-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Kw5RCz0tCq3UTNFVL06hP9jBACuf2uuFhXKHCHPcJkNKGyVHMzs5qKZPsZG/Ykhe 1giJGaUBa+Gsb0x1D+eWUQ== 0000950137-02-000973.txt : 20020415 0000950137-02-000973.hdr.sgml : 20020415 ACCESSION NUMBER: 0000950137-02-000973 CONFORMED SUBMISSION TYPE: S-2 PUBLIC DOCUMENT COUNT: 12 FILED AS OF DATE: 20020228 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MOLECULAR DIAGNOSTICS INC CENTRAL INDEX KEY: 0000075439 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 364296006 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-2 SEC ACT: 1933 Act SEC FILE NUMBER: 333-83578 FILM NUMBER: 02563696 BUSINESS ADDRESS: STREET 1: 900 NORTH FRANKLIN STREET STREET 2: SUITE 210 CITY: CHICAGO STATE: IL ZIP: 60610 BUSINESS PHONE: 4078490290 MAIL ADDRESS: STREET 1: 900 NORTH FRANKLIN STREET 1 STREET 2: SUITE 210 CITY: CHICAGO STATE: IL ZIP: 60610 FORMER COMPANY: FORMER CONFORMED NAME: BELL NATIONAL CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: AMPERSAND MEDICAL CORP DATE OF NAME CHANGE: 19990527 FORMER COMPANY: FORMER CONFORMED NAME: PACIFIC COAST HOLDINGS INC DATE OF NAME CHANGE: 19830303 S-2 1 c66354s-2.txt REGISTRATION STATEMENT AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 28, 2002 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM S-2 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 MOLECULAR DIAGNOSTICS, INC. (formerly Ampersand Medical Corporation) (Exact name of registrant as specified in its charter) DELAWARE 36-4296006 (State or other jurisdiction of (I.R.S. Employer incorporation of organization) Identification No.)
414 NORTH ORLEANS STREET, SUITE 510 CHICAGO, ILLINOIS 60610 (312) 222-9550 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) PETER P. GOMBRICH CHIEF EXECUTIVE OFFICER MOLECULAR DIAGNOSTICS, INC. 414 NORTH ORLEANS STREET, SUITE 510 CHICAGO, ILLINOIS 60610 (312) 222-9550 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service) Copy to: ROBERT J. MINKUS, ESQ. SCHIFF HARDIN & WAITE 6600 SEARS TOWER CHICAGO, ILLINOIS 60606-6473 (312) 258-5500 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: from time to time after the effective date of this Registration Statement. If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [X] If the registrant elects to deliver its latest annual report to security holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1) of this form, check the following box. [X] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) 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 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 this form is a post-effective amendment filed pursuant to Rule 462(d) 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, check the following box. [ ] CALCULATION OF REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE OFFERING AMOUNT OF SECURITIES TO BE REGISTERED BE REGISTERED(1) PER SHARE(2) PRICE(2) REGISTRATION FEE - ----------------------------------------------------------------------------------------------------------------------- Common Stock, par value $0.001 per share............................ 6,657,495 $0.94 $6,258,045 $576 - ----------------------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------------------
(1) The registrant is also registering an undetermined number of shares of common stock as may be issued pursuant to antidilution adjustments. (2) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) of the Securities Act based on the average of the bid and ask prices for our common stock as reported on the Over-the-Counter Bulletin Board on February 25, 2002. 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 THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. PURSUANT TO RULE 429 OF THE SECURITIES ACT, THE PROSPECTUS INCLUDED IN THIS REGISTRATION STATEMENT ALSO COVERS 34,969,124 SHARES OF COMMON STOCK FROM A PREVIOUS REGISTRATION STATEMENT (FILE NO. 333-65240) AS TO WHICH A REGISTRATION FEE OF $9,537 WAS PAID. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE SELLING STOCKHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION, DATED FEBRUARY 28, 2002 PRELIMINARY PROSPECTUS 29,835,328 SHARES MOLECULAR DIAGNOSTICS, INC. (FORMERLY AMPERSAND MEDICAL CORPORATION) COMMON STOCK The selling stockholders listed in this prospectus are offering from time to time: - 13,027,769 shares of our common stock; - 5,429,424 shares of our common stock that are issuable upon the conversion of our Series B convertible preferred stock; - 6,657,495 shares of our common stock that are issuable upon the conversion of our Series C convertible preferred stock; - 1,022,500 shares of our common stock that are issuable upon conversion of our convertible promissory notes; and - 3,698,140 shares of our common stock that are issuable upon exercise of common stock purchase warrants. We will not receive any of the proceeds from the sale of the common stock. We will, however, receive the exercise price of the common stock purchase warrants if and when they are exercised. We issued the common stock, Series B convertible preferred stock, Series C convertible preferred stock, convertible promissory notes and common stock purchase warrants to the selling stockholders in transactions exempt from registration under the Securities Act. The selling stockholders may offer and sell the common stock from time to time in transactions in the over-the-counter market or in negotiated transactions. The selling stockholders directly, or through agents or dealers designated from time to time, may sell the common stock at fixed prices, which may change, at prevailing market prices at the time of sale, at varying prices determined at the time of sale or at negotiated prices. Our common stock is traded on the Over-the-Counter Bulletin Board under the symbol MCDG. On February 25, 2002, the last reported sale price of our common stock on the Over-the-Counter Bulletin Board was $0.95 per share. INVESTING IN OUR COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 1. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. The date of this prospectus is February , 2002. TABLE OF CONTENTS
PAGE ---- About this Prospectus....................................... i Risk Factors................................................ 1 Forward-Looking Statements.................................. 4 Molecular Diagnostics, Inc.................................. 5 Recent Developments......................................... 8 Use of Proceeds............................................. 9 Selling Stockholders........................................ 10 Plan of Distribution........................................ 23 Description of Capital Stock................................ 24 Legal Matters............................................... 37 Experts..................................................... 37 Where You Can Find More Information About Us................ 38 Documents Delivered with this Prospectus.................... 39 Commission Position on Indemnification for Securities Act Liability................................................. 39
In this prospectus, "we," "us," "our" and "Molecular Diagnostics" refer to Molecular Diagnostics, Inc. --------------------- You should rely only on information contained in or incorporated by reference in this prospectus. Neither we nor the selling stockholders have authorized anyone to provide you with different information. The selling stockholders are not offering these securities in any state where the offer is not permitted. You should not assume that the information provided by this prospectus is accurate as of any date other than the date on the front of this prospectus. ABOUT THIS PROSPECTUS This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission to register 29,835,328 shares of our common stock which the selling stockholders named in this prospectus may sell from time to time. Accordingly you should refer to the registration statement and its exhibits for further information about us and our common stock. Statements contained in this prospectus concerning documents we filed with the SEC are not intended to be comprehensive, and in each instance we refer you to the copy of the actual document filed as an exhibit to the registration statement or otherwise filed with the SEC. You should read this prospectus together with the additional information described under the heading "Where You Can Find More Information About Us." i RISK FACTORS You should carefully consider the risks described below before making an investment decision. The risks described below are not the only ones we are facing. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment. WE HAVE NOT IMPLEMENTED OUR REVERSE STOCK SPLIT. IF WE DO IMPLEMENT THE SPLIT, IT MAY NOT HAVE THE INTENDED EFFECT OF ENHANCING STOCKHOLDER VALUE. On May 24, 2001, our common stockholders approved a reverse stock split of our common stock in which each three shares of our issued and outstanding common stock would be reclassified and converted into one share of common stock. The timing of the reverse split will depend on several factors, including whether our common stock is listed on the American Stock Exchange or quoted on the Nasdaq SmallCap Market, whether Molecular Diagnostics takes on a strategic partner, whether we obtain approval from the Federal Drug Administration for our e(2) collector and whether a securities research analyst initiates coverage on Molecular Diagnostics. Delay in implementing the split may create uncertainty in the market, and investors may be unwilling to buy our common stock until they know when or if the split will be effective. The split is intended to increase the acceptance of our common stock by the financial community and the investing public and could enhance stockholder value as well as increase our stock price to meet the minimum price criteria of The American Stock Exchange or Nasdaq SmallCap Market. The price of our common stock after the reverse stock split may not increase in an amount proportionate to the decrease in the number of outstanding shares. If we do not implement the reverse stock split prior to the time we are required to give notice of our 2002 annual meeting of stockholders, we intend to submit to shareholders a proposal to reapprove the reverse stock split. We have withdrawn our application for listing on The American Stock Exchange and will not re-file it until we implement the reverse stock split. However, our management does not know if listing will or can be effected. The American Stock Exchange Company Guide states that meeting the Exchange's quantitative listing requirements does not automatically guarantee that the stock of a company will be approved for listing. The Company Guide also states that The American Stock Exchange has discretion in allowing the listing of the stock of a company that does not meet all of the criteria. Our independent accountants have noted that there are substantial doubts as to our ability to continue as a going concern. The listing criteria for The American Stock Exchange do not discuss the effect of a going concern explanatory paragraph which could affect our ability to list. THERE IS A LIMITED MARKET FOR PENNY STOCKS SUCH AS OUR COMMON STOCK. Our common stock is considered a "penny stock" because, among other things, its price is below $5 per share, it trades on the Over-the-Counter Bulletin Board and we have net tangible assets of less than $2,000,000. As a result, there may be less coverage by security analysts, the trading price may be lower, and it may be more difficult for our stockholders to dispose of, or to obtain accurate quotations as to the market value of, their common stock. Being a penny stock could limit the liquidity of our common stock. THE HISTORICALLY VOLATILE MARKET PRICE OF OUR COMMON STOCK MAY AFFECT THE VALUE OF OUR STOCKHOLDERS' INVESTMENT. The market price of our common stock, like that of many other medical products and biotechnology companies, has in the past been highly volatile. This volatility is likely to continue for the foreseeable future. Factors affecting potential volatility include: - general economic and other external market factors; - announcements of mergers, acquisitions, licenses and strategic agreements; 1 - announcements of private or public sales of securities; - announcements of new products or technology by us or our competitors; - fluctuations in operating results; and - announcements of the FDA actions relating to products. OUR COMMON STOCK IS UNLIKELY TO PRODUCE DIVIDEND INCOME FOR THE FORESEEABLE FUTURE. We have never paid a cash dividend on our common stock and we do not anticipate paying cash dividends for the foreseeable future. We intend to reinvest any funds that might otherwise be available for the payment of dividends in further development of our business. OUR COMMON STOCK IS SUBJECT TO DILUTION, AND AN INVESTOR'S OWNERSHIP INTEREST AND RELATED VALUE MAY DECLINE. We are authorized to issue up to 5,000,000 shares of preferred stock. We have approximately 548,908 shares of Series A convertible preferred stock outstanding which convert into 239,763 shares of our common stock and 1,357,356 shares of Series B convertible preferred stock outstanding which convert into 5,429,424 shares of our common stock. We also have 1,331,499 shares of Series C convertible preferred stock outstanding which convert into 6,657,495 shares of our common stock, 175,000 shares of Series D convertible preferred stock outstanding which convert into 1,750,000 shares of our common stock, and 434,363.52 shares of Series E convertible preferred stock outstanding, which will be convertible into 10,859,088 shares of our common stock on December 1, 2002. Our Certificate of Incorporation gives our board of directors authority to issue the remaining undesignated shares of preferred stock with such voting rights, if any, designations, rights, preferences and limitations as they may determine. We have outstanding warrants to purchase 9,986,244 shares of our common stock, outstanding options to purchase approximately 3,468,722 shares of our common stock and $1,049,000 in principal amount of convertible promissory notes outstanding which are convertible into 1,022,500 shares of common stock. Exercise or conversion by the holders of these securities would result in substantial dilution to our shareholders. The reverse stock split, if effected, would create almost 17,000,000 additional authorized but unissued shares of our common stock that could be sold by our board of directors without stockholder approval, thus potentially diluting the relative stock interests of our exiting stockholders at the time of sale. WE HAVE A LIMITED OPERATING HISTORY AND THERE ARE DOUBTS AS TO OUR BEING A GOING CONCERN. We have limited operating history. Our revenues, since our inception in March 1998, have been derived almost entirely from sales by Samba Technologies, Sarl, our wholly-owned subsidiary. We have not introduced or sold any of our InPath System products to date. We will continue to devote substantial resources to product development. We anticipate that we will continue to incur significant losses unless and until some or all of our products have been successfully introduced, if ever, into the market place. We have incurred substantial losses and have limited financial resources. Consequently our independent accountants have noted that these conditions raise substantial doubt as to our ability to continue as a going concern. Our financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that may result from the outcome of this uncertainty. The going concern explanatory paragraph may prevent our common stock from being listed on The American Stock Exchange and may make additional financing more difficult or costly. 2 WE MAY NOT BE ABLE TO MEET OUR LONG-TERM CAPITAL REQUIREMENTS. We do not know if we will be able to sustain our longer-term operations through future revenues. Whether we will need to raise additional funds to support our long-term operations is influenced by many factors, including the costs, timing and success of efforts to develop products and market acceptance of our products. OUR PRODUCTS ARE SUBJECT TO GOVERNMENT REGULATION AND THEY MAY NOT RECEIVE NEEDED GOVERNMENT APPROVALS. The sale and use of our products in the United States is regulated by the FDA. We must meet significant FDA requirements before we receive clearance to market our products. Included in these FDA requirements is the conduct of lengthy and expensive clinical trials to prove the safety and efficacy of the products. Until we complete such clinical trials our products may be used only for research purposes or to provide supplemental diagnostic information in the United States. We have completed a clinical trial for one of our products and submitted a 501K application to the FDA. We have started clinical trials for two other products and expect to begin additional trials in 2002. We have not yet begun clinical trials of any of our AccuMed products. We cannot be certain that our product development plans will allow these additional trials to commence or be completed according to plan or that the results of these trials, or any future trials, when submitted to the FDA along with other information, will result in FDA clearance to market our products in the United States. Sales of medical devices and diagnostic tests outside the United States are subject to foreign regulatory requirements that vary from country to country. The time required to obtain regulatory clearance in a foreign country may be longer or shorter than that required for FDA marketing clearance. Export sales of certain devices that have not received FDA marketing clearance may be subject to regulations and permits, which may restrict our ability to export the products to foreign markets. If we are unable to obtain FDA clearance for our products, we may need to seek foreign manufacturing agreements to be able to produce and deliver our products to foreign markets. We cannot be certain that we will be able to secure such foreign manufacturing agreements. WE MAY NOT BE ABLE TO COMPETE WITH COMPANIES THAT ARE LARGER AND HAVE MORE RESOURCES. We compete in the medical device and diagnostics marketplace with companies that are much larger and have greater financial resources than we do. We cannot be certain that our products will be able to be successfully marketed in this competitive environment. WE MAY NOT BE ABLE TO MARKET OUR PRODUCTS. We do not intend to maintain a direct sales force to market our products. Therefore, in order to successfully market our products, we must be able to negotiate profitable sales and marketing agreements with organizations that have direct sales forces calling on domestic and foreign markets that may use the products. If we are not able to successfully negotiate such agreements, we may be forced to market our products through our own sales force. We cannot be certain that we will be successful in developing and training such a sales force, should one be required, or that we will have the financial resources to carry out such development and training. WE MAY NOT BE ABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY. We hold a variety of patents and trademarks and have applied for a significant number of additional patents and trademarks with the United States Patent and Trademark Office and several foreign patent authorities. We intend to file additional patent and trademark applications as dictated by our research and development projects and business interests. We cannot be certain that any of the currently pending patent or trademark applications, or any of those which may be filed in the future, will be granted. We protect much of our core technology as trade secrets because our management believes that patent protection would not be possible or would be less effective than maintaining secrecy. We cannot be certain 3 that we will be able to maintain secrecy or that a third-party will not be able to develop technology independently. The cost of litigation to uphold the validity of a patent or patent application, prevent infringement or protect trade secrets can be substantial, even if we are successful. Furthermore, we cannot be certain that others will not develop similar technology independently or design around the patent aspects of our products. FORWARD-LOOKING STATEMENTS This prospectus contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties and are based on the beliefs and assumptions of our management, which, in turn, are based on information currently available to our management. When we use words such as "believes," "expects," "anticipates," "intends," "plans," "estimates," "should," "likely" or similar expressions, we are making forward-looking statements. Forward-looking statements involve risks, uncertainties and assumptions. Our future results and stockholder values may differ materially from those expressed in the forward-looking statements. Many of the factors that will determine these results and values are beyond our ability to control or predict. You are cautioned not to put undue reliance on any forward-looking statements. For a discussion of some of the factors that may cause actual results to differ materially from those suggested by the forward-looking statements, please read carefully the information under "Risk Factors" beginning on page 1. In addition to the Risk Factors and other important factors discussed elsewhere in this prospectus, and in our Annual Report on Form 10-K, as amended, which accompanies this document, you should understand that other risks and uncertainties and our public announcements and SEC filings could affect our future results and could cause results to differ materially from those suggested by the forward-looking statements. Except for special circumstances in which a duty to update arises when prior disclosure becomes materially misleading in light of subsequent events, we do not intend to update any of these forward-looking statements to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events. 4 MOLECULAR DIAGNOSTICS, INC. GENERAL We were incorporated in Delaware in December 1998 as the successor to Bell National Corporation. Bell National was incorporated in California in 1958. In December 1998, Bell National which was then a shell corporation without any business activity, acquired InPath LLC, a development stage company engaged in the design and development of products used in screening for cervical and other types of cancer. For accounting purposes, this acquisition was treated as if InPath LLC had acquired Bell National. However, Bell National continued as the legal entity and the registrant for SEC filing purposes. Bell National merged into Ampersand Medical Corporation, its wholly-owned subsidiary, in May 1999 in order to change the state of incorporation of the company to Delaware. In September 2001, we acquired AccuMed by means of a merger of AccuMed into a wholly-owned subsidiary of Ampersand Medical. Shortly after the AccuMed merger, Ampersand Medical changed its corporate name to Molecular Diagnostics, Inc. The name change was effected by the merger of Ampersand Medical's wholly-owned subsidiary, Molecular Diagnostics, Inc., with and into Ampersand Medical. The science of medical diagnostics has advanced significantly during the past decade. Much of this advance has come as a result of new knowledge of the human genome and related proteins, which form the foundation of cell biology, and the human body. Our goal is to utilize this research as a base to develop screening and diagnostic testing products for cancer and related diseases. We believe that the success of these products will improve patient care through more accurate test performance, wider availability and cost effective service delivery. We are developing an initial series of products to address these criteria, including sample collection devices, chemical and biological tests, and analysis instruments and related software. Our strategy is to develop products through internal development processes, strategic partnerships and licenses and acquisitions of companies or technologies. This strategy has required and will require a substantial amount of capital in the research and development process to complete the products. As a result, we will incur substantial operating losses until we are able to successfully market some, or all, of our products. PRODUCTS We are currently designing and developing a family of products for use in cancer screening and diagnosis. We call this family of products the InPath System. The core of the InPath System is a combination of protein anti-bodies -- the Cocktail -- that allows the InPath System to detect and highlight abnormal cells in a rapid and objective fashion. We intend to use different anti-body combinations for different types of cancer and other diseases. The initial application of the InPath System is designed to enhance the current cervical cancer screening process performed in laboratories, commonly referred to as the PAP test. Our ultimate goal is to perform this screening test in a matter of minutes at the point of service, whether in a laboratory, doctor's office, clinic or mobile medical vehicle. The InPath System includes the following components: - A unique sample collection device consisting of a small balloon, shaped to fit the cervix, and a reusable handle. The device is intended to replace the spatula and brush currently used to collect patient cell samples. - A chemical and biological combination process, which is applied to a sample to identify potentially abnormal cells. 1. In the laboratory version of the InPath System, this process is applied to sample cells released from collectors and deposited on a glass slide. 2. In the point of service version of the InPath System, this process is applied directly to the sample while still on the collector. 5 - An instrument, which performs an automated analysis of a sample via an optical scan that looks for the presence of multiple wavelengths of fluorescent light. This light is produced by tags, which are attached to certain components of the assay. 1. In the laboratory version of the InPath System, the instrument uses an automated microscope and a camera to capture the various wavelengths of light. 2. In the point of service version of the InPath System, the instrument uses custom designed optical devices and lasers to capture the various wavelengths of light. - Custom designed software that controls the automated instruments and processes the analysis of the captured light detected. In June 2000, we obtained a license from Invirion and Dr. Bruce Patterson, M.D., Ph.D., its principal, for a proprietary medical technology to detect the presence of E6/E7 genes present in cancer-causing types of the Human Papilloma Virus (HPV), a sexually transmitted disease. We will use this technology as an adjunct to the InPath System. The combination of the two tests will give the healthcare provider a better picture of the level of any disease present, which patients may be at an increased risk to develop disease in the future, and based on these factors, a course of treatment to follow. In November 2001, Ventana Medical Systems, Inc. agreed to acquire and sell AcCell, a computer-aided microscope designed to help medical experts examine and diagnose specimens of human cells. MARKETS There are approximately 160,000,000 PAP tests performed annually throughout the world, including approximately 60,000,000 tests in the United States. The US market for cervical screening today amounts to approximately $1,000,000,000, based on current average existing costs to perform the test. Cost levels for the PAP test outside of the United States, where 100,000,000 tests are performed, vary widely from country to country. Healthcare in many of these countries is managed by governmental agencies, often at the local level, making the precise number of tests performed difficult to validate. We estimate the total of the non-US market today at between $500,000,000 and $600,000,000. We intend to sell our products into both markets. We also anticipate that because our products are more cost-effective and designed to increase access to the test, the potential combined market could be expanded to a level in excess of $3,000,000,000. CLINICAL STUDIES AND REGULATORY STRATEGY We conduct clinical studies and trials of our products during the course of their development. These studies and trials vary in terms of number of patient samples, individual product components, specific processes and conditions, purpose, and other factors, which may affect the results. We have publicly reported the results of some of these studies and trials at various medical meetings, in publications and in general public announcements. In January 2000, we began to report results from studies employing the InPath System Cocktail. The first report was from a portion of a study involving over 200 patient samples that demonstrated the system's capability to detect cellular abnormality with a sensitivity of 95% and a specificity of 77%. In March 2000, we announced the results of the analysis of over 10,000 individual cell samples. The analysis showed a sensitivity of 92% and a specificity of 82% in detecting cellular abnormalities. In April 2001, we announced the results of a pilot study conducted on 208 patient samples collected in China. The study, which was the precursor of a 9,000 patient trial, showed that the system detected all levels of cervical abnormalities with 95% sensitivity and a specificity of 75%. The results of the most recent study, presented at a medical conference, on patient samples detected all levels of abnormality with 84% sensitivity and 81% specificity. The sensitivity factor, the test performance in detecting versus missing actual disease, commonly called false negatives, is critical in terms of patient health. The specificity factor, the test's performance in correctly identifying patients with disease versus those without, commonly called false positives, is related to overtreatment and health care economics. 6 In each of the studies presented above, the InPath System demonstrated nearly 100% accuracy in detecting high-grade cervical disease and cancer. In addition, the results demonstrate that the InPath System test produces more accurate overall results than the current PAP test. A study conducted in 2000 which reviewed the results of 94 previous studies of the PAP test showed an average sensitivity of 74% and an average specificity of 68% for the PAP test. Data from studies of other InPath System products has also been presented at medical conferences. A study of our In-Cell HPV test showed the test accurately detected 100% of patients with high-grade disease and 64% of patients with low-grade disease. In a presentation of early results of the clinical trial of the InPath System collector, data showed that the accuracy of cytology reports on samples collected with the InPath System collector were equal to or better than those collected with the conventional brush/spatula method. The InPath System collector also proved to be more comfortable for the patient and provided an easier and shorter examination for the physician. We believe the results of these studies support the continued development process of the InPath System products. We will use the data from our completed clinical trials to begin selling our InPath System products in countries, such as Mexico, Peru, Chile and India. We also intend to sell products in the United States and other countries as Analyte Specific Reagents. These Analyte Specific Reagents tests make no medical claims but may be used by laboratories and physicians to aid in their diagnosis. We began this type of product sale in the fourth quarter of 2001. We are pursuing regulatory approval for the InPath System and Cocktail-CVX through a series of submissions, although from a single clinical study. This tiered approach is designed to accelerate our revenue opportunity for the InPath System in the short term and drive adoption of our innovative products over the longer term, while at the same time minimizing the expense and time involved in undertaking the appropriate study. The first stage of the overall strategy involved the submission of our collector for approval as a substantially equivalent device to the brush-and-spatula methods for gathering samples used in the familiar PAP screening tests. The 501K filing was made in late September 2001. The second stage of our overall regulatory strategy involves a continuing study of the InPath System and Cocktail-CVX. This submission will cover the InPath System as a means to eliminate negative samples from further testing. We anticipate this being completed by the end of the second quarter of 2002 or early third quarter 2002. Simultaneously, we will be developing the InPath POS(TM) test. We concluded clinical trials of the collector during the third quarter of 2001 and filed a 510K Application with the FDA on September 28, 2001. We anticipate completion on the Slide Based test, at the end of the second quarter of 2002 and on the In-Cell HPV test during the third quarter of 2002. Once the clinical trials of each component are completed, we will submit the appropriate data to the FDA for clearance consideration. If we get FDA approval, we will be able to sell the cleared product in the United States. We will also submit the data to other regulatory agencies that may have jurisdiction over specific products. 7 PRODUCT INTRODUCTION TIMELINE
PRODUCT PROCESS TIMELINE - ------- ------- -------- e(2) collector FDA Clearance Current Through 2nd Quarter 2002 U.S. Sales Beginning Upon FDA approval International Sales Beginning Upon FDA approval Cocktail-CVX Clinical Trials End of 2nd Quarter or Early 3rd Quarter 2002 U.S. & International ASR Beginning Mid 2nd Quarter 2002 Sales FDA Submission & Review Beginning 3rd Quarter 2002 POS(TM) Test Development Through Mid 4th Quarter 2002 Clinical Trials Beginning 4th Quarter 2002 International Sales Beginning Late 4th Quarter 2002 In-Cell HPV Test Clinical Trials Beginning 3rd Quarter 2002 U.S. & International Beginning 1st Quarter 2002 Sales FDA Submission & Review Beginning 4th Quarter 2002
SAMBA We have a wholly-owned subsidiary, Samba Technologies, Sarl, based in France. Samba designs, develops and markets web-enabled software based systems for image analysis, image capture, and image transmission and management for clinical and industrial applications. Samba also is developing the software used in the InPath System. Almost all of our reported revenue to date has been from the sale of Samba products and services. Samba software suites, a group of programs which may be used singly or together in a particular application, allow the user to capture and share digital images and related data. Examples of applications are radiology, pathology and real-time coordination between pathologist and physician during ongoing surgical procedures. Samba software can create a single data folder, where patient information, physician case notes and diagnostic images from various sources are maintained or annotated. The software can be employed in local or wide area networks, or through an Internet browser using security-encrypted files. All of Samba's software can be used on a wide variety of image capture instruments or devices and can employ static, historical, or dynamic live images. Samba also provides software customization, installation, interface, network and Internet consulting services to the users of its products. RECENT DEVELOPMENTS EXCHANGE OFFER In December 2001, we completed a tender offer in which our common stockholders exchanged 10,859,088 shares of common stock for 434,363.52 shares of Series E convertible preferred stock. Please refer to the description of our Series E convertible preferred stock in the section "Description of Capital Stock." PRIVATE PLACEMENTS In November 2001, we received $3,636,000 in net proceeds from the sale of 1,331,499 shares of Series C convertible preferred stock to accredited investors. The Series C convertible preferred stock has a dividend rate of 10%. In November 2001, we also received $1,750,000 in proceeds from the sale of 175,000 shares of Series D convertible preferred stock to Ventana Medical Systems, Inc. The Series D convertible preferred stock has a dividend rate of 10%. We also issued a common stock purchase warrant to Ventana entitling them to purchase 1,750,000 shares of the common stock at a price of $1.15 per share. The warrant expires November 2, 2004. For a description of our Series C convertible preferred stock and Series D convertible preferred stock please see "Description of Capital Stock." 8 REVERSE STOCK SPLIT On May 24, 2001, our stockholders approved a reverse split of our common stock in which each three shares of our issued and outstanding common stock will be reclassified and converted into one share of common stock. Fractional shares will not be issued. Instead, our stockholders will be entitled to receive a cash distribution, without interest, in lieu of any fractional shares. The reverse stock split will not change the number of shares of common stock we are authorized to issue. The timing of the reverse split will depend on several factors, including whether our common stock is listed on The American Stock Exchange or quoted on the Nasdaq SmallCap Market, whether Molecular Diagnostics takes on a strategic partner, whether we obtain FDA approved for our e(2) collector and whether a securities research analyst initiates coverage on Molecular Diagnostics. One of the principal reasons for seeking stockholder approval to effect a one-for-three reverse stock split was to increase the per share price of the our common stock. Although our directors never expected the resulting price of a post-split share to be exactly three times the price of a pre-split share, they nevertheless hoped it would be enough to meet or exceed the minimum price required for listing on The American Stock Exchange or the Nasdaq SmallCap Market. Moreover, our management recognized that it might be necessary to delay the reverse split until such time as we had positive news to report, thus making it more likely that the reverse split would have the desired effect in the marketplace. We have withdrawn our application for listing on The American Stock Exchange and will not re-file it until we implement the reverse stock split. However, our management does not know if listing will or can be effected. The American Stock Exchange Company Guide states that meeting the Exchange's quantitative listing requirements does not automatically guarantee that the stock of a company will be approved for listing. The Company Guide also states that The American Stock Exchange has discretion in allowing the listing of the stock of a company that does not meet all of the criteria. Our independent accountants have noted that there are substantial doubts as to our ability to continue as a going concern. The listing criteria for The American Stock Exchange do not discuss the effect of a going concern explanatory paragraph which could affect our ability to list. When soliciting the proxies of our stockholders in connection with the vote to approve the reverse stock split, we stated that we would implement the split, if approved, as soon as practicable. However for all of the reasons stated above, our directors do not believe it is yet practicable to give effect to the reverse stock split. Furthermore, because the proposal approved by our stockholders did not impose a deadline with respect to effecting the reverse split, the directors do not believe that the delay in implementing the reverse split is inconsistent with the approval itself or with the stockholders' expectations in regard to such implementation. However, in the event that the reverse split has not been implemented by the time notice of our 2002 annual meeting of stockholders is required to be given, the directors intend to place on the ballot for such meeting either a proposal to reapprove the reverse stock split. USE OF PROCEEDS All of the shares of common stock offered pursuant to this prospectus are being offered by the stockholders listed under Selling Stockholders. We will not receive any of the proceeds from the sales of the shares of common stock. We will receive the exercise price of the common stock purchase warrants if and when they are exercised, up to an aggregate of approximately $10,790,959 if all common stock purchase warrants are exercised. We intend to use any proceeds from the exercise of the common stock purchase warrants for working capital and general corporate purposes. 9 SELLING STOCKHOLDERS The following table sets forth with respect to the selling stockholders (i) the number and percentage of shares of common stock beneficially owned as of February 8, 2002, (ii) the maximum number of shares of common stock which may be sold pursuant to this prospectus and (iii) the number and percentage of shares of common stock which will be beneficially owned after sales pursuant to this prospectus, assuming the sale of all shares of common stock set forth in (ii) above:
NUMBER OF PERCENT OF SHARES OF SHARES OF NUMBER OF PERCENT OF COMMON COMMON SHARES OF SHARES OF NUMBER OF STOCK STOCK COMMON COMMON SHARES OF BENEFICIALLY BENEFICIALLY STOCK STOCK COMMON OWNED OWNED BENEFICIALLY BENEFICIALLY STOCK AFTER THE AFTER THE NAME OF SELLING STOCKHOLDER OWNED OWNED OFFERED OFFERING+ OFFERING+ - --------------------------- ------------ ------------ --------- ------------ ------------ Peter P. Gombrich, Chairman of the Board, Chief Executive Officer, and director(1)................ 866,633 3.4% 672,300 194,333 * 414 N. Orleans #510 Chicago, IL 60610 Seaside Partners(2)................................. 3,735,000 14.8% 3,735,000 0 * 623 Ocean Ave. Sea Girt, NJ 08750 Alexander M. Milley, director(3).................... 756,881 3.0% 0 296,881 * 414 N. Orleans #510 Chicago, IL 60610 Cadmus Corporation(4)............................... 537,881 2.1% 460,000 77,881 * Leonard R. Prange(5)................................ 1,121,688 4.4% 721,688 400,000 641 W. Willow #142 Chicago, IL 60614 Robert C. Shaw, director(6)......................... 719,417 2.8% 500,417 219,000 * 414 N. Orleans #510 Chicago, IL 60610 John Abeles, M.D., director(7)...................... 286,500 * 625 219,050 * 414 N. Orleans #510 Chicago, IL 60610 William J. Ritger(8)................................ 415,474 1.6% 333,674 11,800 * 623 Ocean Avenue Sea Girt, NJ 08750 Jacqueline Gombrich(9).............................. 1,564,481 6.2% 125,000 0 0 2548 Printon Road Cleveland Heights, OH 44118 Jacqueline Gombrich, as Trustee of The EAG Trust dated 10/23/98(10)................................ 479,827 1.9% 479,827 0 * 414 N. Orleans, #510 Chicago, IL 60610 Jacqueline Gombrich, as Trustee of The CMC Trust dated 10/23/98(10)................................ 479,827 1.9% 479,827 0 * 414 N. Orleans, #510 Chicago, IL 60610 Jacqueline Gombrich, as Trustee of The MGD Trust dated 10/23/98(10)................................ 479,827 1.9% 479,827 0 * 414 N. Orleans, #510 Chicago, IL 60610 Theodore L. Koenig, as Trustee of The MSD Trust dated 12/19/94(10)................................ 410,555 1.6% 410,555 0 * One Northbrook Place 5 Revere Drive, Suite 206 Northbrook, IL 60062 Monroe Investments, Inc.(10)........................ 298,586 1.2% 298,586 0 * One Northbrook Place 5 Revere Drive, Suite 206 Northbrook, IL 60062
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NUMBER OF PERCENT OF SHARES OF SHARES OF NUMBER OF PERCENT OF COMMON COMMON SHARES OF SHARES OF NUMBER OF STOCK STOCK COMMON COMMON SHARES OF BENEFICIALLY BENEFICIALLY STOCK STOCK COMMON OWNED OWNED BENEFICIALLY BENEFICIALLY STOCK AFTER THE AFTER THE NAME OF SELLING STOCKHOLDER OWNED OWNED OFFERED OFFERING+ OFFERING+ - --------------------------- ------------ ------------ --------- ------------ ------------ Robert M. Adrian(11)................................ 75,758 * 75,758 0 * 6211 Highland Drive Chevy Chase, MD 20815 Kimberly Allen(11).................................. 2,727 * 2,727 0 * 546 N. Elmwood Avenue Oak Park, IL 60302 Banca Del Gottardo(12).............................. 415,833 1.6% 415,833 0 * Viale Stefano Franscini 8 6901 Luga SWITZERLAND Bathgate McColley Capital Group, LLC(13)............ 295,750 1.2% 295,750 0 * 5350 South Roslyn St., #380 Englewood, CO 80111 Margaret M. Bathgate(14)............................ 100,000 * 100,000 0 * 6376 E. Tufts Ave. Englewood, CO 80111 Bentell AS(12)...................................... 50,000 * 50,000 0 * Askervelen 61 N-1373 Asker NORWAY Frank Blatz(12)..................................... 25,000 * 25,000 0 * 970 Nepawin Lane Scotch Plains, NJ 07076 Kevin G. Boyle(15).................................. 107,781 * 107,781 0 * 127 Hawksbill Way Jupiter, FL 33458 Kevin G. Boyle Securities, Inc...................... 100,000 * 50,000 50,000 * 365 Stewart Ave., Apt B10 Garden City, NY 11530 Brady Retirement Fund, L.P.(15)..................... 130,000 * 130,000 0 * 44 Montgomery St., #2110 San Francisco, CA 94104 John H. Burlingame(12).............................. 15,000 * 15,000 0 * P.O. Box 948 South Orleans, MA 02662 David Cathcart(12).................................. 15,000 * 15,000 0 * 207 Fox Horn Lane Charlottesville, VA 22902 Cat Invest I, AS(15)................................ 206,500 * 206,500 0 * v/Adv. Oystein Eskeland Postboks 1484 Vika 0116 Oslo NORWAY Robert L. Cerasia(15)............................... 53,712 * 53,712 0 * c/o Solomon Smith Barney 325 Columbia Turnpike, 1st Fl Florham Pk, NJ 07932 CHAOS AS(15)........................................ 175,496 * 175,496 0 * Postboks 110, Sentrum 0102 Oslo NORWAY Commonwealth Associates & Designees(16)............. 1,045,143 4.1% 1,045,143 0 * 830 Third Ave., 4th Floor New York, NY 10022 Torrey L. Conrad(11)................................ 30,303 * 30,303 0 * 29W244 Oak Knoll West Chicago, IL 60185
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NUMBER OF PERCENT OF SHARES OF SHARES OF NUMBER OF PERCENT OF COMMON COMMON SHARES OF SHARES OF NUMBER OF STOCK STOCK COMMON COMMON SHARES OF BENEFICIALLY BENEFICIALLY STOCK STOCK COMMON OWNED OWNED BENEFICIALLY BENEFICIALLY STOCK AFTER THE AFTER THE NAME OF SELLING STOCKHOLDER OWNED OWNED OFFERED OFFERING+ OFFERING+ - --------------------------- ------------ ------------ --------- ------------ ------------ Neil Costa(14)...................................... 82,500 * 82,500 0 * 714 Broadway New York, NY 10003 Thomas F. Currin(12)................................ 35,000 * 35,000 0 * 40 Ocean Avenue Larchmont, NY 10538 Bruce De Schryver(12)............................... 20,000 * 20,000 0 * 10 Woodbury Way Fairport, NY 14450 Richard D. Doermer(17).............................. 55,000 * 55,000 0 * 415 N. LaSalle, #500 Chicago, IL 60610 Fred and Susan Duboc(14)............................ 50,000 * 50,000 0 * 5500 South Pemberton Littleton, CO 80121 Gary C. Evans(18)................................... 375,756 1.5% 375,756 0 * 13215 Glad Acres Farmers Branch, TX 75234 Bruce J. Fogel(15).................................. 100,000 * 100,000 0 * 359 Eagle Drive Jupiter, FL 33477 Four Corners(14).................................... 83,330 * 83,330 0 * 330 S. Decatur Blvd., Suite 1225 Las Vegas, NV 89108 Charles B. Ganz..................................... 50,000 * 50,000 0 * c/o Mellon Private Asset Management 1801 N. Military Trail Boca Raton, FL 33431 Geary Partner, L.P.(15)............................. 660,000 2.6% 660,000 0 * 44 Montgomery St., #2110 San Francisco, CA 94101 Drew S. Giles & Laurette K. Giles................... 7,500 * 7,500 0 * S. Pine Hill Trail West Tequerta, FL 33469 George I. Gorodeski & Shafrira S. Gorodeski(19)..... 91,000 * 91,000 0 * 25154 Bridgeton Beachwood, OH 44122 Howard A. Hackett(20)............................... 227,493 * 227,493 0 * 1 Corcoran Drive Tyngsboro, MA 01879 John P. Harkrader(12)............................... 15,000 * 15,000 0 * P.O. Box 465 Farmingdale, NJ 07727 Arthur F. Hebard(12)................................ 30,000 * 30,000 0 * 6408 N W 45th Place Gainesville, FL 32653 Hess Investments(12)................................ 33,333 * 33,333 0 * 4311 Down Point Ln Windermere, FL 34786 Mark Hess(12)....................................... 33,333 * 33,333 0 * 4311 Down Point Ln. Windermere, FL 34786 Holleb and Coff(21)................................. 250,000 * 250,000 0 * 55 East Monroe Suite 4100 Chicago, IL 60603
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NUMBER OF PERCENT OF SHARES OF SHARES OF NUMBER OF PERCENT OF COMMON COMMON SHARES OF SHARES OF NUMBER OF STOCK STOCK COMMON COMMON SHARES OF BENEFICIALLY BENEFICIALLY STOCK STOCK COMMON OWNED OWNED BENEFICIALLY BENEFICIALLY STOCK AFTER THE AFTER THE NAME OF SELLING STOCKHOLDER OWNED OWNED OFFERED OFFERING+ OFFERING+ - --------------------------- ------------ ------------ --------- ------------ ------------ Richard R. Huebner(14).............................. 50,000 * 50,000 0 * Firserv Correspondent Services 16318 E. Berry Ave. Aurora, CO 80015 Fred R. Huettig(12)................................. 20,000 * 20,000 0 * 28 Corey Lane Mendham, NJ 07945 John P. Ike(12)..................................... 35,000 * 35,000 0 * Box 31 Pottersville, NJ 07979 John C. Iverson Family Limited Partnership(15)...... 267,603 1.1% 267,603 0 * 476 Mariner Dr. Jupiter, FL 33477 David Kenkel & Stefanie Kenkel(22).................. 83,333 * 83,333 0 * JTTEN 1845 4 Wheel Drive Whitefish, MT 59937 Thad T. Konopnicki & Audrey E. Vaughn(11)........... 45,000 * 45,000 0 * 3512 N. Dinwiddle Arlington, VA 22207 Jon B. Kruljac & Teri E. Kruljac(23)................ 411,313 1.6% 231,313 0 * JTWROS 2070 Grape St. Denver, CO 80207 John A. Lamb(24).................................... 58,333 * 16,667 0 * 206 Shady Hills Court Simi Valley, CA 93065 John A. Lamb -- IRA(25)............................. 41,666 * 41,666 0 * 7010 North 13th Place Phoenix, AZ 85020 William A. Lamb -- IRA(26).......................... 83,333 * 83,333 0 * 7010 North 13th Place Phoenix, AZ 85020 Norbert Langley(12)................................. 33,333 * 33,333 0 * 320 Southeast Creek Road Church Hill, MD 21623 The League Corporation(11).......................... 75,758 * 75,758 0 * 141 W. Jackson Blvd., #1910-A Chicago, IL 60611 Lucas Capital Management(12)........................ 20,000 * 20,000 0 * 328 Newman Springs Rd Red Bank, NJ 07701 George B. Lucas, Jr. as Trustee of George B. Lucas Trust dated 8/31/88(14)........................... 50,000 * 50,000 0 * 249 Hilldale Rd. Villanova, PA 19085 George B. Lucas, Jr. as Trustee of Muriel B. Crowell Rev. Trust dated 4/26/91(14)...................... 100,000 * 100,000 0 * 1004 Vicars Woods Apt. S-315 Ponte Vedra Beach, FL 32082 George B. Lucas, Jr. as Trustee of Robert L. Crowell Rev. Trust dated 4/26/91(14)...................... 125,000 * 125,000 0 * 1004 Vicars Woods Apt. S-315 Ponte Vedra Beach, FL 32082
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NUMBER OF PERCENT OF SHARES OF SHARES OF NUMBER OF PERCENT OF COMMON COMMON SHARES OF SHARES OF NUMBER OF STOCK STOCK COMMON COMMON SHARES OF BENEFICIALLY BENEFICIALLY STOCK STOCK COMMON OWNED OWNED BENEFICIALLY BENEFICIALLY STOCK AFTER THE AFTER THE NAME OF SELLING STOCKHOLDER OWNED OWNED OFFERED OFFERING+ OFFERING+ - --------------------------- ------------ ------------ --------- ------------ ------------ Wayne Maggio & Maria Maggio(11)..................... 75,758 * 75,758 0 * JT TEN 22 A Grove Street Winchester, MA 01890 James J. Maguire(12)................................ 20,000 * 20,000 0 * P.O. Box 180 Pottersville, NJ 07979 Robert L. Malatesta(12)............................. 15,000 * 15,000 0 * 52 Mitchel Place Little Silver, NJ 07739 Thomas J. McCabe(12)................................ 16,667 * 16,667 0 * P.O. Box 3480 Warrenton, VA 20188 Thomas J. McCabe(15)................................ 80,000 * 80,000 0 * P.O. Box 3480 Warrenton, VA 20188 Gene McColley(14)................................... 30,000 * 30,000 0 * 5350 South Reslyn Street, Suite 380 Englewood, CO 80111 Robert McCullough, Jr.(15).......................... 50,000 * 50,000 0 * P.O. Box 151 Kentfield, CA 94914 Monarch Consulting(27).............................. 180,000 * 180,000 0 * 8873 E. Bayou Gulch Road Parker, CO 80134 W. Douglas Morland(28).............................. 400,000 1.6% 400,000 0 * 1655 E. Layton Drive Englewood, CO 80110 Monsun AS(29)....................................... 1,300,000 5.2% 1,300,000 0 * Torvejen 12 C 1383 Aske NORWAY David R. Morgan(14)................................. 85,000 * 85,000 0 * P.O. Box 470 Meadow Vista, CA 95722 Steven J. Morris(15)................................ 100,000 * 100,000 0 * 66 Navesink Ave. Rumson, NJ 07760 Michael A. Mulshine(30)............................. 58,333 * 58,333 0 * 868 Riverview Drive Brielle, NJ 08730 Gerald Mustapick(31)................................ 50,000 * 50,000 0 * 14041 U.S. Highway One, Suite A Juno Beach, FL 33408 Scott J. Mustapick(31).............................. 5,000 * 5,000 5,000 * Robin R. Mustapick, JTWROS 14041 U.S. Highway One, Suite A Juno Beach, FL 33408 Christopher Neary(12)............................... 33,333 * 33,333 0 * 11768 Willard Avenue Tustin, CA 92782 NeoMed Innovation III, L.P.(32)..................... 2,164,000 8.6% 2,164,000 0 * 8 Queensway House Queen Street, St. Helier JE24WD JERSEY
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NUMBER OF PERCENT OF SHARES OF SHARES OF NUMBER OF PERCENT OF COMMON COMMON SHARES OF SHARES OF NUMBER OF STOCK STOCK COMMON COMMON SHARES OF BENEFICIALLY BENEFICIALLY STOCK STOCK COMMON OWNED OWNED BENEFICIALLY BENEFICIALLY STOCK AFTER THE AFTER THE NAME OF SELLING STOCKHOLDER OWNED OWNED OFFERED OFFERING+ OFFERING+ - --------------------------- ------------ ------------ --------- ------------ ------------ Northlea Partners(33)............................... 67,500 * 61,875 4,950 * 2365 N.W. 41st Street Boca Raton, FL 33432 Barry Ollman(14).................................... 25,000 * 25,000 0 * 9555 Poundstone Place Greenwood Village, CO 80111 The Paisley Fund, L.P.(14).......................... 600,000 2.4% 600,000 0 * 388 Market Street Suite 1700 San Francisco, CA 94111 Bruce K. Patterson(34).............................. 300,000 1.2% 300,000 0 * 2300 Childrens Plaza, No 51 Chicago, IL 60614 Fred H. Pearson(35)................................. 221,616 * 221,616 0 * 10 S. LaSalle Street Chicago, IL 60603 B. Michael Pisani(36)............................... 460,000 1.8% 460,000 0 * 44 Lake Road Short Hills, NJ 07078 P.L. Thomas Group(37)............................... 39,834 * 39,834 0 * 300 W. Washington St. Chicago, IL 60606 Presidio Partners, L.P.(15)......................... 1,210,000 4.8% 1,210,000 0 * 44 Montgomery St., #2110 San Francisco, CA 94104 Robert L. Priddy(38)................................ 412,724 1.7% 16,381 396,343 * 3435 Kingsborough Atlanta, GA 30326 Prospektiva SA(39).................................. 780,550 3.1% 780,550 0 * via Funicolare 2 6900 Lugano SWITZERLAND Jeff Purcell(11).................................... 72,315 * 72,315 0 * 5 Oakbrook Ct. Oak Brook, IL 60521 RS Diversified Growth Fund(14)...................... 3,650,000 14.5% 3,650,000 0 * 388 Market Street Suite 1700 San Francisco, CA 94111 Jonathan D. Rahn(12)................................ 15,000 * 15,000 0 * 413 Gatewood Road Cherry Hill, NJ 08003 The Research Works, Inc.(40)........................ 70,000 * 70,000 0 * 623 Ocean Avenue Sea Girt, NJ 08750 George Resta(22).................................... 83,333 * 83,333 0 * 854 St. Edmonds Pl. Annapolis, MD 21401 Jay Michael Rosenberg(11)........................... 3,007 * 3,007 0 * 414 Sandy Lane Wilmette, IL 60091 Bernard B. Rinella(11).............................. 250,000 * 250,000 0 * One N. LaSalle, #3400 Chicago, IL 60610 John Rutzel(12)..................................... 15,000 * 15,000 0 * 14 Hathaway Drive Princeton Junction, NJ
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NUMBER OF PERCENT OF SHARES OF SHARES OF NUMBER OF PERCENT OF COMMON COMMON SHARES OF SHARES OF NUMBER OF STOCK STOCK COMMON COMMON SHARES OF BENEFICIALLY BENEFICIALLY STOCK STOCK COMMON OWNED OWNED BENEFICIALLY BENEFICIALLY STOCK AFTER THE AFTER THE NAME OF SELLING STOCKHOLDER OWNED OWNED OFFERED OFFERING+ OFFERING+ - --------------------------- ------------ ------------ --------- ------------ ------------ Louis Scher(12)..................................... 15,000 * 15,000 0 * 9 Parkside Avenue Asheville, NC 28804 Virginia Schmidt(12)................................ 30,000 * 30,000 0 * 55 Linden Avenue Verona, NJ 07044 Margret Selig(12)................................... 20,000 * 20,000 0 * Amsandberg 34 60599 Frankfurt GERMANY Arthur A. Sharples(12).............................. 100,000 * 100,000 0 * P.O. Box 570 New Vernon, NJ 07976 Janis Smythe(12).................................... 15,000 * 15,000 0 * P.O. Box 206 Hillsdale, NY 12529 Michael Song(11).................................... 50,000 * 50,000 0 * 333 E. Ontario, #608B Chicago, IL 60611 Dennis J. Stack(15)................................. 25,000 * 25,000 0 * 256 Cardinal Lane Jupiter, FL 33458 Georgie W. Stanley(41).............................. 132,500 * 132,500 0 * P.O. Box 180 Pottersville, NJ 07979 Michael C. Stanley(42).............................. 252,500 1.0% 50,000 0 * 13 Robin Road Warren, NJ 07059 Michael C. Stanley Trustee for the Georgie Stanley II Trust(43)...................................... 122,500 * 122,500 0 * P.O. Box 180 Pottersville, NJ 07979 Michael C. Stanley Trustee for the Benjamin A. Stanley Trust(43)................................. 122,500 * 122,500 0 * P.O. Box 180 Pottersville, NJ 07979 Michael C. Stanley Trustee for the Michael Bredt Stanley Trust(43)................................. 122,500 * 122,500 0 * P.O. Box 180 Pottersville, NJ 07979 Michael Studer(15).................................. 50,000 * 50,000 0 * 1110 Cottonwoodlane, #210 Irving, TX 75038 Jeremy Taylor(12)................................... 35,000 * 35,000 0 * P.O. Box 147 Metamora, IN 47030 James R. Tobin(12).................................. 15,000 * 15,000 0 * 50 Bridge Avenue Bay Head, NJ 08742 Transamerica Business Credit Corp.(44).............. 26,840 * 26,840 0 * 790 E. Colorado Blvd. Pasadena, CA 91101 Trinity Capital, AS(15)............................. 114,944 * 114,944 0 * P.O. Box 1767 Vika 0122 Oslo NORWAY
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NUMBER OF PERCENT OF SHARES OF SHARES OF NUMBER OF PERCENT OF COMMON COMMON SHARES OF SHARES OF NUMBER OF STOCK STOCK COMMON COMMON SHARES OF BENEFICIALLY BENEFICIALLY STOCK STOCK COMMON OWNED OWNED BENEFICIALLY BENEFICIALLY STOCK AFTER THE AFTER THE NAME OF SELLING STOCKHOLDER OWNED OWNED OFFERED OFFERING+ OFFERING+ - --------------------------- ------------ ------------ --------- ------------ ------------ Frank Gerardi Trustee, Univest Management E P S P(45)............................................. 527,815 2.0% 527,815 0 * 149 W. Village Way Jupiter, FL 33458 James A. Urner(12).................................. 15,000 * 15,000 0 * 42 Mount St. Bay Head, NJ 08742 Violina AS(15)...................................... 206,500 * 206,500 0 * Postboks 1484 Vika 0116 Oslo Norway Anita Von Dreusche(12).............................. 30,000 * 30,000 0 * 110 Norman Drive Ramsey, NJ 07446 Karen A. Von Dreusche & Richard J. Berr(12)......... 30,000 * 30,000 0 * JTTEN 52 Sunrise Court Medford, NJ 08055 Trond E. Wennberg(15)............................... 57,480 * 57,480 0 * Jonsok Veien 7 1182 Oslo NORWAY David Craig Wright(20).............................. 263,667 1.0% 263,667 0 * 14740 Maine Cove Terrace Gaithersburg, MD 20878 Xillix Technologies Corp............................ 22,500 * 22,500 0 * 300-13775 Commerce Parkway Richmond, BC V6V 2V4 Canada Richard Yetman(12).................................. 20,000 * 20,000 0 * 6 Ocean Blvd. Island Heights, NJ 08732 Peter J. Zeganelli & Carol A. Zeganelli(31)......... 10,000 * 10,000 0 * 11 Rafenberg Rd. Sleepy Hollow, NY 10591 Robert Zelinka(15).................................. 25,000 * 25,000 0 * 15919 Laurel Creek Drive Delray Beach, FL 33446 Rona Zelinka(15).................................... 25,000 * 25,000 0 * 15919 Laurel Creek Drive Delray Beach, FL 33446 Bud Zuckerman(14)................................... 50,000 * 50,000 0 * 6587 Lakeview Drive Boulder, CO 80303
- --------------- + With respect to shares and percent of shares beneficially owned after the offering, we assumed that the selling stockholders will sell all of the shares of common stock offered by the prospectus. We cannot assure you that the selling stockholders will sell all or any of their shares. * Represents less than 1% of the outstanding shares of Common Stock. (1) Includes: (i) 672,300 shares issued as a result of the merger of InPath, LLC and Bell National Corporation in December 1998; and (ii) 123,333 shares underlying options exercisable by Mr. Gombrich within sixty days. Excludes: (i) 2,894,787 shares underlying 105,265 shares of Series E convertible preferred stock owned by Mr. Gombrich; and (ii) 922,277 shares underlying 33,537.36 shares of Series E convertible preferred stock owned by Suzanne Musikantow Gombrich, all of which are convertible December 1, 2002. 17 (2) Includes: (i) 2,201,667 shares received as a result of the conversion during 2000 of the principal and accrued interest related to a 6% convertible promissory note purchased in a private offering in March 1999; (ii) 200,000 shares purchased in a 1999 private offering; and (iii) 1,333,333 shares purchased in a 2000 private offering. (3) Includes: (i) 287,881 shares owned by Cadmus Corporation, of which Mr. Milley is a director and executive officer, and 250,000 shares issuable to Cadmus Corporation under a currently exercisable warrant; and (ii) 219,000 shares subject to options exercisable by Mr. Milley within sixty days. Excludes: (i) 678,135 shares underlying 24,659.44 shares of Series E convertible preferred stock owned by Mr. Milley; (ii) 553,666 shares underlying 20,133.32 shares of Series E convertible preferred stock owned by Milley Management, Inc. of which Mr. Milley is the sole director and executive officer; (iii) 1,327,465 shares underlying 48,271.44 shares of Series E convertible preferred stock owned by Cadmus Corporation; (iv) 556,875 shares underlying 20,250 shares of Series E convertible preferred stock owned by Azimuth Corporation of which Mr. Milley is a director and executive officer; and (v) 163,520 shares underlying 5,946.20 shares of Series E convertible preferred stock owned by Winchester National, Inc. of which Mr. Milley is a director, all of which are convertible December 1, 2002. (4) Includes: (i) 210,000 shares received in a Claims Settlement Agreement in December 1998; and (ii) 250,000 shares underlying a warrant exercisable within sixty days. Excludes 1,327,465 shares underlying 48,271.44 shares of Series E convertible preferred stock, which are convertible December 1, 2002. (5) Includes: (i) 300,000 shares received as the result of the merger of InPath, LLC and Bell National Corporation in December 1998; (ii) 321,688 shares received as the result of the conversion during 2000 of the principal and accrued interest related to a 6% convertible promissory note purchased in a private offering in May 1999; (iii) 100,000 shares underlying 20,000 shares of Series C convertible preferred stock purchased in a private offering in November 2001; and (iv) 400,000 shares underlying options exercisable within sixty days. (6) Includes: (i) 463,333 shares received in a Claims Settlement Agreement in December 1998; (ii) 37,084 shares acquired in a private transaction in 1989; and (iii) 219,000 shares underlying stock options, which are exercisable within sixty days. (7) Includes: (i) 5,000 shares owned by Northlea Partners, Ltd., of which Dr. Abeles is the general partner, and 62,500 shares issuable to Northlea Partners, Ltd. under a currently exercisable warrant; and (ii) 219,000 shares underlying stock options exercisable by Dr. Abeles within sixty days. Excludes 205,277 shares underlying 7,464.64 shares of Series E convertible preferred stock, which are convertible December 1, 2002. Dr. Abeles disclaims beneficial ownership of all shares owned by Northlea Partners, Ltd. except 675 shares, which shares are attributable to his 1% interest in Northlea Partners, Ltd. as general partner. (8) Includes: (i) 83,674 shares purchased in a private offering during 2000; (ii) 70,000 shares owned by The Research Works, which is controlled by Mr. Ritger; and (iii) 250,000 shares underlying Series C Convertible Preferred Stock. Excludes 1,980,000 shares underlying 72,000 shares of Series E convertible preferred stock, which are convertible December 1, 2002. (9) Includes: (i) 125,000 shares received as the result of the merger of InPath, LLC and Bell National Corporation in December 1998 and (ii) 479,827 shares owned by The EAG Trust, 479,827 shares owned by the CMC Trust, and 479,827 shares owned by The MDG Trust, for which Ms. Gombrich serves as trustee. Ms. Gombrich disclaims beneficial ownership of all shares owned by the trusts. (10) Represents shares received as a result of the merger of InPath, LLC and Bell National Corporation in December 1998. (11) Represents shares purchased in a private offering during 1999. (12) Represents shares purchased in a private offering during 2000. 18 (13) Includes: (i) 68,250 shares issued to Bathgate or its designees as compensation for services rendered during 2001; and (ii) 227,500 shares underlying warrants issued to Bathgate designees as compensation for services during 2001. (14) Represents shares underlying Series C convertible preferred stock. (15) Represents shares underlying Series B convertible preferred stock purchased in a private offering during 2001. (16) Represents warrants issued by AccuMed in connection with various financings. (17) Represents 55,000 shares underlying warrants exercisable within sixty days received as compensation for services performed during 1999. (18) Includes: (i) 75,758 shares purchased in a private offering during 1999; (ii) 33,333 shares purchased in a private offering during 2000; (iii) 100,000 shares underlying 25,000 shares of Series B convertible preferred stock purchased in a private offering during 2001; and (iv) 166,665 shares underlying Series C convertible preferred stock. (19) Includes: (i) 76,000 shares received as the result of the exercise of a warrant received for services performed during 1999; and (ii) 15,000 shares purchased in a private offering during 2000. (20) Represents shares received as a result of the conversion of the principal and accrued interest related to 6% convertible promissory notes purchased in a private offering during 1999. (21) Represents 250,000 shares underlying a warrant received as compensation for services during 1999 and exercisable within sixty days. (22) Includes: (i) 33,333 shares purchased in a private offering in 2000; and (ii) 50,000 shares underlying Series C convertible preferred stock. (23) Includes: (i) 131,313 shares received as a result of the conversion of the principal and accrued interest related to a 6% convertible promissory note purchase in a private offering during 1999; (ii) 180,000 shares underlying warrants issued to Monarch Consulting, which is controlled by Mr. Kruljac, for services performed in 2001; and (iii) 100,000 shares underlying Series C convertible preferred stock. (24) Includes: (i) 16,667 shares purchased in a private offering during 2000; and (ii) 41,666 shares owned by the John Lamb -- IRA. (25) Includes: (i) 16,666 shares purchased in a private offering during 2000; and (ii) 25,000 shares underlying 6,250 shares of Series B convertible preferred stock purchased in a private offering during 2001. (26) Includes: (i) 33,333 shares purchased in a private offering during 2000; and (ii) 50,000 shares underlying 12,500 shares of Series B convertible preferred stock purchase in a private offering during 2001. (27) Represents 180,000 shares underlying warrants issued for services performed during 2001. (28) Includes: (i) 200,000 shares underlying Series C convertible preferred stock; and (ii) 200,000 shares underlying a currently exercisable warrant. (29) Includes: 500,000 shares underlying a convertible promissory note issued during 2000; (ii) 500,000 shares underlying 125,000 shares of Series B convertible preferred stock purchased in a private offering during 2001; and (iii) 300,000 shares underlying currently exercisable warrants. (30) Represents shares underlying a warrant issued for services performed in 2000 and 2001. (31) Represents shares underlying warrants currently exercisable. (32) Includes: (i) 1,664,000 shares underlying Series B convertible preferred stock purchased in a private offering during 2001; and (ii) 500,000 shares underlying a convertible promissory note issued in 2001. (33) Represents shares underlying a warrant currently exercisable. (34) Represents shares underlying warrants issued or issuable as license fees under a License and Technology Agreement entered into during 2000. 19 (35) Includes: (i) 186,616 shares received as the result of the merger of InPath, LLC and Bell National Corporation in December 1998; and (ii) 35,000 shares purchased in a private offering during 1999. (36) Includes: (i) 130,000 shares purchased in a private offering in 1999; and (ii) 330,000 shares underlying Series C convertible preferred stock. (37) Represents warrants issued in the AccuMed merger in exchange for warrants issued by AccuMed as compensation for services. (38) Including 154,647 shares underlying Series A convertible preferred stock, 8,737 shares underlying options exercisable in 60 days and 16,381 shares underlying warrants. (39) Includes: (i) 98,333 shares received as compensation for services during 2000; (ii) 48,333 shares underlying a warrant issued for services performed during 2000; (iii) 225,542 shares received as compensation for services performed during 2001; (iv) 116,400 shares issuable as compensation for services performed during 2001; and (v) 291,942 shares underlying warrants issued for services performed during 2001. (40) Represents shares received upon the exercise of a warrant received for services performed during 1999. (41) Includes: (i) 50,000 shares purchased in a private offering in 2000; and (ii) 82,500 shares underlying Series C convertible preferred stock. (42) Includes: (i) 50,000 shares purchased in a private offering during 2000; (ii) 82,500 shares underlying Series C convertible preferred stock; and (iii) 40,000 shares owned by The Georgie Stanley II Trust, 40,000 shares owned by The Benjamin A. Stanley Trust, and 40,000 shares owned by The Michael Bredt Stanley Trust for each of which Mr. Stanley serves as Trustee. (43) Includes: (i) 40,000 shares purchased in a private offering in 2000; and (ii) 82,500 shares underlying Series C convertible preferred stock. (44) Represents warrants issued in the AccuMed merger in exchange for warrants issued by AccuMed as additional consideration for a long term credit line. (45) Includes: (i) 175,148 shares received as the result of the conversion of the principal and accrued interest related to a 6% convertible promissory note purchased in a private offering during 1999; (ii) 222,167 shares underlying a warrant issued for services performed during 2000 and 2001; (iii) 50,000 shares underlying shares of Series B convertible preferred stock purchased in a private offering during 2001; and (iv) 80,500 shares received as compensation for services performed during 2001. For purposes of this table, a person is deemed to have beneficial ownership of any shares of common stock which such person may acquire within 60 days after the date of this prospectus. For purposes of computing the percentage of outstanding shares of common stock held by each person named above, any security which such person has the right to acquire from us within 60 days after the date of this prospectus is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. On September 1, 1998, we issued a note payable in the amount of $175,000 to Mr. Peter P. Gombrich, our Chairman and Chief Executive Officer, in payment for funds advanced by Mr. Gombrich. The note was due September 1, 2003 and interest was payable at each anniversary date at the rate of 8% per annum. Principal payments in the amount of $26,000, $130,000 and 19,000 were made during 2000, 1999 and 1998, respectively, to repay the entire note. In January 1999, our board of directors authorized the raising of up to $1,500,000 in debt or new equity to provide funding for current operations. Subsequently, on various dates between March 1, 1999 and June 29, 1999, we issued a series of interest-bearing 6% convertible promissory notes totaling $969,600, including a note in the amount of $500,000 issued to Seaside Partners, L.P., a hedge fund and a significant shareholder. Seaside Partners, L.P. receives investment management services from Seaside Advisors, L.L.C., of which 20 Dr. Denis M. O'Donnell, a director, is a member and manager. We also issued a note in the amount of $75,000 to Leonard R. Prange, our former President, Chief Operating Officer and Chief Financial Officer, in exchange for cash. The maturity date of these notes was January 28, 2000, subject to extension by us to June 30, 2000. We extended the maturity date of the notes to June 30, 2000. The notes and accrued interest due thereon were automatically converted into shares of our common stock on April 28, 2000. On December 10, 1999, we borrowed $50,000 from Azimuth Corporation, a company controlled by Alexander M. Milley, a director and significant shareholder. The note evidencing this loan bore interest at the rate of 12% per annum and the principal along with accrued interest was convertible into our common stock at a conversion price of $0.20 per share. On February 22, 2000, Azimuth Corporation exercised its right to convert the principal amount of the note plus accrued interest due thereon in the amount of $1,250 into 256,250 shares of our common stock. On January 6, 2000 and April 28, 2000, we sold 200,000 shares and 1,333,333 shares, respectively, of our common stock to Seaside Partners, L.P. in a private offering. The shares were sold to Seaside Partners, L.P. under the same terms and conditions as those of the other participants in the private offering, including the purchase prices of $0.33 per share and $1.50 per share, respectively. Dr. O'Donnell, our director, is a member and manager of Seaside Advisors, L.L.C., which provides investment management services to Seaside Partners, L.P. On April 28, 2000, we received a promissory note in the amount of $2,000,000 evidencing the purchase price paid by Seaside Partners, L.P. for the 1,333,333 shares of common stock referred to in the prior paragraph. That note bears interest at the rate of 8% per annum and the original due date was July 28, 2000. We agreed to extend the due date of that note until November 30, 2000. Seaside has made all remaining interest and principal payments under the note. On May 24, 2000, we granted Dr. O'Donnell, our director, warrants to purchase 155,455 and 629,446 shares of our common stock, exercisable at $.01 per share. The warrant to purchase 155,455 shares issued to Dr. O'Donnell was compensation for finders services performed in 1999 on the private offering of 6% convertible promissory notes due in 2000 and a private offering of common stock in late 1999 at $0.33 per share. Both offerings were sold at prices representing small discounts to the market price of our common stock at the time of the offerings. The warrant to purchase 629,446 shares issued to Dr. O'Donnell was compensation for finders services performed in 2000 in a private offering of common stock at a price of $1.50 per share, an approximate 20% discount to the market price of the common stock when the offering was priced. The warrants expire five years from the date of the grant. Dr. O'Donnell elected to take all of the compensation due to him for finders services in the form of warrants rather than cash or shares of common stock. We also recorded an accrual of $50,000 in 1999 to cover estimated out-of-pocket expenses, reimbursable to Dr. O'Donnell upon submission of detailed expense bills. On September 22, 2000, we issued a convertible promissory note, with a term of one year, to Azimuth Corporation in exchange for $500,000 in cash. That note bore interest at the rate of 15% per annum and was convertible into our common stock at a conversion price of $1 per share after February 22, 2001. As discussed below, the holder agreed to relinquish the conversion rights on July 26, 2001. The conversion price was less than the market price of our common stock at the date of issuance of the note. Therefore, the holder was considered to have a beneficial conversion feature. We determined the value of this beneficial conversion feature to be $125,000. This value was recorded as a reduction to the debt and is being amortized as additional interest expense over the life of the note. The majority of the proceeds of the note were used to make a loan to AccuMed in accordance with the terms of our then pending merger agreement with AccuMed. Mr. Milley, our director, is a director and executive officer of Azimuth Corporation. We repaid the note on November 15, 2001. On December 4, 2000, we issued a promissory note, with a maturity date of December 31, 2000, to Azimuth Corporation, in exchange for $200,000 in cash. That note bore interest at the rate of 12% per annum. As an additional inducement, we granted Azimuth Corporation a warrant to purchase 50,000 shares of common stock at an exercise price of $0.937 per share, the approximate market price of our common stock on the date the warrant was granted. That warrant expires five years from the date of grant. We repaid the note 21 and accrued interest on February 20, 2001. In that the note was not repaid when due, we were obligated by the terms of the note to grant Azimuth Corporation a warrant to purchase an additional 25,000 shares of our common stock at an exercise price of $0.01 per share, representing a two month late payment penalty. The proceeds of the note were used for general working capital and to pay license fees. On December 11, 2000, we issued a promissory note, with a maturity date 180 days from the date of issue, to Azimuth Corporation, in exchange for $100,000 in cash. That note bore interest at the rate of 12% per annum. As an additional inducement, we granted Azimuth Corporation a warrant to purchase 1,000,000 shares of our common stock at an exercise price of $1.25 per share, an approximate 15% premium over the market price of the common stock at the date that the warrant was issued. That warrant expires five years after the date of grant. We repaid the note and accrued interest on February 20, 2001. The proceeds of the note were used to repay a convertible promissory note held by AccuMed. On February 1, 2001 and February 7, 2001, we issued promissory notes to Azimuth Corporation in exchange for $25,000 and $470,000, respectively, in cash. Those notes bear interest at the rate of 15% per annum. Those notes are required to be repaid from the proceeds of any new offering of debt or equity undertaken by us subsequent to the dates of the notes. As an additional inducement for the note issued on February 7, 2001, we granted Azimuth Corporation a warrant to purchase 1,000,000 shares of our common stock at an exercise price of $0.25 per share, an approximate discount of 83% from the market price of our common stock on the date the warrant was issued. That warrant expires five years after the date of grant. We repaid both notes and accrued interest on February 20, 2001. The proceeds of the notes were used to fund a portion of the loan to AccuMed upon the signing of the merger agreement on February 7, 2001. On July 26, 2001, we issued a promissory note to Cadmus Corporation in exchange for $100,000 in cash. On August 6, 2001, we issued a promissory note to Azimuth Corporation in exchange for $100,000 in cash. Like Azimuth Corporation, Cadmus Corporation is controlled by Alexander Milley, one of our directors and significant stockholder. The notes are due on September 22, 2001 and bear interest at the rate of 15% per annum. As an additional inducement for the notes, we issued five-year warrants to Cadmus Corporation and Azimuth Corporation entitling the holders to each purchase 250,000 shares of the common stock at an exercise price of $1 per share. The closing market prices of the common stock on the respective issue dates of the warrants were $0.97 per share and $0.93 per share. We determined the fair value of these warrants to be $7,200 using the fair value interest rate method. This value will be amortized as additional interest expense over the life of the notes and the full amount was charged to expense during the third quarter. We repaid the note on November 15, 2001. In addition, on July 26, 2001, we issued a five-year warrant to Azimuth Corporation entitling the holder to purchase 500,000 shares of our common stock at $1 per share in consideration of Azimuth Corporation's agreement to relinquish the conversion rights granted to it under the terms of a convertible promissory note we issued in September 2000, which entitled Azimuth Corporation to convert the principal and accrued interest due under that note into our common stock at a conversion price of $1 per share. As noted above, the September 2000 note was considered to have a beneficial conversion feature for which we had determined a fair value of $125,000 in 2000. This fair value was recorded as a discount to the debt and was being amortized as additional interest expense over the term of the note. The closing market price of our common stock on the issue date of this warrant was $0.97 per share. We determined the fair value of the warrant to be approximately $21,000 based on the value of the unamortized debt discount at the date this warrant was issued and the conversion right was waived. This value will be amortized as additional interest expense over the life of the note and the full amount was charged to expense during the third quarter. On August 6, 2001, we issued a promissory note to