SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
__________________________________
Date of Report (Date of earliest event reported): January 22, 1999
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SELFCARE, INC.
(Exact name of Registrant as specified in charter)
Delaware 0-20871 04-3164127
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(State or other jurisdiction (Commission file number) (IRS employer
of incorporation) identification no.)
200 Prospect Street, Waltham, Massachusetts 02453
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(Address of principal executive offices) (Zip Code)
(781) 647-3900
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(Registrant's telephone number, including area code)
ITEM 5. OTHER EVENTS
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A. SERIES B CONVERTIBLE PREFERRED STOCK
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On January 22, 1999, Selfcare, Inc. ("Selfcare") entered
into an Agreement to Amend Terms (the "Agreement") pursuant to
which the terms of the Series B Convertible Preferred Stock
issued on August 26, 1997 (the "Series B Stock") are to be
amended (the "Amended Shares"), subject to shareholder approval
of the issuance of Series B Stock and a proposed amendment to the
Certificate of Designation for the Series B Stock. The
Agreement, as subsequently amended, provides that shareholder
approval is to be obtained on or prior to May 20, 1999. In
exchange for certain forbearances by the holders of the Series B
Stock, the face amount of each such share, plus accrued
dividends, will be increased by 15% and the terms of conversion
will be amended as described below, if shareholder approval is
obtained.
The terms of conversion of the Amended Shares into Selfcare,
Inc. common stock, par value $.001 per share, will vary depending
on the passage of time and the occurrence of certain events.
Until shareholder approval is obtained, the holders of the Series
B Stock cannot convert any Series B Stock to the extent such
conversion would exceed the holder's allocable portion of the
1,689,043 shares listed on the American Stock Exchange for
conversion of Series B Stock. Until shareholder approval is
obtained or the Agreement terminates, the conversion price shall
be the greater of $2.00 and 95% of the average of the five lowest
closing bid prices of Selfcare's common stock during the thirty
trading days preceding such conversion (the "Variable Conversion
Price"). From the effective date of the proposed amendment until
July 20, 1999, the conversion price shall be fixed at $2.00.
After July 20, 1999, the conversion price shall be the lower of
$2.00 and the Variable Conversion Price. In the event the price
per share rises to $3.25 or higher for any ten consecutive
trading days after shareholder approval has been obtained,
Selfcare may fix the conversion price at $2.00, by delivery of a
written notice within five business days after the tenth trading
day, effective thirty days after the delivery of such notice.
Upon shareholder approval and after July 20, 1999, Selfcare may
redeem Amended Shares at the face amount, plus accrued premium
and any conversion default payments in the event the price of
Selfcare's common stock is less than $2.00 for at least ten
consecutive trading days prior to the date of such redemption.
Selfcare intends to submit the proposed amendment to the
Certificate of Designation for the Series B Stock at Selfcare's
annual meeting of shareholders scheduled to be held in May, 1999.
For a more complete description of the terms of the proposed
changes to the Series B Stock which results in the terms of the
Amended Shares, see the Agreement to Amend Terms dated January
22, 1999, attached hereto as Exhibit 4.1.
B. CERTAIN RISK FACTORS TO BE CONSIDERED BEFORE MAKING
INVESTMENTS IN SELFCARE SECURITIES.
Presented below are certain factors that you should consider
with respect to investing in our securities.
RISK FACTORS
WITH RESPECT TO INVESTING IN OUR SECURITIES, YOU SHOULD BE
AWARE THAT THERE ARE VARIOUS RISKS, INCLUDING THOSE DESCRIBED
BELOW, WHICH MAY MATERIALLY IMPACT YOUR INVESTMENT IN SELFCARE OR
MAY IN THE FUTURE, AND, IN SOME CASES, ALREADY DO, MATERIALLY
AFFECT US AND OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF
OPERATIONS. YOU SHOULD CONSIDER CAREFULLY THESE RISK FACTORS
WITH RESPECT TO INVESTING IN OUR SECURITIES. THIS SECTION
INCLUDES OR REFERS TO CERTAIN FORWARD-LOOKING STATEMENTS; YOU
SHOULD READ THE EXPLANATION OF THE QUALIFICATIONS AND LIMITATIONS
ON SUCH FORWARD-LOOKING STATEMENTS DISCUSSED ON PAGE 19.
RISK OF INADEQUATE FUNDING; FUTURE CAPITAL NEEDS
We anticipate that during 1999 we will need to raise
additional capital to help fund our operations and scheduled debt
payments, through borrowing, or the issuance of debt or equity
securities, or in connection with agreements which might be made
with one or more collaborative partners. We are not certain that
such additional financing will be available, or, if available,
that it will be available on acceptable terms. If we raise
additional funds by issuing equity securities, existing
stockholders will be further diluted. If adequate funds are not
available from such sources on satisfactory terms, we may be
required to curtail significantly one or more of our research and
development programs, or obtain funds through arrangements with
collaborative partners or others that may require us to
relinquish rights to certain of our technologies or products
which we would otherwise pursue on our own or to relinquish other
rights or incur other obligations or liabilities.
MANAGING AND MAINTAINING GROWTH
We are currently experiencing a period of rapid growth and
expansion, due, in part, to recent acquisitions and increased
sales. This growth has placed and may continue to place strains
on our management, customer service and support, operations,
sales and administrative personnel as well as our financial and
other resources. In order to meet the needs of our existing and
future customers, we have increased and will continue to increase
our workforce. To do this, we need to attract, train, motivate
and manage qualified employees and need to expand our operating,
management, information and financial systems. This may result
in a significant increase in our operating expenses.
Additionally, through such acquisitions, we are expanding into
new lines of business which impose additional demands. The risks
involved with such acquisitions and expansion are discussed in
further detail below.
Nutritional Supplement Lines Acquisition
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On February 19, 1997, we purchased from American Home
Products Corporation the U.S. rights to several nutritional
supplement product lines. We are also developing additional
nutritional supplement products and plan to expand sales of these
nutritional supplements. In order to do this, we paid and expect
to continue to pay substantial marketing and promotional expenses
and allowances in 1999 and in future years. We cannot guarantee
that these expenditures and allowances will result in an increase
or maintenance of the existing revenue levels from the
nutritional supplement lines or new product lines. Furthermore,
except for our existing promotional efforts with respect to the
nutritional supplement lines, we have not conducted a national
advertising campaign of the scope or magnitude equal to the
ongoing and planned promotional efforts for the nutritional
supplement lines. There is a risk that our efforts may not be
successful or cost-efficient.
The Can-Am Acquisition
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On February 18, 1998, Inverness Medical, Inc., formerly
named Selfcare Consumer Products, Inc., a subsidiary of Selfcare,
Inc., purchased Can-Am Care Corporation, a leading supplier of
diabetes care products. We have decreased, and expect to
continue to decrease, certain expenses by, among other things,
eliminating duplicative management functions and combining our
distribution channels with those of Can-Am. Although we believe
that synergies are present between our existing distribution
channels and those of Can-Am, we can not be certain that the
integration of the Can-Am product line with our product lines
will lead to increased overall revenue or decreased spending as a
percentage of revenue, or that the integration will result in
other benefits customarily pursued in a strategic acquisition.
Accordingly, we may not save any money and may, in fact, incur
additional costs in attempting to make these changes or in
attempting to mitigate any adverse consequences of the
integration.
RISKS RELATED TO NEW PRODUCT DEVELOPMENT
Some of our products are available for commercial sale,
including certain professional diagnostic products for infectious
diseases, women's health products produced by third-party
manufacturers, FastTakeTM diabetes care products, blood glucose
strips and nutritional supplements. All of our other products
are in various stages of research and development and are not
generating revenue. We must develop these products and perform
pre-clinical and clinical testing before we can sell these
products to the public. At this stage, we cannot be certain
that:
any of the products under development will prove to be
safe or effective in clinical trials;
we will be able to obtain regulatory approval to market
any of our products that are in development or
contemplated;
any of such products can be manufactured at acceptable
cost and with appropriate quality; or
any of such products, if and when approved, can be
successfully marketed.
