company
from the Date of Option Grant until
the Initial Vesting Date 25%
Plus
For each full month of the Optionee's
continuous employment by a Participating
Company from the Initial Vesting Date up
to the next 36 months 2.0834%
In no event shall the Vested Percentage
exceed 100%.
</TABLE>
(f) "Option Term Date" shall mean the date ten (10) years
after the Date of Option Grant.
(g) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(h) "Company" shall mean Medjet Inc., a Delaware
corporation, and any successor corporation thereto.
(i) "Participating Company" shall mean (i) the Company and
(ii) any present or future parent and/or subsidiary corporation of the
Company while such corporation is a parent or subsidiary of the Company.
For purposes of this Option Agreement, a parent corporation and a
subsidiary corporation shall be as defined in sections 424(e) and 424(f) of
the Code.
(j) "Participating Company Group" shall mean at any point
in time all corporations collectively which are then a Participating
Company.
(k) "Plan" shall mean the Medjet Inc. 1994 Stock Option
Plan.
2. Status of the Option. This Option is intended to be a non-
statutory stock option and shall not be treated as an incentive stock
option as described in section 422 of the Code.
Page 26 of 42
3. Administration. All questions of interpretation concerning
this Option Agreement shall be determined by the Board of Directors of the
Company (the "Board") and/or by a duly appointed committee of the Board
having such powers as shall be specified by the Board. Any subsequent
references herein to the Board shall also mean the committee if such
committee has been appointed and, unless the powers of the committee have
been specifically limited, the committee shall have all of the powers of
the Board granted in the Plan, including, without limitation, the power to
terminate or amend the Plan at any time, subject to the terms of the Plan
and any applicable limitations imposed by law. All determinations by the
Board shall be final and binding upon all persons having an interest in the
Option. Any officer of a Participating Company shall have the authority to
act on behalf of the Company with respect to any matter, right, obligation,
or election which is the responsibility of or which is allocated to the
Company herein, provided the officer has apparent authority with respect to
such matter, right, obligation, or election.
4. Exercise of the Option.
(a) Right to Exercise. The Option shall not be immediately
exercisable prior to the Initial Vesting Date. At any time the after the
Initial Vesting Date, this Option shall be exercisable only as to the
Vested Percentage. After three (3) years from the Initial Vesting Date,
this Option shall be exercisable in full. Exercise of this Option shall be
subject to the Optionee's agreement that any shares purchased upon exercise
are subject to the Company's repurchase rights set forth in paragraph 11
and paragraph 12 below. Notwithstanding the foregoing, the Option may be
exercised only in multiples of one hundred (100) shares unless all shares
subject to the Option are being exercised; provided, however, that the
foregoing restriction shall not apply so as to prevent an exercise (i)
following the Optionee's termination of employment as set forth in
paragraph 7 below or (ii) permitted by the Board pursuant to paragraph 11
of the Plan. In addition to the foregoing, in the event that the adoption
of the Plan or any amendment of the Plan is subject to the approval of the
Company's stockholders in order for the Option to comply with the
requirements of Rule 16b-3, promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), the Option shall not be
exercisable prior to such stockholder approval if the Optionee is subject
to Section 16(b) of the Exchange Act, unless the Board, in its sole
discretion, approves the exercise of the Option prior to such stockholder
approval.
(b) Method of Exercise. Exercise of the Option must be by
written notice to the Company which must state the election to exercise the
Option, the number of shares for which the Option is being exercised and
such other representations and agreements as to the Optionee's investment
intent with respect to such shares as may be required pursuant to the
provisions of this Option Agreement. The written notice must be signed by
the Optionee and must be delivered in person, by certified or registered
mail, return receipt requested, or by facsimile transmission, to the Chief
Financial Officer of the Company, or other authorized representative of the
Participating Company Group, prior to the termination of the Option as set
forth in paragraph 6 below, accompanied by (i) full payment of the exercise
price for the number of shares being purchased and (ii) an executed copy,
if required herein, of the then current forms of escrow and security
agreements referenced below.
(c) Payment of Exercise Price.
(i) Forms of Payment Authorized. Payment of the
exercise price for the number of shares for which the Option is being
exercised shall be made
(A) in cash, by check, or cash equivalent;
Page 27 of 42
(B) by tender to the Company of shares of the
Company's common stock owned by the Optionee having a fair market value, as
determined by the Board, not less than the exercise price, which either
have been owned by the Optionee for more than six (6) months or were not
acquired, directly or indirectly, from the Company;
(C) if expressly authorized by the Company at the
time of Option exercise, in its sole discretion, by the Optionee's recourse
promissory note in a form approved by the Company;
(D) by Immediate Sales Proceeds, as defined
below;
(E) by any combination of the foregoing.
(ii) Tender of Company Stock. Notwithstanding the
foregoing, the Option may not be exercised by tender to the Company of
shares of the Company's common stock to the extent such tender of stock
would constitute a violation of the provisions of any law, regulation
and/or agreement restricting the redemption of the Company's common stock
or, if in the opinion of Company counsel, might impair the ability of
purchasers of stock from the Company from taking full advantage of the
provisions of Section 1202 of the Code relating to capital gains treatment
of stock issued by the Company. Unless otherwise provided by the Board, an
Option may not be exercised by tender to the Company of shares of the
Company's common stock unless such shares of the Company's stock either
have been owned by the Optionee for more than six (6) months or were not
acquired, directly or indirectly, from the Company.
(iii) Promissory Note. Unless otherwise specified by
the Board at the time the Option is granted, a promissory note permitted in
accordance with clause (c)(i)(C) above shall not exceed the amount
permitted by law to be paid by a promissory note and shall be a full
recourse note in a form satisfactory to the Company, with principal payable
four (4) years after the date the Option is exercised but in any event upon
the termination of Optionee's employment or consulting relationship with
the Company, if earlier. The Optionee shall be required to make, from time
to time, mandatory prepayments on such promissory note in an amount equal
to fifty percent (50%) of the difference between the aggregate Option
exercise price and the aggregate proceeds from the sale of shares of Stock.
Such mandatory prepayments shall be made within ten (10) days after the
sale of shares of Stock. Interest on the principal balance of the
promissory note shall be payable in annual installments at the minimum
interest rate necessary to avoid imputed interest pursuant to all
applicable sections of the Code. Such recourse promissory note shall be
secured by the shares of stock acquired pursuant to the then current form
of security agreement as approved by the Company. In the event the Company
at any time is subject to the regulations promulgated by the Board of
Governors of the Federal Reserve System or any other governmental entity
affecting the extension of credit in connection with the Company's
securities, any promissory note shall comply with such applicable
regulations, and the Optionee shall pay the unpaid principal and accrued
interest, if any, to the extent necessary to comply with such applicable
regulations. Except as the Company in its sole discretion shall determine,
the Optionee shall pay the unpaid principal balance of the promissory note
and any accrued interest thereon upon termination of the Optionee's
employment with the Participating Company Group for any reason, with or
without cause.
