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[Selfcare Letterhead]
December 31, 1996
All holders of 10% Promissory
Notes (the "Notes") of Selfcare, Inc.
dated March 30, 1995
Dear Noteholder:
Selfcare, Inc. (the "Company") has agreed with holders of the Notes to
revise the terms of the Notes, issue new warrants to the holders of the Notes,
and replace the existing warrants with an agreement to issue the shares covered
thereby by January 15, 2000 at the latest. As a result of these changes, the
holders of the existing warrants will be able to postpone until such issuance
the recognition of a significant amount of taxable income which otherwise might
have to be reported on their 1996 tax returns.
More specifically, the terms of the agreement are as follows:
1. You and the Company hereby agree that, notwithstanding anything in the
Notes or elsewhere to the contrary, the principal amount of your Notes is to be
repaid in full within five (5) business days after January 15, 1998 (the "New
Repayment Date"). You will continue to be entitled to continue to receive
payments of interest on the principal amount of your Notes on the first business
day of each calendar quarter for the immediately preceding quarter. On the New
Repayment Date you also will receive an amount equal to the accrued but unpaid
interest from January 1, 1998 through the New Repayment Date.
2. You and the Company hereby agree that each warrant to purchase shares of
the Company's common stock, par value $.00l per share (the "Common Stock"),
which was issued to you in connection with the issuance of the Notes is hereby
terminated and canceled as of the date hereof. In exchange therefor, the Company
agrees that it will transfer to you, for no additional consideration, the number
of shares to which your warrant currently applies (i.e., your proportionate part
of the 1,142,635 shares of Common Stock for which all such warrants could be
exercised if they all were exercisable today) on the earlier of (i) January 15,
2000 or (ii) the date on which a Change in Control (as defined in Section 6)
occurs. The Company will pay any transfer taxes due with respect to such
transfer and will appropriately adjust the number of shares to be transferred in
the event a stock dividend, stock split or
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reverse stock split with respect to the Common Stock occurs between the date
hereof and the transfer of such shares.
3. In consideration for your agreement to the terms of this letter, the
Company will issue to you new warrants (the "New Warrants") to purchase shares
of the Company's Common Stock in substantially the form attached hereto as
EXHIBIT A. The number of New Warrants that you will receive by accepting this
letter agreement will equal your Proportionate Share (as hereinafter defined) of
warrants to purchase an aggregate of 54,545 shares of the Company's Common
Stock. The term "Proportionate Share" shall mean that portion of warrants to
purchase an aggregate of 54,545 shares of the Company's Common Stock multiplied
by a fraction, the numerator of which is the principal amount of your Notes and
the denominator of which is $3 million. The initial exercise price per share of
Common Stock in the New Warrants will be $12.875 (the "Exercise Price").
4. As further consideration for your agreement to the terms of this letter
agreement, if your Notes are outstanding as of June 30, 1997 and the Company has
not sold shares of Common Stock after the date hereof and on or before June 30,
1997 pursuant to a registration statement on Form SB-2 (or a similar form), then
the Company will issue to you by July 15, 1997, additional warrants, dated June
30, 1997 (the "Secondary Warrants"), to purchase shares of the Company's Common
Stock in substantially the form attached hereto as EXHIBIT A. The number of
Secondary Warrants that you will receive will equal your Proportionate Share of
warrants to purchase an aggregate of 27,273 shares of the Company's Common
Stock. The initial exercise price per share of Common Stock underlying the
Secondary Warrants shall equal the Exercise Price. The aggregate number of
shares of 27,273 and the Exercise Price will be appropriately adjusted to
reflect any adjustments which would have been made if the Secondary Warrants had
instead been issued on December 31, 1996.
5. You hereby agree that you will not transfer or assign any rights
contained herein without the prior written consent of the Company. You also
hereby acknowledge and agree that neither you nor any of your employees, agents
or advisors will disclose any information contained herein in any manner
whatsoever.
6. For purposes of this Agreement, a "Change in Control" shall mean the
occurrence of any one of the following events:
(i) any "person," as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Act"), (other than
the Company, any of its subsidiaries, or any trustee, fiduciary or other
person or entity holding securities under any employee benefit plan or
trust of the Company or any of its subsidiaries), together with all
"affiliates" and "associates" (as such terms are defined in Rule 12b-2
under the Act) of such person, shall become the "beneficial owner" (as such
term is defined in Rule 13d-3 under the Act), directly or indirectly, of
securities of the Company representing in excess of 50% of either (A) the
combined voting power of the Company's then outstanding securities having
the right to vote in an
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election of the Company's Board of Directors ("Voting Securities") or (B)
the then outstanding shares of Common Stock of the Company (in either such
case other than as a result of an acquisition of securities directly from
the Company); or
(ii) persons who, as of December 31, 1996, constitute the Company's
Board of Directors (the "Incumbent Directors") cease for any reason,
including, without limitation, as a result of a tender offer, proxy
contest, merger or similar transaction, to constitute at least a majority
of the Board, provided that any person becoming a director of the Company
subsequent to such date whose election or nomination for election was
approved by a vote of at least a majority of the Incumbent Directors shall,
for purposes of this Agreement, be considered an Incumbent Director; or
(iii) the stockholders of the Company shall approve (A) any
consolidation or merger of the Company or any subsidiary thereof where the
shareholders of the Company, immediately prior to the consolidation or
merger, would not, immediately after the consolidation or merger,
beneficially own (as such term is defined in Rule 13d-3 under the Act),
directly or indirectly, shares representing in the aggregate 80% or more of
the voting shares of the corporation issuing cash or securities in the
consolidation or merger (or of its ultimate parent corporation, if any),
(B) any sale, lease, exchange or other transfer (in one transaction or a
series of transactions contemplated or arranged by any party as a single
plan) of all or substantially all of the assets of the Company or (C) any
plan or proposal for the liquidation or dissolution of the Company.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to
have occurred for purposes of the foregoing clause (i) solely as the result of
an acquisition of securities by the Company which, by reducing the number of
shares of Common Stock or other Voting Securities outstanding, increases (x) the
proportionate number of shares of Common Stock beneficially owned by any person
in excess of 50% or more of the shares of Common Stock then outstanding or (y)
the proportionate voting power represented by the Voting Securities beneficially
owned by any person in excess of 50% or more of the combined voting power of all
then outstanding Voting Securities; PROVIDED, HOWEVER, that if any person
referred to in clause (x) or (y) of this sentence shall thereafter become the
beneficial owner of any additional shares of Common Stock or other Voting
Securities (other than pursuant to a stock split, stock dividend, or similar
transaction) and then beneficially owns in excess of either 50% of the Common
Stock then outstanding or of 50% or more of such combined voting power, then a
"Change in Control" shall be deemed to have occurred for purposes of the
foregoing clause (i).
7. This Agreement supersedes and replaces all other agreements with respect
to the exchange or conversion of your Note or any change in the date of payment
thereof.
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Please confirm your agreement to the above terms by signing and returning
the enclosed extra copy of this letter to the Company at 000 Xxxxxxxx Xxxxxx,
Xxxxxxx, Xxxxxxxxxxxxx 00000 as promptly as possible and in any event by January
15, 1997.
SELFCARE, INC.
By: /s/ Xxxxxxx X. Xxxx
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Xxxxxxx X. Xxxx, Ph.D.
Secretary and Vice President,
U.S. Operations
ACCEPTED AND AGREED TO:
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Signature
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Print Name