RISKS RELATED TO THE LIFESCAN ALLIANCE
In 1995, we entered into an exclusive worldwide alliance and
distribution agreement with LifeScan, Inc., a subsidiary of
Johnson & Johnson. Under the terms of the alliance with
LifeScan, we manufacture and LifeScan distributes FastTakeTM, our
proprietary electrochemical blood glucose monitoring system for
the management of diabetes. We commenced shipments of FastTakeTM
in December 1997. FastTakeTM is currently the most successful
product in our diabetes line of business. Our future results of
operations depend to a substantial degree on LifeScan's ability
to market and sell FastTakeTM. Although the FastTakeTM product
appears to be gaining acceptance, we cannot assure you that the
market will fully accept FastTakeTM or that any acceptance will
continue. Any failure by us to produce or failure of LifeScan to
market and distribute FastTakeTM successfully could have a
material adverse effect on our business, financial condition and
results of operations.
DEPENDENCE UPON KEY PERSONNEL
Our future success is highly dependent on the services of
Ron Zwanziger, the Chairman, President and Chief Executive
Officer, and certain other members of management. Due to the
specialized scientific nature of our business, our future success
depends in large part upon our ability to attract and retain
highly skilled scientific, managerial and marketing personnel,
particularly as we continue to develop and expand our activities.
We face significant competition for such personnel from other
companies, research and academic institutions, government
entities and other organizations. We cannot be certain that we
will be able to hire or retain the personnel we require for
continued growth. The loss of Mr. Zwanziger or one or more of
the management or scientific employees could have a negative
impact upon our ability to manage and operate effectively.
DEPENDENCE ON PATENTS AND PROPRIETARY TECHNOLOGY; TRADEMARKS
Obtaining patent and trade secret protection for new
technologies, products and processes is important in the medical
products and diagnostic testing industries. Our success depends,
in part, on our ability to obtain patent protection for our
products and manufacturing processes, to preserve our trade
secrets and to operate without infringing the proprietary rights
of others.
Patents and Trademarks
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We hold certain patent rights, have certain patent
applications pending, and expect to seek additional patents in
the future. However, we cannot be certain that we will be
successful or timely in obtaining any such patents. The patent
position of medical products and diagnostic testing companies is
often highly uncertain and usually involves complex legal and
factual questions. Furthermore, the U.S. Patent and Trademark
Office has not set forth a consistent policy regarding the
breadth of claims covered in medical products patents.
Therefore, we cannot be certain that any issued patents will
provide adequate protection for our products. If such patents
are limited in scope, our competitors may be able to design
around such patents.
In the medical products industry, including the diagnostic
testing industry, there is extensive litigation regarding
patents, licenses and other intellectual property rights. We
periodically incur, and will likely continue to incur, costs
related to defending potential infringement claims or asserting
such claims against others. To determine the priority of
inventions, we may also have to participate in interference
proceedings to determine the scope of patents issued by the
Patent and Trademark Office which could also result in
substantial costs.
In April of 1998, Abbott Laboratories, Inc. filed a lawsuit
against us and Princeton BioMeditech Corporation which
manufactures our pregnancy detection and ovulation prediction
products. Abbott alleges that these products infringe a patent
under which Abbott claims to have exclusive rights. In October,
1998, Abbott filed a lawsuit against us alleging that our glucose
monitoring system, FastTakeTM, infringes upon a patent held by
Abbott. Although we believe that the pregnancy detection and
ovulation prediction products and FastTakeTM do not infringe upon
these patents, we have already incurred and may continue to incur
substantial costs in defending against Abbott's claims.
Furthermore, under the distribution agreement with LifeScan, we
agreed to indemnify LifeScan for any damage, including expenses
incurred by it, resulting from any claims that FastTakeTM
infringes any patents. For a more in-depth discussion of this
litigation, see the section entitled "Litigation".
Licensing of Technology
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We may be required to obtain licenses to patents or other
proprietary rights of third parties to market their products. We
do not know if we will be able to obtain licenses under any such
patents or proprietary rights on acceptable terms, if at all. If
we do not obtain necessary licenses, we could encounter delays in
product introductions while attempting to design products that do
not infringe on the patents or other rights which we are unable
to license, or we may be unable to develop, manufacture or sell
such products in certain countries or at all.
Other Proprietary Technology
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We seek to protect proprietary technology, including
technology that may not be patented, or patentable, in part
through confidentiality agreements and, if applicable, inventors
rights agreements with collaborators, advisors, employees and
consultants. If the parties breach these agreements, we may not
have adequate remedies for any such breach. Although we take
actions to prevent the disclosure of confidential information, we
cannot be certain that our trade secrets will not otherwise be
revealed to, or discovered by, competitors. Moreover, we may
from time to time conduct research through academic advisors and
collaborators who may be prohibited by their academic
institutions from entering into confidentiality or inventor's
rights agreements.
COMPETITION; RISK OF TECHNOLOGICAL OBSOLESCENCE
Self-Test Products
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The medical products industry, including the diagnostic
testing industry, is rapidly evolving and developments are
expected to continue at a rapid pace. Competition in this
industry is intense and expected to increase as new products and
technologies become available and new competitors enter the
market. Our competitors in the United States and abroad are
numerous and include, among others, diagnostic testing and
medical products companies, universities and other research
institutions. Our future success depends upon our maintaining a
competitive position in the development of products and
technologies in our areas of focus. Competitors may be more
successful in:
developing technologies and products that are more
effective than our products or that render our
technologies or products obsolete or noncompetitive;
obtaining patent protection or other intellectual
property rights that would prevent us from developing
our potential products; or
obtaining regulatory approval for the commercialization
of their products more rapidly or effectively than we
are able to do so.
Many of our existing or potential competitors have or may have
substantially greater research and development capabilities,
clinical, manufacturing, regulatory and marketing experience and
financial and managerial resources.
We are seeking to develop and market generic test strips
which are compatible with other manufacturers' electrochemical
blood glucose monitoring systems including ExcelTM, which is
compatible with the ExacTechTM system sold by MediSense, Inc.
Others may attempt to enter this market with similar products or
the manufacturers of the systems with which such test strips are
compatible may lower their own test strip prices. This would
reduce or eliminate our competitive price advantage.
Additionally, several of our competitors are attempting to
develop noninvasive blood glucose monitoring technology.
Noninvasive blood glucose monitoring involves methods for
measuring blood glucose levels without the need to draw blood
and, in certain proposed configurations, without the need to
utilize disposable components, such as test strips. We believe
that manufacturers are pursuing a number of different
technological approaches to noninvasive blood glucose monitoring,
including near-infrared spectroscopy, which involves shining a
beam of near-infrared light to penetrate the skin and determine
the amount of glucose in the blood, and reverse iontophoresis,
which utilizes a "patch" system to extract glucose through the
skin for measurement by an external meter. In addition, several
manufacturers are pursuing minimally invasive approaches to blood
glucose monitoring, such as using a fine needle to withdraw a
small sample of interstitial fluid which is analyzed by use of
mid-infrared spectroscopy. The successful development and
introduction of any such products could reduce the demand for
meters and test trips such as FastTakeTM and ExcelTM.
Nutritional Supplements
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The market for the sale of vitamins and nutritional
supplements is highly competitive. This competition is based
principally upon price, quality of products, customer service and
marketing support. There are numerous companies in the vitamin
and nutritional supplement industry selling products to retailers
such as mass merchandisers, drug store chains, independent drug
stores, supermarkets and health food stores. As most of these
companies are privately held, we are unable to obtain the
information necessary to assess precisely the size and success of
these competitors. However, we believe that a number of our
competitors, particularly manufacturers of nationally advertised
brand name products, are substantially larger than we are and
have greater financial resources.
