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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 29, 1997
ECHOCATH, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
New Jersey 0-27380 22-3273101
(State or other jurisdiction of (Commission File Number) (IRS Employer Identification
incorporation) No.)
P.O. Box 7224, Princeton, NJ 08543
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 609-987-8400
Not Applicable
(Former name or former address, if changed from last report)
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Item 5. Other Events.
On October 30, 1997 EchoCath, Inc. (the "Company") announced that
it had reached a second definitive licensing and development agreement with
Medtronic, Inc. pursuant to which Medtronic will license the Company's EchoMark
and ColorMark technologies for use in guiding devices during cardiac surgery.
Under the terms of the Agreement, the Company has received an aggregate of
approximately $1.8 million in initial payments from Medtronic; $1,000,000 from
the sale of 363,636 shares of Class A Common Stock and $800,000 of upfront
licensing fees. The license and development agreement also provides for future
payments upon product commercialization and a six month option for Medtronic to
evaluate the uses of certain other Company technologies for use in
cardiovascular surgery under a possible future licensing arrangement. A copy of
the press release issued by the Company on October 30, 1997 announcing the
license and development agreement with Medtronic is attached as an Exhibit
hereto and incorporated by reference herein.
In a separate matter, on October 30, 1997 the Company amended
certain provisions of an agreement dated July 7, 1995 (the "Alliance Agreement")
between the Company and Alliance Partners ("Alliance"). Under the terms of the
Alliance Agreement, the Company had agreed, among other things, to pay $750,000
to Alliance upon the receipt by the Company of $23,040,000 in proceeds from the
exercise of the Company's outstanding Class B Warrants. The $750,000 contingent
payment (the "Contingent Payment") is reflected on the Company's balance sheet
as a capital contribution subject to repayment. Under the terms of the amendment
(the "Amendment") to the Alliance Agreement, Alliance has agreed to release and
discharge the Company from making the Contingent Payment and the Company has
agreed to issue to Alliance (i) 50,000 shares of its Class A Common Stock and
(ii) a seven-year option to purchase 50,000 shares of Class A Common Stock at an
exercise price of $2.00 per share. Upon closing under the Amendment, the
Contingent Payment will be reclassified as equity of the Company. Closing under
the Amendment is conditioned upon approval by NASDAQ of the continued listing of
the Company's Class A Common Stock in the NASDAQ Small C Market.
The descriptions contained in this Item 5 of the transactions set
forth in the Agreement with Medtronic and the Amendment with Alliance Partners
are each qualified in its entirety by reference to the full text of each
Agreement, copies of which are filed as Exhibits hereto.
Item 7. Financial Statements and Exhibits.
The following financial statements and exhibits are filed
herewith unless otherwise indicated:
(b) Pro Forma Financial Information
Pro forma condensed balance sheets at September 30, 1997
and August 31, 1997.
Pro forma condensed statement of operation for the 3 month
period ended August 31, 1997 and the month ended September
30, 1997.
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ECHOCATH, INC.
The pro forma Balance Sheet and Statement of Operations gives effect to an
agreement entered into October 29, 1997 for an exclusive license and stock
purchase agreement with Medtronic, Inc.
The terms of the agreements allow the Company to immediately recognize $800,000
of license fees and record $1,000,000 of equity capital.
The pro forma Balance Sheet also gives effect to the release of a contingent
liability of $750,000 in exchange for 50,000 shares of common stock and a
warrant to purchase 50,000 shares of class A common stock.
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ECHOCATH, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF OPERATION
FOURTH QUARTER ENDED AUGUST 31, 1997
AND THE MONTH OF SEPTEMBER
(UNAUDITED)
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<CAPTION>
FOURTH ONE MONTH
QUARTER ENDING
HISTORIC AS ADJUSTED SEPT. 30, 1997
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REVENUE:
LICENSE FEES $ -- $ 800,000 $ --
PRODUCT SALES 5,900 5,900 --
----------- ---------- -----------
TOTAL REVENUE 5,900 805,900 --
COST OF SALES 2,102 2,102 --
----------- ---------- -----------
GROSS PROFIT 3,798 803,798 --
OPERATING EXPENSES:
R&D 328,985 328,985 129,581
MARKETING AND G&A 399,061 399,061 101,909
----------- ---------- -----------
TOTAL OPERATING EXPENSES 728,046 728,046 231,490
----------- ---------- -----------
LOSS FROM OPERATIONS (724,248) 75,752 (231,490)
NET INTEREST INCOME (EXPENSE) 6,278 6,278 (6,542)
----------- ---------- -----------
NET INCOME(LOSS) $(717,970) $82,030 $(238,032)
=========== ========== ==========
NET INCOME(LOSS) PER SHARE $ (.32) $ .04 $ (.07)
SHARES & COMMON SHARE EQUIVALENT 2,277,000 2,281,496 3,327,000
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ECHOCATH, INC.
(FORMERLY ECHOCATH, LTD.)
(A Development Stage Enterprise)
BALANCE SHEETS
(UNAUDITED)
ASSETS
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<CAPTION>
August 31, 1997 September 30, 1997
--------------- ------------------
Historic As Adjusted Historic As Adjusted
-------- ----------- -------- ------------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 788,933 $ 2,588,933 $ 588,517 $ 2,388,517
Inventory 200,565 200,565 203,248 203,248
Prepaid expenses 109,994 109,994 99,136 99,136
----------- ----------- ----------- -----------
Total current assets 1,099,492 2,899,492 890,901 2,690,901
Furniture, equipment and leasehold improvements, net 324,243 324,243 315,827 315,827
Intangible assets, net 264,076 264,076 263,225 263,225
Other assets 27,827 27,827 27,827 27,827
----------- ----------- ----------- -----------
$ 1,715,638 $ 3,515,638 $ 1,497,780 $ 3,297,780
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Note Payable $ 540,000 $ 540,000 $ 540,000 $ 540,000
Accounts payable 90,270 90,270 81,230 81,230
Accrued expenses 373,145 373,145 405,398 405,398
Obligations under capital leases, current portion 25,852 25,852 25,281 25,281
----------- ----------- ----------- -----------
Total current liabilities 1,029,267 1,029,267 1,051,909 1,051,909
Obligations under capital leases 28,702 28,702 27,336 27,336
Other liabilities 87,519 87,519 86,362 86,362
----------- ----------- ----------- -----------
Total liabilities 1,145,488 1,145,488 1,165,607 1,165,607
----------- ----------- ----------- -----------
Capital contribution subject to repayment 750,000 -- 750,000 --
----------- ----------- ----------- -----------
Stockholders' equity:
Preferred stock, no par value, 5,000,000 shares
authorized;
280,000 shares of Series B Cumulative
Convertible issued and outstanding,
senior in liquidation to Class A and Class B
Common Stock, (liquidation value $1,400,000) 1,356,089 1,356,089 1,356,089 1,356,089
Class A Common Stock, no par value, 18,500,000 shares
authorized;
1,615,331 issued and outstanding historic and
2,028,967 issued as adjusted 6,198,611 7,198,611 6,198,667 7,198,667
Class B Common Stock, no par value, 1,500,000 shares
authorized;
1,494,669 shares issued and outstanding, convertible
into one share of Class A Common Stock 3,273,470 4,023,470 3,273,470 4,023,470
Deficit accumulated during the development stage (11,008,020) (10,208,020) (11,246,053) (10,446,053)
----------- ----------- ----------- -----------
Total stockholders' equity (Deficit) (179,850) 2,370,150 (417,827) 2,132,173
----------- ----------- ----------- -----------
$ 1,715,638 $ 3,515,638 $ 1,497,780 $ 3,297,780
=========== =========== ============= ============
</TABLE>
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(c) Exhibits:
99.1 Text of Press Release dated, October 29, 1997
issued by the Company with respect to Medtronic
transaction.
99.2 Subscription Agreement dated October 29, 1997 by
and between the Company and Medtronic Asset
Management, Inc.
99.3 License and Development Agreement dated October 29,
1997 by and between the Company and Medtronic, Inc.
99.4 Agreement dated October 30, 1997 by and between the
Company and Alliance Partners.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
ECHOCATH, INC.
By: /s/Frank DeBernardis
_____________________________
Frank DeBernardis
President, Chief Executive Officer,
Principal Financial and Accounting Officer
Date: October 31, 1997
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EXHIBIT INDEX
Exhibit
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99.1 Text of Press Release dated October 29, 1997 issued by the Company with
respect to the Medtronic transaction.
99.2 Subscription Agreement dated October 29, 1997 by and between the
Company and Medtronic Asset Management, Inc.
99.3 License and Development Agreement dated October 29, 1997 by and between
the Company and Medtronic, Inc.
99.4 Agreement dated October 30, 1997 by and between the Company and
Alliance Partners.
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FOR RELEASE OCTOBER 30, 1997 AT 7:30 AM EST
Contact: Allen & Caron Inc or Frank A. DeBernardis
Kent Broussard (investors) President & CEO
Owen Daley (media) EchoCath, Inc.
714-252-8440 609-987-8400
ALLIANCE TO EXPAND MINIMALLY
INVASIVE CARDIAC SURGERY ARENA
ECHOCATH SIGNS SECOND LICENSE & DEVELOPMENT AGREEMENT WITH MEDTRONIC;
OPTION ON FUTURE LICENSES
PRINCETON, NJ ( October 30, 1997)....EchoCath, Inc. (Nasdaq:ECHAC) announced
today that it has signed its second license and development agreement with
Minneapolis-based Medtronic, Inc. (NYSE:MDT). Under the terms of this agreement,
Medtronic will license, on an exclusive basis, EchoCath's EchoMark 'r' and
ColorMark 'r' technologies for use in guiding devices during cardiac surgery. In
addition, Medtronic receives a six-month option to evaluate the uses of
EchoCath's EchoFlow 'tm' and EchoEye 'r' technologies for cardiovascular surgery
for possible future licensing. In addition, Medtronic has purchased 363,636
restricted shares of EchoCath Class A Common Stock at $2.75 per share. EchoCath
President Frank DeBernardis said that EchoCath has received a combined total of
$1.8 million from the purchase of the EchoCath Class A Common Stock and upfront
licensing fees, and that the license and development agreement provides for
future payments, including minimum annual royalties, upon product
commercialization. No further terms were disclosed.
M. Jacqueline Eastwood, Vice President and General Manager of Medtronic
Minimally Invasive Surgery, said that the EchoCath technologies would be used
with the Grinfeld cannula, an innovative surgical device that acts as an
internal aortic clamp as it delivers cardioplegia, vents the heart and connects
it to an extracorporeal blood circuit.
The first strategic alliance between EchoCath and Medtronic was formed in
December 1996 to develop an ultrasound-guided heart pacemaker lead implantation
system. This system is designed to augment and, in appropriate cases, replace
the traditional fluoroscopy to guide placement of pacemaker leads.
MORE-MORE-MORE
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ECHOCATH SIGNS LICENSE AGREEMENT
Page 2-2-2
EchoMark and ColorMark aid in the guidance of devices, such as cannulas, using
existing ultrasound equipment, and eliminate the need to use X-ray to confirm
the position of these devices. These technologies are used with existing
ultrasound equipment and shorten the amount of time required to properly insert
and place devices in and near the heart, with greater accuracy and safety.