Page 28 of 42
(iv) Immediate Sales Proceeds. "Immediate Sales
Proceeds" shall mean the assignment in form acceptable to the Company of
the proceeds of a sale of some or all of the shares acquired upon the
exercise of the Option pursuant to a program and/or procedure approved by
the Company (including, without limitation, through an exercise complying
with the provisions of Regulation T as promulgated from time to time by the
Board of Governors of the Federal Reserve System). The Company reserves, at
any and all times, the right, in the Company's sole and absolute
discretion, to decline to approve any such program and/or procedure.
(d) Tax Withholding. At the time the Option is exercised,
in whole or in part, or at any time thereafter as requested by the Company,
the Optionee hereby authorizes payroll withholding and otherwise agrees to
make adequate provision for foreign, federal and state tax withholding
obligations of the Company, if any, which arise in connection with the
Option, including, without limitation, obligations arising upon (i) the
exercise, in whole or in part, of the Option, (ii) the transfer, in whole
or in part, of any shares acquired on exercise of the Option, or (iii) the
operation of any law or regulation providing for the imputation of
interest, or (iv) the lapsing of any restriction with respect to any shares
acquired on exercise of the Option. The Optionee is cautioned that the
Option is not exercisable unless the Company's withholding obligations are
satisfied. Accordingly, the Optionee may not be able to exercise the Option
when desired even though the Option is vested and the Company shall have no
obligation to issue a certificate for such shares.
(e) Certificate Registration. Except in the event the
exercise price is paid by Immediate Sales Proceeds, the certificate or
certificates for the shares as to which the Option is exercised shall be
registered in the name of the Optionee, or, if applicable, the heirs of the
Optionee.
(f) Restrictions on Grant of the Option and Issuance of
Shares. The grant of the Option and the issuance of the shares upon
exercise of the Option shall be subject to compliance with all applicable
requirements of federal, state or foreign law with respect to such
securities. The Option may not be exercised if the issuance of shares upon
such exercise would constitute a violation of any applicable federal, state
or foreign securities laws or other law or regulations or if the Company is
then an "S" corporation pursuant to Code Section 1302, if such exercise
would terminate such "S" corporation election. In addition, the Option may
not be exercised unless (i) a registration statement under the Securities
Act of 1933, as amended (the "Securities Act"), shall at the time of
exercise of the Option be in effect with respect to the shares issuable
upon exercise of the Option or (ii) in the opinion of legal counsel to the
Company, the shares issuable upon exercise of the Option may be issued in
accordance with the terms of an applicable exemption from the registration
requirements of the Securities Act. THE OPTIONEE IS CAUTIONED THAT THE
OPTION MAY NOT BE EXERCISABLE UNLESS THE FOREGOING CONDITIONS ARE
SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION
WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. Questions concerning this
restriction should be directed to the Chief Financial Officer of the
Company. As a condition to the exercise of the Option, the Company may
require the Optionee to satisfy any qualifications that may be necessary or
appropriate, to evidence compliance with any applicable law or regulation
and to make any representation or warranty with respect thereto as may be
requested by the Company.
Page 29 of 42
(g) Fractional Shares. The Company shall not be required
to issue fractional shares upon the exercise of the Option.
5. Non-Transferability of the Option; Non-Alienation of
Benefits. The Option may be exercised during the lifetime of the Optionee
only by the Optionee and may not be assigned or transferred in any manner
except by will or by the laws of descent and distribution. Following the
death of the Optionee, the Option, to the extent unexercised and
exercisable by the Optionee on the date of death, may be exercised by the
Optionee's legal representative or by any person empowered to do so under
the deceased Optionee's will or under the then applicable laws of descent
and distribution.
Except with the prior written consent of the Company, subject to
the foregoing, or as otherwise provided herein, no right or benefit under
this Option Agreement shall be subject to anticipation, alienation, sale,
assignment, pledge, encumbrance or charge, and any attempt to anticipate,
alienate, sell, assign, pledge, encumber or charge the same without such
consent, if applicable, shall be void. Except with such consent, no right
or benefit under this Option Agreement shall in any manner be liable for or
subject to the debts, contracts, liabilities or torts of the person
entitled to such benefit. Except to the extent previously approved by the
Company in writing, or as otherwise provided herein, if the Optionee should
become bankrupt or attempt to anticipate, alienate, sell, assign, pledge,
encumber or charge any right or benefit hereunder, then such right or
benefit shall cease and terminate, and in such event, the Company may hold
or apply the same or any part thereof for the benefit of the Optionee, the
Optionee's spouse, children or other dependents, or any of them, in such
manner and in such proportion as the Company may in its sole determination
deem proper.
6. Termination of the Option. The Option shall terminate and
may no longer be exercised on the first to occur of (a) the Option Term
Date as defined above, (b) the last date for exercising the Option
following termination of employment as described in paragraph 7 below, or
(c) dissolution, liquidation, sale, merger or other event contemplated by
paragraph 11 of the Plan to the extent provided by the Board pursuant to
such paragraph 11.
Page 30 of 42
7. Termination of Employment.
(a) Termination Other Than by Death or Disability. Except
as otherwise provided below, if the Optionee ceases to be an employee of
the Participating Company Group for any reason, except death or disability
within the meaning of section 422(c) of the Code, the Option, to the extent
unexercised and exercisable by the Optionee on the date on which the
Optionee ceased to be an employee, may be exercised by the Optionee within
sixty (60) days (which may be extended by an additional thirty (30) days at
the Board's discretion, if the Optionee's employment or consulting
relationship with a Participating Company is terminated without Cause, as
hereinafter defined) after the date on which the Optionee's employment
terminated, but in any event no later than the Option Term Date.
(b) Termination by Death or Disability. Except as
otherwise provided below, if the Optionee's employment with the Company is
terminated because of the death or disability of the Optionee within the
meaning of section 422(c) of the Code, the Option, to the extent
unexercised and exercisable by the Optionee on the date on which the
Optionee ceased to be an employee, may be exercised by the Optionee (or the
Optionee's legal representative) at any time prior to the expiration of
twelve (12) months from the date on which the Optionee's employment
terminated, but in any event no later than the Option Term Date. The
Optionee's employment shall be deemed to have terminated on account of
death if the Optionee dies within sixty (60) days after the Optionee's
termination of employment.
(c) Limitations on Exercise After Termination. Except as
provided in this paragraph 7, the Option shall terminate and may not be
exercised after the Optionee ceases to be an employee of the Participating
Company Group. Furthermore, the Board may at any time after the Optionee's
termination of employment cancel the Option with respect to all or a
portion of the shares otherwise remaining exercisable under the Option, if
the Company finds or has found that the Optionee:
(i) Engaged in willful, deliberate or gross
misconduct toward the Company;
(ii) Has violated the terms of any confidentiality
agreement or obligation between the Optionee and the Company;
(iii) Has accepted employment with an entity which the
Company determines is in a business that could result in compromising any
confidentiality agreement or obligation between the Optionee and the
Company; or
(iv) been terminated for Cause (as defined in
paragraph 11(b)).
