UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. ___)*
UroHealth Systems, Inc.
(Name of issuer)
Common Stock, par value $.001 per share
(Title of class of securities)
917272-10-6
(CUSIP number)
Kevin Higgins, Esq.
General Counsel
UroHealth Systems, Inc.
5 Civic Plaza, Suite 100
Newport Beach, California 92660
(714) 668-5858
(Name, address and telephone number of person
authorized to receive notices and communications)
May 13, 1996
(Date of event which requires filing of this statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the
following box / /.
Check the following box if a fee is being paid with the statement [X].
(A fee is not required only if the reporting person: (1) has a previous
statement on file reporting beneficial ownership of more than five percent
of the class of securities described in Item 1; and (2) has filed no
amendment subsequent thereto reporting beneficial ownership of five percent
or less of such class.) (See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom
copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any
(Page 1 of 22 Pages)
<PAGE>
subsequent amendment containing information which would alter disclosures
provided in a prior cover page.
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of
that section of the Act but shall be subject to all other provisions of the
Act (however, see the Notes).
(Page 2 of 22 Pages)
<PAGE>
- ---------------------------------- --------------------------
C U S I P N o . 917272-10-6 Page 3 of 22 Pages
- ---------------------------------- --------------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
Chase Venture Capital Associates, L.P.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) / X /
(b) / /
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT
TO ITEM 2(d) or 2(e) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
California
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
2,181,932
NUMBER
OF -----------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED
BY -0-
EACH
REPORTING -----------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
2,181,932
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- -----------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
2,181,932
-----------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* /x/
- --------------------------------------------------------------------------------
(Page 3 of 22 Pages)
<PAGE>
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
16%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
(Page 4 of 22 Pages)
<PAGE>
Item 1. Security and Issuer.
- ------- --------------------
The name of the issuer is UroHealth Systems, Inc. (hereinafter
referred to as the "Issuer"). The address of the Issuer's principal
executive offices is 5 Civic Plaza, Suite 100, Newport Beach, California
92660 . This statement relates to the Issuer's Common Stock, $.001 par
value (the "Common Stock").
Item 2. Identity and Background.
- ------- ------------------------
This statement is being filed by Chase Venture Capital
Associates, a California Limited Partnership (hereinafter referred to as
"CVCA") whose principal office is located at 380 Madison Avenue, 12th
Floor, New York, New York 10017.
CVCA is engaged in the venture capital and leveraged buyout
business. The general partner of CVCA is Chase Capital Partners, a New
York general partnership ("CCP"), also engaged in the venture capital and
leveraged buyout business, and whose principal office is located at the
same address as CVCA.
Set forth below are the names of each general partner of CCP who
is a natural person. Each such general partner is a U.S. citizen, whose
principal occupation is general partner of CCP and whose business address
(except Messrs. Ferguson and Soghikian) is c/o CCP, 380 Madison Avenue,
12th Floor, New York, New York 10017.
Mitchell J. Blutt, M.D.
Arnold L Chavkin
David L. Ferguson
Donald J. Hofmann
Stephen P. Murray
Brian J. Richmand
Shahan D. Soghikian
Jeffrey C. Walker
Mr. Ferguson's address is c/o CCP, 840 Apollo Street, Suite 223, El
Segundo, California 90245. Mr. Soghikian's principal business office
address is c/o CCP, 125 London Wall, London EC2Y5AJ.
Jeffrey C. Walker is the managing general partner of CCP. The
remaining general partners of CCP are Chase Capital Corporation, a New York
corporation ("Chase Capital"), and CCP Principals, L.P., a Delaware limited
partnership ("Principals"), each of whose principal office is located at
380 Madison Avenue, 12th Floor, New York, New York 10017. Chase Capital is
a wholly-owned subsidiary of Chase Manhattan Corporation. The general
partners of Principals are Jeffrey C. Walker and Chase Capital. Chase
Capital and Principals each are engaged in the venture capital and
leveraged buyout business.
Set forth in Schedule A hereto and incorporated herein by
reference are the names, business addresses and principal occupations or
employments of each executive officer and director of Chase Capital, each
of whom is a U.S. citizen.