EchoFlow is being developed to measure blood flow volume through the circulatory
system, while EchoEye will provide a "forward-looking view" of the inside of
vessels.
DeBernardis commented, "This license and development agreement confirms our
belief that our technologies have significant market potential. Medtronic, one
of the world's leading developers and manufacturers of devices that address
unmet medical needs, is forging a leadership position in innovative cardiac
surgery, which makes them the ideal choice for licensing the EchoMark and
ColorMark technologies for these applications."
Eastwood said, "The EchoMark and ColorMark technologies broaden the applications
of minimally invasive cardiac surgery by making it safer, easier and less
expensive for operating room personnel to guide, place and position devices
used. We also see promising similar applications for EchoFlow and EchoEye.
During the next few months, we will evaluate these products and consider further
licensing agreements."
Medtronic, Inc., headquartered in Minneapolis, is the world's leading medical
technology company specializing in implantable and interventional therapies. Its
Internet address is www.medtronic.com.
EchoCath develops, manufactures and markets medical devices that enhance and
expand the use of ultrasound technology for medical applications and procedures.
Certain statements in this Press Release constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from any future
results, performance, or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the following:
delays in product development; failure to receive or delays in receiving
regulatory approval; lack of enforceability of patents and proprietary rights;
competition; material costs and availability; changes in business strategy or
development plans; quality of management; availability, terms and deployment of
capital; business abilities and judgment of personnel; availability of qualified
personnel; changes in, or the failure to comply with, government regulations.
# # # #
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ECHOCATH, INC.
SUBSCRIPTION AGREEMENT
EchoCath, Inc.
P.O. Box 7224
Princeton, New Jersey 08543
Attention: Frank DeBernardis, President
Gentlemen:
I. Subscription. The undersigned, intending to be legally bound, hereby
irrevocably agrees to purchase from EchoCath, Inc., a New Jersey corporation
(the "Company"), the number of shares (the "Shares") of the Company's Class A
Common Stock, no par value (the "Common Stock"), set forth on the signature page
hereof, at a purchase price of $2.75 per Share.
II. Payment. The undersigned will pay for the subscription on the date hereof by
check payable in U.S. dollars or by wire transfer in U.S. dollars to an account
designated by the Company. The Company will issue certificates representing the
Shares within 30 days of the date hereof.
III. Acceptance of Subscription. The undersigned understands and agrees that the
Company in its sole discretion reserve the right to accept or reject this or any
other subscription for Shares, in whole or in part, notwithstanding prior
receipt by the undersigned of notice of acceptance of this subscription. The
Company shall have no obligation hereunder until the Company shall accept and
agree to the terms of this Subscription Agreement, as evidenced by the execution
and delivery to the undersigned of an executed copy of this Subscription
Agreement. If this subscription is rejected in whole, this Subscription
Agreement and all funds received from the undersigned will be returned without
interest or deduction, and this Subscription Agreement shall thereafter be of no
further force or effect. If this subscription is rejected in part, the funds for
such rejected portion of this subscription will be returned without interest or
deduction, and this Subscription Agreement shall continue in force and effect to
the extent this subscription was accepted.
IV. Representations and Warranties. The undersigned hereby acknowledges,
represents, warrants to and agrees with the Company as follows:
(a) None of the Shares are registered under the Securities Act of 1933, as
amended (the "Securities Act") or any state securities laws. The
undersigned understands that the offering and sale of the Shares is
intended to be exempt from registration under the Securities Act, by virtue
of Section 4(2) and the rules and regulations promulgated thereunder,
based, in part, upon the representations, warranties and agreements
contained in this Subscription Agreement;
(b) The undersigned represents that it is an "accredited investor" as such
term is defined in Rule 501 of Regulation D promulgated under the
Securities Act;
(c) Neither the Securities and Exchange Commission (the "Commission") nor
any state securities commission has approved the Shares offered or passed
upon or endorsed the merits of the offering, and the offering of the Shares
has not been reviewed by any federal, state or other regulatory authority;
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(d) The undersigned acknowledges that prior to the date hereof it has
received and reviewed a copy of the Company's annual report on Form 10-KSB
for the year ended August 31, 1996 (the "10-KSB"), all of the Company's
Quarterly Reports on Form 10-QSB since August 31, 1996, and all other
public filings of the Company since the filing of the 10-KSB (referred to
herein as the "SEC Filings");
(e) The undersigned acknowledges that all documents, records, and books
pertaining to the investment in the Shares have been made available for
inspection by it, its attorney, accountant, purchaser representative or tax
advisor (collectively, the "Advisors");
(f) The undersigned and the Advisors have had a reasonable opportunity to
ask questions of and receive answers from a person or persons acting on
behalf of the Company concerning the offering of the Shares and all such
questions have been answered to the full satisfaction of the undersigned
and its Advisors;
(g) In evaluating the suitability of an investment in the Company, the
undersigned has not relied upon any representation or other information
(oral or written) other than as contained in documents or answers to
questions so furnished to the undersigned or its Advisors by the Company;
(h) The undersigned is unaware of, and in no way relying on, any form of
general solicitation or general advertising in connection with the offer
and sale of the Shares;
(i) The undersigned has such knowledge and experience in financial, tax,
and business matters so as to enable it to utilize the information made
available to it in connection with the offering of the Shares to evaluate
the merits and risks of an investment in the Shares and to make an informed
investment decision with respect thereto;
(j) The undersigned is not relying on the Company respecting the tax
considerations of an investment in the Shares, and the undersigned has
relied on the advice of, or has consulted with, only its own Advisors;
(k) The undersigned is acquiring the Shares solely for its own account for
investment and not with a view to resale or distribution and the
undersigned will not sell or transfer the Shares until they are registered
for resale under the Securities Act or an exemption therefrom is available;
(l) The undersigned must bear the economic risk of the investment
indefinitely because none of the Shares may be sold, hypothecated or
otherwise disposed of unless subsequently registered under the Securities
Act and applicable state securities laws or an exemption from registration
is available. Legends shall be placed on the Shares to the effect that they
have not been registered under the Securities Act or applicable state
securities laws and appropriate notations thereof will be made in each of
the Company's stock books;
(m) The undersigned has adequate means of providing for the undersigned's
current needs and foreseeable personal contingencies and has no need for
the undersigned's investment in the Shares to be liquid;
(n) The undersigned is aware that an investment in the Shares involves a
number of very significant risks and is able to bear the loss of its entire
investment;
(o) The undersigned represents that it was not formed for the specific
purpose of acquiring the Shares, such entity is validly existing under the
laws of the state of its organization, the consummation of the
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transactions contemplated hereby is authorized by, and will not result in a
violation of state law or its charter or other organizational documents,
such entity has full power and authority to execute and deliver this
Subscription Agreement and all other related agreements or certificates and
to carry out the provisions hereof and thereof, this Subscription Agreement
has been duly authorized by all necessary action, this Subscription
Agreement has been duly executed and delivered on behalf of such entity and
is a legal, valid and binding obligation of such entity; and
(p) The undersigned has been advised of an action commenced against the
Company by EP MedSystems, Inc. in the United States District Court for the
District of New Jersey, CA No. 2:97 CV 4926 (Lechner, J.) and has received
a copy of the complaint by EP MedSystems, Inc. from the Company.
V. Indemnification. The undersigned agrees to indemnify and hold harmless each
of the Company, their respective officers, directors, employees, agents, and
affiliates against all losses, liabilities, claims, damages, and expenses
(including, but not limited to, any and all expenses incurred in investigating,
preparing, or defending against any litigation commenced or threatened) arising
out of any false representation or warranty or breach by the undersigned of any
Agreement herein or in any other document delivered in connection with this
Subscription Agreement.
VI. Indemnification. The Company agrees to indemnify and hold harmless each of
the Undersigned and its respective officers, directors, employees, agents, and
affiliates against all losses, liabilities, claims, damages, and expenses
(including, but not limited to, any and all expenses incurred in investigating,
preparing, or defending against any litigation commenced or threatened) arising
out of any false representation or warranty or breach by the Company of any
Agreement herein or in any other document delivered in connection with this
Subscription Agreement.
VII. Registration of the Shares.
Piggyback Registration Rights.
(i) If, at any time commencing after the date of this Subscription
Agreement and expiring five (5) years thereafter, the Company proposes to file a
registration statement or statements under the Securities Act for the public
sale of the Common Stock for cash (other than in connection with a merger or
pursuant to Form S-4, Form S-8 or comparable registration statement), it will
give written notice, at least thirty (30) days prior to the filing of each such
registration statement, to the undersigned of its intention to do so. If the
undersigned notifies the Company in writing within ten (10) business days after
receipt of any such notice of its desire to include the Shares in such proposed
registration statement, the Company shall afford the undersigned the opportunity
to have the Shares registered under such registration statement; provided,
however, that in the case of an underwritten offering, if the Company notifies
the undersigned in writing that the managing underwriter of such offering has
notified the Company that the inclusion in the registration statement of any
portion of the Shares would have an adverse effect on such underwritten
offering, then the managing underwriter may limit the number of Shares to be
included in such registration statement only to the extent necessary to avoid
such adverse effect; provided, further, however, that in the event securities of
the Company held by any person or entity other than the Company or the
undersigned (the "Third Party Securities") are to be included in such
underwritten offering, and the managing underwriter shall have determined to
limit the number of shares of Common Stock or Third Party Securities to be so
included, then such limitation shall be applied to the Shares and the Third
Party Securities, based on the number of Shares and Third Party Securities
requested to be included in such underwritten offering so that the amount of
Third Party Securities are reduced by a percentage which is twice as great as
the percentage which the Shares are
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reduced. Notwithstanding the provisions of this Section VII(i), the Company
shall have the right at any time after it shall have given written notice
pursuant to this Section VII(i) (irrespective of whether a written request for
inclusion of any such securities shall have been made) to elect not to file any
such proposed registration statements or to withdraw the same after the filing
but prior to the effective date thereof.
(ii) Following the effective date of a registration statement filed
pursuant to Section VII(i), the Company shall, upon the written request of the
undersigned, forthwith supply such reasonable number of copies of the
registration statement, prospectus and other documents necessary or incidental
to the registration as shall be reasonably requested by the undersigned to
permit the undersigned to make a public distribution of the Shares. The Company
will use its reasonable efforts to qualify the Shares for sale in such states as
the undersigned shall reasonably request, provided that no such qualification
will be required in any jurisdiction where, solely as a result thereof, the
Company would be subject to general service of process or to taxation or
qualification as a foreign corporation doing business in such jurisdiction. The
obligations of the Company hereunder with respect to the Shares are expressly
conditioned on the undersigned furnishing to the Company such appropriate
information concerning the undersigned and the Shares as the Company may
reasonably request.
(iii)The Company shall bear the entire cost and expense of the
registration of the Shares pursuant to Section VII(i); provided, however, that
the undersigned shall be solely responsible for the fees of any counsel retained
by the undersigned in connection with such registration and any transfer taxes
or underwriting discounts, commissions or fees applicable to the Shares sold by
the undersigned pursuant thereto.
(iv) Neither the filing of a registration statement by the Company
pursuant to this Section VII nor the making of any request for prospectuses by
the undersigned shall impose upon the undersigned any obligation to sell the
Shares.
