-----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, LIYyyqkLbfwGxv/iOKPrnk/sNN+XNQ6Q2TvpcS/iKhWxCNVp94t0O2RHlX5y/WCG 5rvfOz3OVh5tOSIkW0C10Q== 0000891020-98-001124.txt : 19980721 0000891020-98-001124.hdr.sgml : 19980721 ACCESSION NUMBER: 0000891020-98-001124 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980420 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980720 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: INCONTROL INC CENTRAL INDEX KEY: 0000871629 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 911501619 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-24540 FILM NUMBER: 98668381 BUSINESS ADDRESS: STREET 1: 6675 185TH AVE NE SUITE 100 CITY: REDMOND STATE: WA ZIP: 98052 BUSINESS PHONE: 2068619800 MAIL ADDRESS: STREET 1: 6675 185TH AVENUE STREET 2: SUITE 100 CITY: REDMOND STATE: WA ZIP: 98052-6734 8-K/A 1 AMENDMENT NO. 2 TO FORM 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------- FORM 8-K/A AMENDMENT NO. 2 TO CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 APRIL 20, 1998 ----------------------- Date of Report (Date of earliest event reported) INCONTROL, INC. - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Charter) DELAWARE 0-24540 91-150619 ----------------- -------------------- ------------------ (State or Other (Commission File No.) (IRS Employer Jurisdiction Identification No.) of Incorporation) 6675 - 185TH AVENUE, N.E., REDMOND, WASHINGTON 98052 - -------------------------------------------------------------------------------- (Address of principal executive offices, including Zip Code) (206) 861-9800 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) 2 ITEM 5. OTHER EVENTS ISSUANCE OF SERIES B CONVERTIBLE PREFERRED STOCK On April 20, 1998, InControl, Inc. (the "Company") sold and issued 7,500 shares (the "Series B Shares") of newly created Series B Convertible Preferred Stock (the "Series B Stock") to two institutional investors (the "Series B Investors"). The Series B Shares were issued and sold pursuant to the provisions of Regulation D promulgated by the Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended (the "Securities Act"). The aggregate offering price of the Series B Shares was $7,500,000, based on a per share price of $1,000. -2- 3 DESCRIPTION OF THE SERIES B STOCK The following description of the Series B Stock is a summary, does not purport to be complete or to give a complete description of the rights and preferences of the Series B Stock, and is subject in all respects to the applicable provisions of law, and to the Certificate of Designations of the Series B Stock (the "Certificate of Designations"), which is filed hereto as Exhibit 3.1, and is incorporated herein by reference. DIVIDENDS The shares of Series B Stock accrue dividends of $50 per annum per share, payable quarterly in cash or in additional shares of Series B Stock, at the option of the Company. The Company's Board of Directors will determine, at the Board of Directors meeting immediately prior to each quarterly dividend payment date, whether to pay dividends on the outstanding shares of Series B Stock in cash or in additional shares of Series B Stock. The Company presently anticipates that, through at least the first two years following the issuance date, it will pay dividends in additional shares of Series B Stock. CONVERSION The Series B Stock is convertible into Common Stock of the Company, $.01 par value per share (the "Common Stock") as follows (subject to adjustments for stock splits, stock dividends, combinations, reclassifications and similar events and to adjustments resulting from certain failures by the Company to satisfy its obligations to the holders of the Series B Stock): (i) until July 20, 1998, each share of Series B Stock is convertible at a price per share (based upon the $1,000 value of each share of Series B Stock) of $7.91; (ii) from July 21, 1998 until January 15, 1999, each share of Series B Preferred Stock, together with accrued and unpaid dividends, is convertible at a price per share equal to the lesser of (a) 92.5% of the average of the two lowest sale prices of the Common Stock during the 12 trading days immediately prior to the conversion and (b) $7.6275 and (iii) thereafter, each share of Series B Preferred Stock, together with accrued and unpaid dividends, is convertible at a price per share equal to the lesser of (a) 87.5% of the