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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 26, 1999
------------------------
VidaMed, Inc.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
0-26082 77-0314454
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(Commission File Number) (IRS Employer Identification No.)
46107 Landing, Fremont, California 94538
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (510) 492-4900
------------------------
Not Applicable
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(Former name or former address, if changed since last report.)
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INFORMATION TO BE INCLUDED IN THE REPORT
Item 5. Other Events
Issuance of Common Stock
As of October 27, 1999, Registrant sold 2,200,000 shares of its common stock in
a private sale for net proceeds of approximately $4,300,000. The common stock
was sold to existing shareholders or persons or entities affiliated with such
shareholders. The common stock was sold at $2.00 per share, or $0.188 below the
closing sale price of the common stock on the day preceding the sale. In
connection with the sale, Bigelow & Company was granted 30,000 shares of
Registrant's common stock for providing consulting services to Registrant.
In connection with the sale, Registrant granted certain registration rights to
the purchasers of the common stock. Under the agreement, Registrant is required
to use its best efforts to register for resale the common stock sold within 90
days of October 27, 1999. If the common stock sold is not timely registered,
purchasers will be issued a warrant to purchase a number of shares of common
stock up to 25% of the amount of common stock purchased in the private sale.
The per share exercise price under such warrant will be $2.4068 and the term of
the warrant will be for three years.
THE FOREGOING DESCRIPTION OF THE PRIVATE SALE IS ONLY A BRIEF SUMMARY, DOES NOT
PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO EXHIBIT
10.1 TO THIS REPORT ON FORM 8-K, WHICH IS INCORPORATED HEREIN BY THIS REFERENCE.
Waiver of Event of Default
On October 26, 1999, Registrant entered into an Amendment and Waiver Agreement
whereby Registrant's secured lender, Transamerica Business Credit Corporation,
waived an event of default under that certain Loan and Security Agreement
between them dated October 20, 1998. The event of default resulted from
Registrant's receipt of a qualified opinion from its independent accountants in
connection with Registrant's amended annual report on Form 10-K for the fiscal
year ended December 31, 1998. In connection with waiver of the event of default,
Registrant paid Transamerica a $10,000 fee and issued it a warrant to acquire up
to 20,000 shares of Registrant's common stock for a
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purchase price of $0.89 per share. The warrant has a term of five years, and
carries piggy-back registration rights.
Potential Loss of NASDAQ Listing
The private sale of common stock disclosed above was precipitated by
Registrant's receipt from NASDAQ of notice that it did not have sufficient net
tangible assets to satisfy its minimum listing requirement to remain listed on
the NASDAQ National Market. Although Registrant believes that the $4,300,000
net proceeds from the private sale described above will not be sufficient to
satisfy the $4 million minimum net tangible asset listing requirement,
registrant continues to seek equity financing sufficient to satisfy the minimum
listing requirements.
A hearing has been scheduled for November 4, 1999, to determine whether
Registrant satisfies the listing requirements to remain listed on the NASDAQ
National Market. As part of that hearing, Registrant has been notified that the
qualified opinion rendered by its independent accountants expressing concern
about Registrant's ability to continue as a going concern must be addressed. As
of the date of this filing, the qualified opinion remains in place, and the net
proceeds received from the sale of its common stock are not sufficient for its
withdrawal. As such, Registrant's common stock may be delisted from the Nasdaq
National Market following the November 4, 1999, hearing. If delisted, Registrant
will seek to have its common stock listed on the NASDAQ SmallCap Market. There
can be no assurance, however, that it will be successful in having its common
stock listed on the SmallCap Market.
Delisting from the Nasdaq National Market could adversely affect the liquidity
and price of Registrant's common stock. Investors may find it more difficult to
dispose of or obtain accurate quotations for Registrant's common stock if it is
delisted because the bid and asked quotations would be reported on an electronic
bulletin board such as the OTC Bulletin Board or a similar quotation medium.
Item 7 Financial Statements, Pro Forma Financial Information
and Exhibits
10.1 Purchase Agreement dated October 27, 1998, between Registrant and the
investors identified therein, including exhibits.
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99.1 Registrant's Press Release dated October 28, 1999.
99.2 Registrant's Press Release dated October 29, 1999.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
VIDAMED, INC.
(Registrant)
Date: October 29, 1999 By /s/ Randy D. Lindholm
--------------------------------
Randy D. Lindholm
President and Chief Executive
Officer
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EXHIBIT 10.1
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PURCHASE AGREEMENT
VIDAMED, INC.
October 27, 1999
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<PAGE>
<TABLE>
TABLE OF CONTENTS Page
<C> <S> <C>
SECTION 1 PURCHASE AND SALE OF COMMON STOCK AND WARRANTS.................................. 1
1.1 Purchase and Sale of Common Stock............................................... 1
SECTION 2 CLOSING DATE; DELIVERY.......................................................... 1
2.1 Closing Date.................................................................... 1
2.2 Delivery........................................................................ 1
2.3 Escrow Account.................................................................. 1
SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................... 2
3.1 Organization and Standing....................................................... 2
3.2 Corporate Power; Authorization.................................................. 2
3.3 Issuance and Delivery........................................................... 2
3.4 SEC Documents; Financial Statements; Subsequent Events.......................... 3
3.5 Governmental Consents........................................................... 3
3.6 Exempt Transactions............................................................. 3
3.7 No Material Adverse Change...................................................... 4
3.8 Intellectual Property........................................................... 4
3.9 Authorized Capital Stock........................................................ 4
3.10 Litigation...................................................................... 4
3.11 Preemptive and Registration Rights.............................................. 5
3.12 Compliance With Other Instruments............................................... 5
3.13 Brokers or Finders.............................................................. 5
3.14 Compliance with Environmental Laws.............................................. 5
3.15 No Implied Representations...................................................... 6
3.16 Contracts....................................................................... 6
3.17 Properties...................................................................... 6
3.18 Compliance...................................................................... 6
3.19 Taxes........................................................................... 6
3.20 Transfer Taxes.................................................................. 6
3.21 Investment Company.............................................................. 7
3.22 Insurance....................................................................... 7
3.23 Contributions................................................................... 7
SECTION 4 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS..................... 7
</TABLE>
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<TABLE>
<C> <S>
4.1 Authorization................................................................... 7
4.2 Investment Experience........................................................... 7
4.3 Investment Intent............................................................... 7
4.4 Registration or Exemption Requirements.......................................... 8
4.5 Restriction on Short Sales...................................................... 8
4.6 No Legal, Tax or Investment Advice.............................................. 8
4.7 Market Stand-Off................................................................ 8
SECTION 5 CONDITIONS TO CLOSING OF PURCHASERS............................................. 9
5.1 Representations and Warranties.................................................. 9
5.2 Covenants....................................................................... 9
5.3 Compliance Certificate.......................................................... 9
5.4 Proceeds........................................................................ 9
5.5 Legal Opinion of Company Counsel................................................ 9
SECTION 6 CONDITIONS TO CLOSING OF COMPANY................................................ 9
6.1 Representations and Warranties.................................................. 9
6.2 Covenants....................................................................... 10
SECTION 7 AFFIRMATIVE COVENANTS OF THE COMPANY............................................ 10
7.1 Registration Requirements....................................................... 10
7.2 Indemnification and Contribution................................................ 13
SECTION 8 RESTRICTIONS ON TRANSFERABILITY OF SECURITIES: COMPLIANCE WITH SECURITIES ACT... 15
8.1 Restrictions on Transferability................................................. 15
8.2 Restrictive Legend.............................................................. 16
8.3 Transfer of Securities After Registration....................................... 16
8.4 Purchaser Information........................................................... 16
SECTION 9 MISCELLANEOUS................................................................... 16
9.1 Waivers and Amendments.......................................................... 16
9.2 Broker's Fee.................................................................... 17
9.3 Governing Law................................................................... 17
9.4 Survival........................................................................ 17
9.5 Successors and Assigns.......................................................... 17
9.6 Entire Agreement................................................................ 17
9.7 Notices, etc.................................................................... 17
</TABLE>
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<TABLE>
<C> <S>
9.8 Serverability of this Agreement.................................... 17
9.9 Counterparts........................................................ 18
9.10 Further Assurances.................................................. 18
9.11 Currency............................................................ 18
</TABLE>
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VIDAMED, INC.
PURCHASE AGREEMENT
This Purchase Agreement (the "Agreement") is made as of October 27, 1999
(the "Agreement Date"), by and between VidaMed, Inc., a Delaware corporation
(the "Company") with its principal office at 46107 Landings Parkway, Fremont,
California 94538, and the purchasers set forth on Exhibit A hereto
(individually a "Purchaser" and collectively the "Purchasers").
SECTION 1
Purchase and Sale of Common Stock and Warrants
1.1 Purchase and Sale of Common Stock. Each Purchaser, severally and not
jointly, agrees to purchase from the Company, and the Company agrees to issue
and sell to such Purchaser, the number of shares (the "Shares") of Common Stock,
$0.001 par value (the "Common Stock") of the Company set forth on opposite such
Purchaser's name on Exhibit A hereto. The purchase price for one Share of
Common Stock (the "Purchase Price") pursuant to this Agreement shall be $2.00.
The Shares, the Warrants (as defined in Section 7.1(j) below) and the shares of
Common Stock issuable upon exercise of the Warrants (the "Warrant Shares") are
herein collectively referred to as the "Securities."
SECTION 2
Closing Date; Delivery
2.1 Closing Date. The completion of the purchase and sale of the Shares
will be held at such place and time as designated by the Company, and the
Purchasers will receive prior notification of the Closing by facsimile, telex,
cable or by other means deemed appropriate by the Company (the "Closing"). The
date of the first Closing to occur hereunder is hereinafter referred to as the
"Closing Date" shall not be later than 5:00 p.m. PDT on Wednesday, October 27,
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1999.
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2.2 Subsequent Closings. If the Company has not sold 4,000,000 Shares to
-------------------
the Purchasers pursuant to this Agreement at the Closing Date, the Company shall
have the right, at any time prior to November 24, 1999, to sell additional
Shares pursuant to this Agreement to one or more additional purchasers as
determined by the Company, or to any Purchaser hereunder who wishes to acquire
additional Shares at the price and on the terms set forth herein, provided that
any such additional purchaser shall be required to execute an Addendum Agreement
substantially in the form attached hereto as Exhibit E. Any additional purchaser
so acquiring Shares shall be considered a "Purchaser" for purposes of this
Agreement, and any Shares so acquired by such additional purchaser shall be
considered "Shares" for purposes of this Agreement and all other agreements
contemplated hereby.
<PAGE>
2.3 Delivery. At any Closing occurring on the Closing Date, the Company
will deliver to each Purchaser the certificates evidencing the Shares purchased
by such Purchaser as shown on Exhibit A and an opinion of Shartsis, Friese &
Ginsburg LLP, counsel to the Company, in the form of Exhibit D. Such delivery
shall be against payment of the Purchase Price multiplied by the number of
Shares acquired by wire transfer of immediately available funds to the Escrow
Account (as defined in Section 2.4, below). At any Closing occurring after the
Closing Date, the Purchaser shall deposit into the Company's bank account, or
into such other account as agreed to between the Company and the Purchaser
acquiring the Shares, the Purchase Price multiplied by the number of Shares
acquired.
2.4 Escrow Account. At any Closing occurring on the Closing Date, each
Purchaser shall deposit the Purchase Price multiplied by the number of Shares
acquired into the following account (the "Escrow Account"):
Bank Name: The Bank of New York
ABA Number: 021000018
Short Term Investment Co. PRIME PORTFOLIO
DDA # 8900117435
For Further Credit to: VIDAMED GENERAL ESCROW ACCOUNT
ACCOUNT # 49158
The funds deposited into the Escrow Agreement shall be released as
provided, and only as provided, in the escrow agreement (the "Escrow Agreement")
between the Company, the Purchasers and Shartsis, Friese & Ginsburg LLP dated of
even date hereof. A copy of the Escrow Agreement is attached hereto as Exhibit
C.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchasers as follows:
3.1 Organization and Standing. The Company is a corporation duly
organized and validly existing under, and by virtue of, the laws of the State of
Delaware and is in good standing as a domestic corporation under the laws of
said state, and has the requisite corporate power and authority to own its
properties and to carry on its business as now being conducted. Other than as
disclosed in the SEC Documents (as defined below), the Company has no
subsidiaries or direct or indirect ownership in any firm, corporation or
business which either, individually or in the aggregate, is material to the
business of the Company. The Company is qualified to do business and is in good
standing as a foreign corporation in every jurisdiction in which its ownership
of property or conduct of business requires it so to be qualified and in which
the failure to so qualify
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would have a material adverse effect on the financial condition or business of
the Company.
3.2 Corporate Power; Authorization. The Company has all requisite legal
and corporate power and authority and has taken all requisite corporate action
to duly authorize, execute and deliver this Agreement, to sell and issue the
Shares and the Warrants and to carry out and perform all of its obligations
under and contemplated by this Agreement. This Agreement has been duly executed
and delivered by an authorized officer of the Company and constitutes the legal,
valid and binding obligation of the Company, enforceable in accordance with its
terms, except as limited by applicable bankruptcy, insolvency, reorganization or
similar laws relating to or affecting the enforcement of creditors' rights
generally.
