<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 30, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PHYSIOMETRIX, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 77-0248588
(State of incorporation) (I.R.S. Employer
Identification Number)
</TABLE>
5 BILLERICA PARK
NORTH BILLERICA, MA 01862
(978) 670-2422
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
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JOHN WILLIAMS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PHYSIOMETRIX, INC.
5 BILLERICA PARK
NORTH BILLERICA, MA 01862
(978) 670-2422
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPIES TO:
CHRIS MITCHELL, ESQ.
BENJAMIN TEMPLIN, ESQ.
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CA 94304
(650) 493-9300
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement. If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box. /X/
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PER SHARE (1) OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock $0.001 par value......... 2,080,340 $19.375 $40,306,587.50 $11,206
Common stock issuable upon exercise of
Warrants............................ 624,102 $19.375 $12,091,976.25 $3,362
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the registration
fee based on the average of the high and low prices of the common stock as
reported on the Over-the-Counter Bulletin Board on March , 2000 pursuant
to Rule 457(c) promulgated under the Securities Act of 1933.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(A),
MAY DETERMINE.
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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED MARCH 30, 2000
PROSPECTUS
PHYSIOMETRIX, INC.
2,080,340 SHARES OF COMMON STOCK
624,102 SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE OF WARRANTS
We have prepared this prospectus to allow the selling stockholders that we
have identified in this prospectus to sell up to 2,080,340 shares of our common
stock, $.001 par value per share, which the selling stockholders purchased from
us in a private placement in February 2000. This prospectus also enables these
selling stockholders to sell up to 624,102 shares of our common stock issuable
upon exercise of warrants issued to the selling stockholders in the private
placement. In this prospectus, we sometimes refer to the shares of common stock
issued in the private placement and the shares issuable upon exercise of the
warrants collectively as the securities.
We will not receive any of the proceeds from the sale of the securities by
the selling stockholders.
Our common stock is traded on the Over-the-Counter Bulletin Board under the
symbol "PHYX." On March 29, 2000, the last reported sale price of our common
stock on the OTC Bulletin Board was $19.375.
------------------------
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is March , 2000.
<PAGE>
ABOUT PHYSIOMETRIX, INC.
We design, develop, manufacture and market noninvasive, advanced medical
products incorporating proprietary materials, electronics technology and
software for use in neurological monitoring applications during surgical and
diagnostic procedures. We sell our products to hospitals, clinics and
physicians' offices domestically and internationally. Our current principal
product focus is our Patient State Analyzer, or PSA, an innovative system for
monitoring brain activity during anesthesia. We are planning to submit a 510(k)
clearance application for the PSA to the Food and Drug Administration.
Our initial products, which were commercially introduced in 1994, are our
E-Net headpiece and disposable HydroDot biosensors, which are based upon our
proprietary HydroGel technology, and its custom electronics. These products are
packaged as the HydroDot NeuroMonitoring System, which was developed and is sold
for brain monitoring applications, such as clinical electroencephalograph, or
EEG, procedures. The system is marketed and sold as a safer, lower cost
alternative to current EEG data collection technology. The system connects and
interfaces to the standard input on all conventional EEG instruments currently
in use worldwide, yet offers reduced patient setup time, more reliable data
readings, and enhanced patient comfort and safety.
PATIENT STATE ANALYZER. The Patient State Analyzer is being developed by us
to provide a simplified, user friendly analysis of patient brain activity during
surgical procedures involving general anesthesia. Currently, such monitoring is
used only in a small percentage of all such procedures, primarily during high
risk interventions such as cardiology and neurology surgeries. Traditional EEG
devices also require a neurologist to interpret their data output. As a result,
anesthesiologists are reluctant to use EEG monitoring during other surgical
procedures, despite the potential benefits offered by brain monitoring, such as
improved patient safety, shorter patient recovery times, and lower overall costs
per procedure. In addition, we are developing the final component of the Patient
State Analyzer, a proprietary software module which will process EEG data and
provide an easy to read signal to anesthesiologists regarding patient's brain
activity.
We believe that monitoring patients' brain activity during surgery with the
Patient State Analyzer will improve patient safety and lower costs per surgical
procedure by better controlling the amount of anesthesia administered during
surgeries. This will reduce the amount of postoperative recovery time required,
and eliminate the requirement of a neurologist or specialized technologists to
interpret EEG results during surgery. We believe that these benefits create the
opportunity for the Patient State Analyzer to become the standard of care during
surgical interventions using general anesthesia. We plan to submit our 510(k)
clearance application for the PSA to the FDA during March 2000.
We will not be able to market the Patient State Analyzer in the United
States unless and until we receive clearance of our 510(k) application from the
FDA. We cannot assure you that we will be able to obtain this clearance on a
timely basis, if at all.
This prospectus contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933. Actual events or results
may differ materially from those projected in the forward-looking statements as
a result of the factors described herein under "Risk Factors" and in the
documents incorporated herein by reference. Such forward-looking statements
include, but are not limited to, statements concerning (i) business strategy;
(ii) products under development; (iii) other products; (iv) marketing and
distribution; (v) research and development; (vi) manufacturing;
(vii) competition; (viii) government regulation; (ix) third-party reimbursement;
(x) operating and capital requirements and (xi) clinical trials. Accordingly,
you should carefully review the "Risk Factors" section of this prospectus.
<PAGE>
The table below summarizes the products currently offered by us, the
products we are developing, the markets served by these products and their
present development and/or commercialization status:
<TABLE>
<CAPTION>
DEVELOPMENT/COMMERCIALIZATION
PRODUCT DESCRIPTION STATUS
- ------- ----------------------------- -----------------------------
<S> <C> <C>
PATIENT STATE ANALYZER Intraoperative EEG monitoring Under development
system
HYDRODOT NEUROMONITORING
SYSTEM
E-Net EEG headpiece Commercial sales
Small E-Net EEG headpiece for children Commercial sales
OR E-Net EEG headpiece for operating Commercial sales
room Applications
HydroDot biosensors Disposable biosensors for use Commercial sales
with E-Nets
HYDROSPOT BIOSENSORS Disposable biosensors Commercial sales
attached to lead wires
</TABLE>
2
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE MAKING AN
INVESTMENT DECISION. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS,
FINANCIAL CONDITION AND OPERATING RESULTS COULD BE SERIOUSLY HARMED. AS A
RESULT, THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE, AND YOU COULD LOSE
ALL OR PART OF THE VALUE OF YOUR INVESTMENT.
WE ARE DEPENDENT UPON THE PATIENT STATE ANALYZER SYSTEM, AND IF WE ARE
UNABLE TO INTRODUCE AND SUCCESSFULLY COMMERCIALIZE THIS PRODUCT, OUR
BUSINESS WILL BE SERIOUSLY HARMED
Our business is completely dependent upon the Patient State Analyzer, or
PSA, system. Commercial introduction of the PSA system will require completion
of development activities and receipt of marketing clearance from the U.S. Food
and Drug Administration, or FDA. If we are unable to complete the necessary
development work or receive FDA marketing clearance, we will be unable to
introduce the system commercially in the U.S. If we are able to introduce the
PSA system, we will need to build market acceptance for the system. Because we
will depend upon our PSA system for substantially all of our future revenue and
we have no other significant products, if we are unable to commence commercial
sales of or achieve widespread market acceptance for the PSA system, we will not
be able to sustain or grow our business. In this event, our business and
operating results would be seriously harmed and our stock price would likely
decline.
WE HAVE NOT RECEIVED FDA MARKETING CLEARANCE FOR THE PSA SYSTEM, AND WE
CANNOT COMMENCE U.S. COMMERCIAL SALES OF THE PSA SYSTEM UNLESS AND UNTIL WE
RECEIVE FDA CLEARANCE
Before we can market the PSA system in the United States we must obtain
clearance from the FDA. If the FDA concludes that the PSA system does not meet
the requirements to obtain clearance of a premarket notification under
Section 510(k) of the Food, Drug and Cosmetic Act, then we would be required to
file a premarket approval application. The approval process for a premarket
approval application is lengthy, expensive and typically requires extensive
preclinical and clinical trial data. We may not obtain clearance of a 510(k)
notification or approval of a premarket approval application with respect to the
PSA system on a timely basis, if at all. If we fail to obtain timely clearance
or approval for our products, we will not be able to market and sell our
products, which will limit our ability to generate revenue. In addition, if we
obtain FDA clearance for the PSA system and elect to enhance or modify it, we
may also be required to obtain additional clearances from the FDA before we can
market enhanced or modified versions of this product. We anticipate filing our
510(k) premarket notification with the FDA during March, 2000. Although we
believe that the clinical and other information we will file with the FDA is
sufficient to support FDA clearance of our 510(k) notification, we cannot assure
that we will be able to obtain such clearance in a timely manner or at all.
Timeliness of FDA clearance is of particular concern to us because a competing
system for brain state monitoring during anesthesia was commercially introduced
in 1998. If we fail to obtain such clearance in a timely manner, our business
and operating results would be seriously harmed and our stock price would likely
decline.
The FDA also requires us to adhere to current Good Manufacturing Practices
regulations, which include production design controls, testing, quality control,
storage and documentation procedures. The FDA may at any time inspect our
facilities to determine whether adequate compliance has been achieved.
Compliance with current Good Manufacturing Practices regulations for medical
devices is difficult and costly. In addition, we may not continue to be
compliant as a result of future changes in, or interpretations of, regulations
by the FDA or other regulatory agencies. If we do not achieve continued
compliance, the FDA may withdraw marketing clearance or require product recall.
When any change or modification is made to a device or its intended use, the
manufacturer may be required to reassess compliance with current Good
Manufacturing Practices regulations, which may cause interruptions or delays in
the marketing and sale of our products.
3
<PAGE>
Sales of our products outside the United States are subject to foreign
regulatory requirements that vary from country to country. The time required to
obtain approvals from foreign countries may be longer or shorter than that
required for FDA approval, and requirements for foreign licensing may differ
from FDA requirements. The Federal, state and foreign laws and regulations
regarding the manufacture and sale of our products are subject to future
changes, as are administrative interpretations of regulatory agencies. If we
fail to comply with applicable federal, state or foreign laws or regulations, we
could be subject to enforcement actions, including product seizures, recalls,
withdrawal of clearances or approvals and civil and criminal penalties.
WE DO NOT HAVE INTERNAL SALES AND MARKETING RESOURCES SUFFICIENT TO SUPPORT
COMMERCIAL INTRODUCTION OF THE PSA SYSTEM, AND WILL NEED TO EITHER OBTAIN
THESE RESOURCES THROUGH STRATEGIC RELATIONSHIPS OR THROUGH INTERNAL
DEVELOPMENT EFFORTS
We do not currently have the sales and marketing capabilities that we will
need to commercially introduce the PSA system. In order to commercially
introduce the system, we will need to either enter into alliances with other
major medical device companies or distributors of medical devices to market and
sell the PSA system or will need to develop internal marketing and sales
capabilities. If we are unable to enter into arrangements with third parties for
marketing, sales and distribution of the PSA system and must develop internal
capabilities, we will need to expend additional funds and recruit a significant
number of additional personnel. We cannot assure you that we will be able to
develop the sales and marketing capabilities we will require, either through a
third party relationship or through internal growth. If we are unable to develop
marketing and sales capabilities in a timely manner, our ability to commercially
introduce the PSA system would be seriously compromised. In this event, our
business and operating results would be seriously harmed and our stock price
would likely decline.
WE WILL NOT BE ABLE TO ACHIEVE REVENUE GROWTH OR PROFITABILITY IF HOSPITALS
AND ANESTHESIA SERVICE PROVIDERS DO NOT BUY AND USE THE PSA SYSTEM IN
SUFFICIENT QUANTITIES
If we are able to obtain regulatory clearance for, and commercially
introduce, the PSA system, our revenue growth and prospects will depend on
customer acceptance and usage of the PSA system. Customers may determine that
the cost of the PSA system exceeds cost savings in drugs, personnel and
post-anesthesia care recovery resulting from use of the PSA system. In addition,
hospitals and anesthesia providers may not accept the PSA system as an accurate
means of assessing a patient's level of consciousness during surgery if patients
regain consciousness during surgery while being monitored with the PSA system or
if they do not consider the PSA system to be a clincially reliable measuring
system for other reasons. If extensive or frequent malfunctions occur, these
providers may also conclude that the PSA system is unreliable. If hospitals and
anesthesia providers do not accept the PSA system as cost-effective, accurate or
reliable, they will not buy and use the PSA system in sufficient quantities to
enable us to be profitable. In this event, our business, operating results and
long-term prospects would be seriously harmed. Our stock price would also likely
decline.
WE EXPECT TO CONTINUE TO INCUR LOSSES IN THE FUTURE, AND WE CANNOT ASSURE
YOU THAT WE WILL EVER BECOME PROFITABLE
We have incurred net losses in each year since inception. We expect to
increase significantly our research and development, sales and marketing and
general and administrative expenses in future periods. We will spend these
amounts before we receive any incremental revenue from these efforts. Therefore,
our losses will be greater than the losses we would incur if we developed our
business more slowly. In addition, we may find that these efforts are more
expensive than we currently anticipate, which would further increase our losses.
Failure to become and remain profitable may depress the market price of our
common stock and our ability to raise capital and continue our operations.
4
<PAGE>
WE HAVE A LIMITED OPERATING HISTORY THAT YOU MAY USE TO ASSESS OUR
PROSPECTS, AND WE HAVE NO OPERATING EXPERIENCE OR HISTORY RELATED TO THE
PSA SYSTEM, OUR CURRENT PRINCIPAL PRODUCT UNDER DEVELOPMENT
We have a limited history of operations. Since our inception in
January 1990, we have been primarily engaged in research and development of
neurophysiological monitoring products. To date, we have sold only a small
number of units of our HydroDot NeuroMonitoring System and these sales have
generated only limited revenues. Furthermore, these products are not central to
our core business, which relates to the development and commercialization of the
PSA system. We have had no revenues from commercial sales of the PSA system.
Accordingly, our historical results of operations may be of limited utility in
evaluating our future prospects. In addition, we do not have experience in
manufacturing, marketing or selling our products in quantities necessary for
achieving profitability. Whether we can successfully manage the transition to a
larger scale commercial enterprise will depend upon the successful development
of our manufacturing capability, the development of our marketing and
distribution network, obtaining U.S. FDA and foreign regulatory approvals for
the PSA system and other potential products and strengthening our its financial
and management systems, procedures and controls. With respect to our PSA system,
we will need to develop, either on our own or in collaboration with third
parties, a sales and marketing effort targeted towards anesthesiologists, rather
than neurologists to whom we have previously marketed our products. Accordingly,
due to the significant change in our business associated with the PSA, our
historical financial information is of limited utility in evaluating our future
prospects, and we cannot assure that we will be able to achieve or sustain
revenue growth or profitability.
