-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EblKPNFbPSbuBX7G9yXYtk9LmSDf6VOdmLU7Av76ztcC4hsCoUrIdyDZQPwIfokW dvY3kZssParsRJjctC8v3A== 0001133884-01-500077.txt : 20010319 0001133884-01-500077.hdr.sgml : 20010319 ACCESSION NUMBER: 0001133884-01-500077 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20010316 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEI MEDICAL SYSTEMS CO INC /DE/ CENTRAL INDEX KEY: 0000851478 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INSTRUMENTS FOR MEASUREMENT, DISPLAY, AND CONTROL [3823] IRS NUMBER: 710455756 STATE OF INCORPORATION: DE FISCAL YEAR END: 0927 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-57172 FILM NUMBER: 1570639 BUSINESS ADDRESS: STREET 1: 100 HOLLISTER ROAD STREET 2: STE 2500 CITY: TETERBOR STATE: NJ ZIP: 07608 BUSINESS PHONE: 2017274900 MAIL ADDRESS: STREET 1: 100 HOLLISTER ROAD CITY: TETERBOR STATE: NJ ZIP: 07608 FORMER COMPANY: FORMER CONFORMED NAME: BEI ELECTRONICS INC DATE OF NAME CHANGE: 19920703 S-3 1 gs3-23793.txt FORM S-3 As filed with the Securities and Exchange Commission on March 16, 2001 Registration No. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------ FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------ BEI MEDICAL SYSTEMS COMPANY, INC. (Exact name of registrant as specified in its charter) Delaware 3823 71-0455756 (State or other jurisdiction (Primary standard (I.R.S. employer of incorporation or industrial classification identification no.) organization) code number) ------------------ 100 Hollister Road Teterboro, NJ 07608 (201) 727-4900 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) ------------------ Richard W. Turner, Ph.D. President and Chief Executive Officer BEI Medical Systems Company, Inc. 100 Hollister Road Teterboro, NJ 07608 (201) 727-4900 (Name, address, including zip code, and telephone number, including area code, of agent for service) ------------------ Copies to: Christopher A. Westover Laura Randall Woodhead Jason Throne Cooley Godward LLP One Maritime Plaza, 20th Floor San Francisco, CA 94111 (415) 693-2000 ------------------ Approximate date of commencement of proposed sale to the public: As soon as practicable after the Registration Statement becomes effective. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box: |_| If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the "Securities Act"), other than securities offered only in connection with dividend or interest reinvestment plans, check the following box: |X| If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: |_| If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: |_| If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box: |_| ------------------ CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------------------ Proposed Maximum Title Of Class Of Amount To Be Proposed Maximum Aggregate Offering Price Securities To Be Registered Registered Offering Price (1) (1) Amount Of Registration Fee - ------------------------------------------------------------------------------------------------------------------------------------ Common Stock, par value 2,228,970 shares(2) $2.75 $6,129,668 $1,533 $0.001 per share - ------------------------------------------------------------------------------------------------------------------------------------
------------------ (1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) of the Securities Act based upon the average of the high and low sales prices of our common stock as reported on the Nasdaq National Market on March 12, 2001. (2) Pursuant to Rule 416 of the Securities Act, this registration statement also covers such indeterminable number of additional shares of common stock as may become issuable as a result of stock splits, stock dividends or similar transactions. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment that specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8 (a), may determine. ================================================================================ The information in this prospectus is not complete and may be changed. The selling stockholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. Subject to Completion (March 16, 2001) BEI MEDICAL SYSTEMS COMPANY, INC. 2,228,970 Shares Common Stock The Selling Stockholders: The selling stockholders identified in this prospectus are selling up to 2,228,970 shares of our common stock. We are not selling any shares of our common stock under this prospectus and will not receive any of the proceeds from the sale of shares by the selling stockholders. Offering Price: The selling stockholders may sell the shares of common stock described in this prospectus in a number of different ways and at varying prices. We provide more information about how they may sell their shares in the section titled "Plan of Distribution" on page 13. Trading Market: Our common stock is listed on the Nasdaq National Market under the symbol "BMED". On March 13, 2001, the closing sale price of our common stock, as reported on the Nasdaq National Market, was $2.75. Risks: Investing in our common stock involves a high degree of risk. See "Risk Factors" beginning on page 3. ------------------ The shares offered or sold under this prospectus have not been approved by the Securities and Exchange Commission or any state securities commission, nor have these organizations determined that this prospectus is accurate or complete. Any representation to the contrary is a criminal offense. ------------------ The date of this prospectus is ___, 2001 SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS In addition to the historical information contained in this prospectus, this prospectus contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act of 1934, which include statements based on our current expectations, assumptions, estimates and projections about our company and our industry, including statements: with respect to timely development; acceptance and pricing of our Hydro ThermAblater or HTA; whether the HTA proves to be safe and effective in U.S. and international clinical trials under applicable regulatory guidelines; receipt of required FDA approval; the impact of competitive products and pricing and general economic conditions as they effect our customers. These statements may be identified by the use of words such as "expects," "anticipates," "intends," "plans" and similar expressions. The outcome of the events described in these forward-looking statements is subject to risks and actual results could differ materially. The sections captioned "Management's Discussion and Analysis of Financial Condition and Results of Operations", "Business" and "Risk Factors" in our annual report on Form 10-K for the year ended September 30, 2000 and the similarly captioned sections in the documents identified under the caption "Incorporation by Reference" describe or will describe some, but not necessarily all, of the factors that could cause these differences. We urge you to read those sections carefully. Except as may be required by law, we undertake no obligation to publicly update any forward-looking statements for any reason, even if new information becomes available or other events occur in the future. PROSPECTUS SUMMARY The following is a summary of our business. This summary highlights selected information from this prospectus and does not contain all the information that may be important to you. You should read this prospectus carefully. You should also carefully read the section entitled "Risk Factors" in this prospectus and the documents identified under the caption "Where You Can Find More Information" in this prospectus. We were incorporated in Delaware in August 1974, changed our name to BEI Electronics, Inc. in August 1976 and on November 4, 1997 changed our name to BEI Medical Systems, Inc. References in the prospectus to "BEI," "we," "our," "us," and the "company" refer to BEI Medical Systems, Inc., a Delaware corporation. Our principal executive offices are located at 100 Hollister Road, Teterboro, NJ 07608, and our telephone number is (201) 727-4900. BEI Medical Systems(R), the BEI Medical Systems logo, Hydro ThermAblator(R) and HTA(R) are registered trademarks of BEI. Trade names and trademarks of other companies appearing in this prospectus are the property of their respective holders. OUR BUSINESS Overview On December 8, 1999, we completed the sale of a substantial portion of our assets to CooperSurgical Acquisition Corp. The assets sold constituted a business of developing, manufacturing, marketing and servicing a broad array of advanced systems and devices for minimally invasive diagnostic and therapeutic procedures in the medical fields of gynecology and gastroenterology referred to as our "base business." During the fiscal year ended October 2, 1999, approximately 96.8% of our revenue were derived from sales of products from our base business. In consideration for the assets of our base business, we received $10.3 million in cash, and CooperSurgical assumed some of our liabilities and contracts and waived up to $100,000 in future royalty payments that we might have otherwise owed to them. In addition, until December 8, 2004, we have agreed not to engage in any business that competes with any of the products sold to CooperSurgical. Following the asset sale, we are focusing on developing and commercializing a new therapeutic system, the Hydro ThermAblator(R), or HTA(R), for treatment of menorrhagia or dysfunctional uterine bleeding. Approval to market this system in the United States is dependent upon authorization from the U.S. Food and Drug Administration, or FDA. We completed 12-month post-treatment follow-up examinations in August 2000 and 2 submitted the results to the FDA in September 2000 as the final portion of the modular application for Pre-Market Approval seeking FDA authorization to market the HTA in the United States. We currently anticipate completion of FDA review in the spring of 2001. See "Business--Risk Factors--Our business is regulated by the government. We cannot guarantee that we will obtain regulatory approvals to commercialize the HTA or other products that we may develop." Recent Private Placement On February 14, 2001, we issued 1,114,485 shares of Series A convertible preferred stock for an aggregate purchase price of $4,179,319 in a private placement to accredited investors. The shares of Series A convertible preferred stock are convertible at any time into an aggregate of 2,228,970 shares of our common stock at an initial conversion price of $1.875 per share. The initial conversion price will be adjusted for stock splits, combinations, certain dividends and distributions and other similar events and could also be adjusted on a weighted average basis in the event we issue additional securities at a per share price below $1.875. RISK FACTORS You should carefully consider the risks described below, as well as the risks identified in our other filings with the SEC, before acquiring our common stock. The risks and uncertainties described below are not the only ones facing our company. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may impair our business operations. If any of the following risks actually occur, our business could be harmed. In such case, the trading price of our common stock could decline and you may lose all or part of your investment. We have a history of operating losses and anticipate future losses and we may never be profitable. Historically, we have incurred significant losses in our medical device business and we expect to incur increasing and significant losses in the future for at least the next two to three years as we expend substantial resources: o in support of regulatory and reimbursement approvals; o for expansion of marketing and sales activities; o for research and development; and o for start-up manufacturing costs. If we are able to commercialize the HTA, we cannot guarantee we will achieve significant revenues from either international or domestic sales of the HTA. In addition, we cannot assure you that we will achieve or sustain profitability in the future. In the event we are unable to achieve profitability or secure additional sources of capital, our ability to continue as a going concern may be severely impaired. We have a limited operating history on which you can base an evaluation of our business and prospects. We have only a limited medical device operating history on which you can base an evaluation of our business and prospects. As an early stage medical device company, you must consider our prospects in light of the risks, expenses and difficulties frequently encountered by entrants into the medical device industry, which is characterized by an increasing number of participants, intense competition and a high failure rate. We cannot be certain that we will be able to overcome the risks and difficulties that we face and successfully compete with other medical device companies that have competing products or treatments. Even if we receive regulatory approval of the HTA, we may not be able to commercialize the HTA profitably. 3 Our ability to successfully commercialize the HTA will depend upon, among other factors, obtaining regulatory approval of our HTA and acceptance by the medical community of the HTA. We believe that physicians will not use the HTA unless they determine, based on clinical data and other factors, that the HTA: o is an attractive safe treatment alternative for dysfunctional menstrual bleeding; o offers clinical utility in a cost-effective manner; and o does not require extensive training prior to use. Even if we receive regulatory approval of the HTA, we cannot guarantee that the HTA will be competitive with respect to these factors or that it will gain any significant degree of market acceptance among physicians, patients and healthcare payors. We believe that recommendations and endorsements by physicians will be essential for market acceptance of the HTA and we cannot be certain that any such recommendations or endorsements will be obtained. If we fail to achieve significant market acceptance of the HTA, our business, financial condition and results of operations will suffer. Our business is regulated by the government. We cannot guarantee that we will obtain regulatory approvals to commercialize the HTA or other products that we may develop. Our products are medical devices subject to extensive regulation by the U.S. Food and Drug Administration, or FDA, under the Federal Food, Drug, and Cosmetic Act. Each medical device that we wish to commercially distribute in the U.S. will likely require FDA to grant either 510(k) clearance or pre-market approval, or PMA, prior to marketing. The FDA's 510(k) clearance pathway usually takes from four to 12 months, but it can last longer. The PMA approval pathway is much more costly, lengthy and uncertain. It generally takes from one to three years or even longer. Even after approval of a PMA, a new PMA or PMA supplement is required in the event of a modification to the device, its labeling or its manufacturing process that affects safety or effectiveness. We are required to obtain PMA approval to market the HTA for treatment of menorrhagia or dysfunctional uterine bleeding. Our PMA application, including supporting clinical data, has been filed with the FDA. We cannot guarantee you that PMA approval for the HTA will be granted in a timely fashion or at all. After a device such as the HTA is placed on the market, numerous regulatory requirements apply. These include: the Quality System Regulation, or QSR, which requires manufacturers to follow elaborate design, testing, control, documentation and other quality assurance procedures during the manufacturing process; labeling regulations; the FDA's general prohibition against promoting products for unapproved or "off-label" uses; and the Medical Device Reporting regulation, which requires that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur. We are subject to inspection and marketing surveillance by the FDA to determine our compliance with regulatory requirements. Noncompliance can result in enforcement action which may include warning letters, recalling products, ceasing product marketing, paying significant fines and penalties, and similar FDA actions which could limit product sales, delay or halt product shipment, delay new product clearance or approvals, and adversely affect our profitability. Unanticipated changes in existing regulatory requirements or adoption of new requirements could hurt our business, financial condition, and results of operations. The FDA regulates the export of medical devices that have not been approved or cleared for marketing in the United States. The Company exports the HTA directly to the European Union under the provisions of the FDA Export Reform and Enhancement Act of 1996. In certain instances, however, we may need to apply for export approval from the FDA. We cannot be certain that such required approvals will be granted. If we fail to obtain the capital necessary to fund our operations, we will be unable to complete the development and commercialization of the HTA. 4 Our capital requirements to complete the development and commercialization of the HTA depend on numerous factors including: o the timing and receipt of regulatory clearances and approvals; o the resources required to initiate commercialization of the HTA in the United States; and o the extent to which the HTA gains market acceptance and sales. We believe that our existing cash balances will provide adequate funding to meet our minimum capital requirements through December 31, 2001. However this plan does not provide for the investment in sales and marketing activities that we believe will be required to successfully commercialize the HTA. We will likely need to raise additional capital to fund operations beyond that period. We may not be able to obtain additional financing on favorable terms or at all. If we are unable to raise additional funds when we need them, we may be required to scale back our operations, research, marketing or sales efforts or obtain funds through arrangements with collaborative partners or others that may require us to license or relinquish rights to technologies or products. If we raise additional funds by issuing equity securities, further dilution to our stockholders may result, and new investors could have rights superior to existing stockholders. Our revenues are dependent upon a single product. If we are unable to commercialize the HTA profitably, we may not have any other source of revenue and our business will fail. We are dependent on a single product, the HTA, to achieve commercial success and generate sufficient future revenues and profits to fulfill capital needs. We cannot guarantee you that the HTA will achieve commercial acceptance. We do not have an alternative source of revenue or profits to meet capital needs in the event the HTA does not achieve commercial acceptance. We have no manufacturing experience and will rely on contract manufacturers. If we are unable to successfully manufacture our HTA in commercial quantities, we may not be able to generate revenue and become profitable. We have no experience in managing the manufacture and assembly of the HTA in commercial quantities and we rely on third party contract manufacturers to manufacture the HTA and its disposable components. In order to commercialize the HTA successfully, we must manufacture or assemble the HTA through third parties in accordance with FDA requirements in commercial quantities, at high quality levels and at commercially reasonable costs. In addition, the third party manufacturers are responsible for registering and maintaining their own facility regulatory and compliance approvals. Any regulatory or compliance actions against a third party vendor by either the FDA or any other regulatory body could affect the third party vendor's ability to supply us, which in turn could harm our business. The HTA has not yet been manufactured in commercial quantities at commercially reasonable costs, and we cannot guarantee you that it will be. As a result, we cannot be certain that we will not encounter difficulties in scaling up manufacturing, including problems involving: o production yields; o quality control; o component supply; and o shortages of qualified manufacturing personnel. In addition, we cannot be certain that we will be able to enter into satisfactory agreements with third party manufacturers to manufacture the HTA. If we fail to enter into agreements with third-party manufacturers on reasonable terms, if at all, or if we are unable to produce the HTA in commercial quantities at high quality levels and at commercially reasonable prices our business, financial condition and results of operations will suffer. We rely on single-source suppliers for a number of the HTA's components and if we are unable to obtain components we would be harmed and our operating results would suffer. 