<PAGE>
*TOTAL NUMBER OF PAGES: AS FILED WITH THE SECURITIES AND EXCHANGE
INDEX TO EXHIBITS AT PAGE: COMMISSION ON JANUARY 22, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
CARDIOTHORACIC SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
----------------------
Delaware 94-3228757
------------ ------------------------------------
(State of incorporation) (I.R.S. Employer Identification No.)
10600 North Tantau Avenue
Cupertino, California 95014
(Address, including zip code, of Registrant's principal executive offices)
----------------------
1998 EMPLOYEE STOCK PURCHASE PLAN
(Full titles of the plans)
----------------------
CardioThoracic Systems, Inc.
10600 North Tantau Avenue
Cupertino, California 95014
(408) 342-1700
(Name, address, and telephone number, including area code, of agent for service)
----------------------
Copies to:
Christopher J. Ozburn, Esq.
WILSON SONSINI GOODRICH &
ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CA 94304-1050
(415) 493-9300
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- -------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
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CALCULATION OF REGISTRATION FEE
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- ----------------------------------------------------------------------------------------------------------------------
Proposed Proposed
Maximum Maximum Amount of
Title of Each Class of Amount to be Offering Price Aggregate Registration
Securities to be Registered (1) Registered Per Share Offering Price Fee
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.001 par value (1) . . . . 250,000 shares (2) $6.6875(3) $1,671,875 $464.7813
TOTAL $465.00
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</TABLE>
(1) In addition, pursuant to Rule 416(c) under the Securities Act of 1933
(the "Act"), this Registration Statement also covers an indeterminate
amount of interests to be offered or sold pursuant to the employee
benefit plans described herein.
(2) This number represents the number of shares being registered pursuant
to this Registration Statement which are issuable upon exercise of
options which have not yet been granted under the 1998 Employee Stock
Purchase Plan as of the date of this Registration Statement.
(3) Calculated in accordance with Rule 457(h) under the Act solely for the
purpose of calculating the total registration fee. Calculation based
on the weighted average exercise price (rounded to the nearest cent)
at which the options outstanding whose exercise will result in the
issuance of the shares being registered may be exercised.
(4) This subtotal represents the number of shares authorized to be issued
under the 1998 Employee Stock Purchase Plan.
2
<PAGE>
PART I
INFORMATION REQUIRED IN THE PROSPECTUS
Item 1. PLAN INFORMATION
The Registrant will provide the documents containing the information
specified in this Item 1 as specified by Rule 428(b)(1). In accordance with the
rules and regulations of the Securities and Exchange Commission (the
"Commission") and the instructions to Form S-8, the Registrant is not filing
such documents with the Commission either as part of this Registration Statement
or as prospectuses or prospectus supplements pursuant to Rule 424.
Item 2. REGISTRATION INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION
The Registrant will provide the documents containing the information
specified in this Item 2 as specified by Rule 428(b)(1). In accordance with the
rules and regulations of the Commission and the instructions to Form S-8, the
Registrant is not filing such documents with the Commission either as part of
this Registration Statement or as prospectuses or prospectus supplements
pursuant to Rule 424.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. INFORMATION INCORPORATED BY REFERENCE
The following documents and information previously filed with the
Securities and Exchange Commission are hereby incorporated by reference:
(a) The Registrant's Annual Report on Form 10-K (the "Annual Report") for
the fiscal year ended January 2, 1998 filed pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act");
(b) The Registrant's definitive Proxy Statement dated September 28, 1998
filed in connection with the Registrant's 1998 Annual Meeting of
Stockholders;
(c) The Registrant's definitive Proxy Statement dated April 9, 1998 filed
in connection with the Registrant's 1998 Annual Meeting of
Stockholders;
(d) The Registrant's Quarterly Report on Form 10-Q for the quarter ended
October 2, 1998, filed pursuant to Section 13 or 15(d) of the Exchange
Act;
(e) The Registrant's Quarterly Report on Form 10-Q for the quarter ended
July 3, 1998, filed pursuant to Section 13 or 15(d) of the Exchange
Act;
(f) The Registrant's Quarterly Report on Form 10-Q for the quarter ended
April 3, 1998, filed pursuant to Section 13 or 15(d) of the Exchange
Act;
(g) The description of the Company's Preferred Share purchase rights
contained in the Company's Registration Statement on Form 8-A12G filed
on February 28, 1997 (File No. 000-27880).
