UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. ______)*
CARDIOTHORACIC SYSTEMS, INC.
(Name of Issuer)
Common Stock, par value $0.001
(Title of Class of Securities)
14190710
(CUSIP Number)
John E. Runnells
The Vertical Group, L.P.
18 Bank Street
Summit, N.J. 07901
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
July 16, 1996
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box |_|.
Check the following box if a fee is being paid with the statement |X|. (A fee is
not required only if the reporting person: (1) has a previous statement on file
reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the act (however, see the
Notes).
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SCHEDULE 13D
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CUSIP NO. 14190710 Page 2 of 12 Pages
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
The Vertical Fund Associates, L.P.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_|
(b) |_|
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS |_|
IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 700,000
--------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
--------------------------------------------------
OWNED BY
9 SOLE DISPOSITIVE POWER
EACH
700,000
REPORTING --------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER
-------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
700,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES |_|
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 5.4%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION
-2-
<PAGE>
SCHEDULE 13D
================================================================================
CUSIP NO. 14190710 Page 3 of 12 Pages
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Vertical Life Sciences, L.P.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_|
(b) |_|
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS |_|
IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 100,000
BENEFICIALLY --------------------------------------------------
8 SHARED VOTING POWER
OWNED BY --------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 100,000
--------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
100,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES |_|
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0.8%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION
-3-
<PAGE>
SCHEDULE 13D
================================================================================
CUSIP NO. Page 4 of 12 Pages
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Stephen D. Baksa
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_|
(b) |_|
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
PF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS |_|
IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
U.S.A.
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 20,000
BENEFICIALLY --------------------------------------------------
8 SHARED VOTING POWER
OWNED BY
800,000
EACH --------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH 20,000
--------------------------------------------------
10 SHARED DISPOSITIVE POWER
800,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
820,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES |_|
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 6.3%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION
-4-
<PAGE>
Item 1. Security and Issuer.
This Statement on Schedule 13-D ("Statement") is filed with
respect to the Common Stock, par value $0.001 per share, of Cardiothoracic
Systems, Inc. (the "Issuer"), whose principal executive offices are located at
3280 Alpine Road, Portola Valley, California 94028. Such class of securities is
hereinafter referred to as "CTSI Common Stock."
Item 2. Identity and Background.
This Statement is filed jointly by The Vertical Fund
Associates, L.P. ("Associates") and Vertical Life Sciences, L.P. ("Life
Sciences") (collectively, the "Partnerships") and Stephen D. Baksa ("Baksa").
Each of the Partnerships is a Delaware limited partnership whose business
address is 18 Bank Street, Summit, New Jersey 07901. The sole general partner of
each of the Partnerships is The Vertical Group, L.P. ("Group"), a Delaware
limited partnership whose business address is 18 Bank Street, Summit, New Jersey
07901. The general partners of Group are Baksa, Richard B. Emmitt, Jack W.
Lasersohn and John E. Runnells (collectively, the "Individuals"), each of whom
is a United States citizen and has a business address of 18 Bank Street, Summit,
New Jersey 07901. Each of the Partnerships, Group and the Individuals is engaged
principally in the business of securities investment. During the past five
years, neither of the Partnerships nor Group nor any of the Individuals has been
(i) convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or (ii) a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of which such person
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
As of July 22, 1996, Associates owned 700,000 shares of CTSI
Common Stock, which it acquired at an aggregate cost of $1,162,500, Life
Sciences owned 100,000 shares of CTSI Common Stock, which it acquired at an
aggregate cost of $1,021,250, and Baksa owned 20,000 shares of CTSI Common
Stock, which he acquired at an aggregate cost of $210,000. All of the 820,000
shares of CTSI Common Stock collectively owned by the Partnerships and Baksa are
hereinafter referred to as the "Shares." The source of funds used by each
Partnership to acquire the Shares owned by it was such Partnership's internal
cash funds and by Baksa was his personal funds.
-5-
<PAGE>
Item 4. Purpose of Transaction.
The Partnerships and Baksa have acquired the Shares for
investment and, depending on prevailing market prices and other factors, may
purchase additional shares of CTSI Common Stock or sell some or all of the
Shares from time to time. Except as set forth above, the Partnerships and Baksa
have no current plans or proposals that relate to or would result in:
(a) the acquisition by any person of additional securities of
the Issuer, or the disposition of securities of the Issuer;
(b) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Issuer of any of its subsidiaries;
(c) a sale or transfer of a material amount of assets of the
Issuer or any of its subsidiaries;
(d) any change in the present board of directors or management
of the Issuer, including any plans or proposals to change the number or term of
directors or to fill any existing vacancies on the board;
(e) any material change in the present capitalization or
dividend policy of the Issuer;
(f) any other material change in the Issuer's business or
corporate structure;
(g) changes in the Issuer's charter, bylaws or instruments
corresponding thereto or other actions which may impede the acquisition of
control of the issuer by any person;
(h) causing a class of securities of the Issuer to be delisted
from a national securities exchange or to cease to be authorized to be quoted in
an inter-dealer quotation system of a registered national securities
association;
(i) a class of equity securities of the Issuer becoming
eligible for termination of registration pursuant to Section 12(g)(4) of the
Act; or
(j) any action similar to any of those enumerated above.