5 We currently depend on single-source vendors for a number of the HTA's significant components. Because the HTA has not yet been manufactured in commercial quantities, we cannot be certain that our current vendors of these components will be able or willing to meet our future demands. Establishing additional sources of supply for these components could take a substantial amount of time and expense. If we have to switch to a replacement vendor, the manufacture and delivery of our HTA could be interrupted for an extended period. Although we will try to maintain sufficient quantities of inventory of such components to minimize production delays or interruptions, we cannot guarantee you that we will find suitable alternatives at reasonable prices, if at all, or that any such alternatives will remain available to us. If we are not able to obtain acceptable suppliers of components in a timely manner or to find and maintain suitable replacement suppliers of components, our business, financial condition and results of operations will suffer. We have limited sales experience. If we fail to establish marketing and direct sales capabilities sufficient to support commercial sales of the HTA, our business will suffer. We have no direct international or domestic field sales force, and have only a limited number of relationships with international distributors to market the HTA. We have been limited to marketing of the HTA internationally with a group of specialty distributors in selected international markets. We cannot guarantee you that we will be successful in establishing additional partnership relationships on commercially reasonable terms, if at all. Achieving market acceptance for the HTA will require us to establish additional marketing and direct sales capability sufficient to support sales in commercial quantities. Establishing such capability will require significant financial and human resources. We cannot be certain that we will be able to recruit and retain additional qualified marketing or sales personnel or that our future sales efforts will be successful. If we fail to establish and maintain an effective distribution channel for the HTA or to establish and retain qualified and effective sales personnel to support commercial sales of the HTA, our business, financial condition and results of operations will suffer. Risks associated with international sales may harm our business. All of our sales to date of the HTA have been made internationally through a limited network of distributors. Our international sales are dependent upon the marketing efforts of, and sales by, these distributors. We may also rely on these distributors to assist us in obtaining reimbursement approvals from both government and private insurers in certain international markets. In general, we have chosen to operate through small distribution firms because of the belief that these firms will devote greater attention to the HTA. However, the use of small distributors increases the risks associated with financial instability of distributors, which includes the risk that distributors will cease operations or will be unable to satisfy financial obligations to us. If a distributor were to fail to invest adequate capital promoting the HTA or were to cease operation, we would likely be unable to achieve significant revenues in the territory. In addition, because we have limited resources directed at supporting international sales, we have only limited sell through with many of our distributors. We also do not currently have distributors in a number of significant international markets that we have targeted and will need to establish additional international distribution relationships. We cannot be certain that we will engage qualified distributors on commercially reasonable terms in a timely manner. If we fail to engage distributors or if the distributors fail to achieve significant revenues from sales of the HTA, our business, financial condition and results of operations would be harmed. In addition, our international revenues and operations may be limited or disrupted by: o government and regulatory controls; o export license requirements; o political instability; o trade restrictions; o changes in tariffs and other local taxes; o difficulties in managing international operations; o fluctuations in foreign currency exchange rates; and 6 o freight and transportation costs. We cannot guarantee you that we will be able to successfully commercialize the HTA in any international market. We may be unable to adequately protect or enforce our intellectual property rights or secure rights to third-party patents. Our ability to compete effectively will depend substantially on our ability to develop and maintain the proprietary aspects of our technology. We cannot be certain that any of our issued patents, or any future patents that may be issued, will offer any degree of protection to the HTA against competitive products. Further, we cannot be certain that any patents that may be issued or licensed to us or any of our patent applications will not be challenged, invalidated or circumvented in the future. In addition, we cannot assure you that competitors, many of whom have substantial resources and have made substantial investments in competing technologies, will not seek to apply for and obtain patents that will prevent, limit or interfere with our ability to make, use or sell the HTA either in the United States or in international markets. The medical device industry has been characterized by extensive litigation regarding patents and other intellectual property disputes, and some companies in the industry have employed intellectual property litigation to gain a competitive advantage. We cannot assure you that we will not in the future become subject to patent infringement claims and litigation or interference or other proceedings in the United States Patent Office or USPTO. The defense and prosecution of intellectual property suits, USPTO proceedings and related legal and administrative proceedings are both costly and time consuming. Litigation may be necessary to enforce patents issued or licensed to us, to protect our trade secrets or know-how or to determine the enforceability, scope and validity of the proprietary rights of others. Any litigation or USPTO proceedings involving us will result in substantial expense to us and significant diversion of effort by our technical and management personnel. An adverse determination in litigation or USPTO proceedings to which we may become a party could subject us to significant liabilities to third parties or require us to seek licenses from third parties. Although some patent and intellectual property disputes in the medical device area have been settled through licensing or similar arrangements, costs associated with such arrangements may be substantial and could include substantial ongoing royalties. Furthermore, we cannot be certain that necessary licenses would be available to us on satisfactory terms, if at all. If we are subjected to an adverse determination in a judicial or administrative proceeding or if we fail to obtain necessary licenses, we could be prevented from manufacturing and selling the HTA, which would harm our business, financial condition and results of operations. In addition to patents, we rely on trade secrets and proprietary know-how, which we seek to protect, in part, through appropriate confidentiality and proprietary information agreements. These agreements generally provide that all confidential information developed or made known to an individual by us during the course of the individual's relationship with us is to be kept confidential and not disclosed to third parties or utilized by the individual, except in specific circumstances. The agreements also generally provide that all inventions conceived by the individual in the course of rendering services to us shall be the exclusive property of BEI. We cannot guarantee you that our proprietary information will not be misused or confidentiality agreements with employees, consultants and others will not be breached, that we will become aware of such breach or will have adequate remedies for any breach, or that our trade secrets will not otherwise become known to or independently developed by competitors. We are subject to uncertainties regarding health care reimbursement and reform. If patients are not reimbursed by third parties for the cost of the diagnostic or therapeutic procedure in which the HTA is used or there are adverse changes in government and private third party payors' policies toward reimbursement for such procedures, our business will be harmed. Our ability to commercialize the HTA in the United States depends in part on the extent to which patients are reimbursed by governmental agencies, private health insurers and other organizations, such as health maintenance organizations, for the cost of such treatments. Although reimbursement for diagnostic and therapeutic procedures to treat uterine disorders such as menorrhagia, or dysfunctional uterine bleeding and fibroid treatment 7 have generally been available in the United States, we cannot guarantee you that it will continue to be the case or that the fees currently allowed for these procedures will not be reduced. Our business could also be harmed by changes in reimbursement policies of government or private healthcare payors, particularly to the extent that any such changes affect reimbursement for diagnostic or therapeutic procedures in which the HTA is used. Failure by physicians, hospitals and other users of our products to obtain sufficient reimbursement from healthcare payors for procedures in which the HTA is used, or adverse changes in government and private third-party payors' policies toward reimbursement for such procedures, could harm our business, financial condition and results of operations. Market acceptance of the HTA in international markets may be dependent in part upon the availability of reimbursement within prevailing healthcare payment systems. Reimbursement and healthcare payment systems in international markets vary significantly by country, and include both government sponsored and private healthcare insurance. Although we will seek international reimbursement approvals, obtaining such approvals can require 12 to 18 months or longer and we cannot be certain that any such approvals will be obtained in a timely manner, that we will obtain sufficient reimbursement, or that we will obtain any reimbursement at all. The failure to receive additional international reimbursement approvals would have a significant effect the market acceptance of the HTA in the international markets in which we are seeking approvals and could harm our business, financial condition and results of operations. We expect that there will be continued pressure on cost-containment throughout the United States healthcare system. Reforms may include mandated basic healthcare benefits, controls on healthcare spending through limitations on the growth of private health insurance premiums and Medicare and Medicaid spending, the creation of large insurance purchasing groups and fundamental changes to the healthcare delivery system. We anticipate that Congress and state legislatures will continue to review and assess alternative healthcare delivery systems and payment methodologies and public debate of these issues will likely continue in the future. Due to uncertainties regarding the ultimate features of reform initiatives and their enactment and implementation, we cannot predict which, if any, of such reform proposals will be adopted, when they may be adopted or what impact they may have on us. We face intense competition in our industry, and if our competitors develop new technologies or products that are more effective than ours, our opportunity to commercialize the HTA will be reduced or eliminated. Competition in the treatment of dysfunctional menstrual bleeding is intense and is accentuated by the rapid pace of technological development. Research and development of products or treatments by others may result in breakthroughs, which render the HTA obsolete even before we generate revenue. There are other products that have already received regulatory approvals that will compete with the HTA and many of our competitors have significantly greater resources than we do. One of the principal competitors for our HTA is Gynecare, a subsidiary of Ethicon, Inc./Johnson & Johnson, whose ThermaChoice balloon, a device for endometrial ablation, was cleared to be marketed in the United States by the FDA in December 1997. Other products of principal competitors that we believe are currently undergoing clinical trials in the United States include: o First Option, a product of CryoGen, which is a cryogenic probe that creates an iceball within the uterus; o NovaSure, a product of Novacept, which utilizes a bipolar electrosurgical probe that incorporates an expandable conductive mesh that is brought into contact with the lining of the uterus through the application of suction; and o MEA, a product of Microsulis PLC, which employs a hand-held applicator to apply low power microwaves to the uterine cavity. Other competitive technologies that are being sold internationally but not domestically include: o Cavaterm, a product of Wallsten Medical SA, which is a hand held balloon similar to that of the ThermaChoice balloon; and 8 o Gynelase, a product of Sharplan, which is a diode laser thermal therapy device. Other large healthcare companies may enter the market in the future. Competing companies may succeed in developing technologies and products that are efficacious or more cost effective than the HTA. We cannot guarantee you that these companies will not succeed in developing technologies and products that are more effective than the HTA or that would render our technologies or HTA obsolete or not competitive. We expect competition for devices and service to treat dysfunctional menstrual bleeding to increase. Such competition could harm our business, financial condition and results of operations. If product liability lawsuits are successfully brought against us, we may incur substantial liabilities and may be required to limit commercialization of the HTA or other products that we may develop. We face an inherent business risk of financial exposure to product liability claims in the event that the use of the HTA or other products we may develop results in personal injury. The HTA is complex and will be used in medical procedures and in situations where there is a potential risk of serious injury, adverse side effects or death. If we cannot successfully defend ourselves against such claims, we may incur substantial liabilities or be required to limit the commercialization of the HTA or other products we may develop. We currently maintain product liability insurance with coverage limits of $10,000,000 per occurrence and in the aggregate. We cannot predict, however, whether such insurance is sufficient, or if not, whether we will be able to obtain such insurance as is sufficient, to cover the risks associated with our business or whether such insurance will be available at premiums that are commercially reasonable. A successful claim against or settlement by BEI in excess of its insurance coverage or our inability to maintain insurance in the future could harm our business, financial condition and results of operations. Our operating results may fluctuate, and failure to meet financial expectations may disappoint securities analysts or investors and result in a decline in our stock price. We expect that our operating results will fluctuate significantly from quarter to quarter in the future and will depend on a number of factors, many of which are outside our control. Some of these factors include: o timing of regulatory approvals, if any; o actions relating to reimbursement and regulatory matters; o the extent to which the HTA gains market acceptance; and o timing of regulatory approval, if any, of competitive products and the rate of market penetration of competing products. We rely on the expertise of key personnel. If any of these individuals leave, our operations could suffer. We are dependent upon a number of key management and technical personnel. The loss of the services of one or more key employees would harm our business, financial condition and results of operations. Our ability to manage our transition to commercial-scale operations, and hence our success, will depend on the efforts of these individuals. Our success will also depend on our ability to attract and retain additional highly qualified management and technical personnel. We face intense competition for qualified personnel, and we cannot guarantee that we will be able to attract and retain such personnel. We do not currently have key person insurance on the life of any employee. We are subject to significant amount of control by our existing stockholders and management and thus investors will have less influence on our stockholder decisions. Our directors, officers and their affiliates beneficially own approximately 33.3% of the outstanding common stock (assuming exercise of vested stock options) as of March 1, 2001. As a result of such common stock ownership, our directors, officers and their affiliates, if they voted together, would be able to exercise significant 9 influence over the election of members of our Board of Directors and other corporate actions requiring stockholder approval. We have adopted several antitakeover measures that may deter, delay or prevent change of control or other transactions that could be beneficial to our stockholders. We have taken a number of actions that could have the effect of discouraging a takeover attempt that might be beneficial to our stockholders who wish to receive a premium for their shares from a potential bidder. For example, we are subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law, or the Delaware Law, and our Certificate of Incorporation contains a fair price provision, the combined effect of which prohibits us from engaging in a "business combination" with an "interested stockholder" for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. The application of Section 203 and the fair price provision could have the effect of delaying or preventing a change of control of BEI. In addition, we have adopted a Stockholder Rights Plan that would cause substantial dilution to a person who attempts to acquire us on terms not approved by our Board of Directors. In addition, our Board of Directors has the authority to issue up to 2,000,000 shares of preferred stock and to determine the price, rights, preferences and privileges of those shares without any further vote or action by our stockholders. Any such preferred stock could contain dividend rights, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences or other rights superior to the rights of holders of common stock. The Board of Directors has no present intention of issuing any additional shares of preferred stock (1,114,485 shares of Series A convertible preferred stock were outstanding as of March 1, 2001), but reserves the right to do so in the future. Further, our Certificate of Incorporation provides for staggered terms for the members of the Board of Directors. The staggered Board of Directors and certain other provisions of our Certificate of Incorporation and Bylaws may have the effect of delaying or preventing changes in control or management of BEI, which could adversely affect the market price of our common stock. Our stockholders will suffer dilution upon the conversion of our outstanding preferred stock. The 1,114,485 shares of Series A convertible preferred stock issued on February 14, 2001 are convertible at any time into an aggregate of 2,228,970 shares of our common stock at an initial conversion price of $1.875 per share. The initial conversion price will be adjusted for stock splits, combinations, certain dividends and distributions and other similar events and could also be adjusted on a weighted average basis in the event we issue additional securities at a per share price below $1.875. Accordingly, if all of the shares of Series A convertible preferred stock are converted into common stock, there will be dilution of at least 2,228,970 shares of common stock, or approximately 29% of the 7,686,108 million shares of common stock outstanding on March 8, 2001. USE OF PROCEEDS We will not receive any proceeds from the sale of the common stock offered by the selling stockholders. DIVIDEND POLICY Since September 1997, we have not declared or paid any cash dividends on our capital stock. We intend to retain any future earnings to support operations and to finance the growth and development of our business and we do not anticipate paying cash dividends for the foreseeable future. WHERE YOU CAN FIND MORE INFORMATION We are a reporting company and file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy these reports, proxy statements and other information at the SEC's public reference rooms at Room 1024, 450 Fifth Street, N.W., Washington, D.C., as well as at the SEC's regional offices at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York, NY 10048. You can request copies of these documents by writing to the SEC and paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for more information about the operation of the public reference rooms. Our SEC filings are also available at the SEC's web site at "http://www.sec.gov." In addition, you 10 can read and copy our SEC filings at the office of the National Association of Securities Dealers, Inc. at 1735 "K" Street, Washington, D.C. 20006. The SEC allows us to "incorporate by reference" information that we file with them, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is an important part of this prospectus, and information that we file later with the SEC will automatically update and supersede this information. We incorporate by reference the documents listed below and any future filings we will make with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934: o Annual report on Form 10-K for the year ended September 30, 2000; o Report on Form 10-Q for the quarter ended December 30, 2000; o The description of our Series A convertible preferred stock contained in our current report on Form 8-K, filed February 20, 2001; o The proxy statement for our Annual Meeting of Stockholders held on February 27, 2001; and o The description of the common stock contained in our registration statement on Form 8-A. You may request a copy of these filings at no cost, by writing or telephoning us at the following address: BEI Medical Systems, Inc. 100 Hollister Road Teterboro, NJ 07608 Attention: Chief Financial Officer (201) 727-4900 This prospectus is part of a registration statement we filed with the SEC. You should rely only on the information incorporated by reference or provided in this prospectus and the registration statement. We have authorized no one to provide you with different information. You should not assume that the information in this prospectus is accurate as of any date other than the date on the front of the document. SELLING STOCKHOLDERS In connection with a private placement of shares of Series A convertible preferred stock that closed on February 14, 2001, we issued to the selling stockholders 1,114,485 shares of our Series A convertible preferred stock that are convertible at any time into an aggregate of 2,228,970 shares of our common stock, and we agreed to register all of the shares of common stock issuable upon conversion of the Series A convertible preferred stock. We also agreed to use reasonable efforts to keep the registration statement effective until the earliest of (i) the date the shares of common stock offered under this prospectus have been sold to the public and (ii) the date on which all shares of common stock offered under this prospectus may be sold in any three month period under Rule 144. Our registration of the shares of common stock does not necessarily mean that the selling stockholders will sell all or any of the shares. The following table provides certain information with respect to shares of common stock held and to be offered by each of the selling stockholders. The information provided in the table below with respect to each selling stockholder has been obtained from that selling stockholder. Except for our director Jordan Davis, who is a principal of the general partner of Radius Venture Partners I, L.P., no selling stockholder has, or within the past three years has had, any position, office or other material relationship with us. Because the selling stockholders may sell all or some portion of the shares of common stock beneficially owned by them, only an estimate can be given as to the number of shares of common stock that will be beneficially owned by the selling stockholders after this offering. 11
