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EXHIBIT 3
FORM OF
SENIOR CONVERTIBLE FLOATING RATE BRIDGE NOTE
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD EXCEPT
IN COMPLIANCE THEREWITH. THIS SECURITY ALSO IS SUBJECT TO ADDITIONAL
RESTRICTIONS ON TRANSFER AS SET FORTH IN THE SECURITIES PURCHASE AGREEMENT DATED
AS OF MAY 20, 1999, A COPY OF WHICH MAY BE OBTAINED FROM CARDIAC PATHWAYS
CORPORATION.
No. $[Principal Amount]
CARDIAC PATHWAYS CORPORATION
SENIOR CONVERTIBLE FLOATING RATE BRIDGE NOTE
Cardiac Pathways Corporation, a Delaware corporation (together with its
successors and assigns the "Issuer"), for value received hereby promises to pay
to ____________ (the "Holder") and its successors, transferees and assigns the
principal sum of [Principal Amount] by wire transfer of immediately available
funds to the Holder's account (the "Bank Account") at a bank in the United
States specified on Schedule I hereto, as amended from time to time, on the
Stated Maturity Date, in such coin or currency of the United States of America
as at the time of payment shall be legal tender for the payment of public and
private debts, and to pay interest, quarterly in arrears, on August __, November
__, February __ and May __ (unless such day is not a Business Day, in which
event on the next succeeding Business Day) (each an "Interest Payment Date") of
each year in which this Note remains outstanding, commencing with August __,
1999, on the unpaid principal sum hereof outstanding in like coin or currency,
at the rates per annum set forth below, by wire transfer of immediately
available funds to the Bank Account from the most recent Interest Payment Date
to which interest has been paid on this Note until payment in full of the
principal sum hereof has been made.
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The interest rate shall be a floating rate per annum (the "Interest
Rate") equal to the sum of (i) the variable rate of interest announced by
Silicon Valley Bank as its "prime rate" in effect from time to time plus (ii)
2.00%.
Further, the Issuer shall pay interest on overdue principal at a rate
per annum 5% above the rate borne by the Notes at the time the same became
overdue (the "Overdue Rate"), and interest on overdue installments of interest,
to the extent lawful, at the Overdue Rate, it being understood that the payment
of interest on interest may result in the compounding of interest.
The Issuer may, at its option and in its sole discretion, in lieu of the
payment in whole or in part of interest in cash on this Note, on any Interest
Payment Date, pay interest on this Note through the issuance of additional Notes
("Additional Securities"). Such Additional Securities shall be in an aggregate
principal amount equal to the amount of interest that would be payable with
respect to this Note on such Interest Payment Date (less any cash interest
payments, if any) and such Additional Securities shall be identical to the Notes
otherwise issued. Such Additional Securities shall be issued only in
denominations of $1,000 and multiples thereof. Any interest due and payable in
Additional Securities which cannot be paid in Notes because such Note would have
a denomination less than $1,000 shall be paid in cash. Except as expressly
provided herein, the term "Notes" shall include all Additional Securities that
may be issued pursuant to this paragraph.
Interest on this Note will be calculated on the basis of a 360 day year,
based on the actual number of days elapsed.
Notwithstanding anything herein to the contrary, the interest or any
amount deemed to be interest payable by the Issuer with respect to this Note
shall not exceed the maximum amount permitted by applicable law and, to the
extent that any payments in excess of such permitted amount are received by the
Holder, such excess shall be considered payments in respect of the principal
amount of this Note. All sums paid or agreed to be paid to the Holder for the
use, forbearance or retention of the indebtedness of the Issuer to the Holder
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full term of such indebtedness until payment
in full of the principal so that the interest on account of such indebtedness
shall not exceed the maximum amount permitted by applicable law.
This Note is one of a duly authorized issue of senior convertible
floating rate bridge notes of the Issuer (the "Notes") referred to in the
Securities Purchase Agreement dated as of May __, 1999 among the Issuer and the
Purchasers listed on the signature pages thereto (the "Purchase Agreement"). The
Notes are
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subject to the terms and conditions of the Purchase Agreement. The Notes are
transferable and assignable to one or more purchasers (in denominations of
$250,000 or any larger multiple of $100,000), in accordance with the limitations
set forth in the Purchase Agreement. The Issuer agrees to issue from time to
time replacement Notes in the form hereof to facilitate such transfers and
assignments. In addition, after delivery of an indemnity in form and substance
satisfactory to the Issuer, the Issuer also agrees to issue replacement Notes
for Notes which have been lost, stolen, mutilated or destroyed.