3.3 Issuance and Delivery. The Shares and the Warrants have been duly
authorized, and, when issued and delivered in compliance with this Agreement,
will be duly and validly issued and delivered and will be outstanding, fully
paid, nonassessable and free and clear of all pledges, liens, encumbrances and
restrictions, and will conform to the description thereof contained in the
Registration Statement (or incorporated by reference therein). The Warrant
Shares have been duly authorized and reserved for issuance upon exercise of the
Warrants, and such shares, when issued upon such exercise in accordance with the
terms of the Company's Certificate of Incorporation and the Warrants,
respectively, and when the price is paid upon exercise of the Warrants, shall be
fully paid and non-assessable. No preemptive rights, or other rights to
subscribe for or purchase, exist with respect to the issuance and sale of the
Securities by the Company pursuant to this Agreement. No stockholder of the
Company has any right (which has not been waived or has not expired by reason of
lapse of time following notification of the Company's intent to file the
Registration Statement) to require the Company to register the sale of any
securities owned by such holder under the Securities Act of 1933, as amended
(the "Securities Act"), in the Registration Statement. No further approval or
authority of the stockholders or the Board of Directors of the Company will be
required for the issuance and sale of the Securities to be sold by the Company
as contemplated herein.
3.4 SEC Documents; Financial Statements; Subsequent Events. The Company
has filed in a timely manner all documents that the Company was required to file
with the Securities and Exchange Commission ("SEC") under Sections 13, 14(a) and
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
during the twelve (12) months preceding the date of this Agreement and all rules
and regulations thereunder. As of their respective filing dates, all documents
filed by the Company with the SEC (the "SEC Documents") complied in all material
respects with the requirements of the Exchange Act or the Securities Act of
1933, as amended (the "Securities Act"), as applicable and all rules and
regulations thereunder. None of the SEC Documents contained, as of their
respective dates, any untrue statement of material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they were made, not
misleading, and such SEC Documents, when read as a whole, do not contain any
untrue statements of a material fact and do not omit to state a
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material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents (the "Financial
Statements") comply in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto. The Financial Statements have been prepared in accordance with
United States generally accepted accounting principles consistently applied and
fairly present the financial position of the Company and any subsidiaries at the
dates thereof and the results of the Company's operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
adjustments).
3.5 Governmental Consents. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state, or local governmental authority on the part of the Company is
required in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement except for (a)
the filing of a Form D with respect to the issuance of the Securities with the
SEC and (b) the filing of a NASDAQ National Market Notification Form (pursuant
to Rule 10b-17 promulgated under the Exchange Act) with the NASDAQ National
Market, each of which will be filed in a timely manner.
3.6 Exempt Transactions. Subject to the accuracy of the Purchasers'
representations and warranties in Section 4 of this Agreement, the offer, sale
and issuance of the Securities in conformity with the terms of this Agreement
constitute transactions exempt from the registration requirements of Section 5
of the Securities Act and from the registration or qualification requirements of
the laws of any applicable state or United States jurisdiction.
3.7 No Material Adverse Change. Except as otherwise disclosed herein and
the SEC Documents, since June 30, 1999, there have not been any changes in the
assets, liabilities, financial condition, business or operations of the Company
from that reflected in the Financial Statements except (i) changes in the
ordinary course of business which have not been, either individually or in the
aggregate, materially adverse and (ii) the Company's continued incurrence of
operating losses and negative cash flow, which have occurred at a rate not
materially in excess of the rate at which operating losses and negative cash
flows were incurred from January 1, 1999 to June 30, 1999.
3.8 Intellectual Property. The Company owns or possesses adequate rights
to use all patents, patent rights, inventions, trademarks, trade names,
copyrights, licenses, governmental authorizations, trade secrets and know-how
that are used or necessary for the conduct of its business as described in the
SEC Documents. Neither the Company nor any of its subsidiaries has received any
notice of, or has any knowledge of, any infringement of or conflict with
asserted rights of others with respect to any patent, patent right, invention,
trademarks, trade names, copyrights, licenses, governmental authorizations,
trade secret or know-how that, individually or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would have a material adverse
effect on the condition (financial or otherwise), earnings, operations or
business of the Company and its subsidiaries considered as a whole.
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3.9 Authorized Capital Stock. The authorized capital stock of the Company
conforms, as of the dates for which such information is given, in all material
respects to the statements relating thereto contained in the SEC Documents. The
issued and outstanding shares of capital stock of the Company have been duly
authorized, validly issued and are fully paid and nonassessable. No warrants,
options or other rights to purchase, agreements or other obligations to issue,
or agreements or other rights to convert any obligation into, any shares of
capital stock of the Company have been granted or entered into by the Company.
All of the above securities of the Company were issued in compliance with all
applicable federal and state securities laws and were not issued in violation of
or subject to any preemptive rights or other rights to subscribe for or purchase
securities.
3.10 Litigation. Except as provided in the SEC Documents, there are no
actions, suits, proceedings or investigations pending or, to the best of the
Company's knowledge, threatened against the Company or any of its properties
before or by any court or arbitrator or any governmental body, agency or
official in which there is a reasonable likelihood (in the judgment of the
Company) of an adverse decision that (a) would have a material adverse effect on
the Company's properties or assets or the business of the Company as presently
conducted or proposed to be conducted or (b) would impair the ability of the
Company to perform in any material respect its obligations under this Agreement.
The Company is not in default with respect to any judgment, order or decree of
any court or governmental agency or instrumentality which, individually or in
the aggregate, would have a material adverse effect on the assets, properties or
business of the Company.
3.11 Preemptive and Registration Rights. There are no preemptive rights,
rights of first refusal, repurchase rights or any other right of the Company or
any third party as to the Securities which have not been satisfied or waived,
and except as provided in this Agreement, the Company has not granted or agreed
to grant any registration rights that would be applicable to the registration
for resale of the Securities pursuant to the Registration Statement, as defined
in and contemplated by Section 7.1 hereof, to any person or entity which have
not been satisfied or waived.
3.12 Compliance With Other Instruments. The business and operations of
the Company have been and are being conducted in accordance with all applicable
laws, rules and regulations of all governmental authorities, except for such
violations of applicable laws, rules and regulations which would not,
individually or in the aggregate, have a material adverse effect on the assets,
properties, financial condition or business of the Company. Neither the
execution and delivery of, nor the performance or compliance with, this
Agreement and the transactions contemplated hereby, will, with or without the
giving of notice or the passage of time, (i) result in any breach of, or
constitute a default under, or result in the imposition of any lien or
encumbrance upon any asset or property of the Company pursuant to, any agreement
or other instrument to which the Company is a party or by which it or any of its
properties, assets or rights is bound or effected, except for such breach or
default or the imposition of any such lien or encumbrance which, either
individually or in the aggregate, would not have a material adverse effect on
the assets, properties, financial condition or business of the Company
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or (ii) violate the Certificate of Incorporation or Bylaws of the Company, or
any law, rule regulation, judgment, order or decree. The Company is not in
violation of its Certificate of Incorporation or Bylaws nor in violation of, or
in default under, any lien, indenture, mortgage, lease, agreement, instrument,
commitment or arrangement, except for such defaults which would not,
individually or in the aggregate, have a material adverse effect on the assets,
properties, financial condition or business of the Company, or subject to any
restriction which would prohibit the Company from entering into or performing
its obligations under the Agreement.
3.13 Brokers or Finders. To the knowledge of the Company and except for
claims of Bigelow & Company, Inc. (the "Bigelow") in connection with their
consultancy services in this transaction, no person, firm or corporation has or
will have, as a result of any act or omission of the Company, any right,
interest or valid claim against the Purchasers for any commission, fee or other
compensation ("Fees") as a finder, broker, or consultant in connection with the
transactions contemplated by this Agreement. The Fees payable to Bigelow shall
be paid by the Company and the Company shall indemnify and hold each Purchaser
harmless for any claims made by Bigelow concerning the purchase of the
Securities.
3.14 Compliance with Environmental Laws. The Company is not in violation
of any applicable statute, law or regulation relating to the environment or
occupational health and safety, and, to the best of the Company's knowledge, no
material expenditures are or will be required in order to comply with any such
existing statute, law or regulation. To the best of the Company's knowledge, the
Company does not have any material liability to any governmental authority or
other third party arising under or as a result of any such past or existing
statute, law or regulation.
3.15 No Implied Representations. All of the Company's representations and
warranties are contained in this Agreement and no other representations or
warranties by the Company shall be implied.
3.16 Contracts. The contracts so described in the SEC Documents or
incorporated by reference therein are in full force and effect on the date
hereof, except for contracts the termination or expiration of which would,
individually or in the aggregate, not have a material adverse effect on the
business, properties or assets of the Company, and neither the Company nor any
of its subsidiaries, nor to the Company's knowledge, any other party is in
breach of or default under any of such contracts.
3.17 Properties. The Company has good and marketable title to all the
properties and assets reflected as owned in the financial statements included in
the SEC Documents, subject to no lien, mortgage, pledge, charge or encumbrance
of any kind except (i) those, if any, reflected in the notes to such financial
statements, or (ii) those which are not material in amount and do not adversely
affect the use made and promised to be made of such property by the Company and
its subsidiaries. The Company and any applicable subsidiary holds its leased
properties under valid and binding leases, with such exceptions as are not
materially significant in relation to the
6
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business of the Company and the subsidiaries. The Company owns or leases all
such properties as are necessary to its operations as now conducted or as
proposed to be conducted.
3.18 Compliance. The Company has not been advised, and has no reason to
believe, that either it or any of its subsidiaries is not conducting business in
compliance with all applicable laws, rules and regulations of the jurisdictions
in which it is conducting business; except where failure to be so in compliance
would not materially adversely affect the condition (financial or otherwise),
business, results of operations or prospects of the Company and its
subsidiaries.
3.19 Taxes. The Company and its subsidiaries have filed all necessary
federal, state and foreign income and franchise tax returns and have paid or
accrued all taxes shown as due thereon, and the Company has no knowledge of any
tax deficiency which has been or might be asserted or threatened against the
Company or its subsidiaries which could materially and adversely affect the
business, operations or properties of the Company and its subsidiaries.
3.20 Transfer Taxes. On the Closing, all stock transfer or other taxes
(other than income taxes) which are required to be paid in connection with the
sale and transfer of the Securities to be sold to the Purchasers hereunder will
be, or will have been, fully paid or provided for by the Company and all laws
imposing such taxes will be or will have been complied with fully.
3.21 Investment Company. The Company is not an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
3.22 Insurance. Each of the Company and its subsidiaries maintains
insurance of the types and in the amounts generally deemed adequate for its
business, including, but not limited to, insurance covering all real and
personal property owned or leased by the Company and its subsidiaries against
theft, damage, destruction, acts of vandalism and all other risks customarily
insured against, all of which insurance is in full force and effect.
3.23 Contributions. Neither the Company nor any of its subsidiaries has,
directly or indirectly, at any time during the last five years (i) made any
unlawful contribution to any candidate for public office, or failed to disclose
fully any contribution in violation of law, or (ii) made any payment to any
federal or state governmental officer or official, or other person charged with
similar public or quasi-public duties, other than payments required or permitted
by the laws of the United States or any jurisdiction thereof.
SECTION 4
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS
Each Purchaser, severally and for itself only, hereby represents and
warrants to the Company as follows:
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4.1 Authorization. (i) The Purchaser has all requisite legal and
corporate or other power and capacity and has taken all requisite corporate or
other action to execute and deliver this Agreement, to purchase the Securities
to be purchased by it and to carry out and perform all of its obligations under
this Agreement; and (ii) this Agreement constitutes the legal, valid and binding
obligation of the Purchaser, enforceable in accordance with its terms, except
(a) as limited by applicable bankruptcy, insolvency, reorganization, or similar
laws relating to or affecting the enforcement of creditors' rights generally and
(b) as limited by equitable principles generally.
4.2 Investment Experience. The Purchaser is an "accredited investor" as
defined in Rule 501(a) under the Securities Act. The Purchaser is aware of the
Company's business affairs and financial condition and has had access to and has
acquired sufficient information about the Company to reach an informed and
knowledgeable decision to acquire the Securities. The Purchaser has such
business and financial experience as is required to give it the capacity to
protect its own interests in connection with the purchase of the Securities.
4.3 Investment Intent. The Purchaser is purchasing the Securities for its
own account as principal, for investment purposes only, and not with a present
view to, or for, resale, distribution or fractionalization thereof, in whole or
in part, within the meaning of the Securities Act. The Purchaser understands
that its acquisition of the Securities has not been registered under the
Securities Act or registered or qualified under any state securities law in
reliance on specific exemptions therefrom, which exemptions may depend upon,
among other things, the bona fide nature of the Purchaser's investment intent as
expressed herein. The Purchaser has completed or caused to be completed the
Purchaser Questionnaire attached hereto as Appendix I for use in preparation of
the Registration Statement (as defined below), and the responses provided
therein shall be true and correct as of the Closing and will be true and correct
as of the effective date of the Registration Statement. The Purchaser will not,
directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of
(or solicit any offers to buy, purchase or otherwise acquire or take a pledge
of) any of the Shares, the Warrants and the Warrant Shares except in compliance
with the Securities Act, and the rules and regulations promulgated thereunder.
4.4 Registration or Exemption Requirements. The Purchaser further
acknowledges and understands that the Securities may not be resold or otherwise
transferred except in a transaction registered under the Securities Act or
unless an exemption from such registration is available. The Purchaser
understands that the certificate(s) evidencing the Securities will be imprinted
with a legend that prohibits the transfer of such securities unless (i) they are
registered or such registration is not required, and (ii) if the transfer is
pursuant to an exemption from registration other than Rule 144 under the
Securities Act and, if the Company shall so request in writing, an opinion of
counsel reasonably satisfactory to the Company is obtained to the effect that
the transaction is so exempt.