SHARES BENEFICIALLY SHARES BENEFICIALLY OWNED BEFORE OWNED AFTER OFFERING OFFERING(4) -------------------------- ----------------------- NUMBER OF SHARES BEING SELLING STOCKHOLDER NUMBER(1) PERCENT(2) OFFERED (3) NUMBER PERCENT(2) - ------------------- ------------- ---------- ------------- --------- ---------- Radius Venture Partners I, L.P............. 533,334 6.5% 533,334 0 * MedCapital, LLC............................ 266,666 3.4% 266,666 0 * First Chicago Equity Corporation........... 504,134 6.2% 504,134 0 * Cross Creek Partners XI, LLC............... 2,534 * 2,534 0 * Garrett Capital Advisors, LLC.............. 26,668 * 26,668 0 * Robert P. Khederian........................ 161,322 2.1% 156,322 5,000 * Robert P. Khederian C/F Robert P. Khederian, Jr. UTMA/MA................... 156,322 2.0% 156,322 0 * Robert P. Khederian C/F Allison L. Khederian UTMA/MA........................ 156,322 2.0% 156,322 0 * Delta Opportunity Fund, Ltd................ 160,000 2.0% 160,000 0 * Delta Opportunity Fund (Institutional), LLC ..................................... 106,668 1.4% 106,668 0 * Overbrook Fund I, LLC...................... 133,334 1.7% 133,334 0 * Oscar S. Schafer........................... 26,666 * 26,666 0 *
================= * Less than one percent (1%) (1) The shares of common stock beneficially owned before the offering equals the sum of (a) any shares beneficially owned unrelated to Series A convertible preferred stock and (b) the shares of common stock beneficially owned by the selling stockholder upon conversion of the Series A convertible preferred stock, based on a conversion rate of two shares of common stock for each share of Series A convertible preferred stock. In calculating the percentage for each selling stockholder, the shares represented by item (b) above are included in the denominator of the shares outstanding for that selling stockholder but are not included in the denominator for any other person. (2) Percentages are based on 7,686,108 shares of our common stock outstanding as of March 1, 2001. (3) Represents the maximum number of shares of our common stock that each of selling stockholder may offer pursuant to this registration statement. (4) Assumes the sale of all shares offered hereby. - ----------------- Each selling stockholder identified in this prospectus has agreed to notify us of any information that is required to be disclosed in this prospectus so that the information contained in this prospectus is not materially 12 misleading and does not omit to state any material fact required to be stated in this prospectus or necessary to make the statements in this prospectus not misleading in light of the circumstances in which the statements were made. PLAN OF DISTRIBUTION The shares of common stock may be sold from time to time by the selling stockholders in one or more transactions at fixed prices, at market prices at the time of the sale, at varying prices determined at the time of sale or at negotiated prices. As used in this prospectus, "selling stockholders" includes donees, pledgees, transferees and other successors in interest selling shares received from a selling stockholder after the date of this prospectus as a gift, pledge, partnership distribution or other non-sale transfer. Upon receiving notice from a selling stockholder that a donee, pledgee, transferee or other successor in interest intends to sell more than 500 shares, we will file a supplement to this prospectus. The selling stockholders may offer their shares of common stock: o on any national securities exchange or quotation service on which the common stock may be listed or quoted at the time of sale, including the Nasdaq National Market; o in the over-the-counter market; o in private transactions; o through options; o by pledge to secure debts and other obligations; or o a combination of any of the above transactions. The shares of common stock described in this prospectus may be sold from time to time directly by the selling stockholders. Alternatively, the selling stockholders may from time to time offer shares of common stock to or through underwriters, broker/dealers or agents. The selling stockholders and any underwriters, broker/dealers or agents that participate in the distribution of the shares of common stock may be deemed to be "underwriters" within the meaning of the Securities Act of 1933. Any profits on the resale of shares of common stock and any compensation received by any underwriter, broker/dealer or agent may be deemed to be underwriting discounts and commissions under the Securities Act of 1933. We have agreed to indemnify each selling stockholder against certain liabilities, including liabilities arising under the Securities Act of 1933. The selling stockholders may agree to indemnify any agent, dealer or broker-dealer that participates in the sale of shares of common stock described in this prospectus against certain liabilities, including liabilities arising under the Securities Act of 1933. The selling stockholders have advised us that they have not, as of the date of this prospectus, entered into any agreements, understandings or arrangements with any underwriters or broker-dealers for the sale of shares, nor is there an underwriter or coordinating broker acting in connection with the proposed sale of shares by the selling stockholders. Any shares covered by this prospectus that qualify for sale pursuant to Rule 144 under the Securities Act of 1933 may be sold under Rule 144 rather than pursuant to this prospectus. The selling stockholders may elect to not sell the shares they hold. The selling stockholders may transfer, devise or gift such shares by other means not described in this prospectus. To comply with the securities laws of certain jurisdictions, the common stock must be offered or sold only through registered or licensed brokers or dealers. In addition, in certain jurisdictions, the shares of common stock may not be offered or sold unless they have been registered or qualified for sale or an exemption is available and complied with. Under the Securities Exchange Act of 1934, any person engaged in a distribution of the common stock may not simultaneously engage in market-making activities with respect to the common stock for five business days prior to the start of the distribution. In addition, each selling stockholder and any other person participating in a distribution will be subject to the Securities Exchange Act of 1934, which may limit the timing of purchases and 13 sales of common stock by the selling stockholders or any such other person. These factors may affect the marketability of the common stock and the ability of brokers or dealers to engage in market-making activities. We will bear all expenses of the offering of the common stock, including registration and filing fees, printing expenses, administrative expenses and certain legal and accounting fees. The selling stockholders will pay any applicable underwriting commissions and expenses, brokerage fees and transfer taxes. This prospectus will be supplemented or amended to satisfy requirements under the Securities Act or other applicable laws. LEGAL MATTERS For the purpose of this offering, Cooley Godward LLP, San Francisco, California, is giving an opinion as to the validity of the common stock offered by this prospectus. EXPERTS Ernst & Young LLP, independent auditors, have audited our consolidated financial statements included in our Annual Report on Form 10-K for the year ended September 30, 2000, as set forth in their report, which is incorporated by reference in this prospectus and elsewhere in the registration statement. Our financial statements are incorporated by reference in reliance on Ernst & Young LLP's report, given on their authority as experts in accounting and auditing. 14 ================================================================================ We have not authorized any dealer, sales person or other person to give any information or to make any representations other than those contained in this prospectus or any prospectus supplement. You must not rely on any unauthorized information. This prospectus is not an offer of these securities in any state where an offer is not permitted. The information in this prospectus is current as of ________, 2001. You should not assume that this prospectus is accurate as of any other date. TABLE OF CONTENTS PAGE Prospectus Summary ........................................................ 2 Risk Factors ............................................................ 3 Use of Proceeds ........................................................... 10 Dividend Policy ........................................................... 10 Where You Can Find More Information ....................................... 10 Selling Stockholders ...................................................... 11 Plan of Distribution ...................................................... 13 Legal Matters ............................................................. 14 Experts ................................................................... 14 SHARES COMMON STOCK PROSPECTUS BEI Medical Systems, Inc. ________, 2001 ================================================================================ PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following table sets forth the costs and expenses, all of which will be paid by us, in connection with the distribution of our common stock being registered. All amounts are estimated, except the SEC registration fee: SEC registration fee....................................$1,533 Accounting fees........................................ $4,000 Legal fees and expenses................................$25,000 Printing and engraving..................................$2,500 Miscellaneous...........................................$3,467 Total.........................................$36,500 We will pay all fees and expenses associated with filing this registration statement. ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS. As permitted by Section 145 of the Delaware General Corporation Law, our Bylaws provide that (i) we are required to indemnify our directors and executive officers to the fullest extent permitted by the Delaware General Corporation Law, (ii) we may, in our discretion, indemnify other officers, employees and agents as set forth in the Delaware General Corporation Law, (iii) to the fullest extent permitted by the Delaware General Corporation Law, we are required to advance all expenses incurred by our directors and executive officers in connection with a legal proceeding (subject to certain exceptions), (iv) the rights conferred in our Bylaws are not exclusive, (v) we are authorized to enter into indemnification agreements with our directors, officers, employees and agents and (vi) we may not retroactively amend the Bylaws provisions relating to indemnity. We have entered into agreements with our directors and executive officers that require us to indemnify such persons against expenses, judgments, fines, settlements and other amounts that such person becomes legally obligated to pay (including expenses of a derivative action) in connection with any proceeding, whether actual or threatened, to which any such person may be made a party by reason of the fact that such person is or was our director or officer or any of our affiliated enterprises, provided such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to our best interests. The indemnification agreements also set forth certain procedures that will apply in the event of a claim for indemnification thereunder. The selling stockholders have entered into an agreement with us whereby each selling stockholder will severally (but not jointly and pro rata with the other selling stockholders) indemnify and hold harmless our officers and directors against any losses, claims, damages, liabilities or actions (joint or several) to which they may become subject under the 1933 Act, the 1934 Act or other federal or state law, arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in this registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, or arising out of or based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the context in which made, not misleading; provided that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished by such selling stockholder expressly for use in the registration by such selling stockholder, and provided, however, that such selling stockholder shall not be liable for any reimbursement or indemnification thereunder in excess of the gross proceeds (less underwriting discounts and commissions) received by such selling stockholder in the offering. Each selling stockholder will reimburse each officer or director for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action. The agreement also sets forth certain procedures that will apply in the event of a claim for indemnification thereunder. II-1 ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. Exhibit Number Description of Document - ------ ----------------------- 3.1(a) Restated Certificate of Incorporation.* 3.1(b) Certificate of Designation of Series A Junior Participating Preferred Stock.** 3.1(c) Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock.*** 3.2 Amended Bylaws of the Company dated February 12, 2001. 4.1 Registration Rights Agreement dated February 14, 2001. 5.1 Opinion of Cooley Godward LLP. 23.1 Consent of Ernst & Young LLP. 23.2 Consent of Cooley Godward LLP (reference is made to Exhibit 5.1). 24.1 Power of Attorney. Reference is made to the signature page. - -------------------------------------------------------------------------------- * Previously filed as an Exhibit to the Company's Registration Statement on Form S-1 (File No. 33-29032). ** Previously filed as an Exhibit to the Company's Current Report on Form 8-K filed on June 30, 1997. *** Previously filed as an Exhibit to the Company's Current Report on Form 8-K filed on February 20, 2001. ITEM 17. UNDERTAKINGS. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers, and controlling persons pursuant to the provisions described in Item 14 or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by one of our directors, officers, or controlling persons in the successful defense of any action, suit, or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, we will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. We further undertake: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of a prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; II-2 (iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the registration statement is on Forms S-3, Form S-8 or Form F-3, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Securities and Exchange Commission by the registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. We hereby undertake that, for purposes of determining any liability under the Securities Act of 1933, each filing of our annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to the initial bona fide offering thereof. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Teterboro, State of New Jersey, on the 16th day of March, 2001. BEI MEDICAL SYSTEMS COMPANY, INC. By: /s/ Thomas W. Fry ------------------------------- Thomas W. Fry Vice President of Finance and Administration, Secretary and Treasurer POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Charles Crocker and Thomas W. Fry, or any of them, each with the power of substitution, his attorney-in-fact, to sign any amendments to this Registration Statement (including post-effective amendments), with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
Signature Title Date - --------- ----- ---- /s/ Charles Crocker Chairman of the Board of March 15, 2001 - --------------------------------------- Directors (Charles Crocker) Vice President of Finance and /s/ Thomas W. Fry Administration, Secretary and March 16, 2001 - --------------------------------------- Treasurer (Principal Financial and (Thomas W. Fry) Accounting Officer) /s/ Ralph M. Richart Director March 15, 2001 - --------------------------------------- (Ralph M. Richart) President and Chief Executive Officer March 15, 2001 /s/ Richard W. Turner & Director - --------------------------------------- (Richard W. Turner) /s/ Lawrence A. Wan Director March 15, 2001 - --------------------------------------- (Lawrence A. Wan) /s/ Gary D. Wrench Director March 15, 2001 - --------------------------------------- (Gary D. Wrench) - ------------------------------------------------------------------------------------------------------ /s/ Jordan Davis Director March 15, 2001 - ------------------------------------------------------------------------------------------------------ (Jordan Davis) - ------------------------------------------------------------------------------------------------------
II-4 EXHIBIT INDEX Exhibit Number Description of Document - ------ ----------------------- 3.1 (a) Restated Certificate of Incorporation.* 3.1 (b) Certificate of Designation of Series A Junior Participating Preferred Stock.** 3.1(c) Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock.*** 3.3 Amended Bylaws of the Company dated February 12, 2001. 4.2 Registration Rights Agreement dated February 14, 2001. 5.1 Opinion of Cooley Godward LLP. 23.1 Consent of Ernst & Young LLP. 23.2 Consent of Cooley Godward LLP (reference is made to Exhibit 5.1). 24.1 Power of Attorney. Reference is made to the signature page. - -------------------------------------------------------------------------------- * Previously filed as an Exhibit to the Company's Registration Statement on Form S-1 (File No. 33-29032). ** Previously filed as an Exhibit to the Company's Current Report on Form 8-K filed on June 30, 1997. *** Previously filed as an Exhibit to the Company's Current Report on Form 8-K filed on February 20, 2001. II-5 EX-3.2 2 gex3_2-23793.txt BY-LAWS BY-LAWS OF BEI MEDICAL SYSTEMS COMPANY, INC. (as amended through February 12, 2001) TABLE OF CONTENTS PAGE ARTICLE I Offices........................................................1 Section 1. Registered Office...........................................1 Section 2. Other Offices...............................................1 ARTICLE II Corporate Seal.................................................1 Section 3. Corporate Seal..............................................1 ARTICLE III Stockholders' Meetings.........................................1 Section 4. Place of Meetings...........................................1 Section 5. Annual Meetings.............................................1 Section 6. Special Meetings............................................4 Section 7. Notice of Meetings..........................................4 Section 8. Quorum......................................................5 Section 9. Adjournment and Notice of Adjourned Meetings................5 Section 10. Voting Rights...............................................5 Section 11. Beneficial Owners of Stock..................................6 Section 12. List of Stockholders........................................6 Section 13. Action without Meeting......................................7 Section 14. Organization................................................7 ARTICLE IV Directors......................................................7 Section 15. Number and Term of Office...................................7 Section 16. Powers......................................................7 Section 17. Classes Of Directors........................................8 Section 18. Vacancies...................................................8 Section 19. Resignation.................................................8 Section 20. Removal.....................................................8 Section 21. Meetings....................................................9 (a) Annual Meetings.............................................9 (b) Regular Meetings............................................9 (c) Special Meetings............................................9 (d) Telephone Meetings..........................................9 (e) Notice Of Meetings..........................................9 i. TABLE OF CONTENTS (CONTINUED) PAGE (f) Waiver of Notice............................................9 Section 22. Quorum and Voting..........................................10 Section 23. Action without Meeting.....................................10 Section 24. Fees and Compensation......................................10 Section 25. Committees.................................................10 (a) Executive Committee........................................10 (b) Other Committees...........................................11 (c) Term.......................................................11 (d) Meetings...................................................11 Section 26. Organization...............................................12 ARTICLE V Officers......................................................12 Section 27. Officers Designated........................................12 Section 28. Tenure and Duties of Officers..............................12 (a) General....................................................12 (b) Duties of Chairman of the Board of Directors...............12 (c) Duties of President........................................13 (d) Duties of Vice Presidents..................................13 (e) Duties