(v) The undersigned, upon receipt of notice from the Company that an
event has occurred which requires a post-effective amendment to a registration
statement or a supplement to a prospectus included therein, shall promptly
discontinue the sale of the Shares until the undersigned receives a copy of a
supplemented or amended prospectus from the Company, which the Company shall
provide as soon as practicable after such notice.
(vi) Notwithstanding anything else to the contrary contained in this
Subscription Agreement, if the undersigned requests to have any of the Shares
registered under the Securities Act pursuant to this Section VII, and if such
Shares are so registered, then this Section VII shall be of no further force or
effect.
VIII. Registration Indemnification.
(a) The Company shall indemnify and hold harmless the undersigned from
and against any and all losses, claims, damages and liabilities caused by any
untrue statement of a material fact contained in any registration statement
covering the Shares filed by the Company under the Securities Act, any
post-effective amendment to such registration statement, or any prospectus
included therein required to be filed or furnished by reason of Section VII of
this Subscription Agreement or caused by any omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except, insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission based upon
information furnished or required to be furnished in writing to the Company by
the undersigned expressly for use therein, which indemnification shall include
each person, if any, who controls the undersigned within the
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meaning of the Securities Act; provided, however, that the indemnification in
this paragraph VIII(a) with respect to any prospectus shall not inure to the
benefit of the undersigned (or to the benefit of any person controlling the
undersigned) on account of any such loss, claim, damage or liability arising
from the sale of the Shares by the undersigned, if a copy of a subsequent
prospectus correcting the untrue statement or omission in such earlier
prospectus was provided to the undersigned by the Company prior to the subject
sale and the subsequent prospectus was not delivered or sent by the undersigned
to the purchaser prior to such sale; and provided further, that the Company
shall not be obligated to so indemnify the undersigned or other person referred
to above unless the undersigned or other person, as the case may be, shall at
the same time indemnify the Company, its directors, each officer signing such
registration statement and each person, if any, who controls the Company within
the meaning of the Securities Act, from and against any and all losses, claims,
damages and liabilities caused by any untrue statement of a material fact
contained in such registration statement, any registration statement or any
prospectus required to be filed or furnished by reason of this Subscription
Agreement or caused by any omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
insofar as such losses, claims, damages or liabilities are caused by any untrue
statement or omission based upon information furnished in writing to the Company
by the undersigned expressly for use therein.
(b) If for any reason the indemnification provided for in the preceding
subparagraph is held by a court of competent jurisdiction to be unavailable to
an indemnified party with respect to any loss, claim, damage, liability or
expense referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party thereunder, shall contribute to the amount
paid or payable by the indemnified party as a result of such loss, claim, damage
or liability in such proportion as is appropriate to reflect not only the
relative benefits received by the indemnified party and the indemnifying party,
but also the relative fault of the indemnified party and the indemnifying party,
as well as any other relevant equitable considerations.
IX. Representations and Warranties of the Company. The Company hereby represents
and warrants to the undersigned that:
(a) The Company is a corporation duly organized, existing and in good
standing under the laws of the State of New Jersey and has the corporate power
to conduct the business which it conducts and proposes to conduct.
(b) The execution, delivery and performance of this Subscription
Agreement by the Company will have been duly approved by the Board of Directors
of the Company and all other actions required to authorize and effect the offer
and sale of the Shares will have been duly taken and approved.
(c) The Shares have been duly and validly authorized and when issued and
paid for in accordance with the terms hereof, will be fully paid and
nonassessable.
(d) The capitalization of the Company (before giving effect to the sale
of the Shares) will be substantially as set forth in Exhibit A hereto (which
includes the Common Stock, the Class B Common Stock, the Series A Convertible
Preferred Stock, the Series B Cumulative Convertible Preferred Stock and all
options and warrants of the Company).
(e) The execution and delivery of this Subscription Agreement, the
issuance of the Shares and the incurrence of the obligations herein set forth
and the consummation of the transactions herein contemplated, will not result in
a violation of, or constitute a default under, the certificate of incorporation
or by-laws, in the performance or observance of any material obligations,
agreement, covenant or condition contained in
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any bond, debenture, note or other evidence of indebtedness to which the Company
is a party or by which it or any of its properties may be bound or in violation
of any material order, rule, regulations writ, injunction, or decree of any
government, governmental instrumentality or court, domestic or foreign; and
(f) The SEC Filings, when filed, did not contain any untrue statement of
a material fact or, to the Company's knowledge, omit a material fact necessary
to make the statements contained in the SEC Filings, in light of the
circumstances under which they were made, not misleading.
X. Irrevocability; Binding Effect; Entirety. The undersigned hereby acknowledges
and agrees that the subscription hereunder is irrevocable by the undersigned,
except as required by applicable law, and that this Subscription Agreement shall
survive the death or disability of the undersigned and shall be binding upon and
inure to the benefit of the parties and their heirs, executors, administrators,
successors, legal representatives, and permitted assigns. If the undersigned is
more than one person, the obligations of the undersigned hereunder shall be
joint and several and the agreements, representations, warranties, and
acknowledgments herein shall be deemed to be made by and be binding upon each
such person and his heirs, executors, administrators, successors, legal
representatives, and permitted assigns. This Subscription Agreement sets forth
the entire agreement and understanding between the parties as to the subject
matter hereof, and supersedes and replaces all prior agreements, understandings,
writings and discussions between the parties relating to said subject matter.
XI. Modification. This Subscription Agreement shall not be modified or waived
except by an instrument in writing signed by the party against whom any such
modification or waiver is sought.
XII. Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or delivered against receipt to the party to whom it
is to be given (a) if to either of the Company, at the address set forth above,
or (b) if to the undersigned, at the address set forth on the signature page
hereof (or, in either case, to such other address as the party shall have
furnished in writing in accordance with the provisions of this Section XII). Any
notice or other communication given by certified mail shall be deemed given at
the time of certification thereof, except for a notice changing a party's
address which shall be deemed given at the time of receipt thereof.
XIII. Assignability. To the extent permitted by law, the rights and obligations
hereunder are assignable by the undersigned; provided, however, that anyone to
whom this Subscription Agreement is assigned must agree in writing to be bound
by all of the terms and provisions hereof.
XIV. Applicable Law. This Subscription Agreement shall be governed by and
construed in accordance with the internal laws of the State of New Jersey
without regard to its conflicts of laws principles.
XV. Blue Sky Qualification. The Sale of the Shares is expressly conditioned upon
the exemption from qualification of the offer and sale of the Shares from
applicable federal and state securities laws. The Company shall not be required
to qualify this transaction under the securities laws of any jurisdiction and,
should qualification be necessary, the Company shall be released from any and
all obligations to maintain its offer, and may rescind any sale contracted, in
the jurisdiction.
XVI. Counterparts. This Subscription Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this subscription by
signing any of such counterpart and delivering the same by telex, telecopy,
telegraph, cable or otherwise in writing (each delivery by any of such means to
be deemed to be "in writing" for purposes of this Subscription Agreement).
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XVII. Use of Pronouns. All pronouns and any variations thereof used herein shall
be deemed to refer to the masculine, feminine, neuter, singular or plural as the
identity of the person or persons referred to may require.
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement this 29th day of October, 1997.
Number of Shares Subscribed: 363,636 Shares of Class A Common Stock
Total Subscription Amount: $1,000,000
MEDTRONIC ASSET MANAGEMENT, INC.
By:
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Name:
Title:
Taxpayer Identification Number
----------------------------------
----------------------------------
Address
ACCEPTED AND AGREED
ECHOCATH, INC.
By:
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Name:
Title:
Date: October 29, 1997
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Exhibit A
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EchoCath, Inc.
Warrants & Options
as of October 28, 1997
Warrants Issued
In connection with the Company's initial public offering, the Company
issued one Class A warrant and one Class B warrant. Each Class A warrant
entitles the holder to purchase, at an exercise price of $7.00 (subject to
adjustment) one share of Class A common stock and one Class B warrant. Each
Class B warrant entitles the holder to purchase, at an exercise price of $9.15
(subject to adjustment) one share of Class A common stock. The Class A warrants
and Class B warrants are exercisable through January 2001. 1,610,000 Class A
warrants and 1,610,000 Class B warrants were issued in connection with the
public offering.
In connection with the Company's initial public offering, the Company sold
to the Underwriter and its designees a unit purchase option to purchase up to
140,000 units. The securities underlying the unit purchase option are
substantially identical in all respects to the units (One share of Class A
common stock, one Class A warrant and one Class B warrant) sold in the Company's
initial public offering.
Warrants issued as a result of the September 1995 Bridge Financing total
500,000 warrants that are identical to the Class A and Class B warrants issued
in the initial public offering.
Warrants for 50,000 shares will be issued resulting form the release of the
$750,000 contingent liability. Additionally, 50,000 shares of Class A common
stock will be issued.
Options Granted
Under the terms of the 1995 Stock Option Plan, 150,000 share options have
been granted at an exercise price of $5.00 and 592,500 share options have been
granted at an exercise price of 3 1/8.
Under the terms of the employee investment plan, 552 share options are
currently reserved.
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LICENSE AND DEVELOPMENT AGREEMENT
THIS LICENSE AGREEMENT (the "Agreement") is made and entered into as of the 29th
day of October, 1997, between ECHOCATH, INC. ("EchoCath"), a New Jersey
corporation, and MEDTRONIC, INC. ("Medtronic"), a Minnesota corporation.
W I T N E S S E T H:
WHEREAS, EchoCath is the owner of technology and patents relating to
visualization of medical devices using ultrasound methods; and
WHEREAS, Medtronic wishes access to the technology and license rights in the
patents; and
WHEREAS, Medtronic and EchoCath are simultaneously entering into an investment
or subscription agreement pursuant to which Medtronic or its affiliate,
Medtronic Asset Management, Inc. will purchase $1,000,000 of Class A common
stock from EchoCath at a price per share of two dollars and seventy five cents
($2.75) and as shall be agreed to in a definitive Subscription Agreement to be
executed between the parties; and
WHEREAS, the parties will also negotiate in good faith to enter into a Supply
Agreement and a Development Agreement as described herein.
NOW THEREFORE, in consideration of the representations, warranties, covenants
and agreements contained herein, and for other valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the parties mutually agree
as follows:
ARTICLE 1
DEFINITIONS
1.1 Specific Definitions. As used in this Agreement, the following
terms have the meanings set forth or referenced below:
"Affiliate" of a specified person (natural or judicial) means a person that
directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the person specified. "Control"
shall mean ownership of more than 50% of the shares of stock entitled to vote
for the election of directors in the case of a corporation, and more than 50% of
the voting power in the case of a business entity other than a corporation.
"ColorMark"r"" is a trademark of EchoCath and, within this Agreement, means
the technology of EchoCath for inducing vibration in structures to enhance their
visibility in ultrasound images, as more particularly described by the U.S.
Patents listed on Exhibit A.
