-----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, M+kbNK/V+DrkMcdX250gfBRYSgQJ3YoMCnBEaoHQIVJzITpesu9MxvNm3UlzrXSU 6R5QBvsc2WsJbaSFCICSBw== 0000932440-96-000022.txt : 19960524 0000932440-96-000022.hdr.sgml : 19960524 ACCESSION NUMBER: 0000932440-96-000022 CONFORMED SUBMISSION TYPE: SB-2/A PUBLIC DOCUMENT COUNT: 19 FILED AS OF DATE: 19960523 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDJET INC CENTRAL INDEX KEY: 0000932265 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 223283541 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SB-2/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-03184 FILM NUMBER: 96571697 BUSINESS ADDRESS: STREET 1: 1090 KING GEORGE POST RD STREET 2: STE 301 CITY: EDISON STATE: NJ ZIP: 08837 BUSINESS PHONE: 9087383990 MAIL ADDRESS: STREET 1: 1090 KING GEORGES POST ROAD STREET 2: SUITE 301 CITY: EDISON STATE: NJ ZIP: 08837 SB-2/A 1 AMEND 1 TO SB-2 As filed with the Securities and Exchange Commission on May 23, 1996 Registration No. 333-3184 Securities and Exchange Commission Washington, D.C. 20549 AMENDMENT NO. 1 to FORM SB-2 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 _____________________ MEDJET INC. (Name of small business issuer in its charter) Delaware 3841 22-3283541 (State or jurisdiction of (Primary Standard (IRS Employer incorporation or Industrial Identification No.) organization) Classification Code Number)
1090 King Georges Post Road, Suite 301 Edison, New Jersey 08837 (908) 738-3990 (908) 738-3984 (fax) (Address and telephone number of principal executive offices and principal place of business) EUGENE I. GORDON President Medjet Inc. 1090 King Georges Post Road, Suite 301 Edison, New Jersey 08837 (908) 738-3990 (908) 738-3984 (fax) (Name, address and telephone number of agent for service) Please send a copy of all communications to: JANE E. JABLONS, ESQ. STUART NEUHAUSER, ESQ. Kelley Drye & Warren LLP Bernstein & Wasserman, LLP 101 Park Avenue 950 Third Avenue New York, New York 10178 New York, New York 10022 (212) 808-7800 (212) 826-0730 (212) 808-7897 (fax) (212) 371-4730 (fax)
Approximate date of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the offering. [ ] _____ If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] ____ If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] If any of the Securities being registered on this Form are to be offered on a delayed or continual basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [X] ___________________________
CALCULATION OF REGISTRATION FEE Title of Each Class of Securities Dollar Amount Being to be Per Registered Registered Security(1) Price(1) Fee(1)(5) Units, each $8,000,000 $5.00 $8,000,000 $2,758.62 consisting of one share of Common Stock and one Class A Warrant Common Stock, -- -- -- -- par value $.001 per share, included in the Units Class A -- -- -- -- Warrants included in the Units Common Stock $16,000,000 $10.00 $16,000,000 $5,517.24 underlying Class A Warrants(2) Underwriter's $160 $.001 $160 $.06 Options(3) Units $1,320,000 $8.25 $1,320,000 $2,758.62 underlying Underwriter's Options(4) Common Stock -- -- -- -- included in Units underlying Underwriter's Options Class A -- -- -- -- Warrants included in Units underlying Underwriter's Options Common $2,640,000 $16.50 $2,640,000 $910.34 Stock underlying Warrants included in Units underlying Underwriter's Options Total $27,960,160 $16.50 $27,960,160 $9,641.43 Registration Fee
(1) Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457 of the Securities Act. (2) Pursuant to Rule 416, there are also being registered hereby such additional indeterminate number of shares of Common Stock as may become issuable by reason of stock splits, stock dividends, anti-dilution adjustments and similar adjustments as set forth in the provisions of the Warrants and the Underwriter's Option Agreement. (3) The maximum amount to be delivered to the Underwriter at the closing of this Offering. (4) The maximum amount issuable upon exercise of the Underwriter's Options. (5) Previously paid. _______________________________________________ The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
MEDJET INC. CROSS-REFERENCE SHEET Form SB-2 Item Number and Caption Heading in Prospectus 1. Front of Registration Statement and Outside Front Cover of Prospectus . . . . . . Outside Front Cover of Prospectus 2. Inside Front and Outside Back Inside Front and Outside Back Cover Cover Pages of Prospectus . . . Pages of Prospectus 3. Summary Information and Risk Factors . . . . . . . . . . . . Prospectus Summary; Risk Factors 4. Use of Proceeds . . . . . . . . Use of Proceeds 5. Determination of Offering Price . . . . . . . . . . . . . Risk Factors; Underwriting 6. Dilution . . . . . . . . . . . Dilution; Risk Factors 7. Selling Security Holders. . . . Not Applicable 8. Plan of Distribution. . . . . . Outside Front Cover Page of Prospectus; Underwriting 9. Legal Proceedings . . . . . . . Business 10. Directors, Executive Officers, Promoters and Control Persons . Risk Factors; Management 11. Security Ownership of Certain Beneficial Owners and Management. . . . . . . . . . . Principal Stockholders 12. Description of Securities . . . Description of Securities 13. Interests of Named Experts and Counsel . . . . . . . . . . . . Legal Matters; Experts 14. Disclosure of Commission Position on Indemnification for Securities Act Liabilities Description of Securities 15. Organization Within Last Five Years . . . . . . . . . . . . . Business; Certain Transactions 16. Description of Business . . . . Business 17. Management's Discussion and Analysis or Plan of Operation . Plan of Operation 18. Description of Property . . . . Prospectus Summary; Risk Factors; Plan of Operation; Business 19. Certain Relationships and Related Transactions. . . . . . Certain Transactions 20. Market for Common Equity and Risk Factors; Dilution; Management; Related Stockholder Matters . . Shares Eligible for Future Sale 21. Executive Compensation. . . . . Management 22. Financial Statements. . . . . . Financial Statements 23. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure. . . . Not Applicable
SUBJECT TO COMPLETION, DATED MAY 23, 1996 PROSPECTUS MEDJET INC. 1,200,000 Units - Minimum Offering 1,600,000 Units - Maximum Offering Each Unit Consisting of One Share of Common Stock and One Class A Redeemable Common Stock Purchase Warrant Medjet Inc., a Delaware corporation (the "Company"), hereby offers through Patterson Travis, Inc. (the "Underwriter") up to 1,600,000 Units (the "Units") to be sold on a "best-efforts" basis, subject to the sale of a minimum of 1,200,000 Units. Each Unit consists of one share of common stock, $.001 par value (the "Shares" or "Common Stock") and one redeemable Common Stock Purchase Warrant to purchase one share of Common Stock at $10.00 for 18 months commencing on the date that is three months following the date funds in escrow are released by the escrow agent (the "Closing Date"), which period may be extended by mutual agreement between the Company and the Underwriter (the "Class A Warrants" or the "Warrants"). The Common Stock and the Class A Warrants will become separable on the date (the "Separation Date") which is the earlier of three months following the Closing Date or such earlier date as may be agreed to by the Company and the Underwriter. The Units, Common Stock and Warrants are sometimes collectively referred to as the "Securities." Pending the sale of a minimum of 1,200,000 Units, all proceeds will be held in an escrow account with Continental Stock Transfer & Trust Company (the "Escrow Agent"). (continued on following page) THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE SUBSTANTIAL DILUTION. SEE "RISK FACTORS" BEGINNING ON PAGE 10 AND "DILUTION." _________________ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Underwriting Price to Discounts and Proceeds to Public Commissions(1) Company(2) Per Unit ............... $5.00 $.45(4) $4.55 Total Minimum(3) ....... $6,000,000 $600,000 $5,400,000 Total Maximum(3) ....... $8,000,000 $717,500 $7,282,500 (1) Does not include additional compensation to the Underwriter, including (i) options (the "Underwriter's Options") to purchase such number of Units as shall equal 10% of the number of Units sold at an exercise price of $8.25 per Unit for a period of four years, commencing one year from the date of this Prospectus, each unit consisting of one share of Common Stock and one redeemable Common Stock Purchase Warrant exercisable at $16.50 per share (which, other than with respect to the exercise price, is identical to the Warrants contained in the Units offered hereby) and (ii) a non-accountable expense allowance of $180,000 (if the minimum number of Units is sold) and $240,000 (if the maximum number of Units is sold). The Company has also agreed to indemnify the Underwriter against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the "Securities Act"). See "Underwriting." (continued on following page) PATTERSON TRAVIS, INC. _________________ The date of this Prospectus is ______________, 1996. (continued from previous page) If a minimum of 1,200,000 Units are not sold by ________, 1996 (which may be extended to _____________, 1996 upon the mutual agreement between the Company and the Underwriter), all funds received will be refunded to subscribers in full without interest or deductions (unless the Offering is extended for such additional 90-day period, in which case interest will be paid for the extension period). If the minimum number of Units is sold prior to ______________, 1996 (or ______________, 1996, if so extended), the Offering will continue until the earlier of ____________, 1996 (or _______________, 1996, as applicable) or until the maximum number of Units offered hereby is sold. The Units, Common Stock and Warrants will be separately transferable commencing on the Separation Date. All of the Units offered hereby are being sold by the Company. The Company is in the development stage and has not yet sold any products or generated any revenues. The Company believes that it will require additional capital before it reaches profitability, of which there can be no assurance. The Warrants are redeemable by the Company for $.01 per warrant on 30 days' written notice, if the market price of the Common Stock equals or exceeds $13.00 for any 10 consecutive trading days within a period of 30 trading days ending within five years prior to the date of the notice of redemption. See "Description of Securities -- Warrants." Prior to this Offering, there has been no public market for the Units, the Common Stock or the Warrants, and there can be no assurance that a public market will develop. The initial public offering price of the Units has been arbitrarily determined by agreement between the Company and the Underwriter and is not related to the Company's earnings, assets, book value or any other established criteria of value. See "Risk Factors" and "Underwriting." The Company is seeking to have the Units approved for trading on the Nasdaq SmallCap Market ("Nasdaq") under the sumbol "MJETU," and the Common Stock and the Warrants approved for trading under the symbols "MJETC" and "MJETW," respectively. (continued from previous page) (2) Before deducting expenses (including legal, accounting and filing fees and printing and engraving) payable by the Company, estimated at $337,000, excluding the non-accountable expense allowance to the Underwriter referred to above. (3) The Units are being offered on a "best-efforts" basis, subject to the sale of a minimum of 1,200,000 Units. Pending the sale of a minimum of 1,200,000 Units, all proceeds of the Offering will be deposited in a non-interest-bearing escrow account with the Escrow Agent. Unless a minimum of 1,200,000 Units are sold by ________, 1996, or by ________, 1996 if extended upon agreement between the Company and the Underwriter (and after the expiration of an additional 10 business days to permit clearance of the funds in escrow), the Offering will terminate and all funds collected will be promptly returned to the subscribers without deduction or interest (unless the Offering is extended for such additional 90-day period, in which case interest will be paid for the extension period). If the minimum number of Units are sold prior to _______________________, 1996 (or ______________________, 1996, if so extended), the Offering will continue until the earlier of _____________________, 1996 (or _______________________, 1996, as applicable) or until the maximum number of Units offered hereby is sold. During the escrow period, subscribers will not be entitled to a return of their subscriptions. See "Underwriting." (4) Reflects average underwriting commission of 8.97%, based on a commission of 10% ($.50 per Unit) for the first 1,300,000 Units and 4.5% ($.225 per Unit) for each additional Unit. The Units are being offered when, as and if delivered to and accepted by the Underwriter and subject to approval of certain legal matters by its counsel and subject to certain other conditions, including the right to reject orders in whole or in part. It is anticipated that delivery of the Units will be made upon transfer of the proceeds of the Offering payable to the Company and held in escrow by the Escrow Agent for the Company's account. Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. AVAILABLE INFORMATION The Company has filed with the Securities and Exchange Commission (the "Commission") a Registration Statement on Form SB-2 (together with all amendments thereto, the "Registration Statement") under the Securities Act with respect to the Securities offered by this Prospectus. This Prospectus does not contain all of the information set forth in the Registration Statement and the exhibits filed therewith, certain portions of which have been omitted as permitted by the rules and regulations of the Commission. For further information with respect to the Company and the Securities offered hereby, reference is hereby made to the Registration Statement and to the exhibits filed therewith. Statements contained in this Prospectus regarding the contents of any contract or other document referred to are not necessarily complete and, in each instance, reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement, each such statement being deemed to be qualified in its entirety by such reference. However, all material elements of each such contract or other document are set forth in this Prospectus. The Registration Statement, including all exhibits thereto, may be inspected without charge at the principal office of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the Commission's regional offices located at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and at Seven World Trade Center, 13th Floor, New York, New York 10048. Copies of such material may be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, upon the payment of prescribed fees. SPECIAL STANDARDS FOR UNITS SOLD IN CALIFORNIA EACH CALIFORNIA INVESTOR, AND EACH TRANSFEREE THEREOF WHO ALSO IS A CALIFORNIA INVESTOR, MUST HAVE AN ANNUAL GROSS INCOME OF AT LEAST $65,000 AND A NET WORTH, EXCLUSIVE OF HOME, FURNISHINGS AND AUTOMOBILES, OF AT LEAST $250,000, OR IN THE ALTERNATIVE, A NET WORTH, EXCLUSIVE OF HOME, FURNISHINGS AND AUTOMOBILES, OF AT LEAST $500,000. IN ADDITION, AN INVESTOR'S TOTAL PURCHASE MAY NOT EXCEED 10% OF SUCH INVESTOR'S NET WORTH. ______________________________________ IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE UNITS, THE COMMON STOCK AND THE WARRANTS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ SMALLCAP MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. PROSPECTUS SUMMARY The following is a summary of certain information contained in this Prospectus and is qualified in its entirety by the detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, the information in this Prospectus (i) assumes that the initial public offering price for the Units will be $5.00 and (ii) has been adjusted to reflect a 2.226043597-for-1 stock split of the Company's Common Stock effected immediately prior to the date of this Prospectus. See "Description of Securities." Unless otherwise indicated, no effect is given in this Prospectus to (i) the shares of Common Stock reserved for issuance upon the exercise of the Warrants included in the Units, (ii) the shares of Common Stock reserved for issuance upon the exercise of options granted to the Underwriter for nominal consideration and the Warrants included therein or (iii) the shares of Common Stock reserved for issuance pursuant to the Company's stock option plan. See "Description of Securities," "Underwriting" and "Management -- 1994 Stock Option Plan." For definitions of certain terms and abbreviations used in this Prospectus, see the "Glossary" at page 51. The Company Medjet Inc. (the "Company"), founded in December 1993, has developed a proprietary surgical device known as a keratome, which utilizes a hair-thin (approximately 30 microns in diameter) circular beam of supersonic velocity water. The waterjet beam substitutes for a conventional metal or diamond blade scalpel and in combination with other elements of the device is capable of shaving thin, shaped layers from the cornea of the eye, a procedure known as lamellar keratoplasty. The keratome is used to treat diseases of the cornea as well as to correct vision deficiencies such as nearsightedness ("myopia"), farsightedness ("hyperopia") and astigmatism by excising layers, either parallel or shaped, of the cornea in order to reshape the cornea to achieve proper focusing. In combination with a template of prescribed dimensions, the shape of the layer to be removed can be determined in advance. The Company believes that its keratome can be used to treat corneal disease in a procedure known as hydro-therapeutic keratoplasty ("HTK"), in which diseased corneal tissue is removed and the remaining corneal tissue may be reshaped to provide proper focusing. About 45,000 corneal procedures, including full transplants and partial removals, are performed annually in the United States. The Company believes that the same keratome, through a procedure known as hydro-refractive keratoplasty ("HRK"), has the potential to reduce or eliminate a patient's dependence on eyeglasses or contact lenses by modifying the shape of the cornea to correct vision deficiencies. Based upon feasibility studies and limited animal testing conducted by the Company, the Company believes that its waterjet scalpel cuts more precisely and smoothly than the sharpest metal, diamond or laser scalpel and that, as a result, HRK may result, once approved, in a safer, more accurate and more stable corneal adjustment that is less painful for patients than other refractive surgical procedures currently available. The Company anticipates that HRK will also be competitively priced with, or cost less than, such other procedures. The Company has not yet tested its HRK Keratome on live human eyes but has tested its waterjet keratome on approximately 1,000 porcine and rabbit corneas, 25 human cadaver eyes and 22 live rabbits. The Company began construction in March 1996 of a keratome designed for use in surgery on non-human primates and humans in a clinical setting. Due to funding limitations, the Company has not yet constructed a full prototype. The Company's keratome, which consists of a waterjet nozzle and a device known as a globe fixation device (to align and fix the eye in place relative to the template during surgery), is intended to be used with a miniature high pressure water storage element and related equipment, which together produce the water beam; a scanning mechanism to move the water beam across the cornea; a device to regulate and control the action of the water beam; a force transducer to monitor the water beam status; and a template designed to support and shape the eye during surgery. The keratome will be placed on the patient's eye during the surgical procedure. The Company believes that the keratome, when used in HTK (the "HTK Keratome"), would be used similarly to other keratomes but would allow for the removal of layers of corneal tissue of a predetermined shape and thickness with a higher degree of accuracy as well as producing a more cleanly cut surface of the stroma, the main layer of the cornea. The Company intends to seek approval from the United States Food and Drug Administration ("FDA") to market the HTK Keratome. The HTK Keratome is intended to become the first commercially available product using the Company's waterjet technology and would be both an early source of income for the Company and the basis for additional applications for FDA-approved uses of the keratome. The next and possibly more commercially valuable use of the keratome is for refractive surgery through HRK. Subsequent to the approval and marketing of the HTK Keratome, the Company intends to seek FDA approval to market the keratome for HRK (the "HRK Keratome"). In the United States, more than 145 million people wear either eyeglasses or contact lenses and, each year, approximately two million people who have not previously suffered from refractive disorders are informed by their doctors that they are in need of refractive correction. Over $13 billion is spent annually in the United States for corrective eyewear products. Approximately 29 million Americans wear contact lenses, primarily for cosmetic or convenience reasons. The number of people in the United States newly electing to wear contact lenses is over one million per year. This large and growing population of contact lens wearers is the largest potential market for refractive surgery, including HRK. Studies indicate that approximately 60% of persons electing refractive surgery are contact lens wearers. However, there can be no assurance that eyeglass or contact lens wearers will elect to undergo surgery. Upon regulatory approval of the HRK Keratome, the Company intends to market the HRK Keratome to individual ophthalmologists and groups of ophthalmologists for the treatment of patients in a clinical setting. The Company expects to derive a significant part of its revenues from leasing the keratome, to be returned by the ophthalmologist to the Company after each procedure for sterilization, routine maintenance and recharging (although there is no assurance that the Company will ever obtain any revenues from the HRK Keratome). The Company believes that by retaining control over the sterilization process and performing any necessary maintenance itself, the efficacy, safety and reliability of the keratome will be enhanced. In addition, the Company believes that the leasing arrangement will be attractive to ophthalmologists, because they will be able to maintain a supply of keratomes on hand, thereby eliminating the down time that would otherwise be required for the sterilization process. The Company intends to sell the other components of the keratome, including the disposable, single-use template designed for each particular use as instructed by the surgeon. The Company believes that its proprietary waterjet technology may have additional surgical applications. However, the Company has not conducted any studies of such applications to date. The Company has sought to protect its proprietary interest in the HRK Keratome by applying for patents in the United States and corresponding patents abroad. In September 1994, a U.S. patent application was filed in the name of Dr. Eugene I. Gordon and two employees of the Company, as inventors, which application was assigned to the Company. The U.S. patent application, as allowed for issuance, covers a method and device for use in the HRK Keratome, including use of a template for corneal shaping and holding, during use of a waterjet keratome device. A corresponding international application has been filed, pursuant to the Patent Cooperation Treaty ("PCT"), with designation of all member countries foreign to the United States, including but not limited to Japan, the members of the European Patent Office, Canada, Mexico, Australia, Russia, China and Brazil. The PCT filing has been published and separate patent applications have been or will be filed pursuant to the PCT filing. In addition, for countries not currently part of the PCT, patent applications have also been filed in Israel, Taiwan and South Africa. A prior U.S. patent application, filed in April 1994, is currently pending and relates to topographic corneal mapping, which has utility for surgery utilizing the HRK Keratome. The Company is in the development stage and has not sold any products or generated any revenues as of the date of this Prospectus. To date, the Company's research and development activities have been limited to constructing and testing experimental versions of the keratome and conducting a limited number of feasibility studies using porcine, rabbit and human cadaver eyes and live animals to prove that a hair-thin beam of water can smoothly incise and shape the anterior surface of the cornea and that the cornea will heal properly after the surgery. No human clinical trials have been performed to date. The FDA has regulatory authority over the manufacture, labeling, distribution and promotion of the keratome. The first phase of the Company's FDA approval strategy involves seeking approval for the HTK Keratome. The Company believes the HTK Keratome will be considered for approval for marketing by the FDA through a Section 510(k) pre-market notification ("510(k) notification") procedure, and it is the intent of the Company to file such notification with the FDA in the second half of 1996 to obtain approval for the HTK Keratome. Although there can be no assurance that this will prove to be the case, approval of the 510(k) notification should enable the Company to commence its marketing efforts sooner than if the Company had to submit to the FDA a pre-market approval ("PMA") application, which typically is a much more complex submission requiring lengthy human clinical trials. See "Risk Factors -- No Assurance of FDA and Other Regulatory Approval" and "Business -- U.S. Government Regulation." The second phase of the Company's FDA approval strategy relates to the HRK Keratome. Although the Company believes that the HRK Keratome will be considered for approval for marketing by the FDA through a 510(k) notification based upon the similarities of the keratome between the HTK use and the HRK use, obtaining such approval of the HRK Keratome is somewhat more complicated than for HTK. There can be no assurance that either the HTK use or the HRK use will be approved for marketing by the FDA. The differences between the two uses are found in the components, other than the waterjet scalpel, which comprise the keratome. For the HRK Keratome, the Company may be required to show that the procedure is effective, stable and does not decrease visual acuity to any significant extent. The Company believes that, based on three features of the HRK Keratome, it will be considered for 510(k) notification by the FDA. First, there are no known or anticipated physical or chemical processes that would impact on the safety of the HRK procedure. The waterjet keratome cuts by mechanisms similar to that of conventional scalpels (although at speeds of more than 100 times greater), except that the Company believes that HRK would not produce certain side effects incident to other refractive surgery procedures. Such side effects include the inferior cut produced by the oscillating blade used in conventional keratomes, and the potential carcinogenic effects, dehydration from overheating and high amplitude shock waves to the eye resulting from the high energy, pulsed radiation used in a procedure known as photo-refractive keratotomy ("PRK"). PRK could represent the strongest competition to HRK. As a result of the anticipated safety issues, the FDA approval process for PRK involved numerous clinical studies on human eyes and took several years to complete. The Company believes that the FDA approval process for the HRK Keratome should be shorter and entail fewer clinical studies in light of the higher safety and lack of anticipated side effects, in comparison to other previously approved products. The second feature of the HRK Keratome is the benign nature of the waterjet cut. While a conventional scalpel tears the lamellae (layers of the stroma) and PRK completely or partially destroys the surface lamellae, the waterjet beam has a unique cutting action which separates the various lamellae prior to cutting the targeted tissue, thereby preserving the integrity of the remaining lamellae and both localizing and minimizing the damage to the lamellae generally. The healing process following a waterjet cut is expected to be less traumatic than that following a conventional scalpel cut or a PRK cut. The third feature of the HRK Keratome is that the portion of the corneal tissue targeted for removal is extracted in a single piece similar to a contact lens. The Company is developing and experimenting with an in- vitro model which would allow intact removal of the targeted portion of corneal tissue and comparison to the expected refraction, in effect producing a definitive model of the relationship between the template shape and the refractive result. The efficacy requirement of such experimentation is to demonstrate validity in humans of the in-vitro model, a less demanding requirement than demonstrating validity on live human eyes. The Company believes that the clinical studies would be primarily directed toward validating this model and that the 510(k) notification process would be relatively short and consist of tests on a limited number of live eyes. The Company may distribute its products internationally. Distribution of the Company's products in countries other than the United States may be subject to regulation in those countries. In some countries, the regulations governing such distribution are less burdensome than in the United States and the Company may pursue marketing its products in such countries prior to receiving approval from the FDA. The Company will endeavor to obtain the necessary government approvals in those foreign countries where the Company decides to manufacture, market and sell its products. See "Business -- Foreign Government Regulation." With the net proceeds of this Offering, the Company intends to continue the research and development of its keratome and related manufacturing processes and to commence human clinical trials of the HRK Keratome. See "Plan of Operation." If the HTK Keratome or the HRK Keratome is approved for marketing in the United States, the Company will be required to establish a marketing organization and production facilities, which will require additional financing. No assurance can be given that the Company's research and development efforts will be successfully completed, that the HTK Keratome or HRK Keratome will prove to be safe and effective in correcting vision, that the HTK Keratome or HRK Keratome will be approved for marketing by the FDA or any other regulatory agency, or that the HTK Keratome or HRK Keratome or any other product developed by the Company will be commercially successful. The Company was incorporated under the laws under the State of Delaware in December 1993. Its offices are located at 1090 King Georges Post Road, Suite 301, Edison, New Jersey 08837; its telephone number is (908) 738-3990. The Company has elected Subchapter "S" status pursuant to Section 1362 of the Internal Revenue Code of 1986, as amended (the "Code"), which status will terminate upon the Closing Date.
The Offering Securities Offered . . . . A minimum of 1,200,000 Units and a maximum of 1,600,000 Units at $5.00 per Unit, each Unit consisting of one share of Common Stock and one Warrant. The shares of Common Stock and Warrants offered as Units become detachable and separately transferable on the date (the "Separation Date") which is the earlier of three months following the date on which the proceeds of this Offering are first paid to the Company (the "Closing Date") or such earlier date as may be agreed to by the Company and the Underwriter. See "Description of Securities." Warrants . . . . . . . . . The Warrants will be exercisable at $10.00 per share for 18 months commencing on the date which is three months following the Closing Date, which period may be extended by mutual agreement between the Company and the Underwriter. The Warrants will be redeemable at $.01 per Warrant if the market price of the Common Stock equals or exceeds $13.00 for 10 consecutive trading days within a period of 30 consecutive trading days ending within 5 days of the notice of redemption. See "Description of Securities -- Warrants." Common Stock Outstanding prior to the Offering(1) . 2,744,349 shares Common Stock to be Outstanding after the Offering(1). . . 3,944,349 shares if the minimum is sold and 4,344,349 if the maximum is sold. Use of Proceeds. . . . . . Research and development of the HTK Keratome and the HRK Keratome, human clinical trials, repayment of indebtedness, working capital and general corporate purposes. See "Use of Proceeds." Risk Factors . . . . . . . An investment in the Units involves a high degree of risk and immediate substantial dilution. See "Risk Factors" at page 10 and "Dilution." Proposed Nasdaq Trading Symbol (2) . . . . . . . . Units: MJETU Common Stock: MJETC Class A Warrants: MJETW
____________________________ (1) Unless otherwise indicated, no effect is given to (i) 1,200,000 or 1,600,000 shares reserved for issuance upon the exercise of the Warrants included in the minimum and maximum number of Units, respectively, (ii) 240,000 or 320,000 shares reserved for issuance upon the exercise of the minimum and maximum number of Underwriter's Options and the Warrants included therein, respectively, and (iii) 200,000 shares reserved for issuance pursuant to stock options available for grant under the Company's 1994 Stock Option Plan, as amended (the "Stock Option Plan"), 55,651 shares reserved for issuance pursuant to stock options which have been granted under the Stock Option Plan as of the date of this Prospectus and 110,000 shares reserved for issuance pursuant to outstanding warrants. Gives effect to a stock split ratio of 2.226043597-for-1 effected in connection with the Offering. (2) Application will be made for the quotation of the Securities on Nasdaq. See "Risk Factors -- No Assurance of Public Trading Market or Continued Nasdaq Inclusion." Risk Factors In addition to the other information contained in this Prospectus, the discussion of risk factors which begins on page 10 hereof should be considered carefully in evaluating an investment in the Securities. The risks of investing in the Securities include the following factors: No Revenues; Uncertain Profitability; Development Stage Company; History of Losses; Ability to Continue as a Going Concern; Dependence on Proceeds of this Offering; Need for Future Financing; Dependence Upon Key Officer; Attraction and Retention of Key Personnel; Uncertainty of Market Acceptance; Reliance on Single Technology; Dependence on Patents and Proprietary Rights; Competitive Technologies, Procedures and Companies; No Manufacturing Experience; Dependence on Third Parties; No Sales or Marketing Experience; Risk of Product Liability Litigation; Potential Unavailability of Insurance; Surgical Risks; No Assurance of FDA and Other Regulatory Approval; International Sales and Operations Risks; Broad Discretion in Application of Proceeds; Control by Current Stockholders; Immediate Dilution; Disparity of Consideration Paid by Investors; Repayments to Management from Proceeds of Offering; Future Sale of Unregistered Securities; Registration Rights; Effect of Future Exercise of Options and Warrants; Loss of Warrants through Redemption; Need for Current Prospectus and State Blue Sky Registration in Connection with Exercise of Warrants; Underwriter as Market Maker; Best-Efforts Offering; Escrow of Investors' Funds; No Dividends; Adverse Impact on Common Stock of Issuance of Preferred Stock; Anti-Takeover Provisions; Arbitrary Determination of Offering Prices; Possible Volatility of Stock Price; No Assurance of Public Trading Market or Continued Nasdaq Inclusion; and Risk of Low-Priced Securities. Summary Financial Information The following summary financial information is derived from the Company's unaudited financial statements at March 31, 1996 included elsewhere in this Prospectus and should be read in conjunction with, and are qualified in their entirety by reference to, such financial statements and the notes thereto, and in conjunction with "Plan of Operation."
March 31, 1996 As Adjusted(1) Summary Balance Sheet Data: Actual Minimum Maximum Working capital (deficiency) . . $(460,445) $4,265,575 $6,088,075 Total assets . . . . . . . . . . 352,707 4,728,727 6,551,227 Total liabilities. . . . . . . . 527,301 177,301 177,301 Stockholder's equity (deficit) . (174,594) 4,668,426 6,373,926
__________________________ (1) Adjusted to give effect to (i) the sale of the minimum and maximum number of Units in this Offering at $5.00 per Unit and the net proceeds to the Company of approximately $4,883,000, if the minimum number of Units is sold, and $6,705,500 if the maximum number of Units is sold, therefrom, (ii) the repayment from such net proceeds of $350,000 of indebtedness outstanding at March 31, 1996 and (iii) payment of $156,980 of expenses in this Offering which was reflected as an asset, "Deferred Offering Costs," in the Company's unaudited financial statements at March 31, 1996. See "Use of Proceeds." RISK FACTORS The purchase of the Securities offered hereby involves a high degree of risk. Before subscribing for the Securities, each prospective investor should consider carefully the following risk factors, as well as the other information contained in this Prospectus. No Revenues; Uncertain Profitability; Development Stage Company; History of Losses. Since its inception, the Company has been principally engaged in developmental and organizational activities. To date, the Company has generated no revenues from operations. No revenues are expected from operations until, and only if, the Company begins commercial marketing of its keratome or other products, which is not expected to occur before the third quarter of 1997. In addition, commercial marketing of the Company's products in the U.S. will be contingent upon obtaining FDA approval and possibly the approval of other governmental agencies. The approval procedure will be extremely time consuming, expensive and uncertain. Accordingly, there can be no assurance that the Company will be able to generate sufficient revenues to operate on a profitable basis in the future. The Company, which was founded in December 1993, is in the development stage, and its business is subject to all of the risks inherent in the establishment of a new business enterprise. The likelihood of the success of the Company must be considered in light of the problems, expenses, complications and delays frequently encountered in connection with the formation of a new business, the development of new products, the competitive and regulatory environment in which the Company may be operating, and the possibility that its activities will not result in the development of any commercially viable products. There can be no assurance that the Company's activities will ultimately result in the development of commercially saleable or useful products. The Company has experienced annual operating losses and negative operating cash flow since inception. At December 31, 1995, the Company had an accumulated deficit of approximately $964,676. Unless and until the Company's product development and marketing activities are successful and its products are sold, of which there can be no assurance, the Company will not have revenues to apply to operating expenses and the Company will continue to incur losses. Additionally, as a result of the start-up nature of its business and the fact that it has not commercially marketed any products, the Company can be expected to sustain substantial operating losses in the future. See "Use of Proceeds" and "Plan of Operation." Ability to Continue as a Going Concern. The report of the Company's independent auditors dated January 15, 1996, and with respect to Note A(2), Note B(6) and Note I, which are dated March 22, 1996, on the Company's financial statements for the period from December 16, 1993 (Date of Inception) to December 31, 1995, includes an explanatory paragraph expressing substantial doubt with respect to the Company's ability to continue as a going concern. The financial statements do not contain any adjustments that might result from the outcome of this uncertainty. See "Use of Proceeds" and "Plan of Operation." Dependence on Proceeds of this Offering; Need for Future Financing. The Company is dependent on the proceeds of this Offering to fund current working capital needs, additional research, development, engineering and testing of its products, establishment of manufacturing and marketing capabilities and to fund the governmental approval process. It anticipates that the net proceeds of this Offering are sufficient to meet its cash requirements for approximately 24 months following this Offering if the Company's 510(k) notification is approved, or approximately 36 months if such approval is not received. The Company believes that, in order to proceed with the research, development and marketing currently planned, it will require additional capital before it reaches profitability and positive cash flows, if at all. As a result, the Company will be required to raise additional funds through public or private financing or grants that may be available for its research and development. There can be no assurance that the Company will be able to obtain additional financing on terms favorable to it or its stockholders, if at all. If adequate funds are not available to satisfy short-term or long-term capital requirements, the Company may be required to reduce substantially, or eliminate, certain areas of its product development activities, limit its operations significantly, or otherwise modify its business strategy. The failure of the Company to obtain acceptable financing would have a material adverse effect on the operations of the Company. Other than this Offering, the Company has no current plans, understandings or commitments to raise any additional financing. Additional financing may result in dilution for then current shareholders. See "Use of Proceeds" and "Plan of Operation." Dependence Upon Key Officer; Attraction and Retention of Key Personnel. The business of the Company is highly dependent upon the active participation of its founder and President, Dr. Eugene I. Gordon. The loss or unavailability to the Company of Dr. Gordon would have a materially adverse effect on the Company's business prospects and potential earning capacity. The recruitment of skilled scientific personnel is critical to the Company's success. There can be no assurance that it will be able to continue to attract such personnel in the future. In addition, the Company's anticipated growth and expansion into areas and activities requiring additional expertise, clinical testing, governmental approvals, production and marketing are expected to place increased demands upon the Company's financial resources and corporate structure. These demands, if they arise, are expected to require the addition of new management personnel and the development of additional expertise by existing management. See "Use of Proceeds" and "Plan of Operation." Uncertainty of Market Acceptance; Reliance on Single Technology. Acceptance of the Company's keratome is difficult to predict and will require substantial marketing efforts and the expenditure of significant funds. There can be no assurance that the HRK Keratome will be accepted by the medical community once it is approved. Market acceptance of the Company's keratome will depend in large part upon the Company's ability to demonstrate the operational advantages, safety and cost-effectiveness of the keratome compared to other refractive surgical techniques. Failure of the keratome to achieve market acceptance will have a material adverse effect on the Company's financial condition and results of operations. See "Business -- Markets." At present, the Company's only product (although still in development stage) is its keratome, and the Company expects that its keratome will be, if and when commercially available, its sole product for an indefinite period of time. The Company's present narrow focus on a particular technology makes the Company vulnerable to the development of superior competing products and changes in technology that could eliminate the need for the Company's products. There can be no assurance that significant changes in the foreseeable future in the need for the Company's products or the desirability of those products, will not occur. See "Risk Factors -- Dependence on Patents and Proprietary Rights" and "Business -- Patents." Dependence on Patents and Proprietary Rights. The Company's success will depend in part on whether it successfully obtains and maintains patent protection for its products, preserves its trade secrets and operates without infringing the proprietary rights of third parties. The Company has sought to protect its proprietary interest in the keratome by applying for patents in the United States and corresponding patents abroad. The Company has been notified by the United States Patent and Trademark Office (the "PTO") that its patent application covering the Company's keratome has been allowed for issuance. There can be no assurance that any other patent will be issued to the Company, that any patents owned by or issued to the Company, or that may issue to the Company in the future, will provide a competitive advantage or will afford protection against competitors with similar technology, or that competitors of the Company will not circumvent, or challenge the validity of, any patents issued to the Company. There also can be no assurance that any patents issued to or licensed by the Company will not be infringed upon or designed around by others or would prevail in a legal challenge, that others will not obtain patents that the Company will need to license or design around, that the keratome or any other potential product of the Company will not inadvertently infringe upon the patents of others, or that others will not manufacture the Company's patented products upon expiration of such patents. There can be no assurance that existing or future patents of the Company will not be invalidated. Moreover, there can be no assurance that the Company's non-disclosure agreements and other safeguards will protect its proprietary information and trade secrets or provide adequate remedies for the Company in the event of unauthorized use or disclosure of such information, or that others will not be able to independently develop such information. As is the case with the Company's patent rights, the enforcement by the Company of its non-disclosure agreements can be lengthy and costly, with no guarantee of success. The Company received a license from the New Jersey Institute of Technology ("NJIT") for the patent rights under a patent application assigned to it by Dr. Gordon and two other individuals relating to a refractive correction procedure based on the use of an isotonic waterjet, in a manner similar to photorefractive keratectomy ("PRK"). Such patent application was subsequently denied by the PTO and on February 15, 1996, the Company gave notice to NJIT of its intent to terminate such license agreement effective August 15, 1996. The Company believes that its current work relating to HTK and HRK do not infringe any patents or proprietary rights (including those of NJIT) of third parties. If the Company becomes involved with patent infringement litigation, either to enforce the Company's patents or defend against patent infringement suits, such litigation would be lengthy and expensive, and if it occurs, would divert Company resources from planned uses. Further, any adverse outcome in such litigation could have a material adverse effect on the Company. If any of the Company's products are found to infringe upon the patents or proprietary rights of another party, the Company may be required to obtain licenses under such patents or proprietary rights of such other party. No assurance can be given that any such licenses would be made available on terms acceptable to the Company, if at all. In addition, patent applications filed in foreign countries and patents granted in such countries are subject to laws, rules and procedures which differ from those in the United States. Patent protection in such countries may be different from patent protection provided by United States laws and may not be as favorable to the Company. There can be no assurance that the Company's program of patent protection, including the internal security of its proprietary information, and non-disclosure agreements will be sufficient to protect the Company's proprietary technology from competitors. See "Business -- Patents and Proprietary Rights." Competitive Technologies, Procedures and Companies. The Company is engaged in a rapidly evolving field. The HRK Keratome will compete with other presently existing forms of treatment for vision disorders, including eyeglasses, contact lenses, corneal transplants, other refractive surgery procedures and other technologies under development. There can be no assurance that persons whose vision can be corrected with eyeglasses or contact lenses will elect to undergo the HRK surgical procedure when such non-surgical vision correction alternatives are available. There are many companies, both public and private, universities and research laboratories engaged in activities relating to research on other vision correction alternatives, including RK, PRK, KIS and various forms of corneal inserts. Competition from these companies, universities and laboratories is intense and is expected to increase. The Company is not aware of any commercial entity, other than itself, involved in the development of a waterjet scalpel for use in refractive surgery, although it is aware of ongoing research at many companies and institutions into a wide variety of procedures for corneal adjustment, as noted above. Many of these companies and institutions have substantially greater resources, research and development staffs and facilities, as well as greater experience in research and development, obtaining regulatory approval and manufacturing and marketing medical device products than the Company, and represent significant long-term competition for the Company. In addition to those mentioned above, other recently developed technologies or procedures are, or may in the future be, the basis of competitive products. There can be no assurance that the Company's competitors will not succeed in developing technologies, procedures or products that are more effective or economical than those being developed by the Company or that would render the Company's technology and proposed products obsolete or noncompetitive. Furthermore, if the Company is permitted to commence commercial sales of products, it will also be competing with respect to manufacturing efficiency and marketing capabilities, areas in which the Company has no experience. See "Risk Factors -- No Manufacturing Experience; Dependence on Third Parties" and "- - - No Sales or Marketing Experience" and "Business -- Competition." No Manufacturing Experience; Dependence on Third Parties. The Company has no volume manufacturing capacity or experience in manufacturing medical devices or other products. To be successful, the Company's proposed products must be manufactured in commercial quantities in compliance with regulatory requirements at acceptable costs. Production in clinical or commercial-scale quantities may involve technical challenges for the Company. Establishing its own manufacturing capabilities would require significant scale-up expenses and additions to facilities and personnel. The Company may consider seeking collaborative arrangements with other companies to manufacture certain of its potential products, including the HRK Keratome and the disposable templates to be used in connection therewith. There can be no assurance that the Company will be able to obtain necessary regulatory approvals on a timely basis or at all. Delays in receipt of or failure to receive such approvals or loss of previously received approvals would have a material adverse effect on the Company's business, financial condition and results of operations. There can be no assurance that the Company will be able to develop clinical or commercial- scale manufacturing capabilities at acceptable costs or enter into agreements with third parties with respect to these activities. If the Company is dependent upon third parties for the manufacture of its proposed products, then the Company's profit margins and its ability to develop and deliver such products on a timely basis may be adversely affected. Moreover, there can be no assurance that such parties will perform adequately, and any failures by third parties may delay the submission of products for regulatory approval, impair the Company's ability to deliver products on a timely basis, or otherwise impair the Company's competitive position. See "Business -- Markets." No Sales or Marketing Experience. The Company intends to market and sell the keratome in the United States and certain foreign countries, if and when regulatory approval is obtained, through a direct sales force or a combination of a direct sales force and distributors. The Company currently has no marketing organization and has never sold a product. Establishing sufficient marketing and sales capability will require significant resources. There can be no assurance that the Company will be able to recruit and retain skilled sales management, direct salespersons or distributors, or that the Company's sales effort will be successful. To the extent that the Company enters into distribution arrangements for the sale of its products, the Company will be dependent on the efforts of third parties. There can be no assurance that such efforts will be successful. See "Business -- The HRK Keratome" and "-- Markets." Risk of Product Liability Litigation; Potential Unavailability of Insurance. The testing, manufacture, marketing and sale of medical devices entail the inherent risk of liability claims or product recalls. As a result, the Company faces a risk of exposure to product liability claims and/or product recalls in the event that the use of its keratome or other future potential products are alleged to have caused injury. In addition to testing, manufacturing and marketing the keratome, the Company intends to lease the keratome and provide sterilization and maintenance services for the keratome, which may enhance the Company's exposure to product liability claims. There can be no assurance that the Company will avoid significant liability in spite of the precautions taken to minimize exposure to avoid product liability claims. Prior to the commencement of clinical testing, the Company intends to procure product liability insurance. It is expected that such insurance will be in the amount of $1 million per claim with an annual aggregate limit of $20 million. After any commercialization of its products, the Company will seek to obtain an appropriate increase in its coverage. However, there can be no assurance that adequate insurance coverage will be available at an acceptable cost, if at all. Consequently, a product liability claim, product recall or other claims with respect to uninsured liabilities or in excess of insured liabilities could have a material adverse effect on the business or financial condition of the Company. See "Business -- Product Liability Insurance." Surgical Risks. There can be no assurance that the HRK System will be successful in providing reliable refractive correction. As with all surgical procedures, the procedures for which the Company's products are intended entail certain inherent risks, including error in the location of the incision due to movement of the eye, defective equipment or human error, infection or other injury resulting in partial or total loss of vision. Such injury could expose the Company to product liability or other claims. There can be no assurance that the Company's product liability insurance in effect from time to time will be sufficient to cover any such claim in part or in whole. Any such claim could adversely impact the commercialization of the Company's products and could have a material adverse effect on the business or financial condition of the Company. No Assurance of FDA and Other Regulatory Approval. As a medical device, the Company's keratome is subject to regulation by the FDA under the Federal Food, Drug, and Cosmetic Act (the "FD&C Act") and implementing regulations. Pursuant to the FD&C Act, the FDA regulates, among other things, the development, manufacture, labeling, distribution, and promotion of the keratome in the United States. The Company believes, based on approvals granted to other keratomes, that the HTK Keratome, and subsequently the HRK Keratome, will be considered by the FDA for approval through a Section 510(k) procedure, a much shorter and less extensive process than the alternative PMA procedure. See "Plan of Operation." However, there can be no assurance that the Company will obtain approval to market the HTK Keratome, or the HRK Keratome, pursuant to a 510(k) notification, or that in order to obtain such approval, the Company will not be required to submit extensive clinical data or meet additional FDA requirements that may substantially delay the 510(k) approval process and add to the Company's expenses. Moreover, such approval, if obtained, may be subject to conditions with respect to the marketing or manufacturing of the HTK Keratome that may impede the Company's ability to market and/or manufacture such product. See "Business -- U.S. Government Regulation." If Section 510(k) treatment is not available for the HTK Keratome or the HRK Keratome, the Company will seek approval through a PMA, typically a more complex submission which usually includes the results of clinical studies, and preparing an application is a detailed and time-consuming process. Once a PMA application has been submitted, the FDA's review may be lengthy and may include requests for additional data. Furthermore, there can be no assurance that a PMA application will be approved by the FDA. See "Business -- The Company." The process of obtaining required regulatory clearances or approvals can be time-consuming and expensive, and compliance with the FDA's Good Manufacturing Practices ("GMP") regulations and other regulatory requirements can be burdensome. Moreover, there can be no assurance that the required regulatory clearances will be obtained, and such clearances, if obtained, may include significant limitations on the uses of the product in question. In addition, changes in existing regulations or guidelines or the adoption of new regulations or guidelines could make regulatory compliance by the Company more difficult in the future. The failure to comply with applicable regulations could result in fines, delays or suspensions of clearances, seizures or recalls of products, operating restrictions and criminal prosecutions, and would have a material adverse effect on the Company. See "Business -- U.S. Government Regulation." Distribution of the Company's products in countries outside the United States may be subject to regulation in those countries. Foreign regulatory requirements vary widely from country to country. In addition, export sales of medical devices that have not received FDA marketing clearance are generally subject to FDA export permit requirements. There can be no assurance that the Company will be able to obtain the approvals necessary to market the keratome or any other product outside the United States. International Sales and Operations Risks. The Company initially plans to sell the keratome and any future products to customers outside of the United States. However, the Company may begin manufacturing or operating activities outside of the United States. A number of risks are inherent in international transactions. International sales and operations may be limited or disrupted by the imposition of the regulatory approval process, government controls, export license requirements, political instability, price controls, trade restrictions, changes in tariffs or difficulties in staffing and managing international operations. Foreign regulatory agencies have or may establish product standards different from those in the United States, and any inability to obtain foreign regulatory approvals on a timely basis could have an adverse effect on the Company's international business and its financial condition and results of operations. Additionally, the Company's business, financial condition and results of operations may be adversely affected by fluctuations in currency exchange rates, increases in duty rates and difficulties in obtaining export licenses. There can be no assurance that the Company will be able to successfully commercialize the keratome or any future product in any foreign market. See "Business -- Marketing and Sales." Broad Discretion in Application of Proceeds. Approximately $833,000, or 17.1%, of the estimated $4,883,000 of net proceeds from the sale of the minimum number of Units offered hereby, or approximately $1,005,500, or 15.0%, of the estimated $6,705,500 of net proceeds from the sale of the maximum number of Units offered hereby, will be applied to working capital and general corporate purposes. Accordingly, the Company's management will have broad discretion as to the use of these proceeds. See "Use of Proceeds." Control by Current Stockholders. Upon consummation of this Offering, the Company's current stockholders will own 2,744,349 shares of Common Stock (without giving effect to 55,651 shares of Common Stock reserved for issuance pursuant to outstanding options under the Stock Option Plan and 110,000 shares of Common Stock reserved for issuance pursuant to outstanding warrants), representing approximately 69.5% of the issued and outstanding shares if the minimum number of Units are sold and approximately 63.1% of the issued and outstanding shares if the maximum number of Units are sold. Accordingly, the current stockholders will be able to elect all the Company's directors and generally direct the affairs of the Company. The control of the Company by these persons could impede or prevent a change of control of the Company. As a result, potential future purchasers might not seek to complete a proposed purchase of the Company. See "Management," "Principal Stockholders" and "Description of Securities -- Common Stock." Immediate Dilution; Disparity of Consideration Paid by Investors. If the minimum number of Units are sold, upon consummation of this Offering, purchasers of the Units offered hereby will experience immediate and substantial dilution in the net tangible book value of their investment in the Company of $3.816, or approximately 76.3%, per share. If the maximum number of Units are sold, this dilution will be $3.533 per share, or approximately 70.7%. Dr. Gordon and certain other current stockholders of the Company acquired their shares of Common Stock at a nominal price. Additional dilution to future net tangible book value per share may occur upon the exercise of the Warrants to be issued to the Underwriter and options that may be issued pursuant to the Stock Option Plan. See "Dilution," "Management -- 1994 Stock Option Plan" and "Underwriting." Repayments to Management from Proceeds of Offering. After the consummation of this Offering, the Company intends to repay an aggregate principal amount of $150,000 of indebtedness to Eugene I. Gordon, who is President, Chairman of the Board and a principal stockholder of the Company, and $50,000 of indebtedness to each of Steven G. Cooperman, a Director of the Company, and Sanford J. Hillsberg, who has been elected to serve as a Director of the Company upon consummation of the Offering. Thus, purchasers of the Units offered hereby are advised that such members of the Company's management will personally benefit from the consummation of this Offering. See "Use of Proceeds," "Management" and " Certain Transactions." Future Sale of Unregistered Securities; Registration Rights. After the Offering, the Company will have outstanding 2,744,349 shares of Common Stock (without giving effect to (i) 1,600,000 shares of Common Stock reserved for issuance upon the exercise of the Warrants included in the maximum number of Units, (ii) 320,000 shares of Common Stock reserved for issuance upon the exercise of the maximum number of Underwriter's Options and the Warrants included therein, (iii) 255,651 shares of Common Stock reserved for issuance pursuant to the Stock Option Plan and (iv) 110,000 shares of Common Stock reserved for issuance pursuant to outstanding warrants), all of which are "restricted securities" within the meaning of Rule 144 under the Securities Act. As of the date of this Prospectus, options to purchase 55,651 shares of Common Stock have been granted pursuant to the Stock Option Plan and warrants to purchase 110,000 shares of Common Stock have been granted. The Company has agreed with the Underwriter that options with respect to the 200,000 shares under the Stock Option Plan which have not yet been granted as of the date of this Prospectus shall, upon grant vest no earlier than one year from the date of grant. The Company has granted certain piggyback registration rights to certain of its existing stockholders with respect to 788,026 shares. The holders of all of such shares have agreed to waive such registration rights for a period of two years. Shares issuable upon exercise of stock options granted under the Stock Option Plan may be registered under the Securities Act commencing 24 months after the Closing Date or such earlier date as consented to by the Underwriter. All of the shares of Common Stock issuable in connection with the Underwriter's Options (as defined herein), including the Common Stock contained in the Units and the Common Stock issuable upon exercise of the Warrants, may, at the request of the Underwriter (as defined herein) be registered by the Company for sale to the public. The sale or the availability for sale of any or all of such shares of Common Stock or other Securities could adversely affect the market price of the Securities prevailing from time to time. See "Management -- 1994 Stock Option Plan," "Shares Eligible for Future Sale" and "Underwriting." Effect of Future Exercise of Options and Warrants. Sales of the Company's Common Stock upon exercise of options may have a depressive effect on the price of the Units, the Common Stock and the Warrants, and issuance of additional Common Stock upon the exercise of options, the Warrants, the Underwriter's Options or otherwise will also dilute the proportionate ownership of the then current stockholders of the Company. The Company has agreed with the Underwriter not to issue shares of Common Stock without the Underwriter's prior written consent during the 24-month period following the Closing Date, other than pursuant to the Stock Option Plan and the Warrants. The Company has further agreed with the Underwriter that during the 12-month period commencing 12 months after the Closing Date, it will not issue shares of Common Stock at a price less that the then "Market Price" thereof, other than pursuant to the Stock Option Plan. "Market Price" is defined as (i) the average closing bid price, for any 10 consecutive trading days within a period of 30 consecutive trading days ending within five days prior to the date of issuance of the Common Stock, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or (ii) the average of the last reported sale price, for the 10 consecutive business days ending within five days of the date of issuance of the Common Stock, on the primary exchange on which the Common Stock is traded, if the Common Stock is traded on a national securities exchange. See "Management -- 1994 Stock Option Plan" and "Description of Securities." Loss of Warrants through Redemption. The Warrants are subject to redemption by the Company. Redemption of the Warrants could force the holders to exercise the Warrants and pay the exercise prices at a time when it may be disadvantageous for the holders to do so, to sell the Warrants at the current market price when they might otherwise wish to hold the Warrants or to accept the redemption price, which may be substantially less than the market value of the Warrants at the time of redemption. The holders of the Warrants will automatically forfeit their rights to purchase the shares of Common Stock issuable upon exercise of such Warrants unless the Warrants are exercised before they are redeemed. The holders of Warrants will not possess any rights as stockholders of the Company unless and until their Warrants are exercised. See "Description of Securities -- Warrants." Need for Current Prospectus and State Blue Sky Registration in Connection with Exercise of Warrants. The Company will be able to issue shares of its Common Stock upon exercise of the Warrants only if there is a then current prospectus relating to the Common Stock issuable upon the exercise of the Warrants under an effective registration statement filed with the Commission, and only if such Common Stock is then qualified for sale or exempt from qualification under applicable state securities laws of the jurisdictions in which the various holders of Warrants reside. There can be no assurance that the Company will be able to meet these requirements. The failure of the Company to meet these requirements may deprive the Warrants of their value and cause the resale or disposition of Common Stock issued upon the exercise of the Warrants to become unlawful. See "Description of Securities." Underwriter as Market Maker. A significant amount of the Units that are to be sold in this Offering may be sold to customers of the Underwriter. These customers subsequently may engage in transactions for the sale or purchase of such securities through or with the Underwriter. Although it has no legal obligation to do so, the Underwriter has indicated that it intends to act as a market-maker and otherwise effect transactions in the securities offered hereby. To the extent the Underwriter acts as a market-maker in the Units, Common Stock or Warrants, it may be a dominating influence in those markets. The degree of participation in those markets by the Underwriter may significantly affect the price and liquidity of the Company's securities. The Underwriter may discontinue these activities at any time or from time to time. The Company cannot ensure that broker- dealers other than the Underwriter will make a market in the Company's securities. In the event that other broker-dealers fail to make a market in the Company's securities, the possibility exists that the market for and the liquidity of the Company's securities could be adversely affected, which in turn could affect stockholders' ability to trade the Company's securities. Further, unless granted an exemption by the Commission pursuant to Rule 10b-6 under the Securities Exchange Act of 1934 (the "Exchange Act"), the Underwriter may be prohibited from engaging in any market making activities with regard to the Company's securities for the period of from two to nine business days prior to the exercise of the Underwriter's Options or if it is soliciting the exercise of the Warrants. As a result, the Underwriter may be unable to continue to provide a market for the Company's securities during certain periods, which may adversely affect the price and liquidity of the securities. See "Underwriting." Best-Efforts Offering; Escrow of Investors' Funds. This Offering is being made on a "best-efforts, all-or-none" basis with respect to 1,200,000 Units and on a "best efforts" basis with respect to an additional 400,000 Units. There can be no assurance that any of the Units will be sold. The Underwriter is offering the Company's Units for a period of 90 days expiring __________________________, 1996, which may be extended up to an additional 90 days to _______________________, 1996 by mutual agreement between the Company and the Underwriter. Pending the sale of the minimum of 1,200,000 Units offered hereby, all proceeds will be held in escrow for as long as 90 days and returned without interest or deduction (unless the Offering is extended for such additional 90-day period, in which case interest will be paid for the extension period) in the event 1,200,000 Units are not sold within the Offering period. Investors, therefore, will not have the use of any subscription funds during the subscription period. See "Underwriting." No Dividends. The Company has paid no dividends since its inception and does not intend to pay dividends in the foreseeable future. Any earnings which the Company may realize in the foreseeable future will be retained to finance the growth of the Company. See "Dividend Policy." Adverse Impact on Common Stock of Issuance of Preferred Stock; Anti- Takeover Provisions. The Board of Directors of the Company has the authority to issue up to 1,000,000 shares of preferred stock in one or more series and to determine the number of shares in each series, as well as the designations, preferences, rights and qualifications or restrictions of those shares, without any further vote or action by the stockholders of the Company. The rights of the holders of Common Stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future, including that the market price of the Common Stock may be adversely impacted upon the issuance of a series of preferred stock with voting and/or distribution rights superior to those of the Common Stock. The issuance of preferred stock could have the effect of making it more difficult for a third party to acquire a majority of the outstanding voting stock of the Company. In addition, the Company will, upon consummation of this Offering, be subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law. In general, this statute prohibits a publicly-held Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. See "Description of Securities -- Preferred Stock" and "Description of Securities -- Anti-Takeover Effects of Delaware Law." Arbitrary Determination of Offering Prices. The initial offering price of the Units and the exercise and redemption price of the Warrants were arbitrarily determined by negotiations between the Company and the Underwriter and bear no relationship to the Company's asset value, book value, net worth, results of operations or any other generally accepted criteria of value. See "Underwriting." Possible Volatility of Stock Price. The market prices for securities of medical device companies have been highly volatile. Announcements regarding the results of regulatory approval filings, clinical studies or other testing, technological innovations or new commercial products by a Company or its competitors, proposed government regulations, developments concerning proprietary rights or public concern as to safety of technology have historically had, and are expected to continue to have, a significant impact on the market prices of the securities of medical device companies. The trading price of the Common Stock could also be subject to significant fluctuations in response to variations in the Company's operating results. See "Business -- Competition." No Assurance of Public Trading Market or Continued Nasdaq Inclusion. Prior to this Offering, there has been no established trading market for the Securities and there is no assurance that a regular trading market for the Securities will develop after the consummation of this Offering. If a trading market does develop for the Securities offered hereby, there can be no assurance that it will be sustained. Application will be made for the quotation of the Securities on The Nasdaq SmallCap Market ("Nasdaq"), and it is anticipated that, on the Closing Date, the Securities will be quoted on Nasdaq. If for any reason the Securities are not eligible for continued quotation on Nasdaq, purchasers of the Securities may have difficulty selling the Securities. In order to qualify for continued quotation on Nasdaq, a company, among other things, must have at least $2,000,000 in total assets and $1,000,000 in total capital and surplus, a public float of at least 100,000 shares having a market value of at least $200,000 and a minimum bid price of $1.00 per share (which minimum bid price requirement is waived if the company maintains at least $2,000,000 in total capital and surplus and $1,000,000 in market value of its public float). If the Company is unable to satisfy the requirements for continued quotation on Nasdaq, of which there can be no assurance, the Securities offered hereby would be quoted in the over-the-counter market in the National Quotation Bureau ("NQB") "Pink Sheets" or on the National Association of Securities Dealers ("NASD") OTC Electronic Bulletin Board, a NASD-sponsored and operated inter-dealer automated quotation system for equity securities not quoted on Nasdaq. In such event, the prices and liquidity of the Securities could be adversely affected and the trading of the Securities could be subject to the so-called "penny stock" rules. Further, the removal or delisting of the Securities from Nasdaq may cause the Company to experience difficulty in obtaining subsequent financing and may result in a loss in coverage of the Securities by brokers and the financial press. See "Risk Factors -- Risk of Low-Priced Securities." Risk of Low-Priced Securities. The Commission has adopted regulations which generally define a "penny stock" to be any equity security that has a market price (as defined in the regulations) of less than $5.00 per share and that is not traded on a national stock exchange, Nasdaq or The Nasdaq National Market System. If at some time in the future the Units offered hereby are removed or delisted from Nasdaq, they may become subject to rules of the Commission that impose additional sales practice requirements on broker-dealers effecting transactions in penny stocks. In most instances, unless the purchaser is either (i) an institutional accredited investor, (ii) the issuer, (iii) a director, officer, general partner or beneficial owner of more than 5% of any class of equity security of the issuer of the penny stock that is the subject of the transaction or (iv) an established customer of the broker-dealer, the broker-dealer must make a special suitability determination for the purchaser of such securities and have received the purchaser's prior written consent to the transaction. Additionally, for any transaction involving a penny stock, the rules of the Commission require, among other things, the delivery, prior to the transaction, of a disclosure schedule prepared by the Commission relating to the penny stock market and the risks associated therewith. The broker- dealer also must disclose the commissions payable to both the broker-dealer and its registered representative and current quotations for the securities. Finally, among other requirements, monthly statements must be sent to the purchaser of the penny stock disclosing recent price information for the penny stock held in the purchaser's account and information on the limited market in penny stocks. Consequently, the penny stock rules may restrict the ability of broker-dealers to sell the Securities and may affect the ability of purchasers in this Offering to sell the Securities in the secondary market. See "Risk Factors -- No Assurance of Public Trading Market or Continued Nasdaq Inclusion." USE OF PROCEEDS The estimated net proceeds from the sale of the minimum number of Units offered hereby, after deducting the underwriting discount of $600,000 and other expenses of the Offering, estimated to be $517,000, will be approximately $4,883,000. The estimated net proceeds from the sale of the maximum number of Units offered hereby, after deducting the underwriting discount of $717,500 and other expenses of the Offering, estimated to be $577,000, will be approximately $6,705,500. The Company currently intends to initially allocate the net proceeds of this Offering as follows:
Approximate Percent Application of Proceeds Amount of Proceeds of Net Proceeds Minumum Maximum Minimum Maximum Research and development(1) . . $3,050,000 $4,500,000 62.5% 67.1% Human clinical trials(2). . . . 500,000 500,000 10.2 7.5 Repayment of indebtedness(3). . 450,000 450,000 9.2 6.7 Patent filings(4) . . . . . . . 50,000 150,000 1.0 3.7 Working capital and general corporate purposes. . . . . . 833,000 1,105,500 17.1 15.0 ---------- ---------- ---- ---- Total $4,883,000 $6,705,500 100.0% 100.0% ========== ========== ====== ====== ========== ========== ====== ======
________________________ (1) Includes trials involving rabbit eyes, generation of data at the Company's Edison, New Jersey laboratory, payments for the use of laboratory facilities at the University (as defined herein), salaries of officers and other employees and payments to consultants engaged in research and development. (2) Includes payments to hospitals or other institutions at which operations on humans will be conducted. (3) Includes four loans to the Company from Mrs. Jan Wernick in an aggregate principal amount of $200,000, which bear interest at the rate of 12% per annum and are due and payable on or after December 31, 1996. Mrs. Wernick's husband is affiliated with the Underwriter as the manager of its New York office. Also includes five loans to the Company from Eugene I. Gordon in an aggregate principal amount of $150,000, which bear interest at the rate of 7% per annum and are due and payable upon demand; and two loans to the Company, one from each of Steven G. Cooperman and Sanford J. Hillsberg, each in the principal amount of $50,000, which bear interest at the rate of 8% per annum and are due and payable on the earlier of (a) written demand made any time on or after January 31, 1997 or (b) the consummation of this Offering. Drs. Gordon and Cooperman are directors and stockholders of the Company. Mr. Hillsberg will begin serving as a director upon the consummation of the Offering and is a stockholder of the Company. All such loans were made after September 30, 1995 and were used for various purposes, including research costs, payroll and other expenses. See "Certain Transactions" and "Underwriting." (4) The amount of proceeds to be applied to patent filings in the event of the sale of the maximum number of Units offered hereby reflects the costs associated with the filing of additional patent applications by the Company. The initial application of the net proceeds of this Offering represents the Company's estimates based upon current business and economic conditions. Although the Company does not contemplate material changes in the proposed allocation of the use of proceeds, to the extent that the Company finds that an adjustment is required by reason of existing business conditions, the amounts shown may be adjusted among the uses indicated above. The Company has limited cash and working capital and is dependent on the net proceeds of this Offering for the continuation and expansion of the Company's operations. The Company believes that the net proceeds of this Offering will be sufficient for the Company to conduct its proposed business for at least the 24-month period following this Offering; however, there can be no assurance that such net proceeds will be sufficient to finance the Company's operations for such period. The Company believes that it will require additional capital before it reaches profitability and positive cash flow, if at all. See "Risk Factors -- Dependence on Proceeds of this Offering -- Need for Future Financing" and "Plan of Operation." To the extent that the Company's expenditures are less than projected, the resulting balances will be used for the purposes set forth above and/or for other general working capital expenses. The net proceeds of this Offering that are not expended immediately will be deposited in interest- bearing accounts, or invested in money market investments, certificates of deposit or similar short-term, low-risk investments. Any additional proceeds received upon the exercise of the Underwriter's Options, as well as from the foregoing short-term investments, will be added to working capital. DILUTION The difference between the initial public offering price per share of Common Stock and the pro forma net tangible book value per share after this Offering constitutes the dilution to investors in this Offering. Net tangible book value per share is determined by dividing the net tangible book value of the Company (total tangible assets less total liabilities) by the number of outstanding shares of Common Stock. At March 31, 1996, the Company had a net tangible book value of $(372,777), or $(.14) per share. After the sale of the minimum of 1,200,000 Units (less underwriting commissions and estimated expenses of this Offering), the pro forma net tangible book value of the Company at March 31, 1996 would have been $4,668,426, or $1.184 per share, representing an immediate increase in net tangible book value of $1.324 per share to the existing shareholders and an immediate dilution of $3.816 (76.3%) per share to new investors. After the sale of the maximum of 1,600,000 Units (less underwriting commissions and estimated expenses of this Offering), the pro forma net tangible book value of the Company at March 31, 1996 would have been $6,373,926, or $1.467 per share, representing an immediate increase in net tangible book value of $1.607 per share to the existing shareholders and an immediate dilution of $3.533 (70.7%) per share to new investors. The following table illustrates the foregoing information with respect to dilution to new investors on a per-share basis if the minimum number of Units is sold: Public offering price per share(1) . . . . . . . . . . $5.00 Net tangible book value per share before Offering. . . $(.14) Increase per share attributable to new investors . . . 1.324 ----- As adjusted, net tangible book value per share after Offering(2). . . . . . . . . . . . . . . . . . . 1.184 ----- Dilution per share to public investors . . . . . . . . $3.816 ======
_________________ (1) Does not attribute any value to the Warrants. (2) Does not include funds that may be received upon the exercise of the Warrants. The following table illustrates the foregoing information if the maximum number of Units is sold: Public offering price per share(1) . . . . . . . . . . $5.00 Net tangible book value per share before Offering. . . $(.14) Increase per share attributable to new investors . . . 1.607 ----- As adjusted, net tangible book value per share after Offering(2) . . . . . . . . . . . . . . . . . . 1.467 ----- Dilution per share to public investors . . . . . . . . $3.533 ======
________________________ (1) Does not attribute any value to the Warrants. (2) Does not include funds that may be received upon the exercise of the Warrants. The following tables set forth, at March 31, 1996, with respect to the (a) Company's existing stockholders and (b) purchasers of the Units offered hereby, a comparison of the number of shares of Common Stock acquired from the Company, the total consideration paid (but attributing no value to the Warrants) and the average price per share of Common Stock if the minimum or maximum number of Units are sold.