of Secretary........................................13 (f) Duties of Chief Financial Officer or Treasurer.............13 Section 29. Delegation of Authority....................................13 Section 30. Resignations...............................................14 Section 31. Removal....................................................14 ARTICLE VI Execution Of Corporate Instruments And Voting Of Securities Owned By The Corporation.......................................14 Section 32. Execution of Corporate Instruments.........................14 Section 33. Voting of Securities Owned by the Corporation..............15 ARTICLE VII Shares Of Stock...............................................15 Section 34. Form and Execution of Certificates.........................15 Section 35. Lost Certificates..........................................15 Section 36. Transfers..................................................16 ii. TABLE OF CONTENTS (CONTINUED) PAGE Section 37. Fixing Record Dates........................................16 Section 38. Registered Stockholders....................................16 ARTICLE VIII Other Securities Of The Corporation...........................17 Section 39. Execution of Other Securities..............................17 ARTICLE IX Dividends.....................................................17 Section 40. Declaration of Dividends...................................17 Section 41. Dividend Reserve...........................................17 ARTICLE X Fiscal Year...................................................18 Section 42. Fiscal Year................................................18 ARTICLE XI Indemnification...............................................18 Section 43. Indemnification of Directors, Executive Officers, Other Officers, Employees And Other Agents.......................18 (a) Directors and Executive Officers...........................18 (b) Other Officers, Employees and Other Agents.................18 (c) Expenses...................................................18 (d) Enforcement................................................19 (e) Non-Exclusivity Of Rights..................................19 (f) Survival Of Rights.........................................20 (g) Insurance..................................................20 (h) Amendments.................................................20 (i) Saving Clause..............................................20 (j) Certain Definitions........................................20 ARTICLE XII Notices.......................................................21 Section 44. Notices....................................................21 (a) Notice to Stockholders.....................................21 (b) Notice to Directors........................................21 (c) Address Unknown............................................21 (d) Affidavit of Mailing.......................................21 (e) Time Notices Deemed Given..................................21 (f) Methods of Notice..........................................22 iii. TABLE OF CONTENTS (CONTINUED) PAGE (g) Failure to Receive Notice..................................22 (h) Notice to Person with Whom Communication Is Unlawful.......22 (i) Notice to Person with Undeliverable Address................22 ARTICLE XIII Amendments....................................................23 Section 45. Amendments.................................................23 ARTICLE XIV Loans To Officers.............................................23 Section 46. Loans to Officers..........................................23 iv. BY-LAWS OF BEI MEDICAL SYSTEMS COMPANY, INC. (a Delaware corporation) (as amended through February 12, 2001) ARTICLE I OFFICES Section 1. Registered Office. The registered office of the corporation in the State of Delaware shall be in the City of Dover, County of Kent. (Del. Code Ann., tit. 8, ss. 131) Section 2. Other Offices. The corporation shall also have and maintain an office or principal place of business in San Francisco, California, at such place as may be fixed by the Board of Directors, and may also have offices at such other places, both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the corporation may require. (Del. Code Ann., tit. 8, ss. 122(8)) ARTICLE II CORPORATE SEAL Section 3. Corporate Seal. The corporate seal shall consist of a die bearing the name of the corporation and the inscription, "Corporate Seal-Delaware." Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. ARTICLE III STOCKHOLDERS' MEETINGS Section 4. Place of Meetings. Meetings of the stockholders of the corporation shall be held at such place, either within or without the State of Delaware, as may be designated from time to time by the Board of Directors, or, if not so designated, then at the office of the corporation required to be maintained pursuant to Section 2 hereof. (Del. Code Ann., tit. 8, ss. 211(a)) Section 5. Annual Meetings. (a) The annual meeting of the stockholders of the corporation, for the purpose of election of Directors and for such other business as may lawfully come before it, shall be held on such date and at such time as may be designated from time to time by the Board of Directors. Nominations of persons for election to the Board of Directors of the corporation and the proposal of business to be considered by the stockholders may be made at an annual meeting of 1. stockholders: (i) pursuant to the corporation's notice of meeting of stockholders; (ii) by or at the direction of the Board of Directors; or (iii) by any stockholder of the corporation who was a stockholder of record at the time of giving of notice provided for in the following paragraph, who is entitled to vote at the meeting and who complied with the notice procedures set forth in Section 5. (Del. Code Ann., tit. 8, ss. 211(b)). (b) At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to Section 5(a) of these Bylaws, (i) the stockholder must have given timely notice thereof in writing to the Secretary of the corporation, (ii) such other business must be a proper matter for stockholder action under the General Corporation Law of Delaware, (iii) if the stockholder, or the beneficial owner on whose behalf any such proposal or nomination is made, has provided the corporation with a Solicitation Notice (as defined in this Section 5(b)), such stockholder or beneficial owner must, in the case of a proposal, have delivered a proxy statement and form of proxy to holders of at least the percentage of the corporation's voting shares required under applicable law to carry any such proposal, or, in the case of a nomination or nominations, have delivered a proxy statement and form of proxy to holders of a percentage of the corporation's voting shares reasonably believed by such stockholder or beneficial owner to be sufficient to elect the nominee or nominees proposed to be nominated by such stockholder, and must, in either case, have included in such materials the Solicitation Notice, and (iv) if no Solicitation Notice relating thereto has been timely provided pursuant to this section, the stockholder or beneficial owner proposing such business or nomination must not have solicited a number of proxies sufficient to have required the delivery of such a Solicitation Notice under this Section 5. To be timely, a stockholder's notice shall be delivered to the Secretary at the principal executive offices of the corporation not later than the close of business on the ninetieth (90th) day nor earlier than the close of business on the one hundred twentieth (120th) day prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced more than thirty (30) days prior to or delayed by more than thirty (30) days after the anniversary of the preceding year's annual meeting, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the one hundred twentieth (120th) day prior to such annual meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a stockholder's notice as described above. Such stockholder's notice shall set forth: (A) as to each person whom the stockholder proposed to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "1934 Act") and Rule 14a-11 thereunder (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (B) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (C) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is 2. made (i) the name and address of such stockholder, as they appear on the corporation's books, and of such beneficial owner, (ii) the class and number of shares of the corporation which are owned beneficially and of record by such stockholder and such beneficial owner, and (iii) whether either such stockholder or beneficial owner intends to deliver a proxy statement and form of proxy to holders of, in the case of the proposal, at least the percentage of the corporation's voting shares required under applicable law to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders of the corporation's voting shares to elect such nominee or nominees (an affirmative statement of such intent, a "Solicitation Notice"). (c) Notwithstanding anything in the third sentence of Section 5(b) of these Bylaws to the contrary, in the event that the number of Directors to be elected to the Board of Directors of the corporation is increased and there is no public announcement naming all of the nominees for Director or specifying the size of the increased Board of Directors made by the corporation at least one hundred (100) days prior to the first anniversary of the preceding year's annual meeting, a stockholder's notice required by this Section 5 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the corporation not later than the close of business on the tenth (10th) day following the day on which such public announcement is first made by the corporation. (d) Only such persons who are nominated in accordance with the procedures set forth in this Section 5 shall be eligible to serve as Directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 5. Except as otherwise provided by law, the Chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made, or proposed, as the case may be, in accordance with the procedures set forth in these Bylaws and, if any proposed nomination or business is not in compliance with these Bylaws, to declare that such defective proposal or nomination shall not be presented for stockholder action at the meeting and shall be disregarded. (e) Notwithstanding the foregoing provisions of this Section 5, in order to include information with respect to a stockholder proposal in the proxy statement and form of proxy for a stockholder's meeting, stockholders must provide notice as required by the regulations promulgated under the 1934 Act. Nothing in these Bylaws shall be deemed to affect any rights of stockholders to request inclusion of proposals in the corporation proxy statement pursuant to Rule 14a-8 under the 1934 Act. (f) For purposes of this Section 5, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the 1934 Act. Section 6. Special Meetings. (a) Special meetings of the stockholders of the corporation may be called, for any purpose or purposes, by (i) the Chairman of the Board of Directors, (ii) the Chief Executive 3. Officer, or (iii) the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the Board) of Directors for adoption) and shall be held at such place, on such date, and at such time as the Board of Directors shall fix. (b) If a special meeting is properly called by any person or persons other than the Board of Directors, the request shall be in writing, specifying the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile transmission to the Chairman of the Board of Directors, the Chief Executive Officer, or the Secretary of the corporation. No business may be transacted at such special meeting otherwise than specified in such notice. The Board of Directors shall determine the time and place of such special meeting, which shall be held not less than thirty-five (35) nor more than one hundred twenty (120) days after the date of the receipt of the request. Upon determination of the time and place of the meeting, the officer receiving the request shall cause notice to be given to the stockholders entitled to vote, in accordance with the provisions of Section 7 of these Bylaws. If the notice is not given within one hundred (100) days after the receipt of the request, the person or persons properly requesting the meeting may set the time and place of the meeting and give the notice. Nothing contained in this paragraph (b) shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the Board of Directors may be held. (c) Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which Directors are to be elected pursuant to the corporation's notice of meeting (i) by or at the direction of the Board of Directors or (ii) by any stockholder of the corporation who is a stockholder of record at the time of giving notice provided for in these Bylaws who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 6(c). In the event the corporation calls a special meeting of stockholders for the purpose of electing one or more Directors to the Board of Directors, any such stockholder may nominate a person or persons (as the case may be), for election to such position(s) as specified in the corporation's notice of meeting, if the stockholder's notice required by Section 5(b) of these Bylaws shall be delivered to the Secretary at the principal executive offices of the corporation not earlier than the close of business on the one hundred twentieth (120th) day prior to such special meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such meeting or the tenth (10th) day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of an adjournment of a special meeting commence a new time period for the giving of a stockholder's notice as described above. Section 7. Notice of Meetings. Except as otherwise provided by law or the Certificate of Incorporation, written notice of each meeting of stockholders shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting, such notice to specify the place, date and hour and purpose or purposes of the meeting. Notice of the time, place and purpose of any meeting of stockholders may be waived in writing, signed by the person entitled to notice thereof, either before or after such meeting, and will be waived by any stockholder by his attendance thereat in person or by proxy, except when the stockholder attends a meeting for the express purpose of 4. objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Any stockholder so waiving notice of such meeting shall be bound by the proceedings of any such meeting in all respects as if due notice thereof had been given. (Del. Code Ann., tit. 8, ss.ss. 222, 229) Section 8. Quorum. At all meetings of stockholders, except where otherwise provided by statute or by the Certificate of Incorporation, or by these Bylaws, the presence, in person or by proxy duly authorized, of the holders of a majority of the outstanding shares of stock entitled to vote shall constitute a quorum for the transaction of business. Any shares, the voting of which at said meeting has been enjoined, or which for any reason cannot be lawfully voted at such meeting, shall not be counted to determine a quorum at such meeting. In the absence of a quorum any meeting of stockholders may be adjourned, from time to time, either by the chairman of the meeting or by vote of the holders of a majority of the shares represented thereat, but no other business shall be transacted at such meeting. The stockholders present at a duly called or convened meeting, at which a quorum is present, may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, all action taken by the holders of a majority of the voting power represented at any meeting at which a quorum is present shall be valid and binding upon the corporation; provided, however, that Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of Directors. Where a separate vote by a class or classes is required, a majority of the outstanding shares of such class or classes, present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to that vote on that matter and the affirmative vote of the majority (plurality, in the case of the election of Directors) of shares of such class or classes present in person or represented by proxy at the meeting shall be the act of such class. (Del. Code Ann., tit. 8, ss. 216) Section 9. Adjournment and Notice of Adjourned Meetings. Any meeting of stockholders, whether annual or special, may be adjourned from time to time either by the chairman of the meeting or by the vote of a majority of the shares represented thereat. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. (Del. Code Ann., tit. 8, ss. 222(c)) Section 10. Voting Rights. For the purpose of determining those stockholders entitled to vote at any meeting of the stockholders, except as otherwise provided by law, only persons in whose names shares stand on the stock records of the corporation on the record date, as provided in Section 12 of these Bylaws, shall be entitled to vote at any meeting of stockholders. Except as may be otherwise provided in the Certificate of Incorporation or these Bylaws, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder. Every person entitled to vote or execute consents shall have the right to do so either in person or by an agent or agents authorized by a written proxy executed by such person or his duly authorized agent, which proxy shall be filed with the Secretary at or before the 5. meeting at which it is to be used. An agent so appointed need not be a stockholder. No proxy shall be voted after three (3) years from its date of creation unless the proxy provides for a longer period. All elections of Directors shall be by written ballot, unless otherwise provided in the Certificate of Incorporation. (Del. Code Ann., tit. 8, ss.ss. 211(e), 212(b)) Section 11. Beneficial Owners of Stock. (a) If shares or other securities having voting power stand of record in the names of two (2) or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety, or otherwise, or if two (2) or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect: (a) if only one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the majority so voting binds all; (c) if more than one (1) votes, but the vote is evenly split on any particular matter, each faction may vote the securities in question proportionally, or may apply to the Delaware Court of Chancery for relief as provided in the General Corporation Law of Delaware, Section 217(b). If the instrument filed with the Secretary shows that any such tenancy is held in unequal interests, a majority or even-split for the purpose of this subsection (c) shall be a majority or even-split in interest. (Del. Code Ann., tit. 8, ss. 217(b)) (b) Persons holding stock in a fiduciary capacity shall be entitled to vote the shares so held. Persons whose stock is pledged shall be entitled to vote, unless in the transfer by the pledgor on the books of the corporation he has expressly empowered the pledgee to vote thereon, in which case only the pledgee, or his proxy, may represent such stock and vote thereon. (Del. Code Ann., tit. 8, ss. 217(a)). Section 12. List of Stockholders. The Secretary shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order, showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not specified, at the place where the meeting is to be held. The list shall be produced and kept at the time and place of meeting during the whole time thereof, and may be inspected by any stockholder who is present. (Del. Code Ann., tit. 8, ss. 219(a)) Section 13. Action without Meeting. (a) No action shall be taken by the stockholders except at an annual or special meeting of stockholders called in accordance with these Bylaws, and no action shall be taken by the stockholders by written consent. Section 14. Organization. (a) At every meeting of stockholders, the Chairman of the Board of Directors, or, if a Chairman has not been appointed or is absent, the President, or, if the President is absent, the most senior Vice President present, or in the absence of any such officer, a chairman of the meeting chosen by a majority in interest of the stockholders entitled to vote, 6. present in person or by proxy, shall act as chairman. The Secretary, or, in his absence, an Assistant Secretary directed to do so by the President, shall act as secretary of the meeting. (b) The Board of Directors of the corporation shall be entitled to make such rules or regulations for the conduct of meetings of stockholders as it shall deem necessary, appropriate or convenient. Subject to such rules and regulations of the Board of Directors, if any, the chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are necessary, appropriate or convenient for the proper conduct of the meeting, including, without limitation, establishing an agenda or order of business for the meeting, rules and procedures for maintaining order at the meeting and the safety of those present, limitations on participation in such meeting to stockholders of record of the corporation and their duly authorized and constituted proxies, and such other persons as the chairman shall permit, restrictions on entry to the meeting after the time fixed for the commencement thereof, limitations on the time allotted to questions or comments by participants and regulation of the opening and closing of the polls for balloting on matters which are to be voted on by ballot. Unless, and to the extent determined by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with rules of parliamentary procedure. ARTICLE IV DIRECTORS Section 15. Number and Term of Office. The authorized number of directors of the corporation shall be fixed from time to time by the Board of Directors either by a resolution or a bylaw duly adopted by the Board of Directors. The number of directors presently authorized is six (6). Directors need not be stockholders unless so required by the Certificate of Incorporation. If for any cause, the Directors shall not have been elected at an annual meeting, they may be elected as soon thereafter as convenient at a special meeting of the stockholders called for that purpose in the manner provided in these Bylaws. No reduction of the authorized number of Directors shall have the effect of removing any Director before the Director's term of office expires, unless such removal is made pursuant to the provisions of Section 20 hereof. (Del. Code Ann., tit. 8, ss.ss. 141(b), 211(b), (c)) Section 16. Powers. The powers of the corporation shall be exercised, its business conducted and its property controlled by the Board of Directors, except as may be otherwise provided by statute or by the Certificate of Incorporation (Del. Code Ann., tit. 8, ss. 141(a)) Section 17. Classes Of Directors. Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the directors shall be divided into three classes designated as Class I, Class II and Class III, respectively, and the number of directors in each class shall be as nearly equal as possible. Each director shall serve for a term ending on the date of the third annual meeting of stockholders following the annual meeting at which the director was elected; provided, however, that each initial director in Class I shall hold office until the annual meeting of stockholders in 1990; and each initial director in Class II shall hold office until the annual meeting of stockholders in 1991; and each initial director in Class III shall hold office until the annual meeting of stockholders in 1992. At each 7. succeeding annual meeting of stockholders, directors shall be elected for a full term of three years to succeed the directors of the class whose terms expire at such annual meeting. Notwithstanding the foregoing provisions of this Section, each director shall serve until his successor is duly elected and qualified or until his death, resignation or removal. Section 18. Vacancies. Unless otherwise provided in the Certificate of Incorporation, any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other causes and any newly created directorships resulting from any increase in the number of directors, shall unless the Board of Directors determines by resolution that any such vacancies or newly created directorships shall be filled by stockholders, be filled only by the affirmative vote of a majority of the directors then in office, even though less than a quorum of the Board of Directors. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred and until such director's successor shall have been elected and qualified. A vacancy in the Board of Directors shall be deemed to exist under this Bylaw in the case of the death, removal or resignation of any director. (Del. Code Ann., tit. 8, ss. 223(a), (b)) Section 19. Resignation. Any director may resign at any time by delivering his written resignation to the Secretary, such resignation to specify whether it will be effective at a particular time, upon receipt by the Secretary or at the pleasure of the Board of Directors. If no such specification is made, it shall be deemed effective at the pleasure of the Board of Directors. When one or more Directors shall resign from the Board of Directors, effective at a future date, a majority of the Directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each Director so chosen shall hold office for the unexpired portion of the term of the Director whose place shall be vacated and until his successor shall have been duly elected and qualified. (Del. Code Ann., tit. 8, ss.ss. 141(b), 223(d)) Section 20. Removal. Subject to the rights of the holders of any series of Preferred Stock, no director shall be removed without cause. Subject to any limitations imposed by law, the Board of Directors or any individual director may be removed from office at any time with cause by the affirmative vote of the holders of eighty percent (80%) of the voting power of all the then-outstanding shares of voting stock of the corporation, entitled to vote at an election of directors (the "Voting Stock"). Section 21. Meetings. (a) Annual Meetings. The annual meeting of the Board of Directors shall be held immediately after the annual meeting of stockholders and at the place where such meeting is held. No notice of an annual meeting of the Board of Directors shall be necessary and such meeting shall be held for the purpose of electing officers and transacting such other business as may lawfully come before it. (b) Regular Meetings. Except as hereinafter otherwise provided, regular meetings of the Board of Directors shall be held in the office of the corporation required to be 8. maintained pursuant to Section 2 hereof. Unless otherwise restricted by the Certificate of Incorporation, regular meetings of the Board of Directors may also be held at any place within or without the State of Delaware which has been determined by the Board of Directors. (Del. Code Ann., tit. 8, ss. 141(g)) (c) Special Meetings. Unless otherwise restricted by the Certificate of Incorporation, special meetings of the Board of Directors may be held at any time and place within or without the State of Delaware whenever called by the President or a majority of the Directors. (Del. Code Ann., tit. 8, ss. 141(g)) (d) Telephone Meetings. Any member of the Board of Directors, or of any committee thereof, may participate in a meeting by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting. (Del. Code Ann., tit. 8, ss. 141(i)) (e) Notice Of Meetings. Notice of the time and place of all special meetings of the Board of Directors shall be orally or in writing, by telephone, facsimile, telegraph or telex, during normal business hours, at least twenty-four (24) hours before the date and time of the meeting, or sent in writing to each director by first class mail, charges prepaid, at least three (3) days before the date of the meeting. Notice of any meeting may be waived in writing at any time before or after the meeting and will be waived by any director by attendance thereat, except when the director attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. (Del. Code Ann., tit. 8, ss. 229) (f) Waiver of Notice. The transaction of all business at any meeting of the Board of Directors, or any committee thereof, however called or noticed, or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum is present and if, either before or after the meeting, each of the Directors not present signs a written waiver of notice, or a consent to holding such meeting, or an approval of the minutes thereof. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in any written waiver of notice or consent unless so required by the Certificate of Incorporation or these Bylaws. All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of the meeting. (Del. Code Ann., tit. 8, ss. 229) Section 22. Quorum and Voting. (a) Unless the Certificate of Incorporation requires a greater number and except with respect to indemnification questions arising under Section 43 hereof, for which a quorum shall be one-third of the exact number of Directors fixed from time to time in accordance with Section 15 hereof, but not less than one (1), a quorum of the Board of Directors shall consist of a majority of the exact number of Directors fixed from time to time in accordance with Section 15 of these Bylaws, but not less than one (1); provided, however, at any meeting whether a quorum be present or otherwise, a majority of the Directors present may adjourn from time to 9. time until the time fixed for the next regular meeting of the Board of Directors, without notice other than by announcement at the meeting. (Del. Code Ann., tit. 8, ss. 141(b)) (b) At each meeting of the Board of Directors at which a quorum is present all questions and business shall be determined by a vote of a majority of the Directors present, unless a different vote be required by law, the Certificate of Incorporation or these Bylaws. (Del. Code Ann., tit. 8, ss. 141(b)) Section 23. Action without Meeting. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board of Directors or committee, as the case may be, consent thereto in writing, and such writing or writings are filed with the minutes of proceedings of the Board of Directors or committee. (Del. Code Ann., tit. 8, ss. 141(f)) Section 24. Fees and Compensation. Directors shall be entitled to such compensation for their services as may be approved by the Board of Directors, including, if so approved, by resolution of the Board of Directors, a fixed sum and expenses of attendance, if any, for attendance at each regular or special meeting of the Board of Directors and at any meeting of a committee of the Board of Directors. Nothing herein contained shall be construed to preclude any Director from serving the corporation in any other capacity as an officer, agent, employee, or otherwise and receiving compensation therefor. (Del. Code Ann., tit. 8, ss. 141(h)) Section 25. Committees. (a) Executive Committee. The Board of Directors may by resolution passed by a majority of the whole Board of Directors appoint an Executive Committee to consist of one (1) or more members of the Board of Directors. The Executive Committee, to the extent permitted by law and provided in the resolution of the Board of Directors shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, including without limitation the power or authority to declare a dividend, to authorize the issuance of stock and to adopt a certificate of ownership and merger, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the Board of Directors fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the corporation or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series), adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, or amending the bylaws of the corporation. (Del. Code Ann., tit. 8, ss. 141(c)) 10. (b) Other Committees. The Board of Directors may, by resolution passed by a majority of the whole Board of Directors, from time to time appoint such other committees as may be permitted by law. Such other committees appointed by the Board of Directors shall consist of one (1) or more members of the Board of Directors, and shall have such powers and perform such duties as may be prescribed by the resolution or resolutions creating such committees, but in no event shall such committee have the powers denied to the Executive Committee in these Bylaws. (Del. Code Ann., tit. 8, ss. 141(c)) (c) Term. The members of all committees of the Board of Directors shall serve a one (1) year term. The Board of Directors, subject to the provisions of subsections (a) or (b) of this Section 25, may at any time increase or decrease the number of members of a committee or terminate the existence of a committee. The membership of a committee member shall terminate on the date of his death or voluntary resignation from the committee or from the Board of Directors. The Board of Directors may at any time for any reason remove any individual committee member and the Board of Directors may fill any committee vacancy created by death, resignation, removal or increase in the number of members of the committee. The Board of Directors may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee, and, in addition, in the absence or disqualification of any member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. (Del. Code Ann., tit. 8, ss.141(c)) (d) Meetings. Unless the Board of Directors shall otherwise provide, regular meetings of the Executive Committee or any other committee appointed pursuant to this Section 25 shall be held at such times and places as are determined by the Board of Directors, or by any such committee, and when notice thereof has been given to each member of such committee, no further notice of such regular meetings need be given thereafter. Special meetings of any such committee may be held at any place which has been determined from time to time by such committee, and may be called by any Director who is a member of such committee, upon written notice to the members of such committee of the time and place of such special meeting given in the manner provided for the giving of written notice to members of the Board of Directors of the time and place of special meetings of the Board of Directors. Notice of any special meeting of any committee may be waived in writing at any time before or after the meeting and will be waived by any Director by attendance thereat, except when the Director attends such special meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. A majority of the authorized number of members of any such committee shall constitute a quorum for the transaction of business, and the act of a majority of those present at any meeting at which a quorum is present shall be the act of such committee. (Del. Code Ann., tit. 8, ss.ss. 141(c), 229) Section 26. Organization. At every meeting of the Directors, the Chairman of the Board of Directors, or, if a Chairman has not been appointed or is absent, the President, or if the President is absent, the most senior Vice President, or, in the absence of any such officer, a chairman of the meeting chosen by a majority of the Directors present, shall preside over the 11. meeting. The Secretary, or in his absence, an Assistant Secretary directed to do so by the President, shall act as secretary of the meeting. ARTICLE V OFFICERS Section 27. Officers Designated. The officers of the corporation shall be the Chairman of the Board of Directors, the President, one or more Vice Presidents, the Secretary and the Chief Financial Officer or Treasurer, all of whom shall be elected at the annual organizational meeting of the Board of Directors. The order of the seniority of the Vice Presidents shall be in the order of their nomination, unless otherwise determined by the Board of Directors. The Board of Directors may also appoint one or more Assistant Secretaries, Assistant Treasurers, and such other officers and agents with such powers and duties as it shall deem necessary. The Board of Directors may assign such additional titles to one or more of the officers as it shall deem appropriate. Any one person may hold any number of offices of the corporation at any one time unless specifically prohibited therefrom by law. The salaries and other compensation of the officers of the corporation shall be fixed by or in the manner designated by the Board of Directors. (Del. Code Ann., tit. 8, ss.ss. 122(5), 142(a), (b)) Section 28. Tenure and Duties of Officers. (a) General. All officers shall hold office at the pleasure of the Board of Directors and until their successors shall have been duly elected and qualified, unless sooner removed. Any officer elected or appointed by the Board of Directors may be removed at any time by the Board of Directors. If the office of any officer becomes vacant for any reason, the vacancy may be filled by the Board of Directors. (Del. Code Ann., tit. 8, ss. 141(b), (e)) (b) Duties of Chairman of the Board of Directors. The Chairman of the Board of Directors, if appointed and present, shall preside at all meetings of the stockholders and the Board of Directors. The Chairman of the Board of Directors shall perform other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from time to time. If there is no President, then the Chairman of the Board of Directors shall also serve as the Chief Executive Officer of the corporation and shall have the powers and duties prescribed in paragraph (c) of this Section 28. (Del. Code Ann., tit. 8, ss. 142(a)) (c) Duties of President. The President shall preside at all meetings of the stockholders and at all meetings of the Board of Directors, unless the Chairman of the Board of Directors has been appointed and is present. The President shall be the Chief Executive Officer of the corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and officers of the corporation. The President shall perform other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from time to time. (Del. Code Ann., tit. 8, ss. 142(a)) 12. (d) Duties of Vice Presidents. The Vice Presidents, in the order of their seniority, may assume and perform the duties of the President in the absence or disability of the President or whenever the office of President is vacant. The Vice Presidents shall perform other duties commonly incident to their office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time. (Del. Code Ann., tit. 8, ss. 142(a)) (e) Duties of Secretary. The Secretary shall attend all meetings of the stockholders and of the Board of Directors, and shall record all acts and proceedings thereof in the minute book of the corporation. The Secretary may give notice in conformity with these Bylaws of all meetings of the stockholders, and of all meetings of the Board of Directors and any committee thereof requiring notice. The Secretary shall perform all other duties given him in these Bylaws and other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from time to time. The President may direct any Assistant Secretary to assume and perform the duties of the Secretary in the absence or disability of the Secretary, and each Assistant Secretary shall perform other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time. (Del. Code Ann., tit. 8, ss. 142(a)) (f) Duties of Chief Financial Officer or Treasurer. The Chief Financial Officer or Treasurer shall keep or cause to be kept the books of account of the corporation in a thorough and proper manner, and shall render statements of the financial affairs of the corporation in such form and as often as required by the Board of Directors or the President. The Chief Financial Officer or Treasurer, subject to the order of the Board of Directors, shall have the custody of all funds and securities of the corporation. The Chief Financial Officer or Treasurer shall perform other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time. The President may direct any Assistant Treasurer to assume and perform the duties of the Chief Financial Officer or Treasurer in the absence or disability of the Chief Financial Officer or Treasurer, and each Assistant Treasurer shall perform other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time. (Del. Code Ann., tit. 8, ss. 142(a)) Section 29. Delegation of Authority. The Board of Directors may from time to time delegate the powers or duties of any officer to any other officer or agent, notwithstanding any provision hereof. Section 30. Resignations. Any officer may resign at any time by giving written notice to the Board of Directors or to the President or to the Secretary. Any such resignation shall be effective when received by the person or persons to whom such notice is given, unless a later time is specified therein, in which event the resignation shall become effective at such later time. Unless otherwise specified in such notice, the acceptance of any such resignation shall not be necessary to make it effective. Any resignation shall be without prejudice to the rights, if any, of the corporation under any contract with the resigning officer. (Del. Code Ann., tit. 8, ss. 142(b)) 13. Section 31. Removal. Any officer may be removed from office at any time, either with or without cause, by the vote or written consent of a majority of the Directors in office at the time, or by any committee or superior officers upon whom such power of removal may have been conferred by the Board of Directors. ARTICLE VI EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE CORPORATION Section 32. Execution of Corporate Instruments. The Board of Directors may, in its discretion, determine the method and designate the signatory officer or officers, or other person or persons, to execute on behalf of the corporation any corporate instrument or document, or to sign on behalf of the corporation the corporate name without limitation, or to enter into contracts on behalf of the corporation, except where otherwise provided by law or these Bylaws, and such execution or signature shall be binding upon the corporation. (Del. Code Ann., tit. 8, ss.ss. 103(a), 142(a), 158) Unless otherwise specifically determined by the Board of Directors or otherwise required by law, promissory notes, deeds of trust, mortgages and other evidences of indebtedness of the corporation, and other corporate instruments or documents requiring the corporate seal, and certificates of shares of stock owned by the corporation, shall be executed, signed or endorsed by the Chairman of the Board of Directors, or the President or any Vice President, and by the Secretary or Chief Financial Officer or Treasurer or any Assistant Secretary or Assistant Treasurer. All other instruments and documents requiring the corporate signature, but not requiring the corporate seal, may be executed as aforesaid or in such other manner as may be directed by the Board of Directors. (Del. Code Ann., tit. 8, ss.ss. 103(a), 142(a), 158) All checks and drafts drawn on banks or other depositaries on funds to the credit of the corporation or in special accounts of the corporation shall be signed by such person or persons as the Board of Directors shall authorize so to do. Unless authorized or ratified by the Board of Directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount. (Del. Code Ann., tit. 8, ss.ss. 103(a), 142(a), 158). Section 33. Voting of Securities Owned by the Corporation. All stock and other securities of other corporations owned or held by the corporation for itself, or for other parties in any capacity, shall be voted, and all proxies with respect thereto shall be executed, by the person authorized so to do by resolution of the Board of Directors, or, in the absence of such authorization, by the Chairman of the Board of Directors, the President, or any Vice President. (Del. Code Ann., tit. 8, ss. 123) 14. ARTICLE VII SHARES OF STOCK Section 34. Form and Execution of Certificates. Certificates for the shares of stock of the corporation shall be in such form as is consistent with the Certificate of Incorporation and applicable law. Every holder of stock in the corporation shall be entitled to have a certificate signed by or in the name of the corporation by the Chairman of the Board of Directors, or the President or any Vice President and by the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary, certifying the number of shares owned by him in the corporation. Where such certificate is countersigned by a transfer agent other than the corporation or its employee, or by a registrar other than the corporation or its employee, any other signature on the certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued with the same effect as if he were such officer, transfer agent, or registrar at the date of issue. Each certificate shall state upon the face or back thereof, in full or in summary, all of the designations, preferences, limitations, restrictions on transfer and relative rights of the shares authorized to be issued. Within a reasonable time after the issuance or transfer of uncertificated stock, the corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to this section or otherwise required by law or with respect to this section a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Except as otherwise expressly provided by law, the rights and obligations of the holders of certificates representing stock of the same class and series shall be identical. (Del. Code Ann., tit. 8, ss. 158) Section 35. Lost Certificates. A new certificate or certificates may be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen, or destroyed. The corporation may require, as a condition precedent to the issuance of a new certificate or certificates, the owner of such lost, stolen, or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require or to give the corporation a surety bond in such form and amount as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen, or destroyed. (Del. Code Ann., tit. 8, ss. 167) Section 36. Transfers. (a) Transfers of record of shares of stock of the corporation shall be made only upon its books by the holders thereof, in person or by attorney duly authorized, and upon the surrender of a properly endorsed certificate or certificates for a like number of shares. (Del. Code Ann., tit. 8, ss. 201, tit. 6, ss. 8-401(1)) (b) The corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes owned by such stockholders in any manner not prohibited by the General Corporation Law of Delaware. (Del. Code Ann., tit. 8, ss.160 (a)) 15. Section 37. Fixing Record Dates. (a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix, in advance, a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. (b) In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty (60) days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. (Del. Code Ann., tit. 8, ss. 213) Section 38. Registered Stockholders. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. (Del. Code Ann., tit. 8, ss.ss. 213(a), 219) ARTICLE VIII OTHER SECURITIES OF THE CORPORATION Section 39. Execution of Other Securities. All bonds, debentures and other corporate securities of the corporation, other than stock certificates (covered in Section 34), may be signed by the Chairman of the Board of Directors, the President or any Vice President, or such other person as may be authorized by the Board of Directors, and the corporate seal impressed thereon or a facsimile of such seal imprinted thereon and attested by the signature of the Secretary or an Assistant Secretary, or the Chief Financial Officer or Treasurer or an Assistant Treasurer; provided, however, that where any such bond, debenture or other corporate security shall be authenticated by the manual signature of a trustee under an indenture pursuant to which such bond, debenture or other corporate security shall be issued, the signatures of the persons signing and attesting the corporate seal on such bond, debenture or other corporate security may be the imprinted facsimile of the signatures of such persons. Interest coupons 16. appertaining to any such bond, debenture or other corporate security, authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an Assistant Treasurer of the corporation or such other person as may be authorized by the Board of Directors, or bear imprinted thereon the facsimile signature of such person. In case any officer who shall have signed or attested any bond, debenture or other corporate security, or whose facsimile signature shall appear thereon or on any such interest coupon, shall have ceased to be such officer before the bond, debenture or other corporate security so signed or attested shall have been delivered, such bond, debenture or other corporate security nevertheless may be adopted by the corporation and issued and delivered as though the person who signed the same or whose facsimile signature shall have been used thereon had not ceased to be such officer of the corporation. ARTICLE IX DIVIDENDS Section 40. Declaration of Dividends. Dividends upon the capital stock of the corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors pursuant to law at any regular or special meeting. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation. (Del. Code Ann., tit. 8, ss.ss. 170, 173) Section 41. Dividend Reserve. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the Board of Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the Board of Directors shall think conducive to the interests of the corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created. (Del. Code Ann., tit. 8, ss. 171) ARTICLE X FISCAL YEAR Section 42. Fiscal Year. The fiscal year of the corporation shall end on the nearest Saturday to the 30th day of September of each year and begin on the following day or at such other times as may be fixed by resolution of the Board of directors. ARTICLE XI INDEMNIFICATION Section 43. Indemnification of Directors, Executive Officers, Other Officers, Employees And Other Agents. (a) Directors and Executive Officers. The corporation shall indemnify its directors and executive officers (for the purposes of this Article XI, "executive officers shall have the meaning defined in Rule 3b-7 promulgated under the 1934 Act) to the fullest extent not prohibited by the Delaware General Corporation Law; provided, however, that the corporation 17. may modify the extent of such indemnification by individual contracts with its directors and executive officers; and, provided, further, that the corporation shall not be required to indemnify any director or executive officer in connection with any proceeding (or part thereof) initiated by such person unless (i) such indemnification is expressly required to be made by law, (ii) the proceeding was authorized by the Board of Directors of the corporation, (iii) such indemnification is provided by the corporation, in its sole discretion, pursuant to the powers vested in the corporation under the Delaware General Corporation Law or (iv) such indemnification is required to be made under subsection (d). (b) Other Officers, Employees and Other Agents. The corporation shall have power to indemnify its other officers, employees and other agents as set forth in the Delaware General Corporation Law. (c) Expenses. The corporation shall advance to any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director or executive officer, of the corporation, or is or was serving at the request of the corporation as a director or executive officer of another corporation, partnership, joint venture, trust or other enterprise, prior to the final disposition of the proceeding, promptly following request therefor, all expenses incurred by any director or executive officer in connection with such proceeding upon receipt of an undertaking by or on behalf of such person to repay said amounts if it should be determined ultimately that such person is not entitled to be indemnified under this Bylaw or otherwise. Notwithstanding the foregoing, unless otherwise determined pursuant to paragraph (e) of this Bylaw, no advance shall be made by the corporation to an executive officer of the corporation (except by reason of the fact that such executive officer is or was a director of the corporation in which event this paragraph shall not apply) in any action, suit or proceeding, whether civil, criminal, administrative or investigative, if a determination is reasonably and promptly made (i) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to the proceeding, or (ii) if such quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, that the facts known to the decision-making party at the time such determination is made demonstrate clearly and convincingly that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the corporation. (d) Enforcement. Without the necessity of entering into an express contract, all rights to indemnification and advances to directors and executive officers under this Bylaw shall be deemed to be contractual rights and be effective to the same extent and as if provided for in a contract between the corporation and the director or executive officer. Any right to indemnification or advances granted by this Bylaw to a director or executive officer shall be enforceable by or on behalf of the person holding such right in any court of competent jurisdiction if (i) the claim for indemnification or advances is denied, in whole or in part, or (ii) no disposition of such claim is made within ninety (90) days of request therefor. The claimant in such enforcement action, if successful in whole or in part, shall be entitled to be paid also the expense of prosecuting his claim. In connection with any claim for indemnification, the corporation shall be entitled to raise as a defense to any such action that the claimant has not met 18. the standards of conduct that make it permissible under the Delaware General Corporation Law for the corporation to indemnify the claimant for the amount claimed. In connection with any claim by an executive officer of the corporation (except in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such executive officer is or was a director of the corporation) for advances, the corporation shall be entitled to raise a defense as to any such action clear and convincing evidence that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the corporation, or with respect to any criminal action or proceeding that such person acted without reasonable cause to believe that his conduct was lawful. Neither the failure of the corporation (including its Board of Directors, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the corporation (including its Board of Directors, independent legal counsel or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that claimant has not met the applicable standard of conduct. In any suit brought by a director or executive officer to enforce a right to indemnification or to an advancement of expenses hereunder, the burden of proving that the director or executive officer is not entitled to be indemnified, or to such advancement of expenses, under this Article XI or otherwise shall be on the corporation. (e) Non-Exclusivity Of Rights. The rights conferred on any person by this Bylaw shall not be exclusive of any other right which such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, Bylaws, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding office. The corporation is specifically authorized to enter into individual contracts with any or all of its directors, officers, employees or agents respecting indemnification and advances, to the fullest extent not prohibited by the Delaware General Corporation Law. (f) Survival Of Rights. The rights conferred on any person by this Bylaw shall continue as to a person who has ceased to be a director, officer, employee or other agent and shall inure to the benefit of the heirs, executors and administrators of such a person. (g) Insurance. To the fullest extent permitted by the Delaware General Corporation Law, the corporation, upon approval by the Board of Directors, may purchase insurance on behalf of any person required or permitted to be indemnified pursuant to this Bylaw. (h) Amendments. Any repeal or modification of this Bylaw shall only be prospective and shall not affect the rights under this Bylaw in effect at the time of the alleged occurrence of any action or omission to act that is the cause of any proceeding against any agent of the corporation. (i) Saving Clause. If this Bylaw or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the corporation shall nevertheless 19. indemnify each director and executive officer to the full extent not prohibited by any applicable portion of this Bylaw that shall not have been invalidated, or by any other applicable law. (j) Certain Definitions. For the purposes of this Bylaw, the following definitions shall apply: (i) The term "proceeding" shall be broadly construed and shall include, without limitation, the investigation, preparation, prosecution, defense, settlement, arbitration and appeal of, and the giving of testimony in, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative. (ii) The term "expenses" shall be broadly construed and shall include, without limitation, court costs, attorneys' fees, witness fees, fines, amounts paid in settlement or judgment and any other costs and expenses of any nature or kind incurred in connection with any proceeding. (iii) The term the "corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Bylaw with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. (iv) References to a "director," "executive officer," "officer," "employee," or "agent" of the corporation shall include, without limitation, situations where such person is serving at the request of the corporation as, respectively, a director, executive officer, officer, employee, trustee or agent of another corporation, partnership, joint venture, trust or other enterprise. (v) References to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the corporation" shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the corporation" as referred to in this Bylaw. 20. ARTICLE XII NOTICES Section 44. Notices. (a) Notice to Stockholders. Whenever, under any provisions of these Bylaws, notice is required to be given to any stockholder, it shall be given in writing, timely and duly deposited in the United States mail, postage prepaid, and addressed to his last known post office address as shown by the stock record of the corporation or its transfer agent. (Del. Code Ann., tit. 8, ss. 222) (b) Notice to Directors. Any notice required to be given to any Director may be given by the method stated in subsection (a), or by facsimile, telex or telegram, except that such notice other than one which is delivered personally shall be sent to such address as such Director shall have filed in writing with the Secretary, or, in the absence of such filing, to the last known post office address of such Director. (c) Address Unknown. If no address of a stockholder or Director be known, notice may be sent to the office of the corporation required to be maintained pursuant to Section 2 hereof. (d) Affidavit of Mailing. An affidavit of mailing, executed by a duly authorized and competent employee of the corporation or its transfer agent appointed with respect to the class of stock affected, specifying the name and address or the names and addresses of the stock- holder or stockholders, or Director or Directors, to whom any such notice or notices was or were given, and the time and method of giving the same, shall be conclusive evidence of the statements therein contained. (Del. Code Ann., tit. 8, ss. 222) (e) Time Notices Deemed Given. All notices given by mail, as above provided, shall be deemed to have been given as at the time of mailing and all notices given by facsimile, telex or telegram shall be deemed to have been given as of the sending time recorded at time of transmission. (f) Methods of Notice. It shall not be necessary that the same method of giving notice be employed in respect of all Directors, but one permissible method may be employed in respect of any one or more, and any other permissible method or methods may be employed in respect of any other or others. (g) Failure to Receive Notice. The period or limitation of time within which any stockholder may exercise any option or right, or enjoy any privilege or benefit, or be required to act, or within which any Director may exercise any power or right, or enjoy any privilege, pursuant to any notice sent him in the manner above provided, shall not be affected or extended in any manner by the failure of such stockholder or such Director to receive such notice. (h) Notice to Person with Whom Communication Is Unlawful. Whenever notice is required to be given, under any provision of law or of the Certificate of Incorporation or 21. Bylaws of the corporation, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the corporation is such as to require the filing of a certificate under any provision of the Delaware General Corporation Law, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful. (i) Notice to Person with Undeliverable Address. Whenever notice is required to be given, under any provision of law or the Certificate of Incorporation or Bylaws of the corporation, to any stockholder to whom (i) notice of two consecutive annual meetings, and all notices of meetings or of the taking of action by written consent without a meeting to such person during the period between such two consecutive annual meetings, or (ii) all, and at least two, payments (if sent by first class mail) of dividends or interest on securities during a twelve month period, have been mailed addressed to such person at his address as shown on the records of the Corporation and have been returned undeliverable, the giving of such notice to such person shall not be required. Any action or meeting which shall be taken or held without notice to such person shall have the same force and effect as if such notice had been duly given. If any such person shall deliver to the corporation a written notice setting forth his then current address, the requirement that notice be given to such person shall be reinstated. In the event that the action taken by the corporation is such as to require the filing of a certificate under any provision of the Delaware General Corporation Law, the certificate need not state that notice was not given to persons to whom notice was not required to be given pursuant to this paragraph. (Del. Code Ann, tit. 8, ss. 230 ) ARTICLE XIII AMENDMENTS Section 45. Amendments. Subject to paragraph (h) of Section 43 of the Bylaws, (i) the affirmative vote of at least eighty percent (80%) of the voting power of all of the then outstanding shares of the Voting Stock, shall be required to alter, amend or repeal Sections 5, 6, 13, 15, 16, 17, 18, 20, 43 and 45 of the Bylaws or to adopt any provision inconsistent with the Bylaws, and (ii) the affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then outstanding shares of the Voting Stock shall be required to alter, amend or repeal any other Section of the Bylaws. The Board of Directors shall also have the power to adopt, amend or repeal Bylaws. (Del. Code Ann., tit. 8, ss.ss. 109(a), 122(6)). ARTICLE XIV LOANS TO OFFICERS Section 46. Loans to Officers. The corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or of its subsidiaries, including any officer or employee who is a Director of the corporation or its 22. subsidiaries, whenever, in the judgment of the Board of Directors, such loan, guarantee or assistance may reasonably be expected to benefit the corporation. The loan, guarantee or other assistance may be with or without interest and may be unsecured, or secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing in this Section 46 shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute. (Del. Code Ann., tit. 8, ss. 143) 23. EX-4.1 3 gex4_1-23793.txt REGISTRATION RIGHTS AGREEMENT ================================================================================ BEI MEDICAL SYSTEMS COMPANY, INC. REGISTRATION RIGHTS AGREEMENT ================================================================================ TABLE OF CONTENTS PAGE SECTION 1. GENERAL...........................................................1 1.1 Definitions......................................................1 SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER............................2 2.1 Restrictions on Transfer.........................................2 2.2 Registration.....................................................4 2.3 Piggyback Registrations..........................................4 2.4 Eligibility for Form S-3.........................................5 2.5 Expenses of Registration.........................................6 2.6 Obligations of the Company.......................................6 2.7 Holder's Obligations.............................................7 2.8 Other Transactions...............................................8 2.9 Indemnification..................................................8 2.10 Furnishing Information..........................................10 2.11 Assignment of Registration Rights...............................11 2.12 Amendment of Registration Rights................................11 2.13 Rule 144 Reporting..............................................11 SECTION 3. COVENANTS OF THE COMPANY.........................................11 3.1 Basic Financial Information and Reporting.......................11 3.2 Confidentiality of Records......................................12 3.3 Reservation of Common Stock.....................................12 3.4 Observer Rights.................................................12 3.5 Directors' Expenses.............................................12 3.6 Directors' Liability and Indemnification........................12 3.7 Termination of Covenants........................................13 SECTION 4. MISCELLANEOUS....................................................13 4.1 Governing Law...................................................13 4.2 Survival........................................................13 4.3 Holder Information..............................................14 4.4 Successors and Assigns..........................................14 i TABLE OF CONTENTS (CONTINUED) PAGE 4.5 Entire Agreement................................................14 4.6 Severability....................................................14 4.7 Amendment and Waiver............................................14 4.8 Delays or Omissions.............................................15 4.9 Notices.........................................................15 4.10 Attorneys' Fees.................................................15 4.11 Titles and Subtitles............................................15 4.12 Additional Investors............................................15 4.13 Counterparts....................................................15 ii BEI MEDICAL SYSTEMS COMPANY, INC. REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as of the 14th day of February, 2001, by and among BEI MEDICAL SYSTEMS COMPANY, INC., a Delaware corporation (the "Company") and the investors listed on Exhibit A hereto, referred to hereinafter as the "Investors" and each individually as an "Investor." RECITALS WHEREAS, the Investors are purchasing shares of the Company's Series A Convertible Preferred Stock (the "Series A Stock") pursuant to that certain Series A Convertible Preferred Stock Purchase Agreement (the "Purchase Agreement") of even date herewith (the "Financing"); WHEREAS, the obligations in the Purchase Agreement are conditioned upon the execution and delivery of this Agreement; and WHEREAS, in connection with the consummation of the Financing, the parties desire to enter into this Agreement in order to grant registration, information and other rights to the Investors as set forth below. NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree hereto as follows: SECTION 1. GENERAL. 