<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 28, 1996
REGISTRATION NO. 333-
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------
Form S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
------------------------------------
INTERACT MEDICAL TECHNOLOGIES CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7373 13-3894450
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or Number)
organization)
</TABLE>
------------------------------------
654 MADISON AVENUE, SUITE 1606, NEW YORK, NEW YORK 10021 (212) 319-3500
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------------
BRUCE D. STURMAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
INTERACT MEDICAL TECHNOLOGIES CORPORATION
654 MADISON AVENUE, SUITE 1606
NEW YORK, NEW YORK 10021
(212) 319-3500
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------------
WITH COPIES TO:
<TABLE>
<S> <C>
CRAIG S. ANDREWS, ESQ. A. JOHN MURPHY, ESQ.
MICHAEL S. KAGNOFF, ESQ. BRONSON, BRONSON & MCKINNON LLP
BROBECK, PHLEGER & HARRISON LLP 505 MONTGOMERY STREET
550 WEST "C" STREET, SUITE 1300 SAN FRANCISCO, CA 94111
SAN DIEGO, CALIFORNIA 92101
</TABLE>
------------------------------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
------------------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: / /
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act of 1933, please
check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering: / / ______________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / / ______________
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box: /X/
CALCULATION OF REGISTRATION FEE
- - --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
- - --------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED (1) PER SHARE (2) OFFERING PRICE REGISTRATION FEE
- - ---------------------------------------------------------------------------------------------------
Common Stock, $0.01 par
value....................... 2,300,000 shares $10.00 $23,000,000 $7,932
</TABLE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
(1) Includes 300,000 shares of Common Stock that the Underwriters have the
option to purchase to cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the registration
fee.
------------------------------------
THE COMPANY HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE COMPANY SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(a)
MAY DETERMINE.
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<PAGE> 2
INTERACT MEDICAL TECHNOLOGIES CORPORATION
------------------------
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K SHOWING LOCATION
IN PROSPECTUS OF INFORMATION REQUIRED BY ITEMS OF FORM S-1
<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING IN
FORM S-1 REGISTRATION STATEMENT CAPTION IN PROSPECTUS
-------------------------------------------- --------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus...... Cover Page of Registration Statement;
Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus.................................. Inside Front and Outside Back Cover Pages
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges................ Prospectus Summary; Risk Factors
4. Use of Proceeds............................. Use of Proceeds
5. Determination of Offering Price............. Underwriting
6. Dilution.................................... Dilution
7. Selling Security Holders.................... Inapplicable
8. Plan of Distribution........................ Outside Front Cover Page; Underwriting
9. Description of Securities to be
Registered.................................. Outside Front Cover Page; Description of
Capital Stock
10. Interests of Named Experts and Counsel...... Legal Matters; Experts
11. Information with Respect to the
Registrant.................................. Outside Front Cover Page; Prospectus
Summary; The Company; Risk Factors; Dividend
Policy; Capitalization; Selected Financial
Data; Management's Discussion and Analysis
of Financial Condition and Results of
Operations; Business; Management; Certain
Transactions; Principal Stockholders;
Description of Capital Stock; Shares
Eligible for Future Sale; Financial
Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................. Inapplicable
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD
NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE
ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 28, 1996
PROSPECTUS
2,000,000 SHARES
[INTERACT MEDICAL TECHNOLOGIES CORPORATION LOGO]
COMMON STOCK
All 2,000,000 shares of Common Stock offered hereby are being issued and
sold by Interact Medical Technologies Corporation ("Interact" or the "Company").
Prior to this offering ("Offering"), there has been no public market for
the Common Stock of the Company. It is currently estimated that the initial
public offering price will be between $8.00 and $10.00 per share. See
"Underwriting" for a discussion of the factors considered in determining the
initial public offering price. Application has been made to have the Common
Stock approved for quotation on the Nasdaq National Market under the symbol
"IACT."
------------------------
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<S> <C> <C> <C>
- - -------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- - -------------------------------------------------------------------------------------------------
Per Share........................ $ $ $
- - -------------------------------------------------------------------------------------------------
Total(3)......................... $ $ $
- - -------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes the value of warrants to be issued to the representative of the
Underwriters. Does not include a 2% non-accountable expense allowance
payable to the representative of the Underwriters of which $50,000 has been
paid to date. See "Underwriting" for indemnification arrangements with the
several Underwriters.
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 300,000 additional shares of Common Stock solely to cover
over-allotments, if any. If all such shares are purchased, the total Price
to Public, Underwriting Discount and Proceeds to Company will be
$ , $ and $ , respectively. See "Underwriting."
------------------------
The shares of Common Stock are offered by the several Underwriters subject
to prior sale, receipt and acceptance by them and subject to the right of the
Underwriters to reject any order in whole or in part and certain other
conditions. It is expected that certificates for such shares will be available
for delivery on or about , 1996 at the office of Dakin Securities
Corporation in San Francisco, California.
------------------------
DAKIN SECURITIES CORPORATION
, 1996
<PAGE> 4
[INSIDE FRONT COVER]
The Company intends to distribute to its stockholders annual reports
containing financial statements audited by its independent certified public
accountants and will make available copies of quarterly financial reports for
the first three quarters of each fiscal year containing unaudited financial
information.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Financial Statements and Notes thereto appearing elsewhere
in this Prospectus. The Company was formed in April 1996, and in May 1996, it
acquired its assets and technologies in connection with a business combination.
All references herein to Interact Medical Technologies Corporation ("Interact"
or the "Company") also shall be deemed to be references to the Company and its
predecessors, Ixion, Inc. ("Ixion") and Medical Media Systems ("MMS"). See "The
Company."
THE COMPANY
Interact develops, markets and manufactures products designed to facilitate
the effective use of minimally invasive surgical ("MIS") procedures and enhance
clinical performance. The Company's initial product, Preview(TM), was launched
in June 1996. Preview provides the clinician with a detailed three-dimensional
model of the patient-specific anatomy manufactured by processing computed
tomography ("CT") or magnetic resonance ("MR") images on the Company's
proprietary software platform at its production facility. The Company delivers
its Preview models to the clinician embodied in user-friendly proprietary
viewing software that can be run on a Macintosh personal computer. The model and
the viewing software augment traditional two-dimensional medical imaging tools
and allow the clinician, without significant computer expertise, to manipulate
information, perform measurements and conduct pre-surgical planning for use
primarily in MIS procedures.
The Company is also currently field testing a pre-production prototype of
GastroSim(TM), an interactive virtual reality ("IVR") simulator for teaching and
training clinicians. GastroSim is designed to figuratively place the clinician
inside the upper and lower gastrointestinal tracts of a "virtual" patient and
allow the clinician to perform a number of simulated MIS procedures using
realistic medical instruments and devices.
The Company has a multi-faceted business relationship with Baxter
Healthcare Corporation ("Baxter"). A wholly-owned subsidiary of Baxter is a
principal stockholder of the Company and previously invested approximately $7.1
million in the development of the visualization technology upon which Preview is
based. In May 1996, the Company entered into a distribution agreement with
Baxter pursuant to which Baxter obtained an exclusive right to sell Preview for
use in connection with treating aortic and iliac aneurysms (except with regard
to sales to parties developing or manufacturing devices specifically designed
for endovascular treatment of aortic aneurysms for which Baxter's rights are
co-exclusive with the Company), including abdominal aortic aneurysms ("AAA").
Baxter has loans outstanding to the Company in the principal amount of $2.55
million of which $2.0 million together with certain accrued interest will be
converted into Common Stock upon the closing of this Offering (assuming such
closing takes place prior to September 1, 1996), and the remaining $550,000
together with certain accrued interest will be repaid in cash. After this
Offering, Baxter, together with a wholly-owned subsidiary will own approximately
19.7% of the outstanding Common Stock of the Company. See "Use of Proceeds" and
"Certain Transactions."
MIS procedures have revolutionized some areas of surgery, and the
advantages of MIS approaches over open surgical techniques (including reduced
trauma, complications, pain and suffering, convalescence time, procedure time
and ultimately lower overall medical costs), suggest that MIS procedures could
eventually be adopted in place of numerous other open surgical procedures. The
Company believes the growth in MIS procedures is being accelerated by today's
healthcare environment, in which more cost effective means for clinicians to
deliver services are aggressively being sought. Despite the benefits of
minimally invasive surgery, only select MIS procedures have attained widespread
adoption. In 1995, MIS procedures accounted for approximately 15% of the
surgical procedures performed in the United States. The Company believes that
its products will help address two of the major impediments to the widespread
adoption and performance of many additional MIS procedures. First, in performing
MIS procedures, parts of the physical anatomy that can be visualized and
manipulated during traditional surgeries are hidden from the eye and must be
handled remotely. Second, MIS procedures require proficiency in novel surgical
techniques potentially involving specialized MIS instruments and devices.
3
<PAGE> 6
Preview allows the clinician to visualize and plan surgical procedures by
using a three-dimensional model of the patient-specific anatomy. Although
Preview has been tested clinically to model most parts of the human anatomy,
initial marketing efforts have focused on the application of Preview to planning
surgical procedures to treat AAA. AAAs are lifethreatening aneurysms which form
in the abdominal aorta. The National Center for Health Care Statistics estimates
that approximately 1.5 million people in the United States have AAA, with
approximately 190,000 new patients diagnosed with AAA each year. The Company
believes that due to the drawbacks of open surgery, the recommended course of
treatment for AAA will ultimately be an MIS procedure. The Company believes that
Preview's ability to generate three-dimensional representations and present
thousands more pre-operative images than traditional imaging methods provides
clinicians with a valuable perspective for use in planning MIS procedures.
As an outgrowth of Preview, the Company is also developing DataFusion(TM),
a product designed to aid the clinician with visualization and navigation during
the performance of actual MIS procedures. DataFusion will use proprietary
software to track surgical instruments and overlay live images of a patient's
anatomy on the same three-dimensional model used in Preview. By helping the
clinician to compensate for the inability to directly visualize and manipulate
the operative area, the Company believes that Preview, (and DataFusion once
developed), will improve the results of MIS procedures and enable the
application of MIS technology to additional surgical procedures.
GastroSim is designed to create realistic clinical experiences for training
clinicians to conduct diagnostic tests and therapy on ulcers, polyps, cancers,
bile stone removals, bronchoscopies, endotracheal tube placements and ultrasound
echocardial procedures and in using sophisticated MIS instruments and devices.
Although the Company's initial market focus for its IVR simulator technology
will be on procedures typically performed in the areas of gastroenterology and
family practice medicine, the Company plans to apply its core IVR technology to
develop simulators designed to replicate MIS procedures utilized by clinicians
in a number of clinical specialties, including cardiology, cardiac surgery,
interventional radiology, urology, obstetrics/gynecology, neurosurgery and
various micro minimally invasive procedures such as functional endoscopic sinus
surgery. By allowing the clinician to replicate a multitude of complex surgical,
diagnostic and therapeutic procedures without the need for live patients,
cadavers or animals, the IVR simulators the Company intends to develop can be
anticipated to increase the number of physicians capable of performing advanced
MIS procedures, improve the general level of competency of clinicians performing
MIS procedures and help safely and expeditiously make MIS procedures more widely
available.
The Company has received 510(k) clearance from the United States Food and
Drug Administration ("FDA") for the use of Preview. This FDA clearance allows
the Company to use Preview to model many anatomical regions. The Company does
not believe that its GastroSim product will require FDA approval.
The Company's objective is to capitalize on advances in software and
medical imaging to become a leading provider of interactive products to promote
the effective use of MIS procedures. The Company's strategy is comprised of the
following key elements: (i) gain acceptance for use of Preview in planning AAA
procedures; (ii) bring GastroSim to production and establish it and other IVR
simulators as a standard for use in teaching, training and credentialing
clinicians to perform a variety of MIS procedures and other diagnostic and
therapeutic techniques; (iii) develop new products and new applications for
Preview and the Company's IVR simulator technology; and (iv) minimize upfront
investment costs to customers.
4
<PAGE> 7
THE OFFERING
Common Stock offered by the
Company.......................... 2,000,000 shares
Common Stock to be outstanding
after this Offering(1)(2)(3)(4).. 5,182,924 shares
Use of proceeds.................. For commercialization of products, research
and development, clinical testing,
repayment of approximately $2.6 million of
indebtedness, capital expenditures, working
capital and general corporate purposes. See
"Use of Proceeds."
Proposed Nasdaq National Market
symbol........................... IACT
- - ---------------
(1) Does not include (i) 1,000,000 shares of Common Stock reserved for issuance
pursuant to the Company's 1996 Stock Option/Stock Issuance Plan (of which
316,173 shares were subject to options outstanding at May 31, 1996), (ii)
200,000 shares reserved for issuance under the Company's 1996 Employee
Stock Purchase Plan, (iii) 58,529 shares of Common Stock reserved for
issuance upon exercise of outstanding non-qualified stock options, and (iv)
73,162 shares of Common Stock reserved for issuance upon exercise of
outstanding warrants. See "Capitalization," "Management--Benefit Plans,"
"Certain Transactions," "Description of Capital Stock--Warrants" and
"Shares Eligible for Future Sale."
(2) Includes 244,455 shares of Common Stock to be issued immediately following
the closing of this Offering to investors in Ixion's 1995 Bridge Financing
(the "Bridge Financing"). Such number of shares is calculated by dividing
the approximately $2,200,000 of Common Stock the investors in the Bridge
Financing are entitled to receive immediately following the closing of this
Offering pursuant to the terms of certain agreements between the Company
and such investors (the "Letter Agreements"), by the initial public
offering price for the sale of shares of Common Stock offered hereby
(assuming an initial public offering price of $9.00 per share (the midpoint
of the range set forth on the cover page of this Prospectus)).
(3) Includes 38,889 shares of Common Stock to be issued immediately following
the closing of this Offering to Baxter. Such number of shares is calculated
by dividing the $350,000 of Common Stock Baxter is entitled to receive
immediately following the closing of this Offering pursuant to the terms of
a certain agreement between the Company and Baxter (the "Baxter Letter"),
by the initial public offering price for the sale of shares of Common Stock
offered hereby (assuming an initial public offering price of $9.00 per
share (the midpoint of the range set forth on the cover page of this
Prospectus)).
(4) Includes 227,964 shares of Common Stock to be issued immediately following
the closing of this Offering to Baxter in the event that such closing
occurs prior to September 1, 1996. Such number of shares is calculated by
dividing the $2,000,000 principal amount of a promissory note issued by the
Company to Baxter on May 24, 1996 (the "$2,000,000 Note"), plus accrued
interest calculated at a rate of 200 basis points above the prime rate
(assuming that the closing of this Offering occurs on August 24, 1996), by
the initial public offering price (assuming an initial public offering
price of $9.00 per share (the midpoint of the range set forth on the cover
page of this Prospectus)).
------------------------
Unless otherwise indicated, all information in this Prospectus assumes (i)
no exercise of the Underwriters' over-allotment option, (ii) the issuance of
244,455 shares of Common Stock pursuant to the Letter Agreements, (iii) the
issuance of 38,889 shares of Common Stock pursuant to the Baxter Letter and (iv)
the conversion of the $2,000,000 Note into 227,964 shares of Common Stock.
5
<PAGE> 8
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following should be read in conjunction with the Financial Statements,
Management's Discussion and Analysis of Financial Condition and Results of
Operations, and Pro Forma Financial Information presented elsewhere in this
Prospectus.
Interact was formed in April 1996, and in May 1996, it acquired its assets
and technologies in connection with a business combination involving Ixion and
MMS. Inasmuch as former Ixion stockholders own the majority of Interact capital
stock after the business combination, Ixion is considered to be the acquiring
corporation for purposes of purchase accounting and the predecessor entity to
Interact for purposes of financial reporting. When Interact financial statements
are presented as of and for periods subsequent to the business combination, the
Interact financial statements for periods prior to the business combination will
be those of what was formerly Ixion.
INTERACT MEDICAL TECHNOLOGIES CORPORATION
As more fully described in the Pro Forma Condensed Financial Information
appearing elsewhere in this Prospectus, the Company's unaudited Pro Forma
Balance Sheet Data at March 31, 1996, gives effect to (i) the contribution of
MMS partnership interests to Interact and merger of Ixion with and into
Interact, (ii) the issuance of Common Stock in exchange for certain accrued
amounts payable, and (iii) receipt of $2.0 million cash pursuant to a
convertible note payable to Baxter, as if such transactions had occurred as of
March 31, 1996. The Company's unaudited Pro Forma Statements of Operations Data
for the year ended December 31, 1995 and for the three months ended March 31,
1996 include the results of operations of Ixion and MMS for the respective
periods presented and give effect to pro forma adjustments as if the
aforementioned transactions had occurred at the beginning of the respective
periods. These Pro Forma Condensed Financial Statements are not necessarily
indicative of future financial positions or results of operations of the
Company.
PRO FORMA BALANCE SHEET DATA AT MARCH 31, 1996
<TABLE>
<S> <C> <C> <C>
Cash................................ $2,191 Accrued payables.................... $ 634
Due to stockholders................. 108
Other current assets................ 10 Notes payable....................... 2,237
Convertible note payable............ 2,000
------
4,979
------
Property and equipment.............. 791 Stockholders' Equity:
Common Stock........................ 8,024
Intangible assets................... 3,703 Accumulated deficit................. (6,308)
------ ------
1,716
------
$6,695 $6,695
====== ======
</TABLE>
PRO FORMA STATEMENTS OF OPERATIONS DATA
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1995 MARCH 31, 1996
----------------- --------------
<S> <C> <C>
Revenues.................................................... $ 266 $ --
------- -------
Expenses:
Research and development.................................. 3,613 764
Selling, general and administrative....................... 1,518 517
------- -------
5,131 1,281
------- -------
Loss before interest........................................ (4,865) (1,281)
Interest expense............................................ 324 218
------- -------
Net loss.................................................... $(5,189) $ (1,499)
======= =======
Pro forma net loss per share................................ $ (1.73) $ (0.48)
======= =======
</TABLE>
6
<PAGE> 9
IXION, INC.
STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
----------------------------- -----------------
1993 1994 1995 1995 1996
------ ------ ------- ------ ------
<S> <C> <C> <C> <C> <C>
Revenues................................... $1,359 $1,237 $ 266 $ 266 $ --
------ ------ ------- ------ ------
Expenses:
Research and development................. 951 1,189 1,332 358 284
Selling, general and administrative...... 416 588 1,124 306 456
------ ------ ------- ------ ------
1,367 1,777 2,456 664 740
------ ------ ------- ------ ------
Loss from operations....................... (8) (540) (2,190) (398) (740)
Interest expense........................... -- 9 132 11 169
------ ------ ------- ------ ------
Net loss................................... $ (8) $ (549) $(2,322) $ (409) $ (909)
====== ====== ======= ====== ======
Net loss per share......................... $(0.01) $(0.21) $ (0.81) $(0.15) $(0.31)
====== ====== ======= ====== ======
</TABLE>
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- MARCH 31,
1993 1994 1995 1996
---- ---- ------- ---------
<S> <C> <C> <C> <C>
Total assets.......................................... $635 $489 $ 238 $ 662
Notes payable and accrued interest.................... -- 192 1,014 1,837
Accumulated deficit................................... (61) (610) (2,932) (3,841)
Total stockholders' equity (deficit).................. 558 36 (1,762) (2,147)
</TABLE>
MEDICAL MEDIA SYSTEMS
(a development stage company)
STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
THREE MONTHS CUMULATIVE
ENDED AMOUNTS FROM
YEARS ENDED DECEMBER 31, MARCH 31, DATE OF
------------------------------- --------------- INCEPTION TO
1993 1994 1995 1995 1996 MARCH 31, 1996
------- ------- ------- ----- ----- --------------
<S> <C> <C> <C> <C> <C> <C>
Revenues................... $ -- $ -- $ -- $ -- $ -- $ --
------- ------- ------- ----- ----- --------------
Expenses:
Research and
development........... 2,346 1,693 1,540 360 295 6,215
General and
administrative........ 170 168 394 56 61 798
------- ------- ------- ----- ----- --------------
2,516 1,861 1,934 416 356 7,013
Loss from operations....... (2,516) (1,861) (1,934) (416) (356) (7,013)
Interest income............ 13 11 13 4 2 40
------- ------- ------- ----- ----- --------------
Net loss................... $(2,503) $(1,850) $(1,921) $(412) $(354) $ (6,973)
======= ======= ======= ===== ===== ===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- MARCH 31,
1993 1994 1995 1996
------ ------ ------ ---------
<S> <C> <C> <C> <C>
Total assets........................................ $1,507 $1,569 $1,059 $ 748
Note payable........................................ -- -- 400 400
Partners' equity(1)................................. 1,340 1,440 429 75
</TABLE>
- - ---------------
(1) Partners' equity includes accumulated deficit of approximately $2.8 million,
$4.7 million, $6.6 million and $7.0 million at December 31, 1993, 1994 and
1995 and March 31, 1996, respectively.
7
<PAGE> 10
THE COMPANY
COMPANY BACKGROUND
Interact develops, markets and manufactures products designed to facilitate
the effective use of MIS procedures and enhance clinical performance. The
Company's initial product, Preview, was launched in June 1996. Preview provides
the clinician with a detailed three-dimensional model of the patient-specific
anatomy manufactured by processing CT or MR images on the Company's proprietary
software platform at its production facility. The Company delivers its Preview
models to the clinician embodied in user-friendly proprietary viewing software
that can be run on a Macintosh personal computer. The model and the viewing
software augment traditional two-dimensional medical imaging tools and allow the
clinician, without significant computer expertise, to manipulate information,
perform measurements and conduct presurgical planning for use primarily in MIS
procedures.
The Company is also currently field testing a pre-production prototype of
GastroSim, an IVR simulator for teaching and training clinicians. GastroSim is
designed to figuratively place the clinician inside the upper and lower
gastrointestinal tracts of a "virtual" patient and allow the clinician to
perform a number of simulated MIS procedures using realistic medical instruments
and devices.
The Company was incorporated in April 1996. The Company's principal
executive offices are located at 654 Madison Avenue, Suite 1606, New York, New
York 10021, and its telephone number is (212) 319-3500.
COMPANY HISTORY
Medical Media Systems
MMS, a New Hampshire general partnership, was founded to incorporate
advances in scientific visualization and computer software into products that
would help improve the practice of surgery. A wholly-owned subsidiary of Baxter
has provided MMS with approximately $7.1 million in equity financing. MMS
developed Preview and performed development work on DataFusion.
Ixion, Inc.
Ixion, a Delaware corporation, was founded to design and develop procedural
simulators for use in training clinicians to conduct a variety of medical
procedures. Ixion's development expenses were funded, in part, by approximately
$4.5 million of contract revenues received from Ethicon Endo-Surgery
("Ethicon"), its sole customer from 1991 through 1995, in connection with the
development of a laparoscopic skills simulator, and by approximately $2.0
million received from various investors in the Bridge Financing. Ixion performed
development work on GastroSim and developed additional IVR simulation
technology.
The Merger
The Company was incorporated in Delaware in April 1996 under the name
Medical Media Systems, Inc., and all of the partnership interests in MMS were
contributed to the Company in May 1996. Later in May 1996, Ixion was merged with
and into the Company and the Company was renamed Interact Medical Technologies
Corporation. The Company believes that the merger has brought together
outstanding management teams with significant marketing and manufacturing
expertise and development teams with complimentary skills in the areas of
software development, three-dimensional modeling and virtual reality
visualization techniques.
8
<PAGE> 11
RISK FACTORS
The following risk factors should be considered carefully in addition to
the other information contained in this Prospectus before purchasing the Common
Stock offered hereby. This Prospectus contains forward-looking statements which
involve risks and uncertainties. The Company's actual results may differ
significantly from the results discussed in the forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
those discussed below:
Early Stage of Development. The Company is at an early stage of
development. Only one of the Company's products is commercially available, and
limited revenues have been generated from sales since product launch in June
1996. To date the Company's resources have been dedicated to the research and
development of products based upon its expertise in digital medical imaging and
interactive software programming. The Company does not believe that certain of
its proposed products, including GastroSim and DataFusion will be commercially
viable absent significant further development and certain technological
advances, and there can be no assurance that development will be completed or
advances will be achieved. Product development involves a high degree of risk
and there can be no assurance the Company will ever finally develop, transfer to
manufacturing, or successfully commercialize, any additional products.
History of Operating Losses; Uncertainty of Profitability. The Company is
at an early stage of development, has generated little revenue to date, and has
not yet achieved profitability. Operating losses for Ixion in the years ended
December 31, 1994 and December 31, 1995 were approximately $549,000 and
$2,322,000, respectively. Operating losses for MMS in the years ended December
31, 1994 and December 31, 1995 were approximately $1,850,000 and $1,921,000,
respectively. The Company expects to continue to incur substantial losses over
at least the next several years as the Company's development, testing, marketing
and manufacturing scale-up efforts expand. To achieve profitability and
increased sales levels, the Company must, among other things, establish and
increase market acceptance of its products, respond effectively to competitive
pressures, offer high quality customer service and support, introduce on a
timely basis products incorporating its technologies and advanced versions and
enhancements to its products, and successfully market and support advanced
versions and enhancements. There can be no assurance that the Company will
complete the development of any product other than Preview, that products
developed will achieve market acceptance, or that the Company will ever produce
significant levels of revenue or achieve sustainable profitability. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Independent Certified Public Accountants' Opinion--Going Concern. Ixion's
financial statements for the years ended December 31, 1993, 1994 and 1995 were
audited by the Company's independent certified public accountants, whose report
includes an explanatory paragraph stating that the financial statements have
been prepared assuming the Company will continue as a going concern and that the
Company has incurred significant operating losses and has stockholders' and
working capital deficiencies that raise substantial doubt about its ability to
continue as a going concern. See "Financial Statements."
Developing Markets; Uncertain Market Acceptance. The markets for Preview
and the Company's products under development have only recently begun to
develop, are rapidly evolving and are either already characterized by, or
expected to be characterized by, an increasing number of market entrants who
will introduce or develop products competitive with the Company's products. As
is typical in the case of new and rapidly evolving industries, demand and market
acceptance for Preview and future products, if any, is subject to a high level
of uncertainty. The success of Preview and the Company's products under
development will depend, in large part, on the continued adoption, and the rate
of adoption, of MIS procedures by surgeons. The successful commercialization of
Preview (and DataFusion, if ever finalized), will depend on many other
variables, including their acceptance as reliable, accurate, cost-effective
tools for improving surgical performance and reducing time spent conducting
procedures. The successful commercialization of the Company's IVR simulators, if
ever finalized, also will depend on further variables, including market
acceptance of simulators as an alternative or supplement to traditional teaching
and training methods, such as practicing procedures on animals and cadavers and
observing and assisting trained physicians in performing procedures on live
patients. The markets in which the Company's products compete are young and have
few proven products. There can be no assurance that the markets for Preview and
the Company's products under development will develop, that Preview or the
Company's products under development will be adopted or that
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surgeons will continue to adopt MIS procedures at a rapid pace, if at all. If
the markets for Preview or the Company's products under development fail to
develop, develop more slowly than expected or become saturated with competitors,
or if the Company's products do not achieve market acceptance, the Company's
business, results of operations and financial condition would be materially
adversely affected. See "--Technological Change," "--Competition" and
"Business--Industry Background."
Uncertainty of Pricing. The Company's current sole product, Preview, was
launched in June 1996. The Company has completed only a limited number of sales
of this product. As a result, there can be no assurance of the price at which
the Company will be able to sell or lease Preview or any of its future products.
In addition, the Company anticipates that the price of Preview and its future
products will vary depending on a variety of factors, including competitive
factors at the time future products, if any, are launched, the level of
acceptance in the marketplace, the number of new MIS procedures developed, and
the rate of adoption of new and existing MIS procedures. The Company may
discount asking prices to facilitate early market penetration or in response to
market conditions, which may reduce the Company's gross profit margins. Any
reduction in the price of Preview or any of the Company's future products or in
gross profit margins could have a material adverse effect on the Company's
business, results of operations and financial condition. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Limited Sales, Marketing and Distribution Capability; Dependence on
Baxter. The Company has limited experience in sales, marketing and
distribution. To market Preview or any of its future products directly, the
Company must develop a marketing and sales force with technical expertise and
with supporting distribution capability. Alternatively, the Company may obtain
the assistance of another company with a large distribution system and sales
force. There can be no assurance that the Company will be able to establish
sales and distribution capabilities or enter into profitable arrangements with
third parties with respect to marketing or distribution of its products. To the
extent the Company enters into co-promotion or other licensing arrangements, any
revenues received by the Company will be dependent on the efforts of third
parties and there can be no assurance that third party efforts will be
successful.
The Company is dependent on its relationship with Baxter for a variety of
reasons, and the termination of this relationship could have a material adverse
effect on the Company. Pursuant to a distribution agreement between Baxter and
the Company, Baxter has an exclusive right to sell Preview models prepared for
use in connection with treating aortic and iliac aneurysms (except with regard
to sales to parties developing or manufacturing devices specifically designed
for endovascular treatment of aortic aneurysms for which Baxter's rights are
co-exclusive with the Company's), and is responsible for sales activities
relating to these products. Baxter is entitled to receive between 23% and 30% of
all revenue generated from its Preview sales in this field. Sales of Preview for
use in treating aortic and iliac aneurysms and the Company's financial results
will depend in significant part on the extent to which Baxter commits adequate
resources to its product launch and to the subsequent distribution of Preview.
Baxter develops, manufactures and markets a wide variety of medical devices,
some of which may compete indirectly with Preview. There can be no assurance
that Baxter will commit significant resources to market Preview for use in
treating aortic and iliac aneurysms or that its marketing activities will be
effective. See "Business--Marketing, Sales and Distribution."
Limited Manufacturing Experience; Risk of Manufacturing Scale-Up. In order
to achieve significant revenue, the Company will have to produce or arrange for
third parties to produce its products on a commercial scale. It is the Company's
current intention to produce all Preview models at the Company's FDA registered
production facility. There can be no assurance that the Company will be able to
manufacture or cause third parties to manufacture its products in commercial
scale quantities at commercially viable costs. The Company may encounter
unexpected delays or costs in scaling-up its manufacturing operations or in
hiring and training additional personnel to manufacture its products. The
failure to scale-up manufacturing successfully in a timely or cost-effective
manner, future production problems or interruptions in supply could have a
material adverse effect on the Company's business, results of operations and
financial condition. The Company will be required to adhere to applicable
regulatory requirements, including FDA-mandated current Good Manufacturing
Practices ("GMPs") regulations in the manufacture of certain of its products.
Any failure to meet such requirements could delay or prohibit the manufacturing
of the Company's products, which could have a material adverse effect on the
Company's business, results of operations and financial
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condition. Pursuant to an agreement between Baxter and the Company, Baxter is
entitled to obtain the right to produce or to cause third parties to produce its
requirements of Preview models in the event that the Company is unable to supply
its requirements in a timely manner. If the Company were to surrender any rights
with respect to producing Preview models to Baxter, it could have a material
adverse effect on the Company's business, results of operations and financial
condition because the Company would receive only a 10% royalty on revenues
generated from Preview sales by Baxter. See "--Reliance on Single or Limited
Sources of Supply," "--Government Regulation; Uncertainty of Obtaining
Regulatory Approval" and "Business--Manufacturing."
Risk of Failure to Port Preview to Windows. The Company's success depends,
in significant part, on its ability to port its Preview models and proprietary
viewing software from the Macintosh operating system to a Windows platform,
since the installed base of Windows-based personal computers amongst the
Company's potential customers base is large and growing rapidly. The Company
believes that the failure to complete this port in a timely manner could weaken
market acceptance of Preview and ultimately have a material adverse effect on
the Company's business, results of operations and financial condition. There can
be no assurance that the Company will be able to complete this port in a timely
manner, if at all.
Technological Change. The Company's success will depend on its ability to
continually anticipate, and adapt its new and existing products to emerging
technologies and capabilities, such as improved graphic imaging and diminished
interactive lag times. The life cycles of the Company's products are difficult
to estimate because the markets that the Company targets are in the early stages
of development and because of the rapid pace of development of computer
technology. If Preview or the Company's future products, if any, become outdated
or are not accepted by the market, the Company's revenues, results of operations
and financial condition could be materially adversely affected. The markets in
which Preview and the Company's products under development will compete are
characterized by rapid technological innovation. There can be no assurance that
the Company's competitors and potential competitors will not succeed in
developing and marketing technologies and products that are more effective or
more cost effective than those developed and marketed by the Company or that
would render the Company's technology and products obsolete or noncompetitive.
The applications for which Preview and the Company's products under development
are designed can also be addressed by other products, methods or techniques,
many of which are widely accepted in the medical community. There can be no
assurance that Preview or the Company's products under development will be able
to replace such established products, methods or techniques. Additionally, new
products could be developed that replace or reduce the importance of the
Company's products. See "--Developing Markets; Uncertain Market Acceptance."
Competition. Competition in the markets in which Preview and the Company's
products under development will compete is expected to be intense. A number of
companies currently compete or intend to compete directly and indirectly with
the Company's existing product and products under development. Many of the
Company's competitors and potential competitors have substantially greater name
recognition and capital resources than the Company and also have greater
resources and expertise in the areas of research and development. See
"--Technological Change," "--Developing Markets; Uncertain Market Acceptance"
and "Business--Competition."
Patents and Proprietary Technology. The Company's success is dependent, in
part, upon its extensive proprietary technology. The Company relies on a
combination of patent, trade secret, copyright and trademark protection and
nondisclosure agreements to protect its proprietary rights. As of May 31, 1996,
the Company has one issued United States patent, U.S. Patent No. 4,907,973 for
an expert system simulator for modeling realistic internal environments and
performance, and has filed applications for certain additional United States and
foreign patents primarily related to medical imaging systems and methodology.
The Company intends to file additional patent applications in the future. There
can be no assurance that the Company will be issued any patents or that if any
patents are issued they will provide the Company with significant protection or
will not be challenged. Even if issued patents are enforceable, the Company
anticipates that any attempt to enforce its patents would be time consuming and
costly. Moreover, the laws of some foreign countries do not protect the
Company's proprietary rights in its products to the same extent as do the laws
of the United States.
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The Company's patent positions are uncertain and involve complex legal and
factual issues. Additionally, the coverage originally claimed in a patent
application can be significantly reduced before the patent application is
allowed and a patent is created. As a consequence, there can be no assurance
that any of the Company's patent applications will result in the issuance of
patents or, if any patents issue, that they will provide significant proprietary
protection or will not be circumvented or invalidated. Because patent
applications in the United States are maintained in secrecy until patents issue
and publication of discoveries in scientific or patent literature often lag
behind actual discoveries, the Company cannot be certain that it was the first
inventor of inventions covered by its pending patent applications or that it was
the first to file patent applications for such inventions. Moreover, the Company
may have to participate in interference proceedings declared by the United
States Patent and Trademark Office ("PTO") to determine priority of invention
which could result in substantial cost to the Company, even if the eventual
outcome is favorable to the Company. There can be no assurance that the
Company's patents if issued would be held valid by a court of competent
jurisdiction. An adverse outcome could subject the Company to significant
liabilities to third parties, require disputed rights to be licensed from or to
third parties or require the Company to cease using the technology in dispute.
The Company has not been advised nor is it aware of any infringement of the
proprietary rights of others by the Company's existing product. With respect to
the Company's products under development, the Company has not been advised nor
is it aware of any proprietary rights of others which would prevent the Company
from completing and commercializing such products. There can be no assurance
that third parties will not assert infringement claims against the Company in
the future or that any such assertions will not result in costly litigation or
require the Company to obtain a license to intellectual property rights of such
parties. There can be no assurance that any such licenses would be available on
terms acceptable to the Company, if at all. Furthermore, parties making such
claims may be able to obtain injunctive or other equitable relief that could
effectively block the Company's ability to further develop or commercialize its
products in the United States and abroad and could result in the award of
substantial damages. Defense of any lawsuit or failure to obtain any such
license could have a material adverse effect on the Company. Finally,
litigation, regardless of outcome, could result in substantial cost to and a
diversion of efforts by the Company.
The Company may require additional technology in the development of its
products to which the Company does not currently have rights. If the Company
determines that this additional technology is relevant to the development of its
products and further determines that a license to this additional technology is
needed, there can be no assurance that the Company can obtain a license from the
relevant party or parties on commercially reasonable terms, if at all. There can
be no assurance that the Company can obtain any license to any technology that
the Company determines it needs, on reasonable terms, if at all, or that the
Company could develop or otherwise obtain alternate technology. The failure of
the Company to obtain licenses, if needed, could have a material adverse effect
on the Company.
As part of its confidentiality procedures, the Company generally enters
into nondisclosure agreements with its employees and suppliers, and limits
access to and distribution of its proprietary information. Despite these
precautions, it may be possible for a third party to copy or otherwise obtain
and use the Company's technology without authorization. In addition, competitors
may be able to engineer around the Company's patents and trade secrets, or
reverse-engineer around its trade secrets. Accordingly, there can be no
assurance that the Company will be successful in protecting its proprietary
technology or that the Company's proprietary rights will preclude competitors
from developing products or technology equivalent or superior to that of the
Company. See "Business--Patents and Proprietary Rights."
Government Regulation; Uncertainty of Obtaining Regulatory
Approval. Preview is and DataFusion, when developed, will be subject to
government regulation in the United States and other countries. In the United
States, the Federal Food, Drug, and Cosmetic Act, as amended ("FDC Act"), and
other statutes and regulations govern the testing, manufacture, labeling,
storage, record keeping, distribution, sale, marketing, advertising and
promotion of such medical devices. Failure to comply with applicable
requirements could result in fines, recall or seizure of products, total or
partial suspension of production, withdrawal of existing product approvals or
clearances, refusal to approve or clear new applications or notices and criminal
prosecution.
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Prior to commercial distribution in the United States, most medical devices
must be cleared or approved by the FDA. The regulatory process is lengthy
(potentially taking up to several years), expensive and uncertain. Under the FDC
Act, medical devices are classified into one of three classes on the basis of
the controls necessary to reasonably ensure their safety and effectiveness.
Class I devices are those whose safety and effectiveness can reasonably be
ensured through general controls, such as labeling, premarket notification and
adherence to FDA-mandated current GMPs. Class II devices are those whose safety
and effectiveness can reasonably be ensured through the use of "special
controls," such as performance standards, post-market surveillance, patient
registries and FDA guidelines. Class III devices are devices that must receive
premarket approval ("PMA") from the FDA to ensure their safety and
effectiveness. They are generally life-sustaining, life-supporting, or
implantable devices, and also include most devices that were not on the market
before May 18, 1976 ("new devices") and for which the FDA has not made a finding
of substantial equivalence based upon a 510(k).
Before a new device can be introduced into the market, the manufacturer
generally must obtain FDA clearance of a 510(k) or approval of a PMA
application. Following submission of a 510(k) or PMA application, the
manufacturer may not market the new device until an order is issued by the FDA
granting clearance or approval. While the Company has obtained FDA clearance
pursuant to a 510(k) to distribute Preview models of many anatomical regions,
even after FDA clearance the Company's application for clearance is subject to
continual review, and the later discovery of previously unknown problems may
result in restrictions on Preview's marketing or withdrawal of the product from
market. Withdrawal of the Company's 510(k) clearance with respect to Preview
could have a material adverse effect on the Company's business, results of
operations and financial condition.
Modification or enhancement of a product that has been cleared through the
510(k) process requires clearance of a new 510(k) if the modification or
enhancement could significantly affect the safety or effectiveness of the
original device. Since 510(k) clearance was obtained for Preview, the Company
has made, and anticipates the need to make additional improvements in the device
and its labeling. The Company has not sought 510(k) clearance for any of these
improvements in the device and its labeling, and currently, on the basis of the
Company's conclusion that none of the improvements or labeling changes could
significantly affect the safety or effectiveness of the original product, does
not intend to seek such clearance. Under the FDA's regulatory scheme, the
decision whether to seek 510(k) clearance for a modified device is left first to
the manufacturer. There can be no assurance, however, that the FDA would agree
with the Company's conclusion, that the FDA would not require the Company to
cease marketing and obtain 510(k) clearance for Preview (as improved), or that
such clearance, if required, would be obtained.
The Company believes that it will be necessary to file a PMA application
with respect to DataFusion. The PMA process is significantly more complex,
expensive and time consuming than the 510(k) process. The PMA process requires
the performance of at least two independent, statistically significant clinical
trials that must demonstrate the safety and effectiveness of the device in order
to obtain FDA approval of the PMA application. The PMA process typically
requires several years, and may never result in approval.
The Company does not believe that its IVR simulators would be subject to
FDA review or approval or any other governmental reviews. However, in the event
the FDA or any foreign regulatory body determined to regulate such products, no
assurance can be given that compliance with such regulatory process will be
achieved or that necessary clearances will be obtained in a timely manner, if at
all.
The FDC Act requires that medical devices be manufactured in accordance
with the current GMPs. These regulations require, among other things that (i)
the manufacturing process be regulated and controlled by the use of written
procedures and (ii) the ability to produce devices which meet the manufacturer's
specifications be validated by extensive and detailed testing of every aspect of
the process. They also require investigation of any deficiencies in the
manufacturing process or in the products produced and detailed record keeping.
Manufacturing facilities are therefore subject to FDA inspection on a periodic
basis to monitor compliance with current GMPs. If violations of the applicable
regulations are noted during FDA inspections of the Company's manufacturing
facilities or the manufacturing facilities of its contract manufacturers, if
any, there could be a material adverse effect on the continued marketing of the
Company's products.
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The FDA regulates computer software that performs the function of a
regulated device or that is intimately associated with a given device, such as
control software for imaging or other diagnostic devices. The FDA is in the
process of reevaluating its regulation of such software, and if the FDA
undertakes increased or more rigorous regulation of such software (which the
Company cannot predict), Preview and DataFusion may become subject to further
regulatory processes and clearance requirements. No assurance can be given that
compliance with more extensive regulatory processes will be achieved or that the
necessary clearances for such products will be obtained by the Company on a
timely basis, if at all. The Company may, as a result, be required to expend
additional time, resources and effort in the areas of software design,
production and quality control to ensure full technical compliance.
Laws and regulations regarding the manufacture, sale and use of medical
devices are subject to change and depend heavily on administrative
interpretations. There can be no assurance that future changes in the
regulations or interpretations made by the FDA or other regulatory bodies, with
possible retroactive effect, will not adversely affect the Company.
The Company plans to sell its products in several foreign markets.
Requirements pertaining to such products vary widely from country to country,
ranging from simple product registrations to detailed submissions such as those
required by the FDA. The Company believes the extent and complexity of
regulation of medical devices is increasing worldwide. The Company anticipates
this trend will continue and that the cost and time required to obtain approval
to market in any given country will greatly increase, with no assurance that
such approval will be obtained. The ability to export into other countries may
require compliance with ISO 9000 and CE Mark certifications, which are analogous
to and in some instances more rigorous than compliance with the FDA's GMPs. The
Company has not obtained any regulatory approvals to market any of its products
outside of the United States, no regulatory clearances or certifications have
yet been applied for in any country other than the United States and there is no
assurance that any such clearance or certification, if applied for, would be
issued.
The Company, its existing product and future products, if any, may be
subject to a variety of laws and regulations in those states and countries where
such products are or will be marketed. These restrictions may hinder the
Company's ability to market such products in those states or countries. See
"Business--Government Regulation."
Future Capital Needs; Uncertainty of Additional Funding. The development
and commercialization of the Company's product and products under development
will require substantial funds. The Company's future capital requirements will
depend on many factors, including the time and costs involved in obtaining any
required regulatory approvals, competing technological and market developments,
the cost of manufacturing scale-up and effective commercialization activities
and arrangements, continued progress in its development programs, and the
magnitude of these programs, and the costs involved in preparing, filing,
prosecuting, maintaining and enforcing patent claims. To date, the Company has
not received significant revenues from product sales. The Company anticipates
that its existing available cash, combined with the proceeds of this Offering,
and operating revenues and interest income from cash investments will be
adequate to fund the Company for at least 18 months following this Offering. The
Company intends to seek additional funding through public or private financings.
There can be no assurance that additional financing will be available on
acceptable terms, or at all. If additional funds are raised by issuing equity
securities, further dilution to then existing stockholders may result. If
adequate funds are not available, the Company may be required to delay, scale
back or eliminate one or more of its development programs or obtain funds
through arrangements with collaborative partners or others that may require the
Company to relinquish certain rights to certain of its technologies or products
that the Company would not otherwise relinquish. See "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
Litigation. From time to time the Company may be exposed to litigation
arising out of its products and operations. As of the date of this Prospectus,
the Company is not engaged in any legal proceedings that are expected,
individually or in the aggregate to have a material adverse effect on the
Company, except that an assignee of a law firm at which the Company's Secretary
formerly practiced law has initiated a lawsuit in a Washington state court for
approximately $200,000 of legal fees which are allegedly past due. The Company
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<PAGE> 17
denies owing these fees. Nonetheless, no assurance can be given that this
lawsuit will not be decided against the Company.
In April 1995, Ethicon indicated in certain correspondence that it believes
it has rights beyond its exclusive license to a laparascopic skills simulator,
delivered by Ixion pursuant to a 1992 research, option and license agreement, to
source code, software, hardware, firmware and related intellectual property
incorporated in such simulator. The Company believes that there is no basis to
support this position and believes that it should prevail if litigation were
commenced. However, litigation is subject to inherent uncertainties, especially
in cases where complex technical issues are decided by a jury. Accordingly, no
assurance can be given that, if a lawsuit is commenced, it would not be decided
against the Company. Such an adverse determination could have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Business--Legal Proceedings" and "Business--Ethicon License Agreement."
Dependence on and Need to Attract Key Personnel. The success of the
Company is dependent, in part, on its ability to attract, retain and motivate
highly qualified personnel. Competition for such personnel is intense and the
inability to attract and retain additional key employees or the loss of one or
more current key employees could adversely affect the Company. There can be no
assurance that the Company will be successful in hiring or retaining requisite
personnel. Several of the Company's executive officers, including the Company's
Chief Executive Officer, have entered into employment arrangements with the
Company. See "Management--Employment Agreements" and "Certain Transactions."
Management of Changing Business; Ability to Manage Growth. As a result of
the business combination involving Ixion and MMS in connection with which the
Company obtained its assets and technologies, the Company has recently
experienced a period of significant growth. The Company expects to continue to
experience significant growth as its products are commercialized and revenue
from product sales is obtained. Such growth has placed and is expected to
continue to place a significant strain on the Company's management, information
systems and operations. As the Company grows, recruiting and retaining
additional qualified personnel to supervise and manage the Company's operations
will be important to the Company's success. The Company's potential inability to
manage its changing business effectively and to attract and retain additional
qualified management, manufacturing, engineering and development personnel could
have a material adverse effect on the Company's business, results of operations
and financial condition.
Reliance on Single or Limited Sources of Supply. The Company anticipates
that certain key components of GastroSim and DataFusion will be obtained from
single or limited sources, will be available only in limited quantities and will
require substantial production lead times. The Company's reliance on outside
vendors generally, and a single qualified source or a limited group of
suppliers, in particular, involves several risks, including a potential
inability to obtain an adequate supply of required components and reduced
control over quality, pricing and timing of delivery of components. In the past
the Company has experienced delays in the delivery of components for GastroSim
prototypes. Because the manufacture of certain of these components is
specialized and requires long lead times, there can be no assurance that delays
or shortages caused by vendors will not reoccur. The Company anticipates that a
limited number of components of the Company's products will be manufactured to
the Company's specifications by third-party manufacturers. There can be no
assurance that custom-made components from alternative third-party manufacturers
would be available on terms satisfactory to the Company, if at all. If the
Company were to change manufacturers of these components, it could experience an
interruption in supply, which could have a material adverse effect on the
Company's business, results of operations and financial condition. In addition,
the purchase of certain components by the Company is based on the Company's
internal forecasts of future product sales and there can be no assurance that
the Company's internal forecasts will be accurate or that purchases based on
forecasting will be adequate to meet the Company's requirements. See
"Business--Manufacturing."
Uncertainty of Third-Party Reimbursement and Healthcare Reform
Policies. In both domestic and foreign markets, sales of the Company's existing
product and future products, if any, will depend in part on the availability of
reimbursement by third-party payors such as government health administration
authorities, private health insurers and other organizations. Third-party payors
are increasingly challenging the price and cost-effectiveness of medical
products and services. Significant uncertainty exists as to the reimbursement
status of new healthcare products. There can be no assurance that the Company's
proposed products will be
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considered cost-effective or that adequate third-party reimbursement will be
available to enable the Company to maintain price levels sufficient to realize
an appropriate return on its investment in product development. There can be no
assurance that reimbursement levels, once established, will not be decreased and
that any such decrease will not reduce the demand for, or the price of certain
of the Company's products. Healthcare reform measures adopted by United States
federal or state governments or by foreign governments could affect the price of
medical devices or services or the amount of reimbursement available, and
consequently, could have a material adverse effect on the Company's business,
results of operations and financial condition.
Product Liability; Availability of Insurance. The design, development and
manufacture of the Company's existing product and future products, if any,
involve an inherent risk of product liability claims and associated adverse
publicity. Although the Company currently maintains general liability insurance,
there can be no assurance that the coverage limits of the Company's insurance
policies will be adequate. There can also be no assurance that the Company will
be able to obtain or maintain insurance for any of its commercial products. Such
insurance is expensive, difficult to obtain and may not be available in the
future on acceptable terms or at all. A successful claim brought against the
Company in excess of the Company's insurance coverage could have a material
adverse effect on the Company's business, results of operations and financial
condition.
No Prior Public Market; Possible Volatility of Stock Price; No
Dividends. Prior to this Offering, there has been no public market for the
Company's Common Stock and there can be no assurance that an active trading
market will develop or be sustained after this Offering. The initial public
offering price for the Common Stock will be determined by negotiations between
the Company and Dakin Securities Corporation (the "Representative"). See
"Underwriting." There can be no assurance that an active public market will
develop or be sustained after this Offering or that the market price of the
Common Stock will not decline below the initial public offering price. Factors
such as the announcements of technological innovations or new products by the
Company, its competitors and other third parties, as well as variations in the
Company's results of operations, market conditions, analysts' estimates and the
stock market may cause the market price of the Company's Common Stock to
fluctuate significantly. Also, future sales of shares by existing stockholders
pursuant to Rule 144 of the Securities Act of 1933, as amended (the "Securities
Act"), or through the exercise of outstanding registration rights, could have an
adverse effect on the price of the Company's Common Stock. The Company currently
intends to retain any future earnings for use in its business and does not
anticipate paying any cash dividends in the future. See "Description of Capital
Stock--Registration Rights," "Dividend Policy" and "Shares Eligible for Future
Sale."
Shares Eligible for Future Sale; Registration Rights. Sales of a
substantial number of shares of the Company's Common Stock in the public market
following this Offering could adversely affect the market price of the Common
Stock. Upon completion of this Offering, the Company will have outstanding
5,182,924 shares of Common Stock (without taking into account shares of Common
Stock issuable upon exercise of outstanding options and warrants). As of May 31,
1996, 316,173 shares of Common Stock are subject to outstanding options under
the Company's 1996 Stock Option Plan, 58,529 shares of Common Stock are subject
to outstanding non-qualified stock options, 73,162 shares of Common Stock are
subject to outstanding warrants, 683,827 additional shares are reserved for
issuance under the Company's 1996 Stock Option Plan and 200,000 shares of Common
Stock are reserved for issuance under the Company's 1996 Employee Stock Purchase
Plan. See "Management--Benefit Plans." The 2,000,000 shares of Common Stock sold
in this Offering will be freely tradeable without restrictions under the
Securities Act, except for any such shares held by an "affiliate" of the
Company, which will be subject to the "control securities" resale limitations of
Rule 144 under the Securities Act. The remaining 3,182,924 shares of Common
Stock were issued by the Company in private transactions in reliance upon one or
more exemptions under the Securities Act, are "restricted securities" as that
term is defined in Rule 144 promulgated under the Securities Act and may be sold
in compliance with such Rule, pursuant to registration under the Securities Act
or pursuant to an exemption therefrom. Of the outstanding shares, 3,182,924
shares are tradeable, subject to the limitations set forth in Rule 144 and
subject to the lock-up period described below. Stockholders owning an aggregate
of approximately 3,153,903 shares of Common Stock, representing approximately
99% of the total shares outstanding (and 273,774 shares issuable upon exercise
of outstanding warrants and options), including shares held by all officers and
directors and certain other stockholders of the Company, have agreed not to
directly or
16
<PAGE> 19
indirectly offer or sell, contract to sell, grant any option to purchase, make
any short sale, transfer or otherwise dispose of or make a distribution of any
of their shares or securities convertible or exchangeable for the Company's
Common Stock for a period of 365 days (180 days in the case of shares acquired
pursuant to the Company's 1996 Employee Stock Purchase Plan) from the date of
this Prospectus without the prior written consent of the Representative. See
"Shares Eligible for Future Sale."
Holders of approximately 511,308 shares of Common Stock are also entitled
to certain rights with respect to registration of such shares of Common Stock
for offer or sale to the public (without taking into account shares of Common
Stock issuable upon the exercise of outstanding options and warrants). Such
sales may have an adverse effect on the Company's ability to raise needed
capital and may adversely affect the market price of the Common Stock. See
"Shares Eligible for Future Sale" and "Description of Capital
Stock--Registration Rights."
Dilution. The initial public offering price of the Common Stock is
substantially higher than the net tangible book value per share of the Common
Stock. Investors participating in this Offering will therefore incur an
immediate, substantial dilution in net tangible book value of approximately
$6.43 per share and may incur additional dilution upon exercise of outstanding
stock options and warrants. In the event that the promissory notes issued to
investors in the Bridge Financing (the "Bridge Notes"), the $2,000,000 Note and
an additional promissory note issued by the Company to Baxter on May 24, 1996,
in the principal amount of $350,000, accruing interest at the rate of 8% per
annum (the "350,000 Note") (collectively, the "Promissory Notes"), have not been
repaid in full prior to September 1, 1996, the Company will be required to issue
2,439 shares of Common Stock for each $25,000 of principal plus accrued interest
then outstanding pursuant to the Promissory Notes. The aggregate principal
amount of the Promissory Notes outstanding as of May 31, 1996, was $4,350,000.
See "Dilution" and "Use of Proceeds."
Representative's Potential Influence on the Market. A significant number
of shares of Common Stock offered hereby may be sold to customers of the
Representative. Such customers subsequently may engage in transactions for the
sale or purchase of shares of Common Stock through or with the Representative.
Although it has no obligation to do so, the Representative intends to make a
market in the Common Stock and may otherwise affect transactions in the Common
Stock. If it participates in such market, the Representative may influence the
market, if one develops, for the Common Stock. Such market-making activity may
be discontinued at any time. Moreover, if the Representative sells the
securities issuable upon exercise of the Representative's warrants, it may be
required under the Securities Exchange Act of 1934, as amended, to temporarily
suspend its market-making activities. The prices and liquidity of the Common
Stock may be significantly affected by the degree, if any, of the
Representative's participation in such market. See "Underwriting."
Payment of Debts by the Company to Baxter from Proceeds of this
Offering. Approximately $565,000 of the proceeds of this Offering will be used
to satisfy certain debts owed by the Company to Baxter. Baxter together with a
wholly-owned subsidiary will own approximately 19.7% of the Company immediately
following this Offering. See "Use of Proceeds" and "Certain Transactions."
Management Discretion Over Proceeds of this Offering. The Company
currently has no specific plan for a significant portion of the proceeds of this
Offering. As a consequence, the Company's management will have the discretion to
allocate a large percentage of the proceeds from this Offering to uses which the
stockholders may not deem desirable, and there can be no assurance that the
proceeds can or will be invested to yield a significant return. See "Use of
Proceeds."
Antitakeover Provisions. Certain provisions of the Company's Certificate
of Incorporation and of Delaware law could discourage potential acquisition
proposals and could delay or prevent a change in control of the Company. Such
provisions could diminish the opportunities for a stockholder to participate in
tender offers, including tender offers at a price above the then current market
value of the Common Stock. Such provisions may also inhibit increases in the
market price of the Common Stock that could result from takeover attempts. In
addition, the Board of Directors, without further stockholder approval, may
issue preferred stock that could have the effect of delaying, deterring or
preventing a change in control of the Company. The issuance of preferred stock
could also adversely affect the voting power of the holders of Common Stock,
17
<PAGE> 20
including the loss of voting control to others. The Company has no present plans
to issue any preferred stock. See "Description of Capital Stock--Delaware Law
and Certain Charter Provisions."
Control by Existing Stockholders. Following this Offering (assuming
exercise of all stock options and warrants beneficially owned by officers and
directors) the present executive officers and directors of the Company and their
affiliates will beneficially own approximately 25.7% of the outstanding shares
of Common Stock, and Baxter together with a wholly-owned subsidiary will
beneficially own approximately 19.7% of the outstanding shares of Common Stock.
Accordingly, the present officers and directors of the Company and their
affiliates, and Baxter will both have the ability to exercise significant
influence over the management and policies of the Company.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,000,000 shares of
Common Stock offered hereby are estimated to be approximately $
($ if the Underwriter's over-allotment option is exercised in full),
assuming an initial public offering price of $9.00 per share (the midpoint of
the price range set forth on the cover page of this Prospectus) and after
deducting the underwriting discounts and commissions and other estimated
offering expenses.
The Company intends to use a portion of the net proceeds to repay the
outstanding balance on certain promissory notes issued to Baxter on May 24, 1996
(the "Baxter Notes") that had an outstanding balance, including accrued
interest, of $550,844 as of May 31, 1996. The Company also plans to use a
portion of the net proceeds to repay all of the Bridge Notes that had an
outstanding balance, including accrued interest, of $2,083,211 as of May 31,
1996, and that were assumed by the Company on May 24, 1996. The Baxter Notes and
the Bridge Notes bear interest at an annual rate equal to 8%.
The Company also expects to use the net proceeds, including the interest
thereon, for commercialization of products, research and development, clinical
testing, capital expenditures, working capital and general corporate purposes.
In the ordinary course of its business, the Company from time to time evaluates
technologies for acquisition or license that, if acquired, could be used in the
development of product candidates. The Company has no present commitments or
agreements and is not currently involved in any negotiations with respect to
such acquisitions or licenses. The Company has not identified precisely the
amounts it plans to spend on specific development or commercialization projects
or the timing of such expenditures. The amounts actually expended for each
purpose may vary significantly depending upon numerous factors, including future
revenue growth, the amount of cash generated by the Company's operations, the
progress of the Company's development projects, the timing of regulatory
approvals, the technological advances and the status of competitive products. In
addition, expenditures will also depend upon the availability of additional
financing and other factors. The Company believes that the net proceeds from
this Offering, together with interest thereon, and the Company's existing
capital resources will satisfy its capital requirements and fund operating
losses for at least 18 months following this Offering. Pending application of
the proceeds as described above, the Company intends to invest the net proceeds
of this Offering in investment-grade, short-term securities.
DIVIDEND POLICY
The Company has never declared or paid dividends on its capital stock. The
Company currently intends to retain all earnings, if any, to fund the
development and growth of its business and therefore does not anticipate paying
any cash dividends within the foreseeable future.
18
<PAGE> 21
CAPITALIZATION
The following table sets forth (i) the pro forma capitalization of the
Company as of March 31, 1996 and (ii) as adjusted to give effect to (a) the sale
by the Company of 2,000,000 shares of Common Stock offered hereby, assuming an
initial public offering price of $9.00 per share (the midpoint of the range set
forth on the cover page of this Prospectus), less estimated underwriting
discounts and commissions and other expenses of this Offering, (b) application
of a portion of the proceeds of this Offering to repay the Bridge Notes, (c) the
issuance of approximately 244,455 shares of Common Stock, assuming an initial
public offering price of $9.00 per share, immediately following the closing of
this Offering to investors in the Bridge Financing, (d) the issuance of 38,889
shares of Common Stock to Baxter, assuming an initial public offering price of
$9.00 per share, immediately following the closing of this Offering, and (e) the
issuance of approximately 227,964 shares of Common Stock to Baxter, assuming an
initial public offering price of $9.00 per share, immediately following the
closing of this Offering upon the conversion of the $2,000,000 Note, and related
accrued interest. See "Dilution" and "Certain Transactions."
<TABLE>
<CAPTION>
PRO FORMA
MARCH 31, 1996
-----------------------
ACTUAL AS ADJUSTED
------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Notes payable........................................................ $ 2,237 $ --
------- -----------
Convertible note payable............................................. 2,000 --
------- -----------
Stockholders' equity:
Preferred Stock, $0.01 par value, 5,000,000 shares authorized, none
issued or outstanding..............................................
Common Stock, $0.01 par value, 10,000,000 shares authorized,
2,671,616 pro forma shares issued and outstanding; 5,182,924 shares
as adjusted........................................................ 8,024 25,324
Accumulated deficit(1)............................................... (6,308) (6,752)
------- -----------
Total Stockholders' equity(2)...................................... 1,716 18,572
------- -----------
Total capitalization............................................ $ 5,953 $18,572
======= =========
</TABLE>
- - ---------------
(1) As adjusted includes $444,000 of amortization expense relating to the
write-off of original issue discount, net of accumulated amortization,
relating to notes payable repaid with a portion of the proceeds from this
offering.
(2) Does not include (i) 1,000,000 shares of Common Stock reserved for issuance
pursuant to the Company's 1996 Stock Option/Stock Issuance Plan (of which
316,173 shares were subject to options outstanding at May 31, 1996), (ii)
200,000 shares reserved for issuance under the Company's 1996 Employee
Stock Purchase Plan, (iii) 58,529 shares of Common Stock reserved for
issuance upon exercise of non-qualified stock options, and (iv) 73,162
shares of Common Stock reserved for issuance upon exercise of outstanding
warrants. See "Management--Benefit Plans," "Description of Capital
Stock--Warrants" and "Shares Eligible for Future Sale."
19
<PAGE> 22
DILUTION
The pro forma net tangible book value of the Company at March 31, 1996 was
negative ($1,987,000), or negative ($0.62) per share of Common Stock. Net pro
forma tangible book value per share of Common Stock represents the amount of the
Company's total tangible assets (pro forma total assets of $6,695,000, less
intangible assets of $3,703,000) less total liabilities of $4,979,000 divided by
the pro forma number of shares (3,182,924) of Common Stock outstanding at March
31, 1996 (which gives effect to the issuance of approximately 511,308 shares
immediately following this Offering to existing investors in connection with
rights associated with previous borrowings as more fully described elsewhere in
this Prospectus). After giving effect to the sale of the 2,000,000 shares of
Common Stock offered by the Company hereby at an assumed initial public offering
price of $9.00 per share (the midpoint of the range set forth on the cover page
of this Prospectus), and after deducting underwriter discounts and commissions
and estimated Offering expenses payable by the Company, the Company's net
tangible book value as of March 31, 1996 would have been $13,313,000 or $2.57
per share of Common Stock. This represents an immediate increase in net tangible
book value of $3.19 per share to current stockholders and an immediate dilution
of $6.43 or 71% per share to new investors purchasing Common Stock in this
Offering. The following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed public offering price per share....................................... $9.00
Net pro forma tangible book value per share of Common Stock before this
Offering.................................................................... $(0.62)
Increase per share attributable to new investors............................ 3.19
------
Net pro forma tangible book value per share of Common Stock after this
Offering.................................................................... $2.57
-----
Dilution per share to new investors........................................... $6.43
=====
</TABLE>
- - ---------------
(1) If the Underwriters' over-allotment option is exercised in full, dilution
per share to new investors would be $6.15 or 68% per share.
The following table summarizes, as of March 31, 1996, the pro forma number
of shares of Company Common Stock issued, the total consideration and the
average price per share presented for existing stockholders and new investors
(before deduction of underwriting discounts and commissions and estimated
offering expenses):
<TABLE>
<CAPTION>
SHARES TOTAL CONSIDERATION
------------------ -------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
-------- ------- ---------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing Stockholders(2)....................... 3,182,924 61% $ 8,024,000 31% $2.52
New investors.................................. 2,000,000 39% 18,000,000 69% 9.00
-------- ------- ----------- -------
Total........................................ 5,182,924 100% $26,024,000 100%
======== ===== =========== =====
</TABLE>
- - ---------------
(2) Includes all stockholders receiving shares immediately following the closing
of this Offering.
All of the above computations assume no exercise of outstanding options or
warrants to purchase Common Stock. As of May 31, 1996, (i) options to purchase
316,173 shares of Common Stock at a weighted average exercise price of
approximately $5.18 per share under the Company's stock option plan, (ii)
options to purchase 9,755 and 48,774 shares of Common Stock pursuant to
non-qualified options at per share exercise prices of $15.38 and $0.02,
respectively, and (iii) warrants to purchase 73,162 shares of Common Stock at a
weighted average exercise price of approximately $10.65 per share (assuming an
initial public offering price of $9.00 per share (the midpoint of the range set
forth on the cover page of this Prospectus)) were outstanding. To the extent
these options and warrants become vested and are exercised, there will be
further share ownership dilution to new investors. The Company also has an
additional 683,827 shares of Common Stock reserved for issuance pursuant to the
Company's 1996 Stock Option/Stock Issuance Plan and 200,000 shares reserved for
issuance under the Company's 1996 Employee Stock Purchase Plan. Further dilution
may result from the exercise of outstanding options or options granted in the
future. See "Management--Benefit Plans."
In the event that the Promissory Notes have not been repaid in full prior
to September 1, 1996, the Company will be required to issue 2,439 shares of
Common Stock for each $25,000 of principal plus accrued interest then
outstanding pursuant to the Promissory Notes. The effect of such issuances would
be further share ownership dilution to new investors. The aggregate principal
amount of the Promissory Notes outstanding as of May 31, 1996, was $4,350,000.
20
<PAGE> 23
SELECTED FINANCIAL DATA
The selected financial data set forth below with respect to Ixion and MMS
statements of operations for each of the three years in the period ended
December 31, 1995, and with respect to Ixion and MMS balance sheets at December
31, 1994 and 1995 are derived from audited financial statements which are
included elsewhere herein and are qualified by reference to such Financial
Statements and related Notes thereto. The Ixion Statement of Operations Data for
the years ended December 31, 1991 and 1992, and Balance Sheet Data at December
31, 1991, 1992 and 1993 have been derived from unaudited financial statements
which are not included herein. The unaudited interim financial information
includes all adjustments, consisting only of normal recurring adjustments,
considered necessary for a fair presentation of the financial position and
results of operations for these periods. Operating results for the three months
ended March 31, 1996 are not necessarily indicative of the results that may be
expected for the entire year ending December 31, 1996. The data set forth below
should be read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations and the Pro Forma Condensed
Financial Information and Financial Statements and related Notes included
elsewhere in this Prospectus.
Interact was formed in April 1996, and in May 1996 it acquired its assets
and technologies in connection with a business combination involving Ixion and
MMS. Inasmuch as former Ixion stockholders own the majority of the Interact
capital stock after the business combination, Ixion is considered to be the
acquiring corporation for purposes of purchase accounting and the predecessor
entity to Interact for purposes of financial reporting. When Interact financial
statements are presented as of and for periods subsequent to the business
combination, the Interact financial statements for periods prior to the business
combination will be those of what was formerly Ixion.
21
<PAGE> 24
INTERACT MEDICAL TECHNOLOGIES CORPORATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO FORMA BALANCE SHEET DATA AT MARCH 31, 1996
As more fully described in the Pro Forma Condensed Financial Information
appearing elsewhere in this Prospectus, the Company's Unaudited Pro Forma
Balance Sheet Data at March 31, 1996, gives effect to (i) the contribution of
MMS partnership interests to Interact and merger of Ixion with and into
Interact, (ii) the issuance of Common Stock in exchange for certain accrued
amounts payable, and (iii) receipt of $2.0 million cash pursuant to a
convertible note payable to Baxter, as if such transactions had occurred as of
March 31, 1996. The Company's Unaudited Pro Forma Statements of Operations Data
for the year ended December 31, 1995 and for the three months ended March 31,
1996 include the results of operations of Ixion and MMS for the respective
periods presented and give effect to pro forma adjustments as if the
aforementioned transactions had occurred at the beginning of the respective
periods. These Pro Forma Condensed Financial Statements are not necessarily
indicative of future financial positions or results of operations of the
Company.
PRO FORMA BALANCE SHEET DATA AT MARCH 31, 1996
<TABLE>
<S> <C>
Cash.............................. $2,191
Other current assets.............. 10
Property and equipment............ 791
Intangible assets................. 3,703
------
$6,695
======
Accrued payables.................. $ 634
Due to stockholders............... 108
Notes payable..................... 2,237
Convertible note payable.......... 2,000
------
4,979
------
Stockholders' Equity
Common Stock.................... 8,024
Accumulated deficit............. (6,308)
------
1,716
------
$6,695
======
</TABLE>
PRO FORMA STATEMENTS OF OPERATIONS DATA
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1995 MARCH 31, 1996
----------------- --------------
<S> <C> <C>
Revenues.................................................... $ 266 $ --
----------------- --------------
Expenses:
Research and development.................................. 3,613 764
Selling, general and administrative....................... 1,518 517
----------------- --------------
5,131 1,281
----------------- --------------
Loss before interest........................................ (4,865) (1,281)
Interest expense............................................ 324 218
----------------- --------------
Net loss.................................................... $(5,189) $ (1,499)
============= ===========
Pro forma net loss per share................................ $ (1.73) $ (0.48)
============= ===========
</TABLE>
22
<PAGE> 25
IXION, INC.
STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
----------------------------------------------- ----------------
1991 1992 1993 1994 1995 1995 1996
------ ------ ------ ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues........................ $ 200 $1,413 $1,359 $1,237 $ 266 $ 266 $ --
------ ------ ------ ------ ------- ------ ------
Expenses:
Research and development...... 195 636 951 1,189 1,332 358 284
Selling, general and
administrative............. 68 184 416 588 1,124 306 456
------ ------ ------ ------ ------- ------ ------
263 820 1,367 1,777 2,456 664 740
------ ------ ------ ------ ------- ------ ------
Income (loss) from operations... (63) 593 (8) (540) (2,190) (398) (740)
Interest expense................ -- -- -- 9 132 11 169
------ ------ ------ ------ ------- ------ ------
Net income (loss)............... $ (63) $ 593 $ (8) $ (549) $(2,322) $ (409) $ (909)
====== ====== ====== ====== ======= ====== ======
Net income (loss) per share..... $(0.08) $ 0.79 $(0.01) $(0.21) $ (0.81) $(0.15) $(0.31)
====== ====== ====== ====== ======= ====== ======
</TABLE>
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------- MARCH 31,
1991 1992 1993 1994 1995 1996
---- ---- ---- ----- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Total assets................................ $203 $699 $635 $ 489 $ 238 $ 662
Notes payable and accrued interest.......... 49 -- -- 192 1,014 1,837
Accumulated deficit......................... (646) (53) (61) (610) (2,932) (3,841)
Total stockholders' equity (deficit)........ (29) 564 558 36 (1,762) (2,147)
</TABLE>
MEDICAL MEDIA SYSTEMS
(a development stage company)
STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
THREE MONTHS CUMULATIVE
ENDED AMOUNTS FROM
YEARS ENDED DECEMBER 31, MARCH 31, DATE OF
----------------------------- -------------- INCEPTION TO
1993 1994 1995 1995 1996 MARCH 31, 1996
------- ------- ------- ----- ----- --------------
<S> <C> <C> <C> <C> <C> <C>
Revenues.......................... $ -- $ -- $ -- $ -- $ -- $ --
------- ------- ------- ----- ----- --------------
Expenses:
Research and development........ 2,346 1,693 1,540 360 295 6,215
General and administrative...... 170 168 394 56 61 798
------- ------- ------- ----- ----- --------------
2,516 1,861 1,934 416 356 7,013
------- ------- ------- ----- ----- --------------
Loss from operations.............. (2,516) (1,861) (1,934) (416) (356) (7,013)
Interest income................... 13 11 13 4 2 40
------- ------- ------- ----- ----- --------------
Net loss.......................... $(2,503) $(1,850) $(1,921) $(412) $(354) $ (6,973)
======= ======= ======= ===== ===== ===========
</TABLE>
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- MARCH 31,
1993 1994 1995 1996
------ ------ ------ ---------
<S> <C> <C> <C> <C>
Total assets............................................. $1,507 $1,569 $1,059 $ 748
Note payable............................................. -- -- 400 400
Partners' equity(1)...................................... 1,340 1,440 429 75
</TABLE>
- - ---------------
(1) Partners' equity includes accumulated deficit of approximately $2.8 million,
$4.7 million, $6.6 million and $7.0 million at December 31, 1993, 1994 and
1995 and March 31, 1996, respectively.
23
<PAGE> 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following should be read in conjunction with Selected Financial Data
and Financial Statements and related Notes thereto appearing elsewhere in this
Prospectus.
BACKGROUND
Interact was formed in April 1996, and in May 1996, it acquired its assets
and technologies through a business combination involving Ixion and MMS.
Inasmuch as former Ixion stockholders own the majority of Interact common stock
after the business combination, Ixion is considered to be the acquiring
corporation for purposes of purchase accounting and the predecessor entity to
Interact for purposes of financial reporting. When Interact financial statements
are presented as of and for periods subsequent to the business combination, the
Interact financial statements for periods prior to the business combination will
be those of what was formerly Ixion. Accordingly, for purposes of Management's
Discussion and Analysis of Financial Condition and Results of Operations, the
period-to-period comparisons of results of operations are those of Ixion, as the
predecessor entity to Interact. Operating results comparisons relating to MMS
are also presented. Comments with respect to the Company's stage of development
and future of product development and liquidity and capital resources pertain to
Interact.
Interact is at an early stage of development. Only one of the Company's
products is commercially available, and limited revenues have been generated
from product sales. To date the Company's resources have been dedicated to the
research and development of products based upon its expertise in digital medical
imaging and interactive software programming. The Company does not believe
certain of its proposed products will be commercially viable absent significant
further development and certain technological advances, and there can be no
assurance that development will be completed or advances will be achieved.
The Company expects to continue to incur substantial losses over at least
the next several years as the Company's development, testing, marketing and
manufacturing scale-up efforts expand. To achieve profitability and increased
sales levels, the Company must, among other things, establish and increase
market acceptance of its products, respond effectively to competitive pressures,
offer high quality customer service and support, introduce on a timely basis
products incorporating its technologies and advanced versions and enhancements
to its products, and successfully market and support advanced versions and
enhancements. The success of the Company's products and products under
development will depend, in large part, on the continued adoption, and the rate
of adoption, of MIS procedures by surgeons. There can be no assurance that the
Company will complete the development of any product, that products developed
will achieve market acceptance, or that the Company will ever produce
significant levels of revenue or achieve sustainable profitability.
The business combination involving Ixion and MMS resulted in approximately
$3.7 million of intangible assets, which will reduce future net income (or
increase net loss) as such intangible assets are amortized.
LIQUIDITY AND CAPITAL RESOURCES
Ixion's annual financial statements were audited by the Company's
independent certified public accountants, whose report includes an explanatory
paragraph stating that the Company has incurred significant operating losses and
has stockholders' and working capital deficiencies that raise substantial doubt
about its ability to continue as a going concern. See "Financial Statements."
Since 1994, Ixion has incurred operating losses which have been funded
primarily by contract revenues during 1994 and early 1995, and the Bridge
Financing since that time. Ixion had a net working capital deficit and a net
stockholders' deficit. During 1996, Ixion raised additional bridge debt funds of
$900,000, and otherwise financed its operations through the continued
forbearance of its creditors, many of whom are Company stockholders. MMS has
funded its operating losses through capital contributions and loans from its
majority owner, a wholly-owned subsidiary of Baxter.
In connection with the merger of Ixion with and into Interact in May 1996,
Interact received $2.0 million cash pursuant to a short-term, convertible
promissory note payable to a principal stockholder. Interact continues to be in
the process of fund raising, including a Common Stock public offering to raise
up to
24
<PAGE> 27
approximately an additional $20 million. The Company intends to use a portion of
the net proceeds of this Offering to repay approximately $2.6 million of
existing indebtedness, representing the outstanding balance on certain
promissory notes issued to stockholders. The Company also expects to use the net
proceeds for commercialization of products, research and development, clinical
testing, capital expenditures, working capital and general corporate purposes.
In the ordinary course of its business, the Company from time to time evaluates
technologies for acquisition or license that, if acquired could be used in the
development of products. The Company has no present commitments or agreements
and is not currently involved in any negotiations with respect to such
acquisitions or licenses. The Company has not identified precisely the amounts
it plans to spend on specific development or commercialization projects or the
timing of such expenditures. The amounts actually expended for each purpose may
vary significantly depending upon numerous factors, including future revenue
growth, the amount of cash generated by the Company's operations, the progress
of the Company's development projects, the timing of regulatory approvals,
technological advances and the status of competitive products. In addition,
expenditures will also depend upon the availability of additional financing and
other factors.
The Company's ability to meet its anticipated future obligations and to
continue as a going concern depends upon raising sufficient capital to fund its
operations and finance its contemplated business and product development, and
achieving profitable operations. The development and commercialization of the
Company's products will require substantial funds. The Company expects to
continue to incur substantial losses over at least the next several years and
its future capital requirements will depend on many factors, including the time
and costs involved in obtaining any required regulatory approvals, the cost of
manufacturing scale-up and effective commercialization activities and
arrangements, continued progress in its development programs and the magnitude
of these programs, and the costs involved in preparing, filing, prosecuting,
maintaining and enforcing patent claims. The Company anticipates that its
existing available cash, combined with the proceeds of this Offering and
interest income from cash investments will be adequate to fund the Company for
at least 18 months following this Offering. The Company intends to seek
additional funding through public or private financings to fund its operations
thereafter. There can be no assurances that additional financing will be
available on acceptable terms, or at all. If adequate funds are not available,
the Company may be required to delay, scale back or eliminate one or more of its
development programs or to obtain funds through arrangements with collaborative
partners or others that may require the Company to relinquish certain rights to
certain of its technologies or products that the Company would not otherwise
relinquish.
RESULTS OF OPERATIONS
IXION
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
The net loss for the three months ended March 31, 1996 increased $500,000
over the comparative prior year period to $909,000 as a result of elimination of
revenues and increases in both operating and interest expenses. Revenues
received during the three months ended March 31, 1995 represented final payments
from Ethicon, Ixion's sole customer, pursuant to research and license agreements
and included a minimum royalty payment. Operating expenses for the three months
ended March 31, 1996 increased approximately $76,000 or 11% due primarily to
increases in financing, legal, sales and marketing expenses, resulting from
stepped-up product and business development activities. Research and development
expenses decreased $74,000 primarily as a result of redirecting outside
consultant efforts from research and development to product and business
development. Interest expense for the three months ended March 31, 1996
increased approximately $158,000 due to increased bridge loan borrowings, which
were $325,000 at March 31, 1995 and $2.2 million at March 31, 1996. Net cash
used by operating activities for the three months ended March 31, 1996 increased
$382,000 over the comparative prior year period as a result of the increase in
net loss offset by increased non-cash charges relating primarily to original
issue discount amortization.
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
The net loss for 1995 increased over 1994 from $549,000 to $2,322,000 as a
result of decreased revenues and increased operating and interest expenses.
Revenues decreased $971,000 in 1994 to $266,000 in 1995 due to completion of
services for Ixion's sole customer. Operating expenses for 1995 increased
$679,000 or 38%
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primarily due to increased levels of product development, marketing and
financing activities. Interest expense for the year ended December 31, 1995
increased $123,000 over the prior year due to increased bridge loan borrowings,
which were $200,000 at December 31, 1994 and $1.1 million at December 31, 1995.
Net cash used by operating activities increased to $979,000 in 1995 as compared
to $256,000 for 1994 due primarily to the decrease in revenue.
Revenues of approximately $1.2 million in 1994 decreased $122,000 or 9% as
compared to 1993, due to a slightly lower level of contract services provided to
Ixion's sole customer. Operating expenses for 1994 increased $410,000, or 30%,
primarily due to Ixion incurring more costs related to research and development
and utilizing more outside consultants for business development.
Deferred income taxes recorded for significant temporary differences
between tax and financial reporting basis of assets and liabilities approximate
$100,000 and $800,000 at December 31, 1994 and 1995, respectively, and primarily
relate to operating loss carryforwards. A valuation allowance has been recorded
for the full amount of deferred taxes as realization of such deferred tax asset
is not considered to be more likely than not.
MEDICAL MEDIA SYSTEMS
(a development stage company)
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
There were no revenues received during the three months ended March 31,
1996 or 1995. Operating expenses for the three months ended March 31, 1996
decreased approximately $60,000 or 14% due primarily to a decrease in research
and development costs, resulting from the Company utilizing consultants to a
lesser extent than the prior year. In addition, depreciation expense decreased
in 1996 as certain equipment was fully depreciated in the comparative prior
period.
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
There were no revenues received in any of the three years ended December
31, 1995. Operating expenses for 1995 increased approximately $73,000 or 4% over
1994 primarily due to an increase in salaries expense, resulting from the hiring
of three new employees during 1995. Consulting and travel fees also increased,
due to increased business development activities. Operating expenses decreased
in 1994 as compared to 1993 by $655,000 or 26% due to a decrease in research and
development expenses resulting from the completion of a project in 1994 that had
required a higher level of expense in 1993.
IMPACT OF INFLATION
The Company believes that the effects of inflation have not had a
significant effect on its financial condition or results of operations and
anticipates that the level of inflation, if moderate, will not have a
significant effect on operations.
EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS
Recently issued accounting standards having relevant applicability to the
Company consist primarily of Statement of Financial Accounting Standards No. 121
("SFAS No. 121"), which establishes accounting standards for, among other
things, the impairment of long-lived assets and certain identifiable
intangibles, and Statement of Financial Accounting Standards No. 123 ("SFAS No.
123"), which establishes standards for accounting for stock-based compensation.
SFAS No. 121 will be effective for financial statements having fiscal years
beginning after December 15, 1995, and is not expected to have a significant
effect, if any, on the Company's financial condition or results of operations.
SFAS No. 123 is not expected to have a significant effect, if any, on the
Company's financial condition or results of operations. SFAS No. 123 will be
effective for financial statements for fiscal years beginning after December 15,
1995, and required pro forma disclosures will be included in such statements. It
is expected that the Company will not adopt the "fair value based method" of
accounting for stock options, which is encouraged by SFAS No. 123, but rather
will continue to account for such, utilizing the "intrinsic value based method"
as is allowed by such statement.
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BUSINESS
Interact develops, markets and manufactures products designed to facilitate
the effective use of minimally invasive surgical ("MIS") procedures and enhance
clinical performance. The Company's initial product, Preview(TM), was launched
in June 1996. Preview provides the clinician with a detailed three-dimensional
model of the patient-specific anatomy manufactured by processing computed
tomography ("CT") or magnetic resonance ("MR") images on the Company's
proprietary software platform at its production facility. The Company delivers
its Preview models to the clinician embodied in user-friendly proprietary
viewing software that can be run on a Macintosh personal computer. The model and
the viewing software augment traditional two-dimensional medical imaging tools
and allow the clinician to manipulate information, perform measurements and
conduct pre-surgical planning for use primarily in MIS procedures. The Company
is also currently field testing a pre-production prototype of GastroSim(TM), an
interactive virtual reality ("IVR") simulator for teaching and training
clinicians. GastroSim is designed to figuratively place the clinician inside the
upper and lower gastrointestinal tracts of a "virtual" patient and allow the
clinician to perform a number of simulated MIS procedures using realistic
medical instruments and devices. The Company is also currently developing
DataFusion, which is designed to aid the clinician during the performance of MIS
procedures by overlaying live images of a patient's anatomy on the same three-
dimensional model used in Preview, IVR simulators depicting anatomical regions
of the body other than the gastrointestinal tract and interactive CD-ROMs to
educate clinicians to perform certain procedures.
In May 1996, the Company entered into a distribution agreement with Baxter
Healthcare Corporation ("Baxter"), a wholly-owned subsidiary of which is a
principal stockholder of the Company, pursuant to which Baxter obtained an
exclusive right to sell Preview for use in connection with treating aortic and
iliac aneurysms (except with regard to sales to parties developing or
manufacturing devices specifically designed for endovascular treatment of aortic
aneurysms for which Baxter's rights are co-exclusive with the Company's),
including abdominal aortic aneurysms ("AAA").
INDUSTRY BACKGROUND
Open surgery is an invasive procedure that generally requires large
incisions and significant tissue manipulation in order to provide the clinician
with direct access to the intended surgical site. A significant part of the
trauma suffered in connection with open surgery is a result of gaining access to
the surgical site and is not caused by the surgical repair itself. For example,
the clinician often must make large incisions through layers of muscle and
tissue, which may cause muscle or nerve damage, bleeding, scarring and other
complications such as infection, temporary or permanent debilitation and pain.
As a result, many open surgical procedures require extended operating times,
expose the patient to the risks of prolonged general anesthesia and involve
lengthy hospitalization and patient recovery times. In addition, because of the
severe trauma often associated with open surgical procedures, a significant
population of patients, which includes the elderly and physically weak, are not
considered good candidates for these surgical procedures.
In order to reduce the complications associated with open surgical
techniques, and driven by advances in both device technology and surgical
technique, a number of surgical approaches referred to as MIS procedures have
been developed. MIS procedures allow surgeons to access the surgical site
through the body's natural openings or by making small incisions to access body
cavities. The benefits of MIS procedures, as compared to open surgery, generally
include significantly reduced patient trauma (including muscle, nerve and other
tissue damage), complications, pain and suffering, convalescence time, procedure
time and ultimately lower medical costs.
The advantages of MIS approaches over open surgical techniques suggest that
minimally invasive surgery could revolutionize the manner in which surgery is
performed. The Company believes the growth in MIS procedures is being
accelerated by today's healthcare environment, in which more cost effective
means to deliver services are aggressively being sought. The development and
adoption of MIS procedures have already had a significant impact on many
surgical fields, including general surgery, cardiology, orthopedics, gynecology,
urology and neurosurgery. Notable examples of MIS procedures that have been
widely adopted include laparoscopic and arthroscopic procedures.
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Despite the benefits of minimally invasive surgery, only select MIS
procedures have attained widespread adoption. In 1995, MIS procedures accounted
for approximately 15% of the surgical procedures performed in the United States.
The Company believes that its products will help address two of the major
impediments to the growth in use of MIS procedures. First, in performing MIS
procedures, parts of the physical anatomy that can be visualized and manipulated
during traditional surgeries are hidden from the eye and must be handled
remotely. In order to enable clinicians to be able to effectively perform many
MIS procedures, the Company believes that there exists a need for products which
provide clinicians with improved visualization, navigation and support
capabilities. Second, MIS procedures require proficiency in novel surgical
techniques potentially involving specialized MIS instruments and devices. Due to
the increasing number of clinically accepted procedures and the increasing
number of devices and techniques that have been developed and are expected to
continue to be developed, even highly competent clinicians may not be able to
perform all of the various techniques or utilize all of the instruments and
devices developed within their area of specialty. The Company believes that a
training and teaching system capable of assisting in development of the skills
necessary to perform an increasing number of clinically accepted surgical and
diagnostic techniques and the use of an increasing number of complex medical
instruments and devices would greatly facilitate the adoption of MIS procedures.
THE INTERACT SOLUTION
The Company is developing products designed to facilitate the effective use
of MIS procedures and enhance clinical performance. Preview and the Company's
products under development incorporate technical advances in the fields of
medical imaging and computer software in order to provide clinicians with
information to assist in the more effective and efficient performance of MIS
procedures.
Visualization and Planning. The Company's initial product, Preview, allows
the clinician to visualize and plan surgical procedures by interacting with a
three-dimensional model of the patient-specific anatomy. MIS procedures strive
to apply precise treatment to specific anatomical locations identified in
pre-operative imaging. The Company believes that Preview's ability to generate
three-dimensional representations and present thousands more pre-operative
images than traditional imaging methods provides clinicians with a valuable
perspective for use in planning MIS procedures.
As an outgrowth of Preview, the Company is also developing DataFusion, a
product designed to aid the clinician with visualization and navigation during
the performance of actual MIS procedures. DataFusion will use proprietary
software to track surgical instruments and overlay live images of a patient's
anatomy on the same three-dimensional model used in Preview. By helping the
clinician to compensate for the inability to directly visualize and manipulate
the operative area, the Company believes that Preview (and DataFusion once
developed), will improve the results of MIS procedures and enable the
application of MIS technology to additional surgical procedures.
Teaching and Training. The Company is currently field testing a
pre-production prototype of GastroSim, an IVR simulator that is designed to
create realistic clinical experiences for training clinicians to conduct
diagnostic tests and therapy on ulcers, polyps, cancers, bile stone removals,
bronchoscopies, endotracheal tube placements and ultrasound echocardial
procedures and in using sophisticated MIS instruments and devices. Although the
Company's initial market focus for its IVR simulator technology will be on
procedures typically performed in the areas of gastroenterology and family
practice medicine, the Company plans to apply its core IVR technology to develop
simulators designed to replicate MIS procedures utilized by clinicians in a
number of clinical specialties, including cardiology, cardiac surgery,
interventional radiology, urology, obstetrics/gynecology, neurosurgery and
various micro minimally invasive procedures such as functional endoscopic sinus
surgery. By allowing the clinician to replicate a multitude of complex surgical,
diagnostic and therapeutic procedures without the need for live patients,
cadavers or animals, the IVR simulators the Company intends to develop can be
anticipated to increase the number of physicians capable of performing advanced
MIS procedures, improve the general level of competency of clinicians performing
MIS procedures and help safely and expeditiously make MIS procedures more widely
available.
The Company believes that Preview and its products under development, by
providing the clinician with information required in order to perform MIS
procedures and helping to ensure the competency with which
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such procedures are performed, will offer significant clinical benefits. These
benefits include reduced trauma and limited need for general anesthesia and cost
benefits, including lower procedure costs, reduced procedure time and shorter
hospital stays, as well as faster recovery times, as compared to open surgery.
COMPANY STRATEGY
The Company's objective is to capitalize on advances in software and
medical imaging to become a leading provider of interactive products to promote
the effective use of MIS procedures. The key elements of the Company's strategy
are as follows:
- FOCUS INITIAL PREVIEW MARKETING EFFORTS ON AAA. In the near term the
Company has focused its marketing efforts on the application of Preview
to planning MIS procedures to treat AAA. After the Company has validated
Preview for use in connection with AAA, the Company intends to
concentrate significant resources on establishing the use of Preview as a
standard for the performance of a number of other MIS procedures.
- COMMERCIALIZE GASTROSIM AND ESTABLISH IT AS A TEACHING AND TRAINING
STANDARD. The Company plans to develop and maintain relationships with
leading medical institutions and clinicians in order to help establish
GastroSim as a standard for use in teaching and training
gastroenterologists and family practitioners to perform various MIS
procedures and diagnostic and therapeutic techniques. The Company
believes that because GastroSim is designed to be capable of providing
unbiased and objective results of the clinician's skills performance, it
can also be established as a standard by which medical institutions
accredit and credential clinicians to perform certain MIS procedures and
diagnostic and therapeutic techniques.
- EXPAND TO OTHER APPLICATIONS. The Company believes that Preview can be
applied in a number of procedures, including procedures for treating
kidney stones, tumors in solid abdominal organs, prostate tumors and
maxillofacial reconstructions. The Company's existing 510(k) clearance
applies to its entire Preview technology and not just a specific
application for such technology, and as such the Company believes that it
is well positioned to model a broad variety of anatomical structures
without significant additional United States regulatory pre-market
clearance compliance requirements. The Company's IVR simulator
technology, although initially applied in the Company's GastroSim
product, is also suited to replicate MIS procedures utilized by
clinicians in a number of clinical specialties, including, cardiology,
cardiac surgery, interventional radiology, urology,
obstetrics/gynecology, neurosurgery and various micro minimally invasive
procedures such as functional endoscopic sinus surgery. The Company does
not believe that its IVR simulators are subject to United States Food and
Drug Administration ("FDA") regulation.
- MINIMIZE UPFRONT INVESTMENT COSTS TO CUSTOMERS. The Company seeks to
minimize upfront investment costs for its customers. Preview, unlike
other three-dimensional imaging products, does not require the purchase
of any equipment, other than imaging equipment typically available to
clinicians and a Macintosh personal computer. Furthermore, as the
entertainment industry continues to drive down the cost of computer
graphic modeling and improvements are made in computer video processing,
the Company will be able to incorporate new lower-cost hardware into its
products under development. The Company anticipates establishing
equipment leasing programs to lower the upfront costs required to
purchase certain of its products under development.
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PRODUCTS
The Company is developing products designed to be utilized by clinicians
from the operating room to the medical school classroom. The Company's initial
product and products under development are as follows:
PREVIEW
Preview allows the clinician to visualize and plan surgical procedures by
using a three-dimensional model of the patient-specific anatomy. Each Preview
model provides thousands of pre-operative images and a detailed
three-dimensional model of the patient-specific anatomy. The Company delivers
its Preview models to clinicians embodied in user-friendly proprietary viewing
software that can be run on a Macintosh personal computer and allows the
clinician, without significant computer expertise, to directly manipulate
information, perform measurements and conduct pre-surgical planning for use in
MIS procedures. MIS procedures strive to apply precise treatment to specific
anatomical locations identified in pre-operative imaging. The Company believes
that Preview's ability to generate three-dimensional representations and present
thousands more pre-operative images than traditional imaging methods provides
clinicians with a valuable perspective for use in planning MIS procedures.
Preview augments traditional two-dimensional medical imaging. In order to
obtain a three-dimensional patient-specific model, a clinician can order a
conventional CT or MR scan and send the images to the Company's production
facility for processing. Depending on the customer's preference, images can be
transferred to the Company through the Internet, through a private data network,
or via magnetic tape and overnight shipping. At the Company's FDA registered
production facility, trained production engineers create patient specific
computer models using the Company's proprietary software and advanced graphics
workstations. The resulting models are recorded on CD-ROM and returned to the
clinician embodied in the Company's proprietary viewing software.
Preview allows a clinician to address clinical planning needs without
making the sizeable investment in hardware, software and training that would be
required if a clinician were required to conduct the modeling him or herself.
Each Preview model the clinician orders currently costs between $900 and $1,500.
On an ongoing basis, Preview allows customers to outsource their
three-dimensional modeling needs and avoid service, maintenance and additional
staffing costs.
It is the Company's belief that Preview will eventually supersede the use
of the angiogram in a significant number of cases. Although the angiogram
continues to be a useful imaging procedure, some of the potential advantages of
Preview over the angiogram are as follows:
- Reduced trauma and overall risk--Preview models can be generated without
making a surgical incision and do not require anesthesia.
- Three-dimensional images--Preview provides the clinician with the
ability to view both two and three-dimensional images.
- Improved tissue differentiation--The Company believes Preview provides
clearer images of tissue than the angiogram.
- Reduced cost--A Preview model currently costs between $900-$1500,
significantly less than an angiogram.
Initial Application. The Company has focused its initial marketing efforts
on the application of Preview to planning surgical procedures to treat AAA.
Disruptions of blood flow to the aorta can lead to major cardiovascular
complications and death. AAAs result from a weakening in the aortic wall which
causes a bulge or aneurysm to form. Because of the blood pressure in the aorta,
AAAs are particularly susceptible to rupture, usually resulting in death. The
National Center for Health Care Statistics estimates that approximately 1.5
million people in the United States have AAA, with approximately 190,000 new
patients diagnosed with AAA each year and approximately 45,000 AAAs repaired
each year. The cost of treating aortic and iliac aneurysms in the United States
alone is estimated to be greater than $2.0 billion per year.
Until recently, the only means of repair for AAA was open surgery. Open
surgery is invasive, requires substantial incisions and long recovery times, and
can lead to complications such as blood loss and infection.
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For example, the conventional treatment for AAA involves the opening and
division of the diaphragm, retraction of the intestines, opening of the
retroperitoneum, and clamping of the aorta above and below the aneurysm in
preparation for vascular graft insertion. This procedure typically lasts two to
four hours and is performed under general anesthesia. As a result of its
invasiveness, open surgical AAA repair has high mortality and complication rates
and is often deemed too dangerous to perform on the elderly and the weak.
Preview has been used by leading surgeons in a number of countries for
planning both minimally invasive and open repair of AAA. The Company believes
that due to the drawbacks of open surgical procedures, the recommended course of
treatment for AAA will ultimately be an MIS procedure. EndoVascular
Technologies, Inc. has developed and is conducting clinical trials of an MIS
procedure for AAA and Baxter, Boston Scientific, Medtronic Inc. and Pfizer are
all believed to be in the process of developing MIS procedures and instruments
to treat AAA. The Company believes that Preview will play a particularly key
role in these MIS procedures because the importance of pre-surgical planning is
heightened by the clinician's need to size a vascular graft to use in the
procedure without first being able to observe the aneurysm.
Other Applications. Preview has been tested clinically on many parts of
the human anatomy, including the peripheral vascular system, the kidney, the
liver, the head, the neck and the breast, and in a variety of MIS procedures.
The Company believes that Preview can be applied in a number of procedures,
including procedures for treating kidney stones, tumors in solid abdominal
organs, prostate tumors and maxillofacial reconstructions. Although the Company
currently does not market Preview for use other than in connection with AAA, the
Company recently received an order to prepare a number of kidney models. The
Company's existing 510(k) clearance covers its Preview technology, not just a
specific application for such technology, and, as such, the Company believes
that it is well positioned to model a broad variety of anatomical structures
without significant additional United States regulatory pre-market clearance
compliance requirements. The Company further believes that the ability to adopt
Preview to modeling different parts of the human anatomy is limited only by
ability of CT or MR scans to capture quality images of these areas.
IVR SIMULATORS
The Company is developing IVR simulators that consist of a platform which
is a computer system that is capable of being configured to control various
pavilions, each consisting of a specific robotic mannequin depicting one of
various anatomical regions of the body in which simulated diagnostic and
therapeutic procedures are performed. These procedures are simulated through the
use of proprietary software that monitors and actuates the pavilion and displays
video images on the platform computer monitor.
The Company's initial IVR simulator, GastroSim (which is currently in the
pre-production prototype stage), consists of a pavilion depicting two anatomical
regions, the upper gastrointestinal ("UGI") and lower gastrointestinal ("LGI")
tracts. GastroSim incorporates procedures designed for (i) training medical
personnel to conduct diagnostic tests and perform therapies on ulcers, polyps,
cancers, bile stone removals and other UGI procedures, such as bronchoscopy,
endotracheal tube placement and ultrasound echocardial procedures, (ii) teaching
clinicians to manipulate sophisticated MIS medical devices and instruments and
(iii) evaluating the clinicians' ability to accomplish these diagnostic and
therapeutic maneuvers. GastroSim is currently deployed in beta test at Swedish
Medical Center in Seattle, Washington and the Company is in negotiations to
establish additional beta test sites.
GastroSim displays realistic images of the UGI and LGI tracts of a
"virtual" patient on the platform computer monitor. While looking inside the
"virtual" patient, the clinician can perform a variety of diagnostic and
therapeutic procedures by inserting a flexible endoscope into the pavilion and
maneuvering the endoscope through the UGI and LGI tracts. While performing
procedures on the "virtual" patient, GastroSim replicates the feel and sound of
performing an actual procedure. GastroSim records digital data on the
clinician's performance that can be used to generate an unbiased and objective
evaluation of the clinician's therapeutic skills. Various characteristics of the
clinician's performance can be measured by GastroSim, such as "lapse time" to
perform a procedure or technique, the force used to perform such tasks and
psychomotor proficiency involved in utilizing or manipulating MIS instruments or
devices.
The Company believes that GastroSim, once commercially deployed, will be a
more cost-effective means of training clinicians than performing procedures on
animals and cadavers, and will reduce the time spent by
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trained physicians in supervising procedures. The Company also believes that by
providing the clinician with the opportunity to practice an unlimited number of
realistic procedures without the need for a live patient, GastroSim will allow
the clinician to shorten the time needed to obtain a level of proficiency
required to perform a variety of new diagnostic methods and therapies, and to
use new medical instruments and devices. The Company further believes that with
its ability to provide in-depth evaluation of the clinician's performance,
GastroSim has the potential to become a standard for accrediting, credentialing
and privileging clinicians.
The initial procedure deployed by the Company for GastroSim allows the
simulator to replicate a sigmoidoscopy, the second most commonly performed
endoscopic procedure in the United States, with approximately 1.6 million such
procedures conducted in 1995 in the United States alone. The Company estimates
that there are over 100,000 clinicians, including gastroenterologists, family
practitioners, general practitioners, physicians assistants, nurses and
technicians who could benefit from using GastroSim to help master this
procedure. The Company further envisions the opportunity to model numerous
additional procedures for use with GastroSim. These procedures have the
potential to generate new sales from initial customers and will create a more
expansive product for potential additional customers. In order to capitalize on
this opportunity, the Company is currently developing a procedure to replicate a
colonoscopy, the third most commonly performed endoscopic procedure in the
United States, with approximately 1.4 million procedures conducted in 1995 in
the United States alone.
While GastroSim is focused on procedures typically performed by
gastroenterologists and family practitioners, the Company is evaluating market
data, and is currently planning to develop pavilions and procedures which
replicate MIS procedures utilized by clinicians in a number of clinical
specialties, including cardiology, cardiac surgery, interventional radiology,
urology, obstetrics/gynecology, neurosurgery and various micro MIS procedures
such as functional endoscopic sinus surgery. The Company does not believe that
its IVR simulators will be subject to FDA regulation.
ADDITIONAL PRODUCTS UNDER DEVELOPMENT
DATAFUSION
As an outgrowth of Preview, the Company is developing DataFusion, a product
designed to aid the clinician with visualization and navigation during the
performance of MIS procedures. DataFusion will use proprietary software to track
surgical instruments and overlay live images of a patient's anatomy on the same
three-dimensional model used in Preview. DataFusion is being developed to
address clinical problems that hinder wider application of MIS procedures in the
operating room. These clinical problems result from the limited exposure and
visualization of anatomy possible using endoscopes and other MIS instruments and
devices.
MIS procedures strive to apply precise treatment to specific anatomical
locations identified in pre-operative imaging. Unfortunately, while MIS
procedures present a great need for precision, due to the very nature of these
procedures, only a small portion of the anatomy may be visible at any time.
DataFusion is being developed to provide an exact road map of the patient's
anatomy in the form of a three-dimensional model with the location of the
surgical instruments visually superimposed. DataFusion, through computer
tracking of surgical instruments, is designed to provide the clinician with
precise targeting to specific locations defined with respect to the
three-dimensional model.
DataFusion is designed to be integrated with the traditional real-time
imaging modalities (endoscopes, ultrasound, fluoroscopy, etc.) through digital
video processing and tracker interfaces. The Company anticipates that DataFusion
will use off-the-shelf computer hardware with some custom attachments to adapt
conventional surgical instrumentation for computer tracking, and that DataFusion
will be packaged on an operating room-compatible cart.
DataFusion is in the prototype stage and has been used in an initial series
of animal trials to demonstrate accuracy and hardware compatibility with the
operating room environment. It is anticipated that regulatory clearance for the
DataFusion product will require extensive clinical trials to establish clinical
efficacy, and that FDA premarket approval ("PMA") will be required.
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CD-ROM PRODUCTS
In order to address the clinicians' need for improved information and
exposure to MIS techniques and diagnostic images from a wide range of disease
states, the Company is developing a series of educational CD-ROMs for multimedia
personal computers. These products are being designed to integrate aspects of
the Company's simulation technology to create interactive illustrations of the
best-demonstrated clinical practice. The Company intends to include
sophisticated simulation modules in its CD-ROM products that are designed to
allow the clinician to become involved in performing the procedure depicted in
the CD-ROM. Using standard computer input devices, the Company currently
anticipates developing CD-ROMs that allow the clinician to manipulate MIS
instruments and devices and observe the response of the simulated tissue on the
computer monitor. The Company believes that, once they are developed, it will be
able to use its CD-ROM products as another channel to gain revenue from the
extensive database of clinical images collected in the development of IVR
simulators. The Company further believes that the CD-ROM products that it plans
to develop will appeal to both medical students and practicing clinicians as
part of their personal libraries.
MARKETING, SALES, AND DISTRIBUTION
The Company has limited experience in sales, marketing and distribution. To
market any of its products directly, the Company must develop a marketing and
sales force with technical expertise and with supporting distribution
capability. Alternatively, the Company may obtain the assistance of another
company with a large distribution system and a large sales force. There can be
no assurance that the Company will be able to establish sales and distribution
capabilities or enter into profitable arrangements with third parties with
respect to distribution of its products. To the extent the Company enters into
co-promotion or other licensing arrangements, any revenues received by the
Company will be dependent on the efforts of third parties and there can be no
assurance that third party efforts will be successful. The Company is dependent
on its relationship with Baxter for a variety of reasons, and the termination of
this relationship could have a material adverse effect on the Company. Pursuant
to a distribution agreement between Baxter and the Company, Baxter has an
exclusive right to sell Preview for use in connection with treating aortic and
iliac aneurysms (except with regard to parties developing or manufacturing
devices specifically designed for endovascular treatment of aortic aneurysms for
which Baxter's rights are co-exclusive with the Company's), including AAA. Sales
of Preview for use in treating aortic and iliac aneurysms and the Company's
financial results will depend in significant part on the extent to which Baxter
commits adequate resources to its product launch and to the subsequent marketing
of Preview. Baxter develops, manufactures and markets a wide variety of medical
devices, some of which may compete indirectly with Preview. There can be no
assurance that Baxter will commit significant resources to market Preview for
use in treating aortic and iliac aneurysms or that its marketing activities will
be effective. See "--Baxter Distribution Agreement."
The Company currently markets Preview for use in connection with AAA
through Baxter and through the Company's direct sales force. Sales of Preview
for other applications and sales of the Company's IVR simulators will be made
either through the Company's direct sales force, through distributors, by means
of collaborative arrangements, or by a combination of these methods.
In connection with the Company's initial marketing efforts, the Company has
established a Medical Advisory Board comprised of vascular surgeons,
gastroenterologists, family practitioners and other prominent surgeons. The
Company also plans to sponsor training programs designed to increase clinician
familiarity with the advantages of and applications for the Company's products.
BAXTER DISTRIBUTION AGREEMENT
In May 1996, the Company entered into a distribution agreement with Baxter,
a wholly-owned subsidiary of which is a principal stockholder of the Company,
pursuant to which Baxter has obtained an exclusive right to sell Preview for use
in connection with treating aortic and iliac aneurysms (except with regard to
parties developing or manufacturing devices specifically designed for
endovascular treatment of aortic aneurysms for which Baxter's rights are
co-exclusive with the Company's), including AAA. The Company has retained all
other rights, except as otherwise set forth below, with respect to the
marketing, sales and distribution of models generated using its Preview
technology. Under the distribution agreement, Baxter is entitled to receive
between 23% and 30% of all revenue generated from its Preview sales. Baxter is
currently developing products
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<PAGE> 36
for the less invasive treatment of aneurysms and has publicly announced plans to
include Preview in its product line.
Under the terms of the distribution agreement, Baxter has a right of first
offer to negotiate distribution agreements for any future products the Company
develops in the fields of peripheral vascular surgery and/or endovascular
grafting. Baxter also has the right to cause the Company to develop, at Baxter's
sole expense, a custom product based on the Company's Preview technology for use
in treating aortic aneurysms which would be marketed, distributed and sold
exclusively by Baxter. The term of the distribution agreement is five years, and
will be automatically extended for an additional five years unless Baxter
provides written notice of termination. The parties can each terminate the
distribution agreement under certain circumstances, including the material
breach by the other party. In addition, the Company can terminate the
distribution agreement if Baxter fails to achieve certain minimum sales figures.
See "Certain Transactions."
Baxter has agreed not to sell any products that are directly competitive
with the products distributed on behalf of the Company pursuant to the
distribution agreement. Baxter has also agreed to advertise and promote Preview
for use in connection with treating aortic and iliac aneurysms.
The Company believes that its distribution arrangement with Baxter will
enable it to establish a presence for Preview in the market more quickly and on
a more cost-effective basis than it could achieve by approaching the market
solely with its own sales and marketing network.
Pursuant to a manufacturing license agreement entered into between Baxter
and the Company in May 1996, during the term of the distribution agreement
between the parties, Baxter is entitled to obtain the right to produce or cause
third parties to produce its requirements of Preview models for use in
connection with treating aortic and iliac aneurysms in the event that the
Company is unable to supply its requirements in a timely manner. Baxter's right
to produce Preview models or have them produced will expire, in any instance
where Baxter has asserted its rights to produce Preview models, three months
after the Company notifies Baxter in writing that it can again meet its
requirements. If the Company were to surrender any rights with respect to
producing Preview models to Baxter, it could have a material adverse effect on
the Company's business, results of operations and financial condition.
MEDICAL ADVISORY BOARD
The Company has established a Medical Advisory Board composed of clinicians
with extensive expertise in the fields related to the Company's products. The
members are available to review product plans, identify clinical applications,
and consult as needed with the Company's staff. The members of the Medical
Advisory Board are consultants to the Company and have substantial constraints
on the amount of time they can devote to Company matters. The members of the
Medical Advisory Board are as follows:
<TABLE>
<CAPTION>
NAME OCCUPATION/TITLE
- - --------------------------------- ----------------------------------------------------------
<S> <C>
Mark Fillinger, M.D. Assistant Professor of Vascular
Surgery--Dartmouth-Hitchcock Medical Center, Lebanon, NH.
Richard Kozarek, M.D. Chief of Gastroenterology--Virginia Mason Hospital,
Seattle, WA
Benjamin Krevsky, M.D. Associate Chairman, Gastroenterology--Temple University,
Philadelphia, PA
Simon K. Lo, M.D. Director of Endoscopy--University of California, Los
Angeles-Harbor Medical Center
Mark D. Noar, M.D. Director--Endoscopic Microsurgery Associates, Baltimore,
MD
J. Patrick O'Leary, M.D. Head, Department of Surgery--Louisiana State University,
Baton Rouge, LA
John Payne, M.D. Head, Department of Surgery--Kaiser, Honolulu, HI
Wm. MacMillan Rodney, M.D. Chairman, Department of Family Medicine--University of
Tennessee, Knoxville, TN
</TABLE>
34
<PAGE> 37
<TABLE>
<CAPTION>
NAME OCCUPATION/TITLE
- - --------------------------------- ----------------------------------------------------------
<S> <C>
Joseph Rosen, M.D. Associate Professor of Surgery, Division of Plastic and
Reconstructive Surgery--Dartmouth-Hitchcock Medical
Center, Lebanon, NH
Michael Tuggy, M.D. Faculty and Procedural Trainer, Department of Family
Medicine-- Swedish Medical Center, Seattle, WA
</TABLE>
Additional medical advisors and consultants have been made available to the
Company though its distribution agreement with Baxter. The following individuals
are ongoing consultants to Baxter's Vascular Systems Division who have been
involved in advising the Company with respect to Preview:
<TABLE>
<CAPTION>
NAME OCCUPATION/TITLE
- - --------------------------------- ----------------------------------------------------------
<S> <C>
Hugh Beebe, M.D. Director--Jobst Vascular Center, Toledo, Ohio
Thomas J. Fogarty, M.D. Professor of Surgery--Stanford Medical Center, Stanford,
CA
John Martin, M.D. Horizon Vascular Institute, Montgomery General Hospital,
Montgomery, AL
Geoff White, M.D. Chief of Vascular Surgery--Royal Prince Albert Hospital,
Sydney, Australia
Weiyun Yu, M.D. Assistant Chief of Vascular Surgery--Royal Prince Albert
Hospital, Sydney, Australia
</TABLE>
MANUFACTURING
Preview is software-based and DataFusion and the Company's IVR simulators
will include both software and hardware. Relatively few of the hardware
components contained in DataFusion and the Company's IVR simulators are expected
to be unique to such products. The Company's manufacturing experience to date
has been limited to the processing of a limited number of Preview models and the
assembly of a limited number of pre-production units of GastroSim. In order to
achieve significant revenue, the Company will have to produce or arrange for
third parties to produce its products on a commercial scale. There can be no
assurance that the Company will be able to produce or cause third parties to
produce its products in commercial-scale quantities at commercially viable
costs. The Company may encounter unexpected delays or costs in scaling-up
manufacturing operations or in hiring and training additional personnel to
produce its products. The failure to scale-up manufacturing successfully in a
timely or cost-effective manner, future production problems or interruptions in
supply could have a material adverse effect on the Company's business, results
of operations and financial condition.
The Company anticipates that certain key components of GastroSim and
DataFusion will be obtained from single or limited sources, will be available
only in limited quantities and will require substantial production lead times.
The Company's reliance on outside vendors generally, and a single qualified
source or a limited group of suppliers, in particular, involves several risks,
including a potential inability to obtain an adequate supply of required
components and reduced control over quality, pricing and timing of delivery of
components.
The Company will be required to adhere to applicable regulatory
requirements, including FDA-mandated current Good Manufacturing Practices
("GMPs") regulations in the processing of Preview models and the eventual
manufacture of DataFusion. Any failure to meet such requirements could delay or
prohibit the manufacturing of the Company's products, which, could have a
material adverse effect on the Company's business, results of operations and
financial condition.
Pursuant to an agreement between Baxter and the Company, Baxter is entitled
to obtain the right to produce, or have third parties produce, its requirements
of Preview models in the event the Company is unable to supply its requirements
in a timely manner. See "--Baxter Distribution Agreement."
35
<PAGE> 38
PRODUCT DEVELOPMENT
Ixion spent approximately $951,000, $1,189,000 and $1,332,000 on research
and development in 1993, 1994 and 1995, respectively. MMS spent approximately
$2,346,000, $1,693,000 and $1,540,000 on research and development in 1993, 1994
and 1995, respectively. The Company expects that it will continue to spend
substantial amounts on the development of products, and there can be no
assurance that any new products will be successfully developed or
commercialized. As of May 31, 1996, the Company had 12 persons engaged in
development activities.
COMPETITION
Competition in the markets in which Preview and the Company's products
under development will compete is expected to be intense. A number of companies
currently compete or intend to compete directly and indirectly with the
Company's existing products and products under development. Many of the
Company's competitors and potential competitors have substantially greater name
recognition and capital resources than the Company and also have greater
resources and expertise in the areas of research and development.
The markets in which Preview and the Company's products under development
will compete are characterized by rapid technological innovation. There can be
no assurance that the Company's competitors and potential competitors will not
succeed in developing and marketing technologies and products that are more
effective or more cost effective than those developed and marketed by the
Company or that would render the Company's technology and products obsolete or
noncompetitive. The applications for which Preview and the Company's products
under development are designed can also be addressed by other products, methods
or techniques, many of which are widely accepted in the medical community. There
can be no assurance that Preview or the Company's products under development
will be able to replace such established products, methods or techniques.
Additionally, new products could be developed that replace or reduce the
importance of the Company's products.
Preview. The Company believes that Preview competes with three-dimensional
imaging applications developed for traditional radiology workstations and
general purpose software visualization systems. Existing radiology workstations
with three-dimensional modeling capabilities include the Allegro Workstation
from ISG Technologies, Inc., Analyze software from the Mayo Clinic and CN
Software Inc., Advantage Windows from General Electric, EasyVision from
Phillips, Magic View from Siemens, and OmniPro from Algotec/Elscint. Other
companies believed to be developing products in this area include Picker, VoxL,
Cemax-Ikon and Toshiba. Suppliers of visualization software systems include AVS,
Inc., Iris Explorer, NAG, Inc., Data Explorer, KB Vision, Amerinex, Artificial
Intelligence, Inc., Interactive Data Language, Inc., VoxelView and Vital Images,
Inc. The Company believes that the primary competitive factors in the market for
three-dimensional imaging include efficacy, ease of use, quality, reliability
and cost effectiveness. In addition, the length of time required for products to
be developed and to receive regulatory approval is an important competitive
factor. The Company believes that it competes favorably with respect to these
factors, although there can be no assurance that it will continue to do so.
IVR Simulators. The Company anticipates that its IVR simulators will
compete directly against other medical procedure simulators and, to a lesser
extent, against print textbooks, interactive software, and other methods of
training for conducting surgical procedures, including performing procedures on
animals and cadavers. The Company believes that the primary competitive factors
in the market in which its IVR simulators are expected, when completed, to
compete will be cost and the ability of simulators to provide a realistic
environment in which to practice procedures. The Company believes that the
numerous years of research and development that it has performed in the area of
simulation, allows it to compete favorably with respect to these factors,
although there can be no assurance that it will continue to do so. The Company
expects that the number of competing IVR simulators will increase as the
potential benefits of medical procedure simulators become more widely
recognized. The Company is aware that each of Boston Dynamics, Cine Med and High
Techsplanations, as well as a number of universities and research institutions,
are attempting to develop technologies and products that would directly compete
with the Company's IVR simulators.
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<PAGE> 39
CD-ROM Products. The interactive software publishing industry is intensely
competitive. The Company's sales of the CD-ROMs that it develops, if any, may be
adversely affected by the increasing number of competitive products. The
Company's software titles are expected, when completed, to compete directly with
educational software products on various medical topics and, to a lesser extent,
with traditional print textbooks on various medical topics. There are a large
number of competitors in this market, including Engineering Animation, Inc.,
A.D.A.M. Software, Inc. and IVI Publishing, Inc. Moreover, as the market for
interactive software continues to develop, the Company expects that it will be
faced with many new competitors.
GOVERNMENT REGULATION
Preview is and DataFusion, when developed, will be subject to government
regulation in the United States and other countries. In the United States, the
Federal Food, Drug, and Cosmetic Act, as amended ("FDC Act"), and other statutes
and regulations govern the testing, manufacture, labeling, storage, record
keeping, distribution, sale, marketing, advertising and promotion of such
medical devices. Failure to comply with applicable requirements could result in
fines, recall or seizure of products, total or partial suspension of production,
withdrawal of existing product approvals or clearances, refusal to approve or
clear new applications or notices and criminal prosecution.
Prior to commercial distribution in the United States, most medical devices
must be cleared or approved by the FDA. The regulatory process is lengthy
(potentially taking up to several years), expensive and uncertain. Under the FDC
Act, medical devices are classified into one of three classes on the basis of
the controls necessary to reasonably ensure their safety and effectiveness.
Class I devices are those whose safety and effectiveness can reasonably be
ensured through general controls, such as labeling, premarket notification and
adherence to FDA-mandated current GMPs. Class II devices are those whose safety
and effectiveness can reasonably be ensured through the use of "special
controls," such as performance standards, post-market surveillance, patient
registries and FDA guidelines. Class III devices are devices that must receive
PMA from the FDA to ensure their safety and effectiveness. They are generally
life-sustaining, life-supporting, or implantable devices, and also include most
devices that were not on the market before May 18, 1976 ("new devices") and for
which the FDA has not made a finding of substantial equivalence based upon a
510(k).
Before a new device can be introduced into the market, the manufacturer
generally must obtain FDA clearance of a 510(k) or approval of a PMA
application. Following submission of a 510(k) or PMA application, the
manufacturer may not market the new device until an order is issued by the FDA
granting clearance or approval. While the Company has obtained FDA clearance
pursuant to a 510(k) to distribute Preview models of many anatomical regions,
even after FDA clearance the Company's application for clearance is subject to
continual review, and the later discovery of previously unknown problems may
result in restrictions on Preview's marketing or withdrawal of the product from
market. Withdrawal of the Company's 510(k) clearance with respect to Preview
could have a material adverse effect on the Company's business, results of
operations and financial condition.
Modification or enhancement of a product that has been cleared through the
510(k) process requires clearance of a new 510(k) if the modification or
enhancement could significantly affect the safety or effectiveness of the
original device. Since 510(k) clearance was obtained for Preview, the Company
has made, and anticipates the need to make additional improvements in the device
and its labeling. The Company has not sought 510(k) clearance for any of these
improvements in the device and its labeling, and currently, on the basis of the
Company's conclusion that none of the improvements or labeling changes could
significantly affect the safety or effectiveness of the original product, does
not intend to seek such clearance. Under the FDA's regulatory scheme, the
decision whether to seek 510(k) clearance for a modified device is left first to
the manufacturer. There can be no assurance, however, that the FDA would agree
with the Company's conclusion, that the FDA would not require the Company to
cease marketing and obtain 510(k) clearance for Preview (as improved), or that
such clearance, if required, would be obtained.
The Company believes that it will be necessary to file a PMA application
with respect to DataFusion. The PMA process is significantly more complex,
expensive and time consuming than the 510(k) process. The PMA process requires
the performance of at least two independent, statistically significant clinical
trials that
37
<PAGE> 40
must demonstrate the safety and effectiveness of the device in order to obtain
FDA approval of the PMA application. The PMA process typically requires several
years, and may never result in approval.
The Company does not believe that its IVR simulators would be subject to
FDA review or approval or any other governmental reviews. However, in the event
the FDA or any foreign regulatory body determined to regulate such products, no
assurance can be given that compliance with such regulatory process will be
achieved or that necessary clearances will be obtained in a timely manner, if at
all.
The FDC Act requires that medical devices be manufactured in accordance
with current GMPs. These regulations require, among other things that (i) the
manufacturing process be regulated and controlled by the use of written
procedures and (ii) the ability to produce devices which meet the manufacturer's
specifications be validated by extensive and detailed testing of every aspect of
the process. They also require investigation of any deficiencies in the
manufacturing process or in the products produced and detailed record keeping.
Manufacturing facilities are therefore subject to FDA inspection on a periodic
basis to monitor compliance with current GMPs. If violations of the applicable
regulations are noted during FDA inspections of the Company's manufacturing
facilities or the manufacturing facilities of its contract manufacturers, if
any, there could be a material adverse effect on the continued marketing of the
Company's products.
The FDA regulates computer software that performs the function of a
regulated device or that is intimately associated with a given device, such as
control software for imaging or other diagnostic devices. The FDA is in the
process of re-evaluating its regulation of such software, and if the FDA
undertakes increased or more rigorous regulation of such software (which the
Company cannot predict), Preview and DataFusion may become subject to further
regulatory processes and clearance requirements. No assurance can be given that
compliance with more extensive regulatory processes will be achieved or that the
necessary clearances for such products will be obtained by the Company on a
timely basis, if at all. The Company may, as a result, be required to expend
additional time, resources and effort in the areas of software design,
production and quality control to ensure full technical compliance.
Laws and regulations regarding the manufacture, sale and use of medical
devices are subject to change and depend heavily on administrative
interpretations. There can be no assurance that future changes in the
regulations or interpretations made by the FDA or other regulatory bodies, with
possible retroactive effect, will not adversely affect the Company.
The Company plans to sell its products in several foreign markets.
Requirements pertaining to such products vary widely from country to country,
ranging from simple product registrations to detailed submissions such as those
required by the FDA. The Company believes the extent and complexity of
regulation of medical devices is increasing worldwide. The Company anticipates
this trend will continue and that the cost and time required to obtain approval
to market in any given country will greatly increase, with no assurance that
such approval will be obtained. The ability to export into other countries may
require compliance with ISO 9000 and CE Mark certifications, which are analogous
to and in some instances more rigorous than compliance with the FDA's GMPs. The
Company has not obtained any regulatory approvals to market any of its products
outside of the United States, no regulatory clearances or certifications have
yet been applied for in any country other than the United States and there is no
assurance that any such clearance or certification, if applied for, would be
issued.
The Company, its existing product and future products, if any, may be
subject to a variety of laws and regulations in those states and countries where
such products are or will be marketed. These restrictions may hinder the
Company's ability to market such products in those states or countries.
PATENTS AND PROPRIETARY RIGHTS
The Company's success is dependent, in part, upon its extensive proprietary
technology. The Company relies on a combination of patent, trade secret,
copyright and trademark protection and nondisclosure agreements to protect its
proprietary rights. As of May 31, 1996, the Company has one issued United States
patent, U.S. Patent No. 4,907,973 for an expert system simulator for modeling
realistic internal environments and performance, and has filed applications for
certain additional United States and foreign patents primarily related to
medical imaging systems and methodology. The Company intends to file additional
patent applications in the future. There can be no assurance that the Company
will be issued any patents or that if
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<PAGE> 41
any patents are issued they will provide the Company with significant protection
or will not be challenged. Even if issued patents are enforceable, the Company
anticipates that any attempt to enforce its patents would be time consuming and
costly. Moreover, the laws of some foreign countries do not protect the
Company's proprietary rights in its products to the same extent as do the laws
of the United States.
The Company's patent positions are uncertain and involve complex legal and
factual issues. Additionally, the coverage originally claimed in a patent
application can be significantly reduced before the patent application is
allowed and a patent is created. As a consequence, there can be no assurance
that any of the Company's patent applications will result in the issuance of
patents or, if any patents issue, that they will provide significant proprietary
protection or will not be circumvented or invalidated. Because patent
applications in the United States are maintained in secrecy until patents issue
and publication of discoveries in scientific or patent literature often lag
behind actual discoveries, the Company cannot be certain that it was the first
inventor of inventions covered by its pending patent applications or that it was
the first to file patent applications for such inventions. Moreover, the Company
may have to participate in interference proceedings declared by the United
States Patent and Trademark Office ("PTO") to determine priority of invention
which could result in substantial cost to the Company, even if the eventual
outcome is favorable to the Company. There can be no assurance that the
Company's patents if issued would be held valid by a court of competent
jurisdiction. An adverse outcome could subject the Company to significant
liabilities to third parties, require disputed rights to be licensed from or to
third parties or require the Company to cease using the technology in dispute.
The Company has not been advised nor is it aware of any infringement of the
proprietary rights of others by the Company's existing product. With respect to
the Company's products under development, the Company has not been advised nor
is it aware of any proprietary rights of others which would prevent the Company
from completing and commercializing such products. There can be no assurance
that third parties will not assert infringement claims against the Company in
the future or that any such assertions will not result in costly litigation or
require the Company to obtain a license to intellectual property rights of such
parties. There can be no assurance that any such licenses would be available on
terms acceptable to the Company, if at all. Furthermore, parties making such
claims may be able to obtain injunctive or other equitable relief that could
effectively block the Company's ability to further develop or commercialize its
products in the United States and abroad and could result in the award of
substantial damages. Defense of any lawsuit or failure to obtain any such
license could have a material adverse effect on the Company. Finally,
litigation, regardless of outcome, could result in substantial cost to and a
diversion of efforts by the Company.
The Company may require additional technology in the development of its
products to which the Company does not currently have rights. If the Company
determines that this additional technology is relevant to the development of its
products and further determines that a license to this additional technology is
needed, there can be no assurance that the Company can obtain a license from the
relevant party or parties on commercially reasonable terms, if at all. There can
be no assurance that the Company can obtain any license to any technology that
the Company determines it needs, on reasonable terms, if at all, or that the
Company could develop or otherwise obtain alternate technology. The failure of
the Company to obtain licenses, if needed, could have a material adverse effect
on the Company.
As part of its confidentiality procedures, the Company generally enters
into nondisclosure agreements with its employees and suppliers, and limits
access to and distribution of its proprietary information. Despite these
precautions, it may be possible for a third party to copy or otherwise obtain
and use the Company's technology without authorization. In addition, competitors
may be able to engineer around the Company's patents and trade secrets, or
reverse-engineer around its trade secrets. Accordingly, there can be no
assurance that the Company will be successful in protecting its proprietary
technology or that the Company's proprietary rights will preclude competitors
from developing products or technology equivalent or superior to that of the
Company.
ETHICON LICENSE AGREEMENT
The Company has succeeded to Ixion's rights and obligations under a 1992
research, option and license agreement ("License Agreement") between Ixion and
Ethicon Endo-Surgery ("Ethicon"), which called for
39
<PAGE> 42
Ixion to design, develop and deliver a laparoscopic surgical skills simulator.
Pursuant to the License Agreement, the Company has granted Ethicon an exclusive
world-wide license to use the Company's IVR simulator technology in the field
defined in the License Agreement.
Pursuant to the License Agreement, the Company is entitled to receive from
Ethicon, with respect to sales of the laparoscopic skills simulator, continuing
royalty payments of at least $50,000 per calendar quarter through the first
quarter of 1999. Ethicon has not tendered to the Company the $50,000 minimum
royalty payment for the quarter ended March 31, 1996. If Ethicon does not make
this payment to the Company it will lose its exclusivity with respect to the
laparoscopic skills simulator.
In April 1995, Ethicon indicated in certain correspondence that it believes
it has rights beyond its license to the laparoscopic skills simulator delivered
pursuant to the License Agreement to source code, software, hardware, firmware
and related intellectual property incorporated in such simulator. The Company
believes that there is no basis to support this position under the terms of the
License Agreement and believes that it should prevail if litigation were
commenced. However, litigation is subject to inherent uncertainties, especially
in cases where complex technical issues are decided by a lay jury. Accordingly,
no assurance can be given that, if a lawsuit is commenced, it would not be
decided against the Company. Such an adverse determination could have a material
adverse effect upon the Company's business, results of operations and financial
condition.
EMPLOYEES
As of May 31, 1996, the Company had 21 full-time employees and 4 part-time
employees, including 12 persons engaged in research and development, 4 persons
engaged in manufacturing and marketing, 1 person engaged in medical education
and training, and 8 persons engaged in administration, management, operations
and finance. The Company considers its relations with its employees to be good.
None of the Company's employees are represented by labor unions.
FACILITIES
The Company's research and development facilities are located in (i)
Seattle, Washington, where it occupies approximately 4,000 square feet of
office, research and development space pursuant to two leases with unaffiliated
parties at a combined monthly rent of approximately $4,500, expiring in December
1996 and (ii) West Lebanon, New Hampshire, where it occupies approximately 3,300
square feet of office, research and development space pursuant to a lease with
an unaffiliated party at a monthly rent of approximately $3,500, expiring in
July 1997.
The Company's principal executive offices are located in New York, New York
where it occupies approximately 1,000 square feet of office space at a monthly
rent of approximately $1,800, pursuant to a lease expiring in December 1997.
The Company anticipates a need for larger corporate offices and
manufacturing facilities and does not expect any interruption in the operation
of its business in connection with any move to a new location.
LEGAL PROCEEDINGS
From time to time the Company may be exposed to litigation arising out of
its products and operations. As of the date of this Prospectus, the Company is
not engaged in any legal proceedings that are expected, individually or in the
aggregate to have a material adverse effect on the Company, except that an
assignee of a law firm at which the Company's Secretary formerly practiced law
has initiated a lawsuit in a Washington state court for approximately $200,000
of legal fees which are allegedly past due. The Company denies owing these fees
and intends to vigorously defend this lawsuit. In addition, the Company and
Ethicon are in a dispute. See "--Ethicon License Agreement."
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<PAGE> 43
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company as of June 28, 1996 are
as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- - ----------------------------------- --- ----------------------------------------------------
<S> <C> <C>
Bruce D. Sturman................... 40 President, Chief Executive Officer and Director
Greg Claypool...................... 33 Vice President, Clinical Education
Thomas E. Mignanelli............... 48 Vice President, Finance and Chief Financial Officer
Valentino V. Montegrande........... 52 Vice President, Marketing
Steven D. Pieper, Ph.D............. 33 Vice President, Chief Technical Officer and Director
Harold J. Walbrink................. 44 Vice President, Manufacturing
James C. Caillouette, M.D.......... 69 Director
David C. Hon....................... 53 Director
Charles E. Hutchinson, Ph.D.(1).... 60 Director
John R. Lyon(1)(2)................. 50 Director
Leo C. McKenna(2).................. 62 Director
</TABLE>
- - ---------------
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
Mr. Sturman has served as the Company's President, Chief Executive Officer
and a director since May 1996. From November 1993 to May 1996, Mr. Sturman
served as Chief Executive Officer and a director of Ixion. From July 1992 to
November 1993, Mr. Sturman was a self-employed strategic and financial
consultant to various corporations. He also served as Co-Chairman of the Board
of Directors of The Cooper Companies, Inc. ("Cooper"), a publicly traded
healthcare company, from August 1989 to July 1992 and as a Senior Consultant to
Cooper from July 1988 to August 1989. He is currently Chairman of the Board of
Maxal Capital Corporation ("Maxal"), a privately-held merchant banking and
consulting company.
Mr. Claypool has served as Vice President, Clinical Education of the
Company since May 1996. Prior to joining the Company, Mr. Claypool was Vice
President of Ixion from March 1995 to May 1996. From August 1991 to March 1995,
Mr. Claypool was employed with U.S. Surgical Corporation, a publicly traded
healthcare company, as Manager of Education.
Mr. Mignanelli joined the Company in June 1996 and will serve as the
Company's Vice President, Finance and Chief Financial Officer. From February
1996 to June 1996, Mr. Mignanelli was Chief Information Officer and from May
1993 to June 1996 he served as Vice President of Finance and Chief Financial
Officer of Petals, a privately-held company in the business of manufacturing and
marketing home accessories. He also was Controller of Petals from November 1990
to May 1993. From 1982 to 1987, Mr. Mignanelli was Vice President and General
Manager of Cooper Lasersonics, Inc., a manufacturer of surgical laser systems
and a subsidiary of Cooper. From 1978 to 1981, Mr. Mignanelli also served as
Corporate Controller and Assistant Treasurer of Ealing Corporation, a
publicly-traded manufacturer of scientific and medical instruments.
Mr. Montegrande has served as the Company's Vice President, Marketing since
May 1996. From March 1994 to May 1996, he was Executive Vice President,
Marketing of Ixion. Since January 1995, he also has served as Chief Executive
Officer and Managing Partner of Global Nexus, Inc., a domestic and international
consulting business specializing in strategic marketing within the medical
industry. Since September 1980, Mr. Montegrande also has been President and
Chief Executive Officer of V. Montegrande & Co., Inc., a strategic management
consulting business. Mr. Montegrande is currently a director of NT Company, a
privately-held dental products company and a director of Tycom Dental, a
privately-held dental products company.
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<PAGE> 44
Dr. Pieper has served as the Company's Vice President and Chief Technical
Officer and a director since the Company's formation in April 1996. From October
1995 to May 1996, Dr. Pieper was President of MMS. From November 1992 to October
1995, Dr. Pieper was Director of Technical Staff, Vice President of Research and
Development and a member of the Management Committee of MMS. Dr. Pieper was also
an Assistant Professor of Engineering Sciences at the Thayer School of
Engineering at Dartmouth College ("Thayer") from September 1991 to July 1994 and
remains an adjunct Assistant Professor of Engineering at Thayer. Dr. Pieper was
also a Research Assistant at the Massachusetts Institute of Technology Media
Laboratory from September 1986 to August 1991.
Mr. Walbrink has served as Vice President, Manufacturing, of the Company
since May 1996. Prior to joining the Company, Mr. Walbrink served as Vice
President, Manufacturing of Ixion, a position held since April 1995. Since
January 1995, Mr. Walbrink also has served as President of Xinetix Technologies,
Inc. ("Xinetix"), a privately held company which provides consulting services to
start-up and early stage medical device companies. From January 1990 to March
1995, he served as Senior Vice President of Birtcher Medical Systems, Inc., a
publicly-traded medical device company.
Dr. Caillouette has served as a director of the Company and also on the
Company's Medical Advisory Board since May 1996. Since July 1959, he has been
President and Chief Executive Officer of James C. Caillouette, M.D., Inc., a
medical practice. In addition, Dr. Caillouette is currently serving as Chairman
of the Department of Obstetrics and Gynecology at Huntington Memorial Hospital
in Pasadena, California, with which he has been associated since July 1959. Dr.
Caillouette has been a Clinical Professor of Obstetrics and Gynecology at the
University of Southern California School of Medicine since 1969.
Mr. Hon has served as a director of the Company since May 1996. From
September 1983 to May 1996 he served as President of Ixion. Mr. Hon also was the
Director of Advanced Technology Development for the American Heart Association
from 1977 to 1983.
Dr. Hutchinson has served as a director of the Company since May 1996. Dr.
Hutchinson was Dean of Thayer from July 1984 to June 1994, and since July 1994
has remained as a Professor of Engineering at Thayer. Dr. Hutchinson is
currently a director of Specialty Equipment Companies, Inc., a publicly traded
domestic manufacturer of food service equipment, Hypertherm Incorporated, a
privately-held plasma cutting equipment company and Markem Corporation, a
privately-held designer and manufacturer of printing systems.
Mr. Lyon has served as a director of the Company since May 1996. Since July
1993, he has been President, Chief Executive Officer and a director of Vista
Medical Technologies ("Vista"), a privately held company with enabling
technology for minimally invasive surgical procedures. Mr. Lyon joined Kaiser
Aerospace and Electronics Corporation in January 1993 to develop the business
plan for Vista, and when Vista was incorporated in July 1993, Mr. Lyon was named
President. From January 1992 to January 1993, Mr. Lyon was President of
CooperSurgical Inc., a subsidiary of Cooper. From January 1991 to December 1992,
he was President, International Division of CooperSurgical, Inc.
Mr. McKenna has served as a director of the Company since May 1996. From
November 1993 to May 1996, Mr. McKenna served as an Administrative Officer and
Treasurer of MMS. Mr. McKenna has been self employed and served as a financial
consultant to various companies and individuals since 1974. He is also President
of Bashon Corp., a privately-held company in the business of licensing tabletop
products. Mr. McKenna is also a director of Life of Boston & New York, a
subsidiary of Boston Mutual Life, a mutual insurance company and a director of
Ledyard National Bank, a publicly-traded bank.
BOARD COMMITTEES
The Board of Directors has two standing committees: a Compensation
Committee and an Audit Committee. The Compensation Committee, consisting of
Charles E. Hutchinson and John R. Lyon, provides recommendations concerning
salaries and incentive compensation for executive officers and key personnel,
including stock options. Bruce D. Sturman, the Company's President and Chief
Executive Officer, participates in the deliberations of the Compensation
Committee regarding executive compensation, but does not take part in the
deliberations regarding his own compensation. The Audit Committee, consisting of
John R. Lyon and
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<PAGE> 45
Leo C. McKenna, recommends the Company's independent auditors and reviews the
results and scope of audit and other services provided by such auditors.
DIRECTOR COMPENSATION
Directors are not currently compensated for serving on the Board of
Directors. Following the closing of this Offering, the Company intends to pay
its outside directors $1,500 per Board meeting. No additional payments will be
made with respect to attendance at committee meetings. Outside directors also
will be eligible to receive stock options under the Company's 1996 Stock
Option/Stock Issuance Plan following the closing of this Offering. See
"--Benefit Plans--1996 Stock Option/Stock Issuance Plan."
EXECUTIVE COMPENSATION
The following table sets forth for the fiscal year ended December 31, 1995,
certain compensation of the Company's current President and Chief Executive
Officer and the other highest paid executive officers of the Company who earned
more than $100,000 in the fiscal year ended December 31, 1995 (collectively, the
"Named Executive Officers"). Because the Company was incorporated in April 1996
and acquired its assets and technology in May 1996 in connection with a business
combination involving Ixion and MMS, information shown below is as to
compensation which was paid by either Ixion or MMS during 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
FISCAL ------------------------ UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#)
- - ------------------------------------------------- ------ ---------- --------- ------------
<S> <C> <C> <C> <C>
Bruce D. Sturman(1).............................. 1995 $ 118,200 $-0- -0-
President, Chief Executive Officer and Director
Steven D. Pieper, Ph.D.(2)....................... 1995 $ 106,537 $ 4,891 -0-
Vice President, Chief Technical Officer and
Director
</TABLE>
- - ---------------
(1) For service as President and Chief Executive Officer of Ixion. Pursuant to a
consulting agreement entered into between Maxal and Ixion in May 1994,
Maxal agreed to provide the services of Mr. Sturman to Ixion in exchange
for payment to Maxal of $9,850 per month. Mr. Sturman is currently Chairman
of the Board of Maxal. See "--Employment Agreements" and "Certain
Transactions."
(2) For service as President of MMS. See "--Employment Agreements."
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<PAGE> 46
OPTION GRANTS IN LAST FISCAL YEAR
The Company was incorporated in April 1996 and accordingly no options were
granted during fiscal 1995. In addition, neither Ixion nor MMS ever granted
options to the Named Executive Officers. However, each of the Named Executive
Officers has received the stock option grants during fiscal year 1996 (through
May 31, 1996), as reflected in the following table:
OPTION/SAR GRANTS DURING FISCAL YEAR 1996
THROUGH MAY 31, 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
- - ---------------------------------------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED EXERCISE OR OPTION TERM
OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME GRANTED(1)(2) FISCAL YEAR(3) ($/SH)(4) DATE 5% ($)(5) 10% ($)(5)
- - ---------------------------- ------------- --------------- ----------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Bruce D. Sturman............ 75,000 29.4% $6.30 3/27/06 $ 297,153 $753,043
Steven D. Pieper, Ph.D...... 20,000 7.8% $6.30 3/27/05 $ 79,241 $200,812
</TABLE>
- - ---------------
(1) Options were granted under the Company's 1994 Stock Option Plan.
(2) Options were granted on May 27, 1996 and will vest over four years with 25%
vesting one year following the date of grant and the remainder of such
options vesting in 36 equal monthly installments upon completion of each
month of service beginning one year after date of grant.
(3) The Company granted options to acquire 255,000 shares of the Company's
Common Stock to the Company's directors, officers and employees on May 27,
1996.
(4) The exercise price per share of options granted represented the fair market
value of the underlying shares of Common Stock on May 27, 1996 as
determined by the Compensation Committee of the Board of Directors.
(5) There is no assurance provided to any executive officer or any other holder
of the Company's securities that the actual stock price appreciation over
the 10-year option term will be at the assumed 5% or 10% levels or at any
other defined level. Unless the market price of the Common Stock does in
fact appreciate over the option term, no value will be realized from the
option grants made to the executive officers.
OPTION EXERCISES IN LAST FISCAL YEAR
There were no option exercises by the Named Executive Officers in fiscal
year 1995 and as of May 31, 1996, there have been no option exercises in fiscal
year 1996. Pursuant to Item 402(a)(6) of Regulation S-K promulgated under the
Securities Act, the table containing option exercise information has been
omitted.
EMPLOYMENT AGREEMENTS
Pursuant to an employment agreement between the Company and Bruce D.
Sturman entered into in June 1996, Mr. Sturman receives an annual base salary of
$190,000, with a potential cash bonus of up to an additional 50% of his base
salary based on his performance and the achievement by the Company of certain
milestones. The term of the agreement is three years, with one year's severance
pay if Mr. Sturman is terminated without cause as defined in the agreement as a
result of certain performance related issues, pursuant to a vote of a
supermajority of the Board of Directors, or two years severance pay if Mr.
Sturman is otherwise terminated without cause. The agreement provides for
standard life, health and disability insurance benefits.
Pursuant to an employment agreement between the Company and Steven D.
Pieper entered into in May 1996, Mr. Pieper receives an annual base salary of
$101,600, with a potential cash bonus of an additional $30,480 and a potential
one time stock bonus of 30,000 shares of Common Stock based on his performance.
The term of the agreement is two years and is automatically extended for one
additional year absent the
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<PAGE> 47
Company's delivery of written notice to terminate at least 60 days prior to the
end of the initial two year period. If Mr. Pieper's employment is terminated
without cause as defined in the agreement, Mr. Pieper is entitled to his then
current compensation, including all deferred compensation and applicable
bonuses, through the end of the term of the agreement, but in no event greater
than one year. The agreement provides for standard life, health and disability
insurance benefits.
Pursuant to an employment agreement between Ixion and Greg Claypool entered
into in February 1995, the obligations under which were assumed by the Company
in May 1996, Mr. Claypool receives an annual base salary of $95,000, with a
potential cash bonus of an additional $38,000, a potential one time stock bonus
of 9,755 shares of Common Stock based on his performance and an additional
commission based performance incentive. The term of the agreement is two years.
If Mr. Claypool's employment is terminated without cause as defined in the
agreement, Mr. Claypool is entitled to his then current compensation, including
all deferred compensation and applicable bonuses, including commissions on sales
made but not paid in full, through the end of the term of the agreement. The
agreement provides for standard life, health and disability insurance benefits.
The Company has entered into or assumed consulting agreements with certain
of its officers and directors. See "Certain Transactions."
BENEFIT PLANS
1996 STOCK OPTION/STOCK ISSUANCE PLAN
The Company's 1996 Stock Option/Stock Issuance Plan (the "Plan") was
adopted by the Board of Directors on June 18, 1996 subject to approval by the
stockholders. It is expected that stockholder approval will be obtained prior to
the closing of this Offering. The Plan will become effective at the time the
Company's registration statement becomes effective. The Plan will serve as the
successor equity incentive program to Ixion's 1994 Incentive Stock Option Plan,
which has been assumed by the Company (the "Prior Plan"), and no further option
grants or stock issuances will be made under the Prior Plan following the
effective date of the Plan. All outstanding stock options and unvested share
issuances under the Prior Plan have been incorporated into the Plan but will
continue to be governed by the terms and conditions of the specific instruments
evidencing those options and issuances.
A total of 1,000,000 shares of Common Stock are authorized for issuance
under the Plan including 400,000 shares available under the Prior Plan and an
additional increase of 600,000 shares. Under the Prior Plan, 316,173 shares were
reserved for issuance under options outstanding on May 31, 1996, leaving 683,827
shares available for future option grants or share issuances on such date.
Shares reserved for issuance under granted options which are not actually issued
will again become available for option grants under the terms of the Plan.
The total number of shares authorized, as well as shares subject to
outstanding options, will be appropriately adjusted in the event of certain
changes to the Company's capital structure, such as stock dividends, stock
splits or other recapitalizations. The weighted average exercise price of
outstanding options under the Prior Plan, as of May 31, 1996 was approximately
$5.18.
The Plan is divided into two separate programs: the option grant program
and the stock issuance program. The Plan will be administered by the Board or by
a committee of two or more Board members appointed by the Board (the "Plan
Administrator"). The Plan Administrator will have complete discretion under the
option grant program and the stock issuance program to determine which eligible
individuals are to receive option grants or stock issuances, the number of
shares subject to each such grant or issuance, the status of any granted option
as either an incentive option (which potentially qualify for certain favorable
treatment under federal tax law) or a non-statutory option, the vesting schedule
to be in effect for the option grant or stock issuance and the maximum term for
which any granted option is to remain outstanding. Participation in such
programs is limited to employees (including officers and directors) and
consultants of the Company.
The exercise price for each incentive stock option must be at least 100% of
the fair market value of the stock on the date of the option grant. The exercise
price for each non-statutory option or for any share issuance under the Plan
must be at least 85% of the fair market value of the shares on the date of the
option grant or
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<PAGE> 48
stock issuance. The purchase price for any shares may be paid in cash, by
delivery of shares of Common Stock, or through a same-day sale program pursuant
to which the purchased shares will be sold immediately and a portion of the sale
proceeds applied to the payment of the purchase price. The Plan Administrator
may also permit a participant to deliver a promissory note in payment of the
purchase price and any tax liability incurred in connection with the purchase.
Options granted under the option grant program may be immediately
exercisable for all the option shares, on either a vested or unvested basis, or
may become exercisable for shares in one or more installments vesting over the
participant's period of service. Shares issued under the stock issuance program
may either be fully-vested or subject to a vesting schedule tied to future
service. All unvested shares will be subject to repurchase by the Company, at
the original purchase price paid for such shares, upon the participant's
cessation of service prior to vesting in the shares. However, the Plan
Administrator will have full discretionary authority to accelerate the
exercisability of any outstanding option grant or the vesting of any issued
shares.
Each option granted under the Plan will have a maximum term of ten years
and will be subject to earlier termination in the event of the optionee's
cessation of service. Incentive stock options are not assignable or transferable
by the optionee except in connection with the participant's death. Other options
are not assignable or transferable without the consent of the Plan
Administrator. The participant will have no stockholder rights with respect to
the shares subject to his or her outstanding options until such options are
exercised and the purchase price is paid for the shares. The participant will,
however, have full stockholder rights with respect to any shares issued under
the Plan.
Participants subject to federal or state tax withholding in connection with
any issuance of shares under the Plan may be permitted to apply a portion of the
shares issuable upon the exercise of their outstanding options to the
satisfaction of the federal and state withholding taxes incurred in connection
with such exercise. Alternatively, such participants may be permitted to deliver
existing shares of Common Stock in satisfaction of such tax liability. In either
case, the Company will pay cash to the appropriate government authority equal to
the fair market value of the stock as a deposit of taxes withheld.
Officers and directors of the Company may also be granted special stock
appreciation rights in connection with their options under which the outstanding
options can be surrendered for cancellation upon a hostile take-over of the
Company in return for a cash distribution from the Company, based on the excess
of the price per share paid by the acquiring entity in effecting the take-over
above the option exercise price. The limited stock appreciation rights may be
given to officers and directors receiving option grants. The Plan Administrator
may grant other stock appreciation rights with respect to option grants. The
other stock appreciation rights would provide the holders with the right to
receive an appreciation distribution from the Company equal to the excess of (i)
the fair market value (on the date such right is exercised) of the shares of
Common Stock in which the optionee is at the time vested under the surrendered
option over (ii) the aggregate exercise price payable for such shares. Such
appreciation distribution would be able to be made, at the Plan Administrator's
discretion, in shares of Common Stock valued at fair market value on the
exercise date, in cash or in a combination of cash and Common Stock.
In the event the Company is acquired, whether by merger or asset sale, each
outstanding option which is not to be assumed by the successor corporation or
replaced with a comparable option to purchase the capital stock of the successor
corporation will automatically accelerate in full, and all unvested shares will
automatically vest, except to the extent such accelerated vesting is precluded
by the terms of the agreements evidencing those unvested shares. The Plan
Administrator can apply this acceleration to options outstanding under the Prior
Plan.
The Plan provides for the automatic acceleration of outstanding options and
the vesting of unvested shares upon the following change in control events: (i)
the acquisition of more than 50% of the Company's voting stock by hostile tender
offer or (ii) a change in the composition of the Board effected through one or
more contested Board elections, except that the Plan Administrator may at the
time of a option grant or stock issuance, provide that no such acceleration
shall occur. However, no unvested options or stock issuances under the Prior
Plans will accelerate in connection with any such change in control unless the
Plan Administrator has determined to grant such acceleration.
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<PAGE> 49
To the extent outstanding options terminate prior to exercise, the shares
subject to those options will be available for subsequent grant. In addition,
the Plan Administrator may effect cancellation/regrant programs pursuant to
which outstanding options under the option grant program (including options
incorporated from the Prior Plans) are cancelled and new options are granted for
the same or different number of option shares at an exercise price per share not
less than 85% of the fair market value of the Common Stock on the new grant
date.
The Board may amend or modify the Plan at any time, and may make any such
amendment subject to stockholder approval. The Plan will terminate 10 years from
the date on which shares of the Company's Common Stock are first registered
under the Securities Exchange Act of 1934, as amended, unless sooner terminated
by the Board.
1996 EMPLOYEE STOCK PURCHASE PLAN
On June 18, 1996, the Board of Directors adopted, subject to stockholder
approval, the 1996 Employee Stock Purchase Plan (the "Purchase Plan") covering
an aggregate of 200,000 shares of Common Stock. It is expected that stockholder
approval will be obtained prior to the closing of this Offering. The Purchase
Plan is intended to qualify as an employee stock purchase plan within the
meaning of Section 423 of the Internal Revenue Code of 1986, as amended. Under
the Purchase Plan, eligible employees, including officers, will be entitled to
participate in periodic offerings following the commencement of the Purchase
Plan. The initial offering under the Purchase Plan will commence on the
effective date of a Registration Statement on Form S-8 covering the shares of
Common Stock issuable under the Purchase Plan (which the Company intends to file
on the effective date of this Offering), and will terminate in December 1997.
Each subsequent offering period will coincide with calendar years. The Purchase
Plan will terminate on the earlier of December 31, 2005 or the date on which all
shares available under the Purchase Plan have been purchased by the
participants.
Employees are eligible to participate if they are employed by the Company
for at least 20 hours per week and at least five months per year. All employees
of the Company on the commencement date of the initial offering period can join
that period. Thereafter, only employees who have been employed by the Company
for at least three months will be allowed to participate. Employees eligible to
participate in an offering can elect to have up to 15% of their base salary
withheld under the Purchase Plan and used to purchase shares of the Common Stock
at quarterly intervals. The price of Common Stock purchased under the Purchase
Plan will be equal to 85% of the lower of the fair market value of the Common
Stock on (i) the commencement date of the offering period or (ii) the purchase
date. Persons not eligible to participate at the commencement of an offering
period may join that offering period on the first day of any quarter in which
they meet the eligibility requirements. Employees may end their participation in
the offering at any time during the offering period, except the last five days
of that period, and participation ends automatically on termination of
employment with the Company. Employees who do not join an offering period when
first permitted to do so, or who end their participation in any offering period,
may not participate again until the next offering period. Employees may alter
their level of participation on a limited basis.
No participant may accrue rights to purchase more than $25,000 of stock in
any calendar year. Upon an acquisition of the Company, the outstanding payroll
deductions will be immediately applied to the purchase of Common Stock.
The Purchase Plan may be terminated at any time by the Board. Unless sooner
terminated the Purchase Plan will terminate on the earlier of December 31, 2005
or the date on which all shares available under the Purchase Plan have been
issued. The Purchase Plan may be amended by the Board at any time, provided that
the Board may make any amendment of the Purchase Plan conditional on obtaining
stockholder approval.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Bylaws provide that the Company will indemnify its directors
and executive officers and may indemnify its other officers, employees and other
agents to the fullest extent not prohibited by Delaware law. The Company is also
empowered under its Bylaws to enter into indemnification contracts with its
directors and officers and to purchase insurance on behalf of any person it is
required or permitted to
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<PAGE> 50
indemnify. Pursuant to this provision, the Company has entered into indemnity
agreements with each of its directors and executive officers.
In addition, the Company's Certificate of Incorporation provides that, to
the fullest extent permitted by Delaware law, the Company's directors will not
be liable for monetary damages for breach of the directors' fiduciary duty of
care to the Company or its stockholders. This provision in the Certificate of
Incorporation does not eliminate the duty of care, and in appropriate
circumstances equitable remedies such as an injunction or other forms of
non-monetary relief would remain available under Delaware law. Each director
will continue to be subject to liability for breach of the director's duty of
loyalty to the Company or its stockholders, for acts or omissions not in good
faith or involving intentional misconduct, for knowing violations of law, for
any transaction from which the director derived an improper personal benefit and
for improper distributions to stockholders. This provision also does not affect
a director's responsibilities under any other laws, such as the federal
securities laws or state or federal environmental laws.
There is no pending litigation or proceeding involving a director or
officer of the Company as to which indemnification is being sought, nor is the
Company aware of any pending or threatened litigation that may result in claims
for indemnification by any director or officer.
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<PAGE> 51
CERTAIN TRANSACTIONS
IXION
In May 1996, the Company and the following employees and consultants of
Ixion agreed to convert earned, but unpaid compensation ("Accrued Compensation")
owed to the following employees and consultants of Ixion, in the following
amounts, into Common Stock at a rate of one share for each $7.50 of Accrued
Compensation (less the requisite withholding obligations), a price determined by
the Company's Board of Directors not to be less than the estimated fair market
value of such shares at the agreement date. Bruce D. Sturman, President, Chief
Executive Officer and a director of the Company, $201,000; Valentino V.
Montegrande, Vice President, Marketing of the Company, $38,000; David Hon, a
director of the Company, $17,000; Xinetix (Harold J. Walbrink, Vice President,
Manufacturing of the Company is President), $82,000.
In April 1996, Ixion entered into an Asset Purchase Agreement ("Asset
Purchase Agreement") with David C. Hon, a director of the Company. Under such
Asset Purchase Agreement, Ixion purchased U.S. Patent No. 4,907,973, entitled
"Expert system simulator for modelling realistic internal environments and
performance" and all corresponding foreign patents and patent applications
(collectively, the "Patent") from Mr. Hon and agreed to pay Mr. Hon $25,000 on
or before August 1, 1996 and an additional $25,000 on or before August 1 of each
succeeding year for nine additional years. Pursuant to that certain Agreement
and Plan of Reorganization by and between Ixion and the Company dated May 24,
1996, the Company acquired all of Ixion's rights in the Patent. See
"Business--Patents and Proprietary Rights."
Ixion entered into a consulting agreement with Xinetix in August 1995.
Harold J. Walbrink, Vice President, Manufacturing of the Company, is President
of Xinetix. Pursuant to the consulting agreement, Xinetix agreed to provide Mr.
Walbrink's consulting services to the Company in exchange for a monthly retainer
of $7,500 for April and May 1995, $12,500 for June through September 1995 and
$7,500 for October 1995 through March 1996. In addition to the above retainer,
the Company has granted Xinetix with options to purchase 48,774 shares of the
Company's Common Stock that will vest in accordance with the milestone schedule
set forth in the consulting agreement. Xinetix has three years from the date
each milestone is met to exercise the vested options. As of May 31, 1996,
options having an exercise price of $0.02 for the purchase of 9,755 shares were
fully vested.
Pursuant to a consulting agreement between Ixion and Valentino V.
Montegrande, Vice President, Marketing of the Company, entered into in April
1995, the obligations under which were assumed by the Company in May 1996, Mr.
Montegrande's compensation includes a commission of 2% of the Company's revenue
derived from those sales of platforms, pavilions and procedures for the
Company's IVR simulators in which Mr. Montegrande's efforts produce sales and a
potential one time stock bonus of 14,633 shares of Common Stock based on his
performance. The term of the agreement is two years. If Mr. Montegrande's
consulting services are terminated without cause as defined in the agreement,
Mr. Montegrande is entitled to his then current compensation, including all
deferred compensation and applicable bonuses, through the end of the term of the
agreement.
In May 1994, Ixion entered into a consulting agreement with Maxal. Bruce D.
Sturman, President, Chief Executive Officer and a director of the Company is
chairman of the Board of Maxal. Pursuant to the consulting agreement, Maxal
agreed to provide Mr. Sturman's services as Chief Executive Officer and Chairman
of the Board of the Company in exchange for $9,850 per month. The agreement
terminated on May 1, 1996.
In each of October 1994 and October 1995, Ixion issued a two year 8%
promissory note to Bruce D. Sturman, the Company's President and Chief Executive
Officer. The aggregate principal amount of these two notes is $60,000. In May
1996, the Company assumed the obligations of Ixion under these promissory notes.
MMS
In May 1996, the Company and Steven D. Pieper agreed to convert $20,117.39
of Accrued Compensation owed to Dr. Pieper, as an employee of MMS at a rate of
one share of Common Stock for each $7.50 of Accrued Compensation (less the
requisite withholding obligations), a price determined by the Company's
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<PAGE> 52
Board of Directors not to be less than the estimated fair value of such shares
at the agreement date. Dr. Pieper is a Vice President, Chief Technical Officer
and a director of the Company.
In April 1996, MMS entered into a credit agreement with Baxter, a
wholly-owned subsidiary of which is a principal stockholder of the Company,
pursuant to which MMS issued a 6% promissory note in the principal amount of
$550,000 to Baxter payable on demand. This note was cancelled in May 1996.
In October 1994, MMS entered into a regulatory services agreement with
Baxter, a wholly-owned subsidiary of which is a principal stockholder of the
Company. Under the agreement, Baxter agreed to provide regulatory professional
services to MMS for two years in exchange for $60,000 per year. MMS also agreed
to fund travel and other miscellaneous expenses pursuant to such agreement. This
agreement has since been terminated by Baxter and the Company.
INTERACT
In May 1996, the Company issued the $350,000 Note to Baxter, a wholly-owned
subsidiary of which is a greater than 5% stockholder of the Company and entered
into the Baxter Letter. The $350,000 Note is due on the earlier of (i) the
closing of this Offering or (ii) September 1, 1996 (extendable to September 1,
1997 at the option of the Company). Pursuant to the terms of the Baxter Letter,
in addition to repayment of the principal amount of the $350,000 Note plus
accrued interest, immediately following the closing of this Offering Baxter is
entitled to receive a number of shares of Common Stock equal to $350,000 divided
by the initial public offering price of the Common Stock sold hereunder. If the
Company chooses to extend the maturity date of the $350,000 Note to September 1,
1997, Baxter will be entitled to receive 2,439 shares of Common Stock for each
$25,000 of principal outstanding under the $350,000 Note.
In May 1996, the Company issued another 8% promissory note in the principal
amount of $200,000 (the "$200,000 Note") to Baxter, a wholly-owned subsidiary of
which is a greater than 5% stockholder of the Company. The $200,000 Note is due
on the earlier of (i) the closing of this Offering, or (ii) September 1, 1996.
The Company entered into a Credit Agreement in May 1996 with Baxter, a
wholly-owned subsidiary of which is a greater than 5% stockholder of the
Company, pursuant to which the Company issued the $2,000,000 Note due on the
earlier of (i) the closing of this Offering or (ii) September 1, 1996
(extendable to September 1, 1997 at the option of the Company). Immediately
following the closing of this Offering, assuming this Offering closes on or
before September 1, 1996, the principal amount together with all accrued but
unpaid interest under the $2,000,000 Note automatically will be converted into
Common Stock at the initial public offering price of the Common Stock offered
hereby. If this Offering does not close on or prior to September 1, 1996 and the
Company chooses to extend the maturity date of the $2,000,000 Note to September
1, 1997, Baxter will be entitled to receive 2,439 shares of Common Stock for
each $25,000 of principal outstanding under the $2,000,000 Note.
The Company entered into a Distribution Agreement in May 1996 (the
"Distribution Agreement") with Baxter, a wholly-owned subsidiary of which is a
greater than 5% stockholder of the Company, pursuant to which Baxter guaranteed
it would provide orders for at least $350,000 of the Company's Preview models
during the initial 12 month period as specified in the Distribution Agreement.
In the event the total sales by Baxter do not equal or exceed $350,000, Baxter
is obligated to pay the Company 70% of the difference between $350,000 and the
total sales for the initial 12 month period. Baxter shall receive off-set credit
for such payment against future orders. For each of the subsequent 12 month
periods during the initial five-year term of the Distribution Agreement, Baxter
guaranteed its sales would equal or exceed the product of 1,000 multiplied by
the average sales price of a Preview model during the last year. In the event
total sales do not equal or exceed that amount, Baxter is obligated to pay the
Company 70% of the shortfall. Baxter will receive off-set credit for such
payment against future orders and the Company may terminate the Distribution
Agreement. See "Business--Baxter Distribution Agreement".
The Company entered into a Manufacturing License Agreement in May 1996 (the
"Manufacturing Agreement") with Baxter, a wholly-owned subsidiary of which is a
greater than 5% stockholder of the
50
<PAGE> 53
Company, effective during the term of the Distribution Agreement. Pursuant to
the Manufacturing Agreement, the Company granted Baxter an exclusive license to
use the Company's technology, if the Company fails to fill the minimum delivery
requirements under the Distribution Agreement, solely to make or have made
Preview models in connection with treating aortic and iliac aneurysms. Baxter
has agreed to pay royalties to the Company based on revenues generated from
sales of the product in the amount of 10% with the exception of the 200 clinical
training models to be provided pursuant to the Distribution Agreement for which
Baxter agreed to pay a royalty of $50 each. See "Business--Baxter Distribution
Agreement."
In May 1996, the Company granted options to purchase Common Stock at $6.30
per share (the "Options") to the following individuals in the following amounts:
Bruce D. Sturman (President, Chief Executive Officer and Director of the
Company) 75,000 shares; Thomas E. Mignanelli (Vice President, Finance and Chief
Financial Officer of the Company) 50,000 shares; Steven D. Pieper (Vice
President, Chief Technical Officer and Director of the Company) 20,000 shares;
David C. Hon (Director of the Company) 20,000 shares; Leo C. McKenna (Director
of the Company) 15,000 shares; Charles E. Hutchinson (Director of the Company)
15,000 shares; James C. Caillouette (Director of the Company) 15,000 shares and
John R. Lyon (Director of the Company) 15,000 shares. With the exception of the
Options granted to Messrs. McKenna, Hutchinson, Caillouette and Lyon, whose
Options vest in equal monthly installments over 48 months of service with the
Company from the grant date, these options vest 25% upon the completion of one
year of service with the Company from the grant date and thereafter in equal
monthly installments over the next 36 months of service with the Company. Each
option has a term of 10 years and a vesting commencement date of May 27, 1996.
The Company has entered into certain additional transactions with its
directors and officers (or with corporations affiliated with them), as described
under the captions, "Management--Executive Compensation" and
"Management--Employment Agreements."
The Company has entered into a registration rights agreement granting
registration rights to certain individuals and entities, including Baxter, a
wholly-owned subsidiary of which is a greater than 5% stockholder of the
Company. See "Description of Capital Stock--Registration Rights."
The Company believes that the foregoing transactions were in its best
interests. As a matter of policy, all future transactions between the Company
and any of its officers, directors or principal stockholders will be approved by
a majority of the independent and disinterested members of the Board of
Directors, will be on terms no less favorable to the Company than could be
obtained from unaffiliated third parties, and will be in connection with bona
fide business purposes of the Company.
51
<PAGE> 54
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of May 31, 1996, and as adjusted to
reflect the sale of the shares of the Common Stock offered hereby (assuming no
exercise of the Underwriter's over-allotment option) by (i) each person (or
group of affiliated persons) who is known by the Company to own beneficially
more than 5% of the Common Stock, (ii) each of the Company's directors, (iii)
each of the Named Executive Officers and (iv) all directors and executive
officers of the Company as a group. Except as otherwise indicated, the Company
believes that the beneficial owners of the Common Stock listed below, based on
information furnished by such owners, have sole investment and voting power with
respect to such shares, subject to community property laws where applicable.
<TABLE>
<CAPTION>
PERCENTAGE
OWNERSHIP
-------------------
NUMBER OF SHARES BEFORE AFTER
DIRECTORS, OFFICERS AND 5% STOCKHOLDERS BENEFICIALLY OWNED(1) OFFERING OFFERING
- - ----------------------------------------------------------- --------------------- -------- --------
<S> <C> <C> <C>
Baxter Medical Media Holdings, Inc.(2)..................... 1,018,853 34.7% 19.7%
17221 Red Hill Avenue
Irvine, CA 92714
Bruce D. Sturman(3)........................................ 721,830 27.0% 13.9%
654 Madison Avenue
Suite 1606
New York, NY 10021
Maxal Trust(4)............................................. 695,030 26.0% 13.4%
1202 Lexington Avenue
Suite 295
New York, NY 10028
David C. Hon(5)............................................ 391,197 14.6% 7.6%
1335 N. Northlake Way, Suite 102
Seattle, WA 98104
Steven D. Pieper(6)........................................ 106,717 4.0% 2.1%
79 East Wilder Road
West Lebanon, NH 03784-310746
Charles E. Hutchinson(7)................................... 38,225 1.4% *
8000 Cummings Hall
Hanover, NH 03755
Leo C. McKenna(8).......................................... 13,158 * *
79 East Wilder Road
West Lebanon, NH 03784-3106
John R. Lyon(9)............................................ 4,824 * *
540 Idaho Avenue Escondido, CA 92025
James C. Caillouette, M.D(10).............................. 4,824 * *
50 Bellafontaine Street
Pasadena, CA 91105
All directors and officers as a group (11 persons)(11)..... 1,350,429 49.3% 25.7%
</TABLE>
- - ---------------
*Less than one percent.
(1) Unless otherwise indicated in the footnotes to this table and subject to
the community property laws where applicable, each of the stockholders
named in this table has sole voting and investment power with respect to
the shares shown as beneficially owned by them. Share ownership in each
case includes shares issuable on exercise of certain outstanding options,
warrants and other similar rights to purchase
52
<PAGE> 55
shares held by the particular beneficial owners as described in the
footnotes below. See "Certain Transactions."
(2) Includes 227,964 shares issuable to Baxter pursuant to the conversion of
the $2,000,000 Note upon the closing of this Offering, Baxter is the parent
company of Baxter Medical Media Holdings, Inc. Such number of shares is
calculated by dividing the $2,000,000 principal amount of the $2,000,000
Note, plus accrued interest (assuming that the closing of this Offering
occurs on August 24, 1996), by the initial public offering price (assuming
an initial public offering price of $9.00 per share (the midpoint of the
range set forth on the cover page of this Prospectus)). Also includes
38,889 shares to be issued to Baxter immediately following the closing of
this Offering pursuant to the Baxter Letter. Such number of shares is
calculated by dividing $350,000 by the initial public offering price
assuming an initial public offering price of $9.00 per share (the midpoint
of the range set forth on the cover page of this Prospectus).
(3) Includes 695,030 shares held by the Maxal Trust over which Michael D.
