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 8, 1999
SELFCARE, INC.
(Exact name of Registrant as specified in charter)
Delaware 0-20871 04-3164127
____________________________ ________________________ __________________
(State or other jurisdiction (Commission file number) (IRS employer
of incorporation) identification no.)
200 Prospect Street, Waltham, Massachusetts 02453
_________________________________________________
(Address of principal executive offices) (Zip Code)
(781) 647-3900
(Registrant's telephone number, including area code)
Item 5. Other Events
Senior Subordinated Convertible Notes
- -------------------------------------
On January 11, 1999, Selfcare, Inc. (the "Company") entered
into a Note Amendment Agreement and issued Amended and Restated
Senior Subordinated Convertible Notes (the "Amended Notes")
pursuant to which the terms of the Senior Subordinated
Convertibles Notes issued to two institutional investors (the
"Note Investors") on October 27, 1997 were amended, subject to
shareholder approval. Under the terms of the Amended Notes, the
total principal amount of approximately $3,778,000, plus accrued
but unpaid interest, accrues interest at a rate of 8% per annum
and is due on July 12, 1999. In exchange for certain
forbearances by the Note Investors, this total principal amount
represents a 15% premium on the amount previously owed to the
Note Investors by the Company.
The Amended Notes may be converted into shares of Selfcare,
Inc. common stock, par value $.001 per share (the "Common
Stock"), subject to certain restrictions. The holders of the
Amended Notes cannot effect a conversion of the Amended Notes
until the Company has obtained the approval of its shareholders,
to the extent required (the "Shareholder Approval"), of the
terms of issuance and conversion of the Amended Notes. In the
event Shareholder Approval, if required, is not obtained by
certain dates which may vary depending upon regulatory review, if
any, the investors shall be able to require the Company to repay
in full the Amended Notes. If Shareholder Approval, if required,
is obtained, then the holders of the Amended Notes may convert
all or a portion of the Amended Notes into shares of Common Stock
at a conversion price of $2.00 per share. Upon the occurrence of
certain events of default, the holders of the Amended Notes may
convert all or a portion of such Amended Notes for shares of
Common Stock at a conversion price equal to the lesser of $2.00
(the "Ceiling Price") and the lowest price at which the Company's
Common Stock traded during the five trading days preceding such
conversion date. Notwithstanding the foregoing provision, the
holders of the Amended Notes may on any date elect to fix
permanently the conversion price of the Amended Notes at the
conversion price in effect on such date. If the per share
conversion price is less than 60% of the Ceiling Price, the
Company may block any conversion by offering to redeem the
Amended Notes for cash in an amount equal to the fair market
value of the Common Stock for which the Amended Notes could then
be converted. At any time following two weeks after Shareholder
Approval is obtained, the Company may redeem an Amended Note at
100% of its face value plus accrued but unpaid interest.
The Company intends to call a Special Meeting of its
shareholders as soon as practicable to approve, among other
items, the terms of the Amended Notes. For a complete
description of the terms of the Amended Notes, see the Amended
and Restated Senior Subordinated Convertible Notes due July 12,
1999 attached hereto as Exhibit 99.3 and Exhibit 99.4, as well as
the Note Amendment Agreement attached hereto as Exhibit 99.2.
Series B Convertible Preferred Stock
_____________________________________
On January 13, 1999, the Company announced that it had
entered into a letter of intent with the holders of the Series B
Convertible Preferred Stock, which was originally issued in
August 1997, to amend the terms of the preferred stock. The
amendments, which are subject to the execution of definitive
documents and to approval of the Company's shareholders at a
shareholders meeting, will fix the conversion price of the Series
B Convertible Preferred Stock at no less than $2.00 per share for
six months and will provide the holders of the preferred stock
with a 15% premium on the approximately $4.9 million of preferred
stock which has not yet been converted. The press release
describing this transaction is attached as Exhibit 99.1 hereto.
New Issuance of Convertible Preferred Stock
___________________________________________
On January 11, 1999, January 8, 1999 and January 11, 1999,
respectively, the Company sold in a private placement 56,845
shares of Series C Convertible Preferred Stock, par value $.001
per share, 3,030 shares of Series D Convertible Preferred Stock,
par value $.001 per share, and 14,170 shares of Series E
Convertible Preferred Stock, par value $.001 per share, of the
Company (collectively, the "Preferred Shares") to investors (the
"Preferred Investors") at an aggregate purchase price of
$7,404,500. The Preferred Investors include certain officers and
directors of the Company. Each Preferred Share accrues a premium
of 7% per annum (the "Premium"). The Preferred Shares are
convertible into shares of Common Stock. The actual number of
shares of Common Stock issuable upon conversion of a Preferred
Share is equal to the aggregate stated value per share (i.e.,
$100), plus any accrued but unpaid Premium (unless the Company
elects to pay such premium in cash) through the date of such
conversion, divided by a conversion price initially equal to
$1.8125 per share of Series C Convertible Preferred Stock, $2.00
per share of Series D Convertible Preferred Stock, and $3.028 per
share of Series E Convertible Preferred Stock (in each case, the
"Conversion Price"). The Conversion Price is subject to
adjustment for stock splits, stock dividends, recapitalization
and similar transactions. Any Preferred Share not previously
converted will automatically convert into Common Stock on January
8, 2002.
The Company intends to call a Special Meeting of the
shareholders as soon as practicable to approve the issuance of
the Preferred Shares. No holder of any Series Preferred Share is
entitled to convert such securities until the earlier of April
30, 1999 or Shareholder Approval of the issuance of such
Preferred Shares. If the shareholders do not approve the
issuance of the Preferred Shares and any holder of the Preferred
Shares gives the Company a conversion notice on or after April
30, 1999, then the Company will give all holders of the Preferred
Shares notice of the right to convert up to a pro-rata portion of
the aggregate number of shares which may be issued under the
applicable rules and regulations of the American Stock Exchange.
In such event, if the total number of shares of Common Stock
issuable upon conversion of the Preferred Stock for which
conversion is requested (the "Requested Shares") exceeds the
number of such permitted shares, then the Company will convert,
on a pro-rata basis, only such portion of Preferred Shares as is
convertible into the number of such permitted shares, and will
redeem the remaining Preferred Shares. If, however, the total
number of shares of Common Stock issuable upon conversion of the
Requested Shares does not exceed the number of such permitted
shares, then the Company will automatically convert the Requested
Shares and redeem all remaining outstanding Preferred Shares. In
such an event, the Company has the option of redeeming a
percentage of such Preferred Shares in shares of Common Stock so
long as the aggregate number of shares of Common Stock issuable
upon conversion and redemption does not exceed the number of
permitted shares.
For a complete description of the terms of the Preferred
Stock, see the Certificate of Designations, Preferences and
Rights of Series C Convertible Preferred Stock, the Certificate
of Designations, Preferences and Rights of Series D Convertible
Preferred Stock and the Certificate of Designations, Preferences
and Rights of Series E Convertible Preferred Stock, each as filed
with the Secretary of State of the State of Delaware, January 8,
1999, attached hereto as Exhibit 4.1, Exhibit 4.2 and Exhibit
4.3, respectively.
Item 7. Exhibits
_________________
Exhibits
________
4.1 Certificate of Designations, Preferences
and Rights of Series C Convertible Preferred Stock
as filed with the Secretary of State of the State
of Delaware, January 8, 1999.
4.2 Certificate of Designations, Preferences
and Rights of Series D Convertible Preferred Stock
as filed with the Secretary of State of the State
of Delaware, January 8, 1999.
4.3 Certificate of Designations, Preferences
and Rights of Series E Convertible Preferred Stock
as filed with the Secretary of State of the State
of Delaware, January 8, 1999.
99.1 Press Release issued January 13, 1999.
99.2 Note Amendment Agreement dated as of
January 11, 1999, by and among the Company, Elliot
Associates, L.P. and Westgate International, L.P.
99.3 Amended and Restated Senior Subordinated
Convertible Note dated January 11, 1999, delivered
by the Company to Elliot Associates, L.P.
99.4 Amended and Restated Senior Subordinated
Convertible Note dated January 11, 1999, delivered
by the Company to Westgate International, L.P.
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: January 19, 1999 SELFCARE, INC.
/s/ Kenneth D. Legg
_________________________
Kenneth D. Legg
Vice President, U.S. Operations and
Secretary
EXHIBIT 4.1
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS
of
SERIES C CONVERTIBLE PREFERRED STOCK
of
SELFCARE, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
Selfcare, Inc., a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), hereby
certifies that the following resolution was adopted by a Special
Committee of the Board of Directors of the Corporation pursuant
to authority of such Special Committee of the Board of Directors
and the Board of Directors as required by Section 151 of the
Delaware General Corporation Law.
RESOLVED, that pursuant to the authority granted to and
vested in the special Committee of the Board of Directors (the
"Special Committee") by duly approved and adopted resolutions of
the Board of Directors of the Corporation (the "Board of
Directors" or the "Board") and in accordance with the provisions
of its Certificate of Incorporation and Bylaws, each as amended
and restated through the date hereof, the Special Committee
hereby authorizes a series of the Corporation's previously
authorized Preferred Stock, par value $.001 per share (the
"Preferred Stock"), and hereby states the designation and number
of shares, and fixes the relative rights, preferences,
privileges, powers and restrictions thereof as follows:
Section 1. Designation.
The designation of this series, which consists of 65,000
shares of Preferred Stock, is the Series C Convertible Preferred
Stock (the "Series C Preferred Stock") and the face amount shall
be One Hundred U.S. Dollars ($100) per share (the "Face Amount").
Section 2. Dividends.
(a) The holders of outstanding shares of Series C
Preferred Stock shall be entitled to receive, when, as and if
declared by the Board of Directors, out of funds legally
available for the payment of dividends, dividends at the rate per
share of 7% of the initial purchase price paid for such shares
(the "Purchase Price") per annum. All dividends shall be
cumulative and shall be payable in cash in arrears on the last
day of March, June, September and December of each year (each
such date, a "Dividend Payment Date") commencing on March 31,
1999, in preference to and with priority over dividends on the
common stock of the Corporation, par value $.001 per share (the
"Common Stock"). Such quarterly dividends shall be cumulative
and shall accrue (whether or not earned or declared, and whether
or not there are funds legally available therefor) without
interest from the later of (i) the first day of the quarterly
period in which such dividend may be payable as herein provided,
or (ii) the date of issuance of the shares of Series C Preferred
Stock.
(b) The amount of dividends accrued on the Series C
Preferred Stock for any period less than a full quarterly
dividend period (including the initial dividend period) shall be
equal to a pro rata portion of the total dividend payable for the
quarterly dividend period during which such period occurs, based
on the actual number of days elapsed in such period and the total
number of days in the applicable quarterly dividend period.
Dividends shall accrue on a daily basis during each dividend
period as provided above, and the Liquidation Preference (as
defined below) of each outstanding share of Series C Preferred
Stock shall be correspondingly increased on a daily basis. Each
such dividend shall be payable to holders of record as their
names shall appear on the stock books of the Corporation on any
record date for such dividends, except that dividends in arrears
for any past Dividend Payment Date may be declared and paid at
any time without reference to such regular Dividend Payment Date
to holders of record on such date not more than sixty (60) days
or less then ten (10) days prior to the date of payment as shall
be determined by the Board of Directors.
(c) No dividends will be declared or paid on any
Series C Preferred Stock unless full cumulative dividends, if
any, payable on the Corporation's Series B Convertible Preferred
Stock and on any other Senior Dividend Stock (as defined below)
have been declared and paid or are contemporaneously declared and
funds sufficient for payment are set aside on the Series B
Convertible Preferred Stock and any other Senior Dividend Stock
for all prior dividend periods.
(d) Except as provided in the next sentence, no
dividends will be declared or paid on any Parity Dividend Stock
(as defined below) unless full cumulative dividends have been
declared and paid or are contemporaneously declared and funds
sufficient for payment are set aside on the Series C Preferred
Stock for all prior dividend periods. If accrued dividends are
not paid in full upon the Series C Preferred Stock for all prior
dividend periods, all dividends declared upon shares of the
Series C Preferred Stock and Parity Dividend Stock for any
dividend period will be declared pro rata so that the amount of
dividends declared per share on the Series C Preferred Stock and
such other Parity Dividend Stock shall bear to each other the
same ratio that accumulated and unpaid dividends per share on the
shares of Series C Preferred Stock and such other Parity Dividend
Stock bear to each other.
(e) The Corporation may not declare or pay any
dividends on any shares of Common Stock or Junior Dividend Stock
(as defined below), or make any payment on account of, or set
apart money for, the purchase, redemption or other retirement of,
or for a sinking or other analogous fund for, any shares of
Junior Dividend Stock or make any distribution in respect
thereof, whether in cash or property or in obligations or stock
of the Corporation, other than in Common Stock or Junior Dividend
Stock, unless full cumulative dividends shall have been or are
contemporaneously paid or declared and set apart for payment on
the Series C Preferred Stock and any Parity Dividend Stock.
Section 3. Liquidation Preference.
(a) Preference. In the event of any liquidation,
dissolution or winding up of the Corporation, either voluntarily
or involuntarily, the holders of the Series C Preferred Stock
shall be entitled to receive prior and in preference to any
distribution of any of the assets or surplus funds of the
Corporation to the holders of Common Stock or any Junior
Liquidation Stock (as defined below), an amount equal to the sum
of (A) the Purchase Price (which shall be $100 per share), plus
(B) a further amount equal to any dividends on such shares as to
which holders of the Series C Preferred Stock are entitled
pursuant to Section 2 that have not been paid (such sum, the
"Liquidation Preference"). If, upon such liquidation,
dissolution or winding up of the Corporation, the assets of the
Corporation available for distribution to the holders of the
Series C Preferred Stock, after required distributions are made
to the holders of any Senior Liquidation Stock, are insufficient
to provide for the payment of the full Liquidation Preference,
such assets as are so available shall be distributed pro rata
among the holders of the Series C Preferred Stock and Parity
Liquidation Stock (as defined below) ratably in accordance with
the respective amounts which would be payable on such shares if
all amounts payable thereon were paid in full, subject to the
preferential rights of the holders of the Corporation's Series B
Convertible Preferred Stock and any other Senior Liquidation
Stock (as defined below). After payment of the full amount of
the Liquidation Preference and accumulated dividends to which
holders of shares of Series C Preferred Stock are entitled, the
holders of shares of Series C Preferred Stock will not be
entitled to any further participation in any distribution of
assets by the Corporation. The amount per share set forth in
this Section 3(a) shall be appropriately adjusted for any stock
splits, stock combinations, stock dividends or similar
recapitalizations with respect to the Series C Preferred Stock.
(b) Definitions. For the purposes of this resolution,
any stock of any class or series of the Corporation shall be
deemed to rank:
(i) senior to shares of the Series C Preferred
Stock as to dividends if the terms of the stock of such class or
series specifically provide that the shares rank senior to the
Series C Preferred Stock with respect to the receipt of dividends
("Senior Dividend Stock");
(ii) senior to shares of the Series C Preferred
Stock upon liquidation, if the terms of the stock of such class
or series specifically provide that the shares rank senior to the
Series C Preferred Stock with respect to the amounts
distributable upon liquidation, dissolution or winding up, as the
case may be ("Senior Liquidation Stock");
(iii) junior to shares of the Series C
Preferred Stock as to dividends if the terms of the stock of such
class or series specifically provide that the shares rank junior
to the Series C Preferred Stock with respect to the receipt of
dividends ("Junior Dividend Stock");
(iv) junior to shares of the Series C Preferred
Stock upon liquidation if the terms of the stock of such class or
series specifically provide that the shares rank junior to the
Series C Preferred Stock with respect to the amounts
distributable upon liquidation, dissolution or winding up
("Junior Liquidation Stock");
(v) on a parity with shares of the Series C
Preferred Stock as to dividends, whether or not the dividend
rates or dividend payment dates per share thereof shall be
different from those of the Series C Preferred Stock, if the
holders of stock of such class or series shall be entitled by the
terms thereof to the receipt of dividends in proportion to their
respective dividend rates, without preference or priority of one
over the other as between the holders of such stock and the
holders of shares of Series C Preferred Stock ("Parity Dividend
Stock"); and
(vi) on a parity with shares of the Series C
Preferred Stock upon liquidation, whether or not the redemption
or liquidation prices per share thereof shall be different from
those of the Series C Preferred Stock, if the holders of stock of
such class or series shall be entitled by the terms thereof to
the receipt of amounts distributable upon liquidation,
dissolution or winding up, in proportion to their respective
liquidation prices, without preference or priority of one over
the other as between the holders of such stock and the holders of
shares of Series C Preferred Stock ("Parity Liquidation Stock").
(c) Consolidation or Merger. A consolidation or
merger of the Corporation with or into any other corporation or
corporations, or a sale of all or substantially all of the assets
of the Corporation, shall not be deemed to be a liquidation,
dissolution or winding up within the meaning of this Section 3.
Section 4. Conversion.
(a) Right to Convert. Subject to and in compliance
with the provisions of this Section 4, any shares of the Series C
Preferred Stock may, at any time or from time to time at the
option of the holder, be converted into fully-paid and
non-assessable shares of Common Stock. The number of shares of
Common Stock to which a holder of the Series C Preferred Stock
shall be entitled upon conversion shall be the product obtained
by multiplying the Applicable Conversion Rate (determined as
provided in Section 4(c)) by the number of shares of Series C
Preferred Stock being converted.
(b) Automatic Conversion.
(i) Immediately upon the close of business (or
the next succeeding trading day if such date is not a trading
day) on the third anniversary of the date of issuance of a share
of Series C Preferred Stock, such share of Series C Preferred
Stock, if not previously converted, shall automatically be
converted into the number of shares of Common Stock into which
such shares are convertible upon application of the then
effective Applicable Conversion Rate (determined as provided in
Section 4(c)).
(ii) Upon the occurrence of an automatic
conversion with respect to a share of Series C Preferred Stock as
described in Section (4)(b)(i), such outstanding share of Series
C Preferred Stock shall be converted automatically without any
further action by the holder of such share and whether or not the
certificate representing such share is surrendered to the
Corporation or its transfer agent; provided, however, that the
Corporation shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such
conversion unless a certificate evidencing such share of Series C
Preferred Stock being so converted is either delivered to the
Corporation or any transfer agent, as hereinafter provided, or
the holder notifies the Corporation or any transfer agent, as
hereinafter provided, that such certificates have been lost,
stolen or destroyed and executes an agreement satisfactory to the
Corporation to indemnify the Corporation from any loss incurred
by it in connection therewith.
Upon the conversion of outstanding Series C Preferred Stock,
the holders of the Series C Preferred Stock shall surrender the
certificates representing such shares at the office of the
Corporation or of any transfer agent for the Common Stock.
Thereupon, there shall be issued and delivered to each such
holder, promptly at such office and in his, her or its name as
shown on such surrendered certificate or certificates, a
certificate or certificates for the number of shares of Common
Stock into which the shares of the Series C Preferred Stock
surrendered were convertible on the date on which such automatic
conversion occurred and cash as provided in Section 4(k) below in
respect of any fraction of a share of Common Stock issuable upon
such automatic conversion.
(c) Applicable Conversion Rate. The conversion rate
in effect at any time with respect to a share of Series C
Preferred Stock (the "Applicable Conversion Rate") shall equal
the quotient obtained by dividing such Series C Preferred Share's
Liquidation Preference (which includes accrued and unpaid
dividends, if any, thereon) by the Applicable Conversion Value
for such share, calculated as hereinafter provided.
(d) Applicable Conversion Value. The Applicable
Conversion Value with respect to a share of Series C Preferred
Stock in effect initially, and until first adjusted in accordance
with Section 4(e), 4(g) or 4(h) hereof, shall be $1.8125.
(e) Adjustment to Applicable Conversion Value. Upon
the happening of an Extraordinary Common Stock Event (as
hereinafter defined), the Applicable Conversion Value shall,
simultaneously with the happening of such Extraordinary Common
Stock Event, be adjusted by dividing the then effective
Applicable Conversion Value by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding
(excluding treasury stock) immediately after such Extraordinary
Common Stock Event and the denominator of which shall be the
number of shares of Common Stock outstanding (excluding treasury
stock) immediately prior to such Extraordinary Common Stock
Event, and the quotient so obtained shall thereafter be the
Applicable Conversion Value. The Applicable Conversion Value, as
so adjusted, shall be readjusted in the same manner upon the
happening of any successive Extraordinary Common Stock Event or
Events.
(f) Adjustments for Mergers and Other Reorganizations.
If at any time or from time to time there shall be a capital
reorganization of the Common Stock (other than an Extraordinary
Common Stock Event) or a merger or consolidation of the
Corporation with or into another corporation or the sale of all
or substantially all of the Corporation's properties and assets
to any other person in connection with which the holders of
Series C Preferred Stock do not elect to convert such Series C
Preferred Stock, then, as a part of and as a condition to the
effectiveness of such reorganization, merger, consolidation or
sale, lawful and adequate provision shall be made so that the
holders of the Series C Preferred Stock shall thereafter be
entitled to receive upon conversion of the Series C Preferred
Stock the number of shares of stock or other securities or
property of the Corporation or of the successor corporation
resulting from such merger or consolidation or sale or other
consideration, to which such holders would have been entitled if
they had converted their Series C Preferred Stock immediately
prior to such capital reorganization, merger, consolidation, or
sale. In any such case, appropriate provisions shall be made
with respect to the rights of the holders of the Series C
Preferred Stock after the reorganization, merger, consolidation
or sale to the end that the provisions set forth herein
(including without limitation provisions for adjustment of the
Applicable Conversion Value of the Series C Preferred Stock and
the number of shares purchasable upon conversion of the Series C
Preferred Stock) shall thereafter be applicable, as nearly as may
be, with respect to any shares of stock, securities or assets to
be deliverable thereafter upon the conversion of the Series C
Preferred Stock.
(g) Adjustments for Distributions. If the Corporation
shall distribute to all holders of its Common Stock any shares of
capital stock of the Corporation (other than Common Stock) or
evidence of its indebtedness or assets (any of the foregoing
being hereinafter in this Section 4(g) called a "Distribution"),
(but excluding regularly declared quarterly cash dividends (if
any) or rights or warrants to subscribe for or purchase any of
its securities), then in each such case the Applicable Conversion
Value shall be adjusted so that it shall equal the price
determined by multiplying (A) the Applicable Conversion Value in
effect immediately prior to the close of business on the date
fixed for the determination of stockholders entitled to receive
such Distribution by (B) a fraction, the numerator of which shall
be the Fair Market Value (as hereinafter defined) per share of
Common Stock on the record date referred to below less the then
fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a Board
resolution), of the portion of the capital stock or assets or
evidences of indebtedness so distributed or of such rights or
warrants applicable to one share of Common Stock, and the
denominator of which shall be the Fair Market Value per share of
Common Stock on the record date referred to below. Such
adjustment shall become effective immediately at the opening of
business on the business day next following (except as provided
in Section 4(n) below) the record date for the determination of
stockholders entitled to receive such Distribution. For the
purposes of this Section 4(g), the distribution of a right or
warrant to subscribe or purchase any of the Corporation's
securities, which is distributed not only to the holders of the
Common Stock on the date fixed for the determination of
stockholders entitled to such Distribution of such right or
warrant, but also would be distributed with shares of Common
Stock delivered to a person converting shares of Series A
Preferred Stock after such determination date, shall not require
an adjustment of the Applicable Conversion Value pursuant to this
Section 4(g); PROVIDED that if on the date, if any, on which a
person converting shares of Series A Preferred Stock such person
would no longer be entitled to receive such right or warrant with
shares of Common Stock (other than as a result of the termination
of all such rights or warrants), a distribution of such rights or
warrants shall be deemed to have occurred and the Applicable
Conversion Value shall be adjusted as provided in this Section
4(g) and such day shall be deemed to be "the date fixed for the
determination of the stockholders entitled to receive such
distribution" and "the record date" within the meaning of the two
preceding sentences.
(h) Minimum Adjustment. No adjustment in the
Applicable Conversion Value shall be required unless such
adjustment would require a cumulative increase or decrease of at
least 1% in such price; PROVIDED, HOWEVER, that any adjustments
that by reason of this Section 4(h) are not required to be made
shall be carried forward and taken into account in any subsequent
adjustment until made; and PROVIDED, FURTHER, that any adjustment
shall be required and made in accordance with the provisions of
this Section 4 (other than this Section 4(h)) not later than such
time as may be required in order to preserve the tax-free nature
of a distribution to the holders of shares of Common Stock.
Notwithstanding any other provisions of this Section 4, the
Corporation shall not be required to make any adjustment of the
Applicable Conversion Value for the issuance of any shares of
Common Stock pursuant to any plan providing for the reinvestment
of dividends or interest payable on securities of the Corporation
and the investment of additional optional amounts in shares of
Common Stock under such plan. All calculations under this
Section 4 shall be made to the nearest cent (with $.005 being
rounded upward) or to the nearest one-tenth of a share (with .05
of a share being rounded upward), as the case may be. Anything
in this Section 4 to the contrary notwithstanding, the
Corporation shall be entitled, to the extent permitted by law, to
make such reductions in the Applicable Conversion Value, in
addition to those required by this Section 4, as it in its
discretion shall determine to be advisable in order that any
stock dividends, subdivision of shares, reclassification or
combination of shares, distribution of rights or warrants to
purchase stock or securities, or a distribution of other assets
(other than cash dividends) hereafter made by the Corporation to
its stockholders shall not be taxable, or if that is not
possible, to diminish any income taxes that are otherwise payable
because of such event.
(i) Certificate as to Adjustments. In each case of an
adjustment or readjustment of the Applicable Conversion Rate, the
Corporation will promptly furnish each holder of Series C
Preferred Stock with a certificate, prepared by the chief
financial officer or other executive officer of the Corporation,
showing such adjustment or readjustment, and stating in detail
the facts upon which such adjustment or readjustment is based.
(j) Mechanics of Conversion. To exercise its
conversion privilege, a holder of Series C Preferred Stock shall
surrender the certificate or certificates representing the shares
being converted to the Corporation at its principal office, and
shall give written notice to the Corporation at that office that
such holder elects to convert such shares. Such notice shall
also state the name or names (with address or addresses) in which
the certificate or certificates for shares of Common Stock
issuable upon such conversion shall be issued. The certificate
or certificates for shares of Series C Preferred Stock
surrendered for conversion shall be accompanied by proper
assignment thereof to the Corporation or in blank. The date when
such written notice is received by the Corporation together with
the certificate or certificates representing the shares of Series
C Preferred Stock being converted, shall be the "Conversion
Date." As promptly as practicable after the Conversion Date, the
Corporation shall issue and shall deliver to the holder of the
shares of Series C Preferred Stock being converted, a certificate
or certificates in such denominations as it may request in
writing for the number of full shares of Common Stock issuable
upon the conversion of such shares of Series C Preferred Stock in
accordance with the provisions of this Section 4 and cash as
provided in Section 4(k) below in respect of any fraction of a
share of Common Stock issuable upon such conversion. Such
conversion shall be deemed to have been effected immediately
prior to the close of business on the Conversion Date, and at
such time the rights of the holder as holder of the converted
shares of Series C Preferred Stock shall cease and the person or
persons in whose name or names any certificate or certificates
for shares of Common Stock shall be issuable upon such conversion
shall be deemed to have become the holder or holders of record of
shares of Common Stock represented thereby.