Northlea Partners, Ltd. in exchange for $25,000 in cash. John Abeles, one of our directors, is the general partner of Northlea Partners, Ltd. The terms of the note are the same as the notes issued on July 26, 2001 to Cadmus Corporation and Azimuth Corporation. As an additional incentive to purchase this note, we issued a five-year warrant to Northlea Partners, Ltd. entitling the holder to purchase 62,500 shares of common stock at an exercise price of $1 per share. The closing market price of the common stock on the issue date of this warrant was $0.93 per share. We determined the fair value 22 of the warrant to be $825 using the fair value interest rate method. This value will be amortized as additional interest expense over the life of the note and the full amount was charged to expense during the third quarter. In November 2001, Leonard R. Prange who at the time served as our President, Chief Operating Officer, Chief Financial Officer and Secretary purchased 20,000 shares of Series C convertible preferred stock in our November 2001 private placement on the same terms and conditions as the other investors. We believe that our historical financial position has made it difficult to access standard sources for capital. We have limited assets on which a lender might seek a security interest to provide loans or a line of credit. We have been able to utilize the accounts receivable base of Samba as a means to locally fund the subsidiary. However, no such base exists with us. Since we have no asset base against which to arrange secured loans, we must deal with unsecured lending. The terms and conditions of the $500,000 convertible promissory note issued in September 2000 to Azimuth Corporation are identical to two other convertible promissory notes issued to unaffiliated third parties. In transactions in which we have borrowed short-term funds for brief periods of time, such funds were not available to us from any other sources. Accordingly, our board of directors believes that the interest rates and additional consideration paid to Azimuth Corporation for these short-term loans are in accordance with what other companies might be required to pay for such loans were their financial circumstances similar to ours. The terms of each loan were approved by all members of the board who are not affiliated with Azimuth Corporation. We have negotiated similar compensation terms for all individuals, groups, or companies, who provide placement or finders services in private offering of equity or debt. The exercise price of warrants issued as compensation related to finders services has varied depending on the price of the offering. Affiliated parties were treated the same as all other outside parties providing finders services. PLAN OF DISTRIBUTION We are registering the common stock on behalf of the selling stockholders. The common stock may be offered and sold by the selling stockholders, or by purchasers, transferees, donees, pledgees or other successors in interest, directly or through brokers, dealers, agents or underwriters who may receive compensation in the form of discounts, commissions or similar selling expenses paid by the selling stockholders or by a purchaser of the common stock on whose behalf such broker-dealer may act as agent. Sales and transfers of the common stock may be effected from time to time in one or more transactions, in private or public transactions, in the over-the-counter market, in negotiated transactions or otherwise, at a fixed price or prices that may be changed, at market prices prevailing at the time of sale, at negotiated prices, without consideration or by any other legally available means. The selling stockholders may sell any or all of the common stock from time to time in one or more of the following methods: - ordinary brokers transactions, which may include long or short sales; - transactions involving cross or block trades or otherwise on the Over-the-Counter Bulletin Board; - purchases by brokers, dealers or underwriters as principal and resales by such purchasers for their own accounts under this prospectus; - "at the market" offerings to or through market makers or into an existing market for the common stock; - in other ways not involving market makers or established trading markets, including direct sales to purchasers or sales effected through agents; - through transactions in options, swaps or other derivatives (whether exchange listed or otherwise); or - any combination of the above. In addition, the selling stockholders or successors in interest may enter into hedging transactions with broker-dealers who may engage in short sales of common stock in the course of hedging the positions they assume with the selling stockholders. The selling stockholders or successors in interest may also enter into 23 option or other transactions with broker-dealers that require delivery by such broker-dealers of the common stock, which common stock may be resold thereafter under this prospectus. Brokers, dealers, underwriters or agents participating in the distribution of the common stock may receive compensation in the form of discounts, concessions or commissions from the selling stockholders and/or the purchasers of common stock for whom such broker-dealers may act as agent or to whom they may sell as principal, or both (which compensation as to a particular broker-dealer may be in excess of customary commissions). The selling stockholders and any broker-dealers acting in connection with the sale of the common stock by this prospectus may be deemed to be underwriters within the meaning of Section 2(11) of the Securities Act, and any commissions received by them and any profit realized by them on the resale of common stock as principals may be underwriting compensation under the Securities Act. Neither we nor the selling stockholders can presently estimate the amount of such compensation. We do not know of any existing arrangements between the selling stockholders and any other stockholder, broker, dealer, underwriter or agent relating to the sale or distribution of the common stock. The selling stockholders and any other persons participating in a distribution of securities will be subject to applicable provisions of the Securities Exchange Act and the rules and regulations thereunder, including, without limitation, Regulation M, which may restrict certain activities of, and limit the timing of purchases and sales of securities by, the selling stockholders and other persons participating in a distribution of securities. Furthermore, under Regulation M, persons engaged in a distribution of securities are prohibited from simultaneously engaging in market making and certain other activities with respect to such securities for a specified period of time prior to the commencement of such distributions subject to specified exceptions or exemptions. Any securities covered by this prospectus that qualify for sale under Rule 144 under the Securities Act may be sold under that rule rather than under this prospectus. We cannot assure you that the selling stockholders will sell any or all of the shares of common stock offered by this prospectus. In order to comply with the securities laws of certain states, if applicable, the selling stockholders will sell the common stock in jurisdictions only through registered or licensed brokers or dealers. In addition, in certain states, the selling stockholders may not sell the common stock unless the shares of common stock have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with. We will not receive any proceeds from the sale of the common stock covered by this prospectus. We have agreed to pay all of the expenses incident to the registration of the common stock, other than discounts and selling concessions or commissions, if any, and fees and expenses of counsel for the selling stockholders, if any. DESCRIPTION OF CAPITAL STOCK GENERAL We have set forth in this section a description of certain rights and preferences of our convertible preferred stock as well as our other outstanding securities and contractual obligations because we believe they are materially relevant to an investor's understanding of an investment in our shares of common stock. Our authorized capital stock consists of 55,000,000 shares, consisting of 50,000,000 shares of common stock, par value $0.001 per share, and 5,000,000 shares of preferred stock, par value $0.001 per share. On February 8, 2002 we had: - 25,167,501 shares of common stock issued and outstanding; - 590,197 shares of Series A convertible preferred stock of which 548,908 were issued and outstanding; 24 - 1,500,000 shares of Series B convertible preferred stock of which 1,357,356 were issued and outstanding; - 1,666,666 shares of Series C convertible preferred stock of which 1,331,499 were issued and outstanding; - 300,000 shares of Series D convertible preferred stock of which 175,000 were issued and outstanding; - 800,000 shares of Series E convertible preferred stock of which 434,363.52 were issued and outstanding; - warrants that entitle the holders the right to purchase 9,986,244 shares of common stock at prices ranging from $0.01 to $23.75; - $1,049,000 aggregate principal amount convertible promissory notes that entitle the holders to purchase 1,022,500 shares of common stock; and - options that entitle the holders to purchase 3,468,722 shares of common stock at prices ranging from $0.39 to $36.08. If and when we implement the reverse stock split that our stockholders approved in May 2001, each three shares of our issued and outstanding common stock will be converted into one share of common stock and the conversion rights of our convertible securities will be correspondingly adjusted. The reverse stock split will not affect the number of shares we are authorized to issue. COMMON STOCK Each share of our common stock has the same relative rights and is identical in all respects with each other share of common stock. Subject to any prior rights of the holders of any preferred stock then outstanding, holders of our common stock are entitled to receive such dividends as are declared by our board of directors out of funds legally available therefor. Full voting rights are vested in the holders of common stock, each share being entitled to one vote, subject to the rights of the holders of any preferred stock then outstanding. Our board of directors may issue authorized shares of common stock without stockholder approval. Subject to any prior rights of the holders of any preferred stock then outstanding, in the event of our liquidation, dissolution or winding up, holders of shares of our common stock are entitled to receive, pro rata, any assets distributable to stockholders with respect to shares held by them. Holders of shares of common stock do not have any preemptive rights to subscribe for any additional securities which may be issued by us or any cumulative voting rights. The outstanding shares of our common stock are fully paid and non-assessable. PREFERRED STOCK Our preferred stock may be issued in one or more series at such time or times and for such consideration as our board of directors may determine. Our board of directors is expressly authorized at any time, and from time to time, to provide for the issuance of preferred stock with such voting rights and other powers, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions, as shall be stated in the resolution authorizing the particular series of preferred stock. Our board of directors is authorized to designate the series and the number of shares comprising such series, the dividend rate, the redemption rights, if any, any purchase, retirement or sinking fund provisions, any conversion rights and any special voting rights with respect to the shares of such series. The ability of our board of directors to issue preferred stock without stockholder approval could make an acquisition by an unwanted suitor of a controlling interest in us more difficult, time-consuming or costly, or otherwise discourage an attempt to acquire control of us. Shares of preferred stock redeemed or acquired by us may return to the status of authorized but unissued shares, without designation as to series, and may be reissued by our board of directors. 25 SERIES A CONVERTIBLE PREFERRED STOCK We are authorized to issue 590,197 shares of Series A convertible preferred stock, of which 548,908 shares were issued and outstanding as of February 8, 2002. Each share of Series A convertible preferred stock has a stated value of $4.50 and a conversion price of $10.3034, subject to antidilution adjustment. The Series A convertible preferred stock ranks senior to our common stock and on parity with our other issued and outstanding preferred stock. We may issue other series of preferred stock at any time and from time to time without the consent of the holders of the Series A convertible preferred stock. DIVIDENDS Shares of the Series A convertible preferred stock pay no dividends. VOTING RIGHTS The holders of the Series A convertible preferred stock have no right to vote on any matter except as required by Delaware law. If the Series A convertible preferred stock is entitled to vote with the holders of common stock as one class, each share of Series A convertible preferred stock shall entitle the holder to the number of votes that equals the number of shares of common stock into which each share of Series A convertible preferred stock is convertible. Without first obtaining the approval of a majority of the shares of Series A convertible preferred stock then outstanding, we may not repeal, amend or change the Series A convertible preferred stock Certificate of Designations or our Certificate of Incorporation to alter or change the powers, preferences or rights of the Series A convertible preferred stock so as to affect them adversely. LIQUIDATION The liquidation preference of the Series A convertible preferred stock is $4.50 per share. Upon liquidation, dissolution or winding up of Molecular Diagnostics, each holder of the Series A convertible preferred stock is entitled to be paid in cash out of our assets available for distribution to shareholders an amount equal to the liquidation preference of the Series A convertible preferred stock before any amounts may be paid to any class or series of capital stock ranking junior to the Series A convertible preferred stock. If the assets available for distribution to the holders of Series A convertible preferred stock and any other security ranking on parity with the preferred stock are insufficient to pay in full all amounts payable to the holders of the Series A convertible preferred stock and all other parity securities, then all of the assets available for distribution to the holders of the Series A convertible preferred stock and parity securities will be distributed among the holders ratably in proportion to the amounts that would be payable if there were sufficient assets to permit payment in full. After payment in full, the holders of the Series A convertible preferred stock will not be entitled to any further distribution of assets. A merger or consolidation will be considered a liquidation event in certain circumstances. RESERVATION OF SHARES We have authorized and will reserve and keep available a sufficient number of shares of our common stock as will be issuable upon the conversion of all outstanding shares of Series A convertible preferred stock and dividends payable thereon. These shares of our common stock, when issued, will be duly and validly issued, fully paid and non-assessable, and free of liens. REDEMPTION Shares of the Series A convertible preferred stock are not redeemable. SINKING FUND There is no sinking fund for the Series A convertible preferred stock. 26 CONVERSION Shares of Series A convertible preferred stock are convertible, at any time, at the option of the holder into shares of common stock. Each share of the Series A convertible preferred stock is convertible into such number of shares of our common stock as is determined by dividing the $4.50 stated value by the then effective conversion price (currently $10.3034), which is referred to as the conversion rate. The conversion rate is currently 0.4367. If during the three year period beginning March 1, 2001, the then current market price of our common stock equals or exceeds $13.50 per share for any 20 consecutive trading days commencing 45 business days before the date in question, we may elect to convert all the then outstanding shares of Series A convertible preferred stock into common stock at the then effective conversion rate. ADJUSTMENTS TO CONVERSION PRICE The conversion price and the number of shares of common stock issuable upon conversion of the Series A convertible preferred stock are subject to adjustment from time to time upon the occurrence of any of the following events at any time: - If we (A) issue common stock as a dividend or a distribution with respect to any class or series of our capital stock, (B) split or otherwise subdivide our common stock , (C) combine our outstanding shares of common stock into a greater or smaller number of shares, or (D) issue any shares of capital stock in a reclassification; - If there occurs a merger, consolidation, recapitalization or conveyance of all or substantially all of our assets. The conversion price and the conversion rate will be adjusted when we implement the reverse stock split. FRACTIONAL SHARES We will not issue any fractional shares of common stock upon the conversion of the Series A convertible preferred stock but rather will pay cash based on the then current market price per share of our common stock. SERIES B CONVERTIBLE PREFERRED STOCK We are authorized to issue 1,500,000 shares of Series B convertible preferred stock, of which 1,357,356 shares were outstanding as of February 8, 2002. Each share of Series B convertible preferred stock has a stated value of $4 and a conversion price of $1, subject to antidilution adjustment. The Series B convertible preferred stock ranks senior to our common stock and on parity with our other issued and outstanding preferred stock. We may issue other series of preferred stock at any time and from time to time without the consent of the holders of the Series B convertible preferred stock. DIVIDENDS Shares of the Series B convertible preferred stock accrue dividends on a quarterly basis at an annual rate of 10% per share payable on the last day of March, June, September and December, commencing March 31, 2001, out of any assets or funds legally available for payment of dividends. Dividends are cumulative and accrue, whether or not declared by our board of directors, but can only be declared or paid and set apart for payment if full cumulative dividends for all prior quarterly dividend periods then outstanding shall have been or shall be concurrently paid or declared and set apart for payment. We may not pay any dividends or any distribution on any class or series of capital stock ranking junior to the Series B convertible preferred stock except dividends payable in shares of our stock of any class junior to the preferred stock, and we may not repurchase or redeem any junior stock, if any dividends on the Series B convertible preferred stock are then in arrears. 27 VOTING RIGHTS The holders of the Series B convertible preferred stock have no right to vote on any matter except as required by Delaware law. If the Series B convertible preferred stock is entitled to vote with the holders of common stock as one class, each share of Series B convertible preferred stock shall entitle the holder to the number of votes that equals the number of shares of common stock into which each share of Series B convertible preferred stock is convertible. Without first obtaining the approval of a majority of the shares of Series B convertible preferred stock then outstanding, we may not repeal, amend or change the Series B convertible preferred stock Certificate of Designations or our Certificate of Incorporation to alter or change the powers, preferences or rights of the Series B convertible preferred stock so as to affect them adversely. LIQUIDATION The liquidation preference of the Series B convertible preferred stock is $4 per share plus all accrued but unpaid dividends. Upon liquidation, dissolution or winding up of Molecular Diagnostics, each holder of the Series B convertible preferred stock is entitled to be paid in cash out of our assets available for distribution to shareholders an amount equal to the liquidation preference of the Series B convertible preferred stock before any amounts may be paid to any class or series of capital stock ranking junior to the Series B convertible preferred stock. If the assets available for distribution to the holders of Series B convertible preferred stock and any other security ranking on parity with the preferred stock are insufficient to pay in full all amounts payable to the holders of the Series B convertible preferred stock and all other parity securities, then all of the assets available for distribution to the holders of the Series B convertible preferred stock and parity securities will be distributed among the holders ratably in proportion to the amounts that would be payable if there were sufficient assets to permit payment in full. After payment in full, the holders of the Series B convertible preferred stock will not be entitled to any further distribution of assets. A merger or consolidation will be considered a liquidation event in certain circumstances. RESERVATION OF SHARES We have authorized and will reserve and keep available a sufficient number of shares of our common stock as will be issuable upon the conversion of all outstanding shares of Series B convertible preferred stock and dividends payable thereon. These shares of our common stock, when issued, will be duly and validly issued, fully paid and non-assessable, and free of liens. REDEMPTION Shares of the Series B convertible preferred stock are not redeemable. SINKING FUND There is no sinking fund for the Series B convertible preferred stock. CONVERSION Shares of Series B convertible preferred stock are convertible, at any time, at the option of the holder, into shares of common stock. Each share of the Series B convertible preferred stock is convertible into such number of shares of our common stock as is determined by dividing the $4 stated value per share plus all accrued but unpaid dividends by the then effective conversion price (currently $1), which is referred to as the conversion rate. If the then current market price of our common stock equals or exceeds $4 per share for any 40 consecutive trading days, we may elect to convert all outstanding shares of Series B convertible preferred stock into common stock at the then effective conversion rate. If for any reason we do not pay any portion of the accrued dividends on the Series B convertible preferred stock being converted, we may pay that portion of unpaid dividends in shares of common stock. 28 ADJUSTMENTS TO CONVERSION PRICE The conversion price and the number of shares of common stock issuable upon conversion of the Series B convertible preferred stock are subject to adjustment from time to time upon the occurrence of any of the following events at any time: - If we (A) issue common stock as a dividend or a distribution with respect to any class or series of our capital stock, (B) split or otherwise subdivide our common stock, (C) combine our outstanding shares of common stock into a greater or smaller number of shares, or (D) issue any shares of capital stock in a reclassification; - If there occurs a merger, consolidation, recapitalization or conveyance of all or substantially all of our assets. The conversion price and the conversion rate will be adjusted when we implement the reverse stock split. FRACTIONAL SHARES We will not issue any fractional shares of common stock upon the conversion of the Series B convertible preferred stock but rather will pay cash based on the then current market price per share of our common stock. SERIES C CONVERTIBLE PREFERRED STOCK We are authorized to issue 1,666,666 shares of Series C convertible preferred stock, of which 1,331,499 were issued and outstanding as of February 8, 2002. Each share of Series C convertible preferred stock has a stated value of $3 and a conversion price of $0.60, subject to antidilution adjustment. The Series C convertible preferred stock ranks senior to our common stock and on parity with our other issued and outstanding preferred stock. We may issue other series of preferred stock at any time and from time to time without the consent of the holders of the Series C convertible preferred stock. DIVIDENDS Shares of the Series C convertible preferred stock accrue dividends on a semi-annual basis at an annual rate of 10% per share payable on the last day of March and September, commencing March 31, 2002, out of any assets or funds legally available for payment of dividends. Dividends are cumulative and accrue, whether or not declared by our board of directors, but can only be declared or paid and set apart for payment if full cumulative dividends for all prior dividend periods then outstanding shall have been or shall be concurrently paid or declared and set apart for payment. Dividends are payable in cash provided that we may pay the dividends for the first two years in cash or in shares of our common stock. We may not pay any dividends or any distribution on any class or series of capital stock ranking junior to the Series C convertible preferred stock except dividends payable in shares of our stock of any class junior to the preferred stock, and we may not repurchase or redeem any junior stock, if any dividends on the Series C convertible preferred stock are then in arrears. VOTING RIGHTS The holders of the Series C convertible preferred stock have no right to vote on any matter except as required by Delaware law. If the Series C convertible preferred stock is entitled to vote with the holders of common stock as one class, each share of Series C convertible preferred stock shall entitle the holder to the number of votes that equals the number of shares of common stock into which each share of Series C convertible preferred stock is convertible. Without first obtaining the approval of a majority of the shares of Series C convertible preferred stock then outstanding, we may not repeal, amend or change the Series C convertible preferred stock Certificate of Designations or our Certificate of Incorporation to alter or change the powers, preferences or rights of the Series C convertible preferred stock so as to affect them adversely. 29 LIQUIDATION The liquidation preference of the Series C convertible preferred stock is $3 per share plus all accrued but unpaid dividends. Upon liquidation, dissolution or winding up of Molecular Diagnostics, each holder of the Series C convertible preferred stock is entitled to be paid in cash out of our assets available for distribution to shareholders an amount equal to the liquidation preference of the Series C convertible preferred stock before any amounts may be paid to any class or series of capital stock ranking junior to the Series C convertible preferred stock. If the assets available for distribution to the holders of Series C convertible preferred stock and any other security ranking on parity with the preferred stock are insufficient to pay in full all amounts payable to the holders of the Series C convertible preferred stock and all other parity securities, then all of the assets available for distribution to the holders of the Series C convertible preferred stock and parity securities will be distributed among the holders ratably in proportion to the amounts that would be payable if there were sufficient assets to permit payment in full. After payment in full, the holders of the Series C convertible preferred stock will not be entitled to any further distribution of assets. A merger or consolidation will be considered a liquidation event in certain circumstances. RESERVATION OF SHARES We will have authorized and reserved a sufficient number of shares of our common stock as will be issuable upon the conversion of all outstanding shares of Series C convertible preferred stock and dividends payable thereon if we implement the reverse stock split or amend our certificate of incorporation to increase the number of authorized shares of common stock. These shares of our common stock, when issued, will be duly and validly issued, fully paid and non-assessable, and free of liens. REDEMPTION Shares of the Series C convertible preferred stock are not redeemable. SINKING FUND There is no sinking fund for the Series C convertible preferred stock. CONVERSION Shares of Series C convertible preferred stock are convertible, at any time at the option of the holder, into shares of common stock. Each share of the Series C convertible preferred stock is convertible into such number of shares of our common stock as is determined by dividing the $3 stated value per share plus all accrued but unpaid dividends by the then effective conversion price, which is referred to as the conversion rate. ADJUSTMENTS TO CONVERSION PRICE The conversion price and the number of shares of common stock issuable upon conversion of the Series C convertible preferred stock are subject to adjustment from time to time upon the occurrence of any of the following events at any time: - If we (A) issue common stock as a dividend or a distribution with respect to any class or series of our capital stock, (B) split or otherwise subdivide our common stock, (C) combine our outstanding shares of common stock into a greater or smaller number of shares, or (D) issue any shares of capital stock in a reclassification; - If there occurs a merger, consolidation, recapitalization or conveyance of all or substantially all of our assets. 30 FRACTIONAL SHARES We will not issue any fractional shares of common stock upon the conversion of the Series C convertible preferred stock but rather will pay cash based on the then current market price per share of our common stock. SERIES D CONVERTIBLE PREFERRED STOCK We are authorized to issue 300,000 shares of Series D convertible preferred stock, of which 175,000 were issued and outstanding as of February 8, 2002. Each share of Series D convertible preferred stock has a stated value of $10 and a conversion price of $1, subject to antidilution adjustment. The Series D convertible preferred stock ranks senior to our common stock and on parity with our other outstanding preferred stock. We may issue other series of preferred stock at any time and from time to time without the consent of the holders of the Series D convertible preferred stock. DIVIDENDS Shares of the Series D convertible preferred stock accrue dividends on a semi-annual basis at an annual rate of 10% per share payable on the last day of April and October, commencing April 30, 2002, out of any assets or funds legally available for payment of dividends. Dividends are cumulative and accrue, whether or not declared by our board of directors, but can only be declared or paid and set apart for payment if full cumulative dividends for all prior dividend periods then outstanding shall have been or shall be concurrently paid or declared and set apart for payment. Dividends are payable in cash provided that we may pay the dividends for the first two years in cash or in shares of our common stock. We may not pay any dividends or any distribution on any class or series of capital stock ranking junior to the Series D convertible preferred stock except dividends payable in shares of our stock of any class junior to the preferred stock, and we may not repurchase or redeem any junior stock, if any dividends on the Series D convertible preferred stock are then in arrears. VOTING RIGHTS The holders of the Series D convertible preferred stock have no right to vote on any matter except as required by Delaware law. If the Series D convertible preferred stock is entitled to vote with the holders of common stock as one class, each share of Series D convertible preferred stock shall entitle the holder to the number of votes that equals the number of shares of common stock into which each share of Series D convertible preferred stock is convertible. Without first obtaining the approval of a majority of the shares of Series D convertible preferred stock then outstanding, we may not repeal, amend or change the Series D convertible preferred stock Certificate of Designations or our Certificate of Incorporation to alter or change the powers, preferences or rights of the Series D convertible preferred stock so as to affect them adversely. LIQUIDATION The liquidation preference of the Series D convertible preferred stock is $10 per share plus all accrued but unpaid dividends. Upon liquidation, dissolution or winding up of Molecular Diagnostics, each holder of the Series D convertible preferred stock is entitled to be paid in cash out of our assets available for distribution to shareholders an amount equal to the liquidation preference of the Series D convertible preferred stock before any amounts may be paid to any class or series of capital stock ranking junior to the Series D convertible preferred stock. If the assets available for distribution to the holders of Series D convertible preferred stock and any other security ranking on parity with the preferred stock are insufficient to pay in full all amounts payable to the holders of the Series D convertible preferred stock and all other parity securities, then all of the assets available for distribution to the holders of the Series D convertible preferred stock and parity securities will be distributed among the holders ratably in proportion to the amounts that would be payable if there were sufficient assets to permit payment in full. After payment in full, the holders of the Series D convertible 31 preferred stock will not be entitled to any further distribution of assets. A merger or consolidation will be considered a liquidation event in certain circumstances. RESERVATION OF SHARES We will have authorized and reserved a sufficient number of shares of our common stock as will be issuable upon the conversion of all outstanding shares of Series D convertible preferred stock and dividends payable thereon if we implement the reverse stock split or amend our certificate of incorporation to increase the number of authorized shares of common stock. These shares of our common stock, when issued, will be duly and validly issued, fully paid and non-assessable, and free of liens. REDEMPTION Shares of the Series D convertible preferred stock are not redeemable. SINKING FUND There is no sinking fund for the Series D convertible preferred stock. CONVERSION Shares of Series D convertible preferred stock are convertible, at any time after April 1, 2002, at the option of the holder, into shares of common stock. Each share of the Series D convertible preferred stock is convertible into such number of shares of our common stock as is determined by dividing the $10 stated value per share plus all accrued but unpaid dividends by the then effective conversion price, which is referred to as the conversion rate. If the then current market price of our common stock equals or exceeds $5 per share for any 20 consecutive trading days, we may elect to convert all outstanding shares of Series D convertible preferred stock into common stock at the then effective conversion rate. If for any reason we do not pay any portion of the accrued dividends on the Series D convertible preferred stock being converted, we may pay that portion of unpaid dividends in shares of common stock. ADJUSTMENTS TO CONVERSION PRICE The conversion price and the number of shares of common stock issuable upon conversion of the Series D convertible preferred stock are subject to adjustment from time to time upon the occurrence of any of the following events at any time: - If we (A) issue common stock as a dividend or a distribution with respect to any class or series of our capital stock, (B) split or otherwise subdivide our common stock, (C) combine our outstanding shares of common stock into a greater or smaller number of shares, or (D) issue any shares of capital stock in a reclassification; - If there occurs a merger, consolidation, recapitalization or conveyance of all or substantially all of our assets. The conversion price and the conversion rate will be adjusted when we implement the reverse stock split. FRACTIONAL SHARES We will not issue any fractional shares of common stock upon the conversion of the Series D convertible preferred stock but rather will pay cash based on the then current market price per share of our common stock. SERIES E CONVERTIBLE PREFERRED STOCK We are authorized to issue 800,000 shares of Series E convertible preferred stock, of which 434,363.52 were issued and outstanding as of February 8, 2002. Each share of Series E convertible preferred stock has a 32 stated value of $22 and a conversion price of $0.80, subject to antidilution adjustment. The Series E convertible preferred stock ranks senior to our common stock and on parity with our other outstanding preferred stock. We may issue other series of preferred stock at any time and from time to time without the consent of the holders of the Series E convertible preferred stock. DIVIDENDS Shares of the Series E convertible preferred stock accrue dividends on a semi-annual basis at an annual rate of 10% per share payable on the last day of May and November, commencing May 31, 2002, out of any assets or funds legally available for payment of dividends. Dividends are cumulative and accrue, whether or not declared by our board of directors, but can only be declared or paid and set apart for payment if full cumulative dividends for all prior dividend periods then outstanding shall have been or shall be concurrently paid or declared and set apart for payment. Dividends are payable in cash provided that we may pay the dividends for the first two years in cash or in shares of our common stock. The dividend rate increases to 20% per share if after December 1, 2002 we have not reserved sufficient shares of common stock to allow for the conversion of all shares of Series E convertible preferred stock. We may not pay any dividends or any distribution on any class or series of capital stock ranking junior to the Series E convertible preferred stock except dividends payable in shares of our stock of any class junior to the preferred stock, and we may not repurchase or redeem any junior stock, if any dividends on the Series E convertible preferred stock are then in arrears. VOTING RIGHTS The holders of the Series E convertible preferred stock shall be entitled to vote on any matter on which the holders of common stock are entitled to vote. If the Series E convertible preferred stock is entitled to vote with the holders of common stock as one class, each share of Series E convertible preferred stock shall entitle the holder to the number of votes that equals the number of shares of common stock into which each share of Series E convertible preferred stock is convertible. Without first obtaining the approval of a majority of the shares of Series E convertible preferred stock then outstanding, we may not repeal, amend or change the Series E convertible preferred stock Certificate of Designations or our Certificate of Incorporation to alter or change the powers, preferences or rights of the Series E convertible preferred stock so as to affect them adversely. LIQUIDATION The liquidation preference of the Series E convertible preferred stock is $22 per share plus all accrued but unpaid dividends. Upon liquidation, dissolution or winding up of Molecular Diagnostics, each holder of the Series E convertible preferred stock is entitled to be paid in cash out of our assets available for distribution to shareholders an amount equal to the liquidation preference of the Series E convertible preferred stock before any amounts may be paid to any class or series of capital stock ranking junior to the Series E convertible preferred stock. If the assets available for distribution to the holders of Series E convertible preferred stock and any other security ranking on parity with the preferred stock are insufficient to pay in full all amounts payable to the holders of the Series E convertible preferred stock and all other parity securities, then all of the assets available for distribution to the holders of the Series E convertible preferred stock and parity securities will be distributed among the holders ratably in proportion to the amounts that would be payable if there were sufficient assets to permit payment in full. After payment in full, the holders of the Series E convertible preferred stock will not be entitled to any further distribution of assets. A merger or consolidation will be considered a liquidation event in certain circumstances. RESERVATION OF SHARES We will have authorized and reserved a sufficient number of shares of our common stock as will be issuable upon the conversion of all outstanding shares of Series E convertible preferred stock and dividends 33 payable thereon if we implement the reverse stock split or amend our certificate of incorporation to increase the number of authorized shares of common stock. These shares of our common stock, when issued, will be duly and validly issued, fully paid and non-assessable, and free of liens. REDEMPTION Shares of the Series E convertible preferred stock are not redeemable. SINKING FUND There is no sinking fund for the Series E convertible preferred stock. CONVERSION Shares of Series E convertible preferred stock are convertible, at any time after December 1, 2002, at the option of the holder, into shares of common stock. Each share of the Series E convertible preferred stock is convertible into such number of shares of our common stock as is determined by dividing the $22 stated value per share plus all accrued but unpaid dividends by the then effective conversion price, which is referred to as the conversion rate. If the then current market price of our common stock equals or exceeds $22 per share for any 20 consecutive trading days, we may elect to convert all outstanding shares of Series E convertible preferred stock into common stock at the then effective conversion rate. If for any reason we do not pay any portion of the accrued dividends on the Series E convertible preferred stock being converted, we may pay that portion of unpaid dividends in shares of common stock. ADJUSTMENTS TO CONVERSION PRICE The conversion price and the number of shares of common stock issuable upon conversion of the Series E convertible preferred stock are subject to adjustment from time to time upon the occurrence of any of the following events at any time: - If we (A) issue common stock as a dividend or a distribution with respect to any class or series of our capital stock, (B) split or otherwise subdivide our common stock, (C) combine our outstanding shares of common stock into a greater or smaller number of shares, or (D) issue any shares of capital stock in a reclassification; - If there occurs a merger, consolidation, recapitalization or conveyance of all or substantially all of our assets. - The conversion price and the conversion rate will be adjusted when we implement the reverse stock split. FRACTIONAL SHARES We will not issue any fractional shares of common stock upon the conversion of the Series E convertible preferred stock but rather will pay cash based on the then current market price per share of our common stock. COMMON STOCK PURCHASE WARRANTS As of February 8, 2002, we have outstanding 9,986,244 common stock purchase warrants, each entitling the holder the right to purchase one share of our common stock. These common stock purchase warrants have exercise prices ranging from $0.01 to $23.75. Common stock purchase warrants not exercised by their respective expiration dates will expire. 