Mulfoletto, the trustee, has the sole voting and dispositive power. The
Maxal Trust is an irrevocable trust established for the benefit of Mr.
Sturman's wife. Mr. Sturman is the President, Chief Executive Officer and a
director of the Company and disclaims beneficial ownership of these 695,030
shares.
(4) The Maxal Trust is a trust established for the benefit of Mr. Sturman's
wife. Michael D. Mulfoletto, the trustee of the Maxal Trust, has the sole
voting and dispositve power with respect to these shares. Mr. Sturman is
the President, Chief Executive Officer and a director of the Company and
disclaims beneficial ownership of these shares.
(5) Includes 3,610 shares subject to options exercisable within 60 days of May
31, 1996, held by Mr. Hon's wife. Mr. Hon disclaims beneficial ownership of
these shares.
(6) Includes 30,000 shares potentially issuable pursuant to a certain
employment agreement within 60 days of May 31, 1996. See "Employment
Agreements."
(7) Includes 625 shares subject to options exercisable within 60 days of May
31, 1996.
(8) Includes 625 shares subject to options exercisable within 60 days of May
31, 1996.
(9) Includes 625 shares subject to options exercisable within 60 days of May
31, 1996.
(10) Includes 625 shares subject to options exercisable within 60 days of May
31, 1996.
(11) Includes 54,388 shares potentially issuable pursuant to certain consulting
agreements within 60 days of May 31, 1996 and 15,865 shares issuable upon
exercise of stock options that are exercisable within 60 days of May 31,
1996.
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<PAGE> 56
DESCRIPTION OF CAPITAL STOCK
Upon the closing of this Offering, the authorized capital stock of the
Company will consist of 10,000,000 shares of Common Stock, $0.01 par value
("Common Stock"), and 5,000,000 shares of Preferred Stock, $0.01 par value
("Preferred Stock").
COMMON STOCK
At May 31, 1996, there were 2,671,616 shares of Common Stock outstanding
and held of record by approximately 35 stockholders. The holders of Common Stock
are entitled to one vote for each share held of record on all matters submitted
to a vote of the stockholders, except upon the closing of this Offering the
holders of Common Stock will be entitled to cumulative voting rights with
respect to the election of directors and as a consequence, certain minority
stockholders will be able to elect directors on the basis of their votes alone.
Subject to preferences that may be applicable to any shares of Preferred Stock
issued in the future, holders of Common Stock are entitled to receive ratably
such dividends as may be declared by the Board of Directors out of funds legally
available for such purpose. See "Dividend Policy." In the event of a
liquidation, dissolution or winding up of the Company, holders of the Common
Stock are entitled to share ratably in all assets remaining after payment of
liabilities and the liquidation preference of any then outstanding Preferred
Stock. Holders of Common Stock have no preemptive rights and no right to convert
their Common Stock into any other securities. There are no redemption or sinking
fund provisions applicable to the Common Stock. All outstanding shares of Common
Stock are, and shares of Common Stock to be outstanding upon completion of this
Offering will be, fully paid and nonassessable.
PREFERRED STOCK
Effective upon the closing of this Offering, the Board of Directors has the
authority to issue up to 5,000,000 shares of the Preferred Stock in one or more
series and to fix the rights, priorities, preferences, qualifications,
limitations and restrictions, including the dividend rights, conversion rights,
voting rights, terms of redemption, terms of sinking funds, liquidation
preferences and the number of shares constituting any series and the designation
of such series, without any further vote or action by the stockholders, which
could decrease the amount of earnings and assets available for distribution to
holders of Common Stock or adversely affect the rights and powers, including
voting rights, of the holders of the Common Stock. Because the terms of the
Preferred Stock may be fixed by the Board of Directors of the Company without
stockholder action, the Preferred Stock could be issued quickly with terms
calculated to defer or delay a proposed takeover of the Company, or to make the
removal of the management of the Company more difficult.
Effective upon the closing of this Offering, there will be no shares of
Preferred Stock outstanding. The Company has no present intention of issuing any
shares of Preferred Stock.
WARRANTS TO PURCHASE COMMON STOCK
At May 31, 1996, there were outstanding warrants to purchase 48,774 shares
of Common Stock at the initial public offering price, warrants to purchase
12,194 shares of Common Stock at 150% of the initial public offering price and
warrants to purchase 12,194 shares of Common Stock at 160% of the initial public
offering price.
For a description of warrants to be sold to the Representative of the
Underwriters in connection with this Offering, see "Underwriting."
REGISTRATION RIGHTS
Pursuant to a Registration Rights Agreement dated May 24, 1996 (the
"Registration Rights Agreement"), the holders of approximately 511,308 shares of
Common Stock or their permitted transferees (the "Holders") are entitled to
certain rights with respect to the registration of such shares under the
Securities Act. Under the terms of the Registration Rights Agreement, if the
Company proposes to register any of its securities under the Securities Act for
its own account, such Holders are entitled to include shares of such
54
<PAGE> 57
Common Stock therein, provided, among other conditions, that the underwriters of
any such offering have the right to limit the number of shares included in such
registration. In addition, Holders of at least 40% (or a lesser percent if the
anticipated aggregate offering price, net of underwriting discounts and
commissions, would exceed $5,000,000) of the then outstanding registrable
securities under the Registration Rights Agreement may, one year after this
Offering, require the Company to prepare and file a registration statement under
the Securities Act with respect to the shares entitled to demand registration
rights, and the Company is required to use its best efforts to effect such
registration, subject to certain conditions and limitations. The Company is not
obligated to effect more than one of these stockholder-initiated registrations,
or to effect such a registration 30 days prior to the Company's good faith
estimate of the date of a filing of or 180 days after the effective date of a
registration statement for an offering of the Company's securities, including
this Offering, nor if the shares requested to be registered may be immediately
registered on Form S-3. Holders of at least 20% of the outstanding registrable
securities under the Registration Rights Agreement may request the Company to
register such shares on Form S-3 provided the shares registered have an
aggregate market value of at least $500,000. The Company is not obligated to
effect more than two of these Form S-3 registrations in any 12 month period.
Generally, the Company is required to bear the expense of all such
registrations. The registration rights of the Holders expire: (i) three years
following the sale of securities pursuant to a registration statement filed by
the Company or (ii) when the registrable securities under the Registration
Rights Agreement may be sold in compliance with Rule 144 of the Securities Act.
The Registration Rights Agreement also provides Baxter with a one-time priority
over all other parties to such agreement to register a number of shares of the
Company's Common Stock which will result in gross proceeds of up $2,000,000 (but
not less than $1,000,000). Baxter's right to exercise such right commences six
months after this Offering and expires three years after this Offering.
The Company has granted rights to register shares in certain Company
initiated registrations to the Representative of the Underwriters and to the
holders of warrants to purchase approximately 24,388 shares of the Company's
Common Stock. See "Underwriting."
DELAWARE LAW AND CERTAIN CHARTER PROVISIONS
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law (the "Delaware Law"), an anti-takeover law. In general,
the statute prohibits a publicly held Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
For purposes of Section 203, a "business combination" includes a merger, asset
sale or other transaction resulting in a financial benefit to the interested
stockholder, and an "interested stockholder" is a person who, together with
affiliates and associates, owns (or within three years prior, did own) 15% or
more of the corporation's voting stock.
The holders of Common Stock are currently entitled to one vote for each
share held of record on all matters submitted to a vote of the stockholders
other than the election of directors, in which event any holder may demand
cumulative voting. Under cumulative voting, the holders of Common Stock are
entitled to cast for each share held the number of votes equal to the number of
directors to be elected. A holder may cast all of his or her votes for one
nominee or distribute them among any number of nominees for election.
An Amended and Restated Certificate of Incorporation has been approved by
the Company's Board of Directors and stockholders, effective immediately prior
to the closing of this Offering, which, among other things, requires that any
action required or permitted to be taken by stockholders of the Company must be
effected at a duly called annual or special meeting of stockholders and may not
be effected by a consent in writing. The Company's Certificate of Incorporation,
as amended, will also require special meetings of the stockholders of the
Company be called only by the Board of Directors, the Chairman of the Board or
the Chief Executive Officer or the holders of at least 10% of the outstanding
shares of Common Stock. In addition, the Certificate of Incorporation and Bylaws
of the Company, as amended, will require that stockholders give advance notice
to the Company's secretary of any directorship nominations or other business to
be brought by stockholders at any stockholders' meeting. The Company's
Certificate of Incorporation, as amended, will also divide the Board of
Directors into two classes of directors serving staggered two-year terms, with
one class of
55
<PAGE> 58
directors to be elected at each annual meeting of stockholders. The
classification of directors has the effect of making it more difficult to change
the composition of the Board. See "--Common Stock," "--Preferred Stock" and
"Risk Factors--Antitakeover Provisions." These provisions may have the effect of
deterring hostile takeovers or delaying changes in control or management of the
Company.
TRANSFER AGENT AND REGISTRAR
American Stock Transfer is the transfer agent and registrar for the
Company's Common Stock.
56
<PAGE> 59
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this Offering, there has been no public market for the Common
Stock of the Company. Future sales of substantial amounts of Common Stock in the
public market could adversely affect prevailing market prices. Upon completion
of this Offering, the Company will have approximately 5,182,924 shares of Common
Stock outstanding, assuming no exercise of warrants and options to purchase
approximately 447,864 shares of Common Stock outstanding as of the date of this
Prospectus. Of these shares, the 2,000,000 shares sold in this Offering will be
freely tradeable without restriction or further registration under the
Securities Act, unless they are purchased by an "affiliate" of the Company as
that term is defined in Rule 144 under the Securities Act (which sales would be
subject to certain limitations and restrictions described below).
The remaining 3,182,924 shares of Common Stock may be sold in the public
market only if registered or pursuant to an exemption from registration such as
Rules 144 or 144(k) promulgated under the Securities Act. Except for those
shares sold in this Offering, approximately 3,153,903 shares of the Company's
Common Stock outstanding after this Offering will be subject to contractual
lock-up agreements with the Company or the Underwriters. Specifically, each of
the Company's executive officers, directors and certain stockholders who
together hold an aggregate of 3,153,903 shares of the Company's Common Stock
have executed lock-up agreements providing that they will not offer, sell,
contract to sell, grant any option to purchase or otherwise dispose of, or agree
to dispose of any shares of Common Stock (other than as permitted in this
Offering) until 365 days (180 days in the case of shares acquired pursuant to
the Purchase Plan) after the date of this Prospectus.
Taking into account these lock-up agreements and provisions, unless
registered by the Company, none of the shares outstanding prior to this Offering
will be eligible for sale prior to April 15, 1998.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned shares for at least two
years (including the holding period of any prior owner except an affiliate) is
entitled to sell in "brokers' transactions" or to market makers, within any
three-month period a number of shares that does not exceed the greater of (a)
one percent of the number of shares of Common Stock then outstanding
(approximately 51,829 shares immediately after this Offering) or (b) the average
weekly trading volume in the Common Stock during the four calendar weeks
preceding the required filing of a Form 144 with respect to such sale. Sales
under Rule 144 are subject to the availability of current public information
about the Company. Under Rule 144(k), a person who is not deemed to have been an
affiliate of the Company at any time during the 90 days preceding a sale, and
who has beneficially owned the shares proposed to be sold for at least three
years, is entitled to sell such shares without having to comply with the manner
of sale, public information, volume limitation or notice filing provisions of
Rule 144. In addition, Rule 144A would permit the resale of restricted
securities to qualified institutional buyers, subject to compliance with
conditions of the Rule.
The Company is unable to estimate the number of shares that may be sold
under Rule 144 or otherwise because this will depend on the market price for the
Common Stock of the Company, the individual circumstances of the sellers and
other factors. Future sales of shares of Common Stock, or the availability for
sale of substantial amounts of Common Stock, or the perception that such sales
could occur, could adversely affect prevailing market prices for the Common
Stock and could impair the Company's future ability to raise capital through an
offering of its equity securities.
Any employee, officer or director of or consultant to the Company who
purchased his or her shares pursuant to a written compensatory plan or contract
is entitled to rely on the resale provisions of Rule 701, which permits
nonaffiliates to sell their Rule 701 shares without having to comply with the
public information, holding period, volume limitation or notice provisions of
Rule 144 and permits affiliates to sell their Rule 701 shares without having to
comply with the Rule 144 holding period restrictions.
As of May 31, 1996, (i) 316,173 shares of Common Stock are subject to
outstanding options issued pursuant to the Prior Plan, (ii) 58,529 shares of
Common Stock are subject to outstanding non-qualified stock options, (iii)
73,162 shares of Common Stock are subject to outstanding warrants and 683,827
additional shares are reserved for issuance under the Plan. See
"Management--Benefit Plans." The Company intends to
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<PAGE> 60
file a registration statement under the Securities Act on Form S-8 covering an
aggregate of approximately 1,200,000 shares of Common Stock reserved for
issuance under its Plan and the Purchase Plan. Such registration statement is
expected to be filed as soon as practicable after the effectiveness of this
Offering and will automatically become effective upon filing. Accordingly,
shares registered under such registration statement will be available for resale
by nonaffiliates in the public market, subject to any vesting restrictions with
the Company or any contractual restrictions.
58
<PAGE> 61
UNDERWRITING
The Underwriters named below, for whom Dakin Securities Corporation is
acting as the Representative (the "Representative"), have severally agreed,
subject to the terms and conditions contained in the Underwriting Agreement, to
purchase from the Company the number of shares of Common Stock set forth
opposite their respective names.
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- - ---------------------------------------------------------------------------------- ---------
<S> <C>
Dakin Securities Corporation......................................................
--------
Total........................................................................... 2,000,000
========
</TABLE>
The Underwriting Agreement provides that the several Underwriters are
obligated to purchase all of the 2,000,000 shares of Common Stock offered by the
Underwriters hereby (other than shares which may be purchased under the
over-allotment option), if any are purchased. The Representative has advised the
Company that the Underwriters propose to offer the shares to the public
initially at the public offering price set forth on the cover page of this
Prospectus, that the Underwriters may allow to selected dealers a concession of
$ per share and that such dealers may reallow a concession of
$ per share to certain other dealers. After this Offering, the initial
public offering price and the concessions may be changed by the Representative.
The Company has granted to the Underwriters an option, expiring at the
close of business on the 30th day after the date of the Underwriting Agreement,
to purchase up to 300,000 additional shares of Common Stock at the initial
public offering price less underwriting discounts and commissions, all as set
forth on the cover page of this Prospectus. The Underwriters may exercise the
option only to cover over-allotments, if any, in the sale of shares of Common
Stock in this Offering. To the extent that the Underwriters exercise the option,
each Underwriter will become obligated, subject to certain conditions, to
purchase approximately the same percentage thereof that the number of shares to
be purchased by each of them as shown in the foregoing table bears to the
2,000,000 shares of Common Stock offered hereby.
The Company has agreed to pay to the Representative, individually, and not
in its capacity as the Representative, a non-accountable expense allowance of
two percent of the gross proceeds of this Offering ($360,000 if the
Underwriters' over-allotment option is not exercised and $414,000 if the
Underwriters' over-allotment option is exercised in full (assuming an initial
public offering price of $9.00 per share (the midpoint of the range set forth on
the cover page of this prospectus))), of which $50,000 has been paid to date. If
this Offering is not consummated, the Representatives will be entitled to be
reimbursed for actual out-of-pocket expenses, on an accountable basis only, up
to $50,000, inclusive of the amount paid to date. The Company has also agreed to
pay all expenses in connection with registering or qualifying the Common Stock
offered hereby for sale under the laws of the states in which the Common Stock
is sold by the Underwriters (including expenses of counsel retained for such
purposes by the Underwriters) as well as certain expenses associated with
information meetings.
The Company has agreed to sell to the Representative, or its designees,
warrants (the "Underwriters' Warrants") to purchase 200,000 shares of the
Company's Common Stock at an aggregate purchase price of
59
<PAGE> 62
$200. The exercise price per Underwriters' Warrant, subject to anti-dilution
adjustment, is equal to 120% of the public offering price per share of Common
Stock offered hereby. The Underwriters' Warrants expire on the fifth anniversary
of the date hereof. The Underwriters' Warrants may not be transferred or
exercised for one year from the date of this Prospectus, except for transfers to
officers of the Representative or members of the underwriting or selling group
and/or their officers or partners, if any. The Underwriters' Warrants become
exercisable during the four-year period commencing one year from the date of
this Prospectus (the "Warrant Exercise Term"). During the Warrant Exercise Term,
the holders of the Underwriters' Warrants are given, at nominal cost, the
opportunity to profit from an increase in the market price of the Company's
Common Stock. The Company has granted the Representative certain registration
rights with respect to the Underwriters' Warrants. All registration rights will
terminate seven years from the effective date of this Offering.
The Company, its officers and directors and certain stockholders of the
Company have agreed that they will not, directly or indirectly, offer, sell,
offer to sell, contract to sell, grant any option to purchase or otherwise sell
or dispose of (or announce any offer, sale, offer or sale, contract of sale,
grant of any option to purchase or any other sale or disposition) any shares of
Common Stock or other capital stock of the Company or any securities convertible
into, or exercisable or exchangeable for, any shares of Common Stock or other
capital stock of the Company for a period of 365 days (180 days in the case of
shares acquired pursuant to the Purchase Plan) after the date of this Prospectus
without the prior written consent of the Representative, on behalf of the
Underwriters. See "Shares Eligible for Future Sale."
Prior to this Offering, there has been no public market for the Common
Stock. The initial public offering price of the Common Stock offered hereby will
be determined through negotiations between the Company and the Representative.
Among the factors to be considered in making such determination will be the
prevailing market conditions, the Company's fiscal and operating history and
condition, the Company's prospects and the prospects of its industry, and the
market price of securities for companies in businesses similar to that of the
Company.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Brobeck, Phleger & Harrison LLP, San Diego, California. Certain legal
matters in connection with this Offering will be passed upon for the
Underwriters by Bronson, Bronson & McKinnon LLP, San Francisco, California.
Various portions of the statements in this Prospectus under the captions
"Risk Factors--Patents and Proprietary Technology," and "Business--Patents and
Proprietary Rights" and other references to intellectual property have been
reviewed and approved by various firms. These include Crutsinger & Booth of
Dallas, Texas, Pandisico & Pandisico of Waltham, Massachusetts and Finnegan,
Henderson, Farabow, Garrett & Dunner, L.L.P. of Washington, D.C.
EXPERTS
The financial statements of Ixion, Inc. included in this Prospectus have
been audited by BDO Seidman, LLP, independent certified public accountants, to
the extent and for the periods set forth in their report appearing elsewhere
herein, which report contains an explanatory paragraph regarding uncertainties
as to the ability of the Company to continue as a going concern, and are
included in reliance upon such report given upon the authority of said firm as
experts in auditing and accounting.
The financial statements of Medical Media Systems included in this
Prospectus have been audited by Robert E. Moses, independent certified public
accountants, to the extent and for the periods set forth in their report
appearing elsewhere herein, and are included in reliance upon such report given
upon the authority of said firm as experts in auditing and accounting.
60
<PAGE> 63
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement on Form S-1 (the
"Registration Statement") under the Securities Act, with respect to the Common
Stock offered hereby. This Prospectus does not contain all of the information
set forth in the Registration Statement and the exhibits and schedules thereto.
For further information with respect to the Company and such Common Stock,
reference is hereby made to the copy of such contract or document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference to such exhibit. The Registration Statement,
including the exhibits and schedules thereto, may be inspected without charge at
the principal office in Washington, D.C. 20549, and copies of all or any part
thereof may be obtained at the Public Reference Section of the Commission, 450
Fifth Street, N.W., Washington, D.C. 20549, upon payment of fees prescribed by
the Commission. Also, the Commission maintains a World Wide WebSite on the
Internet at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission.
61
<PAGE> 64
INDEX TO FINANCIAL STATEMENTS
INTERACT MEDICAL TECHNOLOGIES CORPORATION
<TABLE>
<S> <C>
Pro Forma Condensed Financial Information............................................. F-2
Unaudited Pro Forma Balance Sheet..................................................... F-3
Unaudited Pro Forma Statements of Operations.......................................... F-4
</TABLE>
IXION, INC.
<TABLE>
<S> <C>
Report of Independent Certified Public Accountants.................................... F-5
Balance Sheets........................................................................ F-6
Statements of Operations.............................................................. F-7
Statements of Stockholders' Equity (Deficit).......................................... F-8
Statements of Cash Flows.............................................................. F-9
Notes to Financial Statements......................................................... F-10
</TABLE>
MEDICAL MEDIA SYSTEMS
<TABLE>
<S> <C>
Report of Independent Certified Public Accountants.................................... F-19
Balance Sheets........................................................................ F-20
Statements of Operations.............................................................. F-21
Statement of Changes in Partners' Equity.............................................. F-22
Statements of Cash Flows.............................................................. F-23
Notes to Financial Statements......................................................... F-25
</TABLE>
F-1
<PAGE> 65
INTERACT MEDICAL TECHNOLOGIES CORPORATION
PRO FORMA CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma condensed financial information has been
prepared in accordance with guidelines established by regulations promulgated by
the Securities and Exchange Commission. The unaudited pro forma balance sheet at
March 31, 1996, gives effect to (i) the contribution of MMS partnership
interests to a newly formed corporation and merger of Ixion with and into such
newly formed corporation, which was renamed Interact, (ii) the issuance of
Common Stock to certain employees and consultants of Ixion and MMS in exchange
for accrued amounts payable, and (iii) receipt of $2.0 million cash pursuant to
a short term, convertible promissory note payable to one of the Company's
stockholders, as if such transactions had occurred as of March 31, 1996. The
unaudited pro forma statements of operations for the year ended December 31,
1995 and for the three months ended March 31, 1996 include the results of
operations of Ixion and MMS for the respective periods presented and give effect
to the pro forma adjustments as if all such transactions had occurred at the
beginning of the respective periods.
The following pro forma adjustments have been determined on the basis as
described below:
1. The business combination involving MMS and Ixion is accounted for
utilizing the purchase method of accounting. Inasmuch as the former Ixion
stockholders own a majority of the Interact capital stock after the
business combination, Ixion is considered to be the acquiring corporation
for purposes of purchase accounting, and the predecessor entity to Interact
for purposes of financial reporting. The estimated fair value attributed to
Common Stock issued to former MMS stockholders was $5,865,000.
2. Fees paid in the estimated amount of $235,000 that were directly
attributable to the merger have been included in the purchase price
allocated to the MMS acquisition.
3. The total purchase price, including assumed liabilities at their
estimated fair values (which approximates book value), is allocated to
assets acquired based upon preliminary estimates of fair values. Assets
acquired include tangible assets (which fair values are estimated to
approximate book value) and identifiable intangible assets, such as
products in varying stages of development. The estimated value of products
in development which are considered to have attained technological
feasibility, as such term is defined and interpreted in accordance with
generally accepted accounting principles, are capitalized at their
estimated fair values of approximately $2.5 million and are amortized over
lives of five years. The estimated value of products in development which
are not deemed to have attained technological feasibility, as defined, are
capitalized in purchase accounting at their estimated fair values of
approximately $2.5 million and immediately expensed subsequent to recording
the business combination. The estimated value attributable to contracts and
agreements is capitalized and amortized over five years. The total of
estimated fair values of assets acquired reasonably approximated the total
purchase price and accordingly, no goodwill was recorded.
4. Increased amortization expense results from the purchase price
allocation to the assets acquired and liabilities assumed in accordance
with APB Opinion No. 16 based on preliminary estimates of fair value.
5. Conversion of approximately $503,000 of accrued payables to certain
employees and consultants for approximately 62,000 shares of Common Stock
and payment of payroll related withholdings.
6. Receipt of $2.0 million cash pursuant to issuance of a convertible
promissory note bearing interest at prime plus 2%, and increased related
interest expense.
These pro forma condensed financial statements are not necessarily
indicative of future financial positions or results of operations of the Company
and should be read in conjunction with the financial statements of Ixion and MMS
included elsewhere in this prospectus.
F-2
<PAGE> 66
INTERACT MEDICAL TECHNOLOGIES CORPORATION
UNAUDITED PRO FORMA BALANCE SHEET
MARCH 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA INTERACT
IXION MMS ADJUSTMENTS PRO FORMA
------- ---- ----------- ---------
<S> <C> <C> <C> <C>
Cash............................................. $ 416 $ 48 $ (273) (a,b) $ 2,191
2,000 (c)
Other current assets............................. 9 1 10
------- ---- ------- -------
Total current assets........................... 425 49 1,727 2,201
Property and equipment, net...................... 237 554 -- 791
Intangible assets................................ -- 145 3,558 (a,d) 3,703
------- ---- ------- -------
$ 662 $748 $ 5,285 $ 6,695
======= ==== ======= =======
Accounts payable................................. $ 424 $144 $ -- $ 568
Accrued payroll and related...................... 49 129 (112) (b) 66
Due to Stockholders.............................. 499 -- (391) (b) 108
Notes payable and accrued interest............... 1,837 400 -- 2,237
Convertible promissory note...................... -- -- 2,000 (c) 2,000
------- ---- ------- -------
Total current liabilities...................... 2,809 673 1,497 4,979
------- ---- ------- -------
Partners' Equity................................. -- 75 (75) (a) --
Stockholders' Equity............................. 5,865 (a)
Common stock................................... 1,694 -- 465 (b) 8,024
Accumulated deficit............................ (3,841) -- (2,467) (d) (6,308)
------- ---- ------- -------
(2,147) 75 3,788 1,716
------- ---- ------- -------
$ 662 $748 $ 5,285 $ 6,695
======= ==== ======= =======
</TABLE>
- - ---------------
(a) To record the issuance of approximately 1,290,000 shares of Common Stock in
exchange for MMS partners' interests at an estimated fair value of
approximately $5,865,000 and payment of approximately $235,000 in merger
related fees which is included in the purchase price to be allocated in
accordance with APB Opinion No. 16, and to record assets acquired and
liabilities assumed at their respective estimated fair values.
(b) To record the conversion of approximately $503,000 of accrued payables to
certain employees and consultants for approximately 62,000 shares of Common
Stock and payment of certain related tax withholdings.
(c) To record the receipt of $2.0 million in cash in exchange for a short-term,
convertible promissory note.
(d) To record expensing of the estimated fair value of intangible assets
acquired associated with products in development which have not been
determined to have yet attained technological feasibility.
F-3
<PAGE> 67
INTERACT MEDICAL TECHNOLOGIES CORPORATION
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRO FORMA INTERACT
IXION MMS ADJUSTMENTS PRO FORMA
------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues......................................... $ 266 $ -- $ -- $ 266
------- ------- ----- -------
Expenses:
Research and development....................... 1,332 1,540 741(a) 3,613
Selling, general and administrative............ 1,124 394 -- 1,518
------- ------- ----- -------
2,456 1,934 741 5,131
------- ------- ----- -------
Loss before interest............................. (2,190) (1,934) (741) (4,865)
Interest expense (income)........................ 132 (13) 205(b) 324
------- ------- ----- -------
Net loss (d)..................................... $(2,322) $(1,921) $(946) $(5,189)
======= ======= ===== =======
Pro forma net loss per share (d)................. $ (1.73)(c)
=======
</TABLE>
FOR THE THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
PRO FORMA INTERACT
IXION MMS ADJUSTMENTS PRO FORMA
------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues......................................... $ -- $ -- $ -- $ --
------- ------- ----- -------
Expenses:
Research and development....................... 284 295 185(a) 764
Selling, general and administrative............ 456 61 -- 517
------- ------- ----- -------
740 356 185 1,281
------- ------- ----- -------
Loss before interest............................. (740) (356) (185) (1,281)
Interest expense (income)........................ 169 (2) 51(b) 218
------- ------- ----- -------
Net loss (d)..................................... $ (909) $ (354) $(236) $(1,499)
======= ======= ===== =======
Pro forma net loss per share (d) (0.48)(c)
=======
</TABLE>
- - ---------------
(a) To reflect pro forma increased amortization charges resulting from the
allocation of the purchase price paid for MMS. Such amortization was based
upon estimated remaining useful lives of five years.
(b) To record proforma interest expense on convertible promissory note.
(c) Calculated on the basis of approximately 3,008,000 and 3,134,000 weighted
average shares of Common Stock for the year ended December 31, 1995 and the
three months ended March 31, 1996, respectively. Stock options were not
included in such computations as the effects were antidilutive.
(d) In accordance with guidelines established by the Securities and Exchange
Commission, proforma net loss does not include approximately $2.5 million
of expense to be recorded immediately subsequent to recording the business
combination relating to the estimated fair value of intangible assets
acquired associated with products in development which have not been
determined to have yet attained technological feasibility.
F-4
<PAGE> 68
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Ixion, Inc.
We have audited the accompanying balance sheets of Ixion, Inc., (the
Company) as of December 31, 1994 and 1995 and the related statements of
operations, stockholders' equity (deficit) and cash flows for each of the three
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements present fairly, in all material
respects, the financial position of Ixion, Inc. as of December 31, 1994 and
1995, and the results of its operations and its cash flows for each of the three
years then ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has incurred operating losses and has
stockholders' and working capital deficiencies that raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
in regard to these matters are also discussed in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
BDO SEIDMAN, LLP
Seattle, Washington
April 25, 1996, Except as to
Notes 1 and 10, which are as of
June 27, 1996
F-5
<PAGE> 69
IXION, INC.
BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- MARCH 31,
1994 1995 1996
----- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents................................ $ 207 $ -- $ 416
Accounts receivable...................................... 28 1 9
----- ----- -------
Total Current Assets........................... 235 1 425
EQUIPMENT AND SOFTWARE, net of accumulated
depreciation and amortization.......................... 254 237 237
----- ----- -------
Total Assets................................... $ 489 $ 238 $ 662
===== ===== =======
CURRENT LIABILITIES
Accounts payable and accrued liabilities................. $ 128 $ 478 $ 424
Accrued payroll and related.............................. -- 71 49
Accrued payables and advances due to stockholders (Note
6)..................................................... 133 437 499
Notes payable and accrued interest (Note 4).............. 192 1,014 1,837
----- ----- -------
Total Current Liabilities...................... 453 2,000 2,809
----- ----- -------
COMMITMENTS (Note 9)
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred Stock, no par value, 1 million shares
authorized, none issued............................. -- -- --
Common Stock, $0.01 par value, 10 million shares
authorized, 2,458,350, 2,731,880 and 2,772,464
shares issued and issuable.......................... 646 1,170 1,694
Accumulated Deficit.................................... (610) (2,932) (3,841)
----- ----- -------
Total Stockholders' Equity (Deficit)........... 36 (1,762) (2,147)
----- ----- -------
Total Liabilities and Stockholders' Equity
(Deficit).................................... $ 489 $ 238 $ 662
===== ===== =======
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 70
IXION, INC.
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, THREE MONTHS ENDED
----------------------------- MARCH 31,
1993 1994 1995 ---------------------------
------ ------ ------- 1995 1996
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES............................ $1,359 $1,237 $ 266 $ 266 $ --
------ ------ ------ ------- -----
EXPENSES
Research and development.......... 951 1,189 1,332 358 284
Sales and marketing............... 46 109 244 18 36
General and administrative........ 217 191 226 41 54
Financing, legal and other
consulting..................... 153 288 654 247 366
------ ------ ------ ------- -----
Total Expenses............ 1,367 1,777 2,456 664 740
------ ------ ------ ------- -----
Loss Before Interest Expense........ (8) (540) (2,190) (398) (740)
Interest Expense.................... -- 9 132 11 169
------ ------ ------ ------- -----
Net Loss............................ $ (8) $ (549) $(2,322) $ (409) $ (909)
====== ====== ====== ======= =====
Net Loss Per Share.................. $(0.01) $(0.21) $ (0.81) $ (0.15) $ (0.31)
====== ====== ====== ======= =====
</TABLE>
See accompanying notes to financial statements.
F-7
<PAGE> 71
IXION, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
----------------- ACCUMULATED
SHARES AMOUNT DEFICIT TOTAL
------ ------ ----------- -------
<S> <C> <C> <C> <C>
BALANCE, January 1, 1993............................ 750 $ 617 $ (53) $ 564
Shares issued for other than cash................... 1,675 2 -- 2
Net loss............................................ -- -- (8) (8)
----- ------ ------- -------
BALANCE, December 31, 1993.......................... 2,425 619 (61) 558
Shares issued for other than cash................... 33 27 -- 27
Net loss............................................ -- -- (549) (549)
----- ------ ------- -------
BALANCE, December 31, 1994.......................... 2,458 646 (610) 36
Shares issued for other than cash................... 268 501 -- 501
Issuance of compensatory options.................... -- 22 -- 22
Shares issued for exercise of options............... 6 1 -- 1
Net loss............................................ -- -- (2,322) (2,322)
----- ------ ------- -------
BALANCE, December 31, 1995.......................... 2,732 1,170 (2,932) (1,762)
Shares issued for other than cash (unaudited)....... 40 524 524
Net loss (unaudited)................................ -- -- (909) (909)
----- ------ ------- -------
BALANCE, March 31, 1996 (unaudited)................. 2,772 $1,694 $(3,841) $(2,147)
===== ====== ======= =======
</TABLE>
See accompanying notes to financial statements.
F-8
<PAGE> 72
IXION, INC.
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, THREE MONTHS
--------------------------- ENDED MARCH 31,
1993 1994 1995 ---------------------------
----- ----- ------- 1995 1996
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss................................. $ (8) $(549) $(2,322) $(409) $(909)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation........................... 67 81 95 22 26
Amortization........................... -- 3 78 5 132
Other non-cash consulting expense...... 2 14 321 129 84
Increase (decrease) in accounts payable
and accrued liabilities............. 21 66 350 59 (54)
Increase (decrease) in accrued
payroll and related................. -- -- 71 23 (22)
Increase in accrued payables to
stockholders........................ -- 88 254 29 62
Other.................................. (159) 41 174 (134) 23
----- ----- ------- ----- -----
Net Cash Used by Operating
Activities........................ (77) (256) (979) (276) (658)
----- ----- ------- ----- -----
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of equipment................... (91) (61) (78) (6) (26)
----- ----- ------- ----- -----
Net Cash Used by Investing
Activities.......................... (91) (61) (78) (6) (26)
----- ----- ------- ----- -----
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of notes
payable................................ -- 200 900 125 1,100
Advances from stockholders, net of
repayments............................. -- 45 50 -- --
Repayment of notes payable............... -- -- (100) -- --
----- ----- ------- ----- -----
Net Cash Provided by Financing
Activities.......................... -- 245 850 125 1,100
----- ----- ------- ----- -----
Net Increase (Decrease) in Cash
and Cash Equivalents................ (168) (72) (207) (157) 416
CASH AND CASH EQUIVALENTS
Beginning of period...................... 447 279 207 207 --
----- ----- ------- ----- -----
End of period............................ $ 279 $ 207 $ -- $ 50 $ 416
===== ===== ======= ===== =====
</TABLE>
See accompanying notes to financial statements.
F-9
<PAGE> 73
IXION, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF BUSINESS, MERGER, AND LIQUIDITY AND CAPITAL RESOURCES
Ixion, Inc. ("Ixion" or the "Company"), is principally engaged in designing
and developing patented medical procedures training simulators for the medical
community and creating interactive, virtual reality ("IVR") medical software.
The Company has developed IVR medical software and multi-media procedures
simulators, which offer a unique and proprietary system dedicated to minimally
invasive medical training and quantitative performance evaluation primarily for
physicians. The IVR simulator consists of interrelated computer systems and
components, a life-like mannequin or body part section, and mathematical and
multi-media, interactive, virtual reality capabilities, techniques and formulas,
which are incorporated into each software program for a particular medical
procedure.
OPERATIONS -- The Company, incorporated in 1983, started designing and
constructing medical procedures simulators in 1987, specifically focused on
diagnostic and therapeutic procedures. In 1992 and 1993, the Company developed
laparoscopic simulators pursuant to a contract with a large pharmaceutical
corporation and continued to provide research and development services through
1994. Since 1995, the Company has been engaged in product and business
development activities. To date the Company's resources have been dedicated to
the research and development of products based upon its expertise in digital
medical imaging and interactive software programming. The Company does not
believe that certain of its proposed products will be commercially viable absent
significant further development and certain technological advances, and there
can be no assurance that development will be completed or advances will be
achieved.
MERGER -- As more fully described in Note 10 -- Subsequent Events, the
Company entered into a Merger Agreement pursuant to which, among other things,
in May 1996, the Company merged with and into a recently incorporated entity,
Interact Medical Technologies Corporation ("Interact"), which had acquired the
partnership interests of Medical Media Systems, a development stage partnership
("MMS"). Immediately prior to the merger (the "Merger") former MMS partners (the
"MMS Partners") owned all outstanding shares of Interact common stock ("Interact
Stock"). Effective upon merger, Ixion common stock converted into .48774 shares
of Interact Stock, and Interact received $2.0 million cash from one of the MMS
Partners in exchange for a short-term promissory note, which is convertible,
under certain circumstances, at Interact's option into Interact Stock. Other
outstanding warrants, options or other commitments to issue Ixion common stock
also are provided with similar rights to acquire Interact Stock. This business
combination will be accounted for utilizing purchase accounting. Inasmuch as
Ixion stockholders own the majority of Interact capital stock after the merger,
Ixion is considered to be the acquiring corporation for purposes of purchase
accounting and the predecessor entity to Interact for purposes of financial
reporting.
LIQUIDITY AND CAPITAL RESOURCES -- Since 1994, the Company has incurred
operating losses which have been funded primarily by contract revenues during
1994 and early 1995, and bridge debt financing since then. The Company has had,
and continues to have, a net working capital deficit and net stockholders'
deficit that raise substantial doubt about the Company's ability to continue as
a going concern. Subsequent to December 31, 1995, the Company has raised
additional bridge debt funds of $900,000, and otherwise financed its operations
through the continued forbearance of its creditors, many of whom are Company
stockholders.
In connection with the Merger, Interact received $2.0 million cash pursuant
to a short-term, convertible promissory note payable to a stockholder. Interact
continues to be in the process of fund raising, including a common stock public
offering to raise up to an additional $20.0 million. The Company intends to use
a portion of the net proceeds of such offering to repay approximately $2.6
million of existing indebtedness, representing the outstanding balance on
certain promissory notes issued to stockholders. The Company also expects to use
the net proceeds for commercialization of products, research and development,
clinical testing, capital expenditures, working capital and general corporate
purposes. The amounts actually expended for each purpose may vary significantly
depending upon numerous factors, including future revenue growth, the amount of
cash generated by the Company's operations, the progress of the Company's
development projects,
F-10
<PAGE> 74
IXION, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. DESCRIPTION OF BUSINESS, MERGER, AND LIQUIDITY AND CAPITAL RESOURCES
(CONTINUED)
availability of sufficient funding for such expenditures, the timing of
regulatory approvals, technological advances and the status of competitive
products.
The Company expects to continue to incur substantial losses over at least
the next several years as the Company's development, testing, marketing and
manufacturing scale-up efforts expand. To achieve profitability and increased
sales levels, the Company must, among other things, establish and increase
market acceptance of its products, respond effectively to competitive pressures,
offer high quality customer service and support, introduce on a timely basis
products incorporating its technologies and advanced versions and enhancements
to its products, and successfully market and support advanced versions and
enhancements. There can be no assurance that the Company will complete the
development of any product, or that products developed will achieve market
acceptance, or that the Company will ever produce significant levels of revenue
or achieve sustainable profitability.
The Company's ability to meets its anticipated future obligations and
continue as a going concern depends upon raising sufficient capital to fund its
operations and finance its contemplated business expansion, and achieving
profitable operations. The development and commercialization of the Company's
products will require substantial funds. The Company's future capital
requirements will depend on many factors, including the time and costs involved
in obtaining any required regulatory approvals, competing technological and
market developments, the cost of manufacturing scale-up and effective
commercialization activities and arrangements, continued progress in its
development programs and the magnitude of those programs and the costs involved
in preparing, filing, prosecuting, maintaining and enforcing patent claims. The
Company intends to seek additional funding through public or private financings.
There can be no assurance that additional financing will be available on
acceptable terms or at all. If adequate funds are not available, the Company may
be required to delay, scale back or eliminate one or more of its development
programs or obtain funds through arrangements with collaborative partners or
others that may require the Company to relinquish certain rights to certain of
its technologies or products that the Company would not otherwise relinquish.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INTERIM FINANCIAL STATEMENTS -- The interim financial data as of and for
the three months ended March 31, 1995 and 1996 is unaudited; however, in the
opinion of Company management, the interim data includes all adjustments,
consisting only of normal recurring adjustments necessary for a fair statement
of results for the interim periods. The 1996 interim period results of
operations are not necessarily indicative of results for the entire year.
USE OF ESTIMATES -- The Company's financial statements are prepared in
conformity with generally accepted accounting principles which requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from the
estimates.
CASH AND CASH EQUIVALENTS -- Cash and cash equivalents are comprised
primarily of funds on deposit with banks.
EQUIPMENT AND SOFTWARE -- Equipment and software is recorded at cost less
accumulated depreciation based on assets' estimated useful lives of five years.
Depreciation is computed using primarily straight-line methods. Maintenance and
repairs are expensed while major improvements are capitalized.
FAIR VALUE OF FINANCIAL INSTRUMENTS -- Accrued payables and advances due to
stockholders are due on demand. Due to the related party nature and uncertainty
of the timing of actual repayment, the Company cannot estimate the fair value of
such financial instruments. The carrying value of notes payable represents the
F-11
<PAGE> 75
IXION, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
face value of such notes less unamortized original issue discount. The recording
of original issue discount for the estimated fair value of the Company's stock
issued together with the notes payable results in an approximation of fair value
of such notes.
INCOME TAXES -- Income taxes are accounted for utilizing the liability
method. Deferred income taxes are provided to represent the tax consequence on
future years for temporary differences between tax and financial reporting basis
of assets and liabilities. A valuation allowance has been provided for the total
amount of deferred tax assets which would otherwise be recorded for income tax
benefits, primarily relating to operating loss carryforwards, as realization is
not more likely than not.
REVENUE RECOGNITION -- The Company records revenue as contract services or
deliverables are provided and records fees for royalty payments, which, to date
represent minimum royalties, as revenue upon receipt.
COMMON STOCK AND STOCK SPLIT -- The Company records issuances of its common
stock and grants or issuances of options or warrants to acquire such stock at
the amount of cash received or, if issued for other than cash consideration, at
the estimated fair value of such security at the date of issuance or grant. To
the extent that options are issued or granted with an exercise price less than
the estimated fair value of common stock at the date of grant ("compensatory"
options), the Company records an increase in amounts ascribed to common stock
and expense for such difference.
On December 31, 1993, the Company effected a split of its common stock. All
share and per share information presented in these financial statements give
effect to the stock split.
NET LOSS PER SHARE -- Net loss per share is computed by dividing net loss
by the weighted average number of shares outstanding. Stock options did not
impact loss per share as the effect was antidilutive. Pursuant to Securities and
Exchange Commission Staff Accounting Bulletin No. 83, common stock issued for
consideration below the expected offering price during the twelve-month period
preceding an initial public offering, together with common stock options and
warrants issued during such period with exercise prices below the expected
offering price, have been included in the calculation of common shares utilizing
the treasury stock method as if they were outstanding for all periods presented.
The weighted average number of shares of common stock outstanding for the
calculation of net loss per share approximated 1,239,000, 2,655,000 and
2,850,000 for the years ended December 31, 1993, 1994 and 1995, respectively,
and (unaudited) 2,802,000 and 2,953,000 for the three months ended March 31,
1995 and 1996, respectively.
EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS -- Recently issued
accounting standards having relevant applicability to the Company consist
primarily of Statement of Financial Accounting Standards No. 121 ("SFAS No.
121"), which establishes accounting standards for, among other things, the
impairment of long-lived assets and certain identifiable intangibles, and SFAS
No. 123 ("SFAS No. 123"), which establishes standards for accounting for
stock-based compensation. SFAS No. 121 and SFAS No. 123 are effective for fiscal
years beginning after December 15, 1995. SFAS No. 121 is not expected to have a
significant effect, if any, in the Company's financial condition or results of
operations. It is not expected that the Company will adopt the "fair value based
method" of accounting for stock options, which is encouraged by SFAS No. 123,
but rather will continue to account for such, utilizing the "intrinsic value
based method" as is allowed by that statement.
NOTE 3. MAJOR CUSTOMER AND CONTRACT REVENUES
During 1993, 1994 and 1995, the Company received revenues from a customer
pursuant to terms of research and license agreements. During 1995 revenues
included a minimum royalty payment for one of the Company's products. Under
certain circumstances, the licensee could obtain exclusive rights for the sale
and
F-12
<PAGE> 76
IXION, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3. MAJOR CUSTOMER AND CONTRACT REVENUES (CONTINUED)
distribution of this specific product, during which period the Company could
receive additional future royalty payments.
NOTE 4. NOTES PAYABLE
Notes payable and accrued interest are comprised of the following
(thousands of dollars):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- MARCH 31,
1994 1995 1996
---- ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Promissory notes 8%, due September 1996......... $200 $1,100 $ 2,200
Original issue discount, net of accumulated
amortization of $3, $81 and $213.............. (12) (136) (444)
---- ------ ------
188 964 1,756
Accrued interest................................ 4 50 81
---- ------ ------
Notes payable and accrued interest.............. $192 $1,014 $ 1,837
==== ====== ======
</TABLE>
The promissory notes (the "Notes") are unsecured and bear interest at an
annual rate of 8%. In connection with Note borrowings, holders of such Notes are
entitled to receive that number of shares of the Company's common stock which
have a value equal to the face amount of the Notes. As set forth in the offering
memorandum pursuant to which the Notes were issued, for each $25,000 of Notes,
the holder is entitled to receive 2,500 shares, subject to adjustment, of common
stock upon the Company's initial public offering, on the basis of such offering
price at $10 per share. In the event the initial offering price is more than $10
per share, the Note holder would receive fewer shares, and conversely, if the
price is less than $10 per share, the Note holder would receive more shares. The
Company has recorded the estimated fair value of shares issuable as an increase
in common stock and as original issue discount. Original issue discount is
amortized on a straight line basis over the life of related debt.
The Notes may be extended, at the Company's option until September 1, 1997,
in such event the Company shall issue to the holder of such Notes shares of the
Company's common stock at the rate of 5,000 shares for each $25,000 principal
amount of Notes extended.
Additionally, during 1995, the Company borrowed and repaid $100,000 under
terms of a 90-day unsecured 8% promissory note.
Average borrowings outstanding during 1994 and 1995 approximated $67,000
and $578,000, respectively.
Subsequent to March 31, 1996, the Company repaid $200,000 of Notes.
NOTE 5. COMMON STOCK AND STOCK OPTIONS
During 1994 and 1995, the Company issued common stock to certain
consultants in consideration for, among other things, marketing, strategic
planning, legal and other financial related services. During 1994 and 1995, the
Company recorded expense of approximately $14,000 and $321,000, respectively,
relating to such issuances of stock, which are recorded at the approximate fair
value of securities issued.
Some of the Company's consulting agreements provide for future issuances
and vesting of Company common stock and options to acquire Company common stock
under certain circumstances. Approximately 45,000 shares in 1996 and 30,000
shares in 1997 are issuable and vest dependent upon continued service, and
30,000 shares are issuable and vest in each of the Company's first 2 years of
systems sales dependent upon the consultant and the Company attaining certain
revenue levels. Stock options for 100,000 shares, which are to be exercisable
for three years at per share prices to be determined by the Company's Board of
Directors, are
F-13
<PAGE> 77
IXION, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5. COMMON STOCK AND STOCK OPTIONS (CONTINUED)
issuable and vest dependent upon the consultant and the Company attaining
certain milestones; during 1995, 20,000 of such options were granted with an
exercise price of $0.01 per share.
The Company has an Incentive Stock Option Plan (the "Plan") which permits
grants to Company employees of options to acquire shares of Common Stock.
Pursuant to Plan terms, the exercise price of stock options shall not be less
than the fair market value of Common Stock at the date of grant. The duration
and terms of options shall be established by the Board of Directors. The Company
has reserved 400,000 shares of common stock for Plan grants. During 1993 and
1994, the Company granted approximately 195,000 and 41,000 Plan options,
respectively. During 1995, approximately 105,000 Plan options were cancelled and
approximately 6,000 Plan options were exercised. All granted Plan options have a
10 year term and vest over three years on a straight-line, monthly basis
commencing six months after certain conditions have been met. All such
conditions have been met for options granted. Plan options are canceled at the
time grantees leave the Company's employ, except to the extent that 5% of
originally granted options may be exercised by such grantees for a certain
period.
In addition, subsequent to December 31, 1995, in connection with certain
financing transactions, the Company issued options and warrants to acquire
common stock. In January 1996, the Company issued 100,000 warrants having an
exercise price at the Company's initial public offering price ("$IPO")
exercisable for five years. In April 1996, the Company issued 20,000 options
having an exercise price of $7.50 per share exercisable for 18 months, and
50,000 warrants having exercise prices of 150% to 160% of the $IPO exercisable
for three years following the Company's initial public offering.
The following summarizes stock options and warrants transactions through
March 31, 1996 (thousands of shares):
<TABLE>
<CAPTION>
PRICE
SHARES PER SHARE
------ --------------
<S> <C> <C>
Outstanding at January 1, 1993....................... --
Granted............................................ 195 $0.11
----
Outstanding at December 31, 1993..................... 195
Granted............................................ 41 $0.11 to $0.70
----
Outstanding at December 31, 1994..................... 236
Granted............................................ 20 $0.01
Canceled........................................... (105) $0.11 to $0.70
Exercised.......................................... (6) $0.11
----
Outstanding at December 31, 1995..................... 145 $0.01 to $0.70
Granted (Unaudited)................................ 100 $IPO
----
Outstanding at March 31, 1996 (unaudited)............ 245 $0.01 to $IPO
====
</TABLE>
The average remaining lives of outstanding stock options summarized by
exercise price are as follows (thousands of shares):
<TABLE>
<CAPTION>
EXERCISE PRICE WEIGHTED
PER SHARE SHARES AVERAGE LIFE
- - -------------- ------ ------------
<S> <C> <C>
$ 0.01 20 3 years
$ 0.11 112 7 years
$ 0.70 13 8 years
$ IPO 100 5 years
</TABLE>
F-14
<PAGE> 78
IXION, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6. RELATED PARTY TRANSACTIONS
The Company has received cash advances from its principal stockholders.
Borrowings are unsecured, have no stated due date and bear interest at an annual
rate of 8%. At December 31, 1994 and 1995, advances payable approximate $45,000
and $95,000, respectively. Average borrowings were $15,000 and $53,000 during
1994 and 1995, respectively.
The Company has accrued payables due to its principal stockholders and
other Company officers and directors, which primarily represent amounts due
pursuant to terms of consulting agreements. These payables are due on demand and
do not bear interest. See Note 10 -- Subsequent Events regarding conversion of
such accrued payables to common stock.
Prior to 1996, the Company annually acquired from a principal stockholder,
exclusive license rights for certain patents. Included in research and
development expense is $50,000 in each of 1993, 1994 and 1995, representing cash
payments made during each such year and including approximately $29,000 which
was accrued at December 31, 1995 relating to that year. In April 1996, the
Company acquired these patent rights pursuant to terms of an agreement in
exchange for, among other things, $25,000 annual payments to be made by the
Company to such stockholder during 1996 through 2005. The discounted present
value of payments, net of accrued liabilities which were canceled, approximates
$130,000, and will be included in research and development expense. These rights
are limited as to transferability and assignability and are subject to reversion
under certain conditions.
NOTE 7. INCOME TAXES
Deferred income taxes recorded for significant temporary differences
between tax and financial reporting basis of assets and liabilities approximate
$100,000 and $800,000 at December 31, 1994 and 1995, respectively, and primarily
relate to operating loss carryforwards. A valuation allowance has been recorded
for the full amount of deferred taxes as realization of such deferred tax asset
is not considered to be more likely than not.
For income tax purposes, at December 31, 1995, the Company has net
operating loss carryforwards approximating $2.0 million, which begin to expire
in 2006. As a result of changes in the Company's stock ownership, utilization of
net operating loss carryforwards could be subject to annual limitations. The
annual amount that could be utilized is limited to the value of the Company as
of the date of the change in ownership multiplied by the interest rate on
federal long-term exempt securities at that date.
NOTE 8. FACILITIES, EQUIPMENT AND SOFTWARE
Equipment and software is comprised of the following (thousands of
dollars):
<TABLE>
<CAPTION>
MARCH 31,
DECEMBER 31, 1996
------------- ----------
1994 1995
----- ----- (UNAUDITED)
<S> <C> <C> <C>
Computer hardware and software...................... $ 436 $ 469 $ 484
Production and tooling equipment.................... - 45 50
Office equipment and other.......................... 37 37 43
----- ----- -----
473 551 577
Accumulated depreciation............................ (219) (314) (340)
----- ----- -----
Equipment, net...................................... $ 254 $ 237 $ 237
===== ===== =====
</TABLE>
F-15
<PAGE> 79
IXION, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 8. FACILITIES, EQUIPMENT AND SOFTWARE (CONTINUED)
The Company leases its office and development facilities and certain office
equipment under short-term operating leases. Rent expense approximated $87,000,
$94,000 and $127,000 during 1993, 1994 and 1995, respectively.
NOTE 9. COMMITMENTS
Pursuant to terms of a June 1995 agreement, the Company may, under certain
events and circumstances and subject to such consummation of such a defined
event, be obligated to pay a fee to a financial consultant. Such events, as more
specifically defined in the agreement, generally would include certain business
combinations or alliances. The fee is variable in amount and is payable in cash
and in warrants to purchase Company common stock. See Note 10 -- Subsequent
Events regarding final settlement of obligations pursuant to this agreement.
NOTE 10. SUBSEQUENT EVENTS
Effective May 24, 1996, the Company entered into a Merger Agreement
pursuant to which, among other things, Ixion merged with and into Interact which
had acquired the MMS partnership interests. As a result of the Merger, former
Ixion stockholders own the majority of the Interact capital stock.
The business combination involving MMS and Ixion is accounted for utilizing
the purchase method of accounting. Inasmuch as the former Ixion stockholders own
a majority of the Interact capital stock after the business combination, Ixion
is considered the acquiring corporation for purposes of purchase accounting. The
purchase price of approximately $6.0 million attributed to the MMS acquisition
represents the estimated fair value of the approximately 1.3 million shares of
Interact Common Stock issued to former MMS stockholders and includes certain
costs and fees incurred directly in connection with the business combination. In
accordance with purchase accounting, the total purchase price, including assumed
liabilities at their estimated fair values (which approximates book value), is
allocated to assets acquired at their estimated fair values. Assets acquired
include tangible assets (which fair values are estimated to approximate book
value) and identifiable intangible assets, such as products in varying stages of
development. The estimated value of products in development which are considered
to have attained technological feasibility, as such term is defined and
interpreted in accordance with generally accepted accounting principles, are
capitalized and amortized over lives of five years. The estimated value of
products in development which are not deemed to have attained technological
feasibility, as defined, are capitalized in purchase accounting and immediately
expensed subsequent to recording the business combination. The estimated value
attributable to contracts and agreements is capitalized and amortized over five
years.
The Company's unaudited pro forma results of operations for the year ended
December 31, 1995 and the three months ended March 31, 1996, presented on the
basis that the business combination had occurred at the beginning of the
respective periods, are as follows (thousands of dollars, except per share
information):
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1995 MARCH 31, 1996
----------------- ------------------
<S> <C> <C>
Revenues............................ $ 266 $ --
======= =======
Net loss............................ $(5,189) $ (1,499)
======= =======
Net loss per share.................. $ (1.73) $ (0.48)
======= =======
</TABLE>
Contemporaneous with the Merger, Interact received $2.0 million cash from
Baxter Healthcare Corporation ("Baxter"), the former majority owner of MMS,
pursuant to terms of a promissory note, bearing interest at prime plus 2%, due
the earlier of the closing date of Interact's initial public offering or
September 1,
F-16
<PAGE> 80
IXION, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 10. SUBSEQUENT EVENTS (CONTINUED)
1996 (or such later date under certain circumstances). In the event the initial
public offering does not occur on or prior to September 1, 1996, Interact may
extend the due date to September 1, 1997 in exchange for approximately 195,000
shares of Interact Common Stock. In the event the initial public offering occurs
before September 1, 1996, then immediately following such closing the principal
amount plus accrued interest (the "Amount Owed") shall be converted into
Interact Common Stock by issuing such number of shares as determined by dividing
the Amount Owed by the public offering price. The promissory note is subject to
terms and conditions of a Credit Agreement, which prohibits or limits, among
other things, dividends or other capital distributions, issuances of Interact
common stock or options or warrants to acquire such stock, incurrence of
additional indebtedness, sales of assets, repayment of existing indebtedness,
and transactions with shareholders or affiliates. Additionally, on May 24, 1996,
in exchange for existing MMS promissory notes payable to Baxter having a
combined total principal amount of $550,000, Interact issued 8% promissory notes
to Baxter in the amounts of $350,000 and $200,000 having the same maturity date
as the $2.0 million convertible note and agreed to issue immediately following
the closing of the initial public offering such number of shares of Interact
Common Stock as determined by dividing $350,000 by the public offering price.
The $350,000 note may be extended to September 1997 at Interact's option in
exchange for approximately 34,000 shares of Interact Common Stock.
In May and June 1996, the Company entered into employment contracts with
certain of its executive officers covering two- and three-year periods and
providing for base compensation, potential bonuses, severance pay under certain
circumstances, and other standard and customary employment-related benefits.
In connection with the Merger, certain employees and consultants of Ixion
and MMS converted approximately $503,000 of accrued compensation in exchange for
approximately 62,000 shares of Interact Common Stock and payment of payroll
related withholdings. Accrued compensation was converted at a rate of one share
for each $7.50 of accrued payables, a price determined by the Company's Board of
Directors not to be less than the estimated fair market value of such shares at
the agreement date.
As a result of the Merger, the Company paid fees to a financial consultant
in the amount of approximately $132,000 in full settlement of amounts due
pursuant to terms of a consulting agreement.
In May 1996, Interact entered into a distribution agreement with Baxter,
pursuant to which Baxter has obtained a co-exclusive right to distribute the
Company's existing product for use in connection with certain specific
applications. Under terms of the distribution agreement, Baxter has been granted
an exclusive right to provide healthcare providers and their affiliates with
certain product software. The Company has retained all other rights, except as
otherwise set forth below, with respect to the sales and distribution of
products based upon this technology. Baxter has provided the Company with
certain minimum order guarantees and has agreed not to promote, purchase, sell
or distribute any products that are directly competitive with the products
distributed on behalf of the Company pursuant to the distribution agreement.
Baxter also has a right to negotiate distribution agreements for any future
products the Company develops in certain specific other fields. The term of the
agreement is five years, and may be extended for an additional five years at
Baxter's discretion. The parties can each terminate the distribution agreement
under certain circumstances. Further, pursuant to an agreement between Baxter
and the Company, Baxter is entitled to obtain the right to produce or cause
third parties to produce its product requirements in the event that the Company
is unable to supply its requirements in a timely manner.
In May 1996, the Company granted to certain Company officers, directors and
employees options to purchase 255,000 shares of Interact Stock at $6.30 per
share, such exercise price being the estimated fair market value as of the date
of grant as determined by the Compensation Committee of the Company's Board of
Directors. Options have a term of ten years and generally vest 25% after one
year of continued service and ratably thereafter over the remaining three years
of a four-year vesting period.
F-17
<PAGE> 81
IXION, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 10. SUBSEQUENT EVENTS (CONTINUED)
In June 1996, the Company's Board of Directors, subject to stockholder
approval, adopted a 1996 Stock Option Plan (the "1996 Plan"), such plan to
become effective when the Company's initial public offering registration
statement becomes effective. The 1996 Plan will serve as the successor equity
incentive program to Ixion's Stock Option Plan, which has been assumed by
Interact. A total of one million shares have been authorized for issuance under
the 1996 Plan, including approximately 380,000 shares reserved for issuance
under options outstanding. In addition, the Company's Board of Directors,
subject to stockholder approval, adopted an Employee Stock Purchase Plan
covering an aggregate of 200,000 shares of Interact Stock.
F-18
<PAGE> 82
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Partners of Medical Media Systems:
We have audited the accompanying balance sheets of Medical Media Systems (a
New Hampshire development stage partnership) as of December 31, 1994 and 1995,
and the related statements of operations, changes in partners' equity and cash
flows for each of the three years then ended and for the period from November
25, 1992 (date of inception) to December 31, 1995. These financial statements
are the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Medical Media Systems as of
December 31, 1994 and 1995 and the results of its operations and its cash flows
for each of the three years then ended and from November 25, 1992 (date of
inception) to December 31, 1995, in conformity with generally accepted
accounting principles.
Robert E. Moses
Certified Public Accountants
Lebanon, New Hampshire
February 16, 1996, except as to
Note 7, which is as of June 13, 1996
F-19
<PAGE> 83
MEDICAL MEDIA SYSTEMS
(A DEVELOPMENT STAGE PARTNERSHIP)
BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- MARCH 31,
1994 1995 1996
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash.......................................................... $ 599 $ 302 $ 48
Other current assets.......................................... -- 11 1
------ ------ -----
Total current assets.................................. 599 313 49
------ ------ -----
PROPERTY AND EQUIPMENT, at cost (Note 1):
Leasehold improvements........................................ 9 9 9
Research and development equipment............................ 1,942 2,016 2,021
Furniture..................................................... 15 16 16
------ ------ -----
1,966 2,041 2,046
Less Accumulated depreciation................................. 1,045 1,424 1,492
------ ------ -----
921 617 554
------ ------ -----
OTHER ASSETS (Note 1):
Organization expense, net of accumulated amortization of $20,
$29 and $32................................................ 28 18 16
Patents....................................................... 21 111 129
------ ------ -----
49 129 145
------ ------ -----
$1,569 $1,059 $ 748
====== ====== =====
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES:
Note payable (Note 5)......................................... $ -- $ 400 $ 400
Accounts payable.............................................. 75 112 144
Accrued wages and expenses.................................... 54 118 129
------ ------ -----
Total current liabilities............................. 129 630 673
------ ------ -----
COMMITMENTS AND CONTINGENCIES (Note 2)
PARTNERS' EQUITY, including deficit accumulated during the
development stage of $4,698, $6,619 and $6,973................ 1,440 429 75
------ ------ -----
$1,569 $1,059 $ 748
====== ====== =====
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-20
<PAGE> 84
MEDICAL MEDIA SYSTEMS
(A DEVELOPMENT STAGE PARTNERSHIP)
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, CUMULATIVE AMOUNTS FROM
--------------------------------------- DATE OF INCEPTION TO
1993 1994 1995 DECEMBER 31, 1995
----------- ----------- ----------- -----------------------
<S> <C> <C> <C> <C>
OPERATING EXPENSES
Research and development........... $ 1,846 $ 1,176 $ 1,153 $ 4,467
General and administrative......... 170 168 394 737
Depreciation and amortization...... 500 517 387 1,453
------- ------- ------- -------
2,516 1,861 1,934 6,657
------- ------- ------- -------
OTHER INCOME
Interest income.................... (13) (10) (13) (37)
Miscellaneous...................... -- (1) -- (1)
------- ------- ------- -------
(13) (11) (13) (38)
------- ------- ------- -------
NET LOSS............................. $(2,503) $(1,850) $(1,921) $(6,619)
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
31, CUMULATIVE AMOUNTS FROM
------------------------- DATE OF INCEPTION TO
1996 MARCH 31, 1996
----------- -----------------------
1995 (UNAUDITED) (UNAUDITED)
-----------
(UNAUDITED)
<S> <C> <C> <C>
OPERATING EXPENSES
Research and development...................... $ 266 $ 224 $ 4,691
General and administrative.................... 56 61 798
Depreciation and amortization................. 94 71 1,524
----- ----- -------
416 356 7,013
----- ----- -------
OTHER INCOME
Interest income............................... (4) (2) (39)
Miscellaneous................................. -- -- (1)
----- ----- -------
(4) (2) (40)
----- ----- -------
NET LOSS........................................ $(412) $(354) $(6,973)
===== ===== =======
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-21
<PAGE> 85
MEDICAL MEDIA SYSTEMS
(A DEVELOPMENT STAGE PARTNERSHIP)
STATEMENT OF CHANGES IN PARTNERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MMS FOUNDERS GROUP
BAXTER MEDICAL MEDIA LIMITED
HOLDINGS, INC. PARTNERSHIP TOTAL
-------------------- ------------------ -------
<S> <C> <C> <C>
BALANCE, November 25, 1992 (date of inception)... $ -- $ -- $ --
Capital contributions.......................... 1,378 -- 1,378
Net loss....................................... (345) -- (345)
------- ------- -------
BALANCE, December 31, 1992....................... 1,033 -- 1,033
Capital contributions.......................... 2,810 -- 2,810
Net loss....................................... (2,503) -- (2,503)
------- ------- -------
BALANCE, December 31, 1993....................... 1,340 -- 1,340
Capital contributions.......................... 1,950 -- 1,950
Net loss....................................... (1,850) -- (1,850)
------- ------- -------
BALANCE, December 31, 1994....................... 1,440 -- 1,440
Capital contributions.......................... 910 -- 910
Net loss....................................... (1,921) -- (1,921)
------- ------- -------
BALANCE, December 31, 1995....................... 429 -- 429
Net loss (Unaudited)........................... (354) -- (354)
------- ------- -------
BALANCE, March 31, 1996 (Unaudited).............. $ 75 $ -- $ 75
======= ======= =======
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-22
<PAGE> 86
MEDICAL MEDIA SYSTEMS
(A DEVELOPMENT STAGE PARTNERSHIP)
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CUMULATIVE
AMOUNTS FROM
YEARS ENDED DECEMBER 31, DATE OF INCEPTION
--------------------------- TO DECEMBER 31,
1993 1994 1995 1995
------- ------- ------- ------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.......................................... $(2,503) $(1,850) $(1,921) $ (6,619)
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation................................... 490 508 377 1,424
Amortization................................... 10 9 10 29
Increase in other current assets............... -- -- (11) (11)
Increase (decrease) in accounts payable........ (52) (92) (22) 52
Increase in accrued wages and expenses......... -- 54 64 118
------- ------- ------- -------
Net cash flows used by operating activities....... (2,055) (1,371) (1,503) (5,007)
------- ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for property and equipment............... (698) (302) (75) (2,041)
Payments for organization expenses................ (48) -- -- (48)
Cash paid to acquire patents...................... (10) (12) (29) (50)
------- ------- ------- -------
Net cash flows used by investing activities....... (756) (314) (104) (2,139)
------- ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term financing................ -- -- 400 400
Cash received as capital contributions............ 2,810 1,950 910 7,048
------- ------- ------- -------
Net cash flows provided by financing activities... 2,810 1,950 1,310 7,448
------- ------- ------- -------
Net increase (decrease) in cash..................... (1) 265 (297) 302
CASH, beginning of year............................. 335 334 599 --
------- ------- ------- -------
CASH, end of year................................... $ 334 $ 599 $ 302 $ 302
======= ======= ======= =======
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-23
<PAGE> 87
MEDICAL MEDIA SYSTEMS
(A DEVELOPMENT STAGE PARTNERSHIP)
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED CUMULATIVE
MARCH 31, AMOUNTS FROM
----------------------------- DATE OF INCEPTION
1995 1996 TO MARCH 31,
------------ ------------ 1996
(UNAUDITED) (UNAUDITED) -----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.......................................... $ (412) $ (354) $(6,973)
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation................................... 91 68 1,492
Amortization................................... 3 3 32
Decrease (increase) in other current assets.... (1) 10 (1)
Increase (decrease) in accounts payable........ (5) 17 69
Increase in accrued wages and expenses......... 11 11 129
----- ----- -------
Net cash flows used by operating activities....... (313) (245) (5,252)
----- ----- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for property and equipment............... (24) (5) (2,046)
Payments for organization expenses................ -- -- (48)
Cash paid to acquire patents...................... (19) (4) (54)
----- ----- -------
Net cash flows used by investing activities....... (43) (9) (2,148)
----- ----- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term financing................ -- -- 400
Cash received as capital contributions............ -- -- 7,048
----- ----- -------
Net cash flows provided by financing activities... -- -- 7,448
----- ----- -------
NET INCREASE (DECREASE) IN CASH..................... (356) (254) 48
CASH, beginning of period........................... 599 302 --
----- ----- -------
CASH, end of period................................. $ 243 $ 48 $ 48
===== ===== =======
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-24
<PAGE> 88
MEDICAL MEDIA SYSTEMS
(A DEVELOPMENT STAGE PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization -- Medical Media Systems ("MMS" or "the Partnership"), a New
Hampshire general partnership in the development stage, was organized on
November 25, 1992 for the purpose of engaging in research, development and
commercialization of virtual reality and other advanced visualization as it
pertains to an operating room in a medical environment.
Depreciation -- Research and development equipment is carried at cost, less
accumulated depreciation. The Partnership follows the policy of charging to
operating expenses annual amounts of depreciation which allocates the cost of
property and equipment over their estimated useful lives. The Partnership
estimates that research and development equipment has a useful life of five
years, furniture has a useful life of seven years and leasehold improvements
have a useful life of 39 years. Expenditures for repairs and maintenance are
expensed when incurred and betterments are capitalized.
Organization expense -- Organization expense includes legal expenses
relating to the organization of the Partnership and will be amortized over five
years.
Patents -- The Partnership capitalizes legal fees incurred to obtain
patents. Patents will be amortized over 15 years when issued.
Cash and cash equivalents -- For purposes of the statement of cash flows,
the partnership considers all highly liquid short-term investments with an
original maturity of three months or less to be cash equivalents. The majority
of the Partnership's cash is held in one Hanover, New Hampshire based commercial
bank. At times, the FDIC insurance limit may be exceeded.
Income taxes -- These statements do not include provisions for federal
income taxes, since any income or loss is reported on the applicable federal
returns of the respective general partners.
Use of estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Interim Financial Statements -- The interim financial data as of and for
the three months ended March 31, 1995 and 1996 is unaudited; however, in the
opinion of Partnership management, the interim data includes all adjustments,
consisting only of normal recurring adjustments necessary for a fair statement
of results for the interim periods. The 1996 interim period results of
operations are not necessarily indicative of results for the entire year.
Effect of Recently Issued Accounting Standards -- Recently issued
accounting standards having relevant applicability to the Partnership consists
primarily of Statement of Financial Accounting Standards No. 121 ("SFAS No.
121"), which establishes accounting standards for, among other things, the
impairment of long-lived assets and certain identifiable intangibles. SFAS No.
121 is effective for fiscal years beginning after December 15, 1995 and is not
expected to have a significant effect, if any, in the Company's financial
condition or results of operations.
2. COMMITMENTS AND CONTINGENCIES:
License agreement -- The Partnership has entered into a licensing agreement
with a related party of Baxter Medical Media Holdings, Inc. ("Baxter"). Under
the license agreement, MMS has granted the licensee exclusive rights to make,
have made, use and sell any product in the field of knee arthroscopic training
and surgery developed by MMS. In consideration of the licenses granted, the
Partnership will receive royalties
F-25
<PAGE> 89
MEDICAL MEDIA SYSTEMS
(A DEVELOPMENT STAGE PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. COMMITMENTS AND CONTINGENCIES (CONTINUED)
on net sales of all patented products or copyrighted software sold by the
licensee. See Note 7 -- Subsequent Events regarding the termination of this
license agreement.
Consulting agreements -- The Partnership has entered into consulting
agreements with five individuals to perform research services. Under these
agreements, MMS has agreed to pay an aggregate annual amount of $375,000 to
these individuals. MMS may terminate or amend these agreements at its
discretion. Payments under these agreements amounted to $209,219, $276,816 and
$126,680, respectively, for the years ended December 31, 1993, 1994 and 1995 and
to $639,752 since the date of inception.
Research agreement -- On January 2, 1995, the Partnership entered into a
research agreement with The Trustees of Dartmouth College through the New
Hampshire Industrial Research Center to develop additional clinical products.
The New Hampshire Industrial Research Center has committed $50,000 to this
project. MMS is obligated to make contributions in the amount of $200,000.
Lease commitments -- The Partnership leases its facilities and equipment
under noncancelable lease arrangements. On August 1, 1994, the Partnership
entered into a three-year agreement to lease office space in West Lebanon, New
Hampshire. The Partnership also obtained one three-year renewal option. Minimum
annual lease payments will amount to $32,278 for the lease term. In addition,
MMS will be required to pay its proportionate share of building expenses.
Building rent expense amounted to $15,934 and $39,799, respectively, for the
years ended December 31, 1994 and 1995. Rent expense under equipment leases
amounted to $12,285 for the year ended December 31, 1995. Future minimum lease
payments under equipment leases were as follows: 1996 -- $14,275;
1997 -- $13,305; 1998 -- $1,991.
3. RETIREMENT PLAN:
The Partnership adopted a defined contribution, salary reduction plan
during 1994 which covers all employees aged 21 or over. Each employee may elect
to defer a percentage of their salary into the plan, subject to annual maximums
as prescribed by the Internal Revenue Service. The Partnership does not intend
to make matching contributions.
4. PARTNERSHIP CAPITAL STRUCTURE:
The Partnership is organized as a New Hampshire general partnership under
the New Hampshire Uniform Partnership Act. MMS Founders Group Limited
Partnership ("MMS, L.P.") and Baxter Medical Media Holdings, Inc. ("Baxter") are
the sole general partners. MMS, L.P. has been designated the managing general
partner.
MMS, L.P., in exchange for a 49% general partnership interest in Medical
Media Systems, contributed all of its proprietary rights, both tangible and
intangible, in regard to its research and development of virtual reality and
other advanced visualization.
Baxter, in exchange for a 51% general partnership interest in Medical Media
Systems, agreed to contribute $5,100,000 of capital subject to the achievement
of certain milestones agreed upon by Baxter and MMS. As of December 31, 1995 the
Partnership had received $4,887,991. Prior to the organization of MMS, Baxter
contributed $212,009 to a predecessor corporation. In addition, Baxter has
options to contribute additional capital subject to the achievement of
additional milestones agreed upon by Baxter and MMS. If the options to
contribute additional capital are exercised, Baxter's Partnership interest would
increase.
During 1995 and 1994, Baxter contributed $2,160,000 of capital in exchange
for an additional 9% Partnership interest.
F-26
<PAGE> 90
MEDICAL MEDIA SYSTEMS
(A DEVELOPMENT STAGE PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. RELATED PARTY TRANSACTIONS:
During 1995, the Partnership received $400,000 from Baxter as a 6% demand
note payable. There are no fixed repayment terms.
During 1995, the Partnership contracted with a related party of Baxter to
provide regulatory support for its products under development. As of December
31, 1995, the Partnership had incurred $75,000 of expense, of which $45,000 was
included in accounts payable at the end of the year.
6. FAIR VALUE OF FINANCIAL INSTRUMENTS:
In accordance with FASB Statement 107, Disclosures about Fair Values of
Financial Instruments, which is effective for the year ended December 31, 1995,
the Partnership estimates that the carrying amounts of all financial
instruments, such as cash and accounts payable approximated their fair values
due to the short-term maturity of these instruments. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgment and therefore cannot be determined with precision. Changes in
assumptions could affect estimates. It is not practicable to estimate the fair
value of the related party note payable.
7. SUBSEQUENT EVENTS:
Note payable -- In April 1996, the Partnership received an additional
advance of $150,000 from a related party as a short-term note payable. The
promissory note bears interest at 6% and is due on demand.
Reorganization and merger -- In accordance with terms of a merger
agreement, in May 1996, the Partnership reorganized as a corporation and changed
its name to Interact Medical Technologies Corporation ("Interact"). Subsequent
to the reorganization, Interact merged its operations with Ixion, Inc.
("Ixion"). Ixion stockholders received shares of Interact common stock
("Interact Common Stock") in such amount that the former Ixion stockholders own
a majority of Interact Common Stock after the merger, and Interact received $2.0
million in cash from Baxter in exchange for a short-term promissory note, which
is convertible, under certain circumstances, at Interact's option into Interact
Common Stock. This business combination will be accounted for utilizing purchase
accounting. Inasmuch as former Ixion stockholders own a majority of Interact
Common Stock after the merger, Ixion is considered to be the acquiring
corporation for purposes of purchase accounting. In connection with the merger,
the license agreement with Baxter as described in Note 2 was terminated.
F-27
<PAGE> 91
- - ------------------------------------------------------
- - ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT IS UNLAWFUL. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
The Company........................... 8
Risk Factors.......................... 9
Use of Proceeds....................... 18
Dividend Policy....................... 18
Capitalization........................ 19
Dilution.............................. 20
Selected Financial Data............... 21
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 24
Business.............................. 27
Management............................ 41
Certain Transactions.................. 49
Principal Stockholders................ 52
Description of Capital Stock.......... 54
Shares Eligible for Future Sale....... 57
Underwriting.......................... 59
Legal Matters......................... 60
Experts............................... 60
Additional Information................ 61
Index to Financial Statements......... F-1
</TABLE>
------------------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSAC-
TIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THE DISTRIBUTION, MAY
BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- - ------------------------------------------------------
- - ------------------------------------------------------
- - ------------------------------------------------------
- - ------------------------------------------------------
2,000,000 SHARES
[INTERACT MEDICAL
TECHNOLOGIES LOGO]
COMMON STOCK
-------------------------
PROSPECTUS
-------------------------
DAKIN SECURITIES CORPORATION
, 1996
- - ------------------------------------------------------
- - ------------------------------------------------------
<PAGE> 92
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the Common Stock being registered. All the amounts shown are estimates,
except for the registration fee, the Nasdaq National Market filing fee and the
NASD fee.
<TABLE>
<S> <C>
Registration fee.................................................... $7,932
Nasdaq National Market fee.......................................... *
NASD fee............................................................ *
Blue Sky fees and expenses.......................................... *
Printing and engraving expenses..................................... *
Legal fees and expenses............................................. *
Accounting fees and expenses........................................ *
Transfer Agent and Registrar fees................................... *
Miscellaneous expenses.............................................. *
------
TOTAL..................................................... $ *
======
</TABLE>
- - ---------------
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Under Section 145 of the Delaware General Corporation Law, the Registrant
has broad powers to indemnify its directors and officers against liabilities
they may incur in such capacities, including liabilities under the Securities
Act. The Registrant's Bylaws also provide that the Registrant will indemnify its
directors and executive officers and may indemnify its other officers, employees
and other agents to the fullest extent not prohibited by Delaware law.
The Registrant's Certificate of Incorporation provides for the elimination
of liability for monetary damages for breach of the directors' fiduciary duty of
care to the Registrant and its stockholders. These provisions do not eliminate
the directors' duty of care and, in appropriate circumstances, equitable
remedies such as injunctive or other forms of non-monetary relief will remain
available under Delaware law. In addition, each director will continue to be
subject to liability for breach of the director's duty of loyalty to the
Registrant, for acts or omissions not in good faith or involving intentional
misconduct, for knowing violations of law, for any transaction from which the
director derived an improper personal benefit, and for payment of dividends or
approval of stock repurchases or redemptions that are unlawful under Delaware
law. The provision does not affect a director's responsibilities under any other
laws, such as the federal securities laws or state or federal environmental
laws.
Pursuant to authorization provided under the Certificate of Incorporation,
the Registrant has entered into indemnification agreements with each of its
directors and officers. Generally, the indemnification agreements attempt to
provide the maximum protection permitted by Delaware law as it may be amended
from time to time. Moreover, the indemnification agreements provide for certain
additional indemnification. Under such additional indemnification provisions,
however, an individual will not receive indemnification for judgments,
settlements or expenses if he or she is found liable to the Registrant (except
to the extent the court determines he or she is fairly and reasonably entitled
to indemnity for expenses), for settlements not approved by the Registrant or
for settlements and expenses if the settlement is not approved by the court. The
indemnification agreements provide for the Registrant to advance to the
individual any and all reasonable expenses (including legal fees and expenses)
incurred in investigating or defending any such action, suit or proceeding. In
order to receive an advance of expenses, the individual must submit to the
Registrant copies of invoices presented to him or her for such expenses. Also,
the individual must repay such advances upon a final judicial decision that he
or she is not entitled to indemnification.
II-1
<PAGE> 93
The Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the Underwriters of the Registrant and
its officers and directors for certain liabilities arising under the Securities
Act or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since May 31, 1993, the Registrant has sold and issued the following
unregistered securities:
1. On May 24, 1996, the Registrant issued an aggregate of 1,253,333 shares
of Common Stock to Baxter Medical Media Holdings, Inc. ("Baxter Holdings") and
MMS Founders Group Limited Partnership ("MMSLP") in consideration of Baxter
Holdings and MMSLP transferring their general partnership interests in Medical
Media Systems ("MMS"), to the Registrant.
2. On May 24, 1996, the Registrant issued an aggregate of 1,352,252 shares
of Common Stock to the stockholders of Ixion, Inc. ("Ixion") pursuant to that
certain Agreement and Plan of Reorganization by and among MMS and Ixion dated
May 24, 1996 (the "Merger Agreement"), in consideration of such stockholders
cancelling their shares of Ixion.
3. On May 24, 1996, the Registrant issued an aggregate of 62,372 shares of
Common Stock to certain Ixion and MMS employees and consultants in consideration
of the cancellation of accrued but unpaid compensation owed to them by Ixion and
MMS.
4. On May 24, 1996, pursuant to the terms of the Merger Agreement, the
Registrant assumed Ixion's obligations under letter agreements (the "Letter
Agreements") executed in favor of certain investors in Ixion's 1995 bridge
financing, pursuant to which a number of shares of Common Stock equal to
$2,200,000 divided by the initial public offering price for the sale of Common
Stock offered hereby will be issued immediately following the closing of this
Offering. Assuming an initial public offering price of $9.00 per share (the
midpoint of the range set forth on the cover page of this Prospectus), an
aggregate of 244,455 shares will be issued pursuant to the Letter Agreements.
5. On May 24, 1996, pursuant to the terms of the Merger Agreement, the
Registrant assumed Ixion's obligations under certain promissory notes accruing
interest at the rate of 8% per annum in the aggregate principal amount of
$2,000,000 issued in connection with Ixion's 1995 bridge financing (the "Bridge
Notes"). The Bridge Notes provide for an additional issuance of 2,439 shares for
each $25,000 of principal amount outstanding under the Bridge Notes following
September 1, 1996.
6. On May 24, 1996, the Registrant issued a promissory note to Baxter
Healthcare Corporation ("Baxter") accruing interest at the rate of 8% per annum
in the aggregate principal amount of $350,000 (the "$350,000 Note"). The
Registrant also entered into an agreement with Baxter (the "Baxter Letter")
pursuant to which a number of shares of Common Stock equal to $350,000 divided
by the initial public offering price for the shares of Common Stock offered
hereby will be issued to Baxter immediately following the closing of this
Offering. Assuming an initial public offering price of $9.00 per share (the
midpoint of the range set forth on the cover page of this Prospectus), an
aggregate of 38,889 shares will be issued to Baxter pursuant to the Baxter
Letter. If the $350,000 Note is not repaid in full on or before September 1,
1996, an additional 2,439 shares of Common Stock will be issued for each $25,000
outstanding.
7. On May 24, 1996, the Registrant issued a convertible promissory note
bearing interest at a rate of 200 basis points above the prime rate to Baxter in
the aggregate principal amount of $2,000,000 (the "$2,000,000 Note"). The
$2,000,000 Note is convertible prior to September 1, 1996 into a number of
shares of Common Stock equal to $2,000,000 plus accrued interest divided by the
initial public offering price for the shares of Common Stock offered hereby.
Assuming the closing of this Offering occurs on August 24, 1996 and an initial
public offering price of $9.00 (the midpoint of the range set forth on the cover
page of this Prospectus), an aggregate of 227,964 shares will be issued to
Baxter pursuant to the $2,000,000 Note. If the $2,000,000 Note is not repaid in
full on or before September 1, 1996, an additional 2,439 shares of Common Stock
will be issued for each $25,000 outstanding.
II-2
<PAGE> 94
8. On May 24, 1996, pursuant to the terms of the Merger Agreement, the
Registrant assumed the stock options Ixion had granted to certain Ixion
employees, officers, directors and consultants to purchase an aggregate of
119,702 shares of Common Stock at a weighted average exercise price of $4.77.
9. On May 24, 1996, pursuant to the Merger Agreement, the Registrant
assumed warrants Ixion had granted to purchase an aggregate of 73,162 shares of
Common Stock to certain warrantholders at a weighted average exercise price of
1.18 times the initial public offering price of the shares of Common Stock
offered hereby.
10. On May 27, 1996, the Registrant granted options to purchase an
aggregate of 255,000 shares of Common Stock to certain employees, officers and
directors of the Registrant at an exercise price of $6.30 per share, pursuant to
the Registrant's then existing stock option plan.
The sales and issuances of securities in the above transactions were deemed
to be exempt under the Act by virtue of Section 4(2) thereof and/or Regulation D
and Rule 701 promulgated thereunder as transactions not involving any public
offering. The purchasers in each case represented their intention to acquire the
securities for investment only and not with a view to the distribution thereof.
Appropriate legends were affixed to the stock certificates issued in such
transactions. Similar representations of investment intent were obtained and
similar legends imposed in connection with any subsequent transfers of any such
securities. The Registrant believes that all recipients had adequate access,
through employment or other relationships, to information about the Registrant
to make an informed investment decision.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- - -------- ------------------------------------------------------------------------------------
<S> <C>
+1.1 Form of Underwriting Agreement.
2.1 Agreement and Plan of Reorganization dated May 24, 1996 between Medical Media
Systems, Inc. ("MMS, Inc.") and Ixion, Inc. ("Ixion").
3.1 Registrant's Certificate of Incorporation.
3.2 Registrant's Certificate of Merger.
3.3 Form of Registrant's Amended and Restated Certificate of Incorporation to be
effective immediately prior to this Offering.
3.4 Registrant's Bylaws, as amended.
3.5 Registrant's Amended and Restated Bylaws to be effective upon completion of this
Offering.
+4.1 Specimen Stock Certificate.
+5.1 Opinion of Brobeck, Phleger & Harrison LLP.
10.1 Voting Agreement and Irrevocable Proxy dated May 24, 1996 between Baxter and Maxal
Capital Corporation.
10.2 Distribution Agreement dated May 24, 1996 between the Registrant and Baxter.
10.3 Credit Agreement dated May 24, 1996 between the Registrant and Baxter.
10.4 $2,000,000 Promissory Note dated May 24, 1996 executed by the Registrant in favor of
Baxter.
10.5 $350,000 Promissory Note dated May 24, 1996 executed by the Registrant in favor of
Baxter.
10.6 $200,000 Promissory Note dated May 24, 1996 executed by the Registrant in favor of
Baxter.
10.7 Registration Rights Agreement dated May 24, 1996 among the Registrant, Baxter and
certain stockholders.
10.8 Stock Agreement dated May 24, 1996 among MMSLP, Baxter Holdings, and the Registrant.
</TABLE>
II-3
<PAGE> 95
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- - -------- ------------------------------------------------------------------------------------
<S> <C>
10.9 Agreement dated May 24, 1996 regarding issuance of Common Stock between the
Registrant and Baxter.
10.10 Letter Agreement regarding corporate conversion of MMSLP dated May 17, 1996.
10.11 Manufacturing License Agreement dated May 24, 1996 between the Registrant and
Baxter.
10.12 Standard Form Office Lease for the Registrant's facilities located at 400 Mercer
Street, Suite 400, Seattle, WA 98109 dated January 29, 1996 between CVK Partnership
and Ixion.
10.13 Standard Form of Office Lease for the Registrant's facilities located at 654 Madison
Avenue, Suite 1606, New York, NY 10021 dated March 15, 1994 between the Rolfe Group,
Inc. and Hydration Technology Corporation including Agreement Extending lease dated
October 31, 1994.
10.14 Assignment and Assumption of Lease for the Registrant's facilities located at 654
Madison Avenue, Suite 1606, New York, NY 10021 dated April 24, 1996 between
Hydration Technology Corporation and Ixion.
10.15 Commercial Lease for the Registrant's facilities located at 1335 North Northlake
Way, Seattle, WA 98103 dated September 1, 1984 between Nelson Northwest, Inc. and
Ixion.
10.16. Addendum to Lease for the Registrant's facilities located at 1335 North Northlake
Way, Seattle, WA 98103 dated November 1, 1995 between Nelson Northwest, Inc. and
Ixion.
10.17 Lease Agreement for the Registrant's facilities located at 79 East Wilder Road, West
Lebanon, NH 03784 dated July 8, 1994 between RSR Robson Resources, Inc. and Medical
Media Systems, including First and Second Amendments.
10.18 Consulting Agreement dated April 25, 1995 between Ixion and Valentino Montegrande.
10.19 Consulting Agreement dated January 1, 1996 between Ixion and James Caillouette.
+10.20 Consulting Agreement dated January 1, 1996 between Ixion and John Lyon.
10.21 Employment Agreement dated February 21, 1995 between Ixion and Greg Claypool.
10.22 Employment Agreement dated May 24, 1996 between the Registrant and Steven Pieper.
+10.23 Employment Agreement dated May 24, 1996 between the Registrant and Bruce Sturman.
10.24 Form of Promissory Note executed by Ixion in favor of various parties.
10.25 Form of Letter Agreement dated February 22, 1996 regarding the issuance of Common
Stock between Ixion and various parties.
10.26 Form of Subscription Agreement regarding the issuance of Common Stock between Ixion
and various parties.
10.27 Promissory Note dated October 4, 1994 executed by Ixion in favor of Bruce Sturman.
10.28 Promissory Note dated October 31, 1995 executed by Ixion in favor of Bruce Sturman.
10.29 Promissory Note dated September 9, 1994 executed by Ixion in favor of David Hon.
10.30 Promissory Note dated September 12, 1995 executed by Ixion in favor of David Hon.
10.31 Research, Option and License Agreement dated April 8, 1992 between Ixion and Ethicon
Endo-Surgery.
10.32 Development and License Agreement dated January 13, 1993 between MMS and
MusculoGraphics, Inc.
10.33 Cooperative Agreement dated January 2, 1995 between MMS and the Trustees of
Dartmouth College.
10.34 Form of Letter Agreement dated May 17, 1996 between the Registrant and certain
employees and consultants of Ixion and MMS relating to the conversion of accrued
salaries into shares of Common Stock.
10.35 General Release Agreement dated May 28, 1996 among the Kriegsman Group, Steven
Kriegsman, MMS, Inc., and Ixion.
</TABLE>
II-4
<PAGE> 96
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- - -------- ------------------------------------------------------------------------------------
<S> <C>
10.36 Settlement Agreement and Release of All Claims dated April 16, 1996 among Ixion,
Inc., Cyndel & Co., Inc., Patrick Kolenik and Steven Bayern.
10.37 Asset Purchase Agreement dated April 22, 1996 between Ixion and David Hon.
10.38 Registrant's 1994 Incentive Stock Option Plan (the "Prior Plan").
10.39 Form of Incentive Stock Option Rights Agreement under the Prior Plan.
10.40 Form of Grant of Incentive Stock Option under the Prior Plan.
10.41 Patent Filing of Patent No. 4,907,973 dated May 20, 1996.
10.42 1996 Stock Option/Stock Issuance Plan (the "Plan").
10.43 Form of Notice of Grant under the Plan.
10.44 Form of Stock Option Agreement under the Plan.
10.45 1996 Employee Stock Purchase Plan (the "Purchase Plan").
10.46 Form of Stock Purchase Agreement under the Purchase Plan.
10.47 Form of Ixion Employee Non-Disclosure and Non-Compete Agreement.
10.48 Form of MMS Invention and Non-Disclosure Agreement.
10.49 Form of Indemnification Agreements entered into between the Registrant and its
directors.
10.50 Form of Indemnification Agreement entered into between the Registrant and its
officers.
+10.51 Common Stock Purchase Warrant dated January 1, 1996 executed by Ixion in favor of
Richard Friedman.
+10.52 Common Stock Purchase Warrant dated January 1, 1996 executed by Ixion in favor of
Jeff Markowitz.
10.53 Letter Agreement regarding regulatory affairs dated October 17, 1994 between MMS and
Baxter.
10.54 Credit Agreement dated April 10, 1996 between MMS and Baxter.
10.55 Demand Promissory Note dated April 10, 1996 executed by MMS in favor of Baxter.
+23.1 Consent of Brobeck, Phleger & Harrison LLP. Reference is made to Exhibit 5.1.
23.2 Consent of Independent Certified Public Accountants -- BDO Seidman, LLP
23.3 Consent of Independent Certified Public Accountants -- Robert E. Moses
24.1 Power of Attorney. Reference is made to page II-7.
</TABLE>
- - ---------------
+ To be filed by amendment.
(b) Financial Statement Schedules included separately in the Registration
Statement.
All other schedules are omitted because they are not required, are not
applicable or the information is included in the Financial Statements or notes
thereto.
ITEM 17. UNDERTAKINGS.
The undersigned hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 14, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of
II-5
<PAGE> 97
expenses incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-6
<PAGE> 98
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Diego, County of San
Diego, State of California, on the 28th day of June, 1996.
INTERACT MEDICAL
TECHNOLOGIES CORPORATION
By: /s/ BRUCE D. STURMAN
------------------------------------
Bruce D. Sturman
President and Chief Executive
Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Bruce D. Sturman, as his true and lawful
attorney-in-fact and agent, with full power of substitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or his
substitute or substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- - --------------------------------------------- -------------------------------- ---------------
<C> <S> <C>
/s/ BRUCE D. STURMAN President, June 28, 1996
- - --------------------------------------------- Chief Executive Officer and
(Bruce D. Sturman) Director
(Principal Executive Officer)
/s/ THOMAS E. MIGNANELLI Vice President, Finance and June 28, 1996
- - --------------------------------------------- Chief Financial Officer
(Thomas E. Mignanelli) (Principal Financial and
Accounting Officer)
/s/ STEVEN D. PIEPER, Ph.D. Vice President, Chief Technical June 28, 1996
- - --------------------------------------------- Officer, Director
(Steven D. Pieper, Ph.D.)
/s/ JAMES C. CAILLOUETTE, M.D. Director June 28, 1996
- - ---------------------------------------------
(James C. Caillouette, M.D.)
/s/ DAVID C. HON Director June 28, 1996
- - ---------------------------------------------
(David C. Hon)
/s/ CHARLES E. HUTCHINSON, Ph.D. Director June 28, 1996
- - ---------------------------------------------
(Charles E. Hutchinson, Ph.D.)
/s/ JOHN R. LYON Director June 28, 1996
- - ---------------------------------------------
(John R. Lyon)
/s/ LEO C. McKENNA Director June 28, 1996
- - ---------------------------------------------
(Leo C. McKenna)
</TABLE>
II-7
<PAGE> 99
APPENDIX TO ELECTRONIC DOCUMENT FORMAT
DESCRIPTION OF GRAPHICS
Pursuant to Paragraph 625 of the EDGAR User Manual, the following is an
explanation of the differences between the foregoing document in electronic
format and the corresponding printed document on
1. Location: Outside Front Cover Page of Prospectus.
Description: Interact Medical Technologies Corporation logo, below which
is printed "INTERACT MEDICAL TECHNOLOGIES."
2. Location: Inside Front Cover Page of Prospectus.
Description: A graphic with the Company's logo described in Paragraph 1
above. Below the logo is the caption, "CLOSED-LOOP MARKETING STRATEGY."
Below this caption is a graphic of a closed loop labeled with the
captions "GastroSim(TM)," "Preview(TM)," "DataFusion(TM)" and "Vascular
Surgeons, Family Practitioners, Gastroenterologists, others." In the
middle of the closed loop is the caption "Encompassing the Clinical
Experience in Education, Training and MIS Procedures." In three circles
intersecting the closed loop there are the captions "Interactive Virtual
Reality Simulators," "Interactive 3D Modeling Services" and "Interactive
CD-Rom titles." Placed around the closed loop are the captions "Training
Room," "Operating Room" and "Medical School Classroom." Placed to the
left and right of the closed loop are three pictures. The first picture
depicts an individual operating GastroSim. The next picture depicts an
individual observing a Preview model on a computer screen. The final
picture depicts one screen from a CD-Rom product under development. The
caption at the bottom left states "Preview(TM) and Interact's products
under development are being designed to provide a comprehensive suite of
interactive information tools that are designated to enhance clinical
performance from the operating room to the medical school classroom."
3. Location: Inside Front Cover Page of Prospectus -- Foldout.
Description: A graphic with the Company's logo described in Paragraph 1
above. Above the logo is the caption "MISSION STATEMENT." Below the logo
is the caption "Interact Medical Technologies Corporation develops,
markets and manufactures products designed to facilitate the effective
use of minimally invasive surgical (MIS) procedures and enhance clinical
performance." Below this caption is the caption "Interactive 3D Modeling
Services." Below this caption is the caption "The Company's initial
product, Preview(TM), allows the clinician to visualize and plan
surgical procedures by interacting with the three dimensional model of
the patient-specific anatomy." Below this caption are nine pictures of
images of patient-specific anatomy generated using Preview. Below these
pictures are the following captions: (i) "Each Preview(TM) model
provides thousands of preoperative images and a detailed
three-dimensional model of patient-specific anatomy" and "Preview(TM)
allows the clinician to address clinical planning needs without making a
sizeable investment in hardware, software and
training."
4. Location: Inside Front Cover Page of Prospectus -- Foldout.
Description: At the top of the page is the caption "INTERACTIVE VIRTUAL
REALITY SIMULATORS." Below this caption is the caption "Interact's
initial IVR simulator, GastroSim(TM) (which is currently in the
pre-production prototype stage), consists of a pavilion depicting two
anatomical regions, the upper gastrointestinal ("UGI") and lower
gastrointestinal ("LGI") tracts. GastroSim incorporates procedures
designed for training medical personnel to conduct diagnostic tests and
perform therapies on ulcers, polyps, cancers, bile stone removals and
other UGI procedures, such as bronchoscopy, endotracheal tube placement
and ultrasound echocardial procedures; teaching clinicians to manipulate
sophisticated MIS medical devices and instruments; and evaluating the
clinician's ability to accomplish these diagnostic and therapeutic
maneuvers." Beneath this caption on the left is a picture of GastroSim.
Below this picture is the caption "Interact is developing IVR simulators
that consist of a platform which is a computer system that is capable of
being reconfigured to control various pavilions, each consisting of a
specific robotic mannequin depicting one of various
<PAGE> 100
anatomical regions of the body in which diagnostic and therapeutic
procedures are performed." On the right of the picture of the GastroSim
is a picture of two of the introductory screens depicted on the
GastroSim computer monitor as a simulation is begun. Below this picture
is the caption "With its ability to provide in-depth evaluation of the
clinician's performance, GastroSim can be used for accrediting,
credentialling and privileging clinicians. Below this caption is a
picture of GastroSim in operation with the term "GastroSim(TM)"
superimposed next to a picture of a transverse colon generated by
GastroSim labeled "Trans-verse Colon." Below these pictures is the
caption "While performing procedures on a "virtual patient",
GastroSim(TM) replicates the look, feel and sound of performing an
actual procedure. Below this caption is the caption "INTERACTIVE CD-ROM
TITLES." Below this caption is the caption "Interact is developing a new
series of educational CD-ROMs for multimedia personal computers. These
products are being designed to integrate aspects of the Company's
simulation technology to create interactive illustrations of the
best-demonstrated clinical practice." Beneath this caption are four
pictures of screens from a CD-Rom product under development.
5. Location: Outside Back Cover Page of Prospectus.
Description: Interact Medical Technologies Corporation logo, described
in paragraph 1 above.
<PAGE> 101
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
- - ------- ------------------------------------------------------------------------- ------------
<S> <C> <C>
+1.1 Form of Underwriting Agreement. .........................................
2.1 Agreement and Plan of Reorganization dated May 24, 1996 between Medical
Media Systems, Inc. ("MMS, Inc.") and Ixion, Inc. ("Ixion"). ............
3.1 Registrant's Certificate of Incorporation. ..............................
3.2 Registrant's Certificate of Merger. .....................................
3.3 Form of Registrant's Amended and Restated Certificate of Incorporation to
be effective immediately prior to this Offering. ........................
3.4 Registrant's Bylaws, as amended. ........................................
3.5 Registrant's Amended and Restated Bylaws to be effective upon completion
of this Offering. .......................................................
+4.1 Specimen Stock Certificate. .............................................
+5.1 Opinion of Brobeck, Phleger & Harrison LLP. .............................
10.1 Voting Agreement and Irrevocable Proxy dated May 24, 1996 between Baxter
and Maxal Capital Corporation. ..........................................
10.2 Distribution Agreement dated May 24, 1996 between the Registrant and
Baxter. .................................................................
10.3 Credit Agreement dated May 24, 1996 between the Registrant and
Baxter. .................................................................
10.4 $2,000,000 Promissory Note dated May 24, 1996 executed by the Registrant
in favor of Baxter. .....................................................
10.5 $350,000 Promissory Note dated May 24, 1996 executed by the Registrant in
favor of Baxter. ........................................................
10.6 $200,000 Promissory Note dated May 24, 1996 executed by the Registrant in
favor of Baxter. ........................................................
10.7 Registration Rights Agreement dated May 24, 1996 among the Registrant,
Baxter and certain stockholders. ........................................
10.8 Stock Agreement dated May 24, 1996 among MMSLP, Baxter Holdings, and the
Registrant. .............................................................
10.9 Agreement dated May 24, 1996 regarding issuance of Common Stock between
the Registrant and Baxter. ..............................................
10.10 Letter Agreement regarding corporate conversion of MMSLP dated May 17,
1996. ...................................................................
10.11 Manufacturing License Agreement dated May 24, 1996 between the Registrant
and Baxter. .............................................................
10.12 Standard Form Office Lease for the Registrant's facilities located at 400
Mercer Street, Suite 400, Seattle, WA 98109 dated January 29, 1996
between CVK Partnership and Ixion. ......................................
10.13 Standard Form of Office Lease for the Registrant's facilities located at
654 Madison Avenue, Suite 1606, New York, NY 10021 dated March 15, 1994
between the Rolfe Group, Inc. and Hydration Technology Corporation
including Agreement Extending lease dated October 31, 1994. .............
10.14 Assignment and Assumption of Lease for the Registrant's facilities
located at 654 Madison Avenue, Suite 1606, New York, NY 10021 dated April
24, 1996 between Hydration Technology Corporation and Ixion. ............
10.15 Commercial Lease for the Registrant's facilities located at 1335 North
Northlake Way, Seattle, WA 98103 dated September 1, 1984 between Nelson
Northwest, Inc. and Ixion. ..............................................
</TABLE>
<PAGE> 102
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
- - ------- ------------------------------------------------------------------------- ------------
<S> <C> <C>
10.16 Addendum to Lease for the Registrant's facilities located at 1335 North
Northlake Way, Seattle, WA 98103 dated November 1, 1995 between Nelson
Northwest, Inc. and Ixion. ..............................................
10.17 Lease Agreement for the Registrant's facilities located at 79 East Wilder
Road, West Lebanon, NH 03784 dated July 8, 1994 between RSR Robson
Resources, Inc. and Medical Media Systems, including First and Second
Amendments. .............................................................
10.18 Consulting Agreement dated April 25, 1995 between Ixion and Valentino
Montegrande. ............................................................
10.19 Consulting Agreement dated January 1, 1996 between Ixion and James
Caillouette. ............................................................
+10.20 Consulting Agreement dated January 1, 1996 between Ixion and John
Lyon. ...................................................................
10.21 Employment Agreement dated February 21, 1995 between Ixion and Greg
Claypool. ...............................................................
10.22 Employment Agreement dated May 24, 1996 between the Registrant and Steven
Pieper. .................................................................
+10.23 Employment Agreement dated May 24, 1996 between the Registrant and Bruce
Sturman. ................................................................
10.24 Form of Promissory Note executed by Ixion in favor of various
parties. ................................................................
10.25 Form of Letter Agreement dated February 22, 1996 regarding the issuance
of Common Stock between Ixion and various parties. ......................
10.26 Form of Subscription Agreement regarding the issuance of Common Stock
between Ixion and various parties. ......................................
10.27 Promissory Note dated October 4, 1994 executed by Ixion in favor of Bruce
Sturman. ................................................................
10.28 Promissory Note dated October 31, 1995 executed by Ixion in favor of
Bruce Sturman. ..........................................................
10.29 Promissory Note dated September 9, 1994 executed by Ixion in favor of
David Hon. ..............................................................
10.30 Promissory Note dated September 12, 1995 executed by Ixion in favor of
David Hon. ..............................................................
10.31 Research, Option and License Agreement dated April 8, 1992 between Ixion
and Ethicon Endo-Surgery. ...............................................
10.32 Development and License Agreement dated January 13, 1993 between MMS and
MusculoGraphics, Inc. ...................................................
10.33 Cooperative Agreement dated January 2, 1995 between MMS and the Trustees
of Dartmouth College. ...................................................
10.34 Form of Letter Agreement dated May 17, 1996 between the Registrant and
certain employees and consultants of Ixion and MMS relating to the
conversion of accrued salaries into shares of Common Stock. .............
10.35 General Release Agreement dated May 28, 1996 among the Kriegsman Group,
Steven Kriegsman, MMS, Inc., and Ixion. .................................
10.36 Settlement Agreement and Release of All Claims dated April 16, 1996 among
Ixion, Inc., Cyndel & Co., Inc., Patrick Kolenik and Steven Bayern. .....
10.37 Asset Purchase Agreement dated April 22, 1996 between Ixion and David
Hon. ....................................................................
10.38 Registrant's 1994 Incentive Stock Option Plan (the "Prior Plan"). .......
10.39 Form of Incentive Stock Option Rights Agreement under the Prior Plan. ...
10.40 Form of Grant of Incentive Stock Option under the Prior Plan. ...........
10.41 Patent Filing of Patent No. 4,907,973 dated May 20, 1996. ...............
</TABLE>
<PAGE> 103
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
- - ------- ------------------------------------------------------------------------- ------------
<S> <C> <C>
10.42 1996 Stock Option/Stock Issuance Plan (the "Plan"). .....................
10.43 Form of Notice of Grant under the Plan. .................................
10.44 Form of Stock Option Agreement under the Plan. ..........................
10.45 1996 Employee Stock Purchase Plan (the "Purchase Plan"). ................
10.46 Form of Stock Purchase Agreement under the Purchase Plan. ...............
10.47 Form of Ixion Employee Non-Disclosure and Non-Compete Agreement. ........
10.48 Form of MMS Invention and Non-Disclosure Agreement. .....................
10.49 Form of Indemnification Agreements entered into between the Registrant
and its directors. ......................................................
10.50 Form of Indemnification Agreement entered into between the Registrant and
its officers. ...........................................................
+10.51 Common Stock Purchase Warrant dated January 1, 1996 executed by Ixion in
favor of Richard Friedman. ..............................................
+10.52 Common Stock Purchase Warrant dated January 1, 1996 executed by Ixion in
favor of Jeff Markowitz. ................................................
10.53 Letter Agreement regarding regulatory affairs dated October 17, 1994
between MMS and Baxter. .................................................
10.54 Credit Agreement dated April 10, 1996 between MMS and Baxter. ...........
10.55 Demand Promissory Note dated April 10, 1996 executed by MMS in favor of
Baxter. .................................................................
+23.1 Consent of Brobeck, Phleger & Harrison LLP. Reference is made to Exhibit
5.1. ....................................................................
23.2 Consent of Independent Certified Public Accountants -- BDO Seidman,
LLP. ....................................................................
23.3 Consent of Independent Certified Public Accountants -- Robert E.
Moses. ..................................................................
24.1 Power of Attorney. Reference is made to page II-7. ......................
</TABLE>
- - ---------------
+ To be filed by amendment.
<PAGE> 1
Exhibit 2.1
<PAGE> 2
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
MEDICAL MEDIA SYSTEMS, INC.
AND
IXION, INC.
May 24, 1996
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I THE MERGER ...................................................... 1
1.1 The Merger ...................................................... 1
1.2 Closing; Effective Time ......................................... 1
1.3 Effect of the Merger ............................................ 2
1.4 Certificate of Incorporation; Bylaws ............................ 2
1.5 Directors and Officers .......................................... 2
1.6 Effect on Capital Stock ......................................... 2
1.7 Surrender of Certificates ....................................... 4
1.8 No Further Ownership Rights in Ixion Common Stock ............... 5
1.9 Lost, Stolen or Destroyed Certificates .......................... 5
1.10 Taking of Necessary Action; Further Action ...................... 5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF MMS ........................... 6
2.1 Organization, Standing and Power ................................ 6
2.2 Capital Structure ............................................... 7
2.3 Authority ....................................................... 7
2.4 Financial Statements ............................................ 8
2.5 Absence of Certain Changes ...................................... 8
2.6 Subsidiaries .................................................... 9
2.7 Absence of Undisclosed Liabilities .............................. 9
2.8 Material Contracts .............................................. 9
2.9 Litigation ...................................................... 9
2.10 Restrictions on Business Activities ............................. 10
2.11 Governmental Authorization ...................................... 10
2.12 Title to Property ............................................... 10
2.13 Intellectual Property ........................................... 10
2.14 Environmental Matters ........................................... 12
2.15 Taxes ........................................................... 13
2.16 Employee Benefit Plans .......................................... 14
2.17 Certain Agreements Affected by the Merger ....................... 16
2.18 Employee Matters ................................................ 16
2.19 Interested Party Transactions ................................... 17
2.20 Insurance ....................................................... 17
2.21 Compliance With Laws ............................................ 17
2.22 Minute Book ..................................................... 17
2.23 Complete Copies of Materials .................................... 17
2.24 Brokers' and Finders' Fees ...................................... 17
2.25 Board Approval .................................................. 17
2.26 Stockholder Approval ............................................ 18
2.27 Representations Complete ........................................ 18
</TABLE>
i.
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE III REPRESENTATIONS AND WARRANTIES OF IXION ............................... 18
3.1 Organization, Standing and Power ................................ 18
3.2 Capital Structure ............................................... 18
3.3 Authority ....................................................... 19
3.4 Financial Statements ............................................ 20
3.5 Absence of Certain Changes ...................................... 20
3.6 Subsidiaries .................................................... 21
3.7 Absence of Undisclosed Liabilities .............................. 21
3.8 Material Contracts .............................................. 21
3.9 Litigation ...................................................... 22
3.10 Restrictions on Business Activities ............................. 22
3.11 Governmental Authorization ...................................... 22
3.12 Title to Property ............................................... 22
3.13 Intellectual Property ........................................... 23
3.14 Environmental Matters ........................................... 24
3.15 Taxes ........................................................... 25
3.16 Employee Benefit Plans .......................................... 26
3.17 Certain Agreements Affected by the Merger ....................... 28
3.18 Employee Matters ................................................ 28
3.19 Interested Party Transactions ................................... 28
3.20 Insurance ....................................................... 28
3.21 Compliance With Laws ............................................ 29
3.22 Minute Book ..................................................... 29
3.23 Brokers' and Finders' Fees ...................................... 29
3.24 Complete Copies of Materials .................................... 29
3.25 Board Approval .................................................. 29
3.26 Stockholder Approval ............................................ 29
3.27 Representations Complete ........................................ 29
ARTICLE IV ADDITIONAL AGREEMENTS .................................................. 30
4.2 Employee Benefit Plans .......................................... 30
4.3 Public Offering ................................................. 31
4.4 Employees ....................................................... 31
4.5 Promissory Notes ................................................ 31
4.6 Investor Letter Agreements ...................................... 32
4.7 Consulting Agreements ........................................... 32
4.8 New Hampshire Facility .......................................... 32
4.9 Distribution Agreement .......................................... 32
4.10 Convertible Promissory Note ..................................... 33
4.11 Confidentiality ................................................. 33
4.12 Registration Rights Agreement ................................... 33
4.13 Further Assurances .............................................. 33
ARTICLE V GENERAL PROVISIONS ...................................................... 33
</TABLE>
ii.
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C> <C>
5.1 Non-Survival at Effective Time .................................. 33
5.2 Notices ......................................................... 33
5.3 Interpretation .................................................. 34
5.4 Counterparts .................................................... 34
5.5 Entire Agreement; Nonassignability; Parties in Interest ......... 35
5.6 Severability .................................................... 35
5.7 Amendment ....................................................... 35
5.8 Remedies Cumulative ............................................. 35
5.9 Governing Law ................................................... 35
5.10 Rules of Construction ........................................... 35
5.11 Expenses ........................................................ 36
</TABLE>
SCHEDULES
Schedule 1.6(d) - Promissory Notes
Schedule 1.6(e) - Investor Letters
Schedule 1.6(f) - Consulting Agreements
Schedule 2 - MMS Disclosure Schedule
Schedule 2.2 - MMS Common Stock
Schedule 2.12 - MMS Real Property
Schedule 2.13 - MMS Intellectual Property
Schedule 2.16 - MMS Employee Plans
Schedule 3 - Ixion Disclosure Schedule
Schedule 3.2 - Ixion Common Stock
Schedule 3.12 - Ixion Real Property
Schedule 3.13 - Ixion Intellectual Property
Schedule 3.16 - Ixion Employee Plans
Schedule 4.2(a) - Outstanding Options
Schedule 4.4 - List of Employees
EXHIBITS
Exhibit A - Certificate of Merger
Exhibit B - Form of Distribution Agreement
Exhibit C - Form of Convertible Promissory Note
Exhibit D - Form of Credit Agreement
Exhibit E - Form of Registration Rights Agreement
iii.
<PAGE> 6
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is
made and entered into as of May 24, 1996, by and among Medical Media Systems,
Inc., a Delaware corporation ("MMS"), and Ixion, Inc., a Delaware corporation
("Ixion").
RECITALS
A. The Boards of Directors of Ixion and MMS believe it is in
the best interests of their respective companies and the stockholders of their
respective companies that Ixion and MMS combine into a single company through
the statutory merger of Ixion with and into MMS (the "Merger") and, in
furtherance thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, the outstanding
shares of Ixion Common Stock, par value $0.01 per share ("Ixion Common Stock"),
shall be converted into shares of MMS Common Stock, par value $0.01 per share
("MMS Common Stock"), at the rate set forth herein.
C. Ixion and MMS desire to make certain representations and
warranties and other agreements in connection with the Merger.
NOW, THEREFORE, in consideration of the covenants and
representations set forth herein, and for other good and valuable consideration,
the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section
1.2) and subject to and upon the terms and conditions of this Agreement, the
Certificate of Merger attached hereto as Exhibit A (the "Certificate of Merger")
and the applicable provisions of the Delaware General Corporation Law ("Delaware
Law"), Ixion shall be merged with and into MMS, the separate corporate existence
of Ixion shall cease and MMS shall continue as the surviving corporation, except
that its name shall be changed to Interact Medical Technologies Corporation
("Interact"). MMS as the surviving corporation after the Merger is hereinafter
sometimes referred to as the "Surviving Corporation."
1.2 Closing: Effective Time. The closing of the transactions
contemplated hereby (the "Closing") shall take place on the date of this
Agreement (the
1.
<PAGE> 7
"Closing Date") at the offices of Brobeck, Phleger & Harrison LLP, or at such
other location as the parties hereto agree. In connection with the Closing, the
parties hereto shall cause the Merger to be consummated by filing the
Certificate of Merger with the Secretary of State of the State of Delaware and
with the Recorder of the County in which the registered office of each of Ixion
and MMS is located, in accordance with the relevant provisions of Delaware Law
(the time of such filing or such later time as is specified in the Certificate
of Merger being the "Effective Time").
1.3 Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in this Agreement, the Certificate of Merger and
the applicable provisions of Delaware Law. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time, all the property,
rights, privileges, powers and franchises of Ixion shall vest in the Surviving
Corporation, and all debts, liabilities and duties of Ixion shall become the
debts, liabilities and duties of the Surviving Corporation with the effect set
forth in Section 259 of Delaware Law.
1.4 Certificate of Incorporation; Bylaws.
(a) At the Effective Time, the Certificate of
Incorporation of MMS, as in effect immediately prior to the Effective Time,
shall be the Certificate of Incorporation of the Surviving Corporation until
thereafter amended as provided by Delaware Law and such Certificate of
Incorporation; provided, however, that Article I of the Certificate of
Incorporation of the Surviving Corporation shall be amended to read as follows:
"The name of the corporation is Interact Medical Technologies Corporation."
(b) The Bylaws of MMS, as in effect immediately prior to
the Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended.
1.5 Directors and Officers. At the Effective Time, the
directors of the Surviving Corporation shall be Charles Hutchinson, Bruce
Sturman, David Hon, James Calliouette, Leo McKenna, Steven Pieper and John Lyon.
The officers of Ixion and Steven Pieper shall be elected as the initial officers
of the Surviving Corporation and all officers of MMS shall resign immediately
prior to the Effective Time.
1.6 Effect on Capital Stock. By virtue of the Merger and
without any action on the part of Ixion or the holders of any of the following
securities:
(a) Conversion of Ixion Common Stock. At the Effective
Time, each share of Ixion Common Stock issued and outstanding immediately prior
to the Effective Time (other than any shares of Ixion Common Stock to be
cancelled pursuant to Section 1.6(b)) will be canceled and extinguished and be
converted automatically into the right to receive 0.48774 shares of Common Stock
of the Surviving Corporation (the "Exchange Ratio").
2.
<PAGE> 8
(b) Cancellation of Ixion Common Stock Owned by Ixion. At
the Effective Time, all shares of Ixion Common Stock that are owned by Ixion as
treasury stock immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof.
(c) Ixion Stock Options and Warrants. At the Effective
Time, the Ixion 1994 Stock Option Plan (the "Ixion Stock Option Plan"), and the
options set forth on Schedule 4.2(a) to purchase Ixion Common Stock then
outstanding under the Ixion Stock Option Plan and the other outstanding options
and warrants to acquire Ixion Common Stock set forth on Schedule 4.2(a) shall be
assumed by the Surviving Corporation in accordance with Section 4.2.
(d) Ixion Promissory Notes. At the Effective Time, all
rights to acquire Ixion Common Stock pursuant to the promissory notes (the
"Securities") listed on attached Schedule 1.6(d) (which Schedule 1.6(d) shall
also set forth the number of shares of Ixion Common Stock that each holder of
Securities shall have the right to acquire and the price, expiration and other
terms related thereto), shall be assumed by the Surviving Corporation in
accordance with Section 4.5.
(e) Ixion Investor Letter Agreements. At the Effective
Time, all rights to acquire Ixion Common Stock pursuant to the investor letter
agreements (the "Investor Letters") listed on attached Schedule 1.6(e) (which
Schedule 1.6(e) shall also set forth the method of calculating the number of
shares to be issued pursuant to the Investor Letters), shall be assumed by the
Surviving Corporation in accordance with Section 4.6
(f) Consulting Agreements. At the Effective Time, all
rights to acquire Ixion Common Stock pursuant to the consulting agreements (the
"Consulting Agreements") listed on attached Schedule 1.6(f) (which Schedule
1.6(f) shall also set forth the number of shares that may be issued pursuant to
each Consulting Agreement), shall be assumed by the Surviving Corporation in
accordance with Section 4.7.
(g) Fractional Shares. No fraction of a share of Common
Stock of the Surviving Corporation will be issued and the number of shares of
Common Stock of the Surviving Corporation to be issued shall be rounded up to
the nearest whole share.
(h) MMS Common Stock. Each share of MMS Common Stock
issued and outstanding immediately prior to the Effective Time shall continue to
represent one (1) share of issued and outstanding common stock of the Surviving
Corporation and shall not be affected by the Merger.
3.
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1.7 Surrender of Certificates.
(a) Exchange Agent. American Stock Transfer Company shall
act as exchange agent (the "Exchange Agent") in the Merger.
(b) Interact to Provide Common Stock. Promptly after the
Effective Time, Interact shall make available to the Exchange Agent for exchange
in accordance with this Article I, through such reasonable procedures as
Interact may adopt, the shares of Interact Common Stock issuable pursuant to
Section 1.6 in exchange for shares of Ixion Common Stock outstanding immediately
prior to the Effective Time.
(c) Exchange Procedures. Promptly after the Effective
Time, the Surviving Corporation shall cause to be mailed to each holder of
record of a certificate or certificates (the "Certificates") which immediately
prior to the Effective Time represented outstanding shares of Ixion Common
Stock, whose shares were converted into the right to receive shares of Common
Stock of the Surviving Corporation pursuant to Section 1.6, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon receipt of the
Certificates by the Exchange Agent, and shall be in such form and have such
other provisions as MMS may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of Common Stock of the Surviving Corporation. Upon surrender
of a Certificate for cancellation to the Exchange Agent or to such other agent
or agents as may be appointed by MMS, together with such letter of transmittal,
duly completed and validly executed in accordance with the instructions thereto,
the holder of such Certificate shall be entitled to receive in exchange therefor
a certificate representing the number of whole shares of Common Stock of the
Surviving Corporation which such holder has the right to receive pursuant to
Section 1.6, and the Certificate so surrendered shall forthwith be canceled.
Until so surrendered, each outstanding Certificate that, prior to the Effective
Time, represented shares of Ixion Common Stock will be deemed from and after the
Effective Time, for all corporate purposes, other than the payment of dividends,
to evidence the ownership of the number of full shares of Common Stock of the
Surviving Corporation into which such shares of Ixion Common Stock shall have
been so converted.
(d) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions with respect to Common Stock of the Surviving
Corporation with a record date after the Effective Time will be paid to the
holder of any unsurrendered Certificate with respect to the shares of Common
Stock of the Surviving Corporation represented thereby until the holder of
record of such Certificate shall surrender such Certificate. Subject to
applicable law, following surrender of any such Certificate, there shall be paid
to the record holder of the certificates representing whole shares of Common
Stock of the Surviving Corporation issued in exchange therefor, without
interest, at the time of such surrender, the amount of any such dividends or
other distributions with a record date after the Effective Time theretofore
payable (but
4.
<PAGE> 10
for the provisions of this Section 1.7(d)) with respect to such shares of Common
Stock of the Surviving Corporation.
(e) Transfers of Ownership. If any certificate for shares
of Common Stock of the Surviving Corporation is to be issued in a name other
than that in which the Certificate surrendered in exchange therefor is
registered, it will be a condition of the issuance thereof that the Certificate
so surrendered will be properly endorsed and otherwise in proper form for
transfer and that the person requesting such exchange will have paid to the
Surviving Corporation or any agent designated by it any transfer or other taxes
required by reason of the issuance of a certificate for shares of Common Stock
of the Surviving Corporation in any name other than that of the registered
holder of the Certificate surrendered, or established to the satisfaction of the
Surviving Corporation or any agent designated by it that such tax has been paid
or is not payable.
(f) No Liability. Notwithstanding anything to the contrary
in this Section 1.7, none of the Exchange Agent, the Surviving Corporation or
any party hereto shall be liable to any person for any amount properly paid to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
1.8 No Further Ownership Rights in Ixion Common Stock. All
shares of Common Stock of the Surviving Corporation issued upon the surrender
for exchange of shares of Ixion Common Stock in accordance with the terms hereof
shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Ixion Common Stock, and there shall be no further
registration of transfers on the records of the Surviving Corporation of shares
of Ixion Common Stock which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Article I.
1.9 Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, such shares of Common
Stock of the Surviving Corporation as may be required pursuant to Section 1.6;
provided, however, that the Surviving Corporation may, in its discretion and as
a condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed Certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against MMS,
the Surviving Corporation or the Exchange Agent with respect to the Certificates
alleged to have been lost, stolen or destroyed.
1.10 Taking of Necessary Action: Further Action. If, at any
time after the Effective Time, any further action is necessary or desirable to
carry out the purposes of this Agreement and to vest the Surviving Corporation
with full right, title and possession to all assets, property, rights,
privileges, powers and franchises of Ixion, the
5.
<PAGE> 11
officers and directors of Ixion are fully authorized in the name of Ixion or
otherwise to take, and will take, all such lawful and necessary action, so long
as such action is not inconsistent with this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF MMS
In this Agreement, any reference to any event, change,
condition or effect being "material" with respect to any entity or group of
entities means any material event, change, condition or effect related to the
condition (financial or otherwise), properties, assets (including intangible
assets), liabilities, business, operations or results of operations of such
entity or group of entities. In this Agreement, any reference to a "Material
Adverse Effect" with respect to any entity or group of entities means any event,
change or effect that is materially adverse to the condition (financial or
otherwise), properties, assets (including intangible assets), liabilities,
business, operations or results of operations of such entity and its
subsidiaries, taken as a whole. In this Agreement, any reference to a party's
"knowledge" means such party's actual knowledge after due and diligent inquiry
of officers, directors and other employees of such party reasonably believed to
have knowledge of such matters.
Except as disclosed on Schedule 2 attached hereto (the "MMS
Disclosure Schedule"), MMS represents and warrants to Ixion as follows:
2.1 Organization, Standing and Power. MMS is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization. MMS has the corporate power to own its properties
and to carry on its business as now being conducted and as proposed to be
conducted and is duly qualified to do business and is in good standing in each
jurisdiction in which the failure to be so qualified and in good standing would
have a Material Adverse Effect on MMS. MMS has delivered a true and correct copy
of its Certificate of Incorporation (the "MMS Certificate of Incorporation"),
and Bylaws (the "MMS Bylaws") or other charter documents, as applicable, of MMS,
each as amended to date, to Ixion. MMS is not in violation of any of the
provisions of the MMS Certificate of Incorporation or the MMS Bylaws or
equivalent organizational documents. There are no outstanding subscriptions,
options, warrants, puts, calls, rights, exchangeable or convertible securities
or other commitments or agreements of any character relating to the issued or
unissued capital stock, or otherwise obligating MMS to issue, transfer, sell,
purchase, redeem or otherwise acquire any such securities. MMS does not directly
or indirectly own any equity or similar interest in, or any interest convertible
or exchangeable or exercisable for, any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity.
6.
<PAGE> 12
2.2 Capital Structure. The authorized capital stock of MMS consists of
10,000,000 shares of Common Stock, $0.01 par value, of which there were issued
and outstanding immediately prior to the transactions contemplated hereby
1,253,333 shares. Such shares of MMS Common Stock are owned of record as set
forth on Schedule 2.2. There are no other outstanding shares of capital stock or
voting securities and no outstanding commitments to issue any shares of capital
stock or voting securities. All outstanding shares of MMS Common Stock are duly
authorized, validly issued, fully paid and non-assessable and are free of any
liens or encumbrances other than any liens or encumbrances created by or imposed
upon the holders thereof, and are not subject to preemptive rights or rights of
first refusal created by statute, the MMS Certificate of Incorporation or the
MMS Bylaws or any agreement to which MMS is a party or by which it is bound.
Except for the rights created pursuant to this Agreement, there are no other
options, warrants, calls, rights, commitments or agreements of any character to
which MMS is a party or by which it is bound obligating MMS to issue, deliver,
sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased
or redeemed, any shares of capital stock of MMS or obligating MMS to grant,
extend, accelerate the vesting of, change the price of, or otherwise amend or
enter into any such option, warrant, call, right, commitment or agreement. There
are no contracts, commitments or agreements relating to voting, purchase or sale
of MMS's capital stock (i) between or among MMS and any of its stockholders and
(ii) to the best of MMS's knowledge, between or among any of MMS's stockholders.
2.3 Authority. MMS has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of MMS, including, without
limitation, the requisite approval of MMS's stockholders. This Agreement has
been duly executed and delivered by MMS and constitutes the valid and binding
obligation of MMS enforceable against MMS in accordance with its terms. The
execution and delivery of this Agreement by MMS does not, and the consummation
of the transactions contemplated hereby will not, conflict with, or result in
any violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any benefit under (i) any provision of the MMS
Certificate of Incorporation or the MMS Bylaws, or (ii) any material mortgage,
indenture, lease, contract or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to MMS or any of its properties or assets, except where
such conflict, violation, default, termination, cancellation or acceleration
with respect to the foregoing provisions of (ii) would not have had and would
not reasonably be expected to have a Material Adverse Effect on MMS. No
additional consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality ("Governmental Entity") is
required by or with respect to MMS in connection with the execution and delivery
of this Agreement or the
7.
<PAGE> 13
consummation of the transactions contemplated hereby except for the filing of
the Certificate of Merger as provided in Section 1.2 and such other consents,
authorizations, filings, approvals and registrations which, if not obtained or
made, would not have a Material Adverse Effect on MMS and would not prevent, or
materially alter or delay any of the transactions contemplated by this
Agreement.
2.4 Financial Statements. MMS has delivered to Ixion its
audited financial statements (balance sheet and profit and loss statement,
statement of stockholders' equity and statement of changes in financial
position) at December 31, 1995, and for the fiscal year then ended and its
unaudited financial statements (balance sheet and profit and loss statement) at
and for the 3-month period ended March 31, 1996 (the "MMS Financial
Statements"). The MMS Financial Statements are complete and correct in all
material respects and have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods indicated and with each other, except
that unaudited MMS Financial Statements may not contain all footnotes required
by GAAP and have not been condensed as required by GAAP. The MMS Financial .
Statements accurately set out and describe the financial condition and operating
results of MMS as of the dates, and for the periods, indicated therein, subject
to normal year-end adjustments. Except as set forth in the MMS Financial
Statements, MMS has no liabilities, contingent or otherwise, other than (a)
liabilities incurred in the ordinary course of business since March 31,1996 (b)
liabilities set forth on the MMS Disclosure Schedule, and (c) obligations under
contracts and commitments incurred in the ordinary course of business and not
required under GAAP to be reflected in the MMS Financial Statements, which, in
both cases, individually or in the aggregate, are not material to the financial
condition or operating results of MMS. MMS maintains and will continue to
maintain a standard system of accounting established and administered in
accordance with GAAP.
2.5 Absence of Certain Changes. Since March 31,1996, MMS has
conducted its business in the ordinary course consistent with past practice and
there has not occurred: (i) any change, event or condition (whether or not
covered by insurance) that has resulted in, or might reasonably be expected to
result in, a Material Adverse Effect to MMS; (ii) any acquisition, sale,
mortgage, pledge or transfer of any material asset of MMS other than in the
ordinary course of business and consistent with past material change in
depreciation or amortization policies or rates) by MMS or any practice; (iii)
any material change in accounting methods or practices (including any material
revaluation by MMS of any of its assets; (iv) any declaration, setting aside, or
payment of a dividend or other distribution with respect to the shares of MMS,
or any direct or indirect redemption, purchase or other acquisition by MMS of
any of its shares of capital stock; (v) any material contract entered into by
MMS, other than in the ordinary course of business and as provided to Ixion, or
any material amendment or termination of, or default under, any material
contract to which MMS is a party or by which it is bound; (vi) any indebtedness
incurred by MMS, except such as may have been incurred in the ordinary course of
business and consistent with past practice; (vii)
8.
<PAGE> 14
any loan made or agreed to be made by MMS, nor has MMS become liable or agreed
to become liable as a guarantor with respect to any loan; or (viii) any
negotiation or agreement by MMS to do any of the things described in the
preceding clauses (i) through (vii) (other than negotiations with Ixion and its
representatives regarding the transactions contemplated by this Agreement) .
2.6 Subsidiaries. MMS does not presently own or control,
directly or indirectly, an interest in any other corporation, association or
business entity.
2.7 Absence of Undisclosed Liabilities. MMS has no material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (i) those set forth or adequately provided for in the MMS
Financial Statements, (ii) those set forth on the MMS Disclosure Schedule, (iii)
those incurred in the ordinary course of business and not required to be set
forth in the MMS Financial Statements under GAAP, (iv) those incurred in the
ordinary course of business since March 31, 1996, and consistent with past
practice; and (v) those incurred in connection with the execution of this
Agreement.
2.8 Material Contracts. All contracts, agreements and
instruments to which MMS is a party, which involve future revenue to or payments
by MMS that are material, are listed in the MMS Disclosure Schedule
(collectively, the "MMS Material Contracts"). Except as set forth in the MMS
Disclosure Schedule, all the MMS Material Contracts are in full force and effect
in all material respects. MMS has no notice that any party to any such MMS
Material Contract intends to cancel, withdraw, modify or amend such MMS Material
Contract. MMS is not in material default or breach, and no event has occurred or
will occur by reason of the transactions contemplated in this Agreement which
would constitute a default or breach, where such default or breach would entitle
another party to this Agreement to accelerate or terminate such MMS Material
Contract or otherwise impose a material penalty or forfeiture thereunder
(whether with or without notice, lapse of time or the happening or occurrence of
any other event), under any MMS Material Contract.
2.9 Litigation. There is no private or governmental action,
suit, proceeding, claim, arbitration or investigation pending before any agency,
court or tribunal, foreign or domestic, or, to the knowledge of MMS threatened
against MMS or any of its properties or any of its officers or directors (in
their capacities as such) that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect on MMS. There is no
judgment, decree or order against MMS or, to the knowledge of MMS any of its
respective directors or officers (in their capacities as such), that could
prevent, enjoin, alter or materially delay any conduct or practice in connection
with the business engaged in by MMS or any of the transactions contemplated by
this Agreement, or that could reasonably be expected to have a Material Adverse
Effect on MMS.
9.
<PAGE> 15
2.10 Restrictions on Business Activities. There is no material
agreement, judgment, injunction, order or decree binding upon MMS which has the
effect of prohibiting or materially impairing any current or future business
practice of MMS, any acquisition of property by MMS or the conduct of business
by MMS as currently conducted or as proposed to be conducted by MMS.
2.11 Governmental Authorization. MMS has obtained each
federal, state, county, local or foreign governmental consent, license, permit,
grant, or other authorization of a governmental entity (i) pursuant to which MMS
currently operates or holds any interest in any of its properties or (ii) that
is required for the operation of MMS's business or the holding of any such
interest ((i) and (ii) herein collectively called "MMS Authorizations"), and
all of such MMS Authorizations are in full force and effect, except where the
failure to obtain or have any of such MMS Authorizations could not reasonably be
expected to have a Material Adverse Effect on MMS.
2.12 Title to Property. MMS has good and valid title to all of
its properties, interests in properties and assets, real and personal, reflected
in the MMS Financial Statements or acquired after March 31, 1996 (except
properties, interests in properties and assets sold or otherwise disposed of
since March 31,1996 in the ordinary course of business), or in the case of
leased properties and assets, valid leasehold interests in, free and clear of
all mortgages, liens, pledges, charges or encumbrances of any kind or character,
except (i) the lien of current taxes not yet due and payable, (ii) such
imperfections of title, liens and easements as do not and will not materially
detract from or interfere with the use of the properties subject thereto or
affected thereby, or otherwise materially impair business operations involving
such properties and (iii) liens securing debt which is reflected on the MMS
Financial Statements. The plants, property and equipment of MMS that are used in
the operations of its business are in good operating condition and repair. All
properties used in the operations of MMS are reflected in the Financial
Statements to the extent GAAP requires the same to be reflected. Schedule 2.12
identifies each parcel of real property owned or leased by MMS.
2.13 Intellectual Property.
(a) MMS owns, or is licensed or otherwise possesses legally
enforceable rights to use all patents, trademarks, trade names, service marks,
copyrights, and any applications therefor, maskworks, net lists, schematics,
technology, know-how, trade secrets, inventory, ideas, algorithms, processes,
computer software programs or applications (in both source code and object code
form), and tangible or intangible proprietary information or material ("MMS
Intellectual Property") that is used or currently proposed to be used in the
business of MMS as currently conducted or as currently proposed to be conducted
by MMS, except to the extent that the failure to have such rights have not had
and would not reasonably be expected to have a Material Adverse Effect on MMS.
10.
<PAGE> 16
(b) Schedule 2.13 lists (i) all patents and patent
applications and all registered and unregistered trademarks, trade names and
service marks, registered and unregistered copyrights, and maskworks, which MMS
considers to be material to its business and included in the MMS Intellectual
Property, including the jurisdictions in which each such MMS Intellectual
Property right has been issued or registered or in which any application for
such issuance and registration has been filed, (ii) all material licenses,
sublicenses and other agreements as to which MMS is a party and pursuant to
which any person is authorized to use any MMS Intellectual Property, and (iii)
all material licenses, sublicenses and other agreements as to which MMS is a
party and pursuant to which MMS is authorized to use any third party patents,
trademarks or copyrights, including software ("MMS Third Party Intellectual
Property Rights") which are incorporated in, are, or form a part of any MMS
product that is material to its business.
(c) To the knowledge of MMS, there is no material unauthorized
use, disclosure, infringement or misappropriation of any MMS Intellectual
Property rights, any trade secret material to MMS, or any MMS Intellectual
Property right of any third party to the extent licensed by or through MMS, by
any third party, including any employee or former employee of MMS. MMS has not
entered into any agreement to indemnify any other person against any charge of
infringement of any intellectual property, other than indemnification provisions
contained in purchase orders arising in the ordinary course of business.
(d) MMS is not, nor will it be as a result of the execution
and delivery of this Agreement or the performance of its obligations under this
Agreement, in breach of any license, sublicense or other agreement relating to
the MMS Intellectual Property or MMS Third Party Intellectual Property Rights,
the breach of which would have a Material Adverse Effect on MMS.
(e) To MMS's knowledge, all patents, registered trademarks,
service marks and copyrights held by MMS are valid and subsisting. MMS (i) has
not been sued in any suit, action or proceeding which involves a claim of
infringement of any patents, trademarks, service marks, copyrights or violation
of any trade secret or other proprietary right of any third party; (ii) has no
knowledge that the manufacturing, marketing, licensing or sale of its products
infringes any patent, trademark, service mark, copyright, trade secret or other
proprietary right of any third party, which such infringement would have a
Material Adverse Effect on MMS; and (iii) has not brought any action, suit or
proceeding for infringement of MMS Intellectual Property or breach of any
license or agreement involving MMS Intellectual Property against any third
party.
(f) MMS has secured valid written assignments from all
consultants and employees who contributed to the creation or development of MMS
Intellectual Property of the rights to such contributions that MMS does not
already own by operation of law,
11.
<PAGE> 17
except where the failure to secure such assignments would not have a Material
Adverse Effect on MMS.
(g) MMS has taken all reasonable and appropriate steps to
protect and preserve the confidentiality of all MMS Intellectual Property not
otherwise protected by patents, or patent applications or copyright ("MMS
Confidential Information"). To the knowledge of MMS, all use, disclosure or
appropriation of MMS Confidential Information by or to a third party has been
pursuant to the terms of a written agreement between MMS and such third party.
To the knowledge of MMS, all use, disclosure or appropriation of MMS
Confidential Information not owned by MMS has been pursuant to the terms of a
written agreement between MMS and the owner of such MMS Confidential
Information, or is otherwise lawful.
2.14 Environmental Matters.
(a) The following terms shall be defined as follows when used
in this Section 2.14:
(i) "Environmental and Safety Laws" shall mean any federal,
state or local laws, ordinances, codes, regulations, rules, policies and orders
that are intended to assure the protection of the environment, or that classify,
regulate, call for the remediation of, require reporting with respect to, or
list or define air, water, groundwater, solid waste, hazardous or toxic
substances, materials, wastes, pollutants or contaminants, or which are intended
to assure the safety of employees, workers or other persons, including the
public.
(ii) "Hazardous Materials" shall mean any toxic or hazardous
substance, material or waste or any pollutant or contaminant, or infectious or
radioactive substance or material, including without limitation, those
substances, materials and wastes defined in or regulated under any Environmental
and Safety Laws.
(iii) "Property" shall mean all real property leased or
owned by MMS either currently or in the past.
(iv) "Facilities" shall mean all buildings and improvements on
the Property of MMS.
(b) MMS represents and warrants as follows: (i) no methylene
chloride or asbestos is contained in or has been used at or released from the
Facilities; (ii) to the knowledge of MMS, all Hazardous Materials and wastes
have been disposed of in accordance with all Environmental and Safety Laws;
(iii) MMS has received no notice (verbal or written) of any noncompliance of the
Facilities or its past or present operations with Environmental and Safety Laws;
(iv) no notices, administrative actions or suits are pending or, to the
knowledge of MMS, threatened relating to a violation of any
12.
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Environmental and Safety Laws; (v) to the knowledge of MMS, MMS is not a
potentially responsible party under the federal Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), or state analog statute,
arising out of events occurring prior to the Closing Date; (vi) to the knowledge
of MMS, there have not been in the past, and are not now, any Hazardous
Materials on, under or migrating to or from the Facilities or Property; (vii) to
the knowledge of MMS, there have not been in the past, and are not now, any
underground tanks or underground improvements at, on or under the Property
including without limitation, treatment or storage tanks, sumps, or water, gas
or oil wells; (viii) to the knowledge of MMS, there are no polychlorinated
biphenyls ("PCBs") deposited, stored, disposed of or located on the Property or
Facilities or any equipment on the Property containing PCBs at levels in excess
of 50 parts per million; (ix) to the knowledge of MMS, there is no formaldehyde
on the Property or in the Facilities, nor any insulating material containing
urea formaldehyde in the Facilities; (x) to the knowledge of MMS, the Facilities
and MMS's uses and activities therein have at all times complied with all
Environmental and Safety Laws; and (xi) MMS has all the permits and licenses
required to be issued and is in full compliance with the terms and conditions of
those permits.
2.15 Taxes. MMS has timely filed all Tax Returns required to
be filed by it, have paid all Taxes shown thereon to be due and has provided
adequate accruals in accordance with GAAP in its financial statements for any
Taxes that have not been paid, whether or not shown as being due on any Tax
Returns. No material claim for Taxes has become a lien against the property of
MMS or is being asserted against MMS other than liens for Taxes not yet due and
payable. No audit of any Tax Return of MMS is being conducted by a Tax
authority. No extension of the statute of limitations on the assessment of any
Taxes has been granted by MMS and is currently in effect. There is no agreement,
contract or arrangement to which MMS is a party that may result in the payment
of any amount that would not be deductible by reason of Sections 280G, 162 or
404 of the Internal Revenue Service Code of 1986, as amended (the "Code"). MMS
has not been and will not be required to include any material adjustment in
Taxable income for any Tax period (or portion thereof) pursuant to Section 481
or 263A of the Code or any comparable provision under state or foreign Tax laws
as a result of transactions, events or accounting methods employed prior to the
Merger. MMS is not a party to any tax sharing or tax allocation agreement nor
does MMS owe any amount under any such agreement. For purposes of this
Agreement, the following terms have the following meanings: "Tax" (and, with
correlative meaning, "Taxes" and "Taxable") means (i) any net income,
alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest or any penalty, addition to tax or additional amount imposed by any
Governmental Entity (a "Tax authority") responsible for the imposition of any
such tax (domestic or foreign), (ii) any liability for the payment of any
amounts of the type described above as a result of being a member
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of an affiliated, consolidated, combined or unitary group for any Taxable period
and (iii) any liability for the payment of any amounts of the type described
above as a result of any express or implied obligation to indemnify any other
person. As used herein, "Tax Return" shall mean any return, statement, report
or form (including, without limitation,) estimated Tax returns and reports,
withholding Tax returns and reports and information reports and returns required
to be filed with respect to Taxes. MMS is in full compliance with all terms and
conditions of any Tax exemptions or other Tax-sparing agreement or order of a
foreign government and the consummation of the Merger shall not have any adverse
effect on the continued validity and effectiveness of any such Tax exemptions or
other Tax-sparing agreement or order.
2.16 Employee Benefit Plans.
(a) Schedule 2.16 lists, with respect to MMS and any trade
or business (whether or not incorporated) which is treated as a single employer
with MMS (an "MMS ERISA Affiliate") within the meaning of Section 414(b), (c),
(m) or (o) of the Code, (i) all material employee benefit plans (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), (ii) each loan to a non-officer employee in excess of $50,000, loans
to officers and directors and any stock option, stock purchase, phantom stock,
stock appreciation right, supplemental retirement, severance, sabbatical,
medical, dental, vision care, disability, employee relocation, cafeteria benefit
(Code section 125) or dependent care (Code Section 129), life insurance or
accident insurance plans, programs or arrangements, (iii) all bonus, pension,
profit sharing, savings, deferred compensation or incentive plans, programs or
arrangements, (iv) other fringe or employee benefit plans, programs or
arrangements that apply to senior management of MMS and that do not generally
apply to all employees, and (v) any current or former employment or executive
compensation or severance agreements, written or otherwise, as to which
unsatisfied obligations of MMS of greater than $50,000 remain for the benefit
of, or relating to, any present or former employee, consultant or director of
MMS (together, the "MMS Employee Plans").
(b) MMS has furnished to Ixion a copy of each of the MMS
Employee Plans and related plan documents (including trust documents, insurance
policies or contracts, employee booklets, summary plan descriptions and other
authorizing documents, and, to the extent still in its possession, any material
employee communications relating thereto) and has, with respect to each MMS
Employee Plan which is subject to ERISA reporting requirements, provided copies
of the Form 5500 reports filed for the last three plan years. Any MMS Employee
Plan intended to be qualified under Section 401(a) of the Code has either
obtained from the Internal Revenue Service a favorable determination letter as
to its qualified status under the Code, including all amendments to the Code
effected by the Tax Reform Act of 1986 and subsequent legislation, or has
applied to the Internal Revenue Service for such a determination letter prior to
the expiration of the requisite period under applicable Treasury Regulations or
Internal Revenue Service pronouncements in which to apply for
14.
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such determination letter and to make any amendments necessary to obtain a
favorable determination. MMS has also furnished Ixion with the most recent
Internal Revenue Service determination letter issued with respect to each such
MMS Employee Plan, and nothing has occurred since the issuance of each such
letter which could reasonably be expected to cause the loss of the tax-qualified
status of any MMS Employee Plan subject to Code Section 401(a).
(c) (i) None of the MMS Employee Plans promises or
provides retiree medical or other retiree welfare benefits to any person; (ii)
there has been no "prohibited transaction," as such term is defined in Section
406 of ERISA and Section 4975 of the Code, with respect to any MMS Employee
Plan, which could reasonably be expected to have, in the aggregate, a Material
Adverse Effect; (iii) each MMS Employee Plan has been administered in accordance
with its terms and in compliance with the requirements prescribed by any and all
statutes, rules and regulations (including ERISA and the Code), except as would
not have, in the aggregate, a Material Adverse Effect, and MMS and each MMS
ERISA Affiliate have performed all obligations required to be performed by them
under, are not in any respect in default under or violation of, and have no
knowledge of any default or violation by any other party to, any of the MMS
Employee Plans, which default or violation could reasonably be expected to have
a Material Adverse Effect on MMS; (iv) neither MMS nor any MMS ERISA Affiliate
is subject to any liability or penalty under Sections 4976 through 4980 of the
Code or Title I of ERISA with respect to any of the MMS Employee Plans; (v) all
material contributions required to be made by MMS or any MMS ERISA Affiliate to
any MMS Employee Plan have been made on or before their due dates and a
reasonable amount has been accrued for contributions to each MMS Employee Plan
for the current plan years; (vi) with respect to each MMS Employee Plan, no
""reportable event"" within the meaning of Section 4043 of ERISA (excluding any
such event for which the thirty (30) day notice requirement has been waived
under the regulations to Section 4043 of ERISA) nor any event described in
Section 4062, 4063 or 4041 or ERISA has occurred; and (vii) no MMS Employee Plan
is covered by, and neither MMS nor any MMS ERISA Affiliate has incurred or
expects to incur any liability under Title IV of ERISA or Section 412 of the
Code. With respect to each MMS Employee Plan subject to ERISA as either an
employee pension plan within the meaning of Section 3(2) of ERISA or an employee
welfare benefit plan within the meaning of Section 3(1) of ERISA, MMS has
prepared in good faith and timely filed all requisite governmental reports
(which were true and correct as of the date filed) and has properly and timely
filed and distributed or posted all notices and reports to employees required to
be filed, distributed or posted with respect to each such MMS Employee Plan. No
suit, administrative proceeding, action or other litigation has been brought, or
to the best knowledge of MMS is threatened, against or with respect to any such
MMS Employee Plan, including any audit or inquiry by the IRS or United States
Department of Labor. Neither MMS nor any MMS ERISA Affiliate is a party to, or
has made any contribution to or otherwise incurred any obligation under, any
"multiemployer plan" as defined in Section 3(37) of ERISA.
15.
<PAGE> 21
(d) With respect to each MMS Employee Plan, MMS has
complied with (i) the applicable health care continuation and notice provisions
of the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") and
the proposed regulations thereunder and (ii) the applicable requirements of the
Family Leave Act of 1993 and the regulations thereunder, except to the extent
that such failure to comply would not, in the aggregate, have a Material Adverse
Effect.
(e) The consummation of the transactions contemplated by
this Agreement will not (i) entitle any current or former employee or other
service provider of MMS, or any MMS ERISA Affiliate to severance benefits or any
other payment, except as expressly provided in this Agreement, or (ii)
accelerate the time of payment or vesting, or increase the amount of
compensation due any such employee or service provider.
(f) There has been no amendment to, written interpretation
or announcement (whether or not written) by MMS, or any MMS ERISA Affiliate
relating to, or change in participation or coverage under, any MMS Employee Plan
which would materially increase the expense of maintaining such Plan above the
level of expense incurred with respect to that Plan for the most recent fiscal
year included in the MMS Financial Statements.
2.17 Certain Agreements Affected by the Merger. Neither the
execution and delivery of this Agreement nor the consummation of the transaction
contemplated hereby will (i) result in any payment (including, without
limitation, severance, unemployment compensation, golden parachute, bonus or
otherwise) becoming due to any director or employee of MMS, (ii) materially
increase any benefits otherwise payable by MMS or (iii) result in the
acceleration of the time of payment or vesting of any such benefits.
2.18 Employee Matters. MMS is in compliance in all respects
with all currently applicable laws and regulations respecting employment,
discrimination in employment, terms and conditions of employment, wages, hours
and occupational safety and health and employment practices, and is not engaged
in any unfair labor practice, except where the failure to be in compliance or
the engagement in such unfair labor practices would not have a Material Adverse
Effect on MMS. There are no pending claims against MMS under any workers
compensation plan or policy or for long term disability. MMS has not incurred
any obligations under COBRA with respect to any former employees or qualifying
beneficiaries thereunder, except for obligations that would not have a Material
Adverse Effect on MMS. There are no controversies pending or, to the knowledge
of MMS, threatened, between MMS and any of its respective employees, which
controversies have or could reasonably be expected to have a Material Adverse
Effect on MMS. MMS is not a party to any collective bargaining agreement or
other labor unions contract nor does MMS know of any activities or proceedings
of any labor union to organize any such employees.
16.
<PAGE> 22
2.19 Interested Party Transactions. MMS is not indebted to any
director, officer, employee or agent of MMS (except for amounts due as normal
salaries and bonuses and in reimbursement of ordinary expenses), and no such
person is indebted to MMS.
2.20 Insurance. MMS has policies of insurance and bonds of the
type and in amounts customarily carried by persons conducting businesses or
owning assets similar to those of MMS. There is no material claim pending under
any of such policies or bonds as to which coverage has been questioned, denied
or disputed by the underwriters of such policies or bonds. All premiums due and
payable under all such policies and bonds have been paid and MMS is otherwise in
compliance in all material respects with the terms of such policies and bonds.
MMS has no knowledge of any threatened termination of, or material premium
increase with respect to, any of such policies.
2.21 Compliance With Laws. MMS has complied with, is not in
violation of, and has not received any notices of violation with respect to, any
federal, state, local or foreign statute, law or regulation with respect to the
conduct of its business, or the ownership or operation of its business, except
for such violations or failures to comply as could not be reasonably expected to
have a Material Adverse Effect on MMS.
2.22 Minute Book. The minute book of MMS made available to
Ixion contains a complete and accurate summary of all meetings of directors and
stockholders or actions by written consent since the time of incorporation of
MMS through the date of this Agreement, and reflects all transactions referred
to in such minutes accurately in all material respects.
2.23 Complete Copies of Materials. MMS has delivered or made
available true and complete copies of each document identified on the MMS
Disclosure Schedule.
2.24 Brokers' and Finders' Fees. MMS has not incurred, nor
will it incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or investment bankers' fees or any similar charges
in connection with this Agreement or any transaction contemplated hereby.
2.25 Board Approval. The Board of Directors of MMS has
unanimously (i) approved this Agreement and the Merger, (ii) determined that the
Merger is in the best interests of the stockholders of MMS and is on terms that
are fair to such stockholders and (iii) recommended that the stockholders of MMS
approve this Agreement and the Merger.
2.26 Stockholder Approval. The stockholders of MMS have
unanimously approved this Agreement and the Merger.
17.
<PAGE> 23
2.27 Representations Complete. None of the representations or
warranties made by MMS herein or in any Schedule hereto, including the MMS
Disclosure Schedule, or certificate furnished by MMS pursuant to this Agreement,
when all such documents are read together in their entirety, contains or will
contain at the Effective Time any untrue statement of a material fact, or omits
or will omit at the Effective Time to state any material fact necessary in order
to make the statements contained herein or therein, in the light of the
circumstances under which made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF IXION
Except as disclosed on Schedule 3 attached hereto (the "Ixion
Disclosure Schedule"), Ixion represents and warrants to MMS as follows:
3.1 Organization, Standing and Power. Ixion is a corporation duly
organized, validly existing and in good standing under tile laws of its
jurisdiction of organization. Ixion has the corporate power to own its
properties and to carry on its business as now being conducted and as proposed
to be conducted and is duly qualified to do business and is in good standing in
each jurisdiction in which the failure to be so qualified and in good standing
would have a Material Adverse Effect on Ixion. Ixion has delivered a true and
correct copy of its Certificate of Incorporation, as amended (the "Ixion
Certificate of Incorporation"), and Bylaws, as amended (the "Ixion Bylaws") or
other charter documents, as applicable, of Ixion, each as amended to date, to
MMS Ixion is not in violation of any of the provisions of the Ixion Certificate
of Incorporation or the Ixion Bylaws or equivalent organizational documents.
There are no outstanding subscriptions, options, warrants, puts, calls, rights,
exchangeable or convertible securities or other commitments or agreements of
any character relating to the issued or unissued capital stock, or otherwise
obligating Ixion to issue, transfer, sell, purchase, redeem or otherwise
acquire any such securities. Ixion does not directly or indirectly own any
equity or similar interest in, or any interest convertible or exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity.
3.2 Capital Structure. The authorized capital stock of Ixion
consists of 10,000,000 shares of Common Stock, $0.01 par value, of which there
were issued and outstanding immediately prior to the transactions contemplated
hereby 2,772,464 shares. Such shares of Ixion Common Stock are owned of record
as set forth on Schedule 3.2. There are no other outstanding shares of capital
stock or voting securities and no outstanding commitments to issue any shares of
capital stock or voting securities other than pursuant to (i) the exercise of
options and warrants outstanding as of the date hereof, as set forth in Schedule
4.2(a), (ii) the Securities, (iii) the Investor Letters and (iv) the Consulting
Agreements. All outstanding shares of Ixion Common Stock are duly
18.
<PAGE> 24
authorized, validly issued, fully paid and non-assessable and are free of any
liens or encumbrances other than any liens or encumbrances created by or imposed
upon the holders thereof, and are not subject to preemptive rights or rights of
first refusal created by statute, the Ixion Certificate of Incorporation Bylaws
of Ixion or any agreement to which Ixion is a party or by which it is bound.
Ixion has reserved 400,000 shares of Common Stock for issuance to employees and
consultants pursuant to the Ixion Stock Option Plan, of which 6,000 shares have
been issued pursuant to option exercises or direct stock purchases, 125,432
shares are subject to outstanding, unexercised options, and no shares are
subject to outstanding stock purchase rights. Except as set forth above and
except for (i) the rights created pursuant to this Agreement, (ii) Ixion's right
to repurchase any unvested shares under the Ixion Stock Option Plan and (iii)
Ixion's obligations to issue shares of its Common Stock pursuant to the
Securities, the Investor Letters and the Consulting Agreements, there are no
other options, warrants, calls, rights, commitments or agreements of any
character to which Ixion is a party or by which it is bound obligating Ixion to
issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered,
sold, repurchased or redeemed, any shares of capital stock of Ixion or
obligating Ixion to grant, extend, accelerate the vesting of, change the price
of, or otherwise amend or enter into any such option, warrant, call, right,
commitment or agreement. There are no contracts, commitments or agreements
relating to voting, purchase or sale of Ixion's capital stock (i) between or
among Ixion and any of its stockholders and (ii) to the best of Ixion's
knowledge, between or among any of Ixion's stockholders. The terms of the Ixion
Stock Option Plan permit the assumption or substitution of options to purchase
Common Stock of the Surviving Corporation as provided in this Agreement, without
the consent or approval of the holders of such securities, the Ixion
stockholders, or otherwise and without any acceleration of the exercise schedule
or vesting provisions in effect for those options. True and complete copies of
all agreements and instruments relating to or issued under the Ixion Stock
Option Plan have been made available to MMS and such agreements and instruments
have not been amended, modified or supplemented, and there are no agreements to
amend, modify or supplement such agreements or instruments in any case from the
form made available to MMS.
3.3 Authority. Ixion has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Ixion, including, without
limitation, approval of Ixion's Stockholders. This Agreement has been duly
executed and delivered by Ixion and constitutes the valid and binding obligation
of Ixion enforceable against Ixion in accordance with its terms. The execution
and delivery of this Agreement by Ixion does not, and the consummation of the
transactions contemplated hereby will not, conflict with, or result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any benefit under (i) any provision of the Ixion
Certificate of Incorporation or the Ixion Bylaws, or (ii) any
19.
<PAGE> 25
material mortgage, indenture, lease, contract or other agreement or instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Ixion or any of its properties or
assets, except where such conflict, violation, default, termination,
cancellation or acceleration with respect to the foregoing provisions of (ii)
would not have had and would not reasonably be expected to have a Material
Adverse Effect on Ixion. No additional consent, approval, order or authorization
of, or registration, declaration or filing with any Governmental Entity is
required by or with respect to Ixion in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby except for the filing of the Certificate of Merger as provided in Section
1.2 and such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not have a Material Adverse
Effect on Ixion and would not prevent, or materially alter or delay any of the
transactions contemplated by this Agreement.
3.4 Financial Statements. Ixion has delivered to MMS its
audited financial statements (balance sheet and profit and loss statement,
statement of stockholders' equity and statement of changes in financial
position) at December 31, 1995, and for the fiscal year then ended and its
unaudited financial statements (balance sheet and profit and loss statement) at
and for the 3-month period ended March 31, 1996 (the "Ixion Financial
Statements"). The Ixion Financial Statements are complete and correct in all
material respects and have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods indicated and with each other, except
that unaudited Ixion Financial Statements may not contain all footnotes required
by GAAP. The Ixion Financial Statements accurately set out and describe the
financial condition and operating results of Ixion as of the dates, and for the
periods, indicated therein, subject to normal year-end adjustments. Except as
set forth in the Ixion Financial Statements, Ixion has no liabilities,
contingent or otherwise, other than (a) liabilities incurred in the ordinary
course of business since March 31, 1996, (b) liabilities set forth on the Ixion
Disclosure Schedule, and (c) obligations under contracts and commitments
incurred in the ordinary course of business and not required under GAAP to be
reflected in the Ixion Financial Statements, which, in both cases, individually
or in the aggregate, are not material to the financial condition or operating
results of Ixion. Ixion maintains and will continue to maintain a standard
system of accounting established and administered in accordance with GAAP.
3.5 Absence of Certain Changes. Since March 31,1996, Ixion has
conducted its business in the ordinary course consistent with past practice and
there has not occurred: (i) any change, event or condition (whether or not
covered by insurance) that has resulted in, or might reasonably be expected to
result in, a Material Adverse Effect to Ixion; (ii) any acquisition, sale,
mortgage, pledge or transfer of any material asset of Ixion other than in the
ordinary course of business and consistent with past practice; (iii) any
material change in accounting methods or practices (including any material
change in depreciation or amortization policies or rates) by Ixion or any
material revaluation by Ixion of any of its assets; (iv) any declaration,
setting aside, or
20.
<PAGE> 26
payment of a dividend or other distribution with respect to the shares of Ixion,
or any direct or indirect redemption, purchase or other acquisition by Ixion of
any of its shares of capital stock; (v) any material contract entered into by
Ixion, other than in the ordinary course of business and as provided to MMS, or
any material amendment or termination of, or default under, any material
contract to which Ixion is a party or by which it is bound; (vi) any
indebtedness incurred by Ixion, except such as may have been incurred in the
ordinary course of business and consistent with past practice; (vii) any loan
made or agreed to be made by Ixion, nor has Ixion become liable or agreed to
become liable as a guarantor with respect to any loan; or (viii) any negotiation
or agreement by Ixion to do any of the things described in the preceding clauses
(i) through (vii) (other than negotiations with MMS and its representatives
regarding the transactions contemplated by this Agreement).
3.6 Subsidiaries. Ixion does not presently own or control,
directly or indirectly, an interest in any other corporation, association or
business entity.
3.7 Absence of Undisclosed Liabilities. Ixion has no material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (i) those set forth or adequately provided for in the
Ixion Financial Statements, (ii) those set forth on the Ixion Disclosure
Schedule, (iii) those incurred in the ordinary course of business and not
required to be set forth in the Ixion Financial Statements under GAAP, (iv)
those incurred in the ordinary course of business since March 31, 1996, and
consistent with past practice; and (v) those incurred in connection with the
execution of this Agreement.
3.8 Material Contracts. All contracts, agreements and
instruments to which Ixion is a party, which involve future revenue to or
payments by Ixion that are material, are listed in the Ixion Disclosure Schedule
(collectively, the "Ixion Material Contracts"). Except as set forth in the Ixion
Disclosure Schedule, all the Ixion Material Contracts are in full force and
effect in all material respects. Ixion has no notice that any party to any such
Ixion Material Contract intends to cancel, withdraw, modify or amend such Ixion
Material Contract. Ixion is not in material default or breach, and no event has
occurred or will occur by reason of the transactions contemplated in this
Agreement which would constitute a default or breach, where such default or
breach would entitle another party to this Agreement to accelerate or terminate
such Ixion Material Contract or otherwise impose a material penalty or
forfeiture thereunder (whether with or without notice, lapse of time or the
happening or occurrence of any other event), under any Ixion Material Contract.
3.9 Litigation. There is no private or governmental action,
suit, proceeding, claim, arbitration or investigation pending before any agency,
court or tribunal, foreign or domestic, or, to the knowledge of Ixion threatened
against Ixion or any of its properties or any of its officers or directors (in
their capacities as such) that, individually or in the aggregate, could
reasonably be expected to have a Material
21.
<PAGE> 27
Adverse Effect on Ixion. There is no judgment, decree or order against Ixion or,
to the knowledge of Ixion any of its respective directors or officers (in their
capacities as such), that could prevent, enjoin, alter or materially delay any
conduct or practice in connection with the business engaged in by Ixion or any
of the transactions contemplated by this Agreement, or that could reasonably be
expected to have a Material Adverse Effect on Ixion.
3.10 Restrictions on Business Activities. There is no material
agreement, judgment, injunction, order or decree binding upon Ixion which has
the effect of prohibiting or materially impairing any current or future business
practice of Ixion, any acquisition of property by Ixion or the conduct of
business by Ixion as currently conducted or as proposed to be conducted by
Ixion.
3.11 Governmental Authorization. Ixion has obtained each
federal, state, county, local or foreign governmental consent, license, permit,
grant, or other authorization of a governmental entity (i) pursuant to which Mon
currently operates or holds any interest in any of its properties or (ii) that
is required for the operation of Ixion's business or the holding of any such
interest ((i) and (ii) herein collectively called "Ixion Authorizations"), and
all of such Ixion Authorizations are in full force and effect, except where the
failure to obtain or have any of such Ixion Authorizations could not reasonably
be expected to have a Material Adverse Effect on Ixion.
3.12 Title to Property. Ixion has good and valid title to all
of its properties, interests in properties and assets, real and personal,
reflected in the Ixion Financial Statements or acquired after March 31, 1996
(except properties, interests in properties and assets sold or otherwise
disposed of since March 31, 1996 in the ordinary course of business), or in the
case of leased properties and assets, valid leasehold interests in, free and
clear of all mortgages, liens, pledges, charges or encumbrances of any kind or
character, except (i) the lien of current taxes not yet due and payable, (ii)
such imperfections of title, liens and easements as do not and will not
materially detract from or interfere with the use of the properties subject
thereto or affected thereby, or otherwise materially impair business operations
involving such properties and (iii) liens securing debt which is reflected on
the Ixion Financial Statements. The plants, property and equipment of Ixion that
are used in the operations of its business are in good operating condition and
repair. All properties used in the operations of Ixion are reflected in the
Ixion Financial Statements to the extent GAAP requires the same to be reflected.
Schedule 3.12 identifies each parcel of real property owned or leased by Ixion.
3.13 Intellectual Property.
(a) Ixion owns, or is licensed or otherwise possesses legally
enforceable rights to use all patents, trademarks, trade names, service marks,
copyrights, and any applications therefor, maskworks, net lists, schematics,
technology, know-how, trade secrets, inventory, ideas, algorithms, processes,
computer software programs or
22.
<PAGE> 28
applications (in both source code and object code form), and tangible or
intangible proprietary information or material ("Ixion Intellectual Property")
that is used or currently proposed to be used in the business of Ixion as
currently conducted or as currently proposed to be conducted by Ixion, except to
the extent that the failure to have such rights have not had and would not
reasonably be expected to have a Material Adverse Effect on Ixion.
(b) Schedule 3.13 lists (i) all patents and patent
applications and all registered and unregistered trademarks, trade names and
service marks, registered and unregistered copyrights, and maskworks, which
Ixion considers to be material to its business and included in the Ixion
Intellectual Property, including the jurisdictions in which each such Ixion
Intellectual Property right has been issued or registered or in which any
application for such issuance and registration has been filed, (ii) all material
licenses, sublicenses and other agreements as to which Ixion is a party and
pursuant to which any person is authorized to use any Ixion Intellectual
Property, and (iii) all material licenses, sublicenses and other agreements as
to which Ixion is a party and pursuant to which Ixion is authorized to use any
third party patents, trademarks or copyrights, including software ("Ixion Third
Party Intellectual Property Rights") which are incorporated in, are, or form a
part of any Ixion product that is material to its business.
(c) To the knowledge of Ixion, there is no material
unauthorized use, disclosure, infringement or misappropriation of any Ixion
Intellectual Property rights, any trade secret material to Ixion, or any Ixion
Intellectual Property right of any third party to the extent licensed by or
through Ixion, by any third party, including any employee or former employee of
Ixion. Ixion has not entered into any agreement to indemnify any other person
against any charge of infringement of any intellectual property, other than
indemnification provisions contained in purchase orders arising in the ordinary
course of business.
(d) Ixion is not, nor will it be as a result of the execution
and delivery of this Agreement or the performance of its obligations under this
Agreement, in breach of any license, sublicense or other agreement relating to
the Ixion Intellectual Property or Ixion Third Party Intellectual Property
Rights, the breach of which would have a Material Adverse Effect on Ixion.
(e) To Ixion's knowledge, all patents, registered trademarks,
service marks and copyrights held by Ixion are valid and subsisting. Ixion (i)
has not been sued in any suit, action or proceeding which involves a claim of
infringement of any patents, trademarks, service marks, copyrights or violation
of any trade secret or other proprietary right of any third party; (ii) has no
knowledge that the manufacturing, marketing, licensing or sale of its products
infringes any patent, trademark, service mark, copyright, trade secret or other
proprietary right of any third party, which such infringement would have a
Material Adverse Effect on Ixion; and (iii) has not brought any action, suit or
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proceeding for infringement of Ixion Intellectual Property or breach of any
license or agreement involving Ixion Intellectual Property against any third
party.
(f) Ixion has secured valid written assignments from all
consultants and employees who contributed to the creation or development of
Ixion Intellectual Property of the rights to such contributions that Ixion does
not already own by operation of law, except where the failure to secure such
assignments would not have a Material Adverse Effect on Ixion.
(g) Ixion has taken all reasonable and appropriate steps to
protect and preserve the confidentiality of all Ixion Intellectual Property not
otherwise protected by patents, or patent applications or copyright ("Ixion
Confidential Information"). To the knowledge of Ixion, all use, disclosure or
appropriation of Ixion Confidential Information by or to a third party has been
pursuant to the terms of a written agreement between Ixion and such third party.
To the knowledge of Ixion, all use, disclosure or appropriation of Ixion
Confidential Information not owned by Ixion has been pursuant to the terms of a
written agreement between Ixion and the owner of such Ixion Confidential
Information, or is otherwise lawful.