Average Price Shares Purchased Total Consideration per Share Minimum Offering Number Percent Amount Percent Existing Stockholders. . . $2,744,349 70.0% $ 966,824 14% $ .352 New Investors . . . 1,200,000 30.0 6,000,000 86 5.000 --------- ---- --------- -- Total . . . . . . 3,944,349 100% $6,966,824 100% ========= ==== ========== ====
Average Price Shares Purchased Total Consideration per Share Maximum Offering Number Percent Amount Percent Existing Stockholders. . . $2,744,349 63.0% $ 966,824 11% $ .352 New Investors . . . 1,600,000 37.0 8,000,000 89 5.000 --------- ---- --------- -- Total . . . . . . 4,344,349 100% $8,966,824 100% ========= ==== ========== ====
CAPITALIZATION The following tables set forth the capitalization of the Company as of March 31, 1996, as adjusted to give effect to (i) the sale of the minimum and maximum number of Units and the application of the estimated net proceeds therefrom, (ii) the repayment of $350,000 of indebtedness, including interest, outstanding at March 31, 1996, from the net proceeds received by the Company and (iii) a 2.226043597-for-1 stock split of the Company's Common Stock effected immediately prior to the date of this Prospectus. See "Financial Statements," "Use of Proceeds" and "Description of Securities."
Assuming 1,200,000 Units are sold: At March 31, 1996 Actual Adjustment As Adjusted Notes payable . . . . . . . . . . . $ 350,000 $ (350,000) $ -0- ======= ======== Stockholders' equity: Common Stock, $.001 par value, 7,000,000 shares authorized; 2,744,349 shares issued and outstanding; 3,944,349 shares as adjusted(1). . . . . . . . . . $ 2,744 $ 1,200 $ 3,944 Additional paid-in capital. . . . 964,080 3,700,402 4,664,482 Deficit accumulated during the development state(2). . . . . (1,141,418) 1,141,418 0 ----------- ---------- Total capitalization. . . . . . . . $ (174,594) $4,668,426 =========== ==========
________________________ (1) Unless otherwise indicated, no effect is given to (i) 1,200,000 shares of Common Stock reserved for issuance upon the exercise of the 1,200,000 Warrants included in the Units, (ii) 240,000 reserved for issuance upon the exercise of the Underwriter's Options and the Warrants included therein, (iii) 200,000 shares reserved for issuance pursuant to stock options available for grant under the Stock Option Plan, 55,651 shares of Common Stock reserved for issuance upon the exercise of outstanding options under the Stock Option Plan and 110,000 shares reserved for issuance pursuant to outstanding warrants and (iv) payment of $156,980 of expenses in this Offering which was reflected as an asset, "Deferred Offering Costs," in the Company's unaudited financial statements at March 31, 1996. See "Description of Securities" and "Underwriting." (2) Upon completion of the Offering, the Company's status will change from an "S" corporation to a "C" corporation. Accordingly, the deficits accumulated during the development stage are charged against additional paid in capital.
Assuming 1,600,000 Units are sold: At March 31, 1996 Actual Adjustment As Adjusted Notes payable . . . . . . . . . . . $ 350,000 $ (350,000) $ -0- ========== ========== Stockholders' equity: Common Stock, $.001 par value, 7,000,000 shares authorized; 2,744,349 shares issued and outstanding; 4,344,349 shares as adjusted(1). . . . . . . . . . $ 2,744 $ 1,600 $ 4,344 Additional paid-in capital. . . . 964,080 5,405,502 6,369,582 Deficit accumulated during the development state(2). . . . . (1,141,418) 1,141,418 0 ----------- --------- Total capitalization. . . . . . . . $ (174,594) $6,474,936 ============ ==========
________________________ (1) Unless otherwise indicated, no effect is given to (i) 1,600,000 shares of Common Stock reserved for issuance upon the exercise of the 1,600,000 Warrants included in the Units, (ii) 320,000 reserved for issuance upon the exercise of the Underwriter's Options and the Warrants included therein, (iii) 200,000 shares reserved for issuance pursuant to stock options available for grant under the Stock Option Plan, 55,651 shares of Common Stock reserved for issuance upon the exercise of outstanding options under the Stock Option Plan and 110,000 shares reserved for issuance pursuant to outstanding warrants and (iv) payment of $156,980 of expenses in this Offering which was reflected as an asset, "Deferred Offering Costs," in the Company's unaudited financial statements at March 31, 1996. See "Description of Securities" and "Underwriting." (2) Upon completion of the Offering, the Company's status will change from an "S" corporation to a "C" corporation. Accordingly, the deficits accumulated during the development stage are charged against additional paid in capital. DIVIDEND POLICY The Company has not paid dividends on its Common Stock since its inception and does not expect to pay any cash or other dividends in the foreseeable future. Earnings of the Company, if any, are expected to be retained for use in expanding the Company's business. The payment of dividends is within the discretion of the Board of Directors of the Company and will depend upon the Company's earnings, if any, capital requirements, financial condition and such other factors as are considered relevant by the Board of Directors. PLAN OF OPERATION Operation for the Next Twelve Months For the next 12 months, the Company intends to continue testing and developing the HTK Keratome and the HRK Keratome. If the Company's animal testing program in the United States continues to succeed, the Company intends to have discussions with FDA officials and then initiate clinical testing programs on blind human eyes at one site in the United States and at four sites outside the United States. The Company anticipates that its first keratome suitable for use in human clinical trials will be completed early in the third quarter of 1996. The clinical test sites selected by the Company are located in Israel, Germany, Mexico and the Dominican Republic. The Company estimates that the cost of conducting clinical trials at each site will be approximately $50,000. However, there can be no assurance that such actions will be taken within such time periods. 510(k) Notification In an effort to expedite the regulatory approval process for the HRK Keratome, the Company intends to submit to the FDA a Section 510(k) notification with respect to the HTK Keratome within approximately six months of the Closing Date. The Company's application will be based on the HTK Keratome's similarity to other FDA-approved keratomes. See "Business - U.S. Government Regulation." A successful 510(k) notification generally results in FDA approval within six to 12 months. However, there can be no assurance that the Company's 510(k) notification will be approved on a timely basis or at all. Cash Requirements If the Company's 510(k) notification for the HTK Keratome is approved by the FDA in the first half of 1997, the Company estimates that the net proceeds of this Offering will be sufficient to fund its operations for approximately 24 months after the Closing Date, without taking into account operating cash flow, if any. In that event, the Company intends to make expenditures to establish a manufacturing facility as well as to hire marketing staff. If the Company's 510(k) notification is not approved within such period, the Company estimates that the net proceeds from this Offering will be sufficient to fund its operations for approximately 36 months. In that event, the Company plans to conduct human clinical trials during such period for the purpose of accumulating sufficient clinical data to obtain FDA approval of the HTK Keratome. The FDA process can be expensive, uncertain and lengthy; accordingly, the Company may require additional financing prior to obtaining FDA approval of the HTK Keratome. Clinical Trials and Product Research and Development The Company intends to use approximately $0.5 million of the net proceeds of this Offering to initiate and conduct human clinical trials involving blind eyes or eyes scheduled to be removed for other reasons, and approximately $3.1 million, if the minimum number of Units is sold, or approximately $4.5 million, if the maximum number of Units is sold, for research and development of the HRK Keratome. These amounts include the salaries of the employees who will be conducting research and development of the HRK Keratome, monitoring the progress of clinical testing and preparing applications and other filings with regulatory authorities. Laboratory Facilities The Company currently leases a 4,982 square foot facility in Edison, New Jersey for its research and development operations, which the Company believes will be adequate for research and development of the keratome prior to its commercialization. The Company believes that nearby space suitable for a manufacturing facility is in adequate supply. Number of Employees The Company currently employs nine individuals on a full-time basis and one individual on a part-time basis, as well as one medical consultant, one marketing consultant and two strategic planning and business development consultants. After the consummation of this Offering, the Company intends to increase its laboratory staff to 10 persons. If and when the HTK Keratome receives FDA approval, the Company intends to employ additional individuals in connection with the manufacturing and marketing of the HRK Keratome. BUSINESS The Company The Company, founded in December 1993, has developed a proprietary surgical device known as a keratome, which utilizes a hair-thin (approximately 30 microns in diameter) circular beam of supersonic velocity water. The waterjet beam substitutes for a conventional metal or diamond blade scalpel and in combination with other elements of the device is capable of shaving thin, shaped layers from the cornea of the eye, a procedure known as lamellar keratoplasty. The keratome is used to treat diseases of the cornea as well as to correct vision deficiencies such as nearsightedness ("myopia"), farsightedness ("hyperopia") and astigmatism by excising layers, either parallel or shaped, of the cornea in order to reshape the cornea to achieve proper focusing. In combination with a template of prescribed dimensions, the shape of the layer to be removed can be determined in advance. The Company believes that its keratome can be used to treat corneal disease in a procedure known as hydro-therapeutic keratoplasty ("HTK"), in which diseased corneal tissue is removed and the remaining corneal tissue may be reshaped to provide proper focusing. About 45,000 corneal procedures, including full transplants and partial removals, are performed annually in the United States. The Company believes that the same keratome, through a procedure known as hydro-refractive keratoplasty ("HRK"), has the potential to reduce or eliminate a patient's dependence on eyeglasses or contact lenses by modifying the shape of the cornea to correct vision deficiencies. Based upon feasibility studies and limited animal testing conducted by the Company, the Company believes that its waterjet scalpel cuts more precisely and smoothly than the sharpest metal, diamond or laser scalpel and that, as a result, HRK may result, once approved, in a safer, more accurate and more stable corneal adjustment that is less painful for patients than other refractive surgical procedures currently available. The Company anticipates that HRK will also be competitively priced with, or cost less than, such other procedures. The Company has not yet tested its HRK Keratome on live human eyes but has tested its waterjet keratome on approximately 1,000 porcine and rabbit corneas, 25 human cadaver eyes and 22 live rabbits. The Company began construction in March 1996 of a keratome designed for use in surgery on non-human primates and humans in a clinical setting. Due to funding limitations, the Company has not yet constructed a full prototype. The Company's keratome, which consists of a waterjet nozzle and a device known as a globe fixation device (to align and fix the eye in place relative to the template during surgery), is intended to be used with a miniature high pressure water storage element and related equipment, which together produce the water beam; a scanning mechanism to move the water beam across the cornea; a device to regulate and control the action of the water beam; a force transducer to monitor the water beam status; and a template designed to support and shape the eye during surgery. The keratome will be placed on the patient's eye during the surgical procedure. The following diagram illustrates the Company's keratome: [CONTINUED ON NEXT PAGE] [DIAGRAM OF MICROSCOPE WITH WATERJET KERATOME] The Company believes that the keratome, when used in HTK (the "HTK Keratome"), would be used similarly to other keratomes but would allow for the removal of layers of corneal tissue of a predetermined shape and thickness with a higher degree of accuracy as well as producing a more cleanly cut surface of the stroma, the main layer of the cornea. The Company intends to seek approval from the United States Food and Drug Administration ("FDA") to market the HTK Keratome. The HTK Keratome is intended to become the first commercially available product using the Company's waterjet technology and would be both an early source of income for the Company and the basis for additional applications for FDA-approved uses of the keratome. The next and possibly more commercially valuable use of the keratome is for refractive surgery through HRK. Subsequent to the approval and marketing of the HTK Keratome, the Company intends to seek FDA approval to market the keratome for HRK (the "HRK Keratome"). In the United States, more than 145 million people wear either eyeglasses or contact lenses and, each year, approximately two million people who have not previously suffered from refractive disorders are informed by their doctors that they are in need of refractive correction. Over $13 billion is spent annually in the United States for corrective eyewear products. Approximately 29 million Americans wear contact lenses, primarily for cosmetic or convenience reasons. The number of people in the United States newly electing to wear contact lenses is over one million per year. This large and growing population of contact lens wearers is the largest potential market for refractive surgery, including HRK. Studies indicate that approximately 60% of persons electing refractive surgery are contact lens wearers. However, there can be no assurance that eyeglass or contact lens wearers will elect to undergo surgery. Upon approval of the HRK Keratome, the Company intends to market the HRK Keratome to individual ophthalmologists and groups of ophthalmologists for the treatment of patients in a clinical setting. The Company expects to derive a significant part of its revenues from leasing the keratome, to be returned by the ophthalmologist to the Company after each procedure for sterilization, routine maintenance and recharging. The Company believes that by retaining control over the sterilization process and performing any necessary maintenance itself, the efficacy, safety and reliability of the keratome will be enhanced. In addition, the Company believes that the leasing arrangement will be attractive to ophthalmologists, because they will be able to maintain a supply of keratomes on hand, thereby eliminating the down time that would otherwise be required for the sterilization process. The Company intends to sell the other components of the keratome, including the disposable, single-use template designed for each particular use as instructed by the surgeon. The Company believes that its proprietary waterjet technology may have additional surgical applications. However, the Company has not conducted any studies of such applications to date. The Company has sought to protect its proprietary interest in the HRK Keratome by applying for patents in the United States and corresponding patents abroad. In September 1994, a U.S. patent application was filed in the name of Dr. Eugene I. Gordon and two employees of the Company, as inventors, which application was assigned to the Company. The U.S. patent application, as allowed for issuance, covers a method and device for use in the HRK Keratome, including use of a template for corneal shaping and holding, during use of a waterjet keratome device. A corresponding international application has been filed, pursuant to the Patent Cooperation Treaty ("PCT"), with designation of all member countries foreign to the United States, including but not limited to Japan, the members of the European Patent Office, Canada, Mexico, Australia, Russia, China and Brazil. The PCT filing has been published and separate patent applications have been or will be filed pursuant to the PCT filing. In addition, for countries not currently part of the PCT, patent applications have also been filed in Israel, Taiwan and South Africa. A prior U.S. patent application, filed in April 1994, is currently pending and relates to topographic corneal mapping, which has utility for surgery utilizing the HRK Keratome. The Company is in the development stage and has not sold any products or generated any revenues as of the date of this Prospectus. To date, the Company's research and development activities have been limited to constructing and testing experimental versions of the keratome and conducting a limited number of feasibility studies using porcine, rabbit and human cadaver eyes and live animals to prove that a hair-thin beam of water can smoothly incise and shape the anterior surface of the cornea and that the cornea will heal properly after the surgery. No human clinical trials have been performed to date. The FDA has regulatory authority over the manufacture, labeling, distribution and promotion of the keratome. The first phase of the Company's FDA approval strategy involves seeking approval for the HTK Keratome. The Company believes the HTK Keratome will be considered for approval for marketing by the FDA through a Section 510(k) pre-market notification ("510(k) notification") procedure, and it is the intent of the Company to file such notification with the FDA in the second half of 1996 to obtain approval for the HTK Keratome. Although there can be no assurance that this will prove to be the case, approval of the 510(k) notification should enable the Company to commence its marketing efforts sooner than if the Company had to submit to the FDA a pre-market approval ("PMA") application. In order to obtain FDA clearance of a 510(k) notification, a company must prove its device is substantially similar to a marketed product. PMA applications must demonstrate, among other matters, that the device is safe and effective. Although human clinical trial data is sometimes required to be submitted with a 510(k) notification, a PMA application is typically a more complex submission which usually includes the results of clinical studies, and preparing an application is a detailed and time-consuming process. Once a PMA application has been submitted, the FDA's review may be lengthy and may include requests for additional data. See "-- U.S. Government Regulation" and "Risk Factors -- No Assurance of FDA and Other Regulatory Approval." The second phase of the Company's FDA approval strategy relates to the HRK Keratome. Although the Company believes that the HRK Keratome will be considered for approval for marketing by the FDA through a 510(k) notification based upon the similarities of the keratome between the HTK use and the HRK use, obtaining such approval of the HRK Keratome is somewhat more complicated than for HTK. There can be no assurance that either the HTK use or the HRK use will be approved for marketing by the FDA. The differences between the two uses are found in the components, other than the waterjet scalpel, which comprise the keratome. For the HRK Keratome, the Company may be required to show that the procedure is effective, stable and does not decrease visual acuity to any significant extent. The Company believes that, based on three features of the HRK Keratome, it will be considered for 510(k) notification by the FDA. First, there are no known or anticipated physical or chemical processes that would impact on the safety of the HRK procedure. The waterjet keratome cuts by mechanisms similar to that of conventional scalpels (although at speeds of more than 100 times greater), except that the Company believes that HRK would not produce certain side effects incident to other refractive surgery procedures. Such side effects include the inferior cut produced by the oscillating blade used in conventional keratomes, and the potential carcinogenic effects, dehydration from overheating and high amplitude shock waves to the eye resulting from the high energy, pulsed radiation used in a procedure known as photo-refractive keratotomy ("PRK"). PRK could represent the strongest competition to HRK. As a result of the anticipated safety issues, the FDA approval process for PRK involved numerous clinical studies on human eyes and took several years to complete. The Company believes that the FDA approval process for the HRK Keratome should be shorter and entail fewer clinical studies in light of the higher safety and lack of anticipated side effects, in comparison to other previously approved products. The second feature of the HRK Keratome is the benign nature of the waterjet cut. While a conventional scalpel tears the lamellae (layers of the stroma) and PRK completely or partially destroys the surface lamellae, the waterjet beam has a unique cutting action which separates the various lamellae prior to cutting the targeted tissue, thereby preserving the integrity of the remaining lamellae and both localizing and minimizing the damage to the lamellae generally. The healing process following a waterjet cut is expected to be less traumatic than that following a conventional scalpel cut or a PRK cut. The third feature of the HRK Keratome is that the portion of the corneal tissue targeted for removal is extracted in a single piece similar to a contact lens. The Company is developing and experimenting with an in- vitro model which would allow intact removal of the targeted portion of corneal tissue and comparison to the expected refraction, in effect producing a definitive model of the relationship between the template shape and the refractive result. The efficacy requirement of such experimentation is to demonstrate validity in humans of the in-vitro model, a less demanding requirement than demonstrating validity on live human eyes. The Company believes that the clinical studies would be primarily directed toward validating this model and that the 510(k) notification process would be relatively short and consist of tests on a limited number of live eyes. The Company may distribute its products internationally. Distribution of the Company's products in countries other than the United States may be subject to regulation in those countries. In some countries, the regulations governing such distribution are less burdensome than in the United States and the Company may pursue marketing its products in such countries prior to receiving approval from the FDA. The Company will endeavor to obtain the necessary government approvals in those foreign countries where the Company decides to manufacture, market and sell its products. See "-- Foreign Government Regulation." With the net proceeds of this Offering, the Company intends to continue the research and development of its keratome and related manufacturing processes and to commence human clinical trials of the HRK Keratome. See "Plan of Operation." If the HTK Keratome or the HRK Keratome is approved for marketing in the United States, the Company will be required to establish a marketing organization and production facilities, which will require additional financing. No assurance can be given that the Company's research and development efforts will be successfully completed, that the HTK Keratome or HRK Keratome will prove to be safe and effective in correcting vision, that the HTK Keratome or HRK Keratome will be approved for marketing by the FDA or any other regulatory agency, or that the HTK Keratome or HRK Keratome or any other product developed by the Company will be commercially successful. The Company was incorporated under the laws under the State of Delaware in December 1993. Its offices are located at 1090 King Georges Post Road, Suite 301, Edison, New Jersey 08837; its telephone number is (908) 738-3990. The Company has elected Subchapter "S" status pursuant to Section 1362 of the Internal Revenue Code of 1986, as amended (the "Code"), which status will terminate upon the Closing Date. Refractive Disorders and Correction The human eye consists of a hollow, flexible globe approximately 25 millimeters in diameter, which is filled with a vitreous fluid. The optical part of the eye functions much like an automatic focus video camera, incorporating a variable focus lens system (the fixed focus cornea and the variable focus internal lens) which adjusts the sharpness of the image on the retina, a variable aperture system (the iris) which regulates the amount of light falling on the retina, and a sensory array (the retina) which converts the focused image into electrical signals which are transmitted through the optic nerve to the brain for image processing and storage to achieve the best image. Approximately 70% of the focusing power of the eye resides in the cornea. The precise focusing power of the cornea is a function of the curvature of the anterior corneal surface. The internal lens of the eye also has focusing power and the ability to adjust its focusing power to achieve the best focus for near or far objects; however, its ability to so adjust is limited and tends to decrease with age, ultimately disappearing. Most common refractive problems result from an inability of the optical system of the eye to focus images on the retina properly with normal accommodation. The extent of this inability to focus is known as refractive error. For instance, in the nearsighted eye, light rays from an object at a distance of 20 feet focus in front of the retina, because the curvature of the cornea is too great. People with uncorrected myopia see nearby objects clearly, but distant objects appear blurry, even with accommodation. Conversely, in the uncorrected farsighted eye, light rays from an object at a distance of 20 feet focus behind the retina because the curvature of the cornea is too low. People with hyperopia see distant objects clearly, but may need correction so that nearby objects do not appear blurry. In the astigmatic eye, the curvature of the cornea is not uniform. This lack of uniform curvature makes it impossible for a person to focus clearly on an object at any distance without correction. Refractive power is measured in diopters. The current ophthalmic measurement technology and the techniques for manufacturing eyeglasses and contact lenses produce a refractive correction that is within +/- 1/4 diopter of the optimum value for ideal vision. This residual error is generally viewed as acceptable for all purposes by ophthalmologists. Vision disorders are currently treated primarily by eyeglasses, contact lenses or surgery, all of which compensate for the existing refractive error. Among the surgical techniques available to treat vision disorders are radial keratotomy ("RK"), PRK and keratomileusis in situ ("KIS"). In RK, PRK and KIS, the object of the surgery is to change the shape of the anterior corneal surface, thereby eliminating or reducing refractive error. RK is a surgical procedure used to correct myopia in which steel or diamond knives are used to make a series of deep, perpendicular cuts in a radial configuration around the periphery of the cornea outside the vision zone. The incisions cause a flattening of the cornea and eliminate or reduce small to moderate amounts of myopia. Tangential cuts are used to correct moderate astigmatism, a technique known as astigmatic keratotomy. PRK uses energy from a type of ultraviolet laser, known as an "excimer laser," to correct various types of refractive disorders by changing the curvature of the anterior corneal surface. The excimer laser emits ultraviolet light in very short, high energy pulses and "photoablates," or vaporizes, part of the anterior corneal surface to achieve a new curvature. PRK has been approved for use in the United States by the FDA for the correction of low to moderate myopia (i.e., under 6 diopters). KIS, which is also known as refractive lamellar keratoplasty ("RLK") or automated lamellar keratoplasty ("ALK"), involves using an automated metal or diamond scalpel in a microkeratome to cut and pull back a corneal flap (consisting of the epithelium, the Bowman's layer and a portion of the stroma) and to then shave away a portion of the exposed stromal area of the cornea in a second cut, thereby changing the corneal curvature after the flap is replaced. Light ablation system for in-situ keratomileusis ("LASIK"), an investigational procedure under FDA review, with FDA approval anticipated by the Company to be at least one year away, combines elements of KIS and PRK. In the LASIK technique, the corneal flap is pulled back, and photoablation is performed directly on the exposed stromal surface to change its curvature. In both KIS and LASIK, the hinged flap is reset as close as possible to its original position, where it adheres to the underlying stroma. RK and PRK produce corrections that are usually not optimum, typically leaving the eye within +/- 1 diopter of optimum, but sometimes worse. The corrections generally are not stable to within 1 diopter. This leaves the patient able to function without eyeglasses or contact lenses but not with the best possible vision and not under all conditions. The accuracy of KIS is generally poorer, but it is typically used to correct larger myopia and is more stable. See "-- Competition." The HRK Keratome General The HRK Keratome uses a single, hair-thin, supersonic water beam with a diameter of approximately 30 microns to incise corneal material and a disposable, custom-made template to support and shape the cornea during surgery. Other parts of the HRK Keratome include a miniature high pressure water storage element and related equipment, which together produce the water beam; a scanning mechanism to move the water beam across the cornea; a device to regulate and control the action of the water beam; a force transducer to monitor the water beam status; and a template designed to support and shape the eye during surgery. The HRK Keratome will be placed on the patient's eye during the surgical procedure. Once the HRK Keratome is placed into position on the eye (directly over the area to be incised), to which it is attached by a globe fixation device ( a suction device to align and fix the eye in place relative to the template and waterjet parts during surgery), the surgical cut takes less than one second. The total water volume used during the procedure, including the amount necessary to check the waterjet beam and its performance, is less than a few drops. Involuntary motions of the eye, including saccadic movement in which the eye makes minute, constant side-to-side movements to assist in imaging, have no impact during HRK because the eye is fixed to the HRK Keratome during the procedure. The template for any procedure will be constructed according to the specification provided by the ophthalmologist and will be provided to the surgeon with the HRK Keratome. HRK, with the HRK Keratome, can be done in three methods. In the first method, a shaped slice of corneal tissue is removed without damage to the rest of the cornea. The shape and size of the removed portion corresponds to the error in refractive power of the cornea to be corrected, having the effect of the permanent removal of the equivalent of a contact lens. In the other two methods, a hinged flap is cut into the cornea and the underlying tissue is reshaped before the flap is replaced. The Company believes that the first method, without the creation of a flap (which the Company believes allows more opportunity for infection, requires more surgical skill, offers the potential for irregular astigmatism and results in a more complex healing process), is the simplest and safest and initially intends to seek FDA approval with respect to that method alone. Status To date the Company has spent approximately $1,100,000 on research and development of the HTK Keratome and the HRK Keratome. Research and development activities have consisted of developing, designing and constructing two experimental versions of the Company's keratome, and, since July 1994, conducting feasibility studies on approximately 1,000 porcine and rabbit corneas, on approximately 25 human cadaver eyes and on 22 live rabbits. The purpose of the feasibility studies was to determine if the water beam could smoothly incise and shape the anterior surface of the cornea and to determine if the incised eye would heal. The Company has been highly satisfied with the results of the feasibility studies conducted to date. Specifically, the Company, using light and electron microscopes and post incision casts, has compared the cuts made by the waterjet scalpel with cuts made by scalpels and lasers in other refractive surgical procedures. The Company believes that the cuts made by the waterjet scalpel are cleaner than those made by conventional scalpels and lasers. The Company has found the corneal flaps created by the HRK Keratome to be extremely close to parallel, as desired, and of the desired thickness (approximately 140 microns). The Company also found the shape of the cut stromal bed to be the desired spherical shape and the restored flap to fit the stromal bed with no discernable disparity in size or alignment. The Company's studies have also shown that HRK incisions (resections) heal with much less wound healing response and haze than results from PRK incisions. Pre-clinical research and development is being conducted by the Company directly and, on the Company's behalf, by the University of Medicine and Dentistry of New Jersey in Newark, New Jersey (the "University"). The Company maintains a laboratory for its experiments at the University's animal facility and has access to certain University diagnostic equipment. The Company has agreed to pay the University $40,000 per year from July 1994 to June 1997 in order to use such facilities for its research and development. Dr. Eugene I. Gordon, the President of the Company, is an adjunct professor of ophthalmology at the University. The Company's agreement with the University calls for tests on 40 dutch belted rabbits and 40 cats with post-operative follow-up and, subsequently, microscope studies on enucleated eyes. The tests are carried out by Company personnel under the supervision of Prof. Marco Zarbin, M.D., the Chairman of the University's Department of Ophthalmology, who serves as the principal investigator. The Company began construction in March 1996 of a keratome designed for use in surgery on non-human primates and humans in a clinical setting. Due to funding limitations, the Company has not yet constructed the manufacturing equipment for making specifically designed templates. The Company believes that the technology for producing specifically designed templates exists and that the Company will be able to produce such equipment or license others to do so. However, there can be no assurance that the Company will be able to do so at all or in a timely and cost- effective manner. Patents The Company has sought to protect its proprietary interest in the HRK Keratome by applying for patents in the United States and corresponding patents abroad. In September 1994, a U.S. patent application was filed in the name of Dr. Eugene I. Gordon and two employees of the Company, as inventors, which application was assigned to the Company. The U.S. patent application, as allowed for issuance, covers a method and device for use in the HRK Keratome, including use of a template for corneal shaping and holding, during use of a waterjet keratome device. A corresponding international application has been filed, pursuant to the Patent Cooperation Treaty ("PCT"), with designation of all member countries foreign to the United States, including but not limited to Japan, the members of the European Patent Office, Canada, Mexico, Australia, Russia, China and Brazil. The PCT filing has been published and separate patent applications have been or will be filed pursuant to the PCT filing. In addition, for countries not currently part of the PCT, patent applications have also been filed in Israel, Taiwan and South Africa. A prior U.S. patent application, filed in April 1994, is currently pending and relates to topographic corneal mapping, which has utility for surgery utilizing the HRK Keratome. U.S. Government Regulation The components of the Company's HTK Keratome and HRK Keratome are medical devices. Accordingly, the Company is subject to the relevant provisions and regulations of the FD&C Act, under which the FDA regulates the manufacturing, labeling, distribution, and promotion of medical devices in the United States. The FD&C Act requires manufacturers of medical devices to, among other things, comply with labeling requirements and manufacture devices in accordance with prescribed GMPs, which require companies to manufacture and test their products, exercise quality control and maintain related documentation in a prescribed manner. The FD&C Act and regulations thereunder also require all medical device manufacturers and distributors to register with the FDA annually, to provide the FDA with a list of those medical devices which they distribute commercially and to report death or serious injuries alleged to have been associated with the use of their products, as well as product malfunctions that would likely cause or contribute to death or serious injury if the malfunction were to recur. Certain medical devices not cleared for marketing in the United States are required to have FDA approval before they are exported. The FDA frequently inspects medical device manufacturing and distribution facilities and has broad authority to order recalls of medical devices, seize noncomplying medical devices, enjoin and/or impose civil penalties on manufacturers and distributors marketing non-complying medical devices and criminally prosecute violators. Pursuant to the FD&C Act, the FDA classifies medical devices intended for human use into three classes: Class I, Class II and Class III. In general, Class I devices are those products for which the FDA determines that safety and effectiveness can be reasonably assured through the FD&C Act general controls relating to such matters as adulteration, misbranding, registration, notification, record keeping and GMP. Class II devices are those products for which the FDA determines that the general controls in the FD&C Act alone are insufficient to provide a reasonable assurance of safety and effectiveness. The FDA has promulgated special controls applicable to Class II devices, including, but not limited to, performance standards, postmarket surveillance, patient registries and specific testing guidelines. Class III devices are devices for which the FDA has insufficient information to conclude that either general FD&C Act controls or special controls would be sufficient to assure safety and effectiveness, and which are life-supporting, life-sustaining, of substantial importance in preventing impairment of human health (e.g., a diagnostic device to detect a life-threatening illness) or present a potential unreasonable risk of illness or injury. Class III devices must undergo a rigorous pre-market approval process, as described below. The FD&C Act provides that, unless exempted by regulation, medical devices may not be commercially distributed in the United States unless they have been approved or cleared by the FDA. There are two review procedures by which medical devices can receive such approval or clearance. Some products may qualify for clearance under a 510(k) notification. Pursuant to that procedure, the manufacturer submits to the FDA a pre- market notification that it intends to begin marketing its product. The notification must demonstrate that the product is substantially equivalent to another legally marketed product (i.e., that it has the same intended use and that it is as safe and effective as, and does not raise different questions of safety and effectiveness than does, a legally marketed device). In some cases, the 510(k) notification must include data from human clinical studies. In March 1995, the FDA issued a draft guidance document in connection with 510(k) notifications for medical devices, "Addendum: How to Submit a Premarket Notification [(510(k)]," which states that clinical data is not needed for most devices cleared by the 510(k) process. However, the Company anticipates that the FDA will require submission of human clinical trial data in connection with the Company's 510(k) notification. A successful 510(k) notification will result in the issuance of an approval letter from the FDA in which the FDA acknowledges the substantial equivalence of the reviewed device to a legally marketed device and clears the reviewed device for marketing to the public. Under FDA regulations, the FDA has a 90-day period to respond to a 510(k) notification, although such response has been known to take longer. The Company intends to file a 510(k) notification with the FDA within approximately six months of the Closing Date, in which the Company will seek to demonstrate that the HTK Keratome is substantially equivalent to the currently available keratome having a metal or diamond scalpel used for lamellar keratoplasty. Under current FDA regulations, a keratome is defined as a device for shaving thin layers from the cornea and is classified as a Class I device. The Company will seek to demonstrate that, for the purpose of making lamellar, or substantially lamellar, corneal incisions, the waterjet scalpel and template included in the HTK Keratome are substantially similar to a keratome with a metal or diamond scalpel. There can be no assurance that the Company will obtain 510(k) premarket notification clearance to market the HTK Keratome or, subsequently, the HRK Keratome in a timely manner, or at all, that the Company's device will be classified as a Class I device, or that, in order to obtain 510(k) clearance, the Company will not be required to submit additional data or meet additional FDA requirements that may substantially delay the 510(k) process and add to the Company's expenses. Moreover, such 510(k) notification approval, if obtained, may impose conditions on the Company with respect to the marketing or manufacturing of which may impede the Company's ability to market and/or manufacture the HTK Keratome or the HRK Keratome. There can be no assurance that the Company will be able to obtain necessary regulatory approvals or clearances on a timely basis or at all. Delays in receipt of or failure to receive such approvals, the loss of previously received approvals, or failure to comply with existing or future regulatory requirements will have a material adverse effect on the Company. In addition to laws and regulations enforced by the FDA, the Company's products may also be subject to labelling laws and regulations enforced by the Federal Trade Commission. The Company is also subject to government regulations applicable to all businesses, including, but not limited to, regulations related to occupational health and safety, workers' benefits and environmental protection. Foreign Government Regulation Sales of medical devices outside the United States are subject to foreign regulatory requirements that vary widely from country to country. The time required to obtain approvals required by foreign countries may be longer or shorter than that required for FDA approval, and requirements for licensing may differ from FDA requirements. Export sales of investigational devices that have not received FDA marketing clearance generally are subject to FDA export permit requirements. Material failure to comply with any applicable regulatory requirements could have a material adverse effect on the Company. Markets In the United States, more than 145 million people wear either eyeglasses or contact lenses, and each year, approximately two million people who have not previously suffered from refractive disorders are informed by their doctors that they are in need of refractive correction. Over $13 billion is spent annually in the United States for corrective eyewear products. Studies indicate that approximately 29 million Americans wear contact lenses, primarily for cosmetic or convenience reasons. The number of people in the United States newly electing to wear contact lenses is over one million per year. This large and growing population of contact lens wearers is the largest potential market for refractive surgery, including HRK. Studies indicate that approximately 60% of persons electing refractive surgery are contact lens wearers. However, there can be no assurance that eyeglass or contact lens wearers will elect to undergo surgery. The only refractive surgery techniques generally available in the United States today are RK, PRK and automated lamellar keratoplasty, or ALK. The Company believes that approximately 7 million RK procedures (each "procedure" being performed on a single eye) have been performed worldwide, and approximately 1.5 million in the United States, in the last 15 years. The Company believes that approximately 5,000 PRK procedures have been performed in the United States, with a total of several hundred thousand worldwide. The American Society of Cataract and Refractive Surgeons has estimated that the number of PRK procedures performed in the United States will grow to over 1 million annually within the next few years. The Company estimates that 5,000 ALK procedures are performed in the United States each year by approximately 100 surgeons and that approximately 350 ALK microkeratomes have been sold in total. The Company anticipates that the initial market for the HRK Keratome will be ophthalmologists, many of whom already are familiar with PRK, RK and ALK. The American Medical Association estimates that there are currently 15,000 ophthalmologists in the United States, of which 12,000 are in private practice and 3,000 are associated with hospitals, teaching institutions and the military. The degree to which the Company's HRK Keratome can penetrate the potential market of ophthalmologists will depend on a variety of factors, including, but not limited to, acceptance by the medical community and the public of the HRK Keratome and alternative technologies. None of these factors is under the control of the Company. There is presently no data available to the Company to determine what percentage HRK will have of the market for refractive surgery. Competition If approved by the FDA and other regulatory authorities, HRK using the Company's HRK Keratome will compete with other treatments for refractive problems, including eyeglasses, contact lenses, other refractive surgery procedures (such as RK, PRK and ALK), and other technologies under development, such as LASIK, refractive intraocular lenses (lenses which are inserted into the eye behind the cornea), intrastromal lenses (lenses which are inserted into the stroma), corneal rings (transparent circles of acrylic which are inserted within the cornea outside the vision zone in order to correct the curvature of the corneal surface) and injection of hydrogel materials into layers of corneal tissue to change the curvature of the cornea. The healthcare field is characterized by rapid technological change. At any time, competitors may develop and bring to market new products or surgical techniques with vision correction capabilities superior to those of the HRK Keratome or which would otherwise render the HRK Keratome obsolete. Generally, refractive surgical techniques are considered to be "elective" surgery and are typically not reimbursed under healthcare insurance policies in the United States. However, in certain countries outside the United States, such as China, the costs of refractive surgery are paid by the government, because it is believed that such surgery is, over time, less costly than glasses or contact lenses. It can be expected that many individuals will choose to forego refractive surgery, if not reimbursed, and instead obtain eyeglasses or contact lenses, which are covered under some healthcare insurance plans and are considerably less expensive than refractive surgery in the short term. Other companies, most of which are larger and better financed than the Company, are engaged in refractive surgery research. Two companies, Summit Technology, Inc. ("Summit") and VISX Inc. ("VISX"), have completed Phase III clinical studies in the United States to evaluate PRK for the treatment of myopia. Both companies have received a PMA. In addition to Summit and VISX, there are a number of other large entities that currently market and sell laser systems overseas for use in refractive surgery, including Aesculap-Meditec GmbH, Chiron-Technolas and Schwind, each of Germany, and Nidek of Japan. Many of these companies have substantially greater financial, technical and human resources than the Company and may be better equipped to develop, manufacture and market their technologies. In addition, many of these companies have extensive experience in preclinical testing and human clinical studies. Certain of these companies may develop and introduce products or processes competitive with or superior to those of the Company. Furthermore, if the Company is permitted to commence commercial sales of products, it will also be competing with respect to manufacturing efficiency and marketing capabilities, areas in which the Company has no experience. The Company's competition will be determined in part by those refractive surgery technologies that are ultimately approved for sale by regulatory authorities. The relative speed at which the Company is able to develop the HRK Keratome, complete the necessary governmental and regulatory approval processes, and manufacture and market commercial quantities thereof will be important competitive factors. Although the HRK Keratome is still in the early stages of development and has neither been tested on live human eyes nor received the regulatory approval necessary for sale, the Company believes that it has the potential to effectively compete with other refractive surgical techniques because of its relative simplicity, safety, efficacy and reduced risk of significant pain. Each of these factors is discussed below. Simplicity. The Company's keratome is designed to allow ophthalmic surgeons to perform HTK and HRK with relative ease. In the HRK Keratome, the waterjet is controlled by a switch, the eye is aligned and fixed in place during the procedure by means of the globe fixation device and the template is used to determine exactly how much of the corneal tissue is excised. Accordingly, whereas procedures such as ALK and LASIK are difficult and require that the ophthalmic surgeon possess a high level of surgical skill, the HRK procedure is largely automatic and, accordingly, the ophthalmologist will not be required to operate manually on the cornea or perform manual adjustments or calculations in connection with the surgery. Further, the fact that the eye is fixed in place during the HRK procedure eliminates the surgical risk of error due to the natural saccadic movement of the human eye in which the eye makes minute, constant side-to- side movements to assist in imaging. Safety. HRK is designed to minimize invasiveness and trauma to the cornea. Unlike RK, but like ALK, HRK does not require deep incisions into the cornea with the potential for perforation and weakening of the cornea. Unlike PRK, the Company's HRK procedure does not result in heating the cornea, nor does it hydrate or dehydrate the corneal tissue. PRK also has the potential to lacerate the stromal surface, expose the eye to potentially carcinogenic ultraviolet light and free radicals, produce high amplitude acoustic pulses which sometimes cause subretinal hemorrhages or leave a residue of scar tissue and haze, all of which can have negative effects on the cornea and the patient's ability to see properly or at all. Unlike ALK, the Company's procedure does not require high intraocular pressure ("IOP") with its attendant risk of inducing glaucoma or retinal detachment. ALK also poses a risk of residual metal chips in the flap- stroma interface from the blade edge. In addition, because HRK is largely automatic and requires no manual adjustments or calculations or control by software, the Company believes that HRK has the potential to promote more consistent outcomes. Efficacy. Efficacy refers to the ability of a surgical technique to achieve the desired result with a minimum of adverse side effects. Studies have shown that RK does not regularly achieve optimum vision correction; residual refractive error can be as large as +/- 1 diopter, sometimes with some small loss in visual acuity. RK has been reported to cause adverse side effects, such as halo (i.e., appearance of a bright spot with a surrounding area of confusion) and glare, and to result in diurnal fluctuations in refractive correction and unstable post-operative correction due to weakening of the cornea from the multiple corneal incisions. Such weakening often results in progress toward hyperopia over a period of up to 10 years following the surgery, with changes as large as several diopters in patients with moderate to high myopia before the surgery. A significant number of RK procedures are repeated as a result of inaccurate correction. There is also a higher risk of post-operative infections from RK than PRK, due to the number and depth of the incisions made. Studies have shown that when PRK is used on patients with low to moderate myopia, the post-operative refractive correction is not predictable within +/- 1 diopter. Generally, the range of inaccuracy varies directly with the degree of attempted change. Following PRK surgery, some patients' vision has been reported to regress toward myopia over a period of approximately one year following the surgery and some patients report haze. The Company believes that these inaccuracies and instability are the result of the photoablation process, which causes a variety of wound- healing responses which are difficult to predict. As with RK, the achieved correction following PRK is adequate, in most cases, to allow a patient to perform typical daily functions, such as driving, without vision assistance; however, optimum vision correction is not typically achieved without the use of eyeglasses or contact lenses. Furthermore, patients undergoing PRK generally require a period ranging from several days to two weeks before vision is restored, whereas vision is generally restored in patients undergoing RK or ALK within a short time or immediately following those procedures. In up to 5.0% of PRK procedures, permanent loss of visual acuity (as much as two lines or more on the standard eye chart) has been reported. Subretinal hemorrhages, induced in the operated eye by the procedure sometimes occur and have been reported to have caused blindness in a very small percentage of PRK patients. Based on experimental data, LASIK appears to be comparable to PRK with respect to post-operative refractive error but more stable as a result of a more predictable wound- healing response. However, it has the potential for flap-related problems. ALK is generally regarded as highly inaccurate but useful for correcting high myopia and hyperopia and is reasonably stable. Studies have shown that in some cases, the epithelium under the flap will regenerate after the ALK procedure, requiring removal of the flap and/or cleaning of the interface. Accurate realignment of the flap after such procedure is difficult and can produce irregular astigmatism. HRK is similar to PRK, but the Company believes it will allow more accurate correction of high and low myopia, hyperopia and astigmatism. The expected accuracy of the Company's HRK procedure is based on the use of a custom template to flatten and shape the stroma, so as to reliably shave the proper amount of tissue to achieve the desired correction. However, the Company has not yet conducted human clinical trials and, accordingly, the Company has not yet demonstrated that in live human eyes, the mechanical properties of the stroma are similar enough that a given template will consistently shave exactly the same amount of tissue. The Company also anticipates that the cleanness of the HRK incisions, together with the fact that the epithelium is not scraped off during HRK, may result in a lower incidence of post-operative infections. However, no assurances can be given that the safety and efficacy of HRK anticipated by the Company will be realized. Reduced Risk of Significant Pain. The Company anticipates that patients who undergo HRK utilizing the HRK Keratome will not experience significant pain. The pain following refractive surgery through PRK is primarily due to the scraping off from the cornea of a portion of the epithelium, which contains most of the nerve endings in the cornea. Less pain is associated with merely cutting through the epithelium in a limited region, such as in RK and ALK. In the Company's HRK procedure, only a small cut is made into the epithelium, similar to that made in ALK and possibly more cleanly, which the Company anticipates should result in minimal pain. In addition to the competitive factors listed above, HRK is expected to be less costly than PRK, because of the high costs of the laser equipment and laser facility necessary for PRK, and to be competitively priced with, or less costly than, other refractive surgery procedures. Litigation The Company is not a party to any pending litigation, nor is it aware of any litigation threatened against it. The Company is involved in a contract dispute in which the amount in controversy is less than $35,000. Employees As of May 1, 1996, the Company had nine full-time employees, all of whom, including its President, were engaged in research and development activities, and one part-time employee. As of such date, the Company also had consulting arrangements with one medical consultant, one marketing consultant and two strategic planning and business development consultants. The Company's ability to design, develop, manufacture, market and sell its products successfully will depend to a large extent on its ability to attract and retain qualified personnel, for which competition is or may be intense. None of the Company's employees are represented by a union. The Company believes that its relations with its employees are satisfactory. Facilities The Company leases approximately 4,982 square feet of research and development and office space in Edison, New Jersey. The term of the lease expires in March 1999. The base rent is $57,440 per year. The Company believes that nearby space suitable for a manufacturing facility is in adequate supply. Product Liability Insurance The use of medical devices, both in clinical and commercial settings, entails the risk of allegations of product liability, and there can be no assurance that substantial product liability claims will not be asserted against the Company. The Company does not now have any product liability insurance, but it expects to obtain such insurance prior to the commencement of clinical testing. It is expected that such insurance will be in the amount of $1 million per claim with an annual aggregate limit of $20 million. After any commercialization of its products, the Company will seek to obtain an appropriate increase in its coverage. However, there can be no assurance that adequate insurance coverage will be available at an acceptable cost, if at all. Consequently, a material product liability claim or other material claims with respect to uninsured liabilities or in excess of insured liabilities would have a material adverse effect on the Company. MANAGEMENT Executive Officers and Directors The following table sets forth certain information with respect to the executive officers, directors and nominees for director of the Company:
Name Age Position Eugene I. Gordon, Ph.D. 65 President and Chairman of the Board Thomas M. Handschiegel 49 Vice President for Finance and Human Resources Steven G. Cooperman, M.D. 54 Director Sanford J. Hillsberg* 47 Director Steven Katz, Ph.D.** 51 Director
_____________________ *Mr. Hillsberg was elected as a director to begin serving upon the consummation of this Offering. *Mr. Katz was elected as a director to begin serving 30 days after the Closing Date. Prior to the commencement of the Offering, the Company intends to elect one additional person to the Board of Directors of the Company. Such person will not be an officer or employee of the Company. Dr. Eugene I. Gordon is the founder and President of the Company and has been a Director and Chairman of the Board since its inception in December 1993. He is an inventor of the Company's HRK Keratome technology. From 1987 to 1988, Dr. Gordon served as Senior Vice President and Director of the Research Laboratories for Hughes Aircraft Co. of Malibu, California. Dr. Gordon has served as an adjunct professor in the Department of Ophthalmology at the University of Medicine and Dentistry of New Jersey since 1994, and was a professor in the Department of Electrical and Computer Engineering at the New Jersey Institute of Technology from 1990 to 1995. Dr. Gordon was Laboratory Director for AT&T Bell Laboratories and the founder of Lytel Incorporated, a manufacturer of lasers and optical transmission subsystems which is a wholly-owned subsidiary of AMP Incorporated. Dr. Gordon has done extensive research on laser and opto- electronic systems, is a named inventor under approximately 70 U.S. patents and has published widely on those subjects. Dr. Gordon has a Ph.D. in physics from the Massachusetts Institute of Technology. He is a member of the National Academy of Engineering and has been awarded the Edison Medal of the Institute of Electrical and Electronic Engineers, among a number of other prestigious awards. Dr. Steven G. Cooperman has been a Director of the Company since September 1994. Dr. Cooperman was engaged in the private practice of ophthalmology and ophthalmic surgery in Beverly Hills, California from 1972 to his retirement in 1989. Since his retirement, Dr. Cooperman has been active as a private investor. He is the founder of the American Intraocular Implant Society (now known as the American Society for Cataract and Refractive Surgery), has served on the teaching staff of the Jules Stein Eye Institute and has lectured widely on phacoemulsification and intraocular lens implant surgery. Dr. Cooperman received his M.D. from the Northwestern University Medical School. Thomas M. Handschiegel has been an executive officer of the Company since March 1996. Mr. Handschiegel has been a Certified Public Accountant since 1980. From November 1995 to March 1996, he served as Senior Managing Director of Gruntal & Co. Incorporated. From 1994 to November 1995, Mr. Handschiegel was self-employed as an independent financial consultant. From 1993 to 1994, he served as Senior Vice President and Division Financial Officer, Industry Services Group for Cowen & Company. From 1989 to 1993, he served as Vice President, Comptroller and Chief Accounting Officer for Discount Corporation of New York. Mr. Handschiegel received a B.B.A. in Accounting from Loyola University (Chicago) in 1969. Sanford J. Hillsberg has agreed to serve as a director of the Company upon the consummation of this Offering. Mr. Hillsberg has been engaged in the private practice of corporate law since 1973 and is currently the managing partner of Troy & Gould Professional Corporation. From 1983 to 1993, he served as a director and Vice President of Medco Research Inc., a publicly-traded pharmaceutical research and development company. Mr. Hillsberg received his J.D. from Harvard Law School. Dr. Steven Katz has agreed to serve as a director of the Company commencing 30 days after the Closing Date. Dr. Katz is the President, Chief Executive Officer, Chairman of the Board and a founder of Ortec International, Inc., a publicly-traded company which has developed proprietary technology to create natural replacement skin. He has been employed by Ortec International, Inc. and a predecessor since 1991. Dr. Katz has also been a professor of Economics and Finance at Bernard Baruch College in New York City since 1972. He has a Ph.D. in Finance and Statistics as well as an M.B.A. and M.S. in Operations Research, both from New York University. All directors hold office until the next annual meeting of stockholders and the election and qualification of their successors. Executive officers are elected by the Board of Directors to hold office for such term as may be prescribed by the Board of Directors. The Board of Directors has established a Stock Option Committee which administers the Stock Option Plan. The Stock Option Committee is currently composed of one member, Dr. Gordon, and, upon the closing of the Offering, will be composed of two members, Dr. Cooperman and Mr. Hillsberg. Key Employees The following individuals are key employees of the Company: Victor Taret has served as Director of Regulatory Affairs of the Company since 1995. His responsibilities include technical supervision of all clinical trials and the FDA application process. Prior to joining the Company, Dr. Taret served in various capacities at Oculon Corporation in Cambridge, Massachusetts, a development stage company which was developing a non-surgical treatment for cataracts, including as a Section Head for Clinical Research and Development from 1992 to 1995, a Project Leader from 1990 to 1992 and a Research Scientist from 1989 to 1990. Dr. Taret received a B.S. in Physics and Biology from Odessa State University (in the former USSR) in 1977, a Ph.D. in Physics from Brandeis University in 1985 and performed two years of post-doctoral research at the Massachusetts Institute of Technology from 1986 to 1987. Peretz M. Feder has served as Vice President for Biological Studies and Applications and Comptroller of the Company since 1994. His responsibilities include safety and efficacy of the Company's animal studies. Prior to joining the Company, Mr. Feder served for five years as Vice President of Research and Development and later as General Manager for Photon Imaging Corporation, where his responsibilities included imaging science for hard copy printer design, optical and fiber optics design, and manufacturing. Mr. Feder received an M.S. in electrical engineering from Columbia University in 1981. Directors' Compensation Directors who are officers or employees of the Company receive no additional compensation for service as members of the Board of Directors or committees thereof. Outside directors will be reimbursed for out-of-pocket expenses incurred in connection with attendance of meetings of the Board of Directors. Upon consummation of the Offering and upon each election as director thereafter, outside directors will receive options under the Stock Option Plan to purchase 4,000 shares of Common Stock with an exercise price equal to the fair market value per share of the Common Stock on the date of grant and which shall vest one year after the date of grant if such director has served as such for that full year. Employment Agreements Effective as of March 15, 1996, the Company entered into an employment agreement with Eugene I. Gordon as President, for an initial term of three years. The agreement provides for a base compensation of $125,000 per year and bonuses and other additional compensation as may be determined by the Board of Directors (without the participation of Dr. Gordon) in its sole discretion. The Board of Directors (without the participation of Dr. Gordon) may also increase such base compensation in its sole discretion. The agreement may be terminated for cause and contains proprietary information, invention and non-competition provisions which prohibit disclosure of any of the Company's proprietary information and preclude competition with the Company for two years after termination of employment. The Company has procured life insurance in the amount of $500,000 to compensate it for the loss, through death, of Dr. Gordon, who is 65 years old. The Company is seeking to increase such coverage (i) in connection with the Offering, to $1 million compensation and (ii) in accordance with the employment agreement, for the loss through disability as well as death of Dr. Gordon. However, there can be no assurance that the Company will be able to obtain such additional coverage at an acceptable cost or at all. Effective as of March 18, 1996, the Company entered into an employment agreement with Thomas M. Handschiegel as Vice President for Finance and Human Resources, for an indefinite term. The agreement provides for a base compensation of $95,000 per year. The agreement may be terminated by either party at any time upon two weeks' prior notice and contains proprietary information, invention and non-competition provisions which prohibit disclosure of any of the Company's proprietary information and preclude competition with the Company for two years after termination of employment. Executive Compensation The following table sets forth the aggregate compensation paid to the Company's Chief Executive Officer in 1995. No other executive officer of the Company was paid any other compensation from the period of the Company's inception through December 31, 1995.