34 ADJUSTMENTS TO EXERCISE PRICE The exercise price and the number of shares of common stock issuable upon the exercise of the common stock purchase warrants is subject to adjustment from time to time upon the occurrence of any of the following events: - If we (A) subdivide shares of our common stock, (B) declare a dividend upon our common stock payable solely in shares of our common stock, (C) reclassify or change our common stock into different securities, or (D) make a distribution on our capital stock other than regular cash dividends. The common stock purchase warrants will be adjusted on the same basis as the common stock if and when we implement the reverse stock split. RESERVATION OF SHARES We will have reserved a sufficient number of shares of our common stock as will be issuable upon exercise of all outstanding common stock purchase warrants if we implement the reverse stock split or amend our certificate of incorporation to increase the authorized number of shares of common stock. Upon issuance, these shares of common stock will be duly and validly issued, fully paid and non-assessable, free of all preemptive rights and taxes. VOTING The holders of the common stock purchase warrants have no right to vote on matters submitted to shareholders and have no right to receive dividends. LISTING There is no public trading market for the common stock purchase warrants. FRACTIONAL SHARES We will not issue fractional shares of common stock upon exercise of the common stock purchase warrants but rather will pay the holder an amount in cash equal to the fair market value of any fractional interest. REGISTRATION RIGHTS We are obligated to register the resale of the common stock into which the common stock purchase warrants are exercisable provided more than one year has elapsed from the issuance of the relevant common stock purchase warrant. If we fail to make a filing with the SEC to register the underlying common stock within 30 days of the holder's request, the holder is entitled to receive from us in cash the difference between the exercise price and the average closing price of our common stock during the 30 calendar days immediately following the holder's request to register the common stock purchase warrants. In addition to the common stock purchase warrants described above, we have issued warrants for services rendered and in connection with financings. These warrants have the same characteristics as the common stock purchase warrants described above with respect to reservation of shares, voting, listing and fractional shares. The particular additional terms of these warrants are as follows: AZIMUTH/CADMUS/NORTHLEA/VENTANA COMMON STOCK PURCHASE WARRANTS On February 7, 2001, we issued a warrant to Azimuth Corporation entitling Azimuth to purchase 1,000,000 shares of our common stock at an exercise price of $0.25 per share, subject to the antidilution adjustments described below. The Azimuth warrant expires February 7, 2006. On August 6, 2001, we issued warrants to Azimuth Corporation, Cadmus Corporation and Northlea Partners entitling the holders to purchase 250,000, 250,000 and 62,500 shares respectively of our common 35 stock at an exercise price of $1 per share subject to the antidilution adjustments described below. These warrants expire August 6, 2006. On November 2, 2001 we issued a warrant to Ventana Medical Systems, Inc. to purchase 1,750,000 shares of our common stock at an exercise price of $1.15 per share, subject to the antidilution adjustments described below. The Ventana warrant expires November 2, 2004. ADJUSTMENTS TO EXERCISE PRICE The exercise price and the number of shares of common stock issuable upon the exercise of these warrants are subject to adjustment from time to time upon the occurrence of any of the following events: - If we (A) pay a dividend or make a distribution of common stock or (B) subdivide or combine outstanding shares of our common stock; - If we issue or sell any shares of our common stock at a price per share less than the exercise price; - If we dividend or otherwise issue or sell any securities convertible into our common stock; - If we (A) merge or consolidate with another entity, (B) sell, lease or otherwise transfer all or substantially all of our property or assets or (C) effect a capital reorganization or recapitalization of our common stock. BATHGATE WARRANTS On February 28, 2001, we issued warrants pursuant to a warrant agreement with Bathgate McColley Capital Group, LLC, entitling the holders of those warrants to purchase an aggregate of 227,500 shares of our common stock at an exercise price of $1.20 per share subject to the antidilution adjustments described below. The Bathgate warrants expire February 28, 2006. ADJUSTMENTS TO EXERCISE PRICE The exercise price and the number of shares of common stock issuable upon the exercise of the Bathgate warrants are subject to adjustment from time to time upon the occurrence of any of the following events: - If we (A) pay a dividend or make a distribution to holders of our common stock, (B) subdivide or combine our outstanding shares of our common stock, or (C) issue by reclassification of our common stock other securities; - If we issue rights, options, warrants or convertible securities to all or substantially all holders of our common stock, without charge, entitling them to purchase common stock below the then current market value per share of common stock on the date of issuance; - If we distribute to holders of common stock all or substantially all evidences of indebtedness of assets or rights, options, warrants or convertible securities containing the right to purchase our common stock; - If we (A) consolidate or merge with another entity, or (B) sell or convey all or substantially all of our property or assets of business. We may not merge or consolidate with another entity unless we make these adjustments. No adjustment to the Bathgate warrants will be made due to any dividends or distributions out of earnings or grants or exercises of currently authorized or outstanding options or issuance of shares under our benefit plans. HOLLEB WARRANT On July 15, 1999, we issued a warrant to Holleb & Coff entitling Holleb to purchase 250,000 shares of our common stock at an exercise price of $0.33 per share. The Holleb warrant expires July 14, 2009. 36 TUCKER ANTHONY WARRANT On July 10, 2001, we issued a warrant to Tucker Anthony Incorporated entitling Tucker Anthony to purchase 150,000 shares of our common stock at an exercise price of $1.20 subject to the antidilution adjustments described below. The Tucker Anthony warrant expires July 10, 2006. ADJUSTMENTS TO EXERCISE PRICE The exercise price and the number of shares of common stock issuable upon the exercise of the Tucker Anthony warrant is subject to adjustment from time to time upon the occurrence of any of the following events: - If we (A) declare a dividend on our outstanding common stock payable in shares of our capital stock; (B) subdivide or combine outstanding shares of our common stock into a greater or smaller number of shares; or (C) issue any shares of our capital stock by way of reclassification, including a merger or consolidation. CONVERTIBLE PROMISSORY NOTES We have issued two convertible promissory notes, one to Monsun A/S due April 1, 2002 and the other to NeoMed Innovations III, L.P. due May 15, 2002. Each promissory note is for the principal amount of $500,000. We also issued 200,000 warrants with an exercise price of $.30 per share to Monsun in consideration of Monsun extending the due date on their note. If we prepay the promissory notes, the holders, at their option, may elect to convert the promissory note, plus accrued interest, into shares of our common stock at the conversation rate of $1 per share. In addition, the number of shares of common stock the promissory notes are convertible into is subject to adjustment from time to time if we (A) subdivide, combine or reclassify our common stock, or (B) exchange our common stock for securities or property of another company. TRANSFER AGENT AND REGISTRAR The transfer agent and registrar of our common stock is LaSalle Bank National Association, Chicago, Illinois. LEGAL MATTERS The validity of the shares offered by this prospectus has been passed upon for us by Schiff Hardin & Waite, Chicago, Illinois. EXPERTS The consolidated financial statements of Molecular Diagnostics, Inc. (formerly named Ampersand Medical Corporation) appearing in our Form 10-K, as amended, for the year ended December 31, 2000, have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon (which contain an explanatory paragraph describing conditions that raise substantial doubt about Molecular Diagnostics' ability to continue as a going concern as described in Note 1 to the consolidated financial statements) included therein and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such report given on the authority of such firm as experts in accounting and auditing. 37 WHERE YOU CAN FIND MORE INFORMATION ABOUT US We file annual, quarterly and special reports and other information with the SEC. You may read and copy any document we file with the SEC in Washington, D.C. or at its regional offices located at: Public Reference Room Midwest Regional Office 450 Fifth Street, N.W. Citicorp Center Room 1024 500 West Madison Street Washington, D.C. 20549 Suite 1400 Chicago, Illinois 60661
You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a web site that contains reports, proxy statements and other information about issuers, like us, who file electronically. The address of that site is: http://www.sec.gov. Our common stock is listed on the Over-the-Counter Bulletin Board and reports and proxy statements and other information about us can be inspected at the offices of The Nasdaq-Amex Stock Market, Inc., 1735 K Street, N.W., Washington, DC 20006-1500. We filed with the SEC a registration statement on Form S-2 under the Securities Act that registers the shares of our common stock offered by this prospectus. This prospectus constitutes a part of the registration statement but does not contain all the information presented in the registration statement and its exhibits. For more information we refer you to the registration statement, including the exhibits. The SEC allows us to "incorporate by reference" information we file with the SEC, which means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is an important part of this prospectus. This prospectus incorporates by reference: - Annual Report on Form 10-K, as amended, for the year ended December 31, 2000; - Quarterly Report on Form 10-Q, as amended, for the quarter ended March 31, 2001; - Quarterly Report on Form 10-Q, as amended, for the quarter ended June 30, 2001; - Current Report on Form 8-K dated September 17, 2001; - Current Report on Form 8-K dated September 24, 2001; - Quarterly Report on Form 10-Q, as amended, for the quarter ended September 30, 2001; and - Current Report on Form 8-K dated December 31, 2001. You may request a copy of the documents incorporated by reference in this prospectus and not delivered with the prospectus at no cost by writing or by telephoning us at the following address: Molecular Diagnostics, Inc. 414 North Orleans Street Suite 510 Chicago, Illinois 60610 (312) 222-9550 Attention: Peter P. Gombrich We will not provide exhibits to documents unless they are specifically incorporated by reference. If you request any incorporated documents from us, we will mail them to you by first class mail, or another equally prompt means, within one business day after we receive your request. 38 DOCUMENTS DELIVERED WITH THIS PROSPECTUS We are delivering a copy of our Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 2000 and Quarterly Report on Form 10-Q, as amended, for the quarter ended September 30, 2001 with this prospectus. COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITY Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to our charter, bylaws or otherwise, we have been advised that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim of indemnification against such liabilities (other than the payment by us of expenses incurred or paid by one of our directors, officers or controlling persons in the successful defense of any action, suit or proceeding) is asserted by one of our directors, officers or controlling persons in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. 39 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 29,835,328 Shares Molecular Diagnostics, Inc. Common Stock PROSPECTUS February [ ], 2002 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable by Molecular Diagnostics, Inc. in connection with the sale of the common stock being registered. All amounts are estimates except the registration fees.
AMOUNT TO BE PAID ------------ SEC Registration Fee................................... $ 570 Printing............................................... * Legal Fees and Expenses................................ * Accounting Fees and Expenses........................... * Blue Sky Fees and Expenses............................. $ 0 Transfer Agent and Registrar Fees...................... * Miscellaneous.......................................... * -------- Total........................................ * ========
- --------------- * To be provided by amendment. ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS Section 145 of the Delaware General Corporation Law authorizes indemnification of directors, officers, employees and agents of Molecular Diagnostics; allows the advancement of costs of defending against litigation; and permits companies incorporated in Delaware to purchase insurance on behalf of directors, officers, employees and agents against liabilities whether or not in the circumstances such companies would have the power to indemnify against such liabilities under the provisions of the statute. Molecular Diagnostics' Certificate of Incorporation, a copy of which is incorporated hereto as Exhibit 3.1, and its By-Laws, which are incorporated hereto as Exhibit 3.2, provide for indemnification of its officers and directors to the fullest extent permitted by Section 145 of the Delaware General Corporation Law. Molecular Diagnostics' Certificate of Incorporation eliminates, to the fullest extent permitted by Delaware law, liability of a director to Molecular Diagnostics or its stockholders for monetary damages for a breach of such director's fiduciary duty of care except for liability where a director (a) breaches his or her duty of loyalty to Molecular Diagnostics or its stockholders, (b) fails to act in good faith or engages in intentional misconduct or knowing violation of law, (c) authorizes payment of an illegal dividend or a stock repurchase or (d) obtains an improper personal benefit. While liability for monetary damages has been eliminated, equitable remedies such as injunctive relief or rescission remain available. In addition, a director is not relieved of his responsibilities under any other law, including the federal securities laws. Molecular Diagnostics has obtained an insurance policy in the amount of $3,000,000 which (i) provides for the payment by the insurer of all amounts which Molecular Diagnostics may legally pay to officers and directors as indemnification, excluding certain fines and penalties which are legally uninsurable, and (ii) insures Molecular Diagnostics' officers and directors against certain claims which are not indemnified by Molecular Diagnostics. Insofar as indemnification by Molecular Diagnostics for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of Molecular Diagnostics pursuant to the foregoing provisions, Molecular Diagnostics has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. II-1 ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Exhibits
EXHIBIT NUMBER DESCRIPTION ------- ----------- 2.1 -- Agreement and Plan of Merger by and among AccuMed International, Inc., AccuMed Acquisition Corp. and Ampersand Medical Corporation, dated as of February 7, 2001. (Incorporated hereby in reference to Appendix I to Registration Statement No. 333-61666) 2.2 -- Amendment No. 1, dated May 14, 2001 to the Agreement and Plan of Merger by and among AccuMed International, Inc., AccuMed Acquisition Corp. and Ampersand Medical Corporation, dated February 7, 2001. (Incorporated hereby in reference to Appendix I to Registration Statement No. 333-61666) 3.1 -- Certificate of Incorporation of Molecular Diagnostics, Inc., as amended. (Incorporated herein by reference to the Company's Current Report on Form 8-K dated September 26, 2001.) 3.2 -- By-laws of the Company. (Incorporated herein by reference to Appendix E to the Bell National Corporation Definitive Proxy Statement filed on April 30, 1999.) 3.3 -- Section 6 of Article VII of the By-laws of the Company as amended. (Incorporated herein by reference to Exhibit 3.3 to the Company's S-4 Registration Statement, File No. 333-61666, filed August 24, 2001.) 3.4 -- Certificate of Designation, Preferences and Rights of Series C Convertible Preferred Stock of Molecular Diagnostics, Inc. 3.5 -- Certificate of Amendment of Certificate of Designation, Preferences and Rights of Series C Convertible Preferred Stock. 3.6 -- Certificate of Amendment of Amended Certificate of Designation, Preferences and Rights of Series C Convertible Preferred Stock. 3.7 -- Certificate of Designation, Preferences and Rights of Series D Convertible Preferred Stock. 3.8 -- Certificate of Designation, Preferences and Rights of Series E Convertible Preferred Stock. 4.1 -- Form of common stock Purchase Warrant, as executed by Bell National Corporation on December 4, 1998 with respect to each of Mr. Gombrich, Theodore L. Koenig, William J. Ritger, Fred H. Pearson, Walter Herbst, AccuMed International, Inc., Northlea Partners Ltd., and Monroe Investments, Inc. (collectively, the "InPath Members"). (Incorporated herein by reference to Exhibit 3 of the Schedule 13D filed jointly by the InPath Members on December 14, 1998.)* 4.2 -- Stockholders Agreement dated December 4, 1998 among the Company, Winchester National, Inc., the InPath Members, and Mr. Milley, Mr. Shaw, Cadmus, and MM I (collectively, the "Claimants"). (Incorporated herein by reference to Exhibit 2 to the Schedule 13D filed jointly by the InPath Members on December 14, 1998.)* 4.3 -- Form of Common Stock Purchase Warrant issued to Holleb & Coff on July 4, 1999 representing the right to purchase 250,000 shares of common stock of the Company in connection with legal services rendered. (Incorporated herein by reference to Exhibit 4.3 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.)*
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EXHIBIT NUMBER DESCRIPTION ------- ----------- 4.4 -- Form of Common Stock Purchase Warrant issued to The Research Works on October 11, 1999 representing the right to purchase 70,000 shares of common stock of the Company in connection with the preparation of an investment research report. (Incorporated herein by reference to Exhibit 4.4 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.)* 4.5 -- Form of Common Stock Purchase Warrant issued to Azimuth Corporation on December 10, 1999 representing the right to purchase 50,000 shares of common stock of the Company as additional consideration for a 12% Convertible Promissory Note issued on the same date. (Incorporated herein by reference to Exhibit 4.5 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.)* 4.6 -- Form of Common Stock Purchase Warrant issued to Richard Doermer on January 3, 2000 representing the right to purchase 96,250 shares of common stock of the Company in connection with financial advisory services rendered. (Incorporated by reference to Exhibit 4.6 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 4.7 -- Form of Common Stock Purchase Warrant issued to Richard Doermer on January 3, 2000 representing the right to purchase 75,759 shares of common stock of the Company in connection with financial advisory services rendered. (Incorporated by reference to Exhibit 4.7 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 4.8 -- Form of Common Stock Purchase Warrant issued to Richard Doermer on January 3, 2000 representing the right to purchase 121,313 shares of common stock of the Company in connection with financial advisory services rendered. (Incorporated by reference to Exhibit 4.8 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 4.9 -- Form of Common Stock Purchase Warrant issued to Richard Doermer on January 3, 2000 representing the right to purchase 94,697 shares of common stock of the Company in connection with financial advisory services rendered. (Incorporated by reference to Exhibit 4.9 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 4.10 -- Form of Common Stock Purchase Warrant issued to William J. Ritger on May 24, 2000 representing the right to purchase 531,614 shares of common stock of the Company in connection with financial advisory services rendered. (Incorporated by reference to Exhibit 4.10 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 4.11 -- Form of Common Stock Purchase Warrant issued to Denis M. O'Donnell on May 24, 2000 representing the right to purchase 784,901 shares of common stock of the Company in connection with financial advisory services rendered. (Incorporated by reference to Exhibit 4.11 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 4.12 -- Form of Common Stock Purchase Warrant issued to Prospektiva, SA on May 23, 2000 representing the right to purchase 48,333 shares of common stock of the Company in connection with financial advisory services rendered. (Incorporated by reference to Exhibit 4.12 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)*
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EXHIBIT NUMBER DESCRIPTION ------- ----------- 4.13 -- Form of Common Stock Purchase Warrant issued to Dr. Bruce Patterson, on September 12, 2000 representing the right to purchase 150,000 shares of common stock of the Company as additional consideration for the achievement of product development milestones under a License and Development Agreement for Specific Medical Technology for the Detection of Oncogenic HPV Virus. (Incorporated by reference to Exhibit 4.13 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 4.14 -- Form of Common Stock Purchase Warrant issued to Dr. Bruce Patterson, on September 12, 2000 representing the right to purchase 100,000 shares of common stock of the Company as consideration for an Addendum to a License and Development Agreement for Specific Medical Technology for the Detection of Oncogenic HPV Virus. (Incorporated by reference to Exhibit 4.14 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 4.15 -- Form of Common Stock Purchase Warrant issued to Osprey Partners, on November 22, 2000 representing the right to purchase 100,000 shares of common stock of the Company in connection with financial advisory services to be rendered over twelve months. (Incorporated by reference to Exhibit 4.15 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 4.16 -- Form of Common Stock Purchase Warrant issued to Univest Management, Inc. on November 22, 2000 representing the right to purchase 100,000 shares of common stock of the Company in connection with financial advisory services to be rendered over twelve months. (Incorporated by reference to Exhibit 4.16 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 4.17 -- Form of Common Stock Purchase Warrant issued to Azimuth Corporation on December 1, 2000 representing the right to purchase 50,000 shares of common stock of the Company as additional consideration for a 12% Promissory Note issued on December 4, 2000. (Incorporated by reference to Exhibit 4.17 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 4.18 -- Form of Common Stock Purchase Warrant issued to Azimuth Corporation on December 8, 2000 representing the right to purchase 1,000,000 shares of common stock of the Company as additional consideration for a 15% Promissory Note issued on December 11, 2000 in connection with the proposed acquisition of AccuMed International, Inc. by the Company. (Incorporated by reference to Exhibit 4.18 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 4.19 -- Form of Common Stock Purchase Warrant issued to Azimuth Corporation on February 7, 2001 representing the right to purchase 1,000,000 shares of common stock of the Company as additional consideration for two 15% Promissory notes issued on February 1, 2001 and February 7, 2001 in connection with the proposed acquisition of AccuMed International, Inc. by the Company. (Incorporated by reference to Exhibit 4.19 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 4.20 -- Common Stock Purchase Warrant issued to Azimuth Corporation on August 6, 2001 representing the right to purchase 250,000 shares of common stock of the Company as additional consideration for a 15% promissory note. (Incorporated by reference to Exhibit 4.24 to the Company's S-4 Registration Statement File No. 333-61666 filed August 24, 2001.)
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EXHIBIT NUMBER DESCRIPTION ------- ----------- 4.21 -- Common Stock Purchase Warrant issued to Cadmus Corporation on August 6, 2001 representing the right to purchase 250,000 shares of common stock of the Company as additional consideration for a 15% promissory note. (Incorporated by reference to Exhibit 4.23 to the Company's S-4 Registration Statement File No. 333-61666 filed August 24, 2001.) 4.22 -- Common Stock Purchase Warrant issued to Northlea Partners, Ltd. on August 6, 2001 representing the right to purchase 62,500 shares of common stock of the Company as additional consideration for a 15% promissory note. (Incorporated by reference to Exhibit 4.27 to the Company's S-4 Registration Statement File No. 333-61666 filed August 24, 2001.) 4.23 -- Common Stock Purchase Warrant issued to Azimuth Corporation on July 26, 2001 representing the right to purchase 500,000 shares of common stock of the Company as consideration of Azimuth's waiver of the conversion feature of its $500,000 convertible promissory note issued September 22, 2000. (Incorporated by reference to Exhibit 4.25 to the Company's S-4 Registration Statement File No. 333-61666 filed August 24, 2001.) 4.24 -- Common Stock Purchase Warrant issued to Azimuth Corporation on August 17, 2001 representing the right to purchase 25,000 shares of common stock of the Company. (Incorporated by reference to Exhibit 4.26 to the Company's S-4 Registration Statement File No. 333-61666, filed August 24, 2001.) 4.25 -- Common Stock Purchase Warrant issued to Tucker Anthony Incorporated on July 10, 2001 representing the right to purchase 150,000 shares of common stock of the Company. 4.26 -- Common Stock Purchase Warrant issued to Ventana Medical Systems, Inc. on November 2, 2001 representing the right to purchase 1,750,000 shares of common stock of the Company. 4.27 -- Form of Confidential $5,000,000 Common Stock Private Offering Memorandum dated January 2000. (Incorporated by reference to Exhibit 4.20 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 4.28 -- Form of Confidential $5,000,000 Series B Convertible Preferred Stock Private Offering memorandum dated November 2000 and amended January 30, 2001. (Incorporated by reference to Exhibit 4.21 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 4.29 -- Amendment No. 1 to Stockholders Agreement dated July 25, 2000 among the Company, the InPath Members, Mr. Milley, Mr. Shaw, MMI, Cadmus Corporation, and Winchester National, Inc. (Incorporated by reference to Exhibit 4.22 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 5.1 -- Opinion of Schiff, Hardin & Waite. 10.1 -- Stock Appreciation Rights Agreement dated as of November 20, 1989 between the Company and Raymond O'S. Kelly. (Incorporated herein by reference to Exhibit 10.5 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989.)* 10.2 -- Stock Appreciation Rights Agreement dated as of November 20, 1989 between the Company and Nicholas E. Toussaint. (Incorporated herein by reference to Exhibit 10.7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989.)*
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EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.3 -- Stock Appreciation Rights Agreement dated as of June 14, 1990 between the Company and Roy D. Rafalco. (Incorporated herein by reference to Exhibit 4 of the Company's Form 8-K filed June 15, 1990.)* 10.4 -- SAR Agreement Extension dated November 15, 1995 between the Company and Raymond O'S. Kelly. (Incorporated herein by reference to Exhibit 10.20 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995.)* 10.5 -- SAR Agreement Extension dated November 15, 1995 between the Company and Nicholas E. Toussaint. (Incorporated herein by reference to Exhibit 10.21 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995.)* 10.6 -- Employment Agreement dated May 1, 1998 between Mr. Gombrich and InPath, LLC, as amended on December 4, 1998. (Incorporated herein by reference to Exhibit 10.6 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998.)* 10.8 -- Claims Agreement dated December 4, 1998 among the Company, the Claimants, and Liberty Associates Limited Partnership. (Incorporated herein by reference to Exhibit 4 to the Schedule 13D filed jointly by the InPath Members on December 14, 1998.)* 10.9 -- Ampersand Medical Corporation Equity Incentive Plan established as of June 1, 1999. (Incorporated herein by reference to Appendix F to the Bell National Corporation Definitive Proxy Statement on Schedule 14A, as filed on April 30, 1999.)* 10.10 -- Ampersand Medical Corporation Employee Stock Purchase Plan. (Incorporated herein by reference to Appendix G to the Bell National Corporation Definitive Proxy statement, as filed on April 30, 1999.)* 10.11 -- Employment Agreement dated June 1, 1999 between Mr. Prange and the Company. (Incorporated herein by reference to Exhibit 10.11 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.)* 10.12 -- Lease Agreement between the Company and O.P., L.L.C. dated September 1, 1999 pertaining to the premises located at suite 305, 414 N. Orleans, Chicago, IL 60610. (Incorporated herein by reference to Exhibit 10.12 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.)* 10.13 -- Amendment to Lease Agreement between the Company and O.P., L.L.C. dated November 1, 1999 pertaining to the premises at suite 300, 414 N. Orleans, Chicago, IL 60610. (Incorporated herein by reference to Exhibit 10.13 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.)* 10.14 -- Form of Note purchase Agreements dated between March 1, 1999 and June 29, 1999 between the Company and several purchasers. (Incorporated herein by reference to Exhibit 10.14 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.)* 10.15 -- Form of 6% Convertible Subordinated Note Due 2000, dated between March 1, 1999 and June 29, 1999 issued by the Company to several purchasers. (Incorporated herein by reference to Exhibit 10.15 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.)*
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EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.16 -- Schedule of purchasers of 6% Convertible Notes Due 2000, including dates and amount purchased. (Incorporated herein by reference to Exhibit 10.16 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.)* 10.17 -- Form of Senior Convertible Promissory Note issued to Azimuth Corporation on December 10, 1999. (Incorporated herein by reference to Exhibit 10.17 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.)* 10.18 -- Form of Restricted Stock Award of 50,000 shares of common stock issued to David A. Fishman, M.D., on August 10, 1999 as additional compensation under a 36 month Consulting Agreement dated June 1, 1999. (Incorporated herein by reference to Exhibit 10.18 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.)* 10.19 -- Form of Restricted Stock award of 50,000 shares of common stock issued to Arthur L. Herbst, M.D., on August 10, 1999 as additional compensation under a 36 month Consulting Agreement dated July 1, 1999. (Incorporated herein by reference to Exhibit 10.19 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.)* 10.20 -- Form of $2,000,000 note received from Seaside Partners, L.P. on April 28, 2000. (Incorporated by reference to Exhibit 10.20 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 10.21 -- Form of $300,000 note received from AccuMed International, Inc. on September 22, 2000 in conjunction with the proposed acquisition of AccuMed by the Company. (Incorporated by reference to Exhibit 10.21 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 10.22 -- Form of $500,000 Convertible Promissory Note issued to Azimuth Corporation on September 22, 2000 in connection with the proposed acquisition of AccuMed International, Inc. by the Company. (Incorporated by reference to Exhibit 10.22 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 10.23 -- Form of $500,000 Convertible Promissory Note issued to Monsun, AS on November 1, 2000. (Incorporated by reference to Exhibit 10.23 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 10.24 -- Form of $200,000 Promissory Note issued to Azimuth Corporation on December 4, 2000. (Incorporated by reference to Exhibit 10.24 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 10.25 -- Form of $100,000 Promissory Note issued to Azimuth Corporation on December 11, 2000 in conjunction with the proposed acquisition of AccuMed International, Inc. by the Company. (Incorporated by reference to Exhibit 10.25 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 10.26 -- Amendment to Patent and Technology License Agreement dated June 9, 2000 by and between Ampersand Medical Corporation, AccuMed International, Inc. and InPath, L.L.C. (Incorporated by reference to Exhibit 10.26 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)*
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EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.27 -- License and Development Agreement for Specific Medical Technology for the Detection of Oncogenic HPV Virus dated June 23, 2000, by and between Invirion, Dr. Bruce Patterson, and Ampersand Medical Corporation. (Incorporated by reference to Exhibit 10.27 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 10.28 -- First Addendum to License and Development Agreement for Specific Medical Technology for the Detection of Oncogenic HPV Virus dated September 12, 2000, by and between Invirion, Dr. Bruce Patterson and Ampersand Medical Corporation. (Incorporated by reference to Exhibit 10.28 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 10.29 -- Second Addendum to License and Development Agreement for Specific Medical Technology for the Detection of Oncogenic HPV Virus dated January 12, 2001, by and between Invirion, Dr. Bruce Patterson and Ampersand Medical Corporation. (Incorporated by reference to Exhibit 10.29 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 10.30 -- Form of $25,000 Promissory Note issued to Azimuth Corporation on February 1, 2001 in conjunction with the proposed acquisition of AccuMed International, Inc. by the Company. (Incorporated by reference to Exhibit 10.30 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 10.31 -- Form of $470,000 Promissory Note issued to Azimuth Corporation on February 7, 2001 in conjunction with the proposed acquisition of AccuMed International, Inc. by the Company. (Incorporated by reference to Exhibit 10.31 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 10.32 -- Lease Agreement between the Company and O.P., L.L.C date May 18, 2000, pertaining to premises located at 414 N. Orleans, Suite 510, Chicago, Illinois 60610. (Incorporated by reference to Exhibit 10.32 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 10.33 -- First Amendment to Lease Agreement between the Company and O.P., L.L.C. dated February 13, 2001, pertaining to additional premises at 414 N. Orleans, Suite 503, Chicago, Illinois 60610 and extending the term of the original lease until February 28, 2006. (Incorporated by reference to Exhibit 10.33 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 10.34 -- Form of Restricted Stock Award of 25,000 shares of common stock issued to Eric A Gombrich on May 1, 2000 as additional compensation under a 36 month Employment Agreement dated April 1, 2000. (Incorporated by reference to Exhibit 10.34 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 10.35 -- Form of Restricted Stock Award of 50,000 shares of common stock issued to Ralph M. Richart, M.D., on July 24, 2000 as additional compensation under a 36 month Consulting Agreement dated June 1, 2000. (Incorporated by reference to Exhibit 10.35 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)* 10.36 -- Form of Restricted Stock Award of 50,000 shares of common stock issued to J. Thomas Cox, M.D., on October 20, 2000 as additional compensation under a 36 month Consulting Agreement dated October 15, 2000. (Incorporated by reference to Exhibit 10.36 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)*
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EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.37 -- Form of Voting Agreement between the Company and each of the officers and directors of AccuMed International, Inc. (Exhibit A to the Agreement and Plan of Merger included in Appendix I to the proxy statement-prospectus.) 10.38 -- $100,000 Promissory Note issued to Cadmus Corporation on July 26, 2001. (Incorporated by reference to Exhibit 10.39 to the Company's S-4 Registration Statement, File No. 333-61666, filed August 24, 2001.) 10.39 -- $100,000 Promissory Note issued to Azimuth Corporation on August 6, 2001. (Incorporated by reference to Exhibit 10.40 to the Company's S-4 Registration Statement, File No. 333-61666, filed August 24, 2001.) 10.40 -- $25,000 Promissory Note issued to Northlea Partners, Ltd. on August 6, 2001. (Incorporated by reference to Exhibit 10.41 to the Company's S-4 Registration Statement, File No. 333-61666, filed August 24, 2001.) 23.1 -- Consent of Ernst & Young. 23.2 -- Consent of Opinion of Schiff, Hardin & Waite (Included in Exhibit 5.) 24.1 -- Power of Attorney by directors and officers of the Company. 24.2 -- Certified copy of a resolution by the Board of Directors of the Company authorizing execution of the Registration Statement on behalf of the Company by an attorney-in-fact.