4.5 Restriction on Short Sales. The Purchaser represents and warrants to
and covenants with the Company that the Purchaser has not engaged and will not
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engage in any short sales of the Company's Common Stock prior to the
effectiveness of the Registration Statement, except to the extent that any such
short sale is fully covered by shares of Common Stock of the Company owned by
such Purchaser other than the Shares or the Warrant Shares.
4.6 No Legal, Tax or Investment Advice. The Purchaser understands that
nothing in this Agreement or any other materials presented to the Purchaser in
connection with the purchase of the Securities constitutes legal, tax or
investment advice. The Purchaser has consulted such legal, tax and investment
advisors as it, in its sole discretion, has deemed necessary or appropriate in
connection with its purchase of the Securities.
SECTION 5
CONDITIONS TO CLOSING OF PURCHASERS
The obligation of each Purchaser to purchase the Shares at the Closing is
subject to the fulfillment as of the Closing of the following conditions:
5.1 Representations and Warranties. The representations and warranties
made by the Company in Section 3 hereof shall be true and correct in all
material respects when made, and shall be true and correct in all material
respects on the Closing with the same force and effect as if they had been made
on and as of said date.
5.2 Covenants. All covenants, agreements and conditions contained in this
Agreement to be performed by the Company on or prior to the Closing shall have
been performed or complied with in all material respects.
5.3 Compliance Certificate. The President or Chief Financial Officer of
the Company shall have delivered to the Purchasers a certificate, dated as of
the Closing, certifying that the conditions specified in Sections 5.1 and 5.2
have been fulfilled and stating that since June 30, 1999, there shall have been
no material adverse change in the assets, liabilities, financial condition,
business or operations of the Company from that reflected in the Financial
Statements except (i) changes in the ordinary course of business which have not
been, either individually or in the aggregate, materially adverse and (ii) the
Company's continued incurrence of operating losses and negative cash flow which
have occurred at a rate not materially in excess of the rate at which operating
losses and negative cash flows were incurred from January 1, 1999 to June 30,
1999.
5.4 Proceeds. The gross proceeds from the sale of Shares shall be at
least $4,000,000, but no more than $8,000,000.
5.5 Legal Opinion of Company Counsel. Shartsis, Friese & Ginsburg LLP,
counsel to the Company, shall have delivered a legal opinion, addressed to the
Purchasers, in the form attached as Exhibit D hereto.
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SECTION 6
CONDITIONS TO CLOSING OF COMPANY
The Company's obligation to sell and issue the Shares at the Closing to a
Purchaser is subject to the fulfillment or waiver of the following conditions:
6.1 Representations and Warranties. The representations and warranties
made by such Purchaser in Section 4 hereof shall be true and correct in all
material respects when made, and shall be true and correct in all material
respects on the Closing with the same force and effect as if they had been made
on and as of such date.
6.2 Covenants. All covenants, agreements and conditions contained in this
Agreement to be performed by such Purchaser on or prior to the Closing shall
have been performed or complied with in all material respects.
SECTION 7
AFFIRMATIVE COVENANTS OF THE COMPANY
The Company hereby covenants and agrees as follows:
7.1 Registration Requirements.
(a) The Company shall, subject to receipt of necessary information
from the Purchasers, prepare and file a registration statement with the SEC
under the Securities Act as soon as reasonably practicable after the Closing to
register the resale of the Shares purchased by the Purchasers, and the Company
shall use its best efforts to secure the effectiveness of such registration
statement as soon as reasonably practicable thereafter. For purposes hereof, the
term "Registration Statement" shall refer to any and all registration statements
filed for the purpose of registering the Shares for resale, including any
prospectus(es) constituting a part thereof and together with any amendments and
supplements thereto.
(b) The Company shall pay all Registration Expenses (as defined
below) in connection with any registration, qualification or compliance
hereunder, and the Purchasers shall pay all Selling Expenses (as defined below)
and other expenses that are not Registration Expenses relating to the Securities
resold by the Purchasers. "Registration Expenses" shall mean all expenses,
except for Selling Expenses, incurred by the Company in complying with the
registration provisions herein described, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, blue sky fees and expenses
and the expense of any special audits incident to or required by any such
registration. "Selling Expenses" shall mean all selling commissions,
underwriting fees and stock transfer taxes applicable to the Securities.
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(c) In the case of the registration effected by the Company pursuant
to these registration provisions, the Company will use its best efforts to: (i)
keep such registration effective until the earlier of (A) the fourth anniversary
of the Closing Date, (B) such date as all of the Securities have been resold or
(C) such time as all of the Securities held by the Purchasers can be sold within
a given three-month period without compliance with the registration requirements
of the Securities Act pursuant to Rule 144(k); (ii) prepare and file with the
SEC such amendments and post-effective amendments to the Registration Statement
as may be necessary to keep the Registration Statement effective for the
applicable period specified in this Section 7.1(c); (iii) cause the related
prospectus to be supplemented by any required prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 (or any similar provisions then in
force) under the Securities Act; (iv) comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by the
Registration Statement during the applicable period in accordance with the
intended methods of disposition by the sellers thereof set forth in the
Registration Statement as so amended or such prospectus as so supplemented; (v)
furnish such number of prospectuses and other documents incident thereto,
including any amendment of or supplement to the prospectus, as a Purchaser from
time to time may reasonably request, and the Company hereby consents to the use
of such prospectus or each amendment and supplement thereto by each of the
selling holders of Securities and the underwriters, if any, in connection with
the offering and sale of the Securities covered by such prospectus or any
amendment or supplement thereto; (vi) cause the Shares and, if applicable, the
Warrant Shares, to be listed on each securities exchange and quoted on each
quotation service on which similar securities issued by the Company are then
listed or quoted and maintain the listing of the Shares and Warrant Shares;
(vii) provide a transfer agent and registrar for all Securities registered
pursuant to the Registration Statement and a CUSIP number for all such
Securities; (viii) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC; and (ix) file the documents required of the
Company and otherwise use its best efforts to maintain requisite blue sky
clearance in (A) all jurisdictions in which any of the Securities are originally
sold and (B) all other states specified in writing by a Purchaser, provided as
to clause (B), however, that the Company shall not be required to qualify to do
business or consent to service of process in any state in which it is not now so
qualified or has not so consented.
(d) The Company shall furnish to each Purchaser upon request a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary in order to facilitate the public sale or other
disposition of all or any of the Securities held by such Purchaser.
(e) With a view to making available to the Purchasers the benefits of
Rule 144 promulgated under the Securities Act ("Rule 144") and any other rule or
regulation of the SEC that may at any time permit a Purchaser to sell Securities
to the public without registration or pursuant to a registration on Form S-3,
the Company covenants and agrees to: (i) make and keep public information
available, as those terms are understood and defined in Rule 144, until the
earlier of (A) the fourth anniversary of the effective date of the Registration
Statement or (B) such date as all of the Securities shall
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have been resold; (ii) file with the SEC in a timely manner all reports and
other documents required of the Company under the Securities Act and Exchange
Act; and (iii) furnish to each Purchaser upon request, as long as such Purchaser
owns any Securities, (A) a written statement by the Company that it has complied
with the reporting requirements of the Securities Act and the Exchange Act, (B)
a copy of the most recent annual or quarterly report of the Company, and (C)
such other information as may be reasonably requested in order to avail a
Purchaser of any rule or regulation of the SEC that permits the selling of any
such Securities without registration or pursuant to such Form S-3.
(f) The Company shall notify each Purchaser, if such Purchaser has
registered Securities in a Registration Statement which remain unsold, and (if
requested by such Purchaser) confirm such notice in writing, (i) when a
prospectus or any prospectus supplement or post-effective amendment has been
filed, and, with respect to the 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 the
Registration Statement or related prospectus or for additional information
relating to the Registration Statement, (iii) of the issuance by the SEC or any
other federal or state governmental authority of any stop order suspending the
effectiveness of the 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 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 the 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 the
Registration Statement would be appropriate.
(g) The Company may, upon written notice to the Purchasers of (i) the
happening of any event of the kind described in Section 7.1(f)(ii), 7.1(f)(iii),
7.1(f)(iv), 7.1(f)(v) or 7.1(f)(vi) hereof or (ii) that, in the judgement of the
Company's Board of Directors, 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, discontinue disposition of Securities
covered by the Registration Statement or prospectus until copies of the
supplemented or amended prospectus contemplated by Section 7.1(i) hereof are
distributed to the Purchasers, or until the Purchasers are advised in writing by
the Company that the use of the applicable prospectus may be
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resumed, and the Purchasers have received copies of any additional or
supplemental filings that are incorporated or deemed incorporated by reference
in such prospectus. The Company shall not suspend use of a prospectus or
Registration Statement under this Section 7.1(g) for more than 30 days at a time
and more than twice in any 12-month period. Any period for which use of a
prospectus or Registration Statement is suspended under this Section 7.1(g)
shall be added to the time for which the Company is required to maintain the
effectiveness of such Registration Statement, including the prospectus
constituting a part thereof, under Section 7.1(c).
(h) The Company shall use every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of the Registration
Statement, or the lifting of any suspension of the qualification (or exemption
from qualification) of any of the Securities for sale in any jurisdiction, at
the earliest possible moment.
(i) The Company shall, upon the occurrence of any event contemplated
by Section 7.1(f)(v) or 7.1(f)(vi) above, prepare a supplement or post-effective
amendment to the 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
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.
(j) If the Registration Statement covering the Shares is not declared
effective by the SEC on or before ninety (90) days from the Closing Date (the
"Registration Deadline"), then the Company will issue a warrant ("Warrant") to
purchase shares of Common Stock to each Purchaser in an amount equal to twenty-
five percent (25%) of the Shares such Purchaser acquired hereunder. Each
Warrant, the form of which is attached hereto as Exhibit B, entitles the
registered holder thereof to purchase Common Stock at a price of 110% of the
average closing sale price of the Common Stock for the five trading days
immediately preceding the Closing Date, the subject to adjustment in certain
circumstances as provided in the Warrant, commencing on the date hereof until
three years from the Closing. If such Warrant and the Warrant Shares are not
already registered pursuant to an effective registration statement, the Company
shall register for resale the Warrant and the Warrant Shares in the next
registration statement the Company files. If the Company does not file such a
registration statement within ninety (90) days after such Warrants are issuable,
on request of a majority of the holders of such Warrants the Company within
thirty days after such request shall file a registration statement registering
for resale the Warrant and the Warrant Shares.
7.2 Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless the Purchasers
from and against any losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) to which the Purchasers may become subject
(under the Securities Act or otherwise) insofar as such losses, claims, damages
or liabilities (or actions or
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proceedings in respect thereof) arise out of, or are based upon, any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement or any prospectus (preliminary or final), as amended on
the applicable date thereof, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or arise out of any
failure by the Company to fulfill any undertaking included in the Registration
Statement or any prospectus (preliminary or final), as amended on the applicable
date thereof, and the Company will, as incurred, reimburse the Purchasers for
any legal or other expenses reasonably incurred in investigating, defending or
preparing to defend any such action, proceeding or claim; provided, however,
that the Company shall not be liable in any such case to the extent that such
loss, claim, damage or liability arises out of, or is based upon (i) an untrue
statement or an omission made in such Registration Statement in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of such Purchaser specifically for use in preparation of the Registration
Statement, or (ii) any untrue statement or the omission of a material fact in
any prospectus that is corrected in any subsequent prospectus that was delivered
to a Purchaser prior to the pertinent sale or sales by such Purchaser.
(b) Each Purchaser, severally and not jointly, agrees to indemnify
and hold harmless the Company from and against any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) to which the Company
may become subject (under the Securities Act or otherwise) insofar as such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) arise out of, or are based upon (i) an untrue statement or an alleged
untrue statement of a material fact made in such Registration Statement or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of such Purchaser specifically for use in preparation of
the Registration Statement, provided, however, that a Purchaser shall not be
liable in any such case for any untrue statement or alleged untrue statement or
the omission or alleged omission that has been corrected, in writing, by such
Purchaser, delivered to the Company before the sale from which such loss
occurred, or (ii) any untrue statement or alleged untrue statement or the
omission or alleged omission in any prospectus that is corrected in any
subsequent prospectus that was delivered to a Purchaser prior to the pertinent
sale or sales by such Purchaser, and such Purchaser, severally and not jointly,
will, as incurred, reimburse the Company for any legal or other expenses
reasonably incurred in investigating, defending or preparing to defend any such
action, proceeding or claim; provided, however, that each Purchaser's
indemnification obligation shall be limited to the net proceeds received from
its sale of the Securities.
(c) Promptly after receipt by any indemnified person of a notice of a
claim or the beginning of any action in respect of which indemnity is to be
sought against an indemnifying person pursuant to this Section 7.2, such
indemnified person shall notify the indemnifying person in writing of such claim
or of the commencement of such action, and, subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and the indemnifying person shall have been
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notified thereof, the indemnifying person shall be entitled to participate
therein, and, to the extent that it shall wish, to assume the defense thereof,
with counsel reasonably satisfactory to the indemnified person. After notice
from the indemnifying person to such indemnified person of the indemnifying
person's election to assume the defense thereof, the indemnifying person shall
not be liable to such indemnified person for any legal expenses subsequently
incurred by such indemnified person in connection with the defense thereof;
provided, however, that if there exists or shall exist a conflict of interest
that would make it inappropriate in the reasonable judgment of the indemnified
person for the same counsel to represent both the indemnified person and such
indemnifying person or any affiliate or associate thereof, the indemnified
person shall be entitled to retain its own counsel at the expense of such
indemnifying person.