"Confidential Information" means know-how, trade secrets, and unpublished
information disclosed (whether before or during the term of this Agreement) by
one of the parties (the "disclosing party") to the other party (the "receiving
party") or generated under this Agreement, excluding information which:
(a) was already in the possession of receiving party prior to its
receipt from the disclosing party (provided that the receiving party is
able to provide the disclosing party with reasonable documentary proof
thereof);
(b) is or becomes part of the public domain by reason of acts
not attributable to the receiving party;
(c) is or becomes available to receiving party from a source other than
the disclosing party which source, to the best of receiving party's
knowledge, has rightfully obtained such information and has no
obligation of non-disclosure or confidentiality to the disclosing party
with respect thereto;
(d) is made available by the disclosing party to a third
party unaffiliated with the disclosing party on an unrestricted basis;
(e) has been independently developed by the receiving party
without breach of this Agreement or use of any Confidential Information
of the disclosing party; or
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(f) has been or must be publicly disclosed by reason of legal,
accounting or regulatory requirements beyond the reasonable control, and
despite the reasonable efforts of the receiving party.
All Confidential Information disclosed by one party to the other under this
Agreement shall be in writing and bear a legend "Company Proprietary," "Company
Confidential" or words of similar import or, if disclosed in any manner other
than writing, shall be preceded by an oral statement indicating that the
information is Company proprietary or confidential, and shall be followed by
transmittal of a reasonably detailed written summary of the information provided
to the receiving party with identification as Confidential Information
designated as above within thirty (30) days.
"EchoCath" means EchoCath, Inc. and its Affiliates.
"EchoEye"r"" is a trademark of EchoCath and, within of this Agreement, means
the technology of EchoCath for a forward looking intra-vascular and intra-cavity
ultrasound system for 3-D imaging, as more particularly described by the U.S.
Patents listed on Exhibit A.
"EchoFlow"tm"" is a trademark of EchoCath and, within this Agreement, means
the technology of EchoCath for quantitative method of Doppler flow measurement
using surface contact to vessel or conduit using multi-beam grating technology,
as more particularly described by the U.S. Patents listed on Exhibit A.
"EchoMark"r"" is a trademark of EchoCath and, within this Agreement, means the
technology of EchoCath for quasi-omnidirectional ultrasound transducers, as more
particularly described by the U.S. Patents listed on Exhibit A.
"Expiration" or "Expired" shall mean, with respect to a particular copyright, or
issued patent, the expiration, abandonment, cancellation, disclaimer, award to
another party other than Medtronic or EchoCath (as the context requires) in an
interference proceeding, or declaration of invalidity or unenforceability by a
court or other authority of competent jurisdiction (including rejection in a
re-examination or re-issue proceeding) of such copyright, or patent. References
to an "unexpired" patent mean a patent that is not Expired.
"Field of Use" means cardiothoracic surgical procedures consisting of one or
more of the following:
(1) repair or reconstruction of the heart and/or lungs;
(2) perioperative perfusion of the heart;
(3) protection of the myocardium during surgery;
(4) acute measurement of hemodynamic parameters (flow, pressures, etc.);
(5) removal of air and/or fluid from the heart and vessels;
(6) post-operative placement of drains and temporary
pacing/defibrillation wires;
(7) epicardial placement of pacing/defibrillation leads.
The Field of Use specifically excludes electrophysiology applications (defined
to include mapping, ablation and internal cardioversion but exclude permanent
pacemaker leads and permanent defibrillator leads attached to permanent pulse
generators); and further excludes any procedures solely utilizing angioplasty
catheters and energy delivering therapeutic catheters or probes.
"Knowledge" means actual knowledge of a fact or the knowledge that such person
or its officers or other employees could reasonably be expected to have based on
reasonable investigation and inquiry.
"Invention" means any invention, discovery, know-how, trade secret, data,
information, technology, process or concept, whether or not patented or
patentable, and whether or not memorialized in writing.
"Licensed Technology" means ColorMark"r" technology and EchoMark"r" technology,
(and expressly excluding any technology related to EchoEye or EchoFlow)
heretofore or hereafter designed, developed or used by or for EchoCath, or
heretofore or hereafter acquired by or licensed to EchoCath, and all amendments,
modifications and improvements to any of the foregoing, necessary or useful for
designing, developing, manufacturing, processing or marketing medical devices
which incorporate EchoMark or ColorMark within the Field of Use, and shall
include (a) all U.S. and foreign patents and patent applications related thereto
(including but not limited to the patents and patent applications listed in the
attached Exhibit A, referred to herein as the "EchoCath Patents"), and (b) all
know-how, trade secrets, inventions, discoveries and technical information,
including, but not limited to, information embodied in drawings, designs,
copyrights, copyright applications, trademarks, trade applications, material
specifications, processing instructions, formulas, equipment specifications,
product specifications, confidential data, computer software,
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electronic files, research notebooks, invention disclosures, research and
development reports and the like related thereto.
"Medtronic" means Medtronic, Inc. and its Affiliates.
"Quarter" means a quarter of the Medtronic fiscal year; which begins on May 1 of
each calendar year.
"Product" means any acute device, or any epicardial pacing or defibrillation
lead, which utilizes either the ColorMark"r" or EchoMark"r" technology.
"Royalty Bearing Unit" means a Product sold by Medtronic that is covered by a
valid claim of an unexpired EchoCath Patent in the country in which such Product
is made or sold. Products sold for use in bona fide clinical studies in order to
gain governmental or regulatory approval or market clearance shall not be
considered Royalty Bearing Units.
1.2 Other Terms. Other terms may be defined elsewhere in the text of
this Agreement and shall have the meaning indicated throughout this
Agreement.
1.3 Other Definitional Provisions.
(a) The words "hereof," "herein," and "hereunder" and words of similar
import, when used in this Agreement, shall refer to this Agreement as a
whole and not to any particular provisions of this Agreement.
(b) The terms defined in the singular shall have a comparable meaning
when used in the plural, and vice versa.
(c) References to an "Exhibit" or "Appendix" are, unless otherwise
specified, to one of the Exhibits or Appendices attached to or
referenced in this Agreement, and references to an "Article" or a
"Section" are, unless otherwise specified, to one of the Articles or
Sections of this Agreement.
(d) The term "person" includes any individual, partnership, joint
venture, corporation, trust, unincorporated organization or government
or any department or agency thereof.
(e) The term "Dollars" or "$" shall refer to the currency of the
United States of America.
(f) All references to time shall refer to Minneapolis, Minnesota time.
ARTICLE 2
PURPOSE
2.1 Development and License. This Agreement is intended to establish a
relationship between EchoCath and Medtronic in the area of the Field of Use,
wherein Medtronic may (1) have access to EchoCath technology and development
personnel for developing new products in the Field of Use; (2) purchase certain
EchoCath products, and (3) obtain rights under the EchoCath Patents and know-how
which are included in the Licensed Technology.
ARTICLE 3
LICENSE TO MEDTRONIC
3.1 Grant of License. Subject to the terms and conditions of this Agreement,
EchoCath hereby grants to Medtronic a worldwide exclusive license to the
Licensed Technology to make, have made, use, sell and have sold Products
incorporating or utilizing, and to otherwise commercialize and exploit, the
Licensed Technology in the Field of Use.
3.2 Medtronic Exclusivity. EchoCath will not, without the prior written consent
of Medtronic, supply, sell, transfer or otherwise dispose of Products or
components utilizing Licensed Technology to any third party if EchoCath has
knowledge that such third party intends or is likely to use such Products or
components, or resell such Products or components for use ithin the Field of
Use.
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3.3 Term of License. Unless otherwise terminated under provisions of this
Agreement, Medtronic's rights and obligations as licensed under this Agreement
shall continue (a) in the case of EchoCath Patents, until such time as all of
such patents and copyrights, including any extensions thereof, have Expired, and
(b) in the case of any trade secrets and know-how included in the Licensed
Technology, for the life of such trade secrets and know-how.
3.4 Regulatory Approvals. In connection with Medtronic's commercialization of
the Products in the Field of Use, EchoCath shall transfer to Medtronic any
applicable U.S. FDA 510(k) approvals or similar foreign approvals held by or on
behalf of EchoCath. Medtronic shall be solely responsible for obtaining any
other required regulatory approvals for the Products in Medtronic's discretion,
and EchoCath shall provide Medtronic with reasonable support in connection with
such regulatory approvals pursuant to mutually agreeable terms.
3.5 Technology Transfer. EchoCath shall, upon Medtronic's request from time to
time, provide to Medtronic at no charge (other than reasonable copying charges)
such drawings, specifications, processes, materials, manufacturing procedures,
and other documentation and know-how as is reasonably necessary to enable
Medtronic to utilize its rights under this Agreement. In addition, EchoCath
will, subject to existing commitments and resources, provide such training to
Medtronic technical and manufacturing personnel as is reasonably necessary to
enable Medtronic to fully utilize its rights under this Agreement, at such
reasonable times and places as Medtronic may request from time to time. The
total amount of hours to be provided by EchoCath hereunder for these services
shall not exceed 250 hours per year. Medtronic will pay EchoCath consulting fees
for such services equal to the fully-burdened actual hourly rates of pay of the
EchoCath employees providing such training and will reimburse EchoCath for
reasonable travel and lodging expenses for EchoCath personnel with respect to
training trips requested by Medtronic to the extent such expenses are
substantiated by expense receipts.
ARTICLE 4
LICENSE ACQUISITION FEES
4.1 Consideration. In exchange for the grant of exclusive license
rights in the Field of Use Medtronic agrees to pay a non-refundable license fee
as enumerated below:
(a) Seven Hundred Fifty Thousand Dollars ($750,000) upon execution
of this Agreement; and
(b) Seven Hundred Fifty Thousand Dollars ($750,000) within two business
days after Medtronic's first commercial sale of a Medtronic Product
(other than the standalone EchoMark"r" guidwire) utilizing the
EchoMark"r" or ColorMark"r" technology in the Field of Use.
ARTICLE 5
CAPITAL EQUIPMENT DISTRIBUTION; SUPPLY
5.1 Distribution. Medtronic shall have the right, but not the obligation, to
distribute capital equipment of EchoCath, including what are known as drive
boxes, used in connection with either EchoCath products distributed by Medtronic
or Medtronic Products sold under license from EchoCath. The currently available
capital equipment and its current price to Medtronic are listed in the attached
Exhibit B. The parties agree to add equipment to Exhibit B as it is developed by
EchoCath with present and future products at prices mutually agreed upon. The
parties agree that the prices to Medtronic shall never be higher than those to
any other EchoCath distributor or customer for comparable products, for
comparable volume commitments, and that such Exhibit B price list shall be
renegotiated in good faith at the time the supply agreement is negotiated
pursuant to Section 5.3 and after that on an annual basis.
5.2 Services. EchoCath shall be responsible for installing and servicing any
capital equipment distributed by Medtronic under EchoCath's standard service
contracts, to be entered into between EchoCath and the purchaser; provided that
Medtronic shall have the option to assume responsibility for installation and/or
service of some or all of the EchoCath capital equipment distributed by
Medtronic, in which case EchoCath shall, subject to existing commitments and
resources, provide Medtronic with such specifications and other documentation
and know-how, and such individual training to Medtronic technical and service
personnel, as is reasonably necessary to enable Medtronic to perform such
responsibilities. The total amount of hours to be provided by EchoCath hereunder
for these services shall not exceed 100 hours per year. Medtronic will pay
EchoCath consulting fees for such services equal to the fully-burdened actual
hourly rate of pay for the EchoCath employees providing such training and will
reimburse EchoCath for reasonable travel and lodging expenses for EchoCath
personnel with respect to training trips requested by Medtronic to the extent
such expenses are substantiated by expense receipts.