(k) Fractional Shares. No fractional shares of Common
Stock or scrip representing fractional shares shall be issued
upon conversion of Series C Preferred Stock. Instead of any
fractional shares of Common Stock that would otherwise be
issuable upon conversion of Series C Preferred Stock, including
pursuant to the provisions of Section 5 hereof, the Corporation
shall pay to the holder of the shares of Series C Preferred Stock
that were converted a cash adjustment in respect of such fraction
in an amount equal to the same fraction of the market price per
share of the Common Stock (as determined in a manner prescribed
by the Board of Directors) at the close of business on the
Conversion Date.
(l) Partial Conversion. In the event some but not all
of the shares of Series C Preferred Stock represented by a
certificate or certificates surrendered by a holder are
converted, the Corporation shall execute and deliver to or on the
order of the holder, at the expense of the Corporation, a new
certificate representing the number of shares of Series C
Preferred Stock which were not converted.
(m) Reservation of Common Stock. The Corporation
shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the
purpose of effecting the conversion of the shares of the Series C
Preferred Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of
all outstanding shares of the Series C Preferred Stock, and if at
any time the number of authorized but unissued shares of Common
Stock shall not be sufficient to effect the conversion of all
then outstanding shares of the Series C Preferred Stock, the
Corporation shall take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized
but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose.
(n) Deferment. In any case in which this Section 4
provides that an adjustment shall become effective on the day
next following the record date for an event, the Corporation may
defer until the occurrence of such event (A) issuing to the
holder of any share of Series A Preferred Stock converted after
such record date and before the occurrence of such event the
additional Common Stock issuable upon such conversion by reason
of the adjustment required by such event over and above the
Common Stock issuable upon such conversion before giving effect
to such adjustment and (B) paying to such holder any amount of
cash in lieu of any fraction pursuant to Section 4(k).
(o) Extraordinary Common Stock Event. "Extraordinary
Common Stock Event" shall mean (i) the issuance of additional
shares of Common Stock of any class as a dividend or other
distribution on outstanding Common Stock, (ii) the subdivision of
outstanding shares of Common Stock of any class into a greater
number of shares of Common Stock, or (iii) the combination of
outstanding shares of Common Stock of any class into a smaller
number of shares of Common Stock.
(p) Fair Market Value. "Fair Market Value" shall mean
the average of the daily Current Market Prices (as hereinafter
defined) of a share of Common Stock during five (5) consecutive
trading days selected by the Corporation commencing not more than
twenty (20) trading days before, and ending not later than, the
earlier of the day in question and the day before the "ex" date
with respect to the issuance or distribution requiring such
computation. The term "`ex' date," when used with respect to any
issuance or distribution, means the first day on which the share
of Common Stock trades regular way, without the right to receive
such issuance or distribution, on the exchange or in the market,
as the case may be, used to determine that day's Current Market
Price.
(q) Current Market Price. "Current Market Price"
shall mean the last reported sales price, regular way on such
day, or, if no sale takes place on such day, the average of the
reported closing bid and asked prices regular way on such day, in
either case as reported on the American Stock Exchange (or, in
the event that such security is not traded on the American Stock
Exchange, such other national or regional securities exchange or
automated quotation system upon which such security is listed and
principally traded or, if no such price is available, the per
share market value of such security as determined by a nationally
recognized investment banking firm or other nationally recognized
financial adviser retained by the Corporation for such purpose).
Section 5. Shareholder Approval.
(a) For purposes of this Section 5, the term "Series
Preferred Stock" shall mean the Series C Preferred Stock, the
Series D Convertible Preferred Stock and the Series E Convertible
Preferred Stock of the Corporation. Notwithstanding anything
herein to the contrary, no shares of the Series C Preferred Stock
may be converted pursuant to Section 4(a) unless and until the
earlier of (i) April 30, 1999 or (ii) the fifth business day
following approval of the issuance of the Series C Preferred
Stock by a majority of a quorum of the shareholders of the
Corporation voting at a meeting of the shareholders. If the
shareholders do not give such approval and the Corporation
receives a conversion notice on or after April 30, 1999 from any
holder of the Series Preferred Stock, and such holder fails to
withdraw such notice within five (5) business days of receipt by
the Corporation of such notice (if such notice is not withdrawn,
such notice shall be deemed the "First Conversion Notice"), the
Corporation shall mail a notice (the "Maximum Conversion Notice")
six business days following receipt of such First Conversion
Notice, postage prepaid, to each holder of record of the Series
Preferred Stock at its address shown on the records of the
Corporation. The Maximum Conversion Notice shall inform such
holders that (i) if such holders wish to convert any or all of
their shares of Series Preferred Stock, then they must so notify
the Corporation and surrender the applicable stock certificates
pursuant to Section 5(b) below not later than the thirtieth
(30th) day (the "Cutoff Date") after the date of the Maximum
Conversion Notice, and (ii) on the Cutoff Date the Corporation
will convert a number of shares of Series Preferred Stock in
accordance with the provisions of Section 5(b) below, such that
the number of shares of Common Stock issuable thereupon will not
exceed the Listed Shares. The "Listed Shares" shall mean the
number of shares of Common Stock listed on the American Stock
Exchange for issuance upon conversion of the Series Preferred
Stock as of the date of the Maximum Conversion Notice.
(b) After the Corporation mails the Maximum Conversion
Notice, any holder of the Series C Preferred Stock wishing to
convert any of its shares of Series C Preferred Stock shall, on
or prior to the Cutoff Date, (i) surrender the certificate or
certificates representing the shares its wishes to convert to the
Corporation at its principal office, and (ii) give written notice
to the Corporation at that office of the number of shares that
such holder wishes to convert. Such notice shall also state the
name or names (with address or addresses) in which the
certificate or certificates for shares of Common Stock issuable
upon such conversion shall be issued. The certificate or
certificates for shares of Series C Preferred Stock surrendered
for conversion shall be accompanied by duly executed proper
assignment thereof to the Corporation or in blank, and shall
otherwise comply with the procedures set forth in Section 4(j)
for conversion. Each such completed conversion notice, and any
similarly completed conversion notices with respect to any other
shares of Series Preferred Stock, shall be referred to
hereinafter in this Section 5(b) as a "Subject Conversion
Notice." If the total number of shares of Common Stock that
would be issuable upon conversion of all of the shares of Series
Preferred Stock for which conversion was requested pursuant to
all of the Subject Conversion Notices (the "Requested Shares")
exceeds the Listed Shares, then only such portion of the
Requested Shares as is convertible into the Listed Shares shall
be converted (on a pro-rata basis among the holders of such
Requested Shares in proportion to the respective numbers of the
Requested Shares as to which the holders gave Subject Conversion
Notices into Common Stock (rounded down to the nearest whole
share). All remaining shares of Series C Preferred Stock
(including those shares for which the holders thereof gave a
Subject Conversion Notice but which were not converted due to the
provisions of the preceding sentence) shall be redeemed by the
Corporation in cash for a per share amount (the "Redemption
Price") equal to the product of (i) the number of shares of
Common Stock into which such one share of Series Preferred Stock
was convertible on the Cutoff Date and (ii) the Cutoff Date
Market Price. The "Cutoff Date Market Price" shall mean the
average of the closing prices of the Common Stock on the American
Stock Exchange or, if applicable, such other exchange or market
on which it instead principally trades on each of the five (5)
trading days immediately preceding the Cutoff Date.
(c) If the total number of shares of Common Stock
issuable upon conversion of the Requested Shares does not exceed
the Listed Shares, then the Corporation shall cause the automatic
conversion of the Requested Shares and shall redeem, at the
Redemption Price, all remaining outstanding shares of the Series
Preferred Stock, provided, however, that the Corporation may
instead elect to pay a percentage of such Redemption Price in
shares of Common Stock (valued at the Cutoff Date Market Price),
such percentage being equal to the quotient of (i) the difference
between the Listed Shares minus the actual number of shares of
Common Stock issued pursuant to the conversion of the Requested
Shares, divided by (ii) the number of shares of Series Preferred
Stock which remain outstanding following conversion of the
Requested Shares. In such an event, such percentage of the
Redeemed Shares (rounded down to the nearest whole share) shall
be deemed to have been automatically converted into Common Stock.
(d) Each holder of shares of Series C Preferred Stock
to be redeemed under this Section 5 shall surrender the
certificate or certificates representing such shares to the
Corporation at its principal office, and, within twenty (20) days
following the Cutoff Date, the Redemption Price shall be paid to
the order of the person whose name appears on such certificate or
certificates.
Section 6. No Reissuance of Series C Preferred Stock.
No share or shares of the Series C Preferred Stock acquired by
the Corporation by reason of redemption, purchase, conversion or
otherwise shall be reissued, and all such shares shall be
cancelled, retired, and eliminated from the shares which the
Corporation shall be authorized to issue. The Corporation may
from time to time take such appropriate corporate action as may
be necessary to reduce the authorized number of shares of the
Series C Preferred Stock accordingly.
Section 7. Notices of Record Date. In the event (i) the
Corporation establishes a record date to determine the holders of
its Common Stock who are entitled to receive any dividend or
other distribution, or (ii) there occurs any capital
reorganization of the Corporation, any reclassification or
recapitalization of the capital stock of the Corporation, any
merger or consolidation of the Corporation, or any transfer of
all or substantially all of the assets of the Corporation to any
other Corporation, or any other entity or person, or any
voluntary or involuntary dissolution, liquidation or winding up
of the Corporation, the Corporation shall mail to each holder of
Series C Preferred Stock at least 10 days prior to the record
date specified therein, a notice specifying (a) the date of such
record date for the purpose of such dividend or distribution and
a description of such dividend or distribution, (b) the date on
which any such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation or winding up is
expected to become effective, and (c) the time, if any, that is
to be fixed, as to when the holders of record of Common Stock (or
other securities) shall be entitled to exchange their shares of
Common Stock (or other securities) for securities or other
property deliverable upon such reorganization, reclassification,
transfer, consolidation, merger, dissolution, liquidation or
winding up.
Section 8. Voting Rights of Series C Preferred Stock.
Except as required by law, each share of Series C Preferred
Stock shall be non-voting. The increase or decrease in the amount
of authorized capital stock of any class or of any series of any
class, including Series C Preferred Stock, shall not require the
consent of the holders of Series C Preferred Stock and shall not
be deemed to materially and adversely affect the specified
designations, preferences or special rights of the Series C
Preferred Stock.
Section 9. Miscellaneous.
(a) All notices referred to herein shall be in
writing, and all notices hereunder shall be deemed to have been
given upon the earlier of delivery thereof by hand delivery, by
courier, or by standard form of telecommunication, addressed: (i)
if to the Corporation, to its principal executive office
(Attention: President) and to the transfer agent, if any, for
the Series C Preferred Stock or other agent of the Corporation
designated as permitted hereby or (ii) if to any holder of the
Series C Preferred Stock or Common Stock, as the case may be, to
such holder at the address of such holder as listed in the stock
record books of the Corporation (which may include the records of
any transfer agent for the Series C Preferred Stock or Common
Stock, as the case may be) or (iii) to such other address as the
Corporation or any such holder, as the case may be, shall have
designated by notice similarly given.
(b) The term "Common Stock" as used herein means the
Corporation's Common Stock, $.001 par value, as the same exists
at the date of the filing of this Certificate of Designations,
Preferences and Rights of Series C Convertible Preferred Stock,
or any other class of stock resulting from successive changes or
reclassifications of such Common Stock consisting solely of
changes in par value, or from par value to no par value, or from
no par value to par value. In the event that, at any time as a
result of an adjustment made pursuant to Section 4 hereof, the
holder of any shares of the Series C Preferred Stock upon
thereafter surrendering such shares for conversion shall become
entitled to receive any shares or other securities of the
Corporation other than shares of Common Stock, the Applicable
Conversion Rate in respect of such other shares or securities so
receivable upon conversion of shares of Series C Preferred Stock
shall thereafter be adjusted, and shall be subject to further
adjustment from time to time, in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to
Common Stock contained in Section 4 hereof, and the remaining
provisions hereof with respect to the Common Stock shall apply on
like or similar terms to any such other shares or securities.
(c) The Corporation shall pay any and all stock
transfer and documentary stamp taxes that may be payable in
respect of any issuance or delivery of shares of Series C
Preferred Stock or shares of Common Stock or other securities
issued on account of Series C Preferred Stock pursuant hereto or
certificates representing such shares or securities. The
Corporation shall not, however, be required to pay any such tax
which may be payable in respect of any transfer involved in the
issuance or delivery of shares of Series C Preferred Stock or
Common Stock or other securities in a name other than that in
which the shares of Series C Preferred Stock with respect to
which such shares or other securities are issued or delivered
were registered, or in respect of any payment to any person with
respect to any such shares or securities other than a payment to
the registered holder thereof, and shall not be required to make
any such issuance, delivery or payment unless and until the
person otherwise entitled to such issuance, delivery or payment
has paid to the Corporation the amount of any such tax or has
established, to the satisfaction of the Corporation, that such
tax has been paid or is not payable.
(d) The Corporation may appoint, and from time to time
discharge and change, a transfer agent for the Series C Preferred
Stock. Upon any such appointment or discharge of a transfer
agent, the Corporation shall send notice thereof by hand
delivery, by courier, by standard form of telecommunication or by
first class mail (postage prepaid), to each holder of record of
Series C Preferred Stock.
[Remainder of page intentionally left blank.]
IN WITNESS WHEREOF, Selfcare, Inc. has caused this
certificate to be executed in its name and on its behalf by its
Treasurer and Chief Financial Officer, and attested by its
Secretary, as of this _____ day of _______________, 199__.
SELFCARE, INC.
By: /s/ Chris Huntoon
_________________________
Name: Chris Huntoon
Title: Treasurer and Chief
Financial Officer
Attest:
/s/ Kennett D. Legg
__________________________
Name: Kenneth D. Legg
Title: Secretary
EXHIBIT 4.2
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS
of
SERIES D CONVERTIBLE PREFERRED STOCK
of
SELFCARE, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
Selfcare, Inc., a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), hereby
certifies that the following resolution was adopted by a Special
Committee of the Board of Directors of the Corporation pursuant
to authority of such Special Committee of the Board of Directors
and the Board of Directors as required by Section 151 of the
Delaware General Corporation Law.
RESOLVED, that pursuant to the authority granted to and
vested in the special Committee of the Board of Directors (the
"Special Committee") by duly approved and adopted resolutions of
the Board of Directors of the Corporation (the "Board of
Directors" or the "Board") and in accordance with the provisions
of its Certificate of Incorporation and Bylaws, each as amended
and restated through the date hereof, the Special Committee
hereby authorizes a series of the Corporation's previously
authorized Preferred Stock, par value $.001 per share (the
"Preferred Stock"), and hereby states the designation and number
of shares, and fixes the relative rights, preferences,
privileges, powers and restrictions thereof as follows:
Section 1. Designation.
The designation of this series, which consists of 3,500
shares of Preferred Stock, is the Series D Convertible Preferred
Stock (the "Series D Preferred Stock") and the face amount shall
be One Hundred U.S. Dollars ($100) per share (the "Face Amount").
Section 2. Dividends.
(a) The holders of outstanding shares of Series D
Preferred Stock shall be entitled to receive, when, as and if
declared by the Board of Directors, out of funds legally
available for the payment of dividends, dividends at the rate per
share of 7% of the initial purchase price paid for such shares
(the "Purchase Price") per annum. All dividends shall be
cumulative and shall be payable in cash in arrears on the last
day of March, June, September and December of each year (each
such date, a "Dividend Payment Date") commencing on March 31,
1999, in preference to and with priority over dividends on the
common stock of the Corporation, par value $.001 per share (the
"Common Stock"). Such quarterly dividends shall be cumulative
and shall accrue (whether or not earned or declared, and whether
or not there are funds legally available therefor) without
interest from the later of (i) the first day of the quarterly
period in which such dividend may be payable as herein provided,
or (ii) the date of issuance of the shares of Series D Preferred
Stock.
(b) The amount of dividends accrued on the Series D
Preferred Stock for any period less than a full quarterly
dividend period (including the initial dividend period) shall be
equal to a pro rata portion of the total dividend payable for the
quarterly dividend period during which such period occurs, based
on the actual number of days elapsed in such period and the total
number of days in the applicable quarterly dividend period.
Dividends shall accrue on a daily basis during each dividend
period as provided above, and the Liquidation Preference (as
defined below) of each outstanding share of Series D Preferred
Stock shall be correspondingly increased on a daily basis. Each
such dividend shall be payable to holders of record as their
names shall appear on the stock books of the Corporation on any
record date for such dividends, except that dividends in arrears
for any past Dividend Payment Date may be declared and paid at
any time without reference to such regular Dividend Payment Date
to holders of record on such date not more than sixty (60) days
or less then ten (10) days prior to the date of payment as shall
be determined by the Board of Directors.
(c) No dividends will be declared or paid on any
Series D Preferred Stock unless full cumulative dividends, if
any, payable on the Corporation's Series B Convertible Preferred
Stock and on any other Senior Dividend Stock (as defined below)
have been declared and paid or are contemporaneously declared and
funds sufficient for payment are set aside on the Series B
Convertible Preferred Stock and any other Senior Dividend Stock
for all prior dividend periods.
(d) Except as provided in the next sentence, no
dividends will be declared or paid on any Parity Dividend Stock
(as defined below) unless full cumulative dividends have been
declared and paid or are contemporaneously declared and funds
sufficient for payment are set aside on the Series D Preferred
Stock for all prior dividend periods. If accrued dividends are
not paid in full upon the Series D Preferred Stock for all prior
dividend periods, all dividends declared upon shares of the
Series D Preferred Stock and Parity Dividend Stock for any
dividend period will be declared pro rata so that the amount of
dividends declared per share on the Series D Preferred Stock and
such other Parity Dividend Stock shall bear to each other the
same ratio that accumulated and unpaid dividends per share on the
shares of Series D Preferred Stock and such other Parity Dividend
Stock bear to each other.
(e) The Corporation may not declare or pay any
dividends on any shares of Common Stock or Junior Dividend Stock
(as defined below), or make any payment on account of, or set
apart money for, the purchase, redemption or other retirement of,
or for a sinking or other analogous fund for, any shares of
Junior Dividend Stock or make any distribution in respect
thereof, whether in cash or property or in obligations or stock
of the Corporation, other than in Common Stock or Junior Dividend
Stock, unless full cumulative dividends shall have been or are
contemporaneously paid or declared and set apart for payment on
the Series D Preferred Stock and any Parity Dividend Stock.
Section 3. Liquidation Preference.
(a) Preference. In the event of any liquidation,
dissolution or winding up of the Corporation, either voluntarily
or involuntarily, the holders of the Series D Preferred Stock
shall be entitled to receive prior and in preference to any
distribution of any of the assets or surplus funds of the
Corporation to the holders of Common Stock or any Junior
Liquidation Stock (as defined below), an amount equal to the sum
of (A) the Purchase Price (which shall be $100 per share), plus
(B) a further amount equal to any dividends on such shares as to
which holders of the Series D Preferred Stock are entitled
pursuant to Section 2 that have not been paid (such sum, the
"Liquidation Preference"). If, upon such liquidation,
dissolution or winding up of the Corporation, the assets of the
Corporation available for distribution to the holders of the
Series D Preferred Stock, after required distributions are made
to the holders of any Senior Liquidation Stock, are insufficient
to provide for the payment of the full Liquidation Preference,
such assets as are so available shall be distributed pro rata
among the holders of the Series D Preferred Stock and Parity
Liquidation Stock (as defined below) ratably in accordance with
the respective amounts which would be payable on such shares if
all amounts payable thereon were paid in full, subject to the
preferential rights of the holders of the Corporation's Series B
Convertible Preferred Stock and any other Senior Liquidation
Stock (as defined below). After payment of the full amount of
the Liquidation Preference and accumulated dividends to which
holders of shares of Series D Preferred Stock are entitled, the
holders of shares of Series D Preferred Stock will not be
entitled to any further participation in any distribution of
assets by the Corporation. The amount per share set forth in
this Section 3(a) shall be appropriately adjusted for any stock
splits, stock combinations, stock dividends or similar
recapitalizations with respect to the Series D Preferred Stock.
(b) Definitions. For the purposes of this resolution,
any stock of any class or series of the Corporation shall be
deemed to rank:
(i) senior to shares of the Series D Preferred
Stock as to dividends if the terms of the stock of such class or
series specifically provide that the shares rank senior to the
Series D Preferred Stock with respect to the receipt of dividends
("Senior Dividend Stock");
(ii) senior to shares of the Series D Preferred
Stock upon liquidation, if the terms of the stock of such class
or series specifically provide that the shares rank senior to the
Series D Preferred Stock with respect to the amounts
distributable upon liquidation, dissolution or winding up, as the
case may be ("Senior Liquidation Stock");
(iii) junior to shares of the Series D
Preferred Stock as to dividends if the terms of the stock of such
class or series specifically provide that the shares rank junior
to the Series D Preferred Stock with respect to the receipt of
dividends ("Junior Dividend Stock");
(iv) junior to shares of the Series D Preferred
Stock upon liquidation if the terms of the stock of such class or
series specifically provide that the shares rank junior to the
Series D Preferred Stock with respect to the amounts
distributable upon liquidation, dissolution or winding up
("Junior Liquidation Stock");
(v) on a parity with shares of the Series D
Preferred Stock as to dividends, whether or not the dividend
rates or dividend payment dates per share thereof shall be
different from those of the Series D Preferred Stock, if the
holders of stock of such class or series shall be entitled by the
terms thereof to the receipt of dividends in proportion to their
respective dividend rates, without preference or priority of one
over the other as between the holders of such stock and the
holders of shares of Series D Preferred Stock ("Parity Dividend
Stock"); and
(vi) on a parity with shares of the Series D
Preferred Stock upon liquidation, whether or not the redemption
or liquidation prices per share thereof shall be different from
those of the Series D Preferred Stock, if the holders of stock of
such class or series shall be entitled by the terms thereof to
the receipt of amounts distributable upon liquidation,
dissolution or winding up, in proportion to their respective
liquidation prices, without preference or priority of one over
the other as between the holders of such stock and the holders of
shares of Series D Preferred Stock ("Parity Liquidation Stock").
(c) Consolidation or Merger. A consolidation or
merger of the Corporation with or into any other corporation or
corporations, or a sale of all or substantially all of the assets
of the Corporation, shall not be deemed to be a liquidation,
dissolution or winding up within the meaning of this Section 3.
Section 4. Conversion.
(a) Right to Convert. Subject to and in compliance
with the provisions of this Section 4, any shares of the Series D
Preferred Stock may, at any time or from time to time at the
option of the holder, be converted into fully-paid and
non-assessable shares of Common Stock. The number of shares of
Common Stock to which a holder of the Series D Preferred Stock
shall be entitled upon conversion shall be the product obtained
by multiplying the Applicable Conversion Rate (determined as
provided in Section 4(c)) by the number of shares of Series D
Preferred Stock being converted.
(b) Automatic Conversion.
(i) Immediately upon the close of business (or
the next succeeding trading day if such date is not a trading
day) on the third anniversary of the date of issuance of a share
of Series D Preferred Stock, such share of Series D Preferred
Stock, if not previously converted, shall automatically be
converted into the number of shares of Common Stock into which
such shares are convertible upon application of the then
effective Applicable Conversion Rate (determined as provided in
Section 4(c)).
(ii) Upon the occurrence of an automatic
conversion with respect to a share of Series D Preferred Stock as
described in Section (4)(b)(i), such outstanding share of Series
D Preferred Stock shall be converted automatically without any
further action by the holder of such share and whether or not the
certificate representing such share is surrendered to the
Corporation or its transfer agent; provided, however, that the
Corporation shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such
conversion unless a certificate evidencing such share of Series D
Preferred Stock being so converted is either delivered to the
Corporation or any transfer agent, as hereinafter provided, or
the holder notifies the Corporation or any transfer agent, as
hereinafter provided, that such certificates have been lost,
stolen or destroyed and executes an agreement satisfactory to the
Corporation to indemnify the Corporation from any loss incurred
by it in connection therewith.
Upon the conversion of outstanding Series D Preferred Stock,
the holders of the Series D Preferred Stock shall surrender the
certificates representing such shares at the office of the
Corporation or of any transfer agent for the Common Stock.
Thereupon, there shall be issued and delivered to each such
holder, promptly at such office and in his, her or its name as
shown on such surrendered certificate or certificates, a
certificate or certificates for the number of shares of Common
Stock into which the shares of the Series D Preferred Stock
surrendered were convertible on the date on which such automatic
conversion occurred and cash as provided in Section 4(k) below in
respect of any fraction of a share of Common Stock issuable upon
such automatic conversion.
(c) Applicable Conversion Rate. The conversion rate
in effect at any time with respect to a share of Series D
Preferred Stock (the "Applicable Conversion Rate") shall equal
the quotient obtained by dividing such Series D Preferred Share's
Liquidation Preference (which includes accrued and unpaid
dividends, if any, thereon) by the Applicable Conversion Value
for such share, calculated as hereinafter provided.
(d) Applicable Conversion Value. The Applicable
Conversion Value with respect to a share of Series D Preferred
Stock in effect initially, and until first adjusted in accordance
with Section 4(e), 4(g) or 4(h) hereof, shall be $2.00.
(e) Adjustment to Applicable Conversion Value. Upon
the happening of an Extraordinary Common Stock Event (as
hereinafter defined), the Applicable Conversion Value shall,
simultaneously with the happening of such Extraordinary Common
Stock Event, be adjusted by dividing the then effective
Applicable Conversion Value by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding
(excluding treasury stock) immediately after such Extraordinary
Common Stock Event and the denominator of which shall be the
number of shares of Common Stock outstanding (excluding treasury
stock) immediately prior to such Extraordinary Common Stock
Event, and the quotient so obtained shall thereafter be the
Applicable Conversion Value. The Applicable Conversion Value, as
so adjusted, shall be readjusted in the same manner upon the
happening of any successive Extraordinary Common Stock Event or
Events.