(d) If the indemnification provided for in this Section 7.2 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as the result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the Company on the one hand and the Purchasers
on the other in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities (or actions in respect thereof), as
well as any other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or a Purchaser on the other and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Company and the Purchasers agree that it would not be just and equitable if
contribution pursuant to this subsection (d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above in this subsection (d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, or liabilities (or actions in respect thereof) referred to
above in this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), a Purchaser shall not be required to
contribute any amount in excess of the amount by which the net amount received
by such Purchaser from the sale of the Securities to which such loss relates
exceeds the amount of any damages which such Purchaser 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. Each Purchaser's obligations in this subsection (d) to
contribute is several in proportion to its sale of Securities to which such loss
relates and not joint.
(e) The obligations of the Company and the Purchasers under this
Section 7.2 shall be in addition to any liability which the Company and the
Purchasers may
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otherwise have and shall extend, upon the same terms and conditions, to
directors, officers, employees and agents of the Company and the Purchasers and
to each person, if any, who controls the Company or any Purchaser within the
meaning of the Act.
SECTION 8
RESTRICTIONS ON TRANSFERABILITY OF SECURITIES:
COMPLIANCE WITH SECURITIES ACT
8.1 Restrictions on Transferability. The Shares, the Warrants and the
Warrant Shares shall not be transferable in the absence of a registration under
the Securities Act or an exemption therefrom or in the absence of compliance
with any term of this Agreement.
8.2 Restrictive Legend. Each certificate representing the Securities
shall bear substantially the following legends (in addition to any legends
required under applicable securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT
PURPOSES ONLY AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM.
ADDITIONALLY, THE TRANSFER OF THE SECURITIES REPRESENTED HEREBY IS SUBJECT
TO CERTAIN RESTRICTIONS SPECIFIED IN THE PURCHASE AGREEMENT DATED AS OF
OCTOBER 27, 1999 BETWEEN THE COMPANY AND THE ORIGINAL PURCHASER, AND NO
TRANSFER OF THE SECURITIES SHALL BE VALID OR EFFECTIVE ABSENT COMPLIANCE
WITH SUCH RESTRICTIONS. ALL SUBSEQUENT HOLDERS OF THESE SECURITIES WILL
HAVE AGREED TO BE BOUND BY CERTAIN OF THE TERMS OF THE AGREEMENT, INCLUDING
SECTIONS 7.1 AND 8.3 THEREOF. COPIES OF THE PURCHASE AGREEMENT MAY BE
OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE REGISTERED HOLDER OF
THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY.
8.3 Transfer of Securities After Registration. Each Purchaser hereby
covenants with the Company not to make any sale of the Shares, the Warrant or
the Warrant Shares except either (i) in accordance with the Registration
Statement, in which case such Purchaser covenants to comply with the requirement
of delivering a current prospectus, or (ii) in accordance with Rule 144, in
which case Purchaser covenants to comply with Rule 144, or (iii) in accordance
with another exemption from the registration requirements of the Securities Act.
The legend set forth in Section 8.2 will be removed from a certificate
representing the Securities following and in connection with any sale of the
Securities pursuant to subsection (i) or (ii) hereof, but not in connection with
any sale of Shares pursuant to subsection (iii) hereof, and also
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will be removed at such time that the Securities may be sold under Rule 144
without restriction as to volume and manner of sale at such time as the resale
of the Shares is registered under the Securities Act. If the above legend is
removed from any of the Securities and thereafter the effectiveness of a
registration statement covering such Securities is suspended or the Company
determines that a supplement or amendment thereto is required by applicable
securities laws, then upon reasonable advance notice to Purchaser the Company
may require that the above legend be placed on any such Securities that cannot
then be sold pursuant to an effective registration statement or under Rule 144
and Purchaser shall cooperate in the replacement of such legend. Such legend
shall thereafter be removed when such Securities may again be sold pursuant to
and effective registration statement or under Rule 144.
8.4 Purchaser Information. Each Purchaser covenants that it will promptly
notify the Company of any changes in the information set forth in the
Registration Statement regarding such Purchaser, under the heading "Selling
Security Holders" or elsewhere, or such Purchaser's "Plan of Distribution."
SECTION 9
MISCELLANEOUS
9.1 Waivers and Amendments. Neither this Agreement nor any provisions
hereof shall be waived, modified, changed or discharged or terminated except by
an instrument in writing signed by the party against whom any waiver,
modification, change, discharge or termination is sought.
9.2 Consultant's Fee. The Purchasers acknowledge that the Company intends
to pay a consultant fee to Bigelow in the form of 30,000 Shares of common stock
of the Company and certain related legal expenses. Each of the parties hereto
hereby represents that, on the basis of any actions and agreements by it, there
are no brokers or finders or other consultants entitled to compensation in
connection with the sale of the Securities to the Purchasers.
9.3 Governing Law. This Agreement shall be governed in all respects by
and construed in accordance with the laws of the State of Delaware without any
regard to conflicts of laws principles.
9.4 Survival. The representations, warranties, covenants and agreements
made in this Agreement shall survive any investigation made by the Company or
the Purchasers and the Closing.
9.5 Successors and Assigns. The provisions hereof shall inure to the
benefit of, and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties to this Agreement.
9.6 Entire Agreement. This Agreement, including all exhibits, schedules
and appendices hereto constitutes the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof.
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9.7 Notices, etc. All notices and other communications required or
permitted under this Agreement shall be effective upon receipt and shall be in
writing and may be delivered in person, by telecopy, overnight delivery service
or registered or certified United States mail, addressed to the Company or the
Purchasers, as the case may be, at their respective addresses set forth at the
beginning of this Agreement or on Schedule 1, or at such other address as the
Company or a Purchaser shall have furnished to the other party in writing. All
notices and other communications shall be effective upon the earlier of actual
receipt thereof by the person to whom notice is directed or (i) in the case of
notices and communications sent by personal delivery or telecopy, one business
day after such notice or communication arrives at the applicable address or was
successfully sent to the applicable telecopy number, (ii) in the case of notices
and communications sent by overnight delivery service, at noon (local time) on
the second business day following the day such notice or communication was sent,
and (iii) in the case of notices and communications sent by United States mail,
seven days after such notice or communication shall have been deposited in the
United States mail.
9.8 Severability of this Agreement. If any provision of this Agreement
shall be judicially determined to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
9.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
9.10 Further Assurances. Each party to this Agreement shall do and
perform or cause to be done and performed all such further acts and things and
shall execute and deliver all such other agreements, certificates, instruments
and documents as the other party hereto may reasonably request in order to carry
out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
9.11 Currency. All references to "dollars" or "$" in this Agreement shall
be deemed to refer to United States dollars.)
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The foregoing agreement is hereby executed as of the date first above
written.
"Company" "Purchaser"
VidaMed, Inc. Zesiger Capital Group, LLC
A Delaware Corporation as agent and attorney-in-fact
By: ____________________________ By: ____________________________
John F. Howe Albert L. Zesiger, Principal
Vice President and CFO
For:
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City of Milford Pension & Retirement Fund
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Norwalk Employees' Pension Plan
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The Jenifer Altman Foundation
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Dean Witter Foundation
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Roanoke College
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Butler Family LLC
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HBL Charitable Unitrust
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Andrew Heiskell
---------------------------------------------------
Helen Hunt
---------------------------------------------------
Jeanne L. Morency
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Psychology Associates
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Murray Capital, LLC
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Domenic J. Mizio
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Morgan Trust Co.of the Bahamas Ltd. as Trustee
U/A/D 11/30/93
---------------------------------------------------
Susan Uris Halpern
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William B. Lazar
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Wells Family LLC
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Harold & Grace Willens JTWROS
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Albert L. Zesiger
---------------------------------------------------
Barrie Ramsay Zesiger
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Wolfson Investment Partners LLP
---------------------------------------------------
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The foregoing agreement is hereby executed as of the date first above written.
"Company" "Purchaser"
VidaMed, Inc. Circle F Ventures, LLP
A Delaware Corporation
By: ____________________________ By: ____________________________
John F. Howe Hayden Fleming
Vice President and CFO President
<PAGE>
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"Purchaser"
Lewis and Paula Yarborough
By: ____________________________
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"Purchaser"
Robert and Rebecca Williamson
By: ____________________________
----------------------------------------------
"Purchaser"
Southwest Securities f/b/o Hayden R. Fleming
IRA
By: ____________________________
----------------------------------------------
"Purchaser"
Southwest Securities f/b/o LaDonna M. Fleming
IRA
By: ____________________________
----------------------------------------------
----------------------------------------------
<PAGE>
SCHEDULE OF EXCEPTIONS
This Schedule of Exceptions, dated October 27, 1999, is made and given
pursuant to Section 3 of the VidaMed, Inc. Purchase Agreement dated October 27,
1999 (the "Agreement") by and between VidaMed, Inc. (the "Company", "we" or
"us") and the Purchasers listed on Exhibit A attached thereto. The Company
makes the following disclosures with the section numbers in this Schedule of
Exceptions corresponding to the section numbers in the Agreement. Any terms
defined in the Agreement shall have the same meaning when used in this Schedule
of Exceptions as when used in the Agreement unless the context otherwise
requires.
3.7 The Company continues to incur operating losses, and has received a
qualified opinion from its outside accountant expressing concern about the
Company's ability to continue as a going concern. The receipt of the qualified
opinion triggered a letter from the staff of the Nasdaq National Market
regarding continued listing, as discussed in 3.10, and caused an event of
default under section 7.1(k) of the Company's Loan and Security Agreement dated
October 28, 1998, with Transamerica Business Credit Corporation. Transamerica
entered into a written waiver of such event of default October 26, 1999. In
connection with the wavier obtained from Transamerica, the Company paid a
$10,000 fee and issued it a five year warrant to acquire 20,000 shares of Common
Stock at a price of $0.89 per share.
3.9 If the Company's Registration Statement is not declared effective as
provided in Section 7.1(j) of the Agreement the Company will be obligated to
issue Warrants to the Purchasers to purchase shares of Common Stock as provided
in Section 7.1(j) of the Agreement.
The Company's warrants are not currently listed with any exchange, and any
Warrants issued in connection with this Agreement will not be listed.
In connection with the wavier obtained from Transamerica, the Company paid
a $10,000 fee and issued it a five year warrant to acquire 20,000 shares of
Common Stock at a price of $0.89 per share.
The Company has committed to issue to Bigelow thirty thousand (30,000)
shares of Common Stock in connection with its consultancy services to the
Company.
3.10 Nasdaq has notified the Company that it does not satisfy the minimum net
tangible assets listing requirements to remain a National Market Security. Even
if the proceeds from the sale of Shares would be sufficient to satisfy the
minimum net tangible asset requirement, Nasdaq has expressed concern about the
Company's viability as a going concern. Nasdaq has scheduled a hearing for
November 4, 1999 to determine whether the Common Stock of the Company will
remain listed on the Nasdaq National Market. Depending upon the results of the
hearing and the Nasdaq independent review of the Company, Nasdaq may take the
following action(s):
(i) delist the Common Stock of the Company from the Nasdaq National
Market; or
(ii) move listing of the Common Stock of the Company from the Nasdaq
National Market to the Nasdaq Small Cap Market; or
(iii) continue to list the Common Stock of the Company on the Nasdaq
National Market for a period, to be determined by Nasdaq in its sole discretion,
in order for the Company to come into full compliance with Nasdaq Marketplace
Rules.
26
<PAGE>
There can be no assurance that the Company will be given any extension for
continued trading on the Nasdaq National Market or that the Company will
qualify, in the opinion of Nasdaq, for transfer to the Nasdaq Small Cap Market.
3.12 The receipt of a qualified opinion from the Company's outside accountants,
which opinion expresses a concern about the Company's viability as a going
concern, constituted an event of default under section 7.1(k) of the Company's
Loan and Security Agreement dated October 28, 1998, with Transamerica Business
Credit Corporation. Transamerica entered into a written waiver of such event of
default October 26, 1999. In connection with the wavier obtained from
Transamerica, the Company paid a $10,000 fee and issued it a five year warrant
to acquire 20,000 shares of Common Stock at a price of $0.89 per share.