WE FACE INTENSE COMPETITION AND MAY NOT BE ABLE TO COMPETE EFFECTIVELY,
WHICH COULD HARM THE MARKET FOR OUR PRODUCTS AND OUR OPERATING RESULTS
We expect to face substantial competition from larger medical device
companies that have greater financial, technical, marketing and other resources
than we do. As our resources in these areas are extremely limited, any current
or potential competitor of ours is likely to have greater resources in these
areas. In particular, Aspect Medical markets an anesthesia monitoring system
that competes with the PSA. Aspect has received FDA clearance for this system
and is marketing it in the U.S. We may not be able to compete effectively with
Aspect or other potential competitors. Other companies may develop anesthesia-
monitoring systems that perform better than the PSA system and/or sell for less.
Competition in the sale of anesthesia-monitoring systems could result in the
inability of the PSA to achieve market acceptance, price reductions, fewer
orders, reduced gross margins and inability to establish or erosion of market
share. Any of these events would harm our business and operating results and
cause our stock price to decline.
WE MAY NOT BE ABLE TO KEEP UP WITH NEW PRODUCTS OR ALTERNATIVE TECHNIQUES
DEVELOPED BY COMPETITORS, WHICH COULD IMPAIR OUR FUTURE GROWTH AND OUR
ABILITY TO COMPETE
The medical industry in which we market our products is characterized by
rapid product development and technological advances. Our current or planned
products are at risk of obsolescence from:
- new monitoring products, based on new or improved technologies,
- new products or technologies used on patients or in the operating room
during surgery in lieu of monitoring devices,
- electrical or mechanical interference from new or existing products or
technologies,
- alternative techniques for evaluating the effects of anesthesia,
- significant changes in the methods of delivering anesthesia, and
- the development of new anesthetic agents.
5
<PAGE>
We may not be able to improve our products or develop new products or
technologies quickly enough to maintain a competitive position in our markets
and continue to grow our business.
IF WE DO NOT SUCCESSFULLY DEVELOP AND INTRODUCE NEW OR ENHANCED PRODUCTS,WE
COULD LOSE REVENUE OPPORTUNITIES AND CUSTOMERS
As the market for anesthesia monitoring equipment matures, we need to
develop and introduce new products for anesthesia monitoring or other
applications. We face at least the following risks:
- we may not successfully adapt the PSA system to function properly in the
intensive care unit, for procedural sedation, when used with anesthetics
we have not tested or with patient populations we have not studied, such
as infants and young children, and
- our technology is complex, and we may not be able to develop it further
for applications outside anesthesia monitoring.
If we do not successfully adapt the PSA system for new products and
applications both within and outside the field of anesthesia monitoring, then we
could lose revenue opportunities and customers.
WE HAVE EXPERIENCED SIGNIFICANT OPERATING LOSSES TO DATE, AND OUR FUTURE
OPERATING RESULTS COULD FLUCTUATE SIGNIFICANTLY
We have experienced significant operating losses since inception and, as of
December 31, 1999 had an accumulated deficit of approximately $29.4 million. The
development and commercialization of the PSA system and other new products, if
any, will require substantial development, clinical, regulatory and other
expenditures. We expect our operating losses to continue for at least the next
couple of years as we continue to expend substantial resources to expand
marketing and sales activities, scale up manufacturing capabilities, continue
research and development and support regulatory and reimbursement approvals.
Results of operations may fluctuate significantly from quarter to quarter and
will depend upon numerous factors, including actions relating to regulatory and
reimbursement matters, including particularly timing of FDA clearance of the PSA
system, and whether the PSA system, if commercialized, is able to garner market
acceptance. In addition, competition, availability of third party reimbursement
and other factors may affect our future results of operations.
WE MAY NEED ADDITIONAL FUNDS, AND SUCH FUNDS MAY NOT BE AVAILABLE ON
COMMERCIALLY REASONABLE TERMS WHEN WE NEED THEM
We plan to continue to expend substantial funds for obtaining regulatory
approvals, expansion of sales and marketing activities and research and
development. We may be required to expend greater than anticipated funds if
unforeseen difficulties arise in the course of obtaining necessary regulatory
approvals or in other aspects of our business. In particular, our funding needs
will increase significantly if we cannot obtain satisfactory third party
arrangements for marketing, sale and distribution of the PSA system. Although we
believe that our existing cash reserves, including the proceeds from the sale of
the securities being registered for resale, will be sufficient to meet our
operating and capital requirements during the next 12 months, we may require
additional financing within this time frame. Our future liquidity and capital
requirements will depend upon numerous factors, including actions relating to
regulatory matters, and the extent to which the PSA system gains market
acceptance. Any additional financing, if required, may not be available on
satisfactory terms or at all. Future equity financings may result in dilution to
the holders of our common stock. Future debt financings may require us to pledge
assets and to comply with financial and operational covenants.
6
<PAGE>
OUR RELIANCE ON SOLE AND LIMITED SOURCE SUPPLIERS COULD HARM OUR ABILITY TO
MEET CUSTOMER REQUIREMENTS IN A TIMELY MANNER OR WITHIN BUDGET
Some of the components that are necessary for the assembly of our PSA system
are currently provided to us by separate sole suppliers or a limited group of
suppliers. We purchase components through purchase orders rather than long-term
supply agreements and generally do not maintain large volumes of inventory. We
have experienced shortages and delays in obtaining some of the components of our
PSA systems in the past, and we may experience similar delays or shortages in
the future. The disruption or termination of the supply of components could
cause a significant increase in the costs of these components, which could
affect our profitability. A disruption or termination in the supply of
components could also result in our inability to meet demand for our products,
which could lead to customer dissatisfaction and damage our reputation.
Furthermore, if we are required to change the manufacturer of a key component of
the PSA system, we may be required to verify that the new manufacturer maintains
facilities and procedures that comply with quality standards and with all
applicable regulations and guidelines. The delays associated with the
verification of a new manufacturer could delay our ability to manufacture PSA
systems in a timely manner or within budget.
OUR BUSINESS DEPENDS ON OUR INTELLECTUAL PROPERTY RIGHTS, AND MEASURES WE
TAKE TO PROTECT THOSE RIGHTS MAY NOT BE SUFFICIENT
Our ability to compete effectively will depend in part on its ability to
develop and maintain proprietary aspects of its technology. We cannot assure you
that our issued patents or any patents that may be issued as a result of our
U.S. or international patent applications will offer any degree of protection.
We cannot assure you that any patents that may be issued to us or any of our
patent applications will not be challenged, invalidated or circumvented in the
future. In addition, we cannot assure you that competitors, many of which have
substantial resources and have made substantial investments in competing
technologies, will not seek to apply for and obtain patents that will prevent,
limit or interfere with the our ability to make, use or sell its products either
in the U.S. or in international markets.
In addition to patents, we rely on trade secrets and proprietary know how,
which we seek to protect, in part, through appropriate confidentiality and
proprietary information agreements. These agreements generally provide that all
confidential information developed or made known to the individual by us during
the course of the individual's relationship with us, is to be kept confidential
and not disclosed to third parties, except in specific circumstances. The
agreements generally provide that all inventions conceived by the individual in
the course of rendering services to us are our exclusive property. However, some
of our agreements with consultants, who typically are employed on a full time
basis by academic institutions or hospitals, do not contain assignment of
invention provisions. We cannot assure you that proprietary information or
confidentiality agreements with employees, consultants and others will not be
breached, that we would have adequate remedies for any breach, or that our trade
secrets will not otherwise become known to or independently developed by
competitors.
WE COULD BECOME INVOLVED IN LITIGATION RELATING INTELLECTUAL PROPERTY
RIGHTS, AND ANY SUCH LITIGATION, EVEN IF RESOLVED FAVORABLY TO US, WILL
RESULT IN SIGNIFICANT COST AND DIVERSION OF MANAGEMENT'S TIME AND EFFORT
The medical device industry has been characterized by extensive litigation
regarding patents and other intellectual property rights, and companies in the
medical device industry have employed intellectual property litigation to gain a
competitive advantage. We cannot assure you that we will not in the future
become subject to patent infringement claims and litigation or interference
proceedings declared by the U.S. Patent and Trademark Office to determine the
priority of inventions. The defense and prosecution of intellectual property
suits, USPTO interference proceedings and related legal and administrative
proceedings are both costly and time consuming. Litigation may be necessary to
enforce patents issued to us, to
7
<PAGE>
protect trade secrets or know how owned by us or to determine the
enforceability, scope and validity of the proprietary rights of others.
Any litigation or interference proceedings will result in substantial
expense to us and significant diversion of effort by our technical and
management personnel. An adverse determination in litigation or interference
proceedings to which we may become a party could subject us to significant
liabilities to third parties or require us to seek licenses from third parties.
Costs associated with licensing or similar arrangements that may be involved in
statement of intellectual property disputes, including patent disputes, may be
substantial and could include ongoing royalties. Furthermore, there can be no
assurance that necessary licenses would be available to us on satisfactory terms
if at all. Adverse determinations in a judicial or administrative proceeding or
failure to obtain necessary licenses could prevent us from manufacturing,
marketing and selling our products, which would seriously harm our business and
operating results and would likely cause our stock price to decline.
OUR BUSINESS ENTAILS THE RISK OF PRODUCT LIABILITY CLAIMS, AND THESE CLAIMS
COULD HARM OUR FINANCIAL CONDITION AND OUR ABILITY TO MAINTAIN INSURANCE
COVERAGES
The manufacture and sale of our products expose us to product liability
claims and product recalls, including those which may arise from misuse or
malfunction of, or design flaws in, our products or use of our products with
components or systems not manufactured or sold by us. Product liability claims
or product recalls, regardless of their ultimate outcome, could require us to
spend significant time and money in litigation or to pay significant damages. We
currently maintain insurance; however, it might not cover the costs of any
product liability claims made against us. Furthermore, we may not be able to
obtain insurance in the future at satisfactory rates or in adequate amounts.
IF WE DO NOT ATTRACT AND RETAIN SKILLED PERSONNEL, WE WILL NOT BE ABLE TO
EXPAND OUR BUSINESS.
Our products are based on complex technology. Accordingly, we require
skilled personnel to develop, manufacture, sell and support our products. In
addition, as we move toward commercialization of our products, we will require
additional personnel skilled in the sales and marketing of medical device
products. Our future success will depend largely on our ability to continue to
hire, train, retain and motivate additional skilled personnel, particularly
sales representatives and clinical specialists who are responsible for customer
education and training and post-installation customer support. We continue to
experience difficulty in recruiting and retaining skilled personnel because the
pool of experienced persons is small and we compete for personnel with other
companies, many of which have greater resources than we do. Consequently, if we
are not able to attract and retain skilled personnel, we will not be able to
expand our business.
FAILURE OF USERS OF THE PSA SYSTEM TO OBTAIN ADEQUATE REIMBURSEMENT FROM
THIRD PARTY PAYORS COULD LIMIT MARKET OF THE SYSTEM, WHICH COULD PREVENT US
FROM GROWING OUR BUSINESS
Anesthesia providers are generally not reimbursed separately for patient
monitoring activities, including any such activities that would involve use of
the PSA system. Accordingly, potential users of the PSA system would have to
justify its use based on the clinical and cost benefits they believe use of the
system provides. For hospitals and outpatient surgical centers, when
reimbursement is based on charges or costs, patient monitoring with the PSA
system may reduce reimbursements for surgical procedures, because charges or
costs may decline as a result of monitoring with the PSA system. Failure by
hospitals and other users of the PSA system to obtain adequate reimbursement
from third-party payors, or any reduction in the reimbursement by third-party
payors to hospitals and other users as a result of using the PSA system could
limit market acceptance of the PSA system, which could prevent us from growing
our revenues and our business.
8
<PAGE>
OUR STOCK IS CURRENTLY TRADED ON THE OVER THE COUNTER BULLETIN BOARD, WHICH
MAY LIMIT THE AMOUNT OF LIQUIDITY AVAILABLE TO STOCKHOLDERS
Our common stock is currently traded on the Over the Counter Bulletin Board.
The Bulletin Board has limited liquidity when compared to more established stock
markets, such as the Nasdaq National Market and the Nasdaq Small-Cap Market. In
addition, Bulletin Board companies typically receive significantly less research
coverage and institutional investor attention that stocks that are traded on the
Nasdaq markets. Trading volumes of Bulletin Board stocks also tend to be lower.
All of these factors may harm your ability to sell your shares of our common
stock, and may adversely affect the price you are able to obtain for your
shares.
OUR STOCK PRICE MAY FLUCTUATE, WHICH MAY CAUSE YOUR INVESTMENT IN OUR STOCK
TO SUFFER A DECLINE IN VALUE
The market price of our common stock has fluctuated significantly in the
past and may fluctuate significantly in the future in response to factors which
are beyond our control. In addition, the stock market in general has recently
experienced extreme price and volume fluctuations. In addition, the market
prices of securities of technology and medical device companies have been
extremely volatile, and have experienced fluctuations that often have been
unrelated or disproportionate to the operating performance of these companies.
These broad market fluctuations could result in extreme fluctuations in the
price of our common stock, which could cause a decline in the value of your
shares.
WE MAY INCUR SIGNIFICANT COSTS FROM SECURITIES CLASS LITIGATION DUE TO OUR
STOCK PRICE VOLATILITY
Our stock price may fluctuate for many reasons, including timing of
regulatory actions relating to the PSA system, variations in our quarterly
operating results and changes in market valuations of medical device companies.
Recently, when the market price of a stock has been volatile as our stock price
may be, holders of that stock have occasionally instituted securities class
action litigation against the company that issued the stock. If any of our
stockholders were to bring a lawsuit of this type against us, even if the
lawsuit is without merit, we could incur substantial costs defending the
lawsuit. The lawsuit could also divert the time and attention of our management.
ANTITAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS AND UNDER DELAWARE LAW
COULD PREVENT OR DELAY TRANSACTIONS THAT STOCKHOLDERS MAY FAVOR
Provisions of our restated certificate of incorporation and amended and
restated by-laws may discourage, delay or prevent a merger or acquisition that
stockholders may consider favorable, including transactions in which you might
otherwise receive a premium for your shares. These provisions include:
- authorizing the issuance of "blank check" preferred stock without any need
for action by stockholders,
- requiring supermajority stockholder voting to effect certain amendments to
our restated certificate of incorporation and amended and restated
by-laws,
- eliminating the ability of stockholders to call special meetings of
stockholders,
- prohibiting stockholder action by written consent, and
- establishing advance notice requirements for nominations for election to
the board of directors or for proposing matters that can be acted on by
stockholders at stockholder meetings.