(f) Adjustments for Mergers and Other Reorganizations.
If at any time or from time to time there shall be a capital
reorganization of the Common Stock (other than an Extraordinary
Common Stock Event) or a merger or consolidation of the
Corporation with or into another corporation or the sale of all
or substantially all of the Corporation's properties and assets
to any other person in connection with which the holders of
Series D Preferred Stock do not elect to convert such Series D
Preferred Stock, then, as a part of and as a condition to the
effectiveness of such reorganization, merger, consolidation or
sale, lawful and adequate provision shall be made so that the
holders of the Series D Preferred Stock shall thereafter be
entitled to receive upon conversion of the Series D Preferred
Stock the number of shares of stock or other securities or
property of the Corporation or of the successor corporation
resulting from such merger or consolidation or sale or other
consideration, to which such holders would have been entitled if
they had converted their Series D Preferred Stock immediately
prior to such capital reorganization, merger, consolidation, or
sale. In any such case, appropriate provisions shall be made
with respect to the rights of the holders of the Series D
Preferred Stock after the reorganization, merger, consolidation
or sale to the end that the provisions set forth herein
(including without limitation provisions for adjustment of the
Applicable Conversion Value of the Series D Preferred Stock and
the number of shares purchasable upon conversion of the Series D
Preferred Stock) shall thereafter be applicable, as nearly as may
be, with respect to any shares of stock, securities or assets to
be deliverable thereafter upon the conversion of the Series D
Preferred Stock.
(g) Adjustments for Distributions. If the Corporation
shall distribute to all holders of its Common Stock any shares of
capital stock of the Corporation (other than Common Stock) or
evidence of its indebtedness or assets (any of the foregoing
being hereinafter in this Section 4(g) called a "Distribution"),
(but excluding regularly declared quarterly cash dividends (if
any) or rights or warrants to subscribe for or purchase any of
its securities), then in each such case the Applicable Conversion
Value shall be adjusted so that it shall equal the price
determined by multiplying (A) the Applicable Conversion Value in
effect immediately prior to the close of business on the date
fixed for the determination of stockholders entitled to receive
such Distribution by (B) a fraction, the numerator of which shall
be the Fair Market Value (as hereinafter defined) per share of
Common Stock on the record date referred to below less the then
fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a Board
resolution), of the portion of the capital stock or assets or
evidences of indebtedness so distributed or of such rights or
warrants applicable to one share of Common Stock, and the
denominator of which shall be the Fair Market Value per share of
Common Stock on the record date referred to below. Such
adjustment shall become effective immediately at the opening of
business on the business day next following (except as provided
in Section 4(n) below) the record date for the determination of
stockholders entitled to receive such Distribution. For the
purposes of this Section 4(g), the distribution of a right or
warrant to subscribe or purchase any of the Corporation's
securities, which is distributed not only to the holders of the
Common Stock on the date fixed for the determination of
stockholders entitled to such Distribution of such right or
warrant, but also would be distributed with shares of Common
Stock delivered to a person converting shares of Series A
Preferred Stock after such determination date, shall not require
an adjustment of the Applicable Conversion Value pursuant to this
Section 4(g); PROVIDED that if on the date, if any, on which a
person converting shares of Series A Preferred Stock such person
would no longer be entitled to receive such right or warrant with
shares of Common Stock (other than as a result of the termination
of all such rights or warrants), a distribution of such rights or
warrants shall be deemed to have occurred and the Applicable
Conversion Value shall be adjusted as provided in this Section
4(g) and such day shall be deemed to be "the date fixed for the
determination of the stockholders entitled to receive such
distribution" and "the record date" within the meaning of the two
preceding sentences.
(h) Minimum Adjustment. No adjustment in the
Applicable Conversion Value shall be required unless such
adjustment would require a cumulative increase or decrease of at
least 1% in such price; PROVIDED, HOWEVER, that any adjustments
that by reason of this Section 4(h) are not required to be made
shall be carried forward and taken into account in any subsequent
adjustment until made; and PROVIDED, FURTHER, that any adjustment
shall be required and made in accordance with the provisions of
this Section 4 (other than this Section 4(h)) not later than such
time as may be required in order to preserve the tax-free nature
of a distribution to the holders of shares of Common Stock.
Notwithstanding any other provisions of this Section 4, the
Corporation shall not be required to make any adjustment of the
Applicable Conversion Value for the issuance of any shares of
Common Stock pursuant to any plan providing for the reinvestment
of dividends or interest payable on securities of the Corporation
and the investment of additional optional amounts in shares of
Common Stock under such plan. All calculations under this
Section 4 shall be made to the nearest cent (with $.005 being
rounded upward) or to the nearest one-tenth of a share (with .05
of a share being rounded upward), as the case may be. Anything
in this Section 4 to the contrary notwithstanding, the
Corporation shall be entitled, to the extent permitted by law, to
make such reductions in the Applicable Conversion Value, in
addition to those required by this Section 4, as it in its
discretion shall determine to be advisable in order that any
stock dividends, subdivision of shares, reclassification or
combination of shares, distribution of rights or warrants to
purchase stock or securities, or a distribution of other assets
(other than cash dividends) hereafter made by the Corporation to
its stockholders shall not be taxable, or if that is not
possible, to diminish any income taxes that are otherwise payable
because of such event.
(i) Certificate as to Adjustments. In each case of an
adjustment or readjustment of the Applicable Conversion Rate, the
Corporation will promptly furnish each holder of Series D
Preferred Stock with a certificate, prepared by the chief
financial officer or other executive officer of the Corporation,
showing such adjustment or readjustment, and stating in detail
the facts upon which such adjustment or readjustment is based.
(j) Mechanics of Conversion. To exercise its
conversion privilege, a holder of Series D Preferred Stock shall
surrender the certificate or certificates representing the shares
being converted to the Corporation at its principal office, and
shall give written notice to the Corporation at that office that
such holder elects to convert such shares. Such notice shall
also state the name or names (with address or addresses) in which
the certificate or certificates for shares of Common Stock
issuable upon such conversion shall be issued. The certificate
or certificates for shares of Series D Preferred Stock
surrendered for conversion shall be accompanied by proper
assignment thereof to the Corporation or in blank. The date when
such written notice is received by the Corporation together with
the certificate or certificates representing the shares of Series
D Preferred Stock being converted, shall be the "Conversion
Date." As promptly as practicable after the Conversion Date, the
Corporation shall issue and shall deliver to the holder of the
shares of Series D Preferred Stock being converted, a certificate
or certificates in such denominations as it may request in
writing for the number of full shares of Common Stock issuable
upon the conversion of such shares of Series D Preferred Stock in
accordance with the provisions of this Section 4 and cash as
provided in Section 4(k) below in respect of any fraction of a
share of Common Stock issuable upon such conversion. Such
conversion shall be deemed to have been effected immediately
prior to the close of business on the Conversion Date, and at
such time the rights of the holder as holder of the converted
shares of Series D Preferred Stock shall cease and the person or
persons in whose name or names any certificate or certificates
for shares of Common Stock shall be issuable upon such conversion
shall be deemed to have become the holder or holders of record of
shares of Common Stock represented thereby.
(k) Fractional Shares. No fractional shares of Common
Stock or scrip representing fractional shares shall be issued
upon conversion of Series D Preferred Stock. Instead of any
fractional shares of Common Stock that would otherwise be
issuable upon conversion of Series D Preferred Stock, including
pursuant to the provisions of Section 5 hereof, the Corporation
shall pay to the holder of the shares of Series D Preferred Stock
that were converted a cash adjustment in respect of such fraction
in an amount equal to the same fraction of the market price per
share of the Common Stock (as determined in a manner prescribed
by the Board of Directors) at the close of business on the
Conversion Date.
(l) Partial Conversion. In the event some but not all
of the shares of Series D Preferred Stock represented by a
certificate or certificates surrendered by a holder are
converted, the Corporation shall execute and deliver to or on the
order of the holder, at the expense of the Corporation, a new
certificate representing the number of shares of Series D
Preferred Stock which were not converted.
(m) Reservation of Common Stock. The Corporation
shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the
purpose of effecting the conversion of the shares of the Series D
Preferred Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of
all outstanding shares of the Series D Preferred Stock, and if at
any time the number of authorized but unissued shares of Common
Stock shall not be sufficient to effect the conversion of all
then outstanding shares of the Series D Preferred Stock, the
Corporation shall take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized
but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose.
(n) Deferment. In any case in which this Section 4
provides that an adjustment shall become effective on the day
next following the record date for an event, the Corporation may
defer until the occurrence of such event (A) issuing to the
holder of any share of Series A Preferred Stock converted after
such record date and before the occurrence of such event the
additional Common Stock issuable upon such conversion by reason
of the adjustment required by such event over and above the
Common Stock issuable upon such conversion before giving effect
to such adjustment and (B) paying to such holder any amount of
cash in lieu of any fraction pursuant to Section 4(k).
(o) Extraordinary Common Stock Event. "Extraordinary
Common Stock Event" shall mean (i) the issuance of additional
shares of Common Stock of any class as a dividend or other
distribution on outstanding Common Stock, (ii) the subdivision of
outstanding shares of Common Stock of any class into a greater
number of shares of Common Stock, or (iii) the combination of
outstanding shares of Common Stock of any class into a smaller
number of shares of Common Stock.
(p) Fair Market Value. "Fair Market Value" shall mean
the average of the daily Current Market Prices (as hereinafter
defined) of a share of Common Stock during five (5) consecutive
trading days selected by the Corporation commencing not more than
twenty (20) trading days before, and ending not later than, the
earlier of the day in question and the day before the "ex" date
with respect to the issuance or distribution requiring such
computation. The term "`ex' date," when used with respect to any
issuance or distribution, means the first day on which the share
of Common Stock trades regular way, without the right to receive
such issuance or distribution, on the exchange or in the market,
as the case may be, used to determine that day's Current Market
Price.
(q) Current Market Price. "Current Market Price"
shall mean the last reported sales price, regular way on such
day, or, if no sale takes place on such day, the average of the
reported closing bid and asked prices regular way on such day, in
either case as reported on the American Stock Exchange (or, in
the event that such security is not traded on the American Stock
Exchange, such other national or regional securities exchange or
automated quotation system upon which such security is listed and
principally traded or, if no such price is available, the per
share market value of such security as determined by a nationally
recognized investment banking firm or other nationally recognized
financial adviser retained by the Corporation for such purpose).
Section 5. Shareholder Approval.
(a) For purposes of this Section 5, the term "Series
Preferred Stock" shall mean the Series D Preferred Stock, the
Series C Convertible Preferred Stock and the Series E Convertible
Preferred Stock of the Corporation. Notwithstanding anything
herein to the contrary, no shares of the Series D Preferred Stock
may be converted pursuant to Section 4(a) unless and until the
earlier of (i) April 30, 1999 or (ii) the fifth business day
following approval of the issuance of the Series D Preferred
Stock by a majority of a quorum of the shareholders of the
Corporation voting at a meeting of the shareholders. If the
shareholders do not give such approval and the Corporation
receives a conversion notice on or after April 30, 1999 from any
holder of the Series Preferred Stock, and such holder fails to
withdraw such notice within five (5) business days of receipt by
the Corporation of such notice (if such notice is not withdrawn,
such notice shall be deemed the "First Conversion Notice"), the
Corporation shall mail a notice (the "Maximum Conversion Notice")
six business days following receipt of such First Conversion
Notice, postage prepaid, to each holder of record of the Series
Preferred Stock at its address shown on the records of the
Corporation. The Maximum Conversion Notice shall inform such
holders that (i) if such holders wish to convert any or all of
their shares of Series Preferred Stock, then they must so notify
the Corporation and surrender the applicable stock certificates
pursuant to Section 5(b) below not later than the thirtieth
(30th) day (the "Cutoff Date") after the date of the Maximum
Conversion Notice, and (ii) on the Cutoff Date the Corporation
will convert a number of shares of Series Preferred Stock in
accordance with the provisions of Section 5(b) below, such that
the number of shares of Common Stock issuable thereupon will not
exceed the Listed Shares. The "Listed Shares" shall mean the
number of shares of Common Stock listed on the American Stock
Exchange for issuance upon conversion of the Series Preferred
Stock as of the date of the Maximum Conversion Notice.
(b) After the Corporation mails the Maximum Conversion
Notice, any holder of the Series D Preferred Stock wishing to
convert any of its shares of Series D Preferred Stock shall, on
or prior to the Cutoff Date, (i) surrender the certificate or
certificates representing the shares its wishes to convert to the
Corporation at its principal office, and (ii) give written notice
to the Corporation at that office of the number of shares that
such holder wishes to convert. Such notice shall also state the
name or names (with address or addresses) in which the
certificate or certificates for shares of Common Stock issuable
upon such conversion shall be issued. The certificate or
certificates for shares of Series D Preferred Stock surrendered
for conversion shall be accompanied by duly executed proper
assignment thereof to the Corporation or in blank, and shall
otherwise comply with the procedures set forth in Section 4(j)
for conversion. Each such completed conversion notice, and any
similarly completed conversion notices with respect to any other
shares of Series Preferred Stock, shall be referred to
hereinafter in this Section 5(b) as a "Subject Conversion
Notice." If the total number of shares of Common Stock that
would be issuable upon conversion of all of the shares of Series
Preferred Stock for which conversion was requested pursuant to
all of the Subject Conversion Notices (the "Requested Shares")
exceeds the Listed Shares, then only such portion of the
Requested Shares as is convertible into the Listed Shares shall
be converted (on a pro-rata basis among the holders of such
Requested Shares in proportion to the respective numbers of the
Requested Shares as to which the holders gave Subject Conversion
Notices into Common Stock (rounded down to the nearest whole
share). All remaining shares of Series D Preferred Stock
(including those shares for which the holders thereof gave a
Subject Conversion Notice but which were not converted due to the
provisions of the preceding sentence) shall be redeemed by the
Corporation in cash for a per share amount (the "Redemption
Price") equal to the product of (i) the number of shares of
Common Stock into which such one share of Series Preferred Stock
was convertible on the Cutoff Date and (ii) the Cutoff Date
Market Price. The "Cutoff Date Market Price" shall mean the
average of the closing prices of the Common Stock on the American
Stock Exchange or, if applicable, such other exchange or market
on which it instead principally trades on each of the five (5)
trading days immediately preceding the Cutoff Date.
(c) If the total number of shares of Common Stock
issuable upon conversion of the Requested Shares does not exceed
the Listed Shares, then the Corporation shall cause the automatic
conversion of the Requested Shares and shall redeem, at the
Redemption Price, all remaining outstanding shares of the Series
Preferred Stock, provided, however, that the Corporation may
instead elect to pay a percentage of such Redemption Price in
shares of Common Stock (valued at the Cutoff Date Market Price),
such percentage being equal to the quotient of (i) the difference
between the Listed Shares minus the actual number of shares of
Common Stock issued pursuant to the conversion of the Requested
Shares, divided by (ii) the number of shares of Series Preferred
Stock which remain outstanding following conversion of the
Requested Shares. In such an event, such percentage of the
Redeemed Shares (rounded down to the nearest whole share) shall
be deemed to have been automatically converted into Common Stock.
(d) Each holder of shares of Series D Preferred Stock
to be redeemed under this Section 5 shall surrender the
certificate or certificates representing such shares to the
Corporation at its principal office, and, within twenty (20) days
following the Cutoff Date, the Redemption Price shall be paid to
the order of the person whose name appears on such certificate or
certificates.
Section 6. No Reissuance of Series D Preferred Stock.
No share or shares of the Series D Preferred Stock acquired by
the Corporation by reason of redemption, purchase, conversion or
otherwise shall be reissued, and all such shares shall be
cancelled, retired, and eliminated from the shares which the
Corporation shall be authorized to issue. The Corporation may
from time to time take such appropriate corporate action as may
be necessary to reduce the authorized number of shares of the
Series D Preferred Stock accordingly.
Section 7. Notices of Record Date. In the event (i) the
Corporation establishes a record date to determine the holders of
its Common Stock who are entitled to receive any dividend or
other distribution, or (ii) there occurs any capital
reorganization of the Corporation, any reclassification or
recapitalization of the capital stock of the Corporation, any
merger or consolidation of the Corporation, or any transfer of
all or substantially all of the assets of the Corporation to any
other Corporation, or any other entity or person, or any
voluntary or involuntary dissolution, liquidation or winding up
of the Corporation, the Corporation shall mail to each holder of
Series D Preferred Stock at least 10 days prior to the record
date specified therein, a notice specifying (a) the date of such
record date for the purpose of such dividend or distribution and
a description of such dividend or distribution, (b) the date on
which any such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation or winding up is
expected to become effective, and (c) the time, if any, that is
to be fixed, as to when the holders of record of Common Stock (or
other securities) shall be entitled to exchange their shares of
Common Stock (or other securities) for securities or other
property deliverable upon such reorganization, reclassification,
transfer, consolidation, merger, dissolution, liquidation or
winding up.
Section 8. Voting Rights of Series D Preferred Stock.
Except as required by law, each share of Series D Preferred
Stock shall be non-voting. The increase or decrease in the amount
of authorized capital stock of any class or of any series of any
class, including Series D Preferred Stock, shall not require the
consent of the holders of Series D Preferred Stock and shall not
be deemed to materially and adversely affect the specified
designations, preferences or special rights of the Series D
Preferred Stock.
Section 9. Miscellaneous.
(a) All notices referred to herein shall be in
writing, and all notices hereunder shall be deemed to have been
given upon the earlier of delivery thereof by hand delivery, by
courier, or by standard form of telecommunication, addressed: (i)
if to the Corporation, to its principal executive office
(Attention: President) and to the transfer agent, if any, for
the Series D Preferred Stock or other agent of the Corporation
designated as permitted hereby or (ii) if to any holder of the
Series D Preferred Stock or Common Stock, as the case may be, to
such holder at the address of such holder as listed in the stock
record books of the Corporation (which may include the records of
any transfer agent for the Series D Preferred Stock or Common
Stock, as the case may be) or (iii) to such other address as the
Corporation or any such holder, as the case may be, shall have
designated by notice similarly given.
(b) The term "Common Stock" as used herein means the
Corporation's Common Stock, $.001 par value, as the same exists
at the date of the filing of this Certificate of Designations,
Preferences and Rights of Series D Convertible Preferred Stock,
or any other class of stock resulting from successive changes or
reclassifications of such Common Stock consisting solely of
changes in par value, or from par value to no par value, or from
no par value to par value. In the event that, at any time as a
result of an adjustment made pursuant to Section 4 hereof, the
holder of any shares of the Series D Preferred Stock upon
thereafter surrendering such shares for conversion shall become
entitled to receive any shares or other securities of the
Corporation other than shares of Common Stock, the Applicable
Conversion Rate in respect of such other shares or securities so
receivable upon conversion of shares of Series D Preferred Stock
shall thereafter be adjusted, and shall be subject to further
adjustment from time to time, in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to
Common Stock contained in Section 4 hereof, and the remaining
provisions hereof with respect to the Common Stock shall apply on
like or similar terms to any such other shares or securities.
(c) The Corporation shall pay any and all stock
transfer and documentary stamp taxes that may be payable in
respect of any issuance or delivery of shares of Series D
Preferred Stock or shares of Common Stock or other securities
issued on account of Series D Preferred Stock pursuant hereto or
certificates representing such shares or securities. The
Corporation shall not, however, be required to pay any such tax
which may be payable in respect of any transfer involved in the
issuance or delivery of shares of Series D Preferred Stock or
Common Stock or other securities in a name other than that in
which the shares of Series D Preferred Stock with respect to
which such shares or other securities are issued or delivered
were registered, or in respect of any payment to any person with
respect to any such shares or securities other than a payment to
the registered holder thereof, and shall not be required to make
any such issuance, delivery or payment unless and until the
person otherwise entitled to such issuance, delivery or payment
has paid to the Corporation the amount of any such tax or has
established, to the satisfaction of the Corporation, that such
tax has been paid or is not payable.
(d) The Corporation may appoint, and from time to time
discharge and change, a transfer agent for the Series D Preferred
Stock. Upon any such appointment or discharge of a transfer
agent, the Corporation shall send notice thereof by hand
delivery, by courier, by standard form of telecommunication or by
first class mail (postage prepaid), to each holder of record of
Series D Preferred Stock.
[Remainder of page intentionally left blank.]
IN WITNESS WHEREOF, Selfcare, Inc. has caused this
certificate to be executed in its name and on its behalf by its
Treasurer and Chief Financial Officer, and attested by its
Secretary, as of this _____ day of _______________, 199__.
SELFCARE, INC.
By: /s/ Chris Huntoon
________________________
Name: Chris Huntoon
Title: Treasurer and Chief
Financial Officer
Attest:
/s/ Kennett D. Legg
______________________
Name: Kenneth D. Legg
Title: Secretary
EXHIBIT 4.3
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS
of
SERIES E CONVERTIBLE PREFERRED STOCK
of
SELFCARE, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
Selfcare, Inc., a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), hereby
certifies that the following resolution was adopted by a Special
Committee of the Board of Directors of the Corporation pursuant
to authority of such Special Committee of the Board of Directors
and the Board of Directors as required by Section 151 of the
Delaware General Corporation Law.
RESOLVED, that pursuant to the authority granted to and
vested in the special Committee of the Board of Directors (the
"Special Committee") by duly approved and adopted resolutions of
the Board of Directors of the Corporation (the "Board of
Directors" or the "Board") and in accordance with the provisions
of its Certificate of Incorporation and Bylaws, each as amended
and restated through the date hereof, the Special Committee
hereby authorizes a series of the Corporation's previously
authorized Preferred Stock, par value $.001 per share (the
"Preferred Stock"), and hereby states the designation and number
of shares, and fixes the relative rights, preferences,
privileges, powers and restrictions thereof as follows:
Section 1. Designation.
The designation of this series, which consists of 20,000
shares of Preferred Stock, is the Series E Convertible Preferred
Stock (the "Series E Preferred Stock") and the face amount shall
be One Hundred U.S. Dollars ($100) per share (the "Face Amount").
Section 2. Dividends.
(a) The holders of outstanding shares of Series E
Preferred Stock shall be entitled to receive, when, as and if
declared by the Board of Directors, out of funds legally
available for the payment of dividends, dividends at the rate per
share of 7% of the initial purchase price paid for such shares
(the "Purchase Price") per annum. All dividends shall be
cumulative and shall be payable in cash in arrears on the last
day of March, June, September and December of each year (each
such date, a "Dividend Payment Date") commencing on March 31,
1999, in preference to and with priority over dividends on the
common stock of the Corporation, par value $.001 per share (the
"Common Stock"). Such quarterly dividends shall be cumulative
and shall accrue (whether or not earned or declared, and whether
or not there are funds legally available therefor) without
interest from the later of (i) the first day of the quarterly
period in which such dividend may be payable as herein provided,
or (ii) the date of issuance of the shares of Series E Preferred
Stock.
(b) The amount of dividends accrued on the Series E
Preferred Stock for any period less than a full quarterly
dividend period (including the initial dividend period) shall be
equal to a pro rata portion of the total dividend payable for the
quarterly dividend period during which such period occurs, based
on the actual number of days elapsed in such period and the total
number of days in the applicable quarterly dividend period.
Dividends shall accrue on a daily basis during each dividend
period as provided above, and the Liquidation Preference (as
defined below) of each outstanding share of Series E Preferred
Stock shall be correspondingly increased on a daily basis. Each
such dividend shall be payable to holders of record as their
names shall appear on the stock books of the Corporation on any
record date for such dividends, except that dividends in arrears
for any past Dividend Payment Date may be declared and paid at
any time without reference to such regular Dividend Payment Date
to holders of record on such date not more than sixty (60) days
or less then ten (10) days prior to the date of payment as shall
be determined by the Board of Directors.
(c) No dividends will be declared or paid on any
Series E Preferred Stock unless full cumulative dividends, if
any, payable on the Corporation's Series B Convertible Preferred
Stock and on any other Senior Dividend Stock (as defined below)
have been declared and paid or are contemporaneously declared and
funds sufficient for payment are set aside on the Series B
Convertible Preferred Stock and any other Senior Dividend Stock
for all prior dividend periods.
(d) Except as provided in the next sentence, no
dividends will be declared or paid on any Parity Dividend Stock
(as defined below) unless full cumulative dividends have been
declared and paid or are contemporaneously declared and funds
sufficient for payment are set aside on the Series E Preferred
Stock for all prior dividend periods. If accrued dividends are
not paid in full upon the Series E Preferred Stock for all prior
dividend periods, all dividends declared upon shares of the
Series E Preferred Stock and Parity Dividend Stock for any
dividend period will be declared pro rata so that the amount of
dividends declared per share on the Series E Preferred Stock and
such other Parity Dividend Stock shall bear to each other the
same ratio that accumulated and unpaid dividends per share on the
shares of Series E Preferred Stock and such other Parity Dividend
Stock bear to each other.
(e) The Corporation may not declare or pay any
dividends on any shares of Common Stock or Junior Dividend Stock
(as defined below), or make any payment on account of, or set
apart money for, the purchase, redemption or other retirement of,
or for a sinking or other analogous fund for, any shares of
Junior Dividend Stock or make any distribution in respect
thereof, whether in cash or property or in obligations or stock
of the Corporation, other than in Common Stock or Junior Dividend
Stock, unless full cumulative dividends shall have been or are
contemporaneously paid or declared and set apart for payment on
the Series E Preferred Stock and any Parity Dividend Stock.
Section 3. Liquidation Preference.
(a) Preference. In the event of any liquidation,
dissolution or winding up of the Corporation, either voluntarily
or involuntarily, the holders of the Series E Preferred Stock
shall be entitled to receive prior and in preference to any
distribution of any of the assets or surplus funds of the
Corporation to the holders of Common Stock or any Junior
Liquidation Stock (as defined below), an amount equal to the sum
of (A) the Purchase Price (which shall be $100 per share), plus
(B) a further amount equal to any dividends on such shares as to
which holders of the Series E Preferred Stock are entitled
pursuant to Section 2 that have not been paid (such sum, the
"Liquidation Preference"). If, upon such liquidation,
dissolution or winding up of the Corporation, the assets of the
Corporation available for distribution to the holders of the
Series E Preferred Stock, after required distributions are made
to the holders of any Senior Liquidation Stock, are insufficient
to provide for the payment of the full Liquidation Preference,
such assets as are so available shall be distributed pro rata
among the holders of the Series E Preferred Stock and Parity
Liquidation Stock (as defined below) ratably in accordance with
the respective amounts which would be payable on such shares if
all amounts payable thereon were paid in full, subject to the
preferential rights of the holders of the Corporation's Series B
Convertible Preferred Stock and any other Senior Liquidation
Stock (as defined below). After payment of the full amount of
the Liquidation Preference and accumulated dividends to which
holders of shares of Series E Preferred Stock are entitled, the
holders of shares of Series E Preferred Stock will not be
entitled to any further participation in any distribution of
assets by the Corporation. The amount per share set forth in
this Section 3(a) shall be appropriately adjusted for any stock
splits, stock combinations, stock dividends or similar
recapitalizations with respect to the Series E Preferred Stock.