3.16 See section 3.12, above.
27
<PAGE>
EXHIBIT A
SCHEDULE OF INVESTORS
<TABLE>
<CAPTION>
Purchaser Share Qty Total Cost
- ------------------------------------------------------------------------------------------
<S> <C> <C>
City of Milford Pension & Retirement Fund 150,000 $ 300,000
- ------------------------------------------------------------------------------------------
Norwalk Employees' Pension Plan 160,000 $ 320,000
- ------------------------------------------------------------------------------------------
The Jenifer Altman Foundation 80,000 $ 160,000
- ------------------------------------------------------------------------------------------
Dean Witter Foundation 75,000 $ 150,000
- ------------------------------------------------------------------------------------------
Roanoke College 100,000 $ 200,000
- ------------------------------------------------------------------------------------------
Butler Family LLC 60,000 $ 120,000
- ------------------------------------------------------------------------------------------
HBL Charitable Unitrust 40,000 $ 80,000
- ------------------------------------------------------------------------------------------
Andrew Heiskell 90,000 $ 180,000
- ------------------------------------------------------------------------------------------
Helen Hunt 40,000 $ 80,000
- ------------------------------------------------------------------------------------------
Jeanne L. Morency 30,000 $ 60,000
- ------------------------------------------------------------------------------------------
Psychology Associates 10,000 $ 20,000
- ------------------------------------------------------------------------------------------
Murray Capital, LLC 60,000 $ 120,000
- ------------------------------------------------------------------------------------------
Domenic J. Mizio 120,000 $ 240,000
- ------------------------------------------------------------------------------------------
Morgan Trust Co.of the Bahamas Ltd. as Trustee 100,000 $ 200,000
U/A/D 11/30/93
- ------------------------------------------------------------------------------------------
Susan Uris Halpern 60,000 $ 120,000
- ------------------------------------------------------------------------------------------
William B. Lazar 30,000 $ 60,000
- ------------------------------------------------------------------------------------------
Wells Family LLC 120,000 $ 240,000
- ------------------------------------------------------------------------------------------
Harold & Grace Willens JTWROS 20,000 $ 40,000
- ------------------------------------------------------------------------------------------
Albert L. Zesiger 75,000 $ 150,000
- ------------------------------------------------------------------------------------------
Barrie Ramsay Zesiger 40,000 $ 80,000
- ------------------------------------------------------------------------------------------
Wolfson Investment Partners LP 40,000 $ 80,000
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Lewis and Paula Yarborough 100,000 $ 200,000
- ------------------------------------------------------------------------------------------
Robert and Rebecca Williamson 100,000 $ 200,000
- ------------------------------------------------------------------------------------------
Southwest Securities f/b/o Hayden R. Fleming 250,000 $ 500,000
IRA
- ------------------------------------------------------------------------------------------
Southwest Securities f/b/o LaDonna M. Fleming 50,000 $ 100,000
IRA
- ------------------------------------------------------------------------------------------
Circle F Ventures, LLC 200,000 $ 400,000
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Total 2,200,000 $4,400,000
- ------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
EXHIBIT B
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY AND NOT WITH A
VIEW TO OR FOR SALE IN CONNECTION WITH ANY DISTRIBUTION THEREOF. EXCEPT UNDER
CERTAIN SPECIFIC LIMITED CIRCUMSTANCES, THE SECURITIES MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION AND QUALIFICATION
WITHOUT AN OPINION OF COUNSEL FOR THE HOLDER REASONABLY SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
STOCK PURCHASE WARRANT
To Purchase Shares of Common Stock of
VIDAMED, INC.
THIS CERTIFIES that, for value received, [Name] (the "Investor"), is
entitled, upon the terms and subject to the conditions hereinafter set forth, at
any time on or prior to the close of business on the date three (3) years after
________. 1999, but not thereafter, to subscribe for and purchase, from
VIDAMED, INC. a Delaware corporation (the "Company"), [Number of Shares] shares
(the "Warrant Shares") of Common Stock. The purchase price of one share of
Common Stock under this Warrant shall be $[price] per share. The purchase price
and the number of shares for which the Warrant is exercisable shall be subject
to adjustment as provided herein.
1. Transfer of Warrant. Prior to the expiration hereof and subject to
-------------------
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company,
referred to in Section 2 hereof, by the holder hereof in person or by duly
authorized attorney, upon surrender of this Warrant together with the Assignment
Form annexed hereto properly endorsed.
2. Exercise of Warrant.
-------------------
(a) The purchase rights represented by this Warrant are exercisable
by the registered holder hereof, in whole or in part, at any time before the
close of business on the date three (3) years after _______, 1999, by delivery
of the Notice of Exercise form annexed hereto duly executed at the office of the
Company, in Fremont, California (or such other office or agency of the Company
as it may designate by notice in writing to the registered holder hereof at the
address of such holder appearing on the books of the Company), and upon payment
of the purchase price of the shares thereby purchased (by cash or by check or
bank draft payable to the order of the Company); whereupon the holder of this
Warrant shall be entitled to receive a certificate for the
29
<PAGE>
number of shares of Common Stock so purchased. The Company agrees that if at the
time of the surrender of this Warrant and purchase of shares, the holder hereof
shall be entitled to exercise this Warrant, the shares so purchased shall be and
be deemed to be issued to such holder as the record owner of such shares as of
the close of business on the date on which this Warrant shall have been
exercised as aforesaid. If this Warrant should be exercised in part only, the
Company shall, upon surrender of this Warrant, execute and deliver a new Warrant
evidencing the rights of the holder hereof to purchase the balance of the
Warrant Shares purchasable hereunder.
(b) Certificates for shares purchased hereunder shall be delivered
to the holder hereof promptly after this Warrant shall have been exercised as
aforesaid. The Company covenants that all shares of Common Stock which may be
issued upon the exercise of rights represented by this Warrant will, upon
exercise of the rights represented by this Warrant, be fully paid and
nonassessable and free from all taxes, liens and charges in respect of the issue
thereof (other than taxes in respect of any transfer occurring contemporaneously
with such issue).
3. No Fractional Shares or Scrip. No fractional shares or scrip
-----------------------------
representing fractional shares shall be issued upon the exercise of this
Warrant. With respect to any fraction of a share called for upon the exercise of
this Warrant, an amount equal to such fraction multiplied by the then Fair
Market Value shall be paid in cash to the holder of this Warrant.
4. Charges, Taxes and Expenses. Issuance of certificates for shares of
---------------------------
Common Stock upon the exercise of this Warrant shall be made without charge to
the holder hereof for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the holder of this Warrant or in such name or names as may be directed by the
holder of this Warrant; provided, however, that in the event certificates for
shares of Common Stock are to be issued in a name other than the name of the
holder of this Warrant, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the holder
hereof.
5. No Rights as Shareholders. This Warrant does not entitle the holder
-------------------------
hereof to any voting rights or other rights as a stockholder of the Company
prior to the exercise thereof.
6. Exchange and Registry of Warrant. This Warrant is exchangeable,
--------------------------------
without charge, upon the surrender hereof by the registered holder at the above-
mentioned office or agency of the Company, for a new Warrant of like tenor and
dated as of such exchange.
(a) The Company shall maintain at the above-mentioned office or
agency a registry showing the name and address of the registered holder of this
Warrant. This Warrant may be surrendered for exchange, transfer or exercise, in
accordance with its
30
<PAGE>
terms, at such office or agency of the Company, and the Company shall be
entitled to rely in all respects, prior to written notice to the contrary, upon
such registry.
7. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the
-------------------------------------------------
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and
cancellation of this Warrant, if mutilated, the Company will make and deliver a
new Warrant of like tenor and dated as of such cancellation, in lieu of this
Warrant.
8. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
---------------------------------
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a Saturday, Sunday or legal holiday.
9. Early Termination, Antidilution Adjustments and Registration Statement
----------------------------------------------------------------------
Adjustments.
- -----------
(a) Merger, Sale of Assets, etc. In case of any consolidation of
---------------------------
the Company with, or merger of the Company into, any other corporation (other
than a consolidation or merger in which the Company is the continuing
corporation and in which no change occurs in its outstanding Common Stock), or
in case of any sale or transfer of all or substantially all of the assets of the
Company, or in the case of any statutory exchange of securities with another
corporation (including any exchange effected in connection with a merger of a
third corporation into the Company, except where the Company is the surviving
entity and no change occurs in its outstanding Common Stock), the corporation
formed by such consolidation or the corporation resulting from or surviving such
merger or the corporation which shall have acquired such assets or securities of
the Company, as the case may be, shall execute and deliver to the Holder
simultaneously therewith a new Warrant, satisfactory in form and substance to
the Holder, together with such other documents as the Holder may reasonably
request, entitling the Holder thereof to receive upon exercise of such Warrant
the kind and amount of shares of stock and other securities and property
receivable upon such consolidation, merger, sale, transfer, or exchange of
securities, or upon the dissolution following such sale or other transfer, by a
holder of the number of shares of Common Stock purchasable upon exercise of this
Warrant immediately prior to such consolidation, merger, sale, transfer, or
exchange. Such new Warrant shall contain the same basic other terms and
conditions as this Warrant and shall provide for adjustments which, for events
subsequent to the effective date of such written instrument, shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
9. The above provisions of this paragraph (a) shall similarly apply to
successive consolidations, mergers, exchanges, sales or other transfers covered
hereby. Notwithstanding the foregoing, in the event the consideration to be paid
to holders of Company capital stock in any transaction of the nature referred to
above in this Section 9(a) (a "Transaction") consists of cash or cash
equivalents, then, provided that the Company shall have given the holder hereof
the notice required by
31
<PAGE>
Section 10, this Warrant shall, to the extent it has not been exercised by the
effective date of such Transaction, terminate upon the completion of such
Transaction.
(b) Reclassification, etc. If the Company at any time shall, by
---------------------
subdivision, combination or reclassification of securities or otherwise, change
any of the securities to which purchase rights under this Warrant exist into the
same or a different number of securities of any class or classes, this Warrant
shall thereafter represent the right to acquire such number and kind of
securities as would have been issuable as the result of such change with respect
to the securities which were subject to the purchase rights under this Warrant
immediately prior to such subdivision, combination, reclassification or other
change. If shares of the Company's Common Stock are subdivided or combined into
a greater or smaller number of shares of Common Stock, the purchase price under
this Warrant shall be proportionately reduced in case of subdivision of shares
or proportionately increased in the case of combination of shares, in both cases
by the ratio which the total number of shares of Common Stock to be outstanding
immediately after such event bears to the total number of shares of Common Stock
outstanding immediately prior to such event.
(c) Cash Distributions. Except as set forth herein, no adjustment
------------------
on account of cash dividends on the Company's Common Stock or other securities
purchasable hereunder will be made to the purchase price under this Warrant.
(d) Authorized Shares. The Company covenants that during the
-----------------
period the Warrant is outstanding, it will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of Common Stock upon the exercise of any purchase rights under this Warrant. The
Company further covenants that its issuance of this Warrant shall constitute
full authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares of the
Company's Common Stock upon the exercise of the purchase rights under this
Warrant. The Company further covenants and agrees (i) that it will not, by
amendment of its Certificate of Incorporation or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observation or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
the Company, (ii) promptly to take such action as may be required of the Company
to permit the Holder to exercise this Warrant and the Company duly and
effectively to issue shares of its Common Stock or other securities as provided
herein upon the exercise hereof and (iii) promptly to take all action required
or provided herein to protect the rights of the Holder granted hereunder against
dilution.
(e) If the Company declares a dividend on Common Stock, or makes a
distribution to holders of Common Stock, and such dividend or distribution is
payable or made in Common Stock or securities convertible into or exchangeable
for Common Stock, or rights to purchase Common Stock or securities convertible
into or exchangeable for Common Stock, the number of shares of Common Stock for
which this Warrant may be exercised shall be increased, as of the record date
for determining which holders of Common Stock shall be entitled to receive such
dividend or
32
<PAGE>
distribution, in proportion to the increase in the number of outstanding shares
(and shares of Common Stock issuable upon conversion of all such securities
convertible into Common Stock) of Common Stock as a result of such dividend or
distribution, and the Exercise Price shall be adjusted so that the aggregate
amount payable for the purchase of all the Warrant Shares issuable hereunder
immediately after the record date for such dividend or distribution shall equal
the aggregate amount so payable immediately before such record date.
(f) If the Company declares a dividend on Common Stock (other than
a dividend covered by subsection (e) above) or distributes to holders of its
Common Stock, other than as part of its dissolution or liquidation or the
winding up of its affairs, any shares of its capital stock, any evidence of
indebtedness or any cash or other of its assets (other than Common Stock or
securities convertible into or exchangeable for Common Stock), the Holder shall
receive notice of such event as set forth in Section 11 below.
(g) If the Company shall, at any time before the expiration of this
Warrant, sell all or substantially all of its assets and distribute the proceeds
thereof to the Company's stockholders, the Holder shall, upon exercise of this
Warrant have the right to receive, in lieu of the shares of Common Stock of the
Company that the Holder otherwise would have been entitled to receive, the same
kind and amount of assets as would have been issued, distributed or paid to the
Holder upon any such distribution with respect to such shares of Common Stock of
the Company had the Holder been the holder of record of such shares of Common
Stock receivable upon exercise of this Warrant on the date for determining those
entitled to receive any such distribution. If any such distribution results in
any cash distribution in excess of the Exercise Price provided by this Warrant
for the shares of Common Stock receivable upon exercise of this Warrant, the
Holder may, at the Holder's option, exercise this Warrant without making payment
of the Exercise Price and, in such case, the Company shall, upon distribution to
the Holder, consider the Exercise Price to have been paid in full and, in making
settlement to the Holder, shall obtain receipt of the Exercise Price by
deducting an amount equal to the Exercise Price for the shares of Common Stock
receivable upon exercise of this Warrant from the amount payable to the Holder.
Notwithstanding the foregoing, in the event the consideration to be paid to
holders of Company capital stock in any transaction of the nature referred to
above in this Section 9(i) (an "Asset Sale Transaction") consists of cash or
cash equivalents and the consideration payable per share of Common Stock of the
Company is less than the Exercise Price hereunder, then, provided that the
Company shall have given the holder hereof the notice required by Section 10,
this Warrant shall, to the extent it has not been exercised by the effective
date of such Transaction, terminate upon the completion of such Transaction.
(h) The term "Common Stock" shall mean the Common Stock of the
Company as the same exists at September 30, 1999 or as such stock may be
constituted from time to time, except that for the purpose of this Section 9,
the term "Common Stock" shall include any stock of any class of the Company
which has no preference in respect of dividends or of amounts payable in the
event of any voluntary
33
<PAGE>
or involuntary liquidation, dissolution or winding up of the Company and which
is not subject to redemption by the Company.