Summary Compensation Table Name and Principal Position Year Salary Bonus Other Compensation Eugene I. Gordon, Ph.D. . . . . 1995 $96,400 -- $66,700(1)
_______________________ (1) Consists entirely of deferred 1994 salary. The Stock Option Committee intends to make a grant of 10,000 stock options under the Stock Option Plan effective upon the Closing Date to Mr. Handschiegel, which will vest, as to 25%, one year from the date of grant and, as to the remainder, ratably over the following three-year period. 1994 Stock Option Plan The Stock Option Plan has been adopted by the Company's Board of Directors and approved by its stockholders. The Underwriting Agreement restricts the Company from granting, after the date of this Prospectus, options to purchase more than 200,000 shares of Common Stock under the Stock Option Plan, and from registering any shares covered by the Stock Option Plan, without the prior written consent of the Underwriter, until 24 months after the Closing Date. Upon expiration of that period, the Company intends to file a registration statement on Form S-8 covering all shares issuable upon the exercise of stock options that may be granted under the Stock Option Plan. Administration. The Stock Option Plan is administered by the Stock Option Committee of the Board of Directors. The Stock Option Committee interprets the terms, and establishes administrative regulations to further the purposes, of the Stock Option Plan, authorizes awards to eligible participants, determines vesting schedules and takes any other action necessary for the proper implementation of the Stock Option Plan. Members of the Stock Option Committee must be "disinterested" within the meaning of Rule 16b-3 under the Exchange Act. Participation. Under the Stock Option Plan, options to purchase shares of Common Stock of the Company may be granted only to employees (including officers) and directors of the Company or individuals who are rendering services to the Company as consultants, advisors or other independent contractors. Shares Available for Awards. 255,651 shares of Common Stock of the Company have been reserved for issuance under the Stock Option Plan, subject to adjustment for stock splits, stock dividends, recapitalizations and similar events. Such shares may consist in whole or in part of authorized and unissued shares or treasury shares. In the event that any outstanding option for any reason expires or is terminated or canceled and/or shares of Common Stock subject to repurchase are repurchased by the Company, the shares allocable to the unexercised portion of such option or repurchased shares, may again be subject to an option grant. Notwithstanding the foregoing, any such shares shall be made subject to a new option only if the grant of such new option and the issuance of such shares pursuant to such new option would not cause the Stock Option Plan or any option granted under the Stock Option Plan to contravene Rule 16b-3 under the Exchange Act. Awards. The Stock Option Plan authorizes grants of either incentive stock options ("ISOs"), as defined in Section 422 of the Code, or non- statutory (nonqualified) stock options. Under the Stock Option Plan, all options must be granted, if at all, within 10 years from the earlier of the date the Stock Option Plan is adopted by Board of Directors or the date the Stock Option Plan is approved by the stockholders of the Company. The Stock Option Committee shall set, including by amendment of an option, the time or times within which each option shall be exercisable or the event or events upon the occurrence of which all or a portion of each option shall be exercisable and the term of each option; provided, however, that (i) no option shall be exercisable after the expiration of 10 years after the date such option is granted and (ii) no ISO granted to an Optionee who at the time the option is granted owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company within the meaning of Section 422(b)(6) of the Code (a "Ten Percent Owner Optionee") shall be exercisable after the expiration of five years after the date such option is granted. The Company has agreed with the Underwriter not to issue shares of common Stock without the Underwriter's prior written consent, during the 24 months following the Closing Date, other than pursuant to the Stock Option Plan. As of the date of this Prospectus, non- statutory stock options to purchase a total of 26,712 shares of Common Stock have been granted to Steven G. Cooperman, a director of the Company, and ISOs to purchase an additional 28,938 shares of Common Stock have been granted to employees of the Company. The Company has agreed with the Underwriter that it will not issue options to purchase more than 200,000 shares of Common Stock during the 24-month period following the Closing Date without the Underwriter's prior written consent, and that of such number, it will not issue options to purchase more than 50,000 shares of Common Stock at less than fair market value on the date of grant. The Company has also agreed with the Underwriter that the options with respect to the 200,000 shares under the Stock Option Plan which have not yet been granted as of the date of this Prospectus shall vest no earlier than one year from the date of grant. Stock Options. The Stock Option Plan provides that (i) the exercise price per share for an ISO shall not be less than the fair market value, as determined by the Stock Option Committee, of a share of Common Stock on the date of the granting of the option; and (ii) no ISO granted to a Ten Percent Owner Optionee shall have an exercise price per share less than 110% of the fair market value, as determined by the Stock Option Committee, of a share of Common Stock on the date of the granting of the option. Notwithstanding the foregoing, an option may be granted with an exercise price lower than the minimum exercise price set forth above if such option is granted pursuant to an assumption or substitution for another option in a manner qualifying within the provisions of Section 424(a) of the Code. Federal Income Tax Consequences. The federal income tax consequences of awards granted pursuant to the Stock Option Plan under the Code, and the regulations thereunder are summarized below. The grant of a stock option will create no immediate tax consequences for the participant or the Company. The participant will have no taxable income upon exercising an ISO (except that an alternative minimum tax may apply), and the Company will not receive a deduction when an ISO is exercised. If the participant does not dispose of the shares acquired on exercise of an ISO within the two-year period beginning on the day after the grant of the ISO or within one year after the transfer of the shares to the participant, the gain or loss on a subsequent sale will be a capital gain or loss. If the participant disposes of the shares within the two- year or one-year period described above, the participant generally will realize ordinary income, and the Company will be entitled to a corresponding deduction. Upon exercising a non-statutory stock option, the participant must recognize ordinary income in an amount equal to the difference between the exercise price and the fair market value of the Common Stock on the exercise date, unless the shares are subject to certain restrictions. The Company will receive a deduction for the same amount on the exercise date (or the date the restrictions lapse). With respect to other awards granted under the Stock Option Plan that are settled in cash or shares of Common Stock that are either transferable or not subject to a substantial risk of forfeiture, the participant must recognize ordinary income in an amount equal to the cash or the fair market value of the shares received. With respect to other awards granted under the Stock Option Plan that are settled in shares of Common Stock that are subject to restrictions as to transferability and subject to a substantial risk of forfeiture, the participant must recognize ordinary income in an amount equal to the fair market value of the shares received at the first time the shares become transferable or not subject to a substantial risk of forfeiture, whichever occurs earlier. The Company will receive a deduction for the amount recognized as income by the participant, subject to the provisions of Section 162(m) of the Code, which provides for a possible denial of a tax deduction to the Company for compensation for any of the five most highly compensated executive officers in excess of $1 million in any year. The tax treatment upon disposition of shares acquired under the Stock Option Plan will depend on how long the shares have been held. In the case of shares acquired through exercise of an option, the tax treatment will also depend on whether or not the shares were acquired by exercising an ISO. There will be no tax consequences to the Company upon the disposition of shares acquired under the Stock Option Plan, except that the Company may receive a deduction in the case of disposition of shares acquired under an ISO before the applicable holding period has been satisfied. Scientific Advisory Board The Company has recently formed a Scientific Advisory Board to advise and consult with management and the Board of Directors of the Company at such times as the Board of Directors shall require on matters relating to the refractive surgical device industry. Members of the Advisory Board may be employed on a full-time basis by employers other than the Company, and may have commitments to, or consulting or advisory contracts with, other entities that may limit their availability to the Company. The Board of Directors has not to date convened a meeting of the Scientific Advisory Board, but members of the Scientific Advisory Board have provided consulting and other services to the Company from time to time. The members of the Scientific Advisory Board are Stephen G. Slade, M.D., a member of the clinical faculty in the Department of Ophthalmology at the University of Texas Medical School; David M. Dillman, M.D., a specialist in cataract and refractive surgery; Marco Zarbin, M.D., the Chairman of the Department of Ophthalmology at the University of Medicine and Dentistry of New Jersey; and Theo Seiler, M.D., a Professor at Universitats Klinikum Carl Gustav Carus in Dresden, Germany. Consultants The Company has retained Joseph F. Carroll, III as a consultant, to assist and advise the Company in connection with market studies related to the HRK Keratome. The Company does not pay Mr. Carroll a consulting fee. As compensation for services rendered, and to be rendered, in the period from April 1994 to April 1998, the Company issued 33,391 shares of Common Stock to Mr. Carroll in April 1994, which vest ratably over a four-year period. The Company has also retained Dr. Joseph Calderone as a consultant, to assist and advise the Company with respect to medical issues associated with refractory surgery and clinical examination of animals under study. The Company does not pay Dr. Calderone a consulting fee. As compensation for services rendered, and to be rendered, in the period from April 1994 to April 1998, the Company issued 33,391 shares of Common Stock to Dr. Calderone, which vest ratably over a four-year period. The Company has also retained Dr. Steven G. Cooperman, a director of the Company, as a consultant, to assist and advise the Company with respect to strategic planning and business development. The Company does not pay Dr. Cooperman a consulting fee. As compensation for services rendered, the Company issued warrants to purchase 100,172 shares of Common Stock, with an exercise price of $6.70 per share, 25% of which shall vest at the completion of each year of service until fully vested. The Company has also retained Sanford J. Hillsberg, a director of the Company, as a consultant, to assist and advise the Company with respect to strategic planning and business development. The Company does not pay Dr. Cooperman a consulting fee. As compensation for services rendered, the Company issued warrants to purchase 8,904 shares of Common Stock, with an exercise price of $6.70 per share, 25% of which shall vest at the completion of each year of service until fully vested. PRINCIPAL STOCKHOLDERS The following table sets forth certain information as of May 1, 1996 with respect to the beneficial ownership of shares of Common Stock by (i) each person known by the Company to be the beneficial owner of more than five percent of the outstanding shares of Common Stock, (ii) each executive officer, director and nominee for director of the Company and (iii) all executive officers and directors of the Company as a group:
Percentage of Outstanding of Common Name and Address Number of of Beneficial Owner Shares(1) Before Offering After Offering Minimum Maximum Eugene I. Gordon 1,782,689 65.0% 45.2% 41.0% 1090 King Georges Post Road Suite 301 Edison, NJ 08837 Thomas M. Handschiegel -0- -- -- -- 1090 King Georges Post Road Suite 301 Edison, NJ 08837 Steven G. Cooperman(2) 92,381 3.4 2.3 2.1 201 Beagling Hill Circle Fairfield, Ct 06430 Sanford G. Cooperman(3) 20,776 * * * 201 Beagling Hill Circle Fairfield, Ct 06430 Steven Katz -0- -- -- -- 8000 Cooper Avenue Building 28 Glendale, NY 11355 All Executive officers 1,895,846 69.1 48.0 43.6 and directors of the Company as a group (3 persons)(3)
________________ * Represents holdings of less than one percent. (1) All shares owned directly unless otherwise noted. (2) Includes 12,243 shares of Common Stock which Mr. Cooperman has the right to acquire through the exercise of options within 60 days of May 1, 1996. (3) Mr. Hillsberg will begin serving as a director of the Company upon the consummation of the Offering. Mr. Katz will begin serving as a director of the Company 30 days after the Closing Date. CERTAIN TRANSACTIONS Between September 1995 and December 1995, Eugene I. Gordon, President and Chairman of the Board made five unsecured loans to the Company in an aggregate principal amount of $150,000, which bear interest at the rate of 7% per annum and are due and payable on demand. A portion of the proceeds of this Offering will be used for repayment of such indebtedness. See "Use of Proceeds." In February 1996, Steven G. Cooperman, a Director of the Company, made an unsecured loan to the Company in the principal amount of $50,000, which bears interest at the rate of 8% per annum and is due and payable on the earlier of (a) written demand made any time on or after January 31, 1997 or (b) the consummation of this Offering. A portion of the proceeds of this Offering will be used for repayment of such indebtedness. See "Use of Proceeds." In February 1996, Sanford Hillsberg, a nominee for Director of the Company, made an unsecured loan to the Company in the principal amount of $50,000, which bears interest at the rate of 8% per annum and is due and payable on the earlier of (a) written demand made any time on or after January 31, 1997 or (b) the consummation of this Offering. A portion of the proceeds of this Offering will be used for repayment of such indebtedness. See "Use of Proceeds." Each such loan was made, and all future transactions of a similar nature will be made, on terms no less favorable to the Company than other loans available from unaffiliated parties. DESCRIPTION OF SECURITIES The authorized capital of the Company consists of 7,000,000 shares of Common Stock, par value $.001 per share and 1,000,000 shares of Preferred Stock, par value $.01 per share (the "Preferred Stock"). As of the date of this Prospectus, 2,744,349 shares of Common Stock are currently issued and outstanding to approximately 25 holders, and no shares of preferred stock have been issued or are outstanding (without giving effect to 55,651 shares of Common Stock reserved for issuance pursuant to outstanding options under the Stock Option Plan and 110,000 shares of Common Stock reserved for issuance pursuant to outstanding warrants). There will be 3,944,349 shares of Common Stock and 1,200,000 Warrants issued and outstanding after giving effect to the sale of the minimum number of Units offered hereby and 4,344,349 shares of Common Stock and 1,600,000 Warrants issued and outstanding after giving effect to the maximum number of Units offered hereby (without giving effect to 55,651 shares of Common Stock reserved for issuance pursuant to outstanding options under the Stock Option Plan and 110,000 shares of Common Stock reserved for issuance pursuant to outstanding warrants). Immediately prior to the date of this Prospectus, the Company will effect a 2.226043597-for-1 split of its Common Stock. The information contained in this Prospectus has been adjusted to give effect to such stock split. Preferred Stock The Company's Board of Directors has the authority to issue shares of Preferred Stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption (including sinking fund provisions), redemption prices and liquidation preferences and the number of shares constituting and the designation of any such series, without approval by the stockholders. The Company's Board of Directors currently does not have any plans to issue any shares of Preferred Stock. The Company has agreed with the Underwriter not to issue shares of capital stock without the Underwriter's prior written consent during the 24-month period following the Closing Date, other than pursuant to the Stock Option Plan and the Warrants. Certain Effects of Authorized and Unissued Stock There are currently 3,890,000 unissued and unreserved shares of Common Stock and 1,000,000 unissued and unreserved shares of Preferred Stock. These additional shares may be issued for a variety of proper corporate purposes, including future public or private offerings to raise additional capital or facilitate acquisitions. The Company has agreed with the Underwriter not to issue shares of Common Stock without the Underwriter's prior written consent during the 24-month period following the Closing Date, other than in connection with the Stock Option Plan and the Warrants. One of the effects of the existence of unissued and unreserved shares of Common Stock and Preferred Stock may be to enable the Company's Board of Directors to discourage an attempt to change control of the Company (by means of a tender offer, proxy contest or otherwise) and thereby to protect the continuity of the Company's management. The issuance of shares of Preferred Stock, whether or not related to any attempt to effect change in control, may adversely affect the rights of the holders of shares of Common Stock. Units Each Unit consists of one share of Common Stock and one Class A Warrant. The shares of Common Stock and the Warrants offered as Units become detachable and separately transferable commencing on the date (the "Separation Date") which is the earlier of three months after the Closing Date or such earlier date as may be agreed upon by the Company and the Underwriter. Common Stock The holders of Common Stock are entitled to one vote per share for the election of directors and with respect to all other matters to be voted on by stockholders. Shares of Common Stock do not have cumulative voting rights. Therefore, the holders of more than 50% of such shares voting for the election of directors can elect all of the directors if they choose to do so and, in that event, the holders of the remaining shares will not be able to elect any directors. The holders of Common Stock are entitled to receive dividends when, as and if declared by the Board of Directors out of legally available funds. See "Dividend Policy." In the event of liquidation, dissolution or winding up of the Company, the holders of Common Stock are entitled to share ratably in all assets remaining available for distribution to them after payment of liabilities and after provision has been made for each class of stock, if any, having preference over the Common Stock. Holders of shares of Common Stock, as such, have no conversion, preemptive or other subscription rights, and there are no redemption provisions applicable to the Common Stock. Warrants Each Class A Warrant entitles the holder to purchase, at a price of $10.00, one share of Common Stock for a period of 18 months commencing on the date that is three months following the Closing Date, which period may be extended by mutual agreement between the Company and the Underwriter, unless redeemed by the Company prior to such expiration date. The exercise price of the Warrants and the number of shares of Common Stock or other securities or property to be obtained upon exercise of the Warrants, are subject to adjustment under certain circumstances, including, but not limited to, certain sales by the Company of its shares of Common Stock for a price per share less than the then market price of the Common Stock, or issuance by the Company of any shares of its Common Stock as a dividend, or subdivision or combination of the Company's outstanding shares of Common Stock into a greater or lesser number of shares. Reference is hereby made to the complete text of the form of Warrant Agreement filed as an exhibit to the Registration Statement of which this Prospectus forms a part. The Class A Warrants are redeemable by the Company in whole but not in part for $.01 per Warrant, upon 30 days' prior written notice, if the market price of the Common Stock equals or exceeds $13.00 per share. In the event that the Company gives notice of its intention to redeem the Warrants, holders would be forced to exercise their Warrants or accept the redemption price. For purposes of redemption, market price means (i) the average closing bid price for any 10 consecutive trading days within a period of 30 consecutive trading days, ending within five days of the date of the notice of redemption, of the Common Stock as reported by Nasdaq or (ii) the average of the last reported sale price for the 10 consecutive business days ending within five days of the date of the notice of redemption, on the primary exchange on which the Common Stock is traded, if the Common Stock is traded on a national securities exchange. The Warrants may be exercised by filling out and signing the appropriate notice of exercise form attached to the Warrant and mailing or delivering it (together with the Warrant) to Continental Stock Transfer & Trust Company of New York, New York, the Warrant Agent, in time to reach the Warrant Agent prior to the time fixed for termination or redemption of the Warrants, accompanied by payment of the full warrant exercise price. The holders of the Warrants are not entitled to vote, receive dividends, or exercise any of the rights of the holders of shares of Common Stock for any purpose until the Warrants have been duly exercised and payment of the Warrant exercise price has been made. Although it is anticipated that the Warrants will commence trading on Nasdaq commencing on the Separation Date, there can be no assurance that a trading market for the Warrants will ever develop. For the life of the Warrants, the holders are given the opportunity to profit from the rise, if any, in the market price of the Common Stock at the expense of the remaining holders of the Common Stock. However, during the outstanding period of the Warrants, the Company might be deprived of favorable opportunities to secure additional equity capital for its business, since holders of Warrants may be expected to exercise their Warrants at a time when the Company would be able to obtain equity capital by a public sale of new securities on terms more favorable than those provided in the Warrants. Certain General Corporation Law Provisions A Delaware statute prevents an "interested stockholder" (defined generally as a person owning 15% or more of a corporation's voting stock) from engaging in a "business combination" with the Delaware corporation for three years following the date on which the person became an interested stockholder unless, with certain exceptions, the transaction is approved by the Company's Board of Directors and the vote of two-thirds of the outstanding shares not owned by such interested stockholder. This statute could have the effect of discouraging, delaying or preventing hostile takeovers, including those that might result in the payment of a premium over market price for the Common Stock, or changes in control or management of the Company. Transfer and Warrant Agent The transfer agent for the Common Stock and the warrant agent for the Warrants is Continental Stock Transfer & Trust Company, whose address is 2 Broadway, New York, New York 10004. SHARES ELIGIBLE FOR FUTURE SALE Upon the consummation of the Offering, the Company will have outstanding 3,944,349 shares of Common Stock if the minimum number of Units are sold, and 4,344,349 shares of Common Stock if the maximum number of shares are sold (without giving effect to 55,651 shares of Common Stock reserved for issuance pursuant to outstanding options under the Stock Option Plan and 110,000 shares of Common Stock reserved for issuance pursuant to outstanding warrants). In addition, the Company will have reserved (i) 1,600,000 shares of Common Stock for issuance upon the exercise of the Warrants included in the maximum number of Units, (ii) 320,000 shares of Common Stock for issuance upon the exercise of the maximum number of Options granted to the Underwriter and the Warrants included therein, (iii) 255,651 shares of Common Stock for issuance pursuant to the Stock Option Plan and (iv) 110,000 shares of Common Stock for issuance pursuant to outstanding warrants. Of such outstanding shares, the shares underlying the Units sold in connection with the Offering will become freely tradeable in the United States without restriction under the Securities Act after the Separation Date, except that shares underlying the Units purchased by an "affiliate" of the Company, within the meaning of the rules and regulations adopted under the Securities Act, may be subject to resale restrictions. The remaining outstanding shares and any shares issued pursuant to the Stock Option Plan of the Company are "restricted securities," as that term is defined under such rules and regulations, and may not be sold unless they are registered under the Securities Act or sold in accordance with Rule 144 under the Securities Act or another applicable exemption from such registration requirement. In general, under Rule 144, beginning 90 days after the date of this Prospectus, subject to certain conditions with respect to the manner of sale, the availability of current public information concerning the Company and other matters, each of the existing stockholders who has beneficially owned shares of Common Stock for at least two years will be entitled to sell within any three-month period that number of such shares which does not exceed the greater of 1% of the total number of then outstanding shares of Common Stock or the average weekly trading volume of shares of Common Stock during the four calendar weeks preceding the date on which notice of the proposed sale is sent to the Commission. Moreover, each of the existing stockholders who is not deemed to be an affiliate of the Company at the time of the proposed sale, who is not deemed to be such an affiliate during the three months preceding the time of the proposed sale and who has beneficially owned his shares of Common Stock for at least three years will be entitled to sell such shares under Rule 144 without regard to such volume limitations. All of the shares of Common Stock held by the existing stockholders will be eligible for sale under Rule 144 after December 31, 1997. Approximately 71.7% of such shares are presently held by affiliates of the Company and, therefore, would not presently be eligible for sale under Rule 144 without regard to such volume limitations. The Company and its executive officers, directors and stockholders have agreed that, for a period of 24 months after the Closing Date, they will not dispose of any securities held by them under Rule 144 or otherwise without the prior written consent of the Company and the Underwriter. Prior to the Offering, there has been no public market for the Units or underlying Common Stock and Warrants, and no assurance can be given that such a market will develop or, if it develops, that it will be sustained after the Offering or that the purchasers of the Units will be able to resell such Units at a price higher than the initial public offering price or otherwise. UNDERWRITING Subject to the terms and conditions set forth in the Underwriting Agreement, Patterson Travis, Inc. (the "Underwriter") has agreed to use its best efforts to offer the Units for sale to the public at a purchase price of $5.00 per Unit. The Units are offered on a "best-efforts" basis, subject to the sale of a minimum of 1,200,000 Units. The Underwriter has made no commitment to purchase or take down all or any part of the Units offered hereby. The Underwriter has agreed to use its best efforts to find purchasers for the Units offered hereby within a period of 90 days ending __________, 1996, subject to an extension by mutual agreement between the Underwriter and the Company for an additional period of 90 days ending _______, 1996 (and an additional period of 10 business days thereafter to permit clearance of the funds in escrow). The Underwriter will promptly send to each subscriber confirmation of the subscriber's subscription with instructions to forward his funds to the order of the Escrow Agent. All proceeds from this Offering will be deposited in an escrow account maintained by the Escrow Agent at Chemical Bank. If a minimum of 1,200,000 Units are not sold by _____________, 1996, (or if extended upon the agreement between the Company and the Underwriter, by ____________, 1996) and the Offering is canceled, all monies held in the escrow account will be promptly returned to the subscribers without interest or deduction (unless the Offering is extended for an additional 90 days, in which case interest will be paid for the extension period). During the escrow period subscribers will not be entitled to a refund of their subscription. Upon completion of the sale of a minimum of 1,200,000 Units, all funds in the escrow account will be released to the Company. The Company has agreed to pay to the Underwriter a non-accountable expense allowance equal to 3% of the gross proceeds of this Offering upon the closing of this Offering. The Underwriter proposes to offer the Units to the public at the offering price set forth on the cover page. The Underwriter has informed the Company that it will not confirm sales to any accounts over which it exercises discretionary authority. The Company has agreed to pay the Underwriter a commission for the first 1,300,000 Units sold equalling 10.0% of the public offering price thereof and a commission for the remaining 300,000 Units sold equalling 4.5% of the public offering price thereof. In addition, the Company has agreed to pay the Underwriter a commission of 8.0% of the exercise price of all Warrants exercised beginning one year after the date hereof as the result of solicitation made by the Underwriter. A commission for Warrant exercise will not be paid if (i) the market price of the Common Stock is lower than the exercise price; (ii) the Warrants are held in a discretionary account; (iii) disclosure of the compensation arrangements have not been made in documents provided to the holder of Warrants both as part of this Offering and at the time of exercise; or (iv) the exercise of Warrants is unsolicited. An exercise of Warrants will be presumed to be unsolicited pursuant to (iv) above unless the holder has indicated in writing that the transaction was solicited and has designated the broker/dealer that is to receive compensation for the exercise. The Underwriter may allow to selected dealers who are members of the National Association of Securities Dealers, Inc., and such dealers may reallow, a concession not in excess of $.50 per Unit to certain other dealers, including the Underwriter. The Underwriter has informed the Company that it will not confirm sales to any accounts over which it exercises discretionary authority. The initial offering price of the Units and the exercise and redemption price of the Warrants were arbitrarily determined by negotiations between the Company and the Underwriter. Among factors considered in determining such prices were the history of and the prospects for the field in which the Company competes, the ability and expertise of the Company's management, the prospects for future earnings of the Company, the present state of the Company's development, the general condition of the securities markets at the time of the Offering and the recent market prices of and the demand for publicly traded common stock of generally comparable companies. Conditioned upon the sale of a minimum of 1,200,000 Units, the Company has also agreed to sell to the Underwriter, for a nominal consideration, on the basis of one Unit for each ten Units sold, options (the "Underwriter's Options") for the purchase of up to 160,000 Units. Each of the Underwriter's Options is exercisable to purchase one Unit at $8.25 at any time during a period of four years commencing one year from the date of this Prospectus. The Units will each consist of one share of Common Stock and one Class A 18-month Warrant to purchase one share of Common Stock at an exercise price of $16.50. The Underwriter's Options require, under certain circumstances, the Company to register the Common Stock underlying such Options for sale to the public. The Underwriter's Options are nontransferable for a period of one year except to officers of the Underwriter or the selling group. The exercise price of the Underwriter's Options and the number of Units covered thereby are subject to adjustment to protect the holders against dilution in certain events. The Class A Warrants contained in the Units are redeemable by the Company for $.01 per Warrant if the market price for the Common Stock equals or exceeds $21.45 within a period of any 10 consecutive trading days within a period of 30 trading days ending within five days prior to the date of the notice of redemption. The Company has agreed with the Underwriter not to issue shares of Common Stock without the Underwriter's prior written consent during the 24- month period following the Closing Date, other than pursuant to options which have been or will be granted under the Stock Option Plan and pursuant to the Warrants. The Company has further agreed that during the 12-month period commencing 12 months after the Closing Date, it will not issue options for shares of Common Stock at an exercise price less than the then "Market Price" thereof. "Market Price" is defined as (i) the average closing bid price, for any 10 consecutive trading days within a period of 30 consecutive trading days ending within five days prior to the date of issuance of the Common Stock, as reported by Nasdaq or (ii) the average of the last reported sale price, for the 10 consecutive business days ending within five days of the date of issuance of the Common Stock, on the primary exchange on which the Common Stock is traded, if the Common Stock is traded on a national securities exchange. The Company also has agreed with the Underwriter not to issue shares of preferred stock without the Underwriter's prior written consent during the 24-month period following the Closing Date. The Company and its executive officers, directors and stockholders have agreed that, for a period of 24 months after the Closing Date, they will not dispose of any securities held by them under Rule 144 or otherwise without the prior written consent of the Company and the Underwriter. Pursuant to a letter agreement dated January 25, 1996, the Underwriter has arranged bridge financing for the Company from Mrs. Jan Wernick in the amount of $50,000 per month, not to exceed an aggregate of $200,000, with interest payable at the rate of 12%. Mrs. Wernick's husband is affiliated with the Underwriter as the manager of its New York office. All amounts outstanding under such bridge financing, which was $200,000 at May 6, 1996, become due and payable upon the Closing Date. A portion of the proceeds of this Offering will be used for repayment of such indebtedness. See "Use of Proceeds." The Underwriting Agreement provides that the Underwriter shall have the right to designate one member to the Board of Directors of the Company for a period of three years after the closing of this Offering. Dr. Steven Katz has been designated by the Underwriter to serve as a Director. The Company and the Underwriter have agreed in the Underwriting Agreement to indemnify each other against certain liabilities, including liabilities under the Securities Act. Insofar as indemnification for liabilities arising under the Securities Act may be provided to officers, directors or controlling persons of the Company, such indemnification, in the opinion of the Commission, is against public policy and therefore unenforceable. LEGAL MATTERS The legality of the Securities offered and certain legal matters relating to this Offering (other than matters relating to patent law and regulatory matters relating to the FDA) will be passed upon for the Company by Kelley Drye & Warren LLP, New York, New York. Matters relating to United States patent law will be passed upon for the Company by Graham & James LLP, New York, New York. Regulatory matters relating to the FDA will be passed upon for the Company by Dean E. Snyder, Esquire, Northfield, Illinois. Bernstein & Wasserman, LLP, New York, New York, has acted as counsel for the Underwriter in connection with this Offering. EXPERTS The financial statements of the Company included in this Prospectus at December 31, 1993, 1994 and 1995 and for the years ended December 31, 1993, 1994 and 1995 and the period from December 16, 1993 (inception) through December 31, 1995, have been audited by Rosenberg Rich Baker Berman & Company, P.A., independent certified public accountants, as set forth in their reports thereon appearing elsewhere herein and are included in reliance upon such reports given upon the authority of such firm as experts in accounting and auditing. GLOSSARY As used in this Prospectus, the following terms have the following meanings: ALK. See Keratomileusis in situ. Accommodation is the ability of the internal lens of the eye to adjust its shape, and hence its refractive power, in order to achieve best focus. Accommodation diminishes and ultimately disappears in mature adults. Astigmatism is a result of a nonuniformity in the curvature of the cornea. This causes a blurring of vision in the uncorrected eye because of its inability to achieve a single point focus. Bowman's layer is the layer of the cornea between the epithelium and the stroma. Cornea is the curved, transparent, outermost surface of the eye and serves as a window through which light can pass. It is the primary focusing element of the optical system of the eye. Epithelium is the outer regenerative layer of the cornea. Emmetropia is a condition in which the eyes focus optimally and no vision correction is required. In emmetropia, the focusing system of the eye is not myopic, hyperopic or astigmatic. FDA means the United States Food and Drug Administration. FD&C Act means the Federal Food, Drug, and Cosmetic Act and implementing regulations. Hydro-refractive keratoplasty (HRK) is a refractive surgical procedure which utilizes an ultra-fine beam of water traveling at supersonic speeds as a scalpel. The waterjet scalpel, in conjunction with a template, is used to reshape the anterior surface of the cornea, thereby correcting refractive disorders or errors. Hydro-theraputic keratoplasty (HTK) is a theraputic procedure which utilizes an ultra-fine beam of water traveling at supersonic speeds as a scalpel. The waterjet scalpel, in conjunction with a template, is used to remove diseased tissue from the cornea. Hyperopia is farsightedness, which occurs when the cornea is too flat for the depth of the eye. Internal lens is an element of the optical system of the eye which changes or accommodates its refractive power to achieve best focus. Intraocular pressure ("IOP") is the internal gauge pressure of the liquid within the eye globe. Keratectomy is a surgical procedure in which a portion of the cornea is removed in order to modify its refractive power. Kerato- is a prefix meaning cornea. Keratome is a surgical device employed in keratoplasty to shave thin layers from the anterior surface of the cornea. One of the components of a keratome is a cutting instrument, consisting of a diamond, metal, laser or waterjet scalpel, which actually makes the incision across the cornea. Keratomileusis is a refractive surgical procedure in which the cornea is carved or shaved in order to modify its curvature. Keratomileusis in situ ("KIS"), also known as refractive lamellar keratoplasty ("RLK") or automated lameller keratoplasty ("ALK"), is a refractive surgical procedure in which a keratome with a metal or diamond scalpel is used to shave away a portion of the intact stromal bed after a flap has been formed by the keratome to gain access to the stroma. Keratoplasty is any surgical modification of the cornea. Keratotomy is a surgical incision into the cornea, which is approximately perpendicular to the surface of the eye. LASIK is a combination of KIS to make a flap and PRK to shape the stomal bed. LASIK stands for "Light Ablation System for In-Situ Keratomileusis." Myopia is nearsightedness, a focusing deficiency which occurs when the cornea is too spherical for the depth of the eye. Photoablation is a process which uses high intensity pulsed light to remove a thin surface layer of the cornea. Photorefractive keratectomy (PRK) is a refractive surgical procedure using a particular type of pulsed laser, known as an excimer laser, to remove by photoablation many very thin layers of tissue of locally variable thickness from the cornea in order to modify its curvature. Pre-Market Approval Application (PMA) is an application to seek approval from the FDA to market a product under Section 515 of the FD&C Act. Pre-Market Notification Application refers to an application to seek approval from the FDA to market a product (without obtaining a PMA) under Section 510(k) of the FD&C Act. RLK. See Keratomileusis in situ. Radial keratotomy (RK) is a refractive surgical procedure utilizing a diamond or metal scalpel in which radial incisions are made in the periphery of the cornea, outside of the vision zone, producing a flattening of the cornea due to a redistribution of stresses in the cornea. The incisions are approximately perpendicular to the surface of the eye. Refraction refers to the passage of light rays from one optical medium, such as air, into a second optical medium, such as the cornea, which passage is accompanied by the bending of light rays at the interface. The amount of bending depends on the direction of the light rays relative to the surface normal direction. Refractive error is the amount of deviation from emmetropia in the focusing system of the eye. It is measured in diopters. Refractive surgery is surgery of which the purpose is to alter the refraction of light passing into the cornea in order to change the focusing strength of the cornea. This is accomplished by modifying the anterior curvature of the corneal surface. Sclera is the opaque white of the eye surrounding the cornea. It constitutes the main structure of the eye. Stroma is the main layer of the cornea, constituting about 80% of its thickness, which is responsible for most of its mechanical and optical properties. It is a complex structure, composed of about 70% water. Vision zone is a circular region within the cornea through which all of the light ultimately reaching the retina passes.
INDEX TO FINANCIAL STATEMENTS Page Independent Auditors' Report F-2 Balance Sheets as of March 31, 1996 (Unaudited) and December 31, 1995 F-3 Statements of Operations for the three months ended March 31, 1996 and 1995 (Unaudited) and for the years ended December 31, 1995 and 1994 and the period from December 16, 1993 (inception) to March 31, 1996 (Unaudited) F-5 Statement of Stockholders' Equity as of March 31, 1996 (Unaudited) and December 31, 1995 and 1994 F-7 Statements of Cash Flows for the three months ended March 31, 1996 and 1995 (Unaudited) and for the years ended December 31, 1995 and 1994 and the period from December 16, 1993 (inception) to March 31, 1996 (Unaudited) F-8 Notes to the Financial Statements F-12
INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Medjet Inc. (A Development Stage Company) 1090 King Georges Post Road Suite 301 Edison, New Jersey 08837 We have audited the accompanying balance sheet of Medjet Inc. (A Development Stage Company) as of December 31, 1995 and the related statements of operations, stockholders' equity and cash flows for the years then ended December 31, 1995 and 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Medjet Inc. (A Development Stage Company) as of December 31, 1995 and the results of its operations and its cash flows for the years then ended December 31, 1995 and 1994 in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company continues to be in the development stage as of December 31, 1995 and has incurred a net loss of $677,385 for the year ended December 31, 1995 and has incurred losses since inception of $964,676. These factors, among others as discussed in Note A to the financial statements, raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note A. The 1995 financial statements do not include any adjustments that might result from the outcome of this uncertainty. Maplewood, New Jersey January 15, 1996, except as to Note A(2), Note B(5) and (6), Note E, Note H, Note I and Note J which are dated May 21, 1996.
MEDJET INC. (A DEVELOPMENT STAGE COMPANY) BALANCE SHEETS ASSETS March Pro-Forma March December 31, 1996 Adjustments 31, 1996 31, 1995 ----------- ----------- ----------- -------- (Unaudited) (Unaudited) (Pre-Pro- (Post-Pro- Forma Forma Adjustments) Adjustments) CURRENT ASSETS: Cash and cash equivalents $ 60,660 - $ 60,660 $ 57,678 Marketable securities, at cost - - - - Interest receivable - - - - Prepaid expenses 6,196 - 6,196 2,543 Prepaid income taxes - - - - -------- --- -------- -------- 66,856 66,856 60,221 PROPERTY, PLANT & EQUIPMENT: Leasehold improvements 1,620 - 1,620 - Ophthalmic equipment 29,688 - 29,688 29,688 Office furniture 10,011 - 10,011 8,781 Lab furniture 2,851 - 2,851 2,851 Computer equipment 26,892 - 26,892 20,487 Optical equipment 20,144 - 20,144 19,207 Waterjet equipment 35,794 - 35,794 32,497 Software 5,025 - 5,025 3,640 Mechanical equipment 2,313 - 2,313 2,313 Electronic equipment 2,874 - 2,874 1,169 -------- --- -------- -------- 137,212 - 137,212 120,633 Less - Accumulated depreciation 54,981 - 54,981 47,127 -------- --- -------- -------- 82,231 - 82,231 73,506 -------- --- -------- -------- DEFERRED OFFERING COSTS 156,980 - 156,980 36,263 -------- --- -------- -------- ORGANIZATION COSTS - Less accumulated amortization of $14,531 in 1996, $12,661 in 1995 and $5,183 in 1994 22,856 - 22,856 24,726 PATENT - Less accumulated amortization of $1,058 in 1996, $772 in 1995 and $208 in 1994 18,347 - 18,347 18,633 SECURITY DEPOSITS 5,437 - 5,437 3,702 -------- --- -------- -------- $352,707 - $352,707 $217,051 ======== === ======== ========
See Notes to the Financial Statements.
MEDJET INC. (A DEVELOPMENT STAGE COMPANY) BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY March Pro-Forma March December 31, 1996 Adjustments 31, 1996 31, 1995 ------------ ----------- ----------- --------- (Unaudited) (Unaudited) (Pre-Pro- (Post-Pro- Forma Forma Adjustments) Adjustments) CURRENT LIABILITIES: Accounts payable $ 171,783 - $ 171,783 $ 64,753 Accrued interest payable 5,368 - 5,368 - Notes payable 200,000 - 200,000 - Notes payable - officer 150,000 - 150,000 150,000 Income taxes payable 150 - 150 150 Accrued officer's salary - - - - ----------- --------- --------- --------- 527,301 - 527,301 214,903 STOCKHOLDERS' EQUITY (DEFICIT): Common stock, $.001 par value, 7,000,000 shares authorized, 2,744,349 2,744,349 and 2,314,457 shares (post-split) issued and outstanding in 1996, 1995 and 1994, respectively 2,744 - 2,744 2,352 Preferred Stock, $.01 par value, 1,000,000 shares authorized, no shares issued - - - - Additional paid in capital 964,080 (1,141,418)(1) (177,338) 964,472 Accumulated deficit during development stage (1,141,418) 1,141,418(1) - (964,676) ----------- --------- --------- --------- (174,594) - (174,594) 2,148 ----------- --------- --------- --------- $ 352,707 - $352,707 $217,051 ============ ========= ========= =========
Pro-Forma Adjustment (1) Upon completion of the Initial Public Offering (see "Subsequent Event" note) the Company's status changes from an "S" corporation to a "C" corporation. Accordingly, the deficits accumulated during the development stage are charged against additional paid in capital. See Notes to the Financial Statements.
MEDJET INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED) AND YEARS ENDED DECEMBER 31, 1995 AND 1994, AND THE PERIOD FROM DECEMBER 16, 1993 (DATE OF INCEPTION) TO MARCH 31, 1996 (UNAUDITED) FOR THE THREE FOR THE THREE DECEMBER 16, 1993 MONTHS ENDED MONTHS ENDED (INCEPTION) TO MARCH 31, 1996 MARCH 31, 1995 MARCH 31, 1996 -------------- -------------- ----------------- (Unaudited) (Unaudited) (Unaudited) NET SALES $ - $ - $ - ----------- ----------- ------------ EXPENSES: Officer's salary 28,867 24,100 191,967 Consultant fees 7,000 26,850 93,100 Other salaries 80,429 44,638 427,125 Professional fees 2,280 - 50,695 Rent 6,105 6,663 47,884 Mechanical supplies 7,417 18,711 65,793 Depreciation 7,854 6,791 54,981 Ophthalmology research 2,700 804 22,349 Insurance 1,147 - 14,400 Amortization 2,156 1,998 15,589 Travel 1,625 2,366 21,956 Payroll taxes 11,704 8,998 50,079 Optical supplies 392 633 5,938 Telephone 1,462 1,213 11,146 Miscellaneous expenses, fees and taxes 3,184 2,184 17,576 Advertising - 402 3,104 Biological supplies 800 1,202 10,530 Freight 1,352 1,603 8,765 Office supplies 1,363 477 7,189 Employee welfare 1,038 1,199 12,741 Electrical supplies 794 896 3,837 Chemical supplies 396 956 5,055 Payroll processing fees 182 178 1,710 Bank charges 61 - 649 Postage 160 93 1,195 Blueprinting and photostats 502 125 4,874 Security system 204 - 546 Membership fees - 45 90 ----------- ----------- ------------ 171,174 153,125 1,150,863 ----------- ----------- ------------ OTHER INCOME (EXPENSE): Interest income - 6,074 15,263 Interest expense (5,368) - (5,368) LOSS BEFORE INCOME TAXES (176,542) (147,051) (1,140,968) STATE INCOME TAXES 200 - 450 ----------- ----------- ------------ NET LOSS $(176,742) $ (147,051) $(1,141,418) =========== =========== ============ NET LOSS PER SHARE $ (.06) $ (.05) $ (.44) =========== =========== ============ WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 2,744,349 2,700,200 2,580,440 =========== =========== ============
See Notes to the Financial Statements.
MEDJET INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED) AND YEARS ENDED DECEMBER 31, 1995 AND 1994, AND THE PERIOD FROM DECEMBER 16, 1993 (DATE OF INCEPTION) TO MARCH 31, 1996 (UNAUDITED) (CONTINUED) FOR THE YEAR FOR THE YEAR ENDED ENDED DECEMBER 31, 1995 DECEMBER 31, 1994 ----------------- ----------------- NET SALES $ - $ - ----------- ----------- EXPENSES: Officer's salary 96,400 66,700 Consultant fees 29,850 56,250 Other salaries 302,774 43,922 Professional fees 26,689 21,726 Rent 24,066 17,713 Mechanical supplies 40,994 17,382 Depreciation 32,321 14,806 Ophthalmology research 7,874 11,775 Insurance 7,672 5,581 Amortization 8,042 5,391 Travel 15,566 4,765 Payroll taxes 34,015 4,360 Optical supplies 1,985 3,561 Telephone 6,186 3,498 Miscellaneous expenses, fees and taxes 11,125 3,267 Advertising 762 2,342 Biological supplies 7,609 2,121 Freight 5,636 1,777 Office supplies 4,063 1,763 Employee welfare 10,303 1,400 Electrical supplies 1,715 1,328 Chemical supplies 3,643 1,016 Payroll processing fee 812 716 Bank charges 20 568 Postage 598 437 Blueprinting and photostats 4,182 190 Security system 166 176 Membership fees 45 45 ----------- ----------- 685,113 294,576 ----------- ----------- OTHER INCOME (EXPENSES): Interest income 7,928 7,335 Interest expense - - LOSS BEFORE INCOME TAXES (677,185) (287,241) STATE INCOME TAXES 200 50 ----------- ----------- NET LOSS $ (677,385) $ (287,291) =========== =========== NET LOSS PER SHARE $ (.25) $ (.12) =========== =========== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 2,713,707 2,364,989 =========== ===========
MEDJET INC. (A DEVELOPMENT STAGE COMPANY) STATEMENT OF STOCKHOLDERS' EQUITY PERIOD FROM DECEMBER 16, 1993 (DATE OF INCEPTION) TO MARCH 31, 1996 (UNAUDITED) COMMON PRICE TOTAL SHARES PER CONSIDERATION DATE DESCRIPTION ISSUED SHARE PAID - ---- ----------- ------- ------ ------------- March 12, 1994 Share Issuance 800,000 $ .10 $ 80,000 April 21, 1994 Share Issuance 15,000 .10 1,500 May 1, 1994 Share Issuance 63,000 .10 6,300 May 25, 1994 Share Issuance 50,000 1.00 50,000 May 31, 1994 Share Issuance 25,000 1.00 25,000 June 6, 1994 Share Issuance 50,000 1.00 50,000 June 7, 1994 Share Issuance 50,000 1.00 50,000 June 13, 1994 Share Issuance 25,000 1.00 25,000 June 20, 1994 Share Issuance 25,000 1.00 25,000 July 28, 1994 Share Issuance 25,000 1.00 25,000 September 23, 1994 Share Issuance 45,002 6.00 270,012 October 20, 1994 Share Issuance 20,501 6.00 123,008 October 28, 1994 Share Issuance 2,500 6.00 15,000 November 10, 1994 Share Issuance 14,500 6.00 87,000 November 16, 1994 Share Issuance 2,501 6.00 15,004 Net Loss, Year Ended December 31, 1994 - - --------- -------- Balance, December 31, 1994 1,213,004 847,824 August 8, 1995 Share Issuance 5,000 6.00 30,000 August 28, 1995 Share Issuance 4,000 6.00 24,000 September 21, 1995 Share Issuance 5,000 6.00 30,000 September 29, 1995 Share Issuance 5,000 6.00 30,000 December 31, 1995 Share Issuance 833 6.00 5,000 December 31, 1995 Stock Split 2.2260435971 for 1 Share Outstanding 1,511,512 - - Net Loss, Year Ended December 31, 1995 - - - --------- -------- Balance, December 31, 1995 2,744,349 $966,824 Net Loss, Three Months Ended March 31, 1996 - - - --------- -------- Balance, March 31, 1996 (Unaudited) 2,744,349 $966,824 ========= ========
See Notes to the Financial Statements.
MEDJET INC. (A DEVELOPMENT STAGE COMPANY) STATEMENT OF STOCKHOLDERS' EQUITY PERIOD FROM DECEMBER 16, 1993 (DATE OF INCEPTION) TO MARCH 31, 1996 (UNAUDITED) COMMON STOCK PAID ($.001 PAR IN ACCUMULATED DATE DESCRIPTION VALUE CAPITAL DEFICIT - ---- ----------- ---------- ------- ----------- March 12, 1994 Share Issuance $ 800 $ 79,200 $ - April 21, 1994 Share Issuance 15 1,485 - May 1, 1994 Share Issuance 63 6,237 - May 25, 1994 Share Issuance 50 49,950 - May 31, 1994 Share Issuance 25 24,975 - June 6, 1994 Share Issuance 50 49,950 - June 7, 1994 Share Issuance 50 49,950 - June 13, 1994 Share Issuance 25 24,975 - June 20, 1994 Share Issuance 25 24,975 - July 28, 1994 Share Issuance 25 24,975 - September 23, 1994 Share Issuance 45 269,967 October 20, 1994 Share Issuance 21 122,987 - October 28, 1994 Share Issuance 2 14,998 - November 10, 1994 Share Issuance 15 86,985 - November 16, 1994 Share Issuance 2 15,002 - Net Loss, Year Ended December 31, 1994 - - (287,291) ------ ---------- ------------ Balance, December 31, 1994 1,213 846,611 (287,291) August 8, 1995 Share Issuance 5 29,995 - August 28, 1995 Share Issuance 4 23,996 - September 21, 1995 Share Issuance 5 29,995 - September 29, 1995 Share Issuance 5 29,995 - December 31, 1995 Share Issuance 1 4,999 - December 31, 1995 Stock Split 2.2260435971 for 1 Share Outstanding 1,511 (1,511) - Net Loss, Year Ended December 31, 1995 - - (677,385) ------ ---------- ------------ Balance, December 31, 1995 $2,744 $ 964,080 $ (964,676) Net Loss, Three Months Ended March 31, 1996 - - (176,742) ------ ---------- ------------ Balance, March 31, 1996 (Unaudited) $2,744 $ 964,080 $(1,141,418) ====== ========== ============
See Notes to the Financial Statements.
MEDJET INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED) AND YEARS ENDED DECEMBER 31, 1995 AND 1994, AND THE PERIOD FROM DECEMBER 16, 1993 (DATE OF INCEPTION), TO MARCH 31, 1996 (UNAUDITED) FOR THE THREE FOR THE THREE DECEMBER 16, 1993 MONTHS ENDED MONTHS ENDED (INCEPTION) TO MARCH 31, 1996 MARCH 31, 1995 MARCH 31, 1996 -------------- -------------- ----------------- (Unaudited) (Unaudited) (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(176,742) $(147,051) $(1,141,418) Adjustments to Reconcile Net Loss to Net Cash Used by Operating Activities: Depreciation and amortization 10,010 8,789 70,570 (Increase) Decrease in interest receivable - (4,663) - (Increase) Decrease in prepaid income taxes - - - (Increase) in prepaid expenses (3,653) (3,779) (6,196) (Decrease) Increase in accounts payable (13,687) 407 14,803 Increase in accrued interest payable 5,368 - 5,368 Increase in income taxes payable - - 150 Increase (Decrease) in accrued officer's salary - (18,000) - ---------- ---------- ------------ Net Cash Used by Operating Activities (178,704) (164,297) (1,056,723) ---------- ---------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Cash (purchases) redemption of marketable securities - 320,605 - Cash purchases of property and equipment (16,579) (16,937) (137,212) Cash purchase of organization costs - - (37,387) Cash purchase of patents - - (19,405) Cash payments for security deposits (1,735) - (4,437) ---------- ---------- ------------ Net Cash Provided (Used) by Investing Activities (18,314) 303,668 (199,441) ---------- ---------- ------------
See Notes to the Financial Statements.
MEDJET INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED) AND YEARS ENDED DECEMBER 31, 1995 AND 1994, AND THE PERIOD FROM DECEMBER 16, 1993 (DATE OF INCEPTION), TO MARCH 31, 1996 (UNAUDITED) (CONTINUED) FOR THE YEAR FOR THE YEAR ENDED ENDED DECEMBER 31, 1995 DECEMBER 31, 1994 ----------------- ----------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(677,385) $(287,291) Adjustments to reconcile Net Loss to Net Cash Used by Operating Activities: Depreciation and amortization 40,363 20,197 (Increase) Decrease in interest receivable 2,877 (2,877) (Increase) Decrease in prepaid income taxes 25 (25) (Increase) in prepaid expenses (2,543) - (Decrease) Increase in accounts payable (3,016) 31,506 Increase in accrued interest payable - - Increase in income taxes payable 150 - Increase (Decrease) in accrued officer's salary (66,700) 66,700 ---------- ---------- Net Cash Used by Operating Activities (706,229) (171,790) ---------- ---------- CASH FLOW FROM INVESTING ACTIVITIES: Cash (purchases) redemption of marketable securities 320,605 (320,605) Cash purchase of property and equipment (43,918) (76,715) Cash purchase of organization costs - (37,387) Cash purchase of patents (10,716) (8,689) Cash payments for security deposits - (3,702) ---------- ---------- Net Cash Provided (Used) by Investing Activities 265,971 (447,098) ---------- ----------
See Notes to the Financial Statements.
MEDJET INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED) AND YEARS ENDED DECEMBER 31, 1995 AND 1994, AND THE PERIOD FROM DECEMBER 16, 1993 (DATE OF INCEPTION), TO MARCH 31, 1996 (UNAUDITED) FOR THE THREE FOR THE THREE DECEMBER 16, 1993 MONTHS ENDED MONTHS ENDED (INCEPTION) TO MARCH 31, 1996 MARCH 31, 1995 MARCH 31, 1996 -------------- -------------- ----------------- (Unaudited) (Unaudited) (Unaudited) CASH FLOWS FROM FINANCING ACTIVITIES (CONTINUED): Proceeds from issuance of common stock $ - $ - $ 966,824 Proceeds from officer loan - - 156,000 Repayment of officer loan - - (6,000) Proceeds from notes payable 200,000 - 200,000 -------- -------- ----------- Net Cash Provided by Financing Activities 200,000 - 1,316,824 -------- -------- ----------- NET INCREASE (DECREASE) IN CASH 2,982 139,371 60,660 CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 57,678 228,936 - -------- -------- ----------- CASH AND CASH EQUIVALENTS - END OF PERIOD $ 60,660 $368,307 $ 60,660 ======== ======== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash Paid During the Year For: Income taxes $ - $ - $ 200 ======== ======== =========== SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING ACTIVITIES: Increase in Accounts Payable for Accrual of Deferred Charges $120,717 $ - $ 156,980 ======== ======== ===========
See Notes to the Financial Statements.
MEDJET INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED) AND YEARS ENDED DECEMBER 31, 1995 AND 1994, AND THE PERIOD FROM DECEMBER 16, 1993 (DATE OF INCEPTION), TO MARCH 31, 1996 (UNAUDITED) (CONTINUED) FOR THE YEAR FOR THE YEAR ENDED ENDED DECEMBER 31, 1995 DECEMBER 31, 1994 ----------------- ----------------- CASH FLOWS FROM FINANCING ACTIVITIES (CONTINUED): Proceeds from issuance of common stock $ 119,000 $847,824 Proceeds from officer loan 150,000 6,000 Repayment of officer loan - (6,000) Proceeds from notes payable - - ---------- --------- Net Cash Provided by Financing Activities 269,000 847,824 ---------- --------- NET INCREASE (DECREASE) IN CASH (171,258) 228,936 CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 228,936 - ---------- --------- CASH AND CASH EQUIVALENTS - END OF PERIOD $ 57,678 $228,936 ========== ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash Paid During the Year For: Income taxes $ 125 $ 75 ========== ========= SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING ACTIVITIES: Increase in Accounts Payable for Accrual of Deferred Charges $ 36,263 $ - ========== =========
MEDJET INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO THE FINANCIAL STATEMENTS NOTE A - NATURE OF ORGANIZATION AND BASIS OF PRESENTATION: (1) Nature of Organization: Medjet Inc. (the Company) is a development stage company incorporated in the State of Delaware on December 16, 1993. The Company was organized to engage in the design, development, production and sales of refractive corneal correction technology and equipment. (2) Basis of Presentation: The Company is a development stage enterprise and has neither realized any operating revenue nor has any assurance of realizing any future operating revenue. Successful future operations depend upon the successful development and marketing of the refractive corneal correction technology and equipment. During the period required to successfully develop and market a commercial product, the Company will require additional funds for operations. Substantial additional financing may be required to continue and complete the development of refractive corneal correction technology and equipment, obtain regulatory approval and market the product. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters include (1) an initial public offering of a minimum of 1,200,000 units or a maximum of 1,600,000 units ("Units"), with each Unit consisting of (i) one share of Medjet common stock, and (ii) one 18-month warrant to purchase one common share at an exercise price of $10 per share, (2) securing interim short-term financing until such time as the planned initial public offering is completed, (3) reducing the level of research and administrative expenses, including the deferment of officers' salaries until such time as additional equity financing is completed, and (4) considering additional private placements of equity securities in the event the initial public offering is not completed. The Units are expected to be offered for sale to the public at $5 per Unit and will be sold on a best efforts, all or none, basis with respect to the first 1,200,000 Units and on a best efforts basis with respect to the additional 400,000 Units and will continue for a period of up to 180 days. There is no assurance that the offering will be successful. Management believes that the net proceeds of the offering, if successful, will be sufficient to meet the Company's anticipated cash requirements for a period of approximately 24 months following the offering. Between December 31, 1995 and March 31, 1996, the Company obtained two $50,000 bridge loans arranged for by the Company's underwriter. Both of the bridge loans bear interest at 12% per annum and are payable at the earlier of (a) December 31, 1996 or (b) the closing of an equity or debt financing for not less than $1,000,000 or (c) the closing of any sale of the Company's securities. During that time, the Company also obtained two additional $50,000 loans which bear interest at 8% per annum and are payable at the earlier of (a) January 31, 1997 or (b) the closing of an equity or debt financing for not less than $1,000,000 or (c) the closing of any sale of the Company's securities. The accompanying financial statements do not include any adjustments that might result from the outcome of the aforementioned uncertainty. NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (1) Cash and Equivalents: For the purpose of the statement of cash flows, cash equivalents include all highly liquid treasury bill instruments with original maturities of three months or less. (2) Marketable Securities: Marketable securities are treasury bills stated at cost which approximates market at December 31, 1994. (3) Deferred Offering Costs: Deferred offering costs consist of expenses incurred to date with respect to a public offering which the Company is pursuing. These costs will be charged against the proceeds of such offering or, in the event the offering is unsuccessful, against operations in the period in which the offering is aborted. (4) Property, Plant and Equipment: Property, plant and equipment are recorded at cost. Depreciation is computed using primarily accelerated methods based upon the estimated useful lives of the assets which range from 5 to 7 years. Repairs and maintenance which do not extend the useful lives of the related assets are expensed as incurred. (5) Amortization: Organizational costs are being amortized over sixty months on a straight-line basis. Total amortization in 1996 (to date), 1995 and 1994 was $1,870, $7,478 and $5,183, respectively. Patents are being amortized over seventeen years on a straight- line basis. These costs will be expensed if and when it is concluded that nonapproval or no future economic benefits are probable. Total amortization in 1996 (to date), 1995 and 1994 was $286, $564 and $208, respectively. (6) Net Loss Per Share: Net loss per share is computed by dividing net loss by the weighted average number of shares of Common Stock outstanding during the year after giving effect to a 2.226043597 to 1 stock split of the Company's Common Stock on the effective date based on the minimum number of units to be sold in the offering. (7) Income Taxes: The Company, with the consent of its shareholders, has elected to be an "S" Corporation under the Internal Revenue Code. Instead of paying Federal corporate income taxes, the shareholders of an "S" Corporation are taxed individually on their proportionate share of the Company's taxable income. Therefore, no provision or liability for Federal income taxes has been included in these financial statements. In accordance with the provision of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"), deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases for State purposes only. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the years in which those temporary differences are expected to be recovered or settled. Under SFAS No. 109, the effect on deferred tax assets and liabilities of a change in state tax rates is recognized in income in the period that includes the enactment date. (8) Reclassification: Certain accounts in the prior year's financial statements have been reclassified for comparative purposes to conform with presentation in the current year's financial statements. NOTE C - EQUITY TRANSACTIONS: The Company's founder and President, Dr. Eugene I. Gordon ("Dr. Gordon"), and three other original investors were initially issued stock (pre-split) of the Company as follows between March 12, 1994 and May 1, 1994:
Price Shares per Issued share Total ------ ------- ----- Dr. Gordon, President 800,000 $.10 $80,000 Other Original Investors (3) 78,000 $.10 7,800 ------- ------- 878,000 $87,800 ======= =======
The sale of these securities was exempt from registration under Section 4(2) of the Securities Act of 1933 ("the Act"). Pursuant to a first private placement offering that commenced May 25, 1994 and concluded July 28, 1994, the Company sold an aggregate of 250,000 shares (pre-split) at $1 per share ($250,000). The sale of these securities was exempt from registration under Rule 506, Regulation D of the Act. Pursuant to a second private placement offering that commenced September 23, 1994 and concluded November 16, 1994, the Company sold an aggregate of 85,004 shares (pre-split) at $6 per share ($510,024). The sale of these securities was exempt from registration under Rule 506, Regulation D of the Act. On September 30, 1994, the Company adopted its 1994 Stock Option Plan ("the Plan"). The Plan provides that certain options granted thereunder are intended to qualify as "incentive stock options" within the meaning of Section 422A of the Internal Revenue Code of 1986, while non- qualified options may also be granted under the Plan. The Plan provides for authorization of up to 25,000 shares. The option price per share of Common Stock purchasable under an incentive stock option shall be determined at the time of grant but shall be not less than 100% of the fair market value of the Common Stock on such date, or, in the case of a 10% Stockholder, the option price per share shall be no less than 110% of the fair market value of the Common Stock on the date an Incentive Stock Option is granted to such 10% Stockholder. Pursuant to a third private placement offering that commenced August 8, 1995 and concluded October 31, 1995, the Company offered an additional 85,000 shares (pre-split) of which an aggregate of 19,833 shares (pre-split) have been sold through December 31, 1995 at $6 per share ($118,988). The sale of these securities was exempt from registration under Rule 506, Regulation D of the Act. On December 31, 1995, 833 additional common shares (pre-split) were issued to Dr. Gordon at $6 per share ($5,000), bringing his total share holdings of the Company's Common Stock to be 800,833 shares (pre- split) at December 31, 1995. NOTE D - DEVELOPMENT STAGE OPERATIONS: The Company was formed December 16, 1993. Operations since then have consisted primarily of raising capital, locating and acquiring equipment, obtaining qualified staff, installing and testing equipment and experimenting, testing and developing the procedures necessary to produce positive results and to lay the foundation for specific development for manufacturing and FDA approvals. NOTE E - NOTES PAYABLE Between December 31, 1995 and March 31, 1996, the Company obtained two $50,000 bridge loans arranged for by the Company's underwriter. Both of the bridge loans bear interest at 12% per annum and are payable at the earlier of (a) December 31, 1996 or (b) the closing of an equity or debt financing for not less than $1,000,000 or (c) the closing of any sale of the Company's securities. During that time, the Company also obtained two additional $50,000 loans which bear interest of 8% per annum and are payable at the earlier of (a) January 31, 1997 or (b) the closing of an equity or debt financing for not less than $1,000,000 or (c) the closing of any sale of the Company's securities. The accompanying financial statements do not include any adjustments that might result from the outcome of the aforementioned uncertainty. NOTE F - NOTES PAYABLE - OFFICER: Loans made to the Company by the officer bear interest at 7% per annum, are payable upon demand and are unsecured. NOTE G - RETIREMENT PLAN: The Company sponsors a qualified 401(k) plan covering substantially all full time employees under which eligible employees can defer a portion of their annual compensation. At the present time, the Company makes no matching contributions to the plan. NOTE H - INCOME TAXES: The income tax provision is comprised of the following at March 31, 1996 (unaudited) and December 31 of each of 1995 and 1994: State current provision $200 $200 $ 50 ==== ==== ====
The Company's total deferred tax asset and valuation allowance at March 31, 1996 (unaudited) and December 31 of each of 1995 and 1994 are as follows: Total deferred tax asset $ 95,972 $ 80,083 $ 26,133 Less valuation allowance (95,972) (80,083) (26,133) --------- --------- --------- Net deferred tax asset $ - $ - $ - ========= ========= =========
The Company has available a $889,815 net operating loss carry forward which may be used to reduce future state taxable income available through December 31, 2002. NOTE I - OPERATING LEASE: The Company leases its building and office space. The following is a schedule by years of future minimum lease payments as of March 31, 1996 under operating leases that have initial or remaining non-cancelable lease terms in excess of one year.
For the Year Ended March 31, ---------------------------- 1997 57,444 1998 59,069 1999 64,764 -------- Total Minimum Lease Payments Required $181,277 ========
Rent expense under the operating lease totaled $6,105, $24,066 and $17,713 at March 31, 1996 (unaudited), December 31, 1995 and 1994, respectively. The lease also contains provisions for contingent rental payments based upon increases in taxes, insurance and common area maintenance expense. NOTE J - SUBSEQUENT EVENTS: On April 3, 1996, the Company filed with the SEC a registration statement to sell and issue 1,200,000 units under a minimum offering or 1,600,000 units under a maximum offering consisting of one share of Common Stock and one redeemable Class A Common Stock purchase warrant. All costs associated with this offering will be deferred and deducted from the proceeds from the sale of stock. If the Company does not complete this offering, such costs will be charged to expense. On the effective date of the registration, the Company will give effect to a 2.226043597 to 1 stock split of its Common Stock on all shares of Common Stock outstanding based on the minimum number of units to be sold in the offering. During April and May 1996, the Company obtained additional bridge financing in the amount of $100,000. In exchange for the $100,000, the Company executed in favor of the lender two promissory notes, each in the amount of $50,000. The notes accrue interest at 12% per annum and are due on the earlier of (i) December 31, 1996 or (ii) the closing date of this offering or (iii) the closing of an equity or debt financing for not less than $1,000,000. No dealer, sales representative or other individual has been authorized to give any information or to make any representation not contained in 1,200,000 UNITS - MINIMUM OFFERING this Prospectus in connection with this offering other than those 1,600,000 UNITS - MAXIMUM OFFERING contained in this Prospectus and, if given or made, such information or representation must not be relied Each Unit Consisting of One Share upon as having been authorized by the of Common Stock and One Class A Company or the Underwriters. This Redeemable Common Prospectus does not constitute an Stock Purchase Warrant offer to sell or solicitation of an offer to buy the Common Stock by anyone in any jurisdiction in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation. Neither the delivery of this Prospectus nor any sale made hereunder shall under any circumstances create an implication that the information contained herein is correct as of any time subsequent to its date. _________ MEDJET INC. TABLE OF CONTENTS Page ---- Additional Information 4 Prospectus Summary 5 Risk Factors 10 Use of Proceeds 19 Dilution 21 Capitalization 23 Dividend Policy 24 ____________________ Plan of Operation 24 Business 26 PROSPECTUS Management 38 ____________________ Principal Stockholders 44 Certain Transactions 45 Description of Securities 45 Shares Eligible for Future Sale 47 PATTERSON TRAVIS, INC. Underwriting 48 Legal Matters 50 _________, 1996 Experts 50 Glossary 51 Index to Financial Statements F-1 _________ Until _____________, 1996 [25 days after the date of this Prospectus], all dealers effecting transactions in the registered securities, whether or not participating in this distribution, may be required to deliver a Prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a Prospectus when acting as an underwriter and with respect to their unsold allotments or subscriptions.
PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 24. Indemnification of Directors and Officers. As permitted by Section 145 of the Delaware General Corporation Law ("GCL"), the Company's Certificate of Incorporation (the "Certificate") provides that no Director shall be personally liable to the Company or any stockholder for monetary damages for breach of fiduciary duty as a Director, except for liability: (i) arising from payment of dividends or approval of a stock purchase in violation of Section 174 of the GCL; (ii) for any breach of the duty of loyalty to the Company or its stockholders; (iii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; or (iv) for any action from which the Director derived an improper personal benefit. While the Certificate provides protection from awards for monetary damages for breaches of the duty of care, it does not eliminate the Director's duty of care. Accordingly, the Certificate will not affect the availability of equitable remedies, such as an injunction, based on a Director's breach of the duty of care. The provisions of the Certificate described above apply to officers of the Company only if they are Directors of the Company and are acting in their capacity as Directors, and does not apply to officers of the Company who are not Directors. In addition, the Company's By-Laws provide that the Company shall indemnify its officers and Directors, employees and agents, to the fullest extent permitted by the GCL. Under the GCL, directors and officers as well as employees and individuals may be indemnified against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement in connection with specified actions, suits or proceedings, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation as a derivative action) if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. The Company has entered into indemnification agreements with its officers and directors which provide for indemnification in favor of such officers and directors by the Company to the fullest extent permitted by the GCL. Reference is made to Section 6 of the Form of Underwriting Agreement (to be filed as Exhibit 1.1 to this Registration Statement) which provides for indemnification of the Company's officers, Directors and controlling persons by the Underwriters against certain civil liabilities, including liabilities under the Securities Act of 1933, as amended (the "Securities Act"). INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING THE COMPANY PURSUANT TO THE FOREGOING PROVISIONS, THE COMPANY HAS BEEN INFORMED THAT, IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION, SUCH INDEMNIFICATION IS AGAINST PUBLIC POLICY AS EXPRESSED IN SUCH ACT AND IS THEREFORE UNENFORCEABLE. The Company is seeking a Director and Officer Liability Insurance Policy, under which each Director and certain officers of the Company would be insured against certain liabilities. Item 25. Other Expenses of Issuance and Distribution. The following expenses in connection with the issuance and distribution of the securities being registered hereby (which exclude the Underwriter's non-accountable expense allowance) will be borne by the Company. Registration Fee $ 9,641 Transfer Agent and Registrar Fee* 9,000 NASD Filing Fee 3,296 NASDAQ Listing Fee 10,000 Printing Costs* 10,000 Legal Fees* 210,000 Accounting Fees* 30,000 Blue Sky Fees and Expenses* 55,000 Miscellaneous* 63 -------- Total $337,000 ========
____________________________ *Estimated Item 26. Recent Sales of Unregistered Securities. Described below are all securities which have been issued by the Company since December 16, 1993 (the date of the Company's inception) without registration under the Act. There were no underwriting discounts or commissions paid in connection with the issuance of any such securities. 1. Between March 12 and May 1, 1994, the Company sold 800,000 shares (pre-split) of Common Stock to Eugene I. Gordon, 48,000 shares (pre- split) of Common Stock to Peretz Feder, and 15,000 shares (pre-split) of Common Stock to each of Joseph Calderone, Jr. and Joseph Carroll, III (an aggregate of 878,000 shares) at a purchase price of $.10 per share (an aggregate purchase price of $87,800). The sale of these securities was exempt from registration under Section 4(2) of the Act, because no public offering was involved. 2. Between May 25, 1994 and July 28, 1994, the Company sold 25,000 shares (pre-split) of Common Stock to each of 10 investors (an aggregate of 250,000 shares) at a purchase price of $1.00 per share (an aggregate purchase price of $250,000). The sale of these securities was exempt from registration under Rule 506, Regulation D of the Act. 3. Between September 23, 1994 and November 16, 1994, the Company sold an aggregate of 85,004 shares (pre-split) of its Common Stock to nine investors at a purchase price of $6.00 per share (an aggregate purchase price of $510,024). The sale of these securities was exempt from registration under Rule 506, Regulation D of the Act. 4. Between August 8, 1995 and September 29, 1995, the Company sold an aggregate of 19,000 shares (pre-split) of its Common Stock to four investors at a purchase price of $6.00 per share (an aggregate purchase price of $114,000). The sale of these securities was exempt from registration under Rule 506, Regulation D of the Act. 5. On December 31, 1995, the Company sold 833 shares (pre-split) of its Common Stock to Eugene I. Gordon at a purchase price of $6.00 per share (an aggregate purchase price of $5,000). The sale of these securities was exempt from registration under Section 4(2) of the Act, because no public offering was involved. Item 27. Exhibits. The following is a list of all Exhibits filed as a part of this Registration Statement.
Exhibit Number Exhibit - ------- ------- *1.1 Form of Underwriting Agreement. *1.2 Form of Escrow Agreement by and among the Registrant, the Underwriter and the Escrow Agent. 1.3 Form of Selected Dealers Agreement. *3.1 Amended and Restated Certificate of Incorporation of the Registrant. *3.2 By-Laws of the Registrant. *4.1 Form of Certificate evidencing the shares of Common Stock. *4.2 Form of Certificate evidencing the Units. *4.3 Form of Certificate evidencing the Class A Warrants (included in Exhibit 4.5). *4.4 Form of Underwriter's Option Agreement. *4.5 Form of Warrant Agreement for the Class A Warrants. 4.6 Form of Subscription Agreement for the Units. *5.1 Opinion of Kelley Drye & Warren LLP. *10.1 Employment Agreement between the Registrant and Eugene I. Gordon, dated as of March 15, 1996. 10.2 Employment Agreement between the Registrant and Thomas Handschiegel, dated as of March 18, 1996. 10.3 Consulting Agreement between the Registrant and Joseph F. Carroll III, dated as of April , 1994. 10.4 Consulting Agreement between the Registrant and Joseph P. Calderone, Jr., dated as of April 1, 1994. *10.6 The Medjet Inc. 1994 Stock Option Plan, as amended. 10.7 Promissory Note from the Registrant in favor of Eugene Gordon in the principal amount of $25,000, dated October 27, 1995. 10.8 Promissory Note from the Registrant in favor of Eugene Gordon in the principal amount of $25,000, dated November 13, 1995. 10.9 Promissory Note from the Registrant in favor of Eugene Gordon in the principal amount of $25,000, dated November 30, 1995. 10.10 Promissory Note from the Registrant in favor of Eugene Gordon in the principal amount of $25,000, dated December 18, 1995. 10.11 Promissory Note from the Registrant in favor of Eugene Gordon in the principal amount of $50,000, dated December 30, 1995. 10.12 Promissory Note from the Registrant in favor of Jan Wernick in the principal amount of $50,000, dated February 6, 1996. 10.13 Promissory Note from the Registrant in favor of Steven G. Cooperman in the principal amount of $50,000, dated February 26, 1996. 10.14 Promissory Note from the Registrant in favor of Sanford J. Hillsberg in the principal amount of $50,000, dated February 26, 1996. 10.15 Promissory Note from the Registrant in favor of Jan Wernick in the principal amount of $50,000, dated March 14, 1996. 10.16 Agreement of Lease between the Registrant and Linpro Edison Land Limited, dated May 13, 1994. 10.17 First Amendment to Lease between the Registrant and BCE Associates, L.P., dated February 28, 1996. *10.18 Promissory Note from the Registrant in favor of Jan Wernick in the principal amount of $50,000, dated April 15, 1996. *10.19 Promissory Note from the Registrant in favor of Jan Wernick in the principal amount of $50,000, dated May 6, 1996. *10.20 Form of Consulting Agreement between the Registrant and Steven G. Cooperman, dated as of _______, 1996. *10.21 Form of Consulting Agreement between the Registrant and Sanford J. Hillsberg, dated as of _______, 1996. *23.1 Consent of Rosenberg Rich Baker Berman and Company. *23.2 Consent of Kelley Drye & Warren LLP (included in Exhibit 5.1). 23.3 Consent of Graham & James LLP. *23.4 Consent of Dean E. Snyder, Esquire. 24.1 Power of Attorney (included on signature page). *27 Financial Data Schedule
_______________________ * Filed herewith. Unless otherwise indicated, all exhibits were previously filed. Item 28. Undertakings. (a) Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the "Securities Act"), may be permitted to directors, officers and controlling persons of the Company, the Company has been advised that, in the opinion of the Securities and Exchange Commission (the "Commission"), such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by a director, officer or controlling person of the Company in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Company will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. (b) The Company hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include a prospectus required by Section 10(a)(3) of the Securities Act; (ii) To reflect in the prospectus any facts or events which, individually or in the aggregate, represent a fundamental change in the information set forth in this Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective Registration Statement; (iii) To include any additional or changed material information on the plan of distribution. (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement of the securities offered, and the offering of such securities at that time to be the initial bona fide offering. (3) To file a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering. (4) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in the form of prospectus filed by the Company pursuant to Rule 424(b)(1) or (4), or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective. (5) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) The Company will provide to the underwriter at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser. SIGNATURES In accordance with the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form SB-2 and authorized this amendment to the registration statement to be signed on its behalf by the undersigned, in the City of New York, State of New York, on May 21, 1996. MEDJET INC. By: /s/ Eugene I. Gordon ____________________________________ Eugene I. Gordon President and Chairman of the Board In accordance with the requirements of the Securities Act of 1933, this amendment to the registration statement has been signed by the following persons in the capacities and on the dates stated.
Signature Title Date - --------- ----- ---- /s/ Eugene I. Gordon _______________________________ President and May 21, 1996 Eugene I. Gordon Chairman of the Board (Principal Executive Officer) /s/ Thomas M. Handschiegel ________________________________ Chief Financial Officer May 21, 1996 Thomas M. Handschiegel and Vice President for Finance and Human Resources (Principal Financial and Accounting Officer) * _______________________________ Director May 21, 1996 Steven G. Cooperman *By: /s/ Thomas M. Handschiegel __________________________ Attorney-in-Fact
INDEX TO EXHIBITS Exhibit Number Exhibit Sequentially Numbered Page *1.1 Form of Underwriting Agreement. *1.2 Form of Escrow Agreement by and among the Registrant, the Underwriter and the Escrow Agent. 1.3 Form of Selected Dealers Agreement. *3.1 Amended and Restated Certificate of Incorporation of the Registrant. *3.2 By-Laws of the Registrant. *4.1 Form of Certificate evidencing the shares of Common Stock. *4.2 Form of Certificate evidencing the Units. *4.3 Form of Certificate evidencing the Class A Warrants (included in Exhibit 4.5). *4.4 Form of Underwriter's Option Agreement. *4.5 Form of Warrant Agreement for the Class A Warrants. 4.6 Form of Subscription Agreement for the Units. *5.1 Opinion of Kelley Drye & Warren LLP. *10.1 Employment Agreement between the Registrant and Eugene I. Gordon, dated as of March 15, 1996. 10.2 Employment Agreement between the Registrant and Thomas Handschiegel, dated as of March 18, 1996. 10.3 Consulting Agreement between the Registrant and Joseph F. Carroll, III, dated as of April ____, 1994. 10.4 Consulting Agreement between the Registrant and Joseph P. Calderone, Jr., dated as of April 1, 1994. *10.6 The Medjet Inc. 1994 Stock Option Plan, as amended. 10.7 Promissory Note from the Registrant in favor of Eugene Gordon in the principal amount of $25,000, dated October 27, 1995. 10.8 Promissory Note from the Registrant in favor of Eugene Gordon in the principal amount of $25,000, dated November 13, 1995. 10.9 Promissory Note from the Registrant in favor of Eugene Gordon in the principal amount of $25,000, dated November 30, 1995. 10.10 Promissory Note from the Registrant in favor of Eugene Gordon in the principal amount of $25,000, dated December 18, 1995. 10.11 Promissory Note from the Registrant in favor of Eugene Gordon in the principal amount of $50,000, dated December 30, 1995. 10.12 Promissory Note from the Registrant in favor of Jan Wernick in the principal amount of $50,000, dated February 6, 1996. 10.13 Promissory Note from the Registrant in favor of Steven G. Cooperman in the principal amount of $50,000, dated February 26, 1996. 10.14 Promissory Note from the Registrant in favor of Sanford J. Hillsberg in the principal amount of $50,000, dated February 26, 1996. 10.15 Promissory Note from the Registrant in favor of Jan Wernick in the principal amount of $50,000, dated March 14, 1996. 10.16 Agreement of Lease between the Registrant and Linpro Edison Land Limited, dated May 13, 1994. 10.17 First Amendment to Lease between the Registrant and BCE Associates, L.P., dated February 28, 1996. *10.18 Promissory Note from the Registrant in favor of Jan Wernick in the principal amount of $50,000, dated April 15, 1996. *10.19 Promissory Note from the Registrant in favor of Jan Wernick in the principal amount of $50,000, dated May 6, 1996. *10.20 Form of Consulting Agreement between the Registrant and Steven G. Cooperman, dated as of _______, 1996. *10.21 Form of Consulting Agreement between the Registrant and Sanford J. Hillsberg, dated as of _______, 1996. *23.1 Consent of Rosenberg Rich Baker Berman and Company. *23.2 Consent of Kelley Drye & Warren LLP (included in Exhibit 5.1). 23.3 Consent of Graham & James LLP. *23.4 Consent of Dean E. Snyder, Esquire. 24.1 Power of Attorney (included on signature page). *27 Financial Data Schedule
_______________________ * Filed herewith. Unless otherwise indicated, all exhibits were previously filed. EX-1 2 EX 1.1 UNDERWRITING AG 1,200,000 Units - Minimum 1,600,000 Units - Maximum (Each Unit consisting of one share of Common Stock, par value $.001 per share and one Class A Redeemable Common Stock Purchase Warrant, each exercisable to purchase one share of Common Stock) MEDJET INC. UNDERWRITING AGREEMENT New York, New York ___________, 1996 Patterson Travis, Inc. One Battery Park Plaza New York, NY 10004 Medjet Inc., a Delaware corporation (the "Company"), proposes to sell an aggregate of 1,600,000 Units (each Unit consisting of one share of Common Stock, par value $.001 per share ("Common Stock") and one Class A Redeemable Common Stock Purchase Warrant ("Warrants") to purchase one share of Common Stock at $10.00 per share for a period of eighteen (18) months commencing three (3) months from the date the funds in escrow are released by the Escrow Agent (as defined below), subject to redemption, in certain instances, of which the first 1,200,000 Units shall be offered on a "best efforts, all-or-none basis" and thereafter the remaining 400,000 Units shall be offered on a "best efforts basis", to the public through you (the "Underwriter") as exclusive agent of the Company. Unless the context otherwise requires, the aggregate of 1,600,000 shares of Common Stock and Warrants to be sold by the Company, and the 1,600,000 shares of Common Stock and the 1,600,000 Warrants, are herein called the "Units." The Common Stock to be outstanding after giving effect to the sale of the Units are herein called the "Shares." The Shares and Warrants included in the Units are herein collectively called the "Securities." You have advised the Company that you desire to sell the Units. The Company confirms the agreements made by it with respect to the sale of the Units by the Underwriter as follows: 1. Representations and Warranties of the Company. The Company represents and warrants to, and agrees with you that: (a) A registration statement (File No. 333-3184) on Form SB-2 relating to the public offering of the Units, including a form of prospectus subject to completion, copies of which have heretofore been delivered to you, has been prepared in conformity with the requirements of the Securities Act of 1933, as amended (the "Act"), and the rules and regulations (the "Rules and Regulations") of the Securities and Exchange Commission (the "Commission") thereunder, and has been filed with the Commission under the Act and one or more amendments to such registration statement may have been so filed. After the execution of this Agreement, the Company will file with the Commission either (i) if such registration statement, as it may have been amended, has been declared by the Commission to be effective under the Act, a prospectus in the form most recently included in an amendment to such registration statement (or, if no such amendment shall have been filed, in such registration statement), with such changes or insertions as are required by Rule 430A under the Act or permitted by Rule 424(b) under the Act and as have been provided to and approved by you prior to the execution of this Agreement, or (ii) if such registration statement, as it may have been amended, has not been declared by the Commission to be effective under the Act, an amendment to such registration statement, including a form of prospectus, a copy of which amendment has been furnished to and approved by you prior to the execution of this Agreement. As used in this Agreement, the term "Registration Statement" means such registration statement, as amended at the time when it was or is declared effective, including all financial schedules and exhibits thereto and including any information omitted therefrom pursuant to Rule 430A under the Act and included in the Prospectus (as hereinafter defined); the term "Preliminary Prospectus" means each prospectus subject to completion filed with such registration statement or any amendment thereto (including the prospectus subject to completion, if any, included in the Registration Statement or any amendment thereto at the time it was or is declared effective); and the term "Prospectus" means the prospectus first filed with the Commission pursuant to Rule 424(b) under the Act, or, if no prospectus is required to be filed pursuant to said Rule 424(b), such term means the prospectus included in the Registration Statement; except that if such registration statement or prospectus is amended or such prospectus is supplemented, after the effective date of such registration statement, the terms "Registration Statement" and "Prospectus" shall include such registration statement and prospectus as so amended, and the term "Prospectus" shall include the prospectus as so supplemented, or both, as the case may be. (b) The Commission has not issued any order preventing or suspending the use of any Preliminary Prospectus. At the time the Registration Statement becomes effective and at all times subsequent thereto up to and on the Closing Date (as hereinafter defined) (i) the Registration Statement and Prospectus will in all respects conform to the requirements of the Act and the Rules and Regulations; and (ii) neither the Registration Statement nor the Prospectus will include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make statements therein not misleading; provided, however, that the Company makes no representations, warranties or agreements as to information contained in or omitted from the Registration Statement or Prospectus in reliance upon, and in conformity with, written information furnished to the Company by or on behalf of the Underwriter specifically for use in the preparation thereof. It is understood that the statements set forth in the Prospectus on page __ with respect to stabilization, the paragraph under the heading "Underwriting" relating to concessions to certain dealers, and the identity of counsel to the Underwriter under the heading "Legal Matters" and the amount under Blue Sky Fees and Expenses under Item 25 of Part II of the Registration Statement constitute for purposes of this Section and Section 6(b) the only information furnished in writing by or on behalf of the Underwriter for inclusion in the Registration Statement and Prospectus, as the case may be. (c) The Company has no subsidiaries. The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware with full corporate power and authority to own its properties and conduct its business as described in the Prospectus and is duly qualified or licensed to do business as a foreign corporation and is in good standing in each other jurisdiction in which the nature of its business or the character or location of its properties requires such qualification, except where the failure to so qualify will not materially adversely affect its business, properties or financial condition. (d) The authorized, issued and outstanding capital stock of the Company, including the predecessors of the Company, as of the date of the Prospectus is as set forth in the Prospectus under "Capitalization"; the shares of issued and outstanding capital stock of the Company set forth thereunder have been duly authorized, validly issued and are fully paid and nonassessable; except as set forth in the Prospectus, no options, warrants, or other rights to purchase, agreements or other obligations to issue, or agreements or other rights to convert any obligation into, any shares of capital stock of the Company have been granted or entered into by the Company; and the capital stock conforms to all statements relating thereto contained in the Registration Statement and Prospectus. (e) The Units and the Shares are duly authorized, and when issued and delivered pursuant to this Agreement, will be duly authorized, validly issued, fully paid and nonassessable and free of preemptive rights of any security holder of the Company. Neither the filing of the Registration Statement nor the offering or sale of the Units as contemplated in this Agreement gives rise to any rights, other than those which have been waived or satisfied, for or relating to the registration of any shares of Common Stock, except as described in the Registration Statement. The Warrants have been duly authorized and, when issued and delivered pursuant to this Agreement, will have been duly executed, issued and delivered and will constitute valid and legally binding obligations of the Company enforceable in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency or other laws affecting the right of creditors generally or by general equitable principles, and holders thereof will be entitled to the benefits provided by the warrant agreement pursuant to which such Warrants are to be issued (the "Warrant Agreement"), which will be substantially in the form filed as an exhibit to the Registration Statement. The shares of Common Stock issuable upon exercise of the Warrants have been reserved for issuance upon the exercise of the Warrants and when issued in accordance with the terms of the Warrants and Warrant Agreement, will be duly and validly authorized, validly issued, fully paid and non-assessable, and free of preemptive rights and no personal liability will attach to the ownership thereof. The Warrant Agreement has been duly authorized and, when executed and delivered pursuant to this Agreement, will have been duly executed and delivered and will constitute the valid and legally binding obligation of the Company enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency or other laws affecting the rights of creditors generally or by general equitable principles. The Shares and the Warrants contained in the Underwriter's Options (as defined in the Registration Statement) have been duly authorized and, when duly issued and delivered, such Shares and Warrants will constitute valid and legally binding obligations of the Company enforceable in accordance with their terms and entitled to the benefits provided by the Underwriter s Options, except as enforceability may be limited by bankruptcy, insolvency or other laws affecting the rights of creditors generally or by general equitable principles and the indemnification contained in paragraph 7 of the Underwriter's Options may be unenforceable. The shares of Common Stock included in the Underwriter's Options (and the shares of Common Stock issuable upon exercise of the Warrants included therein) when issued and sold, will be duly authorized, validly issued, fully paid and non-assessable and free of preemptive rights and no personal liability will attach to the ownership thereof. (f) This Agreement and the Underwriter's Options have been duly and validly authorized, executed, and delivered by the Company. The Company has full power and authority to authorize, issue, and sell the Units to be sold by it hereunder on the terms and conditions set forth herein, and no consent, approval, authorization or other order of any governmental authority is required in connection with such authorization, execution and delivery or in connection with the authorization, issuance, and sale of the Units or the Underwriter's Options, except such as may be required under the Act, state securities laws or by the National Association of Securities Dealers, Inc. (The "NASD"). (g) Except as described in the Prospectus, or which would not have a material adverse effect on the condition (financial or otherwise), business prospects, net worth or properties of the Company taken as a whole (a "Material Adverse Effect"), the Company is not in violation, breach, or default of or under, and consummation of the transactions herein contemplated and the fulfillment of the terms of this Agreement will not conflict with, or result in a breach or violation of, any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge, or encumbrance upon any of the property or assets of the Company pursuant to the terms of, any material indenture, mortgage, deed of trust, loan agreement, or other agreement or instrument to which the Company is a party or by which the Company may be bound or to which any of the property or assets of the Company is subject, nor will such action result in any violation of the provisions of the articles of incorporation or the by-laws of the Company, as amended, or any statute or any order, rule or regulation applicable to the Company of any court or of any regulatory authority or other governmental body having jurisdiction over the Company. (h) Subject to the qualifications stated in the Prospectus, the Company has good and marketable title to all properties and assets described in the Prospectus as owned by it, free and clear of all liens, charges, encumbrances or restrictions, except such as are not materially significant or important in relation to its business; all of the material leases and subleases under which the Company is the lessor or sublessor of properties or assets or under which the Company holds properties or assets as lessee or sublessee as described in the Prospectus are in full force and effect, and, except as described in the Prospectus, the Company is not in default in any material respect with respect to any of the terms or provisions of any of such leases or subleases, and, to the best knowledge of the Company, no claim has been asserted by anyone adverse to rights of the Company as lessor, sublessor, lessee, or sublessee under any of the leases or subleases mentioned above, or affecting or questioning the right of the Company to continued possession of the leased or subleased premises or assets under any such lease or sublease except as described or referred to in the Prospectus; and the Company owns or leases all such properties described in the Prospectus as are necessary to its operations as now conducted and, except as otherwise stated in the Prospectus, as proposed to be conducted as set forth in the Prospectus. (i) Rosenberg Rich Baker Berman & Company, P.A. who have given their report on certain financial statements filed with the Commission as a part of the Registration Statement, are with respect to the Company, independent public accountants within the meaning of the Act and the Rules and Regulations. (j) The financial statements, and schedules together with related notes, set forth in the Prospectus or the Registration Statement present fairly the financial position and results of operations and changes in cash flow position of the Company on the basis stated in the Registration Statement, at the respective dates and for the respective periods to which they apply. Said statements and schedules and related notes have been prepared in accordance with generally accepted accounting principles applied on a basis which is consistent during the periods involved except as disclosed in the Prospectus and Registration Statement. The information set forth under the caption "Selected Financial Data" in the Prospectus fairly present, on the basis stated in the Prospectus, the information included therein. (k) Subsequent to the respective dates as of which information is given in the Registration Statement and Prospectus and except as otherwise disclosed or contemplated therein, the Company has not incurred any liabilities or obligations, direct or contingent, not in the ordinary course of business, or entered into any transaction not in the ordinary course of business, which would have a Material Adverse Effect, and there has not been any change in the capital stock of, or any incurrence of long-term debt by, the Company or any issuance of options, warrants or other rights to purchase the capital stock of the Company or any material adverse change or any development involving, so far as the Company can now reasonably foresee a prospective adverse change in the condition (financial or other), net worth, results of operations, business, key personnel or properties of them which would have a Material Adverse Effect. (l) Except as set forth in the Prospectus, there is not now pending or, to the knowledge of the Company, threatened, any action, suit or proceeding to which the Company is a party before or by any court or governmental agency or body, which might result in a Material Adverse Effect on the Company, nor are there any actions, suits or proceedings related to environmental matters or related to discrimination on the basis of age, sex, religion or race; and no labor disputes involving the employees of the Company exist or to the knowledge of the Company are threatened which might be expected to have a Material Adverse Effect. (m) Except as disclosed in the Prospectus, the Company has filed all necessary federal, state, and foreign income and franchise tax returns required to be filed as of the date hereof (taking into account all extensions of time to file) and has paid all taxes shown as due thereon; and there is no tax deficiency which has been asserted against the Company. (n) Except as disclosed in the Registration Statement, the Company has sufficient licenses, permits, and other governmental authorizations currently necessary for the conduct of its business or the ownership of its properties as described in the Prospectus and is in all material respects complying therewith and owns or possesses adequate rights to use all material patents, patent applications, trademarks, service marks, trade-names, trademark registrations, service mark registrations, copyrights, and licenses necessary for the conduct of such business and had not received any notice of conflict with the asserted rights of others in respect thereof. To the best knowledge of the Company, none of the activities or business of the Company or its subsidiaries are in violation of, or cause the Company or its subsidiaries to violate, any law, rule, regulation, or order of the United States, any state, county, or locality, or of any agency or body of the United States or of any state, county or locality, the violation of which would have a Material Adverse Effect. (o) The Company has not, directly or indirectly, at any time (i) made any contributions to any candidate for political office, or failed to disclose fully any such contribution in violation of law or (ii) made any payment to any state, federal or foreign governmental officer or official, or other person charged with similar public or quasi-public duties, other than payments or contributions required or allowed by applicable law. The Company's internal accounting controls and procedures are sufficient to cause the Company to comply in all material respects with the Foreign Corrupt Practices Act of 1977, as amended. (p) On the Closing Date (as hereinafter defined) all transfer or other taxes, (including franchise, capital stock or other tax, other than income taxes, imposed by any jurisdiction) if any, which are required to be paid in connection with the sale and transfer of the Units hereunder will have been fully paid or provided for by the Company and all laws imposing such taxes will have been complied with in all material respects. (q) All contracts and other documents of the Company which are, under the Rules and Regulations, required to be filed as exhibits to the Registration Statement have been so filed. (r) Intentionally Omitted. (s) The Company has not entered into any agreement pursuant to which any person is entitled either directly or indirectly to compensation from the Company for services as a finder in connection with the proposed public offering other than as described in the Registration Statement, including under the caption Litigation . (t) Except as disclosed in the Prospectus, no officer, director, or stockholder of the Company or its subsidiaries has any NASD affiliation. (u) No other firm, corporation or person has any rights to underwrite an offering of any of the Company's securities. 2. Employment of the Underwriter; Payment and Delivery On the basis of the representations and warranties herein contained, but subject to the terms and conditions herein set forth: (a) The Company hereby employs the Underwriter as its exclusive agent to sell for its account 1,600,000 Units, the first 1,200,000 Units on a "best efforts, all-or-none" basis, and the remaining 400,000 Units on a "best efforts" basis, at a price of $5.00 per Unit. The Underwriter agrees to use its best efforts as agent, promptly after receipt of written notice of the Effective Date to sell the 1,600,000 Units subject to the terms, provisions and conditions hereinafter mentioned, for a period of not less than ninety (90) calendar days, which may be extended up to an additional ninety (90) calendar days with the consent of the Company and the Underwriter. The period during which the Units are offered shall hereinafter be referred to as the "Offering Period". In the event that less than 1,200,000 Units are sold during the Offering Period, this offering will not be completed, will be withdrawn, none of the Units will be sold during the Offering Period (as such may be extended) and all proceeds will be promptly returned in full by the Escrow Agent (as defined below), without interest (except for interest to be paid relating to any extension beyond the initial 90 days of the offering period, as described in the Registration Statement) or deduction to subscribers, not more than ten (10) business days following the expiration of said Offering Period. (b) All proceeds from subscriptions shall be deposited promptly into a non-interest bearing escrow account to be maintained with____________Bank which account is operated by Continental Stock Transfer & Trust Company ( "Escrow Agent"). All subscriber's checks shall be made payable to "Continental Stock Transfer & Trust Company as Escrow Agent for MEDJET INC." All subscription proceeds will be transmitted to the Escrow Agent no later than noon of the next business day following receipt for deposit into the escrow account. (c) If a minimum of 1,200,000 Units are sold, the Company agrees to issue or have the Units issued in such names and denominations as may be specified by the Underwriter and to deliver the Units on the Closing Date against payment to the Company at $4.50 per Unit for the first 1,300,000 Units sold and $4.775 per Unit for the remaining Units sold, less the non-accountable expense allowance as set forth below. (d) If a minimum of 1,200,000 Units are sold, the Underwriter shall be entitled to receive as compensation (i) a commission of $.50 per Unit for the first 1,300,000 Units sold and $.225 per Unit for the remaining Units sold, which compensation the Underwriter shall be entitled to receive and retain from the proceeds of the sale of the Units prior to transmittal of payment to the Company by the Escrow Agent as indicated in paragraph (c) above; and (ii) $.15 per Unit with respect to all Units sold as a non-accountable expense allowance, which compensation the Underwriter shall be entitled to receive and have retained from the proceeds of the sale of the Units prior to the transmittal of payment to the Company by the Escrow Agent. (e) You shall use your best efforts to require that payments made by purchasers of Units to broker/dealers for Units sold shall be made payable, in cash or by certified or official bank check, to "Continental Stock Transfer & Trust Company as Escrow Agent for MEDJET INC." and will thereafter be delivered to the escrow agent, by twelve o'clock noon of the next business day following receipt at the full public offering price of $5.00 per Unit, together with the name, social security or employer identification number of, and number of Units purchased by, each subscriber. (f) Upon closing of the minimum offering, the release of funds in the Escrow Account shall be made by wire transfers or certified or official bank checks against delivery of the Units and the Underwriter s Options to the Underwriter. Such payment and delivery shall be made at the offices of Bernstein & Wasserman, LLP, 950 Third Avenue, New York, NY 10022 (or at such other place as may be designated by agreement between the Underwriter and the Company) at the earlier of (a) a mutually agreed upon date and time following collection by the Escrow Agent of a minimum of $6,000,000 in offering proceeds or (b) ten (10) business days after the expiration of the Offering Period, such date and time as fixed hereunder for such payment and delivery being herein called the "Closing Date". Certificates for the Units, Common Stock, Warrants and Underwriter s Options so to be delivered will be in such denominations and registered in such names as you request not less than five (5) full business days prior to the Closing Date, and will be made available to you for inspection, checking and packaging at your offices, not less than one (1) full business day prior to the Closing Date. 3. Covenants of the Company. The Company covenants and agrees with the Underwriter that: (a) The Company will use its best efforts to cause the Registration Statement to become effective. If required, the Company will file the Prospectus and any amendment or supplement thereto with the Commission in the manner and within the time period required by Rule 424(b) under the Act. Upon notification from the Commission that the Registration Statement has become effective, the Company will so advise the Underwriter and will not at any time, whether before or after the Effective Date, file any amendment to the Registration Statement or supplement to the Prospectus of which the Underwriter shall not previously have been advised and furnished with a copy or to which the Underwriter or its counsel shall have reasonably objected in writing or which is not in compliance with the Act and the Rules and Regulations. At any time prior to the later of (A) the completion by the Underwriter of the distribution of the Units contemplated hereby (but in no event more than nine months after the date on which the Registration Statement shall have become or been declared effective) and (B) 25 days after the date on which the Registration Statement shall have become or been declared effective, the Company will prepare and file with the Commission, promptly upon the Underwriter's request, any amendments or supplements to the Registration Statement or Prospectus which, in the opinion of counsel to the Company and the Underwriter, may be reasonably necessary or advisable in connection with the distribution of the Units. As soon as the Company is advised thereof, the Company will advise the Underwriter, and provide the Underwriter copies of any written advice, of the receipt of any comments of the Commission, of the effectiveness of any post-effective amendment to the Registration Statement, of the filing of any supplement to the Prospectus or any amended Prospectus, of any request made by the Commission for an amendment of the Registration Statement or for supplementing of the Prospectus or for additional information with respect thereto, of the issuance by the Commission or any state or regulatory body of any stop order or other order or threat thereof suspending the effectiveness of the Registration Statement or any order preventing or suspending the use of any preliminary prospectus, or of the suspension of the qualification of the Units for offering in any jurisdiction, or of the institution of any proceedings for any of such purposes, and will use its best efforts to prevent the issuance of any such order, and, if issued, to obtain as soon as possible the lifting thereof. [The Company has caused to be delivered to the Underwriter copies of each Preliminary Prospectus, and the Company has consented and hereby consents to the use of such copies for the purposes permitted by the Act]. The Company authorizes the Underwriter and dealers to use the Prospectus in connection with the sale of the Units for such period as in the opinion of counsel to the Underwriter and the Company the use thereof is required to comply with the applicable provisions of the Act and the Rules and Regulations. In case of the happening, at any time within such period as a Prospectus is required under the Act to be delivered in connection with sales by the Underwriter or dealer, of any event of which the Company has knowledge and which materially affects the Company or the securities of the Company, or which in the opinion of counsel for the Company and counsel for the Underwriter should be set forth in an amendment of the Registration Statement or a supplement to the Prospectus in order to make the statements therein not then misleading, in light of the circumstances existing at the time the Prospectus is required to be delivered to a purchaser of the Units or in case it shall be necessary to amend or supplement the Prospectus to comply with law or with the Rules and Regulations, the Company will notify the Underwriter promptly and forthwith prepare and furnish to the Underwriter copies of such amended Prospectus or of such supplement to be attached to the Prospectus, in such quantities as the Underwriter may reasonably request, in order that the Prospectus, as so amended or supplemented, will not contain any untrue statement of a material fact or omit to state any material facts necessary in order to make the statements in the Prospectus, in the light of the circumstances under which they are made, not misleading. The preparation and furnishing of any such amendment or supplement to the Registration Statement or amended Prospectus or supplement to be attached to the Prospectus shall be without expense to the Underwriter, except that in case the Underwriter is required, in connection with the sale of the Units to deliver a Prospectus nine months or more after the effective date of the Registration Statement, the Company will upon request of and at the expense of the Underwriter, amend or supplement the Registration Statement and Prospectus and furnish the Underwriter with reasonable quantities of prospectuses complying with Section 10(a)(3) of the Act. The Company will comply with the Act, the Rules and Regulations and the Securities Exchange Act of 1934 (the "Exchange Act") and the rules and regulations thereunder in connection with the offering and issuance of the Units. (b) The Company will furnish such information as may be required and will otherwise cooperate and use its best efforts to qualify to register the Units for sale under the securities or "blue sky" laws of such jurisdictions as the Underwriter may reasonably designate and will make such applications and furnish such information as may be required for that purpose and to comply with such laws, provided the Company shall not be required to qualify as a foreign corporation or a dealer in securities or to execute a general consent of service of process in any jurisdiction in any action other than one arising out of the offering or sale of the Units. The Company will, from time to time, prepare and file such statements and reports as are or may be required to continue such qualification in effect for so long a period as the counsel to the Company and the Underwriter deem reasonably necessary, but not for a period of less than three (3) years. (c) If the sale of the Units provided for herein is not consummated as a result of the Company s actions or failure to take such actions as the Underwriter believes are reasonably required to complete the transaction, the Company shall pay all costs and expenses incurred by it which are incident to the performance of the Company's obligations hereunder, including but not limited to, all of the expenses itemized in Section 8, including the accountable expenses of the Underwriter which shall not exceed $150,000 (including the reasonable fees and expenses of counsel to the Underwriter)provided, however, that if the Company files a registration statement or signs a letter of intent, or any other agreement involving transactions contemplated by this Agreement, with another NASD member firm within a period of twelve (12) months from the termination of this offering, the Company shall pay the Underwriter promptly an aggregate of $300,000 (less any amount previously paid pursuant to this paragraph). If the sale of the Units provided herein is not consummated and the reasons therefore are reasonably related to a Material Adverse Effect on the Company, the Company shall pay the Underwriter promptly $100,000. In the event of the sale or merger of the Company, any significant subsidiary or any significant assets thereof (hereinafer, a Transaction ) from the date hereof prior to the Closing Date and the closing of the public offering contemplated hereby does not occur, the Company shall pay the Underwriter, as long as the Underwriter is diligently attempting to close the offering, three hundred thousand dollars ($300,000). (d) The Company will use its best efforts (i) to cause a registration statement under the Securities Exchange Act of 1934 to be declared effective concurrently with the completion of this offering and will notify you in writing immediately upon the effectiveness of such registration statement, and (ii) to obtain and keep current a listing in the Standard & Poors or Moody's OTC Industrial Manual for a period of five (5) years from the Effective Date. (e) For so long as the Company is a reporting company under either Section 12(g) or 15(d) of the Securities Exchange Act of 1934, the Company, at its expense, will furnish to its stockholders an annual report (including financial statements audited by independent public accountants), in reasonable detail and at its expense, will furnish to the Underwriter during the period ending five (5) years from the date hereof, (i) as soon as practicable after the end of each fiscal year, but no earlier than the filing of such information with the Commission, a balance sheet of the Company and any of its subsidiaries as at the end of such fiscal year, together with statements of income, surplus and cash flow of the Company and any subsidiaries for such fiscal year, all in reasonable detail and accompanied by a copy of the certificate or report thereon of independent accountants; (ii) as soon as practicable after the end of each of the first three fiscal quarters of each fiscal year, but no earlier than the filing of such information with the Commission, consolidated summary financial information of the Company for such quarter in reasonable detail; (iii) as soon as they are publicly available, a copy of all reports (financial or other) mailed to security holders; (iv) as soon as they are available, a copy of all non-confidential reports and financial statements furnished to or filed with the Commission or any securities exchange or automated quotation system on which any class of securities of the Company is listed; and (v) such other information as you may from time to time reasonably request. In addition, the Company shall deliver to the Underwriter for a three (3) year period following the effective date, copies of all transfer sheets relating to the Company's securities. (f) In the event the Company has an active subsidiary or subsidiaries, such financial statements referred to in subsection (e) above will be on a consolidated basis to the extent the accounts of the Company and its subsidiary or subsidiaries are consolidated in reports furnished to its stockholders generally. (g) The Company will deliver to the Underwriter at or before the Closing Date two signed copies of the Registration Statement including all financial statements and exhibits filed therewith, and of all amendments thereto, and will deliver to the Underwriter such number of conformed copies of the Registration Statement, including such financial statements but without exhibits, and of all amendments thereto, as the Underwriter may reasonably request. [The Company will deliver to or upon the Underwriter's order, from time to time until the effective date of the Registration Statement, as many copies of any Preliminary Prospectus filed with the Commission prior to the effective date of the Registration Statement as the Underwriter may reasonably request.] The Company will deliver to the Underwriter on or promptly after the effective date of the Registration Statement and thereafter for so long as a Prospectus is required to be delivered under the Act, from time to time, as many copies of the Prospectus, in final form, or as thereafter amended or supplemented, as the Underwriter may from time to time reasonably request. (h) The Company will deliver to the Underwriter as soon as it is practicable copies of all reports filed with the Commission under the Exchange Act. (i) The Company will apply the net proceeds from the sale of the Units substantially for the purposes set forth under "Use of Proceeds" in the Prospectus, and will file such reports with the Commission with respect to the sale of the Units and the application of the proceeds therefrom as may be required pursuant to Rule 463 under the Act. (j) The Company will promptly prepare and file with the Commission any amendments or supplements to the Registration Statement, Preliminary Prospectus or Prospectus and take any other action, which in the opinion of counsel to the Underwriter and counsel to the Company, may be reasonably necessary or advisable in connection with the distribution of the Units, and will use its best efforts to cause the same to become effective as promptly as possible. (k) The Company will reserve and keep available that maximum number of its authorized but unissued securities which are issuable upon exercise of the Warrants and Underwriter s Options and warrants thereunder outstanding from time to time. (l) For a period of twenty-four (24) months from the Closing Date, no officers or directors, nor any shareholder of the Company's securities prior to the offering, as well as all holders of restricted securities of the Company, will, directly or indirectly, offer, sell (including any short sale), grant any option for the sale of, transfer or gift (except for estate planning or charitable transfers or other privates sales, provided the transferees agree to be bound by the same restrictions on transfer), acquire any option to dispose of, or otherwise dispose of any shares of capital stock without the prior written consent of the Underwriter, other than as set forth in the Registration Statement. In order to enforce this covenant, the Company shall impose stop-transfer instructions with respect to the shares owned by such persons prior to the offering until the end of such period (subject to any exceptions to such limitation on transferability set forth in the Registration Statement). In addition, all such persons shall waive any of their registration rights with respect to all such securities for such twenty-four (24) month period. In addition, the Company agrees not to file any other registration statement (excluding a registration statement on Form S-8 or successor form so long as the shares of Common Stock offered thereby are also subject to this paragraph 3(l)) to register any securities of the Company for such twenty-four (24) month period, and will not grant any future registration rights without the prior written consent of the Underwriter for the same twenty-four (24) month period. If necessary to comply with any applicable Blue-sky Law, the shares held by such shareholders will be escrowed, as required by such Blue-sky Laws. In addition, the Company shall not issue any shares of its capital stock (or securities convertible into capital stock) for a twenty four (24) month period following the Closing Date other than (i) pursuant to the Warrants, (ii) pursuant to the options already granted under the Company s stock option plan, and (iii) options to purchase up to 200,000 shares of Common Stock under employee stock option plans in accordance with the succeeding sentence, and (iv) Common Stock issued on or after the first anniversary of the Closing Date for consideration at least equal to the Market Price as defined below in this paragraph (l). The Company may grant options to purchase up to 200,000 (150,000 if only 1,200,000 Units are sold) shares of Common Stock under employee stock option plans to the Company s employees, officers, directors or other consultants or advisors during the twenty-four (24) month period following the Closing Date without the prior written consent of the Underwriter; provided that the shares underlying such options do not vest until one (1) year following the grant of such options. The grant of additional options during such period will require the Underwriter's prior written consent. Of the options to purchase such 200,000 shares, the Company may not grant options for 50,000 shares at exercise prices which are less than the Market Price at the date of the grant without the prior written consent of the Underwriter. For purposes of this Agreement, Market Price shall mean (i) the average closing bid price for any ten (10) consecutive trading days within a period of thirty (30) consecutive trading days ending within five (5) days prior to the date of issuance of the Common Stock as reported by the National Association of Securities Dealers, Inc. Automatic Quotation System, or (ii) the last reported sale price, for ten (10) consecutive business days ending within five (5) days of the date of issuance on the primary exchange on which the Common Stock is traded, if the Common Stock is traded on a national securities exchange. (m) Upon completion of this offering, the Company will make all filings required, including registration under the Securities Exchange Act of 1934, to obtain the listing of the Units, Common Stock and Class A Warrants in the NASDAQ system, and will use its best efforts to effect and maintain such listing for at least five years from the date of this Agreement to the extent that the Company has at least 300 record holders of Common Stock. (n) Except for the transactions contemplated by this Agreement, the Company represents that it has not taken and agrees that it will not take, directly or indirectly, any action designed to or which has constituted or which might reasonably be expected to cause or result in the stabilization or manipulation of the price of the Units, Shares, or the Warrants or to facilitate the sale or resale of the Securities. (o) On the Closing Date and simultaneously with the delivery of the Units, the Company shall execute and deliver to you the Underwriter s Options. The Underwriter s Options will be substantially in the form filed as an Exhibit to the Registration Statement. (p) Intentionally omitted. (q) Upon the Closing Dates, the Company will have in force key person life insurance on the life of Eugene Gordon, in the amount of not less than $1,000,000.00 and will use its best efforts to maintain such insurance during the three year period commencing with the First Closing Date. (r) So long as any Warrants are outstanding and the exercise price of the Warrants is less than the market price of the Common Stock, the Company shall use its best efforts to cause post-effective amendments, if required by the Act, to the Registration Statement to become effective in compliance with the Act and without any lapse of time between the effectiveness of any such post-effective amendments and cause a copy of each Prospectus, as then amended, to be delivered to each holder of record of a Warrant and to furnish to the Underwriter and each dealer as many copies of each such Prospectus as such Underwriter or dealer may reasonably request. The Company shall not call for redemption any of the Warrants unless a registration statement covering the securities underlying the Warrants has been declared effective by the Commission and remains current at least until the date fixed for redemption. (s) For a period of five (5) years from the Effective Date, the Company, at its expense, shall cause its regularly engaged independent certified public accountants to review (but not audit) the Company's financial statements for each of the first three (3) fiscal quarters prior to the announcement of quarterly financial information and the filing of the Company's 10-Q quarterly report, provided that the Company shall not be required to file a report of such accountants relating to such review with the Commission. (t) The Underwriter shall have the right to request the Company to use its best efforts to nominate one (1) nominee of the Underwriter for election to the Board of Directors for three (3) years following the Effective Date, and in each case the Company will use its best efforts to cause such nominee to be elected to the Board of Directors. Until such time as the Underwriter exercises its right to require the Company to use its best efforts to cause a nominee of the Underwriter to be elected to the Board of Directors and until such time as such nominee begins to serve on the Board of Directors, the Company agrees to allow a representative designated by the Underwriter from time to time to receive timely, written notice of all Board of Directors meetings and notice of all telephonic Board meetings and the right to attend all Board meetings and participate in all telephonic Board meetings. The Underwriter shall also have the right to obtain copies of the minutes from all Board of Directors meetings for three (3) years following the Effective Date of the Registration Statement, whether or not a representative of the Underwriter attends or participates in any such Board meeting. The Company agrees to reimburse the Underwriter immediately upon the Underwriter's request therefor of any reasonable travel and lodging expenses directly incurred by the Underwriter in connection with its representative attending Company Board meetings on the same basis for other Board members. In addition, the Company shall compensate such representative as it does all other outside directors of the Company. (u) Intentionally omitted. (v) The Company agrees to pay the Underwriter a Warrant Solicitation fee of 8.0% of the exercise price of any of the Warrants exercised beginning one (1) year after the Effective Date if (a) the Market Price of the Company's Common Stock on the date the Warrant is exercised in greater than the exercise price of the Warrant, (b) the exercise of the Warrant is solicited by the Underwriter and the Underwriter is designated in writing by the holder of such Warrant as the soliciting broker, (c) the Warrant is not held in a discretionary account, (d) disclosure of the compensation arrangement is made upon the sale and exercise of the Warrants, (e) soliciting the exercise is not in violation of Rule 10b-6 under the Securities Exchange Act of 1934, and (f) solicitation of the exercise is in compliance with the NASD Notice to Members 81-38 (September 22, 1981). (w) Intentionally omitted. (x) Intentionally omitted. (y) On or prior to the date hereof, the Company shall have entered into an employment agreement with Eugene Gordon on terms and conditions satisfactory to the Underwriter. 4. Conditions of Underwriters' Obligation. The obligations of the Underwriter to perform its obligations hereunder are subject to the accuracy (as of the date hereof, and as of the Closing Date) of and compliance with the representations and warranties of the Company herein, to the performance by the Company of its obligations hereunder, and to the following conditions: (a) The Registration Statement shall have become effective and you shall have received notice thereof not later than 10:00 a.m., New York time, on the day following the date of this Agreement, or at such later time or on such later date as to which the Underwriter may agree in writing; on or prior to the Closing Date no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that or a similar purpose shall have been instituted or shall be pending or, to the Underwriter's knowledge or to the knowledge of the Company, shall be contemplated by the Commission; any request on the part of the Commission for additional information shall have been complied with to the satisfaction of the Commission; and no stop order shall be in effect denying or suspending effectiveness of such qualification nor shall any stop order proceedings with respect thereto be instituted or pending or threatened. If required, the Prospectus shall have been filed with the Commission in the manner and within the time period required by Rule 424(b) under the Act. (b) (A) At the Closing Date, you shall have received the opinion, dated as of the Closing Date, of Kelley Drye & Warren, counsel for the Company, in form and substance satisfactory to counsel for the Underwriter, to the effect that: (i) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware, with all requisite corporate power and authority to own its properties and conduct its business as described in the Registration Statement and Prospectus and, to its knowledge, is duly qualified or licensed to do business as a foreign corporation and is in good standing in each other jurisdiction in which the ownership or leasing of its properties or conduct of its business requires such qualification except where the failure to qualify or be licensed will not have a Material Adverse Effect; (ii) the authorized capitalization of the Company as of the date of the prospectus is as set forth under "Capitalization" in the Prospectus; all shares of the Company's outstanding capital stock have been duly authorized, validly issued, fully paid and non-assessable and conform in all material respects to the description thereof contained in the Prospectus; to such counsel's knowledge the outstanding shares of capital stock of the Company have not been issued in violation of the preemptive rights of any shareholder and the shareholders of the Company do not have any preemptive rights or other rights to subscribe for or to purchase, nor are there any restrictions upon the voting or transfer of any of the capital stock except as provided in the Prospectus; the Common Stock, the Warrants, the Underwriter s Options, and the Warrant Agreement conform in all material respects to the respective descriptions thereof contained in the Prospectus; the Shares have been, and the shares of Common Stock to be issued upon exercise of the Warrants and the Underwriter s Options, upon issuance in accordance with the terms of such Warrants, the Warrant Agreement and Underwriter s Options will have been duly authorized and, when issued and delivered in accordance with their respective terms and applicable Delaware law, will be duly and validly issued, fully paid, non-assessable, free of preemptive rights and no personal liability will attach to the ownership thereof; all prior sales by the Company of the Company's securities have been made in compliance with or under an exemption from registration under the Act and applicable state securities laws; a sufficient number of shares of Common Stock has been reserved for issuance upon exercise of the Warrants and Underwriter s Options (giving effect to the conversion ratio in effect on the Closing Date) and to the best of such counsel's knowledge, neither the filing of the Registration Statement nor the offering or sale of the Units as contemplated by this Agreement gives rise to any registration rights other than (i) those which have been waived or satisfied for or relating to the registration of any shares of Common Stock or (ii) those contained in the Underwriter s Options. (iii) this Agreement, the Underwriter s Options, and the Warrant Agreement have been duly and validly authorized, executed, and delivered by the Company; (iv) the certificates evidencing the shares of Common Stock comply with the Delaware General Corporation Law; the Warrants will be exercisable for shares of Common Stock in accordance with the terms of the Warrants and the Warrant Agreement and at the prices therein provided for; (v) except as otherwise disclosed in the Registration Statement, such counsel knows of no pending or threatened legal or governmental proceedings to which the Company is a party which would materially adversely affect the business, property, financial condition, or operations of the Company; or which question the validity of the Securities, this Agreement, the Warrant Agreement, or the Underwriter s Options, or of any action taken or to be taken by the Company pursuant to this Agreement, the Warrant Agreement, or the Underwriter s Options; to such counsel's knowledge there are no governmental proceedings or regulations required to be described or referred to in the Registration Statement which are not so described or referred to; (vi) the execution and delivery of this Agreement, the Underwriter s Options, or the Warrant Agreement and the incurrence of the obligations herein and therein set forth and the consummation of the transactions herein or therein contemplated, will not result in a breach or violation of, or constitute a default under the certificate or articles of incorporation or by-laws of the Company, or to the best knowledge of counsel, in the performance or observance of any material obligations, agreement, covenant, or condition contained in any bond, debenture, note, or other evidence of indebtedness or in any material contract, indenture, mortgage, loan agreement, lease, joint venture, or other agreement or instrument to which the Company is a party or by which they or any of their properties is bound or in violation of any order, rule, regulation, writ, injunction, or decree of any government, governmental instrumentality, or court, domestic or foreign, the result of which would have a Material Adverse Effect; (vii) the Registration Statement has become effective under the Act, and to the best of such counsel's knowledge, (a) no stop order suspending the effectiveness of the Registration Statement is in effect, and (b) no proceedings for that purpose have been instituted or are pending before, or threatened by, the Commission; the Registration Statement and the Prospectus (except for (i) the financial statements and other financial data and (ii) certain information relating to patent law and regulatory matters relating to the Federal Food and Drug Administration) contained therein, or omitted therefrom, as to which such counsel need express no opinion) as of the Effective Date comply as to form in all material respects with the applicable requirements of the Act and the Rules and Regulations; (viii) in the course of preparation of the Registration Statement and the Prospectus such counsel has participated in conferences with the President of the Company with respect to the Registration Statement and Prospectus and such discussions did not disclose to such counsel any information which gives such counsel reason to believe that the Registration Statement or any amendment thereto at the time it became effective contained any untrue statement of a material fact required to be stated therein or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectus or any supplement thereto contains any untrue statement of a material fact or omits to state a material fact necessary in order to make statements therein, in light of the circumstances under which they were made, not misleading (except, in the case of both the Registration Statement and any amendment thereto and the Prospectus and any supplement thereto, for the financial statements, notes thereto and other financial information (including without limitation, the pro forma financial information) and schedules contained therein, as to which such counsel need express no opinion); (ix) except for the exceptions set forth in paragraph (vii) above, all descriptions in the Registration Statement and the Prospectus, and any amendment or supplement thereto, of contracts and other agreements to which the Company is a party are accurate and fairly present in all material respects the information required to be shown, and such counsel is familiar with all contracts and other agreements referred to in the Registration Statement and the Prospectus and any such amendment or supplement or filed as exhibits to the Registration Statement, and such counsel does not know of any contracts or agreements to which the Company is a party of a character required to be summarized or described therein or to be filed as exhibits thereto which are not so summarized, described or filed; (x) no authorization, approval, consent, or license of any governmental or regulatory authority or agency is necessary in connection with the authorization, issuance, transfer, sale, or delivery of the Units by the Company, in connection with the execution, delivery, and performance of this Agreement by the Company or in connection with the taking of any action contemplated herein, or the issuance of the Underwriter s Options or the Securities underlying the Underwriter s Options, other than registrations or qualifications of the Units under applicable state or foreign securities or Blue Sky laws and registration under the Act and the NASD; and (xi) the Units, Common Stock and Warrants have been duly authorized for quotation on the National Association of Securities Dealers, Inc. Automatic Quotation System. (xii) Except as disclosed in the Registration Statement, to the best knowledge of such counsel, the Company has sufficient licenses, permits, and other governmental authorizations currently necessary for the conduct of its business or the ownership of its properties as described in the Prospectus and is in all material respects complying therewith. To the best knowledge of such counsel, the business of the Company is not in violation of, or will not cause the Company to violate any law, rule, regulation, or order of the United States, any state, county, or locality, or of any agency or body of the United States, or of any state, county, or locality, the violation of which would have a Material Adverse Effect and are in compliance with all rules and regulations pertaining to the business of the Company. Such opinion shall also cover such matters incident to the transactions contemplated hereby as the Underwriter or counsel for the Underwriter shall reasonably request. In rendering such opinion, such counsel may rely upon certificates of any officer of the Company or public officials as to matters of fact; and may rely as to all matters of law other than the law of the United States or of the State of Delaware upon opinions of counsel satisfactory to the Underwriter, in which case the opinion shall state that they have no reason to believe that the Underwriter and they are not entitled to so rely. (B) At the Closing Date, you shall have received the opinion of Graham & James, special patent counsel, in form and substance satisfactory to you, identifying any patent searches conducted with respect to the Company s patent applications and providing that the description in the Registration Statement with respect to the status of such patent applications is accurate, that the Company owns the entire right, title and interest in and to such applications as described in the Prospectus and has not received any notice of conflict with the asserted rights of others in respect thereof and that the statements on the Prospectus under the captions "Prospectus Summary-The Company", "Risk Factors-Dependence on Patents and Proprietary Rights" and"Business-Patent Application" are true and correct. (C) At the Closing Date, you shall have received the opinion of Dean E. Snyder, Esq., special regulatory counsel, in form and substance satisfactory to you, providing that (i) the description in the Registration Statement regarding the FDA and governmental regulation related thereto is true, complete and accurate in all material respects including those statements relating thereto contained in the following sections: Prospectus Summary -- The Company , Risk Factors -- FDA Regulation," Plan of Operation -- 510(k) Notification," Business -- The Company," Business -- U.S. Government Regulation and Business -- Foreign Government Regulation and (ii) where any conclusion with respect to likely treatment of the Company's products by the FDA is stated in the Prospectus, after reasonable investigation, reasonable bases exist for such conclusion and the conclusion is reasonable to the extent qualified in the Prospectus, there being no qualifications known other than those described in the Prospectus. (c) All corporate proceedings and other legal matters relating to this Agreement, the Registration Statement, the Prospectus and other related matters shall be satisfactory to or approved by Bernstein & Wasserman, LLP, counsel to the Underwriter. (d) The Underwriter shall have received a letter prior to the effective date of the Registration Statement and again on and as of the Closing Date from Rosenberg Rich Baker Berman & Company, independent public accountants for the Company, substantially in the form reasonably acceptable to the Underwriter. (e) At the Closing Date, (i) the representations and warranties of the Company contained in this Agreement shall be true and correct in all material respects with the same effect as if made on and as of the Closing Date and the Company shall have performed all of its obligations hereunder and satisfied all the conditions on its part to be satisfied at or prior to such Closing Date; (ii) the Registration Statement and the Prospectus and any amendments or supplements thereto shall contain all statements which are required to be stated therein in accordance with the Act and the Rules and Regulations, and shall in all material respects conform to the requirements thereof, and neither the Registration Statement nor the Prospectus nor any amendment or supplement thereto shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; (iii) there shall have been, since the respective dates as of which information is given, no material adverse change, or to the Company's knowledge, any development involving a prospective material adverse change, in the business, properties, condition (financial or otherwise), results of operations, capital stock, long-term or short-term debt, or general affairs of the Company from that set forth in the Registration Statement and the Prospectus, except changes which the Registration Statement and Prospectus indicate might occur after the effective date of the Registration Statement, and the Company shall not have incurred any material liabilities or entered into any material agreement not in the ordinary course of business other than as referred to in the Registration Statement and Prospectus; (iv) except as set forth in the Prospectus, no action, suit, or proceeding at law or in equity shall be pending or threatened against the Company which would be required to be set forth in the Registration Statement, and no proceedings shall be pending or threatened against the Company before or by any commission, board, or administrative agency in the United States or elsewhere, wherein an unfavorable decision, ruling, or finding would materially and adversely affect the business, property, condition (financial or otherwise), results of operations, or general affairs of the Company and (v) the Underwriter shall have received, at the Closing Date, a certificate signed by each of the President and the principal operating officer of the Company, dated as of the Closing Date, evidencing compliance with the provisions of this subsection (e). (f) Intentionally Omitted. (g) After the first Closing Date (if the maximum offering has not been achieved) the obligations of the Underwriter to purchase and pay for any additional Units will be subject (as of the date hereof and of the such other Closing Dates) to the following additional conditions: (i) The Registration Statement shall remain effective at such Closing Dates, and no stop order suspending the effectiveness thereof shall have been issued and no proceedings for that purpose shall have been instituted or shall be pending, or, to your knowledge or the knowledge of the Company, shall be contemplated by the Commission, and any reasonable request on the part of the Commission for additional information shall have been complied with to the satisfaction of the Commission. (ii) At each such Closing Date there shall have been delivered to you the signed opinions of Kelley Drye & Warren, and Graham & James, counsel and special counsel to the Company, respectively, dated as of such Closing Date, in form and substance reasonably satisfactory to Bernstein & Wasserman, LLP, counsel to the Underwriter, which opinions shall be substantially the same in scope and substance as the opinions furnished to you at the initial Closing Date pursuant to Sections 4(b) hereof, except that such opinions, where appropriate, shall cover the additional Units. (iii) At such Closing Dates there shall have been delivered to you a certificate of the President and the principal operating officer of the Company, dated such Closing Dates, in form and substance reasonably satisfactory to Bernstein & Wasserman, LLP, counsel to the Underwriter, substantially the same in scope and substance as the certificate furnished to you at the initial Closing Date pursuant to Section 4(e) hereof. (iv) At each such Closing Date there shall have been delivered to you a letter in form and substance satisfactory to you from Rosenberg Rich Baker Berman & Company, P.A. dated such Closing Date and addressed to the Underwriter confirming the information in their letter referred to in Section 4(d) hereof and stating that nothing has come to their attention during the period from the ending date of their review referred to in said letter to a date not more than five business days prior to such Closing Date, which would require any change in said letter if it were required to be dated such Closing Date. (v) All proceedings taken at or prior to each such Closing Date in connection with the sale and issuance of the additional Units shall be reasonably satisfactory in form and substance to you, and you and Bernstein & Wasserman, LLP, counsel to the Underwriter, shall have been furnished with all such documents, certificates, and opinions as you may reasonably request in connection with this transaction in order to evidence the accuracy and completeness of any of the representations, warranties or statements of the Company or its compliance with any of the covenants or conditions contained herein. (h) No action shall have been taken by the Commission or the NASD the effect of which would make it improper, at any time prior to a Closing Date (unless cured by the Company within ten (10) business days of notice to the Company of such action), for members of the NASD to execute transactions (as principal or agent) in the Units, Common Stock or the Warrants and no proceedings for the taking of such action shall have been instituted or shall be pending, or, to the knowledge of the Underwriter or the Company, shall be contemplated by the Commission or the NASD. The Company represents that at the date hereof it has no knowledge that any such action is in fact contemplated by the Commission or the NASD. (i) If any of the conditions herein provided for in this Section shall not have been fulfilled in all material respects as of the date indicated, this Agreement and all obligations of the Underwriter under this Agreement may be canceled at, or at any time prior to, each Closing Date by the Underwriter notifying the Company of such cancellation in writing or by telegram at or prior to the applicable Closing Date. Any such cancellation shall be without liability of the Underwriter to the Company. 5. Conditions of the Obligations of the Company. The obligation of the Company to sell and deliver the Units is subject to the following conditions: (a) The Registration Statement shall have become effective not later than 10:00 a.m. New York time, on the day following the date of this Agreement, or on such later date as the Company and the Underwriter may agree in writing. (b) At each Closing Date, no stop orders suspending the effectiveness of the Registration Statement shall have been issued under the Act or any proceedings therefor initiated or threatened by the Commission. If the conditions to the obligations of the Company provided for in this Section have been fulfilled on the initial Closing Date but are not fulfilled after the initial Closing Date and prior to any subsequent Closing Date, then only the obligation of the Company to sell and deliver the Units on any subsequent Closing Date shall be affected. 