<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
CARDIAC PATHWAYS CORPORATION
(Name of Issuer)
COMMON
(Title of Class of Securities)
141408104
(CUSIP Number)
Judith A. Manion, One Mellon Bank Center, Pittsburgh, PA 15228 (412) 236-1985
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
MAY 21, 1999
(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(e), 13d-1(f), 13d-1(g) check the
following box |X|
Note: Schedules filed in paper format shall include a signed
original and five copies of the schedule, including all exhibits. See Rule
13d-7(b) 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 the 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, as amended (the "Exchange Act") or otherwise subject to the
liabilities of that section of the Exchange Act but shall be subject to all
other provisions of the Exchange Act.
(Continued on following page(s))
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CUSIP No. 141408104 13D Page 2 of 29 Pages
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(1) Names of Reporting Persons. SS or I.R.S. Identification Nos. of Above
Persons
State of Wisconsin Investment Board 39-6006423
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(2) Check The Appropriate Box If A Member Of A Group (a) |_|
(b) |X|
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(3) SEC Use Only
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(4) Source Of Funds*
OO
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(5) Check Box If Disclosure Of Legal Proceedings Is Required Pursuant To
Items 2(d) Or 2(e): |_|
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(6) Citizenship Or Place Of Organization
Wisconsin
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Number Of Shares (7) Sole Voting Power 1,815,000
Beneficially Owned
By Each Reporting
Person With (8) Shared Voting Power -0-
(9) Sole Dispositive Power 1,815,000
(10) Shared Dispositive Power -0-
(11) Aggregate Amount Beneficially Owned By Each Reporting Person
1,815,000 -- See Item 5
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(12) Check If The Aggregate Amount In Row (11) Excludes Certain Shares* |_|
- --------------------------------------------------------------------------------
(13) Percent Of Class Represented By Amount In Row (11)
18.1% -- See Item 5
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(14) Type Of Reporting Person
EP
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*SEE INSTRUCTION BEFORE FILLING OUT!
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ITEM 1. SECURITY AND ISSUER.
The class of equity securities to which this statement relates is the
Common Stock, $0.001 par value per share, (the "Common Stock") of Cardiac
Pathways Corporation, a Delaware corporation (the "Company"). The principal
executive offices of the Company are located at 995 Benecia Avenue, Sunnyvale,
California 94086.
ITEM 2. IDENTITY AND BACKGROUND.
(a) This Schedule 13D is being filed by the State of Wisconsin
Investment Board (SWIB), an independent agency of the State of Wisconsin,
designated by s. 25.15, Wis. Stats., as investment manager for assets of the
Wisconsin Retirement System (WRS).
(b) The address of the principal business and offices of SWIB is 121 E.
Wilson Street, Madison, WI 53707-7842
(c) Not applicable.
(d) None of the Reporting Persons has been convicted in a criminal
proceeding in the past five years (excluding traffic violations or similar
misdemeanors).
(e) During the past five years, none of the Reporting Persons was 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.
(f) Not applicable.
<PAGE> 4
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The State of Wisconsin Investment Board ("SWIB") is the beneficial
owner of warrants to purchase sixty (60) shares of Series B Preferred Stock,
which shares are convertible at the option of the holder into sixty thousand
(60,000) shares of Common Stock. The aggregate exercise price of such warrants
is sixty thousand dollars ($60,000) and is payable out of WRS public pension
trust funds managed by SWIB.
ITEM 4. PURPOSE OF TRANSACTION.
Bridge Financing. In an effort to raise additional capital, on May 21,
1999, the Company entered into a bridge loan with SWIB and certain other
investors (the "Bridge Investors") for an aggregate amount of three million
dollars ($3,000,000), pursuant to the terms of that certain Securities Purchase
Agreement, dated May 20, 1999, executed May 21, 1999, (the "Securities Purchase
Agreement") filed as Exhibit 1 hereto (the "Bridge Financing"). The Bridge
Investors may increase the amount of the Bridge Financing up to an aggregate of
six million dollars ($6,000,000) at their election. The Cardiac Pathways
Corporation Senior Convertible Floating Rate Bridge Notes (the "Notes"), filed
as Exhibit 2 hereto, issued by the Company in connection with the Bridge
Financing, are secured by substantially all of the Company's assets and accrue
interest at a floating rate per annum equal to the sum of the variable rate of
interest announced by Silicon Valley Bank as its "prime rate" in effect from
time to time, plus 2.00%. The Notes are convertible into shares of Series B
Preferred at the rate of $1,000 per share. On May 21, 1999, pursuant to the
terms of the Securities Purchase Agreement, the Company issued to each Bridge
Investor a warrant, a form of which is filed as Exhibit 3 hereto ("Warrant"), to
purchase a number of shares of Series B Preferred equal to the quotient of (a)
the aggregate amount of the Notes held by such Bridge Investor multiplied by ten
percent (10%) divided by (b) one thousand (1,000) (the "Warrant Coverage"). In
the event that the Bridge Investors should choose to lend up to an additional
three million dollars ($3,000,000) to the Company, the Company shall issue to
the Bridge Investors the same Warrant Coverage on such additional funds, for an
aggregate Warrant Coverage of up to six hundred (600) shares of Series B
Preferred, convertible into an aggregate of six hundred thousand (600,000)
shares of Common Stock. The shares of Common Sock disclosed as beneficially
owned by SWIB in this Schedule 13D consist of (i) shares issuable upon
conversion of Series B Preferred issuable upon exercise of Warrants currently
held by SWIB to purchase an aggregate of sixty (60) shares of Series B
Preferred, convertible into an aggregate of 60,000 shares of Common Stock, and
(ii) 1,755,000 shares of Common Stock currently held by SWIB.
Purchase Agreement. The Notes and the interest accrued thereon are
convertible into shares of Series B Preferred as set forth above in accordance
with the terms of the Securities Purchase Agreement and that certain Series B
Convertible Preferred Stock Purchase Agreement, filed as Exhibit 4 hereto (the
"Purchase Agreement"), dated May 20, 1999, executed May 21, 1999, by and between
the Company on the one hand, and the Bridge Investors and certain other
investors (collectively, the "Series B Investors"). Under the terms of the
Purchase Agreement, upon the satisfaction of certain closing conditions, the
Company shall issue and sell up to forty million (40,000,000) shares of Series B
Preferred to the Series B Investors for an aggregate purchase price of forty
million dollars ($40,000,000), which amounts include the issuance of any shares
of Series B Preferred pursuant to the conversion of the Notes and the interest
accrued thereon, but not shares of Series B Preferred issued pursuant to the
exercise of Warrants. The Notes and the interest thereon may not be converted
into Series B Preferred, nor will shares of Series B Preferred be purchased
under the terms of the Purchase Agreement, unless and until the Company's
stockholders approve the issuance of such shares, and as a result, such shares
are not included in shares beneficially owned for the purpose of Rule 13d-3.
Under the terms of the Purchase Agreement, the Company's existing board
of directors other than William N. Starling shall resign effective upon the
closing date of the Purchase Agreement. Mr. Starling shall serve as the
Company's chairman of the board of directors.
<PAGE> 5
Thomas M. Prescott has been appointed as the Company's new chief
executive officer replacing William N. Starling, the Company's former chief
executive officer and president. Mr. Prescott was appointed at the
recommendation of the Series B Investors in accordance with the terms of the
Purchase Agreement.
The Purchase Agreement provides that the holders of the Series B
Preferred shall have the right to nominate three (3) members of the Company's
board of directors, two (2) of whom shall be representatives of BankAmerica
Ventures and one (1) of whom shall be a representative of Morgan Stanley Venture
Partners III, L.P. In the event that the number of the Company's directors
exceeds five (5), the holders of the Series B Preferred shall have the right to
nominate one (1) additional director. All members of the Company's board of
directors nominated by holders of the Series B Preferred shall have the right to
be members of all committees of the Company's board of directors. The Company
further agrees not to file any proxy or other materials with the Securities and
Exchange Commission opposed to the re-election of such persons as directors of
the Company unless such director has committed any action giving the
stockholders of the Company the right to remove such director for cause, and to
use all reasonable efforts to secure the election of such persons as directors.
The Purchase Agreement provides that the remaining directors of the Company will
include one (1) representative of the Company's management, who shall be the
Company's chief executive officer and one (1) outside representative appointed
by a majority of the Company's board of directors.
As of May 21, 1999, under the terms of the Purchase Agreement, the
Company has agreed to grant to BankAmerica Ventures, Morgan Stanley Venture
Partners III, L.P., and SWIB, non-voting, board observation rights.
Pursuant to the terms of the Purchase Agreement, the Company has agreed
to use its best efforts to obtain stockholder approval to amend its Certificate
of Incorporation to effect a 1 for 5 reverse split of the outstanding common
stock and to amend its Bylaws to (i) fix the number of directors at five (5)
members with a provision that the number of directors may be increased to seven
(7) members with the consent of the directors who are representatives of the
Series B Investors, and (ii) to require the affirmative vote of the holders of
at least a majority of the voting power of all of the then outstanding shares
entitled to vote, voting together as a single class, to (I) increase the number
of shares reserved for issuance under the Company's stock plans, such that the
quotient of (A) the shares outstanding issued pursuant to the Company's stock
plans plus the shares available for issuance under the Company's stock plans
plus additional shares proposed to be issued under the Company's stock plans;
divided by (B) the total outstanding capital stock of the Company, including any
outstanding convertible preferred stock, on an as converted basis, is not
greater than thirty percent (30%); and (II) re-price any options granted after
May 20, 1999 to purchase shares of common stock under the Company's stock plans,
provided that the Company shall only re-price each option outstanding prior to
May 20, 1999 once. It is a condition to closing of the Purchase Agreement that
the Company obtain stockholder approval to increase the number of shares of
common stock available for management and employees under the Company's 1991
Stock Option Plan by 4,000,000 shares.
Voting Agreement. Under the terms of the Purchase Agreement, the
Company has entered into a voting agreement, a form of which is filed as Exhibit
5 hereto, (the Voting Agreement) with certain directors, officers, and
stockholders of the Company. Under the terms of the Voting Agreement, such
stockholders have agreed to vote their shares of the Company's common stock in
favor of the approval of the sale of the Series B Preferred pursuant to the
terms of the Purchase Agreement (the "Financing") and against (a) any proposal
made in opposition to or in competition with the completion of the sale of the
sale of the Financing, (b) any liquidation or winding up of the Company and (c)
any action that would make consummation of the Financing unfeasible. Such
stockholders further agreed through the closing date of the Purchase Agreement,
to not directly or indirectly solicit or encourage the acquisition of twenty
percent (20%) or more of the Company's securities by a third party other than
the Series B Investors.
The Rights Preferences and Privileges of the Series B Preferred. The
Certificate of Designation filed by the Company with the Office of the Secretary
of State for the State of Delaware, a form of which is filed as
<PAGE> 6
Exhibit 6 hereto, sets forth the rights, preferences, and privileges of the
Series B Preferred, including, but not limited to the following:
Each share of Series B Preferred will initially be convertible into
1,000 shares of the Company's common stock (before giving effect to the proposed
reverse stock split). The conversion ratio of the Series B Preferred will be
subject to adjustment for price-based anti-dilution.
The Series B Preferred will be entitled to an 11% cumulative dividend
per year and will have a liquidation preference equal to the initial purchase
price of $1,000 plus accrued but unpaid dividends upon the occurrence of a
liquidation, a merger or the sale of our substantially all of the Company's
capital stock or assets.
The holders of the Series B Preferred will vote on all matters
presented to the Company's stockholders on an as-converted to common stock
basis. In addition, the affirmative vote of holders of the Series B Preferred,
voting as a separate class, will be required to: (i) amend or repeal any
provision, or add any provision to the Company's certificate of incorporation or
bylaws which changes the rights of the Series B Preferred; (ii) increase or
decrease (other than by redemption or conversion) the total number of authorized
shares of the Company's preferred stock or common stock; (iii) authorize or
issue, or obligate itself to issue, any other security, including any other
security convertible into or exercisable for any security having a preference
over, or being on a parity with, the Series B Preferred with respect to voting,
dividends, redemption or upon liquidation; (iv) issue any shares of common
stock, other than (a) shares of common stock issuable or issued to employees,
consultants or directors of Cardiac Pathways directly or pursuant to a stock
option plan or restricted stock plan approved by the board of directors,
including the representatives of the Series B Investors; (b) shares of common
stock issuable or issued upon conversion of the Company's Series A Participating
Preferred Stock or Series B Preferred or as dividends or distributions on the
Series A Participating Preferred Stock or Series B Preferred; (c) shares of
common stock issuable or issued upon exercise of warrants issued to banks,
equipment lessors or other venders, where such common stock or warrants were
approved by the board of directors, including the representatives of the Series
B Investors; or (d) shares of common stock issuable or issued as consideration
for business combinations or corporate partnering agreements approved by the
board of directors, including the representatives of the Series B Investors; (v)
declare or pay any dividends on its common stock or redeem, purchase or
otherwise acquire (or pay into or set aside for a sinking fund for such purpose)
any share or shares of common stock; provided, however, that this restriction
shall not apply to the repurchase of shares of common stock from employees,
officers, directors, consultants or other persons performing services for
Cardiac Pathways or any subsidiary pursuant to agreements under which Cardiac
Pathways has the option to repurchase such shares at cost or at cost upon the
occurrence of certain events, such as the termination of employment; (vi) sell,
convey, or otherwise dispose of all or substantially all of its property or
business or merge into or consolidate with any other corporation (other than a
wholly-owned subsidiary corporation) or effect any transaction or series of
related transactions in which more than fifty percent (50%) of the voting power
of this corporation is disposed of; (vii) repurchase any series of preferred
stock, or (viii) increase or decrease the size of the Cardiac Pathways board of
directors.
Redemption Rights At any time after May 31, 2004, the holders of a
majority of the then outstanding Series B Preferred may request that the Company
redeem the outstanding Series B Preferred in whole, upon payment in cash in
respect of each share of Series B Preferred redeemed of an amount equal to
$1,000 plus accrued but unpaid dividends on such shares. In the event the
Company elects not to redeem the then outstanding Series B Preferred, the
cumulative dividend rate payable on the Series B Preferred shall increase six
percent, each year at the beginning after such date the Company elects not to
redeem the Series B Preferred.
Registration Rights The Company and the Series B Investors have entered
into that certain Registration Rights Agreement, dated May 20, 1999, executed
May 21, 1999, filed as Exhibit 7 hereto, (the "Rights Agreement"). Under the
terms of the Rights Agreement, at any time after May 31, 2000 the holders of at
least forty five percent (45%) of the Series B Preferred issued pursuant to the
Purchase Agreement (the
<PAGE> 7
"Shares") can (i) request the Company to effect a registration of the common
stock into which the then outstanding Shares are convertible, of at least
$7,500,000 (a "Requested Registration") and (ii) request the Company to effect a
registration of at least $2,000,000 on Form S-3. The Series B Investors are
entitled to two Requested Registrations, and one registration on Form S-3 per
twelve (12) month period. In addition, in the event the Company proposed to
register any of its securities for its own account or the account of any of its
stockholders (other then certain registrations relating (i) solely to employee
benefits plans; (ii) to a registration on Form S-4 or (iii) relating solely to a
Securities and Exchange Commission Rule 145 transaction), the Series B Investors
will have the right, upon a timely request and subject to a right of priority in
favor of the Company, to have the common stock into which the Shares are
convertible included in such registration. All expenses for the aforementioned
registrations shall be paid by the Company.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) Upon the exercise of Warrants issued in connection with the Bridge
Financing of three million dollars ($3,000,000), SWIB has the right to acquire
and for the purposes of Rule 13d-3 promulgated under the Exchange Act may be
deemed to beneficially own sixty (60) shares of Series B Preferred, which are
convertible at the option of the holder into sixty thousand (60,000) shares of
Common Stock, which is approximately 18.1% of the outstanding shares of Common
Stock as of May 21, 1999 when combined with SWIB's current 1,755,000 shares.
SWIB and the Bridge Investors, for the purposes of Rule 13d-5(b)(i) and
Rule 13d-3 promulgated under the Exchange Act, upon exercise of Warrants with
the underlying cumulative rights to obtain 300,000 shares may be deemed to
beneficially own at the current time an aggregate of 2,055,000 shares of Common
Stock, or approximately 19.9% of the outstanding shares of Common Stock as of
May 21, 1999.
(b) SWIB has the power to direct the disposition of and vote the
shares of Series B Preferred and Common Stock held by it.
However, SWIB has entered into the Voting Agreement described
in Item 4, above.
(c) SWIB has not effected any transaction in the Common Stock
during the past 60 days.
(d) See Item 4
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
See responses to Item 4 and Item 7.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1: Securities Purchase Agreement
Exhibit 2: Form of Senior Convertible Floating Rate Bridge Note
Exhibit 3: Form of Cardiac Pathways Corporation Warrants for The
Purchase of Shares of Preferred Stock of Cardiac
Pathways Corporation
Exhibit 4: Cardiac Pathways Corporation Series B Convertible
Preferred Stock Purchase Agreement
<PAGE> 8
Exhibit 5: Form of Voting Agreement
Exhibit 6: Form of Certificate of Designation
Exhibit 7: Cardiac Pathways Corporation Registration Rights
Agreement
<PAGE> 9
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
June 2, 1999
------------
Date
/s/ George Natzke
-----------------
Signature
George Natzke, Chief Financial Officer
--------------------------------------
Name/Title
<PAGE> 10
SCHEDULE A
EXECUTIVE OFFICERS AND DIRECTORS
OF
STATE OF WISCONSIN INVESTMENT BOARD
The names of the Trustees and the names and titles of the Executive
Officers of the State of Wisconsin Investment Board are set forth below. The
principal business address of each Trustee and officer is State of Wisconsin
Investment Board, 121 E. Wilson Street, Madison, Wisconsin 53707-7842
Board of Trustees
- -----------------
John Petersen III - Chair
Joseph E. Gorman - Vice-Chair
Eric O. Stanchfield - Secretary
Mark D. Bugher
Norma DeHaven
George H. Hahner
Jon D. Hammes
James R. Nelsen
William R. Sauey
Executive Officers
- ------------------
Patricia Lipton Executive Director
Michael L. McCowin Chief Investment Officer
George R. Natzke Chief Financial Officer
Kenneth W. Johnson Chief Administrative Officer
Kurt N. Schacht Chief Legal Counsel
James W. Kaellner Director of Internal Audit
Ledell Zellers Human Resources Director
Investment Directors
- --------------------
Steven F. Hilmer Equities
John F. Nelson Equities
Trisha L. Reopelle Equities
Charles D. Saunders Equities
Robert H. Severance Real Estate
Sally J. Lee Public Fixed Income
Jon R. Traver Public Fixed Income
John J. Zwadzich Public Fixed Income
Michael A. Wagner Non Traditional
James M. Gannon Private Placements
<PAGE> 11
EXHIBIT 1
SECURITIES PURCHASE AGREEMENT
<PAGE> 12
EXHIBIT 2
FORM OF SENIOR CONVERTIBLE FLOATING RATE BRIDGE NOTE
<PAGE> 13
EXHIBIT 3
FORM OF CARDIAC PATHWAYS CORPORATION WARRANTS FOR THE PURCHASE OF SHARES
OF PREFERRED STOCK OF CARDIAC PATHWAYS CORPORATION
<PAGE> 14
EXHIBIT 4
FORM OF CARDIAC PATHWAYS CORPORATION SERIES B CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
<PAGE> 15
EXHIBIT 5
FORM OF VOTING AGREEMENT
<PAGE> 16
EXHIBIT 6
FORM OF CERTIFICATE OF DESIGNATION
<PAGE> 17
EXHIBIT 7
CARDIAC PATHWAYS CORPORATION REGISTRATION RIGHTS AGREEMENT
<PAGE> 18
Exhibit 1
SECURITIES PURCHASE AGREEMENT
dated as of
May 20, 1999
among
CARDIAC PATHWAYS CORPORATION
and
The Purchasers listed on the
signature pages hereof
<PAGE> 19
TABLE OF CONTENTS
----------------------
PAGE
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions.....................................................1
ARTICLE 2
PURCHASE AND SALE OF SECURITIES
SECTION 2.01. Commitments to Purchase.........................................4
SECTION 2.02. The Closings....................................................5
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Organization, Standing, etc.....................................6
SECTION 3.02. Authorization; Noncontravention.................................6
SECTION 3.03. Binding Effect..................................................6
SECTION 3.04. Capitalization..................................................6
SECTION 3.05. Litigation, Proceedings; No Defaults............................8
SECTION 3.06. Investment Company..............................................8
SECTION 3.07. Governmental Regulation.........................................8
SECTION 3.08. Solicitation; Access to Information.............................8
SECTION 3.09. Qualified Small Business........................................9
SECTION 3.10. Small Business Concern..........................................9
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
SECTION 4.01. Private Placement...............................................9
SECTION 4.02. Authority; No Other Action.....................................10
SECTION 4.03. Margin Compliance..............................................11
SECTION 4.04. Source of Funds................................................11
ARTICLE 5
CONDITIONS PRECEDENT TO CLOSING
SECTION 5.01. Conditions to Purchaser's Obligations..........................11
SECTION 5.02. Conditions to Issuer's Obligations.............................13
<PAGE> 20
PAGE
ARTICLE 6
COVENANTS
SECTION 6.01. Incorporation of Affirmative Covenants from the Credit
Agreement...................................................13
SECTION 6.02. Incorporation of Negative Covenants from the Credit
Agreement...................................................13
SECTION 6.03. Furnishing of Information......................................13
SECTION 6.04. Use of Proceeds................................................14
SECTION 6.05. Notice of Shareholder Meetings.................................14
SECTION 6.06. Capitalization.................................................14
SECTION 6.07. Qualified Small Business.......................................14
SECTION 6.08. Small Business Administration Matters..........................15
SECTION 6.09. Regulatory Compliance Cooperation..............................15
SECTION 6.10. Board Observer Rights..........................................16
ARTICLE 7
LIMITATION ON TRANSFERS
SECTION 7.01. Restrictions on Transfer.......................................16
SECTION 7.02. Restrictive Legends............................................17
SECTION 7.03. Notice of Proposed Transfers...................................17
ARTICLE 8
CONVERSION OF SECURITIES
SECTION 8.01. Right to Convert Securities.....................................18
SECTION 8.02. Conversion of Securities........................................18
SECTION 8.03. Equity Securities...............................................19
SECTION 8.04. Registration Rights.............................................19
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices........................................................19
SECTION 9.02. No Waivers; Amendments.........................................20
SECTION 9.03. Expenses; Documentary Taxes....................................20
SECTION 9.04. Payment........................................................20
SECTION 9.05. Termination....................................................20
SECTION 9.06. Successors and Assigns.........................................20
ii
<PAGE> 21
PAGE
SECTION 9.07. California Law.................................................21
SECTION 9.08. Counterparts; Effectiveness....................................21
SECTION 9.09. Entire Agreement...............................................21
Schedule I -- Small Business Investment Companies
Schedule II -- Use of Proceeds
Exhibit A -- Form of Senior Convertible Floating Rate Bridge Note
Exhibit B -- Certificate of Designation
Exhibit C -- Form of Warrant
Exhibit D -- Form of Security Agreement
iii
<PAGE> 22
SECURITIES PURCHASE AGREEMENT
AGREEMENT dated as of May 20, 1999 among Cardiac Pathways Corporation,
a Delaware corporation (the "Issuer"), and the Purchasers listed on the
signature pages hereof (the "Purchasers").
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. (a) Terms defined in the Credit Agreement
referred to below and not otherwise defined herein have, as used herein, the
respective meanings provided for therein.
(b) The following additional terms, as used herein, have the following
meanings:
"Affiliate", as applied to any Person, means any other Person directly
or indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities, by
contract or otherwise.
"Agreement" means this Agreement, as the same may be amended from
time to time.
"BAV" means BankAmerica Ventures, a California corporation.
"Bridge Securities" means the Issuer's Senior Convertible Floating Rate
Bridge Notes substantially in the form set forth in Exhibit A hereto.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in San Francisco and the City of New York are authorized
by law to close.
<PAGE> 23
"Certificate of Designation" means the Certificate of Designation of
the Issuer substantially in the form of Exhibit B hereto, setting forth the
terms of the Preferred Stock.
"Closing" and "Closing Date" have the meanings set forth in Section
2.02(a).
"Collateral Agent" means BankAmerica Ventures as collateral agent under
the Collateral Documents.
"Collateral Documents" means the Security Agreement and any other
agreement pursuant to which the Issuer or any of its Subsidiaries provides a
Lien on its assets in favor of the Collateral Agent for the benefit of the
Purchasers, and all supplementary assignments, security agreements, pledge
agreements, acknowledgments or other documents delivered or to be delivered
pursuant to the terms hereof or of any Collateral Document.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Issuer, par value $.001
per share.
"Credit Agreement" means the Loan and Security Agreement dated as of
May 15, 1998, between the Issuer, and Silicon Valley Bank, together with the
related documents thereto, including without limitation any security documents,
in each case as in effect on May 17, 1999.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Financing Documents" means this Agreement, the Bridge Securities and
the Collateral Documents.
"Issuer" has the meaning set forth in the first paragraph of this
Agreement.
"Issuer's Counsel" means Wilson Sonsini Goodrich & Rosati.
2
<PAGE> 24
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, any Person shall be deemed to own subject to
any Lien any asset that it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement relating to such asset.
"MSVP" means the collective reference to Morgan Stanley Venture
Partners III, L.P., Morgan Stanley Venture Investors III, L.P. and The Morgan
Stanley Venture Partners Entrepreneur Fund, L.P., each a Delaware limited
partnership.
"Other Financing Documents" means the Preferred Stock Purchase
Agreement, the Registration Rights Agreement and the Voting Agreement.
"Permitted Transferee" means a Person that is an Affiliate of a
Purchaser (or, with respect to any Purchaser that is a trust, a successor trust,
Affiliate, or beneficiary thereof) and to which such Purchaser transfers Bridge
Securities.
"Person" means an individual or a corporation, partnership, limited
liability company, association, trust, or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Preferred Stock" means the Series B Convertible Preferred Stock of the
Issuer as set forth in the Certificate of Designation.
"Preferred Stock Purchase Agreement" means the Series B Convertible
Preferred Stock Purchase Agreement dated as of May 20, 1999 among the Issuer and
the purchasers listed therein, as the same may be amended from time to time.
"Purchaser" means the Purchaser or Purchasers listed on the signature
pages hereto together with any Permitted Transferee.
"Regulation D" has the meaning set forth in Section 3.08 hereof.
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of May 20, 1999 among the Issuer and the holders listed therein, as the
same may be amended from time to time.
"Required Purchasers" means at any time prior to the Closing Date,
Purchasers who have agreed to purchase, or, at any time after the Closing Date,
holders of more than, 50% of the aggregate principal amount of the Bridge
Securities.
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"Securities" means the Bridge Securities and the Preferred Stock
issuable upon conversion of the Bridge Securities.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Agreement" means the Security Agreement dated as of May 20,
1999 between the Issuer and the Collateral Agent, substantially in the form of
Exhibit D.
"Subsidiary" means, with respect to any Person, any corporation or
other entity of which a majority of the capital stock or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time directly
or indirectly owned by such Person.
"SWIB" means State of Wisconsin Investment Board.
"Transfer" means any disposition of Securities that would constitute a
sale thereof under the Securities Act.
"Voting Agreement" means the Voting Agreement dated as of May 20, 1999
between the Issuer and the stockholder listed therein, as the same may be
amended from time to time.
"Warrant" means warrants exercisable for shares of Preferred Stock,
substantially in the form of Exhibit C hereto.
"Warrant Purchase Price" means $1.00.
ARTICLE 2
PURCHASE AND SALE OF SECURITIES
SECTION 2.01. Commitments to Purchase. Upon the basis of the
representations and warranties herein contained of each Purchaser, the Issuer
agrees to issue and sell to each Purchaser listed on the signature pages hereto
and each Purchaser, upon the basis of the representations and warranties herein
contained, but subject to the terms and conditions hereinafter stated, agrees
severally but not jointly, to purchase from the Issuer on each Closing Date the
Bridge Securities in the principal amount and at the price as is set forth below
such Purchaser's name on the signature pages hereof in respect of such Closing
Date.
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SECTION 2.02. The Closings. (a) The purchases and sales of the
Securities will take place at two closings (individually, a "Closing") at the
offices of Davis Polk & Wardwell, or at such other location as the Issuer and
the Purchasers shall agree. The initial Closing shall be held on a date as soon
as practicable after all conditions to the obligation of the Purchasers to
purchase the Securities hereunder specified in Section 5.01(a)(i) have been
fulfilled or waived. The second closing (if any) shall be held on a date as soon
as practicable after all considerations to the obligations of the Purchasers to
purchase the Securities hereunder specified in Section 5.01(b) have been
fulfilled or waived. The Issuer shall notify each of the Purchasers of the date
and time of the initial Closing (and the second Closing) not less than two
Business Days prior to such date (or within such other time period as the
parties mutually agree), and each Closing shall occur on such date or such other
date as the parties hereto agree. Such notice shall also specify the principal
amount and purchase price of the Bridge Securities to be purchased by such
Purchaser at such Closing. The maximum principal amount of Bridge Securities to
be purchased by each Purchaser hereunder at each of the Closings shall be as set
forth on the signature pages hereof, and the price of all Bridge Securities
purchased hereunder shall be the same as that set forth on the signature pages
hereof. The date and time of each Closing is referred to herein as the "Closing
Date".
(b) On each Closing Date, each Purchaser shall deliver to the Issuer,
by wire transfer to the account number of the Issuer listed on the signature
pages hereof in immediately available funds or by federal funds check, an amount
equal to the aggregate purchase price of the Bridge Securities being purchased
by such Purchaser from the Issuer on such Closing Date.
(c) At each Closing, the Issuer shall deliver to each Purchaser,
against payment of the purchase price therefor, (i) one or more certificates
evidencing the Bridge Securities being purchased by such Purchaser at such
Closing, in definitive form and registered in such name or names, and in such
denominations, as such Purchaser shall request not later than one Business Day
prior to the applicable Closing Date. The authorized minimum denomination for
the Bridge Securities upon original issuance thereof is $250,000 and any larger
multiple of $100,000.
(d) The second Closing shall be held not later than the date specified
by the Required Purchasers in the notice delivered to the Issuer pursuant to
Section 5.01(b).
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES
The Issuer represents and warrants to each Purchaser as follows:
SECTION 3.01. Organization, Standing, etc. The Issuer is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as conducted to date.
SECTION 3.02. Authorization; Noncontravention. The execution, delivery
and performance by the Issuer of this Agreement and the Bridge Securities are
within the Issuer's corporate powers, have been duly authorized by all necessary
corporate action, require no action by or in respect of, or filing with, any
governmental body, agency or official other than such actions or filings which
have been taken or made or will be taken or made on or prior to the time
required under any such agreement (except the failure either singly or in the
aggregate to take such actions and make such filings which would not have any
bearing on the validity and enforceability of this Agreement) and do not
contravene or constitute a default under (i) any provision of applicable law or
regulation (including Regulations T, U and X of the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board")), (ii) the certificate of
incorporation or bylaws of the Issuer or (iii) any material agreement, judgment,
injunction, order, decree or other instrument binding upon the Issuer or result
in the creation or imposition of any Lien on any asset of the Issuer or any of
its Subsidiaries.
SECTION 3.03. Binding Effect. This Agreement has been duly executed and
delivered by the Issuer and constitutes a valid and binding agreement of the
Issuer (except to the extent that rights to indemnity in respect of liabilities
under federal and state securities laws provided in the Agreement may be limited
under such laws), and the Bridge Securities, when executed and delivered by the
Issuer in accordance with this Agreement, will constitute valid and binding
obligations of the Issuer.
SECTION 3.04. Capitalization. (a) The authorized capital stock of the
Issuer consists of 30,000,000 shares of Common Stock, $.001 par value per share,
and 5,000,000 shares of Preferred Stock, $.001 par value per share, of which
50,000 shares have been designated Series A Participating Preferred Stock,
30,000 shares have been designated Series B Convertible Preferred Stock and
4,920,000 are undesignated. As of the date hereof, (i) 10,038,578 shares of
Common Stock, all of which are validly issued, fully paid and nonassessable, no
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shares of Series A Participating Preferred Stock and no shares of Series B
Convertible Preferred Stock were issued and outstanding; (ii) no shares were
held in treasury by the Issuer or by any subsidiaries of the Issuer; (iii)
2,866,629 shares of Common Stock were reserved for issuance under the Issuer's
stock plans (including (A) 1,442,440 shares of Common Stock reserved for
issuance under the Issuer's 1991 Stock Option Plan, 1,067,591 shares of which
were subject to outstanding options and 374,849 of which were reserved for
future grants, (B) 60,000 shares of Common Stock were reserved for issuance
under the Issuer's 1996 Director Option Plan, 33,000 shares of which were
subject to outstanding options and 27,000 of which were reserved for future
grants, (C) 400,000 shares of Common Stock were reserved for issuance under the
Issuer's 1998 Non- Statutory Stock Option Plan, 143,818 of which were subject to
outstanding options and 256,182 shares of which were available for future
grants, (D) 920,506 shares of Common Stock were reserved for issuance under the
Issuer's 1998 Employee Stock Purchase Plan, 40,506 shares of which were
available for future purchase in fiscal 1999 and 880,000 of which may be
purchased in maximum amounts of 200,000 shares per fiscal year commencing July
1, 1999 and (E) 43,683 shares were subject to an outstanding nonstatutory option
granted outside of the plans); and (iv) 143,141 shares of Common Stock and
related Preferred Stock Purchase Rights were subject to outstanding warrants to
purchase such shares. All shares of the Issuer's Common Stock subject to
issuance as specified above, on the terms and conditions specified in the
instruments pursuant to which they are issuable, shall be duly authorized,
validly issued, fully paid and nonassessable. There are no obligations,
contingent or otherwise, of the Issuer or any of its subsidiaries to repurchase,
redeem or otherwise acquire any shares of the Issuer's capital stock or the
capital stock of any of the Issuer's subsidiaries or make any investment (in the
form of a loan, capital contribution or otherwise) in any such subsidiary or any
other entity other than as contemplated by this Agreement. All of the
outstanding shares of capital stock of each Subsidiary of the Issuer are duly
authorized, validly issued, fully paid and nonassessable, and all such shares
(other than directors' qualifying shares) are owned by the Issuer or another
subsidiary of the Issuer free and clear of all security interests, liens,
claims, pledges, agreements, limitations on the Issuer's voting rights, charges
or other encumbrances of any nature. The Common Stock is quoted on the Nasdaq
National Market.
(b) The Preferred Stock, when issued and delivered to the Purchasers
in accordance with this Agreement, shall be entitled to the benefits set forth
in the certificate of incorporation of the Issuer and the Certificate of
Designation. Upon any conversion of Bridge Securities into Preferred Stock in
accordance with this Agreement, all of such shares shall be validly issued,
fully paid and nonassessable and free and clear of any Lien or other right or
claim. The issuance of such shares of Preferred Stock is not subject to any
preemptive or similar rights and holders of
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such shares of Preferred Stock will not be entitled to any preemptive or similar
rights. Except as set forth in Section 3.04(a) and as provided in Article 8,
immediately following the initial Closing Date, the Issuer will have outstanding
no other shares of capital stock and no securities convertible into or
exchangeable for, or options or other rights to acquire from the Issuer, or
other obligations of the Issuer to issue, directly or indirectly, any shares of
capital stock of the Issuer.
SECTION 3.05. Litigation, Proceedings; No Defaults. (a) There is no
action, suit or proceeding pending against, or to the best knowledge of the
Issuer threatened against or affecting, the Issuer or any of its Subsidiaries
before any court or arbitrator or any governmental body, agency or official
which could, with reasonable likelihood (individually or in the aggregate)
materially adversely affect the business, financial position, results of
operations or prospects of the Issuer and its Subsidiaries, taken as a whole, or
which in any manner draws into question the validity of this Agreement, the
Securities, or any of the other documents delivered or to be delivered by the
Issuer pursuant hereto or thereto.
(b) The Issuer is not in violation of its certificate of incorporation
or bylaws or in violation, breach or default under any provision of applicable
law or regulation or of any agreement, judgment, injunction, order, decree or
other instrument to which it is a party or which is binding upon it, which
violation, breach or default (i) would affect the validity or enforceability of
this Agreement, the Securities or any other agreement, instrument or document
executed or to be executed by the Issuer pursuant hereto or thereto or (ii)
would (individually or in the aggregate) impair the ability of the Issuer to
perform in any material respect the obligations which it has under this
Agreement, the Securities, or any such other agreement, instrument or document.
SECTION 3.06. Investment Company. The Issuer is not, and after giving
effect to the sale and issuance of the Bridge Securities (and any conversion
thereof into the Preferred Stock or other equity securities of the Issuer), will
not be, an "investment company" within the meaning of the Investment Company Act
of 1940, as amended.
SECTION 3.07. Governmental Regulation. Except as required pursuant to
the Securities Act, the Exchange Act and state securities laws, the Issuer is
not subject to any Federal or state law or regulation limiting its ability to
issue and perform its obligations under the terms of the Securities.
SECTION 3.08. Solicitation; Access to Information. (a) No form of
general solicitation or general advertising was used by the Issuer or, to the
best of its knowledge, any other Person acting on its behalf, in respect of
the Securities or in connection with the offer and sale of the Securities.
Neither the Issuer nor any
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Person acting on behalf of the Issuer has, either directly or indirectly, sold
or offered for sale to any Person any of the Securities or any other similar
security of the Issuer except as contemplated by this Agreement.