(Page 5 of 22 Pages)
<PAGE>
Chase Manhattan Corporation ("Chase") is a Delaware corporation
engaged in the commercial banking business with its principal office
located at 270 Park Avenue, New York, New York 10017. Set forth in
Schedule A hereto and incorporated herein by reference is information
responsive to Items 2(a)-(c) of Schedule 13D for each executive officer and
director of Chase. All such persons are U.S. citizens.
To CVCA's knowledge, the response to Items 2(d) and (e) of
Schedule 13D is negative with respect to CVCA and all persons to whom
information is required hereunder by virtue of CVCA's response to Item 2.
Insofar as the requirements of Items 3-6 inclusive of this
Schedule 13D Statement require that in addition to CVCA the information
called for therein should be given with respect to each of the persons
listed in this Item 2, including CCP, CCP's individual general partners,
Chase Capital, Chase Capital's executive officers and directors,
Principals, Principals' controlling partners, Chase, Chase's executive
officers and directors, the information provided in Items 3-6 with respect
to CVCA should also be considered fully responsive with respect to the
aforementioned persons who have no separate interests in the Issuer's
Common Stock which is required to be reported thereunder. Although the
definition of "beneficial ownership" in Rule 13d-3 under the Securities and
Exchange Act of 1934, as amended (the "Exchange Act"), might also be deemed
to constitute these persons beneficial owners of the Issuer's Common Stock
acquired by CVCA, neither the filing of this statement nor any of its
contents shall be deemed an admission that any of such persons is a
beneficial owner of the Issuer's Common Stock acquired by CVCA or a member
of a group together with CVCA either for the purpose of Schedule 13D of the
Exchange Act or for any other purpose with respect to the Issuer's Common
Stock.
Item 3. Source and Amount of Funds or Other Consideration.
- ------- --------------------------------------------------
Description of Transaction
- --------------------------
On May 3, 1996, CVCA, the Issuer, Apollo Investment Fund III,
L.P., Apollo Overseas Partners III, L.P., Apollo U.K. Partners III, L.P.
(collectively, "Apollo") and certain other parties entered into a
Securities Purchase Agreement (the "Agreement").
Pursuant to the Agreement, CVCA will purchase (i) 4,550 shares of
the Issuer's Series C Preferred Stock which is convertible into
approximately 41,364 shares of the Issuer's Common Stock; (ii) Warrants to
purchase 113,750 shares of the Issuer's Common Stock and (iii) $22,295,000
of 8.75% Convertible Subordinated Debentures (the "Debentures") convertible
into approximately 2,026,818 shares of the Issuer's Common Stock. CVCA's
original cost basis for the above purchases is $22,750,000.00. The funds
CVCA used to acquire the securities were from its contributed capital.
Disclaimer of Group Status
- --------------------------
As noted above, CVCA, Apollo and certain other persons were
parties to the Agreement. They each received the rights to purchase the
Issuer's Common Stock upon consummation of the transactions contemplated by
the Agreement. In addition, in connection with the Agreement and the
closing of the transactions contemplated thereby, CVCA entered into certain
agreements
(Page 6 of 22 Pages)
<PAGE>
with the Issuer, Apollo and the other purchasers. The terms of these
agreements provide generally that CVCA, Apollo and the other purchasers
agree to certain restrictions on the transferability of their stockholdings
and that the Issuer agrees with CVCA, Apollo and the other purchasers to
provide certain rights of registration under the Securities Act of 1933 as
amended (the "1933 Act"), with respect to their stockholdings. Prior to
execution of the Agreement, CVCA had no contractual or other relationship
with Apollo or the other purchasers with respect to beneficial ownership of
the Issuer's Common Stock. Upon the Issuer's filing of a Certificate of
Amendment with the Secretary of State of Delaware, the Debentures will be
voting securities of the Issuer and will permit the holders thereof to vote
on all matters on which holders of Common Stock are entitled to vote (with
number of votes as is equal to the number of shares of Common Stock
obtainable upon conversion of the Debentures) and with the special class
right to elect two directors to the Issuer's Board of Directors (the
"Board"). Prior to the Issuer's filing of the Certificate of Amendment,
the Series C Preferred Stock will have voting rights which will provide the
holders thereof with fifty votes for each $11 of face value of each share
of Series C Preferred stock held. Upon the Issuer's filing of the
Certificate of Amendment with the Secretary of State of the State of
Delaware, all outstanding shares of Series C Preferred Stock (including
shares held by CVCA) will be exchanged for additional Debentures in the
aggregate principal amount of $1 million. CVCA and Apollo have entered
into a voting agreement pursuant to which each has agreed to vote the
Debentures and Series C Preferred Stock held by it to elect one director
designated by CVCA and one director designated by Apollo. A copy of the
agreement is attached hereto as Exhibit A.