(d) Employee and Termination of Employment Defined. For
purposes of this Option, the term "employee" shall mean any person,
including officers and directors, employed by a Participating Company or
performing services for a Participating Company as a director, consultant,
advisor or other independent contractor. For purposes of this Option, the
Optionee's employment shall be deemed to have terminated if the Optionee
ceases to be employed (whether as an employee, consultant, advisor or
independent contractor) by a Participating Company (whether upon an actual
termination of employment or upon the Optionee's employer ceasing to be a
Participating Company). The Optionee's employment shall not be deemed to
have terminated merely because of a change in the capacity in which the
Optionee serves as an employee, provided that there is no interruption or
termination of the Optionee's service as an employee.
Page 31 of 42
(e) Extension if Exercise Prevented by Law.
Notwithstanding the foregoing, if the exercise of the Option within the
applicable time periods set forth above is prevented by the provisions of
paragraph 4(f) above, the Option shall remain exercisable until three (3)
months after the date the Optionee is notified by the Company that the
Option is exercisable, but in any event no later than the Option Term Date.
(f) Extension if Optionee Subject to Section 16(b).
Notwithstanding the foregoing, if the exercise of the Option within the
applicable time periods set forth above would subject the Optionee to suit
under Section 16(b) of the Exchange Act, the Option shall remain
exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which the Optionee would no longer be subject to such
suit, (ii) the one hundred and ninetieth (190th) day after the Optionee's
termination of employment, or (iii) the Option Term Date.
(g) Leave of Absence. For purposes hereof, the Optionee's
employment with the Participating Company Group shall not be deemed to
terminate if the Optionee takes any military leave, sick leave, or other
bona fide leave of absence approved by the Company of ninety (90) days or
less. In the event of a leave in excess of ninety (90) days, the Optionee's
employment shall be deemed to terminate on the ninety-first (91st) day of
the leave unless the Optionee's right to reemployment with the
Participating Company Group remains guaranteed by statute or contract.
Notwithstanding the foregoing, unless otherwise designated by the Company
(or required by law) a leave of absence shall not be treated as employment
for purposes of determining the Optionee's Vested Percentage.
8. Dissolution, Liquidation, Sale or Merger. The Optionee
acknowledges that it understands the provisions of paragraph 11 of the
Plan.
9. Effect of Change in Stock Subject to the Option.
Appropriate adjustments shall be made in the number, exercise price and
class of shares of stock subject to the Option in the event of a stock
dividend, stock split, reverse stock split, recapitalization, combination,
reclassification, or like change in the capital structure of the Company.
In the event a majority of the shares which are of the same class as the
shares that are subject to the Option are exchanged for, converted into, or
otherwise become (whether or not pursuant to an Ownership Change) shares of
another corporation (the "New Shares"), the Company may unilaterally amend
the Option to provide that the Option is exercisable for New Shares. In the
event of any such amendment, the number of shares and the exercise price
shall be adjusted in a fair and equitable manner.
Page 32 of 42
10. Rights as a Stockholder or Employee. The Optionee shall
have no rights as a stockholder with respect to any shares covered by the
Option until the date of the issuance of a certificate or certificates for
the shares for which the Option has been exercised. No adjustment shall be
made for dividends or distributions or other rights for which the record
date is prior to the date such certificate or certificates are issued,
except as provided in paragraph 9 above. Nothing in the Option shall confer
upon the Optionee any right to continue in the employ of a Participating
Company or interfere in any way with any right of the Participating Company
Group to terminate the Optionee's employment at any time.
11. Share Repurchase Option For Termination For Cause.
(a) Share Repurchase Option. In the event the Optionee's
employment with the Participating Company Group is terminated for Cause (as
defined in paragraph 11(b) below), the Company shall have the right to
repurchase the Option Shares under the terms and subject to the conditions
set forth in this paragraph 11 (the "Cause Share Repurchase Option").
(b) Cause Defined. For purposes of this Agreement, "Cause"
shall mean the good faith determination made by a majority of the Board
that either of the following events have occurred: (i) substantial
malfeasance of the Optionee towards any Participating Company or (ii)
substantial failure by Optionee to perform the duties of his employment or
consulting or director relationship with a Participating Company and such
failure is continuing after 15 days written notice to Optionee thereof.
(c) Exercise of Cause Share Repurchase Option. The Company
may exercise the Cause Share Repurchase Option by written notice to the
Optionee within six (6) months after such termination of employment or
consulting relationship (or exercise of the Option, if later). If the
Company fails to give notice within such six (6) month period, the Cause
Share Repurchase Option shall terminate unless the Company and the Optionee
have extended the time for the exercise of the Cause Share Repurchase
Option.
(d) Payment for Option Shares and Return of Option Shares.
Payment by the Company to the Optionee shall be made in cash within thirty
(30) days after the date of the mailing of the written notice of exercise
of the Cause Share Repurchase Option. For purposes of the foregoing,
cancellation of any indebtedness of the Optionee to any Participating
Company shall be treated as payment to the Optionee in cash to the extent
of the unpaid principal and any accrued interest canceled. The purchase
price per Option Share being repurchased by the Company shall be an amount
equal to the Optionee's original cost per Option Share, as adjusted
pursuant to paragraph 9 above (the "Repurchase Price"). The Option Shares
being repurchased shall be delivered to the Company by the Optionee at the
same time as the delivery of the Repurchase Price to the Optionee.
Page 33 of 42
(e) Assignment of Cause Share Repurchase Option. The
Company shall have the right to assign the Cause Share Repurchase Option at
any time, whether or not such option is then exercisable, to one (1) or
more persons as may be selected by the Company.
(f) Ownership Change. Any and all new, substituted or
additional securities or other property to which the Optionee is entitled
by reason of his or her ownership of Option Shares shall be immediately
subject to the Cause Share Repurchase Option and included in the term
"Option Shares" for all purposes of the Cause Share Repurchase Option with
the same force and effect. While the aggregate Repurchase Price shall
remain the same after such ownership change, the Repurchase Price per
Option Share upon exercise of the Cause Share Repurchase Option following
such ownership change shall be appropriately adjusted.
12. Right of First Refusal.
(a) Right of First Refusal. Except as provided in
paragraph 12(f) below, in the event the Optionee proposes to sell, pledge,
or otherwise transfer any Option Shares (the "Transfer Shares") to any
person or entity, including, without limitation, any stockholder of the
Participating Company Group, the Company shall have the right to repurchase
the Transfer Shares under the terms and subject to the conditions set forth
in this paragraph 12 (the "Right of First Refusal").