average of the two lowest sale prices of the Common Stock during the 15 trading days immediately prior to the conversion and (b) $7.345. For purposes of determining the conversion price for the Series B Stock, the price for the Company's Common Stock will be determined from the first applicable among the following: (i) a national securities exchange on which the shares of Common Stock are listed which constitutes the principal securities market for the Common Stock, (ii) Nasdaq, if Nasdaq constitutes the principal securities market for the Common Stock or (iii) the Nasdaq SmallCap Market, if the Nasdaq SmallCap Market constitutes the principal market for the Common Stock. Because the Series B Stock is convertible by the holders thereof at a discount to the prevailing price of the Common Stock at the time of conversion, any downturn in the price of the Company's Common Stock will increase the number of common shares issuable to such holders upon conversion of the Series B Stock. As a result, in the event of a subsequent upturn in the price of the Common Stock, the opportunity for profits to such holders may be increased, depending upon the extent of such upturn, by virtue of their corresponding acquisition of a greater number of shares of Common Stock. -3- 4 CONVERSION RESTRICTIONS Pursuant to the terms of the Certificate of Designations of the Series B Stock, the Series B Stock is convertible by each holder thereof only to the extent that the number of shares of Common Stock then owned by such holder and its related persons (not including shares underlying unconverted shares of Series B Stock) would not exceed 4.9% of the then outstanding shares of Common Stock as determined in accordance with Sections 13(d) and 16 of the Securities Exchange Act of 1934, as amended (the "Beneficial Ownership Restriction"). The Company is under no obligation to redeem shares of Series B Stock that are not convertible by reason of the Beneficial Ownership Restriction. As a result of Nasdaq rules requiring stockholder approval for the issuance of certain securities, the number of shares of Common Stock issuable upon conversion of the shares of Series B Stock is limited to a maximum share amount equal to 20% of the number of shares of Common Stock outstanding at the time of issuance of the Series B Stock, which equals 3,769,000 shares (or such greater number as is permitted by the rules of Nasdaq) (the "Maximum Share Amount"), unless the stockholders of the Company approve the issuance of a greater number of shares (as required by Nasdaq) or Nasdaq waives the requirement of stockholder approval. If at any time after July 20, 1998, the number of shares issuable upon conversion of the Series B Stock (based upon the conversion price formula discussed above) exceeds the Maximum Share Amount, the holders of the Series B Stock may compel the Company to redeem that portion (on a pro rata basis) of their shares as would not have been convertible because of the Maximum Share Amount restriction. If requested by the holders of Series B Stock, unless the Company obtains stockholder aproval for the issuance of a greater number of shares, the Company must redeem the inconvertible portion of the shares of Series B Stock at a price equal to the greater of (i) 115% of the purchase price and any accrued but unpaid dividends and (ii) the price that is equal to the number of shares issuable upon conversion of the Series B Stock, multiplied by the average of the closing bid price of the Common Stock for the previous five trading days. If the Company's stock price remains below $4.00 per share for a period of 10 consecutive trading days, the holders of Series B Stock will be precluded from converting shares of Series B Stock for a period of 30 days. Thereafter, so long as the price of the Company's Common Stock remains below $4.00 per share, the holders of Series B Stock will be precluded from converting more than 1,500 shares of Series B Stock per month. The following table sets forth (i) the maximum and minimum number of shares of Common Stock issuable upon conversion of the outstanding shares of Series B Stock pursuant to the conversion terms provided in the Certificate of Designations and described above and (ii) the number of shares of Common Stock issuable upon conversion of the Series B Stock pursuant to the conversion terms of the Certificate of Designations described above (assuming that the average of the two lowest sale prices of the Common Stock during the applicable measurement period immediately prior to the conversion is equal to each of the prices set forth in the left column of the table and that no additional shares of Series B Stock are issued in payment of dividends on the Series B Stock): -4- 5