CVCA disclaims that it is member of a group with any other
persons either for purposes of this Schedule 13D or for any other purpose
related to its beneficial ownership of the Issuer's securities.
Item 4. Purpose of Transaction.
- ------- -----------------------
The acquisition of the Issuer's equity securities has been made
by CVCA for investment purposes. Although CVCA has no present intention to
do so, CVCA may make additional purchases of Common Stock either in the
open market or in privately negotiated transactions, including transactions
with the Issuer, depending on an evaluation of the Issuer's business
prospects and financial condition, the market for the Common Stock, other
available investment opportunities, money and stock market conditions and
other future developments. Depending on these factors, CVCA may decide to
sell all or part of its holdings of the Issuer's Common Stock in one or
more public or private transactions.
Board of Directors
- ------------------
Pursuant to the Certificate of Designation, filed on May 8, 1996,
and the Indenture dated May 13, 1996, between the Issuer and Bankers Trust
Company, as Indenture Trustee, CVCA and Apollo at all times have the
special and exclusive right to elect two directors to the Board. As
described in Item 3, CVCA and Apollo have entered into a voting agreement
pursuant to which each has agreed to vote the Debentures and Series C
Preferred Stock held by it to elect one director designated by CVCA and one
director designated by Apollo.
(Page 7 of 22 Pages)
<PAGE>
Except as set forth in this Item 4, CVCA has no present plans or
proposals that relate to or would result in any of the actions specified in
clauses (a) through (j) of Item 4 of Schedule 13D. However, CVCA reserves
the right to propose or participate in future transactions which may result
in one or more of such actions, including but not limited to, an
extraordinary corporate transaction, such as a merger, reorganization or
liquidation, of a material amount of assets of the Issuer or its
subsidiaries, or other transactions which might have the effect of causing
the Issuer's Common Stock to cease to be listed on the NASDAQ National
Market System or causing the Common Stock to become eligible for
termination of registration, under Section 12(g) of the Exchange Act.
Item 5. Interest in Securities of the Issuer.
- ------- -------------------------------------
CVCA is deemed to be the beneficial owner of 2,181,932 shares of
the Issuer's Common Stock. CVCA's deemed beneficial ownership represents
16% of the Common Stock. Except as set forth in Item 4, CVCA has sole
voting power and dispositive power with respect to its shares of Common
Stock.
Except as reported in Item 6 below and incorporated herein by
reference, there have been no transactions in the Common Stock during the
past sixty days which are required to be reported in this Statement. No
person other than CVCA has the right to receive or the power to direct the
receipt of dividends from or the proceeds from the sale of the Common Stock
owned beneficially by CVCA.
Item 6. Contracts, Arrangements, Understandings or
- -------
Relationships With Respect to Securities of the Issuer.
-------------------------------------------------------
Reference is made to the information disclosed under Items 3 and
4 of this Statement which is incorporated by reference in response to this
Item. In addition to such information, the following contracts,
arrangements, understandings or relationships are reported hereunder.
(a) Registration Rights Agreement. Pursuant to Section
-----------------------------
5A.5(a) of the Agreement, the Issuer entered into the Registration Rights
Agreement dated as of May 13, 1996 (the "Registration Agreement"), between
CVCA, Apollo and certain other parties. The Registration Agreement grants
CVCA, Apollo and certain other parties three demand rights with respect to
registrations under the 1933 Act, provided that if the Issuer shall
consummate a "shelf" registration pursuant to the Registration Agreement or
the Debenture Registration Agreement (as defined below), such registration
shall be deemed to count as one demand registration. The parties to the
Registration Agreement are granted certain "piggy-back" rights to
participate in certain registration statements filed by the Issuer. The
Issuer agreed to pay all costs and expenses of all registrations under the
Registration Agreement. The Registration Agreement also contains customary
terms and conditions with respect to hold back of shares from public sale
or distribution, selection of underwriters and indemnification.