The Issuer shall keep at its principal office a register (the
"Register") in which shall be entered the names and addresses of the registered
holders of the Notes and particulars of the respective Notes held by them and of
all transfers of such Notes. References to the "Holder" or "Holders" shall mean
the Person listed in the Register as the payee of any Note unless the payee
shall have presented such Note to the Issuer for transfer and the transferee
shall have been entered in the Register as a subsequent holder, in which case
the term shall mean such subsequent holder. The ownership of the Notes shall be
proven by the Register. For the purpose of paying interest and principal on the
Notes, the Issuer shall be entitled to rely on the names and addresses in the
Register and notwithstanding anything to the contrary contained in this Note, no
Event of Default shall occur under Section 4(a) or 4(b) if payment of interest
and principal is made in accordance with the names and addresses and particulars
contained in the Register.
SECTION 1. Certain Terms Defined. Terms defined in the Credit Agreement
and not otherwise defined herein have, as used herein, the respective meanings
provided for therein. The following additional terms (except as otherwise
expressly provided or unless the context otherwise clearly requires) for all
purposes of this Note shall have the respective meanings specified below. All
accounting terms used herein and not expressly defined shall have the meanings
given to them in accordance with generally accepted accounting principles, and
the term "generally accepted accounting principles" shall mean such accounting
principles which are generally accepted as of the date hereof. The terms defined
in this Section 1 include the plural as well as the singular.
"Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, "control" when used with
respect to any Person means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
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"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in San Francisco and the City of New York are authorized
by law to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's capital stock whether now outstanding or issued after the date of this
Note, including, without limitation, all Common Stock and Preferred Stock.
"Certificate of Designation" means the Certificate of Designation of the
Issuer substantially in the form of Exhibit B to the Purchase Agreement, setting
forth the terms of the Preferred Stock.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means, with respect to any Person, any and all shares,
interests, participations and other equivalents (however designated) of such
person's common stock, whether now outstanding or issued after the date of this
Note, and includes, without limitation, all series and classes of such common
stock.
"Credit Agreement" shall have the meaning set forth in the Purchase
Agreement.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Issuer against fluctuations in currency values.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes, or other similar instruments,
(iii) all obligations of such Person in respect of letters of credit or other
similar instruments (or reimbursement obligations with respect thereto), (iv)
all obligations of such Person to pay the deferred purchase price of property or
services, except Trade Payables, (v) all obligations of such Person as lessee
under capital leases, (vi) all Debt of others secured by a Lien on any asset of
such Person, whether or not such Debt is assumed by such Person, and (vii) all
Debt of others Guaranteed by such Person and (viii) to the extent not otherwise
included, obligations under Currency Agreements and Interest Rate Agreements.
"Derivatives Obligations" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
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equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cross-currency rate swap transaction, currency option or
any other similar transaction (including any option with respect to any of the
foregoing transactions) or any combination of the foregoing transactions.
"Event of Default" means any event or condition specified as such in
Section 4 which shall have continued for the period of time, if any, therein
designated.
"Interest Rate Agreement" means any interest rate protection agreement,
interest rate future, interest rate option, interest rate swap, interest rate
cap or other interest rate hedge arrangement, to or under which the Issuer is a
party or a beneficiary on the date hereof or becomes a party or a beneficiary
hereafter.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Note, the Issuer shall be deemed to own subject to a
Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement relating to such asset.
"Material Financial Obligation" means a principal or face amount of Debt
and/or payment obligations in respect of any Derivative Obligations of the
Issuer and/or one or more if to Subsidiaries, arising in one or more related or
unrelated transactions, exceeding in the aggregate $250,000.
"Permitted Lien" has the meaning set forth in the Credit Agreement.
"Person" means an individual, a corporation, a partnership, limited
liability company, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Preferred Stock" means the Series B Convertible Preferred Stock of the
Issuer as set forth in the Certificate of Designation.
"Preferred Stock Purchase Agreement" means the Series B Convertible
Preferred Stock Purchase Agreement dated as of May 20, 1999 among the Issuer and
the purchasers listed therein.
"Registration Rights" shall have the meaning set forth in the Purchase
Agreement.
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"Stated Maturity Date" means May 20, 2000.
"Subsidiary" means, with respect to any Person, any corporation or other
entity of which a majority of the Capital Stock or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions are at the time directly or
indirectly owned by such Person.
"Transaction" means the purchase of up to $40 million aggregate
preference amount of the Issuer's Series B Convertible Preferred Stock by the
purchasers listed on the signature pages of the Preferred Stock Purchase
Agreement.
"Trade Payables" means accounts payable or any other indebtedness or
monetary obligations to trade creditors created or assumed by the Issuer or any
Subsidiary of the Issuer in the ordinary course of business in connection with
the obtaining of materials or services.
"Warrants" means warrants exercisable for shares of Preferred Stock,
substantially in the form of Exhibit C to the Purchase Agreement.
SECTION 2. Payment of Principal and Interest. No provision of this Note
shall alter or impair the obligations of the Issuer, which are absolute and
unconditional, to pay the principal of and interest on this Note at the place,
times, and rate, and in the currency, herein prescribed.
SECTION 3. Covenants. The Issuer will comply with the covenants set
forth in Article 6 of the Purchase Agreement.
SECTION 4. Events of Default and Remedies.
(a) Event of Default Defined; Acceleration of Maturity; Waiver
of Default. In case one or more of the following Events of Default (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body) shall have occurred and be continuing:
(i) default in the payment of any interest (including the
payment of interest in Additional Securities in lieu of a cash payment)
upon any of the Notes as and when the same shall become due and payable;
or
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(ii) default in the payment of all or any part of the principal
on any of the Notes as and when the same shall become due and payable,
at maturity, upon any redemption, by declaration or otherwise; or
(iii) failure on the part of the Issuer duly to observe or
perform any other of the covenants or agreements on the part of the
Issuer contained in the Notes or the Purchase Agreement for a period of
10 days after the date on which written notice specifying such failure,
stating that such notice is a "Notice of Default" hereunder and
demanding that the Issuer remedy the same, shall have been given by
registered or certified mail, return receipt requested, to the Issuer by
the holders of at least a majority in aggregate principal amount of the
Notes at the time outstanding; or
(iv) the Issuer or any Subsidiary shall fail to make any payment
in respect of any Material Financial Obligation when due, giving effect
to any applicable grace period;
(v) a judgment or order (not covered by insurance) for the
payment of money shall be rendered against the Issuer or any Subsidiary
of the Issuer in excess of $250,000 individually or $250,000 in the
aggregate for all such judgments or orders against all such Persons
(treating any deductibles, self insurance or retention as not so
covered) that shall not be discharged, and all such judgments and orders
remain outstanding and there shall be any period of 30 consecutive days
following entry of the judgment or order in excess of $250,000 or the
judgment or order which causes the aggregate amount described above to
exceed $250,000 during which a stay of enforcement of such judgment or
order, by reason of a pending appeal or otherwise, shall not be in
effect; or
(vi) an involuntary case or other proceeding shall be commenced
against the Issuer or any of its Subsidiaries seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator, custodian
or other similar official of it or any substantial part of its property,
and such involuntary case or other proceeding shall remain undismissed
and unstayed for a period of 60 days; or an order for relief shall be
entered against the Issuer or any of its Subsidiaries under the federal
bankruptcy laws as now or hereafter in effect;
(vii) the Issuer or any of its Subsidiaries shall commence a
voluntary case under any applicable bankruptcy, insolvency or other
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similar law now or hereafter in effect, or consent to the entry of an
order for relief in an involuntary case under any such law, or consent
to the appointment or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of the
Issuer or any of its Subsidiaries or for any substantial part of the
property of the Issuer or any of its Subsidiaries, or the Issuer or any
of its Subsidiaries shall make any general assignment for the benefit of
creditors;
(viii) any representation, warranty, certification or statement
made by the Issuer in the Purchase Agreement or in any certificate,
financial statement or other document delivered pursuant to the Purchase
Agreement shall be inaccurate or incorrect in any material respect when
made;
(ix) any Lien created by any of the Collateral Documents shall
at any time fail to constitute a valid and perfected Lien on all of the
Collateral purported to be subject to such Lien, subject to no prior or
equal Lien (except Permitted Liens) or the Issuer or any Subsidiary
shall so assert in writing;
(x) Xxxxxx X. Xxxxxxxx shall cease to be chief executive officer
of the Issuer;
(xi) the shareholders of the Issuer shall fail to approve the
Transaction by October 31, 1999;
(xii) the shareholders of the Issuer shall, by affirmative vote
at any time, fail to approve the Transaction;
(xiii) Issuer shall have accepted a Higher Offer as defined in
the Preferred Stock Purchase Agreement;
(xiv) the Preferred Stock Purchase Agreement shall have been
terminated for any other reason;
then, and in each and every such case (other than an Event of Default specified
in Section 4(a)(vi) or 4(a)(vii) hereof), unless the principal of all of the
Notes shall have already become due and payable, (x) the holders of not less
than 25% in aggregate principal amount of the Notes then outstanding, by notice
in writing to the Issuer (the "Acceleration Notice"), may declare the entire
principal amount of the Notes and the interest accrued thereon to be due and
payable immediately, and upon any such declaration the same shall become
immediately due and payable and (y) the Issuer shall issue to each Holder,
Warrants exercisable for a number of
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shares of Preferred Stock that is calculated by dividing the aggregate principal
amount of the Notes held by such Holder by the product of 10,000 and the average
of the trading price of the Issuer's Common Stock, as reported on the Nasdaq
National Market for the 10 Business Days immediately preceding the date of the
Acceleration Notice. If an Event of Default specified in Section 4(a)(vi) or
4(a)(vii) occurs, the principal of and accrued interest on the Notes shall
become and be immediately due and payable without any declaration or other act
on the part of any Noteholder.
The foregoing paragraph, however, is subject to the condition that if,
at any time after the principal of the Notes shall have been so declared due and
payable, and before any judgment or decree for the payment of the moneys due
shall have been obtained or entered as hereinafter provided, the Issuer shall
pay or shall deposit in trust for the benefit of the Noteholders a sum
sufficient to pay all matured installments of interest upon all the Notes and
the principal of any and all Notes which shall have become due otherwise than by
acceleration (with interest upon such principal and, to the extent that payment
of such interest is enforceable under applicable law, on overdue installments of
interest, at the same rate as the rate of interest specified in the Notes, to
the date of such payment or deposit), and if any and all defaults and Events of
Default under this Note, other than the non-payment of the principal of the
Notes which shall have become due by acceleration, shall have been cured, waived
or otherwise remedied as provided herein; then and in every such case, the
Holders of a majority in aggregate principal amount of the Notes then
outstanding, by written notice to the Issuer, may waive all defaults and rescind
and annul such declaration and its consequences, but no such waiver or
rescission and annulment shall extend to or shall affect any subsequent default
or shall impair any right consequent thereon.
(b) Powers and Remedies Cumulative; Delay or Omission Not Waiver
of Default. No right or remedy herein conferred upon or reserved to the Holders
is intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
No delay or omission of the Holders to exercise any right or power
accruing upon any Event of Default occurring and continuing as aforesaid shall
impair any such right or power or shall be construed to be a waiver of any such
Event of Default or an acquiescence therein; and every power and remedy given by
the Notes or by law may be exercised from time to time, and as often as shall be
deemed expedient, by the Holders.
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(c) Waiver of Past Defaults. Prior to the declaration of the
acceleration of maturity of the Notes as provided in Section 4(a), the Holders
of a majority in aggregate principal amount of the Notes at the time
outstanding, may on behalf of the Holders of all the Notes waive any past
default or Event of Default hereunder and its consequences, except a default (A)
in the payment of principal of or interest on any of the Notes or (B) in respect
of a covenant or provision hereof which cannot be modified or amended without
the consent of the Holder of each Note affected. In the case of any such waiver,
the Issuer, and the Holders of the Notes shall be restored to their former
positions and rights hereunder, respectively; but no such waiver shall extend to
any subsequent or other default or impair any right consequent thereon.
Upon any such waiver, such default shall cease to exist and be deemed to
have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured, and not to have occurred for every
purpose of this Note; but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent thereon.
SECTION 5. Ranking of Notes. The Issuer covenants and agrees to ensure
that the obligations of the Issuer under the Bridge Securities constitute direct
and unconditional general obligations of the Issuer ranking in priority of
payment and as to security prior to all other secured and unsubordinated Debt of
the Issuer.
SECTION 6. Modification of Notes. The Notes may be modified without
prior notice to any Holder but with the written consent of the Holders of a
majority in principal amount of the Notes then outstanding. Subject to Section
4(a) and Section 4(c), the Holders of a majority in principal amount of the
Notes then outstanding may waive compliance by the Issuer of any provision of
the Notes without prior notice to any Holder. However, without the consent of
each Holder affected, an amendment, supplement or waiver may not (i) reduce the
amount of Notes whose Holders must consent to an amendment, supplement or
waiver, (ii) reduce the rate or extend the time for payment for interest on any
Note, (iii) reduce the principal amount of or extend the fixed maturity of any
Note or alter the redemption provisions with respect thereto or (iv) make any
Note payable in money or property other than as stated in the Notes.
The Required Purchasers have the right to convert the principal amount
of all outstanding Notes into fully paid and nonassessable shares of Preferred
Stock in accordance with the provisions set forth in Article 8 of the Purchase
Agreement.
SECTION 7. Miscellaneous. This Note shall be deemed to be a contract
under the laws of the State of California, and for all purposes shall be
construed in
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accordance with the laws of said State, except as may otherwise be required by
mandatory provisions of law. The parties hereto, including all guarantors or
endorsers, hereby waive presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance, performance and
enforcement of this Note, except as specifically provided herein, and assent to
extensions of the time of payment, or forbearance or other indulgence without
notice. The Holder of this Note by acceptance of this Note agrees to be bound by
the provisions of this Note which are expressly binding on such Holder. In
determining whether the Holders of the requisite aggregate principal amount of
Notes have concurred in any direction, consent or waiver as provided under the
Notes, Notes which are owned by the Issuer or any Subsidiary or any other
obligor on the Notes shall be disregarded and deemed not to be outstanding for
the purpose of any such determination. The Section headings herein are for
convenience only and shall not affect the construction hereof.
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IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed under its corporate seal.
Dated:
[Seal] CARDIAC PATHWAYS CORPORATION
By:
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Chief Financial Officer
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