1.1 Definitions. As used in this Agreement the following terms shall have the following respective meanings: "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Form S-3" means such form under the Securities Act as in effect on the date hereof or any successor or similar registration form under the Securities Act subsequently adopted by the SEC which permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC. "Holder" means any person owning of record Registrable Securities that have not been sold to the public or any assignee of record of such Registrable Securities in accordance with Section 2.11 hereof. 1 "Register," "registered," and "registration" refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of effectiveness of such registration statement or document. "Registrable Securities" means (a) Common Stock of the Company issued or issuable upon conversion of the Shares; and (b) any Common Stock of the Company issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of the Common Stock issuable upon conversion of the Shares. Notwithstanding the foregoing, Registrable Securities shall not include any securities sold by a person to the public either pursuant to a registration statement or Rule 144 or sold in a private transaction in which the transferor's rights under Section 2 of this Agreement are not assigned. "Registrable Securities then outstanding" shall be the number of shares determined by calculating the total number of shares of the Company's Common Stock that are Registrable Securities and either (a) are then issued and outstanding or (b) are issuable pursuant to then exercisable or convertible securities. "Registration Expenses" shall mean, except as otherwise provided herein, all expenses incurred by the Company in complying with Sections 2.2 and 2.3 hereof, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for the Company, reasonable fees and disbursements of a single special counsel for the Holders, blue sky fees and expenses and the expense of any special audits incident to or required by any such registration (but excluding the compensation of regular employees of the Company which shall be paid in any event by the Company). "SEC" or "Commission" means the Securities and Exchange Commission. "Securities Act" shall mean the Securities Act of 1933, as amended. "Selling Expenses" shall mean all underwriting discounts and selling commissions applicable to the sale. "Shares" shall mean the Company's Series A Stock issued pursuant to the Purchase Agreement and held by the Investors listed on Exhibit A hereto and their permitted assigns. "Special Registration Statement" shall mean a registration statement relating to any employee benefit plan or with respect to any corporate reorganization or other transaction under Rule 145 of the Securities Act. SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER. 2.1 Restrictions on Transfer. 2 (a) Each Holder agrees not to make any disposition of all or any portion of the Shares or Registrable Securities unless and until: (i) There is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such registration statement; or (ii) (A) The transferee has agreed in writing to be bound by the terms of this Agreement, (B) such Holder shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and (C) if reasonably requested by the Company, such Holder shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration of such shares under the Securities Act. It is agreed that the Company will not require opinions of counsel for transactions made pursuant to Rule 144 except in unusual circumstances; or (iii) Notwithstanding the provisions of paragraphs (i) and (ii) above, no such registration statement or opinion of counsel shall be necessary for a transfer by a Holder which is (A) a partnership to its partners or former partners in accordance with partnership interests, (B) a corporation to its stockholders in accordance with their interest in the corporation, (C) a limited liability company to its members or former members in accordance with their interest in the limited liability company, or (D) to the Holder's family member or trust for the benefit of an individual Holder; provided that in each case the Holder shall have notified the Company of the proposed transfer or disposition at least 10 days prior to such transfer and the transferee will be subject to the terms of this Agreement to the same extent as if he were an original Holder hereunder. (b) Each certificate representing Shares or Registrable Securities shall (unless otherwise permitted by the provisions of the Agreement) be stamped or otherwise imprinted with a legend substantially similar to the following (in addition to any legend required under applicable state securities laws): THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. THE TRANSFER OF SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO CERTAIN RESTRICTIONS SPECIFIED IN THE REGISTRATION RIGHTS AGREEMENT DATED FEBRUARY 14, 2001, BETWEEN THE COMPANY AND CERTAIN INVESTORS, AND NO 3 TRANSFER OF SHARES SHALL BE VALID OR EFFECTIVE ABSENT COMPLIANCE WITH SUCH RESTRICTIONS. (c) The Company shall be obligated to reissue promptly unlegended certificates at the request of any holder thereof if the holder shall have obtained an opinion of counsel (which counsel may be counsel to the Company) reasonably acceptable to the Company to the effect that the securities proposed to be disposed of may lawfully be so disposed of without registration, qualification or legend. (d) Any legend endorsed on an instrument pursuant to applicable state securities laws and the stop-transfer instructions with respect to such securities shall be removed upon receipt by the Company of an order of the appropriate blue sky authority authorizing such removal. 2.2 Registration. (a) The Company shall prepare and file as soon as practicable, but in no event later than March 16, 2001 (the "Filing Deadline"), with the SEC a registration statement on Form S-3 covering the resale of all of the Registrable Securities (the "Registration Statement") issuable upon full conversion of the Series A Stock. The Company shall use its best efforts to cause the Registration Statement filed hereunder to become effective as soon as practicable, but in no event later than April 16, 2001 (or June 14, 2001 if reviewed in writing by the SEC). (b) The Holders shall furnish such information the Company may reasonably request in connection with the preparation of the Registration Statement. Upon registration of the resale of the Registrable Securities with the SEC pursuant to the terms of this Agreement, the Registrable Securities may be sold in accordance with the Registration Statement under the Securities Act. 2.3 Piggyback Registrations. The Company shall notify all Holders of Registrable Securities in writing at least 10 days prior to the filing of any registration statement under the Securities Act for purposes of a public offering of securities of the Company (including, but not limited to, registration statements relating to secondary offerings of securities of the Company, but excluding Special Registration Statements) and will afford each such Holder an opportunity to include in such registration statement all or part of such Registrable Securities held by such Holder. Each Holder desiring to include in any such registration statement all or any part of the Registrable Securities held by it shall, within 10 days after the above-described notice from the Company, so notify the Company in writing. Such notice shall state the intended method of disposition of the Registrable Securities by such Holder. If a Holder decides not to include all of its Registrable Securities in any registration statement thereafter filed by the Company, such Holder shall nevertheless continue to have the right to include any Registrable Securities in any subsequent registration statement or registration statements as may be filed by the Company with respect to offerings of its securities, all upon the terms and conditions set forth herein. 4 (a) Underwriting. If the registration statement under which the Company gives notice under this Section 2.3 is for an underwritten offering, the Company shall so advise the Holders of Registrable Securities. In such event, the right of any such Holder to be included in a registration pursuant to this Section 2.3 shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their Registrable Securities through such underwriting shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company. Notwithstanding any other provision of the Agreement, if the underwriter determines in good faith that marketing factors require a limitation of the number of shares to be underwritten, the number of shares that may be included in the underwriting shall be allocated, first, to the Company; second, to the Holders on a pro rata basis based on the total number of Registrable Securities held by the Holders; and third, to any stockholder of the Company (other than a Holder) on a pro rata basis. No such reduction shall reduce the securities being offered by the Company for its own account to be included in the registration and underwriting. In no event will shares of any other selling stockholder be included in such registration which would reduce the number of shares which may be included by Holders without the written consent of Holders of not less than 66 2/3% of the Registrable Securities proposed to be sold in the offering. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the underwriter, delivered at least 10 business days prior to the effective date of the registration statement. Any Registrable Securities excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration. For any Holder which is a partnership or corporation, the partners, retired partners and stockholders of such Holder, or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing person shall be deemed to be a single "Holder," and any pro rata reduction with respect to such "Holder" shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such "Holder," as defined in this sentence. (b) Right to Terminate Registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2.3 prior to the effectiveness of such registration whether or not any Holder has elected to include securities in such registration. The Registration Expenses of such withdrawn registration shall be borne by the Company in accordance with Section 2.5 hereof. (c) Expiration of Piggyback Registration Rights. The registration rights described under this Section 2.3 shall expire three years from the date hereof. 2.4 Eligibility for Form S-3. The Company represents and warrants that it is currently eligible to register the resale of all of the Registrable Securities issuable upon full conversion of the Series A Stock by the Holders on a registration statement on Forms S-3 under the Securities Act for the account of Holders (and not for or on behalf of Company). The Company shall file all reports required to be filed by the Company under the Securities Act and the Exchange Act with the SEC in a timely manner and take all other actions which may be required so as to maintain such eligibility for the use of Forms S-3. 5 2.5 Expenses of Registration. Except as specifically provided herein, all Registration Expenses incurred in connection with any registration, qualification or compliance pursuant to Section 2.2 or any registration under Section 2.3 herein shall be borne by the Company, including reasonable legal fees and cost of one special counsel of the selling stockholders not to exceed $25,000. All Selling Expenses incurred in connection with any registrations hereunder, shall be borne by the holders of the securities so registered pro rata on the basis of the number of shares so registered. The Company shall not, however, be required to pay for expenses of any registration proceeding begun pursuant to Section 2.2, the request of which has been subsequently withdrawn by the Holders unless the withdrawal is based upon material adverse information concerning the Company of which the Holders were not aware at the time of such request. If the Holders are required to pay the Registration Expenses, such expenses shall be borne by the Holders of securities in proportion to the number of shares being registered. 2.6 Obligations of the Company. Whenever required to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible: (a) Prepare promptly and file with the SEC the registration statement required by Section 2.2, and cause such registration statement relating to Registrable Securities to become effective as soon as practicable after such filing, and keep the registration statement effective pursuant to Rule 415 and immediately available for use at all times until such date as is the earlier of (i) the date on which all of the Registrable Securities have been sold (and no further Registrable Securities may be issued in the future) and (ii) the date on which all of the Registrable Securities (in the reasonable opinion of counsel to the Holders) may be immediately sold to the public without registration and without restriction as to the number of Registrable Securities to be sold pursuant to Rule 144 (k) or any successor provision. The registration statement (including any amendments or supplements thereto and prospectuses contained therein and all documents incorporated by reference therein) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein not misleading. (b) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the sale or disposition of all securities covered by such registration statement for the period set forth in paragraph (a) above. (c) Furnish to the Holders such number of copies of a prospectus and any amendments and supplements thereto in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them. (d) Use its reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders; provided that the Company shall not be required in 6 connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. (e) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter(s) of such offering. Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement. (f) Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. The Company will use reasonable efforts to amend or supplement such prospectus in order to cause such prospectus not to include any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. (g) Use its reasonable efforts to furnish, on the date that such Registrable Securities are delivered to the underwriters for sale, if such securities are being sold through underwriters, (i) an opinion, dated as of such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and (ii) a letter dated as of such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering addressed to the underwriters. 2.7 Holder's Obligations. In connection with the Registration Statement referred above, the Holders shall each: (a) Complete, execute, acknowledge and/or deliver such questionnaires, indemnification agreements, custody agreements, underwriting agreements (if the registration is underwritten) and other documents, certificates and instruments as are reasonably required by the Company or any underwriters(s) or are otherwise necessary in connection with the registration and offering. Each Holder shall promptly provide to the Company such information concerning such Holder, its ownership of the Company's securities, the intended method of distribution and such other information as may be required by application law or regulation as may be reasonably requested by the Company. (b) Upon receipt of any notice from the Company (i) of the happening of any event of the kind described in Section 2.6(f) or (ii) that the Company no longer qualifies to use Form S-3, immediately discontinue disposition of the Registrable Securities pursuant to the Registration Statements covering such shares until the Holders' receipt of the copies of the supplemented or amended prospectus contemplated by Section 2.6(f) or until such time the 7 Company can make an appropriate filing with the SEC or take such further action so as to qualify the Company to use of Form S-3, and if so directed by the Company, deliver to the Company all copies of the prospectus covering such Registrable Securities in such Holder's possession at the time of receipt of such notice. (c) No Holder and no person or entity acting on any Holder's behalf (other than underwriter selected by the Company or approved by the Company) shall offer any Registrable Securities by means of any preliminary prospectus. 2.8 Other Transactions . The Company shall not be obligated to effect a registration pursuant to Section 2.2, or to file any amendment or supplement thereto, and may suspend the Holders' rights to make sales pursuant to an effective registration pursuant to Section 2.2, at any time when the Company, in the good faith judgment of its Board of Directors, reasonably believes that the filing thereof at the time requested, or the offering of securities pursuant thereto, would (i) materially and adversely affect a pending or proposed acquisition, merger, recapitalization, consolidation, reorganization or similar transaction, or negotiations, discussions or pending proposals related thereto, or (ii) be seriously detrimental to the Company and its stockholders, in which event (under clause (i) or (ii) above) the Company's sole relief from its registration obligations is the right to defer filing of a registration statement (or to suspend the Holders' rights to make sales pursuant to an effective registration pursuant to Section 2.2) for a period of not more than 60 days; provided, however, that the Company shall not utilize the right described in this Section 2.8 more than twice in any 12-month period. 2.9 Indemnification. In the event any Registrable Securities are included in a registration statement under this Agreement: (a) To the extent permitted by law, the Company will indemnify and hold harmless each Holder, the partners, officers and directors of each Holder, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a "Violation") by the Company: (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law in connection with the offering covered by such registration statement; and the Company will pay as incurred to each such Holder, partner, officer, director, underwriter or controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided however, that the indemnity agreement contained in this Section 8 2.9(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by such Holder, partner, officer, director, underwriter or controlling person of such Holder; provided further, however, that the foregoing indemnity agreement with respect to any preliminary prospectus shall not inure to the benefit of any Holder or underwriter, or any person controlling such Holder or underwriter, from whom the person asserting any such losses, claims, damages or liabilities purchased shares in the offering, if a copy of the prospectus (as then amended or supplemented if the Company shall have furnished any amendments or supplements thereto) was not sent or given by or on behalf of such Holder or underwriter to such person, if required by law so to have been delivered by such Holder or underwriter, at or prior to the written confirmation of the sale of the shares to such person, and if the prospectus (as so amended or supplemented) would have cured the defect giving rise to such loss, claim, damage or liability. (b) To the extent permitted by law, each Holder will, if Registrable Securities held by such Holder are included in the securities as to which such registration qualifications or compliance is being effected, indemnify and hold harmless the Company, each of its directors, its officers and each person, if any, who controls the Company within the meaning of the Securities Act, any underwriter and any other Holder selling securities under such registration statement or any of such other Holder's partners, directors or officers or any person who controls such Holder, against any losses, claims, damages or liabilities (joint or several) to which the Company or any such director, officer, controlling person, underwriter or other such Holder, or partner, director, officer or controlling person of such other Holder may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder under an instrument duly executed by such Holder and stated to be specifically for use in connection with such registration; and each such Holder will pay as incurred any legal or other expenses reasonably incurred by the Company or any such director, officer, controlling person, underwriter or other Holder, or partner, officer, director or controlling person of such other Holder in connection with investigating or defending any such loss, claim, damage, liability or action if it is judicially determined that there was such a Violation; provided, however, that the indemnity agreement contained in this Section 2.9(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided further, that in no event shall any indemnity under this Section 2.9 exceed the net proceeds from the offering received by such Holder. (c) Promptly after receipt by an indemnified party under this Section 2.9 of notice of the commencement of any action (including any governmental action), such indemnified party 9 will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.9, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if materially prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 2.9, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.9. (d) If the indemnification provided for in this Section 2.9 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any losses, claims, damages or liabilities referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall to the extent permitted by applicable law contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the Violation(s) that resulted in such loss, claim, damage or liability, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by a court of law by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, that in no event shall any contribution by a Holder hereunder exceed the net proceeds from the offering received by such Holder. (e) The obligations of the Company and Holders under this Section 2.9 shall survive completion of any offering of Registrable Securities in a registration statement and the termination of this agreement. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. 2.10 Furnishing Information. It shall me a condition precedent to the obligations of the Company to take any action pursuant to Sections 2.2 and 2.3 that the selling Holder shall furnish to the Company such information regarding themselves, the Registrable Securities held by them and the intended method of disposition of such securities as shall be required to effect the registration of their Registrable Securities. 10 2.11 Assignment of Registration Rights. The rights to cause the Company to register Registrable Securities pursuant to this Section 2 may be assigned by a Holder to a transferee or assignee of Registrable Securities which (a) is a subsidiary, parent, general partner, limited partner, retired partner, member or retired member of a Holder, (b) is a Holder's family member or trust for the benefit of an individual Holder, or (c) acquires at least 100,000 shares of Registrable Securities (as adjusted for stock splits and combinations); provided, however, (i) the transferor shall, within 10 days after such transfer, furnish to the Company written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned and (ii) such transferee shall agree to be subject to all restrictions set forth in this Agreement. 2.12 Amendment of Registration Rights. Any provision of this Section 2 may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Holders of at least a majority of the Registrable Securities then outstanding. Any amendment or waiver effected in accordance with this Section 2.12 shall be binding upon each Holder and the Company. By acceptance of any benefits under this Section 2, Holders of Registrable Securities hereby agree to be bound by the provisions hereunder. 2.13 Rule 144 Reporting. With a view to making available to the Holders the benefits of certain rules and regulations of the SEC which may permit the sale of the Registrable Securities to the public without registration, the Company agrees to use its best efforts to: (a) Make and keep public information available, as those terms are understood and defined in SEC Rule 144 or any similar or analogous rule promulgated under the Securities Act, at all times after the effective date of the first registration filed by the Company for an offering of its securities to the general public; (b) File with the SEC, in a timely manner, all reports and other documents required of the Company under the Exchange Act; and (c) So long as a Holder owns any Registrable Securities, furnish to such Holder forthwith upon request: a written statement by the Company as to its compliance with the reporting requirements of said Rule 144 of the Securities Act, and of the Exchange Act (at any time after it has become subject to such reporting requirements); a copy of the most recent annual or quarterly report of the Company; and such other reports and documents as a Holder may reasonably request in availing itself of any rule or regulation of the SEC allowing it to sell any such securities without registration. SECTION 3. COVENANTS OF THE COMPANY. 3.1 Basic Financial Information and Reporting. The Company will maintain true books and records of account in which full and correct entries will be made of all its business transactions pursuant to a system of accounting established and administered in accordance with 11 generally accepted accounting principles consistently applied, and will set aside on its books all such proper accruals and reserves as shall be required under generally accepted accounting principles consistently applied; 3.2 Confidentiality of Records. Each Investor agrees to use, and to use its best efforts to insure that its authorized representatives use, the same degree of care as such Investor uses to protect its own confidential information to keep confidential any information furnished to it which the Company identifies as being confidential or proprietary (so long as such information is not in the public domain), except that such Investor may disclose such proprietary or confidential information to any partner, subsidiary or parent of such Investor for the purpose of evaluating its investment in the Company as long as such partner, subsidiary or parent is advised of the confidentiality provisions of this Section 3.2. 3.3 Reservation of Common Stock. The Company will at all times reserve and keep available, solely for issuance and delivery upon the conversion of the Series A Stock, all Common Stock issuable from time to time upon such conversion. 3.4 Observer Rights. For so long as MedCapital continues to hold at least 50% of their shares of Series A Stock purchased pursuant to the Purchase Agreement, the Company shall allow one representative designated by MedCapital to attend all meetings of the Company's Board of Directors in a nonvoting capacity, and in connection therewith, the Company shall give such representative copies of all notices, minutes, consents and other materials, financial or otherwise, which the Company provides to its Board of Directors; provided, however, that the Company reserves the right to exclude such representative from access to any material or meeting or portion thereof if the Company believes upon advice of counsel that such exclusion is reasonably necessary to preserve the attorney-client privilege, to protect highly confidential proprietary information or for other similar reasons. The Company shall reimburse reasonable expenses of the designated representative for costs incurred in attending meetings of the Board of Directors on the same basis as the Company reimburses other directors of the Company. 3.5 Directors' Expenses. The Company shall reimburse expenses of the director designated by the holders of the Series A Stock and observer designated by MedCapital for reasonable costs incurred in attending meetings of the Board of Directors on the same basis as the Company reimburses other directors of the Company. 3.6 Directors' Liability and Indemnification. The Company's Certificate of Incorporation and Bylaws shall provide (a) for elimination of the liability of director to the maximum extent permitted by law and (b) for indemnification of directors for acts on behalf of the Company to the maximum extent permitted by law. For so long as the holders of Series A Stock, voting separately as a class in accordance with the Certificate of Designations (as defined in the Purchase Agreement) shall be entitled to elect one member of the Company's Board of Directors, the Company shall maintain the Company's existing directors and officers liability insurance policy (or a substantially equivalent policy) with coverage up to $10,000,000, provided, however, that should the Board of Directors in its reasonable discretion determine that the cost to the Company to maintain such directors and officers liability insurance policy with 12 coverage up to $10,000,000 has increased materially or the Company cannot obtain a policy with such limits, the Company shall obtain as much comparable insurance as shall be available at a cost (no less than the cost of the Company's policy on the date hereof) which the Company may reasonably afford pursuant to a policy which shall have been reasonably approved by the Directors, provided further, however, that in no case shall the coverage for any directors and officers liability policy be less than $5,000,000. 3.7 Special Stockholders Meeting. The Company will use its reasonable best efforts to hold a Special Meeting of Stockholders (the "Special Meeting") within 120 days after the initial Closing Date (as defined in the Purchase Agreement) under the Purchase Agreement. At the Special Meeting, the stockholders of the Company will be asked to consider and approve (i) an increase in the number of shares of Common Stock which the Company is authorized to issue to at least 30,000,000, (ii) an increase in the number of shares of preferred stock which the Company is authorized to issue to at least 5,000,000 and (iii) an increase in the number of shares of Common Stock reserved for issuance under the Company's Plan (as defined in the Purchase Agreement) (or the adoption of a new stock option plan, as determined by the Board of Directors), to such amount as the Board of Directors in its reasonable discretion believes appropriate to meet the incentive compensation needs of the Company for the reasonably foreseeable future. In addition, at the Special Meeting the Company will seek stockholder approval to change the fiscal year of the Company to a calendar year unless the Board reasonably determines, upon the advice of counsel and the Company's independent auditors, that such change in fiscal year will cause undue expense to the Company or will otherwise adversely affect the Company in any material respect. 3.8 Termination of Covenants. All covenants of the Company contained in Section 3 of this Agreement shall expire and terminate as to each Investor upon (i) the sale, lease or other disposition of all or substantially all of the assets of the Company or (ii) an acquisition of the Company by another corporation or entity by consolidation, merger or other reorganization in which the holders of the Company's outstanding voting stock immediately prior to such transaction own, immediately after such transaction, securities representing less than 50% of the voting power of the corporation or other entity surviving such transaction, provided that this Section 3.8(ii) shall not apply to a merger effected exclusively for the purpose of changing the domicile of the Company. SECTION 4. MISCELLANEOUS. 4.1 Governing Law. This Agreement shall be governed by and construed under the laws of the State of Delaware (without giving effect to principles of conflict of laws). 4.2 Survival. The representations, warranties, covenants, and agreements made herein shall survive any investigation made by any Holder and the closing of the transactions contemplated hereby. All statements as to factual matters contained in any certificate or other instrument delivered by or on behalf of the Company pursuant hereto in connection with the transactions contemplated hereby shall be deemed to be representations and warranties by the Company hereunder solely as of the date of such certificate or instrument. 13 4.3 Holder Information. Each Holder covenants that it will promptly notify the Company in writing of any changes in the information set forth in the Registration Statement regarding such Holder or such Holder's "Plan of Distribution." 4.4 Successors and Assigns. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors, and administrators of the parties hereto and shall inure to the benefit of and be enforceable by each person who shall be a holder of Registrable Securities from time to time; provided, however, that prior to the receipt by the Company of adequate written notice of the transfer of any Registrable Securities specifying the full name and address of the transferee, the Company may deem and treat the person listed as the holder of such shares in its records as the absolute owner and holder of such shares for all purposes, including the payment of dividends or any redemption price. 4.5 Entire Agreement. This Agreement, the Exhibits, Appendices and Schedules hereto, the Purchase Agreement and the other documents delivered pursuant thereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and no party shall be liable or bound to any other in any manner by any representations, warranties, covenants and agreements except as specifically set forth herein and therein. 4.6 Severability. In the event one or more of the provisions of this Agreement should, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. 4.7 Amendment and Waiver. (a) Except as otherwise expressly provided, this Agreement may be amended or modified only upon the written consent of the Company and the holders of at least a majority of the Registrable Securities. (b) Except as otherwise expressly provided, the obligations of the Company and the rights of the Holders under this Agreement may be waived only with the written consent of the holders of at least a majority of the Registrable Securities. (c) Notwithstanding the foregoing, this Agreement may be amended with only the written consent of the Company to include additional purchasers of Series A Stock as "Investors," "Holders" and parties hereto. (d) For the purposes of determining the number of Holder or Investors entitled to vote or exercise any rights hereunder, the Company shall be entitled to rely solely on the list of record holders of its stock as maintained by or on behalf of the Company. 14 4.8 Delays or Omissions. It is agreed that no delay or omission to exercise any right, power, or remedy accruing to any Holder, upon any breach, default or noncompliance of the Company under this Agreement shall impair any such right, power, or remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of any similar breach, default or noncompliance thereafter occurring. It is further agreed that any waiver, permit, consent, or approval of any kind or character on any Holder's part of any breach, default or noncompliance under the Agreement or any waiver on such Holder's part of any provisions or conditions of this Agreement must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not alternative. 4.9 Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient; if not, then on the next business day, (c) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the party to be notified at the address as set forth on the signature pages hereof or Exhibit A hereto or at such other address as such party may designate by 10 days advance written notice to the other parties hereto. 4.10 Attorneys' Fees. In the event that any suit or action is instituted to enforce any provision in this Agreement, the prevailing party in such dispute shall be entitled to recover from the losing party all fees, costs and expenses of enforcing any right of such prevailing party under or with respect to this Agreement, including without limitation, such reasonable fees and expenses of attorneys and accountants, which shall include, without limitation, all fees, costs and expenses of appeals. 4.11 Titles and Subtitles. The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement. 4.12 Additional Investors. Notwithstanding anything to the contrary contained herein, if the Company shall issue additional shares of its Series A Stock pursuant to the Purchase Agreement, any purchaser of such shares of Series A Stock may become a party to this Agreement by executing and delivering an additional counterpart signature page to this Agreement and shall be deemed an "Investor" hereunder. 4.13 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. 15 [Remainder of Page Intentionally Left Blank] IN WITNESS WHEREOF, the parties hereto have executed this REGISTRATION RIGHTS AGREEMENT as of the date set forth in the first paragraph hereof. COMPANY: PURCHASERS: BEI MEDICAL SYSTEMS COMPANY, INC. RADIUS VENTURE PARTNERS I, L.P. Signature: /s/ Richard Turner By: /s/ Jordan Davis /s/ Daniel Lubin --------------------------- --------------------------------------- Name: Richard Turner Name: Jordan Davis Daniel Lubin Title: President and Chief Executive Its: Managing Partner Managaing Partner Officer 100 Hollister Road Teterboro, New Jersey 07608 MEDCAPITAL, LLC By: /s/ Jan Rock ------------------------------------ Name: Jan Rock ---------------------------------- Its: Administrative Member ---------------------------------- FIRST CHICAGO EQUITY CORPORATION By: /s/ illegible signature ------------------------------------ Name: ---------------------------------- Its: ----------------------------------- CROSS CREEK PARTNERS XI, LLC By: /s/ illegible signature ------------------------------------ Name: ---------------------------------- Its: ----------------------------------- GARRETT CAPITAL ADVISORS, LLC By: /s/ Scott Garrett ------------------------------------ Name: S. Garrett ---------------------------------- Its: CEO ----------------------------------- By: /s/ Robert P. Khederian ------------------------------------ Name: ROBERT P. KHEDERIAN
REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE ROBERT P. KHEDERIAN C/F ROBERT P. KHEDERIAN, JR. UTMA/MA By: /s/ Robert P. Khederian ------------------------------------ Name: Robert P. Khederian ---------------------------------- Its: Custodian ---------------------------------- ROBERT P. KHEDERIAN C/F ALLISON L. KHEDERIAN UTMA/MA By: /s/ Robert P. Khederian ------------------------------------ Name: Robert P. Khederian ---------------------------------- Its: Custodian ---------------------------------- DELTA OPPORTUNITY FUND, LTD. C/O DIAZ & ALTSCHUL ADVISORS, LLC By: /s/ Christopher S. Mooney ------------------------------------ Name: Christopher S. Mooney ---------------------------------- Its: CFO ---------------------------------- DELTA OPPORTUNITY FUND (INSTITUTIONAL), LLC C/O DIAZ & ALTSCHUL ADVISORS, LLC By: /s/ Christopher S. Mooney ------------------------------------ Name: Christopher S. Mooney ---------------------------------- Its: CFO ---------------------------------- OVERBROOK FUND I, LLC By: /s/ A. G. Altschid. Jr. ------------------------------------ Name: Arthru G. Altshid, Jr. ---------------------------------- Its: Managing Member ---------------------------------- OSCAR SCHAFER /s/ Oscar Schafer --------------------------------------- Name: OSCAR SCHAFER REGISTRATION RIGHTS AGREEMENT EXHIBIT A SCHEDULE OF investors NAME AND ADDRESS SHARES RADIUS VENTURE PARTNERS I, L.P. 266,667 One Rockefeller Plaza Suite 920 New York, NY 10020 Attn: Jordan S. Davis MEDCAPITAL, LLC 133,333 500 CAMPUS DRIVE SUITE 220 FLORHAM PARK, NJ 07932 FIRST CHICAGO EQUITY CORPORATION 252,067 55 WEST MONROE 16TH FLOOR CHICAGO, IL 60670-0610 CROSS CREEK PARTNERS XI, LLC 1,267 55 WEST MONROE 16TH FLOOR CHICAGO, IL 60670-0610 GARRETT CAPITAL ADVISORS, LLC 13,334 55 WEST MONROE 16TH FLOOR CHICAGO, IL 60670-0610 ROBERT P. KHEDERIAN 78,161 200 POND ROAD WELLESLEY, MA 02482 ROBERT P. KHEDERIAN C/F ROBERT P. 78,161 KHEDERIAN, JR. UTMA/MA 200 POND ROAD WELLESLEY, MA 02482 ROBERT P. KHEDERIAN C/F ALLISON L. 78,161 KHEDERIAN UTMA/MA 200 POND ROAD WELLESLEY, MA 02482 A-1 DELTA OPPORTUNITY FUND, LTD. 80,000 C/O DIAZ & ALTSCHUL ADVISORS, LLC ATTN: REINALDO M. DIAZ 950 THIRD AVENUE, 16TH FLOOR NEW YORK, NY 10022 DELTA OPPORTUNITY FUND 53,334 (INSTITUTIONAL), LLC C/O DIAZ & ALTSCHUL ADVISORS, LLC ATTN: REINALDO M. DIAZ 950 THIRD AVENUE, 16TH FLOOR NEW YORK, NY 10022 OSCAR S. SCHAFER 13,333 150 CENTRAL PARK SOUTH APARTMENT 3601 NEW YORK, NEW YORK 10019 OVERBROOK FUND I, LLC 66,667 C/O OVERBROOK MANAGEMENT ATTN: NORA JOBSON 521 5TH AVENUE, SUITE 1501 NEW YORK, NY 10175 --------- TOTAL: 1,114,485 ========= A-2 EX-5.1 4 gex5_1-23793.txt OPINION OF COOLEY GODWARD LLP Exhibit 5.1 OPINION OF COOLEY GODWARD [LETTERHEAD OF COOLEY GODWARD LLP] March 16, 2000 BEI Medical Systems Company, Inc. 100 Hollister Road Teterboro, NJ 07608 Ladies and Gentlemen: You have requested our opinion with respect to certain matters in connection with the filing by BEI Medical Systems Company, Inc., a Delaware corporation (the "Company"), of a Registration Statement on Form S-3 (the "Registration Statement") with the Securities and Exchange Commission (the "Commission") on March 16, 2000 under the Securities Act of 1933, as amended (the "Securities Act"). The Registration Statement relates to the registration under the Securities Act of the resale by the holders thereof of 2,228,970 shares of the Company's Common Stock (the "Common Shares") issuable upon the conversion of 1,114,485 shares of the Company's Series A Convertible Preferred Stock (the "Preferred Shares"). In connection with this opinion, we have examined and relied upon the Registration Statement and related Prospectus included therein, the Company's Restated Certificate of Incorporation, as amended, Bylaws, as amended, and the originals or copies certified to our satisfaction of such records, documents, certificates, memoranda and other instruments as in our judgment are necessary or appropriate to enable us to render the opinion expressed below. We have assumed the genuineness and authenticity of all documents submitted to us as originals, and the conformity to originals of all documents where due execution and delivery are a prerequisite to the effectiveness thereof. On the basis of the foregoing, and in reliance thereon, we are of the opinion that: The Common Shares issuable upon conversion of the Preferred Shares have been duly authorized by the Company and such Common Shares, when issued upon conversion of the Preferred Shares in accordance with the terms of the Preferred Shares, will be validly issued, fully paid and nonassessable. We consent to the reference to our firm under the caption "Legal Matters" in the Prospectus included in the Registration Statement and to the filing of this opinion as an exhibit to the Registration Statement. Very truly yours, COOLEY GODWARD LLP By: /s/ Christopher A. Westover ------------------------------- Christopher A. Westover EX-23.1 5 gex23_1-23793.txt CONSENT OF INDEPENDENT ACCOUNTANTS Exhibit 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the reference to our firm under the caption "Experts" in the Registration Statement on Form S-3 and related Prospectus of BEI Medical Systems Company, Inc. for the registration of 2,228,970 shares of its common stock and to the incorporation by reference therein of our report dated December 1, 2000 with respect to the consolidated financial statements of BEI Medical Systems Company, Inc. included in its Annual Report on Form 10-K for the year ended September 30, 2000, filed with the Securities and Exchange Commission. /s/ Ernst & Young LLP MetroPark, New Jersey March 16, 2001 -----END PRIVACY-ENHANCED MESSAGE-----