3.14 Environmental Matters.
(a) The following terms shall be defined as follows when used
in this Section 3.14:
(i) "Environmental and Safety Laws" shall mean any federal,
state or local laws, ordinances, codes, regulations, rules, policies and orders
that are intended to assure the protection of the environment, or that classify,
regulate, call for the remediation of, require reporting with respect to, or
list or define air, water, groundwater, solid waste, hazardous or toxic
substances, materials, wastes, pollutants or contaminants, or which are intended
to assure the safety of employees, workers or other persons, including the
public.
(ii) "Hazardous Materials" shall mean any toxic or hazardous
substance, material or waste or any pollutant or contaminant, or infectious or
radioactive substance or material, including without limitation, those
substances, materials and wastes defined in or regulated under any Environmental
and Safety Laws.
(iii) "Property" shall mean all real property leased or owned
by Ixion either currently or in the past.
(iv) "Facilities" shall mean all buildings and improvements on
the Property of Ixion.
24.
<PAGE> 30
(b) Ixion represents and warrants as follows: (i) no
methylene chloride or asbestos is contained in or has been used at or released
from the Facilities; (ii) to the knowledge of Ixion, all Hazardous Materials
and wastes have been disposed of in accordance with all Environmental and
Safety Laws; (iii) Ixion has received no notice (verbal or written) of any
noncompliance of the Facilities or its past or present operations with
Environmental and Safety Laws; (iv) no notices, administrative actions or suits
are pending or, to the knowledge of Ixion, threatened relating to a violation
of any Environmental and Safety Laws; (v) to the knowledge of Ixion, Ixion is
not a potentially responsible party under CERCLA, or state analog statute,
arising out of events occurring prior to the Closing Date; (vi) to the
knowledge of Ixion, there have not been in the past, and are not now, any
Hazardous Materials on, under or migrating to or from the Facilities or
Property; (vii) to the knowledge of Ixion, there have not been in the past, and
are not now, any underground tanks or underground improvements at, on or under
the Property including without limitation, treatment or storage tanks, sumps,
or water, gas or oil wells; (viii) to the knowledge of Ixion, there are no PCBs
deposited, stored, disposed of or located on the Property or Facilities or any
equipment on the Property containing PCBs at levels in excess of 50 parts per
million; (ix) to the knowledge of Ixion, there is no formaldehyde on the
Property or in the Facilities, nor any insulating material containing urea
formaldehyde in the Facilities; (x) to the knowledge of Ixion, the Facilities
and Ixion's uses and activities therein have at all times complied with all
Environmental and Safety Laws; and (xi) Ixion has all the permits and licenses
required to be issued and is in full compliance with the terms and conditions
of those permits.
3.15 Taxes. Ixion has timely filed all Tax Returns required to
be filed by it, have paid all Taxes shown thereon to be due and has provided
adequate accruals in accordance with GAAP in its financial statements for any
Taxes that have not been paid, whether or not shown as being due on any Tax
Returns. No material claim for Taxes has become a lien against the property of
Ixion or is being asserted against Ixion other than liens for Taxes not yet due
and payable. No audit of any Tax Return of Ixion is being conducted by a Tax
authority. No extension of the statute of limitations on the assessment of any
Taxes has been granted by Ixion and is currently in effect. There is no
agreement, contract or arrangement to which Ixion is a party that may result in
the payment of any amount that would not be deductible by reason of Sections
280G, 162 or 404 of the Code. Ixion has not been and will not be required to
include any material adjustment in Taxable income for any Tax period (or portion
thereof) pursuant to Section 481 or 263A of the Code or any comparable provision
under state or foreign Tax laws as a result of transactions, events or
accounting methods employed prior to the Merger. Ixion is not a party to any tax
sharing or tax allocation agreement nor does Ixion owe any amount under any such
agreement. Ixion is in full compliance with all terms and conditions of any Tax
exemptions or other Tax-sparing agreement or order of a foreign government and
the consummation of the Merger shall not have any adverse effect on the
continued validity and effectiveness of any such Tax exemptions or other
Tax-sparing agreement or order.
25.
<PAGE> 31
3.16 Employee Benefit Plans.
(a) Schedule 3.16 lists, with respect to Ixion and any
trade or business (whether or not incorporated) which is treated as a single
employer with Ixion (an "Ixion ERISA Affiliate") within the meaning of Section
414(b), (c), (m) or (o) of the Code, (i) all material employee benefit plans (as
defined in Section 3(3) of ERISA), (ii) each loan to a non-officer employee in
excess of $50,000, loans to officers and directors and any stock option, stock
purchase, phantom stock, stock appreciation right, supplemental retirement,
severance, sabbatical, medical, dental, vision care, disability, employee
relocation, cafeteria benefit (Code section 125) or dependent care (Code Section
129), life insurance or accident insurance plans, programs or arrangements,
(iii) all bonus, pension, profit sharing, savings, deferred compensation or
incentive plans, programs or arrangements, (iv) other fringe or employee benefit
plans, programs or arrangements that apply to senior management of Ixion and
that do not generally apply to all employees, and (v) any current or former
employment or executive compensation or severance agreements, written or
otherwise, as to which unsatisfied obligations of Ixion of greater than $50,000
remain for the benefit of, or relating to, any present or former employee,
consultant or director of Ixion (together, the "Ixion Employee Plans").
(b) Ixion has furnished to MMS a copy of each of the
Ixion Employee Plans and related plan documents (including trust documents,
insurance policies or contracts, employee booklets, summary plan descriptions
and other authorizing documents, and, to the extent still in its possession, any
material employee communications relating thereto) and has, with respect to each
Ixion Employee Plan which is subject to ERISA reporting requirements, provided
copies of the Form 5500 reports filed for the last three plan years. Any Ixion
Employee Plan intended to be qualified under Section 401(a) of the Code has
either obtained from the Internal Revenue Service a favorable determination
letter as to its qualified status under the Code, including all amendments to
the Code effected by the Tax Reform Act of 1986 and subsequent legislation, or
has applied to the Internal Revenue Service for such a determination letter
prior to the expiration of the requisite period under applicable Treasury
Regulations or Internal Revenue Service pronouncements in which to apply for
such determination letter and to make any amendments necessary to obtain a
favorable determination. Ixion has also furnished MMS with the most recent
Internal Revenue Service determination letter issued with respect to each such
Ixion Employee Plan, and nothing has occurred since the issuance of each such
letter which could reasonably be expected to cause the loss of the tax-qualified
status of any Ixion Employee Plan subject to Code Section 401(a).
(c) (i) None of the Ixion Employee Plans promises or
provides retiree medical or other retiree welfare benefits to any person; (ii)
there has been no "prohibited transaction," as such term is defined in Section
406 of ERISA and Section 4975 of the Code, with respect to any Ixion Employee
Plan, which could reasonably be expected to have, in the aggregate, a Material
Adverse Effect; (iii) each Ixion Employee
26.
<PAGE> 32
Plan has been administered in accordance with its terms and in compliance with
the requirements prescribed by any and all statutes, rules and regulations
(including ERISA and the Code), except as would not have, in the aggregate, a
Material Adverse Effect, and Ixion and each Ixion ERISA Affiliate have performed
all obligations required to be performed by them under, are not in any respect
in default under or violation of, and have no knowledge of any default or
violation by any other party to, any of the Ixion Employee Plans, which default
or violation could reasonably be expected to have a Material Adverse Effect on
Ixion; (iv) neither Ixion nor any Ixion ERISA Affiliate is subject to any
liability or penalty under Sections 4976 through 4980 of the Code or Title I of
ERISA with respect to any of the Ixion Employee Plans; (v) all material
contributions required to be made by Ixion or any Ixion ERISA Affiliate to any
Ixion Employee Plan have been made on or before their due dates and a reasonable
amount has been accrued for contributions to each Ixion Employee Plan for the
current plan years; (vi) with respect to each Ixion Employee Plan, no
"reportable event" within the meaning of Section 4043 of ERISA (excluding any
such event for which the thirty (30) day notice requirement has been waived
under the regulations to Section 4043 of ERISA) nor any event described in
Section 4062, 4063 or 4041 or ERISA has occurred; and (vii) no Ixion Employee
Plan is covered by, and neither Ixion nor any Ixion ERISA Affiliate has incurred
or expects to incur any liability under Title IV of ERISA or Section 412 of the
Code. With respect to each Ixion Employee Plan subject to ERISA as either an
employee pension plan within the meaning of Section 3(2) of ERISA or an employee
welfare benefit plan within the meaning of Section 3(1) of ERISA, Ixion has
prepared in good faith and timely filed all requisite governmental reports
(which were true and correct as of the date filed) and has properly and timely
filed and distributed or posted all notices and reports to employees required to
be filed, distributed or posted with respect to each such Ixion Employee Plan.
No suit, administrative proceeding, action or other litigation has been brought,
or to the best knowledge of Ixion is threatened, against or with respect to any
such Ixion Employee Plan, including any audit or inquiry by the IRS or United
States Department of Labor. Neither Ixion nor any Ixion ERISA Affiliate is a
party to, or has made any contribution to or otherwise incurred any obligation
under, any "multiemployer plan" as defined in Section 3(37) of ERISA.
(d) With respect to each Ixion Employee Plan, Ixion has
complied with (i) the applicable health care continuation and notice provisions
of COBRA and the proposed regulations thereunder and (ii) the applicable
requirements of the Family Leave Act of 1993 and the regulations thereunder,
except to the extent that such failure to comply would not, in the aggregate,
have a Material Adverse Effect.
(e) The consummation of the transactions contemplated by
this Agreement will not (i) entitle any current or former employee or other
service provider of Ixion, or any Ixion ERISA Affiliate to severance benefits or
any other payment, except as expressly provided in this Agreement, or (ii)
accelerate the time of payment or vesting, or increase the amount of
compensation due any such employee or service provider.
27.
<PAGE> 33
(f) There has been no amendment to, written
interpretation or announcement (whether or not written) by Ixion, or any Ixion
ERISA Affiliate relating to, or change in participation or coverage under, any
Ixion Employee Plan which would materially increase the expense of maintaining
such Plan above the level of expense incurred with respect to that Plan for the
most recent fiscal year included in the Ixion Financial Statements.
3.17 Certain Agreements Affected by the Merger. Neither the
execution and delivery of this Agreement nor the consummation of the transaction
contemplated hereby will (i) result in any payment (including, without
limitation, severance, unemployment compensation, golden parachute, bonus or
otherwise) becoming due to any director or employee of Ixion, (ii) materially
increase any benefits otherwise payable by Ixion or (iii) result in the
acceleration of the time of payment or vesting of any such benefits.
3.18 Employee Matters. Ixion is in compliance in all respects
with all currently applicable laws and regulations respecting employment,
discrimination in employment, terms and conditions of employment, wages, hours
and occupational safety and health and employment practices, and is not engaged
in any unfair labor practice, except where the failure to be in compliance or
the engagement in such unfair labor practices would not have a Material Adverse
Effect on Ixion. There are no pending claims against Ixion under any workers
compensation plan or policy or for long term disability. Ixion has not incurred
any obligations under COBRA with respect to any former employees or qualifying
beneficiaries thereunder, except for obligations that would not have a Material
Adverse Effect on Ixion. There are no controversies pending or, to the knowledge
of Ixion, threatened, between Ixion and any of its respective employees, which
controversies have or could reasonably be expected to have a Material Adverse
Effect on Ixion. Ixion is not a party to any collective bargaining agreement or
other labor unions contract nor does Ixion know of any activities or proceedings
of any labor union to organize any such employees.
3.19 Interested Party Transactions. Ixion is not indebted to
any director, officer, employee or agent of Ixion (except for amounts due as
normal salaries and bonuses and in reimbursement of ordinary expenses), and no
such person is indebted to Ixion.
3.20 Insurance. Ixion has policies of insurance and bonds of
the type and in amounts customarily carried by persons conducting businesses or
owning assets similar to those of Ixion. There is no material claim pending
under any of such policies or bonds as to which coverage has been questioned,
denied or disputed by the underwriters of such policies or bonds. All premiums
due and payable under all such policies and bonds have been paid and Ixion is
otherwise in compliance in all material respects with
28.
<PAGE> 34
the terms of such policies and bonds. Ixion has no knowledge of any threatened
termination of, or material premium increase with respect to, any of such
policies.
3.21 Compliance With Laws. Ixion has complied with, is not in
violation of, and has not received any notices of violation with respect to, any
federal, state, local or foreign statute, law or regulation with respect to the
conduct of its business, or the ownership or operation of its business, except
for such violations or failures to comply as could not be reasonably expected to
have a Material Adverse Effect on Ixion.
3.22 Minute Book. The minute book of Ixion made available to
MMS contains a complete and accurate summary of all meetings of directors and
stockholders or actions by written consent since the time of incorporation of
Ixion through the date of this Agreement, and reflects all transactions referred
to in such minutes accurately in all material respects.
3.23 Brokers' and Finders' Fees. Ixion has not incurred, nor
will it incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or investment bankers' fees or any similar charges
in connection with this Agreement or any transaction contemplated hereby.
3.24 Complete Copies of Materials. Ixion has delivered or made
available true and complete copies of each document identified on the Ixion
Disclosure Schedule.
3.25 Board Approval. The Board of Directors of Ixion has
unanimously (i) approved this Agreement and the Merger, (ii) determined that the
Merger is in the best interests of the stockholders of Ixion and is on terms
that are fair to such stockholders and (iii) recommended that the stockholders
of Ixion approve this Agreement and the Merger.
3.26 Stockholder Approval. The stockholders of Ixion have
unanimously approved this Agreement and the Merger.
3.27 Representations Complete. None of the representations or
warranties made by Ixion herein or in any Schedule hereto, including the Ixion
Disclosure Schedule, or certificate furnished by Ixion pursuant to this
Agreement, when all such documents are read together in their entirety, contains
or will contain at the Effective Time any untrue statement of a material fact,
or omits or will omit at the Effective Time to state any material fact necessary
in order to make the statements contained herein or therein, in the light of the
circumstances under which made, not misleading.
ARTICLE IV
29.
<PAGE> 35
ADDITIONAL AGREEMENTS
4.1 Intentionally omitted.
4.2 Employee Benefit Plans.
(a) At the Effective Time, the Ixion Stock Option Plan and each
outstanding option to purchase shares of Ixion Common Stock under the Ixion
Stock Option Plan, whether vested or unvested, and all other outstanding options
and warrants to acquire Ixion Common Stock, whether vested or unvested, will be
assumed by the Surviving Corporation. Schedule 4.2(a) hereto sets forth a true
and complete list as of the date hereof of all holders of outstanding options
under the Ixion Stock Option Plan, whether vested or unvested, and all holders
of other outstanding options and warrants, whether vested or unvested, including
the number of shares of Ixion capital stock subject to each such option or
warrant, the exercise or vesting schedule, the exercise price per share and the
term of each such option or warrant. Each such option or warrant so assumed by
the Surviving Corporation under this Agreement shall continue to have, and be
subject to, the same terms and conditions as applied to such option or warrant
immediately prior to the Effective Time, except that (i) such option or warrant
will be exercisable for that number of whole shares of Common Stock of the
Surviving Corporation equal to the product of the number of shares of Ixion
Common Stock that were issuable upon exercise of such option or warrant
immediately prior to the Effective Time multiplied by the Exchange Ratio and
rounded up to the nearest whole number of shares of Common Stock of the
Surviving Corporation, and (ii) the per share exercise price for the shares of
Common Stock of the Surviving Corporation issuable upon exercise of such assumed
option or warrant will be equal to the quotient determined by dividing the
exercise price per share of Ixion Common Stock at which such option or warrant
was exercisable immediately prior to the Effective Time by the Exchange Ratio,
rounded up to the nearest whole cent. Consistent with the terms of the documents
governing the outstanding options and warrants, the Merger will not terminate
any of the outstanding options or warrants or accelerate the exercisability or
vesting of such options or warrants or the shares of Common Stock of the
Surviving Corporation which will be subject to those options or warrants upon
the Surviving Corporation's assumption of the options and warrants in the
Merger. It is the intention of the parties that the options issued pursuant to
the Ixion Stock Option Plan which are assumed by the Surviving Corporation
qualify following the Effective Time as incentive stock options as defined in
Section 422 of the Code to the extent such options qualified as incentive stock
options prior to the Effective Time. Within 10 business days after the Effective
Time, the Surviving Corporation will issue to each person who, immediately prior
to the Effective Time was a holder of an outstanding option or warrant a
document evidencing the foregoing assumption of such option or warrant by the
Surviving Corporation.
(b) All outstanding purchase options or repurchase rights which Ixion
may hold immediately prior to the Effective Time to repurchase shares of Ixion
Common
30.
<PAGE> 36
Stock issued under the Ixion Stock Option Plan shall be transferred to the
Surviving Corporation in the Merger and shall thereafter be exercisable by the
Surviving Corporation upon the same terms and conditions in effect immediately
prior to the Effective Time, except that the shares purchasable thereunder shall
be shares of Common Stock of the Surviving Corporation and the price payable per
share by the Surviving Corporation shall be equal to the quotient determined by
dividing the purchase price per share at which the Ixion Common Stock was issued
under the Ixion Stock Option Plan by the Exchange Ratio and rounding the
resulting price per share payable by the Surviving Corporation up to the nearest
whole one-hundredth of a cent.
4.3 Public Offering. The Surviving Corporation shall use its
commercially reasonable efforts to effect within one hundred and eighty (180)
days following the Closing Date, pursuant to a registration statement under the
Securities Act of 1933, as amended, an underwritten public offering with
aggregate gross proceeds to the Surviving Corporation of at least $15,000,000.
Baxter Healthcare Corporation ("Baxter") hereby agrees that the Surviving
Corporation, in its sole discretion, may select Kaufman Bros., L.P., as its sole
lead or co-lead underwriter for such public offering.
4.4 Employees. Set forth on Schedule 4.4 is a list of (i)
employees of Ixion to whom the Surviving Corporation will make an offer of
employment comparable to such employee's current position, and (ii) employees of
MMS who will continue their employment with the Surviving Corporation, effective
at the Closing. The Surviving Corporation will negotiate in good faith to hire
or retain, as the case may be, the employees on Schedule 4.4 and will
incentivize such employees consistent with its prior policies regarding
employees of MMS, including the issuance of options to purchase the Common Stock
of the Surviving Corporation in such amounts and on such terms as determined by
the Surviving Corporation in its sole discretion. The Surviving Corporation
shall have no obligation to make an offer of employment to any employee of Ixion
except those listed on Schedule 4.4.
4.5 Promissory Notes. At the Effective Time, the Securities
will be assumed by the Surviving Corporation. Schedule 1.6(d) hereto sets forth
a true and complete list as of the date hereof of all holders of the Securities.
The Securities so assumed by the Surviving Corporation under this Agreement
shall continue to have, and be subject to, the same terms and conditions, except
that the holders of such Securities will be entitled to receive that number of
whole shares of Common Stock of the Surviving Corporation equal to the product
of the number of shares of Ixion Common Stock that would have been issuable
pursuant to such Securities multiplied by the Exchange Ratio and rounded up to
the nearest whole number of shares of Common Stock of the Surviving Corporation.
Within 10 business days after the Effective Time, the Surviving Corporation will
issue to each person who, immediately prior to the Effective Time was a holder
of any Securities a document evidencing the foregoing assumption of such
Securities by the Surviving Corporation.
31.
<PAGE> 37
4.6 Investor Letter Agreements. At the Effective Time, the
Investor Letters will be assumed by the Surviving Corporation. Schedule 1.6(e)
hereto sets forth a true and complete list as of the date hereof of all Investor
Letters. The Investor Letters so assumed by the Surviving Corporation under this
Agreement shall continue to have, and be subject to, the same terms and
conditions, except that the holders of such Investor Letters will be entitled to
receive shares of the Surviving Corporation's Common Stock based upon the
initial public offering price of the Surviving Corporation's Common Stock.
Within ten (10) business days after the Effective Time, the Surviving
Corporation will issue to each person who, immediately prior to the Effective
Time was a holder of any Investor Letter a document evidencing the foregoing
assumption of such Investor Letter by the Surviving Corporation.
4.7 Consulting Agreements. At the Effective Time, the
Consulting Agreements will be assumed by the Surviving Corporation. Schedule
1.6(f) hereto sets forth a true and complete list as of the date hereof of all
of the Consulting Agreements. The Consulting Agreements so assumed by the
Surviving Corporation under this Agreement shall continue to have, and be
subject to, the same terms and conditions, except that the holders of such
Consulting Agreements will be entitled to receive that number of whole shares of
the Surviving Corporation's Common Stock equal to the product of the number of
shares of Ixion Common Stock that would have been issuable pursuant to such
Consulting Agreements multiplied by the Exchange Ratio and rounded to the
nearest whole number of shares of the Surviving Corporation's Common Stock.
Within ten (10) business days after the Effective Time, the Surviving
Corporation will issue to each person who, immediately prior to the Effective
Time was a party to any Consulting Agreement a document evidencing the foregoing
assumption of such Consulting Agreements by the Surviving Corporation.
4.8 New Hampshire Facility. The Surviving Corporation
covenants to maintain a facility in the West Lebanon, New Hampshire area,
substantially equivalent to the present MMS facility and appropriate for
operating the MMS Division of the Surviving Corporation, for so long as David
Chen, Steven Pieper and Michael McKenna remain employees of the Surviving
Corporation.
4.9 Distribution Agreement. The Surviving Corporation and
Baxter shall enter into a Distribution Agreement in the form attached hereto as
Exhibit B concurrently with the execution of this Agreement.
4.10 Convertible Promissory Note. Baxter shall deliver to the
Surviving Corporation $2,000,000, and the Surviving Corporation shall enter into
with Baxter a Convertible Promissory Note in the form attached hereto as Exhibit
C and a Credit Agreement in the form attached hereto as Exhibit D, concurrently
with the execution of this Agreement.
32.
<PAGE> 38
4.11 Confidentiality. The parties acknowledge that MMS and
Ixion have previously executed a non-disclosure agreement dated January 17, 1996
(the "Confidentiality Agreement"), which Confidentiality Agreement shall
continue in full force and effect in accordance with its terms.
4.12 Registration Rights Agreement. The Surviving Corporation
and Baxter shall enter into a Registration Rights Agreement in the form attached
hereto as Exhibit E concurrently with the execution of this Agreement.
4.13 Further Assurances. Each party hereto, at the reasonable
request of the other party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of this Agreement and the
transactions contemplated hereby.
ARTICLE V
GENERAL PROVISIONS
5.1 Non-Survival at Effective Time. The representations,
warranties and agreements set forth in this Agreement shall terminate at the
Effective Time, except in writing and shall be deemed given if delivered
personally or by commercial delivery that the agreements set forth in Article I,
Article IV and this Article V shall survive the Effective Time.
5.2 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or by
commercial delivery service, or mailed by registered or certified mail (return
receipt requested) or sent via facsimile (with confirmation of receipt) to the
parties at the following address (or at such other address for a party as shall
be specified by like notice):
(a) if to MMS, to:
Medical Media Systems
c/o Baxter Healthcare Corporation
17221 Red Hill Avenue, m/s 98
Irvine, California 92714
Attention: Vice President, Law
Facsimile No.: (714) 474-6444
Telephone No.: (714) 474-6415
with a copy to:
Gibson, Dunn & Crutcher LLP
4 Park Plaza
Irvine, California 92714
33.
<PAGE> 39
Attention: Thomas D. Magill, Esq.
Facsimile No.: (714) 451-4220
Telephone No.: (714) 451-3800
(b) if to Ixion, to:
Ixion, Inc.
654 Madison Avenue, Suite 1606
New York, New York 10021
Attention: President
Facsimile No.: (212) 319-3519
Telephone No.: (212) 319-3500
with a copy to:
Brobeck, Phleger & Harrison LLP
550 West "C" Street, Suite 1300
San Diego, CA 92101
Attention: Craig S. Andrews, Esq.
Facsimile No.: (619) 234-3848
Telephone No.: (619) 234-1966
5.3 Interpretation. When a reference is made in this Agreement
to Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. The words "include," "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation." The phrase "made available" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available. The phrases "the date of this
Agreement", "the date hereof", and terms of similar import, unless the context
otherwise requires, shall be deemed to refer to April 25, 1996. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
5.4 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
5.5 Entire Agreement; Nonassignability; Parties in Interest.
This Agreement and the documents and instruments and other agreements
specifically referred to herein or delivered pursuant hereto, including the
Exhibits, the Schedules, including the Ixion Disclosure Schedule and the MMS
Disclosure Schedule (a) constitute the entire agreement among the parties with
respect to the subject matter hereof and
34.
<PAGE> 40
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof, except for the
Confidentiality Agreement, which shall continue in full force and effect, and
shall survive any termination of this Agreement or the Closing, in accordance
with its terms; (b) are not intended to confer upon any other person any rights
or remedies hereunder, except as set forth in Sections 1.6-1.9, 4.3, and 5.11;
and shall not be assigned by operation of law or otherwise except as otherwise
specifically provided.
5.6 Severability. In the event that any provision of this
Agreement, or the application thereof, becomes or is declared by a court of
competent jurisdiction to be illegal, void or unenforceable, the remainder of
this Agreement will continue in full force and effect and the application of
such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further agree
to replace such void or unenforceable provision of this Agreement with a valid
and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
5.7 Amendment. The boards of directors of the parties hereto
may cause this Agreement to be amended at any time by execution of an instrument
in writing signed on behalf of each of the parties hereto; provided that an
amendment made subsequent to adoption of the Agreement by the stockholders of
Ixion or MMS shall not (i) alter or change the amount or kind of consideration
to be received on conversion of the Ixion Common Stock, (ii) alter or change any
term of the Certificate of Incorporation of the Surviving Corporation to be
effected by the Merger, or (iii) alter or change any of the terms and conditions
of the Agreement if such alteration or change would adversely affect the holders
of Ixion Common Stock or MMS Common Stock.
5.8 Remedies Cumulative. Except as otherwise provided herein,
any and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby, or by
law or equity upon such party, and the exercise by a party of any one remedy
will not preclude the exercise of any other remedy.
5.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware (without regard
to its principles of conflicts of law).
5.10 Rules of Construction. The parties hereto agree that they
have been represented by counsel during the negotiation, preparation and
execution of this Agreement and, therefore, waive the application of any law,
regulation, holding or rule of construction providing that ambiguities in an
agreement or other document will be construed against the party drafting such
agreement or document.
35.
<PAGE> 41
5.11 Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated by this Agreement will be paid by
the party incurring such expenses; provided, however, that Baxter shall pay all
expenses incurred by MMS prior to the Closing Date.
[Remainder of This Page Intentionally Left Blank]
36.
<PAGE> 42
IN WITNESS WHEREOF, Ixion and MMS have caused this Agreement
to be executed and delivered by their respective officers thereunto duly
authorized, all as of the date first written above.
IXION, INC
By: /s/ BRUCE D. STURMAN
-----------------------------------------
Name: BRUCE D. STURMAN
----------------------------------------
Title: C.E.O.
---------------------------------------
MEDICAL MEDIA SYSTEMS, INC.
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
As acknowledged and agreed with respect to Sections 4.3, 4.9, 4.10, 4.12 and
5.11.
BAXTER HEALTHCARE CORPORATION
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION]
<PAGE> 43
IN WITNESS WHEREOF, Ixion and MMS have caused this Agreement
to be executed and delivered by their respective officers thereunto duly
authorized, all as of the date first written above.
IXION, INC.
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
MEDICAL MEDIA SYSTEMS, INC.
By: /s/ Steve Pieper
-----------------------------------------
Name: Steve Pieper
----------------------------------------
Title: President
---------------------------------------
As acknowledged and agreed with respect to Sections 4.3, 4.9, 4.10, 4.12 and
5.11.
BAXTER HEALTHCARE CORPORATION
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION]
<PAGE> 44
IN WITNESS WHEREOF, Ixion and MMS have caused this Agreement
to be executed and delivered by their respective officers thereunto duly
authorized, all as of the date first written above.
IXION, INC
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
MEDICAL MEDIA SYSTEMS, INC.
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
As acknowledged and agreed with respect to Sections 4.3, 4.9, 4.10, 4.12 and
5.11.
BAXTER HEALTHCARE CORPORATION
By: /s/ JAY P. WERTHEIM
-----------------------------------------
Name: JAY P. WERTHEIM
----------------------------------------
Title: VICE PRESIDENT, LAW
---------------------------------------
CARDIOVASCULAR GROUP
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION]
<PAGE> 45
SCHEDULE 1.6(d)
IXION PROMISSORY NOTES
Ixion currently has promissory notes (collectively, the "Notes" and
individually, a "Note") issued and outstanding to the following parties with the
maturity date, aggregate principal amount and the number of shares potentially
issuable pursuant to such Note(s) listed next to each party. Each Note bears
eight percent (8%) simple interest annually until the maturity date which may be
extended by one (1) year in exchange for 5,000 shares of Ixion Common Stock for
each $25,000 of principal amount.
<TABLE>
<CAPTION>
NAME OF NOTE MATURITY PRINCIPAL POTENTIAL
HOLDER DATE AMOUNT SHARES
------ ---- ------ ------
<S> <C> <C> <C>
Mark Segal, Trustee for Segal
Family Trust 09/01/96 50,000 10,000
Marvin Landau, Trustee for
Landau Living Trust 09/01/96 50,000 10,000
David Letterman 09/01/96 25,000 5,000
Fred Nigro 09/01/96 25,000 5,000
09/01/96
Steven David or IPO 25,000 5,000
Merv Adelson, Trustee for
Merv Adelson Trust 09/01/96 100,000 20,000
Eli Grossman 09/01/96 50,000 10,000
Revit Family Trust 09/01/96 25,000 5,000
G&G Diagnostics L.P. I 09/01/96 50,000 10,000
Ameritech International
Corporation 09/01/96 100,000 20,000
09/01/96
Merv Adelson or IPO 250,000 50,000
George Holbrook 09/01/96 50,000 10,000
Bruce Brackenridge 09/01/96 75,000 15,000
Paul Glenn 09/01/96 50,000 10,000
</TABLE>
SCHEDULE 1.6(d) - PAGE 1
<PAGE> 46
<TABLE>
<S> <C> <C> <C>
Gordon Segal 09/01/96 25,000 5,000
Steven Lee Craft 09/01/96 25,000 5,000
Nicole Katz 09/01/96 25,000 5,000
Larry Wells 09/01/96 25,000 5,000
John & Marilyn Dougery 09/01/96 150,000 30,000
DayStar Partners, L.P. 09/01/96 175,000 35,000
Henry L.B. Wilder 09/01/96 150,000 30,000
A.B. Laffer, V.A. Canto & Ass. 09/01/96 50,000 10,000
Randall Fowler - TTEE 09/01/96 50,000 10,000
Perry Esping 09/01/96 350,000 70,000
Jerrold & Lisa Morrison 09/01/96 25,000 5,000
John Lemak 09/01/96 25,000 5,000
---------- -------
TOTAL $2,000,000 400,000
========== =======
</TABLE>
SCHEDULE 1.6(d) - PAGE 2
<PAGE> 47
SCHEDULE 1.6(e)
IXION LETTER AGREEMENT
Ixion and each of those parties listed below (collectively, the "Investors"
and individually, the "Investor") have entered into a letter agreement that
revises the number of shares to be issued pursuant to the Subscription
Agreements executed in connection with the Company's Confidential Private
Offering Memorandum dated July 28, 1994 and as amended on October 18,1994,
December 10,1994 and August 25,1995 (the "Letter Agreement"). Originally, each
Investor was to receive 5,000 shares of Ixion Common Stock for each $25,000 of
investment. Pursuant to the Letter Agreement, each Investor shall instead
receive the number of shares of Ixion Common Stock equal to the amount of such
Investor's investment divided by the price of the Common Stock issued by the
Company upon its initial public offering.
<TABLE>
<CAPTION>
NAME OF INVESTOR INVESTMENT AMOUNT
- - --------------------------------------------------------------------------------
<S> <C>
Kenneth E. Chyten $200,000
Mark Segal, Trustee for Segal Family Trust 50,000
Marvin Landau, Trustee for Landau Living Trust 50,000
David Letterman 25,000
Fred Nigro 25,000
Steven David 25,000
Merv Adelson, Trustee for Merv Adelson Trust 100,000
Eli Grossman 50,000
Revit Family Trust 25,000
G&G Diagnostics L.P. I 50,000
Ameritech International Corporation 100,000
Merv Adelson 250,000
George Holbrook 50,000
Bruce Brackenridge 75,000
Paul Glenn 50,000
Gordon Segal 25,000
Steven Lee Craft 25,000
Nicole Katz 25,000
Larry Wells 25,000
John & Marilyn Dougery 150,000
DayStar Partners, L.P. 175,000
Henry L.B. Wilder 150,000
A.B. Laffer, V.A. Canto & Associates 50,000
Randall Fowler - TTEE 50,000
</TABLE>
SCHEDULE 1.6(e) - PAGE 1
<PAGE> 48
<TABLE>
<S> <C>
Perry Esping 350,000
Jerrold & Lisa Morrison 25,000
John Lemak 25,000
----------
TOTAL $2,200,000
==========
</TABLE>
SCHEDULE 1.6(e) - PAGE 2
<PAGE> 49
SCHEDULE 1.6(f)
CONSULTING AGREEMENTS
The following Ixion consultants have that number of potential shares of
Ixion Common Stock issuable to them pursuant to their respective Ixion
Consulting Agreements:
<TABLE>
<CAPTION>
NAME OF CONSULTANT POTENTIAL NUMBER OF SHARES
- - ------------------ --------------------------
<S> <C>
Mark Cherney 30,000
Valentino Montegrande 30,000
Greg Claypool 20,000
</TABLE>
SCHEDULE 1.6(e) - PAGE 1
<PAGE> 50
SCHEDULE 2
DISCLOSURE SCHEDULE
INTRODUCTION
Set forth below are the exceptions made to the representations and
warranties of Medical Media Systems, Inc. ("MMS") in the Agreement and Plan of
Reorganization dated as of May 24, 1996 (the "Agreement"), by and among Ixion,
Inc. ("Ixion") and MMS (the "Disclosure Schedule").
Except as otherwise stated, all capitalized terms used herein shall have
the meanings given them in the Agreement. Section numbers used herein correspond
to the Section numbers in the Agreement. Any matter specifically described and
set forth herein as an exception to a Section of the Agreement or specifically
described and set forth in a Schedule to this Agreement shall be deemed to
constitute an exception (to the extent specifically described) to all other
applicable Sections of the Agreement. Where the terms of a contract or other
disclosure item have been summarized or described in this Disclosure Schedule.
such summary or description does not purport to be a complete statement of the
material terms of such contract or other item.
Nothing herein constitutes an admission of any liability or obligation
of MMS nor an admission against the interest of MMS. The inclusion of anything
in any section of the Disclosure Schedule should not be interpreted as
indicating that MMS has determined that such an agreement or other matter is
necessarily material to MMS. Ixion acknowledges that the information contained
in the Disclosure Schedule constitutes material confidential information
relating to MMS which may not be used for any purpose other than that
contemplated in the Agreement.
<PAGE> 51
SECTION 2.2 - CAPITAL STRUCTURE.
See Schedule 2.2
SECTION 2.5 - ABSENCE OF CERTAIN CHANGES.
1. Prior to the consummation of the transactions contemplated by the
Agreement, Medical Media Systems, a New Hampshire general partnership
("MMS-GP") and the predecessor entity to MMS, was converted to a
Delaware corporation.
2. MMS-GP entered into a Credit Agreement and related Demand Promissory
Note for borrowings in the amount of $550,000 with Baxter Healthcare
Corporation, a Delaware corporation ("Baxter"), as of April 10, 1996.
SECTION 2.7 - ABSENCE OF UNDISCLOSED LIABILITIES.
1. The Kriegsman Group has asserted that MMS has agreed to pay the
Kriegsman Group a fee should a merger be consummated between Ixion and
MMS. Baxter has agreed that it shall be responsible for the fee to be
paid to the Kriegsman Group, if any.
2. MMS is a party to a Cooperative Agreement dated January 2,1995 with
the Trustees of Dartmouth College whereby MMS is obligated to purchase
services valued at $200,000. As of the date of the Agreement, MMS has
purchased services valued at approximately $70,000.
3. MMS is a party to a Development and License Agreement dated January
13,1993 with MusculoGraphics, Inc. ("MG") whereby MMS agreed to pay MG
a total of $465,000 for consulting services and $200,000 upon
termination of the consulting services under certain circumstances. As
of the date of the Agreement, MMS has completed payment of the amounts
owed for consulting services and does not believe that it is obligated
to make payments to MG as a result of the termination of consulting
services. Additionally, MMS is liable to MG for certain royalties in
the event that certain future products or services incorporate
products licensed from MG.
4. MMS is a party to an agreement dated October 17, 1994 with Baxter
whereby Baxter provides regulatory legal services to MMS for fees in
the amount of $15,000 per quarter.
5. See Sections 2.5 and 2.8.
PAGE 2 OF SCHEDULE 2
<PAGE> 52
SECTION 2.8 - MATERIAL CONTRACTS.
1. License Agreement dated November 25, 1992, as amended January 27,
1995, between MMS-GP and Baxter whereby MMS-GP grants Baxter a license
in the field of knee and liver surgery and further grants Baxter a
right of first refusal with respect to any invention in the "medical
area" outside such field. This right of first refusal is being
terminated concurrent with the effectiveness of the merger
contemplated by the Agreement.
2. MMS-GP entered in consulting agreements dated November 25, 1992 with
each of the parties listed below:
a. Steve D. Pieper
b. David T. Chen
c. Michael A. McKenna
d. Joseph M. Rosen
3. Internet Services and Products Master Agreement dated May 31, 1995
between MMS-GP and BBN Planet Corporation ("BBN") whereby BBN will
provide networking equipment and services to MMS-GP.
4. Lease Agreement dated July 3, 1994 between MMS-GP and RSR Robsan
Resources, Inc. pursuant to which MMS leases office space for a term
of three years from the date of the lease execution.
5. SGI Master Lease Agreement dated February 3, 1995 between MMS-GP and
Advanta Business Services, Inc pursuant to which MMS leases computer
hardware, software and services.
6. TDS Leasing, Inc. Lease Agreement dated August 17, 1994 between MMS-GP
and TDS Leasing, Inc. pursuant to which MMS leases a Ricoh copier.
7. See Sections 2.5, 2.7 and 2.24.
8. See Schedule 2.13
SECTION 2.10 - RESTRICTIONS ON BUSINESS ACTIVITIES.
1. See Sections 2.7 and 2.8
SECTION 2.12 - TITLE TO PROPERTY.
1. See Schedule 2.12
PAGE 3 OF SCHEDULE 2
<PAGE> 53
Section 2.13 - Intellectual Property.
1. See Schedule 2.13
2. MMS does not have a valid written assignment from Mark Fillinger with
respect to any rights that he may have as a result of his contributions to
the development of certain intellectual property.
3. Core Trademark. MMS is the owner of U.S. Trademark Application Serial No.
74/433.134 for the trademark CORE. This application was published for
opposition on 3/19/96. On 4/15/96, Cohr Inc. filed a request for a 30 day
extension of the time for filing a Notice of Opposition against this
trademark application while it studies this matter further. MMS does not
know how Cohr Inc. will proceed in this matter.
4. Multimedia Medical Systems, Inc. and the terms "MMS" and/or "MMMS". MMS
recently learned of the existence of a company called Multimedia Medical
Systems, Inc. MMS also understands that this company may be using the term
"MMS" and/or "MMMS" in connection with its business. It is believed that
this company may be offering clinical visualization products designed to
build three dimensional medical images on desktop computers. MMS does not
know how the existence of this other company and/or its possible use of the
terms "MMS" and/or "MMMS", will impact MMS.
5. Medical Multimedia Systems, Inc. MMS recently learned of the existence of a
company called Medical Multimedia Systems, Inc. MMS understands that this
company may be offering software related to biomedical education. MMS does
not know how the existence of this company will impact MMS.
6. Multi Media Systems. MMS has learned of the existence of a company called
Multi Media Systems. MMS also understands that this company is using the
Internet address "mms.com" in connection with its business. MMS does not
know how the existence of this other company and/or its use of the term
"mms.com", will impact MMS.
7. Microsoft License. MMS is currently shipping commercial versions of its
PREVIEW SURGERY PLANNING SOFTWARE product using the MacIntosh version of
Microsoft's Reality Labs(RL) software product. This is being done on the
oral and E-mail understanding that Microsoft is granting MMS a royalty-free
license to use this software. However, MMS has not yet received the signed
written license agreement from Microsoft. MMS understands that it will
receive a signed written license agreement for this software as soon as the
license agreement has been prepared by the Microsoft legal department.
8. Bucholz Patent. Last year a vendor IGT/Pixsys. suggested to MMS that MMS
might need to acquire a license under U.S. Patent No. 5,383,454 issued to
Bucholz, depending on whether certain products were developed by MMS. Some
preliminary work was done to review this patent but this work was set aside
as product emphasis evolved. MMS
PAGE 4 OF SCHEDULE 2
<PAGE> 54
does not know how the existence of the Bucholz patent might impact its
products in the future.
9. Blanco Patent. Some time ago MMS became aware of the existence of U.S.
Patent No. 5,005,559 issued to Blanco et al. Some preliminary work was
done to review this patent, but this work was set aside as product
emphasis evolved. MMS does not know how the existence of the Blanco et
al. patent might impact its products in the future.
10. General Electric Patents. MMS understands that the General Electric
Company may own one or more patents relating to modeling processes
similar to those used by MMS in connection with its PREVIEW products.
MMS does not know how the existence of any such patents might impact its
products in the future.
11. Finnegan, Henderson Patent Infringement Concerns. In the course of
conducting its due diligence review, the law firm of Finnegan, Henderson
identified six (6) patents it believed might be infringed by products of
MMS. These patents are U.S. Patents Nos. 4,882,679 issued to Tuy et al;
4,945,478 issued to Merickel et al; 5,151,856 issued to Halmann et al;
5,261,404 issued to Mick et al; 5,274,551 issued to Corby, Jr.; and
5,447,154 issued to Cinquin et al. Finnegan, Henderson attorneys
discussed each of these patents in detail with personnel of MMS and its
patent attorneys, Pandiscio & Pandiscio. MMS understands that, at the
conclusion of this extensive review, Finnegan, Henderson attorneys
concluded that the products of MMS do not infringe any of the foregoing
patents.
12. Preview Trademark. MMS is the owner of U.S. Trademark Application Serial
No. 75/061,179 for the trademark PREVIEW. MMS understands that the
company Cemax may be using the term "Preview Mode" and/or "preview
mode" in connection with one of its products. MMS does not know how
Cemax's use of the term "Preview mode" and/or "preview mode" might
impact MMS.
13. Preexisting MIT Media Lab software. Certain of the software developed by
MMS utilizes preexisting software which was developed earlier at the MIT
Media Lab by a founder of MMS. MMS understands that this preexisting MIT
Media Lab software has been placed into the public domain by the MIT
Media Lab so that no license is needed to utilize this software.
SECTION 2.16 - EMPLOYEE BENEFIT PLANS.
1. See Schedule 2.16
SECTION 2.19 - INTERESTED PARTY TRANSACTIONS.
1. See Sections 2.5 and 2.8
PAGE 5 OF SCHEDULE 2
<PAGE> 55
SECTION 2.20 - INSURANCE.
1. MMS does not maintain product liability insurance.
SECTION 2.24 - BROKERS' AND FINDERS' FEES.
1. The Kriegsman Group has asserted that MMS has agreed to pay the
Kriegsman Group a fee should a merger be consummated between Ixion and
MMS.
PAGE 6 OF SCHEDULE 2
<PAGE> 56
SCHEDULE 2.2
CAPITAL STRUCTURE
The following table sets forth the information concerning shares of MMS
Common Stock owned of record as of the date hereof by each person or entity
known to MMS to own of record MMS Common Stock;
<TABLE>
<CAPTION>
Name of Holders of Record Number of MMS Common Stock Shares Owned
- - ------------------------- ---------------------------------------
<S> <C>
Baxter Medical Media Holdings, Inc 752,000 shares
MMS Founders Group Limited Partnership 501,333 shares
</TABLE>
<PAGE> 57
SCHEDULE 2.12
TITLE TO PROPERTY
The following chart identifies each parcel of real property owned or leased
by MMS.
<TABLE>
<CAPTION>
Parcel(s) of Real Property Owned Parcel(s) of Real Property Leased
- - -------------------------------- ---------------------------------
<S> <C>
None 3,285 square feet in a building located at 79
East Wilder Road, West Lebanon, New
Hampshire
</TABLE>
<PAGE> 58
SCHEDULE 2.13
INTELLECTUAL PROPERTY
1. MMS is a party to a Development and License Agreement dated January
13, 1993 with MusculoGraphics, Inc. ("MG") whereby MMS agreed to pay
MG a total of $465,000 for consulting services and $200,000 upon
termination of the consulting services. Additionally, MMS is liable to
MG for certain royalties in the event that future products or services
incorporate products licensed from MG.
2. License Agreement dated November 25, 1992 between MMS-GP and Baxter
whereby MS-GP grants Baxter a license in the field of knee and liver
surgery.
3. See Attachment.
<PAGE> 59
Patent Status Report
Medical Media Systems
(05/10/96)
<TABLE>
<CAPTION>
Docket Fil. Date Pat. Date
No. Title Status Ser. No. Pat. No. Remarks
<S> <C> <C> <C> <C> <C>
MMS-1 Electronically patent 03/30/94
Steerable application 08/220367
Endoscope pending -
Notice of
Allowance
issued,
Issue Fee
paid, patent
to issue in
due course
MMS-1 DIV Electronically patent 06/05/95 divisional
Steerable application 08/464,380 case
Endoscope pending directed
to
non-elected
subject
matter in
parent
case
MMS-1 PCT Electronically PCT patent 03/29/95
Steerable application PCT/US95/
Endoscope pending 03908
</TABLE>
PAGE 2 OF SCHEDULE 2.13
<PAGE> 60
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
MMS-2/A Endoscopic patent 01/18/95
Viewing System application 08/374,126
For pending -
Maintaining Notice or
A Surgeon's Allowance
Normal issued
Sense Of
Kinesthesia
During
Endoscopic
Surgery
Regardless Of
The
Orientation
Of The
Endoscope
Vis-A-Vis The
Surgeon
MMS-2/A Endoscopic PCT patent 01/18/96
PCT viewing System application PCT/US96/
For pending 00715
Maintaining
A Surgeon's
Norma
Sense Of
Kinesthesia
During
Endoscopic
Surgery
Regardless Of
The
Orientation
Of The
Endoscope
Vis-A-Vis The
Surgeon
MMS-2/B System For disclosure invention
Maintaining received currently
The Orientation being
Of An Image studied
With Respect by company
To Some and patent
Predefined attorneys
Axis
</TABLE>
PAGE 3 OF SCHEDULE 2.13
<PAGE> 61
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
MMS-2/C System For disclosure invention
Correcting received currently
Distortions, being
Etc. studied
by company
and patent
attorneys
MMS-2/D System Far disclosure invention
Providing An received currently
Electronic being
Guide studied
by company
and patent
attorneys
MMS-2/E Anatomical patent 07/24/95
Visualization application 08/505,587
System pending
(system for
integrating
an image
obtained from
an input
device with
an image
generated by
a computer
model)
MMS-2/F System For disclosure invention
Building A received currently
3-D Surface being
Model using studied
Data Obtained by company
From An Input and patent
Device And For attorneys
Generating
Images From
That 3-D
Surface Model
</TABLE>
PAGE 4 OF SCHEDULE 2.13
<PAGE> 62
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
MMS-2/G System For disclosure invention
Building A received currently
Full 3-D being
Model Using studied
Data Obtained by company
From An Input and patent
Device And For attorneys
Generating
Images From
That Full 3-D
Model
MMS-3 Computerized preliminary detailed
Operating disclosure disclosure
Room received to be
Environment prepared
(CORE) by
inventors
MMS-4 Video-Based patent 10/7/94
Surgical application 08/320502
Targeting pending
System
("Compuscope")
MMS-4 Video-Based PCT patent 10/6/95
PCT Surgical application PCT/US95/
Targeting pending 13353
System
("Compuscope")
MMS-5 ** Distributed preliminary detailed
Tracking disclosure disclosure
System received to be
(Infoplasm) prepared
by
inventors
</TABLE>
PAGE 5 OF SCHEDULE 2.13
<PAGE> 63
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
MMS-6 ** Virtual preliminary detailed
World disclosure disclosure
In A received to be
Virtual prepared
World by
inventors
MMS-7 Health preliminary detailed
Information disclosure disclosure
System received to be
(Intermed) prepared
by
inventors
MMS-8 Virtual preliminary detailed
Human disclosure disclosure
received to be
prepared
by
inventors
MMS-9 Anatomical patent 06/01/95
Viewing application 08/457,692
System pending
(Preview)
MMS-10 Anatomical patent 06/09/95
Visualization application 08/489,061
System pending
(semi-
automatic
method for
calculating
vascular graft
sizes at
branch points
from
volumetric
image data
sets - basic
centerline
case)
</TABLE>
PAGE 6 OF SCHEDULE 2.13
<PAGE> 64
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
MMS-11 Treatment preliminary detailed
Allocation disclosure disclosure
System received to be
prepared
by
inventors
MMS-12 Simulation disclosure invention
Subtraction received currently
Imaging being
Technique studied
by company
and patent
attorneys
MMS-13 Smart disclosure patent
Fluoroscope received application
(C-arm currently
device) being
prepared
MMS-14 Anatomical patent 12/29/95
Visualization application 08/581,055
System pending
(advanced
centerline
case)
MMS-15 Optimized disclosure invention
Graft Length received currently
Calculation being
Method studied
by company
and patent
attorneys
</TABLE>
** this listing represents the ownership interest of MMS to this
technology, as derived through the rights of co-inventor J. Rosen
PAGE 7 OF SCHEDULE 2.13
<PAGE> 65
Trademark Status Report
Medical Media Systems
(05/10/96)
<TABLE>
<CAPTION>
Docket Fil. Date Reg. Date
No. Mark Status Ser. No. Reg. No. Remarks
<S> <C> <C> <C> <C> <C>
MMS/TM-1 MMS trademark 09/01/93
application 74/431531
pending -
Notice of
Allowance
issued
MMS/TM-2 logo trademark 09/01/93
application 74/431513
pending -
Notice of
Allowance
issued
MMS/TM-3 SEE trademark 09/01/93
application 74/431810
pending -
Notice of
Allowance
issued
MMS/TM-4 IMAGE STICK trademark 09/01/93
application 74/431813
pending -
Notice of
Allowance
issued
</TABLE>
PAGE 8 OF SCHEDULE 2.13
<PAGE> 66
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
MMS/TM-5 CORE trademark 09/01/93 application
application 74/433134 allowed by
pending Examiner and
published
for
opposition;
Cohr Inc.
has
requested
extension of
time to file
Notice of
Opposition
while it
studies this
matter
further
MMS/TM-6 MEDICAL trademark 02/22/96
MEDIA application 75/061130
MMS/TM-7 PREVIEW trademark 02122/96
application 73/061179
pending
MMS/TM-8 DATAFUSION trademark 02/22/95
application 75/061178
pending
MMS/TM-9 PATIENT CD trademark 02/22/96
application 75/061310
pending
MMS/TM-10 PATIENT trademark 02/22/96
SPECIFIC application 75/061312
SOFTWARE pending
</TABLE>
PAGE 9 OF SCHEDULE 2.13
<PAGE> 67
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
MMS/TM-11 MAKING trademark 02/22/96
COMPUTER application 75/060730
AIDED pending
SURGERY
A REALITY
</TABLE>
PAGE 10 OF SCHEDULE 2.13
<PAGE> 68
Copyright Status Report
Medical Media Systems
(05/10/96)
<TABLE>
<CAPTION>
Docket Reg. Date
No. Work Status Reg. No. Remarks
<S> <C> <C> <C> <C>
MMS/COP-1 MMS Preview registered 01/09/95 this work
0.1.3.22 TX3-984-532 is Mike
McKenna's
Preview
computer
program
MMS/COP-2 3d.94-10-2 registered 01/09/95 this work
TX3-979-273 is Dave
Chen's
Compuscope
interpreter
computer
program
MMS/COP-3 Liver registered 01/09/95 this work
DataFusion TX3-984-531 is Dave
Chen's
Compuscope
application
computer
program
</TABLE>
PAGE 11 OF SCHEDULE 2.13
<PAGE> 69
SCHEDULE 2.16
EMPLOYEE BENEFIT PLANS
The following list consists of all the MMS material employee benefit plans and
all bonus, pension, profit sharing, savings, deferred compensation or incentive
plans, programs or arrangements, all of which have previously been provided to
Ixion counsel:
1. Self-administered MMS 401(k) Retirement Plan
2. The Guardian Life Insurance Company of American Group Insurance Plan
a. Employee Basic Term Life
b. Employee Long Term Disability Income Insurance
c. Major Medical Expense Insurance
d. Dental Expense Insurance
3: MMS has outstanding obligations pursuant to certain consulting
agreements between MMS and the below listed parties that have been
delivered to Ixion counsel:
a. Steve D. Pieper
b. David T. Chen
c. Michael A. McKenna
d. Joseph M. Rosen
e. William Greenrose
<PAGE> 70
SCHEDULE 3
IXION DISCLOSURE SCHEDULE
INTRODUCTION
Set forth below are the exceptions made to the representations and
warranties of Ixion, Inc. ("Ixion" or the "Company") in the Agreement and Plan
of Reorganization dated as of May 24, 1996 (the "Agreement"), by and among
Medical Media Systems, Inc. ("MMS") and the Company (the "Disclosure Schedule").
Except as otherwise stated, all capitalized terms used herein shall have the
meanings given them in the Agreement. Section numbers used herein correspond to
the Section numbers in the Agreement. Any matter specifically described and set
forth herein as an exception to a Section of the Agreement or specifically
described and set forth in a Schedule to this Agreement shall be deemed to
constitute an exception (to the extent specifically described) to all other
applicable Sections of the Agreement. Where the terms of a contract or other
disclosure item have been summarized or described in this Disclosure Schedule,
such summary or description does not purport to be a complete statement of the
material terms of such contract or other item.
Nothing herein constitutes an admission of any liability or obligation of
Ixion nor an admission against Ixion's interest. The inclusion of anything in
any section of the Disclosure Schedule should not be interpreted as indicating
that Ixion has determined that such an agreement or other matter is necessarily
material to the Company. Interact acknowledges that the information contained in
the Disclosure Schedule constitutes material confidential information relating
to Ixion which may not be used for any purpose other than that contemplated in
the Agreement.
IXION DISCLOSURE SCHEDULE - PAGE 1
<PAGE> 71
SECTION 3.1
ORGANIZATION, STANDING AND POWER
1. See Schedules 1.6(d), 1.6(e), 3.2 and 4.2(a).
IXION DISCLOSURE SCHEDULE - PAGE 2
<PAGE> 72
SECTION 3.2
CAPITAL STRUCTURE
1. Shares of Ixion capital stock have been granted to the following parties
upon the execution of consulting agreements for future services and
therefore such shares of capital stock were not fully paid at issuance:
Ameritech International Corporation
Ken Chyten
Mike Muffoletto
Fred Katz
Gordon Segal
David Abramson
George Holbrook, Jr.
Bruce Brackenridge
James Caillouette, Sr., M.D.
Mark Noar, M.D.
2. See Schedules 1.6(d), 1.6(e) and 3.2.
IXION DISCLOSURE SCHEDULE - PAGE 3
<PAGE> 73
SECTION 3.3
AUTHORITY
The following Ixion agreements may not be assigned without the other party's
prior written consent:
1. 400 Mercer Building Standard Form Office Lease dated January 29,1996 between
Ixion and CVK Partnership, pursuant to which Ixion leases approximately
4,235 rentable square feet at 400 Mercer Street, Suite 400, Seattle, WA
98145-2430 for a term of three (3) years from the date of the Lease.
2. Standard Form of Office Lease dated March 15, 1994 between Hydration
Technology Corporation and 654 Madison Avenue Company, as amended October
31, 1994, that was subsequently assigned to Ixion on April 24,1996, pursuant
to which Ixion leases executive office space at 654 Madison Avenue, Suite
1606, New York, NY 10021 for a term of three and one half (3 1/2) years from
the date of the initial execution of the Lease.
3. Purchase Agreement dated December 13,1994 between Ixion and Hewlett Packard
that sets the terms by which Ixion purchases and licenses various Hewlett
Packard products over the term of this evergreen Purchase Agreement.
4. General Lease Agreement dated August 1, 1995 between Ixion and AT&T Capital
Corporation, pursuant to which Ixion leases a digital oscilloscope and a
probe.
5. General Lease Agreement dated February 28, 1994 between Ixion and AT&T
Capital Corporation, pursuant to which Ixion leases a Fluke Model PM3585/61,
64 Channel Logic Analyzer.
6. Commercial Lease dated September 1, 1984 between Ixion and Nelson Northwest,
Inc., as amended November 1, 1995, pursuant to which Ixion leases
approximately 900 square feet at 1335 North Northlake Way, Seattle,
Washington 98103 for a term that shall expire on October 31, 1996.
7. Consulting Agreements with the following parties:
Maxal Corporation
Ken Chyten
Ameritech International Corporation
Mike Muffoletto
IXION DISCLOSURE SCHEDULE - PAGE 4
<PAGE> 74
Fred Katz
Shropshire Capital
Xinetix Technologies, Inc.
Gordon Segal
David Abramson
George Holbrook, Jr.
Bruce Brackenridge
James Caillouette, Sr.
Richard Friedman
Jeff Markowitz
Mark Noar
IXION DISCLOSURE SCHEDULE - PAGE 5
<PAGE> 75
SECTION 3.4
FINANCIAL STATEMENTS
None.
IXION DISCLOSURE SCHEDULE - PAGE 6
<PAGE> 76
SECTION 3.5
ABSENCE OF CERTAIN CHANGES
None.
IXION DISCLOSURE SCHEDULE - PAGE 7
<PAGE> 77
SECTION 3.6
SUBSIDIARIES
None.
IXION DISCLOSURE SCHEDULE - PAGE 8
<PAGE> 78
SECTION 3.7
ABSENCE OF UNDISCLOSED LIABILITIES
1. Engagement Agreement dated June 5,1995 between Ixion and the Kriegsman
Group, pursuant to which the Company is currently in negotiations to
determine the Kriegsman Group's fee, if any, that may include a cash
payment, some form of an equity issuance or some combination thereof. The
Kriegsman Group fee shall not have an aggregate value in excess of $150,000.
2. Settlement Agreement dated April 29, 1996 between Ixion and Canal Place
Limited Partnership, pursuant to which the Company must pay $10,450 related
to a prior lease obligation.
3. 2 year 8% Promissory Notes dated September 9, 1994 and September 12, 1994
between Ixion and David Hon, pursuant to which the Company must repay Mr.
Hon an aggregate amount of $35,000.
4. 2 year 8% Promissory Notes dated October 4,1994 and October 31,1995 between
Ixion and Bruce Sturman, pursuant to which the Company must repay Mr.
Sturman an aggregate amount of $60,000.
5. Asset Purchase Agreement dated April 22, 1996 between Ixion and David Hon,
pursuant to which Mr. Hon transferred a patent and patent applications
related to Ixion's business to the Company in exchange for $25,000 per year
for each of the next 10 years beginning in 1996.
6. Ixion is obligated to pay the following parties the amount of accrued but
unpaid salary set forth next to each name:
<TABLE>
<CAPTION>
<S> <C>
Maxal Capital Corporation ("Maxal") (Sturman) $201,000
Global Nexus (Montegrande/Cherney) 62,000
Shropshire Capital Corporation ("Shropshire") (Otto) 56,000
Val Montegrande 7,000
Xinetix Technologies, Inc. ("Xinetix") (Walbrink) 82,000
David Hon 17,000
--------
TOTAL $425,000
========
</TABLE>
7. See Section 3.3.
IXION DISCLOSURE SCHEDULE - PAGE 9
<PAGE> 79
SECTION 3.8
MATERIAL CONTRACTS
1. Research, Option and License Agreement dated April 8, 1992 between Ixion and
Ethicon Endo-Surgery ("Ethicon"), a division of Ethicon, Inc., a subsidiary
of Johnson & Johnson Corporation (the "Ethicon Agreement"), pursuant to
which Ixion granted Ethicon an exclusive world-wide license to make, have
made, use, lease and sell or otherwise dispose of Ixion products relating to
the use of Ixion technology in the Field defined in the Ethicon Agreement as
"methods, processes, devices, and instruments for the simulation of
endoscopic and minimally invasive surgery in humans through an extendable,
multi-plane computer-based video laparoscopic surgical training apparatus
with tactile feedback for the teaching of surgical skills."
In September, 1995, Ethicon informed the Company that it believes it has
certain rights beyond its license to the laparoscopic simulator. The Company
believes there is no basis to support this position under the terms of the
Ethicon Agreement as set forth above. Ixion is entitled to receive
continuing royalty payments pursuant to the Ethicon Agreement.
Pursuant to Section 5.5 of the Ethicon Agreement, Ethicon has not tendered
to Ixion the $50,000 minimum royalty payment for the past quarter of the
Royalty Year (as defined in the Ethicon Agreement). Pursuant to Section
5.5.1 of the Ethicon Agreement, on April 24,1996 (the "Delivery Date"),
Ixion delivered notice of Ixion's intention to convert Ethicon's exclusive
license into a non-exclusive license. Ethicon has ninety (90) from the
delivery date to make up any deficiencies in the minimum royalty payment for
the past Royalty Year (as defined in the last Ethicon Agreement) to maintain
its exclusive license as described above.
2. See Sections 3.3, 3.7, 3.10 and 3.23.
3, See Schedules 3.2, 3.12, 3.13 and 4.2(a).
IXION DISCLOSURE SCHEDULE - PAGE 10
<PAGE> 80
SECTION 3.9
LITIGATION
None.
IXION DISCLOSURE SCHEDULE - PAGE 11
<PAGE> 81
SECTION 3.10
RESTRICTIONS ON BUSINESS ACTIVITIES
1. Research, Option and License Agreement dated April 8,1992 between Ixion and
Ethicon Endo-Surgery ("Ethicon"), a division of Ethicon, Inc., a subsidiary
of Johnson & Johnson Corporation (the "Ethicon Agreement"), pursuant to
which Ixion granted Ethicon an exclusive world-wide license to make, have
made, use, lease and sell or otherwise dispose of Ixion products relating to
the use of Ixion technology in the Field defined in the Ethicon Agreement as
"methods, processes, devices, and instruments for the simulation of
endoscopic and minimally invasive surgery in humans through an extendable,
multi-plane computer-based video laparoscopic surgical training apparatus
with tactile feedback for the teaching of surgical skills."
In September, 1995, Ethicon informed the Company that it believes it has
certain rights beyond its license to the laparoscopic simulator. The Company
believes there is no basis to support this position under the terms of the
Ethicon Agreement as set forth above. Ixion is entitled to receive
continuing royalty payments pursuant to the Ethicon Agreement.
IXION DISCLOSURE SCHEDULE - PAGE 12
<PAGE> 82
SECTION 3.11
GOVERNMENTAL AUTHORIZATION
None.
IXION DISCLOSURE SCHEDULE - PAGE 13
<PAGE> 83
SECTION 3.12
TITLE TO PROPERTY
1. See Schedule 3.12.
IXION DISCLOSURE SCHEDULE - PAGE 14
<PAGE> 84
SECTION 3.13
INTELLECTUAL PROPERTY
1. See Schedule 3.13.
IXION DISCLOSURE SCHEDULE - PAGE 15
<PAGE> 85
SECTION 3.14
ENVIRONMENTAL MATTERS
None.
IXION DISCLOSURE SCHEDULE - PAGE 16
<PAGE> 86
SECTION 3.15
TAXES
None.
IXION DISCLOSURE SCHEDULE - PAGE 17
<PAGE> 87
SECTION 3.16
EMPLOYEE BENEFIT PLANS
1. See Schedule 3.16.
IXION DISCLOSURE SCHEDULE - PAGE 18
<PAGE> 88
SECTION 3.17
CERTAIN AGREEMENTS AFFECTED BY THE MERGER
1. See Section 3.3.
IXION DISCLOSURE SCHEDULE - PAGE 19
<PAGE> 89
SECTION 3.18
EMPLOYEE MATTERS
None.
IXION DISCLOSURE SCHEDULE - PAGE 20
<PAGE> 90
SECTION 3.19
INTERESTED PARTY TRANSACTIONS
1. Ixion is obligated to pay the following parties the amount of accrued but
unpaid salary set forth next to each name:
<TABLE>
<S> <C>
Maxal Capital Corporation ("Maxal") (Sturman) $201,000
Global Nexus (Montegrande/Cherney) 62,000
Shropshire Capital Corporation ("Shropshire") (Otto) 56,000
Val Montegrande 7,000
Xinetix Technologies, Inc. ("Xinetix") (Walbrink) 82,000
David Hon 17,000
--------
TOTAL $425,000
========
</TABLE>
2. See Section 3.7.
3. See Schedule 3.2.
IXION DISCLOSURE SCHEDULE - PAGE 21
<PAGE> 91
SECTION 3.20
INSURANCE
None.
IXION DISCLOSURE SCHEDULE - PAGE 22
<PAGE> 92
SECTION 3.21
COMPLIANCE WITh LAWS
1. Effective as of April 12,1996, each Ixion stockholder executed an
Acknowledgment and Release Agreement, in the form previously provided to
Interact Special Counsel, in which each stockholder acknowledged and
released Ixion from any liability associated with Ixion's attempted
issuances of Ixion capital stock beyond the number of shares of Ixion
capital stock authorized at the time of each attempted issuance.
IXION DISCLOSURE SCHEDULE - PAGE 23
<PAGE> 93
SECTION 3.22
MINUTE BOOK
None.
IXION DISCLOSURE SCHEDULE - PAGE 24
<PAGE> 94
SECTION 3.23
BROKERS' AND FINDERS' FEES
1. Engagement Agreement dated June 5,1995 between Ixion and the Kriegsman
Group, pursuant to which the Company is currently in negotiations to
determine the Kriegsman Group's fee, if any, that may include a cash
payment, some form of an equity issuance or some combination thereof. The
Kriegsman Group fee shall not have an aggregate value in excess of $150,000
IXION DISCLOSURE SCHEDULE - PAGE 25
<PAGE> 95
SECTION 3.24
COMPLETE COPIES OF MATERIALS
None.
IXION DISCLOSURE SCHEDULE - PAGE 26
<PAGE> 96
SECTION 3.25
BOARD APPROVAL
None.
IXION DISCLOSURE SCHEDULE - PAGE 27
<PAGE> 97
SECTION 3.26
STOCKHOLDER APPROVAL
None.
IXION DISCLOSURE SCHEDULE - PAGE 28
<PAGE> 98
SECTION 3.27
REPRESENTATIONS COMPLETE
None.
IXION DISCLOSURE SCHEDULE - PAGE 29
<PAGE> 99
SCHEDULE 3.2
CAPITAL STRUCTURE
1. Ixion Common Stock Ownership
The following table sets forth information concerning the shares of the
Company's Common Stock ("Common Stock") owned of record as of the date
hereof by each person or entity known to the Company to own of record Common
Stock.
<TABLE>
<CAPTION>
Number of
Shares of
Name Common Stock(7)
<S> <C>
David C. Hon 750,000
Bruce D. Sturman(1) 0
Maxal Capital 1,425,000
Corporation(1&2)
Shropshire Capital 250,016
Corporation(3)
Greg Claypool(4) 20,000
Mark Cherney(5) 20,000
Val V. Montegrande(6) 20,000
Darrell Livezey 6,030
G&G Diagnostics 2,500
Terry Moffat 2,500
Ameritech International Corp. 5,000
Kenneth E. Chyten 88,334
</TABLE>
SCHEDULE 3.2 - PAGE 1
<PAGE> 100
<TABLE>
<CAPTION>
Number of
Shares of
Name Common Stock(7)
<S> <C>
George Holbrook 2,500
East-West Capital Associates 50,000
A. Bruce Brackenridge 3,750
Gordon Segal, M.D. 3,334
Michael Muffoletto 25,000
James C. Caillouette, Sr., M.D. 7,500
Mark D. Noar, M.D. 3,500
David Abramson 17,500
Fred Katz 70,000
------
Total Issued and
Outstanding Shares 2,772,464
=========
</TABLE>
(1) Bruce D. Sturman, Chief Executive Officer and Director of the Company, is
also Chairman of Maxal. All of the Common Stock held by Maxal is owned by a
trust for Mr. Sturman's wife and minor children. Mr. Sturman disclaims
beneficial ownership of these shares.
(2) Maxal, through Mr. Sturman, and Mr. Hon have agreed to vote for each other
as directors and appoint each other as officers of the Company.
(3) David M. Otto, Secretary, Director and General Counsel to the Company, is
also President of Shropshire. All of the stock of Shropshire is owned by a trust
for Mr. Otto's minor child. Mr. Otto disclaims beneficial ownership of these
shares.
(4) Mr. Claypool owns a total of 20,000 shares of Common Stock, and is entitled
to receive another 20,000 shares upon the achievement of certain milestones set
forth in the Consulting Agreement between Mr. Claypool and the Company dated
February 21,1995.
SCHEDULE 3.2 - PAGE 2
<PAGE> 101
(5) Mr. Cherney owns a total of 20,000 shares of Common Stock, and is entitled
to receive another 30,000 shares upon the achievement of certain milestones set
forth in the Consulting Agreement between Mr. Cherney and the Company dated
April 25, 1995.
(6) Mr. Montegrande owns a total of 20,000 shares of Common Stock, and is
entitled to receive another 30,000 shares upon the achievement of certain
milestones set forth in the Consulting Agreement between Mr. Montegrande and the
Company dated April 25, 1995.
(7) The Company has completed a "bridge" financing of $2,200,000. All current
"bridge" investors are entitled to that number of shares of Common Stock equal
to the investor's principal investment divided by the Company's initial public
offering price. Assuming an initial public offering price of $7.50 per share,
the Company's "bridge" investors will be entitled to 293,333 shares of Common
Stock at the time of the Company's initial public offering.
(8) The Company is currently in negotiations to determine the Kriegsman Group's
fee, if any, related to that certain Engagement Agreement dated June 5, 1995
between Ixion and the Kriegsman Group, that may include a cash payment, an
equity issuance or some combination thereof.
SCHEDULE 3.2 - PAGE 3
<PAGE> 102
SCHEDULE 3.12
TITLE TO PROPERTY
1. 400 Mercer Building Standard Form Office Lease dated January 29,1996 between
Ixion and CVK Partnership, pursuant to which Ixion leases approximately
4,235 rentable square feet at 400 Mercer Street, Suite 400, Seattle, WA
98145-2430 for a term of three (3) years from the date of the Lease.
2. Standard Form of Office Lease dated March 15, 1994 between Hydration
Technology Corporation and 654 Madison Avenue Company, as amended October
31, 1994, that was subsequently assigned to Ixion on April 24, 1996,
pursuant to which Ixion leases executive office space at 654 Madison
Avenue, Suite 1606, New York, NY 10021 for a term of three and one half
(3 1/2) years from the date of the Lease.
3. Commercial Lease dated September 1, 1984 between Ixion and Nelson Northwest,
Inc., as amended November 1, 1995, pursuant to which Ixion leases
approximately 900 square feet at 1335 North Northlake Way, Seattle,
Washington 98103 for a term that shall expire on October 31, 1996.
SCHEDULE 3.12 - PAGE 1
<PAGE> 103
SCHEDULE 3.13
INTELLECTUAL PROPERTY
(b) (i) Patents, Patent Applications, Registered and Unregistered Trademarks,
Trade Names and Service Marks, Registered and Unregistered Copyrights
and Maskworks.
1. Expert System Simulator for Modeling Realistic Internal Environments
and Performance - U.S. Patent Number 4,907,973 dated March 13, 1990.
2. Expert System Simulator for Modeling Realistic Internal Environments
and Performance - International Application Number PCT/US89/040690,
with an International Filing Date of October 19, 1989, and National
Phase entries made in the following countries:
A. Japan Application Number 1-511777
B. Canada Application Number 2002219-6
C. European Application Number 89912557.9
(Austria, Belgium, France, Germany, Italy,
Luxembourg, Switzerland, Netherlands,
Sweden and United Kingdom)
3. Medical Procedure Simulator - U.S. Patent Application Serial Number
08/341,686 filed November 17, 1994.
4. Medical Procedure Simulator - Foreign Patent Filing License granted
January 11, 1995.
5. Force Feedback for Virtual Reality - U.S. Patent Application Serial
Number 08/355,612 filed December 14, 1994.
6. Force Feedback for Virtual Reality - Foreign Patent Filing License
granted January 27, 1995.
7. ENDO-SIM - Notice of Acceptance of Statement of Use Serial Number
74/279999 accepted by the U.S. Patent and Trademark Office on
December 1, 1994.
SCHEDULE 3.13 - PAGE 1
<PAGE> 104
(ii) Material Licenses Dealing with Intellectual Property.
1. Research, Option and License Agreement dated April 8, 1992 between
Ixion and Ethicon Endo-Surgery ("Ethicon"), a division of Ethicon,
Inc., a subsidiary of Johnson & Johnson Corporation (the "Ethicon
Agreement"), pursuant to which Ixion granted Ethicon an exclusive
world-wide license to make, have made, use, lease and sell or otherwise
dispose of Ixion products relating to the use of Ixion technology in
the Field defined in the Ethicon Agreement as "methods, processes,
devices, and instruments for the simulation of endoscopic and minimally
invasive surgery in humans through an extendable, multi-plane
computer-based video laparoscopic surgical training apparatus with
tactile feedback for the teaching of surgical skills."
In September, 1995, Ethicon informed the Company that it believes it
has certain rights beyond its license to the laparoscopic simulator.
The Company believes there is no basis to support this position under
the terms of the Ethicon Agreement as set forth above. Ixion is
entitled to receive continuing royalty payments pursuant to the Ethicon
Agreement.
SCHEDULE 3.13- PAGE 2
<PAGE> 105
SCHEDULE 3.16
EMPLOYEE BENEFIT PLANS
1. The below listed employee benefit plans previously provided to Interact
Special Counsel are provided to each Ixion employee:
A. 401(k) Plan & Trust administered by Compensation Consultants, Inc.
B. Washington Software Association Employee Benefit Trust -
(i) Medical Insurance
(ii) Dental Insurance
(iii) Vision Insurance
(iv) Life Insurance
C. UNUM Life Insurance Company of America -
(i) Short-Term Disability Insurance
(ii) Long-Term Disability Insurance
2. Ixion has accrued but unpaid salary obligations to the following parties
in that amount set forth next to each name:
<TABLE>
<S> <C>
Maxal Capital Corporation ("Maxal") (Sturman) $201,000
Global Nexus (Montegrande/Cherney) 62,000
Shropshire Capital Corporation ("Shropshire") (Otto) 56,000
Val Montegrande 7,000
Xinetix Technologies, Inc. ("Xinetix") (Walbrink) 82,000
David Hon 17,000
--------
TOTAL $425,000
========
</TABLE>
3. Ixion has outstanding obligations pursuant to certain consulting or
employment agreements among the Company and the below listed parties that
have been delivered to Interact Special Counsel:
Mark Cherney
Valentino Montegrande
Xinetix
East-West Capital
Greg Claypool
Ameritech International Corporation
SCHEDULE 3.16- PAGE 1
<PAGE> 106
Ken Chyten
Mike Muffoletto
Fred Katz
Gordon Segal
David Abramson
George Holbrook, Jr.
Bruce Brackenridge
James Caillouette, Sr., M.D.
Mark Noar, M.D.
SCHEDULE 3.16 - PAGE 2
<PAGE> 107
SCHEDULE 4.2(a)
OUTSTANDING OPTIONS AND WARRANTS
Outstanding Options under Ixion 1994 Incentive Stock Option Plan
Pursuant to the Ixion 1994 Incentive Stock Option Plan, the below listed
Ixion employees have stock options outstanding that are exercisable into that
number of shares of Common Stock set forth below. Each of the below listed
options must be exercised before March 26, 2003.
<TABLE>
<CAPTION>
No. of Price/ Grant
Employee Shares Share Date Vesting
<S> <C> <C> <C> <C> <C>
1/36th vested at end of 6
months of employment and
additional 1/36th vested
John Staneff 42,900 $0.11 3/26/93 each month thereafter.
1/36th vested at end of 6
months of employment and
additional 1/36th vested
David Ludke 12,768 $0.11 3/26/93 each month thereafter.
1/36th vested at end of 6
months of employment and
additional 1/36th vested
David Newton 12,768 $0.11 4/26/93 each month thereafter.
1/36th vested at end of 6
months of employment and
additional 1/36th vested
Robert Jones 12,768 $0.11 3/26/93 each month thereafter.
1/36th vested at end of 6
months of employment and
additional 1/36th vested
Brenda Hon 7,400 $0.11 3/10/93 each month thereafter.
1/36th vested at end of 6
months of employment and
additional 1/36th vested
Rampa Tinling 5,363 $0.11 3/26/93 each month thereafter.
1/36th vested at the end of
1st month of employment
and additional 1/36th vested
Jack Tomkinson 15,000 $0.70 7/10/95 each month thereafter.
</TABLE>
SCHEDULE 3.16 - PAGE 3
<PAGE> 108
<TABLE>
<S> <C> <C> <C> <C> <C>
1/36th vested at the end of
1st month of employment
and additional 1/36th vested
Tamara Stephos 12,768 $0.70 5/30/95 each month thereafter.
------
TOTAL: 121.735
=======
</TABLE>
Outstanding Options Held by Terminated Employees
The below listed ex-employees were terminated prior to exercising any stock
options. Pursuant to such ex-employees Stock Option Rights Agreement, they may
exercise 5% of the stock options that were granted prior to their termination
during the 12th to 14th months following their termination.
<TABLE>
<CAPTION>
No. of Price/ Grant
Terminated Employee Shares Share Date Window of Exercise
<S> <C> <C> <C> <C>
Robert Moore 3,575 $0.11 3/26/93 5/1/96 - 7-31-96
John Harthan 22 $0.11 3/26/93 3/1/96 - 5/31/96
George Gilman 100 $0.70 3/26/93 5/1/96 - 7/31/96
---
TOTAL: 3.697
=====
</TABLE>
Other Outstanding Options
<TABLE>
<CAPTION>
Option No. of Price Grant Expiration
Holder Shares Share Date Vesting Date
<S> <C> <C> <C> <C> <C>
CynDel & 20,000 $7.50 4/1/96 Fully Vested 11/1/1997
Company, Inc.
Xinetix 100,000 $0.01 8/16/95 See Consulting 3 years
Agreement following
dated 8/16/95 each
between Xinetix vesting
and the accom-
Company plishment
with
respect to
shares
that vest
upon such
accom-
plishment
</TABLE>
SCHEDULE 3.16- PAGE 4
<PAGE> 109
Outstanding Warrants
<TABLE>
<CAPTION>
No. of Length of
Warrant Holder Shares Price/Share Term Date Exercisable
<S> <C> <C> <C> <C>
Richard Friedman 50,000 IPO Price 5 years Completion of IPO
Jeff Markowitz 50,000 IPO Price 5 years Completion of IPO
CynDel & Company, 25,000 150% of Earlier of Completion of IPO
Inc. IPO Price 3 years
after
Company's
IPO or
3/1/2000
CynDel & Company, 25,000 160% of Earlier of Completion of IPO
Inc. IPO Price 3 years
after
Company's
IPO or
3/1/2000
</TABLE>
SCHEDULE 3.16- PAGE 5
<PAGE> 110
SCHEDULE 4.4
LIST OF EMPLOYEES
David Hon
John Staneff
Glenn Johnson
Robert Jones
David Ludke
David Newton
Tamara Stephas
Rampa Tinling
John Tomkinson
William Zude
Jeanne DeThomas
Brenda Hon
Steven Pieper
David Chen
Micahel McKenna
SCHEDULE 4.4 - PAGE 1
<PAGE> 1
EXHIBIT 3.1
<PAGE> 2
PAGE 1
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "MEDICAL MEDIA SYSTEMS, INC.", FILED IN THIS OFFICE ON THE
FIFTEENTH DAY OF APRIL, A.D., 1996, AT 9 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW
CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING.
[STATE SEAL] /s/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 7907678
DATE: 04-15-96
<PAGE> 3
CERTIFICATE OF INCORPORATION
OF
MEDICAL MEDIA SYSTEMS, INC.
ARTICLE I
NAME OF CORPORATION
The name of this corporation is
MEDICAL MEDIA SYSTEMS, INC.
ARTICLE II
REGISTERED OFFICE
The address of the registered office of the corporation in the State
of Delaware is 1209 Orange Street, in the City of Wilmington, County of New
Castle, and the name of its registered agent at that address is The Corporation
Trust Company.
ARTICLE III
PURPOSE
The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
ARTICLE IV
AUTHORIZED CAPITAL STOCK
The corporation shall be authorized to issue one class of stock to be
designated Common Stock; the total number of shares which the corporation shall
have authority to issue is Ten Million (10,000,000), and each such share shall
have a par value of one cent ($0.01).
<PAGE> 4
ARTICLE V
INCORPORATOR
The name and mailing address of the incorporator of the corporation is:
Andrew Strohman
4 Park Plaza
Irvine, CA 92714
ARTICLE VI
BOARD POWER REGARDING BYLAWS
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, repeal, alter, amend and
rescind the bylaws of the corporation.
ARTICLE VII
ELECTION OF DIRECTORS
Elections of directors need not be by written ballot unless the bylaws
of the corporation shall so provide.
ARTICLE VIII
LIMITATION OF DIRECTOR LIABILITY
To the fullest extent permitted by the Delaware General Corporation Law
as the same exists or may hereafter be amended, a director of the corporation
shall not be liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director. If the Delaware General Corporation
Law is amended after the date of the filing of this Certificate of Incorporation
to authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended from time to time. No repeal or
modification of this Article VIII by the stockholders shall adversely affect any
right or protection of a director of the corporation existing by virtue of this
Article VIII at the time of such repeal or modification.
2
<PAGE> 5
ARTICLE IX
CORPORATE POWER
The corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred on stockholders herein
are granted subject to this reservation.
ARTICLE X
CREDITOR COMPROMISE OR ARRANGEMENT
Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation to do business both within and without the
State of Delaware, and in pursuance of the Delaware General Corporation Law,
does make and file this Certificate.
/s/ Andrew B. Strohman
--------------------------------
Andrew B. Strohman, Incorporator
3
<PAGE> 1
EXHIBIT 3.2
<PAGE> 2
STATE OF DELAWARE
Page 1
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF
DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT
COPY OF THE CERTIFICATE OF MERGER, WHICH MERGES:
[SEAL OF THE STATE OF DELAWARE]
"IXION, INC., A DELAWARE CORPORATION,
WITH AND INTO "MEDICAL MEDIA SYSTEMS, INC." UNDER THE NAME
OF "INTERACT MEDICAL TECHNOLOGIES CORPORATION", A CORPORATION
ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE,
AS RECEIVED AND FILED IN THIS OFFICE THE TWENTY-FOURTH DAY OF
MAY, A.D., 1996, AT ?? O'CLOCK.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO
THE NEW CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING.
[SEAL] /s/ EDWARD J. FREEL
----------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 7960511
DATE: 05-24-96
<PAGE> 3
CERTIFICATE OF MERGER
OF
IXION, INC.
WITH AND INTO
MEDICAL MEDIA SYSTEMS, INC.
To the Secretary of State
of the State of Delaware
Pursuant to the provisions of Section 251 of the Delaware General
Corporation Law, Medical Media Systems, Inc. hereby certifies that:
1. The name and state of incorporation of each of the constituent
corporations are as follows: (a) Ixion, Inc., a Delaware
corporation ("Ixion"); and (b) Medical Media Systems, Inc., a
Delaware corporation ("MMS").
2. An Agreement and Plan of Reorganization (the "Agreement")
between the constituent corporations has been approved,
adopted, certified, executed and acknowledged in accordance
with Section 251(c) of the Delaware General Corporation Law.
3. The surviving corporation is MMS; provided, however, that the
name of the surviving corporation shall be changed pursuant to
paragraph 4 below.
4. The Certificate of Incorporation of MMS shall be the
Certificate of Incorporation of the surviving corporation;
provided, however, that Article I of the Certificate of
Incorporation of MMS is hereby amended to read in its entirety
as follows:
"The name of the corporation is:
Interact Medical Technologies Corporation"
5. The executed Agreement is on file at the principal place of
business of the surviving corporation. The address of the
principal place of business of the surviving corporation is
654 Madison Avenue, Suite 1606, New York, New York 10021.
6. The surviving corporation will furnish a copy of the
Agreement, on request and without cost, to any stockholder of
Ixion or MMS.
7. The surviving corporation will continue its existence as a
corporation of the State of Delaware.
<PAGE> 1
EXHIBIT 3.3
<PAGE> 2
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF INTERACT MEDICAL TECHNOLOGIES CORPORATION,
a Delaware corporation
Interact Medical Technologies Corporation, a corporation organized and
existing under the laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Interact Medical Technologies
Corporation. The original Certificate of Incorporation of the corporation was
filed with the Secretary of State of the State of Delaware on April 15, 1996.
2. Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, this Amended and Restated Certificate of Incorporation was
adopted by the corporation's Board of Directors and stockholders.
3. The text of the Certificate of Incorporation is heretofore amended or
supplemented and is hereby restated and further amended to read in its entirety
as follows:
ARTICLE I
The name of this corporation is Interact Medical Technologies Corporation.
ARTICLE II
The address of this corporation's registered office in the State of
Delaware is 1209 Orange Street, City of Wilmington, County of New Castle. The
name of its registered agent at such address is The Corporation Trust Company.
ARTICLE III
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may now or hereafter be organized under the Delaware
General Corporation Law.
ARTICLE IV
(A) Classes of Stock. This corporation is authorized to issue two classes
of stock to be designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares of all classes of capital stock which this
corporation shall have authority to issue is fifteen million (15,000,000) of
which ten million (10,000,000) shares
<PAGE> 3
of the par value of one cent ($0.01) each shall be Common Stock and five million
(5,000,000) shares of the par value of one cent ($0.01) each shall be Preferred
Stock.
(B) Powers, Preferences and Rights and Qualifications, Limitations and
Restrictions of Preferred Stock. The Preferred Stock may be issued from time to
time in one or more series. The Board of Directors is hereby authorized, by
filing a certificate pursuant to the Delaware General Corporation Law, to fix or
alter from time to time the designation, powers, preferences and rights of the
shares of each such series and the qualifications, limitations or restrictions
thereof, including without limitation the dividend rights, dividend rate,
conversion rights, voting rights, rights and terms of redemption (including
sinking fund provisions), redemption price or prices, and the liquidation
preferences of any wholly unissued series of Preferred Stock, and to establish
from time to time the number of shares constituting any such series and the
designation thereof, or any of them (a "Preferred Stock Designation"); and to
increase or decrease the number of shares of any series subsequent to the
issuance of shares of that series, but not below the number of shares of such
series then outstanding. In case the number of shares of any series shall be
decreased in accordance with the foregoing sentence, the shares constituting
such decrease shall resume the status that they had prior to the adoption of the
resolution originally fixing the number of shares of such series.
(C) Rights, Preferences, Privileges and Restrictions of Common Stock.
1. Dividend Rights. Subject to the prior or parity rights of holders
of all classes of stock at the time outstanding having prior or parity rights as
to dividends, the holders of the Common Stock shall be entitled to receive, when
and as declared by the Board of Directors, out of any assets of this corporation
legally available therefor, such dividends as may be declared from time to time
by the Board of Directors.
2. Redemption. The Common Stock is not redeemable upon demand of any
holder thereof or upon demand of this corporation.
3. Voting Rights. The holder of each share of Common Stock shall have
the right to one vote, and shall be entitled to notice of any stockholders'
meeting in accordance with the bylaws of this corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law.
ARTICLE V
Every stockholder entitled to vote in any election of directors of the
corporation may cumulate such stockholder's votes and give one candidate a
number of votes equal to the number of directors to be elected multiplied by the
number of votes to which the stockholder's shares are otherwise entitled, or
distribute the stockholder's votes on the same principle among as many
candidates as such stockholder thinks fit. No stockholder,
-2-
<PAGE> 4
however, may cumulate such stockholder's votes for one or more candidates unless
(i) the names of such candidates have been properly placed in nomination, in
accordance with the bylaws of the corporation, prior to the voting, (ii) the
stockholder has given advance notice to the corporation of the intention to
cumulate votes in accordance with the bylaws, and (iii) the stockholder has
given proper notice to the other stockholders at the meeting, prior to voting,
of such stockholder's intention to cumulate such stockholder's votes. If any
stockholder has given proper notice, all stockholders may cumulate their votes
for any candidates who have been properly placed in nomination. The candidates
receiving the highest number of votes of the shares entitled to be voted for
them up to the number of directors to be elected by such shares shall be
declared elected.
ARTICLE VI
(A) Exculpation. A director of the corporation shall not be personally
liable to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which the director derived any
improper personal benefit.
(B) Indemnification. To the extent permitted by applicable law, this
corporation is also authorized to provide indemnification of (and advancement of
expenses to) such agents (and any other persons to which Delaware law permits
this corporation to provide indemnification) through bylaw provisions,
agreements with such agents or other persons, vote of stockholders or
disinterested directors or otherwise, in excess of the indemnification and
advancement otherwise permitted by Section 145 of the Delaware General
Corporation Law, subject only to limits created by applicable Delaware law
(statutory or non-statutory), with respect to actions for breach of duty to the
corporation, its stockholders, and others.
(C) Effect of Repeal or Modification. Any repeal or modification of any of
the foregoing provisions of this Article VI shall be prospective and shall not
adversely affect any right or protection of a director, officer, agent or other
person existing at the time of, or increase the liability of any director of the
corporation with respect to any acts or omissions of such director occurring
prior to, such repeal or modification.
-3-
<PAGE> 5
ARTICLE VII
Elections of directors need not be by written ballot except and to the
extent provided in the bylaws of the corporation. The directors shall be
classified into two classes, as nearly equal in number as possible, with the
term of office of the first class to expire at the 1997 Annual Meeting of
Stockholders and the term of office of the second class to expire at the 1998
Annual Meeting of Stockholders. At each Annual Meeting of Stockholders following
such initial classification and election, directors elected to succeed those
directors whose terms expire shall be elected for a term of office to expire at
the second succeeding Annual Meeting of Stockholders after their election.
ARTICLE VIII
No holder of shares of stock of the corporation shall have any preemptive
or other right, except as such rights are expressly provided by contract, to
purchase or subscribe for or receive any shares of any class, or series thereof,
of stock of the corporation, whether now or hereafter authorized, or any
warrants, options, bonds, debentures or other securities convertible into,
exchangeable for or carrying any right to purchase any share of any class, or
series thereof, of stock; but such additional shares of stock and such warrants,
options, bonds, debentures or other securities convertible into, exchangeable
for or carrying any right to purchase any shares of any class, or series
thereof, of stock may be issued or disposed of by the Board of Directors to such
persons, and on such terms and for such lawful consideration as in its
discretion it shall deem advisable or as the corporation shall have by contract
agreed.
ARTICLE IX
The corporation is to have a perpetual existence.
ARTICLE X
The corporation reserves the right to repeal, alter, amend or rescind
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred on stockholders
herein are granted subject to this reservation.
-12-
<PAGE> 6
ARTICLE XI
The Board of Directors may from time to time make, amend, supplement or
repeal the bylaws; provided, however, that the stockholders may change or repeal
any bylaw adopted by the Board of Directors by the requisite affirmative vote of
stockholders as set forth in the bylaws; and, provided further, that no
amendment or supplement to the bylaws adopted by the Board of Directors shall
vary or conflict with any amendment or supplement thus adopted by the
stockholders.
ARTICLE XII
No action shall be taken by the stockholders of the corporation except at
an annual or special meeting of stockholders called in accordance with the
bylaws, and no action shall be taken by the stockholders by written consent.
ARTICLE XIII
Advance notice of stockholder nominations for the election of directors
and of business to be brought by stockholders before any meeting of the
stockholders of the corporation shall be given in the manner provided in the
bylaws of the corporation.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 7
IN WITNESS WHEREOF, the Amended and Restated Certificate of Incorporation
has been signed under the seal of the corporation as of this _____ day of June,
1996.
INTERACT MEDICAL TECHNOLOGIES
CORPORATION
By:
---------------------------
Bruce D. Sturman, President
ATTEST:
- - ------------------------------
David Otto, Secretary
[SIGNATURE PAGE TO AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION]
<PAGE> 1
EXHIBIT 3.4
<PAGE> 2
MEDICAL MEDIA SYSTEMS, INC.
(a Delaware corporation)
BYLAWS
ARTICLE I
Offices
SECTION 1.01 Registered Office. The registered office of Medical Media
Systems, Inc. (the "Corporation") in the State of Delaware shall be 1209 Orange
Street, City of Wilmington, County of New Castle, and the name of the registered
agent in charge thereof shall be The Corporation Trust Company.
SECTION 1.02 Other Offices. The Corporation may also have an office or
offices at such other place or places, either within or without the State of
Delaware, as the Board of Directors (the "Board") may from time to time
determine or as the business of the Corporation may require.
ARTICLE II
Meetings of Stockholders
SECTION 2.01 Annual Meetings. Annual meetings of the stockholders of the
Corporation for the purpose of electing directors and for the transaction of
such other proper business as may come before such meetings may be held at such
time, date and place as the Board shall determine by resolution.
SECTION 2.02 Special Meetings. A special meeting of the stockholders for
the transaction of any proper business may be called at any time by the Board or
by the President.
SECTION 2.03 Place of Meetings. All meetings of the stockholders shall
be held at such places, within or without the State of Delaware, as may from
time to time be designated by the person or persons calling the respective
meeting and specified in the respective notices or waivers of notice thereof.
SECTION 2.04 Notice of Meetings. Except as otherwise required by law,
notice of each meeting of the stockholders, whether annual or special, shall be
given not less than ten (10) nor more than sixty (60) days before the date of
the meeting to each stockholder of record entitled to vote at such meeting by
delivering a typewritten or printed notice thereof to him personally, or by
depositing such notice in the United States mall, in a postage prepaid envelope,
directed to him at his post office address furnished by him to the Secretary of
the Corporation for such purpose or, if he shall not have furnished to the
Secretary his address for such purpose, then at his post office address last
known to the Secretary, or by transmitting a notice thereof to him at such
address by telegraph, cable, or wireless. Except as otherwise
<PAGE> 3
expressly required by law, no publication of any notice of a meeting of the
stockholders shall be required. Every notice of a meeting of the stockholders
shall state the place, date and hour of the meeting, and, in the case of a
special meeting, shall also state the purpose or purposes for which the meeting
is called. Notice of any meeting of stockholders shall not be required to be
given to any stockholder who shall have waived such notice and such notice shall
be deemed waived by any stockholder who shall attend such meeting in person or
by proxy, except as a stockholder who shall attend such meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Except as
otherwise expressly required by law, notice of any adjourned meeting of the
stockholders need not be given if the time and place thereof are announced at
the meeting at which the adjournment is taken.
SECTION 2.05 Quorum. Except in the case of any meeting for the election
of directors summarily ordered as provided by law, the holders of record of a
majority in voting interest of the shares of stock of the Corporation entitled
to be voted thereat, present in person or by proxy, shall constitute a quorum
for the transaction of business at any meeting of the stockholders of the
Corporation or any adjournment thereof. In the absence of a quorum at any
meeting or any adjournment thereof, a majority in voting interest of the
stockholders present in person or by proxy and entitled to vote thereat or, in
the absence therefrom of all the stockholders, any officer entitled to preside
at, or to act as secretary of, such meeting may adjourn such meeting from time
to time. At any such adjourned meeting at which a quorum is present any business
may be transacted which might have been transacted at the meeting as originally
called.
SECTION 2.06 Voting.
(a) Each stockholder shall, at each meeting of the stockholders, be
entitled to vote in person or by proxy each share or fractional share of the
stock of the Corporation having voting rights on the matter in question and
which shall have been held by him and registered in his name on the books of the
Corporation:
(i) on the date fixed pursuant to Section 6.05 of these Bylaws
as the record date for the determination of stockholders entitled to
notice of and to vote at such meeting, or
(ii) if no such record date shall have been so fixed, then (a)
at the close of business on the day next preceding the day on which
notice of the meeting shall be given or (b) if notice of the meeting
shall be waived, at the close of business on the day next preceding the
day on which the meeting shall be held.
(b) Shares of its own stock belonging to the Corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
directors in such other corporation is held, directly or indirectly, by the
Corporation, shall neither be entitled to vote nor be counted for quorum
purposes. Persons holding stock of the Corporation in a fiduciary capacity shall
be entitled to vote such stock. Persons whose stock is pledged shall be entitled
2
<PAGE> 4
to vote, unless in the transfer by the pledgor on the books of the Corporation
he shall have expressly empowered the pledgee to vote thereon, in which case
only the pledgee, or his proxy, may represent such stock and vote thereon. Stock
having voting power standing of record in the names of two or more persons,
whether fiduciaries, members of a partnership, joint tenants in common, tenants
by entirety or otherwise, or with respect to which two or more persons have the
same fiduciary relationship, shall be voted in accordance with the provisions of
the General Corporation Law of the State of Delaware.
(c) Any such voting rights may be exercised by the stockholder entitled
thereto in person or by his proxy appointed by an instrument in writing,
subscribed by such stockholder or by his attorney thereunto authorized and
delivered to the secretary of the meeting; provided, however, that no proxy
shall be voted or acted upon after three years from its date unless said proxy
shall provide for a longer period. The attendance at any meeting of a
stockholder who may theretofore have given a proxy shall not have the effect of
revoking the same unless he shall in writing so notify the secretary of the
meeting prior to the voting of the proxy. At any meeting of the stockholders all
matters, except as otherwise provided in the Certificate of Incorporation, in
these Bylaws or by law, shall be decided by the vote of a majority in voting
interest of the stockholders present in person or by proxy and entitled to vote
thereat and thereon, a quorum being present. The vote at any meeting of the
stockholders on any question need not be by ballot, unless so directed by the
chairman of the meeting. On a vote by ballot each ballot shall be signed by the
stockholder voting, or by his proxy, if there be such proxy, and it shall state
the number of shares voted.
SECTION 2.07 List of Stockholders. The Secretary of the Corporation
shall prepare and make, at least ten (10) days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
SECTION 2.08 Judges. If at any meeting of the stockholders a vote by
written ballot shall be taken on any question, the chairman of such meeting may
appoint a judge or judges to act with respect to such vote. Each judge so
appointed shall first subscribe an oath faithfully to execute the duties of a
judge at such meeting with strict impartiality and according to the best of his
ability. Such judges shall decide upon the qualification of the voters and shall
report the number of shares represented at the meeting and entitled to vote on
such question, shall conduct and accept the votes, and, when the voting is
completed, shall ascertain and report the number of shares voted respectively
for and against the question. Reports of judges shall be in writing and
subscribed and delivered by them to the Secretary of the Corporation. The judges
need not be stockholders of the Corporation, and any officer of
3
<PAGE> 5
the Corporation may be a judge on any question other than a vote for or against
a proposal in which he shall have a material interest.
SECTION 2.09 Action Without Meeting. Any action required to be taken at
any annual or special meeting of stockholders of the Corporation, or any action
which may be taken at any annual or special meeting of such stockholders, may be
taken without a meeting, without prior notice and without a vote, if a consent
in writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
ARTICLE III
Board of Directors
SECTION 3.01 General Powers. The property, business and affairs of the
Corporation shall be managed by the Board.
SECTION 3.02 Number and Term of Office. The number of directors of the
Corporation shall be not less than five (5) nor more than nine (9), until
changed in accordance with applicable law. The exact number of directors shall
be fixed from time to time, within the limits specified, by resolution of the
board of directors or stockholders. Subject to the foregoing provisions for
changing the exact number of directors, the number of directors of this
Corporation shall initially be seven (7). Directors need not be stockholders.
Each of the directors of the Corporation shall hold office until his successor
shall have been duly elected and shall qualify or until he shall resign or shall
have been removed in the manner hereinafter provided.
SECTION 3.03 Election of Directors. The directors shall be elected
annually by the stockholders of the Corporation and the persons receiving the
greatest number of votes, up to the number of directors to be elected, shall be
the directors.
SECTION 3.04 Resignations. Any director of the Corporation may resign at
any time by giving written notice to the Board or to the Secretary of the
Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time be not specified, it shall take effect immediately upon
its receipt; and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 3.05 Vacancies. Except as otherwise provided in the Certificate
of Incorporation, any vacancy in the Board, whether because of death,
resignation, disqualification, an increase in the number of directors, or any
other cause, may be filled by vote of the majority of the remaining directors,
although less than a quorum. Each director so chosen to fill a vacancy shall
hold office until his successor shall have been elected and shall qualify or
until he shall resign or shall have been removed in the manner hereinafter
provided.
4
<PAGE> 6
SECTION 3.06 Place of Meeting. Etc. The Board may hold any of its
meetings at such place or places within or without the State of Delaware as the
Board may from time to time by resolution designate or as shall be designated by
the person or persons calling the meeting or in the notice or a waiver of notice
of any such meeting. Directors may participate in any regular or special meeting
of the Board by means of conference telephone or similar communications
equipment pursuant to which all persons participating in the meeting of the
Board can hear each other, and such participation shall constitute presence in
person at such meeting.
SECTION 3.07 First Meeting. The Board shall meet as soon as practicable
after each annual election of directors and notice of such first meeting shall
not be required.
SECTION 3.08 Regular Meetings. Regular meetings of the Board may be held
at such times as the Board shall from time to time by resolution determine. If
any day fixed for a regular meeting shall be a legal holiday at the place where
the meeting is to be held, then the meeting shall be held at the same hour and
place on the next succeeding business day not a legal holiday. Except as
provided by law, notice of regular meetings need not be given.
SECTION 3.09 Special Meetings. Special meetings of the Board shall be
held whenever called by the President or a majority of the authorized number of
directors. Except as otherwise provided by law or by these Bylaws, notice of the
time and place of each such special meeting shall be mailed to each director,
addressed to him at his residence or usual place of business, at least five (5)
days before the day on which the meeting is to be held, or shall be sent to him
at such place by telegraph or cable or be delivered personally not less than
forty-eight (48) hours before the time at which the meeting is to be held.
Except where otherwise required by law or by these Bylaws, notice of the purpose
of a special meeting need not be given. Notice of any meeting of the Board shall
not be required to be given to any director who is present at such meeting,
except a director who shall attend such meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened.
SECTION 3.10 Quorum and Manner of Acting. Except as otherwise provided
in these Bylaws or by law, the presence of a majority of the authorized number
of directors shall be required to constitute a quorum for the transaction of
business at any meeting of the Board, and all matters shall be decided at any
such meeting, a quorum being present, by the affirmative votes of a majority of
the directors present. In the absence of a quorum, a majority of directors
present at any meeting may adjourn the same from time to time until a quorum
shall be present. Notice of any adjourned meeting need not be given. The
directors shall act only as a Board, and the individual directors shall have no
power as such.
SECTION 3.11 Action by Consent. Any action required or permitted to be
taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if a written consent thereto is signed by all members of the
Board or of such
5
<PAGE> 7
committee, as the case may be, and such written consent is filed with the
minutes of proceedings of the Board or committee.
SECTION 3.12 Removal of Directors. Subject to the provisions of the
Certificate of Incorporation, any director may be removed at any time, either
with or without cause, by the affirmative vote of the stockholders having a
majority of the voting power of the Corporation given at a special meeting of
the stockholders called for the purpose.
SECTION 3.13 Compensation. The directors shall receive only such
compensation for their services as directors as may be allowed by resolution of
the Board. The Board may also provide that the Corporation shall reimburse each
such director for any expense incurred by him on account of his attendance at
any meetings of the Board or Committees of the Board. Neither the payment of
such compensation nor the reimbursement of such expenses shall be construed to
preclude any director from serving the Corporation or its subsidiaries in any
other capacity and receiving compensation therefor.
SECTION 3.14 Committees. The Board may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the Corporation. Any such committee,
to the extent provided in the resolution of the Board and except as otherwise
limited by law, shall have and may exercise all the powers and authority of the
Board in the management of the business and affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it. Any such committee shall keep written minutes of its meetings and
report the same to the Board at the next regular meeting of the Board. In the
absence or disqualification of a member of a committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
Board to act at the meeting in the place of any such absent or disqualified
member.
ARTICLE IV
Officers
SECTION 4.01 Number. The officers of the Corporation shall be a
President, one or more Vice Presidents (the number thereof and their respective
titles to be determined by the Board), a Secretary and a Treasurer.
SECTION 4.02 Election. Term of Office and Qualifications. The officers
of the Corporation, except such officers as may be appointed in accordance with
Section 4.03, shall be elected annually by the Board at the first meeting
thereof held after the election thereof. Each officer shall hold office until
his successor shall have been duly chosen and shall qualify or until his
resignation or removal in the manner hereinafter provided.
SECTION 4.03 Assistants. Agents and Employees. Etc. In addition to the
officers specified in Section 4.01, the Board may appoint other assistants,
agents and employees as it may deem necessary or advisable, including one or
more Assistant Secretaries,
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and one or more Assistant Treasurers, each of whom shall hold office for such
period, have such authority, and perform such duties as the Board may from time
to time determine. The Board may delegate to any officer of the Corporation or
any committee of the Board the power to appoint, remove and prescribe the duties
of any such assistants, agents or employees.
SECTION 4.04 Removal. Any officer, assistant, agent or employee of the
Corporation may be removed, with or without cause, at any time: (i) in the case
of an officer, assistant, agent or employee appointed by the Board, only by
resolution of the Board; and (ii) in the case of an officer, assistant, agent or
employee, by any officer of the Corporation or committee of the Board upon whom
or which such power of removal may be conferred by the Board.
SECTION 4.05 Resignations. Any officer or assistant may resign at any
time by giving written notice of his resignation to the Board or the Secretary
of the Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time be not specified, upon receipt thereof by the Board or
the Secretary, as the case may be; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 4.06 Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification, or other cause, may be filled for the
unexpired portion of the term thereof in the manner prescribed in these Bylaws
for regular appointments or elections to such office.
SECTION 4.07 The President. The President of the Corporation shall be
the chief executive officer of the Corporation and shall have, subject to the
control of the Board, general and active supervision and management over the
business of the Corporation and over its several officers, assistants, agents
and employees.
SECTION 4.08 The Vice Presidents. Each Vice President shall have such
powers and perform such duties as the Board may from time to time prescribe. At
the request of the President, or in case of the President's absence or
inability to act upon the request of the Board, a Vice President shall perform
the duties of the President and when so acting, shall have all the powers of,
and be subject to all the restrictions upon, the President.
SECTION 4.09 The Secretary. The Secretary shall, if present, record the
proceedings of all meetings of the Board, of the stockholders, and of all
committees of which a secretary shall not have been appointed in one or more
books provided for that purpose; he shall see that all notices are duly given in
accordance with these Bylaws and as required by law; he shall be custodian of
the seal of the Corporation and shall affix and attest the seal to all documents
to be executed on behalf of the Corporation under its seal; and, in general, he
shall perform all the duties incident to the office of Secretary and such other
duties as may from time to time be assigned to him by the Board.
SECTION 4.10 The Treasurer. The Treasurer shall have the general care
and custody of the funds and securities of the Corporation, and shall deposit
all such funds in
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the name of the Corporation in such banks, trust companies or other depositories
as shall be selected by the Board. He shall receive, and give receipts for,
moneys due and payable to the Corporation from any source whatsoever. He shall
exercise general supervision over expenditures and disbursements made by
officers, agents and employees of the Corporation and the preparation of such
records and reports in connection therewith as may be necessary or desirable. He
shall, in general, perform all other duties incident to the office of Treasurer
and such other duties as from time to time may be assigned to him by the Board.
SECTION 4.11 Compensation. The compensation of the officers of the
Corporation shall be fixed from time to time by the Board. None of such officers
shall be prevented from receiving such compensation by reason of the fact that
he is also a director of the Corporation. Nothing contained herein shall
preclude any officer from serving the Corporation, or any subsidiary
corporation, in any other capacity and receiving such compensation by reason of
the fact that he is also a director of the Corporation. Nothing contained herein
shall preclude any officer from serving the Corporation, or any subsidiary
corporation, in any other capacity and receiving proper compensation therefor.
ARTICLE V
Contracts, Checks, Drafts, Bank Accounts, Etc.
SECTION 5.01 Execution of Contracts. The Board, except as in these
Bylaws otherwise provided, may authorize any officer or officers, agent or
agents, to enter into any contract or execute any instrument in the name of and
on behalf of the Corporation, and such authority may be general or confined to
specific instances; and unless so authorized by the Board or by these Bylaws, no
officer, agent or employee shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or in any amount.
SECTION 5.02 Checks, Drafts, Etc. All checks, drafts or other orders for
payment of money, notes or other evidence of indebtedness, issued in the name of
or payable to the Corporation, shall be signed or endorsed by such person or
persons and in such manner as, from time to time, shall be determined by
resolution of the Board. Each such officer, assistant, agent or attorney shall
give such bond, if any, as the Board may require.
SECTION 5.03 Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board may select, or
as may be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. For the purpose of deposit and for the purpose
of collection for the account of the Corporation, the President, any Vice
President or the Treasurer (or any other officer or officers, assistant or
assistants, agent or agents, or attorney or attorneys of the Corporation who
shall from time to time be determined by the Board) may endorse, assign and
deliver checks, drafts and other orders for the payment of money which are
payable to the order of the Corporation.
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SECTION 5.04 General and Special Bank Accounts. The Board may from time
to time authorize the opening and keeping of general and special bank accounts
with such banks, trust companies or other depositories as the Board may select
or as may be selected by any officer or officers, assistant or assistants, agent
or agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. The Board may make such special rules and
regulations with respect to such bank accounts, not inconsistent with the
provisions of these Bylaws, as it may deem expedient.
ARTICLE VI
Shares and Their Transfer
SECTION 6.01 Certificates for Stock. Every owner of stock of the
Corporation shall be entitled to have a certificate or certificates, to be in
such form as the Board shall prescribe, certifying the number and class of
shares of the stock of the Corporation owned by him. The certificates
representing shares of such stock shall be numbered in the order in which they
shall be issued and shall be signed in the name of the Corporation by the
President or a Vice President, and by the Secretary or an Assistant Secretary or
by the Treasurer or an Assistant Treasurer. Any of or all of the signatures on
the certificates may be a facsimile. In case any officer, transfer agent or
registrar who has signed, or whose facsimile signature has been placed upon, any
such certificate, shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, such certificate may nevertheless
be issued by the Corporation with the same effect as though the person who
signed such certificate, or whose facsimile signature shall have been placed
thereupon, were such officer, transfer agent or registrar at the date of issue.
A record shall be kept of the respective names of the persons, firms or
corporations owning the stock represented by such certificates, the number and
class of shares represented by such certificates, respectively, and the
respective dates thereof, and in case of cancellation, the respective dates of
cancellation. Every certificate surrendered to the Corporation for exchange or
transfer shall be cancelled, and no new certificate or certificates shall be
issued in exchange for any existing certificate until such existing certificate
shall have been so cancelled, except in cases provided for in Section 6.04.
SECTION 6.02 Transfers of Stock. Transfers of shares of stock of the
Corporation shall be made only on the books of the Corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary, or with a transfer clerk or a
transfer agent appointed as provided in Section 6.03, and upon surrender of the
certificate or certificates for such shares properly endorsed and the payment of
all taxes thereon. The person in whose name shares of stock stand on the books
of the Corporation shall be deemed the owner thereof for all purposes as regards
the Corporation. Whenever any transfer of shares shall be made for collateral
security, and not absolutely, such fact shall be so expressed in the entry of
transfer if, when the certificate or certificates shall be presented to the
Corporation for transfer, both the transferor and the transferee request the
Corporation to do so.
SECTION 6.03 Regulations. The Board may make such rules and regulations
as it may deem expedient, not inconsistent with these Bylaws, concerning the
issue,
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transfer and registration of certificates for shares of the stock of the
Corporation. It may appoint, or authorize any officer or officers to appoint,
one or more transfer clerks or one or more transfer agents and one or more
registrars, and may require all certificates for stock to bear the signature or
signatures of any of them.
SECTION 6.04 Lost, Stolen, Destroyed, and Mutilated Certificates. In any
case of loss, theft, destruction, or mutilation of any certificate of stock,
another may be issued in its place upon proof of such loss, theft, destruction,
or mutilation and upon the giving of a bond of indemnity to the Corporation in
such form and in such sum as the Board may direct; provided, however, that a new
certificate may be issued without requiring any bond when, in the judgment of
the Board, it is proper so to do.
SECTION 6.05 Fixing Date for Determination of Stockholders of Record. In
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any other change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board may fix, in advance, a record date, which shall not be more than 60
nor less than 10 days before the date of such meeting, nor more than 60 days
prior to any other action. If in any case involving the determination of
stockholders for any purpose other than notice of or voting at a meeting of
stockholders or expressing consent to corporate action without a meeting the
Board shall not fix such a record date, the record date for determining
stockholders for such purpose shall be the close of business on the day on which
the Board shall adopt the resolution relating thereto. A determination of
stockholders entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of such meeting; provided, however, that the Board may
fix a new record date for the adjourned meeting.
ARTICLE VII
Indemnification
SECTION 7.01 Action, Etc. Other Than by or in the Right of the
Corporation. The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did
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not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, that he had reasonable cause to believe that his
conduct was unlawful.
SECTION 7.02 Actions, Etc., by or in the Right of the Corporation. The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
Corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
SECTION 7.03 Determination of Right of Indemnification. Any
indemnification under Section 7.01 or 7.02 (unless ordered by a court) shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances because he has met the applicable standard of
conduct set forth in Section 7.01 and 7.02. Such determination shall be made (i)
by the Board by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (ii) if such a quorum is not
obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (iii) by the
stockholders.
SECTION 7.04 Indemnification Against Expenses of Successful Party.
Notwithstanding the other provisions of this Article, to the extent that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in Section 7.01 or 7.02, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys fees) actually and
reasonably incurred by him in connection therewith.
SECTION 7.05 Prepaid Expenses. Expenses incurred by an officer or
director in defending a civil or criminal action, suit or proceeding may be paid
by the Corporation in advance of the final disposition of such action, suit or
proceeding as authorized by the Board in the specific case upon receipt of an
undertaking by or on behalf of the director or officer to repay such amount
unless it shall ultimately be determined that he is entitled to be indemnified
by the Corporation as authorized in this Article. Such expenses incurred by
other
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employees and agents may be so paid upon such terms and conditions, if any, as
the Board deems appropriate.
SECTION 7.06 Other Rights and Remedies. The indemnification provided by
this Article shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any Bylaws, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
SECTION 7.07 Insurance. Upon resolution passed by the Board, the
Corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article.
SECTION 7.08 Constituent Corporations. For the purposes of this Article,
references to "the Corporation" include all constituent corporations absorbed in
a consolidation or merger as well as the resulting or surviving corporation, so
that any person who is or was a director, officer, employee or agent of such a
constituent corporation or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise shall stand in the same
position under the provisions of this Article with respect to the resulting or
surviving corporation as he would if he had served the resulting or surviving
corporation in the same capacity.
SECTION 7.09 Other Enterprises, Fines, and Serving at Corporation's
Request. For purposes of this Article, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this
Article.
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ARTICLE VIII
Miscellaneous
SECTION 8.01 Seal. The Board shall provide a corporate seal, which shall
be in the form of a circle and shall bear the name of the Corporation and words
and figures showing that the Corporation was incorporated in the State of
Delaware and the year of incorporation.
SECTION 8.02 Waiver of Notices. Whenever notice is required to be given
by these Bylaws or the Certificate of Incorporation or by law, the person
entitled to said notice may waive such notice in writing, either before or after
the time stated therein, and such waiver shall be deemed equivalent to notice.
SECTION 8.03 Amendments. These Bylaws, or any of them, may be altered,
amended or repealed, and new Bylaws may be made, (i) by the Board, by vote of a
majority of the number of directors then in office as directors, acting at any
meeting of the Board, or (ii) by the stockholders, at any annual meeting of
stockholders, without previous notice, or at any special meeting of
stockholders, provided that notice of such proposed amendment, modification,
repeal or adoption is given in the notice of special meeting. Any Bylaws made or
altered by the stockholders may be altered or repealed by either the Board or
the stockholders.
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CERTIFICATE OF SECRETARY
The undersigned, being the duly elected Secretary of Medical Media
Systems, Inc., a Delaware corporation, hereby certifies that the Bylaws to which
this Certificate is attached were duly adopted by the Board of Directors of said
Corporation as of April 15, 1996.
-----------------------------
Charles E. Hutchinson
[Bylaws of MMS]
<PAGE> 1
EXHIBIT 3.5
<PAGE> 2
AMENDED AND RESTATED BYLAWS
OF
INTERACT MEDICAL TECHNOLOGIES CORPORATION
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office shall be in the City
of Dover, County of Kent, State of Delaware.
Section 2. Other Offices. The corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. All meetings of the stockholders for the
election of Directors shall be held in the City of San Diego, State of
California, at such place as may be fixed from time to time by the Board of
Directors, or at such other place either within or without the State of Delaware
as shall be designated from time to time by the Board of Directors and stated in
the notice of the meeting. Meetings of stockholders for any other purpose may be
held at such time and place, within or without the State of Delaware, as shall
be stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
Section 2. Annual Meeting.
(a) The annual meeting of the stockholders of the
corporation, for the purpose of election of Directors and for such other
business as may lawfully come before it, shall be held on such date and at such
time as may be designated from time to time by the Board of Directors.
(b) At an annual meeting of the stockholders, only such
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual meeting, business must be: (A)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors, (B) otherwise properly brought before
the meeting by or at the direction of the Board of Directors, or (C) otherwise
properly brought before the meeting by a
<PAGE> 3
stockholder. For business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the Secretary of the corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
corporation not less than one hundred twenty (120) calendar days in advance of
the date specified in the corporation's proxy statement released to stockholders
in connection with the previous year's annual meeting of stockholders; provided,
however, that in the event that no annual meeting was held in the previous year
or the date of the annual meeting has been changed by more than thirty (30) days
from the date contemplated at the time of the previous year's proxy statement,
notice by the stockholder to be timely must be so received a reasonable time
before the solicitation is made. A stockholder's notice to the Secretary shall
set forth as to each matter the stockholder proposes to bring before the annual
meeting: (i) a brief description of the business desired to be brought before
the annual meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and address, as they appear on the corporation's books,
of the stockholder proposing such business, (iii) the class and number of shares
of the corporation which are beneficially owned by the stockholder, (iv) any
material interest of the stockholder in such business and (v) any other
information that is required to be provided by the stockholder pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the "1934
Act"), in his capacity as a proponent to a stockholder proposal. Notwithstanding
the foregoing, in order to include information with respect to a stockholder
proposal in the proxy statement and form of proxy for a stockholder's meeting,
stockholders must provide notice as required by the regulations promulgated
under the 1934 Act. Notwithstanding anything in these Bylaws to the contrary, no
business shall be conducted at any annual meeting except in accordance with the
procedures set forth in this paragraph (b). The chairman of the annual meeting
shall, if the facts warrant, determine and declare at the meeting that business
was not properly brought before the meeting and in accordance with the
provisions of this paragraph (b), and, if he should so determine, he shall so
declare at the meeting that any such business not properly brought before the
meeting shall not be transacted.
(c) Only persons who are nominated in accordance with the
procedures set forth in this paragraph (c) shall be eligible for election as
Directors. Nominations of persons for election to the Board of Directors of the
corporation may be made at a meeting of stockholders by or at the direction of
the Board of Directors or by any stockholder of the corporation entitled to vote
in the election of Directors at the meeting who complies with the notice
procedures set forth in this paragraph (c). Such nominations, other than those
made by or at the direction of the Board of Directors, shall be made pursuant to
timely notice in writing to the Secretary of the corporation in accordance with
the provisions of paragraph (b) of this Section 2. Timely notice shall also be
given of any stockholder's intention to cumulate votes in the election of
Directors at a meeting if cumulative voting is available. Such stockholder's
notice shall set forth (i) as to each person, if any, whom the stockholder
proposes to nominate for election or re-election as a Director: (A) the name,
age, business address and residence address of such person, (B) the principal,
occupation or employment of such person, (C) the class and number of shares of
the corporation which are beneficially owned by such person,
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(D) a description of all arrangements or understandings between the stockholder
and each nominee and any other person or persons (naming such person or persons)
pursuant to which the nominations are to be made by the stockholder, and (E) any
other information relating to such person that is required to be disclosed in
solicitations of proxies for election of Directors, or is otherwise required, in
each case pursuant to Regulation 14A under the 1934 Act (including without
limitation such person's written consent to being named in the proxy statement,
if any, as a nominee and to serving as a Director if elected); and (ii) as to
such stockholder giving notice, the information required to be provided pursuant
to paragraph (b) of this Section 2 and, if cumulative voting is available to
such stockholder, whether such stockholder intends to request cumulative voting
in the election of Directors at the meeting. At the request of the Board of
Directors, any person nominated by a stockholder for election as a Director
shall furnish to the Secretary of the corporation that information required to
be set forth in the stockholder's notice of nomination which pertains to the
nominee. No person shall be eligible for election as a Director of the
corporation unless nominated in accordance with the procedures set forth in this
paragraph (c). The chairman of the meeting shall, if the facts warrant,
determine and declare at the meeting that a nomination was not made in
accordance with the procedures prescribed by these Bylaws, and if he should so
determine, he shall so declare at the meeting, and the defective nomination
shall be disregarded.
Section 3. Notice of Annual Meeting. Written notice of the annual
meeting stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten (10) nor more
than sixty (60) days before the date of the meeting.
Section 4. Voting List. The officer who has charge of the stock ledger
of the corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 5. Special Meetings. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the president and shall be called
by the president or secretary at the request in writing of a majority of the
Board of Directors, or at the request in writing of stockholders owning at least
ten percent (10%) of the entire capital stock of the corporation issued and
outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting. The place, date and time of any special
meeting shall be determined by the Board of Directors. Such determination shall
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include the record date for determining the stockholders having the right of and
to vote at such meeting.
Section 6. Notice of Special Meeting. Written notice of a special
meeting stating the place, date and hour of the meeting and the purpose or
purposes for which the meeting is called shall be given not less than ten (10)
nor more than sixty (60) days before the date of the meeting, to each
stockholder entitled to vote at such meeting.
Section 7. Action at Special Meeting. Business transacted at any special
meeting of stockholders shall be limited to the purposes stated in the notice.
Section 8. Quorum and Adjournments.
(a) The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
Certificate of Incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
(b) When a quorum is present at any meeting, the vote of
the holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the Certificate of Incorporation, a different vote is required, in which case
such express provision shall govern and control the decision of such question.
Section 9. Voting Rights.
(a) Unless otherwise provided in the Certificate of
Incorporation each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
(b) At all elections of Directors of the corporation each
stockholder having voting power shall be entitled to exercise the right of
cumulative voting as provided in the Certificate of Incorporation.
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Section 10. Action Without Meeting. No action shall be taken by the
stockholders of the corporation except at an annual or special meeting of
stockholders called in accordance with these Bylaws, and no action shall be
taken by the stockholders by written consent.
ARTICLE III
DIRECTORS
Section 1. Classes, Number, Term of Office and Qualification. At the
1997 Annual Meeting of Stockholders, the directors shall be classified into two
classes, as nearly equal in number as possible, with the term of office of the
first class to expire at the 1997 Annual Meeting of Stockholders and the term of
office of the second class to expire at the 1998 Annual Meeting of Stockholders.
At each Annual Meeting of Stockholders following such initial classification and
election, directors elected to succeed those directors whose terms expire shall
be elected for a term of office to expire at the second succeeding Annual
Meeting of Stockholders after their election. The number of Directors which
shall constitute the whole Board shall not be less than five nor more than nine.
The number of authorized directors shall be initially fixed at seven. Within the
limits above specified, the number of Directors shall be determined by
resolution of the Board of Directors or by the stockholders at the annual
meeting of the stockholders, except as provided in Section 2 of this Article,
and each Director elected shall hold office until his successor is elected and
qualified. Directors need not be stockholders.
Section 2. Vacancies. Vacancies and newly created Directorships
resulting from any increase in the authorized number of Directors may be filled
by a majority of the Directors then in office, though less than a quorum, or by
a sole remaining Director, and the Directors so chosen shall hold office until
the next annual election and until their successors are duly elected and shall
qualify, unless sooner displaced. If there are no Directors in office, then an
election of Directors may be held in the manner provided by statute. If, at the
time of filling any vacancy or any newly created Directorship, the Directors
then in office shall constitute less than a majority of the whole Board (as
constituted immediately prior to any such increase), the Court of Chancery may,
upon application of any stockholder or stockholders holding at least ten percent
of the total number of the shares at the time outstanding having the right to
vote for such Directors, summarily order an election to be held to fill any such
vacancies or newly created Directorships, or to replace the Directors chosen by
the Directors then in office.
Section 3. Powers. The business of the corporation shall be managed by
or under the direction of its Board of Directors which may exercise all such
powers of the corporation and do all such lawful acts and things as are not by
statute or by the Certificate of Incorporation or by these Bylaws directed or
required to be exercised or done by the stockholders.
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Section 4. Regular and Special Meetings. The Board of Directors of the
corporation may hold meetings, both regular and special, either within or
without the State of Delaware.
Section 5. Annual Meeting. The first meeting of each newly elected Board
of Directors shall be held at such time and place as shall be fixed by the vote
of the stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected Directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
Board of Directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the Board of Directors, or as shall be specified in a
written waiver signed by all of the Directors.
Section 6. Notice of Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at such time and at such place as shall
from time to time be determined by the Board.
Section 7. Notice of Special Meetings. Special meetings of the Board may
be called by the president on four (4) days' notice to each Director by mail or
48 hours' notice to each Director either personally or by telegram; special
meetings shall be called by the president or secretary in like manner and on
like notice on the written request of two Directors unless the Board consists of
only one Director, in which case special meetings shall be called by the
president or secretary in like manner and on like notice on the written request
of the sole Director.
Section 8. Quorum. At all meetings of the Board a majority of the
Directors shall constitute a quorum for the transaction of business and the act
of a majority of the Directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the Certificate of Incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
Directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 9. Action Without Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee.
Section 10. Meetings by Telephone Conference Calls. Unless otherwise
restricted by the Certificate of Incorporation or these Bylaws, members of the
Board of Directors, or any committee designated by the Board of Directors, may
participate in a
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meeting of the Board of Directors, or any committee, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in a
meeting shall constitute presence in person at the meeting.
Section 11. Committees. The Board of Directors may, by resolution passed
by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the Directors of the corporation. The
Board may designate one or more Directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee.
In the absence of disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the Certificate of Incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the Bylaws of the corporation; and,
unless the resolution or the Certificate of Incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the Board of Directors.
Each committee shall keep regular minutes of its meetings and
report the same to the Board of Directors when required.
Section 12. Fees and Compensation. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, the Board of Directors shall have
the authority to fix the compensation of Directors. The Directors may be paid
their expenses, if any, of attendance at each meeting of the Board of Directors
and may be paid a fixed sum for attendance at each meeting of the Board of
Directors or a stated salary as Director. No such payment shall preclude any
Director from serving the corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be allowed
like compensation for attending committee meetings.
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Section 13. Removal. Subject to any limitations imposed by law or the
Certificate of Incorporation, the Board of Directors, or any individual
Director, may be removed from office at any time, with or without cause, by the
affirmative vote of the holders of at least a majority of shares entitled to
vote at an election of Directors.
ARTICLE IV
NOTICES
Section 1. Notice. Whenever, under the provisions of the statutes or of
the Certificate of Incorporation or of these Bylaws, notice is required to be
given to any Director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
Director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to Directors may also be given by telegram.
Section 2. Waiver of Notice. Whenever any notice is required to be given
under the provisions of the statutes or of the Certificate of Incorporation or
of these Bylaws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
ARTICLE V
OFFICERS
Section 1. Enumeration. The officers of the corporation shall be chosen
by the Board of Directors and shall be a president and a secretary. The Board of
Directors may elect from among its members a Chairman of the Board and a Vice
Chairman of the Board. The Board of Directors may also choose a treasurer and/or
one or more vice presidents, assistant secretaries and assistant treasurers. Any
number of offices may be held by the same person, unless the Certificate of
Incorporation or these Bylaws otherwise provide.
The salaries of all officers and agents of the corporation shall be
fixed by the Board of Directors.
Section 2. Election or Appointment. The Board of Directors at its first
meeting after each annual meeting of stockholders shall choose a president and a
secretary and may choose a vice president and a treasurer.
The Board of Directors may appoint such other officers and agents as
it shall deem necessary who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the Board.
Section 3. Tenure, Removal and Vacancies. The officers of the
corporation shall hold office until their successors are chosen and qualified.
Any officer elected or appointed by the Board of Directors may be removed at any
time by the affirmative vote
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of a majority of the Board of Directors. Any vacancy occurring in any office of
the corporation shall be filled by the Board of Directors.
Section 4. Chairman of the Board. The Chairman of the Board, if any,
shall preside at all meetings of the Board of Directors and of the stockholders
at which he shall be present. He shall have and may exercise such powers as are,
from time to time, assigned to him by the Board and as may be provided by law.
Section 5. Vice Chairman of the Board. In the absence of the Chairman of
the Board, the Vice Chairman of the Board, if any, shall preside at all meetings
of the Board of Directors and of the stockholders at which he shall be present.
He shall have and may exercise such powers as are, from time to time, assigned
to him by the Board and as may be provided by law.
Section 6. President. The president shall be the chief executive officer
of the corporation; and in the absence of the Chairman and Vice Chairman of the
Board he shall preside at all meetings of the stockholders and the Board of
Directors; he shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect.
He shall execute bonds, mortgages and other contracts requiring a
seal, under the seal of the corporation, except where required or permitted by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the Board of Directors to some
other officer or agent of the corporation.
Section 7. Vice President. In the absence of the president or in the
event of his inability or refusal to act, the vice president, if any, (or in the
event there be more than one vice president, the vice presidents in the order
designated by the Directors, or in the absence of any designation, then in the
order of their election) shall perform the duties of the president, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the president. The vice presidents shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
Section 8. Secretary. The secretary shall attend all meetings of the
Board of Directors and all meetings of the stockholders and record all the
proceedings of the meetings of the corporation and of the Board of Directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors or president, under whose supervision he shall be. He shall have
custody of the corporate seal of the corporation and he, or an assistant
secretary, shall have authority to affix the same to any instrument requiring it
and when so affixed, it may be attested by his signature or by the signature of
such assistant secretary. The Board of Directors may give general authority to
any other officer to affix the seal of the corporation and to attest the
affixing by his signature.
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Section 9. Assistant Secretary. The assistant secretary, or, if there be
more than one, the assistant secretaries in the order determined by the Board of
Directors (or if there be no such determination, then in the order of their
election) shall, in the absence of the secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
secretary and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
Section 10. Treasurer. The treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the Board of
Directors.
He shall disburse the funds of the corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and shall
render to the president and the Board of Directors, at its regular meetings, or
when the Board of Directors so requires, an account of all his transactions as
treasurer and of the financial condition of the corporation.
If required by the Board of Directors, he shall give the corporation
a bond (which shall be renewed every six years) in such sum and with such surety
or sureties as shall be satisfactory to the Board of Directors for the faithful
performance of the duties of his office and for the restoration to the
corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 11. Assistant Treasurer. The assistant treasurer, or if there
shall be more than one, the assistant treasurers in the order determined by the
Board of Directors (or if there be no such determination, then in the order of
their election) shall, in the absence of the treasurer or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
treasurer and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Certificates of Stock. Every holder of stock in the
corporation shall be entitled to have a certificate, signed by, or in the name
of the corporation by, the chairman or vice chairman of the Board of Directors,
or the president or a vice president and the treasurer or an assistant
treasurer, or the secretary or an assistant secretary of the corporation,
certifying the number of shares owned by him in the corporation.
Certificates may be issued for partly paid shares and in such case
upon the face or back of the certificates issued to represent any such partly
paid shares, the total
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amount of the consideration to be paid therefor, and the amount paid thereon
shall be specified.
If the corporation shall be authorized to issue more than one class
of stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in Section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the corporation shall issue to represent such class or
series of stock, a statement that the corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
Section 2. Execution of Certificates. Any of or all the signatures on
the certificate may be facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the corporation with the
same effect as if he were such officer, transfer agent or registrar at the date
of issue.
Section 3. Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 4. Transfer of Stock. Upon surrender to the corporation or the
transfer agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
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Section 5. Fixing Record Date. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholder or any adjournment thereof, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting, nor more than sixty (60) days
prior to any other action. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
Section 6. Registered Stockholders. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of Delaware.
ARTICLE VII
INDEMNIFICATION
Section 1. Indemnification of Directors and Executive Officers. The
corporation shall indemnify its Directors and executive officers to the fullest
extent not prohibited by the Delaware General Corporation Law; provided,
however, that the corporation may limit the extent of such indemnification by
individual contracts with its Directors and executive officers; and, provided,
further, that the corporation shall not be required to indemnify any Director or
executive officer in connection with any proceeding or part thereof) initiated
by such person or any proceeding by such person against the corporation or its
Directors, officers, employees or other agents unless (i) such indemnification
is expressly required to be made by law, (ii) the proceeding was authorized by
the Board of Directors of the corporation, (iii) such indemnification is
provided by the corporation, in its sole discretion, pursuant to the powers
vested in the corporation under the Delaware General Corporation Law.
Section 2. Indemnification of Other Officers. Employees and Other
Agents. The corporation shall have power to indemnify its other officers,
employees and other agents as set forth in the Delaware General Corporation Law.
Section 3. Good Faith.
(a) For purposes of any determination under this Bylaw, a Director
or executive officer shall be deemed to have acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, to have had
no reasonable cause to
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believe that his conduct was unlawful, if his action is based on information,
opinions, reports and statements, including financial statements and other
financial data, in each case prepared or presented by:
(1) one or more officers or employees of the
corporation whom the Director or executive officer
believed to be reliable and competent in the matters
presented,
(2) counsel, independent accountants or other
persons as to matters which the Director or executive
officer believed to be within such person's
professional competence; and
(3) with respect to a Director, a committee of
the Board upon which such Director does not serve, as
to matters within such Committee's designated
authority, which committee the Director believes to
merit confidence; so long as, in each case, the
Director or executive officer acts without knowledge
that would cause such reliance to be unwarranted.
(b) The termination of any proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent shall
not, of itself, create a presumption that the person did not act in good faith
and in a manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal proceeding, that
he had reasonable cause to believe that his consent was unlawful.
(c) The provisions of this Section 3 shall not be deemed to be
exclusive or to limit in any way the circumstances in which a person may be
deemed to have met the applicable standard of conduct set forth by the Delaware
General Corporation Law.
Section 4. Expenses. The corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all expenses
incurred by any Director or executive officer in connection with such proceeding
upon receipt of an undertaking by or on behalf of such person to repay said
amounts if it should be determined ultimately that such person is not entitled
to be indemnified under this Bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant
to Section 4 of this Bylaw, no advance shall be made by the corporation if a
determination is reasonably and promptly made (i) by the Board of Directors by a
majority vote of a quorum consisting of Directors who were not parties to the
proceeding, or (ii) if such quorum is not obtainable, or, even if obtainable, a
quorum of disinterested Directors so directs, by independent legal counsel in a
written opinion, that the facts known to the decision-making parry at the time
such determination is made demonstrate clearly and
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convincingly that such person acted in bad faith or in a manner that such person
did not believe to be in or not opposed to the best interests of the
corporation.
Section 5. Enforcement. Without the necessity of entering into an
express contract, all rights to indemnification and advances to Directors and
executive officers under this Bylaw shall be deemed to be contractual rights and
be effective to the same extent and as if provided for in a contract between the
corporation and the Director or executive officer. Any right to indemnification
or advances granted by this Bylaw to a Director or executive officer shall be
enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The claimant in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. The corporation shall be entitled to raise as a
defense to any such action that the claimant has not met the standards of
conduct that make it permissible under the Delaware General Corporation Law for
the corporation to indemnify the claimant for the amount claimed. Neither the
failure of the corporation (including its Board of Directors, independent legal
counsel or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he has met the applicable standard of conduct set
forth in the Delaware General Corporation Law, nor an actual determination by
the corporation (including its Board of Directors, independent legal counsel or
its stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that claimant
has not met the applicable standard of conduct.
Section 6. Non-Exclusivity of Rights. The rights conferred on any person
by this Bylaw shall not be exclusive of any other right which such person may
have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or disinterested
Directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is specifically
authorized to enter into individual contracts with any or all of its Directors,
officers, employees or agents respecting indemnification and advances, to the
fullest extent not prohibited by the Delaware General Corporation Law.
Section 7. Survival of Rights. The rights conferred on any person by
this Bylaw shall continue as to a person who has ceased to be a Director,
officer, employee or other agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Section 8. Insurance. To the fullest extent permitted by the Delaware
General Corporation Law, the corporation, upon approval by the Board of
Directors, may purchase insurance on behalf of any person required or permitted
to be indemnified pursuant to this Bylaw.
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Section 9. Amendments. Any repeal or modification of this Bylaw shall
only be prospective and shall not affect the rights under this Bylaw in effect
at the time of the alleged occurrence of any action or omission to act that is
the cause of any proceeding against any agent of the corporation.
Section 10. Saving Clause. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each Director and executive officer to
the full extent not prohibited by any applicable portion of this Bylaw that
shall not have been invalidated, or by any other applicable law.
Section 11. Certain Definitions. For the purposes of this Bylaw, the
following definitions shall apply:
(a) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of the testimony
in, any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative.
(b) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of any
nature or kind incurred in connection with any proceeding.
(c) The term the "corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
Directors, officers, and employees or agents, so that any person who is or was a
Director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a Director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this Bylaw with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.
(d) References to a "Director," "officer," "employee," or "agent" of
the corporation shall include, without limitation, situations where such person
is serving at the request of the corporation as a Director, officer, employee,
trustee or agent of another corporation, partnership, joint venture, trust or
other enterprise.
(e) References to "other enterprises" shall include employee benefit
plans; references to "fines" shall include any excise taxes assessed on a person
with respect to an employee benefit plan; and references to "serving at the
request of the corporation" shall include any service as a Director, officer,
employee or agent of the corporation which imposes duties on, or involves
services by, such Director, officer,
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employee, or agent with respect to an employee benefit plan, its participants,
or beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this Bylaw.
ARTICLE VIII
Section 1. Loans to Officers. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the Corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance may
be with or without interest and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing in this bylaw shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
ARTICLE IX
GENERAL PROVISIONS
Section 1. Declaration of Dividends. Dividends upon the capital stock of
the corporation, subject to the provisions of the Certificate of Incorporation,
if any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.
Section 2. Dividend Reserve. Before payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the Directors from time to time, in their absolute discretion,
think proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purposes as the Directors shall think conducive to the interest
of the corporation, and the Directors may modify or abolish any such reserve in
the manner in which it was created.
Section 3. Execution of Corporate Instruments. All checks or demands for
money and notes of the corporation shall be signed by such officer or officers
or such other person or persons as the Board of Directors may from time to time
designate.
Section 4. Fiscal Year. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
Section 5. Corporate Seal. The Board of Directors may adopt a corporate
seal having inscribed thereon the name of the corporation, the year of its
organization and
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the words "Corporate Seal, Delaware." The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
Section 6. Annual Report.
(a) Subject to the provisions of paragraph (b) of this Bylaw, the
Board of Directors shall cause an annual report to be sent to each stockholder
of the corporation not later than one hundred twenty (120) days after the close
of the corporation's fiscal year. Such report shall include a balance sheet as
of the end of such fiscal year and an income statement and statement of changes
in financial position for such fiscal year, accompanied by any report thereon of
independent accounts or, if there is no such report, the certificate of an
authorized officer of the corporation that such statements were prepared without
audit from the books and records of the corporation. When there are more than
100 stockholders of record of the corporation's shares, as determined by Section
605 of the California Corporations Code, additional information as required by
Section 1501(b) of the California Corporations Code shall also be contained in
such report, provided that if the corporation has a class of securities
registered under Section 12 of the 1934 Act, that Act shall take precedence.
Such report shall be sent to stockholders at least fifteen (15) days prior to
the next annual meeting of stockholders after the end of the fiscal year to
which it relates.
(b) If and so long as there are fewer than 100 holders of record of
the corporation's shares, the requirement of sending of an annual report to the
stockholders of the corporation is hereby expressly waived.
ARTICLE X
AMENDMENTS
Section 1. Amendments.
(a) Except as otherwise set forth in Section 9 of Article VII of
these Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by the
affirmative vote of a majority of the voting power of all of the
then-outstanding shares of capital stock of the corporation entitled to vote
generally in the election of Directors (the "Voting Stock"). The Board of
Directors shall also have the power, if such power is conferred upon the Board
of Directors by the Certificate of Incorporation, to adopt, amend or repeal
Bylaws.
(b) Notwithstanding any other provisions of these Bylaws or any
provision of law which might otherwise permit a lesser vote or no vote, but in
addition to any affirmative vote of the holders of any particular class or
series of the Voting Stock required by law, the Certificate of Incorporation or
any Preferred Stock Designation (as the term is defined in the Certificate of
Incorporation), the affirmative vote of the holders of at least a majority of
the voting power of all of the then-outstanding shares of the Voting Stock,
voting together as a single class, shall be required to alter, amend or repeal
this paragraph (b) or Section 2 or Section 10 of Article II or Section 1 of
Article III of these Bylaws.
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CERTIFICATE OF SECRETARY
The undersigned, being the Secretary of Interact Medical Technologies
Corporation, a Delaware corporation, does hereby certify the foregoing to be the
Bylaws of said Corporation, as adopted by the incorporator and Directors of the
Corporation and which remain in full force and effect as of the date hereof.
Executed at San Diego, California effective as of ___________________,
1996.
-----------------------------
David Otto, Secretary
<PAGE> 1
Exhibit 10.1
<PAGE> 2
VOTING AGREEMENT AND IRREVOCABLE PROXY
This Voting Agreement And Irrevocable Proxy (the "Agreement") is made
and entered into as of the 24th day of May, 1996 by and among Baxter Healthcare
Corporation, a Delaware corporation ("Baxter") and Maxal Capital Corporation, a
New York corporation ("Maxal").
WHEREAS, pursuant to the terms and conditions of an Agreement and Plan
of Reorganization of even date herewith, Ixion, Inc., a Delaware corporation
(of which Maxal is the majority stockholder) is being merged (the "Merger")
with and into Medical Media Systems, Inc. ("MMS"), a Delaware corporation (of
which Baxter is the majority stockholder) after which the name of MMS shall
be changed to Interact Medical Technologies Corporation ("Interact");
WHEREAS, subsequent to the Merger, Maxal and Baxter shall be
stockholders of Interact and Maxal shall own, of record and beneficially,
695,030 shares of Interact common stock (the "Shares"); and
WHEREAS, the parties desire to provide for a voting agreement upon the
terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which is acknowledged, the
parties hereto hereby agree as follows:
1. Agreement to Vote and Irrevocable Proxy.
1.1 Agreement to Vote. Maxal hereby agrees that at any meeting of the
stockholders of Interact, however called, and in any action by written consent
of the stockholders of Interact, Maxal shall vote all its Shares in such a
manner as to elect one director nominated by Baxter.
1.2 Irrevocable Proxy. Maxal hereby constitutes and appoints Baxter
which shall act by and through Stuart Foster or Jay P. Wertheim (each, a "Proxy
Holder"), and each of them, with full power of substitution, its true and
lawful proxy and attorney-in-fact to vote at any and all meetings of the
stockholders of Interact, whether annual or special, and at any adjournment or
adjournments or postponements of any such meetings, and to execute and deliver
any written consent of stockholders in lieu of any such meeting, all Shares
which Maxal beneficially owns as of the date of any such meeting or written
consent, in such manner as Baxter sees fit in the exercise of its sole
discretion. Notwithstanding the foregoing, such proxy shall be limited
strictly to the power to vote such Shares in the manner set forth in
Section 1.1 hereof and shall not extend to any other matters.
The proxy and power of attorney granted herein shall be irrevocable
during the term of this Agreement, shall be deemed to be coupled with an
interest sufficient in law to support an irrevocable proxy and shall revoke all
prior proxies granted by Maxal, which in any way conflicts herewith. Maxal
shall not grant any proxy to any person which conflicts with the proxy granted
herein, and any attempt to do so shall be void. The power of attorney granted
herein is a durable power of attorney and shall survive the disability or
incompetence of any representative of Maxal.
<PAGE> 3
In the event that Maxal fails for any reason to vote its Shares in
accordance with the requirements of Section 1.1 hereof, then the Proxy Holder
shall have the right to vote such shares at any meeting of the Interact
stockholders and in any action by written consent of the Interact stockholders
in accordance with the provisions of this Section 1.2. The vote of the Proxy
Holder shall control in any conflict between his vote of such Shares and a vote
by Maxal of such Shares.
2. Representations and Warranties of Maxal. Maxal represents and
warrants to Baxter as follows:
2.1 Ownership of Shares. The Shares are owned of record and
beneficially by Maxal, free and clear of all liens or encumbrances, and
constitute all the shares of common stock of Interact owned of record and
beneficially by Maxal.
2.2 Power; Binding Agreement. Maxal has full legal right, power and
authority to enter into and perform all of its obligations under this
Agreement. The execution and delivery of this Agreement by Maxal, and the
consummation of the transactions contemplated hereby will not violate any other
agreement to which Maxal is a party including, without limitation, any voting
agreement, stockholders' agreement or voting trust. This Agreement has been
duly executed and delivered by Maxal and constitutes a legal, valid and binding
agreement of Maxal, enforceable in accordance with its terms to the fullest
extent permitted by law.
3. Covenants of Maxal. Maxal agrees, while this Agreement is in
effect, to:
(a) not sell, exchange, transfer, pledge, encumber, assign or
otherwise dispose of, or enter into any contract, option or other arrangement
or understanding with respect to the sale, exchange, transfer, pledge,
encumbrance, assignment or other disposition of, any Shares unless the
transferee of such Shares shall agree to be bound by the terms and provisions
of this Agreement; and
(b) use its best efforts to cause Interact to provide reasonable
notice to Baxter of all meetings of Interact's board of directors, to afford a
designee of Baxter the right to attend all such meetings and to provide Baxter
with copies of the minutes of such meetings within a reasonable period after
each such meeting.
4. Termination. This Agreement shall terminate on the closing date of
Interact's initial public offering on a registration statement on Form S-1
which results in gross offering proceeds of at least $10 million.
5. Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
6. Legend. Each certificate for Shares shall bear a legend stating in
substance as follows, and Maxal shall cause its certificates to be so legended
promptly after the execution of this Agreement:
"The rights of the holder of these shares are subject to the terms and
provisions of a certain Voting Agreement and Irrevocable Proxy dated as
of May 24, 1996."
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7. Severability. The provisions set forth in this Agreement are
severable. If any provision of this Agreement is held invalid or unenforceable
in any jurisdiction, the remainder of this Agreement, and the application of
such provision to other persons or circumstances, shall not be affected
thereby, and shall remain valid and enforceable in such jurisdiction, and any
such invalidity or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
8. Injunctive Relief. The parties agree that in the event of a breach
of any provision of this Agreement, the aggrieved party may be without an
adequate remedy at law. The parties therefore agree that in the event of a
breach of any provision of this Agreement, the aggrieved party may elect to
institute and prosecute proceedings in any court of competent jurisdiction to
enforce specific performance or to enjoin the continuing breach of such
provision, as well as to obtain damages for breach of this Agreement. By
seeking or obtaining any such relief, the aggrieved party will not be
precluded from seeking or obtaining other relief to which it may be entitled.
9. Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the internal laws of the
State of Delaware.
IN WITNESS WHEREOF, each of the parties have caused this Agreement
to be duly executed and delivered on the day and year first above written.
BAXTER HEALTHCARE CORPORATION MAXAL CAPITAL CORPORATION
By: /s/ Jay P. Wertheim By:
-------------------------- -----------------------------
Name: Jay P. Wertheim Name:
----------------------- --------------------------
Title: Vice President, Law Title:
Cardiovascular Group -------------------------
--------------------
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<PAGE> 5
7. Severability. The provisions set forth in this Agreement are
severable. If any provision of this Agreement is held invalid or unenforceable
in any jurisdiction, the remainder of this Agreement, and the application of
such provision to other persons or circumstances, shall not be affected
thereby, and shall remain valid and enforceable in such jurisdiction, and any
such invalidity or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
8. Injunctive Relief. The parties agree that in the event of a breach
of any provision of this Agreement, the aggrieved party may be without an
adequate remedy at law. The parties therefore agree that in the event of a
breach of any provision of this Agreement, the aggrieved party may elect to
institute and prosecute proceedings in any court of competent jurisdiction to
enforce specific performance or to enjoin the continuing breach of such
provision, as well as to obtain damages for breach of this Agreement. By
seeking or obtaining any such relief, the aggrieved party will not be
precluded from seeking or obtaining other relief to which it may be entitled.
9. Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the internal laws of the
State of Delaware.
IN WITNESS WHEREOF, each of the parties have caused this Agreement
to be duly executed and delivered on the day and year first above written.
BAXTER HEALTHCARE CORPORATION MAXAL CAPITAL CORPORATION
By: By: /s/ Bruce D. Sturman
-------------------------- -----------------------------
Name: Name: Bruce D. Sturman
----------------------- --------------------------
Title: Title: V. President
-------------------- -------------------------
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EXHIBIT 10.2
<PAGE> 2
DISTRIBUTION AGREEMENT
This Distribution Agreement (the "Agreement") is made and entered
into as of May 24, 1996, by and between Interact Medical Technologies
Corporation, a Delaware corporation (the "Supplier") and Baxter Healthcare
Corporation, a Delaware corporation (the "Distributor").
RECITALS
Baxter Medical Media Holdings, Inc., a Delaware corporation and
wholly owned subsidiary of Distributor, previously owned a majority interest in
Medical Media Systems, a New Hampshire general partnership ("MMS"). The partners
of MMS exchanged their partnership interests for shares of Medical Media
Systems, Inc., a Delaware corporation and subsequently Ixion, Inc., a Delaware
corporation, was merged with and into Medical Media Systems, Inc., which then
changed its name to Interact Medical Technologies Corporation, to create the
Supplier.
Supplier and Distributor desire to establish in this Agreement
certain terms and conditions concerning the marketing, sale and distribution of
certain products developed and provided by Supplier.
AGREEMENT
In consideration of the following mutual covenants and agreements,
and subject to the terms and conditions set forth herein, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. The following definitions shall be applicable to
the terms set forth below as used in this Agreement:
(a) "Affiliate." The term "Affiliate" shall mean with respect to
any Person, any Person which directly or indirectly through one or more
intermediaries, controls, is controlled by or is under common control with such
Person.
(b) "Agreement." The term "Agreement" shall mean this Distribution
Agreement dated as of the date set forth above by and between Distributor and
Supplier.
(c) "Capacity Date." The term "Capacity Date" shall mean the date
ninety (90) days after Supplier has notified Distributor in writing that
Supplier has established the capacity to produce one hundred (100) Products per
month.
(d) "Contract Year. " The term "Contract Year" shall have the
meaning set forth in Section 3.2 hereof.
<PAGE> 3
(e) "Delivery Minimum." The term "Delivery Minimum" shall have the
meaning set forth in Section 3.1 hereof.
(f) "End User." The term "End User" shall mean any Person that
orders the Product who is a healthcare provider or employs or is otherwise
affiliated with healthcare providers.
(g) "End User Price." The term "End User Price" shall mean the
actual sales price received by Supplier or Distributor from an End User of the
Product, provided that such End User Price shall not be less than 90% of the
applicable List Price without the mutual consent of Supplier and Distributor.
(h) "Information." The term "Information" shall have the meaning
set forth in Section 5 hereof.
(i) "Initial Period." The term "Initial Period" shall have the
meaning set forth in Section 3.2 hereof.
(j) "List Price." The term "List Price" shall mean the
manufacturer's suggested list price for the Product as set forth on Exhibit A,
as may be revised by Supplier from time to time.
(k) "Merger Agreement." The term "Merger Agreement" shall mean the
Agreement and Plan of Reorganization dated May 24, 1996 by and between Ixion,
Inc., a predecessor Delaware corporation and Medical Media Systems, Inc., a
Delaware corporation.
(l) "Person." The term "Person" shall mean an individual, a
corporation, a partnership, a trust or unincorporated organization or any other
entity or organization.
(m) "Product." The term "Product" shall mean the product for use in
connection with aortic and illiac aneurysms provided by Supplier as prepared
with information supplied by the purchaser of the Product through the use of the
Preview(TM) Aortic and Illiac Aneurysm Technology (the "Preview Technology"),
together with all enhancements, modifications, revisions, developments and
improvements thereto, and shall include the customized Product referred to in
Section 2.1(c) hereof
(n) "Specifications." The term "Specifications" shall mean the
performance, quality and reliability requirements of the Product. Supplier shall
prepare the written Specifications for the Product.
(o) "Technology." The term "Technology" shall mean all written
materials and other works which may be subject to copyright and all patentable
and unpatentable inventions, discoveries, ideas, data, know-how and other
intellectual property.
(p) "Transfer Price." The term "Transfer Price" shall mean 70% of
the End User Price for the first ten units purchased by a specific End User and
77% of the End User Price for each unit purchased thereafter by such End User.
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<PAGE> 4
1.2 Additional Definitions. In addition to the foregoing, other
capitalized terms appearing in this Agreement shall have the meanings given to
them where they first appear herein.
ARTICLE II
ELEMENTS OF RELATIONSHIP
2.1 Product.
(a) Distributor is hereby granted a co-exclusive, worldwide right
(subject to Section 2.1(b) hereof) to market, distribute and sell the Product,
and Supplier shall provide Distributor with Specifications and information
requested with respect to the Product, subject to the terms set forth below.
Distributor shall not sublicense its rights hereunder to any Person other than
Persons who distribute other Distributor products in countries where Distributor
does not maintain a direct sales force.
(b) Supplier shall retain (i) the right to sell the Product to
other Persons developing or manufacturing devices specifically designed for the
endovascular treatment of aortic aneurysms and (ii) subject to Section 2.2
hereof, the exclusive right to market, distribute and sell products for uses
other than in connection with peripheral vascular surgery; provided, however,
that Supplier shall not market, distribute or sell the Product to End Users of
such Product, nor shall Supplier grant the right to market, distribute or sell
the Product to any other Person.
(c) Supplier agrees to develop a customized Product for Distributor
pursuant to mutually agreed upon development schedules and specifications for
the exclusive marketing, distribution and sale by Distributor. Supplier shall
not retain any rights to market, distribute or sell the customized Product to
any Person. Distributor shall pay Supplier's reasonable development costs, as
mutually agreed upon by Supplier and Distributor.
2.2 Other Products. Following any definition of any future product
developed by Supplier in the fields of peripheral vascular surgery and/or
endovascular grafting ("Other Products"), Supplier shall inform Distributor in
writing that it shall have the right to make the first offer for the right to
market, distribute and sell each such Other Product. Distributor shall, within
sixty (60) days of such notice, deliver to Supplier a written offer which shall
state the price and other terms and conditions of the proposed distribution
arrangement. Supplier shall notify Distributor in writing as to whether it
accepts or declines the offer within thirty (30) days. Supplier may reject
Distributor's offer; provided, however, that Supplier may not grant the right to
market, distribute or sell the Other Product to any other Person on terms and
conditions which are more favorable than those offered by Distributor.
2.3 Term and Renewal. The rights granted to Distributor pursuant to
Section 2.1 of this Agreement with respect to the Product shall expire on the
fifth anniversary of the Capacity Date (the "Initial Term"), provided that such
rights shall automatically be extended for an additional term of five years (the
"Option Term"), unless Distributor gives written notice to Supplier of its
election to terminate such rights with respect to the Product. The Initial Term
and the Option Term shall be collectively referred to as the "Term." This
Agreement shall terminate
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<PAGE> 5
on the date Distributor's rights under Section 2.1 expire, subject to prior
termination pursuant to Section 8.1 hereof.
2.4 Manufacturing License.
(a) In the event that (i) Supplier fails to complete the
development of the Preview Technology substantially in accordance with the
schedule attached hereto as Exhibit B, (ii) this Agreement is terminated due to
a breach by Supplier pursuant to Section 8.1 hereof or (iii) Supplier fails or
is unable for any reason to fulfill during any calendar quarter at least 90% of
the Delivery Minimum in a timely fashion, then Distributor shall be entitled to
exercise its rights pursuant to the Manufacturing License Agreement attached
hereto as Exhibit C.
(b) Within thirty (30) days after the date hereof, Supplier and
Distributor shall enter into a technology escrow agreement, mutually agreeable
to the parties, pursuant to which Supplier shall place in escrow all documents
and instructions reasonably necessary for Distributor to effectuate its rights
under the Manufacturing License Agreement, and which shall provide that Supplier
shall update such escrowed materials on a quarterly basis.
ARTICLE III
DISTRIBUTION TERMS
3.1 Ordering; Forecasts. Orders of the Product placed by End Users
or Distributor shall be subject to all the terms and conditions of this
Agreement, which shall have precedence over the terms of any purchase order
issued by Distributor or acceptance issued by Supplier, save in respect of
quantities, prices and delivery dates. At least ten (10) days prior to the
beginning of each calendar quarter (the "Applicable Quarter"), Distributor shall
deliver to Supplier a forecast of projected orders for the next twelve month
period. Unless Supplier notifies Distributor in writing of any objections within
ten (10) days of receipt of any such forecast, the forecast for the Applicable
Quarter shall be deemed to be the Delivery Minimum for such Applicable Quarter.
Supplier agrees that it shall meet at least the Delivery Minimum if orders are
placed for such number of Product. Notwithstanding the foregoing, the parties
agree that the Delivery Minimum for any quarter shall be no greater than [one
hundred and ten percent (110%)] of the number of units of Product ordered during
the immediately preceding calendar quarter.
3.2 Minimum Order Guaranty.
(a) During the initial twelve months after the Capacity Date (the
"Initial Period"), Distributor will guaranty Supplier that total sales from
orders for the Product for End Users will equal or exceed $350,000. In the event
that total sales to Distributor and End Users during the Initial Period do not
equal or exceed $350,000, Distributor shall, promptly after the expiration of
the Initial Period, pay Supplier 70% of the difference between $350,000 and
total sales for the Initial Period and receive credit for future orders of that
number of Product units equal to the quotient of the amount paid divided by the
average Transfer Price for the previous twelve months (the calculation of such
average Transfer Price shall exclude sales pursuant to Section 3.3(c) hereof).
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<PAGE> 6
(b) For each twelve-month period following the Initial Period
(each, a "Contract Year") during the Initial Term of this Agreement, Distributor
shall guaranty Supplier that total sales to Distributor and End Users for each
Contract Year shall equal or exceed the product of 1,000 multiplied by the
average End User Price for the previous Contract Year (or the Initial Period if
calculated during the first Contract Year). In the event that total sales to
Distributor and End Users for any Contract Year do not equal or exceed such
amount, Distributor shall (a) promptly after the expiration of such Contract
Year, pay Supplier 70% of the shortfall and receive credit for future orders of
that number of Product units equal to the quotient of the amount paid divided by
the average Transfer Price for the previous Contract Year (or the Initial Period
if calculated during the first Contract Year) and (b) at Distributor's option,
terminate this Agreement.
(c) Prior to the expiration of the Initial Term, Supplier and
Distributor shall negotiate in good faith a minimum order guaranty for the
Option Term.
3.3 Pricing and Commissions.
(a) The End User Price shall be determined by Distributor based
upon its assessment of End Users and market conditions. Distributor may revise
such prices from time to time.
(b) With respect to sales by Supplier directly to the End User, the
commission payable by Supplier to Distributor with respect to each Product unit
sold shall be equal to thirty percent (30%) of the End User Price for the first
ten units purchased by a specific End User and twenty-three percent (23%) of the
End User Price for each unit purchased thereafter by such End User.
(c) With respect to sales by Supplier to Distributor, the purchase
price payable by Distributor to Supplier with respect to each Product unit shall
be equal to the applicable Transfer Price; provided, however, that Distributor
shall have the right to purchase up to 200 units of Product in the Initial
Period and each Contract Year for a purchase price equal to $500 per Product
unit.
3.4 Payment and Supplier Reports. Commissions shall be payable by
Supplier to Distributor or the purchase price shall be payable by Distributor to
Supplier, as the case may be, within thirty (30) days of the date a Product is
delivered to an End User. Following the end of each fiscal quarter of Supplier,
Supplier shall provide Distributor with a report of the Products sold during
such quarter, which report shall contain the name and address of End Users to
whom Products were sold, the number of Product units sold to each End User and
the End User Price for each Product unit. Distributor shall have the right, at
its expense, to audit the books and records of Supplier to confirm the accuracy
of the report prepared pursuant to this Section 3.4.
3.5 Delivery Time. Supplier agrees to use its commercially
reasonable efforts to complete a Product ordered by an End User or Distributor
within 72 hours of the receipt by Supplier of the necessary information from the
End User to complete the Product.
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ARTICLE IV
DUTIES OF DISTRIBUTOR AND SUPPLIER
4.1 Distributor's Duties. During the Term of this Agreement,
Distributor shall:
(a) Advertise and promote the Products by such methods as in
Distributor's judgment are reasonably suited for the sale of such Products and
deliver a budget with respect to the next twelve months for such advertisement
and promotion to Supplier at the beginning of each Contract Year;
(b) Provide Supplier, upon request, with copies of the reports
relating to clinical evaluations utilizing the Product;
(c) Not give any warranty not provided for in this Agreement to any
persons or customers, nor assume liabilities on Supplier's behalf, unless
otherwise specifically agreed to in writing by Supplier;
(d) Not use Supplier's name in advertising without the prior
written consent of Supplier, except to state that the Product is provided by
Interact Medical Technologies Corporation for Baxter Healthcare Corporation; and
(e) Not sell any aortic or illiac aneurysm products that are
directly competitive with the Product.
4.2 Supplier's Duties. During the Term of this Agreement, Supplier
shall:
(a) Conduct a peer-reviewed clinical evaluation demonstrating the
clinical equivalence or superiority to preoperative angiography and use its
commercially reasonable efforts to eliminate capacity constraints related to the
Product.
(b) Permit a duly authorized representative of Distributor to enter
and inspect, upon reasonable notice, during normal business hours, the
establishments in which the Products are prepared in order to determine whether
the Products are being prepared in conformity with the terms of this Agreement
and any practices established by the United States Food and Drug Administration,
and further agrees to provide Distributor with access to such documents as may
be reasonably required to determine whether the Products are being prepared in
accordance with the provisions of this Agreement;
(c) Notify Distributor in advance and in writing of any proposed
change in the Product or the Specifications;
(d) Consider in good faith all reasonably requested changes to the
Product and the Specifications to enhance salability and marketability of the
Product;
(e) Provide sales training, demonstration materials, customer
training, technical support and clinical studies each in quantities that are
commercially adequate; and
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(f) Use all reasonable commercial efforts to fill in a timely
fashion orders for Products in quantities at least equal to the Delivery
Minimum, and to advise Distributor in advance of Supplier's inability to make
full and timely delivery of Products ordered hereunder.
4.3 Quality Control.
(a) The Products shall meet the Specifications and the Product
preparation process shall be subjected to quality control inspection by
Distributor. In furtherance of this provision, Supplier shall permit Distributor
to review periodically Supplier's Product preparation process and quality
control procedures and records.
(b) In the event that either party receives any complaint regarding
the Product, it shall notify the other party promptly. Supplier will be
responsible for evaluating these complaints and responding to Distributor in
writing. Distributor will make a preliminary evaluation of each complaint it
receives and will conduct all follow-up and communication which it deems
appropriate.
(c) Supplier will notify Distributor immediately of any inspection
of its facilities by a federal, state or local regulatory agency as well as the
results of such inspection.
ARTICLE V
CONFIDENTIALITY
5.1 Confidentiality. In order to avoid disclosure of confidential
and proprietary information ("Information") to any other person, firm or
corporation, the parties agree that for a period of three years from the
expiration or termination of this Agreement, each will treat any such
information which is received from one another in writing and clearly marked
"Confidential" with the same degree of care that each employs with respect to
its own information which it does not desire to have published or disseminated.
It is understood that each party shall be liable for any unauthorized disclosure
should it fail to safeguard the disclosed Information with such care. This
obligation shall survive the termination of this Agreement. The parties shall
not have any obligation with respect to such Information which can be shown by
the party receiving the Information to be:
(a) independently developed by the receiving party without the
benefit of the disclosure or is already known to the receiving party at the time
of the disclosure;
(b) publicly known or becomes publicly known without the wrongful
act or breach of this Agreement by the receiving party; or
(c) rightfully received by the receiving party from a third-party
not in breach of any confidentiality agreement with the originating party.
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ARTICLE VI
WARRANTIES AND INDEMNIFICATION
6.1 Warranties. SUPPLIER WARRANTS THAT THE PRODUCT WILL CONFORM
WITH THE SPECIFICATIONS IN EFFECT AT THE TIME OF DELIVERY TO AN END USER AND
SHALL BE FREE FROM DEFECTS IN WORKMANSHIP AND MATERIALS. EXCEPT AS SET FORTH
ABOVE OR AUTHORIZED IN WRITING BY SUPPLIER, SUPPLIER DISCLAIMS ALL WARRANTIES,
EXPRESS OR IMPLIED, INCLUDING ALL WARRANTIES OF MERCHANTABILITY AND FITNESS FOR
A PARTICULAR PURPOSE. DISTRIBUTOR AGREES TO PROVIDE NO WARRANTIES OTHER THAN
THOSE SET FORTH ABOVE OR PRE-APPROVED BY SUPPLIER IN WRITING.
6.2 Supplier Indemnification.
(a) Supplier hereby indemnifies and agrees to defend and to hold
Distributor, its successors, assigns, customers and End Users of the Product
harmless from and against all claims, liabilities, losses or expenses (including
attorneys' fees) arising out of or in connection with the sale, performance or
use of the Product, unless such claims, liabilities, losses or expenses arise
from the gross negligence or willful misconduct of Distributor. Supplier shall
obtain and keep in force during the term of this Agreement general comprehensive
liability insurance covering each occurrence of bodily injury and property
damage in an amount of not less than $5,000,000 combined single limit with
special endorsements providing coverage for:
(i) Products and Completed Operations Liability;
(ii) Blanket Contractual Liability; and
(iii) Blanket Broad Form Supplier Liability.
The insurance policy shall be endorsed to name Distributor as an additional
insured and to provide for written notification to Distributor by the insurer
not less than 30 days prior to cancellation, expiration or modification. A
certificate of insurance evidencing compliance with this Section and referencing
this Agreement shall be furnished to Distributor within thirty (30) days of the
date of this Agreement.
(b) Supplier hereby indemnifies and agrees to defend and to hold
Distributor harmless from and against all claims, liabilities, losses or
expenses (including attorneys' fees) of Distributor arising out of or in
connection with the infringement of patents, trademarks, copyrights or other
intellectual property rights arising out of the use or sale of the Product under
this Agreement. Distributor shall communicate to Supplier all charges of alleged
infringement within a reasonable time after their receipt. Distributor will
cooperate with Supplier in defending or otherwise resolving each charge of
infringement. Supplier agrees to bear all costs and expenses of litigation,
including attorneys' fees in connection with such alleged infringement, and
Supplier will reimburse Distributor for each disbursement made by Distributor in
satisfaction of any judgment issued in such litigation. Notwithstanding anything
to the contrary in this Article VI, the foregoing indemnity shall not apply to
any claim brought against Distributor to the
8
<PAGE> 10
extent it is based upon a claim that the Technology or any part thereof as in
existence on the date hereof directly infringes any patents, trademarks,
copyrights or other intellectual property rights.
