EXHIBIT 4.0
Subscription Agreement with Registration
and Other Protective Rights
SUBSCRIPTION AGREEMENT
World Diagnostics Inc.
00000 XX 00xx Xxx., #000
Xxxxx Xxxxx, XX 00000
Re: SUBSCRIPTION AGREEMENT FOR UNITS OF WORLD DIAGNOSTICS INC.
Gentlemen:
1. The undersigned hereby tenders to World Diagnostics Inc. (the
"Company") this subscription agreement (the "Subscription Agreement"), and
applies to purchase _____ Units at $50,000 per Unit, and tenders herewith
$__________. Each Unit consists of 50,000 shares of Common Stock of the Company
(the "Common Stock"), 50,000 Common Stock A Purchase Warrants of the Company,
substantially in the form attached hereto as Exhibit A ("A Warrants"), and
50,000 Common Stock B Purchase Warrants of the Company, substantially in the
form attached hereto as Exhibit B ("B Warrants") (the A Warrants and B Warrants
being referred to collectively as the "Purchase Warrants").
2. Representations and Warranties. In order to induce the Company to
accept this subscription, the undersigned hereby represents and warrants to, and
covenants with, the Company as follows:
(i) The undersigned has received and carefully reviewed the
Company's 10QSB for the quarter ending June 30, 2000 (the "Quarterly
Report") and its most recent annual report on 10KSB (the "Annual
Report", together with the Quarterly Report, the "Reports"), and except
for the Reports, the undersigned has not been furnished with any other
materials or literature relating to the offer and sale of the Units;
(ii) The undersigned has had a reasonable opportunity to ask
questions of and receive answers from the Company concerning the
Company and the offering, and all such questions, if any, have been
answered to the full satisfaction of the undersigned;
(iii) The undersigned has such knowledge and expertise in
financial and business matters that the undersigned is capable of
evaluating the merits and risks involved in an investment in the Units;
(iv) The Confidential Purchaser Questionnaire being delivered
by the undersigned to the Company simultaneously herewith is true,
complete and correct in all material respects; and the undersigned
understands that the Company has determined that the exemption from the
registration provisions of the Securities Act of 1933, as amended (the
"Act"), which is based upon non-public offerings are applicable to the
offer and sale of the Units, based, in part, upon the representations,
warranties and agreements made by the undersigned herein and in the
Confidential Purchaser Questionnaire referred to above;
(v) Except as set forth in the Reports, no representations or
warranties have been made to the undersigned by the Company or any
agent, employee or affiliate of the Company and in entering into this
transaction the undersigned is not relying upon any information, other
than that contained in the Reports and the results of independent
investigation by the undersigned;
(vi) The undersigned understands that (A) neither the Common
Stock nor the Common Stock A and B Purchase Warrants comprising the
Units have been registered under the Act or the securities laws of any
state, based upon an exemption from such registration requirements for
non-public offerings pursuant to exemptions from registration under the
Act; (B) the Units are and will be "restricted securities", as said
term is defined in Rule 144 of the Rules and Regulations promulgated
under the Act; (c) the Units may not be sold or otherwise transferred
unless they have been first registered under the Act and all applicable
state securities laws, or unless exemptions from such registration
provisions are available with respect to said resale or transfer; (D)
except as set forth below, the Company has no obligation to register
the Units under the Act or any state securities laws, or to take any
action to make any exemption from any such registration provisions
available; (E) the certificates for the Common Stock and Warrants will
bear a legend to the effect that the transfer of the securities
represented thereby is subject to the provisions hereof; and (F) stop
transfer instructions will be placed with the transfer agent for the
Common Stock.
(vii) The undersigned is acquiring the Units solely for the
account of the undersigned, for investment purposes only, and not with
a view towards the resale or distribution thereof;
(viii) The undersigned will not sell or otherwise transfer any
of the Units or any interest therein, unless and until (i) said Common
Stock shall have first been registered under the Act and all applicable
state securities laws; or (ii) the undersigned shall have first
delivered to the Company a written opinion of counsel (which counsel
and opinion (in form and substance) shall be reasonably satisfactory to
the Company), to the effect that the proposed sale or transfer is
exempt from the registration provisions of the Act and all applicable
state securities laws;
(ix) The undersigned has full power and authority to execute
and deliver this Subscription Agreement and to perform the obligations
of the undersigned hereunder; and this Subscription Agreement is a
legally binding obligation of the undersigned in accordance with its
terms;
(x) The undersigned is an "accredited investor," as such term
is defined in Regulation D of the Rules and Regulations promulgated
under the Act; and
(xi) The undersigned acknowledges that it has reviewed and
understands the risks set forth on Exhibit C attached hereto.
3. Registration Rights. In consideration of the purchase in this offering by the
undersigned of one or more Units, and in recognition of the financial benefits
to the Company in connection therewith, the Company hereby agrees that the
undersigned shall have the rights with respect to the registration and sale of
the securities comprising the Units (collectively referred to as "Securities"),
which are set forth in this paragraph 3. In connection with the rights so
provided, the Company will bear the expenses of such registration other than
underwriter discounts and commissions attributable to the Securities sold by
investors thereunder, fees and expenses of counsel for the investors who sell
such Securities, and transfer taxes payable by such sellers. The Company will
indemnify the sellers and any underwriters against claims and losses due to
material misstatements or omissions in the registration statement other than
misstatements or omissions based on information provided by such sellers. Each
seller of Securities will indemnify the Company and the underwriters against
claims and losses due to material misstatements or omissions in the registration
statement based on information provided by such seller.
(i) Standing Registration. Within 30 days after completion of
the offering of the Units, the Company shall file with the U.S.
Securities and Exchange Commission (the "SEC"), and applicable state
securities regulators, a registration statement covering the public
offering and sale of all the Securities (both the Common Stock, the
Purchase Warrants, and the Common Stock issuable upon the exercise of
the Purchase Warrants) issued by the Company in the offering. The
Company shall cooperate with the SEC in its review and approval of such
registration statement, and will use all reasonable efforts to
diligently pursue the effectiveness of such registration statement at
the earliest possible date. The Company shall use every reasonable
effort to maintain the effectiveness of such registration statement
covering each of the Common Stock and Purchase Warrants for sixty
months after the date upon which it first becomes effective. In
furtherance thereof, the Company shall amend the registration statement
from time to time in accordance with applicable legal requirements, and
shall prepare and file all required public reports under applicable
securities laws. THE COMPANY ACKNOWLEDGES THAT THE REGISTRATION OF THE
SECURITIES, AND THE CONTINUED STATUS OF THE SECURITIES AS REGISTERED
SECURITIES, IS A MATERIAL FACTOR IN THE DECISION OF THE UNDERSIGNED TO
PURCHASE A UNIT. In furtherance thereof, the Company will take all
reasonable steps which are required in order for its Common Stock to
continue to be traded in the OTCBB System; for its Purchase Warrants to
be listed on the OTCBB System if and when such warrants so qualify and
the Company agrees to cooperate in the effort of any holder of
Securities to accomplish the same. In the event the company applies for
NASDAQ listing for its common stock it will also take all reasonable
steps which are required in order for its warrants to be listed at the
same time.
(ii) Registration by Request. Notwithstanding the foregoing
paragraph (i) if at any time during the sixty-month period set forth
in the preceding paragraph, a registration statement covering all
Securities is not currently in effect under any applicable securities
law, the holder or holders of Units purchased in this offering may
require the Company to promptly prepare and file a registration or
registrations of Securities of the Company under the Act and under
applicable state securities laws (a "Request for Registration"). Upon
receipt of a Request for Registration, the Company shall notify all
other holders of Units purchased in this offering of the receipt of
such Request for Registration, and shall include in such registration
statement any Securities of such holders which the holder(s) request
that the Company so register.
(iii) "Piggy-Back" Registration. Notwithstanding the foregoing
paragraphs (i) and (ii), if at any time during the sixty-month period
following the completion of the offering, a registration statement
covering the Securities is not currently in effect and the Company
proposes to file any registration statement covering any Securities,
the Company shall notify all other holders of Units purchased in this
offering of its intention to file such a registration statement. Upon
receipt of such notice of an intent to file a registration statement,
the holder or holders of Units purchased in the offering may require
the Company to include in such registration statement Common Stock of
such holders which the holder(s) request that the Company so register.
(iv) Prevention of Detrimental Impact on Private Placement.
The Company hereby agrees to: while the Purchase Warrants are
outstanding, the Company will not issue common shares, other warrants
or rights to acquire Common Stock ("Competing Interests") if such
issuance will have a negative economic impact on the value of the
Purchase Warrants, on the stock issued in this Private Placement or the
Common Stock that could be acquired by the exercise of such Purchase
Warrants. For the purpose of this paragraph the issuance of a Competing
Interest will be presumed to be detrimental if: (a) the Competing
Interest can be exercised to acquire the Common Stock while the
Purchase Warrants are outstanding; (b) the trigger price or the
exercise price of the Competing Interest is more advantageous than the
comparable price under the Purchase Warrants, or the number of shares
of Common stock that can be acquired under the Competing Interest is
proportionally more advantageous than the number that could be acquired
for the investment of a like amount under the Purchase Warrants and (c)
shares are issued for consideration less than $1.00 per share.