(b) Definitions. For the purposes of this resolution,
any stock of any class or series of the Corporation shall be
deemed to rank:
(i) senior to shares of the Series E Preferred
Stock as to dividends if the terms of the stock of such class or
series specifically provide that the shares rank senior to the
Series E Preferred Stock with respect to the receipt of dividends
("Senior Dividend Stock");
(ii) senior to shares of the Series E Preferred
Stock upon liquidation, if the terms of the stock of such class
or series specifically provide that the shares rank senior to the
Series E Preferred Stock with respect to the amounts
distributable upon liquidation, dissolution or winding up, as the
case may be ("Senior Liquidation Stock");
(iii) junior to shares of the Series E
Preferred Stock as to dividends if the terms of the stock of such
class or series specifically provide that the shares rank junior
to the Series E Preferred Stock with respect to the receipt of
dividends ("Junior Dividend Stock");
(iv) junior to shares of the Series E Preferred
Stock upon liquidation if the terms of the stock of such class or
series specifically provide that the shares rank junior to the
Series E Preferred Stock with respect to the amounts
distributable upon liquidation, dissolution or winding up
("Junior Liquidation Stock");
(v) on a parity with shares of the Series E
Preferred Stock as to dividends, whether or not the dividend
rates or dividend payment dates per share thereof shall be
different from those of the Series E Preferred Stock, if the
holders of stock of such class or series shall be entitled by the
terms thereof to the receipt of dividends in proportion to their
respective dividend rates, without preference or priority of one
over the other as between the holders of such stock and the
holders of shares of Series E Preferred Stock ("Parity Dividend
Stock"); and
(vi) on a parity with shares of the Series E
Preferred Stock upon liquidation, whether or not the redemption
or liquidation prices per share thereof shall be different from
those of the Series E Preferred Stock, if the holders of stock of
such class or series shall be entitled by the terms thereof to
the receipt of amounts distributable upon liquidation,
dissolution or winding up, in proportion to their respective
liquidation prices, without preference or priority of one over
the other as between the holders of such stock and the holders of
shares of Series E Preferred Stock ("Parity Liquidation Stock").
(c) Consolidation or Merger. A consolidation or
merger of the Corporation with or into any other corporation or
corporations, or a sale of all or substantially all of the assets
of the Corporation, shall not be deemed to be a liquidation,
dissolution or winding up within the meaning of this Section 3.
Section 4. Conversion.
(a) Right to Convert. Subject to and in compliance
with the provisions of this Section 4, any shares of the Series E
Preferred Stock may, at any time or from time to time at the
option of the holder, be converted into fully-paid and
non-assessable shares of Common Stock. The number of shares of
Common Stock to which a holder of the Series E Preferred Stock
shall be entitled upon conversion shall be the product obtained
by multiplying the Applicable Conversion Rate (determined as
provided in Section 4(c)) by the number of shares of Series E
Preferred Stock being converted.
(b) Automatic Conversion.
(i) Immediately upon the close of business (or
the next succeeding trading day if such date is not a trading
day) on the third anniversary of the date of issuance of a share
of Series E Preferred Stock, such share of Series E Preferred
Stock, if not previously converted, shall automatically be
converted into the number of shares of Common Stock into which
such shares are convertible upon application of the then
effective Applicable Conversion Rate (determined as provided in
Section 4(c)).
(ii) Upon the occurrence of an automatic
conversion with respect to a share of Series E Preferred Stock as
described in Section (4)(b)(i), such outstanding share of Series
E Preferred Stock shall be converted automatically without any
further action by the holder of such share and whether or not the
certificate representing such share is surrendered to the
Corporation or its transfer agent; provided, however, that the
Corporation shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such
conversion unless a certificate evidencing such share of Series E
Preferred Stock being so converted is either delivered to the
Corporation or any transfer agent, as hereinafter provided, or
the holder notifies the Corporation or any transfer agent, as
hereinafter provided, that such certificates have been lost,
stolen or destroyed and executes an agreement satisfactory to the
Corporation to indemnify the Corporation from any loss incurred
by it in connection therewith.
Upon the conversion of outstanding Series E Preferred Stock,
the holders of the Series E Preferred Stock shall surrender the
certificates representing such shares at the office of the
Corporation or of any transfer agent for the Common Stock.
Thereupon, there shall be issued and delivered to each such
holder, promptly at such office and in his, her or its name as
shown on such surrendered certificate or certificates, a
certificate or certificates for the number of shares of Common
Stock into which the shares of the Series E Preferred Stock
surrendered were convertible on the date on which such automatic
conversion occurred and cash as provided in Section 4(k) below in
respect of any fraction of a share of Common Stock issuable upon
such automatic conversion.
(c) Applicable Conversion Rate. The conversion rate
in effect at any time with respect to a share of Series E
Preferred Stock (the "Applicable Conversion Rate") shall equal
the quotient obtained by dividing such Series E Preferred Share's
Liquidation Preference (which includes accrued and unpaid
dividends, if any, thereon) by the Applicable Conversion Value
for such share, calculated as hereinafter provided.
(d) Applicable Conversion Value. The Applicable
Conversion Value with respect to a share of Series E Preferred
Stock in effect initially, and until first adjusted in accordance
with Section 4(e), 4(g) or 4(h) hereof, shall be $3.028.
(e) Adjustment to Applicable Conversion Value. Upon
the happening of an Extraordinary Common Stock Event (as
hereinafter defined), the Applicable Conversion Value shall,
simultaneously with the happening of such Extraordinary Common
Stock Event, be adjusted by dividing the then effective
Applicable Conversion Value by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding
(excluding treasury stock) immediately after such Extraordinary
Common Stock Event and the denominator of which shall be the
number of shares of Common Stock outstanding (excluding treasury
stock) immediately prior to such Extraordinary Common Stock
Event, and the quotient so obtained shall thereafter be the
Applicable Conversion Value. The Applicable Conversion Value, as
so adjusted, shall be readjusted in the same manner upon the
happening of any successive Extraordinary Common Stock Event or
Events.
(f) Adjustments for Mergers and Other Reorganizations.
If at any time or from time to time there shall be a capital
reorganization of the Common Stock (other than an Extraordinary
Common Stock Event) or a merger or consolidation of the
Corporation with or into another corporation or the sale of all
or substantially all of the Corporation's properties and assets
to any other person in connection with which the holders of
Series E Preferred Stock do not elect to convert such Series E
Preferred Stock, then, as a part of and as a condition to the
effectiveness of such reorganization, merger, consolidation or
sale, lawful and adequate provision shall be made so that the
holders of the Series E Preferred Stock shall thereafter be
entitled to receive upon conversion of the Series E Preferred
Stock the number of shares of stock or other securities or
property of the Corporation or of the successor corporation
resulting from such merger or consolidation or sale or other
consideration, to which such holders would have been entitled if
they had converted their Series E Preferred Stock immediately
prior to such capital reorganization, merger, consolidation, or
sale. In any such case, appropriate provisions shall be made
with respect to the rights of the holders of the Series E
Preferred Stock after the reorganization, merger, consolidation
or sale to the end that the provisions set forth herein
(including without limitation provisions for adjustment of the
Applicable Conversion Value of the Series E Preferred Stock and
the number of shares purchasable upon conversion of the Series E
Preferred Stock) shall thereafter be applicable, as nearly as may
be, with respect to any shares of stock, securities or assets to
be deliverable thereafter upon the conversion of the Series E
Preferred Stock.
(g) Adjustments for Distributions. If the Corporation
shall distribute to all holders of its Common Stock any shares of
capital stock of the Corporation (other than Common Stock) or
evidence of its indebtedness or assets (any of the foregoing
being hereinafter in this Section 4(g) called a "Distribution"),
(but excluding regularly declared quarterly cash dividends (if
any) or rights or warrants to subscribe for or purchase any of
its securities), then in each such case the Applicable Conversion
Value shall be adjusted so that it shall equal the price
determined by multiplying (A) the Applicable Conversion Value in
effect immediately prior to the close of business on the date
fixed for the determination of stockholders entitled to receive
such Distribution by (B) a fraction, the numerator of which shall
be the Fair Market Value (as hereinafter defined) per share of
Common Stock on the record date referred to below less the then
fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a Board
resolution), of the portion of the capital stock or assets or
evidences of indebtedness so distributed or of such rights or
warrants applicable to one share of Common Stock, and the
denominator of which shall be the Fair Market Value per share of
Common Stock on the record date referred to below. Such
adjustment shall become effective immediately at the opening of
business on the business day next following (except as provided
in Section 4(n) below) the record date for the determination of
stockholders entitled to receive such Distribution. For the
purposes of this Section 4(g), the distribution of a right or
warrant to subscribe or purchase any of the Corporation's
securities, which is distributed not only to the holders of the
Common Stock on the date fixed for the determination of
stockholders entitled to such Distribution of such right or
warrant, but also would be distributed with shares of Common
Stock delivered to a person converting shares of Series A
Preferred Stock after such determination date, shall not require
an adjustment of the Applicable Conversion Value pursuant to this
Section 4(g); PROVIDED that if on the date, if any, on which a
person converting shares of Series A Preferred Stock such person
would no longer be entitled to receive such right or warrant with
shares of Common Stock (other than as a result of the termination
of all such rights or warrants), a distribution of such rights or
warrants shall be deemed to have occurred and the Applicable
Conversion Value shall be adjusted as provided in this Section
4(g) and such day shall be deemed to be "the date fixed for the
determination of the stockholders entitled to receive such
distribution" and "the record date" within the meaning of the two
preceding sentences.
(h) Minimum Adjustment. No adjustment in the
Applicable Conversion Value shall be required unless such
adjustment would require a cumulative increase or decrease of at
least 1% in such price; PROVIDED, HOWEVER, that any adjustments
that by reason of this Section 4(h) are not required to be made
shall be carried forward and taken into account in any subsequent
adjustment until made; and PROVIDED, FURTHER, that any adjustment
shall be required and made in accordance with the provisions of
this Section 4 (other than this Section 4(h)) not later than such
time as may be required in order to preserve the tax-free nature
of a distribution to the holders of shares of Common Stock.
Notwithstanding any other provisions of this Section 4, the
Corporation shall not be required to make any adjustment of the
Applicable Conversion Value for the issuance of any shares of
Common Stock pursuant to any plan providing for the reinvestment
of dividends or interest payable on securities of the Corporation
and the investment of additional optional amounts in shares of
Common Stock under such plan. All calculations under this
Section 4 shall be made to the nearest cent (with $.005 being
rounded upward) or to the nearest one-tenth of a share (with .05
of a share being rounded upward), as the case may be. Anything
in this Section 4 to the contrary notwithstanding, the
Corporation shall be entitled, to the extent permitted by law, to
make such reductions in the Applicable Conversion Value, in
addition to those required by this Section 4, as it in its
discretion shall determine to be advisable in order that any
stock dividends, subdivision of shares, reclassification or
combination of shares, distribution of rights or warrants to
purchase stock or securities, or a distribution of other assets
(other than cash dividends) hereafter made by the Corporation to
its stockholders shall not be taxable, or if that is not
possible, to diminish any income taxes that are otherwise payable
because of such event.
(i) Certificate as to Adjustments. In each case of an
adjustment or readjustment of the Applicable Conversion Rate, the
Corporation will promptly furnish each holder of Series E
Preferred Stock with a certificate, prepared by the chief
financial officer or other executive officer of the Corporation,
showing such adjustment or readjustment, and stating in detail
the facts upon which such adjustment or readjustment is based.
(j) Mechanics of Conversion. To exercise its
conversion privilege, a holder of Series E Preferred Stock shall
surrender the certificate or certificates representing the shares
being converted to the Corporation at its principal office, and
shall give written notice to the Corporation at that office that
such holder elects to convert such shares. Such notice shall
also state the name or names (with address or addresses) in which
the certificate or certificates for shares of Common Stock
issuable upon such conversion shall be issued. The certificate
or certificates for shares of Series E Preferred Stock
surrendered for conversion shall be accompanied by proper
assignment thereof to the Corporation or in blank. The date when
such written notice is received by the Corporation together with
the certificate or certificates representing the shares of Series
E Preferred Stock being converted, shall be the "Conversion
Date." As promptly as practicable after the Conversion Date, the
Corporation shall issue and shall deliver to the holder of the
shares of Series E Preferred Stock being converted, a certificate
or certificates in such denominations as it may request in
writing for the number of full shares of Common Stock issuable
upon the conversion of such shares of Series E Preferred Stock in
accordance with the provisions of this Section 4 and cash as
provided in Section 4(k) below in respect of any fraction of a
share of Common Stock issuable upon such conversion. Such
conversion shall be deemed to have been effected immediately
prior to the close of business on the Conversion Date, and at
such time the rights of the holder as holder of the converted
shares of Series E Preferred Stock shall cease and the person or
persons in whose name or names any certificate or certificates
for shares of Common Stock shall be issuable upon such conversion
shall be deemed to have become the holder or holders of record of
shares of Common Stock represented thereby.
(k) Fractional Shares. No fractional shares of Common
Stock or scrip representing fractional shares shall be issued
upon conversion of Series E Preferred Stock. Instead of any
fractional shares of Common Stock that would otherwise be
issuable upon conversion of Series E Preferred Stock, including
pursuant to the provisions of Section 5 hereof, the Corporation
shall pay to the holder of the shares of Series E Preferred Stock
that were converted a cash adjustment in respect of such fraction
in an amount equal to the same fraction of the market price per
share of the Common Stock (as determined in a manner prescribed
by the Board of Directors) at the close of business on the
Conversion Date.
(l) Partial Conversion. In the event some but not all
of the shares of Series E Preferred Stock represented by a
certificate or certificates surrendered by a holder are
converted, the Corporation shall execute and deliver to or on the
order of the holder, at the expense of the Corporation, a new
certificate representing the number of shares of Series E
Preferred Stock which were not converted.
(m) Reservation of Common Stock. The Corporation
shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the
purpose of effecting the conversion of the shares of the Series E
Preferred Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of
all outstanding shares of the Series E Preferred Stock, and if at
any time the number of authorized but unissued shares of Common
Stock shall not be sufficient to effect the conversion of all
then outstanding shares of the Series E Preferred Stock, the
Corporation shall take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized
but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose.
(n) Deferment. In any case in which this Section 4
provides that an adjustment shall become effective on the day
next following the record date for an event, the Corporation may
defer until the occurrence of such event (A) issuing to the
holder of any share of Series A Preferred Stock converted after
such record date and before the occurrence of such event the
additional Common Stock issuable upon such conversion by reason
of the adjustment required by such event over and above the
Common Stock issuable upon such conversion before giving effect
to such adjustment and (B) paying to such holder any amount of
cash in lieu of any fraction pursuant to Section 4(k).
(o) Extraordinary Common Stock Event. "Extraordinary
Common Stock Event" shall mean (i) the issuance of additional
shares of Common Stock of any class as a dividend or other
distribution on outstanding Common Stock, (ii) the subdivision of
outstanding shares of Common Stock of any class into a greater
number of shares of Common Stock, or (iii) the combination of
outstanding shares of Common Stock of any class into a smaller
number of shares of Common Stock.
(p) Fair Market Value. "Fair Market Value" shall mean
the average of the daily Current Market Prices (as hereinafter
defined) of a share of Common Stock during five (5) consecutive
trading days selected by the Corporation commencing not more than
twenty (20) trading days before, and ending not later than, the
earlier of the day in question and the day before the "ex" date
with respect to the issuance or distribution requiring such
computation. The term "`ex' date," when used with respect to any
issuance or distribution, means the first day on which the share
of Common Stock trades regular way, without the right to receive
such issuance or distribution, on the exchange or in the market,
as the case may be, used to determine that day's Current Market
Price.
(q) Current Market Price. "Current Market Price"
shall mean the last reported sales price, regular way on such
day, or, if no sale takes place on such day, the average of the
reported closing bid and asked prices regular way on such day, in
either case as reported on the American Stock Exchange (or, in
the event that such security is not traded on the American Stock
Exchange, such other national or regional securities exchange or
automated quotation system upon which such security is listed and
principally traded or, if no such price is available, the per
share market value of such security as determined by a nationally
recognized investment banking firm or other nationally recognized
financial adviser retained by the Corporation for such purpose).
Section 5. Shareholder Approval.
(a) For purposes of this Section 5, the term "Series
Preferred Stock" shall mean the Series E Preferred Stock, the
Series C Convertible Preferred Stock and the Series D Convertible
Preferred Stock of the Corporation. Notwithstanding anything
herein to the contrary, no shares of the Series E Preferred Stock
may be converted pursuant to Section 4(a) unless and until the
earlier of (i) April 30, 1999 or (ii) the fifth business day
following approval of the issuance of the Series E Preferred
Stock by a majority of a quorum of the shareholders of the
Corporation voting at a meeting of the shareholders. If the
shareholders do not give such approval and the Corporation
receives a conversion notice on or after April 30, 1999 from any
holder of the Series Preferred Stock, and such holder fails to
withdraw such notice within five (5) business days of receipt by
the Corporation of such notice (if such notice is not withdrawn,
such notice shall be deemed the "First Conversion Notice"), the
Corporation shall mail a notice (the "Maximum Conversion Notice")
six business days following receipt of such First Conversion
Notice, postage prepaid, to each holder of record of the Series
Preferred Stock at its address shown on the records of the
Corporation. The Maximum Conversion Notice shall inform such
holders that (i) if such holders wish to convert any or all of
their shares of Series Preferred Stock, then they must so notify
the Corporation and surrender the applicable stock certificates
pursuant to Section 5(b) below not later than the thirtieth
(30th) day (the "Cutoff Date") after the date of the Maximum
Conversion Notice, and (ii) on the Cutoff Date the Corporation
will convert a number of shares of Series Preferred Stock in
accordance with the provisions of Section 5(b) below, such that
the number of shares of Common Stock issuable thereupon will not
exceed the Listed Shares. The "Listed Shares" shall mean the
number of shares of Common Stock listed on the American Stock
Exchange for issuance upon conversion of the Series Preferred
Stock as of the date of the Maximum Conversion Notice.
(b) After the Corporation mails the Maximum Conversion
Notice, any holder of the Series E Preferred Stock wishing to
convert any of its shares of Series E Preferred Stock shall, on
or prior to the Cutoff Date, (i) surrender the certificate or
certificates representing the shares its wishes to convert to the
Corporation at its principal office, and (ii) give written notice
to the Corporation at that office of the number of shares that
such holder wishes to convert. Such notice shall also state the
name or names (with address or addresses) in which the
certificate or certificates for shares of Common Stock issuable
upon such conversion shall be issued. The certificate or
certificates for shares of Series E Preferred Stock surrendered
for conversion shall be accompanied by duly executed proper
assignment thereof to the Corporation or in blank, and shall
otherwise comply with the procedures set forth in Section 4(j)
for conversion. Each such completed conversion notice, and any
similarly completed conversion notices with respect to any other
shares of Series Preferred Stock, shall be referred to
hereinafter in this Section 5(b) as a "Subject Conversion
Notice." If the total number of shares of Common Stock that
would be issuable upon conversion of all of the shares of Series
Preferred Stock for which conversion was requested pursuant to
all of the Subject Conversion Notices (the "Requested Shares")
exceeds the Listed Shares, then only such portion of the
Requested Shares as is convertible into the Listed Shares shall
be converted (on a pro-rata basis among the holders of such
Requested Shares in proportion to the respective numbers of the
Requested Shares as to which the holders gave Subject Conversion
Notices into Common Stock (rounded down to the nearest whole
share). All remaining shares of Series E Preferred Stock
(including those shares for which the holders thereof gave a
Subject Conversion Notice but which were not converted due to the
provisions of the preceding sentence) shall be redeemed by the
Corporation in cash for a per share amount (the "Redemption
Price") equal to the product of (i) the number of shares of
Common Stock into which such one share of Series Preferred Stock
was convertible on the Cutoff Date and (ii) the Cutoff Date
Market Price. The "Cutoff Date Market Price" shall mean the
average of the closing prices of the Common Stock on the American
Stock Exchange or, if applicable, such other exchange or market
on which it instead principally trades on each of the five (5)
trading days immediately preceding the Cutoff Date.
(c) If the total number of shares of Common Stock
issuable upon conversion of the Requested Shares does not exceed
the Listed Shares, then the Corporation shall cause the automatic
conversion of the Requested Shares and shall redeem, at the
Redemption Price, all remaining outstanding shares of the Series
Preferred Stock, provided, however, that the Corporation may
instead elect to pay a percentage of such Redemption Price in
shares of Common Stock (valued at the Cutoff Date Market Price),
such percentage being equal to the quotient of (i) the difference
between the Listed Shares minus the actual number of shares of
Common Stock issued pursuant to the conversion of the Requested
Shares, divided by (ii) the number of shares of Series Preferred
Stock which remain outstanding following conversion of the
Requested Shares. In such an event, such percentage of the
Redeemed Shares (rounded down to the nearest whole share) shall
be deemed to have been automatically converted into Common Stock.
(d) Each holder of shares of Series E Preferred Stock
to be redeemed under this Section 5 shall surrender the
certificate or certificates representing such shares to the
Corporation at its principal office, and, within twenty (20) days
following the Cutoff Date, the Redemption Price shall be paid to
the order of the person whose name appears on such certificate or
certificates.
Section 6. No Reissuance of Series E Preferred Stock.
No share or shares of the Series E Preferred Stock acquired by
the Corporation by reason of redemption, purchase, conversion or
otherwise shall be reissued, and all such shares shall be
cancelled, retired, and eliminated from the shares which the
Corporation shall be authorized to issue. The Corporation may
from time to time take such appropriate corporate action as may
be necessary to reduce the authorized number of shares of the
Series E Preferred Stock accordingly.
Section 7. Notices of Record Date. In the event (i) the
Corporation establishes a record date to determine the holders of
its Common Stock who are entitled to receive any dividend or
other distribution, or (ii) there occurs any capital
reorganization of the Corporation, any reclassification or
recapitalization of the capital stock of the Corporation, any
merger or consolidation of the Corporation, or any transfer of
all or substantially all of the assets of the Corporation to any
other Corporation, or any other entity or person, or any
voluntary or involuntary dissolution, liquidation or winding up
of the Corporation, the Corporation shall mail to each holder of
Series E Preferred Stock at least 10 days prior to the record
date specified therein, a notice specifying (a) the date of such
record date for the purpose of such dividend or distribution and
a description of such dividend or distribution, (b) the date on
which any such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation or winding up is
expected to become effective, and (c) the time, if any, that is
to be fixed, as to when the holders of record of Common Stock (or
other securities) shall be entitled to exchange their shares of
Common Stock (or other securities) for securities or other
property deliverable upon such reorganization, reclassification,
transfer, consolidation, merger, dissolution, liquidation or
winding up.
Section 8. Voting Rights of Series E Preferred Stock.
Except as required by law, each share of Series E Preferred
Stock shall be non-voting. The increase or decrease in the amount
of authorized capital stock of any class or of any series of any
class, including Series E Preferred Stock, shall not require the
consent of the holders of Series E Preferred Stock and shall not
be deemed to materially and adversely affect the specified
designations, preferences or special rights of the Series E
Preferred Stock.
Section 9. Miscellaneous.
(a) All notices referred to herein shall be in
writing, and all notices hereunder shall be deemed to have been
given upon the earlier of delivery thereof by hand delivery, by
courier, or by standard form of telecommunication, addressed: (i)
if to the Corporation, to its principal executive office
(Attention: President) and to the transfer agent, if any, for
the Series E Preferred Stock or other agent of the Corporation
designated as permitted hereby or (ii) if to any holder of the
Series E Preferred Stock or Common Stock, as the case may be, to
such holder at the address of such holder as listed in the stock
record books of the Corporation (which may include the records of
any transfer agent for the Series E Preferred Stock or Common
Stock, as the case may be) or (iii) to such other address as the
Corporation or any such holder, as the case may be, shall have
designated by notice similarly given.
(b) The term "Common Stock" as used herein means the
Corporation's Common Stock, $.001 par value, as the same exists
at the date of the filing of this Certificate of Designations,
Preferences and Rights of Series E Convertible Preferred Stock,
or any other class of stock resulting from successive changes or
reclassifications of such Common Stock consisting solely of
changes in par value, or from par value to no par value, or from
no par value to par value. In the event that, at any time as a
result of an adjustment made pursuant to Section 4 hereof, the
holder of any shares of the Series E Preferred Stock upon
thereafter surrendering such shares for conversion shall become
entitled to receive any shares or other securities of the
Corporation other than shares of Common Stock, the Applicable
Conversion Rate in respect of such other shares or securities so
receivable upon conversion of shares of Series E Preferred Stock
shall thereafter be adjusted, and shall be subject to further
adjustment from time to time, in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to
Common Stock contained in Section 4 hereof, and the remaining
provisions hereof with respect to the Common Stock shall apply on
like or similar terms to any such other shares or securities.
(c) The Corporation shall pay any and all stock
transfer and documentary stamp taxes that may be payable in
respect of any issuance or delivery of shares of Series E
Preferred Stock or shares of Common Stock or other securities
issued on account of Series E Preferred Stock pursuant hereto or
certificates representing such shares or securities. The
Corporation shall not, however, be required to pay any such tax
which may be payable in respect of any transfer involved in the
issuance or delivery of shares of Series E Preferred Stock or
Common Stock or other securities in a name other than that in
which the shares of Series E Preferred Stock with respect to
which such shares or other securities are issued or delivered
were registered, or in respect of any payment to any person with
respect to any such shares or securities other than a payment to
the registered holder thereof, and shall not be required to make
any such issuance, delivery or payment unless and until the
person otherwise entitled to such issuance, delivery or payment
has paid to the Corporation the amount of any such tax or has
established, to the satisfaction of the Corporation, that such
tax has been paid or is not payable.
(d) The Corporation may appoint, and from time to time
discharge and change, a transfer agent for the Series E Preferred
Stock. Upon any such appointment or discharge of a transfer
agent, the Corporation shall send notice thereof by hand
delivery, by courier, by standard form of telecommunication or by
first class mail (postage prepaid), to each holder of record of
Series E Preferred Stock.
[Remainder of page intentionally left blank.]
IN WITNESS WHEREOF, Selfcare, Inc. has caused this
certificate to be executed in its name and on its behalf by its
Treasurer and Chief Financial Officer, and attested by its
Secretary, as of this _____ day of _______________, 199__.
