EXHIBIT 4.2
CURON MEDICAL, INC.
CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT
This CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT, dated as of May 19,
2000 (the "Agreement") is entered into by and between CURON MEDICAL, INC., a
Delaware corporation with principal offices located at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Company"), and the individuals/entities whose
names appear on the last page of this Agreement (each an "Investor" and
collectively "Investors").
On the terms and subject to the conditions set forth herein, the Investors
are willing to purchase from the Company, and the Company is willing to sell to
the Investors convertible promissory notes (the "Notes") on the date hereof and
in the principal amounts set forth opposite each Investor's name on Exhibit A
hereto.
Capitalized terms not otherwise defined herein shall have the meaning set
forth in the form of Note attached hereto as Exhibit B.
Accordingly, the Investors agree with the Company as follows:
1. The Notes and Warrants.
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1.1 The Notes. Each Investor severally agrees, on the terms
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of and subject to the conditions specified in this Agreement, to lend to the
Company the sums set forth on Exhibit A hereto. With respect to each loan made
by each Investor, each Investor will receive a Note dated as of the date of each
Closing (as defined below) in the form attached hereto as Exhibit B. These Notes
are collectively referred to as the "Notes." The securities into which the Notes
are convertible are referred to as the "Conversion Stock."
1.2 The Warrants. In connection with the sale of the Notes by
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the Company, the Company shall issue to the Investors stock purchase warrants
(the "Warrants") dated as of the initial Closing in the form attached hereto as
Exhibit C to purchase shares of the Company's Series C Preferred Stock in such
amounts and on such terms as are provided in the Warrants. The securities for
which the Warrants are exercisable are referred to as the "Exercise Stock." The
Notes and the Conversion Stock, and the Warrants and the Exercise Stock are
collectively referred to as the "Securities."
1.3 Place and Date of Closing. The sale to and purchase by
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each Investor of the Notes and the issuance of the Notes and Warrants in respect
thereof will be held at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ at such time and place as the Company and
each Investor shall mutually agree (each a "Closing").
1.4 Delivery. At the Closing, the Company shall deliver to
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each Investor a Note in the principal amount set forth on Exhibit A hereto and a
Warrant to purchase shares of the Company's Series C Preferred Stock.
1.5 Conversion. Conversion of the Notes shall be automatic or on
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demand, subject to and as defined in the Notes. The outstanding principal of and
any accrued but unpaid interest on the Notes shall convert at such time into
shares of Series D Preferred Stock or into shares of the Company's Common Stock
in the event of an earlier initial public offering (an "IPO") by the Company
pursuant to the Securities Act of 1933, as amended (the "Act").
2. Representations and Warranties of the Company. The Company hereby
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represents and warrants to the Investors as follows:
2.1 Organization and Standing Certificate and Bylaws. The Company is
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a corporation duly organized and existing under, and by virtue of, the laws of
the State of Delaware and is in good standing under such laws. The Company has
the requisite corporate power to own and operate its properties and assets and
to carry on its business as presently conducted and as proposed to be conducted.
2.2 Corporate Power/Authorization. The Company has all requisite
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legal and corporate power to perform its obligations under this Agreement, the
Notes and the Warrants (collectively, the "Loan Documents"). All corporate
action on the part of the Company and its stockholders necessary for the
authorization, execution, delivery and performance of all obligations of the
Company under the Loan Documents has been taken on or prior to the Closing Date.
The Loan Documents constitute the valid and binding obligation of the Company
and are enforceable against the Company in accordance with their terms, except
as enforceability may be limited by bankruptcy, insolvency or other laws
affecting the enforcement of creditors' rights generally, and except that the
availability of the remedy of specific performance or other equitable relief is
subject to the discretion of the court before which any proceeding therefor may
be brought.
2.3 Compliance with Other Instruments. The Company is not in
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violation of any term of (i) its Certificate of Incorporation or Bylaws, (ii)
any provision of any mortgage, indenture, or material contract, agreement or
instrument to which the Company is a party or by which it is bound, or (iii) any
judgment, decree or order binding upon the Company or any statute, rule or
regulation applicable to the Company.
2.4 Litigation, etc. There are no actions, proceedings or
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investigations pending against the Company or its properties, or to the
Company's knowledge, any threat thereof, which, either in any case or in the
aggregate, might result in any material adverse change in the business or
financial condition of the Company or any of its properties or assets or in any
material impairment of the right or ability of the Company to carry on its
business as now conducted, and none which challenges the validity of the Loan
Documents or any action taken or to be taken in connection herewith.
2.5 Proceeds. None of the proceeds of the Loans made by the
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Investors to the Company hereunder will be used, directly or indirectly, by the
Company for the purpose of purchasing or carrying, or for the purpose of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry any "margin stock" within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System or for any other purpose which might
make the transactions contemplated herein a "purpose credit" within the meaning
of Regulation U, or cause the Loan Documents to violate any other regulation of
the Board of Governors of the Federal
Reserve System or the Securities Exchange Act of 1934, as amended, or any rules
or regulations promulgated under any of such statutes.
3. Representations and Warranties of Investors. Each Investor, for that
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Investor alone, represents and warrants to the Company upon the acquisition of
the Note and the Warrant and upon conversion of the Note and upon exercise of
the Warrant as follows:
3.1 Binding Obligation. Each of this Agreement, the Note and
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the Warrant issued to the Investor is a valid, binding and enforceable
obligation of the Investor.
3.2 Investment Experience. The Investor is either an
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accredited investor within the meaning of Regulation D prescribed by the
Securities and Exchange Commission pursuant to the Act, or (by virtue of the
Investor's experience in evaluating and investing in private placement
transactions of securities in companies similar to the Company) the Investor is
capable of evaluating the merits and risks of the Investor's investment in the
Company and has the capacity to protect the Investor's own interests.
3.3 Investment Intent. The Investor is acquiring the
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Securities for investment for the Investor's own account and not with a view to,
or for resale in connection with, any distribution thereof. The Investor
understands that the Securities have not been registered under the Act by reason
of a specific exemption from the registration provisions of the Act that depends
upon, among other things, the bona fide nature of the investment intent as
expressed herein.
3.4 Rule 144. The Investor acknowledges that the Securities
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must be held indefinitely unless subsequently registered under the Act, or
unless an exemption from such registration is available. The Investor is aware
of the provisions of Rules 144 and 144A promulgated under the Act that permit
limited resale of securities purchased in a private placement subject to the
satisfaction of certain conditions.
3.5 Discussions with Management. The Investor has had an
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opportunity to discuss the Company's business, management, and financial affairs
with the Company's management and to review the Company's facilities.
3.6 Transfer Among Affiliates. Without in any way limiting
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the representations set forth in this Section 3, an Investor may transfer all or
any portion of the Securities to its partners or affiliated funds if the Company
and its counsel are satisfied that the transfer is exempt from the registration
requirements of federal and applicable state securities laws.
3.7 Legends. All certificates representing any shares of
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stock of the Company subject to the provisions of this Agreement, including the
Conversion Stock and Exercise Stock, shall have endorsed thereon legends
substantially as follows:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED."
(b) Any legend required by the laws of the State of
California or any other applicable state, including any legend required by the
California Department of Corporations and Sections 417 and 418 of the California
Corporations Code.
4. Conditions to Closing.
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4.1 Conditions to Obligations of the Investor. Each of the
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Investor's obligations at the Closing are subject to the fulfillment, on or
prior to each Closing of all of the following conditions, any of which may be
waived in whole or in part by such Investor:
(a) Except for the notices required or permitted to be
filed after each Closing with certain federal and state securities commissions,
the Company shall have obtained all governmental approvals required in
connection with the lawful sale and issuance of the Securities.
(b) At the Closing, the sale and issuance by the
Company, and the purchase by the Investor, of the Securities shall be legally
permitted by all laws and regulations to which the Investor or the Company is
subject.
(c) All corporate and other proceedings in connection
with the transactions contemplated at the Closing and all documents and
instruments incident to such transaction shall be reasonably satisfactory in
substance and form to the Investor.
4.2 Conditions to Obligations of the Company. The Company's
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obligation to issue and sell the Securities at each Closing is subject to the
fulfillment, to the Company's satisfaction on or prior to each Closing of the
following conditions, any of which may be waived in whole or in part by the
Company:
(a) Except for the notices required or permitted to be
filed after each Closing with certain federal and state securities commissions,
the Company shall have obtained all governmental approvals required in
connection with the lawful sale and issuance of the Securities.
(b) At each Closing, the sale and issuance by the
Company, and the purchase by the Investors, of the Securities shall be legally
permitted by all laws and regulations to which the Investors or the Company is
subject.
4.3 Affirmative Covenant of the Company. Upon the earlier to
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occur of (i) May 30, 2001 or (ii) the conversion of Conversion Stock, the
Company shall amend the Amended and Restated Stockholder Rights Agreement dated
August 30, 1999 to include the Conversion Stock under such agreement.
5. Lock-Up Period. Each Investor hereby agrees that, if so requested by
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the Company or any representative of the underwriters in connection with any
registration of the offering of any securities of the Company under the
Securities Act, such Investor shall not sell or otherwise transfer any
Securities during the 180-day period (or such other period as may be requested
in writing by the underwriter and agreed to in writing by the Company) (the
"Market Standoff Period") following the effective date of a registration
statement of the Company filed under the Securities Act. Such restriction shall
apply only to the first registration statement of the Company to become
effective under the Securities Act that includes securities to be sold on behalf
of the Company to the public in
an underwritten public offering under the Securities Act. The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such Market Standoff Period.
6. Miscellaneous.
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6.1 Waivers and Amendments. With the written consent of the
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Company and the record holders of more than 70% of the principal amount of Notes
then outstanding, the rights and obligations of the Company and of the Investors
under this Agreement may be waived (either generally or in a particular
instance, either retroactively or prospectively and either for a specified
period of time or indefinitely), and with the same consent the Company, when
authorized by resolution of its Board of Directors, may enter into a
supplementary agreement for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of this Agreement; provided,
however, that no such waiver or supplemental agreement shall reduce the
aforesaid percentage of the principal amount of Notes the holders of which are
required to consent to any waiver or supplemental agreement, without the consent
of all of the holders of the then outstanding Notes. Upon the effectuation of
each such waiver, consent, agreement, amendment or modification the Company
shall promptly give written notice thereof to the record holders of the
Securities who have not previously consented thereto in writing. Neither this
Agreement nor any provisions hereof may be changed, waived, discharged or
terminated orally, but only by a signed statement in writing. Provided, however,
no amendment or waiver of this Agreement nor any supplemental agreement shall
(i) increase any financial obligation or liability of an Investor beyond that
set forth herein or permitted hereby without such Investor's written consent or
(ii) materially and adversely affect the rights of an Investor in a manner that
discriminates against such Investor vis-a-vis other Investors without such
Investor's written consent.
6.2 Governing Law. This Agreement shall be governed in all
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respects by the laws of the State of California as such laws are applied to
agreements between California residents entered into and to be performed
entirely within California.
6.3 Survival. The representations, warranties, covenants and
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agreements made herein shall survive any investigation made by any Investor and
each Closing. All statements as to factual matters contained in any certificate
or other instrument delivered by or on behalf of the Company pursuant hereto or
in connection with the transactions contemplated hereby shall be deemed to be
representations and warranties by the Company hereunder as of the date of such
certificate or instrument.
6.4 Successors and Assigns. Except as otherwise expressly
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provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto.
6.5 Entire Agreement. This Agreement (including the exhibits and
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schedules attached hereto) and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof.
6.6 Notices, etc. All notices and other communications required
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or permitted hereunder shall be effective upon receipt and shall be in writing
and may be delivered in person, by
telecopy, overnight delivery service or U.S. mail, in which event it may be
mailed by first-class, certified or registered, postage prepaid, addressed (a)
if to an Investor, at such Investor's address set forth on Exhibit A hereto, or
at such other address as such Investor shall have furnished the Company in
writing, or, until any such holder so furnishes an address to the Company, then
to and at the address of the last holder of such Securities who has so furnished
an address to the Company, or (b) if to the Company, at its address set forth at
the beginning of this Agreement, or at such other address as the Company shall
have furnished to the Investor and each such other holder in writing.
6.7 Separability of Agreements; Severability of this Agreement. The
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Company's agreement with each Investor is a separate agreement and the sale of
the Securities to each Investor is a separate sale. If any provision of this
Agreement shall be judicially determined to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
6.8 Payment of Fees and Expenses. The Company and the Investor
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shall each bear their own expenses incurred with respect to this transaction;
provided, however, the Company will pay the reasonable fees and expenses of one
counsel to the Investors.
6.9 Counterparts. This Agreement may be executed in any number of
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counterparts, each of which shall be an original, but all of which together
shall be deemed to constitute one instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
date and year first written above.
CURON MEDICAL, INC. INVESTOR
By:____________________________ By:____________________________
Print Name:____________________ Print Name:____________________
Title:_________________________ Title:_________________________
EXHIBIT A
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SCHEDULE OF INVESTORS
Name Amount of Note Shares Underlying
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Warrants
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EXHIBIT B
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THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY AND NOT WITH A
VIEW TO OR FOR SALE IN CONNECTION WITH ANY DISTRIBUTION THEREOF. THE SECURITIES
MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION AND
QUALIFICATION WITHOUT, EXCEPT UNDER CERTAIN SPECIFIC LIMITED CIRCUMSTANCES, AN
OPINION OF COUNSEL FOR THE HOLDER, CONCURRED IN BY COUNSEL FOR THE COMPANY THAT
SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
CURON MEDICAL, INC.
CONVERTIBLE PROMISSORY NOTE
Sunnyvale, California
$_______________ May ___, 2000
1. Principal and Interest.
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Curon Medical, Inc., a Delaware corporation (the "Company"), for value
received, hereby promises to pay to the order of _______________ or holder
("Payee") in lawful money of the United States at the address of Payee set forth
below, the principal amount of $_____________, together with simple interest at
a rate equal to eight percent (8%) per annum.
The principal of and accrued interest on this Note are due and payable on
demand by holder on or after the five (5) year anniversary of this Note unless
the Note has previously been converted pursuant to Section 2 herein. This Note
may be prepaid at any time without penalty following the closing of an initial
public offering ("IPO") of the Company's Common Stock.
Upon payment in full of all principal and interest payable hereunder, this
Note shall be surrendered to the Company for cancellation.
2. Conversion.
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(a) Automatic Conversion. The outstanding principal balance of
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and any accrued but unpaid interest on this Note shall be automatically
converted upon the closing of an equity financing (excluding an IPO) of the
Company involving the receipt by the Company of at least $10,000,000 (excluding
amounts received on conversion of the Notes), at least 50% of which is received
from venture capital or other financial investors, at a price of at least $3.00
per share, as adjusted for stock splits, dividends, recapitalizations or the
like (the "Next Financing"), into Series D Preferred Stock priced at $3.00 per
share (the "Securities") having rights, preferences and privileges substantially
similar to those of holders of Series C Preferred Stock.
(b) Demand Conversion. If not earlier automatically converted
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pursuant to Section 2(a) above, upon the demand of the holders in interest of
70% of the amounts underlying the Notes, the principal and accrued interest of
all Notes shall be converted into the Securities at the price of $3.00 per
share. This demand conversion right may only be exercised after the one year
anniversary of the issuance of the Notes.
(c) Such conversion into the Securities is conditioned upon Payee
entering into or executing such documents as other purchasers of Series D
Preferred Stock enter into or execute, and meeting the reasonable conditions and
being subject to the reasonable terms applicable to such other purchasers
(including customary 180-day market stand-off terms); provided, however, that
Payee shall not be required to enter into or execute any agreement which
contains terms terminating or diminishing the Warrants granted pursuant to the
Agreement.
(d) Upon such conversion of this Note, Payee shall surrender this
Note, duly endorsed, at the principal office of the Company. At its expense, the
Company shall, as soon as practicable thereafter, issue and deliver to such
Payee at such principal office a certificate or certificates for the number of
shares to which Payee shall be entitled upon such conversion (bearing such
legends as are required by applicable state and federal securities laws and in
the opinion of counsel to the Company), together with any other securities and
property to which Payee is entitled upon such conversion under the terms of this
Note.
(e) No fractional shares shall be issued upon conversion of this
Note. In lieu of the Company issuing any fractional shares to Payee upon the
conversion of this Note, the Company shall pay to Payee an amount in cash equal
to the product obtained by multiplying the conversion price applied to effect
such conversion by the fraction of a share not issued pursuant to the previous
sentence. Upon conversion of this Note in full and the payment of the amounts
specified in this Note, Company shall be released from all its obligations and
liabilities under this Note.
(f) In the event of a "Change in Control" (as defined below) of
Company prior to the payment or conversion of this Note (as provided above), all
outstanding principal and unpaid accrued interest due on this Note shall be due
and payable in full upon the closing of the Change in Control transaction. The
Company shall provide each Investor 20 days notice of such Change in Control in
accordance with Section 4 and shall provide each Investor the right to convert
the principal and accrued interest of its respective Note into the Securities at
the price of $3.00 per share. For purposes of this Note, a Change in Control
shall be deemed to be occasioned by, and to include, (i) the acquisition of the
Company by another entity by means of any transaction or consolidation, (ii) a
sale of all or substantially all of the assets of the Company (including, for
purposes of this section, intellectual property rights which, in the aggregate,
constitute substantially all of the Company's material assets) or (iii) a sale
of all or substantially all of the voting securities of the Company; unless in
each case, the Company's stockholders of record as constituted immediately prior
to such acquisition or sale will, immediately after such acquisition or sale (by
virtue of securities issued as consideration for the corporation's acquisition
or sale or otherwise) hold at least seventy percent (70%) of the voting power of
the surviving or acquiring entity.
3. Attorneys' Fees. If the indebtedness represented by this Note or any
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part thereof is collected in bankruptcy, receivership or other judicial
proceedings or if this Note is placed in the
hands of attorneys for collection after default, the Company agrees to pay, in
addition to the principal and interest payable hereunder, reasonable attorneys'
fees and costs incurred by Payee.
4. Notices. Any notice, other communication or payment required or
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permitted hereunder shall be in writing and shall be deemed to have been given
upon delivery if personally delivered or upon deposit if deposited in the United
States mail for mailing by certified mail, postage prepaid, and addressed as
follows:
If to Payee: At the address set forth on Exhibit A of the Agreement.
If to Company: Curon Medical, Inc.
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▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Each of the above addressees may change its address for purposes of this
paragraph by giving to the other addressee notice of such new address in
conformance with this paragraph.
5. Acceleration. This Note shall become immediately due and payable if
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(i) the Company commences any proceeding in bankruptcy or for dissolution,
liquidation, winding-up, composition or other relief under state or federal
bankruptcy laws; or (ii) such proceedings are commenced against the Company, or
a receiver or trustee is appointed for the Company or a substantial part of its
property, and such proceeding or appointment is not dismissed or discharged
within 60 days after its commencement.
6. Waivers. Company hereby waives presentment, demand for performance,
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notice of non-performance, protest, notice of protest and notice of dishonor. No
delay on the part of Payee in exercising any right hereunder shall operate as a
waiver of such right or any other right. This Note is being delivered in and
shall be construed in accordance with the laws of the State of California,
without regard to the conflicts of laws provisions thereof.
CURON MEDICAL, INC.
By ______________________________
Title: __________________________
EXHIBIT C
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THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, OR AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER
SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT.
Void after
May ___, 2007
CURON MEDICAL, INC.
WARRANT TO PURCHASE SHARES OF PREFERRED STOCK
This Warrant is issued to _____________________________________ by Curon
Medical, Inc., a Delaware corporation (the "Company"), pursuant to the terms of
that certain Convertible Note and Warrant Purchase Agreement (the "Agreement")
dated as of May ___, 2000 in connection with the Company's issuance to the
holder of this Warrant and one or more Convertible Promissory Notes (the
"Notes").
1. Purchase of Shares. Subject to the terms and conditions hereinafter
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set forth and set forth in the Agreement, the holder of this Warrant is
entitled, upon surrender of this Warrant at the principal office of the Company
(or at such other place as the Company shall notify the holder hereof in
writing), to purchase from the Company up to ____________ shares of the
Company's Series C Preferred Stock (the "Shares").
2. Purchase Price. The Purchase Price for the Shares shall be $2.50 per
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share. Such price shall be subject to adjustment pursuant to Section 8 hereof
(such price, as adjusted from time to time, is herein referred to as the
"Exercise Price").
3. Exercise Period. This Warrant shall be exercisable, in whole or in
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part, during the term commencing immediately and ending at 5:00 p.m. on the
earlier of (a) May ____, 2007 or (b) 5 years following the conversion or
repayment of the Notes.
4. Method of Exercise. While this Warrant remains outstanding and
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exercisable in accordance with Section 3 above, the holder may exercise, in
whole or in part, the purchase rights evidenced hereby. Such exercise shall be
effected by:
(i) the surrender of the Warrant, together with a duly executed
copy of the form of subscription attached hereto, to the Secretary of the
Company at its principal offices; and
(ii) the payment to the Company of an amount equal to the
aggregate Exercise Price for the number of Shares being purchased.
5. Net Exercise. In lieu of cash exercising this Warrant, the holder of
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this Warrant may elect to receive shares equal to the value of this Warrant (or
the portion thereof being canceled) by surrender of this Warrant at the
principal office of the Company together with notice of such election, in which
event the Company shall issue to the holder hereof a number of shares of
Preferred Stock computed using the following formula:
Y (A - B)
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X = A
Where
X -- The number of Shares to be issued to the holder of this Warrant.
Y -- The number of Shares purchasable under this Warrant.
A -- The fair market value of one share of the Company's Series C
Preferred Stock.
B -- The Exercise Price (as adjusted to the date of such
calculations).
For purposes of the above calculation, fair market value of one share of
Series C Preferred Stock shall be determined by the Company's Board of Directors
in good faith; provided, however, that in the event the Company makes an initial
public offering of its Common Stock the fair market value per share shall be the
average of the closing bid and asked prices of the Common Stock into which each
share of Series C Preferred Stock has been converted, as quoted in the over-the-
counter market in which the Common Stock is traded or the closing price quoted
on any exchange on which the Common Stock is listed, whichever is applicable, as
published in the Western Edition of The Wall Street Journal for the ten (10)
trading days prior to the date of determination of fair market value (or such
shorter period of time during which such stock was traded over-the-counter or on
such exchange). If the Common Stock is not traded on the over-the-counter
market or on an exchange, the fair market value shall be the price per share
that the Company could obtain from a willing buyer for shares of Series C
Preferred Stock (or Common Stock, if the Series C Preferred Stock has been
converted to Common Stock) sold by the Company from authorized but unissued
shares, as such prices shall be determined in good faith by the Company's Board
of Directors.
6. Certificates for Shares. Upon the exercise of the purchase rights
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evidenced by this Warrant, one or more certificates for the number of Shares so
purchased shall be issued as soon as practicable thereafter, and in any event
within thirty (30) days of the delivery of the subscription notice.
7. Issuance of Shares. The Company covenants that the Shares, when issued
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pursuant to the exercise of this Warrant, will be duly and validly issued, fully
paid and nonassessable and free from all taxes, liens, and charges with respect
to the issuance thereof.
8. Adjustment of Exercise Price and Number of Shares. The number of and
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kind of securities purchasable upon exercise of this Warrant and the Exercise
Price shall be subject to adjustment from time to time as follows:
(a) Subdivisions, Combinations and Other Issuances. If the Company
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shall at any time prior to the expiration of this Warrant subdivide its
Preferred Stock, by split-up or otherwise, or combine its Preferred Stock, or
issue additional shares of its Preferred Stock or Common Stock as a dividend
with respect to any shares of its Preferred Stock, the number of Shares issuable
on the exercise of this Warrant shall forthwith be proportionately increased in
the case of a subdivision or stock dividend, or proportionately decreased in the
case of a combination. Appropriate adjustments shall also be made to the
purchase price payable per share, but the aggregate purchase price payable for
the total number of Shares purchasable under this Warrant (as adjusted) shall
remain the same. Any adjustment under this Section 8(a) shall become effective
at the close of business on the date the subdivision or combination becomes
effective, or as of the record date of such dividend, or in the event that no
record date is fixed, upon the making of such dividend.
(b) Reclassification, Reorganization and Consolidation. In case of
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any reclassification, capital reorganization, or change in the Preferred Stock
of the Company (other than as a result of a subdivision, combination, or stock
dividend provided for in Section 8(a) above), then, as a condition of such
reclassification, reorganization, or change, lawful provision shall be made, and
duly executed documents evidencing the same from the Company or its successor
shall be delivered to the holder of this Warrant, so that the holder of this
Warrant shall have the right at any time prior to the expiration of this Warrant
to purchase, at a total price equal to that payable upon the exercise of this
Warrant, the kind and amount of shares of stock and other securities and
property receivable in connection with such reclassification, reorganization, or
change by a holder of the same number of shares of Preferred Stock as were
purchasable by the holder of this Warrant immediately prior to such
reclassification, reorganization, or change. In any such case appropriate
provisions shall be made with respect to the rights and interest of the holder
of this Warrant so that the provisions hereof shall thereafter be applicable
with respect to any shares of stock or other securities and property deliverable
upon exercise hereof, and appropriate adjustments shall be made to the purchase
price per share payable hereunder, provided the aggregate purchase price shall
remain the same.
(c) Notice of Adjustment. When any adjustment is required to be
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made in the number or kind of shares purchasable upon exercise of the Warrant,
the Company shall promptly notify the holder of such event and of the number of
shares of Preferred Stock or other securities or property thereafter purchasable
upon exercise of this Warrant.
9. No Fractional Shares or Scrip. No fractional shares or scrip
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representing fractional shares shall be issued upon the exercise of this
Warrant, but in lieu of such fractional shares the Company shall make a cash
payment therefor.
10. No Stockholder Rights. Prior to exercise of this Warrant, the holder
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shall not be entitled to any rights of a stockholder with respect to the Shares,
including (without limitation) the right to vote such Shares, receive dividends
or other distributions thereon, exercise preemptive rights or be notified of
stockholder meetings, and such holder shall not be entitled to any notice or
other communication concerning the business or affairs of the Company.
11. Successors and Assigns. The terms and provisions of this Warrant and
----------------------
the Agreement shall inure to the benefit of, and be binding upon, the Company
and the holders hereof and their respective successors and assigns.
12. Amendments and Waivers. Any term of this Warrant may be amended and
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the observance of any term of this Warrant may be waived (either generally or in
a particular instance and either retroactively or prospectively), with the
written consent of the Company and the holders of 70% in interest of shares of
Preferred Stock issued or issuable upon exercise of Warrants issued pursuant to
the Agreement that are then outstanding. Any waiver or amendment effected in
accordance with this Section shall be binding upon each holder of any Shares
purchased under this Warrant at the time outstanding (including securities into
which such Shares have been converted), each future holder of all such Shares,
and the Company; provided that no amendment or waiver shall materially and
adversely affect the rights of the holder in a manner that discriminates against
such holder vis-a-vis other holders without such holders' written consent.
13. Effect of Amendment or Waiver. The holder of this Warrant
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acknowledges that by the operation of Section 12 hereof, the holders of at least
70% in interest of the Warrants issued pursuant to the Agreement that are then
outstanding will have the right and power to diminish or eliminate all rights of
such holder under this Warrant or under the Agreement.
14. Governing Law. This Warrant shall be governed by the laws of the
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State of California as applied to agreements among California residents made and
to be performed entirely within the State of California.
CURON MEDICAL, INC.
By: ______________________________
Tile: _____________________________
SUBSCRIPTION
Curon Medical, Inc.
Attention: Corporate Secretary
The undersigned hereby elects to purchase, pursuant to the provisions of
the Warrant to purchase shares issued by Curon Medical, Inc. and held by the
undersigned, shares of Series C Preferred Stock of Curon Medical, Inc.
Payment of the exercise price per share required under such Warrant
accompanies this Subscription.
The undersigned hereby represents and warrants that the undersigned is
acquiring such shares for its own account for investment purposes only, and not
for resale or with a view to distribution of such shares or any part thereof.
WARRANTHOLDER:
Date:___________________ By:_______________________________________
Address:_____________________________________
_____________________________________
_____________________________________
Name in which shares should be registered:_________________________________