Notwithstanding the foregoing prohibition, the Company may issue a
Competing Interest if, prior to or concurrently with such issuance, the
Company adjusts the terms of the Purchase Warrants and adjust the cost
basis of the private placement common shares by issuing additional
shares of common, without additional charge to the holders of the
Purchase Warrants or Private Placement Common Shares, to provide terns
that are no less advantageous than those of the Competing Interests.
(v) Failure to Register. If the Company fails to register the
Securities as required under the terms of this Agreement, then the
strike price of both the "A" Warrants and the "B" Warrants shall be
reduced as set forth below, and the Purchase Warrants may be exercised
at anytime on a "cashless exercise" basis permanently. If the failure
to effect and maintain registration of the Securities continues after
March 31, 2001, the strike price shall be reduced by 25%. If such
failure continues or occurs after June 30, 2001, the strike price shall
be permanently reduced to $0.25.
4. The undersigned understands that this subscription is not binding
upon the Company until the Company accepts it, which acceptance is at the sole
discretion of the Company and is to be evidenced by the Company's execution of
this subscription Agreement where indicated. This Subscription Agreement shall
be null and void if the Company does not accept it as aforesaid.
5. The undersigned understands that the Company may, in its sole
discretion, reject this subscription and, in the event that this offering is
oversubscribed, offer partial Units or reduce this subscription in any amount
and to any extent, whether or not pro rata reductions are made of any other
investor's subscription.
6. The undersigned agrees to indemnify the Company and hold it harmless
from and against any and all losses, damages, liabilities, costs and expenses
which it may sustain or incur in connection with the breach by the undersigned
of any representation, warranty or covenant made by it herein.
7. Neither this Subscription Agreement nor any of the rights of the
undersigned hereunder may be transferred or assigned by the undersigned.
8. This Subscription Agreement (i) may only be modified by a written
instrument executed by the undersigned and the Company; and (ii) sets forth the
entire agreement of the undersigned and the Company with respect to the subject
matter hereof; and (iii) shall inure to the benefit of, and be binding upon the
Company (upon its acceptance) and the undersigned and its respective heirs,
legal representatives, successors and assigns.
9. Unless the context otherwise requires, all personal pronouns used in
this Subscription Agreement, whether in the masculine, feminine or neuter
gender, shall include all other genders.
10. All notices or other communications hereunder shall be in writing
and shall be deemed to have been duly given if delivered personally or mailed by
certified or registered mail, return receipt requested, postage prepaid, as
follows: if to the undersigned, to the address set forth in the Confidential
Purchaser Questionnaire referred to above; and if to the Company, to World
Diagnostics Inc., 00000 XX 00xx Xxx., #000, Xxxxx Xxxxx, XX 00000.
IN WITNESS WHEREOF, the undersigned has executed this Subscription Agreement
this day of _______, 2000.
SUBSCRIBER
-------------------------
Name:
EXHIBIT A
WORLD DIAGNOSTICS INC.
"A" WARRANT FOR THE PURCHASE OF COMMON SHARES
No. W - _____ Shares of Common Stock
FOR VALUE RECEIVED, WORLD DIAGNOSTICS INC., a Delaware corporation (the
"Company"), hereby certifies that or its permitted assigns is entitled to
purchase from the Company, at any time or from time to time after October 1,
2000 but prior to 5:00PM on October 1, 2005, ______ Thousand ( ) fully paid and
non-assessable shares of common stock, par value $0.01 per share, of the Company
for an aggregate purchase price of $_____ (computed on the basis of $1.375 per
share). (Hereinafter, (i) said common shares, together with any other equity
securities which may be issued by the Company in substitution therefor, are
referred to as the "Common Shares", (ii) the Common Shares purchasable hereunder
are referred to as the "Warrant Shares", (iii) the aggregate purchase price
payable hereunder for the Warrant Shares is referred to as the "Aggregate
Warrant Price", (iv) the price payable hereunder for each of the Warrant Shares,
as adjusted in the manner set forth in Section 3, is referred to as the "Per
Share Warrant Price" and (v) this Warrant and all warrants hereinafter issued in
exchange or substitution for the Warrant are referred to as the "Warrants".) The
Aggregate Warrant Price is not subject to adjustment. The Per Share Warrant
Price and the number of Warrant Shares are subject to adjustment as hereinafter
provided.
1. EXERCISE OF WARRANT. This Warrant may be exercised, in whole at any
time or in part from time to time, on and after October 1, 2000,
but prior to 5:00PM on October 1, 2005, by the holder of this
Warrant (the "Holder") by the surrender of this Warrant (with the
subscription form at the end hereof duly executed) at the principal
office of the Company's counsel Xxxxxxx, Xxxxxxxxx LLP, 0 Xxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, together with proper payment of
the Aggregate Warrant Price applicable on such date, or the
proportionate part thereof if this Warrant is exercised in part.
Payment for Warrant Shares shall be made by check or checks,
payable to the order of the Company. If this Warrant is exercised
in part, this Warrant must be exercised for a whole number of
Warrant Shares, and the Holder is entitled to receive a new Warrant
covering the number of Warrant Shares in respect of which this
Warrant has not been exercised and setting forth the proportionate
part of the Aggregate Warrant Price applicable to such Warrant
Shares. Upon such surrender of this Warrant, the Company will (a)
issue a certificate or certificates in the name of the Holder for
the largest number of whole Warrant Shares to which the Holder
shall be entitled and, if this Warrant is exercised is whole, in
lieu of any fractional shares (determined in such reasonable manner
as the Board of Directors of the Company shall determine), and (b)
deliver the other securities and properties receivable upon the
exercise of this Warrant, or the proportionate part thereof if this
Warrant is exercised in part, pursuant to the provisions of this
Warrant.
2. WARRANT CALL PROVISION. The Company shall have the right to redeem
the Class A Redeemable Warrants at any time at $.10 per Class A
Redeemable Warrant, on 30 days prior written notice ("Notice
Period"), if the closing bid price of the common stock exceeds
$3.50 (subject to adjustment) for 14 consecutive trading days AND
the warrants and their corresponding underlying shares have had a
registration statement in effect continuously for the 30 days
preceding the date of the redemption notice. The 30 days prior
written notice must be sent within ten business days of the 14
consecutive trading day period. If the Class A Redeemable Warrants
are redeemed, Class A Redeemable Warrant holders will lose their
right to exercise the Warrants except during the Notice Period.
Redemption of the Class A Redeemable Warrants could force the
holders to exercise the Class A Redeemable Warrants at a time when
it may be disadvantageous for the holders to do so or to sell the
Class A Redeemable Warrants at the then market price or accept the
redemption price, which likely would be substantially less than the
market value of the Class A Redeemable Warrants at the time of
redemption.
3. RESERVATION OF WARRANT SHARES. The Company agrees that, prior to
the expiration of this Warrant, the Company will at all times have
authorized and will reserve, and will keep available, solely for
issuance or delivery upon the exercise of this Warrant, the shares
receivable upon the exercise of this Warrant, the Warrant Shares
and other securities and properties as from time to time shall be
receivable upon the exercise of this Warrant, free and clear of all
restrictions on sale or transfer (except as may arise under
applicable securities laws) and free and clear of all preemptive
rights.
4. PROTECTION AGAINST DILUTION.
a) If, at any time or from time to time after the date of this
Warrant, the Company shall issue to the holders of the Common
Shares any Common Shares by way of a stock dividend or stock split
(including, without limitation, a reverse stock split), then, and
in each such case, the Per Share Warrant Price on the date of such
stock dividend or stock split shall be adjusted, or further
adjusted, to a price (to the nearest cent) determined by dividing
(i) an amount equal to the number of Common Shares outstanding
immediately prior to such issuance multiplied by the Per Share
Warrant Price in effect immediately prior to such issuance by (ii)
the total number of Common Shares outstanding immediately after
issuance. Upon each adjustment in the Per Share Warrant Price
resulting from a stock split or stock dividend, the number of
Warrant Shares shall be adjusted by dividing the Aggregate Warrant
Price by the Per Share Warrant Price in effect immediately after
such adjustment. Notice of each adjustment and each such
readjustment shall be forthwith mailed to the Holder.
b) If the Company shall be consolidated with or merged into another
corporation, or shall sell all or substantially all of its assets
in part of a reorganization to which the Company is a party within
the meaning on the Internal Revenue Code of 1986, as presently in
effect, or shall issue a security convertible into its Common
Shares as a dividend on its Common Shares, or shall reclassify or
reorganize its capital structure (except a stock split covered by
Subsection 3(a) hereof), each Warrant Share shall be replaced for
the purposes hereof by the securities or properties issuable or
distributable in respect on one Common Share upon such
consolidation, merger, sale, reclassification or reorganization,
and adequate provisions to the effect shall be made at the time
thereof. Notice of such consolidation, merger, sale,
reclassification or reorganization, and of said provisions so
proposed to be made, shall be mailed to the Holder not less than 15
days prior to such event.
c) If the Company shall sell all or substantially all of its assets,
other than as part of a reorganization to which the Company is a
party within the meaning of the Internal Revenue Code of 1986, as
presently in effect, or shall distribute its assets in dissolution
or liquidation (other than as part of such a reorganization), the
Company shall mail notice thereof to the Holder and shall make no
distribution to shareholders until the expiration of 15 days from
the date of mailing so said notice and then only to shareholders of
record as of date at least 15 days after the date of the mailing of
said notice. If this sale is for cash, then each Warrant Share may
be converted into 1/3 of a share of common stock.
d) If the Board of Directors of the Company shall declare any dividend
or other distribution in cash with respect to the Common Shares,
other than out of surplus, the Company shall mail notice thereof to
the Holder not less than 15 days prior to the record date fixed for
determining shareholders entitled to participate in such dividend
or other distribution.