(i) Whenever the number of Warrant Shares or the Exercise Price
shall be adjusted as required by the provisions of this Section 9, the Company
forthwith shall file in the custody of its secretary or an assistant secretary,
at its principal office, and furnish to each Holder hereof, a certificate
prepared by its Chief Financial Officer, showing the adjusted number of Warrant
Shares and the adjusted Exercise Price and setting forth in reasonable detail
the circumstances requiring the adjustments.
(j) No adjustment in the Exercise Price in accordance with the
provisions of this Section 9 need be made if such adjustment would amount to a
change in such Exercise Price of less than $.01; provided however, that the
amount by which any adjustment is not made by reason of the provisions of this
Section 9(j) shall be carried forward and taken into account at the time of any
subsequent adjustment in the Exercise Price.
(k) If an adjustment is made under this Section 9 and the event to
which the adjustment relates does not occur, then any adjustments in accordance
with this Section 9 shall be readjusted to the Exercise Price and the number of
Warrant Shares which would be in effect had the earlier adjustment not been
made.
10. Notice of Adjustment. So long as this Warrant shall be outstanding,
--------------------
(a) if the Company shall propose to pay any dividends or make any distribution
upon the Common Stock, or (b) if the Company shall offer generally to the
holders of Common Stock the right to subscribe to or purchase any shares of any
class of Common Stock or securities convertible into Common Stock or any other
similar rights, or (c) if there shall be any proposed capital reorganization of
the Company in which the Company is not the surviving entity, recapitalization
of the capital stock of the Company, consolidation or merger of the Company with
or into another corporation, sale, lease or other transfer of all or
substantially all of the property and assets of the Company, or voluntary or
involuntary dissolution, liquidation or winding up of the Company, or (d) if the
Company shall give to its stockholders any notice, report or other communication
respecting any significant or special action or event, then in such event, the
Company shall give to the Holder, at least ten (10) days prior to the relevant
date described below, a notice containing a description of the proposed action
or event and stating the date or expected date on which a record of the
Company's stockholders is to be taken for any of the foregoing purposes, and the
date or expected date on which any such dividend, distribution, subscription,
reclassification, reorganization, consolidation, combination, merger,
conveyance, sale, lease or transfer, dissolution, liquidation or winding up is
to take place and the date or expected date, if any is to be fixed, as of which
the holders of Common Stock of record shall be entitled to exchange their shares
of Common Stock for securities or other property deliverable upon such event.
11. Notice. Any notice to be given or to be served upon any party in
------
connection with the Warrant must be in writing and will be deemed to have been
given and received upon confirmed receipt, if sent by facsimile, or two (2) days
after it has been submitted
34
<PAGE>
for delivery by Federal Express or an equivalent carrier, charges prepaid and
addressed to the following addresses with a confirmation of delivery:
If to the Company, to:
VidaMed, Inc.
46107 Landings Parkway
Fremont, California 94538
Attn.: Chief Financial Officer
Telephone: (510) 492-4900
Facsimile: (510) 492-4999
If to the Holder, to:
[Name/Address]
Any party may, at any time by giving written notice to the other party,
designate any other address in substitution of an address established pursuant
to the foregoing to which such notice will be given.
12. Miscellaneous.
(a) Issue Date. The provisions of this Warrant shall be construed
----------
and shall be given effect in all respect as if it had been issued and delivered
by the Company on the date hereof. This Warrant shall be binding upon any
successors or assigns of the Company.
(b) Restrictions. The holder hereof acknowledges that the Common
------------
Stock acquired upon the exercise of this Warrant may have restrictions upon its
resale imposed by state and federal securities laws.
(c) Governing Law. This Agreement shall be governed in all
-------------
respects by and construed in accordance with the laws of the State of Delaware
without any regard to conflicts of laws principles.
(d) Successors and Assigns. Except as otherwise contemplated
----------------------
hereby, this Warrant shall be binding upon and inure to the benefit of any
successors and assigns of the Company.
IN WITNESS WHEREOF, VIDAMED, INC. has caused this Warrant to be executed by
its officers thereunto duly authorized.
Dated:_________, _____
35
<PAGE>
VIDAMED, INC.
By:
--------------------------------------
Title:
-----------------------------------
36
<PAGE>
NOTICE OF EXERCISE
------------------
To: VIDAMED, INC.
(1) The undersigned hereby elects to purchase ____________ shares of Common
Stock of VIDAMED, INC. pursuant to the terms of the attached Warrant, and
tenders herewith payment of $__________ in full satisfaction of the purchase
price.
(2) Please issue a certificate of certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
_______________________________________________
(Name)
_______________________________________________
_______________________________________________
(Address)
(3) The undersigned represents that the aforesaid shares of Common
Stock are being acquired for the account of the undersigned for investment and
not with a view to, or for resale in connection with, the distribution thereof
and that the undersigned has no present intention of distributing or reselling
such shares; provided, that such representation shall not be required at such
time as the shares of Common Stock underlying this Warrant are registered under
the Securities Act of 1933.
- ---------------------------------- ------------------------------------
(Date) (Signature)
37
<PAGE>
ASSIGNMENT FORM
---------------
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby
are hereby assigned to
________________________________________________________________________________
(Please Print)
whose address is
________________________________________________________________________________
(Please Print)
________________________________________________________________________________
Dated: _____________________, 19____.
Holder's Signature: _________________________________
Holder's Address: ___________________________________
_____________________________________________________
Signature Guaranteed:___________________________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatever, and must be guaranteed by a bank or trust company. Officers of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
38
<PAGE>
EXHIBIT C
ESCROW AGREEMENT
----------------
October 27, 1998
Shartsis, Friese & Ginsburg LLP
One Maritime Plaza, 18/th/ Floor
San Francisco, CA 94111
Ladies and Gentlemen:
As Escrow Agent for both VidaMed, Inc., a Delaware corporation ("Company"),
and the undersigned purchasers of stock (the "Stock") of the Company (the
"Purchasers "), you are hereby authorized and directed to hold the funds
delivered to you pursuant to the terms of that certain Purchase Agreement
("Agreement"), dated as of October 27, 1999, to which a copy of this Escrow
Agreement is attached as Exhibit C, in accordance with the following
instructions:
1. At the Closing (as defined in the Agreement), you are directed to
release to the Company any and all funds (the "Escrow Funds") deposited into the
Escrow Account (as defined in the Agreement) provided that the balance of the
Escrow Account is at least $4,000,000 but no more than $8,000,000. If, at the
Closing, the balance of the Escrow Account is less than $4,000,000 or greater
than $8,000,000, you shall return the Escrow Funds to the parties that deposited
said funds in to the Escrow Account. If the Closing has not occurred by October
29, 1999, you are directed to return the Escrow Funds to the parties that
deposited said funds in to the Escrow Account on the next business day. You
shall have no obligation to return any Escrow Funds if the depositor fails to
provide you with proof of deposit and wire transfer instructions indicating
where such funds are to be returned.
2. This escrow shall terminate at such time as there are no longer any
funds in the Escrow Account.
3. Your duties hereunder may be altered, amended, modified or revoked only
by writing signed by all of the parties hereto.
4. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties. You
shall not be personally liable for any act you may do or omit to do hereunder,
while acting in good faith, and any act done or omitted by you pursuant to the
advice of your own attorneys shall be conclusive evidence to such good faith.
39
<PAGE>
5. The Company and the Purchasers, jointly and severally, agree to
indemnify and defend Escrow Agent and its partners, employees, agents and
affiliates, and hold them harmless, from and against, any and all claims,
liabilities, damages, losses and expenses (including, without limitations, costs
of investigation, attorneys fees and expenses, expert witnesses' fees and
expenses, and court costs) suffered or incurred by any of such indemnified
persons as a result of or in connection with this Escrow Agreement, except such
as arise solely from the gross negligence, willful misconduct or bad faith of
Escrow Agent. In the event of any dispute as to the nature of the rights or
obligations of the Purchasers, the Company or Escrow Agent hereunder, Escrow
Agent may at any time or from time to time interplead, deposit and/or pay all or
any part of the Escrow Funds, together with interest thereon, with or to a court
of competent jurisdiction in Fremont, California (including the nearest federal
courts thereto), in accordance with the procedural rules thereof. Escrow Agent
shall give notice of such action to the Company and the Purchasers. On such
interpleader, deposit or payment, Escrow Agent shall immediately and
automatically be relieved of and discharged from all further obligations and
responsibilities hereunder, including the decision to interplead, deposit or pay
any thereof.
6. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law, and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court. In
case you obey or comply with any such order, judgment or decree of any court,
you shall not be liable to any of the parties hereto or to any other person,
firm or corporation by reason of such compliance, notwithstanding any such
order, judgment or decree being subsequently reversed, modified, annulled, set
aside, vacated or found to have been entered without jurisdiction.
7. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
8. You shall not be liable for the outlawing of any rights under the
statute of limitations with respect to this Escrow Agreement or any documents
deposited with you.
9. You shall be entitled to employ such legal counsel and other experts as
you may deem necessary or proper to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor from the Escrow Account.
10. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be counsel to the Company or if you shall resign by written
notice to each party. In the event of any such termination, the Company shall
appoint a successor Escrow Agent.
40
<PAGE>
11. If you reasonably require other or further instructions in connection
with this Escrow Agreement or obligations in respect hereto, the necessary
parties hereto shall join in furnishing such instruments.
12. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or rights of possession of the funds held by
you hereunder, you are authorized and directed to retain in your possession
without liability to any one all or any part of said funds until such dispute
shall have been settled either by mutual written agreement of the parties
concerned or by a final order, decree, or judgment of a court of competent
jurisdiction after the time for appeal has expired and no appeal has been
perfected, but you shall be under no duty whatsoever to institute or defend any
such proceedings.
13. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses, or at such other addresses as a party may designate by ten
(10) days' advance written notice to each of the other parties hereto.
COMPANY: VidaMed, Inc.
46107 Landing Parkway
Fremont, CA 94538
Attn: John Howe, CFO
Tel: 510-492-4000
Fax: 510-492-4999
PURCHASERS:
Circle F Ventures, LLC
14988 N. 78th Way
Suite 200
Scottsdale, Arizona 85260
Lewis & Paula Yarborough
Robert and Rebecca Williamson
Southwest Securities f/b/o Hayden R.
Fleming IRA
--------------------------------------------
Southwest Securities f/b/o LaDonna M.
Fleming IRA
--------------------------------------------
--------------------------------------------
41
<PAGE>
PURCHASERS:
-------------------------------------------
-------------------------------------------
Zesiger Capital Group, LLC
320 Park Avenue
New York, New York 10022
As agent and attorney-in-fact for
-------------------------------------------
-------------------------------------------
City of Milford Pension & Retirement Fund
-------------------------------------------
Norwalk Employees' Pension Plan
-------------------------------------------
The Jenifer Altman Foundation
-------------------------------------------
Dean Witter Foundation
-------------------------------------------
Roanoke College
-------------------------------------------
Butler Family LLC
-------------------------------------------
HBL Charitable Unitrust
-------------------------------------------
Andrew Heiskell
-------------------------------------------
Helen Hunt
-------------------------------------------
Jeanne L. Morency
-------------------------------------------
Psychology Associates
-------------------------------------------
Murray Capital, LLC
-------------------------------------------
Domenic J. Mizio
-------------------------------------------
Morgan Trust Co.of the Bahamas Ltd. as
Trustee U/A/D 11/30/93
-------------------------------------------
Susan Uris Halpern
-------------------------------------------
William B. Lazar
-------------------------------------------
Wells Family LLC
-------------------------------------------
Harold & Grace Willens JTWROS
-------------------------------------------
Albert L. Zesiger
-------------------------------------------
Barrie Ramsay Zesiger
-------------------------------------------
Wolfson Investment Partners LP
-------------------------------------------
ESCROW AGENT: Shartsis, Friese & Ginsburg LLP
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Attn: Steven O. Gasser, Esq.
Tel: 415-421-6500
Fax: 415-421-2922
14. By signing this Escrow Agreement, you become a party hereto only for
the purpose of said Escrow Agreement; you do not become a party to the
Agreement.
42
<PAGE>
15. This Escrow Agreement shall be binding upon and inure the benefit of
the parties hereto, and their respective successors and permitted assigns.
Very truly yours,
COMPANY: VIDAMED, INC.
A Delaware Corporation
47106 Landing Parkway
Fremont, California 94065
By: ____________________________
John F. Howe
Vice President and CFO
"Purchaser"
Zesiger Capital Group, LLC
as agent and attorney-in-fact
By: ____________________________
Albert L. Zesiger, Principal
For:
City of Milford Pension & Retirement Fund
-------------------------------------------
Norwalk Employees' Pension Plan
-------------------------------------------
The Jenifer Altman Foundation
-------------------------------------------
Dean Witter Foundation
-------------------------------------------
Roanoke College
-------------------------------------------
Butler Family LLC
-------------------------------------------
HBL Charitable Unitrust
-------------------------------------------
Andrew Heiskell
-------------------------------------------
Helen Hunt
-------------------------------------------
Jeanne L. Morency
-------------------------------------------
Psychology Associates
-------------------------------------------
Murray Capital, LLC
-------------------------------------------
Domenic J. Mizio
-------------------------------------------
Morgan Trust Co.of the Bahamas Ltd. as
Trustee U/A/D 11/30/93
-------------------------------------------
Susan Uris Halpern
-------------------------------------------
William B. Lazar
-------------------------------------------
Wells Family LLC
-------------------------------------------
Harold & Grace Willens JTWROS
-------------------------------------------
Albert L. Zesiger
-------------------------------------------
Barrie Ramsay Zesiger
-------------------------------------------
Wolfson Investment Partners LLP
-------------------------------------------
43
<PAGE>
"Company" "Purchaser"
VidaMed, Inc. Circle F Ventures, LLP
A Delaware Corporation
By: ____________________________ By: ____________________________
John F. Howe Hayden Fleming
Vice President and CFO President
For:
-----------------------------------------------
"Purchaser"
Lewis and Paula Yarborough
By: ____________________________
-----------------------------------------------
"Purchaser"
Robert and Rebecca Williamson
By: ____________________________
-----------------------------------------------
"Purchaser"
Southwest Securities f/b/o Hayden R. Fleming
IRA
By: ____________________________
-----------------------------------------------
"Purchaser"
Southwest Securities f/b/o LaDonna M. Fleming
IRA
By: ____________________________
-----------------------------------------------
44
<PAGE>
Agreed to and accepted as of the date set forth above:
ESCROW AGENT: SHARTSIS, FRIESE & GINSBURG LLP
One Maritime Plaza, 18/th/ Floor
San Francisco, California 94111
Attn: Steven O. Gasser
_________________________
Steven O. Gasser, Esq.
