<PAGE> 1
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 17, 1996
- --------------------------------------------------------------------------------
(Date of event which requires filing of this statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box [ ].
Check the following box if a fee is being paid with the statement
[x]. (A fee is not required only if the reporting person: (1) has a previous
statement on file reporting beneficial ownership of more than five percent of
the class of securities described in Item 1; and (2) has filed no amendment
subsequent thereto reporting beneficial ownership of five percent or less of
such class.) (See Rule 13d-7.)
NOTE: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom copies
are to be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that
section of the Act but shall be subject to all other provisions of the Act
(however, see the Notes).
(Page 1 of 20 Pages)
<PAGE> 2
SCHEDULE 13D
CUSIP NO. 917272-10-6 PAGE 2 OF PAGES
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Apollo Investment Fund III, 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
ITEMS 2(d) or 2(e) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 1,989,106
SHARES -------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
-0-
OWNED BY
------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 1,989,106
PERSON ------------------------------------------------
10 SHARED DISPOSITIVE POWER
WITH
-0-
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,989,106
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/X/
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
14.59%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- --------------------------------------------------------------------------------
*SEE INSTRUCTION BEFORE FILLING OUT!
(Page 2 of 20 Pages)
<PAGE> 3
SCHEDULE 13D
CUSIP NO. 917272-10-6 PAGE 3 OF PAGES
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Apollo Overseas Partners III, 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
ITEMS 2(d) or 2(e) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 119,097
SHARES -------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
-0-
OWNED BY
------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 119,097
PERSON ------------------------------------------------
10 SHARED DISPOSITIVE POWER
WITH
-0-
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
119,097
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/X/
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
.87%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- --------------------------------------------------------------------------------
*SEE INSTRUCTION BEFORE FILLING OUT!
(Page 3 of 20 Pages)
<PAGE> 4
SCHEDULE 13D
CUSIP NO. 917272-10-6 PAGE 4 OF PAGES
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Apollo U.K. Partners III, 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
ITEMS 2(d) or 2(e) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 73,729
SHARES -------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
-0-
OWNED BY
------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 73,729
PERSON ------------------------------------------------
10 SHARED DISPOSITIVE POWER
WITH
-0-
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
73,729
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/X/
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
.54%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- --------------------------------------------------------------------------------
*SEE INSTRUCTION BEFORE FILLING OUT!
(Page 4 of 20 Pages)
<PAGE> 5
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 filed jointly by Apollo Investment Fund III,
L.P. a Delaware limited partnership ("AIF III"), Apollo Overseas Partners III,
L.P., a Delaware limited partnership ("AOP") and Apollo (UK) Partners III,
L.P., a Delaware limited partnership ("AUK"). Such persons are collectively
referred to herein as the "Reporting Persons".
The Reporting Persons are principally engaged in the business
of investment in securities. The principal office of the Reporting Persons is
c/o Apollo Advisors II, L.P., 2 Manhattanville Road, Purchase, New York, 10577.
Apollo Advisors II, L.P., a Delaware limited partnership
("Advisors"), is the general partner of AIF III and the managing general
partner of AOP and AUK. Advisors is principally engaged in the business of
serving as managing general partner of several investment funds. The principal
place of business of Advisors is located at 2 Manhattanville Road, Purchase,
New York 10577.
Apollo Capital Management II, Inc., a Delaware corporation
("Capital Management") is the general partner of Advisors. Capital Management
is principally engaged in the business of serving as general partner of
Advisors. The address of the principal business and principal office of
Capital Management is c/o Apollo Advisors II, L.P., 2 Manhattanville Road,
Purchase, New York, 10577.
Apollo Fund Administration II LDC, a Cayman Islands LDC
("Administration"), is the administrative general partner of each of AOP and
AUK. Administration is principally engaged in the business of serving as
administrative general partner of AOP and AUK. The principal place of business
of Administration is Apollo Fund Administration II LDC, c/o CIBC Bank and Trust
Company (Cayman) Limited, Edward Street, Georgetown, Grand Cayman, Cayman
Islands, British West Indies.
Apollo Management (UK) Ltd, an English corporation
("Management UK") is the resident general partner of AUK. Management UK is
principally engaged in the business of serving as resident general partner of
AUK. The address of the principal business of Management UK is Hill House, 1
Little New Street, London EC4A 3TR, England.
Leon Black and John Hannan are the directors of Capital
Management and Management UK.
Attached as Appendix A to Item 2 is information concerning the
principals, executive officers, directors and principal shareholders of the
Reporting Persons and other entities as to which such information is required
to be disclosed in response to Item 2 and General Instruction C to Schedule
13D.
(Page 5 of 20 Pages)
<PAGE> 6
Neither Apollo, Advisors, Capital Management, Administration,
Management UK nor any of the persons or entities referred to in Appendix A to
Item 2 has, during the last five years, been convicted in a criminal proceeding
(excluding traffic violations and similar misdemeanors) or been a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree, or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, Federal or state securities laws or finding any
violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
DESCRIPTION OF TRANSACTION
On May 3, 1996, the Reporting Persons (hereinafter referred to
as "Apollo"), Chase Venture Capital Associates, a California Limited
Partnership (hereinafter referred to as "CVCA"), the Issuer and certain other
parties entered into a Securities Purchase Agreement (the "Agreement").
Pursuant to the Agreement, Apollo 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. Apollo's original
cost basis for the above purchases is $22,750,000.00. The funds Apollo 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, Apollo entered into certain agreements
with the Issuer, CVCA and the other purchasers. The terms of these agreements
provide generally that CVCA, Apollo and the other purchasers agree to comply
with certain securities law 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 Apollo) 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.