5. FULLY PAID SHARES; TAXES. The Company agrees that the Common Shares
represented be each and every certificate for Warrant Shares
delivered on the exercise of this Warrant shall, at the time of
such delivery, be validly issued and outstanding, fully paid and
non-assessable, and the Company will take all such actions as may
be necessary to assure that the par value or stated value, if any,
per Warrant Share is at all time equal to or less than the then Per
Share Warrant Price. The Company further covenants and agrees that
it will pay, when due and payable, any and all Federal and state
stamp, original issue or similar taxes which may be payable in
respect of the issue of any Warrant Share or Certificate therefor.
6. LOSS, ETC. OF WARRANT. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this
Warrant, and of indemnify reasonably satisfactory to the Company,
if lost, stolen or destroyed, and upon surrender and cancellation
of this Warrant, if mutilated, and upon reimbursement of the
Company's reasonably incidental expenses, the Company shall execute
and deliver to the Holder a new Warrant of like date, tenor and
denomination.
7. WARRANT HOLDER NOT SHAREHOLDER. Except as otherwise provided
therein, this Warrant does not confer upon the Holder any right to
vote or to consent or to receive notice as a shareholder of the
Company, as such, in respect of any matters whatsoever, or any
other rights or liabilities as a shareholder, prior to the exercise
hereof.
8. COMMUNICATION. No notice or other communication under this Warrant
shall be effective unless the same is in writing and is mailed by
first class mail, postage prepaid, addressed to:
(a) the Company at 00000 XX 00xx Xxx., #000, Xxxxx Xxxxx, XX 00000,
or such other address as the Company has designated in writing
to the Holder, or
(b) the Holder at _________________________________________ or such
other address as the Holder has designated in writing to the
Company.
9. HEADINGS. The headings of this Warrant have been inserted as a
matter of convenience and shall not affect the construction hereof.
10. APPLICABLE LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, World Diagnostics Inc. has caused this
Warrant to be signed by its President and its corporate seal to be hereunto
affixed this _____ day of _______, 2000.
ATTEST: WORLD DIAGNOSTICS INC.
(Corporate Seal)
SUBSCRIPTION
The undersigned, _____________________________________________________
pursuant to the provisions of the Warrant, dated October 1, 2000, granted by
World Diagnostics Inc. for __________ Common Shares hereby elects to purchase
______________________ (____________) Common Shares of World Diagnostics Inc.
covered by this Warrant.
Dated: ___________________, 2000.
Signature:
EXHIBIT B
WORLD DIAGNOSTICS INC.
"B" WARRANT FOR THE PURCHASE OF COMMON SHARES
No. W - ________ Shares of Common Stock
FOR VALUE RECEIVED, WORLD DIAGNOSTICS INC., a Delaware corporation (the
"Company"), hereby certifies that or its permitted assigns is entitled to
purchase from the Company, at any time or from time to time after October 1,
2000 but prior to 5:00PM on October 1, 2005, _____ Thousand ( ) fully paid and
non-assessable shares of common stock, par value $0.01 per share, of the Company
for an aggregate purchase price of $_____ (computed on the basis of $1.625 per
share). (Hereinafter, (i) said common shares, together with any other equity
securities which may be issued by the Company in substitution therefor, are
referred to as the "Common Shares", (ii) the Common Shares purchasable hereunder
are referred to as the "Warrant Shares", (iii) the aggregate purchase price
payable hereunder for the Warrant Shares is referred to as the "Aggregate
Warrant Price", (iv) the price payable hereunder for each of the Warrant Shares,
as adjusted in the manner set forth in Section 3, is referred to as the "Per
Share Warrant Price" and (v) this Warrant and all warrants hereinafter issued in
exchange or substitution for the Warrant are referred to as the "Warrants".) The
Aggregate Warrant Price is not subject to adjustment. The Per Share Warrant
Price and the number of Warrant Shares are subject to adjustment as hereinafter
provided.
1. EXERCISE OF WARRANT. This Warrant may be exercised, in whole at any
time or in part from time to time, on and after October 1, 2000,
but prior to 5:00PM on October 1, 2005, by the holder of this
Warrant the ("Holder") by the surrender of this Warrant (with the
subscription form at the end hereof duly executed) at the principal
office of the Company's counsel Xxxxxxx, Xxxxxxxxx LLP, 0 Xxxx
Xxxxxx, Xxx Xxxx, XX 00000, together with proper payment of the
Aggregate Warrant Price applicable on such date, or the
proportionate part thereof if this Warrant is exercised in part.
Payment for Warrant Shares shall be made by check or checks,
payable to the order of the Company. If this Warrant is exercised
in part, this Warrant must be exercised for a whole number of
Warrant Shares, and the Holder is entitled to receive a new Warrant
covering the number of Warrant Shares in respect of which this
Warrant has not been exercised and setting forth the proportionate
part of the Aggregate Warrant Price applicable to such Warrant
Shares. Upon such surrender of this Warrant, the Company will (a)
issue a certificate or certificates in the name of the Holder for
the largest number of whole Warrant Shares to which the Holder
shall be entitled and, if this Warrant is exercised is whole, in
lieu of any fractional share (determined in such reasonable manner
as the Board of Directors of the Company shall determine), and (b)
deliver the other securities and properties receivable upon the
exercise of this Warrant, or the proportionate part thereof if this
Warrant is exercised in part, pursuant to the provisions of this
Warrant.
2. WARRANT CALL PROVISION. The Company shall have no right to call
this Warrant at any time.
3. RESERVATION OF WARRANT SHARES. The Company agrees that, prior to
the expiration of this Warrant, the Company will at all times have
authorized and will reserve, and will keep available, solely for
issuance or delivery upon the exercise of this Warrant, the shares
receivable upon the exercise of this Warrant, the Warrant Shares
and other securities and properties as from time to time shall be
receivable upon the exercise of this Warrant, free and clear of all
restrictions on sale or transfer (except as may arise under
applicable securities laws) and free and clear of all preemptive
rights.
4. PROTECTION AGAINST DILUTION.
a) If , at any time or from time to time after the date of this
Warrant, the Company shall issue to the holders of the Common
Shares any Common Shares by way of a stock dividend or stock split
(including, without limitation, a reverse stock split), then, and
in each such case, the Per Share Warrant Price on the date of such
stock dividend or stock split shall be adjusted, or further
adjusted, to a price (to the nearest cent) determined by dividing
(i) an amount equal to the number of Common Shares outstanding
immediately prior to such issuance multiplied by the Per Share
Warrant Price in effect immediately prior to such issuance by (ii)
the total number of Common Shares outstanding immediately after
issuance. Upon each adjustment in the Per Share Warrant Price
resulting from a stock split or stock dividend, the number of
Warrant Shares shall be adjusted by dividing the Aggregate Warrant
Price by the Per Share Warrant Price in effect immediately after
such adjustment. Notice of each adjustment and each such
readjustment shall be forthwith mailed to the Holder.
b) If the Company shall be consolidated with or merged into another
corporation, or shall sell all or substantially all of its assets
in part of a reorganization to which the Company is a party within
the meaning on the Internal Revenue Code of 1986, as presently in
effect, or shall issue a security convertible into its Common
Shares as a dividend on its Common Shares, or shall reclassify or
reorganize its capital structure (except a stock split covered by
Subsection 3(a) hereof), each Warrant Share shall be replaced for
the purposes hereof by the securities or properties issuable or
distributable in respect on one Common Share upon such
consolidation, merger, sale, reclassification or reorganization,
and adequate provisions to the effect shall be made at the time
thereof. Notice of such consolidation, merger, sale,
reclassification or reorganization, and of said provisions so
proposed to be made, shall be mailed to the Holder not less than 15
days prior to such event.
c) If the Company shall sell all or substantially all of its assets,
other than as part of a reorganization to which the Company is a
party within the meaning of the Internal Revenue Code of 1986, as
presently in effect, or shall distribute its assets in dissolution
or liquidation (other than as part of such a reorganization), the
Company shall mail notice thereof to the Holder and shall make no
distribution to shareholders until the expiration of 15 days from
the date of mailing so said notice and then only to shareholders of
record as of date at least 15 days after the date of the mailing of
said notice. If this sale is for cash, then the outstanding
warrants may be converted into common stock for 1/3 of a common
share.
d) If the Board of Directors of the Company shall declare any dividend
or other distribution in cash with respect to the Common Shares,
other than out of surplus, the Company shall mail notice thereof to
the Holder not less than 15 days prior to the record date fixed for
determining shareholders entitled to participate in such dividend
or other distribution.