(b) Notice of Proposed Transfer. Prior to any proposed
transfer of the Transfer Shares, the Optionee shall give a written notice
(the "Transfer Notice") to the Company describing fully the proposed
transfer, including the number of Transfer Shares, the name and address of
the proposed transferee (the "Proposed Transferee") and, if the transfer is
voluntary, the proposed transfer price and containing such information
necessary to show the bona fide nature of the proposed transfer. In the
event of a bona fide gift or involuntary transfer, the proposed transfer
price shall be deemed to be the fair market value of the Transfer Shares as
determined by the Company in good faith. In the event the Optionee proposes
to transfer any Transfer Shares to more than one (1) Proposed Transferee,
the Optionee shall provide a separate Transfer Notice for the proposed
transfer to each Proposed Transferee. The Transfer Notice shall be signed
by both the Optionee and the Proposed Transferee and must constitute a
binding commitment of the Optionee and the Proposed Transferee for the
transfer of the Transfer Shares to the Proposed Transferee subject only to
the Right of First Refusal.
(c) Exercise of Right of First Refusal. The Company shall
have the right to purchase all, but not less than all, of the Transfer
Shares (except as the Company and the Optionee otherwise agree) at the
purchase price and on the terms set forth in the Transfer Notice by
delivery to the Optionee of a notice of exercise of the Right of First
Refusal within thirty (30) days after the date the Transfer Notice is
delivered to the Company. The Company's exercise or failure to exercise the
Right of First Refusal with respect to any proposed transfer described in a
Transfer Notice shall not affect the Company's right to exercise the Right
of First Refusal with respect to any proposed transfer described in any
other Transfer Notice, whether or not such other Transfer Notice is issued
by the Optionee or issued by a person other than the Optionee with respect
to a proposed transfer to the same Proposed Transferee. If the Company
exercises the Right of First Refusal, the Company and the Optionee shall
thereupon consummate the sale of the Transfer Shares to the Company on the
terms set forth in the Transfer Notice within sixty (60) days after the
date the Transfer Notice is delivered to the Company (unless a longer
period is offered by the Proposed Transferee); provided, however, that in
the event the Transfer Notice provides for the payment for the Transfer
Shares other than in cash, the Company shall have the option of paying for
the Transfer Shares by the present value cash equivalent of the
consideration described in the Transfer Notice as reasonably determined by
the Company. For purposes of the foregoing, cancellation of any
indebtedness of the Optionee to any Participating Company shall be treated
as payment to the Optionee in cash the extent of the unpaid principal and
any accrued interest canceled.
Page 34 of 42
(d) Failure to Exercise Right of First Refusal. If the
Company fails to exercise the Right of First Refusal in full within the
period specified in paragraph 12(c) above, the Optionee may conclude a
transfer to the Proposed Transferee of the Transfer Shares on the terms and
conditions described in the Transfer Notice, provided such transfer occurs
not later than ninety (90) days following delivery to the Company of the
Transfer Notice and further provided that if the Company is then an "S"
corporation pursuant to Code Section 1362, such transfer would not
terminate such "S" corporation election nor increase the total number of
shareholders of the Company. The Company shall have the right to demand
further assurances from the Optionee and the Proposed Transferee (in a form
satisfactory to the Company) that the transfer of the Transfer Shares was
actually carried out on the terms and conditions described in the Transfer
Notice. No Transfer Shares shall be transferred on the books of the Company
until the Company has received such assurances, if so demanded, and has
approved the proposed transfer as bona fide. Any proposed transfer on terms
and conditions different from those described in the Transfer Notice, as
well as any subsequent proposed transfer by the Optionee, shall again be
subject to the Right of First Refusal and shall require compliance by the
Optionee with the procedure described in this paragraph 12.
(e) Transferees of Transfer Shares. All transferees of the
Transfer Shares or any interest therein, other than the Company, shall be
required as a condition of such transfer to agree in writing (in a form
satisfactory to the Company) that such transferee shall receive and hold
such Transfer Shares or interests subject to the provisions of this
paragraph 12 providing for the Right of First Refusal with respect to any
subsequent transfer. Any sale or transfer of any shares acquired upon
exercise of the Option shall be void unless the provisions of this
paragraph 12 are met.
(f) Transfers Not Subject to Right of First Refusal. The
Right of First Refusal shall not apply to a transfer of Transfer Shares to
the Optionee's ancestors, descendants, or spouse or to a trustee solely for
the benefit of the Optionee or the Optionee's ancestors, descendants, or
spouse, or to a charitable institution; provided, however, that if the
Company is then an "S" corporation pursuant to the Code Section 1362, such
transfer would not terminate such "S" corporation election nor increase the
total number of shareholders in the Company and further provided that such
transferee shall agree in writing (in a form satisfactory to the Company)
to take the stock subject to all the terms and conditions of this paragraph
12 providing for a Right of First Refusal with respect to any subsequent
transfer.
Page 35 of 42
(g) Assignment of Right of First Refusal. The Company
shall have the right to assign the Right of First Refusal at any time,
whether or not the Optionee has attempted a transfer, to one (1) or more
persons as may be selected by the Company.
(h) Early Termination of Right of First Refusal. The other
provisions of this paragraph 12 notwithstanding, the Right of First Refusal
shall terminate, and be of no further force and effect, upon the existence
of a public market for the class of shares subject to the Right of First
Refusal. A "public market" shall be deemed to exist if (x) such stock is
listed on a national securities exchange (as that term is used in the
Exchange Act) or (y) such stock is traded on the over-the-counter market
and prices therefor are published daily on business days in a recognized
financial journal.
13. Escrow.
(a) Establishment of Escrow. To ensure that shares subject
to the Cause Share Repurchase Option, the Right of First Refusal and/or
security for any promissory note will be available for repurchase, the
Company may require the Optionee to deposit the certificate or certificates
evidencing the shares which the Optionee purchases upon exercise of the
Option with the Company or other escrow agent designated by the Company
under the terms and conditions of escrow and security agreements approved
by the Company. If the Company does not require such deposit as a condition
of exercise of the Option, or if the Company releases the certificate or
certificates from escrow prior to the lapsing of all such restrictions
and/or security interest, the Company reserves the right at any time to
require the Optionee to so deposit the certificate or certificates in
escrow. The Company shall bear the expenses of the escrow.
(b) Delivery of Shares to Optionee. As soon as practicable
after the expiration of the Cause Share Repurchase Option and the Right of
First Refusal, and after full repayment on any promissory note secured by
the shares in escrow, the escrow agent shall deliver to the Optionee the
shares no longer subject to such restrictions and no longer security for
any promissory note.
(c) Notices and Payments. In the event the shares held in
escrow are subject to the Company's exercise of the Cause Share Repurchase
Option or the Right of First Refusal, the notices required to be given to
the Optionee shall be given to the escrow agent and any payment required to
be given to the Optionee shall be given to the escrow agent. Within thirty
(30) days after payment by the Company, the escrow agent shall deliver the
shares which the Company has purchased to the Company and shall deliver the
payment received from the Company to the Optionee.