6.3 Distributor Indemnification. Distributor hereby indemnifies and
agrees to defend and to hold Supplier, its successors, assigns, customers and
End Users of the Product harmless from and against all claims, liabilities,
losses or expenses (including attorneys' fees) arising out of or in connection
with the sale of the Product by Distributor to the extent that such claims,
liabilities, losses or expenses arise from (a) the gross negligence or willful
misconduct of Distributor or (b) any warranty with respect to the Product made
by Distributor to an End User that exceeds the warranties provided in this
Agreement or pre-approved by Supplier in writing.
ARTICLE VII
REGULATORY MATTERS
7.1 Regulatory Responsibility and Labeling. Supplier shall be
responsible, at its sole expense, for complying with all applicable regulatory
requirements relating to the sale or use of the Products within the United
States, Europe and Japan including premarket filings and other requirements of
the FDA. Subject to Section 2.1(c), Supplier, at its expense, shall produce and
provide all artwork, labeling, product inserts and packaging related to the
Product provided that Distributor shall have reviewed and approved in writing
each use or display on such artwork, labels, inserts or packaging of any
trademark, trade name or logo owned or used by Distributor. If a trademark,
trade name or logo owned or used by Distributor or its parent corporation is
used in connection with the Product, the labeling shall state "Distributed by
Baxter Healthcare Corporation." Supplier shall obtain prior written
authorization from Distributor for all changes to the artwork, labels, inserts
or packaging related to the Product. Each use of a trademark, trade name or logo
owned or used by Distributor on or in connection with the Product shall inure to
the benefit of Distributor and its parent company. Should any such use vest in
Supplier any rights in a trademark, trade name or logo used by Distributor,
Supplier shall transfer such rights to Distributor or its designee upon request
of Distributor. Except as provided in this Agreement, Supplier shall not use any
trademark, trade name or logo used or claimed by Distributor or any confusingly
similar trademark, trade name or logo during or after the term of this
Agreement. Supplier shall reimburse Distributor for expenses incurred in
providing requested assistance to Supplier in connection with this Section 7.1.
7.2 Product Recall. In the event that Supplier recalls any of the
Products sold pursuant to this Agreement because the Products are believed to
violate any provision of applicable law or because of design, packaging,
labeling or other issues potentially affecting the safety, use or efficacy of
the Products, Supplier shall bear all costs and expenses of such recall,
including, without limitation, obligations to third parties, costs of notifying
customers and costs associated with the shipment of recalled materials from End
Users to Supplier. The parties will cooperate fully with each other in effecting
any recall of the Products, including communications with any purchasers or End
Users.
7.3 Product Registration. Supplier shall, if necessary, register
the Product with the appropriate governmental agencies. Distributor shall assist
in acquiring such registrations but
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<PAGE> 11
shall not, without permission from Supplier, undertake any such Product
registration in its own name.
ARTICLE VIII
TERMINATION
8.1 Events of Termination. Either party shall have the right to
terminate this Agreement immediately upon written notice if (a) any proceeding,
suit or action relating to bankruptcy, reorganization, arrangement of debt,
insolvency, adjustment of debt, receivership, liquidation or dissolution law or
statute shall be filed voluntarily by the other party, (b) any proceeding, suit
or action relating to bankruptcy, reorganization, arrangement of debt,
insolvency, adjustment of debt, receivership, liquidation or dissolution law or
statute shall have been involuntarily filed against the other party and not
dismissed within 90 days thereafter, or such other party shall have been
adjudged insolvent or bankrupt or (c) the other party fails to cure any material
breach of this Agreement within thirty (30) days after written notice of any
such breach.
8.2 Procedures on Termination. Upon the termination of this
Agreement for whatever reason, Supplier shall continue to honor orders for
Products and pay commissions to Distributor for Products ordered prior to the
effective date of termination.
8.3 Effects of Termination.
(a) Termination of this Agreement shall not affect any liability of
any party to the other party which has accrued under this Agreement but is still
outstanding at the time of such termination nor affect the right of any party to
claim damages by reason of any breach of this Agreement by the other party prior
to such termination.
(b) Upon termination of this Agreement, Distributor shall promptly
return to Supplier, without charge, all sales promotional and service materials
in its possession which Supplier has previously supplied.
(c) Supplier's and Distributor's obligations under Article VI and
Supplier's obligations under Section 2.4 of this Agreement shall survive any
termination of this Agreement.
ARTICLE IX
GENERAL PROVISIONS
9.1 Governing Law. This Agreement will be governed and construed in
accordance with the laws of the State of California, excluding its conflicts of
law rules.
9.2 Force Majeure. The obligations of either party to perform under
this Agreement shall be excused during each period of delay caused by matters
such as fire, riots, flood, strikes, shortages of fuel, power, raw materials, or
supplies, government orders, freight embargo, transportation delays, or acts of
God, which are reasonably beyond the control of the party obligated to perform.
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<PAGE> 12
9.3 Assignment. Neither party shall transfer or assign this
Agreement or any of its rights or obligations hereunder, without the written
consent of the other party provided, however, that this Agreement may be
assigned by Supplier or Distributor to any of its Affiliates.
9.4 Attorneys' Fees. If either party to this Agreement shall bring
any action, suit, counterclaim or appeal for any relief against the other,
declaratory or otherwise, to enforce the terms hereof or to declare rights
hereunder (collectively, an "Action"), the prevailing party shall be entitled to
recover as part of any such Action its reasonable attorneys' fees and costs,
including any fees and costs incurred in enforcing any order, judgment, ruling
or award granted as part of such Action. "Prevailing party" within the meaning
of this section includes, without limitation, a party who agrees to dismiss an
Action upon the other party's payment of all or a portion of the sums allegedly
due or performance of the covenants allegedly breached, or who obtains
substantially the relief sought by it.
9.5 Notices. Any notice or demand required or permitted to be given
to a party pursuant to the provision of this Agreement will be in writing and
will be effective and deemed given under this Agreement on the earliest of: (a)
the date of personal delivery, (b) the date of transmission by facsimile, with
confirmed answer back, (c) the business day after deposit with a nationally
recognized overnight delivery service or (d) three (3) business days after
deposit in the United States mail by registered or certified mail. All notices
not delivered personally or by facsimile will be sent with postage and other
charges prepaid and properly addressed to the party to be notified at the
following address:
SUPPLIER: DISTRIBUTOR:
INTERACT MEDICAL BAXTER HEALTHCARE CORPORATION
TECHNOLOGIES CORPORATION Vascular Systems Division
654 Madison Avenue 17221 Red Hill Avenue
Suite 1606 Irvine, California 92714
New York, New York 10021 Fax: (714) 250-2426
Fax: (212) 319-3519 Attention: President
Attention: President
9.6 Miscellaneous Provisions.
(a) The headings of each section of this Agreement have been
inserted for convenience and reference only and will not affect the
interpretation or construction of the provisions of this Agreement.
(b) This Agreement constitutes the entire agreement and
understanding among the parties hereto with respect to the specific subject
matter hereof and supersedes and cancels all previous negotiations,
representations, undertakings and agreements heretofore made by the parties with
respect to the specific subject matter hereof
(c) The failure of a party hereto at any time to require
performance by another party hereto of any provision of this Agreement will in
no way affect the full right to require such
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performance at any time thereafter, nor will the waiver by a party hereto of a
breach of any provision of this Agreement by another party hereto constitute a
waiver of any succeeding breach of the same or any other such provision by such
party nor constitute a waiver of the provision itself.
(d) This Agreement may not be modified except by a written
instrument executed by duly authorized representatives of the parties hereto.
(e) If any term or provision of this Agreement is for any reason
held to be invalid, illegal or unenforceable in any respect, such term or
provision will be enforced to the maximum extent possible, and such invalidity,
illegality or unenforceability will not affect any other term or provision of
this Agreement, and this Agreement will be interpreted and construed as if such
term or provision, to the extent which it is invalid, illegal or unenforceable,
had never been contained in this Agreement, provided that no such severability
shall be effective if it causes a material detriment to either party.
(f) Any payments, pricing or commissions referred to in this
Agreement shall be in U.S. dollars.
(g) The parties to this Agreement are independent of each other and
nothing herein shall be construed as creating a joint venture, partnership or
other type of alliance.
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<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered by their proper and duly authorized officers
as of the date first above written.
"DISTRIBUTOR"
Baxter Healthcare Corporation
By: /s/ Stu Foster
-------------------------------------
Stu Foster
President, Vascular Systems Division
"SUPPLIER"
Interact Medical Technologies Corporation
By:
--------------------------------------
Name:
--------------------------------
Title:
-------------------------------
Attachment
Exhibit A - Description of Product and List Price
Exhibit B - Preview Technology Development Schedule
Exhibit C - Manufacturing License
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<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered by their proper and duly authorized officers
as of the date first above written.
"DISTRIBUTOR"
Baxter Healthcare Corporation
By:
--------------------------------------
Stu Foster
President, Vascular Systems Division
"SUPPLIER"
Interact Medical Technologies Corporation
By: /s/ Bruce D. Sturman
--------------------------------------
Name: Bruce D. Sturman
---------------------------------
Title: C.E.O.
--------------------------------
Attachment
Exhibit A - Description of Product and List Price
Exhibit B - Preview Technology Development Schedule
Exhibit C - Manufacturing License
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<PAGE> 16
EXHIBIT A
TO DISTRIBUTION AGREEMENT
The manufacturer's suggested list price for the Product shall be
$950.00 per unit on an individual basis or $750.00 per unit for sales of ten or
more units to the same End User in any twelve-month period.
<PAGE> 17
EXHIBIT B
TO DISTRIBUTION AGREEMENT
The following milestones shall be met by June 1, 1997:
- - - Interact shall have achieved production capacity of 100 Product units per
month,
- - - Interact shall have achieved connectivity solution to obtain CT data from
major scanner brands, and
- - - Interact shall have undertaken to complete clinical trials to establish
clinical efficacy, cost-effectiveness and reimbursement plan.
<PAGE> 1
EXHIBIT 10.3
<PAGE> 2
CREDIT AGREEMENT
This CREDIT AGREEMENT (the "Agreement") is made and entered into as of
May 24, 1996 by and between Baxter Healthcare Corporation, a Delaware
corporation (the "Lender") and Interact Medical Technologies Corporation, a
Delaware corporation (the "Borrower").
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, have the
following meanings:
"Affiliate" means (i) any Person (other than the Borrower and its
Subsidiaries) directly or indirectly controlling, controlled by, or under common
control with the Borrower or (ii) any Person (other than the Borrower and its
subsidiaries) that owns or controls 20% or more of any class of equity
securities of the Borrower or any of its Subsidiaries or Affiliates. For the
purposes of this definition, "control" (including with correlative meanings, the
terms "controlling", "controlled by," and "under common control with"), as
applied to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of that
Person, whether through the ownership of voting securities or by contract or
otherwise.
"Borrower" means Interact Medical Technologies Corporation, a Delaware
corporation, and its successors, and any of its subsidiaries.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the State of California are authorized by law to
close.
"Cash Equivalents" means and refers to when used in connection with any
Person, that Person's Investment in: (a) marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one (1) year from the date of acquisition thereof; (b)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing with one (1) year from the date of acquisition
thereof and, at the time of acquisition, having the credit rating of at least AA
from Standard & Poor's Corporation or Aa from Moody's Investors Service, Inc.;
(c) commercial paper maturing no more than one (1) year from the date of
creation thereof and, at the time of acquisition, having a credit rating of at
least AA from either Standard & Poor's Corporation or Aa from Moody's Investors
Service, Inc.; (d) certificates of deposit or bankers' acceptances maturing
within one (1) year from the date of acquisition thereof issued by any bank
organized under the laws of the United States of America or any state thereof of
the District of Columbia which has combined capital and surplus of not less than
One Billion Dollars ($1,000,000,000); or (e) money market funds organized under
the laws of the United States of
<PAGE> 3
America or any state thereof that invest solely in any of the Investments
permitted under clauses (a), (b), (c), and (d) of this definition.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of 1985.
"Contingent Obligation" means and refers to, as to any Person, any direct
or indirect liability, contingent or otherwise, of that Person with respect to
any indebtedness, lease, dividend, letter of credit or other obligation of
another, including any such obligation directly or indirectly guaranteed,
endorsed (other than for collection or deposit in the ordinary course of
business), co-made or discounted or sold with recourse by that Person, or in
respect of which that Person is otherwise directly or indirectly liable,
including any such obligation for which that Person is in effect liable through
any agreement (contingent or otherwise) to purchase, repurchase, or otherwise
acquire such obligation or any security therefor, or to provide funds for the
payment or discharge of such obligation (whether in the form of loans, advances,
stock purchases, capital contributions, or otherwise), or to maintain the
solvency or any balance sheet, income, or other financial condition of the
obligor of such obligation, or to make payment for any products, materials, or
supplies or for any delivery or non-furnishing thereof, in any such case if the
purpose or intent of such agreement is to provide assurance that such obligation
will be paid or discharged, or that any agreements relating thereto will be
complied with, or that the holders of such obligation will be protected (in
whole or in part) against loss in respect thereof. The amount of any Contingent
Obligation shall be equal to the amount of the outstanding obligation so
guaranteed or otherwise supported unless limited by its terms to a lesser
amount, in which case such lesser amount.
"Common Stock" means the Common Stock, par value $0.01, of Borrower.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person as lessee which are capitalized in
accordance with generally accepted accounting principles, (v) all Debt secured
by a Lien on any asset of such Person, whether or not such Debt is otherwise an
obligation of such Person, (vi) all Debt of others Guaranteed by such Person.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Effective Date" means the date this Agreement becomes effective in
accordance with Section 6.07.
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<PAGE> 4
"Equipment" means and refers to any and all of Borrower's presently
existing and hereafter acquired machinery, equipment, tools, motors, fixtures,
parts, jigs, and other goods (other than Inventory and consumer goods), and all
attachments, accessories, replacements, substitutions, additions, or
improvements thereto, wherever located, and the proceeds and products of any of
the foregoing.
"Event of Default" has the meaning set forth in Section 5.01.
"GAAP" means generally accepted accounting principles in the United
States of America.
"Guarantee" by any Person means any obligation, contingent or otherwise,
of such Person directly or indirectly guaranteeing any Debt of any other Person
and, without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Debt (whether
arising by virtue of partnership arrangements, by agreement to keep-well, to
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for the
purpose of assuring in any other manner the obligee of such Debt of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part), provided that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"Inventory" means and refers to all of Borrower's presently existing and
hereafter acquired goods held for sale or lease or to be furnished under a
contract of service, including all of Borrower's presently existing and
hereafter acquired raw materials, work in process, and finished goods, wherever
located, together with all containers, packing, packaging, shipping, and similar
materials, and the products and proceeds of any of the foregoing.
"Investment" means and refers to, as to any Person, any direct or
indirect purchase or other acquisition by that Person of, or beneficial interest
in, stock or other securities of any other Person, or any direct or indirect
loan, advance or capital contribution by that Person to any other Person,
including all indebtedness and accounts receivable from that other Person which
do not arise form sales to that other Person in the ordinary and usual course of
business. The amount of any Investment shall be the original cost of such
Investment plus the cost of all additions thereto, without any adjustments for
increases or decreases in value, or write-ups, write-downs or write-offs with
respect to such Investment.
"knowledge" means such party's actual knowledge after due and diligent
inquiry of officers, directors and other employees of such party reasonably
believed to have knowledge of such matters.
"Lender" means Baxter Healthcare Corporation, a Delaware corporation, and
its successors.
3
<PAGE> 5
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has the practical effect of creating a security
interest in respect of such asset. For the purposes of this Agreement, the
Borrower or any Subsidiary shall be deemed to own subject to a Lien any asset
which it has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement relating to such asset.
"Loan" shall mean the $2,000,000 principal amount of the Note.
"Loan Documents" shall mean this Agreement and the Note.
"material" with respect to any entity or group of entities means any
material event, change, condition or effect related to the condition (financial
or otherwise), properties, assets (including intangible assets), liabilities,
business, operations or results of operations of such entity or group of
entities in this Agreement.
"Material Adverse Effect" with respect to any entity or group of entities
means any event, change or effect that is materially adverse to the condition
(financial or otherwise), properties, assets (including intangible assets),
liabilities, business, operations or results or operations of such entity and
its subsidiaries, taken as a whole.
"Material Debt" means Debt (other than the Note) of the Borrower arising
in one or more related or unrelated transactions, in an aggregate principal
amount exceeding $25,000.
"Merger Agreement" means the Agreement and Plan of Reorganization of even
date herewith by and between Ixion, Inc. and Medical Media Systems, Inc.
"Note" means the promissory note of the Borrower, substantially in the
form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the
Loan.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"SEC" means the U.S. Securities and Exchange Commission.
"Securities" shall mean all rights to acquire Common Stock pursuant to
the promissory notes listed on Schedule 1.01 attached hereto.
"Stock Option Plan" means the Interact 1994 Stock Option Plan.
"Subsidiary" means any corporation or other entity of which securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are at the
time directly or indirectly owned by the Borrower.
"Tax" or "Taxes" means all federal, state, local, foreign or other taxes
including net income, alternative minimum or add-on minimum tax, gross income,
unitary, gross receipts, sales,
4
<PAGE> 6
use, intangible, ad valorem, franchise, profits, license, withholding on amounts
paid to or by the Borrower, payroll, employment, excise, severance, stamp,
transfer, occupation, premium, property or environmental windfall profit tax,
custom, duty or other tax, governmental fee or other like assessment or change
of any kind whatsoever, together with any interest or penalty, addition to tax
or additional amount imposed by any jurisdiction or any nation or government,
any state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Tax Return" means all returns or material reports or forms required to
be filed with any nation or government, any state or other political subdivision
thereof and any entity exercising executive, legislative, judicial, regulatory
or administrative functions of or pertaining to government with respect to Tax.
SECTION 1.02. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with
generally accepted accounting principles as in effect from time to time.
ARTICLE II
FUNDING OF LOAN
SECTION 2.01. Loan. Subject to the terms and conditions of this Agreement
and in reliance upon the representations and warranties of Borrower contained
herein, Lender shall have funded to Borrower as of the Effective Date the amount
of $2,000,000 (the "Loan"). The amount borrowed under the Loan and repaid may
not be reborrowed.
SECTION 2.02. Note. Concurrently with the execution of this Agreement,
Borrower shall execute and deliver to Lender a Note to evidence the Loan, such
Note to be in the principal amount of the Loan and with other appropriate
insertions.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BORROWER
Except as disclosed on Schedules 2 or 3 attached hereto, which shall
specifically reference the applicable representations and warranties in this
Agreement (the "Disclosure Schedules"), Borrower represents and warrants to
Lender as follows:
SECTION 3.01. Organization, Standing and Power. Borrower is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization. Borrower has the corporate power to own its
properties and to carry on its business as now being conducted and as proposed
to be conducted and is duly qualified to do business and is in good standing in
each jurisdiction in which the failure to be so qualified and in good standing
would have a Material Adverse Effect on Borrower. Borrower has delivered a true
and correct copy of its Certificate of Incorporation and Bylaws or other charter
documents, as applicable, each as amended to date, to Lender. Borrower is not in
violation of any of the provisions of its
5
<PAGE> 7
Certificate of Incorporation or Bylaws or equivalent organizational documents.
There are no outstanding subscriptions, options, warrants, puts, calls, rights,
exchangeable or convertible securities or other commitments or agreements of any
character relating to the issued or unissued capital stock, or otherwise
obligating Borrower to issue, transfer, sell, purchase, redeem or otherwise
acquire any such securities. Borrower does not directly or indirectly own any
equity or similar interest in, or any interest convertible or exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity.
SECTION 3.02. Capital Structure. The authorized capital stock of Borrower
consists of 10,000,000 shares of Common Stock, $0.01 par value, of which there
are issued and outstanding 3,133,347 shares. There are no other outstanding
shares of capital stock or voting securities and no outstanding commitments to
issue any shares of capital stock or voting securities other than pursuant to
(i) the exercise of options outstanding as of the date hereof under the Stock
Option Plan and (ii) the Securities. All outstanding shares of Common Stock are
duly authorized, validly issued, fully paid and non-assessable and are free of
any liens or encumbrances other than any liens or encumbrances created by or
imposed upon the holders thereof, and are not subject to preemptive rights or
rights of first refusal created by statute, the Certificate of Incorporation or
Bylaws of Borrower or any agreement to which Borrower is a party or by which it
is bound. Borrower has reserved 237,132 shares of Common Stock for issuance to
employees and consultants pursuant to the Stock Option Plan, of which 3,557
shares have been issued pursuant to option exercises or direct stock purchases,
74,360 shares are subject to outstanding, unexercised options, and no shares are
subject to outstanding stock purchase rights. Except for (i) the rights created
pursuant to this Agreement, (ii) Borrower's right to repurchase any unvested
shares under the Stock Option Plan and (iii) Borrower's obligations to issue
shares of its Common Stock pursuant to the Securities, there are no other
options, warrants, calls, rights, commitments or agreements of any character to
which Borrower is a party or by which it is bound obligating Borrower to issue,
deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any shares of capital stock of Borrower or obligating
Borrower to grant, extend, accelerate the vesting of, change the price of, or
otherwise amend or enter into any such option, warrant, call, right, commitment
or agreement. There are no contracts, commitments or agreements relating to
voting, purchase or sale of Borrower's capital stock (i) between or among
Borrower and any of its stockholders and (ii) to the best of Borrower's
knowledge, between or among any of Borrower's stockholders. True and complete
copies of all agreements and instruments relating to or issued under the Stock
Option Plan have been made available to Lender and such agreements and
instruments have not been amended, modified or supplemented, and there are no
agreements to amend, modify or supplement such agreements or instruments in any
case from the form made available to Lender.
SECTION 3.03. Authority. Borrower has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Borrower. This Agreement has
been duly executed and delivered by Borrower and constitutes the valid and
binding obligation of Borrower enforceable against Borrower in accordance with
its terms. The execution and delivery of this Agreement by Borrower does not,
and the consummation of the
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transactions contemplated hereby will not, conflict with, or result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any benefit under (i) any provision of the Certificate
of Incorporation or Bylaws of Borrower, or (ii) any material mortgage,
indenture, lease, contract or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Borrower or any of its properties or assets, except
where such conflict, violation, default, termination, cancellation or
acceleration with respect to the foregoing provisions of (ii) would not have had
and would not reasonably be expected to have a Material Adverse Effect on
Borrower.
SECTION 3.04. Financial Statements. Borrower has delivered to Lender
audited financial statements for its predecessor entities (balance sheet and
profit and loss statement, statement of stockholders' equity and statement of
changes in financial position) at December 31, 1995, and for the fiscal year
then ended and unaudited financial statements (balance sheet and profit and loss
statement) at and for the 3-month period ended March 31, 1996 (collectively, the
"Financial Statements"). The Financial Statements are complete and correct in
all material respects and have been prepared in accordance with GAAP applied on
a consistent basis throughout the periods indicated and with each other, except
that unaudited Financial Statements may not contain all footnotes required by
GAAP and have not been condensed as required by GAAP. The Financial Statements
accurately set out and describe the financial condition and operating results of
Borrower as of the dates, and for the periods, indicated therein, subject to
normal year-end adjustments. Except as set forth in the Financial Statements,
Borrower has no liabilities, contingent or otherwise, other than (a) liabilities
incurred in the ordinary course of business since March 31,1996, (b) liabilities
set forth on the Disclosure Schedules and (c) obligations under contracts and
commitments incurred in the ordinary course of business and not required under
GAAP to be reflected in the Financial Statements, which, in each case,
individually or in the aggregate, are not material to the financial condition or
operating results of Borrower. Borrower maintains and will continue to maintain
a standard system of accounting established and administered in accordance with
GAAP.
SECTION 3.05. Absence of Certain Changes. Except for the transactions
contemplated by the Merger Agreement, since March 31,1996, Borrower has
conducted its business in the ordinary course consistent with past practice and
there has not occurred: (i) any change, event or condition (whether or not
covered by insurance) that has resulted in, or might reasonably be expected to
result in, a Material Adverse Effect to Borrower; (ii) any acquisition, sale or
transfer of any material asset of Borrower other than in the ordinary course of
business and consistent with past practice; (iii) any change in accounting
methods or practices (including any change in depreciation or amortization
policies or rates) by Borrower or any revaluation by Borrower of any of its
assets; (iv) any declaration, setting aside, or payment of a dividend or other
distribution with respect to the shares of Borrower, or any direct or indirect
redemption, purchase or other acquisition by Borrower of any of its shares of
capital stock; (v) any material contract entered into by Borrower, other than in
the ordinary course of business and as provided to Lender, or any material
amendment or termination of, or default under, any material contract to which
Borrower is a party or by which it is bound; or (vi) any negotiation or
agreement by Borrower to do any of the things described in the preceding clauses
(i) through (v) (other than negotiations with Lender and its representatives
regarding the transactions contemplated by this Agreement).
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SECTION 3.06. Subsidiaries. Borrower does not presently own or control,
directly or indirectly, an interest in any other corporation, association or
business entity.
SECTION 3.07. Absence of Undisclosed Liabilities. Borrower has no
material obligations or liabilities of any nature (matured or unmatured, fixed
or contingent) other than (i) those set forth or adequately provided for in the
Financial Statements, (ii) those incurred in the ordinary course of business and
not required to be set forth in the Financial Statements under generally
accepted accounting principles, (iii) those incurred in the ordinary course of
business since March 31,1996, and consistent with past practice; and (iv) those
incurred in connection with the execution of this Agreement.
SECTION 3.08. Material Contracts. All contracts, agreements and
instruments to which Borrower is a party, which involve future revenue to or
payments by Borrower that are material, are listed in the Disclosure Schedule
(collectively, the "Material Contracts"). Except as set forth in the Disclosure
Schedule, all the Material Contracts are in full force and effect in all
material respects. Borrower has no notice that any party to any such Material
Contract intends to cancel, withdraw, modify or amend such Material Contract.
Borrower is not in material default or breach, and no event has occurred or will
occur by reason of the transactions contemplated in this Agreement which would
constitute a default or breach, where such default or breach would entitle
another party to this Agreement to accelerate or terminate such Material
Contract or otherwise impose a material penalty or forfeiture thereunder
(whether with or without notice, lapse of time or the happening or occurrence of
any other event), under any Material Contract.
SECTION 3.09. Litigation. There is no private or governmental action,
suit, proceeding, claim, arbitration or investigation pending before any agency,
court or tribunal, foreign or domestic, or, to the knowledge of Borrower
threatened against Borrower or any of its properties or any of its officers or
directors (in their capacities as such) that, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect on Borrower.
There is no judgment, decree or order against Borrower or, to the knowledge of
Borrower any of its respective directors or officers (in their capacities as
such), that could prevent, enjoin, alter or materially delay any conduct or
practice in connection with the business engaged in by MMS or any of the
transactions contemplated by this Agreement, or that could reasonably be
expected to have a Material Adverse Effect on Borrower.
SECTION 3.10. Restrictions on Business Activities. There is no material
agreement, judgment, injunction, order or decree binding upon Borrower which has
the effect of prohibiting or materially impairing any current or future business
practice of Borrower, any acquisition of property by Borrower or the conduct of
business by Borrower as currently conducted or as proposed to be conducted by
Borrower.
SECTION 3.11. Governmental Authorization. Borrower has obtained each
federal, state, county, local or foreign governmental consent, license, permit,
grant, or other authorization of a governmental entity (i) pursuant to which
Borrower currently operates or holds any interest in any of its properties or
(ii) that is required for the operation of Borrower's business or the holding of
any such interest ((i) and (ii) herein collectively called "Authorizations"),
and all of such
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Authorizations are in full force and effect, except where the failure to obtain
or have any of such Authorizations could not reasonably be expected to have a
Material Adverse Effect on Borrower.
SECTION 3.12. Title to Property. Borrower has good and valid title to all
of its properties, interests in properties and assets, real and personal,
reflected in the Financial Statements or acquired after March 31, 1996 (except
properties, interests in properties and assets sold or otherwise disposed of
since March 31, 1996 in the ordinary course of business), or in the case of
leased properties and assets, valid leasehold interests in, free and clear of
all mortgages, liens, pledges, charges or encumbrances of any kind or character,
except (i) the lien of current taxes not yet due and payable, (ii) such
imperfections of title, liens and easements as do not and will not materially
detract from or interfere with the use of the properties subject thereto or
affected thereby, or otherwise materially impair business operations involving
properties and (iii) liens securing debt which is reflected on the Financial
Statements. The plants, property and equipment of Borrower that are used in the
operations of its business are in good operating condition and repair. All
properties used in the operations of Borrower are reflected in the Financial
Statements to the extent GAAP requires the same to be reflected. Schedule 3.12
attached hereto identifies each parcel of real property owned or leased by
Borrower.
SECTION 3.13. Intellectual Property.
(a) Borrower owns, or is licensed or otherwise possesses legally
enforceable rights to use all patents, trademarks, trade names, service marks,
copyrights, and any applications therefor, maskworks, net lists, schematics,
technology, know-how, trade secrets, inventory, ideas, algorithms, processes,
computer software programs or applications (in both source code and object code
form), and tangible or intangible proprietary information or material
("Intellectual Property") that is used in the business of Borrower as currently
conducted by Borrower, except to the extent that the failure to have such rights
have not had and would not reasonably be expected to have a Material Adverse
Effect on Borrower.
(b) Schedule 3.13 attached hereto lists (i) all patents and patent
applications and all registered and unregistered trademarks, trade names and
service marks, registered and unregistered copyrights, and maskworks, which
Borrower considers to be material to its business and included in the
Intellectual Property, including the jurisdictions in which each such
Intellectual Property right has been issued or registered or in which any
application for such issuance and registration has been filed, (ii) all material
licenses, sublicenses and other agreements as to which Borrower is a party and
pursuant to which any person is authorized to use any Intellectual Property, and
(iii) all material licenses, sublicenses and other agreements as to which
Borrower is a party and pursuant to which Borrower is authorized to use any
third party patents, trademarks or copyrights, including software ("Third Party
Intellectual Property Rights") which are incorporated in, are, or form a part of
any Borrower product that is material to its business.
(c) To the knowledge of Borrower, there is no material unauthorized
use, disclosure, infringement or misappropriation of any Intellectual Property
rights, any trade secret material to Borrower, or any Intellectual Property
right of any third party to the extent licensed by or through Borrower, by any
third party, including any employee or former employee of Borrower. Borrower has
not entered into any agreement to indemnify any other person against
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any charge of infringement of any intellectual property, other than
indemnification provisions contained in purchase orders arising in the ordinary
course of business.
(d) Borrower is not, nor will it be as a result of the execution
and delivery of this Agreement or the performance of its obligations under this
Agreement, in breach of any license, sublicense or other agreement relating to
the Intellectual Property or Third Party Intellectual Property Rights, the
breach of which would have a Material Adverse Effect on Borrower.
(e) To Borrower's knowledge, all patents, registered trademarks,
service marks and copyrights held by Borrower are valid and subsisting. Borrower
(i) has not been sued in any suit, action or proceeding which involves a claim
of infringement of any patents, trademarks, service marks, copyrights or
violation of any trade secret or other proprietary right of any third party;
(ii) has no knowledge that the manufacturing, marketing, licensing or sale of
its products infringes any patent, trademark, service mark, copyright, trade
secret or other proprietary right of any third party, which such infringement
would have a Material Adverse Effect on Borrower; and (iii) has not brought any
action, suit or proceeding for infringement of Intellectual Property or breach
of any license or agreement involving Intellectual Property against any third
party.
(f) Borrower has secured valid written assignments from all
consultants and employees who contributed to the creation or development of
Intellectual Property of the rights to such contributions that Borrower does not
already own by operation of law, except where the failure to secure such
assignments would not have a Material Adverse Effect on Borrower.
(g) Borrower has taken all reasonable and appropriate steps to
protect and preserve the confidentiality of all Intellectual Property not
otherwise protected by patents, or patent applications or copyright
("Confidential Information"). To the knowledge of Borrower, all use, disclosure
or appropriation of Confidential Information by or to a third party has been
pursuant to the terms of a written agreement between Borrower and such third
party. To the knowledge of Borrower, all use, disclosure or appropriation of
Confidential Information not owned by Borrower has been pursuant to the terms of
a written agreement between Borrower and the owner of such Confidential
Information, or is otherwise lawful.
SECTION 3.14. Environmental Matters.
(a) The following terms shall be defined as follows when used
Section 3.14:
(i) "Environmental and Safety Laws" shall mean any federal,
state or local laws, ordinances, codes, regulations, rules,
policies and orders that are intended to assure the protection of
the environment, or that classify, regulate, call for the
remediation of, require reporting with respect to, or list or
define air, water, groundwater, solid waste, hazardous or toxic
substances, materials, wastes, pollutants or contaminants, or which
are intended to assure the safety of employees, workers or other
persons, including the public.
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(ii) "Hazardous Materials" shall mean any toxic or hazardous
substance, material or waste or any pollutant or contaminant, or
infectious or radioactive substance or material defined in or
regulated under any Environmental and Safety Laws.
(iii) "Property" shall mean all real property leased or owned
by Borrower either currently or in the past.
(iv) "Facilities" shall mean all buildings and improvements on
the Property of Borrower.
(b) Borrower represents and warrants as follows: (i) no methylene
chloride or asbestos is contained in or has been used at or released from the
Facilities; (ii) to the knowledge of Borrower, all Hazardous Materials and
wastes have been disposed of in accordance with all Environmental and Safety
Laws; (iii) Borrower has received no notice (verbal or written) of any
noncompliance of the Facilities or its past or present operations with
Environmental and Safety Laws; (iv) no notices, administrative actions or suits
are pending or, to the knowledge of Borrower, threatened relating to a violation
of any Environmental and Safety Laws; (v) to the knowledge of Borrower, Borrower
is not a potentially responsible party under CERCLA, or state analog statute,
arising out of events occurring prior to the Closing Date; (vi) to the knowledge
of Borrower, there have not been in the past, and are not now, any underground
tanks or underground improvements at, on or under the Property including without
limitation, treatment or storage tanks, sumps, or water, gas or oil wells; (vii)
to the knowledge of Borrower, there are no PCBs deposited, stored, disposed of
or located on the Property or Facilities or any equipment on the Property
containing PCBs at levels in excess of 50 parts per million; (viii) to the
knowledge of Borrower, the facilities and Borrower's uses and activities therein
comply with Environmental Health and Safety laws; and (ix) Borrower has all
environmental health and safety permits and licenses required to be issued and
is in compliance with the terms and conditions of those permits.
SECTION 3.15. Taxes. Borrower and any consolidated, combined, unitary or
aggregate group for Tax purposes of which Borrower has been a member have timely
filed all Tax Returns required to be filed by it, have paid all Taxes shown
thereon to be due and has provided adequate accruals in accordance with GAAP in
its financial statements for any Taxes that have not been paid, whether or not
shown as being due on any Tax Returns. No material claim for Taxes has become a
lien against the property of Borrower or is being asserted against Borrower
other than liens for Taxes not yet due and payable. No audit of any Tax Return
of Borrower is being conducted by a Tax authority. No extension of the statute
of limitations on the assessment of any Taxes has been granted by Borrower and
is currently in effect. There is no agreement, contract or arrangement to which
Borrower is a party that may result in the payment of any amount that would not
be deductible by reason of Sections 280G, 162 or 404 of the Code. Borrower is
not a party to any tax sharing or tax allocation agreement nor does Borrower owe
any amount under any such agreement. Borrower is in full compliance with all
terms and conditions of any Tax exemptions or other Tax-sparing agreement or
order of a foreign government.
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SECTION 3.16. Employee Benefit Plans.
(a) Schedule 3.16 attached hereto lists, with respect to Borrower
and any trade or business (whether or not incorporated) which is treated as a
single employer with Borrower (an "ERISA Affiliate") within the meaning of
Section 414(b), (c), (m) or (o) of the Code, (i) all material employee benefit
plans (as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")), (ii) each loan to a non-officer employee in
excess of $50,000, loans to officers and directors and any stock option, stock
purchase, phantom stock, stock appreciation right, supplemental retirement,
severance, sabbatical, medical, dental, vision care, disability, employee
relocation, cafeteria benefit (Code section 125) or dependent care (Code Section
129), life insurance or accident insurance plans, programs or arrangements,
(iii) all bonus, pension, profit sharing, savings, deferred compensation or
incentive plans, programs or arrangements, (iv) other fringe or employee benefit
plans, programs or arrangements that apply to senior management of Borrower and
that do not generally apply to all employees, and (v) any current or former
employment or executive compensation or severance agreements, written or
otherwise, as to which unsatisfied obligations of Borrower of greater than
$50,000 remain for the benefit of, or relating to, any present or former
employee, consultant or director of Borrower (together, the "Employee Plans").
(b) Borrower has furnished to Lender a copy of each of the Employee
Plans and related plan documents (including trust documents, insurance policies
or contracts, employee booklets, summary plan descriptions and other authorizing
documents, and, to the extent still in its possession, any material employee
communications relating thereto) and has, with respect to each Employee Plan
which is subject to ERISA reporting requirements, provided copies of the Form
5500 reports filed for the last three plan years. Any Employee Plan intended to
be qualified under Section 401(a) of the Code has either obtained from the
Internal Revenue Service a favorable determination letter as to its qualified
status under the Code, including all amendments to the Code effected by the Tax
Reform Act of 1986 and subsequent legislation, or has applied to the Internal
Revenue Service for such a determination letter prior to the expiration of the
requisite period under applicable Treasury Regulations or Internal Revenue
Service pronouncements in which to apply for such determination letter and to
make any amendments necessary to obtain a favorable determination. Borrower has
also furnished Lender with the most recent Internal Revenue Service
determination letter issued with respect to each such Employee Plan, and nothing
has occurred since the issuance of each such letter which could reasonably be
expected to cause the loss of the tax-qualified status of any Employee Plan
subject to Code Section 401(a).
(c) (i) None of the Employee Plans promises or provides retiree
medical or other retiree welfare benefits to any person; (ii) there has been no
"prohibited transaction," as such term is defined in Section 406 of ERISA and
Section 4975 of the Code, with respect to any Employee Plan, which could
reasonably be expected to have, in the aggregate, a Material Adverse Effect;
(iii) each Employee Plan has been administered in accordance with its terms and
in compliance with the requirements prescribed by any and all statutes, rules
and regulations (including ERISA and the Code), except as would not have, in the
aggregate, a Material Adverse Effect, and Borrower and each ERISA Affiliate have
performed all obligations required to be performed by them under, are not in any
respect in default under or violation of, and have no knowledge of any default
or violation by any other party to, any of the Employee Plans, which
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default or violation could reasonably be expected to have a Material Adverse
Effect on Borrower; (iv) neither Borrower nor any ERISA Affiliate is subject to
any liability or penalty under Sections 4976 through 4980 of the Code or Title I
of ERISA with respect to any of the Employee Plans; (v) all material
contributions required to be made by Borrower or any ERISA Affiliate to any
Employee Plan have been made on or before their due dates and a reasonable
amount has been accrued for contributions to each Employee Plan for the current
plan years; (vi) with respect to each Employee Plan, no "reportable event"
within the meaning of Section 4043 of ERISA (excluding any such event for which
the thirty (30) day notice requirement has been waived under the regulations to
Section 4043 of ERISA) nor any event described in Section 4062, 4063 or 4041 or
ERISA has occurred; and (vii) no Employee Plan is covered by, and neither
Borrower nor any ERISA Affiliate has incurred or expects to incur any liability
under Title IV of ERISA or Section 412 of the Code. With respect to each
Employee Plan subject to ERISA as either an employee pension plan within the
meaning of Section 3(2) of ERISA or an employee welfare benefit plan within the
meaning of Section 3(1) of ERISA, Borrower has prepared in good faith and timely
filed all requisite governmental reports (which were true and correct as of the
date filed) and has properly and timely filed and distributed or posted all
notices and reports to employees required to be filed, distributed or posted
with respect to each such Employee Plan. No suit, administrative proceeding,
action or other litigation has been brought, or to the best knowledge of
Borrower is threatened, against or with respect to any such Employee Plan,
including any audit or inquiry by the IRS or United States Department of Labor.
Neither Borrower nor any ERISA Affiliate is a party to, or has made any
contribution to or otherwise incurred any obligation under, any "multiemployer
plan" as defined in Section 3(37) of ERISA
(d) With respect to each Employee Plan, Borrower has complied with
(i) the applicable health care continuation and notice provisions of COBRA and
the proposed regulations thereunder and (ii) the applicable requirements of the
Family Leave Act of 1993 and the regulations thereunder, except to the extent
that such failure to comply would not, in the aggregate, have a Material Adverse
Effect.
(e) The consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former employee or other service
provider of Borrower, or any ERISA Affiliate to severance benefits or any other
payment, except as expressly provided in this Agreement, or (ii) accelerate the
time of payment or vesting, or increase the amount of compensation due any such
employee or service provider.
(f) There has been no amendment to, written interpretation or
announcement (whether or not written) by Borrower, or any ERISA Affiliate
relating to, or change in participation or coverage under, any Employee Plan
which would materially increase the expense of maintaining such Plan above the
level of expense incurred with respect to that Plan for the most recent fiscal
year included in the Financial Statements.
SECTION 3.17. Employee Matters. Borrower is in compliance in all respects
with all currently applicable laws and regulations respecting employment,
discrimination in employment, terms and conditions of employment, wages, hours
and occupational safety and health and employment practices, and is not engaged
in any unfair labor practice, except where the failure to be in compliance or
the engagement in such unfair labor practices would not have a Material
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Adverse Effect on Borrower. There are no pending claims against Borrower under
any workers compensation plan or policy or for long term disability. Borrower
has not incurred any obligations under COBRA with respect to any former
employees or qualifying beneficiaries thereunder, except for obligations that
would not have a Material Adverse Effect on Borrower. There are no controversies
pending or, to the knowledge of Borrower, threatened, between Borrower and any
of its respective employees, which controversies have or could reasonably be
expected to have a Material Adverse Effect on Borrower. Borrower is not a party
to any collective bargaining agreement or other labor unions contract nor does
Borrower know of any activities or proceedings of any labor union to organize
any such employees.
SECTION 3.18. Interested Party Transactions. Borrower is not indebted to
any director, officer, employee or agent of Borrower (except for amounts due as
normal salaries and bonuses and in reimbursement of ordinary expenses), and no
such person is indebted to Borrower.
SECTION 3.19. Insurance. Borrower has policies of insurance and bonds of
the type and in amounts customarily carried by persons conducting businesses or
owning assets similar to those of Borrower. There is no material claim pending
under any of such policies or bonds as to which coverage has been questioned,
denied or disputed by the underwriters of such policies or bonds. All premiums
due and payable under all such policies and bonds have been paid and Borrower is
otherwise in compliance in all material respects with the terms of such policies
and bonds. Borrower has no knowledge of any threatened termination of, or
material premium increase with respect to, any of such policies.
SECTION 3.20. Compliance With Laws. Borrower has complied with, is not in
violation of, and has not received any notices of violation with respect to, any
federal, state, local or foreign statute, law or regulation with respect to the
conduct of its business, or the ownership or operation of its business, except
for such violations or failures to comply as could not be reasonably expected to
have a Material Adverse Effect on Borrower.
SECTION 3.21. Minute Book. The minute book of Borrower made available to
Lender contains a complete and accurate summary of all meetings of directors and
stockholders or actions by written consent since the time of incorporation of
Borrower through the date of this Agreement, and reflects all transactions
referred to in such minutes accurately in all material respects.
SECTION 3.22. Complete Copies of Materials. Borrower has delivered or
made available true and complete copies of each document identified on the
Borrower Disclosure Schedule.
SECTION 3.23. Board Approval. The Board of Directors of Borrower has
unanimously approved this Agreement and the borrowing contemplated hereunder.
SECTION 3.24. Representations Complete. None of the representations or
warranties made by Borrower herein or in any Schedule hereto, including the
Disclosure Schedule, or certificate furnished by Borrower pursuant to this
Agreement, when all such documents are read together in their entirety, contains
or will contain at the Effective Date any untrue statement of a
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material fact, or omits or will omit at the Effective Date to state any material
fact necessary in order to make the statements contained herein or therein, in
the light of the circumstances under which made, not misleading.
ARTICLE IV
COVENANTS
As long as any amount payable under the Note remains unpaid, unless
Lender shall otherwise consent in writing, Borrower covenants to Lender as set
forth in this Article IV:
SECTION 4.01. Reporting and Information Requirements.
(a) Financial Statements. Borrower shall deliver the following to
Lender as soon as available and in any event within 60 days after the close of
each fiscal year, copies of the balance sheet of the Borrower as of the close of
such fiscal year, and the respective statements of income and retained earnings
and changes in financial position of Borrower for such fiscal year, in each case
setting forth in comparative form the figures for the preceding fiscal year, all
in reasonable detail and accompanied by an unqualified opinion of independent
public accountants of recognized national standing selected by the Borrower and
reasonably satisfactory to Lender.
(b) Notice of Event of Default. Promptly upon becoming aware of any
Event of Default, and in any event within five (5) Business Days thereof,
Borrower shall give Lender notice thereof, together with a written statement of
the president or chief financial officer of Borrower setting forth the details
thereof and any action with respect thereto taken or contemplated to be taken by
Borrower.
(c) Notice of Material Adverse Change. Promptly, and in any event
within five (5) Business Days after obtaining knowledge thereof, written notice
of any condition or event which has resulted or may reasonably be expected to
result in (i) a Material Adverse Effect on Borrower; (ii) a material breach of
or noncompliance with any term, condition or covenant contained in this
Agreement or the Note; or (iii) a material breach of or noncompliance by
Borrower with any material term, condition, or covenant of any material contract
to which Borrower is a party or by which its properties may be bound.
(d) Notice of Material Proceedings. Promptly, and in any event
within five (5) days after obtaining knowledge thereof, Borrower shall give
Lender notice of the commencement, existence or threat of any suit, action,
investigation, inquiry or other proceeding by or before any court or
governmental agency against or affecting the Borrower which, if adversely
decided, would have a Material Adverse Effect on the Borrower or its ability to
perform its obligations under the Loan Documents.
(e) Notice of Amendments to Certificate of Incorporation or Bylaws.
Promptly, and in any event within five (5) Business Days after obtaining
knowledge thereof, written notice of any amendments to the Certificate of
Incorporation or Bylaws.
(f) Other Information. Borrower will promptly furnish to Lender
such other information as Lender may reasonably request.
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SECTION 4.02. Preservation of Existence and Franchises. The Borrower
shall maintain its corporate existence and all rights, franchises and privileges
necessary for the normal conduct of Borrower's business in full force and
effect.
SECTION 4.03. Compliance With Laws. The Borrower will comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental agency having jurisdiction over the Borrower, a breach of which
could have a material adverse effect on the assets, business, operations, or
financial condition of Borrower.
SECTION 4.04. Debts and Obligations. Borrower shall pay its debts and
other obligations when such debts and obligations become due.
SECTION 4.05. Inspection of Property, Books and Records. The Borrower
shall maintain adequate books and records in accordance with GAAP and will
permit representatives of the Lender to visit and inspect any of Borrower's
properties, to examine and make abstracts from any of Borrower's respective
books and records and to discuss Borrower's respective affairs, finances and
accounts with its respective officers, employees and independent public
accountants, all at such reasonable times and as often as may reasonably be
desired.
SECTION 4.06. Insurance. Except where the failure to do so would not have
a Material Adverse Effect on the Borrower, Borrower shall maintain or cause to
be maintained, with financially sound and reputable insurers reasonably
satisfactory to Lender, insurance with respect to its properties and business
against loss or damage of the kinds customarily insured against by corporations
of established reputations engaged in the same or similar businesses and
similarly situated, of such types and in such amounts as are customarily carried
under similar circumstances by such other corporations, including, without
limitation, business interruption insurance, product liability insurance and
general liability insurance. Borrower shall, upon request made from time to
time, deliver to Lender, copies of certificates describing all insurance then in
effect and endorsements showing Lender as loss payee under all casualty and
property insurance in effect or copies of certificates for all insurance then in
effect describing all insurance then in effect and showing Lender as an
additional insured thereunder.
SECTION 4.07. Debt. Borrower shall not create, incur, assume, permit,
guarantee, or otherwise become, or remain, directly or indirectly, liable with
respect to any Debt, except:
(a) Borrower may become and remain liable with respect to the Debt
evidenced by the Note and this Agreement;
(b) Borrower may become and remain liable with respect to
contingent obligations permitted by Section 4.09 of this Agreement;
(c) Borrower may remain liable with respect to Debt set forth in
the Disclosure Schedule and any renewal thereof on substantially similar terms
as in effect on the date hereof;
(d) Borrower may remain liable with respect to Debt secured by
Permitted Liens and any renewal thereof on substantially similar terms as in
effect on the date hereof; and
16
<PAGE> 18
(e) Borrower may become and remain liable with respect to Debt that
does not exceed $50,000.
SECTION 4.08. Investments. Borrower shall not directly or indirectly make
or own any Investment in any Person, except:
(a) Borrower may make and own Investments in Cash Equivalents; and
(b) Borrower may maintain any Investment existing on the date
hereof, which Investments are set forth in the Disclosure Schedule.
SECTION 4.09. Contingent Obligations. Borrower shall not directly or
indirectly, create or become or be liable with respect to any Contingent
Obligation, except:
(a) Contingent Obligations resulting from the endorsement of
instruments for collection in the ordinary course of business;
(b) Contingent Obligations disclosed in the Financial Statements
referred to in Section 3.04 of this Agreement or reflected in the Disclosure
Schedule and any refinancing, renewals or extensions of such Contingent
Obligations on terms substantially similar to the original terms;
(c) Contingent Obligations incurred in the ordinary course of
business of Borrower; and
(d) Contingent Obligations with respect to Debt permitted by
Section 4.07.
SECTION 4.10. Dividends and Share Issuances. Borrower shall not directly
or indirectly, make or declare any dividend (in cash, return of capital, or any
other form of property) on, or make any other payment or distribution on account
of, or set aside assets for a sinking or other similar fund for the purchase,
redemption, retirement of, or redeem, purchase, retire, or otherwise acquire any
shares or interest of any class of Borrower's capital stock, whether now or
hereafter outstanding, or make any other distribution in respect thereof, either
directly or indirectly, whether in cash or property or in obligations. In
addition, Borrower shall not, nor shall it take any action to, issue any shares
of Borrower's capital stock or grant any options, warrants or rights to acquire
any of Borrower's capital stock; provided, however that Borrower may issue
shares of Common Stock upon the exercise of outstanding options or warrants and
may grant options to purchase up to 199,568 shares of Common Stock pursuant to
its 1994 Stock Option Plan.
SECTION 4.11. Restriction on Fundamental Changes. Borrower shall not
change its name, change the nature of its business, enter into any
recapitalization or reclassify its capital stock or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
assign, lease, transfer, or otherwise dispose of, in one transaction or a series
of transactions, all or any substantial part of its business, property, or
assets, whether now owned or hereafter acquired, except Borrower may sell assets
in accordance with the provisions of Section 4.12 of this Agreement.
17
<PAGE> 19
SECTION 4.12. Sale of Assets.
(a) Without express written approval of Lender, Borrower shall not
sell, assign, transfer, convey, or otherwise dispose of any of its assets,
whether now owned or hereafter acquired, except for:
(i) the sale or other disposition by Borrower of properties or
assets in the ordinary and usual course of business; or
(ii) the sale or other disposition by Borrower of properties or
assets during any of Borrower's fiscal years having an aggregate
value not exceeding $10,000.
SECTION 4.13. Conduct of Business. Borrower shall not engage in any
business other than the businesses in which Borrower is engaged as of the
Effective Date, or any businesses or activities substantially similar or related
thereto.
SECTION 4.14. Amendments or Waivers of Certain Documents. Borrower will
not agree to any amendment to, or waive any of its rights with respect to, the
terms and provisions regarding interest rates, principal or interest payment
amounts, total principal amounts or similar terms and provisions of the Debt,
and related indentures or agreements, referred to in subsections 4.07(b),
4.07(c) or 4.07(d) of this Agreement, or any amendments or waivers with respect
to any of the foregoing which make any of such agreements more onerous or
restrictive with respect to Borrower, without in each case obtaining the prior
written consent of Lender to such amendment or waiver except where such waiver
would not be materially adverse to the interests of the Lender; provided.
however, that no such consent shall be required with respect to any amendment
thereof to conform such agreements to the terms of this Agreement.
SECTION 4.15. Prepayment and Repayment of Debt. Borrower shall not prepay
any Debt set forth in the Disclosure Schedule, any other Debt, or any Debt
secured by any Permitted Lien, or enter into or modify any agreement in a way
which would be materially adverse to the interests of Lender or as a result of
which the terms of payment of any of the foregoing Debt are accelerated.
SECTION 4.16. Partnerships. Borrower shall not become a general or
limited partner in any partnership or a joint venture where the Debt exposure
(including any guaranty of Debt) and/or capitalization requirements of Borrower
shall, in the aggregate, exceed $10,000.
SECTION 4.17. Change in Location of Principal Executive Office and
Assets. Borrower shall not relocate its principal executive office without first
giving Lender (10) calendar days prior written notice of any proposed
relocation. Borrower shall not move its Equipment or Inventory to a location
other than any one of its locations identified in the Disclosure Schedule;
provided. however, that the foregoing shall not be deemed to preclude Borrower
from establishing new locations and moving Equipment or Inventory to such new
locations so long as, prior to relocating such Equipment or Inventory, Borrower,
as applicable, has given Lender ten (10) calendar days prior written notice of
such proposed relocation.
18
<PAGE> 20
SECTION 4.18. Prohibition on Acquisitions. Borrower shall not buy, trade
for, or otherwise acquire the stock or substantially all the assets of any party
not a party to this Agreement unless such purchase, trade, or acquisition has
been approved by Lender.
SECTION 4.19. Use of Proceeds. Except as otherwise permitted by this
Agreement, Borrower shall use the proceeds from the Loan solely for its working
capital needs, including the funding of the development of the aortic and illiac
aneurysm Preview product; provided, however, that Borrower shall not make any
expenditure in any transaction or series of related transactions in an amount in
excess of $50,000 without the prior written consent of Mr. Leo McKenna, who is a
member of Borrower's board of directors. Borrower shall not use the proceeds of
the Loan hereunder directly or indirectly to repay any Debt of the Borrower or
repurchase any capital stock of the Borrower or to make any payment or loan to
any officer, director, employee or stockholder of the Borrower except for
payments for compensation in the ordinary course of business for services
rendered after the date hereof.
SECTION 4.20. Negative Pledge. Borrower will not create, assume or suffer
to exist any Lien on any asset now owned or hereafter acquired by it, except:
(a) any Lien existing on any asset of any corporation at the time
such corporation becomes a Subsidiary and not created in contemplation of such
event;
(b) any Lien on any asset securing Debt incurred or assumed for the
purpose of financing all or any part of the cost of acquiring such asset,
provided that such Lien attaches to such asset concurrently with or within 90
days after the acquisition thereof;
(c) any Lien existing on any asset prior to the acquisition thereof
by the Borrower and not created in contemplation of such acquisition;
(d) Liens for taxes, assessments or governmental charges or levies
on its property if the same shall not at the time be delinquent or thereafter
can be paid without penalty, or are being contested in good faith by appropriate
proceedings and as to which adequate reserves have been provided for;
(e) Liens imposed by law, such as landlords', carriers',
warehousemen's and mechanics' liens and other similar liens arising in the
ordinary course of business which secure payment of obligations not more than 60
days past due;
(f) Liens arising out of statutory pledges or deposits under
applicable law relating to worker's compensation, unemployment insurance, social
security or similar obligations;
(g) utility easements, building restrictions and such other
encumbrances or charges against real property as are of a nature generally
existing with respect to properties of similar nature and which do not in any
material way adversely affect or interfere with the use thereof in the business
of the Borrower;
(h) banker's liens in the nature of rights of set-off arising in
the ordinary course of business; and
19
<PAGE> 21
(i) Liens not otherwise permitted by the foregoing clauses of this
Section, arising in the ordinary course of its business, which (i) do not secure
Debt, (ii) do not secure any obligation in an amount individually or in the
aggregate exceeding $10,000 and (iii) do not in the aggregate materially detract
from the value of its assets or materially impair the use thereof in the
operation of its business.
SECTION 4.21. Consolidations, Mergers and Sales of Assets. The Borrower
will not consolidate or merge with or into any other Person; provided that the
Borrower may merge with a Person if (a) the Borrower is the corporation
surviving such merger and (b) immediately after giving effect to any such
merger, no Event of Default shall have occurred and be continuing and all the
representations and warranties of the Borrower contained in this Agreement shall
be true. The Borrower will not sell, lease or otherwise transfer, directly or
indirectly, all or any substantial part of the assets of the Borrower and its
Subsidiaries, taken as a whole, to any other Person.
SECTION 4.22. Transactions with Shareholders and Affiliates. Except as
permitted hereunder or as set forth in the Disclosure Schedule, Borrower shall
not directly or indirectly, enter into or permit to exist any transaction having
a present value exceeding $5,000 (including the purchase, sale, lease, or
exchange of any property or the rendering of any service) with any holder of
five percent (5%) or more of any class of equity securities of Borrower or with
any Affiliate of Borrower on terms that are less favorable to Borrower than
those terms which might be obtained at the time from Persons who are not such a
holder or Affiliate in a comparable transaction negotiated in good faith on an
arm's length basis.
ARTICLE V
DEFAULTS
SECTION 5.01. Events of Default. If one or more of the following events
("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal of or
interest on the Loan, any fees or any other amount payable hereunder, which
failure, in the case of interest or fees or amounts other than principal of the
Loan, continues for three Business Days;
(b) the Borrower shall fail to observe or perform any covenant
contained in Sections 4.15 to 4.22, inclusive;
(c) the Borrower shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered by clause (a) or
(b) above) for 10 days after written notice thereof has been given to the
Borrower by the Lender.
(d) any representation, warranty, certification or statement made
by the Borrower in this Agreement or in any certificate, financial statement or
other document delivered pursuant to this Agreement shall prove to have been
incorrect in any material respect when made (or deemed made) except to the
extent that such incorrect representation, warranty, certification or statement
is caused by the breach of any representation or warranty made by Medical Media
Systems, Inc. ("MMS") in the Merger Agreement;
20
<PAGE> 22
(e) the Borrower shall fail to make any payment in respect of any
Material Debt when due or within any applicable grace period;
(f) any event or condition shall occur which results in the
acceleration of the maturity of any Material Debt or enables (or with the giving
of notice or lapse of time or both, would enable) the holder of such Material
Debt or any Person acting on such holder's behalf to accelerate the maturity
thereof;
(g) the Borrower shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, or shall consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they become
due, or shall take any corporate action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced
against the Borrower seeking liquidation, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 60 days; or an order for relief shall
be entered against the Borrower under the federal bankruptcy laws as now or
hereafter in effect; or
(i) a judgment or order for the payment of money in excess of
$10,000 shall be rendered against the Borrower and such judgment or order shall
continue unsatisfied and unstayed for a period of 30 days.
SECTION 5.02. Consequences of an Event of Default.
(a) If an Event of Default specified in Section 5.01(a) through
5.01(f) and 5.01(i) hereof shall occur and be continuing or shall exist, Lender
may declare the unpaid principal amount of the Note, interest accrued thereon
and all other amounts owing by borrower under the Loan documents to be
immediately due and payable without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived, and an action
therefor shall immediately accrue.
(b) If an Event of Default specified in Sections 5.01(g) and
5.01(h) hereof shall occur and be continuing or shall exist, the principal
amount of the Note, interest accrued thereon and all other amounts owing by
Borrower under the Loan documents shall be immediately due and payable without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived, and an action therefor shall immediately accrue.
21
<PAGE> 23
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. Notices. Unless otherwise specifically provided herein, any
notice or other communication required to permitted to be given shall be in
writing addressed to the respective party as set forth below and may be
personally served, telecopied, telexed or sent by overnight courier service or
United States mail and shall be deemed to have been given: (a) if delivered in
person, when delivered; (b) if delivered by telecopy or telex, on the date of
transmission if transmitted on a Business Day before 4:00 p.m. (California time)
or, if not, on the next succeeding Business Day; (c) if delivered by overnight
courier, two days after delivery to such courier properly addressed; or (d) if
by U.S. Mail, four Business Days after depositing in the United States mail,
with first class postage prepaid and properly addressed.
Notices shall be addressed as follows:
If to Borrower: Interact Medical Technologies Corporation
654 Madison Avenue, Suite 1606
New York, New York 10021
Attention: President
Facsimile No.: (212)319-3519
Telephone No.: (212) 319-3500
with a copy to:
Brobeck, Phleger & Harrison, LLP
550 West "C" Street, Suite 1300
San Diego, CA 92101
Attention: Craig S. Andrews, Esq.
Facsimile No.: (619) 234-3848
Telephone No.: (619) 234-1966
If to Lender: Baxter Healthcare Corporation
17221 Red Hill Avenue
Irvine, CA 92714
Attention: Jay P. Wertheim, Esq.
Vice President, Law
Facsimile No.: (714) 474-6444
Telephone No.: (714) 474-6415
22
<PAGE> 24
with a copy to:
Gibson, Dunn & Crutcher
4 Park Plaza
Irvine, CA 92714
Attention: Thomas D. Magill, Esq.
Facsimile No.: (714) 451-4220
Telephone No.: (714) 451-3800
SECTION 6.02. No Waivers. No failure or delay by the Lender in exercising
any right, power or privilege hereunder or under any Note shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
SECTION 6.03. Expenses; Indemnification.
(a) The Borrower shall pay (i) all reasonable out-of-pocket
expenses of the Lender, including reasonable fees and disbursements of counsel
for the Lender, in connection with any waiver or consent hereunder or any
amendment hereof or any Default hereunder and (ii) if an Event of Default
occurs, all out-of-pocket expenses incurred by the Lender, including fees and
disbursements of counsel (including, without limitation, the allocated costs of
in-house counsel), in connection with such Event of Default and collection,
bankruptcy, insolvency and other enforcement proceedings resulting therefrom.
(b) The Borrower agrees to indemnify the Lender, their respective
affiliates and the respective directors, officers, agents and employees of the
foregoing (each an "Indemnitee") and hold each Indemnitee harmless from and
against any and all liabilities, losses, damages, costs and expenses of any
kind, including, without limitation, the reasonable fees and disbursements of
counsel (including, without limitation, the reasonable allocated costs of
in-house counsel), which may be incurred by such Indemnitee in connection with
any investigative, administrative or judicial proceeding (whether or not such
Indemnitee shall be designated a party thereto) brought or threatened relating
to or arising out of this Agreement or any actual or proposed use of proceeds of
Loans hereunder; provided that no Indemnitee shall have the right to be
indemnified hereunder for such Indemnitee's own gross negligence or willful
misconduct as finally determined by a court of competent jurisdiction.
SECTION 6.04. Amendments and Waivers. Any provision of this Agreement or
the Notes may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed by the Borrower and the Lender.
SECTION 6.05. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Borrower may not assign or
otherwise transfer any of its rights under this Agreement without the prior
written consent of the Lender.
23
<PAGE> 25
SECTION 6.06. Governing Law; Submission to Jurisdiction. This Agreement and
the Note shall be governed by and construed in accordance with the laws of the
State of California. The Borrower hereby submits to the nonexclusive
jurisdiction of any state or federal court located within the county of Orange,
state of California for purposes of all legal proceedings arising out of or
relating to this Agreement or the transactions contemplated hereby. The Borrower
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought
in such a court has been brought in an inconvenient forum.
SECTION 6.07. Counterparts; Integration; Effectiveness. This Agreement may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement constitutes the entire agreement and understanding
among the parties hereto and supersedes any and all prior agreements and
understandings, oral or written, relating to the subject matter hereof. This
Agreement shall become effective upon receipt by the Lender of counterparts
hereof signed by each of the parties hereto.
SECTION 6.08. WAIVER OF JURY TRIAL. EACH OF THE BORROWER AND THE LENDER
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
Interact Medical Technologies Corporation
By: /s/ Bruce D. Sturman
_____________________________________
Name: Bruce D. Sturman
Title: C.E.O.
Baxter Healthcare Corporation
By: _____________________________________
Name: ___________________________________
Title: __________________________________
24
<PAGE> 26
SECTION 6.06. Governing Law; Submission to Jurisdiction. This Agreement and
the Note shall be governed by and construed in accordance with the laws of the
State of California. The Borrower hereby submits to the nonexclusive
jurisdiction of any state or federal court located within the county of Orange,
state of California for purposes of all legal proceedings arising out of or
relating to this Agreement or the transactions contemplated hereby. The Borrower
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such
a court has been brought in an inconvenient forum.
SECTION 6.07. Counterparts; Integration; Effectiveness. This Agreement may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement constitutes the entire agreement and understanding
among the parties hereto and supersedes any and all prior agreements and
understandings, oral or written, relating to the subject matter hereof. This
Agreement shall become effective upon receipt by the Lender of counterparts
hereof signed by each of the parties hereto.
SECTION 6.08. WAIVER OF JURY TRIAL. EACH OF THE BORROWER AND THE LENDER
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
Interact Medical Technologies Corporation
By: _____________________________________
Name: ___________________________________
Title: __________________________________
Baxter Healthcare Corporation
By: /s/ Jay P. Wertheim
_____________________________________
Name: Jay P. Wertheim
Title: Vice President, Law
Cardiovascular Group
25
<PAGE> 27
SCHEDULES AND EXHIBITS
Schedules
1.01 Securities issuable in connection with Promissory Notes
2 Disclosure Schedule (MMS)
3 Disclosure Schedule (Ixion)
3.12 Real Property
3.13 Intellectual Property
3.16 Employee Benefit Plans
Exhibits
A Promissory Note
<PAGE> 28
SCHEDULE 1.01
INTERACT PROMISSORY NOTES
Interact currently has promissory notes (collectively, the "Notes" and
individually, a "Note") issued and outstanding to the following parties with the
maturity date, aggregate principal amount and the number of shares potentially
issuable pursuant to such Note(s) listed next to each party. Each Note bears
eight percent (8%) simple interest annually until the maturity date which may be
extended by one (1) year in exchange for 2,439 shares of Interact Common Stock
for each $25,000 of principal amount.
<TABLE>
<CAPTION>
NAME OF NOTE MATURITY PRINCIPAL POTENTIAL
HOLDER DATE AMOUNT SHARES
------ ---- ------ ------
<S> <C> <C> <C>
Mark Segal, Trustee for Segal
Family Trust 09/01/96 50,000 4,878
Marvin Landau, Trustee for
Landau Living Trust 09/01/96 50,000 4,878
David Letterman 09/01/96 25,000 2,439
Fred Nigro 09/01/96 25,000 2,439
09/01/96
Steven David or IPO 25,000 2,439
Merv Adelson, Trustee for
Merv Adelson Trust 09/01/96 100,000 9,756
Eli Grossman 09/01/96 50,000 4,878
Revit Family Trust 09/01/96 25,000 2,439
G&G Diagnostics L.P. I 09/01/96 50,000 4,878
Ameritech International
Corporation 09/01/96 100,000 9,756
09/01/96
Merv Adelson or IPO 250,000 24,390
George Holbrook 09/01/96 50,000 4,878
Bruce Brackenridge 09/01/96 75,000 7,317
</TABLE>
SCHEDULE 1.0 - PAGE 1
<PAGE> 29
declare the entire principal amount of this Promissory Note and all accrued
interest thereon immediately due and payable.
By acceptance of this Promissory Note, Lender represents to the Borrower
that by reason of its business and financial experience it has the capacity to
protect its own interests in this transaction and is accepting this Promissory
Note and any Common Stock issued upon conversion hereof or in connection
herewith, for its own account and not with a view to distribution or resale.
This Promissory Note shall be governed by, and construed and enforced in
accordance with, the internal laws (excluding the laws of conflict) of the State
of California.
All agreements between the undersigned and the holder hereof are
expressly limited so that in no contingency or event whatsoever, whether by
reason of advancement of the proceeds hereof, acceleration of maturity of the
unpaid principal balance hereof, or otherwise, shall the amount paid or agreed
to be paid to the holder hereof for the use, forbearance or detention of the
money to be advanced hereunder exceed the highest lawful rate permissible under
applicable usury laws. If, from any circumstances whatsoever, fulfillment of any
provision hereof, at the time performance of such provision shall be due, shall
involve transcending the limit of validity prescribed by law which a court of
competent jurisdiction may deem applicable hereto, then ipso facto, the
obligations to be fulfilled shall be reduced to the limit of such validity, and
if from any circumstances the holder hereof shall ever receive as interest an
amount which would exceed the highest lawful rate, such amount which would be
excessive interest shall be applied to the reduction of the unpaid principal
balance due hereunder and not to the payment of interest.
Borrower promises to pay all the cost and expenses, including reasonable
attorneys' fees, incurred in the collection and enforcement of this Promissory
Note. Borrower and each surety, endorser, guarantor, and other party ever liable
for payment of any sums of money payable under this Promissory Note, hereby,
jointly and severally, consent to renewal and extension of time at or after the
maturity hereof, without notice, and hereby, jointly and severally waive
diligence, presentment, protest, demand and notice of every kind and, to the
full extent permitted by law, the right to plead any statute of limitations as a
defense to any demand hereunder.
Borrower:
Interact Medical Technologies Corporation
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
2
<PAGE> 30
<TABLE>
<S> <C> <C> <C>
Paul Glenn 09/01/96 50,000 4,878
Gordon Segal 09/01/96 25,000 2,439
Steven Lee Craft 09/01/96 25,000 2,439
Nicole Katz 09/01/96 25,000 2,439
Larry Wells 09/01/96 25,000 2,439
John & Marilyn Dougery 09/01/96 150,000 14,634
DayStar Partners, L.P. 09/01/96 175,000 17,073
Henry L.B. Wilder 09/01/96 150,000 14,634
A.B. Laffer, V.A. Canto & Ass. 09/01/96 50,000 4,878
Randall Fowler - TTEE 09/01/96 50,000 4,878
Perry Esping 09/01/96 350,000 34,146
Jerrold & Lisa Morrison 09/01/96 25,000 2,439
John Lemak 09/01/96 25,000 2,439
Baxter Healthcare Corporation 09/01/96 350,000 34,146
---------- -------
TOTAL $2,350,000 229,266
========== =======
</TABLE>
SCHEDULE 1.0 - PAGE 2
<PAGE> 31
SCHEDULE 2
DISCLOSURE SCHEDULE
INTRODUCTION
Set forth below are the exceptions made to the representations and
warranties of Medical Media Systems, Inc. ("MMS") in the Agreement and Plan of
Reorganization dated as of May 24, 1996 (the "Agreement"), by and among Ixion,
Inc. ("Ixion") and MMS (the "Disclosure Schedule").
Except as otherwise stated, all capitalized terms used herein shall have
the meanings given them in the Agreement. Section numbers used herein correspond
to the Section numbers in the Agreement. Any matter specifically described and
set forth herein as an exception to a Section of the Agreement or specifically
described and set forth in a Schedule to this Agreement shall be deemed to
constitute an exception (to the extent specifically described) to all other
applicable Sections of the Agreement. Where the terms of a contract or other
disclosure item have been summarized or described in this Disclosure Schedule,
such summary or description does not purport to be a complete statement of the
material terms of such contract or other item.
Nothing herein constitutes an admission of any liability or obligation of
MMS nor an admission against the interest of MMS. The inclusion of anything in
any section of the Disclosure Schedule should not be interpreted as indicating
that MMS has determined that such an agreement or other matter is necessarily
material to MMS. Ixion acknowledges that the information contained in the
Disclosure Schedule constitutes material confidential information relating to
MMS which may not be used for any purpose other than that contemplated in the
Agreement.
<PAGE> 32
SECTION 2.2 - CAPITAL STRUCTURE.
See Schedule 2.2
SECTION 2.5 - ABSENCE OF CERTAIN CHANGES.
1. Prior to the consummation of the transactions contemplated by the
Agreement, Medical Media Systems, a New Hampshire general partnership
("MMS-GP") and the predecessor entity to MMS, was converted to a Delaware
corporation.
2. MMS-GP entered into a Credit Agreement and related Demand Promissory Note
for borrowings in the amount of $550,000 with Baxter Healthcare
Corporation, a Delaware corporation ("Baxter"), as of April 10, 1996.
SECTION 2.7 - ABSENCE OF UNDISCLOSED LIABILITIES.
1. The Kriegsman Group has asserted that MMS has agreed to pay the Kriegsman
Group a fee should a merger be consummated between Ixion and MMS. Baxter
has agreed that it shall be responsible for the fee to be paid to the
Kriegsman Group, if any.
2. MMS is a party to a Cooperative Agreement dated January 2, 1995 with the
Trustees of Dartmouth College whereby MMS is obligated to purchase
services valued at $200,000. As of the date of the Agreement, MMS has
purchased services valued at approximately $70,000.
3. MMS is a party to a Development and License Agreement dated January 13,
1993 with MusculoGraphics, Inc. ("MG") whereby MMS agreed to pay MG a
total of $465,000 for consulting services and $200,000 upon termination
of the consulting services under certain circumstances. As of the date of
the Agreement, MMS has completed payment of the amounts owed for
consulting services and does not believe that it is obligated to make
payments to MG as a result of the termination of consulting services.
Additionally, MMS is liable to MG for certain royalties in the event that
certain future products or services incorporate products licensed from
MG.
4. MMS is a party to an agreement dated October 17, 1994 with Baxter whereby
Baxter provides regulatory legal services to MMS for fees in the amount
of $15,000 per quarter. This agreement is being terminated concurrent
with the effectiveness of the merger contemplated by the Agreement.
5. See Sections 2.5 and 2.8.
PAGE 2 OF SCHEDULE 2
<PAGE> 33
SECTION 2.8 - MATERIAL CONTRACTS.
1. License Agreement dated November 25, 1992, as amended January 27, 1995,
between MMS-GP and Baxter whereby MMS-GP grants Baxter a license in the
field of knee and liver surgery and further grants Baxter a right of
first refusal with respect to any invention in the "medical area" outside
such field. This License Agreement is being terminated concurrent with
the effectiveness of the merger contemplated by the Agreement.
2. MMS-GP entered in consulting agreements dated November 25, 1992 with each
of the parties listed below:
a. Steve D. Pieper
b. David T. Chen
c. Michael A. McKenna
d. Joseph M. Rosen
3. Internet Services and Products Master Agreement dated May 31, 1995
between MMS-GP and BBN Planet Corporation ("BBN") whereby BBN will
provide networking equipment and services to MMS-GP.
4. Lease Agreement dated July 8, 1994 between MMS-GP and RSR Robsan
Resources, Inc. pursuant to which MMS leases office space for a term of
three years from the date of the lease execution.
5. SGI Master Lease Agreement dated February 3, 1995 between MMS-GP and
Advanta Business Services, Inc. pursuant to which MMS leases computer
hardware, software and services.
6. TDS Leasing, Inc. Lease Agreement dated August 17, 1994 between MMS-GP
and TDS Leasing, Inc. pursuant to which MMS leases a Ricoh copier.
7. See Sections 2.5, 2.7 and 2.24.
8. See Schedule 2.13
SECTION 2.10 - RESTRICTIONS ON BUSINESS ACTIVITIES.
1. See Sections 2.7 and 2.8
SECTION 2.12 - TITLE TO PROPERTY.
1. See Schedule 2.12
PAGE 3 OF SCHEDULE 2
<PAGE> 34
SECTION 2.13 - INTELLECTUAL PROPERTY.
1. See Schedule 2.13
2. MMS does not have a valid written assignment from Mark Fillinger with
respect to any rights that he may have as a result of his contributions
to the development of certain intellectual property.
3. Core Trademark. MMS is the owner of U.S. Trademark Application Serial No.
74/433,134 for the trademark CORE. This application was published for
opposition on 3/19/96. On 4/15/96, Cohr Inc. filed a request for a 30 day
extension of the time for filing a Notice of Opposition against this
trademark application while it studies this matter further. MMS does not
know how Cohr Inc. will proceed in this matter.
4. Multimedia Medical Systems, Inc. and the terms "MMS" and/or "MMMS". MMS
recently learned of the existence of a company called Multimedia Medical
Systems, Inc. MMS also understands that this company may be using the
term "MMS" and/or "MMMS" in connection with its business. It is believed
that this company may be offering clinical visualization products
designed to build three dimensional medical images on desktop computers.
MMS does not know how the existence of this other company, and/or its
possible use of the terms "MMS" and/or "MMMS", will impact MMS.
5. Medical Multimedia Systems Inc. MMS recently learned of the existence of
a company called Medical Multimedia Systems, Inc. MMS understands that
this company may be offering software related to biomedical education.
MMS does not know how the existence of this company will impact MMS.
6. Multi Media Systems. MMS has learned of the existence of a company called
Multi Media Systems. MMS also understands that this company is using the
Internet address "mms.com" in connection with its business. MMS does not
know how the existence of this other company, and/or its use of the term
"mms.com", will impact MMS.
7. Microsoft License. MMS is currently shipping commercial versions of its
PREVIEW: SURGERY PLANING SOFTWARE product using the MacIntosh version of
Microsoft's Reality Labs (RL) software product. This is being done on the
oral and E-mail understanding that Microsoft is granting MMS a
royalty-free license to use this software. However, MMS has not yet
received the signed written license agreement from Microsoft. MMS
understands that it will receive a signed written license agreement for
this software as soon as the license agreement has been prepared by the
Microsoft legal department.
8. Bucholz Patent. Last year a vendor, IGT/Pixsys, suggested to MMS that MMS
might need to acquire a license under U.S. Patent No. 5,383,454 issued to
Bucholz, depending on whether certain products were developed by MMS.
Some preliminary work was done to review this patent, but this work was
set aside as product emphasis evolved. MMS does not know how the
existence of the Bucholz patent might impact its products in the future.
PAGE 4 OF SCHEDULE 2
<PAGE> 35
9. Blanco Patent. Some time ago MMS became aware of the existence of U.S.
Patent No. 5,005,559 issued to Blanco et. al. Some preliminary work was
done to review this patent, but this work was set aside as product
emphasis evolved. MMS does not know how the existence of the Blanco et
al. patent might impact its products in the future.
10. General Electric Patents. MMS understands that the General Electric
Company may own one or more patents relating to modeling processes
similar to those used by MMS in connection with its PREVIEW products. MMS
does not know how the existence of any such patents might impact its
products in the future.
11. Finnegan. Henderson Patent Infringement Concerns. In the course of
conducting its due diligence review, the law firm of Finnegan, Henderson
identified six (6) patents it believed might be infringed by products of
MMS. These patents are U.S. Patents Nos. 4,882,679 issued to Tuy et al.;
4,945,478 issued to Merickel et al.; 5,151,856 issued to Halmann et al.;
5,261,404 issued to Mick et al.; 5,274,551 issued to Corby, Jr.; and
5,447,154 issued to Cinquin et al. Finnegan, Henderson attorneys
discussed each of these patents in detail with personnel of MMS and its
patent attorneys, Pandiscio & Pandiscio. MMS understands that, at the
conclusion of this extensive review, Finnegan, Henderson attorneys
concluded that the products of MMS do not infringe any of the foregoing
patents.
12. Preview Trademark. MMS is the owner of U.S. Trademark Application Serial
No. 75/061,179 for the trademark PREVIEW. MMS understands that the
company Cemax may be using the term "Preview Mode" and/or "preview mode"
in connection with one of its products. MMS does not know how Cemax's use
of the term "Preview mode" and/or "preview mode" might impact MMS.
13. Preexisting MIT Media Lab Software. Certain of the software developed by
MMS utilizes preexisting software which was developed earlier at the MIT
Media Lab by a founder of MMS. MMS understands that this preexisting MIT
Media Lab software has been placed into the public domain by the MIT
Media Lab, so that no license is needed to utilize this software.
SECTION 2.16 - EMPLOYEE BENEFIT PLANS.
1. See Schedule 2.16
SECTION 2.19 - INTERESTED PARTY TRANSACTIONS.
1. See Sections 2.5 and 2.8
PAGE 5 OF SCHEDULE 2
<PAGE> 36
SECTION 2.20 - INSURANCE.
1. MMS does not maintain product liability insurance.
SECTION 2.24 - BROKERS' AND FINDERS' FEES.
1. The Kriegsman Group has asserted that MMS has agreed to pay the Kriegsman
Group a fee should a merger be consummated between Ixion and MMS. Baxter
has agreed that it shall be responsible for the fee to be paid to the
Kriegsman Group, if any.
PAGE 6 OF SCHEDULE 2
<PAGE> 37
SCHEDULE 3
IXION DISCLOSURE SCHEDULE
INTRODUCTION
Set forth below are the exceptions made to the representations and
warranties of Ixion, Inc. ("Ixion" or the "Company") in the Agreement and Plan
of Reorganization dated as of May 24, 1996 (the "Agreement"), by and among
Medical Media Systems, Inc. ("MMS") and the Company (the "Disclosure Schedule").
Except as otherwise stated, all capitalized terms used herein shall have
the meanings given them in the Agreement Section numbers used herein correspond
to the Section numbers in the Agreement. Any matter specifically described and
set forth herein as an exception to a Section of the Agreement or specifically
described and set forth in a Schedule to this Agreement shall be deemed to
constitute an exception (to the extent specifically described) to all other
applicable Sections of the Agreement. Where the terms of a contract or other
disclosure item have been summarized or described in this Disclosure Schedule,
such summary or description does not purport to be a complete statement of the
material terms of such contract or other item.
Nothing herein constitutes an admission of any liability or obligation of
Ixion nor an admission against Ixion's interest. The inclusion of anything in
any section of the Disclosure Schedule should not be interpreted as indicating
that Ixion has determined that such an agreement or other matter is necessarily
material to the Company. Interact acknowledges that the information contained in
the Disclosure Schedule constitutes material confidential information relating
to Ixion which may not be used for any purpose other than that contemplated in
the Agreement.
IXION DISCLOSURE SCHEDULE - PAGE 1
<PAGE> 38
SECTION 3.1
ORGANIZATION, STANDING AND POWER
1. See Schedules 1.6(d), 1.6(e), 3.2 and 4.2(a).
IXION DISCLOSURE SCHEDULE - PAGE 2
<PAGE> 39
SECTION 3.2
CAPITAL STRUCTURE
1. Shares of Ixion capital stock have been granted to the following parties
upon the execution of consulting agreements for future services and
therefore such shares of capital stock were not fully paid at issuance:
Ameritech International Corporation
Ken Chyten
Mike Muffoletto
Fred Katz
Gordon Segal
David Abramson
George Holbrook, Jr.
Bruce Brackenridge
James Caillouette, Sr., M.D.
Mark Noar, M.D.
2. See Schedules 1.6(d), 1.6(e) and 3.2.
IXION DISCLOSURE SCHEDULE - PAGE 3
<PAGE> 40
SECTION 3.3
AUTHORITY
The following Ixion agreements may not be assigned without the other
party's prior written consent:
1. 400 Mercer Building Standard Form Office Lease dated January 29, 1996
between Ixion and CVK Partnership, pursuant to which Ixion leases
approximately 4,235 rentable square feet at 400 Mercer Street, Suite 400,
Seattle, WA 98145-2430 for a term of three (3) years from the date of the
Lease.
2. Standard Form of Office Lease dated March 15, 1994 between Hydration
Technology Corporation and 654 Madison Avenue Company, as amended October
31, 1994, that was subsequently assigned to Ixion on April 24, 1996,
pursuant to which Ixion leases executive office space at 654 Madison
Avenue, Suite 1606, New York, NY 10021 for a term of three and one half
(3 1/2) years from the date of the initial execution of the Lease.
3. Purchase Agreement dated December 13, 1994 between Ixion and Hewlett
Packard that sets the terms by which Ixion purchases and licenses various
Hewlett Packard products over the term of this evergreen Purchase
Agreement.
4. General Lease Agreement dated August 1, 1995 between Ixion and AT&T
Capital Corporation, pursuant to which Ixion leases a digital
oscilloscope and a probe.
5. General Lease Agreement dated February 28, 1994 between Ixion and AT&T
Capital Corporation, pursuant to which Ixion leases a Fluke Model
PM3585/61, 64 Channel Logic Analyzer.
6. Commercial Lease dated September 1, 1984 between Ixion and Nelson
Northwest, Inc., as amended November 1, 1995, pursuant to which Ixion
leases approximately 900 square feet at 1335 North Northlake Way,
Seattle, Washington 98103 for a term that shall expire on October 31,
1996.
7. Consulting Agreements with the following parties:
Maxal Corporation
Ken Chyten
Ameritech International Corporation
Mike Muffoletto
IXION DISCLOSURE SCHEDULE - PAGE 4
<PAGE> 41
Fred Katz
Shropshire Capital
Xinetix Technologies, Inc.
Gordon Segal
David Abramson
George Holbrook, Jr.
Bruce Brackenridge
James Caillouette, Sr.
Richard Friedman
Jeff Markowitz
Mark Noar
IXION DISCLOSURE SCHEDULE - PAGE 5
<PAGE> 42
SECTION 3.4
FINANCIAL STATEMENTS
None.
IXION DISCLOSURE SCHEDULE - PAGE 6
<PAGE> 43
SECTION 3.5
ABSENCE OF CERTAIN CHANGES
None.
IXION DISCLOSURE SCHEDULE - PAGE 7
<PAGE> 44
SECTION 3.6
SUBSIDIARIES
None.
IXION DISCLOSURE SCHEDULE - PAGE 8
<PAGE> 45
SECTION 3.7
ABSENCE OF UNDISCLOSED LIABILITIES
1. Engagement Agreement dated June 5, 1995 between Ixion and the Kriegsman
Group, pursuant to which the Company is currently in negotiations to
determine the Kriegsman Group's fee, if any, that may include a cash
payment, some form of an equity issuance or some combination thereof. The
Kriegsman Group fee shall not have an aggregate value in excess of
$150,000.
2. Settlement Agreement dated April 29, 1996 between Ixion and Canal Place
Limited Partnership, pursuant to which the Company must pay $10,450
related to a prior lease obligation.
3. 2 year 8% Promissory Notes dated September 9, 1994 and September 12, 1994
between Ixion and David Hon, pursuant to which the Company must repay Mr.
Hon an aggregate amount of $35,000.
4. 2 year 8% Promissory Notes dated October 4, 1994 and October 31, 1995
between Ixion and Bruce Sturman, pursuant to which the Company must repay
Mr. Sturman an aggregate amount of $60,000.
5. Asset Purchase Agreement dated April 22, 1996 between Ixion and David
Hon, pursuant to which Mr. Hon transferred a patent and patent
applications related to Ixion's business to the Company in exchange for
$25,000 per year for each of the next 10 years beginning in 1996.
6. Ixion is obligated to pay the following parties the amount of accrued but
unpaid salary set forth next to each name:
<TABLE>
<S> <C>
Maxal Capital Corporation ("Maxal") (Sturman) $201,000
Global Nexus (Montegrande/Cherney) 62,000
Shropshire Capital Corporation ("Shropshire") (Otto) 56,000
Val Montegrande 7,000
Xinetix Technologies, Inc. ("Xinetix") (Walbrink) 82,000
David Hon 17,000
--------
TOTAL $425,000
========
</TABLE>
7. See Section 3.3.
IXION DISCLOSURE SCHEDULE - PAGE 9
<PAGE> 46
SECTION 3.8
MATERIAL CONTRACTS
1. Research, Option and License Agreement dated April 8, 1992 between Ixion
and Ethicon Endo-Surgery ("Ethicon"), a division of Ethicon, Inc., a
subsidiary of Johnson & Johnson Corporation (the "Ethicon Agreement"),
pursuant to which Ixion granted Ethicon an exclusive world-wide license
to make, have made, use, lease and sell or otherwise dispose of Ixion
products relating to the use of Ixion technology in the Field defined in
the Ethicon Agreement as "methods, processes, devices, and instruments
for the simulation of endoscopic and minimally invasive surgery in humans
through an extendable, multi-plane computer-based video laparoscopic
surgical training apparatus with tactile feedback for the teaching of
surgical skills."
In September, 1995, Ethicon informed the Company that it believes it has
certain rights beyond its license to the laparoscopic simulator. The
Company believes there is no basis to support this position under the
terms of the Ethicon Agreement as set forth above. Ixion is entitled to
receive continuing royalty payments pursuant to the Ethicon Agreement.
Pursuant to Section 5.5 of the Ethicon Agreement, Ethicon has not
tendered to Ixion the $100,000 minimum royalty payment for the past
Royalty Year (as defined in the Ethicon Agreement). Pursuant to Section
5.5.1 of the Ethicon Agreement, on ,1996 (the "Delivery Date"),
Ixion delivered notice of Ixion's intention to convert Ethicon's
exclusive license into a non-exclusive license. Ethicon has ninety (90)
from the delivery date to make up any deficiencies in the minimum royalty
payment for the past Royalty Year (as defined in the last Ethicon
Agreement) to maintain its exclusive license as described above.
2. See Sections 3.3, 3.7, 3.10 and 3.23.
3. See Schedules 3.2, 3.12, 3.13 and 4.2(a).
IXION DISCLOSURE SCHEDULE - PAGE 10
<PAGE> 47
SECTION 3.9
LITIGATION
None.
IXION DISCLOSURE SCHEDULE - PAGE 11
<PAGE> 48
SECTION 3.10
RESTRICTIONS ON BUSINESS ACTIVITIES
1. Research, Option and License Agreement dated April 8, 1992 between Ixion
and Ethicon Endo-Surgery ("Ethicon"), a division of Ethicon, Inc., a
subsidiary of Johnson & Johnson Corporation (the "Ethicon Agreement"),
pursuant to which Ixion granted Ethicon an exclusive world-wide license
to make, have made, use, lease and sell or otherwise dispose of Ixion
products relating to the use of Ixion technology in the Field defined in
the Ethicon Agreement as "methods, processes, devices, and instruments
for the simulation of endoscopic and minimally invasive surgery in humans
through an extendable, multi-plane computer-based video laparoscopic
surgical training apparatus with tactile feedback for the teaching of
surgical skills."
In September, 1995, Ethicon informed the Company that it believes it has
certain rights beyond its license to the laparoscopic simulator. The
Company believes there is no basis to support this position under the
terms of the Ethicon Agreement as set forth above. Ixion is entitled to
receive continuing royalty payments pursuant to the Ethicon Agreement.
IXION DISCLOSURE SCHEDULE - PAGE 12
<PAGE> 49
SECTION 3.11
GOVERNMENTAL AUTHORIZATION
None.
IXION DISCLOSURE SCHEDULE - PAGE 13
<PAGE> 50
SECTION 3.13
INTELLECTUAL PROPERTY
1. See Schedule 3.13.
IXION DISCLOSURE SCHEDULE - PAGE 15
<PAGE> 51
SECTION 3.14
ENVIRONMENTAL MATTERS
None.
IXION DISCLOSURE SCHEDULE - PAGE 16
<PAGE> 52
SECTION 3.15
TAXES
None.
IXION DISCLOSURE SCHEDULE - PAGE 17
<PAGE> 53
SECTION 3.16
EMPLOYEE BENEFIT PLANS
1. See Schedule 3.16.
IXION DISCLOSURE SCHEDULE - PAGE 18
<PAGE> 54
SECTION 3.18
EMPLOYEE MATTERS
None.
IXION DISCLOSURE SCHEDULE - PAGE 20
<PAGE> 55
SECTION 3.19
INTERESTED PARTY TRANSACTIONS
1. Ixion is obligated to pay the following parties the amount of accrued but
unpaid salary set forth next to each name:
<TABLE>
<S> <C>
Maxal Capital Corporation ("Maxal") (Sturman) $201,000
Global Nexus (Montegrande/Cherney) 62,000
Shropshire Capital Corporation ("Shropshire") (Otto) 56,000
Val Montegrande 7,000
Xinetix Technologies, Inc. ("Xinetix") (Walbrink) 82,000
David Hon 17,000
--------
TOTAL $425,000
========
</TABLE>
2. See Section 3.7.
3. See Schedule 3.2.
IXION DISCLOSURE SCHEDULE - PAGE 21
<PAGE> 56
SECTION 3.20
INSURANCE
None.
IXION DISCLOSURE SCHEDULE - PAGE 22
<PAGE> 57
SECTION 3.21
COMPLIANCE WITH LAWS
1. Effective as of April 12, 1996, each Ixion stockholder executed an
Acknowledgment and Release Agreement, in the form previously provided to
Interact Special Counsel, in which each stockholder acknowledged and
released Ixion from any liability associated with Ixion's attempted
issuances of Ixion capital stock beyond the number of shares of Ixion
capital stock authorized at the time of each attempted issuance.
IXION DISCLOSURE SCHEDULE - PAGE 23
<PAGE> 58
SECTION 3.22
MINUTE BOOK
None.
IXION DISCLOSURE SCHEDULE - PAGE 24
<PAGE> 59
SECTION 3.23
BROKERS' AND FINDERS' FEES
1. Engagement Agreement dated June 5, 1995 between Ixion and the Kriegsman
Group, pursuant to which the Company is currently in negotiations to
determine the Kriegsman Group's fee, if any, that may include a cash
payment, some form of an equity issuance or some combination thereof. The
Kriegsman Group fee shall not have an aggregate value in excess of
$150,000
IXION DISCLOSURE SCHEDULE - PAGE 25
<PAGE> 60
SECTION 3.24
COMPLETE COPIES OF MATERIALS
None.
IXION DISCLOSURE SCHEDULE - PAGE 26
<PAGE> 61
SECTION 3.26
STOCKHOLDER APPROVAL
None.
IXION DISCLOSURE SCHEDULE - PAGE 28
<PAGE> 62
SECTION 3.27
REPRESENTATIONS COMPLETE
None.
IXION DISCLOSURE SCHEDULE - PAGE 29
<PAGE> 63
SCHEDULE 3.12
TITLE TO PROPERTY
1. 400 Mercer Building Standard Form Office Lease dated January 29, 1996
between Ixion and CVK Partnership, pursuant to which Ixion leases
approximately 4,235 rentable square feet at 400 Mercer Street, Suite 400,
Seattle, WA 98145-2430 for a term of three (3) years from the date of the
Lease.
2. Standard Form of Office Lease dated March 15, 1994 between Hydration
Technology Corporation and 654 Madison Avenue Company, as amended October
31, 1994, that was subsequently assigned to Ixion on April 24, 1996,
pursuant to which Ixion leases executive office space at 654 Madison
Avenue, Suite 1606, New York, NY 10021 for a term of three and one half
(3 1/2) years from the date of the Lease.
3. Commercial Lease dated September 1, 1984 between Ixion and Nelson
Northwest, Inc., as amended November 1,1995, pursuant to which Ixion
leases approximately 900 square feet at 1335 North Northlake Way,
Seattle, Washington 98103 for a term that shall expire on October 31,
1996.
SCHEDULE 3.12. PAGE 1
<PAGE> 64
SCHEDULE 3.13
INTELLECTUAL PROPERTY
(b) (i) Patents, Patent Applications, Registered and Unregistered
Trademarks Trade Names and Service Marks, Registered and
Unregistered Copyrights and Maskworks.
1. Expert System Simulator for Modeling Realistic Internal
Environments and Performance - U.S. Patent Number 4,907,973
dated March 13, 1990.
2. Expert System Simulator for Modeling Realistic Internal
Environments and Performance - International Application
Number PCT/US89/040690, with an International Filing Date of
October 19, 1989, and National Phase entries made in the
following countries:
A. Japan Application Number 1-511777
B. Canada Application Number 2002219-6
C. European Application Number 89912557.9
(Austria, Belgium, France, Germany, Italy,
Luxembourg, Switzerland, Netherlands,
Sweden and United Kingdom)
3. Medical Procedure Simulator - U.S. Patent Application Serial
Number 08/341,686 filed November 17, 1994.
4. Medical Procedure Simulator - Foreign Patent Filing License
granted January 11,1995.
5. Force Feedback for Virtual Reality - U.S. Patent Application
Serial Number 08/355,612 filed December 14, 1994.
6. Force Feedback for Virtual Reality - Foreign Patent Filing
License granted January 27, 1995.
7. ENDO-SIM - Notice of Acceptance of Statement of Use Serial
Number 74/279999 accepted by the U.S. Patent and Trademark
Office on December 1, 1994.
SCHEDULE 3.13 - PAGE 1
<PAGE> 65
(ii) Material Licenses Dealing with Intellectual Property.
1. Research, Option and License Agreement dated April 8, 1992
between Ixion and Ethicon Endo-Surgery ("Ethicon"), a
division of Ethicon, Inc., a subsidiary of Johnson & Johnson
Corporation (the "Ethicon Agreement"), pursuant to which
Ixion granted Ethicon an exclusive world-wide license to
make, have made, use, lease and sell or otherwise dispose of
Ixion products relating to the use of Ixion technology in
the Field defined in the Ethicon Agreement as "methods,
processes, devices, and instruments for the simulation of
endoscopic and minimally invasive surgery in humans through
an extendable, multi-plane computer-based video laparoscopic
surgical training apparatus with tactile feedback for the
teaching of surgical skills."
In September, 1995, Ethicon informed the Company that it
believes it has certain rights beyond its license to the
laparoscopic simulator. The Company believes there is no
basis to support this position under the terms of the Ethicon
Agreement as set forth above. Ixion is entitled to receive
continuing royalty payments pursuant to the Ethicon
Agreement.
SCHEDULE 3.13 - PAGE 2
<PAGE> 66
Ken Chyten
Mike Muffoletto
Fred Katz
Gordon Segal
David Abramson
George Holbrook, Jr.
Bruce Brackenridge
James Caillouette, Sr., M.D.
Mark Noar, M.D.
SCHEDULE 3.16 - PAGE 2
<PAGE> 67
SCHEDULE 3.16
EMPLOYEE BENEFIT PLANS
1. The below listed employee benefit plans previously provided to Interact
Special Counsel are provided to each Ixion employee:
A. 401(k) Plan & Trust administered by Compensation Consultants, Inc.
B. Washington Software Association Employee Benefit Trust -
(i) Medical Insurance
(ii) Dental Insurance
(iii) Vision Insurance
(iv) Life Insurance
C. UNUM Life Insurance Company of America -
(i) Short-Term Disability insurance
(ii) Long-Term Disability Insurance
2. Ixion has accrued but unpaid salary obligations to the following parties
in that amount set forth next to each name:
<TABLE>
<S> <C>
Maxal Capital Corporation ("Maxal") (Sturman) $201,000
Global Nexus (Montegrande/Cherney) 62,000
Shropshire Capital Corporation ("Shropshire") (Otto) 56,000
Val Montegrande 7,000
Xinetix Technologies, Inc. ("Xinetix") (Walbrink) 82,000
David Hon 17,000
--------
TOTAL $425,000
========
</TABLE>
3. Ixion has outstanding obligations pursuant to certain consulting or
employment agreements among the Company and the below listed parties that
have been delivered to Interact Special Counsel:
Mark Cherney
Valentino Montegrande
Xinetix
East-West Capital
Greg Claypool
Ameritech International Corporation
SCHEDULE 3.16 - PAGE 1
<PAGE> 68
Ken Chyten
Mike Muffoletto
Fred Katz
K-Gordon Segal
David Abramson
George Holbrook, Jr.
Bruce Brackenridge
James Caillouette, Sr., M.D.
Mark Noar, M.D.
SCHEDULE 3.16 - PAGE 2
<PAGE> 69
EXHIBIT A
PROMISSORY NOTE
$2,000,000 May 24, 1996
Irvine, California
FOR VALUE RECEIVED, the undersigned, Interact Medical Technologies
Corporation, a Delaware corporation ("Borrower"), hereby promises to pay to the
order of Baxter Healthcare Corporation, a Delaware corporation ("Lender"), the
principal sum of Two Million Dollars ($2,000,000), together with interest at the
reference rate of Bank of America plus two percent ("Note Rate") on the unpaid
principal from the date hereof until the principal amount of this Promissory
Note is paid in full in accordance with the terms of this Promissory Note. The
principal of this Promissory Note, together with all accrued interest, shall
become due and payable upon the earlier to occur of (i) September 1, 1996 (or
such later date as specifically provided below) or (ii) the closing date of any
registration statement of Borrower on Form S-1 declared effective by the SEC
(the "Registration Statement") for its initial public offering (the "IPO").
In the event that the IPO does not occur on or prior to September 1, 1996,
then the principal amount, together with all accrued interest, shall be
immediately due and payable on such date; provided, however, that Borrower may
extend this date to September 1, 1997 in exchange for the issuance on September
1, 1996 by Borrower to Lender of shares of Borrower's Common Stock, without
further consideration, at the rate of 2,439 shares for each $25,000 principal
amount outstanding under this Promissory Note. If the closing date for the
Borrower's IPO occurs before September l, 1996, then immediately following such
closing the principal amount, together with all accrued interest, shall be
converted into Common Stock at the price to the public for shares of Common
Stock issued in the IPO as stated in the Registration Statement (the "IPO
Price"). The number of shares of Common Stock into which this Note may be
converted shall be determined by dividing the aggregate principal amount
together with all accrued interest to the date of conversion by the IPO Price.
No fractional shares of Common Stock shall be issued upon conversion of this
Note. In lieu of the Borrower issuing any fractional shares to Lender upon the
conversion of this Note, Borrower shall pay to Lender in cash the amount of the
outstanding principal and accrued interest that is not so converted.
In the event that any principal and/or interest is not paid when due,
without affecting any of Lender's other rights and remedies, the unpaid
principal amount and, to the extent permitted by applicable law, interest, shall
bear interest at the Note Rate and shall be payable on demand of Lender until
such unpaid amount is paid in full.
Principal and interest shall be payable in lawful money of the United
States at Lender's offices located at the address for notice purposes set forth
in the Credit Agreement (as defined below).
This Promissory Note may not be prepaid at any time by the Borrower
without the written consent of Lender.
This Promissory Note is the Note referred to in, and is entitled to the
benefits of, and is subject to the terms and conditions of, a Credit Agreement
dated as of the date hereof between the Lender and the Borrower as the same may
from time to time be amended, modified or supplemented ("Credit Agreement"), the
terms of which are incorporated herein by reference. Unless the context
indicates otherwise, the capitalized terms appearing in this Note shall have the
meanings designated in the Credit Agreement. The Credit Agreement provides,
among other things, that upon the occurrence of an Event of Default, the Lender
may, among other things,
<PAGE> 70
declare the entire principal amount of this Promissory Note and all accrued
interest thereon immediately due and payable.
By acceptance of this Promissory Note, Lender represents to the Borrower
that by reason of its business and financial experience it has the capacity to
protect its own interests in this transaction and is accepting this Promissory
Note and any Common Stock issued upon conversion hereof or in connection
herewith, for its own account and not with a view to distribution or resale.
This Promissory Note shall be governed by, and construed and enforced in
accordance with, the internal laws (excluding the laws of conflict) of the State
of California.
All agreements between the undersigned and the holder hereof are expressly
limited so that in no contingency or event whatsoever, whether by reason of
advancement of the proceeds hereof, acceleration of maturity of the unpaid
principal balance hereof, or otherwise, shall the amount paid or agreed to be
paid to the holder hereof for the use, forbearance or detention of the money to
be advanced hereunder exceed the highest lawful rate permissible under
applicable usury laws. If, from any circumstances whatsoever, fulfillment of any
provision hereof, at the time performance of such provision shall be due, shall
involve transcending the limit of validity prescribed by law which a court of
competent jurisdiction may deem applicable hereto, then ipso facto, the
obligations to be fulfilled shall be reduced to the limit of such validity, and
if from any circumstances the holder hereof shall ever receive as interest an
amount which would exceed the highest lawful rate, such amount which would be
excessive interest shall be applied to the reduction of the unpaid principal
balance due hereunder and not to the payment of interest.
Borrower promises to pay all the cost and expenses, including reasonable
attorneys' fees, incurred in the collection and enforcement of this Promissory
Note. Borrower and each surety, endorser, guarantor, and other party ever liable
for payment of any sums of money payable under this Promissory Note, hereby,
jointly and severally, consent to renewal and extension of time at or after the
maturity hereof, without notice, and hereby, jointly and severally waive
diligence, presentment, protest, demand and notice of every kind and, to the
full extent permitted by law, the right to plead any statute of limitations as a
defense to any demand hereunder.
Borrower:
Interact Medical Technologies Corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
2
<PAGE> 1
EXHIBIT 10.4
<PAGE> 2
PROMISSORY NOTE
$2,000,000 May 24, 1996
Irvine, California
FOR VALUE RECEIVED, the undersigned, Interact Medical Technologies
Corporation, a Delaware Corporation ("Borrower"), hereby promises to pay to the
order of Baxter Healthcare Corporation, a Delaware corporation ("Lender"), the
principal sum of Two Million Dollars ($2,000,000), together with interest at
the reference rate of Bank of America plus two percent ("Note Rate") on the
unpaid principal from the date hereof until the principal amount of this
Promissory Note is paid in full in accordance with the terms of this Promissory
Note. The principal of this Promissory Note, together with all accrued
interest, shall become due and payable upon the earlier to occur of (i)
September 1, 1996 (or such later date as specifically provided below) or (ii)
the closing date of any registration statement of Borrower on Form S-1 declared
effective by the SEC (the "Registration Statement") for its initial public
offering (the "IPO").
In the event that the IPO does not occur on or prior to September 1,
1996, then the principal amount, together with all accrued interest, shall be
immediately due and payable on such date; provided, however, that Borrower may
extend this date to September 1, 1997 in exchange for the issuance on September
1, 1996 by Borrower to Lender of shares of Borrower's Common Stock, without
further consideration, at this rate of 2,439 shares for each $25,000 principal
amount outstanding under this Promissory Note. If the closing date for the
Borrower's IPO occurs before September 1, 1996, then immediately following such
closing the principal amount, together with all accrued interest, shall be
converted into Common Stock at the price to the public for shares of Common
Stock issued in the IPO as stated in the Registration Statement (the "IPO
Price"). The number of shares of Common Stock into which this Note may be
converted shall be determined by dividing the aggregate principal amount
together with all accrued interest to the date of conversion by the IPO Price.
No fractional shares of Common Stock shall be issued upon conversion of this
Note. In lieu of the Borrower issuing any fractional shares to Lender upon the
conversion of this Note, Borrower shall pay to Lender in cash the amount of the
outstanding principal and accrued interest that is not so converted.
In the event that any principal and/or interest is not paid when due,
without affecting any of Lender's other rights and remedies, the unpaid
principal amount and, to the extent permitted by applicable law, interest,
shall bear interest at the Note Rate and shall be payable on demand of Lender
until such unpaid amount is paid in full.
Principal and interest shall be payable in lawful money of the United
States at Lender's offices located at the address for notice purposes set forth
in the Credit Agreement (as defined below).
This Promissory Note may not be prepaid at any time by the Borrower
without the written consent of Lender.
This Promissory Note is the Note referred to in, and is entitled to the
benefits of, and is subject to the terms and conditions of, a Credit Agreement
dated as of the date hereof between the Lender and the Borrower as the same may
from time to time be amended, modified or supplemented ("Credit Agreement"),
the terms of which are incorporated herein by reference. Unless the context
indicates otherwise, the capitalized terms appearing in this Note shall have
the meanings designated in the Credit Agreement. The Credit Agreement provides,
among other things, that upon the occurrence of an Event of Default, the Lender
may, among other things,
<PAGE> 3
declare the entire principal amount of this Promissory Note and all accrued
interest thereon immediately due and payable.
By acceptance of the Promissory Note, Lender represents to the Borrower
that by reason of its business and financial experience it has the capacity to
protect its own interests in this transaction and is accepting this Promissory
Note and any Common Stock issued upon conversion hereof or in connection
herewith, for its own account and not with a view to distribution or resale.
This Promissory Note shall be governed by, and construed and enforced
in accordance with, the internal laws (excluding the laws of conflict) of the
State of California.
All agreements between the undersigned and the holder hereof are
expressly limited so that in no contingency or event whatsoever, whether by
reason of advancement of the proceeds hereof, acceleration of maturity of the
unpaid principal balance hereof, or otherwise, shall the amount paid or agreed
to be paid to the holder hereof for the use, forbearance or detention of the
money to be advanced hereunder exceed the highest lawful rate permissible
under applicable usury laws. If, from any circumstances whatsoever, fulfillment
of any provision hereof, at the time performance of such provision shall be
due, shall involve transcending the limit of validity prescribed by law which a
court of competent jurisdiction may deem applicable hereto, then ipso facto,
the obligations to be fulfilled shall be reduced to the limit of such validity,
and if from any circumstances the holder hereof shall ever receive as interest
an amount which would exceed the highest lawful rate, such amount which would
be excessive interest shall be applied to the reduction of the unpaid principal
balance due hereunder and not to the payment of interest.
Borrower promises to pay all the cost and expenses, including
reasonable attorney's fees, incurred in the collection and enforcement of this
Promissory Note. Borrower and each surety, endorser, guarantor, and other party
ever liable for payment of any sums of money payable under this Promissory
Note, hereby, jointly and severally, consent to renewal and extension of time
at or after the maturity hereof, without notice, and hereby, jointly and
severally waive diligence, presentment, protest, demand and notice of every
kind and, to the full extent permitted by law, the right to plead any statute
of limitations as a defense to any demand hereunder.
Borrower:
Interact Medical Technologies Corporation
By: /s/ BRUCE D. STURMAN
--------------------------------
Name: Bruce D. Sturman
------------------------------
Title: C.E.O.
-----------------------------
(Promissory Note)
2
<PAGE> 1
Exhibit 10.5
<PAGE> 2
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THIS NOTE MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (ii) AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT WHERE THE HOLDER HAS FURNISHED TO THE
COMPANY AN OPINION OF ITS COUNSEL, IF SUCH OPINION SHALL BE SATISFACTORY TO THE
COMPANY, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
8% PROMISSORY NOTE
$350,000.00 As of May 24, 1996
Orange County, California
FOR VALUE RECEIVED, the undersigned, INTERACT MEDICAL TECHNOLOGIES
CORPORATION, a Delaware corporation (the "Payor"), having its principal place of
business at 1335 N. Northlake Way, Suite 102, Seattle, Washington 98103, hereby
promises to pay to the order of BAXTER HEALTHCARE CORPORATION (the "Payee"),
having an address at 17221 Redhill Avenue, Irvine, California 92714, on the
earlier of either (i) the closing of an initial public offering of the Payor's
securities (the "IPO") or (ii) September 1, 1996 (the "Maturity Date") at the
Payee's address set forth hereinabove or, at such other place as the Payee shall
hereafter specify in writing, the principal sum of Three Hundred Fifty Thousand
Dollars ($350,000.00) in such coin or currency of the United States of America
as at the time shall be legal tender for the payment of public and private
debts.
The Maturity Date may be extended, at the option of Payor, until
September 1, 1997. In such event, Payor shall issue to Payee, without further
consideration, a number of shares of Payor's Common Stock equal to 2,439 shares
for each $25,000 principal amount outstanding under this Note.
By acceptance of this Note, Payee represents to Payor that by reason of
its business and financial experience it has the capacity to protect its own
interests in this transaction and is accepting this Note and any Common Stock
issued pursuant hereto for its own account and not with a view to distribution
or resale.
1. INTEREST AND PAYMENT
1.1. The unpaid principal amount hereof shall bear simple interest
from the date hereof at the rate of 8% per annum until the Maturity Date, (or
until any such earlier date of payment if this Note is prepaid as hereinafter
provided).
1.2. Interest shall be payable in full on the Maturity Date (or on
any such earlier date of payment if this Note is prepaid as hereinafter
provided).
<PAGE> 3
1.3. If payment of the principal amount hereof and interest accrued
thereon is not made when due and payable, at the Maturity Date or upon
acceleration, then interest shall accrue on such unpaid amount from the date of
nonpayment to the date of payment at the lesser interest rate of 12% simple
interest per annum or the maximum interest rate permitted by applicable law.
2. PREPAYMENT. At the option of the Payor, this Note may be prepaid in
whole or in part at any time or from time to time, without penalty or premium.
Each partial prepayment of this Note shall first be applied to interest accrued
through the date of prepayment and then to principal.
3. EVENTS OF DEFAULT. The occurrence of each or any of the following
conditions, events or acts shall constitute an "Event of Default."
3.1. The dissolution of the Payor, or
3.2. The Payor's insolvency, assignment for the benefit of
creditors, application for or appointment of a receiver, filing of a voluntary
or involuntary petition under any provision of the Federal Bankruptcy Code or
amendments thereto or any other federal or state statute affording relief to
debtors; or if there shall be commenced against the Payor any such proceeding or
filed against the Payor any such application or petition which proceeding,
application or petition is not dismissed or withdrawn within thirty (30) days of
commencement or filing as the case may be; or
3.3. The failure by the Payor to make any payment of any amount of
principal on, or accrued interest under, this Note, as and when the same shall
become due and payable; or
3.4. The commencement of a proceeding to foreclose the security
interest or lien in any property or assets to satisfy the security interest or
lien therein of any secured creditor of the payor whose debt is in excess of
$100,000.00; or
3.5. The entry of a final judgment for the, payment of money in
excess of $100,000.00 by a court of competent jurisdiction against the Payor,
which judgment the Payor shall not discharge (or provide for such discharge) in
accordance with its terms within thirty (30) days of the date of entry thereof,
or procure a stay of execution thereof within thirty (30) days from the date of
entry thereof and, within such thirty (30) day period, or such longer period
during which execution of such judgment shall have been stayed, appeal therefrom
and cause the execution thereof to be stayed during such appeal.
In the event any such Event of Default occurs, and at any time
thereafter, while such Event of Default is continuing, the indebtedness
evidenced by this Note shall immediately become due and payable, both as to
principal and interest, without
-2-
<PAGE> 4
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived, notwithstanding anything contained herein to the
contrary.
4. SUITS FOR ENFORCEMENT AND REMEDIES. If any one or more Events of
Default shall occur and be continuing, the holder of this Note may proceed to
protect and enforce such holder's rights either by suit in equity or by action
at law, or both, whether for the specific performance of any covenant, condition
or agreement contained in this Note or in any agreement or document referred to
herein or in aid of the exercise of any power granted in this Note or in any
agreement or document referred to herein, or proceed to enforce the payment of
this Note or to enforce any other legal or equitable right of the holder of this
Note. No right or remedy herein or in any other agreement or instrument
conferred upon the holder of this Note is intended to be exclusive of any other
right or remedy, and each and every such right or remedy shall be cumulative and
shall be in addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or by statute or otherwise.
5. FEES, WAIVERS, OTHER.
5.1. If the holder of this Note shall institute any action to
enforce the collection of any amount of principal of and/or interest on this
Note, and there shall be any amount of principal of and/or interest on this Note
owed to the holder, then there shall be immediately due and payable from the
Payor, in addition to the then unpaid sum of this Note, all reasonable costs and
expenses incurred by the Payee in connection therewith, including, without
limitation, reasonable attorneys' fees and disbursements.
5.2. No forbearance, indulgence, delay or failure to exercise any
right or remedy with respect to this Note shall operate as a waiver, nor as an
acquiescence in any default, nor shall any single or partial exercise of any
right or remedy preclude any other or further exercise thereof or the exercise
of any other right or remedy.
5.3. This Note may not be modified or discharged except by a writing
duly executed by the Payor and the Payee.
5.4. The Payor hereby expressly waives demand and presentment for
payment, notice of nonpayment, notice of dishonor, protest, notice of protest,
bringing of suit, and diligence in taking any action to collect amounts called
for hereunder, and shall be directly and primarily liable for the payment of all
sums owing and to be owing herein, regardless of and without any notice,
diligence, act or omission with respect to the collection of any amount called
for hereunder or in connection with any right, lien, interest or property at any
and all times which the Payee had or is existing as security for any amount
called for hereunder.
5.5. The Payor shall bear all of its expenses, including attorneys'
fees
-3-
<PAGE> 5
incurred in connection with the negotiation and preparation of this Note.
6. GOVERNING LAW. This Note and the legal relations between the parties
hereto shall be governed by and construed in accordance with the laws (excluding
the laws of conflict) of the State of California.
7. MISCELLANEOUS.
7.1. The headings of the various paragraphs of this Note are for
convenience of reference only and shall in no way modify any of the terms or
provisions of this Note.
7.2. All notices required or permitted to be given hereunder shall
be deemed to have been duly given when personally delivered or sent by
registered or certified mail, return receipt requested, postage prepaid, to the
address of the intended recipient set forth in the preamble to this Note or at
such other address as the intended recipient shall have hereafter given to the
other party hereto pursuant to the provisions hereof.
INTERACT MEDICAL TECHNOLOGIES
CORPORATION,
a Delaware corporation
By: /s/ Bruce D. Sturman
---------------------------
Name: Bruce D. Sturman
-------------------------
Title: CEO
------------------------
-4-
<PAGE> 1
Exhibit 10.6
<PAGE> 2
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THIS NOTE MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (ii) AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT WHERE THE HOLDER HAS FURNISHED TO THE
COMPANY AN OPINION OF ITS COUNSEL, IF SUCH OPINION SHALL BE SATISFACTORY TO THE
COMPANY, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
8% PROMISSORY NOTE
$200,000.00 As of May 24, 1996
Orange County, California
FOR VALUE RECEIVED, the undersigned, INTERACT MEDICAL TECHNOLOGIES
CORPORATION, a Delaware corporation (the "Payor"), having its principal place of
business at 1335 N. Northlake Way, Suite 102, Seattle, Washington 98103, hereby
promises to pay to the order of BAXTER HEALTHCARE CORPORATION (the "Payee"),
having an address at 17221 Redhill Avenue, Irvine, California 92714, on the
earlier of either (i) the closing of an initial public offering of the Payor's
securities (the "IPO") or (ii) September 1, 1996 (the "Maturity Date") at the
Payee's address set forth hereinabove or, at such other place as the Payee shall
hereafter specify in writing, the principal sum of Two Hundred Thousand Dollars
($200,000.00) in such coin or currency of the United States of America as at the
time shall be legal tender for the payment of public and private debts.
By acceptance of this Note, Payee represents to Payor that by reason of
its business and financial experience it has the capacity to protect its own
interests in this transaction and is accepting this Note for its own account and
not with a view to distribution or resale.
1. INTEREST AND PAYMENT
1.1. The unpaid principal amount hereof shall bear simple interest
from the date hereof at the rate of 8% per annum until the Maturity Date, (or
until any such earlier date of payment if this Note is prepaid as hereinafter
provided).
1.2. Interest shall be payable in full on the Maturity Date (or on
any such earlier date of payment if this Note is prepaid as hereinafter
provided).
1.3. If payment of the principal amount hereof and interest accrued
thereon is not made when due and payable, at the Maturity Date or upon
acceleration, then interest shall accrue on such unpaid amount from the date of
nonpayment to the date of payment at the lesser interest rate of 12% simple
interest per annum or the maximum interest rate permitted by applicable law.
2. PREPAYMENT. At the option of the Payor, this Note may be prepaid in
whole
<PAGE> 3
or in part at any time or from time to time, without penalty or premium. Each
partial prepayment of this Note shall first be applied to interest accrued
through the date of prepayment and then to principal.
3. EVENTS OF DEFAULT. The occurrence of each or any of the following
conditions, events or acts shall constitute an "Event of Default."
3.1. The dissolution of the Payor, or
3.2. The Payor's insolvency, assignment for the benefit of
creditors, application for or appointment of a receiver, filing of a voluntary
or involuntary petition under any provision of the Federal Bankruptcy Code or
amendments thereto or any other federal or state statute affording relief to
debtors; or if there shall be commenced against the Payor any such proceeding or
filed against the Payor any such application or petition which proceeding,
application or petition is not dismissed or withdrawn within thirty (30) days of
commencement or filing as the case may be; or
3.3. The failure by the Payor to make any payment of any amount of
principal on, or accrued interest under, this Note, as and when the same shall
become due and payable; or
3.4. The commencement of a proceeding to foreclose the security
interest or lien in any property or assets to satisfy the security interest or
lien therein of any secured creditor of the payor whose debt is in excess of
$100,000.00; or
3.5. The entry of a final judgment for the, payment of money in
excess of $100,000.00 by a court of competent jurisdiction against the Payor,
which judgment the Payor shall not discharge (or provide for such discharge) in
accordance with its terms within thirty (30) days of the date of entry thereof,
or procure a stay of execution thereof within thirty (30) days from the date of
entry thereof and, within such thirty (30) day period, or such longer period
during which execution of such judgment shall have been stayed, appeal therefrom
and cause the execution thereof to be stayed during such appeal.
In the event any such Event of Default occurs, and at any time
thereafter, while such Event of Default is continuing, the indebtedness
evidenced by this Note shall immediately become due and payable, both as to
principal and interest, without presentment, demand, protest or other notice of
any kind, all of which are hereby expressly waived, notwithstanding anything
contained herein to the contrary.
4. SUITS FOR ENFORCEMENT AND REMEDIES. If any one or more Events of
Default shall occur and be continuing, the holder of this Note may proceed to
protect and enforce such holder's rights either by suit in equity or by action
at law, or both, whether for the specific performance of any covenant, condition
or agreement contained in this Note or in
-2-
<PAGE> 4
any agreement or document referred to herein or in aid of the exercise of any
power granted in this Note or in any agreement or document referred to herein,
or proceed to enforce the payment of this Note or to enforce any other legal or
equitable right of the holder of this Note. No right or remedy herein or in any
other agreement or instrument conferred upon the holder of this Note is intended
to be exclusive of any other right or remedy, and each and every such right or
remedy shall be cumulative and shall be in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in equity or by
statute or otherwise.
5. FEES, WAIVERS, OTHER.
5.1. If the holder of this Note shall institute any action to
enforce the collection of any amount of principal of and/or interest on this
Note, and there shall be any amount of principal of and/or interest on this Note
owed to the holder, then there shall be immediately due and payable from the
Payor, in addition to the then unpaid sum of this Note, all reasonable costs and
expenses incurred by the Payee in connection therewith, including, without
limitation, reasonable attorneys' fees and disbursements.
5.2. No forbearance, indulgence, delay or failure to exercise any
right or remedy with respect to this Note shall operate as a waiver, nor as an
acquiescence in any default, nor shall any single or partial exercise of any
right or remedy preclude any other or further exercise thereof or the exercise
of any other right or remedy.
5.3. This Note may not be modified or discharged except by a
writing duly executed by the Payor and the Payee.
5.4. The Payor hereby expressly waives demand and presentment for
payment, notice of nonpayment, notice of dishonor, protest, notice of protest,
bringing of suit, and diligence in taking any action to collect amounts called
for hereunder, and shall be directly and primarily liable for the payment of all
sums owing and to be owing herein, regardless of and without any notice,
diligence, act or omission with respect to the collection of any amount called
for hereunder or in connection with any right, lien, interest or property at any
and all times which the Payee had or is existing as security for any amount
called for hereunder.
5.5. The Payor shall bear all of its expenses, including attorneys'
fees incurred in connection with the negotiation and preparation of this Note.
6. GOVERNING LAW. This Note and the legal relations between the
parties hereto shall be governed by and construed in accordance with the laws
(excluding the laws of conflict) of the State of California.
-3-
<PAGE> 5
7. MISCELLANEOUS.
7.1. The headings of the various paragraphs of this Note are for
convenience of reference only and shall in no way modify any of the terms or
provisions of this Note.
7.2. All notices required or permitted to be given hereunder shall
be deemed to have been duly given when personally delivered or sent by
registered or certified mail, return receipt requested, postage prepaid, to the
address of the intended recipient set forth in the preamble to this Note or at
such other address as the intended recipient shall have hereafter given to the
other party hereto pursuant to the provisions hereof.
INTERACT MEDICAL TECHNOLOGIES
CORPORATION,
a Delaware corporation
By: /s/ Bruce D. Sturman
----------------------------
Name: Bruce D. Sturman
-------------------------
Title: CEO
-------------------------
<PAGE> 1
EXHIBIT 10.7
<PAGE> 2
INTERACT MEDICAL TECHNOLOGIES CORPORATION
- - --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
- - --------------------------------------------------------------------------------
May 24, 1996
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Termination of Prior Agreements ....................................... 2
2. Registration Rights ................................................... 2
2.1 Definitions ..................................................... 2
2.2 Request for Registration ........................................ 3
2.3 Company Registration ............................................ 4
2.4 Obligations of the Company ...................................... 5
2.5 Furnish Information ............................................. 6
2.6 Expenses of Demand Registration ................................. 7
2.7 Expenses of Company Registration ................................ 7
2.8 Underwriting Requirements ....................................... 7
2.9 Delay of Registration ........................................... 8
2.10 Indemnification ................................................. 8
2.11 Reports Under Securities Exchange Act of 1934 ................... 10
2.12 Form S-3 Registration ........................................... 11
2.13 Assignment of Registration Rights ............................... 12
2.14 Limitations on Subsequent Registration Rights ................... 12
2.15 "Market Stand-Off" Agreement .................................... 13
2.16 Additional Registration Rights .................................. 13
2.17 Termination of Registration Rights .............................. 14
3. Miscellaneous ......................................................... 14
3.1 Other Rights .................................................... 14
3.2 Governing Law ................................................... 14
3.3 Counterparts .................................................... 14
3.4 Titles and Subtitles ............................................ 14
3.5 Notices ......................................................... 14
3.6 Amendments and Waivers .......................................... 15
3.7 Severability .................................................... 15
3.8 Entire Agreement ................................................ 15
</TABLE>
i.
<PAGE> 4
INTERACT MEDICAL TECHNOLOGIES CORPORATION
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made as of the 24th day of May,
1996, by and between Interact Medical Technologies Corporation, a Delaware
corporation (the "Company"), the investors listed on Schedule A hereto (the
"Existing Investors") and Baxter Healthcare Corporation, a Delaware corporation
("Baxter"). Each of the Existing Investors and Baxter are herein referred to as
"Investors."
RECITALS
WHEREAS, pursuant to a certain Agreement and Plan of Reorganization of
even date herewith, between Ixion, Inc., a Delaware corporation ("Ixion"), and
Medical Media Systems, Inc., a Delaware corporation ("MMS") and predecessor to
the Company, Ixion has merged with and into MMS, with MMS, as the surviving
corporation being renamed as the Company (the "Merger");
WHEREAS, pursuant to certain Investor Agreements dated February 22,
1996 (the "Investor Letters"), each of the Existing Investors has rights to
acquire shares of Ixion's Common Stock following the sale of Ixion's Common
Stock in an underwritten initial public offering pursuant to a registration
statement on Form S-1;
WHEREAS, the Investor Letters have been assumed by the Company in the
Merger;
WHEREAS, each Existing Investor is a party to a certain Security
Registration Agreement between itself and Ixion (the "Prior Agreement");
WHEREAS, each of the Existing Investors desires to terminate the Prior
Agreements and to accept the rights created pursuant hereto in lieu of the
rights granted to them under the Prior Agreements;
WHEREAS, Baxter has rights to acquire shares of the Company's Common
Stock (the "Common Stock") pursuant to a certain letter agreement between Baxter
and the Company of even date herewith (the "Baxter Letter") and pursuant to
certain promissory notes in the principal amounts of $2,000,000 and $200,000,
each of even date herewith (the "Promissory Notes"); and
WHEREAS, in order to induce Baxter to enter into the Baxter Letter and
the Promissory Notes, the Company hereby agrees to grant Baxter the rights set
forth herein.
<PAGE> 5
NOW, THEREFORE, in consideration of the covenants and representations
set forth herein, and for other good and valuable consideration, the parties
hereby agree as follows:
1. Termination of Prior Agreements. The Existing Investors and the Company
hereby agree that this Agreement shall govern the rights of the Existing
Investors as to registration rights and certain other matters as set forth
herein, and the Prior Agreements shall be superseded and replaced in their
entirety by this Agreement.
2. Registration Rights. The Company covenants and agrees as follows:
2.1 Definitions. For purposes of this Agreement:
(a) The term "Act" means the Securities Act of 1933, as amended.
(b) The term "Form S-3" means such form under the Act as in effect
on the date hereof or any registration form under the Act subsequently adopted
by the SEC which permits inclusion or incorporation of substantial information
by reference to other documents filed by the Company with the SEC.
(c) The term "Holder" means any person owning or having the right
to acquire Registrable Securities or any assignee thereof in accordance with
Section 2.13 hereof.
(d) The term "1934 Act" shall mean the Securities Exchange Act of
1934, as amended.
(e) The term "register", "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document.
(f) The term "Registrable Securities" means (i) the Common Stock
issuable or issued pursuant to the Investor and Baxter Letters, (ii) the Common
Stock issued upon the conversion of the Promissory Notes and (iii) any Common
Stock of the Company issued as (or issuable upon the conversion or exercise of
any warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of the shares
referenced in (i) and (ii) above, excluding in all cases, however, any
Registrable Securities sold by a person in a transaction in which his rights
under this Section 2 are not assigned.
2.
<PAGE> 6
(g) The term "SEC" shall mean the Securities and Exchange
Commission.
2.2 Request for Registration.
(a) If the Company shall receive at any time after one (1) year
after the effective date of the first registration statement for a public
offering of securities of the Company (other than a registration statement
relating either to the sale of securities to employees of the Company pursuant
to a stock option, stock purchase or similar plan or an SEC Rule 145
transaction), a written request from the Holders of the Registrable Securities
then outstanding that the Company file a registration statement under the Act
covering the registration of at least forty percent (40%) of the Registrable
Securities then outstanding (or a lesser percent if the anticipated aggregate
offering price, net of underwriting discounts and commissions, would exceed
$5,000,000), then the Company shall:
(i) within ten (10) days of the receipt thereof, give written
notice of such request to all Holders; and
(ii) effect as soon as practicable, and in any event within
one hundred twenty (120) days of the receipt of such request, the registration
under the Act of all Registrable Securities which the Holders request to be
registered, subject to the limitations of subsection 2.2(b), within twenty (20)
days of the mailing of such notice by the Company in accordance with Section
3.5.
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to subsection 2.2(a) and the Company
shall include such information in the written notice referred to in subsection
2.2(a). The underwriter will be selected by the Company and shall be reasonably
acceptable to a majority in interest of the Initiating Holders. In such event,
the right of any Holder to include his Registrable Securities in such
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with the Company as
provided in subsection 2.4(e)) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such underwriting.
Notwithstanding any other provision of this Section 2.2, if the underwriter
advises the Initiating Holders in writing that marketing factors require a
limitation of the number of shares to be underwritten, then the Initiating
Holders shall so advise all Holders of Registrable Securities which would
otherwise be underwritten pursuant hereto, and the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated among all Holders thereof, including the Initiating Holders, in
proportion (as
3.
<PAGE> 7
nearly as practicable) to the amount of Registrable Securities of the Company
owned by each Holder; provided, however, that the number of shares of
Registrable Securities to be included in such underwriting shall not be
reduced unless all other securities are first entirely excluded from the
underwriting.
(c) Notwithstanding the foregoing, if the Company shall
furnish to Holders requesting a registration statement pursuant to this
Section 2.2, a certificate signed by the Chief Executive Officer of the
Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be seriously detrimental to the Company and its
stockholders for such registration statement to be filed and it is therefore
essential to defer the filing of such registration statement, the Company
shall have the right to defer taking action with respect to such filing for a
period of not more than one hundred twenty (120) days after receipt of the
request of the Initiating Holders.
(d) In addition, the Company shall not be obligated to
effect, or to take any action to effect, any registration pursuant to this
Section 2.2:
(i) After the Company has effected one registration
pursuant to this Section 2.2 and such registration has been declared or
ordered effective;
(ii) During the period starting with the date thirty
(30) days prior to the Company's good faith estimate of the date of filing of,
and ending on a date one hundred eighty (180) days after the effective date
of, a registration subject to Section 2.3 hereof; provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; or
(iii) If the Initiating Holders propose to dispose of
shares of Registrable Securities that may be immediately registered on Form
S-3 pursuant to a request made pursuant to Section 2.12 below.
2.3 Company Registration. If (but without any obligation to do so)
the Company proposes to register (including for this purpose a registration
effected by the Company for stockholders other than the Holders) any of its
stock or other securities under the Act in connection with the public offering
of such securities solely for cash (other than a registration relating solely
to the sale of securities to participants in a Company stock plan, a
registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities or a registration in which the
only Common Stock being registered is Common Stock issuable upon conversion of
debt securities which are also being registered), the Company shall, at such
time, promptly give each Holder written notice of such registration. Upon the
written request of each Holder given within twenty (20) days after mailing of
such notice by the Company in accordance with Section 3.5, the Company shall,
subject to the provisions of Section 2.8,
4.
<PAGE> 8
cause to be registered under the Act all of the Registrable Securities that each
such Holder has requested to be registered.
2.4 Obligations of the Company. Whenever required under this Section
2 to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for a period of up to one hundred twenty
(120) days or until the distribution contemplated in the Registration Statement
has been completed; provided, however, that (i) such 120-day period shall be
extended for a period of time equal to the period the Holder refrains from
selling any securities included in such registration at the request of an
underwriter of Common Stock (or other securities) of the Company; and (ii) in
the case of any registration of Registrable Securities on Form S-3 which are
intended to be offered on a continuous or delayed basis, such 120-day period
shall be extended, if necessary, to keep the registration statement effective
until all such Registrable Securities are sold, provided that Rule 415, or any
successor rule under the Act, permits an offering on a continuous or delayed
basis, and provided further that applicable rules under the Act governing the
obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment which (I) includes any prospectus required by Section
10(a)(3) of the Act or (II) reflects facts or events representing a material or
fundamental change in the information set forth in the registration statement,
the incorporation by reference of information required to be included in (I) and
(II) above to be contained in periodic reports filed pursuant to Section 13 or
15(d) of the 1934 Act in the registration statement.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders; provided that the Company shall not be required in connection therewith
or as a condition thereto to
5.
<PAGE> 9
qualify to do business or to file a general consent to service of process in any
such states or jurisdictions.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) Cause all such Registrable Securities registered hereunder
to be listed on each securities exchange on which similar securities issued by
the Company are then listed.
(h) Provide a transfer agent and registrar for all Registrable
Securities registered hereunder and a CUSIP number for all such Registrable
Securities, in each case not later than the effective date of such registration.
(i) Use its best efforts to furnish, at the request of any
Holder requesting registration of Registrable Securities pursuant to this
Section 2, on the date that such Registrable Securities are delivered to the
underwriters for sale in connection with a registration pursuant to this Section
2, if such securities are being sold through underwriters, or, if such
securities are not being sold through underwriters, on the date that the
registration statement with respect to such securities becomes effective, (i) an
opinion, dated such date, of the counsel representing the Company for the
purposes of such registration, in form and substance as is customarily given to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities and
(ii) a letter dated such date, from the independent certified public accountants
of the Company, in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities.
2.5 Furnish Information.
(a) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this Section 2 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company such
6.
<PAGE> 10
information regarding itself, the Registrable Securities held by it, and the
intended method of disposition of such securities as shall be required to effect
the registration of such Holder's Registrable Securities.
(b) The Company shall have no obligation with respect to any
registration requested pursuant to Section 2.2 or Section 2.12 if, due to the
operation of subsection 2.5(a), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in subsection 2.2(a) or subsection
2.12(b)(2), whichever is applicable.
2.6 Expenses of Demand Registration. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 2.2, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company and the
reasonable fees and disbursements of one counsel for the selling Holders shall
be borne by the Company; provided, however, that the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 2.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered (in which case all participating Holders shall bear such expenses),
unless the Holders of a majority of the Registrable Securities agree to forfeit
their right to demand registrations pursuant to Section 2.2.
2.7 Expenses of Company Registration. The Company shall bear and pay
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 2.3 for each Holder (which right may be assigned as provided
in Section 2.13), including (without limitation) all registration, filing, and
qualification fees, printers and accounting fees relating or apportionable
thereto and the fees and disbursements of one counsel for the selling Holders
selected by them, but excluding underwriting discounts and commissions relating
to Registrable Securities.
2.8 Underwriting Requirements. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 2.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is
compatible with the
7.
<PAGE> 11
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Registrable Securities,
which the underwriters determine in their sole discretion will not jeopardize
the success of the offering (the securities so included to be apportioned pro
rata among the selling stockholders according to the total amount of securities
entitled to be included therein owned by each selling stockholder or in such
other proportions as shall mutually be agreed to by such selling stockholders)
but in no event shall (i) the amount of securities of the selling Holders
included in the offering be reduced below thirty percent (30%) of the total
amount of securities included in such offering, unless such offering is the
initial public offering of the Company's securities in which case the selling
stockholders may be excluded if the underwriters make the determination
described above and no other stockholder's securities are included or (ii)
notwithstanding (i) above, any shares being sold by a stockholder exercising a
demand registration right similar to that granted in Section 2.2 be excluded
from such offering. For purposes of the preceding parenthetical concerning
apportionment, for any selling stockholder which is a Holder of Registrable
Securities and which is a partnership or corporation, the partners, retired
partners and stockholders of such holder, or the estates and family members of
any such partners and retired partners and any trusts for the benefit of any of
the foregoing persons shall be deemed to be a single "selling stockholder", and
any pro-rata reduction with respect to such "selling stockholder" shall be based
upon the aggregate amount of shares carrying registration rights owned by all
entities and individuals included in such "selling stockholder", as defined in
this sentence.
2.9 Delay of Registration. No Holder shall have any right to obtain
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 2.
2.10 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 2:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Act or the 1934 Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the Act,
or the 1934 Act, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto; (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading; or (iii) any
violation or alleged violation by the Company of the Act, the 1934 Act or any
rule or regulation
8.
<PAGE> 12
promulgated under the Act or the 1934 Act; and the Company will pay to each such
Holder, underwriter or controlling person any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this subsection 2.10(a) shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability, or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter or controlling person of
such Holder.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act or the 1934 Act, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereto) arise out of or
are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration; and each such Holder will pay any legal or other
expenses reasonably incurred by any person intended to be indemnified pursuant
to this subsection 2.10(b), in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this subsection 2.10(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided, that, in no event shall any
indemnity under this subsection 2.10(b) exceed the gross proceeds from the
offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 2.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.10, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to
9.
<PAGE> 13
actual or potential differing interests between such indemnified party and any
other party represented by such counsel in such proceeding. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 2.10, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
2.10.
(d) If the indemnification provided for in this Section 2.10
is held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this
Section 2.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 2, and otherwise. No
indemnifying party, in the defense of any such claim or litigation, shall,
except with the consent of each indemnified party, consent to the entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation.
2.11 Reports Under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
10.
<PAGE> 14
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(c) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
2.12 Form S-3 Registration. In case the Company shall receive from
Holders of at least twenty percent (20%) of the currently outstanding
Registrable Securities, a written request or requests that the Company effect a
registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holders,
the Company will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such Holder's
or Holders' Registrable Securities as are specified in such request, together
with all or such portion of the Registrable Securities of any other Holder or
Holders joining in such request as are specified in a written request given
within fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this section 2.12: (1) if
Form S-3 is not available for such offering by the Holders; (2) if the Holders,
together with the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than $500,000; (3) if the
Company shall furnish to the Holders a certificate signed by the President of
the Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be seriously detrimental to the Company and its
11.
<PAGE> 15
stockholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form S-3
registration statement for a period of not more than one hundred twenty (120)
days after receipt of the request of the Holder or Holders under this Section
2.12; (4) if the Company has, within the twelve (12) month period preceding the
date of such request, already effected two registrations on Form S-3 for the
Holders pursuant to this Section 2.12; or (5) in any particular jurisdiction in
which the Company would be required to qualify to do business or to execute a
general consent to service of process in effecting such registration,
qualification or compliance.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. All expenses incurred in connection with a
registration requested pursuant to Section 2.12, including (without limitation)
all registration, filing, qualification, printer's and accounting fees and the
reasonable fees and disbursements of counsel for the selling Holder or Holders
and counsel for the Company, but excluding any underwriters' discounts or
commissions associated with Registrable Securities, shall be borne by the
Company. Registrations effected pursuant to this Section 2.12 shall not be
counted as demands for registration or registrations effected pursuant to
Sections 2.2 or 2.3, respectively.
2.13 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 2 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities who, after such assignment or transfer, holds at
least 100,000 shares of Registrable Securities (subject to appropriate
adjustment for stock splits, stock dividends, combinations and other
recapitalizations), provided the Company is, within a reasonable time after such
transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; and provided further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Act.
2.14 Limitations on Subsequent Registration Rights. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of a majority of the outstanding Registrable Securities,
enter into any agreement with any holder or prospective holder of any securities
of the Company which would allow such holder or prospective holder (a) to
include such securities in any registration filed under Section 2.2 hereof,
unless under the terms of such agreement, such holder or prospective holder may
include such securities in any such registration only to the extent that the
inclusion of his securities will not reduce the amount of the Registrable
Securities of the Holders which is included or (b) to make a demand registration
which could result in such registration statement being declared effective prior
to the earlier of
12.
<PAGE> 16
either of the dates set forth in subsection 2.2(a) or within one hundred twenty
(120) days of the effective date of any registration effected pursuant to
Section 2.2.
2.15 "Market Stand-Off" Agreement. Each Investor hereby agrees that,
during the period of duration specified by the Company and an underwriter of
common stock or other securities of the Company, following the effective date of
a registration statement of the Company filed under the Act, it shall not, to
the extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any securities of the Company
held by it at any time during such period except common stock included in such
registration; provided, however, that:
(a) such agreement shall not exceed 360 days for the first
such registration statement of the Company which covers Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
(b) such agreement shall not exceed 90 days for any subsequent
registration statement of the Company which covers Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
and
(c) all officers and directors of the Company and all other
persons with registration rights (whether or not pursuant to this Agreement)
enter into similar agreements.
In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
each Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period. Notwithstanding the
foregoing, the obligations described in this Section 2.15 shall not apply to a
registration relating solely to employee benefit plans on Form S-8 or similar
forms which may be promulgated in the future, or a registration relating solely
to a SEC Rule 145 transaction on Form S-14 or Form S-15 or similar forms which
may be promulgated in the future.
2.16 Additional Registration Rights. Notwithstanding anything set
forth in this Section 2, Baxter Healthcare Corporation ("Baxter") shall have a
one-time priority over all other parties to this Agreement to register, in
accordance with the terms and conditions contained in this Section 2, a number
of shares of the Company's common stock which will result in gross proceeds of
up to $2,000,000 (but not less than $1,000,000). Baxter's right to exercise the
additional rights granted in this Section 2.16 shall commence six (6) months
after the effective date of the first registration statement for a public
offering of securities of the Company (other than a registration statement
relating either to the sale of securities to employees of the Company pursuant
to a stock
13.
<PAGE> 17
option, stock purchase or similar plan or an SEC Rule 145 transaction) (the
"Effective Date") and shall expire three (3) years after the Effective Date.
2.17 Termination of Registration Rights.
(a) No Holder shall be entitled to exercise any right provided
for in this Section 2 after three (3) years following the consummation of the
sale of securities pursuant to a registration statement filed by the Company
under the Act in connection with the initial firm commitment underwritten
offering of its securities to the general public.
(b) In addition, the right of any Holder to request
registration or inclusion in any registration pursuant to Section 2.3 shall
terminate on the closing of the first Company-initiated registered public
offering of Common Stock of the Company if all shares of Registrable Securities
held by such Holder may immediately be sold under Rule 144 during any 90-day
period, or on such date after the closing of the first Company-initiated
registered public offering of Common Stock of the Company as all shares of
Registrable Securities held or entitled to be held upon conversion by such
Holder may immediately be sold under Rule 144 during any 90-day period.
3. Miscellaneous.
3.1 Other Rights. Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
3.2 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
3.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.4 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.5 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof,
14.
<PAGE> 18
or at such other address as such party may designate by ten (10) days' advance
written notice to the other parties.
3.6 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company and the Holders of at
least a majority of the Registrable Securities; provided that this Agreement may
be amended with the consent of the Holders of less than all Registrable
Securities only in a manner which affects all Registrable Securities in the same
fashion. No waivers of or exceptions to any term, condition or provision of this
Agreement, in any one or more instances, shall be deemed to be, or construed as,
a further or continuing waiver of any such term, condition or provision.
3.7 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
3.8 Entire Agreement. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
[Remainder of This Page Intentionally Left Blank]
15.
<PAGE> 19
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
INTERACT MEDICAL TECHNOLOGIES
CORPORATION
By: /s/ Bruce D. Sturman
_______________________________________
Its: President
Address: ___________________________________________
___________________________________________
BAXTER HEALTHCARE CORPORATION
By: ______________________________________
Its: ______________________________________
Address: ___________________________________________
___________________________________________
EXISTING INVESTORS:
___________________________________________
Kenneth E. Chyten
Address: 12424 Wilshire Blvd. #1450
Los Angeles, CA 90025
Mark Segal, Segal Family Trust
By: ______________________________________
Its: ______________________________________
Address: 340 Arbolada Drive
Arcadia, CA 91006
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 20
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
INTERACT MEDICAL TECHNOLOGIES
CORPORATION
By:_______________________________________
Its: President
Address: ___________________________________________
___________________________________________
BAXTER HEALTHCARE CORPORATION
By: /s/ Jay P. Wertheim
----------------------------------------
Its: Vice President, Law
---------------------------------------
Address: Cardiovascular Group
-------------------------------------------
17221 Red Hill Avenue, M/S 98
-------------------------------------------
Irvine, California 92714
-------------------------------------------
EXISTING INVESTORS:
___________________________________________
Kenneth E. Chyten
Address: 12424 Wilshire Blvd. #1450
Los Angeles, CA 90025
Mark Segal, Segal Family Trust
By: ______________________________________
Its: ______________________________________
Address: 340 Arbolada Drive
Arcadia, CA 91006
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 21
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
INTERACT MEDICAL TECHNOLOGIES
CORPORATION
By: /s/ Bruce D. Sturman
---------------------------------------
Its: President
Address: ___________________________________________
___________________________________________
BAXTER HEALTHCARE CORPORATION
By: ______________________________________
Its: ______________________________________
Address: ___________________________________________
___________________________________________
EXISTING INVESTORS:
/s/ Kenneth E. Chyten
-------------------------------------------
Kenneth E. Chyten
Address: 12424 Wilshire Blvd. #1450
Los Angeles, CA 90025
Mark Segal, Segal Family Trust
By: ______________________________________
Its: ______________________________________
Address: 340 Arbolada Drive
Arcadia, CA 91006
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 22
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
INTERACT MEDICAL TECHNOLOGIES
CORPORATION
By: /s/ Bruce D. Sturman
---------------------------------------
Its: President
Address: ___________________________________________
___________________________________________
BAXTER HEALTHCARE CORPORATION
By: ______________________________________
Its: ______________________________________
Address: ___________________________________________
___________________________________________
EXISTING INVESTORS:
___________________________________________
Kenneth E. Chyten
Address: 12424 Wilshire Blvd. #1450
Los Angeles, CA 90025
Mark Segal, Segal Family Trust
By: /s/ Mark Segal
----------------------------------------
Its: Trustee
---------------------------------------
Address: 340 Arbolada Drive
Arcadia, CA 91006
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 23
Marvin Landau, Landau Living Trust
By: /s/ Marvin Landau
------------------------------
Its: Trustee
-----------------------------
Address: 4453 Haskell Avenue
Encino, CA 91436
----------------------------------
David Letterman
Address: 10100 Santa Monica, #1300
Los Angeles, CA 90067
/s/ Fred A. Nigro
----------------------------------
Fred A. Nigro
Address: 400 F Lake Street
Ramsey, NJ 07446
----------------------------------
Steven David
Address: 315 East 70th Street
New York, NY 10021
Merv Adelson, for the Merv Adelson Trust
By:
------------------------------
Its:
-----------------------------
Address: 10010 Santa Monica Blvd., #1300
Los Angeles, CA 90067
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 24
Marvin Landau, Landau Living Trust
By:
------------------------------
Its:
-----------------------------
Address: 4453 Haskell Avenue
Encino, CA 91436
/s/ Fred A. Nigro
----------------------------------
David Letterman By: Fred A. Nigro
Attorney-in-Fact
Address: 10100 Santa Monica, #1300
Los Angeles, CA 90067
----------------------------------
Fred A. Nigro
Address: 400 F Lake Street
Ramsey, NJ 07446
----------------------------------
Steven David
Address: 315 East 70th Street
New York, NY 10021
Merv Adelson, for the Merv Adelson Trust
By:
------------------------------
Its:
-----------------------------
Address: 10100 Santa Monica Blvd., #1300
Los Angeles, CA 90067
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 25
Marvin Landau, Landau Living Trust
By:
------------------------------
Its:
-----------------------------
Address: 4453 Haskell Avenue
Encino, CA 91436
----------------------------------
David Letterman
Address: 10100 Santa Monica, #1300
Los Angeles, CA 90067
----------------------------------
Fred A. Nigro
Address: 400 F Lake Street
Ramsey, NJ 07446
/s/ Steven David
----------------------------------
Steven David
Address: 315 East 70th Street
New York, NY 10021
Merv Adelson, for the Merv Adelson Trust
By:
------------------------------
Its:
-----------------------------
Address: 10100 Santa Monica Blvd., #1300
Los Angeles, CA 90067
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 26
/s/ Eli Grossman
----------------------------------
Eli Grossman
Address: 10100 Santa Monica Blvd., #1300
Los Angeles, CA 90067
The Revit Family Trust
By:
------------------------------
Its:
-----------------------------
Address: P.O. Box 5249
Playa Del Ray, CA 90296
G&G Diagnostics, L.P.I
By:
------------------------------
Its:
-----------------------------
Address:
----------------------------------
----------------------------------
Ameritech International Corporation
Address:
----------------------------------
----------------------------------
----------------------------------
Merv Adelson
Address: 10100 Santa Monica Blvd., #1300
Los Angeles, CA 90067
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 27
------------------------------------
Eli Grossman
Address: 10100 Santa Monica Blvd, #1300
Los Angeles, CA 90067
The Revit Family Trust
By: /s/ M.B. REVIT
--------------------------------
Its: Trustee
--------------------------------
Address: P.O. Box 5249
Playa Del Ray, CA 90296
G&G Diagnostics, L.P.I.
By:
--------------------------------
Its:
--------------------------------
Address: -------------------------------------
-------------------------------------
Ameritech International Corporation
By:
--------------------------------
Its:
--------------------------------
Address: -------------------------------------
-------------------------------------
-------------------------------------
Merv Adelson
Address: 10100 Santa Monica Blvd., #1300
Los Angeles, CA 90067
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 28
------------------------------------
Eli Grossman
Address: 10100 Santa Monica Blvd., #1300
Los Angeles, CA 90067
The Revit Family Trust
By:
---------------------------------
Its:
---------------------------------
Address: P.O. BOX 5249
Playa Del Ray, CA 90296
G&G Diagnostics, L.P.I.
By: /s/ Irwin Gruverman
---------------------------------
Its: General Partner
---------------------------------
Address:
------------------------------
------------------------------
------------------------------
Ameritech International Corporation
By:
---------------------------------
Its:
---------------------------------
Address: --------------------------------------
--------------------------------------
--------------------------------------
Merv Adelson
Address: 10100 Santa Monica Blvd., #1300
Los Angeles, CA 90067
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 29
-----------------------------------
Eli Grossman
Address: 10100 Santa Monica Blvd., #1300
Los Angeles, CA 90067
The Revit Family Trust
By:
------------------------------
Its:
------------------------------
Address: P.O. Box 5249
Playa Del Ray,CA 90296
G&G Diagnostics, L.P.I.
By:
------------------------------
Its:
------------------------------
Address:
-----------------------------------
-----------------------------------
Ameritech International Corporation
By: /s/ Terry Moffat
------------------------------
Its: President
------------------------------
Address: Samuel Lewis Calle 56
-----------------------------------
Panama City, Panama
-----------------------------------
-----------------------------------
Merv Adelson
Address: 10100 South Monica Blvd., #1300
Los Angeles, CA 90067
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 30
/s/ George Holbrook
----------------------------------
George Holbrook
Address: P.O. Box 761, 107 John Street
Southport, CT 06490-0761
----------------------------------
A. Bruce Brackenridge
Address: 107 John Street
Southport, CT 064907-0761
----------------------------------
Paul Glenn
Address: P.O. Box 50310
Santa Barbara, CA 93150
----------------------------------
Gordon Segal
Address: 1816 Autumn
Memphis, TN 38112
----------------------------------
Steven Lee Craft
Address: 104 Circle Drive
Morehead, KY 40351
----------------------------------
Nicole Katz
Address: 10100 Santa Monica Blvd., #1300
Los Angeles, CA 90067
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 31
----------------------------------
George Holbrook
Address: P.O. Box 761, 107 John Street
Southport, CT 06490-0761
/s/ A. Bruce Brackenridge
----------------------------------
A. Bruce Brackenridge
Address: 107 John Street
Southport, CT 064907-0761
----------------------------------
Paul Glenn
Address: P.O. Box 50310
Santa Barbara, CA 93150
----------------------------------
Gordon Segal
Address: 1816 Autumn
Memphis, TN 38112
----------------------------------
Steven Lee Craft
Address: 104 Circle Drive
Morehead, KY 40351
----------------------------------
Nicole Katz
Address: 10100 Santa Monica Blvd., #1300
Los Angeles, CA 90067
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 32
------------------------------------------------
George Holbrook
Address: P.O. Box 761, 107 John Street
Southport, CT 06490-0761
------------------------------------------------
A. Bruce Brackenridge
Address: 107 John Street
Southport, CT 064907-0761
/s/ Paul Glenn
------------------------------------------------
Paul Glenn
Address: P.O. Box 50310
Santa Barbara, CA 93150
------------------------------------------------
Gordon Segal
Address: 1816 Autumn
Memphis, TN 38112
------------------------------------------------
Steven Lee Craft
Address: 104 Circle Drive
Morehead, KY 40351
------------------------------------------------
Nicole Katz
Address: 10100 Santa Monica Blvd., #1300
Los Angeles, CA 90067
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 33
----------------------------------
George Holbrook
Address: P.O. Box 761, 107 John Street
Southport, CT 06490-0761
----------------------------------
A. Bruce Brackenridge
Address: 107 John Street
Southport, CT 064907-0761
----------------------------------
Paul Glenn
Address: P.O. Box 50310
Santa Barbara, CA 93150
/s/ Gordon Segal
----------------------------------
Gordon Segal
Address: 1816 Autumn
Memphis, TN 38112
----------------------------------
Steven Lee Craft
Address: 104 Circle Drive
Morehead, KY 40351
----------------------------------
Nicole Katz
Address: 10100 Santa Monica Blvd., #1300
Los Angeles, CA 90067
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 34
----------------------------------
George Holbrook
Address: P.O. Box 761, 107 John Street
Southport, CT 06490-0761
----------------------------------
A. Bruce Brackenridge
Address: 107 John Street
Southport, CT 064907-0761
----------------------------------
Paul Glenn
Address: P.O. Box 50310
Santa Barbara, CA 93150
----------------------------------
Gordon Segal
Address: 1816 Autumn
Memphis, TN 38112
/s/ Steven Lee Craft
----------------------------------
Steven Lee Craft
Address: 104 Circle Drive
Morehead, KY 40351
----------------------------------
Nicole Katz
Address: 10100 Santa Monica Blvd., #1300
Los Angeles, CA 90067
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 35
-------------------------------------
George Holbrook
Address: P.O. Box 761, 107 John Street
Southport, CT 06490-0761
-------------------------------------
A. Bruce Brackenridge
Address: 107 John Street
Southport, CT 06497-0761
--------------------------------------
Paul Glenn
Address: P.O. Box 50310
Santa Barbara, CA 93150
--------------------------------------
Gordon Segal
Address: 1816 Autumn
Memphis, TN 38112
---------------------------------------
Steven Lee Craft
Address: 104 Circle Drive
Morehead, KY 40351
/s/ NICOLE KATZ
---------------------------------------
Nicole Katz
Address: 10100 Santa Monica Blvd., #1300
Los Angeles, CA 90067
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 36
/s/ Larry J. Wells
----------------------------------
Larry Wells
Address: 12791 Ione Ct.
Saratoga, CA 95870
----------------------------------
John Dougery
Address: 165 Santa Ana Avenue
San Francisco, CA 94127
----------------------------------
Marilyn Dougery
Address: 165 Santa Ana Avenue
San Francisco, CA 94127
DayStar Partners, L.P.
By: /s/ Larry J. Wells for Larry Wells Co.
---------------------------------------
Its: General Partner
--------------------------------------
Address: 10600 N. DeAnza Blvd., Suite 215
Cupertino, CA 95870
----------------------------------
Henry I.B. Wilder
Address: 3301 Tripp Road
Woodside, CA 94062
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 37
----------------------------------
Larry Wells
Address: 12791 Ione Ct.
Saratoga, CA 95870
/s/ John Dougery
----------------------------------
John Dougery
Address: 165 Santa Ana Avenue
San Francisco, CA 94127
/s/ Marilyn Dougery
----------------------------------
Marilyn Dougery
Address: 165 Santa Ana Avenue
San Francisco, CA 94127
DayStars Partner, L.P.
By:
---------------------------------------
Its:
--------------------------------------
Address: 10600 N. DeAnza Blvd., Suite 215
Cupertino, CA 95870
/s/ Henry I.B. Wilder
----------------------------------
Henry I.B. Wilder
Address: 3301 Tripp Road
Woodside, CA 94062
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 38
A.B. Laffer, V.A. Canto & Ass.
By: /s/ Howard Apdel
---------------------------------------
Its: CEO
--------------------------------------
Address: 5405 Morehouse Drive, Suite 340
San Diego, CA 92121
Randall Fowler - TTEE
By:
---------------------------------------
Its:
--------------------------------------
Address: 210 Yerba Buena Avenue
Los Altos, CA 94022-2200
-------------------------------------------
Perry Esping
Address: 4330 Bordeaux
Dallas, TX 75205
-------------------------------------------
Jerrold Morrison
Address: 5608 Kelly Lane
Dallas, TX 75093
-------------------------------------------
Lisa Morrison
Address: 5608 Kelly Lane
Dallas, TX 75093
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 39
A.B. Laffer, V.A. Canto & Ass.
By:
---------------------------------------
Its:
--------------------------------------
Address: 5405 Morehouse Drive, Suite 340
San Diego, CA 92121
Randall Fowler - TTEE
By: /s/ Randall C. Fowler
---------------------------------------
Its: Trustee
--------------------------------------
Address: 210 Yerba Buena Avenue
Los Altos, CA 94022-2200
-------------------------------------------
Perry Esping
Address: 4330 Bordeaux
Dallas, TX 75205
-------------------------------------------
Jerrold Morrison
Address: 5608 Kelly Lane
Dallas, TX 75093
-------------------------------------------
Lisa Morrison
Address: 5608 Kelly Lane
Dallas, TX 75093
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 40
A.B. Laffer, V.A. Canto & Ass.
By:
-----------------------------
Its:
-----------------------------
Address: 5406 Morehouse Drive, Suite 340
San Diego, CA 92121
Randall Fowler - TTEE
By:
-----------------------------
Its:
-----------------------------
Address: 210 Yerba Buena Avenue
Los Altos, CA 94022-2200
/s/ Perry Esping
----------------------------------
Perry Esping
Address: 4330 Bordeaux
Dallas, TX 75205
----------------------------------
Jerrold Morrison
Address: 5608 Kelly Lane
Dallas, TX 75093
----------------------------------
Lisa Morrison
Address: 5608 Kelly Lane
Dallas, TX 75093
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 41
A.B. Laffer, V.A. Canto & Ass.
By:
-----------------------------
Its:
-----------------------------
Address: 5405 Morehouse Drive, Suite 340
San Diego, CA 92121
Randall Fowler - TTEE
By:
-----------------------------
Its:
-----------------------------
Address: 210 Yerba Buena Avenue
Los Altos, CA 84022-2200
----------------------------------
Perry Esping
Address: 4330 Bordeaux
Dallas, TX 75205
/s/ Jerrold Morrison
----------------------------------
Jerrold Morrison
Address: 5608 Kelly Lane
Dallas, TX 75093
/s/ Lisa Morrison
----------------------------------
Lisa Morrison
Address: 5608 Kelly Lane
Dallas, TX 75093
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 42
/s/ John Lemak
_________________________________________
John Lemak
Address: 4410 Bordeaux
Dallas, TX 75205
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 43
SCHEDULE A
Kenneth E. Chyten
Mark Segal, Trustee for Segal Family Trust
Marvin Landau, Trustee for Landau Living Trust
David Letterman
Fred A. Nigro
Steven David
Merv Adelson, Trustee for the Merv Adelson Trust
Eli Grossman
Revit Family Trust
G&G Diagnostics, L.P. I
Ameritech International Corporation
Merv Adelson
George Holbrook
Bruce Brackenridge
Paul Glenn
Gordon Segal
Steven Lee Craft
Nicole Katz
Larry Wells
John Dougery & Marilyn Dougery
DayStar Partners, L.P.
Henry L.B. Wilder
A.B. Laffer, V.A. Canto & Ass.
Randall Fowler - TTEE
Perry Esping
Jerrold Morrison & Lisa Morrison
John Lemak
A-1
<PAGE> 1
EXHIBIT 10.8
<PAGE> 2
STOCK AGREEMENT
THIS STOCK AGREEMENT (the "Agreement") is made as of May 24,
1996 by and among Medical Media Systems, Inc., a Delaware corporation (the
"Company"), Baxter Medical Media Holdings, Inc., a Delaware corporation and a
wholly-owned subsidiary of Baxter Healthcare Corporation ("Baxter Holdings"),
and MMS Founders Group Limited Partnership, a Delaware limited partnership
("MMSLP"). Baxter Holdings and MMSLP are sometimes hereinafter referred to
collectively as the "Transferors" and individually as a "Transferor," with
reference to the following facts:
A. Transferors are the general partners of Medical Media
Systems, a New Hampshire general partnership (the "Partnership"). Baxter
Holdings owns a sixty percent (60%) interest in the Partnership and MMSLP owns a
forty percent (40%) interest in the Partnership (referred to collectively as the
"Partnership Interests").
B. The Transferors desire to contribute their respective
Partnership Interests to the Company in exchange for shares of the Common Stock
of the Company, and the Company desires to issue such shares to the Transferors,
all on the terms as set forth below.
FOR AND IN CONSIDERATION OF THE MUTUAL PROMISES AND COVENANTS
HEREIN CONTAINED, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. ISSUANCE OF COMMON STOCK.
Subject to and upon the terms and conditions of this
Agreement, concurrent with the execution of this Agreement, the Transferors
shall contribute to the Company their respective Partnership Interests in
exchange for an aggregate of 1,253,333 shares of Common Stock of the Company
(the "Shares"), of which Baxter Holdings shall receive 752,000 Shares and MMSLP
shall receive 501,333 Shares.
2. SECURITIES LAWS REPRESENTATIONS AND WARRANTIES OF TRANSFERORS.
(a) Baxter Holdings hereby confirms that the Shares to be
received by it are being and will be acquired for investment for its own
account, not as a nominee or agent, and not with a view to the sale or
distribution of any part thereof, and that Baxter Holdings has no present
intention of selling, granting any participation in, or otherwise distributing
the same. Baxter Holdings further represents that it has no contract,
undertaking, agreement or arrangement with any person to sell, transfer, or
grant participations to such person or to any third person, with respect to any
of the Shares to be acquired by it.
(b) MMSLP hereby confirms that the Shares to be received by it
are and will be acquired for investment for its own account and not with a view
to the sale or distribution of any part thereof except as provided in
subparagraph (f) below.
(c) Each Transferor understands and acknowledges that the
Shares will not be registered under the Securities Act of 1933, as amended (the
"Act"), or registered or qualified
<PAGE> 3
under any applicable state, local or foreign securities laws on the grounds that
the issuance of securities contemplated by this Agreement are exempt from
registration and/or qualification pursuant to one or more exemptions under the
Act and/or such applicable state, local or foreign securities laws and that the
Company's reliance upon such exemptions is predicated upon such Transferor's
representations set forth in this Agreement. Each Transferor further understands
and acknowledges that there is no public market for the Shares, there may never
be a public market for the Shares and, even if a market develops for the Shares,
such Transferor may never be able to sell or dispose of the Shares purchased by
it pursuant hereto and that, as a result, it may have to bear the risk of an
investment in the Shares for a substantial period of time or forever.
(d) Each Transferor understands that all certificates for the
Shares shall bear the following legends
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
THE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT."
(e) The certificates evidencing the Shares, or any transferred
Shares, shall also bear any legend which may be or required pursuant to any
state, local or foreign law governing such securities or which the Company may
otherwise deem appropriate.
(f) The parties hereto understand and agree that, subsequent
to the execution of this Agreement, the Shares to be acquired by MMSLP pursuant
hereto shall be distributed on a pro rata basis to holders of the MMSLP
partnership interests as of the date of this Agreement, a list of which holders
and their percentage ownership is set forth on Exhibit A attached hereto;
provided, however, that none of such Shares will be distributed to any partner
of MMSLP until MMSLP has received from such partner a letter in substantially
the form of Exhibit B attached hereto (the "Representation Letter").
3. DOCUMENTS DELIVERED AND ACTIONS TAKEN.
3.1 BY TRANSFERORS. Concurrent with the execution of this
Agreement, each of the Transferors shall deliver to the Company the following:
(a) A duly executed general instrument of conveyance, transfer
and assignment of the Partnership Interest, in the form of Exhibit C attached
hereto.
3.2 BY COMPANY. Concurrent with the execution of this
Agreement, the Company shall deliver or cause to be delivered the following:
(a) A stock certificate, registered in Baxter Holdings' name
evidencing 752,000 shares of Common Stock of the Company.
(b) A stock certificate, registered in MMSLP's name evidencing
501,333 shares of Common Stock of the Company.
2
<PAGE> 4
4. CONTINUATION OF BUSINESS.
Concurrent with the execution of this Agreement and the deliveries
specified in paragraph 3 above, the Partnership shall cease to exist and
thereafter, until the stockholders of the Company otherwise approve, the Company
shall continue to carry on the business of the Partnership as currently
conducted and, in connection therewith, shall utilize both the tangible and
intangible assets of the Partnership.
5. MISCELLANEOUS.
5.1 NOTICES. All notices, demands or other communications hereunder
shall be in writing and shall be deemed given when delivered personally, mailed
by certified mail, return receipt requested, sent by overnight courier service
or telecopied, telegraphed or telexed (transmission confirmed), or otherwise
actually delivered:
If to Baxter Holdings: Baxter Healthcare Corporation
Cardio Vascular Group
17221 Red Hill Avenue
Irvine, CA 92714
Attention: Jay P. Wertheim
Telephone: (714) 474-6415
Facsimile: (714) 474-6444
with copies to: Gibson, Dunn & Crutcher LLP
4 Park Plaza
Irvine, California 92714
Attention: Thomas D. Magill
Telephone: (714) 451-3800
Facsimile: (714) 451-4220
If to MMSLP: MMS Founders Group Limited Partnership
79 East Wilder Road
West Lebanon, New Hampshire 03784-3106
Attention: Steven D. Pieper
Telephone: (603) 298-5509
Facsimile: (603) 298-5523
with copies to: Hale and Dorr
1155 Elm Street
Manchester, New Hampshire 03101
Attention: _________________
Telephone: (603) 627-7600
Facsimile: (603) 627-3880
3
<PAGE> 5
If to Company: Medical Media Systems, Inc.
79 East Wilder Road
West Lebanon, New Hampshire 03784-3106
Attention: Steven D. Pieper
Telephone: (603) 298-5509
Facsimile: (603) 298-5523
or at such other address and numbers as may have been furnished by such person
in writing to the other parties.
5.2 SEVERABILITY AND GOVERNING LAW. Should any Section or any
part of a Section within this Agreement be rendered void, invalid or
unenforceable by any court of law for any reason, such invalidity or
unenforceability shall not void or render invalid or unenforceable any other
Section or part of a Section in this Agreement. This Agreement is made and
entered into in the State of California and the laws of said state shall govern
the validity and interpretation hereof and the performance by the parties hereto
of their respective duties and obligations hereunder.
5.3 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
5.4 CAPTIONS AND SECTION HEADINGS. Section titles or captions
contained in this Agreement are inserted as a matter of convenience and for
reference purposes only, and in no way define, limit, extend or describe the
scope of this Agreement or the intent of any provision hereof.
5.5 SINGULAR AND PLURAL, ETC. Whenever the singular number is
used herein and where required by the context, the same shall include the
plural, and the neuter gender shall include the masculine and feminine genders.