(h) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A filed on March 1, 1996.
All documents subsequently filed with the Commission by Registrant
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to
the filing of a post-effective amendment which indicates that all securities
offered hereunder have been sold or which deregisters all securities then
remaining unsold under this Registration Statement, shall
II-1
<PAGE>
be deemed to be incorporated by reference in this Registration Statement and
to be part hereof from the date of filing of such documents.
Item 4. DESCRIPTION OF SECURITIES.
Not applicable.
Item 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Certain members of Wilson Sonsini Goodrich and Rosati, Professional
Corporation, and investment partnerships of which such persons are partners
beneficially own 1,389 shares of the Registrant's Common Stock.
Item 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of Delaware provides for
the indemnification of officers, directors and other corporate agents in terms
sufficiently broad to indemnify such persons, under certain circumstances, for
certain liabilities (including reimbursement of expenses incurred) arising under
the Securities Act of 1933 (the "Securities Act").
The Registrant's Bylaws provide that the Registrant shall indemnify
its directors and executive officers and may indemnify its other officers and
employees and other agents to the fullest extent permitted by law, including
circumstances in which indemnification is otherwise discretionary under Delaware
law.
The Registrant has adopted provisions in its Certificate of
Incorporation that limits the personal liability of its directors and officers
for monetary damages arising from a breach of their fiduciary duties in certain
circumstances to the fullest extent permitted by law. Such limitation of
liability does not affect the availability of equitable remedies such as
injunctive relief or rescission.
The Registrant entered into indemnification agreements with its
executive officers and directors containing provisions which are in some
respects broader that the specific indemnification provisions contained in the
General Corporation Law of Delaware. The indemnification agreements may require
the Company, among other things, to indemnify such officers and directors
against certain liabilities that may arise by reason of their status or service
as directors or officers (other than liabilities arising from willful misconduct
of a culpable nature). These agreements also indemnify the directors and
executive officers for certain expenses (including attorney's fees), judgments,
fines and settlement amounts incurred as a result of any proceeding against them
as to which they could be indemnified.
Item 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
Item 8. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit
Number Document
- ----------- -----------------------------------------------------------------
<S> <C>
5.1 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation
10.2 1998 Employee Stock Purchase Plan and form of 1998 Employee Stock
Purchase Plan Subscription Agreement thereunder.
23.1 Consent of PricewaterhouseCoopers L.L.P., Independent Accountants.
23.2 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (contained in Exhibit 5.1 hereto).
II-2
<PAGE>
24.1 Power of Attorney (see page II-4).
</TABLE>
- ---------------------
Item 9. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, post-effective amendment to this Registration Statement 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.
(2) That, for the purpose of determining any liability under the
Securities Act, 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.
(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.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each
filing of the Registrant's annual report pursuant to Section 13(a) or
Section 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
therein, and the offering of such securities at that time shall be
deemed to be an initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant 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,
the Registrant 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.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Cupertino, State of California, on this 22nd day of
January, 1999
CardioThoracic Systems, Inc.
By: /s/ RICHARD M. FERRARI
-----------------------------------
Richard M. Ferrari
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Richard M. Ferrari and Steve M. Van Dick,
jointly and severally, as his attorney-in-fact, each with the power of
substitution, for him in any and all capacities, to sign any amendments to this
Registration Statement on Form S-8, and to file the same, with exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that the 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, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ RICHARD M. FERRARI President, Chief Executive January 22, 1999
- ----------------------------- Officer and Director*
Richard M. Ferrari (Principal Executive
Officer)*
/s/ STEVE M. VAN DICK Vice President of Finance January 22, 1999
- ----------------------------- and Administration and
Steve M. Van Dick Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/ CHARLES S. TAYLOR Vice President, Chief January 22, 1999
- ----------------------------- Technical Officer and
Charles S. Taylor Director*
/s/ ROBERT C. BELLAS, JR. Director* January 22, 1999
- -----------------------------
Robert C. Bellas, Jr.
