EXHIBIT 10.1
ORATEC INTERVENTIONS, INC.
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AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
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December 7, 1998
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
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THIS AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT (the "Agreement") is
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entered into as of the 7th day of December, 1998, by and among Oratec
Interventions, Inc., a California corporation (the "Company"), the holders of
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the Company's securities listed on Exhibit A hereto (the "Existing Investors"),
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the holders of warrants to purchase shares of Preferred Stock listed on Exhibit
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A hereto (the "Warrant Holders") and the holders of the Company's securities
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listed on Exhibit B hereto (the "New Investors," and collectively with the
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Existing Investors and the Warrant Holders, the "Investors").
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RECITAL
The Company and the Existing Investors entered into an Amended and Restated
Investor Rights Agreement dated as of November 26, 1997 (the "Prior Rights
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Agreement").
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The Company and certain of the Existing Investors and the New Investors are
parties to a Series E Preferred Stock Purchase Agreement of even date herewith
(the "Series E Purchaser Agreement"), pursuant to which the Company will sell
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and issue to such Investors shares of the Company's Series E Preferred Stock
(the "Series E Preferred Stock").
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The Company has issued warrants to purchase shares of Preferred Stock (the
"Warrants") to certain entities and wishes to grant certain registration rights
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to the Warrant Holders.
The Company and the undersigned Existing Investors, who hold a majority of
the "Registrable Securities" (as such term is defined in the Prior Rights
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Agreement), wish to amend and restate the Prior Rights Agreement in its entirety
in accordance with Section 3.7 of the Prior Rights Agreement on the terms and
conditions set forth in this Agreement in order to include the New Investors and
the shares of Series E Preferred Stock, and the Warrant Holders and the Warrant
Shares hereunder.
AGREEMENT
SECTION 1
Restrictions on Transferability;
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Registration Rights
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1.1 Certain Definitions. As used in this Agreement, the following terms
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shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
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other federal agency at the time administering the Securities Act.
"Conversion Shares" means the Common Stock issued or issuable upon
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conversion of the Securities.
"Holder" shall mean any Investor holding Registrable Securities and
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any person holding Registrable Securities to whom the rights under this
Agreement have been transferred in accordance with Section 1.14 hereof.
The terms "register," "registered" and "registration" refer to a
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registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses incurred by the
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Company in complying with Sections 1.5, 1.6 and 1.7 of this Agreement,
including, without limitation, all registration, qualification and filing fees,
printing expenses, escrow fees, fees and disbursements of counsel for the
Company, blue sky fees and expenses, and the expense of any regular or special
audits incident to or required by any such registration (but excluding the
compensation of regular employees of the Company which shall be paid in any
event by the Company).
"Registrable Securities" means (i) the Conversion Shares; and (ii) any
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Common Stock of the Company issued or issuable in respect of the Conversion
Shares or other securities issued or issuable with respect to the Conversion
Shares upon any stock split, stock dividend, recapitalization, or similar event,
or any Common Stock otherwise issued or issuable with respect to the Conversion
Shares; provided, however, that shares of Common Stock or other securities shall
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only be treated as Registrable Securities if and so long as they have not been
(A) sold to or through a broker or dealer or underwriter in a public
distribution or a public securities transaction, or (B) sold in a transaction
exempt from the registration and prospectus delivery requirements of the
Securities Act under Section 4(1) thereof so that all transfer restrictions and
restrictive legends with respect thereto are removed upon the consummation of
such sale.
"Restricted Securities" shall mean the securities of the Company
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required to bear the legend set forth in Section 1.3 of this Agreement.
"Securities" shall mean (i) shares of the Company's Series A Preferred
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Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock held by the Investors as of the date hereof,
(ii) shares of the Company's Series B Preferred Stock, Series C Preferred Stock
and Series E Preferred Stock issuable upon exercise of warrants (the "Warrant
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Shares") held by certain Investors as of the date hereof, provided that the
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Warrant Shares shall only be considered "Securities" and the holders of Warrant
Shares shall only be considered as "Holders" for the purposes of Sections 1.1,
1.2, 1.3, 1.4, 1.6, 1.7, 1.8, 1.9, 1.10, 1.11, 1.12, 1.13, 1.14, 1.15, 1.16 and
Section 3 of this Agreement, and (iii) shares of Series E Preferred Stock issued
or issuable to persons or entities that become parties to this Agreement
pursuant to Section 3.7.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
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any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
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"Selling Expenses" shall mean all underwriting discounts, selling
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commissions and stock transfer taxes applicable to the securities registered by
the Holders and all fees and disbursements of counsel for the Holders (except as
provided by Section 1.8).
1.2 Restrictions. The Securities and the Conversion Shares shall not be
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sold, assigned, transferred or pledged except upon the conditions specified in
this Agreement, which conditions are intended to ensure compliance with the
provisions of the Securities Act. The Investors will cause any proposed
purchaser, assignee, transferee or pledgee of the Securities and the Conversion
Shares to agree to take and hold such securities subject to the provisions and
upon the conditions specified in this Agreement.
1.3 Restrictive Legend. Each certificate representing (i) the Securities,
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(ii) the Conversion Shares and (iii) any other securities issued in respect of
the securities referenced in clauses (i) and (ii) upon any stock split, stock
dividend, recapitalization, merger, consolidation or similar event, shall
(unless otherwise permitted by the provisions of Section 1.4 below) be stamped
or otherwise imprinted with legends in the following form (in addition to any
legend required under applicable state securities laws):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE ABSENCE OF
SUCH REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL
(WHICH MAY BE COUNSEL FOR THE COMPANY) REASONABLY ACCEPTABLE TO IT STATING
THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF SAID ACT."
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE
SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY."
Each Investor and Holder consents to the Company making a notation on its
records and giving instructions to any transfer agent of the Restricted
Securities in order to implement the restrictions on transfer established in
this Section 1.
1.4 Notice of Proposed Transfers. The holder of each certificate
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representing Restricted Securities, by acceptance thereof, agrees to comply in
all respects with the provisions of this Section 1. Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities, unless there is in
effect a registration statement under the Securities Act covering the proposed
transfer, the holder thereof shall give written notice to the Company of such
holder's intention to effect such transfer, sale, assignment or pledge. Each
such notice shall describe the manner and circumstances of the proposed
transfer, sale, assignment or pledge in sufficient detail, and shall be
accompanied at such holder's expense by either (i) an unqualified written
opinion of legal counsel who shall be, and whose legal opinion shall be,
reasonably satisfactory
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to the Company, addressed to the Company, to the effect that the proposed
transfer of the Restricted Securities may be effected without registration under
the Securities Act, or (ii) a "no action" letter from the Commission to the
effect that the transfer of such securities without registration will not result
in a recommendation by the staff of the Commission that action be taken with
respect thereto, whereupon the holder of such Restricted Securities shall be
entitled to transfer such Restricted Securities in accordance with the terms of
the notice delivered by the holder to the Company. The Company will not require
such a legal opinion or "no action" letter (a) in any transaction in compliance
with Rule 144, (b) in any transaction in which an Investor which is a
corporation distributes Restricted Securities solely to its majority-owned
subsidiaries or affiliates for no consideration, or (c) in any transaction in
which an Investor which is a partnership distributes Restricted Securities
solely to partners or retired partners thereof for no consideration, provided
that each transferee agrees in writing to be subject to the terms of this
Section 1.4. Each certificate evidencing the Restricted Securities transferred
as above provided shall bear, except if such transfer is made pursuant to Rule
144, the appropriate restrictive legend set forth in Section 1.3 above, except
that such certificate shall not bear such restrictive legend if, in the opinion
of counsel for such holder and the Company, such legend is not required in order
to establish compliance with any provisions of the Securities Act. The Company
shall be required to promptly reissue unlegended certificates at the request of
any holder thereof if the Holder shall have obtained an opinion of counsel who
shall be, and whose legal opinion shall be, reasonably acceptable to the
Company, at such Holder's expense, to the effect that the securities proposed to
be disposed of may lawfully be so disposed of without registration,
qualification or legend. Notwithstanding the foregoing, a legend endorsed on an
instrument pursuant to applicable state securities laws and the stop-transfer
instructions with respect to such securities shall be removed upon receipt by
the Company of an order of the appropriate blue sky authority authorizing such
removal.
1.5 Requested Registration.
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(a) Request for Registration. In case the Company shall receive from
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Holders of at least forty percent (40%) of the Registrable Securities a written
request that the Company effect any registration, qualification or compliance of
the Registrable Securities, the anticipated aggregate offering price to the
public of which would exceed $5,000,000, the Company will:
(i) promptly give written notice of the proposed registration,
qualification or compliance to all other Holders; and
(ii) as soon as practicable, use its best efforts to effect such
registration, qualification or compliance (including, without limitation, the
execution of an undertaking to file post-effective amendments, appropriate
qualification under applicable blue sky law or other state securities laws and
appropriate compliance with applicable regulations issued under the Securities
Act and any other governmental requirements or regulations) as may be so
requested and as would permit or facilitate the sale and distribution of all or
such portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder or
Holders joining in such request as are specified in a written request received
by the Company within twenty (20) days after receipt of such written
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notice from the Company by any Holder; provided, however, that the Company shall
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not be obligated to take any action to effect any such registration,
qualification or compliance pursuant to this Section 1.5:
(1) In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting such
registration, qualification or compliance unless the Company is already subject
to service in such jurisdiction and except as may be required by the Securities
Act;
(2) Prior to the earlier of December __ , 2000 or six (6) months
following the bona fide firm commitment underwritten (by an underwriter of
nationally recognized standing) initial public offering of the Company's Common
Stock pursuant to an effective registration statement under the Securities Act;
(3) If at the time of the request to register Registrable
Securities the Company gives notice within thirty (30) days of such request that
it is engaged or has fixed plans to engage within ninety (90) days of the time
of the request in a bona fide firm commitment underwritten public offering of
its Common Stock pursuant to an effective registration statement under the
Securities Act;
(4) After the Company has effected two (2) such registrations
pursuant to this subparagraph 1.5(a), such registrations have been declared or
ordered effective and the securities offered pursuant to such registrations have
been sold; or
(5) If the Company shall furnish to such Holders a certificate,
signed by the President of the Company, stating that in the good faith judgment
of the Board of Directors it would be seriously detrimental to the Company or
its shareholders for registration statements to be filed in the near future,
then the Company's obligation to use it best efforts to register, qualify or
comply under this Section 1.5 shall be deferred for up to one (1) period, not to
exceed one hundred twenty (120) days each from the date of receipt of written
request from the Holders, in any twelve (12) month period.