5.6 AMENDMENTS AND WAIVERS. This Agreement may be amended only
by a written instrument signed by the parties hereto. No failure to exercise and
no delay in exercising, on the part of any party, any right, remedy, power or
privilege hereunder, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges herein provided
are cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law. The failure of any party to insist upon a strict performance of
any of the terms or provisions of this Agreement, or to exercise any option,
right or remedy herein contained, shall not be construed as a waiver or as a
relinquishment for the future of such term, provision, option, right or remedy,
but the same shall continue and remain in full force and effect. No waiver by
any party of any term or provision of this Agreement shall be deemed to have
been made unless expressed in writing and signed by such party.
5.7 SUCCESSORS AND ASSIGNS. All rights, covenants and
agreements of the parties contained in this Agreement shall, except as otherwise
provided herein, be binding upon and inure to the benefit of their respective
successors and assigns.
4
<PAGE> 6
5.8 EXPENSES. Baxter Holdings and MMSLP shall each bear its
own expenses incident to the preparation, negotiation, execution and delivery of
this Agreement, and performance of its obligations hereunder and shall bear its
own sales taxes, if any, with respect to the transactions contemplated
hereunder.
5.9 FURTHER ASSURANCES. Each party hereto agrees to do all
acts and to make, execute and deliver such written instruments as shall from
time to time be reasonably required to carry out the terms and provisions of
this Agreement.
5.10 PRECEDENCE OVER TRANSACTION AGREEMENT. The parties hereto
agree that the provisions of this Agreement shall take precedence over Section 7
of that certain existing Transaction Agreement among MMSLP, Baxter Healthcare
Corporation, Baxter Holdings and Medical Media Systems (the "Transaction
Agreement") as such Section 7 relates to the incorporation of the Partnership.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
TRANSFERORS: COMPANY:
BAXTER MEDICAL MEDIA MEDICAL MEDIA SYSTEMS, INC.
HOLDINGS, INC.
By: /s/ Stuart Foster By: _______________________
------------------------- Name: _________________
Name: Stuart Foster Title: ________________
Title: Authorized Agent
MMS FOUNDERS GROUP
LIMITED PARTNERSHIP
By: MMS FOUNDERS, INC.,
general partner
By: _________________________
Name: ___________________
Title: __________________
[Stock Agreement]
5
<PAGE> 7
5.8 EXPENSES. Baxter Holdings and MMSLP shall each bear its
own expenses incident to the preparation, negotiation, execution and delivery of
this Agreement, and performance of its obligations hereunder and shall bear its
own sales taxes, if any, with respect to the transactions contemplated
hereunder.
5.9 FURTHER ASSURANCES. Each party hereto agrees to do all
acts and to make, execute and deliver such written instruments as shall from
time to time be reasonably required to carry out the terms and provisions of
this Agreement.
5.10 PRECEDENCE OVER TRANSACTION AGREEMENT. The parties hereto
agree that the provisions of this Agreement shall take precedence over Section 7
of that certain existing Transaction Agreement among MMSLP, Baxter Healthcare
Corporation, Baxter Holdings and Medical Media Systems (the "Transaction
Agreement") as such Section 7 relates to the incorporation of the Partnership.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
TRANSFERORS: COMPANY:
BAXTER MEDICAL MEDIA MEDICAL MEDIA SYSTEMS, INC.
HOLDINGS, INC.
By: By: /s/ Leo McKenna
------------------------- -----------------------
Name: Name: Leo McKenna
-------------------- Title: Treasurer
Title:
-------------------
MMS FOUNDERS GROUP
LIMITED PARTNERSHIP
By: MMS FOUNDERS, INC.,
general partner
By: /s/ Steve Pieper
-------------------------
Name: Steve Pieper
Title: President
[Stock Agreement]
5
<PAGE> 8
EXHIBIT A
TO STOCK AGREEMENT
FOUNDERS ALLOCATION
BAXTER OPTION DILUTION 40/49 = 0.816326531
IPO PRICE: 7.5
MMS VALUATION $ 9,399,999.98 # OF SHARES: 1,253,333.33
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------------------
LI STOPS BAXTER FINAL "CASH MMSFLP
ORIGINAL VESTING OPTION ALLOCATION VALUE" EQUITY SHARES ROUNDED
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Baxter MM Holdings 51.00% 51.00% 60.00% 60.00% $5,639,999.00 0% 752,000,00 752,000.0
Dartmouth College 5.00% 5.00% 4.08% 4.08% $ 383,673.47 10.20% 61,156.46 51.157.0
Joseph Rosen 5.00% 5.00% 4.08% 5.00% $ 470,000.00 12.50% 62,666.67 62.667.0
David Chen 5.00% 5.00% 4.08% 5.00% $ 564,000.00 15.00% 75,200.00 75,200.0
Michael McKenna 5.00% 5.00% 4.08% 5.00% $ 564,000.00 15.00% 75,200.00 75,200.0
Steven Pieper 5.00% 5.00% 4.08% 5.00% $ 564,000.00 15.00% 75,200.00 75,200.0
Lehmann Li 5.00% 3.00% 2.45% 2.45% $ 230,204.08 6.12% 30,693.80 30,694.0
Peter Robbie 0.00% 0.00% 0.00% 3.97% $ 373,122.45 9.92% 49,749.68 49,750.0
William Greenrose 0.00% 0.00% 0.00% 1.00% $ 94,000.00 2.50% 12,593.33 12,533.0
Charlie Hutchinson 0.00% 0.00% 0.00% 3.00% $ 282,000.00 7.50% 37,600.00 37,600.0
Leo McKenna 0.00% 0.00% 0.00% 1.00% $ 94,000.00 2.50% 12,533.33 12,533.0
Robyn Mosher 0.00% 0.00% 0.00% 0.50% $ 47,000.00 1.25% 6,266.87 6,267.0
Mark Filinger 0.00% 0.00% 0.00% 1.00% $ 94,000.00 2.50% 12,533.33 12,533.0
Reserved by Founders 19.00% 21.00% 17.14% 0.00% $ - 0.00% - -
- - ----------------------------------------------------------------------------------------------------------------------------------
Total 100% 100% 100% 100% $9,399,999.98 100% 1,263,333.33 1,253,333.0
- - ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 9
EXHIBIT B
May 24, 1996
Medical Media Systems, Inc.
79 East Wilder Road
West Lebanon, New Hampshire 03784
Gentlemen:
In connection with the proposed distribution by MMS Founders
Group Limited Partnership, a Delaware limited partnership ("MMSLP"), to the
undersigned, a holder of partnership units of MMSLP, of a portion of the shares
of Common Stock ("Common Stock") of Medical Media Systems, Inc., a Delaware
corporation (the "Company"), to be acquired by MMSLP, the undersigned does
hereby represent, warrant and covenant to and with the Company as follows:
1. The undersigned hereby confirms that the _________ shares
of Common Stock to be distributed to the undersigned as described above (the
"Shares") will be acquired by the undersigned for investment for his, her or its
own account, not as a nominee or agent, and not with a view to the sale or
distribution of any part thereof, and that the undersigned has no present
intention of selling, granting any participation in, or otherwise distributing
the same. The undersigned further represents that the undersigned has no
contract, undertaking, agreement or arrangement with any person to sell,
transfer, or grant participations to such person or to any third person, with
respect to any of the Shares.
2. The undersigned understands and acknowledges that the
Shares will not be registered under the Securities Act of 1933, as amended (the
"Act"), or registered or qualified under any applicable state, local or foreign
securities laws on the grounds that the offering and sale of the Shares to MMSLP
and the subsequent distribution thereof to the undersigned are exempt from
registration and/or qualification pursuant to one or more exemptions under the
Act and/or such applicable state, local or foreign securities laws and that the
Company's reliance upon such exemptions is predicated upon the undersigned's
representations set forth in this letter. The undersigned further understands
and acknowledges that there is no public market for the Shares, there may never
be a public market for the Shares and, even if a market develops for the Shares,
the undersigned may never be able to sell or dispose of the Shares acquired by
him, her or it and that, as a result, the undersigned may have to bear the risk
of an investment in the Shares for a substantial period of time or forever.
<PAGE> 10
3. The undersigned understands that the certificate for the
Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT."
4. The undersigned understands that the certificates
evidencing the Shares, or any transferred shares of Common Stock, shall also
bear any legend which may be required pursuant to any state, local or foreign
law governing such securities or which the Company may otherwise deem
appropriate.
Very truly yours,
____________________________________________
(please sign name above and print name below)
<PAGE> 11
EXHIBIT C
GENERAL INSTRUMENT OF CONVEYANCE,
TRANSFER AND ASSIGNMENT
WHEREAS, Baxter Medical Media Holdings, Inc., a Delaware
corporation ("Baxter Holdings") and MMS Founders Group Limited Partnership, a
Delaware limited partnership ("MMSLP") (collectively referred to herein as the
"Transferors") have executed a Stock Agreement dated May ____, 1996 which
provides for the transfer, assignment, conveyance and delivery to Medical Media
Systems, Inc., a Delaware corporation (the "Company") of the Transferors'
partnership interests in Medical Media Systems, a New Hampshire general
partnership (the "Partnership Interests").
NOW, THEREFORE, WITNESSETH THAT in consideration of the
premises and the issuance to the Transferors by the Company of the shares of
common stock of the Company as set forth in Section 1 of the Stock Agreement,
the Transferors, by this General Instrument of Conveyance, Transfer and
Assignment, do hereby convey, transfer, assign and deliver unto the Company, its
successors and assigns forever, all of the Transferors' right, title and
interest in and to their respective Partnership Interests.
TO HAVE AND TO HOLD said Partnership Interests, with all
appurtenances thereto, unto the Company, its successors and assigns, and for its
and their own use forever
IN WITNESS WHEREOF, the undersigned has caused this instrument
to be signed on this 24th day of May 1996.
BAXTER MEDICAL MEDIA HOLDINGS, INC.
By: ______________________________
Name: ____________________________
Title: ___________________________
MMS FOUNDERS GROUP
LIMITED PARTNERSHIP
By: MMS FOUNDERS, INC.,
general partner
By: ______________________________
Name: ____________________________
Title: ___________________________
<PAGE> 12
EXHIBIT B
May 24, 1996
Medical Media Systems, Inc.
79 East Wilder Road
West Lebanon, New Hampshire 03784
Gentlemen:
In connection with the proposed distribution by MMS Founders
Group Limited Partnership, a Delaware limited partnership ("MMSLP"), to the
undersigned, a holder of partnership units of MMSLP, of a portion of the shares
of Common Stock ("Common Stock") of Medical Media Systems, Inc., a Delaware
corporation (the "Company"), to be acquired by MMSLP, the undersigned does
hereby represent, warrant and covenant to and with the Company as follows:
1. The undersigned hereby confirms that the _________ shares
of Common Stock to be distributed to the undersigned as described above (the
"Shares") will be acquired by the undersigned for investment for his, her or its
own account, not as a nominee or agent, and not with a view to the sale or
distribution of any part thereof and that the undersigned has no present
intention of selling, granting any participation in, or otherwise distributing
the same. The undersigned further represents that the undersigned has no
contract, undertaking, agreement or arrangement with any person to sell,
transfer, or grant participations to such person or to any third person, with
respect to any of the Shares.
2. The undersigned understands and acknowledges that the
Shares will not be registered under the Securities Act of 1933, as amended (the
"Act"), or registered or qualified under any applicable state, local or foreign
securities laws on the grounds that the offering and sale of the Shares to MMSLP
and the subsequent distribution thereof to the undersigned are exempt from
registration and/or qualification pursuant to one or more exemptions under the
Act and/or such applicable state, local or foreign securities laws and that the
Company's reliance upon such exemptions is predicated upon the undersigned's
representations set forth in this letter. The undersigned further understands
and acknowledges that there is no public market for the Shares, there may never
be a public market for the Shares and, even if a market develops for the Shares,
the undersigned may never be able to sell or dispose of the Shares acquired by
him, her or it and that, as a result, the undersigned may have to bear the risk
of an investment in the Shares for a substantial period of time or forever.
<PAGE> 13
3. The undersigned understands that the certificate for the
Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT."
4. The undersigned understands that the certificates
evidencing the Shares, or any transferred shares of Common Stock, shall also
bear any legend which may be required pursuant to any state, local or foreign
law governing such securities or which the Company may otherwise deem
appropriate.
Very truly yours,
/s/ Jonathan C. King
---------------------------------------------
(please sign name above and print name below)
Jonathan C. King
Director of Investments
<PAGE> 14
3. The undersigned understands that the certificate for the
Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT."
4. The undersigned understands that the certificates
evidencing the Shares, or any transferred shares of Common Stock, shall also
bear any legend which may be required pursuant to any state, local or foreign
law governing such securities or which the Company may otherwise deem
appropriate.
Very truly yours,
/s/ Leo C. McKenna
---------------------------------------------
(please sign name above and print name below)
Leo C. McKenna
<PAGE> 15
3. The undersigned understands that the certificate for the
Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT."
4. The undersigned understands that the certificates
evidencing the Shares, or any transferred shares of Common Stock, shall also
bear any legend which may be required pursuant to any state, local or foreign
law governing such securities or which the Company may otherwise deem
appropriate.
Very truly yours,
/s/ Steve Pieper
---------------------------------------------
(please sign name above and print name below)
Steve Pieper
<PAGE> 16
3. The undersigned understands that the certificate for the
Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT."
4. The undersigned understands that the certificates
evidencing the Shares, or any transferred shares of Common Stock, shall also
bear any legend which may be required pursuant to any state, local or foreign
law governing such securities or which the Company may otherwise deem
appropriate.
Very truly yours,
/s/ Robyn E. Mosher
---------------------------------------------
(please sign name above and print name below)
Robyn E. Mosher
<PAGE> 17
3. The undersigned understands that the certificate for the
Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT."
4. The undersigned understands that the certificates
evidencing the Shares, or any transferred shares of Common Stock, shall also
bear any legend which may be required pursuant to any state, local or foreign
law governing such securities or which the Company may otherwise deem
appropriate.
Very truly yours,
/s/ Joseph Rosen
---------------------------------------------
(please sign name above and print name below)
Joseph Rosen M.D.
<PAGE> 18
3. The undersigned understands that the certificate for the
Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT."
4. The undersigned understands that the certificates
evidencing the Shares, or any transferred shares of Common Stock, shall also
bear any legend which may be required pursuant to any state, local or foreign
law governing such securities or which the Company may otherwise deem
appropriate.
Very truly yours,
/s/ Michael A. McKenna
---------------------------------------------
(please sign name above and print name below)
Michael A. McKenna
<PAGE> 19
3. The undersigned understands that the certificate for the
Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT."
4. The undersigned understands that the certificates
evidencing the Shares, or any transferred shares of Common Stock, shall also
bear any legend which may be required pursuant to any state, local or foreign
law governing such securities or which the Company may otherwise deem
appropriate.
Very truly yours,
/s/ David Chen
---------------------------------------------
(please sign name above and print name below)
David Chen
<PAGE> 20
3. The undersigned understands that the certificate for the
Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT."
4. The undersigned understands that the certificates
evidencing the Shares, or any transferred shares of Common Stock, shall also
bear any legend which may be required pursuant to any state, local or foreign
law governing such securities or which the Company may otherwise deem
appropriate.
Very truly yours,
/s/ Peter J. Robbie
---------------------------------------------
(please sign name above and print name below)
Peter J. Robbie
<PAGE> 21
3. The undersigned understands that the certificate for the
Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT."
4. The undersigned understands that the certificates
evidencing the Shares, or any transferred shares of Common Stock, shall also
bear any legend which may be required pursuant to any state, local or foreign
law governing such securities or which the Company may otherwise deem
appropriate.
Very truly yours,
/s/ Charles E. Hutchinson
---------------------------------------------
(please sign name above and print name below)
Charles E. Hutchinson
<PAGE> 22
3. The undersigned understands that the certificate for the
Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT."
4. The undersigned understands that the certificates
evidencing the Shares, or any transferred shares of Common Stock, shall also
bear any legend which may be required pursuant to any state, local or foreign
law governing such securities or which the Company may otherwise deem
appropriate.
Very truly yours,
/s/ Willian F. Greenrose
---------------------------------------------
(please sign name above and print name below)
Willian F. Greenrose
<PAGE> 23
3. The undersigned understands that the certificate for the
Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT."
4. The undersigned understands that the certificates
evidencing the Shares, or any transferred shares of Common Stock, shall also
bear any legend which may be required pursuant to any state, local or foreign
law governing such securities or which the Company may otherwise deem
appropriate.
Very truly yours,
/s/ Leo C. McKenna
---------------------------------------------
(please sign name above and print name below)
Leo C. McKenna
<PAGE> 24
3. The undersigned understands that the certificate for the
Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT."
4. The undersigned understands that the certificates
evidencing the Shares, or any transferred shares of Common Stock, shall also
bear any legend which may be required pursuant to any state, local or foreign
law governing such securities or which the Company may otherwise deem
appropriate.
Very truly yours,
/s/ Mark F. Fillinger
---------------------------------------------
(please sign name above and print name below)
Mark F. Fillinger
<PAGE> 25
3. The undersigned understands that the certificate for the
Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT."
4. The undersigned understands that the certificates
evidencing the Shares, or any transferred shares of Common Stock, shall also
bear any legend which may be required pursuant to any state, local or foreign
law governing such securities or which the Company may otherwise deem
appropriate.
Very truly yours,
/s/ Lehmann Li
---------------------------------------------
(please sign name above and print name below)
<PAGE> 26
GENERAL INSTRUMENT OF CONVEYANCE,
TRANSFER AND ASSIGNMENT
WHEREAS, Baxter Medical Media Holdings, Inc., a Delaware corporation
("Baxter Holdings") and MMS Founders Group Limited Partnership, a Delaware
limited partnership ("MMSLP") (collectively referred to herein as the
"Transferors") have executed a Stock Agreement dated May 24, 1996 which provides
for the transfer, assignment, conveyance and delivery to Medical Media Systems,
Inc., a Delaware corporation (the "Company") of the Transferors' partnership
interests in Medical Media Systems, a New Hampshire general partnership (the
"Partnership Interests").
NOW, THEREFORE, WITNESSETH THAT in consideration of the premises and
the issuance to the Transferors by the Company of the shares of common stock of
the Company as set forth in Section 1 of the Stock Agreement, the Transferors,
by this General Instrument of Conveyance, Transfer and Assignment, do hereby
convey, transfer, assign and deliver unto the Company, its successors and
assigns forever, all of the Transferors' right, title and interest in and to
their respective Partnership Interests.
TO HAVE AND TO HOLD said Partnership Interests, with all appurtenances
thereto, unto the Company, its successors and assigns, and for its and their own
use forever.
IN WITNESS WHEREOF, the undersigned has caused this instrument to be
signed on this 24th day of May 1996.
BAXTER MEDICAL MEDIA HOLDINGS, INC.
By: /s/ Stuart Foster
-------------------------------
Name: Stuart Foster
Title: Authorized Agent
MMS FOUNDERS GROUP
LIMITED PARTNERSHIP
By: MMS FOUNDERS, INC.,
general partner
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
<PAGE> 27
GENERAL INSTRUMENT OF CONVEYANCE,
TRANSFER AND ASSIGNMENT
WHEREAS, Baxter Medical Media Holdings, Inc., a Delaware corporation
("Baxter Holdings") and MMS Founders Group Limited Partnership, a Delaware
limited partnership ("MMSLP") (collectively referred to herein as the
"Transferors") have executed a Stock Agreement dated May 24, 1996 which provides
for the transfer, assignment, conveyance and delivery to Medical Media Systems,
Inc., a Delaware corporation (the "Company") of the Transferors' partnership
interests in Medical Media Systems, a New Hampshire general partnership (the
"Partnership Interests").
NOW, THEREFORE, WITNESSETH THAT in consideration of the premises and
the issuance to the Transferors by the Company of the shares of common stock of
the Company as set forth in Section 1 of the Stock Agreement, the Transferors,
by this General Instrument of Conveyance, Transfer and Assignment, do hereby
convey, transfer, assign and deliver unto the Company, its successors and
assigns forever, all of the Transferors' right, title and interest in and to
their respective Partnership Interests.
TO HAVE AND TO HOLD said Partnership Interests, with all appurtenances
thereto, unto the Company, its successors and assigns, and for its and their own
use forever.
IN WITNESS WHEREOF, the undersigned has caused this instrument to be
signed on this 24th day of May 1996.
BAXTER MEDICAL MEDIA HOLDINGS, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
MMS FOUNDERS GROUP
LIMITED PARTNERSHIP
By: MMS FOUNDERS, INC.,
general partner
By: /s/ Steve Pieper
------------------------------
Name: Steve Pieper
Title: President
<PAGE> 1
EXHIBIT 10.9
<PAGE> 2
May 24, 1996
Mr. Stu Foster
Baxter Healthcare Corporation
Vascular Systems Division
17221 Red Hill Avenue
Irvine, California 92714
Re: Agreement
Dear Stu:
This Agreement ("Agreement"), when countersigned by you, sets forth
the agreement between Baxter Healthcare Corporation ("Baxter") and Interact
Medical Technologies Corporation, a Delaware corporation ("Interact") with
regard to the obligation of Interact to issue shares of its common stock to
Baxter upon the closing of an underwritten initial public offering ("IPO") of
Interact common stock pursuant to a registration statement on Form S-1 (the
"Registration Statement") in consideration of Baxter providing Interact with a
$350,000 bridge loan, as evidenced by a Promissory Note dated May 24, 1996, a
copy of which is attached hereto as Exhibit A.
On the closing date with respect to the IPO, Interact shall issue to
Baxter or its assignee, upon execution of an Investment Representation in the
form attached hereto as Exhibit B, a number of shares of its common stock equal
to $350,000 divided by the price to the public for shares of common stock issued
in the IPO as stated in the Registration Statement. No fractional shares shall
be issued pursuant to this Agreement, and the number of shares of common stock
to be issued shall be rounded up to the nearest whole share.
Please acknowledge that you understand, agree to and accept the
terms set forth above.
Very truly yours,
INTERACT MEDICAL TECHNOLOGIES
CORPORATION
By: /s/ Bruce D. Sturman
-----------------------------------------
Its: C.E.O.
-----------------------------------------
<PAGE> 3
Mr. Stu Foster May 24, 1996
Page 2
As Acknowledged and Agreed to:
BAXTER HEALTHCARE CORPORATION
By: /s/ Jay R. Wertheim
---------------------------------
Its: Vice President, Law
Cardiovascular Group
---------------------------------
Share Issuance Letter
<PAGE> 1
EXHIBIT 10.10
<PAGE> 2
May 17th, 1996
Baxter Healthcare Corporation
17221 Red Hill Avenue
Irvine, California 92714
RE: MMS/Ixion Merger
Gentlemen:
This letter is written in connection with the proposed incorporation of
Medical Media Systems ("MMS"), a New Hampshire general partnership whose
partners are Baxter Medical Media Holdings, Inc. ("Baxter Holdings") and MMS
Founders Group Limited Partnership ("MMSLP"). It is contemplated that
immediately following such incorporation, Ixion, Inc. ("Ixion") will merge with
and into the newly incorporated successor to MMS (the "Merger"), and the
surviving corporation shall change its name to Interact Medical Technologies
Corporation ("Interact"). As a result of the Merger, Baxter Holdings and MMSLP
shall own, in the aggregate, 40% of the outstanding shares of common stock of
Interact on a fully diluted basis, with the remaining 60% to be owned by the
current shareholders and management of Ixion.
MMSLP and the undersigned partners of MMSLP hereby confirm that they have
been furnished with such documents and financial information as the undersigned
have deemed necessary or advisable in order to become familiar with the
business, management, financial condition and prospects of Ixion, whose
shareholders and management will control Interact following the Merger. In
addition, the undersigned have been afforded an opportunity to meet with
representatives of Ixion and ask and receive answers to any questions the
undersigned have about the business and affairs of Ixion and management's plans
with respect to the operations of Interact following the Merger. On the basis of
the undersigneds' review of these materials and discussions, and relying upon
the undersigneds' knowledge and experience in financial and business matters,
and not in reliance on any express or implied representation, warranty or
assurance by Baxter Healthcare Corporation or any of its officers, employees,
affiliates, advisors, or agents, the undersigned have evaluated the merits and
risks of the Merger and have determined that they are both willing and able to
undertake the economic and business risks associated with the Merger.
Very truly yours,
/s/ Charles Hutchinson /s/ Leo McKenna
- - --------------------------------- ---------------------------------------
Charles Hutchinson Leo McKenna
- - --------------------------------- ---------------------------------------
Joseph Rosen Robyn Mosher
/s/ Lehmann Li
- - --------------------------------- ---------------------------------------
Lehmann Li Mark Fillinger
<PAGE> 3
May 17, 1996
Baxter Healthcare Corporation
17221 Red Hill Avenue
Irvine, California 92714
Re: MMS/Ixion Merger
Gentlemen:
This letter is written in connection with the proposed incorporation of
Medical Media Systems ("MMS"), a New Hampshire general partnership whose
partners are Baxter Medical Media Holdings, Inc. ("Baxter Holdings") and MMS
Founders Group Limited Partnership ("MMSLP"). It is contemplated that
immediately following such incorporation, Ixion, Inc. ("Ixion") will merge with
and into the newly incorporated successor to MMS (the "Merger"), and the
surviving corporation shall change its name to Interact Medical Technologies
Corporation ("Interact"). As a result of the Merger, Baxter Holdings and MMSLP
shall own, in the aggregate, 40% of the outstanding shares of common stock of
Interact on a fully diluted basis, with the remaining 60% to be owned by the
current shareholders and management of Ixion.
MMSLP and the undersigned partners of MMSLP hereby confirm that they
have been furnished with such documents and financial information as the
undersigned have deemed necessary or advisable in order to become familiar with
the business, management, financial condition and prospects of Ixion, whose
shareholders and management will control Interact following the Merger. In
addition, the undersigned have been afforded an opportunity to meet with
representatives of Ixion and ask and receive answers to any questions the
undersigned have about the business and affairs of Ixion and management's plans
with respect to the operations of Interact following the Merger. On the basis of
the undersigneds' review of these materials and discussions, and relying upon
the undersigneds' knowledge and experience in financial and business matters,
and not in reliance on any express or implied representation, warranty or
assurance by Baxter Healthcare Corporation or any of its officers, employees,
affiliates, advisors, or agents, the undersigned have evaluated the merits and
risks of the Merger and have determined that they are both willing and able to
undertake the economic and business risks associated with the Merger.
Very truly yours,
/s/ Charles Hutchinson /s/ Leo McKenna
- - ----------------------------------- --------------------------------------
Charles Hutchinson Leo McKenna
/s/ Joseph Rosen /s/ Robyn Mosher
- - ----------------------------------- --------------------------------------
Joseph Rosen Robyn Mosher
/s/ Lehmann Li /s/ Mark Fillinger
- - ----------------------------------- --------------------------------------
Lehmann Li Mark Fillinger
<PAGE> 4
Baxter Healthcare Corporation
May 17, 1996
Page 2
/s/ Peter Robbie /s/ Steven D. Pieper
- - ------------------------------- -------------------------------
Peter Robbie Steven D. Pieper
/s/ William Greenrose /s/ David T. Chen
- - ------------------------------- -------------------------------
William Greenrose David T. Chen
/s/ Michael A. McKenna
- - -------------------------------
Michael A. McKenna
MMS FOUNDERS GROUP DARTMOUTH COLLEGE
LIMITED PARTNERSHIP
By: MMS Founders, Inc., general partner
By: /s/ Steven D. Pieper By: /s/ Jonathon C. King
---------------------------- -----------------------------
Name: Steven D. Pieper Name: Jonathon C. King
----------------------- ------------------------
Title: President Title: Director of Investments
---------------------- -----------------------
<PAGE> 1
Exhibit 10.11
<PAGE> 2
MANUFACTURING LICENSE AGREEMENT
This MANUFACTURING LICENSE AGREEMENT (the "MLA") is made effective as
of May 24, 1996, by and between Interact Medical Technologies Corporation, a
Delaware corporation ("Interact") and Baxter Healthcare Corporation, a Delaware
corporation (the "Licensee").
RECITALS
A. Interact has developed and utilized certain technology which
Licensee desires to license from Interact in connection with Products purchased
from Interact.
B. Interact desires to license the Interact Technology to Licensee on
the terms and subject to the conditions set forth below.
AGREEMENT
NOW, THEREFORE, the parties hereby agree as follows:
1. Definitions. The following terms, in singular and/or plural forms of
the same term as and whenever used herein, shall have the meanings set forth in
this Article or in the Distribution Agreement (as defined herein).
1.1 "Interact Technology." The documents, technical information,
discoveries, ideas, data, know-how and other intellectual property
relative to the Product.
1.2 "Product." The term "Product" shall mean the product for use
in connection with aortic and illiac aneurysms provided by Interact as
prepared with information supplied by the purchaser of the Product
through the use of the Preview(TM) Aortic and Illiac Aneurysm
technology, together with all enhancements, modifications, revisions,
developments and improvements thereto.
1.3 "Distribution Agreement." That certain Distribution Agreement
by and between Interact and Licensee dated of even date herewith.
2. Grant and Acceptance of License. Interact hereby grants to Licensee,
and Licensee hereby accepts, an exclusive license, within the limits and subject
to the restrictions set forth herein and in the Distribution Agreement, to use
the Interact Technology solely to make or have made the Product using the
Interact Technology and to sell the Products made under this MLA. During any
period that Licensee is exercising its Manufacturing Rights (as hereinafter
defined) hereunder, Licensee shall pay Interact a royalty equal to ten percent
(10%) of the End User Price for each unit of Product sold to an End User, except
for the 200 units of Product sold by Licensee pursuant to Section 3.3(c) of the
Distribution Agreement, for which Licensee shall pay Interact a royalty equal to
$50 for each unit of Product.
<PAGE> 3
3. Ownership and Restricted Purpose of Interact Technology. Licensee
acknowledges Interact's ownership of the Interact Technology, and agrees that it
will do nothing inconsistent with such ownership. Licensee shall have access to
the Interact Technology solely for purposes of manufacturing, having made and
selling, or otherwise distributing Product. Licensee shall not reproduce,
duplicate, copy or otherwise disclose, distribute or disseminate the Interact
Technology in any form except to the extent specifically allowed under this MLA.
4. Licensee's Employees. Disclosure and access to the Interact
Technology shall be restricted to those of Licensee's employees who are required
to use the Interact Technology in the course of their employment, for purposes
consistent with this MLA.
5. Sublicenses. Licensee shall not grant sublicenses to use the
Interact Technology or any part thereof in any manner to any third party, other
than a company that is directly or indirectly controlled by Licensee, without
Interact's prior written consent, which consent shall not unreasonably withheld.
6. Term and Termination. Except as otherwise provided herein, the
license granted herein shall be effective during the period set forth in Section
2.3 of the Distribution Agreement. Notwithstanding the term of this MLA,
Licensee may not exercise its rights hereunder (the "Manufacturing Right")
unless any of the conditions set forth in Section 2.4(a) of the Distribution
Agreement shall have occurred. Licensee's Manufacturing Right shall terminate
(until such time as any of the conditions set forth in Section 2.4(a) of the
Distribution Agreement shall again occur) three (3) months after Interact
notifies Licensee in writing that Interact can produce quantities of the Product
to meet the Delivery Minimums (as defined in the Distribution Agreement) and
provides Licensee with reasonably adequate written assurance of performance in
connection therewith.
7. Return of Technology. Within thirty (30) days following termination
of this MLA, Licensee shall at its expense promptly cause to be delivered to
Interact all documents relating to the Interact Technology or Interact's
business including, without limitation, all drawings, blueprints, manuals,
design and specification documents, lists, documentation, source or object
codes, tapes, disks, or other storage media, letters, notes, notebooks, reports,
flow-charts, and all other materials in its possession or under its control.
8. Use of Trademarks and Tradenames. Except as otherwise provided in
the Distribution Agreement, Licensee shall refrain from using any trademark or
tradename owned by Interact (the "Marks") and any trademarks or any tradenames
confusingly similar to the Marks.
9. Miscellaneous.
9. 1 Entire Agreement. This MLA and the Distribution Agreement
constitute the entire agreement and understanding between the parties
with respect to the manufacturing license which is the subject matter
herein, and supersedes and replaces any prior agreements and
understandings, whether oral or written, between them with respect to
such matters. This MLA shall not be amended except by a written
agreement between the parties.
2
<PAGE> 4
9.2 Severability. If for any reason any provision of this MLA shall be
determined to be invalid or inoperative, the validity and effect of the other
provisions hereof shall not be affected thereby, provided that no such
severability shall be effective if it causes a material detriment to any party.
9.3 Applicable Law. This MLA shall be governed by and construed in
accordance with the internal laws of the State of California, without regard to
its choice of law provisions.
9.4 Notice. Any notice, payment, report or any other communication
required or permitted to be given by one party to the other party by this MLA
shall be in writing and either (a) served personally on such other party, (b)
sent by express, registered or certified first-class airmail, postage prepaid,
addressed to such other party at its address as indicated next to its signature
below, or to such other address as the addressee shall have theretofore
furnished to the other party by written notice, or (c) delivered by commercial
courier to such other party.
9.5 Attorneys' Fees, Costs. In the event a party breaches this MLA, the
breaching party shall pay reasonable costs and attorneys' fees incurred by the
other party in connection with such breach, whether or not any litigation is
commenced.
9.6 Confidentiality. Nothing set forth in this MLA shall in any way
alter, modify or otherwise effect the obligations of the parties with regard to
confidentiality as set forth in Article V of the Distribution Agreement.
3
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have executed this agreement as
of the day and year hereinabove first written.
LICENSEE: INTERACT:
BAXTER HEALTHCARE CORPORATION INTERACT MEDICAL TECHNOLOGIES
Vascular Systems Division CORPORATION
17221 Red Hill Avenue 654 Madison Avenue
Irvine, California 92714 Suite 1606
Attention: President New York, New York 10021
Attention: President
By: /s/ Stuart Foster By: /s/ Bruce D. Sturman
---------------------------------- -----------------------------------
Name: Stuart Foster Name: Bruce D. Sturman
-------------------------------- ---------------------------------
Title: President/Vascular Systems Div. Title: C.E.O.
------------------------------- --------------------------------
Date: Date:
-------------------------------- ---------------------------------
[Manufacturing License Agreement]
4
<PAGE> 1
Exhibit 10.12
<PAGE> 2
THE 400 MERCER BUILDING
STANDARD FORM OFFICE LEASE
BETWEEN
CVK PARTNERSHIP, a Washington Partnership
Landlord
and
IXION, a Delaware Corporation
-----------------------------------
-----------------------------------
<PAGE> 3
TABLE OF CONTENTS
1. Terms and Definitions.................................................. 4
2. Premises and Common Areas Leased....................................... 5
3. Term................................................................... 5
4. Possession............................................................. 5
5. Annual Basic Rent...................................................... 5
6. Rental Adjustment...................................................... 6
7. Security Deposit....................................................... 7
8. Use.................................................................... 7
9. Payment and Notices.................................................... 7
10. Brokers................................................................ 7
11. Holding Over........................................................... 8
12. Taxes on Tenant's Property............................................. 8
13. Condition of Premises.................................................. 8
14. Alterations............................................................ 8
15. Repairs................................................................ 9
16. Liens.................................................................. 9
17. Entry by Landlord...................................................... 9
18. Utilities and Services................................................. 9
19. Bankruptcy............................................................. 9
20. Indemnification........................................................ 10
21. Damage to Tenant's Property............................................ 10
22. Tenant's Insurance..................................................... 10
23. Damage or Destruction.................................................. 11
24. Eminent Domain......................................................... 11
25. Defaults and Remedies.................................................. 12
26. Assignment and Subletting.............................................. 13
27. Subordination.......................................................... 13
28. Estoppel Certificate................................................... 14
29. Building Planning - Deleted............................................ 14
30. Rules and Regulations.................................................. 14
31. Governing Law.......................................................... 14
32. Successors and Assigns................................................. 14
33. Surrender of Premises.................................................. 14
34. Attorney's Fees........................................................ 14
2
<PAGE> 4
35. Performance by Tenant.................................................. 14
36. Mortgage Protection.................................................... 14
37. Definition of Landlord................................................. 15
38. Waiver................................................................. 15
39. Identification of Tenant............................................... 15
40. Parking................................................................ 15
41. Terms and Headings..................................................... 15
42. Examination of Lease................................................... 15
43. Time................................................................... 15
44. Prior Agreement; Amendments............................................ 15
45. Separability........................................................... 15
46. Recording.............................................................. 15
47. Limitation on Liability................................................ 16
48. Riders................................................................. 16
49. Modification for Lender................................................ 16
50. Accord and Satisfaction................................................ 16
3
<PAGE> 5
THE 400 MERCER BUILDING
Standard Form Office Lease
This Lease is made as of the 29th day of January, 1996 by and between Landlord
and Tenant, hereinafter designated.
1. Terms and Definitions. For the purpose of this Lease, the following Terms
shall have the following definitions and meanings:
a. Landlord: CVK Partnership, a Washington Partnership
b. Landlord's Address: 5030 Roosevelt Way NE Ste 300
P.O. Box 95430
Seattle, WA 98145-2430
c. Tenant: IXION, a Delaware Corporation
d. Tenant's Address: 400 Mercer St. Suite 400
Seattle, WA 98109
e. Premises: Those certain premises outlined on the floor plan attached
hereto as Exhibit A and by this reference incorporated herein, consisting
of approximately 4235 rentable square feet located on the 4th floor of
the Building, designated as Suite No. ___. The address of the Building is
400 Mercer St., Seattle, WA 98109.
f. Term: A period of 3 years and 0 months, beginning on the Commencement Date
and ending on January 31, 1999.
g. Building Standard Work: All the work to be done, or which has been done,
at Landlord's expense in the Premises pursuant to the provisions of the
Work Letter Agreement, described in Paragraph 2 below.
h. Building Nonstandard Work: All the work to be done, or which has been
done, in the Premises by Landlord pursuant to the provisions of the Work
Letter Agreement, other than Building Standard Work.
i. Leasehold Improvements: The aggregate of the Building Standard Work and
the Building Nonstandard Work.
j. Commencement Date: The earlier of the following dates:
(i) February 1, 1996
(ii)
(iii)
k. Annual Basic Rent: See Addendum None.
l. Direct Expenses Base: 1996.
m. Tenant's Percentage: 8.8695.
n. Security Deposit: Equal to the first two (2) months rent, one half (1/2)
of which shall be refunded upon successful completion (i.e. sell out in
full) of Tenants IPO, the lead underwriter for which is Kaufman Bros. L.P.
Said refund shall take place within ten (10) business days on Landlord's
receipt of Tenant's written notice thereof.
o. Parking: up to 14 unreserved parking spaces available 24 hours/day each
day. The cost shall be Fifty dollars ($50.00) per month per space for the
first 5 spaces and sixty dollars ($60.00) per month per space for the
balance during calender year 1996. Thereafter said cost shall be adjusted
as per subparagraph 5(b).
p. Brokers: Landlord's: Seavest Realty Inc.
Tenant's: Scott Driver & Co.
Landlord's Initials Tenant's Initials
- - ------------------- ------------------
- - ------------------- ------------------
4
<PAGE> 6
2. PREMISES AND COMMON AREAS LEASED.
a. Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord, the Premises contained within the suite designated in Subparagraph
1.c. The Premises are, or shall be, improved by Landlord with the Leasehold
improvements described in the Work Letter Agreement, a copy of which is attached
hereto and marked Exhibit "B" and Exhibit "B-1" and incorporated herein by this
reference. It is agreed for the purpose of this Lease, that the Premises have an
area of approximately the number of square feet designated in Subparagraph 1.e.,
situated on the floor(s) designated in Subparagraph 1.e., of that certain office
building located at the address designated in Subparagraph 1.e. (hereinafter
called the "Building"). The Premises exclude the common stairways, stairwells,
accessways and pipes, conduits, wires and appurtenant fixtures serving
exclusively or in common other parts of the Building.
The parties hereto agree that said letting is upon and subject to the
terms, covenants and conditions herein set forth and Tenant covenants as a
material part of the consideration for this Lease to keep and perform each and
all of said terms, covenants and conditions by it to be kept and performed and
that this Lease is made upon the condition of such performance.
b. Tenant shall have the nonexclusive right to use, in common with
other tenants in the Building and subject to the Rules and Regulations referred
to in Paragraph 30 below, the following areas appurtenant to the Premises:
(i) The common entrances, lobbies, rest rooms, elevators, stairways
and accessways, loading docks, ramps, drives and platforms and any passageways
and serviceways thereto, and the common pipes, conduits, wires and appurtenant
equipment serving the Premises, which Landlord shall exercise reasonable
diligence to timely maintain and repair;
(ii) Common walkways and sidewalks necessary for access to the Building
maintained by Landlord.
c. Landlord reserves the right from time to time without unreasonable
interference with Tenant's use:
(i) To install, use, maintain, repair and replace pipes, ducts,
conduits, wires and appurtenant meters and equipment included in the Premises
which are located in the Premises or located elsewhere outside the Premises, and
to expand the Building.
(ii) To alter or relocate any other common facility.
3. TERM. The Term of this Lease shall be for the period designated in
Subparagraph 1.f., commencing on the Commencement Date and ending on the
expiration of such period, unless the Term hereby demised shall be sooner
terminated as hereinafter provided. Upon commencement of the Term, this Lease
shall be amended to set forth the actual date of commencement and expiration of
the Term.
4. POSSESSION. Should Landlord tender possession of the Premises to Tenant
prior to the date specified for commencement of the Term hereof, and Tenant
elects to accept such prior tender, such prior occupancy shall be subject to
all the terms, covenants and conditions of this Lease, including the payment
of rent.
5. ANNUAL BASIC RENT
a. Tenant agrees to pay Landlord as Annual Basic Rent for the Premises
the Annual Basic Rent designated in Subparagraph 1.k. (subject to adjustment as
hereinafter provided) in twelve (12) equal monthly installments, each in
advance on the first day of each and every calendar month during the Term,
except that the first month's Rent shall be paid upon execution hereof. In the
event the Term of this Lease commences or ends on a day other than the first or
last day of a calendar month, then the Rent for such period shall be prorated
in the proportion that the number of days this Lease is in effect during such
periods bears to thirty (30), and such Rent shall be paid at the commencement
of such period. In addition to the Annual Basic Rent, Tenant agrees to pay the
amount of the Rental Adjustments as and when hereinafter provided in this Lease.
Said rental shall be paid to Landlord, without any prior demand therefor and
without any deduction or offset whatsoever in lawful money of the United States
of America, which shall be legal tender at the time of payment, at the address
of Landlord designated in Subparagraph 1.b. or to such other person or at such
other place as Landlord may from time to time designate in writing. Tenant
agrees to pay as Additional Rent to Landlord, upon demand, Tenant's percentage
of any parking charges, utility surcharges, or any other costs levied, assessed
or imposed by, or at the direction of, or resulting from statutes or
regulations, or interpretations hereof, promulgated by any federal, state,
regional, municipal or local governmental authority in connection with the use
or occupancy of the Building or the Premises or the parking facilities serving
the Building or the Premises. Further, all charges to be paid by Tenant
hereunder, including, without limitation, payments for real property taxes,
insurance and repairs, shall be considered Additional Rent for the purposes of
this Lease, and the word "Rent" in this Lease shall include such Additional
Rent unless the context specifically or clearly implies that only the Annual
Basic Rent is referenced.
b. The Annual Basic Rent as set forth hereinabove shall be increased
for each year ("Subsequent Year") of the term of this Lease following the
first year if the Consumer Price Index for All Urban Consumers
5
<PAGE> 7
(Seattle-Everett, Washington; Base 1967 = 100) ("Index"), as published by the
United States Department of Labor, Bureau of Labor Statistics, for the
"Comparison Month" (described below) increases over the Index for the calendar
month ("Base Month") which is four (4) months prior to the month in which
Tenant's obligation to pay Annual Basic Rent commences. The Base Month Index
shall be compared with the Index for the same calendar month for each
Subsequent Year by a percentage which shall be calculated by dividing the Base
Month Index into that number which represents the difference, if any, when
subtracting the Base Month index from the Index for any Comparison Month. In no
event shall the Annual Basic Rent be less than that set forth in Paragraph 5(a)
above. By way of illustration only, if Tenant commences paying Annual Basic
Rent in August of 1981, then the Base Month Index would be that for April,
1981, (assume such Index at 130) and that Index shall be compared with the
Index for April, 1982, (assume such Index at 136). Because the Index for April,
1982, is four and six-tenths percent (4.6%) higher than the Index for April,
1981, based on the assumptions of 136 and 130, respectively, the Annual Basic
Rent commencing in August of 1982 would be four and six-tenths percent (4.6%)
higher than the Annual Basic Rent commencing August, 1981. Likewise the Index
for April, 1983, would be compared with the Index for April, 1981. Should said
Bureau discontinue the publication of the above Index or publish the same less
frequently, or alter the same in some other manner, the Landlord shall adopt a
substitute Index or substitute procedure which reasonably reflects and monitors
consumer prices. This subparagraph shall be applicable only to rent for parking
and not for office space.
c. LATE CHARGES. In the event Tenant fails to pay any installment of
Rent when due or in the event Tenant fails to make any other payment to be made
under this Lease when due, then Tenant shall pay to Landlord a late charge
equal to five percent (5%) of the amount due to compensate Landlord for the
extra cost incurred as a result of such late payment.
6. RENTAL ADJUSTMENT.
a. For the purpose of this Subparagraph 6.a. the following Terms
are defined:
(i) LEASE YEAR: Each calendar year of the Term of this Lease.
(ii) TENANT'S PERCENTAGE: That portion of the building occupied by
Tenant divided by the total square footage of the Building available for
occupancy, which result is set forth as a percentage in Subparagraph l.m.
(iii) DIRECT EXPENSE BASE: The amount of the annual Direct Expenses
which Landlord has included in the Annual Basic Rent and which amount is set
forth in Subparagraph 1.1.
(iv) DIRECT EXPENSES: The Term "Direct Expenses" shall include:
(a) Property tax costs consisting of real and personal property taxes
and assessments upon the Building and the land upon which it is located or
assessments levied in lieu thereof imposed by any governmental authority or
agency, and non-progressive tax on or measured by gross rental received from
the rental of space in the Building; any parking charges, utilities surcharges,
or any other costs levied, assessed or imposed by, or at the direction of, or
resulting from statutes or regulations, interpretations thereof, promulgated by
any federal, state, regional, municipal or local government authority in
connection with the use or occupancy of the Premises or the parking facilities
serving the Premises; any tax on this transaction or any document to which
Tenant is a party creating or transferring an interest in the Premises, and any
reasonable expenses, including reasonable cost of attorneys or expert
reasonably incurred by Landlord in seeking reduction by the taxing authority of
the above-referenced taxes, less tax refunds obtained as a result of an
application for review thereof; but shall not include any net income,
franchise, capital stock, estate or inheritance taxes.
(b) Operating costs consisting of costs incurred by Landlord in
maintaining and operating the Building and the land upon which it is located,
exclusive of costs required to be capitalized for federal income tax purposes,
and including (without limiting the generality of the foregoing) the following:
cost of utilities, supplies and insurance, cost of services of independent
contractors, managers and other suppliers, the fair rental value of the
Building office, cost of compensation (including employment taxes and fringe
benefits) of all persons who perform regular and recurring duties connected
with the management, operation maintenance, and repair of the Building, its
equipment, parking facilities and the Common Areas, including, without
limitation, engineers, janitors, foremen, floor waxers, window washers,
watchmen and gardeners, but excluding persons performing services not uniformly
available to or performed for substantially all Building tenants.
(c) Amortization of such capital improvements as Landlord may have
constructed: (1) for the purpose of reducing operating costs and (2) to comply
with governmental rules and regulations promulgated after completion of
the Building.
b. If Tenant's Percentage of the Direct Expenses paid or incurred by
Landlord for any Lease Year exceeds Tenant's percentage of the Direct Expense
Base, then Tenant shall pay such increase as additional rent. As soon as
possible each year Landlord shall give to Tenant an unaudited written statement
of the increase in rent payable by Tenant hereunder which shall be due and
payable upon receipt. In addition, for each year after the First Lease Year,
Tenant shall pay its percentage of Landlord's estimate of the amount by which
Direct Expenses for that year shall exceed, if any, the Direct Expense Base.
This amount shall be divided into twelve (12) equal monthly installments.
Tenant shall pay to Landlord concurrently with the regular monthly rent
payments next due following the receipt of such statement, an amount equal to
one (1) monthly installment multiplied by the number of months from January in
the calendar year in which said statement is submitted to the month of such
payment, both months inclusive. Subsequent installments shall be payable
concurrently with the regular monthly rent
6
<PAGE> 8
payments for the balance of that calendar year and shall continue until the
next calendar year's statement is rendered. If in any calendar year Tenant's
Percentage of actual Direct Expenses is less than the estimate for that year,
then upon receipt of Landlord's statement, any overpayment made by Tenant on
the monthly installment basis provided above shall be credited towards the
next monthly rent falling due and the estimated monthly installments of
Tenant's Percentage of Direct Expenses to be paid shall be adjusted to reflect
such lower Direct Expenses for the most recent Lease Year.
c. Even though the Term has expired and Tenant has vacated the Premises,
when the final determination is made of Tenant Percentage of Direct Expenses
for the year in which this Lease Terminates, Tenant shall immediately pay any
increase due over the estimated expenses paid and conversely any overpayment
made in the event said expenses decrease shall be immediately rebated by
Landlord to Tenant.
d. Landlord shall deliver to Tenant a statement, in no event later than
one hundred twenty (120) days following the end of each calendar year showing
the actual expenses incurred for the previous year. Once a year, Tenant shall
have the right upon reasonable and, mutually agreeable prior written notice to
Landlord, to review without limiting the foregoing, all invoices, charges, or
other records related to expenses charged to Tenant for such costs. Landlord
shall allow Tenant or its appointed representatives to review at Landlord's
principal office or Landlord's representative's office, during regular business
hours, any and all of the above-referenced records relating to the common
area costs.
7. SECURITY DEPOSIT. Tenant has deposited with Landlord the Security Deposit
designated in Subparagraph 1.n. subject to the right of partial refund as set
with therein. Said sum shall be held by Landlord as security for the faithful
performance by Tenant of all the terms, covenants, and conditions of this Lease
to be kept and performed by Tenant during the Term hereof. If Tenant defaults
with respect to any provision of this Lease, including but not limited by the
provisions relating to the payment of Rent, Landlord may (but shall not be
required to) use, apply or retain all or any part of this Security Deposit for
the payment of any Rent or any other sum in default, or for the payment of any
other such amount which Landlord may spend or become obligated to spend by
reason of Tenant's default or to compensate Landlord for any loss or damage
which Landlord may suffer by reason of Tenant's default. If any portion of said
deposit is so used or applied, Tenant shall, within ten (10) days after demand
therefor, deposit cash with Landlord in an amount sufficient to restore the
Security Deposit to its original amount. Tenant's failure to do so shall be a
material breach of this Lease. Landlord shall not be required to keep the
Security Deposit separate from its general funds, and Tenant shall not be
entitled to interest on such Security Deposit. Should Landlord sell its
interests in the Premises during the Term hereof and if Landlord deposits
with the purchaser thereof the then unappropriated funds deposited by
Tenant as aforesaid, thereupon Landlord shall be discharged from any further
liability with respect to the Security Deposit.
8. USE. Tenant shall use the Premises for general business office purposes and
uses incidental thereto, and shall not use the Premises, or permit or suffer
the Premises to be used for any other purpose without the written consent of
Landlord. Tenant shall not use or occupy the Premises in violation of law or
of the certificate of occupancy issued for the Building, or any master lease
underlying the Premises which Tenant has been notified, and shall, upon
five (5) days written notice from Landlord, discontinue any use of the
Premises which is declared by any governmental authority having jurisdiction
to be in violation of law or of said certificate of occupancy or ground lease.
Tenant shall comply with any direction of any governmental authority having
jurisdiction which shall, by reason of the nature of Tenant's use or occupancy
of the Premises, impose any duty upon Tenant or Landlord with respect to the
Premises or with respect to the use or occupation thereof. Tenant shall not do
or permit to be done anything which will invalidate, restrict or increase the
cost of any fire, "All-Risk", extended coverage or other insurance policy
covering the Building and/or property located therein, and shall comply with
all rules, orders, regulations and requirements of the Insurance Service
Offices, formerly known as the Pacific Fire Rating Bureau, or any other
organization performing a similar function. Tenant shall, promptly, upon
demand, reimburse Landlord for any additional premium charged to Landlord
for such policy by reason of Tenant's failure to comply with the provisions
of this Paragraph 8, and upon such payment, shall not be in breach of the
preceding sentence. Tenant shall not do or permit anything to be done in or
about the Premises which will in any way obstruct or interfere with the rights
of other tenants or occupants of the Building, or injure or annoy them, or use
or allow the Premises to be used for any improper, immoral, unlawful or
objectional purpose, nor shall Tenant cause, maintain or permit any nuisance
in, on or about the Premises. Tenant shall not commit or suffer to be committed
any waste in, on or about the Premises.
9. PAYMENT AND NOTICES. All Rent and other sums payable by Tenant to Landlord
hereunder shall be paid to Landlord at the address designated by Landlord in
Subparagraph 1.b. or at such other places as Landlord may hereafter designate
in writing. Any notice required or permitted to be given hereunder must be in
writing and may be given by personal delivery or by mail, and if given by mail
shall be deemed sufficiently given if sent by registered or certified mail,
return receipt requested, postage prepaid, addressed to Tenant at the Building
of which the Premises are a part; or to Landlord at its address designated in
Subparagraph 1.b. Either party may, by written notice to the other, specify a
different address for notice purposes except that Landlord may in any event use
the Premises as Tenant's address for notice purposes. If more than one tenant
is named under this Lease, service of any notice upon any one of said tenants
shall be deemed as service upon all said tenants.
10. BROKERS. The parties recognize that the brokers who negotiated this Lease
are the brokers whose names are stated in Subparagraph 1.p., and agree that
Landlord shall be solely responsible for the payment of brokerage commissions
to said brokers, and that Tenant shall have no responsibility therefor. If
Tenant has dealt with any other person or real estate broker with respect to
leasing or renting space in the Building, Tenant shall be solely responsible
for the payment of any fee due said person or firm and Tenant shall hold
Landlord free and harmless against any liability in respect thereto, including
attorney's fees and costs.
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11. HOLDING OVER. If Tenant holds over after the expiration or earlier
Termination or the Term hereof without the express written consent of Landlord,
Tenant shall become a Tenant at sufferance only, at a rental rate equal to one
hundred twenty-five percent (125%) of the Rent in effect upon the date of such
expiration, and otherwise subject to the terms, covenants and conditions
herein specified so far as applicable. Acceptance by Landlord of Rent after
such expiration or earlier termination shall not constitute a holdover hereunder
or result in a renewal. The foregoing provisions of this Paragraph 11 are in
addition to and do not affect Landlord's right of re-entry or any rights of
Landlord hereunder or as otherwise provided by law. If Tenant fails to
surrender the Premises upon the expiration of this Lease despite demand to do
so by Landlord, Tenant shall indemnify and hold Landlord harmless from all loss
or liability, including without limitation, any claim made by any succeeding
tenant founded on or resulting from such failure to surrender and any
reasonable attorney's fees and costs.
12. TAXES ON TENANT'S PROPERTY.
a. Tenant shall be liable for and shall pay at least ten (10) days
before delinquency, taxes levied against any personal property or trade
fixtures placed by Tenant in or about the Premises. If any such taxes on
Tenant's personal property or trade fixtures are levied against Landlord or
Landlord's property or if the assessed value of the Premises is increased by
the inclusion therein of a value placed upon such personal property or trade
fixtures of Tenant, then Landlord, after written notice to Tenant, shall have
the right to pay the taxes based upon such increased assessments, regardless of
the validity thereof, but only under proper protest if requested by Tenant in
writing. If Landlord shall do so, then Tenant shall, upon demand, repay to
Landlord the taxes levied against Landlord, or the proportion of such taxes
resulting from such increase in the assessment.
13. CONDITION OF PREMISES. Tenant acknowledges that neither Landlord nor any
agent of Landlord has made any representation or warranty with respect to the
Premises or the Building or with respect to the suitability of either for the
conduct of Tenant's business. The taking of possession of the Premises by Tenant
shall conclusively establish that the Premises and the Building were at such
time in satisfactory condition.
14. ALTERATIONS.
a. Tenant shall make no alterations, decorations, additions or
improvements in or to the Premises without Landlord's prior written consent, and
then only by contractors or mechanics first approved by Landlord in writing.
Tenant agrees that there shall be no construction of partitions or other
obstructions which might interfere with Landlord's free access to mechanical
installations or service facilities of the Building or interfere with the moving
of Landlord's equipment to or from the enclosures containing said installations
or facilities. All such work shall be done at such times and in such manner as
Landlord may from time to time designate. Tenant covenants and agrees that all
work done by Tenant shall be performed in full compliance with all laws, rules,
orders, ordinances, directions, regulations and requirements of all governmental
agencies, offices, departments, bureaus and boards having jurisdiction. Before
commencing any work, Tenant shall give Landlord at least five (5) days written
notice of the proposed commencement of such work, and shall, if required by
Landlord, secure at Tenant's own cost and expense, a completion and lien
indemnity bond, reasonably satisfactory to Landlord, for said work. Tenant
further covenants and agrees that any mechanic's liens filed against the
Premises or against the Building for work claimed to have been done, or
materials claimed to have been furnished to Tenant, will be discharged by
Tenant, by bond or otherwise, within ten (10) days after the filing thereof, at
the cost and expense of Tenant. All additional alterations, decorations,
additions or improvements upon the Premises, made by either party, including
(without limiting the generality of the foregoing) all wall covering, built-in
cabinet work, paneling and the like, shall, unless Landlord elects otherwise,
become the property of Landlord, and shall remain upon, and be surrendered with
the Premises, as a part thereof, at the end of the Term hereof. However,
Landlord may, by written notice to Tenant, given at least thirty (30) days
prior to the end of the Term, require Tenant to remove all partitions, counters,
railings, and the like, installed by Tenant, and Tenant shall repair any damage
to the Premises arising from such removal or, at Landlord's option, shall pay to
Landlord all of Landlord's reasonable costs of such removal and repair. Such
removal by Tenant of any such improvements shall not interfere, in any way, with
any other tenant's quiet enjoyment of the Building.
b. All articles of personal property and all business and trade fixtures,
machinery and equipment, furniture and movable partitions owned by Tenant or
installed by Tenant at its expense in the Premises shall be and remain the
property of Tenant and may be removed by Tenant at any time during the Term,
provided Tenant is not in default hereunder, and provided further that Tenant
shall repair any damage caused by such removal. If Tenant shall fail to remove
all of its effects from the Premises upon termination of this Lease for any
cause whatsoever, Landlord may, at its option, remove the same in any
reasonable manner that Landlord shall choose, and store said effects without
liability to Tenant for loss thereof. Tenant agrees to pay Landlord upon
demand any and all reasonable expenses incurred in such removal, including court
costs and attorney's fees and storage charges on such effects for any length of
time that the same shall be in Landlord's possession. Landlord may, at its
option and without notice, sell said effects, or any of the same, at private
sale and without legal process, for such price as Landlord may obtain and
apply the proceeds of such sale upon (i) any amounts due under this Lease from
Tenant to Landlord and (ii) the expenses incident to the removal and sale of
said effects.
c. Landlord reserves the right at any time and from time to time without
the same constituting an actual or constructive eviction and without insuring
any liability to Tenant therefor or otherwise affecting Tenant's obligations
under this Lease, to make such changes, alterations, additions, improvements,
repairs or replacements in or to the Building (including the Premises, if
required so to do by any law or regulation) and the fixtures and equipment
thereof, as well as in or to the street entrances, halls, passages and
stairways thereof, and to change the name by which the Building is commonly
known, as Landlord may deem necessary or desirable. Nothing
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contained in this Subparagraph 14.c. shall be deemed to relieve Tenant of any
duty, obligation or liability of Tenant with respect to making any repair,
replacement or improvement or complying with any law, order or requirement of
any government or other authority. Nothing contained in this Subparagraph 14.c.
shall be deemed or construed to impose upon Landlord any obligation,
responsibility or liability whatsoever, for the care, supervision or repair of
the Building or any part other than as expressly provided in this Lease.
15. REPAIRS.
a. By entry hereunder, Tenant accepts and Landlord delivers the
Premises as being in good and sanitary order, condition and repair. Tenant
shall keep, maintain and preserve the Premises in first class condition and
repair, and shall, when and if needed or whenever requested by Landlord to do
so, at Tenant's sole cost and expense, make all repairs to the Premises and
every part thereof, including all interior windows and doors. Tenant shall,
upon the expiration or sooner termination of the Term hereof, surrender the
Premises to Landlord in the same condition as when received, except for normal
wear and tear or any alterations that have been approved by Landlord except as
designated in advance in writing at the time of Landlord's approval. Landlord
shall have no obligation to alter, remodel, improve, repair, decorate or paint
the Premises or any part thereof except as specifically provided in Exhibits
"B" and "B-1". The parties hereto affirm that Landlord has made no
representations to Tenant respecting the condition of the Premises or the
Building except as specifically set forth.
b. Anything contained in Subparagraph 15.a. above to the contrary
notwithstanding, Landlord shall repair and maintain the structural portions of
the Building, including the basic plumbing, heating, ventilating, air
conditioning and electrical systems installed or furnished by Landlord, unless
such maintenance and repairs are caused in part or in whole by the act,
neglect, fault of or omission of any duty by Tenant, its agents, servants,
employees or invitees, in which case Tenant shall pay to Landlord, as
additional rent, the reasonable cost of such maintenance and repairs. Landlord
shall not be liable for any failure to make any such repairs or to perform any
maintenance unless such failure shall persist for an unreasonable time after
written notice of the need of such repair or maintenance is given to Landlord
by Tenant. Except as provided in Paragraph 23 hereof, there shall be no
abatement of rent and no liability of Landlord by reason of any injury to or
interference with Tenant's business arising from the making of any repairs,
alterations or improvements in or to any portion of the Building or the
Premises or to fixtures, appurtenances and equipment therein.
16. LIENS. Tenant shall not cause any mechanic's, materialmen's or other liens
to be filed against the real property of which the Premises form a part nor
against Tenant's leasehold interest in the Premises. If any such liens are
filed, Landlord may, without waiving its rights and remedies based on such
breach of Tenant, and without releasing Tenant from any of its obligations,
cause such liens to be released by any means it shall deem proper, including
payments in satisfaction of the claim giving rise to such lien. Tenant shall
pay to Landlord at once, upon notice by Landlord, any sum paid by Landlord to
remove such liens, together with interest at the maximum rate per annum
permitted by law from the date of such payment by Landlord.
17. ENTRY BY LANDLORD. Landlord reserves and shall at any and all reasonable
times have the right to enter the Premises to inspect the same, to supply
janitor service and any other service to be provided by Landlord to Tenant
hereunder, to submit said Premises to prospective purchasers or tenants, to
alter, improve or repair the Premises or any other portion of the Building, all
without being deemed guilty of any eviction of Tenant and without abatement of
Rent, and may, in order to carry out such purposes, erect scaffolding and other
necessary structures where reasonably required by the character of the work to
be performed, provided that the business of Tenant shall be interfered with as
little as is reasonably practicable. Tenant hereby waives any claim for damages
for any injury or inconvenience to or interference with Tenant's business, any
loss of occupancy or quiet enjoyment of the Premises, and any other loss in,
upon and about the Premises, and any other loss occasioned thereby. For each of
the aforesaid purposes, Landlord shall at all times, have and retain a key with
which to unlock all of the doors in, upon and about the Premises, excluding
Tenant's vaults and safes. Landlord shall have the right to use any and all
means which Landlord may deem proper to open said doors in an emergency in
order to obtain entry to the Premises, and any entry to the Premises obtained
by Landlord by any of said means, or otherwise, shall not under any
circumstances be construed or deemed to be a forcible or unlawful entry into,
or a detainer of, the Premises, or an eviction of Tenant from the Premises or
any portion thereof, and any damages caused on account thereof shall be paid by
Tenant. It is understood and agreed that no provision of this Lease shall be
construed as obligating Landlord to perform any repairs, alterations or
decorations except as otherwise expressly agreed herein to be performed by
Landlord.
18. UTILITIES AND SERVICES. Provided that Tenant is not in default of this
Lease, Landlord agrees to furnish or cause to be furnished to the Premises the
utilities and services described in the Standards for Utilities and Services,
attached hereto as Exhibit "D", subject to the conditions and in accordance
with the standards set forth therein. Landlord shall not be liable for, Tenant
shall not be entitled to any abatement or reduction of rent by reason of, and
no eviction of Tenant shall result from, and Tenant shall not be relieved from
the performance of any covenant or agreement in this Lease because of,
Landlord's failure to furnish any of the foregoing when such failure is caused
by accident, breakage, repairs, strikes, lockouts or other labor disturbances
or labor dispute of any character, governmental regulation, moratorium or other
cause beyond Landlord's reasonable control. In the event of any failure,
stoppage or interruption thereof, Landlord shall diligently attempt to promptly
resume service.
19. BANKRUPTCY. If Tenant shall file a petition of bankruptcy under any Chapter
of the Bankruptcy Act as then in effect, or if Tenant shall be adjudicated a
bankrupt in involuntary bankruptcy proceedings and such adjudication shall not
have been vacated within thirty (30) days from the date thereof, or if a
receiver or trustee shall be appointed of Tenant's property, and the order
appointing such receiver or trustee shall not be set aside or vacated
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within thirty (30) days after the entry thereof, or if Tenant shall assign
Tenant's estate or effects for the benefit of creditors,
or if this Lease shall by operation of law or otherwise devolve or pass to any
person or persons other than Tenant, then in any such event Landlord may, if
Landlord so elects, with or without notice of such election and with or without
entry or action by Landlord, forthwith terminate this Lease. In such case,
notwithstanding any other provisions of this Lease, Landlord, in addition to
any and all rights and remedies allowed by law or equity, shall, upon such
termination, be entitled to recover damages in the amount provided in
Subparagraph 25.b. Neither Tenant nor any person claiming through or under
Tenant or by virtue of any statute or order of any court shall be entitled to
possession of the Premises, but shall forthwith quit and surrender the Premises
to Landlord. Nothing herein contained shall limit or prejudice the right of
Landlord to prove and obtain as damages by reason of any such termination an
amount equal to the maximum allowed by any statute or rule of law in effect at
the time when, and governing the proceedings in which, such damages are to be
proved, whether or not such amount be greater, equal to, or less than the
amount of damages recoverable under the provisions of this Paragraph 19.
20. INDEMNIFICATION. Tenant shall indemnify, and hold harmless Landlord against
and from any and all claims arising from Tenant's use of the Premises or the
conduct of its business or from any activity, work, or thing done, permitted or
suffered by Tenant in or about the Premises. Tenant shall further indemnify, and
hold harmless Landlord against and from any and all claims arising from any
breach or default in the performance or any obligation on Tenant's part to be
performed under the Terms of this Lease, or arising from any act, neglect, fault
or omission of Tenant or of its agents or employees, and from and against all
costs, attorney's fees, expenses and liabilities incurred in or about such claim
or any action or proceeding brought thereon. In case any action or proceeding
shall be brought against Landlord by reason of any such claim, Tenant, upon
notice from Landlord, shall defend the same at Tenants expense by counsel
approved in writing by Landlord. Tenant, as a material part of the consideration
to Landlord, hereby assumes all risk of damage to property or injury to person
in, upon or about the Premises from any cause whatsoever, except that which is
caused by Landlord's negligence or the failure of Landlord to observe any of the
terms and conditions of this Lease where such failure has persisted for an
unreasonable period of time after written notice of such failure.
21. DAMAGE TO TENANT'S PROPERTY. Notwithstanding the provisions of Paragraph 20
to the contrary, Landlord or its agents shall not be liable for any damage to
property entrusted to employees of the Building, not for loss or damage to any
property by theft or otherwise, not for any injury or damage to persons or
property resulting from fire, explosion, falling plaster, steam, gas,
electricity, water or rain which may leak from any part of the Building or from
the pipes, appliances or plumbing work therein or from the roof, street or
sub-surface or from any other place or resulting from dampness or any other
cause whatsoever except to the extent that such damage or loss is attributable
to the breech of any of Landlord's obligations hereunder or Landlord's
negligence. Landlord or its agents shall not be liable for interference with
light or other incorporeal hereditaments, nor shall Landlord be liable for any
latent defect in the Premises or in the Building. Tenant shall give prompt
notice to Landlord in case of fire or accidents in the Premises or in the
Building or of defects therein or in the fixtures or equipment.
22. TENANT'S INSURANCE.
a. Tenant shall, during the Term hereof and any other period of
occupancy, at its sole cost and expense, obtain, maintain and keep in full
force and effect the following insurance:
(i) Standard Form Property Insurance insuring against the
perils of fire, extended coverage, vandalism, malicious mischief, special
extended coverage ("All-Risk") and sprinkler leakage. This insurance policy
shall be upon property of every description and kind owned by Tenant, for which
Tenant is legally liable or that was installed at Tenant's expense, and which
is located in the Building, including without limitation, furniture, fittings,
installations, fixture (other than Building Standard Work), and any other
personal property, in an amount not less than ninety percent (90%) of the full
replacement cost thereof. This insurance policy shall also be upon direct or
indirect loss of Tenant's earnings attributable to Tenant's inability to use
fully or obtain access to the Premises or Building in an amount as will
properly reimburse Tenant. Such policy shall name Landlord and any mortgages of
Landlord as Additional Insured as their respective interests may appear.
(ii) Comprehensive General Liability Insurance insuring Tenant
against any liability arising out of the lease, use, occupancy or maintenance of
the Premises and all areas appurtenant thereto. Such insurance shall be in the
amount of $1,000,000 Combined Single Limit for injury to, or death of one or
more persons in an occurrence, and for damage to tangible property (including
loss of use) in an occurrence. The policy shall insure the hazards of premises
and operations, independent contractors, contractual liability (covering the
indemnity contained in Paragraph 20 hereof) and shall (a) name Landlord as an
Additional Insured, (b) contain a Cross Liability provision, and (c) contain a
provision that "the insurance provided the Landlord hereunder shall be primary
and non-contributing with any other insurance available to the Landlord".
(iii) Workmen's Compensation and Employer's Liability Insurance
(as required by state law).
(iv) Any other form or forms of insurance as Tenant or Landlord
or any mortgages of Landlord may reasonably require from time to time in form,
in amounts and for insurance risks against which a prudent tenant would protect
itself.
b. All policies shall be written in a form satisfactory to Landlord and
shall be taken out with insurance companies holding a General Policyholders
Rating of "A" and a Financial Rating of "X" or better, as set forth in the most
current issue of Bests Insurance Guide. Tenant shall deliver to Landlord
Certificates of Insurance satisfactory to Landlord. No such policy shall be
cancelable or reducible in coverage except after thirty (30) days prior written
notice to Landlord. Tenant shall, within ten (10) days prior to the expiration
of such policies, furnish
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Landlord with renewals or "binders" thereof, or Landlord may order such
insurance and charge the cost thereof to Tenant as Additional Rent. If Landlord
obtains any insurance that is the responsibility of Tenant under this Paragraph
22, Landlord shall deliver to Tenant a written statement setting forth the
amount of any such insurance cost increase and showing in reasonable detail the
manner in which it has been computed.
23. DAMAGE OR DESTRUCTION.
a. In the event the Building and/or Building Standard Work are damaged by
fire or other perils covered by Landlord's extended coverage insurance Landlord
shall:
(i) In the event of total destruction, at Landlord's option, within a
period of ninety (90) days thereafter, commence repair, reconstruction and
restoration of the Building and/or Building Standard Work and prosecute the
same diligently to completion, in which event this Lease shall remain in full
force and effect; or within said ninety (90) day period elect not to so repair,
reconstruct or restore the Building and/or Building Standard Work in which event
this Lease shall terminate. In the event Landlord elects not to restore the
Building and/or Building Standard Improvements, this Lease shall be deemed to
have terminated as of the date of such total destruction.
(ii) In the event of a partial destruction of the Building and/or
Building Standard Improvements, to an extent not exceeding twenty-five percent
(25%) of the full insurable value thereof and if the damage thereto is such
that the building and/or the Building Standard Improvements may be repaired,
reconstructed or restored within a period of ninety (90) days from the date of
the happening of such casualty and Landlord will receive insurance proceeds
sufficient to cover the cost of such repairs, Landlord shall commence and
proceed diligently with the work of repair, reconstruction and restoration and
this Lease shall continue in full force and effect. If such work or repair
reconstruction and restoration is such as to require a period longer than
ninety (90) days or exceeds twenty-five percent (25%) of the full insurable
value thereof, or if said insurance proceeds will not be sufficient to cover
the cost of such repairs, Landlord either may elect to so repair, reconstruct
or restore and this Lease shall continue in full force and effect or Landlord
may elect not to repair, reconstruct or restore and this Lease shall in such
event terminate. Under any of the conditions of this Subparagraph 23. a.
(ii), Landlord shall give written notice to Tenant of its intention within
said ninety (90) day period. In the event Landlord elects not to restore said
Building and/or Building Standard Improvements, this Lease shall be deemed to
have terminated as of the date of such partial destruction.
b. Upon any termination of this Lease under any of the provisions of this
Paragraph 23, the parties shall be released thereby without further obligation
to the other from the date possession of the Premises is surrendered to
Landlord except for items which have therefor accrued and are then unpaid.
c. In the event of repair, reconstruction and restoration by Landlord
as herein provided, the Rent provided to be paid under this Lease shall be
abated proportionately with the degree to which Tenant's use of the premises is
impaired during the period of such repair, reconstruction or restoration. Tenant
shall not be entitled to any compensation or damages for loss in the use of the
whole or any part of the Premises and/or any inconvenience or annoyance
occasioned by such damage, repair, reconstruction or restoration.
d. Tenant shall not be released from any of its obligations under this
Lease, except to the extent and upon the conditions expressly stated in this
Paragraph 23. Notwithstanding anything to the contrary contained in this
Paragraph 23, should Landlord be delayed or prevented from repairing or
restoring the damaged Premises within one (1) year after the occurrence of
such damage or destruction by reason of acts of God, war, governmental
restrictions, inability to procure the necessary labor or materials, or other
cause beyond the control of Landlord, Landlord shall be relieved of its
obligation to make such repairs or restoration and Tenant shall be released
from its obligations under this Lease as of the end of said one (1) year period.
e. In the event that damage is due to any cause other than fire or other
peril covered by extended coverage insurance, Landlord may elect to terminate
this Lease.
f. It is hereby understood that if Landlord is obligated to or elects to
repair or restore as herein provided, Landlord shall be obligated to make repair
or restoration only to those portions of the Building and the Premises which
were originally provided at Landlord's expense, and the repair and restoration
of items not provided at Landlord's expense shall be the obligation of Tenant.
g. Notwithstanding anything to the contrary contained in Paragraph 21,
Landlord shall not have any obligation whatsoever to repair, reconstruct or
restore the Premises when the damage resulting from any casualty covered under
this Paragraph 23 occurs during the last twelve (12) months of the Term of this
Lease or any extension hereof. In the event Landlord exercises its rights
hereunder, the lease shall terminate effective as of the date of the casualty.
24. EMINENT DOMAIN. In the case the whole of the Premises, or such part thereof
as shall substantially interfere with Tenant's use and occupancy thereof, shall
be taken for any public or quasi-public purpose by any lawful power or authority
by exercise of the right of appropriation, condemnation or eminent domain, or
sold to prevent such taking, either party shall have the right to terminate this
Lease effective as of the date possession is required to be surrendered to said
authority. Tenant shall not assert any claim against Landlord or the taking
authority for any compensation because of such taking, and Landlord shall be
entitled to receive the entire amount of the award without deduction for any
estate or interest or Tenant, and Landlord, at its option, may terminate this
Lease. If Landlord does not so elect, Landlord shall promptly proceed to restore
the premises to substantially the same condition prior to such partial taking,
and a proportionate allowance shall be made to Tenant of the Rent
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corresponding to the time during which, and to the part of the Premises of
which, Tenant shall be so deprived on account of such taking and restoration.
Nothing contained in this Paragraph 24 shall be deemed to give Landlord any
interest in any award made to Tenant for the taking of personal property and
fixtures belonging to Tenant.
25. DEFAULTS AND REMEDIES.
a. The occurrence or any one or more of the following events shall
constitute a default hereunder by Tenant:
(i) The vacation or abandonment of the premises by Tenant.
Abandonment is herein defined to include, but is not limited to, any absence
from the Premises for five (5) business days or longer while in default of any
provision of this Lease.
(ii) The failure by Tenant to make any payment of Rent or
Additional Rent or any other payment required to be made by Tenant hereunder,
as and when due, where such failure shall continue for a period of three (3)
days after written notice thereof from Landlord to Tenant.
(iii) The failure by Tenant to observe or perform any of the
express or implied covenants or provisions of this Lease to be observed or
performed by Tenant, other than as specified in Subparagraph 25.1.a(i) or (ii)
above where such failure shall continue for a period of ten (10) days after
written notice thereof from Landlord to Tenant; provided, however, that if the
nature of Tenant's default is such that more than ten (10) days are
reasonably required for its cure, then Tenant shall not be deemed to be in
default if Tenant shall commence such cure within said ten (10) day period and
thereafter diligently prosecute such cure to completion, which completion shall
occur not later than sixty (60) days from the date of such notice from Landlord.
(iv) The making by Tenant of any general assignment for the
benefit of creditors.
(v) The filing by or against Tenant of a petition to have
Tenant adjudged as bankrupt or a petition for reorganization or arrangement
under any law relating to bankruptcy (unless, in the case of a petition filed
against Tenant, the same is dismissed within sixty (60) days).
(vi) The appointment of a trustee or receiver to take
possession of substantially all of Tenant's assets located at the Premises or
of Tenant's interest in this Lease where possession is not restored to Tenant
within thirty (30) days.
(vii) The attachment, execution or other judicial seizure of
substantially all of Tenant's assets located at the Premises or of Tenant's
interest in this Lease where such seizure is not discharged within thirty (30)
days.
b. In the event of any such default by Tenant, in addition to any other
remedies available to Landlord at law or in equity, Landlord shall have the
immediate option to terminate this Lease and all rights of Tenant hereunder. In
the event that Landlord shall elect to do so terminate this lease then Landlord
may recover from Tenant:
(i) the worth at the time of award of any unpaid Rent which had
been earned at the time of such termination; plus
(ii) the worth at the time of award of the amount by which the
unpaid Rent which would have been earned after termination until the time of
award exceeds the amount of such Rent loss that Tenant proves could have been
reasonably avoided; plus
(iii) the worth at the time of award of the amount by which the
unpaid Rent for the balance of the Term after the time of award exceeds the
amount of such Rent loss that Tenant proves could be reasonably avoided; plus
(iv) any other amount necessary to compensate Landlord for all
the detriment proximately caused by Tenant's failure to perform its obligations
under this Lease or which in the ordinary course of things would be likely to
result therefrom.
As used in Subparagraphs 25.b(i) and (ii), the "worth at the time of
award" is computed by allowing interest at the lesser of eighteen per cent
(18%) per annum, compounded monthly, or the maximum rate permitted by law per
annum. As used in subparagraph 25.b(iii), the "worth at the time of award" is
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of award plus one percent (1%).
c. In the event of any such default by Tenant, Landlord shall also have
the right, with or without terminating this Lease, to re-enter the Premises and
remove all persons and property from the Premises; such property may be removed
and stored in a public warehouse or elsewhere at the cost of and for the
account of Tenant. No re-entry or taking possession of the Premises by Landlord
pursuant to this Subparagraph 25.c. shall be construed as an election to
terminate this Lease unless a written notice of such intention be given to
Tenant or unless the termination thereof be decreed by a court or competent
jurisdiction.
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d. All rights, options and remedies of Landlord contained in this Lease
shall be construed and held to be cumulative, and no one of them shall be
exclusive of the other, and Landlord shall have the right to pursue any one or
all of such remedies or any other remedy or relief which may be provided by
law, whether or not stated in this Lease. No waiver of any default of Tenant
hereunder shall be implied from any acceptance by Landlord of any Rent or other
payment due hereunder or any omission by Landlord to take any action on account
of such default if such default persists or is repeated, and no express waiver
shall affect defaults other than as specified in said waiver. The consent or
approval of Landlord to or of any act by Tenant requiring Landlord's consent or
approval shall not be deemed to waive or render unnecessary Landlord's consent
or approval to or of any subsequent similar acts by Tenant.
26. ASSIGNMENT AND SUBLETTING.
a. Tenant shall not, either voluntarily or by operation of law, assign,
sell, hypothecate or transfer this Lease, or sublet the Premises or any part
thereof, or permit or suffer the Premises or any part thereof to be used or
occupied as work space, storage space, mail drop, concession or otherwise, by
anyone other than Tenant or Tenant's employees without the prior written
consent of Landlord in each instance. In the event Tenant desires to assign,
hypothecate or otherwise transfer this Lease or sublet the Premises, then at
least thirty (30) days prior to the date when Tenant desires the assignment to
sublease to be effective (the "Assignment Date"), Tenant shall give Landlord a
notice (the "Assignment Notice"), which shall set forth the name, address and
business of the proposed assignee or sublessee, information (including
references) concerning the character, ownership, and financial condition of the
proposed assignee or sublessee, the Assignment Date, any ownership or
commercial relationship between Tenant and the proposed assignee or sublessee,
and the consideration and all other material terms and conditions of the
proposed assignment or sublease, all in such detail as Landlord shall
reasonably require. If Landlord requests additional detail, the Assignment
Notice shall not be deemed to have been received until Landlord receives such
additional detail, and Landlord may withhold consent to any assignment or
sublease until such information is provided to it. Any sale, assignment,
hypothecation or transfer of this Lease or subletting of the Premises that is
not in compliance with the provisions of this Subparagraph 26.a. shall be void
and shall, at the option of Landlord, terminate this Lease. The consent by
Landlord to any assignment or subletting shall not be construed as relieving
Tenant or any assignee of this Lease or sublessee of the Premises from
obtaining the express written consent of Landlord to any further assignment of
subletting or as releasing Tenant or any assignee or sublessee of Tenant from
any liability or obligation hereunder whether or not then accrued. In the event
Landlord shall consent to an assignment or sublease, Tenant shall pay Landlord
as Additional Rent a reasonable attorneys' and administrative fee not to exceed
$500.00 for costs incurred in connection with evaluating the Assignment Notice.
This Subparagraph 26.a. shall be fully applicable to all further sales,
hypothecations, transfers, assignments and subleases of any portion of the
Premises by any successor or assignee of Tenant, or any sublessee of the
Premises.
b. Landlord may, in its absolute discretion, withhold consent to any
assignment, sale, hypothecation or transfer of this Lease for any reason
whatsoever. As used in this Paragraph 26, the subletting of substantially all
of the Premises for substantially all of the remaining Term of this Lease
shall be deemed an assignment rather than a sublease. Notwithstanding the
foregoing, Landlord shall consent to the assignment, sale or transfer if the
assignment Notice states that Tenant desires to assign this Lease to any entity
into which Tenant is merged, with which Tenant is consolidated or which
acquires all of substantially all of the assets of Tenant, provided that the
assignee first executes, acknowledges and delivers to Landlord an agreement
whereby the assignee agrees to be bound by all of the covenants and agreements
in this Lease which Tenant has agreed to keep, observe or perform, that the
assignee agrees that the provisions of this Paragraph 26 shall be binding upon
it as if it were the original Tenant hereunder and that the assignee shall have
a net worth (determined in accordance with generally accepted accounting
principles consistently applied) immediately after such assignment which is at
least equal to the net worth (as so determined) of Tenant immediately prior to
the assignment.
c. Except as provided above, Landlord's consent to any sublease shall not
be unreasonably withheld. If Tenant shall sublet all or any portion of the
Premises that Tenant has occupied for its own use at any time, then any
consideration paid by the sublessee for the portion of the Premises being
sublet that previously was occupied by Tenant that exceeds the Annual Basic
Rent and Rental Adjustments provided by this Lease for such portion of the
Premises being sublet shall be due, owing and payable by Tenant to Landlord
when paid or owing by the sublessee under the sublease. Should the
consideration paid by the sublessee exceed the rental amounts stated above,
Tenant shall be entitled to reimbursement for Leasing Commissions or
Landlord-approved Tenant Improvements Tenant paid to procure the sublease,
amortized in equal, non-interest bearing, monthly installments over the term of
the sublease. The parties intend that the preceding sentences shall not apply
to any sublease rentals respecting a portion of the Premises that during the
entire Term of this Lease was not occupied by Tenant for its own use, but was
always subleased by Tenant and/or kept vacant. For the purpose of this
Subparagraph 26.c., the rent for each square foot of floor space in the
Premises shall be deemed equal.
27. SUBORDINATION. Without the necessity of any additional document being
executed by Tenant for the purpose of effecting a subordination, and at the
election of Landlord or any first mortgagee with a lien on the Building or any
ground lessor with respect to the building, this Lease shall be subject and
subordinate at all times to:
a. all ground leases or underlying leases which may now exist or hereafter
be executed affecting the Building or the land upon which the Building is
situated or both, and
b. the lien of any mortgage or deed of trust which may now exist or
hereafter be executed in any amount for which the Building, land, ground leases
or underlying leases, or Landlord's interest or estate in any of said items is
specified as security.
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<PAGE> 15
Notwithstanding the foregoing, Landlord shall have the right to
subordinate or cause to be subordinated any such ground leases or underlying
leases or any such liens to this Lease. In the event that any ground lease or
underlying lease terminates for any reason or any mortgage or deed of trust is
foreclosed or a conveyance in lieu of foreclosure is made for any reason,
Tenant shall, notwithstanding any subordination, attorn to and become the
Tenant of the successor in interest to Landlord, at the option of said
successor in interest. Tenant covenants and agrees to execute and deliver, upon
demand by Landlord and in the form requested by Landlord, any additional
documents evidencing the priority or subordination of this Lease with respect
to any such ground leases or underlying leases or the lien of any such mortgage
or deed of trust and hereby irrevocably appoints Landlord as attorney-in-fact
of Tenant to execute, deliver and record any such document in the name and on
behalf of Tenant.
28. ESTOPPEL CERTIFICATE.
a. Within ten (10) days following any written request which Landlord
may make from time to time, Tenant shall execute and deliver to Landlord a
statement certifying: (i) the Commencement Date of this Lease; (ii) the fact
that this Lease is unmodified and in full force and effect (or, if there have
been modifications hereto, that this Lease is in full force and effect, and
stating the date and nature of such modifications); (iii) the date to which the
Rent and other sums payable under this Lease have been paid; (iv) that there
are no current defaults under this Lease by either Landlord or Tenant except as
specified in Tenant's statement; and (v) such other matters requested by
Landlord. Landlord and Tenant intend that any statement delivered pursuant to
this Paragraph 28 may be relied upon by any mortgages, beneficiary, purchaser,
or prospective purchaser of the Building, property or any interest therein.
b. Tenant's failure to deliver such statement within such time shall be
conclusive upon Tenant: (i) that this Lease is in full force and effect,
without modification except as may be represented by Landlord, (ii) that there
are no uncured defaults in Landlord's performance, and (iii) that not more than
one (1) month's Rent has been paid in advance.
29. BUILDING PLANNING - Deleted.
30. RULES AND REGULATIONS. Tenant shall faithfully observe and comply with the
"Rules and Regulations", a copy of which is attached hereto and marked Exhibit
"C", and all reasonable and nondiscriminatory modifications thereof and
additions thereto from time to time put into effect by Landlord. Landlord shall
not be responsible to Tenant for the violation or non-performance by any other
tenant or occupant of the Building of any of said Rules and Regulations.
31. GOVERNING LAW. This Lease shall be governed by and construed pursuant to
the laws of the State of Washington.
32. SUCCESSORS AND ASSIGNS. Except as otherwise provided in this Lease, all of
the covenants, conditions and provisions of this Lease shall be binding upon
and shall insure to the benefit of the parties hereto and their respective
heirs, personal representatives, successors and assigns.
33. SURRENDER OF PREMISES. The voluntary or other surrender of this Lease by
Tenant, or a mutual cancellation thereof, shall not work a merger, and shall,
at the option of Landlord, operate as an assignment to it of any or all
subleases or subtenancies.
34. ATTORNEY'S FEES.
a. In the event that Landlord should bring suit for the possession of
the Premises, for the recovery of any sum due under this Lease, or because of
the breach of any provision of this Lease, or for any other relief against
Tenant hereunder, then all costs and expenses, including reasonable attorney's
fees, incurred by the prevailing party therein shall be paid by the other
party, which obligation on the part of the other party shall be deemed to have
accrued on the date of the commencement of such action and shall be enforceable
whether or not the action is prosecuted to judgment.
b. Should Landlord be named as a defendant in any suit brought against
Tenant in connection with or arising out of Tenant's occupancy hereunder,
Tenant shall pay to Landlord its costs and expenses incurred in such suit,
including reasonable attorney's fees.
35. PERFORMANCE BY TENANT. All covenants and agreements to be performed by
Tenant under any of the terms of this Lease shall be performed by Tenant at
Tenant's sole cost and expense and without any abatement of rent. If Tenant
shall fail to pay any sum of money, other than Annual Basic rent, required to
be paid by it hereunder or shall fail to perform any other act on its part to
be performed hereunder, and such failure shall continue for ten (10) days after
notice thereof by Landlord, Landlord may, without waiving or releasing Tenant
from obligations of Tenant, but shall not be obligated to, make any such
payment or perform any such other act on Tenant's part to be made or performed
as in this Lease provided all sums so paid by Landlord and all necessary
incidental costs together with interest thereon at the maximum rate permissible
by law, from the date of such payment by Landlord, shall be payable to Landlord
on demand. Tenant covenants to pay any such sums, and Landlord shall have (in
addition to any other right or remedy of Landlord) the same rights and remedies
in the event of the non-payment thereof by Tenant as in the case of default by
Tenant in the payment of the Annual Basic Rent.
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<PAGE> 16
36. MORTGAGE PROTECTION. In the event of any default on the part of Landlord,
Tenant will give notice by registered or certified mail to any beneficiary of a
deed of trust or mortgage covering the Premises whose address shall have been
furnished to Tenant, and shall offer such beneficiary or mortgagee a reasonable
opportunity to cure the default, including the time to obtain possession of the
Premises by power of sale or a judicial foreclosure, if such should prove
necessary to effect a cure.
37. DEFINITION OF LANDLORD. The term "Landlord" as used in this Lease, so far
as covenants or obligations on the part of Landlord are concerned, shall be
limited to mean and include only the owner or owners, at the time in question,
of the fee title of the Premises or the Lessees under any ground lease, if any.
In the event of any transfer, assignment or other conveyance or transfers of
any such title, Landlord herein named (and in the case of any subsequent
transfers or conveyances, the then grantor) shall be automatically freed and
relieved from and after the date of such transfer, assignment or conveyance of
all liability as respects the performance of any covenants or obligations on
the part of Landlord contained in this lease thereafter to be performed.
Without further agreement, the transferee of such title shall be deemed to have
assumed and agreed to observe and perform any and all obligations of Landlord
thereunder, during its ownership to the Premises. Landlord may transfer its
interest in the Premises without the consent of Tenant and such transfer or
subsequent transfer shall not be deemed a violation on Landlord's part of any
of the terms and conditions of this Lease.
38. WAIVER. The waiver by Landlord of any breach of any term, covenant or
condition herein contained shall not be deemed to be a waiver of any subsequent
breach of the same or any other term, covenant or condition herein contained,
nor shall any custom or practice which may grow up between the parties in the
administration of the terms hereof be deemed a waiver of or in any way affect
the rights of Landlord to insist upon the performance by Tenant in strict
accordance with said terms. The subsequent acceptance of Rent hereunder by
Landlord shall not be deemed to be a waiver of any preceding breach by Tenant
of any term, covenant or condition of this Lease, other than the failure of
Tenant to pay the particular Rent so accepted, regardless of Landlord's
knowledge of such preceding breach at the time of acceptance of such Rent.
39. IDENTIFICATION OF TENANT. If more than one person executes this Lease as
Tenant:
a. each of them is jointly and severally liable for the keeping,
observing and performing of all of the terms, covenants, conditions, provisions
and agreements of this Lease to be kept, observed and performed by Tenant; and
b. the term "Tenant" as used in this Lease shall mean and include each
of them jointly and severally.
The act of or notice from, or notice or refund to, or the signature of
any one or more of them, with respect to the tenancy of this Lease, including,
but not limited to, any renewal, extensions, expiration, termination or
modification of this Lease, shall be binding upon each and all of the persons
executing this Lease as Tenant with the same force and effect as if each and
all of them has so acted or so given or received such notice or refund or so
signed.
40. PARKING. As an appurtenance to the Premises, Tenant is entitled to use the
number of parking spaces in the parking facilities of the Building designated
in Subparagraph 1.o. Tenant may use such parking spaces upon the terms and
conditions provided in the Parking Rules attached hereto as Exhibit "E", if
any, and all reasonable and nondiscriminatory modifications thereto from time
to time put into effect by Landlord. Landlord may contract with a Parking
Operator to operate the parking facilities. Landlord and the Parking Operator
shall not be responsible for the violation or nonperformance by any other
tenant or any agent, employee or invitee thereof of any of said terms and
conditions. Tenant shall pay to Landlord, as and when billed and as Additional
Rent, the amount per space designated in Paragraph 1.o., if any, times the
number of spaces shown there, or such other nondiscriminatory charges for
monthly parking set forth from time to time by Landlord.
41. TERMS AND HEADINGS. The words "Landlord" and "Tenant" as used herein shall
include the plural as well as the singular. Words used in any gender includes
other genders. The paragraph headings of this Lease are not a part of this
Lease and shall have no effect upon the construction or interpretation of any
part hereof.
42. EXAMINATION OF LEASE. Submission of this instrument for examination or
signature by Tenant does not constitute a reservation of or option for lease,
and is not effective as a lease or otherwise until execution by and delivery to
both Landlord and Tenant.
43. TIME. Time is of the essence with respect to the performance of every
provision of this Lease in which time or performance is a factor.
44. PRIOR AGREEMENT; AMENDMENTS. This Lease contains all of the agreements of
the parties hereto with respect to any matter covered or mentioned in this
Lease, and no prior agreement or understanding pertaining to any such matter
shall be effective for any purpose. No provisions of this Lease may be amended
or added to except by an agreement in writing signed by the parties hereto or
their respective successors in interest.
45. SEPARABILITY. Any provision of this lease which shall prove to be invalid,
void or illegal in no way affect, impairs or invalidates any other provision
hereof, and such other provisions shall remain in full force and effect.
46. RECORDING. Neither Landlord or Tenant shall record this Lease nor a short
form memorandum thereof without the consent of the other.
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<PAGE> 17
47. LIMITATION ON LIABILITY. In consideration of the benefits accruing
hereunder, Tenant and all successors and assigns covenant and agree that, in
the event of any actual or alleged failure, breach or default hereunder by
Landlord:
a. The sole and exclusive remedy shall be against Landlord's interest in
the Building;
b. No partner of Landlord shall be sued or named as a party in any suit or
action (except as may be necessary to secure jurisdiction of the partnership);
c. No service or process shall be made against any partner of Landlord
(except as may be necessary to secure jurisdiction of the partnership);
d. No partner of Landlord shall be required to answer or otherwise plead
to any service of process;
e. No judgment will be taken against any partner of Landlord;
f. Any judgment taken against any partner of Landlord may be vacated and
set aside at any time nunc pro tunc;
g. No writ of execution will ever be levied against the assets of any
partner of Landlord;
h. These covenants and agreements are enforceable both by Landlord and
also by any partner of Landlord.
48. RIDERS. Clauses, plats and riders, if any, signed by Landlord and Tenant
and affixed to this Lease are a part hereof.
49. MODIFICATION FOR LENDER. If, in connection with obtaining permanent
financing for the Building, the lender shall request reasonable modifications
to this Lease as a condition to such financing, Tenant will not unreasonably
withhold, delay or defer its consent thereto, provided that such modifications
do not increase the obligations of Tenant hereunder or materially adversely
affect the leasehold interest hereby created or Tenant's rights hereunder.
50. ACCORD AND SATISFACTION. No payment by Tenant or receipt by Landlord of a
lesser amount than the Rent payment herein stipulated shall be deemed to be
other than on account of the Rent, nor shall any endorsement or statement on
any check or any letter accompanying any check or payment as Rent be deemed an
accord and satisfaction, and Landlord's right to recover the balance of such
Rent or pursue any other remedy provided in this Lease.
Tenant agrees that each of the foregoing covenants and agreements shall be
applicable to any covenant or agreement either expressly contained in this
Lease or imposed by any statute or a common law.
IN WITNESS WHEREOF, the parties have executed the Lease as of the date
first above written.
LANDLORD: TENANT:
IXION
____________________________________
CVK PARTNERSHIP, a Washington Partnership Tenants Name, a Delaware Corporation
by SEAVEST FINANCIAL CORPORATION
a Washington Corporation,
General Partner by:_________________________________
by___________________________________ David Hon, President
____________________________________
Name, Title
Paul Krug, President
_____________________________________
Name, Title
16
<PAGE> 18
THE 400 MERCER BUILDING
EXHIBIT "A"
Floor Plan
[EXHIBIT "A" Floor Plan]
EXHIBIT "A-1"
Legal Description
Lots 7 and 8 in Block 37 of Mercer's Second Addition to the City of Seattle, as
per Plat recorded in Volume 2 of Plats, Page 7, Records of King County;
Except the East 8 feet thereof for alley;
Together with that portion of vacated 4th Avenue No. adjoining, which, upon
vacation, attached to said property by operation of law, pursuant to Ordinance
No. 115005, recorded under King County Recording No. 9004182002;
Situated in the City of Seattle, County of King, State of Washington.
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THE 400 MERCER BUILDING
EXHIBIT "B"
Work Letter Agreement
Ladies and Gentlemen:
You (hereinafter called "Tenant") and we (hereinafter called "Landlord") are
executing simultaneously with this Work Letter Agreement, a written lease (the
"Lease") covering those certain premises more particularly described in Exhibit
"A" to the Lease, (hereinafter referred to as the "Premises") in the building
addressed at 400 Mercer St., Seattle, Washington 98109.
To induce Tenant to enter into the Lease (which is hereby incorporated by
reference to the extent that the provisions of this Agreement may apply
thereto) and in consideration of the mutual covenants hereinafter contained,
Landlord and Tenant mutually agree as follows:
1. TENANT'S PLANS AND SPECIFICATIONS.
a. Except to the extent otherwise provided in Subparagraph 1.b. and
1.c., Landlord agrees that, at its sole cost and expense, through its architect
or space planner, Landlord will furnish all architectural, mechanical and
electrical engineering plans required for the performance of the work
(hereinafter referred to as "Building Standard Work", Exhibit "B-1")
hereinbelow described, including complete detailed plans and specifications for
Tenant's partition layout, reflected ceiling, heating and air conditioning,
electrical outlets and switches and telephone outlets.
b. It is understood and agreed that Tenant may require work
(hereinafter referred to as "Building Nonstandard Work") different from or in
addition to the Building Standard Work. In such event, any architectural,
mechanical, electrical and plumbing plans and specifications required shall be
furnished, at Tenant's sole cost and expense, by Landlord's architect or
space planner.
c. It is understood and agreed that any interior decorating service,
such as selection of wall paint colors and/or wall coverings, fixtures,
carpeting, and any or all other decorator items required by Tenant in the
performance of said work referred to hereinabove in Subparagraphs 1.a. and 1.b.
shall be at Tenant's sole cost and expense.
d. It is understood and agreed that all plans and specifications
referred to hereinabove Subparagraphs 1.a. and 1.b. are subject to Landlord's
approval, which Landlord agrees shall not be unreasonably withheld.
2. BUILDING STANDARD WORK AT LANDLORD'S COST AND EXPENSE.
Landlord agrees, at its sole cost and expense to furnish and install
all of the following "Building Standard Work" limited to the quantities and/or
dollar amount specified on the attached Exhibit "B-1", and as selected and
specified by Landlord and as indicated on Tenant's final approved plans.
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<PAGE> 20
3. BUILDING NONSTANDARD WORK AT TENANT'S COST AND EXPENSE.
Provided Tenant's plans and specifications are furnished by the date
required hereinabove in Subparagraph 1.c., Landlord shall cause Tenant's
"Building Nonstandard Work" to be installed by Landlord's contractor, but at
Tenant's sole cost and expense. Prior to commencing any such work, Landlord,
its contractor, or its architects shall submit to Tenant a written estimate of
the cost thereof. If Tenant fails to provide to Landlord written notice of its
approval of such costs within five (5) days after submission thereto to Tenant,
such failure shall be deemed a disapproval thereof, and Landlord's contractor
shall not proceed with such work.
4. SUBSTITUTION AND CREDITS.
Tenant may, with Landlord's approval and provided that Landlord has not
previously purchased said material, select different new materials (except
window coverings) in place of "Building Standard Work" materials which would
otherwise be initially furnished and installed by Landlord for or in the
interior of the Premises under the provisions of this Work Letter Agreement,
provided such selection is indicated on said Tenant's final plans. If Tenant
shall make any such selection and if the cost of such different new materials
of Tenant's selection shall exceed Landlord's cost of the "Building Standard
Work" materials thereby replaced, Tenant shall pay to Landlord, as hereinafter
provided, the difference between the cost of such different new materials and
the credit given by Landlord for the materials thereby replaced.
No such different new materials shall be furnished and installed in
replacement for any of Landlord's "Building Standard Work" materials until
Landlord or its contractor and/or its architect or space planner shall have
advised Tenant in writing of, and Landlord or this contractor and/or its
architect or space planner have agreed in writing on, the cost of such
different materials and Landlord's cost of such replaced Landlord's "Building
Standard Work" materials.
One hundred percent (100%) of all amounts payable by Tenant to Landlord
pursuant to Paragraphs 3. and 4. of this Work Letter Agreement shall be paid by
Tenant upon Tenant's execution of the written estimate for the work required.
5. COMPLETION AND RENTAL COMMENCEMENT DATE.
It is agreed that Tenant's obligation for the payment of rent under the
Lease shall not commence until Landlord has substantially completed all work to
be performed by Landlord as hereinabove set forth in Paragraphs 2. and 3.;
provided, however, that if Landlord shall be delayed in substantially
completing said work as a result of:
a. Tenant's failure to furnish plans and specifications in accordance
with the date specified hereinabove in Subparagraph 1.c.; or
b. Tenant's request for materials, finishes or installations other than
Landlord's "Building Standard Work"; or
c. Tenant's changes in the said plans and specifications after their
submission to Landlord in accordance with the provisions of Subparagraph 1.c.
hereinabove; or
d. Tenant's failure to approve estimates pursuant to Paragraph 3.
hereinabove covering "Building Nonstandard Work"; then the commencement of the
term of said lease shall be accelerated by the number of days of such delay.
If the foregoing correctly sets forth our understanding, kindly sign
copies of this Work Letter Agreement where indicated.
LANDLORD: TENANT:
CVK PARTNERSHIP, IXION
a Washington Partnership Tenant's Name, a Delaware Corporation
by SEAVEST FINANCIAL CORPORATION
a Washington Corporation, General Partner
by: by:
---------------------------------- ----------------------------------
Paul Krug, President David Hon, President
---------------------------------- ----------------------------------
Name, Title Name, Title
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THE 400 MERCER BUILDING
EXHIBIT "B-1"
Building Standard Work
Landlord shall clean all carpets. Landlord shall provide building standard
signage. Landlord shall construct and paint new demising wall within twenty one
(21) days of tenant's occupancy. This work shall be at Landlord's sole cost.
All Tenant Improvements shall utilize building standard materials unless
specified in writing by the Tenant and agreed to by the Landlord. Landlord will
use its best efforts to expedite the construction process and minimize the
disruption to Tenant's business activity. Tenant agrees to cooperate, as is
reasonable, with Landlord in completing the required Tenant Improvements.
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THE 400 MERCER BUILDING
EXHIBIT "C"
Rules and Regulations
1. No sign, placard, picture, name or notice shall be installed or displayed
on any part of the outside or inside of the Building without the prior
written consent of Landlord. Landlord shall have the right to remove, at
Tenant's expense and without notice, any sign installed or displayed in
violation of this rule. All approved signs or lettering on doors and walls
shall be printed, painted, affixed or inscribed at the expense of Tenant
by a person chosen by Landlord.
2. If Landlord objects in writing to any curtain, blinds, shades, screens or
hanging plants or other similar objects attached to or used in connection
with any window or door of the premises, Tenant shall immediately
discontinue such use. No awning shall be permitted on any part of the
Premises. Tenant shall not place anything against or near glass partitions
or doors or windows which may appear unsightly from outside the Premises.
3. Tenant shall not obstruct any sidewalk, halls, passages, exits, entrances,
elevators, escalators and stairways of the Building. The halls, passages,
exits, entrances, elevators, escalators and stairways are not open to the
general public. Landlord shall in all cases retain the right to control and
prevent access thereto of all persons whose presence in the judgment of
Landlord would be prejudicial to the safety, character, reputation and
interest of the Building and its tenants; provided that nothing herein
contained shall be construed to prevent such access to persons with whom
any tenant normally deals in the ordinary course of its business, unless
such persons are engaged in illegal activities. No tenant and no employee
or invitee of any tenant shall go upon the roof of the Building.
4. The directory of the Building will be provided exclusively for the display
of the name and location of Tenants only, and Landlord reserves the right
to exclude any other names therefrom.
5. All cleaning and janitorial services for the Building and the Premises
shall be provided exclusively through Landlord, and except with the
written consent of Landlord, no person or persons other than those
approved by Landlord shall be employed by Tenant or permitted to enter
the Building for the purpose of cleaning the same. Tenant shall not
cause any unnecessary labor by carelessness or indifference to the good
order and cleanliness of the Premises. Landlord shall not in any way be
responsible to any Tenant for any loss of property on the Premises,
however occurring, or for any damage to any Tenant's property by the
janitor or any other employee or any other person.
6. Landlord will furnish to Tenant, free of charge, two keys to each door lock
in the Premises. Landlord may make a reasonable charge for any additional
keys. Tenant shall not make or have made additional keys, and Tenant shall
not alter any lock or install a new additional lock or bolt on any door of
its Premises. Tenant, upon termination of its tenancy, shall deliver to
Landlord the keys of all doors which have been furnished to Tenant, and in
the event of loss of any key so furnished, shall pay Landlord therefor.
7. If Tenant requires telegraphic, telephonic, burglar alarm or similar
services, it shall first obtain, and comply with, Landlord's instructions
in their installation.
8. Any freight elevator shall be available for use by all tenants in the
Building, subject to such reasonable scheduling as Landlord in its
discretion shall deem appropriate. No equipment, materials, packages,
supplies, merchandise or other property will be received in the Building
or carried in the elevators except between such hours and in such elevators
as may be designated by Landlord.
9. Tenant shall not place a load on any floor of the Premises which exceeds
the load per square foot which such floor was designed to carry and which
is allowed by law. Landlord shall have the right to prescribe the weight,
size and position of all equipment, materials, furniture or other property
brought into the building. Heavy objects shall, if considered necessary by
Landlord, stand on such platforms as determined by Landlord to be necessary
to properly distribute the weight. Business machines and mechanical
equipment belonging to Tenant, which cause noise or vibration that may be
transmitted to the structure of the Building or to any space therein to
any tenants in the Building, shall be placed and maintained by Tenant, at
Tenant's expense, on vibration eliminators or other devices sufficient to
eliminate noise or vibration. The persons employed to move such equipment
in or out of the Building must be acceptable to Landlord. Landlord will not
be responsible for loss of, or damage to, any such equipment or other
property from any cause, and all damage done to the Building by maintaining
or moving such equipment or other property shall be repaired at the expense
to Tenant.
10. Tenant shall not use or keep in the Premises any kerosene, gasoline or
inflammable or combustible fluid or material other than those limited
quantities necessary for the operation or maintenance of office
equipment. Tenant shall not use or permit to be used in the Premises any
foul or noxious gas or substance, or permit or allow the premises to be
occupied or used in a manner offensive or objectionable to Landlord or
other
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occupants of the Building by reason of noise, odors or vibrations, nor
shall Tenant bring into or keep in or about the Premises any birds or
animals.
11. Tenant shall not use any method of heating or air conditioning other than
that supplied by Landlord.
12. Tenant shall not waste electricity, water or air conditioning and agrees to
cooperate fully with Landlord to assure the most effective operation of the
Building's heating and air conditioning and to comply with any government
energy-saving rules, laws or regulations of which Tenant has actual notice,
and shall refrain from attempting to adjust controls. Tenant shall keep
corridor doors closed, and shall close window coverings at the end of each
business day.
13. Landlord reserves the right, exercisable without notice and without
liability to Tenant, to change the name and street address of the Building.
14. Landlord reserves the right to exclude from the Building between the hours
of 6 p.m. and 7 a.m. the following day, or such other hours as may be
established from time to time by Landlord, and on Sundays and legal
holidays, any person unless that person is known to the person or employee
in charge of the Building and has a pass or is properly identified. Tenant
shall be responsible for all persons for whom it requests passes and shall
be liable to Landlord for all acts of such persons. Landlord reserves the
right to prevent access to the Building in case of invasion, mob, riot,
public excitement or other commotion by closing the doors or by other
appropriate action.
15. Tenant shall close and lock the doors of its Premises and entirely shut off
all water faucets or other water apparatus, and electricity, gas or air
outlets before Tenant and its employees leave the Premises. Tenant shall be
responsible for any damage or injuries sustained by other tenants or
occupants of the Building or by Landlord for noncompliance with this rule.
16.
17. The toilet rooms, toilets, urinals, wash bowls and other apparatus shall
not be used for any purpose other than that for which they were
constructed and no foreign substance of any kind whatsoever shall be
thrown therein. The expense of any breakage, stoppage or damage resulting
from the violation of this rule shall be borne by the tenant who, or
whose employees or invitees, shall have caused it.
18. Tenant shall not sell, or permit the sale at retail, of newspapers,
magazines, periodicals, theater tickets or any other goods or merchandise
to the general public in or on the Premises. Tenant shall not make any
room-to-room solicitation of business from other tenants in the Building.
Tenant shall not use the Premises for any business or activity other than
that specifically provided for in Tenant's Lease.
19. Tenant shall not install any radio or television antenna, loudspeaker or
other device on the roof or exterior walls of the Building. Tenant shall
not interfere with radio or television broadcasting or reception from or in
the Building or elsewhere.
20. Tenant shall not mark, drive nails, screws or drill into the partitions,
woodwork or plaster or any way deface the Premises or any part thereof.
Landlord reserves the right to direct electricians as to where and how
telephone and telegraph wires are to be introduced to the Premises. Tenant
shall not cut or bore holes for wires. Tenant shall not affix any floor
covering to the floor of the Premises in any manner except as approved by
Landlord. Tenant shall repair any damage resulting from noncompliance with
this rule.
21. Tenant shall not install, maintain or operate upon the Premises any vending
machine without the written consent of Landlord.
22. Canvassing, soliciting and distribution of handbills or any other written
material, and peddling in the Building are prohibited, and each tenant
shall cooperate to prevent same.
23. Landlord reserves the right to exclude or expel from the Building any
person who, in Landlord's judgment, is intoxicated or under the influence
of liquor or drugs or who is in violation of the Rules and Regulations of
the Building.
24. Tenant shall store all its trash and garbage within its Premises. Tenant
shall not place in any trash box or receptacle any material which cannot be
disposed of in the ordinary and customary manner of trash and garbage
disposal. All garbage and refuse disposal shall be made in accordance with
directions issued from time to time by Landlord.
25. The Premises shall not be used for the storage of merchandise held for sale
to the general public, or for lodging or for manufacturing of any kind, nor
shall the Premises be used for any improper, immoral or objectionable
purpose. No cooking shall be done or permitted by any tenant on the
Premises except that use by Tenant of Underwriter's Laboratory approved
equipment for brewing coffee, tea, hot chocolate and similar beverages
shall be permitted, provided that such equipment and use is in accordance
with all applicable federal, state, county and city laws, codes,
ordinances, rules and regulations.
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26. Tenant shall not use in any space or in the public halls of the Building
any hand truck except those equipped with rubber tires and side guards or
such other material-handling equipment as Landlord may approve. Tenant
shall not bring any other vehicles of any kind into the Building.
27. Without the written consent of Landlord, Tenant shall not use the name of
the Building in connection with or in promoting or advertising the business
of Tenant except as Tenant's address.
28. Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by Landlord or any governmental
agency.
29. Tenant assumes any and all responsibility for protecting its Premises from
theft, robbery and pilferage, which includes keeping doors locked and other
means of entry to the Premises closed.
30. The requirements of Tenant will be attended to only upon appropriate
application to the office of the Building by an authorized individual.
Employees of Landlord shall not perform any work or do anything outside of
their regular duties unless under special instructions from Landlord, and
no employee of Landlord will admit any person (Tenant or otherwise) to any
office without specific instructions.
31. Tenant shall not park its vehicles in any parking areas designated by
Landlord as areas for parking by visitors to the Building. Tenant shall not
leave vehicles in the Building parking areas overnight nor park any
vehicles in the Building parking areas other than automobiles, motorcycles,
motor driven or non-motor driven bicycles or four-wheeled trucks.
32. Landlord may waive one or more of these Rules and Regulations for the
benefit of Tenant or any other tenant, but no such waiver by Landlord shall
be construed as a waiver of such Rules and Regulations against any or all
of the tenants in the Building.
33. These Rules and Regulations are in addition to, and shall not be construed
to in any way modify or amend, in whole or in part, the terms, covenants,
agreements and conditions of any lease of premises in the Building.
34. Landlord reserves the right to make such other and reasonable Rules and
Regulations as, in its judgment, may from time to time be needed for the
safety and security, for care and cleanliness of the Building and for the
preservation of good order therein. Tenant agrees to abide by all such
Rules and Regulations hereinabove stated and any additional rules and
regulations which are adopted.
35. Tenant shall be responsible for the observance of all to the foregoing
rules by Tenant's employees, agents, clients, customers, invitees and
guests.
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EXHIBIT D
STANDARDS FOR UTILITIES AND SERVICES
The following Standards for Utilities and Services are in effect. Landlord
reserves the right to adopt nondiscriminatory modifications and additions
hereto:
As long as Tenant is not in default under any of the terms, covenants,
conditions, provisions or agreements of this Lease, Landlord shall:
(a) Provide non-attended automatic elevator facilities Monday through
Friday, except holidays, from 3 A.M. to 6 P.M. and have one elevator available
at all other times.
(b) Ventilate the Premises and furnish air conditioning or heating as
may be required for the comfortable occupancy of the Premises. The air
conditioning system achieves maximum cooling when the window coverings are
closed. Landlord shall not be responsible for room temperatures if Tenant does
not keep all window covering in the Premises closed whenever the system is in
operation. Tenant agrees to cooperate fully at all times with Landlord, and to
abide by all regulations and requirements which Landlord may prescribe for the
proper function and protection of said air conditioning system. Tenant agrees
not to connect any apparatus, device, conduit or pipe to the Building chilled
and hot water air conditioning supply lines. Tenant further agrees that neither
Tenant nor its servants, employees, agents, visitors, licensees or contractors
shall at any time enter mechanical installations or facilities of the Building
or adjust, tamper with, touch or otherwise in any manner affect said
installations or facilities.
(c) Landlord shall furnish to the Premises, at all times, rather than
normal business hours on normal business days, electric current as required by
the Building standard office lighting and fractional horsepower office business
machines and computer equipment. Tenant agrees its electrical consumption
extends beyond normal business hours, and as such shall reimburse Landlord not
more than $300.00 monthly for the additional consumption. Tenant agrees not to
use any apparatus or device in, or upon, or about the Premises which may in any
way increase the amount of such services agreed to be furnished or supplied to
said Premises, and Tenant further agrees not to connect any apparatus or device
with wires, conduits or pipes, or other means by which such services are
supplied, for the purpose of using additional or unusual amounts of such
services without written consent of Landlord. Should Tenant use the same to
excess, the refusal on the part of Tenant to pay upon demand of Landlord the
amount established by Landlord for such excess charge shall constitute a breach
of the obligation to pay rent under this Lease and shall entitle Landlord to the
rights therein granted for such breach. At all times Tenant's use of electric
current shall never exceed the capacity of the feeders to the Building or the
risers or wiring installation and Tenant shall not install or use or permit the
installation or use of any computer or electronic data processing equipment in
the Premises without the prior written consent of Landlord.
(d) Water will be available in public areas for drinking and lavatory
purposes only, but if Tenant requires, uses or consumes water for any purposes
in addition to ordinary drinking and lavatory purposes of which fact Tenant
constitutes Landlord to be the sole judge, Landlord may install a water meter
and thereby measure Tenant's water consumption for all purposes. Tenant shall
pay Landlord for the cost of the meter and the cost of the installation thereof
and throughout the duration of Tenant's occupancy Tenant shall keep said meter
and installation equipment in good working order and repair at Tenant's own
cost and expense, in default of which Landlord may cause such meter and
equipment to be replaced or repaired and collect the cost thereof from Tenant.
Tenant agrees to pay for water consumed, as shown on said meter, as and when
bills are rendered, and on default in making such payment, Landlord may pay
such charges and collect the same from Tenant. Any such costs or expenses
incurred, or payments made by Landlord for any of the reasons or purposes
hereinabove stated shall be deemed to be additional rent payable by Tenant and
collectible by Landlord as such.
(e) Provide janitor service to the Premises, provided the same are
used, exclusively as offices, and are kept reasonably in order by Tenant, and
if to be kept clean by Tenant, no one other than persons approved by Landlord
shall be permitted to enter the Premises for such purposes. If the Premises are
not used exclusively as offices, they shall be kept clean and in order by
Tenant, at Tenant's expense, and to the satisfaction of Landlord, and by
persons approved by Landlord, Tenant shall pay to Landlord the cost of removal
of any of Tenant's refuse and rubbish usually attendant upon the use if the
Premises as offices.
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Landlord reserves the right to stop services of the elevator, plumbing,
ventilation, air conditioning and electric systems, when necessary, by reason
of accident or emergency or for repairs, alterations or improvements, in the
judgment of Landlord, desirable or necessary to be made, until said repairs,
alterations or improvements shall have been completed, and shall further have
no responsibility or liability for failure to supply elevator facilities,
plumbing, ventilating, air conditioning or electric service, when prevented
from so doing by strike or accident or by any cause beyond Landlord's
reasonable control, or by laws, rules, orders, ordinances, directions,
regulations or requirements of any federal, state, county or municipal
authority or failure of gas, oil or other suitable fuel supply or inability by
exercise of reasonable diligence to obtain gas, oil or other suitable fuel. It
is expressly understood and agreed that any covenants on Landlord's part to
furnish any service pursuant to any of the terms, covenant, conditions,
provisions or agreements of this Lease, or to perform any act or thing for the
benefit of Tenant, shall not be deemed breached if Landlord is unable to
furnish or perform the same by virtue of a strike or labor trouble or any other
cause whatsoever beyond Landlord's control. However, Landlord shall give Tenant
advance notice of interruption of electrical or HVAC service if such
interruption is caused by other than an accident or emergency.
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STATE OF WASHINGTON )
)ss
COUNTY OF KING )
On this ____ day of ____________________, 19__, before me personally appeared
Paul E. Krug, to me known to be the President of Seavest Financial Corporation,
General Partner of CVK Partnership, the partnership that executed the within and
foregoing instrument and acknowledged the same instrument to be the free and
voluntary act of said partnership, for the uses and purposes therein mentioned
and on oath stated that he is authorized to execute said instrument.
IN WITNESS WHEREOF I have hereunto set my hand and affixed my official seal,
the day and year first above written.
_________________________________________________
NOTARY PUBLIC in and for the State of __________.
Residing at:____________________________________.
STATE OF__________________)
)ss
COUNTY OF_________________)
On this day personally appeared before me __________________________ to me
known to be President of the corporation that executed the within and foregoing
instrument and acknowledged the said instrument to be the free and voluntary act
and deed of said corporation for the uses and purposes therein mentioned and on
oath stated that he was authorized to execute said instrument.
Given under my hand and official seal this ____ day of ___________________,
1996.
_________________________________________________
Notary Public in and for the
State of ______________________________, residing
at _____________________________________________.
My commission expires
________________________________________________.
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THE 400 MERCER BUILDING
ADDENDUM ONE TO LEASE
This Addendum to Lease is made with reference to the certain Lease dated January
29, 1996, between CVK Partnership, a Washington partnership, ("Landlord") and
IXION, a Delaware corporation, ("Tenant") for Premises located at 400 Mercer
Building, Suite 400, Seattle, Washington.
1. BASE RENT SCHEDULE.
February 1, 1996 - January 31, 1997 $4,587.52 per month ($13.00 per RSF)
February 1, 1997 - January 31, 1998 $4,764.38 per month ($13.50 per RSF)
February 1, 1998 - January 31, 1999 $4,940.83 per month ($14.00 per RSF)
2. OPTION TO EXTEND. Provided Tenant is not in default, Landlord hereby grants
to Tenant an option to extend the term of this Lease for an additional three
(3) year period. This option shall be exercised only by written notice
delivered to Landlord at least one hundred twenty (120) days prior to the
expiration of the initial term of this Lease. If Tenant fails to deliver to
Landlord written notice of the exercise of this option within the prescribed
time period, this option shall lapse and there shall be no further right to
extend the term of this Lease. The rent for the option period shall be the then
current market rate but in no event less than $4,940.83 per month.
3. OPTION TO LEASE CONTIGUOUS SPACE. Tenant shall have an option to lease all
vacant contiguous space subject to the pre-existing option in favor of Martens
Chan to expand into the 1,000 square feet contiguous to its premises. This
option shall be exercised, or not, within five (5) business days of Landlord's
notice to Tenant of a bona fide offer to lease said space. The terms of lease
for this option shall track the terms of this Lease.
4. OPTION FOR EARLY TERMINATION. Tenant shall have the right to terminate this
Lease upon the following terms and conditions:
A) Tenant shall give Landlord at least ninety (90) days prior written
notice of its intent to terminate this lease; provided, however, no such notice
shall be effective to terminate this lease prior to July 31, 1996; and
B) Tenant shall pay to Landlord Landlord's unamortized costs of this
Lease consisting of Landlord's Work and lease commissions. The amount to be
paid to Landlord shall be calculated by multiplying the sum of Landlord's Work
and lease commissions by a fraction the numerator of which is the number of
months which would have remained in the original term of this Lease but for
Tenant's early termination and the denominator is thirty six (36).
<PAGE> 1
Exhibit 10.13
<PAGE> 2
STANDARD FORM OF OFFICE LEASE 3/1/90
The Real Estate Board of New York, Inc.
Agreement of Lease, made as of this 15th day of March 1994, between
654 Madison Avenue Company c/o The Rolfe Group, Inc., Agent
party of the first part, hereinafter referred to as OWNER, and
Hydration Technology Corporation, presently located at 654 Madison Avenue
New York, N.Y.
party of the second part, hereinafter referred to as TENANT.
Witnesseth: Owner hereby leases to Tenant and Tenant hereby hires from Owner
Suite 1605
in the building known as 654 Madison Avenue
in the Borough of Manhattan, City of New York, for the term of six months
(or until such term shall sooner cease and expire as hereinafter provided) to
commence on the
1st day of May nineteen hundred and ninety four, and to end on the
31st day of October nineteen hundred and ninety four
both dates inclusive, at an annual rental rate of
$21,000
$1,750.00 per month
which Tenant agrees to pay in lawful money of the United States which shall be
legal tender in payment of all debts and dues, public and private, at the time
of payment, in equal monthly installments in advance on the first day of each
month during said term, at the office of Owner of such other place as Owner may
designate, without any set off or deduction whatsoever, except that Tenant
shall pay the first monthly installment(s) on the execution hereof
(unless this lease be a renewal).
In the event that, at the commencement of the term of this lease, or
thereafter, Tenant shall be in default in the payment of rent to Owner pursuant
to the terms of another lease with Owner or with Owner's predecessor in
interest, Owner may at Owner's option and without notice to Tenant add the
amount of such arrears to any monthly installment of rent payable hereunder and
the same shall be payable to Owner as additional rent.
The parties hereto, for themselves, their heirs, distributees,
executors, administrators, legal representatives, successors and assigns,
hereby convenant as follows:
RENT
1. Tenant shall pay the rent as above and as hereinafter provided
OCCUPANCY
2. Tenant shall use and occupy demised premises for Executive offices
and for no other purpose.
TENANT ALTERATIONS
3. Tenant shall make no changes in or to the demised premises of any
nature without Owner's prior written consent. Subject to the prior written
consent of Owner, and to the provisions of this article, Tenant at Tenant's
expense, may make alterations, installations, additions or improvements which
are non-structural and which do not affect utility services or plumbing and
electrical lines, in or to the interior of the demised premises by using
contractors or mechanics first approved by Owner. Tenant shall, before making
any alterations, additions, installations or improvements, at its expense,
obtain all permits, approvals and certificates required by any governmental or
quasi-governmental bodies and (upon completion) certificates of final approval
thereof and shall deliver promptly duplicates of all such permits, approvals
and certificates to Owner and Tenant agrees to carry and will cause Tenant's
contractors and sub-contractors to carry such workman's compensation, general
liability, personal and property damage insurance as Owner may require. If any
mechanic's lien is filed against the demised premises, or the building of which
the same forms a part, for work claimed to have been done for, or materials
furnished to, Tenant, whether or not done pursuant to this article, the same
shall be discharged by Tenant within thirty days thereafter, at Tenant's
expense, by filing the bond required by law. All fixtures and all paneling,
partitions, railings and like installations, installed in the premises at any
time, either by Tenant or by Owner in Tenant's behalf, shall, upon
installation, become the property of Owner and shall remain upon and be
surrendered with the demised premises unless Owner, by notice to Tenant no
later than twenty days prior to the date fixed as the termination of this
lease, elects to relinquish Owner's right thereto and to have them removed by
Tenant, in which event the same should be removed from the premises by Tenant
prior to the expiration of the lease, at Tenant's expense. Nothing in this
Article shall be construed to give Owner title to or to prevent Tenant's
removal of trade fixtures, moveable office furniture and equipment, but upon
removal of any such from the premises or upon removal of other installations as
may be required by Owner, Tenant shall immediately send at its expense, repair
and restore the premises to the condition existing prior to installation and
repair any damage to the demised premises or the building due to such removal.
All property permitted or required to be removed, by Tenant at the end of the
term remaining in the premises after Tenant's removal shall be deemed abandoned
and may, at the election of Owner, either be retained as Owner's property or
may be removed from the premises by Owner, at Tenant's expense.
MAINTENANCE AND REPAIRS
4. Tenant shall, throughout the term of this lease, take good care of
the demised premises and the fixtures and appurtenances therein. Tenant shall
be responsible for all damage or injury to the demised premises or any other
part of the building and the systems and equipment thereof; whether requiring
structural or nonstructural repairs caused by or resulting from carelessness,
omission, neglect or improper conduct of Tenant, Tenant's subtenants, agents,
employees, invitees or licensees, or which arise out of any work, labor,
service or equipment done for or supplied to Tenant or any subtenant or arising
out of the installation, use or operation of the property or equipment of
Tenant or any subtenant. Tenant shall also repair all damage to the building
and the demised premises caused by the moving of Tenant's fixtures, furniture
and equipment. Tenant shall promptly make, at Tenant's expense, all repairs in
and to the demised premises for which Tenant is responsible, using only the
contractor for the trade or trades in question, selected from a list of at least
two contractors per trade submitted by Owner. Any other repairs in or to the
building or the facilities and systems thereof for which Tenant is responsible
shall be performed by Owner at the Tenant's expense. Owner shall maintain in
good working order and repair the exterior and the structural portions of the
building, including the structural portions of its demised premises, and the
public portions of the building interior and the building plumbing, electrical,
heating and ventilating systems (to the extent such systems presently exist)
serving the demised premises. Tenant agrees to give prompt notice of any
defective condition in the premises for which Owner may be responsible
hereunder. There shall be no allowance to Tenant for diminution of rental value
and no liability on the part of Owner by reason of inconvenience, annoyance or
injury to business arising from Owner or others making repairs, alterations,
additions or improvements in or to any portion of the building or the demised
premises or in and to the fixtures, appurtenances or equipment thereof. It is
specifically agreed that Tenant shall not be entitled to any setoff or
reduction of rent by reason of any failure of Owner to comply with the
convenants of this or any other article of this Lease. Tenant agrees that
Tenant's sole remedy at law in such instance will be by way of an action for
damages for breach of contract. The provisions of this Article 4 shall not apply
in the case of fire or other casualty which are dealt with in Article 9 hereof.
WINDOW CLEANINGS
5. Tenant will not clean nor require, permit, suffer or allow any
window in the demised premises to be cleaned from the outside in violation of
Section 202 of the Labor Law or any other applicable law or of the Rules of the
Board of Standards and Appeals, or of any other Board or body having or
asserting jurisdiction.
REQUIREMENTS OF LAW, FIRE INSURANCE, FLOOR LOADS
6. Prior to the commencement of the lease term, if Tenant is then in
possession, and at all times thereafter, Tenant, at Tenant's sole cost and
expense, shall promptly comply with all present and future laws, orders and
regulations of all state, federal, municipal and local governments,
departments, commissions and boards and any direction of any public officer
pursuant to law, and all orders, rules and regulations of the New York Board of
Fire Underwriters, Insurance Services Office, or any similar body which shall
impose any violation, order or duty upon Owner or Tenant with respect to the
demised premises, whether or not arising out of Tenant's use or manner of use
thereof, (including Tenant's permitted use) or, with respect to the building if
arising out of Tenant's
<PAGE> 3
use or manner of use of the premises or the building (including the use
permitted under the lease). Nothing herein shall require Tenant to make
structural repairs or alterations unless Tenant has, by its manner of use of the
demised premises or method of operation therein, violated any such laws,
ordinances, orders, rules, regulations or requirements with respect thereto.
Tenant may, after securing Owner to Owner's satisfaction against all damages,
interest, penalties and expenses, including, but not limited to: reasonable
attorney's fees, by cash deposit or by surety bond in an amount and in a company
satisfactory to Owner, contest and appeal any such laws, ordinances, orders,
rules, regulations or requirements provided same is done with all reasonable
promptness and provided such appeal shall not subject Owner to prosecution for a
criminal offense or constitute a default under any lease or mortgage under which
Owner may be obligated, or cause the demised premises or any part thereof to be
condemned or vacated. Tenant shall not do or permit any act or thing to be done
in or to the demised premises which is contrary to law, or which will invalidate
or be in conflict with public liability, fire or other policies of insurance at
any time carried by or for the benefit of Owner with respect to the demised
premises or the building of which the demised premises form a part, or which
shall or might subject Owner to any liability or responsibility to any person or
for property damage. Tenant shall not keep anything in the demised premises
except as now or hereafter permitted by the Fire Department, Board of Fire
Underwriters, Fire Insurance Rating Organization or other authority having
jurisdiction, and then only in such manner and such quantity so as not to
increase the rate for fire insurances applicable to the building, nor use the
premises in a manner which will increase the insurance rate for the building or
any property located therein over that in effect prior to the commencement of
Tenant's occupancy. Tenant shall pay all costs, expenses, fines, penalties, or
damages, which may be imposed upon Owner by reason of Tenant's failure to comply
with the provisions of this article and if by reason of such failure the fire
insurance rate shall, at the beginning of this lease or at any time thereafter,
be higher than it otherwise would be, then Tenant shall reimburse Owner, as
additional rent hereunder, for that portion of all fire insurance premiums
thereafter paid by Owner which shall have been charged because of such failure
by Tenant. In any section or proceeding wherein Owner and Tenant are parties, a
schedule or "make-up" of rate for the building or demised premises issued by the
New York Fire Insurance Exchange, or other body making fire insurance rates
applicable to said premises shall be conclusive evidence of the facts therein
stated and of the several items and charges in the fire insurance rates then
applicable to said premises. Tenant shall not place a load upon any floor of the
demised premises exceeding the floor load per square foot area which it was
designated to carry and which is allowed by law. owner reserves the right to
prescribe the weight and position of all safes, business machines and mechanical
equipment. Such installations shall be placed and maintained by Tenant, at
Tenant's expense, in settings sufficient, in Owner's judgement, to absorb and
prevent vibration, noise and annoyances.
SUBORDINATION:
7. This lease is subject and subordinate to all ground or underlying
leases and to all mortgages which may now or hereafter affect such leases or
the real property of which demised premises are a part and to all renewals,
modifications, consolidations, replacements and extensions of any such
underlying leases and mortgages. This clause shall be self-operative and no
further instrument of subordination shall be required by any ground or
underlying lessor or by any mortgagee, affecting any lease or the real property
of which the demised premises are a part. In confirmation of such
subordination, Tenant shall execute promptly any certificate that Owner may
request.
PROPERTY -- LOSS, DAMAGE, REIMBURSEMENT, INDEMNITY:
8. Owner of its agents shall not be liable for any damage to property of
Tenant or of others entrusted to employees of the building, nor for loss of or
damages to any property of Tenant by theft or otherwise, nor for any injury or
damage to persons or property resulting from any cause of whatsoever nature,
unless caused by or due to the negligence of Owner, its agents, servants or
employees. Owner or its agents will not be liable for any such damage caused by
other tenants or persons in, upon or about said building or caused by
operations in construction of any private, public or quasi public work.
If at any time any windows of the demised premises are temporarily
closed, darkened or bricked up (or permanently closed, darkened or bricked up,
if required by law) for any reason whatsoever including, but not limited to
Owner's own acts, Owner shall not be liable for any damage Tenant may sustain
thereby and Tenant shall not be entitled to any compensation therefor nor
abatement or diminution of rent, nor shall the same release Tenant from its
obligations hereunder nor constitute an eviction. Tenant shall indemnify and
save harmless Owner against and from all liabilities, obligations, damages,
penalties, claims, costs and expenses for which Owner shall not be reimbursed
by insurance, including reasonable attorneys fees, paid, suffered or incurred
as a result of any breach by Tenant, Tenant's agents, contractors, employees,
invitees, or licensees, of any covenant or condition of this lease, or the
carelessness, negligence or improper conduct of the Tenant, Tenant's agents,
contractors, employees, invitees or licensees. Tenant's liability under this
lease extends to the acts and omissions of any sub-tenant, and any agent,
contractor, employee, invitee or licensee of any sub-tenant. In case any action
or proceeding is brought against Owner by reason of any such claim, Tenant,
upon written notice from Owner, will, at Tenant's expense, resist or defend
such action or proceeding by counsel approved by Owner in writing, such
approval not to be unreasonably withheld.
DESTRUCTION, FIRE AND OTHER CASUALTY:
9. (a) If the demised premises or any part thereof shall be damaged by
fire or other casualty, Tenant shall give immediate notice thereof to Owner and
this lease shall continue in full force and effect except as hereinafter set
forth. (b) If the demised premises are partially damaged or rendered partially
unusable by fire or other casualty, the damages thereto shall be repaired by and
at the expense of Owner and the rent, until such repair shall be substantially
completed, shall be apportioned from the day following the casualty according to
the part of the premises which is unusable. (c) If the demised premises are
totally damaged or rendered wholly unusable by fire or other casualty, then the
rent shall be proportionately paid up to the time of the casualty and
thenceforth shall cease until the date when the premises shall have been
repaired and restored by Owner, subject to Owner's right to elect not to restore
the same as hereinafter provided. (d) If the demised premises are rendered
wholly unusable or (whether or not the demised premises are damaged in whole or
in part) if the building shall be so damaged that Owner shall decide to demolish
it or to rebuild it, then, in any of such events, Owner may elect to terminate
this lease by written notice to Tenant, given within 90 days after such fire or
casualty, specifying a date for the expiration of the lease, which date shall
not be more than 60 days after the giving of such notice, and upon the date
specified in such notice the term of this lease shall expire as fully and
completely as if such date were the date set forth above for the termination of
this lease and Tenant shall forthwith quit, surrender and vacate the premises
without prejudice however, to Landlord's rights and remedies against Tenant
under the lease provisions in effect prior to such termination, and any rent
owing shall be paid up to such date and any payments of rent made by Tenant
which were on account of any period subsequent to such date shall be returned to
Tenant. Unless Owner shall serve a termination notice as provided for herein.
Owner shall make the repairs and restoration under the conditions of (b) and (c)
hereof, with all reasonable expedition, subject to delays due to adjustment of
insurance claims, labor troubles and causes beyond Owner's control. After any
such casualty, Tenant shall cooperate with Owner's restoration by removing from
the premises as promptly as reasonably possible, all of Tenant's salvageable
inventory and movable equipment, furniture, and other property. Tenant's
liability for rent shall resume five (5) days after written notice from Owner
that the premises are substantially ready for Tenant's occupancy. (e) Nothing
contained hereinabove shall relieve Tenant from liability that may exist as a
result of damage from fire or other casualty. Notwithstanding the foregoing,
each party shall look first to any insurance in its favor before making any
claim against the other party for recovery for loss or damage resulting from
fire or other casualty, and to the extent that such insurance is in force and
collectible and to the extent permitted by law, Owner and Tenant each hereby
releases and waives all right of recovery against the other or any one claiming
through or under each of them by way of subrogation or otherwise. The foregoing
release and waiver shall be in force only if both releasers' insurance policies
contain a clause providing that such a release or waiver shall not invalidate
the insurance. If, and to the extent, that such waiver can be obtained only by
the payment of additional premiums, then the party benefitting from the waiver
shall pay such premiums within ten days after written demand or shall be deemed
to have agreed that the party obtaining insurance coverage shall be free of any
further obligation under the provisions hereof with respect to waiver of
subrogation. Tenant acknowledges that Owner will not carry insurance on Tenant's
furniture and/or furnishings or any fixtures or equipment, improvements, or
appurtenances removable by Tenant and agrees that Owner will not be obligated to
repair any damage thereto or replace the same. (f) Tenant hereby waives the
provisions of Section 227 of the Real Property Law and agrees that the
provisions of this article shall govern and control in lieu thereof.
EMINENT DOMAIN
10. If the whole or any part of the demised premises shall be acquired
or condemned by Eminent Domain for any public or quasi public use or purpose,
then and in that event, the term of this lease shall cease and terminate from
the date of title vesting in such proceeding and Tenant shall have no claim for
the value of any unexpired term of said lease and assigns to Owner, Tenant's
entire interest in any such award.
ASSIGNMENT, MORTGAGE, ETC.:
11. Tenant, for itself, its heirs, distributees, executors,
administrators, legal representatives, successors and assigns, expressly
covenants that it shall not assign, mortgage or encumber this agreement, nor
underlet, or suffer or permit the demised premises or any part thereof to be
used by others, without the prior written consent of Owner in each instance.
Transfer of the majority of the stock of a corporate Tenant shall be deemed an
assignment. If this lease be assigned, or if the demised premises or any part
thereof be underlet or occupied by anybody other than Tenant, Owner may, after
default by Tenant, collect rent from the assignee, under-tenant or occupant,
and apply the net amount collected to the rent herein reserved, but no such
assignment, underletting, occupancy of collection shall be deemed a waiver of
this covenant, or the acceptance of the assignee, under-tenant or occupant as
tenant, or a release of Tenant from the further performance by Tenant of
covenants on the part of Tenant herein contained. The consent by Owner to an
assignment or underletting shall not in any wise be construed to relieve Tenant
from obtaining the express consent in writing of Owner to any further
assignment or underletting.
ELECTRIC CURRENTS [HAND]
12. Rates and conditions in respect to submetering or rent inclusion, as
the case may be, to be added in RIDER attached hereto. Tenant covenants and
agrees that at all times its use of electric current shall not exceed the
capacity of existing feeders to the building or the risers or wiring
installation and Tenant may not use any electrical equipment which, in Owner's
opinion, reasonably exercised, will overload such installations or interfere
with the use thereof by other tenants of the building. The change at any time of
the character of electric service shall in no wise make Owner liable or
responsible to Tenant, for any loss, damages or expenses which Tenant may
sustain.
ACCESS TO PREMISES:
13. Owner or Owner's agents shall have the right (but shall not be
obligated) to enter the demised premises in any emergency at any time, and, at
other reasonable times, to examine the same and to make such repairs,
replacements and improvements as Owner may deem necessary and reasonably
desirable to the demised premises or to any other portion of the building or
which Owner may elect to perform. Tenant shall permit Owner to use and maintain
and replace pipes and conduits in and through the demised premises and to erect
new pipes and conduits therein provided they are concealed within the walls,
floor, or ceiling. Owner may, during the progress of any work in the demised
premises, take all necessary materials and equipment into said premises without
the same constituting an eviction nor shall the Tenant be entitled to any
abatement of rent while such work is in progress nor to any damages by reason
of loss or interruption of business or otherwise. Throughout the term hereof
Owner shall have the right to enter the demised premises at reasonable hours
for the purpose of showing the
- - -----------
[HAND] Rider to be added if necessary.
A-2
<PAGE> 4
same to prospective purchasers or mortgagees of the building, and during the
last six months of the term for the purpose of showing the same to prospective
tenants. If Tenant is not present to open and permit an entry into the premises,
Owner or Owner's agents may enter the same whenever such entry may be necessary
or permissible by master key or forcibly and provided reasonable care is
exercised to safeguard Tenant's property, such entry shall not render Owner or
its agents liable therefor, nor in any event shall the obligations of Tenant
hereunder be affected. If during the last month of the term Tenant shall have
removed all or substantially all of Tenant's property therefrom Owner may
immediately enter, alter, renovate or redecorate the demised premises without
limitation or abatement of rent, or incurring liability to Tenant for any
compensation and such act shall have no effect on this lease or Tenant's
obligations hereunder.
Vault, Vault Space, Area:
14. No Vaults, vault space or area, whether or not enclosed or covered, not
within the property line of the building is leased hereunder, anything contained
in or indicated on any sketch, blue print or plan, or anything contained
elsewhere in this lease to the contrary notwithstanding. Owner makes no
representation as to the location of the property line of the building. All
vaults and vault space and all such areas not within the property line of the
building, which Tenant may be permitted to use and/or occupy, is to be used
and/or occupied under a revocable license, and if any such license be revoked,
or if the amount of such space or area be diminished or required by any federal,
state or municipal authority or public utility, Owner shall not be subject to
any liability nor shall Tenant be entitled to any compensation or diminution or
abatement of rent, nor shall such revocation, diminution or requisition be
deemed constructive or actual eviction. Any tax, fee or charge of municipal
authorities for such vault or area shall be paid by Tenant.
Occupancy:
15. Tenant will not at any time use or occupy the demised premises in violation
of the certificate of occupancy issued for the building of which the demised
premises are a part. Tenant has inspected the premises and accepts them as is,
subject to the riders annexed hereto with respect to Owner's work, if any. In
any event, Owner makes no representation as to the condition of the premises and
Tenant agrees to accept the same subject to violations, whether or not of
record.
Bankruptcy:
16. (a) Anything elsewhere in this lease to the contrary notwithstanding, this
lease may be cancelled by Owner by the sending of a written notice to Tenant
within a reasonable time after the happening of any one or more of the following
events: (1) the commencement of a case in bankruptcy or under the laws of any
state naming Tenant as the debtor; or (2) the making by Tenant of an assignment
or any other arrangement for the benefit of creditors under any state statute.
Neither Tenant nor any person claiming through or under Tenant, or by reason of
any statute or order of court, shall thereafter be entitled to possession of the
premises demised but shall forthwith quit and surrender the premises. If this
lease shall be assigned in accordance with its terms, the provisions of this
Article 16 shall be applicable only to the party then owning Tenant's interest
in this lease.
(b) it is stipulated and agreed that in the event of the termination of this
lease pursuant to (a) hereof, Owner shall forthwith, notwithstanding any other
provisions of this lease to the contrary, be entitled to recover from Tenant as
and for liquidated damages an amount equal to the difference between the rent
reserved hereunder for the unexpired portion of the term demised and the fair
and reasonable rental value of the demised premises for the same period. In the
computation of such damages the difference between any installment of rent
becoming due hereunder after the date of termination and the fair and reasonable
rental value of the demised premises for the period for which such installment
was payable shall be discounted to the date of termination at the rate of four
percent (4%) per annum. If such premises or any part thereof be relet by the
Owner for the unexpired term of said lease, or any part thereof, before
presentation of proof of such liquidated damages to any court, commission or
tribunal, the amount of rent reserved upon such reletting shall be deemed to be
the fair and reasonable rental value for the part or the whole of the premises
so re-let during the term of the re-letting. Nothing herein contained shall
limit or prejudice the right of the Owner to prove for and obtain as liquidated
damages by reason of such termination, an amount equal to the maximum allowed
by any statute or rule of law in effect at the time when, and governing the
proceedings in which, such damages are to be proved, whether or not such amount
be greater, equal to, or less than the amount of the difference referred to
above.
Defaults:
17. (1) If Tenant defaults in fulfilling any of the covenants of this lease
other than the covenants for the payment of rent or additional rent; or if the
demised premises become vacant or deserted; or if any execution or attachment
shall be issued against Tenant or any of Tenant's property whereupon the demised
premises shall be taken or occupied by someone other than Tenant; or if this
lease be rejected under Section 235 of Title 11 of the U.S. Code (bankruptcy
code); or if Tenant shall fail to move into or take possession of the premises
within fifteen (15) days after the commencement of the term of this lease, then,
in any one or more of such events, upon Owner serving a written five (5) days
notice upon Tenant specifying the nature of said default and upon the expiration
of said five (5) days, if Tenant shall have failed to comply with or remedy such
default, or if the said default or omission complained of shall be of a nature
that the same cannot be completely cured or remedied within said five (5) day
period, and if Tenant shall not have diligently commenced curing such default
within such five (5) day period, and shall not thereafter with reasonable
diligence and in good faith, proceed to remedy or cure such default, then Owner
may serve a written three (3) days' notice of cancellation of this lease upon
Tenant, and upon the expiration of said three (3) days this lease and the term
thereunder shall end and expire as fully and completely as if the expiration of
such three (3) day period were the day herein definitely fixed for the end and
expiration of this lease and the term thereof and Tenant shall then quit and
surrender the demised premises to Owner but Tenant shall remain liable as
hereinafter provided.
(2) If the notice provided for is (1) hereof shall have been given, and the
term shall expire as aforesaid; or if Tenant shall make default in the payment
of the rent reserved herein or any item of additional rent herein mentioned or
any part of either or in making any other payment herein required; then and in
any of such events Owner may without notice, re-enter the demised premises
either by force or otherwise, and dispossess Tenant by summary proceedings or
otherwise, and the legal representative of Tenant or other occupant of demised
premises and remove their effects and hold the premises as if this lease had not
been made, and Tenant hereby waives the service of notice of intention to
re-enter or to institute legal proceedings to that end. If Tenant shall make
default hereunder prior to the date fixed as the commencement of any renewal or
extension of this lease, Owner may cancel and terminate such renewal or
extension agreement by written notice.
Remedies of Owner and Waiver of Redemption:
18. In case of any such default, re-entry, expiration and/or dispossess by
summary proceedings or otherwise, (a) the rent shall become due thereupon and be
paid up to the time of such re-entry, dispossess and/or expiration, (b) Owner
may re-let the premises or any part or parts thereof, either in the name of
Owner or otherwise, for a term or terms, which may at Owner's option be less
than or exceed the period which would otherwise have constituted the balance of
the term of this lease and may grant concessions or free rent or charge a higher
rental than that in this lease, and/or (c) Tenant or the legal representatives
of Tenant shall also pay Owner as liquidated damages for the failure of Tenant
to observe and perform said Tenant's covenants herein contained, any deficiency
between the rent hereby reserved and/or covenanted to be paid and the net
amount, if any, of the rents collected on account of the lease or leases of the
demised premises for each month of the period which would otherwise have
constituted the balance of the term of this lease. The failure of Owner to
re-let the premises or any part or parts thereof shall not release or affect
Tenant's liability for damages. In computing such liquidated damages there shall
be added to the said deficiency such expenses as Owner may incur in connection
with re-letting, such as legal expenses, attorneys' fees, brokerage, advertising
and for keeping the demised premises in good order or for preparing the same for
re-letting. Any such liquidated damages shall be paid in monthly installments by
Tenant on the rent day specified in this lease and any suit brought to collect
the amount of the deficiency for any month shall not prejudice in any way the
rights of Owner to collect the deficiency for any subsequent month by a similar
proceeding. Owner, in putting the demised premises in good order or preparing
the same for re-rental may, at Owner's option, make such alterations, repairs,
replacements, and/or decorations in the demised premises as Owner, in Owner's
sole judgement, considers advisable and necessary for the purpose of re-letting
the demised premises, and the making of such alterations, repairs, replacements,
and/or decorations shall not operate or be construed to release Tenant from
liability hereunder as aforesaid. Owner shall in no event be liable in any way
whatsoever for failure to re-let the demised premises, or in the event that the
demised premises are re-let, for failure to collect the rent thereof under such
re-letting, and in no event shall Tenant be entitled to receive any excess, if
any, of such net rents collected over the terms payable by Tenant to Owner
hereunder. In the event of a breach or threatened breach by Tenant of any of the
covenants or provisions hereof. Owner shall have the right of injunction and the
right to invoke any remedy allowed at law or in equity as if re-entry, summary
proceedings and other remedies were not herein provided for. Mention in this
lease of any particular remedy, shall not preclude Owner from any other remedy,
in law or in equity. Tenant hereby expressly waives any and all rights of
redemption granted by or under any present or future laws in the event of Tenant
being evicted or dispossessed for any cause, or in the event of Owner obtaining
possession of demised premises, by reason of the violation by Tenant of any of
the covenants and conditions of this lease, or otherwise.
Fees and Expenses
19. If Tenant shall default in the observance or performance of any term or
covenant on Tenant's part to be observed or performed under or by virtue of any
of the terms or provisions in any article of this lease, then, unless otherwise
provided elsewhere in this lease, Owner may immediately or at any time
thereafter and without notice perform the obligation of Tenant thereunder. If
Owner, in connection with the foregoing or in connection with any default by
Tenant in the covenant to pay rent hereunder, makes any expenditures or incurs
any obligations for the payment of money, including but not limited to
attorney's fees, in instituting, prosecuting or defending any action or
proceeding, then Tenant will reimburse Owner for such sums so paid or
obligations incurred with interest and costs. The foregoing expenses incurred
by reason of Tenant's default shall be deemed to be additional rent hereunder
and shall be paid by Tenant to Owner within five (5) days of rendition of any
bill or statement to Tenant therefor. If Tenant's lease term shall have expired
at the time of making of such expenditures or incurring of such obligations,
such sums shall be recoverable by Owner as damages.
Building Alterations and Management:
20. Owner shall have the right at any time without the same constituting an
eviction and without incurring liability to Tenant therefor to change the
arrangement and/or location of public entrances, passageways, doors, doorways,
corridors, elevators, stairs, toilets or other public parts of the building and
to change the name, number or designation by which the building may be known.
There shall be no allowance to Tenant for diminuation of rental value and no
liability on the part of Owner by reason of inconvenience, annoyance or injury
to business arising from Owner or other Tenants making any repairs in the
building or any such alterations, additions and improvements. Furthermore,
Tenant shall not have any claim against Owner by reason of Owner's imposition of
such controls of the manner of access to the building by Tenant's social or
business visitors as the Owner may deem necessary for the security of the
building and its occupants.
No Representation by Owner:
21. Neither Owner nor Owner's agents have made any representations or promises
with respect to the physical condition of the building, the land upon which
<PAGE> 5
RIDER ATTACHED TO AND FORMING PART OF LEASE DATED MARCH 15, 1994 BETWEEN
HYDRATION TECHNOLOGY CORPORATION AS TENANT AND 654 MADISON AVENUE COMPANY AS
LANDLORD
37. Electricity: (a) Electricity used by Tenant in the Demised Premises shall be
furnished by Landlord to Tenant on a "rent inclusion" basis. There shall be no
separate or specific charge to Tenant for such electricity whether by meter
charge or otherwise, such electric energy being thus included in the annual
rental as hereinafter provided. Landlord shall not in any way be liable or
responsible to Tenant for any loss or damage or expense which Tenant may sustain
or incur if either the quantity or character of electric service is changed,
unless the same results from the negligence of Landlord.
(b) If the public utility rate schedule for the supply of
electric current to the Building shall be increased or decreased or if there
shall be a change in taxes or if additional taxes shall be imposed upon the sale
or furnishing of such electric current, or if Tenant's failure to maintain its
machinery and equipment in good order and repair causes greater consumption of
electrical current, or if Tenant adds substantially to any machinery, appliances
or equipment, the annual rent reserved shall be equitably adjusted to reflect
the resulting increase or decrease in such use. If Landlord and Tenant cannot
agree thereon, the amounts of such adjustments shall be determined, based on
standard practices, by an independent electrical engineer to be mutually agreed
upon by Landlord and Tenant and paid for equally by both parties. When the
amounts of such adjustments are so determined, the parties shall execute an
agreement supplementary hereto to reflect such adjustments in the amount of the
annual rental stated in this Lease effective from the date of the increase or
decrease in the public utility rate schedule; but such adjustments shall be
effective from such date whether or not such a supplementary agreement is
executed.
(c) Landlord reserves the right to discontinue furnishing
electric energy to Tenant in the Demised Premises at any time upon not less than
thirty (30) days' notice to Tenant. If Landlord exercises such right to
termination, this Lease shall continue in full force and effect and shall be
unaffected thereby, except only that, from and after the effective date of such
termination, Landlord shall not be obligated to furnish electric energy to
Tenant. If Landlord so discontinues furnishing electric energy to Tenant,
Landlord shall arrange at Landlord's cost and expense to obtain electric service
directly from the public utility company servicing the Building utilizing the
then existing electric feeders, risers and wiring serving the Demised Premises.
Commencing when Tenant receives such direct service the fixed annual rental rate
payable under this Lease shall be reduced to $19,140 per annum.
(d) Landlord shall not be liable to Tenant for any loss or
damage or expense which Tenant may sustain or incur if either the quantity or
character of electric service is changed or is no longer available or suitable
for Tenant's requirements. Tenant covenants and agrees that at all times its use
of electric current shall never exceed the capacity of existing feeders to the
building or the risers or wiring installation.
INITIAL HERE:
LANDLORD /s/ (Illegible)
---------------
TENANT /s/ BDS
---------------
A-4
<PAGE> 6
RIDER ATTACHED TO AND FORMING PART OF LEASE DATED MARCH 15, 1994
BETWEEN HYDRATION TECHNOLOGY CORPORATION AS TENANT
AND 654 MADISON AVENUE COMPANY AS LANDLORD
38. Far each fiscal tax year of the City of New York (hereinafter defined)
during the term of this lease, subsequent to June 30, 1994, in which the real
estate taxes assessed upon the land and building of which the demised premises
form a part shall exceed that tax base year (hereinafter defined), Tenant shall
pay to Landlord, as additional rent within thirty (30) days after the beginning
of each such fiscal tax period, a sum equal to 0.62% or the amount by which the
real estate taxes imposed for the said current fiscal year exceeds the real
estate taxes imposed for the base tax year. Tax bills for each year will be
provided to Tenant.
For the purpose of this article:
a. "Current Year" is defined to be the period of one year's
duration commencing July 1, 1994, and each successive period
of one year's duration commencing July 1st;
b. "Tax Base Year" is defined to be the amount of real estate
taxes assessed against said land and building for the tax year
commencing on July 1, 1993, and ending on June 30, 1994.
39. The term "Operating Expenses" as used herein shall mean any and all costs
and expenses (except real estate taxes) paid, incurred, or charged by Landlord
in connection with the operation, servicing and maintenance of the Building. In
the event that the operating expenses incurred by Landlord for any calendar year
following the base year shall exceed the operating expenses incurred by Landlord
during the base year, tenant shall pay to the Landlord as additional rent for
such calendar year an amount equal to the Percentage of the excess. On or after
the first of the year subsequent to the calendar year following the base year
and on or after the first of each calendar year thereafter, Landlord shall
furnish to Tenant a statement of the operating expenses for the preceding
calendar year. If the operating expenses for the preceding calendar year exceed
the operating expenses for the base year, additional rent in an amount equal to
The Percentage of the excess shall be due from Tenant to Landlord, and such
additional rent shall be payable by Tenant to Landlord within thirty days after
receipt of the aforesaid statement.
For the purpose of this article, the Base year shall mean the calendar year
1994.
The Percentage for the purposes of this article shall mean 0.62%.
INITIAL HERE:
LANDLORD:
-------------
TENANT: /s/ BDS
-------------
A-5
<PAGE> 7
RIDER ATTACHED TO AND FORMING PART OF LEASE DATED MARCH 15, 1994
BETWEEN HYDRATION TECHNOLOGY CORPORATION AS TENANT
AND 654 MADISON AVENUE COMPANY AS LANDLORD
40. Tenant is advised that Landlord is the owner of a leasehold dated March 12,
1959 on the entire premises and the Tenant hereunder covenants and agrees that
the present lease is made expressly subject to all the terms, provisions,
covenants and conditions of the said Master Lease insofar as same may apply to
the Tenant hereunder and the premises herein described.
Landlord represents that it has complied with all the terms, provisions,
covenants and conditions of said Master Lease and that this Lease is in no way
inconsistent or violative of the terms, provisions, covenants and conditions of
said Master Lease.
41. It is agreed that there is no obligation of the Landlord hereunder, until
this agreement has been signed by the Landlord or the Landlord's agent and
delivered to the Tenant.
42. The Tenant has inspected the demised premises and accepts them in an "as is"
condition.
INITIAL HERE:
LANDLORD:
-------------
TENANT: /s/ BDS
-------------
A-6
<PAGE> 8
THE ROLFE GROUP, INC.
654 Madison Avenue
New York, N.Y. 10021
AGREEMENT EXTENDING LEASE
It is mutually covenanted and agreed this 31st day of October, 1994
between 654 Madison Avenue Associates, L.P. c/o The Rolfe Group, Inc., Agent,
successor Landlord, and Hydration Technology Corporation as Tenant, that the
lease heretofor entered into between the parties under date of March 15, 1994
for the hire of Suite 1605, in premises 654 Madison Avenue in the Borough of
Manhattan, city of New York, for a term which expires on October 31, 1994,
shall, and the same hereby is extended from November 1, 1994 to October 31,
1997, namely for a further term of three years upon the same terms, covenants
and conditions stated in the aforesaid lease.
The Tenant agrees that in and during the extended term of said lease he
will pay to the Landlord rent based upon an annual rental of $21,000.00 in
lawful money of the United States, in equal monthly installments of $1,750.00 in
advance, on the first day of each and every month during the said term, at the
office of the Landlord or Agent, or such other place as the Landlord may
designate, without any set-off or deductions whatsoever.
The Landlord represents that it is the owner of the building at 654
Madison Avenue. Paragraph 40 of the lease dated March 15, 1994 is hereby
deleted.
The parties agree that except as herein provided, this extension
agreement and the aforesaid lease contain all of the terms covenants, conditions
and agreements between said parties with the same force and effect as if said
lease as herein modified and extended were included in this agreement and were
originally made a part hereof.
It is agreed that there is no obligation of the Landlord hereunder,
until this agreement has been signed by the Landlord or the Landlord's agent
and delivered to the Tenant. In witness whereof, the parties hereto have duly
executed this agreement, the day and year first above written.
/s/ Illegible /s/ Illegible
- - ---------------------------- ---------------------------------
Witness for Landlord's agent 654 Madison Avenue Company
c/o The Rolfe Group, Inc., Agent
/s/ Jeanne DeThomas /s/ Bruce D. Sturman
- - ---------------------------- ---------------------------------
Witness for Tenant Hydration Technology Corporation
A-7
<PAGE> 1
Exhibit 10.14
<PAGE> 2
654 MADISON AVENUE
[THE ROLFE GROUP LETTERHEAD] NEW YORK, NY 10021
The Rolfe Group 212 750 7676
REAL ESTATE FAX: 212 832 7563
May 20, 1996
Mr. Bruce Sturman
Hydration Technology Corporation
654 Madison Avenue
New York, N.Y. 10021
Re: Suite 1605
654 Madison Avenue
Dear Mr. Sturman,
As you requested, this letter will serve as Landlord's consent to the
assignment and assumption agreement of the lease dated March 15, 1994 between
654 Madison Avenue Company c/o The Rolfe Group, Inc., Agent as Landlord and
Hydration Technology Corporation as Tenant (previously assigned to Ixion, Inc.)
to Interact Medical Technologies Corporation.
Such consent is given in accordance with the above mentioned lease.
Yours truly,
The Rolfe Group, Inc., Agent
/s/ Laurence Meltzer
Laurence Meltzer
Vice President
SECTION 3.3 ATTACHMENT 2
<PAGE> 3
ASSIGNMENT AND ASSUMPTION OF LEASE
The parties agree as follows:
April 24, 1996
Assignor: Hydration Technology Corporation
Address: 654 Madison Avenue, Suite 1606
New York, NY 10021
Assignee: Ixion, Inc.
Address: 654 Madison Avenue, Suite 1606
New York, NY 10021
If there are more than one Assignor or Assignee, the words "Assignor" and
"Assignee" shall include them.
The Lease which is assigned herein is identified as follows:
Landlord 654 Madison Avenue Assoc. c/o The Rolfe Group, agent
Tenant Hydration Technology Corporation
Date April 24, 1996 Premises: 654 Madison Avenue, New York, NY 10021
(This Lease was recorded on March 15, 1994 in the office of the
of the County of in of conveyances, at page
Assignor has received One thousand seven hundred fifty dollars
($1,750.00) dollars.
and other good and valuable consideration for this Assignment.
Assignor assigns to the Assignee all the Assignor's rights, and interest in a)
the Lease and b) the security deposit, if any, stated in the Lease.
Assignee agrees to pay the rent promptly and perform all of the terms of the
Lease as of the date of this Assignment. Assignee assumes full responsibility
for the Lease as if Assignee signed the Lease originally as Tenant.
Assignee agrees to indemnify and hold Assignor harmless from any legal actions,
damages and expenses, including legal fees that the Assignor may incur arising
out of the Lease.
Assignee agrees that the obligations measured shall benefit the Landlord named
in the Lease as well as the Assignor.
Assignor states that Assignor has the right to assign this Lease and that the
premises are free and clear of any judgments, executions, liens, taxes and
assessments.
Assignee states that Assignee has read the Lease and has received the original
or an exact copy of the Lease.
This assignment is binding on all parties who lawfully succeed to the rights or
take the place of the Assignor or Assignee.
The margin headings are for convenience only.
The Assignor and Assignee have signed this Assignment as of the date at the top
of the first page.
Agreed and Accepted as of the ASSIGNOR Hydration Technology Corp.
date set forth above. By: /s/ Bruce D. Sturman
--------------------------------------
Name: Bruce D. Sturman, President
WITNESS Landlord ASSIGNEE
By: By: /s/ David M. Otto
- - ------------------------------ --------------------------------------
Name: Name: David M. Otto, Secretary
EXHIBIT B
<PAGE> 4
STATE OF Washington
COUNTY OF King
On the 24th day of April 1996, before me personally came David M. Otto, to me
known to be the individual described in and who executed the foregoing
instruments, and acknowledged that executed the same.
STATE OF New York
COUNTY OF Manhattan
On the 24th day of April 1996, before me personally came
to me known, who, being by me duly sworn, did depose and say that he resides
at No.
that he is the
of
, the corporation described in and which
executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the board of directors of said corporation,
and that he signed h name thereto by like order.
STATE OF New York
COUNTY OF Manhattan
On the 24th day of April 1996, before me personally came Bruce D. Sturman, to
me known to be the individual described in and who executed the foregoing
instrument, and acknowledged that executed the same.
STATE OF
COUNTY OF
On the day of 19 , before me personally came
the subscribing witness to the foregoing instrument,
with whom I am personally acquainted, who, being by me duly sworn, did depose
and say that he resides at No.
that he knows
to be the individual
described in and who executed the foregoing instrument; that he said
subscribing witness was present and saw execute the same;
and that he said witness, at the same time subscribed h name as witness
thereto.
Assignor
Assignee
=========================
ASSIGNMENT OF LEASE
WITH ASSUMPTION
=========================
Dated,_____________, 19__
<PAGE> 5
[The Rolfe Group LETTERHEAD] 654 MADISON AVENUE
NEW YORK, NY 10021
212 750 7676
FAX: 212 832 7863
April 25, 1996
Mr. Bruce Sturman
Hydration Technology Corporation
654 Madison Avenue
New York, N.Y. 10021
Re: Suite 1605
654 Madison Avenue
Dear Mr. Sturman,
As you requested, this letter will serve as Landlord's consent to the
assignment and assumption agreement of the lease dated March 15, 1994 between
654 Madison Avenue Company c/o The Rolfe Group, Inc., Agent as Landlord and
Hydration Technology Corporation as Tenant to Ixion, Inc. Such consent is given
in accordance with the above mentioned lease.
Yours truly,
The Rolfe Group, Inc., Agent
/s/ Laurence Meltzer
Laurence Meltzer
Vice President
B-3
<PAGE> 1
EXHIBIT 10.15
<PAGE> 2
NELSON NORTHWEST, INC. COMMERCIAL LEASE
1331 N. Northlake Way
Seattle, WA 98103
THIS LEASE, dated as of the 1st Day of September, 1984 is made by the
parties below who hereby agree between themselves as follows:
1. PARTIES. This Lease is made by and between NELSON NORTHWEST, INC., a
Washington corporation, ("Landlord") and IXION INCORPORATED, a Delaware
corporation ("Tenant").
2. PREMISES. Landlord hereby leases to Tenant and Tenant leases from
Landlord for the term, at the rental, and upon all of the conditions set forth
herein, that certain real property situated in the City of Seattle, County of
King, State of Washington, commonly known as 1335 N. Northlake Way, Seattle,
Washington 98103, and legally described as set forth on Exhibit "A" attached
hereto, and referred to herein as "the Premises."
3. TERM. The term of this Lease shall be for twelve months,
commencing on the 15th day of September, 1984 ("Commencement Date") and ending
on the 15th day of September, 1985 ("Termination Date") unless sooner terminated
pursuant to the terms hereof.
4. RENT.
4.1 Minimum Rent. Tenant shall pay to Landlord as rent for the
Premises equal monthly installments of ($900.00) Nine Hundred Dollars in
advance, on the 15th day of each month of the term hereof. Tenant shall pay to
Landlord upon the execution hereof the sum of ($900.00) Nine Hundred Dollars as
rent for the first month of the term hereof. Rent for any period during the term
hereof which is for less than one month shall be a pro rata portion of the
monthly installment. Rent shall be payable to Landlord at the address stated
herein or to such other persons or at such other places as Landlord may
designate in writing.
The rent quoted hereinabove is exclusive of any sales, franchise,
business or occupation or other excise taxes based on rents, and should any
such taxes apply or be enacted during the life of this Lease, the rent shall
be increased by such amount.
Landlord understands that Tenant's cash flow is presently tight and
hereby agrees that if Tenant deems it necessary, Tenant may delay payment of the
October 15th $900.00 rent payment and the $900.00 Security Deposit until
November 15th.
<PAGE> 3
5. SECURITY DEPOSIT. Tenant shall deposit with Landlord the sum of
($900.00) Nine Hundred Dollars by November 15, 1984 as security for Tenant's
faithful performance of Tenant's obligations hereunder. If Tenant fails to pay
rent or other charges due hereunder, or otherwise defaults with respect to any
provision of this Lease, Landlord may use, apply or retain all or any portion of
said deposit for the payment of any rent or other charge in default or for the
payment of any other sum to which Landlord may become obligated by reason of
Tenant's default, or to compensate Landlord for any loss or damage which
Landlord may suffer thereby. If Landlord so uses or applies all or any portion
of said deposit, Tenant shall within ten (10) days after written demand therefor
deposit cash or bank guaranteed funds with Landlord in an amount sufficient to
restore said deposit to the full amount stated above and Tenant's failure to do
so shall be a breach of this Lease, and Landlord may at its option terminate
this Lease. Landlord shall not be required to keep said deposit separate from
its general accounts nor pay interest thereon. If Tenant performs all of
Tenant's obligations hereunder, said deposit or so much thereof as had not
theretofore been applied by Landlord, shall be returned, without payment of
interest or other increment for its use, to Tenant (or, at Landlord's option, to
the last assignee, if any, of Tenant's interest hereunder) within fifteen (15)
days after expiration of the term hereof, or after Tenant has vacated the
Premises, whichever is later.