/s/ THOMAS J. FOGARTY, M.D. Director* January 22, 1999
- -----------------------------
Thomas J. Fogarty, M.D.
/s/ JACK W. LASERSOHN Director* January 22, 1999
- -----------------------------
Jack W. Lasersohn
/s/ THOMAS C. MCCONNELL Director* January 22, 1999
- -----------------------------
Thomas C. McConnell
/s/ PHILIP M. YOUNG Director* January 22, 1999
- -----------------------------
Philip M. Young
</TABLE>
* The 1998 Employee Stock Purchase Plan is being registered pursuant to this
Registration Statement and is subject to administration by the Board of
Directors of the Registrant.
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description
- ---------------------------------------------------------------------------------------
<S> <C>
5.1 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation
10.2 1998 Employee Stock Purchase Plan
23.1 Consent of PricewaterhouseCoopers L.L.P.,
Independent Accountants
23.2 Consent of Wilson Sonsini Goodrich & Rosati,
Professional Corporation (contained in Exhibit 5.1
hereto)
24.1 Power of Attorney (see Page II-4)
</TABLE>
- -----------------------
<PAGE>
EXHIBIT 5.1
January 22, 1999
CardioThoracic Systems, Inc.
10600 North Tantau Avenue
Cupertino, California 95014
RE: REGISTRATION STATEMENT ON FORM S-8
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-8 to be filed by you
with the Securities and Exchange Commission on January 22, 1999 (the
"Registration Statement") in connection with the registration under the
Securities Act of 1933, as amended, of an aggregate of 250,000 shares of your
Common Stock, par value $0.001 per share (the "Shares"), which are to be issued
pursuant to the 1998 Employee Stock Purchase Plan (the "Plan"). As legal
counsel for CardioThoracic Systems, Inc., we have examined the proceedings taken
and are familiar with the proceedings proposed to be taken by you in connection
with the issuance and sale of the Shares pursuant to the Plan.
It is our opinion that, when issued and sold in the manner described in the
Plan and pursuant to the agreement which accompany each grant under the Plan,
the Shares will be legally and validly issued, fully-paid and non-assessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and further consent to the use of our name wherever appearing in the
Registration Statement and any amendments thereto.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/ WILSON SONSINI GOODRICH & ROSATI
<PAGE>
CARDIOTHORACIC SYSTEMS, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1998 Employee Stock Purchase
Plan of CardioThoracic Systems, Inc.
1. PURPOSE. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the
intention of the Company to have the Plan qualify as an "Employee Stock Purchase
Plan" under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. DEFINITIONS.
(a) "BOARD" shall mean the Board of Directors of the Company.
(b) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(c) "COMMON STOCK" shall mean the common stock of the Company.
(d) "COMPANY" shall mean CardioThoracic Systems, Inc. and any
Designated Subsidiary of the Company.
(e) "COMPENSATION" shall mean all base straight time gross earnings,
commissions, overtime, shift premium, incentive compensation, incentive
payments, and bonuses, but exclusive of any other compensation.
(f) "DESIGNATED SUBSIDIARY" shall mean any Subsidiary which has been
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.
(g) "EMPLOYEE" shall mean any individual who is an Employee of the
Company for tax purposes whose customary employment with the Company is at least
twenty (20) hours per week and more than five (5) months in any calendar year.
For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave.
(h) "ENROLLMENT DATE" shall mean the first Trading Day of each
Offering Period.
(i) "EXERCISE DATE" shall mean the last Trading Day of each Purchase
Period.
<PAGE>
(j) "FAIR MARKET VALUE" shall mean, as of any date, the value of
Common Stock determined as follows:
(1) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing price for such stock as quoted on such
exchange or system for the last market trading day on the date of such
determination, as reported in THE WALL STREET JOURNAL or such other source as
the Board deems reliable;
(2) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock on
the date of such determination, as reported in THE WALL STREET JOURNAL or such
other source as the Board deems reliable;
(3) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board.
(k) "OFFERING PERIODS" shall mean the periods of approximately
twenty-four (24) months during which an option granted pursuant to the Plan may
be exercised, commencing on the first Trading Day on or after May 1 and November
1 of each year and terminating on the last Trading Day in the periods ending
twenty-four months later. The duration and timing of Offering Periods may be
changed pursuant to Section 4 of this Plan.