SELFCARE, INC.
By: /s/ Chris Huntoon
____________________________
Name: Chris Huntoon
Title: Treasurer and Chief
Financial Officer
Attest:
/s/ Kenneth D. Legg
________________________
Name: Kenneth D. Legg
Title: Secretary
EXHIBIT 99.1
SELFCARE COMPLETES $7.4 MILLION PRIVATE EQUITY FINANCING AND
ANNOUNCES RESTRUCTURING OF CONVERTIBLE NOTES AND SERIES B
PREFERRED STOCK
WALTHAM, Mass., - Jan. 13 /PRNewswire/ -- Selfcare, Inc. (AMEX:
SLF -news) today announced that it has completed a $7.4 million
convertible preferred stock private equity financing to a group
of investors, including certain of Selfcare's officers and
directors. The financing was completed to provide additional
working capital for the Company.
Approximately $1 million of the proceeds from this financing
consisted of payments on notes and other obligations that would
have been due by May 31, 1999 but which were, instead, exchanged
for shares of the newly issued preferred stock. Approximately $1
million of the net proceeds from this financing was used to
redeem a portion of the convertible notes originally issued in
October 1997, and the remainder will be used for the Company's
working capital needs. The 74,045 newly issued shares of
preferred stock, which do not have registration rights, will
accrue dividends at the rate of 7% per annum. Subject to
applicable legal requirements and the rules of the American Stock
Exchange, the preferred stock is convertible into common stock at
any time after April 30, 1999, but mandatorily converts into
common stock on the third anniversary of its issuance.
Approximately $5.7 million of the preferred stock converts into
common stock at a fixed conversion price of $1.8125 per share,
$303 thousand is convertible at a fixed conversion price of $2.00
per share and approximately $1.4 million is convertible at a
fixed conversion price of $3.028 per share. The differences in
conversion prices were caused by the different dates on which the
investors agreed to make their investments in the preferred
stock.
The Company also announced that it has entered into an agreement
with the holders of the convertible notes, which were originally
issued in October 1997, to amend the original terms of the notes.
Pursuant to the terms of the agreement, the Company has redeemed
approximately $860 thousand of the convertible notes, including
accrued interest thereon, at a 10% premium. In addition, the
remaining balance of the convertible notes, which has been
increased by a 15% premium to approximately $2.4 million, will
mature in six months and is convertible into shares of common
stock at a fixed conversion price of $2.00 per share, except in
an event of default.
The Company has also entered into a letter of intent with the
holders of the Series B Convertible Preferred Stock, which was
originally issued in August 1997, to amend the terms of the
preferred stock. The amendments, which are subject to the
execution of definitive documents and to approval of the
Company's shareholders at a shareholders meeting, will fix the
conversion price of the Series B Convertible Preferred Stock at
$2.00 per share for six months and will provide the holders of
the preferred stock with a 15 % premium on the approximately $4.9
million of preferred stock which has not yet been converted.
The Company expects that the shareholders meeting to seek
approval of the transactions described above, will be held in
March, 1999. In the event shareholder approval is not obtained,
the Company will be subject to certain penalties or additional
costs, and may be required to redeem some or all of the
convertible securities described above.
Ron Zwanziger, the Chief Executive Officer of Selfcare, stated
"We have successfully completed a financing which provides
essential working capital for the Company and which redeems a
portion of the Company's convertible notes. In addition, we have
restructured, or have agreed to restructure, our two existing
convertible securities which have floating conversion prices into
securities with a conversion price which is fixed in most cases
at $2.00 per share for at least six months. We are pleased to
have reached this resolution."
Selfcare, with principal facilities in Waltham, Massachusetts;
Chazy, New York; Inverness, Scotland; Galway, Ireland; Munich,
Germany and Tel Aviv, Israel, is engaged in the development,
manufacture and marketing of health maintenance and home self-
test diagnostic products for the diabetes and women's health
markets, as well as the marketing of a line of nutritional
supplement products.
Except for the historical information contained herein, this news
release contains forward-looking statements that involve risk and
uncertainty. Actual results and timing of certain events could
differ materially from those projected in or contemplated by the
forward-looking statements due to a number of factors, including,
without limitation, the execution of definitive documents
evidencing the amendment of the Series B Convertible Preferred
Stock, regulatory review of the various filings that may be
required in connection with the above-described transactions,
product demand, market acceptance, changing economic conditions,
risks in product and technology development and other risks
detailed from time to time in the filings of the Company with the
Securities and Exchange Commission, including, without
limitation, quarterly reports on Form l0-Q, current reports on
Form 8-K, and the Company's annual report on Form l0-K for the
year-ended December 31, 1997.
EXHIBIT 99.2
NOTE AMENDMENT AGREEMENT
This NOTE AMENDMENT AGREEMENT ("Agreement") is entered into
as of January 11, 1999, by and between Selfcare, Inc., a Delaware
corporation (the "Company"), with headquarters located at 200
Prospect Street, Waltham, Massachusetts 02154; ELLIOTT
ASSOCIATES, L.P., a Delaware limited partnership ("Elliott"),
with offices located at 712 Fifth Avenue, 36th Floor, New York,
New York 10019; and WESTGATE INTERNATIONAL, L.P., a Cayman
Islands limited partnership ("Westgate," and together with
Elliott, the "Holders"), with an address at c/o Midland Bank
Trust Corporation (Cayman) Limited, P.O. Box 1109, Mary Street,
Grand Cayman, Cayman Islands, regarding to the following:
RECITALS
A. Pursuant to a Securities Purchase Agreement dated as of
October 27, 1997 (the "Securities Purchase Agreement") the
Holders purchased from the Company $10,000,000 face amount of the
Company's Senior Subordinated Convertible Notes (the "Notes"),
convertible into shares of the Company's common stock, par value
$.001 per share (the "Common Stock"), and also received Stock
Purchase Warrants (the "Warrants") to acquire an aggregate of
106,700 shares of Common Stock. Capitalized terms not otherwise
defined herein shall have the meanings ascribed thereto in the
Securities Purchase Agreement.
B. Certain disputes have arisen among the parties hereto, and
the parties desire to amend (and prepay a portion of) the Notes,
cancel the Warrants, dismiss a pending lawsuit and settle all of
these disputes, all as provided below.
AGREEMENTS
NOW, THEREFORE, in consideration of their respective
promises contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Holders hereby agree as follows:
ARTICLE I
AMENDMENT OF NOTES
1.1 Prepayment and Amendment of Notes. Upon the execution
hereof, the Company shall pay to each Holder, by wire transfer of
immediately available funds, an amount equal to $429,524.62
(representing a 10% premium over the principal and interest
represented thereby). Upon the execution hereof, the Notes shall
be amended to conform to the forms annexed hereto (the "Amended
Notes") and a new Amended Note shall be delivered to each Holder
against delivery of the Holder's existing Note and Warrant
Certificate. The face amount of each Holder's Amended Note shall
be $1,207,500 (representing a 15% premium over the remaining
principal and interest of the existing Note). The Amended Notes
shall provide for a six-month maturity, interest at 8% per annum,
a fixed conversion price of $2.00 (except in the case of certain
Events of Default) and redemption by the Company on seven (7)
days notice.
1.2 Current Conversion Notices. The Conversion Notices
delivered on January 7, 1999 for 190,000 Common Shares are hereby
withdrawn, but only subject to the Company's compliance with the
next sentence. Pursuant to the outstanding Conversion Notices
covering an aggregate of 500,000 Common Shares at a Conversion
Price of $1.8125, the Company shall deliver all of such 500,000
Common Shares no later than the close of business on January 20,
1999, and each Holder hereby waives any remedies for late
delivery of such Common Shares if delivered by such date.
1.3 Warrants. In consideration of the Company's agreement to
amend the Notes on the terms described below, all of the Warrants
shall be cancelled effective as of the date hereof.
1.4 Legal Opinion. The Holders' obligation to consummate the
transaction contemplated hereby on the date hereof shall be
conditioned upon the delivery to Holders, on the date hereof, of
a legal opinion of Goodwin, Procter & Hoar LLP with respect to
the transactions contemplated hereby, in form and substance
satisfactory to the Holders.
ARTICLE II
REPRESENTATIONS AND WARRANTS
2.1 Holders' Representations. Each of the Holders repeats each
of the representations and warranties contained in Sections 2.1,
2.2, 2.3, 2.5, 2.6, 2.7 and 2.8 of the Securities Purchase
Agreement, as if made on the date hereof with respect to such
Holders' Amended Note and to this Agreement (as opposed to the
Securities Purchase Agreement).
2.2 Company's Representations. The Company represents and
warrants to each Holder as of the date hereof, as follows:
(a) Organization and Qualification. Each of the Company and its
direct and indirect subsidiaries (collectively, "Subsidiaries")
is a corporation duly organized and existing in good standing
under the laws of the jurisdiction in which it is incorporated,
and has the requisite corporate power to own its properties and
to carry on its business as now being conducted. The Company and
each of its Subsidiaries is duly qualified as a foreign
corporation to do business and is in good standing in every
jurisdiction where the failure so to qualify or be in good
standing would have a Material Adverse Effect. "Material Adverse
Effect" means any effect which, individually or in the aggregate
with all other effects, is or reasonably would be expected to be
materially adverse to the business, operations, properties,
financial condition or operating results of the Company and its
Subsidiaries, taken as a whole on a consolidated basis, or to the
transactions contemplated hereby;
(b) The Company has the requisite corporate power and authority
to enter into and perform this Agreement, and to issue, sell and
perform its obligations with respect to the Amended Notes in
accordance with the terms hereof and thereof and to issue the
applicable Common Shares upon conversion of the Notes, in
accordance with their terms;
(c) The execution, delivery and performance of this Agreement by
the Company and the consummation by it of the transactions
contemplated hereby and thereby (including without limitation the
issuance of the Amended Notes) have been duly authorized by all
necessary corporate action and no further consent or
authorization of the Company, its board of directors, or its
stockholders or any other person, body or agency, and no filing
with any person, body or agency, is required with respect to any
of the transactions contemplated hereby or thereby;
(d) This Agreement has been duly executed and delivered by the
Company, and the Amended Notes have been duly executed and
delivered by the Company; and
(e) This Agreement, the Notes, and the Registration Rights
Agreement constitute, and upon issuance the Amended Notes will
constitute legal, valid and binding obligations of the Company
enforceable against the Company in accordance with their
respective terms, except
(i) to the extent that such validity or enforceability may
be subject to or affected by any bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating
to, or affecting generally the enforcement of, creditors' rights
or remedies of creditors generally, or by other equitable
principles of general application, and
(ii) as rights to indemnity and contribution under the
Registration Rights Agreement may be limited by federal or state
securities laws.
ARTICLE III
COVENANTS
3.1 Company's Covenants.
(a) The Company's covenants contained in Sections 4.3, 4.4, 4.5
(except that for purposes of such Section 4.5 the "Purchase
Price" of the Amended Notes shall be the original principal
amount thereof), 4.6, 4.7, 5.1 and 5.2 of the Securities Purchase
Agreement shall remain in full force and effect with respect to
the Amended Notes.
(b) The Company agrees to use its best efforts by February 8,
1999 to amend the SEC Registration Statement covering the Notes
(or merely supplement the applicable prospectus, if lawful) to
reflect the amendments thereto effected by this Agreement and in
any event to file such amendment (or prospectus supplement) no
later than January 19, 1999. When the SEC notifies the Company
that such amendment or supplement is not being reviewed or that
the SEC's comments have been satisfied, the Company shall
immediately so notify the Holders and cause such amendment or
supplement to become effective within two (2) business days
thereafter. The Company shall respond to any SEC comments within
seven (7) days after receipt of such comments. Notwithstanding
the foregoing, the Holders' remedies for any failure of the
Company despite the Company's good faith efforts, to file such
amendment or supplement by January 19, 1999 or to have such
amendment or supplement effective by February 8, 1999, shall be
limited to the remedies provided for in the Registration Rights
Agreement and the optional extension of the Maturity Date and
also (if such delay continues beyond March 5, 1999), the
redemption notice period as provided in the Amended Notes. The
Registration Rights Agreement among the parties hereto shall
remain in full force and effect with respect to the Amended Notes
and underlying Common Stock.
(c) Notwithstanding Section 4.5 of the Securities Purchase
Agreement, no Delisting Payments shall accrue as a result of the
Company's failure to list additional Common Shares beyond those
previously listed, unless and until the Company obtains the
formal ratification and approval of its Shareholders to the
issuance and conversion of the Amended Notes ("Shareholder
Approval").
3.2 Holders' Covenants.
(a) The Holders' covenants contained in Section 4.6 of the
Securities Purchase Agreement shall remain in full force and
effect with respect to the Amended Notes and the Holders shall
continue to be bound by Sections 5.1 and 5.2 with respect to the
Amended Notes and underlying Common Stock.
(b) Within two (2) business days after the delivery of the
500,000 Common Shares referred in Section 1.2 above, the Holders
shall dismiss with prejudice the action pending in the Court of
Chancery of the State of Delaware entitled Elliott Associates,
L.P., et al. v. Selfcare, Inc.
(c) Until payment in full of the Holders' Amended Notes, the
Holders, collectively, will not effect any short sale in the
Company's Common Stock if the Holders' aggregate short position
in the Company's Common Stock would thereby exceed 100% of the
number of shares of Common Stock into which the Amended Notes are
then convertible. In addition, each Holder agrees that, until
payment in full of the Holder's Amended Note, such Holder shall
not purchase any shares of the Company's Common Stock except (i)
that the Holder may purchase shares of Common Stock to the extent
necessary to comply with requests or demands by lenders of the
Company's Common Stock to return such Common Stock; (ii) to the
extent necessary to cover short sales made (A) prior to, or after
failure to obtain, Shareholder Approval, or (B) following
Shareholder Approval because the Company has failed to timely
honor one or more Conversion Notices herein; or (iii) following
Shareholder Approval, to the extent that the Holder acquires
shares of Common Stock to cover short sales made hereafter during
any period during which the Company's Registration Statement is
not fully effective and current, provided that promptly following
the return to effectiveness of the Registration Statement, the
Holder makes corresponding conversions of the Amended Note into
the same amounts of shares; and (iv) the Holder may freely
acquire shares of Common Stock through permitted conversions of
the Holder's Amended Note. Following satisfaction in full of
such Holder's Note by payment and/or conversions, such Holder
shall refrain from any and all purchases or sales (whether long
or short) of the Company's securities for a period of five (5)
years (without the Company's prior written consent).
The foregoing restrictions shall not apply during the
pendency of an Event of Default (excluding an Event of Default
described in Section 11.1 (i) or (j) thereof) under any Holder's
Amended Note.
ARTICLE IV
RELEASES; NO DEFENSES OR COUNTERCLAIMS
4.1 Mutual Releases.
(a) Each of the Holders hereby irrevocably and completely
releases and discharges the Company and its successors and
assigns from and against any and all claims, liabilities,
damages, demands, charges, causes of action and suits, whether
known or unknown, which the Holders have or may have ever had,
arising out of or in connection with the Notes, the Common
Shares, the Securities Purchase Agreement or any related
document, in each case to the extent arising out of any acts,
circumstances, or events occurring prior to the date hereof.
(b) The Company hereby releases and discharges each of the
Holders and each of their respective affiliates (including,
without limitation, Stonington Management Corporation and Martley
International, Inc.) and each of its and their present and former
partners, officers, employees, agents, successors and assigns
from and against any and all claims, liabilities, damages,
demands, charges, causes of action and suits, whether known or
unknown, which such releasors have or may have ever had, arising
out of or in connection with the Notes, the Common Shares, the
Securities Purchase Agreement or any related document, in each
case to the extent arising out of any acts, circumstances or
events occurring prior to the date hereof.
(c) Notwithstanding subparagraphs 4.1 (a) and (b) above, the
foregoing releases shall not apply to claims arising under this
Agreement or the Amended Notes, nor to claims by the Holders for
breach of any of the Company's representations or warranties (but
not covenants) contained in the Securities Purchase Agreement.
4.2 No Defense or Counterclaims.
(a) The Company acknowledges and agrees that its obligations
under this Agreement, the Registration Rights Agreement and the
Amended Notes are intended to be unconditional and not subject to
any defenses whatsoever. Accordingly, the Company agrees not to
suspend performance of or repudiate any of its obligations under
such agreements and not to assert any defenses or counterclaims
against the Holders with respect thereto. Nothing contained in
this Section 4.2(a), however, shall prevent the Company from
contesting the Holders' claims or assertions as to the scope or
existence of the Company's obligations apart from any affirmative
defenses. If the Company at any time believes that it has a
claim against or is entitled to any relief from either or both
Holders, the Company shall assert such claim(s) or seek such
relief only in a proceeding which is entirely independent of any
proceeding brought by either or both of the Holders to enforce
any of such agreements.
(b) The Company hereby acknowledges and agrees as follows:
(i) The Company hereby withdraws its previous allegations
(the "Allegations") that the Holders may have violated any
securities or other laws in connection with the Company's
securities or the Securities Purchase Agreement.
(ii) The Company has determined that it is in its best
interests to obtain the benefits of this Agreement and, in
consideration therefore, the Company hereby covenants not to
commence any action or proceeding against the Holders or any of
their affiliates or controlling persons arising under any
securities or similar laws with respect to any transactions
occurring prior to the date hereof or to intentionally suggest
or recommend that any other party do so.
(iii) The Company has not commenced any legal action or
proceeding against the Holders or any of their affiliates or
controlling persons nor, directly or indirectly, disclosed any of
the specific Allegations to any outside parties, excluding
counsel, but expressly including non-management shareholders and
any regulatory authorities and securities exchanges. The Company
agrees (subject to applicable law and legal or regulatory
process) to keep confidential and not to disclose to any third
party any of the Allegations, provided that any inadvertent
breaches of such confidentiality obligation by employees or
agents of the Company who are not officers or directors of the
Company shall not be deemed a breach of such confidentiality
obligation. The Company also agrees that if, as a result of the
Company's breach of such confidentiality obligation, a third
party threatens or commences an action based upon the Allegations
against the Holders or any of their partners, officers,
employees, agents, successors or assigns, the Company shall
reimburse any and all of such parties for any costs, expenses
and/or settlement costs (including reasonable attorneys' fees and
disbursements) incurred in connection therewith as such expenses
are incurred, unless the plaintiff in such action obtains a final
nonappealable judgment in such action in its favor. (The Company
hereby acknowledges its view that the Allegations need not be
disclosed publicly by the Company as a general matter of public
disclosure obligations under applicable securities laws.)
Without limiting any other remedies of the Holders, the Holders
shall be entitled to injunctive or other appropriate equitable
relief in the event of any actual or threatened breach of such
confidentiality covenant (without the necessity of posting any
bond).
ARTICLE V
GOVERNING LAW; MISCELLANEOUS
5.1 Governing Law: Jurisdiction. This Agreement shall be
governed by and construed in accordance with Delaware law. The
parties hereto irrevocably consent to the jurisdiction of the
United States federal courts and state courts located in the
County of New Castle in the State of Delaware or the Borough of
Manhattan in the State of New York in any suit or proceeding
based on or arising under this Agreement or the transactions
contemplated hereby and irrevocably agree that all claims in
respect of such suit or proceeding may be determined in such
courts. The Company and each Holder irrevocably waives the
defense of an inconvenient forum to the maintenance of such suit
or proceeding in such forum. The Company and each Holder further
agrees that service of process upon the Company or such Holder,
as applicable, mailed by first class mail in accordance with
Section 5.6 shall be deemed in every respect effective service of
process upon the Company or such Holder in any suit or proceeding
arising hereunder. Nothing herein shall affect any Holder's or
the Company's right to serve process in any other manner
permitted by law. The parties hereto agree that a final
non-appealable judgment in any such suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on
such judgment or in any other lawful manner. THE PARTIES HERETO
IRREVOCABLY WAIVE ANY RIGHT TO TRIAL BY JURY UNDER APPLICABLE
LAW.
5.2 Counterparts. This Agreement may be executed in two or more
counterparts, including, without limitation, by facsimile
transmission, all of which counterparts shall be considered one
and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the
other party. In the event any signature page is delivered by
facsimile transmission, the party using such means of delivery
shall promptly cause additional original executed signature pages
to be delivered to the other parties.
5.3 Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement.
5.4 Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability
of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.
5.5 Entire Agreement: Amendments. This Agreement and the
Exhibits and Schedules hereto and the certificates and agreements
required to be delivered hereby and thereby contain the entire
understanding of the parties with respect to the matters covered
herein and therein and, except as specifically set forth herein
or therein, neither the Company nor any Holder makes any
representation, warranty, covenant or undertaking with respect to
such matters. No provision of this Agreement may be waived other
than by an instrument in writing signed by the party to be
charged with enforcement and no provision of this Agreement may
be amended other than by an instrument in writing signed by the
Company and each Holder.
5.6 Notice. Any notice herein required or permitted to be given
shall be in writing and may be personally served or delivered by
nationally-recognized overnight courier or by facsimile machine
confirmed telecopy, and shall be deemed delivered at the time and
date of receipt (which shall include telephone line facsimile
transmission). The addresses for such communications shall be:
If to the Company:
Selfcare, Inc.
200 Prospect Street
Waltham, Massachusetts 02154
Telecopy: (617) 647-3939
Attention: Ron Zwanziger
and with a copy to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Telecopy: (617) 523-1231
Attention: Stephen W. Carr, P.C. & Martin
Carmichael, III, P.C.
If to either Holder:
c/o Stonington Management Corporation
712 Fifth Avenue, 36th Fl.
New York, New York 10019
Telecopy: (212) 974-2092
Attention: Brett Cohen
and with a copy to:
Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue, 18th Floor
New York, New York 10176
Telecopy: (212) 986-8866
Attention: Fredric A. Kleinberg, Esq.
Each party shall provide notice to the other party of any change
in address.
5.7 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors
and assigns. Neither the Company nor any Holder shall assign
this Agreement or any rights or obligations hereunder without the
prior written consent of the other, which consent by the Company
shall not be unreasonably withheld or unreasonably delayed.
Notwithstanding the foregoing, each Holder may, subject to and in
compliance with Article 5 of the Securities Purchase Agreement,
assign all or part of its rights and obligations hereunder to any
of its "affiliates," as that term is defined under the Securities
Act, or to a "Financial Institution" (as defined below), without
the consent of the Company so long as such affiliate or Financial
Institution is an accredited investor (within the meaning of
Regulation D under the Securities Act) and agrees in writing to
be bound by the applicable provisions of this Agreement. A
"Financial Institution" shall include those institutions commonly
called financial institutions as well as banks, savings and
loans, mutual funds, private investment partnerships (commonly
called "hedge funds"), investment banks, brokers, dealers,
pension and profit sharing plans, insurance companies, and
similar entities. This provision shall not limit a Holder's
right to transfer Company securities pursuant to the terms of
this Agreement or the instruments or documents referenced herein,
or to assign the Holder's rights hereunder to any such transferee
pursuant to the terms of this Agreement or the instruments or
documents referenced herein.
5.8 Survival. The representations and warranties of the Company
and each Holder and the agreements and covenants set forth herein
shall survive the Closing. The Company and each Holder agrees to
indemnify and hold harmless each Holder or the Company, as the
case may be, and each of such party's respective officers,
directors, employees, partners, agents and affiliates for loss or
damage or expenses (including reasonable attorneys fees) arising
as a result of or related to any breach or alleged breach by the
Company or any Holder, as the case may be, of any of their
respective representations or covenants set forth herein,
including advancement of expenses as they are incurred. Except
as modified hereby, the Securities Purchase Agreement shall
remain in full force and effect.
5.9 Publicity. As soon as practicable following the date
hereof, the Company shall issue a press release in the form
consented to by the Holders with respect to the transactions
contemplated hereby (which consent shall not be unreasonably
withheld).
5.10 Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things,
and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.
5.11 Remedies. No provision of this Agreement providing for any
remedy to a Holder shall limit any remedy which would otherwise
be available to such Holder at law or in equity. The Company and
each Holder acknowledges that a breach by it of its respective
obligations hereunder will cause irreparable harm to each Holder,
in the case of the Company, and the Company, in the case of a
Holder. Accordingly, the Company and each Holder acknowledges
that the remedy at law for a breach of its respective obligations
under this Agreement will be inadequate and agrees, in the event
of a breach or threatened breach by the Company or a Holder, as
the case may be, of the provisions of this Agreement, that a
Holder or the Company, as the case may be, shall be entitled, in
addition to all other available remedies, to an injunction
restraining any breach and requiring immediate compliance,
without the necessity of showing economic loss and without any
bond or other security being required.
5.12 Several Liability. Notwithstanding anything in this
Agreement to the contrary, the obligations, representations,
warranties, and liabilities of the Holders hereunder shall be
several and not joint.
[Signature Page follows]
IN WITNESS WHEREOF, the undersigned Holders and the Company
have caused this Agreement to be duly executed as of the date
first above written.
HOLDERS:
ELLIOTT ASSOCIATES, L.P.
By: /s/ Paul Singer
_____________________________
Name: Paul Singer
Title: President
WESTGATE INTERNATIONAL, L.P.
By: Martley International, Inc., as
Attorney-in-Fact
By: /s/ Paul Singer
___________________________
Name: Paul Singer
Title: President
SELFCARE, INC.
By: /s/ Ron Zwanziger
__________________________
Name: Ron Zwanziger
Title: CEO
EXHIBIT 99.3
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE SECURITIES
REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS OR UNLESS
OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
AMENDED AND RESTATED
SENIOR SUBORDINATED CONVERTIBLE NOTE
$1,207,500 January 11, 1999
Number 2
FOR VALUE RECEIVED, Selfcare, Inc., a Delaware corporation
(the "Company"), hereby promises to pay to Elliott Associates,
L.P., or its order or its permitted assigns (the "Holder") on
July 12, 1999 (the "Maturity Date") the principal amount of One
Million Two Hundred Seven Thousand Five Hundred U.S. Dollars
($1,207,500), and to pay interest on the principal amount hereof,
in such amounts, at such times and on such terms and conditions
as are specified herein. This Note is one of a numbered series
of Notes having an aggregate principal amount of $2,415,000 (plus
any Notes issued pursuant to the Registration Rights Agreement
referred to below) which are identical in all material respects
except as to the principal amount and date of issuance thereof
and as to any restriction on the transfer thereof in order to
comply with the Securities Act of 1933, as amended, and the
regulations of the Securities and Exchange Commission ("SEC")
promulgated thereunder. Such Notes are referred to herein
collectively as the "Notes." At the Holder's option by written
notice to the Company (given not less than two business days
prior to the Maturity Date nor more than thirty (30) days after
the date upon which the Holder becomes aware that such Event of
Default is no longer continuing), the Maturity Date may be
extended by one trading day for each trading day during which
there has existed an Event of Default after the date hereof, or
after February 8, 1999, during which the applicable SEC
Registration Statement is suspended or otherwise not fully
effective. As used herein, "trading day" shall mean each day on
which the American Stock Exchange is open for business.