(b) Debenture Registration Rights Agreement. Pursuant to
---------------------------------------
Section 5A.5(b) of the Agreement, the Issuer entered into a Debenture
Registration Rights Agreement dated as of May 13, 1996 (the "Debenture
Agreement"), between CVCA, Apollo and certain other parties. The Debenture
Agreement requires the Company to file a Shelf Registration Statement and
to
(Page 8 of 22 Pages)
<PAGE>
keep such Shelf Registration Statement effective 15 months from its
effective date, subject to extension pursuant to Section 5 thereof, or such
shorter period ending when (i) all debentures covered by the Shelf
Registration Statement have been sold in the manner set forth and as
contemplated in the Shelf Registration Statement or (ii) a Subsequent
Registration Statement covering all registrable debentures has been
declared effective under the Securities Act.
(c) Warrant Agreement. Pursuant to Section 2.1(c) of the
-----------------
Agreement, the Issuer entered into a Warrant Agreement dated as of May 13,
1996 (the "Warrant Agreement") with Bankers Trust Company, as Warrant
Agent. The Warrant Agreement allows the Warrant Agent to issue Warrants to
CVCA, Apollo and certain other parties to purchase up to an aggregate of
250,000 shares of Common Stock of the Issuer.
Item 7. Material to be Filed as Exhibits.
- ------- ---------------------------------
1. Security Holders Agreement dated as of May 13, 1996,
between CVCA and Apollo.
SCHEDULE A
- ----------
Item 2 information for executive officers and directors of Chase
Capital and Chase.
(Page 9 of 22 Pages)
<PAGE>
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.
CHASE VENTURE CAPITAL ASSOCIATES, L.P.
By: CHASE CAPITAL PARTNERS,
its General Partner
By:/s/ Mitchell J. Blutt, M.D.
-----------------------------------------------
Name: Mitchell J. Blutt, M.D.
Title: General Partner
Date: May 23, 1996
(Page 10 of 22 Pages)
<PAGE>
SCHEDULE A
----------
CHASE CAPITAL CORPORATION
Directors:
William B. Harrison, Jr.*
Jeffrey C. Walker**
Executive Officers:
President Jeffrey C. Walker**
Executive Vice President Mitchell J. Blutt, M.D.**
Vice President & Secretary Gregory Meridith*
Vice President & Treasurer Donna L. Carter**
Assistant Secretary Robert C. Carroll*
--------------------
*Principal occupation is employee and/or officer of Chase.
Business address is c/o Chase Manhattan Corporation 270 Park
Avenue, New York, New York 10017.
** Principal occupation is employee of Chase and/or general
partner of Chase Capital Partners. Business address is c/o Chase
Capital Partners, 380 Madison Avenue, 12th Floor, New York, NY
10017.
(Page 11 of 22 Pages)
<PAGE>
SCHEDULE A
----------
THE CHASE MANHATTAN CORPORATION
Executive Officers*
Walter V. Shipley, Chairman and CEO
Edward D. Miller, Senior Vice Chairman
Thomas G. Labrecque, President and COO
William B. Harrison, Jr., Vice Chairman
E. Michel Kruse, Vice Chairman
--------------------
*Principal occupation is as executive officer and/or employee of
The Chase Manhattan Bank. Business address is c/o The Chase
Manhattan Bank, 270 Park Avenue, New York, New York 10017.
(Page 12 of 22 Pages)
<PAGE>
SCHEDULE A
----------
THE CHASE MANHATTAN CORPORATION
Each of the persons named below is a citizen of the Unites
States of America, except for John H. McArthur who is a citizen of Canada.
PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME BUSINESS OR RESIDENCE ADDRESS
- --------------------------------------------------------------------------------
DIRECTORS
- --------------------------------------------------------------------------------
Frank A. Bennack, Jr. President and Chief Executive Officer
The Hearst Corporation
959 Eighth Avenue
New York, New York 10019
- --------------------------------------------------------------------------------
Michel C. Bergerac Chairman of the Board and Chief
Executive Officer
Bergerac & Co., Inc.