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5.3 Supply. Medtronic and EchoCath shall negotiate in good faith and use all
commercially reasonable efforts to reach agreement upon and, within 90 days
after the date hereof, enter into a Supply Agreement giving Medtronic the right
to purchase certain products from EchoCath, including EchoCath guidewires,
EchoMark"r" sensors, catheter system interfaces, and ColorMark"r" products. The
prices to Medtronic under such supply agreement shall never be higher than those
to any other EchoCath distributor or customer for comparable products.
ARTICLE 6
ROYALTIES AND REPORTS
6.1 Royalties. Medtronic shall pay to EchoCath a royalty equal to the following
amount for each of the following types of Royalty Bearing Units it sells to
third parties (ignoring transfers among Medtronic):
Per Unit
Royalty Bearing Unit ("RBU") Royalty Rate
EchoCath guidewire $10
Grinfeld cannula $10
All other Products $ 2
For purposes of clarification, notwithstanding the foregoing:
(a) No royalty shall be due upon Medtronic's resale of EchoCath stand
alone guidewires purchased by Medtronic from EchoCath pursuant to the
Supply Agreement referred to in Section 5.3 above;
(b) The Grinfeld cannula currently under development by Medtronic would
not be a Royalty Bearing Unit unless and until such cannula is modified
to incorporate EchoMark"r" or ColorMark"r" technology, and
(c) The $2 per unit royalty rate for "All other Products" applies to (i)
all current Medtronic products which in the future are modified to
incorporate EchoMark"r" or ColorMark"r" technology, and (ii) all future
new Medtronic products incorporating such technology and having an
average selling price per unit, determined in accordance with
Medtronic's established accounting principles ("ASP"), of $100 or less.
The per unit royalty rate for future new Medtronic products
incorporating the EchoMark"r" or ColorMark"r" technology and having an
ASP of over $100 and less than $250 shall be a mutually agreed upon rate
not to exceed $10 per unit. The per unit Royalty rate for future
Medtronic products incorporating either the EchoMark or ColorMark
technologies with an ASP of $250 or more shall be mutually agreed to by
the parties.
6.1.1 Royalties shall not accrue or be due until such time as
Medtronic has achieved sales of Royalty Bearing Units, beginning with
the date of this Agreement, which would otherwise have resulted in the
payment of $1,500,000 in Royalties to EchoCath.
6.2 Cumulative Cap. The total cumulative royalties paid under this Agreement
shall be limited to and shall not exceed the sum of Twenty Million Dollars U.S.
($20,000,000) plus the amount of License Option Fee paid by Medtronic pursuant
to Section 9.1 below ("Cumulative Cap"). The fees set forth in Sections 4.1 and
9.1 and amounts actually paid as Annual Minimum Royalty pursuant to Section 7,
shall be applied against the Cumulative Cap.
6.3 Reports and Payments. Within sixty (60) days after the end of each Quarter,
Medtronic shall provide EchoCath with a written report indicating the number of
each type of Royalty Bearing Unit sold during such Quarter and the amount of the
royalties due to EchoCath for such Quarter. Simultaneously with making such
report and to the extent a payment is due to EchoCath, Medtronic shall pay to
EchoCath the amount of royalties then due.
6.4 Records. Medtronic agrees to keep accurate written records sufficient in
detail to enable the royalties under this Agreement by Medtronic to be
determined and verified. Such records for a particular Quarter shall be retained
by Medtronic for a period of not less than three years after the end of such
Quarter.
6.5 Audit of Records. Upon reasonable notice and during regular business hours,
Medtronic shall from time to time, but no more frequently than semi-annually,
make available the records referred to in Section 6.4 for audit at EchoCath's
expense by independent representatives selected by EchoCath to verify the
accuracy of such reports
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provided by Medtronic to the EchoCath. Such representatives shall execute a
suitable confidentiality agreement reasonably acceptable to Medtronic prior to
conducting such audit. Such representatives may disclose to EchoCath only its
conclusions regarding the accuracy and completeness of royalty payments and of
records related thereto, and shall not disclose Medtronic's confidential
business information to EchoCath without the prior written consent of Medtronic.
ARTICLE 7
ANNUAL MINIMUM ROYALTY; OPTION TO TERMINATE
7.1 Notwithstanding the provisions of Section 6.1.1, starting with the first
Medtronic fiscal year beginning after the date two years following Medtronic's
first commercial sale of a Medtronic Product utilizing either the ColorMark or
the EchoMark technologies in the Field of Use (the "Minimum Royalty Start Date")
Medtronic agrees to pay EchoCath minimum royalties of at least One Hundred
Thousand Dollars ($100,000) per Medtronic fiscal year (the "Annual Minimum
Royalty") subject to the following terms and conditions:
(a) During the first five (5) years after the Minimum Royalty Start
Date, Medtronic shall not be obliged to pay any Annual Minimum Royalty
unless and until the requirements of Section 6.1.1 have been satisfied.
(b) During the first five (5) years after the Minimum Royalty Start
Date, the amount charged against the requirements of Section 6.1.1 shall
be the greater of (i) the Annual Minimum royalty or (ii) the royalties
which, but for Section 6.1.1, would have been paid in any such fiscal
year.
(c) Upon the earlier of (i) the requirements of Section 6.1.1 being
satisfied or (ii) the commencement of the sixth (6th) year following the
Minimum Royalty Start Date, if Medtronic has not generated sales which
(ignoring Section 6.1.1) would have yielded Royalties equal to at least
the Annual Minimum Royalty in any Medtronic fiscal year, Medtronic shall
have the right to pay the amount to make up the difference during the
60-day period ("Annual Cure Period") following the date the last royalty
payment with respect to such fiscal year was due.
7.2 If Medtronic fails to pay the Annual Minimum Royalty by the end of the
Annual Cure Period as provided in Section 7.1 (c), above, EchoCath shall have
the right the option to terminate Medtronic's license rights under this License
Agreement. In order to effectuate a termination of this License Agreement under
the foregoing terms, EchoCath shall pay to Medtronic an amount equal to the
License Acquisition Fees, as actually paid to EchoCath, less an amount equal to
the greater of the Annual Minimum Royalty for each year or the products of RBU's
sold by Medtronic multiplied by the appropriate per unit Royalty rate.
EchoCath's termination option pursuant to this Section shall be EchoCath's sole
right and remedy for Medtronic's failure to pay the Annual Minimum Royalty, and
may be exercised only by delivering written notice to Medtronic within 90 days
after the end of the Annual Cure Period with respect to any Medtronic fiscal
year for which Medtronic has failed to pay at least the Annual Minimum Royalty.
Notwithstanding the foregoing, Medtronic shall have the right to withhold any
particular payment if there is a reasonable basis to conclude that EchoCath has
failed to perform a material obligation under the terms of this Agreement or any
subsequent development agreement, as applicable, and the issue has been
submitted for resolution under Section 14.13, Arbitration, herein.
ARTICLE 8
DEVELOPMENT PROJECTS
8.1 Development Agreement. Medtronic and EchoCath shall negotiate in good faith
and use all commercially reasonable efforts to reach agreement upon and, within
60 days after the date hereof, enter into a Development Agreement for
development by EchoCath of Products or components thereof utilizing the Licensed
Technology. The Development Agreement will require Medtronic and EchoCath to use
reasonable good-faith efforts to complete the following respective obligations
set forth in this Article.
8.2 Development Projects. There shall be two development projects with
separate milestones and mutually agreed upon budgets as follows:
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(a) The first development project shall be accomplished within 60 days
of execution of the Development Agreement, and shall involve EchoCath completing
the EchoMark"r" guidewire manufacturing plan.
(b) The second development project shall be accomplished within 200 days
after completion of the first development project, and shall involve validation
of the EchoMark"r" guidewire system:
8.3 Failure to Meet Milestones. Should EchoCath, for any reason fail to
meet any set of development milestones outlined in Section 8.2 above and in the
Development Agreement above, Medtronic shall notify EchoCath and EchoCath shall
have 60 days to cure. If EchoCath does not cure, Medtronic shall have the right
to undertake product development projects either (1) by itself, or (2) by
engaging third party contractor or consultants, provided that any such
consultant or contract shall be bound by the terms of any applicable
confidentiality agreements between Medtronic and EchoCath related to the
EchoMark"r" or ColorMark"r" technologies. Medtronic shall then have no
obligation to make any milestone payments to EchoCath for those milestones
performed by Medtronic under the Development Agreement.
ARTICLE 9
OPTION FOR ADDITIONAL LICENSE RIGHTS
9.1 Grant of License Option. In addition to the Product development obligations
outlined in Article 8, above and in addition to the fees specified in Section
4.1 above, EchoCath hereby irrevocably grants Medtronic the exclusive right and
option (the "License Option"), exercisable by written notice to EchoCath at any
time within six months after the date hereof (the "Option Period"), to acquire a
worldwide exclusive license to the EchoEye"r" and EchoFlow"r" technologies
within the Field of Use upon mutually agreeable terms and conditions, including
total consideration of not less than $1.5 million, and subject to other
commercially reasonable terms and conditions. In the event that the concept
design validation, described below in this section, is not achieved by the end
of the third month from execution hereof, then the aforementioned six month
period shall be extended to include such additional time as is required for the
concept design validation to be reviewed by Medtronic for a three month period.
For example, if said concept design validation is delivered on the 15th day of
the fourth month from execution hereof, the Option Period shall expire at the
end of the 15th day of the seventh month from execution.
In consideration of such License Option, Medtronic agrees to pay
EchoCath the following amounts (the "License Option Fee") upon the achievement
by EchoCath of the following development milestones:
$50,000 upon signing this Agreement;
I. $200,000 upon the earlier to occur of (i) achievement of concept
design validation of a mutually agreed upon product utilizing either the
EchoEye"r" or EchoFlow technologies in the Field of Use or (ii) six months after
the signing of this Agreement by both parties.
9.2 Right of First Refusal. In the event Medtronic and EchoCath are unable to
agree on the terms of such exclusive license for the EchoEye"r" and EchoFlow"r"
technologies, Medtronic shall have a right of first refusal in connection with
any sale, license or other transfer of such technologies by EchoCath to any
third party during the three month period commencing upon expiration of the
Option Period set forth in Section 9.1. Such "right of first refusal" means that
if EchoCath reaches agreement in principal with, or otherwise indicates its
willingness to accept an offer of, any third party regarding the licensing or
sublicensing, sale or other transfer of any EchoEye"r" or EchoFlow"r"
technologies, then EchoCath shall promptly give written notice (the "Notice") to
Medtronic, which Notice shall (i) specify the pricing, terms, conditions and all
material provisions with respect to the proposed transaction, (ii) identify the
proposed party or parties to such transaction, and (iii) include a copy of the
proposed definitive agreement setting forth the terms of the proposed
transaction between EchoCath and the proposed third party or parties. Medtronic
shall have the irrevocable right and option (the "first refusal option"),
exercisable in writing to EchoCath any time within 45 days after Medtronic's
receipt of the Notice, to elect to enter into such proposed transaction upon the
same pricing (or the monetary equivalent of any non-monetary consideration as
shall be determined by a mutually agreed upon third party), terms, conditions
and other material provisions as set forth in the Notice. If Medtronic so elects
to exercise its first refusal option, EchoCath shall use its/their best efforts
to permit consummation of such proposed transaction with Medtronic within 90
days following exercise. If Medtronic fails to exercise its first refusal option
to enter into such proposed transaction, EchoCath and the proposed party
identified in the Notice may complete such transaction upon the pricing, terms,
conditions and material provisions specified in the Notice and contained in the
proposed definitive agreement included with the Notice; provided that, if (i)
EchoCath and such third party fail to complete such transaction within 90 days
after the expiration of Medtronic's 45-day option, or (ii) if any of
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the pricing, terms, conditions or other material provisions specified in the
Notice and contained in the proposed definitive agreement are modified so as to
be less favorable to EchoCath, or (iii) if the identity of such third party
changes, then, in any such event, EchoCath shall give a new Notice to Medtronic,
and Medtronic shall have a new first refusal option, with respect to such
delayed or modified proposed transaction.