(b) The Issuer has not offered any Securities to any Person unless
immediately prior to making such offer the Issuer had reasonable grounds to
believe and did believe that such Person was an "Accredited investor" as defined
in Regulation D ("Regulation D") under the Securities Act, and, as of the date
hereof, the Issuer has no reason to believe that such Person is not an
"Accredited investor" as so defined.
SECTION 3.09. Qualified Small Business. The Issuer is a "qualified
small business" within the meaning of Section 1202(d) of the Code as of the date
hereof. The Issuer further represents and warrants that, as of the date hereof,
it meets the "active business requirement" of Section 1202(e) of the Code and it
has made no "significant redemptions" within the meaning of Section
1202(c)(3)(B) of the Code.
SECTION 3.10. Small Business Concern. The Issuer, together with its
"affiliates" (as that term is defined in Section 121.103 of Title 13 of the Code
of Federal Regulations (the "Federal Regulations")), is a "small business
concern" within the meaning of the Small Business Investment Act of 1958, as
amended (the "Small Business Act"), and Part 121 of Title 13 of the Federal
Regulations. The information delivered by the Issuer to each Purchaser on SBA
Forms 480, 652 and 1031 of the Small Business Administration (the "SBA")
delivered in connection herewith is accurate and complete. The Issuer is not
ineligible for financing by any SBIC Investor pursuant to Section 107.720 of
Title 13 of the Federal Regulations. The Issuer acknowledges that BankAmerica
Ventures is a Federal licensee under the Small Business Act.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
Each Purchaser severally, and not jointly, hereby represents and
warrants to the Issuer as follows:
SECTION 4.01. Private Placement. (a) Such Purchaser understands that
(i) the offering and sale of the Securities is intended to be exempt from
registration under the Securities Act pursuant to Section 4(2) of the
Securities Act, and (ii) there is no existing public or other market for the
Securities and there can
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be no assurance that any Purchaser will be able to sell or dispose of such
Purchaser's Securities.
(b) The Securities to be acquired by such Purchaser pursuant to this
Agreement are being acquired for its own account and without a view to the
public distribution of such Securities or any interest therein; provided that
each Purchaser shall have the right at all times to sell or otherwise dispose of
all or any part of the Securities so acquired by such Purchaser pursuant to a
registration, or exemption therefrom, under the Securities Act.
(c) Such Purchaser is an "Accredited investor" as such term is defined
in Regulation D.
(d) Such Purchaser is not a broker-dealer subject to Regulation T of
the Federal Reserve Board.
(e) Such Purchaser has sufficient knowledge and experience in
financial and business matters so as to be capable of evaluating the merits and
risks of its investment in the Securities and such Purchaser is capable of
bearing the economic risks of such investment, including a complete loss of its
investment in the Securities.
(f) Such Purchaser has been given the opportunity to ask questions of,
and receive answers from, the Issuer concerning the terms and conditions of the
Securities and other related matters. Each Purchaser further represents and
warrants to the Issuer that the Issuer has made available to such Purchaser or
its agents all documents and information relating to an investment in the
Securities requested by or on behalf of such Purchaser. In evaluating the
suitability of an investment in the Securities, the Purchaser has not relied
upon any other representations or other information (whether oral or written)
made by or on behalf of the Issuer other than as contemplated by the two
preceding sentences.
SECTION 4.02. Authority; No Other Action. (a) The execution, delivery
and performance of this Agreement are within such Purchaser's powers (corporate
or otherwise) and have been duly authorized on its part by all requisite action
(corporate or otherwise).
(b) No action by or in respect of, or filing with, any governmental
authority, agency or official is required for the execution, delivery and
performance of this Agreement by such Purchaser, other than a "control
certificate" to be filed with the SBA within 30 days of the initial Closing
Date.
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SECTION 4.03. Margin Compliance. Such Purchaser is not relying,
directly or indirectly, on any "margin stock" (as defined in Regulation U of the
Federal Reserve Board) as collateral for the Securities.
SECTION 4.04. Source of Funds. If any part of the funds to be used to
purchase the Securities constitutes assets of any employee benefit plan within
the meaning of Section 3 of ERISA, such Securities are being purchased pursuant
to an available exemption from the provisions of Section 406 of ERISA and
Section 4975 of the Code.
ARTICLE 5
CONDITIONS PRECEDENT TO CLOSING
SECTION 5.01. Conditions to Purchaser's Obligations. (a) The obligation
of each Purchaser to purchase the Securities to be purchased by it hereunder on
each Closing Date is subject to the satisfaction, simultaneously with or prior
to such Closing Date, of the following conditions:
(i) The representations and warranties of the Issuer contained
herein shall be true and correct in all material respects on and as of
such Closing Date as if made on and as of such date;
(ii) Each of the Purchasers shall have received duly executed
counterparts of each Financing Document and each Other Financing
Document;
(iii) No Event of Default (within the meaning of the Credit
Agreement) shall have occurred and be continuing;
(iv) The Collateral Agent shall have received all signed UCC
financing statements reasonably requested by the Collateral Agent to
perfect its security interests in the Collateral and evidence
satisfactory to the Collateral Agent that arrangements satisfactory to
it have been made for filing such UCC financing statements on or
promptly after the Closing Date;
(v) The Collateral Agent shall have received all signed UCC-3
termination statements from Silicon Valley Bank together with a payoff
letter in connection with the repayment of the loans outstanding under
the Credit Agreement;
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(vi) Each of the Purchasers shall have received the Warrants to
purchase the number of shares of Preferred Stock set forth below such
Purchaser's name on the signature pages hereof and such Purchaser shall
have paid to the Issuer the Warrant Purchase Price in respect thereof;
(vii) The Issuer shall have performed and complied in all material
respects with all covenants and agreements required by this Agreement
to be performed or complied with by it at or prior to such Closing
Date;
(viii) Each of the Purchasers shall have received duly executed
certificates representing the Bridge Securities being purchased by such
Purchaser pursuant hereto;
(ix) Such Purchaser's purchase of and payment for the Securities
shall not be prohibited by any applicable law, court order or
governmental regulation;
(x) Each Purchaser shall have received a certificate dated such
Closing Date signed by an executive officer of the Issuer to the effect
set forth in subsections 5.01(a)(i) and 5.01(a)(iii);
(xi) Each Purchaser shall have received an opinion, dated such
Closing Date, of Issuer's Counsel, substantially in the form of Exhibit
E hereto;
(xii) The Purchasers shall have received all documents reasonably
requested by the Purchasers relating to the existence of the Issuer,
the corporate authority for entering into, and the validity of, this
Agreement, the Bridge Securities and any other matters relevant hereto
and thereto, all in form and substance reasonably satisfactory to the
Purchasers; and
(xiii) The Issuer shall have executed and delivered to the Purchasers
a Size Status Declaration on SBA Form 480 and an Assurance of
Compliance on SBA Form 652, and shall have provided to BAV, the
information requested by the Purchasers necessary for the preparation
by BAV of a Portfolio Financing Report on SBA Form 1031.
(b) The obligation of each Purchaser to purchase the Securities to be
purchased by it hereunder on the second Closing Date is subject to the
satisfaction, at or prior to the second Closing Date, of the following
additional condition: The Required Purchasers shall have delivered a notice to
the Issuer requesting that the Issuer issue to each Purchaser Securities in the
amounts set
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forth below such Purchaser's name on the signature pages hereof no later than
two Business Days after delivery of such notice.
SECTION 5.02. Conditions to Issuer's Obligations. The obligations of
the Issuer to issue and sell the Securities pursuant to this Agreement on each
Closing Date to any Purchaser are subject to the satisfaction, at or prior to
such Closing Date, of the following conditions:
(a) The representations and warranties of such Purchaser contained
herein shall be true and correct in all material respects on and as of
the Closing Date as if made on and as of such date;
(b) Such Purchaser shall have performed and complied in all
material respects with all agreements required by this Agreement to be
performed or complied with by such Purchaser at or prior to such
Closing Date; and
(c) The issue and sale of the Securities by the Issuer shall not be
prohibited by any applicable law, court order or governmental
regulation.
ARTICLE 6
COVENANTS
SECTION 6.01. Incorporation of Affirmative Covenants from the Credit
Agreement. The Issuer shall, and (where contemplated by the Credit Agreement)
shall cause each of its Subsidiaries to, comply with the affirmative covenants
set forth in Article 6 of the Credit Agreement other than those set forth in
Sections 6.09, 6.10 and 6.11 thereof.
SECTION 6.02. Incorporation of Negative Covenants from the Credit
Agreement. The Issuer shall not, nor shall it permit its Subsidiaries to violate
any of the negative covenants set forth in Article 7 of the Credit Agreement.
SECTION 6.03. Furnishing of Information. As long as any Purchaser or
any Permitted Transferee owns any Securities, the Issuer will furnish to such
Purchaser any documents filed by the Issuer pursuant to Section 13, 14 or 15(d)
of the Exchange Act and all annual, quarterly or other reports furnished to the
Issuer's public securityholders and such additional information regarding the
financial position or business of the Issuer and its Subsidiaries as such
Purchaser may reasonably request; provided that if the Issuer is not subject to
the
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requirements of Section 13, 14 or 15(d) of the Exchange Act, the Issuer will
promptly furnish to such Purchaser:
(a) As soon as available and in any event within 90 days after the
end of each fiscal year of the Issuer, audited consolidated financial
statements of the Issuer for such fiscal year prepared in accordance
with GAAP, consistently applied, setting forth in comparative form the
figures for the previous fiscal year, all reported on in a manner
acceptable to the Commission by an independent public accountant of
nationally recognized standing, and accompanied by a "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" comparable to that which the Issuer would have been
required to include in reports filed under Section 13 of the Exchange
Act.
(b) As soon as available and in any event within 45 days after the
end of each of the first three quarters of each fiscal year of the
Issuer, unaudited consolidated financial statements of the Issuer for
such fiscal quarter and for the portion of the Issuer's fiscal year
ended at the end of such quarter, setting forth in each case in
comparative form the figures for the corresponding quarter and the
corresponding portion of the Issuer's previous fiscal year, all
certified (subject to normal year-end audit adjustments) as to fairness
of presentation, generally accepted accounting principles and
consistency by the principal financial and accounting officers of the
Issuer.
SECTION 6.04. Use of Proceeds. The proceeds from the issuance and sale
of the Securities by the Issuer pursuant to this Agreement will be used solely
to general corporate purposes in the ordinary course of business as listed on
Schedule II hereto.
SECTION 6.05. Notice of Shareholder Meetings. The Issuer shall not hold
any meeting of its shareholders to approve the Transaction unless it has given
each Purchaser notice thereof at least 5 Business Days prior to the record date
for shareholders eligible to vote at such shareholder meeting.
SECTION 6.06. Capitalization. The Issuer shall not issue any capital
stock or otherwise permit any change to its capitalization from that described
in Section 3.04 hereof except as contemplated by the Other Financing Documents.
SECTION 6.07. Qualified Small Business. The Issuer will use its best
efforts to comply with the reporting and recordkeeping requirements of Section
1202 of the Code, any regulations promulgated thereunder and any similar state
laws and regulations. The Issuer further covenants to submit to its
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shareholders and to state and federal taxation authorities such forms and
filings as may be required to document such compliance, including the California
Franchise Tax Board Form 3565, Small Business Stock Questionnaire, with its
franchise or income tax return for the current income year.
SECTION 6.08. Small Business Administration Matters.
(a) The Issuer will provide to each Purchaser identified as a
licensed Small Business Investment Company on Schedule I hereto (each an "SBIC
Investor"), and to the Small Business Administration (the "SBA"), reasonable
access to the Issuer's books and records for the purpose of confirming the use
of proceeds by the Issuer.
(b) For a period of one year following the Closing, the Issuer will
not change the nature of its business activity if such change would render the
Issuer "ineligible" as provided in Section 107.720 of Title 13 of the Federal
Regulations.
(c) So long as any SBIC Investor holds any securities of the
Issuer, the Issuer will at all times comply with the non-discrimination
requirements of Sections 112, 113 and 117 of Title 13 of the Federal
Regulations.
(d) Within 45 days after the end of each fiscal year of the Issuer,
and at such other times as an SBIC Investor may reasonably request in writing to
the Issuer, the Issuer will deliver to such SBIC Investor a written assessment
in form and substance reasonably satisfactory to such SIBC Investor as to the
economic impact of such SBIC Investor's financing of the Issuer, specifying the
full-time equivalent jobs created or retained in connection with such
investment, and the impact of such financing on the Issuer's business in terms
of profits and with respect to taxes paid by the Issuer and its employees. The
Issuer will promptly provide each SBIC Investor who so requests in writing to
the Issuer, specifying in such written request the nature of such required
information in reasonable detail, such information as such SBIC Investor
requests, in order to permit such SBIC Investor to comply with such SBIC
Investor's obligations under the Small Business Act of 1958, as amended (the
"Small Business Act"), and the regulations promulgated thereunder and related
thereto. Any submission of financial information pursuant to this Section
6.08(d) shall be under cover of a certificate executed by the Issuer's
president, chief executive officer, chief financial officer or treasurer,
certifying that such information (i) relates to the Issuer, (ii) to the best of
the Issuer's knowledge is accurate and (iii) if applicable, has been audited by
the Issuer's independent auditors.
SECTION 6.09. Regulatory Compliance Cooperation. In the event that any
SBIC Investor determines that it has a Regulatory Problem (as defined below), it
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shall have the right to transfer its Securities in compliance with applicable
state and federal securities laws, but without regard to any other restrictions
on transfer set forth in this Agreement (provided that the transferee agrees to
become a party to each such agreement), and the Issuer shall take all such
actions as are reasonably requested by such SBIC Investor in order to (i)
effectuate and facilitate any transfer by it of any securities of the Issuer
then held by it to any person designated by such SBIC Investor, (ii) permit such
SBIC Investor (or any of its affiliates) to exchange all or any portion of any
voting security then held by it on a share-for-share basis for shares of a
nonvoting security of the Issuer, which nonvoting security shall be identical in
all respects to the voting security exchanged for it, except that it shall be
nonvoting and shall be convertible into a voting security on such terms as are
requested by it in light of regulatory considerations then prevailing, and (iii)
amend this Agreement, as amended from time to time, to effectuate and reflect
the foregoing. The parties to this Agreement agree to vote all of the Issuer's
securities held by them in favor of such amendments and actions. For purposes of
this Agreement, a "Regulatory Problem" means any set of facts or circumstances
wherein it has been asserted by any governmental regulatory agency that an SBIC
Investor is not entitled to hold, or exercise any significant right with respect
to, the underlying securities into which the Bridge Securities are convertible.
SECTION 6.10. Board Observer Rights. The Issuer shall invite a
representative of each of BAV, MSDWV and SWIB to attend all meetings of its
Board of Directors in a nonvoting observer capacity and, in this respect, shall
give each such representative copies of all notices, minutes, consents, and
other materials (the "Board Materials") that it provides to its directors at the
same time as such Board Materials are provided to any of its directors;
provided, however, that the Issuer may withhold any information and exclude any
such representative of BAV, MSDWV and SWIB from any meeting or portion thereof
if the disclosure of such material or discussion, in the opinion of counsel to
the Issuer, would jeopardize the Issuer's attorney client privilege. The right
granted to each of BAV, MSDWV and SWIB to attend meetings of the Issuer's Board
of Directors and to receive Board Materials shall not be assignable.
ARTICLE 7
LIMITATION ON TRANSFERS
SECTION 7.01. Restrictions on Transfer. From and after the Closing Date
and their respective dates of issuance, as the case may be, neither the
Securities, nor any interest therein shall be transferable except that from
and after October
16
<PAGE> 38
31, 1999, such Securities or interests therein shall be transferable upon the
conditions specified in Sections 7.02 and 7.03, which conditions are intended to
ensure compliance with the provisions of the Securities Act in respect of the
Transfer of any of the Securities, or any interest therein. Each Purchaser will
cause any proposed transferee of the Securities (or any interest therein) held
by it to agree to take and hold such Securities (or any interest therein)
subject to the provisions and upon the conditions specified in Sections 7.02 and
7.03.
SECTION 7.02. Restrictive Legends. (a) Each certificate for Securities
issued to a Purchaser or to a subsequent transferee shall (unless otherwise
permitted by the provisions of Section 7.02(b) or Section 7.03 include a legend
in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD EXCEPT
IN COMPLIANCE THEREWITH. THIS SECURITY ALSO IS SUBJECT TO ADDITIONAL
RESTRICTIONS ON TRANSFER AS SET FORTH IN THE SECURITIES PURCHASE AGREEMENT DATED
AS OF MAY 20, 1999, A COPY OF WHICH MAY BE OBTAINED FROM CARDIAC PATHWAYS
CORPORATION.
(b) Subject to Section 7.03, any holders of Securities registered
pursuant to the Securities Act and qualified under applicable state securities
laws may exchange such Securities, as the case may be, upon transfer for new
securities that shall not bear the legend set forth in Section 7.02(a).
SECTION 7.03. Notice of Proposed Transfers. At least ten Business Days
prior to any proposed Transfer (other than transfers by MSVP or BAV of some or
all of the Securities (or interests therein) purchased by it hereunder pursuant
to participation agreements or secondary note purchase agreements) of any
Securities, the holder thereof shall give written notice to the Issuer of such
holder's intention to effect such Transfer, setting forth the manner and
circumstances of the proposed Transfer in reasonable detail. Such proposed
Transfer (other than transfers to Permitted Transferees) may be effected only if
the Issuer shall have received such notice of Transfer accompanied by (i) an
opinion of counsel reasonably satisfactory to the Issuer, addressed to the
Issuer, to the effect that the proposed Transfer of the Securities may be
effected without registration under the Securities Act, (ii) representation
letters in form and substance reasonably satisfactory to the Issuer to ensure
compliance with the provisions of the Securities Act, and (iii) letters in form
and substance reasonably satisfactory to the Issuer from each such transferee
stating such transferee's agreement to be bound by the terms of this Article 7.
Each certificate evidencing
17
<PAGE> 39
the Securities transferred as above provided shall bear the legend set forth in
Section 7.02(a) except that such certificate shall not bear such legend if the
opinion of counsel referred to above is to the further effect that neither such
legend nor the restrictions on Transfer in Sections 7.02 and 7.03 are required
in order to ensure compliance with the provisions of the Securities Act.
ARTICLE 8
CONVERSION OF SECURITIES
SECTION 8.01. Right to Convert Securities. Subject to and upon
compliance with the provisions of this Article 8, all outstanding Bridge
Securities are convertible at the option of the Required Purchasers, at any time
through the close of business on May 20, 2000, into fully paid and nonassessable
shares of Preferred Stock in accordance with the terms of the Preferred Stock
Purchase Agreement; provided that prior to the satisfaction of any stockholder
approval requirement of the Nasdaq National Market with respect to the issuance
of the Bridge Securities, under no circumstance shall the Required Purchasers be
permitted to convert the Bridge Securities into Preferred Stock.
SECTION 8.02. Conversion of Securities. (a) In order to convert the
Securities, the Required Purchasers shall deliver to the Issuer an irrevocable
Notice of Conversion setting forth the principal amount of Securities
outstanding as of such date, the accrued but unpaid interest thereon as of such
date, together with the name or names, if other than any Purchaser, in which the
shares of Preferred Stock should be issued upon conversion and surrender to the
Issuer of all the outstanding Securities, duly endorsed or assigned to the
Issuer or in blank. The number of shares of Preferred Stock to be delivered upon
conversion of the Securities shall be determined by reference to the number
obtained by dividing (i) the aggregate principal amount of all the Securities,
plus accrued but unpaid interest thereon as of the Conversion Date (as defined
below) by (ii) the "Per Share Purchase Price" of the Preferred Stock determined
in accordance with the Preferred Stock Purchase Agreement.
(b) The Issuer's delivery upon conversion of the fixed number of
shares of Preferred Stock into which the Securities are convertible (together
with the cash payment, if any, in lieu of fractional shares) shall be deemed to
satisfy the Issuer's obligation to pay the principal amount at maturity of the
portion of Securities so converted and any unpaid interest accrued on such
Securities at the time of such conversion.
18
<PAGE> 40
SECTION 8.03. Equity Securities. (a) The Issuer shall reserve, free
from pre-emptive rights, out of its authorized but unissued shares, sufficient
shares to provide for the conversion of the Securities from time to time as
such Securities are presented for conversion.
(b) If any shares of Preferred Stock to be reserved for the purpose
of delivery upon conversion of Securities hereunder require registration with or
approval of any governmental authority under any Federal or state law before
such shares may be validly issued or delivered upon conversion, then the Issuer
covenants that it will in good faith and as expeditiously as possible endeavor
to secure such registration or approval, as the case may be, provided, however,
that nothing in this Section 8.03 shall be deemed to affect in any way the
obligations of the Issuer to convert Securities into Preferred Stock as provided
in this Article 8.
(c) The Issuer covenants that all shares of Preferred Stock which
may be issued upon conversion of Securities will upon issue be fully paid and
non-assessable by the Issuer and free of pre-emptive rights.
SECTION 8.04. Registration Rights. The Issuer agrees that each
Purchaser shall be entitled to the benefits of the Registration Rights Agreement
with respect to any Preferred Stock issued upon conversion of Bridge Securities
and that any Preferred Stock received by such Purchaser upon conversion of
Securities pursuant to this Article 8 shall be deemed to be "Registrable
Securities" within the meaning of the Registration Rights Agreement.
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including telex, telecopier or
similar writing) and shall be given to such party at its address, telex or
telecopier number set forth on the signature pages hereof, or such other
address, telex or telecopier number as such party may hereinafter specify for
the purpose to the party giving such notice. Each such notice, request or other
communication shall be effective (i) if given by telex or telecopy, when such
telex or telecopy is transmitted to the telex or telecopy number specified in
this Section and the appropriate answerback is received or, (ii) if given by
mail, 72 hours after such communication is deposited in the mails with first
class postage prepaid, addressed as aforesaid or,
19
<PAGE> 41
(iii) if given by any other means, when delivered at the address specified in
this Section 9.01.
SECTION 9.02. No Waivers; Amendments. (a) No failure or delay on the
part of any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
(b) Any provision of this Agreement may be amended or waived if,
but only if, such amendment or waiver is in writing and is signed by the Issuer
and the Required Purchasers; provided that no such amendment or waiver shall,
unless signed by all of the Purchasers, (i) change the amount or terms of any
Bridge Securities to be purchased by any Purchaser pursuant to this Agreement,
(ii) extend the period of time during which the Purchasers shall be obligated to
purchase Bridge Securities pursuant to this Agreement or (iii) change the number
of Purchasers that shall be required for the Purchasers or any of them to take
any action under this Section 9.02(b) or any other provision of this Agreement.
SECTION 9.03. Expenses; Documentary Taxes. The Issuer shall pay all
reasonable fees and disbursements of Special Counsel in connection with the
purchase and sale of the Bridge Securities as contemplated by this Agreement or
any amendments thereto. In addition, the Issuer shall pay any and all stamp,
transfer and other similar taxes payable or determined to be payable in
connection with the execution and delivery of this Agreement or any Securities
or the issuance of the Securities.
SECTION 9.04. Payment. The Issuer agrees that, so long as any Purchaser
hereunder shall own any Securities purchased by it from the Issuer hereunder,
the Issuer will make payments to such Purchaser of all amounts due thereon by
wire transfer by 1:00 p.m. Eastern Time, on the date of payment to such
Purchaser's account as specified beneath such Purchaser's name on the signature
pages hereof or to such other account or in such other similar manner as such
Purchaser may designate to the Issuer in writing.
SECTION 9.05. Termination.
Required Purchasers, on behalf of all the Purchasers at 5:00 p.m. on May 20,
1999, unless the conditions to the Purchasers obligations hereunder are
satisfied or waived by such date.
SECTION 9.06. Successors and Assigns. (a) Except as expressly provided
in this Agreement, the rights and obligations of any Purchaser under this
20
<PAGE> 42
Agreement may not be assigned to any Person and this Agreement shall not be
construed so as to confer any right or benefit upon any Person other than the
parties to this Agreement, and their respective successors and assigns. This
Agreement shall be binding upon the Issuer and each Purchaser and their
respective successors and assigns. Notwithstanding the foregoing, each of BAV
and MSVP may sell interests in the Securities pursuant to participation
agreements or secondary note purchase agreements and the purchasers of such
interests shall be entitled to the rights of a Purchaser hereunder to the extent
provided in such participation agreements/secondary note purchase agreements.
(b) All provisions hereunder purporting to give rights to the
Purchasers shall extend to and include those entities receiving beneficial
interest of the Securities at such Closing Date.
SECTION 9.07. California Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of California. Each of the
parties hereto agrees to submit to the jurisdiction of the courts of the State
of New York in any action or proceeding arising out of or relating to this
Agreement.
SECTION 9.08. Counterparts; Effectiveness. This Agreement may be
executed in any number of counterparts each of which shall be an original with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when the Issuer shall have
executed counterparts hereof and received counterparts hereof signed by all of
the parties hereto.
SECTION 9.09. Entire Agreement. This Agreement constitutes the entire
agreement and understanding among the parties hereto and supersedes any and all
prior agreements and understandings, written or oral, relating to the subject
matter hereof.
21
<PAGE> 43
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers (or, in the case of
parties that are not corporations, other authorized persons), as of the date
first above written.
CARDIAC PATHWAYS CORPORATION
By: /s/ William N. Starling
-------------------------------
Title: President and CEO
Address: 995 Benecia Avenue
Sunnyvale, CA 94086
Account No.:
<PAGE> 44
PURCHASERS:
MORGAN STANLEY VENTURE PARTNERS III, L.P.
By: Morgan Stanley Venture Partners III, L.L.C.
its General Partner
By: Morgan Stanley Venture Capital III, Inc.,
its Institutional Managing Member
By: /s/ Fazle Husain
---------------------------------------------
Title: General Partner
Address: 1221 Avenue of the Americas
New York, New York 10020
Fax: (212) 762-8424
The Purchaser represents and warrants that it is one or more of the
following (please check appropriate box)
[ ] (1) A bank as defined in Section 3(a)(2) of the Securities Act,
acting in either its individual or fiduciary capacity.
[ ] (2) An insurance company as defined in Section 2(13) of the
Securities Act.
[ ] (3) An investment company registered under the Investment Company
Act of 1940.
[ ] (4) A business development company as defined in Section 2(a)( 48)
of the Investment Company Act of 1940.
[ ] (5) A Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958.
[ ] (6) An employee benefit plan within the meaning of Title I of the
Employee Retirement Income Security Act of 1974 and (i) the decision to make an
investment in the Securities was made by a plan fiduciary, as defined in Section
3(21) of such Act, which fiduciary is either a bank, insurance company or
registered investment advisor, or such plan has total assets in excess of
$5,000,000.
[ ] (7) A private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940.
<PAGE> 45
[ ] (8) A not-for-profit organization described n Section 501(c)(3) of
the Code with total assets in excess of $5,000,000.
[ ] (9) A natural person (i.e., not a corporation, trust or
partnership) whose individual net worth (total assets less total liabilities),
or joint net worth with spouse, is in excess of $1,000,000.
[ ] (10) A trust, the trustee of which is a bank as defined in Section
3(a)(2) of the Securities Act acting in its fiduciary capacity.
[x] (11) An entity (other than a trust) in which ALL of the equity
owners (i.e., partners or shareholders) are accredited investors pursuant to any
of the paragraphs above.
[ ] (12) A trust which its grantor may revoke at any time and over
whose assets its grantor retains sole investment control and the grantor is an
accredited investor pursuant to paragraph (9) above.
[x] (13) A corporation, trust or partnership and the total purchase
price of Securities purchased by such entity does not exceed 20% of the
undersigned's net worth at the time of sale. The undersigned has not been formed
for the specific purpose of acquiring the Securities.
[ ] (14) Any director, executive officer or general partner of the
Issuer or any director, executive officer or general partner of the Issuer.
Designated Bank:
Address:
Account No.:
Attention:
Initial Closing Date
Securities Principal Amount Aggregate Purchase Price Warrants
Bridge
Securities $877,305.00 $877,305.00 87.7305
Second Closing Date
Securities Principal Amount Aggregate Purchase Price Warrants
Bridge
Securities $877,305.00 $877,305.00 87.7305
<PAGE> 46
MORGAN STANLEY VENTURE INVESTORS III, L.P.
By: Morgan Stanley Venture Partners III, L.L.C.
its General Partner
By: Morgan Stanley Venture Capital III, Inc.,
its Institutional Managing Member
By: /s/ Fazle Husain
---------------------------------------------
Title: General Partner
Address: 1221 Avenue of the Americas
New York, New York 10020
Fax: (212) 762-8424
The Purchaser represents and warrants that it is one or more of the
following (please check appropriate box)
[ ] (1) A bank as defined in Section 3(a)(2) of the Securities Act,
acting in either its individual or fiduciary capacity.
[ ] (2) An insurance company as defined in Section 2(13) of the
Securities Act.
[ ] (3) An investment company registered under the Investment Company
Act of 1940.
[ ] (4) A business development company as defined in Section 2(a) (48)
of the Investment Company Act of 1940.
[ ] (5) A Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958.
[ ] (6) An employee benefit plan within the meaning of Title I of the
Employee Retirement Income Security Act of 1974 and (i) the decision to make an
investment in the Securities was made by a plan fiduciary, as defined in Section
3(21) of such Act, which fiduciary is either a bank, insurance company or
registered investment advisor, or such plan has total assets in excess of
$5,000,000.
[ ] (7) A private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940.
[ ] (8) A not-for-profit organization described n Section 501(c)(3) of
the Code with total assets in excess of $5,000,000.
<PAGE> 47
[ ] (9) A natural person (i.e., not a corporation, trust or
partnership) whose individual net worth (total assets less total liabilities),
or joint net worth with spouse, is in excess of $1,000,000.
[ ] (10) A trust, the trustee of which is a bank as defined in Section
3(a)(2) of the Securities Act acting in its fiduciary capacity.
[x] (11) An entity (other than a trust) in which ALL of the equity
owners (i.e., partners or shareholders) are accredited investors pursuant to any
of the paragraphs above.
[ ] (12) A trust which its grantor may revoke at any time and over
whose assets its grantor retains sole investment control and the grantor is an
accredited investor pursuant to paragraph (9) above.
[x] (13) A corporation, trust or partnership and the total purchase
price of Securities purchased by such entity does not exceed 20% of the
undersigned's net worth at the time of sale. The undersigned has not been formed
for the specific purpose of acquiring the Securities.
[ ] (14) Any director, executive officer or general partner of the
Issuer or any director, executive officer or general partner of the Issuer.
Designated Bank:
Address:
Account No.:
Attention:
Initial Closing Date
Securities Principal Amount Aggregate Purchase Price Warrants
Bridge
Securities $84,237.00 $84,237.00 8.4237
Second Closing Date
Securities Principal Amount Aggregate Purchase Price Warrants
Bridge
Securities $84,237.00 $84,237.00 8.4237
<PAGE> 48
THE MORGAN STANLEY VENTURE PARTNERS
ENTREPRENEUR FUND, L.P.
By: Morgan Stanley Venture Partners III, L.L.C.
its General Partner
By: Morgan Stanley Venture Capital III, Inc.,
its Institutional Managing Member
By: /s/ Fazle Husain
---------------------------------------------
Title: General Partner
Address: 1221 Avenue of the Americas
New York, New York 10020
Fax: (212) 762-8424
The Purchaser represents and warrants that it is one or more of the
following (please check appropriate box)
[ ] (1) A bank as defined in Section 3(a)(2) of the Securities Act,
acting in either its individual or fiduciary capacity.
[ ] (2) An insurance company as defined in Section 2(13) of the
Securities Act.
[ ] (3) An investment company registered under the Investment Company
Act of 1940.
[ ] (4) A business development company as defined in Section 2(a) (48
of the Investment Company Act of 1940.
[ ] (5) A Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958.
[ ] (6) An employee benefit plan within the meaning of Title I of the
Employee Retirement Income Security Act of 1974 and (i) the decision to make an
investment in the Securities was made by a plan fiduciary, as defined in Section
3(21) of such Act, which fiduciary is either a bank, insurance company or
registered investment advisor, or such plan has total assets in excess of
$5,000,000.
[ ] (7) A private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940.
<PAGE> 49
[ ] (8) A not-for-profit organization described n Section 501(c)(3) of
the Code with total assets in excess of $5,000,000.
[ ] (9) A natural person (i.e., not a corporation, trust or
partnership) whose individual net worth (total assets less total liabilities),
or joint net worth with spouse, is in excess of $1,000,000.
[ ] (10) A trust, the trustee of which is a bank as defined in Section
3(a)(2) of the Securities Act acting in its fiduciary capacity.
[x] (11) An entity (other than a trust) in which ALL of the equity
owners (i.e., partners or shareholders) are accredited investors pursuant to any
of the paragraphs above.
[ ] (12) A trust which its grantor may revoke at any time and over
whose assets its grantor retains sole investment control and the grantor is an
accredited investor pursuant to paragraph (9) above.
[x] (13) A corporation, trust or partnership and the total purchase
price of Securities purchased by such entity does not exceed 20% of the
undersigned's net worth at the time of sale. The undersigned has not been formed
for the specific purpose of acquiring the Securities.
[ ] (14) Any director, executive officer or general partner of the
Issuer or any director, executive officer or general partner of the Issuer.
Designated Bank:
Address:
Account No.:
Attention:
Initial Closing Date
Securities Principal Amount Aggregate Purchase Price Warrants
Bridge
Securities $38,458.00 $38,458.00 3.8458
Second Closing Date
Securities Principal Amount Aggregate Purchase Price Warrants
Bridge
Securities $38,458.00 $38,458.00 3.8458
<PAGE> 50
BANKAMERICA VENTURES
By: /s/ James D. Murphy
----------------------------------------
Title: President and Managing Director
Address: 950 Tower Lane, Suite 700
Foster City, CA 94404
Fax: (650) 378-6040
The Purchaser represents and warrants that it is one or more of the
following (please check appropriate box)
[ ] (1) A bank as defined in Section 3(a)(2) of the Securities Act,
acting in either its individual or fiduciary capacity.
[ ] (2) An insurance company as defined in Section 2(13) of the
Securities Act.
[ ] (3) An investment company registered under the Investment Company
Act of 1940.
[ ] (4) A business development company as defined in Section 2(a) (48)
of the Investment Company Act of 1940.
[x] (5) A Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958.
[ ] (6) An employee benefit plan within the meaning of Title I of the
Employee Retirement Income Security Act of 1974 and (i) the decision to make an
investment in the Securities was made by a plan fiduciary, as defined in Section
3(21) of such Act, which fiduciary is either a bank, insurance company or
registered investment advisor, or such plan has total assets in excess of
$5,000,000.
[ ] (7) A private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940.
[ ] (8) A not-for-profit organization described n Section 501(c)(3) of
the Code with total assets in excess of $5,000,000.
[ ] (9) A natural person (i.e., not a corporation, trust or
partnership) whose individual net worth (total assets less total liabilities),
or joint net worth with spouse, is in excess of $1,000,000.
<PAGE> 51
[ ] (10) A trust, the trustee of which is a bank as defined in Section
3(a)(2) of the Securities Act acting in its fiduciary capacity.
[ ] (11) An entity (other than a trust) in which ALL of the equity
owners (i.e., partners or shareholders) are accredited investors pursuant to any
of the paragraphs above.
[ ] (12) A trust which its grantor may revoke at any time and over
whose assets its grantor retains sole investment control and the grantor is an
accredited investor pursuant to paragraph (9) above.
[ ] (13) A corporation, trust or partnership and the total purchase
price of Securities purchased by such entity does not exceed 20% of the
undersigned's net worth at the time of sale. The undersigned has not been formed
for the specific purpose of acquiring the Securities.
[ ] (14) Any director, executive officer or general partner of the
Issuer or any director, executive officer or general partner of the Issuer.
Designated Bank:
Address:
Account No.:
Attention:
Initial Closing Date
Securities Principal Amount Aggregate Purchase Price Warrants
Bridge
Securities $1,400,000 $1,400,000 140
Second Closing Date
Securities Principal Amount Aggregate Purchase Price Warrants
Bridge
Securities $1,400,000 $1,400,000 140
<PAGE> 52
STATE OF WISCONSIN INVESTMENT BOARD
By: /s/ John Nelson
------------------------------------
Title: Investment Director
Address: 121 East Wilson Street
Madison, WI 53702
Fax: (608) 266-2436
The Purchaser represents and warrants that it is one or more of the
following (please check appropriate box)
[ ] (1) A bank as defined in Section 3(a)(2) of the Securities Act,
acting in either its individual or fiduciary capacity.
[ ] (2) An insurance company as defined in Section 2(13) of the
Securities Act.
[ ] (3) An investment company registered under the Investment Company
Act of 1940.
[ ] (4) A business development company as defined in Section 2(a) (48)
of the Investment Company Act of 1940.
[ ] (5) A Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958.
[ ] (6) An employee benefit plan within the meaning of Title I of the
Employee Retirement Income Security Act of 1974 and (i) the decision to make an
investment in the Securities was made by a plan fiduciary, as defined in Section
3(21) of such Act, which fiduciary is either a bank, insurance company or
registered investment advisor, or such plan has total assets in excess of
$5,000,000.
[ ] (7) A private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940.
[x] (8) A not-for-profit organization described n Section 501(c)(3) of
the Code with total assets in excess of $5,000,000.
[ ] (9) A natural person (i.e., not a corporation, trust or
partnership) whose individual net worth (total assets less total liabilities),
or joint net worth with spouse, is in excess of $1,000,000.
<PAGE> 53
[ ] (10) A trust, the trustee of which is a bank as defined in Section
3(a)(2) of the Securities Act acting in its fiduciary capacity.
[ ] (11) An entity (other than a trust) in which ALL of the equity
owners (i.e., partners or shareholders) are accredited investors pursuant to any
of the paragraphs above.
