EXHIBIT 6
CARDIAC PATHWAYS CORPORATION
SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
MAY 20, 1999
TABLE OF CONTENTS
PAGE
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1. Sale of Stock............................................................................1
2. Closing Date.............................................................................2
3. Delivery.................................................................................2
4. Representations and Warranties of the Company............................................2
(a) Corporate Power...................................................................2
(b) Authorization.....................................................................3
(c) Capital Structure.................................................................3
(d) Valid Issuance of Stock...........................................................5
(e) No Conflict; Required Filings and Consents........................................5
(f) Litigation........................................................................6
(g) Charter Documents; Subsidiaries...................................................6
(h) Absence of Certain Developments...................................................6
(i) Absence of Undisclosed Liabilities................................................6
(j) Non-Contravention.................................................................7
(k) Filings...........................................................................8
(l) Employee Matters and Benefit Plans................................................8
(m) Labor Matters....................................................................11
(n) Title to Property................................................................11
(o) Taxes............................................................................12
(p) Compliance with Laws.............................................................12
(q) Environmental Matters............................................................13
(r) Intellectual Property............................................................14
(s) Personnel........................................................................14
(t) Year 2000 Compliance.............................................................14
(u) No Brokers.......................................................................15
(v) Chief Executive Officer..........................................................15
(w) Registration Rights..............................................................15
(x) Permits..........................................................................15
(y) Royalties........................................................................15
(z) Real Property Holding Corporation................................................15
(aa) Investment Company Act...........................................................16
(bb) Qualified Small Business.........................................................16
(cc) Small Business Concern...........................................................16
(dd) Broker's or Finder's Fee.........................................................16
(ee) Vote Required....................................................................16
5. Representations and Warranties of the Purchasers........................................17
(a) Corporate Power..................................................................17
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(b) Authorization....................................................................17
(c) Governmental Approvals...........................................................17
(d) Non-Contravention................................................................17
(e) Risk Factors.....................................................................18
(f) No Brokers.......................................................................18
6. Compliance with Securities Laws and Restrictions on Transfer of Securities..............18
(a) Additional Representations and Warranties and Agreements of Each
Purchaser........................................................................18
(b) Stop Transfer Orders.............................................................21
(c) Compliance with Section 6........................................................21
7. Additional Covenants of the Purchasers Regarding Securities.............................21
(a) Forms 13D or 13G.................................................................21
(b) Insider Trading Policy; Short Sales..............................................21
(c) Material Confidential Information................................................22
(d) Reporting Obligations Pursuant to Section 16.....................................23
8. Additional Covenants of the Company.....................................................23
(a) Inspection.......................................................................23
(b) Board of Directors...............................................................23
(c) Right of First Offer.............................................................24
(d) Sonometrics License..............................................................26
(e) Chief Executive Officer..........................................................26
(f) Reverse Stock Split..............................................................26
(g) Reservation of Common Stock......................................................27
(h) Proprietary Information and Inventions Agreement.................................27
(i) Qualified Small Business.........................................................27
(j) Small Business Administration Matters............................................27
(k) Regulatory Compliance Cooperation................................................28
(l) Proxy Statement..................................................................28
(m) Stockholder Approvals; Recommendations...........................................29
(n) Notices of Certain Events........................................................30
(o) Efforts..........................................................................30
(p) No Solicitation..................................................................31
9. Closing Conditions......................................................................32
(a) Conditions to Purchaser's Obligations at the Closing.............................32
(b) Conditions to Company's Obligations at the Closing...............................34
10. General Provisions......................................................................35
(a) Notices..........................................................................35
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(CONTINUED)
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(b) Governing Law....................................................................37
(c) Amendments.......................................................................37
(d) Assignment.......................................................................37
(e) Expenses.........................................................................38
(f) Counterparts.....................................................................38
(g) Entire Agreement.................................................................38
(h) Titles...........................................................................38
(i) Termination......................................................................39
(j) Effect of Termination............................................................39
EXHIBITS
A. CERTIFICATE OF DESIGNATION
B. DISCLOSURE SCHEDULE
C. REGISTRATION RIGHTS AGREEMENT
D. VOTING AGREEMENT
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CARDIAC PATHWAYS CORPORATION
SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
THIS CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (the "AGREEMENT") is
made as of May 20, 1999 between Cardiac Pathways Corporation, a Delaware
corporation having its principal executive office at 995 Benecia Avenue,
Sunnyvale, California 94086 (the "Company"), and the purchasers listed on
Schedule A hereto, each of which is herein referred to as a "PURCHASER" and
collectively, the "PURCHASERS".
RECITALS
A. The parties desire that the Purchasers make an equity investment
of between $25,000,000 and $40,000,000 in the Company pursuant to the terms and
conditions of this Agreement.
B. The shares of Series B Convertible Preferred Stock issued to the
Purchasers pursuant to this Agreement shall have registration rights and other
rights as evidenced by the Registration Rights Agreement in the form attached
hereto as Exhibit C (the "RIGHTS AGREEMENT").
C. In order to induce the Purchasers to enter into this Agreement,
certain directors, certain officers, and certain stockholders of the Company
have entered into a voting agreement in the form attached hereto as Exhibit D
(the "VOTING AGREEMENT") with the Company, pursuant to which they have agreed to
vote to approve the transaction contemplated hereunder.
D. In partial consideration of the Purchasers' investment in the
Company, three nominees of the Purchasers shall be elected to the Board of
Directors of the Company pursuant to the terms and conditions set forth in the
Rights Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and promises set forth in this Agreement, the parties agree as
follows:
1. Sale of Stock.
(a) The Company hereby agrees to sell to the Purchasers or
their designees, and the Purchasers or their designees hereby agree to purchase
from the Company in the amounts listed on Schedule A hereto, which are inclusive
of any Shares (as defined below) issued upon cancellation of notes issued by the
Company to the Purchasers, for aggregate consideration of between $25.0 and
$40.0 million, up to 40,000 shares of the Company's Series B Convertible
Preferred Stock (the "SHARES") at the per share purchase price (the "PER SHARE
PURCHASE PRICE") equal to 1,000 times the lower of (i) $1.00 or (ii) average
trading price of the Company's common stock (the "COMMON STOCK") on the five (5)
trading days immediately prior to the date of the public announcement of this
private placement, as reported on the Nasdaq National Market. Additional
Purchasers may be added to Schedule A after the date of this Agreement at the
sole discretion of the majority in interest of the Purchasers as set forth on
Schedule A.
(b) The Shares shall have the respective rights, preferences
and privileges set forth in a certificate of designation attached hereto as
Exhibit A (the "CERTIFICATE OF DESIGNATION"), which shall be approved by the
Purchasers and filed on or prior to the Closing Date (as defined below) by the
Company with the Secretary of State of Delaware.
2. Closing Date. The closing of the purchase and sale of the Shares
hereunder (the "CLOSING") will take place, upon the satisfaction of the
conditions to closing set forth in Section 9 hereof, at the offices of Wilson
Sonsini Goodrich & Rosati, Professional Corporation, 650 Page Mill Road, Palo
Alto, California, as soon as practicable but in any event, subject to applicable
law, no later than the earlier to occur of five (5) business days after the last
of the conditions set forth in Section 9 hereof have been satisfied or October
31, 1999. The date of the Closing is hereinafter referred to as the "Closing
Date."
3. Delivery. At the Closing, the Company will deliver a certificate
registered in each Purchaser's name representing the Shares to be purchased by
such Purchaser. Such delivery shall be against payment of the purchase price
therefor or by cancellation of notes delivered by the Purchasers to the Company,
or a combination of each of the foregoing, in an amount equal to the product of
the number of Shares and the Per Share Purchase Price (the "PURCHASE PRICE") by
wire transfer to the Company's bank account at:
Bank Name: Citibank
Bank Address: 111 Wall Street
New York, NY 10005
Contact: David L. Hayes (415-576-2148)
ABA#: 021000089
Account Name: Morgan Stanley
Account Number: # 3889-0774
FBO CPC # 14-78247
4. Representations and Warranties of the Company. The Company
hereby represents and warrants to the Purchasers as follows, except as set forth
on a Disclosure Schedule (the "DISCLOSURE SCHEDULE") attached hereto as Exhibit
B and furnished to each Purchaser, which exceptions shall be deemed to be
representations and warranties as if made hereunder
(a) Corporate Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is qualified to do business as a foreign corporation in each
jurisdiction where failure to qualify would not, individually or in the
aggregate, (i) adversely affect the legality, validity or enforceability of this
Agreement, the Voting Agreement or the Rights Agreement in any material respect,
(ii) have or result in a Material Adverse Effect on the results of operations,
assets, prospects or financial condition of the Company, taken as a whole or
(iii) adversely impair the Company's ability to perform fully on a timely basis
its obligations under this Agreement, the Voting Agreement or the Rights
Agreement (any of (i), (ii) or (iii), being a "MATERIAL ADVERSE EFFECT"). The
Company has full corporate power and authority to own its property, to carry on
its business as presently conducted and to carry out the transactions
contemplated hereby.
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(b) Authorization. The Company has full corporate power to
execute, deliver and perform this Agreement, the Voting Agreement and the Rights
Agreement, and each such agreement has been duly executed and delivered by the
Company and is the legal, valid and, assuming due execution by the Purchaser,
binding obligation of the Company, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, moratorium, reorganization or
similar laws affecting creditors' rights generally, and to general equitable
principles. The execution, delivery and performance by the Company of this
Agreement, the Voting Agreement and the Rights Agreement, including the issuance
(or reservation for issuance), sale and delivery of the Shares contemplated by
Section 1 hereof and the Common Stock issuable upon conversion thereof, have
been duly authorized by all necessary corporate action on the part of the
Company, its officers, directors and stockholders; provided, however, that the
Company makes no representation or warranty as to the enforceability of the
indemnification and contribution provisions of Section 5 of the Rights Agreement
to the extent that the provisions thereof may be subject to limitations of
public policy and the effect of applicable statutes and judicial decisions. The
Board of Directors of the Company (at a meeting duly called and held) has (a)
determined that the sale of the Shares is advisable and fair and in the best
interests of the Company and its stockholders, and (b) recommended the approval
and adoption of this Agreement and approval of the sale of the Shares by the
stockholders and directed that this Agreement and the sale of the Shares by
submitted for consideration by the Company's stockholders. The Board of
Directors of the Company has taken all action necessary to render inapplicable,
as it relates to Purchasers, the provisions of Section 203 of the Delaware
General Corporation Law (the "DGCL"). No other corporate action on the part of
the Company is necessary to authorize the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby
(other than, in the case of this Agreement, the approval of the sale of the
Shares by the holders of at least a majority of the Common Stock voting at the
meeting held to consider sale of the Shares).
(c) Capital Structure.
