<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 23, 1998
REGISTRATION NO. 333-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
CHEMTRAK INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
<TABLE>
<S> <C>
DELAWARE 77-0295388
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
929 E. ARQUES AVENUE
SUNNYVALE, CALIFORNIA 94086
(408) 773-8156
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------
EDWARD F. COVELL
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CHEMTRAK INCORPORATED
929 E. ARQUES AVENUE
SUNNYVALE, CA 94086
(408) 773-8156
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------
COPIES TO:
THOMAS C. KLEIN, ESQ.
BERNARD J. CASSIDY, ESQ.
CHRISTOPHER M. KOA, ESQ.
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304
(650) 493-9300
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: FROM TIME
TO TIME 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, please check the
following box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===============================================================================================
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE FEE(2)
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<S> <C> <C> <C> <C>
Common Stock, $0.001 par value-
(1)............................ 4,266,600 shares $0.86 $3,669,276.00 $1,082.50
===============================================================================================
</TABLE>
(1) Includes up to 4,266,600 shares of Common Stock to be issued upon
conversion of the Company's Series A 6% Cumulative Convertible Preferred
Stock (the "Series A Preferred Stock") and (ii) an indeterminate number of
additional shares of Common Stock as may from time to time become issuable
upon conversion of the Series A Preferred Stock or payment of dividends on
the Series A Preferred Stock, which shares are registered hereunder
pursuant to Rule 416 under the Securities Act.
(2) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457 under the Securities Act.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS +
+OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED FEBRUARY 23, 1998
PROSPECTUS
4,266,600 SHARES
CHEMTRAK INCORPORATED
COMMON STOCK
This Prospectus relates to the offer and sale by the persons listed herein
under "Selling Stockholders" and "Plan of Distribution" (the "Selling
Stockholders") of a maximum of 4,266,600 shares (collectively, the "Shares") of
common stock, $0.001 par value ("Common Stock"), of ChemTrak Incorporated
("ChemTrak" or the "Company") to be issued from time to time to the Selling
Stockholders upon conversion of the Company's Series A 6% Cumulative
Convertible Preferred Stock (the "Series A Preferred Stock"). This Prospectus
covers the resale by the Selling Stockholders of up to 4,266,000 Shares, plus,
in accordance with Rule 416 under the Securities Act of 1933, as amended (the
"Securities Act"), such presently indeterminate number of additional Shares as
may be issuable upon conversion of the Series A Preferred Stock, based upon
fluctuations in the conversion price of the Series A Preferred Stock and upon
such additional shares of Series A Preferred Stock as the Company may pay as
dividends in lieu of cash. The Series A Preferred Stock and the shares of
Common Stock issuable upon conversion have been and will be issued in
transactions exempt from the registration requirements of the Securities Act.
See "Selling Stockholders" and "Plan of Distribution." The Company will not
receive any proceeds from the sale of the Shares covered by this Prospectus.
The Shares are being registered by the Company pursuant to the terms of
Subscription Agreements dated January 23, 1998, and January 26, 1998,
respectively, by and between the Company and the individual Selling
Stockholders (each a "Subscription Agreement"). See "Selling Stockholders" and
"Plan of Distribution."
The sale of the Shares may be effected by the Selling Stockholders from time
to time in transactions on the Nasdaq SmallCap Market, in privately negotiated
transactions or in 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 prices or at negotiated prices. The Selling
Stockholders 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 Stockholders and/or the
purchasers of the Shares for whom such broker-dealers may act as agents or to
whom they may sell as principals or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions). See "Selling
Stockholders" and "Plan of Distribution."
The Company has agreed, among other things, to bear certain expenses (other
than fees and expenses of counsel and underwriting discounts and commission and
brokerage commissions and fees) in connection with the registration and sale of
the Shares being offered by the Selling Stockholders. See "Selling
Stockholders."
The Common Stock is quoted on the Nasdaq SmallCap Market under the symbol
"CMTR." On February 18, 1998, the last reported sale price for the Common Stock
was $0.844 per share.
The Selling Stockholders and any agents, broker-dealers or underwriters that
participate in the distribution of the Shares may be deemed to be
"underwriters" within the meaning of the Securities Act, and any commission
received by them and any profit on the resale of the Common Stock purchased by
them may be deemed to be underwriting discounts or commissions under the Act.
The Company will not receive any proceeds from the sale of shares by the
Selling Stockholders. The Company has agreed to indemnify the Selling
Stockholders and certain other persons against certain liabilities, including
liabilities under the Act. See "Selling Stockholders" and "Plan of
Distribution."
-----------
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
COMMENCING ON PAGE 5 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
The date of this Prospectus is , 1998.
<PAGE>
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE BY THIS
PROSPECTUS TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, ANY SELLING STOCKHOLDER OR BY ANY OTHER PERSON. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITY OTHER THAN THE SHARES OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SHARES OFFERED HEREBY
TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE OF
OR OFFER TO SELL THE SHARES MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
2
<PAGE>
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"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities of the Commission located at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's regional offices at Seven World Trade Center, 13th Floor, New
York, New York 10048, and Northwest Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such materials also can be
obtained from the Public Reference Section of the Commission, at 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549 at prescribed rates. The
Commission also maintains a World Wide Web site that contains reports, proxy
and information statements and other information regarding registrants, such
as the Company, that file electronically with the Commission. The address of
the site is http://www.sec.gov. The Company's Common Stock is quoted on the
Nasdaq SmallCap Market. Reports, proxy statements and other information
concerning the Company can also be inspected at the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20002.
The Company has filed with the Commission a registration statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the Common Stock offered hereby. This Prospectus, which
constitutes a part of the Registration Statement, 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 with respect to the Company and the Common Stock
offered hereby, reference is made to the Registration Statement and to the
exhibits and schedules filed therewith. Statements contained in this
Prospectus as to the contents of any contract or other document are not
necessarily complete, and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. Copies of the Registration Statement, including all exhibits
thereto, may be obtained from the Commission's principal office in Washington,
D.C. upon payment of the fees prescribed by the Commission, or may be examined
without charge at the offices of the Commission described above.
INFORMATION INCORPORATED BY REFERENCE
The following documents previously filed by the Company with the Commission
(Commission File Number 0-19749) under the Exchange Act are incorporated
herein by reference in this Prospectus:
(i)Annual Report on Form 10-K for the year ended December 31, 1996;
(ii) Current Report on Form 8-K filed on June 16, 1997, October 1, 1997,
December 9, 1997, January 15, 1998 and February 9, 1998;
(iii) Quarterly Reports on Form 10-Q for the fiscal quarters ended March
31, 1997, June 30, 1997, and September 30, 1997; and
(iv) the description of the Company's Common Stock contained in its
Registration Statement on Form 8-A filed with the Commission on
December 20, 1991, including any amendment or report updating such
description.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of securities contemplated hereby shall be deemed
to be incorporated by reference in this Prospectus and to be a part hereof
from the date of filing of such documents.
3
<PAGE>
A copy of any or all of the documents incorporated or deemed to be
incorporated herein by reference (other than exhibits to such documents which
are not specifically incorporated by reference therein) will be provided
without charge to any person to whom a copy of this Prospectus is delivered,
upon written or oral request. Copies of this Prospectus, as amended or
supplemented from time to time, and any other documents (or parts of
documents) that constitute part of this Prospectus under Section 10(a) of the
Securities Act of 1933, as amended (the "Securities Act"), will also be
provided without charge to each such person, upon written or oral request.
Requests for such copies should be directed to: Chief Financial Officer,
ChemTrak Incorporated, 929 E. Arques Avenue, Sunnyvale, CA 94086, telephone
number (408) 773-8156.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
4
<PAGE>
THE COMPANY
The Company develops, manufactures, markets and sells personal medical
diagnostic systems for consumer over-the-counter markets, point-of-care
markets and physician's office laboratories worldwide.
Unlike tests performed in clinical laboratories, where results may not be
available for days, the Company's tests provide diagnoses and results within
minutes. The Company currently manufactures and distributes three products in
the United States: Parent's Alert(R) Home Drug Test Service, a counselor
supported home drug test service committed to helping parents prevent and
eliminate drug abuse by their children ("Parent's Alert Home Drug Test
Service"), The CholesTrak(R) Home Cholesterol Test ("CholesTrak Home
Cholesterol Test"); and ColoCARE(R), a Home Test to Detect the Early Warning
Signs of Colorectal Disease ("ColoCARE, a Home Test to Detect the Early
Warning Signs of Colorectal Disease"). The Company expects to begin marketing
and distribution of two additional products in 1998: the AccuMeter(R) H.
pylori Test ("AccuMeter H. pylori Test"), a physician's office test to
determine the presence of H. pylori, the bacterium associated with gastric and
peptic ulcers; and the AccuMeter(R) Theophylline Test ("AccuMeter Theophylline
Test"), a point-of-care assay for theophylline, a commonly prescribed
bronchodilator used by asthmatics. The CholesTrak, AccuMeter(R) H. pylori, and
AccuMeter(R) theophylline tests are based on the AccuMeter(R) ("AccuMeter")
cassette system, a patented, non-instrumented, hand-held diagnostic
technology. The AccuMeter cassette system is a technology applicable to a
broad range of general chemistry and immunoassay tests designed to screen and
diagnose health conditions with accuracy comparable to physician office and
laboratory instrument tests.
The Company's home test service permits consumers to take diagnostic tests
in the privacy of their homes, mail samples to a certified testing laboratory,
and receive confidential results and counseling from ChemTrak's credentialed
counselors. The Company is in the process of developing home test services for
a variety of health conditions including diabetes, osteoporosis, menopause and
prostate cancer. ChemTrak's products are available through most major drug
chain stores and mass merchandisers.
The Company's principal executive offices are located at 929 E. Arques
Avenue, Sunnyvale, CA 94086 and its telephone number is (408) 773-8156.
RISK FACTORS
This prospectus contains forward-looking statements that involve risks and
uncertainties. Actual results could differ materially from those discussed in
the forward-looking statements as a result of certain factors, including those
set forth below and elsewhere in this prospectus. In evaluating the company's
business, prospective investors should carefully consider the following
factors in addition to other information contained in or incorporated by
reference in this prospectus.
HISTORY OF LOSSES AND ACCUMULATED DEFICIT, FLUCTUATIONS IN OPERATING RESULTS
The Company has incurred operating losses due to the limited number of its
revenue-generating products and the high cost of developing and marketing
consumer medical devices. As of December 31, 1997, the Company had an
accumulated deficit of $41 million. There can be no assurance that the Company
will ever achieve profitability, or that profitability, if achieved, can be
sustained on an ongoing basis. In addition, the Company has historically
experienced significant fluctuations in its operating results on a quarterly
and annual basis and anticipates that these fluctuations may continue. See "--
Reliance on Small Product Line."
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING; GOING CONCERN
QUALIFICATION OF INDEPENDENT ACCOUNTANTS
The development and marketing of consumer medical devices is capital
intensive. The Company has funded its operations to date through public and
private equity and debt financing and product sales. The Company's
5
<PAGE>
available cash, cash equivalents, short-term investments and revenues from
existing collaborations, together with anticipated product revenues will not
be sufficient to meet its capital requirements through the second quarter of
1998. The Company's auditors have notified the Company of their intent to
issue a report that emphasizes substantial doubt about the Company's ability
to continue as a going concern. In order to continue operations, the Company
will need to seek additional debt or equity financing. There can be no
assurance that such financing will be obtained on satisfactory terms or at
all.