6. Indemnification. (a) The Company agrees (i) to indemnify and hold harmless the Underwriter and each person, if any, who controls the Underwriter within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act against any losses, claims, damages, or liabilities, joint or several (which shall, for all purposes of this Agreement, include, but not be limited to, all reasonable costs of defense and investigation and all reasonable attorneys' fees), to which such Underwriter or such controlling person may become subject, under the Act or otherwise, and (ii) to reimburse, as incurred, the Underwriter and such controlling persons for any legal or other expenses reasonably incurred in connection with investigating, defending against or appearing as a third party witness in connection with any losses, claims, damages, or liabilities; insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) relate to and arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in (A) the Registration Statement, any Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto, (B) any blue sky application or other document executed by the Company specifically for that purpose containing written information specifically furnished by the Company and filed in any state or other jurisdiction in order to qualify any or all of the Units under the securities laws thereof (any such application, document or information being hereinafter called a "Blue Sky Application"), or arise out of or are based upon the omission or alleged omission to state in the Registration Statement, any Preliminary Prospectus, Prospectus, or any amendment or supplement thereto, or in any Blue Sky Application, a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that the Company will not be required to indemnify the Underwriter and any controlling person or be liable in any such case to the extent, but only to the extent, that any such loss, claim, damage, or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission is made in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Underwriter specifically for use in the preparation of the Registration Statement or any such amendment or supplement thereof or any such Blue Sky Application or any such Preliminary Prospectus or the Prospectus or any such amendment or supplement thereto, provided, further that the indemnity with respect to any Preliminary Prospectus shall not be applicable on account of any losses, claims, damages, liabilities, or litigation arising from the sale of Units to any person if the misstatement or omission was corrected in the Prospectus but a copy of the Prospectus was not delivered to such person by the Underwriter in accordance with this Agreement at or prior to the written confirmation of the sale to such person. This indemnity will be in addition to any liability which the Company may otherwise have. (b) The Underwriter will indemnify and hold harmless the Company, each of its directors, each nominee (if any) for director named in the Prospectus, each of its officers who have signed the Registration Statement and each person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, against any losses, claims, damages, or liabilities (which shall, for all purposes of this Agreement, include, but not be limited to, all costs of defense and investigation and reasonable attorneys' fees) to which the Company or any such director, nominee, officer, or controlling person may become subject under the Act or otherwise, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, any Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Registration Statement, any Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto, or any Blue Sky Application in reliance upon and in conformity with written information furnished to the Company by the Underwriter specifically for use in the preparation thereof and for any violation by the Underwriter in the sale of such Units of any applicable state or federal law or any rule, regulation or instruction thereunder relating to violations based on unauthorized statements by Underwriter or its representative, provided that such violation is not based upon any violation of such law, rule, or regulation or instruction by the party claiming indemnification or inaccurate or misleading information furnished by the Company or its representatives, including information furnished to the Underwriter as contemplated herein. This indemnity agreement will be in addition to any liability which the Underwriter may otherwise have. (c) Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section, notify in writing the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party otherwise than under this Section unless the omission so to notify prejudices the indemnifying party. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate in, and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, subject to the provisions herein stated, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. The indemnified party shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall not be at the expense of the indemnifying party if the indemnifying party has assumed the defense of the action with counsel reasonably satisfactory to the indemnified party; provided that the reasonable fees and expenses of such counsel shall be at the expense of the indemnifying party if (i) the employment of such counsel has been specifically authorized in writing by the indemnifying party or (ii) the named parties to any such action (including any impleaded parties) include both the indemnified party and the indemnifying party and in the reasonable judgment of the counsel to the indemnified party, there is a conflict of interest between the indemnifying party and the indemnified party in the conduct of the defense (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of such indemnified party, it being understood, however, that the indemnifying party shall not, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys for the indemnified party, which firm shall be designated in writing by the indemnified party). No settlement of any action against an indemnified party shall be made without the consent of the indemnified party, which shall not be unreasonably withheld in light of all factors of importance to such indemnified party. If it is ultimately determined that indemnification is not permitted, then an indemnified party will return all monies advanced to the indemnifying party with interest thereon. 7. Contribution. In order to provide for just and equitable contribution under the Act in any case in which the indemnification provided in Section 6 hereof is requested but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case, notwithstanding the fact that the express provisions of Section 6 provide for indemnification in such case, then the Company and the Underwriter shall contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (which shall, for all purposes of this Agreement, include, but not be limited to, all reasonable costs of defense and investigation and all reasonable attorneys' fees) (after contribution from others) such proportional amount of such losses, claims, damages, or liabilities represented by the percentage that the underwriting discount per Unit appearing on the cover page of the Prospectus plus all other compenation paid to the Underwriter bears to the public offering price appearing thereon and the Company shall be responsible for the remaining portion, provided, however, that if such allocation is not permitted by applicable law, then allocated in such proportion as is appropriate to reflect relative benefits but also the relative fault of the Company and the Underwriter and controlling persons, in the aggregate, in connection with the statements or omissions which resulted in such damages and other relevant equitable considerations shall also be considered. The relative fault shall be determined by reference to, among other things, whether in the case of an untrue statement of a material fact or the omission to state a material fact, such statement or omission relates to information supplied by the Company or the Underwriter and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such untrue statement or omission. The Company and the Underwriter agree that it would not be just and equitable if the respective obligations of the Company and the Underwriter to contribute pursuant to this Section 7 were to be determined by pro rata or per capita allocation of the aggregate damages or by any other method of allocation that does not take account of the equitable considerations referred to in this Section 7. No person guilty of a fraudulent misrepresentation (within the meaning of Section 1(f) of the Act) shall be entitled to contribution from any person who is not guilty of such fraudulent misrepresentation. As used in this paragraph, the word "Company" includes any officer, director, or person who controls the Company within the meaning of Section 15 of the Act. If the full amount of the contribution specified in this paragraph is not permitted by law, then the Underwriter and each person who controls the Underwriter shall be entitled to contribution from the Company, its officers, directors, and controlling persons, and the Company, its officers, directors, and controlling persons shall be entitled to contribution from the Underwriter to the full extent permitted by law. The foregoing contribution agreement shall in no way affect the contribution liabilities of any persons having liability under Section 11 of the Act other than the Company and the Underwriter. No contribution shall be requested with regard to the settlement of any matter from any party who did not consent to the settlement; provided, however, that such consent shall not be unreasonably withheld in light of all factors of importance to such party. 8. Costs and Expenses. (a) Whether or not this Agreement becomes effective or the sale of the Units by the Underwriter is consummated, the Company will pay all costs and expenses incident to the performance of this Agreement by the Company including, but not limited to, the fees and expenses of counsel to the Company and of the Company's accountants; the costs and expenses incident to the preparation, printing, filing, and distribution under the Act of the Registration Statement (including the financial statements therein and all amendments and exhibits thereto), Preliminary Prospectus, and the Prospectus, as amended or supplemented, the fee of the NASD in connection with the filing required by the NASD relating to the offering of the Units contemplated hereby; all documented expenses, including reasonable fees and disbursements of counsel to the Underwriter, in connection with the qualification of the Units under the state securities or blue sky laws which the Underwriter shall designate (which legal fees (not including filing fees or expenses) shall not exceed $35,000); the cost of printing and furnishing to the Underwriter copies of the Registration Statement, each Preliminary Prospectus, if applicable, the Prospectus, this Agreement, and the Blue Sky Memorandum, any fees relating to the listing of the Units, Common Stock, and Warrants on NASDAQ or any other securities exchange; the cost of printing the certificates representing the securities comprising the Units; the fees of the transfer agent and warrant agent, reasonable and traditional advertising costs, meetings and presentation costs; reasonable fees to due diligence experts, if any, incurred by the Underwriter for intellectual property matters not to exceed $25,000; and reasonable costs of bound volumes and prospectus memorabilia. The Company shall pay any and all taxes (including any transfer, franchise, capital stock, or other tax imposed by any jurisdiction) on sales of the Units hereunder. The Company will also pay all costs and expenses incident to the furnishing of any amended Prospectus or of any supplement to be attached to the Prospectus as called for in Section 3(a) of this Agreement except as otherwise set forth in said Section. (b) In addition to the foregoing expenses the Company shall at the Closing Date pay to the Underwriter a non-accountable expense allowance equal to 3.0% of the gross proceeds received from the sale of all Units sold. In the event the transactions contemplated hereby are not consummated by reason of any action by the Underwriter (except if such prevention is based upon a breach by the Company of any covenant, representation, or warranty contained herein or because any other condition to the Underwriter's obligations hereunder required to be fulfilled by the Company is not fulfilled other than because the Underwriter failed to take an action necessary to such fulfillment) the Company shall not be liable for any expenses of the Underwriter, including the Underwriter's legal fees. In the event the transactions contemplated hereby are not consummated by reason of the Company s actions or failure to take such actions as the Underwriter believes are reasonably required to complete the transaction contemplated herein, the Company shall be liable for the actual accountable out-of-pocket expenses of the Underwriter, including reasonable legal fees which shall not exceed $150,000 (less any amount previously paid or payable pursuant to the next sentence). In the event the transactions contemplated hereby are not consummated due to a material adverse change in the business or financial results, prospects or condition of the Company or to adverse market conditions, the Company shall be liable for the actual out-of-pocket expenses of the Underwriter, including reasonable legal fees, not to exceed in the aggregate $100,000. As described in paragraph 3(c), if the Company files a registration statement or signs a letter of intent, or any other agreement involving transactions contemplated by this Agreement, with another NASD member firm within a period of twelve (12) months from the termination of this offering, the Company shall pay the Underwriter promptly an aggregate of $300,000 (less any amount previously paid pursuant to this paragraph). As described in paragraph 3(c), in the event of the sale or merger of the Company, any significant subsidiary or any significant assets thereof (hereinafter, a Transaction ) from the date hereof prior to the Closing Date and the closing of the public offering contemplated hereby does not occur, the Company shall pay the Underwriter, as long as the Underwriter is diligently attempting to close the offering, three hundred thousand dollars ($300,000). (c) Except as disclosed in the Registration Statement, including under the caption Litigation, no person is entitled to the Company s knowledge, either directly or indirectly to compensation from the Company, from the Underwriter or from any other person for services as a finder in connection with the proposed offering, and the Company agrees to indemnify and hold harmless the Underwriter, against any losses, claims, damages, or liabilities, joint or several (which shall, for all purposes of this Agreement, include, but not be limited to, all costs of defense and investigation and all reasonable attorneys' fees), to which the Underwriter or person may become subject insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon the claim of any person (other than an employee of the party claiming indemnity) or entity that he or it is entitled to a finder's fee in connection with the proposed offering by reason of such person's or entity's influence or prior contact with the indemnifying party. 9. Effective Date. The Agreement shall become effective upon its execution except that the Underwriter may, at its option, delay its effectiveness until 11:00 a.m., New York time on the first full business day following the effective date of the Registration Statement, or at such earlier time on such business day after the effective date of the Registration Statement as the Underwriter in its discretion shall first commence the initial public offering of the Units. This Agreement may be terminated by the Underwriter at any time before it becomes effective as provided above, except that Sections 3(c), 6, 7, 8, 12, 13, 14, and 15 shall remain in effect notwithstanding such termination. 10. Termination. (a) After this Agreement becomes effective, this Agreement, except for Sections 3(c), 6, 7, 8, 12, 13, 14, and 15 hereof, may be terminated at any time prior to the Closing Date, by the Underwriter if in the Underwriter's reasonable judgment it is impracticable to offer for sale or to enforce contracts made by the Underwriter for the resale of the Units agreed to be purchased hereunder by reason of (i) the Company having sustained a material loss, whether or not insured, by reason of fire, earthquake, flood, accident, or other calamity, or from any labor dispute or court or government action, order, or decree, (ii) trading in securities on Nasdaq having been suspended or limited, (iii) material governmental restrictions having been imposed on trading in securities generally (not in force and effect on the date hereof), (iv) a banking moratorium having been declared by federal or New York state authorities, (v) an outbreak of major international hostilities involving the United States or other substantial national or international calamity having occurred, (vi) a pending or threatened legal or governmental proceeding or action relating generally to the Company's business, or a notification having been received by the Company of the threat of any such proceeding or action, which would materially adversely affect the Company; (vii) except as contemplated by the Prospectus, the Company is merged with or consolidated into or acquired by another company or group or there exists a binding legal commitment for the foregoing or any other material change of ownership or control occurs; (viii) the adoption of a federal law, rule or regulation which, in the reasonable belief of the Underwriter, would have a material adverse impact on the business or financial condition of the Company, (ix) any material adverse change in the financial or securities markets beyond normal market fluctuations having occurred since the date of this Agreement, or (x) any material adverse change having occurred, since the respective dates of which information is given in the Registration Statement and Prospectus, in the earnings, business prospects, or general condition of the Company, financial or otherwise, whether or not arising in the ordinary course of business. (b) If the Underwriter elects to prevent this Agreement from becoming effective or to terminate this Agreement as provided in this Section 10, the Company shall be promptly notified by the Underwriter, by telephone or telegram, confirmed by letter. 11. Underwriter s Options. At or before the Closing Date, the Company will sell the Underwriter or its designees for a consideration of $.001 per option and upon the terms and conditions set forth in the form of the Underwriter s Options annexed as an exhibit to the Registration Statement, Underwriter s Options to purchase a number of Units equal to 10% of the Units sold hereunder on such Closing Date up to an aggregate of 160,000 Units. In the event of conflict in the terms of this Agreement and the Underwriter s Options with respect to language relating to the Underwriter s Options, the language of the Underwriter s Options shall control. 12. Covenants of the Underwriter. You covenant and agree with the Company as follows: (a) Compliance with Laws. In connection with the offer and sale of Units, you shall comply with any applicable requirements of the Act, the Exchange Act, the NASD and the applicable state securities or "blue sky" laws, and the rules and regulations thereunder. (b) Accuracy of Information. No information supplied by you for use in the Registration Statement, Preliminary Prospectus, Prospectus or Blue Sky Application will contain any untrue statements of a material fact or omit to state any material fact necessary to make such information not misleading. (c) No Additional Information. You will not give any information or make any representation in connection with the offering of the Units other than that contained in the Prospectus. (d) Sale of Units. You shall act as Sales Agent and solicit, directly or through Selected Dealers, purchasers of the Units only in the jurisdictions in which you have been advised by the Company that such solicitation can be made, and in which you or the soliciting Selected Dealer, as the case may be, are qualified to so act. 13. Representations, Warranties and Agreements to Survive Delivery. The respective indemnities, agreements, representations, warranties, and other statements of the Company and the Underwriter and the undertakings set forth in or made pursuant to this Agreement will remain in full force and effect until three years from the date of this Agreement, regardless of any investigation made by or on behalf of the Underwriter, the Company, or any of its officers or directors or any controlling person and will survive delivery of and payment of the Units and the termination of this Agreement. 14. Notice. Any communications specifically required hereunder to be in writing, if sent to the Underwriter, will be mailed, delivered, or telecopied and confirmed to them at Patterson Travis, Inc., One Battery Park Place, 2nd Fl., New York, NY 10004, with a copy sent to Bernstein & Wasserman, LLP, 950 Third Avenue, New York, NY 10022, Attention: Stuart Neuhauser, Esq., or if sent to the Company, will be mailed, delivered, or telecopied and confirmed to it at 1090 King Georges Post Road, Suite 301, Edison, NJ 08837, Attention: Eugene Gordon with a copy sent to Kelley Drye & Warren, 101 Park Avenue, New York, NY 10178 Attention: Jane E. Jablons, Esq. Notice shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. 15. Parties in Interest. The Agreement herein set forth is made solely for the benefit of the Underwriter, the Company, any person controlling the Company or the Underwriter, and directors of the Company, nominees for directors (if any) named in the Prospectus, its officers who have signed the Registration Statement, and their respective executors, administrators, successors, assigns and no other person shall acquire or have any right under or by virtue of this Agreement. The term "successors and assigns" shall not include any purchaser, as such purchaser, from the Underwriter of the Units. 16. Applicable Law. This Agreement will be governed by, and construed in accordance with, of the laws of the State of New York applicable to agreements made and to be entirely performed within New York. 17. Counterparts. This Agreement may be executed in one or more counterparts each of which shall be deemed to constitute an original and shall become effective when one or more counterparts have been signed by each of the parties hereto and delivered to the other parties (including by fax, followed by original copies by overnight mail). 18. Entire Agreement; Amendments. This Agreement constitutes the entire agreement of the parties hereto and supersedes all prior written or oral agreements, understandings, and negotiations with respect to the subject matter hereof. This Agreement may not be amended except in writing, signed by the Underwriter and the Company. If the foregoing is in accordance with your understanding of our agreement, kindly sign and return this agreement, whereupon it will become a binding agreement between the Company and the Underwriter in accordance with its terms. Very truly yours, Medjet Inc. By: __________________________ Its The foregoing Underwriting Agreement is hereby confirmed and accepted as of the date first above written. Patterson Travis, Inc. By: _________________________ Its EX-1 3 EX 1.2 ESCROW AGREEMENT ESCROW AGREEMENT (PUBLIC OFFERING) AGREEMENT made this __________ day of __________________, 19__ by and among the Issuer and the Underwriter whose names and addresses appear on the Information Sheet (as defined herein) attached to this Agreement and Continental Stock Transfer & Trust Company (the "Escrow Agent"). W I T N E S S E T H: WHEREAS, the Issuer has filed with the Securities and Exchange Commission (the "Commission") a registration statement (the "Registration Statement") covering a proposed public offering of its securities as described on the Information Sheet; WHEREAS, the Underwriter proposes to offer the Securities, as agent for the Issuer, for sale to the public on a "best efforts, all or none" basis with respect to the Minimum Securities Amount and Minimum Dollar Amount and at the price per share or other unit all as set forth on the Information Sheet; WHEREAS, the Issuer and the Underwriter propose to establish an escrow account (the "Escrow Account"), to which subscription monies which are received by the Escrow Agent from the Underwriter in connection with such public offering are to be credited, and the Escrow Agent is willing to establish the Escrow Account on the terms and subject to the conditions hereinafter set forth; and WHEREAS, the Escrow Agent has an agreement with Chemical Bank to establish a special bank account (the "Bank Account") into which the subscription monies, which are received by the Escrow Agent from the Underwriter and credited to the Escrow Account, are to be deposited; NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the parties hereto hereby agree as follows: 1. Information Sheet. Each capitalized term not otherwise defined in this Agreement shall have the meaning set forth for such term on the information sheet which is attached to this Agreement and is incorporated by reference herein and made a part hereof (the "Information Sheet"). 2. Establishment of the Bank Account. 2.1 (a) The Escrow Agent shall establish a non-interest-bearing bank account at the branch of Chemical Bank selected by the Escrow Agent, and bearing the designation set forth on the Information Sheet (heretofore defined as the "Bank Account"). The purpose of the Bank Account is for (a) the deposit of all subscription monies (checks, cash or wire transfers) which are received by the Underwriter from prospective purchasers of the Securities and are delivered by the Underwriter to the Escrow Agent, (b) the holding of amounts of subscription monies which are collected through the banking system, and (c) the disbursement of collected funds, all as described herein. (b) If the Offering Period shall be extended by an Extension Period (as defined below) as set forth below, the Escrow Agent shall take any necessary or appropriate action to cause the Bank Account to be converted into an interest bearing bank account, accruing interest on all Escrow Amounts (as defined below) deposited therein commencing on the first day of the Extension Period, with respect to Escrow Amounts already deposited, or on the date of deposit, with respect to Escrow Amounts deposited during the Extension Period. All disbursements of the Escrow Amounts in accordance with Article 4 hereof shall include disbursement of interest, if any, as may have accrued on such funds. 2.2 On or before the date of the initial deposit in the Bank Account pursuant to this Agreement, the Underwriter shall notify the Escrow Agent in writing of the effective date of the Registration Statement ("Effective Date"), and the Escrow Agent shall not be required to accept any amounts for credit to the Escrow Account or for deposit in the Bank Account prior to its receipt of such notification. 2.3 The Offering Period, which shall be deemed to commence on the Effective Date, shall consist of the number of calendar days or business days set forth on the Information Sheet. The Offering Period shall be extended by an Extension Period only if the Escrow Agent shall have received written notice thereof at least five (5) business days prior to the expiration of the Offering Period. The Extension Period, which shall be deemed to commence on the next calendar day following the expiration of the Offering Period, shall consist of the number of calendar days or business days set forth on the Information Sheet. The last day of the Offering Period, or the last day of the Extension Period (if the Escrow Agent has received written notice thereof as hereinabove provided), is referred to herein as the "Termination Date". Except as provided in Section 4.3 hereof, after the Termination Date the Underwriter shall not deposit, and the Escrow Agent shall not accept, any additional amounts representing payments by prospective purchasers. 3. Deposits to the Bank Account. 3.1 The Underwriter shall promptly deliver to the Escrow Agent all monies which it receives from prospective purchasers of the Securities, which monies shall be in the form of checks, cash, or wire transfers. Upon the Escrow Agent's receipt of such monies, they shall be credited to the Escrow Account. All checks delivered to the Escrow Agent shall be made payable to "Continental Stock Transfer & Trust Company, as Escrow Agent for the offering by [the Issuer]". Any check payable other than to the Escrow Agent as required hereby shall be returned to the prospective purchaser, or if the Escrow Agent has insufficient information to do so, then to the Underwriter (together with any Subscription Information, as defined below or other documents delivered therewith) by noon of the next business day following receipt of such check by the Escrow Agent, and such check shall be deemed not to have been delivered to the Escrow Agent pursuant to the terms of this Agreement. 3.2 Promptly after receiving subscription monies as described in Section 3.1, the Escrow Agent shall deposit the same into the Bank Account. Amounts of monies so deposited are hereinafter referred to as "Escrow Amounts". The Escrow Agent shall cause Chemical Bank to process all Escrow Amounts for collection through the banking system. Simultaneously with each deposit to the Escrow Account, the Underwriter (or the Issuer, if such deposit is made by the Issuer) shall inform the Escrow Agent in writing of the name and address of the prospective purchaser, the amount of Securities subscribed for by such purchaser, and the aggregate dollar amount of such subscription (collectively, the "Subscription Information"). 3.3 The Escrow Agent shall not be required to accept for credit to the Escrow Account or for deposit into the Bank Account checks which are not accompanied by the appropriate Subscription Information. Wire transfers and cash representing payments by prospective purchasers shall not be deemed deposited in the Escrow Account until the Escrow Agent has received in writing the Subscription Information required with respect to such payments. 3.4 The Escrow Agent shall not be required to accept in the Escrow Account any amounts representing payments by prospective purchasers, whether by check, cash or wire, except during the Escrow Agent's regular business hours. 3.5 Only those Escrow Amounts, which have been deposited in the Bank Account and which have cleared the banking system and have been collected by the Escrow Agent, are herein referred to as the "Fund". 3.6 If the proposed offering is terminated before the Termination Date, the Escrow Agent shall refund any portion of the Fund prior to disbursement of the Fund in accordance with Article 4 hereof upon instructions in writing signed by both the Issuer and the Underwriter. 4. Disbursement from the Bank Account. 4.1 Subject to Section 4.3 below, if by the close of regular banking hours on the Termination Date the Escrow Agent determines that the amount in the Fund is less than the Minimum Dollar Amount or the Minimum Securities Amount, as indicated by the Subscription Information submitted to the Escrow Agent, then in either such case, the Escrow Agent shall promptly refund to each prospective purchaser the amount of payment received from such purchaser which is then held in the Fund or which thereafter clears the banking system, without interest thereon or deduction therefrom, by drawing checks on the Bank Account for the amounts of such payments and transmitting them to the purchasers. In such event, the Escrow Agent shall promptly notify the Issuer and the Underwriter of its distribution of the Fund. 4.2 Subject to Section 4.3 below, if at any time up to the close of regular banking hours on the Termination Date, the Escrow Agent determines that the amount in the Fund is at least equal to the Minimum Dollar Amount and represents the sale of not less than the Minimum Securities Amount, the Escrow Agent shall promptly notify the Issuer and the Underwriter of such fact in writing. The Escrow Agent shall promptly disburse the Fund, by drawing checks on the Bank Account in accordance with instructions in writing signed by both the Issuer and the Underwriter as to the disbursement of the Fund, promptly after it receives such instructions. 4.3 Upon disbursement of the Fund pursuant to the terms of this Article 4, the Escrow Agent shall be relieved of all further obligations and released from all liability under this Agreement. It is expressly agreed and understood that in no event shall the aggregate amount of payments made by the Escrow Agent exceed the amount of the Fund. 5. Rights, Duties and Responsibilities of Escrow Agent. It is understood and agreed that the duties of the Escrow Agent are purely ministerial in nature, and that: 5.1 The Escrow Agent shall notify the Underwriter, on a daily basis, of the Escrow Amounts which have been deposited in the Bank Account and of the amounts, constituting the Fund, which have cleared the banking system and have been collected by the Escrow Agent. 5.2 The Escrow Agent shall not be responsible for or be required to enforce any of the terms or conditions of the underwriting agreement or any other agreement between the Underwriter and the Issuer nor shall the Escrow Agent be responsible for the performance by the Underwriter or the Issuer of their respective obligations under this Agreement. 5.3 The Escrow Agent shall not be required to accept from the Underwriter (or the Issuer) any Subscription Information pertaining to prospective purchasers unless such Subscription Information is accompanied by checks, cash, or wire transfers meeting the requirements of Section 3.1, nor shall the Escrow Agent be required to keep records of any information with respect to payments deposited by the Underwriter (or the Issuer) except as to the amount of such payments; however, the Escrow Agent shall notify the Underwriter within a reasonable time of any discrepancy between the amount set forth in any Subscription Information and the amount delivered to the Escrow Agent therewith. Such amount need not be accepted for deposit in the Escrow Account until such discrepancy has been resolved. 5.4 The Escrow Agent shall be under no duty or responsibility to enforce collection of any check delivered to it hereunder. The Escrow Agent, within a reasonable time, shall return to the Underwriter any check received which is dishonored, together with the Subscription Information, if any, which accompanied such check. 5.5 The Escrow Agent shall be entitled to rely upon the accuracy, act in reliance upon the contents, and assume the genuineness of any notice, instruction, certificate, signature, instrument or other document which is given to the Escrow Agent pursuant to this Agreement without the necessity of the Escrow Agent verifying the truth or accuracy thereof. The Escrow Agent shall not be obligated to make any inquiry as to the authority, capacity, existence or identity of any person purporting to give any such notice or instructions or to execute any such certificate, instrument or other document. 5.6 If the Escrow Agent is uncertain as to its duties or rights hereunder or shall receive instructions with respect to the Bank Account, the Escrow Amounts or the Fund which, in its sole determination, are in conflict either with other instructions received by it or with any provision of this Agreement, it shall be entitled to hold the Escrow Amounts, the Fund, or a portion thereof, in the Bank Account pending the resolution of such uncertainty to the Escrow Agent's sole satisfaction, by final judgment of a court or courts of competent jurisdiction or otherwise; or the Escrow Agent, at its sole option, may deposit the Fund (and any other Escrow Amounts that thereafter become part of the Fund) with the Clerk of a court of competent jurisdiction in a proceeding to which all parties in interest are joined. Upon the deposit by the Escrow Agent of the Fund with the Clerk of any court, the Escrow Agent shall be relieved of all further obligations and released from all liability hereunder. 5.7 The Escrow Agent shall not be liable for any action taken or omitted hereunder, or for the misconduct of any employee, agent or attorney appointed by it, except in the case of willful misconduct or gross negligence. The Escrow Agent shall be entitled to consult with counsel of its own choosing and shall not be liable for any action taken, suffered or omitted by it in accordance with the advice of such counsel. 5.8 The Escrow Agent shall have no responsibility at any time to ascertain whether or not any security interest exists in the Escrow Amounts, the Fund or any part thereof or to file any financing statement under the Uniform Commercial Code with respect to the Fund or any part thereof. 6. Amendment; Resignation. This Agreement may be altered or amended only with the written consent of the Issuer, the Underwriter and the Escrow Agent. The Escrow Agent may resign for any reason upon three (3) business days' written notice to the Issuer and the Underwriter. Should the Escrow Agent resign as herein provided, it shall not be required to accept any deposit, make any disbursement or otherwise dispose of the Escrow Amounts or the Fund, but its only duty shall be to hold the Escrow Amounts until they clear the banking system and the Fund for a period of not more than five (5) business days following the effective date of such resignation, at which time (a) if a successor escrow agent shall have been appointed and written notice thereof (including the name and address of such successor escrow agent) shall have been given to the resigning Escrow Agent by the Issuer, the Underwriter and such successor escrow agent, then the resigning Escrow Agent shall pay over to the successor escrow agent the Fund, less any portion thereof previously paid out in accordance with this Agreement; or (b) if the resigning Escrow Agent shall not have received written notice signed by the Issuer, the Underwriter and a successor escrow agent, then the resigning Escrow Agent shall promptly refund the amount in the Fund to each prospective purchaser, without interest thereon or deduction therefrom, and the resigning Escrow Agent shall promptly notify the Issuer and the Underwriter in writing of its liquidation and distribution of the Fund; whereupon, in either case, the Escrow Agent shall be relieved of all further obligations and released from all liability under this Agreement. Without limiting the provisions of Section 8 hereof, the resigning Escrow Agent shall be entitled to be reimbursed by the Issuer and the Underwriter for any expenses incurred in connection with its resignation, transfer of the Fund to a successor escrow agent or distribution of the Fund pursuant to this Section 6. 7. Representations and Warranties. The Issuer and the Underwriter hereby jointly and severally represent and warrant to the Escrow Agent that: 7.1 No party other than the parties hereto and the prospective purchasers have, or shall have, any lien, claim or security interest in the Escrow Amounts or the Fund or any part thereof. 7.2 No financing statement under the Uniform Commercial Code is on file in any jurisdiction claiming a security interest in or describing (whether specifically or generally) the Escrow Amounts or the Fund or any part thereof. 7.3 The Subscription Information submitted with each deposit shall, at the time of submission and at the time of the disbursement of the Fund, be deemed a representation and warranty that such deposit represents a bona fide payment by the purchaser described therein for the amount of Securities set forth in such Subscription Information. 7.4 All of the information contained in the Information Sheet is, as of the date hereof, and will be, at the time of any disbursement of the Fund, true and correct. 8. Fees and Expenses. The Escrow Agent shall be entitled to the Escrow Agent Fees set forth on the Information Sheet, payable as and when stated therein. In addition, the Issuer and the Underwriter jointly and severally agree to reimburse the Escrow Agent for any reasonable expenses incurred in connection with this Agreement, including, but not limited to, reasonable counsel fees. Upon receipt of the Minimum Dollar Amount, the Escrow Agent shall have a lien upon the Fund to the extent of its fees for services as Escrow Agent. 9. Indemnification and Contribution. 9.1 The Issuer and the Underwriter (collectively referred to as the "Indemnitors") jointly and severally agree to indemnify the Escrow Agent and its officers, directors, employees, agents and shareholders (collectively referred to as the "Indemnitees") against, and hold them harmless of and from, any and all loss, liability, cost, damage and expense, including without limitation, reasonable counsel fees, which the Indemnitees may suffer or incur by reason of any action, claim or proceeding brought against the Indemnitees arising out of or relating in any way to this Agreement or any transaction to which this Agreement relates, unless such action, claim or proceeding is the result of the willful misconduct or gross negligence of the Indemnitees. 9.2 If the indemnification provided for in Section 9.1 is applicable, but for any reason is held to be unavailable, the Indemnitors shall contribute such amounts as are just and equitable to pay, or to reimburse the Indemnitees for, the aggregate of any and all losses, liabilities, costs, damages and expenses, including counsel fees, actually incurred by the Indemnitees as a result of or in connection with, and any amount paid in settlement of, any action, claim or proceeding arising out of or relating in any way to any actions or omissions of the Indemnitors. 9.3 The provisions of this Article 9 shall survive any termination of this Agreement, whether by disbursement of the Fund, resignation of the Escrow Agent or otherwise. 10. Governing Law and Assignment. This Agreement shall be construed in accordance with and governed by the laws of the State of New York and shall be binding upon the parties hereto and their respective successors and assigns; provided, however, that any assignment or transfer by any party of its rights under this Agreement or with respect to the Escrow Amounts or the Fund shall be void as against the Escrow Agent unless (a) written notice thereof shall be given to the Escrow Agent; and (b) the Escrow Agent shall have consented in writing to such assignment or transfer. 11. Notices. All notices required to be given in connection with this Agreement shall be sent by registered or certified mail, return receipt requested, or by hand delivery with receipt acknowledged, or by the Express Mail service offered by the United States Post Office, and addressed, if to the Issuer or the Underwriter, at their respective addresses set forth on the Information Sheet, and if to the Escrow Agent, at its address set forth above, to the attention of the Trust Department. 12. Severability. If any provision of this Agreement or the application thereof to any person or circumstance shall be determined to be invalid or unenforceable, the remaining provisions of this Agreement or the application of such provision to persons or circumstances other than those to which it is held invalid or unenforceable shall not be affected thereby and shall be valid and enforceable to the fullest extent permitted by law. 13. Execution in Several Counterparts. This Agreement may be executed in several counterparts or by separate instruments, and all of such counterparts and instruments shall constitute one agreement, binding on all of the parties hereto. 14. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings (written or oral) of the parties in connection therewith. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the day and year first above written. THE ISSUER CONTINENTAL STOCK TRANSFER & TRUST COMPANY By:___________________________ By:___________________________ THE UNDERWRITER By:___________________________ ESCROW AGREEMENT INFORMATION SHEET 1. The Issuer Name Medjet Inc. Address 1090 King Georges Post Road, Suite 301, Edison, NJ 08837 State of incorporation of organization Delaware 2. The Underwriter Name Patterson Travis, Inc. Address One Battery Park Plaza, New York, NY 10004 State of incorporation of organization 3. The Securities Description of the Securities to be offered (e.g., shares of or warrants for common stock, debentures, units consisting shares and warrants, etc.) Units consisting of one share of common stock, par value $.001 per share, and one warrant to purchase one share of common stock Offering price per share/unit/other $5.00 per Unit 4. Minimum Amounts Required for Disbursement of the Escrow Account Aggregate dollar amount which must be collected before the Escrow Account may be disbursed to the Issuer ("Minimum Dollar Amount") $6,000,000 Total amount of securities which must be subscribed for before the Escrow Account may be disbursed to the Issuer ("Minimum Securities Amount") 1,200,000 5. Plan of Distribution of the Securities Offering Period: 90 calendar days Extension Period, if any; 90 calendar days Collection Period, if any None business days 6. Title of Escrow Account: Continental Stock Transfer & Trust Company, Escrow Agent for Medjet Inc. 7. Escrow Agent Fees Amount due on execution of the Escrow Agreement $750 and $750 upon completion of the escrow Fee for each check disbursed pursuant to the terms of the Escrow Agreement: $ N/A Fee for each check returned pursuant to the terms of the Escrow Agreement: $ N/A Fee for each additional closing $ $500 Fee for conversion of Bank Account to interest-bearing account [to be determined] EX-3 4 EX 3.1 AMEN CERT. OF INC. AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF MEDJET INC. The undersigned, Eugene I. Gordon, hereby certifies that: 1. He is the President of the corporation referred to herein. 2. Such corporation is a corporation duly organized and validly existing under the General Corporation Law of the State of Delaware, as amended (the "Law"). 3. The name of such corporation is Medjet Inc. 4. The date on which the original certificate of incorporation of such corporation was filed with the Secretary of State of the State of Delaware is December 16, 1993. 5. This Amended and Restated Certificate of Incorporation (i) amends the certificate of incorporation of such corporation so as to increase the number of shares of common stock which such Corporation has authority to issue and to authorize the issuance of preferred stock by such corporation and (ii) integrates into one instrument all of the provisions of such certificate of incorporation, as so amended, which are effective and operative. 6. This Amended and Restated Certificate of Incorporation was duly adopted on May 2, 1996, in accordance with Sections 242 and 245 of the Law and the applicable provisions of such certificate of incorporation by an affirmative vote of the holders of a majority of the outstanding shares of common stock of such corporation. 7. The provisions of such certificate of incorporation, as so amended and restated, are as follows: FIRST: The name of the Corporation is Medjet Inc. SECOND: The address of the Corporation's registered office in the State of Delaware is The Corporation Trust Company, 1209 Orange Street, City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH: The aggregate number of shares of capital stock which the Corporation shall have authority to issue is 8,000,000, of which 7,000,000 shall be shares of common stock, par value $.001 per share (the "Common Stock"), and 1,000,000 shall be shares of preferred stock, par value $.01 per share (the "Preferred Stock"). Shares of the Preferred Stock may be issued in one or more series. The number of shares included in any series of Preferred Stock and the full or limited voting powers, if any, designations, preferences and relative, participating, optional and other special rights, and the qualifications, limitations or restrictions, of Preferred Stock or any series of Preferred Stock shall be stated in the resolution or resolutions providing for the issuance of Preferred Stock or such series of Preferred Stock adopted by the Board of Directors of the Corporation (the "Board"). FIFTH: Elections of directors need not be by ballot unless the By- Laws of the Corporation shall so provide. SIXTH: The Board of Directors of the Corporation may make By-Laws and from time to time may alter, amend or repeal By-Laws. SEVENTH: A director of the Corporation shall not be personally liable to the Corporation or its shareholders for monetary damages for breach of fiduciary duty as a director except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived any improper personal benefit. IN WITNESS WHEREOF, the undersigned has signed this Amended and Restated Certificate of Incorporation on this 13th day of May, 1996. /s/ Eugene I. Gordon _____________________________ Eugene I. Gordon, President ATTEST: /s/ Thomas M. Handschiegel _________________________________ Thomas M. Handschiegel, Secretary EX-3 5 EX 3.2 BY-LAWS BY-LAWS OF MEDJET INC. ARTICLE I Offices SECTION 1. Offices. The Corporation shall maintain its registered office in the State of Delaware at 1209 Orange Street, in the City of Wilmington, New Castle County and its resident agent at such address is The Corporation Trust Company. The Corporation may also have offices in such other places in the United States or elsewhere as the Board of Directors may, from time to time, appoint or as the business of the Corporation may require. ARTICLE II Stockholders SECTION 1. Annual Meetings. Annual meetings of the stockholders of the Corporation for the election of Directors and for such other business as may be conducted at such meeting shall be held on such date, at such time and at such place within or without the State of Delaware as the Board of Directors shall determine by resolution and set forth in the notice of the meeting. In the event the Board of Directors fails to so determine the time, date and place for the annual meeting, it shall be held, beginning in 1994, at the principal office of the Corporation at 11:00 a.m. on the third Monday in March of each year. SECTION 2. Special Meetings. Special meetings of the stockholders of the Corporation for any purpose may be called by resolution of the Board of Directors, the Chairman of the Board, if one is elected, or the President and shall be called by the Chairman of the Board, if one is elected, the President or the Secretary upon the written request of at least twenty-five percent in interest of the stockholders entitled to vote at such meeting. Notice of each special meeting shall be given in accordance with Section 3 of this Article II. SECTION 3. Notice of Meetings. Written notice of each meeting of the stockholders of the Corporation shall be given not less than ten (10) nor more than sixty (60) days before the date of any such meeting to each stockholder of record entitled to vote thereat and shall be mailed to or delivered personally to each stockholder at his address as it appears on the records of the Corporation. The notice shall state the place, date and time of the meeting and, in the case of a special meeting, the purposes for which the meeting is called. Except where prohibited by law, the Certificate of Incorporation or these By-Laws, business not set forth in the notice of meeting may also be transacted at such meeting, provided only that such business properly comes before the meeting. SECTION 4. Quorum. Except as otherwise required by law, the Certificate of Incorporation or these By-Laws, the presence, in person or by proxy, at any meeting of the stockholders, of the holders of a majority of the outstanding shares of stock of the Corporation entitled to vote thereat shall constitute a quorum thereof. SECTION 5. Adjourned Meetings. Whether or not a quorum shall be present at any meeting of the stockholders, a majority of the stockholders of the Corporation entitled to vote at such meeting, present in person or by proxy, may adjourn the meeting to another time, place and date without notice other than by announcement at the meeting so adjourned. Any business may be transacted at any adjourned meeting that could have been transacted at the meeting originally noticed, but only those stockholders entitled to vote at the meeting originally noticed shall be entitled to vote at any adjourned meeting. If the adjournment is for more than thirty (30) days from the date of the meeting originally noticed, or if a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the adjourned meeting. SECTION 6. Organization. The Chairman of the Board, if one is elected, or, in his absence or the vacancy of such office, the President of the Corporation shall preside at all meetings of the stockholders. In the absence of the Chairman of the Board and the President, the holders of a majority of the shares of the Corporation, present in person or by proxy, entitled to vote thereat shall elect a Chairman. The Secretary of the Corporation shall act as Secretary of all meetings of the stockholders, and in his absence, the Chairman of the Board, if one is elected, or the President, may appoint a person to act as Secretary of such meeting. A complete list of stockholders entitled to vote at any meeting of the stockholders, arranged in alphabetical order, showing the address of each stockholder and the number of shares registered in the name of each stockholder shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting either at a place within the city where the meeting is to be held, which shall be specified in the notice of the meeting, or if not so specified, of the place where the meeting is to be held. The list shall also be produced and kept at the meeting and may be inspected by any stockholder who is present. SECTION 7. Voting. Each stockholder shall be entitled to one vote, in person or by proxy, for each share of the capital stock of the Corporation registered in his name. Upon the demand of any stockholder entitled to vote at any meeting, the vote upon any matter before such meeting shall be by written ballot. Directors shall be elected by a plurality of the vote. All other matters shall be authorized by majority vote unless otherwise required by these By-Laws, the Certificate of Incorporation or by law. SECTION 8. Inspectors. The Chairman presiding at any meeting of stockholders shall have the power, in his discretion, to appoint one or more persons to act as Inspectors, to receive, canvass and report the votes cast by stockholders at such meeting, but no candidate for the office of director shall be appointed as inspector at any meeting for the election of directors. If any person so appointed fails to appear or act, the vacancy may be filled by appointment in like manner. SECTION 9. Consent of Stockholders in Lieu of Meeting. Unless otherwise provided in the Certificate of Incorporation, any action required to be taken or which may be taken at any annual or special meeting of the stockholders of the Corporation, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of corporate action taken without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE III Board of Directors SECTION 1. Powers. The property, business and affairs of the Corporation shall be managed and controlled by its Board of Directors. The Board shall exercise all of the powers of the Corporation except such as are by law, the Certificate of Incorporation or these By-Laws conferred upon or reserved to the stockholders. SECTION 2. Number and Term of Office. The number of directors constituting the entire Board of Directors shall not be less than one nor more than nine. The initial Board of Directors shall be designated in the incorporator's statement of organization and shall serve until the first annual meeting of stockholders and until their successors shall be elected and qualified or until their earlier resignation or removal. Thereafter, within the limits specified above, the number of directors shall be fixed from time to time by resolution of the Board of Directors. SECTION 3. Resignations. Any director or member of a committee of the Board may resign at any time. Such resignation shall be made in writing and shall take effect at the time specified therein, and if no time is specified, at the time of its receipt by the Chairman of the Board, if one is elected, President or Secretary. The acceptance of a resignation shall not be necessary to make it effective. SECTION 4. Removal. Any director or the entire Board of Directors may be removed either for or without cause at any time by the affirmative note of the holders of a majority of all of the shares of stock outstanding and entitled to vote for the election of directors at any annual or special meeting of stockholders called for that purpose. Vacancies thus created may be filled at the meeting held for the purpose of removal by the affirmata vote of a majority of the stockholders entitled to vote for directors, or if not so filled, by the directors as provided in Section 5 of this Article III. SECTION 5. Vacancies and Newly Created Directorships. Vacancies in the office of any directors or member of a committee of the Board of Directors and newly created directorships may be filled by a majority vote of the remaining directors in office. Any director so chosen shall hold office for the unexpired term of his predecessor and until his successor shall be elected and qualify or until his earlier resignation or removal. However, the directors may not fill the vacancy created by removal of a director by electing the director so removed. SECTION 6. Place of Meeting. The Board of Directors may hold its meetings at such places and times as the Board of Directors from time to time shall determine. SECTION 7. Regular Meetings. No notice shall be required for any regular meeting of the Board of Directors; however, if the time or place of any regular meeting shall be changed, notice shall be given to each Director at least two days before the meeting. SECTION 8. Special Meetings. Special meetings of the Board of Directors shall be called by the Chairman of the Board, if one is elected, the President or by the Secretary on the written request of any two directors and shall be held at such place as may be determined by the directors or as shall be stated in the notice of the meeting. SECTION 9. Quorum, Voting and Adjournment. A majority of the entire Board of Directors or of any committee of the Board of Directors shall constitute a quorum for the transaction of business at any meeting of the Board of Directors or committee thereof. The vote of the majority of the directors present at any meeting of the Board of Directors or committee at which a quorum is present shall be the act of the Board of Directors or committee. If at any meeting of the Board or committee there is less than a quorum present, a majority of those present may adjourn the meeting from time to time. SECTION 10. Organization. The Chairman of the Board, if one is elected, or, in his absence or the vacancy of such office, the President, shall preside at all meetings of the Board of Directors. In the absence of the Chairman of the Board and the President, a Chairman shall be elected by the Directors present. The Secretary of the Corporation shall act as Secretary of all meetings of the Directors. In the absence of the Secretary, the Chairman may appoint any person to act as Secretary of the meeting. SECTION 11. Committees. The Board of Directors may, by resolution passed by a majority of the Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, to replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent specified by resolution of the Board, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and the affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority to amend the Certificate of Incorporation, adopt an agreement of merger or consolidation, recommend to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommend to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amend these By-Laws; and unless otherwise expressly provided, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. SECTION 12. Conference Telephone Meetings. Unless otherwise restricted by the Certificate of Incorporation or by these By-Laws, the members of the Board of Directors or any committee thereof, may participate in a meeting of the Board or committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation shall constitute presence in person at such meeting. SECTION 13. Action Without a Meeting. Any action required or permitted to be taken at any meeting of the Board of Directors, or any committee thereof, may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing. SECTION 14. Compensation. Directors shall be entitled to receive and be paid for their services such compensation as the Board of Directors may determine. Any director may serve the Corporation in any other capacity as an officer, agent or otherwise, and receive compensation therefor. ARTICLE IV Officers SECTION 1. Officers. The officers of the Corporation shall be a President, a Secretary and a Treasurer, all of whom shall be elected by the Board of Directors. In addition, the Board of Directors may elect a Chairman of the Board, one or more Vice Presidents, one or more Assistant Secretaries and one or more Assistant Treasurers. The initial officers shall be elected at the first meeting of the Board of Directors and, thereafter at the organization meeting of the Board after each annual meeting of the stockholders. All officers shall hold office at the pleasure of the Board of Directors. Officers may, but need not, be Directors. Any number of offices may be held by the same person. In addition to the powers and duties of the officers of the Corporation as set forth in these By-Laws, the officers shall have such authority and shall perform such duties as from time to time may be determined by the Board of Directors. SECTION 2. Resignation and Removal. All officers, agents and employees shall be subject to removal, for or without cause, at any time by the Board of Directors. The removal of an officer without cause shall be without prejudice to his contractual rights, if any. Any officer of the Corporation may resign at any time in the same manner prescribed for the resignation of directors of the Corporation as set forth in Section 3 of Article III of these By-Laws. SECTION 3. Vacancies. Any vacancy caused by the death, resignation or removal of any officer may be filled by the Board of Directors. SECTION 4. Powers and Duties of the Chairman of the Board. The Chairman of the Board, if one is elected, must be a director of the Corporation and shall be the chief executive officer of the Corporation. Subject to the control of the Board of Directors, the Chairman of the Board shall have general charge and control of all its business and affairs and shall perform all duties incident to the office of Chairman of the Board. He shall preside at all meetings of the stockholders and the Board of Directors and shall have such other powers and perform such other duties as may from time to time be assigned to him by these By-Laws or by the Board of Directors. SECTION 5. Powers and Duties of the President. In the absence, disability or refusal of the Chairman of the Board to act, or the vacancy of such office, the President shall be the chief executive officer of the Corporation and, subject to the control of the Board of Directors, shall have general charge and control of all its operations and shall perform all duties incident to the office of President. He shall preside at all meetings of the stockholders and the Board of Directors, in the absence of the Chairman of the Board and shall have such other powers and perform such other duties as may from time to time be assigned to him by the Board of Directors or the Chairman of the Board. SECTION 6. Powers and Duties of the Vice Presidents. Each Vice President, if any are elected, (of whom one or more may be designated Executive Vice President) shall have such powers and perform such duties as may from time to time be assigned to him by the Board of Directors, the Chairman of the Board, if one is elected, or the President. SECTION 7. Powers and Duties of the Secretary. The Secretary shall keep the minutes of all meetings of the Board of Directors and the stockholders in books provided for that purpose; he shall cause all notices of the Corporation to be given; he shall have custody of the corporate seal of the Corporation and shall affix the same to such documents and other papers as the Board of Directors or the President shall authorize and direct; he shall have charge of the stock certificate books, transfer books and stock ledgers and such other books and papers as the Board of Directors or the President shall direct. He shall perform all duties incident to the office of Secretary and shall also have such other powers and shall perform such other duties as may from time to time be assigned to him by these By-Laws or the Board of Directors, the Chairman of the Board, if one is elected, or the President. SECTION 8. Powers and Duties of the Treasurer. The Treasurer shall have custody of all funds, securities, evidences of indebtedness and other valuables of the Corporation and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation. He shall deposit all moneys and other valuables to the credit of the Corporation in such depositaries as the Board of Directors may designate. He shall disburse the funds of the Corporation as may be ordered by the Board of Directors, or the President and shall render to the President and Board of Directors upon their request, a report of the financial condition of the Corporation. The Treasurer shall perform all duties incident to the office of Treasurer and shall also have such other powers and shall perform such other duties as may from time to time be assigned to him by the Board of Directors, the Chairman of the Board, if one is elected, or the President. SECTION 9. Additional Officers. The Board of Directors may elect such other officers including a Controller, Assistant Treasurers, Assistant Secretaries and Assistant Controllers, as they deem advisable and such officers shall have such authority and shall perform such duties as may from time to time be assigned to them by the Board of Directors, the Chairman of the Board, if one is elected, or the President. SECTION 10. Giving of Bond by Officers. All officers of the Corporation, if required to do so by the Board of Directors, shall furnish bonds to the Corporation for the faithful performance of their duties, in such penalties and with such conditions and security as the Board shall require. SECTION 11. Ownership of Stock of Another Corporation. The Chairman of the Board, if one is elected, the President or the Treasurer or such other officer as shall be authorized by the Board of Directors shall have power and authority on behalf of the Corporation to attend and to vote at any meetings of stockholders of any corporation in which the Corporation may hold stock, and shall possess and may exercise any and all of the rights, powers and privileges incident to the ownership of such stock at any such meetings; and shall have power and authority to execute and deliver proxies and consents on behalf of this Corporation in connection with the exercise by this Corporation of the rights and powers incident to the ownership of such stock. SECTION 12. Compensation of Officers. The officers of the Corporation shall be entitled to receive such compensation for their services as shall from time to time be determined by the Board of Directors. SECTION 13. Contracts and Other Documents. The President or Treasurer, or such other officer or officers as may from time to time be authorized by the Board of Directors shall have power to sign and execute on behalf of the Corporation deeds, conveyances and contracts, and any and all other documents requiring execution by the Corporation. SECTION 14. Delegation of Duties. The Board of Directors may delegate to another officer the powers or duties of any officer, in case of such officer's absence, disability or refusal to exercise such powers or perform such duties. ARTICLE V Stock-Seal-Fiscal Year SECTION 1. Certificates For Shares of Stock. The shares of the Corporation shall be represented by certificates, which shall be numbered and shall be in such form as the Board of Directors may, from time to time prescribe; provided that the Board of Directors may provide by resolution that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Notwithstanding the adoption of such a resolution by the Board of Directors, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the Corporation by the Chairman of the Board, if one is elected, or the President or a Vice-President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary representing the number of shares registered in certificate form. Any or all the signatures on the certificate may be a facsimile. The Board of Directors shall have power to appoint one or more transfer agents or registrars for the transfer or registration of certificates of stock of any class, and may require that stock certificates shall be countersigned by one or more such transfer agents or registrars. If any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. The name of the person owning the shares represented thereby with the number of such shares and the date of issue thereof shall be entered on the books of the Corporation. Except as hereinafter provided, all certificates surrendered to the Corporation for transfer shall be canceled, and no new certificates shall be issued until former certificates for the same number of shares have been surrendered. SECTION 2. Lost, Stolen or Destroyed Certificates. A new certificate for shares of stock may be issued in the place of any certificate previously issued by the Corporation, alleged to have been lost, stolen, destroyed or mutilated. The Board of Directors may, in their discretion, require the owner of the lost, stolen, destroyed or mutilated certificate to give to the Corporation an affidavit, setting forth, to the best of his knowledge and belief, the time, place and circumstances of the loss, theft, destruction or mutilation, and a bond or other indemnification in such sums as the Board of Directors may direct to indemnify the Corporation against any claim that may be made against it with respect to the alleged loss, theft, destruction or mutilation of any such certificate or the issuance of a new certificate. SECTION 3. Transfer of Shares. Shares of stock of the Corporation shall be transferred on the books of the Corporation by the holder thereof, in person or by his duly authorized attorney or legal representative, upon surrender and cancellation of certificates for the number of shares of stock to be transferred, except as provided in the preceding section. SECTION 4. Regulations. The Board of Directors shall have power and authority to make such rules and regulations as it may deem necessary or proper concerning the issue, transfer and registration of certificates for shares of stock of the Corporation. SECTION 5. Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. If no record date is fixed, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is necessary, shall be the day on which the first written consent is expressed; and the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 6. Dividends. Subject to the provisions of the Certificate of Incorporation, the Board of Directors shall have power to declare and pay dividends upon shares of stock of the Corporation out of funds legally available therefor. Subject to the provisions of the Certificate of Incorporation, dividends declared upon the stock of the Corporation shall be payable on such date or dates as the Board of Directors shall determine. SECTION 7. Corporate Seal. The seal of the Corporation shall be circular in form and shall bear the name of the Corporation around the circumference and the State and year of incorporation. SECTION 8. Fiscal Year. The fiscal year of the Corporation shall end on December 31st of each year or such other twelve consecutive months as the Board of Directors, from time to time, by resolution shall determine. ARTICLE VI Miscellaneous Provisions SECTION 1. Notice. Whenever any written notice is required to be given by law, the Certificate of Incorporation of the Corporation or these By-Laws, such notice, if mailed, shall be deemed to be sufficiently given if it is written or printed and deposited in the United States mail, postage prepaid, addressed to the person entitled to such notice at his address as it appears on the books and records of the Corporation. Such notice may also be sent by telegram. The mailing of such notice or posting of such telegram, as the case may be, shall constitute due notice, which shall be deemed to have been given on the day of such mailing or posting. SECTION 2. Waivers of Notice. Whenever any notice is required to be given by law, the Certificate of Incorporation or these By-Laws, a written waiver of notice, signed by the person entitled to the notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, unless the person attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any meeting of the stockholders, directors, or members of a committee of the Board need be specified in any written waiver of notice. SECTION 5. Indemnification of Directors, Officers and Employees. The Corporation shall indemnify, to the fullest extent permitted by law, members of the Board, its officers, employees and agents any and all persons whom it shall have power to indemnify against any and all expenses, liabilities or other matters. ARTICLE VII These By-Laws may be altered, amended or repealed, or new By-Laws may be adopted, by the Board of Directors at any regular or special meeting by the affirmative vote of a majority of the Board. By-Laws adopted by the Board of Directors may be altered, amended or repealed by the stockholders of the Corporation. EX-4 6 EX 4.1 COMMON STOCK CERT [Form of Face of Common Stock Certificate] Number ________ Shares _______ MEDJET INC. INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE This certifies that is the owner of Fully paid and non-assessable shares of $.001 par value each of common stock of MEDJET INC. transferable on the books of the corporation in person or by attorney upon surrender of this certificate duly endorsed or assigned. This certificate and the shares represented hereby are subject to the laws of the State of Delaware, and to the Certificate of Incorporation and Bylaws of the Corporation, as now or hereafter amended. This certificate is not valid until countersigned by the Transfer Agent. WITNESS the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. MEDJET INC. By: /s/ Eugene I. Gordon ---------------------------- President By: /s/ Thomas Handschiegel ---------------------------- Secretary Dated: Countersigned: Continental Stock Transfer & Trust Company Transfer Agent By: Authorized Signature [Form of Back of Common Stock Certificate] The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - ___Custodian ___ TEN ENT - as tenants by (Cust) (Minor) the entireties JT TEN - as joint tenants with under Uniform Gifts to Minors right of survivorship and Act _________ not as tenants in common (State) Additional abbreviations may also be used though not in the above list. For Value Received, ______________ hereby sell, assign and transfer unto ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ____________________________________________________________________ Shares of the stock represented by the within Certificate, and do hereby irrevocably constitute and appoint _____________________________ Attorney to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises. Dated ____________________ ________________________________ Notice: the signature to this assignment must correspond with the name as written upon the face of the certificate in every particular, without alteration or enlargement or any change whatsoever. The Corporation will furnish to any stockholder, upon request and without charge, a full statement of the designations, relative rights, preferences and limitations of the shares of each class and series authorized to be issued, so far as the same have been determined, and of the authority, if any, of the Board to divide the shares into classes or series and to determine and change the relative rights, preferences and limitations of any class or series. Such request may be made to the Secretary of the Corporation or to the Transfer Agent named on this Certificate. The signature to the assignment must correspond to the name as written upon the face of this certificate in every particular, without alteration or enlargement or any change whatsoever, and must be guaranteed by a commercial bank or trust company or a member firm of a national or regional or other recognized stock exchange in conformance with a signature guarantee medallion program. EX-4 7 EX 4.2 UNIT CERT. [Form of Face of Unit Certificate] Number ________ Units _______ MEDJET INC. INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE This certifies that is the owner of (the "Registered Holder") is the owner of the number of Units specified above, transferable only on the books of Medjet Inc. (the "Corporation") by the Registered Holder thereof in person or by his or her duly authorized attorney, on surrender of this Unit Certificate properly endorsed. Each Unit consists of one (1) share of the Corporation's common stock, par value $.001 per share (the "Common Stock"), and one (1) Class A redeemable common stock purchase warrant (the "Warrants") to purchase one (1) share of Common stock for $10.00 per share (subject to adjustment) at any time on or after (i) _______________ and before 5:00 p.m. New York time on __________, ____ (the "Expiration Date"). The terms of the Warrants are governed by a Warrant Agreement dated as of ___________, 1996 (the "Warrant Agreement") between the Company and Continental Stock Transfer & Trust Company, as Warrant Agent (the "Warrant Agent"), and are subject to the terms and provisions contained therein, all of which terms and provisions the Registered Holder of this Unit Certificate consents to by acceptance hereof. Copies of the Warrant Agreement are on file at the office of the Warrant Agent at 2 Broadway, New York, NY 10004 and are available to any Registered Holder on written request and with out cost. The Warrant shall be void unless exercised before 5:00 P.M., New York time, on the Expiration Date. This certificate is not valid unless countersigned and registered by the Transfer Agent, Warrant and Registrar of the Corporation. The Warrants and the shares of Common Stock of the Corporation represented by this Unit Certificate shall be nondetachable and not separately transferable until the earlier of __________________ or such earlier date as shall be determined by Patterson Travis, Inc. and Medjet Inc. (the "Separation Date"). IN WITNESS WHEREOF, the Corporation has caused this Unit Certificate to be duly executed, manually or by facsimile, by two of its officers thereunto duly authorized and a facsimile of its corporate seal to be imprinted herein. MEDJET INC. By: /s/ Eugene I. Gordon ____________________ President By: /s/ Thomas Handschiegel _______________________ Secretary Dated: Countersigned: Continental Stock Transfer & Trust Company Transfer Agent By: _______________________ Authorized Signature [Form of Back of Unit Certificate] The Corporation will furnish without charge to each stockholder who so requests, the designations, powers, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Any such request may be made to the Corporation or to the Transfer Agent. WARRANT PROVISIONS This certificate certifies that for value received the Registered Holder hereby is entitled, at any time on or after _____________ or such earlier dated as Patterson Travis, Inc. and Medjet Inc. shall determine that the Warrants and Common Stock which comprise the Units shall be separately transferable (the "Separation Date") to exchange each Unit represented by this Unit Certificate for one Common Stock certificate representing one share of Common Stock and one Warrant Certificate representing one Warrant upon surrender of this Unit certificate to the Transfer Agent at the office of the Transfer Agent together with any documentation required by such Transfer Agent. At any time on or after ______________ and before 5:00 P.M., New York time on the Expiration Date, upon surrender of the Warrant Certificate at the office of the Warrant Agent for the Warrants, with the Subscription Form on the reverse side thereof completed and duly executed and accompanied by payment, in cash or check payable to the warrant Agent for the account of the Corporation, the Registered Holder of such Warrant Certificated shall be entitled to purchase from the Corporation one share of Common Stock of the Corporation for each Warrant represented by the Warrant Certificate, which shares shall be fully paid and non-assessable, at the exercise price of $10.00 per share. The exercise price and the number of shares purchasable upon exercise of each Warrant are subject to adjustment and the Warrants are redeemable by the Corporation, each upon the occurrence of certain events set forth in the Warrant Agreement. After 5:00 P.M., New York time, on _________________, the Warrant shall become null and void and of no value. REFERENCE IS MADE TO THE WARRANT AGREEMENT REFERRED TO ON THE REVERSE SIDE HEREOF AND THE PROVISIONS OF SUCH WARRANT AGREEMENT SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH ON THE FORM OF THIS CERTIFICATE. The Warrant shall be governed by and construed in accordance with the laws of the State of New York without giving effect to conflicts of laws provisions. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - ___Custodian ___ TEN ENT - as tenants by the (Cust) (Minor) entireties JT TEN - as joint tenants with under Uniform Gifts to Minors right of under Uniform Act ____________ Gifts to Minors survivorship (State) and not as tenants in common Additional abbreviations may also be used though not in the above list. For Value Received, ______________ hereby sell, assign and transfer unto ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ __________________________________________ Units represented by the within Certificate, and do hereby irrevocably constitute and appoint _________________________________________________________________ Attorney to transfer the said Unit(s) on the books of the within named Corporation with full power of substitution in the premises. Dated ____________________ _______________________________________ Notice: the signature to this assignment must correspond with the name as written upon the face of the certificate in every particular, without alteration or enlargement or any change whatsoever. The signature to the assignment must be guaranteed by a commercial bank or trust company or a member firm of a national or regional or other recognized stock exchange in conformance with a signature guarantee medallion program. EX-4 8 EX 4.4 UNDER OPTION Option to Purchase _________Units MEDJET INC. UNIT PURCHASE OPTION Dated: ________, 1996 THIS CERTIFIES that PATTERSON TRAVIS, INC., One Battery Park Plaza, New York, NY 10005 (hereinafter sometimes referred to as the "Holder"), is entitled to purchase from Medjet Inc., a Delaware corporation (hereinafter referred to as the "Company"), at the prices and during the periods as hereinafter specified, up to _______ Units ("Units") consisting of the Company's common stock and warrants to purchase the Company's common stock. Each Unit consists of one (1) share of the Company's common stock, $.001 par value, as now constituted ("Common Stock") and one (1) Class A Redeemable Common Stock Purchase Warrant to purchase one (1) share of Common Stock as now constituted at an exercise price of $16.50 per share ("Class A Warrants" or "Warrants"). The Class A Warrants are exercisable until __________. The Units have been registered under a Registration Statement on Form SB-2 (File No. 333-3184) declared effective by the Securities and Exchange Commission on ____________, 1996 (the "Registration Statement"). This Option (the "Option") to purchase ________ Units (the "Option Units") was originally issued pursuant to an underwriting agreement between the Company and Patterson Travis, Inc., as underwriter (the "Underwriter"), in connection with a public offering of up to 1,600,000 Units (the "Public Units") through the Underwriter, in consideration of $.001 per Option Unit. Except as specifically otherwise provided herein, the Common Stock and the Warrants issued pursuant to this Option shall bear the same terms and conditions as described under the caption "Description of Securities" in the Registration Statement, and the Warrants shall be governed by the terms of the Warrant Agreement dated as of ________, 1996 executed in connection with such public offering (the "Warrant Agreement"), and except that (i) the holder shall have registration rights under the Securities Act of 1933, as amended (the "Act"), for the Option, the Common Stock and the Warrants included in the Units, and the shares of Common Stock underlying the Warrants, as more fully described in paragraph 6 of this Option, (ii) the exercise price for the Class A Warrants included in this Option is $16.50, and (iii) the Warrants underlying this Option are redeemable by the Company if the market price of the Common Stock equals or exceeds $21.45. In the event of any reduction of the exercise price of the Warrants included in the Public Units, the same percentage changes to the Warrants included in the Option Units shall be simultaneously effected. 1. The rights represented by this Option shall be exercised at the prices, subject to adjustment in accordance with paragraph 8 of this Option, and during the periods as follows: (a) Between ______, 1997 and _______, 2001, inclusive, the Holder shall have the option to purchase Units hereunder at a price of $8.25 per Unit (subject to adjustment pursuant to paragraph 8 hereof) (the "Exercise Price"). (b) After __________, 2001 (five (5) years from the Effective Date), the Holder shall have no right to purchase any Units hereunder. 2. The rights represented by this Option may be exercised at any time within the period above specified, in whole or in part, by (i) the surrender of this Option (with the purchase form at the end hereof properly executed) at the principal executive office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the Holder at the address of the Holder appearing on the books of the Company); (ii) payment to the Company of the Exercise Price then in effect for the number of Units specified in the above-mentioned purchase form together with applicable stock transfer taxes, if any; and (iii) delivery to the Company of a duly executed agreement signed by the person(s) designated in the purchase form to the effect that such person(s) agree(s) to be bound by the provisions of paragraph 6 and subparagraphs (b), (c) and (d) of paragraph 7 hereof. This Option shall be deemed to have been exercised, in whole or in part to the extent specified, immediately prior to the close of business on the earliest date that both this Option is surrendered and payment is made in accordance with the foregoing provisions of this paragraph 2, and other provisions are complied with and the person or persons in whose name or names the certificates for shares of Common Stock and Warrants shall be issuable upon such exercise shall become the holder or holders of record of such Common Stock and Warrants at that time and date. The Common Stock and Warrants and the certificates for the Common Stock and Warrants so purchased shall be delivered to the Holder within a reasonable time, not exceeding ten (10) days, after the rights represented by this Option shall have been so exercised. 