45
<PAGE>
EXHIBIT D
OPINION OF SHARTSIS, FRIESE & GINSBURG
46
<PAGE>
October 27, 1999
To each of the investors (the "Investors") named in the Schedule of Investors
attached as Exhibit A to the Stock Purchase Agreement dated of even date
herewith (the "Agreement") among the Investors and VidaMed, Inc., a Delaware
corporation (the "Company").
Ladies and Gentlemen:
We have acted as counsel for the Company in connection with the
issuance and sale by the Company to the Investors of up to 4,000,000 shares of
the Company's Common Stock (the "Purchased Shares") and related Warrants
pursuant to the Agreement. This opinion is furnished to you pursuant to Section
5.5 of the Agreement. Unless otherwise indicated in this letter, which includes
Attachment A hereto, all capitalized terms used herein have the meanings given
to those terms in the Agreement.
In connection with this opinion, we have examined such questions of
law as we deem advisable under the circumstances. As to questions of fact, we
have relied solely upon our examination of the documents referred to on
Attachment A and our actual knowledge. We have not examined any documents other
than those described on Attachment A or made any independent factual
investigation. No bring-down certificates, telegrams or telephonic advice of
the public officials referred to on Attachment A were obtained as of the date
hereof, nor, except as described on Attachment A, have we caused the search of
any docket of any court, tribunal, agency or similar authority or any other
record of any governmental agency or third party.
In our examination of documents, we have assumed the current accuracy
and completeness of (a) the information obtained from public officials and
records and reports of professional filing service companies included in the
documents referred to on Attachment A, and (b) the representations and
warranties made by representatives of the Company to us, including without
limitation, those set forth in the Management Certificate. We have also assumed
that all the representations and warranties made by the Company and the
Investors in, or pursuant to, the Closing Agreement to which the Company or any
Investor is a party or the Closing Document provided by any such person or
entity are true and complete in all respects. We have made no attempt to verify
the accuracy of any of such information, representations or warranties or to
determine the existence or non-existence of any factual matters other than those
described above.
In our examination of documents for purposes of this opinion, we have
assumed, and express no opinion as to, the genuineness of all signatures on
original documents, the authenticity and completeness of all documents submitted
to us as originals, the conformity to authentic originals and completeness of
all documents submitted to us as copies, the lack of any undisclosed
termination, modification, waiver or amendment to any document reviewed by us,
the legal competence or capacity of all natural persons executing the same and
the due authorization, execution and delivery of all documents where due
authorization, execution and delivery are prerequisites to the effectiveness
thereof.
47
<PAGE>
For the purposes of this opinion, we have also assumed that: (a) the
Investors have fully paid all required consideration for the Purchased Shares
and Warrants to the Company as provided in the Agreement and have fully
performed all the other obligations that they are to perform at or before the
Closing; and (b) the Closing Agreement is duly enforceable in accordance with
its respective terms against, and constitutes the legal, valid and binding
obligations of, each of the parties thereto other than the Company.
As used in this opinion, the phrases "our actual knowledge," "to our
knowledge" "we are not aware," "known to us" or words of similar import refer
only to the actual knowledge of the attorneys currently in this firm who have
rendered legal services to the Company in connection with the Agreement and mean
that, while such attorneys have not been informed by the Company that the
matters stated are factually incorrect, we have made no investigation of such
matters other than our examination of documents referred to on Attachment A. No
inference as to our knowledge of any matters bearing on the accuracy of any such
statement should be drawn from the fact of our representation of the Company.
This opinion is qualified by, and is subject to, and we render no
opinion with respect to, general limitations and exceptions applicable to all
contracts, including, without limitation:
(a) the effect of bankruptcy, insolvency, reorganization, arrangement,
moratorium, fraudulent conveyance and other similar laws relating to or
affecting the rights of creditors;
(b) the effect of general principles of equity and similar principles,
including, without limitation, concepts of materiality, reasonableness, public
policy and unconscionability and the possible unavailability of specific
performance, injunctive relief or other equitable remedies, regardless of
whether considered in a proceeding in equity or at law; and
(c) the effect of Section 1670.5 of the California Civil Code regarding
unconscionability and of California court decisions indicating that certain
covenants and provisions of agreements are unenforceable where (i) the breach of
such covenants or provisions imposes restrictions or burdens upon the other
party and it cannot be demonstrated that the enforcement of such restrictions or
burdens is reasonably necessary for the protection of the party seeking to
enforce such provisions or (ii) the enforcement of such covenants or provisions
under the circumstances would violate the implied covenant of good faith and
fair dealing.
We render no opinion with respect to: (a) the enforceability of the
indemnification and contribution provisions of the Rights Agreement; (b)
compliance or noncompliance with antifraud provisions of applicable state and
federal statutes, rules and regulations concerning the issuance and sale of
securities; and (c) the effect of California, federal or other laws relating to
usury or permissible rates of interest or other charges for loans, forbearances
or the use of money.
In rendering the opinion expressed in paragraph 1 below regarding the good
standing of the Company, we have relied solely on the certification of the
Company's good standing set forth in the Certificates of Good Standing described
on Attachment A.
48
<PAGE>
In rendering the opinion expressed in paragraph 5 below, we have assumed:
(a) that the offer and sale of the Purchased Shares and Warrants is not
integrated with any other securities offering of the Company; (b) that
appropriate restrictive legends are and will be affixed to each certificate
representing Purchased Shares, which legends can and will be removed (regardless
of any provision to the contrary in the Agreement or the Closing Agreement) only
at such time as the Purchased Shares are publicly resold pursuant to an
effective registration statement under the Securities Act and as the reseller
complies with the prospectus delivery requirements of the Securities Act in
connection therewith; and (c) the accuracy and completeness of the information
provided by the Company to the Investors in connection with such offer and sale.
We have also relied upon the Investors' representations in the Closing Agreement
and the Closing Documents, and the Company's representations to us in the
Management Certificate, including, without limitation, that, the Company has
made no offer to sell the Purchased Shares by means of any "general
solicitation" (as defined in Regulation D under the Securities Act of 1933, as
amended) or the "publication of any advertisement" (as defined under the
California Corporate Securities Act of 1968, as amended, and the regulations
thereunder) and that no offer or sale of the Purchased Shares has been made or
will be made in any state other than California.
We are admitted to practice law only in the State of California, and we
express no opinion herein with respect to the application or effect of the laws
of any jurisdiction other than the existing laws of the State of California, the
existing Delaware General Corporation Law without reference to case law or
secondary sources and the existing federal laws of the United States of America.
Our opinion is limited to such California and United States federal statutes,
laws, rules or regulations and provisions of the Delaware General Corporation
Law as in our experience are of general application to transactions of the sort
provided for in the Closing Agreement.
We also call your attention to the fact that under the 1989 Report of
the Committee on Corporations of the Business Law Section of the State Bar of
California Regarding Legal Opinions in Business Transactions, certain
assumptions, qualifications and exceptions are implicit in opinions of lawyers.
Although we have expressly set forth some assumptions, qualifications and
exceptions herein, we are not limiting or omitting any others set forth in the
various reports or otherwise deemed standard by practice for lawyers in
California.
Based upon the foregoing, subject to the assumptions and qualifications
referred to herein and except as may be otherwise set forth in the Company's
Schedule of Exceptions attached to the Agreement, it is our opinion that as of
immediately prior to the Closing:
l. The Company has been duly incorporated and organized, and is validly
existing in good standing, under the laws of the State of Delaware. The Company
has the corporate power and authority to enter into and perform the Closing
Agreement, to own and operate its properties and assets and to carry on its
business as currently conducted.
2. The Restated Certificate and the Closing Agreement have been duly
adopted and authorized, respectively, by all necessary corporate action on the
part of the Company's Board of Directors and, where required, the Company's
stockholders. The Closing Agreement has been
49
<PAGE>
duly executed on behalf of the Company and delivered by the Company to the
Investors. The Closing Agreement constitutes the valid and binding obligation of
the Company enforceable against the Company in accordance with its terms, except
that we express no opinion herein regarding the validity, binding effect on
enforceability of Section 8.3 of the Agreement.
3. The execution and delivery of the Closing Agreement by the Company and
the performance by the Company of its obligations under the Closing Agreement do
not conflict with or result in a violation of, the Restated Certificate or
Bylaws.
4. The Purchased Shares and Warrants, when issued and paid for as provided
in the Agreement, will be duly authorized and validly issued, fully paid and
nonassessable. The Warrant Shares have been duly and validly reserved for
issuance upon exercise of the Warrants and, when issued and paid for upon
exercise in accordance with the Warrant and the Restated Certificate (assuming
no change in applicable law, the Warrant or the Restated Certificate), the
Warrant Shares will be duly authorized and validly issued, fully paid and
nonassessable.
5. To our knowledge, all approvals, consents, or authorizations of, and
filings with, any U.S. federal, California State or Delaware State governmental
authority required on the part of the Company to enable the Company to execute,
deliver and perform its obligations under the Closing Agreement have been made.
In rendering the opinions above, we are opining only as to the
specific legal issues expressly set forth herein, and no opinion shall be
inferred as to other matters. This opinion is intended solely for the
Investors' use for the purpose of the above transaction, and is not to be made
available to or relied upon for any other purpose or by any other person or
entity, without our prior written consent. We assume no obligation to advise
you of any fact, circumstance, event or change in the law or the facts that may
hereafter be brought to our attention whether or not they would affect or modify
the opinions expressed herein.
Very truly yours,
SHARTSIS, FRIESE & Ginsburg LLP
By: _____________________________
Steven O. Gasser, a Partner
50
<PAGE>
EXHIBIT E
---------
VIDAMED, INC.
ADDENDUM TO
STOCK PURCHASE AGREEMENT
------------------------
This Addendum to Stock Purchase Agreement (the "Addendum") is made as of
--------
the ___ day of ___________, 1999 by and among VidaMed, Inc., a Delaware
corporation (the "Company"), and the individuals and entities listed on the
-------
signature page attached hereto (the "Additional Purchasers").
---------------------
RECITALS
--------
On October 27, 1999 the Company entered into a Stock Purchase Agreement
(the "Purchase Agreement") with certain investors set forth on Exhibit A
------------------ ---------
attached thereto. The Purchase Agreement provides in Section 2.2 thereof that
additional investors may, under conditions set forth therein, become parties to
the Purchase Agreement at any time on or before November 24, 1999.
AGREEMENT
---------
In consideration of the mutual promises, covenants and conditions
hereinafter set forth, the parties hereto mutually agree as follows:
1. Authorization and Sale of Preferred Stock.
-----------------------------------------
1.1 Authorization of Preferred Stock. The Company will, prior to the
--------------------------------
Closing (as defined in Section 2.1 below), authorize the issuance pursuant to
this Addendum of authorized by unissued shares of its Common Stock (the
"Additional Shares").
-----------------
1.2 Sale of Additional Stock. Subject to the terms and conditions
------------------------
hereof, at the Closing the Company will issue and sell to each Additional
Purchaser, and each Additional Purchaser severally agrees to purchase from the
Company, that number of Additional Shares specified opposite such Additional
Purchaser's name on Exhibit A hereto, at a cash purchase price of $2.00 per
----------
share. Each of the Additional Purchasers, by their signatures hereto, shall
hereby (i) become parties to the Purchase Agreement, (ii) be considered a
"Purchaser" for all purposes under the Purchase Agreement and (iii) have all the
---------
rights and obligations of a Purchaser thereunder. The Additional Shares
acquired by the Additional Purchasers hereunder shall be considered "Shares" for
------
all purposes under the Purchase Agreement, as amended.
2. Closing; Delivery.
-----------------
2.1 Closing. The closing of the purchase and sale of the Additional
-------
Shares hereunder (the "Closing") shall be held at the principle office of the
-------
Company at
51
<PAGE>
10:00 a.m., on __________, 1999, or at such other time and place as the Company
and the Additional Purchasers may agree.
2.2 Delivery. At the Closing, the Company will deliver to each
--------
Additional Purchaser a certificate representing the number of Additional Shares
set forth opposite such Additional Purchaser's name on Exhibit A, against
---------
payment of the purchase price therefor by each Additional Purchaser by wire
transfer to the Company.