14. Stock Dividends Subject to Option Agreement. If, from time
to time, there is any stock dividend, stock split, or other change in the
character or amount of any of the outstanding stock of the corporation the
stock of which is subject to the provisions of this Option Agreement, then
in such event any and all new, substituted or additional securities to
which the Optionee is entitled by reason of the Optionee's ownership of the
shares acquired upon exercise of the Option shall be immediately subject to
the Cause Share Repurchase Option, the Right of First Refusal, and/or any
security interest held by the Company with the same force and effect as the
shares subject to the Cause Share Repurchase Option, the Right of First
Refusal, and such security interest immediately before such event.
Page 36 of 42
15. Legends. The Company may at any time place legends
referencing the Cause Share Repurchase Option set forth in paragraph 11
above, the Right of First Refusal set forth in paragraph 12 above, and any
applicable federal, state or foreign securities law restrictions on all
certificates representing shares of stock subject to the provisions of this
Option Agreement. The Optionee shall, at the request of the Company,
promptly present to the Company any and all certificates representing
shares acquired pursuant to the Option in the possession of the Optionee in
order to carry out the provisions of this paragraph. Unless otherwise
specified by the Company, legends placed on such certificates may include,
but shall not be limited to, the following:
(a) "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS
MADE IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY
RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES
REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF SUCH ACT."
(b) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO A FOR CAUSE SHARE REPURCHASE OPTION IN FAVOR OF THE CORPORATION OR ITS
ASSIGNEE SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE
REGISTERED HOLDER, OR SUCH HOLDER'S PREDECESSOR IN INTEREST, A COPY OF
WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS CORPORATION."
(c) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO A RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION OR ITS
ASSIGNEE SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE
REGISTERED HOLDER, OR SUCH HOLDER'S PREDECESSOR IN INTEREST, A COPY OF
WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS CORPORATION."
16. Initial Public Offering. The Optionee hereby agrees that in
the event of an initial public offering of stock made by the Company
pursuant to an effective registration statement filed under the Securities
Act, the Optionee shall not offer, sell, contract to sell, pledge,
hypothecate, grant any option to purchase or make any short sale of, or
otherwise dispose of any shares of stock of the Company or any rights to
acquire stock of the Company for such period of time from and after the
effective date of such registration statement as may be established by the
underwriter for such initial public offering; provided, however, that such
period of time shall not exceed two hundred seventy (270) days from the
effective date of the registration statement to be filed in connection with
such initial public offering. The foregoing limitation shall not apply to
shares registered in the initial public offering under the Securities Act.
The Optionee shall be subject to this paragraph provided and only if the
officers and directors of the Company are also subject to similar
arrangements.
Page 37 of 42
17. Binding Effect. This Option Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
heirs, executors, administrators, successors and assigns.
18. Termination or Amendment. The Board, including any duly
appointed committee of the Board, may terminate or amend the Plan and/or
the Option at any time; provided, however, that no such termination or
amendment may adversely affect the Option or any unexercised portion hereof
without the consent of the Optionee.
19. Integrated Agreement. This Option Agreement, together with
the Plan, constitutes the entire understanding and agreement of the
Optionee and the Participating Company Group with respect to the subject
matter contained herein, and there are no agreements, understandings,
restrictions, representations, or warranties among the Optionee and the
Company other than those as set forth or provided for herein. To the
extent contemplated herein, the provisions of this Option Agreement shall
survive any exercise of the Option and shall remain in full force and
effect.
20. Applicable Law. This Option Agreement shall be governed by
the laws of the State of New Jersey as such laws are applied to agreements
between New Jersey residents entered into and to be performed entirely
within the State of New Jersey.
MEDJET INC.
By: ____________________________
Title:__________________________
The Optionee represents that the Optionee is familiar with the
terms and provisions of this Option Agreement, including the Cause Share
Repurchase Option set forth in paragraph 11 and the Right of First Refusal
set forth in paragraph 12 and hereby accepts the Option subject to all of
the terms and provisions thereof. The Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board
upon any questions arising under this Option Agreement. The undersigned
acknowledges receipt of a copy of the Plan.
OPTIONEE
Date: _____________________ ________________________________
Page 38 of 42
The undersigned, being the spouse of the above-named Optionee,
does hereby acknowledge that the undersigned has read and is familiar with
the provisions of the above Option Agreement, and the undersigned hereby
agrees thereto and joins therein to the extent, if any, that the agreement
and joinder of the undersigned may be necessary.
OPTIONEE
Date: _____________________ ________________________________
Page 39 of 42
AMENDMENT NO. 1
TO THE
MEDJET INC.
1994 STOCK OPTION PLAN
WHEREAS, Medjet Inc. (the "Company") established the Medjet Inc.
1994 Stock Option Plan (the "Plan") effective September 30, 1994; and
WHEREAS, the Plan was adopted by the Board of Directors of the
Company on September 30, 1994; and
WHEREAS, the Plan was approved by the stockholders of the Company
on May 27, 1995; and
WHEREAS, the Company wishes to amend the Plan, effective as of
the first closing date of the initial public offering of the Company.
NOW, THEREFORE, the Plan is amended as follows:
1. Paragraph 1 is amended by inserting the phrase "MEDJET INC.
1994 Stock Option" before, and inserting the phrase "(the "Plan")" after,
the word "Plan" in the first line thereof.
2. Paragraph 2(a) is amended by deleting the text in its
entirety and by substituting the following in lieu thereof:
"(a) Administration by Board and/or Committee. The Plan shall
be
administered by the Board of Directors of the Company (the
"Board")
or by a duly appointed committee of the Board (the "Stock Option
Committee" or "Committee"). The Committee shall consist of two
or
more directors as may be appointed from time to time by the
Board,
each of whom shall qualify as a "disinterested person" within
the
meaning of Rule 16b-3, as defined below. If such Committee has
been appointed and, unless the powers of the Committee have been
specifically limited, the Committee shall have all of the powers
of the Board granted herein, including, without limitation, the
power to terminate or amend the Plan at any time, subject to the
terms of the Plan and any applicable limitations imposed by law.
Where applicable, "Board" may be used interchangeably with
"Committee" and "Stock Option Committee." All questions of
interpretation of the Plan or of any options granted under the
Plan (an "Option") shall be determined by the Board, and such
determinations shall be final and binding upon all persons
having
an interest in the Plan and/or any Option."
Page 40 of 42
3. Paragraph 2(d) is amended by adding the phrase "or ten
percent owners" after the word "directors" in the second line thereof.
4. Paragraph 4 is amended by deleting the second sentence and
by substituting the following in lieu thereof:
"Subject to adjustment as provided in paragraph 10 hereof, the
maximum aggregate number of shares of Stock that may be issued under the
Plan shall be twenty-five thousand (25,000) shares, to be increased by two
hundred thousand (200,000) shares following the stock split effected in
connection with the Initial Public Offering (the "IPO")."