9
<PAGE>
USE OF PROCEEDS
We will not receive any proceeds from the sale of the securities by the
selling stockholders.
SELLING STOCKHOLDERS
We are registering all 2,080,340 shares of our Common Stock issuable upon
exercise of Warrants covered by this prospectus on behalf of the selling
stockholders named in the table below. We have registered the shares to permit
the selling stockholders and their pledgees, donees, transferees or other
successors-in-interest that receive their shares from selling stockholders as a
gift, partnership distribution or another non-sale related transfer after the
date of this prospectus to resell the shares when they deem appropriate. We
refer to all of these possible sellers as selling stockholders in this
prospectus.
The table below sets forth the following information with respect to each
selling stockholder as of March 2, 2000: (i) name of the selling stockholder and
(ii) the number of shares of common stock the selling stockholder is offering.
Except as set forth in the table below, none of the selling stockholders has had
a material relationship with us within the last three years other than as a
result of the ownership of the shares or other securities of Physiometrix. We do
not know how long the selling stockholders will hold the shares before selling
them and we currently have no agreements, arrangements or understandings with
any of the selling stockholders regarding the sale of any of the shares. The
shares offered by this prospectus may be offered from time to time by the
selling stockholders named below.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
ISSUABLE ON
NUMBER OF EXERCISE OF
NAME OF SELLING STOCKHOLDER SHARES OFFERED WARRANTS
- --------------------------- -------------- ------------
<S> <C> <C>
Invesco Funds Group......................................... 370,370 111,111
Raptor Global Portfolio, Ltd................................ 368,890 110,667
Altar Rock Fund, L.P........................................ 1,480 444
Oracle Partners, L.P........................................ 174,900 52,470
Oracle Institutional Partners, L.P.......................... 48,400 14,520
Oracle Offshore, Ltd........................................ 8,900 2,670
Sam Oracle Fund, Inc........................................ 45,800 13,740
Oxford Bioscience Partners III, L.P......................... 243,320 72,996
Oxford Bioscience Partners (Bermuda) III, L.P............... 34,680 10,404
EGS Private Healthcare Partnership, L.P..................... 175,000 52,500
EGS Private Healthcare Counterpart, L.P..................... 25,000 7,500
Pequot Scout Fund, L.P...................................... 185,190 55,557
Narragansett I, L.P......................................... 40,150 12,045
Narragansett Offshore, Ltd.................................. 14,850 4,455
Kensington Partners, L.P.................................... 70,460 21,138
Kensington Partners, II..................................... 4,000 1,200
Bald Eagle Fund, Ltd........................................ 16,280 4,884
Peter B. Orthwein Family Trust.............................. 1,850 555
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES
ISSUABLE ON
NUMBER OF EXERCISE OF
NAME OF SELLING STOCKHOLDER SHARES OFFERED WARRANTS
- --------------------------- -------------- ------------
<S> <C> <C>
Essex Global Life Sciences Fund, LLP........................ 46,300 13,890
Knott Partners, L.P......................................... 23,800 7,140
Matterhorn Offshore Fund Ltd................................ 4,400 1,320
The Common Fund............................................. 10,500 3,150
Trinkaus & Burkhardt, Int'l................................. 1,300 390
Valor Capital Management.................................... 18,520 5,556
First Clearing Corporation, Custodian for Huntley G.
Davenport Special IRA..................................... 10,000 3,000
John Curran................................................. 10,000 3,000
Gregory G. Huston IRA....................................... 10,000 3,000
David B. Musket SEP IRA..................................... 10,000 3,000
Fechtor Detwiler & Co....................................... 10,000 3,000
Stuart Chase................................................ 5,000 1,500
Harry R. Lankenau........................................... 5,000 1,500
T.C. Tomkins................................................ 5,000 1,500
Dalal Salomon............................................... 2,500 750
Tom Horton.................................................. 2,500 750
Edward L. Horton............................................ 2,500 750
Kenneth Zaslav, M.D......................................... 2,500 750
David Musket................................................ 65,000 19,500
Barry Kurokawa.............................................. 6,000 1,800
</TABLE>
11
<PAGE>
PLAN OF DISTRIBUTION
The selling stockholders may sell the common stock from time to time. The
selling stockholders will act independently of us in making decisions regarding
the timing, manner and size of each sale. The selling stockholders may make
these sales on one or more exchanges, in the over-the-counter market or
otherwise, at prices and terms that are then-prevailing or at prices related to
the then-current market price, or in privately negotiated transactions. The
selling stockholders may use one or more of the following methods to sell the
common stock:
- a block trade in which the selling stockholder's broker or dealer will
attempt to sell the shares as agent, but may position and resell all or a
portion of the block as a principal to facilitate the transaction;
- a broker or dealer may purchase the common stock as a principal and then
resell the common stock for its own account pursuant to this prospectus;
- an exchange distribution in accordance with the rules of the applicable
exchange; and
- ordinary brokerage transactions and transactions in which the broker
solicits purchasers.
To the extent required, this prospectus may be amended or supplemented from
time to time to describe a specific plan of distribution. If the plan of
distribution involves an arrangement with a broker-dealer for the sale of shares
through a block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker or dealer, the supplement will disclose:
- the name of each selling stockholder and of the participating
broker-dealer(s);
- the number of shares involved;
- the price at which the shares were sold;
- the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable;
- that such broker-dealer(s) did not conduct any investigation to verify the
information set out or incorporated by reference in this prospectus; and
- other facts material to the transaction.
In effecting sales, broker-dealers engaged by the selling stockholders may
arrange for other broker-dealers to participate in the resales.
The selling stockholders may enter into hedging transactions with
broker-dealers in connection with distributions of the shares or otherwise. In
these transactions, broker-dealers may engage in short sales of the shares in
the course of hedging the positions they assume with selling stockholders. The
selling stockholders may also sell shares short and redeliver the shares to
close out such short positions. The selling stockholders may enter into options
or other transactions with broker-dealers which require the delivery to the
broker-dealer of the shares. The broker-dealer may then resell or otherwise
transfer such shares pursuant to this prospectus. The selling stockholders also
may loan or pledge the shares to a broker-dealer. The broker-dealer may sell the
shares so loaned, or upon default, the broker-dealer may sell the pledged shares
pursuant to this prospectus.
Broker-dealers or agents may receive compensation in the form of
commissions, discounts or concessions from selling stockholders. Broker-dealers
or agents may also receive compensation from the purchasers of the shares for
whom they act as agents or to whom they sell as principal, or both. Compensation
as to a particular broker-dealer might be in excess of customary commissions and
will be in amounts to be negotiated in connection with the sale. Broker-dealers
or agents and any other participating broker-dealers or the selling stockholders
may be deemed to be "underwriters" within the meaning of
12
<PAGE>
section 2(11) of the Securities Act of 1933 in connection with sales of the
shares. Accordingly, any such commission, discount or concession received by
them and any profit on the resale of the shares purchased by them may be deemed
to be underwriting discounts or concessions under the Securities Act. Because
selling stockholders may be deemed "underwriters" within the meaning of
section 2(11) of the Securities Act, the selling stockholders will be subject to
the prospectus delivery requirements of the Securities Act.
Any shares covered by this prospectus which qualify for sale pursuant to
Rule 144 under the Securities Act may be sold under Rule 144 rather than
pursuant to this prospectus.
The shares will be sold only through registered or licensed brokers or
dealers if required under applicable state securities laws. In addition, in
certain states the shares may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the shares may not simultaneously engage in
market making activities with respect to our common stock for a period of two
business days prior to the commencement of such distribution. In addition, each
selling stockholder will be subject to applicable provisions of the Exchange Act
and the associated rules and regulations under the Exchange Act, including
Regulation M, which provisions may limit the timing of purchases and sales of
shares of our common stock by the selling stockholders. We will make copies of
this prospectus available to the selling stockholders and have informed them of
the need to deliver copies of this prospectus to purchasers at or prior to the
time of any sale of the shares.
We will bear all costs, expense and fees in connection with the registration
of the shares. The selling stockholders will bear all commissions and discounts,
if any, attributable to the sale of the shares. The selling stockholders may
agree to indemnify any broker-dealer or agent that participates in transactions
involving sales of the shares against certain liabilities, including liabilities
arising under the Securities Act. We have agreed to indemnify the selling
stockholders against certain liabilities in connection with their offering of
the shares, including liabilities arising under the Securities Act.
13
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
Our amended and restated certificate of incorporation authorizes the
issuance of 50,000,000 shares of common stock, $0.001 par value, and authorizes
the issuance of 10,000,000 shares of undesignated preferred stock, $0.001 par
value. From time to time, our board of directors may establish the rights and
preferences of the preferred stock.
COMMON STOCK
Each holder of common stock is entitled to one vote for each share held on
all matters to be voted upon by the stockholders and there are no cumulative
voting rights. Subject to preferences that may be applicable to any outstanding
preferred stock, holders of common stock are entitled to receive ratably the
dividends, if any, that are declared from time to time by the board of directors
out of funds legally available for that purpose. See "Dividend Policy." In the
event of a liquidation, dissolution or winding up of Physiometrix, the holders
of common stock are entitled to share in our assets remaining after the payment
of liabilities and the satisfaction of any liquidation preference granted to the
holders of any outstanding shares of preferred stock. Holders of common stock
have no preemptive or conversion rights or other subscription rights. There are
no redemption or sinking fund provisions applicable to the common stock. All
outstanding shares of common stock are fully paid and nonassessable. The rights,
preferences and privileges of the holders of common stock are subject to, and
may be adversely affected by, the rights of the holders of shares of any series
of preferred stock that we may designate in the future.
PREFERRED STOCK
The board of directors has the authority, without action by the
stockholders, to designate and issue preferred stock in one or more series and
to designate the rights, preferences and privileges of each series, which may be
greater than the rights of the common stock. It is not possible to state the
actual effect of the issuance of any shares of preferred stock upon the rights
of holders of the common stock until the board of directors determines the
specific rights of the holders of this preferred stock. However, the effects
might include, among other things:
- restricting dividends on the common stock;
- diluting the voting power of the common stock;
- impairing the liquidation rights of the common stock; or
- delaying or preventing a change in control of Physiometrix without further
action by the stockholders.
At December 31, 1999, no shares of preferred stock were outstanding, and we
have no present plans to issue any shares of preferred stock.
WARRANTS
In February 2000, we issued warrants to purchase an aggregate of 624,102
shares of our common stock. The shares issuable upon exercise of these warrants
may be offered for resale with this prospectus. These warrants have an exercise
price of $14.04 per share and expire, if not previously exercised, on
February 29, 2001. The warrants may be exercised by paying the exercise price in
cash or, alternatively, on a cashless, net exercise basis. In addition,
Physiometrix may call the warrants for redemption, at a redemption price of
$0.001 per share subject to each warrant, if the closing price of Physiometrix
common stock equals or exceeds $28.08 per share for a period of five consecutive
trading days ending on the trading day that Physiometrix gives notice of
redemption.
14
<PAGE>
ANTITAKEOVER EFFECTS OF PROVISIONS OF DELAWARE LAW AND OUR CHARTER AND BYLAWS
Provisions of Delaware law and our certificate of incorporation and bylaws
could make the following more difficult:
- the acquisition of Physiometrix by means of a tender offer;
- the acquisition of Physiometrix by means of a proxy contest or otherwise;
or
- the removal of our incumbent officers and directors.
These provisions, summarized below, are expected to discourage certain types
of coercive takeover practices and inadequate takeover bids. These provisions
are also designed to encourage persons seeking to acquire control of
Physiometrix to negotiate first with our board. We believe that the benefits of
increased protection of its potential ability to negotiate with the proponent of
an unfriendly or unsolicited proposal to acquire or restructure Physiometrix
outweigh the disadvantages of discouraging these proposals because negotiation
of any proposals of this type could result in an improvement of their terms.
STOCKHOLDER MEETINGS. Under our bylaws, only the board of directors, the
chairman of the board or the president may call special meetings of
stockholders.
REQUIREMENTS FOR ADVANCE NOTIFICATION OF STOCKHOLDER NOMINATIONS AND
PROPOSALS. Our bylaws establish advance notice procedures for stockholder
proposals and for the nomination of candidates for election as directors, other
than nominations made by or at the direction of the board of directors or a
committee of the board.
DELAWARE ANTITAKEOVER LAW. Physiometrix is subject to Section 203 of the
Delaware General Corporation Law, an antitakeover law. In general, Section 203
prohibits a publicly held Delaware corporation from engaging in a business
combination with an interested stockholder for a period of three years following
the date the person became an interested stockholder, unless the business
combination or the transaction in which the person became an interested
stockholder is approved in the manner specified in Section 203. Generally, a
business combination includes a merger, asset or stock sale, or other
transaction resulting in a financial benefit to the interested stockholder.
Generally, an interested stockholder is a person who, together with affiliates
and associates, owns or within three years prior to the determination of
interested stockholder status did own 15% or more of a corporation's voting
stock. The existence of this provision may have an antitakeover effect by
discouraging takeover attempts not approved in advance by the board of
directors, that might result in a premium over the market price for the shares
of common stock held by stockholders.
ELIMINATION OF STOCKHOLDER ACTION BY WRITTEN CONSENT. Our certificate of
incorporation eliminates the right of stockholders to act by written consent
without a meeting.
NO CUMULATIVE VOTING. Our certificate of incorporation and bylaws do not
provide for cumulative voting in the election of directors.
UNDESIGNATED PREFERRED STOCK. The authorization of undesignated preferred
stock makes it possible for the board of directors to issue preferred stock with
voting or other rights or preferences that could impede the success of any
attempt to change control of Physiometrix. These and other provisions may have
the effect of deferring hostile takeovers or delaying changes in control or
management of Physiometrix.
AMENDMENT OF CHARTER PROVISIONS. The amendment of any of the above
provisions would require approval by holders of at least 66 2/3% of the
outstanding common stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is American Stock
Transfer and Trust. The telephone number for our transfer agent and registrar is
( ) - .
15
<PAGE>
LEGAL MATTERS
The validity of the common stock offered hereby has been passed upon for us
by Wilson Sonsini Goodrich & Rosati, Palo Alto, California.
EXPERTS
Our consolidated financial statements incorporated in this Prospectus by
reference to the Annual Report on Form 10-K for the year ended December 31,
1997, 1998, and 1999 have been so incorporated in reliance on the report of
Ernst & Young LLP, Independent Auditors, given on their authority as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and copy
any document we file at the SEC's public reference rooms in Washington, D.C.,
New York, New York and Chicago, Illinois. Please call the SEC at 1-800-732-0330
for further information on the public reference rooms.
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by referring
you to these documents. The information incorporated by reference is an
important part of this prospectus, and information that we file later with the
SEC will automatically update and supersede this information. We incorporate by
reference the documents listed below (and any amendments thereto) and any future
filings made with the SEC under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 until the selling stockholders sell all of their
common stock:
- Annual report on Form 10-K for the fiscal year ended December 31, 1999;
To obtain a copy of these filings at no cost, you may write or telephone us
at the following address:
Corporate Secretary
Physiometrix, Inc.
5 Billerica Park
North Billerica, MA 01862
(978) 670-2422
16
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
YOU SHOULD RELY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO WHICH WE
HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION
THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED HERE IT IS LEGAL TO SELL THESE
SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE ON THE DATE OF
THIS DOCUMENT. THIS DOCUMENT MAY BE USED ONLY WHERE IT IS LEGAL TO SELL THESE
SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE ON THE DATE OF
THIS DOCUMENT.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
RISK FACTORS........................... 3
USE OF PROCEEDS........................ 11
SELLING STOCKHOLDERS................... 11
PLAN OF DISTRIBUTION................... 14
LEGAL MATTERS.......................... 19
EXPERTS................................ 19
WHERE YOU CAN FIND MORE INFORMATION.... 19
</TABLE>
2,080,340 SHARES OF
COMMON STOCK
624,102 SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE
OF WARRANTS
PHYSIOMETRIX, INC.
COMMON STOCK
---------------------
PROSPECTUS
---------------------
, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than the
underwriting commission, payable by the Registrant in connection with the sale
of common stock being registered. All amounts are estimates except the SEC
Registration Fee and the Over-the-Counter Bulletin Board Fee.
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 14,568
Printing and Engraving Expenses............................. 25,000
Legal Fees and Expenses..................................... 25,000
Accounting Fees and Expenses................................ 25,000
Miscellaneous Expenses...................................... 10,432
Total................................................. $100,000
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law permits a corporation to
indemnify its directors, officers, employees and other agents in terms
sufficiently broad to permit indemnification (including reimbursement for
expenses) under certain circumstances for liabilities arising under the
Securities Act. The Registrant's Certificate of Incorporation and bylaws contain
provisions covering indemnification of corporate directors, officers and other
agents against certain liabilities and expenses incurred as a result of
proceedings involving such persons in their capacities as directors, officers,
employees or agents, including proceedings under the Securities Act or the
Securities Exchange Act of 1934, as amended.
The Registrant's Certificate of Incorporation provides for the
indemnification of directors to the fullest extent permissible under Delaware
law.
The Registrant's Bylaws provide for the indemnification of officers,
directors and third parties acting on behalf of the corporation if such person
acted in good faith and in a manner reasonably believed to be in and not opposed
to the best interest of the corporation, and, with respect to any criminal
action or proceeding, the indemnified party had no reason to believe his conduct
was unlawful.
The Registrant has entered into indemnification agreements with its
directors and executive officers, in addition to indemnification provided for in
the Registrant's Bylaws, and intends to enter into indemnification agreements
with any new directors and executive officers in the future.
At present, there is no pending litigation or proceeding involving a
director, officer, employee or other agent of the Registrant in which
indemnification is being sought, nor is the Registrant aware of any threatened
litigation that may result in a claim for indemnification by any director,
officer, employee or other agent of the Registrant.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
<C> <S>
3.1+ Amended and Restated Certificate of Incorporation of
Registrant
3.2+ Amended and Restated Bylaws of the Registrant
4.1+ Form of common Stock Certificate
4.2 Stock purchase agreement dated February 29, 2000 including
exhibits thereto
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation
23.1 Consent of Ernst & Young LLP, Independent Auditors
24.1 Power of Attorney (see page II-3)
</TABLE>
- ------------------------
+ Incorporated by reference to our Registration Statement on Form S-1 filed
with the Securities and Exchange Commission on March 9, 1996.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes that:
(a) Insofar as indemnification for liabilities arising under the
Securities Act, may be permitted to directors, officers and controlling
persons of the Registrant, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer of controlling person of the Registrant in
the successful defense of any action, suit proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered the Registrant will, unless in the opinion of counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction in the question whether such indemnification by it
is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
(c) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of the registration
statement as of the time it was declared effective.
(d) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein.
The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change
to such information in the registration statement.
2. That, for the purpose of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to
II-2
<PAGE>
Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be
deemed to be part of this registration statement as of the time it was
declared effective.
3. That, for purposes of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
4. For purposes of determining any liability under the Securities Act of
1933, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934
that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
5. To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of North Billerica, State of
Massachusetts, on the 29th day of March, 2000.
<TABLE>
<S> <C> <C>
PHYSIOMETRIX, INC.
By: /s/ JOHN WILLIAMS
-----------------------------------------
John Williams
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John Williams and Daniel Muehl and each of them,
his attorneys-in-fact, each with the power of substitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
sign any registration statement for the same offering covered by this
Registration Statement that is to be effective upon filing pursuant to
Rule 462(b) promulgated under the Securities Act of 1933, and all post-effective
amendments thereto, and to file the same, with all exhibits thereto in all
document sin connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every Act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that such attorneys-in-fact and agents or any of them, or his or their
substitute or substitutes, any lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Act, this Registration Statement has
been signed by the following persons in the capacities and on the dates
indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
President, Chief Executive
/s/ JOHN WILLIAMS Officer and Director
------------------------------------------- (Principal Executive March 29, 2000
John Williams Officer)
Chief Financial Officer,
/s/ DANIEL MUEHL (Principal Financial Officer
------------------------------------------- and Principal Accounting March 29, 2000
Daniel Muehl Officer)
/s/ THOMAS BARUCH
------------------------------------------- Director March 29, 2000
Thomas Baruch
/s/ JAMES E. NICHOLSON
------------------------------------------- Director March 29, 2000
James E. Nicholson
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ PETER BERNARDONI
------------------------------------------- Director March 29, 2000
Peter Bernardoni
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
<C> <S>
3.1+ Amended and Restated Certificate of Incorporation of
Registrant
3.2+ Amended and Restated Bylaws of the Registrant
4.1+ Form of common Stock Certificate
4.2 Stock purchase agreement dated February 29, 2000 including
exhibits thereto
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation
23.1 Consent of Ernst & Young LLP, Independent Auditors
24.1 Power of Attorney (see page II-3)
</TABLE>
- ------------------------
+ Incorporated by reference to our Registration Statement on Form S-1 filed
with the Securities and Exchange Commission on March 9, 1996.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 1 Purchase and Sale of Common Stock and Warrants.........................1
1.1 PURCHASE AND SALE OF COMMON STOCK..............................1
1.2 ISSUANCE OF WARRANTS...........................................1
Section 2 Closing Date; Delivery.................................................1
2.1 CLOSING DATE...................................................1
2.2 DELIVERY.......................................................2
Section 3 Representations and Warranties of the Company..........................2
3.1 ORGANIZATION AND STANDING......................................2
3.2 CORPORATE POWER; AUTHORIZATION.................................2
3.3 ISSUANCE AND DELIVERY..........................................2
3.4 SEC DOCUMENTS; FINANCIAL STATEMENTS; SUBSEQUENT EVENTS.........3
3.5 GOVERNMENTAL CONSENTS..........................................3
3.6 EXEMPT TRANSACTIONS............................................3
3.7 NO MATERIAL ADVERSE CHANGE.....................................4
3.8 INTELLECTUAL PROPERTY..........................................4
3.9 AUTHORIZED CAPITAL STOCK.......................................4
3.10 LITIGATION.....................................................4
3.11 PREEMPTIVE AND REGISTRATION RIGHTS.............................5
3.12 COMPLIANCE WITH OTHER INSTRUMENTS..............................5
3.13 BROKERS OR FINDERS.............................................5
3.14 COMPLIANCE WITH ENVIRONMENTAL LAWS.............................6
3.15 NO IMPLIED REPRESENTATIONS.....................................6
3.16 CONTRACTS......................................................6
3.17 PROPERTIES.....................................................6
3.18 COMPLIANCE.....................................................6
3.19 TAXES..........................................................6
3.20 TRANSFER TAXES.................................................6
3.21 INVESTMENT COMPANY.............................................6
3.22 INSURANCE......................................................6
3.23 CONTRIBUTIONS..................................................7
Section 4 Representations, Warranties and Covenants of the Purchasers............7
4.1 AUTHORIZATION..................................................7
4.2 INVESTMENT EXPERIENCE..........................................7
4.3 INVESTMENT INTENT..............................................7
4.4 REGISTRATION OR EXEMPTION REQUIREMENTS.........................8
</TABLE>
<PAGE>
<TABLE>
<S> <C>
4.5 RESTRICTION ON SHORT SALES.....................................8
4.6 NO LEGAL, TAX OR INVESTMENT ADVICE.............................8
Section 5 Conditions to Closing of Purchasers....................................8
5.1 REPRESENTATIONS AND WARRANTIES.................................8
5.2 COVENANTS......................................................9
5.3 COMPLIANCE CERTIFICATE.........................................9
5.4 LEGAL OPINION OF COMPANY COUNSEL...............................9
5.5 MINIMUM SALE...................................................9
5.6 CLOSING DATE...................................................9
Section 6 Conditions to Closing of Company.......................................9
6.1 REPRESENTATIONS AND WARRANTIES.................................9
6.2 COVENANTS......................................................9
Section 7 Affirmative Covenants of the Company...................................9
7.1 REGISTRATION REQUIREMENTS.....................................10
7.2 INDEMNIFICATION AND CONTRIBUTION..............................12
7.3 NASDAQ SMALL CAP MARKET LISTING...............................15
Section 8 Restrictions on Transferability of Securities:........................15
8.1 RESTRICTIONS ON TRANSFERABILITY...............................15
8.2 RESTRICTIVE LEGEND............................................15
8.3 TRANSFER OF SECURITIES AFTER REGISTRATION.....................15
8.4 PURCHASER INFORMATION.........................................16
Section 9 Miscellaneous.........................................................16
9.1 WAIVERS AND AMENDMENTS........................................16
9.2 BROKER'S FEE..................................................16
9.3 GOVERNING LAW.................................................16
9.4 SURVIVAL......................................................16
9.5 SUCCESSORS AND ASSIGNS........................................16
9.6 ENTIRE AGREEMENT..............................................16
9.7 NOTICES, ETC..................................................16
9.8 SEVERABILITY OF THIS AGREEMENT................................17
9.9 COUNTERPARTS..................................................17
9.10 FURTHER ASSURANCES............................................17
9.11 EXPENSES......................................................17
9.12 CURRENCY......................................................17
</TABLE>
-ii-
<PAGE>
PHYSIOMETRIX, INC.
PURCHASE AGREEMENT
This Purchase Agreement (the "Agreement") is made as of February 29,
2000 (the "Agreement Date"), by and between Physiometrix, Inc., a Delaware
corporation (the "Company") with its principal office at Five Billerica Park,
North Billerica, MA 01862, and the purchasers set forth on Exhibit A hereto
(individually a "Purchaser" and collectively the "Purchasers").
Section 1
PURCHASE AND SALE OF COMMON STOCK AND WARRANTS
1.1 PURCHASE AND SALE OF COMMON STOCK. Each Purchaser, severally and
not jointly, agrees to purchase from the Company, and the Company agrees to
issue and sell to such Purchaser, the number of shares (the "Shares") of Common
Stock, $0.001 par value (the "Common Stock") of the Company set forth on
opposite such Purchaser's name on Exhibit A hereto. The purchase price for one
Share of Common Stock (the "Purchase Price") pursuant to this Agreement shall be
the lesser of (i) $10.80 per share or (ii) the closing price of the Company's
Common Stock on the Over-the-Counter Bulletin Board on Monday February 28, 2000;
provided, however that in no event will the Purchase Price be less than $10.00
per share. Exhibit A hereto has been prepared based on an assumed Purchase Price
of $10.80. A revised Exhibit A will be distributed electronically on February
29, 2000 if the Purchase Price is changed in accordance with this Section 1.1.
1.2 ISSUANCE OF WARRANTS. The Company shall issue to each Purchaser a warrant
(individually a "Warrant" and collectively the "Warrants") exercisable for three
tenths (3/10) of the number of Shares purchased by such Purchaser. Each Warrant,
the form of which is attached hereto as Exhibit B, entitles the registered
holder thereof to purchase Common Stock at a price eqaul to 130% of the Purchase
Price per share, subject to adjustment in certain circumstances, commencing on
the date hereof until one (1) year from the Closing (as defined below). The
Shares, the Warrants and the shares of Common Stock issuable upon exercise of
the Warrants (the "Warrant Shares") are herein collectively referred to as the
"Securities."
Section 2
CLOSING DATE; DELIVERY
2.1 CLOSING DATE. The completion of the purchase and sale of the
Shares and the Warrants will be held at such place and time agreed upon by the
Placement Agent (as defined below) and the Company, and the Purchasers will
receive prior notification of the Closing by facsimile,
-1-
<PAGE>
telex, cable or by other means deemed appropriate by the Company (the
"Closing"). The date of the Closing is hereinafter referred to as the "Closing
Date."
2.2 DELIVERY. At the Closing, the Company will deliver to each
Purchaser the certificates evidencing the Shares and Warrants purchased by such
Purchaser as shown on Exhibit A and an opinion of Wilson Sonsini Goodrich &
Rosati, counsel to the Company, in the form of Exhibit C. Such delivery shall be
against payment of the Purchase Price for the Shares by wire transfer of
immediately available funds to the Company's bank account (in accordance with
instructions furnished by the Company).
Section 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchasers as follows:
3.1 ORGANIZATION AND STANDING. The Company is a corporation duly
organized and validly existing under, and by virtue of, the laws of the State of
Delaware and is in good standing as a domestic corporation under the laws of
said state, and has the requisite corporate power and authority to own its
properties and to carry on its business as now being conducted. Other than as
disclosed in the SEC Documents (as defined below), the Company has no
subsidiaries or direct or indirect ownership in any firm, corporation or
business which either, individually or in the aggregate, is material to the
business of the Company. The Company is qualified to do business and is in good
standing as a foreign corporation in every jurisdiction in which its ownership
of property or conduct of business requires it so to be qualified and in which
the failure to so qualify would have a material adverse effect on the financial
condition or business of the Company.
3.2 CORPORATE POWER; AUTHORIZATION. The Company has all requisite
legal and corporate power and authority and has taken all requisite corporate
action to duly authorize, execute and deliver this Agreement, to sell and issue
the Shares and the Warrants and to carry out and perform all of its obligations
under and contemplated by this Agreement. This Agreement has been duly executed
and delivered by an authorized officer of the Company and constitutes the legal,
valid and binding obligation of the Company, enforceable in accordance with its
terms, except as limited by applicable bankruptcy, insolvency, reorganization or
similar laws relating to or affecting the enforcement of creditors' rights
generally.
3.3 ISSUANCE AND DELIVERY. The Shares and the Warrants have been duly
authorized, and, when issued and delivered in compliance with this Agreement,
will be duly and validly issued and delivered and will be outstanding, fully
paid, nonassessable and free and clear of all pledges, liens, encumbrances and
will conform to the description thereof contained in the Registration Statement
(or incorporated by reference therein). The Warrant Shares have been duly
authorized and reserved for issuance upon exercise of the Warrants, and such
shares, when issued upon such exercise in
-2-
<PAGE>
accordance with the terms of the Company's Certificate of Incorporation and the
Warrants, respectively, and when the price is paid upon exercise of the
Warrants, shall be fully paid and non-assessable. No preemptive rights, or other
rights to subscribe for or purchase, exist with respect to the issuance and sale
of the Securities by the Company pursuant to this Agreement. No stockholder of
the Company has any right (which has not been waived or has not expired by
reason of lapse of time following notification of the Company's intent to file
the Registration Statement) to require the Company to register the sale of any
securities owned by such holder under the Securities Act of 1933, as amended
(the "Securities Act"), in the Registration Statement. No further approval or
authority of the stockholders or the Board of Directors of the Company will be
required for the issuance and sale of the Securities to be sold by the Company
as contemplated herein.
3.4 SEC DOCUMENTS; FINANCIAL STATEMENTS; SUBSEQUENT EVENTS. The
Company has filed in a timely manner all documents that the Company was required
to file with the Securities and Exchange Commission ("SEC") under Sections 13,
14(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), during the twelve (12) months preceding the date of this
Agreement and all rules and regulations thereunder. As of their respective
filing dates, all documents filed by the Company with the SEC (the "SEC
Documents") complied in all material respects with the requirements of the
Exchange Act or the Securities Act of 1933, as amended (the "Securities Act"),
as applicable and all rules and regulations thereunder. None of the SEC
Documents contained, as of their respective dates, any untrue statement of
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading, and such SEC Documents, when read as
a whole, do not contain any untrue statements of a material fact and do not omit
to state a material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents (the "Financial
Statements") comply in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto. The Financial Statements have been prepared in accordance with
United States generally accepted accounting principles consistently applied and
fairly present the financial position of the Company and any subsidiaries at the
dates thereof and the results of the Company's operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
adjustments).
3.5 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state, or local governmental authority on the part of
the Company is required in connection with the execution and delivery of this
Agreement and the consummation of the transactions contemplated by this
Agreement, except for the filing of a Form D with respect to the issuance of the
Securities with the SEC, which will be filed in a timely manner.
3.6 EXEMPT TRANSACTIONS. Subject to the accuracy of the Purchasers'
representations and warranties in Section 4 of this Agreement, the offer, sale
and issuance of the Securities in conformity with the terms of this Agreement
constitute transactions exempt from the registration requirements
-3-
<PAGE>
of Section 5 of the Securities Act and from the registration or qualification
requirements of the laws of any applicable state or United States jurisdiction.
3.7 NO MATERIAL ADVERSE CHANGE. Except as otherwise disclosed herein,
since September 30, 1999, there have not been any changes in the assets,
liabilities, financial condition, business or operations of the Company from
that reflected in the Financial Statements except changes in the ordinary course
of business which have not been, either individually or in the aggregate,
materially adverse.
3.8 INTELLECTUAL PROPERTY. The Company owns or possesses adequate
rights to use all patents, patent rights, inventions, trademarks, trade names,
copyrights, licenses, governmental authorizations, trade secrets and know-how
that are used or necessary for the conduct of its business as described in the
SEC Documents; except as described in the SEC Documents, neither the Company nor
any of its subsidiaries has received any notice of, or has any knowledge of, any
infringement of or conflict with asserted rights of others with respect to any
patent, patent right, invention, trademarks, trade names, copyrights, licenses,
governmental authorizations, trade secret or know-how that, individually or in
the aggregate, if the subject of an unfavorable decision, ruling or finding,
would have a material adverse effect on the condition (financial or otherwise),
earnings, operations or business of the Company and its subsidiaries considered
as a whole.
3.9 AUTHORIZED CAPITAL STOCK. The authorized capital stock of the
Company conforms, as of the dates for which such information is given, in all
material respects to the statements relating thereto contained in the SEC
Documents. The issued and outstanding shares of capital stock of the Company
have been duly authorized, validly issued and are fully paid and nonassessable;
except as set forth or referred to in the SEC Documents, no warrants, options or
other rights to purchase, agreements or other obligations to issue, or
agreements or other rights to convert any obligation into, any shares of capital
stock of the Company have been granted or entered into by the Company. All of
the above securities of the Company were issued in compliance with all
applicable federal and state securities laws and were not issued in violation of
or subject to any preemptive rights or other rights to subscribe for or purchase
securities. No holder of any security of the Company is entitled to any
preemptive or similar rights to purchase any securities of the Company.
3.10 LITIGATION. There are no actions, suits, proceedings or
investigations pending or, to the best of the Company's knowledge, threatened
against the Company or any of its properties before or by any court or
arbitrator or any governmental body, agency or official in which there is a
reasonable likelihood (in the judgment of the Company) of an adverse decision
that (a) would have a material adverse effect on the Company's properties or
assets or the business of the Company as presently conducted or proposed to be
conducted or (b) would impair the ability of the Company to perform in any
respect its obligations under this Agreement. The Company is not in default with
respect to any judgment, order or decree of any court or governmental agency or
instrumentality which, individually or in the aggregate, would have a material
adverse effect on the assets, properties or business of the Company.
-4-
<PAGE>
3.11 PREEMPTIVE AND REGISTRATION RIGHTS. There are no preemptive
rights, rights of first refusal, repurchase rights or any other right of the
Company or any third party as to the Securities which have not been satisfied or
waived, and except as provided in this Agreement, the Company has not granted or
agreed to grant any registration rights that would be applicable to the
registration for resale of any other securities pursuant to the Registration
Statement, as defined in and contemplated by Section 7.1 hereof, to any person
or entity which have not been satisfied or waived.
3.12 COMPLIANCE WITH OTHER INSTRUMENTS. The business and operations of
the Company have been and are being conducted in accordance with all applicable
laws, rules and regulations of all governmental authorities, except for such
violations of applicable laws, rules and regulations which would not,
individually or in the aggregate, have a material adverse effect on the assets,
properties, financial condition or business of the Company. Neither the
execution and delivery of, nor the performance or compliance with, this
Agreement and the transactions contemplated hereby, will, with or without the
giving of notice or the passage of time, (i) result in any breach of, or
constitute a default under, or result in the imposition of any lien or
encumbrance upon any asset or property of the Company pursuant to, any agreement
or other instrument to which the Company is a party or by which it or any of its
properties, assets or rights is bound or effected, except for such breach or
default or the imposition of any such lien or encumbrance which, either
individually or in the aggregate, would not have a material adverse effect on
the assets, properties, financial condition or business of the Company or (ii)
violate the Certificate of Incorporation or Bylaws of the Company, or any law,
rule regulation, judgment, order or decree. The Company is not in violation of
its Certificate of Incorporation or Bylaws nor in violation of, or in default
under, any lien, indenture, mortgage, lease, agreement, instrument, commitment
or arrangement, except for such defaults which would not, individually or in the
aggregate, have a material adverse effect on the assets, properties, financial
condition or business of the Company, or subject to any restriction which would
prohibit the Company from entering into or performing its obligations under the
Agreement.
3.13 BROKERS OR FINDERS. To the knowledge of the Company and except for
claims of Musket Research Associates (the "Placement Agent") in connection with
this transaction, no person, firm or corporation has or will have, as a result
of any act or omission of the Company, any right, interest or valid claim
against the Purchasers for any commission, fee or other compensation as a finder
or broker in connection with the transactions contemplated by this Agreement.
The fees and commissions payable to the Placement Agent shall be paid by the
Company and the Company shall indemnify and hold each Purchaser harmless for any
claims made by the Placement Agent concerning the purchase of the Securities.
3.14 COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as disclosed in the SEC
Documents, the Company is not in violation of any applicable statute, law or
regulation relating to the environment or occupational health and safety, and,
to the best of the Company's knowledge, no material expenditures are or will be
required in order to comply with any such existing statute, law or regulation.
To the best of the Company's knowledge, the Company does not have any material
liability to any governmental authority or other third party arising under or as
a result of any such past or existing statute, law or regulation.
-5-
<PAGE>
3.15 NO IMPLIED REPRESENTATIONS. All of the Company's representations
and warranties are contained in this Agreement and no other representations or
warranties by the Company shall be implied.
3.16 CONTRACTS. The contracts so described in the SEC Documents or
incorporated by reference therein are in full force and effect on the date
hereof, except for contracts the termination or expiration of which would,
individually or in the aggregate, not have a material adverse effect on the
business, properties or assets of the Company, and neither the Company nor any
of its subsidiaries, nor to the Company's knowledge, any other party is in
breach of or default under any of such contracts.
3.17 PROPERTIES. The Company has good and marketable title to all the
properties and assets reflected as owned in the financial statements included in
the SEC Documents, subject to no lien, mortgage, pledge, charge or encumbrance
of any kind except (i) those, if any, reflected in such financial statements, or
(ii) those which are not material in amount and do not adversely affect the use
made and promised to be made of such property by the Company and its
subsidiaries. The Company and any applicable subsidiary holds its leased
properties under valid and binding leases, with such exceptions as are not
materially significant in relation to the business of the Company and the
subsidiaries. Except as disclosed in the SEC Documents, the Company owns or
leases all such properties as are necessary to its operations as now conducted
or as proposed to be conducted.
3.18 COMPLIANCE. The Company has not been advised, and has no reason to
believe, that either it or any of its subsidiaries is not conducting business in
compliance with all applicable laws, rules and regulations of the jurisdictions
in which it is conducting business; except where failure to be so in compliance
would not materially adversely affect the condition (financial or otherwise),
business, results of operations or prospects of the Company and its
subsidiaries.
3.19 TAXES. The Company and its subsidiaries have filed all necessary
federal, state and foreign income and franchise tax returns and have paid or
accrued all taxes shown as due thereon, and the Company has no knowledge of any
tax deficiency which has been or might be asserted or threatened against the
Company or its subsidiaries which could materially and adversely affect the
business, operations or properties of the Company and its subsidiaries.
3.20 TRANSFER TAXES. On the Closing Date, all stock transfer or other
taxes (other than income taxes) which are required to be paid in connection with
the sale and transfer of the Securities to be sold to the Purchasers hereunder
will be, or will have been, fully paid or provided for by the Company and all
laws imposing such taxes will be or will have been complied with fully.
3.21 INVESTMENT COMPANY. The Company is not an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
3.22 INSURANCE. Each of the Company and its subsidiaries maintains
insurance of the types and in the amounts generally deemed adequate for its
business, including, but not limited to, insurance covering all real and
personal property owned or leased by the Company and its subsidiaries against
theft, damage, destruction, acts of vandalism and all other risks customarily
insured against, all of which insurance is in full force and effect.
6
<PAGE>
3.23 CONTRIBUTIONS. Neither the Company nor any of its subsidiaries
has, directly or indirectly, at any time during the last five years (i) made any
unlawful contribution to any candidate for public office, or failed to disclose
fully any contribution in violation of law, or (ii) made any payment to any
federal or state governmental officer or official, or other person charged with
similar public or quasi-public duties, other than payments required or permitted
by the laws of the United States or any jurisdiction thereof.
Section 4
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS
Each Purchaser, severally and for itself only, hereby represents and
warrants to the Company as follows:
4.1 AUTHORIZATION. (i) The Purchaser has all requisite legal and
corporate or other power and capacity and has taken all requisite corporate or
other action to execute and deliver this Agreement, to purchase the Securities
to be purchased by it and to carry out and perform all of its obligations under
this Agreement; and (ii) this Agreement constitutes the legal, valid and binding
obligation of the Purchaser, enforceable in accordance with its terms, except
(a) as limited by applicable bankruptcy, insolvency, reorganization, or similar
laws relating to or affecting the enforcement of creditors' rights generally and
(b) as limited by equitable principles generally.
4.2 INVESTMENT EXPERIENCE. The Purchaser is an "accredited investor"
as defined in Rule 501(a) under the Securities Act. The Purchaser is aware of
the Company's business affairs and financial condition and has had access to and
has acquired sufficient information about the Company to reach an informed and
knowledgeable decision to acquire the Securities. The Purchaser has such
business and financial experience as is required to give it the capacity to
protect its own interests in connection with the purchase of the Securities.
4.3 INVESTMENT INTENT. The Purchaser is purchasing the Securities for
its own account as principal, for investment purposes only, and not with a
present view to, or for, resale, distribution or fractionalization thereof, in
whole or in part, within the meaning of the Securities Act. The Purchaser
understands that its acquisition of the Securities has not been registered under
the Securities Act or registered or qualified under any state securities law in
reliance on specific exemptions therefrom, which exemptions may depend upon,
among other things, the bona fide nature of the Purchaser's investment intent as
expressed herein. The Purchaser has completed or caused to be completed the
Purchaser Questionnaire attached hereto as Appendix I for use in preparation of
the Registration Statement (as defined below), and the responses provided
therein shall be true and
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<PAGE>
correct as of the Closing Date and will be true and correct as of the effective
date of the Registration Statement. The Purchaser will not, directly or
indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit
any offers to buy, purchase or otherwise acquire or take a pledge of) any of the
Shares, the Warrants and the Warrant Shares, except in compliance with the
Securities Act, and the rules and regulations promulgated thereunder.
4.4 REGISTRATION OR EXEMPTION REQUIREMENTS. The Purchaser further
acknowledges and understands that the Securities may not be resold or otherwise
transferred except in a transaction registered under the Securities Act or
unless an exemption from such registration is available. The Purchaser
understands that the certificate(s) evidencing the Securities will be imprinted
with a legend that prohibits the transfer of such securities unless (i) they are
registered or such registration is not required, and (ii) if the transfer is
pursuant to an exemption from registration other than Rule 144 under the
Securities Act and, if the Company shall so request in writing, an opinion of
counsel reasonably satisfactory to the Company is obtained to the effect that
the transaction is so exempt.
4.5 RESTRICTION ON SHORT SALES. The Purchaser represents and warrants
to and covenants with the Company that the Purchaser has not engaged and will
not engage in any short sales of the Company's Common Stock prior to the
effectiveness of the Registration Statement, except to the extent that any such
short sale is fully covered by shares of Common Stock of the Company owned by
such Purchaser other than the Shares or the Warrant Shares.
4.6 NO LEGAL, TAX OR INVESTMENT ADVICE. The Purchaser understands that
nothing in this Agreement or any other materials presented to the Purchaser in
connection with the purchase of the Securities constitutes legal, tax or
investment advice. The Purchaser has consulted such legal, tax and investment
advisors as it, in its sole discretion, has deemed necessary or appropriate in
connection with its purchase of the Securities and understands that Musket
Research Associates (the "Placement Agent") has acted as placement agent for the
Company and not in any of the foregoing capacities on behalf of the Purchaser.
Section 5
CONDITIONS TO CLOSING OF PURCHASERS
The obligation of each Purchaser to purchase the Shares and the
Warrants at the Closing is subject to the fulfillment as of the Closing Date of
the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by the Company in Section 3 hereof shall be true and correct in all
material respects when made, and shall be true and correct in all material
respects on the Closing Date with the same force and effect as if they had been
made on and as of said date.
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<PAGE>
5.2 COVENANTS. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to the Closing Date
shall have been performed or complied with in all material respects.
5.3 COMPLIANCE CERTIFICATE. The President or Chief Financial Officer
of the Company shall have delivered to the Purchasers and the Placement Agent a
certificate, dated as of the Closing Date, certifying that the conditions
specified in Sections 5.1 and 5.2 have been fulfilled and stating that since
December 31, 1999, there shall have been no material adverse change in the
assets, liabilities, financial condition, business or operations of the Company
from that reflected in the Financial Statements except changes in the ordinary
course of business which have not been, either individually or in the aggregate,
materially adverse.
5.4 LEGAL OPINION OF COMPANY COUNSEL. Wilson Sonsini Goodrich &
Rosati, counsel to the Company, shall have delivered a legal opinion, addressed
to the Purchasers, in the form attached as Exhibit C hereto.
5.5 MINIMUM SALE. The Company shall have obtained gross proceeds of at
least $15 million from the sale of the Shares and Warrants at the Closing.
5.6 CLOSING DATE. The Closing shall have occurred on or prior to
February 29, 2000.
Section 6
CONDITIONS TO CLOSING OF COMPANY
The Company's obligation to sell and issue the Shares and the Warrants
at the Closing to a Purchaser is subject to the fulfillment or waiver of the
following conditions:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by such Purchaser in Section 4 hereof shall be true and correct in all
material respects when made, and shall be true and correct in all material
respects on the Closing Date with the same force and effect as if they had been
made on and as of such date.
6.2 COVENANTS. All covenants, agreements and conditions contained in
this Agreement to be performed by such Purchaser on or prior to the Closing Date
shall have been performed or complied with in all material respects.
Section 7
AFFIRMATIVE COVENANTS OF THE COMPANY
The Company hereby covenants and agrees as follows:
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<PAGE>
7.1 REGISTRATION REQUIREMENTS.
(a) The Company shall, subject to receipt of necessary
information from the Purchasers, prepare and file a registration statement with
the SEC under the Securities Act as soon as reasonably practicable after the
Closing to register the resale of the Shares and the Warrant Shares by the
Purchasers, and the Company shall use its best efforts to secure the
effectiveness of such registration statement as soon as reasonably practicable
thereafter. For purposes hereof, the term "Registration Statement" shall refer
to any and all registration statements filed for the purpose of registering the
Shares and the Warrant Shares, including any prospectus(es) constituting a part
thereof and together with any amendments and supplements thereto.
(b) The Company shall pay all Registration Expenses (as defined
below) in connection with any registration, qualification or compliance
hereunder, and the Purchasers shall pay all Selling Expenses (as defined below)
and other expenses that are not Registration Expenses relating to the Securities
resold by the Purchasers. "Registration Expenses" shall mean all expenses,
except for Selling Expenses, incurred by the Company in complying with the
registration provisions herein described, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, blue sky fees and expenses
and the expense of any special audits incident to or required by any such
registration. "Selling Expenses" shall mean all selling commissions,
underwriting fees and stock transfer taxes applicable to the Securities.
(c) In the case of the registration effected by the Company
pursuant to these registration provisions, the Company will use its best efforts
to: (i) keep such registration effective until the earlier of (A) the fourth
anniversary of the Closing Date, (B) such date as all of the Securities have
been resold or (C) such time as all of the Securities held by the Purchasers can
be sold within a given three-month period without compliance with the
registration requirements of the Securities Act pursuant to Rule 144(k); (ii)
prepare and file with the SEC such amendments and post-effective amendments to
the Registration Statement as may be necessary to keep the Registration
Statement effective for the applicable period specified in this Section 7.1(c);
(iii) cause the related prospectus to be supplemented by any required prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 (or any
similar provisions then in force) under the Securities Act; (iv) comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by the Registration Statement during the applicable period in
accordance with the intended methods of disposition by the sellers thereof set
forth in the Registration Statement as so amended or such prospectus as so
supplemented; (v) furnish such number of prospectuses and other documents
incident thereto, including any amendment of or supplement to the prospectus, as
a Purchaser from time to time may reasonably request, and the Company hereby
consents to the use of such prospectus or each amendment and supplement thereto
by each of the selling holders of Securities and the underwriters, if any, in
connection with the offering and sale of the Securities covered by such
prospectus or any amendment or supplement thereto; (vi) cause the Shares and the
Warrant Shares to be listed on each securities exchange and quoted on each
quotation service on which similar securities issued by the Company are then
listed or quoted and maintain the listing of
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<PAGE>
the Shares and Warrant Shares; (vii) provide a transfer agent and registrar for
all Securities registered pursuant to the Registration Statement and a CUSIP
number for all such Securities; (viii) otherwise use its best efforts to comply
with all applicable rules and regulations of the SEC; and (ix) file the
documents required of the Company and otherwise use its best efforts to maintain
requisite blue sky clearance in (A) all jurisdictions in which any of the
Securities are originally sold and (B) all other states specified in writing by
a Purchaser, provided as to clause (B), however, that the Company shall not be
required to qualify to do business or consent to service of process in any state
in which it is not now so qualified or has not so consented.
(d) The Company shall furnish to each Purchaser upon request a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary in order to facilitate the public sale or other
disposition of all or any of the Securities held by such Purchaser.
(e) With a view to making available to the Purchasers the
benefits of Rule 144 promulgated under the Securities Act ("Rule 144") and any
other rule or regulation of the SEC that may at any time permit a Purchaser to
sell Securities to the public without registration or pursuant to a registration
on Form S-3, the Company covenants and agrees to: (i) make and keep public
information available, as those terms are understood and defined in Rule 144,
until the earlier of (A) the fourth anniversary of the effective date of the
Registration Statement or (B) such date as all of the Securities shall have been
resold; (ii) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and Exchange Act; and
(iii) furnish to each Purchaser upon request, as long as such Purchaser owns any
Securities, (A) a written statement by the Company that it has complied with the
reporting requirements of the Securities Act and the Exchange Act, (B) a copy of
the most recent annual or quarterly report of the Company, and (C) such other
information as may be reasonably requested in order to avail a Purchaser of any
rule or regulation of the SEC that permits the selling of any such Securities
without registration or pursuant to such Form S-3.
(f) The Company shall notify each Purchaser, if such Purchaser
has registered Securities in a Registration Statement which remain unsold, and
(if requested by such Purchaser) confirm such notice in writing, (i) when a
prospectus or any prospectus supplement or post-effective amendment has been
filed, and, with respect to the Registration Statement or any post-effective
amendment, when the same has become effective, (ii) of any request by the SEC or
any other federal or state governmental authority during the period of
effectiveness of the Registration Statement for amendments or supplements to the
Registration Statement or related prospectus or for additional information
relating to the Registration Statement, (iii) of the issuance by the SEC or any
other federal or state governmental authority of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceedings
for that purpose, (iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from qualification
of any of the Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, (v) of the happening of any
event which makes any statement made in the Registration Statement or related
prospectus or any document incorporated or deemed to be
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<PAGE>
incorporated therein by reference untrue in any material respect or which
requires the making of any changes in the Registration Statement or prospectus
so that, in the case of the Registration Statement, it 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 that in the case of the prospectus, it will not contain any untrue statement
of a material fact or omit to state any material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and (vi) of the Company's reasonable determination that a
post-effective amendment to the Registration Statement would be appropriate.
(g) The Company may, upon written notice to the Purchasers of (i)
the happening of any event of the kind described in Section 7.1(f)(ii),
7.1(f)(iii), 7.1(f)(iv), 7.1(f)(v) or 7.1(f)(vi) hereof or (ii) that, in the
judgement of the Company's Board of Directors, it is advisable to suspend use of
the prospectus for a discrete period of time due to pending corporate
developments, public filings with the SEC or similar events, discontinue
disposition of Securities covered by the Registration Statement or prospectus
until copies of the supplemented or amended prospectus contemplated by Section
7.1(i) hereof are distributed to the Purchasers, or until the Purchasers are
advised in writing by the Company that the use of the applicable prospectus may
be resumed, and the Purchasers have received copies of any additional or
supplemental filings that are incorporated or deemed incorporated by reference
in such prospectus. The Company shall not suspend use of a prospectus or
Registration Statement under this Section 7.1(g) for more than 30 days at a time
and more than twice in any 12-month period. Any period for which use of a
prospectus or Registration Statement is suspended under this Section 7.1(g)
shall be added to the time for which the Company is required to maintain the
effectiveness of such Registration Statement, including the prospectus
constituting a part thereof, under Section 7.1(c).
(h) The Company shall use every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of the Registration
Statement, or the lifting of any suspension of the qualification (or exemption
from qualification) of any of the Securities for sale in any jurisdiction, at
the earliest possible moment.
(i) The Company shall, upon the occurrence of any event
contemplated by Section 7.1(f)(v) or 7.1(f)(vi) above, prepare a supplement or
post-effective amendment to the Registration Statement or a supplement to the
related prospectus or any document incorporated therein by reference or file any
other required document so that, as thereafter delivered to the purchasers of
the Securities being sold thereunder, such prospectus will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
7.2 INDEMNIFICATION AND CONTRIBUTION.
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<PAGE>
(a) The Company agrees to indemnify and hold harmless the
Purchasers from and against any losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) to which the Purchasers may become
subject (under the Securities Act or otherwise) insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) arise out
of, or are based upon, any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or any prospectus
(preliminary or final), as amended on the applicable date thereof, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or arise out of any failure by the Company to fulfill
any undertaking included in the Registration Statement or any prospectus
(preliminary or final), as amended on the applicable date thereof, and the
Company will, as incurred, reimburse the Purchasers for any legal or other
expenses reasonably incurred in investigating, defending or preparing to defend
any such action, proceeding or claim; provided, however, that the Company shall
not be liable in any such case to the extent that such loss, claim, damage or
liability arises out of, or is based upon (i) an untrue statement or an omission
made in such Registration Statement in reliance upon and in conformity with
written information furnished to the Company by or on behalf of such Purchaser
specifically for use in preparation of the Registration Statement, or (ii) any
untrue statement or the omission of a material fact in any prospectus that is
corrected in any subsequent prospectus that was delivered to a Purchaser prior
to the pertinent sale or sales by such Purchaser.
(b) Each Purchaser, severally and not jointly, agrees to
indemnify and hold harmless the Company from and against any losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) to which
the Company may become subject (under the Securities Act or otherwise) insofar
as such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of, or are based upon (i) an untrue statement or an
alleged untrue statement of a material fact made in such Registration Statement
or the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading, in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of such Purchaser specifically for use in preparation of
the Registration Statement, provided, however, that a Purchaser shall not be
liable in any such case for any untrue statement or alleged untrue statement or
the omission or alleged omission that has been corrected, in writing, by such
Purchaser, delivered to the Company before the sale from which such loss
occurred, or (ii) any untrue statement or alleged untrue statement or the
omission or alleged omission in any prospectus that is corrected in any
subsequent prospectus that was delivered to a Purchaser prior to the pertinent
sale or sales by such Purchaser, and such Purchaser, severally and not jointly,
will, as incurred, reimburse the Company for any legal or other expenses
reasonably incurred in investigating, defending or preparing to defend any such
action, proceeding or claim; provided, however, that each Purchaser's
indemnification obligation shall be limited to the net proceeds received from
its sale of the Securities.
(c) Promptly after receipt by any indemnified person of a notice
of a claim or the beginning of any action in respect of which indemnity is to be
sought against an indemnifying person
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<PAGE>
pursuant to this Section 7.2, such indemnified person shall notify the
indemnifying person in writing of such claim or of the commencement of such
action, and, subject to the provisions hereinafter stated, in case any such
action shall be brought against an indemnified person and the indemnifying
person shall have been notified thereof, the indemnifying person shall be
entitled to participate therein, and, to the extent that it shall wish, to
assume the defense thereof, with counsel reasonably satisfactory to the
indemnified person. After notice from the indemnifying person to such
indemnified person of the indemnifying person's election to assume the defense
thereof, the indemnifying person shall not be liable to such indemnified person
for any legal expenses subsequently incurred by such indemnified person in
connection with the defense thereof; provided, however, that if there exists or
shall exist a conflict of interest that would make it inappropriate in the
reasonable judgment of the indemnified person for the same counsel to represent
both the indemnified person and such indemnifying person or any affiliate or
associate thereof, the indemnified person shall be entitled to retain its own
counsel at the expense of such indemnifying person.
(d) If the indemnification provided for in this Section 7.2 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as the result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the Company on the one hand and the Purchasers
on the other in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities (or actions in respect thereof), as
well as any other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or a Purchaser on the other and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Company and the Purchasers agree that it would not be just and equitable if
contribution pursuant to this subsection (d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above in this subsection (d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, or liabilities (or actions in respect thereof) referred to
above in this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), a Purchaser shall not be required to
contribute any amount in excess of the amount by which the net amount received
by such Purchaser from the sale of the Securities to which such loss relates
exceeds the amount of any damages which such Purchaser has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. 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. Each Purchaser's obligations in this subsection (d) to
contribute is several in proportion to its sale of Securities to which such loss
relates and not joint.
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<PAGE>
(e) The obligations of the Company and the Purchasers under this
Section 7.2 shall be in addition to any liability which the Company and the
Purchasers may otherwise have and shall extend, upon the same terms and
conditions, to directors, officers, employees and agents of the Company and the
Purchasers and to each person, if any, who controls the Company or any Purchaser
within the meaning of the Act.
7.3 NASDAQ LISTING. As soon as reasonably practicable following the
Closing, the Company will apply for the listing of its Common Stock on the
Nasdaq National Market. If the Company is unable to obtain approval to list
its Shares of Common Stock on the Nasdaq National Market, the Company will
apply for listing of its Shares on the Nasdaq Small-Cap Market.
Section 8
RESTRICTIONS ON TRANSFERABILITY OF SECURITIES:
COMPLIANCE WITH SECURITIES ACT
8.1 RESTRICTIONS ON TRANSFERABILITY. The Shares, the Warrants and the
Warrant Shares shall not be transferable in the absence of a registration under
the Securities Act or an exemption therefrom or in the absence of compliance
with any term of this Agreement.
8.2 RESTRICTIVE LEGEND. Each certificate representing the Securities
shall bear substantially the following legends (in addition to any legends
required under applicable securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT
PURPOSES ONLY AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM.
The legend contained in this Section 8.2 shall be removed from a certificate
immediately upon receipt by the Company's transfer agent of a certificate
substantially in the form annexed hereto as Appendix II.
8.3 TRANSFER OF SECURITIES AFTER REGISTRATION. Each Purchaser hereby
covenants with the Company not to make any sale of the Shares, the Warrant or
the Warrant Shares except either (i) in accordance with the Registration
Statement, in which case such Purchaser covenants to comply with the requirement
of delivering a current prospectus, or (ii) in accordance with Rule 144, in
which case Purchaser covenants to comply with Rule 144, or (iii) in accordance
with another exemption from the registration requirements of the SecuritiesAct.
The legend set forth in Section 8.2 will be removed from a certificate
representing the Securities following and in connection with any sale of the
Securities pursuant to subsection (i) or (ii) hereof, but not in connection with
any sale of Shares
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<PAGE>
pursuant to subsection (iii) hereof, and also will be removed at such time that
the Securities may be sold under Rule 144 without restriction as to volume and
manner of sale.
8.4 PURCHASER INFORMATION. Each Purchaser covenants that it will
promptly notify the Company of any changes in the information set forth in the
Registration Statement regarding such Purchaser, under the heading "Selling
Security Holders" or elsewhere, or such Purchaser's "Plan of Distribution."
Section 9
MISCELLANEOUS
9.1 WAIVERS AND AMENDMENTS. Neither this Agreement nor any provisions
hereof shall be waived, modified, changed or discharged or terminated except by
an instrument in writing signed by the party against whom any waiver,
modification, change, discharge or termination is sought.
9.2 BROKER'S FEE. The Purchasers acknowledge that the Company intends
to pay a fee to the Placement Agent in respect of the sale of the Securities to
certain of the Purchasers. Each of the parties hereto hereby represents that, on
the basis of any actions and agreements by it, there are no other brokers or
finders entitled to compensation in connection with the sale of the Units to the
Purchasers.
9.3 GOVERNING LAW. This Agreement shall be governed in all respects by
and construed in accordance with the laws of the State of Delaware without any
regard to conflicts of laws principles.
9.4 SURVIVAL. The representations, warranties, covenants and
agreements made in this Agreement shall survive any investigation made by the
Company or the Purchasers and the Closing.
9.5 SUCCESSORS AND ASSIGNS. The provisions hereof shall inure to the
benefit of, and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties to this Agreement.
9.6 ENTIRE AGREEMENT. This Agreement, including all exhibits,
schedules and appendices hereto constitutes the full and entire understanding
and agreement between the parties with regard to the subjects hereof and
thereof.
9.7 NOTICES, ETC. All notices and other communications required or
permitted under this Agreement shall be effective upon receipt and shall be in
writing and may be delivered in person, by telecopy, overnight delivery service
or registered or certified United States mail, addressed to the Company or the
Purchaser, as the case may be, at their respective addresses set forth at the
beginning of this Agreement or on Schedule 1, or at such other address as the
Company or the Purchaser shall have furnished to the other party in writing. All
notices and other communications shall be effective
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upon the earlier of actual receipt thereof by the person to whom notice is
directed or (i) in the case of notices and communications sent by personal
delivery or telecopy, one business day after such notice or communication
arrives at the applicable address or was successfully sent to the applicable
telecopy number, (ii) in the case of notices and communications sent by
overnight delivery service, at noon (local time) on the second business day
following the day such notice or communication was sent, and (iii) in the case
of notices and communications sent by United States mail, seven days after such
notice or communication shall have been deposited in the United States mail.
9.8 SEVERABILITY OF THIS AGREEMENT. If any provision of this Agreement
shall be judicially determined to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
9.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
9.10 FURTHER ASSURANCES. Each party to this Agreement shall do and
perform or cause to be done and performed all such further acts and things and
shall execute and deliver all such other agreements, certificates, instruments
and documents as the other party hereto may reasonably request in order to carry
out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
9.11 EXPENSES. The Company and each the Purchaser shall bear its own
expenses incurred on its behalf with respect to this Agreement and the
transactions contemplated hereby.
9.12 CURRENCY. All references to "dollars" or "$" in this Agreement
shall be deemed to refer to United States dollars.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
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<PAGE>
The foregoing agreement is hereby executed as of the date first above
written.
"COMPANY"
PHYSIOMETRIX, INC.
a Delaware corporation
By:
---------------------------------------
Title:
------------------------------------
"PURCHASERS"
(Print Name of Purchaser)
By:
---------------------------------------
Title:
------------------------------------
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EXHIBIT A
SCHEDULE OF INVESTORS
<TABLE>
<CAPTION>
NO. OF SHARES
NO. OF SHARES OF SUBJECT TO
NAME AND ADDRESS COMMON STOCK PURCHASE PRICE WARRANT
- -------------------------- ---------------- --------------- -------------
<S> <C> <C> <C>
TOTAL $
==============
</TABLE>
<PAGE>
EXHIBIT B
WARRANT
<PAGE>
EXHIBIT C
OPINION OF WILSON SONSINI GOODRICH & ROSATI
<PAGE>
APPENDIX I
TO THE
PURCHASE AGREEMENT
PHYSIOMETRIX, INC.
PURCHASER QUESTIONNAIRE
In connection with the preparation of the Registration Statement, please provide
us with the following information regarding the Purchaser.
1. Please state your organization's name exactly as it should appear in the
Registration Statement:
- --------------------------------------------------------------------------------
2. Have you or your organization had any position, office or other material
relationship within the past three years with the Company or its affiliates
other than as disclosed in the Prospectus included in the Registration
Statement?
Yes No
- -------------------- ----------------------
If yes, please indicate the nature of any such relationship below:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
3. Do you own any securities of the Company, other than those shares of Common
Stock or Warrants to be sold pursuant to the Registration Statement?
Yes No
- -------------------- ----------------------
If yes, please indicate class of security and number of shares owned below:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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<PAGE>
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY AND NOT WITH A
VIEW TO OR FOR SALE IN CONNECTION WITH ANY DISTRIBUTION THEREOF. THE SECURITIES
MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION AND
QUALIFICATION WITHOUT, EXCEPT UNDER CERTAIN SPECIFIC LIMITED CIRCUMSTANCES, AN
OPINION OF COUNSEL FOR THE HOLDER REASONABLY SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
STOCK PURCHASE WARRANT
TO PURCHASE SHARES OF COMMON STOCK OF
PHYSIOMETRIX, INC.
THIS CERTIFIES that, for value received, __________(the "Investor"), is
entitled, upon the terms and subject to the conditions hereinafter set forth, at
any time on or prior to the close of business on the date one (1) year after the
date hereof, but not thereafter, to subscribe for and purchase, from
PHYSIOMETRIX, INC. a Delaware corporation (the "Company"), ________shares of
Common Stock. The purchase price of one share of Common Stock under this Warrant
shall be $14.04 per share. The purchase price and the number of shares for which
the Warrant is exercisable shall be subject to adjustment as provided herein.
This Warrant has been issued pursuant to a Purchase Agreement dated February 29,
2000 among the Company and the Purchasers named therein (the "Purchase
Agreement"). Capitalized terms not defined herein shall have the meanings
ascribed to them in the Purchase Agreement.
1. TITLE OF WARRANT. Prior to the expiration hereof and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company,
referred to in Section 2 hereof, by the holder hereof in person or by duly
authorized attorney, upon surrender of this Warrant together with the Assignment
Form annexed hereto properly endorsed.
2. EXERCISE OF WARRANT.
(a) The purchase rights represented by this Warrant are
exercisable by the registered holder hereof, in whole or in part, at any time
before the close of business on the date one (1) year after the date hereof, by
delivery of the Notice of Exercise form annexed hereto duly executed at the
principal executive office of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the registered holder hereof
at the address of such holder appearing on the books of the Company), and upon
payment of the purchase price of the shares thereby purchased (by cash or by
check or bank draft payable to the order of the Company); whereupon the holder
of this Warrant shall be entitled to receive a certificate for the number of
shares of Common Stock so purchased. The Company agrees that if at the time of
the surrender of
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<PAGE>
this Warrant and purchase the holder hereof shall be entitled to exercise this
Warrant, the shares so purchased shall be and be deemed to be issued to such
holder as the record owner of such shares as of the close of business on the
date on which this Warrant shall have been exercised as aforesaid. If this
Warrant should be exercised in part only, the Issuer shall, upon surrender of
this Warrant, execute and deliver a new Warrant evidencing the rights of the
holder hereof to purchase the balance of the Warrant Shares purchasable
hereunder.
(b) In lieu of the cash payment set forth in paragraph 2(a)
above, the Holder shall have the right ("Conversion Right") to convert this
Warrant in whole or in part (without payment of any kind) into that number of
shares of Common Stock equal to the quotient obtained by dividing the Net Value
(as defined below) of the Shares issuable upon exercise of this Warrant by the
Fair Market Value (as defined below) of one share of Common Stock. As used
herein, (A) the Net Value of the Shares means the aggregate Fair Market Value of
the shares of Common Stock subject to this Warrant minus the aggregate exercise
price; and (B) the Fair Market Value of one share of Common Stock means:
(i) if the exercise occurs at a time during which the
Company's Common Stock is traded on a national securities exchange or on the
Nasdaq National Market, the Nasdaq Small Cap Market or the Over-the-Counter
Bulletin Board, the Fair Market Value of one share of Common Stock means the
average last reported or closing sale price for the Company's Common Stock on
such exchange or market for the ten (10) trading days ending one business day
before the exercise of this Warrant;
(ii) if the exercise is in connection with a merger,
sale of assets or other reorganization transaction as described in Section 9(a)
below, the Fair Market Value of one share of Common Stock means the value
received by the holders of the Company's Common Stock pursuant to such
transaction; and
(iii) in all other cases, the Fair Market Value of one
share of Common Stock shall be determined in good faith by the Company's Board
of Directors.
(c) Certificates for shares purchased hereunder shall be
delivered to the holder hereof promptly after this Warrant shall have been
exercised as aforesaid. The Company covenants that all shares of Common Stock
which may be issued upon the exercise of rights represented by this Warrant
will, upon exercise of the rights represented by this Warrant, be fully paid and
nonassessable and free from all taxes, liens and charges in respect of the issue
thereof (other than taxes in respect of any transfer occurring contemporaneously
with such issue).
3. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. With respect to any fraction of a share called for upon the exercise of
this Warrant, an amount equal to such fraction multiplied by the then Fair
Market Value shall be paid in cash to the holder of this Warrant.
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4. CHARGES, TAXES AND EXPENSES. Issuance of certificates for shares
of Common Stock upon the exercise of this Warrant shall be made without charge
to the holder hereof for any issue or transfer tax or other incidental expense
in respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the holder of this Warrant or in such name or names as may be directed by the
holder of this Warrant; provided, however, that in the event certificates for
shares of Common Stock are to be issued in a name other than the name of the
holder of this Warrant, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the holder
hereof.
5. NO RIGHTS AS SHAREHOLDERS. This Warrant does not entitle the
holder hereof to any voting rights or other rights as a stockholder of the
Company prior to the exercise thereof.
6. EXCHANGE AND REGISTRY OF WARRANT. This Warrant is exchangeable,
without charge, upon the surrender hereof by the registered holder at the
above-mentioned office or agency of the Company, for a new Warrant of like tenor
and dated as of such exchange.
The Company shall maintain at the above-mentioned office or
agency a registry showing the name and address of the registered holder of this
Warrant. This Warrant may be surrendered for exchange, transfer or exercise, in
accordance with its terms, at such office or agency of the Company, and the
Company shall be entitled to rely in all respects, prior to written notice to
the contrary, upon such registry.
7. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT. Upon receipt by
the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and
cancellation of this Warrant, if mutilated, the Company will make and deliver a
new Warrant of like tenor and dated as of such cancellation, in lieu of this
Warrant.
8. SATURDAYS, SUNDAYS, HOLIDAYS, ETC. If the last or appointed day
for the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a legal holiday.
9. EARLY TERMINATION, ANTIDILUTION ADJUSTMENTS AND REGISTRATION
STATEMENT ADJUSTMENTS.
(a) Merger, Sale of Assets, etc. In case of any consolidation of
the Company with, or merger of the Company into, any other corporation (other
than a consolidation or merger in which the Company is the continuing
corporation and in which no change occurs in its outstanding Common Stock), or
in case of any sale or transfer of all or substantially all of the assets of the
Company, or in the case of any statutory exchange of securities with another
corporation (including any exchange effected in connection with a merger of a
third corporation into the Company, except
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where the Company is the surviving entity and no change occurs in its
outstanding Common Stock), the corporation formed by such consolidation or the
corporation resulting from or surviving such merger or the corporation which
shall have acquired such assets or securities of the Company, as the case may
be, shall execute and deliver to the Holder simultaneously therewith a new
Warrant, satisfactory in form and substance to the Holder, together with such
other documents as the Holder may reasonably request, entitling the Holder
thereof to receive upon exercise of such Warrant the kind and amount of shares
of stock and other securities and property receivable upon such consolidation,
merger, sale, transfer, or exchange of securities, or upon the dissolution
following such sale or other transfer, by a holder of the number of shares of
Common Stock purchasable upon exercise of this Warrant immediately prior to such
consolidation, merger, sale, transfer, or exchange. Such new Warrant shall
contain the same basic other terms and conditions as this Warrant and shall
provide for adjustments which, for events subsequent to the effective date of
such written instrument, shall be as nearly equivalent as may be practicable to
the adjustments provided for in this Section 9. The above provisions of this
paragraph (a) shall similarly apply to successive consolidations, mergers,
exchanges, sales or other transfers covered hereby. Notwithstanding the
foregoing, in the event the consideration to be paid to holders of Company
capital stock in any transaction of the nature referred to above in this Section
9(a) (a "Transaction") consists of cash or cash equivalents, then, provided that
the Company shall have given the holder hereof the notice required by Section
10, this Warrant shall, to the extent it has not been exercised by the effective
date of such Transaction, terminate upon the completion of such Transaction.
(b) INCREASE IN WARRANT COVERAGE RE: REGISTRATION STATEMENT. In
the event that the Registration Statement relating to the Shares and the Warrant
Shares that the Company is required to file with the SEC pursuant to Section 7.1
of the Purchase Agreement has not been filed with the SEC by the 30th day
following the Closing Date or declared effective by the SEC by the 90th day
following the Closing Date, the number of shares of Common Stock of the Company
issuable upon exercise of this Warrant shall, at the close of business,
Washington, D.C. time on such 30th or 90th day, as the case may be, shall be
increased by an amount equal to five per cent (5%) of the original number of
shares subject to issuance upon exercise of this Warrant for each 30 day period
for which the filing or effectiveness of such Registration Statement is delayed.
(c) RECLASSIFICATION, ETC. If the Company at any time shall, by
subdivision, combination or reclassification of securities or otherwise, change
any of the securities to which purchase rights under this Warrant exist into the
same or a different number of securities of any class or classes, this Warrant
shall thereafter represent the right to acquire such number and kind of
securities as would have been issuable as the result of such change with respect
to the securities which were subject to the purchase rights under this Warrant
immediately prior to such subdivision, combination, reclassification or other
change. If shares of the Company's Common Stock are subdivided or combined into
a greater or smaller number of shares of Common Stock, the purchase price under
this Warrant shall be proportionately reduced in case of subdivision of shares
or proportionately increased in the case of combination of shares, in both cases
by the ratio which the
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total number of shares of Common Stock to be outstanding immediately after such
event bears to the total number of shares of Common Stock outstanding
immediately prior to such event.
(d) CASH DISTRIBUTIONS. Except as set forth herein, no adjustment
on account of cash dividends on the Company's Common Stock or other securities
purchasable hereunder will be made to the purchase price under this Warrant.
(e) AUTHORIZED SHARES. The Company covenants that during the
period the Warrant is outstanding, it will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of Common Stock upon the exercise of any purchase rights under this Warrant. The
Company further covenants that its issuance of this Warrant shall constitute
full authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares of the
Company's Common Stock upon the exercise of the purchase rights under this
Warrant. The Company further covenants and agrees (i) that it will not, by
amendment of its Certificate of Incorporation or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observation or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
the Company, (ii) promptly to take such action as may be required of the Company
to permit the Holder to exercise this Warrant and the Company duly and
effectively to issue shares of its Common Stock or other securities as provided
herein upon the exercise hereof and (iii) promptly to take all action required
or provided herein to protect the rights of the Holder granted hereunder against
dilution.
(f) If the Company declares a dividend on Common Stock, or makes
a distribution to holders of Common Stock, and such dividend or distribution is
payable or made in Common Stock or securities convertible into or exchangeable
for Common Stock, or rights to purchase Common Stock or securities convertible
into or exchangeable for Common Stock, the number of shares of Common Stock for
which this Warrant may be exercised shall be increased, as of the record date
for determining which holders of Common Stock shall be entitled to receive such
dividend or distribution, in proportion to the increase in the number of
outstanding shares (and shares of Common Stock issuable upon conversion of all
such securities convertible into Common Stock) of Common Stock as a result of
such dividend or distribution, and the Exercise Price shall be adjusted so that
the aggregate amount payable for the purchase of all the Warrant Shares issuable
hereunder immediately after the record date for such dividend or distribution
shall equal the aggregate amount so payable immediately before such record date.
(g) If the Company declares a dividend on Common Stock (other
than a dividend covered by subsection (g) above) or distributes to holders of
its Common Stock, other than as part of its dissolution or liquidation or the
winding up of its affairs, any shares of its capital stock, any evidence of
indebtedness or any cash or other of its assets (other than Common Stock or
securities convertible into or exchangeable for Common Stock), the Holder shall
receive notice of such event as set forth in Section 10 below.
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(h) If the Company shall, at any time before the expiration of
this Warrant, sell all or substantially all of its assets and distribute the
proceeds thereof to the Company's stockholders, the Holder shall, upon exercise
of this Warrant have the right to receive, in lieu of the shares of Common Stock
of the Company that the Holder otherwise would have been entitled to receive,
the same kind and amount of assets as would have been issued, distributed or
paid to the Holder upon any such distribution with respect to such shares of
Common Stock of the Company had the Holder been the holder of record of such
shares of Common Stock receivable upon exercise of this Warrant on the date for
determining those entitled to receive any such distribution. If any such
distribution results in any cash distribution in excess of the Exercise Price
provided by this Warrant for the shares of Common Stock receivable upon exercise
of this Warrant, the Holder may, at the Holder's option, exercise this Warrant
without making payment of the Exercise Price and, in such case, the Company
shall, upon distribution to the Holder, consider the Exercise Price to have been
paid in full and, in making settlement to the Holder, shall obtain receipt of
the Exercise Price by deducting an amount equal to the Exercise Price for the
shares of Common Stock receivable upon exercise of this Warrant from the amount
payable to the Holder. Notwithstanding the foregoing, in the event the
consideration to be paid to holders of Company capital stock in any transaction
of the nature referred to above in this Section 9(i) (an "Asset Sale
Transaction") consists of cash or cash equivalents and the consideration payable
per share of Common Stock of the Company is less than the Exercise Price
hereunder, then, provided that the Company shall have given the Holder the
notice required by Section 10, this Warrant shall, to the extent it has not been
exercised by the effective date of such Transaction, terminate upon the
completion of such Transaction.
(i) The term "Common Stock" shall mean the Common Stock of the
Company as the same exists at February 29, 2000 or as such stock may be
constituted from time to time, except that for the purpose of this Section 9,
the term "Common Stock" shall include any stock of any class of the Company
which has no preference in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the Company and which is not subject to redemption by the Company.
(j) Whenever the number of Warrant Shares or the Exercise Price
shall be adjusted as required by the provisions of this Section 9, the Company
forthwith shall file in the custody of its secretary or an assistant secretary,
at its principal office, and furnish to each Holder hereof, a certificate
prepared by its Chief Financial Officer, showing the adjusted number of Warrant
Shares and the adjusted Exercise Price and setting forth in reasonable detail
the circumstances requiring the adjustments.
(k) No adjustment in the Exercise Price in accordance with the
provisions of this Section 9 need be made if such adjustment would amount to a
change in such Exercise Price of less than $.01; PROVIDED HOWEVER, that the
amount by which any adjustment is not made by reason of the provisions of this
paragraph (l) shall be carried forward and taken into account at the time of any
subsequent adjustment in the Exercise Price.
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(l) If an adjustment is made under this Section 9 and the event
to which the adjustment relates does not occur, then any adjustments in
accordance with this Section 9 shall be readjusted to the Exercise Price and the
number of Warrant Shares which would be in effect had the earlier adjustment not
been made.
10. NOTICE OF ADJUSTMENT. So long as this Warrant shall be
outstanding, (a) if the Company shall propose to pay any dividends or make any
distribution upon the Common Stock, or (b) if the Company shall offer generally
to the holders of Common Stock the right to subscribe to or purchase any shares
of any class of Common Stock or securities convertible into Common Stock or any
other similar rights, or (c) if there shall be any proposed capital
reorganization of the Company in which the Company is not the surviving entity,
recapitalization of the capital stock of the Company, consolidation or merger of
the Company with or into another corporation, sale, lease or other 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, or (d) if
the Company shall give to its stockholders any notice, report or other
communication respecting any significant or special action or event, then in
such event, the Company shall give to the Holder, at least ten (10) business
days prior to the relevant date described below, a notice containing a
description of the proposed action or event and stating the date or expected
date on which a record of the Company's stockholders is to be taken for any of
the foregoing purposes, and the date or expected date on which any such
dividend, distribution, subscription, reclassification, reorganization,
consolidation, combination, merger, conveyance, sale, lease or transfer,
dissolution, liquidation or winding up is to take place and the date or expected
date, if any is to be fixed, as of which the holders of Common Stock of record
shall be entitled to exchange their shares of Common Stock for securities or
other property deliverable upon such event.
11. REDEMPTION.
(a) The Company may, on ten (10) days prior written notice,
redeem this Warrant and all other warrants issued pursuant to that certain
Purchase Agreement of even date herewith (collectively, the "Warrants") at a
redemption price of $0.001 per share of Company Common Stock subject to issuance
upon exercise of this Warrant; provided, however, that before any such call for
redemption of the Warrants can take place, the average closing sale price of the
Company's Common Stock as reported on the Nasdaq National Market, Nasdaq
Small-Cap Market or the Over-the Counter Bulletin Board (whichever of the
foregoing shall represent the principal trading market for the Company's Common
Stock at the time of such redemption call) shall have equalled or exceed $28.08
per share for any ten (10) consecutive trading days ending on the trading day
prior to the date the notice contemplated by paragraphs (b) and (c) below are
given (subject to adjustment for stock dividends, splits, combinations and
similar events).
(b) In case the Company shall exercise its right to redeem all of
the Warrants, it shall give or cause to be given notice to the registered
holders of the Warrants, by mailing to such registered holders, a notice of
redemption by express mail or overnight courier, delivery charges prepaid, at
their last address as shall appear on the Company's records. Any notice mailed
in the manner
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provided herein shall be conclusively presumed to have been duly given whether
or not the registered holder actually receives notice.
(c) The notice of redemption shall specify the redemption price and the
redemption date, which shall be ten (10) business days following the date notice
of redemption is sent, and the place where the Warrant shall be surrendered for
redemption and the redemption price will be paid. The notice shall also specify
that the right to exercise the Warrants shall terminate at 5:00 p.m. Eastern
Time on the business day immediately prior to the date fixed for redemption. No
failure to mail such notice nor any defect therein except as to a holder to whom
notice was not mailed or whose notice was defective (by virtue of its failure to
include the information required in this paragraph (c)). An affidavit of the
secretary or assistant secretary of the Company that notice of redemption has
been sent in accordance with this Section 11 shall, in the absence of fraud, be
prima facie evidence of the facts stated therein.
12. NOTICE. Any notice to be given or to be served upon any party in
connection with the Warrant must be in writing and will be deemed to have been
given and received upon confirmed receipt, if sent by facsimile, or two (2) days
after it has been submitted for delivery by Federal Express or an equivalent
carrier, charges prepaid and addressed to the following addresses with a
confirmation of delivery:
If to the Company, to:
Physiometrix, Inc.
Five Billerica Park
North Billerica, MA 01862
Attn.: Daniel Muehl, Chief Financial Officer
Phone: (978) 670-2422
Fax: (978) 670-2817
If to the Holder, to:
Any party may, at any time by giving written notice to the other party,
designate any other address in substitution of an address established pursuant
to the foregoing to which such notice will be given.
13. MISCELLANEOUS.
(a) ISSUE DATE. The provisions of this Warrant shall be construed
and shall be given effect in all respect as if it had been issued and delivered
by the Company on the date hereof. This Warrant shall be binding upon any
successors or assigns of the Company.
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(b) RESTRICTIONS. The holder hereof acknowledges that the Common
Stock acquired upon the exercise of this Warrant may have restrictions upon its
resale imposed by state and federal securities laws.
(c) GOVERNING LAW. This Agreement shall be governed in all
respects by and construed in accordance with the laws of the State of Delaware
without any regard to conflicts of laws principles.
(d) SUCCESSORS AND ASSIGNS. Except as otherwise contemplated
hereby, this Warrant shall be binding upon and inure to the benefit of any
successors and assigns of the Company.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, PHYSIOMETRIX, INC. has caused this Warrant to be
executed by its officers thereunto duly authorized.
Dated: February 29, 2000
PHYSIOMETRIX, INC.
By:
---------------------------------
Title:
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NOTICE OF EXERCISE
To: PHYSIOMETRIX, INC.
(1) The undersigned hereby elects to purchase ____________ shares of Common
Stock of PHYSIOMETRIX, INC. pursuant to the terms of the attached Warrant, and
_____tenders herewith payment of the purchase price in full.
_____is electing to convert the Warrant on a "net exercise" basis in
accordance with Section 2(b) of the attached Warrant.
[PLEASE CHECK ONE OF THE FOREGOING LINES]
(2) Please issue a certificate of certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
-----------------------------------------------
(Name)
-----------------------------------------------
-----------------------------------------------
(Address)
(3) The undersigned represents that the aforesaid shares of Common Stock are
being acquired for the account of the undersigned for investment and not with a
view to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares;
provided, that such representation shall not be required at such time as the
shares of Common Stock underlying this Warrant are registered under the
Securities Act of 1933.
- ------------------------- ----------------------------------------
(Date) (Signature)
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ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby
are hereby assigned to
- -------------------------------------------------------------------------------
(Please Print)
whose address is
---------------------------------------------------------------
(Please Print)
- -------------------------------------------------------------------------------
Dated: , 19 .
-------------------------- ----
Holder's Signature:
--------------------------------
Holder's Address:
---------------------------------
--------------------------------------------------
Signature Guaranteed:
----------------------------------------------------------
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatever, and must be guaranteed by a bank or trust company. Officers of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
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EXHIBIT 5.1
[LETTERHEAD OF WILSON SONSINI GOODRICH & ROSATI]
March __, 2000
Physiometrix, Inc.
5 Billerica Park
North Billerica, MA 01862
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 (File
No. _________) filed with the Securities and Exchange Commission on
March __, 2000 (the "Registration Statement"), in connection with the
registration under the Securities Act of 1933, as amended, of 2,704,442
shares of Common Stock of Physiometrix, Inc. (the "Shares"). The Shares, are
to be sold by the selling shareholders as described in such Registration
Statement for the sale to the public. As your counsel in connection with this
transaction, we have examined the proceedings proposed to be taken in
connection with said sale and issuance of the Shares.
It is our opinion that, upon approval by the Physiometrix Board of
Directors, the Shares when issued and sold in the manner referred to in the
Registration Statement will be legally and validly issued, fully paid and
nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and further consent to the use of our name wherever appearing in
the Registration Statement, including the prospectus constituting a part
hereof, and any amendment thereto.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/ Wilson Sonsini Goodrich & Rosati
<PAGE>
EXHIBIT 23.1
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Experts" and
in the Registration Statement and related Prospectus of Physiometrix, Inc.
for the registration of 2,080,340 shares of its Common Stock and 624,102
shares of its Common Stock issuable upon exercise of warrants and to the
incorporation by reference therein of our report dated February 29, 2000,
with respect to the financial statements of Physiometrix, Inc. included in
its Annual Report (Form 10-K) for the year ended December 31, 1999, filed
with the Securities and Exchange Commission.
Ernst & Young LLP, Independent Auditors
Boston, Massachusetts
March 29, 2000