6. USE.
6.1 Use. The premises shall be used and occupied only for
administrative and general offices. Tenant agrees that no stock of goods will be
carried, use made, or anything done in or about the Premises which will increase
the present rate of insurance. Tenant agrees to limit the occupancy of the
Premises to no more than six persons on a regular basis. Tenant is not permitted
to sell boats from this premises.
2
<PAGE> 4
6.2 Compliance With Law. Tenant shall, at its expense, comply promptly
with all applicable statutes, ordinances, rules, regulations, orders and
requirements in effect during the term or any part of the term hereof regulating
the use by Tenant of the Premises. Tenant shall not use or permit the use of the
Premises in any manner that will tend to create waste or a nuisance.
6.3 Insurance Cancellation. Notwithstanding the provisions of Section
6.1 above, no use shall be made or permitted to be made of the Premises nor acts
done which will cause the cancellation of any insurance policy covering said
Premises or any building of which the Premises may be a part.
6.4 Landlord's Rules and Regulations. Tenant shall observe and comply
with reasonable rules and regulations that Landlord shall from time to time
promulgate. Landlord reserves the right from time to time to make reasonable
modifications to said rules and regulations. The additions and modifications to
those rules and regulations shall be binding upon Tenant upon delivery of a copy
of them to Tenant. Landlord shall not be obligated to ensure the compliance with
said rules and regulations by any other tenant(s) or occupant(s).
7. MAINTENANCE, REPAIRS AND ALTERATIONS.
7.1 Landlord's Obligations. Subject to the provisions of Article 8, and
except for damage caused by any negligent or intentional act or omission of
Tenant, Tenant's agents, employees or invitees, Landlord, at Landlord's expense,
shall keep in good order, condition and repair the exterior, including painting
as necessary, the foundations, exterior walls and exterior roof of the Premises
and all sidewalks, landscaping, driveways, parking lots, fences and signs, other
than signs of Tenant, located in the areas which are adjacent to the Premises.
Landlord shall not be required to maintain.the interior surface of exterior
walls, windows, doors or plate glass and store front. Landlord shall make
repairs under this Section 7.1 within a resonable time after receipt of written
notice of the need of such repairs.
7.2 Tenant's Obligations. Subject to the provisions of Sections 7.1 and
7.3 and Article 9, Tenant, at Tenant's expense, shall keep in good order,
condition and repair the Premises and every part thereof, including, without
limiting the generality of the foregoing, all plumbing, ventilating, electrical
and lighting facilities and equipment within the Premises, fixtures, interior
walls, and store front, ceilings, windows, doors, plate glass, and skylights
located within the Premises, and shall provide its own janitorial services.
Tenant will permit no waste, damage or injury to the Premises, and at Tenant's
own cost and expense, will keep all drainage pipes free and open and will
protect water, heating and other pipes so that they will not freeze or become
clogged, and will repair all leaks, and will also repair all damages caused by
leaks or by reason of Tenant's failure to protect and keep free, open and
unfrozen any of the pipes and plumbing on said Premises. Tenant shall be
responsible for the removal of ice and snow from the step up to the Premises and
the sidewalk in front of and about said premises.
7.3 Surrender. On the last day of the term hereof, or on any sooner
termination, Tenant shall surrender the Premises to Landlord in good condition,
broom clean, ordinary wear and tear excepted. Tenant shall repair any damage to
the
<PAGE> 5
Premises occasioned by its use thereof, or by the removal of Tenant's trade
fixtures, furnishings and equipment pursuant to Section 7.5, which repair shall
include the patching and filling of holes and repair of structural damage, and
will deliver all keys belonging to said Premises to Landlord.
7.4 Landlord's Rights. If Tenant fails to perform Tenant's
obligations under this Article 7, Landlord may at its option (but shall not be
required to) enter upon the Premises, after ten (10) days' prior written notice
to Tenant, and put the same in good order, condition and repair, and the cost
thereof shall become due and payable as additional rental to Landlord together
with Tenant's next rental installment.
7.5 Alterations and Additions. Tenant shall not, without
Landlord's prior written consent, which shall not be unreasonably withheld, make
any alterations, improvements, additions or repairs in, on, or about the
Premises. All alterations, improvements or additions (not including Tenant's
furnishings, office equipment, etc.) which may be made on the Premises shall be
at Tenant's sole expense and shall become the property of Landlord and remain
upon and be surrendered with the Premises at the expiration of the term;
provided, however, Landlord may elect, in its sole discretion, to require
Tenant to remove such alterations and/or additions, and if Landlord so elects
Tenant shall remove the alterations and/or additions and leave the Premises as
required under Paragraph 7.3 above.
8. INSURANCE; INDEMNITY; TAXES.
8.1 Liability Insurance. The Tenant shall obtain and keep in
force during the term of this Lease a policy of comprehensive public liability
insurance insuring Landlord and Tenant against any liability arising out of
Tenant's ownership, use, occupancy or maintenance of the Premises and all areas
adjoining and/or appurtenant thereto including all walkways, decks, docks and
other commercial areas owned by Landlord. Such insurance shall be in an amount
of not less than Five Hundred Thousand Dollars ($500,000) for injury to or death
of one person in any one accident or occurrence and in an amount of not less
than Ten Thousand Dollars ($10,000) for injury to or death of more than one
person in any one accident or occurrence. Such insurance shall further insure
Landlord and Tenant against liability for injury to or death of more than one
person in any one accident or occurrence. Such insurance shall further insure
Landlord and Tenant against liability for property damage of at least Two
Hundred Fifty Thousand Dollars ($250,000). The limits of said insurance shall
not, however, limit the liability of the Tenant hereunder. In the event that the
Premises constitute a part of a larger property said insurance shall have a
Landlord's Protective Liability endorsement attached hereto. The insurance
policy provided by Lessee shall name Nelson Northwest, Inc. and John E. Nelson
and Jania M. Nelson, his wife, as additional insureds.
8.2 Property Damage Insurance. Landlord shall continually keep
insured those portions of the Premises or the building of which the Premises are
a part, and all structural portions thereof, against those risks covered in a
fire policy with extended coverage. Said Insurance shall be for the sole benefit
of Landlord, and all proceeds shall be payable to Landlord.
<PAGE> 6
8.3 Waiver of Subrogation. Tenant and Landlord each waives any
and all right of recovery against the other, or against the officers, employees,
agents and representatives of the other, for loss of or damage to such waiving
party or its property or the property of others under its control, where such
loss or damage is insured against by a fire policy whether or not such policy is
in force at the time of such loss or damage, provided that this section shall be
of no force or effect if its inclusion in this Lease would negate the insurance
coverage of Landlord and Tenant. Tenant shall be solely responsible for any
deductible claimed arising out of loss caused by Tenant's acts or omissions.
8.4 Hold Harmless. Tenant shall indemnify, defend and hold
Landlord harmless from any and all claims arising from Tenant's use of the
Premises or from the conduct of its business or from any activity, work or
things which may be permitted or suffered by Tenant in or about the Premises and
shall further indemnify, defend and hold Landlord harmless from and against any
and all claims arising from any breach or default in the performance of any
obligation on Tenant's part to be performed under the provisions of this Lease
or arising from any negligence of Tenant or any of its agents, contractors,
employees or invitees. Tenant hereby assumes all risk of damage to property or
injury to person in or about the Premises from any cause, and Tenant hereby
waives all claims in respect thereof against Landlord, excepting where said
damage or injury arises out of negligence of Landlord, its agents, contractors,
employees or invitees or from a breach by Landlord of any of its obligations
imposed hereunder.
8.5 Exemption of Landlord from Liability, Tenant hereby accepts
the Premises "as is" and agrees that (1) Landlord shall not be liable for
injury to Tenant's business or any loss of income therefrom or for damage to
the goods, wares, merchandise or other property of Tenant, Tenant's employees,
invitees, customers, or any other person in or about the Premises; nor, unless
through its negligence, (2) shall Landlord be liable for injury to the person
of Tenant, Tenant's employees, agents or contractors and invitees, whether such
damage or injury is caused by or results from fire, steam, electricity, gas,
water or rain, or from the breakage, leakage, obstruction or other defect of
pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting
fixtures, or from any other cause, whether the said damage or injury results
from conditions arising upon the Premises or upon other portions of the
building of which the Premises are a part, or from other sources or places, and
regardless of whether the cause of such damage or injury or the means of
repairing the same is inaccessible to Landlord or Tenant. Landlord shall not be
liable for any damages arising from any act or neglect of any other tenant, if
any, of the building in which the Premises are located.
(1) Except for damage arising from the negligence or intentional misconduct
of the Landlord, its agents, or employees.
(2) or intentional misconduct by it, or its agents or employees.
<PAGE> 7
8.6 Tax on Added Improvements. Tenant shall also pay any increase in
"real property taxes" resulting from any and all improvements of any kind
whatsoever placed on or in the Premises for the benefit of or at the request of
Tenant regardless of whether said improvements were installed or constructed
either by Landlord or Tenant, except those items included with the original
Premises.
8.7 Personal Property Taxes.
8.7.1 Tenant shall pay prior to delinquency all taxes assessed
against and levied upon trade fixtures, furnishings, equipment and all other
personal property of Tenant contained in the Premises or elsewhere. Tenant shall
cause said trade fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of the
Landlord.(1)
8.7.2 If any of Tenant's said personal property shall be
assessed with Landlord's real property, Tenant shall pay Landlord the taxes
attributable to Tenant within ten (10) days after receipt from Landlord of a
written statement.
9. UTILITIES. Lessor shall not be liable for the failure of any service
such as heat, electricity, water, sewer, Metro, garbage nor for all other public
utilities for any reason whatsoever. Lessor shall pay for utilities listed
above. Lessee agrees to conserve utilities to the best of his ability.
Specifically Lessee agrees to turn heat thermostat down to 50 degrees when space
is not occupied. Lessee also agrees to turn air conditioning (if available) off
when space is not occupied. Tenant shall pay for telephone, janitorial and all
other services supplied to the Premises together with any taxes thereon.
10. ASSIGNMENT AND SUBLETTING. Tenant may not voluntarily or by
operation of law assign, transfer, mortgage, sublet or otherwise transfer or
encumber all or any part of Tenant's interest in this Lease or in the Premises
without Landlord's prior written consent. Consent will not be unreasonably
withheld by Landlord.
11. DEFAULTS; REMEDIES.
11.1 Defaults. The occurrence of any one or more of the
following events shall constitute a default and breach of this Lease by Tenant:
(1) Tenant shall be permitted the right to contest any such assessments by
any government agencies, and Landlord agrees to cooperate with Tenant
in such proceedings.
<PAGE> 8
11.1.1 The vacating or abandonment of the Premises by Tenant.
11.1.2 The failure by Tenant to make any payment of rent or
any other payment required to be made by Tenant hereunder, as and when due.
11.1.3 The failure by Tenant to observe or perform any of the
covenants, conditions or provisions of this Lease to be observed or performed by
Tenant, other than described in Section 11.1.2 above.
11.2 Remedies in Default. In the event of any such default or breach by
Tenant, Landlord may at any time thereafter, with ten (10) days notice (thirty
(30) days for non-monetary defaults) and demand and without limiting Landlord in
the exercise of any right or remedy which Landlord may have by reason of such
default or breach:
11.2.1 Terminate Tenant's right to possession of the Premises
by any lawful means, in which case this Lease shall terminate and Tenant shall
immediately surrender possession of the Premises to Landlord. In such event
Landlord shall be entitled to recover from Tenant all damages incurred by
Landlord by reason of Tenant's default including, but not limited to, the cost
of recovering possession of the Premises; expenses of reletting, including
necessary renovation and alteration of the Premises; the worth, from the time
Tenant's possession of the Premises ceases for any reason, including
abandonment, of the amount by which the unpaid rent, including all additional
rent, for the balance of the term after such time exceeds the amount of such
rental loss for the same period that could be reasonably avoided.
11.2.2 Maintain Tenant's right to possession, in which case
this Lease shall continue in effect whether or not Tenant shall have abandoned
the Premises. In such event, Landlord shall be entitled to enforce all of
Landlord's rights and remedies under this Lease including the right to recover
the rent, including all additional rent, as it becomes due hereunder.
11.2.3 Pursue any other remedy now or hereafter available to
Landlord under the laws or judicial decisions of the state in which the Premises
are located.
11.2.4 For the purposes of this Section 11.2, additional rent
shall include items such as taxes, insurance, maintenance, etc.
12. CONDEMNATION. if the Premises or any portion thereof (making the
remaining portion untenantable) are taken under the power of eminent domain, or
sold by Landlord under the threat of the exercise of said power (all of which is
herein referred to as "condemnation"), this Lease shall terminate as of the date
the condemning authority takes title or possession, whichever occurs first.
If this Lease is not terminated then the rental shall be reduced in
proportion to the floor area of the Premises taken bears to the total floor area
of the Premises prior to the taking.
<PAGE> 9
13. GENERAL PROVISIONS.
13.1 Estoppel Statement.
13.1.1 Tenant shall at any time upon not less than ten (10)
days' prior written notice from Landlord execute, acknowledge and deliver to
Landlord a statement in writing (i) certifying that this Lease is unmodified and
in full force and effect (or, if modified, stating the nature of such
modification and certifying that this Lease, as so modified, is in full force
and effect) and the date to which the rent, security deposit, and other
charges are paid in advance, if any, and (ii) acknowledging that there are not,
to Tenant's knowledge, any uncured defaults on the part of Landlord hereunder,
or specifying such defaults, if any, which are claimed. Any such statement may
be conclusively relied upon by any prospective purchaser or encumbrances of the
Premises.
13.1.2 Tenant's failure to deliver such statement within such
time shall be conclusive upon Tenant (i) that this Lease is in full force and
effect, without modification except as may be represented by Landlord, (ii) that
there are no uncured defaults in Landlord's performance, and (iii) that not more
than one (1) month's rent has been paid in advance.
13.2 Landlord's Interests. The term "Landlord" as used herein shall
mean only the owner or owners at the time in question of the fee title or a
tenant's interest in ground lease of the Premises. In the event of any transfer
of such title or interest, Landlord herein named (and in case of any subsequent
transfers, the then grantor) shall be relieved from and after the date of such
transfer of all liability as respects Landlord's obligations thereafter to be
performed, provided that any funds in the hands of Landlord or the then grantor
at the time of such transfer, in which Tenant has an interest, shall be
delivered to the grantee. The obligations contained in this Lease to be
performed by Landlord shall, subject as aforesaid, be binding on Landlord's
successors and assignee, only during their respective periods of ownership.
13.3 Severability. The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provisions hereof.
13.4 Time of Essence. Time is of the essence.
13.5 Captions. Article and Section captions are not a part hereof.
13.6 Incorporation of Prior Agreements; Amendments. This Lease contains
all agreements of the parties with respect to any matter mentioned herein. No
prior agreement or understanding pertaining to any such matter shall be
effective. This Lease may be modified in writing only, signed by the parties in
interest at the time of the modification.
<PAGE> 10
13.7 Waivers. No waiver by Landlord or Tenant of any provision hereof
shall be deemed a waiver of any other provision hereof or of any subsequent
breach by Tenant or Landlord of the same or any other provision. Landlords
consent to or approval of any act shall not be deemed to render unnecessary the
obtaining of Landlord's consent to or approval of any subsequent act by Tenant.
The acceptance of rent hereunder by Landlord shall not be a waiver of any
preceding breach by Tenant of any provision hereof, other than the failure of
Tenant to pay the particular rent so accepted, regardless of Landlord's
knowledge of such preceding breach at the time of acceptance of such rent.
13.8 Recording. Landlord and Tenant shall not record this Lease. Any
such recordation shall be a breach under this Lease. Tenant may record a short
form or memorandum of lease and Landlord agrees to execute the same upon
request.
13.9 Holding Over. If Tenant remains in possession of the Premises or
any part thereof after the expiration of the term hereof, with the consent
of Landlord, such occupancy shall be a tenancy from month-to-month at a rental
set by Landlord not to exceed the amount of the last monthly rental plus fifteen
percent (15%), and all other charges payable hereunder, and upon the terms
hereof applicable to month-to-month tenancy. If Tenant remains in possession
without Landlord's approval, the rental shall be twice the amount of the last
monthly rental plus all other charges.
13.10 Cumulative Remedies. No remedy or election hereunder shall be
deemed exclusive, but shall, wherever possible, be cumulative with all other
remedies at law or in equity.
13.11 Binding Effect; Choice of Law. This Lease shall bind the parties,
their personal representatives, successors and assigns. This Lease shall be
governed by the laws of the state where the Premises are located.
13.12 Subordination.
13.12.1 This Lease, at Landlord's option, shall be subordinate
to any ground lease, mortgage, deed of trust, or any other hypothecation for
security now or hereafter placed upon the real property of which the Premises
are a part and to any and all advance made on the security thereof and to all
renewals, modifications, consolidations, replacements and extensions thereof.
Notwithstanding such subordination, Tenant's right to quiet possession of the
Premises shall not be disturbed if Tenant is not in default and so long as
Tenant shall pay the rent and observe and perform all of the provisions of this
Lease, unless this Lease is otherwise terminated pursuant to its terms. Tenant's
right to quiet enjoyment hereunder shall be specified in any document requested
by Landlord.
13.12.2 Tenant agrees to execute any documents required to
effectuate such subordination or to make this Lease prior to the lien of any
mortgage, deed of trust or ground lease, as the case may be, and failing to do
so within ten (10) days after written demand does hereby make, constitute and
irrevocably appoint Landlord as Tenant's attorney in fact and in Tenant's name,
place and stead, to do so.
13.13 Landlord's Access. Landlord and Landlord's agents shall have the
right to enter the Premises at reasonable
<PAGE> 11
times for the purpose of inspecting the same, showing the same to prospective
purchasers or lenders, and making such alterations, repairs, improvements or
additions to the Premises or to the building of which they are a part as
Landlord may deem necessary or desirable. Landlord may at any time place on or
about the Premises any ordinary "For Sale" signs and Landlord may at any time
during the last ninety (90) days of the term hereof, place on or about the
Premises any ordinary "For Sale or Lease" signs, all without rebate of rent or
liability to Tenant.
13.14 Auctions. Tenant shall not place any auction sign upon the
Premises or conduct any auction thereon without Landlord's prior written
consent.
13.15 Liens. Tenant shall keep the leased Premises and the
property in which the leased Premises are situated free from any liens arising
out of any work performed, materials furnished or obligations incurred by
Tenant. In the event Tenant becomes insolvent, voluntarily or involuntarily
bankrupt, or if a receiver, assignee or other liquidating officer is appointed
for the business of the Tenant, then the Landlord may cancel this Lease at
Landlord's option.
13.16 Signs. All signs or symbols placed in the windows or
doors of the Premises, or upon any exterior part of the building, by the Tenant
shall be subject to the approval of the Landlord or Landlord's agents. In the
event Tenant shall place signs or symbols on the exterior of said building, or
in the windows or doors where they are visible from the street, that are not
satisfactory to the Landlord or Landlord's agents, the Landlord or Landlord's
agents may immediately demand the removal of such signs or symbols, and the
refusal of the Tenant to comply with such demand within a period of twenty-four
(24) hours will constitute a breach of this Lease, and entitle the Landlord to
immediately recover possession of said Premises in the manner provided by law.
Any signs so placed on the Premises shall be so placed upon the understanding
and agreement that Tenant will remove same at the termination of the tenancy
herein created and repair any damage or injury to the Premises caused thereby,
and if not so removed by Tenant then Landlord may have same so removed at
Tenant's expense.
13.17 Governmental Fees. All the fees due the city, county or
state on account of any inspection made on said Premises by any officer thereof
shall be paid by Tenant.
13.18 Removal of Property. In the event of any entry in, or
taking possession of, the Premises as aforesaid, the Landlord shall have the
right, but not the obligation, to remove from the Premises all personal property
located therein, and may place the same in storage at a public warehouse at the
expense and risk of the owners thereof.
13.19 Attorney's Fees. If either party brings an action to
enforce the terms hereof or declare rights hereunder, the prevailing party in
any such action, on trial or appeal, shall be entitled to its reasonable
attorney's fees to be paid by the losing party as fixed by the court.
14. FIRE AND OTHER CASUALTY. In the event the Premises are destroyed or
damaged by fire, earthquake, or other casualty to such an extent as to render
the same untenantable in whole or in substantial part thereof, it shall be
optional with the Landlord to rebuild or repair the same and after the happening
<PAGE> 12
of any such contingency, the Tenant shall give the Landlord or Landlord's agents
immediate notice thereof. Landlord shall have not more than sixty (60) days
after date of such notifcation to notify the Tenant in writing of Landlord's
intentions to rebuild or repair said Premises, or the part so damaged as
aforesaid, and if Landlord elects to rebuild or repair said Premises, Landlord
shall prosecute the work of such rebuilding or repairing without unnecessary
delay, and during such period the rent of said Premises shall be abated in the
same ratio that that portion of the Premises rendered for the time being unfit
for occupancy shall bear to the whole of the leased Premises. If the Landlord
shall fail to give the notice aforesaid, Tenant shall have the right to declare
this Lease terminated by written notice served upon the Landlord or Landlord's
agents.
In the event the building in which the Premises hereby leased or
located, shall be destroyed or damaged by fire, earthquake or other casualty
(even though the Premises hereby leased shall not be damaged thereby) to such an
extent that in the opinion of Landlord it shall not be practicable to rebuild or
repair, then it shall be optional with Lessor or Tenant terminate this Lease by
written notice served on either party within sixty (60) days after such
destruction or damage.
15. NOTICES. Whenever under this Lease provision is made for any
demand, notice or declaration of any kind, or where it is deemed desirable or
necessary by either party to give to serve any such notice, demand or
declaration to the other party, it shall be in writing and served either
personally or sent by United State mail, postage prepaid, addressed at the
addresses set forth hereinbelow:
To Landlord at: 1331 N. Northlake Way
Seattle, Washington 98103
To Tenant at: P. 0. Box 9422
Seattle, Washington 98109
<PAGE> 13
LANDLORD, TENANT,
NELSON NORTHWEST, INC. IXION INCORPORATED
By:/s/JOHN E. NELSON /s/DAVID HON
- - ------------------------- --------------------
JOHN E. NELSON, President DAVID HON, President
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this day personally appeared before me JOHN E. NELSON, to me known to
be the President of NELSON NORTHWEST, INC., the corporation described in the
foregoing instrument, and acknowledged the said instrument to be the free and
voluntary act and deed of said corporation for the uses and purposes therein
mentioned, and on oath stated he is authorized to execute the said instrument on
behalf of the corporation.
GIVEN under my hand and official seal this 7th day of September, 1984
--- ----------
/s/ Notary
-------------------------------------
Notary Public in and for the
State of Washington, residing
at Seattle, WA.
-----------
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this day personally appeared before me DAVID HON, President of
IXION INCORPORATED
to me known to be the person described in the within and foregoing
instrument, and acknowledged the said instrument to be his free and voluntary
act and deed for the uses and purposes therein mentioned.
GIVEN under my hand and official seal this 7th day of September, 1984
--- ----------
/s/ Notary
----------------------------------
Notary Public in and for the
State of Washington, residing
at Seattle, WA.
------------
<PAGE> 14
EXHIBIT "A"
That certain space located on the first floor of the Tillicum Marina
Building consisting of approximately 900 square feet situated on the following
real property:
Lots 5, 6 and 7, of Block 100 of Lake Union Shore Lands,
situated in the City of Seattle, County of King, State of
Washington.
Together with the exclusive use during the business hours of two parking
spaces. These parking spaces shall be assigned by the Landlord. Tenant shall
provide signs to designate these parking spaces.
Landlord agrees to install a door with glass (store door) on the side of the
building facing Lake Union.
As long as Tenant is current with rent, security deposit and in compliance with
all other terms of this lease, Landlord agrees to split on a 50-50 basis with
the Tenant the cost of installing interior improvements which are agreeable to
both parties.
<PAGE> 1
EXHIBIT 10.16
<PAGE> 2
ADDENDUM TO LEASE
THIS ADDENDUM TO LEASE is made by and between NELSON NORTHWEST, INC., a
Washington corporation ("Landlord") and IXION INCORPORATED, a Delaware
corporation ("Tenant").
The parties hereto have entered into a Lease ("the Lease") dated Sept.
1, 1984 a copy of which is attached hereto, affecting property situated in the
City of Seattle, County of King, State of Washington, commonly known as 1335 N.
Northlake Way, Seattle, Washington 98103, and legally described as set forth in
the attached Lease ("the Premises"). (Suite 102)
The parties desire to enter into a new agreement modifying the
provisions of the Lease. In consideration of the mutual covenants contained
herein, the parties agree that the Lease shall be modified as follows:
1. Paragraph 3 - TERM. The term of the Lease shall be for twelve (12)
months. The Lease shall commence on the 1st day of November, 1995 ("Commencement
Date") and will terminate on the 31st day of October, 1996 ("Termination Date")
unless sooner terminated pursuant to the terms of the Lease.
2. Paragraph 4.1 - Minimum Rent. Tenant shall pay to Landlord as rent
for the Premises equal monthly installments of One Thousand Four Hundred Sixty
Seven & 00/100 Dollars ($1,467.00) in advance, on the 1st day of each month of
the term hereof. Tenant shall pay to Landlord upon the execution hereof the sum
One Thousand Four Hundred Sixty Seven & 00/100 Dollars ($1,467.00) as rent for
the first month of the term hereof. Rent for any period during the term hereof
which is for less than one month shall be a pro rata portion of the monthly
installment. Rent shall be payable to Landlord at the address stated in the
Lease or to such other person or at such other places as Landlord may designate
in writing.
The rent quoted hereinabove is exclusive of any sales, franchise,
business or occupation or other taxes based on rents, and should any such taxes
apply or be enacted during the life of the Lease, the rent shall be increased by
such amount.
3. Paragraph 5 - SECURITY DEPOSIT. Tenant has on deposit with
Landlord the sum of Nine Hundred and No/100 Dollars ($900.00) as security for
Tenant's faithful performance of Tenant's obligations hereunder.
<PAGE> 3
All provisions of the Lease are incorporated herein and are
hereby modified to conform with the provisions set forth in this Addendum, but
in all other respects are to be and shall continue in full force.
IN WITNESS WHEREOF, the parties have executed this Addendum this
1st day of November, 1995
- - --- ---------
LANDLORD: TENANT:
NELSON NORTHWEST, INC. IXION INCORPORATED
By /s/ JOHN E. NELSON /s/ DAVID HON
- - ------------------------ ------------------------------
JOHN E. NELSON, President DAVID HON, President
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this day personally appeared before me JOHN E. NELSON, to me
known to be the President of NELSON NORTHWEST, INC., the corporation described
in the foregoing instrument, and acknowledged the said instrument to be the free
and voluntary act and deed of said corporation for the uses and purposes therein
mentioned, and on oath stated that he was authorized to execute the said
instrument on behalf of the corporation.
GIVEN under my hand and official seal this 3rd day of November, 1995
--- ---------
/s/ Unledgible
----------------------------
Notary Public in and for the
State of Washington, residing
at Seattle, WA.
-----------
[SEAL]
2
<PAGE> 1
EXHIBIT 10.17
<PAGE> 2
SECOND ADDENDUM TO LEASE AGREEMENT
between
RSR ROBSAN RESOURCES, INC., LANDLORD
and
MEDICAL MEDIA SYSTEMS, TENANT
This Second Addendum to Lease Agreement shall be attached to and become
a part of the Lease Agreement and First Addendum to Lease Agreement between the
parties below signed and in the event a conflict shall occur between this Second
Addendum to Lease Agreement and said Lease Agreement and First Addendum to Lease
Agreement, this Second Addendum to Lease Agreement shall take precedence.
The Lease Agreement and First Addendum to Lease Agreement
notwithstanding, the two parties below signed agree and affirm as follows:
a) The Premises being leased by Tenant from Landlord shall consist of
Area # 1 and Area # 2 unless otherwise agreed to in writing by both parties.
Area # 1 shall consist of 2,895 gross leasable square feet of finished office
space and 80 square feet of finished common area, subject to final verification,
and Area # 2 shall consist of 270 gross leasable square feet of unfinished
warehouse and storage space and 40 gross leasable square feet of unfinished
common area. The gross leasable square footage for both Area # 1 and Area # 2
shall be subject to final verification at occupancy.
b) Area # 1 shall be provided to Tenant by Landlord as "plain vanilla"
space which the parties agree shall mean that Landlord shall provide standard
lighting and electric service, finished painted sheetrock walls and carpeted
floors.
c) Area # 2 shall be provided to Tenant by Landlord as is.
d) Landlord and Tenant further agree and affirm that any and all
additional fit-up required by Tenant shall be the sole responsibility of Tenant,
subject to written approval by Landlord, which shall not unreasonably be
withheld.
e) Costs to be borne by Tenant shall be those as shown on Change
Estimate # 6 dated June 22, 1994 presented by Trumbull-Nelson Construction. It
is agreed by both parties that the Total costs for the fit-up required by Tenant
is $ 9,186.00. Landlord shall provide a credit to Tenant in the amount of $
1,500.00 to off set these costs. The balance due to Landlord from Tenant is $
7,686.00. At the time of signing, Tenant shall pay this amount to Landlord, to
be applied to such fit-up costs. If the amount actually expended by Landlord for
such fit up costs shall be less than such amount, Landlord shall refund at 84%
of such excess to Tenant. Landlord shall provide Tenant reasonable
substantiation of its expenditures for such fit up.
1
<PAGE> 3
SECOND ADDENDUM TO LEASE AGREEMENT
RSR RESOURCES, INC., LANDLORD
MEDICAL MEDIA SYSTEMS, TENANT
SIGNATURE PAGE
Dated this 8TH DAY OF JULY, 1994.
/s/ /s/ ROBERT MACNEIL, PRESIDENT
- - ---------------------------------- ---------------------------------------
WITNESS ROBERT MACNEIL, PRESIDENT
DULY AUTHORIZED
RSR ROBSON RESOURCES, INC.
/s/ /s/
- - ----------------------------------- ---------------------------------------
WITNESS MEDICAL MEDIA SYSTEMS
LEO C. MCKENNA, ADMINISTRATIVE OFFICER
DULY AUTHORIZED
2
<PAGE> 4
[COPY OF CHECK NO. 1491 FROM MEDICAL MEDIA SYSTEMS, DATED 7/8/94, TO RSR ROBSAN
RESOURCES INC. IN THE AMOUNT OF $7,686.00 FOR EST. FIT-UP COSTS]
[COPY OF CHECK NO. 1492 FROM MEDICAL MEDIA SYSTEMS, DATED 7/8/94, TO RSR ROBSAN
RESOURCES, INC. IN THE AMOUNT OF $6,373.75 FOR 2 MOS. RENT]
<PAGE> 5
[REDPATH & CO. COMMERCIAL DIVISION LOGO]
LEASE AGREEMENT CHECKLIST
RSR RESOURCES, INC., LANDLORD
MEDICAL MEDIA SYSTEMS, TENANT
LANDLORD
[/s/] 1. Sign Original Lease
[/s/] 2. Date and Initial A-1.
[/s/] 3. Sign First Addendum
[/s/] 4. Sign Second Addendum
TENANT
[/s/] 1. Sign Original Lease
[/s/] 2. Date and Initial A-1.
[/s/] 3. Sign First Addendum
[/s/] 4. Sign Second Addendum
[/s/] 5. Provide Check to Landlord for Security Deposit
[/s/] 6. Provide Check to Landlord for Fit-up Repayment
BOTH PARTIES AGREE TO MEET AT A PLACE AND TIME OF MUTUAL CONVENIENCE NO LATER
THAN AUGUST 1, 1994 TO EXECUTE A NOTICE OF LEASE IN RECORDABLE FORM.
<PAGE> 6
Article XXVI. Recording
Article XXVII. Notice
Article XXVIII. Miscellaneous
28.1 Binding Effect
28.2 Governing Law
28.3 Provisions are Covenants and Condition
28.4 Caption
28.5 Singular and Plural
28.6 Variations in Gender
28.7 Joint and Several Obligations
28.8 Severability
28.9 Real Estate Brokers' and Finders Fees
28.10 Rent Payable in U.S. Currency
28.11 Integrated Agreement; Modification
28.12 Corporate Authority
28.13 Smoking in Building
28.14 Waterfront Facilities
28.15 Consent, Approval, Discretion
iv
<PAGE> 7
RSR ROBSAN RESOURCES, INC.
79 EAST WILDER ROAD
LEASE AGREEMENT
THIS LEASE AGREEMENT, herein referred to as "Lease", is made between
between RSR Robsan Resources, Inc. of West Lebanon, New Hampshire, herein
referred to as "Landlord," and Medical Media Systems herein referred to as
"Tenant."
Landlord's mailing address is:
79 East Wilder Road
West Lebanon, NH 03784
Tenant's mailing address is:
32 South Main Street
Hanover, NH 03755
ARTICLE I. Premises
1.1 Description. The Landlord is the owner of a certain building located at 79
East Wilder Road, West Lebanon, New Hampshire, herein referred to as the
"Building(s)" containing 8,000 gross leasable square feet. Landlord hereby
leases to Tenant and Tenant hereby leases from Landlord a portion of the
Building consisting of 2,975 gross square feet of office and common entry (Area
# 1) and 310 gross square feet of warehouse and storage area on the First Floor
(Area # 2) herein referred to as the "Premises". The gross square feet of the
Premises is the total gross square feet as measured from the exterior surface of
the exterior walls of the Building; from the exterior surface of interior walls
separating the Premises from the common areas; and from the center of interior
walls dividing the Premises from other leaseholds. The Premises are more fully
depicted on the architectural floor plans of the Building prepared by
Trumbull-Nelson of Hanover, New Hampshire, which plans are incorporated herein
by reference as Exhibit A. As of the date of the execution of this Lease
Landlord has a set of the plans which are available for inspection by Tenant
upon reasonable request. Reduced photocopies of the floor plans of the floor are
attached hereto as Exhibit A-1. Landlord reserves to himself the use of the
exterior walls and surfaces, the roof of the Building, and of the walks and
other common areas and facilities of 79 East Wilder Road and the right to
install, maintain, use, repair and replace pipes, ducts, conduits, utility lines
and wires through, above and below the Premises, in locations and at times which
will not materially interfere with Tenant's use thereof. No easement for light
or air beyond the bounds of the Building is included as a part of this Lease.
1.2 Quiet Enjoyment. Landlord represents and warrants that Landlord has
full right and lawful authority to enter into this Lease for the full Term
hereof, and further warrants that Tenant, upon paying the basic rent and all
additional rent and other charges, and performing all the other terms of this
Lease, shall quietly have and enjoy the Premises during the term of this Lease
without hindrance or interference by anyone claiming
1
<PAGE> 8
by or through the Landlord, subject, however, to the reservations and conditions
of this Lease and the mortgages to which this Lease is subordinate.
1.3 Acceptance. Landlord warrants that to its knowledge the Premises are free of
any latent material damage or defects and are in substantially good repair.
1.4 Fixturing. All fixturing and tenant fit up shall be approved by the Landlord
in advance and all agreements relating thereto shall be set forth in a separate
written addendum to this Lease.
1.5 Possession. Possession of the Premises shall be given to Tenant upon signing
of this Lease . If Tenant is given possession of the Premises prior to the
commencement of the Initial Term of the Lease, this Lease shall be in full force
and effect as of the date of possession and Tenant shall be subject to all of
the terms, conditions, provisions and obligations of the Lease except that
Tenant's obligation to pay base rent and additional rent shall not commence
until the date that the Initial Term commences unless so stated elsewhere within
this Lease.
ARTICLE II. Term
2.1 Term. Unless the plain meaning of the context indicates otherwise the use of
the word "Term" shall mean the Initial Term and any applicable Option Term.
2.2 Initial Term. The Initial Term of this Lease shall be for Three Years
commencing on August 1, 1994 and terminating on July 31, 1997.
2.3 Option Term. Tenant is given the option to extend the term on all the
provisions contained in this Lease, except this Article 2.3, for one (1)
Successive 3 year term "Option Term" following the expiration of the Initial
Term by giving written notice of the exercise of each option to Landlord at
least six months before the expiration of the preceding term. Provided however,
these options may only be exercised if this Lease has not been previously
terminated, by failure to exercise a prior option or otherwise, and Tenant is
not in default of its obligations hereunder at the time the option notice is
received by the Landlord.
ARTICLE III. Rent
3.1 Definitions. The following definitions shall apply to this
Lease:
(a) Base Rent: base rent is defined as the fixed annual rent set
forth herein, as adjusted from time-to-time, payable by Tenant to Landlord.
(b) Additional Rent: additional rent is defined as all additional
amounts payable by Tenant to Landlord pursuant to the terms of this Lease
including but not limited to the items described in section 3.5 below.
(c) Lease Year: a Lease Year is defined as the twelve month
period beginning on August 1 and ending on July 31.
3.2 Base Rent. Tenant shall pay Landlord throughout the Initial Term of
2
<PAGE> 9
this Lease, and any applicable Option Term, an annual Base Rent with cost of
living increases determined as follows:
(a) For the Initial Term the Base Rent shall be as set forth
in the Addendum to Lease Agreement as attached hereto.
(b) For the first Lease Year of each Option Term the Base Rent
shall be the greater of (i) the then annual Fair Market rent for the Premises as
agreed between Landlord and Tenant in accordance with ARTICLE 3.9 below, or (ii)
an amount equal to the Base Rent for the preceding Lease Year plus any cost of
living increase computed in accordance with the formula set forth below.
(c) For each subsequent Lease Year of an Option Term the Base
Rent shall be an amount equal to the Base Rent for the preceding Lease Year plus
any cost of living increases computed in accordance with the formula set forth
below.
3.3 Cost of Living Formula. All cost of living increases to the Base Rent shall
be computed in accordance with the following formula, except that the annual
cost of living increase shall not exceed 8% for any one Lease Year:
(a) The consumer price index "Northeast Urban Consumers-All
Items" published by the United States Department of Labor, Bureau of Labor
Statistics ("Index") which is published for the fifth full calendar month
preceding the Lease Year for which the increase is being computed ("Extension
Index") shall be compared with the Index published for the same calendar month
of the preceding calendar year ("Beginning Index").
(b) If the Extension Index has increased over the Beginning
Index, the Base Rent shall be adjusted by multiplying the Base Rent by a
fraction the numerator of which is the Extension Index and the denominator of
which is the Beginning Index;
(c) By way of example assume on November 1, of the current
calendar year the Lease enters its third Lease Year. Assume also that the Base
Rent for the second Lease Year was 10,500. The Extension Index would be the
Index published for the preceding month of June (the fifth calendar month
preceding the Lease Year for which the increase is being computed). Assume that
Index to be 1.60. The Beginning Index would be that Index published for the
month of June twelve months earlier (the preceding calendar year). Assume that
Index to be 1.50. The Base Rent for the preceding Lease Year or the second Lease
Year would then be multiplied by the fraction 1.60/1.50. The resulting product
of $ 11,200 would be the Base Rent for the third Lease Year.
If the Index is changed so that the base year of the Index
differs from that used as of the commencement of this Lease, the Index shall be
converted in accordance with the conversion factor published by the United
States Department of Labor, Bureau of Labor Statistics. If the Index is
discontinued or revised while this Lease is in effect, such other government
index or computation with which it is replaced shall be used in order to obtain
substantially the same result as would be obtained if the Index had not been
discontinued or revised.
3
<PAGE> 10
3.4 Payment of Base Rent. The Base Rent for each Lease Year shall be paid in
twelve equal monthly installments. All payments shall be made in advance on the
first day of each calendar month commencing on the date this Lease begins
without deduction, set-off, prior notice or demands. The monthly base rent shall
be prorated for any partial month at the beginning or the end of the Lease Term.
Base Rent shall not be paid more than sixty (60) days in advance without the
consent of Landlord's primary mortgage holder.
3.5 Additional Rent. During each Lease Year that this Lease is in effect Tenant
shall pay Landlord as Additional Rent its proportionate share of all expenses
and charges set forth below. For the purpose of this ARTICLE Tenant's
proportionate share, unless otherwise stated, is 41.06 percent (41.06%) which is
the ratio between the gross square feet of the Premises and gross leasable
square feet of the entire building. For any partial Lease Year, other than a
partial Lease Year caused by a default by Tenant, Tenant shall only be
responsible for its proportionate share of such amounts as are attributable to
the period of the Lease Year that this Lease was in effect.
(a) Real Estate Taxes: Tenant shall pay to Landlord its proportionate
share of the annual real estate taxes assessed against the Building and the land
upon which it is situated.
(b) Insurance Premiums: Tenant shall pay Landlord its proportionate
share of the cost of Landlord's fire, property and liability insurance,
including all reasonable endorsements thereto, on the Building and the land upon
which it is situated. Tenant shall not be obligated to reimburse Landlord for
any portion of an increase in the insurance premium caused by a particular use
or activity of any other tenant in the Building which that tenant is required to
pay pursuant to ARTICLE 7.2.
(c) Heating and Air Conditioning: If the fuel usage of the heating
and/or air conditioning systems servicing Tenant's space is separately metered,
Tenant shall be solely responsible for the payment for fuel directly to the
provider of the fuel. If the fuel usage of the heating and air conditioning
systems servicing the Premises is not separately metered Tenant shall pay
Landlord Tenant's share of the cost of the heating and air conditioning of the
Building based on Tenant's proportionate share of the usage measured. Tenant's
proportionate share in this instance shall be the ratio that the total square
feet of the Premises bears to the total square feet of the spaced served.
(d) Electric. If Tenant's space is separately metered for electric
service, Tenant shall be solely responsible for the payment of all electric
charges directly to the public utility servicing the Premises including connect
and disconnect fees. If the Premises are not separately metered for electric
service, Tenant shall pay to Landlord Tenant's proportionate share of the
electricity costs determined by the ratio between the gross square feet of the
Premises and the total gross square feet serviced by the meter serVicing the
Premises as well as any connect and disconnect charges associated with Tenant's
use.
(e) Garbage Removal: Tenant shall pay to Landlord a share of garbage
removal costs as determined by Landlord based on Landlord's good faith estimate
of Tenant's usage.
(f) Water and Sewer: Tenant shall pay to Landlord its proportionate
share of the water and sewer charges assessed against the Premises. At
Landlord's election Landlord may increase Tenant's proportionate share based on
Landlord's reasonable estimate of Tenant's actual usage. Any
4
<PAGE> 11
increase in Tenant's proportionate share shall be reflected in a corresponding
decrease in the other tenants' shares.
(g) HVAC and Maintenance: Tenant shall pay to Landlord its proportionate
share of the maintenance costs, including maintenance contracts on the heating,
ventilating, and air conditioning systems serving the Premises, such obligation
of Tenant shall not include capital expenditure repairs and replacements.
(h) Common Area Operating Expenses: Tenant shall pay to Landlord its
proportionate share of the common area operating expenses to the extent not
included in another subsection of this section 3.5. Costs for maintenance and
operation of the interior and exterior common areas shall not include capital
improvements. Any payments made to partners or other parties related to Landlord
and included as a part of the common area operating expenses as provided for
under this article, shall only be included to the extent such payments are at a
reasonable and competitive rate. Expenses incurred in connection with renovating
or improving space for tenants or other occupants of the Building, expenses paid
for or reimbursed to Landlord by insurance proceeds, third parties or tenants,
and management expenses of Landlord unrelated to the management of the common
areas, shall not be included in the common area operating expenses.
(i) Parking fees: Omitted.
(j) Other Assessments: Tenant shall pay Landlord its proportionate share
of any other assessments or fees which may in the future be levied against the
Building and the land upon which it is situated or against the use of the
Premises by the City of Lebanon or any other governing body or public utility,
including but not limited to assessments relating directly or indirectly to
parking requirements, spaces or facilities.
(k) Other Expenses: Tenant shall pay Landlord any sum which may become
due because of Tenant's failure to comply with any of the covenants of this
Lease, including any damages, costs and expenses to which Landlord is put in
curing any default of Tenant, it being understood that Landlord shall have the
right, but not the obligation, to cure any such default. Tenant shall make all
payments due under this subsections within thirty (30) days of receipt of
Landlord's invoice setting forth the amounts due and the reasons therefore.
All charges provided for in this ARTICLE shall be collectible as rent, the non
payment of which shall entitle Landlord to all rights and remedies to which
Landlord is entitled for the non-payment of rent.
3.6 Payment of Additional Rents. Except as may otherwise be provided in
this Lease, Tenant shall pay to Landlord an amount reasonably estimated by
Landlord to be one twelfth (1/12) of Tenant's proportionate share of additional
rent, on the first day of each month throughout the duration of the Lease. This
amount shall be prorated for any partial months at the beginning or end of the
Lease Term.
Landlord can adjust the monthly additional rent at the end of each accounting
period on the basis of Landlord's reasonable anticipated costs for the following
accounting period. An accounting period for the purposes of this provision shall
be the same as Landlord's tax year, pre-
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sently the calendar year, which may be changed from time to time by Landlord.
Within sixty (60) days after the end of each accounting period, Landlord shall
furnish to Tenant an annual statement showing the total additional rent,
Tenant's share of the additional rent, and the additional rent payments made by
Tenant covering the accounting period just ended. Each statement shall be
prepared, signed, and certified to be correct by Landlord, and if Landlord is a
corporation the statement shall be signed and certified to be correct by an
officer of Landlord. If Tenant's share of the additional rent for the accounting
period exceeds the payments made by Tenant, Tenant shall pay Landlord the
deficiency within thirty (30) days after receipt of the annual statement. If
Tenant's payments made during the accounting period exceed Tenant's share of the
additional rent, the excess shall be returned to Tenant within thirty (30 days
following accounting period. Any excess payments due Tenant at the end of an
accounting period during which the Lease has expired or terminated shall be
refunded to Tenant at the time the statement is provided .
Landlord shall keep at his usual place of business in West Lebanon, New
Hampshire, full, accurate, and separate books of account covering the additional
rent costs together with the necessary invoices and other raw data backup. The
books of account and backup shall be retained by Landlord for a period of at
least twelve (12) months after the expiration of each accounting period. Tenant
shall have the right at reasonable times upon reasonable notice to inspect the
books of account.
3.7 Late Payments. All Base Rent and Additional Rent payments
shall be made on or before the dates they are due by delivering the same to
Landlord at his business office as designated by Landlord from time to time.
After written notification by Landlord to Tenant of the non-payment of rent, any
payment more than five (5) days late, shall be assessed a late charge of ten
percent (10%) of the amount of the payment to cover additional handling and
administrative expenses of Landlord. After written notification by Landlord to
Tenant of the non-payment of rent, any payment more than thirty (30) days late
shall be assessed interest at the rate of eighteen percent (18%) per annum from
thirty days after the due date of the payment through the date the payment is
made.
3.8 Security Deposit. On execution of this Lease, Tenant shall
deposit with Landlord an amount equal to Two Month's Total Rent for Year One of
the Term as a security deposit for the performance by Tenant of the provisions
of the Lease. If Tenant is not in default and the Premises are not damaged at
the expiration or termination of this Lease, Landlord shall return the security
deposit to Tenant, otherwise Landlord can use the security deposit, or any
portion of it, to cure the default or to compensate Landlord for all damage
sustained by Landlord resulting from Tenant's default. Landlord shall not be
required to pay Tenant interest on the deposit.
3.9 Fair Market Rent Set by Appraisal. No later than sixty
(60) days prior to the commencement of any Lease Year for which a fair market
rent adjustment is to be made, the parties shall agree on the annual fair market
rent for the Premises for the ensuing Lease Year and they shall execute a
written statement setting forth the amount agreed to. If they are unable to
agree by the applicable date, each party, at its cost and by giving notice to
the other party, shall appoint a real estate ap-
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praiser with at least five (5) years' commercial appraisal experience in the
area in which the Premises are located to appraise and set the annual fair
market rent for the ensuing Lease Year. If the appraisers are unable to agree
within thirty (30) days after the appointment of the second appraiser, they
shall elect a third appraiser, who also meets the qualifications set forth above
and whose cost shall be paid one half by each party, and the annual fair market
rent shall be established by said third appraiser.
ARTICLE IV. Common Areas
4.1 Common Areas Defined. The term "common areas" means all
areas and facilities outside the Premises and within the exterior boundaries of
the Building and within the exterior boundaries of the land upon which the
Building is situated that are provided and designated by Landlord from time to
time for the general use and convenience of Tenant and of other tenants of the
Building and their respective employees and invitees. Common areas include,
without limitation, pedestrian walkways, landscaped areas, sidewalks, service
corridors, common restrooms, stairways, passageways, utility rooms, loading
areas, docks and parking areas.
4.2 Tenant's Right to Use Common Areas. Landlord gives Tenant
and its employees and invitees the nonexclusive right to use the common areas,
with others who are entitled to use the common areas, subject to Landlord's
rights set forth in this ARTICLE. Landlord shall conduct its activities in the
common areas as allowed in this ARTICLE in a manner that will cause the least
possible inconvenience, annoyance or disturbance to Tenant.
4.3 Landlord's Management of the Common Areas. Landlord shall
manage the common areas and shall have the following rights in conjunction
therewith:
(a) Establish and enforce reasonable rules and regulations
applicable to all tenants concerning the maintenance, management, use, and
operation of the common areas.
(b) Close any of the common areas to whatever extent required
in the opinion of Landlord's counsel to prevent a dedication of any of the
common areas or the accrual of any rights of any person or of the public to the
common areas.
(c) Close temporarily any of the common areas for maintenance
purposes.
(d) Make changes to the common areas including, without
limitation, changes in the location of driveways, entrances, exits, vehicular
parking spaces, parking area, or the direction of the flow of traffic.
ARTICLE V. Parking Spaces
In order to guarantee the proper maintenance of the parking
areas, Tenant shall park no vehicles overnight in any of the designated parking
areas unless Tenant, Tenant's employee(s) or Subtenant(s) is available to move
said vehicle if so requested by Landlord or Landlord's representative.
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ARTICLE VI. Heat. Utilities and Services
Landlord shall provide Tenant with heat, air conditioning,
electricity, water, sewer and garbage removal which shall be paid for by Tenant
as additional rent under ARTICLE III.
ARTICLE VII. Limitation On Use
7.1 Nature of Business. Tenant shall use the Premises for
Offices and Computer Software Research and Development and for no other purpose
without Landlord's written consent. Cooking and food preparation, other than for
consumption by Tenant's employees, on the Premises is prohibited. Tenant shall
have the right to have the premises occupied by up to but not more than fourteen
(14) employees and subtenants.
7.2 Cancellation of Insurance: Increase in Rates. Tenant shall
not do, bring or keep anything in or about the Premises that will cause a
cancellation of any of Landlord's or Tenant's insurance covering the Building or
the Premises. If the rate of any of Landlord's insurance is increased as a
result of a specific hazardous use or activity by Tenant, Tenant shall pay to
Landlord, within ten (10) days after Landlord delivers to Tenant a statement
from the insurance carrier that this rate increase was caused solely by an
activity of Tenant on the Premises, a sum equal to the difference between the
original premium and the increased premium. This sum shall be payable as
Additional Rent and shall continue to be payable for so long as the rate
increase remains in effect .
7.3 Compliance With Laws. Tenant shall comply with all laws,
codes, and regulations of any governing body concerning the Premises or Tenant's
use of the Premises, including without limitation the obligation of Tenant at
Tenant's sole cost to alter, maintain or restore the Premises in compliance and
conformity with all laws relating to the condition, use or occupancy of the
Premises during the term resulting from Tenant's particular and specific use of
the Premises. Landlord affirms that Landlord has met all the requirements set
forth by the City of Lebanon, New Hampshire as demonstrated by a Certificate of
Occupancy and that access to the Premises meets the requirements of the
Americans with Disabilities Act.
7.4 Waste. Nuisance. Tenant shall not use the Premises in any
manner that will constitute or create waste, nuisance or unreasonable annoyance
(including but not limited to, objectionable odors, noise or lights) to the
owners of adjacent properties or to the other tenants in the Building.
7.5 Damage to the Premises and Building. Tenant shall not
overload the Premises or do anything on the Premises that will cause damage to
the Premises. No machinery, equipment or other appliances or fixtures shall be
used or operated in or on the Premises that will in any manner injure the
Premises, and Tenant shall be solely liable for and indemnify the Landlord
against any injuries that occur to the Premises, to the Building, or to other
occupants of the Building as a result of its failure to comply with this
paragraph.
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7.6 Windows. The windows in the Premises form an integral part
of the Building design and appearance. No windows are to be blocked or covered
without Landlord's prior written consent. If windows are dressed they are to be
dressed tastefully. Landlord reserves the right to regulate all window displays
and dressings including signs, posters or other written materials placed in or
on them. Nothing is to be placed on the exterior of the windows or walls of the
Premises.
7.7 Tenant Lighting. Tenant shall not maintain or allow to be
maintained any excessively bright lights, or any changing, flashing, or
flickering lighting or similar devices, the effect of which will be visible from
the exterior of the Premises.
7.8 Loading and Unloading. All loading and unloading of goods,
supplies and equipment shall be done through the designated service entrances to
the Building.
7.9 Garbage and Storage. All garbage and refuse except
demolition, and construction materials shall be deposited into the dumpsters or
other refuse containers provided by Landlord. The disposal of demolition and
construction materials generated by Tenant shall be the sole responsibility of
Tenant. Tenant shall store all of Tenant's property within the Premises. No
property shall be stored temporarily or permanently in the common areas or on
the outside of the Building. Landlord affirms that no hazardous or toxic waste
or substances are improperly stored or handled in the Building in which the
premises are located or the land upon which the Building is located.
ARTICLE VIII. Maintenance
8.1 Landlord's Obligations. Landlord at its sole cost shall
maintain in good condition the following:
(a) The structural parts of the Building, which structural
parts include only, the foundation, bearing and exterior walls (excluding glass
and doors to the Premises), subflooring and roof;
(b) The unexposed plumbing and sewerage systems servicing the
Premises (except to the extent of damage caused by Tenant's use thereof such as
clogged drains);
(C) Capital improvements to the heating, ventilation, and air
conditioning systems;
(d) Capital improvements to the walkways;
(e) Major resurfacing of the parking and delivery areas;
(f) At Tenant's cost as set forth in ARTICLE III, Landlord
shall perform all other maintenance of the heating, ventilation, and air
conditioning systems and the common areas.
8.2 Tenant's Obligations. Except as otherwise provided herein,
Tenant at its cost shall maintain in good condition the following:
(a) The complete electrical system within the Premises;
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(b) The exposed plumbing system within the Premises;
(c) All of Tenant's leasehold improvements and trade fixtures;
(d) All other parts of the Premises which Landlord is not
required to maintain;
(e) Tenant shall not store anything nor create any situation
which would attract rodents or pests to the Premises.
(f) Tenant shall not use or permit the use of the Premises for
storage, generation, or disposal of hazardous waste as defined in NH RSA 147-A:2
et. seq.
ARTICLE IX. Improvements and Alterations
Tenant shall not, without the written consent of Landlord,
which consent shall not be unreasonably withheld, make any alterations,
improvements or additions to the Premises. All alterations, improvements,
additions or building fixtures, whether installed before or after the execution
of this Lease, shall remain upon the Premises at the expiration or sooner
termination of the Lease and become the property of Landlord unless Landlord,
prior to the termination of this Lease, shall have given written notice to
Tenant to remove the same in which event Tenant will remove such alterations,
improvements, additions or building fixtures and restore the Premises to the
same good order and condition which they were in prior to the making of such
alterations, improvements or additions, ordinary wear and tear excepted. Should
Tenant fail to do so, Landlord may do so at Landlord's option and the cost and
expense thereof shall be due by Tenant as Additional Rent.
ARTICLE X. Landlord's Lien
OMITTED
ARTICLE XI. LIENS AGAINST TENANT
11.1 Mechanics' Liens. Tenant shall pay all costs for
construction done or to be done by it on the Premises as permitted in this
Lease. Tenant shall not suffer or permit any lien or liens arising out of
alterations, renovations, improvements or repairs made by it or caused to be
done by it to be filed or perfected against the Premises, Building or land upon
which the Building is situated. If any such lien is filed, it shall constitute
an involuntary assignment prohibited by this Lease, provided, however, this
section is subject to the right to cure provision of ARTICLE 19.1 (c).
11.2 Tax Liens. The Tenant shall pay all state and federal
income, withholding, FICA, FUTA, or other taxes owed by it as and when they
become due and payable. Tenant shall not suffer or permit any lien or levies
arising out of the non-payment of the above to be filed or perfected against the
Premises or Building. If any such lien is filed it shall constitute an
involuntary assignment prohibited by this Lease provided, however this section
is subject to the right to cure provision of ARTICLE 19.1(c).
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ARTICLE XII. Exculpation of Landlord
Landlord shall not be liable to Tenant for any damages to Tenant or
Tenant's property or business from any cause and Tenant waives all claims
against Landlord for damage to persons or property arising for any reason,
except that Landlord shall be liable to Tenant for any damages to Tenant or to
Tenant's property resulting from the negligent or willful acts or omissions of
Landlord or its authorized representatives.
ARTICLE XIII. Indemnification
Tenant shall indemnify and hold Landlord harmless from all damages
arising out of any damage to any person or property occurring in, on, or about
the Premises, except that Landlord shall be liable to Tenant for damage
resulting from the negligent or willful acts or omissions of Landlord or its
authorized representatives. Landlord shall indemnify and hold Tenant harmless
from all damages arising out of any such acts or omissions. A party's obligation
under this ARTICLE to indemnify and hold the other party harmless shall be
limited to the sum that exceeds the amount of insurance proceeds, if any,
received by the party being indemnified, except that the indemnification
obligations shall not apply to damages not covered by insurance but which would
have been covered if the policies required by this Lease were in full force and
effect.
ARTICLE XIV. Insurance
14.1 Comprehensive General Liability Insurance. Tenant at its cost shall
maintain public liability and property damage insurance with a combined single
limit of not less than one million dollars ($1,000,000) insuring against
liability of Tenant and its authorized representatives arising out of or in
connection with Tenant's use or occupancy of the Premises. All such insurance
shall insure performance by Tenant of the indemnity provisions of this Lease,
shall name Landlord as an additional insured, if such insurance is available,
and shall contain cross-liability endorsements.
14.2 Personal Property Insurance. Tenant shall maintain a policy of
standard fire and extended coverage insurance with vandalism and malicious
mischief endorsements insuring all of Tenant's improvements and alterations. The
proceeds from such a policy shall be used by Tenant for the replacement or the
restoration of Tenant's improvements or alterations.
14.3 Plate Glass Insurance. Omitted.
14.4 Waiver of Subrogation. The parties release each other and their
respective authorized representatives from any claims for damages to any person
or to the Premises and the Building, fixtures, personal property, improvements
and alterations of either Landlord or Tenant in or on the Premises that are
caused by or result from risks insured against under any insurance policy
carried by the parties and in full force at the time of any such damage. Within
ninety days of the execution of this Lease each party shall cause each insurance
policy obtained by it to provide that the insurance company waives all rights of
recovery by way of subrogation against either party in connection with any
damages covered by any policy. Neither party shall be liable to the other for
any damage
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caused by fire or any of the risks insured against under any insurance policy
required by this Lease. If any insurance policy cannot be obtained with a waiver
of subrogation, the party undertaking to obtain the insurance shall notify the
other party of this fact and the other party is relieved of the obligation to
obtain a waiver of subrogation rights with respect to the particular insurance
involved.
14.5 Other Insurance Matters. All of the insurance required of Tenant
under this Lease shall:
(a) Be obtained from an insurance company qualified to do business in
the State of New Hampshire and be acceptable to Landlord's insurance agent.
(b) Contain an endorsement requiring ten (10) days written notice from
the insurance company to both parties before cancellation or change in the
coverage, scope or amount of any such policy.
(c) Provide that it WILL not be invalidated as to Landlord as an
additional insured by reason of any act or omission by Tenant or if Tenant has
made any misrepresentation in its application for insurance.
14.6 Certificate of Insurance Coverage. Tenant shall deposit with
Landlord a certificate of insurance for each policy of insurance Tenant is
required to maintain at the beginning of the Lease term and on renewal of each
policy not less than thirty (30) days before expiration of the term of such
policy.
14.7 Landlord's Insurance. Throughout the term of this Lease Landlord
shall carry and maintain general public liability insurance in the single
combined amount of not less than $1,000,000 insuring Landlord's liability in
connection with the Premises and the Building. Landlord shall also carry a
policy of standard fire and extended coverage insurance, with vandalism and
malicious mischief endorsements, and any other endorsements the Landlord deems
necessary, to the extent of at least 80% of the replacement value of the
Premises and the Building.
ARTICLE XV. Subordination to Mortgages
This Lease is and shall be prior to any encumbrance recorded after the
date of this Lease. If, however, a lender requires that this Lease be
subordinate to its mortgage, this Lease shall be subordinate to that mortgage,
if Landlord first obtains from the lender a Subordination, Non-Disturbance and
Attornment Agreement which agreement conforms substantially to Exhibit C
attached hereto.
Tenant shall attorn to any purchaser at any foreclosure sale, or to any
grantee or transferee designated in any deed given in lieu of foreclosure.
Tenant shall execute any documents reasonably required by a lender to
accomplish the purpose of this ARTICLE XV.
ARTICLE XVI. Destruction of Premises
16.1 Destruction Due to Risk Covered by Insurance. If during the Initial
Term and any Option Term the Premises are totally or partially
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destroyed from a risk covered by the Landlord's insurance rendering the Premises
totally or partially inaccessible or unusable, Landlord shall, with reasonable
dispatch, restore the Premises to substantially the same condition as they were
in immediately before destruction and such destruction shall not terminate this
Lease. Provided, however, in the event there is a total destruction or a partial
destruction which exceeds forty percent (40%) of the gross floor area of the
Premises, either Landlord or Tenant may elect to terminate this Lease by giving
notice thereof to the other party within thirty (30) days of the destruction.
Provided further, Landlord shall have thirty (30) days from the date of the
destruction to notify Tenant as to the length of time the restoration shall
take. If the restoration can be completed within one hundred and twenty (120)
days from the date of destruction, the Landlord shall proceed with the
restoration with reasonable dispatch and shall complete the same within the one
hundred and twenty (120) days. If the restoration cannot be completed within one
hundred and twenty (120) days from the date of destruction, Tenant shall have
ten (10) days from the date of Landlord's notification to elect to terminate
this Lease failing which this Lease shall remain in full force and effect and
Landlord will proceed expeditiously with the restoration and complete the same
with reasonable dispatch. In any event, if the existing laws do not permit the
restoration, either party can terminate this Lease immediately by giving notice
to the other party.
16.2 Destruction Due to Risk Not Covered by Insurance. If, during the
term, the Premises, are totally or partially destroyed from a risk not covered
by Landlord's insurance required by this Lease, for reasons other than
Landlord's failure to maintain said insurance, rendering the Premises totally or
partially inaccessible or unusable, Landlord shall restore the Premises and
other improvements in which the Premises are located to substantially the same
condition as they were in immediately before destruction, and such destruction
shall not terminate this Lease. Provided, however, Landlord shall have thirty
(30) days from the date of the destruction to notify Tenant as to the length of
time the restoration shall take. If the restoration can be completed within one
hundred and twenty (120) days from the date of destruction, the Landlord shall
proceed with the restoration with reasonable dispatch and shall complete the
same within the one hundred and twenty (120) days. If the restoration cannot be
completed within one hundred and twenty (120) days from the date of destruction,
Tenant shall have ten (10) days from the date of Landlord's notification to
elect to terminate this Lease failing which this Lease shall remain in full
force and effect and Landlord will proceed expeditiously with the restoration
and complete the same with reasonable dispatch. Provided, further, if the cost
of restoration exceeds ten percent (10%) of the then replacement value of the
Premises or of the Building, Landlord can elect to terminate this Lease by
giving notice to Tenant within thirty (30) days after determining the
restoration cost and replacement value. If the existing laws do not permit
restoration, either party can terminate this Lease immediately by giving notice
to the other party.
In the ease of destruction to the Premises only, if Landlord elects to
terminate this Lease Tenant, within fifteen (15) days after receiving Landlord's
notice to terminate, can elect to pay to Landlord, at the time Tenant notifies
Landlord of its election, the difference between ten percent (10%) of the then
replacement value of the Premises and the actual
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cost of restoration, in which case Landlord shall restore the Premises. Landlord
shall give Tenant satisfactory evidence that all sums contributed by Tenant as
provided in this Paragraph have been expended by Landlord in paying the cost of
restoration.
If Landlord elects to terminate this Lease and Tenant does not elect to
perform the restoration or contribute towards the cost of restoration as
provided in this Paragraph, this Lease shall terminate.
In any event if the existing laws do not permit restoration, either
party can terminate this Lease immediately by giving notice to the other party.
16.3 Extent of Landlord's Obligation to Restore. If Landlord is required
or elects to restore the Premises, Landlord Shall not be required to restore
alterations made by Tenant, Tenant's improvements, Tenant's trade fixtures, and
Tenant's personal property, such excluded items being the sole responsibility of
Tenant to restore.
ARTICLE XVII. Condemnation
17.1 Definition. The following definitions shall apply to this Lease:
(a) "Condemnation" means (i) the exercise of any governmental power,
whether by legal proceedings or otherwise, by a condemnor and (ii) a voluntary
sale or transfer by Landlord to any condemnor, either under threat of
condemnation or while legal proceedings for condemnation are pending.
(b) "Date of taking" means the date the condemnor has the right to
possession of the property being condemned.
(c) "Award" means all compensation, sums, or anything of value awarded,
paid, or received on a total or partial condemnation.
(d) "Condemnor" means any public or quasi-public authority, or private
corporation or individual, having the power of condemnation.
17.2 Total Taking. If the Premises are totally taken by condemnation,
this Lease shall terminate as of the date of taking.
17.3 Partial Taking. If any portion of the Building is taken by
condemnation, this Lease shall remain in effect, except that either party can
elect to terminate this Lease if twenty-five percent (25%) or more of the total
number of square feet in the Premises is taken and the remaining portion of the
Premises is rendered unsuitable for Tenant's continued use of the Premises,
provided, however, Landlord can elect to terminate this Lease if twenty-five
percent (25%) or more of the total number of square feet in the Building is
taken. Landlord shall notify Tenant immediately upon receipt of formal notice by
any condemnor of its intent to condemn by taking any portion of the Building or
the property upon which it is situated.
If either party elects to terminate this Lease, such party must exercise
its right to terminate pursuant to this ARTICLE by giving notice to the other
party within thirty (30) days after the nature and extent of the taking have
been finally determined. If either party elects to
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terminate this Lease as provided in this ARTICLE, the date of termination shall
be thirty (30) days after such party notifies the other party of its election to
terminate or on the date of taking, whichever occurs later. If neither party
elects to terminate this Lease as provided herein, this Lease shall continue in
full force and effect, except that rent shall be reduced pursuant to this
ARTICLE.
17.4 Effect on Rent. If any portion of the Premises is taken by
condemnation and this Lease remains in full force and effect, on the date of
taking the Base Rent shall be reduced by an amount that bears the same ratio to
the Base Rent as the total number of square feet in the Premises taken bears to
the total number of square feet in the Premises immediately before the date of
taking. All items of Additional Rent based on square footage shall be increased
or decreased depending upon the extent of the taking of the Premises and of the
Building.
17.5 Restoration of Premises. If there is a partial taking of the
Premises and this Lease remains in full force and effect, Landlord shall restore
the Premises to as good condition as they were in immediately prior to the
taking less the amount of area taken. Landlord, however, shall not be required
to restore alterations made by the Tenant, Tenant's improvements, Tenant's trade
fixtures, or Tenant's Personal property except to the extent that any such items
may be included in the award made to Landlord as a result of the condemnation.
17.6 Award-Distribution. All condemnation proceeds shall belong to and
be paid to Landlord, except that Tenant may petition the condemner for an award
attributable to Tenant's improvements or alterations made to the Premises by
Tenant in accordance with this Lease, which improvements and restorations Tenant
has the right to remove from the Premises pursuant to the provisions of this
Lease, and a sum for loss of good will.
17.7 Temporary Taking. The taking of the Premises or any part of the
Premises by military or other public authority shall constitute a taking of the
Premises by condemnation only when the use and occupancy by the taking party has
continued for longer than one hundred eighty (180) consecutive days. During the
one hundred eighty (180) day period, all of the provisions of this Lease shall
be in full force and effect, except that rent shall be abated or reduced during
such period of taking based on the extent to which the taking interferes with
Tenant's use of the Premises, and Landlord shall be entitled to whatever award
may be paid for the use and occupation of the Premises for the period involved.
ARTICLE XVIII. Assignment. Subletting and Encumbering
18.1 General. Tenant shall not sell, assign, mortgage, pledge or in any
manner transfer this Lease or any interest therein, nor sublet all or any part
of the Premises, nor license concessions nor lease departments therein, without
Landlord's prior written consent, which consent shall not be unreasonably
refused or delayed. Consent by Landlord to any assignment or subletting shall
not waive the necessity for consent to any subsequent assignment or subletting.
This prohibition shall include a prohibition against any involuntary subletting
or assignment by operation of law. Tenant understands that the use of the
Premises for research and development and offices is governed by the
requirements of Landlord's approvals from the Lebanon Zoning Board of Adjustment
and
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that the failure of a proposed use by a subtenant to be permitted as research
and development or office shall be reasonable grounds for Landlord to withhold
consent to such a subtenancy.
18.2 Omitted
A waiver by Landlord of any of the requirements of this ARTICLE with respect to
a particular prospective assignee or sublessee shall not constitute a waiver of
the requirements with respect to any other prospective assignee or sublessee.
18.3 Corporate Ownership. If at any time while this Lease is in effect
Tenant shall choose to incorporate, it is expressly understood and affirmed that
said corporation shall assume all of Tenant's obligations under this Lease
Agreement and that a written agreement so stating shall be executed by Tenant
and Landlord.
18.4 Involuntary Assignment. No interest of Tenant in this Lease shall
be assignable involuntarily by operation of law (including, without limitation
the transfer by testacy or intestacy). Each of the following acts shall be
considered an involuntary assignment: (i) if Tenant, or if Tenant is a
partnership or consists of more than one person or entity, if any partner of the
partnership or other person or entity, is or becomes insolvent, makes an
assignment for the benefit of creditors, or becomes a party to a proceeding
under the Bankruptcy Act in which the Tenant, partner or other person or entity
is the debtor; (ii) if a writ of attachment, execution or other levy is levied
on this Lease; or (iii) if, in any action or proceeding to which Tenant is a
party, a receiver is appointed with authority to take possession of the
Premises.
An involuntary assignment shall constitute a default by Tenant and
Landlord shall have the right to elect to terminate this Lease, in which case
this Lease shall not be treated as an asset of Tenant. If a writ of attachment,
execution or other levy is levied on this Lease, provided, however Tenant shall
have the right to cure this default as set forth in ARTICLE 19.1 (c). If any
involuntary proceeding in bankruptcy is brought against Tenant, or if a receiver
is appointed, Tenant shall have sixty (60) days in which to have the involuntary
proceeding dismissed or the receiver removed.
ARTICLE XIX. Default
19.1 Tenant's Default. The occurrence of any of the following shall
constitute a default by Tenant:
(a) Failure to pay Base Rent or Additional Rent within five (5) days of
written notice from Landlord of the non-payment of rent on the due date.
(b) Abandonment of or vacating the Premises.
(c) A breach of or the failure to perform any other provision of this
Lease, whether it be a condition or a covenant, if the breach or the failure to
perform is not cured within thirty (30) days after notice has been given to
Tenant. If the default cannot reasonably be cured within
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<PAGE> 23
thirty (30) days, Tenant shall not be in default of this Lease, if Tenant
commences to cure the default within the thirty (30) day period and diligently
and in good faith continues to cure the default until such default is cured.
Notices given under this paragraph shall specify the alleged default and the
applicable Lease provisions, and shall demand that Tenant perform the provisions
of this Lease within the applicable period of time, or quit the Premises. No
such notice shall be deemed a forfeiture or a termination of this Lease unless
Landlord so elects in the notice.
19.2 Remedies. Landlord shall have the following remedies if Tenant
commits a default. These remedies are not exclusive; they are cumulative in
addition to any remedies now or later allowed by law.
(a) Landlord can continue this Lease in full force and effect, and the
Lease will continue in effect as long as Landlord does not terminate Tenant's
right to possession, and Landlord shall have the right to collect rent when due.
During the period Tenant is in default, Landlord can enter the Premises and
relet them, or any part of them, to third parties for Tenant's account. Tenant
shall be liable immediately to Landlord for all costs Landlord incurs in
reletting the Premises, including, without limitation, brokers' commissions,
reasonable attorney's fees, expenses of remodeling the Premises required by the
reletting, and like costs. Reletting can be for a period shorter or longer than
the remaining term of this Lease, for a greater or lesser space with an
appropriate apportionment of rent to those relet portions of the Premises, and
may include good faith reasonable rent concessions. Tenant shall pay to Landlord
the net rent due under this Lease on tho dates such rent is due, less the rent
Landlord receives from any reletting. No act by Landlord allowed by this
paragraph including but not limited to the acceptance of the keys to the
premises, repossession through any lawful means, the making of alterations to
the Premises, or the entering into a reletting agreement upon learning of
Tenant's intent to vacate but before actual vacation, shall terminate this Lease
unless Landlord notifies Tenant that Landlord elects to terminate this Lease.
(b) Landlord can terminate Tenant's right to possession of the Premises
at any time. No act by Landlord, including but not limited to those authorized
by the preceding paragraph or the appointment of a receiver on Landlord's
initiative to protect Landlord's interest under this Lease, other than giving
written notice to Tenant shall terminate this Lease. On termination, Landlord
has the immediate right to recover from Tenant:
(i) The worth, at the time of the award, of the unpaid net rent
applicable to the period of time up to the termination;
(ii) Any other amount, including court cost and reasonable attorney's
fees, necessary to compensate Landlord for all detriment proximately caused by
Tenant's default.
"The worth, at the time of the award," as used in (i) of this section,
includes any late charges and interest charges permitted in ARTICLE 3.7.
If the Demised Premises or any part thereof be relet by Landlord for the
unexpired term of this Lease, or any part thereof, before
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<PAGE> 24
presentation of evidence on the fair and reasonable rental value, to any court
or other hearings officer, the amount of rent reserved upon such reletting shall
prima facie be the fair and reasonable rental value for the part or whole of the
Premises so relet during the term of the reletting period.
(c) Unless Landlord elects to terminate this Lease and pursue recovery
pursuant to the preceding paragraph (b), no termination of this Lease, by any
voluntary or involuntary act or omission of Landlord or Tenant or by operation
of the law, shall relieve Tenant of its obligations under this Lease, including
but not limited to its obligations to pay rent and additional rent, for the
remainder of the term. All such obligations shall expressly survive termination.
19.3 Right to Cure Defaults. Landlord may, but shall not be obligated
to, at any time and without notice to Tenant, cure any default by Tenant under
this Lease. Whenever Landlord so elects, all costs and expenses incurred by
Landlord in curing such default, including, without limitation, reasonable
attorneys' fees, together with interest on the amount of such costs and expenses
shall be paid by Tenant to Landlord on demand and shall be recoverable as
Additional Rent.
Tenant may, but shall not be obligated to, at any time and without
notice to Landlord, cure any default by Landlord under this Lease. Whenever
Tenant so elects, all costs and expenses incurred by Tenant in curing such
default, including, without limitation, reasonable attorney's fees, together
with interest on the amount of such costs and expenses shall be paid by Landlord
to Tenant on demand and may be recoverable as abated Additional Rent.
ARTICLE XX. Landlord's Right to Enter
Landlord, or its authorized representatives shall have the right to
enter the Premises at all reasonable times upon reasonable notice (except in the
case of an emergency) to Tenant for any of the following purposes:
(a) To determine whether the Premises are in good condition and whether
Tenant is complying with its obligations under this Lease;
(b) To do any necessary maintenance and to make any restoration to the
Premises;
(c) To post any notices required or allowed under the provisions of
this Lease;
(d) To post "for sale" signs or "for rent" signs during the last six (6)
months of the Initial Term or any Option Term or during any period while Tenant
is in default;
(e) To show the Premises to prospective brokers or buyers or to
prospective tenants of the Premises during the last six (6) months of the
Initial Term or any Option Term or during any period while Tenant is in default;
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<PAGE> 25
(f) To shore the foundations, footing and walls of the Premises and to
erect scaffolding and protective barricades around and about the Premises, but
not so as to prevent entry to the Premises and to do any other act or thing
necessary for the safety, preservation or expansion of the Premises or the
Building.
Landlord shall not be liable in any manner for any inconvenience,
disturbance, loss of business, nuisance or other damage arising out of
Landlord's entry on the Premises as provided in this ARTICLE, except damage
resulting from negligent acts or omissions of Landlord or its authorized
representative.
Tenant shall not be entitled to an abatement or reduction of rent if
Landlord exercises any right reserved in this ARTICLE.
Landlord shall conduct its activities on the Premises as allowed in this
ARTICLE in a manner that will cause the least possible inconvenience, annoyance
or disturbance to Tenant.
It is expressly understood and agreed that Tenant will have and store
upon the Premises certain proprietary information and products and Tenant shall
have the right to require Landlord or Landlord's authorized representatives to
sign Tenant's Non-Disclosure form, a copy of which shall be attached to this
Lease Agreement as Exhibit D.
ARTICLE XXI. Waiver
No delay or omission in the exercise of any right or remedy of Landlord
on any default by Tenant shall impair such a right or remedy or be construed as
a waiver.
The receipt and acceptance by Landlord of delinquent rent shall not
constitute a waiver of any other default; it shall constitute only a waiver of
timely payment for the particular rent payment involved.
No act or conduct of Landlord, including, without limitation, the
acceptance of the keys to the Premises, shall constitute an acceptance of the
surrender of the Premises and accomplish a termination of the Lease unless so
stated by Landlord in writing.
Landlord's consent to or approval of any act by Tenant requiring
Landlord's consent or approval shall not be deemed to waive or render
unnecessary Landlord's consent to or approval of any subsequent act by Tenant.
Any waiver by Landlord of any default must be in writing and shall not
be a waiver of any other default concerning the same or any other provision of
the Lease.
ARTICLE XXII. Sale or Transfer of the Premises
If Landlord sells or transfers the Premises, Landlord on consummation of
the sale or transfer, shall be released from any liability thereafter accruing
under this Lease if Landlord's successor has assumed in writing, for the benefit
of Tenant, Landlord's obligations under this Lease.
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<PAGE> 26
If any security deposit or prepaid rent has been paid by Tenant,
Landlord can transfer the security deposit or prepaid rent to Landlord's
successor or return said security deposit to Tenant and on such transfer
Landlord shall be discharged from any further liability in reference to the
security deposit or prepaid rent.
ARTICLE XXIII. Surrender: Holding Over
23.1 Surrender. On the expiration or within ten days after any other
termination of the term, Tenant shall surrender to Landlord the Premises and all
Tenant's improvements and alterations in good condition (except for ordinary
wear and tear occurring after the last necessary maintenance made by Tenant and
destruction to the Premises covered by Article XVI), except for alterations that
Tenant has the right to remove or is obligated to remove under the provisions of
Article IX. Tenant shall remove all of its personal property within the
above-stated time. Tenant shall perform all restoration made necessary by the
removal of any alterations or Tenant's personal property within the time period
stated in this Article.
Landlord can elect to retain or dispose of in any manner any alterations
or Tenant's personal property that Tenant does not remove from the Premises on
expiration or termination of the term as allowed or required by this Lease by
giving at least three days notice to Tenant. Title to all such alterations or
Tenant's personal property that Landlord elects to retain or dispose of on
expiration of the three day period shall vest in Landlord. Tenant waives all
claims against Landlord for any damage to Landlord resulting from Landlord's
retention or disposition of any such alterations or Tenant's personal property.
Tenant shall be liable to Landlord for Landlord's cost for storing, removing,
and disposing of any alterations or Tenant's personal property.
If Tenant fails to surrender the Premises to Landlord on expiration or
within ten days after termination of the term as required by this Article,
Tenant shall hold Landlord harmless from all damages resulting from Tenant's
failure to surrender the Premises, including without limitation, claims made by
a succeeding Tenant resulting from Tenant's failure to surrender the Premises.
23.2 Holding Over. If Tenant shall hold over after the expiration of the
term hereby created, it shall be deemed a renewal of this Lease and of all the
terms, covenants and conditions herein contained, which shall continue from
month-to-month, except that the monthly Base Rent shall be double the last
month's Base Rent hereunder, and either Landlord or Tenant may terminate such
holding upon thirty (30) days' written notice.
ARTICLE XXIV. Estoppel Certificate
Tenant agrees from time-to-time, upon not less than fifteen (15) days
prior written request by Landlord, to execute, acknowledge and deliver to
Landlord a statement in writing, which conforms substantially to Exhibit B
attached hereto, certifying that this Lease is unmodified and in full force and
effect and that Tenant has no defenses, offsets or counterclaims against its
obligations to pay rent and additional charges and to perform its other
covenants under this Lease and that there are no uncured defaults of Landlord or
Tenant under this Lease (or, if there have
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<PAGE> 27
been any modifications and, if there are any defenses, offsets, counterclaims,
or defaults, setting them forth in reasonable detail), and the dates to which
the Base Rent and Additional Rents have been paid. Any such statement delivered
pursuant to this ARTICLE may be relied upon by a prospective purchaser or
mortgagee of the leased Premises. Failure to deliver the certificate within the
15 days shall be conclusive upon the Tenant for the benefit of the Landlord that
this Lease is in full force and effect and has not been modified except as may
be represented by the Landlord and that Landlord is not in default of any of its
obligations hereunder.
Tenant shall have the same right to request an Estoppel Certificate from
Landlord under the same conditions as outlined in Paragraph One of this ARTICLE
XXIV.
ARTICLE XXV. Signs and Awnings
No signs or awnings shall be placed on the Premises without the
Landlord's written consent which shall not be unreasonably withheld. No signs
other than directory signs and signs advertising Tenant's business shall be
placed on the Premises. All signs and awnings must conform to the Lebanon Zoning
Ordinance, be aesthetically pleasing and in good taste. No signs or awnings
shall be fastened to the Building except in an architecturally sound manner so
as not to injure or deface the Building, and Tenant shall be solely responsible
for the repair of all damage resulting therefrom.
ARTICLE XXVI. Recording
Upon signing, the parties shall execute a Notice of Lease in recordable form.
ARTICLE XXVII. Notice
Any notice or demand required by this Lease shall be in writing and
shall be delivered or served in any commercially reasonable manner. The burden
of proving delivery or service shall be on the party issuing the notice or
making the demand. In any event delivery or service shall be deemed made when
made by certified mail, return receipt requested, addressed to the respective
party at the mailing address first set forth above or at such other address as
may be designated by either party from time to time in writing.
ARTICLE XXVIII. Miscellaneous
28.1 Binding Effect. Except as otherwise provided herein, all of the
obligations, conditions and undertakings herein contained shall extend to and be
binding upon the legal representatives, heirs, executors, administrators,
successors and assigns of Landlord and Tenant and any other parties hereto.
28.2. Governing Law. This Lease shall be governed by the laws of the
State of New Hampshire.
28.3 Provisions are Covenants and Conditions. All provisions, whether
covenants or conditions, on the part of Tenant shall be deemed to be both
covenants and conditions.
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28.4 Caption. The titles to the ARTICLES and paragraphs in this Lease
have been inserted for convenience only and shall not effect the meaning or
interpretation of the language of this Lease.
28.5 Singular and Plural. Whenever reasonably required by the context of
this Lease, the singular shall include the plural.
28.6 Variations in Gender. The terms "Landlord" and "Tenant" and all
pronouns or any variations thereof shall be deemed to refer to the masculine,
feminine, and neuter as the context may reasonably require.
28.7 Joint and Several Obligations. "Party" shall mean Landlord or
Tenant; and if more than one person or entity is Landlord or Tenant, the
obligations imposed on that party shall be joint and several.
28.8 Severability. The unenforceability, invalidity, or illegality of
any provision shall not render the other provisions unenforceable, invalid, or
illegal.
28.9 Real Estate Brokers; Finders Fees. Each party shall be responsible
for payment of their own real estate brokers or finders fees with respect to
this Lease.
28.10 Rent Payable in U.S. Currency. Rent and all other sums payable
under this Lease must be paid in lawful currency of the United States.
28.11 Integrated Agreement; Modification. This Lease contains all the
agreements of the parties and cannot be amended or modified except by a written
agreement.
28.12 Corporate Authority. If either party is a corporation, that party
shall deliver to the other on execution of this Lease a certified copy of a
resolution of its board of directors authorizing the execution of this Lease and
naming the officers that are authorized to execute this Lease on behalf of the
corporation.
28.13 Smoking. In the interest of all tenants, smoking is pro-
hibited within the Building at all times.
28.14 Waterfront Facilities. Tenant agrees and affirms that the use of
the waterfront facilities located on site is solely and completely at Tenant's
own risk and Landlord shall in no way be held liable or responsible for any act
or occurrence resulting in damage to Tenant, its' agents, assigns or guests.
Tenant acknowledges that use of the waterfront facilities may be hazardous and
hereby releases Landlord from any and all liability connected with Tenant use
thereof.
28.15 Consent, Approval, Discretion. Whenever Landlord's or Tenant's
consent or approval or discretion is permitted hereunder, such consent,
approval, or discretion shall not be unreasonably withheld or delayed and shall
be exercised in good faith.
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<PAGE> 29
RSR ROBSAN RESOURCES, INC.
MEDICAL MEDIA SYSTEMS
LEASE AGREEMENT
SIGNATURE PAGE
Dated this 4th day of July, 1994.
/s/ WITNESS /s/ ROBERT MACNEIL
- - -------------------------------- ------------------------------------
Witness RSR Robsan Resources, Inc., Landlord
Robert MacNeil
Its: President, Duly Authorized
/s/ WITNESS /s/ LEO C. MCKENNA
- - -------------------------------- ------------------------------------
Witness Medical Media Systems, TENANT
By: Leo C. McKenna
Its: Administrative Officer
Duly Authorized
23
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[BLUEPRINT OF TOILET ROOM LAYOUT]
<PAGE> 31
EXHIBIT B TO LEASE
TENANT ESTOPPEL CERTIFICATE
Gentlemen:
The undersigned is Tenant under a lease with _______________________
("Landlord") dated_________________________ ("Lease") relating to premises at
________________________________ and, recognizing that you ("Lender") will rely
on the information herein contained in connection with a contemplated mortgage
loan to be made by Lender, hereby certifies to Lender as follows:
1. The Lease has not been modified, altered or amended except for
_______________________. There are no other oral or written agreements,
understandings or the like between Landlord and Tenant relating to the
premises demised by the Lease (the "Premises") or the Lease transaction.
2. Tenant has accepted possession of the Premises, is in occupancy thereof
under the Lease, and the term commenced on ______________________. The
execution of the Lease was duly authorized, the Lease was properly executed
and is in full force and effect and is valid, binding and enforceable
against Tenant and there exists no default, nor state of facts which with
notice, the passage of time, or both, would become a default, on the part of
either Tenant or Landlord except for ____________________________.
3. Under the Lease, Tenant is presently obligated to pay rent without present
right of defense or offset, in monthly installments of $____________. Rent
is paid through and including _____________________. No rent has been or
will be paid more than 30 days in advance, and Tenant has no claim against
the Landlord for any deposits or other sums, except as
follows:_____________________________.
4. There has not been filed by or against nor, to the best of the knowledge and
belief of Tenant, is there threatened against or contemplated by Tenant, a
petition in bankruptcy, voluntary or otherwise, any assignment for the
benefit of creditors, any petition seeking reorganization or arrangement
under the bankruptcy laws of the United States or of any state thereof, or
any other action brought under said bankruptcy laws.
5. To the best of Tenant's knowledge, there has not been any assignment,
hypothecation or pledge of the Lease or rents accruing under the Lease,
other than as proposed to Lender.
6. All of the improvements contemplated by the Lease have been entirely
completed as required therein.
7. The address for notices to be sent to Tenant is as set forth in the Lease.
8. Tenant has no right of first refusal, option or other right to purchase the
Property or any part thereof, including, without limitation, the Premises.
9. Tenant shall, on serving Landlord with any notice in respect of any Landlord
default under the Lease, simultaneously serve a copy of such notice (by
registered or certified mail, return receipt requested) upon Lender.
10. Tenant understands that Landlord intends to assign the Lease to Lender and
agrees that if Lender so requests pursuant to such assignment, Tenant will
pay all rents and other charges due and payable under said Lease directly to
Lender.
________________________________________
________________________________________
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<PAGE> 32
EXHIBIT C
SUBORDINATION, NON-DISTURBANCE
AND ATTORNMENT AGREEMENT
AGREEMENT, dated ______________, between ________________, of
_______________________ (the "Mortgagee"), and ____________ and ____________, of
___________, _____________ County, _____________, whose mailing address is
____________________________________, ____________, (the "Tenant").
WITNESSETH:
WHEREAS, a certain lease (the "Lease") dated as of _________ , 1991, was
entered into between ______________________(the "Landlord") and Tenant, leasing
certain premises located at ____________, _______ County, ______________, more
particularly described in the Lease (the "Premises"); and
WHEREAS, Landlord has given a mortgage dated __________ (the "Mortgage")
to Mortgagee which encumbers the Premises and secures Landlord's. indebtedness
to the Mortgagee of up to ____________ Dollars ($__________), which Mortgage is
recorded in Book ____, page ______ of the __________ County Registry of Deeds;
NOW, THEREFORE, in consideration of the covenants set forth below, the
Tenant and Mortgagee hereby covenant and agree as follows:
1. The Lease, as the same is in effect at the date hereof and as
may be amended from time to time hereafter, shall be and shall remain
subject and subordinate in each and every respect to the Mortgage in the
total principal sum set forth above plus interest, and to any
extensions, renewals, additions, consolidations, increases, or
modifications thereof in any sum.
2. Notwithstanding the provisions of Section 1 of this
Agreement, so long as Tenant is not in default in the payment of rent or
in the performance of any of the terms, covenants, or conditions of the
Lease on Tenant's part to be performed, Tenant's possession and
occupancy of the Premises and Tenant's right and privileges under the
Lease or any renewal thereof shall not be diminished or interfered with
by Mortgagee; and Mortgage will not join Tenant as a party defendant in
any action or proceeding for the purpose of terminating Tenant's
interest or estate under the Lease because of any default under the
Mortgage.
3, In the event that the Mortgage shall be foreclosed or a deed
is given in lieu of foreclosure, Tenant shall be bound to the Purchaser
and Purchaser shall be bound to the Tenant under all of the terms,
covenants, and conditions of the Lease as amended for the balance of the
remaining term, with the same force and effect as if the Purchaser were
the landlord under the Lease, and Tenant does hereby attorn to the
Purchaser as its landlord, said
<PAGE> 33
-2-
attornment to be effective and self-operative, without the execution of any
further instruments on the part of any of the parties hereto, immediately upon
the Purchaser succeeding to the interest of Landlord under the Lease; provided
however, that Tenant shall be under no obligation to pay rent to the Purchaser
until Tenant receives written notice from the Purchaser that it has succeeded to
the interest of Landlord under the Lease; and provided further that the
Purchaser shall not be:
(a) liable for any act or omission of any prior landlord;
(b) subject to any offsets or defenses which Tenant might have
against any prior landlord; nor
(c) bound by any rent or additional rent which Tenant might
have paid for more than the current month to any prior landlord.
4. No amendment or modification of the Lease shall be effective or
binding upon the Purchaser unless Mortgagee shall have given its prior written
consent to such amendment or modification
MORTGAGEE
By:__________________________
Its Duly Authorized
_____________________________
_____________, Tenant
_____________________________
____________________, Tenant
<PAGE> 34
FIRST ADDENDUM TO LEASE AGREEMENT
between
RSR ROBSAN RESOURCES, INC., LANDLORD
and
MEDICAL MEDIA SYSTEMS, TENANT
This First Addendum to Lease Agreement shall be attached to and become a
part of the Lease Agreement between the two parties below signed and in the
event a conflict shall occur between this First Addendum to Lease Agreement and
said Lease Agreement, this First Addendum to Lease Agreement shall take
precedence.
Notwithstanding the Lease Agreement between the two parties signed
below, the parties agree and affirm as follows:
a) Base Rent for the Initial Term for the portions of the Premises known
as Area # 1 and Area # 2 as shown on the attached drawing shall be:
Year One (8/1/94-7/31/95) $ 10.00/sf for Area # 1 [NOT INCLUDING
Year One (8/1/94-7/31/95) $ 4.00/sf for Area # 2 COMMON AREA]
Year Two (8/1/95-7/31/96) $ 11.00/sf for Area # 1
Year Two (8/1/95-7/31/96) $ Year One + CPI per lease for Area # 2
Year Three (8/1/96-7/31/97) $ 12.00/sf for Area # 1
Year Three (8/1/96-7/31/97) $ Year Two + CPI per Lease for Area # 2
b) Additional Rent for the Initial Term for the portions of the Premises
known as Area # 1 and Area # 2 as shown on the attached drawing shall be as
follows.
Year One (8/1/94-7/31/95) $ 2.50/sf for Area # 1**
Year One (8/1/94-7/31/95) $ 2.50/sf for Area # 2**
Year Two (8/1/95-7/31/96) Actual Operating Cost for
both Area # 1 and Area # 2
Capped at $ 3.25/sf**
Year Three (8/1/96-7/31/97) Actual Operating Costs for
both Area # 1 and Area # 2.
Capped at $ 4.23/sf**
**It is understood and agreed that in determining the operating costs
for Year Two and Year Three, Landlord shall separate the cost of Property Taxes
from the remaining operating costs for the preceding lease year. Tenant shall be
responsible for its prorata share of Property Taxes in their entirety, based on
the Property Taxes actually assessed and paid during the preceding year. The
total of the remaining operating costs shall not increase more than TEN PERCENT
(10%) above the preceding lease year and in no case shall Tenant's proportionate
share of operating costs, including taxes, exceed $ 3.25 per square foot in Year
Two or $ 4.23 per square foot in Year Three. In the event that the property
Taxes actually paid by Landlord in Year Two or in Year Three shall have been
less than that paid for the preceding year, Landlord shall refund the excess to
Tenant as provided in paragraph 3.6 of the Lease.
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<PAGE> 35
c) Unless otherwise stated elsewhere within this agreement, Tenant shall
be totally responsible for the payment of utilities which service the Premises.
Capped Additional Rent costs apply to all other costs of operation.
d) Both parties agree that Tenant requires specialized fit-up for the
operation of Tenant's business beyond the "plain vanilla" fit-up provided by
Landlord. The parties further agree and affirm that Tenant shall pay to
Landlord, as additional rent, the costs of the specialized fit-up amortized over
the Lease Term and more fully explained in the Second Addendum to Lease
Agreement attached hereto. Repayment of fit-up expenses shall be in equal
monthly installments over the Lease Term excepting in the event Tenant shall
exercise its Right to Terminate the Lease Agreement as cited in Section (e)
below. In the event Tenant shall exercise its Right to Terminate, Tenant shall
pay to Landlord any and all payments due for fit-up repayment prior to the
termination of the Lease.
e) Both parties agree that the Lease Agreement and this First Addendum
to Lease Agreement shall be contingent upon approval from the responsible
governing Boards of the City of Lebanon, New Hampshire.
f) Landlord shall grant to Tenant the right to terminate the Lease
Agreement and this First Addendum to Lease Agreement on 7/31/96 by providing
Landlord with written notification of Tenant's intent to terminate the Lease no
later than January 31, 1996.
g) Both Landlord and Tenant agree that Tenant has expressed its interest
in expanding the Premises to space adjacent to the Leasehold when and if
Tenant's business operations require additional space. Landlord agrees that
prior to entering into a lease agreement with another Tenant for said adjacent
space, Landlord will inform Tenant of its intent to lease the space, for how
long the lease term would be and to provide Tenant with the opportunity to
discuss the space with Landlord and to negotiate with Landlord terms and
conditions for leasing said adjacent space. It is expressly understood by both
parties that Landlord is in no way granting to Tenant any right to the adjacent
space.
h) Landlord agrees that Landlord will at his sole expense apply for any
and all necessary permits required for the operation of Tenant's business as
office and research and development including the obtaining of a Certificate of
Occupancy. It is expressly understood that Landlord shall not be liable for any
other permitting beyond that required for Tenant's initial occupancy of the
leasehold.
i) The above cited Lease Agreement notwithstanding, rent shall commence
at occupancy by Tenant or August 1, 1994 whichever shall occur first. In the
event necessary permits, including the Certificate of Occupancy shall not have
been issued, rent shall commence at the time of said issuance.
2
<PAGE> 36
Dated this 8th day of July, 1994.
/s/ SIG ILLEGIBLE /s/ ROBERT MACNEIL
- - -------------------------------- --------------------------------------
Witness RSR ROBSAN RESOURCES, INC.
BY: ROBERT MACNEIL
ITS: PRESIDENT
DULY AUTHORIZED
/s/ SIG ILLEGIBLE /s/ LEO C. MCKENNA
- - ------------------------------- --------------------------------------
Witness MEDICAL MEDIA SYSTEMS
BY: LEO C. MCKENNA
IT : ADMINISTRATIVE OFFICER
DULY AUTHORIZED
3
<PAGE> 37
EXHIBIT D
MEDICAL MEDIA SYSTEMS
INVENTION AND NON-DISCLOSURE AGREEMENT
IN CONSIDERATION of my being engaged as a consultant for Medical Media
Systems, a New Hampshire general partnership (the "Company"), and for other
valuable consideration, receipt of which is acknowledged, I agree as follows:
1. Proprietary Information.
(a) I agree that all information and know-how, whether or not in
writing, of a private, secret or confidential nature concerning the Company's
business of financial affairs (collectively, "Proprietary Information") is and
shall be the exclusive property of the Company. I will not disclose any
Proprietary Information to others outside the Company or use the same for any
purposes (other than in the performance of my duties for the Company unless and
until such Proprietary information has become public knowledge without fault by
me.
(b) All tangible material containing Proprietary Information or copies
thereof and all tangible property of the Company in my custody or possession
shall be delivered to the Company, upon a request by the Company. After such
delivery, I shall not retain any such materials or copies thereof or any such
tangible property.
(c) I agree that my obligation not to disclose or use information,
know-how and materials of the types set forth above, and my obligation to return
materials and tangible property, set forth above, also extends to such types of
information, know-how, materials and tangible property of customers of the
Company or suppliers to the Company or other third parties who may have
disclosed or entrusted the same to the Company or to me in the course of the
Company's business.
2. Developments.
(a) I will make full and prompt disclosure to the Company of all
inventions, improvements, discoveries, methods, developments, software, and
works of authorship, whether or not patentable or copyrightable, which are
created, made, conceived or reduced to practice by me or under my direction or
jointly with others in the course of my work for the Company whether or not
during normal working hours or on the premises of the Company (all of which are
collectively referred to in this Agreement as "Developments").
(or any person or entity designated by the Company) all my right, title and
interest in and to all Developments and all related patents, patent
applications, utility models,
<PAGE> 38
applications for utility models, and copyrights and copyright applications. I
also agree to waive all claims to moral rights in all Developments.
(c) I agree to cooperate fully with the Company, both during and after
my relationship with the Company, with respect to the procurement, maintenance
and enforcement of copyrights, patents and other industrial and intellectual
property rights (both in the United States and foreign countries) relating to
Developments. I will sign all papers, including without limitation, copyright
applications, patent applications, declarations, oaths, formal assignments,
assignment of priority rights, and powers of attorney, which the Company may
deem necessary or desirable in order to protect its rights and interests in any
Development.
3. Other Agreements.
I represent that my performance of all the terms of this Agreement does
not and will not breach any agreement to refrain from competing, directly or
indirectly, with the business of any other party nor any agreement to keep in
confidence proprietary information, knowledge or data acquired by me in
confidence or in trust. I will not disclose to the Company or induce the Company
to use any confidential or proprietary information or material belonging to any
previous employer or others.
4. General.
(a) This Agreement supersedes all prior agreements, written or oral,
between me and the Company relating to the subject matter of this Agreement.
This Agreement may not be modified, changed, or discharged in whole or in part,
except by an agreement in writing signed by me and the Company.
(b) This Agreement will be binding upon my heirs, executors and
administrators and will inure to the benefit of the Company and its successors
and assigns.
(c) This Agreement is governed by, and will be construed and enforced in
accordance with, the internal laws of the State of New Hampshire.
I HAVE READ ALL OF THE PROVISIONS OF THIS AGREEMENT AND I UNDERSTAND AND
AGREE TO EACH OF SUCH PROVISIONS.
Date: _________________ ______________________________
Medical Media Systems
By:___________________________
<PAGE> 1
EXHIBIT 10.18
<PAGE> 2
CONSULTING AGREEMENT
By
and
Between
Valentino V. Montegrande
and
Ixion, Inc.
Dated: April 25, 1995
<PAGE> 3
TABLE OF CONTENTS
1. Engagement ...................................................... 1
2. Duties .......................................................... 1
3. Time Obligations; Other Obligations ............................. 1
4. Compensation .................................................... 2
4.1 Monthly Retainer ....................................... 2
4.2 Stock Bonus ............................................ 2
4.3 Commission ............................................. 4
4.4 Expenses ............................................... 4
5. Independent Contractor Relationship ............................. 4
6. Taxes ........................................................... 4
7. Worker's Compensation Insurance ................................. 5
8. Indemnification ................................................. 5
9. Noncompetition and Confidentiality .............................. 5
9.1 Noncompetition ......................................... 5
9.2 Nonsolicitation ........................................ 5
9.3 Confidentiality ........................................ 5
9.4 Change of Control ...................................... 5
10. Equitable Relief ................................................ 6
11. Term and Termination ............................................ 6
11.1 Effective Date ......................................... 6
11.2 Terminate .............................................. 6
11.3 Compensation Upon Termination .......................... 6
11.4 Enforceability ......................................... 7
12. Cause and Breach ................................................ 7
12.1 Termination for Cause .................................. 7
12.2 Notice of Breach ....................................... 7
13. Notice .......................................................... 7
14. Assignment ...................................................... 8
15. Prior Obligations ............................................... 8
16. Preparation of Agreement ........................................ 8
17. Miscellaneous ................................................... 8
17.1 Waiver ................................................. 8
17.2 Amendments ............................................. 8
17.3 Integration ............................................ 8
17.4 Severability ........................................... 8
17.5 Headings ............................................... 8
17.6 Governing Law .......................................... 9
<PAGE> 4
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") made effective the 25th day
of April, 1995, is between Ixion, Inc., a Delaware corporation (the "Company"),
and Valentino V. Montegrande ("Consultant").
1. Engagement. Beginning on the Effective Date (as defined in Section
11, the Company will hire Consultant, and Consultant agrees to be hired by the
Company, as a Marketing and Sales Consultant.
2. Duties. Consultant shall, during the term of the Agreement, provide
general consultation services, as the Company may reasonably request, in
connection with strategic business development to include marketing, sales and
distribution strategy, product development and the overall positioning of the
Company in the medical/surgical educational marketplace; and evaluation of any
other business opportunities as may be requested by the Company. Consultant's
primary duties will consist of those as may be determined by the Board of
Directors, including, without limitation, the following:
a. Assisting the Company in developing & implementing marketing
programs and sales plans including targeting markets, purchasers and development
partners;
b. Preparing, distributing and implementing, with the Company's
Board of Directors, the Company's business plan;
c. Satisfying the Company's sales plans and projections set forth
in the Company's business plan;
d. Interim service as part of the Company's executive team, V.P.
Marketing and V.P. Sales, on a "consultant basis;"
e. Participation in the promotion, sales and distribution of the
Company's products and services;
f. Assistance in the recruitment of the marketing and sales
executive(s);
g. Support in the product launch, identification and establishing
of business relationships with potential O.E.M. targets into specific product
applications such as urology, Ob/Gyn, general surgery, orthopedics,
cardiovascular, etc.;
h. Development of a strategy for the managed care and large health
care system market segments;
i. Consultation and support of the Company in its efforts to
participate in key medical meetings and congresses/conventions; and
j. Availability to the Company for consultation as requested
on the general concerns of the Company with respect to its present and future
business development. Consultant shall, during the term of the Agreement, be
entitled to perform services for any third party so long as the Agreement is
not breached and the Consultant's ability to perform the services required by
this Agreement is not impaired.
3. Time Obligations; Other Obligations. Consultant will devote the
principal amount of his time toward satisfaction of the above stated duties for
two (2) years.
<PAGE> 5
Consultant will devote his best efforts to the Company's business and will not
engage in any activities in conflict with the Company's interest.
4. Compensation. For all services rendered by Consultant under
this Agreement, the Company will pay Consultant as follows from the Effective
Date:
4.1 Monthly Retainer. A monthly retainer of three thousand
two hundred and fifty dollars ($3,250) for the first year, ending March 31,
1996, and no monthly retainer for the second year ending March 31, 1997. During
the first twelve (12) months, the monthly retainer shall be paid in full at the
end of each month. Further, any commissions to be paid to Consultant pursuant
to paragraph 4.3 herein in the first twelve (12) months of the Company's
operations after completion of the Company's sales plan and business plan shall
only be paid after any commissions owed Consultant on a month-to-month basis
exceed three thousand two hundred fifty dollars ($3,250).
4.2 Stock Bonus. In addition to the monthly retainer set
forth above, the Company shall provide Consultant with an opportunity to
acquire a stock bonus of fifty thousand (50,000) shares of the Company's voting
common stock, $.01 par value. All fifty thousand (50,000) shares of the
Company's voting common stock shall be beneficially owned by Consultant as of
the date of that Agreement, but shall vest as follows: (i) five thousand
(5,000) shares of the Company's voting common stock shall be issued to
Consultant upon execution of this Agreement; (ii) seven thousand five hundred
(7,500) shares of the Company's voting common stock shall be issued to
Consultant the sooner of either the completion of the Company's sales plan and
business plan or August 1, 1995; (iii) seven thousand five hundred (7,500)
shares of the Company's voting common stock shall be issued to Consultant on
December 31, 1995, provided the Consultant is implementing the Company's sales
and marketing plan and global sales and marketing strategy, including hiring,
training and working with the Company's sales representatives; and (iv) fifteen
thousand (15,000) shares of the Company's voting common stock shall be issued
to Consultant upon Consultant selling that number of platforms, procedures and
pavilions set forth in the Company's sales plan and business plan for the first
twelve (12) months of the Company's operation after completion of the Company's
business plan and sales plan; provided however, that if the Consultant does not
sell that number of platforms, pavilions and procedures set forth in the
Company's sales plan and business plan for the first twelve (12) months of the
Company's operations, then the above-referenced fifteen thousand (15,00) shares
of the Company's common stock shall be distributed as follows:
(i) If the Consultant sells that number of platforms, pavilions and
procedures equal to ninety five percent (95%) of the platforms,
pavilions and procedures projected for sale in the Company's
initial twelve (12) months of operation after completion of the
Company's sales plan and business plan, then the Consultant
shall receive fourteen thousand two hundred and fifty (14,250)
shares of the Company's voting common stock.
(ii) If the Consultant sells that number of platforms, pavilions and
procedures equal to ninety percent (90%) of the platforms,
pavilions and procedures projected for sale in the Company's
initial twelve (12) months of operation after completion of the
Company's sales plan and business plan, then the Consultant
shall receive thirteen thousand five hundred (13,500) shares of
the Company's voting common stock;
(iii) If the Consultant sells that number of platforms, pavilions and
procedures equal to eighty five percent (85%) of the platforms,
pavilions and procedures projected for sale in the Company's
initial twelve (12) months of operation after completion of the
Company's sales plan and business plan,
CONSULTING AGREEMENT -- PAGE 2
<PAGE> 6
then the Consultant shall receive twelve thousand seven hundred
fifty (12,750) shares of the Company's voting common stock;
(iv) If the Consultant sells that number of platforms, pavilions and
procedures equal to eighty percent (80%) of the platforms,
pavilions and procedures projected for sale in the Company's
initial twelve (12) months of operation after completion of the
Company's sales plan and business plan, then the Consultant shall
receive twelve thousand (12,000) shares of the Company's voting
common stock; and
(v) If the Consultant sells less than eighty percent (80%) of that
number of platforms, pavilions and procedures projected for sale
in the Company's initial twelve (12) months of operation after
completion of the Company's sales plan and business plan, then the
Consultant shall receive no shares of the Company's voting common
stock.
In addition to the shares of the Company's voting common stock
allocated to the Consultant for the first twelve (12) months of the Company's
operation after completion of the Company's sales plan and business plan, the
Consultant shall be issued fifteen thousand (15,000) shares of the Company's
voting common stock upon Consultant selling that number of platforms, pavilions
and procedures set forth in the Company's sales plan and business plan for the
second twelve (12) months of the Company's operation after completion of the
Company's business plan and sales plan; provided, however, that if the
Consultant does not sell that number of platforms, pavilions and procedures set
forth in the Company's sales plan and business plan for the second twelve (12)
months of the Company's operations after completion of the Company's sales plan
and business plan, then the above-referenced fifteen thousand (15,000) shares of
the Company's voting common stock shall be distributed as follows:
(i) If the Consultant sells that number of platforms, pavilions and
procedures equal to ninety five percent (95%) of the platforms,
pavilions, and procedures projected for sale in the Company's
second twelve months (12) of operation after completion of the
Company's sales plan and business plan, then the Consultant shall
receive fourteen thousand two hundred and fifty (14,250) shares of
the Company's voting common stock.
(ii) If the Consultant sells that number of platforms, pavilions and
procedures equal to ninety percent (90%) of the platforms,
pavilions, and procedures projected for sale in the Company's
second twelve months (12) of operation after completion of the
Company's sales plan and business plan, then the Consultant shall
receive thirteen thousand five hundred (13,500) shares of the
Company's voting common stock,
(iii) If the Consultant sells that number of platforms, pavilions and
procedures equal to eighty five percent (85%) of the platforms,
pavilions, and procedures projected for sale in the Company's
second twelve months (12) of operation after completion of the
Company's sales plan and business plan, then the Consultant shall
receive twelve thousand seven hundred and fifty (12,750) shares of
the Company's voting common stock.
(iv) If the Consultant sells that number of platforms, pavilions and
procedures equal to eighty percent (80%) of the platforms,
pavilions, and procedures projected for sale in the Company's
second twelve months (12) of operation after completion of the
Company's sales plan and business plan, then the
CONSULTING AGREEMENT - PAGE 3
<PAGE> 7
Consultant shall receive twelve thousand (12,000) shares of the
Company's voting common stock.
(v) If the Consultant sells less than eighty percent (80%) of that
number of platforms, pavilions and procedures projected for sale
in the Company's second twelve (12) months of operation after
completion of the Company's business plan and sales plan, then the
Consultant shall receive no shares of the Company's voting common
stock.
Notwithstanding the foregoing, in the event there are incidents or
occurrences beyond the control of the Consultant, and such incidents or
occurrences directly impacts the Consultant's ability to satisfy any of the
sales goals set forth in this Section 4.2, then the performance criteria set
forth above may be adjusted pursuant to an agreement between the Company and the
Consultant, the terms of which shall be negotiated and mutually agreed to
between the Company and the Consultant.
4.3 Commission. The Consultant shall be entitled to a commission
equal to two percent (2%) of the Company's revenue derived from those sales of
platforms, pavilions and procedures in which the Consultant's efforts produced
such sales for twenty four (24) months, (beginning April, 1995 and ending March
31, 1997); provided, however, that for the first twelve (12) months of the
Company's operations after completion of the Company's sales plan and business
plan, the Company shall not be obligated to pay any commission to Consultant
until the Consultant has earned, on a month-to-month basis, three thousand two
hundred fifty dollars ($3,250) of commissions. Thereafter, the Company shall pay
a commission to the Consultant equal to two percent(2%) of the Company's revenue
derived from those sales of platforms, pavilions and procedures in which the
Consultant's efforts produced such sales. For the second twelve (12) months of
the Company's operations after completion of the Company's sales plan and
business plan, the Company shall pay the Consultant a commission equal to two
percent (2%) of the Company's revenue derived from those sales of platforms,
pavilions and procedures in which the Consultant's efforts produced such sales.
Any commission owed Consultant shall be paid to Consultant within ten (10) days
of receipt of payment in full for the purchase of any of the Company's
platforms, pavilions and/or procedures:
4.4 Expenses. Consultant shall be reimbursed by the Company for
all expenses incurred by Consultant and directly related to the performance of
Consultant's duties set forth in paragraph 2 above. Any expenses in excess of
$500 must be preapproved by the Company. All expenses shall be reimbursed on a
monthly basis.
5. Independent Contractor Relationship. Consultant is retained and
engaged by the Company only for the purposes and to the extent set forth in this
Agreement, and their relation to the Company shall be that of an independent
contractor. The Company is interested only in the results to be achieved by
Consultant. Therefore, Consultant is required to use his own discretion when
performing the tasks assigned hereunder, subject to the express condition that
Consultant shall at all times comply with applicable law. Consultant will not
receive or participate in the Company's employee health insurance while
rendering consultant services under this Agreement. Consultant will not be
covered by the Company's workers' compensation insurance policies and other
insurance policies which only apply to employees.
6. Taxes. In order for the Company to submit accurate 1099 information
to the Internal Revenue Service, Consultant is required to provide appropriate
business tax identification numbers and information to the Company concerning
Consultant and the form of Consultant's business. As an independent contractor,
Consultant will be responsible for filing an paying his estimated taxes and
employment taxes in a timely
CONSULTING AGREEMENT - PAGE 4
<PAGE> 8
manner. No amount will be deducted or withheld from Consultant's retainer or
royalties for state, local or federal taxes. No FICA, FUTA or state unemployment
taxes will be payable by the Company on Consultant's behalf.
7. Worker's Compensation Insurance. Upon request of the Company or if
required by law, Consultant shall obtain workers' compensation insurance
coverage. Consultant may be required to provide the Company with proof of
Consultant's workers' compensation coverage.
8 . Indemnification. Consultant agrees to indemnify and hold the
Company harmless from any and all claims, actions and liabilities, including
costs and attorney's fees, as a result of any action, inaction or claim which
arises as a result of Consultant's conduct, whether pursuant to this Agreement,
as a result of tort, or as a result of any other relationship between Consultant
and the Company. Company agrees to indemnify and hold the Consultant harmless
from any and all claims, actions, and liabilities, including costs and
attorney's fees, as a result of any action, inaction or claim which arises as a
result of Company's conduct whether pursuant to this Agreement, as a result of
tort, or as a result of any other relationship between Company and Consultant.
9. Noncompetition and Confidentiality.
9.1 Noncompetition. During the term of this Agreement and for a
period of three (3) years thereafter, Consultant will not, directly or
indirectly, be employed by, own, manage, operate, join, control or participate
in the ownership, management, operation or control of or be connected in any
manner with any business involved in any manner whatsoever with interactive
simulation of medical procedures, either diagnostic or therapeutic, or
interactive simulation of health care services, devices or instruments.
Consultant will be deemed to be connected with a business if such business is
carried on by a partnership in which he is a general or limited partner,
consultant or employee, or a corporation or association of which he is a
shareholder, officer, director, employee, member, consultant or agent; provided,
that nothing herein shall prevent the purchase or ownership by Consultant of
shares of less than 1% of the outstanding shares in a publicly or privately held
company.
9.2 Nonsolicitation. Commencing as of the date of this Agreement
and continuing until three (3) years after the termination of this Agreement
with the Company, Consultant shall not solicit the employment of personnel
employed by the Company or by any direct or indirect parent or subsidiary of the
Company during the period of any direct or indirect parent or subsidiary of the
Company during the period of Consultant's employment by the Company.
9.3 Confidentiality. Consultant agrees that, commencing as of the
date of this Agreement and thereafter, he will not, except to the Company, its
subsidiaries, and affiliates, communicate or divulge to any person, firm or
corporation, either directly or indirectly, any confidential or proprietary
information relating to either this Agreement or the business, customers and
suppliers or other affairs of the Company, its parents, subsidiaries and their
affiliates. Without limiting the foregoing, all information concerning
procedures and strategy of the Company, its subsidiaries and parents, shall be
deemed confidential and proprietary information.
9.4 Change of Control.
9.4.1 Consultant acknowledges that this accord not to compete
is essential to the Company and that the Company would not enter into this
Agreement if it did not include such accord. Consultant shall have no obligation
under Sections 9.1 or 9.2
CONSULTING AGREEMENT - PAGE 5
<PAGE> 9
if he leaves the employment of the Company following a Change in Control Event,
as defined below.
9.4.2 For purposes of this Agreement, a "Change in Control
Event" shall mean (i) the sale of all or substantially all of the Company's
assets or (ii) any transaction or series of related transactions (including
without limitation, any reorganization, merger or consolidation) which will
result to the shareholders of the Company (or, if the Company is at least 80%
owned by another entity, the shareholders of the Company's ultimate parent
entity, as defined below) immediately prior to such transaction holding,
following such transaction, less than twenty percent (20%) of the voting power
of the surviving or continuing entity. "Ultimate parent entity" means that
entity which directly, or through one or more other entities, owns eighty
percent (80%) or more of the Company's voting power.
9.4.3 Upon a Change in Control Event, all of the shares of the
Company's voting common stock allocated for distribution to the Consultant under
Section 4.2 herein shall be issued to the Consultant immediately prior to any
such Change in Control Event.
10. Equitable Relief. Consultant acknowledges that any violation by him
of this Agreement may cause the Company injury. The Company (acting through its
Board of Directors) acknowledges that any violation by the Company of this
Agreement may cause Consultant injury. Therefore, each party separately agrees
that the injured party shall be entitled, in addition to any remedies it may
have under this Agreement, or at law, to injunctive and other equitable relief
to prevent or curtail any breach of this Agreement by the other party,
including, without limitation, Section 9.
11. Term and Termination.
11.1 Effective Date. This Agreement is effective (the "Effective
Date") as of April 25, 1995. Unless otherwise terminated as provided in this
Section 11, the term of this Agreement shall expire on March 31, 1997
11.2 Termination. This Agreement shall be terminated upon the
following:
(a) Death of Consultant;
(b) Inability of Consultant to perform his duties for a
period of 90 consecutive days due to sickness,
disability or any other cause unless Consultant is
granted a leave of absence by the Board of Directors;
(c) For cause as provided in Sections 12.1 and 12.2.
11.3 Compensation Upon Termination. Consultant shall be entitled
to compensation earned through the date of termination if termination is with
cause by the Company, without cause by Consultant or because of Consultant's
death or disability as provided in Sections 11.2(a) or (b). If termination is
without cause by the Company, then Consultant shall be entitled to the
compensation in effect pursuant to this Agreement at the time of termination
through the end of the term of this Agreement, including all deferred
compensation and applicable bonuses. Consultant and Company shall each use
reasonable efforts to mitigate any monetary damages suffered by each as a result
of the termination of Consultant's employment.
CONSULTING AGREEMENT - PAGE 6
<PAGE> 10
11.4 Enforceability. Despite termination of this Agreement, and
irrespective of whether such termination has been effected with or without cause
by either Company or Consultant, such termination shall not affect the
continuing enforceability of those provisions hereof which are by their terms
expressly intended to apply after the termination hereof, including without
limitation, those contained in Section 9.
12. Cause and Breach.
12.1 Termination for Cause. Where reference is made in this
Agreement to termination being by the Company with or without cause, "cause"
shall mean cause given by Consultant to the Company and is limited to the
following:
(a) Failure or refusal to carry out the reasonable
directions of the Board of Directors;
(b) Violation of a state or federal law involving the
commission of a crime against the Company or a felony
adversely affecting the Company; or
(c) Consultant's medically confirmed dependence on or abuse
of alcohol or any controlled substance; or
(d) Any breach of this Agreement or of any covenant herein
or the falsity of any representation or warranty not
corrected as provided in Section 12.2 hereof.
12.2 Notice of Breach. Whenever a breach of this Agreement by
either party is relied upon as a justification for any action taken by a party
pursuant to any provision of this Agreement, before such action is taken, the
party asserting the breach shall give the other party written notice of the
existence and nature of the breach and the opportunity to correct such breach
during the thirty (30) day period following such notice, except that the cure
period for a violation of Section 9 shall be 10 days.
13. Notice. All notices and requests in connection with this Agreement
shall be in writing and may be given by personal delivery, registered or
certified mail, return receipt requested, telegram or any other customary means
of communication addressed as follows:
Consultant: Valentino V. Montegrade
1150 Main Street, B-103
Irvine, CA 92714
Company: Ixion, Inc.
c/o David Hon
1335 N. Northlake Way, #102
Seattle, WA 98103
With a copy to: Monahan & Robinson, P.S.
c/o David M. Otto
701 Fifth Avenue
6500 Columbia Center
Seattle, WA 98104-7003
or to such other address as the party to receive the notice or request shall
designate by written notice to the other. The effective date of any notice or
request shall be five (5) business days from the date which it is sent by
registered or certified mall, or when
CONSULTING AGREEMENT . PAGE 7
<PAGE> 11
delivered to a telegraph company, properly addressed as above with charges
prepaid, or when personally delivered.
14. Assignment. The rights and obligations of the Consultant shall not
be assigned or transferred either voluntarily or by operation of law without the
Company's consent, nor shall the duties of the Consultant be delegated in whole
or in part either voluntarily or by operation of law without the Company's
consent. Any unauthorized assignment, transfer or delegation shall be of no
force or effect and shall be deemed a breach of this Agreement.
15. Prior Obligations. Consultant represents and warrants to the
Company that he may enter into this Agreement and perform his obligations
hereunder without violating any contractual commitment to any other person, and
covenants that in the performance of his duties under this Agreement he will not
use or divulge any information to any person he is lawfully required to maintain
in confidence.
16. Preparation of Agreement. Consultant acknowledges that this
Agreement was prepared by attorneys representing the Company. This Agreement
will have tax consequences to Consultant. Consultant has been advised to consult
with an attorney and tax adviser of his choice before entering into this
Agreement and he has done so. Consultant acknowledges that he has not relied
upon any legal or tax advice of the Company's attorneys in connection with this
Agreement.
17. Miscellaneous.
17.1 Waiver. No waiver of any of the provisions of this Agreement
shall be valid unless in writing, signed by the party against whom such waiver
is sought to be enforced, nor shall failure to enforce any right hereunder
constitute a continuing waiver of the same or a waiver of any other right
hereunder.
17.2 Amendments. All amendments to this Agreement shall be made in
writing, signed by the parties, and no oral amendment shall be binding on the
parties.
17.3 Integration. This Agreement constitutes the entire agreement
between the parties relating to the subject matter hereof and supersedes and
cancels all other prior agreements and understandings of the parties in
connection with such subject matter.
17.4 Severability. The unenforceability or invalidity of any
provision or provisions of this Agreement shall not render any other provisions
or provisions hereof unenforceable or invalid. If any one or more of the
provisions of this Agreement shall for any reason be excessively broad as to
duration, scope, activity or subject, it shall be construed by reducing such
provision, so as to be enforceable to the extent compatible with applicable law.
17.5 Headings. The headings or titles of this Agreement are for
the purpose of reference only and shall not in any way affect the interpretation
or construction of this Agreement.
CONSULTING AGREEMENT - PAGE 8
<PAGE> 12
17.6 Governing Law. This Agreement will be governed by the laws of
the State of California applicable to agreements between California residents to
be performed within the State of California.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
COMPANY:
By: /s/ David Hon
---------------------------------------------
David Hon, President
By: /s/ Bruce Sturman
---------------------------------------------
Bruce Sturman, Chief Executive Officer
CONSULTANT:
/s/ Valentino V. Montegrande
-------------------------------------------------
Valentino V. Montegrande
CONSULTING AGREEMENT - PAGE 9
<PAGE> 1
Exhibit 10.19
<PAGE> 2
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT, (the "Agreement") effective January 1, 1996,
is entered into by and between IXION, INC., a Delaware corporation (the
"Company"), and James C. Caillouette, Sr. (hereinafter the "Consultant").
WHEREAS, the Company desires to retain the Consultant and the
Consultant has consented to provide consulting services for the Company.
NOW, THEREFORE, the Company and the Consultant agree to the following
terms and conditions of the Agreement.
1. Retention. Beginning on the Effective Date, which is January 1,
1996, the Company will retain the Consultant and the Consultant will accept
retention by the Company, as Consultant reporting to the Company's President and
Board of Directors in accordance with the terms of this Agreement.
2. Duties.
2.1 The Consultant's primary duties will be to consult, if
requested, in areas of identifying candidates for, or otherwise developing, a
medical advisory board and establishing an ongoing agenda for such medical
advisory board in connection with the Company's efforts to utilize a medical
advisory board in furthering the strategic and operational growth of the Company
and such reasonable other duties as the Board of Directors of the Company and
the President may reasonably require.
2.2 As part of the Consultant's duties and compensation hereunder,
the Consultant will communicate, if requested, with representatives of the
Company.
3. Time Obligations. If and when requested by the Company's Board of
Directors, the Consultant will devote a reasonable amount of time and his best
efforts to the duties hereunder.
4. Compensation. For all services rendered by the Consultant under this
Agreement, the Consultant shall receive seven thousand five hundred (7,500)
shares of the Company's common stock, which shares shall be issued (i) to the
Consultant upon execution of this Consulting Agreement and (ii) subject to all
effects of any recapitalization, stock split, dividend or any other adjustment
to the Company's issued and outstanding common stock.
5. Term and Termination.
5.1 Unless otherwise terminated, in writing, as provided in this
Section 5, this Agreement shall expire on January 1, 1997.
<PAGE> 3
5.2 This Agreement shall be terminated, in writing, upon the
following:
(a) Death of the Consultant
(b) Inability of the Consultant to perform the duties for a
period of thirty (30) consecutive days in any one calendar year due to sickness,
disability or any other cause unless Consultant is granted a leave of absence by
the Board of Directors; or
(c) For cause as provided in Sections 6.1 and 6.2.
5.3 Consultant shall be entitled to compensation earned through the
date of termination if termination is without cause by the Company or with cause
by the Consultant. If the Consultant is terminated by Company without cause, the
Consultant shall be entitled to full payment of fees, plus the common stock
described in Paragraph 4.1, if such stock has not already been issued.
6. Cause and Breach.
6.1 Where reference is made in this Agreement to termination being
by the Company with or without cause, "cause" shall mean cause given by the
Consultant to the Company and is limited to the following:
(a) Repeated failure or refusal to carry out the reasonable
written directions of the Company, provided such directions are consistent with
the duties and obligations herein set forth to perform by the Consultant; or
(b) Violation of a state or federal law involving the commission
of a crime against the Company or a felony materially adversely affecting the
Company; or
(c) Each Consultant's dependence on or abuse of alcohol or any
controlled substance; or
(d) Any material breach of this Agreement.
6.2 Whenever a material breach of this Agreement by either party is
relied upon as a justification for any action taken by a party pursuant to any
provision of this Agreement before such action is taken, the party asserting the
breach shall give the other party written notice of the existence and nature of
breach and the opportunity to correct such breach during the period of five (5)
business days following such notice.
7. Notice. All notices and requests in connection with this Agreement
shall be in writing and may be given by personal delivery, registered or
certified mail, return receipt requested, telegram or any other customary means
of communications addressed as follows:
Consulting Agreement - Page 2
<PAGE> 4
Consultant: James C. Caillouette, Sr.
50 Bellafontaine Street
Pasadena, CA 91105
Ixion, Inc.: David C. Hon, President
Ixion, Inc.
400 Mercer, Suite 400
Seattle, WA 98109
Bruce D. Sturman, Chief Executive Officer
Ixion, Inc.
654 Madison Avenue
New York, NY 10021
With a Copy: David M. Otto, Esq.
c/o Monahan & Biagi, P.L.L.C.
701 Fifth Avenue
Suite 5701
Seattle, WA 98104-7003
or to such other address as the party to receive the notice or request shall
designate by notice to the other. The effective date of any notice or request
shall be five (5) days from the date which it is sent by the addressor by
registered or certified mail, or when delivered to a telegraph company, properly
addressed as above with charges prepaid, or when personally delivered.
8. Assignment. The rights of either party shall not be assigned or
transferred either voluntarily or by operation of law without the other party's
written consent, nor shall the duties of either party be delegated in whole or
part either voluntarily or by operation of law without the other party's written
consent. Any unauthorized assignment transfer or delegation shall be of no force
or effect.
9. Independent Counsel. All parties have retained independent legal
counsel to advise them with respect to this Agreement and are not relying on the
Company or its counsel for legal or tax advice.
10. Independent Contractor. The Consultant is an independent
contractor. This Agreement shall not create the relationship of employer and
employee, a partnership, or a joint venture. The Company shall not control or
direct the details and means by which the Consultant performs his business and
services. The Consultant shall determine the number of days and hours of his
work as well as the number of assistants, partners or employees utilized by the
Consultant in his responsibilities under this Agreement. The Consultant shall be
solely responsible for the amount of wages, benefits, work schedules and/or any
other conditions of any of either the Consultant's assistants, partners or
employees. Finally, the Consultant is an independent contractor and not an
employee of the Company and agrees to comply with all federal and state tax and
Social Security legislation as applicable to such independent
Consulting Agreement - Page 3
<PAGE> 5
contractors. The Consultant has no authority to bind the Company or incur any
obligation on behalf of the Company.
11. Confidential Information and Covenant. As a result of the
Consultant's independent contractor relationship with the Company, the
Consultant could acquire confidential information about the Company. The
Consultant will respect the confidences of the Company and will not, at any
time, during or after termination of this Agreement, directly or indirectly,
divulge or disclose for any purpose whatsoever, or use for their own benefit,
any confidential information that has been created or obtained by or disclosed
to the Consultant as a result of his relationship with the Company, including
but not limited to, interactive medical technology concepts or projects as they
relate to the business and technology developed by the Company. In addition, all
information created or received by the Consultant shall be deemed the property
of the Consultant and the Company and no information shall be furnished to
persons not associated with the engagement without prior permission of the
Company.
12. Miscellaneous.
12.1 Waiver. No waiver of any of the provisions of this Agreement
shall be valid unless in writing, signed by the party against whom such waiver
is sought to be enforced, nor shall failure to enforce any right hereunder
constitute a continuing waiver of these same or a waiver of any other right
hereunder.
12.2 Amendments. All amendments of this Agreement shall be made in
writing, signed by the parties, and no oral amendment shall be binding on the
parties.
12.3 Relationship of Parties. The Consultant is an independent
contractor and not an employee of the Company and agrees to comply with federal
and state tax and Social Security legislation as applicable to such independent
contractors. The Consultant has no authority to bind the Company or incur any
obligation on behalf of the Company.
12.4 Integration. This Agreement constitutes the entire agreement
between the parties relating to the subject matter hereto and supersedes and
cancels any other prior oral and/or written agreements or understandings of the
parties in connection with such subject matter.
12.5 Severability. The unenforceability or invalidity of any
provision or provisions of this Agreement shall not render any other provision
of provisions hereof unenforceable or invalid. If any one or more of the
provisions of this Agreement shall for any reason be excessively broad as to
duration, scope, activity or subject, it shall be construed by reducing such
provisions, so as to be enforceable to the extent compatible with applicable
law.
12.6 Headings. The headings or titles in this Agreement are for the
purpose of reference only and shall not in any way affect the interpretation or
construction of this Agreement.
Consulting Agreement - Page 4
<PAGE> 6
12.7 Governing Law. This Agreement will be governed by the laws of
the State of Washington, applicable to agreements between Washington residents
to be performed within the State of Washington. Any disputes arising out of or
from this Agreement shall be submitted to binding arbitration for resolution in
Seattle, Washington.
12.8 Attorneys' Fees. In the event of litigation to enforce this
Agreement, the prevailing party will be entitled to recover its reasonable
attorneys' fees as determined by the court.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
CONSULTANT: COMPANY:
/s/ David C. Hon
- - -------------------------- ------------------------------
James C. Caillouette, Sr. David C. Hon, President
Dated: 1-1-96 Ixion, Inc.
Dated: 1-1-96
/s/ Bruce D. Sturman
------------------------------
Bruce D. Sturman,
Chief Executive Officer
Ixion, Inc.
Dated: 1-1-96
Consulting Agreement - Page 5
<PAGE> 7
12.7 Governing Law. This Agreement will be governed by the laws of
the State of Washington, applicable to agreements between Washington residents
to be performed within the State of Washington. Any disputes arising out of or
from this Agreement shall be submitted to binding arbitration for resolution in
Seattle, Washington.
12.8 Attorneys' Fees. In the event of litigation to enforce this
Agreement, the prevailing party will be entitled to recover its reasonable
attorneys' fees as determined by the court.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
CONSULTANT: COMPANY:
/s/ James C. Caillouette, Sr.
- - -------------------------- ------------------------------
James C. Caillouette, Sr. David C. Hon, President
Dated: 1-1-96 Ixion, Inc.
Dated: 1-1-96
------------------------------
Bruce D. Sturman,
Chief Executive Officer
Ixion, Inc.
Dated: 1-1-96
Consulting Agreement - Page 5
<PAGE> 1
Exhibit 10.21
<PAGE> 2
EMPLOYMENT AGREEMENT
BY
AND
BETWEEN
GREG CLAYPOOL
AND
IXION, INC.
DATED: FEBRUARY 21, 1995
<PAGE> 3
TABLE OF CONTENTS
1. Employment .................................................... 1
2. Duties ........................................................ 1
3. Time Obligations: Other Employment ............................ 1
4. Compensation .................................................. 1
4.1 Base Salary ........................................... 1
4.2 Salary Bonus .......................................... 1
4.3 Stock Bonus ........................................... 2
4.4 Benefits .............................................. 2
4.5 Commission ............................................ 2
5. Noncompetition and Confidentiality ............................ 2
5.1 Noncompetition ........................................ 2
5.2 Nonsolicitation ....................................... 3
5.3 Confidentiality ....................................... 3
5.4 Change of Control ..................................... 3
6. Equitable Relief .............................................. 3
7. Term and Termination .......................................... 4
7.1 Effective Date ........................................ 4
7.2 Termination ........................................... 4
7.3 Compensation Upon Termination ......................... 4
7.4 Enforceability ........................................ 4
7.5 Severance ............................................. 4
8. Cause and Breach .............................................. 4
8.1 Termination for Cause ................................. 4
8.2 Notice of Breach ...................................... 5
9. Notice ........................................................ 5
10. Assignment .................................................... 6
10.1 Nonassignability ...................................... 6
10.2 Assignment to Subsidiary .............................. 6
11. Prior Obligations ............................................. 6
12. Preparation of Agreement ...................................... 6
13. Miscellaneous ................................................. 6
13.1 Waiver ................................................ 6
13.2 Amendments ............................................ 6
13.3 Integration ........................................... 6
13.4 Severability .......................................... 6
13.5 Headings .............................................. 7
13.6 Governing Laws ........................................ 7
<PAGE> 4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") made effective the 21st day
of February, 1995, is between Ixion, Inc., a Delaware corporation (the
"Company"), and Greg Claypool ("Employee").
1. Employment. Beginning on the Effective Date (as defined in
Section 7, the Company will employ Employee, and Employee will accept
employment by the Company, as Vice President - Corporate Development and
Strategic Planning and Vice-President - Clinical Development and Clinical
Training.
2. Duties. Employee's primary duties will consist of those as may
be determined by the Board of Directors, including, without limitation, the
following:
a. Assisting the Chief Executive Officer ("CEO"), in
developing & implementing marketing programs and strategic plans including
targeting markets and creating procedures.
b. Hiring, training, developing and managing the Company's
sales force.
c. Overseeing the development of the Company's education
department, which will eventually be responsible for: (i) sales training: (ii)
leadership/management training; (iii) seminars; and (iv) customer development
training programs.
d. Assisting the C.E.O. in developing the Company's
communications department to coordinate press releases as well as marketing
materials.
e. Assisting the C.E.O. in overseeing and developing the
Company's human resources department.
3. Time Obligations: Other Employment. Employee will be a
full-time employee of the Company for not less than two (2) years. Employee
will devote his best efforts to the Company's business and will not engage in
any activities in conflict with the Company's interest. This Agreement shall
remain in full force and effect until the earlier of either Feb. 21st, 1997,
such time as a new Agreement is reached, or the Employee is terminated;
provided, however, that the Company shall provide Employee with a notice of the
Company's intent to terminate employment no later than sixty (60) days prior to
the Expiration Date as defined in Section 7.1 herein; provided, further, that
if the Company does not provide Employee with a notice to terminate employment
sixty (60) days or more prior to the Expiration Date set forth in Section 7.1
herein, then the Expiration Date shall be automatically extended for one (1)
year under the same terms and conditions as set forth in year two of this
Agreement, or until a new agreement is reached.
4. Compensation. For all services rendered by Employee under this
Agreement, the Company will pay Employee as follows from the Effective Date:
4.1 Base Salary. A base salary of eighty-five thousand
dollars ($85,000) for the first year and ninety-five thousand dollars ($95,000)
for the second year, subject to increases as determined by the Board of
Directors. To be paid in 12 equal installments on the 1st of each month.
4.2 Salary Bonus. After the Employee has been employed by
the Company for twelve (12) months, Employee will participate in the Company's
incentive
<PAGE> 5
performance plan ("IPP") wherein Employee will receive forty percent (40%) of
his current salary upon satisfaction by the Company of certain performance
goals, which goals shall be established by mutual agreement between Employee
and the Board of Directors of the Company. This compensation is exclusive of
commissions to be paid to Employee pursuant to Section 4.5.
4.3 Stock Bonus. In addition to the annual base salary set
forth above, the Company shall provide to Employee a stock bonus of forty
thousand (40,000) shares of the Company's voting common stock, $.01 par value;
all forty thousand (40,000) shares of the Company's voting common stock shall be
beneficially owned by Employee as of the date of this Agreement, but shall vest
as follows: (i) twenty thousand (20,000) shares of the Company's voting common
stock upon completion of twelve (12) months's service; (ii) twenty thousand
(20,000) shares of the Company's voting common stock upon completion of
twenty-four (24) months service.
4.4 Benefits. Employee shall be entitled to all fringe
benefits offered generally to the Company's senior managers and any other
benefit plans established by the Company, including COBRA coverage if elected by
Employee, subject to the rules and regulations in effect regarding participation
in such benefit plans. In particular, such benefits shall be, at a minimum,
life, health and disability insurance as currently provided by the Company to
its executive officers; provided, however, that the health coverage premiums are
paid by the Company and the health benefits plan includes all of Employee's
family members with health, dental and vision overage. The life insurance plan
shall include a term life policy for Employee of $300,000 and a term life policy
of $50,000 for Employee's spouse. Employee shall also receive (3) weeks
vacation, ten (10) days sick leave, additional miscellaneous expenses including,
without limitation, additional New York State insurance, taxes and accounting
expenses incurred by Employee, a one time charge of approximately three thousand
dollars ($3,000) for the establishment of Employee's home office, related
telephone and home office expenses and reimbursement of travel expenses deemed
necessary by the C.E.O. of the Company to attend conventions, conferences and
other work related business.
4.5 Commission. In addition to Employee's base salary,
salary bonus, stock bonus and benefits, Employee shall be entitled to a
commission equal to two percent (2%) of the sales price received by the Company
for each of the Company's platforms, pavilions and procedures sold; provided,
however, that Employee shall only be entitled to a two percent (2%) commission
if he is responsible for introducing the purchaser to the Company, training or
managing the salesperson who consummated the sale and/or consummating the sale
of any of the Company's platforms, pavilions and procedures. The two percent
(2%) commission shall be paid to Employee at the time the Company receives full
or partial payment for the purchase of any of its platforms, pavilions and/or
procedures. In the event any of the Company's platforms, pavilions and/or
procedures are returned to the Company within twelve (12) months from the date
the Company receives full or partial payment for the sale thereof, then
Employee's two percent (2%) commission shall be offset against any future
commission owed Employee.
5. Noncompetition and Confidentiality.
5.1 Noncompetition. During the term of Employee's
employment with the Company and for a period of three (3) years thereafter,
Employee will not, directly or indirectly, be employed by, own, manage,
operate, join, control or participate in the ownership, management, operation
or control of or be connected in any manner with any business engaged in or
related to teaching, training or certification through the use of interactive
medical simulation. Employee will be deemed to be connected with a business if
such business is carried on by a partnership in which he is a general or
limited partner, consultant or employee, or a corporation or association of
which he is a shareholder.
Employment Agreement - Page 2
<PAGE> 6
officer, director, employee, member, consultant or agent; provided, however,
that nothing herein shall prevent the purchase or ownership by Employee of
shares of less than 1% of the outstanding shares in a publicly or privately
held company.
5.2 Nonsolicitation. Commencing as of the date of this Agreement
and continuing until three (3) years after the termination of Employee's
employment with the Company. Employee shall not solicit the employment of
personnel employed by the Company or by any direct or indirect parent or
subsidiary of the Company during the period of Employee's employment by the
Company, without the consent of the Company. Furthermore, Employee shall not
solicit employment with any entity engaged in a joint venture or strategic
alliance with the Company during the period of Employee's employment by the
Company and/or for three (3) years after termination of such employment,
without the express written consent of the Company.
5.3 Confidentiality. Employee agrees that, commencing as of the
date of this Agreement and thereafter, he will not, except to the Company, its
subsidiaries, and affiliates, communicate or divulge to any person, firm or
corporation, either directly or indirectly, any confidential or proprietary
information relating to and including this Agreement and the business,
customers and suppliers or other affairs of the Company, its parents,
subsidiaries and their affiliates, except as may be deemed necessary in
carrying out the normal duties of Employee. Without limiting the foregoing, all
information concerning procedures and strategy of the Company, its subsidiaries
and parents shall be deemed confidential and proprietary information.
5.4 Change of Control.
5.4.1 Employee acknowledges that this accord not to compete
is essential to the Company and that the Company would not enter into this
Agreement if it did not include such accord. Employee shall have no obligation
under Sections 5.1 or 5.2 if he leaves the employment of the Company following
a Change in Control Event, as defined below. Employee shall have no obligation
under either Section 5.1 or 5.2 if terminated without cause or upon material
breach of this Agreement by the Company.
5.4.2 For purposes of this Agreement, a Change in Control
Event shall mean (i) the sale of all or substantially all of the Company's
assets or (ii) any transaction or series of related transactions (including
without limitation, any reorganization, merger or consolidation) which will
result to the shareholders of the Company (or, if the Company is at least 80%
owned by another entity, the shareholders of the Company's ultimate parent
entity, as defined below) immediately prior to such transaction holding,
following such transaction, less than twenty-five percent (25%) of the voting
power of the surviving or continuing entity. "Ultimate parent entity" means
that entity which directly, or through one or more other entities, owns eighty
percent (80%) or more of the Company's voting power. There shall be no Change
in Control event if the Company consummates an initial public offering or any
secondary distribution of its securities, regardless of the number of
securities issued in connection with any such transaction.
5.4.3 Upon a Change in Control Event, Employee shall be
immediately entitled to receive all forty thousand (40,000) shares of the
Company's voting common stock as set forth in Section 4.3, as well as any other
shares issued directly to Employee, or options granted to Employee.
6. Equitable Relief. Employee acknowledges that any violation by
him of this Agreement may cause the Company injury. The Company (acting through
its Board of Directors) acknowledges that any violation by the Company of this
Agreement may cause
Employment Agreement - Page 3
<PAGE> 7
Employee injury. Therefore, each party separately agrees that the injured party
shall be entitled, in addition to any remedies it may have under this
Agreement, or at law, to injunctive and other equitable relief to prevent or
curtail any breach of this Agreement by the other party, including, without
limitation, Section 5.
7. Term and Termination.
7.1 Effective Date. This Agreement is effective (the
"Effective Date") as of Feb. 21, 1995. Unless otherwise terminated as provided
in this Section 7, the term of Employee's employment shall expire on ,
1997 (the "Expiration Date"), unless otherwise extended as set forth in
paragraph 3.
7.2 Termination. This Agreement shall be terminated upon the
following:
(a) Death of Employee;
(b) Inability of Employee to perform his duties for a
period of 90 consecutive days due to sickness,
disability or any other cause unless Employee is
granted a leave of absence by the Board of
Directors;
(c) For cause as provided in Sections 8.1 and 8.2.
7.3 Compensation Upon Termination. Employee shall be entitled
to compensation earned through the date of termination if termination is with
cause by the Company, without cause by Employee or because of Employee's death
or disability as provided in Sections 7.2(a) or (b). If termination is without
cause by the Company, then Employee shall be entitled to the compensation in
effect pursuant to this Agreement at the time of termination through the end of
the term of this Agreement, including all deferred compensation and applicable
bonuses, including commissions on sales made but not paid in full. Employee and
Company shall each use reasonable efforts to mitigate any monetary damages
suffered by each as a result of the termination of Employee's employment.
7.4 Enforceability. Despite termination of this Agreement,
and irrespective of whether such termination has been effected with or without
cause by either Company or Employee, such termination shall not affect the
continuing enforceability of those provisions hereof which are by their terms
expressly intended to apply after the termination hereof, including without
limitation, those contained in Section 5, except as otherwise set forth herein.
7.5 Severance. If Employee's employment with the Company is
terminated without cause by the Company, he shall be entitled to payment of
severance compensation in the amount of eighty five thousand dollars ($85,000).
The Company shall secure such severance compensation to Employee by providing
Employee with a promissory note on the Effective Date made payable to Employee
on the fifth (5th) day after termination without cause. The promissory note
shall be executed in accordance with a confession of judgment in an amount
equal to eighty-five thousand dollars ($85,000).
8. Cause and Breach.
8.1 Termination for Cause. Where reference is made in this
Agreement to termination being by the Company with or without cause, "cause"
shall mean cause given by Employee to the Company and is limited to the
following:
EMPLOYMENT AGREEMENT -- PAGE 4
<PAGE> 8
(a) Failure or refusal to carry out the reasonable
directions of the Board of Directors pursuant to
the Company's policies and procedures manual;
(b) Violation of a state or federal law involving
the commission of a crime against the Company or
a felony adversely affecting the Company; or
(c) Employee's medically confirmed dependence on or
abuse of alcohol or any controlled substance; or
(d) Any breach of this Agreement or of any covenant
herein or the falsity of any representation or
warranty not corrected as provided in Section
8.2 hereof.
8.2 Notice of Breach. Whenever a breach of this Agreement
by either party is relied upon as a justification for any action taken by a
party pursuant to any provision of this Agreement, before such action is taken,
the party asserting the breach shall give the other party written notice of the
existence and nature of the breach and the opportunity to correct such breach
during the thirty-day period following such notice except that the cure period
for a violation of Section 5 shall be 10 days.
9. Notice. All notices and requests in connection with this
Agreement shall be in writing and may be given by personal delivery, registered
or certified mail, return receipt requested, telegram or any other customary
means of communication addressed as follows:
Employee Greg Claypool
16 Arapaho Road
Brookfield, CT 06804
With a copy to: James Kristof, Esq.
Lundberg, Kristof, Klug & Torrance
One Union Square, Suite 1625
600 University Street
Seattle, WA 98101-3117
Company: Ixion, Inc.
1335 N. Northlake Way, Suite 102
Seattle, WA 98103
With a copy to: David M. Otto, Esq.
Monahan & Robinson, P.S.
701 Fifth Avenue
6500 Columbia Center
Seattle, WA 98104-7003
or to such other address as the party to receive the notice or request shall
designate by written notice to the other. The effective date of any notice or
request shall be ten (10) business days from the date which it is sent by
registered or certified mail, or when delivered to a telegraph company, properly
addressed as above with charges prepaid, or when personally delivered.
EMPLOYMENT AGREEMENT -- PAGE 5
<PAGE> 9
10. Assignment.
10.1 Nonassignability. Except as provided in Section 10.2
hereof, the rights of either party shall not be assigned or transferred either
voluntarily or by operation of law without the other party's consent, nor shall
the duties of either party be delegated in whole or in part either voluntarily
or by operation of law without the other party's consent. Any unauthorized
assignment, transfer or delegation shall be of no force or effect.
10.2 Assignment to Subsidiary. Notwithstanding Section 10.1
hereof, the Company may assign or delegate all or any part of its rights or
obligations under this Agreement to a direct or indirect subsidiary or direct
or indirect parent or to any entity owned by such a subsidiary or parent or by
merger, consolidation, sale or transfer of all or substantially all of the
company's assets, provided any resulting assignee or transferee succeeds to the
obligations of the Company hereunder, and provided that at least twenty-five
percent (25%) of the ultimate ownership of such assignee or transferee
immediately after such transfer or assignment is held or owned, directly or
indirectly, by the same parties owning or holding immediately prior to the
transfer or assignment. All reference to the Company shall include any
permitted assignee or successor of the Company.
11. Prior Obligations. Employee represents and warrants to the
Company that he may enter into this Agreement and perform his obligations
hereunder without violating any contractual commitment to any other person, and
covenants that in the performance of his duties under this Agreement he will
not use or divulge any information to any person he is lawfully required to
maintain in confidence.
12. Preparation of Agreement. Employee acknowledges that this
Agreement was prepared by attorneys representing the Company. This Agreement
will have tax consequences to Employee. Employee has been advised to consult
with an attorney and tax advisor of his choice before entering into this
Agreement and he has done so. Employee acknowledges that he has not relied upon
any legal or tax advice of the Company's attorneys in connection with this
Agreement.
13. Miscellaneous.
13.1 Waiver. No waiver of any of the provisions of this
Agreement shall be valid unless in writing, signed by the party against whom
such waiver is sought to be enforced, nor shall failure to enforce any right
hereunder constitute a continuing waiver of the same or a waiver of any other
right hereunder.
13.2 Amendments. All amendments to this Agreement shall be
made in writing, signed by the parties, and no oral amendment shall be binding
on the parties.
13.3 Integration. This Agreement constitutes the entire
agreement between the parties relating to the subject matter hereof and
supersedes and cancels all other prior agreements and understandings of the
parties in connection with such subject matter.
13.4 Severability. The unenforceability or invalidity of any
provision or provisions of this Agreement shall not render any other provisions
or provisions hereof unenforceable or invalid. If any one or more of the
provisions of this Agreement shall for any reason be excessively broad as to
duration, scope, activity or subject, it shall be construed by reducing such
provision, so as to be enforceable to the extent compatible with applicable
law.
EMPLOYMENT AGREEMENT -- PAGE 6
<PAGE> 10
13.5 Headings. The headings or titles of this Agreement are
for the purpose of reference only and shall not in any way affect the
interpretation or construction of this Agreement.
13.5 Governing Law. This Agreement will be governed by the
laws of the State of Washington applicable to agreements between Washington
residents to be performed within the State of Washington.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
COMPANY:
/s/ David Hon
----------------------------------
By: David Hon, President
/s/ Bruce Sturman
----------------------------------
By: Bruce Sturman, Chief Executive Office
EMPLOYEE:
/s/ Greg Claypool
----------------------------------
Greg Claypool
EMPLOYMENT AGREEMENT -- PAGE 7
<PAGE> 1
Exhibit 10.22
<PAGE> 2
EMPLOYMENT AGREEMENT
By
and
Between
Steven Pieper
and
Interact Medical Technologies Corporation
Dated: May 24, 1996
<PAGE> 3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") made effective this day of
May 24, 1996 is between Interact Medical Technologies Corporation, a Delaware
Corporation (the "Company"), and Steven Pieper ("Employee")
1. Employment. Beginning on the Effective Date (As defined in Section
7), the Company will employ Employee, and Employee will accept employment by the
Company, as President of the Company's Medical Media Systems Division.
2. Duties. Employee's primary duties will consist of those as may be
determined by the Board of Directors, including, without limitation, the
following:
a. To serve as Chief Technology Officer of the Company and President
of the Company's Medical Media Systems Division and to perform such functions as
are required; and
b. To perform such other reasonable and necessary functions as may
be requested from time to time by the Board of Directors.
3. Time Obligations; Other Employment. Employee will be a full-time
employee of the Company for not less than two years (2). Employee will devote
his best efforts to the Company's business and will not engage in any activities
in conflict with the Company's interest. This Agreement shall remain in full
force and effect until the earlier of either April, 1998, such time as a new
Agreement is reached, or the Employee is terminated; provided, however, that the
Company shall provide Employee with a notice of the Company's intent to
terminate employment no later than sixty (60) days prior to the Expiration Date
as defined in Section 7.1 herein; provided, further, that if the Company does
not provide Employee with a notice to terminate this Agreement sixty (60) days
or more prior to the Expiration Date set forth in Section 7.1 herein, then the
Expiration Date shall be automatically extended for one (1) year under the same
terms and conditions as set forth in year two of this Agreement, or until a new
agreement is reached.
4. Compensation. For all services rendered by Employee under this
Agreement, the Company will pay Employee as follows from the Effective Date;
4.1 Base Salary. A base salary of one hundred and one thousand and
six hundred dollars ($101,600) for the first and second years, subject to
increases as determined by the Board of Directors. The base salary shall be paid
in 24 equal installments on the 1st and 15th of each month.
-1-
<PAGE> 4
4.2 Salary Bonus. After the Employee has been employed by the
Company for twelve (12) months, Employee will participate in the Company's
incentive performance plan ("IPP") wherein Employee will receive thirty percent
(30%) of his current salary upon satisfaction by the Company of certain
performance goals, which goals shall be established by mutual agreement between
Employee and the Board of Directors of the Company.
4.3 Stock Bonus. In addition to the annual base salary set for the
above, the Company shall provide to Employee a stock bonus of thirty thousand
(30,000) shares of the Company's voting common stock, $.01 par value, to be
distributed to Employee upon satisfaction by the Company of certain performance
goals, which goals shall be established by mutual agreement between Employee and
the Board of Directors of the Company.
4.4 Benefits. Employee shall be entitled to all fringe benefits
offered generally to the Company's senior managers and any other benefit plans
established by the Company including COBRA coverage if elected by Employee,
subject to the rules and regulations in effect regarding participation in such
benefit plans. In particular, such benefits shall be, at a minimum, life, health
and disability insurance as currently provided by the Company to its executive
officers. Employee shall also receive three (3) weeks vacation and additional
miscellaneous expenses including, without limitation, travel expenses deemed
necessary by the C.E.O. of the Company.
5. Noncompetition and Confidentiality.
5.1 Noncompetition. During the term of Employee's employment with
the Company and for a period of three (3) years thereafter, Employee will not,
directly or indirectly, be employed by, own, manage, operate, join, control or
participate in the ownership, management, operation or control of or be
connected in any manner with any business engaged in or related to teaching,
training or certification through the use of interactive medical simulation or
the sale or development of computed aided surgical systems or components
thereof. Employee will be deemed to be connected with a business if such
business is carried on by a partnership in which he is a general or limited
partner, consultant or employee, or a corporation or association of which he is
a shareholder, officer, director, employee, member, consultant or agent;
provided, however, that nothing herein shall prevent the purchase or ownership
by Employee of shares of less than 1% of the outstanding shares in a publicly
held company.
5.2 Nonsolicitation. Commencing as of the date of this Agreement and
continuing three (3) years after termination of Employee's employment with the
Company, Employee shall not solicit the employment of personnel employed by the
Company or by any direct or indirect parent or subsidiary of the Company during
the period of Employee's employment by the Company, without consent of the
Company. Furthermore, Employee shall not solicit employment with any entity
engaged in a joint venture or strategic alliance with the Company during the
period of Employee's employment by the Company and/or for three (3) years after
termination of such employment, without the express written consent of the
Company.
-2-
<PAGE> 5
5.3 Confidentiality. Employee agrees that, commencing as of the date
of this Agreement and thereafter, he will not, except to the Company, its
subsidiaries, and affiliates, communicate or divulge to any person, firm or
corporation, either directly or indirectly, any confidential or proprietary
information relating to and including this Agreement and the business, customers
and suppliers or other affairs of the Company, its parents, subsidiaries and
their affiliates, except as may be deemed necessary in carrying out the normal
duties of Employee. Without limiting the foregoing, all information concerning
procedures and strategies of the Company, its subsidiaries and parents shall be
deemed confidential and proprietary information.
5.4 Change of Control. Employee acknowledges that this accord not to
compete is essential to the Company and that the Company would not enter this
Agreement if it did not include such accord. Employee shall have no obligation
under either Sections 5.1 or 5.2 if terminated without cause or upon material
breach of this Agreement by the Company.
6. Equitable Relief. Employee acknowledges that any violation by him of
this Agreement may cause the Company injury. The Company (acting through its
Board of Directors) acknowledges that any violation by the Company of this
Agreement may cause Employee injury. Therefore, each party separately agrees
that the injured party shall be entitled, in addition to any remedies it may
have under this Agreement, or at law, to injunctive and other equitable relief
to prevent or curtail any breach of this Agreement by the other party,
including, without limitation, Section 5.
7. Term and Termination.
7.1 Effective Date. This Agreement is effective (the "Effective
Date") as of April, 1996. Unless otherwise terminated as provided in this
Section 7, the term of Employee's employment shall expire on April, 1998 (the
"Expiration Date), unless otherwise extended as set forth in paragraph 3.
7.2 Termination. This Agreement shall be terminated upon the
following;
(a) Death of Employee;
(b) Inability of Employee to perform his duties for a period of
90 consecutive days due to sickness, disability or any other
cause unless Employee is granted a leave of absence by the
Board of Directors; or
(c) For cause as provided in Section 8.1 and 8.2.
-3-
<PAGE> 6
7.3 Compensation Upon Termination. Employee shall be entitled to
compensation earned through the date of termination if termination is with cause
by the Company, without cause by Employee or because of Employee's death or
disability as provided in Section 7.2(a) or (b). If termination is without cause
by the Company, then Employee shall be entitled to the compensation in effect
pursuant to this Agreement at the time of termination through the end of the
term of this Agreement but in no event greater than one (1) year, including all
deferred compensation and applicable bonuses. Employee shall not be entitled to
any compensation upon termination without cause until such Employee has been
employed by the Company for twelve (12) consecutive months. Notwithstanding the
foregoing, Employee and the Company shall each use reasonable efforts to
mitigate any monetary damages suffered by each as a result of the termination of
Employee's employment and that the Company shall be entitled to offset any
amounts earned by the Employee during the one (1) year period after termination
by the Company against any amounts owed to the Employee by the Company as a
result of the Company's termination of the Employee.
7.4 Enforceability. Despite termination of this Agreement, and
irrespective of whether such termination has been effected with or without cause
by either Company or Employee, such termination shall not affect the continuing
enforceability of those provisions hereof which are by their terms expressly
intended to apply after the termination hereof, including without limitation,
those contained in Section 5, except as otherwise set forth herein.
8. Cause and Breach.
8.1 Termination for Cause. Where reference is made in this Agreement
to termination being by the Company or without cause, "cause" shall mean cause
given by Employee to the Company and is limited to the following:
(a) Failure or refusal to carry out the reasonable directions of
Board of Directors pursuant to the Company's policies and
procedures manual; or
(b) Violation of a state or federal law involving the commission
of a crime against the Company or a felony; or
(c) Employee's medically confirmed dependence on or abuse of
alcohol or any controlled substance; or
(d) Any breach of this Agreement or of any covenant herein or
the falsity of any representation or warranty not corrected
as provided in Section 8.2 hereof.
-4-
<PAGE> 7
8.2 Notice of Breach. Whenever a breach of this Agreement by either
party is relied upon as a justification for any action taken by a party pursuant
to any provision of this Agreement, before such action is taken, the party
asserting the breach shall give the other party written notice of the existence
and nature of the breach and the opportunity to correct such breach during the
thirty-day period following such notice except that the cure period for a
violation of Section 5 shall be 10 days.
9. Notice. All notices and requests in connection with this Agreement
shall be in writing and may be given by personal delivery, registered or
certified mail, return receipt requested, telegram or any other customary means
of communication addressed as follows:
Employee:
---------------------------
---------------------------
---------------------------
With a copy to:
---------------------------
---------------------------
---------------------------
Company: Interact Medical Technologies Corporation
Bruce D. Sturman
654 Madison Avenue
New York, NY 10021
With a copy to: David M. Otto, Esq.
Cairncross & Hempelmann, P.S.
70th Floor, Columbia Center
701 Fifth Avenue
Seattle, WA 98104-7016
or to such other addresses as the party to receive the notice or request shall
designate by written notice to the other. The effective date of any notice or
request shall be ten (10) business days from the date which is sent by
registered or certified mail, or when delivered to a telegraph company, properly
addressed as above with charges prepaid, or when personally delivered.
10. Assignment.
10.1 Nonassignability. Except as provided in Section 10.2 hereof,
the rights of either party shall not be assigned or transferred either
voluntarily or by operation of law without the other party's consent, nor shall
the duties of either party be delegated in whole or in part either voluntarily
or by operation of law without the other party's consent. Any unauthorized
assignment, transfer or delegation shall be of no force or effect.
-5-
<PAGE> 8
10.2 Assignment to Subsidiary. Notwithstanding Section 10.1 hereof,
the Company may assign or delegate all or any part of its rights or obligations
under this Agreement to a direct or indirect subsidiary or direct or indirect
parent or to any entity owned by such a subsidiary or parent or by merger,
consolidation, sale or transfer of all or substantially all of the Company's
assets, provided any resulting assignee or transferee succeeds to the
obligations of the Company hereunder. All references to the Company shall
include any permitted assignee or successor of the Company.
11. Prior Obligations. Employee represents and warrants to the Company
that he may enter into this Agreement and perform his obligations hereunder
without violating any contractual commitment to any other person, and covenants
that in the performance of his duties under this Agreement he will not use or
divulge any information to any person he is lawfully required to maintain in
confidence.
12. Preparation Agreement. Employee acknowledges that this Agreement
was prepared by attorney's representing the Company. This Agreement will have
tax consequences to Employee. Employee has been advised to consult with an
attorney and tax adviser of his choice before entering into this Agreement and
he has done so. Employee acknowledges that he is not relied upon any legal or
tax advice of the Company's attorneys in connection with this Agreement.
13. Miscellaneous.
13.1 Waiver. No waiver of any of the provisions of this Agreement
shall be valid unless in writing, signed by the party against whom such waiver
is sought to been forced, nor shall failure to enforce any right hereunder
constitute a continuing waiver of the same or a waiver of any other right
hereunder.
13.2 Amendments. All amendments to this Agreement shall be made in
writing, signed by the parties, and no oral amendment shall be binding on the
parties.
13.3 Integration. This Agreement constitutes the entire agreement
between the parties relating to the subject matter hereof and supersedes and
cancels all other prior agreements and understandings of the parties in
connection with such subject matter.
13.4 Severability. The unenforceability or invalidity of any
provision or provisions of this Agreement shall not render any other provisions
or provisions hereof unenforceable or invalid. If any one or more of the
provisions of this Agreement shall for any reason be excessively broad as to
duration, scope, activity or subject, it shall be construed by reducing such
provisions, so as to be enforceable to the extent compatible with applicable
law.
13.5 Headings. The headings or titles of this Agreement are for the
purpose of reference only shall not in any way affect the interpretation or
construction of this Agreement.
-6-
<PAGE> 9
13.6 This Agreement will be governed by the laws of the State of
Washington applicable to agreements between Washington residents to be performed
within the State of Washington.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
COMPANY:
/s/ Bruce D. Sturman
--------------------------------------
Bruce D. Sturman
Chief Executive Officer
EMPLOYEE:
--------------------------------------
Steven Pieper
Title:
-7-
<PAGE> 10
13.6 This Agreement will be governed by the laws of the State of
Washington applicable to agreements between Washington residents to be performed
within the State of Washington.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
COMPANY:
--------------------------------------
Bruce D. Sturman
Chief Executive Officer
EMPLOYEE:
/s/ Steven Pieper
--------------------------------------
Steven Pieper
Title: CEO & President
-------------------------------
-7-
<PAGE> 1
Exhibit 10.24
<PAGE> 2
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THIS NOTE MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1993, AS AMENDED, OR (ii) AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT WHERE THE HOLDER HAS FURNISHED TO THE
COMPANY AN OPINION OF ITS COUNSEL, IF SUCH OPINION SHALL BE SATISFACTORY TO THE
COMPANY, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
8% PROMISSORY NOTE
As of
Seattle, Washington
FOR VALUE RECEIVED, the undersigned, IXION, INC., a Delaware
corporation (the "Payor"), having its executive office and principal place of
business at 1335 N. Northlake Way, Suite 102, Seattle, Washington 98103,
Attention: Mr. David C. Hon, hereby promises to pay to the order of Kenneth E.
Chyten (the "Payee"), having an address at 12424 Wilshire Blvd. #1450, Los
Angeles, California 90025, on September 1, 1996 (the "Maturity Date") at the
Payee's address set forth hereinabove or, at such other place as the Payee shall
hereafter specify in writing, the principal sum of in such coin or
currency of the United States of America as at the time shall be legal tender
for the payment of public and private debts.
This Note (the "Note") is one of a series of notes being issued
pursuant to the Payor's Confidential Private Offering Memorandum (the
"Memorandum").
The Maturity Date may be extended, at the option of Payor, until
September 1, 1997. In such event, Payor shall issue to the holder of each Note
additional shares of its Common stock, without further consideration, at the
rate of 5,000 shares for each $25,000.00 principal amount of Notes outstanding
as described in the Memorandum.
1. INTEREST AND PAYMENT
1.1. The unpaid principal amount hereof shall bear simple interest
from the date hereof at the rate of 8% per annum until the Maturity Date (or
until any such earlier date of payment if this Note is prepaid as hereinafter
provided).
<PAGE> 3
1.2. Interest shall be payable in full on the Maturity Date (or on
any such earlier date of payment if this Note is prepaid as hereinafter
provided).
1.3. If payment of the principal amount hereof and interest
accrued thereon is not made when due and payable, at the Maturity Date or upon
acceleration, then interest shall accrue on such unpaid amount from the date of
nonpayment to the date of payment at the lesser interest rate of 12% simple
interest per annum or the maximum interest rate permitted by applicable law.
2. PREPAYMENT. At the option of the Payor, this Note may be prepaid in
whole or in part at any time or from time to time, without penalty or premium.
Each partial prepayment of this Note shall first be applied to interest accrued
through the date of prepayment and then to principal.
3. EVENTS OF DEFAULT. The occurrence of each or any of the following
conditions, events or acts shall constitute an "Event of Default:"
3.1. The dissolution of the Payor; or
3.2. The Payor's insolvency, assignment for the benefit of
creditors, application for or appointment of a receiver, filing of a voluntary
or involuntary petition under any provision of the Federal Bankruptcy Code or
amendments thereto or any other federal or state statute affording relief to
debtors; or if there shall be commenced against the Payor any such proceeding or
filed against the Payor any such application or petition which proceeding,
application or petition is not dismissed or withdrawn within thirty (30) days of
commencement or filing as the case may be; or
3.3. The failure by the Payor to make any payment of any amount of
principal on, or accrued interest under, this Note, as and when the same shall
become due and payable; or
3.4. The commencement of a proceeding to foreclose the security
interest or lien in any property or assets to satisfy the security interest or
lien therein of any secured creditor of the Payor whose debt is in excess of
$100,000.00; or
3.5. The entry of a final judgment for the payment of money in
excess of $100,000.00 by a court of competent jurisdiction against the Payor,
which judgment the Payor shall not discharge (or provide for such discharge) in
accordance with its terms within thirty (30)
2
<PAGE> 4
days of the date of entry thereof, or procure a stay of execution thereof within
thirty (30) days from the date of entry thereof and, with such thirty (30) day
period, or such longer period during which execution of such judgment shall have
been stayed, appeal therefrom and cause the execution thereof to be stayed
during such appeal; then, in any such event and at any time thereafter, while
such Event of Default is continuing, the indebtedness evidenced by this Note
shall immediately become due and payable, both as to principal and interest,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived, notwithstanding anything contained herein to the
contrary.
4. SUITS FOR ENFORCEMENT AND REMEDIES. If any one or more Events of
Default shall occur and be continuing, the holder of this Note may proceed to
protect and enforce such holder's rights either by suit in equity or by action
at law, or both, whether for the specific performance of any covenant, condition
or agreement contained in this Note or in any agreement or document referred to
herein or in aid of the exercise of any power granted in this Note or in any
agreement or document referred to herein, or proceed to enforce the payment of
this Note or to enforce any other legal or equitable right of the holder of this
Note. No right or remedy herein or in any other agreement or instrument
conferred upon the holder of this Note is intended to be exclusive of any other
right or remedy, and each and every such right or remedy shall be cumulative and
shall be in addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or by statute or otherwise.