Notwithstanding anything herein to the contrary, the Holder is
entitled to the benefits of and subject to the provisions of the
Note Amendment Agreement of even date among, inter alia, the
Holder and the Company.
Article 1. Interest
The Company shall pay interest, in cash, on the unpaid
principal amount of this Senior Subordinated Convertible Note
("Note") at the rate of 8% per annum through the date the
principal hereof is paid in full or the date this Note is fully
converted. Such interest shall accrue daily effective from the
date hereof and shall be payable, and shall compound, quarterly
in arrears on the 12th day of April and July, and (if not timely
paid or extended) October and January, with appropriate proration
for any partial interest periods based on a 365-day year (366
days for leap years). If the Holder shall convert this Note
during any quarter, the Company shall pay to the Holder, upon
conversion, the pro-rata portion of accrued interest payable
through the date of conversion, by including the accrued interest
with the principal amount of the Note being converted.
The outstanding principal amount and accrued but unpaid
interest due hereunder shall bear interest, from and after the
10th day following the occurrence and during the continuance of
an Event of Default hereunder, at the rate equal to the lower of
the Citibank Prime Rate per annum plus 8% or the highest rate
permitted by law.
Notwithstanding anything contained in this Note to the
contrary, no interest (and no other payment deemed interest, if
any, under applicable law) shall become due or payable with
respect to any period hereunder to the extent that such interest
or such payment would exceed the highest rate permitted hereunder
by applicable law. Subject to applicable law, any such interest
or payment otherwise payable that is not paid for any applicable
period because it would exceed the highest rate permitted
hereunder by applicable law shall become payable whenever the
payment thereof, together with other interest due for any such
subsequent period, would not exceed such highest legal rate.
Article 2. Method of Payment
This Note (or Lost Note Affidavit, as defined below) must be
surrendered to the Company in order for the Holder to receive
payment of the principal amount hereof. Unless otherwise
converted pursuant to Article 3 below, the Company shall pay the
principal of and accrued interest on this Note in U.S. dollars by
check delivered to Holder by overnight courier at the address
shown on the Register (as defined in Section 12.1 below) or by
wire transfer to an account designated by Holder. Interest
payments shall be subject to any required withholding under
applicable U.S. Internal Revenue Service Regulations.
Article 3. Conversion
Section 3.1. Right to Convert; Conversion Price. Subject to
Section 3.8 below, the Holder shall have the right, at its
option, to convert this Note into shares of Common Stock of the
Company prior to the Maturity Date, as set forth in Section 3.3
below.
Prior to any Changeover Default (as defined in Section 11.1
below), the Notes will be convertible into Common Stock at a
conversion price of $2.00 per share, subject to anti-dilution
adjustments as set forth in Article 6. Whenever a Changeover
Default has occurred and is continuing, and also until ten (10)
trading days following notice to the Holders of any actual cure
thereof, this Note will be convertible into the Common Stock at a
conversion price equal to the lesser of (i) $2.00 per share
(subject to anti-dilution adjustments) (the "Ceiling Price") or
(ii) the Recent Market Price as of the date on which the
Conversion Notice is sent. "Recent Market Price" as of any date
shall mean the lowest price at which the Company's Common Stock
has traded at any time during the five (5) trading days
immediately preceding such date. (The applicable conversion
price under this Section 3.1 shall be referred to hereinafter as
the "Conversion Price.")
Notwithstanding the other provisions of this Note, the
Holder may on any date, with respect to all or some specified
portion of this Note, elect to fix the Conversion Price
permanently at the Conversion Price in effect on that date
("Fixed Conversion Date"), in which event this Note (or the
specified portion hereof) must be converted within 90 days
thereafter (or on the Maturity Date, if earlier than such 90th
day). Such 90 day period shall be extended for the aggregate
number of days (or partial days) after the Fixed Conversion Date
during which there exists an Event of Default, a Delay Period (as
defined in the Registration Rights Agreement), a Delisting Period
(as defined in the Securities Purchase Agreement pursuant to
which this Note was issued) or a period for which Late
Registration Payments (as defined in the Registration Rights
Agreement) are payable.
Notwithstanding anything to the contrary contained in this
Note, no Note may be converted by a Holder thereof to the extent
that, after giving effect to the shares of Common Stock issued
pursuant to the exercise hereof, the total number of shares of
Common Stock deemed beneficially owned by such Holder (other than
by virtue of the ownership of Notes (as defined in the Securities
Purchase Agreement) or other securities that in each case have
limitations on a Holder's rights to convert or exercise similar
to those limitations set forth in this paragraph), together with
all shares of Common Stock deemed beneficially owned by the
Holder's "affiliates" (as defined in Rule 144 under the 1933 Act)
that would be aggregated for purposes of determining whether a
group under Section 13(d) of the Securities Exchange Act of 1934,
as amended, exists, would exceed 9.9% (the "Threshold") of the
total issued and outstanding shares of Common Stock; provided
that each Holder shall have the right to waive this restriction,
in whole or in part, upon 61 days' prior notice to the Company,
or to lower the Threshold prospectively at any time upon written
notice to the Company. The exercise of all or part of the Notes
by any Holder shall be deemed a representation by such Holder
that it is in compliance with this paragraph, and the Company
shall be entitled to rely on such representation, without
investigation. A transferee of the Notes shall not be bound by
this provision unless it expressly agrees to be so bound. The
term "deemed beneficially owned" as used in this paragraph shall
exclude shares that might otherwise be deemed beneficially owned
by reason of the exercisability of the Notes.
The number of shares of Common Stock issuable upon the
conversion of this Note is determined by dividing the portion of
the principal amount hereof to be converted, together with all
accrued but unpaid interest thereon, by the applicable Conversion
Price, as determined in accordance with the provisions of this
Section 3.1, and rounding the result to the nearest 1/100th of a
share. If any conversion would create a fractional share, then
in lieu of issuing such fractional share, the Company shall pay
to the Holder cash equal to such fraction multiplied by the
closing price of the Company's Common Stock on the principal
market on which the Company's Common Stock is then traded on the
date the Notice of Conversion is sent by the Holder. Except as
otherwise provided in this Section 3.1, no payment of or
adjustment for accrued interest shall be made upon conversion
whether or not such conversion occurs before, on or after an
interest payment date. Less than all of the principal amount of
this Note may be converted into Common Stock, and the provisions
of this Article 3 that apply to the conversion of the entire Note
also apply to the conversion of a portion of it. The Conversion
Price and the number of shares of Common Stock to be received by
the Holder upon conversion are subject to adjustment as set forth
in Article 6 below.
Section 3.2. Floor Price. "Floor Price" means an amount equal
to 60% of the Ceiling Price. Subject to the following, following
a Changeover Default, the Company may block conversions below the
Floor Price by redeeming the Note (or portion thereof) that the
Holder indicates would otherwise have been so converted for a
price equal to (x) the value (based on the closing price of the
Common Stock on the principal market where such Common Stock is
then traded on the trading day preceding the nominal conversion
date, i.e., the date the Holder sends the Notice of Conversion)
of the shares that would have been issued if that conversion had
occurred in the normal course, plus (y) accrued interest on the
Note (or portion thereof) so redeemed. In order for the Company
to block conversion below the Floor Price, it must notify the
Holder of its election to do so. Once such notice is given, it
will take effect five trading days thereafter (and not before)
and shall remain in effect until withdrawn on five trading days'
advance notice. So long as such a blockage notice remains in
effect, the Company shall be obligated to redeem as provided
above any Notes tendered for conversion by the Holder when the
Conversion Price is below the Floor Price. The cash redemption
price so payable will be due two (2) trading days after the
Conversion Notice is delivered, but the Company may defer that
payment for a period of time, not to exceed 30 days, during which
deferral the cash redemption payment amount shall accrue interest
at 16% per annum.
Section 3.3. Conversion Procedure. To convert this Note into
Common Stock, the Holder must (a) complete, sign and deliver to
the Company the Notice of Conversion attached hereto, (b)
surrender the original Note (or Lost Note Affidavit) to the
Company, (c) furnish appropriate endorsements if so requested by
the Company, and (d) pay any transfer or similar tax required to
be paid by the Holder pursuant to Section 3.6 hereof if requested
in advance by the Company. The Company shall issue and deliver
to the Holder a certificate or certificates for the number of
shares of Common Stock to which such Holder shall be entitled
within two (2) trading days of receipt of the duly executed
Notice of Conversion; provided, however, that the Company shall
not be required to deliver a certificate for Common Stock unless
and until the Company receives the original Note (or Lost Note
Affidavit) to be converted ("Required Delivery Date"). A
conversion shall be deemed to be made immediately prior to the
close of business on the date of surrender of the Note (or Lost
Note Affidavit) to be converted, and the Holder entitled to
receive the Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder of such Common
Stock on the date of surrender to the Company of the Note (or
Lost Note Affidavit). Upon surrender of a Note that is to be
converted in part, the Company shall promptly issue to the Holder
a new Note or Notes equal in principal amount to the unconverted
portion of the Note surrendered (in such number and denomination
as the Holder shall request).
Section 3.4. Unlegended Shares. The shares of Common Stock
issued upon conversion after the Registration Statement
registering such Common Stock for resale has been declared
effective by the SEC shall not bear any restrictive legend. In
the event any shares of Common Stock are issued with a
restrictive legend while such Registration Statement is not
effective, then upon effectiveness of the Registration Statement,
the Company will, within two (2) business days of the Holder's
request, exchange the legended certificates without charge for
unlegended, but otherwise identical, certificates representing
such shares of Common Stock (except that such certificates shall
be in such number and denomination as the Holder shall request).
Section 3.5. Payments for Late Delivery. The Company
understands that a delay in the issuance of certificates for the
shares of Common Stock upon conversion could result in
substantial economic loss to the Holder. As compensation to the
Holder for such delay, and not as a penalty, the Company agrees
to pay to the Holder in cash an amount equal to two percent (2%)
of the value (based on the closing price of the Common Stock on
the principal market on which such Common Stock is then traded on
the trading day prior to the Required Delivery Date) of the
shares covered by the certificates delivered late, per day,
beginning on the day immediately following the Required Delivery
Date. Notwithstanding anything in this Note to the contrary,
such delayed delivery of certificates shall automatically become
an Event of Default hereunder, without notice, at the close of
business on the second (2nd) trading day following the Required
Delivery Date (unless such certificates are delivered to the
Holder prior to such time). Such payments shall accrue each day
beginning on the day following the Required Delivery Date and
extending through the date certificates for the shares of Common
Stock are issued to the Holder. The payments shall be paid by
check or wire transfer to an account designated by such Holder
upon the earlier to occur of (a) issuance of certificates for the
shares of Common Stock to the Holder, or (b) each monthly
anniversary of the Company's receipt of the Notice of Conversion.
Nothing herein shall waive the Company's obligation to deliver
certificates for the shares of Common Stock upon conversion of
the Notes or limit the Holder's right to pursue damages
(including without limitation lost trading or other profits and
reimbursement for expenses and reasonable legal fees incurred;
excluding, however, other consequential damages and punitive
damages) (collectively, "Damages") for the Company's failure to
timely issue and deliver the shares of Common Stock to the Holder
on the Required Delivery Date.
Section 3.6. Taxes on Conversion. The Company shall pay any
documentary, stamp or similar issue or transfer tax due on the
issue of shares of Common Stock upon the conversion of this Note.
However, the Holder shall pay any such tax which is due because
the shares of Common Stock are issued in a name other than the
Holder's name.
Section 3.7. Revocation of Notice of Conversion. In addition
to any other remedies which may be available to the Holder, in
the event the Company fails for any reason to effect delivery to
the Holder of certificates representing the shares of Common
Stock receivable upon conversion by the Required Delivery Date,
the Holder may revoke the Notice of Conversion by delivering a
notice of such effect to the Company. Upon receipt by the
Company of such a revocation notice, the Company shall
immediately return the subject Note(s) and other conversion
documents, if any, delivered by the Holder, to the Holder, and
the Company and the Holder shall each be restored to their
respective positions held immediately prior to delivery of the
Notice of Conversion; provided, however, that the Company shall
remain liable for payment of the amounts determined pursuant to
Section 3.5 above for each day falling between the Required
Delivery Date and the date the revocation notice is received by
the Company, and shall also remain liable for any damages
suffered by the Holder.
Section 3.8. Limitations on Conversion; Non-Approval
Redemption.
(a) Notwithstanding anything to the contrary
contained in this Note, the Holder shall not effect any
conversions of this Note until the Company has obtained the
formal ratification and approval of its shareholders to the
issuance and conversion of this Note in accordance with its terms
("Shareholder Approval"). The Company agrees to use its
reasonable best efforts to obtain Shareholder Approval on or
before (i) March 31, 1999 if the SEC does not review the
applicable proxy statement or (ii) April 30, 1999 if the SEC
elects to review such proxy statement (such date, as applicable,
the "Outside Approval Date"). The date which is thirty-five (35)
days after either the date upon which the SEC notifies the
Company that it is not reviewing such proxy statement or the date
upon which the Company satisfies the SEC's final comments on such
proxy statement, whichever is applicable, shall be referred to as
the "Scheduled Meeting Date".
(b) If Shareholder Approval is not obtained by
the close of business on the earlier of the Scheduled Meeting
Date or the Outside Approval Date, the Holder shall have the
option, exercisable from time to time at any time prior to (i)
repayment in full of the Note or (ii) the first day after
Shareholder Approval is obtained , to have all or part of this
Note redeemed at the "Non-Approval Redemption Price." The Non-
Approval Redemption Price shall be a cash amount equal to the
number of Common Shares into which the principal amount hereof to
be redeemed would then be convertible, multiplied by the mean
average of the five (5) weighted average trading prices of the
Common Stock over each of the five (5) trading days commencing on
the second day after delivery of the applicable notice of
exercise. Such Non-Approval Redemption Price shall be paid to
the Holder on the first business day following the fifth such
trading day. Notwithstanding the foregoing, the Company may, in
lieu of paying the Non-Approval Redemption Price, deliver to the
Holder, within one business day after any exercise of such
option, the number of listed, registered fully-paid and
nonassessable shares of Common Stock into which the portion of
the principal amount sought to be redeemed would have been
convertible on the date of exercise of such option, which
delivery shall be treated as a conversion under the Note of the
amount of the principal sought to be redeemed.
Article 4. Subordination
Section 4.1. The only debt to which the Notes are senior is (i)
all sums due or payable under the $7.5 Million U.S. subordinate
revenue royalty notes issued in June and July, 1997, (ii) royalty
obligations to USB '93 Technology Associates Limited Partnership
and (iii) debt that by its terms is subordinated to the Notes.
Section 4.2. Holder hereby specifically acknowledges and
agrees, and each of Holder's successors and assigns or any other
holder of this Note (each such successor, assign, or other
holder, a "Later Holder") by accepting this Note agrees, upon the
happening and continuation of an Event of Default described in
Section 11.1(g), that all indebtedness evidenced by this Note
will be junior and subordinate in right of payment to the prior
payment in full of all obligations owed by the Company in respect
of all Senior Debt (as hereinafter defined). "Senior Debt" means
and includes all principal of, interest on, premium, if any, and
other obligations of the Company with respect to any (i)
indebtedness for money borrowed by the Company from a Financial
Institution (as that term is defined in Section 8.7 of the
Securities Purchase Agreement) or for cash grants made to the
Company by a governmental authority, to the extent such grants
may have to be repaid by the Company (collectively,
"Indebtedness") whether outstanding on October 27, 1997 (provided
any Senior Debt outstanding on the date hereof is described on
Schedule 4.2 to the Securities Purchase Agreement) or incurred,
created or arising thereafter pursuant to any agreement or
instrument which the Company may have executed and delivered
prior to October 27, 1997 (provided such agreements or
instruments are described on Schedule 4.2 to the Securities
Purchase Agreement), or may execute and deliver at any time
hereafter, (ii) principal of, interest on and premium, if any,
relating to any Indebtedness of others of the kinds described in
(i) above hereafter assumed or guaranteed by the Company, and
(iii) amendment, modification, supplement, restatement, deferral,
renewal, extension or refunding of any such Indebtedness
described in (i) and (ii) above (and any of the foregoing having
the effect of increasing the principal amount of the Indebtedness
outstanding or available thereunder) as may be entered into by
the Company from time to time. Notwithstanding the foregoing,
and in further limitation (and not in expansion) of the term
Senior Debt, Senior Debt shall not include (a) any debt or
Indebtedness that is directly or indirectly convertible into or
exchangeable for any equity securities of the Company, (b) any
debt or Indebtedness hereafter created that is not by its terms
expressly stated to be senior to the Notes, or (c) debt or
indebtedness which is junior or subordinate to Senior Debt or
which is not pari passu with Senior Debt.
Article 5. Redemption
At any time following two (2) weeks after Shareholder
Approval is obtained, the Company may redeem this Note in whole
or in part, at 100% of face value, plus accrued but unpaid
interest, upon seven (7) trading days' advance notice, provided
that such seven trading day period shall be extended by the
number of previous trading days on which there has been existing
a Changeover Default hereunder or any trading day after March 5,
1999 during which the Registration Statement under the
Registration Rights Agreement is suspended or otherwise not fully
in effect. This Note may only be redeemed under this Article 5
provided that the Registration Statement has been duly amended to
reflect the amendments to the original version of this Note and
related transactions and is otherwise fully in effect during the
entire period from the delivery of the Company's redemption
notice through the effective date of redemption, the Company
honors all of the Holder's Conversion Notices during such period,
the Company complies with Section 3.8 above, and there is no
Changeover Default during such period. The foregoing conditions
may be waived by the Holder with respect to all or part of such
redemption.
Article 6. Adjustments
The Conversion Price and the kind and amount of securities
and property for which the Notes may be converted shall be
subject to adjustment from time to time, upon notice to the
Holder, as follows:
Section 6.1. Stock Dividends, Stock Splits, Reclassifications,
Recapitalizations, Etc. If, at any time after the issuance of
the Notes, the Company (a) pays a dividend or makes a
distribution in Common Stock to the holders of its equity
securities (including investments or securities convertible into
or exchangeable for such equity securities) to the holders of its
Common Stock, (b) subdivides its outstanding Common Stock into a
greater number of shares, (c) combines its outstanding Common
Stock into a smaller number of shares (including a
recapitalization in connection with a consolidation or merger in
which the Company is the continuing corporation), or (d) issues,
by reclassification of the Common Stock, any other securities of
the Company, then, in each such event, the Conversion Price (if a
fixed price) and the Ceiling Price in effect on the date of such
event shall be adjusted so that the Holder of the Note(s)
thereafter surrendered for conversion shall be entitled to
receive the kind and number of shares of Common Stock and/or
other property which such Holder would have been entitled to
receive immediately following such event had the Notes been
converted immediately prior thereto. Any adjustment made
pursuant to this Section 6.1 shall become effective immediately
after the record date in the case of a dividend or distribution
and shall become effective immediately after the effective date
in the case of a subdivision, combination or reclassification.
Section 6.2. Consolidation, Merger, Sale of Assets,
Reorganization, Etc. In the event the Company enters into any
consolidation, merger, sale of all or substantially all of its
assets, or other transaction in which its Common Stock is
exchanged for or changed into other stock or securities, money
and/or any other property, then the Holders of the Notes shall
thereafter have the right to (a) convert each Note into the kind
and amount of shares of stock or other securities or property,
including cash, into which the shares of Common Stock into which
the Notes could have been converted immediately prior to such
merger, consolidation or sale would have been exchanged for
pursuant to any such transaction, with, as nearly as reasonably
possible, not less than the same economic value and relative
conversion and other rights and preferences as apply to the Notes
immediately before such transaction, or (b) immediately following
such merger, consolidation or sale, exchange the Notes for notes
of the surviving entity providing the holders of the Notes with,
as nearly as reasonably possible, the same economic value and
relative rights and preferences as apply to the Notes immediately
before such transaction.
Section 6.3. Spin-offs, etc. (a) If the Company, at any time
while the Notes are outstanding, shall distribute to all holders
of Common Stock evidences of its indebtedness or assets or rights
(other than rights issued pursuant to a shareholders rights plan
adopted by the Company) or warrants to subscribe for or purchase
any security (excluding those referred to in Section 6.4 below),
then in each such case each of the Conversion Price (if a fixed
price) and the Ceiling Price shall be determined by multiplying
the Conversion Price and Ceiling Price in effect immediately
prior to the record date fixed for determination of shareholders
entitled to receive such distribution by a fraction of which the
denominator shall be the Recent Market Price for shares of Common
Stock determined at the record date mentioned above, and of which
the numerator shall be such Recent Market Price for shares of
Common Stock at such record date less the then fair market value
at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share
of Common Stock as determined by the Board of Directors in good
faith; provided, however that in the event of a distribution
exceeding 15% of the net assets of the Company, as determined
according to generally accepted accounting principles, such fair
market value shall be determined by a nationally recognized or
major regional investment banking firm or firm of independent
chartered accountants of recognized standing (which may be the
firm that regularly examines the financial statements of the
Company) (an "Appraiser") selected in good faith by the Board of
Directors and Holders of a majority in interest of the Notes. In
either case the adjustments shall be described in a statement
provided to all holders of Notes of the portion of assets or
evidences of indebtedness so distributed or such subscription
rights applicable to one share of Common Stock. Such adjustment
shall be made whenever any such distribution is made and shall
become effective immediately after the record date mentioned
above.
Section 6.4. Issuance below Certain Price. In the event that
the Company issues or sells any Common Stock or securities which
are convertible into or exchangeable for its Common Stock or any
convertible securities, or any warrants or other rights to
subscribe for or to purchase or any options for the purchase of
its Common Stock or any such convertible securities (other than
shares or options issued or which may be issued pursuant to the
Company's employee or director option plans or shares issued upon
exercise of options, warrants or rights outstanding on the date
of the Securities Purchase Agreement pursuant to which this Note
was originally issued) at an effective purchase price per share
which is less than eighty-five (85%) percent of the Recent Market
Price then in effect at the time of the issuance of such
securities, warrants, options or convertible securities, then in
each such case, the Conversion Price (if a fixed price) and the
Ceiling Price in effect immediately prior to such issue or sale
shall be reduced effective concurrently with such issue or sale
to an amount determined by multiplying the Conversion Price and
Ceiling Price then in effect by a fraction, (x) the numerator of
which shall be the sum of (1) the number of shares of Common
Stock outstanding immediately prior to such issue or sale, plus
(2) the number of shares of Common Stock which the aggregate
consideration received or receivable by the Company for such
additional shares would purchase at the then applicable Recent
Market Value or, if a Changeover Default has occurred and if
less, the Ceiling Price, as the case may be, then in effect; and
(y) the denominator of which shall be the number of shares of
Common Stock of the Company outstanding immediately after such
issue or sale.
For the purposes of the foregoing adjustment, in the case of
the issuance of any convertible securities, warrants, options or
other rights to subscribe for or to purchase or exchange for,
shares of Common Stock ("Convertible Securities"), the maximum
number of shares of Common Stock issuable upon exercise, exchange
or conversion of such Convertible Securities shall be deemed to
be outstanding, provided that no further adjustment shall be made
upon the actual issuance of Common Stock upon exercise, exchange
or conversion of such Convertible Securities.
The number of shares which may be purchased hereunder shall
be increased proportionately to any reduction in conversion price
pursuant to this paragraph, so that after such adjustments the
aggregate Conversion Price payable hereunder for the number of
shares which may be purchased hereunder (as so increased) shall
be the same as the aggregate Conversion Price in effect just
prior to such adjustment.
Notwithstanding the foregoing, the Holder hereby waives any
anti-dilution adjustment which would have resulted from the
issuance of convertible preferred stock and underlying Common
Stock pursuant to letters of intent or binding agreements with
the Company executed by all parties on or prior to January 8,
1999 (but not, in each case, if such letters of intent, binding
agreements or related agreements initially provide for the
issuance (whether initially or upon conversion or exchange) of
shares of Common Stock at an effective price below $1.50 or to
the extent that any actual issuances below such effective price
are made in the future pursuant to any such agreements).
Article 7. Company to Reserve Stock
The Company shall reserve out of its authorized but unissued
Common Stock or Common Stock held in treasury a sufficient number
of shares of Common Stock to permit the conversion of the Notes
(in addition to shares then required by the Company for all other
purposes). If and so long as the number of shares reserved for
issuance upon conversion of the Notes is insufficient to permit
conversion of all of the outstanding Notes and for all other
purposes required by the Company, the Company will make cash
payments to the Holder as partial compensation for the added
liquidity risk of such failure (the "Reserve Payments"). The
Reserve Payments will be equal to two percent (2%) of the
Purchase Price of any outstanding Notes (plus accrued but unpaid
interest) for each month (or part thereof) following the date
that an insufficient number of shares of Common Stock (as
determined above) was reserved for such purpose (the "Failure
Date") continuing through the date a sufficient number of
additional shares of Common Stock (as determined above) is
reserved for such purpose (the "Reserve Date"). The Reserve
Payments will be paid to the Holder in cash within five (5)
business days following the earlier of: (i) the end of each
month following the Failure Date, or (ii) the Reserve Date.
Nothing herein shall limit the Holder's right to pursue damages
for the Company's failure to maintain a sufficient number of
shares of Common Stock reserved for issuance. If, at any time,
the number of authorized but unissued shares of Common Stock is
insufficient to effect the conversion of all outstanding Notes
and for all other purposes then required by the Company, the
Company shall promptly take such corporate action as may be
necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as would be sufficient for
all such purposes. All shares of Common Stock which may be
issued upon the conversion hereof shall be fully paid and
nonassessable. At a minimum, the Company shall at all times so
reserve at least 200% of number of shares of Common Stock needed
for issuance upon conversion of the Notes.
Article 8. Restrictions on Transfer
This Note and the Common Stock issuable upon the conversion
hereof have not been registered under the Securities Act of 1933
(the "Act") and may not be offered for sale, sold or otherwise
transferred unless such offer, sale or other transfer is
registered under the Act or such transfer is exempt from
registration. The Company has undertaken to so register such
shares of Common Stock pursuant to a Registration Rights
Agreement with the Holder dated October 27, 1997 (the
"Registration Rights Agreement").
Article 9. No Impairment
The Company shall not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue, or sale of securities
or any other voluntary action, avoid or delay or seek to avoid or
delay the observance or performance of any of the terms hereof,
but will at all times in good faith carry out all provisions
hereof and take all such action as may be necessary or
appropriate in order to protect the conversion and other rights
of the holders of the Notes against impairment. The Holder shall
not have the right to enjoin the Company from taking any such
action; however, the Company shall be liable for all of the
Holder's Damages if the Company violates this Article 9.