Conversion of 7,500 Until From July 21, 1998 After shares of Series B Stock July 20, 1998(1) until January 15, 1999(2) January 16, 1999(3) - ------------------------- -------------- ---------------------- ---------------- Maximum Number of Shares 948,167 shares 3,769,000 shares(4) 3,769,000 shares(4) Shares at $2.50 948,167 shares 3,243,243 shares 3,428,571 shares Shares at $5.00 948,167 shares 1,621,622 shares 1,714,286 shares Minimum Number of Shares 948,167 shares 983,284 shares(5) 1,021,103 shares(5) - --------------- (1) Until July 20, 1998, each share of Series B Stock is convertible at a fixed price per share of $7.91. (2) From July 21, 1998 until January 15, 1999, each share of Series B Stock is converible at a price per share equal to the lesser of (a) 92.5% of the average of the two lowest sale prices of the Common Stock during the 12 trading days immediately prior to the conversion and (b) $7.6275. (3) After January 15, 1999, each share of Series B Stock is convertible at a price per share equal to the lesser of (a) 87.5% of the average of the two lowest sale prices of the Common Stock during the 15 trading days immediately prior to the conversion and (b) $7.345. (4) As a result of the Maximum Share Amount restriction, the maximum number of shares of Common Stock issuable upon conversion of the Series B Stock is 3,769,000, unless the stockholders of the Company approve the issuance of a greater number of shares (as required by Nasdaq) or Nasdaq waives the requirement of Stockholder approval. (5) Based on the applicable ceiling price at the time of conversion. From July 21, 1998 until January 15, 1999, the applicable ceiling price is $7.6275; thereafter, the applicable ceiling price is $7.345.
OPTIONAL REDEMPTION Upon the occurrence of any of the events listed below ("Optional Redemption Events"), the holders of the Series B Stock may compel the Company to redeem all or any portion of the Series B Stock at a price equal to the greater of (i) 115% of the purchase price and any accrued but unpaid dividends and (ii) the price that is equal to the number of shares issuable upon conversion of the Series B Stock, multiplied by the average of the closing bid prices of the Common Stock for the previous five trading days. Optional Redemption Events are (i) the delisting of the Common Stock from any national securities exchange, the Nasdaq or the Nasdaq SmallCap Market or the absence for five consecutive trading days of a closing bid price for the Common Stock on any one of such markets, (ii) the inability for 30 or more days of the Selling Stockholders to sell the shares pursuant to the Registration Statement on Form S-3 that the Company has filed with the SEC, (iii) the default by the Company of any material obligation to the holders of Series B Stock under the Subscription Agreements and the documents related thereto or the Certificate of Designations or the taking of any action without the consent of the holders of Series B Stock that materially and adversely affects their rights, or (iv) certain business combinations entered into by the Company. The Company may, at its option and at any time, redeem all or a portion of the outstanding shares of Series B Stock at a price per share equal to the greater of: (i) 115% of the purchase price and any accrued but unpaid dividends and (ii) the price that is equal to the number of shares of Common Stock issuable upon conversion of the Series B Stock, multiplied by the average of the closing bid prices of the Common Stock for the previous five trading days. In addition, if at any time prior to April 4, 2001, the price of the Company's Common Stock exceeds $7.91 per share, or at any time later than April 4, 2001, the Company may redeem all (but not less than all) of the outstanding shares of Series B Stock at a price per share equal to $1,000 plus any accrued but unpaid dividends and interest. -5- 6 VOTING AND LIQUIDATION Holders of Series B Stock have no voting rights. In the event of the dissolution, liquidation or winding up of the Company, the holders of Series B Stock are entitled to receive out of the assets of the Company an amount per share equal to $1,000 plus any accrued but unpaid dividends and interest. REGISTRATION RIGHTS AGREEMENT Pursuant to Registration Rights Agreements between the Company and the Series B Investors, the Company is required, by May 20, 1998, to file a registration statement on Form S-3 for the public resale of the Common Stock issuable upon conversion of Series B Stock. These Registration Rights Agreements are attached hereto as Exhibits 4.1 and 4.2. The rights and preferences of the Series B Stock are set forth in the Certificate of Designations attached hereto as Exhibit 3.1. AMENDMENT TO RIGHTS AGREEMENT In connection with the sale of the Series B Shares, the Company amended the Rights Agreement, dated February 27, 1996, between the Company and ChaseMellon Shareholder Services L.L.C., as Rights Agent (the "Rights Agreement"), to provide that holders of Series B Stock shall not be deemed to be the Beneficial Owner (as defined in the Rights Agreement) of the shares of Common Stock issuable upon conversion of Series B Stock until Series B Stock is converted into shares of Common Stock. The amendment to the Rights Agreement is attached hereto as Exhibit 4.3. ADDITIONAL SHARES OF CONVERTIBLE PREFERRED STOCK In connection with the sale and issuance of the Series B Shares, the Company and one of the Series B Investors entered into a letter agreement (the "Letter Agreement"), pursuant to which such Series B Investor, at the option of the Company, will purchase up to $7.5 million of shares of Series C Convertible Preferred Stock, which shall have substantially the same rights and preferences as the Series B Stock and be sold and issued on substantially the same terms as the sale and issuance of the Series B Shares. The obligations of such Series B Investor under the Letter Agreement are subject to certain conditions as set forth in the Letter Agreement. The Letter Agreement is attached hereto as Exhibit 10.1. ISSUANCE OF COMMON STOCK Also, on April 20, 1998, the Company sold and issued 400,000 shares of Common Stock (the "Common Shares") to three institutional investors. The Common Shares were issued and sold pursuant to the provisions of Regulation D promulgated by the SEC under the Securities Act. The aggregate purchase price of the Common -6- 7 Shares was $2,500,000, based on a per share price of $6.25. Under the Stock Purchase Agreement pursuant to which the Common Shares were sold, the Company is obligated to file a registration statement on Form S-3 for the public resale of the Common Shares. The Stock Purchase Agreement is attached hereto as Exhibit 4.4. USE OF PROCEEDS The net proceeds from the two private placements will be used by the Company to fund the continuation of operating activities. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits 3.1 Certificate of Designations of Series B Convertible Preferred Stock.* 4.1 Registration Rights Agreement between InControl, Inc. and Advantage Fund II Ltd., dated April 16, 1998.* 4.2 Registration Rights Agreement between InControl, Inc. and Koch Industries, Inc., dated April 16, 1998.* 4.3 First Amendment of Rights Agreement, dated April 17, 1998.* 4.4 Stock Purchase Agreement between InControl, Inc. and the investors named therein, dated April 20, 1998.* 10.1 Letter Agreement between Advantage Fund II Ltd. and InControl, Inc., dated April 16, 1998.*
- ------------ * Previously filed -7- 8 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. INCONTROL, INC. Dated: July 20, 1998 By /s/ PHILIP A. OKESON -------------------------- Philip A. Okeson Treasurer and Secretary -8- 9 EXHIBIT INDEX
Exhibit Number Description -------------- ----------- 3.1 Certificate of Designations of Series B Convertible Preferred Stock.* 4.1 Registration Rights Agreement between InControl, Inc. and Advantage Fund II Ltd., dated April 16, 1998.* 4.2 Registration Rights Agreement between InControl, Inc. and Koch Industries, Inc., dated April 16, 1998.* 4.3 First Amendment of Rights Agreement, dated April 17, 1998.* 4.4 Stock Purchase Agreement between InControl, Inc. and the investors named therein, dated April 20, 1998.* 10.1 Letter Agreement between Advantage Fund II Ltd. and InControl, Inc., dated April 16, 1998.*
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