EFFECT OF ADVERSE PUBLICITY; SCIENTIFIC RESEARCH
Our nutritional supplement lines contain vitamins, minerals,
herbs and other ingredients that we generally regard as safe when
taken as directed. Various scientific studies have suggested
such vitamins, minerals and herbs may offer certain health
benefits. However, the success of such products is highly
dependent upon consumers' perception of safety and quality of the
nutritional supplement lines as well as similar products
distributed by competitors.
We believe that the recent growth of the nutritional
supplements market is based, in part, on recent scientific
research suggesting potential health benefits from regular
consumption of certain vitamins and other nutritional products
and the attention focused on such benefits by the media. The
scientific research to date is preliminary and therefore it is
possible that future scientific results could be unfavorable or
inconsistent and media attention could be unfavorable. This
could result in a significant decline in sales of the nutritional
supplement products.
COMPREHENSIVE GOVERNMENT REGULATION
Self-Test Products
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Our research, development and clinical programs, and
manufacturing and marketing operations, are subject to extensive
regulation by numerous governmental authorities in the United
States and in other countries. At this time we do not have the
required governmental approvals for commercial sale of most of
our self-test products, including those licensed from third
parties. We expect that some approvals will not be obtained for
several years. The Food and Drug Administration and
corresponding foreign regulatory authorities will review our
pre-clinical and clinical trials to test the safety and efficacy
of many of our products. This regulatory process can take many
years and may require us to spend substantial amounts of money
and other resources.
The FDA and corresponding foreign regulatory authorities may
interpret data obtained from pre-clinical and clinical activities
in ways that could delay, limit or prevent regulatory approval or
may reject approval based upon future, unknown changes to
regulatory policies. Such delays may prevent us from marketing
and selling these products.
Moreover, even if regulatory approval of a product is
granted, the FDA and foreign authorities may impose limitations
on the indicated uses or methods of use for a product. This
could limit the way in which we market such product.
Furthermore, even after granting approval, the FDA or other
regulatory agencies may continue to review and inspect a marketed
product, the manufacturer and its manufacturing facilities. If
the FDA or the foreign authorities discover previously unknown
problems with a product, manufacturer or facility, they may
restrict or prohibit the sale of the product. If we fail to
comply with the applicable regulatory requirements, the FDA or
foreign authorities may impose fines, suspensions of regulatory
approvals, product recalls, operating restrictions and criminal
prosecution.
Regulatory requirements in countries outside the United
States can change rapidly with relatively short notice. It is
possible that changes in such regulations may result in products
being banned in certain countries, causing us to lose revenues
and income. Foreign regulatory agencies could also introduce
testing changes which, if not quickly addressed, could result in
restrictions on sales of our products. Such changes are not
uncommon as such regulatory authorities may react and respond to
advances in basic research and the nature of certain infectious
diseases and agents such as HIV, as some of these diseases are
mutating viruses capable of producing new strains and subtypes.
Nutritional Supplements
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Federal agencies, including the FDA, the Federal Trade
Commission and the Consumer Product Safety Commission, regulate
the manufacturing, processing, formulation, packaging, labeling
and advertising of nutritional supplements. Various agencies of
the states, localities and foreign countries where we sell or may
sell the nutritional supplement lines may also regulate our
activities.
The Dietary Supplement Health and Education Act of 1994
enacted on October 25, 1994, defines dietary supplements as a new
category of food separate from conventional food. The FDA has
finalized certain regulations to implement the Dietary Supplement
Health and Education Act of 1994, including those relating to
nutritional labeling requirements, but it has not finalized other
regulations. Under the Dietary Supplement Health and Education
Act of 1994, we are required to have different labeling for the
nutritional supplement lines and, with respect to nutritional
supplement products under development, we are subject to new
notification procedures and scientific proof requirements
regarding ingredients, product claims and safety. We cannot
determine how, or if, these regulations will affect business in
the future. If we do not comply with applicable FDA
requirements, the FDA could impose sanctions and penalties,
including warning letters, product recalls and seizures,
injunctions or criminal prosecution. Although not yet final, we
anticipate that the FDA will enact specific standards under the
law to regulate the manufacturing of dietary supplements. The
current proposal standards are similar to the current standards
for food and we believe that the current manufacturing process of
our nutritional supplement lines will be in compliance with the
proposed standards for dietary supplements. However, we cannot
be certain that the final standards for dietary supplements will
not change in ways that require changes in the manufacture of the
nutritional supplement lines.
LITIGATION
Abbott Laboratories, Inc. v. Selfcare, Inc. and Princeton
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BioMeditech Corporation
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On April 22, 1998, Abbott served process on us and Princeton
BioMeditech Corporation, which manufactures certain products for
us, in an action filed in the United States District Court for
the District of Massachusetts, asserting patent infringement
arising from our and Princeton BioMeditech's manufacture, use and
sale of certain products. Abbott claims that such products are
covered by one or more of two U.S. patents to which Abbott
asserts that it is the exclusive licensee. Abbott claims that
certain of our products relating to pregnancy detection and
ovulation prediction infringe such patents. Abbott is seeking an
order finding that Selfcare and Princeton BioMeditech infringe
the patents, an order preliminarily and permanently enjoining us
and Princeton BioMeditech from infringing, compensatory damages
to be determined at trial, treble damages, costs, prejudgment and
post-judgment interest on Abbott's compensatory damages,
attorneys' fees, and a recall of all of our and Princeton
BioMeditech's existing products found to infringe such patents.
On August 5, 1998, the court denied Abbott's motion for a
preliminary injunction. On October 23, 1998, we filed a motion
to amend our counterclaim against Abbott, asserting that Abbott
is infringing two U.S. patents which are owned by a joint venture
between us and Princeton BioMeditech, and seeking a declaration
that Abbott infringes the patents, permanent injunctive relief,
money damages and attorneys' fees. On November 5, 1998, Abbott
filed a counterclaim against us in the United States District
Court for the Northern District of Illinois asserting the
invalidity of these two patents and seeking a declaration of
invalidity, non-infringement and unenforceability. We, along
with our co-defendant, have moved in the Massachusetts action for
summary judgment on our defense that the Abbott patents are
invalid, and Abbott has cross-moved for summary judgment on the
issue of infringement. The case is currently in the discovery
stage. We intend to defend this litigation vigorously. A final
ruling against us could have a material adverse effect on our
business, financial condition and results of operations.
Abbott Laboratories, Inc. v. LifeScan, Inc. and Selfcare, Inc.
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In October 1998, Abbott commenced a lawsuit against us and
LifeScan, Inc., a subsidiary of Johnson & Johnson, in the United
States District Court for the District of Massachusetts. The
complaint alleges that the disposable test strips used in the
FastTakeTM blood glucose monitoring system supplied by one of our
subsidiaries to LifeScan infringe a U.S. patent issued to Abbott
on October 13, 1998. Abbott is seeking damages and an injunction
against sales in the United States. Abbott is also seeking to
enjoin LifeScan and Selfcare from the manufacture, use and sale
of these blood glucose test strips in the United States during
the pendency of the infringement litigation. On February 22,
1999, the court denied Abbott's motion for a preliminary
injunction and stated that "...Abbott is unlikely to succeed on the
merits of its claim of patent infringement..." Although a final
ruling against us could have a material adverse impact on our
business, financial condition and results of operations, based on
a review of the Abbott claims by patent counsel and the
aforementioned court ruling, we believe that the FastTakeTM test
strips do not infringe the Abbott patent and that Abbott's claims
will be proven to be without merit.