3. Disclosure.
----------
3.1 Disclosure. Each Additional Purchaser hereby acknowledges
----------
receipt of the Purchase Agreement and the exhibits thereto. The Company affirms
to each Additional Purchaser that:
(a) The representations and warranties of the Company set forth in
Section 3 of the Purchase Agreement were true and accurate when made;
(b) The representations and warranties of the Company set forth in
Section 3 of the Purchase Agreement, which are incorporated herein by this
reference and made a part hereof, remain true and accurate as of the date
hereof, except (A) for changes resulting from the transactions contemplated in
the Purchase Agreement, and (B) as set forth in the Schedule of Exceptions to
Representations and Warranties attached hereto as Exhibit B.
---------
(c) The conditions to closing set forth in Section 4 of the
Purchase Agreement and in Section 6 hereof have been satisfied, provided that
the conditions set forth in Section 5.1, 5.2 and 5.3 of the Purchase Agreement
shall include references to changes as set forth in Section 3.1 of this
Addendum.
4. Representations and Warranties of Additional Purchasers. Each
-------------------------------------------------------
Additional Purchaser acknowledges that such Additional Purchaser has reviewed
the representations and warranties set forth in Section 4 of the Purchase
Agreement and agrees with the Company that such representations and warranties,
which are incorporated herein by this reference and made a part hereof, are true
and correct as of the date hereof as they relate to such Additional Purchaser's
purchase of the Additional Shares hereunder.
5. Conditions to Additional Purchasers' Obligations at Closing. The
-----------------------------------------------------------
obligation of each Additional Purchaser to purchase the Additional Shares at the
Closing is subject to the fulfillment to such Additional Purchaser's
satisfaction at or prior to the Closing of the following conditions:
5.1 Representations and Warranties Correct; Performance of
------------------------------------------------------
Obligations. The representations and warranties made by the Company in Section
- -----------
3 hereof shall be true and correct when made, and shall be true and correct on
the date of the Closing with the same force and effect as if they had been made
on and as of said date, subject to changes contemplated by this Addendum; and
the Company shall have
52
<PAGE>
performed all obligations and conditions herein required to be performed or
observed by it at or prior to the Closing.
5.2 Consents and Waivers. The Company shall have obtained any and
--------------------
all consents and waivers necessary or appropriate for consummation of the
transactions contemplated by this Addendum.
5.3 Legal Opinion. Upon request, each of the Additional Purchasers
-------------
will be entitled to receive from legal counsel for the Company, a legal opinion
substantially in the form delivered to the investors pursuant to Section 5.5 of
the Purchase Agreement.
6. Conditions to Company's Obligations at Closing. The obligations of the
----------------------------------------------
Company under Sections 1.1 and 1.2 of this Addendum are subject to the
fulfillment at or before the Closing of each of the following conditions:
6.1 Representations and Warranties. The representations and
------------------------------
warranties of each Additional Purchaser contained in Section 4 hereof shall be
true at the Closing.
6.2 Consents and Waivers. The Company shall have obtained any and
--------------------
all consents and waivers necessary or appropriate for the Purchasers to become
parties to the Investors' Rights Agreement and the Voting Agreement and for the
consummation of the transactions contemplated by this Addendum.
7. Miscellaneous.
-------------
7.1 Counterparts. This Addendum may be executed in any number of
------------
counterparts, each of which may be executed by less than all of the Additional
Purchasers, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
[Signature Page Follows]
53
<PAGE>
The parties hereto have executed this Addendum as of the date first set
forth above.
VIDAMED, INC.
By:
----------------------------------------------
Address: 46107 Landing Parkway
Fremont, CA 94538
PURCHASER:
By:
----------------------------------------------
Name:
--------------------------------------------
(Print)
Title:
-------------------------------------------
(If applicable)
54
<PAGE>
Exhibit F
Use of Proceeds
The net proceeds to the Company from the sale of the common stock under
this Purchase Agreement at a price of $2.00 per share will approximate
$4,300,000 after deducting the estimated fees, commissions, and expenses of the
Offering payable by the Company.
The Company intends to use the proceeds to expand its sales and marketing
efforts, fund continued product development, and provide for further clinical
research.
55
<PAGE>
APPENDIX I
TO THE
PURCHASE AGREEMENT
VIDAMED, INC.
PURCHASER QUESTIONNAIRE
In connection with the preparation of the Registration Statement, please provide
us with the following information regarding the Purchaser.
1. Please state your organization's name exactly as it should appear in the
Registration Statement:
2. Have you or your organization had any position, office or other material
relationship within the past three years with the Company or its affiliates
other than as disclosed in the Prospectus included in the Registration
Statement?
_______________ Yes _______________ No
If yes, please indicate the nature of any such relationship below:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
3. Do you own any securities of the Company, other than those shares of Common
Stock or Warrants to be sold pursuant to the Registration Statement?
_______________ Yes _______________ No
If yes, please indicate class of security and number of shares owned below:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
56
<PAGE>
EXHIBIT 99.1
VidaMed Reports Improved Results for the Third Quarter
Highlights Include Increased Procedure Volume, Higher Gross Margins
FREMONT, Calif.--(BW HealthWire)--Oct. 28, 1999--VidaMed, Inc. (NASDAQ NM: VIDA-
news) today reported financial results for the three and nine months ended
September 30, 1999.
Third quarter 1999 sales were up 129% to $1,487,000, compared with $650,000
recorded in the prior-year third quarter before the $2,738,000 sales return
reserve related to delays in Medicare reimbursement last year. On a sequential-
quarter basis, sales were up 21%. U.S. sales were driven by fee-per-use TUNA
System (Transurethral Needle Ablation) procedure volume gains, which were up 70%
compared with the second quarter of 1999. In the U.S., a total of 697 TUNA
procedures were performed in the 1999 third quarter, more than triple the 225
procedures performed last year. The net loss narrowed to $2,769,000, or $0.13
per share, from $6,900,000, or $0.35 per share, in the previous year. The 1999
second quarter net loss was $3,485,000, or $0.17 per share.
For the nine months ended September 30, 1999, VidaMed reported a net loss of
$9,411,000, or $0.46 per share, on sales of $3,749,000. This compares with a net
loss of $16,378,000, or $0.93 per share, on sales of $487,000 in the prior-year
period. Cash and equivalents stood at $1,370,000 at September 30, 1999.
"VidaMed continues to make excellent progress in growing both its fee-per-use
sales and its overall customer base," commented Randy Lindholm, President and
Chief Executive Officer. "We are beginning to see the results of our focussed
sales and marketing strategy and awareness initiatives. As of October 1, 1999 we
have reached reimbursement critical mass with 41 states now approving the TUNA
procedure for medical coverage. We are confident that growing numbers of men
suffering from benign prostatic hyperplasia will choose to be treated with our
TUNA system."
Mr. Lindholm went on to say, "Gross margins improved dramatically to 61% this
quarter from 47% in the June quarter. Our increased fee-per-use sales have
directly led to this margin expansion. We continue to thoughtfully manage our
spending rate
<PAGE>
and, as announced yesterday, have secured a net $4.3 million in additional
financing."
As reported in various Company SEC filings, VidaMed recently has been informed
by the NASD that it does not meet all requirements for continued listing of the
Company's common stock on the National Market System. VidaMed has submitted
various documents to the NASD and will be meeting with officials on November 4th
to provide an update on the current business situation and financing status, as
well as to discuss the prospects of continued national listing or moving trading
of the Company's common stock to the NASDAQ Small Cap market.
Additionally, the Company also announced that during the September quarter,
VidaMed and Medtronic (NYSE: MDT - news) expanded the scope of their sales and
marketing agreement for Australia to also include Singapore.
Also, on October 5 VidaMed was featured on the CNBC television show The Edge.
Interested parties can view this segment on VidaMed's Web site, www.vidamed.com,
in addition to an interview with Randy Lindholm that appeared in the September
27 edition of The Wall Street Transcript.
VidaMed designs, develops and markets technologically and clinically advanced
cost-effective systems for the treatment of urological conditions. The Company's
primary product, the VidaMed TUNA System (Transurethral Needle Ablation), offers
a minimally invasive treatment of symptoms associated with benign prostatic
hyperplasia (BPH), or enlarged prostate. For investor information on VidaMed,
please call 888-301-2498 or visit VidaMed's Web site at http://www.vidamed.com.
The forward-looking statements in this news release relating to the increasing
demand for the TUNA procedure and the expectation of Medicare reimbursement,
contain forward-looking information and are subject to risks and uncertainties,
including the rate of adoption of the TUNA procedure by the medical community,
the impact of competitive treatments, products and pricing, the development and
effectiveness of the Company's sales organization and marketing efforts,
continued listing on NASDAQ national market, and other risks, including those
set forth in the Company's Quarterly and Annual Reports filed with the
Securities and Exchange Commission on August 31, 1999. The Company's actual
results may differ significantly from the results anticipated by the forward-
looking statements as a result of these or other factors.
Financial Tables to Follow-
<PAGE>
VIDAMED, INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
------- ------- ------- --------
<S> <C> <C> <C> <C>
Revenue $ 1,487 $(2,088) $ 3,749 $ 487
Cost of products
sold 579 954 2,059 2,634
------- ------- ------- --------
Gross profit 908 (3,042) 1,690 (2,147)
Operating expenses:
Research and
development 683 1,136 2,238 3,471
Selling, general and
administrative 2,934 2,802 8,847 10,705
------- ------- ------- --------
Total operating
Expenses 3,617 3,938 11,085 14,176
------- ------- ------- --------
Operating loss (2,709) (6,980) (9,395) (16,323)
Other income
(expense) (60) 80 (16) (55)
------- ------- ------- --------
Net loss $(2,769) $(6,900) $(9,411) $(16,378)
======= ======= ======= ========
Basic and Diluted
Net loss per
share $(0.13) $(0.35) $(0.46) $(0.93)
======= ======= ======= ========
Shares used in
computing Basic
and Diluted net
loss per share 20,653 19,925 20,505 17,536
======= ======= ======= ========
</TABLE>
<PAGE>
VIDAMED, INC.
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
Sept. 30, Dec. 31,
1999 1998
----------- -------
(Unaudited) (Note)
<S> <C> <C>
Assets:
Cash, cash equivalents
and short-term investments $ 1,370 $ 9,384
Other current assets
2,766 2,636
Property and equipment, net
1,181 1,797
Other assets, net
202 315
------ -------
Total assets $5,519 $14,132
====== =======
Liabilities and stockholders'
equity (deficit):
Notes payable, current portion $1,179 $ 764
Accounts payable and accrued liabilities 3,248 4,031
Deferred revenue 97 229
Notes payable, noncurrent 1,235 1,785
Total liabilities 5,759 6,809
Stockholders' equity (deficit) (240) 7,323
Total liabilities and stockholders'
equity (deficit) $5,519 $14,132
</TABLE>
Note: These amounts have been derived from audited financial statements
Contact:
Company Contact:
VidaMed, Inc.
Randy Lindholm, President & CEO
510/492-4925
or
John Howe, Chief Financial Officer
510/492-4900
www.vidamed.com
or
Investor Contact:
Lippert Heilshorn & Associates
Bruce Voss ([email protected])
310/575-4848
<PAGE>
Kim Sutton Golodetz ([email protected])
212/838-3777
or
Media Contact:
Elissa Grabowski ([email protected])
212/838-3777
www.lhai.com
<PAGE>
Exhibit 99.2
VidaMed Completes $4.4 Million Financing
FREMONT, Calif.--(BW HealthWire)--Oct. 29, 1999--VidaMed, Inc. (NASDAQ NM: VIDA
- - news) today announced that existing Company institutional shareholders have
purchased 2.2 million shares of VidaMed common stock at $2.0 per share, with net
proceeds to the Company of $4.3 million.
"VidaMed has reached a critical mass from a reimbursement and market opportunity
standpoint, as demonstrated by our ability to consistently grow the number of
new customers and TUNA procedures performed" commented Randy Lindholm, President
and Chief Executive Officer. "This financing will enable us to continue the
momentum gained during 1999."
VidaMed designs, develops and markets technologically and clinically advanced
cost-effective systems for the treatment of urological conditions. The Company's
primary product, the VidaMed TUNA System (Transurethral Needle Ablation), offers
a minimally invasive treatment of symptoms associated with benign prostatic
hyperplasia (BPH), or enlarged prostate. For investor information on VidaMed,
please call 888-301-2498 or visit VidaMed's Web site at http://www.vidamed.com.
Certain statements in this news release, including, but not limited to,
statements relating to the increasing demand for the TUNA procedure and the
expectation of Medicare reimbursement, contain forward-looking information.
Actual results may vary significantly from those anticipated in such forward-
looking statements due to risks and uncertainties, including the rate of
adoption of the TUNA procedure by the medical community, the impact of
competitive treatments, products and pricing, the development and effectiveness
of the Company's sales organization and marketing efforts, continued listing on
NASDAQ national market, and other risks, including those set forth in the
Company's amended Quarterly Reports on Form 10-Q filed with the Securities and
Exchange Commission on August 31, 1999 and the Company's amended Registration
Statement filed on Form S-3 filed with the Securities and Exchange Commission on
September 13, 1999. The Company's actual results may differ significantly from
the results anticipated by the forward-looking statements as a result of these
or other factors.
Contact:
VidaMed, Inc., Fremont
Randy Lindholm, 510/492-4925
President & CEO
or John Howe, 510/492-4900
Chief Financial Officer
www.vidamed.com
or
<PAGE>
Lippert Heilshorn & Associates
Investor Contact
Bruce Voss, 310/575-4848
[email protected]
or Kim Sutton Golodetz, 212/838-3777
[email protected]
or Media Contact
Elissa Grabowski, 212/838-3777
[email protected]
www.lhai.com