5. FULLY PAID SHARES; TAXES. The Company agrees that the Common Shares
represented be each and every certificate for Warrant Shares
delivered on the exercise of this Warrant shall, at the time of
such delivery, be validly issued and outstanding, fully paid and
non-assessable, and the Company will take all such actions as may
be necessary to assure that the par value or stated value, if any,
per Warrant Share is at all time equal to or less than the then Per
Share Warrant Price. The Company further covenants and agrees that
it will pay, when due and payable, any and all Federal and state
stamp, original issue or similar taxes which may be payable in
respect of the issue of any Warrant Share or Certificate
6. LOSS, ETC. OF WARRANT. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this
Warrant, and of indemnify reasonably satisfactory to the Company,
if lost, stolen or destroyed, and upon surrender and cancellation
of this Warrant, if mutilated, and upon reimbursement of the
Company's reasonably incidental expenses, the Company shall execute
and deliver to the Holder a new Warrant of like date, tenor and
denomination.
7. WARRANT HOLDER NOT SHAREHOLDER. Except as otherwise provided
therein, this Warrant does not confer upon the Holder any right to
vote or to consent or to receive notice as s shareholder of the
Company, as such, in respect of any matters whatsoever, or any
other rights or liabilities as a shareholder, prior to the exercise
hereof.
8. COMMUNICATION. No notice or other communication under this Warrant
shall be effective unless the same is in writing and is mailed by
first class mail, postage prepaid, addressed to:
a) the Company at 00000 XX 00xx Xxx., #000, Xxxxx Xxxxx, XX 00000, or
such other address as the Company has designated in writing to the
Holder, or
b) the Holder at __________________________________________________ or
such other address as the Holder has designated in writing to the
Company.
9. HEADINGS. The headings of this Warrant have been inserted as a
matter of convenience and shall not affect the construction hereof.
10. APPLICABLE LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF,World Diagnostics Inc. has caused this Warrant to be
signed by its President and its corporate seal to be hereunto affixed this _____
day of _______, 2000.
ATTEST: WORLD DIAGNOSTICS INC.
(Corporate Seal)
SUBSCRIPTION
The undersigned, _____________________________________________________
pursuant to the provisions of the Warrant, dated October 1, 2000, granted by
World Diagnostics Inc. for __________ Common Shares hereby elects to purchase
______________________ (____________) Common Shares of World Diagnostics Inc.
covered by this Warrant.
Dated: ___________________, 2000.
Signature:
EXHIBIT C
RISK FACTORS
You should carefully consider the following factors before deciding to
invest in World Diagnostic Inc.'s (hereinafter sometimes, the "Company" or
"WDI") Securities. If any of the following risks actually occur, our business,
financial condition and results of operations could be materially and adversely
affected. Consequently, you could sustain the loss of your entire investment.
RISKS RELATING TO THE COMPANY
WE CANNOT PREDICT OUR SUCCESS BECAUSE OUR BUSINESS MODEL IS UNPROVEN.
Our success depends on commercial validation of our beliefs that
Internet usage and e-commerce popularity will continue to grow rapidly and that
we can achieve profitability based on our anticipated revenue streams. We cannot
predict whether demand for our products will increase, particularly at the
volume or prices we need to become profitable. Although Internet usage and
e-commerce are growing rapidly, we cannot be certain that this growth will
continue in its present form, or at all. In addition, an increasing number of
companies, some of which have greater financial resources than us, offer
products similar to ours, and we expect competition to intensify.
WE HAVE A LIMITED OPERATING HISTORY.
The Company was originally organized in February 1997 and has a limited
operating history. The Company is a relatively new business and no assurance can
be given that the Company will be successful. Accordingly, the Company's limited
operating history prohibits an effective evaluation of the potential success of
the Company. The Company's viability and continued operations are dependent upon
future profitability, its ability to generate cash flow and other business
opportunities. The Company's operations are subject to all the risks inherent in
the establishment of a young business enterprise. The likelihood of success for
the Company must be considered in light of the problems, expenses,
complications, and delays frequently encountered in connection with the
development of a new business and the competitive environment in which the
Company operates. There can be no assurance that the Company will be able to
operate profitably in the future. Its financial objectives must therefore be
considered highly speculative.
GOING CONCERN AUDITOR'S AUDIT.
The WDI financial statements for year ended March 31, 2000 were issued
pursuant to a going concern report by the WDI auditors. This report states that
the continuation of operations is dependent upon WDI's ability to obtain
adequate financial resources.
WDI EXPECTS TO CONTINUE TO INCUR LOSSES FOR THE FORESEEABLE FUTURE.
WDI incurred a net loss of $1,701,820 for the year ended March 31,
2000, including a negative equity adjustment of $493,938 for fiscal 2000. At
March 31, 2000, the Company had an accumulated deficit of $2,648,340. There is
no assurance that WDI will generate significant revenue or achieve
profitability. There is no assurance WDI will be successful in obtaining
additional financing or that such financing will be available, nor if such
financing becomes available that it would be upon terms acceptable to WDI.
WDI WILL REQUIRE ADDITIONAL WORKING CAPITAL.
The Company will require additional working capital and other funds for
the maintenance and expansion of its operations. We may not be able to raise
additional capital in the future on terms acceptable to us or at all. Moreover,
future financings may be dilutive to our shareholders. If alternative sources of
financing are insufficient or unavailable, we will be required to modify our
growth and operating plans in accordance with the extent of available funding.
There is no assurance that WDI will be successful in obtaining
additional financing or that such financing will be available, nor if such
financing becomes available that it would be upon acceptable terms to WDI.
WE MAY ENCOUNTER DIFFICULTIES PURSUING OUR EXPANSION STRATEGY AND MANAGING OUR
GROWTH.
Our ability to generate sufficient cash flows from operations will
depend upon continued growth in developing markets and the successful, timely
and cost-effective expansion of our business. Our continued growth depends upon
a number of factors, including our ability to:
* form joint ventures or other strategic alliances with distributors
on acceptable terms;
* secure adequate financing to fund our expansion and operating
losses;
* continue to maintain and develop adequate billing and management
information systems;
* continue to maintain and develop an adequate system infrastructure
to accommodate increasing numbers of customers while maintaining
high standards of quality and reliability;
* successfully develop our WDI brand in the markets in which we
operate;
* adapt to different geographic markets; and
* respond effectively to trends in the industry, including trends
related to technological advances.
WE ARE A NEW COMPANY AND ARE VULNERABLE TO THE UNCERTAINTIES AND DIFFICULTIES
FREQUENTLY ENCOUNTERED BY EARLY STAGE COMPANIES.
As a new company, we are vulnerable to the uncertainties and
difficulties encountered by early stage company, such as our ability to
implement sales and marketing activities and attain, retain and motivate
qualified personnel.
We cannot assure you that we will successfully implement our expansion
strategy, that we will generate sufficient net cash flow from operations or that
we will be able to obtain sufficient funding to satisfy all of our obligations.
If the implementation of our expansion strategy is delayed or unsuccessful or if
we do not generate sufficient cash flow to meet our debt service, capital
expenditure and working capital requirements, we may need to seek additional
financing or pursue one or more alternative strategies. We cannot assure you
that any such alternative strategies will be feasible at the time or prove
adequate.
WE DEPEND HEAVILY ON KEY PERSONNEL.
Due to the specialized nature of our business, we are dependent upon
the continued efforts of our management and key personnel, including Xxx Xxxxxx,
President, Xxxxxxx Xxxxxx, Vice-President-Operations, and Xxxxxxx Xxxxxxx, Vice
President-Sales and Marketing, While the company has obtained Keyman insurance
on its Chief Executive Officer in the amount of $2,000,000, the insurance may
not be enough to secure a replacement in the event of the loss of such officer.
The loss of the services of any key employee would likely have a material
adverse effect on our business and prospects.
Our success also depends on our ability to attract and retain
additional highly qualified management, technical, marketing and sales
personnel. These individuals are in high demand and we may not be able to
attract the staff we need. The hiring process will be intensely competitive,
time consuming and will divert the attention of our management from our
operations.
OUR FUTURE FINANCING AGREEMENTS MAY CONTAIN RESTRICTIONS THAT AFFECT OUR ABILITY
TO TAKE CERTAIN ACTIONS, INCLUDING PURSUING OUR EXPANSION STRATEGY.
The restrictions and covenants in any of our future financing
agreements may adversely affect our ability to finance our operations or capital
needs, to pursue our expansion strategy or to engage in other business
activities that may be in our interest. Events beyond our control may affect our
ability to comply with these covenants, including covenants requiring compliance
with certain financial ratios. A breach of any of these covenants, including our
inability to comply with the required financial ratios could result in a default
under our obligations.
THE CONTINUED EXPANSION OF OUR BUSINESS OUTSIDE THE UNITED STATES PRESENTS US
WITH CERTAIN SPECIAL RISKS.