5. Paragraph 11 is amended by adding the term ("Transfer of
Control") immediately after the phrase "or into another corporation" in the
third line thereof.
6. Paragraph 14 is amended by deleting the second sentence of
such Paragraph 14 and by adding the following at the end thereof:
"Notwithstanding the foregoing, the Board and/or the Committee
may not effect any amendment that would require the approval of the
stockholders of the Company under Rule 16b-3 unless such approval is
obtained. In no event, unless no longer required as a condition of
compliance with the requirements of Rule 16b-3, shall the Board or the
Committee without the approval of stockholders normally entitled to vote
for the election of directors of the Company materially increase the
benefits accruing to Optionees hereunder or effect any other change that
would require stockholder approval under Rule 16b-3. Except as otherwise
required by law, no amendment or modification of this Plan may, without the
consent of the Optionee or the permitted transferee of his Option, alter or
impair the rights and obligations arising under any then outstanding
Option."
7. A new Paragraph 15 is added at the end of the Plan, to read
as follows:
"15. Section 16(b) of the Exchange Act. The Plan is intended to
comply with all applicable conditions of Rule 16b-3 or its successors, and
all transactions involving insider-Optionees are subject to such
conditions, regardless of whether such conditions are expressly set forth
in the Plan. To the extent any provision of the Plan or action by the
Board and/or the Committee fails to so comply, it shall be deemed null and
void. The Board and/or the Committee may establish and adopt written
administrative guidelines, designed to facilitate compliance with Section
16(b) of the Exchange Act, as it may deem necessary or proper for the
administration and operation of the Plan and the transaction of business
thereunder."
8. A new Paragraph 16 is added to follow Paragraph 15, to read
as follows:
"16. Withholding of Taxes. The Company shall have the right to
deduct from any payment to be made to an Optionee, or to otherwise require,
prior to the issuance
Page 41 of 42
or delivery of any shares of Stock or the payment of any cash hereunder,
payment by the Optionee of any Federal, state or local taxes required by
law to be withheld."
IN WITNESS WHEREOF, the Company has caused this Amendment to be
executed this 21st day of May 1996.
MEDJET INC.
By: /s/ Eugene I. Gordon
------------------------
Page 42 of 42
PROMISSORY NOTE
__________________
$50,000.00 April 15, 1996
Edison, New Jersey
FOR VALUE RECEIVED, MEDJET INC. (the "Maker") promises to pay to the
order of Jan Wernick ("Holder"), the principal sum of Fifty Thousand
Dollars ($50,000.00), together with interest on the unpaid principal
balance at a rate per annum equal to twelve percent (12%). Principal and
accrued interest hereunder shall be due and payable on the earlier of (a)
written demand made at any time on or after December 31, 1996 or (b) the
closing by the Maker of an equity or debt financing for not less than
$1,000,000 or (c) the closing of the Maker's offering of shares of its
capital stock to the public pursuant to a registration statement filed and
declared effective by the Securities and Exchange Commission pursuant to
the Securities Act of 1933, as amended. Interest shall accrue from the
date of this Note until the entire unpaid principal balance together with
any accrued and unpaid interest is paid in full.
Payment shall be made in lawful tender of the United States and shall
be credited first to the accrued interest then due and payable and the
remainder applied to principal. Prepayment of principal, together with
accrued interest, may be made at any time without notice, premium or
penalty.
The entire unpaid principal sum of this Note, together with accrued
and unpaid interest to date, shall be due and payable at any time on or
after December 31, 1996 upon written demand or, without any demand,
immediately upon the insolvency of the Maker, the commission of any act of
bankruptcy by the Maker, the execution by the Maker of a general assignment
for the benefit of creditors, the filing by or against the Maker of any
petition in bankruptcy or any petition for relief under the provisions of
the federal bankruptcy act or any other state or federal law for the relief
of debtors and the continuation of such petition without dismissal for a
period of fifteen (15) days or more, or the appointment of a receiver or
trustee to take possession of the property or assets of the Maker.
If action is instituted to collect this Note, the Maker promises to
pay all costs and expenses, including reasonable attorneys' fees and
expenses, incurred in connection with such action.
The Maker hereby waives notice of default, presentment or demand for
payment, except as set forth in the first paragraph hereof, protest or
notice of nonpayment or dishonor and all other notices or demands relative
to this instrument.
This Note may not be transferred without the prior written consent of
the Maker.
This Note shall be construed in accordance with the internal laws of
the State of New York.
"MAKER"
MEDJET INC.
By: /s/ Eugene I. Gordon
______________________________
Title: President
PROMISSORY NOTE
-------------------
$50,000.00 May 6, 1996
Edison, New Jersey
FOR VALUE RECEIVED, MEDJET INC. (the "Maker") promises to pay to the
order of Jan Wernick ("Holder"), the principal sum of Fifty Thousand
Dollars ($50,000.00), together with interest on the unpaid principal
balance at a rate per annum equal to twelve percent (12%). Principal and
accrued interest hereunder shall be due and payable on the earlier of (a)
written demand made at any time on or after December 31, 1996 or (b) the
closing by the Maker of an equity or debt financing for not less than
$1,000,000 or (c) the closing of the Maker's offering of shares of its
capital stock to the public pursuant to a registration statement filed and
declared effective by the Securities and Exchange Commission pursuant to
the Securities Act of 1933, as amended. Interest shall accrue from the
date of this Note until the entire unpaid principal balance together with
any accrued and unpaid interest is paid in full.
Payment shall be made in lawful tender of the United States and shall
be credited first to the accrued interest then due and payable and the
remainder applied to principal. Prepayment of principal, together with
accrued interest, may be made at any time without notice, premium or
penalty.
The entire unpaid principal sum of this Note, together with accrued
and unpaid interest to date, shall be due and payable at any time on or
after December 31, 1996 upon written demand or, without any demand,
immediately upon the insolvency of the Maker, the commission of any act of
bankruptcy by the Maker, the execution by the Maker of a general assignment
for the benefit of creditors, the filing by or against the Maker of any
petition in bankruptcy or any petition for relief under the provisions of
the federal bankruptcy act or any other state or federal law for the relief
of debtors and the continuation of such petition without dismissal for a
period of fifteen (15) days or more, or the appointment of a receiver or
trustee to take possession of the property or assets of the Maker.
If action is instituted to collect this Note, the Maker promises to
pay all costs and expenses, including reasonable attorneys' fees and
expenses, incurred in connection with such action.
The Maker hereby waives notice of default, presentment or demand for
payment, except as set forth in the first paragraph hereof, protest or
notice of nonpayment or dishonor and all other notices or demands relative
to this instrument.
This Note may not be transferred without the prior written consent of
the Maker.
This Note shall be construed in accordance with the internal laws of
the State of New York.
"MAKER"
MEDJET INC.
By: /s/ Eugene I. Gordon
______________________
Title: President
CONSULTING AGREEMENT
AGREEMENT made as of the day of May, 1996 by and between
MEDJET INC., a Delaware corporation with its principal office at 1090 King
Georges Post Road, Edison, New Jersey 08837 ("MEDJET") and Steven G.
Cooperman, M.D., with an address at 201 Beagling Hill Circle, Fairfield,
Connecticut 06430 ( Consultant ).
W I T N E S S E T H :
WHEREAS, MEDJET desires to retain Consultant and Consultant
desires to be retained by MEDJET to perform services as a consultant to
MEDJET, upon the terms and subject to the conditions set forth;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements hereinafter set forth, MEDJET and Consultant agree as follows:
1. MEDJET hereby agrees to retain Consultant to, and Consultant
hereby agrees to use such time and effort as shall be reasonably necessary
(but unless otherwise agreed by the parties hereto, no less than one (1)
full day per month during the term of this Agreement) to assist in
strategic planning and business development for MEDJET, as requested by
MEDJET from time to time and to render advice in connection therewith.
Consultant shall not be obligated to make himself available for more than
two days each month to provide Consulting Services.
2. MEDJET shall not pay Consultant a fee for the Consulting
Services but in lieu thereof has agreed to issue a Warrant to Consultant in
accordance with a Warrant for 45,000 shares of Common Stock dated as of May
20, 1996 (the "Warrant"). MEDJET shall reimburse Consultant for such
reasonable expenses actually and necessarily incurred by Consultant in the
performance of the Consulting Services hereunder upon the submission to
MEDJET not later than thirty (30) days following the end of the month in
which the expenses were incurred of MEDJET form expense vouchers covering
such expenses (and original receipts for any and all expenditures in excess
of $25.00), provided that such expenses shall have been approved in writing
by an authorized representative of MEDJET for reimbursement prior to the
incurrence of such expense.
3. Not later than ten (10) days after the end of each calendar
quarter during the term of this Agreement, Consultant will furnish MEDJET
with a written report summarizing the Consulting Services (and the status
thereof) performed by Consultant during the immediately preceding calendar
quarter, any developments in, and such other information as MEDJET shall
reasonably request.
4. This Agreement shall commence on the date hereof and shall
remain in effect for a indefinite time until terminated by (a) either party
giving the other party written notice of termination, at least fifteen (15)
days prior to the effective date of termination or (b) MEDJET for "cause".
For purposes of this Agreement, the term "cause" shall mean the
good faith determination made by a majority of the Board of Directors of
MEDJET that either of the following events has occurred: (A) substantial
malfeasance by Consultant towards MEDJET, or (B) substantial failure by
Consultant to perform the duties of this Agreement and such failure is
continuing after 15 days written notice to Consultant thereof. Any
controversy or dispute arising out of or relating to any termination of
this Agreement for cause shall be settled by arbitration in accordance with
the Rules of the American Arbitration Association by one or more
arbitrators appointed in accordance with the Rules. The arbitration shall
be held in the City and State of New York unless parties hereto agree to
another locality. Judgment upon the award rendered may be entered in any
court having jurisdiction thereof. The cost of the arbitration shall be
borne by the parties in such proportion as the arbitrator(s) shall direct,
with such arbitrator(s) to give due consideration to the fault of the
parties.
5. Nothing in this Agreement shall be considered to create the
relationship of employer and employee between the parties hereto.
Consultant shall be deemed at all times to be an independent contractor and
shall not be entitled to any MEDJET employment rights or benefits.
6. Consultant acknowledges that in the course of performing the
Consulting Services for MEDJET, Consultant will be exposed to confidential
and trade secret information of MEDJET, including but not limited to
information relating to MEDJET's business, its research or engineering
activities, its manufacturing processes, its trade secrets, its sources of
supply, and its plans or contemplated actions, and may be exposed to
information confidential to customers of MEDJET. Accordingly, Consultant
shall execute and be bound by MEDJET's form of Proprietary Information,
Inventions, Non-Competition and Non-Solicitation Agreement, attached hereto
as Exhibit A (the "Proprietary Information Agreement").
7. Consultant represents and warrants that Consultant is under
no obligation or restriction nor will Consultant assume any such obligation
or restriction, which would in any way interfere or be inconsistent with
the Consulting Services.
8. The rights and obligations of Section 6 and 7 shall survive
the termination or expiration of this Agreement.
9. (a) All notices required to be given hereunder shall be in
writing, and shall be duly given if delivered to the other party
personally, or sent to the other party by registered or certified mail
(return receipt requested), addressed to the other party at the address
first set forth above or to such other address as any party may designate
by a similar notice, and deposited in the U.S. mail and shall be deemed to
have been given as of the third day after the date so mailed.
(b) This Agreement shall be binding upon and inure to the
benefit of the parties hereto, the executors, administrators and legal
representatives of Consultant and the successors and assigns of MEDJET.
The provisions of this Agreement shall not be construed as conferring and
are not intended to confer any rights on any other persons. Neither this
Agreement nor any rights or obligations hereunder may be assigned or
delegated by either party without the written consent of the other party,
and any such assignment or delegation shall be null and void.
(c) In the event that any provision of this Agreement shall
for any reason be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement.
(d) This Agreement, together with the Warrant and the
Proprietary Information Agreement, constitutes the entire agreement and
understanding of the parties relating to the subject matter hereof, and may
not be modified or amended except by a writing signed by the party sought
to be charged therewith. No waiver of any breach of this Agreement shall
be binding unless made by writing assigned by the party making the waiver,
and no waiver of any breach of this Agreement by either party hereto shall
be deemed a waiver by such party of any prior or subsequent breach of this
Agreement, whether known or unknown.
(e) This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New Jersey.
IN WITNESS WHEREOF, the parties, intending to be legally bound
hereby, have duly executed this Agreement as of the date first above
written.
MEDJET INC.
By __________________________
CONSULTANT
_____________________________
STEVEN G. COOPERMAN, M.D.
CONSULTING AGREEMENT
AGREEMENT made as of the day of May, 1996 by and between
MEDJET INC., a Delaware corporation with its principal office at 1090 King
Georges Post Road, Edison, New Jersey 08837 ("MEDJET") and Sanford J.
Hillsberg, with an address at c/o Troy & Gould, 1801 Century Park East,
Suite 1700, Los Angeles, California 90067 ("Consultant").
W I T N E S S E T H :
WHEREAS, MEDJET desires to retain Consultant and Consultant
desires to be retained by MEDJET to perform services as a consultant to
MEDJET, upon the terms and subject to the conditions set forth;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements hereinafter set forth, MEDJET and Consultant agree as follows:
1. MEDJET hereby agrees to retain Consultant to, and Consultant
hereby agrees to use such time and effort as shall be reasonably necessary
(but unless otherwise agreed by the parties hereto, no less than one (1)
full day per three-month period during the term of this Agreement) to
assist in strategic planning and business development for MEDJET, as
requested by MEDJET from time to time and to render advice in connection
therewith. Consultant shall not be obligated to make himself available for
more than two days each month to provide Consulting Services.