(i) The authorized capital stock of the Company
consists of 30,000,000 shares of Common Stock, $.001 par value per share, and
5,000,000 shares of Preferred Stock, $.001 par value per share, of which 30,000
shares have been designated Series A Participating Preferred Stock, 50,000
shares have been designated Series B Convertible Preferred Stock and 4,920,000
are undesignated. As of the date hereof, (i) 10,038,578 shares of Common Stock,
all of which are validly issued, fully paid and nonassessable, no shares of
Series A Participating Preferred Stock and no shares of Series B Convertible
Preferred Stock were issued and outstanding; (ii) no shares were held in
treasury by the Company or by any subsidiaries of the Company; (iii) 2,866,629
shares of Common Stock were reserved for issuance under the Company's stock
plans (including (A) 1,442,440 shares of Common Stock reserved for issuance
under the 1991 Stock Option Plan, 1,067,591 shares of which were subject to
outstanding options and 374,849 of which were reserved for future grants, (B)
60,000 shares of Common Stock were reserved for issuance under the 1996 Director
Option Plan, 33,000 shares of which were subject to outstanding options and
27,000 of which were reserved for future grants, (C) 400,000 shares of Common
Stock were reserved for issuance under the 1998 Non-Statutory Stock Option Plan,
143,818 of which were subject to outstanding options and 256,182 shares of which
were available for future grants, (D) 920,506
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shares of Common Stock were reserved for issuance under the 1998 Employee Stock
Purchase Plan, 40,506 shares of which were available for future purchase in
fiscal 1999 and 880,000 of which may be purchased in maximum amounts of 200,000
shares per fiscal year commencing July 1, 1999 and (E) 43,683 shares were
subject to an outstanding nonstatutory option granted outside of the plans);
collectively the Company's "STOCK PLANS;" and (iv) 143,141 shares of Common
Stock and related Preferred Stock Purchase Rights were subject to outstanding
warrants to purchase such shares. All shares of the Company's Common Stock
subject to issuance as specified above, on the terms and conditions specified in
the instruments pursuant to which they are issuable, shall be duly authorized,
validly issued, fully paid and nonassessable. There are no obligations,
contingent or otherwise, of the Company or any of its subsidiaries to
repurchase, redeem or otherwise acquire any shares of the Company's capital
stock or the capital stock of any of the Company's subsidiaries or make any
investment (in the form of a loan, capital contribution or otherwise) in any
such subsidiary or any other entity other than as contemplated by this
Agreement. All of the outstanding shares of capital stock of each subsidiary of
the Company are duly authorized, validly issued, fully paid and nonassessable,
and all such shares (other than directors' qualifying shares) are owned by the
Company or another subsidiary of the Company free and clear of all security
interests, liens, claims, pledges, agreements, limitations on the Company's
voting rights, charges or other encumbrances of any nature. The Common Stock is
quoted on the Nasdaq National Market.
(ii) Except as set forth in Section 4(c)(i), there
are no equity securities of any class of capital stock of the Company, or any
security exchangeable into or exercisable for such equity securities, issued,
reserved for issuance or outstanding. Except as set forth in Section 4(c)(i),
there are no options, warrants, equity securities, calls, rights, commitments or
agreements of any character to which the Company or any of its subsidiaries is a
party or by which it is bound obligating the Company or any of its subsidiaries
to issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock of the Company or any of its subsidiaries to grant or
enter into any such warrant, equity security, call, right, commitment or
agreement, and except for the transactions contemplated by this Agreement, the
Voting Agreement and the Rights Agreement, there are no voting trusts, proxies
or other agreements or understandings with respect to the shares of capital
stock of the Company to which the Company is a party.
(d) Valid Issuance of Stock. The Shares will be duly
authorized, validly issued, fully paid and non-assessable and, based in part
upon the representations of the Purchaser in this Agreement, will be issued in
compliance with all applicable federal and state securities laws. The Common
Stock issuable upon conversion of the Shares (the "CONVERSION SHARES") has been
duly and validly reserved for issuance and, upon issuance in accordance with the
terms of the Certificate of Designation, will be duly and validly issued and
fully paid and nonassessable. The Shares and the Conversion Shares will be free
of restrictions on transfer other than the restrictions in this Agreement and
the Rights Agreement and under applicable state and/or federal securities laws,
and will not be subject to any preemptive or other similar rights or any liens
or encumbrances (other than any liens or encumbrances created by the
Purchasers).
(e) No Conflict; Required Filings and Consents.
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(i) The execution and delivery of this Agreement,
the Voting Agreement and the Rights Agreement by the Company do not, and the
performance of this Agreement, the Voting Agreement and the Rights Agreement by
the Company shall not, (i) conflict with or violate the Amended and Restated
Certificate of Incorporation (the "CERTIFICATE OF INCORPORATION"), the
Certificate of Designation, the Company's Bylaws, as amended (the "BYLAWS") or
equivalent organizational documents of the Company or any of its subsidiaries,
(ii) conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to the Company or any of its subsidiaries or by which it or
their respective properties are bound or affected, or (iii) result in any breach
of or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or impair the Company's or any such
subsidiary's rights or alter the rights or obligations of any third party under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of the Company or any of its subsidiaries pursuant to,
any material note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or its or any of their respective properties are bound or
affected, except for any such breaches, defaults or other occurrences that do
not have or result in, individually or in the aggregate, a Material Adverse
Effect.
(ii) The execution and delivery of this Agreement,
the Voting Agreement and the Rights Agreement by the Company do not, and the
performance of this Agreement, the Voting Agreement and the Rights Agreement by
the Company shall not, require any consent, approval, authorization or permit
of, or filing with or notification to, any governmental entity except for
applicable requirements, if any, of the Securities Act, the Exchange Act, state
securities laws, the rules and regulations of the Nasdaq National Market and the
consent of a majority of the holders of the Common Stock of the Company subject
to that certain Shareholder Rights Agreement dated as of June 13, 1995.
(f) Litigation. There is no litigation or governmental
proceeding or investigation pending or, to the knowledge of the Company,
threatened against the Company that either (i) adversely affects or challenges
the legality, validity or enforceability of this Agreement, the Voting Agreement
or the Rights Agreement or (ii) could reasonably be expected to, individually or
in the aggregate, have a Material Adverse Effect.
(g) Charter Documents; Subsidiaries. Except for Cardiac
Pathways B.V., a corporation organized under the laws of the Netherlands, and
Cardiac Pathways G.m.b.H., a corporation organized under the laws of Germany,
the Company has no active subsidiaries and does not otherwise directly or
indirectly control any other business entity. The Company has furnished counsel
to the Purchasers with true, correct and complete copies of its Amended and
Restated Certificate of Incorporation and Bylaws, together with any amendments
thereto as of the date hereof and the charter documents of each of its
subsidiaries. Each of the Company's subsidiaries is duly organized and existing
under the laws of its jurisdiction of organization and is in good standing under
such laws. None of the Company's subsidiaries owns or leases property or engages
in any
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activity in any jurisdiction that might require its qualification to do business
as a foreign corporation and in which the failure so to qualify would have a
Material Adverse Effect.
(h) Absence of Certain Developments. Since the date of its
most recent report filed with the Commission pursuant to the Securities and
Exchange Act of 1934, as amended from time to time (such act, together with the
rules and regulations promulgated thereunder, the "EXCHANGE ACT," and such
report, the "CURRENT SEC FILING"), except as disclosed therein, there has been
no (i) change in the condition, financial or otherwise, of the Company or its
assets, liabilities, properties, business, operations, intellectual property
rights owned or controlled by it, or prospects generally that would,
individually or in the aggregate, have a Material Adverse Effect; (ii)
declaration, setting aside or payment of any dividend or other distribution with
respect to the capital stock of the Company, or (iii) loss, destruction or
damage to any property of the Company, whether or not insured, which has or may
have a Material Adverse Effect.
(i) Absence of Undisclosed Liabilities. Except as
and to the extent reflected or stated in the Current SEC Filing, there has been
no:
(i) Material accrued or contingent liability of a
type required to be reflected on a balance sheet in accordance with generally
accepted accounting principles or described in the footnotes thereto.
(ii) Resignation or termination of any key officers
in the Company; and the Company, to the best of its knowledge, does not know of
the impending resignation or termination of employment of any such officer;
(iii) Material change, except in the ordinary course
of business, in the contingent obligations of the Company by way of guaranty,
endorsement, indemnity, warranty or otherwise;
(iv) Damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting the properties,
business or prospects or financial condition of the Company;
(v)Waiver by the Company of a valuable right or of a
material debt owed to it;
(vi) Direct or indirect loans made by the Company to
any stockholder, employee, officer or director of the Company, other than
advances made in the ordinary course of business;
(vii) Material change in any compensation arrangement
or agreement with any employee, officer, director or stockholder;
(viii) Declaration or payment of any dividend or other
distribution of the assets of the Company;
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(ix) Labor organization activity;
(x) Debt, obligation or liability incurred, assumed
or guaranteed by the Company, except those for immaterial amounts and for
current liabilities incurred in the ordinary course of business;
(xi) Sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets;
(xii) Change in any material agreement to which the
Company is a party or by which it is bound which has had a Material Adverse
Effect; or
(xiii) Any other event or condition of any character
that, either individually or cumulatively, has had a Material Adverse Effect.
(j) Non-Contravention. The execution, delivery and
performance by the Company of this Agreement, the Voting Agreement and the
Rights Agreement do not and will not (i) contravene or conflict with the Amended
and Restated Certificate of Incorporation, the Certificate of Designation or
Bylaws of the Company, or (ii) contravene or conflict with or constitute a
violation of any provision of any law, regulation, judgment, injunction, order
or decree binding upon or applicable to the Company or its property, or result
in a breach of or constitute a default under any material agreement of the
Company (whether upon notice or passage of time) binding upon or applicable to
it or its property, in any manner which would materially and adversely affect
the Purchasers' rights or their ability to realize the intended benefits under
this Agreement, the Voting Agreement or the Rights Agreement.
(k) Filings.
(i) The Company has filed in a timely manner, and
has delivered to the Purchasers copies of, the following reports required to be
filed with the Commission under the Exchange Act: (1) the Company's quarterly
report on Form 10-Q for the quarter ended December 31, 1998 filed with the
Commission on February 16, 1999 and (2) the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1998 filed with Commission on September 25,
1998 (collectively the "SEC REPORTS"). As of its filing date, (i) each such
report complied in all material respects with the applicable requirements of the
Securities Act and the Exchange Act, as the case may be, (ii) no such report or
statement filed pursuant to the Exchange Act contained any untrue statement of a
material fact or omitted to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading. None of the Company's subsidiaries is required to
file any forms, reports or other documents with the Commission.
(ii) Each of the consolidated financial statements
(including in each case any related notes) contained in the SEC Reports complied
as to form in all material respects with the applicable published rules and
regulations of the Commission with respect thereto, was prepared in accordance
with U.S. generally accepted accounting principles applied on a consistent basis
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throughout the periods involved (except as may be indicated in the notes to such
financial statements or, in the case of unaudited statements, as permitted by
Form 10-Q and the rules and regulations promulgated by the Commission), and
fairly presented the consolidated financial position of the Company and its
subsidiaries as of the respective dates and the consolidated results of
operations and statements of cash flows for the periods indicated, except that
the unaudited interim financial statements were subject to normal and recurring
year-end adjustments which were not or are not expected to be material in
amount.
(l) Employee Matters and Benefit Plans.
(i) Definitions. The following terms shall have the
meanings set forth below:
(1) "Affiliate," as used in this section
shall mean any other person or entity under common control with the Company
within the meaning of Section 414(b), (c), (m) or (o) of the Internal Revenue
Code of 1986, as amended (the "CODE"), and regulations thereunder;
(2) "Company Employee Plan" shall refer to
any plan, program, policy, practice, contract, agreement or other arrangement
providing for compensation, severance, termination pay, performance awards,
stock or stock-related awards, fringe benefits or other employee benefits or
remuneration of any kind, whether formal or informal, funded or unfunded,
including without limitation, each "employee benefit plan," within the meaning
of Section 3(3) of the Employee Retirement Income Security Act of 1978, as
amended ("ERISA"), which is or has been maintained, contributed to, or required
to be contributed to, by the Company or any Affiliate for the benefit of any
"Company Employee" (as defined below), and pursuant to which the Company or any
Affiliate has or may have any material liability contingent or otherwise;
(3) "Company Employee" shall mean any
current, former, or retired employee, officer, or director of the Company or any
Affiliate;
(4) "Company Employee Agreement" shall refer
to each management, employment, severance, consulting, relocation, repatriation,
expatriation, visa, work permit or similar agreement or contact between the
Company or any Affiliates and any Company Employee or consultant; and
(5) "Company Pension Plan" shall refer to
each Company Employee Plan which is an "employee pension benefit plan," within
the meaning of Section 3(2) of ERISA.