Our business strategy is to continue the expansion of our business
operations in developing countries. As we continue to develop our international
operations, we will increasingly become subject to a number of special risks
regarding transnational businesses, including trade barriers, restrictions on
repatriation of earnings, national labor strikes, war and civil strife,
political risks and risks of increases in duties, taxes and governmental
royalties as well as changes in laws and policies affecting Internet services or
governing operations of foreign-based companies. In addition, as a result of our
customers being located outside of the United States, it will be very difficult
for the Company to institute cost effective collection proceedings with respect
to any of the accounts receivable may become in default.
RISKS RELATING TO OUR STRATEGY
THE COMPANY OPERATES IN A HIGHLY COMPETITIVE AND TECHNICAL ENVIRONMENT.
The markets in which the Company operates are highly competitive and
subject to rapid technological change. A large number of companies are involved
or are becoming involved in the development and commercialization of diagnostic
tests. Competitors include major pharmaceutical and medical diagnostic
companies, many of which have considerably greater financial, technical,
clinical and marketing resources than WDI. Such companies may improve existing
products more efficiently than WDI or may design and develop new diagnostic
products which are more accepted in the marketplace than the Company's products.
Further, the markets in which WDI competes and intends to compete are
undergoing, and are expected to continue to undergo, rapid and significant
technological change, and WDI expects competition to intensify as technological
advances in such fields are made.
Several of WDI's competitors have developed or may develop products
that are similar in design and capability to WDI's existing products or products
under development. WDI further anticipates that additional products for similar
applications will be developed and marketed by WDI's competitors. There can be
no assurance that WDI will have the resources, technical expertise or marketing,
distribution or support capabilities to compete successfully in the future or
that it will successfully develop technologies and products that are more
effective or affordable than those being developed by its competitors or that
developments by its competitors will not render WDI's products or technologies
obsolete or noncompetitive. In addition, WDI's competitors may achieve patent
protection, regulatory approval or commercialization earlier than WDI and gain
competitive advantages relative to WDI.
THE COMPANY'S ESTIMATES OF PRODUCT LIFE CYCLES IN EMERGING MARKETS MAY BE
INCORRECT.
In the developing and emerging international market it is difficult to
estimate product life cycles. In the United States market product life cycles
are traditionally 18 to 36 months, primarily because of the health care
reimbursement systems, which create rising revenues upon product introductions
until price erosion occurs and new technologies are introduced. As a
consequence, WDI's modern technology products, (easy to use, equipment based
flexible systems), are arriving before the larger U.S. based corporations even
begin to export their older advanced technology. WDI believes that by offering
modern technologies to developing and emerging international markets, it will
continue to gain market share over the next several years. If the Company's
estimates of product life cycles in emerging markets is incorrect the Company's
business and financial prospects will be adversely effected.
WE RELY ON OUR COMMUNICATION INFRASTRUCTURE PROVIDERS FOR THE DISTRIBUTION OF
OUR WEBSITES.
Our business and financial results depend in significant part on the
capacity, expandability, affordability, reliability and security of the
telecommunications network infrastructures we utilize. The use of our Websites
and the distribution of our products and services require subscribers and users
to initiate connections between their personal computers and local or regional
dial up points of presence ("POPs"). Because we depend on third-party
telecommunications carriers, we do not have direct control over network
reliability and certain aspects of service quality. Network capacity constraints
at particular POPs, especially at times of peak usage, can prevent or delay
access to connect to those POPs. A natural disaster, fire and flooding, power
loss, software related system failures and various similar events that affect
the POPs or the telecommunications lines we use, or that affects a nation's
telecommunications network in general, could cause interruptions in our
services. Poor network performance could result in lower customer satisfaction
with our e-commerce solution.
SEASONAL CONDITIONS AFFECT DEMAND FOR CERTAIN OF THE COMPANY'S PRODUCTS.
Sales levels for several of the Company's products are occasionally
affected by seasonal demand trends for certain sub tropical epidemic outbreaks
such as Dengue Fever, Malaria and other mosquito born diseases. In other parts
of the world, influenza and strep or other viral outbreaks would not have any
significant impact on sales. Sales for these products are not expected to exceed
more than 5% to 7% of annual revenues.
ACTUAL AND PERCEIVED RISK OF SECURITY BREACHES AND OTHER DISRUPTIVE EVENTS COULD
HARM US.
Both our infrastructure and the infrastructure of Internet service
providers may be compromised by security breaches or similar disruptive problems
and system failures. Our systems are also subject to damage caused by fire,
flooding, telecommunications failures, power loss, software-related system
failures and various similar events. Any of these events, whether intentional or
accidental, could lead to interruptions, delays or cessation of service. Third
parties could also potentially jeopardize the security of confidential
information stored in our computer systems or our customer's computer systems
through their inappropriate use of the Internet, which could subject us to
liability. Protecting against the threat of security breaches or alleviating
problems caused by breaches may require us to expend significant capital or
other resources. In addition, we could lose customers if our service, or the
Internet in general, is perceived as not having adequate data security.
Although we maintain redundant computing and/or communication
resources, if there should be a complete failure of such systems, our insurance
policies may not adequately compensate us for any losses that may occur due to
such failures or interruptions in our business.
OUR STRATEGY TO DEVELOP THE WDI BRAND MAY NOT SUCCEED.
We expect to commence an extensive marketing campaign aimed at
establishing the WDI brand in developing countries. Our marketing campaign may
not accomplish this goal as we have a number of competitors with greater
financial resources than the Company.
THE BUSINESS DEPENDS ON SUCCESSFUL RESEARCH AND DEVELOPMENT.
The Company will focus its scientific development efforts in two areas:
1) the creation of new and improved diagnostic formats for its existing
products; and 2) new infectious disease products with increased sensitivity
resulting from DNA viral load detection, utilizing non-invasive specimens such
as urine instead of blood or serum. WDI believes it has obtained significant
footholds in using oligonucleotides for direct detection of a virus rather than
the detection of antibodies, and that this type of format will lead to faster
detection of disorders and provide more rapid treatment. Such a "test and treat"
approach can lower costs and reduce inappropriate therapy, while increasing the
efficiency of therapy among those patients most in need. If the Company is not
successful in its research and development efforts it will not be able to
successfully implement its business plan.
OUR BUSINESS IS DEPENDANT UPON THIRD PARTY SUPPLIERS.
WDI contracts with approximately 37 suppliers to manufacture and
produce various components of WDI products. While there is an agreement with
each supplier, there can be no assurances that such contracts will be fulfilled
or that internal problems within these third parties will not affect production
or productivity in the future. While WDI believes that the suppliers have the
ability to meet production requirements, or be replaced, there can be no
assurances that the suppliers will meet all their contractual obligations or
that the company will not be affected in the event of a breach of contract. WDI
believes it can obtain suitable replacement products from other suppliers,
however, the loss of a supplier may still have some negative impact on
operations.
THE COMPANY'S PRODUCTS REQUIRE GOVERNMENT APPROVALS.
WDI must obtain product and/or company registration in each country in
which WDI products are sold. Government unrest, politics, or other unforeseeable
complications may prevent the further sale of WDI products in a given country.
Moreover, WDI has some contracts through government entities the loss of which
could have a material affect on the business of the Company.
THE COMPANY'S PRODUCTS AND PROCESSES ARE SUBJECT TO GOVERNMENT REGULATION.
The vast majority of the Company's sales occur outside the United
States. The Company has FDA approval for sales in the United States and export
of approximately 350 of the approximately 1,020 products it offers for sale. The
Company believes that the export of these products is in compliance with
applicable foreign law. The Company has an FDA Registration Certificate of
Foreign Commerce for its FDA approved products. The Company also has FDA
Certificates of Exportability 801(e) for approximately 350 products which are
provided by WDI to distributors who have represented to the Company that such
Certificates of Exportability permit the sale of such products in the respective
countries. As of this date, an insignificant amount of the Company's products
are sold within the USA which are subject to the 1976 Medical Device Amendments
to the Federal Food, Drug and Cosmetic Act, as amended, and/or provisions under
the Safe Medical Act of 1990, which governs the manufacture and marketing of
medical devices, including in vitro diagnostic test kits. In addition to the
foregoing, the Company's present and future operations or products may be
subject to regulation under the Occupational Safety and Health Act,
Environmental Protection Act, Resource Conversion and Recovery Act, Toxic
Substances Control Act, Clinical Laboratory Improvement Act and other present or
possible future legislation and regulations, as well as by governmental agencies
with regulatory authority relating to the Company's business.
THE COMPANY'S PRODUCTS ARE NOT PROTECTED BY PATENTS.
WDI has not applied for patent protection with respect to any of its
products. The Company protects its trade secrets through confidentiality and
non-competition agreements executed by its employees. The Company may file for
patent protection within the United States or other countries with respect to a
patent where economic protection for the product is needed and such patent can
be obtained. No assurance can be given that patents will be issued to WDI
pursuant to any future patent applications in the United States or abroad or
that WDI's patents, when and if issued, will provide the Company with a
meaningful level of commercial protection. A large number of individuals and
commercial enterprises seek patent protection for technologies, products and
processes in fields related to WDI's areas of product development. To the extent
such efforts are successful, the Company may be required to obtain licenses in
order to exploit certain of its product strategies. There can be no assurance
that such licenses will be available to WDI at all or if so, on acceptable
terms.