5. FEES, WAIVERS, OTHER.
5.1. If the holder of this Note shall institute any action to
enforce the collection of any amount of principal of and/or interest on this
Note, and there shall be any amount of principal of and/or interest on this Note
owed to the holder, then there shall be immediately due and payable from the
Payor, in addition to the then unpaid sum of this Note, all reasonable costs and
expenses incurred by the Payee in connection therewith, including, without
limitation, reasonable attorneys' fees and disbursements.
3
<PAGE> 5
5.2. No forbearance, indulgence, delay or failure to exercise any
right or remedy with respect to this Note shall operate as a waiver, nor as an
acquiescence in any default, nor shall any single or partial exercise of any
right or remedy preclude any other or further exercise thereof or the exercise
of any other right or remedy.
5.3. This Note may not be modified or discharged except by a
writing duly executed by the Payor and the Payee.
5.4. The Payor hereby expressly waives demand and presentment for
payment, notice of nonpayment, notice of dishonor, protest, notice of protest,
bringing of suit, and diligence in taking any action to collect amounts called
for hereunder, and shall be directly and primarily liable for the payment of all
sums owing and to be owing herein, regardless of and without any notice,
diligence, act or omission with respect to the collection of any amount called
for hereunder or in connection with any right, lien, interest or property at any
and all times which the Payee had or is existing as security for any amount
called for hereunder.
5.5. The Payor shall bear all of its expenses, including
attorneys' fees incurred in connection with the preparation of this Note.
6. MISCELLANEOUS.
6.1. The headings of the various paragraphs of this Note are for
convenience of reference only and shall in no way modify any of the terms or
provisions of this Note.
6.2. All notices required or permitted to be given hereunder shall
be in writing and shall be deemed to have been duly given when personally
delivered or sent by registered or certified mail, return receipt requested,
postage prepaid, to the address of the intended recipient set forth in the
preamble to this Note or at such other address as the intended recipient shall
have hereafter given to the other party hereto pursuant to the provisions
hereof.
4
<PAGE> 6
ATTEST: IXION, INC.
____________________________________ ____________________________________
Name: Name: David C. Hon
Title: Secretary Title: President
5
<PAGE> 7
10.24 Promissory Notes.
-----------------
The following entities hold promissory notes in the form attached in the stated
aggregate amounts:
<TABLE>
<CAPTION>
PRINCIPAL
NAME OF NOTE HOLDER AMOUNT
- - ------------------- ---------
<S> <C>
Mark Segal, Trustee for Segal Family Trust 50,000
Marvin Landau, Trustee for Landau Living Trust 50,000
David Letterman 25,000
Fred Nigro 25,000
Steven David 25,000
Merv Adelson, Trustee for Merv Adelson Trust 100,000
Eli Grossman 50,000
Revit Family Trust 25,000
G&G Diagnostics L.P. I 50,000
Ameritech International Corporation 100,000
Merv Adelson 250,000
George Holbrook 50,000
Bruce Brackenridge 75,000
Paul Glenn 50,000
Gordon Segal 25,000
Steven Lee Craft 25,000
Nicole Katz 25,000
Larry Wells 25,000
John & Marilyn Dougery 150,000
DayStar Partners, L.P. 175,000
Henry L.B. Wilder 150,000
A.B. Laffer, V.A. Canto & Ass. 50,000
Randall Fowler - TTEE 50,000
Perry Esping 350,000
Jerrold & Lisa Morrison 25,000
John Lemak 25,000
----------
TOTAL $2,000,000
==========
</TABLE>
<PAGE> 1
Exhibit 10.25
<PAGE> 2
[LOGO]
IXION
February 22, 1996
Letter Agreement
Dear
This Letter Agreement is forwarded to you in regards to the number of
shares of Ixion, Inc., a Delaware corporation (the "Company") common stock to be
issued to each bridge investor in connection with each investor's investment.
The Company's common stock to be issued in connection with your bridge
investment will be issued upon completion of the Company's initial public
offering. In this regard, please be advised the Company has entered into a
Letter of Intent with Kaufman Bros., L.P. for a contemplated initial public
offering of a number of shares of the Company equal to forty percent (40%) of
the Company's outstanding common stock on a fully diluted basis.
The Company's records indicate that you have invested $
which entitles you to, in addition to the return of this $ at 8% per
annum, that number of shares of the Company's common stock equal to the same
dollar value. As set forth in the Company's Amended Confidential Private
Offering Memorandum, for each twenty five thousand dollar ($25,000) investment,
such investor is entitled to five thousand (5,000) shares of the Company's
common stock at the time of the Company's initial public offering, assuming an
initial public offering price of five dollars ($5.00) per share. Since the
initial public offering price of the Company's common stock has not been
established, however, the Company is not able to issue certificates to any
bridge investors at this time.
In the event the initial public offering price of the Company's common
stock is five dollars ($5.00) per share, you will receive that number of shares
equal to your investment divided by five dollars ($5.00) (e.g. if you invested
$25,000, you will receive 5,000 shares). If the initial public offering price of
the Company's common stock is greater than five dollars ($5.00) per share, each
investor will be entitled to receive a number of shares less than five thousand
(5,000) (e.g. if you invested $25,000 and the initial public offering price is
$10.00 per share, you will receive 2,500 shares). Conversely, if the initial
public offering price of the Company's common stock is less than five dollars
($5.00) per share, each investor will be entitled to receive a number of shares
greater than five thousand (5,000) (e.g. if you invested $25,000 and the initial
public offering price is $2.50 per share, you Will receive 10,000 shares).
Accordingly, the number of shares ultimately issued to each investor is a
function of the initial offering price of the Company's common stock.
It is the Company's intent to provide to each investor that number of
shares that equals, on a dollar value, the investor's initial investment,
excluding accrued interest. The Company intends to accomplish this by simply
dividing the investor's initial investment by the initial public offering price.
Until such initial public offering price is finalized,
Ixion, Inc.
654 Madison Avenue Suite 1606 New York, NY 10021 212/319-3500
1335 N. Northlake Way Suite 102 Seattle, WA 98103 206/547-8801
<PAGE> 3
FEBRUARY 22, 1996
PAGE - 2
however, no certificates representing the number of shares to which each
investor is entitled can be issued.
Please acknowledge that you understand and accept the terms set forth
above. Your acknowledgement will also confirm that you shall be entitled to that
number of shares of the Company's common stock representing your initial
investment, excluding accrued interest, divided by the initial public offering
price of the Company's common stock.
If you have any questions or comments with respect to the above, please
do not hesitate to contact me.
Sincerely,
/s/ Bruce D. Sturman
--------------------------------
Bruce D. Sturman
Agreed and Accepted this ____ day of_______ 1996.
Name: _______________________________
<PAGE> 4
10.25 Rights Under Outstanding Letter Agreements.
-------------------------------------------
Interact has assumed Ixion's obligations under the attached form of
letter agreement in connection with certain promissory notes issued by
Ixion whereby each holder of a promissory note is entitled to receive that
number of shares on the IPO date determined by dividing the amounts of such
party's investment by the IPO Price. Assuming the mid-point of the range set
forth on the cover of this Prospectus ($9.00), the potential number of shares
issuable at the IPO are as follows:
<TABLE>
<CAPTION>
PRINCIPAL POTENTIAL
NAME OF NOTE HOLDER AMOUNT SHARES
- - ------------------- --------- ---------
<S> <C> <C>
Kenneth Chyten $200,000 22,223
Mark Segal, Trustee for Segal Family Trust 50,000 5,556
Marvin Landau, Trustee for Landau Living Trust 50,000 5,556
David Letterman 25,000 2,778
Fred Nigro 25,000 2,778
Steven David 25,000 2,778
Merv Adelson, Trustee for Merv Adelson Trust 100,000 11,112
Eli Grossman 50,000 5,556
Revit Family Trust 25,000 2,778
G&G Diagnostics L.P. I 50,000 5,556
Ameritech International Corporation 100,000 11,112
Merv Adelson 250,000 27,778
George Holbrook 50,000 5,556
Bruce Brackenridge 75,000 8,334
Paul Glenn 50,000 5,556
Gordon Segal 25,000 2,778
Steven Lee Craft 25,000 2,778
Nicole Katz 25,000 2,778
Larry Wells 25,000 2,778
John & Marilyn Dougery 150,000 16,667
DayStar Partners, L.P. 175,000 19,445
Henry L.B. Wilder 150,000 16,667
A.B. Laffer, V.A. Canto & Ass. 50,000 5,556
Randall Fowler - TTEE 50,000 5,556
Perry Esping 350,000 38,889
Jerrold & Lisa Morrison 25,000 2,778
John Lemak 25,000 2,778
---------- -------
TOTAL $2,200,000 244,455
========== =======
</TABLE>
<PAGE> 1
Exhibit 10.26
<PAGE> 2
SUBSCRIPTION AGREEMENT
Ixion, Inc.
654 Madison Avenue, Suite 1606
New York, New York, 10021
Attention: Bruce D. Sturman
Gentlemen:
1. Pursuant to the terms of the offer contained in the Company's
Amended Confidential Private Offering Memorandum dated August 25,1995 (said
Memorandum, including the exhibits and attachments thereto, being hereinafter
called the "Memorandum"), the undersigned hereby subscribes and applies for the
purchase of the number of Units set forth on the signature page of this
agreement, each Unit consisting of an unsecured promissory note in the principal
amount of $25,000 and 5,000 shares of Common Stock, $.01 par value per share
(the "Common Stock") of Ixion, Inc., a Delaware corporation, (the "Company"), at
a purchase price of $25,000 per Unit. Partial Units may be purchased in the
discretion of the Company. Together with this Subscription Agreement, the
undersigned is delivering to the Company, its check, payable to Ixion, Inc., C/O
Monahan & Robinson, P.S., 6500 Columbia Center, 701 Fifth Avenue, Seattle,
Washington 98104-7003, Attention: David M. Otto, in the full amount of the
purchase price for the Units which it is subscribing for pursuant hereto or
funds by wire transfer to Ixion, Inc., Account No.270021698, Republic National
Bank, 1002 Madison Avenue, New York, NY 10021-1895, ABA No. 021 004 823,
Attention: Ms. Lisa Grey or Nancy MacMillen, telephone number (212)794-1600,
facsimile number (212)737-0633.
2. REPRESENTATIONS AND WARRANTIES. In order to induce the Company to
accept this subscription, the undersigned hereby represents and warrants to, and
covenants with, the Company as follows:
(i) The undersigned has received and carefully reviewed the
Memorandum, and except for the Memorandum, the undersigned has not been
furnished with any other materials or literature relating to the offer
and sale of the Units;
(ii) The undersigned has had a reasonable opportunity to ask
questions of and receive answers from the Company concening the Company
and the offering, and all such questions, if any, have been answered to
the full satisfaction of the undersigned;
(iii) The undersigned has such knowledge and expertise in
financial and business matters that the undersigned is capable of
evaluating the merits and risks involved in an investment in the Units;
(iv) The Confidential Purchaser Questionnaire being delivered by
the undersigned to the Company simultaneously herewith is true,
complete and correct in all material respects; and the undersigned
understands that the Company has determined that an exemption from the
registration provisions of the Securities Act of 1933, as amended (the
"Act"), which is based upon non-public offerings is applicable to the
offer and sale of the Units, based, in part, upon the representations,
waaranties and agreements made by the undersigned herein and in the
Confidential Purchaser Questionnaire referred to above;
(v) Except as set forth in the Memorandum, no representations or
waaranties have been made to the undersigned by the Company or any
agent, employee or affiliate of the Company and in entering into this
transaction the undersigned is not relying upon any
<PAGE> 3
information, other than that contained in the Memorandum and the
results of independent investigation by the undersigned;
(vi) The undersigned understands that (A) the Units, the Notes and
the Common Stock have not been registered under the Act or qualified
under the securities laws of any state, based upon an exemption from
such registration requirements for non-public offerings pursuant to
Section 4(2) of the Act and/or Regulation D under the Act; (B) the
Units, the Notes and the Common Stock are and will be "restricted
securities", as said term is defined in Rule 144 of the Rules and
Regulations promulgated under the Act; (C) the Units, the Notes and the
Common Stock may not be sold or otherwise transferred unless they have
been first registered under the Act and all applicable state securities
laws, or unless exemptions from such registration provisions are
available with respect to said resale or transfer; (D) other than as
set forth in the Memorandum, the Company is under no obligation to
register the Units, the Notes or the Common Stock under the Act or any
state securities laws, or to take any action to make any exemption from
any such registration provisions available; (E) the Notes and the
certificates for the Common Stock will bear a legend to the effect that
the transfer of the securities represented thereby is subject to the
provisions hereof; and (F) stop transfer instructions will be placed
with any transfer agent for the Notes and the Common Stock:
(vii) The undersigned is acquiring the Units solely for the
account of the undersigned, for investment purposes ouly, and not with
a view towards the resale or distribution thereof;
(viii) The undersigned will not sell or otherwise transfer any of
the Units, the Notes or the Common Stock or any interest therein,
unless and until (i) said Units, the Notes and the Common Stock shall
have first been registered under the Act and all applicable state
securities laws; or (ii) the undersigned shall have first delivered to
the Company a written opinion of counsel (which counsel and opinion (in
form and substance) shall be reasonably satisfactory to the Company),
to the effect that the proposed sale or transfer is exempt from the
registration provisions of the Act and all applicable state securities
laws;
(ix) The undersigned has full power and authority to execute and
deliver this Subscription Agreement and to perform the obligations of
the undersigned hereunder; and this Subscription Agreement is a legally
binding obligation of the undersigned in accordance with its terms; and
(x) The undersigned is an "accredited investor," as such term is
defined in Regulation D of the Rules and Regulations promulgated under
the Act.
3. The undersigned understands that this Subscription Agreement is not
binding upon the Company until the Company accepts it, which acceptance is at
the sole discretion of the Company and is to be evidenced by the Company's
execution of this Subscription Agreement where indicated This Subscription
Agreement shall be null and void if the Company does not accept it as aforesaid.
4. The undersigned understands that the Company may, in its sole
discretion, reject this subscription and, in the event that the offering to
which the Memorandum relates is oversubscribed, offer partial Units or reduce
this subscription in any amount and to any extent. whether or not pro rata
reductions are made of any other investor's subscription.
5. The undersigned agrees to indemnify the Company and hold it hanmless
from and against any and all losses, damages, liabilities, costs and expenses
which it may sustain or incur in
2
<PAGE> 4
connection with the breach by the undersigned of any representation, warranty or
covenant made by it herein.
6. Neither this Subscription Agreement nor any of the rights of the
undersigned hereunder may be transferred or assigned by the undersigned.
7. This Subscription Agreement (i) may ouly be modified by a written
instrument executed by the undersigned and the Company; and (ii) sets forth the
entire agreement of the undersigned and the Company with respect to the subject
matter hereof; and (iii) shall inure to the benefit of, and be binding upon the
Company and the undersigned and its respective heirs, legal representatives,
successors and assigns.
8. Unless the context otherwise requires, all personal pronouns used in
this Subscription Agreement, whether in the masculine, feminine or neuter
gender, shall include all other genders.
9. All notices or other communications hereunder shall be in writing
and shall be deemed to have been duly given if delivered personally or mailed by
certified or registered mail, return receipt requested, postage prepald, as
follows: if to the undersigned, to the address set forth in the Confidential
Purchaser Questionnaire referred to above; and if to the Company, to Ixion,
Inc., 654 Madison Avenue, Suite 1606, New York, New York 10021, Attention: Bruce
D. Sturman -- or to such other address as the Company or the undersigned shall
have designated to the other by like notice.
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement this ______ day of ___________
3
<PAGE> 5
SIGNATURE PAGE
Organization Signature: Individual Signature:
- - -------------------------------------- -----------------------------------
Print Name of Subscriber
By:
---------------------------------- -----------------------------------
Signature(s)
----------------------------------
Print Name and Title of Person ------------------------------------
Signing Print Name(s)
------------------------------------
Print Name(s)
Number of Units Subscribed for: ------------------------------------
(Please print information below
exactly as you wish it to appear in
the records of the Company)
- - --------------------------------------- ------------------------------------
Name and Capacity in which subscription Social Security Number of Individual
is made - see below for particular or other Taxpayer I.D. Number
requirements
Address: Address for notices if different:
- - --------------------------------------- ------------------------------------
Number and Street Number and Street
- - --------------------------------------- ------------------------------------
City State Zip City State Zip
Please indicate form of ownership:
- - --------------------------------------- ------------------------------------
TENANTS-IN-COMMON JOINT TENANTS WITH RIGHT OF
(Both Parties must sign above) SURVIVORSHIP
(Both Parties must sign above)
4
<PAGE> 6
ACCEPTANCE OF SUBSCRIPTION
IXION, INC.
The foregoing subscription is hereby accepted by Ixion, Inc., this
______ day of _______ for Unit
IXION, INC.
By /s/ Bruce D. Sturman
------------------------------
Name: Bruce D. Sturman
Title: Chief Executive Officer
5
<PAGE> 7
10.26 Subscription Agreement.
The following entities have executed the attached form of Subscription
Agreement for the stated amounts:
<TABLE>
<CAPTION>
PRINCIPAL
NAME OF SUBSCRIBER AMOUNT
- - ------------------ ---------
<S> <C>
Kenneth Chyten $200,000
Mark Segal, Trustee for Segal Family Trust 50,000
Marvin Landau, Trustee for Landau Living Trust 50,000
David Letterman 25,000
Fred Nigro 25,000
Steven David 25,000
Merv Adelson, Trustee for Merv Adelson Trust 100,000
Eli Grossman 50,000
Revit Family Trust 25,000
G&G Diagnostics L.P. I 50,000
Ameritech International Corporation 100,000
Merv Adelson 250,000
George Holbrook 50,000
Bruce Brackenridge 75,000
Paul Glenn 50,000
Gordon Segal 25,000
Steven Lee Craft 25,000
Nicole Katz 25,000
Larry Wells 25,000
John & Marilyn Dougery 150,000
DayStar Partners, L.P. 175,000
Henry L.B. Wilder 150,000
A.B. Laffer, V.A. Canto & Ass. 50,000
Randall Fowler - TTEE 50,000
Perry Esping 350,000
Jerrold & Lisa Morrison 25,000
John Lemak 25,000
----------
TOTAL $2,200,000
==========
</TABLE>
<PAGE> 1
EXHIBIT 10.27
<PAGE> 2
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THIS NOTE MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1993, AS AMENDED, OR (ii) AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT WHERE THE HOLDER HAS FURNISHED TO THE
COMPANY AN OPINION OF ITS COUNSEL, IF SUCH OPINION SHALL BE SATISFACTORY TO THE
COMPANY, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
8% PROMISSORY NOTE
$10,000.00 As of October 4, 1994.
Seattle, Washington
FOR VALUE RECEIVED, the undersigned, IXION, INC., a Delaware
corporation (the "Payor"), having its executive office and principal place of
business at 1335 N. Northlake Way, Suite 102, Seattle, Washington 98103,
Attention: Mr. David C. Hon, hereby promises to pay to the order of Bruce D.
Sturman (the "Payee"), having an address at 654 Madison Avenue, Suite 1606, New
York, New York 10021, on October 4, 1996 (the "Maturity Date") at the Payee's
address set forth hereinabove or, at such other place as the Payee shall
hereafter specify in writing, the principal sum of Ten Thousand Dollars
($10,000.00), in such coin or currency of the United States of America as at the
time shall be legal tender for the payment of public and private debts.
1. INTEREST AND PAYMENT
1.1. The unpaid principal amount hereof shall bear simple interest
from the date hereof at the rate of 8% per annum until the Maturity Date (or
until any such earlier date of payment if this Note is prepaid as hereinafter
provided).
1.2. Interest shall be payable in full on the Maturity Date (or on
any such earlier date of payment if this Note is prepaid as hereinafter
provided).
1.3. If payment of the principal amount hereof and interest accrued
thereon is not made when due and payable, at the Maturity Date or upon
acceleration, then interest shall accrue on such unpaid amount from the date of
nonpayment to the date of payment at the lesser interest rate of 12% simple
interest per annum or the maximum interest rate permitted by applicable law.
<PAGE> 3
2. PREPAYMENT. At the option of the Payor, this Note may be prepaid in
whole or in part at any time or from time to time, without penalty or premium.
Each partial prepayment of this Note shall first be applied to interest accrued
through the date of prepayment and then to principal.
3. EVENTS OF DEFAULT. The occurrence of each or any of the following
conditions, events or acts shall constitute an "Event of Default:"
3.1. The dissolution of the Payor; or
3.2. The Payor's insolvency, assignment for the benefit of
creditors, application for or appointment of a receiver, filing of a voluntary
or involuntary petition under any provision of the Federal Bankruptcy Code or
amendments thereto or any other federal or state statute affording relief to
debtors; or if there shall be commenced against the Payor any such proceeding or
filed against the Payor any such application or petition which proceeding,
application or petition is not dismissed or withdrawn within thirty (30) days of
commencement or filing as the case may be; or
3.3. The failure by the Payor to make any payment of any amount of
principal on, or accrued interest under, this Note, as and when the same shall
become due and payable; or
3.4. The commencement of a proceeding to foreclose the security
interest or lien in any property or assets to satisfy the security interest or
lien therein of any secured creditor of the Payor whose debt is in excess of
$100,000.00; or
3.5. The entry of a final judgment for the payment of money in
excess of $100,000.00 by a court of competent jurisdiction against the Payor,
which judgment the Payor shall not discharge (or provide for such discharge) in
accordance with its terms within thirty (30) days of the date of entry thereof,
or procure a stay of execution thereof within thirty (30) days from the date of
entry thereof and, with such thirty (30) day period, or such longer period
during which execution of such judgment shall have been stayed, appeal therefrom
and cause the execution thereof to be stayed during such appeal; then, in any
such event and at any time thereafter, while such Event of Default is
continuing, the indebtedness evidenced by this Note
2
<PAGE> 4
shall immediately become due and payable, both as to principal and interest,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived, notwithstanding anything contained herein to the
contrary.
4. SUITS FOR ENFORCEMENT AND REMEDIES. If any one or more Events of
Default shall occur and be continuing, the holder of this Note may proceed to
protect and enforce such holder's rights either by suit in equity or by action
at law, or both, whether for the specific performance of any covenant, condition
or agreement contained in this Note or in any agreement or document referred to
herein or in aid of the exercise of any power granted in this Note or in any
agreement or document referred to herein, or proceed to enforce the payment of
this Note or to enforce any other legal or equitable right of the holder of this
Note. No right or remedy herein or in any other agreement or instrument
conferred upon the holder of this Note is intended to be exclusive of any other
right or remedy, and each and every such right or remedy shall be cumulative and
shall be in addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or by statute or otherwise.
5. FEES, WAIVERS, OTHER.
5.1. If the holder of this Note shall institute any action to
enforce the collection of any amount of principal of and/or interest on this
Note, and there shall be any amount of principal of and/or interest on this Note
owed to the holder, then there shall be immediately due and payable from the
Payor, in addition to the then unpaid sum of this Note, all reasonable costs and
expenses incurred by the Payee in connection therewith, including, without
limitation, reasonable attorneys' fees and disbursements.
5.2. No forbearance, indulgence, delay or failure to exercise any
right or remedy with respect to this Note shall operate as a waiver, nor as an
acquiescence in any default, nor shall any single or partial exercise of any
right or remedy preclude any other or further exercise thereof or the exercise
of any other right or remedy.
5.3. This Note may not be modified or discharged except by a writing
duly executed by the Payor and the Payee.
3
<PAGE> 5
5.4. The Payor hereby expressly waives demand and presentment for
payment, notice of nonpayment, notice of dishonor, protest, notice of protest,
bringing of suit, and diligence in taking any action to collect amounts called
for hereunder, and shall be directly and primarily liable for the payment of all
sums owing and to be owing herein, regardless of and without any notice,
diligence, act or omission with respect to the collection of any amount called
for hereunder or in connection with any right, lien, interest or property at any
and all times which the Payee had or is existing as security for any amount
called for hereunder.
5.5. The Payor shall bear all of its expenses, including attorneys'
fees incurred in connection with the preparation of this Note.
6. MISCELLANEOUS.
6.1. The headings of the various paragraphs of this Note are for
convenience of reference only and shall in no way modify any of the terms or
provisions of this Note.
6.2. All notices required or permitted to be given hereunder shall
be in writing and shall be deemed to have been duly given when personally
delivered or sent by registered or certified mail, return receipt requested,
postage prepaid, to the address of the intended recipient set forth in the
preamble to this Note or at such other address as the intended recipient shall
have hereafter given to the other party hereto pursuant to the provisions
hereof.
ATTEST:
IXION, INC.
/s/ David M. Otto
- - -------------------------------
Name: David M. Otto
Title: Secretary
4
<PAGE> 1
EXHIBIT 10.28
<PAGE> 2
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THIS NOTE MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1993, AS AMENDED, OR (ii) AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT WHERE THE HOLDER HAS FURNISHED TO THE
COMPANY AN OPINION OF ITS COUNSEL, IF SUCH OPINION SHALL BE SATISFACTORY TO THE
COMPANY, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
8% PROMISSORY NOTE
$50,000.00 As of October 31, 1995.
Seattle, Washington
FOR VALUE RECEIVED, the undersigned, IXION, INC., a Delaware corporation
(the "Payor"), having its executive office and principal place of business at
1335 N. Northlake Way, Suite 102, Seattle, Washington 98103, Attention: Mr.
David C. Hon, hereby promises to pay to the order of Bruce D. Sturman (the
"Payee"), having an address at 654 Madison Avenue, Suite 1606, New York, New
York 10021, on October 31, 1996 (the "Maturity Date") at the Payee's address set
forth hereinabove or, at such other place as the Payee shall hereafter specify
in writing, the principal sum of Fifty Thousand Dollars ($50,000.00), in such
coin or currency of the United States of America as at the time shall be legal
tender for the payment of public and private debts.
1. Interest and Payment
1.1. The unpaid principal amount hereof shall bear simple interest
from the date hereof at the rate of 8% per annum until the Maturity Date (or
until any such earlier date of payment if this Note is prepaid as hereinafter
provided).
1.2. Interest shall be payable in full on the Maturity Date (or on
any such earlier date of payment if this Note is prepaid as hereinafter
provided).
1.3. If payment of the principal amount hereof and interest accrued
thereon is not made when due and payable, at the Maturity Date or upon
acceleration, then interest shall accrue on such unpaid amount from the date of
nonpayment to the date of payment at the lesser interest rate of 12% simple
interest per annum or the maximum interest rate permitted by applicable law.
<PAGE> 3
2. PREPAYMENT. At the option of the Payor, this Note may be prepaid in
whole or in part at any time or from time to time, without penalty or premium.
Each partial prepayment of this Note shall first be applied to interest accrued
through the date of prepayment and then to principal.
3. EVENTS OF DEFAULT. The occurrence of each or any of the following
conditions, events or acts shall constitute an "Event of Default:"
3.1. The dissolution of the Payor; or
3.2. The Payor's insolvency, assignment for the benefit of
creditors, application for or appointment of a receiver, filing of a voluntary
or involuntary petition under any provision of the Federal Bankruptcy Code or
amendments thereto or any other federal or state statute affording relief to
debtors; or if there shall be commenced against the Payor any such proceeding or
filed against the Payor any such application or petition which proceeding,
application or petition is not dismissed or withdrawn within thirty (30) days of
commencement or filing as the case may be; or
3.3. The failure by the Payor to make any payment of any amount of
principal on, or accrued interest under, this Note, as and when the same shall
become due and payable; or
3.4. The commencement of a proceeding to foreclose the security
interest or lien in any property or assets to satisfy the security interest or
lien therein of any secured creditor of the Payor whose debt is in excess of
$100,000.00; or
3.5. The entry of a final judgment for the payment of money in
excess of $100,000.00 by a court of competent jurisdiction against the Payor,
which judgment the Payor shall not discharge (or provide for such discharge) in
accordance with its terms within thirty (30) days of the date of entry thereof;
or procure a stay of execution thereof within thirty (30) days from the date of
entry thereof and, with such thirty (30) day period, or such longer period
during which execution of such judgment shall have been stayed, appeal therefrom
and cause the execution thereof to be stayed during such appeal; then, in any
such event and at any time thereafter, while such Event of Default is
continuing, the indebtedness evidenced by this Note
2
<PAGE> 4
shall immediately become due and payable, both as to principal and interest,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived, notwithstanding anything contained herein to the
contrary.
4. SUITS FOR ENFORCEMENT AND REMEDIES. If any one or more Events of
Default shall occur and be continuing, the holder of this Note may proceed to
protect and enforce such holder's rights either by suit in equity or by action
at law, or both, whether for the specific performance of any covenant, condition
or agreement contained in this Note or in any agreement or document referred to
herein or in aid of the exercise of any power granted in this Note or in any
agreement or document referred to herein, or proceed to enforce the payment of
this Note or to enforce any other legal or equitable right of the holder of this
Note. No right or remedy herein or in any other agreement or instrument
conferred upon the holder of this Note is intended to be exclusive of any other
right or remedy, and each and every such right or remedy shall be cumulative and
shall be in addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or by statute or otherwise.
5. FEES, WAIVERS, OTHER.
5.1. If the holder of this Note shall institute any action to
enforce the collection of any amount of principal of and/or interest on this
Note, and there shall be any amount of principal of and/or interest on this Note
owed to the holder, then there shall be immediately due and payable from the
Payor, in addition to the then unpaid sum of this Note, all reasonable costs and
expenses incurred by the Payee in connection therewith, including, without
limitation, reasonable attorneys' fees and disbursements.
5.2. No forbearance, indulgence, delay or failure to exercise any
right or remedy with respect to this Note shall operate as a waiver, nor as an
acquiescence in any default, nor shall any single or partial exercise of any
right or remedy preclude any other or further exercise thereof or the exercise
of any other right or remedy.
5.3. This Note may not be modified or discharged except by a writing
duly executed by the Payor and the Payee.
3
<PAGE> 5
5.4. The Payor hereby expressly waives demand and presentment for
payment, notice of nonpayment, notice of dishonor, protest, notice of protest,
bringing of suit, and diligence in taking any action to collect amounts called
for hereunder, and shall be directly and primarily liable for the payment of all
sums owing and to be owing herein, regardless of and without any notice,
diligence, act or omission with respect to the collection of any amount called
for hereunder or in connection with any right, lien, interest or property at any
and all times which the Payee had or is existing as security for any amount
called for hereunder.
5.5. The Payor shall bear all of its expenses, including attorneys'
fees incurred in connection with the preparation of this Note.
6. MISCELLANEOUS.
6.1. The headings of the various paragraphs of this Note are for
convenience of reference only and shall in no way modify any of the terms or
provisions of this Note.
6.2. All notices required or permitted to be given hereunder shall
be in writing and shall be deemed to have been duly given when personally
delivered or sent by registered or certified mail, return receipt requested,
postage prepaid, to the address of the intended recipient set forth in the
preamble to this Note or at such other address as the intended recipient shall
have hereafter given to the other party hereto pursuant to the provisions
hereof.
ATTEST:
IXION, INC.
/s/ David M. Otto
- - -------------------------------------
Name: David M. Otto
Title: Secretary
4
<PAGE> 1
EXHIBIT 10.29
<PAGE> 2
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THIS NOTE MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1993, AS AMENDED, OR (ii) AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT WHERE THE HOLDER HAS FURNISHED TO THE
COMPANY AN OPINION OF ITS COUNSEL, IF SUCH OPINION SHALL BE SATISFACTORY TO THE
COMPANY, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
8% PROMISSORY NOTE
$25,000.00 As of September 6, 1994.
Seattle, Washington
FOR VALUE RECEIVED, the undersigned, IXION, INC., a Delaware
corporation (the "Payor"), having its executive office and principal place of
business at 1335 N. Northlake Way, Suite 102, Seattle, Washington 98103,
Attention: Mr. David C. Hon, hereby promises to pay to the order of David C. Hon
(the "Payee"), having an address at 1450 N.W. Woodbine Way, Seattle, Washington
98177, on September 6, 1996 (the "Maturity Date") at the Payee's address set
forth hereinabove or, at such other place as the Payee shall hereafter specify
in writing, the principal sum of Twenty-Five Thousand Dollars ($25,000.00), in
such coin or currency of the United States of America as at the time shall be
legal tender for the payment of public and private debts.
1. INTEREST AND PAYMENT
1.1 The unpaid principal amount hereof shall bear simple interest
from the date hereof at the rate of 8% per annum until the Maturity Date (or
until any such earlier date of payment if this Note is prepaid as hereinafter
provided).
1.2. Interest shall be payable in full on the Maturity Date (or on
any such earlier date of payment if this Note is prepaid as hereinafter
provided).
1.3. If payment of the principal amount hereof and interest accrued
thereon is not made when due and payable, at the Maturity Date or upon
acceleration, then interest shall accrue on such unpaid amount from the date of
nonpayment to the date of payment at the lesser interest rate of 12% simple
interest per annum or the maximum interest rate permitted by applicable law.
<PAGE> 3
2. PREPAYMENT. At the option of the Payor, this Note may be prepaid in
whole or in part at any time or from time to time, without penalty or premium.
Each partial prepayment of this Note shall first be applied to interest accrued
through the date of prepayment and then to principal.
3. EVENTS OF DEFAULT. The occurrence of each or any of the following
conditions, events or acts shall constitute an "Event of Default:"
3.1. The dissolution of the Payor; or
3.2. The Payor's insolvency, assignment for the benefit of
creditors, application for or appointment of a receiver, filing of a voluntary
or involuntary petition under any provision of the Federal Bankruptcy Code or
amendments thereto or any other federal or state statute affording relief to
debtors; or if there shall be commenced against the Payor any such proceeding or
filed against the Payor any such application or petition which proceeding,
application or petition is not dismissed or withdrawn within thirty (30) days of
commencement or filing as the case may be; or
3.3. The failure by the Payor to make any payment of any amount of
principal on, or accrued interest under, this Note, as and when the same shall
become due and payable; or
3.4. The commencement of a proceeding to foreclose the security
interest or lien in any property or assets to satisfy the security interest or
lien therein of any secured creditor of the Payor whose debt is in excess
of $100,000.00; or
3.5. The entry of a final judgment for the payment of money in
excess of $100,000.00 by a court of competent jurisdiction against the Payor,
which judgment the Payor shall not discharge (or provide for such discharge) in
accordance with its terms within the (30) days of the date of entry thereof, or
procure a stay of execution thereof within thirty (30) days from the date of
entry thereof and, with such thirty (30) day period, or such longer period
during which execution of such judgment shall have been stayed, appeal therefrom
and cause the execution thereof to be stayed during such appeal; then, in any
such event and at any time thereafter, while such Event of Default is
continuing, the indebtedness evidenced by this Note
2
<PAGE> 4
shall immediately become due and payable, both as to principal and interest,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived, notwithstanding anything contained herein to the
contrary.
4. SUITS FOR ENFORCEMENT AND REMEDIES. If any one or more Events of
Default shall occur and be continuing, the holder of this Note may proceed to
protect and enforce such holder's rights either by suit in equity or by action
at law, or both, whether for the specific performance of any covenant, condition
or agreement contained in this Note or in any agreement or document referred to
herein or in aid of the exercise of any power granted in this Note or in any
agreement or document referred to herein, or proceed to enforce the payment of
this Note or to enforce any other legal or equitable right of the holder of this
Note. No right or remedy herein or in any other agreement or instrument
conferred upon the holder of this Note is intended to be exclusive of any other
right or remedy, and each and every such right or remedy shall be cumulative and
shall be in addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or by statute or otherwise.
5. FEES, WAIVERS, OTHER.
5.1. If the holder of this Note shall institute any action to
enforce the collection of any amount of principal of and/or interest on this
Note, and there shall be any amount of principal of and/or interest on this Note
owed to the holder, then there shall be immediately due and payable from the
Payor, in addition to the then unpaid sum of this Note, all reasonable costs and
expenses incurred by the Payee in connection therewith, including, without
limitation, reasonable attorneys' fees and disbursements.
5.2. No forbearance, indulgence, delay or failure to exercise any
right or remedy with respect to this Note shall operate as a waiver, nor as an
acquiescence in any default, nor shall any single or partial exercise of any
right or remedy preclude any other or further exercise thereof or the exercise
of any other right or remedy.
5.3. This Note may not be modified or discharged except by a writing
duly executed by the Payor and the Payee.
3
<PAGE> 5
5.4. The Payor hereby expressly waives demand and presentment for
payment, notice of nonpayment, notice of dishonor, protest, notice of protest,
bringing of suit, and diligence in taking any action to collect amounts called
for hereunder, and shall be directly and primarily liable for the payment of all
sums owing and to be owing herein, regardless of and without any notice,
diligence, act or omission with respect to the collection of any amount called
for hereunder or in connection with any right, lien, interest or property at any
and all times which the Payee had or is existing as security for any amount
called for hereunder.
5.5. The Payor shall bear all of its expenses, including attorneys'
fees incurred in connection with the preparation of this Note.
6. MISCELLANEOUS.
6.1. The headings of the various paragraphs of this Note are for
convenience of reference only and shall in no way modify any of the terms or
provisions of this Note.
6.2. All notices required or permitted to be given hereunder shall
be in writing and shall be deemed to have been duly given when personally
delivered or sent by registered or certified mail, return receipt requested,
postage prepaid, to the address of the intended recipient set forth in the
preamble to this Note or at such other address as the intended recipient shall
have hereafter given to the other party hereto pursuant to the provisions
hereof.
ATTEST:
IXION, INC.
/s/ David M. Otto
- - -------------------------------
Name: David M. Otto
Title: Secretary
4
<PAGE> 1
EXHIBIT 10.30
<PAGE> 2
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THIS NOTE MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1993, AS AMENDED, OR (ii) AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT WHERE THE HOLDER HAS FURNISHED TO THE
COMPANY AN OPTION OF ITS COUNSEL, IF SUCH OPINION SHALL BE SATISFACTORY TO THE
COMPANY, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
8% PROMISSORY NOTE
$10,000.00 As of September 12, 1994.
Seattle, Washington
FOR VALUE RECEIVED, the undersigned, IXION, INC., a Delaware
corporation (the "Payor"), having its executive office and principal place of
business at 1335 N. Northlake Way, Suite 102, Seattle, Washington 98103,
Attention: Mr. David C. Hon, hereby promises to pay to the order of David C. Hon
(the "Payee"), having an address at 1450 N.W. Woodbine Way, Seattle, Washington
98177, on September 12, 1996 (the "Maturity Date") at the Payee's address set
forth hereinabove or, at such other place as the Payee shall hereafter specify
in writing, the principal sum of Ten Thousand Dollars ($10,000.00), in such coin
or currency of the United States of America as at the time shall be legal tender
for the payment of public and private debts.
1. INTEREST AND PAYMENT
1.1. The unpaid principal amount hereof shall bear simple interest
from the date hereof at the rate of 8% per annum until the Maturity Date (or
until any such earlier date of payment if this Note is prepaid as hereinafter
provided).
1.2. Interest shall be payable in full on the Maturity Date (or on
any such earlier date of payment if this Note is prepaid as hereinafter
provided).
1.3. If payment of the principal amount hereof and interest accrued
thereon is not made when due and payable, at the Maturity Date or upon
acceleration, then interest shall accrue on such unpaid amount from the date of
nonpayment to the date of payment at the lesser interest rate of 12% simple
interest per annum or the maximum interest rate permitted by applicable law.
<PAGE> 3
2. PREPAYMENT. At the option of the Payor, this Note may be prepaid in
whole or in part at any time or from time to time, without penalty or premium.
Each partial prepayment of this Note shall first be applied to interest accrued
through the date of prepayment and then to principal.
3. EVENTS OF DEFAULT. The occurrence of each or any of the following
conditions, events or acts shall constitute an "Event of Default:"
3.1. The dissolution of the Payor; or
3.2. The Payor's insolvency, assignment for the benefit of
creditors, application for or appointment of a receiver, filing of a voluntary
or involuntary petition under any provision of the Federal Bankruptcy Code or
amendments thereto or any other federal or state statute affording relief to
debtors; or if there shall be commenced against the Payor any such proceeding or
filed against the Payor any such application or petition which proceeding,
application or petition is not dismissed or withdrawn within thirty (30) days of
commencement or filing as the case may be; or
3.3. The failure by the Payor to make any payment of any amount of
principal on, or accrued interest under, this Note, as and when the same shall
become due and payable; or
3.4. The commencement of a proceeding to foreclose the security
interest or lien in any property or assets to satisfy the security interest or
lien therein of any secured creditor of the Payor whose debt is in excess of
$100,000.00; or
3.5. The entry of a final judgment for the payment of money in
excess of $100,000.00 by a court of competent jurisdiction against the Payor,
which judgment the Payor shall not discharge (or provide for such discharge) in
accordance with its terms within thirty (30) days of the date of entry thereof,
or procure a stay of execution thereof within thirty (30) days from the date of
entry thereof and, with such thirty (30) day period, or such longer period
during which execution of such judgment shall have been stayed, appeal therefrom
and cause the execution thereof to be stayed during such appeal; then, in any
such event and at any time thereafter, while such Event of Default is
continuing, the indebtedness evidenced by this Note
2
<PAGE> 4
shall immediately become due and payable, both as to principal and interest,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived, notwithstanding anything contained herein to the
contrary.
4. SUITS FOR ENFORCEMENT AND REMEDIES. If any one or more Events of
Default shall occur and be continuing, the holder of this Note may proceed to
protect and enforce such holder's rights either by suit in equity or by action
at law, or both, whether for the specific performance of any covenant, condition
or agreement contained in this Note or in any agreement or document referred to
herein or in aid of the exercise of any power granted in this Note or in any
agreement or document referred to herein, or proceed to enforce the payment of
this Note or to enforce any other legal or equitable right of the holder of this
Note. No right or remedy herein or in any other agreement or instrument
conferred upon the holder of this Note is intended to be exclusive of any other
right or remedy, and each and every such right or remedy shall be cumulative and
shall be in addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or by statute or otherwise.
5. FEES, WAIVERS, OTHER.
5.1. If the holder of this Note shall institute any action to
enforce the collection of any amount of principal of and/or interest on this
Note, and there shall be any amount of principal of and/or interest on this Note
owed to the holder, then there shall be immediately due and payable from the
Payor, in addition to the then unpaid sum of this Note, all reasonable costs and
expenses incurred by the Payee in connection therewith, including, without
limitation, reasonable attorneys' fees and disbursements.
5.2. No forbearance, indulgence, delay or failure to exercise any
right or remedy with respect to this Note shall operate as a waiver, nor as an
acquiescence in any default, nor shall any single or partial exercise of any
right or remedy preclude any other or further exercise thereof or the exercise
of any other right or remedy.
5.3. This Note may not be modified or discharged except by a writing
duly executed by the Payor and the Payee.
3
<PAGE> 5
5.4. The Payor hereby expressly waives demand and presentment for
payment, notice of nonpayment, notice of dishonor, protest, notice of protest,
bringing of suit, and diligence in taking any action to collect amounts called
for hereunder, and shall be directly and primarily liable for the payment of all
sums owing and to be owing herein, regardless of and without any notice,
diligence, act or omission with respect to the collection of any amount called
for hereunder or in connection with any right, lien, interest or property at any
and all times which the Payee had or is existing as security for any amount
called for hereunder.
5.5. The Payor shall bear all of its expenses, including attorneys'
fees incurred in connection with the preparation of this Note.
6. MISCELLANEOUS.
6.1. The headings of the various paragraphs of this Note are for
convenience of reference only and shall in no way modify any of the terms or
provisions of this Note.
6.2. All notices required or permitted to be given hereunder shall
be in writing and shall be deemed to have been duly given when personally
delivered or sent by registered or certified mail, return receipt requested,
postage prepaid, to the address of the intended recipient set forth in the
preamble to this Note or at such other address as the intended recipient shall
have hereafter given to the other patty hereto pursuant to the provisions
hereof.
ATTEST;
IXION, INC.
/s/ David M. Otto
- - ---------------------------------
Name: David M. Otto
Title: Secretary
4
<PAGE> 1
Exhibit 10.31
<PAGE> 2
Ethicon/Ixion Final Contract
RESEARCH, OPTION AND LICENSE AGREEMENT
THIS AGREEMENT made and entered into as of April 8, 1992 (the "Effective
Date"), by and between IXION, Inc., a Delaware corporation having its principal
place of business at 1335 N. Northlake Way, Suite #102, Seattle, Washington
98103 (hereafter "IXION"), and ETHICON Endo-Surgery, a division of ETHICON, INC.
a Johnson & Johnson corporation, an Ohio corporation having its principal place
of business at 4545 Creek Road, Cincinnati, Ohio 45242 (hereafter "ETHICON").
WITNESSETH
WHEREAS, IXION has developed, manufactured, and sold endoscopic surgery
simulators for use by surgeons and trainees and owns rights to patents regarding
such simulators, such as U.S. Patent No. 4,907,973, granted March 13, 1990; and
WHEREAS, ETHICON is in the business of providing instruments for
endoscopic surgery and has substantial technology concerning the production,
manufacture, design and marketing of such products; and
WHEREAS, ETHICON is interested in working with IXION in the further
development of its technology and certain simulators and
<PAGE> 3
to have IXION perform various research and development to meet ETHICON's needs;
and
WHEREAS, ETHICON may wish to acquire from IXION rights to sell
simulator inventions in the Field (as defined below) which derive from such
research; and
WHEREAS, IXION wishes to undertake such work, manufacture simulators
and transfer certain rights to ETHICON and
WHEREAS, ETHICON may wish to manufacture, or to market exclusively that
simulator which would be manufactured by IXION.
WHEREAS, the parties have entered into a feasibility agreement (a
letter form agreement) dated May 14, 1991, and as later amended September 10,
1991, whereby ETHICON has provided payments and certain computer products to
IXION, and IXION has performed feasibility performance studies of such
technology to ETHICON; and
WHEREAS, ETHICON has paid IXION Two Hundred Thousand Dollars on
December 23, 1991 as a reflection of ETHICON's desire to enter into this
agreement with IXION;
NOW, THEREFORE, in consideration of the above premises, and the
undertakings, terms, conditions, and covenants set forth
2
<PAGE> 4
herein, the parties, intending to be legally bound, do agree as follows:
ARTICLE I - DEFINITIONS
As utilized herein, the following terms shall be defined as follows:
1.1 "Field" or "Technical Field" shall mean methods, processes,
devices, and instruments for the simulation of endoscopic and minimally invasive
surgery in humans through an extendable, multi-plane computer-based video
laparoscopic surgical training apparatus with tactile feedback for the teaching
of surgical skills.
1.2 "Technology" shall mean any inventions, designs, and technologies
directly relating to instruments in the Field. Inventions, designs, and
technologies not directly relating to instruments in the Field may be disclosed
to ETHICON by IXION during the program as described in Appendix D.
1.3 "Royalty Bearing Product" (also "Product") shall mean any product
which is made, made for, used, leased, or sold by ETHICON or its Affiliates,
assignees or sub licensees, where such making, use, sale, or lease utilizes
Technology and/or IXION Patents.
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<PAGE> 5
1.4 "ETHICON Affiliate" shall mean Johnson & Johnson, a New Jersey
corporation or a subsidiary of Johnson & Johnson, or a corporation controlled by
Johnson & Johnson, control of a corporation being the actual, present capacity
to elect a majority of the directors of the corporation, or if not a majority,
the maximum number of directors that the applicable law allows.
1.5 "IXION Patents" shall mean United States and foreign patents
applicable to Technology and to which IXION owns rights or any continuation,
continuation-in-part, divisional, re-issue or re-examination of such patents. A
list of IXION Patents shall be annually furnished to ETHICON as Appendix A of
this Agreement.
1.6 "Valid Licensed Claim" shall mean a claim of an unexpired IXION
Patent which has not been held invalid in an unappealed or unappealable final
decision rendered by a court or other governmental body of competent
jurisdiction.
1.7 "Program" shall mean the research and developmental efforts
performed under this agreement within the period of time described in Article
II.
1.8 "Effective Date" This Agreement will become effective on the date
signed by all the parties.
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<PAGE> 6
1.9 "Net Sales" on a given unit shall mean:
A. The revenue actually received by the Licensee for products sold or
leased to third party non-affiliates, less the following: (i) any usual
product trade discounts, including product-specific cash discounts or
rebates actually allowed or granted, up to 30% of the established list
price including cash or quantity discounts, rebates or other usual
practices, (ii) product-specific credits or allowances actually granted
upon claims or returns regardless of the party requesting the return,
(iii) freight charges paid by licensee for delivery, and (iv) taxes or
other governmental charges levied on or measured by the invoiced amount
whether absorbed by the billing or the billed party; or
B. The established list price for sale or lease of products put in to
use by licensee or an Affiliate other than as leased products, and for
products disposed of or leased by Licensee to third party
non-affiliates at or for actual compensation of less than 70% of the
established list price for the purchase or lease, but if no list price
or lease rate has been established, then the manufacturing cost,
including cost of materials plus direct and indirect labor cost plus
overhead at the rate currently established by ETHICON's accounting
system plus 15% of said manufacturing cost: or
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<PAGE> 7
C. The tuition compensation actually received by ETHICON or an Affiliate for
organized instructional or testing purposes on the simulator (however, the
minimum royalty payable to IXION by ETHICON under this paragraph will be $25
per student).
ARTICLE II - RESEARCH PROGRAM
2.1 The Program
A. IXION shall undertake efforts to provide ETHICON a replicable
prototype simulator based on Technology for evaluation by ETHICON for inclusion
as part of ETHICON's product line (the "Program") with IXION's corporate name
visibly attached. An outline of the Program including payment and performance
milestones is labeled as Appendix C.
B. ETHICON shall undertake to support IXION's efforts by making
available from ETHICON on a basis which supports a program schedule, all such
medical instrumentation and medical demonstrations and imaging-gathering
sessions that IXION needs to meet ETHICON's needs, if not previously committed
to ETHICON's needs said instrumentation to be returned to ETHICON upon
completion of the Program. During the feasibility period preceding this
agreement, ETHICON has already provided IXION with computer material, listed in
Appendix B to this
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<PAGE> 8
Agreement, which IXION had agreed to return upon ETHICON's request.
2.2 For its participation in the Program, IXION shall be paid a total
fixed fee of $2.8 Million (Two Million, Eight Hundred Thousand Dollars).
ETHICON has already made a first such installment of Two Hundred Thousand
Dollars ($200,000.00). Further details concerning the anticipated direction and
development of the Program are contained in the Program --Technical Plan
attached hereto as Appendix C and incorporated herein.
2.3 Terms of the Program
The Program shall continue for a period of eighteen (18) months from
the Effective Date or as extended under Paragraph 2.4.
2.4 The Program may, at ETHICON's option, be extended for an additional
period up to one year, in three month increments, by sixty (60) days written
notice to IXION; said extended Program to include revised Appendix C -
Technical Plan (agreed to by both parties) with a payment of One Hundred
Thousand Dollars ($100,000.00) per month during each notified three -month
extension of the Program payable in conformance with the provisions of Paragraph
2.2.
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<PAGE> 9
2.5. Reporting
IXION agrees to work under ETHICON direction and technical input
and to communicate to ETHICON the status of the work and development on the
Program, IXION's findings, and all results in a manner and at a periodicity as
the parties shall reasonably agree but no less frequently than every sixty (60)
days, and to promptly disclose to ETHICON any inventions or improvements
pertaining to appropriate Technology conceived or reduced to practice in the
course of the Program by IXION. Upon final payment of the Program invoices,
IXION agrees to provide ETHICON with a final report which details the components
and usage of the simulator.
ARTICLE III - OPTION PERIOD BEYOND PROGRAM
3. Option Extension
ETHICON shall have a One-hundred-Twenty-(120) day period from the date
of IXION's submission of its final invoice for the Program as defined herein, in
which to evaluate Program results, conduct market research, and exercise the
option hereby granted to become the exclusive licensee within the Field under
IXION Patents and the Technology, as granted under Article V hereof, such option
to be exercised through written notification by ETHICON to IXION of its
intention to take such a license.
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<PAGE> 10
ARTICLE IV - INVENTIONS
4.1 Results and Inventions
11 Technology conceived or reduced to practice in the Program by IXION
shall be the property of IXION throughout the world (hereinafter "Inventions"),
subject to any rights granted to ETHICON.
4.2. Patent Filings
4.2.1 IXION shall file and then diligently prosecute, at ETHICON's
expense, patent applications in the United States, and corresponding foreign
patent applications covering Inventions or improvements representing Technology
developed during the Program.
4.2.2 ETHICON shall provide technical assistance to IXION for patent
filings at no cost when requested to do so by IXION.
4.2.3 Should IXION elect to abandon efforts to acquire patent
protection for any invention or improvement representing Technology, IXION
shall, at ETHICON's request, assign to ETHICON all further papers including
such patent application as may be reasonably needed for ETHICON to continue
efforts to acquire patent protection for such invention.
ARTICLE V - LICENSE GRANT
5.1 License Grant
As consideration for payments provided for under Article 11 to IXION
and upon the exercise of the option by ETHICON under
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<PAGE> 11
Article 111, and in consideration of royalty payments as herein after set forth
as part of this Agreement, IXION hereby grants to ETHICON the exclusive
worldwide license within the Field under IXION Patents and Technology to make,
have made, use, lease, and sell or otherwise dispose of Royalty Bearing Products
and to practice IXION Patents and Technology in the Field, and to grant sub
licenses of commensurate scope to ETHICON affiliates. Any sub license granted by
ETHICON pursuant to this Paragraph shall be communicated to IXION by written
notice within fifteen (15) days of the grant of such sub license. Such written
notice shall include, at least, the name of the sub licensee and the scope of
the sub license granted. Under no circumstance without prior approval of IXION,
will ETHICON grant sub licenses pursuant to this Paragraph which grant to the
sub licensees the right to further sub license.
5.2 Upon request by ETHICON and upon IXION's approval of potential
licensees, IXION will grant licenses within the Field to non-affiliates of
ETHICON on terms to be negotiated. Such approval by IXION will not to be
unreasonably withheld.
5.3 Royalties on Patented Products
5.3.1 Upon the exercise by ETHICON of its option under Article III to
accept a license under Article V, ETHICON shall pay IXION a royalty on a
quarterly basis based on the "Royalty Year" for which payment is due. A "Royalty
Year" shall be
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<PAGE> 12
designated as commencing on the first day of the Calendar Quarter (January 1,
April 1, July 1, or October 1) during which occurs, the earlier of: (a) the
eighteen-month (18) anniversary of the end of the Program; or (b) the first
arms-length sale or placement in use of a Royalty Bearing Product, and
continuing for a 12-month period. In the event of delays in obtaining regulatory
approval for the sale of Royalty Bearing Products, the beginning of a Royalty
Year shall be tolled until the granting of such regulatory approval.
5.4 Royalties due IXION shall be Five Percent (5%) of Net Sales on
Royalty Bearing Products which fall under a Valid Licensed Claim of a IXION
Patent. Royalties due IXION on Royalty Bearing Products which do not fall under
a Valid License Claim of a IXION Patent, royalties shall be Three (3 %) of Net
Sales, for five (5) years of Royalty payments, after which ETHICON shall have a
paid-up non-exclusive license to the non-patented Technology.
5.5 Minimum Royalties
In each Royalty Year, solely to hold the exclusive licenses granted
herein, ETHICON shall pay IXION a minimum royalty, regardless of Net Sales of
Royalty Bearing Products. Such Royalties shall be computed based within each
Royalty Year as follows:
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<PAGE> 13
Royalty Year Minimum Royalty
First $100,000.00
Second through Fifth $200,000.00 per year
After the fifth year, should minimum royalties fall below $200,000 per
year, the exclusive license granted ETHICON herein shall become non-exclusive.
5.5.1 The royalty payments set forth in Paragraph 5.5 are in lieu of
any effort or responsibility on the part of ETHICON to market or develop
Royalty Bearing Products at any time during the term of this Agreement. After
the first Royalty Year, if ETHICON does not pay the minimum royalties in 5.5,
IXION's sole remedy shall be to convert the exclusive license granted in this
Agreement to a non-exclusive license. In the event that IXION has the right to
convert ETHICON's rights to a non-exclusive license, royalty payments due by
ETHICON to IXION shall be actual earned royalties only. Any such remedy shall
be taken only upon written notice to ETHICON. ETHICON shall have ninety (90)
days upon the receipt of such notice to make up any deficiencies in order to
maintain the exclusive license granted under this Agreement.
5.5.2 It should be noted that any regulatory delays in the sale of
Royalty Bearing Products shall not be construed as a failure by ETHICON to
market such products as provided herein.
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5.6 Payments by ETHICON under Paragraphs 5.3 through 5.5 shall
continue for as long as there are Royalty Bearing Products made within the
scope of the Technology covered by IXION patents of by pending patent
applications if such applications were filed within five years of the effective
date of this Agreement.
5.7 Records
ETHICON shall keep complete and accurate records of the Net Sales of
Royalty Bearing Products with respect to which a royalty is payable according
to this Agreement and within sixty (60) days following each quarterly period of
a Royalty Year, ETHICON shall render to IXION a written report, certified
accurate by an officer of ETHICON, setting forth gross sales, permitted
discounts, net sales, number, description and actual or established list
selling or list lease price of all royalty bearing products under this license
sold, leased, or otherwise disposed of or put into use by ETHICON and its sub
licensees during such report period and the royalties due IXION thereon.
ETHICON shall, upon rendering such report, remit to IXION in U.S. dollars the
amount of royalty shown thereby to be due. On non-U.S. sales, IXION will accept
a Royalty paid 60 days after each Royalty year until ETHICON's standard royalty
reporting becomes quarterly. In lieu of royalty reports as required above,
ETHICON may make its royalty reports on their standard royalty report form as
shown in Appendix E hereof.
5.8 Audits
At its expense, IXION shall have the right to nominate an independent
public accountant acceptable to and approved by
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<PAGE> 15
ETHICON which approval shall not be unreasonably withheld, who shall have access
to ETHICON's records during reasonable business hours for the purpose of
verifying the royalty reports as provided for in this Agreement, but this right
may not be exercised more than once in any Royalty Year, and the accountant
shall disclose to IXION only information relating solely to the accuracy of the
royalty report and the royalty payments made according to this Agreement.
Receipt of acceptance by IXION of any statements furnished pursuant to this
Agreement or of any sums paid hereunder shall not preclude IXION from
questioning the correctness thereof at any time. If any inconsistencies or
mistakes are discovered in any statements of payments, they shall be immediately
rectified and the appropriate payments made by ETHICON. ETHICON shall bear the
expense of any examination or audit conducted by IXION if a deficiency greater
that Fifteen Percent (15%) or more in Royalty Payments is discovered.
5.9 Sale of Business
Upon the sale by ETHICON of its endoscopic surgery business, IXION
agrees upon the request of ETHICON, to enter into a separate agreement with the
purchaser of ETHICON's business relating to IXION Patents or the sale of Royalty
Bearing Products. Any such agreements made pursuant to this Paragraph will
contain the terms and conditions relating to licenses granted and royalty
payments contained in this Agreement. Except upon sale by ETHICON of its
endosurgery business, all rights
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<PAGE> 16
granted hereunder to ETHICON shall be non-transferable without prior written
consent of IXION.
ARTICLE VI - PATENT INFRINGEMENT
6.1.1 Third Party Infringement During the license period, IXION and
ETHICON shall each give prompt notice to the other of any infringement of the
IXION Patents by third parties as may come to their knowledge.
6.1.2 So long as ETHICON'S License remains exclusive, ETHICON shall
have the right to pursue legal action against infringement of an IXION Patent by
third parties' activities in the Field. Should such legal action require that
IXION be joined as party plaintiff. IXION shall not reasonably withhold
permission to bring such action, and to join IXION as party plaintiff. If
ETHICON pursues such legal action on its own, ETHICON shall bear its own costs,
and retain any profits, settlement or damages awarded as a result of such
action. Any costs to pursue such litigation shall be credited against royalty
payments due IXION up to fifty percent (50%) of payment due in any Royalty Year
Quarter. If ETHICON settles such third party infringement action, and a
settlement agreement or judicial decree includes royalties or payment for lost
sales by ETHICON, IXION shall be entitled to royalty payments on such amounts if
IXION is due a royalty for the years representing such royalties
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or payment for lost sales, less litigation expenses incurred by ETHICON. Any
recovery of costs or attorneys fees shall be shared by IXION and ETHICON in the
proportion to which they each contributed to the financing of such costs and
attorney's fees, such by IXION's aforementioned reduced royalties.
6.1.3 IXION, if not in attendance, will be kept informed on the
progress of any suit by ETHICON reports periodically, or monthly upon request
by IXION. IXION may at all times be represented by counsel of its own choosing
and may at any time initiate infringement actions or join in actions initiated
by ETHICON. For such action, IXION shall be responsible for all of its own
costs. IXION also agrees to provide at ETHICON's expense for out of pocket
costs, all reasonable cooperation in the prosecution of such infringement.
Should ETHICON be unable to prosecute such an infringement of an IXION patent
in its own name as provided in this Section 6.1.2. then IXION agrees to the
filing of suit in IXION's name and will within thirty (30) days after request
by ETHICON provide ETHICON with all necessary documents for prosecution of such
infringement in IXION's name. In the event ETHICON is unable, by operation of
law, to bring such an infringement action under any of the IXION patents, IXION
at the request of ETHICON, shall institute such action in its own name through
such attorneys as ETHICON may designate to handle such legal action. ETHICON
shall pay all costs of any such action.
6.2 Infringement by ETHICON
6.2.1 If, in exercising their rights under this Agreement, ETHICON or
one of its sub licensees are accused of infringing a patent owned by a third
party, ETHICON may enter into negotiations with such third party to obtain
rights under such third party patent. ETHICON shall periodically inform IXION
of the status of any such infringement action or negotiations. If, in obtaining
such rights, ETHICON or its sub licensee is required to make any payments to
such third party solely by reason of IXION's design as embodied in the
replicable simulator prototype
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to be delivered hereunder, and not by reason of any changes from said design
incorporated in the Royalty-Bearing Products produced or used by ETHICON or its
sub licensees, or by reason of the use of the accused product by ETHICON or its
sublicensees in a manner not contemplated by the parties hereto at the time of
delivery of the product, the royalties payable to IXION on sales in the country
in which ETHICON has obtained rights from the third party shall be reduced by
the amount of said payments up to fifty percent (50%) of the royalty due to
IXION from such sales in that country.
6.2.2 If ETHICON is sued for infringing any issued patent contemplated
in Paragraph 6.2.1, and ETHICON elects to defend such a lawsuit, then if such
charge of infringement resulted solely by reason of IXION's design as embodied
in the simulator prototype to be delivered hereunder, and not by reason of any
changes from said design incorporated in the Royalty-Bearing Products produced
or used by ETHICON or its sub licensees, or by reason of the use of the accused
product by ETHICON or its sublicensees in a manner not contemplated by the
parties hereto at the time of delivery of the product, both IXION and ETHICON
shall equally share in the costs and legal fees incurred in defending such
infringement action. IXION's costs and legal fees shall be deducted from any
royalties due IXION, provided that in any period, IXION shall receive no less
than fifty percent (50%) of any royalties due it. Unless IXION has been joined
as a party defendant, all decisions regarding the settlement of such litigation
or the taking of a license as described in Paragraph 6.2.1 shall be vested
solely with ETHICON. Otherwise the parties agree to consult with each other
regarding any settlement contemplated by them or either of them.
17
<PAGE> 19
6.2.3 The costs of litigation's referred to in Paragraphs 6.1 and 6.2
shall include but not be limited to such out-of-pocket expenses as court costs
and court fees, reasonable travel expenses, reasonable charges for the
professional services of outside counsel and experts, and shall exclude only the
time that ETHICON's regular employees devote to such litigation.
ARTICLE VII - GENERAL PROVISIONS
7.1 Regulatory
At all times during the Program and during the term of this license,
IXION will cooperate with ETHICON in satisfying the requirements of all federal,
state and local laws in the United States and foreign countries, as such laws
relate to obtaining approval to sell Royalty Bearing Products.
7.2 Confidentiality
All confidential material provided by one party to the other, if
reduced to writing and marked Confidential by the providing party within two
weeks of delivery, shall be maintained confidential for a period of three (3)
years following termination of this Agreement. The receiving party shall guard
18
<PAGE> 20
such confidential information as if it were its own and shall not "reverse
engineer" know-how to the other party's detriment. Notwithstanding the
foregoing, the receiving party shall be relieved of the confidentiality
obligations herein and shall not be prevented by this Agreement from utilizing
any information received by it from the disclosing party if:
a. the information was previously known to the receiving party;
b. the information is or becomes generally available to the public
through no fault of the receiving party, including information
disclosed as a result of publications and/or laying open for
inspection by the public of any patent applications that the
disclosing party may file, or
c. the information is acquired in good faith in the future by the
receiving party from a third party who is not under an obligation
of confidence to the disclosing party with respect to such
information.
7.3 No Outstanding Agreements
IXION warrants that it has the ability to enter into this Agreement,
that there are no outstanding written or oral agreements inconsistent with this
Agreement to which IXION is a
19
<PAGE> 21
party, and that IXION will not while this Agreement is in force, enter into any
written or oral agreements in conflict with this Agreement.
7.4 Term
The licenses granted in Part V under the IXION Patents shall be for the
life of the IXION Patents, unless such license is terminated sooner, as provided
in this Article VII.
7.5 Termination
ETHICON may terminate this Agreement during the Program or the license
period by giving IXION ninety (90) days advance written notice of its intention
to terminate. Such termination by ETHICON shall cancel any options or licenses
granted to ETHICON by IXION which have not become fully paid-up licenses. Such
termination, however, shall not release ETHICON from its obligations to make any
pro-rated payments or royalties accrued and unpaid up to the effective date of
such termination, nor the provisions of Paragraph 7.2. In the event of
termination of the license by ETHICON during the Program, ETHICON agrees to
return to IXION all prototypes, drawings and other materials belonging to IXION,
and title to all Technology shall remain with IXION.
20
<PAGE> 22
7.6 Material Breach
If either party to this Agreement defaults or materially breaches the
terms of this Agreement other than by reason of force majeure, the other party
shall have the right to terminate this Agreement by giving written notice to the
effect to the defaulting party ninety (90) days in advance of the date of
cancellation specified in the notice. However, if the default or breach is
corrected or made good by the party receiving notice within ninety (90) days
after the notice of termination has been received, this Agreement shall not be
canceled but will remain in full force and effect.
7.7 Notice
All communications, reports, payments and notices shall be effective
when deposited, postage prepaid in United States Registered Mail or when
deposited, fees paid with Overnight Courier and sent to:
If to IXION: IXION, Inc.
1335 N. Northlake Way
Suite 102
Seattle, WA 98103
Attn.: David C. Hon
21
<PAGE> 23
If to ETHICON: ETHICON ENDO-SURGERY
a division of ETHICON, Inc.
4545 Creek Road
Cincinnati, Ohio 45242
Attn: Vice President
New Business Development
7.8 Assignment
The rights and obligations in and to this Agreement shall be binding
upon and inure to the benefit of the parties, their legal representatives,
successors and assigns. However, neither party shall be permitted to assign any
rights hereunder without permission from the other party.
7.9 Integration
It is the mutual desire and intent of ETHICON and IXION to provide
certainty as to their future rights and remedies against each other by defining
the extent of their mutual undertakings as provided herein. Both ETHICON and
IXION acknowledge and agree (a) that no representation or promise not expressly
contained in this Agreement has been made by the other party hereto or by any of
its agents, employees, representatives or attorneys; (b) that such Agreement is
not being entered into on the basis of, or in reliance on, any promise or
representation, expressed or implied, covering the subject matter hereof, other
than those which are
22
<PAGE> 24
set forth expressly in this Agreement; and (c) that each party has had the
opportunity to be represented by counsel of its own choice in this matter,
including the negotiations which preceded the execution of this Agreement.
7.10 Entire Understanding
This Agreement represents the entire understanding between IXION and
ETHICON with respect to the subject matter in this Agreement, and supersedes any
and all implied or express understandings, agreements or obligations between the
parties with respect thereto.
7.11 Undertakings by ETHICON
IXION recognizes that ETHICON has been actively involved in the analyte
measurement field. Except as otherwise expressly provided herein, ETHICON makes
no representation or warranty that ETHICON or an ETHICON affiliate will market
any Royalty Bearing Product or that, if ETHICON or any ETHICON Affiliate does
market any Simulator or any Royalty Bearing Product, such product will be the
exclusive means by which ETHICON or an ETHICON affiliate will participate in
such surgical simulation market.
23
<PAGE> 25
7.12 Force Majeure
Neither party shall be liable for failure to perform as required by any
provision of this Agreement where such failure results from a cause beyond such
party's control such as acts of God, regulation or other acts of civil or
military authority, required approval of government bodies, fires, strikes,
floods, epidemics, quarantine restrictions, riot, delays in transportation and
inabilities due to causes beyond such party's control to obtain necessary labor,
materials, or manufacturing facilities. In the event of any delay attributable
to any of the foregoing causes, the time for performance affected thereby shall
be extended for a period equal to the time lost by reason of such delay.
7.13 No Waiver
Failure of a party to enforce at any time for any period any of the
provisions of this Agreement shall not be construed to be a waiver of such
provision or the right of such party thereafter to enforce each such provision.
7.14 Inoperability
In the event any provision or provisions of this Agreement shall be
inoperable either by operation of law or otherwise, the
24
<PAGE> 26
remainder of this Agreement shall remain in full force and effect.
7.15 Arbitration
If a dispute between the parties which in any way relates to the
entering into of this Agreement and/or the validity, construction, meaning,
enforceability, or performance of this Agreement or any of its provisions; or
the intent of the parties entering into this Agreement, or any of its
provisions; or the validity or infringement of any patents, the parties agree
first to try in good faith to settle the dispute by mediation under the
Commercial Mediation Rules of the American Arbitration Association, before
resorting to arbitration. Thereafter, any remaining unresolved controversy or
claim arising out of the entering into of this Agreement or the validity,
construction, meaning, enforceability of performance of this Agreement or any of
its provisions; or the intent of the parties in entering into this Agreement, or
any of its provisions; or the validity or infringement of any patents, shall be
settled by arbitration in accordance with the Commercial Arbitration Rules of
the American Arbitration Association and with a panel of three (3) arbitrators.
A judgment upon any award rendered by the arbitrators may be entered in any
court having jurisdiction thereof and any decision by such arbitrators shall be
final. Such arbitration shall be conducted in Cincinnati, Ohio. The successful
party in such arbitration, in addition to all other
25
<PAGE> 27
relief provided, shall be entitled to an award of all its reasonable costs and
expenses, including reasonable attorney's fees. ETHICON will pay all travel
expenses incurred by IXION necessary parties in the case of such arbitration, or
other recourse to Ohio law.
7.16 Choice of Law
This Agreement shall be construed, and the legal relations between the
parties determined in accordance with the laws of the State of Ohio, except that
the Federal Arbitration Act, Title 9 of the United States Code, shall apply to
all matters that arise out of arbitration pursuant to Paragraph 7.15.
7.17 No Publicity
Neither party will originate any publicity, news release, or other
public announcement, written or oral, whether to the public press, to
stockholders, or otherwise relating to this Agreement, to any amendment hereto
or to performance hereunder or the existence of an arrangement between the
parties without the prior written approval of the other party. Violation of this
clause shall be considered a material breach of this Agreement.
26
<PAGE> 28
IN WITNESS WHEREOF, ETHICON and IXION have caused these presents to be
signed.
ETHICON ENDO-SURGERY
division of ETHICON, Inc.
By: /s/ M. Kay Clanton April 8, 1992
-----------------------------------
M. Kay Clanton
Title: Vice President
New Product Development
IXION, INC.
By: /s/ David C. Hon March 27, 1992
----------------------------------
David C. Hon
Title: President
By: /s/ David C. Hon March 27, 1992
-----------------------------------
Patent Holder
27
<PAGE> 29
APPENDIX A
IXION PATENTS
1. U.S. Patent 4,907,973
2. U.S. Patent 4,490,810
28
<PAGE> 30
APPENDIX B
COMPUTER MATERIAL SUPPLIED TO IXION
<TABLE>
<CAPTION>
GROUP ITEM UNIT COST QTY TOTAL COST
<S> <C> <C> <C> <C>
TRUE/Vision/ Targa
Targa 64+ Bds. 1,450 2 3,310
Tips Software 650 1 650
Happauge i/860
i/486 Computer 7,400 1 6,294
i/860 Compiler 1,700 1 1,700
Microsoft C 450 1 278
NeXT Computer
Cannon Disk 183 1 183
NeXT Cube 19,000 1 17,194
Total 29,609
</TABLE>
29
<PAGE> 31
APPENDIX C
TECHNICAL PROGRAM PLAN
1. IXION DELIVERABLES
1.1 IXION will deliver to ETHICON, 18 months from the start date of the
contract, an extendable multi-plane computer-based video laparoscopic
surgical training simulator with tactile feedback to include the
capability of teaching the following surgical skills in order of
importance:
1. Exposure
2. Dissection (i.e., of a mesentery of an organ away from surrounding
structures
3. Ligation of blood vessels and ductile structures.
4. Division of organs (i.e. division of the bowel using a stapling
instrument)
5. The joining together of organs or prosthesis to organs, or other
tissues, using various stapling instruments.
6. Simulator model can be packed and transported easily.
7. Updated skills/instrumentation changes can be completed in a
minimum of a 90 day time frame.
30
<PAGE> 32
2. ETHICON FUNDING
A. For the above deliverables, ETHICON ENDO-SURGERY will pay a fixed
fee of $2.8 Million (Two Million Eight Hundred Thousand Dollars)
to IXION, INC. Payment schedules are as follows:
(i) Contracts commencement - $1,000,000 (less $200,000 start-up
fee paid December 23, 1991). Moneys used for manpower
resources, computer hardware/software; consultants,
overhead, General Administrative, as in Part 4 of this
Appendix.
(ii) At the end of the eighth month from the Effective Date or
demonstration of Laparoscopic Diagnostic Simulator described
in 3.4, whichever is sooner $600,000.
(iii) At the end of the Progress Review after the twelfth month
from the Effective Date - $700,000.
(iv) At the end of the eighteenth month from the Effective Date
or the receipt of a final Laparoscopic Skills Simulator
(whichever is later) - $500,000.
31
<PAGE> 33
However, a penalty of $100,000 per month will be deducted
for delay of Final Simulator up to a maximum of $300,000, so
long as ETHICON ENDO-SURGERY requirements for skills and
acquiring human footage have been met.
Conversely, a bonus of Three Hundred Thousand Dollars
($300,000) shall be paid if a functional Final Simulator
shall be delivered before the end of the fifteenth month, a
bonus of Two Hundred Thousand Dollars ($200,000) shall be
paid if a functional Final Simulator shall be delivered
before the end of the sixteenth month, and a bonus of One
Hundred Thousand Dollars ($100,000) shall be paid if a
functional Final Simulator shall be delivered before the end
of the seventeenth month,
3. GENERAL
3.1. There will be a joint progress review every sixty days. H.R.
Trumbull M.D. will be ETHICON ENDO-SURGERY point person and the
coordinator of the Project.
3.2 The prototype two-dimensional video simulator will be designed in
a manner which can be produced for under $40,000 per unit in lots
of 50.
32
<PAGE> 34
3.3 Major variations from, additions to, or subtractions from the
above deliverables must be covered in timely fashion by a mutually
acceptable Change Order.
3.4 As part of the 10 month performance review, IXION will demonstrate
a Laparoscopic Diagnostic Simulator (human footage) on a prototype
simulator platform. This will include a simulated camera cannula
and allow visual inspection of the full hemisphere from the camera
portal. This demonstration will employ the developmental simulator
platform, and thus should not be considered a carry-away product
or exhibit.
3.4.1 Because this will be part of a design and development stage
of the simulator program, it is highly possible that this hardware
and software will not be upwardly compatible to later versions.
Thus, if an interim system is desired by ETHICON for location at
their site, ETHICON will provide:
A. Funding for two interim systems, one of which will be a
spare at IXION. The software and hardware will be "frozen" at
the acceptance of the demonstration, and no additional
improvements will be requested by ETHICON.
33
<PAGE> 35
B. An ETHICON technical correspondent will be assigned, and
committed up to full time for maintenance of that hardware and
software.
3.5 The only additional expenses to be paid under the Program by
ETHICON ENDO-SURGERY shall be expenses for reasonable travel to
and filming which will be paid for by ETHICON ENDO-SURGERY, based
on receipts submitted. Ethicon will manage all logistics of such
activities, including any necessary compliance requirements to
governmental or regulatory laws.
3.6 Should acquisition of anatomical images timely to the schedule of
the simulator be delayed due to no fault of IXION, this will not
defer any payment milestones mentioned above, and will furthermore
automatically create an Extension under 2.4 of necessary length to
the Program and furthermore extend the periods above which define
both bonuses and penalties above. Furthermore, should these
acquisition circumstances prevent the milestone payment at eight
months, that payment will be made at eight months. The first such
image acquisition should occur during the fourth month of this
program,
34
<PAGE> 36
3.7. All hardware purchased for IXION as in Appendix B, which remains
intact, shall continue to be the property of ETHICON ENDO-SURGERY.
4. IXION TECHNICAL MANPOWER RESOURCES IXION projects these manpower
requirements:
1. SOFTWARE MANAGER - Coordinates all SW activities
2. NETWORK ASSISTANT -
3. NETWORK S.E. - Designs and implements Multi-task
4. 3-D CONTRACT LEAD - Designs, coordinates actile/planes
5. SW ENGINEER - Designs, manages video databases
6. SW ENGINEER - Graphics Specialist
7. SW ENGINEER - Designs, integrates simulator engine
8. SW ENGINEER - Designs, manages tactile databases
9. SW ENGINEER - Programs video plane "movements"
10. SW ENGINEER - Programmer, software documentation
11. HARDWARE MANAGER - Coordinates all HW activities
12. SYSTEM DEVELOPMENT ASSISTANT
13. SIGNAL BOARD ELEC. ENG. - Designs, constructs Signal Boards
14. INSTRUMENT/TACTILE - Develops "sensitized" instruments and
plastics
15. INSTRUMENT COMMUNICATIONS - Develops instrument/computer interface
16. TECHNICIAN - Maintains and tests all equipment
35
<PAGE> 37
17. ENG. DOC. SPEC. - Develops all documentation of Elec. and
Mechanical HW
18. VIDEO SPECIALIST - Produces all video segments for system
19. PROFESSIONAL MEDICAL LIAISON
36
<PAGE> 38
APPENDIX D
1. DISCLOSED INVENTIONS OR PROCESSES NOT DIRECTLY RELATED TO PROGRAM,
FIELD OR TECHNOLOGY AS DEFINED IN THIS AGREEMENT
1.1 During the course of the Program IXION may desire to disclose
certain Technology for ETHICON's benefit which does not relate directly to the
Field or to this Agreement, and ETHICON may desire to have that Technology
disclosed in the interest of new products or methodologies which may be of value
to its business.
1.2 In the above situation, IXION will bring to the appropriate parties
at ETHICON listed in Appendix C but not limited to those parties, a description
of at least four pages of text or drawings or both, which shall be dated, signed
by the IXION representative, and marked "IXION CONFIDENTIAL" if it is in any way
confidential. In some cases, these materials will have been disclosed to the
U.S. Commissioner of Patents and Trademarks, bear a U.S. or other Copyright,
have a Patent Pending, or be a Patent to which IXION owns the rights. These
official registries should also be so noted at that time on those materials.
1.3 Upon receipt of these materials, ETHICON will automatically have
the Right of First Refusal to receive exclusive rights to these materials and
the products or methodologies indicated in the materials, for a period of up to
ninety (90) days from the date of delivery by IXION to ETHICON. This submittal
in the
37
<PAGE> 39
manner described herein will bind IXION for that period ETHICON wishes to
exercise its Right of First Refusal, or for ninety (90) days, whichever comes
first. Prior to the end of the Right of Refusal Period of ninety (90) days,
IXION must have written notice from ETHICON that ETHICON does not intend to
exercise that Right, before IXION can commit the product or methodology to other
parties, even if those other parties have seen the material in other
disclosures. After ninety (90) days from the period wherein ETHICON from the
period ETHICON receives such material in the manner described above, IXION has
the right to purvey that material in any manner it wishes without official
notification from ETHICON.
1.4 Should ETHICON wish to exercise this Right of First Refusal, it
thereupon will engage some form of legal agreement with IXION to take action
upon the disclosure by IXION, whether that be an extension Option, Sale, Lease,
or form of joint activity mutually agreed upon.
1.5 All materials will be held confidential in the manner described
under Article VII of this agreement.
1.6 No action by either ETHICON or IXION in relation to these Non-Field
and Non-Technology related disclosures will in any way affect the Program or the
License agreed to in the document to which this is Appended or to any of the
other Appendixes attached to that document.
38
<PAGE> 40
APPENDIX E
[ETHICON LETTERHEAD] bcc: W. S. Emhof
R. G. Fulop
V. R. Kirk
May 25, 1990
Dear
In compliance with the ETHICON agreement with you on the Safety Trocar
instrument, we are submitting the following information for the First Quarter
of 1990, as well as cumulative information for the year:
<TABLE>
<CAPTION>
First Quarter Year-To-Date
1990 1990
------------- ------------
<S> <C> <C>
Sales
- - -----
Gross Domestic Sales $ 637,109 $ 637,109
Cash/Hospital Inform. Disc. (30,581) (30,581)
Contract Erosion (107,989) (107,989)
--------- ---------
Net Domestic Sales $ 498,539 $ 498,539
Net Affiliate Sales 0 0
Royalties Earned
- - ----------------
Net Domestic 24,927 24,927
Net Affiliate 0 0
Total Royalties Earned 24,927 24,927
Total Royalties Paid* 50,000 50,000
</TABLE>
Enclosed is the payment for the first quarter royalties.
Should there be any questions, please contact us.
Sincerely,
/s/ I. J. Minkowski
---------------
I. J. Minkowski
Assistant Commercial Controller
jo
56/19
enclosure
<PAGE> 1
Exhibit 10.32
<PAGE> 2
DEVELOPMENT AND LICENSE AGREEMENT
This Development and License Agreement ("Agreement") is effective as of
the thirtieth day of January, 1993, by and among MUSCULOGRAPHICS, INC, a
California Corporation ("MusculoGraphics"), and MEDICAL MEDIA SYSTEMS, a New
Hampshire general partnership ("MMS").
RECITALS
A. MMS is in the business of developing and producing computer systems
relating to the field of medical/surgical practice, including systems to be sold
under the tradenames "SEE" and "CORE" (the "SEE System"). MMS has entered into
an agreement with Baxter Healthcare Corporation ("Baxter") to develop and market
such systems, under which agreement Baxter provides funding for the development
of the SEE System. MMS is permitted under its agreement with Baxter to enter
into this Agreement and to fund this Agreement using monies MMS has received or
will receive from Baxter.
B. MusculoGraphics is a corporation having expertise in the development
of biomechanical models and related software for use in medical computer
simulations. MusculoGraphics has two existing products, known under the
tradename "SIMM" and the name "dynamics pipeline" that are not within the scope
of, or in any way related to, this Agreement, except to the extent to which
MusculoGraphics will use these products to accelerate the development of the
technologies for the SEE System and the extent to which such products will be
incorporated by MusculoGraphics into said technologies and the SEE System.
C. MusculoGraphics wishes to provide to MMS certain technical expertise
and services to develop certain biomechanical computer knee models and related
patient-specific knee modeling software and related material (the "Licensed
Products") for MMS to develop its SEE System and to test, produce and bring to
market the SEE System and the Licensed Products.
D. MMS wishes to acquire the exclusive rights hereinafter set forth in
connection with the production and Transfer of the Licensed Products within a
defined field of use, in return for payment to MusculoGraphics of compensation
as hereinafter set forth.
E. By this Agreement, MMS wishes to acquire from MusculoGraphics, and
MusculoGraphics wishes to grant to MMS, the exclusive right to use the Licensed
Products and practice the art covered by any patents, copyrights, copyrighted
software, trade secrets, confidential information, know-how, mask work
registrations, utility models, industrial design registrations, or Proprietary
Information of MusculoGraphics (collectively "Intellectual Property Rights")
resulting from or issued in connection with MusculoGraphics' services pursuant
to this Agreement, in the production and Transfer of the Licensed
<PAGE> 3
Products for use in the field of arthroscopy, including training and
pre-procedure modeling, as well as actual surgical procedures.
TERMS AND CONDITIONS
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein, and intending to be legally bound hereby, it is agreed as follows:
ARTICLE 1: DEFINITIONS
1.1 For the purposes of this Agreement, the following terms shall have
the meanings as hereinafter set forth:
The term "Affiliate" shall mean any company controlling,
controlled by, or under common control with MMS or MusculoGraphics. The
term Affiliate shall also, in the case of MMS, include the general
partners of MMS or such other sources of funding to MMS for work
related to this Agreement.
The term "Approvals" shall mean the right to Transfer and use
the Licensed Products or Systems (as hereinafter defined) lawfully, for
operation by licensed physicians or medical technicians in the United
States or in a country which is a member of the European Economic
Community.
The term "Bankruptcy Event" shall have the meaning given to it
in Section 6.3.2.
The term "Consulting Term" shall mean a period of one year
commencing on the Effective Date of this Agreement.
The term "Development Schedule" shall mean the schedule
identified in the attached Annex B.
The term "Effective Date" shall mean the date first set forth
above.
The term "Independent Party" shall have the meaning given to
it in Section 4.3.3.
The term "Independent Royalty Rate" shall have the meaning
given to it in Section 4.3.3.
The term "Intellectual Property Rights" shall have the meaning
given to it in Paragraph E. of the Recitals.
2
<PAGE> 4
The term "Licensed Products" shall mean certain biomechanical
computer models of the human knee, and related patient-specific knee
modeling software, developed under the terms of this Agreement by
MusculoGraphics for MMS to develop its SEE System, including those
products identified in the attached Annex A.
The term "MMS' Right" shall have the meaning given to it in
Section 4.1.
The term "Net Transfer" shall mean the value received for a
Transfer, less customary and usual commercial deductions.
The term "Party's Estimated Royalty Rate" shall have the
meaning given to it in Section 4.3.3.
The term "Proprietary Information" shall have the meaning
given to it in Section 3.1.
The term "Renewal Terms" shall have the meaning given to it in
Section 5.1.
The term "Royalty Period" shall mean the period beginning on
the date that Systems are first Transferred and ending on the later of
(i) the date of expiration of the last of any patents that has an
issued claim that covers the Licensed Products, or (ii) if no such
patents are issued, the tenth anniversary of the date of first
Transfer.
The term "SEE System" shall have the meaning given to it in
Paragraph A. of Recitals.
The term "System," when used apart from "SEE System," shall
mean any product or service of MMS, its Affiliates or sublicensees that
comprises or incorporates the Licensed Products or derivative works
based on the Licensed Products.
The term "Transfer" shall mean any transfer (through sale,
lease or other exchange or use for value) of Licensed Products or
Systems (whether in completed form, components or kits) by MMS, its
Affiliates or sublicensees, to an end user other than an Affiliate. A
Transfer shall also include any transfer for value by any infringer of
an Intellectual Property Right against whom a court or other tribunal
has awarded damages for such infringement to MMS or its Affiliates to
the extent that MMS receives payment of such damages, and settlement of
any infringement claim to the extent that MMS has received payment
therefor. The term Transfers as used herein shall not be construed in a
manner that entitles MusculoGraphics to more than one royalty payment
for any unit of Licensed Products. Transfer may be used in this
Agreement as a noun or as a verb, and in either instance shall be
interpreted to effectuate the meaning set forth in this Section.
3
<PAGE> 5
ARTICLE 2: PRODUCT DEVELOPMENT
2.1 In a site to be provided by MusculoGraphics, at MusculoGraphics'
sole expense, MusculoGraphics shall develop, specify in writing and transfer to
MMS the Licensed Products, all relevant know-how reasonably necessary and
appropriate to enable MMS to use the Licensed Products, and documentation for
the structure, operation and use of the Licensed Products. MusculoGraphics shall
complete said development according to the Development Schedule, which is
consistent with MMS milestones.
2.2 MMS shall pay to MusculoGraphics, as compensation for the
development efforts set forth in Section 2.1, the amount of four hundred
sixty-five thousand dollars ($465,000) for the Consulting Term of this
Agreement. The compensation payable under this Section shall be paid in
installments as follows, provided that the deliveries to be made upon the
milestone dates set forth on the Development Schedule, which correspond to or
precede the installment dates set forth below, have been made:
2.2.1 The first installment of $150,000 shall be paid
within three days after the execution of this
Agreement.
2.2.2 The second installment of $150,000 shall be paid on
August 1, 1993.
2.2.3 The third installment of $165,000 shall be paid on
November 2, 1993.
In the event that one or more required deliveries have not been made by the
corresponding or earlier milestone dates set forth on the Development Schedule,
the installments to be made at the time of or following such deliveries will not
be paid until all over-due deliveries have been made.
2.3 In addition to the compensation set forth in Section 2.2, and not
offsetting any compensation payable thereunder, MMS has paid to MusculoGraphics,
prior to the Effective Date, compensation in the amount of one hundred
ninety-five thousand seven hundred dollars ($195,700) for work performed prior
to the Effective Date.
2.4 During the Consulting Term, MMS shall pay reasonable travel and
related expenses for MusculoGraphics' officers, directors and/or employees to
travel between MMS and MusculoGraphics for purposes related to this Agreement,
and for other travel requested by MMS specifically requests travel to design
reviews in June and October, 1993, MusculoGraphics shall pay all other travel
expenses of its officers, directors or employees related to this Agreement.
4
<PAGE> 6
2.5 MMS shall include the following legend on the first screen display
generated by each System, in such a manner as to be readily visible to users of
a System:
KNEE MODEL PRODUCED BY MUSCULOGRAPHICS, INC.
ALL RIGHTS RESERVED
and on any printed material or videotape showing an image generated by the
Licensed Products, or a simulation thereof, provided that MMS shall only be
required to include such legend from the Effective Date through a date five (5)
years following the first Transfer of a System.
2.6 MMS shall have no additional obligation to compensate
MusculoGraphics beyond the amount set forth above except as hereinafter provided
(in Article 4) or as otherwise agreed in writing by the parties.
2.7 MusculoGraphics agrees to provide a written report within ten (10)
days of the end of each calendar quarter that specifies work done by
MusculoGraphics during that quarter.
ARTICLE 3: CONFIDENTIALITY
3.1 All confidential information, data, research notes and know-how (i)
developed under this Agreement, or (ii) which was developed or obtained outside
this Agreement, transmitted between MMS and MusculoGraphics in connection with
this Agreement, whether in tangible or machine readable form, that is identified
in writing as confidential at the time such information is transmitted by a
party or within ten (10) days thereafter, shall be deemed "Proprietary
Information." Nothing in this Article shall be construed to apply to the
computer software covered by that License Agreement dated December 28, 1992,
between the Parties.
3.2 Any Proprietary Information provided to MMS by MusculoGraphics, and
any non-Proprietary Information developed by MusculoGraphics or supplied to MMS
by MusculoGraphics, shall be owned exclusively by MusculoGraphics.
3.3 Any Proprietary Information provided to MusculoGraphics by MMS, and
any non-Proprietary Information developed by MMS or supplied to MusculoGraphics
by MMS, shall be owned exclusively by MMS.
3.4 Any Proprietary Information developed jointly by MMS and
MusculoGraphics shall be owned jointly by MMS and MusculoGraphics. Such
information shall be deemed to be jointly developed if a patent application
drafted narrowly to claim the information as an invention (if such a patent
application were filed for such information, though no such application actually
need be filed) would require that an officer, director or employee of each of
MMS and MusculoGraphics lawfully be named as inventors thereof.
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3.5 During a term beginning on the Effective Date and running through
the end of the period consisting of (i) the Royalty Period plus (ii) five (5)
years, each of the parties to this Agreement agrees to hold in confidence, and
to refrain from using, distributing, disseminating or disclosing to others, any
Proprietary Information of the other party as defined in this Section, or from
making or causing to be made any product embodying Proprietary Information of
the other party, except in furtherance of this Agreement and permitted thereby;
provided, however, that no party shall be restrained from using Proprietary
Information of the other party if the Proprietary Information at issue:
3.5.1 is shown to be information in the public domain
rather than through the relationship of the parties,
or that becomes a part of the public domain through
no fault of the party; or
3.5.2 as shown by written records, was lawfully in the
possession of the party prior to its disclosure by
the other party; or
3.5.3 as shown by written records, is hereafter acquired by
the party from a third party that is lawfully in
possession of such Proprietary Information and under
no obligation of confidence to the other party; or
3.5.4 as shown by written records is independently
developed by an employee or consultant of the party,
which employee or consultant has had no exposure to
such Proprietary Information, as demonstrated by the
party alleging independent development.
Notwithstanding the foregoing, to the extent any Proprietary Information
constitutes a trade secret, each of the parties to this Agreement agrees to hold
such Proprietary Information in confidence, and to refrain from using,
distributing, disseminating or disclosing such Proprietary Information to others
indefinitely, subject to the provisos set forth in Sections 3.5.1 to 3.5.4.
3.6 Nothing in this Agreement shall prohibit MusculoGraphics, its
officers, directors or employees from presenting or publishing academic papers
relating to the work performed by MusculoGraphics under this Agreement, provided
that such publication:
3.6.1 does not reveal any trade secret or other Proprietary
Information of MMS or any jointly owned information,
as described in Section 3.4 above; and
3.6.2. is submitted to MMS prior to being submitted for
publication or presentation, and MMS fails to object
to such publication or presentation within sixty (60)
days after submission to MMS.
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Upon notice and presentation to MMS of a paper which MusculoGraphics intends to
publish, MMS shall have sixty (60) days in which to either (i) file (or take
diligent steps to have filed) applications for Intellectual Property Rights
relating to the subject of the proposed publication or presentation; (ii) advise
MusculoGraphics that it does not intend to file an application for Intellectual
Property Rights relating to the subject of the proposed publication but has an
objection to such publication or presentation; or (iii) advise MusculoGraphics
that it has no objection to the proposed publication. The failure of MMS to
provide such notice shall be interpreted as a waiver of any objection to such
presentation or publication. Any objection hereunder shall point specifically to
the subject matter as to which MMS objects to the publication or presentation.
ARTICLE 4: EXCLUSIVE LICENSE
4.1 For the period beginning with the Consulting Term and extending
through the end of the Royalty Period of this Agreement, MusculoGraphics hereby
grants to MMS and its Affiliates the sole and exclusive worldwide right to
develop, make (and have made), prepare copies of, Transfer and otherwise use
Systems or practice any invention or the art claimed under or as any
Intellectual] Property Rights or Proprietary Information of MusculoGraphics
(collectively, "MMS' Right") in the field of medical arthroscopy, namely, the
use of an arthroscope to perform surgical procedures relating to the
musculoskeletal system of the human body, including training and pre-procedure
modeling, as well as actual surgical procedures. MusculoGraphics further grants
to MMS and its Affiliates the right to sublicense MMS' Right, or any part
thereof. Following the expiration of the Royalty Period, MMS shall receive a
fully paid-up, perpetual license for the Licensed Products in MMS' Field of Use.
4.2 Ownership
4.2.1 All inventions or other intellectual property
developed solely by MMS, in connection with work
performed under this Agreement by MusculoGraphics,
shall be exclusively owned by MMS, and
MusculoGraphics shall have no rights to such
inventions or intellectual property. MusculoGraphics
shall retain all right, title and interest to
inventions and other intellectual property that it
solely develops under this Agreement, and MMS shall
have no rights to such inventions or intellectual
property, other than as set forth in Section 4.1 and
in Section 3.4.
4.2.2 MusculoGraphics shall promptly notify MMS in writing
of any inventions MusculoGraphics has developed under
this Agreement. Except as otherwise set forth in this
Agreement, MMS shall be financially responsible for,
and have sole control over, the filing and
prosecution of applications for Approvals for the
Licensed Products or
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Systems, Intellectual Property Rights, and the
enforcement and maintenance of all such Intellectual
Property Rights throughout the world.
4.2.3 MusculoGraphics shall have the right to file, at its
own expense and in its own discretion, applications
for Intellectual Property Rights relating to the
Licensed Products that MusculoGraphics has solely
developed, as to which MMS has declined to file an
application for an Intellectual Property Right, or in
such countries or regions as MMS had declined to file
an application for an Intellectual Property Right.
MMS shall provide MusculoGraphics with sufficient
notice (of not less than forty-five (45) days before
the right to file such an application expires,
provided that MusculoGraphics has notified MMS at
least ninety (90) days before the right to file such
an application expires), to MusculoGraphics to obtain
Intellectual Property Rights. MMS shall notify
MusculoGraphics of the first proposed offer to
Transfer or public display of Systems not less than
one hundred-twenty (120) days prior to that first
proposed offer or public display.
4.2.4 The parties shall cooperate with one another in the
prosecution and enforcement of Intellectual Property
Rights, at the sole expense of the party filing an
application for such an Intellectual Property Right
or having the right to bring or defend the action.
4.3 Royalties
4.3.1 In consideration of the licenses granted hereby and
the other covenants of MusculoGraphics made herein,
MMS agrees to pay to MusculoGraphics royalties at a
percentage rate of the monetary value for which
Transfers of Systems are made by MMS, its Affiliates
or its sublicensees during the term of the Agreement,
the royalty percentage as shall be determined in
accordance with Sections 4.3.2 and 4.3.3 of this
Section 4.3, and shall be paid on payments that have
been received by MMS for such Transfers, in
accordance with Section 4.4.
4.3.2 Within 120 days (but not later than 90 days) prior to
the date on which MMS, its Affiliates or sublicensees
proposes to commence the Transfer of a System,
MusculoGraphics and MMS shall enter into good faith
negotiations in an effort to agree on the royalty
rate applicable in Section 4.3.1. Notwithstanding any
other provision of this Agreement to the contrary,
MusculoGraphics and MMS agree that the royalty
percentage shall be (a) no greater percentage than
that which, when applied to Net Transfers will
provide the Transferring entity (MMS, its Affiliates
or sublicensees) the same or a reasonably similar
margin as
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would result from the Transfer of products in the
industry which are the same or similar to the System
Transferred, appropriately reduced to reflect the
benefit of research and development funding provided
by MMS, and (b) no lower percentage than that which
will reflect the proportionate value to the user of
the Licensed Products to the entire SEE System.
4.3.3 If MusculoGraphics and MMS are unable to agree upon
the royalty rate of Section 4.3.1 within 60 days
after commencement of discussions pursuant to Section
4.3.2 hereof, each of the parties shall deliver to
the other, within 5 days thereof, written notice
setting forth its statement of the applicable royalty
rate (each such stated royalty rate being a "Party's
Estimated Royalty Rate"). If the higher of the
Party's Estimated Royalty Rate is not more than 110%
of the lower Party's Estimated Royalty Rate, then the
final applicable royalty rate shall equal the average
of the two Party's Estimated Royalty Rate. Otherwise,
the parties will agree upon and designate an
individual experienced in valuing licenses of
technology similar to the License granted hereby (the
"Independent Party") to determine the applicable
royalty rate in accordance with the provisions of
this Section 4.3. Prior to the 30th day after the
engagement thereof, the Independent Party shall
determine the applicable royalty rate (the
"Independent Royalty Rate") and shall deliver written
notice thereof to each of MusculoGraphics and MMS.
The determination of the Independent Party shall be
final and binding upon MusculoGraphics and MMS,
provided, however, that the final applicable royalty
rate may not be less than the lower, nor greater
than the higher, Party's Estimated Royalty Rate.
Each party shall bear one-half the cost of retaining
the services of the Independent Party, along with
its own costs, if any, associated with the rendering
of those services by the Independent Party.
4.4 MMS agrees to furnish to MusculoGraphics, within 60 days after the
close of each calendar quarter during the Royalty Period for which payment was
received by MMS for a Transfer, a royalty statement showing Net Transfers of all
Licensed Products for each such quarter. This royalty statement shall also show
total royalties due for such quarter and shall be accompanied by a payment of
such royalties, net of any taxes required to be paid or withheld by Licensee
under applicable law; provided, however, that if any required government
approval for the making of such royalty payment has not been obtained by the end
of such 60-day period, the royalty payment shall be made as soon thereafter as
such approval is obtained. All taxes payable on account of the royalties
provided for herein (including income taxes) shall be borne and paid by
MusculoGraphics for its own account. If MMS is required by law to withhold any
such taxes from royalty payments, MMS shall withhold and pay over to the
appropriate taxing authority the amount of such taxes.
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4.5 Royalties payable pursuant to the provisions of this section shall
be payable to MusculoGraphics at its principal place of business in U.S.
dollars. Any currency conversion shall be made using the exchange rate published
in The Wall Street Journal (Midwest edition) on the last day of the calendar
quarter to which such royalties relate.
4.6 During the Royalty Period, MMS shall maintain at its principal
office books and records adequate to permit all royalties payable to
MusculoGraphics at any time under the Agreement to be computed and verified.
Such books and records shall be open to inspection and copying during normal
business hours by representatives of MusculoGraphics (who shall be independent
certified public accountants) for the purpose of verifying the accuracy of
royalties paid by MMS under this Agreement.
4.7 MMS shall pay MusculoGraphics annual minimum royalties according to
the following schedule:
4.7.1 In the first calendar year in which Systems have
first been Transferred, the amount of minimum
royalties shall be fifty thousand dollars
($50,000.00).
4.7.2 In the second through fourth calendar years after the
year in which Systems have first been Transferred,
the amount of minimum royalties shall be one hundred
thousand dollars ($100,000.00) in each such calendar
year.
4.7.3 In the fifth calendar year after the year in which
Systems have first been Transferred, the amount of
minimum royalties shall be one hundred fifty thousand
dollars ($150,000.00).
Minimum royalties shall be credited against any royalties otherwise payable
during the year in which they are paid.
4.8 Nothing in this Agreement shall prevent MusculoGraphics, its
officers, directors and employees, from using the technology developed hereunder
in the course of their academic or other research, except to the extent limited
by the obligations of Articles 3 and 4.
4.9 MMS shall not be liable for any license fees or royalties with
respect to any Proprietary Information developed or supplied by MMS.
ARTICLE 5: RENEWAL
5.1 The consulting provisions of this Agreement, including Article 2,
automatically shall be renewed for successive one year terms ("Renewal Terms")
following the end of the
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Consulting Term, unless either party, Sixty (60) days before the end of a term,
notifies the other in writing of its intention not to renew this Agreement.
5.2 The work to be performed during any Renewal Term, the schedule for
performing such work, and the amount of compensation to be received therefor,
shall be agreed upon in writing by the parties within sixty (60) days prior to
the end of the preceding term, or the consulting provisions of this Agreement
shall expire on the last day of the Consulting Term as a result of nonrenewal.
5.3 The expiration of the consulting provisions of the Agreement as a
result of nonrenewal shall not affect the rights or obligations of the parties
under Articles 3, 4, 6, 7, 8, 9, and 10. The rights and obligations of the
parties shall not be affected in any way by the expiration of the consulting
provisions of this Agreement.
5.4 The expiration of the consulting provisions of this Agreement as a
result of nonrenewal by MMS shall trigger a payment by MMS to MusculoGraphics of
two hundred thousand dollars ($200,000) payable in the following installments:
5.4.1 An installment of one hundred thousand dollars
($100,000) shall be due sixty (60) days following the
date of expiration of the consulting provisions of
this Agreement.
5.4.2 An installment of seventy-five thousand dollars
($75,000) shall be due one year following the date of
the first installment.
5.4.3 An installment of twenty-five thousand dollars
($25,000) shall be due two years following the date
of the first installment.
In no event shall MMS be obligated to make payments under this Section 5.4 if
nonrenewal is the result of bankruptcy, or if no additional musculoskeletal
models or musculoskeletal modeling systems are being developed for the SEE
System by MMS, or by a third party at the request of MMS, its Affiliates or
sublicensees.
ARTICLE 6: TERMINATION
6.1 If, within five (5) years from the actual date of delivery of the
last of any items set forth in Annex B hereto, any Transfers of Systems have not
been made, then this Agreement may be terminated by MusculoGraphics and all
licenses granted by MusculoGraphics to MMS with regard to the Licensed Products,
the Intellectual Property Rights, Proprietary Information of MusculoGraphics and
any work performed by MusculoGraphics hereunder shall revert exclusively to
MusculoGraphics. However, the right to use any jointly owned Proprietary
Information as defined in Section 3.4 shall be retained
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by MMS and MusculoGraphics following termination, provided that such use does
not violate the exclusive rights of either party.
6.2 In the event that either MMS or MusculoGraphics is in material
breach of this Agreement, and the same has not been cured within sixty (60) days
following written notice by the other party of the nature of the breach, the
non-breaching party may terminate this Agreement. If any uncured breach within
the meaning of this Section occurs through acts or omissions of MMS, Section 6.1
shall govern the disposition of all proprietary rights hereunder; if any uncured
breach within the meaning of this Section occurs as a result of MusculoGraphics'
acts, MMS shall have a royalty-free license, as set forth in Section 4.1, to the
Licensed Products.
6.3 Bankruptcy
6.3.1 If a petition in bankruptcy or for reorganization is
filed by or against MMS, or if any insolvency
proceedings are instituted by or against MMS under
any state or federal law, or if it makes an
assignment for the benefit of its creditors, or if a
receiver is appointed for its property and business
and remains undischarged for a period of sixty (60)
days, or if any execution or attachment is levied on
any of its assets and remains undischarged for a
period of sixty (60) days, MusculoGraphics shall have
the right, if it so elects, to terminate this
Agreement as provided in Section 6.2 hereof.
6.3.2 If a petition in bankruptcy or for reorganization is
filed by or against MusculoGraphics, or if any
insolvency proceedings are instituted by or against
MusculoGraphics under any state or federal law, or if
it makes an assignment for the benefit of its
creditors, or if a receiver is appointed for its
property and business and remains undischarged for a
period of sixty (60) days, or if any execution or
attachment is levied on any of its assets and remains
undischarged for a period of sixty (60) days (any of
the foregoing being referred to hereafter as a
"Bankruptcy Event"), on the day prior to such
Bankruptcy Event, MusculoGraphics shall be deemed to
have transferred its interests in the Intellectual
Property Rights and Proprietary Information to MMS in
consideration of the payment of royalties hereunder,
which amount shall be paid in the same manner and at
the same time as the Royalties would have been paid
hereunder; provided, however, that if MusculoGraphics
is in bankruptcy directly as a result of wrongful
non-payment by MMS of monies due hereunder by MMS,
no transfer under this Section shall occur or shall
be deemed to have occurred. If such Bankruptcy Event
occurs during the Consulting Term, such Transfer will
be deemed to have been made in consideration of
amounts already paid by MMS to
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MusculoGraphics, and any amounts then due to be paid
by MMS to MusculoGraphics for services already
rendered by MusculoGraphics.
6.4 In the event of termination under any of the above Sections 6.2 or
6.3, MusculoGraphics shall be paid for all work that has been performed prior to
termination, and for any royalties that have accrued but are not paid as of the
date of termination.
6.5 The obligations of Articles 3, 7, 8 and 9 shall not be suspended or
discharged as a result of termination of this Agreement.
ARTICLE 7: INSURANCE
7.1 MMS agrees to provide adequate product liability insurance for
liabilities that may be reasonably foreseen in relation to the operation of
Systems or the Licensed Products, or an indemnity from Baxter naming
MusculoGraphics and its officers, directors, employees and shareholders as
additional insureds for all claims and liabilities relating to or arising from
the Licensed Products (or any System) wherever distributed by MMS, its
Affiliates or sublicensees, including, but not limited to personal injury and
property damages. The amount and conditions of such insurance or indemnity shall
be the same as that which MMS provides for itself for the Transfer of the
Licensed Products. MMS shall provide MusculoGraphics with certificates of
insurance or indemnity at the time of execution of this Agreement, showing that
they are named as additional insureds, or as soon thereafter as such
certificates are available. MMS shall immediately notify MusculoGraphics of any
termination or change of coverage, and shall warrant that no gaps in coverage
shall result from any change in insurer or coverage. The obligations of this
Section shall not be terminated or expire by operation of Articles 5 or 6 of
this Agreement.
ARTICLE 8: WARRANTIES BY MUSCULOGRAPHICS
8.1 MusculoGraphics represents and warrants that it has granted no
license, nor entered into any other agreements or understandings, that would
limit (i) its right to perform under this Agreement or (ii) the rights to be
licensed under any Licensed Products or Intellectual Property Rights that may be
issued pursuant to this Agreement.
8.2. MusculoGraphics shall indemnify and hold MMS, and each of its
partners, harmless from any damage, liability, cost, claim or suit incident to
the representation set forth above. MMS shall provide prompt notice of any such
claim to MusculoGraphics, and shall tender the right to defend, settle or
compromise such claim to MusculoGraphics. The obligations of this Section shall
survive the termination or expiration of the Agreement under Articles 5 or 6.
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8.3 MusculoGraphics represents and warrants that its performance under
this Agreement shall comply with all laws applicable in any State, Country or
Region in which it performs the obligations hereunder.
3.4 MusculoGraphics represents and warrants that it possesses the
appropriate expertise, and will use reasonable efforts to perform the
development activity identified in Section 2.1.
8.5 MusculoGraphics represents and warrants that the person executing
this Agreement on its behalf is authorized to do so.
ARTICLE 9: WARRANTIES BY MMS
9.1 MMS represents and warrants that it has entered into no other
agreements or understandings that would limit (i) its ability to perform under
this Agreement or (ii) the rights to be licensed under any Intellectual Property
Rights that may be issued pursuant to this Agreement.
9.2 MMS represents and warrants that its performance under this
Agreement shall comply with all laws applicable in any State, Country or Region
in which MMS, its Affiliates and sublicensees, produce, Transfer, market or
distribute Systems, with respect to the production, Transfer, marketing and
distribution of Systems, and that MMS, its Affiliates and sublicensees will use
reasonable efforts to market, promote, distribute and Transfer Systems.
9.3 MMS shall indemnify and hold MusculoGraphics harmless from any
damage, liability, cost, claim or suit incident to the representations set forth
above and to MusculoGraphics' performance under this Agreement. The obligations
of this Section shall survive the termination of this Agreement under Article 6.
9.4 MMS represents and warrants that the person executing this
Agreement on its behalf is authorized to do so.
ARTICLE 10: MISCELLANEOUS
10.1 Complete Agreement. This Agreement sets forth the complete
understanding between MMS and MusculoGraphics relating to the subject matter
hereof and supersedes all prior written and oral agreements and understandings.
This Agreement and any provision thereof may be amended, modified or waived only
by an instrument in writing signed by a duly authorized representative of the
party against whom such amendment, modification or waiver is sought to be
enforced. In the event of any conflict between the
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provisions of this Agreement and those contained in any purchase or sales forms
used by the parties in connection with the Licensed Products, this Agreement
shall prevail.
10.2 Fees. In the event of any litigation or arbitration between the
parties arising from this Agreement, the prevailing party shall be entitled to
recover, in addition to any other relief granted or awarded, its reasonable
costs and expenses (including attorney's fees) incurred in the proceeding.
10.3 Independent Contractors. MusculoGraphics and MMS shall be deemed
to have the status of independent contractors, and nothing in this Agreement
shall be deemed to place the parties in the relationship of employer-employee,
principal-agent, partners or joint ventures.
10.4 Waivers. No waiver by any party, expressed or implied, of any
breach of any term, condition or obligation of this Agreement by the other
parties shall be construed as a waiver of any subsequent breach of that term,
condition, obligation or of any term, condition or obligation of this Agreement
of the same or different nature.
10.5 Notices. All written notices or other written communications
required under this Agreement shall be deemed properly given when provided to
the parties entitled thereto by personal delivery (including delivery by
commercial services such as messengers, airfreight forwarders and nationally
recognized overnight couriers), by electronic means (such as by electronic mail,
telex or facsimile transmission) or by mail sent registered or certified mail,
postage prepaid to the following addresses (or to such other address of a party
designated in writing by such party to the others):
If to MMS
Medical Media Systems
32 South Main Street
Hanover, New Hampshire 03755-0008
Attention: Leo C. McKenna
With a copy to:
Baxter Healthcare Corporation
One Baxter Parkway
Deerfield, Illinois 60015
Attention: General Counsel
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If to MusculoGraphics:
MusculoGraphics Inc.
1840 Oak Avenue
Evanston, Illinois 60201
Attention: James P. Loan
With a copy to:
Stuart I. Graff, Esq.
Schiff Hardin & Waite
7200 Sears Tower
Chicago, Illinois 60606
All notices given by electronic means shall be confirmed by delivery to the
party entitled thereto of a copy of said notice by certified or registered mail,
postage prepaid, return receipt requested. All written notices shall be deemed
delivered and properly received upon the earlier of two (2) days after mailing
the confirmation notice or upon actual receipt of the notice provided by
personal delivery or electronic means.
10.6 Subject Headings. The subject headings of the Sections of this
Agreement are included solely for purposes of convenience and reference only,
and shall not be deemed to explain, modify, limit, amplify or aid in the
meaning, construction or interpretation of any of the provisions of this
Agreement.
10.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.8 Interpretations and Definitions. In this Agreement whenever the
context so requires, the gender includes the neuter, feminine and masculine, the
number includes the singular and the plural, and the words "person" and "party"
include individuals, corporations, partnerships, firms, trusts or associates.
All references to dollars shall mean U.S. Dollars.
10.9 Custom. All parties to this Agreement shall have the right at all
times to enforce the provisions contained in this Agreement, and in all other
agreements and documents required or provided for herein, in strict accordance
with the terms thereof, notwithstanding any custom or practice in the area or
any conduct or continuing conduct on the part of any party hereto to the
contrary unless expressly agreed to in writing. The failure of any party hereto,
at any time or from time to time, to enforce any of its rights under any
provision herein, strictly in accordance with the same, shall not be construed
as varying the term hereof, in any way or manner, contrary to the specific
provisions of this Agreement or be construed as modifying or waiving such
provision.
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10.10 Reformation/Severability
10.10.1 If any provision of this Agreement is declared
invalid or unenforceable by any tribunal, then such
provision shall be deemed automatically adjusted to
the minimum extent necessary to conform to the
requirements for validity as declared at such time
and, as so adjusted, shall be deemed a provision of
this Agreement as though originally included herein.
In the event that the provision so declared is of
such a nature that it cannot be so adjusted, the
provision shall be deemed deleted from this Agreement
as though such provision had never been included
herein. In either case, the remaining provisions of
this Agreement shall remain in effect.
10.10.2 Notwithstanding Section 10.10.1, in the event that
any portion of Articles 2, 3, 4 or 7 is declared
invalid or unenforceable by any tribunal, this
Agreement shall be terminated in accord with Section
6.2.
10.11 Force Majeure. No party shall be liable for any failure or delay
in performing its obligations hereunder due to any external cause beyond its
reasonable control, including without limitation, fire, accident, acts of the
public enemy, war, rebellion, labor dispute or unrest, insurrection, sabotage,
transportation delays, shortage of raw materials, energy or machinery, acts of
God, government or the judiciary, or other matters beyond the reasonable control
of a party.
10.12 Successors and Assigns. Neither this Agreement nor any of the
rights or obligations hereunder shall be assignable by any party hereto without
the written consent of the other party first obtained and any attempted
assignment without such written consent shall be void and confer no rights upon
any third party; provided, however, that MMS may assign any of its rights under
this Agreement to Baxter or any of its affiliates. Subject to the foregoing,
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective representatives, heirs, successors and
permitted assigns.
10.13 Time of the Essence. The parties agree that time is of the
essence in this Agreement, provided, however, each party shall have a reasonable
time to cure any breach of this Agreement as provided by Section 6.2, hereof.
10.14 Governing Law. This Agreement shall be governed and interpreted
in accordance with the substantive laws of the State of Illinois. The parties
agree that any litigation shall be subject to the exclusive jurisdiction, and
venue of the Illinois state courts of Cook County, Illinois (or, if there is
exclusive federal jurisdiction, the United States District Court for the
Northern District of Illinois), and the parties hereby submit to the personal
and exclusive jurisdiction and venue of these courts.
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10.15 Good Faith. The parties agree at all times to act in good faith
and to deal fairly with one another in performing their respective obligations
hereunder.
IN WITNESS WHEREOF, the parties have caused their authorized
representatives to execute this Agreement as of the day and year first above
written.
MUSCULOGRAPHICS INC. MEDICAL MEDIA SYSTEMS
By: MMS FOUNDERS GROUP
LIMITED PARTNERSHIP
General Partner
By:
-----------------------------
James P. Loan
President By: MMS FOUNDERS, INC.
General Partner
By: /s/ Leo C. McKenna
-----------------------------
Leo C. McKenna
Chief Executive Officer
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10.15 Good Faith. The parties agree at all times to act in good faith
and to deal fairly with one another in performing their respective obligations
hereunder.
IN WITNESS WHEREOF, the parties have caused their authorized
representatives to execute this Agreement as of the day and year first above
written.
MUSCULOGRAPHICS INC. MEDICAL MEDIA SYSTEMS
By: MMS FOUNDERS GROUP
LIMITED PARTNERSHIP
General Partner
By: /s/ James P. Loan
--------------------------
James P. Loan
President By: MMS FOUNDERS, INC.
General Partner
By:
--------------------------
Leo C. McKenna
Chief Executive Officer
18
<PAGE> 21
ANNEX A
SCHEDULE OF LICENSED PRODUCTS
The Licensed Products subject to this Agreement in the Consulting Term are:
(1) The computer models of the knee described in the Proposal to Medical
Media Systems Inc. from MusculoGraphics Inc. dated December 1, 1992.
(2) The patient-specific knee modeling system described in the Proposal to
Medical Media Systems Inc. from MusculoGraphics Inc. dated December 1,
1992.
(3) Such variations from the foregoing, or additional products, as the
parties may agree from time to time in writing.
19
<PAGE> 22
ANNEX B
DEVELOPMENT SCHEDULE
MusculoGraphics' work under the Agreement shall be performed according to the
following schedule:
March 15, 1993:
Deliver generic knee model with ligaments and menisci.
April 15, 1993:
Deliver generic knee model with Somso bones and tissue.
September 1, 1993:
Deliver MR-based knee model.
October 1, 1993:
Demonstrate patient-specific knee modeling system and knee models for final
feedback (Design Review).
November 1, 1993:
Deliver patient-specific knee modeling system and knee models.
This schedule was developed on the basis of MMS milestones and is consistent
with those objectives.
20
<PAGE> 1
Exhibit 10.33
<PAGE> 2
COOPERATIVE AGREEMENT
THIS AGREEMENT entered into on the 2nd day of January, 1995 is by and between
MEDICAL MEDIA SYSTEMS, INC. (hereinafter referred to as "MMS") and the TRUSTEES
OF DARTMOUTH COLLEGE, a non-profit educational institution of the State of New
Hampshire (hereinafter referred to as "DARTMOUTH") through the New Hampshire
Industrial Research Center.
WITNESSETH:
WHEREAS, the program contemplated by the Agreement is of mutual interest and
benefit to DARTMOUTH and to MMS; will further the objectives of MMS, DARTMOUTH,
and the State of New Hampshire and may derive benefits for MMS, DARTMOUTH and
the State of New Hampshire through inventions, improvements, discoveries, and/or
other intellectual property;
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, the parties hereto agree to the following:
Article 1 - Definitions
As used herein, the following terms shall have the following meanings:
1.1 "Project" shall mean the Project as described in Attachment A hereof.
1.2 "Contract Period" is August 1,1994 through December 31, 1995.
1.3 "Invention" shall mean individually and collectively any idea, design,
concept, technique, invention, discovery or improvement, whether or not
patentable, conceived of and/or reduced to practice (i) by one or more
employees of MMS or ii) by one or more employees of DARTMOUTH, or iii)
jointly by one or more employees of DARTMOUTH and by one or more
employees of MMS in performance of Project.
Article 2 - Project Work
2.1 All parties to this agreement will commence the performance of Project
promptly after the date of this Agreement and shall use reasonable
efforts to perform such
1 of 7
<PAGE> 3
Project substantially in accordance with the approved proposal attached as
Attachment A and the terms and conditions of this Agreement. Anything in this
Agreement to the contrary not withstanding, MMS and DARTMOUTH may at any time
amend Project by mutual written agreement.
Article 3 - Obligations
3.1 Funds in the amount of $50,000 have been authorized and are obligated
to Dartmouth for the conduct of this Project by the IRC. MMS is
obligated to make contributions to this Project in the amount of
$200,000.
Article 4 - Reports and Conferences
4.1 Written monthly financial reports relating to matching and in-kind
costs shall be provided by MMS to Joseph J. Paterno, Director of the
New Hampshire Industrial Research Center on behalf of the Oversight
Committee of the New Hampshire Industrial Research Center with copies
to Alla Kan, Associate Director on behalf of Dartmouth College. A final
financial report of matching and in-kind costs shall be submitted
within forty-five (45) days of the conclusion of the Contract Period
with copies to the above named officials.
Above stated reports should follow the format as outlined in Attachment
B, attached hereto.
4.2 During the term of the Agreement, representatives of DARTMOUTH through
the New Hampshire Industrial Research Center may meet with
representatives of MMS at times and places mutually agreed upon to
discuss the progress and results, as well as ongoing plans, or changes
therein, of Project to be performed hereunder.
Article 5 - Publicity and Information Transfers
5.1 MMS will not use the name of DARTMOUTH, nor the New Hampshire
Industrial Research Center in any publicity, advertising, or news
release without the prior written approval of an authorized
representative of DARTMOUTH, DARTMOUTH will not use the name of MMS,
nor any employee of MMS, in any publicity without the prior written
approval of MMS.
5.2 MMS and DARTMOUTH during the term of this Agreement may exchange and/or
develop information which is considered to be of proprietary or
2 of 7
<PAGE> 4
confidential nature. When such information is exchanged and/or
developed, it will be appropriately identified in writing by the party
asserting the proprietary or confidential nature. The receiving party
agrees to protect such information for a period of five (5) years from
the date of receipt or a period of three (3) years from completion or
termination of this Agreement, whichever is longer, and to use such
information only in the performance of the Project.
No information shall be within the protection of this provision where
such information:
A. Is or becomes publicly available;
B. Is released by the originating party to anyone without
restrictions;
C. Is rightfully obtained from third parties; or
D. Is known to the receiving party at the time of receipt, as
shown by its prior written records.
Information accepted as proprietary and confidential by the receiving
party will be returned at the conclusion of the Contract Period.
Article 6 - Publications
6.1 MMS recognizes that, exclusive of the restrictions in Article 5.2
above, under DARTMOUTH policy the results of DARTMOUTH's participation
in this Project must be publishable and agrees that personnel engaged
in Project shall be permitted to present at symposia, national, or
regional professional meetings, and to publish in journals, thesis or
dissertations, or otherwise of their own choosing, methods and results
of Project, provided, however, that MMS shall have been furnished
copies of any proposed publication or presentation at least thirty (30)
days in advance of the submission of such proposed publication or
presentation to a journal, editor, or other third party. MMS shall have
thirty (30) days after receipt of said copies to comment upon and/or
object to such proposed presentation or proposed publication because
there is subject matter which needs protection. In the event that MMS
makes such objection, said personnel shall refrain from making such
publication or presentation for a maximum of thirty (30) days from date
of receipt of such objection in order, if appropriate, to enable MMS to
file patent application(s) with the United States Patent and Trademark
Office and/or foreign patent office(s) directed to the patentable
subject matter contained in the proposed publication or presentation.
However, if MMS' objection is that publication would disclose
confidential information protected under Article 5.2 above, said
personnel shall refrain from making any publication, presentation, or
other disclosure until such confidential information is removed.
3 of 7
<PAGE> 5
Article 7 - Inventions and Intellectual Property
7.1 Dartmouth acknowledges that the technology which is to be tested by
Dartmouth's employees during the performance of the Project was
developed by MMS employees or consultants prior to this agreement, and
that the technology constitutes intellectual property, confidential and
proprietary information, and/or trade secrets of MMS. MMS has the right
to file patent applications of the technology without reference to
Dartmouth and Dartmouth obtains no rights to the technology by virtue
of the testing funded under this agreement, except as provided below.
7.2 MMS retains the right to file patent applications on any improvements
to the technology which may be conceived, developed or reduced to
practice during the term of this agreement. Inventorship for any such
improvement to the technology shall be determined by U.S. Patent Law.
All inventions, discoveries, or improvements arising from the Project,
conceived solely by Dartmouth's employees, shall be assigned to
Dartmouth, and all inventions, discoveries, or improvements conceived
solely by the MMS employees shall be assigned to MMS. For inventions,
discoveries, or improvements that are conceived jointly by Dartmouth's
and MMS employees, Dartmouth and MMS will hold joint title. If MMS
decides that it will not support patent filing costs for Dartmouth
patent rights or joint patent rights, Dartmouth then can proceed with
patent filings on its own and at its own expense.
7.3 Mere reduction to practice, testing, or proof of concept by Dartmouth
employees, without conception, shall not create any ownership rights
for Dartmouth.
7.4 Dartmouth grants MMS an exclusive option to negotiate an exclusive
license to Dartmouth patent rights or its portion of any joint patent
application which may be filed as a result of the testing performed
under this Agreement. Dartmouth, to the extent it is able to do so
under its policies and obligations, if any, to third parties, hereby
grants MMS a one hundred eighty (180 day period), (after the disclosure
of invention, discovery, or improvement has been made) to exercise the
option to negotiate the terms of a worldwide exclusive commercial
license. Such a license shall include a reasonable royalty based on the
respective parties' contributions and relevant industry standards and,
subject to Dartmouth's policies, shall include such other terms as are
typical in licenses of similar technology from non-profit organizations
to for-profit organizations. If there is no agreement on license terms
during the ninety (90) day period after the option
4 of 7
<PAGE> 6
exercise, Dartmouth shall be free to offer commercial license rights to
third parties.
7.5 All provisions of this Article 7 are the subject of Dartmouth - MMS
Research Agreement Section 2.03.
Article 8 - Term and Termination
8.1 This Agreement shall become effective upon the date first herein above
written and shall continue in effect for the full duration of the
Contract Period unless sooner terminated in accordance with the
provisions of this Article. The parties hereto may, however, extend the
term of the Agreement for additional period as desired under mutually
agreeable terms and conditions which the parties reduce to writing and
sign. Either party may terminate this Agreement upon ninety (90) days
prior written notice to the other.
8.2 Subject to Article 6, termination of this Agreement by either party for
any reason shall not affect the rights and obligations of the parties
accrued prior to the effective date of termination of the Agreement.
Article 9 - Independent Contractor
9.1 In the performance of all services hereunder:
9.11 DARTMOUTH shall be deemed to be and shall be an independent
Contractor and, as such, DARTMOUTH shall not be entitled to
any benefits applicable to employees of MMS.
9.12 Neither party is authorized or empowered to act as agent for
the other for any purpose and shall not on behalf of the other
enter into any contract, warranty, or representation as to any
matter. Neither shall be bound by the acts or conduct of the
other.
Article 10 - Indemnity
10.1 MMS shall defend and indemnify and hold DARTMOUTH and its employees
harmless for any judgments and other liabilities based upon claims or
causes of action against DARTMOUTH or its employees which arise out of
(i) the design, production, manufacture, sale, use in commerce, lease
or
5 of 7
<PAGE> 7
promotion by MMS, its Subsidiaries and Licensees, affiliates or agents
of MMS of any product, process or service relating to, or developed
pursuant to, this Agreement or (ii) any other activities to be carried
out pursuant to this Agreement, provided that DARTMOUTH promptly
notifies MMS of any such claim coming to its attention and that it
cooperates with MMS in the defense of such claim. If any such claims or
causes of action are made, DARTMOUTH shall be defended by counsel to
MMS, subject to DARTMOUTH's approval, which shall not unreasonably be
withheld.
Article 11 - Governing Law
11.1 This Agreement shall be governed and construed in accordance with the
laws of the State of New Hampshire.
Article 12 - Assignment
12.1 This Agreement shall not be assigned by either party without the prior
written consent of the parties hereto.
Article 13 - Agreement Modification
13.1 Any agreement to change the terms of the Agreement in any way shall be
valid only if the change is made in writing and approved by mutual
agreement of authorized representatives of the parties hereto.
Article 14 - Notices
14.1 Notices, invoices, communications, and payments hereunder shall be
deemed made if given by registered or certified mail, postage prepaid,
and addressed to the party to receive such notice, invoice, or
communication at the address given below, or such other address as may
hereafter be designated by notice in writing:
If to MMS David Dlesk, CEO
Medical Media Systems, Inc.
79 East Wilder Road, Suite 2
West Lebanon, NH 03784
6 of 7
<PAGE> 8
If to DARTMOUTH: John F. Kavanagh, Ph.D.
Director, Office of Grants and Contracts
Trustees of Dartmouth College
6210 Raven House
Hanover, NH 03755
IN WITNESS WHEREOF, the parties have caused this Cooperative Agreement to be
executed in duplicate as of the day and year first above written.
MEDICAL MEDIA SYSTEMS, INC. TRUSTEES OF DARTMOUTH COLLEGE
/s/ David C. Dlesk /s/ John F. Kavanagh
- - ------------------------ ------------------------
David Dlesk John F. Kavanagh, Ph.D.
CEO Director, Office of Grants and Contract
2/3/95 2/3/95
- - ------------------------ ------------------------
Date Date
7 of 7
<PAGE> 9
Attachment A
MEDICAL MEDIA SYSTEMS FUNDING PROPOSAL TO THE
STATE OF NEW HAMPSHIRE INDUSTRIAL RESEARCH CENTER
Medical Media Systems (MMS) is now starting its third year. During our
first two years (07/01/92 - 06/30/94), we have completed our first round of
funding and have developed proof of concept prototypes of several new and
innovative products in medicine. Based on this successful meeting of milestones,
we have been given a second round of funding by our corporate partner, Baxter
Healthcare. We plan to use the second round of funding to bring our products
into clinical trials. MMS continues to be based in the Upper Valley. We would
like to request a second round of funding from the State of New Hampshire
Industrial Research Center. This would be used to develop additional clinical
products that our present funding does not include.
Progress to Date:
We have completed our incubation period within the Thayer School of
Engineering at Dartmouth College and will be moving this month to West Lebanon.
We have hired a CEO, who is moving here from Illinois, to run our company. We
have successfully negotiated our next round of funding from Baxter. We presently
have eight people working for Medical Media Systems, with plans to hire more in
1995.
Medical Media Systems has developed a Smart Endoscopic Environment for
knee arthroscopic procedures. We demonstrated the proof of concept system on
11/29/93. This system would be used by the surgeon as a guide for performing
complex reconstructions within the knee such as anterior cruciate ligament
repairs. We are now moving forward to develop a clinical system for FDA trials.
On 04/14/94, we demonstrated a proof of concept system for liver surgery that
would allow the surgeon to remove multiple metastatic tumors and avoid critical
blood vessels. We are now developing this system for clinical trials.
Our business concept is based on producing patient specific software
for the specific clinical procedure to be performed. We would sell a software
model of the patient's specific anatomy and pathology, whether knee, liver or
other applications to be developed, that would be used by the surgeon as a
navigational map during a specific procedure.
With over 75 million surgical procedures performed annually on a
world-wide basis, we are excited about the opportunity MMS has to develop
computer-aided surgery products to be used in some percentage of these cases.
These products will ultimately help reduce the cost of the procedure and improve
the outcome.
Outlook for the next year:
We have divided our development work into three areas: (1) Workstations
to be used by MMS to produce patient specific software: (2) Compuscopes -
endoscopes with computers to perform surgery using our knee and liver patient
specific software: and (3) Preview System that would allow the surgeon to view
and combine 3-D specific radiology data on an inexpensive personal computer.
This Preview System would be used for surgical planning, instruction to the
patient and family, and intra-operatively as a more intuitive surgical map. We
expect to have a Preview System prototype available in 1994 and a product
available for sale in 1995.
Financial Support:
Baxter Healthcare has provided MMS 5.1 million dollars in support and
has committed to another 2.2 million dollars for next year. These funds would be
used to take our present prototypes into clinical trials. We would like to
request another $50,000 of State of New Hampshire support to develop several new
application areas for our products. These would include ENT sinus surgery and
carpal tunnel release in hand surgery. Both these procedures have very large
markets and would potentially provide an accelerated growth to Medical Media
Systems with introductions of products in these areas in the future.
<PAGE> 1
Exhibit 10.34
<PAGE> 2
INTERACT MEDICAL TECHNOLOGIES, INC.
654 Madison Avenue, Suite 1606
New York, New York 10021
May __, 1996
VIA FEDERAL EXPRESS
Accrued Salary Holder
Address of Accrued Salary Holder
Re: Conversion of Accrued Salary into Interact Medical
Technologies, Inc. Common Stock
Dear Accrued Salary Holder:
In connection with the merger of Ixion, Inc. ("Ixion") and Medical
Media Systems, Inc. ("MMS"), you have been requested to convert all of your
earned, but unpaid salary accrued as an employee of [Ixion] [MMS] through May
17, 1996 (a total of $_____ ) ("Accrued Salary"), into shares of Interact
Medical Technologies, Inc. Common Stock at a rate of 1 share for each $7.50 of
Accrued Salary (less a number of shares calculated at $7.50 per share, necessary
to cover the requisite withholding obligations).
Please note that conversion of your Accrued Salary may result in
personal tax consequences and in this respect you are advised to consult with
your personal tax advisor. To indicate your consent to the conversion of your
Accrued Salary pursuant to the terms outlined in this letter, please countersign
this letter in the space provided below and return a copy to me as soon as
possible.
Very truly yours,
INTERACT MEDICAL TECHNOLOGIES, INC.
Bruce Sturman, President
ACKNOWLEDGED AND ACCEPTED BY:
- - ----------------------------
ACCRUED SALARY HOLDER
<PAGE> 3
10.34 Accrued Compensation Conversion
-------------------------------
The following individuals and entities compensated by Ixion and MMS
converted a portion of such accrued compensation into shares of Interact Common
Stock pursuant to the attached Letter Agreement:
<TABLE>
<CAPTION>
AMOUNT OF CONVERTED
NAME OF COMPENSATED PARTY COMPENSATION NUMBER OF SHARES
- - ------------------------- ------------------- ----------------
<S> <C> <C>
Maxal Capital Corporation $201,000.00 26,800
Valentino Montegrande 38,000.00 5,067
Mark Cherney 31,000.00 4,134
Shropshire Capital Corporation 56,000.00 7,467
David Hon 13,363.70 1,782
Xinetix Technologies, Inc. 82,000.00 10,934
David Chen 12,220.92 1,630
Michael McKenna 11,537.32 1,539
Steven Pieper 11,373.56 1,517
William Greenrose 11,261.24 1,502
------
TOTAL 62,372
======
</TABLE>
<PAGE> 1
Exhibit 10.35
<PAGE> 2
GENERAL RELEASE AGREEMENT
This General Release Agreement, effective as of May 28, 1996 (the
"Agreement"), is made by and among the Kriegsman Group, a sole proprietorship
owned by Steven Kriegsman ("Kriegsman"), Steven Kriegsman ("Owner"), Medical
Media Systems, Inc., a Delaware corporation ("MMS"), and Ixion, Inc., a Delaware
corporation ("Ixion"), with respect to the following facts:
A. Ixion previously entered into an agreement with Kriegsman dated June
5, 1995, pursuant to which Kriegsman was to provide certain services to Ixion
(the "Engagement").
B. Ixion and MMS are contemplating a merger (the "Merger") and a
question has arisen between the parties as to the amount to which Kriegsman is
owed for services rendered to Ixion and/or MMS in connection with the Merger and
certain other transactions.
C. Ixion, MMS, Kriegsman and Owner have each independently determined
that it is in each party's best interests to settle all outstanding claims as to
Kriegsman's compensation.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties agree as follows:
1. Consideration to Kriegsman. In full, complete, and final settlement
of all of Ixion's and MMS' obligations to Kriegsman, Ixion agrees to pay
Kriegsman an aggregate sum of $132,000 cash upon the execution of this
Agreement (the "Consideration").
2. Further Acts. Each of the parties shall execute promptly such
further documents and perform such further acts as may be necessary or
appropriate in order to fully carry out and effectuate the purposes of this
Agreement.
3. General Release. In consideration of the Consideration, and for
other good and valuable consideration, the receipt and sufficiency of which is
acknowledged, Kriegsman and Owner, jointly and severally, on behalf of
themselves, and all of their respective past, present and future agents,
servants, officers, directors, employees, shareholders, principals,
predecessors, alter egos, partners, parent corporations, subsidiaries,
attorneys, insurers, reinsurers, sureties, heirs, executors, administrators,
trustees, successors and assignees, unconditionally release and forever
discharge both MMS and Ixion, individually and collectively, and each of their
respective past, present and future agents, servants, officers, directors,
employees, shareholders, principals, predecessors, alter egos, parent
corporations, subsidiaries, attorneys, insurers, reinsurers,
<PAGE> 3
sureties, administrators, trustees, successors and assignees (collectively, the
"Ixion/MMS Affiliates"), with respect to any and all claims, liabilities and
causes of action, of every nature and description, which have existed in the
past or which now exist, including, but not limited to, any and all claims,
liabilities, and causes of action arising out of or relating to the Engagement,
the Merger or any engagement of Kriegsman or Owner by Ixion, MMS or any
Ixion/MMS Affiliate. Kriegsman and Owner further agree that any and all
agreements and arrangements with Ixion or MMS will be unconditionally terminated
without further consideration upon payment of the Consideration.
4. Unknown Claims. Kriegsman and Owner each understand that Section
1542 of the California Civil Code provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH, IF KNOWN BY HIM, MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR.
Having been advised with respect thereto, each of Kriegsman and Owner
nevertheless assume all risks for claims arising on their behalf, before or
after the date of this Agreement, now known or unknown, based on facts which
exist on or before the date hereof, or events which occur or have occurred on or
prior to the date hereof, and, notwithstanding the provisions of Section 1542 of
the California Civil Code, or any analogous state law or federal law or
regulation (collectively, the "Release Provisions"), Kriegsman and Owner each
expressly waive their rights pursuant to the Release Provisions and expressly
release Ixion and MMS from all liability for all claims arising out of the
matter stated above (with the exception of Kriegsman's and Owner's rights to
enforce the terms of this Agreement).
Kriegsman and Owner fully understand that if the facts with respect to
which this Agreement is executed are found subsequently to be other than or
different from the facts now believed by Kriegsman and Owner to be true,
Kriegsman and Owner each expressly accept and assume the risk of such possible
difference in fact and agree that this Agreement shall remain effective
notwithstanding any difference of fact.
5. Confidentiality. Kriegsman and Owner each agree that the terms and
conditions of this Agreement are strictly confidential and shall not be
disclosed to any person by Kriegsman, Owner or any agent or principal of
Kriegsman or Owner, except as required by law.
6. Covenant Not to Sue. Kriegsman and Owner each covenant not to sue or
otherwise institute or cause to be instituted or in any way participate in legal
or administrative proceedings against Ixion or MMS, or any of their respective
past, present
-2-
<PAGE> 4
and future Ixion/MMS Affiliates, with respect to any and all claims, liabilities
and causes of action, of every nature and description, which have existed in the
past or which now exist, whether or not now known or ascertained, including, but
not limited to, any and all claims, liabilities, and causes of action arising
out of or relating to the Engagement, the Merger or any engagement of Kriegsman
or Owner by Ixion, MMS or any Ixion/MMS Affiliate.
7. No Admission. The parties agree that this Agreement, and performance
of the acts required by it, does not constitute an admission of liability,
culpability, negligence or wrongdoing on the part of anyone, and shall not be
construed for any purpose as an admission of liability, culpability, negligence
or wrongdoing by any party and/or by any party's present or former parents,
subsidiaries, related entities, predecessors, successors, officers, directors,
shareholders, agents, employees and assigns.
8. Attorneys' Fees. Should any party hereto employ an attorney for the
purpose of enforcing or construing this Agreement in any legal proceeding
whatsoever, the prevailing party shall be entitled to receive from the other
party or parties thereto reimbursement for all attorneys' fees and all costs
incurred in connection therewith.
9. Complete Defense. This Agreement may be pleaded as a full and
complete defense to, and may be used as the basis for an injunction against, any
new process, action, suit, claim, administrative action, or other proceeding
which Kriegsman or Owner may initiate, prosecute, or attempt in violation of or
in order to set aside the term hereof.
10. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of California, without
giving effect to its conflicts of laws principles.
11. Successors and Assigns. All the terms of this Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective legal representatives, successors and assigns.
12. Authority. The parties each represent and guarantee that it has
read and understands this Agreement; has actual authority and power to enter
into and perform this Agreement.
13. Kriegsman and Owner Representations. Kriegsman and Owner hereby
each represent to Ixion and MMS that Kriegsman is a sole proprietorship and that
neither Kriegsman nor Owner have assigned any right to any cause of action
against either Ixion, MMS or any of the Ixion/MMS Affiliates, that no other
entity or person has any such right and that Kriegsman and Owner shall
indemnify, defend and hold Ixion, MMS and each Ixion/MMS Affiliate harmless from
any claim, liability, expense or
-3-
<PAGE> 5
damage arising out of any breaches of these representations.
14. Entire Agreement. This Agreement contains the entire agreement
between the parties relating to the transactions contemplated hereby, and all
prior or contemporaneous agreements, understandings, representations, and
statements, oral or written, are merged herein. Kriegsman and Owner expressly
warrant that they have each read and fully understand this Agreement and that
they have each had the opportunity to consult with legal counsel of their own
choosing; that each of Kriegsman and Owner are not executing this Agreement in
reliance on any promises, representations, or inducements other than those
contained herein; and that each of Kriegsman and Owner are executing this
Agreement voluntarily, free of any duress or coercion.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
[Remainder of This Page Intentionally Left Blank]
-4-
<PAGE> 6
MEDICAL MEDIA SYSTEMS, INC., IXION, INC.,
a Delaware corporation a Delaware corporation
By: By: /s/ [signature illegible]
----------------------------- -------------------------------
Its: Its: CEO
---------------------------- ------------------------------
THE KRIEGSMAN GROUP
By:
------------------------------ ----------------------------------
Steven Kriegsman, Steven Kriegsman, Individually
Sole Proprietor
APPROVED AS TO FORM:
LEWIS, GOLDBERG & BALL
By:
-------------------------------
David M. Lewis, Attorney for
the Kriegsman Group
[SIGNATURE PAGE TO
SETTLEMENT AND GENERAL RELEASE AGREEMENT]
<PAGE> 7
MEDICAL MEDIA SYSTEMS, INC., a IXION, INC., a Delaware
Delaware corporation corporation
By: /s/ Steve Pieper By:
------------------------------- -------------------------------
Its: President Its:
------------------------------ ------------------------------
THE KRIEGSMAN GROUP
By:
------------------------------- -----------------------------------
Steven Kriegsman, Sole Proprietor Steven Kriegsman, Individually
APPROVED AS TO FORM:
LEWIS, GOLDBERG & BALL
By:
-------------------------------
David M. Lewis, Attorney for
the Kriegsman Group
[SIGNATURE PAGE TO
SETTLEMENT AND GENERAL RELEASE AGREEMENT]
<PAGE> 8
MEDICAL MEDIA SYSTEMS, INC., a IXION, INC., a Delaware
Delaware corporation corporation
By: By:
------------------------- ------------------------------
Its: Its:
------------------------- ------------------------------
THE KRIEGSMAN GROUP
By: /s/ STEVEN KRIEGSMAN /s/ STEVEN KRIEGSMAN
--------------------------------- ------------------------------
Steven Kriegsman, Sole Proprietor Steven Kriegsman, Individually
APPROVED AS TO FORM:
LEWIS, GOLDBERG & BALL
By: /s/ DAVID M. LEWIS
----------------------------------
David M. Lewis, Attorney for
the Kriegsman Group
[SIGNATURE PAGE TO
SETTLEMENT AND GENERAL RELEASE AGREEMENT]
<PAGE> 1
Exhibit 10.36
<PAGE> 2
SETTLEMENT AGREEMENT AND RELEASE OF ALL CLAIMS
The undersigned parties to this Settlement Agreement and Release
("Agreement") represent and agree as follows:
1. There is now pending in the United States District Court for the
Western District of Washington, a case entitled Ixion, Inc. v. Cyndel & Co.,
Inc., et al, and related counterclaim, Case No. C94-1485Z (the "Action").
Ixion, Inc. ("Ixion") is the plaintiff and counter-defendant in the Action, and
Cyndel and Co., Inc., Steven J. Bayern, and Patrick Kolenik (collectively, the
"Cyndel Parties") are the defendants and counter-claimants.
2. The purpose of this Agreement is to compromise and resolve all of
the disputes and controversies presently existing among the parties to this
Agreement arising out of, or in any way related to, any of the events or
circumstances giving rise to the claims, counterclaims, and defenses raised in
the Action. This Agreement does not apply to, and is not intended to apply to,
any other matters, including but not limited to matters relating to Hydration
Technology, Inc.
3. In consideration for the mutual releases described elsewhere in
this Agreement, Ixion shall issue warrants that will give Cyndel the right to
acquire 25,000 shares of Ixion common stock at a price of 150 percent of the
initial public offering price, and 25,000 shares of Ixion common stock at a
price of 160 percent of the initial public offering price. These warrants must
be exercised by the earlier of (i) three years from the date of the initial
public offering, or (ii) March 1, 2001. Both
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warrants shall contain piggyback registration rights enabling the holder or
Cyndel to register or join in the registration of the underlying securities,
(i.e., the common stock) in the event Ixion looks to register its common stock,
or common stock held by any shareholder, after the initial public offering. In
addition to these warrants, Cyndel shall receive an option to acquire 20,000
shares of Ixion's common stock at a purchase price of $7.50 per share. This
option must be exercised within 18 months after April 1, 1996, and expires on
November 1, 1997, if not exercised by that date. The option cannot be
exercised, in part, and can only be exercised, in full, where all 20,000 shares
are purchased, at $7.50 per share, at one time, in a single transaction. Cyndel
cannot assign its warrants or options to anyone except Steven J. Bayern or his
immediate family, Patrick Kolenik or his immediate family, or to James J. Ragen
or his law firm Ragen & Cromwell. If Cyndel so assigns any warrants or options,
they cannot thereafter be re-assigned to anyone else. Cyndel, and its
assignees, agree to accept any lockup conditions and time periods imposed by
the underwriter(s), although Ixion will not insist upon or otherwise encourage
the underwriter(s) to require such warrants to be locked up.
4. In exchange for the consideration set forth above, all parties
agree that:
a) They will dismiss, with prejudice, and in its entirety, the
complaint and counterclaim in the Action, within three business days of the
date of execution of this Agreement; and
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<PAGE> 4
b) They release each other, and all of their respective agents,
employees, employers, attorneys, insurers, directors, officers, members,
partners, shareholders, representatives, successors, assigns, heirs, executors,
administrators, and estates, absolutely and forever, from any and all claims,
demands, obligations, damages, liabilities, actions, or causes of action of any
kind or nature whatsoever, whether based on contract, tort, statute or other
legal or equitable theories of recovery, whether known or unknown, which as of
the date of this Agreement they had or now have, or claim to have, which relate
to Ixion, including all of the matters alleged in the complaint and
counterclaim in the Action.
c) Ixion will release any claims or potential claims that it
has, or may have, against Henry Hackel, R.F. Lafferty & Co., and Harold
Horowitz (the "Third Party Settlors"), if all of the Third Party Settlors
execute the mutual release attached hereto as Exhibit "A". If any of the Third
Party Settlors refuse, for any reason, to execute the mutual release in the
exact form attached hereto, within three (3) days after this Agreement is
executed, then this paragraph of the Agreement shall be deemed to be null and
void, and the Agreement, without this paragraph, shall constitute the full,
final, and complete settlement between Ixion and the Cyndel Parties.
5. This release does not apply to, and is not intended to apply to,
claims of any type or kind made by any third parties against Ixion, or against
any of the Cyndel Parties with respect to Ixion. None of the hereto parties has
any obligation under
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<PAGE> 5
this Agreement to indemnify any of the other parties for claims brought by any
third party against Ixion, or against any of the Cyndel Parties.
6. All parties to this Agreement agree not to encourage, assist,
instigate, or otherwise participate in the prosecution of any claim, lawsuit,
or other type of action or proceeding against any of the other parties except
to the extent they are compelled by judicial process to do so.
7. Each party denies any liability to the other party hereto in
connection with the matters which are the subject of this Agreement but desires
to resolve the potential claims and causes of action between and among them.
This Agreement is a compromise of disputed claims; accordingly, this Agreement,
and the furnishing of consideration for this Agreement, shall not constitute an
admission of liability or wrongdoing, any and all of which liability or
wrongdoing is expressly denied.
8. This document sets forth the entire agreement between the parties
with respect to the specific subject matter thereof, and supersedes any and all
prior agreements and understandings between the parties pertaining to its
subject matter. The parties agree and acknowledge that there are no
contemporaneous oral agreements between the parties relating to the subject
matter of this Agreement. This Agreement may be amended, or any right or
condition hereunder waived, only by written instrument signed by the party
against whom such an amendment or waiver is sought to be enforced.
9. Each party warrants and covenants that it has not
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<PAGE> 6
previously assigned, transferred, or suffered a loss of any of the rights which
are at issue in this Agreement, and that this Agreement will constitute a
complete settlement and release according to its terms. Each of the parties to
this Agreement represents and warrants that he has full power and authority to
enter into this Agreement to resolve all the claims and causes of action made
the subject of this Agreement.
10. Nothing expressed or implied in this Agreement is intended to
confer upon any person or entity, other than those signing this Agreement, any
rights or remedies by reason thereof, except as specifically set forth in this
Agreement.
11. Each of the parties shall bear the expenses of his own costs and
attorneys' fees in connection with the Action.
12. This Agreement shall be governed by the laws of the State of
Washington, and shall be enforced, if necessary, in the United States District
Court for the Western District of Washington.
13. Each party understands and agrees that a party's execution of this
document constitutes a knowing, voluntary and binding acceptance of this
Agreement and each and all of its terms.
14. By signing in the places indicated below, counsel for the
respective parties indicate the terms of this Agreement are fair and reasonable
to their respective clients.
15. This Agreement may be signed by the parties in counterparts, each
of which shall be deemed to be an original, but all of which, taken together,
shall constitute one and the
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<PAGE> 7
same instrument.
16. This Agreement, including signature pages (and not including the
attached Exhibit "A") is 8 pages. Exhibit "A" is 4 pages.
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<PAGE> 8
SIGNATURES
Dated: April 16, 1996. Ixion, Inc.
By: /s/ BRUCE D. STURMAN
--------------------------------
Bruce D. Sturman
Its: Chief Executive Officer
Dated: April 16, 1996. LEVIN, STEIN, CHYTEN & SCHNEIDER
Approved as to Form only:
By: /s/ KENNETH E. CHYTEN
---------------------------------
Kenneth E. Chyten
Attorneys for Plaiintiff and
Counter-Defendant Ixion, Inc.
Dated: April 16, 1996 Cyndel & Co., Inc.
By: /s/ PATRICK KOLENIK
----------------------------------
Patrick Kolenik
Its: President
Dated: April 16, 1996 /s/ PATRICK KOLENIK
----------------------------------------
Patrick Kolenik
Dated: April 16, 1996 /s/ STEVEN J. BAYERN
----------------------------------------
Steven J. Bayern
Dated: April 22, 1996 Ragen & Cromwell
Approved as to form only:
By: /s/ JAMES J. RAGEN
-----------------------------------
James J. Ragen
Attorneys for Defendant and
Counter-Complianants Cyndel &
Co., Inc., Steven J. Bayern,
and Patrick Kolenik
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MUTUAL RELEASE
This mutual release ("Release") is entered into by and between Ixion,
Inc. ("Ixion"), on the one hand, and Henry Hackel, R. F. Lafferty & Co., and
Harold Horowitz (collectively, the "Lafferty Parties") on the other.
RECITALS
A. WHEREAS, the Lafferty Parties were, at one point, retained to
provide certain services on behalf of Ixion;
B. WHEREAS, Ixion and the Lafferty Parties (collectively, the "Settling
Parties") wish to resolve any disputes or potential disputes between them;
It is therefore agreed as follows:
AGREEMENT
1. The Settling Parties release any claims or potential claims that
they have, or may hereafter have, against each other, and against their current
or former officers, directors, employees and attorneys, relating to matters
involving Ixion.
2. This release does not apply to, and is not intended to apply to,
claims of any type or kind made by any third parties against any of the Settling
Parties. None of the Settling Parties has any obligation under this release to
indemnify any of the other parties for claims brought by any third party against
any of the other Settling Parties.
3. This Agreement does not apply to, and is not intended to apply to,
any claims relating to matters other than Ixion, and,
EXHIBIT "A"
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specifically, does not relate to matters involving Hydration Technology, Inc.
4. The Settling Parties agree not to encourage, assist, instigate, or
otherwise participate in the prosecution of any claim, lawsuit, or other type of
action or proceeding against any of the other Settling Parties except to the
extent they are compelled by judicial process to do so.
5. Each party denies any liability to the other party hereto in
connection with the matters which are the subject of this Release but desires to
resolve the potential claims and causes of action between and among them. This
Release is a compromise of disputed claims; accordingly, this Release and the
furnishing of consideration for this Release, shall not constitute an admission
of liability or wrongdoing, any and all of which liability or wrongdoing is
expressly denied.
6. This Release sets forth the entire agreement between the Settling
Parties with respect to the specific subject matter thereof, and supersedes any
and all prior agreements and understandings between the parties pertaining to
its subject matter. The parties agree and acknowledge that there are no
contemporaneous oral agreements between them relating to the subject matter of
this Release. This Release may be amended, or any right or condition hereunder
waived, only by written instrument signed by the party against whom such an
amendment or waiver is sought to be enforced.
7. This Release may be executed in any number of
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<PAGE> 11
counterparts, with the same effect as if all parties have signed the same
document, and each such executed counterpart shall be deemed to be an original
instrument. All such executed counterparts together shall constitute one and the
same instrument. True and correct copies may be used in lieu of the original.
8. This release shall be governed by the laws of the State of
Washington and shall be enforced, if necessary, in the United States District
Court for the Western District of Washington.
9. This Release, together with the signature page, is 4 pages in
length.
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<PAGE> 12
SIGNATURES
Dated: April __, 1996. Ixion, Inc.
By:
------------------------------
Bruce D. Sturman
Its: Chief Executive Officer
Dated: April __, 1996 R.F. Lafferty & Co.
By:
------------------------------
Henry Hackel
Its: President
Dated: April __, 1996
-----------------------------------
Henry Hackel
Dated: April __, 1996
-----------------------------------
Harold Horowitz
In his individual capacity, and as
counsel for R.F. Lafferty & Co., and
Henry Hackel
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<PAGE> 1
EXHIBIT 10.37
<PAGE> 2
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into this 22nd day of April, 1996, by and between David C. Hon (the "Seller")
having an office at 1335 North Northlake Way, #102, Seattle, WA 98103, and
Ixion, Inc. a Delaware corporation (the "Buyer" or "Ixion"), having an office
at 400 West Mercer Street, Seattle, WA 98109.
WITNESSETH
WHEREAS, the Seller desires to sell, and the Buyer desires to acquire,
certain assets of the Seller, including all documentation and rights, of any
nature or any kind whatsoever, to the internal landscapes patent, Patent No.
4,907,973, including any design modifications thereto and ancillary products of
the patent as more particularly described in Exhibit A hereto and hereby
incorporated by reference as if set forth in its entirety; and
WHEREAS, Buyer's purchase of the internal landscapes patent, Patent No.
4,907,973, shall serve to cancel any prior obligations owed to the Seller by
the Buyer with respect to the Seller's previous assignment of the internal
landscapes patent, Patent No. 4,907,973, to the Buyer;
NOW, THEREFORE, in consideration of the promises and the mutual
covenants and agreements hereinafter set forth, the parties hereto, intending
to be legally bound hereby, do hereby agree as follows:
I. SALE OF ASSETS AND RELATED TRANSACTIONS
1.1 Sale of Asset. On the terms and subject to the conditions of this
Agreement, on the Closing Date (as that term is hereinafter defined in Section
IV hereof), the Sellers shall sell, convey, assign, transfer and deliver to
the Buyer, and the Buyer shall purchase and acquire from the Seller, the
assets, intellectual properties and rights described in Exhibit A hereto.
(Sometimes hereinafter referred to as the "Purchase Assets").
1.2 Instruments of Conveyance and Transfer. On the Closing Date, the
Seller shall deliver to the Buyer such bills of sale, endorsements,
assignments, novations, and other good and sufficient instruments of conveyance
and assignment as set forth in Exhibit B satisfactory in form and substance to
the Buyer and its counsel, as shall be effective to vest in the Buyer, upon the
Closing Date, full and complete right, title and interest in and to the
Purchase Assets.
1.3 Assignment of Contract and Rights. Anything in this Agreement to the
contrary notwithstanding, this Agreement shall not constitute an agreement to
assign any claim, contract, license, lease, commitment, sales or purchase order
or any claim or right or any benefit arising thereunder or resulting therefrom,
if an attempted transfer or assignment thereof, without the consent of a third
party thereto, would constitute a breach thereof or in any way affect the rights
of the Buyer or of the Seller thereunder. If such consent is not obtained, or if
an attempted transfer or assignment thereof would be ineffective or would affect
the rights of the Seller thereunder so that the Buyer would not in fact receive
all such rights, the Seller and Buyer shall cooperate so as to provide the Buyer
with all benefits under any such claims, contracts, licenses, leases,
commitments, sales or purchase orders or any claim or right or any benefit
arising thereunder or resulting therefrom, which Buyer would have received if
such consent had been forthcoming, including enforcement for the benefit of the
Buyer (at the Buyer's sole cost and
<PAGE> 3
expense) of any and all rights of the Seller against a third party thereto
arising out of the breach or cancellation by such third party or otherwise; and
any transfer or assignment to the Buyer by the Seller of any property or
property rights or any contract or agreement which shall require the consent or
approval of any third party, shall be made subject to such consent or approval
being obtained.
II. CONSIDERATION FOR TRANSFER OF THE PURCHASE ASSETS
2.1 Consideration to be Paid. The full consideration for the
Purchase Assets (hereinafter the "Purchase Price"), subject to the terms and
conditions of this Agreement, and paid as provided hereunder shall be:
2.1.1 Upon the execution of this Agreement, Buyer shall be
obligated to pay the following amounts: $25,000 on or before August 1, 1996
and, thereafter, $25,000 on or before August 1 of each succeeding year for nine
additional years.
III. LIABILITIES AND OBLIGATIONS
3.1 Buyer shall not assume and shall under no circumstances be
responsible for, and Seller shall retain and be responsible for, any current
liabilities or obligations of Seller related to the Purchase Assets. Buyer will
maintain the Patent in good standing with all taxes and fees paid in timely
fashion.
IV. CLOSING DATE
4.1 Closing Date. The closing with respect to the transactions
provided for in this Agreement (the "Closing") shall take place at the offices
of Monahan & Biagi, P.L.L.C. at 10:00 a.m., on April 22, 1996, (the "Closing
Date") or at such other place or on such other date as the parties hereto
may mutually agree. At the Closing, the Assignment of Patent, attached hereto as
Exhibit B, shall be filed with the United States Patent Office, in a manner
necessary to complete and perfect the assignments to Buyer, as determined by
Buyer.
V. REPRESENTATIONS AND WARRANTIES OF THE SELLER
Seller hereby represents and warrants to the Buyer as follows:
5.1 Residency; Power. David C. Hon is an individual residing in the
State of Washington. The Seller has all requisite power and authority to sell
and assign his intellectual property and other items as more fully described in
the attached Exhibit A, as now being conducted and to enter into this Agreement
and perform his obligations hereunder.
5.2 Effect of Agreement. The execution, delivery and performance
of this Agreement by the Seller and the consummation of the transactions
contemplated hereby do not and will not (i) violate, with or without the giving
of notice of the passage of time, or both, any provisions of law or statute or
any rule, regulation, order, award, judgment, or decree of any court or
governmental authority applicable to the Seller; or (ii) conflict with or
result in a breach or termination of any provision of, or constitute a default
under, or result in the creation of any lien, charge or encumbrance upon any of
the Purchase Assets, pursuant to any corporate charter, bylaw, indenture,
mortgage, deed of trust, lease, contract, agreement or other instrument, or any
order, judgment, award, decree, statute, ordinance, regulation or any other
restriction of any kind or character, to which the Seller is a party, or by
which any of the Purchase Assets may be affected or bound.
ASSET PURCHASE AGREEMENT - PAGE 2
<PAGE> 4
5.3 Absence of Liens and Encumbrances; Leases.
5.3.1 The Seller has good title to all of the Purchase Assets,
free and clear of all claims, assessments, and encumbrances, other than (i) as
specifically disclosed herein, (ii) any liens for taxes not yet due and payable
or being contested in good faith by appropriate proceedings, (iii) any interest
acquired by Ethicon Endo-Surgery ("Ethicon") pursuant to that certain Research,
Option and License Agreement between Ixion and Ethicon, dated April 8, 1992,
and (iv) such imperfections of title, easements, liens, pledges, charges and
encumbrances, if any, as do not materially detract from the value or interfere
with the present or intended use of the Purchase Assets.
5.3.2 There are no leases and easements relating to the
Purchase Assets, except as otherwise set forth in Paragraph 5.3.1 above.
5.4 Litigation. The Seller is not currently involved in any
litigation and no claims exist against the Seller.
5.5 Condition of Purchase Assets. The Purchase Assets are in good
condition and fit for the particular purpose for which they are purchased. The
Seller warrants that they know of no defect in the Purchase Assets which would
adversely affect the Buyer's ability to market the Purchase Assets.
5.6 Continued Existence of Purchase Assets. All Purchase Assets in
existence on January 1, 1996, shall be in existence on the Closing Date.
5.7 Material Adverse Changes. Since January 1, 1996, there has not
been: (i) any damage, destruction or loss, whether or not covered by insurance,
materially adversely affecting the Purchase Assets; or (ii) any waiver of any
right material to the transactions set forth in this Agreement.
5.8 Books and Records. The books and records of David C. Hon are
in all material respects complete and correct, have been maintained in
accordance with good business practices and accurately reflect the basis for
the financial condition and result of operations of Seller set forth in
Seller's financial statements.
5.9 Compliance with Laws. The Seller holds and is in compliance
with all permits, certificates, licenses, approvals, registrations, and
authorizations required under all laws, rules and regulations in connection
with the business of David C. Hon. The Seller has complied and is now in
compliance with all statutes, rules, regulations, and orders, federal, state
and municipal, including without limitation those relating to health and equal
employment practices. No notice, citation, summons or order has been issued, no
complaint has been filed, no penalty has been assessed and no investigation or
review is pending or threatened by any governmental or other entity (a) with
respect to any alleged violation by the Seller of any law, ordinance, rule,
regulation or order of any governmental agency; or (b) with respect to any
alleged failure by the Seller to have any permit, certificate, license,
approval, registration or authorization required in connection with its
business.
5.10 Disclosure. No representation or warranty by the Seller in
this Agreement, and no exhibit, document, statement, certificate or schedule
furnished or to be furnished to the Buyer pursuant thereto, or in connection
with the transactions contemplated hereby, contains or will contain any untrue
statement of a material fact necessary to make the statements or facts
contained herein or therein not misleading or necessary to provide the Buyer
with proper information as to the Seller and the Purchase Assets.
<PAGE> 5
5.11 Taxes. Seller has paid in full any and all taxes including,
without limitation, all income, property, sales, use, franchise and value added
imposed by the United States or by any foreign country or by any state,
municipality, subdivision or instrumentality of the United States or of any
foreign country or by any other taxing authority, which are due or payable by
Seller with respect to the Purchase Assets.
VI. REPRESENTATIONS AND WARRANTIES OF THE BUYER
Buyer represents and warrants to the Seller as follows:
6.1 Organization, Good Standing, Power. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own, lease and
operate its properties, to carry on its business as now being conducted, and to
enter into this Agreement and perform its obligations hereunder.
6.2 Authority Relative to Agreement. The execution, delivery and
performance of this Agreement by the Buyer has been duly and effectively
authorized by all necessary corporate action by the Buyer. This Agreement has
been duly executed by the Buyer and is a valid, legally binding and enforceable
obligation of the Buyer.
VII. TRANSACTIONS PRIOR TO THE CLOSING DATE
7.1 Access to Information. The Seller shall give to the Buyer, its
employees, counsel, accountants, engineers and other consultants and
representatives, full reasonable access during normal business hours throughout
the period prior to the Closing Date and at anytime following the Closing Date
to the Purchase Assets for such purposes as the Buyer deems appropriate and as
the Buyer or its representatives may reasonably request. The Buyer shall use its
best efforts to cause its representatives to hold in strict confidence all
information so obtained from the Seller and, if the transactions herein
provided for are not consummated as contemplated herein, the Buyer will return
all such data as the Seller may reasonably request.
7.2 Conduct of Business Pending the Closing. From and after the date
hereof and pending the Closing, the Sellers will: (a) maintain the
marketability of the Purchase Assets in at least as equal a level as existed on
the date hereof; and (b) comply with all permits, certificates, licenses,
approvals, laws, rules and regulations applicable to the business of Seller or
the Purchase Assets. From and after the date hereof and pending the Closing,
the Seller will not: (a) sell, transfer, lease, mortgage or encumber any of the
Purchase Assets; (b) fail to pay any liability or charge which, if unpaid,
might become a lien or charge upon any of the Purchase Assets; or (c) waive or
permit the loss of any substantial right relating to the business of the Seller.
VIII. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER
The obligations of the Buyer under this Agreement are subject to the
satisfaction at or prior to the Closing Date of each of the following
conditions:
8.1 Buyer's Corporate Approval. This Agreement and the transactions
contemplated hereby shall have been approved by the Buyer's Board of Directors
and, if necessary, shareholders.
<PAGE> 6
8.2 Accuracy of Representations and Warranties. The
representations and warranties of the Seller herein contained shall be true and
correct on and as of the Closing Date, with the same force and effect as though
made on and as of such date, except as affected by the transactions
contemplated hereby.
8.3 Performance of Agreements. The Seller shall have performed all
obligations and agreements and complied with all covenants and conditions
contained in this Agreement to be performed or complied with by it at or prior
to the Closing Date.
8.4 Actual or Threatened Actions. There shall not be any actual or
threatened action or proceeding by or before any court or other governmental
body or agency which shall seek to restrain, prohibit or invalidate the
transactions contemplated by this Agreement or which might affect the right of
the Buyer to own, operate or control the Purchase Assets after the Closing Date.
8.5 Consents. All required consents shall have been received by
the Buyer, including but not limited to all consents and approvals required to
permit the Buyer to enjoy after the Closing Date substantially all rights and
benefits presently enjoyed by the Seller with respect to the Purchased Assets.
8.6 Licenses. All licenses shall have been approved by the
necessary authorities for transfer to the Buyer of the Purchased Assets.
IX. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLER
The obligations of the Seller under this Agreement are subject to the
satisfaction at or prior to the Closing Date of each of the following
conditions:
9.1 Accuracy of Representations and Warranties. The representations
and warranties of the Buyer herein contained shall be true and correct on and
as of the Closing Date, with the same force and effect as though made on and as
of such date, except as affected by the transactions contemplated hereby.
9.2 Performance of Agreements. The Buyer shall have performed all
obligations and agreements and complied with all covenants and conditions
contained in this Agreement to be performed or complied with by it at or prior
to the Closing Date.
X. EVENTS OF DEFAULT, NATURE AND SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; INDEMNIFICATION
10.1 Events of Default. The occurrence of each or any of the
following conditions, events or acts shall constitute an "Event of Default:"
10.1.1 The dissolution of the Buyer; or
10.1.2 The Buyer's insolvency, assignment for the benefit of
creditors, application for or appointment of a receiver, filing of a voluntary
or involuntary petition under any provision of the Federal Bankruptcy Code or
amendments thereto or any federal or state statute affording relief to debtors;
or if there shall be commenced against the Buyer any such proceeding or filed
against the Buyer any such application or petition which proceeding,
application or petition is not dismissed or withdrawn within thirty (30) days
of commencement as the case may be; or
ASSET PURCHASE AGREEMENT - PAGE 5
<PAGE> 7
10.1.3 The failure of the Buyer to make any payment of any
amount due hereunder, as and when the same shall become due and payable; or
In the event any such Event of Default occurs, ownership of and
interest in all title to the Purchase Assets shall revert to Seller, or
Seller's heirs, successors or assigns, if such Event of Default is not cured
within ninety (90) days of Buyer's receipt of Notice from Seller of an Event of
Default. Further, if the Buyer has transferred, assigned, sold or otherwise
conveyed to a third party (the "Third Party") any interest, right, entitlement
or other claim to the Purchase Assets, then any obligation owed to the Buyer
from such Third Party shall also be transferred or otherwise conveyed to
Seller, or Seller's heirs, successors or assigns.