Article 10. Reports
As required pursuant to the Securities Purchase Agreement
between the initial Holder and the Company, the Company will mail
to the Holder hereof at its address as shown on the Company's
register a copy of any annual, quarterly or current report that
it files with the SEC promptly after the filing thereof and a
copy of any annual, quarterly or other report or proxy statement
that it gives to its shareholders generally at the time such
report or statement is sent to shareholders.
Article 11. Defaults and Remedies
Section 11.1. Events of Default. An "Event of Default" occurs if
(a) the Company does not make the payment of the principal (and
premium, if any) of this Note when the same becomes due and
payable at maturity, upon redemption or otherwise and such
default continues for two (2) days thereafter; (b) the Company
does not make a payment of interest when such interest becomes
due and payable and such default continues for a period of eight
(8) days thereafter; (c) the Company fails to maintain the
listing of its Common Stock and Common Shares as required under
Section 4.5 of the Securities Purchase Agreement such that the
aggregate number of trading days in all Delisting Periods (as
defined in said Section 4.5) during any twelve month period
exceeds five (5) trading days, provided that the failure to list
Common Stock issuable upon conversions prior to the third
business day after Shareholder Approval is obtained shall not
constitute an Event of Default; (d) one or more Suspension
Event(s) (as that term is defined in Section 3(f) of the
Registration Rights Agreement) occur such that the aggregate
number of days for which Delay Compensation (as that term is
defined in said Section 3(f) of the Registration Rights
Agreement) is payable by the Company exceeds twenty-five (25)
days; (e) the Company fails to issue on the Required Delivery
Date shares of Common Stock upon conversion of this Note pursuant
to Section 3.3 hereof and such default continues for two (2)
trading days thereafter; (f) the Company fails to comply with any
of its other payment or other material (individually or in the
aggregate) agreements in this Note and such failure continues for
the period and after the notice specified below; (g) the
Company, pursuant to or within the meaning of any Bankruptcy Law
(as hereinafter defined): (i) commences a voluntary case; (ii)
consents to the entry of an order for relief against it in an
involuntary case; (iii) consents to the appointment of a
Custodian (as hereinafter defined) of it or for all or
substantially all of its property; (iv) makes a general
assignment for the benefit of its creditors; or (v) a court of
competent jurisdiction enters an order or decree under any
Bankruptcy Law that: (A) is for relief against the Company in an
involuntary case; (B) appoints a Custodian of the Company or for
all or substantially all of its property or (C) orders the
liquidation of the Company, and the order or decree remains
unstayed and in effect for sixty days; (h) there is a material
misrepresentation by the Company herein concerning information
which reasonably would be expected to be important to a prudent
investor, herein, in the Securities Purchase Agreement, as
amended, or in the Registration Rights Agreement, or in any
certificate, Exhibit, Schedule or attachment delivered with
respect thereto; (i) the Company is in default under any Senior
Debt such that the holder thereof has a right of acceleration
thereunder; (j) the Company sells or otherwise disposes of all or
substantially all of its assets; or (k) the Company fails to
comply with any other payment or other material (individually or
in the aggregate) obligation under the Securities Purchase
Agreement, as amended, or the Registration Rights Agreement, and
such failure continues for the period and after the notice
specified below. As used in this Section 11.1, the term
"Bankruptcy Law" means Title 11 of the United States Code or any
similar federal or state law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law. A default under
clauses (f) or (k) above is not an Event of Default until the
holders of at least 25% of the aggregate principal amount of the
Notes then outstanding notify the Company of such default and the
Company does not cure it within eight (8) days (with respect to
payment defaults) or thirty (30) days (with respect to other
defaults) after the receipt of such notice, which must specify
the default, demand that it be remedied and state that it is a
"Notice of Default"; except that if such default relates to
payments due monthly, the Holder shall only be obligated to give
notice of such late payment to the Company for the first of a
series of similar monthly payment defaults. In addition to any
other remedies provided herein, the Company will indemnify the
Holder for all Damages incurred as a result of the happening of
an Event of Default.
An Event of Default under subparagraphs 11.1(a), (b), (c),
(d) (e) and/or (g) above shall be deemed a "Changeover Default."
Section 11.2. Acceleration. If an Event of Default occurs and
is continuing, the Holder hereof by notice to the Company, may
declare the principal of and accrued interest on this Note to be
due and payable. Upon such declaration, principal and interest
hereof shall be due and payable, the Holder shall be entitled to
receive the greater of (a) 110% of the outstanding principal and
accrued interest hereof or (b) the Holder's "lost benefit" for
not converting at that time determined as the difference between
the lowest Conversion Price per share then in effect and the then
closing price of the Common Stock on the date of such
declaration, times the number of shares which could then have
been received upon conversion.
Section 11.3. Waiver. The holders of a majority in principal
amount of the Notes outstanding may waive a default or rescind
the declaration of an Event of Default and its consequences
except for a default in the payment of principal of or interest
on any Note as set forth in Section 11.2 hereof, which may be
waived by the holders of outstanding Notes effected by such
default.
Article 12. Register; Transfer; Replacements
Section 12.1. Record Ownership. The Company shall maintain a
current register of the holders of the Notes (the "Register")
showing their names and addresses and the serial numbers and
principal amounts of Notes issued to or transferred of record by
them from time to time. The Register may be maintained in
electronic, magnetic or other computerized form. The Company may
treat the person named as the Holder of this Note in the Register
as the sole owner of this Note. The Holder of this Note is the
person exclusively entitled to receive payments of interest on
this Note, receive notifications with respect to this Note,
convert it into Common Stock and otherwise exercise all of the
rights and powers as the absolute owner hereof.
Section 12.2. Registration of Transfer. Transfers of this Note
may be registered on the books of the Company maintained for such
purpose pursuant to Section 12.1 above (i.e., the Register).
Transfers shall be registered when this Note is presented to the
Company with a request to register the transfer hereof and the
Note is duly endorsed by the appropriate person, reasonable
assurances are given that the endorsements are genuine and
effective, and the Company has received evidence reasonably
satisfactory to it that such transfer is rightful and in
compliance with all applicable laws, including tax laws and state
and federal securities laws; provided, however, that if the
transferee is an affiliate of the Holder, or a Financial
Institution (as defined in Section 8.7 of the Securities Purchase
Agreement), no such documentation nor any consent by the Company
shall be required. When this Note is presented for transfer and
duly transferred hereunder, it shall be canceled and a new Note
showing the name of the transferee as the record holder thereof
shall be issued in lieu hereof. When this Note is presented to
the Company with a reasonable request to exchange it for an equal
principal amount of Notes of other denominations, the Company
shall make such exchange and shall cancel this Note and issue in
lieu thereof Notes having a total principal amount equal to this
Note in the denominations requested by the Holder. The Company
may charge a reasonable fee for any registration of transfer or
exchange other than one occasioned by a notice of redemption or
the conversion hereof.
Section 12.3. Worn and Lost Notes. If this Note becomes worn,
defaced or mutilated but is still substantially intact and
recognizable, the Company or its agent may issue a new Note in
lieu hereof upon its surrender. Where the Holder of this Note
claims that the Note has been lost, destroyed or wrongfully
taken, the Company shall issue a new Note in place of the
original Note if the Holder so requests by written notice ("Lost
Note Affidavit") to the Company actually received by the Company
before it is notified (together with reasonable evidence thereof)
that the Note has been acquired by a bona fide purchaser, and the
Holder has delivered to the Company an affidavit of the Holder
setting forth the facts concerning such loss, destruction or
wrongful taking and such other information in such form with such
proof or verification as the Company may reasonably request.
Section 12.4. Assignment. The Holder (but not the Company) may
transfer or assign this Note or any interest herein and may
mortgage, encumber or transfer any of its rights or interest in
and to this Note or any part hereof and, without limitation, each
assignee, transferee and mortgagee (which may include any
affiliate of the Holder) shall have the right to transfer or
assign its interest; any such assignment or transfer may be made
without notice to or consent from the Company, if the assignee or
transferee is an affiliate of the transferor or a Financial
Institution (as defined in Section 8.7 of the Securities Purchase
Agreement). All other assignments and transfers of this Note
will require the prior consent of the Company, which consent the
Company covenants it shall not unreasonably withhold or
unreasonably delay. Each such assignee, transferee and mortgagee
shall have all of the rights of the Holder under this Note. The
Company agrees that, subject to compliance with the Securities
Purchase Agreement, after receipt by the Company of written
notice of assignment from the Holder or from the Holder's
assignee by registered or certified mail, return receipt
requested, or by any other delivery method whereby the Company
signs a receipt therefor, all principal, interest and other
amounts which are then and thereafter become due under this Note
shall be paid to such assignee at the place of payment designated
in such notice. This Note shall be binding upon the Company and
its successors, assigns and affiliates and shall inure to the
benefit of the Holder and its successors and assigns.
Article 13. Notices
Except as otherwise provided in this Note, any notices
required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery or delivery by
facsimile, or (b) on the next business day following the date of
deposit in the U.S. Mail, certified mail with postage prepaid, or
with a nationally recognized overnight courier service. Notices
shall be addressed to the Holder at such Holder's address or
facsimile number appearing in the records of the Company, or to
the Company at the address most recently provided to the Holder
by the Company.
Article 14. Time
Where this Note authorizes or requires the payment of money
or the performance of a condition or obligation on a Saturday or
Sunday or a public holiday, or authorizes or requires the payment
of money or the performance of a condition or obligation within,
before or after a period of time computed from a certain date,
and such period of time ends on a Saturday or a Sunday or a
public holiday, such payment may be made or condition or
obligation performed on the next succeeding business day, and if
the period ends at a specified hour, such payment may be made or
condition performed, at or before the same hour of such next
succeeding business day, with the same force and effect as if
made or performed in accordance with the terms of this Note.
Where time is extended by virtue of the provisions of this
Article 14, such extended time shall be included in the
computation of interest.
Article 15. Rules of Construction
In this Note, unless the context otherwise requires, words
in the singular number include the plural, and in the plural
include the singular, and words of the masculine gender include
the feminine and the neuter, and when the sense so indicates,
words of the neuter gender may refer to any gender. The numbers
and titles of sections contained in this Note are inserted for
convenience of reference only, and they neither form a part of
this Note nor are they to be used in the construction or
interpretation hereof. Wherever, in this Note, a determination
of the Company is required or allowed, such determination shall
be made by a majority of the Board of Directors of the Company
acting in good faith. Nothing in this Note is intended to reduce
the Company's obligations or reduce the Holder's rights under the
Securities Purchase Agreement or the Registration Rights
Agreement.
Article 16. Governing Law
This Note shall be governed by and interpreted in accordance
with the laws of the State of Delaware without reference to
principles of conflicts of law, and any disputes arising
hereunder will be adjudicated in federal or state court situated
in New York County, New York or Delaware. Each party hereto
consents to such venue and to the personal jurisdiction of said
courts and, to the extent permitted by applicable law, agrees to
waive any objection as to such jurisdiction or venue, and agrees
not to assert any defense based on lack of jurisdiction or venue.
IN WITNESS WHEREOF, the Company has duly executed this Note
as of the date first written above.
SELFCARE, INC.
By /s/ Ron Zwanziger
_________________________________
Name and Title Ron Zwanziger, CEO
_____________________
NOTICE OF CONVERSION
[To be completed and signed only upon conversion of Note]
The undersigned Holder of this Note hereby elects to exercise the
right to convert it into common stock of Selfcare, Inc., par
value $.001 per share, as follows:
[Complete if less than _____________Dollars ($________)*
all of principal amount
is to be converted]
[Signature must be ____________________________________
guaranteed if (Name of Holder of shares if
registered holder of different than registered Holder of
stock differs from Note
registered Holder of
Note.]
___________________________________
(Address of Holder if different
than address of registered Holder
of Note)
___________________________________
(Social Security No. or Tax ID No.
of Holder of shares if different
than Holder of Note)
*If the principal amount of the Note to be converted is
less than the entire principal amount thereof, a new
Note or Notes for the balance of the principal amount
shall be returned to the Holder of the Note in such
number and denominations as is requested by the Holder.
Date:_________________ Sign: ____________________________________
(Signature must conform in all
respects to name of Holder shown on
face of this Note)
Assignment of Note
The undersigned hereby sell(s) and assign(s) and transfer(s)
unto ____________________________________________________________
(name, address and SSN or EIN of assignee)
______________________________________Dollars ($_________)
(principal amount of Note)
of principal amount of this Note together with all accrued
interest hereon.
Date: ________________ Sign:_____________________________
(Signature must conform in all
respects to name of Holder shown on
face of Note)
Signature Guaranteed: ___________________________________
EXHIBIT 99.4
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE SECURITIES
REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS OR UNLESS
OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
AMENDED AND RESTATED
SENIOR SUBORDINATED CONVERTIBLE NOTE
$1,207,500 January 11, 1999
Number 1
FOR VALUE RECEIVED, Selfcare, Inc., a Delaware corporation
(the "Company"), hereby promises to pay to Westgate
International, L.P., or its order or its permitted assigns (the
"Holder") on July 12, 1999 (the "Maturity Date") the principal
amount of One Million Two Hundred Seven Thousand Five Hundred
U.S. Dollars ($1,207,500), and to pay interest on the principal
amount hereof, in such amounts, at such times and on such terms
and conditions as are specified herein. This Note is one of a
numbered series of Notes having an aggregate principal amount of
$2,415,000 (plus any Notes issued pursuant to the Registration
Rights Agreement referred to below) which are identical in all
material respects except as to the principal amount and date of
issuance thereof and as to any restriction on the transfer
thereof in order to comply with the Securities Act of 1933, as
amended, and the regulations of the Securities and Exchange
Commission ("SEC") promulgated thereunder. Such Notes are
referred to herein collectively as the "Notes." At the Holder's
option by written notice to the Company (given not less than two
business days prior to the Maturity Date nor more than thirty
(30) days after the date upon which the Holder becomes aware that
such Event of Default is no longer continuing), the Maturity Date
may be extended by one trading day for each trading day during
which there has existed an Event of Default after the date
hereof, or after February 8, 1999, during which the applicable
SEC Registration Statement is suspended or otherwise not fully
effective. As used herein, "trading day" shall mean each day on
which the American Stock Exchange is open for business.
Notwithstanding anything herein to the contrary, the Holder is
entitled to the benefits of and subject to the provisions of the
Note Amendment Agreement of even date among, inter alia, the
Holder and the Company.
Article 1. Interest
The Company shall pay interest, in cash, on the unpaid
principal amount of this Senior Subordinated Convertible Note
("Note") at the rate of 8% per annum through the date the
principal hereof is paid in full or the date this Note is fully
converted. Such interest shall accrue daily effective from the
date hereof and shall be payable, and shall compound, quarterly
in arrears on the 12th day of April and July, and (if not timely
paid or extended) October and January, with appropriate proration
for any partial interest periods based on a 365-day year (366
days for leap years). If the Holder shall convert this Note
during any quarter, the Company shall pay to the Holder, upon
conversion, the pro-rata portion of accrued interest payable
through the date of conversion, by including the accrued interest
with the principal amount of the Note being converted.
The outstanding principal amount and accrued but unpaid
interest due hereunder shall bear interest, from and after the
10th day following the occurrence and during the continuance of
an Event of Default hereunder, at the rate equal to the lower of
the Citibank Prime Rate per annum plus 8% or the highest rate
permitted by law.
Notwithstanding anything contained in this Note to the
contrary, no interest (and no other payment deemed interest, if
any, under applicable law) shall become due or payable with
respect to any period hereunder to the extent that such interest
or such payment would exceed the highest rate permitted hereunder
by applicable law. Subject to applicable law, any such interest
or payment otherwise payable that is not paid for any applicable
period because it would exceed the highest rate permitted
hereunder by applicable law shall become payable whenever the
payment thereof, together with other interest due for any such
subsequent period, would not exceed such highest legal rate.
Article 2. Method of Payment
This Note (or Lost Note Affidavit, as defined below) must be
surrendered to the Company in order for the Holder to receive
payment of the principal amount hereof. Unless otherwise
converted pursuant to Article 3 below, the Company shall pay the
principal of and accrued interest on this Note in U.S. dollars by
check delivered to Holder by overnight courier at the address
shown on the Register (as defined in Section 12.1 below) or by
wire transfer to an account designated by Holder. Interest
payments shall be subject to any required withholding under
applicable U.S. Internal Revenue Service Regulations.
Article 3. Conversion
Section 3.1. Right to Convert; Conversion Price. Subject to
Section 3.8 below, the Holder shall have the right, at its
option, to convert this Note into shares of Common Stock of the
Company prior to the Maturity Date, as set forth in Section 3.3
below.
Prior to any Changeover Default (as defined in Section 11.1
below), the Notes will be convertible into Common Stock at a
conversion price of $2.00 per share, subject to anti-dilution
adjustments as set forth in Article 6. Whenever a Changeover
Default has occurred and is continuing, and also until ten (10)
trading days following notice to the Holders of any actual cure
thereof, this Note will be convertible into the Common Stock at a
conversion price equal to the lesser of (i) $2.00 per share
(subject to anti-dilution adjustments) (the "Ceiling Price") or
(ii) the Recent Market Price as of the date on which the
Conversion Notice is sent. "Recent Market Price" as of any date
shall mean the lowest price at which the Company's Common Stock
has traded at any time during the five (5) trading days
immediately preceding such date. (The applicable conversion
price under this Section 3.1 shall be referred to hereinafter as
the "Conversion Price.")
Notwithstanding the other provisions of this Note, the
Holder may on any date, with respect to all or some specified
portion of this Note, elect to fix the Conversion Price
permanently at the Conversion Price in effect on that date
("Fixed Conversion Date"), in which event this Note (or the
specified portion hereof) must be converted within 90 days
thereafter (or on the Maturity Date, if earlier than such 90th
day). Such 90 day period shall be extended for the aggregate
number of days (or partial days) after the Fixed Conversion Date
during which there exists an Event of Default, a Delay Period (as
defined in the Registration Rights Agreement), a Delisting Period
(as defined in the Securities Purchase Agreement pursuant to
which this Note was issued) or a period for which Late
Registration Payments (as defined in the Registration Rights
Agreement) are payable.
Notwithstanding anything to the contrary contained in this
Note, no Note may be converted by a Holder thereof to the extent
that, after giving effect to the shares of Common Stock issued
pursuant to the exercise hereof, the total number of shares of
Common Stock deemed beneficially owned by such Holder (other than
by virtue of the ownership of Notes (as defined in the Securities
Purchase Agreement) or other securities that in each case have
limitations on a Holder's rights to convert or exercise similar
to those limitations set forth in this paragraph), together with
all shares of Common Stock deemed beneficially owned by the
Holder's "affiliates" (as defined in Rule 144 under the 1933 Act)
that would be aggregated for purposes of determining whether a
group under Section 13(d) of the Securities Exchange Act of 1934,
as amended, exists, would exceed 9.9% (the "Threshold") of the
total issued and outstanding shares of Common Stock; provided
that each Holder shall have the right to waive this restriction,
in whole or in part, upon 61 days' prior notice to the Company,
or to lower the Threshold prospectively at any time upon written
notice to the Company. The exercise of all or part of the Notes
by any Holder shall be deemed a representation by such Holder
that it is in compliance with this paragraph, and the Company
shall be entitled to rely on such representation, without
investigation. A transferee of the Notes shall not be bound by
this provision unless it expressly agrees to be so bound. The
term "deemed beneficially owned" as used in this paragraph shall
exclude shares that might otherwise be deemed beneficially owned
by reason of the exercisability of the Notes.
The number of shares of Common Stock issuable upon the
conversion of this Note is determined by dividing the portion of
the principal amount hereof to be converted, together with all
accrued but unpaid interest thereon, by the applicable Conversion
Price, as determined in accordance with the provisions of this
Section 3.1, and rounding the result to the nearest 1/100th of a
share. If any conversion would create a fractional share, then
in lieu of issuing such fractional share, the Company shall pay
to the Holder cash equal to such fraction multiplied by the
closing price of the Company's Common Stock on the principal
market on which the Company's Common Stock is then traded on the
date the Notice of Conversion is sent by the Holder. Except as
otherwise provided in this Section 3.1, no payment of or
adjustment for accrued interest shall be made upon conversion
whether or not such conversion occurs before, on or after an
interest payment date. Less than all of the principal amount of
this Note may be converted into Common Stock, and the provisions
of this Article 3 that apply to the conversion of the entire Note
also apply to the conversion of a portion of it. The Conversion
Price and the number of shares of Common Stock to be received by
the Holder upon conversion are subject to adjustment as set forth
in Article 6 below.
Section 3.2. Floor Price. "Floor Price" means an amount equal
to 60% of the Ceiling Price. Subject to the following, following
a Changeover Default, the Company may block conversions below the
Floor Price by redeeming the Note (or portion thereof) that the
Holder indicates would otherwise have been so converted for a
price equal to (x) the value (based on the closing price of the
Common Stock on the principal market where such Common Stock is
then traded on the trading day preceding the nominal conversion
date, i.e., the date the Holder sends the Notice of Conversion)
of the shares that would have been issued if that conversion had
occurred in the normal course, plus (y) accrued interest on the
Note (or portion thereof) so redeemed. In order for the Company
to block conversion below the Floor Price, it must notify the
Holder of its election to do so. Once such notice is given, it
will take effect five trading days thereafter (and not before)
and shall remain in effect until withdrawn on five trading days'
advance notice. So long as such a blockage notice remains in
effect, the Company shall be obligated to redeem as provided
above any Notes tendered for conversion by the Holder when the
Conversion Price is below the Floor Price. The cash redemption
price so payable will be due two (2) trading days after the
Conversion Notice is delivered, but the Company may defer that
payment for a period of time, not to exceed 30 days, during which
deferral the cash redemption payment amount shall accrue interest
at 16% per annum.
Section 3.3. Conversion Procedure. To convert this Note into
Common Stock, the Holder must (a) complete, sign and deliver to
the Company the Notice of Conversion attached hereto, (b)
surrender the original Note (or Lost Note Affidavit) to the
Company, (c) furnish appropriate endorsements if so requested by
the Company, and (d) pay any transfer or similar tax required to
be paid by the Holder pursuant to Section 3.6 hereof if requested
in advance by the Company. The Company shall issue and deliver
to the Holder a certificate or certificates for the number of
shares of Common Stock to which such Holder shall be entitled
within two (2) trading days of receipt of the duly executed
Notice of Conversion; provided, however, that the Company shall
not be required to deliver a certificate for Common Stock unless
and until the Company receives the original Note (or Lost Note
Affidavit) to be converted ("Required Delivery Date"). A
conversion shall be deemed to be made immediately prior to the
close of business on the date of surrender of the Note (or Lost
Note Affidavit) to be converted, and the Holder entitled to
receive the Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder of such Common
Stock on the date of surrender to the Company of the Note (or
Lost Note Affidavit). Upon surrender of a Note that is to be
converted in part, the Company shall promptly issue to the Holder
a new Note or Notes equal in principal amount to the unconverted
portion of the Note surrendered (in such number and denomination
as the Holder shall request).
Section 3.4. Unlegended Shares. The shares of Common Stock
issued upon conversion after the Registration Statement
registering such Common Stock for resale has been declared
effective by the SEC shall not bear any restrictive legend. In
the event any shares of Common Stock are issued with a
restrictive legend while such Registration Statement is not
effective, then upon effectiveness of the Registration Statement,
the Company will, within two (2) business days of the Holder's
request, exchange the legended certificates without charge for
unlegended, but otherwise identical, certificates representing
such shares of Common Stock (except that such certificates shall
be in such number and denomination as the Holder shall request).
Section 3.5. Payments for Late Delivery. The Company
understands that a delay in the issuance of certificates for the
shares of Common Stock upon conversion could result in
substantial economic loss to the Holder. As compensation to the
Holder for such delay, and not as a penalty, the Company agrees
to pay to the Holder in cash an amount equal to two percent (2%)
of the value (based on the closing price of the Common Stock on
the principal market on which such Common Stock is then traded on
the trading day prior to the Required Delivery Date) of the
shares covered by the certificates delivered late, per day,
beginning on the day immediately following the Required Delivery
Date. Notwithstanding anything in this Note to the contrary,
such delayed delivery of certificates shall automatically become
an Event of Default hereunder, without notice, at the close of
business on the second (2nd) trading day following the Required
Delivery Date (unless such certificates are delivered to the
Holder prior to such time). Such payments shall accrue each day
beginning on the day following the Required Delivery Date and
extending through the date certificates for the shares of Common
Stock are issued to the Holder. The payments shall be paid by
check or wire transfer to an account designated by such Holder
upon the earlier to occur of (a) issuance of certificates for the
shares of Common Stock to the Holder, or (b) each monthly
anniversary of the Company's receipt of the Notice of Conversion.
Nothing herein shall waive the Company's obligation to deliver
certificates for the shares of Common Stock upon conversion of
the Notes or limit the Holder's right to pursue damages
(including without limitation lost trading or other profits and
reimbursement for expenses and reasonable legal fees incurred;
excluding, however, other consequential damages and punitive
damages) (collectively, "Damages") for the Company's failure to
timely issue and deliver the shares of Common Stock to the Holder
on the Required Delivery Date.
Section 3.6. Taxes on Conversion. The Company shall pay any
documentary, stamp or similar issue or transfer tax due on the
issue of shares of Common Stock upon the conversion of this Note.
However, the Holder shall pay any such tax which is due because
the shares of Common Stock are issued in a name other than the
Holder's name.
Section 3.7. Revocation of Notice of Conversion. In addition
to any other remedies which may be available to the Holder, in
the event the Company fails for any reason to effect delivery to
the Holder of certificates representing the shares of Common
Stock receivable upon conversion by the Required Delivery Date,
the Holder may revoke the Notice of Conversion by delivering a
notice of such effect to the Company. Upon receipt by the
Company of such a revocation notice, the Company shall
immediately return the subject Note(s) and other conversion
documents, if any, delivered by the Holder, to the Holder, and
the Company and the Holder shall each be restored to their
respective positions held immediately prior to delivery of the
Notice of Conversion; provided, however, that the Company shall
remain liable for payment of the amounts determined pursuant to
Section 3.5 above for each day falling between the Required
Delivery Date and the date the revocation notice is received by
the Company, and shall also remain liable for any damages
suffered by the Holder.
Section 3.8. Limitations on Conversion; Non-Approval
Redemption.