110 East 59th Street, 20th Floor
New York, New York 10022
- --------------------------------------------------------------------------------
Susan V. Berresford President
The Ford Foundation
320 E. 43rd Street
New York, New York 10017
- --------------------------------------------------------------------------------
Randolph W. Broomery President
Springfield College
263 Alden Street
Springfield, Massachusetts 01109
- --------------------------------------------------------------------------------
M. Anthony Burns Chairman of the Board, President and
Chief Executive Officer
Ryder System, Inc.
2800 N.W. 82nd Avenue
Miami, Florida 33166
- --------------------------------------------------------------------------------
Charles W. Duncan, Jr. Private Investor
Duncan Interests
600 Travis, Suite 6100
Houston, Texas 77002
- --------------------------------------------------------------------------------
James L. Ferguson Retired Chairman and Chief Executive
Officer
General Foods Corporation
P.O. Box 1457
Charleston, South Carolina 29401
- --------------------------------------------------------------------------------
H. Laurence Fuller Chairman of the Board and Chief
Executive Officer
Amoco Corporation
200 East Randolph Drive
Chicago, Illinois 60601
(Page 13 of 22 Pages)
<PAGE>
- --------------------------------------------------------------------------------
Melvin R. Goodes Chairman of the Board and Chief
Executive Officer
Warner-Lambert Company
201 Tabor Road
Morris Plains, New Jersey 07950
- --------------------------------------------------------------------------------
William H. Gray, III President and Chief Executive Officer
United Negro College Fund, Inc.
9860 Willow Oaks Corporate Drive
P.O. Box 10444
Fairfax, Virginia 22031
- --------------------------------------------------------------------------------
George V. Grune Chairman of the Board
Dewitt Wallace Reader's Digest Fund
Lila Wallace-Reader's Digest Fund
Two Park Avenue
New York, New York 10016
- --------------------------------------------------------------------------------
William B. Vice Chairman of the Board
Harrison, Jr. The Chase Manhattan Corporation
270 Park Avenue
New York, New York 10017
- --------------------------------------------------------------------------------
Harold S. Hook Chairman and Chief Executive Officer
American General Corporation
2929 Allen Parkway
Houston, Texas 77019
- --------------------------------------------------------------------------------
Helene L. Kaplan Of Counsel
Skadden, Arps, Slate, Maegher & Flom
919 Third Avenue - Room 39-72
New York, New York 10022
- --------------------------------------------------------------------------------
David T. Kearns Retired Chairman and Chief Executive
Officer
The Xerox Corporation
P.O. Box 10340
Stamford, Connecticut 06904-2240
- --------------------------------------------------------------------------------
E. Michel Kruse Vice Chairman of the Board
The Chase Manhattan Corporation
270 Park Avenue
New York, New York 10017
- --------------------------------------------------------------------------------
Thomas G. Labrecque President and Chief Operating Officer
The Chase Manhattan Corporation
270 Park Avenue
New York, New York 10017
- --------------------------------------------------------------------------------
Delano E. Lewis President and Chief Executive Officer
National Public Radio
635 Massachusetts Avenue, N.W. -
6th Floor
Washington, DC 90001
(Page 14 of 22 Pages)
<PAGE>
- --------------------------------------------------------------------------------
J. Bruce Llewellyn Chairman of the Boards of
The Philadelphia Coca-Cola Bottling
Company
The Coca-Cola Bottling Company of
Wilmington, Inc.
Queen City Broadcasting, Inc.
30 Rockefeller Plaza, 29th Floor
New York, New York 10112
- --------------------------------------------------------------------------------
Paul W. MacAvoy William Brothers Professsor of
Management Studies
Yale School of Management
P.O. Box 208200
New Haven, CT 06520-3200
- --------------------------------------------------------------------------------
John P. Mascotte Chairman
The Missouri Corporation of Johnson &
Higgins
4530 Main Street, Suite 900
Kansas City, Missouri 64111
George Fisher Baker Professor,
Imeritus
Harvard Graduate School of Business
Administration
Fowler 32 - Soldiers Field Road
Boston, Massachusetts 02168
- --------------------------------------------------------------------------------
John F. McGillicuddy Retired Chairman of the Board and
Chief Executive Officer
The Chase Manhattan Corporation
270 Park Avenue
New York, New York 10017
- --------------------------------------------------------------------------------
Edward D. Miller Senior Vice Chairman of the Board
The Chase Manhattan Corporation
270 Park Avenue
New York, New York 10017
- --------------------------------------------------------------------------------
Edmund T. Pratt, Jr. Chairman Emeritus
Pfizer Inc.