ARTICLE 10
INTELLECTUAL PROPERTY
10.1 Pre-existing Intellectual Property. Any intellectual property that
exists as of the execution of this Agreement shall remain the property of its
original owner, whether or not it is shared with or used by the other party for
purpose of this Agreement.
10.2 Sole Inventions. Any inventions made by a party during the term of
this Agreement exclusively using its own resources and invented by its own
personnel shall remain the property of the inventing party.
10.3 Joint Inventions. Any inventions made jointly by personnel of Medtronic and
EchoCath ("Joint Inventions") shall be owned jointly with each party having
joint rights to use and license such Joint Inventions, subject to Medtronic's
exclusive license rights to EchoCath's joint interest in the Joint Inventions
within the Field of Use.
10.4 Medtronic-Funded Inventions. Any inventions made by EchoCath using funds
provided by Medtronic, but not otherwise using Medtronic intellectual property,
shall be owned by EchoCath. EchoCath hereby grants Medtronic a worldwide (i)
exclusive royalty-free license for use of such inventions within the Field of
Use and (ii) right of first offer (requiring EchoCath to negotiate exclusively
with Medtronic for a period of at least 90 days) and right of first refusal
(pursuant to the procedures described in Section 9.2) to obtain a license to use
such inventions outside the Field of Use on mutually agreeable terms.
ARTICLE 11
CERTAIN REPRESENTATIONS, WARRANTIES AND INDEMNITIES
11.1 Representations and Warranties of EchoCath. EchoCath represents and
warrants to Medtronic as follows:
(a) The execution and delivery by EchoCath of this Agreement and the
performance by EchoCath of its obligations hereunder have been duly authorized
by all requisite corporate action and will not violate any provision of law, any
order of any court or other agency of government, the Certificate of
Incorporation or Bylaws of EchoCath, as amended, or any provision of any
indenture, agreement or other instrument to which EchoCath or any of its
properties or assets is bound, or conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge, restriction, claim or encumbrance of any nature
whatsoever upon any of the properties or assets of EchoCath.
(b) This Agreement has been duly executed and delivered by EchoCath and
constitutes the legal, valid and binding obligation of EchoCath, enforceable in
accordance with its terms, subject, as to the enforcement of remedies, to the
discretion of the courts in awarding equitable relief and to applicable
bankruptcy, reorganization, insolvency, moratorium and similar laws affecting
the rights of creditors generally.
(c) EchoCath is the owner, or exclusive licensee with the right to grant
sublicenses in the Field of Use, of all right, title and interest in and to the
Licensed Technology free and clear of any liens, mortgages, charges, security
interests, pledges, encumbrances, assessments, restrictions or other third-party
claims of any nature. EchoCath's execution and performance of this Agreement and
Medtronic's use of the Licensed Technology in the Field of Use will not
infringe, misuse, misappropriate or conflict with the rights, including patent
and other intellectual property rights or contract rights, of others. To the
knowledge of EchoCath, the Licensed Technology is valid and has not been
challenged in any judicial or administrative proceeding. Neither any
shareholder, employee or consultant of EchoCath or its Affiliates (or the
employer of any such consultant) has any rights in or to any of the Licensed
Technology. To the knowledge of EchoCath, EchoCath has not failed to take any
necessary steps or appropriate actions to record its interests, or protect its
rights, in the Licensed Technology. To the knowledge of EchoCath, within the
Field of Use, no person or entity nor such person's or entity's business or
products has infringed, misused, misappropriated or conflicted with the Licensed
Technology or currently is infringing, misusing, misappropriating or conflicting
with the Licensed Technology.
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11.2 Representations and Warranties of Medtronic. Medtronic represents
and warrants to EchoCath as follows:
(a) The execution and delivery by Medtronic of this Agreement and the
performance by Medtronic of its obligations hereunder have been duly authorized
by all requisite corporate action and will not violate any provision of law, any
order of any court or other agency of government, the Certificate of
Incorporation or Bylaws of Medtronic, as amended, or any provision of any
indenture, agreement or other instrument to which Medtronic or any of its
properties or assets is bound, or conflict with, result in a breach of or
constitute (with due notice of lapse of time or both) a default under any such
indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge, restriction, claim or encumbrance of any nature
whatsoever upon any of the properties or assets of Medtronic.
(b) This Agreement has been duly executed and delivered by Medtronic and
constitutes the legal, valid and binding obligation of Medtronic, enforceable in
accordance with its terms, subject, as to the enforcement of remedies, to the
discretion of the courts in awarding equitable relief and to applicable
bankruptcy, reorganization, insolvency, moratorium and similar laws affecting
the right of creditors generally.
ARTICLE 12
INDEMNIFICATION
12.1 EchoCath's Liability. EchoCath shall indemnify, defend and hold harmless
Medtronic and each of its subsidiaries, officers, directors, employees,
shareholders and distributors from and against and in respect of any and all
demands, claims, actions or causes of action, assessments, losses, damages,
liabilities, interest and penalties, costs and expenses (including, without
limitation, reasonable legal fees and disbursements incurred in connection
therewith and in seeking indemnification therefor, and any amounts or expenses
required to be paid or incurred in connection with any action, suit, proceeding,
claim, appeal, demand, assessment or judgment) ("Indemnifiable Losses"),
resulting from, arising out of, or imposed upon or incurred by any person to be
indemnified hereunder by reason of any breach of representation, warranty,
covenant or agreement on the part of EchoCath under this Agreement (excluding
matters for which Medtronic is responsible under Section 12.2 below).
12.2 Medtronic's Liability. Medtronic shall indemnify, defend and hold harmless
EchoCath and each of its subsidiaries, officers, directors, employees,
shareholders and suppliers from and against and in respect of any and all
demands, claims, actions or causes of action, assessments, losses, damages,
liabilities, interest and penalties, costs and expenses (including, without
limitation, reasonable legal fees and disbursements incurred in connection
therewith and in seeking indemnification therefor, and any amounts or expenses
required to be paid or incurred in connection with any action, suit, proceeding,
claim, appeal, demand, assessment or judgment) ("Indemnifiable Losses"),
resulting from, arising out of, or imposed upon or incurred by any person to be
indemnified hereunder by reason of any breach of representation, warranty,
covenant or agreement on the part of Medtronic under this Agreement (excluding
matters for which EchoCath is responsible under Section 12.1 above).
12.3 Third Party Claims. If a claim by a third party is made against any
indemnified party, and if the indemnified party intends to seek indemnity with
respect thereto under this Article, such indemnified party shall promptly notify
the indemnifying party of such claim; provided, however, that failure to give
timely notice shall not affect the rights of the indemnified party so long as
the failure to give timely notice does not materially adversely affect the
indemnifying party's ability to defend such claim against a third party. The
indemnifying party shall be entitled to settle or assume the defense of such
claim, including the employment of counsel satisfactory to the indemnified
party, as provided below. If the indemnifying party elects to settle or defend
such claim, it shall notify the indemnified party within thirty (30) days (but
in no event less than twenty (20) days before any pleading, filing or response
on behalf of the indemnified party is due) of its intent to do so. If the
indemnifying party elects not to settle or defend such claim or fails to notify
the indemnified party of its election within thirty (30) days (or such shorter
period provided above) after receipt of the indemnified party's notice of a
claim of indemnity hereunder, the indemnified party shall have the right to
contest, settle or compromise the claim without prejudice to any rights to
indemnification hereunder. Regardless of which party is controlling the
settlement or defense of any claim, (i) both the indemnified party and
indemnifying party shall act in good faith, (ii) the indemnifying party shall
not thereby permit to exist any lien, encumbrance or other adverse charge upon
any asset of any indemnified party or of its subsidiaries, (iii) the
indemnifying party shall permit the indemnified party to participate in such
settlement or defense through counsel chosen by the indemnified party, provided
that all fees, costs and expenses of such counsel in an action controlled by the
indemnifying party shall be borne by the indemnified party, unless the
indemnifying party and indemnified party have different available defenses to
such third party claim, in which case such fees, costs and expenses shall be
borne by the indemnifying party, (iv)
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no entry of judgment or settlement of a claim may be agreed to without the
written consent of both the indemnified party and the indemnifying party, which
consents shall not be unreasonable withheld, and (v) the indemnifying party
shall agree promptly to reimburse the indemnified party for the full amount of
such claim pursuant to this Article. So long as the indemnifying party is
reasonably contesting any such claim in good faith as permitted herein, the
indemnified party shall not pay or settle any such claim. The controlling party
shall deliver, or cause to be delivered, to the other party copies of all
correspondence, pleadings, motions, briefs, appeals or other written statements
relating to or submitted in connection with the settlement or defense of any
such claim, and timely notices of, and the right to participate pursuant to
support (iii) above in any hearing or other court proceeding relating to such
claim. Notwithstanding anything to the contrary herein, Medtronic shall have
full and exclusive authority to litigate, compromise and settle any claims
related to Product Liability, but shall do so in good faith and in a manner
consistent with Medtronic's corporate policies.
12.4 Cooperation as to Indemnified Liability. Each party hereto shall cooperate
fully with the other parties with respect to access to books, records, or other
documentation within such party's control, if deemed reasonably necessary or
appropriate by any party in the defense of any claim which may give rise to
indemnification hereunder.
ARTICLE 13
PROSECUTION OF PATENTS AND INFRINGEMENT
13.1 Prosecution of Infringement of Licensed Technology by Third Party.
(a) Each of Medtronic and EchoCath shall promptly notify the other if it
knows or has reason to believe that rights to the Licensed Technology are being
infringed or misappropriated by a third party within the Field of Use or that
such infringement or misappropriation is threatened. Medtronic shall, after
learning of and investigating such alleged infringement or misappropriation,
send notice to EchoCath electing to do one of the following: (i) prosecute such
alleged infringement or misappropriation for Medtronic's own account; (ii) offer
EchoCath the choice of participating in such prosecution; or (iii) decline to
prosecute such alleged infringement or misappropriation.
(b) In the event Medtronic elects to prosecute such alleged infringement or
misappropriation for its own account pursuant to (a)(i) above, Medtronic shall
be solely responsible for payment of all of its own costs of prosecution and of
negotiating settlement, and shall retain all proceeds from such prosecution.
Medtronic shall have the right to join EchoCath as a party plaintiff to any such
proceeding if Medtronic believes it is necessary to successfully prosecute such
infringement or misappropriation. EchoCath shall cooperate, at Medtronic's
expense, in connection with the initiation and prosecution by Medtronic of such
suit.