2. MEDJET shall not pay Consultant a fee for the Consulting
Services but in lieu thereof has agreed to issue a Warrant to Consultant in
accordance with a Warrant for 4,000 shares of Common Stock dated as of May
20, 1996 (the "Warrant"). MEDJET shall reimburse Consultant for such
reasonable expenses actually and necessarily incurred by Consultant in the
performance of the Consulting Services hereunder upon the submission to
MEDJET not later than thirty (30) days following the end of the month in
which the expenses were incurred of MEDJET form expense vouchers covering
such expenses (and original receipts for any and all expenditures in excess
of $25.00), provided that such expenses shall have been approved in writing
by an authorized representative of MEDJET for reimbursement prior to the
incurrence of such expense.
3. Not later than ten (10) days after the end of each calendar
quarter during the term of this Agreement, Consultant will furnish MEDJET
with a written report summarizing the Consulting Services (and the status
thereof) performed by Consultant during the immediately preceding calendar
quarter, any developments in, and such other information as MEDJET shall
reasonably request.
4. This Agreement shall commence on the date hereof and shall
remain in effect for a indefinite time until terminated by (a) either party
giving the other party written notice of termination, at least fifteen (15)
days prior to the effective date of termination or (b) MEDJET for "cause".
For purposes of this Agreement, the term "cause" shall mean the
good faith determination made by a majority of the Board of Directors of
MEDJET that either of the following events has occurred: (A) substantial
malfeasance by Consultant towards MEDJET, or (B) substantial failure by
Consultant to perform the duties of this Agreement and such failure is
continuing after 15 days written notice to Consultant thereof. Any
controversy or dispute arising out of or relating to any termination of
this Agreement for cause shall be settled by arbitration in accordance with
the Rules of the American Arbitration Association by one or more
arbitrators appointed in accordance with the Rules. The arbitration shall
be held in the City and State of New York unless parties hereto agree to
another locality. Judgment upon the award rendered may be entered in any
court having jurisdiction thereof. The cost of the arbitration shall be
borne by the parties in such proportion as the arbitrator(s) shall direct,
with such arbitrator(s) to give due consideration to the fault of the
parties.
5. Nothing in this Agreement shall be considered to create the
relationship of employer and employee between the parties hereto.
Consultant shall be deemed at all times to be an independent contractor and
shall not be entitled to any MEDJET employment rights or benefits.
6. Consultant acknowledges that in the course of performing the
Consulting Services for MEDJET, Consultant will be exposed to confidential
and trade secret information of MEDJET, including but not limited to
information relating to MEDJET's business, its research or engineering
activities, its manufacturing processes, its trade secrets, its sources of
supply, and its plans or contemplated actions, and may be exposed to
information confidential to customers of MEDJET. Accordingly, Consultant
shall execute and be bound by MEDJET's form of Proprietary Information,
Inventions, Non-Competition and Non-Solicitation Agreement, attached hereto
as Exhibit A (the "Proprietary Information Agreement").
7. Consultant represents and warrants that Consultant is under
no obligation or restriction nor will Consultant assume any such obligation
or restriction, which would in any way interfere or be inconsistent with
the Consulting Services.
8. The rights and obligations of Section 6 and 7 shall survive
the termination or expiration of this Agreement.
9. (a) All notices required to be given hereunder shall be in
writing, and shall be duly given if delivered to the other party
personally, or sent to the other party by registered or certified mail
(return receipt requested), addressed to the other party at the address
first set forth above or to such other address as any party may designate
by a similar notice, and deposited in the U.S. mail and shall be deemed to
have been given as of the third day after the date so mailed.
(b) This Agreement shall be binding upon and inure to the
benefit of the parties hereto, the executors, administrators and legal
representatives of Consultant and the successors and assigns of MEDJET.
The provisions of this Agreement shall not be construed as conferring and
are not intended to confer any rights on any other persons. Neither this
Agreement nor any rights or obligations hereunder may be assigned or
delegated by either party without the written consent of the other party,
and any such assignment or delegation shall be null and void.
(c) In the event that any provision of this Agreement shall
for any reason be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement.
(d) This Agreement, together with the Warrant and the
Proprietary Information Agreement, constitutes the entire agreement and
understanding of the parties relating to the subject matter hereof, and may
not be modified or amended except by a writing signed by the party sought
to be charged therewith. No waiver of any breach of this Agreement shall
be binding unless made by writing assigned by the party making the waiver,
and no waiver of any breach of this Agreement by either party hereto shall
be deemed a waiver by such party of any prior or subsequent breach of this
Agreement, whether known or unknown.
(e) This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New Jersey.
IN WITNESS WHEREOF, the parties, intending to be legally bound
hereby, have duly executed this Agreement as of the date first above
written.
MEDJET INC.
By _____________________________
CONSULTANT
________________________________
SANFORD J. HILLSBERG
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Medjet
Inc. on Form SB-2 of our report dated January 15, 1996 (except as to Note
A(2), Note B(5) and B(6), Note E, Note H, Note I and Note J which are dated
May 15, 1996), appearing in the Prospectus, which is part of this
Registration Statement.
We also consent to the reference to us under the heading
"Experts" in such Prospectus.
/s/ Rosenberg Rich Baker Berman & Company
Maplewood, New Jersey
May 21, 1996
Medjet Inc.
1090 King Georges Post Road
Suite 301
Edison, New Jersey 08837
Re: Medjet Inc. - Initial Public Offering
To Whom it May Concern:
I hereby consent to the reference to me under the caption "Legal
Matters" in the Prospectus included in the Registration Statement of which
this consent constitutes an exhibit. In giving such consent, I do not
admit that I am in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended.
May 13, 1996
DEAN E. SNYDER, ESQUIRE
/s/ Dean E. Snyder, Esquire
_____________________________
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
December 31, 1995 (audited) and March 31, 1996 (unaudited) financial
statements of Medjet Inc. and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-END> DEC-31-1995 MAR-31-1996
<CASH> 57,678 60,660
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 60,221 66,856
<PP&E> 120,633 137,212
<DEPRECIATION> 47,127 54,981
<TOTAL-ASSETS> 217,051 352,705
<CURRENT-LIABILITIES> 214,903 527,301
<BONDS> 0 0
0 0
0 0
<COMMON> 2,352 2,352
<OTHER-SE> (204) (176,946)
<TOTAL-LIABILITY-AND-EQUITY> 2,148 (174,594)
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 685,113 171,174
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 7,928 5,368
<INCOME-PRETAX> (677,185) (176,542)
<INCOME-TAX> 200 200
<INCOME-CONTINUING> (677,385) (176,742)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (677,385) (176,742)
<EPS-PRIMARY> (.25) (.14)
<EPS-DILUTED> 0 0
</TABLE>