Subject to the foregoing clauses (1) through (5), the Company
shall file a registration statement covering the Registrable Securities so
requested to be registered as soon as practicable after receipt of the request
or requests of the Holders.
(b) Underwriting. In the event that a registration pursuant to
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Section 1.5 is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as part of the notice given pursuant to
Section 1.5(a)(i). The right of any Holder to registration pursuant to Section
1.5 shall be conditioned upon such Holder's participation in the underwriting
arrangements required by Section 1.5 and the inclusion of such Holder's
Registrable Securities in the underwriting, to the extent requested and to the
extent provided in this Agreement.
The Company shall (together with all Holders) enter into an
underwriting agreement in customary form with the managing underwriter selected
for such underwriting by majority in interest of the Holders requesting such
registration (which managing underwriter
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shall be reasonably acceptable to the Company). Notwithstanding any other
provision of this Section 1.5, if the managing underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, the managing underwriter may limit the Registrable Securities to
be included in such registration. The Company shall so advise all Holders, and
the number of shares of Registrable Securities that may be included in the
registration and underwriting shall be allocated among all such Holders in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities held by such Holders at the time of filing the registration
statement. To facilitate the allocation of shares in accordance with the above
provisions, the Company or the underwriters may round the number of shares
allocated to any Holder to the nearest one hundred (100) shares. If any Holder
disapproves of the terms of any such underwriting, he or she may elect to
withdraw therefrom by written notice to the Company and the managing
underwriter. Any securities excluded or withdrawn from such underwriting shall
be withdrawn from such registration, and shall not be transferred in a public
distribution prior to 180 days after the effective date of the registration
statement relating thereto.
1.6 Company Registration.
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(a) Notice of Registration. If at any time or from time to time, the
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Company shall determine to register any of its securities, either for its own
account or the account of a security holder or holders other than (i) a
registration relating solely to employee benefit plans, or (ii) a registration
relating solely to a Commission Rule 145 transaction, the Company will:
(i) give to each Holder written notice thereof; and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved in
such registration, all the Registrable Securities specified in a written request
or requests made within twenty (20) days after receipt of such written notice
from the Company by any Holder.
(b) Underwriting. If the registration of which the Company gives
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notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as part of the written notice given pursuant
to Section 1.6(a)(i). In such event, the right of any Holder to registration
pursuant to Section 1.6 shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with the Company)
enter into an underwriting agreement in customary form with the managing
underwriter selected for such underwriting by the Company (or the Holders who
have demanded such registration). Notwithstanding any other provision of this
Section 1.6, if the managing underwriter determines that marketing factors
require a limitation of the number of shares to be underwritten, the managing
underwriter may limit the Registrable Securities to be included in such
registration provided, however, that, except in the case of the initial public
offering of the Company's Common Stock pursuant to a registration statement
under the Securities Act (where securities (including Registrable Securities) to
be included in such registration by the Company's shareholders (including the
Holders) may be excluded entirely if the managing underwriter determines that
marketing factors require a
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limitation of the number of shares to be underwritten), the aggregate value of
securities (including Registrable Securities) to be included in such
registration by the Company's shareholders (including the Holders) may not be so
reduced to less than thirty percent (30%) of the total value of all securities
included in such registration. The Company shall so advise all Holders, and the
number of shares Registrable Securities that may be included in the registration
and underwriting shall be allocated among all such Holders in proportion, as
nearly as practicable, to the respective amounts of Registrable Securities held
by such Holders at the time of filing the registration statement. To facilitate
the allocation of shares in accordance with the above provisions, the Company or
the underwriters may round the number of shares allocated to any Holder to the
nearest one hundred (100) shares. If any Holder disapproves of the terms of any
such underwriting, such person may elect to withdraw therefrom by written notice
to the Company and the managing underwriter. Any securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration, and
shall not be transferred in a public distribution prior to 180 days after the
effective date of the registration statement relating thereto.
(c) Right to Terminate Registration. The Company shall have the right
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to terminate or withdraw any registration initiated by it under this Section 1.6
prior to the effectiveness of such registration, whether or not any Holder has
elected to include securities in such registration.
1.7 Registration on Form S-3.
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(a) If Holders of at least thirty percent (30%) of the Registrable
Securities then outstanding request that the Company file a registration
statement on Form S-3 (or any successor form to Form S-3) for a public offering
of shares of the Registrable Securities, the reasonably anticipated aggregate
price to the public of which would exceed $1,000,000, and the Company is a
registrant entitled to use Form S-3 to register the Registrable Securities for
such an offering, the Company shall use its best efforts to cause such
Registrable Securities to be registered for the offering on such form; provided,
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however, that the Company shall not be required to effect more than two (2)
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registrations, and provided, further, that the Company shall not be required to
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pay Registration Expenses incurred in connection with more than one (1)
registration pursuant to this Section 1.7 in any twelve (12) month period. The
Company will (i) promptly give written notice of the proposed registration to
all other Holders, and (ii) as soon as practicable, use its best efforts to
effect such registration (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualification under
applicable blue sky or other state securities laws and appropriate compliance
with applicable regulations issued under the Securities Act and any other
governmental requirements or regulations) as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Registrable Securities as are specified in such request, together with all or
such portion of the Registrable Securities of any Holder or Holders joining in
such request as are specified in a written request received by the Company
within twenty (20) days after receipt of such written notice from the Company.
(b) Notwithstanding the foregoing, the Company shall not be obligated
to take any action pursuant to this Section 1.7: (i) in any particular
jurisdiction in which the Company
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would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act, (ii) during the period starting with the date sixty (60)
days prior to the filing of, and ending on a date six (6) months following the
effective date of, a registration statement (other than with respect to a
registration statement relating to a Rule 145 transaction, an offering solely to
employees or any other registration which is not appropriate for the
registration of Registrable Securities), provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective, or (iii) if the Company shall furnish to such
Holder a certificate signed by the president of the Company stating that, in the
good faith judgment of the Board of Directors, it would be seriously detrimental
to the Company or its shareholders for registration statements to be filed in
the near future, then the Company's obligation to register, qualify or comply
under this Section 1.7 shall be deferred for up to one (1) period, not to exceed
one hundred twenty (120) days each from the receipt of the request to file such
registration by such Holder or Holders, in any twelve (12) month period.
1.8 Expenses of Registration. Subject to the limitation set forth in
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Section 1.7, all Registration Expenses incurred in connection with any
registration pursuant to Sections 1.5, 1.6 and 1.7 and the reasonable cost of
one (1) special legal counsel to represent all of the Holders together in any
such registration shall be borne by the Company. Unless otherwise stated, all
other Selling Expenses relating to securities registered on behalf of the
Holders shall be borne by the Holders of the registered securities included in
such registration pro rata on the basis of the number of shares so registered.
1.9 Registration Procedures. In the case of each registration,
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qualification or compliance effected by the Company pursuant to this Section 1,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) Prepare and file with the Commission a registration statement with
respect to such securities and use its best efforts to cause such registration
statement to become and remain effective for at least one hundred eighty (180)
days or until the distribution described in the registration statement has been
completed;
(b) Furnish to the Holders participating in such registration and to
the underwriters of the securities being registered such reasonable number of
copies of the registration statement, preliminary prospectus, final prospectus
and such other documents as such underwriters may reasonably request in order to
facilitate the public offering of such securities;
(c) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective for such period
as any seller of Registrable Securities pursuant to such registration statement
shall request and to comply with the provisions of the Securities Act with
respect to the sale or other disposition of all Registrable Securities covered
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by such registration statement in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such registration
statement;
(d) use commercially reasonable efforts to register or qualify the
Registrable Securities covered by such registration statement under such other
securities or "blue sky" laws of such jurisdictions as any sellers of
Registrable Securities or any managing underwriter, if any, shall reasonably
request, and do any and all other acts and things which may be reasonably
necessary or advisable to enable such sellers or underwriter, if any, to
consummate the disposition of the Registrable Securities in such jurisdictions,
except that in no event shall the Company be required to qualify to do business
as a foreign corporation in any jurisdiction where it would not, but for the
requirements of this paragraph (d), be required to be so qualified, to subject
itself to taxation in any such jurisdiction or to consent to general service of
process in any such jurisdiction;
(e) promptly notify each Holder selling Registrable Securities covered
by such registration statement and each managing underwriter, if any: (i) when
the registration statement, any pre-effective amendment, the prospectus or any
prospectus supplement related thereto or post-effective amendment to the
registration statement has been filed and, with respect to the registration
statement or any post-effective amendment, when the same has become effective;
(ii) of any request by the SEC or state securities authority for amendments or
supplements to the registration statement or the prospectus related thereto or
for additional information; (iii) of the issuance by the SEC of any stop order
suspending the effectiveness of the registration statement or the initiation of
any proceedings for that purpose; (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification of any
Registrable Securities for sale under the securities or blue sky laws of any
jurisdiction or the initiation of any proceeding for such purpose; and (v) of
the existence of any fact of which the Company becomes aware which results in
the registration statement, the prospectus related thereto or any document
incorporated therein by reference containing an untrue statement of a material
fact or omitting to state a material fact required to be stated therein or
necessary to make any statement therein not misleading; and, if the notification
relates to an event described in clause (v), the Company shall promptly prepare
and furnish to each such seller and each underwriter, if any, a reasonable
number of copies of a prospectus supplemented or amended so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein in the light of the circumstances under which they were made not
misleading;
(f) comply with all applicable rules and regulations of the SEC, and
make generally available to its security holders, as soon as reasonably
practicable after the effective date of the registration statement (and in any
event within sixteen (16) months thereafter), an earnings statement (which need
not be audited) covering the period of at least twelve consecutive months
beginning with the first day of the Company's first calendar quarter after the
effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder;
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(g) (i) cause all such Registrable Securities covered by such
registration statement to be listed on the principal securities exchange on
which similar securities issued by the Company are then listed (if any), if the
listing of such Registrable Securities is then permitted under the rules of such
exchange, or (ii) if no similar securities are then so listed, to either cause
all such Registrable Securities to be listed on a national securities exchange
or to secure designation of all such Registrable Securities as a National
Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ")
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"national market system security" within the meaning of Rule 11Aa2-1 of the
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Exchange Act or, failing that, secure NASDAQ authorization for such shares and,
without limiting the generality of the foregoing, take all actions that may be
required by the Company as the issuer of such Registrable Securities in order to
facilitate the managing underwriter's arranging for the registration of at least
two (2) market makers as such with respect to such shares with the National
Association of Securities Dealers, Inc. (the "NASD");
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(h) provide and cause to be maintained a transfer agent and registrar
for all such Registrable Securities covered by such registration statement not
later than the effective date of such registration statement;
(i) enter into such customary agreements (including, if applicable, an
underwriting agreement) and take such other actions as the Holders of a majority
of the Registrable Securities participating in such offering shall reasonably
request in order to expedite or facilitate the disposition of such Registrable
Securities. The Holders of the Registrable Securities which are to be
distributed by such underwriters shall be parties to such underwriting
agreement;
(j) obtain an opinion from the Company's counsel in customary form and
covering such matters as are customarily covered by such opinions delivered to
underwriters in underwritten public offerings, which opinion shall be reasonably
satisfactory to the underwriter, if any, and furnish to each Holder
participating in the offering and to each underwriter, if any, a copy of such
opinion addressed to such Holder or underwriter;
(k) deliver promptly to each Holder participating in the offering and
each underwriter, if any, copies of all correspondence between the SEC and the
Company, its counsel or auditors and all memoranda relating to discussions with
the SEC or its staff with respect to the registration statement, other than
those portions of any such memoranda which contain information subject to
attorney-client privilege with respect to the Company, and, upon receipt of such
confidentiality agreements as the Company may reasonably request, make
reasonably available for inspection by any seller of such Registrable Securities
covered by such registration statement, by any underwriter, if any,
participating in any disposition to be effected pursuant to such registration
statement and by any attorney, accountant or other agent retained by any such
seller or any such underwriter, all pertinent financial and other records,
pertinent corporate documents and properties of the Company, and cause all of
the Company's officers, directors and employees to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement;
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(l) use commercially reasonable efforts to obtain the withdrawal of
any order suspending the effectiveness of the registration statement;
(m) provide a CUSIP number for all Registrable Securities, not later
than the effective date of the registration statement;
(n) make reasonably available its employees and personnel and
otherwise provide reasonable assistance to the underwriters (taking into account
the needs of the Company's businesses and the requirements of the marketing
process) in the marketing of Registrable Securities in any underwritten
offering;
(o) promptly after the filing of any document which is to be
incorporated by reference into the registration statement or the prospectus
(after the initial filing of such registration statement) provide copies of such
document to counsel for the selling holders of Registrable Securities and to
each managing underwriter, if any, and make the Company's representatives
reasonably available for discussion of such document and make such changes in
such document;
(p) furnish to each Holder participating in the offering and the
managing underwriter, without charge, at least one signed copy of the
registration statement and any post-effective amendments thereto, including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits (including those incorporated by reference);
(q) cooperate with the selling Holders of Registrable Securities and
the managing underwriter, if any, to facilitate the timely preparation and
delivery of certificates not bearing any restrictive legends representing the
Registrable Securities to be sold, and cause such Registrable Securities to be
issued in such denominations and registered in such names in accordance with the
underwriting agreement prior to any sale of Registrable Securities to the
underwriters or, if not an underwritten offering, in accordance with the
instructions of the selling Holders of Registrable Securities at least three
business days prior to any sale of Registrable Securities and instruct any
transfer agent and registrar of Registrable Securities to release any stop
transfer orders in respect thereto; and
(r) take all such other commercially reasonable actions as are
necessary or advisable in order to expedite or facilitate the disposition of
such Registrable Securities.
1.10 Indemnification.
---------------
(a) The Company will indemnify each Holder, each of its officers and
directors and partners, and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Section 1, and
each underwriter, if any, and each person who controls any underwriter within
the meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages or liabilities, joint or several (or actions or proceedings in
respect thereof) ("Claims"), including any of the foregoing incurred in
------
settlement of any litigation, commenced or threatened, arising out of or based
on any untrue statement (or alleged untrue
-11-
statement) of a material fact contained in any registration statement,
prospectus, offering circular or other document, or any amendment or supplement
thereto, incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, or any
violation by the Company of any federal or state securities law, rule or
regulation applicable to the Company, and relating to action required of or
inaction by the Company, in connection with any such registration, qualification
or compliance, and the Company will reimburse each such Holder, each of its
officers and directors, and each person controlling such Holder, each such
underwriter and each person who controls any such underwriter, for any legal and
any other expenses as reasonably incurred in connection with investigating,
preparing or defending any such claim, loss, damage, liability or action,
provided that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability or expense arises out of or is based on
any untrue statement or omission or alleged untrue statement or omission, made
in reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such Holder, controlling person or
underwriter and stated to be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by such Holder
are included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers, each underwriter, if any, of the Company's securities covered by such
a registration statement, each person who controls the Company or such
underwriter within the meaning of Section 15 of the Securities Act, and each
other such Holder, each of its officers and directors and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular or other document, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and, only out of the
net proceeds received by such Holder from the offering of the securities covered
by such a registration statement, will reimburse the Company, such Holders, such
directors, officers, persons, underwriters or control persons for any legal or
any other expenses as reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by an instrument
duly executed by such Holder and stated to be specifically for use therein. In
no event shall any indemnity under this Section 1.10(b) exceed the net proceeds
from the offering received by such Holder.
(c) Each party entitled to indemnification under this Section 1.10
(the "Indemnified Party") shall give notice to the party required to provide
-----------------
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
------------------
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved
-12-
by the Indemnified Party (whose approval shall not unreasonably be withheld),
and the Indemnified Party may participate in such defense at such party's
expense, and provided further that (i) if the Indemnifying Party fails to take
reasonable steps necessary to defend diligently the action or proceeding within
twenty (20) days after receiving notice from such Indemnified Party; or (ii) if
such Indemnified Party who is a defendant in any action or proceeding which is
also brought against the Indemnifying Party reasonably shall have concluded that
there may be one or more legal defenses available to such Indemnified Party
which are not available to the Indemnifying Party; or (iii) if representation of
both parties by the same counsel is otherwise inappropriate under applicable
standards of professional conduct, then, in any such case, the Indemnified Party
shall have the right to assume or continue its own defense as set forth above
(but with no more than one firm of counsel for all Indemnified Parties in each
jurisdiction), and the Indemnifying Party shall be liable for any expenses
therefor. The failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Section 1
unless the failure to give such notice is materially prejudicial to an
Indemnifying Party's ability to defend such action. No settlement of any such
claim, loss, damage, liability or action shall be made by the Indemnified Party
without the prior written consent of the Indemnifying Party (such consent to not
be unreasonably withheld). No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability in respect to such
claim or litigation.
(d) If for any reason the foregoing indemnity is unavailable or is
insufficient to hold harmless an Indemnified Party under Sections 1.10(a) or
(b), then each Indemnifying Party shall contribute to the amount paid or payable
by such Indemnified Party as a result of any Claim in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party, on the one
hand, and the Indemnified Party, on the other hand, with respect to such
offering of securities. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Indemnifying Party or the Indemnified Party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. If, however, the
allocation provided in the second preceding sentence is not permitted by
applicable law, then each Indemnifying Party shall contribute to the amount paid
or payable by such Indemnified Party in such proportion as is appropriate to
reflect not only such relative faults but also the relative benefits of the
Indemnifying Party and the Indemnified Party as well as any other relevant
equitable considerations. The parties hereto agree that it would not be just and
equitable if contributions pursuant to this Section 1.10(d) were to be
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in the
preceding sentences of this Section 1.10(d). The amount paid or payable in
respect of any Claim shall be deemed to include any legal or other expenses
reasonably incurred by such Indemnified Party in connection with investigating
or defending any such Claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. Notwithstanding anything in this Section 1.10(d) to the
contrary, no
-13-
Indemnifying Party (other than the Company) shall be required pursuant to this
Section 1.10(d) to contribute any amount in excess of the net proceeds received
by such indemnifying party from the sale of Registrable Securities in the
offering to which the Claims of the Indemnified Parties relate, less the amount
of any indemnification payment made by such Indemnifying Party pursuant to
Section 1.10(b).
(e) The indemnification and contribution agreements contained herein
shall be in addition to any other rights to indemnification or contribution
which any Indemnified Party may have pursuant to law or contract and shall
remain operative and in full force and effect regardless of any investigation
made or omitted by or on behalf of any Indemnified Party and shall survive the
transfer of the Registrable Securities by any such party.
(f) The indemnification and contribution required by this Section
1.10 shall be made by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are received or expense,
loss, damage or liability is incurred.
1.11 Information by Holder. The Holder or Holders of Registrable
---------------------
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held by
them and the distribution proposed by such Holder or Holders as the Company may
request in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Section 1.
1.12. Limitations on Subsequent Registration Rights; No Inconsistent
--------------------------------------------------------------
Agreements. Without the prior written consent of the Holders of a majority of
- ----------
the Registrable Securities, the Company will not, on or after the date of this
Agreement, enter into any agreement with respect to its securities with any
holder or prospective holder of any securities of the Company giving such holder
or prospective holder any registration rights, the terms of which are more
favorable than the registration rights granted to the Holders thereunder. The
Company further agrees that if any other registration rights agreement entered
into after the date of this Agreement with respect to any of its securities
contains terms which are more favorable to, or less restrictive on, the other
party thereto than the terms and conditions in this Agreement are (insofar as
they are applicable) to the Holders, then the terms and conditions of this
Agreement shall immediately be deemed to have been amended without further
action by the Company or any of the Holders of Registrable Securities so that
the Holders shall be entitled to the benefit of any such more favorable or less
restrictive terms or conditions.
1.13 Rule 144 Reporting. With a view to making available the benefits of
------------------
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Securities to the public without registration, after such
time as a public market exists for the Common Stock of the Company, the Company
agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times after
the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Securities Exchange Act of 1934, as
amended (the "Exchange Act");
------------
-14-
(b) File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act
(at any time after it has become subject to such reporting requirements); and
(c) So long as an Investor owns any Restricted Securities, to furnish
to the Investor forthwith upon request a written statement by the Company as to
its compliance with the reporting requirements of said Rule 144 (at any time
after ninety (90) days after the effective date of the first registration
statement filed by the Company for an offering of its securities to the general
public), and of the Securities Act and the Exchange Act (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
of the Company and other information as an Investor may reasonably request in
availing itself of any rule or regulation of the Commission allowing an Investor
to sell any such securities without registration.
1.14 Transfer of Registration Rights. The rights to cause the Company to
-------------------------------
register securities granted Investors under Sections 1.5, 1.6 and 1.7 may be
assigned to a transferee or assignee reasonably acceptable to the Company in
connection with any transfer or assignment of Registrable Securities by an
Investor (together with any affiliate); provided, that (a) such transfer may
--------
otherwise be effected in accordance with applicable securities laws, (b) notice
of such assignment is given to the Company, and (c) such transferee or assignee
(i) is a wholly-owned subsidiary or constituent partners (including limited
partners) of such Investor, or (ii) acquires from such Investor the lesser of
(A) 100,000 or more shares of Restricted Securities (as appropriately adjusted
for stock splits, stock dividends and the like) or (B) all of the Restricted
Securities then owned by such Investor.
1.15 Standoff Agreement. Each Holder agrees in connection with any
------------------
registration of the Company's securities, upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities, not
to sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any Registrable Securities (other than those included in
the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed one
hundred eighty (180) days from the effective date of such registration in the
case the initial public offering of the Company's Common Stock pursuant to a
registration statement under the Securities Act and ninety (90) days in any
subsequent offering) as may be requested by the Company or such managing
underwriters; provided, that (a) the officers and directors of the Company who
--------
own stock of the Company (and "affiliates" and "associates" thereof (as such
terms are defined in Rule 12b 2 under the Exchange Act) agree to such
restrictions, and (b) the Company has used commercially reasonable efforts to
cause shareholders holding over 200,000 shares of Common Stock or Common Stock
equivalents to agree to such restrictions.
1.16 Termination of Rights. The rights of any particular Holder to cause
---------------------
the Company to register securities under Sections 1.5, 1.6 and 1.7 shall
terminate with respect to such Holder (i) five (5) years following a bona fide
firm underwritten public offering of shares of the Company's Common Stock
registered under the Securities Act, (ii) with respect to any Holder, at such
time as such Holder is able to dispose of all its Registrable Securities in one
three (3)-month
-15-
period pursuant to the provisions of Rule 144; or (iii) with respect to any
Holder, at such time as such Holder holds Registrable Securities constituting
less than one percent (1%) of the outstanding voting stock of the Company.
SECTION 2
Affirmative Covenants of the Company
The Company hereby covenants and agrees as follows:
2.1 Financial Information. As long as a Holder holds at least 500,000
---------------------
shares of the Securities (as adjusted for stock splits, stock dividends and the
like), the Company will mail the following reports to such Holder:
(a) As soon as practicable after the end of each fiscal year, and in
any event within ninety (90) days thereafter, audited consolidated balance
sheets of the Company and its subsidiaries, if any, as of the end of such fiscal
year, and audited consolidated statements of income, audited consolidated
statements of changes in financial position and audited consolidated statements
of shareholders' equity of the Company and its subsidiaries, if any, for such
year, prepared in accordance with generally accepted accounting principles
consistently applied and setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail and certified by
independent public accountants of recognized national standing selected by the
Company.
(b) As soon as practicable after the end of the first, second and
third quarterly accounting periods in each fiscal year of the Company and in any
event within forty-five (45) days thereafter, an unaudited consolidated balance
sheet of the Company and its subsidiaries, if any, as of the end of each such
quarterly period, and unaudited consolidated statements of income, unaudited
consolidated statements of cash flow and unaudited consolidated statements of
shareholders' equity of the Company and its subsidiaries, if any, for such
period and for the current fiscal year to date, and comparisons to budget and
the corresponding prior year period, prepared in accordance with generally
accepted accounting principles (other than for accompanying notes and subject to
normal year-end audit adjustments), all in reasonable detail.
(c) As soon as practicable after the end of each month (other than
the last month of a fiscal quarter) and in any event within forty-five (45) days
after the end of each such month through November 30, 1998 and within thirty
(30) days after the end of each such month thereafter, an unaudited consolidated
balance sheet of the Company and its subsidiaries, if any, as of the end of each
such month, and unaudited consolidated statements of income, unaudited
consolidated statements of cash flow and unaudited consolidated statements of
shareholders' equity of the Company and its subsidiaries, if any, for such month
and for the current fiscal year to date, and comparisons to budget and the
corresponding prior year period, prepared in accordance with generally accepted
accounting principles (other than for accompanying notes and subject to normal
year-end audit adjustments), all in reasonable detail.
-16-
(d) As soon as practicable, but in any event not less than thirty
(30) days nor more than ninety (90) days prior to the end of each fiscal year, a
budget and business plan for the next fiscal year, prepared on a monthly basis,
including balance sheets and sources and applications of funds statements for
such months and, as soon as prepared, any other budgets or revised budgets
prepared by the Company.
(e) Contemporaneously with delivery to holders of Common Stock, a
copy of each report of the Company delivered to holders of the Company's Common
Stock.
2.2 Subsidiaries. If for any period the Company shall have any subsidiary
------------
or subsidiaries whose accounts are consolidated with those of the Company, then,
in respect of such period, the financial statements and information delivered
pursuant to the foregoing Section 2.1 shall be the consolidated and
consolidating financial statements of the Company and all such consolidated
subsidiaries.
2.3 Access to Records.
-----------------
(a) Each Holder shall have access to the Company's books, records and
properties for purposes reasonably related to such Holder's interests as a
shareholder.
(b) The Company shall afford each Holder of at least 500,000 shares
of Series D Preferred Stock and/or Series E Preferred Stock (a "Major Holder"),
------------
and their employees, counsel and other authorized representatives full access,
during normal business hours, upon reasonable advance notice, with due regard to
its ongoing operations, to the assets, properties, plants, offices, warehouses
and other facilities, contracts and books and records of the Company, and to the
outside auditors of the Company and their work papers relating thereto, in each
case, as the Major Holders may from time to time reasonably request. The Major
Holders and their representatives shall be entitled to consult with the
representatives, officers, employees and accountants of the Company with respect
to the Company, and the Company will instruct such persons to cooperate with the
Major Holders. The Company shall permit representatives of the Major Holders to
discuss the affairs, finances and accounts of the Company with, and to make
proposals and furnish advice with respect thereto to, the principal officers of
the Company, all at such reasonable times, upon reasonable notice and as often
as the Major Holders may reasonably request; provided, however, that neither the
Board of Directors nor the officers of the Company shall be under any obligation
pursuant to this Section 2.3 to take any action with respect to any proposals
made or advice furnished by the Major Holders in their capacities as
shareholders of the Company, other than to take such proposals or advice
seriously and give due consideration thereto.
(c) The Company agrees to furnish to each Major Holder, within ten
(10) business days of any Major Holder's request, a capitalization table setting
forth the class, series of each class, the name of the holder of each class or
series thereof, and the number of shares held by each such holder.
2.4 System of Accounting. The books of account and other financial and
--------------------
corporate records of the Company shall be maintained in accordance with good
business and accounting
-17-
practices and the financial condition of the Company shall be accurately
reflected in the financial statements required to be provided to the Major
Holders under the terms of this Agreement.
2.5 Transfer of Information Rights. The information rights set forth in
------------------------------
Section 2.1 and 2.3 may be assigned to a transferee or assignee reasonably
acceptable to the Company in connection with any transfer or assignment or
assignment of Registrable Securities by an Investor (together with an affiliate)
(which acceptance shall not be unreasonably withheld); provided, that (a) such
--------
transfer may otherwise be effected in accordance with applicable securities
laws, (b) notice of such assignment is given to the Company, and (c) such
transferee or assignee (i) is a wholly-owned subsidiary or constituent partner
(including limited partners) of such Investor, or (ii) acquires from such
Investor the lesser of (A) 100,000 or more shares of Registered Securities
(500,000 shares of Series D Preferred Stock and/or Series E Preferred Stock in
the case of a transfer of rights pursuant to Section 2.3(b)) as appropriately
adjusted for stock splits, stock dividends and the like or (B) all of the
Restricted Securities then owned by such Investor. In the event that the Company
reasonably determines that provision of information to a transferee pursuant to
this Section 2.5 would materially adversely affect its proprietary position,
such information may be edited in the manner necessary to avoid such effect.
2.6 Right to Maintain Interest. Subject to the terms and conditions
--------------------------
specified in this Section 2.6, the Company hereby grants to each Major Holder a
right to maintain the percentage ownership interest of such Major Holder in the
Company with respect to future sales by the Company of any shares of, or
securities convertible into or exercisable for any shares of, any class of its
capital stock ("Shares"), such that each time the Company proposes to offer
------
Shares, the Company shall first make an offering of such Shares to each Major
Holder in accordance with the following provisions:
(a) The Company shall deliver a notice by certified mail ("Notice")
------
to each Major Holder stating the aggregate number of such Shares to be offered
and the price and terms upon which it proposes to offer such Shares.
(b) Within twenty (20) days after delivery of the Notice, each Major
Holder may elect to purchase at the price and on the terms specified in the
Notice, up to such number of Shares equal to (x) the total number of Shares
being offered, multiplied by (y) a fraction, the numerator of which equals the
total number of shares of Common Stock issued and held, or issuable upon
conversion or exercise of all convertible or exercisable securities (including
shares of Common Stock issuable upon conversion of convertible securities
issuable upon exercise of outstanding warrants) then held by such Major Holder,
and the denominator of which equals the total number of shares of Common Stock
of the Company then outstanding (assuming full conversion and exercise of all
then outstanding convertible or exercisable securities and conversion of all
convertible securities issuable upon exercise of outstanding warrants).
(c) The Company may, during the ninety (90)-day period following the
expiration of the period provided in Section 2.6(b), offer the remaining
unsubscribed portion of
-18-
the 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.
(d) The right to maintain interest set forth in this Section 2.6
shall not be applicable to:
(i) Shares issued or deemed to have been issued pursuant to a
split, subdivision or recapitalization of the outstanding shares of Common
Stock, or a payment in respect of outstanding shares of Common Stock of a
dividend of Common Stock or securities or rights convertible into Common Stock;
(ii) Shares issued or deemed to have been issued to employees,
consultants or directors of the Company directly or pursuant to a stock option
plan or stock purchase plan or other stock incentive arrangement approved by the
Company's Board of Directors;
(iii) Shares issued or deemed to have been issued in connection
with bona fide equipment lease financings or similar financing transactions, the
terms of which are approved by the Company's Board of Directors, or warrants
(and the shares issuable upon exercise of such warrants) to purchase up to
122,353 shares of Series E Preferred Stock in connection with the subordinated
debt financing with Transamerica that has been approved by the Company's Board
of Directors prior to the date of this Agreement;
(iv) Shares issued or deemed to have been issued in connection
with strategic relationships or similar transactions, the terms of which are
approved by a majority of the non-employee disinterested members of the
Company's Board of Directors;
(v) Shares issued or deemed to have been issued upon conversion
of Preferred Stock; or
(vi) Shares issued in connection with a public offering of the
Company's securities pursuant to a registration statement under the Securities
Act.
2.7 Effectiveness and Termination of Covenants. The covenants set
------------------------------------------
forth in this Section 2 shall terminate on and be of no further force or effect
upon the earlier of (i) the consummation of the Company's sale of shares of its
Common Stock in an underwritten public offering pursuant to an effective
registration statement filed under the Securities Act or (ii) the registration
by the Company of a class of its equity securities under Section 12(b) or 12(g)
of the Securities Exchange Act of 1934, or (iii) upon the consummation of an
acquisition of the Company in one or a series of related transactions in which
the shareholders of the Company immediately prior thereto own less than 50% of
the voting stock of the Company (or its successor or parent) thereafter, and
pursuant to which a Public Market exists for the Company's capital stock (or
other stock issued in exchange therefore). For the purpose of this Agreement, a
"Public Market" shall be deemed to exist if: (i) such stock is listed on a
-------------
national securities exchange (as that term is used in the 1934 Act or (ii) such
stock is traded on the over-the-counter market and prices are published daily on
business days in a recognized financial journal.
-19-
SECTION 3
Miscellaneous
-------------
3.1 Assignment. Except as otherwise provided in this Agreement, the terms
----------
and conditions of this Agreement shall inure to the benefit of and be binding
upon the respective successors and assigns of the parties to this Agreement.
3.2 Third Parties. Nothing in this Agreement, express or implied, is
-------------
intended to confer upon any party, other than the parties to this Agreement, and
their respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
3.3 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of California in the United States of America.
3.4 Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
3.5 Notices. Any notice required or permitted by this Agreement shall be
-------
in writing and shall be sent by prepaid registered or certified mail, return
receipt requested, or otherwise delivered by hand or by messenger addressed to
the other party at the address shown on the signature page to the Series E
Preferred Stock Purchase Agreement of even date herewith or at such other
address for which such party gives notice under this Agreement. Such notice
shall be deemed to have been given when delivered if delivered personally, by
overnight courier, or by facsimile transmission (as evidenced by the sender's
confirmation receipt), or, if sent by mail, at the earlier of its receipt or
three (3) days after deposit in the mail. Any notice to the Company shall be
given as follows:
Oratec Interventions, Inc.
3700 Haven Court
Menlo Park, CA 94025
Telephone: (650) 369-9904
Facsimile: (650) 369-9905
Attention: President
with a copy to:
Venture Law Group
A Professional Corporation
2775 Sand Hill Road
Menlo Park, CA 94025
Telephone: (650) 854-4488
Facsimile: (650) 233-8386
-20-
Attn.: Mark B. Weeks
3.6 Severability. If one or more provisions of this Agreement are held to
------------
be unenforceable under applicable law, portions of such provisions, or such
provisions in their entirety, to the extent necessary, shall be severed from
this Agreement, and the balance of this Agreement shall be enforceable in
accordance with its terms.
3.7 Amendment and Waiver. Any provision of this Agreement may be amended
--------------------
or waived with the written consent of the Company and the Holders of at least a
majority of the outstanding shares of the Registrable Securities. Any amendment
or waiver effected in accordance with this paragraph shall be binding upon each
Holder of Registrable Securities and the Company. In addition, the Company may
waive performance of any obligation owing to it, as to some or all of the
Holders of Registrable Securities, or agree to accept alternatives to such
performance, without obtaining the consent of any Holder of Registrable
Securities. In the event that an underwriting agreement is entered into, and
such underwriting agreement contains terms differing from this Agreement, as to
any such Holder the terms of such underwriting agreement shall govern. In the
event of the issuance of (a) additional shares of Series E Preferred Stock
permitted to be sold pursuant to the Series E Preferred Stock Purchase Agreement
of even date herewith, or (b) warrants to purchase additional shares of Series E
Preferred Stock in connection with bona fide equipment lease or bank financings,
subordinated debt financings or similar financing transactions, the terms of
which are approved by the Board of Directors of the Company, the holders of such
shares or warrants may become parties to this Agreement, without any further
action by the Holders, by executing and delivering an additional counterpart
signature page to this Agreement and shall be deemed to be "Holders" for all
-------
purposes of this Agreement as of the date of execution and delivery of such
counterpart signature page. In the case of such an issuance, upon execution and
delivery of an additional counterpart signature page by any such person or
entity, the Company shall add such person or entity's name to Exhibit B hereto.
---------
3.8 Effect of Amendment or Waiver. The Investors and their successors and
-----------------------------
assigns acknowledge that by the operation of Section 3.7 of this Agreement the
holders of a majority of the outstanding Registrable Securities, acting in
conjunction with the Company, will have the right and power to diminish or
eliminate any or all rights or increase any or all obligations pursuant to this
Agreement.
3.9 Rights of Holders. Each holder of Registrable Securities shall have
-----------------
the absolute right to exercise or refrain from exercising any right or rights
that such holder may have by reason of this Agreement, including, without
limitation, the right to consent to the waiver or modification of any obligation
under this Agreement, and such holder shall not incur any liability to any other
holder of any securities of the Company as a result of exercising or refraining
from exercising any such right or rights.
3.10 Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy accruing to any party to this Agreement, upon any breach or
default of the other party, shall impair any such right, power or remedy of such
non-breaching party nor shall it be construed to be a waiver of any such breach
or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default
-21-
be deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any party of any breach or default under this Agreement, or any
waiver on the part of any party of any provisions or conditions of this
Agreement, must be made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, or by law or otherwise afforded to any holder, shall be cumulative
and not alternative.
3.11 Termination of Prior Rights Agreement. Pursuant to Section 3.7 of
-------------------------------------
the Prior Rights Agreement, the Company and the undersigned Existing Investors,
being the holders of the requisite majority of the outstanding Registrable
Securities (as defined in the Prior Rights Agreement), hereby amend and restate
the Prior Rights Agreement to read in its entirety as set forth in this
Agreement.
3.12 Waiver of Right to Maintain Interest; Termination of Certain
------------------------------------------------------------
Covenants in Series D Purchase Agreement. Pursuant to Section 14.8 of the
- ----------------------------------------
Series D Preferred Stock Purchase Agreement dated November 26, 1997 between the
Company and certain of the Existing Investors (the "Series D Purchase
-----------------
Agreement"), the Company and the undersigned holders of a majority of the shares
- ---------
of Series D Preferred Stock, being the holders of the requisite majority of the
shares of Stock (as defined in the Series D Purchase Agreement) needed to amend
the Series D Purchase Agreement, do hereby (i) waive the Right to Maintain
Interest contained in Section 7.18 of the Series D Purchase Agreement (including
notice requirements) with respect to the issuance of the shares of Series E
Preferred Stock pursuant to the Series E Purchase Agreement, and (ii) terminate
Sections 7.1, 7.2, 7.3, 7.4 and 7.18 of the Series D Purchase Agreement.
-22-
IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Investor Rights Agreement as of the day and year first above written.
COMPANY:
ORATEC INTERVENTIONS, INC., a California corporation
By: /s/ Kenneth Anstey
---------------------------------
Title: President
------------------------------
WARRANTHOLDERS:
____________________________________
(Warrantholder Name - Please print)
By:_________________________________
(Signature)
Title:______________________________
(if any)
EXISTING INVESTORS:
____________________________________
(Investor Name - Please print)
By:_________________________________
(Signature)
Title:______________________________
(if any)
NEW INVESTORS:
____________________________________
(Investor Name - Please print)
By:_________________________________
(Signature)
Title:______________________________
(if any)
EXHIBIT A
EXISTING INVESTORS
- -------------------------------------------------------------------------------------------------------
First Name Last Name or Entity Name Type of Stock
- -------------------------------------------------------------------------------------------------------
Michael Dillingham Series A
- -------------------------------------------------------------------------------------------------------
Gary Fanton Series A
- -------------------------------------------------------------------------------------------------------
Michael Franz Series A
- -------------------------------------------------------------------------------------------------------
Hartzler, Geoffrey, Trustee of the Geoffrey Hartzler
Revocable Trust dated 1/8/97, as amended Series A
- -------------------------------------------------------------------------------------------------------
Alan Johnson Series A
- -------------------------------------------------------------------------------------------------------
Stephen Marcus Series A
- -------------------------------------------------------------------------------------------------------
Jeffrey Saal Series A
- -------------------------------------------------------------------------------------------------------
Joel Saal Series A
- -------------------------------------------------------------------------------------------------------
Greg Barrett Series B
- -------------------------------------------------------------------------------------------------------
David Birnbach Series B
- -------------------------------------------------------------------------------------------------------
Randy Birnbach Series B
- -------------------------------------------------------------------------------------------------------
Scott Blumenthal Series B
- -------------------------------------------------------------------------------------------------------
Smith Barney IRA Custodian FBO Jeffrey I. Bragman Series B
- -------------------------------------------------------------------------------------------------------
Steve Caria Series B
- -------------------------------------------------------------------------------------------------------
Chris Casscells Series B
- -------------------------------------------------------------------------------------------------------
CN Investment Partners, L.P. Series B
- -------------------------------------------------------------------------------------------------------
Mike Crocker Series B
- -------------------------------------------------------------------------------------------------------
Norma Crocker Series B
- -------------------------------------------------------------------------------------------------------
Delphi BioInvestments III, L.P. Series B
- -------------------------------------------------------------------------------------------------------
Delphi Ventures III, L.P. Series B
- -------------------------------------------------------------------------------------------------------
Michael Dillingham Series B
- -------------------------------------------------------------------------------------------------------
David Jr., M.D. Drez Series B
- -------------------------------------------------------------------------------------------------------
William Elting Series B
- -------------------------------------------------------------------------------------------------------
Peter W. & Mary R. Fanton Series B
- -------------------------------------------------------------------------------------------------------
Gary Fanton Series B
- -------------------------------------------------------------------------------------------------------
Vincent and Marjorie Fanton Series B
- -------------------------------------------------------------------------------------------------------
Michael Franz Series B
- -------------------------------------------------------------------------------------------------------
Michael Franz Series B
- -------------------------------------------------------------------------------------------------------
Lesley Gimbel Series B
- -------------------------------------------------------------------------------------------------------
Lesley and Barry Gimbel, JTWROS Series B
- -------------------------------------------------------------------------------------------------------
Richard Goode Series B
- -------------------------------------------------------------------------------------------------------
Fred and Eleanor Goren Series B
- -------------------------------------------------------------------------------------------------------
Ralph Grant Series B
- -------------------------------------------------------------------------------------------------------
Jean Johnson Series B
- -------------------------------------------------------------------------------------------------------
Jonathan Krass Series B
- -------------------------------------------------------------------------------------------------------
Krass, Jonathan G. Krass and Stephanie M. Bryan, Tenants in
Common Series B
- -------------------------------------------------------------------------------------------------------
Krass, Jonathan G. Krass, custodian for Rebecca May Krass Series B
- -------------------------------------------------------------------------------------------------------
Krass, Jonathan G. Krass, custodian for Daniel Gould Krass Series B
- -------------------------------------------------------------------------------------------------------
Joseph Lagatutta Series B
- -------------------------------------------------------------------------------------------------------
Richard Mastaloni Series B
- -------------------------------------------------------------------------------------------------------
R. Hardwin Mead Series B
- -------------------------------------------------------------------------------------------------------
Munkdale, Steve Munkdale (IRA Account) Account #568-63873-16
Smith Barney Series B
- -------------------------------------------------------------------------------------------------------
Robert and Janet Paul Series B
- -------------------------------------------------------------------------------------------------------
Peloza, John, H., P.A. Profit Sharing Plan & Trust, #101 Series B
- -------------------------------------------------------------------------------------------------------
Richard Randall Series B
- -------------------------------------------------------------------------------------------------------
EXHIBIT A
EXISTING INVESTORS
- ---------------------------------------------------------------------------------------------------------------
First Name Last Name or Entity Name Type of Stock
- ---------------------------------------------------------------------------------------------------------------
???? and Carolyn Ross, JTWROS Series B
- ---------------------------------------------------------------------------------------------------------------
Bruce Saal Series B
- ---------------------------------------------------------------------------------------------------------------
Jeffrey Saal Series B
- ---------------------------------------------------------------------------------------------------------------
Jeffrey Saal Series B
- ---------------------------------------------------------------------------------------------------------------
Joel Saal Series B
- ---------------------------------------------------------------------------------------------------------------
Saal, Laura, TTEE, Laura P. Saal Living Trust Series B
- ---------------------------------------------------------------------------------------------------------------
Sable, Ltd. Series B
- ---------------------------------------------------------------------------------------------------------------
Sharkey, Hugh, Custondia for Zoe Alexandr Sharkey under the CA
Uniform Transfers to Minors Act til 21 Series B
- ---------------------------------------------------------------------------------------------------------------
Sharkey, Hugh, Custondia for Zoe Alexandr Sharkey under the CA
Uniform Transfers to Minors Act til 21 Series B
- ---------------------------------------------------------------------------------------------------------------
Sharkey, Hugh, R. and Kathleen A. Daly, Trustees of the Sharkey-
Daly Family Trust U/D/T dated 9-23-96 Series B
- ---------------------------------------------------------------------------------------------------------------
Six C's Investment Corp. Series B
- ---------------------------------------------------------------------------------------------------------------
C. Thomas Vangness Series B
- ---------------------------------------------------------------------------------------------------------------
Venrock Associates Series B
- ---------------------------------------------------------------------------------------------------------------
Venrock Associates II, L.P. Series B
- ---------------------------------------------------------------------------------------------------------------
Micheline Yuan Series B
- ---------------------------------------------------------------------------------------------------------------
James Zimmerman Series B
- ---------------------------------------------------------------------------------------------------------------
Douglas Zipes Series B
- ---------------------------------------------------------------------------------------------------------------
Mary Jo Anstey Series C
- ---------------------------------------------------------------------------------------------------------------
David & Meleah Arnold Series C
- ---------------------------------------------------------------------------------------------------------------
John Ashley Series C
- ---------------------------------------------------------------------------------------------------------------
Atherton Venture Fund I, LLC Series C
- ---------------------------------------------------------------------------------------------------------------
Bruce Benedick Series C
- ---------------------------------------------------------------------------------------------------------------
Alan Beyer Series C
- ---------------------------------------------------------------------------------------------------------------
Thomas Biesheuvel Series C
- ---------------------------------------------------------------------------------------------------------------
Biesheuvel, Thomas R. Biesheuvel Trustee of Karl W. Bowen
Rodkey Trust Series C
- ---------------------------------------------------------------------------------------------------------------
David Birnbach Series C
- ---------------------------------------------------------------------------------------------------------------
Bovee, The Bovee 1984 Trust DTD 11-24-84 FBO Alexander &
Matthew Saal Series C
- ---------------------------------------------------------------------------------------------------------------
Ann Bowers Series C
- ---------------------------------------------------------------------------------------------------------------
David Bradley Series C
- ---------------------------------------------------------------------------------------------------------------
Burks, Robert Burks Trust Series C
- ---------------------------------------------------------------------------------------------------------------
Dudley Burwell Series C
- ---------------------------------------------------------------------------------------------------------------
Kenneth Caldwell Series C
- ---------------------------------------------------------------------------------------------------------------
Cardiovascular Medicine & Cardiac Arrhythmias Profit Sharing
Plan FBO Roger Winkle Series C
- ---------------------------------------------------------------------------------------------------------------
Cardiovascular Medicine & Cardiac Arrhythmia FBO: Edward
Anderson Series C
- ---------------------------------------------------------------------------------------------------------------
David Chao Series C
- ---------------------------------------------------------------------------------------------------------------
Mark Curtis Series C
- ---------------------------------------------------------------------------------------------------------------
Kathleen Daly Series C
- ---------------------------------------------------------------------------------------------------------------
DB Futures Series C
- ---------------------------------------------------------------------------------------------------------------
Christine DeCaria Series C
- ---------------------------------------------------------------------------------------------------------------
DeLee Ltd. Series C
- ---------------------------------------------------------------------------------------------------------------
Eric and Kyung-Hee Doelling Series C
- ---------------------------------------------------------------------------------------------------------------
EXHIBIT A
EXISTING INVESTORS
- ---------------------------------------------------------------------------------------------------------------
First Name Last Name or Entity Name Type of Stock
- ---------------------------------------------------------------------------------------------------------------
David Drez, Jr., M.D. Series C
- ---------------------------------------------------------------------------------------------------------------
John Dunning Series C
- ---------------------------------------------------------------------------------------------------------------
William Elting Series C
- ---------------------------------------------------------------------------------------------------------------
Dieter Enzman Series C
- ---------------------------------------------------------------------------------------------------------------
Robert Eppley Series C
- ---------------------------------------------------------------------------------------------------------------
Wade Faerber Series C
- ---------------------------------------------------------------------------------------------------------------
Peter W. and Mary R. Fanton, JTWROS Series C
- ---------------------------------------------------------------------------------------------------------------
Vincent and Marjorie Fanton Series C
- ---------------------------------------------------------------------------------------------------------------
Gary Fanton Series C
- ---------------------------------------------------------------------------------------------------------------
Fitzwilson, Robert C. Fitzwilson Trust U/A DTD 6/24/87 Series C
- ---------------------------------------------------------------------------------------------------------------
Michael Franz Series C
- ---------------------------------------------------------------------------------------------------------------
Fred and Eleanor Goren, JTWROS Series C
- ---------------------------------------------------------------------------------------------------------------
GBP Partners Series c
- ---------------------------------------------------------------------------------------------------------------
James Goode Series C
- ---------------------------------------------------------------------------------------------------------------
Richard Goode Series C
- ---------------------------------------------------------------------------------------------------------------
Alan M. and Kathleen E.
Smith Goodman JTWROS Series C
- ---------------------------------------------------------------------------------------------------------------
William Gow Series C
- ---------------------------------------------------------------------------------------------------------------
Robert Gray, Jr. Series c
- ---------------------------------------------------------------------------------------------------------------
Dean Greenberg Series C
- ---------------------------------------------------------------------------------------------------------------
Jerry M. and Susan G. Harris Series C
- ---------------------------------------------------------------------------------------------------------------
Hess, Gabriela Hess Trust UAD 11/30/94, Mark Milani Ttee Series C
- ---------------------------------------------------------------------------------------------------------------
Hess, Verena Hess Trust UAD 11/30/94, Mark Milani Tttee Series C
- ---------------------------------------------------------------------------------------------------------------
Stephen Hochschuler Series C
- ---------------------------------------------------------------------------------------------------------------
Harold Hohbach Series C
- ---------------------------------------------------------------------------------------------------------------
Douglas Huntington Series C
- ---------------------------------------------------------------------------------------------------------------
Jackson, Susan Jackson Trust U/A DTD 9/15/89 Series C
- ---------------------------------------------------------------------------------------------------------------
Jean Johnson Series C
- ---------------------------------------------------------------------------------------------------------------
Linda Kan Series C
- ---------------------------------------------------------------------------------------------------------------
Raj Kapany Series C
- ---------------------------------------------------------------------------------------------------------------
Patricia Kelleher Series C
- ---------------------------------------------------------------------------------------------------------------
Michael Kimball Series C
- ---------------------------------------------------------------------------------------------------------------
Byron King Series C
- ---------------------------------------------------------------------------------------------------------------
Michele Klein Series C
- ---------------------------------------------------------------------------------------------------------------
Howard and Susan
Jeffries Klevens, JTWROS Series C
- ---------------------------------------------------------------------------------------------------------------
Theodore Klint Series C
- ---------------------------------------------------------------------------------------------------------------
Klint Family Trust U/A DTD 2/1/93 Series C
- ---------------------------------------------------------------------------------------------------------------
Kevin Knight Series C
- ---------------------------------------------------------------------------------------------------------------
Franklin Koenig Series C
- ---------------------------------------------------------------------------------------------------------------
Patrick Kraft Series C
- ---------------------------------------------------------------------------------------------------------------
Jonathan Krass Series C
- ---------------------------------------------------------------------------------------------------------------
Jonathan Krass Series C
- ---------------------------------------------------------------------------------------------------------------
Jonathan Krass Series C
- ---------------------------------------------------------------------------------------------------------------
Jonathan Krass Series C
- ---------------------------------------------------------------------------------------------------------------
Krass, Jonathan G. Krass and Stephanie M. Bryan, Tenants in
Common Series C
- ---------------------------------------------------------------------------------------------------------------
Krass, Jonathan G. Krass, custodian for Rebecca May Krass Series C
- ---------------------------------------------------------------------------------------------------------------
EXHIBIT A
EXISTING INVESTORS
- ----------------------------------------------------------------------------------------------------------------
First Name Last Name or Entity Name Type of Stock
- ----------------------------------------------------------------------------------------------------------------
Krass, Jonathan G. Krass, custodian for Daniel Gould Krass Series C
- ----------------------------------------------------------------------------------------------------------------
Krass, Jonathan G. Krass, Smith Barney Inc. Rollover Custodian,
Acct #565-68067-1-7-017 Series C
- ----------------------------------------------------------------------------------------------------------------
Mordecai Kurz Series C
- ----------------------------------------------------------------------------------------------------------------
Kurz, Mordecai Kurz and Linda C. Kurz, Trustees of the Kurz Trust
of 8/17/1987 Series C
- ----------------------------------------------------------------------------------------------------------------
Mordecai Kurz, Guardian for David M. Kurz Series C
- ----------------------------------------------------------------------------------------------------------------
Mordecai Kurz, Guardian for Nathaniel Series C
- ----------------------------------------------------------------------------------------------------------------
Jerry Latta Series C
- ----------------------------------------------------------------------------------------------------------------
Latterman Family Limited Trust Series C
- ----------------------------------------------------------------------------------------------------------------
Le Le Series C
- ----------------------------------------------------------------------------------------------------------------
Calvin Lee Series C
- ----------------------------------------------------------------------------------------------------------------
Betsy Levy Leight Series C
- ----------------------------------------------------------------------------------------------------------------
Carol Light Series C
- ----------------------------------------------------------------------------------------------------------------
John Lopez Series C
- ----------------------------------------------------------------------------------------------------------------
Robert Mack Series C
- ----------------------------------------------------------------------------------------------------------------
Jayne Maggipinto Series C
- ----------------------------------------------------------------------------------------------------------------
Gregory Maletis Series C
- ----------------------------------------------------------------------------------------------------------------
David Marshall Series C
- ----------------------------------------------------------------------------------------------------------------
Marshall, Stuart C. Marshall Trust Series C
- ----------------------------------------------------------------------------------------------------------------
J. Lindsey McLean Series C
- ----------------------------------------------------------------------------------------------------------------
R. Hardwin Mead Series C
- ----------------------------------------------------------------------------------------------------------------
Robert Millard Series C
- ----------------------------------------------------------------------------------------------------------------
Jeffrey Miller Series C
- ----------------------------------------------------------------------------------------------------------------
Munkdale, Steve Munkdale (IRA Account) Series C
- ----------------------------------------------------------------------------------------------------------------
Paul Murphy Series C
- ----------------------------------------------------------------------------------------------------------------
David Musket Series C
- ----------------------------------------------------------------------------------------------------------------
David Nee Series C
- ----------------------------------------------------------------------------------------------------------------
Robert Pelosi Series C
- ----------------------------------------------------------------------------------------------------------------
Jackie Peraza Series C
- ----------------------------------------------------------------------------------------------------------------
Joshua Pickus Series C
- ----------------------------------------------------------------------------------------------------------------
Carlos Prietto Series C
- ----------------------------------------------------------------------------------------------------------------
ProMed Partners, L.P. Series C
- ----------------------------------------------------------------------------------------------------------------
River Edge Partners, Inc. Series C
- ----------------------------------------------------------------------------------------------------------------
Rivers, Christi Rivers and Kevin Van Bladel Series C
- ----------------------------------------------------------------------------------------------------------------
Daniel Robertson Series C
- ----------------------------------------------------------------------------------------------------------------
Rodkey, First Trust Corp TTEE FOB William G. Rodkey Series C
- ----------------------------------------------------------------------------------------------------------------
Rollins, John S. and Elizabeth M., Trustees of the Rollins Living
Trust UDT dtd 9-19-90 Series C
- ----------------------------------------------------------------------------------------------------------------
Douglas Rousse Series C
- ----------------------------------------------------------------------------------------------------------------
Ruder Revocable Intervivos Trust DTD 9/15/93 Series C
- ----------------------------------------------------------------------------------------------------------------
Joel Saal Series C
- ----------------------------------------------------------------------------------------------------------------
Saal, Joel, Custodian for Rachel until age 21 under the UTMA Series C
- ----------------------------------------------------------------------------------------------------------------
Saal, Joel, S. custodian for Nicole Saal until age 21 under the CA
UTMA Series C
- ----------------------------------------------------------------------------------------------------------------
Saratoga Ventures Series C
- ----------------------------------------------------------------------------------------------------------------
David Schurman Series C
- ----------------------------------------------------------------------------------------------------------------
Hugh Sharkey Series C
- ----------------------------------------------------------------------------------------------------------------
EXHIBIT A
EXISTING INVESTORS
- ------------------------------------------------------------------------------------------------------------------------------
First Name Last Name or Entity Name Type of Stock
- ------------------------------------------------------------------------------------------------------------------------------
Charles Silverman Series C
- ------------------------------------------------------------------------------------------------------------------------------
Allen Smoot Series C
- ------------------------------------------------------------------------------------------------------------------------------
Daren Stewart Series C
- ------------------------------------------------------------------------------------------------------------------------------
Robert Stoll Series C
- ------------------------------------------------------------------------------------------------------------------------------
George Thabbit Series C
- ------------------------------------------------------------------------------------------------------------------------------
Jim Tibone, M.D. Series C
- ------------------------------------------------------------------------------------------------------------------------------
Francisco Valencia Series C
- ------------------------------------------------------------------------------------------------------------------------------
Van dick, Steven M. and Deborah A. Van Dick, Trustees of the
Van Dick Family Trust - 1998 U/I/T dtd. 5-2-98 Series C
- ------------------------------------------------------------------------------------------------------------------------------
Vaupel, Geoffrey L. Vaupel, M.D. Pension and Profit Sharing Plan Series C
- ------------------------------------------------------------------------------------------------------------------------------
Eric Verploeg Series C
- ------------------------------------------------------------------------------------------------------------------------------
VLG Investments 1997 Series C
- ------------------------------------------------------------------------------------------------------------------------------
Michael Wall Series C
- ------------------------------------------------------------------------------------------------------------------------------
Warden, Carl and Vickie Warden Family Foundation Series C
- ------------------------------------------------------------------------------------------------------------------------------
Russell Warren Series C
- ------------------------------------------------------------------------------------------------------------------------------
Lee Weissman Series C
- ------------------------------------------------------------------------------------------------------------------------------
Alan Wood Series C
- ------------------------------------------------------------------------------------------------------------------------------
Micheline Yuan Series C
- ------------------------------------------------------------------------------------------------------------------------------
Atherton Venture Fund 1, LLC Series D
- ------------------------------------------------------------------------------------------------------------------------------
Scott Blumenthal Series D
- ------------------------------------------------------------------------------------------------------------------------------
Robert Bonahoom Series D
- ------------------------------------------------------------------------------------------------------------------------------
Bowers, Ann S. Bowers, TTEE Separate Property Trust Series D
- ------------------------------------------------------------------------------------------------------------------------------
Ray Caputo Series D
- ------------------------------------------------------------------------------------------------------------------------------
Cowen and Company, Custodian FBO David B. Musket SEP IRA Series D
- ------------------------------------------------------------------------------------------------------------------------------
Mark Curtis Series D
- ------------------------------------------------------------------------------------------------------------------------------
DB Futures Series D
- ------------------------------------------------------------------------------------------------------------------------------
Delphi BioInvestments III, L.P. Series D
- ------------------------------------------------------------------------------------------------------------------------------
Delphi Ventures III. L.P. Series D
- ------------------------------------------------------------------------------------------------------------------------------
William Elting Series D
- ------------------------------------------------------------------------------------------------------------------------------
Emerald Capital Corporation for John Lopez Series D
- ------------------------------------------------------------------------------------------------------------------------------
Robert Gamburd Series D
- ------------------------------------------------------------------------------------------------------------------------------
Lisa Giannone Series D
- ------------------------------------------------------------------------------------------------------------------------------
Goode, James, IRA Rollover with Smith Barney as Cust. Series D
- ------------------------------------------------------------------------------------------------------------------------------
Gray, MLPF&S Custodian FPO Robert L. Gray, Sr. IRRA FBO
Robert L. Gray, Sr. Series D
- ------------------------------------------------------------------------------------------------------------------------------
Cory Helm Series D
- ------------------------------------------------------------------------------------------------------------------------------
Hochschuler Family Partnership, Stephen J. Hochschuler Series D
- ------------------------------------------------------------------------------------------------------------------------------
Jay Jansen Series D
- ------------------------------------------------------------------------------------------------------------------------------
Tony Jelincik Series D
- ------------------------------------------------------------------------------------------------------------------------------
Raj Kapany Series D
- ------------------------------------------------------------------------------------------------------------------------------
Kevin Knight Series D
- ------------------------------------------------------------------------------------------------------------------------------
Jonathan Krass Series D
- ------------------------------------------------------------------------------------------------------------------------------
Krass, Jonathan G. Krass and Stephanie M. Bryan, Tenants in
Common Series D
- ------------------------------------------------------------------------------------------------------------------------------
Krass, Jonathan G. Krass, custodian for Rebecca May Krass Series D
- ------------------------------------------------------------------------------------------------------------------------------
Krass, Jonathan G. Krass, custodian for Daniel Gould Krass Series D
- ------------------------------------------------------------------------------------------------------------------------------
EXHIBIT A
EXISTING INVESTORS
- ------------------------------------------------------------------------------------------------------------------------------------
First Name Last Name or Entity Name Type of Stock
- ------------------------------------------------------------------------------------------------------------------------------------
Krass, Jonathan G. Krass, Smith Barney Inc. Rollover Custodian,
Acct #565-68067-1-7-017 Series D
-----------------------------------------------------------------------------------------------------------------------------------
Kurz, Mordecai Kurz and Linda C. Kurz, Trustees of the Kurz Trust
of 8/17/1987 Series D
- ------------------------------------------------------------------------------------------------------------------------------------
Mordecai Kurz, Guardian for David M. Kurz Series D
- ------------------------------------------------------------------------------------------------------------------------------------
Mordecai Kurz, Guardian for Nathaniel A. Kurz Series D
- ------------------------------------------------------------------------------------------------------------------------------------
Smith Barney Custodian for the IRA of Jerry D. Latta Series D
- ------------------------------------------------------------------------------------------------------------------------------------
Latterman Family Limited Partnership Series D
- ------------------------------------------------------------------------------------------------------------------------------------
Edward Lauing Series D
- ------------------------------------------------------------------------------------------------------------------------------------
Connie Lee Series D
- ------------------------------------------------------------------------------------------------------------------------------------
Betsy Levy Leight Series D
- ------------------------------------------------------------------------------------------------------------------------------------
Lawrence Lemak Series D
- ------------------------------------------------------------------------------------------------------------------------------------
Irwin Lieber Series D
- -----------------------------------------------------------------------------------------------------------------------------------
John Lopez Series D
- -----------------------------------------------------------------------------------------------------------------------------------
Lopez, Smith Barney Custodian for the IRA of John Lopez Series D
- ------------------------------------------------------------------------------------------------------------------------------------
Terence Matthews Series D
- ------------------------------------------------------------------------------------------------------------------------------------
Peter McGann Series D
- ------------------------------------------------------------------------------------------------------------------------------------
McGann, Peter D. McGann, Profit Sharing Series D
- ------------------------------------------------------------------------------------------------------------------------------------
R. Meisterling Series D
- ------------------------------------------------------------------------------------------------------------------------------------
David Nee Series D
- ------------------------------------------------------------------------------------------------------------------------------------
Pacific Medical Series D
- ------------------------------------------------------------------------------------------------------------------------------------
Pequot Offshore Private Equity Fund, L.P. Series D
- ------------------------------------------------------------------------------------------------------------------------------------
Pequot Private Equity Fund, L.P. Series D
- ------------------------------------------------------------------------------------------------------------------------------------
Prima Associates, L.P. Series D
- ------------------------------------------------------------------------------------------------------------------------------------
R.R.G. #1 Family Ltd. Partnership Series D
- ------------------------------------------------------------------------------------------------------------------------------------
River Edge Partners, Inc. Series D
- ------------------------------------------------------------------------------------------------------------------------------------
Robert Reid, Inc. Series D
- ------------------------------------------------------------------------------------------------------------------------------------
Saratoga Ventures Series D
- ------------------------------------------------------------------------------------------------------------------------------------
David Siegel Series D
- ------------------------------------------------------------------------------------------------------------------------------------
Joshua Siegel Series D
- ------------------------------------------------------------------------------------------------------------------------------------
Smith Barney Custodian for the IRA of Linda C. Kurz Series D
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas Storm Series D
- ------------------------------------------------------------------------------------------------------------------------------------
Joel Swartz Series D
- ------------------------------------------------------------------------------------------------------------------------------------
Team Surgical, Inc. Series D
- ------------------------------------------------------------------------------------------------------------------------------------
William and Judy Thorpe Series D
- ------------------------------------------------------------------------------------------------------------------------------------
Venrock Associates Series D
- ------------------------------------------------------------------------------------------------------------------------------------
Venrock Associates II, L.P. Series D
- ------------------------------------------------------------------------------------------------------------------------------------
Mark Vreede Series D
- ------------------------------------------------------------------------------------------------------------------------------------
Russell Warren Series D
- ------------------------------------------------------------------------------------------------------------------------------------
Micheline Yuan Series D
- ------------------------------------------------------------------------------------------------------------------------------------
Roger Lipton B Warrant
- ------------------------------------------------------------------------------------------------------------------------------------
Venture Lending and Leasing B Warrant
- ------------------------------------------------------------------------------------------------------------------------------------
MMC/GATX Partnership No. 1 C Warrant
- ------------------------------------------------------------------------------------------------------------------------------------
Silicon Valley Bank C Warrant
- ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT B
---------
NEW INVESTORS
Name (in Alphabetical Order)
- ----------------------------
Allen, Glen, Curtis
An, Howard S. and Sue K.
Anderson, Gunnar
Arnold, David M. and Meleah T.
Birnbach, David J.
BP-1, LLC
Capen, Daniel, A.
Casper, G. David and/or Mary Lou
Curtis, Mark T.
Delaney, Terence and Caroline, JTWROS
Delaney, Terence J. SSB Sep IRA Custodian
Richard and Deborah Derby
Richard Derby, Jr. IRA Rollover
Franz, Michael
Gimbel, Lesley and Barry K.
Hacker, Robert J.
Harris, Jerry M. and Susan G., JTWROS
Jelincik, Tony
Jarolem, Kenneth, M.D.
Kapany, Raj
Karasek, Dennis and Sheryl L.
The Trust Co. of Oklahoma Custodian for Dennis E. Karasek IRA
Karasek, Michael and Jean Diamond
Kim, Daniel K
Knight, Kevin T.
Kraft, Mark MD
Krass, Jonathan, Smith Barney Inc. Rollover Custodian, Acct. #565-68067-1-7-017
Krass, Jonathan G. Custodian for Rebecca May Krass
Krass, Jonathan G. Custodian for Daniel Gould Krass
Krass, Jonathan G.
Krass, Jonathan G. and Stephanie M. Bryan, Tenants in Common
Krull, David G.
Kurz, Mordecai and Linda C., Trustees of the Kurz Trust of 8-17-87
Kurzweil, Peter R., M.D.
Larsen, John M.
Lee, Calvin, K.
Lee, Connie, C., M.D.
Leight, Betsy Levy, Trustee of the Betty Levy Leight Trust dtd 9-19-93
Lopez, John
Marshall, David J.
Mitchell, Scott A. and/or Laura E.
Gerlach & Co., nominee for The Manufacturers Life Insurance Company (USA)
Nee, David M. and Karen, Trustees of the Nee Family Trust UAD 8-27-92
Nelson, Russell, W.
PM Investments (Oratec), LLC
Pequot Offshore Private Equity Fund, L.P.
Pequot Private Equity Fund, L.P.
Rhodes, Arthur and Bonnie G.
RiverEdge Partners, Inc.
Roschuk, John Robert
Stonecipher, Thomas K. and Brenda D.
Team Surgical
The Travelers Insurance Company
Venrock Associates
Venrock Associates L.P., II
Warden, Carl Eric
Wheatley Partners, L.P.
Wheatley Foreign Partners, L.P.
White, Howard and Carolee White 1986 Trust