(Page 6 of 20 Pages)
<PAGE> 7
The Reporting Persons may together constitute a "group" within
the meaning of Rule 13d-5(b) under the Securities and Exchange Act of 1934, as
amended due to common lines of authority, although the Apollo entities have no
written agreements to act in concert.
ITEM 4. PURPOSE OF TRANSACTION.
The acquisition of the Issuer's equity securities has been
made by Apollo for investment purposes. Although Apollo has no present
intention to do so, Apollo may make additional purchases or sales 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, Apollo
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.
Except as set forth in this Item 4, Apollo 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,
Apollo 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.
The Reporting Persons acquired beneficial ownership of the
shares of the Preferred Stock, Warrants and Convertible Subordinated Debentures
described in Item 3 to which this Statement on Schedule 13D relates as a result
of the consummation of the Securities Purchase Agreement.
(a) Apollo is deemed to be the beneficial owner of 2,181,932
shares of the Issuer's Common Stock. Apollo's deemed beneficial ownership
represents 16% of the Common Stock.
(b) The number of shares of the Common Stock as to which
there is sole power to vote or to direct the vote, shared power to vote or to
direct the vote, sole power to dispose or direct the disposition, or shared
power to dispose or direct the disposition for the Reporting Persons is set
forth in the cover pages and such information is incorporated herein by this
reference.
(c) Except as disclosed in Item 3 herein, there have been no
reportable transactions with respect to the Common Stock within the last 60
days by the Reporting Persons.
(Page 7 of 20 Pages)
<PAGE> 8
(d) No person other than Apollo 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 Apollo.
(e) Not applicable.
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 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.
(Page 8 of 20 Pages)
<PAGE> 9
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
1. Security Holders Agreement dated as of May 13,
1996, between CVCA and Apollo.
APPENDIX A
Item 2 information for executive officers and directors of
Apollo.
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.
APOLLO INVESTMENT FUND III, L.P.
BY: APOLLO ADVISORS II, L.P.,
ITS GENERAL PARTNER
By: /s/ Michael D. Weiner
-----------------------------------
Name: Michael D. Weiner
Title: General Partner
Date: May 28 1996
(Page 9 of 20 Pages)
<PAGE> 10
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.
APOLLO OVERSEAS PARTNERS III, L.P.
BY: APOLLO ADVISORS II, L.P.,
ITS GENERAL PARTNER
By: /s/ Michael D. Weiner
-----------------------------------
Name: Michael D. Weiner
Title: General Partner
Date: May 28 1996
(Page 10 of 20 Pages)
<PAGE> 11
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.
APOLLO (UK) PARTNERS III, L.P.
BY: APOLLO ADVISORS II, L.P.,
ITS GENERAL PARTNER
By: /s/ Michael D. Weiner
-----------------------------------
Name: Michael D. Weiner
Title: General Partner
Date: May 28 1996
(Page 11 of 20 Pages)
<PAGE> 12
APPENDIX A
The following sets forth information with respect to the
general partners, executive officers, directors and principal shareholders of
the Reporting Persons, Advisors, Capital Management, Administration and
Management UK.
The principal occupation of each of Leon Black and John
Hannan, each of whom is a United States citizen, is to act as an executive
officer and director of Capital Management and each is a limited partner of
Advisors. The principal business of Advisors is to provide advice regarding
investment by the Reporting Persons. Capital Management is principally engaged
in the business of serving as general partner of Advisors. The principal
offices of Advisors and Capital Management are located at Two Manhattanville
Road, Purchase, New York 10577.
Mr. Black is the President and director of Capital Management.
Mr. Black's business address is Two Manhattanville Road, Purchase, New York
10577.
Mr. Hannan is a Vice President and director of Capital
Management. Mr. Hannan's business address is Two Manhattanville Road,
Purchase, New York 10577.
Peter Henry Larder, Michael Francis Benedict Gillooly, Ian
Thomas Patrick and Martin William Laidlaw, each of whom is a British citizen,
each serve as a director of Administration. Each of the above four individuals
is principally employed by CIBC Bank and Trust Company (Cayman) Limited
("CIBC") in the following positions: Mr. Larder, Managing Director; Mr.
Gillooly, Deputy Managing Director; Mr. Patrick, Manager-Accounting Services;
and Mr. Laidlaw, Senior Fund Accountant. CIBC is a Cayman Islands corporation
which is principally engaged int he provision of trust, banking and corporate
administration services, the principal address of which is Edward Street, Grand
Cayman, Cayman Islands, British West Indies. It provides accounting,
administrative and other services to Administration pursuant to a contract.
Mr. Black is the beneficial owner of the stock of Administration.
(Page 12 of 20 Pages)
<PAGE> 13
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 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.
(Page 13 of 20 Pages)
<PAGE> 14
(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
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.
(Page 14 of 20 Pages)
<PAGE> 15
(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 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
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
(Page 15 of 20 Pages)
<PAGE> 16
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.
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
New York, New York 10019
Attention: Joshua Harris
Telephone: (212) 261-4064
Telecopy: (212) 261-4071; and
(Page 16 of 20 Pages)
<PAGE> 17
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 17 of 20 Pages)
<PAGE> 18
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
Title: Vice President
(Page 18 of 20 Pages)
<PAGE> 19
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 19 of 20 Pages)
<PAGE> 20
SCHEDULE I
CVC Director - Mitchell Blutt, M.D.
Apollo Director - Michael Gross
(Page 20 of 20 Pages)
