-----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, Iy3+cHaYS0vRQh5fcJVU8GW5z1dV1gULIsTXPkSorsYKuiQB0EcLTAAVvSsaYqhI HQuJlNgWB+8yyPDJH7cyZA== 0000849401-04-000004.txt : 20040907 0000849401-04-000004.hdr.sgml : 20040906 20040907140019 ACCESSION NUMBER: 0000849401-04-000004 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20040831 ITEM INFORMATION: Unregistered Sales of Equity Securities ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20040907 DATE AS OF CHANGE: 20040907 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADM TRONICS UNLIMITED INC/DE CENTRAL INDEX KEY: 0000849401 STANDARD INDUSTRIAL CLASSIFICATION: ADHESIVES & SEALANTS [2891] IRS NUMBER: 221896032 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-17629 FILM NUMBER: 041018436 BUSINESS ADDRESS: STREET 1: 224 S PEGASUS AVE CITY: NORTHVALE STATE: NJ ZIP: 07647 BUSINESS PHONE: 2017676040 MAIL ADDRESS: STREET 1: 224 S PEGASUS AVE CITY: NORTHVALE STATE: NJ ZIP: 07647 8-K 1 q8k083104.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K Current Report CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of Earliest Event Reported) August 31, 2004 Commission file number 000-17629 ADM Tronics Unlimited, Inc. (Exact name of registrant as specified in its charter) DELAWARE (State or other jurisdiction of incorporation or organization) 22-1896032 (I.R.S. Employer Identification Number) 224 South Pegasus Avenue, Northvale, New Jersey 07647 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (201) 767-6040 Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: ___Written communications pursuant to Rule 425 under the Securities Act ___Soliciting material pursuant to Rule 14a-12 under the Exchange Act ___Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act ___Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act ITEM 3.02 Unregistered Sale of Equity Securities On August 31, 2004, ADM Tronics Unlimited, Inc. (the "Company") held a closing in an ongoing private placement financing (the "Placement"). The Placement has been made to accredited investors only, without any general advertisement or solicitation and all of the securities issued therein have been marked with an appropriate restrictive legend. In making the Placement the Company has relied upon the exemption from registration under the Securities Act of 1933, as amended (the "Act") provided under Regulation D and the Uniform Limited Offering Exemption. As a result of such closing, the Company and its majority owned subsidiary AA Northvale Medical Associates, Inc., a New Jersey corporation ("AAN") have realized gross proceeds of $2,562,500 and net proceeds of approximately $2,190,000 from the sale of Units to 22 accredited investors. Maxim Capital LLC is acting as agent ("Agent") with respect to the Placement and is receiving commissions of 8% as well as certain options and expense reimbursement. To date, the Agent has received $281,875 in commissions, fees and other expense reimbursements. The Placement is for up to 35 units on a best efforts basis subject to an over- allotment option and, as extended, will continue through September 30, 2004. The Units being sold in the Placement are comprised of a $100,000 principal amount 6% unsecured convertible promissory note (the "Note") issued jointly and severally by the Company and AAN. The Notes bear interest at 6% per annum and under certain circumstances the principal and accrued interest on the Note will either be (i) convertible into either the Company's common stock at $.29 per share or (ii) AAN's common stock at $8.30 per share. Each Unit also includes one Company warrant for the purchase of 344,828 shares at $.41 and one AAN warrant for the purchase of 12,048 shares at $5.70. The Company and AAN Warrant's provide that in addition to paying the exercise price, the holder must surrender the non-exercised warrant in the Unit. In connection with the Placement, the Agent has received warrants for the purchase of 706,897 Company shares at an exercise price of $.29 and 706,897 Company shares at an exercise price of $.41 and warrants for the purchase of 24,699 AAN shares at an exercise price of $8.30 and 24,699 AAN shares at an exercise price of $5.70. The Company and AAN have executed registration rights agreements with the investors and AAN which require the registration under the Act of the securities sold in the Placement by March 1, 2005. For a more complete description of the terms of the agreements and other instruments delivered in connection with the Placement, reference is made to the Exhibits to this report. ITEM 9.01. FINANCIAL STATEMENTS, PROFORMA FINANCIAL INFORMATION AND EXHIBITS. Exhibits: 3.1 Form of Note 4.1 Form of Company Warrant 4.2 Form of AAN Warrant 4.3 Form of Agent's Warrant* 10.1 Form of Subscription and Registration Rights Agreement 10.2 Form of Placement Agency Agreement* * To be filed by amendment. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: September 7, 2004 ADM Tronics Unlimited, Inc. By: /s/Andre' DiMino Name: Andre' DiMino Title: President EX-3 2 ex31kaan.txt THE SECURITY REPRESENTED HEREBY, AND THE SECURITIES ISSUABLE UPON CONVERSION OR REDEMPTION HEREOF, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS WHICH, IN THE OPINION OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO COUNSEL FOR THIS COMPANY, IS AVAILABLE. ADM TRONICS UNLIMITED, INC./AA NORTHVALE MEDICAL ASSOCIATES, INC. UNSECURED 6% JOINT AND SEVERAL CONVERTIBLE PROMISSORY NOTE No. _____________ US$________________ August _____, 2004 THIS NOTE is one of a duly authorized issue of unsecured Notes (a "Note" or the "Notes") of the joint and several obligors ADM Tronics Unlimited, Inc., a Delaware corporation duly organized and validly existing under the laws of the State of Delaware ("ADMT") and AA Northvale Medical Associates, Inc., a New Jersey corporation duly organized and validly existing under the laws of the State of New Jersey ("AAN") (ADMT and AAN may hereafter be collectively referred to as the "Joint Obligors" or the "Company") The Notes are designated as the 2004 Unsecured 6% Joint and Several Convertible Promissory Notes, in an aggregate maximum principal face value for all Notes of this series of Three Million Five Hundred Thousand and no/100 United States Dollars (US$3,500,000.00). FOR VALUE RECEIVED, each of ADMT and AAN jointly and severally promises to pay to the registered holder hereof and its successors and assigns (the "Holder"), the principal sum of ________________________ Dollars ($_____________.00) in accordance with the terms hereof, and to pay interest on the principal sum outstanding, at the rate of six percent (6%) per annum. Accrual of interest on the outstanding principal amount shall commence on the date hereof and shall continue until payment in full of the outstanding principal amount has been made or duly provided for, or until the entire outstanding principal amount of the Note has been converted. Each of ADMT and AAN are jointly and severally liable for the repayment of the Note which is an unsecured obligation of each of ADMT and AAN. Pursuant to a private placement memorandum dated May 20, 2004, as amended or supplemented (the "PPM"), the Joint Obligors are offering ("Private Offering") a maximum of $3,500,000 of units, consisting of: (i) the Notes; (ii) warrants to purchase shares of common stock of ADMT (the "ADMT Warrants"); and (iii) warrants to purchase shares of common stock of AAN (the "AAN Warrants"). The following is a statement of the rights of the Holder of this Note and the terms and conditions to which this Note is subject, and to which the Holder, by acceptance of this Note, agrees: 1. Principal Repayment. The outstanding principal amount of this Note shall be payable by August 15, 2009 (the "Maturity Date"), unless this Note has been converted or redeemed as described below. 2. Interest. The holders of the Notes are entitled to receive interest at an annual cumulative rate of six percent (6%) of the principal face dollar value of the Notes held, payable quarterly (on January 1, April 1, July 1 and October 1, with the first interest payment due on January 1, 2005) in, at the election of the Joint Obligors (except as set forth below) either: (i) cash, out of funds legally available therefore, or (ii) prior to December 31, 2004, shares of AAN common stock, no par value per share ("AAN Common Stock"), based on a value of $8.30 per share of AAN Common Stock (the "AAN Conversion Price"). Notwithstanding the foregoing, from and after March 1, 2005, in the event that: (i) the shares of AAN Common Stock issuable upon conversion or exercise, as the case may be, of the Notes, the ADMT Warrants and the AAN Warrants are not registered with the Securities and Exchange Commission (the "SEC"), and (ii) the shares of AAN Common Stock are not publicly-traded on an Approved Market, as defined below, (the foregoing, as applied to the shares of AAN Common Stock, being referred to herein as the "Not Registered"), then the Holder may elect to receive interest payments in either: (A) cash, out of funds legally available therefore, or (B) at the election of each holder of Notes, in (i) a number of shares of AAN Common Stock based upon the AAN Conversion Price or (ii) a number of shares of ADMT Common Stock, $.0005 par value per share ("ADMT Common Stock") based on a value of $0.29 (the "ADMT Conversion Price"). An "Approved Market" shall mean any public market in the United States on which the AAN Common Stock is trading (it being understood that the Pink Sheets Quotation Service shall not qualify as an Approved Market for these purposes). In addition, and notwithstanding the foregoing, the Joint Obligors shall be prohibited from making the above described interest payments in shares of AAN Common Stock or shares of ADMT Common Stock unless the shares so distributed are registered with the SEC pursuant to an effective registration statement, without the prior written consent of the Holder. The Holder, at its sole election, may defer payments of interest in cash when payable, and elect to accrue such interest payments in such number of shares of AAN Common Stock based upon the AAN Conversion Price or in such number of shares of ADMT Common Stock based upon the ADMT Conversion Price. Interest payments for the period between the applicable closing of the Private Offering and the next interest payment date shall be pro rated based upon the actual number of days elapsed, assuming a 360 day year. The first interest payment to be made on the Notes will be due on January 1, 2005. No interest payments for such period may be made in either ADMT Common Stock or AAN Common Stock unless such interest is paid in either ADMT Common Stock or AAN Common Stock which has been registered for resale pursuant to a registration statement under the Securities Act of 1933, as amended (the "Act"), and declared effective by the SEC. 3. Conversion. (a) Through March 1, 2005, each $100,000 face value of Notes shall initially be convertible at the AAN Conversion Price into 12,048 shares of AAN Common Stock, provided AAN's Common Stock is listed on an Approved Market, and the shares of AAN Common Stock issuable upon conversion of the Note have been registered for resale with the SEC. The AAN Conversion Price is subject to the anti-dilution provisions described below. (b) From and after March 1, 2005, in the event that the shares of AAN Common Stock are Not Registered, then each $100,000 face value of Notes shall be convertible, at the option of the holder thereof, into either: (A) 12,048 shares of AAN Common Stock (based on the AAN Conversion Price) or (B) a number of shares of ADMT Common Stock (determined at the applicable Closing) determined by the ADMT Conversion Price, subject to the anti- dilution provisions described below. (c) Mandatory Conversion. Notwithstanding the foregoing, the Notes and any accrued interest will automatically convert into shares of AAN Common Stock, at the AAN Conversion Price, on such date as: (i) a registration statement covering the shares of AAN Common Stock underlying the Notes and Warrants is ordered effective by the SEC; and (ii) the AAN Common Stock commences trading on an Approved Market. (d) Mechanics of Conversion. Upon any conversion of this Note, (i) such principal amount converted and all accrued but unpaid interest thereon shall be converted and such converted portion of this Note shall become fully paid and satisfied, (ii) the Holder shall surrender and deliver this Note, duly endorsed, to ADMT and AAN's joint office or such other address which either ADMT or AAN shall jointly designate against delivery of the certificates representing the new securities of either ADMT or AAN, (iii) ADMT or AAN, as applicable, shall promptly deliver a duly executed Note to the Holder in the principal amount, if any, that remains outstanding after any such conversion; and (iv) in exchange for all or any portion of the surrendered Note described in the preceding clause 4(d)(ii), ADMT or AAN, as applicable, shall provide the Holder with irrevocable instructions addressed to ADMT or AAN's transfer and exchange agent, as applicable, to issue such number of unrestricted, freely tradable shares of either ADMT Common Stock or AAN Common Stock, as the case may be. (e) Issue Taxes. The Holder shall pay any and all issue and other taxes that may be payable with respect to any issue or delivery of shares of either ADMT Common Stock or AAN Common Stock on conversion of this Note pursuant hereto; provided, however, that the Holder shall not be obligated to pay any transfer taxes resulting from any transfer requested by any holder in connection with any such conversion. (f) Elimination of Fractional Interests. No fractional shares of either ADMT Common Stock or AAN Common Stock shall be issued upon conversion of this Note, nor shall either ADMT or AAN be required to pay cash in lieu of fractional interests, it being the intent of the parties that all fractional interests shall be eliminated and that all issuances of either ADMT Common Stock or AAN Common Stock shall be rounded up to the nearest whole share. 4. Rights upon Liquidation, Dissolution or Winding Up. In the event of any liquidation, dissolution or winding up of ADMT or AAN, either voluntary or involuntary, the holders of the Notes shall be entitled to receive, prior and in preference to any distribution of any of the assets of ADMT or AAN to the holders of any equity security of either ADMT or AAN, an amount equal to the unpaid and unconverted principal face amount of their Notes and any accrued and unpaid interest thereon. The Holders shall share ratably with the other unsecured creditors of AAN and ADMT if the available assets are not sufficient to repay the Notes. 5. Adjustments and Penalties for Non-Registration. (a) In the event that either ADMT or AAN should at any time or from time to time, after the date of this Note, fix a record date for the effectuation of a split or subdivision of the outstanding shares of either the ADMT Common Stock or AAN Common Stock, as applicable, or the determination of holders of either the ADMT Common Stock or AAN Common Stock, as applicable, entitled to receive a dividend or other distribution payable in additional shares of either the ADMT Common Stock or AAN Common Stock, as applicable, or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly additional shares of either the ADMT Common Stock or AAN Common Stock, as applicable, (hereinafter referred to as "Common Stock Equivalents") without payment of any consideration by such holder for the additional shares of either the ADMT Common Stock or AAN Common Stock, as applicable, or the Common Stock Equivalents (including the additional shares of either the ADMT Common Stock or AAN Common Stock, as applicable, issuable upon conversion or exercise thereof), then, as of such record date (or the date of such dividend, distribution, split or subdivision if no record date is fixed), then unless the AAN Conversion Price or ADMT Conversion Price, as applicable, is otherwise automatically adjusted in accordance with the terms of this Note, the AAN Conversion Price or ADMT Conversion Price, as applicable, shall be appropriately decreased so that the number of shares of either the ADMT Common Stock or AAN Common Stock, as applicable, issuable on conversion of this Note shall be increased in proportion to such increase in the aggregate number of shares of either the ADMT Common Stock or AAN Common Stock, as applicable, outstanding and those issuable with respect to such Common Stock Equivalents (see Section 5(c) below). (b) If the number of shares of either the ADMT Common Stock or AAN Common Stock, as applicable, outstanding at any time after the date of this Note is decreased by a combination of the outstanding shares of either the ADMT Common Stock or AAN Common Stock, as applicable, then, following the record date of such combination, the AAN Conversion Price or ADMT Conversion Price, as applicable, shall be appropriately increased so that the number of shares of either the ADMT Common Stock or AAN Common Stock, as applicable, issuable upon conversion of this Note shall be decreased in proportion to such decrease in outstanding shares. (c) In addition, the applicable AAN Conversion Price or ADMT Conversion Price, will be subject to the following adjustment on a weighted average basis for subsequent issuances of ADMT Common Stock or AAN Common Stock, as applicable, or Common Stock Equivalents, at less than the AAN Conversion Price or ADMT Conversion Price, as applicable, excluding issuances pursuant to stock option or restricted stock purchase plans approved by the Board of Directors of the Company (a "New Offering"): (A x B) + (C x D) / E = F A: Number of shares of ADMT Common Stock or AAN Common Stock, as applicable, or Common Stock Equivalents outstanding, including the shares of Common Stock issuable or exercisable to all the holders of the Notes and the Warrants B: Conversion Price C: Number of new shares of ADMT Common Stock or AAN Common Stock, as applicable, or Common Stock Equivalents D: Share price offered in New Offering E: Total number of new shares of ADMT Common Stock or AAN Common Stock, as applicable, or Common Stock Equivalents outstanding after the New Offering F: The adjusted Conversion Price, ADMT Conversion Price or ADMT Conversion Price, as applicable, for the holders of the Notes and the Warrants (d) A merger, consolidation or other corporate reorganization in which ADMT's stockholders shall receive cash or securities of another entity, or any transaction in which all or substantially all of the assets of AAN or ADMT are sold shall be treated as a liquidation for purposes of the liquidation preference. The Holder shall receive prior notice of any of the foregoing transactions and shall have an opportunity to convert, at their sole election, the Note prior to the consummation of any such transaction. (e) Pursuant to the terms of the Private Offering, the Company has granted certain registration rights to the Holder, as more fully described in the Subscription Agreement dated as of the date hereof entered into between the Company and Holder. In the event that the Company does not timely register either the ADMT Common Stock or the AAN Common Stock underlying this Note, the number of shares of either ADMT Common Stock or AAN Common Stock which Holder shall be entitled to receive upon conversion shall increase by 1% and 2%, respectively, for each thirty day period, or part thereof, that such registration default shall continue. 6. Representations and Warranties of the Company. Each of ADMT and AAN understands, agrees with, and represents and warrants to the Holder that: (a) Organization and Qualification. Each of ADMT and AAN is a corporation duly organized and existing, and in good standing under the laws of the jurisdiction in which it is incorporated, except as would not have a Material Adverse Effect (as defined below), and has the requisite corporate power to own its properties and to carry on its business as now being conducted. The Company is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted by it makes such qualification necessary and where the failure so to qualify would have a Material Adverse Effect. "Material Adverse Effect" means any material adverse effect on the operations, properties or financial condition of ADMT or AAN. (b) Authorization; Enforcement. (i) Each of ADMT and AAN has the requisite corporate power and authority to enter into and perform this Note, to issue and sell the Notes and the ADMT Common Stock or AAN Common Stock issuable upon conversion of the Notes in accordance with the terms hereof, and to perform its obligations under the Notes in accordance with the requirements of the same, (ii) the execution, delivery and performance of this Note, the warrants exercisable into shares of ADMT Common Stock or AAN Common Stock to be issued simultaneously with the Notes (as described in the PPM) (the "Warrants"), the PPM and the Subscription Agreement by each of ADMT and AAN and the consummation by them of the transactions contemplated hereby and thereby have been duly authorized by each of ADMT and AAN's Board of Directors and no further consent or authorization of ADMT, AAN, their Boards of Directors, or their stockholders is required, (iii) the Notes and Warrants sold at the Closing have been duly and validly authorized, executed and delivered by each of ADMT and AAN, and (iv) the Notes (when issued) and the Warrants (when issued) constitute the valid and binding obligations of each of ADMT and AAN enforceable against each of ADMT and AAN in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting, generally, the enforcement of creditors' rights and remedies or by other equitable principles of general application. Each of ADMT and AAN(and its legal counsel) has examined this Note and is satisfied in its sole discretion that this Note is in accordance with the provisions of Regulation D ("Regulation D") as promulgated by the SEC under the Act and are effective to accomplish the purposes set forth herein and therein. (c) Capitalization. (i) As of May 20, 2004, the authorized Common Stock of ADMT consisted of 150,000,000 shares, $.0005 par value, of Common Stock of which 51,882,037 shares were issued and outstanding. There are 5,000,000 shares of preferred stock authorized and zero (0) shares of preferred stock issued and outstanding. All of the outstanding shares have been validly issued and are fully paid and nonassessable. None of the shares of ADMT Common Stock sold in the Placement or the unissued shares of ADMT Common Stock are subject to preemptive rights or any other similar rights or any liens or encumbrances. Pursuant to a consulting agreement previously disclosed, 2,000,000 shares of ADMT Common Stock will be issued as compensation to a non-affiliate. There are currently outstanding warrants for the purchase of 1,297,051 shares of ADMT Common Stock in addition to Placement Agent Warrant I and Placement Agent Warrant III, to be issued to the Placement Agent, for an amount of shares to be determined in connection with the closing amount of the Private Offering As of the date of this Note, other than otherwise disclosed in this Section 6(c), (i) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of ADMT or any of its subsidiaries, or arrangements by which ADMT is or may become bound to issue additional shares of capital stock of ADMT or any of its subsidiaries, (ii) there are no outstanding debt securities, and (iii) there are no agreements or arrangements under which ADMT or any of its subsidiaries is obligated to register the sale of any of its or their securities under the Act. If requested by the Holder, the Company has furnished to the Holder, and the Holder acknowledges receipt of same by its signature hereafter, true and correct copies of ADMT's Certificate of Incorporation, as amended, as in effect on the date hereof (the "ADMT Charter"), and ADMT's Bylaws, as in effect on the date hereof (the "ADMT Bylaws"). (ii) As of the date of this Note, the authorized Common Stock of AAN consisted of 10,000,000 shares, no par value, of Common Stock, of which 2,710,000 shares were issued and outstanding. There are no shares of preferred stock authorized. All of such outstanding shares have been validly issued and are fully paid and nonassessable. None of the unissued shares of AAN Common Stock are subject to preemptive rights or any other similar rights or any liens or encumbrances. As of the date of this Note, unless otherwise disclosed in this Section 6(c), (i) there are outstanding options to purchase 622,875 shares of AAN Common Stock in addition to Placement Agent Warrant II and Placement Agent Warrant IV to be issued to the Placement Agent, for an amount of shares to be determined in connection with the closing amount of the Private Offering, and no warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its subsidiaries, or arrangements by which the Company or any of its subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its subsidiaries, (ii) there are no outstanding debt securities, and (iii) there are no agreements or arrangements under which the Company or any of its subsidiaries is obligated to register the sale of any of its or their securities under the Act. If requested by the Holder, the Company has furnished to the Holder, and the Holder acknowledges receipt of same by its signature hereafter, true and correct copies of AAN's Certificate of Incorporation, as amended, as in effect on the date hereof (the "AAN Charter"), and AAN's Bylaws, as in effect on the date hereof (the "AAN Bylaws"). (d) Reservation of Shares. Each of ADMT and AAN shall at all times reserve and keep available out of its authorized but unissued shares of ADMT Common Stock and AAN Common Stock, free from all taxes, liens and charges with respect to the issue thereof and not be subject to preemptive rights or other similar rights of stockholders of ADMT or AAN, solely for the purpose of effecting the conversion or redemption of the Notes and the exercise of the Warrants, such number of its shares of ADMT Common Stock and AAN Common Stock as shall from time to time be sufficient to effect the conversion of all of the outstanding principal amount, and if at any time the number of authorized but unissued shares of ADMT Common Stock or AAN Common Stock shall not be sufficient to effect the conversion or redemption of the Notes and