[ ] (12) A trust which its grantor may revoke at any time and over
whose assets its grantor retains sole investment control and the grantor is an
accredited investor pursuant to paragraph (9) above.
[ ] (13) A corporation, trust or partnership and the total purchase
price of Securities purchased by such entity does not exceed 20% of the
undersigned's net worth at the time of sale. The undersigned has not been formed
for the specific purpose of acquiring the Securities.
[ ] (14) Any director, executive officer or general partner of the
Issuer or any director, executive officer or general partner of the Issuer.
Designated Bank:
Address:
Account No.:
Attention:
Initial Closing Date
Securities Principal Amount Aggregate Purchase Price Warrants
Bridge
Securities $600,000 $600,000 60
Second Closing Date
Securities Principal Amount Aggregate Purchase Price Warrants
Bridge
Securities $600,000 $600,000 60
<PAGE> 54
SCHEDULE I
SMALL BUSINESS INVESTMENT COMPANIES
BankAmerica Ventures
<PAGE> 55
SCHEDULE II
USE OF PROCEEDS
(Please see attached)
<PAGE> 56
EXHIBIT A
FORM OF SENIOR CONVERTIBLE
FLOATING RATE BRIDGE NOTE
<PAGE> 57
EXHIBIT B
CERTIFICATE OF DESIGNATION
<PAGE> 58
EXHIBIT C
FORM OF WARRANT
<PAGE> 59
EXHIBIT D
SECURITY AGREEMENT
<PAGE> 60
EXHIBIT 2
FORM OF
SENIOR CONVERTIBLE FLOATING RATE BRIDGE NOTE
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD EXCEPT
IN COMPLIANCE THEREWITH. THIS SECURITY ALSO IS SUBJECT TO ADDITIONAL
RESTRICTIONS ON TRANSFER AS SET FORTH IN THE SECURITIES PURCHASE AGREEMENT DATED
AS OF MAY 20, 1999, A COPY OF WHICH MAY BE OBTAINED FROM CARDIAC PATHWAYS
CORPORATION.
No. $[Principal Amount]
CARDIAC PATHWAYS CORPORATION
SENIOR CONVERTIBLE FLOATING RATE BRIDGE NOTE
Cardiac Pathways Corporation, a Delaware corporation (together with its
successors and assigns the "Issuer"), for value received hereby promises to pay
to ____________ (the "Holder") and its successors, transferees and assigns the
principal sum of [Principal Amount] by wire transfer of immediately available
funds to the Holder's account (the "Bank Account") at a bank in the United
States specified on Schedule I hereto, as amended from time to time, on the
Stated Maturity Date, in such coin or currency of the United States of America
as at the time of payment shall be legal tender for the payment of public and
private debts, and to pay interest, quarterly in arrears, on August __, November
__, February __ and May __ (unless such day is not a Business Day, in which
event on the next succeeding Business Day) (each an "Interest Payment Date") of
each year in which this Note remains outstanding, commencing with August __,
1999, on the unpaid principal sum hereof outstanding in like coin or currency,
at the rates per annum set forth below, by wire transfer of immediately
available funds to the Bank Account from the most recent Interest Payment Date
to which interest has been paid on this Note until payment in full of the
principal sum hereof has been made.
<PAGE> 61
The interest rate shall be a floating rate per annum (the "Interest
Rate") equal to the sum of (i) the variable rate of interest announced by
Silicon Valley Bank as its "prime rate" in effect from time to time plus (ii)
2.00%.
Further, the Issuer shall pay interest on overdue principal at a rate
per annum 5% above the rate borne by the Notes at the time the same became
overdue (the "Overdue Rate"), and interest on overdue installments of interest,
to the extent lawful, at the Overdue Rate, it being understood that the payment
of interest on interest may result in the compounding of interest.
The Issuer may, at its option and in its sole discretion, in lieu of
the payment in whole or in part of interest in cash on this Note, on any
Interest Payment Date, pay interest on this Note through the issuance of
additional Notes ("Additional Securities"). Such Additional Securities shall be
in an aggregate principal amount equal to the amount of interest that would be
payable with respect to this Note on such Interest Payment Date (less any cash
interest payments, if any) and such Additional Securities shall be identical to
the Notes otherwise issued. Such Additional Securities shall be issued only in
denominations of $1,000 and multiples thereof. Any interest due and payable in
Additional Securities which cannot be paid in Notes because such Note would have
a denomination less than $1,000 shall be paid in cash. Except as expressly
provided herein, the term "Notes" shall include all Additional Securities that
may be issued pursuant to this paragraph.
Interest on this Note will be calculated on the basis of a 360 day
year, based on the actual number of days elapsed.
Notwithstanding anything herein to the contrary, the interest or any
amount deemed to be interest payable by the Issuer with respect to this Note
shall not exceed the maximum amount permitted by applicable law and, to the
extent that any payments in excess of such permitted amount are received by the
Holder, such excess shall be considered payments in respect of the principal
amount of this Note. All sums paid or agreed to be paid to the Holder for the
use, forbearance or retention of the indebtedness of the Issuer to the Holder
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full term of such indebtedness until payment
in full of the principal so that the interest on account of such indebtedness
shall not exceed the maximum amount permitted by applicable law.
This Note is one of a duly authorized issue of senior convertible
floating rate bridge notes of the Issuer (the "Notes") referred to in the
Securities Purchase Agreement dated as of May __, 1999 among the Issuer and the
Purchasers listed on the signature pages thereto (the "Purchase Agreement"). The
Notes are
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subject to the terms and conditions of the Purchase Agreement. The Notes are
transferable and assignable to one or more purchasers (in denominations of
$250,000 or any larger multiple of $100,000), in accordance with the limitations
set forth in the Purchase Agreement. The Issuer agrees to issue from time to
time replacement Notes in the form hereof to facilitate such transfers and
assignments. In addition, after delivery of an indemnity in form and substance
satisfactory to the Issuer, the Issuer also agrees to issue replacement Notes
for Notes which have been lost, stolen, mutilated or destroyed.
The Issuer shall keep at its principal office a register (the
"Register") in which shall be entered the names and addresses of the registered
holders of the Notes and particulars of the respective Notes held by them and of
all transfers of such Notes. References to the "Holder" or "Holders" shall mean
the Person listed in the Register as the payee of any Note unless the payee
shall have presented such Note to the Issuer for transfer and the transferee
shall have been entered in the Register as a subsequent holder, in which case
the term shall mean such subsequent holder. The ownership of the Notes shall be
proven by the Register. For the purpose of paying interest and principal on the
Notes, the Issuer shall be entitled to rely on the names and addresses in the
Register and notwithstanding anything to the contrary contained in this Note, no
Event of Default shall occur under Section 4(a) or 4(b) if payment of interest
and principal is made in accordance with the names and addresses and particulars
contained in the Register.
SECTION 1. Certain Terms Defined. Terms defined in the Credit Agreement
and not otherwise defined herein have, as used herein, the respective meanings
provided for therein. The following additional terms (except as otherwise
expressly provided or unless the context otherwise clearly requires) for all
purposes of this Note shall have the respective meanings specified below. All
accounting terms used herein and not expressly defined shall have the meanings
given to them in accordance with generally accepted accounting principles, and
the term "generally accepted accounting principles" shall mean such accounting
principles which are generally accepted as of the date hereof. The terms defined
in this Section 1 include the plural as well as the singular.
"Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, "control" when used with
respect to any Person means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
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"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in San Francisco and the City of New York are authorized
by law to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's capital stock whether now outstanding or issued after the date of this
Note, including, without limitation, all Common Stock and Preferred Stock.
"Certificate of Designation" means the Certificate of Designation of
the Issuer substantially in the form of Exhibit B to the Purchase Agreement,
setting forth the terms of the Preferred Stock.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means, with respect to any Person, any and all shares,
interests, participations and other equivalents (however designated) of such
person's common stock, whether now outstanding or issued after the date of this
Note, and includes, without limitation, all series and classes of such common
stock.
"Credit Agreement" shall have the meaning set forth in the Purchase
Agreement.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Issuer against fluctuations in currency values.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes, or other similar instruments,
(iii) all obligations of such Person in respect of letters of credit or other
similar instruments (or reimbursement obligations with respect thereto), (iv)
all obligations of such Person to pay the deferred purchase price of property or
services, except Trade Payables, (v) all obligations of such Person as lessee
under capital leases, (vi) all Debt of others secured by a Lien on any asset of
such Person, whether or not such Debt is assumed by such Person, and (vii) all
Debt of others Guaranteed by such Person and (viii) to the extent not otherwise
included, obligations under Currency Agreements and Interest Rate Agreements.
"Derivatives Obligations" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
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equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cross-currency rate swap transaction, currency option or
any other similar transaction (including any option with respect to any of the
foregoing transactions) or any combination of the foregoing transactions.
"Event of Default" means any event or condition specified as such in
Section 4 which shall have continued for the period of time, if any, therein
designated.
"Interest Rate Agreement" means any interest rate protection agreement,
interest rate future, interest rate option, interest rate swap, interest rate
cap or other interest rate hedge arrangement, to or under which the Issuer is a
party or a beneficiary on the date hereof or becomes a party or a beneficiary
hereafter.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Note, the Issuer shall be deemed to own subject to a
Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement relating to such asset.
"Material Financial Obligation" means a principal or face amount of
Debt and/or payment obligations in respect of any Derivative Obligations of the
Issuer and/or one or more if to Subsidiaries, arising in one or more related or
unrelated transactions, exceeding in the aggregate $250,000.
"Permitted Lien" has the meaning set forth in the Credit Agreement.
"Person" means an individual, a corporation, a partnership, limited
liability company, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Preferred Stock" means the Series B Convertible Preferred Stock of the
Issuer as set forth in the Certificate of Designation.
"Preferred Stock Purchase Agreement" means the Series B Convertible
Preferred Stock Purchase Agreement dated as of May 20, 1999 among the Issuer
and the purchasers listed therein.
"Registration Rights" shall have the meaning set forth in the Purchase
Agreement.
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"Stated Maturity Date" means May 20, 2000.
"Subsidiary" means, with respect to any Person, any corporation or
other entity of which a majority of the Capital Stock or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time directly
or indirectly owned by such Person.
"Transaction" means the purchase of up to $40 million aggregate
preference amount of the Issuer's Series B Convertible Preferred Stock by the
purchasers listed on the signature pages of the Preferred Stock Purchase
Agreement.
"Trade Payables" means accounts payable or any other indebtedness or
monetary obligations to trade creditors created or assumed by the Issuer or any
Subsidiary of the Issuer in the ordinary course of business in connection with
the obtaining of materials or services.
"Warrants" means warrants exercisable for shares of Preferred Stock,
substantially in the form of Exhibit C to the Purchase Agreement.
SECTION 2. Payment of Principal and Interest. No provision of this Note
shall alter or impair the obligations of the Issuer, which are absolute and
unconditional, to pay the principal of and interest on this Note at the place,
times, and rate, and in the currency, herein prescribed.
SECTION 3. Covenants. The Issuer will comply with the covenants set
forth in Article 6 of the Purchase Agreement.
SECTION 4. Events of Default and Remedies.
(a) Event of Default Defined; Acceleration of Maturity; Waiver of
Default. In case one or more of the following Events of Default (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body) shall have occurred and be continuing:
(i) default in the payment of any interest (including the payment
of interest in Additional Securities in lieu of a cash payment) upon
any of the Notes as and when the same shall become due and payable; or
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<PAGE> 66
(ii) default in the payment of all or any part of the principal on
any of the Notes as and when the same shall become due and payable, at
maturity, upon any redemption, by declaration or otherwise; or
(iii) failure on the part of the Issuer duly to observe or perform
any other of the covenants or agreements on the part of the Issuer
contained in the Notes or the Purchase Agreement for a period of 10
days after the date on which written notice specifying such failure,
stating that such notice is a "Notice of Default" hereunder and
demanding that the Issuer remedy the same, shall have been given by
registered or certified mail, return receipt requested, to the Issuer
by the holders of at least a majority in aggregate principal amount of
the Notes at the time outstanding; or
(iv) the Issuer or any Subsidiary shall fail to make any payment
in respect of any Material Financial Obligation when due, giving effect
to any applicable grace period;
(v) a judgment or order (not covered by insurance) for the
payment of money shall be rendered against the Issuer or any Subsidiary
of the Issuer in excess of $250,000 individually or $250,000 in the
aggregate for all such judgments or orders against all such Persons
(treating any deductibles, self insurance or retention as not so
covered) that shall not be discharged, and all such judgments and
orders remain outstanding and there shall be any period of 30
consecutive days following entry of the judgment or order in excess of
$250,000 or the judgment or order which causes the aggregate amount
described above to exceed $250,000 during which a stay of enforcement
of such judgment or order, by reason of a pending appeal or otherwise,
shall not be in effect; or
(vi) an involuntary case or other proceeding shall be commenced
against the Issuer or any of its Subsidiaries seeking liquidation,
reorganization or other relief with respect to it or its debts under
any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall
remain undismissed and unstayed for a period of 60 days; or an order
for relief shall be entered against the Issuer or any of its
Subsidiaries under the federal bankruptcy laws as now or hereafter in
effect;
(vii) the Issuer or any of its Subsidiaries shall commence a
voluntary case under any applicable bankruptcy, insolvency or other
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<PAGE> 67
similar law now or hereafter in effect, or consent to the entry of an
order for relief in an involuntary case under any such law, or consent
to the appointment or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of the
Issuer or any of its Subsidiaries or for any substantial part of the
property of the Issuer or any of its Subsidiaries, or the Issuer or any
of its Subsidiaries shall make any general assignment for the benefit
of creditors;
(viii) any representation, warranty, certification or statement made
by the Issuer in the Purchase Agreement or in any certificate,
financial statement or other document delivered pursuant to the
Purchase Agreement shall be inaccurate or incorrect in any material
respect when made;
(ix) any Lien created by any of the Collateral Documents shall at
any time fail to constitute a valid and perfected Lien on all of the
Collateral purported to be subject to such Lien, subject to no prior or
equal Lien (except Permitted Liens) or the Issuer or any Subsidiary
shall so assert in writing;
(x) Thomas M. Prescott shall cease to be chief executive officer
of the Issuer;
(xi) the shareholders of the Issuer shall fail to approve the
Transaction by October 31, 1999;
(xii) the shareholders of the Issuer shall, by affirmative vote at
any time, fail to approve the Transaction;
(xiii) Issuer shall have accepted a Higher Offer as defined in the
Preferred Stock Purchase Agreement;
(xiv) the Preferred Stock Purchase Agreement shall have been
terminated for any other reason;
then, and in each and every such case (other than an Event of Default specified
in Section 4(a)(vi) or 4(a)(vii) hereof), unless the principal of all of the
Notes shall have already become due and payable, (x) the holders of not less
than 25% in aggregate principal amount of the Notes then outstanding, by notice
in writing to the Issuer (the "Acceleration Notice"), may declare the entire
principal amount of the Notes and the interest accrued thereon to be due and
payable immediately, and upon any such declaration the same shall become
immediately due and payable and (y) the Issuer shall issue to each Holder,
Warrants exercisable for a number of
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<PAGE> 68
shares of Preferred Stock that is calculated by dividing the aggregate principal
amount of the Notes held by such Holder by the product of 10,000 and the average
of the trading price of the Issuer's Common Stock, as reported on the Nasdaq
National Market for the 10 Business Days immediately preceding the date of the
Acceleration Notice. If an Event of Default specified in Section 4(a)(vi) or
4(a)(vii) occurs, the principal of and accrued interest on the Notes shall
become and be immediately due and payable without any declaration or other act
on the part of any Noteholder.
The foregoing paragraph, however, is subject to the condition that if,
at any time after the principal of the Notes shall have been so declared due and
payable, and before any judgment or decree for the payment of the moneys due
shall have been obtained or entered as hereinafter provided, the Issuer shall
pay or shall deposit in trust for the benefit of the Noteholders a sum
sufficient to pay all matured installments of interest upon all the Notes and
the principal of any and all Notes which shall have become due otherwise than by
acceleration (with interest upon such principal and, to the extent that payment
of such interest is enforceable under applicable law, on overdue installments of
interest, at the same rate as the rate of interest specified in the Notes, to
the date of such payment or deposit), and if any and all defaults and Events of
Default under this Note, other than the non-payment of the principal of the
Notes which shall have become due by acceleration, shall have been cured, waived
or otherwise remedied as provided herein; then and in every such case, the
Holders of a majority in aggregate principal amount of the Notes then
outstanding, by written notice to the Issuer, may waive all defaults and rescind
and annul such declaration and its consequences, but no such waiver or
rescission and annulment shall extend to or shall affect any subsequent default
or shall impair any right consequent thereon.
(b) Powers and Remedies Cumulative; Delay or Omission Not Waiver of
Default. No right or remedy herein conferred upon or reserved to the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
No delay or omission of the Holders to exercise any right or power
accruing upon any Event of Default occurring and continuing as aforesaid shall
impair any such right or power or shall be construed to be a waiver of any such
Event of Default or an acquiescence therein; and every power and remedy given by
the Notes or by law may be exercised from time to time, and as often as shall be
deemed expedient, by the Holders.
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(c) Waiver of Past Defaults. Prior to the declaration of the
acceleration of maturity of the Notes as provided in Section 4(a), the Holders
of a majority in aggregate principal amount of the Notes at the time
outstanding, may on behalf of the Holders of all the Notes waive any past
default or Event of Default hereunder and its consequences, except a default (A)
in the payment of principal of or interest on any of the Notes or (B) in respect
of a covenant or provision hereof which cannot be modified or amended without
the consent of the Holder of each Note affected. In the case of any such waiver,
the Issuer, and the Holders of the Notes shall be restored to their former
positions and rights hereunder, respectively; but no such waiver shall extend to
any subsequent or other default or impair any right consequent thereon.
Upon any such waiver, such default shall cease to exist and be deemed
to have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured, and not to have occurred for every
purpose of this Note; but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent thereon.
SECTION 5. Ranking of Notes. The Issuer covenants and agrees to ensure
that the obligations of the Issuer under the Bridge Securities constitute direct
and unconditional general obligations of the Issuer ranking in priority of
payment and as to security prior to all other secured and unsubordinated Debt of
the Issuer.
SECTION 6. Modification of Notes. The Notes may be modified without
prior notice to any Holder but with the written consent of the Holders of a
majority in principal amount of the Notes then outstanding. Subject to Section
4(a) and Section 4(c), the Holders of a majority in principal amount of the
Notes then outstanding may waive compliance by the Issuer of any provision of
the Notes without prior notice to any Holder. However, without the consent of
each Holder affected, an amendment, supplement or waiver may not (i) reduce the
amount of Notes whose Holders must consent to an amendment, supplement or
waiver, (ii) reduce the rate or extend the time for payment for interest on any
Note, (iii) reduce the principal amount of or extend the fixed maturity of any
Note or alter the redemption provisions with respect thereto or (iv) make any
Note payable in money or property other than as stated in the Notes.
The Required Purchasers have the right to convert the principal amount
of all outstanding Notes into fully paid and nonassessable shares of Preferred
Stock in accordance with the provisions set forth in Article 8 of the Purchase
Agreement.
SECTION 7. Miscellaneous. This Note shall be deemed to be a contract
under the laws of the State of California, and for all purposes shall be
construed in
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accordance with the laws of said State, except as may otherwise be required by
mandatory provisions of law. The parties hereto, including all guarantors or
endorsers, hereby waive presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance, performance and
enforcement of this Note, except as specifically provided herein, and assent to
extensions of the time of payment, or forbearance or other indulgence without
notice. The Holder of this Note by acceptance of this Note agrees to be bound by
the provisions of this Note which are expressly binding on such Holder. In
determining whether the Holders of the requisite aggregate principal amount of
Notes have concurred in any direction, consent or waiver as provided under the
Notes, Notes which are owned by the Issuer or any Subsidiary or any other
obligor on the Notes shall be disregarded and deemed not to be outstanding for
the purpose of any such determination. The Section headings herein are for
convenience only and shall not affect the construction hereof.
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IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed under its corporate seal.
Dated:
[Seal] CARDIAC PATHWAYS CORPORATION
By:_________________________________
Chief Financial Officer
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EXHIBIT 3
CARDIAC PATHWAYS CORPORATION
WARRANT FOR THE PURCHASE OF SHARES OF
PREFERRED STOCK OF CARDIAC PATHWAYS CORPORATION
No. ____ Warrant to Purchase
_________ Shares
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD
EXCEPT IN COMPLIANCE THEREWITH. NOTWITHSTANDING ANY OTHER PROVISIONS
CONTAINED HEREIN, NO TRANSFER, HYPOTHECATION OR OTHER DISPOSITION OF
THIS WARRANT OR OF THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT, OR OF ANY INTEREST IN EITHER THEREOF, INCLUDING ANY EXERCISE
OF THIS WARRANT IN FAVOR OF ANY PERSON OTHER THAN THE HOLDER OR ANY
AFFILIATE THEREOF, SHALL BE VALID OR EFFECTIVE UNLESS REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED OR UNLESS AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
FOR VALUE RECEIVED, CARDIAC PATHWAYS CORPORATION, a Delaware
corporation (the "Company"), hereby certifies that [HOLDER], its successor or
permitted assigns (the "Holder"), is entitled, subject to the provisions of this
Warrant, to purchase from the Company, at the times specified herein, _________
fully paid and non-assessable shares of Preferred Stock of the Company, par
value $0.001 per share (the "Common Stock"), at a purchase price per share equal
to the Exercise Price (as hereinafter defined). The number of shares of Common
Stock to be received upon the exercise of this Warrant and the price to be paid
for a share of Common Stock are subject to adjustment from time to time as
hereinafter set forth.
<PAGE> 73
1. Definitions. (a) The following terms, as used herein, have the
following meanings:
"Affiliate" shall have the meaning given to such term in Rule 12b-2
promulgated under the Securities and Exchange Act of 1934, as amended.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in San Francisco and the City of New York are authorized
by law to close.
"Certificate of Designation" means the Certificate of Designation of
the Issuer substantially in the form of Exhibit B to the Securities Purchase
Agreement.
"Common Stock" means the Common Stock, par value $.001 per share, of
the Company.
"Current Market Price Per Preferred Share" shall have the meaning set
forth in Section 8(f).
"Duly Endorsed" means duly endorsed in blank by the Person or Persons
in whose name a stock certificate is registered or accompanied by a duly
executed stock assignment separate from the certificate with the signature(s)
thereon guaranteed by a commercial bank or trust company or a member of a
national securities exchange or of the National Association of Securities
Dealers, Inc.
"Exercise Price" means the product of 1,000 and (i) in the case of
Warrants issued on the Closing Date (as defined in the Securities Purchase
Agreement), $1.00 or (ii) in the case of Warrants issued in connection with the
delivery of an Acceleration Notice (as defined in the Bridge Securities), the
average of the trading price of the Common Stock, as reported on the Nasdaq
National Market for the 10 Business Days immediately preceding the delivery of
such Acceleration Notice, such Exercise Price to be adjusted from time to time
as provided herein.
"Expiration Date" means May 31, 2004 at 5:00 p.m. New York City time.
"Person" means an individual, partnership, limited liability company,
corporation, trust, joint stock company, association, joint venture, or any
other entity or organization, including a government or political subdivision or
an agency or instrumentality thereof.
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"Preferred Stock" means the Series B Convertible Preferred Stock of the
Company as set forth in the Certificate of Designation.
"Principal Holder" means the original Holder of this Warrant on the
date of issue, or if such original Holder so elects, any transferee of all or
any portion of this Warrant whom such original Holder shall have designated by
written notice to the Company as the successor Principal Holder. Any successor
Principal Holder designated pursuant to the immediately preceding sentence shall
also have the right upon any subsequent transfer to designate a successor
Principal Holder in the manner described above.
"Securities Purchase Agreement" means the Securities Purchase Agreement
dated as of May 20, 1999 among the Company and the Securityholders listed on the
signature pages thereto, providing for the purchase and issuance of the Bridge
Securities and this Warrant.
"Warrant Shares" means the shares of Preferred Stock deliverable upon
exercise of this Warrant, as adjusted from time to time.
(b) Capitalized terms used but not defined herein shall have the
meanings assigned to such terms in the Securities Purchase Agreement.
2. Exercise of Warrant.
(a) The Holder is entitled to exercise this Warrant in whole or
in part at any time, or from time to time, until the Expiration Date
or, if such day is not a Business Day, then on the next succeeding day
that shall be a Business Day. To exercise this Warrant, the Holder
shall execute and deliver to the Company a Warrant Exercise Notice
substantially in the form annexed hereto. No earlier than ten days
after delivery of the Warrant Exercise Notice, the Holder shall deliver
to the Company this Warrant Certificate, including the Warrant Exercise
Subscription Form forming a part hereof duly executed by the Holder,
together with payment of the applicable Exercise Price or an election
of net issuance of Warrant Shares. Upon such delivery and payment or
election of net issuance, the Holder shall be deemed to be the holder
of record of the Warrant Shares subject to such exercise or election,
notwithstanding that the stock transfer books of the Company shall then
be closed or that certificates representing such Warrant Shares shall
not then be actually delivered to the Holder.
(b) In the event of cash exercise by the Holder, the Exercise
Price may be paid in cash or by certified or official bank check or
bank cashier's check payable to the order of the Company or by any
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combination of such cash or check. The Company shall pay any and all
documentary, stamp or similar issue or transfer taxes payable in
respect of the issue or delivery of the Warrant Shares. In the event of
election by the Holder of net issuance of the Warrant Shares, the
Company, upon receipt of notice of election of net issuance, shall
issue to the Holder a number of shares of Preferred Stock having an
aggregate Current Market Price Per Preferred Share equal to the
aggregate Current Market Price Per Preferred Share of the Warrant
Shares issuable upon exercise less the aggregate Exercise Price for
such Warrant Shares.
(c) If the Holder exercises this Warrant in part, this Warrant
Certificate shall be surrendered by the Holder to the Company and a new
Warrant Certificate of the same tenor and for the unexercised number of
Warrant Shares shall be executed by the Company. The Company shall
register the new Warrant Certificate in the name of the Holder or in
such name or names of its transferee pursuant to paragraph 6 hereof as
may be directed in writing by the Holder and deliver the new Warrant
Certificate to the Person or Persons entitled to receive the same.
(d) Upon surrender of this Warrant Certificate in conformity with
the foregoing provisions, the Company shall transfer to the Holder of
this Warrant Certificate appropriate evidence of ownership of the
shares of Preferred Stock or other securities or property (including
any money) to which the Holder is entitled, registered or otherwise
placed in, or payable to the order of, the name or names of the Holder
or such transferee as may be directed in writing by the Holder, and
shall deliver such evidence of ownership and any other securities or
property (including any money) to the Person or Persons entitled to
receive the same, together with an amount in cash in lieu of any
fraction of a share as provided in paragraph 5 below.
3. Restrictive Legend. Certificates representing shares of Preferred
Stock issued pursuant to this Warrant shall bear a legend substantially in the
form of the legend set forth on the first page of this Warrant Certificate to
the extent that and for so long as such legend is required pursuant to the
Securities Purchase Agreement.
4. Reservation of Shares. The Company hereby agrees that at all times
there shall be reserved for issuance and delivery upon exercise of this Warrant
such number of its authorized but unissued shares of Preferred Stock or other
securities of the Company from time to time issuable upon exercise of this
Warrant as will be sufficient to permit the exercise in full of this Warrant.
All such shares shall be duly authorized and, when issued upon such exercise,
shall be
4
<PAGE> 76
validly issued, fully paid and non-assessable, free and clear of all liens,
security interests, charges and other encumbrances or restrictions on sale and
free and clear of all preemptive rights, except to the extent set forth in the
Preferred Stock Purchase Agreement.
5. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant and in lieu
of delivery of any such fractional share upon any exercise hereof, the Company
shall pay to the Holder an amount in cash equal to such fraction multiplied by
the Current Market Price Per Preferred Share at the date of such exercise.
6. Exchange, Transfer or Assignment of Warrant.
(a) This Warrant Certificate and all rights hereunder are not
transferable by the registered holder hereof except to any Person who,
prior to such transfer, agrees in writing, in form and substance
reasonably satisfactory to the Company, to be bound by the terms of the
Securities Purchase Agreement in accordance with the provisions
thereof. Each taker and holder of this Warrant Certificate by taking or
holding the same, consents and agrees that the registered holder hereof
may be treated by the Company and all other persons dealing with this
Warrant Certificate as the absolute owner hereof for any purpose and as
the person entitled to exercise the rights represented hereby.
(b) Subject to compliance with the Securities Purchase Agreement,
the Holder of this Warrant shall be entitled, without obtaining the
consent of the Company to assign and transfer this Warrant, at any time
in whole or from time to time in part, to any Person or Persons.
Subject to the preceding sentence, upon surrender of this Warrant to
the Company, together with the attached Warrant Assignment Form duly
executed, the Company shall, without charge, execute and deliver a new
Warrant in the name of the assignee or assignees named in such
instrument of assignment and, if the Holder's entire interest is not
being assigned, in the name of the Holder and this Warrant shall
promptly be canceled.
7. Loss or Destruction of Warrant. Upon receipt by the Company of
evidence satisfactory to it (in the exercise of its reasonable discretion) of
the loss, theft, destruction or mutilation of this Warrant Certificate, and (in
the case of loss, theft or destruction) of reasonably satisfactory
indemnification, and upon surrender and cancellation of this Warrant
Certificate, if mutilated, the Company shall execute and deliver a new Warrant
Certificate of like tenor and date.
5
<PAGE> 77
8. Anti-dilution Provisions.
(a) In case the Company shall at any time after the date hereof
(i) declare a dividend or make a distribution on Preferred Stock
payable in Preferred Stock, (ii) subdivide or split the outstanding
Preferred Stock, (iii) combine or reclassify the outstanding Preferred
Stock into a smaller number of shares, or (iv) issue any shares of its
capital stock in a reclassification of Preferred Stock (including any
such reclassification in connection with a consolidation or merger in
which the Company is the continuing corporation), the Exercise Price in
effect at the time of the record date for such dividend or distribution
or of the effective date of such subdivision, split, combination or
reclassification shall be proportionately adjusted so that, giving
effect to paragraph 8(i), the exercise of this Warrant after such time
shall entitle the holder to receive the aggregate number of shares of
Preferred Stock or other securities of the Company (or shares of any
security into which such shares of Preferred Stock have been
reclassified pursuant to clause 8(a)(iii) or 8(a)(iv) above) which, if
this Warrant had been exercised immediately prior to such time, such
holder would have owned upon such exercise and been entitled to receive
by virtue of such dividend, distribution, subdivision, split,
combination or reclassification. Such adjustment shall be made
successively whenever any event listed above shall occur.
(b) In case the Company shall issue or sell any Preferred Stock
(other than Preferred Stock issued (i) upon exercise of the Warrants,
(ii) pursuant to any Preferred Stock related employee compensation plan
of the Company approved by the Company's Board of Directors or (iii)
upon exercise or conversion of any security the issuance of which
caused an adjustment under paragraphs 8(c) or 8(d) hereof) without
consideration or for a consideration per share less than the Current
Market Price Per Preferred Share, the Exercise Price to be in effect
after such issuance or sale shall be determined by multiplying the
Exercise Price in effect immediately prior to such issuance or sale by
a fraction, the numerator of which shall be the sum of (x) the number
of shares of Preferred Stock outstanding immediately prior to the time
of such issuance or sale multiplied by the Current Market Price Per
Preferred Share immediately prior to such issuance or sale and (y) the
aggregate consideration, if any, to be received by the Company upon
such issuance or sale, and the denominator of which shall be the
product of the aggregate number of shares of Preferred Stock
outstanding immediately after such issuance or sale and the Current
Market Price Per Preferred Share immediately prior to such issuance or
sale. In case any portion of the consideration to be received by the
Company shall be in a form other than cash, the fair
6
<PAGE> 78
market value of such noncash consideration shall be utilized in the
foregoing computation. Such fair market value shall be determined by
the Board of Directors of the Company; provided that if the Principal
Holder shall object to any such determination, the Board of Directors
shall retain an independent appraiser reasonably satisfactory to the
Principal Holder to determine such fair market value. The Holder shall
be notified promptly of any consideration other than cash to be
received by the Company and furnished with a description of the
consideration and the fair market value thereof, as determined by the
Board of Directors.
(c) In case the Company shall fix a record date for the issuance
of rights, options or warrants to the holders of its Preferred Stock or
other securities entitling such holders to subscribe for or purchase
for a period expiring within 60 days of such record date shares of
Preferred Stock (or securities convertible into share of Preferred
Stock) at a price per share of Preferred Stock (or having a conversion
price per share of Preferred Stock, if a security convertible into
shares of Preferred Stock) less than the Current Market Price Per
Preferred Share on such record date, the maximum number of shares of
Preferred Stock issuable upon exercise of such rights, options or
warrants (or conversion of such convertible securities) shall be deemed
to have been issued and outstanding as of such record date and the
Exercise Price shall be adjusted pursuant to paragraph 8(b) hereof, as
though such maximum number of shares of Preferred Stock had been so
issued for an aggregate consideration payable by the holders of such
rights, options, warrants or convertible securities prior to their
receipt of such shares of Preferred Stock. In case any portion of such
consideration shall be in a form other than cash, the fair market value
of such noncash consideration shall be determined as set forth in
paragraph 8(b) hereof. Such adjustment shall be made successively
whenever such record date is fixed; and in the event that such rights,
options or warrants are not so issued or expire unexercised, or in the
event of a change in the number of shares of Preferred Stock to which
the holders of such rights, options or warrants are entitled (other
than pursuant to adjustment provisions therein comparable to those
contained in this paragraph 8), the Exercise Price shall again be
adjusted to be the Exercise Price which would then be in effect if such
record date had not been fixed, in the former event, or the Exercise
Price which would then be in effect if such holder had initially been
entitled to such changed number of shares of Preferred Stock, in the
latter event.
(d) In case the Company shall issue rights, options (other than
options issued pursuant to a plan described in clause 8(b)(i)) or
warrants entitling the holders thereof to subscribe for or purchase
Preferred Stock
7
<PAGE> 79
(or securities convertible into shares of Preferred Stock) or shall
issue convertible securities, and the price per share of Preferred
Stock of such rights, options, warrants or convertible securities
(including, in the case of rights, options or warrants, the price at
which they may be exercised) is less than the Current Market Price Per
Preferred Share, the maximum number of shares of Preferred Stock
issuable upon exercise of such rights, options or warrants or upon
conversion of such convertible securities shall be deemed to have been
issued and outstanding as of the date of such sale or issuance, and the
Exercise Price shall be adjusted pursuant to paragraph 8(b) hereof as
though such maximum number of shares of Preferred Stock had been so
issued for an aggregate consideration equal to the aggregate
consideration paid for such rights, options, warrants or convertible
securities and the aggregate consideration payable by the holders of
such rights, options, warrants or convertible securities prior to their
receipt of such shares of Preferred Stock. In case any portion of such
consideration shall be in a form other than cash, the fair market value
of such noncash consideration shall be determined as set forth in
paragraph 8(b) hereof. Such adjustment shall be made successively
whenever such rights, options, warrants or convertible securities are
issued; and in the event that such rights, options or warrants expire
unexercised, or in the event of a change in the number of shares of
Preferred Stock to which the holders of such rights, options, warrants
or convertible securities are entitled (other than pursuant to
adjustment provisions therein comparable to those contained in this
paragraph 8), the Exercise Price shall again be adjusted to be the
Exercise Price which would then be in effect if such rights, options,
warrants or convertible securities had not been issued, in the former
event, or the Exercise Price which would then be in effect if such
holders had initially been entitled to such changed number of shares of
Preferred Stock, in the latter event. No adjustment of the Exercise
Price shall be made pursuant to this paragraph 8(d) to the extent that
the Exercise Price shall have been adjusted pursuant to paragraph 8(c)
upon the setting of any record date relating to such rights, options,
warrants or convertible securities and such adjustment fully reflects
the number of shares of Preferred Stock to which the holders of such
rights, options, warrants or convertible securities are entitled and
the price payable therefor.
(e) In case the Company shall fix a record date for the making of
a distribution to holders of Preferred Stock (including any such
distribution made in connection with a consolidation or merger in which
the Company is the continuing corporation) of evidences of
indebtedness, assets or other property (other than dividends payable in
Preferred Stock or rights, options or warrants referred to in, and for
which an adjustment is made pursuant to, paragraph 8(c) hereof), the
Exercise Price to be in effect
8
<PAGE> 80
after such record date shall be determined by multiplying the Exercise
Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the Current Market Price Per Preferred
Share on such record date, less the fair market value (determined as
set forth in paragraph 8(b) hereof) of the portion of the assets, other
property or evidence of indebtedness so to be distributed which is
applicable to one share of Preferred Stock, and the denominator of
which shall be such Current Market Price Per Preferred Share. Such
adjustments shall be made successively whenever such a record date is
fixed; and in the event that such distribution is not so made, the
Exercise Price shall again be adjusted to be the Exercise Price which
would then be in effect if such record date had not been fixed.
(f) For the purpose of any computation under paragraph 5 or
paragraph 8(b), 8(c), 8(d) or 8(e) hereof, on any determination date
the Current Market Price Per Preferred Share shall be deemed to be the
average (weighted by daily trading volume) of the Daily Prices (as
defined below) per share of the applicable class of Common Stock into
which the Preferred stock is convertible for the 20 consecutive trading
days immediately prior to such date. "Daily Price" means the last
reported sale price on such day on the National Market of the NASDAQ
Stock Market ("NASDAQ"); or (A) if the shares of such class of Common
Stock then are not traded on the NASDAQ National Market, the average of
the highest reported bid and lowest reported asked price on such day as
reported by NASDAQ. If on any determination date the shares of such
class of Common Stock are not quoted by any such organization, the
Current Market Price Per Price Share shall be the fair market value of
such shares of Common Stock on such determination date as determined by
the Board of Directors. If the Principal Holder shall object to any
determination by the Board of Directors of the Current Market Price Per
Preferred Share, the Current Market Price Per Preferred Share shall be
the fair market value per share of the applicable class of Common Stock
as determined by an independent appraiser retained by the Company at
its expense and reasonably acceptable to the Principal Holder. For
purposes of any computation under this paragraph 8, the number of
shares of Preferred Stock outstanding at any given time shall not
include shares owned or held by or for the account of the Company.