(a) Notwithstanding anything to the contrary
contained in this Note, the Holder shall not effect any
conversions of this Note until the Company has obtained the
formal ratification and approval of its shareholders to the
issuance and conversion of this Note in accordance with its terms
("Shareholder Approval"). The Company agrees to use its
reasonable best efforts to obtain Shareholder Approval on or
before (i) March 31, 1999 if the SEC does not review the
applicable proxy statement or (ii) April 30, 1999 if the SEC
elects to review such proxy statement (such date, as applicable,
the "Outside Approval Date"). The date which is thirty-five (35)
days after either the date upon which the SEC notifies the
Company that it is not reviewing such proxy statement or the date
upon which the Company satisfies the SEC's final comments on such
proxy statement, whichever is applicable, shall be referred to as
the "Scheduled Meeting Date".
(b) If Shareholder Approval is not obtained by
the close of business on the earlier of the Scheduled Meeting
Date or the Outside Approval Date, the Holder shall have the
option, exercisable from time to time at any time prior to (i)
repayment in full of the Note or (ii) the first day after
Shareholder Approval is obtained , to have all or part of this
Note redeemed at the "Non-Approval Redemption Price." The Non-
Approval Redemption Price shall be a cash amount equal to the
number of Common Shares into which the principal amount hereof to
be redeemed would then be convertible, multiplied by the mean
average of the five (5) weighted average trading prices of the
Common Stock over each of the five (5) trading days commencing on
the second day after delivery of the applicable notice of
exercise. Such Non-Approval Redemption Price shall be paid to
the Holder on the first business day following the fifth such
trading day. Notwithstanding the foregoing, the Company may, in
lieu of paying the Non-Approval Redemption Price, deliver to the
Holder, within one business day after any exercise of such
option, the number of listed, registered fully-paid and
nonassessable shares of Common Stock into which the portion of
the principal amount sought to be redeemed would have been
convertible on the date of exercise of such option, which
delivery shall be treated as a conversion under the Note of the
amount of the principal sought to be redeemed.
Article 4. Subordination
Section 4.1. The only debt to which the Notes are senior is (i)
all sums due or payable under the $7.5 Million U.S. subordinate
revenue royalty notes issued in June and July, 1997, (ii) royalty
obligations to USB '93 Technology Associates Limited Partnership
and (iii) debt that by its terms is subordinated to the Notes.
Section 4.2. Holder hereby specifically acknowledges and
agrees, and each of Holder's successors and assigns or any other
holder of this Note (each such successor, assign, or other
holder, a "Later Holder") by accepting this Note agrees, upon the
happening and continuation of an Event of Default described in
Section 11.1(g), that all indebtedness evidenced by this Note
will be junior and subordinate in right of payment to the prior
payment in full of all obligations owed by the Company in respect
of all Senior Debt (as hereinafter defined). "Senior Debt" means
and includes all principal of, interest on, premium, if any, and
other obligations of the Company with respect to any (i)
indebtedness for money borrowed by the Company from a Financial
Institution (as that term is defined in Section 8.7 of the
Securities Purchase Agreement) or for cash grants made to the
Company by a governmental authority, to the extent such grants
may have to be repaid by the Company (collectively,
"Indebtedness") whether outstanding on October 27, 1997 (provided
any Senior Debt outstanding on the date hereof is described on
Schedule 4.2 to the Securities Purchase Agreement) or incurred,
created or arising thereafter pursuant to any agreement or
instrument which the Company may have executed and delivered
prior to October 27, 1997 (provided such agreements or
instruments are described on Schedule 4.2 to the Securities
Purchase Agreement), or may execute and deliver at any time
hereafter, (ii) principal of, interest on and premium, if any,
relating to any Indebtedness of others of the kinds described in
(i) above hereafter assumed or guaranteed by the Company, and
(iii) amendment, modification, supplement, restatement, deferral,
renewal, extension or refunding of any such Indebtedness
described in (i) and (ii) above (and any of the foregoing having
the effect of increasing the principal amount of the Indebtedness
outstanding or available thereunder) as may be entered into by
the Company from time to time. Notwithstanding the foregoing,
and in further limitation (and not in expansion) of the term
Senior Debt, Senior Debt shall not include (a) any debt or
Indebtedness that is directly or indirectly convertible into or
exchangeable for any equity securities of the Company, (b) any
debt or Indebtedness hereafter created that is not by its terms
expressly stated to be senior to the Notes, or (c) debt or
indebtedness which is junior or subordinate to Senior Debt or
which is not pari passu with Senior Debt.
Article 5. Redemption
At any time following two (2) weeks after Shareholder
Approval is obtained, the Company may redeem this Note in whole
or in part, at 100% of face value, plus accrued but unpaid
interest, upon seven (7) trading days' advance notice, provided
that such seven trading day period shall be extended by the
number of previous trading days on which there has been existing
a Changeover Default hereunder or any trading day after March 5,
1999 during which the Registration Statement under the
Registration Rights Agreement is suspended or otherwise not fully
in effect. This Note may only be redeemed under this Article 5
provided that the Registration Statement has been duly amended to
reflect the amendments to the original version of this Note and
related transactions and is otherwise fully in effect during the
entire period from the delivery of the Company's redemption
notice through the effective date of redemption, the Company
honors all of the Holder's Conversion Notices during such period,
the Company complies with Section 3.8 above, and there is no
Changeover Default during such period. The foregoing conditions
may be waived by the Holder with respect to all or part of such
redemption.
Article 6. Adjustments
The Conversion Price and the kind and amount of securities
and property for which the Notes may be converted shall be
subject to adjustment from time to time, upon notice to the
Holder, as follows:
Section 6.1. Stock Dividends, Stock Splits, Reclassifications,
Recapitalizations, Etc. If, at any time after the issuance of
the Notes, the Company (a) pays a dividend or makes a
distribution in Common Stock to the holders of its equity
securities (including investments or securities convertible into
or exchangeable for such equity securities) to the holders of its
Common Stock, (b) subdivides its outstanding Common Stock into a
greater number of shares, (c) combines its outstanding Common
Stock into a smaller number of shares (including a
recapitalization in connection with a consolidation or merger in
which the Company is the continuing corporation), or (d) issues,
by reclassification of the Common Stock, any other securities of
the Company, then, in each such event, the Conversion Price (if a
fixed price) and the Ceiling Price in effect on the date of such
event shall be adjusted so that the Holder of the Note(s)
thereafter surrendered for conversion shall be entitled to
receive the kind and number of shares of Common Stock and/or
other property which such Holder would have been entitled to
receive immediately following such event had the Notes been
converted immediately prior thereto. Any adjustment made
pursuant to this Section 6.1 shall become effective immediately
after the record date in the case of a dividend or distribution
and shall become effective immediately after the effective date
in the case of a subdivision, combination or reclassification.
Section 6.2. Consolidation, Merger, Sale of Assets,
Reorganization, Etc. In the event the Company enters into any
consolidation, merger, sale of all or substantially all of its
assets, or other transaction in which its Common Stock is
exchanged for or changed into other stock or securities, money
and/or any other property, then the Holders of the Notes shall
thereafter have the right to (a) convert each Note into the kind
and amount of shares of stock or other securities or property,
including cash, into which the shares of Common Stock into which
the Notes could have been converted immediately prior to such
merger, consolidation or sale would have been exchanged for
pursuant to any such transaction, with, as nearly as reasonably
possible, not less than the same economic value and relative
conversion and other rights and preferences as apply to the Notes
immediately before such transaction, or (b) immediately following
such merger, consolidation or sale, exchange the Notes for notes
of the surviving entity providing the holders of the Notes with,
as nearly as reasonably possible, the same economic value and
relative rights and preferences as apply to the Notes immediately
before such transaction.
Section 6.3. Spin-offs, etc. (a) If the Company, at any time
while the Notes are outstanding, shall distribute to all holders
of Common Stock evidences of its indebtedness or assets or rights
(other than rights issued pursuant to a shareholders rights plan
adopted by the Company) or warrants to subscribe for or purchase
any security (excluding those referred to in Section 6.4 below),
then in each such case each of the Conversion Price (if a fixed
price) and the Ceiling Price shall be determined by multiplying
the Conversion Price and Ceiling Price in effect immediately
prior to the record date fixed for determination of shareholders
entitled to receive such distribution by a fraction of which the
denominator shall be the Recent Market Price for shares of Common
Stock determined at the record date mentioned above, and of which
the numerator shall be such Recent Market Price for shares of
Common Stock at such record date less the then fair market value
at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share
of Common Stock as determined by the Board of Directors in good
faith; provided, however that in the event of a distribution
exceeding 15% of the net assets of the Company, as determined
according to generally accepted accounting principles, such fair
market value shall be determined by a nationally recognized or
major regional investment banking firm or firm of independent
chartered accountants of recognized standing (which may be the
firm that regularly examines the financial statements of the
Company) (an "Appraiser") selected in good faith by the Board of
Directors and Holders of a majority in interest of the Notes. In
either case the adjustments shall be described in a statement
provided to all holders of Notes of the portion of assets or
evidences of indebtedness so distributed or such subscription
rights applicable to one share of Common Stock. Such adjustment
shall be made whenever any such distribution is made and shall
become effective immediately after the record date mentioned
above.
Section 6.4. Issuance below Certain Price. In the event that
the Company issues or sells any Common Stock or securities which
are convertible into or exchangeable for its Common Stock or any
convertible securities, or any warrants or other rights to
subscribe for or to purchase or any options for the purchase of
its Common Stock or any such convertible securities (other than
shares or options issued or which may be issued pursuant to the
Company's employee or director option plans or shares issued upon
exercise of options, warrants or rights outstanding on the date
of the Securities Purchase Agreement pursuant to which this Note
was originally issued) at an effective purchase price per share
which is less than eighty-five (85%) percent of the Recent Market
Price then in effect at the time of the issuance of such
securities, warrants, options or convertible securities, then in
each such case, the Conversion Price (if a fixed price) and the
Ceiling Price in effect immediately prior to such issue or sale
shall be reduced effective concurrently with such issue or sale
to an amount determined by multiplying the Conversion Price and
Ceiling Price then in effect by a fraction, (x) the numerator of
which shall be the sum of (1) the number of shares of Common
Stock outstanding immediately prior to such issue or sale, plus
(2) the number of shares of Common Stock which the aggregate
consideration received or receivable by the Company for such
additional shares would purchase at the then applicable Recent
Market Value or, if a Changeover Default has occurred and if
less, the Ceiling Price, as the case may be, then in effect; and
(y) the denominator of which shall be the number of shares of
Common Stock of the Company outstanding immediately after such
issue or sale.
For the purposes of the foregoing adjustment, in the case of
the issuance of any convertible securities, warrants, options or
other rights to subscribe for or to purchase or exchange for,
shares of Common Stock ("Convertible Securities"), the maximum
number of shares of Common Stock issuable upon exercise, exchange
or conversion of such Convertible Securities shall be deemed to
be outstanding, provided that no further adjustment shall be made
upon the actual issuance of Common Stock upon exercise, exchange
or conversion of such Convertible Securities.
The number of shares which may be purchased hereunder shall
be increased proportionately to any reduction in conversion price
pursuant to this paragraph, so that after such adjustments the
aggregate Conversion Price payable hereunder for the number of
shares which may be purchased hereunder (as so increased) shall
be the same as the aggregate Conversion Price in effect just
prior to such adjustment.
Notwithstanding the foregoing, the Holder hereby waives any
anti-dilution adjustment which would have resulted from the
issuance of convertible preferred stock and underlying Common
Stock pursuant to letters of intent or binding agreements with
the Company executed by all parties on or prior to January 8,
1999 (but not, in each case, if such letters of intent, binding
agreements or related agreements initially provide for the
issuance (whether initially or upon conversion or exchange) of
shares of Common Stock at an effective price below $1.50 or to
the extent that any actual issuances below such effective price
are made in the future pursuant to any such agreements).
Article 7. Company to Reserve Stock
The Company shall reserve out of its authorized but unissued
Common Stock or Common Stock held in treasury a sufficient number
of shares of Common Stock to permit the conversion of the Notes
(in addition to shares then required by the Company for all other
purposes). If and so long as the number of shares reserved for
issuance upon conversion of the Notes is insufficient to permit
conversion of all of the outstanding Notes and for all other
purposes required by the Company, the Company will make cash
payments to the Holder as partial compensation for the added
liquidity risk of such failure (the "Reserve Payments"). The
Reserve Payments will be equal to two percent (2%) of the
Purchase Price of any outstanding Notes (plus accrued but unpaid
interest) for each month (or part thereof) following the date
that an insufficient number of shares of Common Stock (as
determined above) was reserved for such purpose (the "Failure
Date") continuing through the date a sufficient number of
additional shares of Common Stock (as determined above) is
reserved for such purpose (the "Reserve Date"). The Reserve
Payments will be paid to the Holder in cash within five (5)
business days following the earlier of: (i) the end of each
month following the Failure Date, or (ii) the Reserve Date.
Nothing herein shall limit the Holder's right to pursue damages
for the Company's failure to maintain a sufficient number of
shares of Common Stock reserved for issuance. If, at any time,
the number of authorized but unissued shares of Common Stock is
insufficient to effect the conversion of all outstanding Notes
and for all other purposes then required by the Company, the
Company shall promptly take such corporate action as may be
necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as would be sufficient for
all such purposes. All shares of Common Stock which may be
issued upon the conversion hereof shall be fully paid and
nonassessable. At a minimum, the Company shall at all times so
reserve at least 200% of number of shares of Common Stock needed
for issuance upon conversion of the Notes.
Article 8. Restrictions on Transfer
This Note and the Common Stock issuable upon the conversion
hereof have not been registered under the Securities Act of 1933
(the "Act") and may not be offered for sale, sold or otherwise
transferred unless such offer, sale or other transfer is
registered under the Act or such transfer is exempt from
registration. The Company has undertaken to so register such
shares of Common Stock pursuant to a Registration Rights
Agreement with the Holder dated October 27, 1997 (the
"Registration Rights Agreement").
Article 9. No Impairment
The Company shall not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue, or sale of securities
or any other voluntary action, avoid or delay or seek to avoid or
delay the observance or performance of any of the terms hereof,
but will at all times in good faith carry out all provisions
hereof and take all such action as may be necessary or
appropriate in order to protect the conversion and other rights
of the holders of the Notes against impairment. The Holder shall
not have the right to enjoin the Company from taking any such
action; however, the Company shall be liable for all of the
Holder's Damages if the Company violates this Article 9.
Article 10. Reports
As required pursuant to the Securities Purchase Agreement
between the initial Holder and the Company, the Company will mail
to the Holder hereof at its address as shown on the Company's
register a copy of any annual, quarterly or current report that
it files with the SEC promptly after the filing thereof and a
copy of any annual, quarterly or other report or proxy statement
that it gives to its shareholders generally at the time such
report or statement is sent to shareholders.
Article 11. Defaults and Remedies
Section 11.1. Events of Default. An "Event of Default" occurs if
(a) the Company does not make the payment of the principal (and
premium, if any) of this Note when the same becomes due and
payable at maturity, upon redemption or otherwise and such
default continues for two (2) days thereafter; (b) the Company
does not make a payment of interest when such interest becomes
due and payable and such default continues for a period of eight
(8) days thereafter; (c) the Company fails to maintain the
listing of its Common Stock and Common Shares as required under
Section 4.5 of the Securities Purchase Agreement such that the
aggregate number of trading days in all Delisting Periods (as
defined in said Section 4.5) during any twelve month period
exceeds five (5) trading days, provided that the failure to list
Common Stock issuable upon conversions prior to the third
business day after Shareholder Approval is obtained shall not
constitute an Event of Default; (d) one or more Suspension
Event(s) (as that term is defined in Section 3(f) of the
Registration Rights Agreement) occur such that the aggregate
number of days for which Delay Compensation (as that term is
defined in said Section 3(f) of the Registration Rights
Agreement) is payable by the Company exceeds twenty-five (25)
days; (e) the Company fails to issue on the Required Delivery
Date shares of Common Stock upon conversion of this Note pursuant
to Section 3.3 hereof and such default continues for two (2)
trading days thereafter; (f) the Company fails to comply with any
of its other payment or other material (individually or in the
aggregate) agreements in this Note and such failure continues for
the period and after the notice specified below; (g) the
Company, pursuant to or within the meaning of any Bankruptcy Law
(as hereinafter defined): (i) commences a voluntary case; (ii)
consents to the entry of an order for relief against it in an
involuntary case; (iii) consents to the appointment of a
Custodian (as hereinafter defined) of it or for all or
substantially all of its property; (iv) makes a general
assignment for the benefit of its creditors; or (v) a court of
competent jurisdiction enters an order or decree under any
Bankruptcy Law that: (A) is for relief against the Company in an
involuntary case; (B) appoints a Custodian of the Company or for
all or substantially all of its property or (C) orders the
liquidation of the Company, and the order or decree remains
unstayed and in effect for sixty days; (h) there is a material
misrepresentation by the Company herein concerning information
which reasonably would be expected to be important to a prudent
investor, herein, in the Securities Purchase Agreement, as
amended, or in the Registration Rights Agreement, or in any
certificate, Exhibit, Schedule or attachment delivered with
respect thereto; (i) the Company is in default under any Senior
Debt such that the holder thereof has a right of acceleration
thereunder; (j) the Company sells or otherwise disposes of all or
substantially all of its assets; or (k) the Company fails to
comply with any other payment or other material (individually or
in the aggregate) obligation under the Securities Purchase
Agreement, as amended, or the Registration Rights Agreement, and
such failure continues for the period and after the notice
specified below. As used in this Section 11.1, the term
"Bankruptcy Law" means Title 11 of the United States Code or any
similar federal or state law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law. A default under
clauses (f) or (k) above is not an Event of Default until the
holders of at least 25% of the aggregate principal amount of the
Notes then outstanding notify the Company of such default and the
Company does not cure it within eight (8) days (with respect to
payment defaults) or thirty (30) days (with respect to other
defaults) after the receipt of such notice, which must specify
the default, demand that it be remedied and state that it is a
"Notice of Default"; except that if such default relates to
payments due monthly, the Holder shall only be obligated to give
notice of such late payment to the Company for the first of a
series of similar monthly payment defaults. In addition to any
other remedies provided herein, the Company will indemnify the
Holder for all Damages incurred as a result of the happening of
an Event of Default.
An Event of Default under subparagraphs 11.1(a), (b), (c),
(d) (e) and/or (g) above shall be deemed a "Changeover Default."
Section 11.2. Acceleration. If an Event of Default occurs and
is continuing, the Holder hereof by notice to the Company, may
declare the principal of and accrued interest on this Note to be
due and payable. Upon such declaration, principal and interest
hereof shall be due and payable, the Holder shall be entitled to
receive the greater of (a) 110% of the outstanding principal and
accrued interest hereof or (b) the Holder's "lost benefit" for
not converting at that time determined as the difference between
the lowest Conversion Price per share then in effect and the then
closing price of the Common Stock on the date of such
declaration, times the number of shares which could then have
been received upon conversion.
Section 11.3. Waiver. The holders of a majority in principal
amount of the Notes outstanding may waive a default or rescind
the declaration of an Event of Default and its consequences
except for a default in the payment of principal of or interest
on any Note as set forth in Section 11.2 hereof, which may be
waived by the holders of outstanding Notes effected by such
default.
Article 12. Register; Transfer; Replacements
Section 12.1. Record Ownership. The Company shall maintain a
current register of the holders of the Notes (the "Register")
showing their names and addresses and the serial numbers and
principal amounts of Notes issued to or transferred of record by
them from time to time. The Register may be maintained in
electronic, magnetic or other computerized form. The Company may
treat the person named as the Holder of this Note in the Register
as the sole owner of this Note. The Holder of this Note is the
person exclusively entitled to receive payments of interest on
this Note, receive notifications with respect to this Note,
convert it into Common Stock and otherwise exercise all of the
rights and powers as the absolute owner hereof.
Section 12.2. Registration of Transfer. Transfers of this Note
may be registered on the books of the Company maintained for such
purpose pursuant to Section 12.1 above (i.e., the Register).
Transfers shall be registered when this Note is presented to the
Company with a request to register the transfer hereof and the
Note is duly endorsed by the appropriate person, reasonable
assurances are given that the endorsements are genuine and
effective, and the Company has received evidence reasonably
satisfactory to it that such transfer is rightful and in
compliance with all applicable laws, including tax laws and state
and federal securities laws; provided, however, that if the
transferee is an affiliate of the Holder, or a Financial
Institution (as defined in Section 8.7 of the Securities Purchase
Agreement), no such documentation nor any consent by the Company
shall be required. When this Note is presented for transfer and
duly transferred hereunder, it shall be canceled and a new Note
showing the name of the transferee as the record holder thereof
shall be issued in lieu hereof. When this Note is presented to
the Company with a reasonable request to exchange it for an equal
principal amount of Notes of other denominations, the Company
shall make such exchange and shall cancel this Note and issue in
lieu thereof Notes having a total principal amount equal to this
Note in the denominations requested by the Holder. The Company
may charge a reasonable fee for any registration of transfer or
exchange other than one occasioned by a notice of redemption or
the conversion hereof.
Section 12.3. Worn and Lost Notes. If this Note becomes worn,
defaced or mutilated but is still substantially intact and
recognizable, the Company or its agent may issue a new Note in
lieu hereof upon its surrender. Where the Holder of this Note
claims that the Note has been lost, destroyed or wrongfully
taken, the Company shall issue a new Note in place of the
original Note if the Holder so requests by written notice ("Lost
Note Affidavit") to the Company actually received by the Company
before it is notified (together with reasonable evidence thereof)
that the Note has been acquired by a bona fide purchaser, and the
Holder has delivered to the Company an affidavit of the Holder
setting forth the facts concerning such loss, destruction or
wrongful taking and such other information in such form with such
proof or verification as the Company may reasonably request.
Section 12.4. Assignment. The Holder (but not the Company) may
transfer or assign this Note or any interest herein and may
mortgage, encumber or transfer any of its rights or interest in
and to this Note or any part hereof and, without limitation, each
assignee, transferee and mortgagee (which may include any
affiliate of the Holder) shall have the right to transfer or
assign its interest; any such assignment or transfer may be made
without notice to or consent from the Company, if the assignee or
transferee is an affiliate of the transferor or a Financial
Institution (as defined in Section 8.7 of the Securities Purchase
Agreement). All other assignments and transfers of this Note
will require the prior consent of the Company, which consent the
Company covenants it shall not unreasonably withhold or
unreasonably delay. Each such assignee, transferee and mortgagee
shall have all of the rights of the Holder under this Note. The
Company agrees that, subject to compliance with the Securities
Purchase Agreement, after receipt by the Company of written
notice of assignment from the Holder or from the Holder's
assignee by registered or certified mail, return receipt
requested, or by any other delivery method whereby the Company
signs a receipt therefor, all principal, interest and other
amounts which are then and thereafter become due under this Note
shall be paid to such assignee at the place of payment designated
in such notice. This Note shall be binding upon the Company and
its successors, assigns and affiliates and shall inure to the
benefit of the Holder and its successors and assigns.
Article 13. Notices
Except as otherwise provided in this Note, any notices
required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery or delivery by
facsimile, or (b) on the next business day following the date of
deposit in the U.S. Mail, certified mail with postage prepaid, or
with a nationally recognized overnight courier service. Notices
shall be addressed to the Holder at such Holder's address or
facsimile number appearing in the records of the Company, or to
the Company at the address most recently provided to the Holder
by the Company.
Article 14. Time
Where this Note authorizes or requires the payment of money
or the performance of a condition or obligation on a Saturday or
Sunday or a public holiday, or authorizes or requires the payment
of money or the performance of a condition or obligation within,
before or after a period of time computed from a certain date,
and such period of time ends on a Saturday or a Sunday or a
public holiday, such payment may be made or condition or
obligation performed on the next succeeding business day, and if
the period ends at a specified hour, such payment may be made or
condition performed, at or before the same hour of such next
succeeding business day, with the same force and effect as if
made or performed in accordance with the terms of this Note.
Where time is extended by virtue of the provisions of this
Article 14, such extended time shall be included in the
computation of interest.
Article 15. Rules of Construction
In this Note, unless the context otherwise requires, words
in the singular number include the plural, and in the plural
include the singular, and words of the masculine gender include
the feminine and the neuter, and when the sense so indicates,
words of the neuter gender may refer to any gender. The numbers
and titles of sections contained in this Note are inserted for
convenience of reference only, and they neither form a part of
this Note nor are they to be used in the construction or
interpretation hereof. Wherever, in this Note, a determination
of the Company is required or allowed, such determination shall
be made by a majority of the Board of Directors of the Company
acting in good faith. Nothing in this Note is intended to reduce
the Company's obligations or reduce the Holder's rights under the
Securities Purchase Agreement or the Registration Rights
Agreement.
Article 16. Governing Law
This Note shall be governed by and interpreted in accordance
with the laws of the State of Delaware without reference to
principles of conflicts of law, and any disputes arising
hereunder will be adjudicated in federal or state court situated
in New York County, New York or Delaware. Each party hereto
consents to such venue and to the personal jurisdiction of said
courts and, to the extent permitted by applicable law, agrees to
waive any objection as to such jurisdiction or venue, and agrees
not to assert any defense based on lack of jurisdiction or venue.
IN WITNESS WHEREOF, the Company has duly executed this Note
as of the date first written above.
SELFCARE, INC.
By /s/ Ron Zwanziger
______________________________
Name and Title Ron Zwanziger, CEO
___________________
NOTICE OF CONVERSION
[To be completed and signed only upon conversion of Note]
The undersigned Holder of this Note hereby elects to exercise the
right to convert it into common stock of Selfcare, Inc., par
value $.001 per share, as follows:
[Complete if less than _____________Dollars ($________)*
all of principal amount
is to be converted]
[Signature must be
guaranteed if (Name of Holder of shares if
registered holder of different than registered Holder of
stock differs from Note
registered Holder of
Note.]
(Address of Holder if different
than address of registered Holder
of Note)
(Social Security No. or Tax ID No.
of Holder of shares if different
than Holder of Note)
*If the principal amount of the Note to be converted is
less than the entire principal amount thereof, a new
Note or Notes for the balance of the principal amount
shall be returned to the Holder of the Note in such
number and denominations as is requested by the Holder.
Date: Sign: _________________________________
(Signature must conform in all
respects to name of Holder shown on
face of this Note)
Assignment of Note
The undersigned hereby sell(s) and assign(s) and transfer(s)
unto ____________________________________________________________
(name, address and SSN or EIN of assignee)
______________________________________Dollars ($_________)
(principal amount of Note)
of principal amount of this Note together with all accrued
interest hereon.
Date: ____________________ Sign:___________________________
(Signature must conform in all
respects to name of Holder shown on
face of Note)
Signature Guaranteed: ______________________________