3. For a period of one (1) year from the Effective Date, this Option shall not be transferred, sold, assigned, or hypothecated, except that it may be transferred to successors of the Holder, and may be assigned in whole or in part to any person who is an officer of the Holder during such period. Any such assignment shall be effected by the Holder (i) executing the form of assignment at the end hereof and (ii) surrendering this Option for cancellation at the office or agency of the Company referred to in paragraph 2 hereof, accompanied by a certificate (signed by an officer of the Holder if the Holder is a corporation), stating that each transferee is a permitted transferee under this paragraph 3 hereof; whereupon the Company shall issue, in the name or names specified by the Holder (including the Holder) a new Option or Options of like tenor and representing in the aggregate rights to purchase the same number of Units as are purchasable hereunder. 4. The Company covenants and agrees that all shares of Common Stock which may be issued as part of the Units purchased hereunder and the Common Stock which may be issued upon exercise of the Warrants will, upon issuance, be duly and validly issued, fully paid and nonassessable, and no personal liability will attach to the holder thereof. The Company further covenants and agrees that during the periods within which this Option may be exercised, the Company will at all times have authorized and reserved a sufficient number of shares of its Common Stock to provide for the exercise of this Option and that it will have authorized and reserved a sufficient number of shares of Common Stock for issuance upon exercise of the Warrants included in the Units. 5. This Option shall not entitle the Holder to any voting, dividend, or other rights as a stockholder of the Company. 6. (a) During the period set forth in paragraph l(a) hereof, the Company shall advise the Holder or its transferee, by written notice at least 30 days prior to the filing of any post-effective amendment to the Registration Statement or of any new registration statement or post- effective amendment thereto under the Act covering any securities of the Company, for its own account or for the account of others (other than a registration statement on Form S-4 or S-8 or any successor forms thereto), and will for a period of seven (7) years from the effective date of the Registration Statement, upon the request of the Holder, include in any such post-effective amendment or registration statement, such information as may be required to permit a public offering of, all or any of the Units underlying the Option, the Common Stock, or Warrants included in the Units or the Common Stock issuable upon the exercise of the Warrants (the "Registrable Securities"). The Company shall supply prospectuses and such other documents as the Holder may reasonably request in order to facilitate the public sale or other disposition of the Registrable Securities, use its reasonable efforts to register and qualify any of the Registrable Securities for sale in such states as such Holder designates provided that the Company shall not be required to qualify as a foreign corporation or a dealer in securities or execute a general consent to service of process in any jurisdiction in any action and do any and all other acts and things which may be reasonably necessary or desirable to enable such Holders to consummate the public sale or other disposition of the Registrable Securities, and furnish indemnification in the manner provided in paragraph 7 hereof. The Holder shall furnish information and indemnification as set forth in paragraph 7 except that the maximum amount which may be recovered from the Holder shall be limited to the amount of proceeds received by the Holder from the sale of the Registrable Securities. The Company shall use its best efforts to cause the managing underwriter or underwriters of a proposed underwritten offering to permit the holders of Registrable Securities requested to be included in the registration to include such securities in such underwritten offering on the same terms and conditions as any similar securities of the Company included therein. Notwithstanding the foregoing, if the managing underwriter or underwriters of such offering advises the holders of Registrable Securities that the total amount of securities which they intend to include in such offering is such as to materially and adversely affect the success of such offering, then the amount of securities to be offered for the accounts of holders of Registrable Securities shall be eliminated, reduced, or limited to the extent necessary to reduce the total amount of securities to be included in such offering to the amount, if any, recommended by such managing underwriter or underwriters (any such reduction or limitation in the total amount of Registrable Securities to be included in such offering to be borne by the holders of Registrable Securities proposed to be included therein pro rata). The Holder will pay its own legal fees and expenses and any underwriting discounts and commissions on the securities sold by such Holder and shall not be responsible for any other expenses of such registration. (b) If any 50% holder (as defined below) shall give notice to the Company at any time during the period set forth in paragraph l(a) hereof, to the effect that such holder desires to register under the Act, the Units, or any of the underlying securities contained in the Units underlying the Option under such circumstances that a public distribution (within the meaning of the Act) of any such securities will be involved, then the Company will promptly, but no later than 60 days after receipt of such notice, file a post-effective amendment to the current Registration Statement or a new registration statement pursuant to the Act, to the end that the Units and/or any of the securities underlying the Units may be publicly sold under the Act as promptly as practicable thereafter and the Company will use its best efforts to cause such registration to become and remain effective for a period of 120 days (including the taking of such steps as are reasonably necessary to obtain the removal of any stop order); provided that such holder shall furnish the Company with appropriate information in connection therewith as the Company may reasonably request in writing. The 50% holder (which for purposes hereof shall mean any direct or indirect transferee of such holder provided it owns at least 50% of the Option) may, at its option, request the filing of a post-effective amendment to the current Registration Statement or a new registration statement under the Act with respect to the Registrable Securities on only one occasion during the term of this Option. The Holder may at its option request the registration of any of the securities underlying the Option in a registration statement made by the Company as contemplated by Section 6(a) or in connection with a request made pursuant to this Section 6(b) prior to acquisition of the Units issuable upon exercise of the Option and even though the Holder has not given notice of exercise of the Option. The 50% holder may, at its option, request such post-effective amendment or new registration statement during the described period with respect to the Units as a unit, or separately as to the Common Stock and/or Warrants included in the Units and/or the Common Stock issuable upon the exercise of the Warrants, and such registration rights may be exercised by the 50% holder prior to or subsequent to the exercise of the Option. Within ten business days after receiving any such notice pursuant to this subsection (b) of paragraph 6, the Company shall give notice to the other holders of the Options, advising that the Company is proceeding with such post- effective amendment or registration statement and offering to include therein the securities underlying the Options of the other holders. Each holder electing to include its Registrable Securities in any such offering shall provide written notice to the Company within twenty (20) days after receipt of notice from the Company. The failure to provide such notice to the Company shall be deemed conclusive evidence of such holder's election not to include its Registrable Securities in such offering. Each holder electing to include its Registrable Securities shall furnish the Company with such appropriate information (relating to the intentions of such holders) in connection therewith as the Company shall reasonably request in writing. All costs and expenses of such post-effective amendment or new registration statement shall be borne by the Company, except that the holders shall bear the fees of their own counsel and any underwriting discounts or commissions applicable to any of the securities sold by them. The Company shall be entitled to postpone the filing of any registration statement pursuant to this Section 6(b) otherwise required to be prepared and filed by it if (i) the Company is engaged in a material acquisition, reorganization, or divestiture, (ii) the Company is currently engaged in a self-tender or exchange offer and the filing of a registration statement would cause a violation of Rule 10b-6 under the Securities Exchange Act of 1934, (iii) the Company is engaged in an underwritten offering and the managing underwriter has advised the Company in writing that such a registration statement would have a material adverse effect on the consummation of such offering; (iv) for the period of the financial statements called for in such filing, the Company has only unaudited financial statements, unless the underwriter agrees that such filing need not include audited financial statements or (v) the Company is subject to an underwriter's lock-up as a result of an underwritten public offering and such underwriter has refused in writing, the Company's request to waive such lock-up. In the event of such postponement, the Company shall be required to file the registration statement pursuant to this Section 6(b), within 60 days of the consummation of the event requiring such postponement. The Company will use its best efforts to maintain such registration statement or post-effective amendment current under the Act for a period of 120 days (and for up to an additional three months if requested by the Holder) from the effective date thereof. The Company shall supply prospectuses, and such other documents as the Holder may reasonably request in order to facilitate the public sale or other disposition of the Registrable Securities, use its best efforts to register and qualify any of the Registrable Securities for sale in such states as such holder designates, provided that the Company shall not be required to qualify as a foreign corporation or a dealer in securities or execute a general consent to service of process in any jurisdiction in any action and furnish indemnification in the manner provided in paragraph 7 hereof. The demand registration rights granted hereunder will expire no later than five (5) years from the effective date of this offering. (c) The term "50% holder" as used in this paragraph 6 shall mean the holder of more than 50% of the Common Stock and the Warrants underlying the Option, as if exercised, (considered in the aggregate) and shall include any owner or combination of owners of such securities, which ownership shall be calculated by determining the number of shares of Common Stock held by such owner or owners as well as the number of shares then issuable upon exercise of the Warrants. 7. (a) Whenever pursuant to paragraph 6 a registration statement relating to any shares of Common Stock or Warrants issued or issuable upon the exercise of any Options, is filed under the Act, or is amended or supplemented, the Company will indemnify and hold harmless each holder of the securities covered by such registration statement, amendment, or supplement (such holder being hereinafter called the "Distributing Holder"), and each person, if any, who controls (within the meaning of the Act) the Distributing Holder, and each underwriter (within the meaning of the Act) of such securities and each person, if any, who controls (within the meaning of the Act) any such underwriter, against any losses, claims, damages, or liabilities, joint or several, to which the Distributing Holder, any such controlling person or any such underwriter may become subject, under the Act or otherwise, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any such registration statement or any preliminary prospectus or final prospectus constituting a part thereof or any amendment or supplement thereto, or which arise out of or are based upon the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; and will reimburse the Distributing Holder and each such controlling person and underwriter for any legal or other expenses reasonably incurred by the Distributing Holder or such controlling person or underwriter in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage, or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in said registration statement, said preliminary prospectus, said final prospectus, or said amendment or supplement in reliance upon and in conformity with written information furnished by such Distributing Holder or any other Distributing Holder, for use in the preparation thereof; provided, further, that the indemnity with respect to any preliminary prospectus shall not be applicable on account of any losses, claims, damages, liabilities, or litigation arising from the sale of such securities to any person if the misstatement or omission was corrected in the final prospectus related thereto but such final prospectus was not delivered by the Distributing Holder to such person at or prior to sale of such securities. (b) Each Distributing Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who have signed said registration statement and such amendments and supplements thereto, each person, if any, who controls the Company (within the meaning of the Act) and each other Distributing Holder, if any, against any losses, claims, damages, or liabilities, joint and several, to which the Company or any such director, officer, or controlling person may become subject, under the Act or otherwise, insofar as such losses, claims, damages, or liabilities arise out of or are based upon any untrue or alleged untrue statement of any material fact contained in said registration statement, said preliminary prospectus, said final prospectus, or said amendment or supplement, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent that such untrue statement or alleged untrue statement or omission or alleged omission was made in said registration statement, said preliminary prospectus, said final prospectus, or said amendment or supplement in reliance upon and in conformity with written information furnished by such Distributing Holder for use in the preparation thereof; and will reimburse the Company or any such director, officer, or controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action. (c) Promptly after receipt by an indemnified party under this paragraph 7 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party, give the indemnifying party notice of the commencement thereof; but the omission so to notify the indemnifying party will not unless it is prejudiced thereby relieve it from any liability which it may have to any indemnified party otherwise than under this Paragraph 7. (d) In case any such action is brought against any indemnified party, and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate in, and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this paragraph 7 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof. 8. The Exercise Price in effect at any time and the number and kind of securities purchasable upon the exercise of this Option shall be subject to adjustment from time to time upon the happening of certain events as follows: (a) In case the Company shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination or reclassification shall be adjusted so that it shall equal the price determined by multiplying the Exercise Price by a fraction, the denominator of which shall be the number of shares of Common Stock outstanding after giving effect to such action, and the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such action. Notwithstanding anything to the contrary contained in the Warrant Agreement, in the event an adjustment to the Exercise Price is effected pursuant to this Subsection (a) (and a corresponding adjustment to the number of Option Units is made pursuant to Subsection (d) below), the exercise price of the Warrants shall be adjusted so that it shall equal the price determined by multiplying the exercise price of the Warrants by a fraction, the denominator of which shall be the number of shares of Common Stock outstanding immediately after giving effect to such action and the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such action. In such event, there shall be no adjustment to the number of shares of Common Stock or other securities issuable upon exercise of the Warrants. Such adjustment shall be made successively whenever any event listed above shall occur. (b) In case the Company shall fix a record date for the issuance of rights or warrants to all holders of its Common Stock entitling them to subscribe for or purchase shares of Common Stock (or securities convertible into Common Stock) at a price (the "Subscription Price") (or having a conversion price per share) less than the current market price of the Common Stock (as defined in Subsection (e) below) on the record date mentioned below, the Exercise Price shall be adjusted so that the same shall equal the price determined by multiplying the number of shares then comprising an Option Unit by the product of the Exercise Price in effect immediately prior to the date of such issuance multiplied by a fraction, the numerator of which shall be the sum of the number of shares of Common Stock outstanding on the record date mentioned below and the number of additional shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so offered (or the aggregate conversion price of the convertible securities so offered) would purchase at such current market price per share of the Common Stock, and the denominator of which shall be the sum of the number of shares of Common Stock outstanding on such record date and the number of additional shares of Common Stock offered for subscription or purchase (or into which the convertible securities so offered are convertible). Such adjustment shall be made successively whenever such rights or warrants are issued and shall become effective immediately after the record date for the determination of shareholders entitled to receive such rights or warrants; and to the extent that shares of Common Stock are not delivered (or securities convertible into Common Stock are not delivered) after the expiration of such rights or warrants the Exercise Price shall be readjusted to the Exercise Price which would then be in effect had the adjustments made upon the issuance of such rights or warrants been made upon the basis of delivery of only the number of shares of Common Stock (or securities convertible into Common Stock) actually delivered. (c) In case the Company shall hereafter distribute to the holders of its Common Stock evidences of its indebtedness or assets (excluding cash dividends or distributions and dividends or distributions referred to in Subsection (a) above) or subscription rights or warrants (excluding those referred to in Subsection (b) above), then in each such case the Exercise Price in effect thereafter shall be determined by multiplying the number of shares then comprising an Option Unit by the product of the Exercise Price in effect immediately prior thereto multiplied by a fraction, the numerator of which shall be the total number of shares of Common Stock outstanding multiplied by the current market price per share of Common Stock (as defined in Subsection (e) below), less the fair market value per share (as determined by the Company's Board of Directors) of said assets or evidences of indebtedness so distributed or of such rights or warrants, and the denominator of which shall be the total number of shares of Common Stock outstanding multiplied by such current market price per share of Common Stock. Such adjustment shall be made successively whenever such a record date is fixed. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date for the determination of shareholders entitled to receive such distribution. (d) Intentionally omitted. (e) For the purpose of any computation under Subsections (b) or (c)above, the current market price per share of Common Stock at any date shall be deemed to be the average of the daily closing prices for 20 consecutive business days before such date. The closing price for each day shall be the last sale price regular way or, in case no such reported sale takes place on such day, the average of the last reported bid and asked prices regular way, in either case on the principal national securities exchange on which the Common Stock is admitted to trading or listed, or if not listed or admitted to trading on such exchange, the average of the highest reported bid and lowest reported asked prices as reported by NASDAQ, or other similar organization if NASDAQ is no longer reporting such information, or if not so available, the fair market price as determined by the Board of Directors. (f) No adjustment in the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least ten cents ($0.10) in such price; provided, however, that any adjustments which by reason of this Subsection (f) are not required to be made shall be carried forward and taken into account in any subsequent adjustment required to be made hereunder. All calculations under this Section 8 shall be made to the nearest cent or to the nearest one-tenth of a share, as the case may be. Anything in this Section 8 to the contrary notwithstanding, the Company shall be entitled, but shall not be required, to make such changes in the Exercise Price, in addition to those required by this Section 8, as it shall determine, in its sole discretion, to be advisable in order that any dividend or distribution in shares of Common Stock, or any subdivision, reclassification or combination of Common Stock, hereafter made by the Company shall not result in any Federal income tax liability to the holders of Common Stock or securities convertible into Common Stock (including Warrants issuable upon exercise of this Option). (g) Whenever the Exercise Price is adjusted, as herein provided, the Company shall promptly, but no later than 10 days after any request for such an adjustment by the Holder, cause a notice setting forth the adjusted Exercise Price and adjusted number of Option Units issuable upon exercise of this Option and, if requested, information describing the transactions giving rise to such adjustments, to be mailed to the Holder, at the address set forth herein, and shall cause a certified copy thereof to be mailed to its transfer agent, if any. The Company may retain a firm of independent certified public accountants selected by the Board of Directors (who may be the regular accountants employed by the Company) to make any computation required by this Section 8, and a certificate signed by such firm shall be conclusive evidence of the correctness of such adjustment. (h) In the event that at any time, as a result of an adjustment made pursuant to Subsection (a) above, the Holder thereafter shall become entitled to receive any shares of the Company, other than Common Stock, thereafter the number of such other shares so receivable upon exercise of this Option shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in Subsections (a) to (f), inclusive above. 9. No adjustment pursuant to Section 8 hereof to the Exercise Price of the Option will be made, however, (i) upon the sale or exercise of any Warrants, including without limitation the sale or exercise of any of the Warrants comprising the Option; or (ii) upon the sale of any shares of Common Stock included in the Units in the Company's initial public offering, including, without limitation, shares sold upon the exercise of any over-allotment option granted to the Underwriters in connection with such offering; or (iii) upon the issuance or sale of Common Stock or Convertible Securities (as defined in the Warrant Agreement) upon the exercise of any rights or warrants to subscribe for or purchase, or any options for the purchase of, Common Stock or Convertible Securities, whether or not such rights, warrants, or options were outstanding on the date of the original sale of the Warrants or were thereafter issued or sold; or (iv) upon the issuance or sale of Common Stock upon conversion or exchange of any Convertible Securities, whether or not any adjustment in the Exercise Price was made or required to be made upon the issuance or sale of such Convertible Securities and whether or not such Convertible Securities were outstanding on the date of the original sale of the Warrants or were thereafter issued or sold; or (v) upon the issuance or sale of Common Stock or Convertible Securities in a private placement unless the issuance or sale price is less than 85% of the fair market value of the Common Stock on the date of issuance, in which case the adjustment shall only be for the difference between 85% of the fair market value and the issue or sale price; (vi) upon the issuance or sale of Common Stock or Convertible Securities to (a) shareholders of any corporation which merges into the Company or from which the Company acquires assets and some or all of the consideration consists of equity securities of the Company, in proportion to their stock holdings of such corporation immediately prior to the acquisition or (b) to any corporation or person from which the Company acquires assets but only if no adjustment is required pursuant to any other provision of this Section 9; or (vii) upon the issuance or sale of (i) up to 200,000 options for the purchase Common Stock to employees, officers, directors, advisors or consultants under the Stock Option Plan or (ii) Common Stock issued upon the exercise of options granted under the Stock Option Plan. 10. This Agreement shall be governed by and in accordance with the laws of the State of New York. IN WITNESS WHEREOF, Medjet Inc. has caused this Option to be signed by its duly authorized officers under its corporate seal, and this Option to be dated _____________________, 1996. MEDJET INC. By:______________________________ Its (Corporate Seal) PURCHASE FORM (To be signed only upon exercise of option) THE UNDERSIGNED, the holder of the foregoing Option, hereby irrevocably elects to exercise the purchase rights represented by such Option for, and to purchase thereunder, ____ Units of Medjet Inc., each Unit consisting of one share of $.001 Par Value Common Stock and one Class A Redeemable Common Stock Purchase Warrant, and herewith makes payment of $______________ therefor, and requests that the Warrants and certificates for shares of Common Stock be issued in the name(s) of, and delivered to ________________________ whose address(es) is (are)_________________________________________. _______________________ Dated: TRANSFER FORM (To be signed only upon transfer of the Option) For value received, the undersigned hereby sells, assigns, and transfers unto _________________________________ the right to purchase Units represented by the foregoing Option to the extent of _____ Units, and appoints _________________________________ attorney to transfer such rights on the books of Medjet Inc., with full power of substitution in the premises. Dated: By:___________________________ Address: ______________________________ ______________________________ ______________________________ In the presence of: EX-4 9 EX 4.5 WARRANT AGREEMENT WARRANT AGREEMENT AGREEMENT, dated as of this ____ day of _______ 1996, by and between MEDJET INC., a Delaware corporation ("Company"), and Continental Stock Transfer & Trust Company, as Warrant Agent (the "Warrant Agent"). WITNESSETH: WHEREAS, in connection with a public offering of up to 1,600,000 units ("Units"), each unit consisting of one (1) share of the Company's Common Stock, $.001 par value ("Common Stock") and one (1) Class A Redeemable Common Stock Purchase Warrant ("Class A Warrant" or "Warrant") pursuant to an underwriting agreement (the "Underwriting Agreement") dated ______, 1996 between the Company and Patterson Travis, Inc. ("Patterson"), and the issuance to Patterson or its designees of Underwriter's Options to purchase up to _______ additional Units (the "Underwriter's Options"), the Company will issue up to _________ Class A Warrants; WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing to so act, in connection with the issuance, registration, transfer, exchange and redemption of the Warrants, the issuance of certificates representing the Warrants, the exercise of the Warrants, and the rights of the holders thereof; NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter set forth and for the purpose of defining the terms and provisions of the Warrants and the certificates representing the Warrants and the respective rights and obligations thereunder of the Company, the holders of certificates representing the Warrants and the Warrant Agent, the parties hereto agree as follows: 1. Definitions. As used herein, the following terms shall have the following meanings, unless the context shall otherwise require: (a) "Common Stock" shall mean the common stock of the Company of which at the date hereof consists of _________ authorized shares, $.001 par value, and shall also include any capital stock of any class of the Company thereafter authorized which shall not be limited to a fixed sum or percentage in respect to the rights of the holders thereof to participate in dividends and in the distribution of assets upon the voluntary liquidation, dissolution, or winding up of the Company; provided, however, that the shares issuable upon exercise of the Warrants shall include (i) only shares of such class designated in the Company's Certificate of Incorporation as Common Stock on the date of the original issue of the Warrants, or (ii) in the case of any reclassification, change, consolidation, merger, sale, or conveyance of the character referred to in Section 9(c) hereof, the stock, securities, or property provided for in such section, or (iii) in the case of any reclassification or change in the outstanding shares of Common Stock issuable upon exercise of the Warrants as a result of a subdivision or combination or consisting of a change in par value, or from par value to no par value, or from no par value to par value, such shares of Common Stock as so reclassified or changed. (b) "Corporate Office" shall mean the office of the Warrant Agent (or its successor) at which at any particular time its principal business shall be administered, which office is located at the date hereof at ___________________, New York, NY 10005. (c) "Exercise Date" shall mean, as to any Warrant, the first business day on which the Warrant Agent shall have received both (a) the Warrant Certificate representing such Warrant, with the exercise form thereon duly executed by the Registered Holder thereof or his attorney duly authorized in writing, and (b) payment in cash, or by official bank or certified check made payable to the Company, of an amount in lawful money of the United States of America equal to the applicable Purchase Price. (d) "Initial Warrant Exercise Date" shall mean ________, 1996. (e) "Purchase Price" shall mean the purchase price per share to be paid upon exercise of each Warrant in accordance with the terms hereof, which price shall be $10.00 per share (except as set forth in paragraph 2(e) hereof), subject to adjustment from time to time pursuant to the provisions of Section 9 hereof, and subject to the Company's right, in its sole discretion, to reduce the Purchase Price upon notice to all warrantholders. (f) "Redemption Price" shall mean the price at which the Company may, at its option, redeem the Warrants, in accordance with the terms hereof, which price shall be $0.01 per Warrant. (g) "Registered Holder" shall mean as to any Warrant and as of any particular date, the person in whose name the certificate representing the Warrant shall be registered on that date on the books maintained by the Warrant Agent pursuant to Section 6. (h) "Transfer Agent" shall mean Continental Stock Transfer & Trust Company, as the Company's transfer agent, or its authorized successor, as such. (i) "Warrant Expiration Date" shall mean 5:00 P.M. (New York time) on _____, ____ or the Redemption Date as defined in Section 8, whichever is earlier; provided that if such date shall in the State of New York be a holiday or a day on which banks are authorized or required to close, then 5:00 P.M. (New York time) on the next following day which in the State of New York is not a holiday or a day on which banks are authorized or required to close. Upon notice to all warrantholders the Company shall have the right to extend the warrant expiration date. 2. Warrants and Issuance of Warrant Certificates. (a) A Warrant initially shall entitle the Registered Holder of the Warrant representing such Warrant to purchase one share of Common Stock upon the exercise thereof, in accordance with the terms hereof, subject to modification and adjustment as provided in Section 9. (b) Upon execution of this Agreement, Warrant Certificates representing the number of Warrants sold pursuant to the Underwriting Agreement shall be executed by the Company and delivered to the Warrant Agent. Upon written order of the Company signed by its President or Chairman or a Vice President and by its Secretary or an Assistant Secretary, the Warrant Certificates shall be countersigned, issued, and delivered by the Warrant Agent. (c) From time to time, up to the Warrant Expiration Date, the Transfer Agent shall countersign and deliver stock certificates in required whole number denominations representing up to an aggregate of _________ shares of Common Stock, subject to adjustment as described herein, upon the exercise of Warrants in accordance with this Agreement. (d) From time to time, up to the Warrant Expiration Date, the Warrant Agent shall countersign and deliver Warrant Certificates in required whole number denominations to the persons entitled thereto in connection with any transfer or exchange permitted under this Agreement; provided that no Warrant Certificates shall be issued except (i) those initially issued hereunder, (ii) those issued on or after the Initial Warrant Exercise Date, upon the exercise of fewer than all Warrants represented by any Warrant Certificate, to evidence any unexercised Warrants held by the exercising Registered Holder, (iii) those issued upon any transfer or exchange pursuant to Section 6; (iv) those issued in replacement of lost, stolen, destroyed, or mutilated Warrant Certificates pursuant to Section 7; (v) those issued pursuant to the Underwriter's Options; and (vi) those issued at the option of the Company, in such form as may be approved by its Board of Directors, to reflect any adjustment or change in the Purchase Price, the number of shares of Common Stock purchasable upon exercise of the Warrants or the Redemption Price therefor made pursuant to Section 9 hereof. (e) Pursuant to the terms of the Underwriter's Options, Patterson may purchase up to _______ Units, which include up to _______ Class A Warrants. The Class A Warrants underlying the Underwriter's Options are exercisable at $16.50. 3. Form and Execution of Warrant Certificates. (a) The Class A Warrant Certificates shall be substantially in the form annexed hereto as Exhibit A (the provisions of which are hereby incorporated herein) and may have such letters, numbers, or other marks of identification or designation and such legends, summaries, or endorsements printed, lithographed, or engraved thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Warrants may be listed, or to conform to usage or to the requirements of Section 2(b). The Warrant Certificates shall be dated the date of issuance thereof (whether upon initial issuance, transfer, exchange, or in lieu of mutilated, lost, stolen, or destroyed Warrant Certificates) and issued in registered form. Warrant Certificates shall be numbered serially with the letter W. (b) Warrant Certificates shall be executed on behalf of the Company by its Chairman of the Board, President, or any Vice President and by its Secretary or an Assistant Secretary, by manual signatures or by facsimile signatures printed thereon, and shall have imprinted thereon a facsimile of the Company's seal. Warrant Certificates shall be manually countersigned by the Warrant Agent and shall not be valid for any purpose unless so countersigned. In case any officer of the Company who shall have signed any of the Warrant Certificates shall cease to be an officer of the Company or to hold the particular office referenced in the Warrant Certificate before the date of issuance of the Warrant Certificates or before countersignature by the Warrant Agent and issue and delivery thereof, such Warrant Certificates may nevertheless be countersigned by the Warrant Agent, issued and delivered with the same force and effect as though the person who signed such Warrant Certificates had not ceased to be an officer of the Company or to hold such office. After countersignature by the Warrant Agent, Warrant Certificates shall be delivered by the Warrant Agent to the Registered Holder without further action by the Company, except as otherwise provided by Section 4 hereof. 4. Exercise. (a) Each Class A Warrant may be exercised by the Registered Holder thereof at any time on or after the Initial Warrant Exercise Date, but not after the Warrant Expiration Date, upon the terms and subject to the conditions set forth herein and in the applicable Warrant Certificate. A Warrant shall be deemed to have been exercised immediately prior to the close of business on the Exercise Date and the person entitled to receive the securities deliverable upon such exercise shall be treated for all purposes as the holder of those securities upon the exercise of the Warrant as of the close of business on the Exercise Date. As soon as practicable on or after the Exercise Date the Warrant Agent shall deposit the proceeds in an interest bearing account received from the exercise of a Warrant and shall notify the Company in writing of the exercise of the Warrants. Promptly following, and in any event within five days after the date of such notice from the Warrant Agent, the Warrant Agent, on behalf of the Company, shall cause to be issued and delivered by the Transfer Agent, to the person or persons entitled to receive the same, a certificate or certificates for the securities deliverable upon such exercise (plus a certificate for any remaining unexercised Warrants of the Registered Holder), unless prior to the date of issuance of such certificates the Company shall instruct the Warrant Agent to refrain from causing such issuance of certificates pending clearance of checks received in payment of the Purchase Price pursuant to such Warrants. Upon the exercise of any Warrant and clearance of the funds received, the Warrant Agent shall promptly remit the payment received for the Warrant (the "Warrant Proceeds") to the Company or as the Company may direct in writing. (b) If, subsequent to_______ 1997,in respect of the exercise of any Warrant, (i) the market price of the Company's Common Stock is greater than the then Purchase Price of the Warrants, (ii) the exercise of the Warrant was solicited by a member of the National Association of Securities Dealers, Inc. ("NASD") and such member was designated in writing by the holder of such Warrant as having solicited such Warrant, (iii) the Warrant was not held in a discretionary account, (iv) disclosure of compensation arrangements was made both at the time of the original offering and at the time of exercise and (v) the solicitation of the exercise of the Warrant was not in violation of Rule 10b-6 (as such rule or any successor rule may be in effect as of such time of exercise) promulgated under the Securities Exchange Act of 1934, as amended, then the Warrant Agent, simultaneously with the distribution of proceeds to the Company received upon exercise of the Warrant(s) so exercised shall, on behalf of the Company, pay from the proceeds received upon exercise of the Warrant(s), a fee of 8% of the Purchase Price to Patterson (of which 1% may be reallowed to the dealer who solicited the exercise, which may also be Patterson). Within five days after exercise, the Warrant Agent shall send Patterson a copy of the reverse side of each Warrant exercised. Patterson shall reimburse the Warrant Agent, upon request, for its reasonable expenses relating to compliance with this Section. In addition, Patterson and the Company may at any time during business hours, examine the records of the Warrant Agent, including its ledger of original Warrant Certificates returned to the Warrant Agent upon exercise of Warrants. The provisions of this paragraph may not be modified, amended or deleted without the prior written consent of Patterson. 5. Reservation of Shares; Listing; Payment of Taxes, etc. (a) The Company covenants that it will at all times reserve and keep available out of its authorized Common Stock, solely for the purpose of issue upon exercise of Warrants, such number of shares of Common Stock as shall then be issuable upon the exercise of all outstanding Warrants. The Company covenants that all shares of Common Stock which shall be issuable upon exercise of the Warrants shall, at the time of delivery, be duly and validly issued, fully paid, nonassessable, and free from all taxes, liens, and charges with respect to the issue thereof, (other than those which the Company shall promptly pay or discharge) and that upon issuance such shares shall be listed on each national securities exchange or eligible for inclusion in each automated quotation system, if any, on which the other shares of outstanding Common Stock of the Company are then listed or eligible for inclusion. (b) The Company covenants that if any securities to be reserved for the purpose of exercise of Warrants hereunder require registration with, or approval of, any governmental authority under any federal securities law before such securities may be validly issued or delivered upon such exercise, then the Company will in good faith and as expeditiously as reasonably possible, endeavor to secure such registration or approval and will use its reasonable efforts to obtain appropriate approvals or registrations under state "blue sky" securities laws, provided, however, that the Company shall not be required to qualify as a foreign corporation or a dealer in securities or to execute a general consent of service of process in any jurisdiction. With respect to any such securities, however, Warrants may not be exercised by, or shares of Common Stock issued to, any Registered Holder in any state in which such exercise would be unlawful. (c) The Company shall pay all documentary, stamp, or similar taxes and other governmental charges that may be imposed with respect to the issuance of Warrants, or the issuance, or delivery of any shares upon exercise of the Warrants; provided, however, that if the shares of Common Stock are to be delivered in a name other than the name of the Registered Holder of the Warrant Certificate representing any Warrant being exercised, then no such delivery shall be made unless the person requesting the same has paid to the Warrant Agent the amount of transfer taxes or charges incident thereto, if any. (d) The Warrant Agent is hereby irrevocably authorized to requisition the Company's Transfer Agent from time to time for certificates representing shares of Common Stock issuable upon exercise of the Warrants, and the Company will authorize the Transfer Agent to comply with all such proper requisitions. The Company will file with the Warrant Agent a statement setting forth the name and address of the Transfer Agent of the Company for shares of Common Stock issuable upon exercise of the Warrants. 6. Exchange and Registration of Transfer. (a) Warrant Certificates may be exchanged for other Warrant Certificates representing an equal aggregate number of Warrants of the same class or may be transferred in whole or in part. Warrant Certificates to be exchanged shall be surrendered to the Warrant Agent at its Corporate Office, and upon satisfaction of the terms and provisions hereof, the Company shall execute and the Warrant Agent shall countersign, issue, and deliver in exchange therefor the Warrant Certificate or Certificates which the Registered Holder making the exchange shall be entitled to receive. (b) The Warrant Agent shall keep at its office books in which, subject to such reasonable regulations as it may prescribe, it shall register Warrant Certificates and the transfer thereof in accordance with its regular practice. Upon due presentment for registration of transfer of any Warrant Certificate at such office, the Company shall execute and the Warrant Agent shall issue and deliver to the transferee or transferees a new Warrant Certificate or Certificates representing an equal aggregate number of Warrants. (c) With respect to all Warrant Certificates presented for registration or transfer, or for exchange or exercise, the subscription form on the reverse thereof shall be duly endorsed, or be accompanied by a written instrument or instruments of transfer and subscription, in form satisfactory to the Company and the Warrant Agent, duly executed by the Registered Holder or his attorney-in-fact duly authorized in writing. (d) A service charge may be imposed on the Registered Holder by the Warrant Agent for any exchange or registration of transfer of Warrant Certificates. In addition, the Company may require payment by such holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. (e) All Warrant Certificates surrendered for exercise or for exchange in case of mutilated Warrant Certificates shall be promptly canceled by the Warrant Agent and thereafter retained by the Warrant Agent until termination of this Agreement or resignation as Warrant Agent, or disposed of or destroyed, at the direction of the Company. (f) Prior to due presentment for registration of transfer thereof, the Company and the Warrant Agent may deem and treat the Registered Holder of any Warrant Certificate as the absolute owner thereof and of each Warrant represented thereby (notwithstanding any notations of ownership or writing thereon made by anyone other than a duly authorized officer of the Company or the Warrant Agent) for all purposes and shall not be affected by any notice to the contrary. The Warrants which are being publicly offered in Units with shares of Common Stock pursuant to the Underwriting Agreement will be detachable from the Common Stock and transferable separately therefrom upon the earlier of (i) three (3) months from the Escrow Release Date (as defined in the Company's Registration Statement on Form SB-2 No. 333-3184) or upon agreement between the Company and Patterson. 7. Loss or Mutilation. Upon receipt by the Company and the Warrant Agent of evidence satisfactory to them of the ownership of and loss, theft, destruction, or mutilation of any Warrant Certificate and (in case of loss, theft, or destruction) of indemnity satisfactory to them, and (in the case of mutilation) upon surrender and cancellation thereof, the Company shall execute and the Warrant Agent shall (in the absence of notice to the Company and/or Warrant Agent that the Warrant Certificate has been acquired by a bona fide purchaser) countersign and deliver to the Registered Holder in lieu thereof a new Warrant Certificate of like tenor representing an equal aggregate number of Warrants. Applicants for a substitute Warrant Certificate shall comply with such other reasonable regulations and pay such other reasonable charges as the Warrant Agent may prescribe. 8. Redemption. (a) Subject to the provisions of paragraph 2(e) hereof, on not less than thirty (30) days notice given at any time after the Initial Warrant Exercise Date, the Warrants may be redeemed, at the option of the Company, at a redemption price of $0.01 per Warrant, provided that the Market Price (defined below)of the Common Stock receivable upon exercise of the Class A Warrant shall equal or exceed $13.00 ($21.45 in the case of the Warrants included in the Underwriter's Option) (the "Target Price"), subject to adjustment as set forth in Section 8(f) below. Market Price for the purpose of this Section 8 shall mean (i) the average closing bid price for any ten (10) consecutive trading days within a period of thirty (30) consecutive trading days ending within five (5) days prior to the date of the notice of redemption, which notice shall be mailed no later than five days thereafter, of the Common Stock as reported by the National Association of Securities Dealers, Inc. Automatic Quotation System or (ii) the average of the last reported sale price, for ten (10) consecutive business days, ending within five (5) days of the date of the notice of redemption, which notice shall be mailed no later than five days thereafter, on the primary exchange on which the Common Stock is traded, if the Common Stock is traded on a national securities exchange. (b) If the conditions set forth in Section 8(a) are met, and the Company desires to exercise its right to redeem the Class A Warrants, it shall mail a notice of redemption to each of the Registered Holders of the Warrants to be redeemed, first class, postage prepaid, not later than the thirtieth day before the date fixed for redemption, at their last address as shall appear on the records maintained pursuant to Section 6(b). Any notice mailed in the manner provided herein shall be conclusively presumed to have been duly given whether or not the Registered Holder receives such notice. (c) The notice of redemption shall specify (i) the redemption price, (ii) the date fixed for redemption, (iii) the place where the Warrant Certificates shall be delivered and the redemption price paid, and (iv) that the right to exercise the Warrant shall terminate at 5:00 P.M. (New York time) on the business day immediately preceding the date fixed for redemption. The date fixed for the redemption of the Class A Warrant shall be the Redemption Date. No failure to mail such notice nor any defect therein or in the mailing thereof shall affect the validity of the proceedings for such redemption except as to a Registered Holder (a) to whom notice was not mailed or (b) whose notice was defective. An affidavit of the Warrant Agent or of the Secretary or an Assistant Secretary of the Company that notice of redemption has been mailed shall, in the absence of fraud, be prima facie evidence of the facts stated therein. (d) Any right to exercise a Warrant shall terminate at 5:00 P.M. (New York time) on the business day immediately preceding the Redemption Date. On and after the Redemption Date, Holders of the Warrants shall have no further rights except to receive, upon surrender of the Warrant prior to the Redemption Date, the Redemption Price. (e) From and after the Redemption Date specified for, the Company shall, at the place specified in the notice of redemption, upon presentation and surrender to the Company by or on behalf of the Registered Holder thereof of one or more Warrant Certificates evidencing Warrants to be redeemed, deliver or cause to be delivered to or upon the written order of such Holder a sum in cash equal to the redemption price of each such Warrant. From and after the Redemption Date and upon the deposit or setting aside by the Company of a sum sufficient to redeem all the Warrants called for redemption, such Warrants shall expire and become void and all rights hereunder and under the Warrant Certificates, except the right to receive payment of the redemption price, shall cease. (f) If the shares of the Company's Common Stock are subdivided or combined into a greater or smaller number of shares of Common Stock, the Target Price shall be proportionally adjusted by the ratio which the total number of shares of Common Stock outstanding immediately prior to such event bears to the total number of shares of Common Stock to be outstanding immediately after such event. 9. Adjustment of Exercise Price and Number of Shares of Common Stock or Warrants. (a) Subject to the exceptions referred to in Section 9(g) below, in the event the Company shall, at any time or from time to time after the date hereof, sell any shares of Common Stock for a consideration per share less than the Market Price of the Common Stock (as defined in Section 8) (calculated as of the date prior to the date of the sale) or issue any shares of Common Stock as a stock dividend to the holders of Common Stock, or subdivide or combine the outstanding shares of Common Stock into a greater or lesser number of shares (any such sale, issuance, subdivision, or combination being herein called a "Change of Shares"), then, and thereafter upon each further Change of Shares, the Purchase Price in effect immediately prior to such Change of Shares shall be changed to a price (including any applicable fraction of a cent) determined by multiplying the Purchase Price in effect immediately prior thereto by a fraction, the numerator of which shall be the sum of the number of shares of Common Stock outstanding immediately prior to the Change of Shares and the number of shares of Common Stock which the aggregate consideration received (determined as provided in subsection 9(f)below) for the issuance of such additional shares would purchase at such current market price per share of Common Stock, and the denominator of which shall be the number of shares of Common Stock outstanding immediately after the Change of Shares. Such adjustment shall be made successively whenever such an issuance is made. Upon each adjustment of the Purchase Price pursuant to this Section 9, the total number of shares of Common Stock purchasable upon the exercise of each Warrant shall (subject to the provisions contained in Section 9(b) hereof) be such number of shares (calculated to the nearest tenth) purchasable at the Purchase Price in effect immediately prior to such adjustment multiplied by a fraction, the numerator of which shall be the Purchase Price in effect immediately prior to such adjustment and the denominator of which shall be the Purchase Price in effect immediately after such adjustment. (b) The Company may elect, upon any adjustment of the Purchase Price hereunder, to adjust the number of Warrants outstanding, in lieu of the adjustment in the number of shares of Common Stock purchasable upon the exercise of each Warrant as hereinabove provided, so that each Warrant outstanding after such adjustment shall represent the right to purchase one share of Common Stock. Each Warrant held of record prior to such adjustment of the number of Warrants shall become that number of Warrants (calculated to the nearest tenth) determined by multiplying the number one by a fraction, the numerator of which shall be the Purchase Price in effect immediately prior to such adjustment and the denominator of which shall be the Purchase Price in effect immediately after such adjustment. Upon each adjustment of the number of Warrants pursuant to this Section 9, the Company shall, as promptly as practicable, cause to be distributed to each Registered Holder of Warrant Certificates on the date of such adjustment Warrant Certificates evidencing, subject to Section 10 hereof, the number of additional Warrants to which such Holder shall be entitled as a result of such adjustment or, at the option of the Company, cause to be distributed to such Holder in substitution and replacement for the Warrant Certificates held by him prior to the date of adjustment (and upon surrender thereof, if required by the Company) new Warrant Certificates evidencing the number of Warrants to which such Holder shall be entitled after such adjustment. (c) After the date hereof, in case of any reclassification, capital reorganization, or other change of outstanding shares of Common Stock, or in case of any consolidation or merger of the Company with or into another corporation (other than a consolidation or merger in which the Company is the continuing corporation and which does not result in any reclassification, capital reorganization, or other change of outstanding shares of Common Stock), (or in case of any sale or conveyance to another corporation of all or substantially all of the assets of the Company (other than a sale/leaseback, mortgage, or other financing transaction)), the Company shall cause effective provision to be made so that each holder of a Warrant then outstanding shall have the right thereafter, by exercising such Warrant, to purchase the kind and number of shares of stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization, or other change, consolidation, merger, sale, or conveyance by a holder of the number of shares of Common Stock that might have been purchased upon exercise of such Warrant immediately prior to such reclassification, capital reorganization, or other change, consolidation, merger, sale, or conveyance. Any such provision shall include provision for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 9. The Company shall not effect any such consolidation, merger, or sale unless prior to or simultaneously with the consummation thereof, the successor (if other than the Company) resulting from such consolidation or merger or the corporation purchasing assets or other appropriate corporation or entity shall assume, by written instrument executed and delivered to the Warrant Agent, the obligation to deliver to the holder of each Warrant such shares of stock, securities, or assets as, in accordance with the foregoing provisions, such holders may be entitled to purchase and the other obligations under this Agreement. The foregoing provisions shall similarly apply to successive reclassification, capital reorganizations, and other changes of outstanding shares of Common Stock and to successive consolidations, mergers, sales, or conveyances. (d) Irrespective of any adjustments or changes in the Purchase Price or the number of shares of Common Stock purchasable upon exercise of the Warrants, the Warrant Certificates theretofore and thereafter issued shall, unless the Company shall exercise its option to issue new Warrant Certificates pursuant to Section 2(d) hereof, continue to express the Purchase Price per share, the number of shares purchasable thereunder, and the Redemption Price therefor as the Purchase Price per share, and the number of shares purchasable and the Redemption Price therefore were expressed in the Warrant Certificates when the same were originally issued. (e) After each adjustment of the Purchase Price pursuant to this Section 9, the Company will promptly prepare a certificate signed by the Chairman or President, and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary, of the Company setting forth: (i) the Purchase Price as so adjusted, (ii) the number of shares of Common Stock purchasable upon exercise of each Warrant after such adjustment, and, if the Company shall have elected to adjust the number of Warrants, the number of Warrants to which the registered holder of each Warrant shall then be entitled, and the adjustment in Redemption Price resulting therefrom, and (iii) a brief statement of the facts accounting for such adjustment. The Company will promptly file such certificate with the Warrant Agent and cause a brief summary thereof to be sent by ordinary first class mail to Patterson and to each registered holder of Warrants at his last address as it shall appear on the registry books of the Warrant Agent. No failure to mail such notice nor any defect therein or in the mailing thereof shall affect the validity thereof except as to the holder to whom the Company failed to mail such notice, or except as to the holder whose notice was defective and who is prejudiced thereby. The affidavit of an officer of the Warrant Agent or the Secretary or an Assistant Secretary of the Company that such notice has been mailed shall, in the absence of fraud, be prima facie evidence of the facts stated therein. (f) For purposes of Section 9(a) and 9(b) hereof, the following provisions (i) to (vii) shall also be applicable: (i) The number of shares of Common Stock outstanding at any given time shall include shares of Common Stock owned or held by or for the account of the Company and the sale or issuance of such treasury shares or the distribution of any such treasury shares shall not be considered a Change of Shares for purposes of said sections. (ii) No adjustment of the Purchase Price shall be made unless such adjustment would require an increase or decrease of at least $.10 in such price; provided that any adjustments which by reason of this subsection (ii) are not required to be made shall be carried forward and shall be made at the time of and together with the next subsequent adjustment which, together with any adjustment(s) so carried forward, shall require an increase or decrease of at least $.10 in the Purchase Price then in effect hereunder. (iii) After the date hereof, in case of (1) the sale by the Company for cash of any rights or warrants to subscribe for or purchase, or any options for the purchase of, either Common Stock or any securities convertible into or exchangeable for Common Stock without the payment of any further consideration other than cash, if any (such convertible or exchangeable securities being herein called "Convertible Securities"), or (2) the issuance by the Company, without the receipt by the Company of any consideration therefor, of any rights or warrants to subscribe for or purchase, or any options for the purchase of, either Common Stock or Convertible Securities, in each case, if (and only if) the consideration payable to the Company upon the exercise of such rights, warrants, or options shall consist of cash, whether or not such rights, warrants, or options, or the right to convert or exchange such Convertible Securities, are immediately exercisable, and the price per share for which Common Stock is issuable upon the exercise of such rights, warrants, or options or upon the conversion or exchange of such Convertible Securities (determined by dividing (x) the minimum aggregate consideration payable to the Company upon the exercise of such rights, warrants, or options, plus the consideration received by the Company for the issuance or sale of such rights, warrants, or options, plus, in the case of such Convertible Securities, the minimum aggregate amount of additional consideration, if any, other than such Convertible Securities, payable upon the conversion or exchange thereof, by (y) the total maximum number of shares of Common Stock issuable upon the exercise of such rights, warrants, or options or upon the conversion or exchange of such Convertible Securities issuable upon the exercise of such rights, warrants, or options) is less than the Market Price of the Common Stock on the date of the issuance or sale (calculated as of the date prior to the date of sale)of such rights, warrants, or options, then the total maximum number of shares of Common Stock issuable upon the exercise of such rights, warrants, or options or upon the conversion or exchange of such Convertible Securities (as of the date of the issuance or sale of such rights, warrants, or options) shall be deemed to be outstanding shares of Common Stock for purposes of Sections 9(a) and 9(b) hereof and shall be deemed to have been sold for cash in an amount equal to such price per share. (iv) In case of the sale by the Company for cash of any Convertible Securities, whether or not the right of conversion or exchange thereunder is immediately exercisable, and the price per share for which Common Stock is issuable upon the conversion or exchange of such Convertible Securities (determined by dividing (x) the total amount of consideration received by the Company for the sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, other than such Convertible Securities, payable upon the conversion or exchange thereof, by (y) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of such Convertible Securities determined as of the date of issuance) is less than the Market Price of the Common Stock on the date of the sale of such Convertible Securities (calculated as of the date prior to the date of sale), then the total maximum number of shares of Common Stock issuable upon the conversion or exchange of such Convertible Securities (as of the date of the sale of such Convertible Securities) shall be deemed to be outstanding shares of Common Stock for purposes of Sections 9(a) and 9(b) hereof and shall be deemed to have been sold for cash in an amount equal to such price per share. (v) In case the Company shall modify the rights of conversion, exchange, or exercise of any of the securities referred to in subsection (iii) above or any other securities of the Company convertible, exchangeable, or exercisable for shares of Common Stock, for any reason other than an event that would require adjustment to prevent dilution, so that the consideration per share received by the Company after such modification is less than the Market Price on the date prior to such modification (calculated as of the date prior to the date of sale), the Purchase Price to be in effect after such modification shall be determined by multiplying the Purchase Price in effect immediately prior to such event by a fraction, of which the numerator shall be the number of shares of Common Stock outstanding plus the number of shares of Common Stock which the aggregate consideration receivable by the Company for the securities affected by the modification would purchase at the Market Price (calculated as of the date prior to the date of sale)and of which the denominator shall be the number of shares of Common Stock outstanding on such date plus the number of shares of Common Stock to be issued upon conversion, exchange, or exercise of the modified securities at the modified rate. Such adjustment shall become effective as of the date upon which such modification shall take effect. (vi) On the expiration of any such right, warrant, or option or the termination of any such right to convert or exchange any such Convertible Securities, the Purchase Price then in effect hereunder shall forthwith be readjusted to such Purchase Price as would have obtained (a) had the adjustments made upon the issuance or sale of such rights, warrants, options, or Convertible Securities been made upon the basis of the issuance of only the number of shares of Common Stock theretofore actually delivered (and the total consideration received therefor) upon the exercise of such rights, warrants, or options or upon the conversion or exchange of such Convertible Securities and (b) had adjustments been made on the basis of the Purchase Price as adjusted under clause (a) for all transactions (which would have affected such adjusted Purchase Price) made after the issuance or sale of such rights, warrants, options, or Convertible Securities. (vii) In case of the sale (other than pursuant to the Stock Option Plan or the Warrants)for cash of any shares of Common Stock, any Convertible Securities, any rights or warrants to subscribe for or purchase, or any options for the purchase of, Common Stock or Convertible Securities, the consideration received by the Company therefore shall be deemed to be the gross sales price therefor without deducting therefrom any expense paid or incurred by the Company or any underwriting discounts or commissions or concessions paid or allowed by the Company in connection therewith. (g) No adjustment to the Purchase Price of the Warrants or to the number of shares of Common Stock purchasable upon the exercise of each Warrant will be made, however, (i) upon the sale or exercise of the Warrants, including without limitation the sale or exercise of any of the Warrants comprising the Underwriter's Options; or (ii) upon the sale of any shares of Common Stock in the Company's initial public offering, including, without limitation, shares sold upon the exercise of any over-allotment option granted to the Underwriters in connection with such offering; or (iii) upon the issuance or sale of Common Stock or Convertible Securities upon the exercise of any rights or warrants to subscribe for or purchase, or any options for the purchase of, Common Stock or Convertible Securities, whether or not such rights, warrants, or options were outstanding on the date of the original sale of the Warrants or were thereafter issued or sold; or (iv) upon the issuance or sale of Common Stock upon conversion or exchange of any Convertible Securities, whether or not any adjustment in the Purchase Price was made or required to be made upon the issuance or sale of such Convertible Securities and whether or not such Convertible Securities were outstanding on the date of the original sale of the Warrants or were thereafter issued or sold; or (v) upon the issuance or sale of Common Stock or Convertible Securities in a private placement unless the issuance or sale price is less than 85% of the fair market value of the Common Stock on the date of issuance, in which case the adjustment shall only be for the difference between 85% of the fair market value and the issue or sale price; (vi) upon the issuance or sale of Common Stock or Convertible Securities to (a) shareholders of any corporation which merges into the Company or from which the Company acquires assets and some or all of the consideration consists of equity securities of the Company, in proportion to their stock holdings of such corporation immediately prior to the acquisition or (b) to any corporation or person from which the Company acquires assets but only if no adjustment is required pursuant to any other provision of this Section 9; or (vii) upon the issuance or sale of (i) up to 200,000 options for the purchase Common Stock to employees, officers, directors, advisors or consultants under the Stock Option Plan or (ii) Common Stock issued upon the exercise of options granted under the Stock Option Plan. (h) As used in this Section 9, the term "Common Stock" shall mean and include the Company's Common Stock authorized on the date of the original issue of the Units and shall also include any capital stock of any class of the Company thereafter authorized which shall not be limited to a fixed sum or percentage in respect of the rights of the holders thereof to participate in dividends and in the distribution of assets upon the voluntary liquidation, dissolution, or winding up of the Company; provided, however, that the shares issuable upon exercise of the Warrants shall include only shares of such class designated in the Company's Certificate of Incorporation as Common Stock on the date of the original issue of the Units, or (i)in the case of any reclassification, change, consolidation, merger, sale, or conveyance of the character referred to in Section 9(c) hereof, the stock, securities, or property provided for in such section or, (ii)in the case of any reclassification or change in the outstanding shares of Common Stock issuable upon exercise of the Warrants as a result of a subdivision or combination or consisting of a change in par value, or from par value to no par value, or from no par value to par value, such shares of Common Stock as so reclassified or changed. (i) Any determination as to whether an adjustment in the Purchase Price in effect hereunder is required pursuant to Section 9, or as to the amount of any such adjustment, if required, shall be binding upon the holders of the Warrants and the Company if made in good faith by the Board of Directors of the Company. (j) Intentionally omitted. 10. Fractional Warrants and Fractional Shares. (a) If the number of shares of Common Stock purchasable upon the exercise of each Warrant is adjusted pursuant to Section 9 hereof, the Company nevertheless shall not be required to issue fractions of shares, upon exercise of the Warrants or otherwise, or to distribute certificates that evidence fractional shares. With respect to any fraction of a share called for upon any exercise hereof, the Company shall pay to the Holder an amount in cash equal to such fraction multiplied by the current market value of such fractional share, determined as follows: (i) If the Common Stock is listed on a National Securities Exchange or admitted to unlisted trading privileges on such exchange or listed for trading on the NASDAQ Quotation System, the current value shall be the last reported sale price of the Common Stock on such exchange on the last business day prior to the date of exercise of this Warrant or if no such sale is made on such day, the average of the closing bid and asked prices for such day on such exchange; or (ii) If the Common Stock is not listed or admitted to unlisted trading privileges, the current value shall be the mean of the last reported bid and asked prices reported by the National Quotation Bureau, Inc. on the last business day prior to the date of the exercise of this Warrant; or (iii) If the Common Stock is not so listed or admitted to unlisted trading privileges and bid and asked prices are not so reported, the current value shall be an amount determined in such reasonable manner as may be prescribed by the Board of Directors of the Company. 11. Warrant Holders Not Deemed Stockholders. No holder of Warrants shall, as such, be entitled to vote or to receive dividends or be deemed the holder of Common Stock that may at any time be issuable upon exercise of such Warrants for any purpose whatsoever, nor shall anything contained herein be construed to confer upon the holder of Warrants, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issue or reclassification of stock, change of par value or change of stock to no par value, consolidation, merger, or conveyance or otherwise), or to receive notice of meetings, or to receive dividends or subscription rights, until such Holder shall have exercised such Warrants and been issued shares of Common Stock in accordance with the provisions hereof. 12. Rights of Action. All rights of action with respect to this Agreement are vested in the respective Registered Holders of the Warrants, and any Registered Holder of a Warrant, without consent of the Warrant Agent or of the holder of any other Warrant, may, in his own behalf and for his own benefit, enforce against the Company his right to exercise his Warrants for the purchase of shares of Common Stock in the manner provided in the Warrant Certificate and this Agreement. 13. Agreement of Warrant Holders. Every holder of a Warrant, by his acceptance thereof, consents and agrees with the Company, the Warrant Agent and every other holder of a Warrant that: (a) The Warrants are transferable only on the registry books of the Warrant Agent by the Registered Holder thereof in person or by his attorney duly authorized in writing and only if the Warrant Certificates representing such Warrants are surrendered at the office of the Warrant Agent, duly endorsed or accompanied by a proper instrument of transfer satisfactory to the Warrant Agent and the Company in their sole discretion, together with payment of any applicable transfer taxes; and (b) The Company and the Warrant Agent may deem and treat the person in whose name the Warrant Certificate is registered as the holder and as the absolute, true, and lawful owner of the Warrants represented thereby for all purposes, and neither the Company nor the Warrant Agent shall be affected by any notice or knowledge to the contrary, except as otherwise expressly provided in Section 7 hereof. 14. Cancellation of Warrant Certificates. If the Company shall purchase or acquire any Warrant or Warrants, the Warrant Certificate or Warrant Certificates evidencing the same shall thereupon be delivered to the Warrant Agent and canceled by it and retired. The Warrant Agent shall also cause to be cancelled Common Stock following exercise of any or all of the Warrants represented thereby or delivered to it for transfer, split up, combination, or exchange. 15. Concerning the Warrant Agent. The Warrant Agent acts hereunder as agent and in a ministerial capacity for the Company, and its duties shall be determined solely by the provisions hereof. The Warrant Agent shall not, by issuing and delivering Warrant Certificates or by any other act hereunder be deemed to make any representations as to the validity, value, or authorization of the Warrant Certificates or the Warrants represented thereby or of any securities or other property delivered upon exercise of any Warrant or whether any stock issued upon exercise of any Warrant is fully paid and nonassessable. The Warrant Agent shall not at any time be under any duty or responsibility to any holder of Warrant Certificates to make or cause to be made any adjustment of the Purchase Price or the Redemption Price provided in this Agreement, or to determine whether any fact exists which may require any such adjustments, or with respect to the nature or extent of any such adjustment, when made, or with respect to the method employed in making the same. It shall not (i) be liable for any recital or statement of facts contained herein or for any action taken, suffered, or omitted by it in reliance on any Warrant Certificate or other document or instrument believed by it in good faith to be genuine and to have been signed or presented by the proper party or parties, (ii) be responsible for any failure on the part of the Company to comply with any of its covenants and obligations contained in this Agreement or in any Warrant Certificate, or (iii) be liable for any act or omission in connection with this Agreement except for its own negligence or wilful misconduct. The Warrant Agent may at any time consult with counsel satisfactory to it (who may be counsel for the Company) and shall incur no liability or responsibility for any action taken, suffered or omitted by it in good faith in accordance with the opinion or advice of such counsel. Any notice, statement, instruction, request, direction, order, or demand of the Company shall be sufficiently evidenced by an instrument signed by the Chairman of the Board, President, any Vice President, its Secretary, or Assistant Secretary (unless other evidence in respect thereof is herein specifically prescribed). The Warrant Agent shall not be liable for any action taken, suffered or omitted by it in accordance with such notice, statement, instruction, request, direction, order, or demand believed by it to be genuine. The Company agrees to pay the Warrant Agent reasonable compensation for its services hereunder and to reimburse it for its reasonable expenses hereunder; it further agrees to indemnify the Warrant Agent and save it harmless against any and all losses, expenses, and liabilities, including judgments, costs, and counsel fees, for anything done or omitted by the Warrant Agent in the execution of its duties and powers hereunder except losses, expenses, and liabilities arising as a result of the Warrant Agent's negligence or wilful misconduct. The Warrant Agent may resign its duties and be discharged from all further duties and liabilities hereunder (except liabilities arising as a result of the Warrant Agent's own negligence or wilful misconduct), after giving 30 days' prior written notice to the Company. At least 15 days prior to the date such resignation is to become effective, the Warrant Agent shall cause a copy of such notice of resignation to be mailed to the Registered Holder of each Warrant Certificate at the Company's expense. Upon such resignation, or any inability of the Warrant Agent to act as such hereunder, the Company shall appoint a new warrant agent in writing. If the Company shall fail to make such appointment within a period of 15 days after it has been notified in writing of such resignation by the resigning Warrant Agent, then the Registered Holder of any Warrant Certificate may apply to any court of competent jurisdiction for the appointment of a new warrant agent. Any new warrant agent, whether appointed by the Company or by such a court, shall be a bank or trust company having a capital and surplus, as shown by its last published report to its stockholders, of not less than $10,000,000 or a stock transfer company. After acceptance in writing of such appointment by the new warrant agent is received by the Company, such new warrant agent shall be vested with the same powers, rights, duties, and responsibilities as if it had been originally named herein as the Warrant Agent, without any further assurance, conveyance, act, or deed; but if for any reason it shall be necessary or expedient to execute and deliver any further assurance, conveyance, act, or deed, the same shall be done at the expense of the Company and shall be legally and validly executed and delivered by the resigning Warrant Agent. Not later than the effective date of any such appointment the Company shall file notice thereof with the resigning warrant Agent and shall forthwith cause a copy of such notice to be mailed to the Registered Holder of each Warrant Certificate. Any corporation into which the Warrant Agent or any new warrant agent may be converted or merged or any corporation resulting from any consolidation to which the Warrant Agent or any new warrant agent shall be a party or any corporation succeeding to the trust business of the Warrant Agent shall be a successor warrant agent under this Agreement without any further act, provided that such corporation is eligible for appointment as successor to the Warrant Agent under the provisions of the preceding paragraph. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed to the Company and to the Registered Holder of each Warrant Certificate. The Warrant Agent, its subsidiaries and affiliates, and any of its or their officers or directors, may buy and hold or sell Warrants or other securities of the Company and otherwise deal with the Company in the same manner and to the same extent and with like effects as though it were not Warrant Agent. Nothing herein shall preclude the Warrant Agent from acting in any other capacity for the Company or for any other legal entity. 16. Modification of Agreement. The Warrant Agent and the Company may by supplemental agreement make any changes or corrections in this Agreement (i) that they shall deem appropriate to cure any ambiguity or to correct any defective or inconsistent provision or manifest mistake or error herein contained; or (ii) that they may deem necessary or desirable and which shall not adversely affect the interests of the holders of Warrant Certificates; provided, however, that this Agreement shall not otherwise be modified, supplemented, or altered in any respect except with the consent in writing of the Registered Holders of Warrant Certificates representing not less than 50% of the Warrants then outstanding; and provided, further, that no change in the number or nature of the securities purchasable upon the exercise of any Warrant, or the Purchase Price therefor, or the acceleration of the Warrant Expiration Date, shall be made without the consent in writing of the Registered Holder of the Warrant Certificate representing such Warrant, other than such changes as are specifically prescribed by this Agreement as originally executed or are made in compliance with applicable law. In addition, the Company and Patterson may by supplemental agreement extend the Warrant Expiration Date without the consent of the Registered Holders. 17. Notices. All notices, requests, consents, and other communications hereunder shall be in writing and shall be deemed to have been made when delivered or mailed first class registered or certified mail, postage prepaid as follows: if to the Registered Holder of a Warrant Certificate, at the address of such holder as shown on the registry books maintained by the Warrant Agent; if to the Company, 1090 King Georges Road, Suite 301, Edison, NJ 08837, Attention: President, with a copy sent to the Law Offices of Kelley Drye & Warren, 101 Park Avenue, New York, NY 10178, Attention: Jane E. Jablons, Esq.; or at such other address as may have been furnished to the Warrant Agent in writing by the Company; and if to the Warrant Agent, at its corporate office. 18. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without reference to principles of conflict of laws. 19. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Company and, the Warrant Agent and their respective successors and assigns, and the holders from time to time of Warrant Certificates. Nothing in this Agreement is intended or shall be construed to confer upon any other person any right, remedy, or claim, in equity or at law, or to impose upon any other person any duty, liability, or obligation. 20. Termination. This Agreement shall terminate at the close of business on the Warrant Expiration Date of all the Warrants or such earlier date upon which all Warrants have been exercised, except that the Warrant Agent shall account to the Company for cash held by it and the provisions of Section 15 hereof shall survive such termination. 21. Counterparts. This Agreement may be executed in several counterparts, which taken together shall constitute a single document. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. MEDJET INC. By:______________________________ Its CONTINENTAL STOCK TRANSFER & TRUST COMPANY By:______________________________ Its Authorized Officer EXHIBIT A [Form of Face of Class A Warrant Certificate] No. W ___________ Class A Warrants Void after ______, ____ STOCK PURCHASE WARRANT CERTIFICATE FOR PURCHASE OF COMMON STOCK MEDJET INC. This certifies that For Value Received or registered assigns (the "Registered Holder") is the owner of the number of Class A Redeemable Common Stock Purchase Warrants ("Warrants") specified above. Each Warrant initially entitles the Registered Holder to purchase, subject to the terms and conditions set forth in this Certificate and the Warrant Agreement (as hereinafter defined), one fully paid and nonassessable share of Common Stock, $.001 par value ("Common Stock"), of MEDJET INC., a Delaware corporation (the "Company"), at any time between the Initial Warrant Exercise Date (as herein defined) and the Expiration Date (as hereinafter defined), upon the presentation and surrender of this Warrant Certificate with the Subscription Form on the reverse hereof duly executed, at the corporate office of Continental STOCK TRANSFER & TRUST COMPANY, as Warrant Agent, or its successor (the "Warrant Agent"), accompanied by payment of $10.00 ("Purchase Price") in lawful money of the United States of America in cash or by official bank or certified check made payable to Medjet Inc. This Warrant Certificate and each Warrant represented hereby are issued pursuant to and are subject in all respects to the terms and conditions set forth in the Warrant Agreement (the "Warrant Agreement") dated _________, 1996, by and between the Company and the Warrant Agent. In the event of certain contingencies provided for in the Warrant Agreement, the Purchase Price or the number of shares of Common Stock subject to purchase upon the exercise of each Warrant represented hereby are subject to modifications or adjustment. Each Warrant represented hereby is exercisable at the option of the Registered Holder, but no fractional shares of Common Stock will be issued. In the case of the exercise of less than all the Warrants represented hereby, the Company shall cancel this Warrant Certificate upon the surrender hereof and shall execute and deliver a new Warrant Certificate or Warrant Certificates of like tenor, which the Warrant Agent shall countersign, for the balance of such Warrants. The term "Initial Warrant Exercise Date" shall mean __________, 1996. The term "Expiration Date" shall mean 5:00 p.m. (New York time on ______,____, or such earlier date as the Warrants shall be redeemed. If such date shall in the State of New York be a holiday or a day on which the banks are authorized to close, then the Expiration Date shall mean 5:00 p.m. (New York time) the next following day which in the State of New York is not a holiday or a day on which banks are authorized to close. The Company shall not be obligated to deliver any securities pursuant to the exercise of this Warrant unless a registration statement under the Securities Act of 1933, as amended, with respect to such securities is effective. The Company has covenanted and agreed that it will file a registration statement and will use its best efforts to cause the same to become effective and to keep such registration statement current while any of the Warrants are outstanding. This Warrant shall not be exercisable by a Registered Holder in any state where such exercise would be unlawful. This Warrant Certificate is exchangeable, upon the surrender hereof by the Registered Holder at the corporate office of the Warrant Agent, for a new Warrant Certificate or Warrant Certificates of like tenor representing an equal aggregate number of Warrants, each of such new Warrant Certificates to represent such number of Warrants as shall be designated by such Registered Holder at the time of such surrender. Upon due presentment with any transfer fee in addition to any tax or other governmental charge imposed in connection therewith, for registration of transfer of this Warrant Certificate at such office, a new Warrant Certificate or Warrant Certificates representing an equal aggregate number of Warrants will be issued to the transferee in exchange therefor, subject to the limitations provided in the Warrant Agreement. Prior to the exercise of any Warrant represented hereby, the Registered Holder shall not be entitled to any rights of a stockholder of the Company, including, without limitation, the right to vote or to receive dividends or other distributions, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided in the Warrant Agreement. This Warrant may be redeemed at the option of the Company, at a redemption price of $.01 per Warrant at any time after the Separation Date (as defined in the Warrant Agreement), provided the Market Price (as defined in the Warrant Agreement) for the securities issuable upon exercise of such Warrant shall exceed $13.00 per share. Notice of redemption shall be given not later than the thirtieth day before the date fixed for redemption, all as provided in the Warrant Agreement. On and after the date fixed for redemption, the Registered Holder shall have no rights with respect to this Warrant except to receive the $.01 per Warrant upon surrender of this Certificate prior to the Redemption Date (as defined in the Warrant Agreement). Prior to due presentment for registration of transfer hereof, the Company and the Warrant Agent may deem and treat the Registered Holder as the absolute owner hereof and of each Warrant represented hereby (notwithstanding any notations of ownership or writing hereon made by anyone other than a duly authorized officer of the Company or the Warrant Agent) for all purposes and shall not be affected by any notice to the contrary. This Warrant Certificate shall be governed by and construed in accordance with the laws of the State of Delaware. This Warrant Certificate is not valid unless countersigned by the Warrant Agent. IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly executed, manually or in facsimile by two (2) of its officers thereunto duly authorized and a facsimile of its corporate seal to be imprinted hereon. MEDJET INC. By:______________________________ Its By:_______________________________ Its Date:_____________________________ [Seal] Countersigned: Continental Stock Transfer & Trust Company as Warrant Agent By:______________________________ Its Authorized Officer [Form of Reverse of Class A Warrant Certificate] SUBSCRIPTION FORM To Be Executed by the Registered Holder in Order to Exercise Warrants THE UNDERSIGNED REGISTERED HOLDER hereby irrevocably elects to exercise _____ Warrants represented by this Warrant Certificate, and to purchase the securities issuable upon the exercise of such Warrants, and requests that certificates for such securities shall be issued in the name of ____________________________________________ (please insert social security or other identifying number) and be delivered to ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ (please print or type name and address) and if such number of Warrants shall not be all the Warrants evidenced by this Warrant Certificate, that a new Warrant Certificate for the balance of such Warrants be registered in the name of, and delivered to, the Registered Holder at the address stated below: ____________________________________________ ____________________________________________ ____________________________________________ (Address) _________________________________ (Date) _________________________________ (Taxpayer Identification Number) Soliciting Broker:_________________________________ Signature Guaranteed ASSIGNMENT To Be Executed by the Registered Holder in Order to Assign Warrants FOR VALUE RECEIVED, hereby sells, assigns, and transfers unto ____________________________________________ (please insert social security or other identifying number) ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ (please print or type name and address) of the Warrants represented by this Warrant Certificate, and hereby irrevocably constitutes and appoints _________________________________ Attorney to transfer this Warrant Certificate on the books of the Company, with full power of substitution in the premises. _________________________________ (Date) Signature Guaranteed THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION (AS DEFINED IN RULE 17AD-15 UNDER THE SECURITIES AND EXCHANGE ACT OF 1934) WHICH MAY INCLUDE A COMMERCIAL BANK OR TRUST COMPANY, SAVINGS ASSOCIATION, CREDIT UNION OR A MEMBER FIRM OF THE AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE OR MIDWEST STOCK EXCHANGE. EX-5 10 KELLEY DRYE OPINION May 21, 1996 Medjet Inc. 1090 King Georges Post Road, Suite 301 Edison, New Jersey 08837 Gentlemen: We have acted as special counsel to Medjet Inc., a Delaware corporation (the "Company"), in connection with the proposed public offering of up to 1,600,000 units (the "Units"), each Unit consisting of one share (collectively, the "Shares") of the Company's common stock, par value $.001 per share (the "Common Stock"), and one warrant (collectively, the "Warrants") to purchase one share of Common Stock (collectively, the "Warrant Shares," and, together with the Units, the Shares and the Warrants, the "Securities") as described in the Registration Statement on Form SB-2 filed by the Company with the Securities and Exchange Commission (the "Commission") pursuant to the Securities Act of 1933, as amended (the "Act"), to which this opinion constitutes an exhibit (the "Registration Statement"). As such counsel, you have requested our opinion as to the matters described herein relating to the Securities. All capitalized terms used but not defined herein shall have the meanings assigned to them in the Registration Statement. We have examined: the Company's Certificate of Incorporation and By-Laws, in each case as amended and restated through the date hereof; minutes of the Company's corporate proceedings through the date hereof, as made available to us by officers of the Company; an executed copy of the Registration Statement and all exhibits thereto in the form filed with the Commission; and such matters of law deemed necessary by us in order to deliver the within opinion. In the course of our examination, we have assumed the genuineness of all signatures, the authority of all signatories to sign on behalf of their principals, if any, the authenticity of all documents submitted to us as original documents and the conformity to original documents of all documents submitted to us as certified or photostatic copies. As to certain factual matters, we have relied upon information furnished to us by officers of the Company. Based on the foregoing and solely in reliance thereon, it is our opinion that: 1. The Units and the Warrants have been duly authorized and, upon issuance against payment therefor as contemplated by the Registration Statement, will be validly issued. 2. The Shares and the Warrant Shares have been duly authorized and, upon issuance of the Units against payment therefor as contemplated by the Registration Statement, the Shares will be validly issued, fully paid and non-assessable. 3. Upon issuance of the Units as contemplated by the Registration Statement, and assuming (a) due countersignature by the Warrant Agent for the Warrants, (b) due execution and delivery by the Company and the Warrant Agent of the Warrant Agreement and (c) that the Warrant Agreement is a valid and binding obligation of the Warrant Agent, the Warrants will constitute valid and binding obligations of the Company enforceable in accordance with their terms, subject to (i) bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium, receivership and similar state or federal laws affecting the rights and remedies of creditors generally, (ii) general principles of equity whether applied in a proceeding in equity or at law and (iii) the enforceability of any provision therein providing for specific performance, injunctive relief or other equitable remedies, regardless of whether such enforceability is considered in a proceeding in equity or at law. 4. Upon issuance of the Units as contemplated by the Registration Statement, and upon payment therefor upon exercise of the Warrants, the Warrant Shares will be validly issued, fully paid and non- assessable. We hereby consent to the filing of this letter as an exhibit to the Registration Statement and to the reference to it in the Prospectus included therein under the caption "Legal Matters." In giving such consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Act. Very truly yours, Kelley Drye & Warren LLP By: /s/ M. Ridgway Barker A Partner EX-10 11 EX 10.1 EMPLOYMENT AGREE EMPLOYMENT AGREEMENT AGREEMENT (Agreement) dated as of March 15, 1996, between Medjet Inc., a Delaware corporation (the Employer), and Eugene I. Gordon (the Employee). W I T N E S S E T H: WHEREAS, Employer desires the services of Employee, and Employee desires to provide services to Employer, each upon the terms and conditions set forth in this Agreement; NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties agree as follows: 1. Employment. Employer hereby employs Employee and Employee hereby accepts employment upon the terms and conditions hereinafter set forth. 2. Term. Unless sooner terminated in accordance with the provisions of Paragraph 7 hereof, the term of this Agreement shall begin on the date hereof, and shall terminate on the third anniversary date of such date. 3. Compensation. (a) Employer shall pay Employee a base salary at the rate of $125,000 per year (the Base Salary), payable semi-monthly or in accordance with Employer's customary practice from time to time, for the term of this Agreement. The Base Salary may be increased in the sole discretion of the Board of Directors from time to time (without the participation of Employee). (b) Employee shall be entitled to such bonuses and other compensation as determined by the Employer's Board of Directors from time to time, provided, however, that Employee shall not participate in such determination. 4. Duties. Employee shall perform such duties and services as set forth on Schedule 1 and such other duties and services as may be reasonably assigned to him by Employer. Employee shall perform well and faithfully such duties and responsibilities, wherever they may be required. 5. Expenses. Employer will reimburse Employee, in accordance with Employer's customary practice from time to time, for all reasonable and necessary expenses incurred by him for or on behalf of Employer in the performance of his duties hereunder. 6. Insurance and Other Employee Benefits. Employee shall be entitled to participate in any medical insurance coverage or other benefits offered by Employer to its employees during the term of this Agreement. 7. Termination. (a) This Agreement shall terminate prior to the termination date set forth in Paragraph 2 hereof upon the following terms and conditions. (i) If Employee dies or suffers a permanent Disability (as hereinafter defined), this Agreement shall terminate effective upon his death or when his Disability is deemed to have become permanent. If the Employee is unable to perform his normal duties for Employer because of Disability for a period of at least six consecutive months, or for shorter periods totalling more than six months during any consecutive twelve month period during the term of this Agreement, the Employer may deem such Disability to have become permanent. Any such determination of permanent Disability shall be made by a Reputable Physician. For the purposes of this Agreement, the term Disability shall mean the physical or mental illness or incapacity of Employee, such that in the judgment of a Reputable Physician, the Employee shall be unable to perform his duties of employment and a Reputable Physician shall mean a physician chosen by Employer, subject to the consent of Employee or his legal representative which shall not be unreasonably withheld or delayed. (ii) If Employer reasonably determines to remove Employee from his duties because of Cause (as defined below), this Agreement shall terminate and Employee shall be removed from his position effective on the date specified by Employer. The term Cause shall mean any of the following: (A) commission of a willful act of dishonesty in the course of the Employee's duties hereunder which significantly injures the Employer, (B) conviction by a court of competent jurisdiction of a crime constituting a felony or conviction in respect of any dishonest or fraudulent act relating to the Employee's duties as an executive officer of the Employer, (C) the Employee's continued, habitual intoxication or performance under the influence of controlled substances during working hours, after the Employer shall have provided written notice to the Employee and given the Employee 30 days within which to commence rehabilitation with respect thereto, and the Employee shall have failed to commence such rehabilitation, (D) frequent or extended, and unjustifiable (not as a result of incapacity or Disability) absenteeism resulting in a material failure by the Employee in the performance of his duties hereunder and which shall not have been cured within 90 days after the Employer shall have advised the Employee in writing of its intention to terminate the Employee's employment in accordance with the provisions of this Paragraph 7, in the event such condition shall not have been cured, (E) willfully engaging in any illegal act which has the potential for material injury to the Employer, or (F) breach of any of Executive's fiduciary duties to the Employer. (b) Any controversy or dispute arising out of or relating to any termination of Employee's employment shall be settled by arbitration in accordance with the Rules of the American Arbitration Association by one or more arbitrators appointed in accordance with the Rules. The arbitration shall be held in the City and State of New York unless the parties agree to another locality. Judgment upon the award rendered may be entered in any court having jurisdiction thereof. The cost of the arbitration shall be borne by the parties in such proportion as the arbitrator(s) shall direct, with such arbitrator(s) to give due consideration to the fault of the parties. (c) Upon any termination pursuant to this Paragraph 7, all rights of Employee under this Agreement shall cease to be effective as of the date of termination, Employee shall be removed from his position and, to the extent permitted by law, Employee shall have no right to receive any payments or benefits hereunder except for (i) the Base Salary then in effect payable pursuant to Paragraph 3 hereof up to the date of termination or in the case of termination pursuant to Section 7(a)(i), for the balance of the term of this Agreement, plus (ii) reimbursement of expenses incurred in accordance with Paragraph 5 hereof prior to the date of termination to the extent not previously reimbursed by Employer. 8. Proprietary Information, Inventions, Non-Competition and Non- Solicitation Agreement. Employee acknowledges that in the course of performing his employment duties for Employer, Employee will be exposed to confidential and trade secret information of Employer, including but not limited to information relating to Employer's business, its research or engineering activities, its manufacturing processes, its trade secrets, its sources of supply, and its plans or contemplated actions, and may be exposed to information confidential to customers of Employer. Accordingly, Employee shall execute and be bound by Employer's Proprietary Information, Inventions, Non-Competition and Non-Solicitation Agreement, attached hereto as Exhibit A (the Proprietary Information Agreement). 9. Notices. Any notice required or permitted to be given under this Agreement shall be sufficient if in writing, and if sent by courier service or registered mail, in the case of the Employee, to his residence address set forth at the foot of this Agreement (or such other address as the Employee may specify in a written notice to the Employer), and in the case of the Employer, to its principal office, with a copy to Jane E. Jablons, Esq., Kelley Drye & Warren, 101 Park Avenue, New York, New York 10178. 10. Benefits. This Agreement shall inure to the benefit and shall be binding upon the parties hereto and their respective successors and assigns. The provisions of this Agreement shall survive termination of this Agreement. 11. Entire Agreement. This Agreement, together with the Proprietary Information Agreement, constitutes the entire agreement and understanding of the parties with respect to the subject matter hereof. It may not be changed orally but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension, or discharge is sought. 12. Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 13. Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of the State of New Jersey. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. MEDJET INC. By: /s/ Eugene I. Gordon ______________________________ Name:Eugene I. Gordon Title:President /s/ Eugene I. Gordon ______________________________ Eugene I. Gordon Home Address: 1535 Coles Avenue Mountainside, New Jersey 07092-1311 SSN: SCHEDULE 1 1. Name of Employee: Eugene I. Gordon 2. Capacity and Title: President 3. Duties: ____________________________________ ____________________________________ ____________________________________ EX-10 12 EX 10.6 STOCK OPTION PLAN MEDJET INC. 1994 STOCK OPTION PLAN 1. Purpose. The purpose of the Plan is to attract, retain and reward persons providing services to Medjet Inc., a Delaware corporation, and any successor corporation thereto (collectively referred to as the "Company"), and any present or future parent and/or subsidiary corporations of such corporation (all of which along with the Company being individually referred to as a "Participating Company" and collectively referred to as the "Participating Company Group"), and to motivate such persons to contribute to the growth and profits of the Participating Company Group in the future. For purposes of the Plan, a parent corporation and a subsidiary corporation shall be as defined in Sections 424(e) and 424(f) of the Internal Revenue Code of 1986, as amended (the "Code"). 2. Administration. (a) Administration by Board and/or Committee. The Plan shall be administered by the Board of Directors of the Company (the "Board") and/or by a duly appointed committee of the Board having such powers as shall be specified by the Board. Any subsequent references herein to the Board shall also mean the committee if such committee has been appointed and, unless the powers of the committee have been specifically limited, the committee shall have all of the powers of the Board granted herein, including, without limitation, the power to terminate or amend the Plan at any time, subject to the terms of the Plan and any applicable limitations imposed by law. All questions of interpretation of the Plan or of any options granted under the Plan (an "Option") shall be determined by the Board, and such determinations shall be final and binding upon all persons having an interest in the Plan and/or any Option. (b) Options Authorized. Options may be either incentive stock options as defined in Section 422 of the Code ("Incentive Stock Options") or non-statutory (nonqualified) stock options. (c) Authority of Officers. Any officer of a Participating Company shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, or election which is the responsibility of or which is allocated to the Company herein, provided the officer has apparent authority with respect to such matter, right, obligation, or election. (d) Disinterested Administration. With respect to the participation in the Plan of officers or directors of the Company subject to Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Plan shall be administered by the Board in compliance with the "disinterested administration" requirement of Rule 16b-3, as promulgated under the Exchange Act and amended from time to time or any successor rule or regulation ("Rule 16b-3"). Page 1 of 42 3. Eligibility. (a) Eligible Persons. Options may be granted only to employees (including officers) and directors of the Participating Company Group or to individuals who are rendering services as consultants, advisors, or other independent contractors to the Participating Company Group. The Board shall, in its sole discretion, determine which persons shall be granted Options (an "Optionee"). Eligible persons may be granted more than one (1) Option. (b) Directors Serving on Committee. If a committee of the Board has been established to administer the Plan in compliance with the "disinterested administration" requirement of Rule 16b-3, no member of such committee, while a member, shall be eligible to be granted an Option. (c) Restrictions on Option Grants. A director of a Participating Company may only be granted a non-statutory stock option unless the director is also an employee of the Participating Company Group. An individual who is rendering services as a consultant, advisor, or other independent contractor may only be granted a non-statutory stock option. 4. Shares Subject to Option. Options shall be for the purchase of shares of the authorized but unissued common stock or treasury shares of common stock of the Company (the "Stock"), subject to adjustment as provided in paragraph 10 below. The maximum number of shares of Stock which may be issued under the Plan shall be twenty-five thousand (25,000) shares. In the event that any outstanding Option for any reason expires or is terminated or canceled and/or shares of Stock subject to repurchase are repurchased by the Company, the shares allocable to the unexercised portion of such Option, or such repurchased shares, may again be subject to an Option grant. Notwithstanding the foregoing any such shares shall be made subject to a new Option only if the grant of such new Option and the issuance of such shares pursuant to such new Option would not cause the Plan or any Option granted under the Plan to contravene Rule 16b-3. 5. Time for Granting Options. All Options shall be granted, if at all, within ten (10) years from the earlier of the date the Plan is adopted by the Board or the date the Plan approved by the stockholders of the Company. 6. Terms, Conditions and Form of Options. Subject to the provisions of the Plan, the Board shall determine for each Option (which need not be identical) the number of shares of Stock for which the Option shall be granted, the exercise price of the Option, the timing and terms of exercisability and vesting of the Option, the time of expiration of the Option, the effect of the Optionee's termination of employment or service, whether the Option is to be treated as an Incentive Stock Option or as a non-statutory stock option, the method for satisfaction of any tax withholding obligation arising in connection with Option, including by the withholding or delivery of shares of stock, and all other terms and conditions of the Option not inconsistent with the Plan. Options granted pursuant to the Plan shall be evidenced by written agreements specifying the number of shares of Stock covered thereby, in such form as the Board shall from time to time establish, which agreements may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions: Page 2 of 42 (a) Exercise Price. The exercise price for each Option shall be established in the sole discretion of the Board; provided, however, that (i) the exercise price per share for an Incentive Stock Option shall be not less than the fair market value, as determined by the Board, of a share of Stock on the date of the granting of the Option; and (ii) no Incentive Stock Option granted to an Optionee who at the time the Option is granted owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of a Participating Company within the meaning of Section 422(b)(6) of the Code (a "Ten Percent Owner Optionee") shall have an exercise price per share less than one hundred ten percent (110%) of the fair market value, as determined by the Board, of a share of Stock on the date of the granting of the Option. Notwithstanding the foregoing, an Option (whether an Incentive Stock Option or a non-statutory stock option) may be granted with an exercise price lower than the minimum exercise price set forth above if such Option is granted pursuant to an assumption or substitution for another option in a manner qualifying with the provisions of Section 424(a) of the Code. (b) Exercise Period of Options. The Board shall have the power to set, including by amendment of an Option, the time or times within which each Option shall be exercisable or the event or events upon the occurrence of which all or a portion of each Option shall be exercisable and the term of each Option; provided, however, that (i) no Option shall be exercisable after the expiration of ten (10) years after the date such Option is granted, and (ii) no Incentive Stock Option granted to a Ten Percent Owner Optionee shall be exercisable after the expiration of five (5) years after the date such Option is granted. (c) Payment of Exercise Price. (i) Forms of Payment Authorized. Payment of the exercise price for the number of shares of Stock being purchased pursuant to any Option shall be made (1) in cash, by check, or cash equivalent, (2) by tender to the Company of shares of the Company's stock owned by the Optionee having a fair market value, as determined by the Board (but without regard to any restrictions on transferability applicable to such stock by reason of federal or state securities laws or agreements with an underwriter for the Company), not less than the exercise price, (3) by the Optionee's recourse promissory note in a form approved by the Company, (4) by the assignment of the proceeds of a sale of some or all of the shares being acquired upon the exercise of the Option (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System), or (5) by any combination thereof. The Board may at any time or from time to time grant Options which do not permit all of the foregoing forms of consideration to be used in payment of the exercise price and/or which otherwise restrict one or more forms of consideration. (ii) Tender of Company Stock. Notwithstanding the foregoing, an Option may not be exercised by tender to the Company of shares of the Company's stock to the extent such tender of stock would constitute a violation of the provisions of any law, regulation and/or agreement restricting the redemption of the Company's stock or, if in the opinion of Company counsel, might impair the ability of purchasers of stock from the Company from taking full advantage of the provisions of Section 1202 of the Code relating to capital gains treatment of stock issued by the Company. Unless otherwise provided by the Board, an Option may not be exercised by tender to the Company of shares of the Company's stock unless such shares of the Company's stock either have been owned by the Optionee for more than six (6) months or were not acquired, directly or indirectly, from the Company. Page 3 of 42 (iii) Promissory Notes. No promissory note shall be permitted if an exercise using a promissory note would be a violation of any law. Any permitted promissory note shall be due and payable not more than four (4) years after the Option is exercised, but in any event upon the termination of Optionee's employment or consulting relationship, as the case may be, with the Company, if earlier. The Optionee shall be required to make, from time to time, mandatory prepayments on such promissory note in an amount equal to fifty percent (50%) of the difference between the aggregate Option exercise price and the aggregate proceeds from the sale of the shares of Stock. Such mandatory prepayments shall be made within ten (10) days after the sale of shares of Stock. Interest shall be payable at least annually and be at least equal to the minimum interest rate necessary to avoid imputed interest pursuant to all applicable sections of the Code. The Board shall have the authority to permit or require the Optionee to secure any promissory note used to exercise an Option with the shares of Stock acquired on exercise of the Option and/or with other collateral acceptable to the Company. Unless otherwise provided by the Board, in the event the Company at any time is subject to the regulations promulgated by the Board of Governors of the Federal Reserve System or any other governmental entity affecting the extension of credit in connection with the Company's securities, any promissory note shall comply with such applicable regulations, and the Optionee shall pay the unpaid principal and accrued interest, if any, to the extent necessary to comply with such applicable regulations. (iv) Assignment of Proceeds of Sale. The Company reserves, at any and all times, the right, in the Company's sole and absolute discretion, to establish, decline to approve and/or terminate any program and/or procedures for the exercise of Options by means of an assignment of the proceeds of a sale of some or all of the shares of Stock to be acquired upon such exercise. 7. Standard Forms of Stock Option Agreement. (a) Incentive Stock Options. Unless otherwise provided for by the Board at the time an Option is granted, an Option designated as an "Incentive Stock Option" shall comply with and be subject to the terms and conditions set forth in the form of incentive stock option agreement attached hereto as Exhibit A and incorporated herein by reference. (b) Non-statutory Stock Options. Unless otherwise provided for by the Board at the time an Option is granted, an Option designated as a "Non-statutory Stock Option" shall comply with and be subject to the terms and conditions set forth in the forms of non-statutory stock option agreement attached hereto as Exhibit B and incorporated herein by reference. (c) Standard Term for Options. Unless otherwise provided for by the Board in the grant of an Option, any Option granted hereunder shall be exercisable for a term of ten (10) years. Page 4 of 42 8. Authority to Vary Terms. The Board shall have the authority from time to time to vary the terms of either of the standard forms of Stock Option Agreement described in paragraph 7 above either in connection with the grant or amendment of an individual Option or in connection with the authorization of a new standard form or forms; provided, however, that the terms and conditions of such revised or amended standard form or forms of stock option agreement shall be in accordance with the terms of the Plan. Such authority shall include, but not by way of limitation, the authority to grant Options which are not immediately exercisable. 9. Fair Market Value Limitation. To the extent that the aggregate fair market value (determined at the time the Option is granted) of stock with respect to which Incentive Stock Options are exercisable by an Optionee for the first time during any calendar year (under all stock option plans of the Company, including the Plan) exceeds One Hundred Thousand Dollars ($100,000), such Options shall be treated as non-statutory stock options. This paragraph shall be applied by taking Incentive Stock Options into account in the order in which they were granted. 10. Effect of Change in Stock Subject to Plan. Appropriate adjustments shall be made in the number and class of shares of Stock subject to the Plan and to any outstanding Options and in the exercise price of any outstanding Options in the event of a stock dividend, stock split, reverse stock split, recapitalization, combination, reclassification, or like change in the capital structure of the Company. In the event a majority of the shares which are of the same class as the shares that are subject to outstanding Options are exchanged for, converted into, or otherwise become (whether or not pursuant to a Transfer of Control (as defined below)) shares of another corporation (the "New Shares"), the Company may unilaterally amend the outstanding Options to provide that such Options are exercisable for New Shares. In the event of any such amendment, the number of shares and the exercise price of the outstanding Options shall be adjusted in a fair and equitable manner. 11. Dissolution, Sale, etc. In the event of the proposed dissolution or liquidation of the Company, or in the event of a proposed sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation, the Options will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Board. The Board may, in the exercise of its sole discretion, in such instances declare that any Option shall terminate as of a date fixed by the Board and give each Optionee the right to exercise his Option as to all or any part of the Stock, including shares to which the Option would not otherwise be exercisable. 12. Provision of Information. Each Optionee shall be given access to information concerning the Company equivalent to that information generally made available to the Company's common stockholders generally. 13. Options Non-Transferable. During the lifetime of the Optionee, the Option shall be exercisable only by the Optionee. No Option shall be assignable or transferable by the Optionee, except by will or by the laws of descent and distribution. Page 5 of 42 14. Termination or Amendment of Plan or Options. The Board, including any duly appointed committee of the Board, may terminate or amend the Plan or any Option at any time; provided, however, that without the approval of the Company's stockholders, there shall be (a) no increase in the total number of shares of Stock covered by the Plan (except by operation of the provisions of paragraph 10 above), (b) no change in the class eligible to receive Incentive Stock Options and (c) no expansion in the class eligible to receive non-statutory stock options. In addition to the foregoing, the approval of the Company's stockholders shall be sought for any amendment to the Plan for which the Board deems stockholder approval necessary in order to comply with Rule 16b-3. In any event, no amendment may adversely affect any then outstanding Option or any unexercised portion thereof, without the consent of the Optionee, unless such amendment is required to enable an Option designated as an Incentive Stock Option to qualify as an Incentive Stock Option. IN WITNESS WHEREOF, the undersigned President of the Company certifies that the foregoing Medjet Inc. 1994 Stock Option Plan was duly adopted by the Board of Directors of the Company on the 30th day of September 1994. /s/ Eugene I. Gordon ___________________________ PLAN HISTORY September 30, 1994 Board of Directors adopts the Medjet Inc. 1994 Employee Stock Option Plan (the "Initial Plan") with a share reserve of twenty-five thousand shares. May 27, 1995 Stockholders approve the Initial Plan with a share reserve of twenty-five thousand shares. Page 6 of 42 EXHIBIT A STANDARD FORM OF MEDJET INC. INCENTIVE STOCK OPTION AGREEMENT Page 7 of 42 THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933. MEDJET INC. INCENTIVE STOCK OPTION AGREEMENT THIS INCENTIVE STOCK OPTION AGREEMENT (the "Option Agreement") is made and entered into as of ______________ 199__, by and between Medjet Inc., a Delaware corporation (the "Company"), and ____________________(the "Optionee"). The Company granted to the Optionee an option to purchase certain shares of common stock of the Company, in the manner and subject to the provisions of this Option Agreement (the "Option"). If the Optionee (and the Optionee's spouse, if married) does not execute and return this Option Agreement to the Company within sixty (60) days of the date first written above, the Option shall terminate and be without further force and effect. 1. Definitions: (a) "Date of Option Grant" shall mean ______________. (b) "Number of Option Shares" shall mean the __________ shares of common stock of the Company as adjusted from time to time pursuant to paragraph 9 below. (c) "Exercise Price" shall mean $____ per share as adjusted from time to time pursuant to paragraph 9 below. (d) "Initial Vesting Date" shall be the last day of the calendar month in which occurs the date one (1) year after the Date of Option Grant. (3) Determination of "Vested Percentage":
Vested Percentage Prior to Initial Vesting Date 0% On Initial Vesting Date, provided 25% the Optionee is continuously employed by a Participating Company from the Date of Option Grant until the Initial Vesting Date Plus For each full month of the Optionee's 2.0834% continuous employment by a Participating Company from the Initial Vesting Date up to the next 36 months In no event shall the Vested Percentage exceed 100%.
Page 8 of 42 (f) "Option Term Date" shall mean the date ten (10) years after the Date of Option Grant. (g) "Code" shall mean the Internal Revenue Code of 1986, as amended. (h) "Company" shall mean Medjet Inc., a Delaware corporation, and any successor corporation thereto. (i) "Participating Company" shall mean (i) the Company and (ii) any present or future parent and/or subsidiary corporation of the Company while such corporation is a parent or subsidiary of the Company. For purposes of this Option Agreement, a parent corporation and a subsidiary corporation shall be as defined in sections 424(e) and 424(f) of the Code. (j) "Participating Company Group" shall mean at any point in time all corporations collectively which are then a Participating Company. (k) "Plan" shall mean the Medjet Inc. 1994 Stock Option Plan. 2. Status of the Option. This Option is intended to be an incentive stock option as described in section 422 of the Code, but the Company does not represent or warrant that this Option qualifies as such. The Optionee should consult with the Optionee's own tax advisors regarding the tax effects of this Option and the requirements necessary to obtain favorable income tax treatment under section 422 of the Code, including, but not limited to, holding period requirements. 3. Administration. All questions of interpretation concerning this Option Agreement shall be determined by the Board of Directors of the Company (the "Board") and/or by a duly appointed committee of the Board having such powers as shall be specified by the Board. Any subsequent references herein to the Board shall also mean the committee if such committee has been appointed and, unless the powers of the committee have been specifically limited, the committee shall have all of the powers of the Board granted in the Plan, including, without limitation, the power to terminate or amend the Plan at any time, subject to the terms of the Plan and any applicable limitations imposed by law. All determinations by the Board shall be final and binding upon all persons having an interest in the Option. Any officer of a Participating Company shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, or election which is the responsibility of or which is allocated to the Company herein, provided the officer has apparent authority with respect to such matter, right, obligation, or election. Page 9 of 42 4. Exercise of the Option. (a) Right to Exercise. The Option shall not be exercisable prior to the Initial Vesting Date. At any time after the Initial Vesting Date, the Option shall be exercisable only as to the Vested Percentage After three (3) years from the Initial Vesting Date, this Option shall be exercisable in full. Exercise of this Option shall be subject to the Optionee's agreement that any shares purchased upon exercise are subject to the Company's repurchase rights set forth in paragraph 11 and paragraph 12 below. Notwithstanding the foregoing, except as provided in paragraph 16 below, the aggregate fair market value of the stock with respect to which the Optionee may exercise the Option for the first time during any calendar year, together with any other incentive stock options which are exercisable for the first time during any such year, as determined in accordance with section 422(d) of the Code, shall not exceed One Hundred Thousand Dollars ($100,000). Such limitation on exercise described in section 422(d) of the Code shall be referred to in this Option Agreement as the "$100,000 Exercise Limitation". Furthermore, notwithstanding the foregoing, the Option may be exercised only in multiples of one hundred (100) shares unless all shares subject to the Option are being exercised; provided, however, that the foregoing restriction shall not apply so as to prevent an exercise (i) following the Optionee's termination of employment as set forth in paragraph 7 below or (ii) permitted by the Board pursuant to paragraph 11 of the Plan. In addition to the foregoing, in the event that the adoption of the Plan or any amendment of the Plan is subject to the approval of the Company's stockholders in order for the Option to comply with the requirements of Rule 16b-3, promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Option shall not be exercisable prior to such stockholder approval if the Optionee is subject to Section 16(b) of the Exchange Act, unless the Board, in its sole discretion, approves the exercise of the Option prior to such stockholder approval. (b) Method of Exercise. Exercise of the Option must be by written notice to the Company which must state the election to exercise the Option, the number of shares for which the Option is being exercised and such other representations and agreements as to the Optionee's investment intent with respect to such shares as may be required pursuant to the provisions of this Option Agreement. The written notice must be signed by the Optionee and must be delivered in person, by certified or registered mail, return receipt requested, or by facsimile transmission, to the Chief Financial Officer of the Company, or other authorized representative of the Participating Company Group, prior to the termination of the Option as set forth in paragraph 6 below, accompanied by (i) full payment of the exercise price for the number of shares being purchased and (ii) an executed copy, if required herein, of the then current forms of escrow and security agreements referenced below. (c) Payment of Exercise Price. (i) Forms of Payment Authorized. Payment of the exercise price for the number of shares for which the Option is being exercised shall be made Page 10 of 42 (A) in cash, by check, or cash equivalent; (B) by tender to the Company of shares of the Company's common stock owned by the Optionee having a fair market value, as determined by the Board, not less than the exercise price, which either have been owned by the Optionee for more than six (6) months or were not acquired, directly or indirectly, from the Company; (C) if expressly authorized by the Company at the time of Option exercise, in its sole discretion, by the Optionee's recourse promissory note in a form approved by the Company; (D) by Immediate Sales Proceeds, as defined below; (E) by any combination of the foregoing. (ii) Tender of Company Stock. Notwithstanding the foregoing, the Option may not be exercised by tender to the Company of shares of the Company's common stock to the extent such tender of stock would constitute a violation of the provisions of any law, regulation and/or agreement restricting the redemption of the Company's common stock or, if in the opinion of Company counsel, might impair the ability of purchasers of stock from the Company from taking full advantage of the provisions of Section 1202 of the Code relating to capital gains treatment of stock issued by the Company. Unless otherwise provided by the Board, an Option may not be exercised by tender to the Company of shares of the Company's common stock unless such shares of the Company's stock either have been owned by the Optionee for more than six (6) months or were not acquired, directly or indirectly, from the Company. (iii) Promissory Note. Unless otherwise specified by the Board at the time the Option is granted, a promissory note permitted in accordance with clause (c)(i)(C) above shall not exceed the amount permitted by law to be paid by a promissory note and shall be a full recourse note in a form satisfactory to the Company, with principal payable four (4) years after the date the Option is exercised but in any event upon the termination of Optionee's employment with the Company, if earlier. The Optionee shall be required to make, from time to time, mandatory prepayments on such promissory note in an amount equal to fifty percent (50%) of the difference between the aggregate Option exercise and the aggregate proceeds form the sale of shares of Stock. Such mandatory prepayments shall be made within ten (10) days after the sale of shares of Stock. Interest on the principal balance of the promissory note shall be payable in annual installments at the minimum interest rate necessary to avoid imputed interest pursuant to all applicable sections of the Code. Such recourse promissory note shall be secured by the shares of stock acquired pursuant to the then current form of security agreement as approved by the Company. In the event the Company at any time is subject to the regulations promulgated by the Board of Governors of the Federal Reserve System or any other governmental entity affecting the extension of credit in connection with the Company's securities, any promissory note shall comply with such applicable regulations, and the Optionee shall pay the unpaid principal and accrued interest, if any, to the extent necessary to comply with such applicable regulations. Except as the Company in its sole discretion shall determine, the Optionee shall pay the unpaid principal balance of the promissory note and any accrued interest thereon upon termination of the Optionee's employment with the Participating Company Group for any reason, with or without cause. Page 11 of 42 (iv) Immediate Sales Proceeds. "Immediate Sales Proceeds" shall mean the assignment in form acceptable to the Company of the proceeds of a sale of some or all of the shares acquired upon the exercise of the Option pursuant to a program and/or procedure approved by the Company (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System). The Company reserves, at any and all times, the right, in the Company's sole and absolute discretion, to decline to approve any such program and/or procedure. (d) Tax Withholding. At the time the Option is exercised, in whole or in part, or at any time thereafter as requested by the Company, the Optionee hereby authorizes payroll withholding and otherwise agrees to make adequate provision for foreign, federal and state tax withholding obligations of the Company, if any, which arise in connection with the Option, including, without limitation, obligations arising upon (i) the exercise, in whole or in part, of the Option, (ii) the transfer, in whole or in part, of any shares acquired on exercise of the Option, or (iii) the operation of any law or regulation providing for the imputation of interest, or (iv) the lapsing of any restriction with respect to any shares acquired on exercise of the Option. The Optionee is cautioned that the Option is not exercisable unless the Company's withholding obligations are satisfied. Accordingly, the Optionee may not be able to exercise the Option when desired even though the Option is vested and the Company shall have no obligation to issue a certificate for such shares. (e) Certificate Registration. Except in the event the exercise price is paid by Immediate Sales Proceeds, the certificate or certificates for the shares as to which the Option is exercised shall be registered in the name of the Optionee, or, if applicable, the heirs of the Optionee. (f) Restrictions on Grant of the Option and Issuance of Shares. The grant of the Option and the issuance of the shares upon exercise of the Option shall be subject to compliance with all applicable requirements of federal, state or foreign law with respect to such securities. The Option may not be exercised if the issuance of shares upon such exercise would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or if the Company is then an "S" corporation pursuant to Code Section 1362, if such exercise would terminate such "S" corporation election. In addition, the Option may not be exercised unless (i) a registration statement under the Securities Act of 1933, as amended (the "Securities Act"), shall at the time of exercise of the Option be in effect with respect to the shares issuable upon exercise of the Option or (ii) in the opinion of legal counsel to the Company, the shares issuable upon exercise of the Option may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. THE OPTIONEE IS CAUTIONED THAT THE OPTION MAY NOT BE EXERCISABLE UNLESS THE FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. Questions concerning this restriction should be directed to the Chief Financial Officer of the Company. As a condition to the exercise of the Option, the Company may require the Optionee to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company. Page 12 of 42 (g) Fractional Shares. The Company shall not be required to issue fractional shares upon the exercise of the Option. 5. Non-Transferability of the Option; Non-Alienation of Benefits. The Option may be exercised during the lifetime of the Optionee only by the Optionee and may not be assigned or transferred in any manner except by will or by the laws of descent and distribution. Following the death of the Optionee, the Option, to the extent unexercised and exercisable by the Optionee on the date of death, may be exercised by the Optionee's legal representative or by any person empowered to do so under the deceased Optionee's will or under the then applicable laws of descent and distribution. Except with the prior written consent of the Company, subject to the foregoing, or as otherwise provided herein, no right or benefit under this Option Agreement shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber or charge the same without such consent, if applicable, shall be void. Except with such consent, no right or benefit under this Option Agreement shall in any manner be liable for or subject to the debts, contracts, liabilities or torts of the person entitled to such benefit. Except to the extent previously approved by the Company in writing, or as otherwise provided herein, if the Optionee should become bankrupt or attempt to anticipate, alienate, sell, assign, pledge, encumber or charge any right or benefit hereunder, then such right or benefit shall cease and terminate, and in such event, the Company may hold or apply the same or any part thereof for the benefit of the Optionee, the Optionee's spouse, children or other dependents, or any of them, in such manner and in such proportion as the Company may in its sole determination deem proper. 6. Termination of the Option. The Option shall terminate and may no longer be exercised on the first to occur of (a) the Option Term Date as defined above, (b) the last date for exercising the Option following termination of employment as described in paragraph 7 below, or (c) dissolution, liquidation, sale, merger or other event contemplated by paragraph 11 of the Plan to the extent provided by the Board pursuant to such paragraph 11. 7. Termination of Employment. (a) Termination Other Than by Death or Disability. Except as otherwise provided below, if the Optionee ceases to be an employee of the Participating Company Group for any reason, except death or disability within the meaning of section 422(c) of the Code, the Option, to the extent unexercised and exercisable by the Optionee on the date on which the Optionee ceased to be an employee, may be exercised by the Optionee within sixty (60) days (which may be extended by an additional thirty (30) days at the Board's discretion, if the Optionee's employment is terminated without Cause, as hereafter defined) after the date on which the Optionee's employment terminated, but in any event no later than the Option Term Date. Page 13 of 42 (b) Termination by Death or Disability. Except as otherwise provided below, if the Optionee's employment with the Company is terminated because of the death or disability of the Optionee within the meaning of section 422(c) of the Code, the Option, to the extent unexercised and exercisable by the Optionee on the date on which the Optionee ceased to be an employee, may be exercised by the Optionee (or the Optionee's legal representative) at any time prior to the expiration of twelve (12) months from the date on which the Optionee's employment terminated, but in any event no later than the Option Term Date. The Optionee's employment shall be deemed to have terminated on account of death if the Optionee dies within sixty (60) days after the Optionee's termination of employment. (c) Limitations on Exercise After Termination. Except as provided in this paragraph 7, the Option shall terminate and may not be exercised after the Optionee ceases to be an employee of the Participating Company Group. Furthermore, the Board may at any time after the Optionee's termination of employment cancel the Option with respect to all or a portion of the shares otherwise remaining exercisable under the Option, if the Company finds or has found that the Optionee: (i) Engaged in willful, deliberate or gross misconduct toward the Company; (ii) Has violated the terms of any confidentiality agreement or obligation between the Optionee and the Company; (iii) Has accepted employment with an entity which the Company determines is in a business that could result in compromising any confidentiality agreement or obligation between the Optionee and the Company; or (iv) Been terminated for Cause (as defined in paragraph 11 (b)). (d) Employee and Termination of Employment Defined. For purposes of this paragraph 7, the term "employee" shall mean any person, including officers and directors, employed by a Participating Company or performing services for a Participating Company as a director, consultant, advisor or other independent contractor. For purposes of this paragraph 7, the Optionee's employment shall be deemed to have terminated if the Optionee ceases to be employed by a Participating Company (whether upon an actual termination of employment or upon the Optionee's employer ceasing to be a Participating Company). The Optionee's employment shall not be deemed to have terminated merely because of a change in the capacity in which the Optionee serves as an employee, provided that there is no interruption or termination of the Optionee's service as an employee. (THE OPTIONEE IS CAUTIONED THAT IF THE OPTION IS EXERCISED MORE THAN THREE (3) MONTHS AFTER THE DATE ON WHICH THE OPTIONEE'S EMPLOYMENT (OTHER THAN AS A DIRECTOR, CONSULTANT, ADVISOR OR OTHER INDEPENDENT CONTRACTOR) TERMINATED, THE OPTION MAY CEASE TO BE AN INCENTIVE STOCK OPTION. THE OPTIONEE SHOULD CONSULT WITH THE OPTIONEE'S OWN TAX ADVISORS AS TO THE TAX CONSEQUENCES OF ANY SUCH DELAYED EXERCISE.) Page 14 of 42 (e) Extension if Exercise Prevented by Law. Notwithstanding the foregoing, if the exercise of the Option within the applicable time periods set forth above is prevented by the provisions of paragraph 4(f) above, the Option shall remain exercisable until three (3) months after the date the Optionee is notified by the Company that the Option is exercisable, but in any event no later than the Option Term Date. The Company makes no representation as to the tax consequences of any such delayed exercise. The Optionee should consult with the Optionee's own tax advisors as to the tax consequences to the Optionee of any such delayed exercise. (f) Extension if Optionee Subject to Section 16(b). Notwithstanding the foregoing, if the exercise of the Option within the applicable time periods set forth above would subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option shall remain exercisable until the earliest to occur of (i) the tenth (10th) day following the date on which the Optionee would no longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day after the Optionee's termination of employment, or (iii) the Option Term Date. The Company makes no representation as to the tax consequences of any such delayed exercise. The Optionee should consult with the Optionee's own tax advisors as to the tax consequences to the Optionee of any such delayed exercise. (g) Leave of Absence. For purposes hereof, the Optionee's employment with the Participating Company Group shall not be deemed to terminate if the Optionee takes any military leave, sick leave, or other bona fide leave of absence approved by the Company of ninety (90) days or less. In the event of a leave in excess of ninety (90) days, the Optionee's employment shall be deemed to terminate on the ninety-first (91st) day of the leave unless the Optionee's right to reemployment with the Participating Company Group remains guaranteed by statute or contract. Notwithstanding the foregoing, unless otherwise designated by the Company (or required by law) a leave of absence shall not be treated as employment for purposes of determining the Optionee's Vested Percentage. 8. Dissolution, Liquidation, Sale or Merger. The Optionee acknowledges that it understands the provisions of paragraph 11 of the Plan. 9. Effect of Change in Stock Subject to the Option. Appropriate adjustments shall be made in the number, exercise price and class of shares of stock subject to the Option in the event of a stock dividend, stock split, reverse stock split, recapitalization, combination, reclassification, or like change in the capital structure of the Company. In the event a majority of the shares which are of the same class as the shares that are subject to the Option are exchanged for, converted into, or otherwise become (whether or not pursuant to an Ownership Change) shares of another corporation (the "New Shares"), the Company may unilaterally amend the Option to provide that the Option is exercisable for New Shares. In the event of any such amendment, the number of shares and the exercise price shall be adjusted in a fair and equitable manner. Page 15 of 42 10. Rights as a Stockholder or Employee. The Optionee shall have no rights as a stockholder with respect to any shares covered by the Option until the date of the issuance of a certificate or certificates for the shares for which the Option has been exercised. No adjustment shall be made for dividends or distributions or other rights for which the record date is prior to the date such certificate or certificates are issued, except as provided in paragraph 9 above. Nothing in the Option shall confer upon the Optionee any right to continue in the employ of a Participating Company or interfere in any way with any right of the Participating Company Group to terminate the Optionee's employment at any time. 11. Share Repurchase Option For Termination For Cause. (a) Share Repurchase Option. In the event the Optionee's employment with the Participating Company Group is terminated for Cause (as defined in paragraph 11(b) below) the Company shall have the right to repurchase any or all of the Option Shares under the terms and subject to the conditions set forth in this paragraph 11 (the "Cause Share Repurchase Option"). (b) Cause Defined. For purposes of this Agreement, "Cause" shall mean the good faith determination made by a majority of the Board that either of the following events have occurred: (i) substantial malfeasance by the Optionee towards any Participating Company, or (ii) substantial failure by Optionee to perform the duties of his employment and such failure is continuing after 15 days' written notice to Optionee thereof. (c) Exercise of Cause Share Repurchase Option. The Company may exercise the Cause Share Repurchase Option by written notice to the Optionee within six (6) months after such termination of employment (or exercise of the Option, if later). If the Company fails to give notice within such six (6) month period, the Cause Share Repurchase Option shall terminate unless the Company and the Optionee have extended the time for the exercise of the Cause Share Repurchase Option. (d) Payment for Option Shares and Return of Shares. Payment by the Company to the Optionee shall be made in cash within thirty (30) days after the date of the mailing of the written notice of exercise of the Cause Share Repurchase Option. For purposes of the foregoing, cancellation of any indebtedness of the Optionee to any Participating Company shall be treated as payment to the Optionee in cash to the extent of the unpaid principal and any accrued interest canceled. The purchase price per Option Share being repurchased by the Company shall be an amount equal to the Optionee's original cost per Option Share, as adjusted pursuant to paragraph 9 above (the "Repurchase Price"). The Option Shares being repurchased shall be delivered to the Company by the Optionee at the same time as the delivery of the Repurchase Price to the Optionee. (e) Assignment of Cause Share Repurchase Option. The Company shall have the right to assign the Cause Share Repurchase Option at any time, whether or not such option is then exercisable, to one (1) or more persons as may be selected by the Company. Page 16 of 42 (f) Ownership Change. Any and all new, substituted or additional securities or other property to which the Optionee is entitled by reason of his or her ownership of Option Shares shall be immediately subject to the Cause Share Repurchase Option and included in the term "Option Shares" for all purposes of the Cause Share Repurchase Option with the same force and effect. While the aggregate Repurchase Price shall remain the same after such ownership change, the Repurchase Price per Option Share upon exercise of the Cause Share Repurchase Option following such ownership change shall be appropriately adjusted. 12. Right of First Refusal. (a) Right of First Refusal. Except as provided in paragraph 12(f) below, in the event the Optionee proposes to sell, pledge, or otherwise transfer any Option Shares (the "Transfer Shares") to any person or entity, including, without limitation, any stockholder of the Participating Company Group, the Company shall have the right to repurchase the Transfer Shares under the terms and subject to the conditions set forth in this paragraph 12 (the "Right of First Refusal"). (b) Notice of Proposed Transfer. Prior to any proposed transfer of the Transfer Shares, the Optionee shall give a written notice (the "Transfer Notice") to the Company describing fully the proposed transfer, including the number of Transfer Shares, the name and address of the proposed transferee (the "Proposed Transferee") and, if the transfer is voluntary, the proposed transfer price and containing such information necessary to show the bona fide nature of the proposed transfer. In the event of a bona fide gift or involuntary transfer, the proposed transfer price shall be deemed to be the fair market value of the Transfer Shares as determined by the Company in good faith. In the event the Optionee proposes to transfer any Transfer Shares to more than one (1) Proposed Transferee, the Optionee shall provide a separate Transfer Notice for the proposed transfer to each Proposed Transferee. The Transfer Notice shall be signed by both the Optionee and the Proposed Transferee and must constitute a binding commitment of the Optionee and the Proposed Transferee for the transfer of the Transfer Shares to the Proposed Transferee subject only to the Right of First Refusal. (c) Exercise of Right of First Refusal. The Company shall have the right to purchase all, but not less than all, of the Transfer Shares (except as the Company and the Optionee otherwise agree) at the purchase price and on the terms set forth in the Transfer Notice by delivery to the Optionee of a notice of exercise of the Right of First Refusal within thirty (30) days after the date the Transfer Notice is delivered to the Company. The Company's exercise or failure to exercise the Right of First Refusal with respect to any proposed transfer described in a Transfer Notice shall not affect the Company's right to exercise the Right of First Refusal with respect to any proposed transfer described in any other Transfer Notice, whether or not such other Transfer Notice is issued by the Optionee or issued by a person other than the Optionee with respect to a proposed transfer to the same Proposed Transferee. If the Company exercises the Right of First Refusal, the Company and the Optionee shall thereupon consummate the sale of the Transfer Shares to the Company on the terms set forth in the Transfer Notice within sixty (60) days after the date the Transfer Notice is delivered to the Company (unless a longer period is offered by the Proposed Transferee); provided, however, that in the event the Transfer Notice provides for the payment for the Transfer Shares other than in cash, the Company shall have the option of paying for the Transfer Shares by the present value cash equivalent of the consideration described in the Transfer Notice as reasonably determined by the Company. For purposes of the foregoing, cancellation of any indebtedness of the Optionee to any Participating Company shall be treated as payment to the Optionee in cash to the extent of the unpaid principal and any accrued interest canceled. Page 17 of 42 (d) Failure to Exercise Right of First Refusal. If the Company fails to exercise the Right of First Refusal in full within the period specified in paragraph 12(c) above, the Optionee may conclude a transfer to the Proposed Transferee of the Transfer Shares on the terms and conditions described in the Transfer Notice, provided such transfer occurs not later than ninety (90) days following delivery to the Company of the Transfer Notice and further provided that if the Company is then an "S" corporation pursuant to Code Section 1362, such transfer would not terminate such "S" corporation election or increase the total number of shareholders of the company. The Company shall have the right to demand further assurances from the Optionee and the Proposed Transferee (in a form satisfactory to the Company) that the transfer of the Transfer Shares was actually carried out on the terms and conditions described in the Transfer Notice. No Transfer Shares shall be transferred on the books of the Company until the Company has received such assurances, if so demanded, and has approved the proposed transfer as bona fide. Any proposed transfer on terms and conditions different from those described in the Transfer Notice, as well as any subsequent proposed transfer by the Optionee, shall again be subject to the Right of First Refusal and shall require compliance by the Optionee with the procedure described in this paragraph 12. (e) Transferees of Transfer Shares. All transferees of the Transfer Shares or any interest therein, other than the Company, shall be required as a condition of such transfer to agree in writing (in a form satisfactory to the Company) that such transferee shall receive and hold such Transfer Shares or interests subject to the provisions of this paragraph 12 providing for the Right of First Refusal with respect to any subsequent transfer. Any sale or transfer of any shares acquired upon exercise of the Option shall be void unless the provisions of this paragraph 12 are met. (f) Transfers Not Subject to Right of First Refusal. The Right of First Refusal shall not apply to a transfer of Transfer Shares to the Optionee's ancestors, descendants, or spouse or to a trustee solely for the benefit of the Optionee or the Optionee's ancestors, descendants, or spouse, or to a charitable institution; provided, however, that if the Company is then an "S" corporation pursuant to Code Section 1362, such transfer would not terminate such "S" corporation election nor increase the total number of shareholders of the company and further provided that such transferee shall agree in writing (in a form satisfactory to the Company) to take the stock subject to all the terms and conditions of this paragraph 12 providing for a Right of First Refusal with respect to any subsequent transfer. Page 18 of 42 (g) Assignment of Right of First Refusal. The Company shall have the right to assign the Right of First Refusal at any time, whether or not the Optionee has attempted a transfer, to one (1) or more persons as may be selected by the Company. (h) Early Termination of Right of First Refusal. The other provisions of this paragraph 12 notwithstanding, the Right of First Refusal shall terminate, and be of no further force and effect, upon the existence of a public market for the class of shares subject to the Right of First Refusal. A "public market" shall be deemed to exist if (x) such stock is listed on a national securities exchange (as that term is used in the Exchange Act) or (y) such stock is traded on the over-the-counter market and prices therefor are published daily on business days in a recognized financial journal. 13. Escrow. (a) Establishment of Escrow. To ensure that shares subject to the Cause Share Repurchase Option, the Right of First Refusal and/or security for any promissory note will be available for repurchase, the Company may require the Optionee to deposit the certificate or certificates evidencing the shares which the Optionee purchases upon exercise of the Option with the Company or other escrow agent designated by the Company under the terms and conditions of escrow and security agreements approved by the Company. If the Company does not require such deposit as a condition of exercise of the Option, or if the Company releases the certificate or certificates from escrow prior to the lapsing of all such restrictions and/or security interest, the Company reserves the right at any time to require the Optionee to so deposit the certificate or certificates in escrow. The Company shall bear the expenses of the escrow. (b) Delivery of Shares to Optionee. As soon as practicable after the expiration of the Cause Share Repurchase Option and the Right of First Refusal, and after full repayment on any promissory note secured by the shares in escrow, the escrow agent shall deliver to the Optionee the shares no longer subject to such restrictions and no longer security for any promissory note. (c) Notices and Payments. In the event the shares held in escrow are subject to the Company's exercise of the Cause Share Repurchase Option or the Right of First Refusal, the notices required to be given to the Optionee shall be given to the escrow agent and any payment required to be given to the Optionee shall be given to the escrow agent. Within thirty (30) days after payment by the Company, the escrow agent shall deliver the shares which the Company has purchased to the Company and shall deliver the payment received from the Company to the Optionee. 14. Stock Dividends Subject to Option Agreement. If, from time to time, there is any stock dividend, stock split, or other change in the character or amount of any of the outstanding stock of the corporation the stock of which is subject to the provisions of this Option Agreement, then in such event any and all new, substituted or additional securities to which the Optionee is entitled by reason of the Optionee's ownership of the shares acquired upon exercise of the Option shall be immediately subject to the Cause Share Repurchase Option, the Right of First Refusal, and/or any security interest held by the Company with the same force and effect as the shares subject to the Cause Share Repurchase Option, the Right of First Refusal, and such security interest immediately before such event. Page 19 of 42 15. Notice of Sales Upon Disqualifying Disposition. The Optionee shall dispose of the shares acquired pursuant to the Option only in accordance with the provisions of this Option Agreement. In addition, the Optionee shall promptly notify the Chief Financial Officer of the Company if the Optionee disposes of any of the shares acquired pursuant to the Option within one (1) year from the date the Optionee exercises all or part of the Option or within two (2) years of the date of grant of the Option. Until such time as the Optionee disposes of such shares in a manner consistent with the provisions of this Option Agreement, the Optionee shall hold all shares acquired pursuant to the Option in the Optionee's name (and not in the name of any nominee) for the one-year period immediately after exercise of the Option and the two-year period immediately after grant of the Option. At any time during the one-year or two-year periods set forth above, the Company may place a legend or legends on any certificate or certificates representing shares acquired pursuant to the Option requesting the transfer agent for the Company's stock to notify the Company of any such transfers. The obligation of the Optionee to notify the Company of any such transfer shall continue notwithstanding that a legend has been placed on the certificate or certificates pursuant to the preceding sentence. 16. Exception To $100,000 Exercise Limitation. Notwithstanding any other provision of this Option Agreement, if compliance with the $100,000 Exercise Limitation as set forth in paragraph 4(a) above will result in the exercisability of any Vested Percentage of Option Shares being delayed more than thirty (30) days beyond the vesting date for such shares, the Option shall be deemed to be two (2) options. The first option shall be for the maximum number of shares subject to the Option that can comply with the $100,000 Exercise Limitation without causing the Option to be unexercisable as to Vested Shares. The second option, which shall not be treated as an incentive stock option as described in section 422(b) of the Code, shall be for the balance of the shares subject to the Option and shall be exercisable on the same terms and at the same time as set forth in this Option Agreement; provided, however, that the fifth sentence of paragraph 4(a) above shall not apply to the second option. Unless the Optionee specifically elects to the contrary in the Optionee's written notice of exercise, the first option shall be deemed to be exercised first to the maximum possible extent and then the second option shall be deemed to be exercised. 17. Legends. The Company may at any time place legends referencing the Cause Share Repurchase Option set forth in paragraph 11 above, the Right of First Refusal set forth in paragraph 12 above, and any applicable federal, state or foreign securities law restrictions on all certificates representing shares of stock subject to the provisions of this Option Agreement. The Optionee shall, at the request of the Company, promptly present to the Company any and all certificates representing shares acquired pursuant to the Option in the possession of the Optionee in order to carry out the provisions of this paragraph. Unless otherwise specified by the Company, legends placed on such certificates may include, but shall not be limited to, the following: Page 20 of 42 (a) "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT." (b) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A FOR CAUSE SHARE REPURCHASE OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS CORPORATION." (c) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS CORPORATION." (d) "THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE CORPORATION TO THE REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK OPTION AS DEFINED IN SECTION 422 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED ("ISO"). IN ORDER TO OBTAIN THE PREFERENTIAL TAX TREATMENT AFFORDED TO ISOs, THE SHARES SHOULD NOT BE TRANSFERRED PRIOR TO TWO YEARS AFTER GRANT OF THE ISO AND ONE YEAR AFTER EXERCISE OF THE ISO. SHOULD THE REGISTERED HOLDER ELECT TO TRANSFER ANY OF THE SHARES PRIOR THERETO AND FOREGO ISO TAX TREATMENT, THE TRANSFER AGENT FOR THE SHARES SHALL NOTIFY THE CORPORATION IMMEDIATELY. THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE INCENTIVE STOCK OPTION IN THE REGISTERED HOLDER'S NAME (AND NOT IN THE NAME OF ANY NOMINEE) PRIOR TO THIS DATE OR UNTIL TRANSFERRED AS DESCRIBED ABOVE." 18. Initial Public Offering. The Optionee hereby agrees that in the event of an initial public offering of stock made by the Company pursuant to an effective registration statement filed under the Securities Act, the Optionee shall not offer, sell, contract to sell, pledge, hypothecate, grant any option to purchase or make any short sale of, or otherwise dispose of any shares of stock of the Company or any rights to acquire stock of the Company for such period of time from and after the effective date of such registration statement as may be established by the underwriter for such initial public offering; provided, however, that such period of time shall not exceed two hundred seventy (270) days from the effective date of the registration statement to be filed in connection with such initial public offering. The foregoing limitation shall not apply to shares registered in the initial public offering under the Securities Act. The Optionee shall be subject to this paragraph provided and only if the officers and directors of the Company are also subject to similar arrangements. Page 21 of 42 19. Binding Effect. This Option Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors and assigns. 20. Termination or Amendment. The Board, including any duly appointed committee of the Board, may terminate or amend the Plan and/or the Option at any time; provided, however, that no such termination or amendment may adversely affect the Option or any unexercised portion hereof without the consent of the Optionee unless such amendment is required to enable the Option to qualify as an Incentive Stock Option. 21. Integrated Agreement. The Option Agreement, together with the Plan, constitutes the entire understanding and agreement of the Optionee and the Participating Company Group with respect tot he subject matter contained herein, and there are no agreements, understandings, restrictions, representations, or warranties among the Optionee and the Company other than those as set forth or provided for herein. To the extent contemplated herein, the provisions of this Option Agreement shall survive any exercise of the Option and shall remain in full force and effect. 22. Applicable Law. This Option Agreement shall be governed by the laws of the State of New Jersey as such laws are applied to agreements between New Jersey residents entered into and to be performed entirely within the State of New Jersey. MEDJET INC. By: ____________________________________ Title: _________________________________ Page 22 of 42 The Optionee represents that the Optionee is familiar with the terms and provisions of this Option Agreement, including the Cause Share Repurchase Option set forth in paragraph 11 and the Right of First Refusal set forth in paragraph 12 and hereby accepts the Option subject to all of the terms and provisions thereof. The Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board upon any questions arising under this Option Agreement. The undersigned acknowledges receipt of a copy of the Plan. OPTIONEE Date: ___________________________ _____________________________ The undersigned, being the spouse of the above-named Optionee, does hereby acknowledge that the undersigned has read and is familiar with the provisions of the above Option Agreement, and the undersigned hereby agrees thereto and joins therein to the extent, if any, that the agreement and joinder of the undersigned may be necessary. OPTIONEE Date: ___________________________ _____________________________ Page 23 of 42 EXHIBIT B STANDARD FORM OF MEDJET INC. NON-STATUTORY STOCK OPTION AGREEMENT Page 24 of 42 THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933. MEDJET INC. NON-STATUTORY STOCK OPTION AGREEMENT THIS NON-STATUTORY STOCK OPTION AGREEMENT (the "Option Agreement") is made and entered into as of ________________, 199__, by and between Medjet Inc., a Delaware corporation (the "Company"), and _________________________________ (the "Optionee"). The Company granted to the Optionee an option to purchase certain shares of common stock of the Company, in the manner and subject to the provisions of this Option Agreement (the "Option"). If the Optionee (and the Optionee's spouse, if married) does not execute and return this Option Agreement to the Company within sixty (60) days of the date first written above, the Option shall terminate and be without further force and effect. 1. Definitions: (a) "Date of Option Grant" shall mean _______________. (b) "Number of Option Shares" shall mean _____________ shares of common stock of the Company as adjusted from time to time pursuant to paragraph 9 below. (c) "Exercise Price" shall mean $____________ per share as adjusted from time to time pursuant to paragraph 9 below. (d) "Initial Vesting Date" shall be the last day of the calendar month in which occurs the date one (1) year after (check one): ______ the Date of Option Grant. ______ ________________________ (specify other date). Page 25 of 42 (e) Determination of "Vested Percentage":
Vested Percentage Prior to Initial Vesting Date 0% On Initial Vesting Date, provided the Optionee is continuously employed by a Participating /Company from the Date of Option Grant until the Initial Vesting Date 25% Plus For each full month of the Optionee's continuous employment by a Participating Company from the Initial Vesting Date up to the next 36 months 2.0834% In no event shall the Vested Percentage exceed 100%.