(l) "PLAN" shall mean this 1998 Employee Stock Purchase Plan.
(m) "PURCHASE PERIOD" shall mean the approximately six month period
commencing after one Exercise Date and ending with the next Exercise Date,
except that the first Purchase Period of any Offering Period shall commence on
the Enrollment Date and end with the next Exercise Date.
(n) "PURCHASE PRICE" shall mean 85% of the Fair Market Value of a
share of Common Stock on the Enrollment Date or on the Exercise Date, whichever
is lower; provided however, that the Purchase Price may be adjusted by the Board
pursuant to Section 20.
(o) "RESERVES" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
(p) "SUBSIDIARY" shall mean a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
-2-
<PAGE>
(q) "TRADING DAY" shall mean a day on which national stock exchanges
and the Nasdaq System are open for trading.
3. ELIGIBILITY.
(a) Any Employee who shall be employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent that his or her rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of
stock (determined at the fair market value of the shares at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.
4. OFFERING PERIODS. The Plan shall be implemented by consecutive,
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after May 1 and November 1 of each year, or on such other date
as the Board shall determine, and continuing thereafter until terminated in
accordance with Section 20 hereof. The Board shall have the power to change
the duration of Offering Periods (including the commencement dates thereof) with
respect to future offerings without stockholder approval if such change is
announced at least five (5) days prior to the scheduled beginning of the first
Offering Period to be affected thereafter.
5. PARTICIPATION.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office prior
to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
6. PAYROLL DEDUCTIONS.
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not
-3-
<PAGE>
exceeding ten percent (10%) of the Compensation which he or she receives on
each pay day during the Offering Period.
(b) All payroll deductions made for a participant shall be credited
to his or her account under the Plan and shall be withheld in whole percentages
only. A participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the
Plan as provided in Section 10 hereof, or may increase the rate of his or her
payroll deductions to 10% or decrease the rate of his or her payroll deductions
to 1% during the Offering Period by completing or filing with the Company a new
subscription agreement authorizing a change in payroll deduction rate. The Board
may, in its discretion, limit the number of participation rate changes during
any Offering Period. The change in rate shall be effective with the first full
payroll period following five (5) business days after the Company's receipt of
the new subscription agreement unless the Company elects to process a given
change in participation more quickly. A participant's subscription agreement
shall remain in effect for successive Offering Periods unless terminated as
provided in Section 10 hereof.
(d) In the event a participant decreases the rate of his or her
payroll deduction to 0% during the Offering Period by completing or filing with
the Company a new subscription agreement authorizing such a change in payroll
deduction rate, such change shall be deemed a withdrawal from the Plan pursuant
to Section 10 hereof. All of the participant's payroll deductions credited to
his or her account shall be paid to such participant promptly after receipt of
the new subscription agreement and such participant's option for the Offering
Period shall be automatically terminated, and no further payroll deductions for
the purchase of shares shall be made for such Offering Period.
(e) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to zero percent (0%) at any time during a
Purchase Period. Payroll deductions shall recommence at the rate provided in
such participant's subscription agreement at the beginning of the first Purchase
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10 hereof.
(f) At the time the option is exercised, in whole or in part, or at
the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
-4-
<PAGE>
7. GRANT OF OPTION. On the Enrollment Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Purchase Period more than 5,000
shares of the Company's Common Stock (subject to any adjustment pursuant to
Section 19), and provided further that such purchase shall be subject to the
limitations set forth in Sections 3(b) and 12 hereof. The Board may, for future
Offering Periods, increase or decrease, in its absolute discretion, the maximum
number of shares of the Company's Common Stock an Employee may purchase during
each Purchase Period of such Offering Period. Exercise of the option shall
occur as provided in Section 8 hereof, unless the participant has withdrawn
pursuant to Section 10 hereof. The option shall expire on the last day of the
Offering Period.
8. EXERCISE OF OPTION.
(a) Unless a participant withdraws from the Plan as provided in
Section 10 hereof, his or her option for the purchase of shares shall be
exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to
purchase shares hereunder is exercisable only by him or her.