THE COMPANY HAS LIMITED PRODUCT LIABILITY INSURANCE.
WDI's business exposes it to product liability risks relating to the
manufacturing, marketing and sale of diagnostic products. To date, WDI has not
experienced any material product liability claims, but any such claim arising in
the future could have a material adverse effect on WDI's business, financial
condition and results of operations. WDI has limited product liability insurance
in effect which, in the event of any legal action by third parties, could result
in significant legal defense fees as well as damages for liability. While WDI
may seek to obtain additional insurance in the future, the cost may be
prohibitive. Therefore, WDI may have to rely on unrelated companies from whom it
purchases WDI product components to provide such liability insurance. There can
be no assurances that WDI will be able to obtain product liability insurance or
that companies from whom WDI product components are purchased will be able to
obtain product liability insurance. In the event that WDI is held liable for a
claim against which it is not indemnified, or for damages exceeding the limits
of its insurance coverage, or if any claim or product recall results in
significant adverse publicity against WDI, such claim or publicity could have a
material adverse effect on WDI's business, financial condition and results of
operations.
WE HAVE BROAD DISCRETION OVER THE USE OF PROCEEDS OF THIS OFFERING.
We will have broad discretion over the use of the net proceeds from
this offering as well as our existing cash balances. The Company may, depending
upon the total amount of proceeds received by the Company in connection with
this offering, use up to a maximum of approximately $260,000 of the net proceeds
to repay short term debt and bridge loans. Key elements of our business strategy
include rapid expansion across Africa, South America, Eastern Europe and
elsewhere, building the WDI brand and maintaining superior functionality and
performance of our services. Pursuing these strategies will require us to
increase materially various expenditures, including investments in capital
equipment, marketing expenses and product development expenses.
RISKS RELATED TO TECHNOLOGY
THE COMPANY'S BUSINESS PROSPECTS ARE DEPENDANT ON CONTINUED GROWTH AND
ACCEPTANCE OF THE INTERNET AND E-COMMERCE.
Our business will suffer if the global marketplace for WDI's products
and services does not accept Internet solutions. Business-to-business e-commerce
is a new and emerging business practice that remains largely untested in the
marketplace. Growth in the demand for our Internet-based purchasing solution for
WDI's products and services depends on the adoption of e-commerce and Internet
solutions by worldwide industry participants, which requires the acceptance of a
new way of conducting business and purchasing diagnostic test and laboratory
products. WDI business could suffer dramatically if e-commerce and Internet
solutions are not accepted or not perceived to be effective.
THE INTERNET'S INFRASTRUCTURE MAY NOT BE ABLE TO SERVICE DEMAND.
The growth and increasing volume of Internet traffic may cause
performance problems which may adversely affect the development of our
Internet-based business. The growth of Internet traffic to high volumes of use
over a relatively short period of time has caused frequent periods of decreased
Internet performance, delays and, in some cases, system outages. This decreased
performance is caused by limitations inherent in the technology infrastructure
supporting the Internet and the internal networks of Internet users. The
international marketplace is less developed in its Internet infrastructure which
may pose problems in the form of delays, interruptions and communication
failures. If Internet usage continues to grow rapidly, the infrastructure of the
Internet and its users may be unable to support the demands of growing
e-commerce usage, and the Internet's performance and reliability may decline. If
our existing or potential customers experience delays on the Internet, the
adoption or use of our Internet-based, e-commerce purchasing solution may grow
more slowly than we expect or even decline. Consequently, the Company may have
difficulty obtaining new customers, or maintaining our existing customers,
either of which could reduce our potential revenues and have a negative impact
on our business, results of operations and financial condition.
OUR CUSTOMERS REQUIRE A SECURE INTERNET.
Security and disruption problems with the Internet or transacting
business over the Internet may inhibit the growth of our Internet-based
business. The secure transmission of confidential information over the Internet
is essential to maintaining customer and supplier confidence. Customers
generally are concerned with security and privacy on the Internet and any
publicized security problems could inhibit the growth of the conducting
transactions. WDI may incur substantial expense to protect against and remedy
security breaches and their consequences, which include computer viruses and
other disruptive problems.
YEAR 2000 COMPLIANCE.
Some computer systems and software products are coded to accept only
two digit entries to represent years. For example, the year "1999" would be
represented by "99." These computer systems and products need the ability to
accept four digit entries to distinguish years beginning with 2000 from prior
years. Computer systems and products that do not accept four digit year entries
need to be upgraded or replaced to comply with such 'Year 2000" requirements.
Prior to January 1, 2000, WDI's computer systems were audited for Year 2000
compliance by PricewaterhouseCoopers. Accordingly, WDI was prepared for, and its
business was not affected by, Year 2000 computer problems. However, there can be
no assurance that Year 2000 compliance problems will not be revealed in the
future which could have a material adverse affect on the Company's business,
financial condition and results of operations. Many of the Company's customers
and suppliers may be affected by latent Year 2000 issues that may require them
to expend significant resources to modify existing systems. This may result in
those customers having reduced funds to purchase the Company's products or in
suppliers experiencing difficulties in producing or shipping products to the
Company on a timely basis or at all.
INTERNET USE AND E-COMMERCE MAY NOT CONTINUE TO GROW AS WE EXPECT.
Our business is new and rapidly evolving and our ability to generate
sufficient cash flows from operations depends upon the continued growth of
Internet usage, and of its commercial uses in particular, and our ability to
capture such growth. Our business and financial results will be dependent on the
use of the Internet for business-to-business commerce. A number of factors, in
general, may inhibit Internet usage, including inadequate network
infrastructure, security and privacy concerns, fraud, government regulation,
high telecommunication tariffs, inconsistent quality of service, fulfillment
logistics and lack of availability of cost-effective service. If Internet usage
grows, the Internet infrastructure may not be able to support the demands placed
on it by this growth and its performance and reliability may decline. In
addition, we may experience interruptions and delays as a result of outages,
excessive demands on networks and other delays occurring throughout the Internet
network infrastructure. If these outages or delays occur frequently in the
future, general Internet usage, as well as the usage of our Websites, could grow
more slowly or decline.
NEW OR AMENDED GOVERNMENT REGULATIONS COULD ADVERSELY AFFECT OUR BUSINESS.
There are currently few laws or regulations that are designed to
specifically regulate communications or commerce on the Internet. Due to the
increasing popularity and use of the Internet and other factors, however, laws
and regulations may be adopted in the future that address issues such as user
privacy, pricing, and the characteristics and quality of products and services.
As use of the Internet has become more pervasive, governments in Europe and the
United States have recently intensified their attention to increased regulation
of Internet services and electronic commerce. The United States and some nations
in Europe have proposed or enacted legislation to restrict the free flow of
information through the Internet that is deemed to be objectionable. United
States regulators have been investigating the use of personal information by
Internet companies. The European Union Directive 95/EC on the Protection of
Individuals with Regard to the Processing of Personal Data and on Free Movement
of Data dated October 25, 1998, regulates and limits the free flow of
information through the Internet. Because our service can be accessed from
anywhere in the world, we may be subject to regulation even in markets where we
have no operations, which regulation could subject us to significant additional
administrative, business and compliance costs. In addition, increased regulation
of the Internet generally could increase the cost of transmitting data over, and
conducting business through, the Internet or decrease the growth of the Internet
including e-commerce transactions.
RISKS RELATING TO THE OFFERING
THE OFFERING PRICE OF THE SECURITIES IS ARBITRARY.
The price of the Securities and other terms of this offering have been
determined solely by us and do not necessarily bear any relation to our results
of operations, our financial condition or any other criteria of value.
NEW INVESTORS WILL INCUR IMMEDIATE AND SUBSTANTIAL DILUTION.
Investors purchasing Securities in the offering will incur immediate
and substantial dilution in net tangible book value per share. To the extent
outstanding options to purchase common stock are exercised in the future, there
will be further dilution to new investors.
THE COMPANY DOES NOT INTEND TO PAY DIVIDENDS ON ITS COMMON SHARES.
WDI has never paid any dividends and WDI does not anticipate paying
dividends in the foreseeable future. The future payment of dividends is directly
dependent upon our future earnings, our financial requirements and other factors
to be determined by our Board of Directors.
CONTROL OF THE COMPANY AND CONFLICTS OF INTEREST.
Our Chairman and each of the other significant shareholders has the
ability to influence our business affairs and prospects so long as they maintain
ownership of certain percentages of our outstanding voting securities.
Accordingly, they will be able to approve major corporate transactions such as
recapitalizations, mergers, consolidations, dissolutions, repayment of debt
obligations and sale of all or substantially all the assets of the Company
without the vote or consent of the investors purchasing the Common Stock in this
offering. (See Risk Factors "We Have Broad Discretion Over The Use Of Proceeds
Of This Offering" herein.)