Astors Lane
Port Washington, New York 11050
- --------------------------------------------------------------------------------
Henry B. Schacht Chairman of the Board and Chief
Executive Officer
Lucent Technologies Inc.
600 Mountain Avenue, Rm. 6A611
Murray Hill, New Jersey 07974
- --------------------------------------------------------------------------------
Walter V. Shipley Chairman of the Board and Chief
Executive Officer
The Chase Manhattan Corporation
270 Park Avenue
New York, New York 10017
(Page 15 of 22 Pages)
<PAGE>
- --------------------------------------------------------------------------------
Andrew C. Sigler Chairman of the Board and Chief
Executive Officer
Champion International Corporation
One Champion Plaza
Stamford, Connecticut 06921
- --------------------------------------------------------------------------------
Michael I. Sovern President Emeritus and
Chancellor Kent
Professor of Law
Columbia University
435 West 116th Street and Amsterdam
Avenue
New York, New York 10027
- --------------------------------------------------------------------------------
John E. Stafford Chairman, President and Chief
Executive Officer
American Home Products Corporation
5 Giralda Farms
Madison, New Jersey 07940
- --------------------------------------------------------------------------------
W. Bruce Thomas Private Investor
Blackburn Road, Route 64
Sewickley, Pennsylvania 15143
(Page 16 of 22 Pages)
<PAGE>
EXHIBIT A
---------
SECURITY HOLDERS AGREEMENT dated as
of May 13, 1996, (the "Agreement")
between CHEMICAL VENTURE CAPITAL
ASSOCIATES, L.P., APOLLO INVESTMENT FUND
III, L.P., APOLLO OVERSEAS PARTNERS III,
L.P., and APOLLO U.K. PARTNERS III, L.P.
(each a "Security Holder" and
collectively, the "Security Holders").
PREAMBLE
Pursuant to the Securities Purchase Agreement dated May 3, 1996
(the "Securities Purchase Agreement"), the Security Holders are purchasing
shares of Series C Convertible Preferred Stock (the "Preferred Stock") and
8.75% Convertible Debentures (the "Debentures") of UroHealth Systems, Inc.,
as the same may exist from time to time (the "Corporation"). On the date
hereof, the holders of a majority of the outstanding shares of Preferred
Stock are entitled to elect two directors to the Board of Directors of the
Corporation (the "Board"). Upon the exchange of the Preferred Stock for
Debentures pursuant to the terms of the Preferred Stock, the holders of a
majority of the existing Debentures will be entitled to elect two directors
to the Board. The Security Holders desire to set forth their agreement
with respect to the voting of the shares of Preferred Stock and Debentures
(the "Securities") owned by them for the election of directors.
ACCORDINGLY, in consideration of the mutual covenants and
agreements contained in this Agreement, the sufficiency of which is hereby
acknowledged, the parties agree as follows:
SECTION 1. DEFINITIONS.
Capitalized terms used in this Agreement and not otherwise
defined shall have the meanings ascribed to them below:
(a) "Affiliates" means, with respect to any Security
Holder, any other holder of Securities that, directly or
(Page 17 of 22 Pages)
<PAGE>
indirectly through one or more intermediaries controls, is controlled by,
is under common control with the Security Holder.
(b) "Apollo" means Apollo Investment Fund III, L.P.
(c) "Apollo Director" means any person designated by Apollo
and elected to the Board as provided herein.
(d) "CVC" means Chase Venture Capital Associates, L.P. and
any affiliates thereof.
(e) "CVC Director" means any person designated by CVC and
elected to the Board as provided herein.
(f) "Certificate of Designation" shall mean the Certificate
of Designation filed by the Corporation with the Secretary of State of the
State of Delaware on May 8, 1996, including any amendments thereto.
(g) "Person" shall be construed broadly and shall include
an individual, a partnership, a corporation, an association, a joint stock
company, a limited liability company, a trust, a joint venture, an
unincorporated organization and a governmental entity or any department,
agency or political subdivision thereof.