(c) In the event Medtronic offers EchoCath the choice of participating in
such prosecution pursuant to (a)(ii) above, upon receipt of Medtronic's notice,
EchoCath shall have thirty (30) days in which to notify Medtronic in writing of
EchoCath's election to participate in the prosecution of such alleged
infringement or misappropriation. If EchoCath elects to participate, EchoCath
shall be obligated to pay fifty percent (50%) of the costs and expenses incurred
by Medtronic and EchoCath in such prosecution and shall be entitled to receive
fifty percent (50%) of the net proceeds realized from EchoCath's and Medtronic's
prosecuting of such matter and remaining after reimbursement of Medtronic's and
EchoCath's costs and expenses out of the proceeds of such matter.
(d) In the event Medtronic elects not to prosecute pursuant to (a)(iii)
above, EchoCath may, at its option, prosecute such alleged infringement or
misappropriation for its own account, in which event EchoCath shall be solely
responsible for all costs of prosecution and of negotiating settlement and shall
retain all proceeds from such prosecution.
13.2 Protection of Intellectual Property and Improvements. During the term of
this Agreement, EchoCath shall promptly inform Medtronic of any Invention,
improvement, upgrading or modification relating to the Licensed Technology.
EchoCath agrees to protect the Licensed Technology by obtaining and maintaining
appropriate patent rights as recommended by reputable patent counsel. If
Medtronic determines, in its sole discretion, that any Invention conceived,
reduced to practice or otherwise made, developed or acquired by one or more
employees or agents of EchoCath and having application to the Field of Use is
not being adequately protected by patents, Medtronic may so inform EchoCath. If
Medtronic decides that EchoCath's response has been inadequate, Medtronic may
take whatever action it deems necessary at its expense to protect such
Invention. All patents and copyright registrations shall be applied for in the
names of the actual inventors or authors and shall be assigned to EchoCath,
subject to Medtronic's
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rights and license therein; each party shall execute and deliver such forms of
assignment, power of attorney and other documents which are necessary to give
effect to the provisions hereof.
ARTICLE 14
MISCELLANEOUS
14.1 Non-Disclosure. Except as permitted or required for performance by the
party receiving such Confidential Information of its rights or duties hereunder,
for a period of three (3) years after receipt, each party agrees (i) not to
disclose or use any Confidential Information of the other party obtained in
connection with the performance of this Agreement, and (ii) not to disclose or
provide any of such Confidential Information of the other party to any third
party and to take appropriate measures to prevent any such disclosure by its
present and future employees, officers, agents, subsidiaries, or consultants.
14.2 Relationship. This Agreement does not make either party the employee, agent
or legal representative of the other for any purpose whatsoever. Neither party
is granted any right or authority to assume or to create any obligation or
responsibility, express or implied, on behalf of or in the name of the other
party. In fulfilling its obligations pursuant to this Agreement, each party
shall be acting as a independent contractor.
14.3 Assignment. This Agreement shall be binding upon and inure to the benefit
of the parties hereto and the successors or assigns of the parties hereto;
provided, that (i) the rights and obligations of EchoCath herein may not be
assigned except to any person who succeeds to substantially all of the assets
and business of EchoCath, and (ii) the rights and obligations of Medtronic
herein may not be assigned except to any person who succeeds to substantially
all of that portion of Medtronic's business to which this Agreement relates.
14.4 Complete Agreement. The Exhibits to this Agreement shall be construed as an
integral part of this Agreement to the same extent as if they had been set forth
verbatim herein. This Agreement and the Exhibits hereto constitute the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersede all prior agreements whether written or oral relating hereto.
14.5 Survival. All of the representations, warranties, and covenants made in
this Agreement, and all terms and provisions hereof intended to be observed and
performed by the parties after the termination hereof, shall survive such
termination and continue thereafter in full force and effect.
14.6 Waiver, Discharge, Amendment, Etc. The failure of any party hereto to
enforce at any time any of the provisions of this Agreement shall in no way be
construed to be a waiver of any such provision, nor in any way to affect the
validity of this Agreement or any part thereof or the right of the party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement shall be held to be a waiver of any other or subsequent breach.
Any amendment to this Agreement shall be in writing and signed by the parties
hereto.
14.7 Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed as original and all of which together shall
constitute one instrument.
14.8 Titles and Headings; Construction. The titles and headings to Sections
herein are inserted for the convenience of reference only and are not intended
to be a part of or to affect the meaning or interpretation of this Agreement.
This Agreement shall be construed without regard to any presumption or other
rule requiring construction hereof against the party causing this Agreement to
be drafted.
14.9 Benefit. Nothing in this Agreement, expressed or implied, is intended to
confer on any person other than the parties to this Agreement or their
respective successors or assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
14.10 Notices. All notices or other communications to a party required or
permitted hereunder shall be deemed given if in writing and delivered personally
or sent by telecopy (with confirmation or transmission) or certified mail
(return receipt requested) to such party at the following addresses (or at such
other addresses as shall be specified by like notice):
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if to Medtronic to:
Medtronic, Inc.
Corporate Center
7000 Central Avenue N.E.
Minneapolis, MN 55432
Attention: General Counsel
FAX (612) 572-5459
with a copy to:
Medtronic, Inc.
Corporate Center
7000 Central Avenue N.E.
Minneapolis, MN 55432
Attention: Vice President Corporate Development and Associate General Counsel
FAX (612) 572-5404
if to EchoCath to:
EchoCath, Inc.
4326 Route One, Monmouth Junction
Princeton, New Jersey 08852
Attention: President
FAX (609) 987-1019
Medtronic or EchoCath may change their respective above-specified recipient
and/or mailing address by notice to the other party given in the manner herein
prescribed. All notices shall be deemed given on the day when actually delivered
as provided above (if delivered personally or by telecopy) or on the day shown
on the return receipt (if delivered by mail).
14.11 Severability. In case any provision of this Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
14.12 Public Announcement. Each of the parties to this Agreement hereby agrees
with the other parties hereto that, except as may be required to comply with the
requirements of applicable law and the appropriate stock exchanges, such as the
New York Stock Exchange or NASDAQ, no press release or similar public
announcement or communication will be made or caused to be made concerning the
execution or performance of this Agreement unless specifically approved in
advance by Medtronic and EchoCath. The foregoing shall not restrict Medtronic's
or EchoCath's communications with employees or customers.
14.13 Arbitration. Any controversy or claim arising out of or relating to this
Agreement or the alleged breach, termination or validity hereof, including any
alleged fraud in the inducement hereof, shall be resolved by mediation under the
Center for Public Resources (CPR) Mediation Procedure for Business Disputes.
Unless the parties agree otherwise, the mediator will be selected from the CPR
Panels of Neutrals with notification to CPR. Any such claim or controversy which
remains unresolved 45 days after appointment of a mediator, shall be settled by
binding arbitration by three (3) arbitrators in accordance with the CPR
Non-Administered Arbitration Rules, and judgment upon the award rendered by the
arbitrators may be entered by any court having jurisdiction thereof.
Notwithstanding the foregoing, either party may seek interim injunctive relief
from any court of competent jurisdiction.
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IN WITNESS WHEREOF, each of the parties has caused this License Agreement to
be executed in the manner appropriate to each, as of the date first above
written.
ECHOCATH, INC.
By
-------------------------------
Its
-------------------------------
MEDTRONIC, INC.
By
-------------------------------
Its
-------------------------------
EXHIBITS:
A - List of Present EchoCath Patents and Patent Applications within
Licensed Technology
B - Capital Equipment
STATEMENT OF DIFFERENCES
The registered trademark symbol shall be expressed as....................... 'r'
The trademark symbol shall be expressed as..................................'tm'
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EXHIBIT A
For the Purposes of this Agreement, the "U.S. Patents" are:
ECHOMARK"r"
U.S. Patents: 5,076,278 Issued: 12/31/91 Expire: 12/31/2011
(Design of Sensor)
5,161,536 Issued: 11/10/92 Expire: 11/10/2012
(Electronics for Detection)
ECHOEYE"r"
U.S. Patent: 5,373,845 Issued: 12/20/94 Expire: 12/20/2014
COLORMARK"r"
U.S. Patents: 5,329,927 Issued 7/19/1994 Expire: 7/19/2014
(Equipment)
U.S. Patents: 5,343,865 Issued 9/16/1994 Expire: 9/16/2014
(Method)
U.S. Patents: 5,425,370 Issued 6/20/1995 Expire: 6/20/2015
("GreyMark")
U.S. Patents: 5,421,336 Issued 6/6/1996 Expire: 6/6/2016
(Needle Engager)
Echo-10 Filed 12/3/96 Serial No. 08/759762
("ColorNeedle")
ECHOFLOW"tm"
U.S. Patents: 5,488,953 Issued 2/6/1996 Expire: 2/6/2016
(Method)
U.S. Patents: 5,540,230 Issued 7/30/1996 Expire: 7/30/2016
(Apparatus)
U.S. Patents: 5,669,388 Issued 9/23/1997 Expire: 6/20/2017
(Automatic Transducer Placement)
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EXHIBIT B
CAPITAL EQUIPMENT
Present Capital Equipment:
ColorMark"r" Driver Model 430001
Best Distributor Pricing (in quantities > 24): $3,000
EchoMark"r" CSI Model No. CSI 1.0 Best Pricing: COGS+30%
(Present [low quantity] COGS of CSI plus accessories: ~ $6400)
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October 30, 1997
Alliance Partners
30 Rockefeller Plaza
New York, NY 10112
Dear Gentlemen and Ladies:
Reference is made to a certain agreement dated July 7,1995 (the
"Alliance Agreement") between EchoCath, Inc. (the "Company") and Alliance
Partners ("Alliance") pursuant to which the Company agreed, among other things,
to pay $750,000 to Alliance (the "Contingent Payment") upon receipt by the
Company of $23,040,000 in proceeds from the exercise of its outstanding lass B
Common Stock Warrants. The Contingent Payment is accounted for as a "capital
contribution subject to repayment" on the Company's balance sheet. This letter
shall document our agreement reached on September 17, 1997 with respect to the
matters set forth herein. The value of the Shares and the Option purchase price
of $2.00 per share have been determined through arms length negotiation between
the parties hereto and reflect the market prices for the Class A Common Stock
reported in the NASDAQ market during the period immediately preceding the final
agreement on September 17, 1997.
1. Closing; Conditions to Closing. The obligations of the parties hereunder
are subject to and conditioned upon the receipt by the Company of the final
determination from the NASDAQ Stock Market, Inc. ("NASDAQ Approval") approving
the continued listing of the Company's common stock on the NASDAQ SmallCap
Market. The closing of the transactions contemplated by this Agreement (the
"Closing") shall occur and be effective on the date on which the Company
receives the NASDAQ Approval.
2. Contingent Liability. Upon Closing under this Agreement in accordance
with Paragraphs 1, 3 and 4 hereof, Alliance, and its designees Marathon
Investments L.L.C., Dr. Herbert Moskowitz and Mr. Irwin M. Rosenthal
(collectively, the "Investors"), hereby release and discharge the Company from
making the Contingent Payment and the provisions of the Alliance
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Alliance Partners
October 30, 1997
Page 2
Agreement providing for the Contingent Payment are hereby rendered null and void
without any further force and effect whatsoever.