Cambridge Biotech Corporation and Cambridge Affiliate Corporation
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v. Ronald Zwanziger, Selfcare, Inc., Cambridge Diagnostics
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Ireland. Ltd., Trinity Biotech, plc and Pasteur Sanofi Diagnostics
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On January 22, 1999, Cambridge Biotech Corporation and
Cambridge Affiliate Corporation filed suit in the Middlesex
County Massachusetts Superior Court against us, our President,
Ron Zwanziger, Cambridge Diagnostics Ireland, Ltd., Trinity
Biotech plc and Pasteur Sanofi Diagnostics. The complaint
alleges, among other things, that actions taken by Mr. Zwanziger
as President of Cambridge Affiliate Corporation in connection
with the sale by Cambridge Diagnostics Ireland, Ltd. of its
diagnostics business to Trinity Biotec plc were not properly
authorized and that, as a result of the actions, Cambridge
Biotech Corporation may lose the benefit of valuable patent
licenses from Pasteur Sanofi Diagnostics. Cambridge Biotech
Corporation's requested relief is to have the Cambridge Affiliate
Corporation/Trinity Biotech plc manufacturing and sales
agreements declared null and void, to have the license between
Pasteur Sanofi Diagnostics and Cambridge Biotech Corporation
declared to be in full force, to recover damages allegedly caused
by us and Mr. Zwanziger, and to recover damages due to Pasteur
Sanofi Diagnostics' actions. Cambridge Biotech Corporation moved
for a preliminary injunction, seeking to enjoin us, Cambridge
Diagnostics Ireland, Ltd., Mr. Zwanziger, and Trinity Biotech plc
from acting pursuant to the Cambridge Affiliate
Corporation/Trinity Biotech plc agreements and to enjoin Pasteur
Sanofi Diagnostics from terminating its license agreements with
Cambridge Biotech Corporation. Following a hearing on January
25, 1999, the Court denied Cambridge Biotech Corporation's
motion. Subsequently, all of the parties have agreed to
voluntary, non-binding mediation of the dispute. We believe that
Cambridge Biotech Corporation's complaint against us, Mr.
Zwanziger, and Cambridge Diagnostics Ireland, Ltd. is without
merit and we intend to defend the action vigorously if the
mediation does not lead to a settlement. We do not believe that
an adverse ruling against us would have a material adverse impact
on our business, financial condition and results of operations.
RISKS RELATED TO THE YEAR 2000 ISSUE
The statements in the following section include "Year 2000
readiness disclosure" within the meaning of the Year 2000
Information and Readiness Disclosure Act of 1998.
Background
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The term "Year 2000 issue" is a general term used to
describe various problems that may result from the improper
processing by computer systems of dates after 1999. These
problems arise from the inability of some hardware and software
to distinguish dates before the year 2000 from dates in and after
the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations. The Year 2000
issue affects virtually all companies and all organizations.
Our efforts to address the Year 2000 issue are focused in
the following areas:
(1) reviewing and taking any necessary steps to attempt to
correct our computer information systems, including
software applications and hardware platforms;
(2) evaluating and making any necessary modifications to
other computer systems that do not relate to
information technology but include embedded technology,
such as telecommunications, security, fire and safety
systems; and
(3) communicating with certain significant customers,
suppliers and service providers to determine whether
there will be any interruption in their systems that
could affect us.
Our State of Readiness
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We have developed a four-phase plan to address the Year 2000
issues. The four phases are: (1) awareness, (2) assessment, (3)
remediation, and (4) testing.
Awareness
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We have made the relevant employees aware of the Year 2000
issue and collected information from such employees regarding
systems that might be affected. We have established a project
team to lead our efforts, and management will oversee the
progress with respect to the implementation of the Year 2000
Plan. In addition, the Year 2000 Plan will be subject to the
review of the Board of Directors.
Assessment
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We have substantially completed an assessment of our
standard computer information systems and we are now taking the
further necessary steps to make our core computer information
systems, in those situations in which we are required to do so,
Year 2000 compliant. We are in the process of obtaining written
verification from vendors to the effect that our other standard
computer information systems acquired from such vendors correctly
distinguish dates before the year 2000 from dates in and after
the year 2000. We expect that most vendors will provide us with
such verifications, or commitments to provide solutions, by May
31, 1999.
In addition, we are currently evaluating and assessing our
other computer systems that do not relate to information
technology but include embedded technology, such as
telecommunications, security, fire and safety systems, and expect
that our assessment will be completed by May 31, 1999. We are
aware that such systems contain embedded chips that are difficult
to identify and test and may require complete replacement because
they cannot be repaired.
We are seeking written verification from our significant
customers, suppliers, and service providers that they will be
Year 2000 compliant by no later than May 31, 1999. We do not
believe that there is a significant risk related to the failure
of vendors or third-party service providers to prepare for the
Year 2000. However, the costs and timing of third-party Year
2000 compliance is not within our control and we cannot be
certain of the cost or timing of such efforts or the potential
effects of any failure of our customers, suppliers or service
providers to comply.
Remediation
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Our primary use of software systems is in our accounting and
electronic data interface software. We also use programmable
logic controls in manufacturing operations at our facility in
Inverness, Scotland. We have received written verification from
our vendor of the accounting software used in our corporate
office that the software is Year 2000 compliant. We expect an
upgrade for our electronic data interface software that has been
designed to be Year 2000 compliant by May 31, 1999. The
programmatic logic controls are in the process of being tested
for Year 2000 compliance.
Testing
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To attempt to confirm that our computer systems are Year
2000 compliant, we expect to perform limited testing of our
computer information systems and our other computer systems that
do not relate to information technology but include embedded
technology. Unless Year 2000 issues arise in the course of our
limited testing, we will rely on the written verification, when
and if received, from each vendor of our computer systems that
the relevant system is Year 2000 compliant. Nevertheless, we
cannot be certain that the computer systems on which we rely will
correctly distinguish dates before the year 2000 from dates in
and after the year 2000. Any failure to distinguish the dates
could have an adverse effect on our operations. Testing of some
systems is in process and we currently expect that our testing
will be complete by May 31, 1999. We have tested the software in
the FastTakeTM blood glucose monitoring system and believe that
it is Year 2000 compliant.
Costs to Address Our Year 2000 Issues
- -------------------------------------
We anticipate that the primary cost of Year 2000 compliance
will be the cost of testing. Because our Year 2000 assessment is
ongoing and additional funds may be required as a result of
future findings, we are not currently able to estimate the final
aggregate cost of addressing the Year 2000 issue. While these
efforts will involve additional costs, we believe, based on
available information, that these costs will not have a material
adverse effect on our business, financial condition or results of
operations. We expect to fund the costs of addressing the Year
2000 issue from cash flows resulting from operations and
additional capital, either through borrowing and/or issuance of
debt or equity securities. While we believe that we will be Year
2000 compliant by December 31, 1999, if these efforts are not
completed on time, or if the costs associated with updating or
replacing our computer systems exceed our estimates, the Year
2000 issue could have a material adverse effect on our business,
financial condition and results of operations.
Risks Presented by Year 2000 Issues
- -----------------------------------
We are still in the process of evaluating potential
disruptions or complications that might result from Year 2000
related problems; however, at this time we have not identified
any specific business functions that we know will suffer material
disruption as a result of Year 2000 related events. It is
possible, however, that we may identify business functions in the
future that are specifically at risk of Year 2000 disruption.
The absence of any such determination at this point represents
only our current status of evaluating potential Year 2000 related
problems. This should not be construed to mean that there is no
risk of Year 2000 related problems and facts presently known to
us, and should not be construed to mean that there is no risk of
Year 2000 related disruption. Moreover, due to the unique and
pervasive nature of the Year 2000 issue, it is impracticable to
anticipate each of the wide variety of Year 2000 events,
particularly outside of Selfcare, that might arise in a worst
case scenario and which might have a material adverse effect on
our business, financial condition and results of operations.
Our Contingency Plans
- ---------------------
We intend to develop contingency plans for significant
business risks that might result from Year 2000 related events,
if necessary. Because we have not identified any specific
business function that will be materially at risk of significant
Year 2000 related disruptions, and because a full assessment of
the risk from potential Year 2000 failures is still in process,
we have not yet developed detailed contingency plans specific to
Year 2000 problems. Development of these contingency plans is
currently scheduled to occur before May 31, 1999, and as
otherwise appropriate.