(h) "Termination Event" shall mean the earlier of (i) the
consummation of a public offering of the Debentures, (ii) May 30, 2006 and
(iii) any time in which either of the Security Holders together with its
Affiliates does not own 10% of the Debentures outstanding at such time.
SECTION 2. ELECTION OF DIRECTORS.
Pursuant to the provisions of the Certificate of Designation and
the Debentures, each Security Holder, in his capacity as a security holder
of the Corporation, shall, promptly after the execution of this Agreement,
and at any time and from time to time thereafter that directors of the
Corporation are elected by the holders of the Preferred Stock or the
Debentures, vote, in person or by proxy, all of the Securities issued by
the Corporation and owned or controlled by such Security Holder and
entitled to vote at any annual or special meeting of the holders of the
Preferred Stock or Debentures called for the purpose of voting on the
election of directors to be elected by such
(Page 18 of 22 Pages)
<PAGE>
holders, or to execute a written consent in lieu thereof, and take all such
other action as may be necessary to provide for the election of:
(i) one director to be designated by CVC; and
(ii) one director to be designated by Apollo.
The execution and delivery of this Agreement by those Security Holders
entitled to vote for the election of directors of the Corporation
constitutes such Security Holders' approval, by written consent pursuant to
Section 228 of the Delaware General Corporation Law, of the election as
directors of the Corporation of the persons set forth on Schedule I annexed
hereto.
SECTION 3. REMOVAL OF DIRECTORS.
(a) At all times, CVC shall have the right to (i) require
the removal, with or without cause, of any CVC Director, and once removed,
(ii) to appoint a successor CVC Director pursuant to the provisions of this
Agreement and the Certificate of Designation or the Indenture.
(b) At all times, Apollo shall have the right to (i)
require the removal, with or without cause, of any Apollo Director, and
once removed, (ii) to appoint a successor Apollo Director pursuant to the
provisions of this Agreement and the Certificate of Designation or the
Indenture.
(c) In the event that any Security Holder acting as
described in Section 3(a) or (b) above shall, in accordance with their
rights specified therein, require the removal of any director or directors
with respect to whom they have such right, each of the Security Holders
hereby agrees to join with such acting Security Holder in recommending such
removal as described above, and in causing the Corporation either to
promptly hold a special meeting of stockholders and to vote, in person or
by proxy, all of its Securities issued by the Corporation and entitled to
vote at such meeting or to execute a written consent in lieu thereof, as
the case may be, in favor of such removal.
(d) Each of the Security Holders agrees that it, together
with its Affiliates, shall not, without the consent of the other Security
Holder, reduce the Securities collectively
(Page 19 of 22 Pages)
<PAGE>
held by such Security Holder and its Affiliates to an amount which is less
than 25.1% of the Securities outstanding.
SECTION 4. TERMINATION EVENT.
Anything contained in Sections 2, 3(a), (b), (c) or (d) to the
contrary notwithstanding, upon the occurrence of a Termination Event, the
Security Holders shall be relieved of the obligations contemplated by this
Agreement, provided however, that in the event the Termination Event shall
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cease, the Agreement will continue in full force and effect as if the
Termination Event had not occurred.
SECTION 5. AMENDMENT, WAIVER AND MODIFICATION.
The terms and provisions of this Agreement may not be modified or
amended, nor may any provision be waived, except pursuant to a writing
signed by the Security Holders.
SECTION 6. TERMINATION.
The provisions of this Agreement shall terminate immediately in
the event that either Security Holder ceases to beneficially own Securities
of the Corporation.
SECTION 7. SEVERABILITY.
It is the desire and intent of the Security Holders that the
provisions of this Agreement be enforced to the fullest extent permissible
under the laws and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, if any particular provision of this
Agreement shall be adjudicated by a court of competent jurisdiction to be
invalid, prohibited or unenforceable for any reason, such provision, as to
such jurisdiction, shall be ineffective, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of
this Agreement or affecting the validity or enforceability in any other
jurisdiction. Notwithstanding the foregoing, if such provision could be
more narrowly drawn so as not to be invalid, prohibited or unenforceable in
such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn,
without invalidating the remaining provisions of this Agreement or
affecting the validity or enforceability of such provision in any other
jurisdiction.