- --------------- * SEC File No. 0-935 (b) Financial Statement Schedules The information required to be set forth herein is incorporated by reference to Molecular Diagnostics' Annual Report on Form 10-K, as amended, for the year ended December 31, 2000. ITEM 17. UNDERTAKINGS A. The undersigned registrant 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 any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the 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 20 percent 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 material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment 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. II-9 (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. B. The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement 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 undersigned registrant hereby undertakes to deliver or cause to be delivered with the prospectus, to each person to whom the prospectus is sent or given, the latest annual report, to security holders that is incorporated by reference in the prospectus and furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934; and where interim financial information required to be presented by Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or cause to be delivered to each person to whom the prospectus is sent or given, the latest quarterly report that is specifically incorporated by reference in the prospectus to provide such interim financial information. D. Insofar as indemnification for liabilities arising under the Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the Certificate of Incorporation, as amended (the "Certificate of Incorporation"), and the bylaws, as amended (the "Bylaws"), of the registrant, the Delaware General Corporation Law or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant 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 registrant 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 Act and will be governed by the final adjudication of such issue. II-10 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe this meets all the requirements for filing on Form S-2 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Chicago, State of Illinois, on February 28, 2002. MOLECULAR DIAGNOSTICS, INC. By: /s/ PETER P. GOMBRICH ---------------------------------- Peter P. Gombrich, Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the date indicated.
SIGNATURE TITLE DATE --------- ----- ---- * Director and Chairman of the Board February 28, 2002 - --------------------------------------------------- of Directors, Chief Executive Peter P. Gombrich Officer, acting President, Chief Financial Officer and Secretary (principal executive officer) * Director February 28, 2002 - --------------------------------------------------- Alexander Milley * Director February 28, 2002 - --------------------------------------------------- Robert C. Shaw * Director February 28, 2002 - --------------------------------------------------- John Abeles * Director February 28, 2002 - --------------------------------------------------- Denis M. O'Donnell /s/ PETER P. GOMBRICH Individually and as February 28, 2002 - --------------------------------------------------- Attorney-in-fact Peter P. Gombrich
II-11 EX-3.4 3 c66354ex3-4.txt CERTIFICATE OF DESIGNATION EXHIBIT 3.4 CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF SERIES C CONVERTIBLE PREFERRED STOCK OF MOLECULAR DIAGNOSTICS, INC. RESOLVED, that pursuant to the authority vested in the Board of Directors of Molecular Diagnostics, Inc. (the "Company") in accordance with the provisions of its Certificate of Incorporation, as amended, there be, and hereby is, created out of the class of 5,000,000 shares of Preferred Stock of the Company authorized in Section 4.1 of its Certificate of Incorporation, as amended, a series of Preferred Stock of the Company with the following voting powers, designation, preferences and relative, participating, optional and other special rights, and qualifications, limitations and restrictions: 1. Designation and Number of Shares. 1,800,000 shares of Preferred Stock are hereby designated as Series C Convertible Preferred Stock, par value $.001 per share (the "Series C Preferred Stock"). 2. Dividends. (A) The rate of dividend payable upon Series C Preferred Stock shall be 10% per share per annum payable in cash or at the election of the Company for the first two years in fully paid and nonassessable shares of Common Stock which shares shall be valued at one hundred percent (100%) as computed in accordance with Section 6(G)(ii) below, (60) consecutive trading days immediately prior to the dividend payment date. Dividends whether payable in cash or Common Stock shall be cumulative from and after October 1, 2001. The "stated value" of each share of Series C Preferred Stock payable in accordance with the provisions of Section 4 in the event of the voluntary liquidation, dissolution or winding up of the Company shall be $4.50 plus the amount of all dividends accumulated and unpaid thereon. (B) The holders of shares of the Series C Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors, dividends at the rate fixed in this Section 2, and no more, payable in semi-annual installments on the last day of March and September in each year. No dividend on the Series C Preferred Stock for any dividend period shall be paid or declared and set apart for payment unless full cumulative dividends for all prior dividend periods on the Series C Preferred Stock then outstanding shall have been or shall be concurrently therewith paid or declared and set apart for payment. (C) If and so along as any Series C Preferred Stock shall be outstanding, the Company shall not declare any dividends on its Common Stock or on any other stock junior to the Series C Preferred Stock, except dividends payable in shares of stock of the Company of any class junior to the Preferred Stock, or redeem or purchase or permit any subsidiary to purchase any shares of Common Stock or of such junior stock of the Company, or make any distributions of cash or property among the holders of its Common Stock or of such junior stock by the reduction of capital stock or otherwise, if any dividends on the Series C Preferred Stock are then in arrears. (D) After full cumulative dividends on the Series C Preferred Stock then outstanding shall have been paid or declared and set apart for payment for all past dividend periods, and after or concurrently with the payment or the declaration and setting apart for payment of the full dividends on the Series C Preferred Stock then outstanding to the end of the currently dividend period, then, and not otherwise, cash dividends may (but only when determined by the Board of Directors) be paid or declared and set apart for payment on the Common Stock and any other class of stock of the Company junior to the Series C Preferred Stock as to dividends, to the exclusion of the holders of the Series C Preferred Stock, subject, however to the provisions of this Section. 3. Redemption. The Series C Preferred Stock shall not be redeemable. 4. Liquidation. Upon any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary ("Liquidation"), the holders of record of the shares of the Series C Preferred Stock shall be entitled to receive, before and in preference to any distribution or payment of assets of the Company or the proceeds thereof that may be made or set apart for the holders of Common Stock or any other security junior to the Series C Preferred Stock in respect of distributions upon Liquidation out of the assets of the Company legally available for distribution to its stockholders, an amount in cash equal to the Stated Value on the date fixed for distribution of assets of the Company (the "Liquidation Preference"). If, upon such Liquidation, the assets of the Company available for distribution to the holders of Series C Preferred Stock and any other series of Preferred Stock then outstanding ranking in parity with the Series C Preferred Stock upon Liquidation (the "Parity Stock") shall be insufficient to permit payment in full to the holders of the Series C Preferred Stock and the Parity Stock, then the entire assets and funds of the Company legally available for distribution to such holders shall be distributed ratably among the holders of the Series C Preferred Stock and the Parity Stock based upon the relative amounts that would have been payable to the holders of each series of Preferred Stock had there been sufficient assets and funds to make full payment of the respective amounts due to such holders. The Series C Preferred Stock shall rank equally and in parity with the Company's Series A Convertible Preferred Stock and Series B Convertible Preferred Stock with respect to liquidation rights. By way of illustration only, if 1,000,000 shares of Series C Preferred Stock were issued and outstanding, and the Stated Value was $4.00 per share, the aggregate Liquidation Preference of such shares would be $4,000,000. If 1,000,000 shares of Parity Stock were also issued and outstanding at the same time, and the Stated Value was $2.00 per share, the aggregate Liquidation Preference of such shares would be $2,000,000. The Liquidation Preference of each of the two series of Preferred Stock would then be added together (i.e., $4,000,000 plus $2,000,000 = $6,000,000) and the result would be divided into the Liquidation Preference of each of the two series of Preferred Stock to determine the relative percentage of the total assets and funds of the Company that would be the aggregate Liquidation Preference of each series. The aggregate Liquidation Preference of each series would then be divided by the number of issued and outstanding shares of such series in order to determine the per share Liquidation Preference. A merger or consolidation shall be considered a Liquidation unless the holders of the Series C Preferred Stock receive securities of the surviving corporation having rights substantially similar to the rights of the Series C Preferred Stock and the stockholders of the Company immediately prior to such transaction become the holders of at least a majority in interest of the voting securities of the surviving corporation immediately thereafter. Notwithstanding Section 7 hereof, such provision may be waived in writing by a majority in interest of the holders of the then outstanding shares of Series C Preferred Stock. 5. Other Series of Preferred Stock. The Company may issue, at any time and from time to time, without the consent of the holders of the Series C Preferred Stock, other series of Preferred Stock. 6. Conversion Rights. Each holder of record of shares of the Series C Preferred Stock shall have the right to convert all or any part of such holder's shares of Series C Preferred Stock into Common Stock as follows: (A) Each share of the Series C Preferred Stock shall be convertible, at the option of the respective holders thereof, at any time after April 1, 2002, at the office of any transfer agent for the Series C Preferred Stock, or if there is none, then at the office of the transfer agent for the Common Stock, or if there is no such transfer agent, at the principal executive office of the Company, into that number of shares of Common Stock of the Company equal to the Stated Value divided by the conversion price in effect at the time of conversion (the "Conversion Price"). The Conversion Price shall be the twenty (20) day average market price per share of Common Stock as calculated in accordance with Section 6(G)(ii) below immediately prior to the conversion notice but in no event shall the Conversion Price be less than $0.75 and no greater than $1.50, subject to antidilution adjustments. The number of shares of Common Stock into which each share of Series C Preferred Stock is convertible is hereinafter collectively referred to as the "Conversion Rate." (B) If the then current market price of the Company's Common Stock (as determined in accordance with Paragraph 6(G)(ii) hereof) equals or exceeds $4.50 per share for any twenty (20) consecutive trading days, each share of Series C Preferred Stock then outstanding shall, at the option of the Company, upon giving twenty (20) days' prior written notice to each holder of record, by virtue of such condition, and without any action on the part of the holder thereof, be deemed automatically converted into that number of shares of Common Stock into which the Series C Preferred Stock would then be converted at the then effective Conversion Rate. (C) Before any holder of Series C Preferred Stock shall be entitled to convert the same into shares of Common Stock, such holder shall surrender the certificate or certificates therefor, duly endorsed, or accompanied by a duly executed stock power, at the office of the Company or of any transfer agent for the Series C Preferred Stock, and shall give written notice to the Company at its principal corporate office, of the election to convert the same. The Company shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Series C Preferred Stock, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid, together with payment in an amount equal to all accrued dividends with respect to each share of Series C Preferred Stock converted, which have not been paid prior thereto; provided, however, if for any reason the Company does not pay any portion of the accrued dividends on Series C Preferred Stock being converted, such portion of the unpaid dividends may, at the Company's option, be converted into an additional number of shares of Common Stock determined by dividing the amount of the unpaid dividends to be applied for such purpose, by the Conversion Price then in effect. (D) All shares of Common Stock that may be issued upon conversion of the Series C Preferred Stock will, upon issuance, be duly issued, fully paid and nonassessable, and free from all taxes, liens, and charges with respect to the issuance thereof. At all times that any shares of Series C Preferred Stock are issued and outstanding, the Company shall have authorized and shall have reserved for the purpose of issuance upon such conversion into Common Stock of all Series C Preferred Stock, a sufficient number of shares of Common Stock to provide for the conversion of all issued and outstanding shares of Series C Preferred Stock at the then effective Conversion Rate. (E) The Conversion Price shall be subject to adjustment from time to time as follows: (i) In case the Company shall (a) issue Common Stock as a dividend or distribution on any class of the capital stock of the Company, (b) split or otherwise subdivide its outstanding Common Stock, (c) combine the outstanding Common Stock into a smaller number of shares, or (d) issue by reclassification of its Common Stock (except in the case of a merger, consolidation or sale of all or substantially all of the assets of the Company as set forth in Paragraph 6(E)(ii) hereof) any shares of the capital stock of the Company, the Conversion Price in effect on the record date for any stock dividend or the effective date of any such other event shall be increased (or decreased in the case of a reverse stock split) so that the holder of each share of the Series C Preferred Stock shall thereafter be entitled to receive, upon the conversion of such share, the number of shares of Common Stock or other capital stock that it would own or be entitled to receive immediately after the happening of any of the events mentioned above had such share of the Series C Preferred Stock been converted immediately prior to the close of business on such record date or effective date. The adjustments herein provided shall become effective immediately following the record date for any such stock dividend or the effective date of any such other events. There shall be no reduction in the Conversion Price in the event that the Company pays a cash dividend. (ii) In case of any reclassification or similar change of outstanding shares of Common Stock of the Company, or in case of the consolidation or merger of the Company with another corporation, or the conveyance of all or substantially all of the assets of the Company in a transaction in which holders of the Common Stock receive shares of stock or other property, including cash, each share of the Series C Preferred Stock shall, after such event and subject to the other rights of the Series C Preferred Stock as set forth elsewhere herein, be convertible only into the number of shares of stock or other securities or property, including cash, to which a holder of the number of shares of Common Stock of the Company deliverable upon conversion of such shares of the Series C Preferred Stock would have been entitled to upon such reclassification, change, consolidation, merger or conveyance had such share been converted immediately prior to the effective date of such event. (iii) No adjustment in the Conversion Price or the number of shares of Common Stock into which a share of Series C Preferred Stock may be converted shall be required unless such adjustment (plus any adjustments not previously made by reason of this subparagraph (iii)) would require an increase or decrease of at least 12% in the number of shares of Common Stock into which each share of the Series C Preferred Stock is then convertible; provided, however, that any adjustments that are not required to be made by reason of this subparagraph (iii) shall be carried forward and taken into account in any subsequent adjustment. All calculations and adjustments shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be. (iv) After each adjustment of the Conversion Price, the Company shall promptly prepare a certificate signed by its Chairman or Chief Financial Officer and a Secretary or Assistant Secretary setting forth the Conversion Price as so adjusted, the number of shares of Common Stock into which the Series C Preferred Stock may be converted, and a statement of the facts upon which such adjustment is based, and such certificate shall forthwith be filed with the transfer agent, if any, for the Series C Preferred Stock, and the Company shall cause a copy of such statement to be sent by ordinary first class mail to each holder of record of Series C Preferred Stock. (F) The Company shall at all times reserve and keep available, out of its authorized but unissued shares of Common Stock or out of shares of Common Stock held in its treasury, solely for the purpose of effecting the conversion of the shares of the Series C Preferred Stock, the full number of shares of Common Stock deliverable upon the conversion of all shares of the Series C Preferred Stock from time to time outstanding. The Company shall from time to time in accordance with Delaware law take all steps necessary to increase the authorized amount of its Common Stock if at any time the authorized number of shares of Common Stock remaining unissued shall not be sufficient to permit the conversion of all of the shares of the Series C Preferred Stock. (G) (i) No fractional shares or scrip representing fractional shares of Common Stock shall be issued upon the conversion of the Series C Preferred Stock. In lieu of any fractional shares to which a holder would otherwise be entitled, the Company shall pay cash, equal to such fraction multiplied by the then current market price per share of the Common Stock (as determined in accordance with the provisions of Paragraph 6(G)(ii) hereof) on the date of conversion. (ii) For the purposes of any computation under this Paragraph 6, the current market price per share of Common Stock on any trading day shall be deemed to be the closing price of such share for such trading day. The closing price for each trading day shall be the last reported sales price regular way, or, in case no sale takes place on such day, the average of the closing high bid and low asked prices regular way, in either case (a) as officially quoted on the principal United States market for the Common Stock, as determined by the Board of Directors of the Company, or b) if, in the reasonable judgment of the Board of Directors of the Company, there exists no principal United States market for the Common Stock, then as reasonably determined by the Board of Directors of the Company. (H) The Company will pay any taxes that may be payable with respect to any issuance or delivery of shares of Common Stock upon conversion of shares of the Series C Preferred Stock. However, the Company shall not be required to pay any tax that may be payable with respect to any transfer of any shares of the Series C Preferred Stock or any shares of Common Stock issued as a consequence of a conversion hereunder, and no such transfer shall be made unless and until the person requesting such transfer has paid to the Company the amount of any such tax, or has established, to the satisfaction of the Company, that such tax has been paid or that no such tax is payable. (I) The Company will not, by amendment of its Certificate of Incorporation, as amended, or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issuance or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Paragraph 6 and in the taking of all such action as may be necessary or appropriate in order to protect the conversion rights of the holders of the Series C Preferred Stock against impairment. (J) For purposes of this Paragraph 6, any and all conversions shall be deemed to have been made immediately prior to the close of business on the date of surrender of the shares of Series C Preferred Stock to be converted, and the former holder of such shares of Series C Preferred Stock, or such holder's designee, shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of such date. 7. Voting Rights. The holders of the Series C Preferred Stock shall have no right to vote for any purpose, except as specifically required by the General Corporation Law of the State of Delaware and except as follows: (A) So long as any shares of the Series C Preferred Stock remain outstanding, the affirmative vote of the holders of a majority of the then outstanding shares of Series C Preferred Stock, voting as one class together with any other series of the Company's Preferred Stock then entitled to vote on such matter, regardless of series, either expressed in writing or at a meeting called for that purpose, shall be necessary to repeal, amend or otherwise change this Certificate of Designation, Preferences and Rights or the Certificate of Incorporation of the Company in a manner which would alter or change the powers, preferences or rights of the Series C Preferred Stock so as to adversely affect the Series C Preferred Stock. However, in case the Series C Preferred Stock would be affected by any action referred to in this Paragraph 7(A) in a different manner than any other series of Preferred Stock then outstanding, the holders of the shares of the Series C Preferred Stock shall be entitled to vote as a single and separate class, and the Company shall not take such action without the affirmative vote, as above provided, of at least a majority of the total number of shares of the Series C Preferred Stock then outstanding, in addition to or as a specific part of the consent or affirmative vote hereinabove otherwise required. (B) Each share of the Series C Preferred Stock shall entitle the holder thereof to one vote on all matters to be voted on by the holders of the Series C Preferred Stock, as set forth above. However, if the Series C Preferred Stock is entitled to vote together with the holders of Common Stock as one class, then each share of Series C Preferred Stock shall entitle the holder thereof to the number of votes per share that equals the number of whole shares of Common Stock into which each such share of Series C Preferred Stock is then convertible, calculated to the nearest whole share. 8. Miscellaneous. (A) All shares of the Series C Preferred Stock purchased or otherwise acquired by the Company or surrendered to it for conversion into Common Stock as provided above shall be cancelled and shall be restored to the status of authorized but unissued Preferred Stock of the Company. (B) There shall be no sinking fund with respect to the Series C Preferred Stock. (C) The shares of the Series C Preferred Stock shall not have any preferences, voting powers or relative, participating, optional, preemptive or other special rights except as set forth above in this Certificate of Designation, Preferences and Rights and in the Certificate of Incorporation of the Company, as amended. (D) The holders of record of shares of the Series C Preferred Stock shall be entitled to receive all communications sent by the Company to the holders of the Common Stock, sent by regular U.S. mail to such holder's address as set forth in the records of the registrar for the Series C Preferred Stock. IN WITNESS WHEREOF, Molecular Diagnostics, Inc. has caused this Certificate to be signed by Peter P. Gombrich, its Chairman of the Board and Chief Executive Officer, on October 4, 2001, and such person hereby affirms under penalty of perjury that this Certificate is the act and deed of Molecular Diagnostics, Inc. and that the facts stated herein are true and correct. MOLECULAR DIAGNOSTICS, INC. By: /s/ PETER P. GOMBRICH --------------------------------------- Peter P. Gombrich, Chairman of the Board and Chief Executive Office EX-3.5 4 c66354ex3-5.txt CERTIFICATE OF AMEND OF CERTIFICATE OF DESIGNATION EXHIBIT 3.5 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF DESIGNATION, PREFERENCES, AND RIGHTS OF SERIES C CONVERTIBLE PREFERRED STOCK OF MOLECULAR DIAGNOSTICS, INC. (PURSUANT TO SECTION 151 OF THE DELAWARE GENERAL CORPORATION LAW) MOLECULAR DIAGNOSTICS, INC., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY: FIRST, that the Certificate of Designation be amended by deleting in its entirety paragraph A of Article Sixth and substituting in lieu thereof the following: Each share of the Series C Preferred Stock shall be convertible, at the option of the respective holders thereof, at any time after April 1, 2002, at the office of any transfer agent for the Series C Preferred Stock, or if there is none, then at the office of the transfer agent for the Common Stock, or if there is no such transfer agent, at the principal executive office of the Company, into that number of shares of Common Stock of the Company equal to the Stated Value divided by the conversion price in effect at the time of conversion (the "Conversion Price"). The Conversion Price shall be equal to eighty-five percent (85%) of the twenty (20) day average market price per share of Common Stock, as calculated in accordance with Section 6(G)(ii) below, immediately prior to the conversion notice but in no event shall the Conversion Price be less than $0.75 and no greater than $1.50, subject to antidilution adjustments. The number of shares of Common Stock into which each share of Series C Preferred Stock is convertible is hereinafter collectively referred to as the "Conversion Rate." SECOND, that this amendment to the Certificate of Designation was duly adopted in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, MOLECULAR DIAGNOSTICS, INC. has caused this Certificate to be executed by Leonard R. Prange of the Corporation this 11th day of October, 2001. MOLECULAR DIAGNOSTICS, INC. By: /S/ LEONARD R. PRANGE ------------------------------------ Leonard R. Prange President EX-3.6 5 c66354ex3-6.txt CERT OF AMEND OF AMENDED CERT OF DESIGNATION EXHIBIT 3.6 CERTIFICATE OF AMENDMENT OF AMENDED CERTIFICATE OF DESIGNATION, PREFERENCES, AND RIGHTS OF SERIES C CONVERTIBLE PREFERRED STOCK OF MOLECULAR DIAGNOSTICS, INC. (PURSUANT TO SECTIONS 151 AND 242 OF THE DELAWARE GENERAL CORPORATION LAW) MOLECULAR DIAGNOSTICS, INC., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY: FIRST, that the Certificate of Designation be amended in Article First by reducing the number of shares designated as Series C Preferred Stock from 1,800,000 to 1,666,666. SECOND, that the Certificate of Designation be amended in paragraph A of Article Second by reducing the stated value from $4.50 to $3.00. THIRD, that the Certificate of Designation be amended by deleting in its entirety paragraph A of Article Sixth and substituting in lieu thereof the following: (A) Each share of the Series C Preferred Stock shall be convertible, at the option of the respective holders thereof, at any time after the date of issuance, at the office of any transfer agent for the Series C Preferred Stock, or if there is none, then at the office of the transfer agent for the Common Stock, or if there is no such transfer agent, at the principal executive office of the Company, into that number of shares of Common Stock of the Company equal to the Stated Value divided by the conversion price in effect at the time of conversion (the "Conversion Price"). The Conversion Price shall be $0.60 per share, subject to antidilution adjustments. The number of shares of Common Stock into which each share of Series C Preferred Stock is convertible is hereinafter collectively referred to as the "Conversion Rate." FOURTH, that the Certificate of Designation be amended by deleting in its entirety paragraph B of Article Sixth. FIFTH, that this amendment to the Certificate of Designation was duly adopted in accordance with the provisions of Sections 151 and 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, MOLECULAR DIAGNOSTICS, INC. has caused this Certificate to be executed by Leonard R. Prange of the Corporation this 19th day of November, 2001. MOLECULAR DIAGNOSTICS, INC. By: /s/ Leonard R. Prange Leonard R. Prange President EX-3.7 6 c66354ex3-7.txt CERTIFICATE OF DESIGNATION EXHIBIT 3.7 CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF SERIES D CONVERTIBLE PREFERRED STOCK OF MOLECULAR DIAGNOSTICS, INC. RESOLVED, that pursuant to the authority vested in the Board of Directors of Molecular Diagnostics, Inc. (the "Company") in accordance with the provisions of its Certificate of Incorporation, as amended (the "Certificate of Incorporation"), there be, and hereby is, created out of the class of 5,000,000 shares of Preferred Stock of the Company authorized in Section 4.1 of its Certificate of Incorporation, a series of Preferred Stock of the Company with the following voting powers, designation, preferences and relative, participating, optional and other special rights, and qualifications, limitations and restrictions: 1. Designation and Number of Shares. (A) 300,000 shares of Preferred Stock are hereby designated as Series D Convertible Preferred Stock, par value $.001 per share (the "Series D Preferred Stock"). (B) With respect to dividend rights, the Series D Preferred Stock shall rank senior to the Common Stock, $0.001 par value per share, of the Company and on parity with other series of preferred stock issued by the Company, other than those series of preferred stock that specifically provide that such series shall rank junior to the Series D Preferred Stock. 2. Dividends. (A) The rate of dividend payable upon Series D Preferred Stock shall be 10% per share per annum payable in cash or at the election of the Company for the first two years in fully paid and nonassessable shares of the Company's common stock, par value $0.001 per share ("Common Stock") which shares shall be valued at one hundred percent (100%) as computed in accordance with Section 6(G)(ii) below, (60) consecutive trading days immediately prior to the dividend payment date. Dividends whether payable in cash or Common Stock shall be cumulative from and after November 1, 2001. The "stated value" of each share of Series D Preferred Stock payable in accordance with the provisions of Section 4 in the event of the voluntary liquidation, dissolution or winding up of the Company shall be $10.00 plus the amount of all dividends accumulated and unpaid thereon. (B) The holders of shares of the Series D Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors, dividends at the rate fixed in this Section 2, and no more, payable in semi-annual installments on the last day of April and October in each year. No dividend on the Series D Preferred Stock for any dividend period shall be paid or declared and set apart for payment unless full cumulative dividends for all prior dividend periods on the Series D Preferred Stock then outstanding shall have been or shall be concurrently therewith paid or declared and set apart for payment. (C) If and so along as any Series D Preferred Stock shall be outstanding, the Company shall not declare any dividends on its Common Stock or on any other stock junior to the Series D Preferred Stock, except dividends payable in shares of stock of the Company of any class junior to the Preferred Stock, or redeem or purchase or permit any subsidiary to purchase any shares of Common Stock or of such junior stock of the Company, or make any distributions of cash or property among the holders of its Common Stock or of such junior stock by the reduction of capital stock or otherwise, if any dividends on the Series D Preferred Stock are then in arrears. (D) After full cumulative dividends on the Series D Preferred Stock then outstanding shall have been paid or declared and set apart for payment for all past dividend periods, and after or concurrently with the payment or the declaration and setting apart for payment of the full dividends on the Series D Preferred Stock then outstanding to the end of the currently dividend period, then, and not otherwise, cash dividends may (but only when determined by the Board of Directors) be paid or declared and set apart for payment on the Common Stock and any other class of stock of the Company junior to the Series D Preferred Stock as to dividends, to the exclusion of the holders of the Series D Preferred Stock, subject, however to the provisions of this Section. 3. Redemption. The Series D Preferred Stock shall not be redeemable. 4. Liquidation. Upon any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary ("Liquidation"), the holders of record of the shares of the Series D Preferred Stock shall be entitled to receive, before and in preference to any distribution or payment of assets of the Company or the proceeds thereof that may be made or set apart for the holders of Common Stock or any other security junior to the Series D Preferred Stock in respect of distributions upon Liquidation out of the assets of the Company legally available for distribution to its stockholders, an amount in cash equal to the Stated Value on the date fixed for distribution of assets of the Company (the "Liquidation Preference"). If, upon such Liquidation, the assets of the Company available for distribution to the holders of Series D Preferred Stock and any other series of Preferred Stock then outstanding ranking in parity with the Series D Preferred Stock upon Liquidation (the "Parity Stock") shall be insufficient to permit payment in full to the holders of the Series D Preferred Stock and the Parity Stock, then the entire assets and funds of the Company legally available for distribution to such holders shall be distributed ratably among the holders of the Series D Preferred Stock and the Parity Stock based upon the relative amounts that would have been payable to the holders of each series of Preferred Stock had there been sufficient assets and funds to make full payment of the respective amounts due to such holders. The Series D Preferred Stock shall rank equally and in parity with the Company's Series A Convertible Preferred Stock, Series B Convertible Preferred Stock, and Series C Convertible Preferred Stock with respect to liquidation rights. By way of illustration only, if 300,000 shares of Series D Preferred Stock were issued and outstanding, and the Stated Value was $10.00 per share, the aggregate Liquidation Preference of such shares would be $3,000,000. If 1,000,000 shares of Parity Stock were also issued and outstanding at the same time, and the Stated Value was $4.00 per share, the aggregate Liquidation Preference of such shares would be $4,000,000. The Liquidation Preference of each of the two series of Preferred Stock would then be added together (i.e., $3,000,000 plus $4,000,000 = $7,000,000) and the result would be divided into the Liquidation Preference of each of the two series of Preferred Stock to determine the relative percentage of the total assets and funds of the Company that would be the aggregate Liquidation Preference of each series. The aggregate Liquidation Preference of each series would then be divided by the number of issued and outstanding shares of such series in order to determine the per share Liquidation Preference. A merger or consolidation shall be considered a Liquidation unless the holders of the Series D Preferred Stock receive securities of the surviving corporation having rights substantially similar to the rights of the Series D Preferred Stock and the stockholders of the Company immediately prior to such transaction become the holders of at least a majority in interest of the voting securities of the surviving corporation immediately thereafter. Notwithstanding Section 7 hereof, such provision may be waived in writing by a majority in interest of the holders of the then outstanding shares of Series D Preferred Stock. 5. Other Series of Preferred Stock. The Company may issue, at any time and from time to time, without the consent of the holders of the Series D Preferred Stock, other series of Preferred Stock. 6. Conversion Rights. Each holder of record of shares of the Series D Preferred Stock shall have the right to convert all or any part of such holder's shares of Series D Preferred Stock into Common Stock at any time after April 1, 2002: (A) Each share of the Series D Preferred Stock shall be convertible, at the option of the respective holders thereof, at any time after the date of issuance, at the office of any transfer agent for the Series D Preferred Stock, or if there is none, then at the office of the transfer agent for the Common Stock, or if there is no such transfer agent, at the principal executive office of the Company, into that number of shares of Common Stock of the Company equal to the Stated Value divided by the conversion price in effect at the time of conversion (the "Conversion Price"). The Conversion Price shall be $1.00 per share, subject to antidilution adjustments. The number of shares of Common Stock into which each share of Series D Preferred Stock is convertible is hereinafter collectively referred to as the "Conversion Rate." (B) If the then current market price of the Company's Common Stock (as determined in accordance with Paragraph 6(G)(ii) hereof) equals or exceeds $5.00 per share for any twenty (20) consecutive trading days, each share of Series D Preferred Stock then outstanding shall, at the option of the Company, upon giving twenty (20) days' prior written notice to each holder of record, by virtue of such condition, and without any action on the part of the holder thereof, be converted into that number of shares of Common Stock into which the Series D Preferred Stock would then be converted at the then effective Conversion Rate. (C) Before any holder of Series D Preferred Stock shall be entitled to convert the same into shares of Common Stock, such holder shall surrender the certificate or certificates therefor, duly endorsed, or accompanied by a duly executed stock power, at the office of the Company or of any transfer agent for the Series D Preferred Stock, and shall give written notice to the Company at its principal corporate office, of the election to convert the same. The Company shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Series D Preferred Stock, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid, together with payment in an amount equal to all accrued dividends with respect to each share of Series D Preferred Stock converted, which have not been paid prior thereto; provided, however, if for any reason the Company does not pay any portion of the accrued dividends on Series D Preferred Stock being converted, such portion of the unpaid dividends may, at the Company's option, be converted into an additional number of shares of Common Stock determined by dividing the amount of the unpaid dividends to be applied for such purpose, by the Conversion Price then in effect. (D) All shares of Common Stock that may be issued upon conversion of the Series D Preferred Stock will, upon issuance, be duly issued, fully paid and nonassessable, and free from all taxes, liens, and charges with respect to the issuance thereof. When shares of Series D Preferred Stock become convertible, the Company shall authorize and reserve for the purpose of issuance upon such conversion into Common Stock of all Series D Preferred Stock, a sufficient number of shares of Common Stock to provide for the conversion of all issued and outstanding shares of Series D Preferred Stock at the then effective Conversion Rate. (E) The Conversion Price shall be subject to adjustment from time to time as follows: (i) In case the Company shall (a) issue Common Stock as a dividend or distribution on any class of the capital stock of the Company, (b) split or otherwise subdivide its outstanding Common Stock, (c) combine the outstanding Common Stock into a smaller number of shares, or (d) issue by reclassification of its Common Stock (except in the case of a merger, consolidation or sale of all or substantially all of the assets of the Company as set forth in Paragraph 6(E)(ii) hereof) any shares of the capital stock of the Company, the Conversion Price in effect on the record date for any stock dividend or the effective date of any such other event shall be increased (or decreased in the case of a reverse stock split) so that the holder of each share of the Series D Preferred Stock shall thereafter be entitled to receive, upon the conversion of such share, the number of shares of Common Stock or other capital stock that it would own or be entitled to receive immediately after the happening of any of the events mentioned above had such share of the Series D Preferred Stock been converted immediately prior to the close of business on such record date or effective date. The adjustments herein provided shall become effective immediately following the record date for any such stock dividend or the effective date of any such other events. There shall be no reduction in the Conversion Price in the event that the Company pays a cash dividend. (ii) In case of any reclassification or similar change of outstanding shares of Common Stock of the Company, or in case of the consolidation or merger of the Company with another corporation, or the conveyance of all or substantially all of the assets of the Company in a transaction in which holders of the Common Stock receive shares of stock or other property, including cash, each share of the Series D Preferred Stock shall, after such event and subject to the other rights of the Series D Preferred Stock as set forth elsewhere herein, be convertible only into the number of shares of stock or other securities or property, including cash, to which a holder of the number of shares of Common Stock of the Company deliverable upon conversion of such shares of the Series D Preferred Stock would have been entitled to upon such reclassification, change, consolidation, merger or conveyance had such share been converted immediately prior to the effective date of such event. (iii) No adjustment in the Conversion Price or the number of shares of Common Stock into which a share of Series D Preferred Stock may be converted shall be required unless such adjustment (plus any adjustments not previously made by reason of this subparagraph (iii)) would require an increase or decrease of at least 1 and 1/2% in the number of shares of Common Stock into which each share of the Series D Preferred Stock is then convertible; provided, however, that any adjustments that are not required to be made by reason of this subparagraph (iii) shall be carried forward and taken into account in any subsequent adjustment. All calculations and adjustments shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be. (iv) After each adjustment of the Conversion Price, the Company shall promptly prepare a certificate signed by its Chairman or Chief Financial Officer and a Secretary or Assistant Secretary setting forth the Conversion Price as so adjusted, the number of shares of Common Stock into which the Series D Preferred Stock may be converted, and a statement of the facts upon which such adjustment is based, and such certificate shall forthwith be filed with the transfer agent, if any, for the Series D Preferred Stock, and the Company shall cause a copy of such statement to be sent by ordinary first class mail to each holder of record of Series D Preferred Stock. (F) From the time the shares of Series D Preferred Stock become convertible, the Company shall at all times thereafter reserve and keep available, out of its authorized but unissued shares of Common Stock or out of shares of Common Stock held in its treasury, solely for the purpose of effecting the conversion of the shares of the Series D Preferred Stock, the full number of shares of Common Stock deliverable upon the conversion of all shares of the Series D Preferred Stock from time to time outstanding. The Company shall from time to time in accordance with Delaware law take all steps necessary to increase the authorized amount of its Common Stock if at any time the authorized number of shares of Common Stock remaining unissued shall not be sufficient to permit the conversion of all of the shares of the Series D Preferred Stock. (G) (i) No fractional shares or scrip representing fractional shares of Common Stock shall be issued upon the conversion of the Series D Preferred Stock. In lieu of any fractional shares to which a holder would otherwise be entitled, the Company shall pay cash, equal to such fraction multiplied by the then current market price per share of the Common Stock (as determined in accordance with the provisions of Paragraph 6(G)(ii) hereof) on the date of conversion. (ii) For the purposes of any computation under this Paragraph 6, the current market price per share of Common Stock on any trading day shall be deemed to be the closing price of such share for such trading day. The closing price for each trading day shall be the last reported sales price regular way, or, in case no sale takes place on such day, the average of the closing high bid and low asked prices regular way, in either case (a) as officially quoted on the principal United States market for the Common Stock, as determined by the Board of Directors of the Company, or b) if, in the reasonable judgment of the Board of Directors of the Company, there exists no principal United States market for the Common Stock, then as reasonably determined by the Board of Directors of the Company. (H) The Company will pay any taxes that may be payable with respect to any issuance or delivery of shares of Common Stock upon conversion of shares of the Series D Preferred Stock. However, the Company shall not be required to pay any tax that may be payable with respect to any transfer of any shares of the Series D Preferred Stock or any shares of Common Stock issued as a consequence of a conversion hereunder, and no such transfer shall be made unless and until the person requesting such transfer has paid to the Company the amount of any such tax, or has established, to the satisfaction of the Company, that such tax has been paid or that no such tax is payable. (I) The Company will not, by amendment of its Certificate of Incorporation, or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issuance or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Paragraph 6 and in the taking of all such action as may be necessary or appropriate in order to protect the conversion rights of the holders of the Series D Preferred Stock against impairment. (J) For purposes of this Paragraph 6, any and all conversions shall be deemed to have been made immediately prior to the close of business on the date of surrender of the shares of Series D Preferred Stock to be converted, and the former holder of such shares of Series D Preferred Stock, or such holder's designee, shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of such date. 7. Voting Rights. The holders of the Series D Preferred Stock shall have no right to vote for any purpose, except as specifically required by the General Corporation Law of the State of Delaware and except as follows: (A) So long as any shares of the Series D Preferred Stock remain outstanding, the affirmative vote of the holders of a majority of the then outstanding shares of Series D Preferred Stock, voting as one class together with any other series of the Company's Preferred Stock then entitled to vote on such matter, regardless of series, either expressed in writing or at a meeting called for that purpose, shall be necessary to repeal, amend or otherwise change this Certificate of Designations, Preferences and Rights or the Certificate of Incorporation in a manner which would alter or change the powers, preferences or rights of the Series D Preferred Stock so as to adversely affect the Series D Preferred Stock. However, in case the Series D Preferred Stock would be affected by any action referred to in this Paragraph 7(A) in a different manner than any other series of Preferred Stock then outstanding, the holders of the shares of the Series D Preferred Stock shall be entitled to vote as a single and separate class, and the Company shall not take such action without the affirmative vote, as above provided, of at least a majority of the total number of shares of the Series D Preferred Stock then outstanding, in addition to or as a specific part of the consent or affirmative vote hereinabove otherwise required. (B) Each share of the Series D Preferred Stock shall entitle the holder thereof to one vote on all matters to be voted on by the holders of the Series D Preferred Stock, as set forth above. However, if the Series D Preferred Stock is entitled to vote together with the holders of Common Stock as one class, then each share of Series D Preferred Stock shall entitle the holder thereof to the number of votes per share that equals the number of whole shares of Common Stock into which each such share of Series D Preferred Stock is then convertible, calculated to the nearest whole share. 