The preceding "Year 2000 Readiness Disclosure" contains
various forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These forward-
looking statements represent our beliefs or expectations
regarding future events. All forward-looking statements involve
a number of risks and uncertainties that could cause the actual
results to differ materially from the projected results. Factors
that may cause these differences include, but are not limited to:
the availability of qualified personnel and other
information technology resources;
the ability to identify and remediate all date
sensitive lines of computer code or to replace embedded
computer chips in affected systems or equipment; and
the actions of governmental agencies or other third
parties with respect to Year 2000 problems.
RISKS RELATED TO THE CONVERSION TO THE EURO
On January 1, 1999, eleven of the fifteen member countries
of the European Union established fixed conversion rates between
their sovereign currencies and the Euro and adopted the Euro as
their common legal currency. As a result, the Euro now trades on
currency exchanges and is available for non-cash transactions.
The participating countries have issued sovereign debt
exclusively in Euro, and redenominated outstanding debt.
Beginning January 1, 2002, the participating countries will issue
new Euro-denominated bills and coins for use in cash transactions
and will withdraw all bills and coins denominated in their
sovereign currencies by July 1, 2002, making the conversion to
the Euro complete.
Certain of our European subsidiaries may need to adapt their
information technology systems to accommodate Euro-denominated
transactions, even if they are not located in countries which are
members of the European Union. In addition, it is likely that
there will be a greater transparency of pricing in the
participating countries, making Europe a more competitive
environment. Our European subsidiaries may need to respond by
adjusting their business and financial strategies. The effect of
any such adaptations or adjustments has not been quantified at
this time. However, we do not believe that the consequences of
the Euro conversion will have a material effect on us, although
no assurances can be given that it will not.
We have manufacturing facilities in Galway, Ireland; Yavne,
Israel; and Inverness, Scotland, and sales and marketing offices
in Germany and Belgium, and we market our products in several
international markets.
LIMITED OPERATING HISTORY; HISTORY OF OPERATING LOSSES AND
ACCUMULATED DEFICIT; UNCERTAIN PROFITABILITY
We have not had significant profits since we began
operations. As of September 30, 1998, our accumulated deficit
totaled approximately $75.5 million. For the nine months ended
September 30, 1998, we had revenues of approximately $89.0
million and a net loss of approximately $5.3 million. In order
to continue developing products, we must expend substantial
resources to conduct research and pre-clinical and clinical
development programs, to establish manufacturing facilities,
sales and marketing capabilities, and to establish additional
quality control and regulatory and administrative capabilities.
We may lose substantial and, perhaps, increasing amounts of
money, over the next several years as our product programs expand
and various clinical trials commence. We do not know when, or
if, we will make money because our profitability depends on a
number of uncertainties.
FLUCTUATIONS IN RESULTS OF OPERATIONS; VOLATILITY OF SHARE PRICE
Our annual and quarterly operating results may fluctuate due
to factors such as:
the timing of new product announcements and
introductions by us and our competitors;
market acceptance of new or enhanced versions of our
products;
changes in manufacturing costs or other expenses;
competitive pricing pressures;
the gain or loss of significant distribution outlets or
customers;
increased research and development expenses; or
general economic conditions.
In addition, it is possible that in some future periods the
results of our operations will be below the expectations of the
public market. In any such event, the market price of the common
stock could be materially and adversely affected. Furthermore,
the stock market may experience significant price and volume
fluctuations which may affect the market price of the common
stock for reasons unrelated to our operating performance. The
market price of the common stock may be highly volatile and may
be affected by such factors as:
our quarterly operating results;
changes in general conditions in the economy, the
financial markets, or the health care industry;
government regulation in the health care industry;
changes in other areas such as tax laws;
sales of substantial amounts of common stock or the
perception that such sales could occur, including as a
result of the conversion or potential conversion of
convertible securities issued by us; or
other developments affecting us or our competitors.
CONTROL BY CERTAIN STOCKHOLDERS
Our executive officers and directors owned as of February 1,
1999, approximately 17.7% of the outstanding shares of common
stock. Accordingly, these persons may have the ability to
control Selfcare's Board of Directors, and, therefore, our
business, policies and affairs.
ANTI-TAKEOVER EFFECT OF CERTIFICATE OF INCORPORATION AND BY-LAW
PROVISIONS AND DELAWARE LAW
Our Amended and Restated Certificate of Incorporation and
Amended and Restated By-laws contain certain provisions relating
to corporate governance and the rights of stockholders. These
provisions may be deemed to have a potential "anti-takeover"
effect since such provisions may delay, defer or prevent a change
in control of Selfcare. These provisions make more difficult,
and may in fact discourage, a proxy contest to change control of
Selfcare and therefore may in turn have an adverse affect on our
stock price.
EFFECT OF ISSUANCE OF PREFERRED STOCK
Our Board of Directors is currently authorized to issue up
to 4,893,500 shares of preferred stock in the future without
further stockholder approval and upon such terms and conditions,
and having such rights, privileges and preferences, as they may
determine. 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 may be issued in the future.
In addition, if Selfcare were to sell additional shares of
preferred stock, it could become more difficult for a third party
to acquire control of, or make acquisition bids for, Selfcare.
This, in turn, could affect the price of the shares of our common
stock.
EFFECT OF CONVERSIONS OF CONVERTIBLE PREFERRED STOCK AND SENIOR
SUBORDINATED CONVERTIBLE NOTES
We have authorized shares of Series A Convertible Preferred
Stock, par value $.001 per share, Series B Convertible Preferred
Stock, par value $.001 per share, Series C Convertible Preferred
Stock, par value $.001 per share, Series D Convertible Preferred
Stock, par value $.001 per share, and Series E Convertible
Preferred Stock, par value $.001 per share. We have outstanding
4,720 shares of Series B Convertible Preferred Stock, 56,845
shares of Series C Convertible Preferred Stock, 3,030 shares of
Series D Convertible Preferred Stock and 14,170 shares of Series
E Convertible Preferred Stock.
Our Series B Convertible Preferred Stock and our Senior
Subordinated Convertible Notes issued October 27, 1997, as
amended January 11, 1999, contain variable conversion ratio
provisions. The terms of the Series B Convertible Preferred
Stock and, in the event of certain defaults thereunder, the
Senior Subordinated Convertible Notes provide that, subject to
certain limitations, as the price of our common stock declines
the number of shares of common stock into which the holders may
convert such securities increases. Accordingly, if our stock
price falls the result may be that the holders of the convertible
securities with variable conversion ratios can convert such
securities for a greater number of shares of our common stock
than previously obtainable by such holder, thereby resulting in
an increase in the potential dilution to all existing common
stock holders.
DIVIDENDS
We have never paid any dividends to holders of shares of
common stock. We were prohibited under the terms of our charter
from paying dividends on the common stock prior to the first
anniversary of the date of issuance of the Series B Convertible
Preferred Stock (August 26, 1998). Currently, we are not
generating a significant profit from operations and we expect
that we will retain earnings, if any, to finance our operations.
Thus, we do not expect to pay dividends to holders of shares of
common stock in the foreseeable future. Holders of shares of
Series B Convertible Preferred Stock are not entitled to receive
dividends.
CAUTIONARY STATEMENTS CONCERNING FORWARD-LOOKING STATEMENTS
Statements made in this document include forward-looking
statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of
1934. Also, documents we subsequently file with the Commission
and incorporate by reference will contain forward-looking
statements. These statements include, among other things,
statements regarding our intent, belief or expectations and those
of our directors and officers with respect to:
our ability to develop new products and integrate new
product lines;
our ability to manage growth;
our ability to successfully market new products in
general;
our ability to obtain debt and equity financing;
our ability to successfully prosecute and defend
litigation;
general economic conditions; and
trends affecting our business, financial condition or
results of operations.