(g) No adjustment in the Exercise Price shall be required unless
such adjustment would require an increase or decrease of at least one
percent in such price; provided that any adjustments which by reason of
this paragraph 8(g) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All
calculations
9
<PAGE> 81
under this paragraph 8 shall be made to the nearest one tenth of a cent
or to the nearest hundredth of a share, as the case may be.
(h) In the event that, at any time as a result of the provisions
of this paragraph 8, the holder of this Warrant upon subsequent
exercise shall become entitled to receive any shares of capital stock
of the Company other than Preferred Stock, the number of such other
shares so receivable upon exercise of this Warrant shall thereafter be
subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions contained herein.
(i) Upon each adjustment of the Exercise Price as a result of the
calculations made in paragraphs 8(a), 8(b), 8(c), 8(d) or 8(e) hereof,
the number of shares for which this Warrant is exercisable immediately
prior to the making of such adjustment shall thereafter evidence the
right to purchase, at the adjusted Exercise Price, that number of
shares of Preferred Stock obtained by (i) multiplying the number of
shares covered by this Warrant immediately prior to this adjustment of
the number of shares by the Exercise Price in effect immediately prior
to such adjustment of the Exercise Price and (ii) dividing the product
so obtained by the Exercise Price in effect immediately after such
adjustment of the Exercise Price.
9. Consolidation, Merger, or Sale of Assets. In case of any
consolidation of the Company with, or merger of the Company into, any other
Person, any merger of another Person into the Company (other than a merger which
does not result in any reclassification, conversion, exchange or cancellation of
outstanding shares of Preferred Stock or Common Stock) or any sale or transfer
of all or substantially all of the assets of the Company or of the Person formed
by such consolidation or resulting from such merger or which acquires such
assets, as the case may be, the Holder shall have the right thereafter to
exercise this Warrant for the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, sale or transfer by a
holder of the number of shares of Preferred Stock for which this Warrant may
have been exercised immediately prior to such consolidation, merger, sale or
transfer, assuming (i) such holder of Preferred Stock is not a Person with which
the Company consolidated or into which the Company merged or which merged into
the Company or to which such sale or transfer was made, as the case may be
("constituent Person"), or an Affiliate of a constituent Person and (ii) in the
case of a consolidation merger, sale or transfer which includes an election as
to the consideration to be received by the holders, such holder of Preferred
Stock failed to exercise its rights of election, as to the kind or amount of
securities, cash and other property receivable upon such consolidation, merger,
sale or transfer (provided that if the kind or amount of securities, cash and
other property receivable upon such consolidation, merger,
10
<PAGE> 82
sale or transfer is not the same for each share of Preferred Stock held
immediately prior to such consolidation, merger, sale or transfer by other than
a constituent Person or an Affiliate thereof and in respect of which such rights
of election shall not have been exercised ("non-electing share"), then for the
purpose of this paragraph 9 the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, sale or transfer by each
non-electing share shall be deemed to be the kind and amount so receivable per
share by a plurality of the non-electing shares). Adjustments for events
subsequent to the effective date of such a consolidation, merger and sale of
assets shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Warrant. In any such event, effective provisions shall be
made in the certificate or articles of incorporation of the resulting or
surviving corporation, in any contract of sale, conveyance, lease or transfer,
or otherwise so that the provisions set forth herein for the protection of the
rights of the Holder shall thereafter continue to be applicable; and any such
resulting or surviving corporation shall expressly assume the obligation to
deliver, upon exercise, such shares of stock, other securities, cash and
property. The provisions of this paragraph 9 shall similarly apply to successive
consolidations, mergers, sales, leases or transfers.
10. Notices. Any notice, demand or delivery authorized by this Warrant
Certificate shall be in writing and shall be given to the Holder, the Company or
the Shareholder Representative, as the case may be, at its address (or
telecopier number) set forth below, or such other address (or telecopier number)
as shall have been furnished to the party giving or making such notice, demand
or delivery:
If to the Company:
Cardiac Pathways Corporation
995 Benecia Avenue
Sunnyvale, California 94086
Telecopy: 408-737-0505
Attention: G. Michael Latta, Chief Financial Officer
If to the Holder: to its address specified on the signature page hereof
Each such notice, demand or delivery shall be effective (i) if given by
telecopy, when such telecopy is transmitted to the telecopy number specified
herein and the intended recipient confirms the receipt of such telecopy or (ii)
if given by any other means, when received at the address specified herein.
11
<PAGE> 83
11. Rights of the Holder. Prior to the exercise of any Warrant, the
Holder shall not, by virtue hereof, be entitled to any rights of a shareholder
of the Company, including, without limitation, the right to vote, to receive
dividends or other distributions, to exercise any preemptive right or to receive
any notice of meetings of shareholders or any notice of any proceedings of the
Company except as may be specifically provided for herein.
12. GOVERNING LAW. THIS WARRANT CERTIFICATE AND ALL RIGHTS ARISING
HEREUNDER SHALL BE CONSTRUED AND DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS
OF THE STATE OF CALIFORNIA, AND THE PERFORMANCE THEREOF SHALL BE GOVERNED AND
ENFORCED IN ACCORDANCE WITH SUCH LAWS.
13. Amendments; Waivers. Any provision of this Warrant Certificate may
be amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by the Holder and the Company, or in the
case of a waiver, by the party against whom the waiver is to be effective. No
failure or delay by either party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.
12
<PAGE> 84
IN WITNESS WHEREOF, the Company has duly caused this Warrant
Certificate to be signed by its duly authorized officer and to be dated as of
May 20, 1999.
CARDIAC PATHWAYS CORPORATION
By:________________________________
Name:
Title:
Acknowledged and Agreed:
[HOLDER]
By:___________________________________
Title:
[ADDRESS]
[ADDRESS]
13
<PAGE> 85
WARRANT EXERCISE NOTICE
(To be delivered prior to exercise of the Warrant
by execution of the Warrant Exercise Subscription Form)
To: CARDIAC PATHWAYS CORPORATION
The undersigned hereby notifies you of its intention to exercise the
Warrant to purchase shares of Preferred Stock, par value $0.001 per share, of
Cardiac Pathways Corporation. The undersigned intends to exercise the Warrant to
purchase ___________ shares (the "Shares") at $______ per Share (the Exercise
Price currently in effect pursuant to the Warrant).
[ ] The undersigned intends to pay the aggregate Exercise Price for the
Shares in cash, certified or official bank or bank cashier's check (or a
combination of cash and check) as indicated below.
[ ] The undersigned elects to have a number of shares of Preferred
Stock having an aggregate Current Market Price Per Preferred Share equal to the
aggregate Current Market Price Per Preferred Share of the Shares issuable upon
exercise less the aggregate Exercise Price for such Shares.
Date:______________________________
------------------------------------
(Signature of Holder)
------------------------------------
(Street Address)
------------------------------------
(City) (State) (Zip Code)
Payment: $_________________________cash
$_________________________check
<PAGE> 86
WARRANT EXERCISE SUBSCRIPTION FORM
(To be executed only upon exercise of the Warrant
after delivery of Warrant Exercise Notice)
To: Cardiac Pathways Corporation
The undersigned irrevocably exercises the Warrant for the purchase of
___________ shares (the "Shares") of Preferred Stock, par value $.01 per share,
of Cardiac Pathways Corporation (the "Company") at $_____ per Share (the
Exercise Price currently in effect pursuant to the Warrant) and either (1)
herewith makes payment of $___________ (such payment being made in cash or by
certified or official bank or bank cashier's check payable to the order of the
Company or by any permitted combination of such cash or check), or (2) has
elected for net issuance of the Shares, all on the terms and conditions
specified in the within Warrant Certificate, surrenders this Warrant Certificate
and all right, title and interest therein to the Company and directs that the
Shares deliverable upon the exercise of this Warrant be registered or placed in
the name and at the address specified below and delivered thereto.
Date:______________________________
------------------------------------
(Signature of Holder)
------------------------------------
(Street Address)
------------------------------------
(City) (State) (Zip Code)
<PAGE> 87
Securities and/or check to be issued to:________________________________________
Please insert social security or identifying number:____________________________
Name:___________________________________________________________________________
Street Address:_________________________________________________________________
City, State and Zip Code:_______________________________________________________
Any unexercised portion of the Warrant evidenced by the within Warrant
Certificate to be issued to:
Please insert social security or identifying number:____________________________
Name:___________________________________________________________________________
Street Address:_________________________________________________________________
City, State and Zip Code:_______________________________________________________
2
<PAGE> 88
WARRANT ASSIGNMENT FORM
Dated ___________ ___, _____
FOR VALUE RECEIVED, _______________________________ hereby sells,
assigns and transfers unto____________________________________(the "Assignee"),
(please type or print in block letters)
- --------------------------------------------------------------------------------
(insert address)
its right to purchase up to ________ shares of Preferred Stock represented by
this Warrant and does hereby irrevocably constitute and appoint
_______________________ Attorney-in-Fact, to transfer the same on the books of
the Company, with full power of substitution in the premises.
Signature:__________________________
<PAGE> 89
Exhibit 4
CARDIAC PATHWAYS CORPORATION
SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
May 20, 1999
<PAGE> 90
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
1. Sale of Stock................................................................................................1
2. Closing Date.................................................................................................2
3. Delivery.....................................................................................................2
4. Representations and Warranties of the Company................................................................2
(a) Corporate Power.....................................................................................2
(b) Authorization.......................................................................................3
(c) Capital Structure...................................................................................3
(d) Valid Issuance of Stock.............................................................................4
(e) No Conflict; Required Filings and Consents..........................................................4
(f) Litigation..........................................................................................5
(g) Charter Documents; Subsidiaries.....................................................................5
(h) Absence of Certain Developments.....................................................................6
(i) Absence of Undisclosed Liabilities..................................................................6
(j) Non-Contravention...................................................................................7
(k) Filings.............................................................................................7
(l) Employee Matters and Benefit Plans..................................................................8
(m) Labor Matters......................................................................................10
(n) Title to Property..................................................................................11
(o) Taxes..............................................................................................11
(p) Compliance with Laws...............................................................................12
(q) Environmental Matters..............................................................................12
(r) Intellectual Property..............................................................................13
(s) Personnel..........................................................................................13
(t) Year 2000 Compliance...............................................................................14
(u) No Brokers.........................................................................................14
(v) Chief Executive Officer............................................................................14
(w) Registration Rights................................................................................14
(x) Permits............................................................................................14
(y) Royalties..........................................................................................14
(z) Real Property Holding Corporation..................................................................14
(aa) Investment Company Act.............................................................................15
(bb) Qualified Small Business...........................................................................15
(cc) Small Business Concern.............................................................................15
(dd) Broker's or Finder's Fee...........................................................................15
(ee) Vote Required......................................................................................15
5. Representations and Warranties of the Purchasers............................................................15
(a) Corporate Power....................................................................................15
</TABLE>
-i-
<PAGE> 91
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
(b) Authorization......................................................................................15
(c) Governmental Approvals.............................................................................16
(d) Non-Contravention..................................................................................16
(e) Risk Factors.......................................................................................16
(f) No Brokers.........................................................................................17
6. Compliance with Securities Laws and Restrictions on Transfer of Securities..................................17
(a) Additional Representations and Warranties and Agreements of Each Purchaser.........................17
(b) Stop Transfer Orders...............................................................................19
(c) Compliance with Section 6..........................................................................19
7. Additional Covenants of the Purchasers Regarding Securities.................................................19
(a) Forms 13D or 13G...................................................................................19
(b) Insider Trading Policy; Short Sales................................................................19
(c) Material Confidential Information..................................................................20
(d) Reporting Obligations Pursuant to Section 16.......................................................21
8. Additional Covenants of the Company.........................................................................21
(a) Inspection.........................................................................................21
(b) Board of Directors.................................................................................21
(c) Right of First Offer...............................................................................22
(d) Sonometrics License................................................................................24
(e) Chief Executive Officer............................................................................24
(f) Reverse Stock Split................................................................................24
(g) Reservation of Common Stock........................................................................25
(h) Proprietary Information and Inventions Agreement...................................................25
(i) Qualified Small Business...........................................................................25
(j) Small Business Administration Matters..............................................................25
(k) Regulatory Compliance Cooperation..................................................................26
(l) Proxy Statement....................................................................................26
(m) Stockholder Approvals; Recommendations.............................................................27
(n) Notices of Certain Events..........................................................................27
(o) Efforts............................................................................................28
(p) No Solicitation....................................................................................28
9. Closing Conditions..........................................................................................30
(a) Conditions to Purchaser's Obligations at the Closing...............................................30
(b) Conditions to Company's Obligations at the Closing.................................................32
10. General Provisions..........................................................................................33
(a) Notices............................................................................................33
</TABLE>
-ii-
<PAGE> 92
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
(b) Governing Law......................................................................................34
(c) Amendments.........................................................................................34
(d) Assignment.........................................................................................34
(e) Expenses...........................................................................................35
(f) Counterparts.......................................................................................35
(g) Entire Agreement...................................................................................35
(h) Titles.............................................................................................35
(i) Termination........................................................................................35
(j) Effect of Termination..............................................................................36
EXHIBITS
A. CERTIFICATE OF DESIGNATION
B. DISCLOSURE SCHEDULE
C. REGISTRATION RIGHTS AGREEMENT
D. VOTING AGREEMENT
</TABLE>
-iii-
<PAGE> 93
CARDIAC PATHWAYS CORPORATION
SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
THIS CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (the "AGREEMENT")
is made as of May 20, 1999 between Cardiac Pathways Corporation, a Delaware
corporation having its principal executive office at 995 Benecia Avenue,
Sunnyvale, California 94086 (the "Company"), and the purchasers listed on
Schedule A hereto, each of which is herein referred to as a "PURCHASER" and
collectively, the "PURCHASERS".
RECITALS
A. The parties desire that the Purchasers make an equity investment of
between $25,000,000 and $40,000,000 in the Company pursuant to the terms and
conditions of this Agreement.
B. The shares of Series B Convertible Preferred Stock issued to the
Purchasers pursuant to this Agreement shall have registration rights and other
rights as evidenced by the Registration Rights Agreement in the form attached
hereto as Exhibit C (the "RIGHTS AGREEMENT").
C. In order to induce the Purchasers to enter into this Agreement,
certain directors, certain officers, and certain stockholders of the Company
have entered into a voting agreement in the form attached hereto as Exhibit D
(the "VOTING AGREEMENT") with the Company, pursuant to which they have agreed to
vote to approve the transaction contemplated hereunder.
D. In partial consideration of the Purchasers' investment in the
Company, three nominees of the Purchasers shall be elected to the Board of
Directors of the Company pursuant to the terms and conditions set forth in the
Rights Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and promises set forth in this Agreement, the parties agree as
follows:
1. Sale of Stock.
(a) The Company hereby agrees to sell to the Purchasers or their
designees, and the Purchasers or their designees hereby agree to purchase from
the Company in the amounts listed on Schedule A hereto, which are inclusive of
any Shares (as defined below) issued upon cancellation of notes issued by the
Company to the Purchasers, for aggregate consideration of between $25.0 and
$40.0 million, up to 40,000 shares of the Company's Series B Convertible
Preferred Stock (the "SHARES") at the per share purchase price (the "PER SHARE
PURCHASE PRICE") equal to 1,000 times the lower of (i) $1.00 or (ii) average
trading price of the Company's common stock (the "COMMON STOCK") on the five (5)
trading days immediately prior to the date of the public announcement of this
private placement, as reported on the Nasdaq National Market. Additional
Purchasers may be added to Schedule A after the date of this Agreement at the
sole discretion of the majority in interest of the Purchasers as set forth on
Schedule A.
<PAGE> 94
(b) The Shares shall have the respective rights, preferences and
privileges set forth in a certificate of designation attached hereto as Exhibit
A (the "CERTIFICATE OF DESIGNATION"), which shall be approved by the Purchasers
and filed on or prior to the Closing Date (as defined below) by the Company with
the Secretary of State of Delaware.
2. Closing Date. The closing of the purchase and sale of the Shares
hereunder (the "CLOSING") will take place, upon the satisfaction of the
conditions to closing set forth in Section 9 hereof, at the offices of Wilson
Sonsini Goodrich & Rosati, Professional Corporation, 650 Page Mill Road, Palo
Alto, California, as soon as practicable but in any event, subject to applicable
law, no later than the earlier to occur of five (5) business days after the last
of the conditions set forth in Section 9 hereof have been satisfied or October
31, 1999. The date of the Closing is hereinafter referred to as the "Closing
Date."
3. Delivery. At the Closing, the Company will deliver a certificate
registered in each Purchaser's name representing the Shares to be purchased by
such Purchaser. Such delivery shall be against payment of the purchase price
therefor or by cancellation of notes delivered by the Purchasers to the Company,
or a combination of each of the foregoing, in an amount equal to the product of
the number of Shares and the Per Share Purchase Price (the "PURCHASE PRICE") by
wire transfer to the Company's bank account at:
Bank Name: Citibank
Bank Address: 111 Wall Street
New York, NY 10005
Contact: David L. Hayes (415-576-2148)
ABA#: 021000089
Account Name: Morgan Stanley
Account Number: # 3889-0774
FBO CPC # 14-78247
4. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchasers as follows, except as set forth on a
Disclosure Schedule (the "Disclosure Schedule") attached hereto as Exhibit B and
furnished to each Purchaser, which exceptions shall be deemed to be
representations and warranties as if made hereunder
(a) Corporate Power. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is qualified to do business as a foreign corporation in each jurisdiction
where failure to qualify would not, individually or in the aggregate, (i)
adversely affect the legality, validity or enforceability of this Agreement, the
Voting Agreement or the Rights Agreement in any material respect, (ii) have or
result in a Material Adverse Effect on the results of operations, assets,
prospects or financial condition of the Company, taken as a whole or (iii)
adversely impair the Company's ability to perform fully on a timely basis its
obligations under this Agreement, the Voting Agreement or the Rights Agreement
(any of (i), (ii) or (iii), being a "Material Adverse Effect"). The Company has
full corporate power and authority to own its property, to carry on its business
as presently conducted and to carry out the transactions contemplated hereby.
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(b) Authorization. The Company has full corporate power to execute,
deliver and perform this Agreement, the Voting Agreement and the Rights
Agreement, and each such agreement has been duly executed and delivered by the
Company and is the legal, valid and, assuming due execution by the Purchaser,
binding obligation of the Company, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, moratorium, reorganization or
similar laws affecting creditors' rights generally, and to general equitable
principles. The execution, delivery and performance by the Company of this
Agreement, the Voting Agreement and the Rights Agreement, including the issuance
(or reservation for issuance), sale and delivery of the Shares contemplated by
Section 1 hereof and the Common Stock issuable upon conversion thereof, have
been duly authorized by all necessary corporate action on the part of the
Company, its officers, directors and stockholders; provided, however, that the
Company makes no representation or warranty as to the enforceability of the
indemnification and contribution provisions of Section 5 of the Rights Agreement
to the extent that the provisions thereof may be subject to limitations of
public policy and the effect of applicable statutes and judicial decisions. The
Board of Directors of the Company (at a meeting duly called and held) has (a)
determined that the sale of the Shares is advisable and fair and in the best
interests of the Company and its stockholders, and (b) recommended the approval
and adoption of this Agreement and approval of the sale of the Shares by the
stockholders and directed that this Agreement and the sale of the Shares by
submitted for consideration by the Company's stockholders. The Board of
Directors of the Company has taken all action necessary to render inapplicable,
as it relates to Purchasers, the provisions of Section 203 of the Delaware
General Corporation Law (the "DGCL"). No other corporate action on the part of
the Company is necessary to authorize the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby
(other than, in the case of this Agreement, the approval of the sale of the
Shares by the holders of at least a majority of the Common Stock voting at the
meeting held to consider sale of the Shares).
(c) Capital Structure.
(i) The authorized capital stock of the Company consists of
30,000,000 shares of Common Stock, $.001 par value per share, and 5,000,000
shares of Preferred Stock, $.001 par value per share, of which 30,000 shares
have been designated Series A Participating Preferred Stock, 50,000 shares have
been designated Series B Convertible Preferred Stock and 4,920,000 are
undesignated. As of the date hereof, (i) 10,038,578 shares of Common Stock, all
of which are validly issued, fully paid and nonassessable, no shares of Series A
Participating Preferred Stock and no shares of Series B Convertible Preferred
Stock were issued and outstanding; (ii) no shares were held in treasury by the
Company or by any subsidiaries of the Company; (iii) 2,866,629 shares of Common
Stock were reserved for issuance under the Company's stock plans (including (A)
1,442,440 shares of Common Stock reserved for issuance under the 1991 Stock
Option Plan, 1,067,591 shares of which were subject to outstanding options and
374,849 of which were reserved for future grants, (B) 60,000 shares of Common
Stock were reserved for issuance under the 1996 Director Option Plan, 33,000
shares of which were subject to outstanding options and 27,000 of which were
reserved for future grants, (C) 400,000 shares of Common Stock were reserved for
issuance under the 1998 Non-Statutory Stock Option Plan, 143,818 of which were
subject to outstanding options and 256,182 shares of which were available for
future grants, (D) 920,506
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<PAGE> 96
shares of Common Stock were reserved for issuance under the 1998 Employee Stock
Purchase Plan, 40,506 shares of which were available for future purchase in
fiscal 1999 and 880,000 of which may be purchased in maximum amounts of 200,000
shares per fiscal year commencing July 1, 1999 and (E) 43,683 shares were
subject to an outstanding nonstatutory option granted outside of the plans);
collectively the Company's "STOCK PLANS;" and (iv) 143,141 shares of Common
Stock and related Preferred Stock Purchase Rights were subject to outstanding
warrants to purchase such shares. All shares of the Company's Common Stock
subject to issuance as specified above, on the terms and conditions specified in
the instruments pursuant to which they are issuable, shall be duly authorized,
validly issued, fully paid and nonassessable. There are no obligations,
contingent or otherwise, of the Company or any of its subsidiaries to
repurchase, redeem or otherwise acquire any shares of the Company's capital
stock or the capital stock of any of the Company's subsidiaries or make any
investment (in the form of a loan, capital contribution or otherwise) in any
such subsidiary or any other entity other than as contemplated by this
Agreement. All of the outstanding shares of capital stock of each subsidiary of
the Company are duly authorized, validly issued, fully paid and nonassessable,
and all such shares (other than directors' qualifying shares) are owned by the
Company or another subsidiary of the Company free and clear of all security
interests, liens, claims, pledges, agreements, limitations on the Company's
voting rights, charges or other encumbrances of any nature. The Common Stock is
quoted on the Nasdaq National Market.
(ii) Except as set forth in Section 4(c)(i), there are no
equity securities of any class of capital stock of the Company, or any security
exchangeable into or exercisable for such equity securities, issued, reserved
for issuance or outstanding. Except as set forth in Section 4(c)(i), there are
no options, warrants, equity securities, calls, rights, commitments or
agreements of any character to which the Company or any of its subsidiaries is a
party or by which it is bound obligating the Company or any of its subsidiaries
to issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock of the Company or any of its subsidiaries to grant or
enter into any such warrant, equity security, call, right, commitment or
agreement, and except for the transactions contemplated by this Agreement, the
Voting Agreement and the Rights Agreement, there are no voting trusts, proxies
or other agreements or understandings with respect to the shares of capital
stock of the Company to which the Company is a party.
(d) Valid Issuance of Stock. The Shares will be duly authorized,
validly issued, fully paid and non-assessable and, based in part upon the
representations of the Purchaser in this Agreement, will be issued in compliance
with all applicable federal and state securities laws. The Common Stock issuable
upon conversion of the Shares (the "CONVERSION SHARES") has been duly and
validly reserved for issuance and, upon issuance in accordance with the terms of
the Certificate of Designation, will be duly and validly issued and fully paid
and nonassessable. The Shares and the Conversion Shares will be free of
restrictions on transfer other than the restrictions in this Agreement and the
Rights Agreement and under applicable state and/or federal securities laws, and
will not be subject to any preemptive or other similar rights or any liens or
encumbrances (other than any liens or encumbrances created by the Purchasers).
(e) No Conflict; Required Filings and Consents.
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<PAGE> 97
(i) The execution and delivery of this Agreement, the Voting
Agreement and the Rights Agreement by the Company do not, and the performance of
this Agreement, the Voting Agreement and the Rights Agreement by the Company
shall not, (i) conflict with or violate the Amended and Restated Certificate of
Incorporation (the "CERTIFICATE OF INCORPORATION"), the Certificate of
Designation, the Company's Bylaws, as amended (the "BYLAWS") or equivalent
organizational documents of the Company or any of its subsidiaries, (ii)
conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to the Company or any of its subsidiaries or by which it or their
respective properties are bound or affected, or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or impair the Company's or any such subsidiary's
rights or alter the rights or obligations of any third party under, or give to
others any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of a lien or encumbrance on any of the properties or
assets of the Company or any of its subsidiaries pursuant to, any material note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries or
its or any of their respective properties are bound or affected, except for any
such breaches, defaults or other occurrences that do not have or result in,
individually or in the aggregate, a Material Adverse Effect.
(ii) The execution and delivery of this Agreement, the Voting
Agreement and the Rights Agreement by the Company do not, and the performance of
this Agreement, the Voting Agreement and the Rights Agreement by the Company
shall not, require any consent, approval, authorization or permit of, or filing
with or notification to, any governmental entity except for applicable
requirements, if any, of the Securities Act, the Exchange Act, state securities
laws, the rules and regulations of the Nasdaq National Market and the consent of
a majority of the holders of the Common Stock of the Company subject to that
certain Shareholder Rights Agreement dated as of June 13, 1995.
(f) Litigation. There is no litigation or governmental proceeding or
investigation pending or, to the knowledge of the Company, threatened against
the Company that either (i) adversely affects or challenges the legality,
validity or enforceability of this Agreement, the Voting Agreement or the Rights
Agreement or (ii) could reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect.
(g) Charter Documents; Subsidiaries. Except for Cardiac Pathways B.V.,
a corporation organized under the laws of the Netherlands, and Cardiac Pathways
G.m.b.H., a corporation organized under the laws of Germany, the Company has no
active subsidiaries and does not otherwise directly or indirectly control any
other business entity. The Company has furnished counsel to the Purchasers with
true, correct and complete copies of its Amended and Restated Certificate of
Incorporation and Bylaws, together with any amendments thereto as of the date
hereof and the charter documents of each of its subsidiaries. Each of the
Company's subsidiaries is duly organized and existing under the laws of its
jurisdiction of organization and is in good standing under such laws. None of
the Company's subsidiaries owns or leases property or engages in any
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<PAGE> 98
activity in any jurisdiction that might require its qualification to do business
as a foreign corporation and in which the failure so to qualify would have a
Material Adverse Effect.
(h) Absence of Certain Developments. Since the date of its most recent
report filed with the Commission pursuant to the Securities and Exchange Act of
1934, as amended from time to time (such act, together with the rules and
regulations promulgated thereunder, the "EXCHANGE ACT," and such report, the
"CURRENT SEC FILING"), except as disclosed therein, there has been no (i) change
in the condition, financial or otherwise, of the Company or its assets,
liabilities, properties, business, operations, intellectual property rights
owned or controlled by it, or prospects generally that would, individually or in
the aggregate, have a Material Adverse Effect; (ii) declaration, setting aside
or payment of any dividend or other distribution with respect to the capital
stock of the Company, or (iii) loss, destruction or damage to any property of
the Company, whether or not insured, which has or may have a Material Adverse
Effect.
(i) Absence of Undisclosed Liabilities. Except as and to the extent
reflected or stated in the Current SEC Filing, there has been no:
(i) Material accrued or contingent liability of a type
required to be reflected on a balance sheet in accordance with generally
accepted accounting principles or described in the footnotes thereto.
(ii) Resignation or termination of any key officers in the
Company; and the Company, to the best of its knowledge, does not know of the
impending resignation or termination of employment of any such officer;
(iii) Material change, except in the ordinary course of
business, in the contingent obligations of the Company by way of guaranty,
endorsement, indemnity, warranty or otherwise;
(iv) Damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, business or
prospects or financial condition of the Company;
(v) Waiver by the Company of a valuable right or of a material
debt owed to it;
(vi) Direct or indirect loans made by the Company to any
stockholder, employee, officer or director of the Company, other than advances
made in the ordinary course of business;
(vii) Material change in any compensation arrangement or
agreement with any employee, officer, director or stockholder;
(viii) Declaration or payment of any dividend or other
distribution of the assets of the Company;
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<PAGE> 99
(ix) Labor organization activity;
(x) Debt, obligation or liability incurred, assumed or
guaranteed by the Company, except those for immaterial amounts and for current
liabilities incurred in the ordinary course of business;
(xi) Sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
(xii) Change in any material agreement to which the Company is
a party or by which it is bound which has had a Material Adverse Effect; or
(xiii) Any other event or condition of any character that,
either individually or cumulatively, has had a Material Adverse Effect.
(j) Non-Contravention. The execution, delivery and performance by the
Company of this Agreement, the Voting Agreement and the Rights Agreement do not
and will not (i) contravene or conflict with the Amended and Restated
Certificate of Incorporation, the Certificate of Designation or Bylaws of the
Company, or (ii) contravene or conflict with or constitute a violation of any
provision of any law, regulation, judgment, injunction, order or decree binding
upon or applicable to the Company or its property, or result in a breach of or
constitute a default under any material agreement of the Company (whether upon
notice or passage of time) binding upon or applicable to it or its property, in
any manner which would materially and adversely affect the Purchasers' rights or
their ability to realize the intended benefits under this Agreement, the Voting
Agreement or the Rights Agreement.
(k) Filings.
(i) The Company has filed in a timely manner, and has
delivered to the Purchasers copies of, the following reports required to be
filed with the Commission under the Exchange Act: (1) the Company's quarterly
report on Form 10-Q for the quarter ended December 31, 1998 filed with the
Commission on February 16, 1999 and (2) the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1998 filed with Commission on September 25,
1998 (collectively the "SEC REPORTS"). As of its filing date, (i) each such
report complied in all material respects with the applicable requirements of the
Securities Act and the Exchange Act, as the case may be, (ii) no such report or
statement filed pursuant to the Exchange Act contained any untrue statement of a
material fact or omitted to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading. None of the Company's subsidiaries is required to
file any forms, reports or other documents with the Commission.
(ii) Each of the consolidated financial statements (including
in each case any related notes) contained in the SEC Reports complied as to form
in all material respects with the applicable published rules and regulations of
the Commission with respect thereto, was prepared in accordance with U.S.
generally accepted accounting principles applied on a consistent basis
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<PAGE> 100
throughout the periods involved (except as may be indicated in the notes to such
financial statements or, in the case of unaudited statements, as permitted by
Form 10-Q and the rules and regulations promulgated by the Commission), and
fairly presented the consolidated financial position of the Company and its
subsidiaries as of the respective dates and the consolidated results of
operations and statements of cash flows for the periods indicated, except that
the unaudited interim financial statements were subject to normal and recurring
year-end adjustments which were not or are not expected to be material in
amount.
(l) Employee Matters and Benefit Plans.
(i) Definitions. The following terms shall have the meanings
set forth below:
(1) "Affiliate," as used in this section shall mean
any other person or entity under common control with the Company within the
meaning of Section 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986,
as amended (the "CODE"), and regulations thereunder;
(2) "Company Employee Plan" shall refer to any plan,
program, policy, practice, contract, agreement or other arrangement providing
for compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether formal or informal, funded or unfunded, including without
limitation, each "employee benefit plan," within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1978, as amended ("ERISA"), which
is or has been maintained, contributed to, or required to be contributed to, by
the Company or any Affiliate for the benefit of any "Company Employee" (as
defined below), and pursuant to which the Company or any Affiliate has or may
have any material liability contingent or otherwise;
(3) "Company Employee" shall mean any current,
former, or retired employee, officer, or director of the Company or any
Affiliate;
(4) "Company Employee Agreement" shall refer to each
management, employment, severance, consulting, relocation, repatriation,
expatriation, visa, work permit or similar agreement or contact between the
Company or any Affiliates and any Company Employee or consultant; and
(5) "Company Pension Plan" shall refer to each
Company Employee Plan which is an "employee pension benefit plan," within the
meaning of Section 3(2) of ERISA.
(ii) Schedule. The Company does not have any plan or
commitment to establish any new Company Employee Plan or Company Employee
Agreement, to modify any Company Employee Plan or Company Employee Agreement
(except to the extent required by law or to conform any such Company Employee
Plan or Company Employee Agreement to the requirements of any applicable law, in
each case as previously disclosed to the Purchasers in writing,
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<PAGE> 101
or as required by this Agreement), or to enter into any Company Employee Plan or
Company Employee Agreement, nor does it have any intention or commitment to do
any of the foregoing.
(iii) Documents. The Company has provided to the Purchasers
(i) correct and complete copies of all documents embodying or relating to each
Company Employee Plan and each Company Employee Agreement including all
amendments thereto and written interpretations thereof, (ii) the most recent
annual actuarial valuations, if any, prepared for each Company Employee Plan;
(iii) the three most recent annual reports (Series 5500 and all schedules
thereto), if any, required under ERISA or the Code in connection with each
Company Employee Plan or related trust; (iv) if any Company Employee Plan is
funded, the most recent annual and periodic accounting of Company Employee Plan
assets; (v) the most recent summary plan description together with the most
recent summary of material modifications, if any, required under ERISA with
respect to each Company Employee Plan; (vi) all IRS determination letters and
rulings relating to Company Employee Plans and copies of all applications and
correspondence to or from the Internal Revenue Service (the "IRS") or the
Department of Labor (the "DOL") with respect to any Company Employee Plan; (vii)
all communications material to any Company Employee or Company Employees
relating to any Company Employee Plan and any proposed Company Employee Plans,
in each case, relating to any amendments, terminations, establishments,
increases or decreases in benefits, acceleration of payments or vesting
schedules or other events which would result in any material liability to the
Company; and (viii) all registration statements and prospectuses prepared in
connection with each Company Employee Plan.
(iv) Company Employee Plan Compliance. (i) The Company has
performed in all material respects all obligations required to be performed by
it under each Company Employee Plan and each Company Employee Plan has been
established and maintained in all material respects in accordance with its terms
and in compliance with all applicable laws, statutes, orders, rules and
regulations, including but not limited to ERISA or the Code; (ii) to the
Company's knowledge no "prohibited transaction," within the meaning of Section
4975 of the Code or Section 406 of ERISA, has occurred with respect to any
Company Employee Plan; (iii) there are no actions, suits or claims pending, or,
to the knowledge of the Company, threatened or anticipated (other than routine
claims for benefits) against any Company Employee Plan or against the assets of
any Company Employee Plan; (iv) each Company Employee Plan can be amended,
terminated or otherwise discontinued after the closing in accordance with its
terms, without liability to the Company or any Affiliates (other than ordinary
administration expenses typically incurred in a termination event); (v) there
are no inquiries or proceedings pending or, to the knowledge of the Company or
any Affiliates, threatened by the IRS or DOL with respect to any Company
Employee Plan; and (vi) to the Company's knowledge neither the Company nor any
Affiliate is subject to any penalty or tax with respect to any Company Employee
Plan under Section 402(i) of ERISA or Section 4975 through 4980 of the Code.
(v) Company Pension Plans. The Company does not now, nor has
it ever, maintained, established, sponsored, participated in, or contributed to,
any Company Pension Plan which is subject to Part 3 of Subtitle B of Title I of
ERISA, Title IV of ERISA or Section 412 of the Code.
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<PAGE> 102
(vi) Multiemployer Plans. At no time has the Company
contributed to or been requested to contribute to any Multiemployer Plan.
(vii) No Post-Employment Obligations. No Company Employee Plan
provides, or has any liability to provide, life insurance, medical or other
employee benefits to any Company Employee upon his or her retirement or
termination of employment for any reason, except as may be required by statute,
and the Company has never represented, promised or contracted (whether in oral
or written form) to any Company Employee (either individually or to Company
Employees as a group) that such Company Employee(s) would be provided with life
insurance, medical or other employee welfare benefits upon their retirement or
termination of employment, except to the extent required by statute.
(viii) Effect of Transaction.
(1) The execution of this Agreement and the
consummation of the transactions contemplated hereby will not (either alone or
upon the occurrence of any additional or subsequent events) constitute an event
under any Company Employee Plan, Company Employee Agreement, trust or loan that
will or may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any Company Employee.
(ix) Employment Matters. The Company and each of its
subsidiaries (i) is in compliance in all material respects with all applicable
foreign, federal, state and local laws, rules and regulations respecting
employment, employment practices, terms and conditions of employment and wages
and hours, in each case, in each location in which the Company or any of its
subsidiaries employs persons; (ii) has withheld all amounts required by law or
by agreement to be withheld from the wages, salaries and other payments to
Company Employees; (iii) is not liable for any material arrears of wages or any
material taxes or any material penalty for failure to comply with any of the
foregoing; and (iv) is not liable for any material payment to any trust or other
fund or to any governmental or administrative authority, with respect to
unemployment compensation benefits, social security or other benefits or
obligations for Company Employees (other than routine payments to be made in the
normal course of business and consistent with past practice).