8. Miscellaneous. (A) All shares of the Series D Preferred Stock purchased or otherwise acquired by the Company or surrendered to it for conversion into Common Stock as provided above shall be cancelled and shall be restored to the status of authorized but unissued Preferred Stock of the Company. (B) There shall be no sinking fund with respect to the Series D Preferred Stock. (C) The shares of the Series D Preferred Stock shall not have any preferences, voting powers or relative, participating, optional, preemptive or other special rights except as set forth above in this Certificate of Designations, Preferences and Rights and in the Certificate of Incorporation. (D) The holders of record of shares of the Series D Preferred Stock shall be entitled to receive all communications sent by the Company to the holders of the Common Stock, sent by regular U.S. mail to such holder's address as set forth in the records of the registrar for the Series D Preferred Stock. IN WITNESS WHEREOF, Molecular Diagnostics, Inc. has caused this Certificate to be signed by Peter P. Gombrich, its Chairman of the Board and Chief Executive Officer, on November 2, 2001, and such person hereby affirms under penalty of perjury that this Certificate is the act and deed of Molecular Diagnostics, Inc. and that the facts stated herein are true and correct. MOLECULAR DIAGNOSTICS, INC. By: PETER P. GOMBRICH ------------------------------------ Peter P. Gombrich, Chairman of the Board and Chief Executive Officer EX-3.8 7 c66354ex3-8.txt CERTIFICATE OF DESIGNATION EXHIBIT 3.8 CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF SERIES E CONVERTIBLE PREFERRED STOCK OF MOLECULAR DIAGNOSTICS, INC. RESOLVED, that pursuant to the authority vested in the Board of Directors of Molecular Diagnostics, Inc. (the "Company") in accordance with the provisions of its Certificate of Incorporation, as amended, there be, and hereby is, created out of the class of 5,000,000 shares of Preferred Stock of the Company authorized in Section 4.1 of its Certificate of Incorporation, as amended, a series of Preferred Stock of the Company with the following voting powers, designation, preferences and relative, participating, optional and other special rights, and qualifications, limitations and restrictions: 1. Designation and Number of Shares. 800,000 shares of Preferred Stock are hereby designated as Series E Convertible Preferred Stock, par value $.001 per share (the "Series E Preferred Stock"). 2. Dividends. (A) The rate of dividend payable upon Series E Preferred Stock shall be 10% per share per annum payable in cash or at the election of the Company for the first two years in fully paid and nonassessable shares of Common Stock which shares shall be valued at one hundred percent (100%) as computed in accordance with Section 6(G)(ii) below, (60) consecutive trading days immediately prior to the dividend payment date. Dividends whether payable in cash or Common Stock shall be cumulative from and after December 1, 2001. The dividend payable to holders of the Series E Preferred Stock shall be increased to 20% per year if, after the first anniversary of the issuance of the Series E Preferred Stock, the Company has not reserved sufficient shares of Common Stock as will be issuable upon conversion of all shares of Series E Preferred Stock and dividends payable thereon. The "stated value" of each share of Series E Preferred Stock payable in accordance with the provisions of Section 4 in the event of the voluntary liquidation, dissolution or winding up of the Company shall be $22 plus the amount of all dividends accumulated and unpaid thereon. (B) The holders of shares of the Series E Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors, dividends at the rate fixed in this Section 2, and no more, payable in semi-annual installments on the last day of May and November in each year. No dividend on the Series E Preferred Stock for any dividend period shall be paid or declared and set apart for payment unless full cumulative dividends for all prior dividend periods on the Series E Preferred Stock then outstanding shall have been or shall be concurrently therewith paid or declared and set apart for payment. (C) The Series E Preferred Stock shall rank senior to Common Stock of the Company and each other class of capital stock or class or series of preferred stock issued by the Company after the date hereof, the terms of which shall specifically provide that such class or series shall rank junior to the Series E Preferred Stock and on par with all other preferred stock issued as of the date hereof and subsequently issued unless such series specifically provides otherwise. (D) If and so along as any Series E Preferred Stock shall be outstanding, the Company shall not declare any dividends on its Common Stock or on any other stock junior to the Series E Preferred Stock, except dividends payable in shares of stock of the Company of any class junior to the Preferred Stock, or redeem or purchase or permit any subsidiary to purchase any shares of Common Stock or of such junior stock of the Company, or make any distributions of cash or property among the holders of its Common Stock or of such junior stock by the reduction of capital stock or otherwise, if any dividends on the Series E Preferred Stock are then in arrears. (E) After full cumulative dividends on the Series E Preferred Stock then outstanding shall have been paid or declared and set apart for payment for all past dividend periods, and after or concurrently with the payment or the declaration and setting apart for payment of the full dividends on the Series E Preferred Stock then outstanding to the end of the currently dividend period, then, and not otherwise, cash dividends may (but only when determined by the Board of Directors) be paid or declared and set apart for payment on the Common Stock and any other class of stock of the Company junior to the Series E Preferred Stock as to dividends, to the exclusion of the holders of the Series E Preferred Stock, subject, however to the provisions of this Section. 3. Redemption. The Series E Preferred Stock shall not be redeemable. 4. Liquidation. Upon any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary ("Liquidation"), the holders of record of the shares of the Series E Preferred Stock shall be entitled to receive, before and in preference to any distribution or payment of assets of the Company or the proceeds thereof that may be made or set apart for the holders of Common Stock or any other security junior to the Series E Preferred Stock in respect of distributions upon Liquidation out of the assets of the Company legally available for distribution to its stockholders, an amount in cash equal to the Stated Value on the date fixed for distribution of assets of the Company (the "Liquidation Preference"). If, upon such Liquidation, the assets of the Company available for distribution to the holders of Series E Preferred Stock and any other series of Preferred Stock then outstanding ranking in parity with the Series E Preferred Stock upon Liquidation (the "Parity Stock") shall be insufficient to permit payment in full to the holders of the Series E Preferred Stock and the Parity Stock, then the entire assets and funds of the Company legally available for distribution to such holders shall be distributed ratably among the holders of the Series E Preferred Stock and the Parity Stock based upon the relative amounts that would have been payable to the holders of each series of Preferred Stock had there been sufficient assets and funds to make full payment of the respective amounts due to such holders. The Series E Preferred Stock shall rank equally and in parity with the Company's Series A Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C Convertible Preferred Stock and Series D Convertible Preferred Stock with respect to Liquidation. By way of illustration only, if 1,000,000 shares of Series E Preferred Stock were issued and outstanding, and the Stated Value was $22 per share, the aggregate Liquidation Preference of such shares would be $22,000,000. If 1,000,000 shares of Parity Stock were also issued and outstanding at the same time, and the Stated Value was $2.00 per share, the aggregate Liquidation Preference of such shares would be $2,000,000. The Liquidation Preference of each of the two series of Preferred Stock would then be added together (i.e., $22,000,000 plus $2,000,000 = $24,000,000) and the result would be divided into the Liquidation Preference of each of the two series of Preferred Stock to determine the relative percentage of the total assets and funds of the Company that would be the aggregate Liquidation Preference of each series. The aggregate Liquidation Preference of each series would then be divided by the number of issued and outstanding shares of such series in order to determine the per share Liquidation Preference. A merger or consolidation shall be considered a Liquidation unless the holders of the Series E Preferred Stock receive securities of the surviving corporation having rights substantially similar to the rights of the Series E Preferred Stock and the stockholders of the Company immediately prior to such transaction become the holders of at least a majority in interest of the voting securities of the surviving corporation immediately thereafter. Notwithstanding Section 7 hereof, such provision may be waived in writing by a majority in interest of the holders of the then outstanding shares of Series E Preferred Stock. 5. Other Series of Preferred Stock. The Company may issue, at any time and from time to time, without the consent of the holders of the Series E Preferred Stock, other series of Preferred Stock. 6. Conversion Rights. Each holder of record of shares of the Series E Preferred Stock shall have the right to convert all or any part of such holder's shares of Series E Preferred Stock into Common Stock as follows: (A) Each share of the Series E Preferred Stock shall be convertible, at the option of the respective holders thereof, at any time after December 1, 2002, at the office of any transfer agent for the Series E Preferred Stock, or if there is none, then at the office of the transfer agent for the Common Stock, or if there is no such transfer agent, at the principal executive office of the Company, into that number of shares of Common Stock of the Company equal to the Stated Value divided by the conversion price in effect at the time of conversion (the "Conversion Price"). The Conversion Price shall be $0.80, subject to antidilution adjustments. The number of shares of Common Stock into which each share of Series E Preferred Stock is convertible is hereinafter collectively referred to as the "Conversion Rate." (B) If the then current market price of the Company's Common Stock (as determined in accordance with Paragraph 6(G)(ii) hereof) equals or exceeds $22.00 per share for any twenty (20) consecutive trading days, each share of Series E Preferred Stock then outstanding shall, at the option of the Company, upon giving twenty (20) days' prior written notice to each holder of record, by virtue of such condition, and without any action on the part of the holder thereof, be deemed automatically converted into that number of shares of Common Stock into which the Series E Preferred Stock would then be converted at the then effective Conversion Rate. (C) Before any holder of Series E Preferred Stock shall be entitled to convert the same into shares of Common Stock, such holder shall surrender the certificate or certificates therefor, duly endorsed, or accompanied by a duly executed stock power, at the office of the Company or of any transfer agent for the Series E Preferred Stock, and shall give written notice to the Company at its principal corporate office, of the election to convert the same. The Company shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Series E Preferred Stock, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid, together with payment in an amount equal to all accrued dividends with respect to each share of Series E Preferred Stock converted, which have not been paid prior thereto; provided, however, if for any reason the Company does not pay any portion of the accrued dividends on Series E Preferred Stock being converted, such portion of the unpaid dividends may, at the Company's option, be converted into an additional number of shares of Common Stock determined by dividing the amount of the unpaid dividends to be applied for such purpose, by the Conversion Price then in effect. (D) All shares of Common Stock that may be issued upon conversion of the Series E Preferred Stock will, upon issuance, be duly issued, fully paid and nonassessable, and free from all taxes, liens, and charges with respect to the issuance thereof. At all times that any shares of Series E Preferred Stock are issued and outstanding, the Company shall have authorized and shall have reserved for the purpose of issuance upon such conversion into Common Stock of all Series E Preferred Stock, a sufficient number of shares of Common Stock to provide for the conversion of all issued and outstanding shares of Series E Preferred Stock at the then effective Conversion Rate. (E) The Conversion Price shall be subject to adjustment from time to time as follows: (i) In case the Company shall (a) issue Common Stock as a dividend or distribution on any class of the capital stock of the Company, (b) split or otherwise subdivide its outstanding Common Stock, (c) combine the outstanding Common Stock into a smaller number of shares, or (d) issue by reclassification of its Common Stock (except in the case of a merger, consolidation or sale of all or substantially all of the assets of the Company as set forth in Paragraph 6(E)(ii) hereof) any shares of the capital stock of the Company, the Conversion Price in effect on the record date for any stock dividend or the effective date of any such other event shall be increased (or decreased in the case of a reverse stock split) so that the holder of each share of the Series E Preferred Stock shall thereafter be entitled to receive, upon the conversion of such share, the number of shares of Common Stock or other capital stock that it would own or be entitled to receive immediately after the happening of any of the events mentioned above had such share of the Series E Preferred Stock been converted immediately prior to the close of business on such record date or effective date. The adjustments herein provided shall become effective immediately following the record date for any such stock dividend or the effective date of any such other events. There shall be no reduction in the Conversion Price in the event that the Company pays a cash dividend. (ii) In case of any reclassification or similar change of outstanding shares of Common Stock of the Company, or in case of the consolidation or merger of the Company with another corporation, or the conveyance of all or substantially all of the assets of the Company in a transaction in which holders of the Common Stock receive shares of stock or other property, including cash, each share of the Series E Preferred Stock shall, after such event and subject to the other rights of the Series E Preferred Stock as set forth elsewhere herein, be convertible only into the number of shares of stock or other securities or property, including cash, to which a holder of the number of shares of Common Stock of the Company deliverable upon conversion of such shares of the Series E Preferred Stock would have been entitled to upon such reclassification, change, consolidation, merger or conveyance had such share been converted immediately prior to the effective date of such event. (iii) No adjustment in the Conversion Price or the number of shares of Common Stock into which a share of Series E Preferred Stock may be converted shall be required unless such adjustment (plus any adjustments not previously made by reason of this subparagraph (iii)) would require an increase or decrease of at least 12% in the number of shares of Common Stock into which each share of the Series E Preferred Stock is then convertible; provided, however, that any adjustments that are not required to be made by reason of this subparagraph (iii) shall be carried forward and taken into account in any subsequent adjustment. All calculations and adjustments shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be. (iv) After each adjustment of the Conversion Price, the Company shall promptly prepare a certificate signed by its Chairman or Chief Financial Officer and a Secretary or Assistant Secretary setting forth the Conversion Price as so adjusted, the number of shares of Common Stock into which the Series E Preferred Stock may be converted, and a statement of the facts upon which such adjustment is based, and such certificate shall forthwith be filed with the transfer agent, if any, for the Series E Preferred Stock, and the Company shall cause a copy of such statement to be sent by ordinary first class mail to each holder of record of Series E Preferred Stock. (F) The Company shall at all times after December 1, 2002 reserve and keep available, out of its authorized but unissued shares of Common Stock or out of shares of Common Stock held in its treasury, solely for the purpose of effecting the conversion of the shares of the Series E Preferred Stock, the full number of shares of Common Stock deliverable upon the conversion of all shares of the Series E Preferred Stock from time to time outstanding. The Company shall from time to time in accordance with Delaware law take all steps necessary to increase the authorized amount of its Common Stock if at any time the authorized number of shares of Common Stock remaining unissued shall not be sufficient to permit the conversion of all of the shares of the Series E Preferred Stock. (G) (i) No fractional shares or scrip representing fractional shares of Common Stock shall be issued upon the conversion of the Series E Preferred Stock. In lieu of any fractional shares to which a holder would otherwise be entitled, the Company shall pay cash, equal to such fraction multiplied by the then current market price per share of the Common Stock (as determined in accordance with the provisions of Paragraph 6(G)(ii) hereof) on the date of conversion. (ii) For the purposes of any computation under this Paragraph 6, the current market price per share of Common Stock on any trading day shall be deemed to be the closing price of such share for such trading day. The closing price for each trading day shall be the last reported sales price regular way, or, in case no sale takes place on such day, the average of the closing high bid and low asked prices regular way, in either case (a) as officially quoted on the principal United States market for the Common Stock, as determined by the Board of Directors of the Company, or b) if, in the reasonable judgment of the Board of Directors of the Company, there exists no principal United States market for the Common Stock, then as reasonably determined by the Board of Directors of the Company. (H) The Company will pay any taxes that may be payable with respect to any issuance or delivery of shares of Common Stock upon conversion of shares of the Series E Preferred Stock. However, the Company shall not be required to pay any tax that may be payable with respect to any transfer of any shares of the Series E Preferred Stock or any shares of Common Stock issued as a consequence of a conversion hereunder, and no such transfer shall be made unless and until the person requesting such transfer has paid to the Company the amount of any such tax, or has established, to the satisfaction of the Company, that such tax has been paid or that no such tax is payable. (I) The Company will not, by amendment of its Certificate of Incorporation, as amended, or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issuance or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Paragraph 6 and in the taking of all such action as may be necessary or appropriate in order to protect the conversion rights of the holders of the Series E Preferred Stock against impairment. (J) For purposes of this Paragraph 6, any and all conversions shall be deemed to have been made immediately prior to the close of business on the date of surrender of the shares of Series E Preferred Stock to be converted, and the former holder of such shares of Series E Preferred Stock, or such holder's designee, shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of such date. 7. Voting Rights. The holders of the Series E Preferred Stock shall be entitled to vote on all matters on which the holders of the Common Stock are entitled to vote, and to notice of any shareholders' meeting. If the Series E Preferred Stock is entitled to vote together with the holders of Common Stock as one class, then each share of Series E Preferred Stock shall entitle the holder thereof to the number of votes per share that equals the number of whole shares of Common Stock into which each such share of Series E Preferred Stock is then convertible, calculated to the nearest whole share. Except as otherwise required by law or provided for below, the holders of the Series E Preferred Stock and the Common Stock shall vote together as a single class on all matters presented to shareholders and not as separate classes except for the following: (A) So long as any shares of the Series E Preferred Stock remain outstanding, the affirmative vote of the holders of a majority of the then outstanding shares of Series E Preferred Stock, voting as one class together with any other series of the Company's Preferred Stock then entitled to vote on such matter, regardless of series, either expressed in writing or at a meeting called for that purpose, shall be necessary to repeal, amend or otherwise change this Certificate of Designation, Preferences and Rights or the Certificate of Incorporation of the Company in a manner which would alter or change the powers, preferences or rights of the Series E Preferred Stock so as to adversely affect the Series E Preferred Stock. However, in case the Series E Preferred Stock would be affected by any action referred to in this Paragraph 7(A) in a different manner than any other series of Preferred Stock then outstanding, the holders of the shares of the Series E Preferred Stock shall be entitled to vote as a single and separate class, and the Company shall not take such action without the affirmative vote, as above provided, of at least a majority of the total number of shares of the Series E Preferred Stock then outstanding, in addition to or as a specific part of the consent or affirmative vote hereinabove otherwise required. (B) Each share of the Series E Preferred Stock shall entitle the holder thereof to one vote on all matters to be voted on by the holders of the Series E Preferred Stock, as set forth above. 8. Miscellaneous. (A) All shares of the Series E Preferred Stock purchased or otherwise acquired by the Company or surrendered to it for conversion into Common Stock as provided above shall be cancelled and shall be restored to the status of authorized but unissued Preferred Stock of the Company. (B) There shall be no sinking fund with respect to the Series E Preferred Stock. (C) The shares of the Series E Preferred Stock shall not have any preferences, voting powers or relative, participating, optional, preemptive or other special rights except as set forth above in this Certificate of Designation, Preferences and Rights and in the Certificate of Incorporation of the Company, as amended. (D) The holders of record of shares of the Series E Preferred Stock shall be entitled to receive all communications sent by the Company to the holders of the Common Stock, sent by regular U.S. mail to such holder's address as set forth in the records of the registrar for the Series E Preferred Stock. IN WITNESS WHEREOF, Molecular Diagnostics, Inc. has caused this Certificate to be signed by Peter P. Gombrich, its Chairman of the Board and Chief Executive Officer, on November 16, 2001, and such person hereby affirms under penalty of perjury that this Certificate is the act and deed of Molecular Diagnostics, Inc. and that the facts stated herein are true and correct. MOLECULAR DIAGNOSTICS, INC. By: /s/ PETER P. GOMBRICH --------------------------------------- Peter P. Gombrich, Chairman of the Board and Chief Executive Officer EX-4.25 8 c66354ex4-25.txt COMMON STOCK PURCHASE WARRANT EXHIBIT 4.25 THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND, UNLESS SO REGISTERED, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE TRANSFER OF THIS WARRANT IS RESTRICTED AS DESCRIBED HEREIN. AMPERSAND MEDICAL CORP. Warrant for the Purchase of Shares of Common Stock, Par value $.001 per share No. 1 150,000 Shares THIS CERTIFIES that, for value received, TUCKER ANTHONY INCORPORATED (the "HOLDER"), is entitled to subscribe for and purchase from Ampersand Medical Corp., a Delaware corporation (the "COMPANY'), upon the terms and conditions set forth herein, at any time or from time to time before 5:00 P.M., New York time, on July 10, 2006 (the "EXERCISE PERIOD"), 150,000 shares of the Company's Common Stock, par value $.001 per share ("COMMON STOCK"), at a price of $1.20 per share (the "EXERCISE PRICE") (collectively, including any warrants issued upon the exercise or transfer of any such warrants in whole or in part, the "WARRANTS"). All of the 150,000 shares subject to the Warrant shall vest on the date hereof. As used herein, the term "this Warrant" shall mean and include this Warrant and any Warrant or Warrants hereafter issued as a consequence of the exercise or transfer of this Warrant in whole or in part. This Warrant may not be sold, transferred, assigned or hypothecated until July 10, 2006, except that it may be transferred, in whole or in part, to (i) one or more directors, officers, members or employees of the Holder (or the directors, officers, members or employees of any such member); (ii) any other firm which participated in the transactions contemplated by the engagement letter (the "TRANSACTION") (or the directors, officers, members or employees of any such firm); (iii) a successor to the Holder, or the officers, members or employees of such successor; (iv) a purchaser of substantially all of the assets of the Holder; or (v) by operation of law; and the term the "Holder" as used herein shall include any transferee to whom this Warrant has been transferred in accordance with the above. The number of shares of Common Stock issuable upon exercise of the Warrants (the "WARRANT SHARES") and the Exercise Price may be adjusted from time to time as hereinafter set forth. 1. Exercise. This Warrant may be exercised during the Exercise Period, as to the whole or any lesser number of whole Warrant Shares, by the surrender of this Warrant (with the election form at the end hereof duly executed) to the Company at its office at 414 North Orleans, Suite 510, Chicago, IL 60610 or at such other place as is designated in writing by the Company, together with a certified or bank cashier's check payable to the order of the Company in an amount equal to the Exercise Price multiplied by the number of Warrant Shares for which this Warrant is being exercised (the "STOCK PURCHASE PRICE"). 2. Conversion. (a) In lieu of the payment of the Stock Purchase Price, the Holder shall have the right (but not the obligation), to require the Company to convert this Warrant, in whole or in part, into shares of Common Stock (the "CONVERSION RIGHT") as provided for in this Section 2. Upon exercise of the Conversion Right, the Company shall deliver to the Holder (without payment by the Holder of any of the Stock Purchase Price) that number of shares of Common Stock (the "CONVERSION SHARES") equal to the quotient obtained by dividing (x) the value of this Warrant (or portion thereof as to which the Conversion Right is being exercised if the Conversion Right is being exercised in part) at the time the Conversion Right is exercised (determined by subtracting the aggregate Stock Purchase Price of the shares of Common Stock as to which the Conversion Right is being exercised in effect immediately prior to the exercise of the Conversion Right from the aggregate Current Market Price (as defined in Section 6(c) hereof), as of the date of exercise of the Conversion Right, of the shares of Common Stock as to which the Conversion Right is being exercised) by (y) the Current Market Price of one share of Common Stock, as of the date of exercise of the Conversion Right. (b) The Conversion Rights provided under this Section 2 may be exercised, in whole or in part, at any time and from time to time, while any Warrants remain outstanding. In order to exercise the Conversion Right, the Holder shall surrender to the Company, at its offices, this Warrant with the Cashless Exercise Form at the end hereof duly executed. The presentation and surrender shall be deemed a waiver of the Holder's obligation to pay all or any portion of the aggregate purchase price payable for the shares of Common Stock as to which such Conversion Right is being exercised. This Warrant (or so much thereof as shall have been surrendered for conversion) shall be deemed to have been converted immediately prior to the close of business on the day of surrender of such Warrant for conversion in accordance with the foregoing provisions. 3. Holder of Record. Upon each exercise of the Holder's rights to purchase Warrant Shares or Conversion Shares, the Holder shall be deemed to be the holder of record of the Warrant Shares or Conversion Shares issuable upon such exercise or conversion, notwithstanding that the transfer books of the Company shall then be closed or certificates representing such Warrant Shares or Conversion Shares shall not then have been actually delivered to the Holder. As soon as practicable after each such exercise or conversion of this Warrant, the Company shall issue and deliver to the Holder a certificate or certificates for the Warrant Shares or Conversion Shares issuable upon such exercise or conversion, registered in the name of the Holder or its designee. If this Warrant should be exercised or converted in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the right of the Holder to purchase the balance of the Warrant Shares (or portions thereof) subject to purchase hereunder. -2- 4. Warrant Register. Any Warrants issued upon the transfer or exercise or conversion in part of this Warrant shall be numbered and shall be registered in a Warrant Register as they are issued. The Company shall be entitled to treat the registered holder of any Warrant on the Warrant Register as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such Warrant on the part of any other person, and shall not be liable for any registration or transfer of Warrants which are registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with the actual knowledge that a fiduciary or nominee is committing a breach of trust in requesting such registration or transfer, or with the knowledge of such facts that its participation therein amounts to bad faith. This Warrant shall be transferable only on the books of the Company upon delivery thereof duly endorsed by the Holder or by his duly authorized attorney or representative, or accompanied by proper evidence of succession, assignment, or authority to transfer. In all cases of transfer by an attorney, executor, administrator, guardian, or other legal representative, duly authenticated evidence of his or its authority shall be produced. Upon any registration of transfer, the Company shall deliver a new Warrant or Warrants to the person entitled thereto. This Warrant may be exchanged, at the option of the Holder thereof, for another Warrant, or other Warrants of different denominations, of like tenor and representing in the aggregate the right to purchase a like number of Warrant Shares (or portions thereof), upon surrender to the Company or its duly authorized agent. Notwithstanding the foregoing, the Company shall have no obligation to cause Warrants to be transferred on its books to any person if, in the opinion of counsel to the Company, such transfer does not comply with the provisions of the Securities Act of 1933, as amended (the "ACT"), and the rules and regulations thereunder. 5. Valid Issuance. The Company shall at all times reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of providing for the exercise of the rights to purchase all Warrant Shares and/or Conversion Shares granted pursuant to the Warrants, such number of shares of Common Stock as shall, from time to time, be sufficient therefor. The Company covenants that all shares of Common Stock issuable upon exercise of this Warrant, upon receipt by the Company of the full Exercise Price therefor, and all shares of Common Stock issuable upon conversion of this Warrant, shall be validly issued, fully paid and nonassessable, without any personal liability attaching to the ownership thereof, and will not be issued in violation of any preemptive rights of stockholders, optionholders, warrantholders and any other persons and the Holders will receive good title to the securities purchased by them, respectively, free and clear of all liens, security interests, pledges, charges, encumbrances, stockholders' agreements and voting trusts which might be created by acts or omissions to act of the Company. 6. Dilutive Events. (a) In case the Company shall at any time after the date the Warrants were first issued (i) declare a dividend on the outstanding Common Stock payable in shares of its capital stock, (ii) subdivide the outstanding Common Stock into a greater number of shares, (iii) combine the outstanding Common Stock into a smaller number of shares, or (iv) issue any shares of its capital stock by reclassification of the Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), then, in each case, the Exercise Price, and the number and kind of securities issuable upon exercise or conversion of this Warrant, in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, shall be altered, effective as of the close of business on such record date, to a -3- price (calculated to the nearest .001 of a cent) determined by multiplying such Exercise Price by a fraction: (1) the numerator of which shall be the Current Market Price in effect on such record date or, if the Common Stock trades on an ex-dividend basis, on the date prior to the commencement of ex-dividend trading, less the amount of such dividend or distribution (as determined in good faith by the Board of Directors of the Company) applicable to one Common Share, and (2) the denominator of which shall be such Current Market Price, provided that, in the event that the amount of such dividend as so determined is equal to or greater than ten percent (10%) of such Current Market Price or in the event that such fraction is less than 9/10, in lieu of the foregoing adjustment, adequate provision shall be made so that the Holder of this Warrant shall receive a pro rata share of such dividend based upon the maximum number of Common Stock at a time issuable to such Holder (determined without regard to whether the Warrant is exercisable at such time). (b) Treatment of Share Dividends, Share Splits, etc. In case the Company at any time or from time to time after the date hereof shall declare or pay any dividend on the Common Stock payable in Common Stock, or shall effect a subdivision of the outstanding Common Stock into a greater number of Common Stock (by reclassification or otherwise than by payment of a dividend in Common Stock), then, and in each such case, Additional Common Stock shall be deemed to have been issued (a) in the case of any such dividend, immediately after the close of business on the record date for the determination of holders of any class of securities entitled to receive such dividend, or (b) in the case of any such clause, at the close of business on the date immediately prior to the day upon which such corporate action becomes effective. (c) For purposes of this Agreement, "CURRENT MARKET PRICE" shall mean the Market Price on the relevant date, as long as the national securities exchanges were open for trading on such date, provided, however, that if the national securities exchanges were not open for trading on such date, it shall mean the Market Price on the most recent date for which the national securities exchanges were open for trading, and further provided, that if no Common Stock is then listed or admitted to trading on any national securities exchange or quoted in the over-the-counter market, the Current Market Price shall be the Market Price on such date. The "MARKET PRICE" shall mean the amount per share of Common Stock equal to (a) the last sale price of such shares of Common Stock on such date or, if no such sale takes place on such date, the average of the closing bid and asked prices thereof on such date, in each case as officially reported on the principal national securities exchanges on which such shares of Common Stock are then listed or admitted to trading or (b) if such shares of Common Stock are not then listed or admitted to trading on any national securities exchange but are designated as a national market system security by the NASD, the last trading price of the shares of Common Stock on such date, or (c) if there shall have been no trading on such date or if the shares of Common Stock are not so designated, the average of the closing bid and asked prices of the shares of Common Stock on such date as shown by the NASD automated quotation system, or (d) if such shares of Common Stock are not then listed or admitted to trading on any national exchange or quoted in the over-the-counter market, the higher of (x) the book value thereof as -4- determined by any firm of independent public accountants of recognized standing selected by the Board of Directors of the Company as of the last day of any month ending within sixty (60) days preceding the date as of which the determination is to be made or (y) the fair value thereof determined in good faith by the Board of Directors of the Company as of a date which is within twenty (20) days of the date as of which the determination is to be made. (d) Computation of Consideration. For the purposes of this Section 6: (1) the consideration for the issue or sale of any Additional Common Stock shall, irrespective of the accounting treatment of such consideration, (i) insofar as it consists of cash, be computed at the net amount of cash received by the Company, without deducting any expenses paid or incurred by the Company or any commissions or compensations paid or concessions or discounts allowed to underwriters, dealers or other performing similar services in connection with such issue or sale, (ii) insofar as it consists of property (including securities) other than cash, be computed at the fair value thereof at the time of such issue or sale, as determined in good faith by the Board of Directors of the Company, and (iii) in case Additional Common Stock are issued or sold together with other shares or securities or other assets of the Company for a consideration which covers both, be the portion of such consideration so received, computed as provided in clauses (i) and (ii) above, allocable to such Additional Common Stock, all as determined in good faith by the Board of Directors of the Company. (2) Additional Common Stock deemed to have been issued pursuant to Section 7(c) relating to share dividends, share splits, etc., shall be deemed to have been issued for no consideration. (e) Adjustments for Combinations, etc. In case the outstanding Common Stock shall be combined or consolidated, by reclassification or otherwise, into a lesser number of Common Stock, the Exercise Price in effect immediately prior to such combination or consolidation shall, concurrently with the effectiveness of such combination or consolidation, be proportionately increased. (f) Dilution in Case of Other Securities. In case any Other Securities shall be issued or sold or shall become subject to issue or sale upon the conversion or exchange of any shares (or Other Securities) of the Company (or any issuer of Other Securities or any other person referred to in Section 7(a)) or to subscription, purchase or other acquisition pursuant to any Options issued or granted by the Company (or any such other issuer or person) for a consideration such as to dilute, on a basis consistent with the standards established in the other provisions of this Section 6, the purchase rights granted by this Warrant, then, and in each such case, the computations, adjustments and readjustments provided for in this Section 6 with respect to the Exercise Price shall be made as nearly as possible in the manner so provided and applied to determine the amount of Other Securities from time to time receivable upon the exercise of the Warrants, so as to protect the Holders of the Warrants against the effect of such dilution. Notwithstanding the foregoing, the provisions of this Section 6 shall not apply with respect to the -5- issuance or sale of Common Stock, or the grant of options exercisable at a price that is equal to or exceeds the fair market value of the Company's Common Stock on the date of issuance, issued or issuable after the date hereof to directors, officers, employees and consultants of the Company or any subsidiary pursuant to any qualified or non-qualified stock option plan or agreement, stock purchase plan or agreement, stock restriction agreement, employee stock ownership plan (ESOP), consulting agreement, or such other options, issuances, arrangements or plans intended principally as a means of providing compensation for employment or services and approved by the Board of Directors. (g) No adjustment in the Exercise Price shall be required if such adjustment is less than $.05; provided, however, that any adjustments which by reason of this Section 6(d) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 6 shall be made to the nearest cent or to the nearest one-thousandth of a share, as the case may be. (h) Upon each adjustment of the Exercise Price as a result of the calculations made in Section 6(a) hereof, this Warrant shall thereafter evidence the right to purchase, at the adjusted Exercise Price, that number of shares (calculated to the nearest thousandth) obtained by dividing (i) the product obtained by multiplying the number of shares purchasable upon exercise of this Warrant prior to adjustment of the number of shares by the Exercise Price in effect prior to adjustment of the Exercise Price, by (ii) the Exercise Price in effect after such adjustment of the Exercise Price. (i) Whenever there shall be an adjustment as provided in this Section 6, the Company shall promptly cause written notice thereof to be sent by registered mail, postage prepaid, to the Holder, at its address as it shall appear in the Warrant Register, which notice shall be accompanied by an officer's certificate setting forth the number of Warrant Shares purchasable upon the exercise of this Warrant and the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment and the computation thereof, which officer's certificate shall be conclusive evidence of the correctness of any such adjustment absent manifest error. (j) The Company shall not be required to issue fractions of shares of Common Stock or other capital stock of the Company upon the exercise or conversion of this Warrant. If any fraction of a share would be issuable on the exercise or conversion of this Warrant (or specified portions thereof) but for the preceding sentence, the Company shall purchase such fraction for an amount in cash equal to the same fraction of the Current Market Price of such share of Common Stock on the date of exercise or conversion of this Warrant. 