3. Issuance of Shares. At the Closing the Company shall issue to the
Investors, and the Investors shall receive (without payment of any additional
cash consideration), an aggregate of 50,000 shares (the "Shares") of the
Company's Class A Common Stock, without par value (the "Class A Common Stock")
to be allocated among each Investor as follows:
Marathon Investments L.L.C. - 25,000 Shares
Dr. Herbert Moskowitz - 16,667 Shares
Irwin M. Rosenthal - 8,333 Shares
4. Issuance of Options. At the Closing, the Company shall grant and issue
to the Investors, and the Investors shall accept (without payment of any
additional cash consideration), options (collectively, the "Stock Options")to
purchase an aggregate of 50,000 shares of the Company's Class A Common Stock.
Each Stock Option shall be evidenced by the Stock Option Agreement attached
hereto as Exhibit A, shall have an exercise price equal to $2.00, and shall be
for the number of shares set forth below:
Marathon Investments L.L.C. - 25,000 Shares
Dr. Herbert Moskowitz - 16,667 Shares
Irwin M. Rosenthal - 8,333 Shares
5. Representations and Warranties of the Company. The Company represents
and warrants to Alliance and the Investors that:
a) The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of New Jersey, and the Company
has the corporate power and authority to perform it obligations hereunder; and
b) The Shares have been duly authorized and, when issued in
accordance with the terms hereof, will be validly issued, fully paid and
nonassessable and will be free and clear of all liens, charges, restrictions,
claims and encumbrances imposed by or through the Company.
c) The Company has all requisite power and authority to execute and
deliver this Agreement, and to perform th obligations of the Company hereunder;
and the execution, delivery and performance by the Company of this Agreement and
the consummation by the Company of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of the
Company.
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Alliance Partners
October 30, 1997
Page 3
d) This Agreement has been duly executed and delivered by the
Company and constitutes the valid and binding obligation of the Company
enforceable against the Company in accordance with the terms.
6. Representations, Warranties and Covenants of Alliance and the Investors.
Alliance and the Investors each severally represent and warrant to and covenants
with the Company with respect to itself as follows:
a) Alliance and each Investor has sufficient knowledge and
experience in investing in companies similar to the Company so as to be able to
eval ate the risks and merits of its investment in the Company and it is able
financially to bear the risks thereof;
b) Marathon Investments L.L.C. has been duly created and is validly
existing under the laws of the jurisdiction of its creation; each of Alliance
and the Investors has all requisite power and authority to execute and deliver
this Agreement and to perform his or its obligations hereunder; and the
execution, delivery and performance by each of All ance and the Investors of
this Agreement and the consummation by each of Alliance and the Investors of the
transactions contemplated hereby have been duly authorized by all necessary
action on the part of Alliance and such Investor.
c) This Agreement has been duly executed and delivered by each of
Alliance and the Investors and constitutes the valid and binding obligation of
each of Alliance and the Investors enforceable against them in accordance with
th terms.
d) The Shares have not been registered under the Securities Act of
1933, as amended (the "Securities Act") and, accordingly, must be held
indefinitely unless the Shares are subsequently registered under the Securities
Act, or an exemption from such registration is available.
e) Routine sales of securities made in reliance upon Rule 144 under
the Securities Act can be made only after the hol ing period provided by that
Rule has been satisfied, and, in any sales to which that Rule is not applicable,
registration or compliance with some other exemption under the Securities Act
will be required.
f) The availability of Rule 144 may be dependent upon adequate
current public information with respect to the Company being available and, at
the time that Alliance may desire to make a sale pursuant to the Rule, the
Company may neither wish nor be able o comply with such requirement.
g) Each of the Investors is acquiring the Shares for his or its own
account for investment, and will not sell, pledge or transfer the Shares in the
absence of an effective registration statement covering the same, except as
permitted by the provisions of Rule 144, if applicable, or some other applicable
exemption under the Securities Act. In view of this
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Alliance Partners
October 30, 1997
Page 4
representation and warranty, each Investor agrees that there may be a fixed to
the certificate for a legend as follows:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and were
acquired by the registered holder pursuant to a representation and
warranty that such holder was acquiring the Shares for such holder's
own account and for investment, with no intention of transfer or
disposition of the same in violation of the registration requirements
of that Act. These securities may not be sold, pledged, or transferred
in the absence of an effective registration statement under such Act,
or an opinion of counsel, which opinion is reasonably satisfactory to
counsel to the Company, to the effect that registration is not
required under such Act."
h) The Investors further agree that the Company may place a stop
transfer order with its transfer agent, prohibiting the transfer of the Shares,
so long as the legend remains on the certificates representing the Shares.
7. Registration Rights.
a) If at any time, or from time to time, after the date hereof
until the second anniversary of the date of expiration of the Stock Option, the
Company proposes to register any of its Class A Common Stock under the
Securities Act, w ether of its own accord or at the request or demand of any
holder thereof, and if the registration form proposed to be used may be used for
the registration of Class A Common Stock (other than a registration statement on
Form S-4 or S-8 or any successor form to such forms or filed in connection with
an exchange offer or an offering of securities solely to the existing
shareholders or employees of the Company), the Company will thereupon give
prompt written notice to the Investors(including transferees thereof who provide
the Company their address) of its intention to proceed with the registration
(hereinafter the "Incidental Registration"). Upon the written request of any of
the Investors made within 15 days after the receipt of any such notice, the
Company will use its best efforts to include in such Incidental Registration all
of the Shares, plus any Shares of Class A Common Stock issued or issuable upon
exercise of the Stock Option (collectively, the "Registrable Shares") for which
the Company receives a written request for registration from an Investor. Such
written request shall specify the number of Registrable Shares to be registered
and the intended method of disposition thereof (which may be, without
limitation, from time to time pursuant to Rule 415). The Company agrees to use
its best efforts to to keep the Registration Statement relating to such
Incidental Registration continuously effective for a period of 90 days(or such
longer period as the Company is otherwise required to keep the registration
statement effective for the Incidental Registration)from the date on which the
SEC declares it effective or such shorter period which will terminate when all
the Registrable Securities covered by the Registration Statement have been sold.
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Alliance Partners
October 30, 1997
Page 5
b) If an Incidental Registration is made in connection with
an underwritten public offering, and if the managing underwriters advise the
Company in writing that in their opinion the amount of securities requested to
be included in such registration (whether by the Company or holders of the
Company's securities pursuant to any rights granted by the Company to demand
inclusion of any such securities in such registration) exceeds the amount of
such securities which can be sold in such offering, the Company will include in
such offering the amount of securities requested to be included which in the
opinion of such underwriters can be sold as follows: (a) first, all the shares
shall be included which are proposed to be sold by the Company or any such
holder of a demand registration right (if the number of demand registration
rights held by such holder will be reduced by the Incidental Registration), and
(b) second, the number of shares of capital stock that may be included shall be
allocated among all holders of Class A Common Stock and of other stock having
and seeking to exercise incidental or "piggy back" registration rights in
proportion, as nearly as practicable, to the respective amounts of shares of
stock then owned by such holders (including shares issuable upon conversion of
convertible securities and upon exercise of warrants, options or other rights).
c) No Investor may participate in any underwritten Incidental
Registration unless such Investor (a) agrees to sell such Registrable Shares on
the basis provided in any underwriting arrangement approved by the Company and
(b) completes and executes all questionnaires, powers of attorney, indemnities,
agreements (including an underwriting agreement in customary form) and other
documents required under the terms of such underwriting arrangements.
d) All expenses incurred by the Company in complying with this
Section 7, including, without limitation (i) all registration and filing fees
(including all expenses incident to filing with the National Association of
Securities Dealers, Inc.), (ii) all printing expenses, (iii) all fees and
disbursements of the Company's lega counsel and accountants for the Company and
(iv) all blue sky fees and expenses, shall be paid by the Company.
Notwithstanding the foregoing, all underwriting discounts and selling
commissions applicable to sales of the Registrable Shares in connection with any
Incidental Registration shall be borne by the seller thereof pro rata in
proportion to the dollar value of the shares of Class A Common Stock being sold
by each such seller. Each Investor shall also pay and be responsible for such
Investor's own costs and expenses in connection with any Incidental
Registration, including without limitation the fees and expenses of legal
counsel, if any.
e) Indemnification by the Company. The Company agrees to
indemnify and hold harmless each selling holder of Registrable Securities from
and against any and all losses, claims, damages, liabilities and expenses
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact ontained in any registration statement or prospectus relating to
the Registrable Securities or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or based upon any omission or any
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages, liabilities or expenses arise
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Alliance Partners
October 30, 1997
Page 6
out of, or are based upon, any such untrue statement or omission or allegation
thereof based upon information furnished in writing to the Company by such
selling holder or on such selling holder's behalf expressly for use therein and;
provided, further, that with respect to any untrue statement or omission or
alleged untrue statement or omission made in any preliminary prospectus, the
indemnity agreement contained in this paragraph shall not apply to the extent
that any such loss, claim, damage, liability or expense results from the fact
that a current copy of the prospectus was not sent or given to the person
asserting any such loss, claim, damage, liability or expense at or prior to the
written confirmation of the sale of the Registrable Securities concerned to such
person if it is determined that it was the responsibility of such selling holder
to provide such person with a current copy of the prospectus and such current
copy of the prospectus would have cured the defect giving rise to such loss,
claim, damage, liability or expense.
f) Indemnification by Holder of Registrable Securities. Each
Selling Holder agrees to indemnify and hold harmless the Company to the same
extent as the foregoing indemnity from the Company to such selling holder, but
only with respect to information furnished in writing by such selling holder or
on such selling holder's behalf expressly for use in any registration statement
or prospectus relating to the Registrable Securities, or any amendment or
supplement thereto, or any preliminary prospectus.
g) Conduct of Indemnification Proceedings. If any action or
proceeding shall be brought or asserted against any person entitled to
indemnification under clauses (a) or (b) above (an "Indemnified Party") in
respect of which indemnity may be sought from any party who has agreed to
provide such indemnification (an "Indemnifying Party"), the Indemnifying Party
shall assume the defense thereof, including the employment of counsel reasonab y
satisfactory to such Indemnified Party, and shall assume the payment of all
expenses.
8. Miscellaneous.
a) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey.
b) Entire Agreement. This Agreement constitutes the sole
and entire agree ent of the parties with respect to the subject matter hereof.
c) Counterparts. This Agreement and the Company's acceptance
may be executed in several counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
d) Amendments. This Agreement may not be amended or modified
without the written consent of the Company a d Alliance, and no provisions
hereof may be waived without the written consent of the party or parties in
favor of which such provision would operate without such waiver.
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Alliance Partners
October 30, 1997
Page 7
e) Severability. If any provision of this Agreement shall be
declared void or unenforceable by any judicial or administrative authority, the
validity of any other provision and of the entire Agreement shall not be
affected thereby.
If you are in agreement with the foregoing, please signify your acceptance
by signing and returning to us the enclosed copy of this letter.
Very truly yours,
ECHOCATH, INC.
By
--------------------------------
APPROVED AND ACCEPTED:
ALLIANCE PARTNERS
By
------------------------- ------------------------ -----------------------
Title Dr. Herbert Moskowitz Irwin M. Rosenthal
MARATHON INVESTMENTS L.L.C.
By _____________________________
Title