We caution you that, while forward-looking statements
reflect our good faith beliefs, they are not guarantees of future
performance and involve known and unknown risks and
uncertainties, and that actual results may differ materially from
those in the forward-looking statements as a result of factors
outside of our control. In addition, we disclaim any obligation
to publicly update or revise any forward-looking statement,
whether as a result of new information, future events or
otherwise.
ITEM 7. EXHIBITS
Exhibits
--------
4.1 Agreement to Amend Terms of Series B Convertible
Preferred Stock dated January 22, 1999 by and among
Selfcare, Inc., Marshall Capital Management, Inc.,
C.C. Investments LDC and Capital Ventures International.
99.1 Press Release issued January 13, 1999 filed as
Exhibit 99.1 to Form 8-K filed January 20, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
Date: March 19, 1999 SELFCARE, INC.
/s/ Kenneth D. Legg
-----------------------------
Kenneth D. Legg
Vice President, U.S. Operations and
Secretary
EXHIBIT 4.1
AGREEMENT TO AMEND TERMS
This Agreement to Amend Terms ("Agreement"), dated as of
January 22, 1999 (the "Effective Date"), is by and between
Selfcare, Inc. (the "Company") and each of the undersigned
holders (the "Holders") of the Company's Series B Convertible
Preferred Stock (the "Preferred Stock") and the Warrants issued
by the Company on August 26, 1997 (the "Warrants").
The terms of the Preferred Stock are set forth in a
Certificate of Designations, Preferences and Rights that was
filed by the Company with the Secretary of State of the State of
Delaware on August 26, 1997 (the "Certificate of Designation").
The Company issued the Preferred Stock and the Warrants to the
Holders pursuant to the terms of a Securities Purchase Agreement,
dated as of August 26, 1997 (the "Securities Purchase
Agreement").
The Company and the Holders wish to amend the terms of the
Certificate of Designation upon the terms and subject to the
conditions set forth herein and, in connection therewith, to
agree to certain other matters relating to the Preferred Stock
and the Warrants.
In consideration of the agreements set forth herein and
other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. STOCKHOLDER APPROVAL; AMENDMENT OF CERTIFICATE OF
DESIGNATION; LISTING. The Company agrees to file, as promptly as
reasonably practicable following the Effective Date (but in no
event later than February 5, 1999), (A) proxy solicitation
materials (the "Proxy Materials") with the Securities and
Exchange Commission (the "SEC") seeking such approvals of the
Company's stockholders as may be necessary in order to (i) amend
the Certificate of Designation in accordance with the terms of
the amendment to the Company's Certificate of Incorporation
attached hereto as Exhibit A (the "Amendment") and (ii) allow the
Company to issue shares of the Company's Common Stock (the
"Common Stock") upon conversion of shares of Preferred Stock in
excess of the Cap Amount (as defined in the Certificate of
Designation) and list on the American Stock Exchange ("AMEX") an
appropriate number of shares of Common Stock issuable upon
conversion of all outstanding shares of Preferred Stock (such
approvals being collectively referred to herein as "Stockholder
Approval") and (B) a draft of a listing application with AMEX
requesting that no less than 2,600,000 additional shares of
Common Stock issuable upon conversion of the Preferred Stock be
approved for listing. The Company agrees to use its reasonable
best efforts to call and hold a meeting of its stockholders (the
"Stockholder Meeting") for the purpose of voting on the proposals
set forth in the Proxy Materials on or before March 31, 1999;
provided, however, that in the event the SEC reviews the Proxy
Materials, such time period shall be extended to April 30, 1999
(such March 31 or April 30 being referred to herein as the
"Stockholder Approval Deadline"). The Company shall, no later
than the second Business Day immediately following the date on
which the Company obtains Stockholder Approval, file the
Amendment pursuant to Section 242 of the Delaware General
Corporation Law, it being understood, however, that no amendment
or change to the Company's Certificate of Incorporation shall be
made unless and until the Corporation has obtained Stockholder
Approval and all approvals necessary in order to list the number
of shares of Common Stock specified above on AMEX has been
obtained on or prior to the Stockholder Approval Deadline.
"Business Day" shall mean any day on which the New York Stock
Exchange, AMEX and commercial banks located in the city of New
York are open for business.
2. STANDSTILL AND WAIVER BY HOLDERS. Each Holder agrees as
follows:
(a) During the period beginning on the date hereof and
ending on the earlier to occur of (A) the Approval Date (as
defined below) and (B) the date on which this Agreement
terminates, such Holder will refrain from converting any shares
of Preferred Stock to the extent that the number of shares of
Common Stock issuable upon such conversion, when added to the
number of shares of Common Stock previously issued to such Holder
upon prior conversions of Preferred Stock, would exceed such
Holder's Cap Amount (as defined in the Certificate of
Designation). For purposes hereof, "Approval Date" shall mean
the first date by which each of the following events has
occurred: (i) the Company has obtained Stockholder Approval,
(ii) AMEX has listed the shares of Common Stock (subject to
official notice of issuance) covered by the listing application
described in Section 1 above, and (iii) all other approvals and
filings that are necessary in order to effect the amendments to
the Certificate of Designation and the listing of the shares of
Common Stock contemplated hereby and to permit the conversion of
all of the outstanding shares of Preferred Stock have been
obtained or made. Notwithstanding the terms of the Certificate
of Designation, during the period beginning on the date hereof
and ending on the earlier to occur of (i) the Approval Date and
(ii) the date on which this Agreement terminates, the Conversion
Price (as defined in the Certificate of Designation) applicable
to any conversion shall equal the greater of (x) the Variable
Conversion Price (as defined in the Certificate of Designation)
in effect as of such date, and (y) $2.00 (subject to adjustment
as provided in Article XI of the Certificate of Designation).
Such Holder agrees that this Section 2(a) shall be binding on any
transferee, permitted or otherwise, of such Holder's shares of
Preferred Stock and, prior to or contemporaneous with any sale or
other transfer of such shares, such Holder will obtain from the
transferee its written agreement (to which the Company shall also
be a party) to be bound by the terms of this Section 2(a), and
any such sale or transfer shall not become effective unless and
until such written agreement is obtained.
(b) Such Holder will refrain from delivering a Redemption
Notice (as defined in the Certificate of Designation) pursuant to
Article VII.A of the Certificate of Designation unless (i) the
Approval Date does not occur prior to the third Business Day
following the Stockholder Approval Deadline (the "Approval
Expiration Date") or (ii) this Agreement terminates. Such Holder
will regain the right to deliver a Redemption Notice pursuant to
and in accordance with Article VII.A of the Certificate of
Designation, in the case of clause (i) above, from and after the
Approval Expiration Date and, in the case of clause (ii) above,
from and after the effective date of such termination.
(c) During the period beginning on the date hereof and
ending on the earlier to occur of (i) the Approval Expiration
Date and (ii) the date on which this Agreement terminates, such
Holder will refrain from pursuing any claim (including without
limitation any claims with respect to Article VII of the
Certificate of Designation) that it may have against the Company
as a result of any default, potential default or alleged default
on the part of the Company which (x) exists on the date hereof or
arises on or prior to the Approval Expiration Date under the
Certificate of Designation, the Securities Purchase Agreement or
the Registration Rights Agreement (as defined in the Securities
Purchase Agreement), and (y) would be cured upon the Company
obtaining Stockholder Approval and listing shares of Common Stock
on AMEX as contemplated by the terms of this Agreement (any such
default being referred to herein as a "Qualified Default").
(d) Such Holder will, promptly upon receiving a written
request from the Company at any time following the Approval Date
(as long as the Approval Date occurs prior to the Approval
Expiration Date), promptly execute and deliver a written release
to the Company covering any and all claims that such Holder may
have as a result of any Qualified Default.
(e) Such Holder waives any rights under the Warrants
relating to antidilution adjustments that would arise as a result
of (i) the issuance of the Amended and Restated Subordinated
Convertible Notes dated January 11, 1999 (the "Notes") or the
conversion thereof in accordance with the terms specified in
Exhibit A to the letter agreement, dated January 7, 1999 (the
"Letter Agreement") by and among the Company and the Holder, (ii)
the issuance of the Company's Series C, D or E Preferred Stock or
the conversion of such preferred stock in accordance with the
terms specified in Exhibit B to the Letter Agreement, or (iii)
the transactions contemplated hereby, including the issuance of
any shares of Common Stock upon conversion of any shares of
Preferred Stock; provided, however, that such waiver shall expire
in the event that this Agreement terminates prior to the Approval
Expiration Date. Following each Holder's receipt of the
Company's written request therefor, each Holder will promptly
deliver its Warrant to the Company upon tender by the Company of,
and in exchange for, an amended warrant that will be identical in
all respects to such Warrant except that such amended warrant
will provide that the holder thereof shall have no rights
relating to antidilution adjustments as provided in this
paragraph (e).
3. WAIVER BY COMPANY. The Company agrees that it will refrain
from delivering to any Holder either (i) an Optional Redemption
Notice (as defined in the Certificate of Designation) pursuant to
Article VIII.B of the Certificate of Designation or (ii) a
Mandatory Conversion Notice (as defined in the Certificate of
Designation) pursuant to Article IV.E of the Certificate of
Designation unless this Agreement terminates prior to the
Approval Expiration Date and, in the event of such termination,
the Company will continue to refrain from delivering either an
Optional Redemption Notice or a Mandatory Conversion Notice until
the expiration of ten (10) Business Days from the date on which
such termination occurs (assuming in such case that the Company
is entitled on the date of the delivery of such notice to deliver
such notice pursuant to the terms of the Certificate of
Designation).
4. TERMINATION. This Agreement shall terminate automatically
upon the occurrence of any of the following events (unless a
waiver thereof is delivered by each Holder to the Company):
(a) the Company fails to file the Proxy Materials with the
SEC on or before February 5, 1999;
(b) the Company fails to obtain Stockholder Approval on or
before the Stockholder Approval Deadline;
(c) the Approval Date does not occur prior to the Approval
Expiration Date;
(d) as of the Approval Date, a registration statement is
not effective and available to each Holder for the
resale of all of the shares of Common Stock issuable
upon (i) conversion of all of the shares of Preferred
Stock and (ii) exercise of all of the Warrants then
held by such Holder (assuming such conversion or
exercise were to occur as of the Approval Date and
without regard to any limitation on such conversion or
exercise that might otherwise exist);
(e) a Redemption Event (as defined in the Certificate of
Designation) occurs, other than a Redemption Event
arising under subparagraph (i) of Article VIII.A of the
Certificate of Designation as a result of the failure
by the Company to have a sufficient number of shares of
Common Stock listed for trading on the exchanges or
market specified in such subparagraph (i).
(f) the Company breaches any of its material obligations
hereunder and such breach is not cured within five (5)
Business Days following receipt by the Company of
written notice from any holder of Preferred Stock then
outstanding; or
(g) each Holder fails to receive, on or before February 5,
1999, the written agreement of each officer or director
of the Company who beneficially owns at least 100,000
shares of Common Stock to vote the shares of Common
Stock beneficially owned by such person on, and
outstanding on, the record date for the Stockholder
Meeting in favor of (i) the issuance of shares of
Common Stock in excess of the Cap Amount (as defined in
the Certificate of Designation) and (ii) the filing of
the Amendment.
Upon the termination of this Agreement, no party shall have
any further obligation hereunder to any other party and each
party shall retain all rights and remedies it may have at law or
in equity under the Certificate of Designation, the Securities
Purchase Agreement or the Registration Rights Agreement. Nothing
contained herein shall affect the rights or remedies available to
the Company, on the one hand, or any Holder, on the other hand,
in the event of a breach of any term hereof by a Holder or the
Company, as the case may be.
5. REPRESENTATIONS OF THE PARTIES. The Company hereby
represents and warrants to each Holder, and each Holder hereby
represents to the Company, that (i) such party has the requisite
power and authority (corporate or otherwise) to enter into and
perform its obligations under this Agreement, (ii) this Agreement
constitutes the valid and legally binding agreement of such
party, enforceable against such party in accordance with its
terms and (iii) neither this Agreement nor the performance by it
of its obligations hereunder will, in any such case, result in
any violation of any provisions of its charter, bylaws or any
other governing document as amended and in effect on and as of
the date hereof or be in conflict with or constitute, with or
without the passage of time and giving of notice, either a
default under any provision of any instrument or contract to
which it is a party or by which it is bound, or of any provision
of any Federal or state judgment, writ, decree, order, statute,
rule or governmental regulation applicable to it, or an event
which results in the creation of any lien, charge or encumbrance
upon any of its or of any of its subsidiaries' assets.
6. REPRESENTATIONS AND AGREEMENTS OF THE COMPANY. The Company
represents and warrants to, and agrees with, each Holder that (i)
each document or report (a "Disclosure Document") filed by the
Company with the SEC since December 31, 1997 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as of the
date of the filing thereof with the SEC, conformed in all
material respects to the requirements of the Exchange Act, and
the rules and regulations thereunder and, as of the date of such
filing, such Disclosure Document did not contain an untrue
statement of material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were
made, not misleading, (ii) the Company has issued and sold the
Notes and the Series C, D and E Preferred Stock, and has not
granted any registration rights with respect to the Series C, D
or E Preferred Stock or the securities into which such preferred
stock is convertible and (iii) the capitalization of the Company,
including its authorized capital stock and the number of shares
issued and outstanding, is set forth on Exhibit B hereto.
7. OPINION OF COUNSEL. The Company agrees that, promptly
following the filing of the Amendment, the Company shall deliver
to each Holder an opinion of counsel addressed to such Holder and
stating that, in reliance on a certificate received from the
Secretary of State of the State of Delaware, the Amendment has
been duly filed and is effective as of the date of such opinion.
8. HEADINGS. The headings used in this Agreement are used for
convenience only and are not to be considered in construing or
interpreting this Agreement.
9. NOTICES. Any notice, demand or request required or
permitted to be given by any party to any other party pursuant to
the terms of this Agreement shall be in writing and shall be
deemed given (i) when delivered personally or by verifiable
facsimile transmission (with an original to follow) on or before
5:00 p.m., eastern time, on a Business Day or, if such day is not
a Business Day, on the next succeeding Business Day, (ii) on the
next Business Day after timely delivery to a
nationally-recognized overnight courier and (iii) upon actual
receipt after deposit in the U.S. mail (certified or registered
mail, return receipt requested, postage prepaid), addressed to
the parties as follows:
If to the Company:
Selfcare, Inc.
200 Prospect Street
Waltham, MA 02154
Attn: Chief Executive Officer
Fax: (617) 647-3939
with a copy to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Attn: Stephen W. Carr, P.C. and Martin Carmichael,
III, P.C.
and if to any Holder, to such address for such Holder as appears
in the Securities Purchase Agreement or as may be designated by
such Holder in writing to the Company.
10. ENTIRE AGREEMENT; AMENDMENTS. This Agreement constitutes
the entire agreement between the parties with regard to the
amendment to the matters described herein, superseding all prior
agreements or understandings, whether written or oral, between or
among the parties, other than the Securities Purchase Agreement,
the Registration Rights Agreement (as defined in the Securities
Purchase Agreement), the Warrants and the other agreements and
documents executed and/or delivered by the Company under or in
connection with the Securities Purchase Agreement, the
Registration Rights Agreement, the Certificate of Designation or
the Warrants. Except as expressly provided herein, neither this
Agreement nor any term hereof may be amended except pursuant to a
written instrument executed by the Company and the holders of at
least two-thirds (_) of the shares of Preferred Stock then
outstanding, and no provision hereof may be waived other than by
a written instrument signed by the party against whom enforcement
of any such waiver is sought.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first-above written.
SELFCARE, INC.
By: /s/ Ron Zwanziger
-----------------------
Name: Ron Zwanziger
Title: President and Chief
Executive Officer
HOLDER NAME: Marshall Capital Management Inc.
---------------------------------
By: /s/ Allan Weine
-----------------
Name: Allan Weine
Title: President
HOLDER NAME: CC Investments, LDC
--------------------
By: /s/ John D. Ziegelman
-----------------------
Name: John D. Ziegelman
Title: Director
HOLDER NAME: Capital Ventures International
------------------------------
By: Heights Capital Management, its
-----------------------------------
authorized agent
----------------
By: /s/ Michael Spolan
-------------------
Name: Michael Spolan
Title: General Counsel and Secretary
Exhibit A to
Agreement to
Amend Terms
CERTIFICATE OF AMENDMENT
TO
THE CERTIFICATE OF INCORPORATION
OF
SELFCARE, INC.
(Pursuant to Section 242 of the
Delaware General Corporation Law)
Selfcare, Inc., a Delaware corporation (the "Corporation"),
hereby certifies that the following amendment to the
Corporation's Certificate of Incorporation (the "Amendment") has
been duly adopted in accordance with Section 242 of the Delaware
General Corporation Law.
The Certificate of Designations, Preferences and Rights of
the Series B Convertible Preferred Stock filed by the Corporation
with the Secretary of State of the State of Delaware on August
26, 1997 and incorporated into the Corporation's Certificate of
Incorporation (the "Certificate") is hereby amended as follows:
1. In Article I of the Certificate, the words "One
Thousand U.S. Dollars ($1,000)" SHALL BE DELETED AND
REPLACED WITH THE WORDS "[THE AMOUNT TO BE INSERTED
WILL BE EQUAL TO THE PRODUCT OF (A) $1,000 PLUS PREMIUM
ON EACH SHARE OF PREFERRED STOCK ACCRUED TO, BUT NOT
INCLUDING, THE DATE OF THE AMENDMENT TIMES (B) 1.15]".
2. Paragraph D of Article III of the Certificate shall be
deleted in its entirety and replaced with the
following:
"`Conversion Price' means (i) on any date occurring
from and after [THE DATE OF THE AMENDMENT] through and
including July 20, 1999, the Fixed Conversion Price;
and (ii) on any date occurring after July 20, 1999, the
lower of (A) the Variable Conversion Price and (B) the
Fixed Conversion Price; provided, however, that in the
event that at any time following [THE DATE OF THE
AMENDMENT] the Closing Bid Price for a share of Common
Stock exceeds $3.25 (subject to equitable adjustment
for the events specified in Article XI, A and B) for a
period of ten (10) consecutive trading days and the
Corporation delivers to each Holder, in accordance with
the provisions of this Certificate relating to the
delivery of notice, written notice of the occurrence of
such event within five (5) Business Days after the
tenth such trading day, "Conversion Price" shall mean,
from and after the effective date specified in such
notice, which date shall be at least thirty (30) days
after delivery of such notice to each Holder, the Fixed
Conversion Price, it being understood that after the
date of such delivery and prior to such effective date,
each Holder shall have the right to convert shares of
Series B Preferred Stock at any time and from time to
time at the lower of (A) the Variable Conversion Price
and (B) the Fixed Conversion Price."
3. Article III of the Certificate shall be amended as
follows:
Paragraph E thereof shall be deleted in its entirety
and replaced with the following:
"E. `Fixed Conversion Price' means $2.00, and shall be
subject to adjustment as provided herein."
Paragraph H thereof shall be deleted in its entirety
and replaced with the following:
"H. `N' means the number of days from and including
[THE DATE OF THE AMENDMENT]."
4. In Section A of Article IV of the Certificate, the
formula described in clause (i) thereof shall be
deleted and replaced with the following:
FA + P
CP
where FA represents the Face Amount of such share of
Series B Preferred Stock,
P represents the aggregate Premium accrued on such
share of Series B Preferred Stock up to and including
the Conversion Date, and
CP represents the Conversion Price (as defined below)
in effect on the applicable Conversion Date.
5. In the first sentence of paragraph (i) of Section B of
Article IV of the Certificate, the following words
shall be inserted in the parenthetical after the words
"subject to a two (2) business day grace period":
"or, if the Corporation does not have a sufficient
number of shares of Common Stock listed on the
principal exchange or market on which the Common Stock
is then traded in order to effect the conversion of
Series B Preferred Stock, a five (5) business day grace
period"
6. Section C of Article IV of the Certificate shall be
amended as follows:
(i) In the first sentence of Section C, the words
"limitations (each of which limitations shall be
applied independently)" shall be deleted and
replaced with the word "limitation".
(ii) Paragraph (i) of Section C shall be deleted in its
entirety.
(iii) The number "(ii)" at the beginning of
paragraph (ii) of Section C shall be deleted.
7. Section E of Article IV of the Certificate shall be
amended so that the words "the Fixed Conversion Price
then in effect" appearing in subparagraph (iii)(a)
shall be deleted and replaced with "$13.9581 (subject
to equitable adjustment for the events specified in
Article XI, A and B)".
8. Article VII of the Certificate shall be deleted in its
entirety and replaced with the following:
"VII. [Intentionally Omitted]"
9. In subparagraph (iv) of Section B, Article VIII of the
Certificate, the parenthetical shall be amended so that
(i) the words "Articles V or VII" shall be deleted and
replaced with the words "Article V" and (ii) the words
"such Articles" shall be deleted and replaced with the
words "such Article".
10. Section B of Article VIII of the Certificate shall be
amended as follows:
(i) In the first sentence of paragraph VIII.B.(i), the
words "for any five (5) consecutive trading days
is less than $9.00" shall be deleted and replaced
with the words "for any ten (10) consecutive
trading days occurring after July 20, 1999 is less
than $2.00".
(ii) In the first sentence of paragraph VIII.B.(i), the
words "following the expiration of such five (5)
day period" shall be deleted and replaced with the
words "following the expiration of such ten (10)
day period".
(iii) In the last sentence of paragraph VIII.B.(i),
the words "115% of the Face Amount thereof" shall
be deleted and replaced with the words "the Face
Amount thereof".
11. In Section C of Article XIV of the Certificate, all
references to "Cap Amount" shall be deleted.
12. The following paragraph shall be added at the end of
Article XIV:
"NOTICES. Any notice, demand or request required or
permitted to be delivered by the Corporation to any Holder or by
any Holder to the Corporation pursuant to the terms of this
Certificate of Designation shall be in writing and shall be
deemed delivered (i) when delivered personally or by verifiable
facsimile transmission (with an original to follow) on or before
5:00 p.m., eastern time, on a Business Day or, if such day is not
a Business Day, on the next succeeding Business Day, (ii) on the
next Business Day after timely delivery to a
nationally-recognized overnight courier and (iii) upon actual
receipt after deposit in the U.S. mail (certified or registered
mail, return receipt requested, postage prepaid), addressed as
follows:
If to the Corporation:
Selfcare, Inc.
200 Prospect Street
Waltham, MA 02154
Attn: Chief Executive Officer
Fax: (617) 647-3939
with a copy to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Attn: Stephen W. Carr, P.C. and Martin Carmichael,
III, P.C.
and if to any Holder, to such address for such Holder as appears
in the Securities Purchase Agreement, dated as of August 26, 1997
by and among the Corporation and each of the purchasers named
therein, or as may be designated by such Holder in writing to the
Corporation."
Except as specifically amended hereby, the Certificate of
Incorporation (including without limitation the Certificate of
Designation) shall remain in full force and effect in accordance
with its terms. No amendment effected hereby shall apply to any
event or circumstance occurring prior to the date on which this
Amendment is filed with the Secretary of State of the State of
Delaware and has become effective in accordance with the laws of
the State of Delaware.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, this Certificate of Amendment has been
executed on behalf of the Corporation this ____ day of
_______________, 1999.
SELFCARE, INC.
By:
Name: _____________________
Title: ______________________
