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Reverse Stock Split
The Company's primary objective of the reverse stock split is to attemptto raise the per share trading price of its common stock in an effort toobtain a listing on the American Stock Exchange or the Nasdaq Capital Market.To obtain a listing, the American Stock Exchange requires, among other things,that the Company's common stock have a minimum bid price of $3.00 per share,and the Nasdaq Capital Market requires, among other things, that the Company'scommon stock maintain a minimum bid price of $4.00 per share. On October 26,2007 the closing price for the Company's common stock, as reported by theOver-the-Counter Bulletin Board (the "OTCBB"), was $1.93. While the Companyintends that the reverse split will increase the bid price per share of itscommon stock above the $3.00 or $4.00 per share minimum price, as the case maybe, there can be no assurance that the reverse split will have that effect,initially or in the future, or that it will enable the Company to achieve thelisting of its common stock on the American Stock Exchange or the NasdaqCapital Market. Moreover, there also can be no assurance that the price pershare of the Company's common stock immediately after the reverse split willincrease proportionately with the reverse split, or that any increase will besustained for any period of time.
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If at the effective time of the reverse stock split the total number ofshares that a shareholder holds is not evenly divisible by ten, theshareholder will not receive a fractional share, but instead will receive cashin an amount equal to the fraction of a share that the shareholder otherwisewould have been entitled to receive, multiplied by the average of the high bidand low asked prices of one share of the Company's common stock, as reportedby the OTC Bulletin Board, for the ten business days immediately preceding theeffective date of the reverse stock split for which transactions in the commonstock are reported.
Process for Reverse Stock Split
Following the effective date of the reverse split, the Company willprovide to each shareholder a transmittal letter from the exchange agentdesignated by the Company (the "Exchange Agent") for use in transmitting theexisting stock certificates representing shares of the Company's common stockto the Exchange Agent. The letter of transmittal will contain instructionsfor the surrender of such stock certificates to the Exchange Agent in exchangefor new certificates representing the appropriate number of whole shares ofnew common stock giving effect to the reverse stock split. The Exchange Agentwill also facilitate the payment to shareholders for fractional shareinterests following the effective date of the reverse split.
Shareholders should not destroy any stock certificates and should notsubmit any certificates until requested to do so.
Payoff of Secured Term Note
The Company is a party to a Secured Loan Agreement dated March 29, 2000,as amended (the "Loan Agreement") with Essex Woodlands Health Venture V, L.P.,Care Capital Investments II, LP, Care Capital Offshore Investments II, LP,Galen Partners, III, L.P., Galen Partners International III, L.P., GalenEmployee Fund III, L.P. and certain individual lenders, having a principalbalance of $5 million plus accrued and unpaid interest. The Loan Agreementprovides that the