(x) Violations. To the Company's knowledge, no employee of the
Company has violated any employment contract, patent disclosure agreement or non
competition agreement between such employee and any former employer of such
employee due to such employee being employed by the Company and disclosing to
the Company trade secrets or proprietary information of such employer. The
Company is not, and has never been, a party to any collective bargaining
agreement. The Company and its subsidiaries are in compliance in all material
respects with all applicable laws regarding employment practices, terms and
conditions of employment, and wages and hours (including, without limitation,
ERISA, the Worker Adjustment and Retaining Notification Act or any similar state
or local law).
(m) Labor Matters. (i) There are no controversies pending or, to the
best knowledge of each of the Company and its respective subsidiaries,
threatened, between the
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Company or any of its subsidiaries and any of their respective employees, which
controversies have or could reasonably be expected to have a Material Adverse
Effect; (ii) as of the date of this Agreement, neither the Company nor any of
its subsidiaries is a party to any collective bargaining agreement or other
labor union contract applicable to persons employed by the Company or its
subsidiaries nor does the Company or its subsidiaries know of any activities or
proceedings of any labor union to organize any such employees (A) as of the date
of this Agreement and (B) which, as of the Closing, have or could reasonably be
expected to have a Material Adverse Effect; and (iii) as of the date of this
Agreement, neither the Company nor any of its subsidiaries has any knowledge of
any strikes, slowdowns, work stoppages or lockouts, or threats thereof, by or
with respect to any employees of the Company or any of its subsidiaries (A) as
of the date of this Agreement and (B) which, as of the closing, have or could
reasonably be expected to have a Material Adverse Effect.
(n) Title to Property. The Company owns no material real property. The
Company and each of its subsidiaries have good and defensible title to all of
their material properties and assets, free and clear of all liens, charges and
encumbrances except liens for taxes not yet due and payable and such liens or
other imperfections of title, if any, as do not materially detract from the
value of or interfere with the present use of the property affected thereby or
which, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect; and all leases pursuant to which the Company or
any of its subsidiaries lease from others material amounts of real or personal
property are in good standing, valid and effective in accordance with their
respective terms, and there is not, under any of such leases, any existing
material default or event of default (or any event which with notice or lapse of
time, or both, would constitute a material default and in respect of which the
Company or its subsidiary has not taken adequate steps to prevent such default
from occurring) except where the lack of such good standing, validity and
effectiveness or the existence of such default or event of default could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. All the plants, structures and equipment of the Company and its
subsidiaries, except such as may be under construction, are in good operating
condition and repair, except where the failure of such plants, structures and
equipment to be in such good operating condition and repair could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(o) Taxes. The Company and each of its subsidiaries, and any
consolidated, combined, unitary or aggregate group for tax purposes of which the
Company or any of its subsidiaries is or has been a member, have timely filed
all tax returns required to be filed by them and have paid all taxes shown
thereon to be due. These returns and reports are true and complete in all
material respects. The Company has paid all taxes and other assessments due. The
Company has provided adequate accruals in accordance with generally accepted
accounting principles in its financial statements for any taxes that have not
been paid, whether or not shown as being due on any tax returns. There is (i) no
material claim for taxes that is a lien against the property of the Company or
any of its subsidiaries or is being asserted against the Company or any of its
subsidiaries other than liens for taxes not yet due and payable, (ii) no audit
of any tax return of the Company or any of its subsidiaries being conducted by a
tax authority, (iii) no extension of the statute of limitations on the
assessment of any taxes granted by the Company or any of its subsidiaries and
currently in effect,
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and (iv) no agreement, contract or arrangement to which the Company or any of
its subsidiaries is a party that may result in the payment of any amount that
would not be deductible by reason of Sections 162(m), 280G or 404 of the Code.
Neither the Company nor any of its subsidiaries has ever been a member of any
combined, controlled, consolidated or affiliated group (other than the group of
which the Company is the parent) for tax purposes. Neither the Company nor any
of its subsidiaries is a party to any tax sharing or tax allocation agreement
nor does the Company or any of its subsidiaries owe any amount under any such
agreement. Neither the Company nor any of its subsidiaries has been at any time,
a "United States real property holding corporation" with the meaning of Section
897(c)(2) of the Code.
(p) Compliance with Laws. Except with respect to environmental matters
(which are covered by Section 4(q) below), the Company and its Subsidiaries are,
and at all times since January 1, 1996 have been, in compliance with all
applicable laws, regulations, orders, judgments and decrees, except where the
failure to so comply would not have a Material Adverse Effect on the condition
of the Company and its Subsidiaries taken as a whole. Neither the Company nor
any of its subsidiaries has received any notice or other communication from any
governmental entity or other person regarding any actual or possible material
violation of, or material failure to comply with, any law, regulation, order,
judgment or decree.
(q) Environmental Matters.
(i) Hazardous Material. Except as would result in any material
liability to the Company under Environmental Laws (as defined below), no
underground storage tanks and no amount of any substance that has been
designated by any Governmental Entity or by applicable Environmental Laws to be
radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including, without limitation, PCBs, asbestos, petroleum,
urea-formaldehyde and all substances listed as hazardous substances pursuant to
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, or defined as a hazardous waste pursuant to the Resource
Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to Environmental Laws, but excluding office and janitorial
supplies maintained in accordance with Environmental Laws (a "HAZARDOUS
MATERIAL") are present, as a result of the actions of the Company or any of its
subsidiaries or any affiliate of the Company, or, to the Company's knowledge, as
a result of any action of any third party or otherwise, in, on or under any
property, including the land and the improvements, ground water and surface
water thereof, that the Company or any of its subsidiaries has at any time
owned, operated, occupied or leased. For the purposes of this Agreement,
"ENVIRONMENTAL LAWS" shall mean all federal, state, local and foreign laws,
ordinances, treaties, rules, regulations, guidelines and permit conditions
relating to contamination, pollution or the environment (including ambient air,
surface water, ground water, land surface or subsurface strata) or the
protection of human health and worker safety, including, without limitation,
laws and regulations relating to Hazardous Materials Activities (as hereinafter
defined) or emissions, discharges, releases or threatened releases of Hazardous
Materials.
(ii) Hazardous Materials Activities. Neither the Company nor
any of its subsidiaries has (i) transported, stored, used, manufactured,
disposed of, released or exposed its
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employees or others to Hazardous Materials in violation of Environmental Laws,
or (ii) disposed of, transported, sold, used, released, exposed its employees or
others to or manufactured any product contained a Hazardous Material
(collectively "HAZARDOUS MATERIALS ACTIVITIES") in violation of any
Environmental Laws in effect prior to or as of the date hereof except for which
violation has not heretofore been cured or for which there is any remaining
liability.
(iii) Permits. The Company and its subsidiaries hold all
environmental approvals, permits, licenses, clearances and consents (the
"ENVIRONMENTAL PERMITS") necessary for the conduct of the Company's and its
subsidiaries' Hazardous Material Activities and other businesses of the Company
and its subsidiaries as such activities and businesses are currently being
conducted. The Company and its subsidiaries are and at all times have been in
compliance in all material respects with the terms of the Environmental Permits
except for which noncompliance has heretofore been cured or for which there is
any remaining liability.
(iv) Environmental Liabilities. No action, proceeding,
revocation proceeding, amendment procedure, writ, claim or injunction is
pending, and to the Company's knowledge, no action, proceeding, revocation
proceeding, amendment procedure, writ, claim or injunction has been threatened
by any governmental entity against the Company or any of its subsidiaries
concerning any Environmental Permit, Hazardous Material or any Hazardous
Materials Activities of the Company or any of its subsidiaries.
(r) Intellectual Property. The Company or its subsidiaries owns each of
the patents and patent applications referred to in the SEC Reports and, except
as disclosed in the SEC Reports, (i) the Company owns or possesses adequate and
enforceable rights to use all other patent applications, patents, trademarks,
trademark applications, trade names, service marks, copyrights, copyright
applications, licenses, know-how and other similar rights and proprietary
knowledge (collectively with the patents and patent applications described in
the SEC Reports, the "INTANGIBLES") necessary for the conduct of the Company's
current, former and anticipated activities and (ii) neither the Company nor any
subsidiary, to its knowledge, has infringed, is infringing, or has received any
notice of infringement of any Intangible of any other person that, if the
subject of an unfavorable decision, ruling or finding, could reasonably be
expected to have a Material Adverse Effect and the Company knows of no basis
therefor. The expiration of any Intangibles would not have a Material Adverse
Effect on the Company and its subsidiaries taken as a whole. Except as set forth
in the SEC Reports, the Company has received no notice of potential indemnity
claims from customers based upon a notice of infringement any such customer has
received from a patent owner relating to an assertion of infringement of a
patent other than potential indemnity claims which individually or in the
aggregate would not reasonably be expected to have a Material Adverse Effect on
the Company.
(s) Personnel. All personnel, including employees, agents, consultants
and contractors, who have contributed to or participated in the conception and
development of the Intangibles on behalf of the Company have executed
nondisclosure agreements in the form set forth on the Disclosure Schedule and
either (i) have been a party to a "work-for-hire" arrangement or agreements with
the Company in accordance with applicable national and state law that has
accorded
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the Company full, effective, exclusive and original ownership of all tangible
and intangible property thereby arising, or (ii) have executed appropriate
instruments of assignment in favor of the Company as assignee that have conveyed
to the Company effective and exclusive ownership of all tangible and intangible
property thereby arising.
(t) Year 2000 Compliance. Except as would not reasonably be expected to
have a Material Adverse Effect on the Company, all of the Company's Information
Technology (as defined below) effectively addresses the Year 2000 issue, and
will not cause an interruption in the ongoing operations of the Company's
business on or after January 1, 2000. For purposes of the foregoing, the term
"INFORMATION TECHNOLOGY" shall mean and include all software, hardware,
firmware, telecommunications systems, network systems, embedded systems and
other systems, components and/or services that are owned or used by the Company
in the conduct of its business, or purchased by the Company from third party
suppliers.
(u) No Brokers. The Company has not directly or indirectly employed any
broker, finder or other person (including any employee) that might be entitled
to a fee, commission or other compensation upon the execution of this Agreement,
the Voting Agreement or the Rights Agreement or the consummation of the
transactions contemplated by this Agreement, the Voting Agreement or the Rights
Agreement for which the Purchasers or the Company is or may be liable.
(v) Chief Executive Officer. The Company has entered into an employment
agreement with a new Chief Executive Officer acceptable to the Purchasers.
(w) Registration Rights. Except as provided in the Rights Agreement,
the Company is presently not under any obligation and has not granted any rights
to register under the Securities Act any of its presently outstanding securities
or any of its securities that may subsequently be issued.
(x) Permits. The Company has all franchises, permits, licenses, and any
similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could have a Material Adverse Effect on the
business, properties, prospects, or financial condition of the Company, and
believes it can obtain, without undue burden or expense, any similar authority
for the conduct of its business as presently planned to be conducted. The
Company is not in default in any material respect under any such franchises,
permits, licenses or other similar authority.
(y) Royalties. Except as set forth in the Disclosure Schedule, there
are no royalties, fees, honoraria or other payments payable by the Company to
any person or entity by reason of the ownership, development, use, license, sale
or disposition of the Intangibles, other than salaries and sales commissions
paid to employees and sales agents in the ordinary course of business.
(z) Real Property Holding Corporation. The Company is not a real
property holding corporation within the meaning of Section 897(c)(2) of the
Internal Revenue Code of 1986, as amended (the "Code") and any regulations
promulgated thereunder.
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(aa) Investment Company Act. The Company is not an "investment
company", or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended.
(bb) Qualified Small Business. The Company is a "qualified small
business" within the meaning of Section 1202(d) of the Code as of the date
hereof and the Series B Preferred should qualify as "qualified small business
stock" as defined in Section 1202(c) of the Code as of the date hereof. The
Company further represents and warrants that, as of the date hereof, it meets
the "active business requirement" of Section 1202(e) of the Code and it has made
no "significant redemptions" within the meaning of Section 1202(c)(3)(B) of the
Code.
(cc) Small Business Concern. The Company, together with its
"affiliates" (as that term is defined in Section 121.103 of Title 13 of the Code
of Federal Regulations (the "FEDERAL REGULATIONS")), is a "small business
concern" within the meaning of the Small Business Investment Act of 1958, as
amended (the "SMALL BUSINESS ACT"), and Part 121 of Title 13 of the Federal
Regulations. The information delivered by the Company to Purchaser on SBA Forms
480, 652 and 1031 of the Small Business Administration (the "SBA") delivered in
connection herewith is accurate and complete. The Company is not ineligible for
financing by any SBIC Investor pursuant to Section 107.720 of Title 13 of the
Federal Regulations. The Company acknowledges that BankAmerica Ventures is a
Federal licensee under the Small Business Act.
(dd) Broker's or Finder's Fee. No agent, broker, person or firm acting
on behalf of the Company or any of its subsidiaries is, or will be, entitled to
any fee, commission or brokers or finder's fees from any of the parties hereto,
or from any person controlling, controlled by, or under common control with any
of the parties hereto, in connection with this Agreement or any of the
transactions contemplated hereby.
(ee) Vote Required. The approval of the sale of the Shares by the
affirmative vote of a majority of the shares of Common Stock voting is the only
vote of the holders of any class or series of the Company's capital stock
necessary to approve the transactions contemplated hereby. Holders of Common
Stock will not have any appraisal rights or similar rights in connection with
the sale of the Shares or any of the other transactions contemplated hereby.
5. Representations and Warranties of the Purchasers. Each of the
Purchasers, severally and not jointly, hereby represents and warrants to the
Company as follows:
(a) Corporate Power. Each Purchaser is a corporation duly incorporated
or a limited partnership duly formed, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or formation with the
requisite power and authority, corporate or otherwise, to enter into and to
consummate the transactions contemplated hereby and otherwise to carry out its
obligations hereunder and thereunder.
(b) Authorization. Each Purchaser has full power to execute, deliver
and perform this Agreement, the Voting Agreement and the Rights Agreement, and
each such agreement has been duly executed and delivered by such Purchaser and
is the legal, valid and, assuming due
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execution by the Company, binding obligation of such Purchaser, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting creditors' rights
generally, and to general equitable principles. The execution, delivery and
performance by such Purchaser of this Agreement, the Voting Agreement and the
Rights Agreement, including the payment of the Purchase Price, have been duly
authorized by all necessary corporate action of such Purchaser.
(c) Governmental Approvals. No authorization, consent, approval,
license, exemption of or filing or registration with any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, under any applicable laws, rules or regulations presently in effect,
other than a Control Certificate to be filed with the SBA by BankAmerica
Ventures within thirty (30) days of the Closing Date, is or will be necessary to
be made or obtained by such Purchaser or any of its Affiliates (as such term is
defined below) for, or in connection with, the execution and delivery of this
Agreement, the Voting Agreement or the Rights Agreement, the consummation of the
transactions contemplated hereby or thereby or performance by such Purchaser of
its obligations hereunder or thereunder. For purposes of this Agreement, the
term "AFFILIATE" means, when used with respect to any specified person, any
other person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified person. For the purposes of this
definition, "control," when used with respect to any person, means the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise and
the terms "affiliated," "controlling" and "controlled" have meanings correlative
to the foregoing.
(d) Non-Contravention. The execution, delivery and performance by the
Company of this Agreement, the Voting Agreement and the Rights Agreement do not
and will not (i) contravene or conflict with the charter documents or bylaws of
such Purchaser, or (ii) contravene or conflict with or constitute a violation of
any provision of any law, regulation, judgment, injunction, order or decree
binding upon or applicable to such Purchaser, or result in a breach of or
constitute a default under any material agreement of such Purchaser.
(e) Risk Factors. Each such Purchaser acknowledges that an investment
in the Company involves known and unknown risks, uncertainties and other factors
which may result in such Purchaser's loss of its entire investment. The Company
is an early stage medical device company that develops and intends to
commercialize medical devices for the treatment of certain cardiovascular and
circulatory disorders. The Company's product candidates are at an early stage of
development and have not been approved for marketing by any regulatory agencies.
In addition, significant investment in research and development, preclinical and
clinical testing, regulatory and sales and marketing activity will be necessary
for the Company to commercialize its product candidates. There can be no
assurance that any of the Company's product candidates can be successfully
developed. If successfully developed, there can be no assurance that the
Company's product candidates will be approved for marketing by regulatory
agencies, will result in any meaningful benefits to patients, will be accepted
by the medical community for use in treatment or will generate sufficient or
sustainable revenues to enable the Company to be profitable.
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Each Purchaser acknowledges that such Purchaser has received a
copy of the SEC Reports and reviewed the section captioned "Factors Affecting
Future Operation Results" contained therein, which such factors are deemed
incorporated by reference into this Agreement.
(f) No Brokers. The Purchasers have not directly or indirectly employed
any broker, finder or other person (including any employee) that might be
entitled to a fee, commission or other compensation upon the execution of this
Agreement, the Voting Agreement or the Rights Agreement or the consummation of
the transactions contemplated by this Agreement, the Voting Agreement or the
Rights Agreement for which the Purchasers or the Company is or may be liable.
6. Compliance with Securities Laws and Restrictions on Transfer of
Securities.
(a) Additional Representations and Warranties and Agreements of Each
Purchaser. Each Purchaser, severally and not jointly, hereby represents and
warrants to, and agrees with, the Company as follows:
(i) The Purchaser (A) is purchasing the Shares for its own
account for investment only and not with a view to any resale or distribution
thereof, except pursuant to an effective registration statement under the
Securities Act of 1933, as amended from time to time (such act, together with
the rules and regulations promulgated thereunder, herein the "Securities Act"),
covering the sale, assignment or transfer or an opinion of counsel reasonably
satisfactory to the Company, concurred in by counsel to the Company, that such
registration is not required; provided, however, that BankAmerica Ventures shall
be permitted to transfer its Shares to Bank of America Ventures, L.P. without
such requirements.
(ii) Such Purchaser has received and carefully reviewed the
Current SEC Filing, and has had the opportunity to obtain and receive such other
information as it deems necessary to understand the business and financial
condition of the Company and to make the investment decision to purchase the
Shares.
(iii) As an investor in companies in the medical device
industry, such Purchaser has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
investment represented by the Shares, and it is able to bear the economic risk
of such investment.
(iv) Such Purchaser is an "accredited investor" as such term
is defined in Rule 501(a) of Regulation D under the Securities Act. If other
than an individual, the Purchaser also represents it has not been organized for
the purpose of acquiring the Shares.
(v) Such Purchaser understands that the Shares are being
issued in a transaction which is exempt from the registration requirements of
the Securities Act by reason of the provisions of Section 4(2) of the Securities
Act and that the Shares will be subject to transfer restrictions and must be
held indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available.
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The certificate representing the Shares will be affixed with
the following legends:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, ASSIGNED OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT COVERING THE TRANSFER OR
AN OPINION OF COUNSEL OR OTHER EVIDENCE IN FORM AND SUBSTANCE
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED."
The restrictions on sale, assignment and transfer of the
Shares contained in this Section 6(a)(v) shall terminate at such time as there
shall be delivered to the Company and such Purchaser an opinion of counsel to
such Purchaser, in form and substance reasonably satisfactory to the Company, to
the effect that, due to the lapse of time or otherwise, no registration of such
securities is required under the Securities Act in connection with any
distribution of such securities to the public in the United States. In addition,
at any time after (A) the delivery of such opinion; or (B) such securities are
sold pursuant to and in accordance with an effective registration statement
under the Securities Act covering such sale, the Purchaser shall be entitled to
exchange its certificate representing such securities (or any portion thereof as
to which (A) or (B) above applies) for a new certificate not bearing the first
legend set forth in Section 6(a)(v).
(vi) Such Purchaser understands that the Shares constitute
"restricted securities" within the meaning of Rule 144, promulgated under the
Securities Act. Purchaser is aware that Rule 144, in substance, except as
otherwise provided in subsection (k) of such rule, permits limited public resale
of "restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering subject
to the satisfaction of certain conditions, including, among other things: (A)
the availability of certain public information about the Company; (B) the resale
occurring not earlier than the expiration of the applicable holding period
stated therein; (C) the sale being made through a broker in an unsolicited
"broker's transaction" or in transactions directly with a market maker (as said
term is defined under the Exchange Act) and (D) the amount of securities being
sold during any three-month period not exceeding the specified limitations
stated therein. Such Purchaser also understands that the holding period under
Rule 144 will commence on the Closing Date.
(vii) Such Purchaser further understands that in the event all
of the applicable requirements of Rule 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rule 144 is
not exclusive, the staff of the Commission has expressed its opinion that
persons proposing to sell private placement securities other than in a
registered offering and otherwise than pursuant to Rule 144 will have a
substantial burden of proof in establishing that
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an exemption from registration is available for such offers or sales, and that
such persons and their respective brokers who participate in such transactions
do so at their own risk.
(b) Agreement Not to Transfer.
(i) Prior to twelve months after the Closing, the Purchasers
shall not, directly or indirectly, Transfer or offer to Transfer any Shares,
unless the Company consents to such Transfer and the transferee agrees to be
bound by this Agreement; provided however, that BankAmerica Ventures shall be
permitted to transfer its Shares to Bank of America Ventures, L.P. without such
requirements.
(ii) As used in this Section 6(b), the term "TRANSFER" shall
mean any sale, transfer, assignment, hypothecation, encumbrance or other
disposition, whether voluntary or involuntary, of Shares. In the case of a
hypothecation, the Transfer shall be deemed to occur both at the time of the
initial pledge and at any pledgee's sale or a sale by any secured creditor or a
retention by the secured creditor of the pledged Shares in complete or partial
satisfaction of the indebtedness for which the Shares are security.
(c) Stop Transfer Orders. Such Purchaser understands that notations
restricting the transfer of the Shares will be made on the transfer records of
the Company and that a stop transfer order will be entered with the Company's
transfer agent.
(d) Compliance with Section 6. None of the Shares (nor any interest
therein) shall be sold, assigned or offered except in accordance with the
provisions of this Section 6.
7. Additional Covenants of the Purchasers Regarding Securities.
(a) Forms 13D or 13G. Promptly following the Closing, the Purchasers
shall file with the Commission any reports regarding their ownership of the
Company's Common Stock as required by Section 13(d) of the Exchange Act and the
rules and regulations.
(b) Insider Trading Policy; Short Sales.
(i) For so long as a representative of the Purchasers is a
member of the Board of Directors of the Company, the Purchasers and their
Affiliates who have access to Material Confidential Information (as defined
below) of the Company shall agree to comply with the Insider Trading Compliance
Program of the Company including, but not limited to, trade pre-clearance
requirements and trading blackout periods as may be in effect from time to time.
In addition, the Purchasers hereby acknowledge that each Purchaser is aware, and
that each Purchaser will advise such directors, officers, employees,
representatives, agents and advisors who are informed as to the matters
concerning the Company or who have access to the Company's Material Confidential
Information, that United States securities laws prohibit any person who has
received from an issuer material nonpublic information concerning the issuer
from communicating such information to any other person under circumstances in
which it is reasonably foreseeable that such person is likely to purchase or
sell the securities of such issuer, make investment recommendations based on
such
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material nonpublic information or otherwise affect the trading price of such
issuer's securities. The limitations set forth in the immediately preceding
sentence are not intended to preclude the brokerage, investment advisory,
financial advisory, financing, money management, trading, arbitrage or other
similar activities conducted on the Purchasers' behalf by only those directors,
officers, representatives and agents and advisors who do not have access to the
Company's Material Confidential Information or are not aware of the content of
such Material Confidential Information.
(ii) The Purchasers and their Affiliates shall not make any
short sale of, loan, or grant any option for the purchase of, any equity
securities of the Company held by the Purchasers at any time.
(c) Material Confidential Information.
(i) In connection with the Purchasers' decision-making with
respect to their acquisition of the Shares, the Company has furnished to the
Purchasers and their officers, directors, employees and agents (collectively
referred to as "PURCHASERS AND AGENTS") financial and other information which
has not theretofore been made available to the public ("MATERIAL CONFIDENTIAL
INFORMATION"). The Purchasers and Agents may also receive Material Confidential
Information of the Company in the future. Pursuant to a Nondisclosure Agreement
dated March 5, 1999, the Purchasers have agreed to refrain from disclosing such
information pursuant to the terms and conditions of such agreement. The Company
and the Purchasers wish to replace the confidentiality obligations of the
parties set forth in such agreement with those provided herein. Therefore, the
Purchasers and Agents shall treat all such Material Confidential Information in
accordance with the provisions of this agreement and to take or abstain from
taking certain other actions herein set forth. The term "Material Confidential
Information" does not include information which (i) was already in the
Purchasers' or Agents' possession prior to the disclosure by the Company of the
Material Confidential Information, provided that such information is not known
by the Purchasers and Agents to be subject to another confidentiality agreement
with or other obligation of secrecy to the Company or another party, (ii)
becomes generally available to the public other than as a result of disclosure
by the Purchasers or Agents or (iii) becomes available to you on a
non-confidential basis from a source other than the Company or its advisors,
provided that such source is not known to the Purchasers or Agents to be bound
by a confidentiality agreement with or other obligation of secrecy to the
Company or another party. The Purchasers agree that the Company's Material
Confidential Information will be used solely for the purpose of monitoring the
Purchasers' holdings of the Shares. The Purchasers also agree that the
Purchasers and Agents will not disclose any of the Company's Material
Confidential Information now or hereafter received or obtained from the Company
or its representatives to any third party or otherwise use or permit the use of
the Material Confidential Information, except as required by applicable law or
legal process, without the prior written consent of the Company; provided,
however, that any such Material Confidential Information of the Company may be
disclosed to such of the Purchasers' representatives who need to know such
information for the purpose of monitoring the Purchasers' investment in the
Shares; in which case it is understood that the Purchasers' representatives,
directors, officers, employees, agents and advisors shall be informed by the
Purchasers of the confidential nature of such information and shall be directed
by the Purchasers to treat such information confidentially. In the
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event that the Purchasers and Agents or any of their representatives becomes
legally compelled (by deposition, interrogatory, request for documents,
subpoena, civil investigative demand, other demand or rules and regulations
under the federal securities laws or similar process, but not pursuant to laws
and regulations which Purchasers and Agents are subject to as a result of being
an affiliate of a national bank) to disclose any of the Material Confidential
Information, the Purchasers and Agents shall provide the Company with prompt
prior written notice of such requirement prior to such disclosure. In the event
that a protective order or other remedy is not obtained, or that the Company
waives compliance with the provisions hereof, each Purchaser agrees to furnish
only that portion of the Material Confidential Information which such Purchaser
is legally required to furnish and, where appropriate, to exercise the
Purchasers' and Agents' reasonable efforts to obtain assurances that
confidential treatment will be accorded such Material Confidential Information.
(d) Reporting Obligations Pursuant to Section 16. The Purchasers agree
to file with the Commission any reports required to be filed pursuant to Section
16(a) of the Exchange Act and the rules and regulations promulgated thereunder
by such Purchasers, their officers, directors, employees or affiliates or by
such Purchasers' nominee to the Company's Board of Directors within the time
such filings are required to be made and to provide the Company with a copy of
all such filings promptly thereafter.
8. Additional Covenants of the Company.
(a) Inspection. For so long as a Purchaser holds at least 500 shares of
Series B Convertible Preferred Stock (or the Common Stock issuable or issued
upon conversion of 500 shares of Series B Convertible Preferred Stock), the
Company shall permit each the Purchaser, at such Purchaser's expense, to visit
and inspect the Company's properties, to examine its books of account and
records and to discuss the Company's affairs, finances and accounts with its
officers, all at such reasonable times as may be requested by the Investor;
provided, however, that the Company shall not be obligated pursuant to this
Section 8(a) to provide access to any information that it reasonably considers
to be a competitively sensitive information unless such Purchaser has executed a
non-disclosure agreement in a form reasonably acceptable to the Company.
(b) Board of Directors. The following actions will be taken with
respect to the Company's Board of Directors.
(i) The existing Board of Directors will resign effective as
of the Closing Date.
(ii) At or prior to the Closing the Company shall amend its
Bylaws, if required, to fix the number of directors to five (5) members with a
provision that the number of directors may be increased to seven (7) members
with the consent of the directors who are representatives of the Purchasers.
(iii) The holders of the Series B Convertible Preferred shall
have the right to nominate three (3) members of the Company's Board of
Directors, two (2) of which shall be representatives of BankAmerica Ventures and
one (1) of which shall be a representative of Morgan
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Stanley Dean Witter Venture Partners ("MSDW"). In the event that the number of
the Company's directors exceeds five (5), the holders of Series B Convertible
Preferred shall have the right to nominate one (1) additional director. All
members of the Company's Board of Directors nominated by holders of Series B
Convertible Preferred shall have the right to be members of all committees of
the Board of Directors. The Company shall not file any proxy or other materials
with the SEC opposed to the re-election of such persons as directors of the
Company unless such director has committed any actions giving the stockholders
of the Company the right to remove such director for cause and shall use all
reasonable efforts to secure the election of such persons as directors.
(iv) The remaining directors will include (i) one (1)
representative of the Company's management, who shall be the Company's Chief
Executive Officer and (ii) one (1) outside representative appointed by a
majority of the Board of Directors.
(v) As of the execution of this Agreement and in the event
that BankAmerica Ventures, the State of Wisconsin Investment Board ("SWIB") or
MSDW do not have a representative on the Company's Board of Directors, or any
committee thereof then the Company shall invite a representative of BankAmerica
Ventures, SWIB or MSDW, as the case may be, to attend all meetings of its Board
of Directors or any committee thereof in a nonvoting observer capacity and, in
this respect, shall give such representative copies of all notices, minutes,
consents, and other materials (the "BOARD MATERIALS") that it provides to its
directors at the same time as such Board Materials are provided to any of its
directors; provided, however, that the Company reserves the right to withhold
any information and to exclude such representative of BankAmerica Ventures, SWIB
or MSDW from any meeting or portion thereof if the disclosure of such material
or discussion, in the opinion of counsel to the Company, would jeopardize the
Company's attorney client privilege. The right granted to BankAmerica Ventures,
SWIB and MSDW to attend meetings of the Company's Board of Directors and to
receive Board Materials shall not be assignable.
(c) Right of First Offer. Subject to the terms and conditions specified
in this Section 8(c), the Company hereby grants to each Purchaser a right of
first offer to purchase its Pro Rata Share (as hereinafter defined) (in whole or
in part) with respect to future sales by the Company of its Future Shares (as
hereinafter defined). Each Purchaser shall be entitled to assign or apportion
the right of first offer hereby granted it among itself and its partners and
affiliates (including in the case of a venture capital fund other venture
capital funds affiliated with such fund) in such proportions as it deems
appropriate. For purposes of this Section 8(c), a Purchaser's "PRO RATA SHARE"
of Future Shares shall mean that number of Future Shares that equals the
proportion that (x) the number of shares of Common Stock issued and held, or
issuable upon conversion of the Shares then held, by such Purchaser bears to (y)
the total number of shares of Common Stock of the Company then outstanding
(assuming full conversion of all convertible securities).
(i) Each time the Company proposes to offer any shares of, or
securities convertible into or exercisable for any shares of, any class of its
capital stock, including any debt securities convertible into equity
(collectively, "FUTURE SHARES"), the Company shall first make an offering of
such Future Shares to each Purchaser in accordance with the following
provisions:
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(ii) The Company shall deliver a notice by confirmed facsimile
transmission, certified mail or a nationally recognized overnight courier
service ("NOTICE") to each of the Purchasers stating (i) its bona fide intention
to offer such Future Shares, (ii) the number of such Future Shares to be
offered, and (iii) the price and a summary of the terms, if any, upon which it
proposes to offer such Future Shares.
(iii) By written notification to the Company within ten (10)
calendar days after receipt of the Notice, each Purchaser may elect to purchase
or obtain, at the price and on the terms specified in the Notice, up to its Pro
Rata Share of such Future Shares. The Company shall promptly, in writing, inform
each Purchaser that elects to purchase all the shares available to it (a
"FULLY-EXERCISING PURCHASER") of any other Purchaser's failure to do likewise.
During the ten (10) day period commencing after such information is given, each
Fully-Exercising Purchaser may elect to purchase that portion of the Future
Shares for which Purchasers were entitled to subscribe but that were not
subscribed for by the Purchasers that is equal to the proportion that the number
of shares of Common Stock issued and held, or issuable upon conversion of Shares
then held, by such Fully-Exercising Purchaser bears to the total number of
shares of Common Stock issued and held, or issuable upon conversion of the
Shares then held, by all Fully-Exercising Purchasers who wish to purchase some
of the unsubscribed Future Shares.
(iv) If all Future Shares that the Purchasers are entitled to
obtain pursuant to Section 8(c) are not elected to be obtained as provided
herein, the Company may, during the sixty (60) day period following the
expiration of the period provided in Section 8(c)(iii) hereof, offer the
remaining unsubscribed portion of such Future Shares to any person or persons at
a price not less than, and upon terms no more favorable to the offeree than
those specified in the Notice. If the Company does not enter into an agreement
for the sale of the Future Shares within such period, or if such agreement is
not consummated within sixty (60) days of the execution thereof, the right
provided hereunder shall be deemed to be revived and such Future Shares shall
not be offered unless first reoffered to the Purchasers in accordance herewith.
(v) The right of first offer in this Section 8(c) shall not be
applicable (i) to any shares of Common Stock (including shares issued upon
exercise of stock options outstanding as of the date of this Agreement) issuable
or issued to employees, consultants or directors directly or pursuant to stock
option plans or arrangements approved by the Board of Directors, including each
board representative of the Purchasers, (ii) to shares of Common Stock issued or
issuable in a firm commitment underwritten public offering, (iii) to shares of
Common Stock issued or issuable upon conversion of shares of Series A
Participating Preferred Stock or Series B Convertible Preferred Stock or as a
dividend or distribution on the shares of Series A Participating Preferred Stock
or Series B Convertible Preferred Stock, (iv) to securities issued or issuable
to banks or equipment lessors, provided such issuances are for other than
primarily equity financing purposes and provided such issuances are approved by
the Board of Directors, including each board representative of the Purchasers,
(v) to securities issued in connection with business combinations or corporate
partnering agreements approved by the Board of Directors, including each board
representative of the Purchasers, or (vi) to securities issued in strategic
financings accompanies by commercial
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development, joint ventures or other related agreements approved by the Board of
Directors, including each board representative of the Purchasers.
(vi) The rights granted to the Purchasers under Section 8(c)
hereof may be assigned to any transferee or assignee who is (a) a subsidiary,
parent, general partner, limited partner, retired partner, member or retired
member of a Purchaser, (b) a Purchaser's ancestors, descendants or spouse or to
trusts for the benefit of such persons or such Purchaser or (c) a client,
employee or member of a Purchaser, provided that (i) such transfer may otherwise
be effected in accordance with applicable securities laws, (ii) the Company is
given written notice of any such transfer five (5) Business Days prior to the
date of said transfer, stating the name and address of said transferee or
assignee and identifying the securities with respect to which such registration
rights are being assigned and (iii) the transferee or assignee of such rights is
not deemed by the Board of Directors of the Company, in its reasonable judgment,
to be a competitor of the Company and provided further that the transferee or
assignee of such rights assumes in writing in a form reasonably acceptable to
the Company the obligations of the Purchasers under this Agreement.
(d) Sonometrics License. The Company will use its best efforts to
execute an agreement to exclusively license or acquire, for an aggregate
purchase price no greater than $1,500,000, Sonometric's patent portfolio
relating to technology and methods for three dimensional digital ultrasound
tracking. The Patent Portfolio will include, but not be limited to the
following: Patent Numbers 5,515,853, 5,779,638, 5,795,298, 5,797,849, 5,817,022
and 5,868,673 and all currently active applications that are continuations,
continuations-in-part, or divisional properties, and all corresponding
foreign-filed patents and patent applications.
(e) Chief Executive Officer. In the event that a new Chief Executive
Officer, (who shall be acceptable to the Purchasers) shall have commenced
employment with the Company prior to the Closing, the Company shall use it best
efforts to retain such Chief Executive Officer through the Closing Date.
(f) Reverse Stock Split; Bylaws. The Company shall use its best efforts
to obtain stockholder approval to amend (i) the Certificate of Incorporation to
effect a five for one reverse stock split of the Company's Common Stock; and
(ii) the Bylaws to require the affirmative vote of the holders of at least a
majority of the voting power of all of the then outstanding shares entitled to
vote, voting together as a single class, to (I) increase the number of shares
reserved for issuance under the Company's Stock Plans, such that the quotient of
(A) the shares outstanding issued pursuant to the Company's Stock Plans plus the
shares available for issuance under the Company's Stock Plans plus additional
shares proposed to be issued under the Company's Stock Plans; divided by (B) the
total outstanding capital stock of the Company, including any outstanding
convertible preferred stock, on an as converted basis, is not greater than
thirty percent (30%); and (II) reprice any options granted after May 20, 1999 to
purchase shares of Common Stock under the Company's Stock Plans, provided that
the Company shall only reprice each options outstanding prior to May 20, 1999
one time.
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(g) Reservation of Common Stock. The Company will at all times reserve
and keep available, solely for issuance and delivery upon the conversion of the
Shares and all Common Stock issuable from time to time upon such conversion.
(h) Proprietary Information and Inventions Agreement. The Company shall
require all employees and consultants to execute and deliver a Proprietary
Information and Inventions Agreement in a form which is acceptable to the
Purchasers.
(i) Qualified Small Business. The Company will use its best efforts to
comply with the reporting and recordkeeping requirements of Section 1202 of the
Code, any regulations promulgated thereunder and any similar state laws and
regulations, and agrees not to repurchase any stock of the Company if such
repurchase would cause the Shares not to so qualify as "Qualified Small Business
Stock." The Company further covenants to submit to its shareholders and to state
and federal taxation authorities such form and filings as may be required to
document such compliance, including the California Franchise Tax Board Form
3565, Small Business Stock Questionnaire, with its franchise or income tax
return for the current income year.
(j) Small Business Administration Matters.
(i) The proceeds from the issuance and sale of the Shares will
be used by the Company for working capital and other general corporate purposes.
The Company will provide to each Purchaser identified as a licensed Small
Business Investment Company on Schedule A hereto (each an "SBIC INVESTOR"), and
to the Small Business Administration (the "SBA"), reasonable access to the
Company's books and records for the purpose of confirming the use of proceeds by
the Company.
(ii) For a period of one (1) year following the Closing (as
defined in the Purchase Agreement), the Company will not change the nature of
its business activity if such change would render the Company "ineligible" as
provided in Section 107.720 of Title 13 of the Federal Regulations.
(iii) So long as any SBIC Investor holds any securities of the
Company, the Company will at all times comply with the non-discrimination
requirements of Sections 112, 113 and 117 of Title 13 of the Federal
Regulations.
(iv) Within forty-five (45) days after the end of each fiscal
year of the Company, and at such other times as an SBIC Investor may reasonably
request in writing to the Company, the Company will deliver to such SBIC
Investor a written assessment in form and substance reasonably satisfactory to
such SBIC Investor, as to the economic impact of such SBIC Investor's financing
of the Company, specifying the full-time equivalent jobs created or retained in
connection with such investment, and the impact of such financing on the
Company's business in terms of profits and with respect to taxes paid by the
Company and its employees. The Company will promptly provide each SBIC Investor
who so requests in writing to the Company, specifying in such written request
the nature of such required information in reasonable detail, such information
as such SBIC Investor requests, in order to permit such SBIC Investor to comply
with such SBIC
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Investor's obligations under the Small Business Act of 1958, as amended (the
"SMALL BUSINESS ACT"), and the regulations promulgated thereunder and related
thereto. Any submission of financial information pursuant to this Section 8(j)
shall be under cover of a certificate executed by the Company's President, Chief
Executive Officer Chief Financial Officer or Treasurer, certifying that such
information (i) relates to the Company, (ii) to the best of the Company's
knowledge is accurate and (iii) if applicable, has been audited by the Company's
independent auditors.
(k) Regulatory Compliance Cooperation. In the event that any SBIC
Investor determines that it has a Regulatory Problem (as defined below), it
shall have the right to transfer its Shares in compliance with applicable state
and federal securities laws, but without regard to any other restrictions on
transfer set forth in this Agreement or the Rights Agreement (provided that the
transferee agrees to become a party to each such agreement), and the Company
shall take all such actions as are reasonably requested by such SBIC Investor in
order to (i) effectuate and facilitate any transfer by it of any securities of
the Company then held by it to any person designated by such SBIC Investor, (ii)
permit such SBIC Investor (or any of its affiliates) to exchange all or any
portion of any voting security then held by it on a share-for-share basis for
shares of a nonvoting security of the Company, which nonvoting security shall be
identical in all respects to the voting security exchanged for it, except that
it shall be nonvoting and shall be convertible into a voting security on such
terms as are requested by it in light of regulatory considerations then
prevailing, and (iii) amend this Agreement, as amended from time to time, to
effectuate and reflect the foregoing. The parties to this Agreement agree to
vote all of the Company's securities held by them in favor of such amendments
and actions. For purposes of this Agreement, a "REGULATORY PROBLEM" means any
set of facts or circumstances wherein it has been asserted by any governmental
regulatory agency that an SBIC Investor is not entitled to hold, or exercise any
significant right with respect to, the underlying securities into which the
Shares are convertible.
(l) Proxy Statement. As promptly as practicable after the execution of
this Agreement, the Company shall prepare and file with the Commission
preliminary proxy materials which shall constitute the preliminary Proxy
Statement in connection with the sale of the Shares. As promptly as practicable
after comments are received from the Commission with respect to the preliminary
proxy materials, the Company shall file with the Commission the definitive Proxy
Statement, which Proxy Statement shall comply in all material respects with the
applicable requirements of the Exchange Act and Securities Act, respectively,
and the applicable rules and regulations of the Commission thereunder.
(i) The Company shall cause the Proxy Statement to be mailed
to its stockholders and, if necessary, after the Proxy Statement shall have been
so mailed, promptly circulate amended, supplemental or supplemented proxy
material and, if required in connection therewith, resolicit proxies.
(ii) The Company warrants that the information provided (or
incorporated by reference to filings made with the Commission by the Company) in
the Proxy Statement, on the date the Proxy Statement is filed with the
Commission and on the date it is first mailed to the Company's stockholders,
shall not contain any untrue statement of a material fact or omit to state
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any material fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The Company shall
notify Purchasers promptly of the receipt of any comments by the Commission and
of any request by the Commission for amendments or supplements to the Proxy
Statement, or for additional information, and shall supply one another with
copies of all correspondence with the Commission with respect to any of the
foregoing. If at any time prior to the meeting of Stockholders to consider sale
of the Shares, any event should occur relating to the Company, its subsidiaries
or any of their respective affiliates, directors or officers which should be
described in an amendment or supplement to the Proxy Statement, the Company
shall promptly inform Purchasers. Whenever any event occurs which should be
described in an amendment or supplement to the Proxy Statement, the Company
shall, upon learning of such event, cooperate promptly to file and clear with
the Commission and, if applicable, mail such amendment or supplement to the
stockholders of the Company.
(iii) The Company shall use its best efforts to obtain
approval for quotation on the Nasdaq National Market, upon official notice of
issuance, of the Common Stock to be issued upon conversion of the Shares.
(iv) The Company shall make all necessary filings with respect
to the sale of Shares under the Securities Act and the Exchange Act and the
rules and regulations thereunder and under applicable blue sky or similar laws
and shall use their reasonable efforts to obtain required approvals and
clearances with respect thereto.
(m) Stockholder Approvals; Recommendations. The Company, acting through
its Board of Directors, shall (i) call, give notice of, convene and hold a
special meeting of the holders of Company Common Stock for the purpose of voting
upon the sale of the Shares (the "SPECIAL MEETING") and (ii) include in the
Proxy Statement the recommendation of its Board of Directors that holders of
Common Stock approve the sale of Shares at the Special Meeting. The Special
Meeting will be held as promptly as practicable. The Company shall ensure that
the Special Meeting is called, noticed, convened, held and conducted, and that
all proxies solicited, in connection with the Special Meeting are solicited in
compliance with all applicable laws, regulations, orders, judgments and decrees.
The Company shall not be permitted to delay, adjourn, postpone or reschedule the
Special Meeting, or delay the vote of the Company's stockholders on the sale of
Shares, without Purchasers' prior written consent (which consent will not be
unreasonably withheld or delayed if the need for the delay, adjournment,
postponement or rescheduling of the Special Meeting or the delay in such vote is
attributable solely to factors outside the Company's control). Notwithstanding
anything to the contrary contained in this Section 8(m), the Company's Board of
Directors shall not be permitted to withdraw or modify its recommendation in
favor of the sale of Shares.
(n) Notices of Certain Events. The Company hereto shall promptly notify
Purchasers of:
(i) the receipt by the Company of any notice or other
communication from any person alleging that the consent of such person is or may
be required in connection with the transactions contemplated by this agreement;
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(ii) the receipt by the Company of any notice or other
communication from any governmental entity in connection with the transactions
contemplated by this agreement;
(iii) the Company obtaining knowledge of any actions, suits,
claims investigations or proceedings commenced or threatened against, relating
to or involving or otherwise affecting the Company or Purchasers, as the case
may be, or any of their respective subsidiaries which relate to the consummation
of the transactions contemplated by this agreement; and
(iv) the Company obtaining knowledge of the occurrence, or
failure to occur, of any event which occurrence or failure to occur will be
likely to cause (A) any representation or warranty contained in this Agreement
to be untrue or inaccurate in any material respect, or (B) any material failure
of any party to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement; provided, however,
that no such notification shall affect the representations, warranties or
obligations of the parties or the conditions to the obligations of the parties
hereunder.
(o) Efforts. The Company shall, and shall cause its respective
subsidiaries to, cooperate and use their reasonable efforts to take, or cause to
be taken, all appropriate action, and to make, or cause to be made, all filings
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation, their reasonable efforts to (i) obtain, prior to
the Closing Date, all licenses, permits, consents, approvals, authorizations,
qualifications and orders of governmental authorities and parties to contracts
with the Company and its subsidiaries and (ii) defend against and respond to any
action, suit, proceeding or investigation relating to the transactions
contemplated by this Agreement, in each case as are necessary for consummation
of the transactions contemplated by this Agreement and to fulfill the conditions
to the sale of Shares.
(p) No Solicitation.
(i) The Company agrees that until the Closing Date, the
Company shall not, directly or indirectly, and the Company shall ensure that its
Representatives (as defined below) do not, directly or indirectly: (i) solicit,
initiate, encourage or induce the making, submission or announcement of any
Acquisition (as defined below) or take any action that could reasonably be
expected to lead to an Acquisition Proposal (as defined below); (ii) furnish any
information regarding the Company or any direct or indirect subsidiary of the
Company to any Person in connection with or in response to an Acquisition
Proposal or potential Acquisition Proposal; or (iii) engage in discussions with
any Person (as defined below) with respect to any Acquisition Proposal. The
Company shall immediately cease and discontinue, and the Company shall ensure
that its Representatives immediately cease and discontinue, any existing
discussions with any Person that relate to any Acquisition Proposal. For
purposes of this Section 8(p):
(1) "ACQUISITION PROPOSAL" shall mean any offer,
proposal or inquiry contemplating or otherwise relating to any Acquisition
Transaction.
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(2) "ACQUISITION TRANSACTION" shall mean any
transaction (other than as contemplated by the Purchase Agreement) involving:
a) any merger, consolidation, amalgamation,
share exchange, business combination, issuance of securities, acquisition of
securities, tender offer, exchange offer or other similar transaction (i) in
which the Company is a constituent company, (ii) in which a person or "group"
(as defined in the Exchange Act of 1934, as amended and the rules promulgated
thereunder) of persons directly or indirectly acquires the Company or more than
15% of the Company's business or directly or indirectly acquires beneficial or
record ownership of securities representing, or exchangeable for or convertible
into, more than 15% of the outstanding securities of any class of voting
securities of the Company, or (iii) in which the Company issues securities
representing more than 15% of the outstanding securities of any class of voting
securities of the Company;
b) any sale, lease, exchange, transfer,
license, acquisition or disposition of more than 15% of the assets of the
Company; or
c) any liquidation or dissolution of the
Company.
(3) "PERSON" shall mean any (i) individual, (ii)
corporation, limited liability company, partnership or other entity, or (iii)
governmental authority.
(4) "REPRESENTATIVES" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
(ii) Neither the Board of Directors of the Company nor any
committee thereof shall (i) withdraw or modify, or propose or resolve to
withdraw or modify, in a manner adverse to Purchasers, the approval or
recommendation by such Board of Directors or any such committee of this
Agreement or the sale of Shares, (ii) approve or recommend, or propose to
approve or recommend, any Acquisition Proposal or (iii) enter into any agreement
or letter of intent with respect to any Acquisition Proposal.
(iii) In addition to the obligations of the Company set forth
in Sections 8(p)(i) and 8(p)(ii) above, the Company shall promptly advise
Purchasers orally and in writing of any request for information or of any
Acquisition Proposal, or any inquiry with respect to or which could reasonably
be expected to lead to any Acquisition Proposal, the material terms and
conditions of such request, Acquisition Proposal or inquiry, and the identify of
the person making any such Acquisition Proposal or inquiry. The Company shall
use its best efforts to keep Purchasers fully informed of the status and details
of any such request, Acquisition Proposal or inquiry.
(iv) Notwithstanding the foregoing, if the Company receives a
bona fide, written, unsolicited offer to acquire all of the equity of the
Company or substantially all of the assets of the Company at a higher valuation
than that implied for the Company by this Agreement (a "HIGHER OFFER") the
Company may enter into a confidentiality agreement with, provide non-public
information to, or enter into discussions with, such offeror. The Company shall
inform the
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Purchasers immediately upon receipt of the Higher Offer in writing of the
identity of the offeror and the terms and conditions of the Higher Offer. In the
event that the Company shall receive a Higher Offer prior to the Closing Date
and consummate a sale of securities or material assets to, or merge with or be
acquired by, any Person other than the Purchasers, then the Company shall pay to
the Purchasers, in proportion to the Purchaser's participation in the Bridge
Financing (as defined in Section 9(xvi) below, $1 million in cash upon the
closing of such transaction.
9. Closing Conditions.
(a) Conditions to Purchaser's Obligations at the Closing. The
Purchaser's obligation to purchase the Shares at the Closing is subject to the
fulfillment on or prior to the Closing of the following conditions, any one or
more of which may be waived in whole or in part by the Purchaser:
(i) Compliance with Laws. At the Closing, the sale and
issuance of the Shares shall be legally permitted by all laws and regulations to
which the Purchaser or the Company is subject.
(ii) Representations and Warranties. Each of the
representations and warranties of the Company set forth in Section 4 shall be
true and correct as if made on the Closing Date.
(iii) Performance. The Company shall have performed and
complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing Date.
(iv) Compliance Certificate. The Chief Executive Officer of
the Company shall deliver to the Purchaser on the Closing Date a certificate
certifying that the conditions set forth in clauses (ii), (iii), (v) - (vii),
(x) - (xiii), (xiv), (xv) and (xviii) of this Section 9(a) have been fulfilled.
(v) Stockholder Approval. The Company shall have satisfied the
stockholder approval requirement provisions of the Nasdaq Stock Market, or any
other exchange or market on which the Common Stock is then listed or traded,
with respect to the issuance of 20% or more of a company's capital stock.
(vi) Increased Option Pool. The Company shall have received
stockholder approval to reserve an additional 4,000,0000 shares of Common Stock
to be available for grant to management and employees under the Company's 1991
Stock Option Plan.
(vii) Certificate of Designation. The Certificate of
Designation shall have been duly filed with the Secretary of State of Delaware,
and the Company shall have delivered a copy thereof to the Purchasers certified
as filed by the office of the Secretary of State of Delaware.
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(viii) Rights Agreement. The Company shall have executed and
delivered to the Purchasers the Rights Agreement.
(ix) Voting Agreement. The Company and certain officers,
directors, and holders of the Company's outstanding Common Stock holding a
minimum of 40% of the outstanding Common Stock shall have executed and delivered
to the Purchasers the Voting Agreement.
(x) Shareholders Rights Agreement. The Company shall have
terminated the existing Shareholders Rights Agreement dated June 13, 1995.
(xi) Preferred Shares Rights Agreement. Prior to the earlier
of thirty (30) days from the date hereof or the Closing Date, the Company shall
have taken all actions required under the Preferred Shares Rights Agreement
between the Company and Norwest Bank Minnesota, N.A. dated as of April 22, 1997
(the "RIGHTS PLAN") to permit the issuance of the Shares and the consummation of
the transactions contemplated by this Agreement, the Certificate of Designation,
the Voting Agreement and the Rights Agreement, without the triggering of any
rights thereunder. In addition the Company shall have amended the Rights Plan to
provide that the Shares held by the Purchasers shall receive upon issuance of
the Shares the same rights as the holders of Common Stock under the Rights Plan.
(xii) Adverse Change. Since the date of the financial
statements included in the Company's Quarterly Report on Form 10-Q last filed
prior to the date of this Agreement, no event which had a Material Adverse
Effect and no material adverse change in the financial condition or prospects of
the Company shall have occurred.
(xiii) Absence of Litigation. There shall be no action, suit,
investigation or proceeding pending or threatened in any court or before an
arbitrator or governmental authority that could have a Material Adverse Effect
on the Company or the purchase of the Shares.
(xiv) Opinion of Counsel. The Company shall have delivered to
the Purchasers an opinion of counsel for the Company, dated as of the Closing
Date, in form and substance reasonably acceptable to the Purchasers.
(xv) Consents. The Company and the Purchasers shall have
obtained all consents (including all governmental and regulatory consents,
approvals, or authorizations required in connection with the valid execution and
delivery of this Agreement, the Voting Agreement and the Rights Agreement),
permits and waivers necessary or required to be obtained on or prior to the
Closing Date for consummation of the transactions contemplated hereby.
(xvi) Bridge Financing. The Company shall have obtained
interim financing of $3 million to fund its operations by May 21, 1999 (the
"BRIDGE FINANCING").
(xvii) Chief Executive Officer. The new Chief Executive
Officer acceptable to the Purchasers remains employed by the Company in such
capacity on the Closing Date.
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(xviii) SBA Matters. The Company shall have executed and
delivered to the BankAmerica Ventures a Size Status Declaration on SBA Form 480
and an Assurance of Compliance on SBA Form 652, and shall have provided to
BankAmerica Ventures, the information requested by BankAmerica Ventures
necessary for the preparation by BankAmerica Ventures of a Portfolio Financing
Report on SBA Form 1031.
(xix) Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated in connection with
each Purchaser's purchase of the Shares and all documents incident thereto shall
be reasonably satisfactory in form and substance to the Purchasers and the
Purchasers' counsel, and they shall have received all such counterpart original
and certified or other copies of such documents as they may reasonably request.
(xx) Delivery of Stock Certificate. The Company shall have
caused the delivery to the Purchasers of a stock certificate representing the
Purchasers' ownership of the Shares.
(b) Conditions to Company's Obligations at the Closing. The Company's
obligation to sell and issue the Shares at the Closing is subject to the
fulfillment on or prior to the Closing of the following conditions, any one or
more of which may be waived in whole or in part by the Company:
(i) Compliance with Laws. At the Closing, sale and issuance of
the Shares shall be legally permitted by all laws and regulations to which the
Purchasers or the Company are subject.
(ii) Representations and Warranties. Each of the
representations and warranties of the Purchasers set forth in Sections 5 and 6
shall be true and correct as if made on the Closing Date.
(iii) The Purchase Price. The Purchasers shall have delivered
to the Company the Purchase Price in accordance with Section 3 hereof.
(iv) Performance. The Purchasers shall have performed and
complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with on or before the
Closing Date.
(v) Other Agreements. The Purchasers shall have executed and
delivered to the Company the Rights Agreement.
(vi) Consents. The Company and the Purchasers shall have
obtained all consents (including all governmental and regulatory consents,
approvals, or authorizations required in connection with the valid execution and
delivery of this Agreement, the Voting Agreement and the Rights Agreement),
permits and waivers necessary or required to be obtained on or prior to the
Closing Date for consummation of the transactions contemplated hereby.
-32-
<PAGE> 125
(vii) Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated in connection with
the sale and issuance of the Shares and all documents incident thereto shall be
reasonably satisfactory in form and substance to the Company and the Company's
counsel, and they shall have received all such counterpart original and
certified or other copies of such documents as they may reasonably request.
10. General Provisions.
(a) Notices. All notices and other communication required or
appropriate to be given hereunder shall be in writing and shall be delivered by
hand or mailed by certified mail, return receipt requested, or sent by telex or
facsimile (in which case a confirming copy shall also be sent by certified mail
or courier), to the following respective addresses or to such other addresses as
may be specified in any notice delivered or mailed as above provided:
(i) If to the Purchasers, to:
BankAmerica Ventures
950 Tower Lane, Suite 700
Foster City, California 94404
Telephone: (650) 378-6000
Facsimile: (650) 378-6040
Attention: Mark Brooks and Robert S. Fore
and
Morgan Stanley Dean Witter Venture Partners
1221 Avenue of America, 33rd floor
New York, NY 10020
Phone: 212-762-8683
Fax: 212-762-8424
Attention: Fazle Husain
with a copy to:
Cooley Godward LLP
Five Palo Alto Square
Palo Alto, CA 94306-2155
Telephone: (650) 843-5000
Facsimile: (650) 857-0663
Attention: Julia L. Davidson, Esq.
and
-33-
<PAGE> 126
Davis, Polk, Wardwell
450 Lexington Ave.
New York, NY 10017
Telephone 212-450-4350
Facsimile: 212-450-5515
Attention: John Bick, Esq.
(ii) If to the Company to:
Cardiac Pathways Corporation
995 Benecia Avenue
Sunnyvale, California 94086
Telephone: (408) 737-0505
Facsimile: (408) 737-1700
Attention: G. Michael Latta,
Chief Financial Officer
with a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050
Telephone: (650) 493-9300
Facsimile: (650) 845-5000
Attention: Chris F. Fennell, Esq.
Any notice or other communication delivered by hand or mailed shall be deemed to
have been delivered on the date on which such notice or communication is
delivered by hand, or in the case of certified mail deposited with the
appropriate postal authorities on the date when such notice or communication is
actually received, and in any other case shall be deemed to have been delivered
on the date on which such notice or communication is actually received.
(b) Governing Law. The parties have agreed that this Agreement will be
governed by and construed in accordance with the laws of the State of
California.
(c) Amendments. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the holders of a majority of the Shares and
Conversion Shares then outstanding. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any
securities purchased under this Agreement at the time outstanding (including
securities into which such securities are convertible), each future holder of
all such securities, and the Company.
(d) Assignment.
-34-
<PAGE> 127
(i) Except as set forth in this Section 10(d), none of the
rights or obligations of the Company and each Purchaser may be assigned or
transferred without the prior written consent of the other party hereto.
(ii) The Company and each Purchaser may assign all of its
rights and obligations under this Agreement in connection with a merger or
similar reorganization or the sale of all or substantially all of its assets.
This Agreement shall survive any such merger or reorganization of the Company or
a Purchaser with or into, or such sale of assets to, another party and no
consent for such merger, reorganization or sale shall be required hereunder.
(iii) Each Purchaser may assign its rights and obligations to
a subsidiary, parent, LLC, general partner, limited partner, retired partner,
member or retired member of a Purchaser, provided the assignee is not deemed by
the Board of Directors of the Company, in its reasonable judgment, to be a
competitor of the Company and provided further such assignee agrees, prior to
the transfer, in writing with the Company to comply with all the provisions of
this Agreement applicable to such Purchaser.
(iv) This Agreement shall be binding upon and inure to the
benefit of the successors and permitted assigns of the parties. Any assignment
not in accordance with this Agreement shall be void.
(e) Expenses. The Company shall reimburse the Purchasers for all
reasonable legal, accounting and due diligence expenses incurred in connection
with this Agreement and the transactions contemplated hereby, regardless of
whether or not the Closing occurs.
(f) Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
(g) Entire Agreement. This Agreement, the Voting Agreement and the
Rights Agreement, together with the Exhibits and other documents attached hereto
and thereto, constitute the entire contract between the parties with respect to
the subject matter hereof and thereof, and no party will be liable or bound to
the other in any manner by any representations, warranties or covenants except
as specifically set forth herein and therein.
(h) Titles. The titles of the Sections of this Agreement are inserted
for reference only, and are not to be considered as part of this Agreement in
construing this Agreement.
(i) Termination. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned, at any time prior to the Closing, whether
before or after approval of the sale of Shares by the stockholders of the
Company:
(i) by mutual consent of the Company and of a majority in
interest of Purchasers as set forth on Schedule A;
-35-
<PAGE> 128
(ii) by either a majority in interest of Purchasers as set
forth on Schedule A or the Company, if the Closing shall not have occurred by
October 31, 1999 (unless the failure to consummate the sale of Shares is
attributable to a failure on the part of the party seeking to terminate this
Agreement to perform any material obligation required to be performed by such
party at or prior to the Closing);
(iii) by a majority in interest of Purchasers as set forth on
Schedule A, if the required approval of the Company's stockholders shall not
have been obtained by reason of the failure to obtain the required vote at a
duly held meeting of stockholders or at any adjournment thereof;
(iv) by either a majority in interest of Purchasers as set
forth on Schedule A or the Company, if there shall be any law or regulation of
any Governmental Entity that makes consummation of the purchase of the Shares
illegal or otherwise prohibited or if any judgment, injunction, order or decree
of any governmental entity prohibiting such transaction is entered and such
judgment, injunction, order or decree shall have become final and nonappealable;
(v) by a majority in interest of Purchasers as set forth on
Schedule A, if there has been a breach of any covenant or a breach of any
representation or warranty on the part of the Company, such that the closing
conditions set forth in Section 9 would not be satisfied or if the Company has
not secured interim financing as specified in Section 9(xvi) by May 21, 1999.
(j) Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 10(i) hereof by the Company, or a majority in
interest of Purchasers, written notice thereof shall forthwith be given to the
other party or parties specifying the provision hereof pursuant to which such
termination is made, and this Agreement shall become void and have no effect,
and there shall be no liability hereunder on the part of Purchasers. Nothing in
this Section 10(j) shall relieve any party to this Agreement of liability for
breach of this Agreement or for representations which were incorrect when made.
-36-
<PAGE> 129
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first set forth above.
"COMPANY"
CARDIAC PATHWAYS CORPORATION
By:
------------------------------------------------
William N. Starling
President and Chief Executive Officer
"PURCHASERS"
BANKAMERICA VENTURES
By:
------------------------------------------------
Title:
---------------------------------------------
MORGAN STANLEY VENTURE PARTNERS III, L.P.
By: Morgan Stanley Venture Partners III, L.L.C.
its General Partner
By: Morgan Stanley Venture Capital III, Inc.,
its Institutional Managing Member
By:
------------------------------------------------
Name:
Title:
Address: 1221 Avenue of the Americas
New York, New York 10020
Fax: (212) 762-8424
SIGNATURE PAGE - CARDIAC PATHWAYS CORPORATION STOCK PURCHASE AGREEMENT
<PAGE> 130
MORGAN STANLEY VENTURE INVESTORS III, L.P.
By: Morgan Stanley Venture Partners III, L.L.C.
its General Partner
By: Morgan Stanley Venture Capital III, Inc.,
its Institutional Managing Member
By:
------------------------------------------------
Name:
Title:
Address: 1221 Avenue of the Americas
New York, New York 10020
Fax: (212) 762-8424
MORGAN STANLEY VENTURE PARTNERS
ENTREPRENEUR FUND, L.P.
By: Morgan Stanley Venture Partners III, L.L.C.
its General Partner
By: Morgan Stanley Venture Capital III, Inc.,
its Institutional Managing Member
By:
------------------------------------------------
Name:
Title:
Address: 1221 Avenue of the Americas
New York, New York 10020
Fax: (212) 762-8424
VAN WAGONER CAPITAL MANAGEMENT
By:
------------------------------------------------
Name:
Title:
Address:
Fax: (415) 835-5050
SIGNATURE PAGE - CARDIAC PATHWAYS CORPORATION STOCK PURCHASE AGREEMENT
<PAGE> 131
STATE OF WISCONSIN INVESTMENT BOARD
By:
------------------------------------------------
Name: John Nelson
Title: Investment Director
Address:
Fax:
- ---------------------------------------------------
THOMAS FOGARTY
SIGNATURE PAGE - CARDIAC PATHWAYS CORPORATION STOCK PURCHASE AGREEMENT
<PAGE> 132
SCHEDULE A
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
Number of
Purchasers Shares
--------------------------------------------------------------------- ------------------
<S> <C>
BankAmerica Ventures 10,000
Morgan Stanley Venture Partners III, L.P. 8,773
Morgan Stanley Venture Investors III, L.P. 842
Morgan Stanley Venture Partners Entrepreneurs Fund, L.P. 385
Van Wagoner Capital Management 5,000
State of Wisconsin Investment Board 6,000
Thomas Fogarty 500
</TABLE>
<PAGE> 133
EXHIBIT A
CERTIFICATE OF DESIGNATION
<PAGE> 134
EXHIBIT B
DISCLOSURE SCHEDULE
<PAGE> 135
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
<PAGE> 136
EXHIBIT D
VOTING AGREEMENT
<PAGE> 137
Exhibit 5
VOTING AGREEMENT
This Voting Agreement ("AGREEMENT") is made and entered into as of May
11, 1999 between Cardiac Pathways Corporation, a Delaware corporation
("COMPANY"), and the undersigned stockholder ("STOCKHOLDER") of the Company, a
Delaware corporation.
RECITALS
A. Concurrently with the execution of this Agreement, the Company and
BankAmerica Ventures ("BAV") have entered into a Series B Convertible Preferred
Stock Purchase Agreement of even date herewith (the "PURCHASE AGREEMENT") which
provides for the purchase of the Company's Series B Convertible Preferred Stock
(the "FINANCING").
B. The Stockholder is the record holder and beneficial owner (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT")) of such number of shares of the outstanding Common Stock of the
Company as is indicated on the final page of this Agreement.
C. Company desires the Stockholder to agree, and the Stockholder is
willing to agree to vote the Shares and any other such shares of capital stock
of the Company so as to facilitate consummation of the Financing.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, the parties agree as follows:
1. Certain Definitions
For purposes of this Voting Agreement:
(a) "ACQUISITION PROPOSAL" shall mean any offer, proposal or
inquiry contemplating or otherwise relating to any Acquisition Transaction.
(b) "ACQUISITION TRANSACTION" shall mean any transaction
(other than as contemplated by the Purchase Agreement) involving:
(1) any merger, consolidation, amalgamation, share
exchange, business combination, issuance of securities, acquisition of
securities, tender offer, exchange offer or other similar transaction (i) in
which the Company is a constituent company, (ii) in which a person or "group"
(as defined in the Exchange Act of 1934, as amended and the rules promulgated
thereunder) of persons directly or indirectly acquires the Company or more than
20% of the Company's business or directly or indirectly acquires beneficial or
record ownership of securities representing, or exchangeable for or convertible
into, more than 20% of the outstanding securities of any class of
<PAGE> 138
voting securities of the Company, or (iii) in which the Company issues
securities representing more than 20% of the outstanding securities of any class
of voting securities of the Company;
(2) any sale, lease, exchange, transfer, license,
acquisition or disposition of more than 20% of the assets of the Company; or
(3) any liquidation or dissolution of the Company.
(c) "COMPANY COMMON STOCK" shall mean the common stock, par
value $.__ per share, of the Company.
(d) "EXPIRATION DATE" shall mean the earlier of (i) the date
upon which the Purchase Agreement is validly terminated, or (ii) the date upon
which the closing (as defined in the Purchase Agreement, hereinafter, the
"Closing") occurs.
(e) Stockholder shall be deemed to "OWN" or to have acquired
"OWNERSHIP" of a security if Stockholder: (i) is the record owner of such
security; or (ii) is the "beneficial owner" (within the meaning of Rule 13d-3
under the Securities Exchange Act of 1934) of such security.
(f) "PERSON" shall mean any (i) individual, (ii) corporation,
limited liability company, partnership or other entity, or (iii) governmental
authority.
(g) "REPRESENTATIVES" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
(h) "SHARES" shall mean: (i) all securities of the Company
(including all shares of Company Common Stock and all options, warrants and
other rights to acquire shares of Company Common Stock) Owned by Stockholder as
of the date of this Agreement; and (ii) all additional securities of the Company
(including all additional shares of Company Common Stock and all additional
options, warrants and other rights to acquire shares of Company Common Stock) of
which Stockholder acquires Ownership during the period from the date of this
Agreement through the Expiration Date.
(i) A Person shall be deemed to have a effected a "TRANSFER"
of a security if such Person directly or indirectly: (i) sells, pledges,
encumbers, grants an option with respect to, transfers or disposes of such
security or any interest in such security; or (ii) enters into an agreement or
commitment contemplating the possible sale of, pledge of, encumbrance of, grant
of an option with respect to, transfer of or disposition of such security or any
interest therein.
2. Agreement to Vote Shares. From the date of this Agreement to the
Expiration Date, at every meeting of the stockholders of the Company called with
respect to any of the following, and at every adjournment thereof, and on every
action or approval by written consent of the Stockholders of the Company with
respect to any of the following, Stockholder shall vote the Shares: (i) in favor
of approval of the Purchase Agreement and the Financing and any matter that
could reasonably be expected to facilitate the Financing; and (ii) against (a)
approval of any proposal
<PAGE> 139
made in opposition to or competition with consummation of the Financing; (b) any
liquidation or winding up of the Company; and (c) any action that would make
consummation of the financing unfeasible (each of the foregoing is hereinafter
referred to as an "OPPOSING PROPOSAL"). Stockholder agrees not to take any
actions contrary to Stockholder's obligations under this Agreement.
3. Irrevocable Proxy. Contemporaneously with the execution of this
Voting Agreement: (i) Stockholder shall deliver to the Company a proxy in the
form attached to this Voting Agreement as EXHIBIT A, which shall be irrevocable
to the fullest extent permitted by law, with respect to the shares referred to
therein (the "PROXY"); and (ii) Stockholder shall cause to be delivered to the
Company an additional proxy (in the form attached hereto as Exhibit A) executed
on behalf of the record owner of any outstanding shares of Company Common Stock
that are owned beneficially (within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934), but not of record, by Stockholder.
4. Transfer of Shares.
4.1 Transferee of Shares to be Bound by this Agreement.
Stockholder agrees that, during the period from the date of this Voting
Agreement through the Expiration Date, Stockholder shall not cause or permit any
Transfer of any of the Shares to be effected unless each Person to which any of
such Shares, or any interest in any of such Shares, is or may be transferred
shall have: (a) executed a counterpart of this Voting Agreement and a proxy in
the form attached hereto as Exhibit A; and (b) agreed to hold such Shares (or
interest in such Shares) subject to all of the terms and provisions of this
Voting Agreement.
4.2 Transfer of Voting Rights. Stockholder agrees that, during
the period from the date of this Voting Agreement through the Expiration Date,
Stockholder shall ensure that: (a) none of the Shares is deposited into a voting
trust; and (b) no proxy is granted, and no voting agreement or similar agreement
is entered into, with respect to any of the Shares.
5. No Solicitation. Stockholder agrees that, during the period from the
date of this Voting Agreement through the Expiration Date, Stockholder shall
not, directly or indirectly, and Stockholder shall ensure that his
Representatives do not, directly or indirectly: (i) solicit, initiate, encourage
or induce the making, submission or announcement of any Acquisition or take any
action that could reasonably be expected to lead to an Acquisition Proposal;
(ii) furnish any information regarding the Company or any direct or indirect
subsidiary of the Company to any Person in connection with or in response to an
Acquisition Proposal or potential Acquisition Proposal; or (iii) engage in
discussions with any Person with respect to any Acquisition Proposal.
Stockholder shall immediately cease and discontinue, and Stockholder shall
ensure that his Representatives immediately cease and discontinue, any existing
discussions with any Person that relate to any Acquisition Proposal.
6. Representations, Warranties and Covenants of the Stockholder.
Stockholder hereby represents, warrants and covenants to Parent as follows:
<PAGE> 140
6.1 Ownership of Shares. Stockholder (i) is the beneficial
owner of the Shares, which at the date hereof and at all times up until the
Expiration Date will be free and clear of any liens, claims, options, charges or
other encumbrances; (ii) does not beneficially own any shares of capital stock
of the Company other than the Shares (excluding shares as to which Stockholder
currently disclaims beneficial ownership in accordance with applicable law); and
(iii) has full power and authority to make, enter into and carry out the terms
of this Agreement and the Proxy. This Voting Agreement and the Proxy have been
duly executed and delivered by Stockholder and constitute legal, valid and
binding obligations of Stockholder, enforceable against Stockholder in
accordance with their terms, subject to (i) laws of general application relating
to bankruptcy, insolvency and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.
6.2 No Conflicts of Consents.
(a) The execution and delivery of this Voting
Agreement and the Proxy by Stockholder do not, and the performance of this
Voting Agreement and the Proxy by Stockholder will not: (i) conflict with or
violate any law, rule, regulation, order, decree or judgment applicable to
Stockholder or by which he or any of his properties is or may be bound or
affected; or (ii) result in or constitute (with or without notice or lapse of
time) any breach of or default under, or give to any other Person (with or
without notice or lapse of time) any right of termination, amendment,
acceleration or cancellation of, or result (with or without notice or lapse of
time) in the creation of any encumbrance or restriction on any of the Shares
pursuant to, any contract to which Stockholder is a party or by which
Stockholder or any of his affiliates or properties is or may be bound or
affected.
(b) The execution and delivery of this Voting
Agreement and the Proxy by Stockholder do not, and the performance of this
Voting Agreement and the Proxy by Stockholder will not, require any consent or
approval of any Person.
6.3 Accuracy of Representations. The representations and
warranties contained in this Voting Agreement are accurate in all respects as of
the date of this Voting Agreement, will be accurate in all respects at all times
through the Expiration Date and will be accurate in all respects as of the date
of the Closing as if made on that date.
6.4 No Proxy Solicitations. Stockholder will not, and will not
permit any entity under Stockholder's control to: (i) solicit proxies or become
a "participant" in a "solicitation" (as such terms are defined in Regulation 14A
under the Exchange Act) with respect to an Opposing Proposal or otherwise
encourage or assist any party in taking or planning any action that would
compete with, restrain or otherwise serve to interfere with or inhibit the
timely consummation of the Financing; (ii) initiate a Stockholders' vote or
action by written consent of the Company Stockholders with respect to an
Opposing Proposal; or (iii) become a member of a "group" (as such term is used
in Section 13(d) of the Exchange Act) with respect to any voting securities of
the Company with respect to an Opposing Proposal.
<PAGE> 141
7. Additional Documents. Stockholder hereby covenants and agrees to
execute and deliver any additional documents necessary or desirable, in the
reasonable opinion of Parent and Stockholder, as the case may be, to carry out
the intent of this Agreement.
8. Termination. This Agreement and the Proxy delivered in connection
herewith shall terminate and shall have no further force or effect as of the
Closing Date of the Financing (as defined in the Purchase Agreement.
9. Legend. Immediately after the execution of this Voting Agreement
(and from time to time upon the acquisition by Stockholder of Ownership of any
shares of Company Common Stock prior to the Expiration Date), Stockholder shall
ensure that each certificate evidencing any outstanding shares of Company Common
Stock or other securities of the Company Owned by Stockholder bears a legend in
the following form:
THE SECURITY OR SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
EXCHANGED OR OTHERWISE TRANSFERRED OR DISPOSED OF EXCEPT IN COMPLIANCE WITH THE
TERMS AND PROVISIONS OF THE VOTING AGREEMENT DATED AS OF MAY 12, 1999 BETWEEN
THE ISSUER AND THE STOCKHOLDER, AS IT MAY BE AMENDED, A COPY OF WHICH IS ON FILE
AT THE PRINCIPAL EXECUTIVE OFFICES OF THE ISSUER.
10. Miscellaneous.
10.1 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, then the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
10.2 Binding Effect and Assignment. This Agreement and all of
the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, but,
except as otherwise specifically provided herein, either this Agreement nor any
of the rights, interests or obligations of the parties hereto may be assigned by
either of the parties without prior written consent of the other. Without
limiting any of the restrictions set forth in Section 4 or elsewhere in this
Voting Agreement, this Voting Agreement shall be binding upon any Person to whom
any Shares are transferred. Nothing in this Voting Agreement is intended to
confer on any Person (other than the Company and its successors and assigns) any
rights or remedies of any nature.
10.3 Amendments and Modification. This Agreement may not be
modified, amended, altered or supplemented except upon the execution and
delivery of a written agreement executed by the parties hereto.
10.4 Specific Performance; Injunctive Relief. The parties
hereto acknowledge that Parent will be irreparably harmed and that there will be
no adequate remedy at law for a violation of any of the covenants or agreements
of Stockholder set forth herein. Therefore, it is agreed that, in
<PAGE> 142
addition to any other remedies that may be available to Parent upon any such
violation, Parent shall have the right to enforce such covenants and agreements
by specific performance, injunctive relief or by any other means available to
Parent at law or in equity.
10.5 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and sufficient if delivered in
person, by cable, telegram or telex, facsimile, or sent by mail (registered or
certified mail, postage prepaid, return receipt requested) or overnight courier
(prepaid) to the respective parties as follows:
If to the Company to:
Cardiac Pathways Corporation
995 Benecia Avenue
Sunnyvale, California 94086
Telephone: (408) 737-0505
Facsimile: (408) 737-1700
Attention: G. Michael Latta,
Chief Financial Officer
with a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050
Telephone: (650) 493-9300
Facsimile: (650) 845-5000
Attention: Chris F. Fennell, Esq.
If to the Stockholder: At the address provided on Signature
Page
or to such other address or facsimile numbers as any party may
have furnished to the other in writing in accordance herewith, except that
notices of change of address or facsimile number shall only be effective upon
receipt.
10.6 Governing Law; Venue.
(a) This Agreement shall be governed by, and
construed and enforced in accordance with, the internal laws of the State of
California.
(b) Any legal action or other legal proceeding
relating to this Voting Agreement or the Proxy or the enforcement of any
provision of this Voting Agreement or the Proxy may be brought or otherwise
commenced in any state or federal court located in the County of Santa Clara,
California. Stockholder:
<PAGE> 143
(i) expressly and irrevocably consents and
submits to the jurisdiction of each state and federal court located in the
County of Santa Clara, California (and each appellate court located in the State
of California), in connection with any such legal proceeding;
(ii) agrees that service of any process,
summons, notice or document by U.S. mail addressed to him at the address set
forth on the signature page attached hereto shall constitute effective service
of such process, summons, notice or document for purposes of any such legal
proceeding;
(iii) agrees that each state and federal
court located in the County of Santa Clara, California, shall be deemed to be a
convenient forum; and
(iv) agrees not to assert (by way of motion,
as a defense or otherwise), in any such legal proceeding commenced in any state
or federal court located in the County of Santa Clara, California, any claim
that Stockholder is not subject personally to the jurisdiction of such court,
that such legal proceeding has been brought in an inconvenient forum, that the
venue of such proceeding is improper or that this Voting Agreement or the
subject matter of this Voting Agreement may not be enforced in or by such court.
Nothing contained in this Section 10.6 shall be deemed to limit or otherwise
affect the right of the Company to commence any legal proceeding or otherwise
proceed against Stockholder in any other forum or jurisdiction.
(c) STOCKHOLDER IRREVOCABLY WAIVES THE RIGHT TO A
JURY TRIAL IN CONNECTION WITH ANY LEGAL PROCEEDING RELATING TO THIS VOTING
AGREEMENT OR THE PROXY OR THE ENFORCEMENT OF ANY PROVISION OF THIS VOTING
AGREEMENT OR THE PROXY.
10.7 Entire Agreement. This Agreement contains the entire
understanding of the parties in respect of the subject matter hereof, and
supersedes all prior negotiations and understandings between the parties with
respect to such subject matter.
10.8 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
10.9 Effect of Headings. The section headings herein are for
convenience only and shall not affect the construction of interpretation of this
Agreement.
10.10 Attorneys' Fees. If any legal action or other legal
proceeding relating to this Voting Agreement or the enforcement of any provision
of this Voting Agreement is brought against Stockholder, the prevailing party
shall be entitled to recover reasonable attorneys' fees, costs and disbursements
(in addition to any other relief to which the prevailing party may be entitled).
10.11 Waiver. No failure on the part of the Company to
exercise any power, right, privilege or remedy under this Voting Agreement, and
no delay on the part of the Company in
<PAGE> 144
exercising any power, right, privilege or remedy under this Voting Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy. The Company shall not be deemed to have waived any claim
available to the Company arising out of this Voting Agreement, or any power,
right, privilege or remedy of the Company under this Voting Agreement, unless
the waiver of such claim, power, right, privilege or remedy is expressly set
forth in a written instrument duly executed and delivered on behalf of the
Company; and any such waiver shall not be applicable or have any effect except
in the specific instance in which it is given.
IN WITNESS WHEREOF, the parties have caused this Voting Agreement to be
duly executed on the date and year first above written.
CARDIAC PATHWAYS CORPORATION
By:
----------------------------------------
Name: William Starling
Title: President and Chief Executive Officer
STOCKHOLDER
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Name:
Stockholder's Address for Notice:
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Facsimile Number:
Shares beneficially owned:
shares of Common Stock
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***SIGNATURE PAGE FOR VOTING AGREEMENT***
<PAGE> 145
EXHIBIT A
IRREVOCABLE PROXY
The undersigned Stockholder of Cardiac Pathways Corporation, a Delaware
corporation ("COMPANY"), hereby irrevocably appoints the William Starling and G.
Michael Latta, and each of them, as the sole and exclusive attorneys and proxies
of the undersigned, with full power of substitution and resubstitution, to the
full extent of the undersigned's rights with respect to (i) the shares of
capital stock of Company beneficially owned by the undersigned, which shares are
listed on the final page of this Proxy, (ii) any and all other shares or
securities issued or issuable in respect thereof on or after the date hereof,
and (iii) any and all other shares of capital stock of the Company which the
undersigned may acquire on or after the date hereof, until such time as that
certain Series B Convertible Preferred Stock Purchase Agreement (the "PURCHASE
AGREEMENT"), among the Company and BankAmerica Ventures ("BAV"), which provides
for the purchase of the Company's Series B Convertible Preferred Stock (the
"FINANCING"), shall be terminated in accordance with its terms or the Closing
(as defined in the Purchase Agreement) occurs (the "EXPIRATION DATE"). (The
shares of capital stock of Company referred to in clauses (i), (ii) and (iii)
above are collectively referred to as the "Shares"). Upon the execution hereof,
all prior proxies given by the undersigned with respect to the Shares are hereby
revoked and no subsequent proxies will be given.
This Proxy is irrevocable, is coupled with an interest, is granted
pursuant to the Voting Agreement dated as of May 11, 1999 between Company and
the undersigned Stockholder (the "VOTING AGREEMENT"), and is granted in
consideration of BAV entering into the Purchase Agreement. The attorneys and
proxies named above will be empowered at any time prior to the Expiration Date
to exercise all voting and other rights (including, without limitation, the
power to execute and deliver written consents with respect to the Shares) of the
undersigned at every annual, special or adjourned meeting of Company
stockholders, and in every written consent in lieu of such a meeting, or
otherwise, (i) in favor of approval of the Purchase Agreement and the Financing
and any matter that could reasonably be expected to facilitate the Financing,
and (ii) against (a) approval of any proposal made in opposition to or
competition with the consummation of the Financing, (b) any liquidation or
winding up of the Company and (c) any action that would make the consummation of
the Financing unfeasible.
The attorneys and proxies named above may only exercise this Proxy to
vote the Shares subject hereto at any time prior to the Expiration Date at every
annual, special or adjourned meeting of the Stockholders of Company and in every
written consent in lieu of such meeting or otherwise, (i) in favor of approval
of the Purchase Agreement and the Financing and any matter that could reasonably
be expected to facilitate the Financing, and (ii) against (a) approval of any
proposal made in opposition to or competition with consummation of the
Financing, (b) any liquidation or winding up of the Company, and (c) any action
that would make the consummation of the Financing unfeasible, and may not
exercise this Proxy on any other matter. The undersigned Stockholder may vote
the Shares on all other matters.
<PAGE> 146
Any obligation of the undersigned hereunder shall be binding upon the
heirs, estates, executors, personal representatives, successors and assigns of
the undersigned (including any transferee of any shares).
This Proxy is irrevocable.
If any provision of this proxy or any part of any such provision is
held under any circumstances to be invalid or unenforceable in any jurisdiction,
then (a) such provision or part thereof shall, with respect to such
circumstances and in such jurisdiction, be deemed amended to conform to
applicable laws so as to be valid and enforceable to the fullest possible
extent, (b) the invalidity or unenforceability of such provision or part thereof
under such circumstances and in such jurisdiction shall not affect the validity
or enforceability of such provision or part thereof under any other
circumstances or in any other jurisdiction, and (c) the invalidity or
unenforceability of such provision or part thereof shall not affect the validity
or enforceability of the remainder of such provision or the validity or
enforceability of any other provision of this proxy. Each provision of this
proxy is separable from every other provision of this proxy, and each part of
each provision of this proxy is separable from every other part of such
provision.
This proxy shall terminate upon the earlier of the valid termination of
the Purchase Agreement or the closing of the Financing.
Dated: May 11, 1999
Signature of Stockholder:
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Print Name of Stockholder:
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Shares beneficially owned: shares of Common Stock
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***PROXY***
<PAGE> 147
Exhibit 6
CERTIFICATE OF DESIGNATION OF RIGHTS, PREFERENCES
AND PRIVILEGES OF
SERIES B CONVERTIBLE PREFERRED STOCK
OF CARDIAC PATHWAYS CORPORATION
The undersigned, William N. Starling and Chris F. Fennell do hereby
certify:
1. That they are the duly elected and acting President and Secretary,
respectively, of Cardiac Pathways Corporation, a Delaware corporation (the
"CORPORATION").
2. That pursuant to the authority conferred upon the Board of Directors
by the Restated Certificate of Incorporation of the said Corporation, the said
Board of Directors on May 16, 1999 adopted the following resolution creating a
series of 50,000 shares of Preferred Stock designated as Series B Convertible
Preferred Stock:
"RESOLVED, that pursuant to the authority vested in the Board of
Directors of the corporation by the Restated Certificate of Incorporation, the
Board of Directors does hereby provide for the issue of a series of Preferred
Stock of the Corporation and does hereby fix and herein state and express the
designations, powers, preferences and relative and other special rights and the
qualifications, limitations and restrictions of such series of Preferred Stock
as follows:
1. Designation and Amount. The shares of such series shall be
designated as "SERIES B CONVERTIBLE PREFERRED STOCK." The Series B Convertible
Preferred Stock shall have a par value of $.001 per share, and the number of
shares constituting such series shall be 50,000.
2. Proportional Adjustment. In the event the Corporation shall at any
time after the issuance of any share or shares of Series B Convertible Preferred
Stock (i) declare any dividend on the Common Stock of the Corporation ("COMMON
STOCK") payable in shares of Common Stock, (ii) subdivide the outstanding Common
Stock or (iii) combine the outstanding Common Stock into a smaller number of
shares, then in each such case the Corporation shall simultaneously effect a
proportional adjustment to the number of outstanding shares of Series B
Convertible Preferred Stock.
3. Dividends and Distributions.
(a) Subject to the prior and superior right of the holders of
any shares of any series of Preferred Stock ranking prior and superior to the
shares of Series B Convertible Preferred Stock with respect to dividends, the
holders of shares of Series B Convertible Preferred Stock shall be entitled to
receive when, as and if declared by the Board of Directors out of funds legally
available for the purpose, cumulative dividends payable in cash, in an amount
per share (rounded to
<PAGE> 148
the nearest cent) equal to 11% of the original Series B Convertible Preferred
Stock Purchase price, per annum.
(b) Dividend Rate Adjustment if Company Redemption Does Not
Occur. If, upon the request of the holders of a majority of the then outstanding
shares of Series B Convertible Preferred Stock, the Company does not redeem the
Series B Convertible Preferred Stock pursuant to Section 7 hereof, the
cumulative dividend payable on the Series B Convertible Preferred Stock shall be
subject to adjustment as follows:
(i) If this corporation has not conducted a Company
Redemption prior to May 31, 2004, at the beginning of each year after such date
in which a Company Redemption does not occur the dividend rate for the Series B
Convertible Preferred Stock shall forthwith be increased by six percentage
points.
(c) The holder of Series B Convertible Preferred Stock shall
also be entitled to participate pro rata in any dividends paid on the Common
Stock on an as-converted basis.
4. Voting Rights. The holders of shares of Series B Convertible
Preferred Stock shall have the following voting rights:
(a) Each share of Series B Convertible Preferred Stock shall
entitle the holder thereof to that number of votes on all matters submitted to a
vote of the stockholders of the Corporation equal to the number of shares of
Common Stock into which the Series B Convertible Preferred Stock can be
converted.
(b) Except as otherwise provided herein or by law, the holders
of shares of Series B Convertible Preferred Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a vote
of stockholders of the Corporation.
(c) Except as otherwise provided herein or by law, holders of
Series B Convertible Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled to
vote with holders of Common Stock as set forth herein) for taking any corporate
action.
5. Reacquired Shares. Any shares of Series B Convertible Preferred
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein and, in the Restated Certificate of Incorporation, as then amended.
6. Liquidation, Dissolution or Winding Up.
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<PAGE> 149
(a) Upon any liquidation, dissolution or winding up of the
Corporation, either voluntary or involuntary, the holders of Series B
Convertible Preferred Stock shall be entitled to receive, prior and in
preference to any distribution of any assets to the holders of Series A
Participating Preferred Stock or Common Stock or any other class of capital
stock of the corporation by reason of their ownership thereof, an amount per
share equal to the sum of (i) the price originally paid for each outstanding
share of Series B Convertible Preferred Stock (the "ORIGINAL SERIES B ISSUE
PRICE") and (ii) an amount equal to accrued but unpaid dividends on such shares.
If upon the occurrence of such event, the assets and funds thus distributed
among the holders of the Series B Convertible Preferred Stock shall be
insufficient to permit the payment to such holders of the full aforesaid
preferential amounts, then the entire assets and funds of this corporation
legally available for distribution shall be distributed ratably among the
holders of the Series B Convertible Preferred Stock in proportion to the
preferential amount each such holder is otherwise entitled to receive.
(b) Upon the completion of the distribution required by
subparagraph (a) of this Section 6, the holders of Series A Participating
Preferred Stock shall be entitled to receive, an aggregate amount per share
equal to 1000 times the aggregate amount to be distributed per share to holders
of shares of Common Stock plus an amount equal to any accrued and unpaid
dividends on such shares of Series A Participating Preferred Stock.
(c) Upon the completion of the distribution required by
subparagraphs (a) and (b) of this Section 6, the remaining assets of this
corporation available for distribution to stockholders shall be distributed
among the holders of Common Stock and the Series B Convertible Preferred Stock,
pro rata based on the number of shares of Common Stock (on an as-converted
basis) held by each.
(d) For purposes of this Section 6, a liquidation, dissolution
or winding up of this corporation shall be deemed to be occasioned by, or to
include, (A) the acquisition of this corporation by another entity by means of
any transaction or series of related transactions (including, without
limitation, any reorganization, merger or consolidation) that results in the
transfer of fifty percent (50%) or more of the outstanding voting power of this
corporation; (B) a sale of all or substantially all of the assets of this
corporation, or (C) a sale or any transaction or series of transactions that
result in a sale or transfer of 50% or more of the outstanding voting power of
the corporation.
(i) In any of such events, if the consideration
received by this corporation is other than cash, the value of such consideration
will be deemed its fair market value. Any securities shall be valued as follows:
(1) Securities not subject to investment
letter or other similar restrictions on free marketability covered by (B) below:
a) If traded on a securities
exchange or through the Nasdaq National Market, the value shall be deemed to be
the average of the closing prices of the
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<PAGE> 150
securities on such quotation system over the thirty (30) day period ending three
(3) days prior to the closing;
b) If actively traded
over-the-counter, the value shall be deemed to be the average of the closing bid
or sale prices (whichever is applicable) over the thirty (30) day period ending
three (3) days prior to the closing; and
c) If there is no active public
market, the value shall be the fair market value thereof, as mutually determined
by this Corporation and the holders of at least sixty-six and two-thirds percent
(66-2/3%) of the voting power of all then outstanding shares of Series B
Convertible Preferred Stock.
(2) The method of valuation of securities
subject to investment letter or other restrictions on free marketability (other
than restrictions arising solely by virtue of a stockholder's status as an
affiliate or former affiliate) shall be to make an appropriate discount from the
market value determined as above in (1) (a), (b) or (c) to reflect the
approximate fair market value thereof, as mutually determined by this
corporation and the holders of at least sixty-six and two-thirds percent
(66-2/3%) of the voting power of all then outstanding shares of Series B
Convertible Preferred Stock.
(3) In the event the requirements of this
subsection 6(d) are not complied with, this corporation shall forthwith either:
a) cause such closing to be
postponed until such time as the requirements of this Section 6 have been
complied with; or
b) cancel such transaction, in
which event the rights, preferences and privileges of the holders of the Series
B Convertible Preferred Stock shall revert to and be the same as such rights,
preferences and privileges existing immediately prior to the date of the first
notice referred to in subsection 6(d)(4) hereof.
(4) This Corporation shall give each holder
of record of Series B Convertible Preferred Stock written notice of such
impending transaction not later than twenty (20) days prior to the stockholders'
meeting called to approve such transaction, if any, or twenty (20) days prior to
the closing of such transaction, whichever is earlier, and shall also notify
such holders in writing of the final approval of such transaction. The first of
such notices shall describe the material terms and conditions of the impending
transaction and the provisions of this Section 6, and this Corporation shall
thereafter give such holders prompt notice of any material changes. The
transaction shall in no event take place sooner than twenty (20) days after this
Corporation has given the first notice provided for herein or sooner than ten
(10) days after this Corporation has given notice of any material changes
provided for herein; provided, however, that such periods may be shortened upon
the written consent of the holders of Series B Convertible Preferred Stock that
are entitled to such notice rights or similar notice rights and that represent
at least sixty-six and two-
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<PAGE> 151
thirds percent (66-2/3%) of the voting power of all then outstanding shares of
such Series B Convertible Preferred Stock.
7. Redemption. The shares of Series B Convertible Preferred Stock shall
be redeemable.
(a) Optional Redemption. At any time after May 31, 2004, the
holders of a majority of the then outstanding shares of Series B Convertible
Preferred Stock, voting as a single class, may request that the Corporation
redeem the outstanding shares of Series B Convertible Preferred Stock. After
receiving such request, the Corporation, to the extent it then lawfully is able
to do so, and in its sole discretion, may redeem the outstanding shares of
Series B Convertible Preferred Stock (an "OPTIONAL REDEMPTION") in whole, upon
payment in cash in respect of each share redeemed of an amount equal to the
Original Series B Issue Price plus accrued but unpaid dividends on such shares.
Such amount is hereinafter referred to as the "REDEMPTION PRICE" of the Series B
Convertible Preferred Stock. Upon the election to conduct an Optional
Redemption, the Corporation shall promptly give written notice of the redemption
to each holder of record of Series B Convertible Preferred Stock, postage
prepaid at the post office address last shown on the records of the Corporation.
(b) Redemption Date. The Corporation shall redeem the shares
of Series B Convertible Preferred Stock to be redeemed hereunder in two equal
annual installments, commencing with the first calendar quarter ending ninety
(90) days after the date notice of redemption is provided to the holders of
Series B Convertible Preferred Stock. Such date shall be a "REDEMPTION DATE" for
the Preferred Stock as described herein.
(c) At least thirty (30) days prior to the Redemption Date for
the Series B Convertible Preferred Stock, written notice shall be mailed,
postage prepaid, to each holder of record of Series B Convertible Preferred
Stock to be redeemed, at such holder's post office address last shown on the
records of the Corporation, notifying such holder of the redemption of such
shares to be redeemed at that time, specifying the Redemption Date, the
Redemption Price, and calling upon such holder to surrender to the Corporation,
in the manner and at the place designated, such holder's certificate or
certificate's representing the shares to be redeemed (such notice is hereinafter
referred to as the "REDEMPTION NOTICE"). On or after the Redemption Date, each
holder of Series B Convertible Preferred Stock to be redeemed shall surrender
such holder's certificate or certificates representing shares to the
Corporation, in the manner and at the place designated in the Redemption Notice,
and thereupon the Redemption Price for such shares shall be payable to the order
of the person whose name appears on such certificate or certificates as the
owner of such shares and each surrendered certificates shall be canceled. In the
event less than all the shares represented by any such certificate are redeemed,
a new certificate shall be issued representing the unredeemed shares. From and
after the Redemption Date, unless there shall have been a default in payment of
the Redemption Price, all rights of the holders of Series B Convertible
Preferred Stock designated for redemption in the Redemption Notice as holders of
Series B Convertible Preferred Stock (except the right to receive the Redemption
Price without interest upon surrender of their certificate or certificates)
shall cease with respect to such shares, and such shares shall not subsequently
be
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<PAGE> 152
transferred on the books of the Corporation or be deemed to be outstanding for
any purpose whatsoever.
(d) Insufficient Funds. If the funds of the Corporation
legally available for redemption of shares of Series B Convertible Preferred
Stock on any Redemption Date are insufficient to redeem the total number of
shares of Series B Convertible Preferred Stock to be redeemed on such date,
those funds that are legally available shall be used to redeem the maximum
possible number of such shares ratably among the holders of such shares to be
redeemed. The shares of Series B Convertible Preferred Stock not redeemed shall
remain outstanding and entitled to all the rights and preferences provided
herein. At any time thereafter when additional funds of the Corporation are
legally available for the redemption of shares of the Series B Convertible
Preferred Stock, such funds shall immediately be used to redeem the balance of
the shares which the Corporation has become obligated to redeem, or elected to
redeem, on any Redemption Date but which it has not redeemed.
(e) Deposit of Redemption Price. On or prior to the Redemption
Date, the Corporation shall deposit the Redemption Price of all shares of Series
B Convertible Preferred Stock designated for redemption in the Redemption Notice
and not yet redeemed with a bank or trust company having aggregate capital and
surplus in excess of $100,000,000 as a trust fund for the benefit of the
respective holders of the shares designated for the redemption and not yet
redeemed, with irrevocable instructions and authority to the bank or trust
company to pay the Redemption Price for such shares to their respective holders
on or after the Redemption Date, upon receipt of notification from the
Corporation that such holder has surrendered such holder's share certificate to
the Corporation pursuant to Section 7(c) above. Such instructions shall also
provide that any funds deposited by the Corporation pursuant to this Section
7(e) for the redemption of shares of subsequently converted into shares of
Common Stock no later than the fifth (5th) day preceding the Redemption Date
shall be returned to the Corporation forthwith upon such conversion. The balance
of any funds deposited by the Corporation pursuant to this Section 7(e)
remaining unclaimed at the expiration of two (2) years following the Redemption
Date shall be returned to the Corporation upon its request expressed in a
resolution of its Board of Directors.
8. Conversion. The holders of the Series B Convertible Preferred Stock
shall have conversion rights as follows (the "CONVERSION RIGHTS"):
(a) Right to Convert. Each share of Series B Convertible
Preferred Stock shall be convertible, at the option of the holder thereof, at
any time after the date of issuance of such share, at the office of this
Corporation or any transfer agent for such stock, into such number of fully paid
and nonassessable shares of Common Stock as is determined by dividing the
Original Series B Issue Price multiplied by 1000, by the Series B Conversion
Price, determined as hereafter provided, in effect on the date the certificate
is surrendered for conversion. The initial Series B Conversion Price per share
shall be the Original Series B Issue Price; provided, however, that the Series B
Conversion Price shall be subject to adjustment as set forth in Section 8(d) and
8(e)
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(b) Automatic Conversion. Each share of Series B Convertible
Preferred Stock, shall automatically be converted into shares of Common Stock at
the Series B Conversion Price at the time in effect upon the election of a
majority of the holders of Series B Convertible Preferred Stock.
(c) Mechanics of Conversion. Before any holder of Series B
Convertible Preferred Stock shall be entitled to convert into shares of Common
Stock, he or she shall surrender the certificate or certificates therefor, duly
endorsed, at the office of this corporation or of any transfer agent for the
Series B Convertible Preferred Stock, and shall give written notice to this
Corporation at its principal corporate office of the election to convert the
same and shall state therein the name or names in which the certificate or
certificates for shares of Common Stock are to be issued. This Corporation
shall, as soon as practicable thereafter, issue and deliver at such office to
such holder of Series B Convertible Preferred Stock, or to the nominee or
nominees of such holder, a certificate or certificates for the number of shares
of Common Stock to which such holder shall be entitled as aforesaid. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the shares of Series B Convertible
Preferred Stock to be converted, and the person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock as
of such date. If the conversion is in connection with a sale to, or a merger
with, a third party, the conversion may, at the option of any holder tendering
Series B Convertible Preferred Stock for conversion, be conditioned upon the
closing of such sale to, or merger with, such third party (as the case may be),
in which event the person(s) entitled to receive the Common Stock upon
conversion of the Series B Convertible Preferred Stock shall not be deemed to
have converted such Series B Convertible Preferred Stock until immediately prior
to the closing of such sale or merger.
(d) Conversion Price Adjustments of Preferred Stock for
Certain Dilutive Issuance, Stock Splits and Combinations. The Conversion Price
of the Series B Convertible Preferred Stock shall be subject to adjustment from
time to time as follows:
(i)
(1) If this corporation shall issue, after
the date upon which any shares of Series B Convertible Preferred Stock were
first issued (the "Purchase Date"), any Additional Stock (as defined below)
without consideration or for a consideration per share less than the Conversion
Price for the Series B Convertible Preferred Stock in effect immediately prior
to the issuance of such Additional Stock, the Conversion Price for the Series B
Convertible Preferred Stock in effect immediately prior to each such issuance
shall forthwith (except as otherwise provided in this clause (i)) be adjusted to
a price determined by multiplying such Conversion Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issuance (including shares of Common Stock deemed to
be issued pursuant to Section 8(d)(i)(5)(a) or (b)) plus the number of shares of
Common Stock that the aggregate consideration received by this Corporation for
such issuance would purchase at such Conversion Price; and the denominator of
which shall be the number of shares of Common Stock outstanding immediately
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<PAGE> 154
prior to such issuance (including shares of Common Stock deemed to be issued
pursuant to Section 8(d)(i)(5)(a) or (b)) plus the number of shares of such
Additional Stock.
(2) No adjustment of the Conversion Price
for the Series B Convertible Preferred Stock shall be made in an amount less
than one cent per share, provided that any adjustments that are not required to
be made by reason of this sentence shall be carried forward and shall be either
taken into account in any subsequent adjustment made prior to three (3) years
from the date of the event giving rise to the adjustment being carried forward,
or shall be made at the end of three (3) years from the date of the event giving
rise to the adjustment being carried forward. Except to the limited extent
provided for in Sections 8(d)(i)(5)(c) and (5)(d), no adjustment of such
Conversion Price of the Series B Convertible Preferred Stock pursuant to this
subsection 8(d)(i) shall have the effect of increasing the Conversion Price
above the Conversion Price in effect immediately prior to such adjustment.
(3) In the case of the issuance of Common
Stock for cash, the consideration shall be deemed to be the amount of net cash
paid therefor (after deducting any reasonable discounts, commissions or other
expenses allowed, paid or incurred by this corporation for any underwriting or
otherwise in connection with the issuance and sale thereof).
(4) In the case of the issuance of the
Common Stock for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair value thereof as
determined in the reasonable good faith judgement of the Board of Directors
irrespective of any accounting treatment.
(5) In the case of the issuance (whether
before, on or after the applicable Purchase Date) of options to purchase or
rights to subscribe for Common Stock, securities by their terms convertible into
or exchangeable for Common Stock or options to purchase or rights to subscribe
for such convertible or exchangeable securities, the following provisions shall
apply for all purposes of this Section 8(d)(i) and Section 8(d)(ii).
a) The aggregate maximum number of
shares of Common Stock deliverable upon exercise (assuming the satisfaction of
any conditions to exercisability, including without limitation, the passage of
time, but without taking into account potential antidilution adjustments) of
such options to purchase or rights to subscribe for Common Stock shall be deemed
to have been issued at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the manner provided in
Sections 8(d)(i)(3) and (d)(i)(4)), if any, received by this Corporation upon
the issuance of such options or rights plus the minimum exercise price provided
in such options or rights (without taking into account potential antidilution
adjustments) for the Common Stock covered thereby.
b) The aggregate maximum number of
shares of Common Stock deliverable upon conversion of or in exchange (assuming
the satisfaction of any conditions to convertibility or exchangeability,
including, without limitation, the passage of time, but without taking into
account potential antidilution adjustments) for any such convertible or
exchangeable securities or upon the exercise of options to purchase or rights to
subscribe for such convertible or exchangeable
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<PAGE> 155
securities and subsequent conversion or exchange thereof shall be deemed to have
been issued at the time such securities were issued or such options or rights
were issued and for a consideration equal to the consideration, if any, received
by this corporation for any such securities and related options or rights
(excluding any cash received on account of accrued interest or accrued
dividends), plus the minimum additional consideration, if any, to be received by
this corporation (without taking into account potential antidilution
adjustments) upon the conversion or exchange of such securities or the exercise
of any related options or rights (the consideration in each case to be
determined in the manner provided in Sections 8(d)(i)(3) and (d)(i)(4)).
c) In the event of any change in
the number of shares of Common Stock deliverable or in the consideration payable
to this Corporation upon exercise of such options or rights or upon conversion
of or in exchange for such convertible or exchangeable securities, including,
but not limited to, a change resulting from the antidilution provisions thereof
(unless such options or rights or convertible or exchangeable securities were
merely deemed to be included in the numerator and denominator for purposes of
determining the number of shares of Common Stock outstanding for purposes of
subsection 8(d)(i)(1)), the Conversion Price of the Series B Convertible
Preferred Stock, to the extent in any way affected by or computed using such
options, rights or securities, shall be recomputed to reflect such change, but
no further adjustment shall be made for the actual issuance of Common Stock or
any payment of such consideration upon the exercise of any such options or
rights or the conversion or exchange of such securities.
d) Upon the expiration of any such
options or rights, the termination of any such rights to convert or exchange or
the expiration of any options or rights related to such convertible or
exchangeable securities, the Conversion Price of the Series B Convertible
Preferred Stock, to the extent in any way affected by or computed using such
options, rights or securities or options or rights related to such securities
(unless such options or rights were merely deemed to be included in the
numerator and denominator for purposes of determining the number of shares of
Common Stock outstanding for purposes of Section 8(d)(i)(1)), shall be
recomputed to reflect the issuance of only the number of shares of Common Stock
(and convertible or exchangeable securities that remain in effect) actually
issued upon the exercise of such options or rights, upon the conversion or
exchange of such securities or upon the exercise of the options or rights
related to such securities.
e) The number of shares of Common
Stock deemed issued and the consideration deemed paid therefor pursuant to
Sections 8(d)(i)(5)(a) and (b) shall be appropriately adjusted to reflect any
change, termination or expiration of the type described in either Section
8(d)(i)(5)(c) or (d).
(ii) "ADDITIONAL STOCK" shall mean any shares of
Common Stock issued (or deemed to have been issued pursuant to Section
8(d)(i)(5)) by this corporation after the Purchase Date other than:
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(1) Common Stock issuable or issued pursuant
to a transaction described in subsection 8(d)(iii) hereof;
(2) shares of Common Stock issuable or
issued to employees, consultants or directors of this Corporation directly or
pursuant to a stock option plan or restricted stock plan approved by the Board
of Directors of this Corporation, including the representatives of the Series B
Convertible Preferred Stock, including all outstanding and granted options;
(3) shares of Common Stock issuable or
issued upon conversion of the Series A Participating Preferred Stock or Series B
Convertible Preferred Stock or as dividends or distributions on the Series A
Participating Preferred Stock or Series B Convertible Preferred Stock;
(4) shares of Common Stock issuable or
issued upon exercise of warrants issued to banks, equipment lessors or other
venders, where such Common Stock or warrants were approved by the Board of
Directors, including the representatives of the Series B Convertible Preferred
Stock; or
(5) shares of Common Stock issuable or
issued as consideration for business combinations or corporate partnering
agreements approved by the Board of Directors, including the representatives of
the Series B Convertible Preferred Stock.
(iii) In the event this Corporation should at any
time or from time to time after the Purchase Date fix a record date for the
effectuation of a split or subdivision of the outstanding shares of Common Stock
or the determination of holders of Common Stock entitled to receive a dividend
or other distribution payable in additional shares of Common Stock or other
securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "COMMON STOCK EQUIVALENTS") without payment of any consideration
by such holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record date is fixed),
the Conversion Price of the Series B Convertible Preferred Stock shall be
appropriately decreased so that the number of shares of Common Stock issuable on
conversion of each share of such series shall be increased in proportion to such
increase of the aggregate of shares of Common Stock outstanding and those
issuable with respect to such Common Stock Equivalents.
(iv) If the number of shares of Common Stock
outstanding at any time after the Purchase Date is decreased by a combination of
the outstanding shares of Common Stock, then, following the record date of such
combination, the Conversion Price for the Series B Convertible Preferred Stock
shall be appropriately increased so that the number of shares of Common Stock
issuable on conversion of each share of such series shall be decreased in
proportion to such decrease in outstanding shares.
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(e) Other Distributions. In the event this Corporation shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this Corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in Section 8(d)(iii), then, in
each such case for the purpose of this Section 8(e), the holders of the Series B
Convertible Preferred Stock shall be entitled to a proportionate share of any
such distribution as though they were the holders of the number of shares of
Common Stock of this corporation into which their shares of Series B Convertible
Preferred Stock are convertible as of the record date fixed for the
determination of the holders of Common Stock of this Corporation entitled to
receive such distribution.
(f) Recapitalizations. If at any time or from time to time
there shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 8 or in Section 6), provision shall be made so that the holders of
the Series B Convertible Preferred Stock shall thereafter be entitled to receive
upon conversion of the Series B Convertible Preferred Stock the number of shares
of stock or other securities or property of this corporation or otherwise to
which a holder of Common Stock deliverable upon conversion would have been
entitled on such recapitalization. In any such case, appropriate adjustment
shall be made in the application of the provisions of this Section 8 with
respect to the rights of the holders of the Series B Convertible Preferred Stock
after the recapitalization to the end that the provisions of this Section 8
(including adjustment of the Conversion Price then in effect and the number of
shares purchasable upon conversion of the Series B Convertible Preferred Stock)
shall be applicable after that event as nearly equivalent as may be practicable.
(g) No Impairment. This Corporation will not, by amendment of
its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by this corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 8(h) and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series B Convertible Preferred Stock
against impairment.
(h) No Fractional Shares and Certificate as to Adjustments.
(i) No fractional shares shall be issued upon the
conversion of any share or shares of the Series B Convertible Preferred Stock,
and the number of shares of Common Stock to be issued shall be determined by
rounding to the nearest whole share. Such conversion shall be determined on the
basis of the total number of shares of Series B Convertible Preferred Stock the
holder is at the time converting into Common Stock and such rounding shall apply
to the number of shares of Common Stock issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or
readjustment of the Conversion Price of the Series B Convertible Preferred Stock
pursuant to this Section 8, this
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Corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Series B Convertible Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. This Corporation shall, upon the written
request at any time of any holder of Series B Convertible Preferred Stock,
furnish or cause to be furnished to such holder a like certificate setting forth
(A) such adjustment and readjustment, (B) the Conversion Price for the Series B
Convertible Preferred Stock at the time in effect, and (C) the number of shares
of Common Stock and the amount, if any, of other property that at the time would
be received upon the conversion of a share of Series B Convertible Preferred
Stock.
(i) Notices of Record Date. In the event of any taking by this
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
corporation shall mail to each holder of Series B Convertible Preferred Stock,
at least twenty (20) days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right.
(j) Reservation of Stock Issuable Upon Conversion. This
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series B Convertible Preferred Stock, such
number of its shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding shares of the Series B Convertible
Preferred Stock; and if at any time the number of authorized but unissued shares
of Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of the Series B Convertible Preferred Stock, in addition to
such other remedies as shall be available to the holder of such Series B
Convertible Preferred Stock, this corporation will take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purposes, including, without limitation, engaging in best efforts to
obtain the requisite stockholder approval of any necessary amendment to the
Corporation's Certificate of Incorporation.
(k) Notices. Any notice required by the provisions of this
Section 8 to be given to the holders of shares of Series B Convertible Preferred
Stock shall be deemed given if deposited in the United States mail, postage
prepaid, and addressed to each holder of record at his address appearing on the
books of this corporation.
9. Protective Provisions. This Corporation shall not take any of the
following actions without first obtaining the approval (by vote or written
consent, as provided by law) of the holders of at least a majority of the then
outstanding shares of Series B Convertible Preferred Stock:
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(a) Amend or repeal any provision, or add any provision to the
Corporation's Certificate of Incorporation or Bylaws which change the rights of
the Series B Convertible Preferred Stock;
(b) Increase or decrease (other than by redemption or
conversion) the total number of authorized shares of Preferred Stock or Common
Stock;
(c) Authorize or issue, or obligate itself to issue, any other
security, including any other security convertible into or exercisable for any
security having a preference over, or being on a parity with, the Series B
Convertible Preferred Stock with respect to voting, dividends, redemption or
upon liquidation;
(d) Issue any shares of Common Stock, other than
(i) shares of Common Stock issuable or issued to
employees, consultants or directors of this Corporation directly or pursuant to
a stock option plan or restricted stock plan approved by the Board of Directors
of this Corporation, including the representatives of the Series B Convertible
Preferred Stock;
(ii) shares of Common Stock issuable or issued upon
conversion of the Series A Participating Preferred Stock or Series B Convertible
Preferred Stock or as dividends or distributions on the Series A Participating
Preferred Stock or Series B Convertible Preferred Stock;
(iii) shares of Common Stock issuable or issued upon
exercise of warrants issued to banks, equipment lessors or other venders, where
such Common Stock or warrants were approved by the Board of Directors, including
the representatives of the Series B Convertible Preferred Stock; or
(iv) shares of Common Stock issuable or issued as
consideration for business combinations or corporate partnering agreements
approved by the Board of Directors, including the representatives of the Series
B Convertible Preferred Stock.
(e) Declare or pay any dividends on its Common Stock or
redeem, purchase or otherwise acquire (or pay into or set aside for a sinking
fund for such purpose) any share or shares of Common Stock; provided, however,
that this restriction shall not apply to the repurchase of shares of Common
stock from employees, officers, directors, consultants or other persons
performing services for this Corporation or any subsidiary pursuant to
agreements under which this Corporation has the option to repurchase such shares
at cost or at cost upon the occurrence of certain events, such as the
termination of employment;
(f) Sell, convey, or otherwise dispose of all or substantially
all of its property or business or merge into or consolidate with any other
corporation (other than a wholly-owned subsidiary corporation) or effect any
transaction or series of related transactions in which more than fifty percent
(50%) of the voting power of this corporation is disposed of;
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(g) Repurchase any series of Preferred Stock, other than a
repurchase pursuant to Section 7 hereof; or
(h) Increase or decrease the size of the Corporation's Board
of Directors.
RESOLVED FURTHER, that the President or any Vice President and the
Secretary or any Assistant Secretary of this corporation be, and they hereby
are, authorized and directed to prepare and file a Certificate of Designation of
Rights, Preferences and Privileges in accordance with the foregoing resolution
and the provisions of Delaware law and to take such actions as they may deem
necessary or appropriate to carry out the intent of the foregoing resolution."
We further declare under penalty of perjury that the matters set forth
in the foregoing Certificate of Designation are true and correct of our own
knowledge.
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Executed at Sunnyvale, California on May 20, 1999
-------------------------------------
William N. Starling
President and Chief Executive Officer
-------------------------------------
Chris F. Fennell, Secretary
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Exhibit 7
CARDIAC PATHWAYS CORPORATION
REGISTRATION RIGHTS AGREEMENT
This Agreement is made as of May 20, 1999 by and between Cardiac
Pathways Corporation, a Delaware corporation (the "COMPANY"), and the persons
and entities listed on the Schedule of Holders attached hereto as Schedule 1
(the "HOLDERS").
WHEREAS, pursuant to a Stock Purchase Agreement (the "STOCK PURCHASE
AGREEMENT") of even date herewith between the Company, and the Holders, the
Company is selling up to 40,000 shares of Series B Convertible Preferred Stock
convertible into shares of the Company's Common Stock, as set forth in the Stock
Purchase Agreement (the "SHARES") to the Holders for the aggregate consideration
of between $25,000,000 and $40,000,000; and
WHEREAS, to induce the Holders to enter into the Stock Purchase
Agreement, the Company has agreed to provide the Holders with certain
registration rights with respect to the Shares pursuant to the terms and
conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions set forth in this Agreement, the Company and the Holders agree as
follows:
1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
(a) Business Day. Each Monday, Tuesday, Wednesday, Thursday
and Friday that is not a day on which banking institutions in New York are
authorized or obligated by law or executive order to close.
(b) Exchange Act. The Securities Exchange Act of 1934, as
amended, or any similar federal statute and the rules and regulations of the SEC
promulgated thereunder.
(c) Losses. See Section 5(a) hereof.
(d) Prospectus. The prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement,
including, without limitation, with respect to the terms of the offering of any
portion of the Registrable Securities covered by such Registration Statement and
all other amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated
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by reference in such Prospectus. Such Prospectus and any amendments or
supplements shall comply with the Securities Act.
(e) Register. The terms "register," "registered" and
"registration" refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act, and the
declaration or ordering of the effectiveness of such registration statement by
the SEC.
(f) Registrable Securities. The Shares or other securities
issued or issuable with respect to the Shares as a result of any conversion,
stock split, stock dividend, recapitalization, exchange, combination, merger,
consolidation, distribution or similar event.
(g) Registration Expenses. See Section 4 hereof.
(h) Registration Statement. Any registration statement of the
Company which covers any of the Registrable Securities pursuant to the
provisions of this Agreement, including the Prospectus, amendments and
supplements to such registration statement, including post-effective amendments,
all exhibits, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement. Such Registration
Statement and any amendments or supplements thereto shall comply with the
Securities Act.
(i) Rule 144. Rule 144 under the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
(j) SEC. The Securities and Exchange Commission.
(k) Securities Act. The Securities Act of 1933, as amended,
and the rules and regulations promulgated by the SEC thereunder.
(l) Special Counsel. Cooley Godward LLP or such other
successor counsel as shall be specified by the BankAmerica Ventures on behalf of
the Holders as special counsel to the Holders, the fees and expenses of which
will be paid by the Company pursuant to Section 4 hereof.
2. Registration.
(a) Demand Registration.
(i) Request from Holders. If the Company shall
receive at any time after May 31, 2000 a written request from the Holders of
forty five percent (45%) of the Registrable Securities then outstanding that the
Company file a registration statement under the Securities Act covering the
registration of at least twenty percent (20%) of the Registrable Securities then
outstanding and having an aggregate offering price, net of underwriting
discounts and commissions, of at least $7,500,000, then the Company shall:
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(1) within ten (10) days of the receipt
thereof, give written notice of such request to all Holders; and
(2) effect as soon as practicable, and in
any event within sixty (60) days of the receipt of such request, the
registration under the Securities Act of all Registrable Securities that the
Holders request to be registered, subject to the limitations of subsections
2(a)(ii), 2(a)(iii) and 2(a(iv), within twenty (20) days of the mailing of such
notice by the Company in accordance with Section 9(d).
(ii) Underwriting. If the Holders initiating the
registration request hereunder ("INITIATING HOLDERS") intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
subsection 2(a)(i) and the Company shall include such information in the written
notice referred to in subsection 2(a)(i)(1). The underwriter will be selected by
the Company and shall be reasonably acceptable to a majority in interest of the
Initiating Holders. In such event, the right of any Holder to include his
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for such underwriting.
Notwithstanding any other provision of this Section 2(a), if the underwriter
advises the Initiating Holders in writing that marketing factors require a
limitation of the number of shares to be underwritten, then the Initiating
Holders shall so advise all Holders of Registrable Securities that would
otherwise be underwritten pursuant hereto, and the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated among all Holders electing to include shares in the offering,
including the Initiating Holders, in proportion (as nearly as practicable) to
the amount of Registrable Securities of the Company owned by each Holder;
provided, however, that for purposes of making any such reduction, each Holder
which is an LLC or a partnership, together with the affiliates, partners and
retired partners of such Holder, the estates and family members of any such
partners and retired partners and their spouses, and any trusts for the benefit
of any of the foregoing persons shall be deemed to be a single Holder of
Registrable Securities and any pro-rata reduction with respect to such Holder
shall be based upon the aggregate amount of Registrable Securities owned by all
entities and individuals included in such Holder, as defined in this proviso
(and the aggregate amount so allocated to such Holder shall be allocated among
the entities and individuals included in such Holder in such manner as such LLC
or partnership shall reasonably determined. No Registrable Securities shall be
excluded from the underwriting until all other securities proposed to be
included by the Company and its stockholder have been excluded.
If any Holder of Registrable Securities disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration, and such Registrable Securities shall not be
transferred in a public
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distribution prior to 180 days after the effective date of such registration, or
such other shorter period of time as the underwriters may permit. If by the
withdrawal of such Registrable Securities a greater number of Registrable
Securities held by other Holders may be included in such registration (up to the
maximum of any limitation then imposed by the underwriters), then the Company
shall offer to all Holders, if any, whose shares have been excluded from the
registration by the terms of the preceding paragraph, the right to include
additional Registrable Securities in the same proportion used in determining the
underwriter limitation in this Section 2(a) up to the limitation then imposed by
the underwriters.
(iii) Deferral. Notwithstanding the foregoing, if the
Company shall furnish to Holders requesting a registration statement pursuant to
this Section 2(a), a certificate from the Company stating that in the good faith
judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its stockholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer taking action
with respect to such filing for a period of not more than ninety (90) days after
receipt of the request of the Initiating Holders; provided, however, that the
Company may not utilize this right more than once in any twelve (12) month
period.
(iv) Exceptions. In addition, the Company shall not
be obligated to effect, or to take any action to effect, any registration
pursuant to this Section 2(a):
(1) After the Company has effected two
registrations pursuant to this Section 2(a) and such registrations have been
declared or ordered effective;
(2) During the period starting with the date
sixty (60) days prior to the Company's good faith estimate of the date of filing
of, and ending on a date one hundred eighty (180) days after the effective date
of, a registration subject to Section 2(b) hereof; provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to be effective; or
(3) If the Initiating Holders propose to
dispose of shares of Registrable Securities that may be immediately registered
on Form S-3 pursuant to a request made pursuant to Section 2(c) below.
(b) Company Registration.
(i) Notice of Registration. If at any time or from
time to time, the Company shall determine to register any of its securities,
either for its own account or the account of a security holder or holders other
than (i) a registration relating solely to employee benefit plans, (ii) a
registration statement on Form S-4 relating to a merger or acquisition by or of
the Company or (iii) a registration relating solely to a Commission Rule 145
transaction, the Company will:
(1) promptly give to each Holder written
notice thereof; and
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(2) include in such registration (and any
related qualification under blue sky laws or other compliance), and in any
underwriting involved in such registration, all the Registrable Securities
specified in a written request or requests made within twenty (20) days after
receipt of such written notice from the Company by any Holder, but only to the
extent that such inclusion will not diminish the number of securities included
by the Company or by holders of the Company's securities who have demanded such
registration.
(ii) Underwriting. If the registration of which the
Company gives notice is for a registered public offering involving an
underwriting, the Company shall so advise the Holders as a part of the written
notice given pursuant to Section 2(b)(i). In such event, the right of any Holder
to registration pursuant to Section 2(b) shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of Registrable Securities
in the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company and the other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company (or by the
holders who have demanded such registration). Notwithstanding any other
provision of this Section 2(b), if the managing underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting will
be allocated, first, to the Company; and second, to each of the Holders
requesting inclusion of their Registrable Securities in such registration
statement on a pro rata basis based on the total number of Registrable
Securities held by each such Holder; provided, however that a minimum of twenty
five percent (25%) of the shares to be underwritten will be allocated to the
Holders requesting inclusion in such offering, on a pro rata basis and provided
further, that in the event of such limitation, no third party other than a
Holder invoking the right to register shares under this Section 2(b) shall be
entitled to sell shares in such offering. To facilitate the allocation of shares
in accordance with the above provisions, the Company or the underwriters may
round the number of shares allocated to any Holder or other holder to the
nearest 100 shares. For purposes of making any pro rata reduction pursuant to
the preceding sentence, each Holder which is an LLC or a partnership together
with the affiliates, partners and retired partners of such Holder of Registrable
Securities and any pro-rata reduction with respect to such Holder shall be based
upon the aggregate amount of Registrable Securities owned by all entities and
individuals included in such Holder, as defined in this sentence (and the
aggregate amount so allocated to such Holder shall be allocated among the
entities and individuals included in such Holder in such manner as such
partnership shall reasonably determine).
The Company shall advise all Holders and other holders distributing
their securities through such underwriting of any such limitation, and the
number of shares of Registrable Securities and other securities that may be
included in the registration and underwriting shall be allocated among all
Holders and such other holders in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities held by such Holders and such other
holders at the time of filing the registration statement. If any Holder or
holder disapproves of the terms of any such underwriting, he may elect to
withdraw therefrom by written notice to the Company and the managing
underwriter.
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Any securities excluded or withdrawn from such underwriting shall be withdrawn
from such registration, and shall not be transferred in a public distribution
prior to 180 days after the effective date of the registration statement
relating thereto, or such other shorter period of time as the underwriters may
require. If by the withdrawal of such Registrable Securities a greater number of
Registrable Securities held by other Holders may be included in such
registration (up to the maximum of any limitation then imposed by the
underwriters), then the Company shall offer to all Holders, if any, whose shares
have been excluded from the registration by the terms of the preceding
paragraph, the right to include additional Registrable Securities in the same
proportion used in determining the underwriter limitation in this Section
2(b)(ii) up to the limitation then imposed by the underwriters.
(iii) Right to Terminate Registration. The Company
shall have the right to terminate or withdraw any registration initiated by it
under this Section 2(b) prior to the effectiveness of such registration, whether
or not any Holder has elected to include securities in such registration.
(iv) Other Registration Rights. No Stockholder of the
Company shall be granted rights to participate in a Company registration that
would reduce the number of shares permitted to be included by the Holders of
Registrable Securities in such registration without the consent of holders of at
least sixty six and two thirds percent (66 2/3%) of the Registrable Securities.
(c) Form S-3 Registration. If the Company shall receive at any
time after May 31, 2000 a written request or requests from the Holders of forty
five percent (45%) of the Registrable Securities then outstanding that the
Company effect a registration on Form S-3 and any related qualification or
compliance with respect to all or a part of the Registrable Securities owned by
such Holder or Holders, the Company will:
(i) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders;
and
(ii) as soon as practicable, effect such registration
and all such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Holder's or Holders' Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any other
Holder or Holders joining in such request as are specified in a written request
given within fifteen (15) days after receipt of such written notice from the
Company; provided, however, that the Company shall not be obligated to effect
any such registration, qualification or compliance, pursuant to this Section
2(c): (1) if Form S-3 is not available for such offering by the Holders; (2) if
the Holders, together with the holders of any other securities of the Company
entitled to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) at an aggregate price to the
public (net of any underwriters' discounts or commissions) of less than
$2,000,000; (3) if the Company shall furnish to the Holders a certificate
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its stockholders
for such Form S-3 Registration to be effected at such time, in which event the
Company
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shall have the right to defer the filing of the Form S-3 registration statement
for a period of not more than one hundred twenty (120) days after receipt of the
request of the Holder or Holders under this Section 2(c); provided, however,
that the Company shall not utilize this right more than once in any twelve (12)
month period; (4) if the Company has, within the twelve (12) month period
preceding the date of such request, already effected one (1) registration on
Form S-3 for the Holders pursuant to this Section 2(c); or (5) in any particular
jurisdiction in which the Company would be required to qualify to do business or
to execute a general consent to service of process in effecting such
registration, qualification or compliance.
(d) "Market Stand-Off" Agreement. Each Holder of more than one
percent (1%) of the Company's outstanding securities hereby agrees that, during
the period of duration (not to exceed ninety (90) days) specified by the Company
and an underwriter of common stock or other securities of the Company, following
the effective date of a registration statement of the Company's securities filed
under the Securities Act, it shall not, to the extent requested by the Company
and such underwriter, directly or indirectly sell, offer to sell, contract to
sell (including, without limitation, any short sale), grant any option to
purchase or otherwise transfer or dispose of (other than to donees who agree to
be similarly bound) any securities of the Company held by it at any time during
such period, except common stock included in such registration; provided,
however, that all officers, directors and employees of the Company enter into
similar agreements. In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the securities of each Holder
(and the shares or securities of every other person subject to the foregoing
restriction) until the end of such period.
3. Registration Procedures. In connection with the Company's
registration obligations under Section 2 hereof, the Company shall effect such
registrations to permit the sale of the Registrable Securities in accordance
with the intended method or methods of disposition thereof and pursuant thereto
the Company shall as expeditiously as possible:
(a) Prepare and file with the SEC a Registration Statement or
Registration Statements on any appropriate form under the Securities Act
available for the sale of the Registrable Securities by the Holders in
accordance with the intended method or methods of distribution thereof, and
cause each such Registration Statement to become effective and remain effective
as provided herein; provided, that before filing any such Registration Statement
or Prospectus or any amendments or supplements thereto (other than documents
that would be incorporated or deemed to be incorporated therein by reference and
that the Company is required by applicable securities laws or stock exchange
requirements to file) the Company shall furnish to the Special Counsel copies of
all such documents proposed to be filed, which documents will be subject to the
review of the Special Counsel.
(b) Prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may be necessary to
keep such Registration Statement continuously effective for the applicable
period specified in Section 2; cause the related Prospectus to be timely
supplemented by any required Prospectus supplement, and as so
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<PAGE> 169
supplemented to be filed pursuant to Rule 424 (or any similar provisions then in
force) under the Securities Act; and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance with the
intended methods of disposition by the Holders set forth in such Registration
Statement as so amended or such Prospectus as so supplemented.
(c) Notify the Holders and the Special Counsel promptly, and
(if requested by any such person) confirm such notice in writing, (i) when a
Prospectus or any Prospectus supplement or post-effective amendment has been
filed, and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective, (ii) of any request by the SEC or
any other federal or state governmental authority during the period of
effectiveness of the Registration Statement for amendments or supplements to a
Registration Statement or related Prospectus or for additional information,
(iii) of the issuance by the SEC or any other federal or state governmental
authority of any stop order suspending the effectiveness of a Registration
Statement or the initiation of any proceedings for that purpose, (iv) of the
receipt by the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose, (v) of the happening of any event which makes any
statement made in such Registration Statement or related Prospectus or any
document incorporated or deemed to be incorporated therein by reference untrue
in any material respect or which requires the making of any changes in the
Registration Statement or Prospectus so that, in the case of the Registration
Statement, it will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading, and that in the case of the Prospectus,
it will not contain any untrue statement of a material fact or omit to state any
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and (vi) of the Company's reasonable
determination that a post-effective amendment to a Registration Statement would
be appropriate.
(d) Use every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of a Registration Statement, or the
lifting of any suspension of the qualification (or exemption from qualification)
of any of the Registrable Securities for sale in any jurisdiction, at the
earliest possible moment.
(e) Subject to the last paragraph of this Section 3, if
reasonably requested by the Holders (i) promptly incorporate in a Prospectus
supplement or post-effective amendment such information as the Holders agrees
should be included therein as required by applicable law, (ii) make all required
filings of such Prospectus supplement or such post-effective amendment as soon
as practicable after the Company has received notification of the matters to be
incorporated in such Prospectus supplement or post-effective amendment, and
(iii) supplement or make amendments to any Registration Statement consistent
with clause (i) or (ii) above; provided, that the Company shall not be required
to take any actions under this Section 3(e) that are not, in the opinion of
counsel for the Company, necessary or advisable to comply with applicable law.
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(f) Furnish to the Holders and the Special Counsel, without
charge, at least one conformed copy of the Registration Statement or
Registration Statements and any post-effective amendment thereto, including
financial statements, but excluding schedules, all documents incorporated or
deemed to be incorporated therein by reference and all exhibits (unless
requested in writing by the Holders or Special Counsel).
(g) Promptly deliver to the Holders and the Special Counsel,
without charge, as many copies of the Prospectus or Prospectuses relating to
such Registrable Securities (including each preliminary prospectus) and any
amendment or supplement thereto as such persons may reasonably request; and the
Company hereby consents to the use of such Prospectus or each amendment or
supplement thereto by the Holders in connection with the offering and sale of
the Registrable Securities covered by such Prospectus or any amendment or
supplement thereto.
(h) Prior to any public offering of Registrable Securities, to
register or qualify or cooperate with the Holders and the Special Counsel in
connection with the registration or qualification (or exemption from such
registration or qualification) of such Registrable Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions within the United
States as the Holders reasonably request in writing; keep each such registration
or qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective and do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by the applicable
Registration Statement; provided, that the Company will not be required to (i)
qualify generally to do business in any jurisdiction where it is not then so
qualified or (ii) take any action that would subject it to general service of
process in suits or to taxation in any such jurisdiction where it is not then so
subject.
(i) Cause the Registrable Securities covered by the applicable
Registration Statement to be registered with or approved by such other
governmental agencies or authorities within the United States, except as may be
required solely as a consequence of the nature of a Holder, in which case the
Company will cooperate in all reasonable respects with the filing of such
Registration Statement and the granting of such approvals, as may be necessary
to enable the Holders or to consummate the disposition of such Registrable
Securities.
(j) Upon the occurrence of any event contemplated by Section
3(c)(v) or 3(c)(vi) above, prepare a supplement or post-effective amendment to
each Registration Statement or a supplement to the related Prospectus or any
document incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of the Registrable Securities
being sold thereunder, such Prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(k) Notwithstanding anything in this Agreement to the
contrary, a Holder shall not be entitled to sell any of such Registrable
Securities pursuant to a Registration Statement or to receive a Prospectus
relating thereto unless such Holder (A) has at such time a current intent to
sell
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such Registrable Securities, and confirms such intent in writing, and (B) has
furnished the Company promptly after the Company's request, such information
regarding the Holder and the distribution of such Registrable Securities as the
Company may from time to time reasonably request. The Company may refrain from
filing a registration for any Holder's Registrable Securities if it does not
furnish such information provided above. Each of the Holders agrees promptly to
furnish to the Company all information required to be disclosed in order to make
the information previously furnished to the Company by Holders not misleading
with respect to such Holder.
The Holders agree by acquisition of the Registrable Securities that,
upon receipt of any notice from the Company of (A) the happening of any event of
the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or 3(c)(vi)
hereof or (B) that, in the reasonable judgment of the Company, it is advisable
to suspend use of the Prospectus for a discrete period of time due to pending
corporate developments, public filings with the SEC or similar events, the
Holders will forthwith discontinue disposition of such Registrable Securities
covered by such Registration Statement or Prospectus until the Holders' receipt
of the copies of the supplemented or amended Prospectus contemplated by Section
3(j) hereof, or until it is advised in writing (the "Advice") by the Company
that the use of the applicable Prospectus may be resumed, and has received
copies of any additional or supplemental filings that are incorporated or deemed
to be incorporated by reference in such Prospectus. The Company shall use its
reasonable efforts to insure that the use of the Prospectus may be resumed as
soon as practicable.
(l) Use its best efforts to furnish, on the date that such
Registrable Securities are delivered to the underwriters for sale, if such
securities are being sold through underwriters, (i) an opinion, dated as of such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the Holders participating in the
offering, and (ii) a letter dated as of such date, from the independent
certified public accountants of the Company, in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering addressed to the Holder participating in the
offering.
4. Registration Expenses. All fees and expenses incident to the
Company's performance of or compliance with this Agreement shall be borne by the
Company whether or not any of the Registration Statements become effective. Such
fees and expenses shall include, without limitation, (i) all registration and
filing fees (including, without limitation, fees and expenses (x) with respect
to filings required to be made with the National Association of Securities
Dealers, Inc. and (y) of compliance with federal securities or Blue Sky laws,
(ii) printing expenses (including, without limitation, expenses of printing
certificates for Registrable Securities in a form eligible for deposit with The
Depository Trust Company), (iii) fees and disbursements of counsel for the
Company and the Special Counsel, and (iv) Securities Act liability insurance
obtained by the Company in its sole discretion. In addition, the Company shall
pay its internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the expense of any annual audit, the fees and expenses incurred in connection
with the listing of the securities to be registered on any securities exchange
on which similar securities issued by the
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Company are then listed and rating agency fees and the fees and expenses of any
person, including special experts, retained by the Company. Notwithstanding the
provisions of this Section 4, the Holders shall pay all registration expenses to
the extent that the Company is prohibited by applicable Blue Sky laws from
paying for or on behalf of the Holders.
All underwriting discounts, selling commissions and stock transfer
taxes applicable to the sale of the Registrable Securities if any, shall be paid
by the Holders.
5. Indemnification.
(a) Indemnification by the Company. The Company shall
indemnify and hold harmless, to the fullest extent permitted by law, BankAmerica
Ventures ("BAV") each of its officers, directors, partners and members and each
selling Holder and each person, if any, who controls such Holder (within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act) from and against all losses, liabilities, claims, damages and expenses
(including but not limited to reasonable attorney fees and any and all
reasonable expenses whatsoever incurred in investigating, preparing or defending
against litigation, commenced or threatened, or any claim whatsoever, and any
and all amounts paid in settlement of any claim or litigation) (collectively,
"LOSSES"), arising out of or based upon any untrue or alleged untrue statement
of a material fact contained in any Registration Statement, Prospectus or form
of Prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, except insofar as the same are based solely upon
information furnished in writing to the Company by BAV or any Holder expressly
for use therein; provided, that the Company shall not be liable to BAV or any
Holder (or any person controlling any of the Holders) to the extent that any
such Losses arise out of or are based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in any prospectus if either (A)
(i) BAV or any of the Holders failed to send or deliver a copy of the Prospectus
with or prior to the delivery of written confirmation of the sale by the Holders
of a Registrable Security to the person asserting the claim from which such
Losses arise and (ii) the Prospectus would have corrected such untrue statement
or alleged untrue statement or such omission or alleged omission, or (B) (x)
such untrue statement or alleged untrue statement, omission or alleged omission
is corrected in an amendment or supplement to the Prospectus and (y) having
previously been furnished by or on behalf of the Company with copies of the
Prospectus as so amended or supplemented, the Holders thereafter fail to deliver
such Prospectus as so amended or supplemented, with or prior to the delivery of
written confirmation of the sale of a Registrable Security to the person
asserting the claim from which such Losses arise. The Company shall also
indemnify each underwriter and each person who controls such person (within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act) to the same extent as provided above with respect to the indemnification of
the Holder.
(b) Indemnification by Holder. In connection with any
Registration Statement in which the Holders are participating, BAV or the
Holders shall furnish to the Company in writing
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<PAGE> 173
such information as the Company reasonably requests for use in connection with
any Registration Statement or Prospectus and each Holder agrees to indemnify, to
the fullest extent permitted by law, the Company, its directors and officers and
each other person who controls the Company (within the meaning of Section 15 of
the Securities Act and Section 20 of the Exchange Act), from and against all
Losses in each case arising out of or based upon any untrue statement of a
material fact contained in any Registration Statement, Prospectus or preliminary
prospectus or arising out of or based upon any omission of a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, to the
extent, but only to the extent, that such untrue statement or omission is
contained in any information so furnished in writing by BAV or the Holders to
the Company expressly for use in such Registration Statement, Prospectus or
preliminary prospectus. In no event shall the liability of BAV or any of the
Holders hereunder exceed the net proceeds received from sales of its Registrable
Securities. The Company shall be entitled to receive indemnities from
underwriters participating in the distribution to the same extent as provided
above with respect to information so furnished in writing by such persons
expressly for use in any Prospectus or Registration Statement.
(c) Conduct of Indemnification Proceedings. If any person
shall be entitled to indemnity hereunder (an "INDEMNIFIED PARTY"), such
Indemnified Party shall give prompt notice to the party from which such
indemnity is sought (the "INDEMNIFYING PARTY") of any claim or of the
commencement of any proceeding with respect to which such Indemnified Party
seeks indemnification or contribution pursuant hereto; provided, that the
failure to so notify the Indemnifying Party shall not relieve the Indemnified
Party from any obligation or liability except to the extent that the Indemnified
Party has been prejudiced materially by such failure. All such fees and expenses
(including any fees and expenses incurred in connection with investigating or
preparing to defend such action or proceeding) shall be paid to the Indemnified
Party on a quarterly basis following written notice thereof to the Indemnified
Party (notwithstanding the absence of judicial determination as to the propriety
and enforceability of the Indemnified Party's obligation to reimburse the
Indemnified Party for such expense and the possibility that such payments might
later be held to have been improper by a court of competent jurisdiction). In
case any such action is brought against an Indemnified Party, the Indemnified
Party shall be entitled to participate therein and it may elect by written
notice delivered to the Indemnified Party within a reasonable period of time
after receiving the aforesaid notice from such Indemnified Party, to assume the
defense thereof with counsel reasonably satisfactory to such Indemnified Party.
No Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant for plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation.
(d) Contribution. If the indemnification provided for in this
Section 5 is unavailable to an Indemnified Party under Section 5(a) or 5(b)
hereof in respect of any Losses or is insufficient to hold such Indemnified
Party harmless, then each applicable Indemnified Party, in lieu of indemnifying
such Indemnified Party, shall, jointly and severally, contribute to the amount
paid or
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<PAGE> 174
payable by such Indemnified Party as a result of such Losses, in such proportion
as is appropriate to reflect the relative fault of the Indemnified Party or
indemnifying parties, on the one hand, and such Indemnified Party, on the other
hand, in connection with the actions, statements or omissions that resulted in
such Losses as well as any other relevant equitable considerations. The relative
fault of such Indemnified Party or indemnifying parties, on the one hand, and
such Indemnified Party, on the other hand, shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of a
material fact, has been taken or made by, or relates to information supplied by,
such Indemnified Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include any reasonable legal or other
reasonable fees or expenses incurred by such party in connection with any
proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method or allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding this Section 5(d), if any of the Holders are the Indemnifying
Party, such Holders shall not be required to contribute any amount in excess of
the amount by which the net proceeds exceeds the amount of any damages which
such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
The indemnity, contribution and expense reimbursement obligations of
the Company hereunder shall be in addition to any liability the Company may
otherwise have hereunder or otherwise. The provisions of this Section 5 shall
survive so long as Registrable Securities remain outstanding, notwithstanding
any termination of this Agreement.
6. Rule 144 Information Requirements. For so long as any Registrable
Securities are "restricted securities" under Rule 144, the Company agrees to
timely file the reports required to be filed by it under the Securities Act and
the Exchange Act.
7. Sale without Registration. The Holders agree to comply in all
respects with the provisions of this Section 7 so long as each certificate
representing the Shares is required to bear the legend in substantially the form
set forth in the Stock Purchase Agreement among the Holders and the Company (or
any similar legend). Prior to any proposed transfer of any Registrable
Securities by the Holders which shall not be registered under the Securities
Act, the Holders shall give written notice to the Company of its intention to
effect such transfer, accompanied by: (a) such information as is reasonably
necessary in order to establish that such transfer may be made without
registration under the Securities Act; and (b) at the expense of such Holder or
such Holder's transferee, an unqualified written opinion of legal counsel,
satisfactory in form and substance to the Company, to the effect that such
transfer may be made without registration under the Securities Act; provided
that
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<PAGE> 175
nothing contained in this Section 7 shall relieve the Company from complying
with its obligations pursuant to Section 2 of this Agreement.
8. Transfer of Rights. The rights granted to the Holders under Section
2 hereof may be assigned to any transferee or assignee who is (a) a subsidiary,
parent, LLC, general partner, limited partner, retired partner, member or
retired member of a Holder, (b) a Holder's ancestors, descendants or spouse or
to trusts for the benefit of such persons or such Holder or (c) a client,
employee or member of BAV, provided that (i) such transfer may otherwise be
effected in accordance with applicable securities laws, (ii) the Company is
given written notice of any such transfer five (5) Business Days prior to the
date of said transfer, stating the name and address of said transferee or
assignee and identifying the securities with respect to which such registration
rights are being assigned and (iii) the transferee or assignee of such rights is
not deemed by the Board of Directors of the Company, in its reasonable judgment,
to be a competitor of the Company and provided further that the transferee or
assignee of such rights assumes in writing in a form reasonably acceptable to
the Company the obligations of the Holders under this Agreement. Notwithstanding
the above, BAV shall be permitted to transfer or assign its rights to Bank of
America Ventures, L.P. without the requirements set forth in Section 8.
9. Miscellaneous.
(a) Remedies. In the event of a breach by the Company of its
obligations under this Agreement, the Holders, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of their rights under this Agreement. The
Company agrees that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
(b) No Conflicting Agreements. The Company has not, as of the
date hereof, and shall not, on or after the date of this Agreement, enter into
any agreement with respect to its securities which materially conflicts with the
rights granted to the Holders in this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of a
majority of the Holders.
(d) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing and shall be deemed given (i)
when made, if made by hand delivery, (ii) upon confirmation, if made by
telecopier or (iii) one business day after being deposited with a reputable
next-day courier, postage prepaid, to the parties as follows:
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(i) if to the Holders, c/o BankAmerica Ventures, 950
Tower Lane, Suite 700, Foster City, California 94404, Attention: Mark Brooks and
Robert S. Fore, or to such other address as a Holder may hereafter furnish to
the Company in writing in accordance herewith, with a copy to Julia Davidson,
Cooley Godward LLP, Five Palo Alto Square, Palo Alto, CA 94306-2155.
(ii) if to the Company, to Cardiac Pathways
Corporation, 995 Benecia Avenue, Sunnyvale, California 94086, Attention: G.
Michael Latta, Chief Financial Officer, or to such other address as the Company
may hereafter furnish to BAV in writing in accordance herewith, with a copy to
Chris F. Fennell, Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo
Alto, California 94304-1050.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties.
(f) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF CALIFORNIA, WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS.
(i) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such
which may be hereafter declared invalid, void or unenforceable.
(j) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and is intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein and the
registration rights granted by the Company with respect to the Shares. There are
no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein, with respect to the registration rights granted by
the Company with respect to the Shares. This
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Agreement supersedes all prior agreements and understandings among the parties
with respect to such registration rights.
(k) Attorneys' Fees. In any action or proceeding brought to
enforce any provision of this Agreement, or where any provision hereof is
validly asserted as a defense, the prevailing party, as determined by the court,
shall be entitled to recover reasonable attorneys' fees in addition to any other
available remedy.
(l) Further Assurances. Each of the parties hereto shall use
all reasonable efforts to take, or cause to be taken, all appropriate action, do
or cause to be done all things reasonably necessary, proper or advisable under
applicable law, and execute and deliver such documents and other papers, as may
be required to carry out the provisions of this Agreement and the other
documents contemplated hereby and consummate and make effective the transactions
contemplated hereby.
(m) Termination. This Agreement and the obligations of the
parties hereunder shall terminate upon the earlier of (i) May 20, 2004, or (ii)
or when all of the Registrable Securities have been sold or cease to be
Registrable Securities.
(n) Actions by the Holders. Any action to be taken by the
Holders pursuant to the Agreement may be taken by the Holders of a majority of
the Registrable Securities.
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The foregoing Registration Rights Agreement is hereby executed as of
the date first above written.
"COMPANY"
CARDIAC PATHWAYS CORPORATION
By:
---------------------------------------------------
William N. Starling
President and Chief Executive Officer
"HOLDERS"
BANKAMERICA VENTURES
By:
---------------------------------------------------
Title:
---------------------------------------------------
MORGAN STANLEY VENTURE PARTNERS III, L.P.
By: Morgan Stanley Venture Partners III, L.L.C.
its General Partner
By: Morgan Stanley Venture Capital III, Inc.,
its Institutional Managing Member
By:
---------------------------------------------------
Name:
Title:
Address: 1221 Avenue of the Americas
New York, New York 10020
Fax: (212) 762-8424
SIGNATURE PAGE - CARDIAC PATHWAYS CORPORATION REGISTRATION RIGHTS AGREEMENT
<PAGE> 179
MORGAN STANLEY VENTURE INVESTORS III, L.P.
By: Morgan Stanley Venture Partners III, L.L.C.
its General Partner
By: Morgan Stanley Venture Capital III, Inc.,
its Institutional Managing Member
By:
---------------------------------------------------
Name:
Title:
Address: 1221 Avenue of the Americas
New York, New York 10020
Fax: (212) 762-8424
MORGAN STANLEY VENTURE PARTNERS
ENTREPRENEUR FUND, L.P.
By: Morgan Stanley Venture Partners III, L.L.C.
its General Partner
By: Morgan Stanley Venture Capital III, Inc.,
its Institutional Managing Member
By:
---------------------------------------------------
Name:
Title:
Address: 1221 Avenue of the Americas
New York, New York 10020
Fax: (212) 762-8424
VAN WAGONER CAPITAL MANAGEMENT
By:
---------------------------------------------------
Name:
Title:
Address:
Fax: (415) 835-5050
SIGNATURE PAGE - CARDIAC PATHWAYS CORPORATION REGISTRATION RIGHTS AGREEMENT
<PAGE> 180
STATE OF WISCONSIN INVESTMENT BOARD
By:
---------------------------------------------------
Name: John Nelson
Title: Investment Director
Address:
Fax:
- ------------------------------------------------------
THOMAS FOGARTY
SIGNATURE PAGE - CARDIAC PATHWAYS CORPORATION REGISTRATION RIGHTS AGREEMENT
<PAGE> 181
Schedule 1
SCHEDULE OF HOLDERS
<TABLE>
<CAPTION>
Number of Shares of
Holder and Beneficial Owner Nominee and Record Holder Registrable Securities
-------------------------------------------------------- --------------------------------- ------------------------
<S> <C> <C>
BankAmerica Ventures
10,000
Morgan Stanley Venture Partners III, L.P.
8,773
Morgan Stanley Venture Investors III, L.P.
842
Morgan Stanley Venture Partners Entrepreneurs Fund, L.P. 385
Van Wagoner Capital Management 5,000
State of Wisconsin Investment Board 6,000
Thomas Fogarty 500
</TABLE>