The Company has sought and intends to seek additional funding through
collaborative agreements with corporate partners, term loans secured by fixed
assets, and/or additional equity or debt financing. There can be no assurance
that the Company will be able to enter into such arrangements on acceptable
terms, or at all. If additional funds are raised by offering equity
securities, substantial dilution to stockholders will result. To obtain funds
through collaborative arrangements, the Company may be required to relinquish
certain right to its technologies or products. If adequate funds are not
available, the Company's operations will be adversely affected, and it may be
required to delay or eliminate one or more of its development programs. In
January 1997, the Company sold and issued shares of its Preferred Stock and
plans to sell and issue additional shares of its Preferred Stock. For a period
of 120 days following the issuance of the Preferred Stock, the Company may not
issue any equity, or convertible debt or other securities, or conduct any
public or private offering, without the consent of the holders of the
Preferred Stock, which consent may not unreasonably be withheld. The Preferred
Stock will be convertible into shares of Common Stock pursuant to a conversion
formula that is substantially dilutive to current shareholders. The conversion
of the Preferred Stock will result in substantial dilution to stockholders.
The Company is seeking stockholder approval at its Annual Meeting of
Stockholders for the sale of Preferred Stock whose conversion into shares of
Common Stock may be equal to or greater than 20% of the Common Stock or voting
power of the Company.
In addition, the report of the Company's independent auditors for the year
ended December 31, 1997, when issued, will contain a qualification as to the
Company's ability to continue as a going concern. The Company's ability to
continue as a going concern is dependent in large part upon the successful
completion of proposed financing transactions.
PERSONNEL CHANGES; DEPENDENCE ON KEY PERSONNEL
The Company is highly dependent upon a small group of management,
manufacturing, marketing and scientific executives, the loss of whose services
could have a material adverse effect on the Company's business, financial
condition and results of operations. Recruiting and retaining qualified
manufacturing, marketing and sales personnel and scientists to perform
research and development work in the future will also be critical to the
Company's ongoing operations. The Company faces competition for qualified
individuals from numerous pharmaceutical, biotechnology, and medical device
companies. There can be no assurance that the Company will be able to attract
and retain such individuals.
From time to time the Company has experienced difficulty in locating and
retaining candidates with appropriate qualifications. Subba Rao Gunupudi,
Ph.D., currently a consultant to the Company, resigned as Vice President,
Research and Development, in January 1997. Thomas M. Waugh, Vice President,
Operations, resigned effective February 20, 1998. The Company also believes
stock options are a critical component for motivating and retaining its key
employees. The decline in the price of the Company's Common Stock has made
stock options previously granted with higher exercise prices less valuable to
the Company's current employees and may make it more difficult for the Company
to retain its key employees. The failure of the Company to attract and retain
key personnel could have an adverse effect on the Company's business, results
of operations, financial position and cash flows.
GOVERNMENT REGULATION
The Company's ongoing product development activities, and the production and
marketing of products, are subject to extensive regulation by government
authorities in the United States and other countries. The regulatory
6
<PAGE>
process can be lengthy and requires the expenditure of substantial resources.
There can be no assurances that any product developed by the Company will meet
all of the applicable regulatory requirements necessary to receive marketing
approval. Regulation by government authorities is a significant factor
affecting the timing of the commercialization of the Company's products. The
timing of regulatory approvals is not entirely within the Company's control.
Failure to obtain, or delays in obtaining, requisite government approvals
could delay or preclude the Company or its licensees from marketing the
Company's products, could limit the commercial use of the products and could
also allow competitors time to introduce competing products ahead of product
introduction by the Company or its licensees and thereby have a material
adverse effect on the Company's business, results of operations and financial
condition. Moreover, Food and Drug Administration ("FDA") policy may change
and additional government regulations may be established that could prevent or
delay regulatory approval of the Company's potential products. In addition, a
marketed product and its manufacturer are subject to continual regulation and
review, and noncompliance with regulations or the later discovery of
previously unknown problems with a product or manufacturer may result in
sanctions or restrictions on such product or manufacturer, including fines,
operating restrictions, withdrawal of the product from the market, or criminal
prosecution.
In February 1995, the Company acquired Coonon Clinical Laboratories, a
company engaged in research and development of a home HIV test service. The
Company believed that the acquisition of Coonon Clinical Laboratories would
accelerate the time to market for a home HIV test service product. The Company
filed a Pre-Market Approval ("PMA") application for the AWARE Home HIV Test
Service with the FDA in 1995 and amended it in 1996. In June 1997, the Company
received a letter from the FDA in which the FDA asked for a significant amount
of clarification and additional information for the PMA filing. Due to the
substantial expense and lengthy response process, coupled with the absence of
substantial growth in the market for home HIV testing products, the Company
decided to withdraw its PMA application. The Company's agreement with Selfcare
for the European distribution of the AWARE Home HIV Test Service was
terminated by Selfcare because FDA market clearance was not received by the
end of 1997.
In order to market its products abroad, the Company also must comply with
foreign regulators requirements, implemented by foreign health authorities,
governing marketing approval. The foreign regulatory approval process includes
all of the risks associated with FDA approval set forth above, and may involve
additional requirements or risks. There is no assurance that a foreign
regulatory body will accept the data developed by the Company for any of its
products, and approval by the FDA does not ensure approval in other countries.
The Parent's Alert Home Drug Test Service is currently operating under
interim FDA guidelines which permit the sale of the test without marketing
clearance from the FDA. Although the Company believes that the guidelines
represent a policy shift at the FDA to facilitate this type of home test,
there can be no assurance that the FDA will not alter its policy. Obtaining
market clearance from the FDA would entail substantial expense for the
Company. The Company's agreement with Parent's Alert, Inc. provides that it
may be terminated by ChemTrak in the event of an unfavorable change in FDA
requirements.
The Company is required to manufacture its products in compliance with the
FDA's current Quality System Regulations ("QSR"), which require the Company to
register its manufacturing facility and list its products. The Company has
registered its facility and listed its products with the FDA. The Company has
also registered its manufacturing facility with the Department of Health
Services of the State of California, as required, and federal and state
inspections have found the Company's facility to be in substantial compliance
with the QSR regulatory requirements for its products. However, there can be
no assurance that the Company's facility will continue to satisfy QSR
requirements. The QSR regulations also impose additional requirements, such as
reporting obligations and restrictions on promotional activities. In addition,
the manufacture, sale or use of the Company's products are also subject to
regulation by other federal entities, such as the Occupational Safety and
Health Administration and the Environmental Protection Agency, and by various
state agencies. Federal and state regulations regarding the manufacture, sale
or use of the Company's products we subject to future change, which could have
a material adverse effect on the Company's business, financial condition and
results of operation.
7
<PAGE>
RELIANCE ON SMALL PRODUCT LINE; UNCERTAINTY OF MARKET ACCEPTANCE
To date, the Company has generated revenue from sales of three of its
products, CholesTrak Home Cholesterol Test and ColoCARE, a Home Test to Detect
the Early Warning Signs of Colorectal Disease, beginning in the first quarter
of 1997, and the Parent's Alert Home Drug Test Service, during the third
quarter of 1997. The Company has generated no sales revenue from its AccuMeter
H. pylori Test or AccuMeter Theophylline Test, both approved by the FDA in
late 1997. The timing and extent of revenues generated by these and other new
products is highly uncertain and will depend in large part on market
acceptance of the Company's products. The Company's future success will depend
in part on its ability to obtain regulatory clearance for marketing its
products and its ability to develop, manufacture and market future products on
a timely basis. There can be no assurance that the Company's current product
development efforts will be successful, or that products can be manufactured
in commercial quantities at an acceptable cost or marketed successfully. In
addition, there can be no assurance that any of the Company's products will
gain significant market acceptance among physicians or the general public.
Because of the Company's small product line, any development, regulatory or
market failures for even a single product are likely to have a material
adverse effect on the Company's business, financial condition and results of
operations.
RAPID TECHNOLOGICAL CHANGE; TECHNICAL UNCERTAINTY; HIGHLY COMPETITIVE INDUSTRY
Rapid and substantial technological change are expected to continue in the
health care industry generally and the diagnostic device industry in
particular. There can be no assurance that the Company's products will not
become obsolete or noncompetitive or that the Company will be able to keep
pace with technological developments. The consumer retail and physician office
markets have attracted a large number of competitors, many of which have
substantially greater resources than ChemTrak. Numerous other companies are
developing alternative strategies for areas in which the Company is marketing
or intends to market products. These alternative strategies could compete with
the Company's products and services. The Company's ability to anticipate
changes in technology and industry standards and to develop and successfully
introduce new and improved products that can gain market acceptance on a
timely basis will be a critical factor in the Company's growth and
competitiveness. Should the Company be unable, for technological or other
reasons, to develop products that are technologically competitive, responsive
to the needs of potential customers and competitively priced, its business
will be materially adversely affected. The Company is in the early stage of
development for various proposed AccuMeter and home test services. There can
be no assurance that successful products can be developed in a timely fashion,
or at all. There can be no assurance that the Company's competitors will not
develop more effective or more affordable products or achieve earlier or more
efficient product commercialization than the Company.
RELIANCE ON CORPORATE PARTNERS FOR PRODUCT DISTRIBUTION
ChemTrak has a broker sales force and also relies on a number of
collaborative arrangements with corporate partners for the distribution of its
products. Many of these arrangements are terminable by corporate partners at
the discretion of those partners. Termination of one or more of these
arrangements could have a material adverse effect on the Company's business,
financial condition and results of operations. There can be no assurance that
the Company will be able to maintain these arrangements with its corporate
partners or, if such arrangements are terminated, that the Company would be
able to enter into arrangements with other corporate partners on satisfactory
terms, or at all. In addition, there can be no assurance that corporate
partners will market the Company's products effectively. In 1997, several of
the Company's corporate partners terminated contracts with the Company.
PATENTS AND PROPRIETARY TECHNOLOGY
The Company's ability to compete effectively is materially dependent on the
proprietary nature of its technology. The Company currently has 15 United
States patents, five patent applications pending and eight foreign patents.
The patent position of medical device manufacturers, including ChemTrak, is
uncertain and may involve complex legal and factual issues. Consequently, the
Company does not know whether any of its patent
8
<PAGE>
applications will result in the issuance of any further patents, or whether
issued patents will provide significant proprietary protection or will not be
challenged, circumvented or invalidated. Since patent applications in the
United States are maintained in secrecy until patents issue, and since
publications or discoveries in the scientific or patent literature tend to lag
behind actual discoveries by several months, ChemTrak cannot be certain that
it was the first creator of inventions covered by pending patent applications
or that it was the first to file patent applications for such inventions.
Moreover, the Company may have to participate in interference proceedings
declared by the United States Patent and Trademark Office to determine the
priority of inventions, which could result in substantial cost to the Company
as well as commitment of management resources. Third parties may be issued
patents covering, or may otherwise acquire rights to, technology necessary or
potentially useful to the Company. The commercial success of the Company is
dependent in part upon its not infringing patents of third parties. There can
be no assurance that licenses to such technology will be available on
acceptable terms or at all. Failure of the Company to obtain any necessary
licenses could delay or prevent the introduction of Company products. The
Company may be required to resort to litigation to protect its patents or,
other proprietary rights or may be the subject of litigation to protect its
patents or against claims of infringement. Such litigation could result in
costs and diversions of resources and could have a material adverse effect on
the Company's business, results of operations and financial condition. There
can be no assurance that the Company's patent applications will result in
further issued patents or that such patents will offer protection against
competitors with similar technology.
VOLATILITY OF STOCK PRICE
The securities markets have from time to time experienced significant price
and volume fluctuations that may be unrelated to the operating performance of
particular companies. In addition, the market prices of the common stock of
many publicly traded medical device companies, including the Company, have in
the past been, and can in the future be expected to be, especially volatile.
Announcements of technological innovations or new products by the Company or
its competitors, developments or disputes concerning patents or proprietary
rights, publicity regarding actual or potential medical results relating to
products under development by the Company or its competitors, regulatory
developments in both the United States and foreign countries and economic and
other external factors, as well as period-to-period fluctuations in the
Company's financial results, may have a significant impact on the market price
of the Company's Common Stock.
Substantially all of the outstanding Common Stock of the Company is
available for sale in the public marketplace. The Company has stock options
outstanding to purchase an aggregate of 1,306,117 shares at exercise prices
ranging from $0.75 to $9.75 per share. In addition, the Company has issued
warrants as part of an equity financing agreement to purchase 130,000 shares
of Common Stock at an exercise price of $0.75 per share, which are exercisable
at any time until May 1998. The Company has also sold and issued shares of
Preferred Stock pursuant to an equity financing agreement and plans to issue
and sell additional shares of Preferred Stock in subsequent financings. The
Preferred Stock will be convertible into shares of Common Stock pursuant to a
conversion formula which is substantially dilutive to current shareholders. No
prediction can be made as to the effect, if any, that exercises or conversions
of these options, warrants or Preferred Stock will have on the market prices
prevailing from time to time. The possibility that substantial amounts of
options, warrants or Preferred Stock can be exercised or converted may
adversely affect prevailing market prices for the Common Stock, and could
impair the Company's ability to raise capital through the sale of its equity
securities.
RISK OF PRODUCT LIABILITY; UNCERTAINTY OF AVAILABILITY OF INSURANCE
The Company's business exposes it to potential product liability risks that
are inherent in the testing, manufacturing and marketing of medical devices.
The Company maintains product liability insurance for products approved for
marketing and intends to seek additional insurance as new products are
approved. However, no assurance can be given that the Company will be able to
acquire or maintain insurance or that insurance can be acquired or maintained
at a reasonable cost or in sufficient amounts to protect the Company. There
can be no assurance that insurance coverage and the resources of the Company
would be sufficient to satisfy any liability resulting from product liability
claims. A successful product liability claim or series of claims brought
against the Company could have a material adverse effect on its business,
financial condition and results of operations.
9
<PAGE>
ENVIRONMENTAL REGULATION
Due to the nature of its current and proposed manufacturing processes, the
Company is subject to stringent federal, state and local laws, rules,
regulations and policies governing the use, generation, manufacture, storage,
air emission, effluent discharge, handling and disposal of certain materials
and wastes. Although the Company believes that it has complied with these laws
and regulations in all material respects and has not been required to take any
action to correct any noncompliance, there can be no assurance that the
Company will not be required to incur significant costs to comply with
environmental and health and safety regulations as it continues to increase
production to commercial levels. In addition, the landlord of the Company's
facility in Sunnyvale, California has advised the Company that the groundwater
may be affected by contaminants migrating from an off-site source. Although
the Company has been indemnified by its landlord as to claims brought by third
parties with respect to this contamination and no claims have been asserted,
in the event remedial action is required, there can be no assurance that the
Company will not have to incur significant costs if the Company is required to
remedy the groundwater contamination even though the Company is not
responsible for the contamination or if the landlord does not fulfill its
obligations.
RISKS ASSOCIATED WITH HAZARDOUS MATERIALS
The Company's research and development involves the controlled use of
hazardous materials, chemicals and viruses. Although the Company believes that
its safety procedures for handling and disposing of such materials comply with
the standards prescribed by state and federal regulations, the risk of
accidental contamination or injury from these materials cannot be completely
eliminated. In the event of such an accident, the Company could be held liable
for any damages that result and any such liability could exceed the resources
of the Company. In addition, the Company may incur substantial costs to comply
with environmental regulations for its manufacturing operations. See "--
Environmental Regulation."
ANTI-TAKEOVER EFFECTS OF DELAWARE LAW AND CERTAIN CHARTER PROVISIONS
The Company's Board of Directors has the authority to issue up to 5,000,000
shares of Preferred Stock and to determine the price, rights, preferences and
privileges of those shares without any further vote or action by the Company's
stockholders. The rights of the holders of Common Stock will be subject to,
and may be adversely affected by, the rights of the holders of any Preferred
Stock that has been issued or may be issued in the future. The Company
recently sold and issued shares of Preferred Stock pursuant to an equity
financing in which it sold 1,300 shares of Preferred Stock. It plans to sell
and issue additional shares of Preferred Stock in subsequent equity
financings. The Preferred Stock will be convertible into shares of Common
Stock pursuant to a conversion formula that is substantially dilutive to
current shareholders. The ability of the Board of Directors to authorize
further issuances, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire a majority of the
outstanding voting stock of the Company. In addition, the Company is subject
to the anti-takeover provisions of Section 203 of the Delaware General
Corporation Law, which prohibits the Company from engaging in a "business
combination" with an "interested stockholder" for a period of three years
after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed
manner. The application of Section 203 could have the effect of delaying or
preventing a change of control of the Company. The Company's Certificate of
Incorporation provides for staggered terms for the members of the Board of
Directors. The staggered Board of Directors and certain other provisions of
the Company's Certificate of Incorporation and Bylaws may have the effect of
delaying or preventing changes in control or management of the Company, which
could adversely affect the market price of the Company's Common Stock.
PENNY STOCK REGULATIONS
The Common Stock is traded on the Nasdaq SmallCap Market. In order to
maintain its listing on the Nasdaq SmallCap Market, the Company must maintain
net tangible assets, capital and public float at specified levels, and must
maintain a minimum bid price of $1.00 per share. The Company's net tangible
assets were
10
<PAGE>
approximately $2.2 million at December 31, 1997, compared to the current
listing standard of $2 million. If the Company fails to maintain the specified
standards necessary to be quoted on the Nasdaq SmallCap Market, the Company's
securities could become subject to delisting. If the securities are delisted,
trading in the securities could be conducted on the OTC Bulletin Board or in
the over-the-counter market in what is commonly referred to as the "pink
sheets." If this occurs a stockholder will find it more difficult to dispose
of the securities or to obtain accurate quotations as to the price of the
Securities. In addition, the Common Stock could become subject to the "penny
stock" regulations promulgated under the Exchange Act, which impose additional
restrictions on broker-dealers who trade in such stock and could severely
limit the liquidity of the Company's securities.
SHARES ELIGIBLE FOR FUTURE SALE; DILUTION
Substantially all of the Company's shares are eligible for sale in the
public market. The issuance of the Company's Common Stock upon conversion of
the Series A Preferred Stock, as well as future sales of such Common Stock or
of shares of Common Stock by existing stockholders, or the perception that
such sales could occur, could adversely affect the market price of the Common
Stock. The Common Stock issuable upon conversion of the Series A Preferred
Stock are being registered hereunder. Conversion of the Series A Preferred
Stock for shares of Common Stock could adversely affect the market price of
the Common Stock. In addition, investors could experience substantial dilution
upon conversion of the Series A Preferred Stock into Common Stock as a result
of either (i) a decline in the market price of the Company's Common Stock
immediately prior to conversion or (ii) an event triggering the antidilution
rights of any outstanding shares of Series A Preferred Stock. See "Dilution"
and "Description of Capital Stock."
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Shares. All proceeds from the sale of the Shares will be for the account of
the Selling Stockholders, as described below. See "Selling Stockholders" and
"Plan of Distribution."
FORWARD-LOOKING STATEMENTS
This Prospectus, including the information incorporated by reference herein,
contains forward-looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act. Actual results could
differ materially from those projected in the forward-looking statements as a
result of the risk factors set forth above. Reference is made in particular to
the discussion set forth under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the Annual Report on Form
10-K for the fiscal year ended December 31, 1996, and the Quarterly Report on
10-Q for the period ended September 30, 1997, incorporated herein by
reference. In connection with forward-looking statements which appear or are
incorporated by reference herein, prospective purchasers of the Common Stock
offered hereby should carefully consider the factors set forth in this
Prospectus under "Risk Factors."
11
<PAGE>
DILUTION
The pro forma net tangible book value of the Company as of December 31, 1997
was $3.5 million or $0.26 per share of Common Stock. Pro forma net tangible
book value represents the Company's total tangible assets less total
liabilities (including proceeds of $1.3 million received from the issuance of
Series A Preferred Stock in January 1998). Pro forma net tangible book value
per share after conversion is calculated by dividing the pro forma net
tangible book value by the pro forma number of outstanding shares of Common
Stock after giving effect to the conversion of the Series A Preferred Stock
into Common Stock(1). Dilution per share represents the difference between the
pro forma net tangible book value per share before giving effect to the
conversion and the pro forma net tangible book value per share after giving
effect to the conversion. This represents an immediate dilution in pro forma
net tangible book value of $0.04 per share as illustrated in the following
table:
<TABLE>
<S> <C>
Pro forma net tangible book value per share before conversion...... $0.26
Pro forma net tangible book value per share after conversion....... $0.22
Dilution in pro forma net tangible book value per share assuming
conversion........................................................ $0.04
=====
</TABLE>
SELLING STOCKHOLDERS
The Shares being offered hereby by the Selling Stockholders may be acquired
from time to time, upon the conversion of the Series A Preferred Stock, which
were acquired from the Company in a private placement transaction exempt from
the registration requirements of the Securities Act by Regulation D and
Regulation S thereof, each pursuant to the terms of Subscription Agreements,
dated as of January 23, 1998, and January 26, 1998, respectively (each a
"Subscription Agreement"). This Prospectus covers the resale by the Selling
Stockholders of up to 4,266,000 Shares, plus, in accordance with Rule 416
under the Securities Act, such presently indeterminate number of additional
Shares as may be issuable upon conversion of the Series A Preferred Stock,
based upon fluctuations in the conversion price of the Series A Preferred
Stock or upon payment of dividends on the Series A Preferred Stock.
Pursuant to the Subscription Agreement, each of the Selling Stockholders has
represented that it acquired the Series A Preferred Stock for investment and
with no present intention of distributing the Series A Preferred Stock. The
Company agreed, in such Subscription Agreement, to prepare and file a
registration statement and to bear all expenses for such preparation and
filing other than fees and expenses of counsel for the Selling Stockholders
and underwriting discounts and commissions and brokerage commissions and fees.
In addition, and in recognition of the fact that each of the Selling
Stockholders, even though purchasing the Series A Preferred Stock without a
view to distribution, may wish to be legally permitted to sell the Shares
received upon conversion of such Series A Preferred Stock when it deems
appropriate, the Company filed with the Commission a Registration Statement on
Form S-3, of which this Prospectus forms a part, with respect to, among other
things, the resale of the Shares from time to time at prevailing prices in the
over-the-counter market or in privately-negotiated transactions, and the
Company further has agreed to prepare and file such amendments and supplements
to the Registration Statement as may be necessary to keep the Registration
Statement effective until all Shares offered hereby have been sold pursuant
thereto.
The Selling Stockholders have had no material relationship with the Company
within the past three years.
The following table sets forth the names of the Selling Stockholders, the
number of shares of Common Stock owned beneficially by the Selling
Stockholders as of February 18, 1998, the number of shares being offered
pursuant to this Prospectus and the number of shares owned after the Offering.
The numbers of Shares shown in the table as being offered by the Selling
Stockholders do not include such presently indeterminate
- --------
(1) For purposes of the calculation, the Conversion Price has been assumed to
be 75% of the average of the Closing Bid Price of the Common Stock for the
five trading days immediately preceding the date of issuance of the Series
A Preferred Stock. See "Selling Stockholders."
12
<PAGE>
number of shares of Common Stock as may be issuable upon conversion of the
Preferred Shares pursuant to the provisions thereof regarding determination of
the applicable conversion price or payment of dividends on the Series A
Preferred Stock but which shares are, in accordance with Rule 416 under the
Securities Act, included in the Registration Statement of which this
Prospectus forms a part. This information is based upon information provided
by the Selling Stockholders. There are currently no agreements, arrangements
or understandings with respect to the sale of any of the Shares. The Shares
are being registered to permit public secondary trading of the Shares, and the
Selling Stockholders may offer the Shares for resale from time to time.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
SHARES OWNED NUMBER OF SHARES OWNED
PRIOR TO SHARES BEING AFTER THE
NAME OFFERING(1) OFFERED OFFERING
---- ------------ ------------ ------------
<S> <C> <C> <C>
Austost Anstalt Schaan............. 0 820,500 0
Balmore Funds S.A. ................ 0 820,500 0
Arcadia Mutual Funds, Inc. ........ 0 492,300 0
Asia Equities...................... 0 328,200 0
Dora Fried......................... 0 820,500 0
Guilherme Duque.................... 0 492,300 0
Paril Holding...................... 0 492,300 0
</TABLE>
--------
(1) As of the date of this Prospectus, no Selling Stockholder holds
any shares of Common Stock; rather, each holds shares of Series A
Preferred Stock convertible into shares of Common Stock pursuant
to the formula set forth above.
The Preferred Stock quarterly accrues dividends in the amount of 6% per
annum. The Series A Preferred Stock is convertible into Common Stock as
follows: Each share of the Preferred Stock has a purchase price of $1,000 and
a stated value of $1,000 (the "Stated Value"). After 60 days from the date on
which a share of Preferred Stock was issued, each holder of shares of
Preferred Stock has the right at any time, and from time to time, to convert
some or all such shares into fully paid and nonassessable shares of Common
Stock. Any such conversion shall occur according to the following formula: the
number of shares of Common Stock issuable upon conversion of each share of
Preferred Stock will equal (i) the sum of (A) the Stated Value per share and
(B) accrued and unpaid dividends on such share, divided by (ii) the Conversion
Price. The Conversion Price shall be equal to the lesser of: (i) 75% of the
average of the Closing Bid Price (as defined below) of the Common Stock for
the five trading days immediately preceding the date of issuance of the
Preferred Stock; or (ii) 75% of the average of the Closing Bid Price for the
five trading days immediately preceding conversion of the Preferred Stock. The
Closing Bid Price shall mean the closing bid price of the Common Stock as
reported from the Nasdaq SmallCap Market (or if not reported by Nasdaq as
reported by such other exchange or market where traded). The minimum aggregate
Stated Value able to be converted will be at least $25,000 (unless if at the
time of such conversion the aggregate Stated Value of all shares of Preferred
Stock registered to the Holder is less than $25,000, then the whole amount may
be converted).
On the date two years after the issuance of the Preferred Stock (the
"Mandatory Conversion Date"), any shares of Preferred Stock not previously
converted into shares of Common Stock shall automatically be converted into
shares of Common Stock at the Conversion Price. On and after the Mandatory
Conversion Date, all dividends on the Preferred Stock shall cease to accrue
and the shares represented thereby shall no longer be deemed outstanding and
all rights of the holders thereof as stockholders of the Company shall cease
and terminate, except the right to receive the shares of Common Stock upon
conversion.
13
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 40,000,000 shares of
Common Stock, $0.001 par value, and 5,000,000 shares of Preferred Stock,
$0.001 par value. As of February 18, 1998, there were approximately 13,643,145
shares of Common Stock outstanding held of record by approximately 614 holders
and 1,300 shares of Series A Preferred Stock outstanding held of record by
approximately 7 holders.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Subject to
preferences that may be applicable to any then outstanding Preferred Stock,
holders of Common Stock are entitled to receive ratably such dividends as may
be declared by the Board of Directors out of funds legally available therefor.
In the event of a liquidation, dissolution or winding up of the Company,
holders of the Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities and the liquidation preference of any
then outstanding Preferred Stock. Holders of Common Stock have no preemptive
rights and no right to convert their Common Stock into any other securities.
There are no redemption or sinking fund provisions applicable to the Common
Stock. All outstanding shares of Common Stock are, and all shares of Common
Stock to be outstanding upon completion of this offering will be, fully paid
and nonassessable.
PREFERRED STOCK
The Board of Directors has the authority to issue the undesignated Preferred
Stock in one or more series, without stockholder approval, with voting and
conversion rights which could adversely affect the voting power of the holders
of the Common Stock and have the effect of delaying, deferring or preventing a
change in the control of the Company.
The holders of outstanding shares of Series A Preferred Stock are entitled
to receive preferential dividends in cash out of any funds of the Company
legally available at the time for declaration of dividends before any dividend
or other distribution will be paid or declared and set apart for payment on
any shares of any Common Stock or other class of stock junior to the Series A
Preferred Stock (the Common Stock and such junior stock being hereinafter
collectively the "Junior Stock") at the rate of 6% simple interest per annum
on the Stated Value per share payable quarterly when and as declared;
provided, however, that these preferential cumulative dividends, if not paid,
will accumulate as a liability of the Company. In addition, fully paid and
non-assessable shares of Series A Preferred Stock at a rate of one share of
Series A Preferred Stock for each $1,000 of such dividend not paid in cash,
and the issuance of such additional shares, will constitute full payment of
such dividend.
The dividends on the Series A Preferred Stock will be cumulative whether or
not earned so that if, at any time, full cumulative dividends at the rate
aforesaid on all shares of the Series A Preferred Stock then outstanding from
the date from and after which dividends thereon are cumulative to the end of
the quarterly dividend period next preceding such time shall not have been
paid or declared and set apart for payment, or if the full dividend on all
such outstanding Series A Preferred Stock for the then current dividend period
shall not have been paid or declared and set apart for payment, the amount of
the deficiency shall be paid or declared and set apart for payment (but
without interest thereon) before any sum shall be set apart for or applied by
the Company or a subsidiary of the Company to the purchase redemption or other
acquisition of the Series A Preferred Stock and before any dividend or other
distribution shall be paid or declared and set apart for payment on any Junior
Stock and before any sum shall be set aside for or applied to the purchase,
redemption or other acquisition of Junior Stock.
Dividends on all shares of the Series A Preferred Stock begin to accrue and
be cumulative from and after the date of issuance thereof. A dividend period
is deemed to commence on the day following a quarterly dividend payment date
herein specified and to end of the next succeeding quarterly dividend payment
date herein specified.
In the event of the dissolution, liquidation or winding-up of the Company,
whether voluntary or involuntary, the holders of the Series A Preferred Stock
will be entitled to receive before any payment or distribution will be made on
the Junior Stock, out of the assets of the Company available for distribution
to stockholders, the Stated
14
<PAGE>
Value per share of Series A Preferred Stock and all accrued and unpaid
dividends to and including the date of payment thereof. Upon the payment in
full of all amounts due to holders of the Series A Preferred Stock, then the
holders of the Junior Stock of the Company will receive, ratably, all
remaining assets of the Company legally available for distribution. If the
assets of the Company available for distribution to the holders of the Series
A Preferred Stock are insufficient to permit payment in full of the amounts
payable as aforesaid to the holders of Series A Preferred Stock upon such
liquidation, dissolution or winding-up, whether voluntary or involuntary, then
all such assets of the Company will be distributed to the exclusion of the
holders of shares of Junior Stock ratably among the holders of Series A
Preferred Stock.
Neither purchase nor the redemption by the Company of shares of any class of
stock nor the merger nor consolidation of the Company with or into any other
corporation or corporations nor the sale or transfer by the Company of all or
any part of its assets will be deemed to be a liquidation, dissolution or
winding-up of the Company for the purposes of the liquidation rights that
would be available under the Financing. The Investors will enjoy a right of
participation in any proposed public offering of Common Stock and a right of
first refusal in the event of any future equity financing.
The Company may elect to redeem all or part of the Stated Value of the
Series A Preferred Stock upon payment of an amount of dollars equal to the
number of shares of Common Stock that could be obtained by converting into the
Company's Common Stock that amount of Stated Value plus accrued but unpaid
dividends and any other sums payable in respect of that Stated Value at the
conversion price in effect on the date notice of redemption is given to the
Holder (the "Redemption Date") multiplied by the average of the Closing Bid
Price of the Common Stock for the five trading days immediately preceding such
date. The Company may not redeem any amount which the Holder has elected to
convert, including a notice of conversion given after the Redemption Date but
prior to receipt by the Holder of the payment under the redemption provisions.
The shares of Series A Preferred Stock have no voting rights. The shares of
Common Stock into which the Series A Preferred Stock is converted will have
full voting rights upon such conversion.
PLAN OF DISTRIBUTION
The Shares offered hereunder may be offered and sold from time to time by
the Selling Stockholders, or by pledgees, donees, transferees or other
successors in interest. Such sales may be made on the Nasdaq SmallCap Market
or in the over-the-counter market or otherwise, at prices and on terms then
prevailing or related to the then-current market price, or in negotiated
transactions. The Shares may be sold to or through one or more of the
following methods, including, without limitation, broker-dealers, acting as
agent or principal, in underwritten offerings, block trades, agency
placements, exchange distributions, brokerage transactions or otherwise, or in
any combination of transactions.
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 Company's Common Stock for a
period of two business days prior to the commencement of such distribution. In
addition and without limiting the foregoing, the Selling Stockholders will be
subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including, without limitation, Regulation M, which
provisions may limit the timing of purchases and sales of shares of Common
Stock by the Selling Stockholders.
At the time a particular offer of Shares is made, to the extent required, a
supplemental prospectus will be distributed which will set forth the number of
shares being offered and the terms of the offering including the name or names
of any underwriters, dealers or agents, the purchase price paid by an
underwriter for the Shares purchased from the Selling Stockholders and any
discounts, concessions or commissions allowed or reallowed or paid to dealers.
15
<PAGE>
In connection with any transaction involving the Shares, broker-dealers or
others may receive from the Selling Stockholders, and/or the purchasers of the
Shares for whom such broker-dealers act as agents or to whom they may sell as
principals or both, compensation in the form of discounts, concessions or
commissions in amounts to be negotiated at the time (which compensation as to
a particular broker-dealer might be in excess of customary commissions).
Broker-dealers and any other persons participating in a distribution of the
Shares may be deemed to be "underwriters" within the meaning of the Act in
connection with such distribution, and any such discounts, concessions or
commissions may be deemed to be underwriting discounts or commissions under
the Act. From time to time, the Selling Stockholders may pledge, hypothecate
or grant a security interest in some or all of the Shares owned by them, and
the pledgees, secured parties or persons to whom such securities have been
hypothecated shall, upon foreclosure in the event of default, be deemed to be
Selling Stockholders hereunder. In addition, the Selling Stockholders may,
from time to time, sell short the Common Stock of the Company, and in such
instances, this Prospectus may be delivered in connection with such short
sales and the Shares offered hereby may be used to cover such short sales.
Any or all of the sales or other transactions involving the Shares described
above, whether effected by the Selling Stockholders, any broker-dealer or
others, may be made pursuant to this Prospectus. In addition, any Shares that
qualify for sale pursuant to Rule 144 under the Act may be sold under Rule 144
rather than pursuant to this Prospectus. The Selling Stockholders' Shares may
also be offered in one or more underwritten offerings, on a firm commitment or
best efforts basis. The Company will receive no proceeds from the sale of the
Selling Stockholders' Shares by the Selling Stockholders. The Shares may be
sold from time to time in one or more transactions at a fixed offering price,
which may be changed, or at varying prices determined at the time of sale or
at negotiated prices. Such prices will be determined by the Selling
Stockholders or by agreement between the Selling Stockholders and its
underwriters, dealers, brokers or agents.
To the extent required under the Securities Act, the aggregate amount of
Selling Stockholders' Shares being offered and the terms of the offering, the
names of any such agents, brokers, dealers or underwriters and any applicable
commission with respect to a particular offer will be set forth in an
accompanying Prospectus supplement. Any underwriters, dealers, brokers or
agents participating in the distribution of the Shares may receive
compensation in the form of underwriting discounts, concessions, commissions
or fees from a Selling Stockholders and/or purchasers of Selling Stockholders'
Shares, for whom they may act. In addition, sellers of Selling Stockholders'
Shares may be deemed to be underwriters under the Securities Act and any
profits on the sale of Selling Stockholders' Shares by them may be deemed to
be discount commissions under the Securities Act. The Selling Stockholders may
have other business relationships with the Company and its subsidiaries or
affiliates in the ordinary course of business.
From time to time the Selling Stockholders may transfer, pledge, donate or
assign Selling Stockholders' Shares to lenders, family members and others and
each of such persons will be deemed to be a "Selling Stockholders" for
purposes of this Prospectus. The number of Selling Stockholders' Shares
beneficially owned by the Selling Stockholders who so transfer, pledge, donate
or assign Selling Stockholders' Shares will decrease as and when they take
such actions. The plan of distribution for Selling Stockholders' Shares sold
hereunder will otherwise remain unchanged, except that the transferees,
pledgees, donees or other successors will be Selling Stockholders hereunder.
Including and without limiting the foregoing, in connection with
distributions of the Common Stock, the Selling Stockholders may enter into
hedging transactions with broker-dealers and the broker-dealers may engage in
short sales of the Common Stock in the course of hedging the positions they
assume with the Selling Stockholders. The Selling Stockholders may also enter
into option or other transactions with broker-dealers that involve the
delivery of the Common Stock to the broker-dealers, who may then resell or
otherwise transfer such Common Stock. The Selling Stockholders may also loan
or pledge the Common Stock to a broker-dealer and the broker-dealer may sell
the Common Stock so loaned or upon a default may sell or otherwise transfer
the pledged Common Stock.
16
<PAGE>
In order to comply with the securities laws of certain states, if
applicable, the Stocks may 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 the Shares have been registered or qualified for
sale or an exemption from registration or qualification requirements is
available and is complied with.
All cost associated with this offering, other than fees and expense of
counsel for the Selling Stockholders and underwriting discounts and
commissions and brokerage commissions and fees, will be paid by the Company.
The Company has agreed to indemnify the Selling Stockholders against certain
liabilities in connection with any offering of the Shares pursuant to this
Prospectus, including liabilities arising under the Securities Act.
LEGAL MATTERS
The validity of the issuance of the Common Stock offered hereby will be
passed upon for the Company by Wilson Sonsini Goodrich & Rosati, Professional
Corporation, Palo Alto, California.
EXPERTS
The financial statements of ChemTrak Incorporated appearing or incorporated
by reference in this Prospectus and Registration Statement have been audited
by Ernst & Young LLP, independent auditors, to the extent indicated in their
reports thereon also appearing elsewhere herein and in the Registration
Statement or incorporated by reference. Such financial statements have been
included herein or incorporated herein by reference in reliance upon such
reports given upon the authority of such firm as experts in accounting and
auditing.
17
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY SELLING
STOCKHOLDER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... 3
Information Incorporated by Reference...................................... 3
The Company................................................................ 5
Risk Factors............................................................... 5
Use of Proceeds............................................................ 11
Forward-Looking Statements................................................. 11
Dilution................................................................... 12
Selling Stockholders....................................................... 12
Description of Capital Stock............................................... 14
Plan of Distribution....................................................... 15
Legal Matters.............................................................. 17
Experts.................................................................... 17
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
4,266,600 SHARES
CHEMTRAK INCORPORATED
COMMON STOCK
(PAR VALUE $0.001 PER SHARE)
----------------
PROSPECTUS
----------------
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all costs and expenses payable by the Company
in connection with the sale of Common Stock being registered hereunder. All of
the amounts are estimates except the SEC registration fee and the NASD filing
fee.
<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
-----------
<S> <C>
SEC Registration Fee........................................ $ 1,082.50
Nasdaq Listing Fee Printing Expenses........................ $ 7,500.00
Printing Expenses........................................... $ 50,000.00
Accounting Fees and Expenses................................ $ 10,000.00
Legal Fees and Expenses..................................... $ 40,000.00
Miscellaneous Expenses...................................... $ 3,000.00
-----------
Total..................................................... $111,582.50
===========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the Delaware General Corporation Law the Company has
broad powers to indemnify its directors and officers against liabilities they
may incur in such capacities, including liabilities under the Securities Act.
The Company's Bylaws provide that the Company will indemnify its directors and
executive officers and may indemnify other officers to the full extend
permitted by law. The Company believes that indemnification under its Bylaws
covers at least negligence and gross negligence by directors and officers, and
requires the Company to advance litigation expenses in the case of stockholder
derivative actions or other actions, against an undertaking by the officer or
director to repay such advances if it is ultimately determined that the
director or officer is not entitled to indemnification. The Bylaws further
provide that rights conferred under such Bylaws shall not be deemed to be
exclusive of any other right such persons may have or acquire under any
statute, provision of any Restated Certificate of Incorporation, Bylaw,
agreement, vote of stockholders, disinterested directors or otherwise.
In addition, the Company's Restated Certificate of Incorporation provides
that, pursuant to Delaware law, its directors shall not be liable for monetary
damages for breach of the directors' fiduciary duty of care to the Company and
its stockholders. This provision in the Restated Certificate of Incorporation
does not eliminate the duty of care, and in appropriate circumstances
equitable remedies such as injunctive or other forms of non-monetary relief
will remain available under Delaware law. In addition, each director will
continue to be subject to liability for breach of the director's duty of
loyalty to the Company, for acts or omissions not in good faith or involving
intentional misconduct, for knowing violations of law, for actions leading to
improper personal benefit to the director, and for payment of dividends or
approval of stock repurchases or redemptions that are unlawful under Delaware
law. The provision also does not affect a director's responsibilities under
any other law, such as the federal securities laws or state or federal
environmental laws.
The Company has entered into indemnification contracts with certain of its
directors and executive officers. The Company currently has a liability
insurance policy which insures directors and officers of the Company in
certain circumstances. The policy also insures the Company against losses as
to which its directors and officers are entitled to indemnification.
II-1
<PAGE>
ITEM 16.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3.1 Certificate of Incorporation of the Company (incorporated by reference
from the Exhibits to the Company's Registration Statement on Form S-1
Registration No. 33-44673 which became effective February 19, 1992).
3.2 Certificate of Amendment of Certificate of Incorporation (incorporated
by reference from the Exhibits to the Company's Registration
Statement on Form S-1 Registration No. 33-44673 which became
effective February 19, 1992).
3.3 Amended and Restated Certificate of Incorporation (incorporated by
reference from the Exhibits to the Company's Registration Statement
on Form S-1 Registration No. 33-44673 which became effective February
19, 1992).
3.4 Certificate to Set Forth Designations, Voting Powers, Preferences,
Limitations, Restrictions, and Relative Rights of Series A 6%
Cumulative Convertible Series A Preferred Stock, $0.001 Par Value Per
Share.
3.5 Certificate of Correction Filed to Correct a Certain Error in the
Certificate to Set Forth Designations, Voting Powers, Preferences,
Limitations, Restrictions, and Relative Rights of Series A 6%
Cumulative Convertible Series A Preferred Stock, $0.001 Par Value Per
Share of ChemTrak Incorporated Filed in the Office of the Secretary
of State of Delaware on January 16, 1998.
3.6 Revised Certificate of Correction Filed in the Office of the Secretary
of State of Delaware on February 19, 1998 to Correct a Certain Error
in the Certificate to Set Forth Designations, Voting Powers,
Preferences, Limitations, Restrictions, and Relative Rights of Series
A 6% Cumulative Convertible Preferred Stock, $0.001 Par Value Per
Share of ChemTrak Incorporated Filed in the Office of the Secretary
of State of Delaware on January 16, 1998.
3.7 Bylaws of the Company (incorporated by reference from the Exhibits to
the Company's Registration Statement on Form S-1 Registration No. 33-
44673 which became effective February 19, 1992).
4.1 Form of Common Stock Certificate.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
23.1 Consent of Ernst & Young LLP (to be filed by amendment).
23.2 Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation
(included as part of
Exhibit 5.1).
27.1 Financial Data Schedule (incorporated by reference from the Exhibits
to the Form 10-K filed on April 1, 1997, as amended on April 30,
1997, and as amended on August 15, 1997).
</TABLE>
ITEM 17. UNDERTAKINGS
The Company hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i)To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii)To 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) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
II-2
<PAGE>
(2) That, for the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act,
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question 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.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
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 Sunnyvale, California, on February 23, 1998.
CHEMTRAK INCORPORATED
/s/ Edward F. Covell
By: _________________________________
Edward F. Covell
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned officers and directors of ChemTrak Incorporated, a
Delaware corporation, do hereby constitute and appoint jointly and severally,
Edward F. Covell and Prithipal Singh, Ph.D., and each of them, the lawful
attorneys and agents, with power and authority to do any and all acts and
things and to execute any and all instruments which said attorneys and agents
determine may be necessary or advisable or required to enable said corporation
to comply with the Securities Act, and any rules or regulations or
requirements of the Securities and Exchange Commission in connection with this
Registration Statement. Without limiting the generality of the foregoing power
and authority, the powers granted include the power and authority to sign the
names of the undersigned officers and directors in the capacities indicated
below to this Registration Statement, to any and all amendments, both pre-
effective and post-effective, and supplements to this Registration Statement,
and to any and all instruments or documents filed as part of or in conjunction
with this Registration Statement or amendments or supplements thereof, and
each of the undersigned hereby ratifies and confirms all that said attorneys
and agents or any of them shall do or cause to be done by virtue hereof. This
Power of Attorney may be signed in any number of counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by or on behalf of the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Prithipal Singh, Ph.D. Chairman of the Board February 23, 1998
____________________________________
Prithipal Singh, Ph.D.
/s/ Edward F. Covell President and Chief February 23, 1998
____________________________________ Executive Officer
Edward F. Covell (Principal Executive
Officer)
/s/ Donald V. Fluken Chief Financial Officer February 23, 1998
____________________________________ (Principal Financial and
Donald V. Fluken Accounting Officer)
</TABLE>
II-4
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Malcolm Jozoff Director February 23, 1998
____________________________________
Malcolm Jozoff
/s/ Robert P. Kiley Director February 23, 1998
____________________________________
Robert P. Kiley
/s/ David Rubinfien Director February 23, 1998
____________________________________
David Rubinfien
/s/ Gordon Russell Director February 23, 1998
____________________________________
Gordon Russell
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3.1 Certificate of Incorporation of the Company (incorporated by reference
from the Exhibits to the Company's Registration Statement on Form S-1
Registration No. 33-44673 which became effective February 19, 1992).
3.2 Certificate of Amendment of Certificate of Incorporation (incorporated
by reference from the Exhibits to the Company's Registration
Statement on Form S-1 Registration No. 33-44673 which became
effective February 19, 1992).
3.3 Amended and Restated Certificate of Incorporation (incorporated by
reference from the Exhibits to the Company's Registration Statement
on Form S-1 Registration No. 33-44673 which became effective February
19, 1992).
3.4 Certificate to Set Forth Designations, Voting Powers, Preferences,
Limitations, Restrictions, and Relative Rights of Series A 6%
Cumulative Convertible Series A Preferred Stock, $0.001 Par Value Per
Share.
3.5 Certificate of Correction Filed to Correct a Certain Error in the
Certificate to Set Forth Designations, Voting Powers, Preferences,
Limitations, Restrictions, and Relative Rights of Series A 6%
Cumulative Convertible Series A Preferred Stock, $0.001 Par Value Per
Share of ChemTrak Incorporated Filed in the Office of the Secretary
of State of Delaware on January 16, 1998.
3.6 Revised Certificate of Correction Filed in the Office of the Secretary
of State of Delaware on February 19, 1998 to Correct a Certain Error
in the Certificate to Set Forth Designations, Voting Powers,
Preferences, Limitations, Restrictions, and Relative Rights of Series
A 6% Cumulative Convertible Preferred Stock, $0.001 Par Value Per
Share of ChemTrak Incorporated Filed in the Office of the Secretary
of State of Delaware on January 16, 1998.
3.7 Bylaws of the Company (incorporated by reference from the Exhibits to
the Company's Registration Statement on Form S-1 Registration No. 33-
44673 which became effective February 19, 1992).
4.1 Form of Common Stock Certificate.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
23.1 Consent of Ernst & Young LLP (to be filed by amendment).
23.2 Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation
(included as part of
Exhibit 5.1).
27.1 Financial Data Schedule (incorporated by reference from the Exhibits
to the Form 10-K filed on April 1, 1997, as amended on April 30,
1997, and as amended on August 15, 1997).
</TABLE>
<PAGE>
Exhibit 3.4
CERTIFICATE TO SET FORTH DESIGNATIONS, VOTING POWERS,
PREFERENCES, LIMITATIONS, RESTRICTIONS, AND RELATIVE
RIGHTS OF SERIES A 6% CUMULATIVE CONVERTIBLE
PREFERRED STOCK, $0.001 PAR VALUE PER SHARE
It is hereby certified that:
I. The name of the corporation is ChemTrak Incorporated (the
"Corporation"), a Delaware corporation.
II. Set forth hereinafter is a statement of the voting powers,
preferences, limitations, restrictions, and relative rights of shares of Series
A 6% Cumulative Convertible Preferred Stock hereinafter designated as contained
in a resolution of the Board of Directors of the Corporation pursuant to a
provision of the Certificate of Incorporation of the Corporation permitting the
issuance of said Series A 6% Cumulative Convertible Preferred Stock by
resolution of the Board of Directors:
Series A 6% Cumulative Convertible Preferred Stock, $0.001 par value.
1. Designation: Number of Shares. The Corporation shall have 2,000
------------------------------
shares designated as Series A 6% Cumulative Convertible Preferred Stock, $0.001
par value, as part of the authorized class of preferred shares (the "Series A
Preferred Stock"). Each share of Series A Preferred Stock shall have a stated
value equal to $1,000 (as adjusted for any stock dividends combinations or
splits with respect to such shares) (the "Stated Value").
2. Dividends.
----------
(a) The holders of outstanding shares of Series A Preferred Stock
shall be entitled to receive preferential dividends in cash out of any funds of
the Corporation legally available at the time for declaration of dividends
before any dividend or other distribution will be paid or declared and set apart
for payment on any shares of any Common Stock or other class of stock junior to
the Series A Preferred Stock (the Common Stock and such junior stock being
hereinafter collectively the "Junior Stock") at the rate of 6% simple interest
per annum on the Stated Value per share payable quarterly when as and if
declared; provided however that dividend payments may be made in the sole
discretion of the Board of Directors of the Corporation in additional fully paid
and non-assessable shares of Series A Preferred Stock at a rate of one share of
Series A Preferred Stock for each $1,000 of such dividend not paid in cash, and
the issuance of such additional shares shall constitute full payment of such
dividend.
<PAGE>
(b) The dividends on the Series A Preferred Stock at the rates
provided above shall be cumulative whether or not earned so that if at any time
full cumulative dividends at the rate aforesaid on all shares of the Series A
Preferred Stock then outstanding from the date from and after which dividends
thereon are cumulative to the end of the quarterly dividend period next
preceding such time shall not have been paid or declared and set apart for
payment, or if the full dividend on all such outstanding Series A Preferred
Stock for the then current dividend period shall not have been paid or declared
and set apartment for payment, the amount of the deficiency shall be paid or
declared and set apart for payment (but without interest thereon) before any sum
shall be set apart for or applied by the Corporation or a subsidiary of the
Corporation to the purchase redemption or other acquisition of the Stock and
before any dividend or other distribution shall be paid or declared and set
apart for payment on any Junior Stock and before any sum shall be set aside for
or applied to the purchase, redemption or other acquisition of Junior Stock.
(c) Dividends on all shares of the Series A Preferred Stock shall
begin to accrue and be cumulative from and after the date of issuance thereof.
A dividend period shall be deemed to commence on the day following a quarterly
dividend payment date herein specified and to end of the next succeeding
quarterly dividend payment date herein specified.
3. Liquidation Rights.
-------------------
(a) Upon the dissolution, liquidation or winding-up of the
Corporation, whether voluntary or involuntary, the holders of the Series A
Preferred Stock shall be entitled to receive before any payment or distribution
shall be made on the Junior Stock, out of the assets of the Corporation
available for distribution to stockholders, the Stated Value per share of Series
A Preferred Stock and all accrued and unpaid dividends to and including the date
of payment thereof. Upon the payment in full of all amounts due to holders of
the Series A Preferred Stock then the holders of the Junior Stock of the
Corporation shall receive, ratably, all remaining assets of the Corporation
legally available for distribution. If the assets of the Corporation available
for distribution to the holders of the Series A Preferred Stock shall be
insufficient to permit payment in full of the amounts payable as aforesaid to
the holders of Series A Preferred Stock upon such liquidation, dissolution or
winding-up, whether voluntary or involuntary, then all such assets of the
Corporation shall be distributed to the exclusion of the holders of shares of
Junior Stock ratably among the holders of Series A Preferred Stock.
(b) Neither purchase nor the redemption by the Corporation of shares
of any class of stock nor the merger nor consolidation of the Corporation with
or into any other corporation or corporations nor the sale or transfer by the
Corporation of all or any part of its assets shall be deemed to be a
liquidation, dissolution or winding-up of the Corporation for the purposes of
this paragraph 3.
4. Conversion into Common Stock. Shares of Series A Preferred Stock
-----------------------------
shall have the following conversion rights and obligations:
(a) Subject to the further provisions of this paragraph 4, each holder
of shares of Series A Preferred Stock shall have the right at any time and from
time to time after sixty (60) days from
2
<PAGE>
the date on which a share of Series A Preferred Stock was issued, to convert
some or all such shares into fully paid and non-assessable shares of Common
Stock of the Corporation (as defined in paragraph 4(i) below) determined in
accordance with the Conversion Rate provided in paragraph 4(b) below (the
"Conversion Rate"); provided, that the aggregate Stated Value to be converted
shall be at least $25,000 (unless if at the time of such conversion the
aggregate Stated Value of all shares of Series A Preferred Stock registered to
the Holder is less than $25,000, then the whole amount may be converted).
(b) The number of shares of Common Stock issuable upon conversion of
each share of Series A Preferred Stock shall equal (i) the sum of (A) the Stated
Value per share and (B) accrued and unpaid dividends on such share, divided by
(ii) the Conversion Price. The Conversion Price shall be equal to the lesser
of: (i) seventy-five percent (75%) of the average of the Closing Bid Price (as
hereinafter defined) of the Corporation's Common Stock for the five (5) trading
days immediately preceding the date of issuance of the Series A Preferred Stock;
or (ii) seventy-five percent (75%) of the average of the Closing Bid Price for
the five trading days immediately preceding conversion of the Series A Preferred
Stock. The Closing Bid Price shall mean the closing bid price of the
Corporation's Common Stock as reported from the NASDAQ SmallCap Market (or if
not reported by NASDAQ as reported by such other exchange or market where
traded).
(c) The holder of any certificate for shares of Series A Preferred
Stock desiring to convert any of such shares may give notice of its decision to
convert the shares into common stock by telecopying an executed and completed
notice of conversion to the Corporation and delivering within three business
days thereafter, the original notice of conversion and the certificate for the
Preferred Stock properly endorsed for or accompanied by duly executed
instruments of transfer (and such other transfer papers as said Transfer Agent
may reasonably require) to the Corporation. Each date on which a notice of
conversion is telecopied to and received by the Corporation in accordance with
the provisions hereof shall be deemed a Conversion Date. The Corporation will
transmit the certificates representing the shares of common stock issuable upon
conversion of any Preferred Stock (together with the Preferred Stock
representing the shares not converted) to the Holder via express courier, or
otherwise, for receipt by the holder within three business days after receipt by
the Corporation of the original notice of conversion and the Preferred Stock
representing the shares to be converted. The holder of the shares so
surrendered for conversion shall be entitled to receive (except as otherwise
provided herein) a certificate or certificates which shall be expressed to be
fully paid and non-assessable for the number of shares of Common Stock to which
such stockholder shall be entitled upon such conversion registered in the name
of such holder or in such other name or names as such stockholder in writing may
specify. In the case of any Series A Preferred Stock which is converted in part
only the holder of shares of Series A Preferred Stock shall upon delivery of the
certificate or certificates representing Common Stock also receive a new share
certificate representing the unconverted portion of the shares of Series A
Preferred Stock. Nothing herein shall be construed to give any holder of Series
A Preferred Stock surrendering the same for conversion the right to receive any
additional shares of Common Stock or other property which results from an
adjustment in conversion rights under the provision of paragraph (d) or (e) of
this
3
<PAGE>
paragraph 4 until holders of Common Stock are entitled to receive the shares
or other property giving rise to the adjustment.
In the case of the exercise of the conversion rights set forth in
paragraph 4(a) the conversion privilege shall be deemed to have been exercised
and the shares of Common Stock issuable upon such conversion shall be deemed to
have been issued upon the date of receipt by such Transfer Agent for conversion
of the certificate for such shares of Series A Preferred Stock. The person or
entity entitled to receive Common Stock issuable upon such conversion shall, on
the date such conversion privilege is deemed to have been exercised and
thereafter, be treated for all purposes as the record holder of such Common
Stock and shall on the same date cease to be treated for any purpose as the
record holder of such shares of Series A Preferred Stock to be converted.
Notwithstanding the foregoing, if the stock transfer books are closed
on the date such shares are received by the Transfer Agent, the conversion
privilege shall be deemed to have been exercised and the person or entity shall
be treated as a record holder of shares of Common Stock on the next succeeding
date on which the transfer books are open, but the Conversion Rate shall be that
in effect on the date such conversion privilege was exercised. The Corporation
shall not be required to deliver certificates for shares of its Common Stock or
new certificates for unconverted shares of its Series A Preferred Stock while
the stock transfer books for such respective classes of stock are duly closed
for any purpose; but the right of surrendering shares of Series A Preferred
Stock for conversion shall not be suspended during any period that the stock
transfer books of either of such classes of stock are closed.
Upon the conversion of any shares of Series A Preferred Stock no
adjustment or payment shall be made with respect to such converted shares on
account of any dividend on shares of such stock or on account of any dividend on
the Common Stock, except that the holder of such converted shares shall be
entitled to be paid any dividends declared on shares of Common Stock after
conversion thereof.
The Corporation shall not be required in connection with any
conversion of Series A Preferred Stock to issue a fraction of a share of its
Common Stock nor to deliver any stock certificate representing a fraction
thereof. For administrative efficiency and simplicity, in the event the number
of shares issuable to a shareholder results in a fractional share, said number
shall be rounded up to the next higher whole number of shares. No cash shall be
paid for any fractional share.
(d) The Conversion Rate shall be subject to adjustment from time to
time as follows:
(i) In case the Corporation shall at any time (A) declare any dividend
or distribution on its Common Stock or other securities of the Corporation other
than the Series A Preferred Stock, (B) split or subdivide the outstanding Common
Stock, (C) combine the outstanding Common Stock into a smaller number of shares,
or (D) issue by reclassification of its Common Stock any shares or other
securities of the Corporation, then in each such event the Conversion Rate shall
be adjusted proportionately so that the holders of Series A Preferred Stock
shall be entitled to receive the kind and number of shares or other securities
of the Corporation which such holders would have owned or have
4
<PAGE>
been entitled to receive after the happening of any of the events described
above had such shares of Series A Preferred Stock been converted immediately
prior to the happening of such event (or any record date with respect
thereto). Such adjustment shall be made whenever any of the events listed
above shall occur. An adjustment made to the Conversion pursuant to this
paragraph 4(d)(i) shall become effective immediately after the effective date
of the event retroactive to the record date, if any, for the event.
(e) The Conversion Rate shall also be subject to adjustment from time
to time as follows:
(i) In case of any merger of the Corporation with or into any
other corporation (other than a merger in which the Corporation is the
surviving or continuing corporation and which does not result in any
reclassification, conversion, or change of the outstanding shares of Common
Stock) then as part of such merger lawful provision shall be made so that
holders of Series A Preferred Stock shall thereafter have the right to convert
each share of Series A Preferred Stock into the kind and amount of shares of
stock and/or other securities or property receivable upon such merger by a
holder of the number of shares of Common Stock into which such shares of
Series A Preferred Stock might have been converted immediately prior to such
consolidation or merger. Such provision shall also provide for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in paragraph (d) of this paragraph 4. The foregoing provisions of
this paragraph 4(e) shall similarly apply to successive mergers.
(ii) In case of any sale or conveyance to another person or
entity of the property of the Corporation as an entirety, or substantially as
an entirety, in connection with which shares or other securities or cash or
other property shall be issuable, distributable, payable, or deliverable for
outstanding shares of Common Stock, then, unless the right to convert such
shares shall have terminated, lawful provision shall be made so that the
holders of Series A Preferred Stock shall thereafter have the right to convert
each share of the Series A Preferred Stock into the kind and amount of shares
of stock or other securities or property that shall be issuable,
distributable, payable, or deliverable upon such sale or conveyance with
respect to each share of Common Stock immediately prior to such conveyance.
(f) Subject to the provisions of this section, if the Corporation at
any time shall issue any shares of Common Stock prior to the conversion of the
entire Stated Value of the Series A Preferred Stock (otherwise than as: (i)
provided in paragraphs (d) and (e) of this paragraph 4; or (ii) pursuant to
options, warrants, or other obligations to issue shares, outstanding on the date
hereof as described in public filings made by the Corporation prior to the date
hereof with the Securities and Exchange Commission including all shares reserved
for issuance pursuant to the Corporation's existing option and stock plans [(i)
and (ii) above, are hereinafter referred to as the "Existing Option
Obligations"] for a consideration less than the Conversion Price that would be
in effect at the time of such issue, then, and thereafter successively upon each
such issue, the Conversion Price shall be reduced as follows: (i) the
5
<PAGE>
number of shares of Common Stock outstanding immediately prior to such issue
shall be multiplied by the Conversion Price in effect at the time of such
issue and the product shall be added to the aggregate consideration, if any,
received by the Corporation upon such issue of additional shares of Common
Stock; and (ii) the sum so obtained shall be divided by the number of shares
of Common Stock outstanding immediately after such issue. Except for the
Existing Option Obligations and options that may be issued under any employee
incentive stock option and/or any qualified stock option plan adopted by the
Company, for purposes of this adjustment, the issuance of any security of the
Corporation carrying the right to convert such security into shares of Common
Stock or of any warrant, right or option to purchase Common Stock shall result
in an adjustment to the Conversion Price upon the issuance of shares of Common
Stock upon exercise of such conversion or purchase rights.
(g) Whenever the number of shares to be issued upon conversion of the
Series A Preferred Stock is required to be adjusted as provided in this
paragraph 4, the Corporation shall forthwith compute the adjusted number of
shares to be so issued and prepare a certificate setting forth such adjusted
conversion amount and the facts upon which such adjustment is based, and such
certificate shall forthwith be filed with the Transfer Agent for the Series A
Preferred Stock and the Common Stock; and the Corporation shall mail to each
holder of record of Series A Preferred Stock notice of such adjusted conversion
price.
(h) In case at any time the Corporation shall propose:
(i) To pay any dividend or distribution payable in shares upon
its Common Stock or make any distribution (other than cash dividends) to the
holders of its Common Stock; or
(ii) To offer for subscription to the holders of its Common
Stock any additional shares of any class or any other rights; or
(iii) Any capital reorganization or reclassification of its
shares or the merger of the Corporation with another corporation (other than a
merger in which the Corporation is the surviving or continuing corporation and
which does not result in any reclassification, conversion, or change of the
outstanding shares of Common Stock); or
(iv) The voluntary dissolution, liquidation or winding-up of the
Corporation; then, and in any one of more of said cases, the Corporation shall
cause at least fifteen (15) days prior notice of the date on which (A) the
books of the Corporation shall close for such stock dividend, distribution, or
subscription rights, or (B) such capital reorganization, reclassification,
merger, dissolution, liquidation or winding-up shall take place, as the case
may be, to be mailed to the Transfer Agent for the Series A Preferred Stock
and for the Common Stock and to the holders of record of the Series A
Preferred Stock.
(i) So long as any shares of Series A Preferred Stock shall remain
outstanding and the holders thereof shall have the right to convert the same in
accordance with provisions of this
6
<PAGE>
paragraph 4 the Corporation shall at all times reserve from the authorized and
unissued shares of its Common Stock a sufficient number of shares to provide
for such conversions.
(j) The term Common Stock as used in this paragraph 4 shall mean
Common Stock of the Corporation as such stock is constituted at the date of
issuance thereof or as it may from time to time be changed or shares of stock of
any class of other securities and/or property into which the shares of Series A
Preferred Stock shall at any time become convertible pursuant to the provisions
of this paragraph 4.
(k) The Corporation shall pay the amount of any and all issue taxes
(but not income taxes) which may be imposed in respect of any issue or delivery
of stock upon the conversion of any shares of Series A Preferred Stock, but all
transfer taxes and income taxes that may be payable in respect of any change or
ownership of Series A Preferred Stock or any rights represented thereby or of
stock receivable upon conversion thereof shall be paid by the person or persons
surrendering such stock for conversion.
5. Mandatory Conversion/Redemption.
--------------------------------
(a) Subject to the provisions of paragraph 5(e) below, the shares of
Series A Preferred Stock not previously converted into shares of Common Stock
shall be converted into shares of Common Stock without further action of the
Holder on the date that is two years from the date of issuance thereof, at the
Conversion Price and on the conversion terms specified in paragraph 4(b).
(b) Notice of conversion of Series A Preferred Stock by the
Corporation pursuant to this paragraph 5 shall be given by mail or in such other
manner as may be prescribed by resolution of the Board not less than thirty (30)
days prior to the applicable date of mandatory conversion (the "Mandatory
Conversion Date"). As applicable, the notice shall specify the number of shares
to be converted, the date fixed for conversion, and the conversion price per
share.
(c) The holder of any certificate for shares of Series A Preferred
Stock that is converted pursuant to this Section 5 shall surrender such
certificate at the principal office of any transfer agent for said stock (the
"Transfer Agent") properly endorsed for or accompanied by duly executed
instruments of transfer (and such other transfer papers as said Transfer Agent
may reasonably require). The holder of the shares so surrendered for conversion
shall be entitled to receive (except as otherwise provided herein) a certificate
or certificates which shall be expressed to be fully paid and non-assessable for
the number of shares of Common Stock to which such stockholder shall be entitled
upon such conversion registered in the name of such holder or in such other name
or names as such stockholder in writing may specify.
7
<PAGE>
(d) On and after the applicable Mandatory Conversion Date (subject to
paragraph 5(e) below), and notwithstanding that any certificate for shares of
Series A Preferred Stock so called for conversion shall not have been
surrendered for cancellation, all dividends on the Series A Preferred Stock
called for conversion shall cease to accrue and the shares represented thereby
shall no longer be deemed outstanding and all rights of the holders thereof as
stockholders of the Corporation shall cease and terminate, except the right to
receive the shares of Common Stock upon conversion as provided herein.
(e) In no event shall a Mandatory Conversion occur at any time unless the
Common Stock to be delivered upon conversion will be immediately upon delivery
and thereafter, unlegended, freely tradable, and freely transferable on the
transfer books of the Corporation.
(f) The Corporation may elect to redeem all or part of the Stated Value of
the Preferred Stock upon payment of an amount of dollars equal to the Stated
Value of the Preferred Stock plus accrued but unpaid dividends and any other sum
payable in respect of the Series A Preferred Stock, multiplied by the greater
of: (i) the average of the Closing Bid Price (as herein defined) of the
Corporation's Common Stock for the five (5) trading days immediately preceding
the date of issuance of the Series A Preferred Stock; or (ii) the average of the
Closing Bid Price for the five trading days immediately preceding the date
notice of redemption is given to the Holder (the "Redemption Price"). The date
notice of redemption is given to the Holder is the Redemption Date. The
Corporation shall effect a Redemption by written notice to the Holder. The
Redemption Price must be paid by the Corporation to the Holder not sooner than
five business days, but not later than ten business days after such notice is
sent. The Corporation may not redeem any amount which the Holder has elected to
convert, including a notice of conversion given after the Redemption Date but
prior to receipt by the Holder of the Redemption Price. In the event the
Corporation gives written notice to affect a redemption, but fails to timely pay
the Redemption Price, then the Holder may elect to void the Redemption Notice.
After such failure, the Corporation will no longer have the right to affect any
Redemption. At the election of the Holder, such default shall be deemed an
additional Event of Default under Paragraph 6 hereof.
6. Event of Default. The occurrence of any of the following events of
-----------------
default ("Event of Default") shall cause the dividend rate of 6% described in
paragraph 2 hereof to become 15% from and after the occurrence of such event,
and at the option of the Holder, the Series A Preferred Stock shall be redeemed
by the Corporation at its Stated Value and accrued dividends and the Holder may
rescind any unfilled Notice of Conversion:
(a) The Corporation fails to pay any dividend payment required to be
paid pursuant to the terms of paragraph 2 hereof and such failure continues for
a period of ten (10) days.
(b) The Corporation breaches any covenant or other term or condition
of the Subscription Agreement entered into between the Corporation and holder
relating to Series A Preferred Stock (the "Subscription Agreement") or in this
Certificate to Set Forth Designations, Voting Powers, Preferences, Limitations,
Restrictions, and Relative Rights of Series A 6% Cumulative Convertible
8
<PAGE>
Preferred Stock, $0.001 Par Value Per Share, and such breach continues for a
period of seven (7) days after written notice to the Corporation from the
holder.
(c) Any representation or warranty of the Corporation made in the
Subscription Agreement, or in any agreement, statement or certificate given in
writing pursuant thereto shall be false or misleading.
(d) The Corporation shall make an assignment for the benefit of
creditors, or apply for or consent to the appointment of a receiver or trustee
for it or for a substantial part of its property or business; or such a receiver
or trustee shall otherwise be appointed.
(e) Any money judgment, writ or similar process shall be entered or
filed against the Corporation or any of its property or other assets for more
than $100,000, and shall remain unvacated, unbonded or unstayed for a period of
forty-five (45) days.
(f) Bankruptcy, insolvency, reorganization or liquidation proceedings
or other proceedings or relief under any bankruptcy law or any law for the
relief of debtors shall be instituted by or against the Corporation.
(g) The delisting of the Common Stock from the NASDAQ SmallCap
Market or such other principal exchange on which the Common Stock is listed
for trading.
(h) A concession by the Company of a default under any one or more
obligations in an aggregate monetary amount in excess of $100,000.
(i) An SEC stop trade order or NASDAQ trading suspension, if either
applies for a period of ten days or longer.
(j) The Corporation's failure to timely deliver Common Stock to the
holder pursuant to paragraph 4 hereof and section 9 of the Subscription
Agreement.
(k) The occurrence of a Registration Default as described in Section
10.2(j) of the Subscription Agreement.
7. Voting Rights. The shares of Series A Preferred Stock shall not have
--------------
voting rights.
8. Status of Converted Stock. In case any shares of Series A Preferred
--------------------------
Stock shall be converted pursuant to paragraph 4 hereof or otherwise repurchased
or reacquired, the shares so converted, or reacquired shall resume the status of
authorized but unissued shares of Preferred Stock and shall no longer be
designated as Series A Preferred Stock.
9
<PAGE>
9. Additional Restrictions. For as long as any shares of the Series A
------------------------
Preferred Stock are outstanding, the Corporation will not issue any preferred
stock that is senior to the Series A Preferred Stock, and will not amend the
terms of the Series A Preferred Stock without the consent of the holders of the
Series A Preferred Stock.
Signed on this 16th day of January, 1998.
CHEMTRAK, INCORPORATED
By: /s/ Edward F. Covell
_________________________________
President
ATTEST:
/s/ Donald V. Fluken
________________________________
Chief Financial Officer
10
<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
(To Be Executed By the Registered Holder in order to Convert the Series A
Convertible Preferred Stock of ChemTrak, Inc.)
The undersigned hereby irrevocably elects to convert $______________ of the
Stated Value of the above Series A Convertible Preferred Stock into shares of
Common Stock of ChemTrak, Inc. (the "Corporation") according to the conditions
hereof, as of the date written below.
The undersigned represents that it is not a U.S. Person as defined in
Regulation S promulgated under the Securities Act of 1933 and is not converting
the Debenture on behalf of any U.S. Person; is not and was not engaged in plan
or scheme to evade the registration provision of the Securities Act of 1933, as
amended (the "Act"); and is not an "affiliate" of the Corporation or an
"Underwriter" as those terms are defined in the Act. The undersigned further
represents that all applicable warranties and representations made by the
Subscriber in the Subscription Agreement entered into by the Subscriber and the
Corporation prior to the issuance of the Series A Preferred Stock are true and
accurate as of the Date of Conversion.
Date of Conversion*
_____________________________________________________________
Applicable Conversion Price
_____________________________________________________
Number of Common Shares Issuable Upon this Conversion
___________________________
Signature
_______________________________________________________________________
Print Name
______________________________________________________________________
Address:
________________________________________________________________________
_____________________________________________________________________________
* THIS ORIGINAL SERIES A PREFERRED STOCK CERTIFICATE AND NOTICE OF CONVERSION
MUST BE RECEIVED BY THE COMPANY PRIOR TO THE ISSUANCE OF COMMON STOCK.
11
<PAGE>
Exhibit 3.5
CERTIFICATE OF CORRECTION FILED TO CORRECT A CERTAIN ERROR IN THE
CERTIFICATE TO SET FORTH DESIGNATIONS, VOTING POWERS, PREFERENCES,
LIMITATIONS, RESTRICTIONS, AND RELATIVE RIGHTS OF SERIES A 6% CUMULATIVE
CONVERTIBLE PREFERRED STOCK, $0.001 PAR VALUE PER SHARE OF CHEMTRAK
INCORPORATED FILED IN THE OFFICE OF THE SECRETARY OF STATE OF DELAWARE ON
JANUARY 16, 1998
CHEMTRAK INCORPORATED hereby certifies that:
1. The name of the corporation is ChemTrak Incorporated, a Delaware
corporation.
2. That a CERTIFICATE TO SET FORTH DESIGNATIONS, VOTING POWERS,
PREFERENCES, LIMITATIONS, RESTRICTIONS, AND RELATIVE RIGHTS OF SERIES A 6%
CUMULATIVE CONVERTIBLE PREFERRED STOCK, $0.001 PAR VALUE PER SHARE was filed by
the Secretary of State of Delaware on January 16, 1998 and that said Certificate
requires correction as permitted under Section 103 of the General Corporation
Law of the State of Delaware.
3. The inaccuracy or defect of said Certificate to be corrected is
as follows: Article II, Section 5(f) included a clerical error.
4. Article II, Section 5(f) of the Certificate is corrected to read as
follows:
(f) Subject to the provisions of this section, if the Corporation
at any time shall issue any shares of Common Stock prior to the conversion
of the entire Stated Value of the Series A Preferred Stock (otherwise than
as: (i) provided in paragraphs (d) and (e) of this paragraph 4; or (ii)
pursuant to options, warrants, or other obligations to issue shares,
outstanding on the date hereof as described in public filings made by the
Corporation prior to the date hereof with the Securities and Exchange
Commission including all shares reserved for issuance pursuant to the
Corporation's existing option and stock plans ((i) and (ii) above, are
hereinafter referred to as the "Existing Option Obligations") for a
consideration less than the Conversion Price that would be in effect at the
time of such issue, then, and thereafter successively upon each such issue,
the Conversion Price shall be reduced as follows: (i) the number of shares
of Common Stock outstanding immediately prior to such issue shall be
multiplied by the Conversion Price in effect at the time of such issue and
the product shall be added to the aggregate consideration, if any, received
by the Corporation upon such issue of additional shares of Common Stock;
and (ii) the sum so obtained shall be divided by the number of shares of
Common Stock outstanding immediately after such issue. Except for the
Existing Option Obligations and options that may be issued under any
employee incentive stock option and/or any qualified
<PAGE>
stock option plan adopted by the Company, for purposes of this
adjustment, the issuance of any security of the Corporation carrying the
right to convert such security into shares of Common Stock or of any
warrant, right or option to purchase Common Stock shall result in an
adjustment to the Conversion Price upon the issuance of shares of Common
Stock upon exercise of such conversion or purchase rights.
IN WITNESS WHEREOF, said CHEMTRAK INCORPORATED has caused this Certificate
to be signed by Edward Covell, its President, and attested by Donald Fluken, its
Chief Financial Officer, this 20th day of January, 1998.
Signed on this 20th day of January, 1998.
CHEMTRAK, INCORPORATED
By:/s/ Edward F. Covell
----------------------------------------------
President
ATTEST:
/s/ Donald V. Fluken
- -------------------------------------------------
Chief Financial Officer
-2-
<PAGE>
Exhibit 3.6
REVISED CERTIFICATE OF CORRECTION FILED TO CORRECT A CERTAIN ERROR IN THE
CERTIFICATE TO SET FORTH DESIGNATIONS, VOTING POWERS, PREFERENCES,
LIMITATIONS, RESTRICTIONS, AND RELATIVE RIGHTS OF SERIES A 6% CUMULATIVE
CONVERTIBLE PREFERRED STOCK, $0.001 PAR VALUE PER SHARE OF CHEMTRAK
INCORPORATED FILED IN THE OFFICE OF THE SECRETARY OF STATE OF DELAWARE ON
JANUARY 16, 1998
CHEMTRAK INCORPORATED hereby certifies that:
1. The name of the corporation is ChemTrak Incorporated, a Delaware
corporation.
2. That a CERTIFICATE OF CORRECTION FILED TO CORRECT A CERTAIN ERROR IN
THE CERTIFICATE TO SET FORTH DESIGNATIONS, VOTING POWERS, PREFERENCES,
LIMITATIONS, RESTRICTIONS, AND RELATIVE RIGHTS OF SERIES A 6% CUMULATIVE
CONVERTIBLE PREFERRED STOCK, $0.001 PAR VALUE PER SHARE was filed by the
Secretary of State of Delaware on January 20, 1998 and that said Certificate
requires correction as permitted under Section 103 of the General Corporation
Law of the State of Delaware.
3. The inaccuracy or defect of said Certificate to be corrected is
as follows: Article II, Section 5(f) included a clerical error.
4. Replace "Article II, Section 5(f)" with "Article II, Section 4(f)" and
make no other changes.
IN WITNESS WHEREOF, said CHEMTRAK INCORPORATED has caused this Certificate
to be signed by Edward Covell, its President, and attested by Donald Fluken, its
Chief Financial Officer, this 19th day of February, 1998.
Signed on this 19th day of February, 1998.
CHEMTRAK, INCORPORATED
By: /s/ Edward F. Covell
----------------------------------------------
President
ATTEST:
/s/ Donald V. Fluken
- -------------------------------------------------
Chief Financial Officer
<PAGE>
Exhibit 4.1
NUMBER [CHEMTRAK LOGO] COMMON STOCK
0-10115 CHEMTRAK INCORPORATED SHARES
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
SEE REVERSE FOR
CERTAIN DEFINITIONS
CUSIP 163877 10 3
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, PAR VALUE OF $.001 PER
SHARE, OF
CHEMTRAK INCORPORATED
TRANSFERABLE ON THE BOOKS OF THE CORPORATION BY THE HOLDER HEREOF IN PERSON OR
BY DULY AUTHORIZED ATTORNEY UPON SURRENDER OF HIS CERTIFICATE PROPERLY ENDORSED.
THIS CERTIFICATE IS NOT VALID UNTIL COUNTERSIGNED AND REGISTERED BY THE TRANSFER
AGENT AND REGISTRAR.
WITNESS THE FACSIMILE SEAL OF THE CORPORATION AND THE FACSIMILE
SIGNATURES OF ITS DULY AUTHORIZED OFFICERS.
Dated:
CHEMTRAK INCORPORATED
/s/ Alan C. Mendelson CORPORATE /s/ Edward F. Covell
DECEMBER 4, 1991
SECRETARY DELAWARE PRESIDENT AND CHIEF
EXECUTIVE OFFICER
COUNTERSIGNED AND REGISTERED
AMERICAN STOCK TRANFER & TRUST COMPANY
(NEW YORK, NEW YORK)
TRANSFER AGENT AND REGISTRAR
BY /S/ illegible
AUTHORIZED SIGNATURE
<PAGE>
CHEMTRAK INCORPORATED
A statement of the rights, preferences, privileges and restrictions
granted to or imposed upon the respective classes or series of shares of stock
of the Corporation, and upon the holders thereof as established by the
Certificate of Incorporation or by any certificate of determination of
preferences, and the number of shares constituting each series or class and
the designations thereof, may be obtained by any stockholder of the
Corporation upon request and without charge from the Secretary of the
Corporation at the principal office of the Corporation.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as through they were written out in
full according to applicable laws or regulations.
<TABLE>
<CAPTION>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT-__________ Custodian __________
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors
Act _______________________
JT TEN - as joint tenants with right of survivorship (State)
and not as tenants in common UNIF TRF MIN ACT-__________ Custodian (until age _________)
(Cust)
__________ under Uniform Transfers
(Minor)
to Minors Act _________________________
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ______________________ hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ---------------------------------------
- ---------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------- Shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
- ----------------------------------------------------------------------- Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated
------------------------------------
------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATEVER.
Signature(s) Guaranteed
By
--------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS
AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP
IN AN APPROVED SIGNATURE GUARANTEE MEDALLION
PROGRAM PURSUANT TO S.E.C. FILE 17AG-15.
<PAGE>
EXHIBIT 5.1
February 23, 1998
ChemTrak Incorporated
929 E. Arques Avenue
Sunnyvale, CA 94086
Re: ChemTrak Incorporated (the "Company") Registration Statement on Form S-3
------------------------------------------------------------------------
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 to be filed with
the Securities and Exchange Commission (the "Registration Statement") in
connection with the registration under the Securities Act of 1933, as amended,
of 4,266,600 shares of Common Stock of the Company (the "Shares"). As your
counsel, we have examined the proceedings taken and are familiar with the
proceedings proposed to be taken by you in connection with the issuance and sale
of the Shares.
It is our opinion that the Shares, when issued and sold in the manner
referred to in the Registration Statement, will be legally and validly issued,
fully paid and non-assessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and further consent to the use of our name wherever appearing in the
Registration Statement, including the Prospectus constituting a part thereof,
and any amendment thereto.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/ WILSON SONSINI GOODRICH & ROSATI