(Page 20 of 22 Pages)
<PAGE>
SECTION 8. ENTIRE AGREEMENT.
This Agreement, the Certificate of Designation and the other
writings referred to herein or therein or delivered pursuant thereto,
contain the entire agreement among the parties with respect to the subject
matter hereof and thereof and supersede all prior and contemporaneous
arrangements or understandings with respect thereto.
SECTION 9. SUCCESSORS AND ASSIGNS.
Except as otherwise provided herein, this Agreement will bind and
inure to the benefit of and be enforceable by the successors and assigns of
the Security Holders so long as they hold Securities of the Corporation.
None of the provisions hereof are intended to create any third party
beneficiaries.
SECTION 10. REMEDIES.
It is acknowledged that it will be impossible to measure in money
the damages that would be suffered if either Security Holder fails to
comply with any of the obligations herein imposed on them and that in the
event of any such failure, an aggrieved Security Holder will be irreparably
damaged and will not have any adequate remedy at law. Any such Security
Holder shall, therefore, be entitled to injunctive relief, including
specific performance, to enforce such obligations, and if any action should
be brought in equity to enforce any of the provisions of this Agreement,
none of the parties hereto shall raise the defense that there is an
adequate remedy at law.
SECTION 11. NOTICES.
All notices or other communications which are required or
otherwise delivered hereunder shall be deemed to be sufficient and duly
given if contained in a written instrument (a) personally delivered or sent
by telecopy, (b) sent by nationally-recognized overnight carrier
guaranteeing next business day delivery or (c) sent by first class
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
if to Apollo, to:
Apollo Management, L.P.
1301 Avenue of the Americas, 38th Floor
(Page 21 of 22 Pages)
<PAGE>
New York, New York 10019
Attention: Joshua Harris
Telephone: (212) 261-4064
Telecopy: (212) 261-4071; and
if to CVC, to:
Chase Venture Capital Associates, L.P.
380 Madison Avenue, 12th Floor
New York, New York 10017
Attention: Mitchell J. Blutt, M.D.
Telephone: (212) 662-3612
Telecopy: (212) 622-3101
All such notices, requests, consents and other communications shall be
deemed to have been delivered (i) in the case of personal delivery, on the
date of such delivery, (ii) in the case of delivery by telecopy, on the
date of confirmation of receipt, (iii) in the case of dispatch by
nationally-recognized overnight courier, on the next business day following
such dispatch and (iv) in the case of mailing, on the third business day
after the posting thereof.
SECTION 12. HEADINGS.
The headings of the various sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be a
part of this Agreement.
SECTION 13. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance
with the laws of the State of New York applicable to contracts made
therein.
* * * * *
(Page 22 of 22 Pages)
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this
Security Holders Agreement as of the date first written above.
CHASE VENTURE CAPITAL
ASSOCIATES, L.P.
By: CHASE CAPITAL PARTNERS,
its General Partner
By:/s/ Mitchell J. Blutt, M.D.
------------------------------------------
Name: Mitchell J. Blutt, M.D.
Title: General Partner
APOLLO INVESTMENT FUND III, L.P.
By: APOLLO ADVISORS II, L.P.,
its General Partner
By: APOLLO CAPITAL MANAGEMENT II,
INC., its General Partner
By:/s/ Joshua Harris
---------------------------------
Name: Joshua Harris
Title: Vice President
APOLLO OVERSEAS PARTNERS III, L.P.
By: APOLLO ADVISORS II, L.P.,
its General Partner
By: APOLLO CAPITAL MANAGEMENT II,
INC., its General Partner
By:/s/ Joshua Harris
------------------------------------------
Name: Joshua Harris
(Page 23 of 22 Pages)
<PAGE>
Title: Vice President
APOLLO U.K. PARTNERS III, L.P.
By: APOLLO ADVISORS II, L.P.,
its General Partner
By: APOLLO CAPITAL MANAGEMENT II,
INC., its General Partner
By:/s/ Joshua Harris
------------------------------------------
Name: Joshua Harris
Title: Vice President
(Page 24 of 22 Pages)
<PAGE>
SCHEDULE I
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CVC Director - Mitchell Blutt, M.D.
Apollo Director - Michael Gross
(Page 25 of 22 Pages)