Item 5. Interest in Securities of the Issuer.
(a) and (b) Of the total Shares beneficially owned by
the Partnerships and Baksa, 700,000 shares (approximately 5.4% of
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<PAGE>
the total outstanding) are directly and beneficially owned by Associates,
100,000 shares (approximately 0.8% of the total outstanding) are directly and
beneficially owned by Life Sciences, and 20,000 shares (approximately 0.2% of
the total outstanding) are directly and beneficially owned by Baksa. Subject to
the next succeeding paragraph, each of the Partnerships and Baksa has the sole
power to vote or direct the vote and to dispose or direct the disposition of the
Shares directly and beneficially owned by such person.
In addition, Group may be deemed to be the beneficial owner of
all 800,000 Shares (approximately 6.2% of the total outstanding) collectively
owned by the two Partnerships because, as the sole general partner of both
Partnerships, Group has the sole power to vote or direct the vote and to dispose
or direct the disposition of such Shares, and each of the Individuals (including
Baksa) may be deemed to be the beneficial owner of all 800,000 Shares
(approximately 6.2% of the total outstanding) collectively owned by the two
Partnerships because as a general partner of Group (which is the sole general
partner of both Partnerships), each such Individual shares the power (which
may be exercised by any one of such Individuals acting alone) to vote or direct
the vote and to dispose or direct the disposition of such Shares.
(c) The chart below lists all transactions in CTSI Common
Stock during to past 60 days by any of the persons identified in response to
paragraph (a) of this Item 5, all of which transactions were effected in the
open market:
Person
Effecting Date of Number of Price per
Transaction Transaction Shares Share
- ----------- ----------- --------- ---------
Associates July 19, 1996 50,000 $10.25
Life Sciences July 16, 1996 20,000 $ 9.94
Life Sciences July 17, 1996 35,000 $10.25
Life Sciences July 19, 1996 25,000 $10.25
Life Sciences July 22, 1996 20,000 $10.38
Baksa July 22, 1996 20,000 $10.50
(d) and (e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or
Relationships With Respect to Securities of the Issuer.
Except as described in the second paragraph of Item 5 (a) and
(b) of this Statement and in this Item 6, there are no contracts, arrangements,
understandings or relationships (legal or otherwise) between or among any of the
persons named in Item 2 of this Statement, or between or among any of such
persons and
-7-
<PAGE>
any other person with respect to any securities of the Issuer, including but not
limited to transfer or voting of any securities, finder's fees, joint ventures,
loan or option arrangements, puts or calls, guarantees of profits, division of
profits or loss, or the giving or withholding of proxies.
The Shares owned by Associates are subject to a "lockup"
agreement dated February, 1996 between Associates and the representatives of the
underwriters of a public offering of CTSI Common Stock pursuant to which
Associates agreed, in general, not to sell or otherwise dispose of any shares of
CTSI Common Stock for a period of 180 days from the effective date of the
registration statement in respect of such offering (April 18, 1996). A copy of
such "lock-up" agreement is filed herewith as Exhibit 2 and incorporated herein
by reference.
Since Group is the sole general partner of each Partnership
and Baksa is a general partner of the Group, it is likely that the Partnerships
and Baksa, although not obligated to do so, will in general adopt similar
strategies with respect to their investments in the Issuer (including with
respect to the acquisition, disposition and voting of CTSI Common Stock). In
addition, Group, as general partner of each of the Partnerships, may from time
to time combine orders to purchase or sell CTSI Common Stock on behalf of the
Partnerships into a single purchase or sale order and thereafter allocate such
purchase or sale between the Partnerships on an average price basis.
Item 7. Material to be Filed as Exhibits.
Exhibit 1 -- Joint Filing Agreement dated July 25, 1996.
Exhibit 2 -- "Lock-Up" Agreement dated February, 1996.
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<PAGE>
Signature.
After reasonable inquiry and to the best of their knowledge
and belief, the undersigned certify that the information set forth in this
Statement is true, complete and correct.
July 25, 1996 VERTICAL FUND ASSOCIATES, L.P.
BY: THE VERTICAL GROUP, L.P.
General Partner
By: /s/ John E. Runnells
-------------------------------
John E. Runnells
General Partner
VERTICAL LIFE SCIENCES, L.P.
BY: THE VERTICAL GROUP, L.P.