7. Assumption of Obligations: (a) In case of any consolidation with or merger of the Company with or into another corporation (other than a merger or consolidation in which the Company is the surviving or continuing corporation), or in case of any sale, lease or conveyance to another corporation of the property and assets of any nature of the Company as an entirety or substantially as an entirety, such successor, leasing or purchasing corporation, as the case may be, shall (i) execute with the Holder an agreement providing that the Holder shall have the right thereafter to receive upon exercise or conversion of this Warrant solely the kind and amount of shares of stock and other securities, property, cash, or any combination thereof -6- receivable upon such consolidation, merger, sale, lease, or conveyance by a holder of the number of shares of Common Stock for which this Warrant would have been exercisable or into which this Warrant could have been converted immediately prior to such consolidation, merger, sale, lease or conveyance, and (ii) make effective provision in its certificate of incorporation or otherwise, if necessary, to effect such agreement. Such agreement shall provide for adjustments which shall be as nearly equivalent as practicable to the adjustments in Section 6 hereof. (b) In case of any reclassification or change of the shares of Common Stock issuable upon exercise or conversion of this Warrant (other than a change in par value or from a specified par value to no par value, or as a result of a subdivision or combination, but including any change in the shares into two or more classes or series of shares), or in case of any consolidation or merger of another corporation into the Company in which the Company is the continuing corporation and in which there is a reclassification or change (including a change to the right to receive cash or other property) of the shares of Common Stock (other than a change in par value, or from a specified par value to no par value, or as a result of a subdivision or combination, but including any change in the shares into two or more classes or series of shares), the Holder shall have the right thereafter to receive upon exercise or conversion of this Warrant solely the kind and amount of shares of stock and other securities, property, cash, or any combination thereof receivable upon such reclassification, change, consolidation, or merger by a holder of the number of shares of Common Stock for which this Warrant would have been exercisable or into which this Warrant could have been converted immediately prior to such reclassification, change, consolidation or merger. Thereafter, appropriate provision shall be made for adjustments which shall be as nearly equivalent as practicable to the adjustments in Section 6. (c) The above provisions of this Section 7 shall similarly apply to successive reclassifications and changes of shares of Common Stock and to successive consolidations, mergers, sales, leases or conveyances. 8. Notice of Adjustments. In case at any time the Company shall propose (i) to pay any dividend or make any distribution on shares of Common Stock in shares of Common Stock or make any other distribution (other than regularly scheduled cash dividends which are not in a greater amount per share than the most recent such dividend) to all holders of Common Stock; or (ii) to issue any rights, warrants or other securities to all holders of Common Stock entitling them to purchase any additional shares of Common Stock or any other rights, warrants or other securities; or (iii) to effect any reclassification or change of outstanding shares of Common Stock, or any consolidation, merger, sale, lease or conveyance of property, described in Section 7; or (iv) to effect any liquidation, dissolution or winding-up of the Company; or -7- (v) to take any other action which would cause an adjustment to the Exercise Price; then, and in any one or more of such cases, the Company shall give written notice thereof, by registered mail, postage prepaid, to each Holder at the address for such Holder as it shall appear in the Warrant Register, mailed at least 10 days prior to (i) the date as of which the holders of record of shares of Common Stock to be entitled to receive any such dividend, distribution, rights, warrants, other securities are to be determined, (ii) the date on which any such reclassification, change of outstanding shares of Common Stock, consolidation, merger, sale, lease, conveyance of property, liquidation, dissolution or winding-up is expected to become effective, and the date as of which it is expected that holders of record of shares of Common Stock shall be entitled to exchange their shares for securities or other property, if any, deliverable upon such reclassification, change of outstanding shares, consolidation, merger, sale, lease, conveyance of property, liquidation, dissolution or winding-up, or (iii) the date of such action which would require an adjustment to the Exercise Price. 9. Taxes. The issuance of any shares or other securities upon the exercise or conversion of this Warrant, and the delivery of certificates or other instruments representing such shares or other securities, shall be made without charge to the Holder for any tax or other charge in respect of such issuance. The Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of any certificate in a name other than that of the Holder and the Company shall not be required to issue or deliver any such certificate unless and until the person or persons requesting the issue thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. 10. Registration Rights. (a) If, at any time during the five year period commencing on July 10, 2001 the Company shall file a registration statement (other than on Form S-4, Form S-8 or any successor form) with the Securities and Exchange Commission (the "COMMISSION") while any Eligible Securities (as hereinafter defined) are outstanding, the Company shall give all of the then holders of any Eligible Securities (the "ELIGIBLE HOLDERS") at least 15 days prior written notice of the filing of such registration statement. If requested by any Eligible Holder in writing within 20 days after receipt of any such notice, the Company shall, at the Company's sole expense (other than the fees and disbursements of counsel for the Eligible Holders and the underwriting discounts, if any, payable in respect of the Eligible Securities sold by any Eligible Holder), register or qualify all or, at each Eligible Holder's option, any portion of the Eligible Securities of any Eligible Holder who shall have made such request, concurrently with the registration of such other securities, all to the extent required to permit a public offering and sale of the Eligible Securities through the facilities of all appropriate securities exchanges and the over-the-counter market, and will use its best efforts through its officers, directors, auditors and counsel to cause such registration statement to become effective as promptly as practicable. Notwithstanding the foregoing, if the managing underwriter of any such offering shall advise the Company in writing that, in its opinion, the distribution of all or a portion of the Eligible Securities requested by the Eligible Holders to be included in the registration concurrently with the securities being registered by the Company would materially adversely affect the distribution of such securities by the Company for its own account, then any Eligible Holder who shall have requested registration of his or its Eligible Securities shall delay the -8- offering and sale of such Eligible Securities (or the portions thereof so designated by such managing underwriter) for such period, not to exceed 90 days from the effectiveness of any registration statement (the "DELAY PERIOD"), as the managing underwriter shall request, provided that no such delay shall be required as to any Eligible Securities if any securities of the Company are included in such registration statement and eligible for sale during the Delay Period for the account of any person other than the Company and any Eligible Holder unless the securities included in such registration statement and eligible for sale during the Delay Period for such other person shall have been reduced pro rata to the reduction of the Eligible Securities which were requested to be included and eligible for sale during the Delay Period in such registration. As used herein, "ELIGIBLE SECURITIES" shall mean the Warrants and the Warrant Shares and the Conversion Shares which, in each case, have not been previously sold pursuant to a registration statement or sold or eligible for sale pursuant to Rule 144 promulgated under the Act. (b) If, during the six-month period commencing on July 10, 2001, the Company has not filed a registration statement (other than on Form S-4, Form S-8 or any successor form) with the Commission while any Eligible Securities are outstanding, and the Eligible Holders have not been given the opportunity to exercise their registration rights pursuant to Section 10(a) above, the Eligible Holders who in the aggregate own (or upon exercise of all Warrants then outstanding would own) a majority of the total number of shares of Common Stock then included (or upon such exercise would be included) in the Eligible Securities (the "MAJORITY HOLDERS") will have the right to, at any time during the four year period commencing after the expiration of the six-month period mentioned above, give a written request to the Company to register the sale of all or part of such Eligible Securities. The Company shall, as promptly as practicable, prepare and file with the Commission a registration statement sufficient to permit the public offering and sale of the Eligible Securities through the facilities of all appropriate securities exchanges and the over-the counter market, and will use such registration statement to become effective as promptly as practicable; provided, however, that the Company shall only be obligated to file one such registration statement for which all expenses incurred in connection with such registration (other than the fees and disbursements of counsel for the Eligible Holders and underwriting discounts, if any, payable in respect of the Eligible Securities sold by the Eligible Holders) shall be borne by the Company and one additional such registration statement for which all such expenses shall be paid by the Eligible Holders. Within three business days after receiving any request contemplated by this Section 10(b), the Company shall give written notice to all the other Eligible Holders, advising each of them that the Company is proceeding with such registration and offering to include therein all or any portion of any such other Eligible Securities, provided that the Company receives a written request to do so from such Eligible Holder within 20 days after receipt by him or it of the Company's notice. (c) In the event of a registration pursuant to the provisions of this Section 10, the Company shall use its best efforts to cause the Eligible Securities so registered to be registered or qualified for sale under the securities or blue sky laws of such jurisdictions as the Holder or Holders may reasonably request; provided, however, that the Company shall not for any such purpose be required to (A) qualify generally to do business as a foreign corporation in any jurisdiction wherein it is not otherwise required to be so qualified, (B) subject itself to taxation in any jurisdiction wherein it is not so subject or (C) consent to general service of process in any such jurisdiction or otherwise take action that would subject it to the general jurisdiction of the courts of any jurisdiction to which it is not so subject. -9- (d) The Company shall keep effective any registration or qualification contemplated by this Section 10 and shall from time to time amend or supplement each applicable registration statement, preliminary prospectus, final prospectus, application, document and communication for such period of time as shall be required to permit the Eligible Holders to complete the offer and sale of the Eligible Securities covered thereby. The Company shall in no event be required to keep any such registration or qualification in effect for a period in excess of nine months from the date on which the Eligible Holders are first free to sell such Eligible Securities. (e) In the event of a registration pursuant to the provisions of this Section 10, the Company shall furnish to each Eligible Holder such number of copies of the registration statement and of each amendment and supplement thereto (in each case, including all exhibits), such reasonable number of copies of each prospectus contained in such registration statement and each supplement or amendment thereto (including each preliminary prospectus), all of which shall conform to the requirements of the Act and the rules and regulations thereunder, and such other documents, as any Eligible Holder may reasonable request to facilitate the disposition of the Eligible Securities included in such registration. (f) In the event of a registration pursuant to the provisions of this Section 10, the Company shall furnish each Eligible Holder of any Eligible Securities so registered with an opinion of its counsel (reasonably acceptable to the Eligible Holders) to the effect that (i) the registration statement has become effective under the Act and no order suspending the effectiveness of the registration statement, preventing or suspending the use of the registration statement, any preliminary prospectus, any final prospectus or any amendment or supplement thereto has been issued, nor has the Commission or any securities or blue sky authority of any jurisdiction instituted or threatened to institute any proceedings with respect to such an order, (ii) the registration statement and each prospectus forming a part thereof (including each preliminary prospectus), and any amendment or supplement, thereto, complies as to form with the Act and the rules and regulations thereunder, and (iii) such counsel has no knowledge of any material misstatement or omission in such registration statement or any prospectus, as amended or supplemented. Such opinion shall also state the jurisdictions in which the Eligible Securities have been registered or qualified for sale pursuant to the provisions of Section 10(c). (g) In the event of a registration pursuant to the provision of this Section 10, the Company shall enter into a cross-indemnity agreement and a contribution agreement, each in customary form, with each underwriter, if any, and, if requested, enter into an underwriting agreement containing conventional representations, warranties, allocation of expenses, and customary closing conditions, including, but not limited to, opinions of counsel and accountants' cold comfort letters, with any underwriter who acquires any Eligible Securities. (h) The Company covenants and agrees that, until all the Eligible Securities have been sold under a registration statement or pursuant to Rule 144 under the Act, it shall keep current in filing all reports, statements and other materials required to be filed with the Commission to permit holders of the Eligible Securities to sell such securities under Rule 144. -10- (i) The Company may delay any requested registration hereunder by giving written notice to Eligible Holders who have elected to include their Eligible Securities in a registration under this Section 10 if the Company's Board of Directors determines in good faith that a registration at such time would be materially detrimental to the Company provided that any such delay shall not exceed ninety (90) days and the Company cannot provide this notice more than twice in any twelve-month period. (j) Notwithstanding the foregoing, if the managing underwriter of an offering which includes all or a portion of the Eligible Securities, and such managing underwriter advises the Company that marketing factors require a limitation of the number of securities to be underwritten (including Eligible Securities) then the Company shall so advise all security holders whose securities are proposed to be registered, and the number of shares that may be included in the underwriting and registration shall be allocated pro rata to the participating security holders based on the number of securities initially proposed to be underwritten. 11. Indemnification. (a) Subject to the conditions set forth below, the Company agrees to indemnify and hold harmless each Eligible Holder, its officers, directors, members, employees, agents and counsel, and each person, if any, who controls any such person within the meaning of Section 15 of the Act or Section 20(a) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), from and against any and all loss, liability, charge, claim, damage and expense whatsoever (which shall include, for all purposes of this Section 11, but not be limited to, reasonable attorneys' fees and any and all reasonable expense whatsoever incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation), as and when incurred, arising out of, based upon, or in connection with (i) any untrue statement or alleged untrue statement of a material fact contained (A) in any registration statement, preliminary prospectus or final prospectus (as from time to time amended and supplemented), or any amendment or supplement thereto, relating to the sale of any of the Eligible Securities, or (B) in any application or other document or communication (in this Section 11 collectively called an "APPLICATION") executed by or on behalf of the Company or based upon written information furnished by or on behalf of the Company filed in any jurisdiction in order to register or qualify any of the Eligible Securities under the securities or blue sky laws thereof or filed with the Commission or any securities exchange; or any omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, unless such statement or omission was made in reliance upon and in conformity with written information furnished to the Company with respect to such Eligible Holder by or on behalf of such person expressly for inclusion in any registration statement, preliminary prospectus or final prospectus, or any amendment or supplement thereto, or in any application, as the case may be, or (ii) any breach of any representation, warranty, covenant or agreement of the Company contained in this Warrant. The foregoing agreement to indemnify shall be in addition to any liability the Company may otherwise have, including liabilities arising under this Warrant. If any action is brought against any Eligible Holder or any of its officers, directors, members, employees, agents or counsel, or any controlling persons of such person (an "INDEMNIFIED PARTY") in respect of which indemnity may be sought against the Company pursuant to the foregoing paragraph, such indemnified party or parties shall promptly notify the -11- Company in writing of the institution of such action (provided that the failure so to notify shall not relieve the Company from any liability pursuant to this Section 11(a), but shall only reduce the amount of the indemnification if any to the extent that the Company is prejudiced by such delay) and the Company shall promptly assume the defense of such action, including the employment of counsel (reasonably satisfactory to such indemnified party or parties) and payment of expenses. Such indemnified party or parties shall have the right to employ its or their own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such indemnified party or parties unless the employment of such counsel shall have been authorized in writing by the Company in connection with the defense of such action or the Company shall not have promptly employed counsel reasonably satisfactory to such indemnified party or parties to have charge of the defense of such action or such indemnified party or parties shall have reasonably concluded that there may be a conflict of interest between the indemnified party or parties and the Company in the conduct of the defense of such action in any of which events such fees and expenses shall be borne by the Company and the Company shall not have the right to direct the defense of such action on behalf of the indemnified party or parties. Anything in this Section 11 to the contrary notwithstanding, the Company shall not be liable for any settlement of any such claim or action effected without its written consent, which shall not be unreasonably withheld. The Company shall not, without the prior written consent of each indemnified party that is not released as described in this sentence, settle or compromise any action, or permit a default or consent to the entry of judgment in or otherwise seek to terminate any pending or threatened action, in respect of which indemnity may be sought hereunder (whether or not any indemnified party is a party thereto), unless such settlement, compromise, consent or termination includes an unconditional release of each indemnified party from all liability in respect of such action. The Company agrees promptly to notify the Eligible Holders of the commencement of any litigation or proceedings against the Company or any of its officers or directors in connection with the sale of any Eligible Securities or any preliminary prospectus, prospectus, registration statement, or amendment or supplement thereto, or any application relating to any sale of any Eligible Securities. (b) The Holder agrees to indemnify and hold harmless the Company, each director of the Company, each officer of the Company who shall have signed any registration statement covering Eligible Securities held by the Holder, each other person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, and its or their respective counsel, to the same extent as the foregoing indemnity from the Company to the Holder in Section 11(a), but only with respect to statements or omissions, if any, made in any registration statement, preliminary prospectus or final prospectus (as from time to time amended and supplemented), or any amendment or supplement thereto, or in any application, in reliance upon and in conformity with written information furnished to the Company with respect to the Holder by or on behalf of the Holder expressly for inclusion in any such registration statement, preliminary prospectus or final prospectus, or any amendment or supplement thereto, or in any application, as the case may be. If any action shall be brought against the Company or any other person so indemnified based on any such registration statement, preliminary prospectus or final prospectus, or any amendment or supplement thereto, or in any application, and in respect of which indemnity may be sought against the Holder pursuant to this Section 11(b), the Holder shall have the rights and duties given to the Company, and the Company and each other person so indemnified shall have the rights and duties given to the indemnified parties, by the provisions of Section 11(a). -12- (c) To provide for just and equitable contribution, if (i) an indemnified party makes a claim for indemnification pursuant to Section 11(a) or 11(b) (subject to the limitations thereof) but it is found in a final judicial determination, not subject to further appeal, that such indemnification may not be enforced in such case, even though this Agreement expressly provides for indemnification in such case, or (ii) any indemnified or indemnifying party seeks contribution under the Act, the Exchange Act or otherwise, then the Company (including for this purpose any contribution made by or on behalf of any director of the Company, any officer of the Company who signed any such registration statement, any controlling person of the Company, and its or their respective counsel), as one entity, and the Eligible Holders of the Eligible Securities included in such registration in the aggregate (including for this purpose any contribution by or on behalf of an indemnified party), as a second entity, shall contribute to the losses, liabilities, claims, damages and expenses whatsoever to which any of them may be subject, on the basis of relevant equitable considerations such as the relative fault of the Company and such Eligible Holders in connection with the facts which resulted in such losses, liabilities, claims, damages and expenses. The relative fault, in the case of an untrue statement, alleged untrue statement, omission or alleged omission, shall be determined by, among other things, whether such statement, alleged statement, omission or alleged omission relates to information supplied by the Company or by such Eligible Holders, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement, alleged statement, omission or alleged omission. The Company and the Holder agree that it would be unjust and inequitable if the respective obligations of the Company and the Eligible Holders for contribution were determined by pro rata or per capita allocation of the aggregate losses, liabilities, claims, damages and expenses (even if the Holder and the other indemnified parties were treated as one entity for such purpose) or by any other method of allocation that does not reflect the equitable considerations referred to in this Section 11(c). In no case shall any Eligible Holder be responsible for a portion of the contribution obligation imposed on all Eligible Holders in excess of its pro rata share based on the number of shares of Common Stock owned by it (or which would be owned by it upon exercise of all Eligible Securities) and included in such registration as compared to the number of shares of Common Stock owned by it (or which would be owned by it upon exercise of all Eligible Securities by all Eligible Holders) and included in such registration. No person guilty of a fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who is not guilty of such fraudulent misrepresentation. For purposes of this Section 11(c), each person, if any, who controls any Eligible Holder within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act and each officer, director, member, employee, agent and counsel of each such Eligible Holder or control person shall have the same rights to contribution as such Eligible Holder or control person 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, each officer of the Company who shall have signed any such registration statement, each director of the Company, and its or their respective counsel shall have the same rights to contribution as the Company, subject in each case to the provisions of this Section 11(c). Anything in this Section 11(c) to the contrary notwithstanding, no party shall be liable for contribution with respect to the settlement of any claim or action effected without its written consent. This Section 11(c) is intended to supersede any right to contribution under the Act, the Exchange Act or otherwise. 12. Representations and Warranties. The Company represents and warrants to Holder as follows: -13- (a) This Warrant has been duly authorized and executed by the Company and is a valid and binding obligation of the Company enforceable in accordance with its terms; (b) The shares of Common Stock issuable hereunder have been duly authorized and reserved for issuance by the Company and, when issued in accordance with the terms hereof, will be validly issued, fully paid and nonassessable; (c) The execution and delivery of this Warrant are not, and the issuance of the shares of Common Stock upon exercise of this Warrant in accordance with the terms hereof will not be, inconsistent with the Company's Certificate of Incorporation or by-laws, do not and will not contravene any law, governmental rule or regulation, judgment or order applicable to the Company, and, except for consents that have already been obtained by the Company, do not and will not conflict with or contravene any provision of, or constitute a default under, any indenture, mortgage, contract or other instrument of which the Company is a party or by which it is bound or require the consent or approval of, the giving of notice to, the registration with or the taking of any action in respect of or by, any Federal, state or local governmental authority or agency or other person. 13. Legend. Unless registered pursuant to the provisions of Section 10 hereof, the Warrant Shares or Conversion Shares issued upon exercise or conversion of the Warrants shall be subject to a stop transfer order and the certificate or certificates evidencing such Warrant Shares shall bear the following legend: "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND, UNLESS SO REGISTERED, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS." 14. Reservation and Listing of Securities. The Company shall at all times reserve and keep available out of its authorized Common Stock, solely for the purpose of issuance upon the exercise of the Warrants, such number of Common Stock or other securities, properties or rights as shall be issuable upon the exercise thereof. The Company covenants and agrees that, upon exercise of the Warrants and payment of the Exercise Price therefor, all Common Stock and other securities issuable upon such exercise shall be duly and validly issued, fully paid, nonassessable and not subject to the preemptive rights of any shareholder. As long as the Warrants shall be outstanding, the Company shall use its best efforts to cause all Common Stock issuable upon the exercise of the Warrants to be listed on all securities exchanges and/or included in the automated quotation system of the Nasdaq (subject to official notice of issuance) with respect to which the Common Stock issued to the public in connection herewith may then be listed and/or quoted. -14- 15. Destroyed or Lost Warrants. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of any Warrant (and upon surrender of any Warrant if mutilated), and upon reimbursement of the Company's reasonable incidental expenses, the Company shall execute and deliver to the Holder thereof a new Warrant of like date, tenor and denomination. 16. Notices to Warrant Holders. In the event of (a) any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, or (b) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger involving the Company and any other person or any transfer of all or substantially all the assets of the Company to any other person, or (c) any voluntary or involuntary dissolution, liquidation or winding-up of the Company, the Company will mail to each Holder of a Warrant a notice specifying (i) the date or expected date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right, and (ii) the date or expected date on which any such reorganization, reclassification, recapitalization, consolidation, merger, transfer, dissolution, liquidation or winding-up is to take place and time, if any such time is to be fixed, as of which the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for the securities or other property deliverable upon such reorganization, reclassification, recapitalization, consolidation, merger, transfer, dissolution, liquidation or winding-up. Such notice shall be mailed at least 45 days prior to the date therein specified. 17. Notices. All notices, requests, consents and other communications hereunder shall be in writing and shall be deemed to have been duly given or made at the time delivered by hand if personally delivered; five calendar days after mailing if sent by registered or certified mail; when answered back, if telexed; when receipt is acknowledged, if telecopied: and the next business day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery (except that a notice of change of address shall not be deemed to have been given until actually received by the addressee): (a) If to the registered Holder of the Warrants, to the address of such Holder as shown on the books of the Company; or (b) If to the Company, to the address set forth in Section 1 hereof or to such other address as the Company may designate by notice to the Holders. 18. Supplements and Amendments. The Company and the Underwriter may from time to time supplement or amend this Agreement without the approval of any Holders of -15- Warrants (other than the Underwriter) in order to cure any ambiguity, to correct or supplement any provision contained herein which may be defective or inconsistent with any provisions herein, or to make any other provisions in regard to matters or questions arising hereunder which the Company and the Underwriter may deem necessary or desirable and which the Company and the Underwriter deem shall not adversely affect the interests of the Holders of Warrants. 19. No Notice of Meetings. The Holder of any Warrant shall not have, solely on account of such status, any rights of a stockholder of the Company, either at law or in equity, or to any notice of meetings of stockholders or of any other proceedings of the Company, except as provided in this Warrant. 20. Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and performed within such State, without regard to the principles thereof respecting conflicts of law. Dated: ------------------------- AMPERSAND MEDICAL CORP. By: ----------------------------- Name: ----------------------------- Title: Attest: - -------------------------------- Secretary Acknowledged and Accepted by: TUCKER ANTHONY INCORPORATED By: ----------------------------- Name: ----------------------------- Title: -16- FORM OF ASSIGNMENT (To be executed by the registered holder if such holder desires to transfer the attached Warrant.) FOR VALUE RECEIVED, _______________________________ hereby sells, assigns and transfers unto ______________________ a Warrant to purchase ______ shares of Common Stock, par value $.001 per share, of AMPERSAND MEDICAL CORP. (the "Company"), together with all right, title and interest therein, and does hereby irrevocably constitute and appoint ________________ attorney to transfer such Warrant on the books of the Company, with full power of substitution. Dated: ------------------------- Signature ----------------------- NOTICE The Signature on the foregoing Assignment must correspond to the name as written upon the fact of this Warrant in every particular, without alteration or enlargement or any change whatsoever. -17- To: Ampersand Medical Corp. 414 North Orleans, Suite 510 Chicago, IL 60610 ELECTION TO EXERCISE The undersigned hereby exercises his or its rights to purchase ____ Warrant Shares covered by the within Warrant and tenders payment herewith in the amount of $________ in accordance with the terms thereof, and requests that certificates for such securities be issued in the name of, and delivered to: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print Name, Address and Social Security or Tax Identification Number) and, if such number of Warrant Shares shall not be all the Warrant Shares covered by the within Warrant, that a new Warrant for the balance of the Warrant Shares covered by the within Warrant be registered in the name of, and delivered to, the undersigned at the address stated below. Dated: Name ---------------------------- ----------------------------- (Print) Address: ------------------------------------------------------------------------ ---------------------------------- (Signature) -18- To: Ampersand Medical Corp. 414 North Orleans, Suite 510 Chicago, IL 60610 CASHLESS EXERCISE FORM (To be executed upon conversion of the attached Warrant) The undersigned hereby irrevocably elects to surrender its Warrant for the number of shares of Common Stock as shall be issuable pursuant to the cashless exercise provisions set forth in Section 2 of the within Warrant, in respect of ____ shares of Common Stock underlying the within Warrant, and requests that certificates for such securities be issued in the name of and delivered to: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print, Name, Address and Social Security or Tax Identification Number) and, if such number of shares shall not be all the shares exchangeable or purchasable under the within Warrant, that a new Warrant for the balance of the Warrant Shares covered by the within Warrant be registered in the name of, and delivered to, the undersigned at the address stated below. Dated: Name ---------------------------- ----------------------------- (Print) Address: ------------------------------------------------------------------------ ---------------------------------- (Signature) -19- EX-4.26 9 c66354ex4-26.txt COMMON STOCK PURCHASE WARRANT EXHIBIT 4.26 THIS WARRANT, AND THE SECURITIES ISSUABLE UPON THE EXERCISE THEREOF, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES OR BLUE SKY LAWS OF ANY STATE OR OTHER JURISDICTION, AND NEITHER THIS WARRANT NOR SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, DISTRIBUTED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS: (A) THERE IS AN EFFECTIVE REGISTRATION AND/OR QUALIFICATION UNDER SUCH ACT AND ALL SUCH APPLICABLE SECURITIES AND/OR BLUE SKY LAWS COVERING SUCH TRANSACTION, OR (B) THE COMPANY RECEIVES AN OPINION LETTER FROM LEGAL COUNSEL TO THE HOLDER OF THIS WARRANT OR SUCH SECURITIES (AS THE CASE MAY BE), REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT SUCH TRANSACTION IS EXEMPT FROM THE APPLICABLE REGISTRATION AND/OR QUALIFICATION REQUIREMENTS OF SUCH ACT AND APPLICABLE SECURITIES AND BLUE SKY LAWS. WARRANT TO PURCHASE COMMON STOCK OF MOLECULAR DIAGNOSTICS, INC. Warrant No. VMSI - 1 1,750,000 November 2, 2001 MOLECULAR DIAGNOSTICS, INC., a Delaware corporation (the "Company"), for value received, hereby certifies that VENTANA MEDICAL SYSTEMS, INC. or its registered assigns, is entitled to purchase from the Company ONE MILLION SEVEN HUNDRED AND FIFTY THOUSAND (1,750,000) of duly authorized, validly issued, fully paid and non-assessable shares of Common Stock, par value $0.001 per share, of the Company ("Common Stock"), at the purchase price of US$1.15 per share (such per share price, subject to the adjustments, if any provided for in Section 2), being hereinafter referred to as the ("Exercise Price") at any time or from time to time prior to 5:00 p.m., New York City time, on the Expiration Date, all subject to the terms, conditions and adjustments set forth below in this Warrant. Certain terms used and not defined above in this Warrant are defined in Section 5. 1. EXERCISE OF WARRANT 1.1. MANNER OF EXERCISE. This Warrant may be exercised by the holder hereof, in whole or in any part (including as to any fraction of a share), during normal business hours on any Business Day until the Expiration Date by surrender of this Warrant, with the form of Subscription Notice at the end hereof (or a reasonable facsimile thereof) duly executed by such holder, to the Company, accompanied by: (i) payment of the aggregate Exercise Price for the Common Stock being purchased. Payment of the Exercise Price shall be made, at the option of the holder hereof, either: (A) in cash or by certified or official bank check payable to the order of the Company in the amount of the aggregate Exercise Price (or portion thereof being paid in this manner), (B) by the surrender of indebtedness of the Company (principal and/or interest) in an amount equal to the aggregate Exercise Price (or portion thereof being paid in this manner), (C) by the surrender of Common Stock, including Common Stock obtained upon any previous exercise of this Warrant, having a Market Value (as hereinafter defined) as of the date of exercise equal to the aggregate Exercise Price (or portion thereof being paid in this manner), (D) by the surrender of other warrants of the Company, having a Warrant Value (as hereinafter defined) as of the date of exercise equal to the aggregate Exercise Price (or portion thereof being paid in this manner), or (E) by any combination of the foregoing. In lieu of paying the Exercise Price in the foregoing manner, the holder hereof may, at its option, surrender to the Company all or a specified portion of this Warrant in exchange for a number of shares of Common Stock determined by dividing (1) the product of (i) the number of shares issuable upon exercise of this Warrant or such specified portion (as the case may be) and (ii) the difference between the Market Value of the Common Stock as of the date of exercise and the Exercise Price, by (2) such Market Value. For purposes of the foregoing, "Market Value" of the Common Stock means, as of any date, the reported closing sale price per share of the Common Stock as of the immediately preceding Business Day (provided there is no such reported closing sale price on such Business Day, then the average of the last-reported bid and ask prices on such Business Day); and "Warrant Value" means, for any warrant as of any date, the excess (if any) of the exercise price per share thereof over the Market Value of the Common Stock as of such date. 1.2. WHEN EXERCISE EFFECTIVE. Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the Business Day on which this Warrant shall have been exercised as provided in Section 1.1, and immediately prior to the close of business on such Business Day the Person or Persons in 2 whose name or names any certificate or certificates for Common Stock shall be issuable upon such exercise as provided in Section 1.3 shall be deemed to have become the holder or holders of record thereof. 1.3. DELIVERY OF STOCK CERTIFICATES, ETC. As soon as practicable after the exercise of this Warrant in whole or in any part as provided in Section 1.1, and in any event within ten (10) days thereafter, the Company at its expense (including the payment by it of any applicable issue taxes) will cause to be issued in the name of and delivered to the holder hereof or, subject to Section 3, such other Person or Persons as such holder (upon payment by such holder of any applicable transfer taxes) may direct: (i) a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled upon such exercise; (ii) in case such exercise is in part only, a new Warrant or Warrants of like tenor, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock equal to (without giving effect to any adjustment therein from the Original Issue Date) the number of such shares called for on the face of this Warrant minus the number of shares of Common Stock (without giving effect to any adjustment therein from the Issue Date) as to which this Warrant shall have been so exercised. 2. ANTI-DILUTION ADJUSTMENTS. (A) Stock Splits, Stock Dividends, Combinations. If at any time after the Original Issue Date the Company shall: (1) take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend payable in, or other distribution of, Additional Shares of Common Stock, (2) subdivide its outstanding shares of Common Stock into a larger number of shares of Common Stock, or (3) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock then: (i) the number of shares of Common Stock issuable upon exercise of the Warrants shall be adjusted to equal the number of shares of Common Stock which a holder of the same number of shares of Common Stock issuable upon exercise of the Warrants immediately prior to the occurrence of such event would own or be entitled to receive after the occurrence of such event; and (ii) the Exercise Price shall be adjusted to equal the product of such Exercise Price in effect immediately prior to such adjustment and a fraction (x) the numerator of which shall be the number of shares of Common Stock issuable upon exercise of the Warrants immediately prior to the adjustment made pursuant to the foregoing clause (i) and (y) the denominator shall be the number of shares of Common Stock issuable upon exercise of the Warrants immediately after such adjustment. (B) Issuance of Additional Shares of Common Stock. If at any time after the Original Issue Date the Company shall issue or sell any Additional Shares of Common Stock to any Person or Persons for consideration in an amount per Additional Share of Common Stock less than the Exercise Price at the date the Additional Shares of Common Stock are issued, then: (i) the number of shares of Common Stock issuable upon exercise of the Warrants shall be adjusted to equal the product of (A) the number of shares of Common Stock issuable upon exercise of the Warrants immediately prior to the occurrence of such issuance or sale, and (B) a fraction (x) the numerator of which shall be the number of shares of Common Stock Outstanding immediately prior the occurrence of such issuance or sale plus the number of Additional Shares of Common Stock to be issued in such issuance or sale and (y) the denominator of which shall be the number of shares of Common Stock Outstanding immediately prior to the occurrence of such issuance or sale plus the number of shares of Common Stock which the aggregate consideration to be paid for such Additional Shares of Common Stock would purchase at the Exercise Price at the date such shares are issued or sold (prior to adjustment hereunder); and (ii) the Exercise Price shall be adjusted to equal the product of such Exercise Price in effect immediately prior to such adjustment and a fraction (x) the numerator of which shall be the number of shares of Common Stock issuable upon exercise of the Warrants immediately prior to the adjustment made pursuant to the foregoing clause (i) and (y) the denominator shall be the number of shares of Common Stock issuable upon exercise of the Warrants immediately after such adjustment. 3 (C) Issuance of Convertible Securities. If at any time after the Original Issue Date the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a distribution of, or shall otherwise issue or sell, any Convertible Securities, whether or not the rights to convert, exchange or exercise thereunder are immediately exercisable, then the number of shares of Common Stock issuable upon exercise of the Warrants shall be adjusted as provided in Section 2(B) on the basis that the maximum number of Additional Shares of Common Stock issuable to effect the conversion, exchange or exercise of all such Convertible Securities shall be deemed to have been issued and outstanding and the Company shall have received all of the consideration payable therefor, if any, as of the date of the actual issuance of such Convertible Securities. After adjustment shall have been made in the number of shares of the Common Stock issuable upon exercise of the Warrants and the Exercise Price with respect to the distribution, issuance or sale of any Convertible Securities ("Primary Convertible Securities") in accordance with the foregoing, no further adjustment thereof shall be made upon the actual issuance of (x) any Convertible Securities ("Secondary Convertible Securities") issued upon conversion, exchange or exercise of such Primary Convertible Securities or (y) any shares of Common Stock issued upon conversion, exchange or exercise of such Primary Convertible Securities or Secondary Convertible Securities. (D) Superseding Adjustments. If, at any time any adjustment of the number of shares of Common Stock issuable upon exercise of the Warrants shall have been made pursuant to subsection 2(C) as the result of any issuance of Convertible Securities, (1) the right of conversion, exchange or exercise with respect to all or a portion of such Convertible Securities shall have expired, shall not have been exercised or shall be treated as having been cancelled or acquired by the Company, or (2) the consideration per share of Common Stock issuable pursuant to the terms of such Convertible Securities shall be increased or decreased, or the number of shares of Common Stock issuable pursuant to such terms shall be increased or decreased, solely by virtue of provisions therein contained for an automatic decrease in such consideration per share, or automatic increase in such number of shares, upon the occurrence of a specified date or event, then (i) such previous adjustment shall be rescinded and annulled and the Additional Shares of Common Stock which were deemed to have been issued by virtue of the computation made in connection with the adjustment so rescinded and annulled shall no longer be deemed to have been issued by virtue of such computation, and (ii) a recomputation shall be made of the effect of such Convertible Securities on the basis of (3) treating the number of Additional Shares of Common Stock or other property (if any) theretofore actually issued or issuable pursuant to any previous conversion, exchange or exercise (as the case may be) of any such Convertible Securities as having been issued on the date or dates of any such conversion, exchange or exercise and for the consideration actually received and receivable therefor, and (4) treating any such Convertible Securities which then remain outstanding as having been granted or issued immediately after the time of such increase or decrease (as the case may be) whereupon a new adjustment of the number of shares of Common Stock issuable upon exercise of the Warrants, and of the Exercise Price, shall be made on the basis pursuant to the appropriate provisions of this Section 2, which new adjustment shall supersede the previous adjustment so rescinded and annulled. (E) Other Provisions Applicable to Adjustments Under this Section. The following provisions shall be applicable to the making of adjustments provided for in this Section 2: (1) Computation of Consideration. To the extent that any Additional Shares of Common Stock or any Convertible Securities shall be issued for cash consideration, the consideration received by the Company therefor shall be the amount of the cash received by the Company therefor, or, if such Additional Shares of Common Stock or Convertible Securities are offered by the Company for subscription, the subscription price, or, if such Additional Shares of Common Stock or Convertible Securities are sold to underwriters or dealers for public offering without a subscription offering, the initial public offering price (in any such case subtracting any amounts paid or receivable for accrued interest or accrued dividends and without taking into account any compensation, discounts or expenses paid or incurred by the Company for and in the underwriting of, or otherwise in connection with, the issuance thereof). To the extent that such issuance shall be for a consideration other than cash, then, except as herein otherwise expressly provided herein, the amount of such consideration shall be deemed to be the fair value of such consideration at the time of such issuance as 4 determined by resolution of the Board of Directors. In case any Additional Shares of Common Stock or any Convertible Securities shall be issued in connection with any transaction described in Section 2(F) in which the Company issues any securities or other property, the amount of consideration therefor shall be deemed to be the fair value, as determined by resolution of the Board of Directors, of such portion of the assets and business of the non-surviving Person as such Board by resolution shall determine to be attributable to such Additional Shares of Common Stock or Convertible Securities, as the case may be. The consideration for any Additional Shares of Common Stock issuable pursuant to conversion, exchange or exercise of any Convertible Securities shall be the consideration received by the Company for issuing such Convertible Securities plus the additional consideration (if any) payable to the Company upon the conversion, exchange or exercise of such Convertible Securities. In case of the issuance at any time of any Additional Shares of Common Stock or Convertible Securities in payment or satisfaction of any dividends upon any class of stock other than Common Stock, the Company shall be deemed to have received for such Additional Shares of Common Stock or Convertible Securities a consideration equal to the amount of such dividend so paid or satisfied. (2) When Adjustments to be Made. The adjustments required by this Section 2 shall be made whenever and as often as any specified event requiring an adjustment shall occur, except that any adjustment of the number of shares of Common Stock into which the Notes are convertible that would otherwise be required may be postponed (except in the case of a subdivision or combination of shares of the Common Stock, as provided for in subsection 2.(A)) up to, but not beyond the date of, conversion if such adjustment either by itself or with other adjustments not previously made adds or subtracts less than 1 % of the shares of Common Stock issuable upon exercise of the Warrants immediately prior to the making of such adjustment. Any adjustment representing a change of less than such minimum amount (except as aforesaid) which is postponed shall be carried forward and made as soon as such adjustment, together with other adjustments required by this Section 2 and not previously made, would result in a minimum adjustment or on the date of conversion. For the purpose of any adjustment, any specified event shall be deemed to have occurred at the close of business on the date of its occurrence. (3) Fractional Interests. In computing adjustments under this Section 2, fractional interests in Common Stock shall be taken into account to the nearest one-ten thousandth (1/10,000th) of a share. (4) When Adjustment Not Required. If the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution or subscription or purchase rights and shall, thereafter and before the distribution to stockholders, legally abandon its plan to pay or deliver such dividend, distribution, subscription or purchase rights, then thereafter no adjustment shall be required by reason of the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled. (F) Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets. In the event that the Company, at any time after the Original Issue Date, shall (i) merge or consolidate with any other Person and the Company shall not be the resulting or surviving Person, (ii) merge or consolidate with any other Person and the Company shall be the resulting or surviving Person but in connection therewith the Common Stock shall be changed into or exchanged for stock or other securities of any other Person or cash or any other property or assets, (iii) sell, lease or otherwise transfer all or substantially all of its property or assets to any other Person and in connection therewith stock or other securities, cash or any other property or assets shall be issuable or deliverable in exchange for the Common Stock, or (iv) effect a capital reorganization or reclassification of the Common Stock (other than in the circumstances where any of Sections 2(A), (B) or (C) apply), then, and as a condition to the effectiveness of any such merger consolidation, sale, lease or other transfer or capital reorganization or reclassification (as the case may be), lawful and adequate provision shall be made so that the holders of the Warrants shall thereafter be entitled to receive, upon exercise thereof (in lieu of the Common Stock which such holders would have been entitled to receive upon such exercise immediately prior to such merger, consolidation, sale, lease or other transfer or capital reorganization or reclassification (as the case may be)), the stock or other securities, cash or other property or assets which such holders would have been entitled to receive had the outstanding Warrants been exercised immediately prior to such merger, consolidation, sale, lease or other transfer or capital reorganization or reclassification (as the case may be), at the aggregate Exercise Price in effect immediately prior to the such merger, consolidation, sale, lease or other transfer or capital reorganization or reclassification (as the case may be). As a further condition to the effectiveness of any such merger, consolidation, sale, lease or other transfer or capital reorganization or reclassification (as the case may be), any Person (other than the Company) who shall become obligated to deliver any stock or other securities, cash or other property or assets in accordance with the foregoing shall deliver to the holders of the Warrants a written instrument by which such Person shall expressly agree to issue and deliver any such stock or other securities, cash or other property or assets upon exercise of the Warrants. 5 (G) Certain Limitations. Notwithstanding anything herein to the contrary, the Company shall not enter into any transaction which, by reason of any adjustment hereunder, would cause the Exercise Price to be less than the par value per share of Common Stock. (H) Notice of Exercise Price Adjustments. Whenever the number of shares of Common Stock issuable upon exercise of the Warrants, or the Exercise Price, shall be adjusted pursuant to this Section 2, the Company shall forthwith prepare a certificate to be executed by an authorized officer of the Company setting forth, in reasonable detail, the event requiring the adjustment and the method by which such adjustment was calculated, specifying the number of shares of Common Stock into which the outstanding Warrants are exercisable and (if such adjustment was made pursuant to Section 2(F), describing the number and kind of) any stock or other securities, cash or other property or assets for which the outstanding Warrants are exercisable, and any change in the Exercise Price thereof, after giving effect to such adjustment or change. The Company shall promptly cause a signed copy of such certificate to be delivered to each holder of Warrants at such holder's address as appears on the books of the Company. The Company shall keep at its office copies of all such certificates and cause the same to be available for inspection at said office during normal business hours by any holder of Warrants or any prospective purchaser of Warrants from such holder. (I) Notice of Certain Corporate Actions. Holders of Warrants shall be entitled to the same rights to receive notices of corporate actions and other matters pertaining to the Company as the holders of outstanding shares of Common Stock, and the Company shall forward (or cause to be forwarded) to each holder of Warrants, at such holder's address as appears on the books of the Company, all notices forwarded to holders of the Common Stock generally (whether or not legally required). 3. RESTRICTIONS ON TRANSFER 3.1. WARRANTS LEGEND. Except as otherwise provided in this Section 3, each Warrant shall be stamped or otherwise imprinted with a legend in substantially the following form: "THIS WARRANT, AND THE SECURITIES ISSUABLE UPON THE EXERCISE THEREOF, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES OR BLUE SKY LAWS OF ANY STATE OR OTHER JURISDICTION, AND NEITHER THIS WARRANT NOR SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, DISTRIBUTED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS: (A) THERE IS AN EFFECTIVE REGISTRATION AND/OR QUALIFICATION UNDER SUCH ACT AND ALL SUCH APPLICABLE SECURITIES AND/OR BLUE SKY LAWS COVERING SUCH TRANSACTION, OR (B) THE COMPANY RECEIVES AN OPINION LETTER FROM LEGAL COUNSEL TO THE HOLDER OF THIS WARRANT OR SUCH SECURITIES (AS THE CASE MAY BE), REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT SUCH TRANSACTION IS EXEMPT FROM THE APPLICABLE REGISTRATION AND/OR QUALIFICATION REQUIREMENTS OF SUCH ACT AND APPLICABLE SECURITIES AND BLUE SKY LAWS." 3.2. COMMON STOCK LEGEND. Except as otherwise provided in this Section 3, each certificate representing Common Stock shall be stamped or otherwise imprinted with a legend in substantially the following form: "THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES OR BLUE SKY LAWS OF ANY STATE OR OTHER JURISDICTION, AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, DISTRIBUTED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS: (A) THERE IS AN EFFECTIVE REGISTRATION AND/OR QUALIFICATION UNDER SUCH ACT AND ALL SUCH APPLICABLE SECURITIES AND/OR BLUE SKY LAWS COVERING SUCH TRANSACTION, OR (B) THE CORPORATION RECEIVES AN OPINION LETTER FROM LEGAL COUNSEL TO THE HOLDER OF SUCH SECURITIES, REASONABLY SATISFACTORY TO THE CORPORATION, TO THE EFFECT THAT SUCH TRANSACTION IS EXEMPT FROM THE APPLICABLE REGISTRATION AND/OR QUALIFICATION REQUIREMENTS OF SUCH ACT AND APPLICABLE SECURITIES AND BLUE SKY LAWS." 6 3.3. RESTRICTIONS ON TRANSFER. Each offer, sale, transfer, distribution, assignment, pledge, hypothecation or other disposal of this Warrant, or Common Stock and any interest therein shall be subject to compliance with the terms of the foregoing legend(s) (as applicable), and the Company may refuse to register or otherwise recognize any transfer of this Warrant or Common Stock not in compliance therewith. 3.4. TERMINATION OF COMMON STOCK RESTRICTIONS. The restrictions imposed under this Section 3 shall terminate as to this Warrant and any shares of Common Stock when, if and so long as such shares shall have been effectively registered under the Securities Act and disposed of pursuant thereto. Whenever the restrictions imposed by this Section 3 shall terminate as to this Warrant or any shares of Common Stock as hereinabove provided, the holder thereof shall be entitled to receive from the Company, at its expense, a new Warrant or a new certificate or certificates for such shares (as applicable) without the legend called for hereunder 4. CORPORATE OFFICE; OWNERSHIP; REGISTRATION OF TRANSFER, ETC. 4.1. CORPORATE OFFICE. The Company shall maintain a copy of the Warrants at its corporate office. 4.2. OWNERSHIP OF WARRANTS. The Company may deem and treat the Person in whose name this Warrant is registered as the owner and holder thereof for all purposes hereunder and shall not be bound by any notice to the contrary, until presentation of this Warrant for registration of transfer as provided in this Section 4. 4.3. REGISTRATION OF TRANSFER. The Company agrees to maintain at its corporate offices books for the registration and registration of transfer of Warrants, and (subject to the provisions of Section 3) this Warrant and all rights hereunder are transferable, in whole or in any part, on said books at said office upon surrender of this Warrant at said offices, together with a written instrument of transfer of this Warrant duly executed by the holder thereof or its duly authorized agent or attorney and funds sufficient to pay any transfer taxes payable in respect thereof. Upon such surrender and payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument and this Warrant shall promptly be cancelled. 4.4. DIVISION OR COMBINATION OF WARRANTS. This Warrant may be divided or combined with other Warrants upon presentation of this Warrant and of any other Warrants with which this Warrant is to be combined at the corporate offices of the Company, together with a written notice specifying the names and denominations in which the new Warrant or Warrants are to be issued duly executed by the holders hereof and thereof or their respective duly authorized agents or attorneys. Subject to compliance with Section 4.3 as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. 4.5. LOSS, DESTRUCTION, ETC. OF WARRANTS. Upon receipt of evidence satisfactory to the Company of the loss, theft, mutilation or destruction of the Warrant, and in the case of any such loss, theft or destruction upon delivery of a written indemnity in such form and amount as shall be reasonably satisfactory to the Company, or in the event of such mutilation upon surrender and cancellation of the mutilated Warrant, the Company shall execute and deliver a new Warrant of like tenor in lieu of such lost, stolen, mutilated or destroyed Warrant. Any Warrant issued under the provisions of this Section 4.5 in lieu of any Warrant alleged to be lost, stolen, mutilated or destroyed Warrant shall constitute an original contractual obligation on the part of the Company. 4.6. EXPENSES OF DELIVERY. The Company shall bear and pay all expenses, taxes (other than transfer taxes) and other charges incurred or charged in connection with the preparation, issuance and delivery of the Warrant hereunder. 5. DEFINITIONS For purposes of the Warrants, the following definitions, not defined elsewhere in this Warrant, have the following meanings: "Additional Shares of Common Stock" means all shares of Common Stock issued or issuable by the Company after the Original Issue Date other than Excluded Shares. "Board of Directors" means the Board of Directors of the Company, or any authorized committee thereof. 7 "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions at the place where any specified act pursuant to this Note is to occur are authorized or obligated by or pursuant to law, regulation or executive order to close. "Convertible Securities" means evidences of indebtedness, shares of stock, options, warrants and other purchase or subscription rights, other than Series C Convertible Preferred Stock, which are convertible into, exchangeable for or exercisable for, with or without payment of additional consideration in cash or other property, and either immediately or upon the occurrence of a specified date or a specified event, Additional Shares of Common Stock (which excludes, for the avoidance of doubt, Excluded Shares) or other Convertible Securities. "Excluded Shares" means shares of Common Stock issued or issuable: (A) to: (i) employees, officers and/or directors of, and/or consultants to, the Company or any of its subsidiaries in consideration of services rendered or to be rendered to the Company or any of its subsidiaries, to otherwise compensate any such Person and/or to retain the services of any such Person (provided that Excluded Shares under this clause (i) may not exceed at, any time, 20% of the amount of Common Stock outstanding and issuable pursuant to Convertible Securities outstanding at such time); (ii) vendors, lenders or other providers of finance to, and/or strategic partners of, the Company or any of its subsidiaries in consideration of favorable cash pricing, continued business and/or other consideration or value added; and (iii) sellers and/or other securityholders of companies, businesses or assets purchased or otherwise acquired (including by merger, consolidation or joint venture formation) by the Company or any of its subsidiaries; and (B) upon conversion of Convertible Securities originally issued prior to the Original Issue Date. "Expiration Date" means November 2, 2004. "Majority Holders" means, at any time, the holders of a majority of the Warrants. "Original Issue Date" means November 2, 2001. "Outstanding" means, when used with reference to Common Stock at any date as of which the number of shares thereof is to be determined, (i) all issued and outstanding shares of Common Stock, except shares then owned or held by or for the account of the Company or any subsidiary thereof, and shall include all shares issuable in respect of outstanding scrip or any certificates representing fractional interests in shares of Common Stock, and (ii) all shares of Common Stock issuable in respect of any outstanding Convertible Securities of the Company having a nominal conversion, exchange or exercise price. "Person" means any individual, firm, corporation or other entity, and shall include any successor (by merger or otherwise) of such entity. "Securities Act" means the Securities Act of 1933, as amended. 6. NO IMPAIRMENT OF RIGHTS; CERTAIN COVENANTS The Company will not, by amendment of its certificate of incorporation or through any consolidation, merger, sale, lease or other transfer of property or assets, capital reorganization or reclassification, issuance of securities, dissolution, liquidation, winding-up or otherwise, take any action or omit to take any action directly or indirectly avoiding or seeking to avoid the observance or performance of the provisions of the Warrant, but shall at all times in good faith assist in the carrying out the terms of such provisions thereof. Without limiting the generality of the foregoing, the Company covenants and agrees that it: (i) shall not take any action (contemplated under Section 2 or otherwise) that results in the par value of a share of Common Stock to exceed the Exercise Price therefor; (ii) shall not take any action (contemplated under Section 2 or otherwise) that results in the total number of shares of Common Stock or other securities issuable upon exercise of the Warrant exceeding the number of authorized but unissued shares of the Company under its certificate of incorporation; and (iii) shall otherwise take all actions as may be necessary or appropriate in order that the Company may issue and deliver to the holders of the Warrant upon exercise thereof at the Exercise Price, free from preemptive rights, duly authorized, validly issued, fully paid and non-assessable shares of Common Stock which may be issuable upon exercise thereof. 7. MISCELLANEOUS 7.1. NOT STOCKHOLDERS; LIMITATION OF LIABILITY. Except as expressly provided herein, no provision of this Warrant shall be construed as conferring upon the holder thereof the rights of a stockholder of the Company. No provision 8 hereof, in the absence of affirmative action by the holder hereof to purchase Common Stock, and no mere enumeration herein of the rights, powers or privileges of the holder hereof, shall give rise to any liability of such holder for the purchase price of any Common Stock or otherwise as a stockholder of the Company, whether such liability is asserted by the Company or its creditors. 7.2. WAIVERS AND AMENDMENTS. Any term or provision of the Warrant may be waived, supplemented or amended in a writing executed by the Company and executed (or consented to in writing) by the Majority Holders. 7.3. ILLEGALITY. If the event that any one or more of the provisions contained in this Warrant shall be determined to be invalid, unenforceable or illegal in any respect for any reason, the validity, enforceability or legality of such provision in any other respect and the remaining provisions of this Warrant shall not, at the election of the party for whom the benefit of the provision exists, be in any way impaired. 7.4. NOTICES. All notices or other communications which are required or permitted hereunder shall be in writing and sufficient if delivered personally, sent by overnight delivery service or sent by registered or certified mail, postage prepaid, addressed as follows: (i) if to the holder of this Warrant, at the registered address of such holder as set forth in the Warrant; and (ii) if to the Company, 414 N. Orleans, Suite 510, Chicago, Illinois 60610, Attention: President; provided that exercise of this Warrant shall be effective if effected in the manner provided in Section 1. The Company or holder of this Warrant may by notice to the other change the address to which notices or other communications to it are to be delivered or sent. 7.5. ENTIRE AGREEMENT. This Warrant contains the entire agreement between the Company and the holder of this Warrant with respect to the subject matter hereof and supersedes all prior arrangements or understandings with respect thereto. 7.6. SPECIFIC PERFORMANCE. The holder of the Warrant shall be entitled to the equitable remedy of specific performance by the Company in the event of any breach by it of the terms and provisions thereof. The Company hereby irrevocably waives, to the extent that it may do so under applicable law, any defense based on the adequacy of a remedy at law which may be asserted as a bar to the remedy of specific performance in any action brought against the Company for specific performance of the Warrant. 7.7. DESCRIPTIVE HEADINGS; SECTION REFERENCES. The descriptive headings of this Warrant are for convenience only and shall not control or affect the meaning or construction of any provision of this Warrant. All Section references set forth in this Warrant are (unless the context otherwise require) references to sections of this Warrant. 7.8. GOVERNING LAW. This Warrant shall be governed by and construed in accordance with the laws of the State of Illinois (without regard to the choice of law principles thereof). IN WITNESS WHEREOF, the Company has caused this Warrant to be executed and delivered on its behalf as of the date first above written. MOLECULAR DIAGNOSTICS, INC. By: --------------------------------- Peter P. Gombrich Chairman and CEO MOLECULAR DIAGNOSTICS, INC. Warrant No. VMSI - 1 Subscription Notice THE UNDERSIGNED, the holder of the foregoing Warrant, HEREBY ELECTS TO EXERCISE purchase rights represented by said Warrant for, and to purchase thereunder, _______________________________________________________ shares of the Common Stock covered by said Warrant and herewith makes payment of the full Exercise Price therefor by the delivery herewith of cash or a certified or official bank check payable to the order of the Company in the amount of $___________________ or such other payment form as specified in Section 1.1 of the warrant. THE UNDERSIGNED HEREBY SURRENDERS to the Company the foregoing Warrant with respect to ____ shares of Common Stock. AND THE UNDERSIGNED HEREBY REQUESTS that: (1) the certificates for such shares (and any other securities or other property issuable upon such exercise): (1) be issued in the name of the undersigned or (if indicated in the following space), the following person or entity: _______________________________________________________________ __________________________________________________________________________ and (2) be delivered to the following address:____________________________ __________________________________________________________________________ (2) and if such shares shall not include all of the shares (or other securities or other property) issuable as provided in said Warrant, then a new Warrant, of like tenor and date, for the balance of the shares issuable thereunder be executed and delivered to the undersigned at the following address:_________________________________________________________________ _____________________________________________ . Dated: _______________________ ____________________________ Name Printed: EX-5.1 10 c66354ex5-1.txt OPINION OF SCHIFF, HARDIN & WAITE EXHIBIT 5.1 February [ ], 2002 Molecular Diagnostics, Inc. 414 North Orleans Street Suite 510 Chicago, Illinois 60610 Re: MOLECULAR DIAGNOSTICS, INC. Ladies and Gentlemen: We have acted as counsel to Molecular Diagnostics, Inc., a Delaware corporation (the "Company"), in connection with the preparation and filing by the Company of a registration statement on Form S-2 (the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to which the Company is registering 6,657,495 shares of the Company's common stock, par value $0.001 per share (the "Common Stock") for resale to the public. The Common Stock, if and when sold, will be sold by certain shareholders of the Company. This opinion is being rendered in connection with the filing of the Registration Statement. In connection with the foregoing, we have made such examination as we have deemed necessary for the purpose of this opinion. Based upon such examination it is our opinion that, when the Registration Statement has become effective under the Securities Act, and when the Common Stock included therein has been qualified as required under the laws of those jurisdictions in which they are to be issued and when the Common Stock included therein has been sold, issued and paid for in the manner described in the Registration Statement, the Common Stock will have been validly issued and will be fully paid and non-assessable. We hereby consent to the use of this opinion as an exhibit to the Registration Statement and to the reference to our name under the caption "Legal Matters" in the prospectus included in the Registration Statement. Very truly yours, /s/ ROBERT J. MINKUS ----------------------------------- Robert J. Minkus EX-23.1 11 c66354ex23-1.txt CONSENT OF ERNST & YOUNG LLP EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the reference to our firm under the caption "Experts" in the Registration Statement (Form S-2) and related prospectus of Molecular Diagnostics, Inc. (formerly Ampersand Medical Corporation) and Subsidiaries for the registration of 30,415,328 shares of its common stock and to the incorporation by reference therein of our report dated March 9, 2001, with respect to the consolidated financial statements and schedule of Molecular Diagnostics, Inc. and Subsidiaries included in its Annual Report on Form 10-K, as amended, for the year ended December 31, 2000, filed with the Securities and Exchange Commission. Chicago, Illinois February 27, 2002 EX-24.1 12 c66354ex24-1.txt POWER OF ATTORNEY EXHIBIT 24.1 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, being a director or officer, or both, of MOLECULAR DIAGNOSTICS, INC., a Delaware corporation (the "Company"), does hereby constitute and appoint Peter P. Gombrich, with full power to act alone, as the true and lawful attorney and agent of the undersigned, with full power of substitution and resubstitution to execute, file or deliver any and all instruments and to do any and all acts and things which he may deem advisable to enable the Company to comply with the Securities Act of 1933, as amended (the "Securities Act") and any requirements or regulations of the Securities and Exchange Commission in respect thereto, in connection with the registration under said Securities Act of 6,657,495 shares of common stock, par value $.001 per share, which were issued and sold in connection with agreements in which the Company is required to register such shares, including specifically, but without limitation of the general authority hereby granted, the power and authority to sign his name as director or officer, or both, of the Company, as indicated below opposite his signature, to the registration statement, or any amendments, post-effective amendments, supplements or papers supplemental thereto, to be filed in respect of said shares of common stock, and each of the undersigned does hereby fully ratify and conform all that said attorneys and agents, or any of them, or the substitute of any of them, shall do or cause to be done by the virtue hereof. IN WITNESS WHEREOF, each of the undersigned has subscribed these presents, this 25th day of February, 2002. SIGNATURE TITLE /s/ PETER P. GOMBRICH - --------------------------- Peter P. Gombrich Director and Chairman of the Board of Directors, Chief Executive Officer and acting President, Secretary and Treasurer (Principal Financial and Accounting Officer) /s/ ALEXANDER M. MILLEY - --------------------------- Alexander M. Milley Director /s/ ROBERT C. SHAW - --------------------------- Robert C. Shaw Director /s/ JOHN H. ABELES, M.D. - --------------------------- John H. Abeles, M.D. Director /s/ DENIS M. O'DONNELL, M.D. - ---------------------------- Denis M. O'Donnell, M.D. Director EX-24.2 13 c66354ex24-2.txt CERTIFIED COPY OF A RESOLUTION EXHIBIT 24.2 SECRETARY'S CERTIFICATE I, PETER P. GOMBRICH, hereby certify that I am acting Secretary of MOLECULAR DIAGNOSTICS, INC., a Delaware corporation (the "Corporation"), and as such the official custodian of its records and seal, that attached hereto is a true and correct copy of resolutions which were adopted by the Board of Directors of the Corporation; and that such resolutions have not been annulled, rescinded or amended in any manner and are in full force and effect. IN WITNESS WHEREOF, I have hereunto set my hand as Secretary of said Corporation and affixed its Corporate seal this 25th day of February, 2002. /s/ PETER P. GOMBRICH ------------------------------------ Peter P. Gombrich, Chief Executive Officer and acting Secretary [Corporate Seal] UNANIMOUS WRITTEN CONSENT OF THE BOARD OF DIRECTORS OF MOLEULAR DIAGNOSTICS, INC. WHEREAS, Molecular Diagnostics, Inc. (the "Corporation") has entered into registration rights agreements with holders of Series C convertible preferred stock, par value $.001 per share (all of whom are hereafter referred to as the "Selling Stockholders") holding an aggregate of 1,331,499 shares of Series C convertible preferred stock convertible into 6,657,495 shares of the Corporation's common stock (the "Shares"), pursuant to which the Corporation is required to register such shares. NOW, THEREFORE, BE IT RESOLVED, that the Corporation cause to be registered under the Securities Act of 1933, as amended, (the "Securities Act") the Shares held by the Selling Stockholders shall request, and that the Corporation and its officers and directors do or cause to be done all acts and things deemed necessary to comply with the Securities Act or any requirements of the Securities and Exchange Commission (the "SEC") in respect thereof for the purpose of registering the Shares under the Securities Act, including the preparation, execution and filing of an appropriate registration statement (the "Registration Statement") and any and all amendments and exhibits thereto; FURTHER RESOLVED, that Peter P. Gombrich is hereby designated as agent for service of process to be named in the Registration Statement and to receive notices and communications from the SEC in connection therewith; FURTHER RESOLVED, that the Chairman of the Board and the President of the Corporation are hereby authorized and empowered to execute powers of attorney in such form as deemed appropriate, constituting and appointing Peter P. Gombrich, with full power to act alone, as the true and lawful attorney and agent of the Corporation and its officers, with full power of substitution and resubstitution to execute and file with the SEC, in the name and on behalf of the Corporation and any such officer, the Registration Statement and any amendments or exhibits thereto, and any and all other documents as may be necessary or appropriate to comply with the Securities Act in connection with the registration of the Shares; FURTHER RESOLVED, that the Chairman of the Board and the President of the Corporation, with full power to act alone, be hereby authorized to determine the jurisdictions in which appropriate action shall be taken to qualify or register for sale all or such part of the Shares as any such officer may deem advisable; that any such officer be and each is hereby authorized to perform on behalf of the Corporation any and all such acts as he may deem necessary or advisable in order to comply with the applicable laws of any such jurisdictions, and in connection therewith to execute and file all requisite papers and documents, including but not limited to, applications, reports, surety bonds, irrevocable consents and appointments of attorneys for service of process; that the execution by any such officer of any such paper or document or the doing by them of any act in connection with the foregoing matters shall conclusively establish his authority therefor from the Corporation and the approval and ratification by the Corporation of the papers and documents so executed and the actions so taken; and that any resolutions required to be adopted by any such jurisdiction so taken; and that any resolutions required to be adopted by any such jurisdictions in connection with such registration or qualification of the Shares shall be considered as adopted hereby; FURTHER RESOLVED, that it is desirable and in the best interest of the Corporation that its securities be qualified or registered for sale in various states; that the Chairman of the Board or President and the Secretary or an Assistant Secretary hereby are authorized to determine the states in which appropriate action shall be taken to qualify or register for sale all or such part of the securities of the Corporation as said officers may deem advisable; that said officers are hereby authorized to perform on behalf of the Corporation any and all such acts as they may deem necessary or advisable in order to comply with the applicable laws of any such states, and in connection therewith to execute and file all requisite papers and documents, including, but not limited to, applications, reports, surety bonds, irrevocable consents and appointments of attorneys for service of process; and the execution by such officers of any such paper or document or the doing by them of any act in connection with the foregoing matters shall conclusively establish their authority therefor from the Corporation and the approval and ratification by the Corporation of the papers and documents so executed and the action so taken. IN WITNESS WHEREOF, each of the undersigned has subscribed these presents, this 25th day of February, 2002. SIGNATURE TITLE /s/ PETER P. GOMBRICH - --------------------------- Peter P. Gombrich Director and Chairman of the Board of Directors, Chief Executive Officer and acting President, Secretary and Treasurer (Principal Financial and Accounting Officer) /s/ ALEXANDER M. MILLEY - --------------------------- Alexander M. Milley Director /s/ ROBERT C. SHAW - --------------------------- Robert C. Shaw Director /s/ JOHN H. ABELES, M.D. - --------------------------- John H. Abeles, M.D. Director /s/ DENIS M. O'DONNELL, M.D. - ---------------------------- Denis M. O'Donnell, M.D. Director -----END PRIVACY-ENHANCED MESSAGE-----