Certain of our directors also serve as directors or officers of other
companies with which we do or may conduct business. Therefore, there is a
possibility that such directors may have a conflict of interest. Any decision
made by directors is required to be made in accordance with their duties and
obligations to deal fairly and in good faith with a view to the best interests
of the Company. Directors may owe similar duties to other companies for which
they serve as directors or officers. Because of the nature of the potential
conflicts presented by certain of our suppliers, customers and others, the
directors involved in such a conflict may not act in our best interests.
EXHIBIT 4.1
WORLD DIAGNOSTICS INC.
"A" WARRANT FOR THE PURCHASE OF COMMON SHARES
No. W - _____Shares of Common Stock
FOR VALUE RECEIVED, WORLD DIAGNOSTICS INC., a Delaware corporation (the
"Company"), hereby certifies that or its permitted assigns is entitled to
purchase from the Company, at any time or from time to time after October 1,
2000 but prior to 5:00PM on October 1, 2005, ______ Thousand ( ) fully paid and
non-assessable shares of common stock, par value $0.01 per share, of the Company
for an aggregate purchase price of $_____ (computed on the basis of $1.375 per
share). (Hereinafter, (i) said common shares, together with any other equity
securities which may be issued by the Company in substitution therefor, are
referred to as the "Common Shares", (ii) the Common Shares purchasable hereunder
are referred to as the "Warrant Shares", (iii) the aggregate purchase price
payable hereunder for the Warrant Shares is referred to as the "Aggregate
Warrant Price", (iv) the price payable hereunder for each of the Warrant Shares,
as adjusted in the manner set forth in Section 3, is referred to as the "Per
Share Warrant Price" and (v) this Warrant and all warrants hereinafter issued in
exchange or substitution for the Warrant are referred to as the "Warrants".) The
Aggregate Warrant Price is not subject to adjustment. The Per Share Warrant
Price and the number of Warrant Shares are subject to adjustment as hereinafter
provided.
11. EXERCISE OF WARRANT. This Warrant may be exercised, in whole at any
time or in part from time to time, on and after October 1, 2000,
but prior to 5:00PM on October 1, 2005, by the holder of this
Warrant (the "Holder") by the surrender of this Warrant (with the
subscription form at the end hereof duly executed) at the principal
office of the Company's counsel Xxxxxxx, Xxxxxxxxx LLP, 0 Xxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, together with proper payment of
the Aggregate Warrant Price applicable on such date, or the
proportionate part thereof if this Warrant is exercised in part.
Payment for Warrant Shares shall be made by check or checks,
payable to the order of the Company. If this Warrant is exercised
in part, this Warrant must be exercised for a whole number of
Warrant Shares, and the Holder is entitled to receive a new Warrant
covering the number of Warrant Shares in respect of which this
Warrant has not been exercised and setting forth the proportionate
part of the Aggregate Warrant Price applicable to such Warrant
Shares. Upon such surrender of this Warrant, the Company will (a)
issue a certificate or certificates in the name of the Holder for
the largest number of whole Warrant Shares to which the Holder
shall be entitled and, if this Warrant is exercised is whole, in
lieu of any fractional shares (determined in such reasonable manner
as the Board of Directors of the Company shall determine), and (b)
deliver the other securities and properties receivable upon the
exercise of this Warrant, or the proportionate part thereof if this
Warrant is exercised in part, pursuant to the provisions of this
Warrant.
12. WARRANT CALL PROVISION. The Company shall have the right to redeem
the Class A Redeemable Warrants at any time at $.10 per Class A
Redeemable Warrant, on 30 days prior written notice ("Notice
Period"), if the closing bid price of the common stock exceeds
$3.50 (subject to adjustment) for 14 consecutive trading days AND
the warrants and their corresponding underlying shares have had a
registration statement in effect continuously for the 30 days
preceding the date of the redemption notice. The 30 days prior
written notice must be sent within ten business days of the 14
consecutive trading day period. If the Class A Redeemable Warrants
are redeemed, Class A Redeemable Warrant holders will lose their
right to exercise the Warrants except during the Notice Period.
Redemption of the Class A Redeemable Warrants could force the
holders to exercise the Class A Redeemable Warrants at a time when
it may be disadvantageous for the holders to do so or to sell the
Class A Redeemable Warrants at the then market price or accept the
redemption price, which likely would be substantially less than the
market value of the Class A Redeemable Warrants at the time of
redemption.
13. RESERVATION OF WARRANT SHARES. The Company agrees that, prior to
the expiration of this Warrant, the Company will at all times have
authorized and will reserve, and will keep available, solely for
issuance or delivery upon the exercise of this Warrant, the shares
receivable upon the exercise of this Warrant, the Warrant Shares
and other securities and properties as from time to time shall be
receivable upon the exercise of this Warrant, free and clear of all
restrictions on sale or transfer (except as may arise under
applicable securities laws) and free and clear of all preemptive
rights.
14. PROTECTION AGAINST DILUTION.
e) If, at any time or from time to time after the date of this
Warrant, the Company shall issue to the holders of the Common
Shares any Common Shares by way of a stock dividend or stock split
(including, without limitation, a reverse stock split), then, and
in each such case, the Per Share Warrant Price on the date of such
stock dividend or stock split shall be adjusted, or further
adjusted, to a price (to the nearest cent) determined by dividing
(i) an amount equal to the number of Common Shares outstanding
immediately prior to such issuance multiplied by the Per Share
Warrant Price in effect immediately prior to such issuance by (ii)
the total number of Common Shares outstanding immediately after
issuance. Upon each adjustment in the Per Share Warrant Price
resulting from a stock split or stock dividend, the number of
Warrant Shares shall be adjusted by dividing the Aggregate Warrant
Price by the Per Share Warrant Price in effect immediately after
such adjustment. Notice of each adjustment and each such
readjustment shall be forthwith mailed to the Holder.
f) If the Company shall be consolidated with or merged into another
corporation, or shall sell all or substantially all of its assets
in part of a reorganization to which the Company is a party within
the meaning on the Internal Revenue Code of 1986, as presently in
effect, or shall issue a security convertible into its Common
Shares as a dividend on its Common Shares, or shall reclassify or
reorganize its capital structure (except a stock split covered by
Subsection 3(a) hereof), each Warrant Share shall be replaced for
the purposes hereof by the securities or properties issuable or
distributable in respect on one Common Share upon such
consolidation, merger, sale, reclassification or reorganization,
and adequate provisions to the effect shall be made at the time
thereof. Notice of such consolidation, merger, sale,
reclassification or reorganization, and of said provisions so
proposed to be made, shall be mailed to the Holder not less than 15
days prior to such event.
g) If the Company shall sell all or substantially all of its assets,
other than as part of a reorganization to which the Company is a
party within the meaning of the Internal Revenue Code of 1986, as
presently in effect, or shall distribute its assets in dissolution
or liquidation (other than as part of such a reorganization), the
Company shall mail notice thereof to the Holder and shall make no
distribution to shareholders until the expiration of 15 days from
the date of mailing so said notice and then only to shareholders of
record as of date at least 15 days after the date of the mailing of
said notice. If this sale is for cash, then each Warrant Share may
be converted into 1/3 of a share of common stock.
h) If the Board of Directors of the Company shall declare any dividend
or other distribution in cash with respect to the Common Shares,
other than out of surplus, the Company shall mail notice thereof to
the Holder not less than 15 days prior to the record date fixed for
determining shareholders entitled to participate in such dividend
or other distribution.
15. FULLY PAID SHARES; TAXES. The Company agrees that the Common Shares
represented be each and every certificate for Warrant Shares
delivered on the exercise of this Warrant shall, at the time of
such delivery, be validly issued and outstanding, fully paid and
non-assessable, and the Company will take all such actions as may
be necessary to assure that the par value or stated value, if any,
per Warrant Share is at all time equal to or less than the then Per
Share Warrant Price. The Company further covenants and agrees that
it will pay, when due and payable, any and all Federal and state
stamp, original issue or similar taxes which may be payable in
respect of the issue of any Warrant Share or Certificate therefor.
16. LOSS, ETC. OF WARRANT. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this
Warrant, and of indemnify reasonably satisfactory to the Company,
if lost, stolen or destroyed, and upon surrender and cancellation
of this Warrant, if mutilated, and upon reimbursement of the
Company's reasonably incidental expenses, the Company shall execute
and deliver to the Holder a new Warrant of like date, tenor and
denomination.
17. WARRANT HOLDER NOT SHAREHOLDER. Except as otherwise provided
therein, this Warrant does not confer upon the Holder any right to
vote or to consent or to receive notice as a shareholder of the
Company, as such, in respect of any matters whatsoever, or any
other rights or liabilities as a shareholder, prior to the exercise
hereof.
18. COMMUNICATION. No notice or other communication under this Warrant
shall be effective unless the same is in writing and is mailed by
first class mail, postage prepaid, addressed to:
(c) the Company at 00000 XX 00xx Xxx., #000, Xxxxx Xxxxx, XX 00000, or
such other address as the Company has designated in writing to the
Holder, or
(d) the Holder at __________________________________________ or such
other address as the Holder has designated in writing to the
Company.
19. HEADINGS. The headings of this Warrant have been inserted as a
matter of convenience and shall not affect the construction hereof.