(f) "Option Term Date" shall mean the date ten (10) years after the Date of Option Grant. (g) "Code" shall mean the Internal Revenue Code of 1986, as amended. (h) "Company" shall mean Medjet Inc., a Delaware corporation, and any successor corporation thereto. (i) "Participating Company" shall mean (i) the Company and (ii) any present or future parent and/or subsidiary corporation of the Company while such corporation is a parent or subsidiary of the Company. For purposes of this Option Agreement, a parent corporation and a subsidiary corporation shall be as defined in sections 424(e) and 424(f) of the Code. (j) "Participating Company Group" shall mean at any point in time all corporations collectively which are then a Participating Company. (k) "Plan" shall mean the Medjet Inc. 1994 Stock Option Plan. 2. Status of the Option. This Option is intended to be a non- statutory stock option and shall not be treated as an incentive stock option as described in section 422 of the Code. Page 26 of 42 3. Administration. All questions of interpretation concerning this Option Agreement shall be determined by the Board of Directors of the Company (the "Board") and/or by a duly appointed committee of the Board having such powers as shall be specified by the Board. Any subsequent references herein to the Board shall also mean the committee if such committee has been appointed and, unless the powers of the committee have been specifically limited, the committee shall have all of the powers of the Board granted in the Plan, including, without limitation, the power to terminate or amend the Plan at any time, subject to the terms of the Plan and any applicable limitations imposed by law. All determinations by the Board shall be final and binding upon all persons having an interest in the Option. Any officer of a Participating Company shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, or election which is the responsibility of or which is allocated to the Company herein, provided the officer has apparent authority with respect to such matter, right, obligation, or election. 4. Exercise of the Option. (a) Right to Exercise. The Option shall not be immediately exercisable prior to the Initial Vesting Date. At any time the after the Initial Vesting Date, this Option shall be exercisable only as to the Vested Percentage. After three (3) years from the Initial Vesting Date, this Option shall be exercisable in full. Exercise of this Option shall be subject to the Optionee's agreement that any shares purchased upon exercise are subject to the Company's repurchase rights set forth in paragraph 11 and paragraph 12 below. Notwithstanding the foregoing, the Option may be exercised only in multiples of one hundred (100) shares unless all shares subject to the Option are being exercised; provided, however, that the foregoing restriction shall not apply so as to prevent an exercise (i) following the Optionee's termination of employment as set forth in paragraph 7 below or (ii) permitted by the Board pursuant to paragraph 11 of the Plan. In addition to the foregoing, in the event that the adoption of the Plan or any amendment of the Plan is subject to the approval of the Company's stockholders in order for the Option to comply with the requirements of Rule 16b-3, promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Option shall not be exercisable prior to such stockholder approval if the Optionee is subject to Section 16(b) of the Exchange Act, unless the Board, in its sole discretion, approves the exercise of the Option prior to such stockholder approval. (b) Method of Exercise. Exercise of the Option must be by written notice to the Company which must state the election to exercise the Option, the number of shares for which the Option is being exercised and such other representations and agreements as to the Optionee's investment intent with respect to such shares as may be required pursuant to the provisions of this Option Agreement. The written notice must be signed by the Optionee and must be delivered in person, by certified or registered mail, return receipt requested, or by facsimile transmission, to the Chief Financial Officer of the Company, or other authorized representative of the Participating Company Group, prior to the termination of the Option as set forth in paragraph 6 below, accompanied by (i) full payment of the exercise price for the number of shares being purchased and (ii) an executed copy, if required herein, of the then current forms of escrow and security agreements referenced below. (c) Payment of Exercise Price. (i) Forms of Payment Authorized. Payment of the exercise price for the number of shares for which the Option is being exercised shall be made (A) in cash, by check, or cash equivalent; Page 27 of 42 (B) by tender to the Company of shares of the Company's common stock owned by the Optionee having a fair market value, as determined by the Board, not less than the exercise price, which either have been owned by the Optionee for more than six (6) months or were not acquired, directly or indirectly, from the Company; (C) if expressly authorized by the Company at the time of Option exercise, in its sole discretion, by the Optionee's recourse promissory note in a form approved by the Company; (D) by Immediate Sales Proceeds, as defined below; (E) by any combination of the foregoing. (ii) Tender of Company Stock. Notwithstanding the foregoing, the Option may not be exercised by tender to the Company of shares of the Company's common stock to the extent such tender of stock would constitute a violation of the provisions of any law, regulation and/or agreement restricting the redemption of the Company's common stock or, if in the opinion of Company counsel, might impair the ability of purchasers of stock from the Company from taking full advantage of the provisions of Section 1202 of the Code relating to capital gains treatment of stock issued by the Company. Unless otherwise provided by the Board, an Option may not be exercised by tender to the Company of shares of the Company's common stock unless such shares of the Company's stock either have been owned by the Optionee for more than six (6) months or were not acquired, directly or indirectly, from the Company. (iii) Promissory Note. Unless otherwise specified by the Board at the time the Option is granted, a promissory note permitted in accordance with clause (c)(i)(C) above shall not exceed the amount permitted by law to be paid by a promissory note and shall be a full recourse note in a form satisfactory to the Company, with principal payable four (4) years after the date the Option is exercised but in any event upon the termination of Optionee's employment or consulting relationship with the Company, if earlier. The Optionee shall be required to make, from time to time, mandatory prepayments on such promissory note in an amount equal to fifty percent (50%) of the difference between the aggregate Option exercise price and the aggregate proceeds from the sale of shares of Stock. Such mandatory prepayments shall be made within ten (10) days after the sale of shares of Stock. Interest on the principal balance of the promissory note shall be payable in annual installments at the minimum interest rate necessary to avoid imputed interest pursuant to all applicable sections of the Code. Such recourse promissory note shall be secured by the shares of stock acquired pursuant to the then current form of security agreement as approved by the Company. In the event the Company at any time is subject to the regulations promulgated by the Board of Governors of the Federal Reserve System or any other governmental entity affecting the extension of credit in connection with the Company's securities, any promissory note shall comply with such applicable regulations, and the Optionee shall pay the unpaid principal and accrued interest, if any, to the extent necessary to comply with such applicable regulations. Except as the Company in its sole discretion shall determine, the Optionee shall pay the unpaid principal balance of the promissory note and any accrued interest thereon upon termination of the Optionee's employment with the Participating Company Group for any reason, with or without cause. Page 28 of 42 (iv) Immediate Sales Proceeds. "Immediate Sales Proceeds" shall mean the assignment in form acceptable to the Company of the proceeds of a sale of some or all of the shares acquired upon the exercise of the Option pursuant to a program and/or procedure approved by the Company (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System). The Company reserves, at any and all times, the right, in the Company's sole and absolute discretion, to decline to approve any such program and/or procedure. (d) Tax Withholding. At the time the Option is exercised, in whole or in part, or at any time thereafter as requested by the Company, the Optionee hereby authorizes payroll withholding and otherwise agrees to make adequate provision for foreign, federal and state tax withholding obligations of the Company, if any, which arise in connection with the Option, including, without limitation, obligations arising upon (i) the exercise, in whole or in part, of the Option, (ii) the transfer, in whole or in part, of any shares acquired on exercise of the Option, or (iii) the operation of any law or regulation providing for the imputation of interest, or (iv) the lapsing of any restriction with respect to any shares acquired on exercise of the Option. The Optionee is cautioned that the Option is not exercisable unless the Company's withholding obligations are satisfied. Accordingly, the Optionee may not be able to exercise the Option when desired even though the Option is vested and the Company shall have no obligation to issue a certificate for such shares. (e) Certificate Registration. Except in the event the exercise price is paid by Immediate Sales Proceeds, the certificate or certificates for the shares as to which the Option is exercised shall be registered in the name of the Optionee, or, if applicable, the heirs of the Optionee. (f) Restrictions on Grant of the Option and Issuance of Shares. The grant of the Option and the issuance of the shares upon exercise of the Option shall be subject to compliance with all applicable requirements of federal, state or foreign law with respect to such securities. The Option may not be exercised if the issuance of shares upon such exercise would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or if the Company is then an "S" corporation pursuant to Code Section 1302, if such exercise would terminate such "S" corporation election. In addition, the Option may not be exercised unless (i) a registration statement under the Securities Act of 1933, as amended (the "Securities Act"), shall at the time of exercise of the Option be in effect with respect to the shares issuable upon exercise of the Option or (ii) in the opinion of legal counsel to the Company, the shares issuable upon exercise of the Option may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. THE OPTIONEE IS CAUTIONED THAT THE OPTION MAY NOT BE EXERCISABLE UNLESS THE FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. Questions concerning this restriction should be directed to the Chief Financial Officer of the Company. As a condition to the exercise of the Option, the Company may require the Optionee to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company. Page 29 of 42 (g) Fractional Shares. The Company shall not be required to issue fractional shares upon the exercise of the Option. 5. Non-Transferability of the Option; Non-Alienation of Benefits. The Option may be exercised during the lifetime of the Optionee only by the Optionee and may not be assigned or transferred in any manner except by will or by the laws of descent and distribution. Following the death of the Optionee, the Option, to the extent unexercised and exercisable by the Optionee on the date of death, may be exercised by the Optionee's legal representative or by any person empowered to do so under the deceased Optionee's will or under the then applicable laws of descent and distribution. Except with the prior written consent of the Company, subject to the foregoing, or as otherwise provided herein, no right or benefit under this Option Agreement shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber or charge the same without such consent, if applicable, shall be void. Except with such consent, no right or benefit under this Option Agreement shall in any manner be liable for or subject to the debts, contracts, liabilities or torts of the person entitled to such benefit. Except to the extent previously approved by the Company in writing, or as otherwise provided herein, if the Optionee should become bankrupt or attempt to anticipate, alienate, sell, assign, pledge, encumber or charge any right or benefit hereunder, then such right or benefit shall cease and terminate, and in such event, the Company may hold or apply the same or any part thereof for the benefit of the Optionee, the Optionee's spouse, children or other dependents, or any of them, in such manner and in such proportion as the Company may in its sole determination deem proper. 6. Termination of the Option. The Option shall terminate and may no longer be exercised on the first to occur of (a) the Option Term Date as defined above, (b) the last date for exercising the Option following termination of employment as described in paragraph 7 below, or (c) dissolution, liquidation, sale, merger or other event contemplated by paragraph 11 of the Plan to the extent provided by the Board pursuant to such paragraph 11. Page 30 of 42 7. Termination of Employment. (a) Termination Other Than by Death or Disability. Except as otherwise provided below, if the Optionee ceases to be an employee of the Participating Company Group for any reason, except death or disability within the meaning of section 422(c) of the Code, the Option, to the extent unexercised and exercisable by the Optionee on the date on which the Optionee ceased to be an employee, may be exercised by the Optionee within sixty (60) days (which may be extended by an additional thirty (30) days at the Board's discretion, if the Optionee's employment or consulting relationship with a Participating Company is terminated without Cause, as hereinafter defined) after the date on which the Optionee's employment terminated, but in any event no later than the Option Term Date. (b) Termination by Death or Disability. Except as otherwise provided below, if the Optionee's employment with the Company is terminated because of the death or disability of the Optionee within the meaning of section 422(c) of the Code, the Option, to the extent unexercised and exercisable by the Optionee on the date on which the Optionee ceased to be an employee, may be exercised by the Optionee (or the Optionee's legal representative) at any time prior to the expiration of twelve (12) months from the date on which the Optionee's employment terminated, but in any event no later than the Option Term Date. The Optionee's employment shall be deemed to have terminated on account of death if the Optionee dies within sixty (60) days after the Optionee's termination of employment. (c) Limitations on Exercise After Termination. Except as provided in this paragraph 7, the Option shall terminate and may not be exercised after the Optionee ceases to be an employee of the Participating Company Group. Furthermore, the Board may at any time after the Optionee's termination of employment cancel the Option with respect to all or a portion of the shares otherwise remaining exercisable under the Option, if the Company finds or has found that the Optionee: (i) Engaged in willful, deliberate or gross misconduct toward the Company; (ii) Has violated the terms of any confidentiality agreement or obligation between the Optionee and the Company; (iii) Has accepted employment with an entity which the Company determines is in a business that could result in compromising any confidentiality agreement or obligation between the Optionee and the Company; or (iv) been terminated for Cause (as defined in paragraph 11(b)). (d) Employee and Termination of Employment Defined. For purposes of this Option, the term "employee" shall mean any person, including officers and directors, employed by a Participating Company or performing services for a Participating Company as a director, consultant, advisor or other independent contractor. For purposes of this Option, the Optionee's employment shall be deemed to have terminated if the Optionee ceases to be employed (whether as an employee, consultant, advisor or independent contractor) by a Participating Company (whether upon an actual termination of employment or upon the Optionee's employer ceasing to be a Participating Company). The Optionee's employment shall not be deemed to have terminated merely because of a change in the capacity in which the Optionee serves as an employee, provided that there is no interruption or termination of the Optionee's service as an employee. Page 31 of 42 (e) Extension if Exercise Prevented by Law. Notwithstanding the foregoing, if the exercise of the Option within the applicable time periods set forth above is prevented by the provisions of paragraph 4(f) above, the Option shall remain exercisable until three (3) months after the date the Optionee is notified by the Company that the Option is exercisable, but in any event no later than the Option Term Date. (f) Extension if Optionee Subject to Section 16(b). Notwithstanding the foregoing, if the exercise of the Option within the applicable time periods set forth above would subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option shall remain exercisable until the earliest to occur of (i) the tenth (10th) day following the date on which the Optionee would no longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day after the Optionee's termination of employment, or (iii) the Option Term Date. (g) Leave of Absence. For purposes hereof, the Optionee's employment with the Participating Company Group shall not be deemed to terminate if the Optionee takes any military leave, sick leave, or other bona fide leave of absence approved by the Company of ninety (90) days or less. In the event of a leave in excess of ninety (90) days, the Optionee's employment shall be deemed to terminate on the ninety-first (91st) day of the leave unless the Optionee's right to reemployment with the Participating Company Group remains guaranteed by statute or contract. Notwithstanding the foregoing, unless otherwise designated by the Company (or required by law) a leave of absence shall not be treated as employment for purposes of determining the Optionee's Vested Percentage. 8. Dissolution, Liquidation, Sale or Merger. The Optionee acknowledges that it understands the provisions of paragraph 11 of the Plan. 9. Effect of Change in Stock Subject to the Option. Appropriate adjustments shall be made in the number, exercise price and class of shares of stock subject to the Option in the event of a stock dividend, stock split, reverse stock split, recapitalization, combination, reclassification, or like change in the capital structure of the Company. In the event a majority of the shares which are of the same class as the shares that are subject to the Option are exchanged for, converted into, or otherwise become (whether or not pursuant to an Ownership Change) shares of another corporation (the "New Shares"), the Company may unilaterally amend the Option to provide that the Option is exercisable for New Shares. In the event of any such amendment, the number of shares and the exercise price shall be adjusted in a fair and equitable manner. Page 32 of 42 10. Rights as a Stockholder or Employee. The Optionee shall have no rights as a stockholder with respect to any shares covered by the Option until the date of the issuance of a certificate or certificates for the shares for which the Option has been exercised. No adjustment shall be made for dividends or distributions or other rights for which the record date is prior to the date such certificate or certificates are issued, except as provided in paragraph 9 above. Nothing in the Option shall confer upon the Optionee any right to continue in the employ of a Participating Company or interfere in any way with any right of the Participating Company Group to terminate the Optionee's employment at any time. 11. Share Repurchase Option For Termination For Cause. (a) Share Repurchase Option. In the event the Optionee's employment with the Participating Company Group is terminated for Cause (as defined in paragraph 11(b) below), the Company shall have the right to repurchase the Option Shares under the terms and subject to the conditions set forth in this paragraph 11 (the "Cause Share Repurchase Option"). (b) Cause Defined. For purposes of this Agreement, "Cause" shall mean the good faith determination made by a majority of the Board that either of the following events have occurred: (i) substantial malfeasance of the Optionee towards any Participating Company or (ii) substantial failure by Optionee to perform the duties of his employment or consulting or director relationship with a Participating Company and such failure is continuing after 15 days written notice to Optionee thereof. (c) Exercise of Cause Share Repurchase Option. The Company may exercise the Cause Share Repurchase Option by written notice to the Optionee within six (6) months after such termination of employment or consulting relationship (or exercise of the Option, if later). If the Company fails to give notice within such six (6) month period, the Cause Share Repurchase Option shall terminate unless the Company and the Optionee have extended the time for the exercise of the Cause Share Repurchase Option. (d) Payment for Option Shares and Return of Option Shares. Payment by the Company to the Optionee shall be made in cash within thirty (30) days after the date of the mailing of the written notice of exercise of the Cause Share Repurchase Option. For purposes of the foregoing, cancellation of any indebtedness of the Optionee to any Participating Company shall be treated as payment to the Optionee in cash to the extent of the unpaid principal and any accrued interest canceled. The purchase price per Option Share being repurchased by the Company shall be an amount equal to the Optionee's original cost per Option Share, as adjusted pursuant to paragraph 9 above (the "Repurchase Price"). The Option Shares being repurchased shall be delivered to the Company by the Optionee at the same time as the delivery of the Repurchase Price to the Optionee. Page 33 of 42 (e) Assignment of Cause Share Repurchase Option. The Company shall have the right to assign the Cause Share Repurchase Option at any time, whether or not such option is then exercisable, to one (1) or more persons as may be selected by the Company. (f) Ownership Change. Any and all new, substituted or additional securities or other property to which the Optionee is entitled by reason of his or her ownership of Option Shares shall be immediately subject to the Cause Share Repurchase Option and included in the term "Option Shares" for all purposes of the Cause Share Repurchase Option with the same force and effect. While the aggregate Repurchase Price shall remain the same after such ownership change, the Repurchase Price per Option Share upon exercise of the Cause Share Repurchase Option following such ownership change shall be appropriately adjusted. 12. Right of First Refusal. (a) Right of First Refusal. Except as provided in paragraph 12(f) below, in the event the Optionee proposes to sell, pledge, or otherwise transfer any Option Shares (the "Transfer Shares") to any person or entity, including, without limitation, any stockholder of the Participating Company Group, the Company shall have the right to repurchase the Transfer Shares under the terms and subject to the conditions set forth in this paragraph 12 (the "Right of First Refusal"). (b) Notice of Proposed Transfer. Prior to any proposed transfer of the Transfer Shares, the Optionee shall give a written notice (the "Transfer Notice") to the Company describing fully the proposed transfer, including the number of Transfer Shares, the name and address of the proposed transferee (the "Proposed Transferee") and, if the transfer is voluntary, the proposed transfer price and containing such information necessary to show the bona fide nature of the proposed transfer. In the event of a bona fide gift or involuntary transfer, the proposed transfer price shall be deemed to be the fair market value of the Transfer Shares as determined by the Company in good faith. In the event the Optionee proposes to transfer any Transfer Shares to more than one (1) Proposed Transferee, the Optionee shall provide a separate Transfer Notice for the proposed transfer to each Proposed Transferee. The Transfer Notice shall be signed by both the Optionee and the Proposed Transferee and must constitute a binding commitment of the Optionee and the Proposed Transferee for the transfer of the Transfer Shares to the Proposed Transferee subject only to the Right of First Refusal. (c) Exercise of Right of First Refusal. The Company shall have the right to purchase all, but not less than all, of the Transfer Shares (except as the Company and the Optionee otherwise agree) at the purchase price and on the terms set forth in the Transfer Notice by delivery to the Optionee of a notice of exercise of the Right of First Refusal within thirty (30) days after the date the Transfer Notice is delivered to the Company. The Company's exercise or failure to exercise the Right of First Refusal with respect to any proposed transfer described in a Transfer Notice shall not affect the Company's right to exercise the Right of First Refusal with respect to any proposed transfer described in any other Transfer Notice, whether or not such other Transfer Notice is issued by the Optionee or issued by a person other than the Optionee with respect to a proposed transfer to the same Proposed Transferee. If the Company exercises the Right of First Refusal, the Company and the Optionee shall thereupon consummate the sale of the Transfer Shares to the Company on the terms set forth in the Transfer Notice within sixty (60) days after the date the Transfer Notice is delivered to the Company (unless a longer period is offered by the Proposed Transferee); provided, however, that in the event the Transfer Notice provides for the payment for the Transfer Shares other than in cash, the Company shall have the option of paying for the Transfer Shares by the present value cash equivalent of the consideration described in the Transfer Notice as reasonably determined by the Company. For purposes of the foregoing, cancellation of any indebtedness of the Optionee to any Participating Company shall be treated as payment to the Optionee in cash the extent of the unpaid principal and any accrued interest canceled. Page 34 of 42 (d) Failure to Exercise Right of First Refusal. If the Company fails to exercise the Right of First Refusal in full within the period specified in paragraph 12(c) above, the Optionee may conclude a transfer to the Proposed Transferee of the Transfer Shares on the terms and conditions described in the Transfer Notice, provided such transfer occurs not later than ninety (90) days following delivery to the Company of the Transfer Notice and further provided that if the Company is then an "S" corporation pursuant to Code Section 1362, such transfer would not terminate such "S" corporation election nor increase the total number of shareholders of the Company. The Company shall have the right to demand further assurances from the Optionee and the Proposed Transferee (in a form satisfactory to the Company) that the transfer of the Transfer Shares was actually carried out on the terms and conditions described in the Transfer Notice. No Transfer Shares shall be transferred on the books of the Company until the Company has received such assurances, if so demanded, and has approved the proposed transfer as bona fide. Any proposed transfer on terms and conditions different from those described in the Transfer Notice, as well as any subsequent proposed transfer by the Optionee, shall again be subject to the Right of First Refusal and shall require compliance by the Optionee with the procedure described in this paragraph 12. (e) Transferees of Transfer Shares. All transferees of the Transfer Shares or any interest therein, other than the Company, shall be required as a condition of such transfer to agree in writing (in a form satisfactory to the Company) that such transferee shall receive and hold such Transfer Shares or interests subject to the provisions of this paragraph 12 providing for the Right of First Refusal with respect to any subsequent transfer. Any sale or transfer of any shares acquired upon exercise of the Option shall be void unless the provisions of this paragraph 12 are met. (f) Transfers Not Subject to Right of First Refusal. The Right of First Refusal shall not apply to a transfer of Transfer Shares to the Optionee's ancestors, descendants, or spouse or to a trustee solely for the benefit of the Optionee or the Optionee's ancestors, descendants, or spouse, or to a charitable institution; provided, however, that if the Company is then an "S" corporation pursuant to the Code Section 1362, such transfer would not terminate such "S" corporation election nor increase the total number of shareholders in the Company and further provided that such transferee shall agree in writing (in a form satisfactory to the Company) to take the stock subject to all the terms and conditions of this paragraph 12 providing for a Right of First Refusal with respect to any subsequent transfer. Page 35 of 42 (g) Assignment of Right of First Refusal. The Company shall have the right to assign the Right of First Refusal at any time, whether or not the Optionee has attempted a transfer, to one (1) or more persons as may be selected by the Company. (h) Early Termination of Right of First Refusal. The other provisions of this paragraph 12 notwithstanding, the Right of First Refusal shall terminate, and be of no further force and effect, upon the existence of a public market for the class of shares subject to the Right of First Refusal. A "public market" shall be deemed to exist if (x) such stock is listed on a national securities exchange (as that term is used in the Exchange Act) or (y) such stock is traded on the over-the-counter market and prices therefor are published daily on business days in a recognized financial journal. 13. Escrow. (a) Establishment of Escrow. To ensure that shares subject to the Cause Share Repurchase Option, the Right of First Refusal and/or security for any promissory note will be available for repurchase, the Company may require the Optionee to deposit the certificate or certificates evidencing the shares which the Optionee purchases upon exercise of the Option with the Company or other escrow agent designated by the Company under the terms and conditions of escrow and security agreements approved by the Company. If the Company does not require such deposit as a condition of exercise of the Option, or if the Company releases the certificate or certificates from escrow prior to the lapsing of all such restrictions and/or security interest, the Company reserves the right at any time to require the Optionee to so deposit the certificate or certificates in escrow. The Company shall bear the expenses of the escrow. (b) Delivery of Shares to Optionee. As soon as practicable after the expiration of the Cause Share Repurchase Option and the Right of First Refusal, and after full repayment on any promissory note secured by the shares in escrow, the escrow agent shall deliver to the Optionee the shares no longer subject to such restrictions and no longer security for any promissory note. (c) Notices and Payments. In the event the shares held in escrow are subject to the Company's exercise of the Cause Share Repurchase Option or the Right of First Refusal, the notices required to be given to the Optionee shall be given to the escrow agent and any payment required to be given to the Optionee shall be given to the escrow agent. Within thirty (30) days after payment by the Company, the escrow agent shall deliver the shares which the Company has purchased to the Company and shall deliver the payment received from the Company to the Optionee. 14. Stock Dividends Subject to Option Agreement. If, from time to time, there is any stock dividend, stock split, or other change in the character or amount of any of the outstanding stock of the corporation the stock of which is subject to the provisions of this Option Agreement, then in such event any and all new, substituted or additional securities to which the Optionee is entitled by reason of the Optionee's ownership of the shares acquired upon exercise of the Option shall be immediately subject to the Cause Share Repurchase Option, the Right of First Refusal, and/or any security interest held by the Company with the same force and effect as the shares subject to the Cause Share Repurchase Option, the Right of First Refusal, and such security interest immediately before such event. Page 36 of 42 15. Legends. The Company may at any time place legends referencing the Cause Share Repurchase Option set forth in paragraph 11 above, the Right of First Refusal set forth in paragraph 12 above, and any applicable federal, state or foreign securities law restrictions on all certificates representing shares of stock subject to the provisions of this Option Agreement. The Optionee shall, at the request of the Company, promptly present to the Company any and all certificates representing shares acquired pursuant to the Option in the possession of the Optionee in order to carry out the provisions of this paragraph. Unless otherwise specified by the Company, legends placed on such certificates may include, but shall not be limited to, the following: (a) "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT." (b) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A FOR CAUSE SHARE REPURCHASE OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS CORPORATION." (c) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS CORPORATION." 16. Initial Public Offering. The Optionee hereby agrees that in the event of an initial public offering of stock made by the Company pursuant to an effective registration statement filed under the Securities Act, the Optionee shall not offer, sell, contract to sell, pledge, hypothecate, grant any option to purchase or make any short sale of, or otherwise dispose of any shares of stock of the Company or any rights to acquire stock of the Company for such period of time from and after the effective date of such registration statement as may be established by the underwriter for such initial public offering; provided, however, that such period of time shall not exceed two hundred seventy (270) days from the effective date of the registration statement to be filed in connection with such initial public offering. The foregoing limitation shall not apply to shares registered in the initial public offering under the Securities Act. The Optionee shall be subject to this paragraph provided and only if the officers and directors of the Company are also subject to similar arrangements. Page 37 of 42 17. Binding Effect. This Option Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors and assigns. 18. Termination or Amendment. The Board, including any duly appointed committee of the Board, may terminate or amend the Plan and/or the Option at any time; provided, however, that no such termination or amendment may adversely affect the Option or any unexercised portion hereof without the consent of the Optionee. 19. Integrated Agreement. This Option Agreement, together with the Plan, constitutes the entire understanding and agreement of the Optionee and the Participating Company Group with respect to the subject matter contained herein, and there are no agreements, understandings, restrictions, representations, or warranties among the Optionee and the Company other than those as set forth or provided for herein. To the extent contemplated herein, the provisions of this Option Agreement shall survive any exercise of the Option and shall remain in full force and effect. 20. Applicable Law. This Option Agreement shall be governed by the laws of the State of New Jersey as such laws are applied to agreements between New Jersey residents entered into and to be performed entirely within the State of New Jersey. MEDJET INC. By: ____________________________ Title:__________________________ The Optionee represents that the Optionee is familiar with the terms and provisions of this Option Agreement, including the Cause Share Repurchase Option set forth in paragraph 11 and the Right of First Refusal set forth in paragraph 12 and hereby accepts the Option subject to all of the terms and provisions thereof. The Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board upon any questions arising under this Option Agreement. The undersigned acknowledges receipt of a copy of the Plan. OPTIONEE Date: _____________________ ________________________________ Page 38 of 42 The undersigned, being the spouse of the above-named Optionee, does hereby acknowledge that the undersigned has read and is familiar with the provisions of the above Option Agreement, and the undersigned hereby agrees thereto and joins therein to the extent, if any, that the agreement and joinder of the undersigned may be necessary. OPTIONEE Date: _____________________ ________________________________ Page 39 of 42 AMENDMENT NO. 1 TO THE MEDJET INC. 1994 STOCK OPTION PLAN WHEREAS, Medjet Inc. (the "Company") established the Medjet Inc. 1994 Stock Option Plan (the "Plan") effective September 30, 1994; and WHEREAS, the Plan was adopted by the Board of Directors of the Company on September 30, 1994; and WHEREAS, the Plan was approved by the stockholders of the Company on May 27, 1995; and WHEREAS, the Company wishes to amend the Plan, effective as of the first closing date of the initial public offering of the Company. NOW, THEREFORE, the Plan is amended as follows: 1. Paragraph 1 is amended by inserting the phrase "MEDJET INC. 1994 Stock Option" before, and inserting the phrase "(the "Plan")" after, the word "Plan" in the first line thereof. 2. Paragraph 2(a) is amended by deleting the text in its entirety and by substituting the following in lieu thereof: "(a) Administration by Board and/or Committee. The Plan shall be administered by the Board of Directors of the Company (the "Board") or by a duly appointed committee of the Board (the "Stock Option Committee" or "Committee"). The Committee shall consist of two or more directors as may be appointed from time to time by the Board, each of whom shall qualify as a "disinterested person" within the meaning of Rule 16b-3, as defined below. If such Committee has been appointed and, unless the powers of the Committee have been specifically limited, the Committee shall have all of the powers of the Board granted herein, including, without limitation, the power to terminate or amend the Plan at any time, subject to the terms of the Plan and any applicable limitations imposed by law. Where applicable, "Board" may be used interchangeably with "Committee" and "Stock Option Committee." All questions of interpretation of the Plan or of any options granted under the Plan (an "Option") shall be determined by the Board, and such determinations shall be final and binding upon all persons having an interest in the Plan and/or any Option." Page 40 of 42 3. Paragraph 2(d) is amended by adding the phrase "or ten percent owners" after the word "directors" in the second line thereof. 4. Paragraph 4 is amended by deleting the second sentence and by substituting the following in lieu thereof: "Subject to adjustment as provided in paragraph 10 hereof, the maximum aggregate number of shares of Stock that may be issued under the Plan shall be twenty-five thousand (25,000) shares, to be increased by two hundred thousand (200,000) shares following the stock split effected in connection with the Initial Public Offering (the "IPO")." 5. Paragraph 11 is amended by adding the term ("Transfer of Control") immediately after the phrase "or into another corporation" in the third line thereof. 6. Paragraph 14 is amended by deleting the second sentence of such Paragraph 14 and by adding the following at the end thereof: "Notwithstanding the foregoing, the Board and/or the Committee may not effect any amendment that would require the approval of the stockholders of the Company under Rule 16b-3 unless such approval is obtained. In no event, unless no longer required as a condition of compliance with the requirements of Rule 16b-3, shall the Board or the Committee without the approval of stockholders normally entitled to vote for the election of directors of the Company materially increase the benefits accruing to Optionees hereunder or effect any other change that would require stockholder approval under Rule 16b-3. Except as otherwise required by law, no amendment or modification of this Plan may, without the consent of the Optionee or the permitted transferee of his Option, alter or impair the rights and obligations arising under any then outstanding Option." 7. A new Paragraph 15 is added at the end of the Plan, to read as follows: "15. Section 16(b) of the Exchange Act. The Plan is intended to comply with all applicable conditions of Rule 16b-3 or its successors, and all transactions involving insider-Optionees are subject to such conditions, regardless of whether such conditions are expressly set forth in the Plan. To the extent any provision of the Plan or action by the Board and/or the Committee fails to so comply, it shall be deemed null and void. The Board and/or the Committee may establish and adopt written administrative guidelines, designed to facilitate compliance with Section 16(b) of the Exchange Act, as it may deem necessary or proper for the administration and operation of the Plan and the transaction of business thereunder." 8. A new Paragraph 16 is added to follow Paragraph 15, to read as follows: "16. Withholding of Taxes. The Company shall have the right to deduct from any payment to be made to an Optionee, or to otherwise require, prior to the issuance Page 41 of 42 or delivery of any shares of Stock or the payment of any cash hereunder, payment by the Optionee of any Federal, state or local taxes required by law to be withheld." IN WITNESS WHEREOF, the Company has caused this Amendment to be executed this 21st day of May 1996. MEDJET INC. By: /s/ Eugene I. Gordon ------------------------ Page 42 of 42 EX-10 13 EX-10.18 PROMISSORY NOTE PROMISSORY NOTE __________________ $50,000.00 April 15, 1996 Edison, New Jersey FOR VALUE RECEIVED, MEDJET INC. (the "Maker") promises to pay to the order of Jan Wernick ("Holder"), the principal sum of Fifty Thousand Dollars ($50,000.00), together with interest on the unpaid principal balance at a rate per annum equal to twelve percent (12%). Principal and accrued interest hereunder shall be due and payable on the earlier of (a) written demand made at any time on or after December 31, 1996 or (b) the closing by the Maker of an equity or debt financing for not less than $1,000,000 or (c) the closing of the Maker's offering of shares of its capital stock to the public pursuant to a registration statement filed and declared effective by the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended. Interest shall accrue from the date of this Note until the entire unpaid principal balance together with any accrued and unpaid interest is paid in full. Payment shall be made in lawful tender of the United States and shall be credited first to the accrued interest then due and payable and the remainder applied to principal. Prepayment of principal, together with accrued interest, may be made at any time without notice, premium or penalty. The entire unpaid principal sum of this Note, together with accrued and unpaid interest to date, shall be due and payable at any time on or after December 31, 1996 upon written demand or, without any demand, immediately upon the insolvency of the Maker, the commission of any act of bankruptcy by the Maker, the execution by the Maker of a general assignment for the benefit of creditors, the filing by or against the Maker of any petition in bankruptcy or any petition for relief under the provisions of the federal bankruptcy act or any other state or federal law for the relief of debtors and the continuation of such petition without dismissal for a period of fifteen (15) days or more, or the appointment of a receiver or trustee to take possession of the property or assets of the Maker. If action is instituted to collect this Note, the Maker promises to pay all costs and expenses, including reasonable attorneys' fees and expenses, incurred in connection with such action. The Maker hereby waives notice of default, presentment or demand for payment, except as set forth in the first paragraph hereof, protest or notice of nonpayment or dishonor and all other notices or demands relative to this instrument. This Note may not be transferred without the prior written consent of the Maker. This Note shall be construed in accordance with the internal laws of the State of New York. "MAKER" MEDJET INC. By: /s/ Eugene I. Gordon ______________________________ Title: President EX-10 14 EX 10.19 PROMISSORY NOTE PROMISSORY NOTE ------------------- $50,000.00 May 6, 1996 Edison, New Jersey FOR VALUE RECEIVED, MEDJET INC. (the "Maker") promises to pay to the order of Jan Wernick ("Holder"), the principal sum of Fifty Thousand Dollars ($50,000.00), together with interest on the unpaid principal balance at a rate per annum equal to twelve percent (12%). Principal and accrued interest hereunder shall be due and payable on the earlier of (a) written demand made at any time on or after December 31, 1996 or (b) the closing by the Maker of an equity or debt financing for not less than $1,000,000 or (c) the closing of the Maker's offering of shares of its capital stock to the public pursuant to a registration statement filed and declared effective by the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended. Interest shall accrue from the date of this Note until the entire unpaid principal balance together with any accrued and unpaid interest is paid in full. Payment shall be made in lawful tender of the United States and shall be credited first to the accrued interest then due and payable and the remainder applied to principal. Prepayment of principal, together with accrued interest, may be made at any time without notice, premium or penalty. The entire unpaid principal sum of this Note, together with accrued and unpaid interest to date, shall be due and payable at any time on or after December 31, 1996 upon written demand or, without any demand, immediately upon the insolvency of the Maker, the commission of any act of bankruptcy by the Maker, the execution by the Maker of a general assignment for the benefit of creditors, the filing by or against the Maker of any petition in bankruptcy or any petition for relief under the provisions of the federal bankruptcy act or any other state or federal law for the relief of debtors and the continuation of such petition without dismissal for a period of fifteen (15) days or more, or the appointment of a receiver or trustee to take possession of the property or assets of the Maker. If action is instituted to collect this Note, the Maker promises to pay all costs and expenses, including reasonable attorneys' fees and expenses, incurred in connection with such action. The Maker hereby waives notice of default, presentment or demand for payment, except as set forth in the first paragraph hereof, protest or notice of nonpayment or dishonor and all other notices or demands relative to this instrument. This Note may not be transferred without the prior written consent of the Maker. This Note shall be construed in accordance with the internal laws of the State of New York. "MAKER" MEDJET INC. By: /s/ Eugene I. Gordon ______________________ Title: President EX-10 15 EX 10.20 CONSULT AGREE CONSULTING AGREEMENT AGREEMENT made as of the day of May, 1996 by and between MEDJET INC., a Delaware corporation with its principal office at 1090 King Georges Post Road, Edison, New Jersey 08837 ("MEDJET") and Steven G. Cooperman, M.D., with an address at 201 Beagling Hill Circle, Fairfield, Connecticut 06430 ( Consultant ). W I T N E S S E T H : WHEREAS, MEDJET desires to retain Consultant and Consultant desires to be retained by MEDJET to perform services as a consultant to MEDJET, upon the terms and subject to the conditions set forth; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements hereinafter set forth, MEDJET and Consultant agree as follows: 1. MEDJET hereby agrees to retain Consultant to, and Consultant hereby agrees to use such time and effort as shall be reasonably necessary (but unless otherwise agreed by the parties hereto, no less than one (1) full day per month during the term of this Agreement) to assist in strategic planning and business development for MEDJET, as requested by MEDJET from time to time and to render advice in connection therewith. Consultant shall not be obligated to make himself available for more than two days each month to provide Consulting Services. 2. MEDJET shall not pay Consultant a fee for the Consulting Services but in lieu thereof has agreed to issue a Warrant to Consultant in accordance with a Warrant for 45,000 shares of Common Stock dated as of May 20, 1996 (the "Warrant"). MEDJET shall reimburse Consultant for such reasonable expenses actually and necessarily incurred by Consultant in the performance of the Consulting Services hereunder upon the submission to MEDJET not later than thirty (30) days following the end of the month in which the expenses were incurred of MEDJET form expense vouchers covering such expenses (and original receipts for any and all expenditures in excess of $25.00), provided that such expenses shall have been approved in writing by an authorized representative of MEDJET for reimbursement prior to the incurrence of such expense. 3. Not later than ten (10) days after the end of each calendar quarter during the term of this Agreement, Consultant will furnish MEDJET with a written report summarizing the Consulting Services (and the status thereof) performed by Consultant during the immediately preceding calendar quarter, any developments in, and such other information as MEDJET shall reasonably request. 4. This Agreement shall commence on the date hereof and shall remain in effect for a indefinite time until terminated by (a) either party giving the other party written notice of termination, at least fifteen (15) days prior to the effective date of termination or (b) MEDJET for "cause". For purposes of this Agreement, the term "cause" shall mean the good faith determination made by a majority of the Board of Directors of MEDJET that either of the following events has occurred: (A) substantial malfeasance by Consultant towards MEDJET, or (B) substantial failure by Consultant to perform the duties of this Agreement and such failure is continuing after 15 days written notice to Consultant thereof. Any controversy or dispute arising out of or relating to any termination of this Agreement for cause shall be settled by arbitration in accordance with the Rules of the American Arbitration Association by one or more arbitrators appointed in accordance with the Rules. The arbitration shall be held in the City and State of New York unless parties hereto agree to another locality. Judgment upon the award rendered may be entered in any court having jurisdiction thereof. The cost of the arbitration shall be borne by the parties in such proportion as the arbitrator(s) shall direct, with such arbitrator(s) to give due consideration to the fault of the parties. 5. Nothing in this Agreement shall be considered to create the relationship of employer and employee between the parties hereto. Consultant shall be deemed at all times to be an independent contractor and shall not be entitled to any MEDJET employment rights or benefits. 6. Consultant acknowledges that in the course of performing the Consulting Services for MEDJET, Consultant will be exposed to confidential and trade secret information of MEDJET, including but not limited to information relating to MEDJET's business, its research or engineering activities, its manufacturing processes, its trade secrets, its sources of supply, and its plans or contemplated actions, and may be exposed to information confidential to customers of MEDJET. Accordingly, Consultant shall execute and be bound by MEDJET's form of Proprietary Information, Inventions, Non-Competition and Non-Solicitation Agreement, attached hereto as Exhibit A (the "Proprietary Information Agreement"). 7. Consultant represents and warrants that Consultant is under no obligation or restriction nor will Consultant assume any such obligation or restriction, which would in any way interfere or be inconsistent with the Consulting Services. 8. The rights and obligations of Section 6 and 7 shall survive the termination or expiration of this Agreement. 9. (a) All notices required to be given hereunder shall be in writing, and shall be duly given if delivered to the other party personally, or sent to the other party by registered or certified mail (return receipt requested), addressed to the other party at the address first set forth above or to such other address as any party may designate by a similar notice, and deposited in the U.S. mail and shall be deemed to have been given as of the third day after the date so mailed. (b) This Agreement shall be binding upon and inure to the benefit of the parties hereto, the executors, administrators and legal representatives of Consultant and the successors and assigns of MEDJET. The provisions of this Agreement shall not be construed as conferring and are not intended to confer any rights on any other persons. Neither this Agreement nor any rights or obligations hereunder may be assigned or delegated by either party without the written consent of the other party, and any such assignment or delegation shall be null and void. (c) In the event that any provision of this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement. (d) This Agreement, together with the Warrant and the Proprietary Information Agreement, constitutes the entire agreement and understanding of the parties relating to the subject matter hereof, and may not be modified or amended except by a writing signed by the party sought to be charged therewith. No waiver of any breach of this Agreement shall be binding unless made by writing assigned by the party making the waiver, and no waiver of any breach of this Agreement by either party hereto shall be deemed a waiver by such party of any prior or subsequent breach of this Agreement, whether known or unknown. (e) This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New Jersey. IN WITNESS WHEREOF, the parties, intending to be legally bound hereby, have duly executed this Agreement as of the date first above written. MEDJET INC. By __________________________ CONSULTANT _____________________________ STEVEN G. COOPERMAN, M.D. EX-10 16 EX 10.21 CONSULT AGREE CONSULTING AGREEMENT AGREEMENT made as of the day of May, 1996 by and between MEDJET INC., a Delaware corporation with its principal office at 1090 King Georges Post Road, Edison, New Jersey 08837 ("MEDJET") and Sanford J. Hillsberg, with an address at c/o Troy & Gould, 1801 Century Park East, Suite 1700, Los Angeles, California 90067 ("Consultant"). W I T N E S S E T H : WHEREAS, MEDJET desires to retain Consultant and Consultant desires to be retained by MEDJET to perform services as a consultant to MEDJET, upon the terms and subject to the conditions set forth; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements hereinafter set forth, MEDJET and Consultant agree as follows: 1. MEDJET hereby agrees to retain Consultant to, and Consultant hereby agrees to use such time and effort as shall be reasonably necessary (but unless otherwise agreed by the parties hereto, no less than one (1) full day per three-month period during the term of this Agreement) to assist in strategic planning and business development for MEDJET, as requested by MEDJET from time to time and to render advice in connection therewith. Consultant shall not be obligated to make himself available for more than two days each month to provide Consulting Services. 2. MEDJET shall not pay Consultant a fee for the Consulting Services but in lieu thereof has agreed to issue a Warrant to Consultant in accordance with a Warrant for 4,000 shares of Common Stock dated as of May 20, 1996 (the "Warrant"). MEDJET shall reimburse Consultant for such reasonable expenses actually and necessarily incurred by Consultant in the performance of the Consulting Services hereunder upon the submission to MEDJET not later than thirty (30) days following the end of the month in which the expenses were incurred of MEDJET form expense vouchers covering such expenses (and original receipts for any and all expenditures in excess of $25.00), provided that such expenses shall have been approved in writing by an authorized representative of MEDJET for reimbursement prior to the incurrence of such expense. 3. Not later than ten (10) days after the end of each calendar quarter during the term of this Agreement, Consultant will furnish MEDJET with a written report summarizing the Consulting Services (and the status thereof) performed by Consultant during the immediately preceding calendar quarter, any developments in, and such other information as MEDJET shall reasonably request. 4. This Agreement shall commence on the date hereof and shall remain in effect for a indefinite time until terminated by (a) either party giving the other party written notice of termination, at least fifteen (15) days prior to the effective date of termination or (b) MEDJET for "cause". For purposes of this Agreement, the term "cause" shall mean the good faith determination made by a majority of the Board of Directors of MEDJET that either of the following events has occurred: (A) substantial malfeasance by Consultant towards MEDJET, or (B) substantial failure by Consultant to perform the duties of this Agreement and such failure is continuing after 15 days written notice to Consultant thereof. Any controversy or dispute arising out of or relating to any termination of this Agreement for cause shall be settled by arbitration in accordance with the Rules of the American Arbitration Association by one or more arbitrators appointed in accordance with the Rules. The arbitration shall be held in the City and State of New York unless parties hereto agree to another locality. Judgment upon the award rendered may be entered in any court having jurisdiction thereof. The cost of the arbitration shall be borne by the parties in such proportion as the arbitrator(s) shall direct, with such arbitrator(s) to give due consideration to the fault of the parties. 5. Nothing in this Agreement shall be considered to create the relationship of employer and employee between the parties hereto. Consultant shall be deemed at all times to be an independent contractor and shall not be entitled to any MEDJET employment rights or benefits. 6. Consultant acknowledges that in the course of performing the Consulting Services for MEDJET, Consultant will be exposed to confidential and trade secret information of MEDJET, including but not limited to information relating to MEDJET's business, its research or engineering activities, its manufacturing processes, its trade secrets, its sources of supply, and its plans or contemplated actions, and may be exposed to information confidential to customers of MEDJET. Accordingly, Consultant shall execute and be bound by MEDJET's form of Proprietary Information, Inventions, Non-Competition and Non-Solicitation Agreement, attached hereto as Exhibit A (the "Proprietary Information Agreement"). 7. Consultant represents and warrants that Consultant is under no obligation or restriction nor will Consultant assume any such obligation or restriction, which would in any way interfere or be inconsistent with the Consulting Services. 8. The rights and obligations of Section 6 and 7 shall survive the termination or expiration of this Agreement. 9. (a) All notices required to be given hereunder shall be in writing, and shall be duly given if delivered to the other party personally, or sent to the other party by registered or certified mail (return receipt requested), addressed to the other party at the address first set forth above or to such other address as any party may designate by a similar notice, and deposited in the U.S. mail and shall be deemed to have been given as of the third day after the date so mailed. (b) This Agreement shall be binding upon and inure to the benefit of the parties hereto, the executors, administrators and legal representatives of Consultant and the successors and assigns of MEDJET. The provisions of this Agreement shall not be construed as conferring and are not intended to confer any rights on any other persons. Neither this Agreement nor any rights or obligations hereunder may be assigned or delegated by either party without the written consent of the other party, and any such assignment or delegation shall be null and void. (c) In the event that any provision of this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement. (d) This Agreement, together with the Warrant and the Proprietary Information Agreement, constitutes the entire agreement and understanding of the parties relating to the subject matter hereof, and may not be modified or amended except by a writing signed by the party sought to be charged therewith. No waiver of any breach of this Agreement shall be binding unless made by writing assigned by the party making the waiver, and no waiver of any breach of this Agreement by either party hereto shall be deemed a waiver by such party of any prior or subsequent breach of this Agreement, whether known or unknown. (e) This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New Jersey. IN WITNESS WHEREOF, the parties, intending to be legally bound hereby, have duly executed this Agreement as of the date first above written. MEDJET INC. By _____________________________ CONSULTANT ________________________________ SANFORD J. HILLSBERG EX-23 17 EX 23.1 AUDITOR CONSENT INDEPENDENT AUDITORS' CONSENT We consent to the use in this Registration Statement of Medjet Inc. on Form SB-2 of our report dated January 15, 1996 (except as to Note A(2), Note B(5) and B(6), Note E, Note H, Note I and Note J which are dated May 15, 1996), appearing in the Prospectus, which is part of this Registration Statement. We also consent to the reference to us under the heading "Experts" in such Prospectus. /s/ Rosenberg Rich Baker Berman & Company Maplewood, New Jersey May 21, 1996 EX-23 18 EX 23.4 CONSENT SNYDER Medjet Inc. 1090 King Georges Post Road Suite 301 Edison, New Jersey 08837 Re: Medjet Inc. - Initial Public Offering To Whom it May Concern: I hereby consent to the reference to me under the caption "Legal Matters" in the Prospectus included in the Registration Statement of which this consent constitutes an exhibit. In giving such consent, I do not admit that I am in the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended. May 13, 1996 DEAN E. SNYDER, ESQUIRE /s/ Dean E. Snyder, Esquire _____________________________ EX-27 19 FINANCIAL DATA SCH
5 This schedule contains summary financial information extracted from the December 31, 1995 (audited) and March 31, 1996 (unaudited) financial statements of Medjet Inc. and is qualified in its entirety by reference to such financial statements. YEAR 3-MOS DEC-31-1995 DEC-31-1996 DEC-31-1995 MAR-31-1996 57,678 60,660 0 0 0 0 0 0 0 0 60,221 66,856 120,633 137,212 47,127 54,981 217,051 352,705 214,903 527,301 0 0 0 0 0 0 2,352 2,352 (204) (176,946) 2,148 (174,594) 0 0 0 0 0 0 0 0 685,113 171,174 0 0 7,928 5,368 (677,185) (176,542) 200 200 (677,385) (176,742) 0 0 0 0 0 0 (677,385) (176,742) (.25) (.14) 0 0
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