the exercise of the Warrants, in addition to such other remedies as shall be available to Holder, including declaring the Notes to be in default and all amounts to be immediately due and payable, ADMT or AAN, as the case may be, will take such corporate action as may, in the opinion of its counsel, be necessary to increase the number of authorized but unissued shares of ADMT Common Stock or AAN Common Stock to such number of shares as shall be sufficient for such purposes, including without limitation, using its best efforts to obtain the requisite stockholder approval necessary to increase the number of authorized shares of the ADMT Common Stock or AAN Common Stock. (e) Acknowledgment Regarding Holder's Purchase of the Note. Each of ADMT and AAN acknowledges and agrees that the Holder is not acting as financial advisor to or fiduciary of either ADMT and AAN (or in any similar capacity with respect to this Note or the transactions contemplated hereby), that this Note and the transactions contemplated hereby, and the relationship between the Holder and each of ADMT and AAN, are and will be considered "arms-length" notwithstanding any other or prior agreements or nexus between the Holder and each of ADMT and AAN, whether or not disclosed, and that any statement made by the Holder, or any of its representatives or agents, in connection with this Note and the transactions contemplated hereby is not advice or a recommendation, is merely incidental to the Holder's purchase of the Note and has not been relied upon in any way by each of ADMT and AAN, their officers or directors. Each of ADMT and AAN further represents to the Holder that each of ADMT and AAN's decision to enter into this Note and the transactions contemplated hereby has been based solely upon an independent evaluation by each of ADMT and AAN, its officers and directors. (f) No Integrated Offering. Neither ADMT nor AAN, nor any of their affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales of any security or solicited any offers to buy any security under circumstances which would prevent the parties hereto from consummating the transactions contemplated hereby pursuant to an exemption from registration under the Act and specifically in accordance with the provisions of Regulation D. The transactions contemplated hereby are exempt from the registration requirements of the Act, assuming the accuracy of the representations contained in the Purchaser Questionnaire executed by the Holder. (g) No Conflicts. The execution, delivery and performance of this Note by the each of ADMT and AAN and the consummation by each of ADMT and AAN of the transactions contemplated hereby will not (i) result in a violation of the ADMT Charter, ADMT Bylaws, AAN Charter or AAN Bylaws or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which ADMT or AAN or any of its subsidiaries is a party, or result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Company or any of its subsidiaries or by which any property or asset of the Company or any of its subsidiaries is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect). Neither ADMT nor AAN nor any of their subsidiaries is in violation of its Charter or other organizational documents, and neither ADMT nor AAN nor any of its/subsidiaries is in default (and no event has occurred which, with notice or lapse of time or both, would put ADMT or AAN or any of their subsidiaries in default) under, nor has there occurred any event giving others (with notice or lapse of time or both) any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which ADMT and AAN or any of their subsidiaries is a party, except for possible defaults or rights as would not, in the aggregate or individually, have a Material Adverse Effect. The business of each of ADMT and AAN and their subsidiaries is not being conducted, and shall not be conducted so long as the Holder owns any of the Notes, in violation of any law, ordinance or regulation of any governmental entity, except for possible violations which neither singly nor in the aggregate would have a Material Adverse Effect. Except as specifically contemplated by this Note and as required under the Act and any applicable state securities laws, ADMT and AAN are not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under the Notes or the Warrants in accordance with the terms hereof and thereof, or to perform its obligations with respect to the Notes exactly as described in the Notes (once issued), and with respect to the Warrants exactly as described in the Warrants (once issued). (h) SEC Documents; Financial Statements. Except as otherwise disclosed, since at least July 14, 1999, ADMT has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act") (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents (other than exhibits) incorporated by reference therein, being hereinafter referred to as the "SEC Documents"). ADMT has delivered to the Holder as requested by the Holder true and complete copies of the SEC Documents, except for such exhibits, schedules and incorporated documents. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). No other information provided by or on behalf of the Company to the Holder contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstance under which they are or were made, not misleading. Except as set forth in the financial statements of ADMT included in the SEC Documents, the Company has no liabilities, contingent or otherwise, other than (i) liabilities incurred in the ordinary course of business subsequent to the date of such financial statements and (ii) obligations under contracts and commitments incurred in the ordinary course of business and not required under generally accepted accounting principles to be reflected in such financial statements, in each case of clause (i) and (ii) next above which, individually or in the aggregate, are not material to the financial condition, business, operations, properties, operating results or prospects of the Company. The SEC Documents contain a complete and accurate list of all written and oral contracts, agreements, leases or other instruments to which the Company or any subsidiary is a party or by which the Company or any subsidiary is subject which are required by the rules and regulations promulgated by the SEC to be so listed (each a "Contract"). None of the Company, its subsidiaries or, to the best of the Company's knowledge, any of the other parties thereto, is in breach or violation of any Contract, which breach or violation would, or with the lapse of time, the giving of notice, or both, have a Material Adverse Effect. (i) Absence of Certain Changes. Except as disclosed in the SEC Documents, since at least March 31, 2004, there has been no material adverse change and no material adverse development in the business, properties, operation, financial condition, results of operations or prospects of either ADMT and AAN. ADMT and AAN have not taken any steps, and do not currently have any reasonable expectation of taking any steps, to seek protection pursuant to any bankruptcy law nor do ADMT or AAN have any knowledge that its creditors intend to initiate involuntary bankruptcy proceedings. ADMT and AAN shall, at least until Holder no longer holds any of the Notes, maintain its corporate existence in good standing and shall pay all taxes when due except for taxes it reasonably disputes. (j) Absence of Litigation. Except as otherwise disclosed in the PPM, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board or body pending or, to the knowledge of either ADMT or AAN, threatened against or affecting either ADMT or AAN, wherein an unfavorable decision, ruling or finding would have a Material Adverse Effect or which would adversely affect the validity or enforceability of, or the authority or ability of ADMT or AAN to perform its obligations under, this Note or any of the documents contemplated herein. (k) Foreign Corrupt Practices. Neither ADMT nor AAN, nor any of their subsidiaries, nor any officer, director or other person acting on behalf of ADMT or AAN or any subsidiary has, in the course of his actions for or on behalf of ADMT or AAN, used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity, made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee. (l) Brokers; No General Solicitation. ADMT and AAN have taken no action that would give rise to any claim by any person for brokerage commissions, finder's fees or similar payments relating to this Note and the transactions contemplated hereby, other than to Maxim Group LLC (the "Placement Agent"). ADMT, AAN and the Holder both acknowledge that no other broker or finder was involved with respect to the transactions contemplated hereby other than the Placement Agent. Neither ADMT, AAN nor any distributor participating on either ADMT or AAN's behalf in the transactions contemplated hereby nor any person acting for ADMT or AAN, or any such distributor, has conducted any "general solicitation," as described in Rule 502(c) under Regulation D, with respect to the Notes being offered hereby. ADMT and AAN have agreed to compensate the Placement Agent in accordance with their separate written agreement. (m) Acknowledgment of Dilution. The number shares of AAN Common Stock or ADMT Common Stock issuable upon conversion of the Notes and exercise of the Warrants may increase substantially in certain circumstances, including the circumstance wherein the trading price of the ADMT Common Stock or AAN Common Stock declines. ADMT and AAN's executive officers and directors have studied and fully understand the nature of the securities being sold hereunder and recognize they have a potential dilutive effect. The Board of Directors of each of ADMT and AAN have concluded in its good faith business judgment that such issuance is in the best interests of each of ADMT and AAN. ADMT and AAN acknowledge that their obligation to issue shares of ADMT Common Stock or AAN Common Stock issuable upon conversion of the Notes and exercise of the Warrants is binding upon it and enforceable regardless of the dilution that such issuance may have on the ownership interests of other stockholders. (n) Eligibility to File Registration Statement. Each of ADMT and AAN are currently eligible to file a registration statement with the SEC on Form SB-2 under the Act. (o) Non-Disclosure of Non-Public Information. ADMT and AAN shall in no event disclose non-public information to the Holder, advisors to or representatives of the Holder unless prior to such disclosure of information ADMT or AAN marks such information as "non-public information - confidential" and provides the Holder, such advisors and representatives with the opportunity to accept or refuse to accept such non-public information for review. ADMT and AAN may, as a condition to disclosing any non-public information hereunder, require the Holder, its advisors and representatives to enter into a confidentiality agreement in form reasonably satisfactory to ADMT or AAN and the Holder. (p) Patriot Act and Other Representations. ADMT, AAN and their subsidiaries hereby represent and warrant that the parties (i) are not included on any Government List (as defined below), (ii) are not persons who have been determined by any governmental or regulatory authority, domestic or foreign (each a "Governmental Entity") to be subject to the prohibitions contained in Executive Order No. 13224 (Sept. 23, 2001) or any other similar prohibitions contained in the rules and regulations of Office of Foreign Assets Control ("OFAC") and/or in any enabling legislation or other Executive Orders in respect thereof, (iii) to the actual knowledge of the parties, based upon reasonable investigation, are not owned or controlled by, or acts for or on behalf of, any person on any Government List or any other person who has been determined by a Governmental Entity to be subject to the prohibitions contained in Executive Order No. 13224 (Sept. 23, 2001) or similar prohibitions contained in the rules and regulations of OFAC or any enabling legislation or other Executive Orders in respect thereof, (iv) are in compliance with Executive Order No. 13224 (September 23, 2001), the rules and regulations of the OFAC, Department of Treasury or other Executive Orders in respect thereof to which such parties have actual knowledge or should have known based upon reasonable investigation, (v) have not been (and are not currently being) investigated by any Governmental Authority for, or indicted for, any Patriot Act Offense (as defined below) and/or (vi) are not under investigation by any Governmental Entity for alleged criminal behavior. "Governmental Authority" shall mean any nation or government, any state or other political subdivision thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled (through stock or capital ownership or otherwise) by any of the foregoing. "Government List" shall mean (i) the Specially Designated Nationals and Blocked Persons List maintained by the Office of Foreign Assets Control, U.S. Department of the Treasury or (ii) any other list of terrorists, terrorist organizations or narcotics traffickers maintained pursuant to any of the rules and regulations of Office of Foreign Assets Control, U.S. Department of the Treasury, or (iii) any similar list maintained by the U.S. Department of State, the U.S. Department of Commerce or pursuant to any Executive Order of the President of the United States. "Patriot Act Offense" shall means any violation of the criminal laws of the United States of America or any of the several states therein, or that would be a criminal violation if committed within the jurisdiction of the United States of America or any of the several states therein, relating to terrorism or the laundering of monetary instruments, including any offense under (i) the Bank Secrecy Act, as amended, (ii) the Money Laundering Control Act of 1986, as amended, or (iii) the Uniting and Strengthening of America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, Public Law 107-56 (October 26, 2001), in each case as the same may be amended from time to time, and the rules and regulations promulgated thereunder and corresponding provisions of future laws. The term "Patriot Act Offense" also includes the crimes of conspiracy to commit, or aiding and abetting another to commit, a Patriot Act Offense. 7. Affirmative Covenants of ADMT and AAN. Each of ADMT and AAN hereby agree that, so long as the Note remains outstanding and unpaid, or any other amount is owing to the Holder hereunder, each of ADMT and AAN will and with respect to the agreements set forth in this Section 7 hereof will cause each of ADMT and AAN as applicable to: (a) Corporate Existence and Qualification. Take the necessary steps to preserve its corporate existence and its right to conduct business in all states in which the nature of its business requires qualification to do business. In the event of dispute between ADMT or AAN and the Holder as to when qualification is necessary, the decision of the Holder shall control. (b) Financial Information and Compliance Certificates. Keep its books of account in accordance with good accounting practices, and until such time as the Holder no longer beneficially owns the Notes or the Warrants, promptly furnish to the Holder the following financial and other information: (i) each of the Company's Annual Reports, Quarterly Reports and any reports filed on Form 8-K filed with the SEC; and (ii) any press release issued by the Company or any of its subsidiaries. (c) Within five (5) days of any officer of either ADMT or AAN obtaining knowledge of any Event of Default (as defined in Section 9), if such Event of Default is then continuing, each of ADMT and AAN shall furnish to the Holder a certificate of the chief financial or accounting officer of each of ADMT and AAN setting forth the details thereof and the action which ADMT and AAN are taking or proposes to take with respect thereto. (d) Insurance. Maintain insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which ADMT and AAN operates and naming the Holder as an additional insured and loss payee thereon as its interest may appear. (e) Preservation of Properties; Compliance with Law. Maintain and preserve all of its properties which are used or which are useful in the conduct of its business in good working order and condition, ordinary wear and tear excepted and comply with the Charter and Bylaws or other organizational or governing documents of each of ADMT and AAN, and any law, treaty, rule or regulation, or determination of an arbitrator or a court or other governmental authority, in each case applicable to or binding upon each of ADMT and AAN or any of their property or to which each of ADMT and AAN or any of their property is subject. (f) Taxes. Duly pay and discharge all taxes or other claims, which might become a lien upon any of its property except to the extent that any thereof are being in good faith appropriately contested with adequate reserves provided therefor. (g) Notice of Litigation. Promptly notify the Holder in writing of any litigation, legal proceeding or dispute, other than disputes in the ordinary course of business or, whether or not in the ordinary course of business, involving amounts in excess of One Hundred Thousand ($100,000.00) Dollars, affecting either ADMT, AAN or any subsidiary, whether or not fully covered by insurance, and regardless of the subject matter thereof. (h) Securities Laws. Each of ADMT and AAN agree to timely file a Form D (or equivalent form required by applicable state law) with respect to the Notes if and as required under Regulation D and applicable state securities laws and to provide a copy thereof to the Holder promptly after such filing. Each of ADMT and AAN shall, in a timely fashion, take such action as is necessary to sell the Notes being sold to the Holder under applicable securities laws of the United States and the relevant state(s), and shall if specifically so requested provide evidence of any such action so taken to the Holder. (i) Reporting Status. So long as the Holder beneficially owns any of the Notes, ADMT shall file all reports required to be filed with the SEC pursuant to the 1934 Act, and ADMT shall not terminate its status as an issuer required to file reports under the 1934 Act even if the 1934 Act or the rules and regulations hereunder would permit such termination. (j) Use of Proceeds. ADMT and AAN will use the proceeds from the sale of the Notes as set forth in the "Use of Proceeds" section of the PPM. (k) Reservation of Shares. Each of ADMT and AAN shall at all times have authorized, and reserved for the purpose of issuance, a sufficient number of shares of ADMT Common Stock and AAN Common Stock issuable upon conversion of the Notes and exercise of the Warrants to provide for the issuance of all of such shares. Prior to complete conversion of the Notes and exercise of the Warrants, ADMT and AAN shall not reduce the number of shares of ADMT Common Stock or AAN Common Stock reserved for issuance hereunder without the written consent of the Holder except for a reduction proportionate to a reverse stock split effected for a business purpose other than affecting the requirements of this Section, which reverse stock split affects all shares of ADMT Common Stock or AAN Common Stock equally. (l) Listing. Upon the Closing, ADMT and AAN, as applicable, shall in accordance with the registration rights granted to the Holders in the Private Offering secure the listing of the ADMT Common Stock and AAN Common Stock underlying the Notes, the ADMT Warrants and the AAN Warrants upon each national securities exchange or automated quotation system upon which shares of ADMT Common Stock or AAN Common Stock are then listed (subject to official notice of issuance) and shall maintain such listing of shares of ADMT Common Stock and AAN Common Stock issued under the terms of this Note. The Company shall at all times comply in all respects with the Company's reporting, filing and other obligations under the by-laws or rules of the National Association of Securities Dealers and the OTC Bulletin Board (or such other national securities exchange or market on which the ADMT Common Stock or AAN Common Stock may then be listed, as applicable). (m) Prospectus Delivery Requirement; Escrow of ADMT Common Stock or AAN Common Stock. The Holder understands that the Act requires delivery of a prospectus relating to the ADMT Common Stock or AAN Common Stock in connection with any sale thereof pursuant to a registration statement under the Act covering any resale by the Holder of the ADMT Common Stock or AAN Common Stock being sold, and the Holder shall comply with any applicable prospectus delivery requirements of the Act in connection with any such sale. The Company shall have the unequivocal right to rely upon the Holder's representation and covenant to deliver a prospectus as required by applicable law or regulation contained in this Section, and thus, with respect to any resales by the Holder pursuant to a registration statement, such ADMT Common Stock or AAN Common Stock shall contain a restrictive legend only if and to the extent required by law. The Holder will indemnify and hold harmless the Company and its transfer agent for any loss, cost or expense (including reasonable attorneys' fees) incurred by such parties as a result of improper actions taken by the Holder in response to the Company's and the transfer agent's compliance with the provisions of this Section, including without limitation, the sales of such ADMT Common Stock or AAN Common Stock without delivery of a prospectus as required by applicable law or regulation. (n) Intentional Acts or Omissions. Neither party shall intentionally perform any act that if performed, or omit to perform any act which if omitted to be performed, would prevent or excuse the performance of this Note or any of the transactions contemplated hereby. 8. Negative Covenants of the Company. Each of ADMT and AAN hereby agree that, so long as the Note remains or remain outstanding and unpaid, or any other amount is owing to the Holder hereunder it will not, nor will it permit any of its subsidiaries to: (a) Indebtedness for Borrowed Money. Incur, or permit to exist, any Indebtedness (as defined below) for borrowed money, with rights superior to Holder, except in the ordinary course of ADMT or AAN's business. "Indebtedness" shall mean, with respect to ADMT or AAN, (a) all obligations of ADMT or AAN for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of ADMT or AAN evidenced by bonds, debentures, notes or other similar instruments, (c) all obligations of ADMT or AAN for the deferred purchase price of property or services, except current accounts payable arising in the ordinary course of business and not overdue beyond such period as is commercially reasonable for ADMT or AAN's business, (d) all obligations of ADMT or AAN under conditional sale or other title retention agreements relating to property purchased by ADMT or AAN, (e) all payment obligations of ADMT or AAN with respect to interest rate or currency protection agreements , (f) all obligations of ADMT or AAN as an account party under any letter of credit or in respect of bankers' acceptances, (g) all obligations of any third party secured by property or assets of such Person (regardless of whether or not ADMT or AAN is liable for repayment of such obligations), (h) all guarantees of ADMT or AAN and (i) the redemption price of all redeemable preferred stock of ADMT or AAN, but only to the extent that such stock is redeemable at the option of the holder or requires sinking fund or similar payments at any time prior to the Maturity Date. (b) Mergers, Acquisitions and Sales of Assets. Enter into any merger or consolidation or liquidate, windup or dissolve itself or sell, transfer or lease or otherwise dispose of all or any substantial part of its assets or technologies (other than sales of inventory and obsolescent equipment in the ordinary course of business) or acquire by purchase or otherwise the business or assets of, or stock of, another business entity in excess of $250,000; except that any subsidiary of ADMT (other than AAN) may merge into or consolidate with any other subsidiary which is wholly-owned by ADMT and any subsidiary which is wholly-owned by ADMT may merge with or consolidate into ADMT provided that ADMT is the surviving corporation, or enter into any transaction or series of related transactions in which more than 50% of the voting power of AAN is disposed of by ADMT. (c) Loans; Investments. Lend or advance money, credit or property to or invest in (by capital contribution, loan, purchase or otherwise) any firm, corporation, or other Person except (i) investments in United States Government obligations, certificates of deposit of any banking institution with combined capital and surplus of at least $200,000,000; (iii) accounts receivable arising out of sales of inventory in the ordinary course of business; and (iii) loans to subsidiaries. (d) Dividends and Distributions. Pay dividends or make any other distribution on shares of the capital stock of either ADMT or AAN. (e) Liens. Create, assume or permit to exist, any lien on any of its property or assets now owned or hereafter acquired except (i) liens in favor of the Holder; (ii) other liens incidental to the conduct of its business or the ownership of its property and assets which were not incurred in connection with the borrowing of money or the obtaining of advances or credit and which do not materially impair the use thereof in the operation of its business; (iii) liens for taxes or other governmental charges which are not delinquent or which are being contested in good faith and for which a reserve shall have been established in accordance with generally accepted accounting principles; and (iv) purchase money liens granted to secure the unpaid purchase price of any fixed assets purchased within the limitations of Section 8(i) hereof. (f) Contingent Liabilities. Assume, endorse, be or become liable for or guarantee the obligations of any Person, contingently or otherwise, excluding however, the endorsement of negotiable instruments for deposit or collection in the ordinary course of business. (g) Sales of Receivables; Sale - Leasebacks. Sell, discount or otherwise dispose of notes, accounts receivable or other obligations owing to ADMT or AAN, with or without recourse, except for the purpose of collection in the ordinary course of business; or sell any asset pursuant to an arrangement to thereafter lease such asset from the purchaser thereof. (h) Capital Expenditures; Capitalized Leases. Expend in the aggregate for the Company and all its subsidiaries in excess of $1,500,000 in any fiscal year for Capital Expenditures (as defined below) including payments made on account of Capitalized Leases (as defined below). For purposes of the foregoing, Capital Expenditures shall include payments made on account of any deferred purchase price or on account of any indebtedness incurred to finance any such purchase price. "Capital Expenditures" shall mean for any period, the aggregate amount of all payments made by any Person directly or indirectly for the purpose of acquiring, constructing or maintaining fixed assets, real property or equipment which, in accordance with generally accepted accounting principles, would be added as a debit to the fixed asset account of such Person, including, without limitation, all amounts paid or payable with respect to Capitalized Lease Obligations and interest which are required to be capitalized in accordance with generally accepted accounting principles. "Capitalized Lease" shall mean any lease the obligations to pay rent or other amounts under which constitute Capitalized Lease Obligations. "Capitalized Lease Obligations" shall mean as to any Person, the obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) real and/or personal property which obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under generally accepted accounting principles and, for purposes of this Note, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with generally accepted accounting principles. (i) Lease Payments. Expend in the aggregate for the Company and all its subsidiaries in excess of $500,000 in any fiscal year for the lease, rental or hire of real or personal property pursuant to any rental agreement therefor, whether an operating lease, capitalized lease or otherwise. (j) Nature of Business. Materially alter the nature of ADMT's business or permit AAN to engage in any business other than the business engaged in or proposed to be engaged in on the date of this Note. (k) Stock of Subsidiaries. Sell or otherwise dispose of any subsidiary (except in connection with a merger or consolidation of a subsidiary into ADMT or another subsidiary) or permit a subsidiary to issue any additional shares of its capital stock except pro rata to its stockholders. (l) ERISA. (i) Terminate any plan ("Plan") of a type described in Section 402l(a) of the Employee Retirement Income Security Act of l974, as amended from time to time ("ERISA") in respect of which the Company is an "employer" as defined in Section 3(5) of ERISA so as to result in any material liability to the Pension Benefit Guaranty Corporation (the "PBGC") established pursuant to Subtitle A of Title IV of ERISA, (ii) engage in or permit any person to engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1954, as amended) involving any Plan which would subject the Company to any material tax, penalty or other liability, (iii) incur or suffer to exist any material "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, involving any Plan, or (iv) allow or suffer to exist any event or condition, which presents a material risk of incurring a material liability to the PBGC by reason of termination of any Plan. (m) Accounting Changes. Make, or permit any subsidiary to make any change in their accounting treatment or financial reporting practices except as required or permitted by generally accepted accounting principles in effect from time to time. (n) Transactions with Affiliates. Except as otherwise specifically set forth in this Note, directly or indirectly purchase, acquire or lease any property from, or sell, transfer or lease any property to, or enter into any other transaction, with any Affiliate (as defined below) except in the ordinary course of business and at prices and on terms not less favorable to it than those which would have been obtained in an arm's-length transaction with a non-affiliated third party. "Affiliate" as applied to any Person, shall mean any other Person directly or indirectly through one or more intermediaries controlling, controlled by, or under common control with, that Person. For the purposes of this definition, "control" (including with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise. 9. Events of Default. The Note shall become immediately due and payable at the option of the Holder, without notice or demand, upon any one or more of the following events or occurrences ("Events of Default"): (a) if any portion of the Note is not paid when due; (b) if any representation or warranty of either ADMT or AAN made in this Note or in any certificate, report or other financial statement or other instrument or document delivered pursuant hereto, or any notice, certificate, demand or request delivered to the Holder pursuant to this Note or any other document proves to be false or misleading in any material respect as of the time when the same is made; (c) if ADMT or AAN consummates a transaction which would cause this Note or any exercise of any Holder's rights under the Notes and the Warrants (i) to constitute a non-exempt prohibited transaction under ERISA, (ii) to violate a state statute regulating governmental plans or (iii) otherwise to subject ADMT or AAN to liability for violation of ERISA or such state statute; (d) if any final judgment for the payment of money is rendered against ADMT or AAN and ADMT or AAN does not discharge the same or cause it to be discharged or vacated within one hundred twenty (120) days from the entry thereof, or does not appeal therefrom or from the order, decree or process upon which or pursuant to which said judgment was granted, based or entered, and does not secure a stay of execution pending such appeal within one hundred twenty (120) days after the entry thereof; (e) subject to the provisions of Section 7(f) hereof, if any taxes are not paid before delinquency; (f) if ADMT or AAN makes an assignment for the benefit of creditors or if ADMT or AAN generally does not pay its debts as they become due; (g) if a receiver, liquidator or trustee of ADMT or AAN is appointed or if ADMT or AAN is adjudicated a bankrupt or insolvent, or if any petition for bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any similar federal or state law, is filed by or against, consented to, or acquiesced in, by ADMT or AAN or if any proceeding for the dissolution or liquidation of ADMT or AAN is instituted; however, if such appointment, adjudication, petition or proceeding is involuntary and is not consented to by ADMT or AAN, upon the same not being discharged, stayed or dismissed within 60 days; (h) if ADMT or AAN defaults under any other mortgage or security agreement covering any part of its property; (i) except for specific defaults set forth in this Section 9, if ADMT or AAN defaults in the observance or performance of any other term, agreement or condition of this Note, and ADMT and AAN fail to remedy such default within thirty (30) days after notice by the Holder to ADMT and AAN of such default, or, if such default is of such a nature that it cannot with due diligence be cured within said thirty (30) day period, if ADMT and AAN fail, within said thirty (30) days, to commence all steps necessary to cure such default, and fail to complete such cure within ninety (90) days after the end of such thirty (30) day period; (j) except for specific defaults set forth in this Section 9, if ADMT or AAN defaults in the observance or performance of any term, agreement or condition of the Note, and such default continues after the end of any applicable cure period provided for therein; and (k) if any of the following exist uncured for forty-five (45) days following written notice to ADMT or AAN: (i) the failure of any representation or warranty made by ADMT or AAN to be true and correct in all respects or (ii) ADMT or AAN fails to provide the Holder with the written certifications and evidence referred to in this Note. 10. Note Holder Not Deemed a Stockholder. No Holder, as such, of this Note shall be entitled (prior to conversion or redemption of this Note into ADMT Common Stock or AAN Common Stock, and only then to the extent of such conversion) to vote or receive dividends or be deemed the holder of shares of ADMT or AAN for any purpose, nor shall anything contained in this Note be construed to confer upon the Holder hereof, as such, any of the rights at law of a stockholder of ADMT or AAN prior to the issuance to the holder of this Note of the shares of Common Stock which the Holder is then entitled to receive upon the due conversion of all or a portion of this Note. Notwithstanding the foregoing, ADMT and AAN will provide the Holder with copies of the same notices and other information given to the stockholders of ADMT and AAN generally, contemporaneously with the giving thereof to the stockholders. 11. Mutilated, Destroyed, Lost or Stolen Notes. In case this Note shall become mutilated or defaced, or be destroyed, lost or stolen, ADMT and AAN shall execute and deliver a new note of like principal amount in exchange and substitution for the mutilated or defaced Note, or in lieu of and in substitution for the destroyed, lost or stolen Note. In the case of a mutilated or defaced Note, the Holder shall surrender such Note to the Company. In the case of any destroyed, lost or stolen Note, the Holder shall furnish to the Company (a) evidence to its satisfaction of the destruction, loss or theft of such Note and (b) such security or indemnity as may be reasonably required by the Company to hold the Company harmless. 12. Waiver of Demand, Presentment, Etc. The Company hereby expressly waives demand and presentment for payment, notice of nonpayment, protest, notice of protest, notice of dishonor, notice of acceleration or intent to accelerate, bringing of suit and diligence in taking any action to collect amounts called for hereunder and shall be directly and primarily liable for the payment of all sums owing and to be owing hereunder, regardless of and without any notice, diligence, act or omission as or with respect to the collection of any amount called for hereunder. 13. Payment. Except as otherwise provided for herein, all payments with respect to this Note shall be made in lawful currency of the United States of America, at the option of the Holder, (i) at the principal office of the Holder, located at 237 Avenue, 9th Floor, New York, New York 10017, or such other place or places as may be reasonably specified by the Holder of this Note in a written notice to each of ADMT and AAN at least ten (10) business days before a given payment date, or (ii) by mailing a good check in the proper amount to the Holder at least two days prior to the due date of each payment or otherwise transferring funds so as to be received by the Holder on the due date of each such payment; provided, however, that ADMT and AAN shall make payment by wire transfer to an account such Holder may specify in writing to ADMT and AAN at least two days prior to the due date of each payment. Payment shall be credited first to the accrued interest then due and payable and the remainder applied to principal. The Holder shall keep a record of each payment of principal and interest with respect thereto. This Note is not secured. 14. Assignment. The rights and obligations of the Company and the Holder of this Note shall be binding upon, and inure to the benefit of, the permitted successors, assigns, heirs, administrators and transferees of the parties hereto. Notwithstanding the foregoing, the Holder may not assign, pledge or otherwise transfer this Note without the prior written consent of the Company. Interest and principal are payable only to the registered Holder of this Note in the Note Register. 15. Waiver and Amendment. Any provision of this Note, including, without limitation, the due date hereof, and the observance of any term hereof, may be amended, waived or modified (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and the Holder. 16. Notices. Any notice, request or other communication required or permitted hereunder shall be in writing and shall be deemed to have been duly given if personally delivered or mailed by registered or certified mail, postage prepaid, or delivered by facsimile transmission, to the Company at the address or facsimile number set forth herein or to the Holder at its address or facsimile number set forth in the records of the Company. Any party hereto may by notice so given change its address for future notice hereunder. Notice shall conclusively be deemed to have been given when personally delivered or when deposited in the mail in the manner set forth above and shall be deemed to have been received when delivered or, if notice is given by facsimile transmission, when delivered with confirmation of receipt. 17. Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York, excluding that body of law relating to conflicts of laws. 18. Severability. If one or more provisions of this Note are held to be unenforceable under applicable law, such provisions shall be excluded from this Note, and the balance of this Note shall be interpreted as if such provisions were so excluded and shall be enforceable in accordance with its terms. 19. Headings. Section headings in this Note are for convenience only, and shall not be used in the construction of this Note. IN WITNESS WHEREOF, the Company has caused this Note to be issued as of the date first above written. ADM TRONICS UNLIMITED, INC. By: _________________________ Name: Title: AA NORTHVALE MEDICAL ASSOCIATES INC. By: _________________________ Name: Title: EX-4 3 ex42kaan.txt AA NORTHVALE MEDICAL ASSOCIATES, INC. REDEEMABLE COMMON STOCK PURCHASE WARRANT NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT"), AND NEITHER THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION SHALL BE APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. Void after 5:00 P.M., New York City time, on the last day of the Exercise Period, as defined below REDEEMABLE CLASS A COMMON STOCK PURCHASE WARRANT OF AA NORTHVALE MEDICAL ASSOCIATES, INC. This is to certify that, FOR VALUE RECEIVED, ____________ ("Holder"), is entitled to purchase, subject to the provisions of this Redeemable Class A Common Stock Purchase Warrant (this "Warrant"), from AA Northvale Medical Associates, Inc., a New Jersey corporation (the "Company"), at an initial exercise price per share of $5.70 (100% of the Conversion Price) (the "Initial Exercise Price"), subject to adjustment as provided in this Warrant, _______________ thousand (_____________) shares of common stock, no par value ("Common Stock"). The shares of Common Stock deliverable upon such exercise, and as adjusted from time to time, are hereinafter sometimes referred to as "Warrant Stock," and the exercise price for the purchase of a share of Common Stock pursuant to this Warrant in effect at any time and as adjusted from time to time is hereinafter sometimes referred to as the "Exercise Price." 1. ISSUANCE OF WARRANT. This Warrant is being issued pursuant to that certain Subscription Agreement dated as of the date hereof between the Company and the Holder (the "Subscription Agreement"). Capitalized terms used herein and not otherwise defined shall have the meanings ascribed thereto in the Subscription Agreement. In addition the following terms have the meanings set forth below: "AAN Warrant" means this Warrant for the purchase of the number of shares of Common Stock of the Company noted above. "ADMT Warrant" shall mean the Warrant for the purchase of ______ shares of common stock of ADM Tronics Unlimited, Inc., a Delaware corporation, which was issued to the Holder concurrently with the issuance of the AAN Warrant. The ADMT Warrant is sometimes referred to herein as the "Corresponding ADMT Warrant." "Approved Market" shall mean any public market in the United States on which the AAN Common Stock is trading (it being understood that the Pink Sheets Quotation Service shall not qualify as an Approved Market for these purposes). "Convertible Securities" shall mean evidences of indebtedness, shares of stock or other securities, which are convertible into or exchangeable, with or without payment of additional consideration in cash or property, for shares of Common Stock, either immediately or upon the occurrence of a specified date or a specified event. "Exercise Period" shall mean the period commencing on August __, 2004 and ending at 5 p.m., eastern time on August __, 2009. "Offering" shall mean the joint offering of units by the Company and ADMT pursuant to a confidential private placement memorandum dated May 20, 2004, as amended and supplemented ("PPM"). "Permitted Issuances" shall mean: (i) Common Stock issued pursuant to a stock split or subdivision, (ii) Common Stock issuable or issued to employees, consultants or directors of the Company directly or pursuant to a stock plan or other compensation arrangement approved by the Board of Directors of the Company, provided: however, that such issuances, in the aggregate, shall be less than 271,000 shares of AAN until such time as the shares of Common Stock underlying the Warrant are registered for resale with the SEC and listed for trading on an Approved Market, (iii) Common Stock issued or issuable upon conversion of the Warrants or any other securities exercisable or exchangeable for, or convertible into shares of Common Stock outstanding as of May 20, 2004, and (iv) shares of Common Stock issued or issuable in a transaction approved in advance by the holders of more than 50% of the then outstanding Warrants. 2. EXERCISE OF WARRANT/REGISTRATION RIGHTS. (a) This AAN Warrant may be exercised in whole or in part at any time or from time to time from the date that the Common Stock of the Company is listed on an Approved Market, and that the shares of Common Stock issuable upon exercise of this AAN Warrant have been registered for resale with the SEC until the end of the Exercise Period by presentation and surrender of this AAN Warrant and the ADMT Warrants to the Company at its principal office, or at the office of its stock transfer agent, if any, with the Purchase Form annexed to this AAN Warrant duly executed and accompanied by payment of the Exercise Price for the number of shares of Common Stock specified in the Purchase Form in cash (the Holder will receive no consideration for the surrender of the ADMT Warrant). If this AAN Warrant should be exercised in part only, the Company shall, upon surrender of this AAN Warrant (and the ADMT Warrants) for cancellation, execute and deliver a new AAN Warrant (and the ADMT Warrants) evidencing the rights of the Holder hereof to purchase the balance of the shares of Common Stock purchasable hereunder. Upon receipt by the Company of this AAN Warrant at its office, or by the stock transfer agent of the Company at its office, in proper form for exercise, the Holder shall be deemed to be the holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such shares of Common Stock shall not then be actually delivered to the Holder. As soon as practicable after each exercise of this Warrant, in whole or in part, and in any event within three (3) business days thereafter, the Company at its expense (including the payment by it of any applicable issue taxes) will cause to be issued in the name of and delivered to the Holder hereof or, subject to Section 6 hereof, as the Holder (upon payment by the Holder of any applicable transfer taxes) may direct a certificate or certificates for the number of duly authorized, validly issued, fully paid and nonassessable shares of Common Stock to which the Holder shall be entitled upon exercise plus, in lieu of any fractional share to which the Holder would otherwise be entitled, all issuances of Common Stock shall be rounded up to the nearest whole share. (b) The Company shall use its best efforts to file a registration statement (the "Registration Statement") registering the Warrant Stock with the SEC under the Securities Act of 1933, as amended (the "Act") within 60 days following the closing of the Offering. (c) The Company has also granted "piggyback" registration rights to the Holder, as more fully described in the Subscription Agreement executed as of the date hereof. 3. RESERVATION OF SHARES; FRACTIONAL SHARES. The Company hereby agrees that at all times there shall be reserved for issuance and/or delivery upon exercise of this Warrant such number of shares of Common Stock as shall be required for issuance and delivery upon exercise of this Warrant. No fractional shares or script representing fractional shares shall be issued upon the exercise of this Warrant. Instead, the Company will round up to the nearest whole share. 4. EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This AAN Warrant is exchangeable, without expense, at the option of the Holder, upon presentation and surrender hereof (along with the Corresponding ADMT Warrant) to the Company or at the office of its stock transfer agent, if any, for other AAN Warrants (and Corresponding ADMT Warrants) of different denominations entitling the holder thereof to purchase in the aggregate the same number of shares of Common Stock purchasable hereunder. Upon surrender of this AAN Warrant (and Corresponding ADMT Warrant) to the Company or at the office of its stock transfer agent, if any, with the Assignment Form annexed hereto duly executed and funds sufficient to pay any transfer tax, the Company shall, without charge, execute and deliver a new AAN Warrant (and Corresponding ADMT Warrant) in the name of the assignee named in such instrument of assignment and this AAN Warrant (and Corresponding ADMT Warrant) shall promptly be canceled. This AAN Warrant (and Corresponding ADMT Warrant) may be divided or combined with other AAN Warrants (and Corresponding ADMT Warrants) which carry the same rights upon presentation hereof at the office of the Company or at the office of its stock transfer agent, if any, together with a written notice specifying the names and denominations in which new AAN Warrants (and Corresponding ADMT Warrants) are to be issued and signed by the Holder hereof. The term "Warrant" and "AAN Warrant" as used herein includes any AAN Warrants into which this Warrant may be divided or exchanged. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver a new Warrant of like tenor. Any such new Warrant executed and delivered shall constitute an additional contractual obligation on the part of the Company, whether or not this Warrant so lost, stolen, destroyed, or mutilated shall be at any time enforceable by anyone. 5. RIGHTS AND OBLIGATIONS OF THE HOLDER. The Holder shall not, by virtue of this Warrant, be entitled to any rights of a stockholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in the Warrant and are not enforceable against the Company except to the extent set forth herein. In addition, no provision hereof, in the absence of affirmative action by Holder to purchase shares of Common Stock, and no enumeration herein of the rights or privileges of Holder hereof, shall give rise to any liability of such Holder for the purchase price of any Common Stock or as a stockholder of Company, whether such liability is asserted by Company or by creditors of Company. 6. ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any time and the number and kind of securities purchasable upon exercise of each Warrant shall be subject to adjustment as follows and the Company shall give each Holder notice of any event described below which requires an adjustment pursuant to this Section 6 at the time of such event: (a) Stock Dividends, Subdivisions and Combinations. If at any time Company shall: (i) take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend payable in, or other distribution of, shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into a larger number of shares of Common Stock, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares of Common Stock or otherwise effect a reverse stock split, then (i) the number of shares of Common Stock for which this Warrant is exercisable immediately after the occurrence of any such event shall be adjusted to equal the number of shares of Common Stock which a record holder of the same number of shares of Common Stock for which this Warrant is exercisable immediately prior to the occurrence of such event, or the record date therefor, whichever is earlier, would own or be entitled to receive after the happening of such event, and (ii) the Exercise Price(s) shall be adjusted to equal (A) the Exercise Price immediately prior to such event multiplied by the number of shares of Common Stock for which this Warrant is exercisable immediately prior to the adjustment divided by (B) the number of shares for which this Warrant is exercisable immediately after such adjustment. (b) Certain Other Distributions and Adjustments. (i) If at any time Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive any dividend or other distribution of: (A) cash, (B) any evidences of its indebtedness, any shares of its stock or any other securities or property of any nature whatsoever (other than Convertible Securities or shares of Common Stock), or (C) any warrants or other rights to subscribe for or purchase any evidences of its indebtedness, any shares of its stock or any other securities or property of any nature whatsoever (other than Convertible Securities or shares of Common Stock), then Holder, upon exercise of this Warrant, shall be entitled to receive such dividend or distribution as if Holder had exercised this Warrant. (ii) A reclassification of the Common Stock (other than a change in par value, or from par value to no par value or from no par value to par value) into shares of Common Stock and shares of any other class of stock shall be deemed a distribution by Company to the holders of its Common Stock of such shares of such other class of stock and in such event Holder shall be entitled to receive such distribution as if Holder had exercised this Warrant and, if the outstanding shares of Common Stock shall be changed into a larger or smaller number of shares of Common Stock as a part of such reclassification, such change shall be deemed a subdivision or combination, as the case may be, of the outstanding shares of Common Stock within the meaning of Section 6(a). (c) Issuance of Additional Shares of Common Stock. (i) If at any time the Company shall issue or sell any shares of Common Stock in exchange for consideration in an amount per share of Common Stock less than the then current Exercise Price, other than Permitted Issuances, then (A) the Exercise Price shall be adjusted so that it shall equal the price determined by multiplying the Exercise 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 on the date of issuance plus the number of additional shares of Common Stock which the aggregate offering price would purchase based upon the Exercise Price, and of which the denominator shall be the number of shares of Common Stock outstanding on the date of issuance plus the number of additional shares of Common Stock issued or issuable in such offering, and (B) the number of shares of Common Stock for which this Warrant is exercisable shall be adjusted to equal the product obtained by multiplying the Exercise Price in effect immediately prior to such issue or sale by the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such issue or sale and dividing the product thereof by the Exercise Price resulting from the adjustment made pursuant to clause (A) above. (ii) The provisions of paragraph (i) of this Section 6(c) shall not apply to any issuance of shares of Common Stock for which an adjustment is provided under Section 6(a) or 6(b). No adjustment of the number of shares of Common Stock for which this Warrant shall be exercisable shall be made under paragraph (i) of this Section 6(c) upon the issuance of any shares of Common Stock which are issued pursuant to the exercise of any warrants or other subscription or purchase rights or pursuant to the exercise of any conversion or exchange rights in any Convertible Securities, if any such adjustment shall previously have been made upon the issuance of such warrants or other rights or upon the issuance of such Convertible Securities (or upon the issuance of any warrant or other rights therefor) pursuant to Section 6(d) or Section 6(e). (d) Issuance of Warrants or Other Rights. If at any time Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a distribution of, or shall in any manner (whether directly or by assumption in a merger in which Company is the surviving corporation) issue or sell, any warrants or other rights to subscribe for or purchase any shares of Common Stock or any Convertible Securities, whether or not the rights to exchange or convert thereunder are immediately exercisable, and the price per share for which Common Stock is issuable upon the exercise of such warrants or other rights or upon conversion or exchange of such Convertible Securities shall be less than the Trigger Price, then the number of shares for which this Warrant is exercisable and the Exercise Price shall be adjusted as provided in Section 6(c) on the basis that the maximum number of shares of Common Stock issuable pursuant to all such warrants or other rights or necessary to effect the conversion or exchange of all such Convertible Securities shall be deemed to have been issued and outstanding and the Company shall be deemed to have received all the consideration payable therefor, if any, as of the date of issuance of such warrants or other rights. No further adjustment of the Exercise Price(s) shall be made upon the actual issuance of such Common Stock or of such Convertible Securities upon exercise of such warrants or other rights or upon the actual issuance of such Common Stock upon such conversion or exchange of such Convertible Securities. (e) Issuance of Convertible Securities. If at any time Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a distribution of, or shall in any manner (whether directly or by assumption in a merger in which Company is the surviving corporation) issue or sell, any Convertible Securities, whether or not the rights to exchange or convert thereunder are immediately exercisable, and the price per share for which Common Stock is issuable upon such conversion or exchange shall be less than the then current Exercise Price, then the number of shares of Common Stock for which this Warrant is exercisable and the Exercise Price shall be adjusted as provided in Section 6(c) on the basis that the maximum number of shares of Common Stock necessary to effect the conversion or exchange of all such Convertible Securities shall be deemed to have been issued and outstanding and Company shall have received all of the consideration payable therefor, if any, as of the date of issuance of such Convertible Securities. If any issue or sale of Convertible Securities is made upon exercise of any warrant or other right to subscribe for or to purchase any such Convertible Securities for which adjustments of the number of shares of Common Stock for which this Warrant is exercisable and the Exercise Price have been or are to be made pursuant to Section 6(d), no further adjustment of the number of shares of Common Stock for which this Warrant is exercisable and the Exercise Price shall be made by reason of such record, issue or sale. (f) No adjustment in the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least one cent ($0.01) in such price; provided, however, that any adjustments which by reason of this Section 6(f) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 6(f) shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. (g) The Company may retain a firm of independent public accountants of recognized standing selected by the Board (who may be the regular accountants employed by the Company) to make any computation required by this Section 6. (h) In the event that at any time, as a result of an adjustment made pursuant to Section 6(a), (b) or (c) of this Warrant, the Holder of any Warrant 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 any Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in Sections 6(a) through (g), inclusive, of this Warrant. (i) Notwithstanding the foregoing, no adjustment shall be effected due to, or as a result of, any Permitted Issuances. (j) Other Action Affecting Common Stock. In case at any time or from time to time Company shall take any action in respect of its Common Stock, other than any action described in this Section 6, then, unless such action will not have a materially adverse effect upon the rights of the Holders, the number of shares of Common Stock or other stock for which this Warrant is exercisable and/or the purchase price thereof shall be adjusted in such manner as may be equitable in the circumstances. 7. REDEMPTION. Provided the shares of Common Stock issuable upon exercise of this Warrant are registered with the SEC for resale to the public, or an exemption to the registration requirements is available to the Holder of this Warrant under Rule 144, the Company may, at its option, call for the redemption of the then outstanding AAN Warrants in the event that: (i) the market price of the Common Stock is at or above $31.26 per share for twenty (20) consecutive trading days ending on the day prior to the date on which the Company gives notice that it is requiring exercise of the AAN Warrants; and (ii) the shares of Common Stock issuable upon exercise of the AAN Warrants are registered with the SEC for resale to the public, or an exemption to the registration requirements is available to the holder of the AAN Warrants under Rule 144, provided, however, that the aggregate number of AAN Warrants to be redeemed shall not exceed the cumulative trading volume for the ten (10) consecutive trading days prior to such redemption within any thirty (30) day period. The number of AAN Warrants to be redeemed shall be pro rata among each holder of the then outstanding AAN Warrants. The redemption price to be paid by AAN shall be equal to $1.00 per AAN Warrant. If the AAN Warrants are redeemed, the Corresponding ADMT Warrant shall thereafter be void. The Redemption Notice shall be given not later than the thirtieth day before the date fixed for redemption. On and after the date fixed for redemption, the Registered Holder shall have no rights with respect to this Warrant except to receive the redemption price of $1.00 per Warrant upon surrender. If the AAN Warrants are redeemed, a proportionate number of the Corresponding ADMT Warrants shall thereafter be void. 8. OFFICER'S CERTIFICATE. Whenever the Exercise Price(s) shall be adjusted as required by the provisions of Section 6 of this Warrant, the Company shall forthwith file in the custody of its Secretary or an Assistant Secretary at its principal office and with its stock transfer agent, if any, an officer's certificate showing the adjusted Exercise Price(s) and the adjusted number of shares of Common Stock issuable upon exercise of each Warrant, determined as herein provided, setting forth in reasonable detail the facts requiring such adjustment, including a statement of the number of additional shares of Common Stock, if any, and such other facts as shall be necessary to show the reason for and the manner of computing such adjustment. A copy of each such officer's certificate shall be forwarded to Holder. 9. NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be outstanding, (1) if the Company shall pay any dividend or make any distribution upon Common Stock, or (2) if the Company shall offer to the holders of Common Stock for subscription or purchase by them any share of any class or any other rights, or (3) if any capital reorganization of the Company, reclassification of the capital stock of the Company, consolidation or merger of the Company with or into another entity, tender offer transaction for the Company's Common Stock, sale, lease or transfer of all or substantially all of the property and assets of the Company, or voluntary or involuntary dissolution, liquidation or winding up of the Company shall be effected, or (4) if the Company shall file a registration statement under the Securities Act, on any form other than on Form S-4 or S-8 or any successor form, then in any such case, the Company shall cause to be mailed by certified mail to the Holder, at least ten days prior to the date specified in clauses (1), (2), (3) or (4), as the case may be, of this Section 9 a notice containing a brief description of the proposed action and stating the date on which (i) a record is to be taken for the purpose of such dividend, distribution or rights, or (ii) such reclassification, reorganization, consolidation, merger, tender offer transaction, conveyance, lease, dissolution, liquidation or winding up is to take place and the date, if any is to be fixed, as of which the holders of Common Stock or other securities shall receive cash or other property deliverable upon such reclassification, reorganization, consolidation, merger, conveyance, dissolution, liquidation or winding up, or (iii) such registration statement is to be filed with the Securities and Exchange Commission. 10. RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the Company, or in case of any consolidation or merger of the Company with or into another corporation (other than a merger with a subsidiary in which merger the Company is the continuing or surviving corporation and which does not result in any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the class issuable upon exercise of this Warrant) or in case of any sale, lease or conveyance of all or substantially all of the assets of the Company, the Company shall, as a condition precedent to such transaction, cause effective provisions to be made so that (i) the Holder shall have the right thereafter by exercising this Warrant, to purchase the kind and amount of shares of stock and other securities and property receivable upon such reclassification, capital reorganization and other change, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock which could have been purchased upon exercise of this Warrant immediately prior to such reclassification, change, consolidation, merger, sale or conveyance, and (ii) the successor or acquiring entity shall expressly assume the due and punctual observance and performance of each covenant and condition of this Warrant to be performed and observed by Company and all obligations and liabilities hereunder (including but not limited to the provisions of Section 3 regarding the increase in the number of shares of Warrant Stock potentially issuable hereunder). Any such provision shall include provision for adjustments which shall be as nearly equivalent as possible to the adjustments provided for in this Warrant. The foregoing provisions of this Section 10 shall similarly apply to successive reclassifications, capital reorganizations and changes of shares of Common Stock and to successive consolidations, mergers, sales or conveyances. In the event that in connection with any such capital reorganization or reclassification, consolidation, merger, sale or conveyance, additional shares of Common Stock shall be issued in exchange, conversion, substitution or payment, in whole in part, for a security of the Company other than Common Stock, any such issue shall be treated as an issuance of Common Stock covered by the provisions of Section 6 of this Warrant. 11. TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933. This Warrant or the Warrant Stock or any other security issued or issuable upon exercise of this Warrant may not be sold or otherwise disposed of except as follows: (i) to a person who, in the opinion of counsel for the Company, is a person to whom this Warrant or Warrant Stock may legally be transferred without registration and without the delivery of a current prospectus under the Act with respect thereto and then only against receipt of an agreement of such person to comply with the provisions of this Section 11 with respect to any resale or other disposition of such securities which agreement shall be satisfactory in form and substance to the Company and its counsel; or (ii) to any person upon delivery of a prospectus then meeting the requirements of the Act relating to such securities and the offering thereof for such sale or disposition. 12. GOVERNING LAW; JURISDICTION. The corporate laws of the State of New Jersey shall govern all issues concerning the relative rights of the Company and its stockholders. All issues concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by and construed in accordance with the internal laws of the State of New York without giving effect to the principles of conflicts of law thereof. The parties hereto agree that venue in any and all actions and proceedings related to the subject matter of this Warrant shall be in the state and federal courts in and for New York, New York, which courts shall have exclusive jurisdiction for such purpose, and the parties hereto irrevocably submit to the exclusive jurisdiction of such courts and irrevocably waive the defense of an inconvenient forum to the maintenance of any such action or proceeding. Service of process may be made in any manner recognized by such courts. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. 13. NOTICES. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 6:30 p.m. (New York City time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Agreement later than 6:30 p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York City time) on such date, (iii) the Business Day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows: AA Northvale Medical Associates, Inc. 224-S Pegasus Avenue Northvale, New Jersey 07647 Attn: President Tel: (201) 767-6040 Fax: (201) 784-0620 or such other address as it shall have specified to the Subscriber in writing, with a copy (which shall not constitute notice) to: Frank J. Hariton, Esq. 1065 Dobbs Ferry Road White Plains, New York 10607 Attn: Frank J. Hariton Tel: 914.674.4373; Fax: 914.693.2963 If to the Holder: With copies to: 14. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes attributable to the issuance of shares of Common Stock underlying this Warrant upon exercise of this Warrant; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificate for shares of Common Stock underlying this Warrant in a name other that of the Holder. The Holder is responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving shares of Common Stock underlying this Warrant upon exercise hereof. [Signature page follows] IN WITNESS WHEREOF, this Warrant has been duly executed as of ____, 2004. AA NORTHVALE MEDICAL ASSOCIATES, INC. By: ________________________________ Name: Title: PURCHASE FORM Dated: _______________, 20_____ The undersigned hereby irrevocably elects to exercise the within AAN Warrant to the extent of purchasing ___ shares of Common Stock and hereby makes payment of (i) $________ in payment of the actual exercise price thereof and (ii) the surrender to the Company of a proportionate amount of the Corresponding ADMT Warrant for no consideration. ____________________________ INSTRUCTIONS FOR REGISTRATION OF STOCK Name:___________________________________________ (Please typewrite or print in block letters) Signature:________________________________________ Social Security or Employer Identification No.:_________________ ASSIGNMENT FORM FOR VALUE RECEIVED, _______________________________________ hereby sells, assigns and transfer unto: Name:_______________________________________________ (Please typewrite or print in block letters) Address:_____________________________________________ Social Security or Employer Identification No.:______________________ The right to purchase Common Stock represented by this Warrant to the extent of shares as to which such right is exercisable and does hereby irrevocably constitute and appoint attorney to transfer the same (along with the Corresponding ADMT Warrant) on the books of the Company with full power of substitution. Dated: _________________, 200_. Signature:_____________________________ Signature Guaranteed: ___________________________________ EX-10 4 ex101aan.txt ADM TRONICS UNLIMITED, INC. and its majority-owned subsidiary AA NORTHVALE MEDICAL ASSOCIATES, INC. SUBSCRIPTION AGREEMENT The undersigned (hereinafter "Subscriber") hereby confirms his/her/its subscription for the purchase of Units of ADM Tronics Unlimited ("ADM"), Inc., a Delaware corporation and AA Northvale Medical Associates, Inc. ("AAN"), a New Jersey corporation. ADM and AAN shall be collectively referred to herein as the "Company." Each Unit consists of: one (1) $100,000 Unsecured 6% Joint and Several Convertible Promissory Note ("Note"); one (1) Class A Warrant for ADM (the "ADM Warrant"); and one (1) Class A Warrant for AAN (the "AAN Warrant"). The Units and the securities underlying the Units are sometimes referred to collectively as the "Securities". Capitalized terms used and not otherwise defined herein shall have the meanings set forth for such terms in the Company's Confidential Private Placement Memorandum, dated as of May 20, 2004 (as amended or supplemented, and together with all documents and filings attached thereto, the "Memorandum"). The Company and Subscriber are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Rule 506 of Regulation D ("Regulation D") as promulgated by the Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended (the "Act") and Section 4(2) of the Act. In connection with this subscription, Subscriber and the Company agree as follows: 1. Purchase and Sale of the Securities. (a) The Company hereby agrees to issue and to sell to Subscriber, and Subscriber hereby agrees to purchase from the Company, a number of Units for the aggregate subscription amount set forth on the signature page hereto. Upon acceptance of this Subscription Agreement by the Company, the Company shall issue and deliver to Subscriber a Note, and warrant certificates evidencing each of the ADM Warrant and the AAN Warrant, subscribed for against payment in U.S. Dollars of the Purchase Price (as defined below). (b) Subscriber has hereby delivered and paid concurrently herewith the purchase price (the "Purchase Price") set forth on the signature page hereof required to purchase the Units subscribed for hereunder which amount has been paid in U.S. Dollars by wire transfer or check, subject to collection, to the order of "American Stock Transfer & Trust Company, ADM Tronics Unlimited, Inc. Escrow Account." (c) Subscriber understands and acknowledges that this subscription is part of a proposed placement by the Company of up to $3,500,000 of Units, which offering is being made on a "best efforts" basis for a maximum of 35 Units (the "Maximum Offering"). (d) At each closing of this transaction (the "Closing"), (1) the Company shall deliver to or as directed by Subscriber (i) the Notes to be acquired by Subscriber at the Closing, in the form attached as Exhibit A, attached hereto, in the principal amount set forth beside Subscriber's name below, (ii) a warrant certificate evidencing the ADM Warrants to be issued to Subscriber, in the form attached as Exhibit B attached hereto, (iii) a warrant certificate evidencing the AAN Warrants to be issued to Subscriber at the Closing, in the form attached as Exhibit C attached hereto, and (iv) the opinion of counsel to ADM and AAN of a legal opinion in form and substance satisfactory to Subscriber's counsel, and (iv) all other instruments and writings required to have been delivered at or prior to the Closing by the Company pursuant to this Agreement; and (2) each Subscriber shall deliver or cause to be delivered to the Company (1) by check or wire transfer of immediately available funds in accordance with the Company's written wire instructions, its respective share of the aggregate of $3,500,000 for the purchase of the Units, and (ii) all documents, instruments and writings required to have been delivered at or prior to the Closing by Subscriber pursuant to this Agreement. 2. Representations and Warranties of Subscriber. Subscriber represents and warrants to the Company as follows: (a) At the time Subscriber was offered the Securities, Subscriber was, and on the date Subscriber receives the Securities will be, an "accredited investor" as defined by Rule 501 under the Act, and Subscriber is capable of evaluating the merits and risks of Subscriber's investment in the Company and has the capacity to protect Subscriber's own interests. (b) Subscriber understands that the Securities are not presently registered, but Subscriber is entitled to certain rights with respect to the registration of certain of the securities underlying the Units (see Section 6 below). (c) Subscriber acknowledges and understands that the Securities are being purchased for investment purposes and not with a view to distribution or resale, nor with the intention of selling, transferring or otherwise disposing of all or any part thereof for any particular price, or at any particular time, or upon the happening of any particular event or circumstances, except selling, transferring, or disposing the Securities made in full compliance with all applicable provisions of the Act, the rules and regulations promulgated by the SEC thereunder, and applicable state securities laws; and that an investment in the Securities is not a liquid investment. (d) Subscriber acknowledges that the Securities must be held indefinitely unless subsequently registered under the Act or unless an exemption from such registration is available. Subscriber is aware of the provisions of Rule 144 promulgated under the Act which permit limited resale of common stock purchased in a private placement subject to the satisfaction of certain conditions, including, among other things, the existence of a public market for the common stock, the availability of certain current public information about the Company, the resale occurring not less than one year after a party has purchased and paid for the security to be sold, the sale being effected through a "broker's transaction" or in transactions directly with a "market maker" and the number of shares of common stock being sold during any three-month period not exceeding specified limitations. (e) Subscriber acknowledges that the Notes, ADM Warrants, AAN Warrants and shares of AAN' s common stock issuable upon the exercise of the AAN Warrants, in payment of interest on the Notes and upon conversion of the Notes, as the case may be are not currently publicly trading. (f) Subscriber acknowledges that Subscriber has had the opportunity to ask questions of, and receive answers from the Company or any person acting on its behalf concerning the Company and its business and to obtain any additional information, to the extent possessed by the Company (or to the extent it could have been acquired by the Company without unreasonable effort or expense) necessary to verify the accuracy of the information received by Subscriber. In connection therewith, Subscriber acknowledges that Subscriber has had the opportunity to discuss the Company's business, management and financial affairs with the Company's management or any person acting on its behalf. Subscriber has received and reviewed the Memorandum, and all the information, both written and oral, that it desires. Without limiting the generality of the foregoing, Subscriber has been furnished with or has had the opportunity to acquire, and to review, (i) copies of all of the Company's publicly available documents, including but not limited to, those attached to the Memorandum, and (ii) all information, both written and oral, that it desires with respect to the Company's business, management, financial affairs and prospects. In determining whether to make this investment, Subscriber has relied solely on Subscriber's own knowledge and understanding of the Company and its business based upon Subscriber's own due diligence investigations and the information furnished pursuant to this paragraph. Subscriber understands that no person has been authorized to give any information or to make any representations which were not furnished pursuant to this paragraph and Subscriber has not relied on any other representations or information. (g) Subscriber has all requisite legal and other power and authority to execute and deliver this Subscription Agreement and to carry out and perform Subscriber's obligations under the terms of this Subscription Agreement. This Subscription Agreement constitutes a valid and legally binding obligation of Subscriber, enforceable in accordance with its terms, and subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other general principals of equity, whether such enforcement is considered in a proceeding in equity or law. (h) Subscriber has carefully considered and has discussed with the Subscriber's professional legal, tax, accounting and financial advisors, to the extent the Subscriber has deemed necessary, the suitability of this investment and the transactions contemplated by this Subscription Agreement for the Subscriber's particular federal, state, local and foreign tax and financial situation and has determined that this investment and the transactions contemplated by this Subscription Agreement are a suitable investment for the Subscriber. Subscriber relies solely on such advisors and not on any statements or representations of the Company or any of its agents. Subscriber understands that Subscriber (and not the Company) shall be responsible for Subscriber's own tax liability that may arise as a result of this investment or the transactions contemplated by this Subscription Agreement. (i) This Subscription Agreement and the Purchaser Questionnaire do not contain any untrue statement of a material fact or omit any material fact concerning Subscriber. (j) There are no actions, suits, proceedings or investigations pending against Subscriber or Subscriber's properties before any court or governmental agency (nor, to Subscriber's knowledge, is there any threat thereof) which would impair in any way Subscriber's ability to enter into and fully perform Subscriber's commitments and obligations under this Subscription Agreement or the transactions contemplated hereby. (k) The execution, delivery and performance of and compliance with this Subscription Agreement, and the issuance of the Securities will not result in any material violation of, or conflict with, or constitute a material default under, any of Subscriber's articles of incorporation or bylaws, if applicable, or any of Subscriber's material agreements nor result in the creation of any mortgage, pledge, lien, encumbrance or charge against any of the assets or properties of Subscriber or the Securities. (l) Subscriber acknowledges that the Securities are speculative and involve a high degree of risk and that Subscriber can bear the economic risk of the purchase of the Securities, including a total loss of his/her/its investment. (m) Subscriber acknowledges that he/she/it has carefully reviewed and considered the risk factors discussed in the "Risk Factors" section of the Memorandum. (n) Subscriber recognizes that no federal, state or foreign agency has recommended or endorsed the purchase of the Securities. (o) Subscriber is aware that the Securities are and will be, when issued, "restricted securities" as that term is defined in Rule 144 of the general rules and regulations under the Act. (p) Subscriber understands that any and all certificates representing the Securities and any and all securities issued in replacement thereof or in exchange therefor shall bear the following legend or one substantially similar thereto, which Subscriber has read and understands: "THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS WHICH, IN THE OPINION OF COUNSEL FOR THIS CORPORATION, IS AVAILABLE." (q) In addition, the certificates representing the Securities, and any and all securities issued in replacement thereof or in exchange therefor, shall bear such legend as may be required by the securities laws of the jurisdiction in which Subscriber resides. (r) Because of the restrictions imposed on resale, Subscriber understands that the Company shall have the right to note stop-transfer instructions in its stock transfer records, and Subscriber has been informed of the Company's intention to do so. Any sales, transfers, or any other dispositions of the Securities by Subscriber, if any, will be in compliance with the Act. (s) Subscriber acknowledges that Subscriber has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of an investment in the Securities and of making an informed investment decision. (t) Subscriber represents that (i) Subscriber is able to bear the economic risks of an investment in the Securities and to afford the complete loss of the investment; and (ii) (A) Subscriber could be reasonably assumed to have the capacity to protect his/her/its own interests in connection with this subscription; or (B) Subscriber has a pre-existing personal or business relationship with either the Company or any affiliate thereof of such duration and nature as would enable a reasonably prudent purchaser to be aware of the character, business acumen and general business and financial circumstances of the Company or such affiliate and is otherwise personally qualified to evaluate and assess the risks, nature and other aspects of this subscription. (u) Subscriber further represents that the address set forth below is his/her principal residence (or, if Subscriber is a company, partnership or other entity, the address of its principal place of business); that Subscriber is purchasing the Securities for Subscriber's own account and not, in whole or in part, for the account of any other person; Subscriber is purchasing the Securities for investment and not with a view to resale or distribution; and that Subscriber has not formed any entity for the purpose of purchasing the Securities. (v) Subscriber understands that the Company shall have the unconditional right to accept or reject this subscription, in whole or in part, for any reason or without a specific reason, in the sole and absolute discretion of the Company (even after receipt and clearance of Subscriber's funds). This Subscription Agreement is not binding upon the Company until accepted by an authorized officer of the Company. In the event that the subscription is rejected, then Subscriber's subscription funds will be returned without interest thereon or deduction therefrom. (w) Subscriber has not been furnished with any oral representation or oral information in connection with the offering of the Securities that is not contained in the Memorandum and this Subscription Agreement. (x) Subscriber represents that Subscriber is not subscribing for Securities as a result of or subsequent to any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over the Internet, television or radio or presented at any seminar or meeting. (y) Subscriber has carefully read this Subscription Agreement and the Memorandum, and Subscriber has accurately completed the Purchaser Questionnaire which accompanies this Subscription Agreement. (z) No representations or warranties have been made to Subscriber by the Company, or any officer, employee, agent, affiliate or subsidiary of the Company, other than the representations of the Company contained herein, and in subscribing for the Securities the Subscriber is not relying upon any representations other than those contained in the Memorandum or in this Subscription Agreement. (aa) Subscriber represents and warrants, to the best of its knowledge, that other than the Placement Agent, no finder, broker, agent, financial advisor or other intermediary, nor any purchaser representative or any broker-dealer acting as a broker, is entitled to any compensation in connection with the transactions contemplated by this Subscription Agreement. (bb) Subscriber represents and warrants that he/she/it will have no open position in the Company's Common stock at the time a Registration Statement is filed with the SEC to register the Securities (the "Registration Statement") and is aware of the following Telephone Interpretation in the SEC Manual of Publicly Available Telephone Interpretations (July 1997): A.65. Section 5 An issuer filed a Form S-3 registration statement for a secondary offering of common stock which is not yet effective. One of the selling shareholders wanted to do a short sale of common stock "against the box" and cover the short sale with registered shares after the effective date. The issuer was advised that the short sale could not be made before the registration statement becomes effective, because the shares underlying the short sale are deemed to be sold at the time such sale is made. There would, therefore, be a violation of Section 5 if the shares were effectively sold prior to the effective date. (cc) Subscriber represents and warrants that he/she/it has complied with all applicable provisions of the Act, the rules and regulations promulgated by the SEC thereunder, including Regulation M and applicable state securities laws, and will comply at the time of sale pursuant to the Registration Statement. (dd) Subscriber represents and warrants that Subscriber has: (i) not distributed or reproduced the Memorandum, in whole or in part, at any time, without the prior written consent of the Company and the Placement Agent, (ii) kept confidential the existence of the Memorandum and the information contained therein or made available in connection with any further investigation of the Company and (iii) refrained and shall refrain from trading in the publicly-traded securities of the Company or any other relevant company for so long as such recipient has been in possession of the material non-public information contained in the Memorandum. (ee) The obligations of each Subscriber under this Subscription Agreement are several and not joint with the obligations of any other Subscriber, and no Subscriber shall be responsible in any way for the performance of the obligations of any other Subscriber under this Subscription Agreement. Nothing contained herein, or in any other Agreement, and no action taken by any Subscriber pursuant thereto, shall be deemed to constitute the Subscribers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Subscribers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by this Subscription Agreement. Each Subscriber shall be entitled to independently protect and enforce its rights, including without limitation, the rights arising out of the Subscription Agreement or out of the other Offering documents, and it shall not be necessary for any other Subscriber to be joined as an additional party in any proceeding for such purpose. 3. Representations, Warranties and Covenants of ADM and AAN. Each of ADM and AAN represents, warrants and covenants to Subscriber as follows: (a) Organization and Qualification. Each of ADM and AAN is a corporation, duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation, with the requisite corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. AAN has no subsidiaries, and AAN does not own, directly or indirectly, any capital stock or other equity ownership or proprietary interests in any other corporation, association, trust, partnership joint venture or other entity. ADM has those subsidiaries set forth in its Annual Report on Form 10-KSB for the year ended March 31, 2004 (the "Form 10-KSB"), collectively the "Subsidiaries" and each a "Subsidiary". Each of the Subsidiaries is a corporation, duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation, with the requisite corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. Each of ADM, AAN and the Subsidiaries is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not, individually or in the aggregate, (w) adversely affect the legality, validity or enforceability of any of the Notes, the Warrants or this Agreement, (collectively, the "Transaction Documents"), (x) have or result in a material adverse effect on the results of operations, assets, prospects, or condition (financial or otherwise) of ADM or AAN, (y) have or result in a material adverse effect on the results of operations, assets, prospects, or condition (financial or otherwise) of the Subsidiaries, taken as a whole with ADM, or (z) adversely impair ADM or AAN's ability to perform fully on a timely basis its obligations under any Transaction Document (any of (w), (x), (y) or (z), a "Material Adverse Effect"). (b) Authorization; Enforcement. Each of ADM and AAN has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents, and otherwise to carry out its obligations thereunder. The execution and delivery of each of the Transaction Documents by each of ADM and AAN and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of ADM and AAN and no further action is required by ADM or AAN. Each of the Transaction Documents has been duly executed by each of ADM and AAN and, when delivered in accordance with the terms thereof, will constitute the legal, valid and binding obligation of each of ADM and AAN enforceable against each of ADM and AAN in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to or affecting generally the enforcement of creditors' rights and remedies or by other equitable principles of general application. Neither ADM, AAN nor any Subsidiary is in violation of any of the provisions of its respective certificate of incorporation, by-laws or other charter documents. (c) Capitalization. The number of authorized, issued and outstanding capital stock of each of ADM and AAN is set forth in the Memorandum. Except as described in the Memorandum, no shares of common stock are entitled to preemptive or similar rights, nor is any holder of common stock entitled to preemptive or similar rights arising out of any agreement or understanding with ADM or AAN by virtue of any of the Transaction Documents. Except as disclosed in the Memorandum, there are no outstanding options, warrants, script rights to subscribe to, calls or commitments of any character whatsoever relating to, or, except as a result of the purchase and sale of the securities underlying the Units under this Agreement, securities, rights or obligations convertible into or exchangeable for, or giving any Person any right to subscribe for or acquire any shares of common stock, or contracts, commitments, understandings, or arrangements by which ADM, AAN or any Subsidiary is or may become bound to issue additional shares of common stock, or securities or rights convertible or exchangeable into shares of common stock. To the knowledge of ADM and AAN, except as specifically disclosed in the Memorandum or Schedule 3(c) attached hereto, no Person or group of related Persons beneficially owns (as determined pursuant to Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) or has the right to acquire by agreement with or by obligation binding upon ADM or AAN beneficial ownership of in excess of 5% of the common stock. A "Person" means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. (d) Issuance of the Securities. The issuance, sale and delivery of Securities have been duly authorized by all requisite corporate action of the ADM and AAN. When so issued, sold and delivered in accordance with the terms hereof, the Securities will be duly executed, issued and delivered and will constitute valid and legal obligations of ADM and AAN enforceable in accordance with their respective terms and, in each case, will not be subject to preemptive or other similar rights, shall be free and clear of all liens, encumbrances and rights of first refusal of any kind (collectively, "Liens"). ADM and AAN will at all times while the securities underlying the Units are outstanding maintain an adequate reserve of duly authorized shares of common stock equal to the number of shares of common stock issuable upon conversion in full of the securities underlying the Units and in payment of interest thereon. The shares of ADM common stock or AAN common stock, as the case may be, when issued in accordance with the Notes, ADM Warrants or AAN Warrants, as the case may be, shall have been duly authorized, validly issued, fully paid and non-assessable, free and clear of all Liens. (e) No Conflicts. The execution, delivery and performance of the Transaction Documents by ADM and AAN and the consummation by ADM and AAN of the transactions contemplated thereby do not and will not (i) conflict with or violate any provision of ADM or AAN's certificate of incorporation, bylaws or other charter documents (each as amended through the date hereof), or (ii) subject to obtaining the Required Approvals (as defined below), conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, bond, debenture, note, lease, contract, mortgage, deed of trust, loan agreement, credit facility, indenture or instrument (evidencing an ADM or AAN debt or otherwise) to which ADM, AAN or any Subsidiary is a party or by which any property or asset of ADM, AAN or any Subsidiary is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which ADM or AAN is subject (including federal and state securities laws and regulations and the rules and regulations of the principal market or exchange on which the common stock is listed or traded), or by which any property or asset of ADM or AAN is bound or affected, except in the case of each of clauses (ii) and (iii), as could not, individually or in the aggregate, have or result in a Material Adverse Effect. The business of each of ADM and AAN is not being conducted in violation of any law, ordinance or regulation of any governmental authority, except for violations, which, individually or in the aggregate, could not have, or result in a Material Adverse Effect. (f) Consents and Approvals. Neither ADM, AAN nor any Subsidiary is required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than the filing of (i) one or more registration statements with the SEC meeting the requirements set forth in this Agreement and covering the resale of the shares of common stock of either ADM or AAN common stock, as the case may be, (ii) the applications to a securities exchange, market or other quotation system for the listing therewith of the ADM or AAN common stock, as the case may be, (iii) applicable blue sky filings and (iv) in all other cases where the failure to obtain such consent, waiver, authorization or order, or to give such notice or make such filing or registration could not have or result in, individually or in the aggregate, a Material Adverse Effect (the consents, waivers, authorizations, orders, notices and filings referred to in (i)-(v) of this Section are, collectively, the "Required Approvals"). (g) Litigation; Proceedings. Except as specifically disclosed in the Disclosure Materials (as hereinafter defined) or as otherwise disclosed on Schedule 3(g) attached hereto, there is no action, suit, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries or any of their respective properties before or by any court, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) which (i) adversely affects or challenges the legality, validity or enforceability of any Transaction Document or the Securities or (ii) could, individually or in the aggregate, have or result in a Material Adverse Effect. (h) No Default or Violation. Except as specifically disclosed in the Form 10-KSB or as otherwise disclosed in Section 3(h) attached hereto, neither ADM, AAN nor any Subsidiary (i) is in default under or in violation of (and no event has occurred which has not been waived which, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has ADM, AAN or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound, (ii) is in violation of any order of any court, arbitrator or governmental body, or (iii) is in violation of any statute, rule or regulation of any governmental authority, except as could not, individually or in the aggregate, have or result in a Material Adverse Effect or, except in the case of clause (i) above as has not been waived pursuant to an effective waiver. (i) Private Offering. Assuming the accuracy of the representations and warranties of Subscriber set forth in Section 2, the offer, issuance and sale of the Securities to Subscriber as contemplated hereby are exempt from the registration requirements of the Act. Neither the Company nor any Person acting on its behalf has taken any action that could subject the offering, issuance or sale of the Securities to the registration requirements of the Act. (j) SEC Reports; Financial Statements. The Company has filed all reports required to be filed by it under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law to file such material) (the foregoing materials being collectively referred to herein as the "SEC Reports" and, together with the other written disclosures to Subscriber, the "Disclosure Materials"); on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective filing dates, the SEC Reports complied in all material respects with the requirements of the Act and the Exchange Act and, the rules and regulations promulgated thereunder, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. None of the statements made in any such SEC Reports is currently required to be updated or amended under applicable law (except for such statements as have been amended or updated by subsequent SEC Reports prior to the date of this Subscription Agreement). All material agreements to which the Company is a party or to which the property or assets of the Company are subject have been filed as exhibits to the SEC Reports to the extent required. The financial statements of the Company included in the SEC Reports have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), consistently applied, and the rules and regulations of the SEC with respect thereto as in effect at the time of filing (except as may be otherwise specified in such financial statements or the notes thereto), and fairly present, in all material respects the financial position of ADM and its consolidated subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments. Since March 31, 2004, except as specified in the SEC Reports, (i) there has been no event, occurrence or development that has had or that could have or result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (x) liabilities incurred in the ordinary course of business consistent with past practice and (y) liabilities not required to be reflected in the Company's financial statements pursuant to GAAP or required to be disclosed in filings made with the SEC, in each case that, individually or in the aggregate, are not material to the financial condition, business, operations, properties, operating results or prospects of ADM or AAN, (iii) the Company has not altered its method of accounting or the identity of its auditors and (iv) the Company has not declared or made any payment or distribution of cash or other property to its stockholders or officers or directors (other than in compliance with existing Company stock option plans) with respect to its capital stock, or purchased, redeemed (or made any agreements to purchase or redeem) any shares of its capital stock or debt convertible into shares of common stock. (k) Investment Company. ADM and AAN are not, and are not an Affiliate (as defined in Rule 405 under the Act) of, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (l) Certain Fees. Except as disclosed in the Disclosure Materials, Subscribers shall have no obligation with respect to any fees or commissions or with respect to any claims made by or on behalf of any Person for any fees or commissions that may be due in connection with the transactions contemplated by this Agreement to any broker, adviser, consultant, finder, placement agent, banker or other Person. As among ADM, AAN and the Subscribers (including, for such purposes, Affiliates and agents of Subscriber), the each of ADM and AAN shall be jointly and severally solely responsible for all such fees and amounts and each of ADM and AAN shall jointly and severally indemnify and hold harmless each Subscriber, its employees, officers, directors, agents, and partners, and their respective Affiliates, from and against all claims, losses, damages, costs (including the costs of preparation and attorney's fees) and expenses suffered in respect of any such claimed or existing fees or amounts, as such fees and expenses are incurred. Other than as set forth on Section 3(l) attached hereto, Subscriber shall be responsible for the payment of any fees or costs incurred by their own legal counsel or other advisors in connection with this transaction. (m) Patents and Trademarks. Each of ADM and AAN owns, or has sufficient rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, licenses and rights (collectively, the "Intellectual Property Rights") which are described or referred to in the SEC Reports as owned or possessed by it or that are necessary for use in connection with its business, except where the failure to currently own or possess will not have a Material Adverse Effect. AAN owns, and has the exclusive right to commercialize the SofPulse Device. ADM and AAN are not infringing, or have not received any notice of, nor has any knowledge of, any asserted infringement by ADM or AAN or, any rights of a third party with respect to any Intellectual Property rights. ADM and AAN have not received any notice of, or have any knowledge of, infringement by a third party with respect to any Intellectual Property Rights of ADM or AAN. (n) Registration Rights; Rights of Participation. Except as set forth in the Disclosure Materials, neither ADM nor AAN has granted or agreed to grant to any Person any rights (including "piggy-back" registration rights) to have any securities of ADM or AAN registered with the SEC or any other governmental authority which has not been satisfied. No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents. (o) Regulatory Permits. ADM, AAN and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports, except where the failure to possess such permits could not, individually or in the aggregate, have or result in a Material Adverse Effect ("Material Permits"), and neither ADM, AAN nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit. (p) Disclosure. The Company confirms that it has not provided Subscriber or his/her/its respective agents or counsel with any information that constitutes or might constitute material non-public information. The Company understands and confirms that Subscriber shall be relying on the foregoing representation in effecting transactions in securities of the Company. All information relating to or concerning the Company or its Subsidiaries set forth in the Transaction Documents and the Disclosure Materials is true and correct and does not fail to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. (q) Reliance on Placement Agency Agreement Representations. In addition to the foregoing, Subscriber shall be entitled to rely on all of the representations and warranties made by the Company to the Placement Agent in that certain Placement Agency Agreement ("Placement Agency Agreement"), as the same may be amended, entered into between the Placement Agent and the Company in connection with the Offering, as if such representations and warranties were made directly to the Subscriber. The form of Placement Agency Agreement is attached hereto as Exhibit E. (r) No Manipulation of Stock. Neither ADM nor AAN has not taken and will not, in violation of applicable law, take any action designed to, or that might reasonably be expected to, cause or result in stabilization or manipulation of the price of the common stock to facilitate the sale or resale of the Securities. (s) No Integrated Offering. Neither ADM, AAN nor any of its Subsidiaries, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales of any security or solicited any offers to buy any security under circumstances that would prevent the parties hereto from consummating the transactions contemplated hereby pursuant to an exemption from registration under the Securities Act pursuant to the provisions of Regulation D or cause the offering of Securities to be integrated with any other offering of securities by ADM and AAB for the purpose of any stockholder approval provision applicable to ADM, AAN or their securities. The transactions contemplated hereby are exempt from the registration requirements of the Securities Act, assuming the accuracy of the representations and warranties herein contained of the Subscriber to the extent relevant for such determination. (t) Foreign Corrupt Practices. Neither ADM, AAN nor any Subsidiaries has, nor any director, officer, agent, employee or other person acting on behalf of ADM, AAN or any Subsidiary has in the course of his actions for or on behalf of ADM or AAN, used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee. Without limiting the generality of the foregoing, ADM, AAN and the Subsidiaries have not directly or indirectly made or agreed to make (whether or not said payment is lawful) any payment to obtain, or with respect to, sales other than usual and regular compensation to its or their employees and sales representatives with respect to such sales. (u) Solvency. Each of ADM and AAN (both before and after giving effect to the transactions contemplated by the Agreements) is solvent (i.e., its assets have a fair market value in excess of the amount required to pay its probable liabilities on its existing debts as they become absolute and matured), and currently ADM and AAN has no information that would lead it to reasonably conclude that ADM or AAN would not have the ability to, nor does it intend to take any action that would impair its ability to, pay its debts from time to time incurred in connection therewith as such debts mature. (v) Legends. Except for the legend contemplated by Section 2(p), the Securities shall bear no other legend. (w) No General Solicitation. Neither ADM, AAN nor any person acting on behalf of ADM or AAN has conducted any "general solicitation," as described in Rule 502(c) under Regulation D, with respect to any of the Securities being offered hereby. (x) Internal Accounting Controls. Each of ADM and AAN and the Subsidiaries maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management's general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (y) Compliance with Patriot Act. Neither ADM, AAN nor any Subsidiaries (i) is or will become a Person whose property or interests in property are blocked pursuant to Section 1 of Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) or (ii) knowingly engages or will knowingly engage in any dealings or transactions, or be otherwise knowingly associated, with any such person. Neither ADM, AAN nor any Subsidiaries is or will be in violation of the Uniting and Strengthening America By Providing Appropriate Tools Required To Intercept And Obstruct Terrorism (USA Patriot Act of 2001). (z) Accountants. Weinick Sanders Leventhal & Co., LLP, who expressed their opinion with respect to the consolidated financial statements from the ADM's Annual Report on Form 10-K from the year ended March 31, 2004, have advised ADM that they are, and to the best knowledge of ADM they are, independent accountants as required by the Securities Act and the rules and regulations promulgated therunder. (aa) Form S-3 Eligibility. ADM is currently eligible to register the resale of the applicable ADM Securities on a registration statement on Form S-3 under the Securities Act. There exist no fact or circumstances that would prohibit or delay the preparation and filing of a registration statement on Form S-3 with respect to the applicable ADM Securities within the time periods referred to herein. 4. Covenants of the Company. (a) Certain Securities Law Disclosures. The Company shall: (i) issue a press release accurately describing and disclosing the transactions contemplated hereby on the Closing Date, (ii) file with the SEC a report on Form 8-K or Form 10-QSB disclosing the transactions contemplated hereby within ten (10) days after the Closing Date, and (iii) timely file with the SEC a Form D promulgated under the Act as required under Regulation D and provide a copy thereof to Subscriber promptly after the filing thereof. (b) Furnishing of Information. So long as Subscriber owns any of the Securities, the Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to Section 13(a) or 15(d) of the Exchange Act. If at any time while Subscriber owns any of the Securities, the Company is not required to file reports pursuant to Section 13(a) or 15(d) of the Exchange Act, it will prepare and furnish to Subscriber and make publicly available in accordance with Rule 144(c) promulgated under the Act annual and quarterly financial statements, together with a discussion and analysis of such financial statements in form and substance substantially similar to those that would otherwise be required to be included in reports required by Section 13(a) or 15(d) of the Exchange Act, as well as any other information required thereby, in the time period that such filings would have been required to have been made under the Exchange Act. The Company further covenants that it will take such further action as any holder of the Securities may reasonably request, all to the extent required from time to time to enable such holder to sell the Common Shares without registration under the Exchange Act under Rule 144 promulgated under the Act. Upon the request of any such holder, the Company shall deliver thereto a written certification of a duly authorized officer as to whether it has complied with such requirements. (c) Reservation of Shares. The Company shall take all action necessary to at all times have authorized, and reserved for the purpose of issuance, no less than the number of shares of common stock which are issuable upon conversion of the Notes, in connection with the payment of interest on the Notes, upon exercise of the ADM Warrants or upon exercise of the AAN Warrants. (d) Listing. The Company shall promptly seek the listing of all additional Registrable Securities not previously listed as such shares are issued on the securities exchange, market or other quotation system on which the common stock is then listed or traded and shall maintain, so long as any other shares of common stock shall be so listed, such listing of all such securities from time to time issuable under the terms of the Transaction Documents. Once listed, the Company shall maintain the common stock's authorization for listing on a securities exchange, market or other quotation system on which the common stock is then listed or traded. The Company shall promptly provide to Subscriber copies of any notices it receives from a securities exchange, market or other quotation system on which the common stock is then listed or traded regarding the continued eligibility of the common stock for listing on such a securities exchange, market or other quotation system. The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section. (e) Notice of Breaches. Each of the Company and Subscriber shall give prompt written notice to the other of any breach by it of any representation, warranty or other agreement contained in any Transaction Document, as well as any events or occurrences arising after the date hereof, which would reasonably be likely to cause any representation or warranty or other agreement of such party, as the case may be, contained in the Transaction Document to be incorrect or breached as of and after the Closing Date. However, no disclosure by any party pursuant to this Section shall be deemed to cure any breach of any representation, warranty or other agreement contained in any Transaction Document. No breach, default or other action by or claim against one Subscriber will be deemed a breach, default or action of or claim against of any other Subscriber or in any way adversely affect the rights of the other Subscribers. (f) Integration. The Company shall not and shall use its best efforts to ensure that no Affiliate shall sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Act) that would be integrated with the offer or sale of the Securities in a manner that would require the registration under the Act of the issue, offer or sale of the Securities to Subscriber. (g) Acknowledgment of Dilution. The Company acknowledges that the issuance of common stock will result in dilution of the outstanding shares of common stock, which dilution may be substantial under certain market conditions. The Company further acknowledges that its obligation to issue shares of common stock in accordance with the terms of and with respect to the Notes, the ADM Warrants and the AAN Warrants is unconditional and absolute regardless of the effect of any such dilution. (h) Intentional Acts or Omissions. The Company shall not intentionally perform any act that if performed, or intentionally omit to perform any act that, if omitted to be performed, would prevent or excuse the performance of the Transaction Agreements or any of the transactions contemplated hereby or thereby or the benefits intended to be secured thereby by the Investor. (i) Use of Proceeds. ADM and AAN shall use the proceeds from the sale of the Securities as described in the Memorandum. Without limiting the generality of the foregoing, the ADM and AAN shall not use such proceeds to make a loan to any employee, officer, director or stockholder of ADM or AAN, to repay any loan or other obligation of ADM or AAN to any such person, or to repurchase or pay a dividend on shares of common stock or other securities of ADM or AAN, other than any such payment explicitly required or permitted by the terms of the Transaction Agreements. (j) Transactions with Affiliates. Each of ADM, AAN and the Subsidiaries will not enter into any agreement or arrangement, written or oral, directly or indirectly, with an affiliate, or provide services or sell goods to, or for the benefit of, or pay or otherwise distribute monies, goods or other valuable consideration to, an affiliate, except upon fair and reasonable terms under circumstances as determined by ADM or AAN, as applicable, in good faith, taking into account all of the facts and circumstances of such agreement or arrangement, and except for existing intercompany debt or transaction with or between ADM or AAN and any of the Subsidiaries and payments and benefits to officers and directors in their capacities as such in the ordinary course of business, consistent with past practices. (k) Legend Removal. Notwithstanding anything contained herein to the contrary, upon the earlier of (i) the effectiveness of the Registration Statement for either ADMT or AAN and receipt by ADMT or AAN, as the case may be, of a holder's written confirmation that ADMT common stock or AAN common stock, as the case may be, will not be disposed of except in compliance with the prospectus delivery requirements of the Securities Act or (ii) Rule 144(k) under the Securities Act becoming available to a holder, ADMT or AAN, as the case may be, shall, upon such holder's written request and delivery of all required documentation by the Company's securities counsel, promptly cause certificates evidencing the ADMT common stock or the AAN common stock, as the case may be, to be replaced with certificates that do not bear such restrictive legends. When ADMT or AAN, as the case may be, is required to cause unlegended certificates to replace previously issued legended certificates, if unlegended certificates are not delivered to such holder within three (3) business days following submission by such holder of legended certificate(s) to ADMT or AAN's transfer agent, as applicable, together with a representation letter in customary form, ADMT or AAN, as the case may be, shall be liable to such holder for liquidated damages in an amount equal to 1% of the aggregate purchase price of the ADMT common stock or AAN common stock, as the case may be, evidenced by such certificate(s) for each thirty (30) day period) beyond such three (3) business day period that the unlegended certificates have not been so delivered. ADMT or AAN's obligation to issue unlegended certificates pursuant to this paragraph shall be excused if (i) the SEC promulgates any rule or interpretation expressly prohibiting removal of legends in such circumstances; (ii) the SEC or other regulatory authority instructs ADMT or AAN, as applicable, or their respective transfer agent not to remove such legends, or (iii) the SEC makes it a condition to the effectiveness of the Registration Statement so that ADMT or AAN, as applicable, continues to keep such legends in place. 5. Indemnification. (a) Each of ADM and AAN agrees to indemnify and hold harmless the Subscriber, its respective officers, directors, employees, stockholders and affiliates, and any person acting on behalf of the Subscriber, from and against any and all damage, loss, liability, cost and expense (including reasonable attorneys' fees) which any of them may incur by reason of the failure by ADM or AAN to fulfill any of the terms and conditions of this Subscription Agreement, or by reason of any breach of the representations and warranties made by ADM or AAN herein, or in any other document provided by the Company to the Subscriber. All representations, warranties and covenants of each of Subscriber and ADM and AAN contained herein shall survive the acceptance of this subscription. (b) Subscriber agrees to indemnify and hold harmless the Company and the Placement Agent, its respective officers, directors, employees, stockholders and affiliates, and any person acting on behalf of the Company or the Placement Agent, from and against any and all damage, loss, liability, cost and expense (including reasonable attorneys' fees) which any of them may incur by reason of the failure by Subscriber to fulfill any of the terms and conditions of this Subscription Agreement, or by reason of any breach of the representations and warranties made by Subscriber herein, or in any other document provided by Subscriber to the Company. All representations, warranties and covenants of each of Subscriber and ADM and AAN contained herein shall survive the acceptance of this subscription. 6. Registration Rights. Subscriber shall have the registration rights set forth on Annex A attached hereto. 7. Miscellaneous. (a) Subscriber agrees not to transfer or assign this Subscription Agreement or any of Subscriber's interest herein and further agrees that the transfer or assignment of the Securities acquired pursuant hereto shall be made only in accordance with all applicable laws. (b) Subscriber agrees that Subscriber cannot cancel, terminate, or revoke this Subscription Agreement or any agreement of Subscriber made hereunder, and this Subscription Agreement shall survive the death or legal disability of Subscriber and shall be binding upon Subscriber's heirs, executors, administrators, successors, and permitted assigns. (c) Subscriber has read and has accurately completed this entire Subscription Agreement. (d) This Subscription Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and may be amended only by a written execution by all parties. (e) Subscriber acknowledges that it has been advised to consult with his/her/its own attorney regarding this subscription and Subscriber has done so to the extent that Subscriber deems appropriate. (f) Any notice or other document required or permitted to be given or delivered to the Subscriber shall be in writing and sent (i) by fax if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or (g) by registered or certified mail with return receipt requested (postage prepaid) or (c) by a recognized overnight delivery service (with charges prepaid). If to the Company, at: ADM Tronics Unlimited, Inc. 224-S Pegasus Ave. Northvale, New Jersey 07647 Attn: President Tel: (201) 767-6040 Fax: (201) 784-0620 or such other address as it shall have specified to the Subscriber in writing, with a copy (which shall not constitute notice) to: Frank J. Hariton, Esq. 1065 Dobbs Ferry Road White Plains, New York 10607 Attn: Frank J. Hariton Tel: 914.674.4373; Fax: 914.693.2963 If to the Subscriber, at its address set forth on the signature page to this Subscription Agreement, or such other address as it shall have specified to the Company in writing, with a copy (which shall not constitute notice) to each of the following: Maxim Group LLC 405 Lexington Avenue, 2nd Floor New York, New York 10017 Attn: Anthony Sarkis Tel: 212.895.3695; Fax: 212.895.2555 and Ellenoff Grossman & Schole LLP 370 Lexington Avenue, 19th Floor New York, NY 100 17-6503 Attn: Barry I. Grossman, Esq. Tel: 212.370.1300; Fax: 212.370.7889 (h) Failure of the Company to exercise any right or remedy under this Subscription Agreement or any other agreement between the Company and the Subscriber, or otherwise, or delay by the Company in exercising such right or remedy, will not operate as a waiver thereof. No waiver by the Company will be effective unless and until it is in writing and signed by the Company. (i) This Subscription Agreement shall be enforced, governed and construed in all respects in accordance with the laws of the State of New York, as such laws are applied by the New York courts to agreements entered into and to be performed in New York by and between residents of New York, and shall be binding upon the Subscriber, the Subscriber's heirs, estate, legal representatives, successors and assigns and shall inure to the benefit of the Company, its successors and assigns. (j) Any legal suit, action or proceeding arising out of or relating to this Subscription Agreement or the transactions contemplated hereby shall be instituted exclusively in New York Supreme Court, County of New York, or in the United Stated District Court for the Southern District of New York. The parties hereto hereby: (i) waives any objection which they may now have or hereafter have to the venue of any such suit, action or proceeding, and (ii) irrevocably consents to the jurisdiction of the New York Supreme Court, County of New York, and the United States District Court for the Southern District of New York in any such suit, action or proceeding. The parties further agree to accept and acknowledge service of any and all process which may be served in any such suit, action or proceeding in the New York Supreme Court, County of New York, or in the United States District Court for the Southern District of New York and agree that service of process upon a party mailed by certified mail to such party's address shall be deemed in every respect effective service of process upon such party in any such suit, action or proceeding. (k) If any provision of this Subscription Agreement is held to be invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed modified to conform to such statute or rule of law. Any provision hereof that may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provisions hereof. (l) The parties understand and agree that money damages would not be a sufficient remedy for any breach of the Subscription Agreement by the Company or the Subscriber and that the party against which such breach is committed shall be entitled to equitable relief, including injunction and specific performance, as a remedy for any such breach. Such remedies shall not be deemed to be the exclusive remedies for a breach by either party of the Subscription Agreement but shall be in addition to all other remedies available at law or equity to the party against which such breach is committed. (m) All pronouns and any variations thereof used herein shall be deemed to refer to the masculine, feminine, singular or plural, as identity of the person or persons may require. (n) This Subscription Agreement may be executed in counterparts and by facsimile, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. Signature Page for Individuals: IN WITNESS WHEREOF, Subscriber has caused this Subscription Agreement to be executed as of the date indicated below. $ Purchase Price Print or Type Name Signature Date Social Security Number (if applicable) Address Please check if applicable and include co-owner's information below (name, address, social security number): _____ Joint Tenancy _____ Tenants in Common Partnerships, Corporations or Other Entities: IN WITNESS WHEREOF, Subscriber has caused this Subscription Agreement to be executed as of the date indicated below. $ Purchase Price Print or Type Name of Entity Address ______________________________________ Taxpayer I.D. No. (if applicable) ______________________________________ Date ______________________________________ Signature ______________________________________ Print or Type Name and Indicate Title or Position with Entity IN WITNESS WHEREOF, the Company has caused this Subscription Agreement to be executed, and the foregoing subscription accepted, as of the date indicated below. ADM TRONICS UNLIMITED, INC. By: Name: Title: Date: , 2004 AA NORTHVALE MEDICAL ASSOCIATES, INC. By: Name: Title: Date: , 2004 Annex A Registration Rights ADM Tronics Unlimited, Inc. and AA Northvale Medical Associates, Inc. hereby grant to the Subscriber the following registration rights. 1. Definitions. Capitalized terms used herein without definition shall have the respective meanings given such terms as set forth in the Subscription Agreement between ADM Tronics Unlimited, Inc., AA Northvale Medical Associates, Inc. and the subscriber signatory thereto (the "Subscription Agreement") or in the Company's Confidential Private Placement Memorandum, dated as of May 20, 2004 (as amended or supplemented, and together with all documents and filings attached thereto, the "Memorandum"). As used herein, the following terms shall have the following meanings: Business Day: Any day other than a day on which banks are authorized or required to be closed in the State of New York. Commission: The United States Securities and Exchange Commission. Common Stock: The common stock, par value $.0005 per share, of ADM Tronics Unlimited, Inc. and AA Northvale Medical Associates, Inc., no par value. Exchange Act: The Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. Holder or Holders: Any holder of the Registrable Securities. Person: Any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or other agency or political subdivision thereof. Prospectus: The prospectus included in any Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement, and all other amendments and supplements to the prospectus, including post- effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such prospectus. Registrable Securities: The shares of common stock issuable upon conversion of the Notes, the common stock issuable upon the payment of interest of the Notes, the common stock issuable upon the exercise of ADM Warrants and the common stock issuable upon the exercise of AAN Warrants, until such time as (1) a Registration Statement covering such Registrable Securities has been declared effective by the Commission and such Registrable Securities have been disposed of pursuant to such effective Registration Statement or (2) such Registrable Securities are saleable pursuant to Rule 144 (or any similar provision then in force) under the Securities Act, without any restriction, whichever is earlier. Registration Statement: Any registration statement of the Company that covers any of the Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such registration statements, including post effective amendments, all exhibits, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. Securities Act: The Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. Units: The units of the Company sold pursuant to the Subscription Agreement consisting of Notes, ADM Warrants and AAN Warrants. 2. Registration Rights. (a) Spin Off and Demand Registration. AAN agrees to file a registration statement covering the resale of the shares of AAN common stock issuable upon the conversion of the Notes and payment of interest on the Notes, and the exercise of the AAN Warrants in conjunction with a pro rata distribution to ADM's stockholders ("Spin Off") or an initial public offering ("IPO") of the shares of AAN Common Stock. The Company will file a registration statement on Form SB-2 or other appropriate form (the "Registration Statement") with the SEC no later than sixty (60) days following the Closing. ADM shall use its best-efforts to have the Registration Statement declared effective by the SEC by no later than ninety (90) days following the filing thereof. In the event that the Registration Statement has not been declared effective by the SEC on or before March 1, 2005, then the number of shares of AAN Common Stock issuable upon the conversion of the Notes and the exercise of the AAN Warrants shall be increased by two percent (2%) for each 30 day period (or partial period, as the case may be) following March 1, 2005. In addition, the Company shall grant to the holders of Units a demand registration right to the effect that in the event that if, by March 1, 2005: (i) the Spin Off or IPO is not effected, or (ii) the Registration Statement has not been declared effective by the SEC, then ADM shall register with the SEC all of the shares of ADM common stock issuable upon the conversion of the Notes and the exercise of the ADM Warrants. ADM shall use its best efforts to have such securities registered within 30 days of the demand made by the holders thereof. In the event that the registration statement covering all of such securities is not declared effective by the SEC within 90 days of the demand for registration or the registration does not remain effective for 60 consecutive days, then the number of shares of ADM Common Stock issuable upon the conversion of the Notes and the exercise of the ADM Warrants shall be increased by one percent (1%) for each 30 day period (or partial period, as the case may be) following such 90 day period. ADM covenants to maintain the effectiveness of such ADM registration statement until the third (3rd) anniversary of the date of such effectiveness. (b) Piggyback Registration. If, at any time after the closing of the Offering, the Company proposes to register any of its securities under the Securities Act for sale to the public for its own account or for the account of other security holders (or registration statements on Forms S-4 or S-8 or another form not available for registering the Registrable Securities for sale to the public), each such time it will give written notice thereof to Holders of its intention so to do (such notice to be given at least fifteen (15) days prior to the filing thereof). Upon the written request of any such Holder (which request shall specify the number of Registrable Securities intended to be disposed of by such Holder and the intended method of disposition thereof), received by the Company within ten (10) days after giving of any such notice by the Company, to register any of such Holder's Registrable Securities, the Company shall include in such registration statement all or any part of such Registrable Securities such Purchaser requests to be registered ("Piggyback Registration Rights"). 3. Registration Procedures. In connection with the registration obligations of the Company pursuant to the terms and conditions of this Agreement, the Company shall: (a) prior to filing a Registration Statement or Prospectus or any amendments or supplements thereto, including documents incorporated by reference after the initial filing of the Registration Statement, the Company will furnish to the Holders covered by such Registration Statement (the "Selling Holders"), Holders' legal counsel and the underwriters, if any, draft copies of all such documents proposed to be filed at least three (3) Business Days prior thereto, which documents will be subject to the review of such Holders' Counsel and the underwriters, if any, and the Company will not, unless required by law, file any Registration Statement or amendment thereto or any Prospectus or any supplement thereto (including such documents incorporated by reference) to which Selling Holders of at least a majority of the Registrable Securities (the "Objecting Party") shall object, pursuant to notice given to the Company prior to the filing of such amendment or supplement (the "Objection Notice"). The Objection Notice shall set forth the objections and the specific areas in the draft documents where such objections arise. The Company shall have five (5) Business Days after receipt of the Objection Notice to correct such deficiencies to the satisfaction of the Objecting Party, and will notify each Selling Holder of any stop order issued or threatened by the Commission in connection therewith and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered; (b) as promptly as practicable prepare and file with the Commission such amendments and post-effective amendments to the Registration Statement as may be necessary to keep such Registration Statement effective for the period required pursuant to Section 2; cause the Prospectus to be supplemented by any required Prospectus supplement, and, as so supplemented, to be filed pursuant to Rule 424 under the Securities Act; and comply with the provisions of the Securities Act applicable to it with respect to the disposition of all Registrable Securities covered by such Registration Statement during the applicable period in accordance with the intended methods of disposition by the Selling Holders set forth in such Registration Statement or supplement to the Prospectus; (c) as promptly as practicable furnish to any Selling Holder and the underwriters, if any, without charge, such number or conformed copies of such Registration Statement and any post-effective amendment thereto and such number of copies of the Prospectus (including each preliminary Prospectus) and any amendments or supplements thereto, and any documents incorporated by reference therein, as such Selling Holder or underwriter may reasonably request in order to facilitate the disposition of the Registrable Securities being sold by such Selling Holder (it being understood that the Company consents to the use of the Prospectus and any amendment or supplement thereto by each Selling Holder and the underwriters, if any, in connection with the offering and sale of the Registrable Securities covered by the Prospectus or any amendment or supplement thereto); provided, that before filing a Registration Statement or Prospectus relating to the Registrable Securities or any amendments or supplements thereto, the Company will furnish to Holders' Counsel copies of all documents proposed to be filed at least three (3) Business Days prior to the filing thereof, which documents will be subject to the review of such counsel; (d) on or prior to the date on which the Registration Statement is declared effective, register or qualify such Registrable Securities under such other securities or "blue sky" laws of such jurisdictions as any Selling Holder, Holders' Counsel or underwriter reasonably requests and do any and all other acts and things which may be necessary or advisable to enable such Selling Holder to consummate the disposition in such jurisdictions of such Registrable Securities owned by such Selling Holder; keep each such registration or qualification (or exemption therefrom) effective during the period which the Registration Statement is required to be kept effective; and do any and all other acts or things reasonably necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by the applicable Registration Statement; provided that the Company shall not be required to (i) qualify to do business as a foreign corporation or as a broker-dealer in any jurisdiction where it is not then so qualified or (ii) take any action which would subject it to general service of process or to taxation in any jurisdiction where it is not then so subject; (e) cause the Registrable Securities covered by such Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the Selling Holders to consummate the disposition of such Registrable Securities; (f) as promptly as practicable notify each Selling Holder, Holders' Counsel and any underwriter and (if requested by any such Person) confirm such notice in writing, (i) when a Prospectus or any Prospectus supplement or post-effective amendment has been filed and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective, (ii) of any request by the Commission or any other federal or state governmental authority for amendments or supplements to a Registration Statement or related Prospectus or for additional information to be included in any Registration Statement or Prospectus or otherwise, (iii) of the issuance by the Commission of any stop order suspending the effectiveness of a Registration Statement or the initiation or threatening of any proceedings for that purpose, (iv) of the issuance by any state securities commission or other regulatory authority of any order suspending the qualification or exemption from qualification of any of the Registrable Securities under state securities or "blue sky" laws or the initiation of any proceedings for that purpose and (v) of the happening of any event which makes any statement made in a Registration Statement or related Prospectus or any document incorporated or deemed to be incorporated by reference therein untrue or which requires the making of any changes in such Registration Statement, Prospectus or documents so that they will not 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; and, as promptly as practicable thereafter, prepare and file with the Commission and furnish a supplement or amendment to such Prospectus so that, as thereafter deliverable to the purchasers of such Registrable Securities, such Prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (g) make generally available to the Holders an earnings statement satisfying the provisions of Section 11(a) of the Securities Act no later than thirty (30) days after the end of the 12-month period beginning with the first day of the Company's first fiscal quarter commencing after the effective date of a Registration Statement; (h) use its reasonable efforts to prevent the issuance of any order suspending the effectiveness of a Registration Statement, and, if one is issued, to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement at the earliest possible moment; (i) as promptly as practicable after filing with the Commission of any document which is incorporated by reference into a Registration Statement, deliver a copy of such document to Holders' legal counsel; (j) cooperate with the Selling Holders and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of certificates (which shall not bear any restrictive legends and shall be in a form eligible for deposit with the Depository Trust Company) representing securities sold under such Registration Statement, and enable such securities to be in such denominations and registered in such names as the managing underwriter or underwriters, if any, or such Selling Holders may request and make available prior to the effectiveness of such Registration Statement a supply of such certificates; Each Selling Holder, upon receipt of any notice from the Company of the happening of any event of the kind described in subsection (f) of this Section 3, shall forthwith discontinue disposition of the Registrable Securities until such Selling Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by subsection (f) of this Section 3 or until it is advised in writing (the "Advice") by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings which are incorporated by reference in the Prospectus, and, if so directed by the Company, such Selling Holder will, or will request the managing underwriter or underwriters, if any, to, deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Selling Holder's possession, of the Prospectus covering such Registrable Securities current at the time of receipt of such notice. In the event that the Company shall give any such notice, the time periods for which a Registration Statement is required to be kept effective pursuant to Section 2 hereof shall be extended by the number of days during the period from and including the date of the giving of such notice to and including the date when each Selling Holder shall have received (i) the copies of the supplemented or amended Prospectus contemplated by Section 3(f) or (ii) the Advice. 4. Registration Expenses. (a) All expenses incident to the Company's performance of, or compliance with, the provisions hereof, including without limitation, all Commission and securities exchange or NASD registration and filing fees, fees and expenses of compliance with securities or "blue sky" laws (including fees and disbursements of counsel in connection with "blue sky" qualifications of the Registrable Securities), printing expenses, messenger and delivery expenses, internal expenses (including, without limitation, all salaries and expenses of the Company's officers and employees performing legal or accounting duties), fees and expenses incurred in connection with the listing of the securities to be registered, if any, on each securities exchange on which similar securities issued by the Company are then listed, fees and disbursements of counsel for the Company and its independent certified public accountants (including the expense of any special audit or "cold comfort" letters required by, or incident to, such performance), Securities Act liability insurance (if the Company elects to obtain such insurance), reasonable fees and expenses of any special experts retained by the Company in connection with such registration, fees and expenses of other Persons retained by the Company in connection with each registration hereunder (but not including the fees and expense of legal counsel retained by a Holder or Holders, or any underwriting fees, discounts or commissions attributable to the sale of Registrable Securities) are herein called "Registration Expenses." (b) The Company will pay all Registration Expenses in connection with each Registration Statement filed pursuant to Section 2 except as otherwise set forth therein. Other than as specifically provided for in Section 2(a) hereto, all expenses to be borne by the Holders in connection with any Registration Statement filed pursuant to Section 2 (including, without limitation, all underwriting fees, discounts or commissions attributable to such sale of Registrable Securities) shall be borne by the participating Holders pro rata in relation to the number of Units of Registrable Securities to be registered by each Holder. 5. Indemnification; Contribution. (a) Indemnification by the Company. The Company agrees to indemnify and hold harmless, to the full extent permitted by law, each Holder, its officers, directors and each Person who controls such Holder (within the meaning of the Securities Act), and any agent or investment adviser thereof, against all losses, claims, damages, liabilities and expenses (including reasonable attorneys' fees and costs of investigation) arising out of or based upon any untrue or alleged untrue statement of material fact contained in any Registration Statement, any amendment or supplement thereto, any Prospectus or preliminary Prospectus or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same arise out of or are based upon any such untrue statement or omission based upon information with respect to such Holder furnished in writing to the Company by or on behalf of such Holder expressly for use therein; provided that, in the event that the Prospectus shall have been amended or supplemented and copies thereof as so amended or supplemented, shall have been furnished to a Holder prior to the confirmation of any sales of Registrable Securities, such indemnity with respect to the Prospectus shall not inure to the benefit of such Holder if the Person asserting such loss, claim, damage or liability and who purchased the Registrable Securities from such holder did not, at or prior to the confirmation of the sale of the Registrable Securities to such Person, receive a copy of the Prospectus as so amended or supplemented and the untrue statement or omission of a material fact contained in the Prospectus was corrected in the Prospectus as so amended or supplemented. (b) Indemnification by Holders of Registrable Securities. In connection with any Registration Statement in which a Holder is participating, each such Holder will furnish to the Company in writing such information with respect to the name and address of such Holder and such other information as may be reasonably required for use in connection with any such Registration Statement or Prospectus and agrees to indemnity, to the full extent permitted by law, the Company, its directors and officers and each Person who controls the Company (within the meaning of the Securities Act) against any losses, claims, damages, liabilities and expenses resulting from any untrue statement of a material fact in the Registration Statement or Prospectus or any amendment thereof or supplement thereto or necessary to make the statements therein not misleading, to the extent, but only to the extent, that such untrue or alleged untrue statement relates to any information with respect to such Holder so furnished in writing by such Holder specifically for inclusion in any Prospectus or Registration Statement; provided, however, that such Holder shall not be liable in any such case to the extent that prior to the filing of any such Registration Statement or Prospectus or amendment thereof or supplement thereto, such Holder has furnished in writing to the Company information expressly for use in such Registration Statement or Prospectus or any amendment thereof or supplement thereto which corrected or made not misleading information previously furnished to the Company. In no event shall the liability of any Selling Holder hereunder be greater in amount than the dollar amount of the proceeds received by such Selling Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation. (c) Conduct of Indemnification Proceedings. Any Person entitled to indemnification hereunder agrees to give prompt written notice to the indemnifying party after the receipt by such Person of any written notice of the commencement of any action, suit, proceeding or investigation or threat thereof made in writing for which such Person will claim indemnification or contribution pursuant to the provisions hereof and, unless in the judgment of counsel of such indemnified party a conflict of interest may exist between such indemnified party and the indemnifying party with respect to such claim, permit the indemnifying party to assume the defense of such claim. Whether or not such defense is assumed by the indemnifying party, the indemnifying party will not be subject to any liability for any settlement made without its consent (but such consent will not be unreasonably withheld). No indemnifying party will consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation. If the indemnifying party is not entitled to, or elects not to, assume the defense of a claim, it will not be obligated to pay the fees and expenses of more than one counsel (plus such local counsel, if any, as may be reasonably required in other jurisdictions) with respect to such claim, unless in the judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim, in which event the indemnifying party shall be obligated to pay the fees and expenses of such additional counsel or counsels. For the purposes of this Section 5(c), the term "conflict of interest" shall mean that there are one or more legal defenses available to the indemnified party that are different from or additional to those available to the indemnifying party or such other indemnified parties, as applicable, which different or additional defenses make joint representation inappropriate. (d) Contribution. If the indemnification from the indemnifying party provided for in this Section 5 is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 5(c), any reasonable legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. (e) If indemnification is available under this Section 5, the indemnifying parties shall indemnify each indemnified party to the full extent provided in Sections 5(a) and (b) without regard to the relative fault of said indemnifying party or indemnified party or any other equitable consideration provided for in this Section 5. 6. Transfer of Rights. The rights to cause the Company to register Registrable Securities granted pursuant to the provisions hereof may be transferred or assigned by any Holder to a transferee or assignee; provided; however, that the transferee or assignee of such rights assumes the obligations of such transferor or assignor, as the case may be, hereunder. 7. Amendment Except as otherwise provided herein, the provisions hereof may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless the Company has obtained the written consent of Holders of at least a majority of the aggregate number of the Registrable Securities then outstanding. SUBSCRIPTION AGREEMENT Please review, sign on page S-1, and return to: Maxim Group LLC 405 Lexington Avenue, 2nd Floor New York, New York 10017 Attention: Anna Varga Phone: (212) 895-3801 Fax: (212) 895-3555 SUBSCRIPTION AGREEMENT ADM TRONICS UNLIMITED, INC. And its majority-owned subsidiary AA NORTHVALE MEDICAL ASSOCIATES, INC. Offering of up to $3,500,000 worth of Units consisting of Private Placement of Units Consisting of: one (1) $100,000 Unsecured 6% Joint Convertible Promissory Note; one (1) Class A Warrant for ADM Tronics Unlimited, Inc.; and one (1) Class A Warrant for AA Northvale Medical Associates, Inc. Minimum Amount: 20 Units ($2,000,000) Maximum Amount: 35 Units ($3,500,000) $100,000 per Unit Return by mail or overnight delivery to: Maxim Group LLC 405 Lexington Avenue, 2nd Floor New York, New York 10017 Attention: Anna Varga EX-4 5 ex41kaan.txt ADM TRONICS UNLIMITED, INC. REDEEMABLE COMMON STOCK PURCHASE WARRANT NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT"), AND NEITHER THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION SHALL BE APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. Void after 5:00 P.M., New York City time, on the last day of the Exercise Period,as defined below REDEEMABLE CLASS A COMMON STOCK PURCHASE WARRANT OF ADM TRONICS UNLIMITED, INC. This is to certify that, FOR VALUE RECEIVED, _______________________ ("Holder"), is entitled to purchase, subject to the provisions of this Redeemable Class A Common Stock Purchase Warrant (this "Warrant"), from ADM Tronics Unlimited, Inc., a Delaware corporation (the "Company"), at an initial exercise price per share equal to 110% of the closing price of the Company's Common Stock as reported on the OTC Bulletin Board on the date of the initial closing of the offering pursuant to which this warrant has been issued (the "Initial Exercise Price"), subject to adjustment as provided in this Warrant, a number of shares of the Company's Common Stock, $.0005 par value, (the "Common Stock") equal to $_____ [principal amount of the Note] divided by the ADMT Discount Price (as defined below). The shares of Common Stock deliverable upon such exercise, and as adjusted from time to time, are hereinafter sometimes referred to as "Warrant Stock," and the exercise price for the purchase of a share of Common Stock pursuant to this Warrant in effect at any time and as adjusted from time to time is hereinafter sometimes referred to as the "Exercise Price." 1. ISSUANCE OF WARRANT. This Warrant is being issued pursuant to that certain Subscription Agreement dated as of the date hereof between the Company and the Holder (the "Subscription Agreement"). Capitalized terms used herein and not otherwise defined shall have the meanings ascribed thereto in the Subscription Agreement. In addition the following terms have the meanings set forth below: "AAN Warrant" shall mean the Warrant for the purchase of _____ [for each Unit sold in the Offering a warrant to purchase 12,048 shares of AAN common stock shall be issued] shares of common stock of AA Northvale Medical Associates, Inc., a New Jersey corporation, ("AAN") which was issued to the Holder concurrently with the issuance of the ADMT Warrant. The AAN Warrant is sometimes referred to herein as the "Corresponding AAN Warrant." "ADMT Discount Price" means $0.29 per share. "ADMT Warrant" means this Warrant for the purchase of the number of shares of Common Stock of the Company. "Approved Market" shall mean any public market in the United States on which the AAN Common Stock is trading (it being understood that the Pink Sheets Quotation Service shall not qualify as an Approved Market for these purposes). "Closing Price" shall mean the last sale price of the Company's Common Stock as reported on the OTC Bulletin Board or any other public market on which the Company's Common Stock is then trading. "Convertible Securities" shall mean evidences of indebtedness, shares of stock or other securities, which are convertible into or exchangeable, with or without payment of additional consideration in cash or property, for shares of Common Stock, either immediately or upon the occurrence of a specified date or a specified event. "Exercise Period" shall mean the period commencing on March 1, 2005 and ending at 5:00 p.m., eastern time on December 31, 2009. "Offering" shall mean the joint offering of units by the Company and AAN pursuant to a confidential private placement memorandum dated May 20, 2004, as amended and supplemented ("PPM"). "Permitted Issuances" shall mean: (i) Common Stock issued pursuant to a stock split or subdivision, (ii) Common Stock issuable or issued to employees, consultants or directors of the Company directly or pursuant to a stock plan or other compensation arrangement approved by the Board of Directors of the Company, provided; however, that such issuances, in the aggregate, shall be less than 5,188,203 shares of ADMT for a period of one year from the date hereof, (iii) Common Stock issued or issuable upon conversion of the Warrants or any other securities exercisable or exchangeable for, or convertible into shares of Common Stock outstanding as of May 20, 2004, and (iv) shares of Common Stock issued or issuable in a transaction approved in advance by the holders of more than 50% of the then outstanding Warrants. 2. EXERCISE OF WARRANT/REGISTRATION RIGHTS. (a) This ADMT Warrant may be exercised in whole or in part at any time or from time to time during the Exercise Period; provided, however, that the Warrant may only be exercised during such time as the shares of Common Stock underlying the Warrant are registered for resale with the SEC. The Warrant shall be exercised by presentation and surrender of this ADMT Warrant and a proportionate number of the Corresponding AAN Warrants to the Company at its principal office, or at the office of its stock transfer agent, if any, with the Purchase Form annexed to this ADMT Warrant duly executed and accompanied by payment of the Exercise Price for the number of shares of Common Stock specified in the Purchase Form (the Holder will receive no consideration for the surrender of all or any portion of the Corresponding AAN Warrants). If this ADMT Warrant should be exercised in part only, the Company shall, upon surrender of this ADMT Warrant (and a proportionate number of the Corresponding AAN Warrants) for cancellation, execute and deliver a new ADMT Warrant (and a proportionate number of Corresponding AAN Warrants) evidencing the rights of the Holder hereof to purchase the balance of the shares of Common Stock purchasable hereunder. Upon receipt by the Company of this ADMT Warrant at its office, or by the stock transfer agent of the Company at its office, in proper form for exercise, the Holder shall be deemed to be the holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such shares of Common Stock shall not then be actually delivered to the Holder. As soon as practicable after each exercise of this Warrant, in whole or in part, and in any event within three (3) business days thereafter, the Company at its expense (including the payment by it of any applicable issue taxes) will cause to be issued in the name of and delivered to the Holder hereof or, subject to Section 6 hereof, as the Holder (upon payment by the Holder of any applicable transfer taxes) may direct a certificate or certificates for the number of duly authorized, validly issued, fully paid and nonassessable shares of Common Stock to which the Holder shall be entitled upon exercise plus, in lieu of any fractional share to which the Holder would otherwise be entitled, all issuances of Common Stock shall be rounded up to the nearest whole share. (b) Upon the listing of: (i) the AAN Common Stock on an Approved Market, and (ii) the registration of the resale of the AAN Common Stock underlying the AAN Warrants with the SEC, all ADMT Warrants shall immediately expire without any value to the holder of ADMT Warrants. (c) The Holder hereof is hereby granted a demand registration right to the effect that in the event that if, by March 1, 2005: (i) the Spin Off (as described in the PPM) is not effected, or (ii) the registration statement of the AAN Common Stock, as described in the PPM, has not been declared effective by the SEC, then upon demand of Holder, the Company shall register with the SEC all of the shares of ADMT Common Stock issuable upon the exercise of the ADMT Warrants. The Company shall use its best efforts to have such securities registered within 30 days of the demand made by Holder. In the event that the registration statement covering all of such securities is not declared effective by the SEC within 90 days of the demand for registration or the registration does not remain effective for 60 consecutive days, then the number of shares of ADMT Common Stock issuable upon the exercise of the ADMT Warrants shall be increased by one percent (1%) for each 30 day period (or partial period, as the case may be) following such 90 day period. The Company covenants to maintain the effectiveness of such registration statement until the third (3rd) anniversary of the date of such effectiveness. 3. RESERVATION OF SHARES; FRACTIONAL SHARES. The Company hereby agrees that at all times there shall be reserved for issuance and/or delivery upon exercise of this Warrant such number of shares of Common Stock as shall be required for issuance and delivery upon exercise of this Warrant. No fractional shares or script representing fractional shares shall be issued upon the exercise of this Warrant. Instead, the Company will round up to the nearest whole share. 4. EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This ADMT Warrant is exchangeable, without expense, at the option of the Holder, upon presentation and surrender hereof (along with the Corresponding AAN Warrant) to the Company or at the office of its stock transfer agent, if any, for other ADMT Warrants (and Corresponding AAN Warrants) of different denominations entitling the holder thereof to purchase in the aggregate the same number of shares of Common Stock purchasable hereunder. Upon surrender of this ADMT Warrant (and Corresponding AAN Warrant) to the Company or at the office of its stock transfer agent, if any, with the Assignment Form annexed hereto duly executed and funds sufficient to pay any transfer tax, the Company shall, without charge, execute and deliver a new ADMT Warrant (and Corresponding AAN Warrant) in the name of the assignee named in such instrument of assignment and this ADMT Warrant (and Corresponding AAN Warrant) shall promptly be canceled. This ADMT Warrant (and Corresponding AAN Warrant) may be divided or combined with other ADMT Warrants (and Corresponding AAN Warrants) which carry the same rights upon presentation hereof at the office of the Company or at the office of its stock transfer agent, if any, together with a written notice specifying the names and denominations in which new ADMT Warrants (and Corresponding AAN Warrants) are to be issued and signed by the Holder hereof. The term "Warrant" and "ADMT Warrant" as used herein includes any ADMT Warrants into which this Warrant may be divided or exchanged. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver a new Warrant of like tenor. Any such new Warrant executed and delivered shall constitute an additional contractual obligation on the part of the Company, whether or not this Warrant so lost, stolen, destroyed, or mutilated shall be at any time enforceable by anyone. 5. RIGHTS AND OBLIGATIONS OF THE HOLDER. The Holder shall not, by virtue of this Warrant, be entitled to any rights of a stockholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in the Warrant and are not enforceable against the Company except to the extent set forth herein. In addition, no provision hereof, in the absence of affirmative action by Holder to purchase shares of Common Stock, and no enumeration herein of the rights or privileges of Holder hereof, shall give rise to any liability of such Holder for the purchase price of any Common Stock or as a stockholder of Company, whether such liability is asserted by Company or by creditors of Company. 6. ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any time and the number and kind of securities purchasable upon exercise of each Warrant shall be subject to adjustment as follows and the Company shall give each Holder notice of any event described below which requires an adjustment pursuant to this Section 6 at the time of such event: (a) Stock Dividends, Subdivisions and Combinations. If at any time Company shall: (i) take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend payable in, or other distribution of, shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into a larger number of shares of Common Stock, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares of Common Stock or otherwise effect a reverse stock split, then (i) the number of shares of Common Stock for which this Warrant is exercisable immediately after the occurrence of any such event shall be adjusted to equal the number of shares of Common Stock which a record holder of the same number of shares of Common Stock for which this Warrant is exercisable immediately prior to the occurrence of such event, or the record date therefor, whichever is earlier, would own or be entitled to receive after the happening of such event, and (ii) the Exercise Price(s) shall be adjusted to equal (A) the Exercise Price immediately prior to such event multiplied by the number of shares of Common Stock for which this Warrant is exercisable immediately prior to the adjustment divided by (B) the number of shares for which this Warrant is exercisable immediately after such adjustment. (b) Certain Other Distributions and Adjustments. (i) If at any time Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive any dividend or other distribution of: (A) cash, (B) any evidences of its indebtedness, any shares of its stock or any other securities or property of any nature whatsoever (other than Convertible Securities or shares of Common Stock), or (C) any warrants or other rights to subscribe for or purchase any evidences of its indebtedness, any shares of its stock or any other securities or property of any nature whatsoever (other than Convertible Securities or shares of Common Stock), then Holder, upon exercise of this Warrant, shall be entitled to receive such dividend or distribution as if Holder had exercised this Warrant. (ii) A reclassification of the Common Stock (other than a change in par value, or from par value to no par value or from no par value to par value) into shares of Common Stock and shares of any other class of stock shall be deemed a distribution by Company to the holders of its Common Stock of such shares of such other class of stock and in such event Holder shall be entitled to receive such distribution as if Holder had exercised this Warrant and, if the outstanding shares of Common Stock shall be changed into a larger or smaller number of shares of Common Stock as a part of such reclassification, such change shall be deemed a subdivision or combination, as the case may be, of the outstanding shares of Common Stock within the meaning of Section 6(a). (c) Issuance of Additional Shares of Common Stock. (i) If at any time the Company shall issue or sell any shares of Common Stock in exchange for consideration in an amount per share of Common Stock less than the then current Exercise Price, other than Permitted Issuances, then (A) the Exercise Price shall be adjusted so that it shall equal the price determined by multiplying the Exercise 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 on the date of issuance plus the number of additional shares of Common Stock which the aggregate offering price would purchase based upon the Exercise Price, and of which the denominator shall be the number of shares of Common Stock outstanding on the date of issuance plus the number of additional shares of Common Stock issued or issuable in such offering, and (B) the number of shares of Common Stock for which this Warrant is exercisable shall be adjusted to equal the product obtained by multiplying the Exercise Price in effect immediately prior to such issue or sale by the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such issue or sale and dividing the product thereof by the Exercise Price resulting from the adjustment made pursuant to clause (A) above. (ii) The provisions of paragraph (i) of this Section 6(c) shall not apply to any issuance of shares of Common Stock for which an adjustment is provided under Section 6(a) or 6(b). No adjustment of the number of shares of Common Stock for which this Warrant shall be exercisable shall be made under paragraph (i) of this Section 6(c) upon the issuance of any shares of Common Stock which are issued pursuant to the exercise of any warrants or other subscription or purchase rights or pursuant to the exercise of any conversion or exchange rights in any Convertible Securities, if any such adjustment shall previously have been made upon the issuance of such warrants or other rights or upon the issuance of such Convertible Securities (or upon the issuance of any warrant or other rights therefor) pursuant to Section 6(d) or Section 6(e). (d) Issuance of Warrants or Other Rights. If at any time Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a distribution of, or shall in any manner (whether directly or by assumption in a merger in which Company is the surviving corporation) issue or sell, any warrants or other rights to subscribe for or purchase any shares of Common Stock or any Convertible Securities, whether or not the rights to exchange or convert thereunder are immediately exercisable, and the price per share for which Common Stock is issuable upon the exercise of such warrants or other rights or upon conversion or exchange of such Convertible Securities shall be less than the Exercise Price, then the number of shares for which this Warrant is exercisable and the Exercise Price shall be adjusted as provided in Section 6(c) on the basis that the maximum number of shares of Common Stock issuable pursuant to all such warrants or other rights or necessary to effect the conversion or exchange of all such Convertible Securities shall be deemed to have been issued and outstanding and the Company shall be deemed to have received all the consideration payable therefor, if any, as of the date of issuance of such warrants or other rights. No further adjustment of the Exercise Price(s) shall be made upon the actual issuance of such Common Stock or of such Convertible Securities upon exercise of such warrants or other rights or upon the actual issuance of such Common Stock upon such conversion or exchange of such Convertible Securities. (e) Issuance of Convertible Securities. If at any time Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a distribution of, or shall in any manner (whether directly or by assumption in a merger in which Company is the surviving corporation) issue or sell, any Convertible Securities, whether or not the rights to exchange or convert thereunder are immediately exercisable, and the price per share for which Common Stock is issuable upon such conversion or exchange shall be less than the then current Exercise Price, then the number of shares of Common Stock for which this Warrant is exercisable and the Exercise Price shall be adjusted as provided in Section 6(c) on the basis that the maximum number of shares of Common Stock necessary to effect the conversion or exchange of all such Convertible Securities shall be deemed to have been issued and outstanding and Company shall have received all of the consideration payable therefor, if any, as of the date of issuance of such Convertible Securities. If any issue or sale of Convertible Securities is made upon exercise of any warrant or other right to subscribe for or to purchase any such Convertible Securities for which adjustments of the number of shares of Common Stock for which this Warrant is exercisable and the Exercise Price have been or are to be made pursuant to Section 6(d), no further adjustment of the number of shares of Common Stock for which this Warrant is exercisable and the Exercise Price shall be made by reason of such record, issue or sale. (f) No adjustment in the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least one cent ($0.01) in such price; provided, however, that any adjustments which by reason of this Section 6(f) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 6(f) shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. (g) The Company may retain a firm of independent public accountants of recognized standing selected by the Board (who may be the regular accountants employed by the Company) to make any computation required by this Section 6. (h) In the event that at any time, as a result of an adjustment made pursuant to Section 6(a), (b) or (c) of this Warrant, the Holder of any Warrant 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 any Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in Sections 6(a) through (g), inclusive, of this Warrant. (i) Notwithstanding the foregoing, no adjustment shall be effected due to, or as a result of, any Permitted Issuances. (j) Other Action Affecting Common Stock. In case at any time or from time to time Company shall take any action in respect of its Common Stock, other than any action described in this Section 6, then, unless such action will not have a materially adverse effect upon the rights of the Holders, the number of shares of Common Stock or other stock for which this Warrant is exercisable and/or the purchase price thereof shall be adjusted in such manner as may be equitable in the circumstances. 7. REDEMPTION. This ADMT Warrant, or part thereof, (as described below in this Section 7) may be redeemed at the option of the Company, at a redemption price of $0.01 per Warrant, provided that the following terms and conditions are met. In the event that the Spin Off, (as described in the PPM) has not occurred within twelve (12) months from the date of the initial closing of this offering, and provided the shares of ADMT Common Stock issuable upon exercise of the ADMT Warrants are registered with the SEC for resale to the public, or an exemption to the registration requirements is available to the holders of the ADMT Warrants under Rule 144, ADMT may at its option call for the redemption the then outstanding ADMT Warrants, on a pro rata basis, in the event that: (i) the market price of the ADMT Common Stock is at or above 300% of the ADMT Warrant Exercise Price per share for twenty (20) consecutive trading days ending on the day prior to the date on which ADMT gives notice that it is requiring exercise of the ADMT Warrants; and (ii) the shares of ADMT Common Stock issuable upon exercise of the ADMT Warrants are registered with the SEC for resale to the public, or an exemption to the registration requirements is available to the holders of the ADMT Warrants under Rule 144, provided, however, that the aggregated number of ADMT Warrants to be redeemed shall not exceed the cumulative trading volume for the ten (10) consecutive trading days prior to such redemption within any thirty (30) day period. The Number of ADMT Warrants to be redeemed shall be pro rata among each holder of the then outstanding ADMT Warrants. The Redemption Notice shall be given not later than the thirtieth day before the date fixed for redemption. On and after the date fixed for redemption, the Registered Holder shall have no rights with respect to this Warrant except to receive the redemption price of $0.01 per Warrant upon surrender. If the ADMT Warrants are redeemed, a proportionate number of the Corresponding AAN Warrants shall thereafter be void. 8. OFFICER'S CERTIFICATE. Whenever the Exercise Price(s) shall be adjusted as required by the provisions of Section 6 of this Warrant, the Company shall forthwith file in the custody of its Secretary or an Assistant Secretary at its principal office and with its stock transfer agent, if any, an officer's certificate showing the adjusted Exercise Price(s) and the adjusted number of shares of Common Stock issuable upon exercise of each Warrant, determined as herein provided, setting forth in reasonable detail the facts requiring such adjustment, including a statement of the number of additional shares of Common Stock, if any, and such other facts as shall be necessary to show the reason for and the manner of computing such adjustment. A copy of each such officer's certificate shall be forwarded to Holder. 9. NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be outstanding, (1) if the Company shall pay any dividend or make any distribution upon Common Stock, or (2) if the Company shall offer to the holders of Common Stock for subscription or purchase by them any share of any class or any other rights, or (3) if any capital reorganization of the Company, reclassification of the capital stock of the Company, consolidation or merger of the Company with or into another entity, tender offer transaction for the Company's Common Stock, sale, lease or transfer of all or substantially all of the property and assets of the Company, or voluntary or involuntary dissolution, liquidation or winding up of the Company shall be effected, or (4) if the Company shall file a registration statement under the Securities Act, on any form other than on Form S-4 or S-8 or any successor form, then in any such case, the Company shall cause to be mailed by certified mail to the Holder, at least ten days prior to the date specified in clauses (1), (2), (3) or (4), as the case may be, of this Section 9 a notice containing a brief description of the proposed action and stating the date on which (i) a record is to be taken for the purpose of such dividend, distribution or rights, or (ii) such reclassification, reorganization, consolidation, merger, tender offer transaction, conveyance, lease, dissolution, liquidation or winding up is to take place and the date, if any is to be fixed, as of which the holders of Common Stock or other securities shall receive cash or other property deliverable upon such reclassification, reorganization, consolidation, merger, conveyance, dissolution, liquidation or winding up, or (iii) such registration statement is to be filed with the Securities and Exchange Commission. 10. RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the Company, or in case of any consolidation or merger of the Company with or into another corporation (other than a merger with a subsidiary in which merger the Company is the continuing or surviving corporation and which does not result in any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the class issuable upon exercise of this Warrant) or in case of any sale, lease or conveyance of all or substantially all of the assets of the Company, the Company shall, as a condition precedent to such transaction, cause effective provisions to be made so that (i) the Holder shall have the right thereafter by exercising this Warrant, to purchase the kind and amount of shares of stock and other securities and property receivable upon such reclassification, capital reorganization and other change, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock which could have been purchased upon exercise of this Warrant immediately prior to such reclassification, change, consolidation, merger, sale or conveyance, and (ii) the successor or acquiring entity shall expressly assume the due and punctual observance and performance of each covenant and condition of this Warrant to be performed and observed by Company and all obligations and liabilities hereunder (including but not limited to the provisions of Section 3 regarding the increase in the number of shares of Warrant Stock potentially issuable hereunder). Any such provision shall include provision for adjustments which shall be as nearly equivalent as possible to the adjustments provided for in this Warrant. The foregoing provisions of this Section 10 shall similarly apply to successive reclassifications, capital reorganizations and changes of shares of Common Stock and to successive consolidations, mergers, sales or conveyances. In the event that in connection with any such capital reorganization or reclassification, consolidation, merger, sale or conveyance, additional shares of Common Stock shall be issued in exchange, conversion, substitution or payment, in whole in part, for a security of the Company other than Common Stock, any such issue shall be treated as an issuance of Common Stock covered by the provisions of Section 6 of this Warrant. 11. TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933. This Warrant or the Warrant Stock or any other security issued or issuable upon exercise of this Warrant may not be sold or otherwise disposed of except as follows: (i) to a person who, in the opinion of counsel for the Company, is a person to whom this Warrant or Warrant Stock may legally be transferred without registration and without the delivery of a current prospectus under the Act with respect thereto and then only against receipt of an agreement of such person to comply with the provisions of this Section 11 with respect to any resale or other disposition of such securities which agreement shall be satisfactory in form and substance to the Company and its counsel; or (ii) to any person upon delivery of a prospectus then meeting the requirements of the Act relating to such securities and the offering thereof for such sale or disposition. 12. GOVERNING LAW; JURISDICTION. The corporate laws of the State of Delaware shall govern all issues concerning the relative rights of the Company and its stockholders. All issues concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by and construed in accordance with the internal laws of the State of New York without giving effect to the principles of conflicts of law thereof. The parties hereto agree that venue in any and all actions and proceedings related to the subject matter of this Warrant shall be in the state and federal courts in and for New York, New York, which courts shall have exclusive jurisdiction for such purpose, and the parties hereto irrevocably submit to the exclusive jurisdiction of such courts and irrevocably waive the defense of an inconvenient forum to the maintenance of any such action or proceeding. Service of process may be made in any manner recognized by such courts. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. 13. NOTICES. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 6:30 p.m. (New York City time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Agreement later than 6:30 p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York City time) on such date, (iii) the Business Day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows: ADM Tronics Unlimited, Inc. 224-S Pegasus Avenue Northvale, New Jersey 07647 Attn: President Tel: (201) 767-6040 Fax: (201) 784-0620 or such other address as it shall have specified to the Subscriber in writing, with a copy (which shall not constitute notice) to: Frank J. Hariton, Esq. 1065 Dobbs Ferry Road White Plains, New York 10607 Attn: Frank J. Hariton Tel: 914.674.4373; Fax: 914.693.2963 If to the Holder To the Address Set Forth Below: With copies to: 14. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes attributable to the issuance of shares of Common Stock underlying this Warrant upon exercise of this Warrant; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificate for shares of Common Stock underlying this Warrant in a name other that of the Holder. The Holder is responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving shares of Common Stock underlying this Warrant upon exercise hereof. [Signature page follows] IN WITNESS WHEREOF, this Warrant has been duly executed as of ____ ___, 2004. ADM TRONICS UNLIMITED, INC. By: ________________________________ Name: Title: PURCHASE FORM Dated: _______________, 20_____ The undersigned hereby irrevocably elects to exercise the within ADMT Warrant to the extent of purchasing ____ shares of Common Stock and hereby makes payment of (i)$ ______in payment of the actual exercise price thereof and (ii) the surrender to the Company of a proportionate amount of the Corresponding AAN Warrant for no consideration. ____________________________________ INSTRUCTIONS FOR REGISTRATION OF STOCK Name:___________________________________________ (Please typewrite or print in block letters) Signature:________________________________________ Social Security or Employer Identification No.:____________________ ASSIGNMENT FORM FOR VALUE RECEIVED, _________________________________ hereby sells, assigns and transfer unto: Name:_______________________________________________ (Please typewrite or print in block letters) Address:_____________________________________________ Social Security or Employer Identification No.:_____________ The right to purchase Common Stock represented by this Warrant to the extent of shares as to which such right is exercisable and does hereby irrevocably constitute and appoint attorney to transfer the same (along with the Corresponding AAN Warrant) on the books of the Company with full power of substitution. Dated: _________________, 200_. Signature:________________________________ Signature Guaranteed: ___________________________________ -----END PRIVACY-ENHANCED MESSAGE-----