20. APPLICABLE LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, World Diagnostics Inc. has caused this
Warrant to be signed by its President and its corporate seal to be hereunto
affixed this _____ day of _______, 2000.
ATTEST: WORLD DIAGNOSTICS INC.
(Corporate Seal)
SUBSCRIPTION
The undersigned, _____________________________________________________
pursuant to the provisions of the Warrant, dated October 1, 2000, granted by
World Diagnostics Inc. for __________ Common Shares hereby elects to purchase
_____________________ (____________) Common Shares of World Diagnostics Inc.
covered by this Warrant.
Dated: ___________________, 2000.
Signature:
EXHIBIT 4.2
WORLD DIAGNOSTICS INC.
"B" WARRANT FOR THE PURCHASE OF COMMON SHARES
No. W - ______ Shares of Common Stock
FOR VALUE RECEIVED, WORLD DIAGNOSTICS INC., a Delaware corporation (the
"Company"), hereby certifies that or its permitted assigns is entitled to
purchase from the Company, at any time or from time to time after October 1,
2000 but prior to 5:00PM on October 1, 2005, _____ Thousand ( ) fully paid and
non-assessable shares of common stock, par value $0.01 per share, of the Company
for an aggregate purchase price of $_____ (computed on the basis of $1.625 per
share). (Hereinafter, (i) said common shares, together with any other equity
securities which may be issued by the Company in substitution therefor, are
referred to as the "Common Shares", (ii) the Common Shares purchasable hereunder
are referred to as the "Warrant Shares", (iii) the aggregate purchase price
payable hereunder for the Warrant Shares is referred to as the "Aggregate
Warrant Price", (iv) the price payable hereunder for each of the Warrant Shares,
as adjusted in the manner set forth in Section 3, is referred to as the "Per
Share Warrant Price" and (v) this Warrant and all warrants hereinafter issued in
exchange or substitution for the Warrant are referred to as the "Warrants".) The
Aggregate Warrant Price is not subject to adjustment. The Per Share Warrant
Price and the number of Warrant Shares are subject to adjustment as hereinafter
provided.
11. EXERCISE OF WARRANT. This Warrant may be exercised, in whole at any
time or in part from time to time, on and after October 1, 2000,
but prior to 5:00PM on October 1, 2005, by the holder of this
Warrant the ("Holder") by the surrender of this Warrant (with the
subscription form at the end hereof duly executed) at the principal
office of the Company's counsel Xxxxxxx, Xxxxxxxxx LLP, 0 Xxxx
Xxxxxx, Xxx Xxxx, XX 00000, together with proper payment of the
Aggregate Warrant Price applicable on such date, or the
proportionate part thereof if this Warrant is exercised in part.
Payment for Warrant Shares shall be made by check or checks,
payable to the order of the Company. If this Warrant is exercised
in part, this Warrant must be exercised for a whole number of
Warrant Shares, and the Holder is entitled to receive a new Warrant
covering the number of Warrant Shares in respect of which this
Warrant has not been exercised and setting forth the proportionate
part of the Aggregate Warrant Price applicable to such Warrant
Shares. Upon such surrender of this Warrant, the Company will (a)
issue a certificate or certificates in the name of the Holder for
the largest number of whole Warrant Shares to which the Holder
shall be entitled and, if this Warrant is exercised is whole, in
lieu of any fractional share (determined in such reasonable manner
as the Board of Directors of the Company shall determine), and (b)
deliver the other securities and properties receivable upon the
exercise of this Warrant, or the proportionate part thereof if this
Warrant is exercised in part, pursuant to the provisions of this
Warrant.
12. WARRANT CALL PROVISION. The Company shall have no right to call
this Warrant at any time.
13. RESERVATION OF WARRANT SHARES. The Company agrees that, prior to
the expiration of this Warrant, the Company will at all times have
authorized and will reserve, and will keep available, solely for
issuance or delivery upon the exercise of this Warrant, the shares
receivable upon the exercise of this Warrant, the Warrant Shares
and other securities and properties as from time to time shall be
receivable upon the exercise of this Warrant, free and clear of all
restrictions on sale or transfer (except as may arise under
applicable securities laws) and free and clear of all preemptive
rights.
14. PROTECTION AGAINST DILUTION.
e) If, at any time or from time to time after the date of this
Warrant, the Company shall issue to the holders of the Common
Shares any Common Shares by way of a stock dividend or stock split
(including, without limitation, a reverse stock split), then, and
in each such case, the Per Share Warrant Price on the date of such
stock dividend or stock split shall be adjusted, or further
adjusted, to a price (to the nearest cent) determined by dividing
(i) an amount equal to the number of Common Shares outstanding
immediately prior to such issuance multiplied by the Per Share
Warrant Price in effect immediately prior to such issuance by (ii)
the total number of Common Shares outstanding immediately after
issuance. Upon each adjustment in the Per Share Warrant Price
resulting from a stock split or stock dividend, the number of
Warrant Shares shall be adjusted by dividing the Aggregate Warrant
Price by the Per Share Warrant Price in effect immediately after
such adjustment. Notice of each adjustment and each such
readjustment shall be forthwith mailed to the Holder.
f) If the Company shall be consolidated with or merged into another
corporation, or shall sell all or substantially all of its assets
in part of a reorganization to which the Company is a party within
the meaning on the Internal Revenue Code of 1986, as presently in
effect, or shall issue a security convertible into its Common
Shares as a dividend on its Common Shares, or shall reclassify or
reorganize its capital structure (except a stock split covered by
Subsection 3(a) hereof), each Warrant Share shall be replaced for
the purposes hereof by the securities or properties issuable or
distributable in respect on one Common Share upon such
consolidation, merger, sale, reclassification or reorganization,
and adequate provisions to the effect shall be made at the time
thereof. Notice of such consolidation, merger, sale,
reclassification or reorganization, and of said provisions so
proposed to be made, shall be mailed to the Holder not less than 15
days prior to such event.
g) If the Company shall sell all or substantially all of its assets,
other than as part of a reorganization to which the Company is a
party within the meaning of the Internal Revenue Code of 1986, as
presently in effect, or shall distribute its assets in dissolution
or liquidation (other than as part of such a reorganization), the
Company shall mail notice thereof to the Holder and shall make no
distribution to shareholders until the expiration of 15 days from
the date of mailing so said notice and then only to shareholders of
record as of date at least 15 days after the date of the mailing of
said notice. If this sale is for cash, then the outstanding
warrants may be converted into common stock for 1/3 of a common
share.
h) If the Board of Directors of the Company shall declare any dividend
or other distribution in cash with respect to the Common Shares,
other than out of surplus, the Company shall mail notice thereof to
the Holder not less than 15 days prior to the record date fixed for
determining shareholders entitled to participate in such dividend
or other distribution.
15. FULLY PAID SHARES; TAXES. The Company agrees that the Common Shares
represented be each and every certificate for Warrant Shares
delivered on the exercise of this Warrant shall, at the time of
such delivery, be validly issued and outstanding, fully paid and
non-assessable, and the Company will take all such actions as may
be necessary to assure that the par value or stated value, if any,
per Warrant Share is at all time equal to or less than the then Per
Share Warrant Price. The Company further covenants and agrees that
it will pay, when due and payable, any and all Federal and state
stamp, original issue or similar taxes which may be payable in
respect of the issue of any Warrant Share or Certificate
16. LOSS, ETC. OF WARRANT. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this
Warrant, and of indemnify reasonably satisfactory to the Company,
if lost, stolen or destroyed, and upon surrender and cancellation
of this Warrant, if mutilated, and upon reimbursement of the
Company's reasonably incidental expenses, the Company shall execute
and deliver to the Holder a new Warrant of like date, tenor and
denomination.
17. WARRANT HOLDER NOT SHAREHOLDER. Except as otherwise provided
therein, this Warrant does not confer upon the Holder any right to
vote or to consent or to receive notice as s shareholder of the
Company, as such, in respect of any matters whatsoever, or any
other rights or liabilities as a shareholder, prior to the exercise
hereof.
18. COMMUNICATION. No notice or other communication under this Warrant
shall be effective unless the same is in writing and is mailed by
first class mail, postage prepaid, addressed to:
c) the Company at 00000 XX 00xx Xxx., #000, Xxxxx Xxxxx, XX 00000, or
such other address as the Company has designated in writing to the
Holder, or
d) the Holder at __________________________________________________ or
such other address as the Holder has designated in writing to the
Company.
19. HEADINGS. The headings of this Warrant have been inserted as a
matter of convenience and shall not affect the construction hereof.
20. APPLICABLE LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF,World Diagnostics Inc. has caused this Warrant to be
signed by its President and its corporate seal to be hereunto affixed this _____
day of _______, 2000.
ATTEST: WORLD DIAGNOSTICS INC.
(Corporate Seal)
SUBSCRIPTION
The undersigned, _____________________________________________________
pursuant to the provisions of the Warrant, dated October 1, 2000, granted by
World Diagnostics Inc. for __________ Common Shares hereby elects to purchase
_____________________ (____________) Common Shares of World Diagnostics Inc.
covered by this Warrant.
Dated: ___________________, 2000.
Signature:
