As Filed with the Securities and Exchange Commission on February 22, 1996.
Registration No. 33-_____________
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
SPECTRASCIENCE, INC.
(Exact Name of Registrant as Specified in Its Charter)
MINNESOTA 41-1448837
(State of Incorporation) (I.R.S. Employer Identification Number)
5909 BAKER ROAD, SUITE 580,MINNETONKA, MN 55345. TEL: (612) 931-9000
(Address, Including Zip Code, and Telephone Number of Registrant's
Principal Executive Offices)
BRIAN T. MCMAHON
President and Chief Executive Officer
SpectraScience, Inc.
5909 Baker Road, Suite 580, Minnetonka, MN 55345.
Tel: (612) 931-9000
Copy To:
STEPHEN P. KREGSTEIN, ESQ.
4999 Pearl East Circle, Suite 300,
Boulder, CO 80301.
Tel: (303) 449-9445
(Name, Address, and Telephone Number of Agent For Service)
--------------------------------------
Approximate date of commencement of proposed sale to the public: From time to
time, as soon as practicable after this Registration Statement becomes
effective.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, check the following box: [ ]
If 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 ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- ------------------------ ------------------------ --------------------- ---------------------- ----------------------
Title of Each Class of
Securities to be Amount Proposed Proposed Maximum
Registered to be Maximum Aggregate Offering Amount of
Registered Offering Price Price Registration Fee
- ------------------------ ------------------------ --------------------- ---------------------- ----------------------
<C> <C> <C> <C> <C>
Common Stock,
$.25 par value 2,264,006 $7.00 $15,848,042 $5,464.84
- ------------------------ ------------------------ --------------------- ---------------------- ----------------------
</TABLE>
The price of $7.00 per share, which was the average of the bid price of $6.50
and ask price of $7.50 for the Common Stock on February 20, 1996, is set forth
solely for the purpose of calculating the registration fee in accordance with
Rule 457(c) of the Securities Act of 1993.
--------------------------------------
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a)
may determine.
SPECTRASCIENCE, INC.
2,264,006 SHARES OF COMMON STOCK
($.25 PAR VALUE PER SHARE)
--------------------------------
This Prospectus relates to the public offering, which is not being
underwritten, of shares (the "Shares") of Common Stock, par value $.25 per share
(the "Common Stock") of SpectraScience, Inc. (the "Company"). The shares may be
offered by certain securityholders of the Company or by pledges, donees,
transferees or other successors in interest that receive such shares as a gift
or other non-sale related transfer (the "Selling Shareholders") from time to
time in transactions on the Nasdaq Small Cap Market, in over-the-counter trades,
in privately negotiated transactions, or by a combination of such methods of
sale, at fixed prices that may be changed, at market prices prevailing at the
time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Shares are issuable upon conversion of Series A Preferred
Stock ("Preferred A") and Series B Preferred Stock ("Preferred B") and exercise
of warrants received by the Selling Shareholders in private placements by the
Company and in providing bridge loan financing (the "Bridge Loans") to the
Company (collectively, the "Warrants"). See "Recent Developments". Preferred A,
Preferred B and the Warrants were issued pursuant to exemptions from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), provided by Section 4(2) thereof. The Shares are being
registered by the Company pursuant to a commitment to the Selling Shareholders
made by the Company in connection with the private placements and the Bridge
Loans. The Selling Shareholders may effect such transactions by selling the
Shares to or through broker-dealers and such broker-dealers may receive
compensation in the form of discounts, concessions or commissions from the
Selling Shareholders or the purchasers of the Shares for whom such
broker-dealers may act as agent or to whom they sell as principal or both (which
compensation to a particular broker-dealer might be in excess of customary
commissions.) See "Selling Shareholders" and "Plan of Distribution".
None of the proceeds from the sale of the Shares by the Selling
Shareholders will be received by the Company. However, the Company may receive
gross proceeds of up to $4,900,213 if all the Warrants were exercised. The
Company has agreed to bear certain expenses in connection with the registration
of the Shares being offered by the Selling Shareholders.
The Common Stock of the Company is traded over-the-counter under the
symbol "SPSI". On February 14, 1996, the average of the bid and ask prices for
the Common Stock was $7.00 per share.
The Selling Shareholders and any broker-dealers or agents that
participate with the Selling Shareholders in the distribution of the Shares may
be deemed to be "underwriters" within the meaning of Section 2(11) of the
Securities Act , and any commissions received by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
--------------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "INVESTMENT CONSIDERATIONS" COMMENCING ON PAGE 4.
--------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
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 THE PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The Date of this Prospectus is February 14, 1996
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING SHAREHOLDER OR ANY
OTHER PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
------------------
TABLE OF CONTENTS
------------------
Page
----
AVAILABLE INFORMATION ...................................................... 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE ............................ 3
INVESTMENT CONSIDERATIONS .................................................. 4
THE COMPANY ................................................................ 7
RECENT DEVELOPMENTS ........................................................ 8
USE OF PROCEEDS ............................................................ 8
DILUTION ................................................................... 9
SELLING SHAREHOLDERS ....................................................... 10
PLAN OF DISTRIBUTION ....................................................... 11
DESCRIPTION OF CAPITAL STOCK ............................................... 12
LEGAL MATTERS .............................................................. 13
EXPERTS .................................................................... 13
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information concerning the Company filed with the
Commission may be inspected and copied at the public reference facilities
maintained by the Commission at its office at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, as well as at the Regional Offices of the Commission at
500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade
Center, Suite 1300, New York, New York 10048. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Company has filed with the Commission a Registration Statement
(which term shall include all amendments, exhibits and schedules thereto) on
Form S-3 under the Securities Act with respect to the securities offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information, reference
is made to the Registration Statement and the exhibits filed as apart thereof.
Statements contained herein concerning any document filed as an exhibit are not
necessarily complete and, in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement. Each such
statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
hereby incorporated by reference into this Prospectus: (a) the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1995, (b) the
definitive Proxy Statement dated May 19, 1995, filed in connection with the
Company's 1995 Annual Meeting of Shareholders, (c) a registration statement on
Form S-8 filed on September 28, 1995, in connection with the registration of
Common Stock to be issued upon exercise of certain stock options issued pursuant
to the Company's 1991 Stock Option Plan, As Amended, (d) the description of the
Company's Common Stock contained in its registration statement on Form 8-A filed
on March 11, 1985, including any amendment or report filed for the purpose of
updating such description, and (e) the Company's Report on Form 8-K filed on
January 10, 1996.
All other documents filed by the Company pursuant to Sections 13(a),
13(c),14 and 15(d) of the Exchange Act subsequent to the date of this Prospectus
and prior to the termination of the offering shall be incorporated by reference
into this Prospectus from the date of filing of such documents. Any statement
contained in a document incorporated by reference shall be deemed to be modified
or superseded for all purposes to the extent that a statement contained herein
or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy
of this Prospectus is delivered, upon oral or written request, a copy of any or
all of the documents incorporated herein by reference, other than certain
exhibits to such documents. Requests for such copies should be directed to:
Investor Relations, SpectraScience, Inc., 5909 Baker Road, Suite 580,
Minnetonka, MN 55345; USA, Tel. No. (612) 931-9000.
INVESTMENT CONSIDERATIONS
AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE
OF RISK AND MAY NOT BE APPROPRIATE FOR INVESTORS WHO CANNOT AFFORD THE LOSS OF
THEIR ENTIRE INVESTMENT. PROSPECTIVE PURCHASERS SHOULD BE FULLY AWARE OF THE
FOLLOWING INVESTMENT CONSIDERATIONS AND SHOULD CAREFULLY REVIEW THE INFORMATION
CONTAINED ELSEWHERE IN THIS PROSPECTUS.
1. Future Capital Needs; Uncertainty of Additional Financing: The
development of the Company's products will require the commitment of substantial
funds to conduct research and development, to establish commercial scale
manufacturing capabilities, and to market its products. The Company's future
capital requirements will depend on many factors, including the progress of the
Company's research and development, the scope and results of clinical trials,
the cost and time of obtaining regulatory approvals, the rate of technological
advances, determinations as to the commercial potential of the Company's
products, the status of competitive products and the establishment of
manufacturing capacity. The Company anticipates that its current funds will be
adequate to satisfy its capital requirements for approximately the next two
years. The Company anticipates that it will be required to raise substantial
additional funds, including funds raised through strategic partnerships and
additional public or private financings. No assurance can be given that
additional financing will be available on acceptable terms, or at all.
2. Volatility of Stock Price: The market price for securities of high
technology medical products companies have historically been highly volatile,
and the market has from time to time experienced significant price and volume
fluctuations that are unrelated to the operating performance of particular
companies. Factors such as fluctuations in the Company's operating results,
announcements of technological innovations or new diagnostic or therapeutic
products by the Company or its competitors, government regulations, developments
in patent or other proprietary rights, public concern as to the safety of
products developed by the Company or others and general market conditions may
have a significant effect on the market price of the Company's Common Stock.
3. Early Stage of Development; Limited Sales; Regulatory Approval;
Market Acceptance: Although sale of certain of the Company's products have begun
in international markets, sales to date have been very limited and it is not
anticipated that revenues from sales of Company products will be significant for
at least another year. Moreover, there are many reasons that potential products
that appear promising do not result in successful commercialization. Newly
developed products may not receive regulatory approval or be successfully
introduced and marketed at prices that would permit the Company to operate
profitably.
4. Ongoing Clinical Trials: In June 1995, the Company and Massachusetts
General Hospital's Wellman Laboratories of Photomedicine ("Wellman Lab") entered
into a 2-year collaborative research agreement for the spectroscopic detection
of cancer using minimally invasive endoscopic and laparoscopic techniques.
Applications currently targeted include the real-time spectroscopic
identification and differentiation of pre-cancerous lesions and cancerous
tissues in various areas of the body which can be accessed less invasively, such
as the lung, bladder, prostate, cervix, upper and lower gastrointestinal tract
and colon. While the Company believes that the Wellman Lab is extremely
competent in its work, there can be no assurance that clinical results will be
encouraging. Other risks attendant with the clinicals include the
unpredictability of the time frame for completion due to patient availability,
hospital procedures and policies which could change, and changes in the
principal investigators leading the clinicals.
The Company has also been conducting clinical feasibility studies in
collaboration with the Cleveland Clinic Foundation designed to lead to the
development of a commercial product for cardiovascular applications. These
studies are carried out under Investigational Device Exemptions ("IDE") approved
by the Food and Drug Administration ("FDA") and also by the hospital's
Institutional Review Board ("IRB"). There can be no assurance such studies or
development will prove successful.
5. Dependence upon Key Personnel, Consultants and Contract
Manufacturers: The Company's success is highly dependent on the retention of
principal members of its management and scientific staff, key consulting
arrangements and the recruitment of additional qualified personnel. The loss of
key personnel or the failure to recruit additional qualified personnel could
have an adverse effect on the operations of the Company. There is intense
competition from other companies, research and academic institutions and other
organizations for qualified personnel in the areas of the Company's activities.
There is no assurance the Company will be able to attract and retain the
qualified personnel necessary for the continued successful development of its
business.
The Company has entered into consulting agreements with a number of
individuals and business organizations who are currently providing management,
software development, and regulatory compliance and submissions. Risks attendant
to the use of consultants include their competence and availability on short
notice. In addition, the Company currently uses reputable contract manufacturers
for the manufacture of its products. These companies have been audited by the
Food and Drug Administration ("FDA") and found to be in compliance with
applicable rules and regulations. However, there is no guarantee that they will
remain in compliance. Additional risks attendant to the use of contract
manufacturers include manufacturing priorities and the resultant ability to
obtain products on a timely basis, and less control over the manufacturing
process, costs and inventory control and maintenance of proprietary information.
6. Patents, Proprietary Rights and Licenses: The Company has been
awarded a number of patents that it hopes to commercially exploit. However,
there can be no assurance that the patents will afford protection against
competitors with similar technology. The Company also relies upon unpatented
proprietary technology. No assurance can be given that the Company can
meaningfully protect its rights in such unpatented proprietary technology or
that others will not duplicate or independently develop substantially equivalent
technology.
In order to manufacture and market certain products, the Company may be
required to obtain licenses to patents or other proprietary rights of third
parties. There can be no assurance that the Company will be able to license such
technology at a reasonable cost, if at all. If the Company does not obtain such
licenses, it could encounter delays in introducing such products while it
attempts to design around such patents and there can be no assurance that this
can be successfully done, or it could find that the development, manufacture or
sale of such products could be adversely affected.
In addition, the Company could incur substantial costs in defending
itself in suits brought against it on such patents or in suits in which the
Company's patents may be asserted by it against another party.
The Company has acquired significant proprietary rights under license
agreements with the Massachusetts Institute of Technology and others that permit
the licensor to terminate these agreements in the event of certain material
breaches by the Company. Although the Company is not currently in default under
any of these agreements, there can be no assurance that such defaults will not
occur in the future. Should a default occur and any of these agreements be
terminated in the future, the Company could lose the right to continue to
develop and market one or more products.
7. Operating Loss and Accumulated Deficit. The Company has incurred net
losses since its inception. At fiscal year ending December 31, 1995, the
Company's accumulated deficit was approximately $40.9 million. Such losses have
resulted principally from expenses incurred in the Company's research and
development program, the acquisition of new technology, and, to a lesser extent,
from general and administrative expenses. The Company incurred a loss of
$1,345,910 in fiscal year 1995, and expects to incur substantial losses for
fiscal year 1996 due primarily to additional research and development expenses.
There can be no assurance that the Company will successfully commercially market
its products or ever achieve or sustain profitability.
8. Commercialization; Limited Manufacturing or Marketing Experience;
Collaborative Relationship: The Company intends to market and sell some of its
products directly, while relying on sales and marketing expertise of corporate
partners for other products. The Company has limited experience in direct
marketing of its products and there can be no assurance that such direct
marketing will be successful. The decision to market products directly or
through corporate partners will be based upon a number of factors including
market size and concentration, the size and expertise of the partner's sales
force in a particular market and the Company's overall strategic objectives.
International markets will be serviced by a strategic partner (or
partners) currently operating in Canada, Europe, Japan and other markets. The
Company has entered into an exclusive three year international distribution
agreement with SCIMED Life Systems, Inc., ("SCIMED") a wholly owned subsidiary
of Boston Scientific Corporation (NYSE:BSX), which will allow interventional
cardiologists at major medical institutions outside the United States, access to
advanced spectroscopic techniques for the diagnosis and to facilitate treatment
of cardiovascular disease. SCIMED will market the Company's Spectroscopic
Guidewire(TM) System ("SGS") outside the United States. under the terms of the
3-year agreement enhancing the synergy between the Company's Spectroscopic
Guidewire(TM) and SCIMED's innovative angioplasty products.
SCIMED, founded in 1971 and a leading provider of cardiovascular
devices, develops, manufactures and markets coronary and peripheral angioplasty
catheters and other related disposable medical devices used in the non-surgical
treatment of cardiovascular diseases.
While the Company believes that this strategic partnership will prove
beneficial to the Company, there is no guarantee that it will continue in its
present form or that SCIMED will effectively sell the Company's products
overseas.
9. Product Liability and Insurance: Clinical trials or marketing of any
of the Company's products may expose the Company to liability claims resulting
from the use of such products. These claims might be made directly by consumers,
health care providers or by others selling the products. The Company currently
maintains $1 million of product liability insurance coverage. There can be no
assurance that the Company will be able to maintain such insurance or, if
maintained, that sufficient coverage can be acquired at a reasonable cost. An
inability to maintain insurance at acceptable cost or at all, could prevent or
inhibit the clinical testing or commercialization of products developed by the
Company. In addition, there can be no assurance, regardless of the availability
of product liability insurance, that the Company will be adequately protected
from claims that may be brought against it. A product liability claim or recall
could have a material adverse effect on the business or financial condition of
the Company.
10. Shares eligible for Future Sale; Dilution: Future sales of common
shares by existing shareholders and holders of options and warrants could
adversely affect the prevailing market price of the Company's Common Stock. The
price of the Common Stock issued in this offering is substantially higher than
the book value per share of the Company's Common Stock. Investors purchasing the
Company's Common Stock in this offering will therefore incur immediate,
substantial dilution.
11. Reliability of Plans: Management has made its best effort to plan
the development of the Company's business. However, there are substantial risks
and uncertainties associated with the time schedules and financial projections.
There could be errors of omission or of estimating, new events or circumstances
imposed on the business that require additional time and/or capital, or the
products could fail any number of tests, government requirements or market
requirements, resulting in delays, redesign or even abandonment of products.
Should any of these events, as well as others currently unforeseen, occur, it
could materially impair management's plans for development of the business.
12. Uncertainty of Health Care Reimbursement and Proposed Health Care
Legislation: Government and other third party reimbursement sources are
increasingly attempting to contain healthcare costs by limiting both coverage
and the level of reimbursement, especially for new diagnostic and therapeutic
products. If adequate coverage and reimbursement levels are not provided by
government and third party reimbursement sources for uses of the products to be
commercialized by the Company, market acceptance of these products could be
adversely affected.
THE COMPANY
The Company, a publicly-held company located in Minnetonka, Minnesota,
is a market-driven high technology medical products company that has developed
novel proprietary technology for spectroscopic identification of human tissues.
The Company was incorporated in the state of Minnesota on May 4, 1983 as GV
Medical, Inc. Subsequently the Company changed its name to SpectraScience, Inc.
on October 16, 1992, which was approved by the shareholders on May 13, 1993. The
executive offices of the Company are located at 5909 Baker Road, Suite 580,
Minnetonka, Minnesota 55345. Its telephone number is (612) 931-9000 and its fax
number is (612) 933-9090. The Company's common stock, symbol SPSI, is currently
being traded on the OTC Bulletin Board.
The Company's unique SGS product allows cardiologists performing
catheterization of the coronary arteries to identify and differentiate
atherosclerotic plaques and thrombus. Knowledge of the composition of the plaque
and presence of intracoronary thrombus can help the cardiologist select, in a
cost effective manner, the appropriate lesion specific angioplasty modality,
which may offer significant benefit to the patient in terms of maximizing
success rate, minimizing complications and improving long-term patient outcomes.
The feasibility of the technology having been established, the Company
has received an IDE protocol approval from the FDA for cardiology clinical
studies on the Company's SGS product, which have now commenced at two hospital
sites.
The mission of the Company is to utilize its expertise in the
underlying core technologies of spectroscopy, fiber optics, computer software
and hardware, and minimally-invasive medical delivery systems to design,
develop, manufacture and market medical products for the diagnosis and
facilitation of treatment of a broad range of human diseases. The diseases
currently targeted by the Company are the diagnosis and differentiation of
atherosclerotic plaques and cancerous tissues.
RECENT DEVELOPMENTS
On September 30, 1994, the Company received $300,000 of bridge loan
financing ("Bridge Loans"). The Bridge Loans did not bear interest. In return,
lenders were given 5-year Warrants exercisable at $3.00 per share, to purchase
100,000 shares of Common Stock. During the fiscal first quarter ending March 31,
1995, the Company received $225,000 of additional Bridge Loans. Lenders for this
portion of the Bridge Loans were given 5-year Warrants exercisable at $3.00 per
share, to purchase 74,998 shares of Common Stock. The Bridge Loans were
converted on March 31, 1995 as part of the private placement of Preferred A.
On June 29, 1995, the Company completed the private placement of 674,998
shares of Preferred A and Warrants to purchase 225,000 shares of Common Stock
for $2,025,000, including conversion of Bridge Loans, before offering costs. The
selling agent, R.J. Steichen & Co., received two Warrants: a Warrant to purchase
20,000 shares and another Warrant to purchase 6,667 shares of the Company's
Common Stock.
On December 28, 1995, the Company completed an additional private
placement of 792,500 shares of Preferred B and Warrants to purchase 264,175
shares of Common Stock for $3,962,500, before offering costs. The selling agent,
Miller, Johnson & Kuehn, received a Warrant to purchase 79,250 shares of Common
Stock and a conditional Warrant to purchase up to an additional 26,418 shares of
Common Stock.
Preferred A and Preferred B (collectively, the "Preferred Stock") and
the Warrants were issued to the Selling Shareholders pursuant to exemptions from
the registration requirements of the Securities Act provided by Section 4(2)
thereof. Preferred A is convertible from time to time on or after March 31, 1996
into 674,998 shares of Common Stock. Preferred B is initially convertible on
December 28, 1996 into 792,500 shares of Common Stock.
The Company granted S-3 registration rights to the Selling Shareholders
covering the resale of Common Stock issuable upon the conversion of the
Preferred Stock and exercise of the Warrants (collectively, the "Shares"). The
Shares are being registered by the Company on a registration statement on Form
S-3, of which this prospectus forms a part, pursuant to which all of the Shares
may be offered from time to time by the Selling Shareholders. In addition, the
Preferred Stock has certain rights, preferences and privileges. (See
"Description of Capital Stock.") Copies of the form of Warrant and the
Amendments to the Company's Articles of Incorporation to designate the rights,
preferences and privileges of the Preferred Stock are incorporated herein.
USE OF PROCEEDS
None of the proceeds from the sale of the Shares by the Selling
Shareholders will be received by the Company. However, the Company may receive
gross proceeds of up to $4,900,213 if all the Warrants were exercised.
The Company expects to use a majority of the net proceeds from the
exercise of Warrants to fund development activities, clinical trials, conduct
studies on alternative medical applications, and expansion of marketing, sales
and manufacturing activities for the Company's SGS systems. The balance of the
net proceeds will be used for working capital, general and administrative and
general corporate purposes. Although the Company may use a portion of the net
proceeds for the licensing of new patents, products or technologies from other
entities, the Company currently has no specific plans or commitments in this
regard. The amounts actually expended for each purpose and the timing of such
expenditures may vary significantly depending upon numerous factors, including
the progress of the Company's clinical trials, actions relating to regulatory
and reimbursement matters, the costs and timing of expansion of marketing,
sales, manufacturing and product development activities, the extent to which the
Company's products gain market acceptance and competition. Pending such uses,
the Company intends to invest the net proceeds of this offering in short-term,
interest-bearing investment grade securities.
DILUTION
On December 31, 1995, the number of shares of Common Stock outstanding
was 2,933,348. The net tangible book value on that date was $4,389,601, or $1.5
per share of Common Stock. The net tangible book value per share represents the
amount of the Company's total tangible assets less total liabilities, divided by
the number of shares of Common Stock outstanding.
The total number of shares of Preferred Stock that is convertible to an
equivalent number of shares of Common Stock is 1,467,498. The total number of
Warrants issued in connection with the Bridge Loan, issuance of Preferred A and
issuance of Preferred B, to both participants and selling agents is 796,508. If
all the Preferred Stock and Warrants were converted to Common Stock, then the
total number of shares of Common Stock outstanding would be 5,197,354. The net
assets would also increase by $4,900,213 from the exercise of Warrants. The net
assets would then be $1.79 per share of Common Stock. This represents an
increase of $0.29 net tangible book value per share of Common Stock from the net
tangible book value per share on December 31, 1995.
The table below illustrates the amount of dilution if all the shares of
Preferred Stock were converted to Common Stock, and also if all the outstanding
Warrants were exercised.
----------------------
Net Tangible Book
Value per share of
Common Stock
----------------------
Net tangible book value on December 31, 1995 $ 1.50
Increase as a result of Conversion of
All Preferred Stock ($ 0.50)
--------
Net tangible book value after Conversion of
Preferred Stock $ 1.00
Increase as a result of Exercise of
All Warrants $ 0.79
--------
Net tangible book value after Conversion of
All Preferred Stock and after Exercise of
All Warrants $ 1.79
========
SELLING SHAREHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of Common Stock of each Selling Shareholder and as adjusted
to give effect to the sale of the Shares offered hereby. The Shares are being
registered to permit public secondary trading of the Shares, and the Selling
Shareholders may offer the Shares for resale from time to time. (See "Plan of
Distribution.")
<TABLE>
- ------------------------------ ---------------------------- ----------------------------- ----------------------------
<S> <C> <C> <C>
Security holder Number of Shares of Series Shares of Common Stock Owned Number of Shares and % of
A Preferred Shares, Series at Dec 31, 1995 Assuming No Common Stock Owned at Dec
B Preferred Shares, and/or Preferred Shares Are 31, 1995 Assuming All Preferred
Warrants Owned at December Converted or Warrants Shares Are Converted and
31, 1995 Exercised Warrants Exercised
</TABLE>
(NOTE: THIS TABLE IS ATTACHED AS EXHIBIT 99)
(1) This Registration Statement shall also cover additional shares of Common
Stock which become issuable in connection with the shares registered for sale
hereby by reason of any stock dividend, stock split, recapitalization or other
similar transaction effected without the receipt of consideration which results
in an increase in the number of the Registrant's outstanding shares of Common
Stock.
(2) Includes shares of Common Stock issuable upon conversion of 674,998 shares
of Series A Preferred Stock.
(3) Includes shares of Common Stock issuable upon conversion of 792,500 shares
of Series B Preferred Stock.
(4) Includes shares issuable upon exercise of Warrants to purchase 796,508
shares of Common Stock.
The Shares being offered by the Selling Shareholders will be acquired
from the Company (i) following conversion of Preferred A acquired from the
Company in private placement transactions at a purchase price of $3.00 per
share, (ii) following conversion of Preferred B acquired from the Company in
private placement transactions at a purchase price of $5.00 per share, or (iii)
upon exercise of Warrants acquired in connection with the Bridge Loans, the
Preferred A and Preferred B offerings, at prices of $3.00, $5.00 and $9.50 per
share.
The selling agent, in connection with the sale of Preferred A, received
a fee of $60,000 and two Warrants: a 5-year Warrant to purchase 20,000 shares of
the Company's Common Stock at an exercise price of $3.00 per share, and a 3-year
Warrant to purchase 6,667 shares of the Company's Common Stock at an exercise
price of $5.00 per share.
The selling agent in connection with the sale of Preferred B received a
fee of $435,875 and received a 5-year Warrant to purchase 79,250 shares of the
Company's Common Stock at an exercise price of $5.00 per share and a conditional
5-year Warrant to purchase up to an additional 26,418 shares of the Company's
Common Stock at $9.50 per share.
Each Selling Shareholder that purchased Preferred Stock pursuant to a
Purchase Agreement represented to the Company that it would acquire the Shares
for investment and has no present intention of distributing any of such Shares
except pursuant to this Prospectus. The Company has filed with the Commission,
under the Act, a Registration Statement on Form S-3, of which this Prospectus
forms a part, with respect to the resale of the Shares from time to time on the
Nasdaq Small Cap Market, the over-the-counter market, or in privately-negotiated
transactions and has agreed to use its best efforts to keep such Registration
Statement effective until the earlier of (i) the fifth anniversary of the
closing of the offering of the Preferred B shares, (ii) such date as all of the
Shares have been resold, or (iii) such time as all of the Shares held by the
Selling Shareholders can be sold within a given three-month period without
compliance with the registration requirement of the Securities Act pursuant to
Rule 144.
PLAN OF DISTRIBUTION
The Company will receive gross proceeds of $4,900,213 if all the
Warrants were exercised, but will not receive any proceeds from the issuance of
shares of Common Stock as a result of the conversion of Preferred Stock.
The Shares offered hereby may be sold by the Selling Shareholders from
time to time in transactions on the Nasdaq Small Cap market, in the
over-the-counter market, in negotiated transactions, or a combination of such
methods of sale, at fixed prices which may be changed, at market prices
prevailing at the time of sale, at prices related to prevailing market prices or
at negotiated prices. The Selling Shareholders may effect such transactions by
selling the Shares to or through broker-dealers, and such broker-dealers may
receive compensation in the form of discounts, concessions or commissions from
the Selling Shareholders and/or the purchasers of the Shares for whom such
broker-dealers may act as agents or to whom they sell as principals, or both
(which compensation as to a particular broker-dealer might be in excess of
customary commissions).
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. 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.
The Selling Shareholders and any broker-dealers or agents that
participate with the Selling Shareholders in the distribution of the Shares may
be deemed to be "underwriters" within the meaning of the Securities Act, and any
commissions received by them and any profit on the resale of the Shares
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act.
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 the Common Stock of the Company for
a period of two business days prior to the commencement of such distribution. In
addition and without limiting the foregoing, each Selling Shareholder will be
subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including without limitation, Rules l0b-6 and l0b-7,
which provisions may limit the timing of purchases and sales of shares of the
Company's Common Stock by the Selling Shareholders.
The Shares were issued to the Selling Shareholders pursuant to
exemptions from the registration requirements of the Securities Act provided by
Section 4(2) thereof. The Company agreed to register the Shares under the
Securities Act and to indemnify and hold the Selling Shareholders harmless
against certain liabilities under the Securities Act that could arise in
connection with the sale by the Selling Shareholders of the Shares. The Company
has agreed to pay all reasonable fees and expenses incident to the filing of
this Registration Statement.
DESCRIPTION OF CAPITAL STOCK
The Company has 24,000,000 shares of authorized capital stock, of which
4,000,000 shares have been designated Common Stock, $.25 par value, and
20,000,000 shares have been designated Preferred Stock, $1 par value (the
"Authorized Preferred Stock") of which 5,000,000 shares have been designated
Preferred A and 1,000,000 shares have been designated Preferred B. On December
31, 1995, the Company had outstanding 2,933,348 shares of Common Stock, 674,998
shares of Preferred A, and 792,500 shares of Preferred B.
In the event shareholders of the Company do not approve, on or before
December 15, 1996, the authorization of sufficient additional shares of Common
Stock required for the conversion of Preferred B into shares of Common Stock,
the holders of Preferred B will be entitled to receive an 8% cumulative
dividend, payable quarterly, in preference to the holders of Common Stock. In
addition, in the event of a liquidation, winding up, or change in control of the
Company, the holders of the Preferred Stock are entitled to receive, in
preference to any distribution of funds to the holders of Common Stock, an
amount equal to the par value of the Preferred Stock, plus any accrued but
unpaid dividends.
Each share of Preferred A is convertible into one share of Common
Stock, from time to time commencing March 31, 1996. Each share of Preferred B is
convertible into one share of Common Stock, plus any accrued and unpaid
dividends, at any time on or after December 28, 1996. The consent of the holders
of a majority of the outstanding Authorized Preferred Stock is required for the
amendment of the Company's Articles of Incorporation or By-laws in a manner that
directly affects the Authorized Preferred Stock.
Holders of shares of Common Stock are entitled to one vote per share on
all matters to be voted on by shareholders. Subject to the preferences
applicable to the outstanding Authorized Preferred Stock, holders of Common
Stock are entitled to receive ratably such dividends as may be declared by the
Board of Directors in its discretion from funds legally available for such
purpose. Shareholders of Common Stock have no preemptive rights and have no
rights to convert their Common Stock into any other securities. The outstanding
shares of Common Stock and Preferred Stock are, and the Common Stock to be
outstanding upon completion of this offering, will be, fully paid and
nonassessable.
The Company has outstanding Warrants to purchase an aggregate of
796,508 shares of the Company's Common Stock. Of the outstanding Warrants, the
Common Stock issuable upon exercise of Warrants to purchase 796,508 shares of
Common Stock are being registered in this offering (the "Warrants"). Warrants
held by the purchasers of the Preferred Stock, totalling 664,173, are
exercisable at any time from the date of issuance until the third anniversary of
the date of issuance.
The selling agent for Preferred A, received two Warrants: a 5-year
Warrant to purchase 20,000 shares of the Company's Common Stock at an exercise
price of $3.00 per share, and a 3-year Warrant to purchase 6,667 shares of the
Company's Common Stock at an exercise price of $5.00 per share. The selling
agent for Preferred B received a 5-year Warrant to purchase 79,250 shares of the
Company's Common Stock at an exercise price of $5.00 per share and a conditional
Warrant to purchase up to an additional 26,418 shares of the Company's Common
Stock at an exercise price of $9.50 per share. Conditional Warrants issued to
the selling agent for Preferred B are exercisable for a period of 5 years from
the expiration date of the Warrants issued to purchasers of Preferred B. The
exercise price of the Warrants is subject to proportional adjustment in the
event that the Company undertakes a stock split, stock dividend, or
recapitalization.
LEGAL MATTERS
The legality of the securities being offered hereby will be passed upon
for the Company by Stephen P. Kregstein, Esq., Boulder, Colorado.
EXPERTS
The financial statements included in SpectraScience, Inc's Annual Report
on Form 10-KSB for the years ended December 31, 1995 and 1994 have been audited
by Ernst & Young LLP, independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such financial statements
are incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is a list of the estimated expenses to be incurred by the
Registrant in connection with the issuance and distribution of the Shares being
registered hereby.
SEC Registration Fee $ 5,465
Accountant's Fees and Expenses $ 2,500 *
Legal Fees and Expenses $ 5,000 *
Miscellaneous $ 500 *
-------
TOTAL $12,965
=======
* Estimated, subject to change.
The Selling Shareholders will not bear any portion of the expenses of
registration of the Shares.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Minnesota Business Corporation Act ("MBCA") permits a corporation
to indemnify its directors, officers and certain others acting in an official
capacity for the corporation made or threatened to be made a party to a
proceeding by reason of the former or present official capacity of the person
against judgments, penalties, fines, including attorneys' fees and expenses, if,
with respect to the acts or omissions of the person, the person: (1) has not
been indemnified by another party; (2) acted in good faith; (3) received no
improper personal benefit; and (4) in the case of a criminal proceeding, had no
reasonable cause to believe the conduct was unlawful. In general, the person
must have reasonably believed that his or her conduct was in the best interests,
or not opposed to the best interests, of the corporation.
Article IX of the By-laws of the Company requires the Company to
indemnify a director or officer to the extent permitted and required by
Minnesota Statutes Section 302A.521. The Company must make advance payments upon
the request of an eligible person if the person signs an affidavit stating that
he or she honestly believes he or she has met the criteria for indemnification
and promises to repay the Company if it is ultimately found that the criteria
were not met. The determination as to whether the criteria are met is made by a
board of disinterested directors, a committee of two or more disinterested
directors, special legal counsel, or the shareholders, depending upon the
circumstances of each case. If a determination is made that the person is not
eligible for indemnification or if no determination is made within sixty days
after the termination of the proceedings or after a request for an advance of
expenses, the person may petition a court for an independent determination. The
shareholders of the Company will be notified in the annual reports of all
indemnification payments made in derivative action suits.
The Company also maintains insurance policies for general officers and
directors liability covering all of the Company's officers and directors in
certain instances where by law they may not be indemnified by the Company.
ITEM 16. EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
4.1 Articles of Incorporation, As Amended
4.2 Form of Warrant Agreement
5.1 Opinion of Stephen P. Kregstein, Esq.
23.1 Consent of Stephen P. Kregstein, Esq. (included in Exhibit 5.1)
23.2 Consent of Ernst & Young LLP
24.1 Power of Attorney (included in Part II of this Registration Statement
under the caption "Signatures")
99 List of Selling Shareholders
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10 (a) (3) of the
Securities Act;
(ii) Reflect in the Prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement;
(iii) Include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change of such information in the
registration statement;
Provided, however, that paragraphs (a)(1)(i) and (ii) do not apply if
the registration statement is on Form S-3, or Form S-8, and the information
required in a post-effective amendment is incorporated by reference from
periodic reports filed by a small business issuer under the Exchange Act.
(2) For determining liability under the Securities Act, to treat each
post-effective amendment as a new registration statement of the securities
offered therein, and the offering of the securities at that time to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities which remain unsold at the termination of the offering.
(b) That, for the purpose of determining any liability under the Securities Act,
each filing of the registrant's annual report pursuant to Section 13 (a) or
Section 15 (d) of the Exchange Act 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 the securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question 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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Minnetonka, Minneapolis on February 14, 1996.
SPECTRASCIENCE, INC.
By: /s/ Brian T. McMahon
BRIAN T. MCMAHON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below in so signing also makes, constitutes and appoints Brian T.
McMahon and Ching-Meng Chew, and each of them, as true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution
for him and in his name, place and stead, in any and all capacities to execute
and cause to be filed with the Securities and Exchange Commission any and all
amendments (including pre-effective and post-effective amendments) to this
Registration Statement, with exhibits thereto and other documents in connection
therewith, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully as to all intents and purposes as he might or could do in
person, and hereby ratifies and confirms all that said attorneys-in-fact and
agents or their or his substitutes or substitute may lawfully do or cause to be
done by virtue thereof.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Brian T. McMahon President, Chief Executive Officer February 14, 1996
- ------------------------- and Director
Brian T. McMahon (Principal Executive Officer)
/s/ Ching-Meng Chew Vice President Finance and February 14, 1996
- ------------------------- Administration, Chief Financial
Ching-Meng Chew Officer, Treasurer, Secretary
(Principal Financial and Accounting
Officer)
/s/ Henry M. Holterman Director February 14, 1996
- -------------------------
Henry M. Holterman
/s/ Nathaniel S. Thayer Director February 14, 1996
- -------------------------
Nathaniel S. Thayer
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
Number Description Page No.
<S> <C> <C>
4.1 Articles of Incorporation, As Amended* 18
4.2 Form of Warrant Agreement* 27
5.1 Opinion of Stephen P. Kregstein, Esq.* 35
23.1 Consent of Stephen P. Kregstein, Esq. (included in Exhibit 5.1) 35
23.2 Consent of Ernst & Young LLP* 36
24.1 Power of Attorney (included in Part II of this Registration Statement under the caption 16
"Signatures")
99 List of Selling Shareholders* 37
</TABLE>
- ---------------------------------
* Filed herewith
EXHIBIT 4.1 TO FORM S-3:
ARTICLES OF INCORPORATION OF SPECTRASCIENCE, INC
INCLUDING AMENDMENTS
ARTICLES OF INCORPORATION
OF
SPECTRASCIENCE, INC.
The undersigned incorporator, a natural person 18 years of age or
older, in order to form a corporation under Minnesota Statutes, Section 302A,
hereby adopts the following Articles of Incorpration:
ARTICLE I
The name of this corporation is G V Medical, Inc.
ARTICLE I - AMENDED
The name of this corporation is SpectraScience, Inc.
ARTICLE II
The registered office of this corporation is located at 4200 IDS
Center, 80 South Eighth Street, Minneapolis, Minnesota 55402
ARTICLE II - AMENDED (A)
The registered office of this corporation is located at 3750 Annapolis
Lane, Minneapolis, Minnesota 55441
ARTICLE II - AMENDED (B)
The registered office of this corporation is located at 3750 Annapolis
Lane, Minneapolis, Minnesota 55447
ARTICLE II - AMENDED (C)
The registered office of this corporation is located at 5909 Baker
Road, Suite 580, Minnetonka, Minnesota 55345
ARTICLE III
The corporation is authorized to issue an aggregate total of 2,000,000
shares, par value of $.05 per share. All shares shall be of one class and one
series.
ARTICLE III - AMENDED (A)
The corporation is authorized to issue an aggregate total of 5,000,000
shares, par value of $.05 per share. All shares shall be of one class and one
series.
ARTICLE III - AMENDED (B)
CAPITAL STOCK
The authorized capital stock of this corporation shall be Twenty
Million (20,000,000) shares of common stock with a stated par value of twenty
five cents ($.05) per share (the "Common Stock") and Twenty Million (20,000,000)
shares of preferred stock with a stated par value of one dollar ($1.00) per
share (the "Preferred Stock"). The designation and the powers, preferences and
rights, and the qualifications, limitations or restrictions of the shares of
each class of stock shall be as follows:
SECTION 1. Common Stock. Subject to all of the rights of the Preferred Stock,
and except as may be expressly provided with respect to the Preferred Stock
herein, by law or by the Board of Directors pursuant to this Article III:
(a) dividends may be declared and paid or set apart for payment upon
the Common Stock out of any assets or funds of the corporation legally
available for the payment of dividends;
(b) the holders of the Common Stock shall have the exclusive right to
vote for the election of directors and on all other matters requiring
stockholder action, each share being entitled to one vote; and
(c) upon the voluntary or involuntary liquidation, dissolution or
winding up of the corporation, the net assets of the corporation shall
be distributed pro rata to the holders of the Common Stock in
accordance with their respective share ownership.
SECTION 2. Preferred Stock. The Preferred Stock may be issued from time to time
by the Board of Directors as shares of one or more series. Subject to the
provisions hereof and the limitations prescribed by law, the Board of Directors
is expressly authorized by adopting resolutions providing for the issuance of
shares of any particular series and, if and to the extent from time to time
required by law, by filing with the Minnesota Secretary of State a statement
with respect to the adoption of the resolutions pursuant to the Minnesota
Business Corporation Act (or other law hereafter in effect relating to the same
or substantially similar subject matter), to establish the number of shares to
be included in each such series and to fix the designation and relative powers,
preferences and rights and the qualifications and limitations or restrictions
thereof relating to the shares of each such series. The authority of the Board
of Directors with respect to each series shall include, but not be limited to,
determination of the following:
(a) the distinctive serial designation of such series and the number of
shares constituting such series, provided that the aggregate number of
shares constituting all series of Preferred Stock shall not exceed
Twenty Million (20,000,000);
(b) the annual dividend rate on shares of such series, if any, whether
dividends shall be cumulative and, if so, from which date or dates;
(c) whether the shares of such series shall be redeemable and, if so,
the terms and conditions of such redemption, including the date or
dates upon and after which such shares shall be redeemable, and the
amount per share payable in case of redemption, which amount may vary
under different conditions and at different redemption dates;
(d) the obligation, if any, of the corporation to retire shares of such
series pursuant to a sinking fund;
(e) whether shares of such series shall be convertible into, or
exchangeable for, shares of stock of any other class or classes and, if
so, the terms and conditions of such conversion or exchange, including
the price or prices or the rate or rates of conversion or exchange and
the terms of adjustment, if any;
(f) whether the shares of such series shall have voting rights provided
by law, and, if so, the terms of such voting rights;
(g) the rights of the shares of such series in the event of the
voluntary or involuntary liquidation, dissolution or winding up of the
corporation; and
(h) any other rights, powers, preferences, qualifications, limitations
or restrictions thereof relating to such series.
The shares of Preferred Stock of any one series shall be identical with
each other in all respects except as to the dates from and after which dividends
thereon shall cumulate, if cumulative.
ARTICLE III - AMENDED (C)
CAPITAL STOCK
The following text hereby replaces the first paragraph of Article III - Amended
(b):
The authorized capital stock of this corporation shall be Twenty
Million (20,000,000) shares of common stock with a stated par value of twenty
five cents ($.05) per share (the "Common Stock") and Twenty Million (20,000,000)
shares of preferred stock with a stated par value of one dollar ($1.00) per
share (the "Preferred Stock").
Effective as of 11:59 p.m. CDT on June 30, 1994, a one-for-five reverse
split of shares of Common Stock of the Corporation issued and outstanding
immediately prior to that time and date shall be and hereby is enacted, with
each holder of Common Stock of the Corporation of record as of 11:59 p.m. CDT on
June 30, 1994, to be deemed the owner of one share of Common Stock for every
three shares of Common Stock owned by such holder as of 11:59 p.m. CDT on June
30, 1994. Fractional shares of Common Stock shall not be issued and no payment
in lieu of fractional shares of Common Stock shall be made, but each fractional
share of Common Stock interest of .5 or more held by any one holder of Common
Stock shall be rounded up to the next higher full share, and each fractional
share of Common Stock interest of less than .5 held by any one holder of Common
Stock shall be rounded down to zero. Effective as of June 30, 1994, the stated
par value of the Common Stock shall be twenty-five cents ($.25) per share and
the number of authorized shares of Common Stock shall be reduced to four million
(4,000,000). The changes stated herein shall not adversely effect the rights or
preferences of the holders of outstanding shares of any class or series and
shall not result in the percentage of authorized shares that remains unissued
after the combination of shares of Common Stock exceeding the percentage of
authorized shares that were unissued before the combination. The designation and
the powers, preferences and rights, and the qualifications, limitations or
restrictions of the shares of each class of stock shall be as follows:
ARTICLE III - AMENDED (D)
CAPITAL STOCK
The authorized capital stock of this corporation shall be Four Million
(4,000,000) shares of common stock with a stated par value of twenty five cents
($.25) per share (the "Common Stock") and Twenty Million (20,000,000) shares of
preferred stock with a stated par value of one dollar ($1.00) per share (the
"Preferred Stock"). The designation and the powers, preferences and rights, and
the qualifications, limitations or restrictions of the shares of each class of
stock shall be as follows:
SECTION 1. Common Stock. Subject to all of the rights of the Preferred Stock,
and except as may be expressly provided with respect to the Preferred Stock
herein, by law or by the Board of Directors pursuant to this Article III:
(a) dividends may be declared and paid or set apart for payment upon
the Common Stock out of any assets or funds of the corporation legally
available for the payment of dividends;
(b) the holders of the Common Stock shall have the exclusive right to
vote for the election of directors and on all matters requiring
shareholder action, each share being entitled to one vote; and
(c) upon the voluntary or involuntary liquidation, dissolution or
winding up of the corporation, the net assets of the corporation shall
be distributed pro rata to the holders of the Common Stock in
accordance with their respective share ownership.
SECTION 2. Preferred Stock. The Preferred Stock may be issued from time to time
by the Board of Directors as shares of one or more series. Subject to the
provisions hereof and the limitations prescribed by law, the Board of Directors
is expressly authorized by adopting resolutions providing for the issuance of
shares of any particular series and, if and to the extent from time to time
required by law, by filing with the Minnesota Secretary of State a statement
with respect to the adoption of the resolutions pursuant to the Minnesota
Business Corporation Act (or other law hereafter in effect relating to the same
or substantially similar subject matter), to establish the number of shares to
be included in each such series and to fix the designation and relative powers,
preferences and rights and the qualifications and limitations or restrictions
thereof relating to the shares of each such series. The authority of the Board
of Directors with respect to each series shall include, but not be limited to,
determination of the following:
(a) the distinctive serial designation of such series and the number of
shares constituting such series, provided that the aggregate number of
shares constituting all series of Preferred Stock shall not exceed
Twenty Million (20,000,000);
(b) the annual dividend rate on shares of such series, if any, whether
dividends shall be cumulative and, if so, from which date or dates;
(c) whether the shares of such series shall be redeemable and, if so,
the terms and conditions of such redemption, including the date or
dates upon and after which such shares shall be redeemable, and the
amount per share payable in case of redemption, which amount may vary
under different conditions and at different redemption dates;
(d) the obligation, if any, of the corporation to retire shares of such
series pursuant to a sinking fund;
(e) whether shares of such series shall be convertible into, or
exchangeable for, shares of stock of any other class or classes and, if
so, the terms and conditions of such conversion or exchange, including
the price or prices or the rate or rates of conversion or exchange and
the terms of adjustment, if any;
(f) whether the shares of such series shall have voting rights provided
by law, and, if so, the terms of such voting rights;
(g) the rights of the shares of such series in the event of the
voluntary or involuntary liquidation, dissolution or winding up of the
corporation; and
(h) any other rights, powers, preferences, qualifications, limitations
or restrictions thereof relating to such series.
The shares of Preferred Stock of any one series shall be identical with
each other in all respects except as to the dates from and after which dividends
thereon shall cumulate, if cumulative. Although the Board of Directors may fix
and determine the relative rights and preferences among the various series of
Preferred Stock in accordance with the authority set forth above, in all other
respects, the shares of all series shall be of equal rank with each other,
regardless of series.
2.1 Redemption and Conversion. Any share of any series of Preferred Stock which
has been redeemed or converted shall have the status of an authorized and
unissued share of Preferred Stock and may be reissued as a part of the series of
which it was originally a part or may be reissued as part of another series of
Preferred Stock established by the Board of Directors.
2.2 Preferential Distribution in Liquidation. Upon the liquidation, dissolution
or winding up of the corporation, the holders of the Preferred Stock then
outstanding shall be entitled to receive the amount per share fixed for the
various series before any of the assets of the corporation are distributed to
the holders of the Common Stock. If the assets of the corporation distributable
to the holders of the Preferred Stock have a value which is less that the full
amount so fixed for the various series, such assets shall be distributed among
the holders of the various series of Preferred Stock in accordance with any
preferences among the series that may have been established or, to the extent
that no such preferences shall have been established, pro rata among the holders
of all of the series of Preferred Stock. After distribution of the preferential
amounts required to be distributed to the holders of the Preferred Stock then
outstanding, the holders of the Common Stock shall be entitled, to the exclusion
of the holders of the Preferred Stock unless otherwise provided, to share in all
the remaining assets of the corporation.
SERIES A CONVERTIBLE STOCK
There is hereby established and created an initial series of Preferred Stock in
the number of shares and having the designation, relative rights, preferences
and limitations as follows:
2.3 Designation and Number of Shares. The distinctive designation of the series
shall be "Series A Convertible Preferred Stock" (par value $ 1.00 per share)
herein sometimes referred to as the "Series A Preferred Stock") and the number
of shares initially constituting the series shall be 5,000,000.
2.4 Dividends. The Series A Preferred Stock shall bear no dividends.
2.5 Preferences in Liquidation.
(a) Preferential Payment. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the corporation, the holders
of shares of the Series A Preferred Stock then outstanding shall be
entitled to be paid according to their relationship with other holders
of Preferred Stock, out of the assets of the corporation available for
distribution to shareholders, whether from capital, surplus or
earnings, before any payment shall be made in respect of the
corporation's Common Stock, an amount equal to $1.00 per share. After
setting apart or paying in full the preferential amounts due the
holders of the Series A Preferred Stock and any other holders of
Preferred Stock, the remaining assets of the corporation available for
distribution to shareholders, if any, shall be distributed to the
holders of Common Stock unless otherwise provided. If upon liquidation,
dissolution or winding up of the corporation, the assets of the
corporation available for distribution to its shareholders shall be
insufficient to pay the holders of the Series A Preferred Stock the
full preferential distribution of $1 per share, the holders of the
Series A Preferred Stock shall share ratably in the distribution of
such assets.
(b) Notice. In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the corporation, the corporation shall,
within 10 days after the date the Board of Directors approves such
action, or within 20 days prior to any shareholders' meeting called to
approve such action, or within 20 days after the commencement of any
involuntary proceeding, whichever is earlier, give each holder of
shares of Series A Preferred Stock initial written notice of the
proposed action. Such initial written notice shall describe the
material terms and conditions of the proposed action, including a
description of the stock, cash and property to be received by the
holders of shares of Series A Preferred Stock upon consummation of the
proposed action and the date of delivery thereof. If any material
change in the facts set forth in the initial notice shall occur, the
corporations shall promptly give written notice to each holder of
shares of Series A Preferred Stock of such material change.
2.6 Voting Rights. Except as otherwise provided by law or as expressly provided
herein, the Common Stock shall have exclusive voting rights and powers,
including the exclusive right to notice of shareholders' meetings.
2.7 Conversion Rights.
(a) Optional Conversion. Shares of Series A Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after
March 31, 1996, (the "Conversion Period"), into fully paid and
nonassessable shares of Common Stock of the corporation.
(b) Conversion Ratio. Each share of Series A Preferred Stock shall be
converted into one share of the Common Stock of the corporation,
subject to adjustment as provided in paragraph 2.8 below.
(c) Procedure For Conversion. The holder of any shares of Series A
Preferred Stock may exercise the conversion rights during the
Conversion Period as to such shares or any part thereof by delivering
to the corporation during regular business hours, at the office of any
transfer agent of the corporation for the Series A Preferred Stock, or
at the principal office of the corporation, the certificate or
certificates for the shares to be converted, duly endorsed for transfer
to the corporation, accompanied by written notice stating that the
holder elects to convert such shares or a part thereof. Conversion
shall be deemed to have been effected on the date when such delivery is
made, and such date is referred to herein as the "Conversion Date". As
promptly as practicable thereafter the corporation shall issue and
deliver to or upon the written order of such holder, at such office or
other place designated by the corporation, a certificate or
certificates for the number of full shares of Common Stock to which
such holder is entitled and a check for cash with respect to any
fractional interest in a share of Common Stock as provided in paragraph
2.7(d). The holder shall be deemed to have become a shareholder of
record on the applicable Conversion Date unless the transfer books of
the corporation are closed on such date, in which event he shall be
deemed to have become a shareholder of record on the next succeeding
date on which the transfer books are open, but the Conversion Ratio
shall be that in effect on the Conversion Date. Upon conversion of only
a portion of the number of shares of Series A Preferred Stock
represented by a certificate surrendered for conversion, the
corporation shall issue and deliver to or upon the written order of the
holder of the certificate so surrendered for conversion, at the expense
of the corporation, a new certificate covering the number of shares of
Series A Preferred Stock representing the unconverted portion of the
certificate so surrendered.
(d) Fractional Shares. No fractional shares of Common Stock or scrip
shall be issued upon conversion of shares of Series A Preferred Stock.
If more than one share of Series A Preferred Stock shall be surrendered
for conversion at any one time by the same holder, the number of full
shares of Common Stock issuable upon conversion thereof shall be
computed on the basis of the aggregate number of shares of Series A
Preferred Stock so surrendered. Instead of any fractional shares of
Common Stock which would otherwise be issuable upon conversion of any
shares of Series A Preferred Stock, the corporation shall pay a cash
adjustment in respect of such fractional interest equal to the fair
market value of such fractional interest as determined by the Board of
Directors.
(e) Reserved Shares. The corporation shall reserve and keep available,
out of its authorized but unissued Common Stock, solely for the purpose
of effecting the conversion of the Series A Preferred Stock, the full
number of shares of Common Stock deliverable upon the conversion of all
Series A Preferred Stock from time to time outstanding. The corporation
shall from time to time (subject to obtaining necessary director and
shareholder action) increase the authorized amount of its Common Stock
if at any time the authorized number of shares of its Common Stock
remaining unissued shall not be sufficient to permit the conversion of
all of the shares of Series A Preferred Stock at the time outstanding.
(f) Registration. If any shares of Common Stock to be reserved for the
purpose of shares of Series A Preferred Stock require registration or
listing with, or approval of, any governmental authority, stock
exchange, or other regulatory body under any federal or state law or
regulation or otherwise, before such shares may be validly issued or
delivered upon conversion, the corporation will in good faith and as
expeditiously as reasonable endeavor to secure such registration,
listing or approval, as the case may be.
(g) Validly Issued. All shares of Common Stock which may be issued upon
conversion of the shares of Series A Preferred Stock will, upon
issuance by the corporation, be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect
to the issuance thereof.
(h) Negative Covenants. This corporation will not, by amendment of its
articles of incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of
securities, or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or
performed thereunder, but will at all times in good faith assist in the
carrying out of all the provisions hereof and in the taking of such
action as may be necessary or appropriate in order to protect the
conversion rights of the holders of the Series A Preferred Stock
against impairment. In addition, the corporation shall at no time issue
or sell any shares of its Common Stock or Preferred Stock, options or
warrants for a consideration less than fair market value, as reasonably
determined by the Board of Directors, except for grants or awards of
Common Stock or options to acquire Common Stock made to the
corporation's employees, officers, and directors and to consultants and
other participants in the corporation's stock option, stock award,
stock purchase and other benefit plans, provided such grants and awards
made after the date of the first issuance of the corporation's Series A
Preferred Stock shall not represent more than 10% of the then
outstanding shares of Common Stock of the corporation.
2.8 Antidilution. The Conversion Ratio (referred to in paragraph 2.7 (b)) shall
be subject to adjustment from time to time, and the number of shares of Common
Stock issuable on conversion of any shares of Series A Preferred Stock shall be
subject to a resultant increase or decrease (calculated to the nearest 1/100th
of a share) by reason of such adjustment, as hereafter stated, except that no
adjustment shall be made, unless by reason of the occurrence of one or more of
the events hereinafter specified, the Conversion Ratio theretofore in effect
shall be changed by an amount equal to at least 5% thereof, but in the event
that an adjustment would be required except of insufficiency of amount, such
amount shall be carried forward and added to and shall be made at the time of
and together with any subsequent adjustment which, together with any adjustment
or adjustments so carried forward, amount to at least 5% of the Conversion Ratio
at such later time:
(a) Stock Dividends, Subdivisions and Combinations. In the event the
corporation shall declare a stock dividend with respect to its Common
Stock or shall effect a subdivision or combination of its Common Stock
into a greater or lesser number of shares without a proportionate and
corresponding stock dividend, subdivision or combination with respect
to its outstanding Series A Preferred Stock, then the existing
Conversion Ratio for the Series A Preferred Stock shall be increased or
decreased proportionately.
(b) Classification, Reclassification, Capital Reorganization, Etc. In
the case of any classification, reclassification, capital
reorganization or other change of outstanding shares of Common Stock
(other than a change in par value, or from without par value to par
value, or from par value to without par value, or as a result of an
issuance of Common Stock by way of dividend or other distribution or of
a subdivision or combination), or in case of any consolidation or
merger of the corporation with or into another corporation (other than
a merger with a subsidiary in which the corporation is the continuing
corporation and which does not result in any reclassification, capital
reorganization or other change of outstanding shares of the Common
Stock issuable upon conversion of the shares of the Series A Preferred
Stock) or in case of any sale or conveyance to another corporation of
the property of the corporation as an entirety or substantially as an
entirety, the corporation shall cause the holders of the Series A
Preferred Stock to have the right, by exercising their conversion
rights thereunder, to purchase the kind and amount of shares of stock
and other securities and property receivable upon such
reclassification, capital reorganization or other change,
consolidation, merger, sale or conveyance, if any, which the holders of
the Series A Preferred Stock would have received had the conversion
taken place immediately prior to such event.
2.9 Changes Affecting Series A Preferred Stock. So long as any shares of Series
A Preferred Stock are outstanding, the corporation shall not, without first
obtaining the approval by vote or written consent, in the manner provided by
law, of the holders of at least a majority of the total number of shares of
Series A Preferred Stock outstanding, voting separately as a class, (i) alter or
change any of the powers, preferences, privileges, or rights of the Series A
Preferred Stock; or (ii) amend the provisions of this paragraph 2.9; or (iii)
create any new class or series of shares having preferences prior to the Series
A Preferred Stock or reclassifying any class or series of any Common Stock or
any other shares of stock hereafter created junior to the Class A Preferred
Stock into shares having any preference or priority over the Series A Preferred
Stock.
ARTICLE III - AMENDED (E)
CAPITAL STOCK
The authorized capital stock of this corporation shall be Four Million
(4,000,000) shares of common stock with a stated par value of twenty five cents
($.25) per share (the "Common Stock") and Twenty Million (20,000,000) shares of
preferred stock with a stated par value of one dollar ($1.00) per share (the
"Preferred Stock"). The designation and the powers, preferences and rights, and
the qualifications, limitations or restrictions of the shares of each class of
stock shall be as follows:
SECTION 1. Common Stock. Subject to all of the rights of the Preferred Stock,
and except as may be expressly provided with respect to the Preferred Stock
herein, by law or by the Board of Directors pursuant to this Article III:
(a) dividends may be declared and paid or set apart for payment upon
the Common Stock out of any assets or funds of the corporation legally
available for the payment of dividends;
(b) the holders of the Common Stock shall have the exclusive right to
vote for the election of directors and on all matters requiring
shareholder action, each share being entitled to one vote; and
(c) upon the voluntary or involuntary liquidation, dissolution or
winding up of the corporation, the net assets of the corporation shall
be distributed pro rata to the holders of the Common Stock in
accordance with their respective share ownership.
SECTION 2. Preferred Stock. The Preferred Stock may be issued from time to time
by the Board of Directors as shares of one or more series. Subject to the
provisions hereof and the limitations prescribed by law, the Board of Directors
is expressly authorized by adopting resolutions providing for the issuance of
shares of any particular series and, if and to the extent from time to time
required by law, by filing with the Minnesota Secretary of State a statement
with respect to the adoption of the resolutions pursuant to the Minnesota
Business Corporation Act (or other law hereafter in effect relating to the same
or substantially similar subject matter), to establish the number of shares to
be included in each such series and to fix the designation and relative powers,
preferences and rights and the qualifications and limitations or restrictions
thereof relating to the shares of each such series. The authority of the Board
of Directors with respect to each series shall include, but not be limited to,
determination of the following:
(a) the distinctive serial designation of such series and the number of
shares constituting such series, provided that the aggregate number of
shares constituting all series of Preferred Stock shall not exceed
Twenty Million (20,000,000);
(b) the annual dividend rate on shares of such series, if any, whether
dividends shall be cumulative and, if so, from which date or dates;
(c) whether the shares of such series shall be redeemable and, if so,
the terms and conditions of such redemption, including the date or
dates upon and after which such shares shall be redeemable, and the
amount per share payable in case of redemption, which amount may vary
under different conditions and at different redemption dates;
(d) the obligation, if any, of the corporation to retire shares of such
series pursuant to a sinking fund;
(e) whether shares of such series shall be convertible into, or
exchangeable for, shares of stock of any other class or classes and, if
so, the terms and conditions of such conversion or exchange, including
the price or prices or the rate or rates of conversion or exchange and
the terms of adjustment, if any;
(f) whether the shares of such series shall have voting rights provided
by law, and, if so, the terms of such voting rights;
(g) the rights of the shares of such series in the event of the
voluntary or involuntary liquidation, dissolution or winding up of the
corporation; and
(h) any other rights, powers, preferences, qualifications, limitations
or restrictions thereof relating to such series.
The shares of Preferred Stock of any one series shall be identical with
each other in all respects except as to the dates from and after which dividends
thereon shall cumulate, if cumulative. Although the Board of Directors may fix
and determine the relative rights and preferences among the various series of
Preferred Stock in accordance with the authority set forth above, in all other
respects, the shares of all series shall be of equal rank with each other,
regardless of series.
2.1 Redemption and Conversion. Any share of any series of Preferred Stock which
has been redeemed or converted shall have the status of an authorized and
unissued share of Preferred Stock and may be reissued as a part of the series of
which it was originally a part or may be reissued as part of another series of
Preferred Stock established by the Board of Directors.
2.2 Preferential Distribution in Liquidation. Upon the liquidation, dissolution
or winding up of the corporation, the holders of the Preferred Stock then
outstanding shall be entitled to receive the amount per share fixed for the
various series before any of the assets of the corporation are distributed to
the holders of the Common Stock. If the assets of the corporation distributable
to the holders of the Preferred Stock have a value which is less that the full
amount so fixed for the various series, such assets shall be distributed among
the holders of the various series of Preferred Stock in accordance with any
preferences among the series that may have been established or, to the extent
that no such preferences shall have been established, pro rata among the holders
of all of the series of Preferred Stock. After distribution of the preferential
amounts required to be distributed to the holders of the Preferred Stock then
outstanding, the holders of the Common Stock shall be entitled, to the exclusion
of the holders of the Preferred Stock unless otherwise provided, to share in all
the remaining assets of the corporation.
SERIES A CONVERTIBLE STOCK
There is hereby established and created an initial series of Preferred Stock in
the number of shares and having the designation, relative rights, preferences
and limitations as follows:
2.3 Designation and Number of Shares. The distinctive designation of the series
shall be "Series A Convertible Preferred Stock" (par value $ 1.00 per share)
herein sometimes referred to as the "Series A Preferred Stock") and the number
of shares initially constituting the series shall be 5,000,000.
2.4 Dividends. The Series A Preferred Stock shall bear no dividends.
2.5 Preferences in Liquidation.
(a) Preferential Payment. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the corporation, the holders
of shares of the Series A Preferred Stock then outstanding shall be
entitled to be paid according to their relationship with other holders
of Preferred Stock, out of the assets of the corporation available for
distribution to shareholders, whether from capital, surplus or
earnings, before any payment shall be made in respect of the
corporation's Common Stock, an amount equal to $1.00 per share. After
setting apart or paying in full the preferential amounts due the
holders of the Series A Preferred Stock and any other holders of
Preferred Stock, the remaining assets of the corporation available for
distribution to shareholders, if any, shall be distributed to the
holders of Common Stock unless otherwise provided. If upon liquidation,
dissolution or winding up of the corporation, the assets of the
corporation available for distribution to its shareholders shall be
insufficient to pay the holders of the Series A Preferred Stock the
full preferential distribution of $1 per share, the holders of the
Series A Preferred Stock shall share ratably in the distribution of
such assets.
(b) Notice. In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the corporation, the corporation shall,
within 10 days after the date the Board of Directors approves such
action, or within 20 days prior to any shareholders' meeting called to
approve such action, or within 20 days after the commencement of any
involuntary proceeding, whichever is earlier, give each holder of
shares of Series A Preferred Stock initial written notice of the
proposed action. Such initial written notice shall describe the
material terms and conditions of the proposed action, including a
description of the stock, cash and property to be received by the
holders of shares of Series A Preferred Stock upon consummation of the
proposed action and the date of delivery thereof. If any material
change in the facts set forth in the initial notice shall occur, the
corporations shall promptly give written notice to each holder of
shares of Series A Preferred Stock of such material change.
2.6 Voting Rights. Except as otherwise provided by law or as expressly provided
herein, the Common Stock shall have exclusive voting rights and powers,
including the exclusive right to notice of shareholders' meetings.
2.7 Conversion Rights.
(a) Optional Conversion. Shares of Series A Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after
March 31, 1996, (the "Conversion Period"), into fully paid and
nonassessable shares of Common Stock of the corporation.
(b) Conversion Ratio. Each share of Series A Preferred Stock shall be
converted into one share of the Common Stock of the corporation,
subject to adjustment as provided in paragraph 2.8 below.
(c) Procedure For Conversion. The holder of any shares of Series A
Preferred Stock may exercise the conversion rights during the
Conversion Period as to such shares or any part thereof by delivering
to the corporation during regular business hours, at the office of any
transfer agent of the corporation for the Series A Preferred Stock, or
at the principal office of the corporation, the certificate or
certificates for the shares to be converted, duly endorsed for transfer
to the corporation, accompanied by written notice stating that the
holder elects to convert such shares or a part thereof. Conversion
shall be deemed to have been effected on the date when such delivery is
made, and such date is referred to herein as the "Conversion Date". As
promptly as practicable thereafter the corporation shall issue and
deliver to or upon the written order of such holder, at such office or
other place designated by the corporation, a certificate or
certificates for the number of full shares of Common Stock to which
such holder is entitled and a check for cash with respect to any
fractional interest in a share of Common Stock as provided in paragraph
2.7(d). The holder shall be deemed to have become a shareholder of
record on the applicable Conversion Date unless the transfer books of
the corporation are closed on such date, in which event he shall be
deemed to have become a shareholder of record on the next succeeding
date on which the transfer books are open, but the Conversion Ratio
shall be that in effect on the Conversion Date. Upon conversion of only
a portion of the number of shares of Series A Preferred Stock
represented by a certificate surrendered for conversion, the
corporation shall issue and deliver to or upon the written order of the
holder of the certificate so surrendered for conversion, at the expense
of the corporation, a new certificate covering the number of shares of
Series A Preferred Stock representing the unconverted portion of the
certificate so surrendered.
(d) Fractional Shares. No fractional shares of Common Stock or scrip
shall be issued upon conversion of shares of Series A Preferred Stock.
If more than one share of Series A Preferred Stock shall be surrendered
for conversion at any one time by the same holder, the number of full
shares of Common Stock issuable upon conversion thereof shall be
computed on the basis of the aggregate number of shares of Series A
Preferred Stock so surrendered. Instead of any fractional shares of
Common Stock which would otherwise be issuable upon conversion of any
shares of Series A Preferred Stock, the corporation shall pay a cash
adjustment in respect of such fractional interest equal to the fair
market value of such fractional interest as determined by the Board of
Directors.
(e) Reserved Shares. The corporation shall reserve and keep available,
out of its authorized but unissued Common Stock, solely for the purpose
of effecting the conversion of the Series A Preferred Stock, the full
number of shares of Common Stock deliverable upon the conversion of all
Series A Preferred Stock from time to time outstanding. The corporation
shall from time to time (subject to obtaining necessary director and
shareholder action) increase the authorized amount of its Common Stock
if at any time the authorized number of shares of its Common Stock
remaining unissued shall not be sufficient to permit the conversion of
all of the shares of Series A Preferred Stock at the time outstanding.
(f) Registration. If any shares of Common Stock to be reserved for the
purpose of shares of Series A Preferred Stock require registration or
listing with, or approval of, any governmental authority, stock
exchange, or other regulatory body under any federal or state law or
regulation or otherwise, before such shares may be validly issued or
delivered upon conversion, the corporation will in good faith and as
expeditiously as reasonable endeavor to secure such registration,
listing or approval, as the case may be.
(g) Validly Issued. All shares of Common Stock which may be issued upon
conversion of the shares of Series A Preferred Stock will, upon
issuance by the corporation, be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect
to the issuance thereof.
(h) Negative Covenants. This corporation will not, by amendment of its
articles of incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of
securities, or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or
performed thereunder, but will at all times in good faith assist in the
carrying out of all the provisions hereof and in the taking of such
action as may be necessary or appropriate in order to protect the
conversion rights of the holders of the Series A Preferred Stock
against impairment. In addition, the corporation shall at no time issue
or sell any shares of its Common Stock or Preferred Stock, options or
warrants for a consideration less than fair market value, as reasonably
determined by the Board of Directors, except for grants or awards of
Common Stock or options to acquire Common Stock made to the
corporation's employees, officers, and directors and to consultants and
other participants in the corporation's stock option, stock award,
stock purchase and other benefit plans, provided such grants and awards
made after the date of the first issuance of the corporation's Series A
Preferred Stock shall not represent more than 10% of the then
outstanding shares of Common Stock of the corporation.
2.8 Antidilution. The Conversion Ratio (referred to in paragraph 2.7 (b)) shall
be subject to adjustment from time to time, and the number of shares of Common
Stock issuable on conversion of any shares of Series A Preferred Stock shall be
subject to a resultant increase or decrease (calculated to the nearest 1/100th
of a share) by reason of such adjustment, as hereafter stated, except that no
adjustment shall be made, unless by reason of the occurrence of one or more of
the events hereinafter specified, the Conversion Ratio theretofore in effect
shall be changed by an amount equal to at least 5% thereof, but in the event
that an adjustment would be required except of insufficiency of amount, such
amount shall be carried forward and added to and shall be made at the time of
and together with any subsequent adjustment which, together with any adjustment
or adjustments so carried forward, amount to at least 5% of the Conversion Ratio
at such later time:
(a) Stock Dividends, Subdivisions and Combinations. In the event the
corporation shall declare a stock dividend with respect to its Common
Stock or shall effect a subdivision or combination of its Common Stock
into a greater or lesser number of shares without a proportionate and
corresponding stock dividend, subdivision or combination with respect
to its outstanding Series A Preferred Stock, then the existing
Conversion Ratio for the Series A Preferred Stock shall be increased or
decreased proportionately.
(b) Classification, Reclassification, Capital Reorganization, Etc. In
the case of any classification, reclassification, capital
reorganization or other change of outstanding shares of Common Stock
(other than a change in par value, or from without par value to par
value, or from par value to without par value, or as a result of an
issuance of Common Stock by way of dividend or other distribution or of
a subdivision or combination), or in case of any consolidation or
merger of the corporation with or into another corporation (other than
a merger with a subsidiary in which the corporation is the continuing
corporation and which does not result in any reclassification, capital
reorganization or other change of outstanding shares of the Common
Stock issuable upon conversion of the shares of the Series A Preferred
Stock) or in case of any sale or conveyance to another corporation of
the property of the corporation as an entirety or substantially as an
entirety, the corporation shall cause the holders of the Series A
Preferred Stock to have the right, by exercising their conversion
rights thereunder, to purchase the kind and amount of shares of stock
and other securities and property receivable upon such
reclassification, capital reorganization or other change,
consolidation, merger, sale or conveyance, if any, which the holders of
the Series A Preferred Stock would have received had the conversion
taken place immediately prior to such event.
2.9 Changes Affecting Series A Preferred Stock. So long as any shares of Series
A Preferred Stock are outstanding, the corporation shall not, without first
obtaining the approval by vote or written consent, in the manner provided by
law, of the holders of at least a majority of the total number of shares of
Series A Preferred Stock outstanding, voting separately as a class, (i) alter or
change any of the powers, preferences, privileges, or rights of the Series A
Preferred Stock; or (ii) amend the provisions of this paragraph 2.9; or (iii)
create any new class or series of shares having preferences prior to the Series
A Preferred Stock or reclassifying any class or series of any Common Stock or
any other shares of stock hereafter created junior to the Class A Preferred
Stock into shares having any preference or priority over the Series A Preferred
Stock.
SERIES B CONVERTIBLE STOCK
There is hereby established and created a second series of Preferred Stock in
the number of shares and having the designation, relative rights, preferences
and limitations as follows:
2.10 Designation and Number of Shares. The distinctive designation of the series
shall be "Series B Convertible Preferred Stock" (par value $ 1.00 per share)
herein sometimes referred to as the "Series B Preferred Stock") and the number
of shares initially constituting the series shall be 1,000,000.
2.11 Dividends. Except as provided below, the Series B Preferred Stock shall
bear no dividends. In the event that the corporation has not increased the
number of authorized shares of its Common Stock to the extent sufficient to
enable the corporation to reserve a number of shares of Common Stock sufficient
to cover the conversion of the shares of Series B Preferred Stock and the
exercise of all Warrants issued in connection with the offering of the Series B
Preferred Stock by December 15, 1996, the Series B Preferred Stock shall bear an
8% cumulative annual dividend, payable quarterly, commencing upon the
corporation's failure to satisfy such condition and terminating on the date
compliance with such condition is satisfied.
2.12 Preferences in Liquidation.
(a) Preferential Payment. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the corporation, the holders
of shares of the Series B Preferred Stock then outstanding shall be
entitled to be paid according to their relationship with other holders
of Preferred Stock, out of the assets of the corporation available for
distribution to shareholders, pari passu, whether from capital, surplus
or earnings, before any payment shall be made in respect of the
corporation's Common Stock, an amount equal to $1.00 per share. After
setting apart or paying in full the preferential amounts due the
holders of the Series B Preferred Stock and any other holders of
Preferred Stock, the remaining assets of the corporation available for
distribution to shareholders, if any, shall be distributed to the
holders of Common Stock unless otherwise provided. If upon liquidation,
dissolution or winding up of the corporation, the assets of the
corporation available for distribution to its shareholders shall be
insufficient to pay the holders of the Series B Preferred Stock the
full preferential distribution of $1 per share, the holders of the
Series B Preferred Stock shall share ratably in the distribution of
such assets.
(b) Notice. In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the corporation, the corporation shall,
within 10 days after the date the Board of Directors approves such
action, or within 20 days prior to any shareholders' meeting called to
approve such action, or within 20 days after the commencement of any
involuntary proceeding, whichever is earlier, give each holder of
shares of Series B Preferred Stock initial written notice of the
proposed action. Such initial written notice shall describe the
material terms and conditions of the proposed action, including a
description of the stock, cash and property to be received by the
holders of shares of Series B Preferred Stock upon consummation of the
proposed action and the date of delivery thereof. If any material
change in the facts set forth in the initial notice shall occur, the
corporations shall promptly give written notice to each holder of
shares of Series B Preferred Stock of such material change.
2.13 Voting Rights. Except as otherwise provided by law or as expressly provided
herein, the Common Stock shall have exclusive voting rights and powers,
including the exclusive right to notice shareholders' meetings.
2.14 Conversion Rights.
(a) Optional Conversion. Shares of Series B Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after
December 28, 1996 (the "Conversion Period"), into fully paid and
nonassessable shares of Common Stock of the corporation.
(b) Conversion Ratio. Each share of Series B Preferred Stock shall be
converted into one share of the Common Stock of the corporation,
subject to adjustment as provided in paragraph 2.15 below.
(c) Procedure For Conversion. The holder of any shares of Series B
Preferred Stock may exercise the conversion rights during the
Conversion Period as to such shares or any part thereof by delivering
to the corporation during regular business hours, at the office of any
transfer agent of the corporation for the Series B Preferred Stock, or
at the principal office of the corporation, the certificate or
certificates for the shares to be converted, duly endorsed for transfer
to the corporation, accompanied by written notice stating that the
holder elects to convert such shares or a part thereof. Conversion
shall be deemed to have been effected on the date when such delivery is
made, and such date is referred to herein as the "Conversion Date". As
promptly as practicable thereafter the corporation shall issue and
deliver to or upon the written order of such holder, at such office or
other place designated by the corporation, a certificate or
certificates for the number of full shares of Common Stock to which
such holder is entitled and a check for cash with respect to any
fractional interest in a share of Common Stock as provided in paragraph
2.14(d). The holder shall be deemed to have become a shareholder of
record on the applicable Conversion Date unless the transfer books of
the corporation are closed on such date, in which event he shall be
deemed to have become a shareholder of record on the next succeeding
date on which the transfer books are open, but the Conversion Ratio
shall be that in effect on the Conversion Date. Upon conversion of only
a portion of the number of shares of Series B Preferred Stock
represented by a certificate surrendered for conversion, the
corporation shall issue and deliver to or upon the written order of the
holder of the certificate so surrendered for conversion, at the expense
of the corporation, a new certificate covering the number of shares of
Series B Preferred Stock representing the unconverted portion of the
certificate so surrendered.
(d) Fractional Shares. No fractional shares of Common Stock or scrip
shall be issued upon conversion of shares of Series B Preferred Stock.
If more than one share of Series B Preferred Stock shall be surrendered
for conversion at any one time by the same holder, the number of full
shares of Common Stock issuable upon conversion thereof shall be
computed on the basis of the aggregate number of shares of Series B
Preferred Stock so surrendered. Instead of any fractional shares of
Common Stock which would otherwise be issuable upon conversion of any
shares of Series B Preferred Stock, the corporation shall pay a cash
adjustment in respect of such fractional interest equal to the fair
market value of such fractional interest as determined by the Board of
Directors.
(e) Reserved Shares. The corporation shall reserve and keep available,
out of its authorized but unissued Common Stock, solely for the purpose
of effecting the conversion of the Series B Preferred Stock, the full
number of shares of Common Stock deliverable upon the conversion of all
Series B Preferred Stock from time to time outstanding. The corporation
shall from time to time (subject to obtaining necessary director and
shareholder action) increase the authorized amount of its Common Stock
if at any time the authorized number of shares of its Common Stock
remaining unissued shall not be sufficient to permit the conversion of
all of the shares of Series B Preferred Stock at the time outstanding.
(f) Registration. If any shares of Common Stock to be reserved for the
purpose of shares of Series B Preferred Stock require registration or
listing with, or approval of, any governmental authority, stock
exchange, or other regulatory body under any federal or state law or
regulation or otherwise, before such shares may be validly issued or
delivered upon conversion, the corporation will in good faith and as
expeditiously as reasonable endeavor to secure such registration,
listing or approval, as the case may be.
(g) Validly Issued. All shares of Common Stock which may be issued upon
conversion of the shares of Series B Preferred Stock will, upon
issuance by the corporation, be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect
to the issuance thereof.
(h) Negative Covenants. This corporation will not, by amendment of its
articles of incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of
securities, or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or
performed thereunder, but will at all times in good faith assist in the
carrying out of all the provisions hereof and in the taking of such
action as may be necessary or appropriate in order to protect the
conversion rights of the holders of the Series B Preferred Stock
against impairment.
2.15 Antidilution. The Conversion Ratio (referred to in paragraph 2.14 (b))
shall be subject to adjustment from time to time, and the number of shares of
Common Stock issuable on conversion of any shares of Series B Preferred Stock
shall be subject to a resultant increase or decrease (calculated to the nearest
1/100th of a share) by reason of such adjustment, as hereafter stated, except
that no adjustment shall be made, unless by reason of the occurrence of one or
more of the events hereinafter specified, the Conversion Ratio theretofore in
effect shall be changed by an amount equal to at least 5% thereof, but in the
event that an adjustment would be required except of insufficiency of amount,
such amount shall be carried forward and added to and shall be made at the time
of and together with any subsequent adjustment which, together with any
adjustment or adjustments so carried forward, amount to at least 5% of the
Conversion Ratio at such later time.
(a) Stock Dividends, Subdivisions and Combinations. In the event the
corporation shall declare a stock dividend with respect to its Common
Stock or shall effect a subdivision or combination of its Common Stock
into a greater or lesser number of shares without a proportionate and
corresponding stock dividend, subdivision or combination with respect
to its outstanding Series B Preferred Stock, then the existing
Conversion Ratio for the Series B Preferred Stock shall be increased or
decreased proportionately.
(b) Classification, Reclassification, Capital Reorganization, Etc. In
the case of any classification, reclassification, capital
reorganization or other change of outstanding shares of Common Stock
(other than a change in par value, or from without par value to par
value, or from par value to without par value, or as a result of an
issuance of Common Stock by way of dividend or other distribution or of
a subdivision or combination), or in case of any consolidation or
merger of the corporation with or into another corporation (other than
a merger with a subsidiary in which the corporation is the continuing
corporation and which does not result in any reclassification, capital
reorganization or other change of outstanding shares of the Common
Stock issuable upon conversion of the shares of the Series B Preferred
Stock) or in case of any sale or conveyance to another corporation of
the property of the corporation as an entirety or substantially as an
entirety, the corporation shall cause the holders of the Series B
Preferred Stock to have the right, by exercising their conversion
rights thereunder, to purchase the kind and amount of shares of stock
and other securities and property receivable upon such
reclassification, capital reorganization or other change,
consolidation, merger, sale or conveyance, if any, which the holders of
the Series B Preferred Stock would have received had the conversion
taken place immediately prior to such event.
2.16 Changes Affecting Series B Preferred Stock So long as any shares of Series
B Preferred Stock are outstanding, the corporation shall not, without first
obtaining the approval by vote or written consent, in the manner provided by
law, of the holders of at least a majority of the total number of shares of
Series B Preferred Stock outstanding, voting separately as a class, (i) alter or
change any of the powers, preferences, privileges, or rights of the Series B
Preferred Stock; or (ii) amend the provisions of this paragraph 2.16; or (iii)
create any new class or series of shares having preferences prior to the Series
B Preferred Stock or reclassifying any class or series of any Common Stock or
any other shares of stock hereafter created junior to the Class B Preferred
Stock into shares having any preference or priority over the Series B Preferred
Stock.
ARTICLE IV
The name and address of the incorporator is Thomas H. Garrett III, 4200
IDS Center, 80 South Eighth Street Minneapolis, Minneosta 55402.
ARTICLE V
No shareholder of this corporation shall have any cumulative voting
rights.
ARTICLE VI
No shareholder of this corporation shall have any preemptive rights to
subscribe for, purchase, or acquire any shares of the corporation of any class,
whether unissued or now or hereafter authorized, or any obligations or other
securities convertible into or exchangeable for any such shares.
ARTICLE VII
The affirmative note of the holders of a majority of the voting power
of the shares represented and voting at a duly held meeting of the shareholders
of this corporation is required for an action of the shareholders, except where
Minnesota Statutes, Section 302A requires the affirmative vote of a majority of
the voting power of all voting shares.
ARTICLE VIII
The number of directors of this corporation shall be fixed in the
manner provided in the bylaws.
ARTICLE IX
Any action required or permitted to be taken at a meeting of the board
of directors of this corporation not needing approval by the shareholders under
Minnesota Statutes, Section 302A, may be taken by written action signed by the
number of directors that would be required to take such action at a meeting of
the board of directors at which all directors were present.
ARTICLE X
DIRECTOR LIABILITY
No director of this corporation shall be personally liable to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its shareholders; (ii) for acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law; (iii) under Sections 302A.559 or 80A.23 of the Minnesota
Statutes; (iv) for any transaction from which the director derived any improper
personal benefit; (v) for any act or omission occurring prior to the date when
this provision becomes effective.
The provisions of this Article X shall not be deemed to limit or
preclude indemnification of a director by the corporation for any liability of a
director which has not been eliminated by the provisions of this Article.
If the Minnesota Statues hereafter are amended to authorize the further
elimination or limitation of the liability of directors, then the liability of a
director of the corporation shall be eliminated or limited to the fullest extent
permitted by the Minnesota Statutes, as so amended.
EXHIBIT 4.2 TO FORM S-3
SPECTRASCIENCE, INC.
(A MINNESOTA CORPORATION)
WARRANT TO PURCHASE _______________ SHARES
OF COMMON STOCK*
(*THIS WARRANT IS SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH
AT THE BOTTOM OF THE LAST PAGE HEREOF)
VOID AFTER MIDNIGHT, MINNEAPOLIS, MINNESOTA
TIME, ON _____________, ______.
No. ________
This is the certify that, for value received,__________________________
_________________________________ (the "Holder") is entitled to purchase,
subject to the provisions of this Warrant, from SPECTRASCIENCE, INC., a
Minnesota corporation (the "Company"), at any time from and after the date
hereof and prior to ______________, _____, (the "Exercise Period:), up to
_________________________________ fully paid the nonassessable shares of the
Common Stock, twenty five cent par value, of the Company ("Common Stock") ,
exercisable at the purchase price per share of $_____ subject to the provisions
of this Warrant. The number of shares of Common Stock to be received upon the
exercise of this Warrant and the price to be paid for a share of Common Stock
may be adjusted from time to time as hereinafter set forth. The shares of Common
Stock deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Stock" and the exercise price of a
share of Common Stock in effect at any time and as adjusted from time to time
hereinafter sometimes referred to as the "Exercise Price." This Warrant is one
of a series of Warrants identical in form which may be issued by the Company to
purchase shares of Common Stock of the Company and the term "Warrants" as used
herein means all such warrants (including this Warrant).
1. EXERCISE OF WARRANT. This Warrant may be exercised in whole or in part at any
time or from time to time during the Exercise Period, but not later than
Midnight, Minnesota Time, on _______________, _____, or if ______________, _____
is a day on which banking institutions are authorized by law to close, then on
the next succeeding day which shall not be such a day, by presentation and
surrender hereof to the Company or at the office of its stock transfer agent, if
any, with the Exercise Form annexed hereto duly executed and accompanied by
payment of the Exercise Price for the number of shares specified in such form,
together with all Federal and state taxes applicable upon such exercise. If this
Warrant should be exercised in part only, the Company shall, upon surrender of
this Warrant for cancellation, execute and deliver a new Warrant evidencing the
right of the Holder to purchase the balance of the shares purchasable hereunder.
Upon receipt by the Company of this Warrant at the office or agency of the
Company, in proper form for exercise, the Holder shall be deemed to be the
Holder of record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares of Common Stock shall not
then be actually delivered to the Holder.
2. RESERVATION OF SHARES. The Company hereby agrees that at all times there
shall be reserved for issuance and/or delivery upon exercise of this Warrant
such number of shares of Common Stock as shall be required for issuance or
delivery upon the exercise of this Warrant.
3. FRACTIONAL SHARES. 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 any exercise hereof, the Company shall pay
to the Holder an amount in cash equal to such fraction multiplied by the current
market value of such fractional share, determined as follows:
3.1 If the Common Stock is listed on national securities exchange
or admitted to unlisted trading privileges on such exchange,
the current value shall be the last reported sale price of the
Common Stock on such exchange on the last business day prior
to the date of exercise of this Warrant or if no such sale is
made on such day, the average of the closing bid and asked
prices for such day on such exchange; or
3.2 If the Common Stock is not so listed or admitted to unlisted
trading privileges, current value shall be the mean of the
last reported bid and asked prices reported by bid and asked
prices reported by the National Association of Securities
Dealers Quotation System (or, if not so quoted on NASDAQ, by
the National Quotation Bureau, Inc.) on the last business day
prior to the date of the exercise of this Warrant; or
3.3 If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so
reported, the current value shall be an amount, not less than
book value, determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company, such
determination to be final and binding on the Holder.
4. EXCHANGE, ASSIGNMENT OR LOSS OF WARRANT. Subject to Section 7, this Warrant
is exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company for other Warrants of different
denominations entitling the Holder thereof to purchase in the aggregate the same
number of shares of Common Stock purchasable hereunder. Any such assignment
shall be made by surrender of this Warrant with the Assignment Form annexed
hereto duly executed and funds sufficient to pay any transfer tax, whereupon the
Company shall, without change, execute and deliver a new Warrant in the name of
the assignee named in such instrument of assignment and this Warrant shall
promptly be canceled. This Warrant may be divided or combined with other
Warrants which carry the same rights upon presentation hereof at the office of
the Company or at the office of its stock transfer agent, if any, together with
a written notice specifying the names and denominations in which new Warrants
are to be issued and signed by the Holder hereof The term "Warrant" issued
herein includes any Warrants issued in substitution for or replacement of this
Warrant, or into which this Warrant may be divided or exchanged. Upon receipt by
the Company of evidence satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification, and upon surrender and cancellation of
this Warrant, if mutilated, the Company will execute and deliver a new Warrant
of like tenor and date. Any such new Warrant executed and delivered shall
constitute an additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed or mutilated shall be at
any time enforceable by anyone.
5. RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be entitled to
any rights of a shareholder in the Company, either at law or equity, and the
rights of the Holder are limited to those expressed in the Warrant and are not
enforceable against the Company, either at law or equity, except to the extent
set forth herein..
6. STOCK SPLITS, REORGANIZATION, MERGER, SALES OF ALL ASSETS.
6.1 In case the Company shall declare any dividend or other
distribution upon its outstanding capital stock payable in
capital stock or shall subdivide its outstanding shares of
capital stock into a greater number of shares, then the number
of shares of capital stock which may thereafter be purchased
upon the exercise of the rights represented hereby shall be
increased in proportion to the increase through such dividend
or subdivision and the purchase price per share shall be
decreased in such proportion. In case the Company shall at any
time combine the outstanding shares of its capital stock into
a smaller number of shares, the number of shares of capital
stock which may thereafter be purchased upon the exercise of
the rights represented hereby shall be decreased in proportion
to the increase through such combination and the purchase
price per share shall be increased in such proportion.
6.2 In case of any reclassification, capital reorganization or
other change of outstanding shares of Common Stock of the
Company (other than a change in par value, or from without par
value to par value, or from par value to without par value, or
as a result of an issuance of Common Stock by way of dividend
or other distribution or of a subdivision or combination), or
in case of any consolidation or merger of the Company with or
into another corporation (other than a merger with a
subsidiary in which merger the Company is the continuing
corporation and which does not result in any reclassification,
capital reorganization or other change of outstanding shares
of Common Stock of the class issuable upon exercise of this
Warrant) or in case of any sale or conveyance to another
corporation of the property of the Company as an entirety or
substantially as an entirety, the Company shall cause an
effective provision to be made so that the Holder shall have
the right thereafter, by excising this Warrant, to purchase
the kind and amount of shares of stock and other securities
and property receivable upon such reclassification, capital
reorganization or other change, consolidation, merger, sale or
conveyance, if any, which the Holder would have received had
the Warrants been exercised immediately prior to such event.
The Company shall not effect any such consolidation, merger,
or sale, unless prior to or simultaneously with the
consummation thereof the successor corporation (if other than
the Company) resulting from such consolidation or merger or
the corporation purchasing such assets shall assume by written
instrument executed and mailed or delivered to the Holder at
the last address of such Holder appearing on the books of the
Company, the obligation to deliver to such Holder such shares
of stock, securities or assets as, in accordance with the
foregoing provisions, such Holder may be entitled to purchase.
7. TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933.
7.1 This Warrant or the Warrant Stock or any other security issued
or issuable upon exercise of this Warrant may not be offered
or sold except in conformity with the Securities Act of 1933,
as amended, and then only against receipt of an agreement of
such person to whom such offer of sale is made to comply with
the provisions of this Section 7.1 with respect to any resale
or other disposition of such securities.
7.2 The Company may cause the following legend to be set forth on
each Warrant and certificate representing Warrant Stock or any
other security issued or issuable upon exercise of this
Warrant not theretofore distributed to the public or sold to
underwriters for distribution to the public unless counsel for
the Company is of the opinion as to any such certificate that
such legend is unnecessary:
The securities represented by this certificate may
not be offered for sale, sold or otherwise
transferred exceptpursuant to an effective
registration statement made under the Securities Act
of 1933 ("the Act"), or pursuant to an exemption from
registration under the Act.
8. REGISTRATION RIGHTS.
(a) If the Company proposes to claim an exemption under
Section 3(b) for a public offering of any of its securities or to
register under the Securities Act of 1933 (except by a claim of
exemption or registration statement on a form that does not permit the
inclusion of shares by its security holders) any of its securities, it
will give written notice to all registered holders of Warrants, and all
registered holders of shares of common stock acquired upon the exercise
of Warrants, of its intention to do so and, on the written request of
any such registered holders given within twenty (20) days after receipt
of any such notice (which request must be made within five (5) years
from the date of this Warrant), the Company will use its best efforts
to cause all such shares, the registered holders of which shall have
requested the registration or qualification thereof, to be included in
such notification or registration statement proposed to be filed by the
Company; provided, however, that nothing herein shall prevent the
Company from, at any time, abandoning or delaying any such registration
initiated by it. If any such registration shall be underwritten in
whole or in part, the Company may require that the shares requested for
inclusion pursuant to this section be included in the underwriting on
the same terms and conditions as the securities otherwise being sold
through the underwriters. In the event that, in the good faith judgment
of the managing underwriter of such public offering, the inclusion of
all of the shares originally covered by a request for registration
would reduce the number of shares to be offered by the Company or
interfere with the successful marketing of the shares of stock offered
by the Company, the number of shares otherwise to be included pursuant
to this Section in the underwritten public offering may be reduced.
Those shares which are thus excluded from the underwritten public
offering shall be withheld from the market for a period, not to exceed
90 days, which the managing underwriter reasonably determines is
necessary in order to effect the underwritten public offering. All
expenses of such offering, except the fees of special counsel to such
holders and brokers' commissions or underwriting discounts payable by
such holders, shall be borne by the Company.
(b) Further, on one occasion only, commencing one year from
the date hereof, upon request by the holders of Warrants and/or the
holders of shares issued upon the exercise of the Warrants who
collectively (i) have the right to purchase at least 50% of the shares
subject to the Warrants, (ii) hold directly at least 50% of the shares
purchased hereunder, or (iii) have the right to purchase or hold
directly an aggregate of at least 50% of the shares purchasable or
purchased hereunder, the Company will promptly take all necessary
steps, at the option of such holders, to register or qualify the sale
of the Warrants or such shares by the holders thereof, or to register
the issuance by the Company of shares upon the exercise of Warrants,
under the Securities Act of 1933 (and, upon the request of such
holders, under Rule 415 thereunder) and such state laws as such holders
may reasonably request; provided that (i) such request must be made by
___________, _____, and (ii) the Company may delay the filing of any
registration statement requested pursuant to this section to a date not
more than ninety (90) days following the date of such request if in the
opinion of the Company's principal investment banker at the time of
such request such a delay is necessary in order not to adversely affect
financing efforts then underway at the Company or if in the opinion of
the Company such a delay is necessary or advisable to avoid disclosure
of material nonpublic information. The costs and expenses directly
related to any registration requested pursuant to this section,
including but not limited to legal fees of the Company's counsel, audit
fees, printing expense, filing fees and fees and expenses relating to
qualifications under state securities or blue sky laws incurred by the
Company shall be borne entirely by the Company; provided, however, that
the persons for whose account the securities covered by such
registration are sold shall bear the expenses of underwriting
commissions applicable to their shares and fees of their legal counsel.
If the holders of Warrants and the holders of shares of Common Stock
underlying the Warrants are the only persons whose shares are included
in the registration pursuant to this section, such holders shall bear
the expense of inclusion of audited financial statements in the
registration statement which are not dated as of the Company's normal
fiscal year or are not otherwise prepared by the Company for its own
business purposes. The Company shall keep effective and maintain any
registration, qualification, notification or approval specified in this
paragraph for such period as may be necessary for the holders of the
Warrants and such common stock to dispose thereof, and from time to
time shall amend or supplement, at the holder's expense, the prospectus
or offering circular used in connection therewith to the extent
necessary in order to comply with applicable law, provided that the
Company shall not be obligated to maintain any registration for a
period of more than nine (9) months.
If, at the time any written request for registration is
received by the Company pursuant to this Section 8(b), the Company has
determined to proceed with the actual preparation and filing of a
registration statement under the Securities Act in connection with the
proposed offer and sale for cash of any of its securities by it or any
of its security holders, such written request shall be deemed to have
been given pursuant to Section 8(a) hereof rather than this Section
8(b), and the rights of the holders of Warrants and or shares issued
upon the exercise of the Warrants covered by such written request shall
be governed by Section 8(a) hereof.
The managing underwriter of an offering registered pursuant to
this Section 8(b), if any, shall be selected by the holders of a
majority of the Warrants and/or shares issued upon the exercise of the
Warrants for which registration has been requested and shall be
reasonably acceptable to the Company. Without the written consent of
the holders of a majority of the Warrants and/or shares issued upon
exercise of the Warrants for which registration has been requested
pursuant to this Section 8(b), neither the Company nor any other holder
of securities of the Company may include securities in such
registration if in the good faith judgment of the managing underwriter
of such public offering the inclusion of such securities would
interfere with the successful marketing of the Warrants and/or shares
issued upon the exercise of the Warrants or require the exclusion of
any portion of the Warrants and/or shares issued upon the exercise of
the Warrants to be registered. Subject to the preceding sentence,
shares to be excluded from an underwritten public offering shall be
selected in the manner provided in Section 8(a) hereof.
(c) If and whenever the Company is required by the provisions
of Section 8(a) or 8(b) hereof to effect the registration of Warrants
and/or shares issued upon the exercise of the Warrants under the
Securities Act, the Company will:
(i) prepare and file with the Commission a
registration statement with respect to such securities, and
use its best efforts to cause such registration statement to
become and remain effective for such period as may be
reasonably necessary to effect the sale of such securities;
(ii) prepare and file with the Commission such
amendments to such registration statement and supplements to
the prospectus contained therein as may be necessary to keep
such registration statement effective for such period as may be
reasonably necessary to effect the sale of such securities;
(iii) furnish to the security holders participating
in such registration and to the underwriters of the securities
being registered such reasonable number of copies of the
registration statement, preliminary prospectus, final
prospectus and such other documents as such underwriters may
reasonably request in order to facilitate the public offering
of such securities;
(iv) use its best efforts to register or qualify the
securities covered by such registration statement under such
state securities or blue sky laws of such jurisdictions as
such participating holders may reasonably request in writing
within 30 days following the original filing of such
registration statement, except that the Company shall not for
any purpose be required to execute a general consent to
service of process or to qualify to do business as a foreign
corporation in any jurisdiction wherein it is not so
qualified;
(v) notify the security holders participating in such
registration, promptly after it shall receive notice thereof,
of the time when such registration statement has become
effective or a supplement to any prospectus forming a part of
such registration statement has been filed;
(vi) notify such holders promptly of any request by
the Commission for the amending or supplementing of such
registration statement or prospectus or for additional
information;
(vii) prepare and file with the Commission, promptly
upon the request of any such holders, any amendments or
supplements to such registration statement or prospectus
which, in the opinion of counsel for such holders (and
concurred in by counsel for the Company), is required under
the Securities Act or the rules and regulations thereunder in
connection with the distribution of the Warrants or shares by
such holder;
(viii) prepare and promptly file with the Commission
and promptly notify such holders of the filing of such
amendment or supplement to such registration statement or
prospectus as may be necessary to correct any statements or
omissions if, at the time when a prospectus relating to such
securities is required to be delivered under the Securities
Act, any event shall have occurred as the result of which any
such prospectus or any other prospectus as then in effect
would include an untrue statement of a material fact or omit
to state any material fact necessary to make the statements
therein, in the light of the circumstances in which they were
made, not misleading;
(ix) advise such holders, promptly after it shall
receive notice or obtain knowledge thereof, of the issuance of
any stop order by the Commission suspending the effectiveness
of such registration statement or the initiation or
threatening of any proceeding for that purpose and promptly
use its best efforts to prevent the issuance of any stop order
or to obtain its withdrawal if such stop order should be
issued;
(x) not file any amendment or supplement to such
registration statement or prospectus to which a majority in
interest of such holders shall have reasonably objected on the
grounds that such amendment or supplement does not comply in
all material respects with the requirements of the Securities
Act or the rules and regulations thereunder, after having been
furnished with a copy thereof at least five business days
prior to the filing thereof, unless in the opinion of counsel
for the Company the filing of such amendment or supplement is
reasonably necessary to protect the Company from any
liabilities under any applicable federal or state law and such
filing will not violate applicable law; and
(xi) at the request of any such holder, furnish on
the effective date of the registration statement and, if such
registration includes an underwritten public offering, at the
closing provided for in the underwriting agreement: (i)
opinions, dated such respective dates, of the counsel
representing the Company for the purposes of such
registration, addressed to the underwriters, if any, and to
the holder or holders making such request, covering such
matters as such underwriters and holder or holders may
reasonably request; and (ii) letters, dated such respective
dates, from the independent certified public accountants of
the Company, addressed to the underwriters, if any, and to the
holder or holders making such request, covering such matters
as such underwriters and holder or holders may reasonably
request, in which letter such accountants shall state (without
limiting the generality of the foregoing) that they are
independent certified public accountants with the meaning of
the Securities Act and that in the opinion of such accountants
the financial statements and other financial data of the
Company included in the registration statement or the
prospectus or any amendment or supplement thereto comply in
all material respects with the applicable accounting
requirements of the Securities Act.
(d) The Company hereby indemnifies the holder of this Warrant
and of any common stock issued or issuable hereunder, its officers and
director, and any person who controls such Warrant holder or such
holder of common stock within the meaning of Section 15 of the
Securities Act of 1933, against all losses, claims, damages and
liabilities caused by any untrue statement of a material fact contained
in any registration statement, prospectus, notification or offering
circular (and as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) or any preliminary
prospectus or caused by any omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading except insofar as such losses, claims, damages
or liabilities are caused by any untrue statement or omission contained
in information furnished in writing to the Company by such Warrant
holder or such holder of common stock expressly for use therein, and
each such holder by its acceptance hereof severally agrees that it will
indemnify and hold harmless the Company and each of its officers who
signs such registration statement and each of its directors and each
person, if any, who controls the Company within the meaning of Section
15 of the Securities Act of 1933 with respect to losses, claims,
damages or liabilities which are caused by any untrue statement or
omission contained in information furnished in writing to the Company
by such holder expressly for use therein.
9. APPLICABLE LAW. This Warrant shall be governed by, and construed in
accordance with, the laws of the State of Minnesota.
DATED: _________________________
SPECTRASCIENCE, INC.,
By:
---------------------------------------
Brian T. McMahon
Its: President & CEO
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, ASSIGNED
OR OTHERWISE DISPOSED OF, AND NO TRANSFER OF THE SECURITIES WILL BE MADE BY THE
COMPANY OR ITS TRANSFER AGENT, IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION
OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
EXHIBIT 5.1 TO FORM S-3:
OPINION OF COUNSEL TO SPECTRASCIENCE, INC
STEPHEN P. KREGSTEIN, ESQ.
ATTORNEY AT LAW
4999 Pearl East Circle, Suite 300
Boulder, Colorado 80301
Tel: 303/449-9445
February 15, 1996
SpectraScience, Inc
5909 Baker Road
Minnetonka, MN 55345
Gentlemen:
I have acted as your counsel in connection with the proposed shares of
your common stock, par value $.25 per share, by the selling shareholders named
in the Registration Statement on Form S-3 (the "Registration Statement") filed
on or about the date hereof with the Securities and Exchange Commission under
the Securities Act of 1933, as amended.
In connection therewith, I have examined and relied upon corporate
records and other documents, instruments and certificates and have made such
other investigation as I deem appropriate as basis for the opinion set forth
below.
Based upon the foregoing, I am of the opinion that the shares of common
stock to be sold by the selling shareholders, when sold in connection with the
propsed offering, will be legally issued, fully paid and nonassessable.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to me under the caption "Legal
Matters: in the Prospectus forming a part thereof.
Very truly yours,
/s/ Stephen P. Kregstein
EXHIBIT 23.2 TO FORM S-3
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of SpectraScience, Inc.
and to the incorporation by reference therein of our report dated January 19,
1996, with respect to the financial statements of SpectraScience, Inc. included
in its Annual Report (Form 10-KSB) for the year ended December 31, 1995, filed
with the Securities and Exchange Commission.
Ernst & Young LLP
Minneapolis, Minnesota
February 22, 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
EXHIBIT 99 TO FORM S-3
SPECTRASCIENCE, INC.
LIST OF INVESTORS IN BRIDGE LOANS, PREFERRED STOCK AND WARRANTS
TOTAL COMMON STOCK, PREFERRED STOCK AND WARRANTS
OUTSTANDING AS OF FEBRUARY 14, 1996: 5,197,554
PRIVATE PLACEMENT --- SERIES "A" PREFERRED STOCK
CLOSED ON JUNE 29, 1995
- -----------------------------------------------------------------------------------------------------------------------
NO. OF NO. OF NO. OF TOTAL
PREFERRED WARRANTS BRIDGE PREFERRED
SHARES LOAN SHARES AND
WARRANTS WARRANTS
NAME, ADDRESS AND SSN/EIN OF INVESTOR %
- -----------------------------------------------------------------------------------------------------------------------
INVESTORS IN PREFERRED A
FROM BRIDGE LOAN
CONVERSION:
============================================
PA062995-001 PYRAMID PARTNERS, L.P. 75,000 25,000 75,000 175,000 3.4%
730 EAST LAKE STREET
WAYZATA, MN 55391
EIN: 41-1735365
PA062995-002 DANIEL & PATRICE PERKINS 8,333 2,778 8,333 19,444 0.4%
55 LANDMARK DRIVE
LONG LAKE, MN 55356
SSN: ###-##-#### (DANIEL)
SSN: ###-##-#### (PATRICE)
PA062995-003 RICHARD W. PERKINS TRUST 16,667 5,556 16,667 38,890 0.7%
730 EAST LAKE STREET
WAYZATA, MN 55391
SSN: ###-##-####
PA062995-004 JOHN F. ROONEY 8,333 2,778 8,333 19,444 0.4%
1654 MARTHALER LANE
ST. PAUL, MN 55118
SSN: ###-##-####
PA062995-005 EDWARD E. STRICKLAND 8,333 2,778 8,333 19,444 0.4%
C/O PERKINS CAPITAL MANAGEMENT, INC.
730 EAST LAKE STREET
WAYZATA, MN 55391
SSN: ###-##-####
PA062995-006 INDUSTRICORP & CO., INC. FBO TC CARPENTERS 33,333 11,111 33,333 77,777 1.5%
312 CENTRAL AVENUE - ATTN: TRUST DEPT
MINNEAPOLIS, MN 55414
EIN: 31-1250885
PA062995-007 DR. WILLIAM & MARLA KENNEDY* 8,333 2,778 8,333 19,444 0.4%
2259 SUMMIT AVENUE
ST. PAUL, MN 55105
SSN: ###-##-#### (MARLA)
SSN: ###-##-#### (WILLIAM)
PA062995-008 PYRAMID PARTNERS 8,333 2,778 8,333 19,444 0.4%
730 EAST LAKE STREET
WAYZATA, MN 55391
EIN: 41-1735365
PA062995-009 JAMES & ELEANOR LYONS* 8,333 2,778 8,333 19,444 0.4%
C/O PERKINS CAPITAL MANAGEMENT, INC.
730 EAST LAKE STREET
WAYZATA, MN 55391
SSN: ###-##-####
--------------------------------------------------------
SUBTOTAL - BRIDGE LOAN CONVERSION 174,998 58,335 174,998 408,331
--------------------------------------------------------
--------------------------------------------
ADDITIONAL INVESTORS IN PREFERRED A:
--------------------------------------------
PA062995-010 CHRISTOPHER LENZO 20,000 6,667 26,667 0.5%
2306 BROADWAY
SAN FRANCISCO, CA 94115
SSN: ###-##-####
PA062995-011 WOOTERS TRUST 100,000 33,333 133,333 2.6%
ROBERT L. WOOTERS
37 CREEKSIDE DRIVE
LONG LAKE, MN 55356
EIN: 41-6220899
PA062995-012 MATTHEW FRANK 13,333 4,444 17,777 0.3%
2995 WOODSIDE ROAD, SUITE 400
WOODSIDE, CA 94062
SSN: ###-##-####
PA062995-013 ROBERT WOOTERS IRA 100,000 33,333 133,333 2.6%
37 CREEKSIDE DRIVE
LONG LAKE, MN 55356
SSN: ###-##-####
PA062995-014 BILL CORNELIUSON* 66,667 22,222 88,889 1.7%
C/O B.C. HOLDINGS, INC.
777 EAST WISCONSIN AVE
SUITE 3020
MILWAUKEE, WI 53202
SSN: ###-##-####
PA062995-015 DIK WESSELS 100,000 33,333 133,333 2.6%
JACOB REVIUSSTRAAT 77
7461 ZM RIJSSEN THE NETHERLANDS
SSN: 0110-18 070
PA062995-016 PERKINS OPPORTUNITY FUND 100,000 33,333 133,333 2.6%
THE PROVIDENT BANK (CUSTODIAN)
THE PROVIDENT BANK - MUTUAL FUNDS
ONE EAST FOURTH STREET
CINCINNATI, OH 45202
EIN: 13-3682185
--------------------------------------------------------
SUBTOTAL ADDITIONAL INVESTORS 500,000 166,665 0 666,665
--------------------------------------------------------
TOTAL INVESTORS PREFERRED "A" 674,998 225,000 174,998 1,074,996
========================================================
Selling Agent for Preferred A:
R.J. STEICHEN & COMPANY --
MIDWEST PLAZA, SUITE 1100
801 NICOLLET MALL
MINNEAPOLIS, MN 55402-2543
ASSIGNED TO:
THOMAS LANKTON 10,000
JOHN FELTL 5,000
RICHARD HEISE 5,000
--------------------------------------------------------
SUBTOTAL 20,000
--------------------------------------------------------
THOMAS LANKTON 3,333 13,333 0.3%
JOHN FELTL 1,667 6,667 0.1%
RICHARD HEISE 1,667 6,667 0.1%
--------------------------------------------------------
SUBTOTAL 6,667 26,667
--------------------------------------------------------
TOTAL R.J. STEICHEN & CO. WARRANTS 26,667
--------------------------------------------------------
TOTAL PRIVATE PLACEMENT "A" 674,998 251,667 174,998 1,101,663
INCLUDING WARRANTS ISSUED IN CONJUNCTION
WITH BRIDGE LOANS
========================================================
PRIVATE PLACEMENT --- SERIES B CONVERTIBLE
CLOSED ON DECEMBER 28, 1995
- -----------------------------------------------------------------------------------------------------------------------
NO. OF NO. OF NO. OF TOTAL
PREFERRED WARRANTS BRIDGE PREFERRED
SHARES LOAN SHARES AND
WARRANTS WARRANTS
NAME, ADDRESS AND SSN/EIN OF INVESTOR %
- -----------------------------------------------------------------------------------------------------------------------
PB122895-001 Maurice R. Tayler IRA 5,000 1,667 6,667 0.1%
First Trust NA TTEE
550 E. Longlake Road
Wayzata, MN 55391
ss ####-##-####
PB122895-002 Luther O. Forde 10,000 3,333 13,333 0.3%
55 Vagabond Lane
Plymouth, MN 55446
ss ####-##-####
PB122895-003 Steven J. Olson 5,000 1,667 6,667 0.1%
2517 Wilshire Court
St. Paul, MN 55120
ss ####-##-####
PB122895-004 C. Ray McCulloch & 5,000 1,667 6,667 0.1%
Betty L. McCulloch Jt/Ten
2800 Linden Drive
New Brighton, MN 55112
ss ####-##-####
PB122895-005 Richard S. Rog 5,000 1,667 6,667 0.1%
2977 13th Terrace NW
New Brighton, MN 55112
ss ####-##-####
PB122895-006 Michael R. Marston 5,000 1,667 6,667 0.1%
7570 99th Street North
White Bear Lake, MN 55110
ss ####-##-####
PB122895-007 Wallace S. Wells 5,000 1,667 6,667 0.1%
2544 Upton Avenue Soutn
Minneapolis, MN 55405
ss ####-##-####
PB122895-008 H. James Roitenberg 15,000 5,000 20,000 0.4%
5444 Pompano Drive
Minnetonka, MN 55343
ss ####-##-####
PB122895-009 John G. Ordway III 5,000 1,667 6,667 0.1%
73 Tamarack Street
Mahtomedi, MN 55115
ss ####-##-####
PB122895-010 Christopher C. Moritz 5,000 1,667 6,667 0.1%
51 Westgate
Laguna Niguel, CA 92677
ss ####-##-####
PB122895-011 Penn Dental Center 10,000 3,333 13,333 0.3%
by Gary J. Wendlandt, Pres.