(ii) Schedule. The Company does not have any plan or
commitment to establish any new Company Employee Plan or Company Employee
Agreement, to modify any Company Employee Plan or Company Employee Agreement
(except to the extent required by law or to conform any such Company Employee
Plan or Company Employee Agreement to the requirements of any applicable law, in
each case as previously disclosed to the Purchasers in writing,
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or as required by this Agreement), or to enter into any Company Employee Plan or
Company Employee Agreement, nor does it have any intention or commitment to do
any of the foregoing.
(iii) Documents. The Company has provided to the
Purchasers (i) correct and complete copies of all documents embodying or
relating to each Company Employee Plan and each Company Employee Agreement
including all amendments thereto and written interpretations thereof, (ii) the
most recent annual actuarial valuations, if any, prepared for each Company
Employee Plan; (iii) the three most recent annual reports (Series 5500 and all
schedules thereto), if any, required under ERISA or the Code in connection with
each Company Employee Plan or related trust; (iv) if any Company Employee Plan
is funded, the most recent annual and periodic accounting of Company Employee
Plan assets; (v) the most recent summary plan description together with the most
recent summary of material modifications, if any, required under ERISA with
respect to each Company Employee Plan; (vi) all IRS determination letters and
rulings relating to Company Employee Plans and copies of all applications and
correspondence to or from the Internal Revenue Service (the "IRS") or the
Department of Labor (the "DOL") with respect to any Company Employee Plan; (vii)
all communications material to any Company Employee or Company Employees
relating to any Company Employee Plan and any proposed Company Employee Plans,
in each case, relating to any amendments, terminations, establishments,
increases or decreases in benefits, acceleration of payments or vesting
schedules or other events which would result in any material liability to the
Company; and (viii) all registration statements and prospectuses prepared in
connection with each Company Employee Plan.
(iv) Company Employee Plan Compliance. (i) The
Company has performed in all material respects all obligations required to be
performed by it under each Company Employee Plan and each Company Employee Plan
has been established and maintained in all material respects in accordance with
its terms and in compliance with all applicable laws, statutes, orders, rules
and regulations, including but not limited to ERISA or the Code; (ii) to the
Company's knowledge no "prohibited transaction," within the meaning of Section
4975 of the Code or Section 406 of ERISA, has occurred with respect to any
Company Employee Plan; (iii) there are no actions, suits or claims pending, or,
to the knowledge of the Company, threatened or anticipated (other than routine
claims for benefits) against any Company Employee Plan or against the assets of
any Company Employee Plan; (iv) each Company Employee Plan can be amended,
terminated or otherwise discontinued after the closing in accordance with its
terms, without liability to the Company or any Affiliates (other than ordinary
administration expenses typically incurred in a termination event); (v) there
are no inquiries or proceedings pending or, to the knowledge of the Company or
any Affiliates, threatened by the IRS or DOL with respect to any Company
Employee Plan; and (vi) to the Company's knowledge neither the Company nor any
Affiliate is subject to any penalty or tax with respect to any Company Employee
Plan under Section 402(i) of ERISA or Section 4975 through 4980 of the Code.
(v) Company Pension Plans. The Company does not now,
nor has it ever, maintained, established, sponsored, participated in, or
contributed to, any Company Pension Plan which is subject to Part 3 of Subtitle
B of Title I of ERISA, Title IV of ERISA or Section 412 of the Code.
-9-
(vi) Multiemployer Plans. At no time has the Company
contributed to or been requested to contribute to any Multiemployer Plan.
(vii) No Post-Employment Obligations. No Company
Employee Plan provides, or has any liability to provide, life insurance, medical
or other employee benefits to any Company Employee upon his or her retirement or
termination of employment for any reason, except as may be required by statute,
and the Company has never represented, promised or contracted (whether in oral
or written form) to any Company Employee (either individually or to Company
Employees as a group) that such Company Employee(s) would be provided with life
insurance, medical or other employee welfare benefits upon their retirement or
termination of employment, except to the extent required by statute.
(viii) Effect of Transaction.
(1) The execution of this Agreement and the
consummation of the transactions contemplated hereby will not (either alone or
upon the occurrence of any additional or subsequent events) constitute an event
under any Company Employee Plan, Company Employee Agreement, trust or loan that
will or may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any Company Employee.
(ix) Employment Matters. The Company and each of its
subsidiaries (i) is in compliance in all material respects with all applicable
foreign, federal, state and local laws, rules and regulations respecting
employment, employment practices, terms and conditions of employment and wages
and hours, in each case, in each location in which the Company or any of its
subsidiaries employs persons; (ii) has withheld all amounts required by law or
by agreement to be withheld from the wages, salaries and other payments to
Company Employees; (iii) is not liable for any material arrears of wages or any
material taxes or any material penalty for failure to comply with any of the
foregoing; and (iv) is not liable for any material payment to any trust or other
fund or to any governmental or administrative authority, with respect to
unemployment compensation benefits, social security or other benefits or
obligations for Company Employees (other than routine payments to be made in the
normal course of business and consistent with past practice).
(x) Violations. To the Company's knowledge, no
employee of the Company has violated any employment contract, patent disclosure
agreement or non competition agreement between such employee and any former
employer of such employee due to such employee being employed by the Company and
disclosing to the Company trade secrets or proprietary information of such
employer. The Company is not, and has never been, a party to any collective
bargaining agreement. The Company and its subsidiaries are in compliance in all
material respects with all applicable laws regarding employment practices, terms
and conditions of employment, and wages and hours (including, without
limitation, ERISA, the Worker Adjustment and Retaining Notification Act or any
similar state or local law).
(m) Labor Matters. (i) There are no controversies pending
or, to the best knowledge of each of the Company and its respective
subsidiaries, threatened, between the
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Company or any of its subsidiaries and any of their respective employees, which
controversies have or could reasonably be expected to have a Material Adverse
Effect; (ii) as of the date of this Agreement, neither the Company nor any of
its subsidiaries is a party to any collective bargaining agreement or other
labor union contract applicable to persons employed by the Company or its
subsidiaries nor does the Company or its subsidiaries know of any activities or
proceedings of any labor union to organize any such employees (A) as of the date
of this Agreement and (B) which, as of the Closing, have or could reasonably be
expected to have a Material Adverse Effect; and (iii) as of the date of this
Agreement, neither the Company nor any of its subsidiaries has any knowledge of
any strikes, slowdowns, work stoppages or lockouts, or threats thereof, by or
with respect to any employees of the Company or any of its subsidiaries (A) as
of the date of this Agreement and (B) which, as of the closing, have or could
reasonably be expected to have a Material Adverse Effect.
(n) Title to Property. The Company owns no material real
property. The Company and each of its subsidiaries have good and defensible
title to all of their material properties and assets, free and clear of all
liens, charges and encumbrances except liens for taxes not yet due and payable
and such liens or other imperfections of title, if any, as do not materially
detract from the value of or interfere with the present use of the property
affected thereby or which, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect; and all leases
pursuant to which the Company or any of its subsidiaries lease from others
material amounts of real or personal property are in good standing, valid and
effective in accordance with their respective terms, and there is not, under any
of such leases, any existing material default or event of default (or any event
which with notice or lapse of time, or both, would constitute a material default
and in respect of which the Company or its subsidiary has not taken adequate
steps to prevent such default from occurring) except where the lack of such good
standing, validity and effectiveness or the existence of such default or event
of default could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect. All the plants, structures and equipment of
the Company and its subsidiaries, except such as may be under construction, are
in good operating condition and repair, except where the failure of such plants,
structures and equipment to be in such good operating condition and repair could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(o) Taxes. The Company and each of its subsidiaries, and any
consolidated, combined, unitary or aggregate group for tax purposes of which the
Company or any of its subsidiaries is or has been a member, have timely filed
all tax returns required to be filed by them and have paid all taxes shown
thereon to be due. These returns and reports are true and complete in all
material respects. The Company has paid all taxes and other assessments due. The
Company has provided adequate accruals in accordance with generally accepted
accounting principles in its financial statements for any taxes that have not
been paid, whether or not shown as being due on any tax returns. There is (i) no
material claim for taxes that is a lien against the property of the Company or
any of its subsidiaries or is being asserted against the Company or any of its
subsidiaries other than liens for taxes not yet due and payable, (ii) no audit
of any tax return of the Company or any of its subsidiaries being conducted by a
tax authority, (iii) no extension of the statute of limitations on the
assessment of any taxes granted by the Company or any of its subsidiaries and
currently in effect,
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and (iv) no agreement, contract or arrangement to which the Company or any of
its subsidiaries is a party that may result in the payment of any amount that
would not be deductible by reason of Sections 162(m), 280G or 404 of the Code.
Neither the Company nor any of its subsidiaries has ever been a member of any
combined, controlled, consolidated or affiliated group (other than the group of
which the Company is the parent) for tax purposes. Neither the Company nor any
of its subsidiaries is a party to any tax sharing or tax allocation agreement
nor does the Company or any of its subsidiaries owe any amount under any such
agreement. Neither the Company nor any of its subsidiaries has been at any time,
a "United States real property holding corporation" with the meaning of Section
897(c)(2) of the Code.
(p) Compliance with Laws. Except with respect to
environmental matters (which are covered by Section 4(q) below), the Company and
its Subsidiaries are, and at all times since January 1, 1996 have been, in
compliance with all applicable laws, regulations, orders, judgments and decrees,
except where the failure to so comply would not have a Material Adverse Effect
on the condition of the Company and its Subsidiaries taken as a whole. Neither
the Company nor any of its subsidiaries has received any notice or other
communication from any governmental entity or other person regarding any actual
or possible material violation of, or material failure to comply with, any law,
regulation, order, judgment or decree.
(q) Environmental Matters.
(i) Hazardous Material. Except as would result in
any material liability to the Company under Environmental Laws (as defined
below), no underground storage tanks and no amount of any substance that has
been designated by any Governmental Entity or by applicable Environmental Laws
to be radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including, without limitation, PCBs, asbestos, petroleum,
urea-formaldehyde and all substances listed as hazardous substances pursuant to
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, or defined as a hazardous waste pursuant to the Resource
Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to Environmental Laws, but excluding office and janitorial
supplies maintained in accordance with Environmental Laws (a "HAZARDOUS
MATERIAl") are present, as a result of the actions of the Company or any of its
subsidiaries or any affiliate of the Company, or, to the Company's knowledge, as
a result of any action of any third party or otherwise, in, on or under any
property, including the land and the improvements, ground water and surface
water thereof, that the Company or any of its subsidiaries has at any time
owned, operated, occupied or leased. For the purposes of this Agreement,
"ENVIRONMENTAL LAWS" shall mean all federal, state, local and foreign laws,
ordinances, treaties, rules, regulations, guidelines and permit conditions
relating to contamination, pollution or the environment (including ambient air,
surface water, ground water, land surface or subsurface strata) or the
protection of human health and worker safety, including, without limitation,
laws and regulations relating to Hazardous Materials Activities (as hereinafter
defined) or emissions, discharges, releases or threatened releases of Hazardous
Materials.
(ii) Hazardous Materials Activities. Neither the
Company nor any of its subsidiaries has (i) transported, stored, used,
manufactured, disposed of, released or exposed its
-12-
employees or others to Hazardous Materials in violation of Environmental Laws,
or (ii) disposed of, transported, sold, used, released, exposed its employees or
others to or manufactured any product contained a Hazardous Material
(collectively "HAZARDOUS MATERIALS ACTIVITIES") in violation of any
Environmental Laws in effect prior to or as of the date hereof except for which
violation has not heretofore been cured or for which there is any remaining
liability.
(iii) Permits. The Company and its subsidiaries hold
all environmental approvals, permits, licenses, clearances and consents (the
"ENVIRONMENTAL PERMITS") necessary for the conduct of the Company's and its
subsidiaries' Hazardous Material Activities and other businesses of the Company
and its subsidiaries as such activities and businesses are currently being
conducted. The Company and its subsidiaries are and at all times have been in
compliance in all material respects with the terms of the Environmental Permits
except for which noncompliance has heretofore been cured or for which there is
any remaining liability.
(iv) Environmental Liabilities. No action,
proceeding, revocation proceeding, amendment procedure, writ, claim or
injunction is pending, and to the Company's knowledge, no action, proceeding,
revocation proceeding, amendment procedure, writ, claim or injunction has been
threatened by any governmental entity against the Company or any of its
subsidiaries concerning any Environmental Permit, Hazardous Material or any
Hazardous Materials Activities of the Company or any of its subsidiaries.
(r) Intellectual Property. The Company or its subsidiaries
owns each of the patents and patent applications referred to in the SEC Reports
and, except as disclosed in the SEC Reports, (i) the Company owns or possesses
adequate and enforceable rights to use all other patent applications, patents,
trademarks, trademark applications, trade names, service marks, copyrights,
copyright applications, licenses, know-how and other similar rights and
proprietary knowledge (collectively with the patents and patent applications
described in the SEC Reports, the "INTANGIBLES") necessary for the conduct of
the Company's current, former and anticipated activities and (ii) neither the
Company nor any subsidiary, to its knowledge, has infringed, is infringing, or
has received any notice of infringement of any Intangible of any other person
that, if the subject of an unfavorable decision, ruling or finding, could
reasonably be expected to have a Material Adverse Effect and the Company knows
of no basis therefor. The expiration of any Intangibles would not have a
Material Adverse Effect on the Company and its subsidiaries taken as a whole.
Except as set forth in the SEC Reports, the Company has received no notice of
potential indemnity claims from customers based upon a notice of infringement
any such customer has received from a patent owner relating to an assertion of
infringement of a patent other than potential indemnity claims which
individually or in the aggregate would not reasonably be expected to have a
Material Adverse Effect on the Company.
(s) Personnel. All personnel, including employees, agents,
consultants and contractors, who have contributed to or participated in the
conception and development of the Intangibles on behalf of the Company have
executed nondisclosure agreements in the form set forth on the Disclosure
Schedule and either (i) have been a party to a "work-for-hire" arrangement or
agreements with the Company in accordance with applicable national and state law
that has accorded
-13-
the Company full, effective, exclusive and original ownership of all tangible
and intangible property thereby arising, or (ii) have executed appropriate
instruments of assignment in favor of the Company as assignee that have conveyed
to the Company effective and exclusive ownership of all tangible and intangible
property thereby arising.
(t) Year 2000 Compliance. Except as would not reasonably be
expected to have a Material Adverse Effect on the Company, all of the Company's
Information Technology (as defined below) effectively addresses the Year 2000
issue, and will not cause an interruption in the ongoing operations of the
Company's business on or after January 1, 2000. For purposes of the foregoing,
the term "INFORMATION TECHNOLOGY" shall mean and include all software, hardware,
firmware, telecommunications systems, network systems, embedded systems and
other systems, components and/or services that are owned or used by the Company
in the conduct of its business, or purchased by the Company from third party
suppliers.
(u) No Brokers. The Company has not directly or indirectly
employed any broker, finder or other person (including any employee) that might
be entitled to a fee, commission or other compensation upon the execution of
this Agreement, the Voting Agreement or the Rights Agreement or the consummation
of the transactions contemplated by this Agreement, the Voting Agreement or the
Rights Agreement for which the Purchasers or the Company is or may be liable.
(v) Chief Executive Officer. The Company has entered into an
employment agreement with a new Chief Executive Officer acceptable to the
Purchasers.
(w) Registration Rights. Except as provided in the Rights
Agreement, the Company is presently not under any obligation and has not granted
any rights to register under the Securities Act any of its presently outstanding
securities or any of its securities that may subsequently be issued.
(x) Permits. The Company has all franchises, permits,
licenses, and any similar authority necessary for the conduct of its business as
now being conducted by it, the lack of which could have a Material Adverse
Effect on the business, properties, prospects, or financial condition of the
Company, and believes it can obtain, without undue burden or expense, any
similar authority for the conduct of its business as presently planned to be
conducted. The Company is not in default in any material respect under any such
franchises, permits, licenses or other similar authority.
(y) Royalties. Except as set forth in the Disclosure
Schedule, there are no royalties, fees, honoraria or other payments payable by
the Company to any person or entity by reason of the ownership, development,
use, license, sale or disposition of the Intangibles, other than salaries and
sales commissions paid to employees and sales agents in the ordinary course of
business.
(z) Real Property Holding Corporation. The Company is not a
real property holding corporation within the meaning of Section 897(c)(2) of the
Internal Revenue Code of 1986, as amended (the "Code") and any regulations
promulgated thereunder.
-14-
(aa) Investment Company Act. The Company is not an
"investment company", or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended.
(bb) Reserved.
(cc) Small Business Concern. The Company, together with its
"affiliates" (as that term is defined in Section 121.103 of Title 13 of the Code
of Federal Regulations (the "FEDERAL REGULATIONS")), is a "small business
concern" within the meaning of the Small Business Investment Act of 1958, as
amended (the "SMALL BUSINESS ACT"), and Part 121 of Title 13 of the Federal
Regulations. The information delivered by the Company to Purchaser on SBA Forms
480, 652 and 1031 of the Small Business Administration (the "SBA") delivered in
connection herewith is accurate and complete. The Company is not ineligible for
financing by any SBIC Investor pursuant to Section 107.720 of Title 13 of the
Federal Regulations. The Company acknowledges that BankAmerica Ventures is a
Federal licensee under the Small Business Act.
(dd) Broker's or Finder's Fee. No agent, broker, person or
firm acting on behalf of the Company or any of its subsidiaries is, or will be,
entitled to any fee, commission or brokers or finder's fees from any of the
parties hereto, or from any person controlling, controlled by, or under common
control with any of the parties hereto, in connection with this Agreement or any
of the transactions contemplated hereby.
(ee) Vote Required. The approval of the sale of the Shares by
the affirmative vote of a majority of the shares of Common Stock voting is the
only vote of the holders of any class or series of the Company's capital stock
necessary to approve the transactions contemplated hereby. Holders of Common
Stock will not have any appraisal rights or similar rights in connection with
the sale of the Shares or any of the other transactions contemplated hereby.
5. Representations and Warranties of the Purchasers. Each of the
Purchasers, severally and not jointly, hereby represents and warrants to the
Company as follows:
(a) Corporate Power. Each Purchaser is a corporation duly
incorporated or a limited partnership duly formed, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or formation
with the requisite power and authority, corporate or otherwise, to enter into
and to consummate the transactions contemplated hereby and otherwise to carry
out its obligations hereunder and thereunder.
(b) Authorization. Each Purchaser has full power to execute,
deliver and perform this Agreement, the Voting Agreement and the Rights
Agreement, and each such agreement has been duly executed and delivered by such
Purchaser and is the legal, valid and, assuming due
-15-
execution by the Company, binding obligation of such Purchaser, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting creditors' rights
generally, and to general equitable principles. The execution, delivery and
performance by such Purchaser of this Agreement, the Voting Agreement and the
Rights Agreement, including the payment of the Purchase Price, have been duly
authorized by all necessary corporate action of such Purchaser.
(c) Governmental Approvals. No authorization, consent,
approval, license, exemption of or filing or registration with any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, under any applicable laws, rules or regulations presently
in effect, other than a Control Certificate to be filed with the SBA by
BankAmerica Ventures within thirty (30) days of the Closing Date, is or will be
necessary to be made or obtained by such Purchaser or any of its Affiliates (as
such term is defined below) for, or in connection with, the execution and
delivery of this Agreement, the Voting Agreement or the Rights Agreement, the
consummation of the transactions contemplated hereby or thereby or performance
by such Purchaser of its obligations hereunder or thereunder. For purposes of
this Agreement, the term "AFFILIATE" means, when used with respect to any
specified person, any other person directly or indirectly controlling or
controlled by or under direct or indirect common control with such specified
person. For the purposes of this definition, "control," when used with respect
to any person, means the power to direct the management and policies of such
person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise and the terms "affiliated," "controlling"
and "controlled" have meanings correlative to the foregoing.
(d) Non-Contravention. The execution, delivery and
performance by the Company of this Agreement, the Voting Agreement and the
Rights Agreement do not and will not (i) contravene or conflict with the charter
documents or bylaws of such Purchaser, or (ii) contravene or conflict with or
constitute a violation of any provision of any law, regulation, judgment,
injunction, order or decree binding upon or applicable to such Purchaser, or
result in a breach of or constitute a default under any material agreement of
such Purchaser.
(e) Risk Factors. Each such Purchaser acknowledges that an
investment in the Company involves known and unknown risks, uncertainties and
other factors which may result in such Purchaser's loss of its entire
investment. The Company is an early stage medical device company that develops
and intends to commercialize medical devices for the treatment of certain
cardiovascular and circulatory disorders. The Company's product candidates are
at an early stage of development and have not been approved for marketing by any
regulatory agencies. In addition, significant investment in research and
development, preclinical and clinical testing, regulatory and sales and
marketing activity will be necessary for the Company to commercialize its
product candidates. There can be no assurance that any of the Company's product
candidates can be successfully developed. If successfully developed, there can
be no assurance that the Company's product candidates will be approved for
marketing by regulatory agencies, will result in any meaningful benefits to
patients, will be accepted by the medical community for use in treatment or will
generate sufficient or sustainable revenues to enable the Company to be
profitable.
-16-
Each Purchaser acknowledges that such Purchaser has
received a copy of the SEC Reports and reviewed the section captioned "Factors
Affecting Future Operation Results" contained therein, which such factors are
deemed incorporated by reference into this Agreement.
(f) No Brokers. The Purchasers have not directly or
indirectly employed any broker, finder or other person (including any employee)
that might be entitled to a fee, commission or other compensation upon the
execution of this Agreement, the Voting Agreement or the Rights Agreement or the
consummation of the transactions contemplated by this Agreement, the Voting
Agreement or the Rights Agreement for which the Purchasers or the Company is or
may be liable.
6. Compliance with Securities Laws and Restrictions on Transfer of
Securities.
(a) Additional Representations and Warranties and Agreements
of Each Purchaser. Each Purchaser, severally and not jointly, hereby represents
and warrants to, and agrees with, the Company as follows:
(i) The Purchaser (A) is purchasing the Shares for
its own account for investment only and not with a view to any resale or
distribution thereof, except pursuant to an effective registration statement
under the Securities Act of 1933, as amended from time to time (such act,
together with the rules and regulations promulgated thereunder, herein the
"Securities Act"), covering the sale, assignment or transfer or an opinion of
counsel reasonably satisfactory to the Company, concurred in by counsel to the
Company, that such registration is not required; provided, however, that
BankAmerica Ventures shall be permitted to transfer its Shares to Bank of
America Ventures, L.P. without such requirements.
(ii) Such Purchaser has received and carefully
reviewed the Current SEC Filing, and has had the opportunity to obtain and
receive such other information as it deems necessary to understand the business
and financial condition of the Company and to make the investment decision to
purchase the Shares.
(iii) As an investor in companies in the medical
device industry, such Purchaser has such knowledge and experience in financial
and business matters that it is capable of evaluating the merits and risks of
the investment represented by the Shares, and it is able to bear the economic
risk of such investment.
(iv) Such Purchaser is an "accredited investor" as
such term is defined in Rule 501(a) of Regulation D under the Securities Act. If
other than an individual, the Purchaser also represents it has not been
organized for the purpose of acquiring the Shares.
(v) Such Purchaser understands that the Shares are
being issued in a transaction which is exempt from the registration requirements
of the Securities Act by reason of the provisions of Section 4(2) of the
Securities Act and that the Shares will be subject to transfer restrictions and
must be held indefinitely unless subsequently registered under the Securities
Act or an exemption from such registration is available.
-17-
The certificate representing the Shares will be affixed
with the following legends:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, ASSIGNED OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT COVERING THE TRANSFER OR
AN OPINION OF COUNSEL OR OTHER EVIDENCE IN FORM AND SUBSTANCE
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED."
The restrictions on sale, assignment and transfer of the
Shares contained in this Section 6(a)(v) shall terminate at such time as there
shall be delivered to the Company and such Purchaser an opinion of counsel to
such Purchaser, in form and substance reasonably satisfactory to the Company, to
the effect that, due to the lapse of time or otherwise, no registration of such
securities is required under the Securities Act in connection with any
distribution of such securities to the public in the United States. In addition,
at any time after (A) the delivery of such opinion; or (B) such securities are
sold pursuant to and in accordance with an effective registration statement
under the Securities Act covering such sale, the Purchaser shall be entitled to
exchange its certificate representing such securities (or any portion thereof as
to which (A) or (B) above applies) for a new certificate not bearing the first
legend set forth in Section 6(a)(v).
(vi) Such Purchaser understands that the Shares
constitute "restricted securities" within the meaning of Rule 144, promulgated
under the Securities Act. Purchaser is aware that Rule 144, in substance, except
as otherwise provided in subsection (k) of such rule, permits limited public
resale of "restricted securities" acquired, directly or indirectly, from the
issuer thereof (or from an affiliate of such issuer), in a non-public offering
subject to the satisfaction of certain conditions, including, among other
things: (A) the availability of certain public information about the Company;
(B) the resale occurring not earlier than the expiration of the applicable
holding period stated therein; (C) the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Exchange Act) and (D) the amount of
securities being sold during any three-month period not exceeding the specified
limitations stated therein. Such Purchaser also understands that the holding
period under Rule 144 will commence on the Closing Date.
(vii) Such Purchaser further understands that in the
event all of the applicable requirements of Rule 144 are not satisfied,
registration under the Securities Act, compliance with Regulation A, or some
other registration exemption will be required; and that, notwithstanding the
fact that Rule 144 is not exclusive, the staff of the Commission has expressed
its opinion that persons proposing to sell private placement securities other
than in a registered offering and otherwise than pursuant to Rule 144 will have
a substantial burden of proof in establishing that
-18-
an exemption from registration is available for such offers or sales, and that
such persons and their respective brokers who participate in such transactions
do so at their own risk.
(b) Agreement Not to Transfer.
(i) Prior to twelve months after the Closing, the
Purchasers shall not, directly or indirectly, Transfer or offer to Transfer any
Shares, unless the Company consents to such Transfer and the transferee agrees
to be bound by this Agreement; provided however, that BankAmerica Ventures shall
be permitted to transfer its Shares to Bank of America Ventures, L.P. without
such requirements.
(ii) As used in this Section 6(b), the term
"TRANSFER" shall mean any sale, transfer, assignment, hypothecation, encumbrance
or other disposition, whether voluntary or involuntary, of Shares. In the case
of a hypothecation, the Transfer shall be deemed to occur both at the time of
the initial pledge and at any pledgee's sale or a sale by any secured creditor
or a retention by the secured creditor of the pledged Shares in complete or
partial satisfaction of the indebtedness for which the Shares are security.
(c) Stop Transfer Orders. Such Purchaser understands that
notations restricting the transfer of the Shares will be made on the transfer
records of the Company and that a stop transfer order will be entered with the
Company's transfer agent.
(d) Compliance with Section 6. None of the Shares (nor any
interest therein) shall be sold, assigned or offered except in accordance with
the provisions of this Section 6.
7. Additional Covenants of the Purchasers Regarding Securities.
(a) Forms 13D or 13G. Promptly following the Closing, the
Purchasers shall file with the Commission any reports regarding their ownership
of the Company's Common Stock as required by Section 13(d) of the Exchange Act
and the rules and regulations.
(b) Insider Trading Policy; Short Sales.
(i) For so long as a representative of the
Purchasers is a member of the Board of Directors of the Company, the Purchasers
and their Affiliates who have access to Material Confidential Information (as
defined below) of the Company shall agree to comply with the Insider Trading
Compliance Program of the Company including, but not limited to, trade
pre-clearance requirements and trading blackout periods as may be in effect from
time to time. In addition, the Purchasers hereby acknowledge that each Purchaser
is aware, and that each Purchaser will advise such directors, officers,
employees, representatives, agents and advisors who are informed as to the
matters concerning the Company or who have access to the Company's Material
Confidential Information, that United States securities laws prohibit any person
who has received from an issuer material nonpublic information concerning the
issuer from communicating such information to any other person under
circumstances in which it is reasonably foreseeable that such person is likely
to purchase or sell the securities of such issuer, make investment
recommendations based on such
-19-
material nonpublic information or otherwise affect the trading price of such
issuer's securities. The limitations set forth in the immediately preceding
sentence are not intended to preclude the brokerage, investment advisory,
financial advisory, financing, money management, trading, arbitrage or other
similar activities conducted on the Purchasers' behalf by only those directors,
officers, representatives and agents and advisors who do not have access to the
Company's Material Confidential Information or are not aware of the content of
such Material Confidential Information.
(ii) The Purchasers and their Affiliates shall not
make any short sale of, loan, or grant any option for the purchase of, any
equity securities of the Company held by the Purchasers at any time.
(c) Material Confidential Information.
(i) In connection with the Purchasers'
decision-making with respect to their acquisition of the Shares, the Company has
furnished to the Purchasers and their officers, directors, employees and agents
(collectively referred to as "PURCHASERS AND AGENTS") financial and other
information which has not theretofore been made available to the public
("MATERIAL CONFIDENTIAL INFORMATION"). The Purchasers and Agents may also
receive Material Confidential Information of the Company in the future. Pursuant
to a Nondisclosure Agreement dated March 5, 1999, the Purchasers have agreed to
refrain from disclosing such information pursuant to the terms and conditions of
such agreement. The Company and the Purchasers wish to replace the
confidentiality obligations of the parties set forth in such agreement with
those provided herein. Therefore, the Purchasers and Agents shall treat all such
Material Confidential Information in accordance with the provisions of this
agreement and to take or abstain from taking certain other actions herein set
forth. The term "Material Confidential Information" does not include information
which (i) was already in the Purchasers' or Agents' possession prior to the
disclosure by the Company of the Material Confidential Information, provided
that such information is not known by the Purchasers and Agents to be subject to
another confidentiality agreement with or other obligation of secrecy to the
Company or another party, (ii) becomes generally available to the public other
than as a result of disclosure by the Purchasers or Agents or (iii) becomes
available to you on a non-confidential basis from a source other than the
Company or its advisors, provided that such source is not known to the
Purchasers or Agents to be bound by a confidentiality agreement with or other
obligation of secrecy to the Company or another party. The Purchasers agree that
the Company's Material Confidential Information will be used solely for the
purpose of monitoring the Purchasers' holdings of the Shares. The Purchasers
also agree that the Purchasers and Agents will not disclose any of the Company's
Material Confidential Information now or hereafter received or obtained from the
Company or its representatives to any third party or otherwise use or permit the
use of the Material Confidential Information, except as required by applicable
law or legal process, without the prior written consent of the Company;
provided, however, that any such Material Confidential Information of the
Company may be disclosed to such of the Purchasers' representatives who need to
know such information for the purpose of monitoring the Purchasers' investment
in the Shares; in which case it is understood that the Purchasers'
representatives, directors, officers, employees, agents and advisors shall be
informed by the Purchasers of the confidential nature of such information and
shall be directed by the Purchasers to treat such information confidentially. In
the
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event that the Purchasers and Agents or any of their representatives becomes
legally compelled (by deposition, interrogatory, request for documents,
subpoena, civil investigative demand, other demand or rules and regulations
under the federal securities laws or similar process, but not pursuant to laws
and regulations which Purchasers and Agents are subject to as a result of being
an affiliate of a national bank) to disclose any of the Material Confidential
Information, the Purchasers and Agents shall provide the Company with prompt
prior written notice of such requirement prior to such disclosure. In the event
that a protective order or other remedy is not obtained, or that the Company
waives compliance with the provisions hereof, each Purchaser agrees to furnish
only that portion of the Material Confidential Information which such Purchaser
is legally required to furnish and, where appropriate, to exercise the
Purchasers' and Agents' reasonable efforts to obtain assurances that
confidential treatment will be accorded such Material Confidential Information.
(d) Reporting Obligations Pursuant to Section 16. The
Purchasers agree to file with the Commission any reports required to be filed
pursuant to Section 16(a) of the Exchange Act and the rules and regulations
promulgated thereunder by such Purchasers, their officers, directors, employees
or affiliates or by such Purchasers' nominee to the Company's Board of Directors
within the time such filings are required to be made and to provide the Company
with a copy of all such filings promptly thereafter.
8. Additional Covenants of the Company.
(a) Inspection. For so long as a Purchaser holds at least
500 shares of Series B Convertible Preferred Stock (or the Common Stock issuable
or issued upon conversion of 500 shares of Series B Convertible Preferred
Stock), the Company shall permit each the Purchaser, at such Purchaser's
expense, to visit and inspect the Company's properties, to examine its books of
account and records and to discuss the Company's affairs, finances and accounts
with its officers, all at such reasonable times as may be requested by the
Investor; provided, however, that the Company shall not be obligated pursuant to
this Section 8(a) to provide access to any information that it reasonably
considers to be a competitively sensitive information unless such Purchaser has
executed a non-disclosure agreement in a form reasonably acceptable to the
Company.
(b) Board of Directors. The following actions will be taken
with respect to the Company's Board of Directors.
(i) The existing Board of Directors will resign
effective as of the Closing Date.
(ii) At or prior to the Closing the Company shall
amend its Bylaws, if required, to fix the number of directors to five (5)
members with a provision that the number of directors may be increased to seven
(7) members with the consent of the directors who are representatives of the
Purchasers.
(iii) The holders of the Series B Convertible
Preferred shall have the right to nominate three (3) members of the Company's
Board of Directors, two (2) of which shall be representatives of BankAmerica
Ventures and one (1) of which shall be a representative of Morgan
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Stanley Dean Witter Venture Partners ("MSDW"). In the event that the number of
the Company's directors exceeds five (5), the holders of Series B Convertible
Preferred shall have the right to nominate one (1) additional director. All
members of the Company's Board of Directors nominated by holders of Series B
Convertible Preferred shall have the right to be members of all committees of
the Board of Directors. The Company shall not file any proxy or other materials
with the SEC opposed to the re-election of such persons as directors of the
Company unless such director has committed any actions giving the stockholders
of the Company the right to remove such director for cause and shall use all
reasonable efforts to secure the election of such persons as directors.
(iv) The remaining directors will include (i) one (1)
representative of the Company's management, who shall be the Company's Chief
Executive Officer and (ii) one (1) outside representative appointed by a
majority of the Board of Directors.
(v) As of the execution of this Agreement and in the
event that BankAmerica Ventures, the State of Wisconsin Investment Board
("SWIB") or MSDW do not have a representative on the Company's Board of
Directors, or any committee thereof then the Company shall invite a
representative of BankAmerica Ventures, SWIB or MSDW, as the case may be, to
attend all meetings of its Board of Directors or any committee thereof in a
nonvoting observer capacity and, in this respect, shall give such representative
copies of all notices, minutes, consents, and other materials (the "BOARD
MATERIALS") that it provides to its directors at the same time as such Board
Materials are provided to any of its directors; provided, however, that the
Company reserves the right to withhold any information and to exclude such
representative of BankAmerica Ventures, SWIB or MSDW from any meeting or portion
thereof if the disclosure of such material or discussion, in the opinion of
counsel to the Company, would jeopardize the Company's attorney client
privilege. The right granted to BankAmerica Ventures, SWIB and MSDW to attend
meetings of the Company's Board of Directors and to receive Board Materials
shall not be assignable.
(c) Right of First Offer. Subject to the terms and
conditions specified in this Section 8(c), the Company hereby grants to each
Purchaser a right of first offer to purchase its Pro Rata Share (as hereinafter
defined) (in whole or in part) with respect to future sales by the Company of
its Future Shares (as hereinafter defined). Each Purchaser shall be entitled to
assign or apportion the right of first offer hereby granted it among itself and
its partners and affiliates (including in the case of a venture capital fund
other venture capital funds affiliated with such fund) in such proportions as it
deems appropriate. For purposes of this Section 8(c), a Purchaser's "PRO RATA
SHARE" of Future Shares shall mean that number of Future Shares that equals the
proportion that (x) the number of shares of Common Stock issued and held, or
issuable upon conversion of the Shares then held, by such Purchaser bears to (y)
the total number of shares of Common Stock of the Company then outstanding
(assuming full conversion of all convertible securities).
(i) Each time the Company proposes to offer any
shares of, or securities convertible into or exercisable for any shares of, any
class of its capital stock, including any debt securities convertible into
equity (collectively, "FUTURE SHARES"), the Company shall first make an offering
of such Future Shares to each Purchaser in accordance with the following
provisions:
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(ii) The Company shall deliver a notice by confirmed
facsimile transmission, certified mail or a nationally recognized overnight
courier service ("NOTICE") to each of the Purchasers stating (i) its bona fide
intention to offer such Future Shares, (ii) the number of such Future Shares to
be offered, and (iii) the price and a summary of the terms, if any, upon which
it proposes to offer such Future Shares.
(iii) By written notification to the Company within
ten (10) calendar days after receipt of the Notice, each Purchaser may elect to
purchase or obtain, at the price and on the terms specified in the Notice, up to
its Pro Rata Share of such Future Shares. The Company shall promptly, in
writing, inform each Purchaser that elects to purchase all the shares available
to it (a "FULLY-EXERCISING PURCHASER") of any other Purchaser's failure to do
likewise. During the ten (10) day period commencing after such information is
given, each Fully-Exercising Purchaser may elect to purchase that portion of the
Future Shares for which Purchasers were entitled to subscribe but that were not
subscribed for by the Purchasers that is equal to the proportion that the number
of shares of Common Stock issued and held, or issuable upon conversion of Shares
then held, by such Fully-Exercising Purchaser bears to the total number of
shares of Common Stock issued and held, or issuable upon conversion of the
Shares then held, by all Fully-Exercising Purchasers who wish to purchase some
of the unsubscribed Future Shares.
(iv) If all Future Shares that the Purchasers are
entitled to obtain pursuant to Section 8(c) are not elected to be obtained as
provided herein, the Company may, during the sixty (60) day period following the
expiration of the period provided in Section 8(c)(iii) hereof, offer the
remaining unsubscribed portion of such Future Shares to any person or persons at
a price not less than, and upon terms no more favorable to the offeree than
those specified in the Notice. If the Company does not enter into an agreement
for the sale of the Future Shares within such period, or if such agreement is
not consummated within sixty (60) days of the execution thereof, the right
provided hereunder shall be deemed to be revived and such Future Shares shall
not be offered unless first reoffered to the Purchasers in accordance herewith.
(v) The right of first offer in this Section 8(c)
shall not be applicable (i) to any shares of Common Stock (including shares
issued upon exercise of stock options outstanding as of the date of this
Agreement) issuable or issued to employees, consultants or directors directly or
pursuant to stock option plans or arrangements approved by the Board of
Directors, including each board representative of the Purchasers, (ii) to shares
of Common Stock issued or issuable in a firm commitment underwritten public
offering, (iii) to shares of Common Stock issued or issuable upon conversion of
shares of Series A Participating Preferred Stock or Series B Convertible
Preferred Stock or as a dividend or distribution on the shares of Series A
Participating Preferred Stock or Series B Convertible Preferred Stock, (iv) to
securities issued or issuable to banks or equipment lessors, provided such
issuances are for other than primarily equity financing purposes and provided
such issuances are approved by the Board of Directors, including each board
representative of the Purchasers, (v) to securities issued in connection with
business combinations or corporate partnering agreements approved by the Board
of Directors, including each board representative of the Purchasers, or (vi) to
securities issued in strategic financings accompanies by commercial
-23-
development, joint ventures or other related agreements approved by the Board of
Directors, including each board representative of the Purchasers.
(vi) The rights granted to the Purchasers under
Section 8(c) hereof may be assigned to any transferee or assignee who is (a) a
subsidiary, parent, general partner, limited partner, retired partner, member or
retired member of a Purchaser, (b) a Purchaser's ancestors, descendants or
spouse or to trusts for the benefit of such persons or such Purchaser or (c) a
client, employee or member of a Purchaser, provided that (i) such transfer may
otherwise be effected in accordance with applicable securities laws, (ii) the
Company is given written notice of any such transfer five (5) Business Days
prior to the date of said transfer, stating the name and address of said
transferee or assignee and identifying the securities with respect to which such
registration rights are being assigned and (iii) the transferee or assignee of
such rights is not deemed by the Board of Directors of the Company, in its
reasonable judgment, to be a competitor of the Company and provided further that
the transferee or assignee of such rights assumes in writing in a form
reasonably acceptable to the Company the obligations of the Purchasers under
this Agreement.
(d) Sonometrics License. The Company will use its best
efforts to execute an agreement to exclusively license or acquire, for an
aggregate purchase price no greater than $1,500,000, Sonometric's patent
portfolio relating to technology and methods for three dimensional digital
ultrasound tracking. The Patent Portfolio will include, but not be limited to
the following: Patent Numbers 5,515,853, 5,779,638, 5,795,298, 5,797,849,
5,817,022 and 5,868,673 and all currently active applications that are
continuations, continuations-in-part, or divisional properties, and all
corresponding foreign-filed patents and patent applications.
(e) Chief Executive Officer. In the event that a new Chief
Executive Officer, (who shall be acceptable to the Purchasers) shall have
commenced employment with the Company prior to the Closing, the Company shall
use it best efforts to retain such Chief Executive Officer through the Closing
Date.
(f) Reverse Stock Split; Bylaws. The Company shall use its
best efforts to obtain stockholder approval to amend (i) the Certificate of
Incorporation to effect a five for one reverse stock split of the Company's
Common Stock; and (ii) the Bylaws to require the affirmative vote of the holders
of at least a majority of the voting power of all of the then outstanding shares
entitled to vote, voting together as a single class, to (I) increase the number
of shares reserved for issuance under the Company's Stock Plans, such that the
quotient of (A) the shares outstanding issued pursuant to the Company's Stock
Plans plus the shares available for issuance under the Company's Stock Plans
plus additional shares proposed to be issued under the Company's Stock Plans;
divided by (B) the total outstanding capital stock of the Company, including any
outstanding convertible preferred stock, on an as converted basis, is not
greater than thirty percent (30%); and (II) reprice any options granted after
May 20, 1999 to purchase shares of Common Stock under the Company's Stock Plans,
provided that the Company shall only reprice each options outstanding prior to
May 20, 1999 one time.
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(g) Reservation of Common Stock. The Company will at all
times reserve and keep available, solely for issuance and delivery upon the
conversion of the Shares and all Common Stock issuable from time to time upon
such conversion.
(h) Proprietary Information and Inventions Agreement. The
Company shall require all employees and consultants to execute and deliver a
Proprietary Information and Inventions Agreement in a form which is acceptable
to the Purchasers.
(i) Reserved.
(j) Small Business Administration Matters.
(i) The proceeds from the issuance and sale of the
Shares will be used by the Company for working capital and other general
corporate purposes. The Company will provide to each Purchaser identified as a
licensed Small Business Investment Company on Schedule A hereto (each an "SBIC
INVESTOR"), and to the Small Business Administration (the "SBA"), reasonable
access to the Company's books and records for the purpose of confirming the use
of proceeds by the Company.
(ii) For a period of one (1) year following the
Closing (as defined in the Purchase Agreement), the Company will not change the
nature of its business activity if such change would render the Company
"ineligible" as provided in Section 107.720 of Title 13 of the Federal
Regulations.
(iii) So long as any SBIC Investor holds any
securities of the Company, the Company will at all times comply with the
non-discrimination requirements of Sections 112, 113 and 117 of Title 13 of the
Federal Regulations.
(iv) Within forty-five (45) days after the end of
each fiscal year of the Company, and at such other times as an SBIC Investor may
reasonably request in writing to the Company, the Company will deliver to such
SBIC Investor a written assessment in form and substance reasonably satisfactory
to such SBIC Investor, as to the economic impact of such SBIC Investor's
financing of the Company, specifying the full-time equivalent jobs created or
retained in connection with such investment, and the impact of such financing on
the Company's business in terms of profits and with respect to taxes paid by the
Company and its employees. The Company will promptly provide each SBIC Investor
who so requests in writing to the Company, specifying in such written request
the nature of such required information in reasonable detail, such information
as such SBIC Investor requests, in order to permit such SBIC Investor to comply
with such SBIC
-25-
Investor's obligations under the Small Business Act of 1958, as amended (the
"SMALL BUSINESS ACT"), and the regulations promulgated thereunder and related
thereto. Any submission of financial information pursuant to this Section 8(j)
shall be under cover of a certificate executed by the Company's President, Chief
Executive Officer Chief Financial Officer or Treasurer, certifying that such
information (i) relates to the Company, (ii) to the best of the Company's
knowledge is accurate and (iii) if applicable, has been audited by the Company's
independent auditors.
(k) Regulatory Compliance Cooperation. In the event that any
SBIC Investor determines that it has a Regulatory Problem (as defined below), it
shall have the right to transfer its Shares in compliance with applicable state
and federal securities laws, but without regard to any other restrictions on
transfer set forth in this Agreement or the Rights Agreement (provided that the
transferee agrees to become a party to each such agreement), and the Company
shall take all such actions as are reasonably requested by such SBIC Investor in
order to (i) effectuate and facilitate any transfer by it of any securities of
the Company then held by it to any person designated by such SBIC Investor, (ii)
permit such SBIC Investor (or any of its affiliates) to exchange all or any
portion of any voting security then held by it on a share-for-share basis for
shares of a nonvoting security of the Company, which nonvoting security shall be
identical in all respects to the voting security exchanged for it, except that
it shall be nonvoting and shall be convertible into a voting security on such
terms as are requested by it in light of regulatory considerations then
prevailing, and (iii) amend this Agreement, as amended from time to time, to
effectuate and reflect the foregoing. The parties to this Agreement agree to
vote all of the Company's securities held by them in favor of such amendments
and actions. For purposes of this Agreement, a "REGULATORY PROBLEM" means any
set of facts or circumstances wherein it has been asserted by any governmental
regulatory agency that an SBIC Investor is not entitled to hold, or exercise any
significant right with respect to, the underlying securities into which the
Shares are convertible.
(l) Proxy Statement. As promptly as practicable after the
execution of this Agreement, the Company shall prepare and file with the
Commission preliminary proxy materials which shall constitute the preliminary
Proxy Statement in connection with the sale of the Shares. As promptly as
practicable after comments are received from the Commission with respect to the
preliminary proxy materials, the Company shall file with the Commission the
definitive Proxy Statement, which Proxy Statement shall comply in all material
respects with the applicable requirements of the Exchange Act and Securities
Act, respectively, and the applicable rules and regulations of the Commission
thereunder.
(i) The Company shall cause the Proxy Statement to
be mailed to its stockholders and, if necessary, after the Proxy Statement shall
have been so mailed, promptly circulate amended, supplemental or supplemented
proxy material and, if required in connection therewith, resolicit proxies.
(ii) The Company warrants that the information
provided (or incorporated by reference to filings made with the Commission by
the Company) in the Proxy Statement, on the date the Proxy Statement is filed
with the Commission and on the date it is first mailed to the Company's
stockholders, shall not contain any untrue statement of a material fact or omit
to state
-26-
any material fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The Company shall
notify Purchasers promptly of the receipt of any comments by the Commission and
of any request by the Commission for amendments or supplements to the Proxy
Statement, or for additional information, and shall supply one another with
copies of all correspondence with the Commission with respect to any of the
foregoing. If at any time prior to the meeting of Stockholders to consider sale
of the Shares, any event should occur relating to the Company, its subsidiaries
or any of their respective affiliates, directors or officers which should be
described in an amendment or supplement to the Proxy Statement, the Company
shall promptly inform Purchasers. Whenever any event occurs which should be
described in an amendment or supplement to the Proxy Statement, the Company
shall, upon learning of such event, cooperate promptly to file and clear with
the Commission and, if applicable, mail such amendment or supplement to the
stockholders of the Company.
(iii) The Company shall use its best efforts to obtain
approval for quotation on the Nasdaq National Market, upon official notice of
issuance, of the Common Stock to be issued upon conversion of the Shares.
(iv) The Company shall make all necessary filings
with respect to the sale of Shares under the Securities Act and the Exchange Act
and the rules and regulations thereunder and under applicable blue sky or
similar laws and shall use their reasonable efforts to obtain required approvals
and clearances with respect thereto.
(m) Stockholder Approvals; Recommendations. The Company,
acting through its Board of Directors, shall (i) call, give notice of, convene
and hold a special meeting of the holders of Company Common Stock for the
purpose of voting upon the sale of the Shares (the "SPECIAL MEETING") and (ii)
include in the Proxy Statement the recommendation of its Board of Directors that
holders of Common Stock approve the sale of Shares at the Special Meeting. The
Special Meeting will be held as promptly as practicable. The Company shall
ensure that the Special Meeting is called, noticed, convened, held and
conducted, and that all proxies solicited, in connection with the Special
Meeting are solicited in compliance with all applicable laws, regulations,
orders, judgments and decrees. The Company shall not be permitted to delay,
adjourn, postpone or reschedule the Special Meeting, or delay the vote of the
Company's stockholders on the sale of Shares, without Purchasers' prior written
consent (which consent will not be unreasonably withheld or delayed if the need
for the delay, adjournment, postponement or rescheduling of the Special Meeting
or the delay in such vote is attributable solely to factors outside the
Company's control). Notwithstanding anything to the contrary contained in this
Section 8(m), the Company's Board of Directors shall not be permitted to
withdraw or modify its recommendation in favor of the sale of Shares.
(n) Notices of Certain Events. The Company hereto shall
promptly notify Purchasers of:
(i) the receipt by the Company of any notice or
other communication from any person alleging that the consent of such person is
or may be required in connection with the transactions contemplated by this
agreement;
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(ii) the receipt by the Company of any notice or
other communication from any governmental entity in connection with the
transactions contemplated by this agreement;
(iii) the Company obtaining knowledge of any actions,
suits, claims investigations or proceedings commenced or threatened against,
relating to or involving or otherwise affecting the Company or Purchasers, as
the case may be, or any of their respective subsidiaries which relate to the
consummation of the transactions contemplated by this agreement; and
(iv) the Company obtaining knowledge of the
occurrence, or failure to occur, of any event which occurrence or failure to
occur will be likely to cause (A) any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect, or (B) any
material failure of any party to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it under this Agreement;
provided, however, that no such notification shall affect the representations,
warranties or obligations of the parties or the conditions to the obligations of
the parties hereunder.
(o) Efforts. The Company shall, and shall cause its respective
subsidiaries to, cooperate and use their reasonable efforts to take, or cause to
be taken, all appropriate action, and to make, or cause to be made, all filings
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation, their reasonable efforts to (i) obtain, prior to
the Closing Date, all licenses, permits, consents, approvals, authorizations,
qualifications and orders of governmental authorities and parties to contracts
with the Company and its subsidiaries and (ii) defend against and respond to any
action, suit, proceeding or investigation relating to the transactions
contemplated by this Agreement, in each case as are necessary for consummation
of the transactions contemplated by this Agreement and to fulfill the conditions
to the sale of Shares.
(p) No Solicitation.
(i) The Company agrees that until the Closing Date,
the Company shall not, directly or indirectly, and the Company shall ensure that
its Representatives (as defined below) do not, directly or indirectly: (i)
solicit, initiate, encourage or induce the making, submission or announcement of
any Acquisition (as defined below) or take any action that could reasonably be
expected to lead to an Acquisition Proposal (as defined below); (ii) furnish any
information regarding the Company or any direct or indirect subsidiary of the
Company to any Person in connection with or in response to an Acquisition
Proposal or potential Acquisition Proposal; or (iii) engage in discussions with
any Person (as defined below) with respect to any Acquisition Proposal. The
Company shall immediately cease and discontinue, and the Company shall ensure
that its Representatives immediately cease and discontinue, any existing
discussions with any Person that relate to any Acquisition Proposal. For
purposes of this Section 8(p):
(1) "ACQUISITION PROPOSAL" shall mean any
offer, proposal or inquiry contemplating or otherwise relating to any
Acquisition Transaction.
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(2) "ACQUISITION TRANSACTION" shall mean any
transaction (other than as contemplated by the Purchase Agreement) involving:
a) any merger, consolidation,
amalgamation, share exchange, business combination, issuance of securities,
acquisition of securities, tender offer, exchange offer or other similar
transaction (i) in which the Company is a constituent company, (ii) in which a
person or "group" (as defined in the Exchange Act of 1934, as amended and the
rules promulgated thereunder) of persons directly or indirectly acquires the
Company or more than 15% of the Company's business or directly or indirectly
acquires beneficial or record ownership of securities representing, or
exchangeable for or convertible into, more than 15% of the outstanding
securities of any class of voting securities of the Company, or (iii) in which
the Company issues securities representing more than 15% of the outstanding
securities of any class of voting securities of the Company;
b) any sale, lease, exchange,
transfer, license, acquisition or disposition of more than 15% of the assets of
the Company; or
c) any liquidation or dissolution
of the Company.
(3) "PERSON" shall mean any (i) individual,
(ii) corporation, limited liability company, partnership or other entity, or
(iii) governmental authority.
(4) "REPRESENTATIVES" shall mean officers,
directors, employees, agents, attorneys, accountants, advisors and
representatives.
(ii) Neither the Board of Directors of the Company
nor any committee thereof shall (i) withdraw or modify, or propose or resolve to
withdraw or modify, in a manner adverse to Purchasers, the approval or
recommendation by such Board of Directors or any such committee of this
Agreement or the sale of Shares, (ii) approve or recommend, or propose to
approve or recommend, any Acquisition Proposal or (iii) enter into any agreement
or letter of intent with respect to any Acquisition Proposal.
(iii) In addition to the obligations of the Company
set forth in Sections 8(p)(i) and 8(p)(ii) above, the Company shall promptly
advise Purchasers orally and in writing of any request for information or of any
Acquisition Proposal, or any inquiry with respect to or which could reasonably
be expected to lead to any Acquisition Proposal, the material terms and
conditions of such request, Acquisition Proposal or inquiry, and the identify of
the person making any such Acquisition Proposal or inquiry. The Company shall
use its best efforts to keep Purchasers fully informed of the status and details
of any such request, Acquisition Proposal or inquiry.
(iv) Notwithstanding the foregoing, if the Company
receives a bona fide, written, unsolicited offer to acquire all of the equity of
the Company or substantially all of the assets of the Company at a higher
valuation than that implied for the Company by this Agreement (a "HIGHER OFFER")
the Company may enter into a confidentiality agreement with, provide non-public
information to, or enter into discussions with, such offeror. The Company shall
inform the
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Purchasers immediately upon receipt of the Higher Offer in writing of the
identity of the offeror and the terms and conditions of the Higher Offer. In the
event that the Company shall receive a Higher Offer prior to the Closing Date
and consummate a sale of securities or material assets to, or merge with or be
acquired by, any Person other than the Purchasers, then the Company shall pay to
the Purchasers, in proportion to the Purchaser's participation in the Bridge
Financing (as defined in Section 9(xvi) below, $1 million in cash upon the
closing of such transaction.
9. Closing Conditions.
(a) Conditions to Purchaser's Obligations at the Closing.
The Purchaser's obligation to purchase the Shares at the Closing is subject to
the fulfillment on or prior to the Closing of the following conditions, any one
or more of which may be waived in whole or in part by the Purchaser:
(i) Compliance with Laws. At the Closing, the sale
and issuance of the Shares shall be legally permitted by all laws and
regulations to which the Purchaser or the Company is subject.
(ii) Representations and Warranties. Each of the
representations and warranties of the Company set forth in Section 4 shall be
true and correct as if made on the Closing Date.
(iii) Performance. The Company shall have performed
and complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing Date.
(iv) Compliance Certificate. The Chief Executive
Officer of the Company shall deliver to the Purchaser on the Closing Date a
certificate certifying that the conditions set forth in clauses (ii), (iii), (v)
- - (vii), (x) - (xiii), (xiv), (xv) and (xviii) of this Section 9(a) have been
fulfilled.
(v) Stockholder Approval. The Company shall have
satisfied the stockholder approval requirement provisions of the Nasdaq Stock
Market, or any other exchange or market on which the Common Stock is then listed
or traded, with respect to the issuance of 20% or more of a company's capital
stock.
(vi) Increased Option Pool. The Company shall have
received stockholder approval to reserve an additional 4,000,0000 shares of
Common Stock to be available for grant to management and employees under the
Company's 1991 Stock Option Plan.
(vii) Certificate of Designation. The Certificate of
Designation shall have been duly filed with the Secretary of State of Delaware,
and the Company shall have delivered a copy thereof to the Purchasers certified
as filed by the office of the Secretary of State of Delaware.
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(viii) Rights Agreement. The Company shall have
executed and delivered to the Purchasers the Rights Agreement.
(ix) Voting Agreement. The Company and certain
officers, directors, and holders of the Company's outstanding Common Stock
holding a minimum of 40% of the outstanding Common Stock shall have executed and
delivered to the Purchasers the Voting Agreement.
(x) Shareholders Rights Agreement. The Company shall
have terminated the existing Shareholders Rights Agreement dated June 13, 1995.
(xi) Preferred Shares Rights Agreement. Prior to the
earlier of thirty (30) days from the date hereof or the Closing Date, the
Company shall have taken all actions required under the Preferred Shares Rights
Agreement between the Company and Norwest Bank Minnesota, N.A. dated as of April
22, 1997 (the "RIGHTS PLAN") to permit the issuance of the Shares and the
consummation of the transactions contemplated by this Agreement, the Certificate
of Designation, the Voting Agreement and the Rights Agreement, without the
triggering of any rights thereunder. In addition the Company shall have amended
the Rights Plan to provide that the Shares held by the Purchasers shall receive
upon issuance of the Shares the same rights as the holders of Common Stock under
the Rights Plan.
(xii) Adverse Change. Since the date of the financial
statements included in the Company's Quarterly Report on Form 10-Q last filed
prior to the date of this Agreement, no event which had a Material Adverse
Effect and no material adverse change in the financial condition or prospects of
the Company shall have occurred.
(xiii) Absence of Litigation. There shall be no action,
suit, investigation or proceeding pending or threatened in any court or before
an arbitrator or governmental authority that could have a Material Adverse
Effect on the Company or the purchase of the Shares.
(xiv) Opinion of Counsel. The Company shall have
delivered to the Purchasers an opinion of counsel for the Company, dated as of
the Closing Date, in form and substance reasonably acceptable to the Purchasers.
(xv) Consents. The Company and the Purchasers shall
have obtained all consents (including all governmental and regulatory consents,
approvals, or authorizations required in connection with the valid execution and
delivery of this Agreement, the Voting Agreement and the Rights Agreement),
permits and waivers necessary or required to be obtained on or prior to the
Closing Date for consummation of the transactions contemplated hereby.
(xvi) Bridge Financing. The Company shall have
obtained interim financing of $3 million to fund its operations by May 21, 1999
(the "BRIDGE FINANCING").
(xvii) Chief Executive Officer. The new Chief Executive
Officer acceptable to the Purchasers remains employed by the Company in such
capacity on the Closing Date.
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(xviii) SBA Matters. The Company shall have executed and
delivered to the BankAmerica Ventures a Size Status Declaration on SBA Form 480
and an Assurance of Compliance on SBA Form 652, and shall have provided to
BankAmerica Ventures, the information requested by BankAmerica Ventures
necessary for the preparation by BankAmerica Ventures of a Portfolio Financing
Report on SBA Form 1031.
(xix) Proceedings and Documents. All corporate and
other proceedings in connection with the transactions contemplated in connection
with each Purchaser's purchase of the Shares and all documents incident thereto
shall be reasonably satisfactory in form and substance to the Purchasers and the
Purchasers' counsel, and they shall have received all such counterpart original
and certified or other copies of such documents as they may reasonably request.
(xx) Delivery of Stock Certificate. The Company shall
have caused the delivery to the Purchasers of a stock certificate representing
the Purchasers' ownership of the Shares.
(b) Conditions to Company's Obligations at the Closing. The
Company's obligation to sell and issue the Shares at the Closing is subject to
the fulfillment on or prior to the Closing of the following conditions, any one
or more of which may be waived in whole or in part by the Company:
(i) Compliance with Laws. At the Closing, sale and
issuance of the Shares shall be legally permitted by all laws and regulations to
which the Purchasers or the Company are subject.
(ii) Representations and Warranties. Each of the
representations and warranties of the Purchasers set forth in Sections 5 and 6
shall be true and correct as if made on the Closing Date.
(iii) The Purchase Price. The Purchasers shall have
delivered to the Company the Purchase Price in accordance with Section 3 hereof.
(iv) Performance. The Purchasers shall have performed
and complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with on or before the
Closing Date.
(v) Other Agreements. The Purchasers shall have
executed and delivered to the Company the Rights Agreement.
(vi) Consents. The Company and the Purchasers shall
have obtained all consents (including all governmental and regulatory consents,
approvals, or authorizations required in connection with the valid execution and
delivery of this Agreement, the Voting Agreement and the Rights Agreement),
permits and waivers necessary or required to be obtained on or prior to the
Closing Date for consummation of the transactions contemplated hereby.
-32-
(vii) Proceedings and Documents. All corporate and
other proceedings in connection with the transactions contemplated in connection
with the sale and issuance of the Shares and all documents incident thereto
shall be reasonably satisfactory in form and substance to the Company and the
Company's counsel, and they shall have received all such counterpart original
and certified or other copies of such documents as they may reasonably request.
10. General Provisions.
(a) Notices. All notices and other communication required or
appropriate to be given hereunder shall be in writing and shall be delivered by
hand or mailed by certified mail, return receipt requested, or sent by telex or
facsimile (in which case a confirming copy shall also be sent by certified mail
or courier), to the following respective addresses or to such other addresses as
may be specified in any notice delivered or mailed as above provided:
(i) If to the Purchasers, to:
BankAmerica Ventures
950 Tower Lane, Suite 700
Foster City, California 94404
Telephone: (650) 378-6000
Facsimile: (650) 378-6040
Attention: Mark Brooks and Robert S. Fore
and
Morgan Stanley Dean Witter Venture Partners
1221 Avenue of America, 33rd floor
New York, NY 10020
Phone: 212-762-8683
Fax: 212-762-8424
Attention: Fazle Husain
with a copy to:
Cooley Godward LLP
Five Palo Alto Square
Palo Alto, CA 94306-2155
Telephone: (650) 843-5000
Facsimile: (650) 857-0663
Attention: Julia L. Davidson, Esq.
and
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Davis, Polk, Wardwell
450 Lexington Ave.
New York, NY 10017
Telephone 212-450-4350
Facsimile: 212-450-5515
Attention: John Bick, Esq.
(ii) If to the Company to:
Cardiac Pathways Corporation
995 Benecia Avenue
Sunnyvale, California 94086
Telephone: (408) 737-0505
Facsimile: (408) 737-1700
Attention: G. Michael Latta,
Chief Financial Officer
with a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050
Telephone: (650) 493-9300
Facsimile: (650) 845-5000
Attention: Chris F. Fennell, Esq.
Any notice or other communication delivered by hand or mailed shall be deemed to
have been delivered on the date on which such notice or communication is
delivered by hand, or in the case of certified mail deposited with the
appropriate postal authorities on the date when such notice or communication is
actually received, and in any other case shall be deemed to have been delivered
on the date on which such notice or communication is actually received.
(b) Governing Law. The parties have agreed that this
Agreement will be governed by and construed in accordance with the laws of the
State of California.
(c) Amendments. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the holders of a majority of the
Shares and Conversion Shares then outstanding. Any amendment or waiver effected
in accordance with this paragraph shall be binding upon each holder of any
securities purchased under this Agreement at the time outstanding (including
securities into which such securities are convertible), each future holder of
all such securities, and the Company.
(d) Assignment.
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(i) Except as set forth in this Section 10(d), none
of the rights or obligations of the Company and each Purchaser may be assigned
or transferred without the prior written consent of the other party hereto.
(ii) The Company and each Purchaser may assign all of
its rights and obligations under this Agreement in connection with a merger or
similar reorganization or the sale of all or substantially all of its assets.
This Agreement shall survive any such merger or reorganization of the Company or
a Purchaser with or into, or such sale of assets to, another party and no
consent for such merger, reorganization or sale shall be required hereunder.
(iii) Each Purchaser may assign its rights and
obligations to a subsidiary, parent, LLC, general partner, limited partner,
retired partner, member or retired member of a Purchaser, provided the assignee
is not deemed by the Board of Directors of the Company, in its reasonable
judgment, to be a competitor of the Company and provided further such assignee
agrees, prior to the transfer, in writing with the Company to comply with all
the provisions of this Agreement applicable to such Purchaser.
(iv) This Agreement shall be binding upon and inure
to the benefit of the successors and permitted assigns of the parties. Any
assignment not in accordance with this Agreement shall be void.
(e) Expenses. The Company shall reimburse the Purchasers for
all reasonable legal, accounting and due diligence expenses incurred in
connection with this Agreement and the transactions contemplated hereby,
regardless of whether or not the Closing occurs.
(f) Counterparts. This Agreement may be executed in two or
more counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
(g) Entire Agreement. This Agreement, the Voting Agreement
and the Rights Agreement, together with the Exhibits and other documents
attached hereto and thereto, constitute the entire contract between the parties
with respect to the subject matter hereof and thereof, and no party will be
liable or bound to the other in any manner by any representations, warranties or
covenants except as specifically set forth herein and therein.
(h) Titles. The titles of the Sections of this Agreement are
inserted for reference only, and are not to be considered as part of this
Agreement in construing this Agreement.
(i) Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned, at any time prior to the
Closing, whether before or after approval of the sale of Shares by the
stockholders of the Company:
(i) by mutual consent of the Company and of a majority in
interest of Purchasers as set forth on Schedule A;
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(ii) by either a majority in interest of Purchasers
as set forth on Schedule A or the Company, if the Closing shall not have
occurred by October 31, 1999 (unless the failure to consummate the sale of
Shares is attributable to a failure on the part of the party seeking to
terminate this Agreement to perform any material obligation required to be
performed by such party at or prior to the Closing);
(iii) by a majority in interest of Purchasers as set
forth on Schedule A, if the required approval of the Company's stockholders
shall not have been obtained by reason of the failure to obtain the required
vote at a duly held meeting of stockholders or at any adjournment thereof;
(iv) by either a majority in interest of Purchasers
as set forth on Schedule A or the Company, if there shall be any law or
regulation of any Governmental Entity that makes consummation of the purchase of
the Shares illegal or otherwise prohibited or if any judgment, injunction, order
or decree of any governmental entity prohibiting such transaction is entered and
such judgment, injunction, order or decree shall have become final and
nonappealable;
(v) by a majority in interest of Purchasers as set
forth on Schedule A, if there has been a breach of any covenant or a breach of
any representation or warranty on the part of the Company, such that the closing
conditions set forth in Section 9 would not be satisfied or if the Company has
not secured interim financing as specified in Section 9(xvi) by May 21, 1999.
(j) Effect of Termination. In the event of the termination
of this Agreement pursuant to Section 10(i) hereof by the Company, or a majority
in interest of Purchasers, written notice thereof shall forthwith be given to
the other party or parties specifying the provision hereof pursuant to which
such termination is made, and this Agreement shall become void and have no
effect, and there shall be no liability hereunder on the part of Purchasers.
Nothing in this Section 10(j) shall relieve any party to this Agreement of
liability for breach of this Agreement or for representations which were
incorrect when made.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first set forth above.
"COMPANY"
CARDIAC PATHWAYS CORPORATION
By: /s/ William N. Starling
-------------------------------------
William N. Starling
President and Chief Executive Officer
"PURCHASERS"
BANKAMERICA VENTURES
By: /s/ Anchie Y. Kuo
-------------------------------------
Title: Managing Director
----------------------------------
MORGAN STANLEY VENTURE PARTNERS III, L.P.
By: Morgan Stanley Venture Partners III, L.L.C.
its General Partner
By: Morgan Stanley Venture Capital III, Inc.,
its Institutional Managing Member
By: /s/ Fazle Husain
-------------------------------------
Name: Fazle Husain
Title: General Partner
Address: 1221 Avenue of the Americas
New York, New York 10020
MORGAN STANLEY VENTURE INVESTORS III, L.P.
By: Morgan Stanley Venture Partners III, L.L.C.
its General Partner
By: Morgan Stanley Venture Capital III, Inc.,
its Institutional Managing Member
By: /s/ Fazle Husain
-------------------------------------
Name: Fazle Husain
Title: General Partner
Address: 1221 Avenue of the Americas
New York, New York 10020
MORGAN STANLEY VENTURE PARTNERS
ENTREPRENEUR FUND, L.P.
By: Morgan Stanley Venture Partners III, L.L.C.
its General Partner
By: Morgan Stanley Venture Capital III, Inc.,
its Institutional Managing Member
By: /s/ Fazle Husain
-------------------------------------
Name: Fazle Husain
Title: General Partner
Address: 1221 Avenue of the Americas
New York, New York 10020
VAN WAGONER CAPITAL MANAGEMENT
By: /s/ Garreat Van Wagoner
-------------------------------------
Name: Garreat Van Wagoner
Title: President
Address:
STATE OF WISCONSIN INVESTMENT BOARD
By: /s/ John Nelson
-------------------------------------
Name: John Nelson
Title: Investment Director
Address:
/s/ Thomas Fogarty
- ----------------------------------------
THOMAS FOGARTY
SCHEDULE A
SCHEDULE OF PURCHASERS
Number of
Purchasers Shares
-------------------------------------------------------------------------
BankAmerica Ventures 10,000
Morgan Stanley Venture Partners III, L.P. 8,773
Morgan Stanley Venture Investors III, L.P. 842
Morgan Stanley Venture Partners Entrepreneurs Fund, 385
L.P.
Van Wagoner Capital Management 5,000
State of Wisconsin Investment Board 6,000
Thomas Fogarty 500
EXHIBIT A
CERTIFICATE OF DESIGNATION
EXHIBIT B
DISCLOSURE SCHEDULE
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
EXHIBIT D
VOTING AGREEMENT