General Partner
By: /s/ John E. Runnells
-------------------------------
John E. Runnells
General Partner
/s/ Stephen D. Baksa
--------------------------------
Stephen D. Baksa
-9-
Exhibit 1
JOINT FILING AGREEMENT
Pursuant to Rule 13d-1(f)(1) under the Securities Exchange Act
of 1934, the undersigned hereby agree that only one statement containing the
information required by Schedule 13D (or any amendment thereof) need be filed on
their behalf with respect to the beneficial ownership of any equity securities
of Cardiothoracic Systems, Inc. or any subsequent acquisitions or dispositions
of equity securities of Cardiothoracic Systems, Inc. by any of the undersigned.
Date: July 25, 1996
VERTICAL FUND ASSOCIATES, L.P.
BY: THE VERTICAL GROUP, L.P.
General Partner
By: /s/ John E. Runnells
-------------------------------
John E. Runnells
General Partner
VERTICAL LIFE SCIENCES, L.P.
BY: THE VERTICAL GROUP, L.P.
General Partner
By: /s/ John E. Runnells
-------------------------------
John E. Runnells
General Partner
/s/ Stephen D. Baksa
--------------------------------
Stephen D. Baksa
Exhibit 2
UBS Securities Inc.
Dillon, Read & Co., Inc.
Montgomery Securities
Piper Jaffray Inc.
As Representatives of the Several Underwriters
c/o UBS Securities, Inc.
299 Park Avenue
New York, New York 10171
Ladies and Gentlemen:
The undersigned is a stockholder of Cardio Thoracic Systems,
Inc. (the "Company") and wishes to facilitate the public offering of Common
Stock of the Company pursuant to a Registration Statement on Form S-1 (the
"Registration Statement") to be transmitted for filing with the Securities and
Exchange Commission in or about February 1996, with respect to shares (the
"Shares") of Common Stock of the Company proposed to be issued and sold by the
Company, to the several underwriters to be named in the underwriting agreement.
In consideration of the foregoing, and in order to induce you
to act as underwriters in the public offering, the undersigned hereby
irrevocably agrees that it will not, directly or indirectly, sell, offer, make
any short sale or otherwise dispose of or enter into any contract, arrangement
or commitment to sell or otherwise dispose of any shares of Common Stock or any
securities convertible into or exchangeable or exercisable for any other rights
to purchase or acquire common Stock, without the prior written consent of UBS
Securities, Inc., for a period of 180 days from the effective date of the
Registration Statement.
Notwithstanding the foregoing, if the undersigned is an
individual, he or she may transfer any shares of Common Stock or securities
convertible into or exchangeable or exercisable for the Company's Common Stock
either during his or her lifetime or on death by will or intestacy to his or her
immediate family or to a trust the beneficiaries of which are exclusively the
undersigned and/or a member or members of his or her immediate family; provided,
however, that prior to any such transfer each transferee shall execute an
agreement satisfactory to UBS Securities Inc. pursuant to which each transferee
shall agree to receive and hold such shares of Common Stock, or securities
exercisable or convertible into or exchangeable for the Company's
<PAGE>
Common Stock, subject to the provisions hereof, and there shall be no further
transfer except in accordance with the provisions hereof. For the purposes of
this paragraph, "immediate family" shall mean spouse, lineal descendant, father,
mother, brother or sister of the transferor.
The undersigned hereby waives any rights of the undersigned to
sell shares of Common Stock or any other security issued by the Company pursuant
to the Registration Statement, and acknowledges and agrees that for a period of
180 days from the effective date of the Registration Statement it has no right
to require the Company to register under the Securities Act of 1933, as amended,
such Common Stock or other securities issued by the Company and beneficially
owned by the undersigned.
The undersigned understands that the agreements of the
undersigned are irrevocable and shall be binding upon the undersigned's heirs,
legal representatives, successors and assigns. The undersigned agrees and
consents to the entry of stop transfer instructions with the Company's transfer
agent against the transfer of Common Stock or other securities of the Company
held by the undersigned except in compliance with this agreement.
Dated: February ____, 1996
Very truly yours,
VERTICAL FUND ASSOCIATES
By:/s/ Jack Lasersohn
Name:________________________
Address:_____________________
_____________________
THE COMPANY REQUESTS THAT THIS AGREEMENT BE COMPLETED AND
DELIVERED BY FACSIMILE TRANSMISSION (IF POSSIBLE) TO JASON M. BRADY, ESQ.
(FACSIMILE NUMBER (415) 493-6811), AS SOON AS POSSIBLE. IN ADDITION, PLEASE
RETURN THE ORIGINAL TO MR. BRADY AT WILSON, SONSINI, GOODRICH & ROSATI, 650 PAGE
MILL ROAD, PALO ALTO, CALIFORNIA 94304.
<PAGE>