(b) If the Board determines that, on a given Exercise Date, the
number of shares with respect to which options are to be exercised may exceed
(i) the number of shares of Common Stock that were available for sale under the
Plan on the Enrollment Date of the applicable Offering Period, or (ii) the
number of shares available for sale under the Plan on such Exercise Date, the
Board may in its sole discretion (x) provide that the Company shall make a pro
rata allocation of the shares of Common Stock available for purchase on such
Enrollment Date or Exercise Date, as applicable, in as uniform a manner as shall
be practicable and as it shall determine in its sole discretion to be equitable
among all participants exercising options to purchase Common Stock on such
Exercise Date, and continue all Offering Periods then in effect, or (y) provide
that the Company shall make a pro rata allocation of the shares available for
purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform
a manner as shall be practicable and as it shall determine in its sole
discretion to be equitable among all participants exercising options to purchase
Common Stock on such Exercise Date, and terminate any or all Offering Periods
then in effect pursuant to Section 20 hereof. The Company may make pro rata
allocation of the shares available on the Enrollment Date of any applicable
Offering Period pursuant to the preceding sentence, notwithstanding any
authorization of
-5-
<PAGE>
additional shares for issuance under the Plan by the Company's stockholders
subsequent to such Enrollment Date.
9. DELIVERY. As promptly as practicable after each Exercise Date on
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
10. WITHDRAWAL.
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company in
the form of Exhibit B to this Plan. All of the participant's payroll deductions
credited to his or her account shall be paid to such participant promptly after
receipt of notice of withdrawal and such participant's option for the Offering
Period shall be automatically terminated, and no further payroll deductions for
the purchase of shares shall be made for such Offering Period. If a participant
withdraws from an Offering Period, payroll deductions shall not resume at the
beginning of the succeeding Offering Period unless the participant delivers to
the Company a new subscription agreement.
(b) A participant's withdrawal from an Offering Period shall not have
any effect upon his or her eligibility to participate in any similar plan which
may hereafter be adopted by the Company or in succeeding Offering Periods which
commence after the termination of the Offering Period from which the participant
withdraws.
11. TERMINATION OF EMPLOYMENT.
Upon a participant's ceasing to be an Employee, for any reason, he or
she shall be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such participant's account during the Offering Period but
not yet used to exercise the option shall be returned to such participant or, in
the case of his or her death, to the person or persons entitled thereto under
Section 15 hereof, and such participant's option shall be automatically
terminated. The preceding sentence notwithstanding, a participant who receives
payment in lieu of notice of termination of employment shall be treated as
continuing to be an Employee for the participant's customary number of hours per
week of employment during the period in which the participant is subject to such
payment in lieu of notice.
12. INTEREST. No interest shall accrue on the payroll deductions of a
participant in the Plan.
13. STOCK.
(a) Subject to adjustment upon changes in capitalization of the
Company as provided in Section 19 hereof, the maximum number of shares of the
Company's Common Stock which shall be made available for sale under the Plan
shall be 250,000 shares, plus an annual increase
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<PAGE>
to be added on October 1 of each year beginning in 1999 equal to the lesser
of (i) 250,000 shares and (ii) 1.5% of the outstanding shares on such date.
(b) The participant shall have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant, in the name of the participant and
his or her spouse, or in the name of a trust for the benefit of any one or more
members of such participant's immediate family (the "Trust"). For this purpose,
"immediate family" shall mean the spouse, lineal descendants, father, mother,
brothers and sisters of the participant. In the event the participant
designates that shares be registered in the name of a Trust, such transaction
shall be deemed for tax purposes as a purchase of shares of common Stock by
participant and a subsequent transfer of such shares by participant to the
Trust.
14. ADMINISTRATION. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision
and determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
15. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to an Exercise Date
on which the option is exercised but prior to delivery to such participant of
such shares and cash. In addition, a participant may file a written designation
of a beneficiary who is to receive any cash from the participant's account under
the Plan in the event of such participant's death prior to exercise of the
option. If a participant is married and the designated beneficiary is not the
spouse, spousal consent shall be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and
in the absence of a beneficiary validly designated under the Plan who is living
at the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
16. TRANSFERABILITY. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
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distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
17. USE OF FUNDS. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
18. REPORTS. Individual accounts shall be maintained for each participant
in the Plan. Statements of account shall be given to participating Employees at
least annually, which statements shall set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
19. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, LIQUIDATION,
MERGER OR ASSET SALE.