3553 Penn Avenue South
Minneapolis, MN 55412
EIN #41-1607865
PB122895-012 Eugene College 10,000 3,333 13,333 0.3%
12805 Hamilton Street
Omaha, NE 68154
ss ####-##-####
PB122895-013 Thomas L. Dvorak & 5,000 1,667 6,667 0.1%
Debra D. Dvorak Jt/Ten
7660 64th Street North
Pine Springs, MN 55115
ss ####-##-####
PB122895-014 Larry Serbin IRA 5,000 1,667 6,667 0.1%
First Trust NA TTEE
644 Indian Mound East
Wayzata, MN 55391
ss ####-##-####
PB122895-015 James T. Petersen IRA 5,000 1,667 6,667 0.1%
First Trust NA TTEE
P. O. Box 248
Emily, MN 56447
ss ####-##-####
PB122895-016 Michael R. Dahl 5,000 1,667 6,667 0.1%
1019 Interlachen Pkwy.
Woodbury, MN 55125
ss ####-##-####
PB122895-017 Robert A. Johnson 10,000 3,333 13,333 0.3%
6509 Ridgeview Circle
Minneapolis, MN 55409
ss ####-##-####
PB122895-018 Herbert J. Bernick 5,000 1,667 6,667 0.1%
1685 University Avenue
St. Paul, MN 55104
ss ####-##-####
PB122895-019 Thomas R. McGuire & 5,000 1,667 6,667 0.1%
Susan M. McGuire Jt/Ten
2815 West 45th Street
Minneapolis, MN 55410
ss ####-##-####
PB122895-020 E. Scott Thatcher 5,000 1,667 6,667 0.1%
4611 Meadow Road
Edina, MN 55424
ss ####-##-####
PB122895-021 Mark D. Margolis 5,000 1,667 6,667 0.1%
11133 Mill Run
Minnetonka, MN 55305
ss ####-##-####
PB122895-022 William P. Treacy 10,000 3,333 13,333 0.3%
1120 St. Dennis Court
St. Paul, MN 55116
ss ####-##-####
PB122895-023 Thomas A. Volpe & 10,000 3,333 13,333 0.3%
Linda C. Volpe Jt/Ten
2800 North Hamline Ave. #212
Roseville, MN 55113
ss ####-##-####
PB122895-024 George B. Bonniwell 5,000 1,667 6,667 0.1%
18107 Woolman drive
Minnetonka, MN 55345
ss ####-##-####
PB122895-025 Sheldon Chester 5,000 1,667 6,667 0.1%
3908 Sunset Blvd.
Minneapolis, MN 55416
ss ####-##-####
PB122895-026 Danny Gominsky 10,000 3,333 13,333 0.3%
1131 Black Oak Drive
New Brighton, MN 55112
ss ####-##-####
PB122895-027 Kimberly K. Washburn 5,000 1,667 6,667 0.1%
5 Alcalde Road
Santa Fe, NM 87505
ss ####-##-####
PB122895-028 Duane Family Trust 5,000 1,667 6,667 0.1%
u/a dtd 8/31/90, Charles F. & Diane M.
Duane TTEES
1707 Rodeo Raod
Arcadia, CA 91006
ss ####-##-####
PB122895-029 Erika Arneson & 2,500 833 3,333 0.1%
Jon Arneson
20400 Hackamure Road
Corcoran, MN 55340
ss ####-##-####
PB122895-030 Richard C. Lundell Sep-Ira, 3,333 13,333 0.3%
10,000
First Trust N.A. TTEE
7341 Dogwood Road
Excelsior, MN 55331
ss ####-##-####
PB122895-031 Roitenberg Investments, Inc. 15,000 5,000 20,000 0.4%
5500 Wayzata Blvd. Suite 1065
Minneapolis, MN 55416
EIN #41-1475371
PB122895-032 Kevin McHale 5,000 1,667 6,667 0.1%
20 Blue Jay Lane
North Oaks, MN 55127
ss ####-##-####
PB122895-033 St. Paul Surgeons Ltd. 5,000 1,667 6,667 0.1%
Profit Sharing Plan & Trust, dtd 1/12/77
FBO Phil C. Roy, Jr.
310 North Smith, Suite 330
St. Paul, MN 55102
ss ####-##-####
PB122895-034 Kenneth K. Cheng 30,000 10,000 40,000 0.8%
2 Windy Point
Rock Island, IL 6l201
ss ####-##-####
PB122895-035 Clint Hill Partners 5,000 1,667 6,667 0.1%
c/o Bruce Christianson
6161 Wooddale Avenue South
Minneapolis, MN 55424
EIN #41-1759627
PB122895-036 Gust R. Sarrack & 10,000 3,333 13,333 0.3%
Barbara E. Sarrack
2311 Case Street
St. Paul, MN 55119
ss ####-##-####
PB122895-037 William F. Hoefer & 5,000 1,667 6,667 0.1%
Julia A. Hoefer, jt/ten
2325 Aquila Avenue North
Golden Valley, MN 55427
ss ####-##-####
PB122895-038 Neal T. Jansen 10,000 3,333 13,333 0.3%
6216 St. Alban's Circle
Edina, MN 55439
ss ####-##-####
PB122895-039 Werner W. Amerongen Rev. Trust dtd 6/9/95 1,667 6,667 0.1%
5,000
Werner W. Amerongen TTEE
1421 Roselawn North
St. Paul, MN 55113
EIN #41-1759627
PB122895-040 Metropolitan Endodontics Pension,* 2,500 833 3,333 0.1%
Eric Grutzner TTEE
1055 60th Street
Sunfish Lake, MN 55075
EIN #41-1702831
PB122895-041 Metropolitan Endodontics* 2,500 833 3,333 0.1%
Profit Sharing Plan, Eric Grutzner TTEE
1055 60th Street
Sunfish Lake, MN 55075
EIN #41-1702831
PB122895-042 Stephen J. Esser & 5,000 1,667 6,667 0.1%
Clara Linda Esser Jt/Ten
201 Glenwood Drive North
Baxter, MN 56425
ss ####-##-####
PB122895-043 Doyle D. Gustafson & 50,000 16,667 66,667 1.3%
Dorothy L. Gustafson, Ten in Common
8049 Manderson
Omaha, NE 68134
ss ####-##-####
PB122895-044 Lowell R. Singerman 2,500 833 3,333 0.1%
7825 Washington Avenue South
Suite 120
Minneapolis, MN 55439
ss ####-##-####
PB122895-045 Stephen E. Benedict 2,500 833 3,333 0.1%
7825 Washington Avenue South Suite 120
Minneapolis, MN 55439
SS ####-##-####
PB122895-046 Rollin C. Vickers 10,000 3,333 13,333 0.3%
205 11th Street
Williston, ND 58801
ss ####-##-####
PB122895-047 Richard L. Danielsen 5,000 1,667 6,667 0.1%
2414 Cypress Drive
Woodbury, MN 55125
ss ####-##-####
PB122895-048 Richard Lynch & 5,000 1,667 6,667 0.1%
Marlys Lynch, Jt/Ten
11340 57th Avenue North
Plymouth, MN 55442
ss ####-##-####
PB122895-049 Ellsworth L. Peterson Rev Trust 10,000 3,333 13,333 0.3%
Dtd 9/24/79 Ellsworth L. Peterson TTEE
55 Utopia Circle
Sturgeon Bay, WI 54235
EIN #39-6331390
PB122895-050 Harold Saunders 5,000 1,667 6,667 0.1%
1085 Bald Eagle Drive
Marco Island, FL 33937
ss ####-##-####
PB122895-051 John T. Telford 5,000 1,667 6,667 0.1%
369 6th Avenue North
Tierra Verde, FL 33715
ss ####-##-####
PB122895-052 Steven Hamm 5,000 1,667 6,667 0.1%
6147 Artic Way
Eidna, MN 55436
ss ####-##-####
PB122895-053 Lawrence Schrader 5,000 1,667 6,667 0.1%
2 4th Street
Easton, MN 56025
ss ####-##-####
PB122895-054 Jeffrey D. Rahm 2,500 833 3,333 0.1%
16810 45th Avenue North
Plymouth, MN 55447
ss ####-##-####
PB122895-055 Everett Jensen Rev Trust, 5,000 1,667 6,667 0.1%
dtd 3/7/95 Everett Jensen TTEE
P. O. Box 119
Clarks Grove, MN 56016
ss ####-##-####
PB122895-056 Charles W. Schramm 10,000 3,333 13,333 0.3%
2998 Yellowood Court
Bremen, IN 46506
ss ####-##-####
PB122895-057 Elaine Millard 10,000 3,333 13,333 0.3%
5030 West Stanton Road
Stanton, MI 48888
ss ####-##-####
PB122895-058 Edward Adamek, Jr. & Eleanore Adamek 5,000 1,667 6,667 0.1%
Trust u/a dtd 2/14/94 Edward & Eleanore
Adamek TTEEs
7013 24th Street North
Oakdale, MN 55128
ss ####-##-####
PB122895-059 William Flies 10,000 3,333 13,333 0.3%
14726 Oak Run Lane
Burnsville, MN 55306
ss ####-##-####
PB122895-060 Mark D. Johnson 5,000 1,667 6,667 0.1%
86 East Pleasant Lake Road
North Oaks, MN 55127
ss ####-##-####
PB122895-061 William D. Corneliuson* 60,000 20,000 80,000 1.5%
777 East Wisconsin Avenue Suite 3020
Milwaukee, WI 53202
ss ####-##-####
PB122895-062 Isadore J. Goldstein Rev. 5,000 1,667 6,667 0.1%
Living Trust dtd 3/14/90 Isadore J.
Goldstein TTEE
25839 Southwood
Southfield, MI 48075
ss ####-##-####
PB122895-063 Kenneth G. Benson 5,000 1,667 6,667 0.1%
c/o Benson-Orth Assoc, Inc.
14001 Ridgedale Drive Suite 320
Minnetonka, MN 55305
ss ####-##-####
PB122895-064 Earl L. Ferris 5,000 1,667 6,667 0.1%
900 7th Avenue NW
Independence, IA 50644
ss ####-##-####
PB122895-065 Timothy M. Gray 5,000 1,667 6,667 0.1%
700 International Centre
900 Second Avenue
Minneapolis, MN 55402
ss ####-##-####
PB122895-066 James Ryan 5,000 1,667 6,667 0.1%
700 International Centre
900 Second Avenue
Minneapolis, MN 55402
ss ####-##-####
PB122895-067 Thomas B. Wartman 5,000 1,667 6,667 0.1%
28120 Boulder Bridge Drive
Shorewood, MN 55331
ss ####-##-####
PB122895-068 Bruce Christensen 2,500 833 3,333 0.1%
6161 Wooddale Avenue South, Suite 200
Eidna, MN 55424
ss ####-##-####
PB122895-069 Dan Dryer 2,500 833 3,333 0.1%
Lease Finance Group
566 Prairie Center Drive
Eden Prairie, MN 55344
ss ####-##-####
PB122895-070 Ronald A. Erickson and 10,000 3,333 13,333 0.3%
Kristine S. Erickson, Jt/Ten
5123 Lake Ridge Road
Edina, MN 55436
ss ####-##-####
PB122895-071 Donovan A. Erickson Trust 5,000 1,667 6,667 0.1%
dtd 1/3/67 Ronald A. Erickson TTEE
4567 West 80th Street
Bloomington, MN 55437
EIN #41-6115510
PB122895-072 Jeff Dobbs 20,000 6,667 26,667 0.5%
2765 Capriole Drive
Medina, MN 55340
ss ####-##-####
PB122895-073 Patrick Ryan 5,000 1,667 6,667 0.1%
15170 Boulder Point Road
Eden Prairie, MN 55347
ss ####-##-####
PB122895-074 Larry Arnold 10,000 3,333 13,333 0.3%
1545 Hunter Drive
Wayzata, MN 55391
ss ####-##-####
PB122895-075 W. Harold Davis & 10,000 3,333 13,333 0.3%
Joyce Lee Davis, Jt/Ten
Tyrjingham Hal
2155 South 950 East
Zion, IN 46077
ss ####-##-####
PB122895-076 VBS General Partnership 20,000 6,667 26,667 0.5%
1019 Chevy Chase Drive
Beverly Hills, CA 90210
EIN #95-4297203
PB122895-077 Judy Peterson 5,000 1,667 6,667 0.1%
851 Goodrich Street
St. Paul, MN 55105
ss ####-##-####
PB122895-078 Steve Romanek 10,000 3,333 13,333 0.3%
3571 Hwy 33 North
Cloquet, MN 55720
ss ####-##-####
PB122895-079 Gerald R. Nelson Keogh,* 5,000 1,667 6,667 0.1%
First Trust NA TTEE
19395 Waterford Place
Shorewood, MN 55331
ss ####-##-####
PB122895-080 Gerald R. Nelson* 5,000 1,667 6,667 0.1%
19395 Waterford Place
Shorewood, MN 55331
ss ####-##-####
PB122895-081 James N. Owens Rev. Trust, 20,000 6,667 26,667 0.5%
James N. Owens TTEE, dtd 9/10/70
PO Box 2387
LaMirage #435
Port Aransas, TX 78373-2387
ss ####-##-####
PB122895-082 Robert Terhaar and 5,000 1,667 6,667 0.1%
Harriet Terhaar, Jt/Ten
3635 Goodwood Drive SE
Grand Rapids, MI 49546
ss ####-##-####
PB122895-083 James F. Lyons* 2,000 667 2,667 0.1%
730 E. Lake Street
Wayzata, MN 55391
ss ####-##-####
PB122895-084 Quest Venture Partners 15,000 5,000 20,000 0.4%
730 E. Lake Street
Wayzata, MN 55391
EIN #41-1354697
PB122895-085 Strickland Family Ltd 5,000 1,667 6,667 0.1%
Partnership ua dtd 12/18/92
730 E. Lake Street
Wayzata, MN 55391
EIN #41-1737036
PB122895-086 Kenneth B. Heithoff 5,000 1,667 6,667 0.1%
730 E. Lake Street
Wayzata, MN 55391
ss ####-##-####
PB122895-087 S.L. Wallack & S. Kaplan TTEE, 4,000 1,333 5,333 0.1%
dtd 2/23/89 FBO S. L. Wallack Rev. Trust
Perkins Capital Mgt. Inc.
730 E. Lake Street
Wayzata, MN 55391
EIN #41-6312283
PB122895-088 Sandra J. Hale 4,000 1,333 5,333 0.1%
730 E. Lake Street
Wayzata, MN 55391
ss ####-##-####
PB122895-089 Piper Jaffray As Cust. 10,000 3,333 13,333 0.3%
FBO Harold Roitenberg IRA
730 E. Lake Street
Wayzata, MN 55391
EIN #41-1422918
PB122895-090 Anita H. Kunin 5,000 1,667 6,667 0.1%
Perkins Capital Mgt. Inc.
730 E. Lake Street
Wayzata, MN 55391
ss ####-##-####
PB122895-091 William R. Kennedy* 5,000 1,667 6,667 0.1%
730 E. Lake Street
Wayzata, MN 55391
ss ####-##-####
PB122895-092 Ellis Limited Partnership 10,000 3,333 13,333 0.3%
730 E. Lake Street
Wayzata, MN 55391
EIN #41-1699025
PB122895-093 Gary S. Holmes 5,000 1,667 6,667 0.1%
730 E. Lake Street
Wayzata, MN 55391
ss ####-##-####
PB122895-094 David E. Riviere 2,500 833 3,333 0.1%
11510 52nd Avenue North
Plymouth, MN 55422
ss ####-##-####
PB122895-095 John R. Albers 5,000 1,667 6,667 0.1%
3825 Gillon Avenue
Dalls, TX 75205
ss ####-##-####
PB122895-096 Lee Wesley 10,000 3,333 13,333 0.3%
3621 North Magnolia
Chicago, IL 60613
ss ####-##-####
PB122895-097 Kenneth R. Parker* 5,000 1,667 6,667 0.1%
1250 11th Street SW
Willmar, MN 56201
ss ####-##-####
PB122895-098 Kenneth R. Parker IRA,* 15,000 5,000 20,000 0.4%
First Trust, N.A. TTEE
1250 11th Street SW
Willmar, MN 56201
ss ####-##-####
PB122895-099 Earl B. Olson 10,000 3,333 13,333 0.3%
1516 Hansen Drive SW
Willmar, MN 56201-2885
ss ####-##-####
--------------------------------------------------------
TOTAL INVESTORS PREFERRED "B" 792,500 264,175 1,056,675
--------------------------------------------------------
Warrant issued to Selling Agent of
Preferred B
============================================
MILLER JOHNSON & KUEHN WARRANT ($5.00)
1660 South Highway 100
Suite 228
Minneapolis, MN 55416
ASSIGNED TO:
David B Johnson 29,719 29,719 0.6%
Paul R. Kuehn 29,719 29,719 0.6%
Eldon C. Miller 9,906 9,906 0.2%
Stanley D. Rahm 9,906 9,906 0.2%
--------------------------------------------------------
Total MJK Warrant 79,250 79,250
--------------------------------------------------------
CONDITIONAL WARRANT ($9.50):
Miller, Johnson & Kuehn 26,418 26,418 0.5%
1660 South Highway 100
Suite 228
Minneapolis, MN 55416
--------------------------------------------------------
TOTAL PRIVATE PLACEMENT "B" 792,500 369,843 1,162,343
========================================================
GRAND TOTAL PREFERRED 1,467,498 796,508 2,264,006
SHARES & WARRANTS:
========================================================
*TOTAL BENEFICIAL OWNERSHIP:
William D. Corneliuson 168,889 3.2%
Dr. William Kennedy 26,111 0.5%
James F. Lyons 22,111 0.4%
Kenneth R. Parker 26,667 0.5%
Metropolitan Endodontics, Eric Grutzner 6,666 0.1%
Gerald R. Nelson 13,334 0.3%
</TABLE>