(a) CHANGES IN CAPITALIZATION. Subject to any required action by the
stockholders of the Company, the Reserves, the maximum number of shares each
participant may purchase each Purchase Period (pursuant to Section 7), as well
as the price per share and the number of shares of Common Stock covered by each
option under the Plan which has not yet been exercised shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration". Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an option.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and
shall terminate immediately prior to the consummation of such proposed
dissolution or liquidation, unless provided otherwise by the Board. The New
Exercise Date shall be before the date of the Company's proposed dissolution or
liquidation. The Board shall notify each participant in writing, at least
ten (10) business days prior to the New Exercise Date, that the Exercise Date
for the participant's option has been changed to the New Exercise Date and that
the participant's option shall be exercised automatically on the New Exercise
Date, unless prior to such date the participant has withdrawn from the Offering
Period as provided in Section 10 hereof.
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<PAGE>
(c) MERGER OR ASSET SALE. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each outstanding option shall be assumed or an
equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the option, any Purchase Periods
then in progress shall be shortened by setting a new Exercise Date (the "New
Exercise Date") and any Offering Periods then in progress shall end on the New
Exercise Date. The New Exercise Date shall be before the date of the Company's
proposed sale or merger. The Board shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for the participant's option has been changed to the New Exercise Date and
that the participant's option shall be exercised automatically on the New
Exercise Date, unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.
20. AMENDMENT OR TERMINATION.
(a) The Board of Directors of the Company may at any time and for any
reason terminate or amend the Plan. Except as provided in Section 19 hereof, no
such termination can affect options previously granted, provided that an
Offering Period may be terminated by the Board of Directors on any Exercise Date
if the Board determines that the termination of the Offering Period or the Plan
is in the best interests of the Company and its stockholders. Except as
provided in Section 19 and this Section 20 hereof, no amendment may make any
change in any option theretofore granted which adversely affects the rights of
any participant. To the extent necessary to comply with Section 423 of the Code
(or any successor rule or provision or any other applicable law, regulation or
stock exchange rule), the Company shall obtain stockholder approval in such a
manner and to such a degree as required.
(b) Without stockholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.
(c) In the event the Board determines that the ongoing operation of
the Plan may result in unfavorable financial accounting consequences, the Board
may, in its discretion and, to the extent necessary or desirable, modify or
amend the Plan to reduce or eliminate such accounting consequence including, but
not limited to:
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<PAGE>
(1) altering the Purchase Price for any Offering Period
including an Offering Period underway at the time of the change in Purchase
Price;
(2) shortening any Offering Period so that Offering Period ends
on a new Exercise Date, including an Offering Period underway at the time of the
Board action; and
(3) allocating shares.
Such modifications or amendments shall not require stockholder
approval or the consent of any Plan participants.
21. NOTICES. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
23. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 20 hereof.
24. AUTOMATIC TRANSFER TO LOW PRICE OFFERING PERIOD. To the extent
permitted by any applicable laws, regulations, or stock exchange rules if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering Period
is lower than the Fair Market Value of the Common Stock on the Enrollment Date
of such Offering Period, then all participants in such Offering Period shall be
automatically withdrawn from such Offering Period immediately after the exercise
of their option on such Exercise Date and automatically re-enrolled in the
immediately following Offering Period as of the first day thereof.
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EXHIBIT A
CARDIOTHORACIC SYSTEMS, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: _______
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. __________________________________________________ hereby elects to
participate in the CardioThoracic Systems, Inc. 1998 Employee Stock
Purchase Plan (the "Employee Stock Purchase Plan") and subscribes to
purchase shares of the Company's Common Stock in accordance with this
Subscription Agreement and the Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of
____% of my Compensation on each payday (from 1% to 10%) during the
Offering Period in accordance with the Employee Stock Purchase Plan.
(Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise my
option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is in
all respects subject to the terms of the Plan. I understand that my
ability to exercise the option under this Subscription Agreement is subject
to stockholder approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of Employee, Employee and Spouse, or a Trust (as
defined in Section 13(c) of the Employee Stock Purchase Plan) only: _____
__________________________________________________. In the event the
shares purchased under the Employee Stock Purchase Plan are issued in
the name of a Trust, I acknowledge and agree and such transaction shall
be deemed for tax purposes a purchase of the shares of Common Stock by me,
and a subsequent transfer of the shares of Common Stock by me to the Trust.
6. I understand that if I dispose of any shares received by me pursuant to the
Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such
<PAGE>
shares) or one year after the Exercise Date, I will be treated for federal
income tax purposes as having received ordinary income at the time of such
disposition in an amount equal to the excess of the fair market value of
the shares at the time such shares were purchased by me over the price
which I paid for the shares. I HEREBY AGREE TO NOTIFY THE COMPANY IN
WRITING WITHIN 30 DAYS AFTER THE DATE OF ANY DISPOSITION OF MY SHARES AND
I WILL MAKE ADEQUATE PROVISION FOR FEDERAL, STATE OR OTHER TAX
WITHHOLDING OBLIGATIONS, IF ANY, WHICH ARISE UPON THE DISPOSITION OF THE
COMMON STOCK. The Company may, but will not be obligated to, withhold
from my compensation the amount necessary to meet any applicable
withholding obligation including any withholding necessary to make
available to the Company any tax deductions or benefits attributable
to sale or early disposition of Common Stock by me. If I dispose of
such shares at any time after the expiration of the 2-year and 1-year
holding periods, I understand that I will be treated for federal income
tax purposes as having received income only at the time of such
disposition, and that such income will be taxed as ordinary income only to
the extent of an amount equal to the lesser of (1) the excess of the fair
market value of the shares at the time of such disposition over the
purchase price which I paid for the shares, or (2) 15% of the fair market
value of the shares on the first day of the Offering Period. The remainder
of the gain, if any, recognized on such disposition will be taxed as
capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent upon
my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print)----------------------------------------------
(First) (Middle) (Last)
- ------------------------- ---------------------------------------------
Relationship
---------------------------------------------
(Address)
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Employee's Social
Security Number: ------------------------------------
Employee's Address: ------------------------------------
------------------------------------
------------------------------------
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:------------------------- ----------------------------------------
Signature of Employee
----------------------------------------
Spouse's Signature (If beneficiary other than
spouse)
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EXHIBIT B
CARDIOTHORACIC SYSTEMS, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the CardioThoracic
Systems, Inc. 1998 Employee Stock Purchase Plan which began on ____________,
19____ (the "Enrollment Date") hereby notifies the Company that he or she hereby
withdraws from the Offering Period. He or she hereby directs the Company to pay
to the undersigned as promptly as practicable all the payroll deductions
credited to his or her account with respect to such Offering Period. The
undersigned understands and agrees that his or her option for such Offering
Period will be automatically terminated. The undersigned understands further
that no further payroll deductions will be made for the purchase of shares in
the current Offering Period and the undersigned shall be eligible to participate
in succeeding Offering Periods only by delivering to the Company a new
Subscription Agreement.
Name and Address of Participant:
--------------------------------
--------------------------------
--------------------------------
Signature:
--------------------------------
Date:
----------------------------
<PAGE>
EXHIBIT 23.1
CONSENT OF PRICEWATERHOUSECOOPERS L.L.P., INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement of
CardioThoracic Systems, Inc. on Form S-8 of our reports dated January 23, 1998
and February 12, 1996, on our audits of the financial statements of
CardioThoracic Systems, Inc. as of January 2, 1998 and December 31, 1996 and for
the years ended January 2, 1998 and December 31, 1996 and for the period from
June 15, 1995 (date of inception) to December 31, 1995, and Informed Creation (a
development stage entity) as of June 14, 1995 and for the period from January 1,
1995 to June 14, 1995, the year ended December 31, 1994, and the cumulative
period from November 3, 1993 (date of inception) to June 14, 1995, respectively,
which reports are included in the 1997 Annual Report on Form 10-K.
PricewaterhouseCoopers L.L.P.
San Jose, California
January 21, 1999