10.2 Survival of Representations, Etc. All representations, warranties
and agreements made by the Sellers and the Buyer in this Agreement or in any
exhibit, certificate, document or instrument delivered pursuant to the
provisions hereof or in connection with the transactions contemplated hereby,
and the remedies of the Buyer and the Seller with respect thereto, shall
survive the Closing hereunder until the Purchase Price has been satisfied in
full as provided for herein.
XI. EXPENSES
Whether or not the transactions contemplated by this Agreement are
consummated, the Buyer shall pay the fees and expenses of its counsel,
accountant, other experts and all other expenses incurred by it incident to the
negotiation, preparation and execution of this Agreement, and the Sellers shall
pay any and all such fees and expenses incurred by it incident to the
negotiation, preparation and execution of this Agreement. Seller acknowledges
that he has had an opportunity to seek the advice of legal counsel prior to
entering into this Agreement.
XII. NOTICES
All notices, requests, demands and other communications which are
required or may be given under this Agreement shall be in writing and shall be
deemed to have been duly given if delivered personally or set by registered or
certified mail, return receipt requested, postage prepaid:
If to the Seller: David C. Hon
1335 N. Northlake Way, Suite 102
Seattle, WA 98103
If to the Buyer: Ixion, Inc.
654 Madison Avenue, #1606
New York, NY 10021
Mr. Bruce D. Sturman
With a copy to: David M. Otto, Esq.
Monahan & Biagi, P.L.L.C.
701 Fifth Avenue
Suite 5701
Seattle, WA 98104-7003
or to such other address as any party shall have specified by notice in writing
to the other.
Asset Purchase Agreement - Page 6
<PAGE> 8
XIII. TERMINATION PRIOR TO CLOSING DATE
13.1 This Agreement may be terminated by either party hereto by
written notice to the other if all conditions precedent to such party's
obligations hereunder shall not have been met by the Closing Date and such
non-compliance shall not have been waived by such party; or the Closing under
this Agreement shall not have occurred prior to April 22, 1996, and such
non-occurrences shall not have been due to any failure of the party terminating
pursuant to this paragraph to perform its obligations hereunder or any
misrepresentation on its part; or there has been a material misrepresentation
herein or material breach of a covenant herein by the other party hereto.
13.2 Any such termination shall be without liability of the party
terminating pursuant to this paragraph; but such termination, if due to any
material misrepresentation or willful nonfulfillment of any undertaking on the
part of any party, shall not affect the other party's liability therefor and,
in that event, the other party shall (in addition to any other remedies which
may be available against it) be obligated to reimburse the party terminating
pursuant to this paragraph for all costs (including legal and accounting fees
and disbursements) and other expenses it may have incurred in connection with
this Agreement.
XIV. ENTIRE AGREEMENT
This Agreement and the Exhibits hereto constitute the entire agreement
between the Buyer and the Sellers with respect to the subject matter hereof.
XV. BINDING EFFECT: BENEFITS
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their successors; nothing in this Agreement, expressed or
implied, is intended to confer on any other person other than the parties
hereto, or their successors, any rights, remedies, obligations or liabilities
under or by reason of this Agreement.
XVI. NON-ASSIGNABILITY
Except with respect to an assignment by Buyer upon the merger,
consolidation, sale or transfer of all or substantially all of the Buyer's
assets, this Agreement and any rights and obligations pursuant hereto shall not
be assignable by either party without the prior written consent of the other,
which shall not be unreasonably withheld.
XVII. SEVERABILITY
In the event that any one or more of the provisions contained in this
Agreement shall for any reason be held to be invalid in any respect, such
provision shall be modified to the extent necessary to make such provision
valid and enforceable and such invalidity shall not affect any other provisions
of this Agreement, and this Agreement shall be construed as if such invalid
provision had never been contained herein.
XVIII. APPLICABLE LAW
This Agreement and the legal relations between the parties hereto shall
be governed by and construed in accordance with the laws of the State of
Washington.
Asset Purchase Agreement -- Page 7
<PAGE> 9
XIX. SECTION AND OTHER HEADINGS
The section and other headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
XX. TIME
TIME IS OF THE ESSENCE UNDER THIS AGREEMENT.
<PAGE> 10
IN WITNESS WHEREOF, the undersigned have duly executed and delivered
this Agreement as of the date first above written.
SELLER:
David C. Hon
/s/ DAVID C. HON
-------------------------------
By: David C. Hon, Individually
BUYER:
Ixion, Inc.
/s/ BRUCE D. STURMAN
-------------------------------
By: Bruce D. Sturman
Its: Chief Executive Officer
<PAGE> 11
Exhibit A
PURCHASE ASSETS
The Purchase Assets of Seller include all documentation and attendant
rights of any nature or kind whatsoever to the patent set forth below:
1) Patent -- Simulation of all minimally invasive surgery throughout
the human anatomy under the internal landscape - expert system patent, Patent
No. 4,907,973.
2) Patent Application - International Application No. PCT/US89/04690,
with an International Filing Date of October 19, 1989 and National Phase
entities made in the following countries:
Canada Application No. 2002219-6
Japan Application No. 1-511777
U.S. Application No. 4,907,973
European Application No. 89912557.9
(Austria, Belgium, France,
Germany, Italy,
Luxembourg, Switzerland,
Netherlands, Sweden,
United Kingdom)
On August 8, 1992, David C. Hon, as patent holder, entered into a
Research Option and License Agreement (the "Agreement") with Ethicon
Endo-Surgery, a division of Johnson & Johnson ("Ethicon"), which Agreement
provides Ethicon with, among other things, the exclusive world wide right for
certain endoscopic and minimally invasive procedures in the laparoscopic region
of the body and/or performed through a laparoscopic surgical simulation device,
which simulation device Ethicon defines as the "PreCeptor."
<PAGE> 12
Exhibit B
ASSIGNMENT OF PATENT
THIS ASSIGNMENT of interest in patent and associated other rights that
have been acquired is made between IXION, INC., a Delaware corporation
("Ixion") and DAVID C. HON ("Seller" or "Hon").
WHEREAS, Seller is the owner of patent rights of various items more
fully described in Exhibit A herewith and also identified below concerning
development of interactive virtual reality simulators; and
WHEREAS, Seller is entering into an asset purchase agreement with Ixion
for the purchase of the below described assets; and
WHEREAS, Pursuant to the Asset Purchase Agreement as requested under
paragraph 1.2 thereunder Seller will assign its rights in the patented
products; and
WHEREAS, no prior transfers, sales, conveyances, or assignments of said
rights have been made of all or any portion of said rights;
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged the assignor, Hon, hereby assigns to the assignee,
Ixion, all right, title and interest in the patented technology owned or sold
by Hon as of the date of Closing between Hon and Ixion.
Purchase Assets
The Purchase Assets of Seller include all documentation and rights of
any nature or kind whatsoever, to the patent and patent applications set forth
below:
1) Patent - Simulation of all minimally invasive surgery
throughout the human anatomy under the internal landscape - expert system
patent, Patent No. 4,907,973.
2) Patent Application - International Application No.
PCT/US89/04690, with an International Filing Date of October 19, 1989, and
National Phase entries made in the following countries:
Canada Application No. 2002219-6
Japan Application No. 1-511777
U.S. Application No. 4,907,973
European Application No. 89912557.9
(Austria, Belgium, France,
Germany, Italy,
Luxembourg, Switzerland,
Netherlands, Sweden,
United Kingdom)
On August 8, 1992, David C. Hon, as patent holder, entered into a
Research Option and License Agreement (the "Agreement") with Ethicon
Endo-Surgery, a division of Johnson & Johnson ("Ethicon"), which Agreement
provides Ethicon with, among other things, the exclusive world wide right for
certain endoscopic and minimally invasive procedures in the laparoscopic region
of the body and/or performed through a laparoscopic surgical simulation device,
which simulation device Ethicon defines as the "PreCeptor."
Asset Purchase Agreement - Page 11
<PAGE> 1
Exhibit 10.38
<PAGE> 2
IXION,INC.
1994 Incentive Stock Option Plan
SECTION 1. Purpose. The purpose of the Ixion, Inc., 1994 Incentive
Stock Option Plan (the "Plan") is to enable Ixion, Inc. (the "Company") to
attract and retain the services of people with training, experience and ability
and to provide additional incentive to such persons by granting them an
opportunity to participate in the ownership of the Company.
SECTION 2. Stock Subject to Plan. The stock subject to this Plan shall
be the Company's common stock, with a par value of $0.01 per share (the "Common
Stock"), presently authorized but unissued or now held or subsequently acquired
by the Company as treasury shares. Subject to adjustment as provided in Section
10, the aggregate amount of Common Stock reserved issuance or delivery upon
exercise of all options granted under this Plan shall not exceed 400,000 shares
of the total shares of Common Stock, as constituted on date of adoption of this
Plan by the Board of Directors. If any option granted under this Plan shall
expire or terminate for any reason without having been exercised in full, the
unpurchased shares subject thereto shall thereupon again be available for
purposes of this Plan.
SECTION 3. Administration. The Plan shall be administered by the Board
of Directors of the Company, in accordance with the following terms and
conditions:
3.1 General Authority. Subject to the express provisions of the
Plan, the Board of Directors shall have the authority, in its discretion, to
determine all matters relating to options to be granted under the Plan,
including the selection of individuals to be granted options, the number of
shares to be subject to each option, the exercise price, the term, whether such
options shall be immediately exercisable or shall become exercisable in
increments over time, and all other terms and conditions thereof. Grants under
this Plan to persons eligible need not be identical in any respect, even when
made simultaneously. The Board of Directors may from time to time adopt rules
and regulations relating to the administration of the Plan. The interpretation
and construction by the Board of Directors of any terms or provisions of this
Plan or any option issued hereunder, or of any rule or regulation promulgated in
connection herewith, shall be conclusive and binding on all interested parties.
The Board of Directors in its sole discretion, may grant incentive stock options
("Incentive Stock Options") as such term is defined in Section 422 of the
Internal Revenue Code of 1986, as amended, (the "Code"). The term option when
used in this Plan should refer to Incentive Stock Options only.
3.2 Directors. A member of the Board of Directors may be eligible
to participate in or receive or hold options under this Plan; provided, however,
that said Director is also an employee of the Company, and that no member of the
Board of Directors shall vote with respect to the granting of an option
hereunder to himself or herself, as the case may be.
3.3 Delegation to a Committee. Notwithstanding the foregoing, the
Board of Directors, if it so determines, may delegate to a committee of the
Board of Directors any or all authority for the administration of the Plan, and
thereafter references to the Board of Directors in this Plan shall be deemed to
be references to the committee to the extent provided in the resolution
establishing the committee.
1994 Incentive Stock Option Plan - Page 1
<PAGE> 3
3.4 Persons Subject to Section 16(b). Notwithstanding anything in
the Plan to the contrary, the Board of Directors, in its absolute discretion,
may bifurcate the Plan so as to restrict, limit or condition the use of any
provision of the Plan to participants who are officers and directors subject to
Section 16(b) of the Securities Exchange Act of 1934, as amended, (the "1934
Act") without so restricting, limiting or conditioning the Plan with respect to
other participants.
3.5 Replacement of Options. The Board of Directors, in its
absolute discretion, may grant options subject to the condition that options
previously granted at a higher or lower exercise price under the Plan be
canceled or exchanged in connection with such grant. The number of shares
covered by the new options, the exercise price, the term and the other terms and
conditions of the new option, shall be determined in accordance with the Plan
and may be different from the provisions of the canceled or exchanged options.
Alternatively, the Board of Directors may, with the agreement of the Optionee,
amend previously granted options to establish the exercise price at the then
current fair market value of the Company's Common Stock, maintaining existing
vesting and expiration dates.
3.6 Loans to Optionees. The Board of Directors, in its absolute
discretion, may provide that the Company loan to Optionees sufficient funds to
exercise any option granted under the Plan and/or to pay withholding tax due
upon exercise of such option. The Board of Directors shall have the authority to
make such determinations at the time of grant or exercise and shall establish
repayment terms thereof, including installments, maturity and interest rate.
SECTION 4. Eligibility. Options may be granted only to persons who, at
the time the option is granted, are employees of the Company or any of its
present or future parent or subsidiary corporations (hereafter a "Parent" or
"Subsidiary") as may be decided by the Board of Directors. Any individual to
whom an option is granted under this Plan shall be referred to hereinafter as
"Optionee". Any Optionee may receive one or more grants of options as the Board
of Directors as shall from time to time determine, and such determinations may
be different as to different Optionees and may vary as to different grants.
SECTION 5. Terms and Conditions of Options. Options granted under this
Plan shall be evidenced by written agreements which shall contain such terms,
conditions, limitations and restrictions as the Board of Directors shall deem
advisable and which are not inconsistent with this Plan. All such options shall
include or incorporate by reference the following terms and conditions:
5.1 Number of Shares. The maximum number of shares that may be
purchased pursuant to the exercise of each option and the price per share at
which such option is exercisable (the "exercise price") shall be as established
by the Board of Directors, provided that the exercise price of Incentive Stock
Options shall not be less than the fair market value per share of the Common
Stock at the time the option is granted, as determined in good faith by the
Board of Directors.
5.2 Duration of Options. Subject to the restrictions contained in
Sections 7 and 9 of this Plan, the term of each option shall be established by
the Board of Directors and, if not so established, shall in no event exceed ten
(10) years from the date of grant.
1994 Incentive Stock Option Plan - Page 2
<PAGE> 4
5.3 Exercisability. Each option shall prescribe the installments,
if any, in which an option granted under the Plan shall become exercisable. The
Board of Directors, in its absolute discretion, may waive or accelerate any
installment requirement contained in outstanding options. In no case may an
option be exercised as to less than 100 shares at any one time (or the remaining
shares covered by the option if less than 100) during the term of the option.
Only whole shares shall be issued pursuant to the exercise of any option.
5.4 Incentive Stock Option. Any option which is issued as an
Incentive Stock Option under this Plan, shall, notwithstanding any other
provisions of this Plan or the option terms to the contrary, contain all of the
terms, conditions, restrictions, rights and limitations required to be an
Incentive Stock Option, and any provision to the contrary shall be disregarded.
SECTION 6. Nontransferability of Options. Options granted under this
Plan and the rights and privileges conferred hereby may not be transferred,
assigned, pledged or hypothecated in any manner (whether by operation of law or
otherwise) other than by will or the applicable laws of descent and
distribution, and shall not be subject to execution, attachment or similar
process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise
dispose of any option under this Plan or any right or privilege conferred
hereby, contrary to the provisions hereof, or upon the sale or levy or any
attachment or similar process, such option thereupon shall terminate and become
null and void. During an Optionee's lifetime, any options granted under this
Plan are personal to him or her and are exercisable solely by such Optionee.
SECTION 7. Certain Limitations Regarding Incentive Stock Options. The
grant of Incentive Stock Options shall be subject to the following special
limitations:
7.1 Limitation on Amount of Grants. In no event shall any Optionee
be granted Incentive Stock Options that in the aggregate (together with all
other Incentive Stock Options granted by the Company or any Parents or
Subsidiaries) entitled the Optionee to purchase, in any calendar year during
which such options first become exercisable, stock of the Company, any Parent or
any Subsidiary having a fair market value (determined as of the time such
options are granted) in excess of $100,000 plus the amount of any unused limit
carry-over permitted under the applicable provisions of the Code.
7.2 Grants to 10% Shareholders. Incentive Stock options may be
granted a person owning more than 10% of the total combined voting power of all
classes of stock of the Company and any Parent or Subsidiary only if (i) the
exercise price is at least 110% of the fair market value of the stock at the
time of grant, and (ii) the option is not exercisable after the expiration of
five years from the date of grant.
SECTION 8. Exercise of Options. Options shall be exercised in
accordance with the following terms and conditions:
8.1 Procedure. Options shall be exercised by delivery to the
Company of written notice of the number of shares with which the option is
exercised.
8.2 Payment. Payment of the option price shall be made in full
within 5 business days of the notice of exercise of the option and shall be in
cash or bank-certified or cashier's checks, or personal check if permitted by
the Board of Directors. To the extent permitted by applicable laws and
regulations (including, but not limited to, federal tax and securities laws and
regulations), an option may be exercised by delivery of shares of Common Stock
of the Company held by the Optionee having a fair market value equal to
1994 Incentive Stock Option Plan - Page 3
<PAGE> 5
the exercise price, such fair market value to be determined in good faith by the
Board of Directors. Such payment in stock may occur in the context of a single
exercise of an option or successive and simultaneous exercises, sometimes
referred to as "pyramiding", which provides that, rather than physically
exchanging certificates for a series of exercises, bookkeeping entries will be
made pursuant to which the Optionee is permitted to retain his existing stock
certificate and a new stock certificate is issued for the net shares.
If the Company's Common Stock is registered under the 1934 Act,
and if permitted by the Board of Directors, and to the extent permitted by
applicable laws and regulations, (including, but not limited to, federal tax and
securities laws and regulations) an option also may be exercised by delivery of
a properly executed exercise notice together with irrevocable instructions to a
broker to promptly deliver to the Company the amount of sale or loan proceeds to
pay the exercise price.
8.3 Federal Withholding Tax Requirements. Upon exercise of an
option, the Optionee shall, upon notification of the amount due and prior to or
concurrently with the delivery of the certificates representing the shares, pay
to the Company amounts necessary to satisfy applicable federal, state and local
withholding tax requirements or shall otherwise make arrangements satisfactory
to the Company for such requirements. Such arrangements may include payment of
the appropriate withholding tax in shares of stock of the Company having a fair
market value equal to such withholding tax, either through delivery of shares
held by the Optionee or by reduction in the number of shares to be delivered to
the optionee upon exercise of such option.
SECTION 9. Termination of Employment, Disability and Death.
9.1 General. If the employment of the Optionee by the Company, a
Parent or a Subsidiary shall terminate for any reason other than death or
disability hereinafter provided, the option shall automatically terminate as of
the first advice or discussion thereof, and such Optionee shall thereupon have
no right to purchase any shares pursuant to such option. Further, to the extent
that the Optionee has exercised certain of his options, such stock shall be
redeemed by the Company at a price as may be determined by the Board of
Directors.
9.2 Disability. If the employment of the Optionee by the Company,
a Parent or a Subsidiary is terminated because of the Optionee's disability (as
herein defined), the option may be exercised by the Optionee at any time prior
to the expiration of one year after the date of such termination (unless by its
terms the option sooner terminates or expires), but only if, and to the extent
the Optionee was entitled to exercise the option at the date of such
termination. For purposes of this section, an Optionee will be considered to be
disabled if the Optionee is unable to engage in any substantial gainful activity
by reason of any medically determinable mental or physical impairment which can
be expected to result in death or which has lasted or can be expected to last a
continuous period of not less than 12 months.
9.3 Death. In the event of the death of an Optionee while in the
employ of the Company, a Parent or a Subsidiary, the option shall be exercisable
on or prior to the expiration of one year after the date of such death (unless
by its terms the option sooner terminates and expires), but only if and to the
extent the Optionee was entitled to exercise the option at date of such death
and only by the Optionee's personal representative if then subject to
administration as part of the Optionee's estate, or by the person or persons to
whom such Optionee's rights under the option shall have passed by the Optionee's
will or by the applicable laws of descent and distribution.
1994 Incentive Stock Option Plan - Page 4
<PAGE> 6
9.4 Waiver or Extension of Time Periods. The Board of Directors
shall have the authority, prior to or within the times specified in this Section
9 for the exercise of any such option, to extend such time period or waive in
its entirety any such time period to the extent that such time period expires
prior to the expiration of the term of such option. In addition, the Board of
Directors may grant, pursuant to a specific resolution adopted at the time of
grant, modify or eliminate the time periods specified in this Section 9.
However, no Incentive Stock Option may be exercised after the expiration of ten
(10) years from the date such option is granted.
9.5 Termination of Options. To the extent that the option of any
deceased Optionee or of any Optionee whose employment is terminated shall not
have been exercised within the limited periods prescribed in this Section 9, all
further rights to purchase shares pursuant to such option shall cease and
terminate at the expiration of such period. No Incentive Stock Option may be
exercised after the expiration of ten (10) years from the date such option is
granted, notwithstanding any provision to the contrary.
9.6 Non-employee Optionees. Options granted to Optionees who are
not employees of the Company, a Parent or a Subsidiary at the time of grant
shall not be subject to the provisions of this Section 9, except as specifically
provided in the option.
SECTION 10. Option Adjustments.
10.1 Adjustments Upon Changes in Capitalization. The aggregate
number and class of shares on which options may be granted under this Plan, the
number and class of shares covered by each outstanding option and the exercise
price per share thereof (but not the total price), and all such options, shall
each be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock of the Company resulting from a split-up or
consolidation of shares or any like capital adjustment, or the payment of any
stock dividend, or any other increase or decrease in the number of shares of
Common Stock of the Company without the receipt of consideration by the Company.
10.2 Effect of Certain Transactions. Except as provided in
subsection 10.3, upon a merger, consolidation, acquisition of property or stock,
separation, reorganization or liquidation of the Company, as a result of which
the shareholders of the Company receive cash, stock or other property in
exchange for their shares of Common Stock, any option granted hereunder shall
terminate, but, provided that the Optionee shall have the right immediately
prior to any such merger, consolidation, acquisition of property or stock,
separation, reorganization or liquidation to exercise his or her option in whole
or in part whether or not the vesting requirements set forth in the option
agreement have been satisfied.
10.3 Conversion of Options on Stock for Stock Exchange. If the
shareholders of the Company receive capital stock of another corporation
("Exchange Stock") in exchange for their shares of Common Stock in any
transaction involving a merger, consolidation, acquisition of property or stock,
separation or reorganization, all options granted hereunder shall terminate in
accordance with the provision of subsection 10.2 unless the Board of Directors
and the corporation issuing the Exchange Stock, in their sole and arbitrary
discretion and subject to any required action by the shareholders of the Company
and such corporation, agree that all such options granted hereunder are
converted into options to purchase shares of Exchange Stock. The amount and
price of the such options shall be determined by adjusting the amount and price
of the options granted hereunder in the same proportion as used for determining
the number of shares of Exchange Stock the holders of the Common Stock receive
in such merger, consolidation,
1994 Incentive Stock Option Plan - Page 5
<PAGE> 7
acquisition of property or stock, separation or reorganization. The vesting
schedule set forth in the option agreement shall continue to apply to the
options granted for the Exchange Stock.
10.4 Fractional Shares. In the event of any adjustment in the
number of shares covered by any option, any fractional shares resulting from
such adjustment shall be disregarded and each such option shall cover only the
number of full shares resulting from such adjustment.
10.5 Determination of Board of Directors to be Final. All such
adjustments shall be made by the Board of Directors and its determination as to
what adjustments shall be made, and the extent thereof, shall be final, binding
and conclusive.
SECTION 11. Securities Regulations.
11.1 Compliance. Shares shall not be issued with respect to an
option granted under this Plan unless the exercise of such option and the
issuance and delivery of such shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, any applicable state
securities laws, the Securities Act of 1933, as amended, the 1934 Act, the rules
and regulations promulgated thereunder, and the requirements of any stock
exchange upon which the shares may then be listed, and shall further be subject
to the approval of counsel for the Company with respect to such compliance.
Inability of the Company to obtain from any regulatory body having jurisdiction,
the authority deemed by the Company's counsel to be necessary for the lawful
issuance and sale of any shares hereunder, shall relieve the Company of any
liability in respect of the nonissuance or sale of such shares as to which such
requisite authority shall not have been obtained.
11.2 Representations by Optionee. As a condition to the exercise
of an option, the Company may require the optionee to represent and warrant at
the time of any such exercise that the shares are being purchased only for
investment and without any present intention to sell or distribute such shares,
if, in the opinion of counsel for the Company, such representation is required
by any relevant provision of the laws referred to in Section 11.1. At the option
of the Company, a stop transfer order against any shares of stock may be placed
on the official stock books and records of the Company, and a legend indicating
that the stock may not be pledged, sold or otherwise transferred unless an
opinion of counsel was provided (concurred in by counsel for the Company)
stating that such transfer is not in violation of any applicable law or
regulation, may be stamped on the stock certificate in order to assure exemption
from registration. The Board of Directors may also require such other action or
agreement by the Optionees as may from time to time be necessary to comply with
the federal and state securities laws. This provision shall not obligate the
Company to undertake registration of options or stock hereunder.
SECTION 12. Employment Rights. Nothing in this Plan or any option or
right granted pursuant hereto shall confer upon any Optionee any right to be
continued in the employment of the Company, a Parent or any Subsidiary of the
Company or to remain a director, or to interfere in any way with the right of
the Company, a Parent or any Subsidiary, in its sole discretion, to terminate
such Optionee's employment at any time or to remove the Optionee as a director
at any time.
SECTION 13. Amendment and Termination.
13.1 Action by Shareholders. The Plan may be terminated, modified
or amended by the shareholders of the Company.
1994 Incentive Stock Option Plan - Page 6
<PAGE> 8
13.2 Action by Board of Directors. The Board of Directors may also
terminate the Plan, or modify or amend the Plan in such respects as it shall
deem advisable in order to conform to any changes in law or regulation
applicable thereto, or in other respects; provided, however, that the Board of
Directors may not, without further approval by the shareholders of the Company:
(i) Increase the number of shares in the aggregate which may
be sold pursuant to options granted under the Plan;
(ii) Increase the period during which options may be granted
or exercised; or
(iii) Change the terms of the Plan which causes the Plan to
lose its qualification as an incentive stock option plan under Section 422 of
the Code.
No termination, suspension or amendment of the Plan may, without the consent of
each optionee to whom any option shall theretofore have been granted, adversely
affect the rights of such Optionees under such options.
13.3 Automatic Termination. Unless the Plan shall theretofore have
been terminated as herein provided, this Plan shall terminate ten (10) years
from the earlier of: (i) the date on which the Plan is adopted; or (ii) the date
on which this Plan is approved by the shareholders of the Company. No option may
be granted after such termination, or during any suspension of this Plan. The
amendment or termination of this Plan shall not, without the consent of the
Optionee, alter or impair any rights or obligations under any option theretofore
granted under this Plan.
SECTION 14. Effective Date of the Plan. This Plan shall become
effective on the date of its adoption by the Board of Directors of the Company
and options may be granted immediately thereafter but no option may be exercised
under the Plan unless and until the Plan shall have been approved by the
shareholders within 12 months after the date of adoption of the Plan by the
Board of Directors. If such approval is not obtained within such period the Plan
and any options granted thereunder shall be null and void.
Adopted by the Board of Directors: December 31, 1993
IXION, INC.
--------------------------------------------
David C. Hon, President
Ixion, Inc.'s 1995 Combined Stock Option Plan - Page 7
<PAGE> 1
Exhibit 10.39
<PAGE> 2
Strictly Confidential between Optionee
and Ixion Stock Option Committee
Ixion, Inc.
Stock Option Rights Agreement
Under 1994 Incentive Stock Option Plan
Ixion, Inc., a Delaware corporation (the "Company"), conditionally grants to
(the "Optionee") an incentive stock option (the "Option") under its 1994
Incentive Stock Option Plan (the "Plan") to purchase shares of
its Common Stock, $.01 par value per share ("Common Stock"), prior to
This Agreement shall be subject to the following terms and conditions and to all
terms and conditions of the Plan:
1. The above shares will be granted upon successful completion by the individual
or by the Company of the objectives described herein:
Should any disagreement arise as to the extent of contribution or to completion
of said objective that is required in the conditional grant, the Stock Option
Committee may grant instead a percentage of this option which, in that
Committee's sole discretion, it deems as a fair assessment of the objective
which has been achieved.
2. The Option's exercise price shall be Dollars and Cents ($ )
per share. This option shall not be exercisable until the Optionee has completed
(6) months continuous employment beyond the date on which the Stock Option
Committee agrees the conditions have been met. At the end of the six month
period, his or her option shall be exercisable to the extent of not more than
one thirty-sixth (1/36) of the number of shares subject to purchase under this
option. At the end of each additional one (1) full month of continuous
employment, this option shall be exercisable to the extent of an additional one
thirty-sixth (1/36) of the number of shares subject to purchase under this
option, until the finally granted option has vested in full after three (3)
further years of continuous employment at Ixion, Inc. Upon termination of
employment for any reason, vesting of this option pursuant to this paragraph 2
shall immediately cease, notwithstanding any period after termination during
which previously vested options may be exercisable.
<PAGE> 3
Strictly Confidential between Optionee
and Ixion Stock Option Committee
without cause that his or her rights will afford these, and only these,
settlements and remedies under law in only these amounts:
(a) If the Optionee is terminated without cause by the Company prior to
completion of these Performance conditions by either the Company or by
the Optionee, any options conditionally granted will be null and void.
(b) If the Optionee -- when terminated without cause by the Company --
has satisfied both the performance conditions and the 6-month period of
employment until the first opportunity to exercise options, five
percent (5%) of the options for which performance has been completed
will be exercisable between the 12th and 14th months following the date
of termination.
12. In the event the Company is merged or consolidated with another corporation
and the Company is not the surviving corporation, or in the event all or
substantially all of the assets or more than 50% of the outstanding voting stock
of the Company is acquired by any other corporation, or in case of a
reorganization or liquidation of the Company, the Board of Directors of the
Company, or the board of directors of any corporation assuming the obligations
of the Company, shall determine in its sole discretion either (i) to make
appropriate provision for the protection of the Option by (x) substituting on an
equitable basis, which shall be determined by the Company, appropriate Common
Stock of the Company or Common Stock of the merged, consolidated or otherwise
reorganized corporation which will be issuable in respect to the shares of
Common Stock of the Company, and (y) enabling the Optionee to retain the excess,
if any, of the aggregate fair market value of the shares subject to the Option
immediately after such substitution over the Option price thereof, or (ii) upon
written notice to the Optionee, to provide that the remaining portion of the
unexercised Option must be exercised within a specified number of days of the
date of such notice or it will be terminated; provided, however, that the
Company shall not provide any additional benefits to the Optionee other than
those benefits set forth in this Section 12. In any such case, the Board of
Directors may, in its discretion, accelerate the exercise date of the Option.
FOR IXION, INC. By ______________________Option Set #JS
(David C. Hon. President)
Date Conditions Set__________ ____ 19
Date Conditions Met______________ 19____
ACCEPTED:
Optionee: ___________________________________Date:__________________
<PAGE> 1
Exhibit 10.40
<PAGE> 2
Ixion, Inc. Incentive Stock Option Plan
GRANT OF INCENTIVE STOCK OPTION
Date of Grant: _____________, 1994.
THIS GRANT, dated as of the date of grant first stated above
(the "Date of Grant"), is delivered by Ixion, Inc., a Delaware corporation
("Ixion") to __________ (the "Grantee"), who is an employee of Ixion or one of
its subsidiaries (the Grantee's employer is sometimes referred to herein as the
"Employer").
WHEREAS, the Board of Directors of Ixion (the "Board") on
January 1, 1994, adopted, with subsequent stockholder approval, the Ixion, Inc.
Incentive Stock Option Plan (the "Plan");
WHEREAS, the Plan provides for the granting of incentive stock
options by the Board to directors, officers and key employees of Ixion or any
subsidiary of Ixion (excluding directors and officers who are not employees) to
purchase, or to exercise certain rights with respect to, shares of the Common
Stock of Ixion, par value $.01 per share (the "Stock"), in accordance with the
terms and provisions thereof; and
WHEREAS, the Board considers the Grantee to be a person who is
eligible for a grant of incentive stock options under the Plan, and has
determined that it would be in the best interest of Ixion to grant the incentive
stock options documented herein.
NOW, THEREFORE, the parties hereto, intending to be legally
bound hereby, agree as follows:
1. Grant of Option
Subject to the terms and conditions hereinafter set forth,
Ixion, with the approval and at the direction of the Board, hereby grants to the
Grantee, as of the Date of Grant, an option to purchase up to shares
of Stock at a price of $____ per share ("Exercise Price"), the fair market
value. Such option is hereinafter referred to as the "Option" and the shares
of stock purchasable upon exercise of the Option are hereinafter sometimes
referred to as the "Option Shares." The Option is intended by the parties
hereto to be, and shall be treated as an incentive stock option (as such term
is defined under Section 422 of the Internal Revenue Code of 1986).
2. Incremental Exercise
Subject to such further limitations as are provided herein, the
Option shall become exercisable in thirty-six (36) monthly increments as
provided herein; the Grantee having the right hereunder to purchase from Ixion
the following number of Option Shares upon exercise of the Option, on and after
the following dates, in cumulative fashion:
(a) on and after every month beginning with the Date of Grant,
up to 1/36 (ignoring fractional shares) of the total number of Option Shares
granted herein;
(b) on and after the thirty-sixth (36th) month of the Date of
Grant, the remaining Option Shares.
Grant of Incentive Stock Option - Page 1
<PAGE> 3
3. Termination of the Option
(a) The Option and all rights hereunder with respect thereto, to the
extent such rights shall not have been exercised, shall terminate and become
null and void after the expiration of ten (10) years from the Date of Grant (the
"Option Term").
(b) Upon the occurrence of the Grantee's ceasing for any reason to be
employed by the Employer (such occurrence being a "termination of the Grantee's
employment"), the Option, to the extent not previously exercised, shall
terminate and become null and void immediately upon such termination of the
Grantee's employment, except in a case where the termination of the Grantee's
employment is by reason of disability or death.
Upon termination of the Grantee's employment by reason of disability or
death, the Option may be exercised during the following periods, but only to the
extent that the Option was outstanding and exercisable on any such date of
disability or death; (i) the one-year period following the date of such
termination of the Grantee's employment in the case of a disability (within the
meaning of Section 22(e)(3) of the Code), and (ii) the six-month period
following the date of issuance of letters testamentary or letters of
administration to the executor or administrator of a deceased Grantee, in the
case of the Grantee's death during his employment by the Employer, but not later
than one year after the Grantee's death, or in the case of disability other than
as described in (i) above. In no event, however, shall any such period extend
beyond the Option Term.
(c) In the event of the death of the Grantee, the Option may be
exercised by the Grantee's legal representative(s), but only to the extent that
the Option would otherwise have been exercisable by the Grantee.
(d) A transfer of the Grantee's employment between Ixion and any
subsidiary of Ixion, or between any subsidiaries of Ixion, shall not be deemed
to be a termination of the Grantee's employment.
(e) Notwithstanding any other provisions set forth herein or in the
Plan, if the Grantee shall (i) commit any act of malfeasance or wrongdoing
affecting Ixion or any subsidiary of Ixion, (ii) breach any covenant not to
compete, or employment contract, with Ixion or any subsidiary of Ixion, or (iii)
engage in conduct that would warrant the Grantee's discharge for cause
(excluding general dissatisfaction with the performance of the Grantee's duties
but including any act of disloyalty or any conduct clearly tending to bring
discredit upon or any subsidiary of Ixion), any unexercised portion of the
Option shall immediately terminate and be void.
(f) Upon the termination of the Grantee's employment, any and all
options exercised to date by said Grantee shall be redeemed by the Company at a
price no less than two times the Optionee's Exercise Price as established
herein, provided the Company is not yet a public company. In the event the
Company should become a public company, Grantee shall have the right to retain
all options exercised, irrespective of Grantee's employment status with the
Company.
4. Exercise of Options
(a) The Grantee may exercise the Option with respect to all or any part
of the number of Option Shares then exercisable hereunder by giving the Company
written notice of intent to exercise. The notice of exercise shall specify the
number of Option Shares as to which the Option is to be exercised and the date
of exercise thereof, which
Grant of Incentive Stock Option - Page 2
<PAGE> 4
date shall be at least five days after the giving of such notice unless an
earlier time shall have been mutually agreed upon.
(b) Full payment (in U.S. dollars) by the Grantee of the option price
for the Option Shares purchased shall be made on or before the exercise date
specified in the notice of exercise in cash, or, with the prior written consent
of the Board, in whole or in part through the surrender of previously acquired
shares of Stock at their fair market value on the exercise date.
On the exercise date specified in the Grantee's notice or as soon
thereafter as is practicable, Ixion shall cause to be delivered to the Grantee,
a certificate or certificates for the Option Shares then being purchased (out of
theretofore unissued Stock or required Stock, as Ixion may elect) upon full
payment for such Option Shares. The obligation of Ixion to deliver Stock shall,
however, be subject to the condition that if at any time the Board shall
determine in its discretion that the listing, registration or qualification of
the Option or the Option Shares upon any securities exchange or under any state
or federal law, or the consent or approval of any governmental regulatory body,
is necessary or desirable as a condition of, or in connection with, the Option
or the issuance of purchase of Stock thereunder, the Option may not be exercised
in whole or in part unless such listing, registration, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Board.
(c) If the Grantee fails to pay for any of the Option Shares specified
in such notice or fails to accept delivery thereof, the Grantee's right to
purchase such Option shares may be terminated by Ixion. The date specified in
the Grantee's notice as the date of exercise shall be deemed the date of
exercise of the Option, provided that payment in full for the Option Shares to
be purchased upon such exercise shall have been received by such date.
5. Adjustment of and Changes in Stock of Ixion
In the event of a reorganization, recapitalization, change of shares,
stock split, spin-off, stock dividend, reclassification, subdivision or
combination of shares, merger, consolidation, rights offering, or any other
change in the corporate structure of shares of capital stock of Ixion, the Board
shall make such adjustment as it deems appropriate in the number and kind of
shares of Stock subject to the Option or in the option price; provided, however,
that no such adjustment shall give the Grantee any additional benefits under the
Option.
6. Fair Market Value
As used herein, the "fair market value" of a share of Stock shall be
average of the high and low sale prices per share of Stock on the American Stock
Exchange, composite tape or other recognized market source, as determined by the
Board, on the applicable date of reference hereunder, or if there is no sale on
such date, then the average of such high and low sale prices on the last
previous day on which a sale is reported.
7. No Rights of Stockholders
Neither the Grantee nor any personal representative shall be, or shall
have any of the rights and privileges of, a stockholder of Ixion with respect to
any shares of Stock purchasable or issuable upon the exercise of the Option, in
whole or in part, prior to the date of exercise of the Option.
Grant of Incentive Stock Option - Page 3
<PAGE> 5
8. Non-Transferability of Option
During the Grantee's lifetime, the Option hereunder shall be exercisable
only by the Grantee of any guardian or legal representative of the Grantee, and
the Option shall not be transferable except, in case of the death of the Grantee
by will or the laws of descent and distribution, nor shall the Option be subject
to attachment, execution or other similar process. In no event of (a) any
attempt by the Grantee to alienate, assign, pledge, hypothecate or otherwise
dispose of the Option, except as provided for herein, or (b) the levy of any
attachment, execution or similar process upon the rights or interest hereby
conferred, Ixion may terminate the Option by notice to the Grantee and it shall
thereupon become null and void.
9. Employment Not Affected
The granting of the Option nor its exercise shall not be construed as
granting to the Grantee any right with respect to continuance of employment of
the Employer. Except as may otherwise be limited by a written agreement between
the Employer and the Grantee, the right of the Employer to terminate at will the
Grantee's employment with it at any time (whether by dismissal, discharge,
retirement or otherwise) is specifically reserved by Ixion, as the Employer or
on behalf of the Employer (whichever the case may be), and acknowledged by the
Grantee.
10. Amendment of Option
The Option may be amended by the Board, at any time (if the Board
determines, in its sole discretion, that amendment is necessary or advisable in
the light of any addition to or change in the Internal Revenue Code of 1986 or
in the regulations issued thereunder, or any federal or state securities law or
the law of regulation, which change occurs after the Date of Grant and by its
terms applies to the Option); or (ii) other than in the circumstances described
in clause (i), with the consent of the Grantee.
11. Notice
Any notice to Ixion provided for in this instrument shall be addressed
to it in care of David M. Otto, 6500 Columbia Center, 701 Fifth Avenue, Seattle,
Washington 98104-7003, and any notice to the Grantee shall be addressed to the
Grantee at the current address shown on the payroll records of the Employer. Any
notice shall be deemed to be duly given if any when properly addressed and
posted by registered or certified mail, postage prepaid.
12. Incorporation of Plan by Reference
The Option is granted pursuant to the terms of the Plan, the terms of
which are incorporated herein by reference, and the Option shall in all respects
be interpreted in accordance with the Plan. The Board shall interpret and
construe the Plan and this instrument, and its interpretations and
determinations shall be conclusive and binding on the parties hereto an any
other person claiming an interest hereunder, with respect to any issue arising
hereunder or thereunder.
Grant of Incentive Stock Option - Page 4
<PAGE> 6
13. Governing Law
The validity, construction, interpretation and effect of this instrument
shall exclusively be governed by and determined in accordance with the laws of
the state of Washington, except to the extent preempted by federal law, which
shall to the extent govern.
IN WITNESS WHEREOF, Ixion has caused its duly authorized officers to
execute and attest this Grant of Incentive Stock Option, and to apply the
corporate seal hereto, and the Grantee has placed his or her signature hereon,
effective as of the Date of Grant.
IXION, INC.
Attest:
_____________________________
By: _________________________
David C. Hon, President
ACCEPTED AND AGREED TO
By: _________________________
Grant of Incentive Stock Option - Page 5
<PAGE> 1
Exhibit 10.41
<PAGE> 2
[BROBECK,PHLEGER & HARRISON LLP LETTERHEAD]
May 20, 1996
VIA EXPRESS MAIL POST OFFICE TO ADDRESSEE
SERVICE OF THE U.S. POST OFFICE
Honorable Commissioner of Patents and Trademarks
Box Assignments
Washington, D.C. 20231
Re: Submission of Assignment of Patent for Recordation
Conveying Party: David C. Hon
Receiving Party: Ixion, Inc.
Our Reference: 024662.0002
Dear Sir:
Enclosed for recordation, please find an original Assignment of Patent
Rights dated May 18, 1996, pursuant to which Mr. David C. Hon assigned U.S.
patent no. 4,907,973 to Ixion, Inc.
Enclosed please also find a check in the amount of $40.00 for
recordation of the assignment of one issued U.S. patent.
The following is the required cover sheet information for recording the
enclosed Patent Assignment:
1. Conveying Party: David C. Hon (an individual)
2. Receiving Party: Ixion, Inc.
(a Delaware corporation)
400 West Mercer Street
Seattle, Washington 98109
3. Nature of
Conveyance: Assignment
1
<PAGE> 3
[BROBECK,PHLEGER & HARRISON LLP LETTERHEAD]
May 20, 1996 Page 2
4. Execution Date: May 18, 1996
5. Patents:
Patent No.: 4,907,973
6. Party to Whom Correspondence Regarding this Document Should Be
Mailed:
Nigel L. Howard, Esq.
Brobeck, Phleger & Harrison, LLP
1301 Avenue of the Americas
New York, New York 10019
7. Total Number of Patents: 1
8. Total Fee: $40.00 (enclosed)
To the best of the undersigned's knowledge and belief, the foregoing
information is true and correct and any copy attached is a true copy of the
original document.
Respectfully submitted,
BROBECK, PHLEGER & HARRISON LLP
By: /S/ Nigel L. Howard
-----------------------------------------
Nigel L. Howard
Enclosures
2
<PAGE> 4
[COPY OF CHECK NO.0012632 FROM BROBEK, PHLEGER & HARRISON, LLP, ATTORNEYS AT
LAW, DATED 5/20/96, TO COMMISSIONER OF PATENTS & TRADEMARKS IN THE AMOUNT OF
$40.00 FOR PATENT COSTS]
<PAGE> 5
ASSIGNMENT OF PATENT RIGHTS
THIS ASSIGNMENT is made as of the date set forth below by and between
DAVID C. HON, a citizen of the United States having an office at 1335 North
Northlake Way #102, Seattle, Washington 98103 and IXION, INC., a Delaware
corporation having an office at 400 West Mercer Street, Seattle, Washington
98109 (the "Assignee").
WHEREAS, Assignor is the owner of U.S. Patent No.4,907,973 entitled
"Expert system simulator for modelling realistic internal environments and
performance" and all corresponding foreign patents and patent applications (the
"Patent Rights"), including but not limited to those set forth on Schedule I
attached hereto;
WHEREAS, Assignee is desirous of acquiring the entire and exclusive
right, title and interest in and to the Patent Rights and the underlying
inventions described therein, in the United States and throughout the world.
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged by Assignor, Assignor hereby assigns, transfers and
conveys to Assignee and Assignee's successors and assigns all of Assignor's
right, title, and interest throughout the world in and to the Patent Rights, the
underlying inventions described therein and all existing and future design
modifications and improvements thereon, and any and all Letters Patent whether
U.S. or foreign that are or may be granted therefrom including without
limitation any extensions, continuations, continuations-in-part, divisions,
reissues, reexaminations, and renewals thereof, or other equivalents thereof,
and further, all rights and privileges pertaining to the Patent Rights and any
and all Letters Patent whether U.S. or foreign that are or may be granted
therefrom including without limitation the right, if any, to sue or bring other
actions for past, present and future infringement thereof.
Assignor further assigns to and empowers Assignee, its successors,
assigns or nominees, all rights to make applications for patents or other forms
of protection for said inventions, design modifications and improvements and to
prosecute such applications as well as to claim and receive the benefit of the
right of priority provided by the International Convention for the Protection of
Industrial Property, as amended, or by any convention which may henceforth be
substituted for it, and the right to invoke and claim such right of priority
without further written or oral authorization.
Assignor further agrees that Assignor will, without charge to Assignee,
but at Assignee's expense: (a) cooperate with Assignee in the prosecution of
U.S. patent applications and foreign counterparts on the inventions and any
design modifications and improvements; (b) execute, verify, acknowledge and
deliver all such further papers, including patent applications and instruments
of transfer; and (c) perform such other acts as Assignee lawfully may request to
obtain, maintain, defend or enforce Letters Patent for the inventions, design
<PAGE> 6
modifications and improvements in any and all countries, and to vest title
thereto in Assignee, or Assignee's successors and assigns.
In the event that Assignee is unable for any reason whatsoever to
secure Assignor's signature to any document it is entitled to under the
preceding paragraph, Assignor hereby irrevocably designates and appoints
Assignee and its duly authorized officers and agents, as his agents and
attorneys-in-fact to act for and on his behalf and instead of him, to execute
and file any such document and to do all other lawfully permitted acts to
further the purposes of the foregoing with the same legal force and effect as if
executed by Assignee.
IN TESTIMONY WHEREOF, the undersigned Assignor has hereunto signed his
name this 18th day of May, 1996.
DAVID C. HON
(Assignor)
Signed: /s/ David C. Hon
---------------------
STATE OF WASHINGTON )
) ss
COUNTY OF King )
-----------
On May 18, 1996, before me, MYAVA HEGAMIN , Notary Public, personally
appeared DAVID C. HON, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his personal
capacity, and that by his signature on the instrument, executed the instrument.
WITNESS my hand and official seal.
/s/ Myava Hegamin
--------------------
(SEAL) Notary Public
My Commission Expires: 9-12-97
--------------------
<PAGE> 7
SCHEDULE I
1. U.S. Patent No. 4,907,973 entitled "Expert system simulator for modelling
realistic internal environments and performance".
2. The following corresponding foreign patents that have issued from
International Application No. PCT/US89/04690, with an International Filing
Date of October 19, 1989:
Australia Patent No. 8945177
Canada Patent No. 2002919
Japan Patent No. 6506301
European Patent No. 426767 (Application No. 89912557)
(Designating the following countries: Austria (Patent
No.116465), Belgium, France,
Germany (Patent No. 68920327), Italy,
Liechtenstein,
Luxembourg, Switzerland,
Netherlands, Sweden,
United Kingdom)
3. International Application No. PCT/US89/04690, with an International Filing
Date of October 19, 1989, any international search report resulting
therefrom and any other National Phase entries, including but not limited to
those in Brazil, Denmark, Finland, Hungary, Republic of Korea and Norway.
<PAGE> 1
EXHIBIT 10.42
<PAGE> 2
INTERACT MEDICAL TECHNOLOGIES CORPORATION
1996 STOCK OPTION/STOCK ISSUANCE PLAN
ARTICLE ONE
GENERAL
I. PURPOSE OF THE PLAN
This 1996 Stock Option/Stock Issuance Plan ("Plan") is intended to
promote the interests of Interact Medical Technologies Corporation, a Delaware
corporation (the "Corporation"), by providing (i) key employees (including
officers) of the Corporation (or its parent or subsidiary corporations) who are
responsible for the management, growth and financial success of the Corporation
(or its parent or subsidiary corporations), (ii) Directors and (iii) consultants
and other independent contractors who provide valuable services to the
Corporation (or its parent or subsidiary corporations) with the opportunity to
acquire a proprietary or increase their proprietary interest in the Corporation
as an incentive for them to remain in the service of the Corporation (or its
parent or subsidiary corporations).
II. GENERAL
A. The Plan shall become effective on the first date on which shares
of the Corporation's Common Stock are registered under Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"). Such date is
hereby designated as the "Effective Date" of this Plan.
B. This Plan shall serve as the successor to all prior stock option
or stock issuance plans (together, the "Predecessor Plans"), and no further
option grants or share issuances shall be made under the Predecessor Plans from
and after the Effective Date. Each outstanding option or share issuances under
the Predecessor Plans immediately prior to the Effective Date are hereby
incorporated into this Plan and shall accordingly be treated as outstanding
options or share issuance under this Plan. However, each such option or share
issuance shall continue to be governed solely by the terms and conditions of the
instrument evidencing such grant or issuance, and, except as otherwise expressly
provided herein, no provision of this Plan shall affect or otherwise modify the
rights or obligations of the holders of such incorporated options or shares with
respect to their acquisition of shares of the Corporation's Common Stock or
otherwise modify the rights or obligations of the holders of such options or
shares.
C. For purposes of this Plan, the following provisions shall be
applicable in determining the parent and subsidiary corporations of the
Corporation:
<PAGE> 3
Any corporation (other than the Corporation) in an unbroken
chain of corporations ending with the Corporation shall be considered
to be a PARENT of the Corporation, provided each such corporation in
the unbroken chain (other than the Corporation) owns, at the time of
the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
Each corporation (other than the Corporation) in an unbroken
chain of corporations beginning with the Corporation shall be
considered to be a SUBSIDIARY of the Corporation, provided each such
corporation (other than the last corporation) in the unbroken chain
owns, at the time of the determination, stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
D. Neither the grant of options nor the issuance of any shares
pursuant to this Plan shall in any way affect the right of the Corporation to
adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer all
or any part of its business or assets.
E. The holder of an option grant under this Plan shall have none of
the rights of a stockholder with respect to any shares subject to such option
until such individual shall have exercised the option, paid the exercise price
for the purchased shares and been issued a stock certificate for such shares.
III. STRUCTURE OF THE PLAN
A. The Plan shall be divided into two components: the Option Grant
Program specified in Article Two; and the Stock Issuance Program specified in
Article Three. Under the Option Grant Program, eligible individuals may be
granted options to purchase shares of the Corporation's Common Stock at not less
than 85% of the fair market value of such shares on the grant date. Under the
Stock Issuance Program, eligible individuals may be allowed to purchase shares
of the Corporation's Common Stock at discounts from the fair market value of
such shares of up to 15%. Such shares may be issued as fully-vested shares or as
shares to vest over time.
B. The provisions of Articles One and Four of the Plan, except as
otherwise expressly provided, shall apply to the Option Grant Program and the
Stock Issuance Program and shall accordingly govern the interests of all
individuals in the Plan.
IV. ADMINISTRATION OF THE PLAN
A. This Plan shall be administered by the Board of Directors (the
"Board") or a committee ("Committee") of two (2) or more Board members who
assume
-2-
<PAGE> 4
full responsibility for the administration of the Plan (the "Plan
Administrator"). Members of the Committee shall serve for such period of time as
the Board may determine and shall be subject to removal by the Board at any
time.
B. The Plan Administrator shall have full power and authority
(subject to the express provisions of the Plan) to establish such rules and
regulations as it may deem appropriate for the proper administration of the Plan
and to make such determinations under, and issue such interpretations of, the
Plan and any outstanding option grants or stock issuances as it may deem
necessary or advisable. Decisions of the Plan Administrator shall be final and
binding on all parties who have an interest in the Plan or any outstanding
option or stock issuance.
V. OPTION GRANTS AND STOCK ISSUANCES
A. Except as set forth in paragraph B. hereof, the persons eligible
to receive stock issuances under the Stock Issuance Program ("Participant")
and/or option grants pursuant to the Option Grant Program ("Optionee") are as
follows:
(i) officers, directors and other employees of the Corporation
(or its parent or subsidiary corporations) who render services which
contribute to the management, growth and financial success of the
Corporation (or its parent or subsidiary corporations);
(ii) those consultants or other independent contractors who
provide valuable services to the Corporation (or its parent or
subsidiary corporations).
B. The Plan Administrator shall have full authority to determine,
(I) with respect to the option grants made under the Option Grant Program, which
eligible individuals are to receive option grants, the number of shares to be
covered by each such grant, whether the granted option is to be an incentive
stock option ("Incentive Option") which satisfies the requirements of Section
422 of the Internal Revenue Code of 1986, as amended (the "Internal Revenue
Code") or a non-statutory option not intended to meet such requirements, the
time or times at which and the circumstances under which each granted option is
to become exercisable and the maximum term for which the option may remain
outstanding and (II), with respect to stock issuances under the Stock Issuance
Program, the number of shares to be issued to each Participant, the vesting
schedule and conditions to vesting (if any) to be applicable to the issued
shares, and the consideration to be paid by the individual for such shares.
-3-
<PAGE> 5
C. Notwithstanding any other provision of this Plan, no individual
shall be granted options to acquire more than five hundred thousand (500,000)
shares of stock hereunder.
VI. STOCK SUBJECT TO THE PLAN
A. Shares of the Corporation's Common Stock shall be available for
issuance under the Plan and shall be drawn from either the Corporation's
authorized but unissued shares of Common Stock or from reacquired shares of
Common Stock, including shares repurchased by the Corporation on the open
market. The maximum number of shares of Common Stock which may be issued over
the term of the Plan shall not exceed 1,000,000 shares, subject to adjustment
from time to time in accordance with the provisions of this Section VI. Such
authorized number of shares is comprised of (i) 400,000 shares previously
authorized under the Predecessor Plans, (ii) an additional 600,000 shares.
B. Should one or more outstanding options under this Plan (including
outstanding options under the Predecessor Plans incorporated into this Plan)
expire or terminate for any reason prior to exercise in full (including any
option cancelled in accordance with the cancellation-regrant provisions of
Section III of Article Two of the Plan), then the shares subject to the portion
of each option not so exercised shall be available for subsequent option grant
or share issuance under this Plan. Shares subject to any option or portion
thereof surrendered or cancelled in accordance with Section I.C. of Article Four
and all shares issuances under the Plan, whether or not such shares are
subsequently repurchased by the Corporation pursuant to its repurchase rights
under the Plan or otherwise surrendered for cancellation, shall reduce on a
share-for-share basis the number of shares of the same class of Common Stock
available for subsequent option grant or stock issuance under the Plan. In
addition, should the exercise price of an outstanding option under the Plan be
paid with shares of Common Stock or should shares of Common Stock otherwise
issuable under the Plan be withheld by the Corporation in satisfaction of the
withholding taxes incurred in connection with the exercise of an outstanding
option under the Plan, then the number of shares of Common Stock available for
issuance under the Plan shall be reduced by the gross number of shares for which
the option is exercised.
C. In the event any change is made to the Common Stock issuable
under the Plan by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares, conversion or other change affecting
the outstanding Common Stock, or any class of Common Stock as a class, without
the Corporation's receipt of consideration, then appropriate adjustments shall
be made to (i) the number and/or class of shares issuable under the Plan, (ii)
the number and/or class of shares and price per share in effect under each
outstanding option under this Plan (including outstanding options incorporated
into this Plan from the Predecessor Plans). Such adjustments to the outstanding
options are to be effected in a manner which shall
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preclude the enlargement or dilution of rights and benefits under such options.
The adjustments determined by the Plan Administrator shall be final, binding and
conclusive.
D. Common Stock issuable under the Option Grant Program or the Stock
Issuance Program may be subject to such restrictions on transfer, repurchase
rights or such other restrictions as determined by the Plan Administrator.
ARTICLE TWO
OPTION GRANT PROGRAM
I. TERMS AND CONDITIONS OF OPTIONS
Options granted to Employees of the Corporation or its parent or
subsidiary corporations pursuant to this Article Two shall be authorized by
action of the Plan Administrator and may, at the Plan Administrator's
discretion, be either Incentive Options or non-statutory options. Individuals
who are not Employees of the Corporation or its parent or subsidiary
corporations may only be granted non-statutory options. Each granted option
shall be evidenced by one or more instruments in the form approved by the Plan
Administrator; provided, however, that each such instrument shall comply with
the terms and conditions specified below. Each instrument evidencing an
Incentive Option shall, in addition, be subject to the applicable provisions of
Section II of this Article Two.
A. Option Price.
(i) In General. The option price per share shall be fixed by the
Plan Administrator. In no event, however, shall the price for any share
be less than eighty-five percent (85%) of the fair market value of that
share on the date of the option grant.
(ii) 10% Stockholder. If any individual to whom an option is
granted is the owner of stock (as determined under Section 424(d) of
the Internal Revenue Code) possessing 10% or more of the total combined
voting power of all classes of stock of the Corporation or any one of
its parent or subsidiary corporations, then the option price per share
shall not be less than one hundred and ten percent (110%) of the fair
market value per share of Common Stock on the grant date.
(iii) How Payable. The option price shall become immediately due
upon exercise of the option and, subject to the provisions of Article
Four, Section III and the instrument evidencing the grant, shall be
payable in one of the following alternative forms specified below:
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- full payment in cash or check drawn to the Corporation's
order;
- full payment in shares of Common Stock held for at least
six (6) months and valued at fair market value on the Exercise Date (as
such term is defined below);
- full payment in a combination of shares of Common Stock
held for at least six (6) months and valued at fair market value on the
Exercise Date and cash or check; or
- full payment through a broker-dealer sale and remittance
procedure pursuant to which the Optionee (I) shall provide irrevocable
written instructions to a designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the Corporation,
out of the sale proceeds available on the settlement date, sufficient
funds to cover the aggregate option price payable for the purchased
shares plus all applicable Federal and State income and employment
taxes required to be withheld by the Corporation in connection with
such purchase and (II) shall provide written directives to the
Corporation to deliver the certificates for the purchased shares
directly to such brokerage firm in order to complete the sale
transaction.
For purposes of this subparagraph (iii), the Exercise Date shall be
the date on which written notice of the option exercise is delivered to the
Corporation. Except to the extent the sale and remittance procedure is utilized
in connection with the exercise of the option, payment of the option price for
the purchased shares must accompany such notice.
B. Term and Exercise of Options. Each option granted under this
Article Two shall have such term as may be fixed by the Plan Administrator, be
exercisable at such time or times and during such period, and on such
conditions, as is determined by the Plan Administrator and set forth in the
stock option agreement evidencing the grant. No such option, however, shall have
a maximum term in excess of ten (10) years from the grant date and no option
granted to a 10% stockholder shall have a maximum term in excess of five (5)
years from the grant date. During the lifetime of the Optionee, the option
(together with any related stock appreciation right) shall, unless otherwise
expressly permitted by the Plan Administrator in its sole discretion, be
exercisable only by the Optionee and shall not be assignable or transferable by
the Optionee otherwise than by will or by the laws of descent and distribution
following the Optionee's death.
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C. Termination of Service.
(i) Except to the extent otherwise provided pursuant to Section V of
this Article Two, the following provisions shall govern the exercise
period applicable to any outstanding options under this Article Two which
are held by the Optionee at the time of his or her cessation of Service or
death.
- Should an Optionee's Service terminate for any reason (including
death or permanent disability as defined in Section 22(e)(3) of the
Internal Revenue Code) while the holder of one or more outstanding options
under the Plan, then none of those options shall (except to the extent
otherwise provided pursuant to Section V of this Article Two) remain
exercisable beyond the later of (i) the limited post-Service period
designated by the Plan Administrator at the time of the option grant and
set forth in the option agreement; or (ii) (A) ninety (90) days from the
date of termination if termination was caused by other than the death or
disability (as defined in Section 22(e)(3) of the Internal Revenue Code)
of such Optionee or (B) twelve (12) months from the date of termination if
termination was caused by death or disability of Optionee.
- Any option granted to an Optionee under this Article Two and
exercisable in whole or in part on the date of the Optionee's death may be
subsequently exercised, by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred
pursuant to the Optionee's will or in accordance with the laws of descent
and distribution, provided and only if such exercise occurs prior to the
earlier of (i) the first anniversary of the date of the Optionee's death
or (ii) the specified expiration date of the option term. Upon the
occurrence of the earlier event, the option shall terminate and cease to
be exercisable.
- Under no circumstances, however, shall any such option be
exercisable after the specified expiration date of the option term.
- During the limited post-Service period of exercisability, the
option may not be exercised for more than the number of shares for which
the option is exercisable on the date the Optionee's Service terminates.
Upon the expiration of such limited exercise period or (if earlier) upon
the expiration of the option term, the option shall terminate and cease to
be exercisable.
(ii) The Plan Administrator shall have complete discretion,
exercisable either at the time the option is granted or at any time while
the option remains outstanding, to permit one or more options
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held by the Optionee under this Article Two to be exercised, during
the limited period of exercisability provided under subparagraph (i)
above, not only with respect to the number of shares for which each such
option is exercisable at the time of the Optionee's cessation of Service
but also with respect to one or more subsequent installments of
purchasable shares for which the option would otherwise have become
exercisable had such cessation of Service not occurred.
(iii) For purposes of the foregoing provisions of this Section I.C.
of Article Two (and for all other purposes under the Plan):
- The Optionee shall (except to the extent otherwise specifically
provided in the applicable option or issuance agreement) be deemed to
remain in the SERVICE of the Corporation for so long as such individual
renders services on a periodic basis to the Corporation (or any parent or
subsidiary corporation) in the capacity of an Employee, a non-employee
member of the Board or an independent consultant or advisor.
- The Optionee shall be considered to be an EMPLOYEE for so long as
he or she remains in the employ of the Corporation or one or more parent
or subsidiary corporations, subject to the control and direction of the
employer entity not only as to the work to be performed but also as to the
manner and method of performance.
II. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable to all
Incentive Options granted under this Article Two. Incentive Options may only be
granted to individuals who are Employees of the Corporation. Options which are
specifically designated as "non-statutory" options when issued under the Plan
shall not be subject to such terms and conditions.
A. Option Price. The option price per share of any share of Common
Stock subject to an Incentive Option shall in no event be less than one hundred
percent (100%) of the fair market value of such share of Common Stock on the
grant date.
B. Dollar Limitation. The aggregate fair market value (determined
as of the respective date or dates of grant) of the Common Stock for which one
or more options granted to any Employee after December 31, 1986 under this Plan
(or any other option plan of the Corporation or its parent or subsidiary
corporations) may for the first time become exercisable as incentive stock
options under the Federal tax laws during any one calendar year shall not exceed
the sum of One Hundred Thousand Dollars ($100,000). To the extent the Employee
holds two or more such options which become exercisable for the first time in
the same calendar year, the foregoing limitation on the
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exercisability of such options as Incentive Options under the Federal tax laws
shall be applied on the basis of the order in which such options are granted.
C. During the lifetime of the Optionee, the incentive stock option
(together with any related stock appreciation right) shall be exercisable only
by the Optionee and shall not be assignable or transferable by the Optionee
otherwise than by will or by the laws of descent and distribution following the
Optionee's death.
D. Except as modified by the preceding provisions of this Section
II, the provisions of Articles One, Two and Four of the Plan shall apply to all
Incentive Options granted hereunder.
III. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any
time and from time to time, with the consent of the affected Optionees, the
cancellation of any or all outstanding options under this Article Two (including
outstanding options under the Predecessor Plans incorporated into this Plan) and
to grant in substitution new options under this Article Two covering the same or
different numbers of shares of Common Stock but having an option price for each
share which is not less than (i) eighty-five percent (85%) of the fair market
value of such share on the new grant date or (ii) one hundred percent (100%) of
such fair market value in the case of an Incentive Option.
IV. STOCK APPRECIATION RIGHTS
A. Provided and only if the Plan Administrator determines in its
discretion to implement the stock appreciation right provisions of this Section
IV, one or more Optionees under the Option Grant Program may be granted the
right, exercisable upon such terms and conditions as the Plan Administrator may
establish, to surrender all or part of an unexercised option under this Article
Two in exchange for a distribution from the Corporation in an amount equal to
the excess of (i) the fair market value (on the option surrender date) of the
number of shares in which the Optionee is at the time vested under the
surrendered option (or surrendered portion thereof) over (ii) the aggregate
option price payable for such vested shares.
B. No surrender of an option shall be effective hereunder unless it
is approved by the Plan Administrator. If the surrender is so approved, then the
distribution to which the Optionee shall accordingly become entitled under this
Section IV may be made in shares of any class of Common Stock valued at fair
market value on the option surrender date, in cash, or partly in shares and
partly in cash, as the Plan Administrator shall in its sole discretion deem
appropriate.
C. If the surrender of an option is rejected by the Plan
Administrator, then the Optionee shall retain whatever rights the Optionee had
under the surrendered option (or surrendered portion thereof) on the option
surrender date and may exercise
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such rights at any time prior to the later of (i) five (5) business days after
the receipt of the rejection notice or (ii) the last day on which the option is
otherwise exercisable in accordance with the terms of the instrument evidencing
such option, but in no event may such rights be exercised more than ten (10)
years after the date of the option grant.
D. One or more officers of the Corporation subject to the
short-swing profit restrictions of the Federal securities laws may, in the Plan
Administrator's sole discretion, be granted limited stock appreciation rights in
tandem with their outstanding options under this Article Two. Upon the
occurrence of a Hostile Take-Over (as defined in Section II.B. of Article Four)
effected at any time when the Corporation's outstanding Common Stock is
registered under Section 12(g) of the 1934 Act, each outstanding option with
such a limited stock appreciation right in effect for at least six (6) months
shall automatically be cancelled, to the extent such option is at the time
exercisable for fully-vested shares of Common Stock. The Optionee shall in
return be entitled to a cash distribution from the Corporation in an amount
equal to the excess of (i) the Take-Over Price of the vested shares of Common
Stock at the time subject to the cancelled option (or cancelled portion of such
option) over (ii) the aggregate exercise price payable for such shares. The cash
distribution payable upon such cancellation shall be made within five (5) days
following the consummation of the Hostile Take-Over. Neither the approval of the
Plan Administrator nor the consent of the Board shall be required in connection
with such option cancellation and cash distribution. The balance of the option
(if any) shall continue to remain outstanding and exercisable in accordance with
the terms of the instrument evidencing such grant.
E. The shares of Common Stock subject to any option surrendered or
cancelled for an appreciation distribution pursuant to this Section IV shall NOT
be available for subsequent option grant under the Plan.
V. EXTENSION OF EXERCISE PERIOD
The Plan Administrator shall have full power and authority to
extend the period of time for which any option granted under this Article Two is
to remain exercisable following the Optionee's cessation of Service or death
from the limited period in effect under Section I.C.(i) of this Article Two to
such greater period of time as the Plan Administrator shall deem appropriate;
provided, however, that in no event shall such option be exercisable after the
specified expiration date of the option term.
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ARTICLE THREE
STOCK ISSUANCE PROGRAM
I. TERMS AND CONDITIONS OF STOCK ISSUANCES
Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate purchases without any intervening stock option
grants. The issued shares shall be evidenced by a Stock Issuance Agreement
("Issuance Agreement") that complies with the terms and conditions of this
Article Three.
A. CONSIDERATION
Shares of Common Stock shall be issued under the Plan for one or
more of the following items of consideration, which the Plan Administrator may
deem appropriate in each individual instance:
(i) cash or cash equivalents (such as a personal check or bank
draft) paid the Corporation;
(ii) in Common Stock of the Corporation valued at fair market
value on the date of issuance;
(iii) a promissory note payable to the Corporation's order in
one or more installments, which may be subject to cancellation in whole
or in part upon terms and conditions established by the Plan
Administrator;
(iv) past services rendered to the Corporation or any parent or
subsidiary corporation;
(v) any combination of the above approved by the Plan
Administrator.
Shares may, in the absolute discretion of the Plan Administrator,
be issued for consideration with a value less than one hundred percent (100%) of
the fair market value of such shares, but in no event less than eighty-five
percent (85%) of such fair market value. Notwithstanding the foregoing, in the
case of 10% stockholders, Shares must be issued at one hundred percent (100%) of
fair market value of such shares.
B. VESTING PROVISIONS
1. Shares of Common Stock issued under this Article Three may, in
the absolute discretion of the Plan Administrator, be fully and immediately
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vested upon issuance or may vest in one or more installments over the
Participant's period of Service (as such term is defined in Section I.C.(iii)
of Article Two); provided, that such vesting must be at a rate of at least 20%
per year over no more than five years from the date such shares are issued. The
elements of the vesting schedule applicable to any unvested shares of Common
Stock issued under the Plan, namely:
(i) the Service period to be completed by the Participant or
the performance objectives to be achieved by the Corporation,
(ii) the number of installments in which the shares are to
vest,
(iii) the interval or intervals (if any) which are to lapse
between installments,
(iv) any conditions or contingencies to vesting, and
(v) the effect which death, disability or other event
designated by the Plan Administrator is to have upon the vesting
schedule, shall be determined by the Plan Administrator and
incorporated into the Issuance Agreement executed by the Corporation
and the Participant at the time such unvested shares are issued.
2. The Participant shall have full stockholder rights with
respect to any shares of Common Stock issued to him or her under this Article
Three, whether or not his or her interest in those shares is vested.
Accordingly, the Participant shall have the right to vote such shares and to
receive any regular cash dividends paid on such shares. Any new, additional or
different shares of stock or other property (including money paid other than as
a regular cash dividend) which the Participant may have the right to receive
with respect to his or her unvested shares by reason of any stock dividend,
stock split, reclassification of Common Stock or other similar change in the
Corporation's capital structure or by reason of any Corporate Transaction under
Section I of this Article Four shall be issued, subject to (i) the same vesting
requirements applicable to his or her unvested shares and (ii) such escrow
arrangements as the Plan Administrator shall deem appropriate.
3. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock under this Article Three,
then those shares shall be immediately surrendered to the Corporation for
cancellation, and the Participant shall have no further stockholder rights with
respect to those shares. The Corporation shall repay to the Participant the cash
consideration paid for the surrendered shares and shall cancel the principal
balance of any outstanding purchase-money note of the Participant to the extent
attributable to such surrendered shares. The surrendered shares may, at the Plan
Administrator's discretion, be retained by the
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Corporation as Treasury Shares or may be retired to authorized but unissued
share status.
4. The Plan Administrator may in its discretion elect to waive
the surrender and cancellation of one or more unvested shares of Common Stock
(or other assets attributable thereto) which would otherwise occur upon the
non-completion of the vesting schedule applicable to such shares. Such waiver
shall result in the immediate vesting of the Participant's interest in the
shares of Common Stock as to which the waiver applies. Such waiver may be
effected at any time, whether before or after the Participant's cessation of
Service or the attainment or non-attainment of the applicable performance
objectives.
II. TRANSFER RESTRICTIONS/SHARE ESCROW
A. Unvested shares under this Article Three may, in the Plan
Administrator's discretion, be held in escrow by the Corporation until the
Participant's interest in such shares vests or may be issued directly to the
Participant with restrictive legends on the certificates evidencing such
unvested shares. To the extent an escrow arrangement is utilized, the unvested
shares and any securities or other assets issued with respect to such shares
(other than regular cash dividends) shall be delivered in escrow to the
Corporation to be held until the Participant's interest in such shares (or other
securities or assets) vests. Alternatively, if the unvested shares are issued
directly to the Participant, the restrictive legend on the certificates for such
shares shall read substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE UNVESTED AND ARE
ACCORDINGLY SUBJECT TO (I) CERTAIN TRANSFER RESTRICTIONS AND TO (II)
CANCELLATION OR REPURCHASE IN THE EVENT THE REGISTERED HOLDER (OR
HIS/HER PREDECESSOR IN INTEREST) CEASES TO REMAIN IN THE CORPORATION'S
SERVICE. SUCH TRANSFER RESTRICTIONS AND THE TERMS AND CONDITIONS OF SUCH
CANCELLATION OR REPURCHASE ARE SET FORTH IN A STOCK ISSUANCE AGREEMENT
BETWEEN THE CORPORATION AND THE REGISTERED HOLDER (OR HIS/HER
PREDECESSOR IN INTEREST) DATED ______,19_, A COPY OF WHICH IS ON FILE AT
THE PRINCIPAL OFFICE OF THE CORPORATION.
B. The Participant shall have no right to transfer any unvested shares
of Common Stock issued to him or her under this Article Three. For purposes of
this restriction, the term "transfer" shall include (without limitation) any
sale, pledge, assignment, encumbrance, gift, or other disposition of such
shares, whether voluntary or involuntary. Upon any such attempted transfer, the
unvested shares shall immediately be
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cancelled, and neither the Participant nor the proposed transferee shall have
any rights with respect to those shares. However, the Participant shall have the
right to make a gift of unvested shares acquired under the Plan to his or her
spouse or issue, including adopted children, or to a trust established for such
spouse or issue, provided the donee of such shares delivers to the Corporation a
written agreement to be bound by all the provisions of the Plan and the Issuance
Agreement applicable to the gifted shares.
ARTICLE FOUR
MISCELLANEOUS
I. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE
TAKE-OVER
A. The treatment and rights of optionees or participants in connection
with any Corporate Transaction (as defined below) shall be established in the
option agreement governing such option, which agreement may accelerate vesting
or exercisability, or may provide that the option shall terminate upon any such
transaction.
B. A Corporate Transaction means:
(i) a merger or consolidation in which the Corporation is not
the surviving entity, except for a transaction the principal purpose of
which is to change the State of the Corporation's incorporation,
(ii) the sale, transfer or disposition of all or substantially
all of the assets of the Corporation in liquidation or dissolution of the
Corporation, or
(iii) any reverse merger in which the Corporation is the
surviving entity but in which securities possessing more than fifty percent
(50%) of the total combined voting power of the Corporation's outstanding
securities are issued to holders different from those who held such
securities immediately prior to such merger.
C. Except as otherwise provided by the Plan Administrator in agreements
governing the grant of options or stock issuances, in connection with any Change
in Control of the Corporation, the exercisability of each option grant at the
time outstanding under this Plan shall automatically accelerate so that each
such option shall, immediately prior to the specified effective date for the
Change in Control, become fully exercisable with respect to the total number of
shares of Common Stock at the time subject to such option and may be exercised
for all or any portion of such shares. Similarly, all unvested shares issued
under the Plan shall automatically vest immediately
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prior to the effective date of the Change in Control. For purposes of this
Article Four, a Change in Control shall be deemed to occur in the event:
(i) any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is controlled
by, or is under common control with, the Corporation) directly or
indirectly acquires beneficial ownership (within the meaning of Rule 13d-3
of the Securities Exchange Act of 1934, as amended) of securities
possessing more than fifty percent (50%) of the total combined voting power
of the Corporation's outstanding securities pursuant to a tender or
exchange offer made directly to the Corporation's stockholders which the
Board does not recommend such stockholders to accept; or
(ii) there is a change in the composition of the Board over a
period of twenty-four (24) consecutive months or less such that a majority
of the Board members (rounded up to the next whole number) cease, by reason
of one or more proxy contests for the election of Board members, to be
comprised of individuals who either (A) have been Board members
continuously since the beginning of such period or (B) have been elected or
nominated for election as Board members during such period by at least a
majority of the Board members described in clause (A) who were still in
office at the time such election or nomination was approved by the Board.
The provisions of this Paragraph C shall apply to option grants and/or stock
issuances under the Predecessor Plans only to the extent expressly extended
thereto by the Plan Administrator.
II. CERTAIN DEFINITIONS
A. Fair Market Value. The fair market value of a share of Common Stock
shall be determined in accordance with the following provisions:
- If shares of the Class of Common Stock to be valued are not at
the time listed or admitted to trading on any national stock exchange but
is traded on the Nasdaq National Market System, the fair market value shall
be the closing selling price per share of a share of that class on the date
in question, as such price is reported by the National Association of
Securities Dealers through the Nasdaq National Market System or any
successor system. If there is no reported closing selling price for the
series on the date in question, then the closing selling price on the last
preceding date for which such quotation exists shall be determinative of
fair market value.
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- If shares of the class of Common Stock to be valued are at the
time listed or admitted to trading on any national stock exchange, then the
fair market value of a share of that class shall be the closing selling
price per share on the date in question on the stock exchange determined by
the Plan Administrator to be the primary market for the Common Stock, as
such price is officially quoted in the composite tape of transactions on
such exchange. If there is no reported sale of a share of the class on such
exchange on the date in question, then the fair market value shall be the
closing selling price on the exchange on the last preceding date for which
such quotation exists.
- If shares of the series of Common Stock to be valued at the
time are neither listed nor admitted to trading on any stock exchange nor
traded on the Nasdaq National Market System, then the fair market value
shall be determined by the Plan Administrator after taking into account
such factors as the Plan Administrator shall deem appropriate, which may
include independent professional appraisals, in a manner consistent with
the provisions of Section 260.140.50 of the Rules of the California
Corporations Commissioner.
B. Hostile Take-Over. A HOSTILE TAKE-OVER shall be deemed to occur
in the event (i) any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is controlled by,
or is under common control with, the Corporation) directly or indirectly
acquires beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act)
of securities possessing more than fifty percent (50%) of the total combined
voting power of the Corporation's outstanding securities pursuant to a tender or
exchange offer made directly to the Corporation's stockholders which the Board
does not recommend such stockholders to accept.
C. Take-Over Price. The Take-Over Price per share shall be deemed
to be equal to the greater of (a) the fair market value per share on the option
surrender date, as determined pursuant to the valuation provisions of Section
II.A. of this Article Four, or (b) the highest reported price per share paid by
the tender offeror in effecting such Hostile Take-Over.
III. LOANS OR GUARANTEE OF LOANS
A. The Plan Administrator may, in its discretion, assist any
Optionee or Participant (including an Optionee or Participant who is an officer
of the Corporation) in the exercise of one or more options granted to such
Optionee under the Article Two Option Grant Program or the purchase of one or
more shares issued to such Participant under the Article Three Stock Issuance
Program, including the satisfaction of any Federal and State income and
employment tax obligations arising therefrom by (i) authorizing the extension of
a loan from the Corporation to such Optionee or Participant or (ii) permitting
the Optionee or Participant to pay the option price or purchase price for the
purchased Common Stock in installments over a period of years.
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The terms of any loan or installment method of payment (including the interest
rate and terms of repayment) will be upon such terms as the Plan Administrator
specifies in the applicable option or issuance agreement or otherwise deems
appropriate under the circumstances. Loans and installment payments may be
granted with or without security or collateral (other than to individuals who
are consultants or independent contractors, in which event the loan must be
adequately secured by collateral other than the purchased shares). However, the
maximum credit available to the Optionee or Participant may not exceed the
option or purchase price of the acquired shares (less the par value of such
shares) plus any Federal and State income and employment tax liability incurred
by the Optionee or Participant in connection with the acquisition of such
shares.
B. The Plan Administrator may, in its absolute discretion,
determine that one or more loans extended under this financial assistance
program shall be subject to forgiveness by the Corporation in whole or in part
upon such terms and conditions as the Plan Administrator may deem appropriate.
IV. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares or cash upon
the exercise of stock options or stock appreciation rights granted under the
Option Grant Program or upon direct issuance under the Stock Issuance Program
shall be subject to the satisfaction of all applicable Federal, State and local
income and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion and upon such
terms and conditions as it may deem appropriate, provide any or all holders of
outstanding option grants under the Option Grant Program with the election to
have the Corporation withhold, from the shares of Common Stock otherwise
issuable upon the exercise of such options, a portion of such shares with an
aggregate fair market value equal to the designated percentage (up to 100% as
specified by the optionee) of the Federal and State income taxes ("Taxes")
incurred in connection with the acquisition of such shares. In lieu of such
direct withholding, one or more option holders may also be granted the right to
deliver shares of Common Stock to the Corporation in satisfaction of such Taxes.
V. AMENDMENT OF THE PLAN AND AWARDS
A. Except as herein provided, the Board has complete and
exclusive power and authority to amend or modify the Plan (or any component
thereof) in any or all respects whatsoever. No amendment or modification may
adversely affect the rights and obligations of an Optionee with respect to
options at the time outstanding under the Plan, nor adversely affect the rights
of any Participant with respect to Common Stock issued under the Plan prior to
such action, unless the Optionee or Participant consents to such amendment. In
addition, the Board may, in its discretion, condition any and all such
amendments on the Corporation obtaining approval of its stockholders.
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B. Options to purchase shares of Common Stock may be granted
under the Option Grant Program and shares of Common Stock may be issued under
the Stock Issuance Program, which are in both instances in excess of the number
of shares then available for issuance under the Plan, provided any excess shares
actually issued under the Option Grant Program or the Stock Issuance Program are
held in escrow until stockholder approval, if required by the Board in
connection with the amendment of the Plan, is obtained for a sufficient increase
in the number of shares available for issuance under the Plan. If such
stockholder approval is required and is not obtained within twelve (12) months
after the date the first such excess option grants or excess share issuances are
made, then (I) any unexercised excess options shall terminate and cease to be
exercisable and (II) the Corporation shall promptly refund the purchase price
paid for any excess shares actually issued under the Plan and held in escrow,
together with interest (at the applicable Short Term Federal Rate) for the
period the shares were held in escrow.
C. Stockholder approval of this Plan shall not be construed or
interpreted to require that stockholder approval shall be required in connection
with any amendment of this Plan, the adoption by the Corporation of any other
plans, or the grant of options or issuance of shares not covered by any plan.
VI. EFFECTIVE DATE AND TERM OF PLAN
A. This Plan, as successor to the Corporation's Predecessor
Plans, shall become effective as of the Effective Date, and no further option
grants shall be made under the Option Plan nor shall any further shares be
issued under the Stock Plan from and after such Effective Date. If stockholder
approval of this Plan is not obtained within twelve months after the date this
Plan is adopted by the Board, then each option granted under this Plan from and
after the Effective Date shall terminate without ever becoming exercisable for
the option shares and all shares issued hereunder shall be repurchased by the
Corporation at the purchase price paid, together with interest (at the
applicable Short Term Federal Rate). However, in the event such stockholder
approval is not obtained, the Predecessor Plans shall continue in effect in
accordance with the terms and provisions last approved by the Corporation's
stockholders, and all outstanding options and unvested stock issuances under the
Predecessor Plans shall remain in full force and effect in accordance with the
instruments evidencing such options and issuances.
B. Each outstanding option and share issuance under the
Predecessor Plans immediately prior to the Effective Date of this Plan are
hereby incorporated into this Plan and shall accordingly be treated as an
outstanding option or share issuance under this Plan. However, each such option
or share issuance shall continue to be governed solely by the terms and
conditions of the instrument evidencing such grant or issuance, and except as
otherwise expressly provided in this Plan, no provision of this Plan shall
affect or otherwise modify the rights or obligations of the holders of such
options or shares with respect to their acquisition of shares of Common Stock,
or otherwise modify the rights or obligations of the holders of such options or
shares.
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<PAGE> 20
C. The sale and remittance procedure authorized for the exercise
of outstanding options under this Plan shall be available for all options
granted under this Plan on or after the Effective Date and for all non-statutory
options outstanding under the Option Plan and incorporated into this Plan. The
Plan Administrator may also allow such procedure to be utilized in connection
with one or more disqualifying dispositions of Incentive Option shares effected
after the Effective Date, whether such Incentive Options were granted under this
Plan or the Option Plan.
D. The Plan shall terminate upon the earlier of (i) the tenth
anniversary of the Effective Date or (ii) the date on which all shares available
for issuance under the Plan shall have been issued or cancelled pursuant to the
exercise, surrender or cash-out of the options granted under the Option Grant
Program or the issuance of shares (whether vested or unvested) under the Stock
Issuance Program. If the date of termination is determined under clause (i)
above, then all option grants and unvested stock issuances outstanding on such
date shall thereafter continue to have force and effect in accordance with the
provisions of the instruments evidencing such grants or issuances.
VII. USE OF PROCEEDS
Cash proceeds received by the Corporation from the sale of
shares under the Plan shall be used for general corporate purposes.
VIII. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option
under the Option Grant Program, the issuance of any shares under the Stock
Issuance Program, and the issuance of Common Stock upon the exercise or
surrender of the option grants made hereunder shall be subject to the
Corporation's procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the options granted under it, and
the Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under this Plan unless and until there shall have been compliance with
all applicable requirements of Federal and State securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any securities exchange on which stock of the same class is then listed.
IX. NO EMPLOYMENT/SERVICE RIGHTS
Neither the action of the Corporation in establishing the Plan,
nor any action taken by the Plan Administrator hereunder, nor any provision of
the Plan shall be construed so as to grant any individual the right to remain in
the employ or service of the Corporation (or any parent or subsidiary
corporation) for any period of specific
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<PAGE> 21
duration, and the Corporation (or any parent or subsidiary corporation retaining
the services of such individual) may terminate such individual's employment or
service at any time and for any reason, with or without cause.
X. MISCELLANEOUS PROVISIONS
A. The right to acquire Common Stock or other assets under the Plan
may not be assigned, encumbered or otherwise transferred by any Optionee or
Participant.
B. The provisions of the Plan shall inure to the benefit of, and be
binding upon, the Corporation and its successors or assigns, whether by
Corporate Transaction or otherwise, and the Participants and Optionees, the
legal representatives of their respective estates, their respective heirs or
legatees and their permitted assignees.
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<PAGE> 1
EXHIBIT 10.43
<PAGE> 2
INTERACT MEDICAL TECHNOLOGIES CORPORATION
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following stock option grant (the
"Option") to purchase shares of the Common Stock of Interact Medical
Technologies Corporation (the "Company"):
Optionee:
-----------------------------------------
Grant Date:
----------------------------------------
Option Price: $ per share
---------
Number of Option Shares: shares
----------
Expiration Date:
--------------------------------------------
Type of Option: Incentive Stock Option
------
Non-Statutory Stock Option
------
Exercise Schedule:
Other Special Provisions:
<PAGE> 3
Optionee agrees to be bound by the terms and conditions of the Option as
set forth in the Stock Option Agreement attached hereto as Exhibit A. Optionee
also understands that the Option is granted subject to and in accordance with
the express terms and conditions of the Interact Medical Technologies
Corporation 1996 Stock Option/Stock Issuance Plan (the "Plan"), a copy of which
is attached hereto as Exhibit B, and agrees to be bound by the terms and
conditions of the Plan.
Optionee hereby acknowledges receipt of a copy of the official plan
prospectus.
NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in the Stock Option Agreement
or the Plan shall confer upon the Optionee the right to continue in the Service
of the Company for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Company or the Optionee, which
rights are hereby expressly reserved by each, to terminate Optionee's Service at
any time for any reason whatsoever, with or without cause.
INTERACT MEDICAL TECHNOLOGIES
CORPORATION
By:
-------------------------------
Title:
-----------------------------
------------------------------------
OPTIONEE
Address:
------------------------------------
------------------------------------
Dated: , 19
----------------- ---
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<PAGE> 1
EXHIBIT 10.44
<PAGE> 2
INTERACT MEDICAL TECHNOLOGIES CORPORATION
STOCK OPTION AGREEMENT
WITNESSETH:
RECITALS
A. INTERACT MEDICAL TECHNOLOGIES CORPORATION (the "Company") has
adopted the 1996 Stock Option/Stock Issuance Plan (the "Plan") for the purpose
of attracting and retaining the services of selected key employees (including
officers and directors) and consultants and other independent contractors who
contribute to the financial success of the Company or its parent or subsidiary
corporations.
B. Optionee is an individual who is to render valuable services to the
Company or its parent or subsidiary corporations, and this Agreement is executed
pursuant to, and is intended to carry out the purposes of, the Plan in
connection with the Company's grant of a stock option to Optionee.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. Subject to and upon the terms and conditions
set forth in this Agreement, the Company hereby grants to Optionee, as of the
grant date (the "Grant Date") specified in the accompanying Notice of Grant of
Stock Option (the "Notice of Grant"), a stock option to purchase up to that
number of shares of the Company's Common Stock (the "Option Shares") as is
specified in the Notice of Grant. The Option Shares shall be purchasable from
time to time during the option term at the option price per share (the "Option
Price") specified in the Notice of Grant.
2. OPTION TERM. This option shall have a maximum term of ten
(10) years measured from the Grant Date and shall accordingly expire at the
close of business on the expiration date (the "Expiration Date") specified in
the Notice of Grant, unless sooner terminated in accordance with Paragraph 5 or
6.
3. LIMITED TRANSFERABILITY. This option shall be neither
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following the Optionee's death and may be exercised,
during Optionee's lifetime, only by Optionee, unless such assignment or transfer
is expressly approved by the Plan Administrator.
4. EXERCISABILITY. This option shall become exercisable for the
Option Shares in one or more installments as specified in the Notice of Grant.
As the option becomes exercisable for the Option Shares in one or more such
installments, those
<PAGE> 3
installments shall accumulate and the option shall remain exercisable for the
accumulated installments until the Expiration Date or the sooner termination of
the option term under Paragraph 5 or 6 of this Agreement.
5. TERMINATION OF SERVICE. The option term specified in
Paragraph 2 shall terminate (and this option shall cease to be exercisable)
prior to the Expiration Date should one of the following provisions become
applicable:
(i) Except to the extent otherwise provided in
subparagraphs (ii) and (iii) below, should Optionee cease to remain in the
Service of the Company at any time during the option term, then this
option shall not remain exercisable for more than a ninety (90)-day period
commencing with the date of such cessation of Service. Upon the expiration
of such ninety (90)-day period or (if earlier) upon the specified
Expiration Date of the option term, this option shall terminate and cease
to be outstanding.
(ii) Should Optionee die while in Service or within the
ninety (90)-day period following his or her cessation of Service, then the
personal representative of the Optionee's estate or the person or persons
to whom this option is transferred pursuant to the Optionee's will or in
accordance with the law of descent and distribution shall have the right
to exercise this option. Such right shall lapse, and this option shall
terminate and cease to remain exercisable, upon the earlier of (A) the
expiration of the twelve (12)-month period measured from the date of
Optionee's death or (B) the Expiration Date.
(iii) Should Optionee become permanently disabled and
cease by reason thereof to remain in Service at any time during the option
term, then this option shall not remain exercisable for more than a twelve
(12) month period commencing with the date of such cessation of Service.
Upon the expiration of such limited period of exercisability or (if
earlier) upon the Expiration Date, this option shall terminate and cease
to be outstanding.
(iv) In no event shall this option be exercisable at any
time after the specified Expiration Date of the option term.
(v) During the limited post-Service period of
exercisability determined in accordance with subparagraphs (i) through
(iii) above, this option may not be exercised for more than the number of
Option Shares (if any) for which this option is, at the time of the
Optionee's cessation of Service, exercisable in accordance with either the
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<PAGE> 4
normal exercise provisions specified in the Notice of Grant or the special
acceleration provisions of Paragraph 6 of this Agreement. However, the
number of Option Shares purchasable after the Optionee's death shall be
reduced for any Option Shares purchased by the Optionee after his or her
cessation of Service but prior to death.
(vi) For purposes of this Paragraph 5 and for all other
purposes under this Agreement, the following definitional provisions shall
be in effect:
A. The Optionee shall be deemed to remain in SERVICE for so
long as the Optionee continues to render periodic services to the Company
or any parent or subsidiary corporation, whether as an Employee, a
non-employee member of the Company's Board of Directors or an independent
consultant or advisor.
B. The Optionee shall be deemed to be an EMPLOYEE and to
continue in the Company's employ for so long as the Optionee remains in
the employ of the Company or one or more of its parent or subsidiary
corporations, subject to the control and direction of the employer entity
as to both the work to be performed and the manner and method of
performance.
C. The Optionee shall be deemed to be PERMANENTLY DISABLED
if the Optionee is, by reason of any medically determinable physical or
mental impairment expected to result in death or to be of continuous
duration of not less than twelve (12) consecutive months or more, unable
to perform his or her usual duties for the Company or the parent or
subsidiary corporation retaining his or her services.
D. A corporation shall be considered to be a SUBSIDIARY
corporation of the Company if it is a member of an unbroken chain of
corporations beginning with the Company, provided each such corporation in
the chain (other than the last corporation) owns, at the time of
determination, stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such
chain.
E. A corporation shall be considered to be a PARENT
corporation of the Company if it is a member of an unbroken chain ending
with the Company, provided each such corporation in the chain (other than
the Company) owns, at the tie of determination, stock
-3-
<PAGE> 5
possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
6. CORPORATE TRANSACTION.
A. For purposes of this paragraph, a "Corporate Transaction" shall be
one or more of the following stockholder-approved transactions:
(i) a merger or consolidation in which the Company is not
the surviving entity, except for a transaction the principal purpose of
which is to change the State of the Company's incorporation,
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company in liquidation or
dissolution of the Company, or
(iii) any reverse merger in which the Company is the
surviving entity but in which securities possessing more than fifty
percent (50%) of the total combined voting power of the Company's
outstanding securities are issued to holders different from those who held
such securities immediately prior to such merger.
B. If this option is to be assumed in connection with the Corporate
Transaction or is otherwise to continue in effect, then it shall be
appropriately adjusted, immediately after such Corporate Transaction, to apply
and pertain to the number and class of securities which would have been
issuable, in consummation of such Corporate Transaction, to an actual holder of
the same number of shares of Common Stock as are subject to such option
immediately prior to such Corporate Transaction. Appropriate adjustments shall
also be made to the option price payable per share, provided that the aggregate
option price payable for such securities shall remain the same.
C. Except to the extent that any option is to be assumed by the
acquiring or successor corporation in a Corporate Transaction (as herein
defined), each option outstanding hereunder shall expire and terminate
immediately prior to the consummation of such Corporate Transaction.
D. The exercisability of this option as an incentive stock option under
the Federal tax laws (if designated as such in the Notice of Grant) shall, in
connection with any such Corporate Transaction, be subject to the applicable
dollar limitation of Paragraph 18.
E. This Agreement shall not in any way affect the right of the Company
to adjust, reclassify, reorganize or otherwise make changes in its capital or
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<PAGE> 6
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
7. ADJUSTMENT IN OPTION SHARES.
A. In the event any change is made to the Common Stock issuable
under the Plan by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares, or other change affecting the
outstanding Common Stock as a class without the Company's receipt of
consideration, then appropriate adjustments shall be made to (i) the total
number of Option Shares subject to this option and (ii) the Option Price payable
per share in order to reflect such change and thereby preclude a dilution or
enlargement of benefits hereunder.
B. If this option is to be assumed in connection with a Corporate
Transaction or is otherwise to continue in effect, then this option shall,
immediately after such Corporate Transaction, be appropriately adjusted to apply
and pertain to the number and class of securities which would have been issued
to the Optionee in the consummation of such Corporate Transaction had the option
been exercised immediately prior to such Corporate Transaction. Appropriate
adjustments shall also be made to the Option Price payable per share, provided
the aggregate Option Price payable hereunder shall remain the same.
8. PRIVILEGE OF STOCK OWNERSHIP. The holder of this option shall not
have any of the rights of a stockholder with respect to the Option Shares until
such individual shall have exercised the option, paid the Option Price for the
purchased shares and been issued a stock certificate for such shares.
9. MANNER OF EXERCISING OPTION.
A. In order to exercise this option with respect to all or any part
of the Option Shares for which this option is at the time exercisable, Optionee
(or in the case of exercise after Optionee's death, the Optionee's executor,
administrator, heir or legatee, as the case may be) must take the following
actions:
(i) Execute and deliver to the Secretary of the Company a
written notice of exercise (the "Exercise Notice"), in substantially the
form of Exhibit I attached hereto, in which there is specified the number
of Option Shares for which the option is exercised.
(ii) Pay the aggregate Option Price for the purchased
shares in one or more of the following alternative forms:
-5-
<PAGE> 7
1. full payment in cash or check drawn to the Company's order;
2. full payment in shares of Common Stock of the Company held by
the Optionee for at least six (6) months and valued at Fair Market Value
on the Exercise Date (as such terms are defined below);
3. full payment in a combination of shares of Common Stock of
the Company held by the Optionee for at least six (6) months and valued at
Fair Market Value on the Exercise Date, and cash or check drawn to the
Company's order;
4. full payment effected through a broker-dealer sale and
remittance procedure pursuant to which the Optionee (I) shall provide
irrevocable written instructions to a designated brokerage firm to effect
the immediate sale of the purchased shares and remit to the Company, out
of the sale proceeds available on the settlement date, sufficient funds to
cover the aggregate Option Price payable for the purchased shares plus all
applicable Federal and State income and employment taxes required to be
withheld by the Company by reason of such purchase and (II) shall provide
written directives to the Company to deliver the certificates for the
purchased shares directly to such brokerage firm in order to complete the
sale transaction; or
5. full payment in any other form which the Plan Administrator
may, in its discretion, approve at the time of exercise in accordance with
the provisions of Paragraph 15 of this Agreement.(1)
(iii) Furnish to the Company appropriate documentation that the
person or persons exercising the option (if other than the Optionee) have
the right to exercise this option.
B. For purposes of this Agreement, the Fair Market Value of a share of
Common Stock on any relevant date shall be determined in accordance with
subparagraphs (i) and (ii) below, and the Exercise Date shall be the date on
which the executed Exercise Notice is delivered to the Company. Except to the
extent the sale and remittance procedure specified above is utilized for the
exercise of the option, payment
- - ------------------
(1) Authorization of a Company loan or installment payment pursuant to this
provision may, under currently proposed Treasury Regulations, result in the loss
of incentive stock option treatment under the Federal tax laws.
-6-
<PAGE> 8
of the Option Price for the purchased shares must accompany the Exercise Notice.
The procedure for measuring Fair Market Value shall be as follows:
(i) If the Common Stock is not at the time listed or admitted to
trading on any national stock exchange but is traded on the Nasdaq
National Market System, Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers through the
Nasdaq National Market System or any successor system. If there is no
reported closing selling price for the Common Stock on the date in
question, then the closing selling price on the last preceding date for
which such quotation exists shall be determinative of Fair Market Value.
(ii) If the Common Stock is at the time listed or admitted to
trading on any national stock exchange, then the Fair Market Value shall
be the closing selling price per share of Common Stock on the date in
question on the stock exchange determined by the Plan Administrator to be
the primary market for the Common Stock, as such price is officially
quoted in the composite tape of transactions on such exchange. If there is
no reported sale of Common Stock on such exchange on the date in question,
then the Fair Market Value shall be the closing selling price on the
exchange on the last preceding date for which such quotation exists.
(iii) If shares of the series of Common Stock to be valued at
the time are neither listed nor admitted to trading on any stock exchange
nor traded in the over-the-counter market, then the fair market value
shall be determined by the Plan Administrator after taking into account
such factors as the Plan Administrator shall deem appropriate, including
one or more independent professional appraisals.
C. As soon after the Exercise Date as practical, the Company shall mail
or deliver to or on behalf of the Optionee (or to any other person or persons
exercising this option) a certificate or certificates representing the purchased
shares.
D. In no event may this option be exercised for any fractional shares.
10. COMPLIANCE WITH LAWS AND REGULATIONS.
A. The exercise of this option and the issuance of the Option Shares
upon such exercise shall be subject to compliance by the Company and the
Optionee with all applicable requirements of law relating thereto and with all
applicable
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<PAGE> 9
regulations of any stock exchange on which shares of the Option Shares may be
listed at the time of such exercise and issuance.
B. In connection with the exercise of this option, Optionee shall
execute and deliver to the Company such representations in writing as may be
requested by the Company in order for it to comply with the applicable
requirements of federal and state securities laws.
11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided in
Paragraph 3 or 6, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the successors, administrators, heirs, legal
representatives and assigns of Optionee and the successors and assigns of the
Company.
12. LIABILITY OF COMPANY.
A. If the Option Shares covered by this Agreement exceed, as of the
Grant Date, the number of shares of Common Stock which may without stockholder
approval be issued under the Plan, then this option shall be void with respect
to such excess shares, unless stockholder approval of an amendment sufficiently
increasing the number of shares of Common Stock issuable under the Plan is
obtained in accordance with the provisions of Article 4, Section III of the
Plan.
B. The inability of the Company to obtain approval from any
regulatory body having authority deemed by the Company to be necessary to the
lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Company of any liability with respect to the non-issuance or sale of
the Common Stock as to which such approval shall not have been obtained. The
Company, however, shall use its best efforts to obtain all such approvals.
13. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement or in
the Plan shall confer upon the Optionee any right to continue in the Service of
the Company (or any parent or subsidiary corporation of the Company employing or
retaining Optionee) for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Company (or any parent or
subsidiary corporation of the Company employing or retaining Optionee) or the
Optionee, which rights are hereby expressly reserved by each, to terminate the
Optionee's Service at any time for any reason whatsoever, with or without cause.
14. NOTICES. Any notice required to be given or delivered to the
Company under the terms of this Agreement shall be in writing and addressed to
the Company in care of the Corporate Secretary at the Company's principal
corporate offices. Any notice required to be given or delivered to Optionee
shall be in writing and addressed to Optionee at the address indicated below
Optionee's signature line on the Notice of
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<PAGE> 10
Grant. All notices shall be deemed to have been given or delivered upon personal
delivery or upon deposit in the U.S. mail, postage prepaid and properly
addressed to the party to be notified.
15. LOANS. The Plan Administrator may, in its absolute discretion and
without any obligation to do so, assist the Optionee in the exercise of this
option by (i) authorizing the extension of a loan to the Optionee from the
Company or (ii) permitting the Optionee to pay the Option Price for the
purchased Common Stock in installments over a period of years. The terms of any
loan or installment method of payment (including the interest rate, the
collateral requirements and terms of repayment) shall be established by the Plan
Administrator in its sole discretion.
16. CONSTRUCTION. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the express terms and provisions of the Plan. All decisions of the
Plan Administrator with respect to any question or issue arising under the Plan
or this Agreement shall be conclusive and binding on all persons having an
interest in this option.
17. GOVERNING LAW. The interpretation, performance, and enforcement of
this Agreement shall be governed by the laws of the State of California without
resort to that State's conflict-of-laws rules.
18. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE STOCK OPTION. In the
event this option is designated as an incentive stock option in the Notice of
Grant, the following terms and conditions shall also apply to the grant:
A. This option shall cease to qualify for favorable tax treatment
as an incentive stock option under the Federal tax laws if (and to the extent)
this option is exercised for one or more Option Shares: (i) more than three (3)
months after the date the Optionee ceases to be an Employee for any reason other
than death or permanent disability (as defined in Paragraph 5) or (ii) more than
one (1) year alter the date the Optionee ceases to be an Employee by reason of
permanent disability.
B. No installment under this option (whether annual or monthly)
shall qualify for favorable tax treatment as an incentive stock option under the
Federal tax laws if (and to the extent) the aggregate fair market value
(determined at the Grant Date) of the Common Stock for which such installment
first becomes exercisable hereunder will, when added to the aggregate fair
market value (determined as of the respective date or dates of grant) of any
earlier installments of Common Stock for which this option or any other
post-1986 incentive stock options granted to the Optionee prior to the Grant
Date (whether under the Plan or any other option plan of the Company or any
parent or subsidiary corporations) first become exercisable during the same
calendar year, exceed One Hundred Thousand Dollars ($100,000) in the aggregate.
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<PAGE> 11
C. Should the exercisability of this option be accelerated upon a
Corporate Transaction, then this option shall qualify for favorable tax
treatment as an incentive stock option under the Federal tax laws only to the
extent the aggregate fair market value (determined at the Grant Date) of the
Common Stock for which this option first becomes exercisable at the time the
Corporate Transaction occurs does not, when added to the aggregate fair market
value (determined as of the respective date or dates of grant) of any earlier
installments of Common Stock for which this option or any other post-1986
incentive stock options granted to the Optionee prior to the Grant Date (whether
under the Plan or any other option plan of the Company or any parent or
subsidiary corporations) first become exercisable during the calendar year in
which the Corporate Transaction occurs, exceed One Hundred Thousand Dollars
($100,000) in the aggregate.
D. To the extent this option should fall to qualify as an incentive
stock option under the Federal tax laws, the Optionee will recognize
compensation income in connection with the acquisition of one or more Option
Shares hereunder, and the Optionee must make appropriate arrangements for the
satisfaction of all Federal, State or local income tax withholding requirements
and Federal social security employee tax requirements applicable to such
compensation income.
E. The Plan Administrator shall not consent to any assignment or
transfer not otherwise permitted hereunder.
19. ADDITIONAL TERMS APPLICABLE TO A NON-STATUTORY STOCK OPTION. In the
event this option is designated as a non-statutory stock option in the Notice of
Grant, Optionee hereby agrees to make appropriate arrangements with the Company
or parent or subsidiary corporation employing Optionee for the satisfaction of
any Federal, State or local income tax withholding requirements and Federal
social security employee tax requirements applicable to the exercise of this
option.
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<PAGE> 12
EXHIBIT I
NOTICE OF EXERCISE OF STOCK OPTION
I hereby notify INTERACT MEDICAL TECHNOLOGIES CORPORATION (the
"Company") that I elect to purchase ______ shares of the Company's Common Stock
(the "Purchased Shares") pursuant to that certain option (the "Option") granted
to me under the Company's 1996 Stock Option/Stock Issuance Plan (the "Plan") on
__________, 19___ to purchase up to _________ shares of such Common Stock at an
option price of $______ per share (the "Option Price").
Concurrently with the delivery of this Exercise Notice to the Secretary
of the Company, I shall pay to the Company the Option Price for the Purchased
Shares in accordance with the provisions of my agreement with the Company
evidencing the Option and shall deliver whatever additional documents may be
required by such agreement as a condition for exercise.
- - ----------------------------- -----------------------------------
Date Optionee
Address:
-----------------------------------
-----------------------------------
Print name in exact manner
it is to appear on the
stock certificate:
-----------------------------------
-----------------------------------
Address to which certificate
is to be sent, if different
from address above:
-----------------------------------
-----------------------------------
Social Security Number:
-----------------------------------
I-1
<PAGE> 1
EXHIBIT 10.45
<PAGE> 2
INTERACT MEDICAL TECHNOLOGIES CORPORATION
1996 EMPLOYEE STOCK PURCHASE PLAN
I. PURPOSE
This Interact Medical Technologies Corporation 1996 Employee Stock
Purchase Plan (the "Plan") is intended to provide Qualifying Employees with the
opportunity to acquire a proprietary interest in the Company by accumulating
amounts for the Employee's Account through payroll deductions and the periodic
application of such amounts to the purchase of shares of the Company's Common
Stock.
II. DEFINITIONS
For purposes of plan administration, the following terms shall have the
meanings indicated:
Act shall mean the Securities Act of 1933, as amended.
Account means the amount held for the benefit of a Participant hereunder
which Account will be increased by any payroll deductions from the Participant
and will be decreased by amounts applied to the purchase of shares or refunded
to or for the benefit of the Participant hereunder.
Board means the Company's Board of Directors.
Code means the Internal Revenue Code of 1986, as amended.
Common Stock means shares of the Company's Common Stock.
Company means Interact Medical Technologies Corporation, a Delaware
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of Interact Medical Technologies Corporation which adopts
the Plan.
Corporate Affiliate means any company which is a parent or subsidiary
corporation of the Company (as determined in accordance with Code Section 424),
including any parent or subsidiary corporation which becomes such after the
Effective Date.
Effective Date means the first day of the term of this Plan as set forth
in Article XI.A, which term is scheduled to commence upon the effective date of
the S-8 Registration Statement covering the shares of Common Stock issuable
under the Plan. However, for any Corporate Affiliate which becomes a
Participating Company in the Plan
<PAGE> 3
after the first day of the initial option period, a subsequent Effective Date
shall be designated with respect to participation by its Qualifying Employees.
Entry Date means the date on which a Participant first joins the option
period in effect under the Plan.
Participant means any Qualifying Employee of a Participating Company who
has enrolled and is actively participating in the Plan.
Participating Company means the Company and any Corporate Affiliate
designated from time to time by the Board.
Qualifying Employee means any person who is engaged, on a regularly-
scheduled basis of more than twenty (20) hours per week and more than five (5)
months per calendar year, in the rendition of personal services to the Company,
or any Participating Company in exchange for amounts which constitute wages
under Section 3121(a) of the Code, provided that no person who owns (within the
meaning of Code Section 424(d)) or holds outstanding options or other rights to
purchase stock possessing five percent (5%) or more of the total combined voting
power or value of all classes of stock of the Company or any of its Corporate
Affiliates shall be a Qualifying Employee.
Quarter means a calendar quarter and (except for the first Quarter of
the initial option period or as otherwise designated by the Plan Administrator),
each Quarter shall begin on the first business day of the Quarter and shall end
on the last business day of such Quarter. The first Quarter of the initial
option period under this Plan shall commence on the Effective Date and shall end
on September 30, 1996.
Regular Compensation means the basic earnings paid to a Participant by
Participating Companies plus (i) any pre-tax contributions made by the
Participant to any Code Section 401(k) salary deferral plan or any Code Section
125 cafeteria benefit program (now existing or hereafter established), (ii)
commissions, and (iii) bonuses payable pursuant to any formal bonus plan which
has been approved and adopted by the Board. Regular Compensation shall not
include (a) overtime payments, profit-sharing distributions and other
incentive-type payments or (b) contributions (other than Code Section 401(k) or
Code Section 125 contributions) made on the Participant's behalf under any
employee benefit or welfare plan (now existing or hereafter established).
Service means the period during which an individual remains a Qualifying
Employee and all periods of Service shall be measured from such individual's
most recent date of hire by the Company or such Corporate Affiliate.
-2-
<PAGE> 4
III. ADMINISTRATION
The Plan shall be administered by the Board or a committee comprised of
two (2) or more Board members appointed from time to time by the Board (the
"Plan Administrator"). The Plan Administrator shall have full authority to
administer the Plan, including authority to interpret and construe any provision
of the Plan. Decisions of the Plan Administrator shall be final and binding on
all parties who have an interest in the Plan.
IV. OPTION PERIODS
A. Shares of Common Stock shall be offered for purchase under the Plan
through a series of successive option periods during the term of the Plan until
the maximum number of shares of Common Stock available for issuance under the
Plan shall have been issued.
B. The initial option period will begin on the Effective Date and will
end on the last business day in December, 1997. Subsequent option periods will
coincide with calendar years.
C. Each Participant will have purchase rights as set forth in Article
VII for each option period, the purchase price for which shall be collected
through payroll deductions and which purchase rights shall be exercised in
successive installments each Quarter within the option period.
D. The acquisition of Common Stock through participation in the Plan for
any option period shall neither limit nor require the acquisition of Common
Stock by the Participant in any subsequent option period.
V. ELIGIBILITY AND PARTICIPATION
A. Each Qualifying Employee shall be eligible to participate in an
option period under the Plan in accordance with the following provisions:
- All Qualifying Employees on the Effective Date may enter the initial
option period on the Effective Date by enrolling in accordance with
Section V.C. below.
- A Qualifying Employee with at least three (3) months of Service on
the first day of any subsequent option period may enter that option
period on such first day by enrolling in accordance with Section V.C.
below.
-3-
<PAGE> 5
- A Qualifying Employee who was not previously eligible to enter an
option period may enter that option period on the first day of the
Quarter next following the date such Qualifying Employee has at least
three (3) months of Service by enrolling in accordance with Section V.C.
below.
B. A Qualifying Employee who does not enroll for an option period on
the first date such Qualifying Employee is permitted to enroll hereunder may not
subsequently enroll in that option period.
C. To enroll in the Plan, a Qualifying Employee must complete the
enrollment forms prescribed by the Plan Administrator and file such forms with
the Plan Administrator (or its designate) on or before the date such Qualifying
Employee is first permitted to enter the Option Period.
D. The payroll deduction authorized by the Participant for purposes of
acquiring shares of Common Stock under the Plan may be any multiple of one
percent (1%) of the Regular Compensation paid to the Participant during each
Quarter of the option period, up to a maximum of fifteen percent (15%) of
Regular Compensation. The deduction rate so authorized shall continue in effect
for the remainder of the option period, except to the extent such rate is
changed in accordance with the following guidelines:
- The Participant may, at any time during a Quarter, reduce the rate
of payroll deduction. Such reduction shall become effective as soon as
possible after filing of the requisite reduction form with the Plan
Administrator (or its designate), but the Participant may not effect
more than one such reduction during the same Quarter.
- The Participant may, prior to the commencement of any new Quarter
within the option period, increase or decrease the rate of payroll
deduction for the new Quarter by filing the appropriate form with the
Plan Administrator (or its designate). The new rate shall become
effective as of the first day of the next Quarter.
Payroll deductions will automatically cease upon the termination
of the Participant's purchase right in accordance with the applicable provisions
of Section VII below.
VI. STOCK SUBJECT TO PLAN
A The maximum number of shares of Common Stock which may be issued under
the Plan shall be 200,000 shares of Common Stock (subject to adjustment under
Section VI.B. below).
-4-
<PAGE> 6
B. In the event any change is made to the Company's outstanding Common
Stock by reason of any stock dividend, stock split, combination of shares or
other change affecting such outstanding Common Stock as a class without receipt
of consideration, then appropriate adjustments shall be made by the Plan
Administrator to (i) the class and maximum number of shares issuable over the
term of the Plan, (ii) the class and maximum number of shares purchasable per
Participant during any one option period and (iii) the class and number of
shares and the price per share in effect under each purchase right at the time
outstanding under the Plan. Such adjustments shall be designed to preclude the
dilution or enlargement of rights and benefits under the Plan.
VII. PURCHASE RIGHTS
Each Participant in a particular option period shall have the right to
purchase shares of Common Stock in a series of successive quarterly installments
during such option period on the terms and conditions set forth below (the
"Purchase Rights"). Each Participant shall execute a purchase agreement
embodying such terms and conditions and such other provisions (not inconsistent
with the Plan) as the Plan Administrator may require.
Purchase Price. The Purchase Rights shall be exercised at the end of
each Quarter at a purchase price equal to eighty-five percent (85%) of the lower
of (i) the fair market value per share of the Common Stock on the Participant's
Entry Date or (ii) the fair market value per share of the Common Stock on the
last business day of the Quarter. However, for each Participant whose Entry Date
is other than the first day of the option period, the amount determined under
clause (i) shall not be less than the fair market value of the Common Stock on
the first day of such option period.
Valuation. For purposes of determining the fair market value per share
of Common Stock on any relevant date, the following procedures shall be in
effect:
- If fair market value is to be determined on or after the date the
Common Stock is first registered under Section 12(g) of the Securities
Exchange Act of 1934, as amended, then the fair market value shall be
the closing selling price on that date, as officially quoted on the
Nasdaq National Market System, or if there is no quoted selling price
for such date, then the closing selling price on the next preceding day
for which there does exist such a quotation.
- If fair market value is to be determined prior to such Section 12(g)
registration of the Common Stock, then the fair market value of the
Common Stock on such date shall be determined by the Plan Administrator
after taking into account such factors as the Plan Administrator deems
appropriate.
-5-
<PAGE> 7
Number of Purchasable Shares. The number of shares purchasable by a
Participant each Quarter shall be the number of whole shares obtained by
dividing the amount in Participant's Account at the end of such Quarter by the
purchase price in effect for the Quarter.
Notwithstanding the above, (i) no Participant shall have the right to
purchase more than 2,500 shares of Common Stock in any one Option Period, and
(ii) no Participant shall have the right to purchase shares of Common Stock to
the extent that, immediately after the grant, such Participant would own (within
the meaning of Code Section 424(d)) or hold outstanding options or other rights
to purchase, stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of stock of the Company or any of its
Corporate Affiliates.
Payment. Payment for the Common Stock purchased under the Plan shall be
effected by means of the Participant's authorized payroll deductions. Such
deductions shall begin on the first pay day coincident with or immediately
following the Participant's Entry Date into the option period and shall (unless
sooner terminated by the Participant) continue through the pay day ending with
or immediately prior to the last day of the option period. The amounts so
collected shall be credited to the Participant's Account under the Plan, but no
interest shall be paid on the balance from time to time outstanding in such
Account. The amounts collected from a Participant may be commingled with the
general assets of the Company and may be used for general corporate purposes.
Termination of Purchase Right. The following provisions shall govern
the termination of outstanding purchase rights:
(i) A Participant may, at any time prior to the last five (5)
business days of the Quarter, terminate his/her outstanding purchase right
under the Plan by filing the prescribed notification form with the Plan
Administrator (or its designate). No further payroll deductions shall be
collected from the Participant with respect to the terminated purchase
right, and any payroll deductions collected for the current Quarter shall,
at the Participant's election, be immediately refunded or held for the
purchase of shares on the end of the Quarter. If no such election is made,
then such funds shall be refunded as soon as possible after the close of
such Quarter.
(ii) After the termination of purchase rights for an option
period, the Participant may not subsequently rejoin that option period. In
order to resume participation in any subsequent option period, such
individual must re-enroll in the Plan for that option period.
(iii) If a Participant ceases to be a Qualifying Employee for
any reason whatsoever during an option period then all payroll
-6-
<PAGE> 8
deductions shall terminate and all funds held in the Participant's Account
will be promptly paid to the Participant or the Participant's legal
representative. No further purchases of shares hereunder shall occur after
the Participant has ceased to be a Qualifying Employee.
Stock Purchase. Subject to the limitations set forth herein, funds held
in a Participant's Account at the end of a Quarter (and which are not required
to be refunded hereunder) shall be applied to the purchase of whole shares of
Common Stock for the Participant on the last business day of the Quarter at the
purchase price in effect for such Quarter. Any payroll deductions not applied to
such purchase because they are not sufficient to purchase a whole share shall be
held for the purchase of Common Stock in the next Quarter. Any payroll
deductions not applied to the purchase of Common Stock for any other reason
shall be promptly refunded to the Participant.
Proration of Purchase Rights. If the total number of shares of Common
Stock which would otherwise be purchased hereunder on any date exceed the number
of shares then available for issuance under the Plan, the Plan Administrator
shall make a pro-rata allocation of the available shares to Participants on a
uniform and nondiscriminatory basis.
Rights as Stockholder. A Participant shall have no stockholder rights
with respect to the shares subject to his/her outstanding purchase right until
the shares are actually purchased on the Participant's behalf in accordance with
the applicable provisions of the Plan. No adjustments shall be made for
dividends, distributions or other rights for which the record date is prior to
the date of such purchase.
A Participant shall be entitled to receive, as soon as practicable
after purchase hereunder, a stock certificate for the number of shares purchased
for the Participant. Such certificate may, upon the Participant's request, be
issued in the names of the Participant and his/her spouse as community property
or as joint tenants with right of survivorship.
Assignability. No purchase right granted under the Plan shall be
assignable or transferable by the Participant other than by will or by the laws
of descent and distribution following the Participant's death, and during the
Participant's lifetime the purchase right shall be exercisable only by the
Participant.
Change in Ownership. Should the Company or its stockholders enter into
an agreement to dispose of all or substantially all of the assets or outstanding
capital stock of the Company by means of:
(i) a sale, merger or other reorganization in which the Company
will not be the surviving corporation (other than a reorganization
effected primarily to change the State in which the Company is
incorporated), or
-7-
<PAGE> 9
(ii) a reverse merger in which the Company is the surviving
corporation but in which more than 50% of the Company's outstanding voting
stock is transferred to holders different from those who held the stock
immediately prior to the reverse merger,
then all outstanding purchase rights under the Plan shall automatically
be exercised immediately prior to the consummation of such sale, merger,
reorganization or reverse merger by applying the amounts in each Participant's
Account to the purchase of whole shares of Common Stock at eighty-five percent
(85%) of the lower of (i) the fair market value of the Common Stock on the
Participant's Entry Date into the option period in which such transaction occurs
or (ii) the fair market value of the Common Stock immediately prior to the
consummation of such transaction. However, the applicable share limitations of
Articles VII and VIII shall continue to apply to any such purchase, and the
clause (i) amount above shall not, for any Participant whose Entry Date for the
option period is other than the start date of such option period, be less than
the fair market value of the Common Stock on such start date.
The Company shall use its best efforts to provide at least ten (10)-days
advance written notice of the occurrence of any such sale, merger,
reorganization or reverse merger, and Participants shall, following the receipt
of such notice, have the right to terminate their outstanding purchase rights in
accordance with the applicable provisions of this Article VII.
VIII. ACCRUAL LIMITATIONS
A. No Participant shall be entitled to accrue rights to acquire Common
Stock pursuant to any purchase right outstanding under this Plan if and to the
extent such accrual, when aggregated with (i) rights to purchase Common Stock
accrued under any other purchase right outstanding under this Plan and (ii)
similar rights accrued under other employee stock purchase plans (within the
meaning of Section 423 of the Code) of the Company or its Corporate Affiliates,
would otherwise permit such Participant to purchase more than $25,000 worth of
stock of the Company or any Corporate Affiliate (determined on the basis of the
fair market value of such stock on the date or dates such rights are granted to
the Participant) for each calendar year such rights are at any time outstanding.
B. For purposes of applying such accrual limitations, the right to
acquire Common Stock pursuant to each purchase right outstanding under the Plan
shall accrue as follows:
(i) The right to acquire Common Stock under each such purchase
right shall accrue in a series of successive quarterly installments as and
when the purchase right first becomes exercisable for each quarterly
-8-
<PAGE> 10
installment on the last business day of each Quarter for which the right
remains outstanding.
(ii) No right to acquire Common Stock under any outstanding
purchase right shall accrue to the extent the Participant has already
accrued in the same calendar year the right to acquire $25,000 worth of
Common Stock (determined on the basis of the fair market value on the date
or dates of grant) pursuant to one or more purchase rights held by the
Participant during such calendar year.
(iii) If by reason of such accrual limitations, any purchase
right of a Participant does not accrue for a particular Quarter, then the
payroll deductions which the Participant made during that Quarter with
respect to such purchase right shall be promptly refunded.
C. In the event there is any conflict between the provisions of
this Article VIII and one or more provisions of the Plan or any instrument
issued thereunder, the provisions of this Article VIII shall be controlling.
IX. STATUS OF PLAN UNDER FEDERAL TAX LAWS
The Plan is designed to qualify as an employee stock purchase plan under
Code Section 423.
X. AMENDMENT AND TERMINATION
A. The Board may alter, amend, suspend or discontinue the Plan following
the close of any Quarter. However, the Board may, if it so determines, condition
any amendment on the Company having obtained the approval of the Company's
stockholders.
B. The Company shall have the right, exercisable in the sole discretion
of the Plan Administrator, to terminate all outstanding purchase rights under
the Plan immediately following the close of any Quarter. Should the Company
elect to exercise such right, then the Plan shall terminate in its entirety. No
further purchase rights shall thereafter be granted or exercised, and no further
payroll deductions shall thereafter be collected, under the Plan.
XI. GENERAL PROVISIONS
A. The term of this Plan shall commence on the effective date of the S-8
Registration Statement covering the Common Stock issuable under the Plan,
provided that the term shall not commence, and no shares of Common Stock shall
be issued hereunder, until (i) the Plan shall have been approved by the
stockholders; (ii) the Company shall have
-9-
<PAGE> 11
complied with all applicable requirements, all applicable listing requirements
of any securities exchange on which shares of the Common Stock are listed and
all other applicable requirements established by law or regulation and the Plan
Administrator shall have determined to commence granting Purchase Rights
hereunder. In the event stockholder approval is not obtained, or Company
compliance with the Act is not effected, within twelve (12) months after the
date on which the Plan is adopted by the Board, the Plan shall terminate and
have no further force or effect.
B. The Plan shall terminate on June 3, 2006.
C. All costs and expenses incurred in the administration of the
Plan shall be paid by the Company.
D. Neither the action of the Company in establishing the Plan,
nor any action taken under the Plan by the Board or the Plan Administrator, nor
any provision of the Plan itself shall be construed so as to grant any person
the right to remain in the employ of the Company or any Corporate Affiliate for
any period, and such person's employment may be terminated at any time, with or
without cause.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-10-
<PAGE> 1
EXHIBIT 10.46
<PAGE> 2
INTERACT MEDICAL TECHNOLOGIES CORPORATION
1996 EMPLOYEE STOCK PURCHASE PLAN
STOCK PURCHASE AGREEMENT
1. I hereby elect to participate In the Interact Medical Technologies
Corporation 1996 Employee Stock Purchase Plan (the "Plan") for the option
period specified below, and I accordingly subscribe to purchase shares of
Interact Medical Technologies Corporation Common Stock at the end of each of
my quarterly periods of participation within such option period.
2. By separate form, I have authorized payroll deductions from each of my
paychecks during my period of participation in the option period. Such
payroll deductions will be accumulated for the purchase of shares of
Interact MEDICAL Technologies Corporation Common Stock on the last business
day of each quarterly period of participation. The purchase price per share
will be the lower of (i) 85% of the market price on the start date of the
quarterly period of participation in which I first enter the option period
or (ii) 85% of the market price on each quarterly purchase date. However,
the clause (i) amount will in no event be less than 85% of the market price
on the start date of the option period.
3. This enrollment will be effective for the duration of the option period
specified below, and shares will automatically be purchased on my behalf at
the end of each quarterly period of participation, unless I withdraw from
the Plan or my employment terminates.
4. My rate of payroll deduction will automatically continue in effect for each
of my quarterly periods of participation within the option period, unless I
change such rate or otherwise withdraw from the Plan or my employment
terminates.
5. I can withdraw from the Plan at any time and elect either to have the
Company refund all my payroll deductions for the quarterly period of
participation in which I withdraw or to have such payroll deductions applied
to the purchase of Interact Medical Technologies Corporation Common Stock at
the end of such period. However, I may not rejoin the Plan for that
particular option period at any later date. Upon my termination of
employment or change to ineligible employee status, payroll deductions will
automatically cease on my behalf and the Company will refund my payroll
deductions to date in the quarterly period of participation in which such
termination or change occurs.
6. I have a copy of, and am familiar with, the official Plan Prospectus
summarizing the operation of the Plan. A complete copy of the actual plan
document is attached as Exhibit A to the Prospectus.
7. I am to receive a stock certificate for the shares purchased on my behalf
after each quarterly purchase date. The certificate will be issued as
indicated on my Enrollment/Change Form.
8. The Company has the right to amend or terminate the Plan at any time, with
such amendment or termination to become effective immediately following the
exercise of outstanding purchase rights at the end of any current quarterly
period of participation. Should the Company elect to terminate the Plan, I
will have no further rights to purchase shares of Interact Medical
Technologies Corporation Common Stock pursuant to this Agreement.
9. I am familiar with the Plan restriction prohibiting any participant from
purchasing more than $25,000 worth of Common Stock per calendar year.
10. I have read this Agreement and the Plan. I hereby agree to be bound by the
terms of both this Agreement and the Plan. The effectiveness of this
Agreement is dependent upon my eligibility to participate in the Plan.
Date
-------------- ---------------------------------------------
Signature of Employee
Printed Name:
--------------------------------
Duration of Option Period:
From: to
------------- -------------
Start Date of My Quarterly Subsequent Quarterly Periods
Period of Participation: of Participation:
, 19__ From: to
-------------- ------------ --------------
From: to
------------ --------------
From: to
------------ --------------
<PAGE> 1
Exhibit 10.47
<PAGE> 2
Ixion Employee Non-Disclosure and Non-Compete Agreement
GENERAL
As an employee of Ixion (a Delaware corporation), I will devote my best efforts
to furthering the Business purposes and interests of Ixion. As defined herein,
Ixion "Business" will be the development, marketing, and support of medical
simulation systems along with other such business as is called out in an Ixion
Mission Statement, which Ixion will update quarterly or more frequently, and
which will be supplied to me when updated.
During my employment I will not engage in any non-Ixion activity or investment
outside of Ixion that (a) conflicts with Ixion's Business purposes or
interests, including without limitation any additional interests as described
in the Ixion Mission Statement, (b) occupies my attention so as to interfere
with the proper and efficient performance of my duties at Ixion, or (c)
interferes with the independent exercise of my judgment in Ixion's best
interests.
NON-DISCLOSURE
At all times during my employment and thereafter I will not disclose to anyone
outside Ixion nor use for the purpose other than my work for Ixion (a) any
confidential, client-proprietary, technical, financial, marketing,
manufacturing, distribution or other technical or business information or trade
secrets of Ixion, including without limitation, business plans or proposals,
sales and pricing information, information about business relationships with
customers or suppliers, vendors, or contracts, customer lists, concepts,
techniques, processes, methods systems, designs, circuits, cost data, computer
program, formulas, development or experimental work, work in progress,
customers and suppliers, (b) any information Ixion has received from others
which Ixion is obligated to treat as confidential or proprietary or (c) any
confidential or proprietary information which is circulated within Ixion.
Furthermore, I will not remove such proprietary materials as described in (a),
(b), or (c) above from the premises of Ixion without permission of Ixion.
INVENTIONS
I will make prompt and full disclosure to Ixion, will hold in trust for the
sole benefit of Ixion, and will assign exclusively to Ixion all my right and
title, and interest in and all Inventions including discoveries, designs,
developments, improvements, copyrightable material, trade secrets, and patents
(herein collectively named "Inventions") that I solely or jointly, may
conceive, develop, or reduce to practice as a result of or in connection with
services performed for Ixion. All material developed for Ixion shall be
considered "work-for-hire."
I hereby waive and quitclaim to Ixion any and all claims of any nature
whatsoever that I now or hereafter may have for infringement of any patent
resulting from any patent applications for any Inventions assigned to Ixion. I
further understand that key contributors will be named in Ixion patents at the
sole discretion of Ixion, and that any form of recognition shall be decided on
a
<PAGE> 3
2
case by case basis at the sole discretion of Ixion. I further concur that no
term of employment shall be based on the value of any Invention of mine or as
the result of my participation in Ixion inventions.
ASSIGNMENT OF INVENTIONS
I hereby assign to Ixion all my right, title, and interest in and to any and all
Ixion Inventions full title to which may be required to be valid for any purpose
worldwide. I also agree here to use my best efforts to assist Ixion in the
application and prosecution of such inventions while employed and beyond the
term of my employment. My obligation to assign shall not apply to any Invention
about which I can prove by clear, cogent, and convincing evidence that:
a) it was developed entirely on my own time; and
b) no trade secret information of Ixion was used in its development;
and
c) it does not relate directly to the business purposes and interests
of Ixion as set forth in the Ixion Mission Statement, and
d) it does not directly or substantially result from any work
performed by me for Ixion.
I have attached hereto a list describing all patented, copyrighted, or
otherwise documented Inventions which are my property and which were made prior
to the date of this agreement with Ixion that I wish to exclude from this
Assignment.
NON-COMPETITION AND TERMINATION PROVISIONS
I agree that, for a stated period of time following the termination of my
employment, I will not, beyond passive investment, either directly or
indirectly own, manage, operate, join, control, or participate in the
ownership, management, operation or control of, or become an employee, service
technician, agent, or sales representative of, or consultant or advisor to, any
business, person, customer, or other entity, which engages in any activity
that creates competition with Ixion's Business purposes and interest as set out
in the last Ixion Mission Statement preceding my date of termination. If I as
an employee effect the termination, that period will be two (2) years. If Ixion
effects the termination with just cause, that period will be (2) years, and if
Ixion effects the termination for any cause, that period will be (9) months.
This will apply work with companies worldwide, including specifically the
United States, Western Europe, Japan, Canada, Mexico, Both Chinas, Korea and
Australia.
I understand that my employment relationship is "at will" and that notice of
termination with or without cause by either an employee or by Ixion will be
considered immediate unless a transitional term is mutually agreed upon by both
parties. I will leave in good order all materials that I have developed with
Ixion and all materials that are the property of Ixion.
PERSONAL PROPERTY
I understand that I may voluntarily use my own personal tangible or intangible
property to facilitate my work at Ixion when appropriate, but that Ixion will
not be responsible for its maintenance, rent or other payments, storage,
replacement, damage, or theft or assume any other liability for that property.
If the personal property is used in conjunction with Ixion confidential
material -- such as computer software -- then that material will remain as
<PAGE> 4
3
confidential as if it were within the physical confines of Ixion. I understand
that Ixion will provide fire and theft insurance for my possessions while they
are on Ixion's premises to the extent such possessions are covered by Ixion
insurance and as long as Ixion property is fully compensated first.
ENTIRE AGREEMENT
I understand that this Agreement shall be governed for all purposes by laws of
the state of Washington as such laws apply to contracts to be performed within
Washington by residents of Washington and that venue for any action arising out
of this Agreement shall be properly laid in King County, Washington or in the
Federal District Court for the Western District of Washington or at the
employee's then-current residence, at Ixion's option. If any provision of this
Agreement shall be declared excessively broad, it shall be construed so as to
afford Ixion the maximum protection permissible by law. If any provision of
this agreement is void or is so declared, such provisions shall be severed from
this Agreement, which shall otherwise remain in full force and effect. I agree
that in case of such a breach irreparable harm may be suffered by Ixion for
which remedies at law may not adequately compensate and therefore Ixion shall be
entitled to obtain injunctive or other equitable relief against Employee in any
court in addition to any damages which might be proved. Should it be necessary
for either party to enforce this agreement, the court shall award the
prevailing party attorney's fees, costs, expenses, legal assistant and expert
fees reasonably incurred to enforce or defend parties' rights under this
agreement.
This agreement sets forth the entire Agreement of the parties as to my duties
to Ixion regarding rights, non-disclosure and non-competition, and supercedes
any prior non-disclosure or non-compete agreements. Any representations,
promises, or conditions in connection therewith will not apply except for
pre-existing products or conditions of which I have notified Ixion in writing
and which Ixion has subsequently acknowledged and agreed. Any waiver of any
breach of this Agreement or failure to enforce its provisions shall not
operate, or be construed as, a waiver of any subsequent or prior breach by any
party. The terms and conditions of this Agreement shall survive my employment
termination. This agreement may be modified, amended, or superceded only by a
separate written instrument executed by both IXION and Employee.
I HAVE READ AND FULLY UNDERSTAND THIS AGREEMENT WITH IXION
- - ----------------------------- -------------------------------
Signature Date Acknowledging for Ixion (Date)
Personal Invention(s) or Personal Property List attached
(initial): Yes No
----- -----
Acknowledging for Ixion (Date)
------------------------ --------------
<PAGE> 1
EXHIBIT 10.48
<PAGE> 2
MEDICAL MEDIA SYSTEMS
INVENTION AND NON-DISCLOSURE AGREEMENT
IN CONSIDERATION of my being engaged as a of
Medical Media Systems, a New Hampshire general partnership (the "Company"),
and for other valuable consideration, receipt of which is acknowledged, I agree
as follows:
1. Proprietary Information.
(a) I agree that all information and know-how, whether or not in writing,
of a private, secret or confidential nature concerning the Company's business
of financial affairs (collectively, "Proprietary Information") is and shall be
the exclusive property of the Company. I will not disclose any Proprietary
Information to others outside the Company or use the same for any purposes
(other than in the performance of my duties as a management committee member of
the Company unless and until such Proprietary Information has become public
knowledge without fault by me.
(b) All tangible material containing Proprietary Information or copies
thereof and all tangible property of the Company in my custody or possession
shall be deliver to the Company, upon a request by the company. After such
delivery, I shall not retain any such materials or copies thereof or any such
tangible property.
(c) I agree that my obligation not to disclose or use information,
know-how and materials of the types set forth above, and my obligation to return
materials and tangible property, set forth above, also extends to such types of
information, know-how, materials and tangible property of customers of the
Company or suppliers to the Company or other third parties who may have
disclosed or entrusted the same to the Company or to me in the course of the
Company's business.
2. Developments.
(a) I will make full and prompt disclosure to the Company of all
inventions, improvements, discoveries, methods, developments, software, and
works of authorship, whether or not patentable or copyrightable, which are
created, made, conceived or reduced to practice by me or under my direction or
jointly with others in the course of my work for the Company (whether directly
for the Company or through my work pursuant to the Research Agreement between
Dartmouth College and the Company), whether or not during normal working hours
or on the premises of the
1
<PAGE> 3
Company (all of which are collectively referred to in this Agreement as
"Developments").
(b) I agree to assign and do hereby assign to the Company (or any
person or entity designated by the Company) all my right, title and interest in
and to all Developments and all related patents, patent applications, utility
models, applications for utility models, and copyrights and copyright
applications. I also agree to waive all claims to moral rights in all
Developments.
(c) I agree to cooperate fully with the Company, both during and after
my relationship with the Company, with respect to the procurement, maintenance
and enforcement of copyrights, patents and other industrial and intellectual
property rights (both in the United States and foreign countries) relating to
Developments. I will sign all papers, including without limitation, copyright
applications, patent applications, declarations, oaths, formal assignments,
assignment of priority rights, and power of attorney, which the Company may
deem necessary or desirable in order to protect its rights and interests in any
Development.
3. Other Agreements.
I represent that my performance of all the terms of this Agreement does
not and will not breach any agreement to refrain from competing, directly or
indirectly, with the business of any other party nor any agreement to keep in
confidence proprietary information, knowledge or data acquired by me in
confidence or in trust. I will not disclose to the Company or induce the
Company to use any confidential or proprietary information or material
belonging to any previous employer or others.
4. General
(a) This Agreement supersedes all prior agreements, written or oral,
between me and the Company relating to the subject matter of this Agreement.
This Agreement may not be modified, changed, or discharged in whole or in
part, except by an agreement in writing signed by me and the Company.
(b) This Agreement will be binding upon my heirs, executors and
administrators and will inure to the benefit of the Company and its successors
and assigns.
2
<PAGE> 4
(c) This Agreement is governed by and will be construed as a State
of New Hampshire.
(d) This Agreement does not constitute a consulting contract and
does not imply that my membership on the management committee will continue for
any period of time.
(e) I understand and agree that my obligations under this Agreement
shall be effective as of the date of commencement of my membership of the
management committee.
I HAVE READ ALL OF THE PROVISIONS OF THIS AGREEMENT AND I UNDERSTAND,
AND AGREE TO, EACH OF SUCH PROVISIONS.
Date:
---------------------------------- ---------------------------------
Signature
Medical Media Systems, Inc.
by: Baxter Medical Media
Holdings, Inc.
by:
------------------------------
title:
---------------------------
<PAGE> 1
EXHIBIT 10.49
<PAGE> 2
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made and entered into this _____ day of
_________________________,1996 between Interact Medical Technologies
Corporation, a Delaware corporation ("Corporation"), and ______________________
("Director").
RECITALS:
A. Director, a member of the Board of Directors of Corporation,
performs a valuable service in such capacity for Corporation; and
B. The stockholders of Corporation have adopted Bylaws (the
"Bylaws") providing for the indemnification of its Directors and executive
officers to the fullest extent not prohibited by the Delaware General
Corporation Law, as amended (the "Code"); and
C. The Bylaws and the Code, by their non-exclusive nature,
permit contracts between Corporation and the members of its Board of Directors
with respect to indemnification of such directors; and
D. In accordance with the authorization as provided by the Code,
Corporation may purchase and maintain a policy or policies of Directors and
Officers Liability Insurance ("D & 0 Insurance"), covering certain liabilities
which may be incurred by its directors and officers in the performance as
directors and officers of Corporation; and
E. As a result of developments affecting the terms, scope and
availability of D & O Insurance, there exists general uncertainty as to the
extent of protection afforded members of the Board of Directors by such D & O
Insurance, if any, and by statutory and by-law indemnification provisions; and
F. In order to induce Director to continue to serve as a member
of the Board of Directors of Corporation, Corporation has determined and agreed
to enter into this contract with Director.
NOW, THEREFORE, in consideration of Director's continued service
as a director after the date hereof, the parties hereto agree as follows:
1. Indemnity of Director. Corporation hereby agrees to hold
harmless and indemnify Director to the fullest extent authorized or permitted by
the provisions of the Code, as may be amended from time to time.
2. Additional Indemnity. Subject only to the exclusions set
forth in Section 3 hereof, Corporation hereby further agrees to hold harmless
and indemnify Director:
<PAGE> 3
(a) against any and all expenses (including attorneys' fees),
witness fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by Director in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (including an action by or in the right of Corporation) to which
Director is, was or at any time becomes a party, or is threatened to be made a
party, by reason of the fact that Director is, was or at any time becomes a
director, officer, employee or agent of Corporation, or is or was serving or at
any time serves at the request of Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise; and
(b) otherwise to the fullest extent as may be provided to
Director by Corporation under the non-exclusivity provisions of the Bylaws of
Corporation and the Code.
3. Limitations on Additional Indemnity. No indemnity pursuant to Section
2 hereof shall be paid by Corporation:
(a) except to the extent the aggregate of losses to be
indemnified thereunder exceeds the sum of such losses for which the Director is
indemnified pursuant to Section 1 hereof or pursuant to any D & 0 Insurance
purchased and maintained by Corporation;
(b) in respect to remuneration paid to Director if it shall be
determined by a final judgment or other final adjudication that such
remuneration was in violation of law;
(c) on account of any suit in which judgment is rendered against
Director for an accounting of profits made from the purchase or sale by Director
of securities of Corporation pursuant to the provisions of Section 16(b) of the
Securities Exchange Act of 1934 and amendments thereto or similar provisions of
any federal, state or local statutory law;
(d) on account of Director's conduct which is finally adjudged
to have been knowingly fraudulent or deliberately dishonest, or to constitute
willful misconduct;
(e) on account of Director's conduct which is the subject of an
action, suit or proceeding described in Section 7(c)(ii) hereof;
(f) on account of any action, claim or proceeding (other than a
proceeding referred to in Section 8(b) hereof) initiated by the Director unless
such action, claim or proceeding was authorized in the specific case by action
of the Board of Directors;
(g) if a final decision by a Court having jurisdiction in the
matter shall determine that such indemnification is not lawful (and, in this
respect, both Corporation
-2-
<PAGE> 4
and Director have been advised that the Securities and Exchange Commission
believes that indemnification for liabilities arising under the federal
securities laws is against public policy and is, therefore, unenforceable and
that claims for indemnification should be submitted to appropriate courts for
adjudication).
4. Contribution. If the indemnification provided in Sections 1 and 2
hereof is unavailable by reason of a Court decision described in Section 3(g)
hereof based on grounds other than any of those set forth in paragraphs (b)
through (f) of Section 3 hereof, then in respect of any threatened, pending or
completed action, suit or proceeding in which Corporation is jointly liable with
Director (or would be if joined in such action, suit or proceeding), Corporation
shall contribute to the amount of expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
and paid or payable by Director in such proportion as is appropriate to reflect
(i) the relative benefits received by Corporation on the one hand and Director
on the other hand from the transaction from which such action, suit or
proceeding arose, and (ii) the relative fault of Corporation on the one hand and
of Director on the other in connection with the events which resulted in such
expenses, judgments, fines or settlement amounts, as well as any other relevant
equitable considerations. The relative fault of Corporation on the one hand and
of Director on the other shall be determined by reference to, among other
things, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent the circumstances resulting in such expenses,
judgments, fines or settlement amounts. Corporation agrees that it would not be
just and equitable if contribution pursuant to this Section 4 were determined by
pro rata allocation or any other method of allocation which does not take
account of the foregoing equitable considerations.
5. Continuation of Obligations. All agreements and obligations of
Corporation contained herein shall continue during the period Director is a
director, officer, employee or agent of Corporation (or is or was serving at the
request of Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise) and shall continue thereafter so long as Director shall be subject
to any possible claim or threatened, pending or completed action, suit or
proceeding, whether civil, criminal or investigative, by reason of the fact that
Director was a director of Corporation or serving in any other capacity referred
to herein.
6. Notification and Defense of Claim. Not later than thirty (30) days
after receipt by Director of notice of the commencement of any action, suit or
proceeding, Director will, if a claim in respect thereof is to be made against
Corporation under this Agreement, notify Corporation of the commencement
thereof; but the omission so to notify Corporation will not relieve it from any
liability which it may have to Director otherwise than under this Agreement.
With respect to any such action, suit or proceeding as to which Director
notifies Corporation of the commencement thereof:
(a) Corporation will be entitled to participate therein at its
own expense;
-3-
<PAGE> 5
(b) except as otherwise provided below, to the extent that it
may wish, Corporation jointly with any other indemnifying party similarly
notified will be entitled to assume the defense thereof, with counsel reasonably
satisfactory to Director. After notice from Corporation to Director of its
election so as to assume the defense thereof, Corporation will not be liable to
Director under this Agreement for any legal or other expenses subsequently
incurred by Director in connection with the defense thereof other than
reasonable costs of investigation or as otherwise provided below. Director shall
have the right to employ its counsel in such action, suit or proceeding but the
fees and expenses of such counsel incurred after notice from Corporation of its
assumption of the defense thereof shall be at the expense of Director unless (i)
the employment of counsel by Director has been authorized by Corporation, (ii)
Director shall have reasonably concluded that there may be a conflict of
interest between Corporation and Director in the conduct of the defense of such
action or (iii) Corporation shall not in fact have employed counsel to assume
the defense of such action, in each of which cases the fees and expenses of
Director's separate counsel shall be at the expense of Corporation. Corporation
shall not be entitled to assume the defense of any action, suit or proceeding
brought by or on behalf of Corporation or as to which Director shall have made
the conclusion provided for in (ii) above; and
(c) Corporation shall not be liable to indemnify Director under
this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. Corporation shall be permitted to settle
any action except that it shall not settle any action or claim in any manner
which would impose any penalty or limitation on Director without Director's
written consent. Neither Corporation nor Director will unreasonably withhold its
consent to any proposed settlement.
7. Advancement and Repayment of Expenses.
(a) In the event that Director employs his own counsel pursuant
to Section 6(b)(i) through (iii) above, Corporation shall advance to Director,
prior to any final disposition of any threatened or pending action, suit or
proceeding, whether civil, criminal, administrative or investigative, any and
all reasonable expenses (including legal fees and expenses) incurred in
investigating or defending any such action, suit or proceeding within ten (10)
days after receiving copies of invoices presented to Director for such expenses.
(b) Director agrees that Director will reimburse Corporation for
all reasonable expenses paid by Corporation in defending any civil or criminal
action, suit or proceeding against Director in the event and only to the extent
it shall be ultimately determined by a final judicial decision (from which there
is no right of appeal) that Director is not entitled, under the provisions of
the Code, the Bylaws, this Agreement or otherwise, to be indemnified by
Corporation for such expenses.
(c) Notwithstanding the foregoing, Corporation shall not be
required to advance such expenses to Director if Director (i) commences any
action, suit or proceeding as a plaintiff unless such advance is specifically
approved by a majority of the
-4-
<PAGE> 6
Board of Directors or (ii) is a party to an action, suit or proceeding brought
by Corporation and approved by a majority of the Board which alleges willful
misappropriation of corporate assets by Director, disclosure of confidential
information in violation of Director's fiduciary or contractual obligations to
Corporation, or any other willful and deliberate breach in bad faith of
Director's duty to Corporation or its stockholders.
8. Enforcement.
(a) Corporation expressly confirms and agrees that it has
entered into this Agreement and assumed the obligations imposed on Corporation
hereby in order to induce Director to continue as a director of Corporation, and
acknowledges that Director is relying upon this Agreement in continuing in such
capacity.
(b) In the event Director is required to bring any action to
enforce rights or to collect moneys due under this Agreement and is successful
in such action, the Corporation shall reimburse Director for all Director's
reasonable fees and expenses in bringing and pursuing such action.
9. Subrogation. In the event of payment under this agreement,
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Director, who shall execute all documents required and
shall do all acts that may be necessary to secure such rights and to enable
Corporation effectively to bring suit to enforce such rights.
10. Non-Exclusivity of Rights. The rights conferred on Director
by this Agreement shall not be exclusive of any other right which Director may
have or hereafter acquire under any statute, provision of Corporation's
Certificate of Incorporation or Bylaws, agreement, vote of stockholders or
directors, or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office.
11. Survival of Rights. The rights conferred on Director by this
Agreement shall continue after Director has ceased to be a director, officer,
employee or other agent of Corporation and shall inure to the benefit of
Director's heirs, executors and administrators.
12. Separability. Each of the provisions of this Agreement is a
separate and distinct agreement and independent of the others, so that if any or
all of the provisions hereof shall be held to be invalid or unenforceable for
any reason, such invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions hereof or the obligation of the
Corporation to indemnify the Director to the full extent provided by the Bylaws
or the Code.
13. Governing Law. This Agreement shall be interpreted and
enforced in accordance with the laws of the State of Delaware.
-5-
<PAGE> 7
14. Binding Effect. This Agreement shall be binding upon
Director and upon Corporation, its successors and assigns, and shall inure to
the benefit of Director, his heirs, personal representatives and assigns and to
the benefit of Corporation, its successors and assigns.
15. Amendment and Termination. No amendment, modification,
termination or cancellation of this Agreement shall be effective unless in
writing signed by both parties hereto.
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.
CORPORATION: INTERACT MEDICAL TECHNOLOGIES
CORPORATION,
a Delaware corporation
-----------------------------------
Bruce D. Sturman, President
DIRECTOR: -----------------------------------
[SIGNATURE PAGE TO INDEMNIFICATION AGREEMENT]
<PAGE> 1
Exhibit 10.50
<PAGE> 2
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made and entered into this ____ day of ____________, 1996,
between Interact Medical Technologies Corporation, a Delaware corporation
("Corporation"), and ____________________ ("Officer").
RECITALS:
A. Officer, an officer (but not currently a member of the Board of
Directors) of Corporation, performs a valuable service in such capacity for
Corporation; and
B. The stockholders of Corporation have adopted Bylaws (the "Bylaws")
providing for the indemnification of its Directors and executive officers to the
fullest extent not prohibited by the Delaware General Corporation Law, as
amended (the "Code"); and
C. The Bylaws and the Code, by their non-exclusive nature, permit contracts
between Corporation and its officers with respect to indemnification of
officers; and
D. In accordance with the authorization as provided by the Code, Corporation
may purchase and maintain a policy or policies of Directors and Officers
Liability Insurance ("D & O Insurance"), covering certain liabilities which may
be incurred by its directors and officers in the performance as directors and
officers of Corporation; and
E. As a result of developments affecting the terms, scope and availability
of D & O Insurance there exists general uncertainty as to the extent of
protection afforded officers by such D & O Insurance, if any, and by statutory
and by-law indemnification provisions; and
F. In order to induce Officer to continue to serve as an officer of
Corporation, Corporation has determined and agreed to enter into this contract
with Officer;
NOW, THEREFORE, in consideration of Officer's continued service as an
officer after the date hereof, the parties hereto agree as follows:
1. Indemnity of Officer. Corporation hereby agrees to hold harmless and
indemnify Officer to the fullest extent authorized or permitted by the
provisions of the Code, as it may be amended from time to time.
2. Additional Indemnity. Subject only to the exclusions set forth in Section
3 hereof, Corporation hereby further agrees to hold harmless and indemnify
Officer:
<PAGE> 3
(a) against any and all legal expenses (including attorneys' fees),
witness fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by Officer in connection with any threatened, pending or
completed action, suit or proceeding, whether civil , criminal, administrative
or investigative (including an action by or in the right of Corporation) to
which Officer is, was or at any time becomes a party, or is threatened to be
made a party, by reason of the fact that Officer is, was or at any time becomes
a director, officer, employee or agent of Corporation, or is or was serving or
at any time serves at the request of Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise; and
(b) otherwise to the fullest extent as may be provided to Officer by
Corporation under the non-exclusivity provisions of the Bylaws of Corporation
and the Code.
3. Limitations on Additional Indemnity. No indemnity pursuant to Section 2
hereof shall be paid by Corporation:
(a) except to the extent the aggregate of losses to be indemnified
thereunder exceeds the sum of such losses for which Officer is indemnified
pursuant to Section 1 hereof or pursuant to any D & 0 Insurance purchased and
maintained by Corporation;
(b) in respect to remuneration paid to Officer if it shall be
determined by a final judgment or other final adjudication that such
remuneration was in violation of law;
(c) on account of any suit in which judgment is rendered against
Officer for an accounting of profits made from the purchase or sale by Officer
of securities of Corporation pursuant to the provisions of Section 16(b) of the
Securities Exchange Act of 1934 and amendments thereto or similar provisions of
any federal, state or local statutory law;
(d) on account of Officer's conduct which is finally adjudged to have
been knowingly fraudulent or deliberately dishonest, or to constitute willful
misconduct;
(e) on account of Officer's conduct which is the subject of an action,
suit or proceeding described in Section 7(c)(ii) hereof;
(f) on account of any action, claim or proceeding (other than a
proceeding referred to in Section 8(b) hereof) initiated by Officer unless such
action, claim or proceeding was authorized in the specific case by action of the
Board of Directors; or
(g) if a final decision by a Court having jurisdiction in the matter
shall determine that such indemnification is not lawful (and, in this respect,
both Corporation
-2-
<PAGE> 4
and Officer have been advised that the Securities and Exchange Commission
believes that indemnification for liabilities arising under the federal
securities laws is against public policy and is, therefore, unenforceable and
that claims for indemnification should be submitted to appropriate courts for
adjudication).
4. Contribution. If the indemnification provided in Sections 1 and 2 hereof
is unavailable by reason of a Court decision described in Section 3(g) hereof
based on grounds other than any of those set forth in paragraphs (b) through (f)
of Section 3 hereof, then in respect of any threatened, pending or completed
action, suit or proceeding in which Corporation is jointly liable with Officer
(or would be if joined in such action, suit or proceeding), Corporation shall
contribute to the amount of expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred and paid
or payable by Officer in such proportion as is appropriate to reflect (i) the
relative benefits received by Corporation on the one hand and Officer on the
other from the transaction from which such action, suit or proceeding arose, and
(ii) the relative fault of Corporation on the one hand and of Officer on the
other in connection with the events which resulted in such expenses, judgments,
fines or settlement amounts, as well as any other relevant equitable
considerations. The relative fault of Corporation on the one hand and of Officer
on the other shall be determined by reference to, among other things, the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent the circumstances resulting in such expenses, judgments,
fines or settlement amounts. Corporation agrees that it would not be just and
equitable if contribution pursuant to this Section 4 were determined by pro rata
allocation or any other method of allocation which does not take account of the
foregoing equitable considerations.
5. Continuation of Obligations. All agreements and obligations of
Corporation contained herein shall continue during the period Officer is a
director, officer, employee or agent of Corporation (or is or was serving at the
request of Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise) and shall continue thereafter so long as Officer shall be subject to
any possible claim or threatened, pending or completed action, suit or
proceeding, whether civil, criminal or investigative, by reason of the fact that
Officer was an officer of Corporation or serving in any other capacity referred
to herein.
6. Notification and Defense of Claim. Not later than thirty (30) days after
receipt by Officer of notice of the commencement of any action, suit or
proceeding, Officer will, if a claim in respect thereof is to be made against
Corporation under this Agreement, notify Corporation of the commencement
thereof; but the omission so to notify Corporation will not relieve it from any
liability which it may have to Officer otherwise than under this Agreement. With
respect to any such action, suit or proceeding as to which Officer notifies
Corporation of the commencement thereof:
(a) Corporation will be entitled to participate therein at its own
expense;
-3-
<PAGE> 5
(b) except as otherwise provided below, to the extent that it may wish,
Corporation jointly with any other indemnifying party similarly notified will be
entitled to assume the defense thereof, with counsel reasonably satisfactory to
Officer. After notice from Corporation to Officer of its election so as to
assume the defense thereof, Corporation will not be liable to Officer under this
Agreement for any legal or other expenses subsequently incurred by Officer in
connection with the defense thereof other than reasonable costs of investigation
or as otherwise provided below. Officer shall have the right to employ his or
her own counsel in such action, suit or proceeding but the fees and expenses of
such counsel incurred after notice from Corporation of its assumption of the
defense thereof shall be at the expense of Officer unless (i) the employment of
counsel by Officer has been authorized by Corporation, (ii) Officer shall have
reasonably concluded that there may be a conflict of interest between
Corporation and Officer in the conduct of the defense of such action or (iii)
Corporation shall not in fact have employed counsel to assume the defense of
such action, in each of which cases the fees and expenses of Officer's separate
counsel shall be at the expense of Corporation. Corporation shall not be
entitled to assume the defense of any action, suit or proceeding brought by or
on behalf of Corporation or as to which Officer shall have made the conclusion
provided for in (ii) above; and
(c) Corporation shall not be liable to indemnify Officer under this
Agreement for any amounts paid in settlement of any action or claim effected
without its written consent. Corporation shall be permitted to settle any action
except that it shall not settle any action or claim in any manner which would
impose any penalty or limitation on Officer without Officer's written consent.
Neither Corporation nor Officer will unreasonably withhold its or his or her
consent to any proposed settlement.
7. Advancement and Repayment of Expenses.
(a) In the event that Officer employs his or her own counsel pursuant
to Section 6(b)(i) through (iii) above, Corporation shall advance to Officer,
prior to any final disposition of any threatened or pending action, suit or
proceeding, whether civil , criminal, administrative or investigative, any and
all reasonable expenses (including legal fees and expenses) incurred in
investigating or defending any such action, suit or proceeding within ten (10)
days after receiving copies of invoices presented to Officer for such expenses.
(b) Officer agrees that Officer will reimburse Corporation for all
reasonable expenses paid by Corporation in defending any civil or criminal
action, suit or proceeding against Officer in the event and only to the extent
it shall be ultimately determined by a final judicial decision (from which there
is no right of appeal) that Officer is not entitled, under the provisions of the
Code, the Bylaws, this Agreement or otherwise, to be indemnified by Corporation
for such expenses.
(c) Notwithstanding the foregoing, Corporation shall not be required to
advance such expenses to Officer if Officer (i) commences any action, suit or
proceeding as a plaintiff unless such advance is specifically approved by a
majority of the Board of
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<PAGE> 6
Directors or (ii) is a party to an action, suit or proceeding brought by
Corporation and approved by a majority of the Board which alleges willful
misappropriation of corporate assets by Officer, disclosure of confidential
information in violation of Officer's fiduciary or contractual obligations to
Corporation, or any other willful and deliberate breach in bad faith of
Officer's duty to Corporation or its stockholders.
8. Enforcement.
(a) Corporation expressly confirms and agrees that it has entered into
this Agreement and assumed the obligations imposed on Corporation hereby in
order to induce Officer to continue as an officer of Corporation, and
acknowledges that Officer is relying upon this Agreement in continuing in such
capacity.
(b) In the event Officer is required to bring any action to enforce
rights or to collect moneys due under this Agreement and is successful in such
action , Corporation shall reimburse Officer for all of Officer's reasonable
fees and expenses in bringing and pursuing such action.
9. Subrogation. In the event of payment under this agreement, Corporation
shall be subrogated to the extent of such payment to all of the rights of
recovery of Officer, who shall execute all documents required and shall do all
acts that may be necessary to secure such rights and to enable Corporation
effectively to bring suit to enforce such rights.
10. Non-Exclusivity of Rights. The rights conferred on Officer by this
Agreement shall not be exclusive of any other right which Officer may have or
hereafter acquire under any statute, provision of Corporation's Certificate of
Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office.
11. Survival of Rights. The rights conferred on Officer by this Agreement
shall continue after Officer has ceased to be a director, officer, employee or
other agent of Corporation and shall inure to the benefit of Officer's heirs,
executors and administrators.
12. Separability. Each of the provisions of this Agreement is a separate and
distinct agreement and independent of the others, so that if any or all of the
provisions hereof shall be held to be invalid or unenforceable for any reason,
such invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions hereof or the obligation of Corporation
to indemnify Officer to the full extent provided by the Bylaws or the Code.
13. Governing Law. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Delaware.
-5-
<PAGE> 7
14. Binding Effect. This Agreement shall be binding upon Officer and upon
Corporation, its successors and assigns, and shall inure to the benefit of
Officer, his or her heirs, personal representatives and assigns and to the
benefit of Corporation, its successors and assigns.
15. Amendment and Termination. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless in writing signed by
both parties hereto.
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.
CORPORATION: INTERACT MEDICAL TECHNOLOGIES
CORPORATION,
a Delaware corporation
By:
-----------------------------------------
Bruce D. Sturman, President
OFFICER: -----------------------------------------
[SIGNATURE PAGE TO INDEMNIFICATION AGREEMENT]
<PAGE> 1
Exhibit 10.53
<PAGE> 2
[BAXTER LETTERHEAD]
October 17, 1994
David Dlesk
Chief Executive Officer
Medical Media Systems
79 E. Wilder Road
Suite 2
West Lebanon, NH 03784-3106
Dear David:
Thank you for forwarding your comments regarding our contractual agreement.
This letter summarizes the key elements of the working relationship between
Baxter and Medical Media Systems (MMS). All of your comments have been
included.
MMS products are intended to facilitate visualization and decision making
during delicate surgical procedures such as ACL reconstruction or resection of
liver metastases.
Initially, MMS intends to offer a "Preview" product, a software platform that
allows the reconstruction of a set of 2-D images (e.g. NMR, CT, ultrasound
images) into a 3-D model, which can then be viewed on a computer screen in
different dimensions and at various angles. The "Preview" product will be
offered only for resection of liver metastases procedures.
At a later time, MMS will introduce a more advanced product, the "CompuScope"
device, which, in addition to the above, allows for superposition of the
computer 3-D image to a real-time video image. The "CompuScope" device is
valuable for both ACL reconstruction and resection of liver metastases
procedures.
Preliminary timelines discussed in the meeting are as follows:
- - - A regulatory strategy for the "Preview" product is needed by November 94.
- - - Regulatory support is needed in preparation for the American College of
Surgeons Meeting in Chicago (October 13-15, 1994)
- - - Clinical/Marketing trials are planned for Q3, 1995 to evaluate the
"CompuScope" product. "Preview" trials are planned for Q1, 1995.
<PAGE> 3
David Dlesk
October 17, 1994
Page 2
It is estimated that a regulatory professional will be needed by MMS at a half
time capacity for the coming year. As projects and submissions develop, more
time commitment may be required. I.V. Systems Regulatory Affairs is willing to
commit the equivalent of a professional's half time for the next two years, in
form of professional, managerial and support time. We understand some travel is
involved. We discussed $60,000/year and funding for travel or other
miscellaneous expenses to be provided by MMS. We would like to keep any
administrative mechanics of this project as straight forward as possible. We
propose a fee of $15,000 due at the beginning of every quarter and that
additional bills for travel or other miscellaneous expenses be sent directly to
you.
If you concur with this arrangement, please sign and return a copy of this
letter. Dated signatures concurring with this letter could be used as the
agreement between us. I have also attached a standard confidentiality agreement
letter for your signature. Such letter is needed if we are to provide you with
examples of previous submissions or other Baxter confidential documents.
I look forward to the opportunity of working with you and your team.
Sincerely,
/s/ Tamima Itani
Tamima Itani, Ph.D.
Manager
Regulatory Affairs
(708) 270-4013
Concurrence:
/s/ David Dlesk 11/10/94
- - -----------------------------------------------------------
David Dlesk, Chief Executive Officer, Medical Media Systems
/s/ Marcia Marconi 10/17/94
- - -----------------------------------------------------------
Marcia Marconi, Director, Regulatory Affairs
<PAGE> 4
MUTUAL CONFIDENTIAL DISCLOSURE AGREEMENT
Baxter Healthcare Corporation, having a principal place of business at
One Baxter Parkway, Deerfield, Illinois 60015 ("Baxter") and Medical Media
Services, having a principal place of business at 79 E. Wilder Road, Suite 2,
West Lebanon, New Hampshire, are interested in exploring a potential business
arrangement regarding regulatory support for products developed by Medical
Media Services. In exploring such potential business relationship, Baxter will
be disclosing to Medical Media Services valuable information relating to the
Flo-Gard Infusion Pumps, as well as to potentially other medical devices, which
is confidential, and Medical Media Services will be disclosing to Baxter
valuable information relating to the development of some of its products, such
as the "Preview" device and the "Compuscope" device, which is confidential.
Because of the confidential nature of such information, each party agrees that
these disclosures will be in written, documentary or other tangible form,
marked "Confidential" ("Confidential Information"), and will be subject to the
following conditions:
1. Each party agrees to keep confidential the Confidential Information which
is disclosed to it by the other. Such Confidential Information includes
but is not limited to
Baxter Specifications
Baxter Standard Operating Procedures
510(k) submissions or parts thereof that are considered
Baxter confidential material
2. Each party's use of Confidential Information will be solely for the
purpose of
Addressing regulatory requirements for MMS's products.
<PAGE> 5
Confidentiality Agreement
Page 2
[BAXTER LOGO]
3. The confidentiality obligations of this Agreement shall not apply to
information which: (a) at the time of disclosure is reasonably
available to the public; (b) becomes reasonably available to the
public through no fault of the receiving party; (c) is possessed by
the receiving party, as evidenced by written or other tangible
evidence, prior to receipt hereunder; (d) becomes known to the
receiving party from a third party who has no obligation of
confidentiality to the disclosing party; or (e) is developed
independently by the receiving party.
4. The term of this Agreement shall be three (3) years from the date
of signature on behalf of Baxter.
5. The obligations of this Agreement shall not be altered, amended or
superseded by any subsequent agreement except by written instrument
signed by both parties.
6. This Agreement shall be governed by the laws of the State of
Illinois.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
through their authorized representatives.
Baxter Healthcare Corporation Medical Media Services
By: /s/ JACK McGINLEY By: /s/ DAVID C. DLESK
------------------------------------ --------------------------------
Name: Jack McGinley Name: David C. Dlesk
--------------------------------- ------------------------------
Title: President, I.V. Systems Division Title: Chief Executive Officer, MMS
-------------------------------- -----------------------------
Date: October 27, 1994 Date: 11/10/94
-------------------------------- -----------------------------
<PAGE> 6
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*** ACTIVITY REPORT ***
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RECEPTION OR
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CONNECTION TEL 6034482478
CONNECTION ID
START TIME 06/25 13:19
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PAGES 5
RESULT OK
<PAGE> 1
Exhibit 10.54
<PAGE> 2
CREDIT AGREEMENT
This Credit Agreement (this "Agreement"), dated as of April 10, 1996,
is by and between Baxter Healthcare Corporation, a Delaware corporation
("Baxter"), having an office at 17221 Redhill Avenue, Irvine, California 92714,
and Medical Media Systems, a New Hampshire general partnership ("MMS"), having
an office at 79 East Wilder Road, West Lebanon, New Hampshire 03784.
RECITALS
As of December 22, 1995, Baxter had advanced $400,000 to MMS for the
purpose of funding MMS' continuing operations. At MMS' request, Baxter is now
advancing to MMS an additional $150,000 to fund MMS' continuing operations.
Baxter and MMS now desire to consolidate these advances into one $550,000 loan
on the terms and subject to the conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree:
1. Loans. Baxter agrees, on the terms and conditions of this
Agreement, to make one or more loans to MMS during the period from the date
hereof through April 30, 1996 in an aggregate principal amount not exceeding
One Hundred Fifty Thousand Dollars ($150,000). In addition, MMS confirms that
it has already borrowed and received the sum of $400,000 from Baxter as a
non-interest bearing, due on demand, loan which, as of the date of this
Agreement, will be governed by the terms and subject to the conditions set
forth in this Agreement. Once any loan has been made by Baxter, MMS shall not
have any right to reborrow any amount repaid to Baxter by MMS.
2. Notice of Borrowing. Whenever MMS desires to borrow funds
under this Agreement, it shall deliver to Baxter written notice specifying the
amount to be borrowed and the date on which such borrowing is requested to be
made. Subject to the terms and conditions of this Agreement, Baxter shall make
such funds available to MMS to an account designated by MMS not later than ten
(10) business days after receipt of the request for borrowing.
3. Promissory Note. Loans and advances made under this Agreement
shall be consolidated into a single promissory note for $550,000 (the "Note")
of MMS, payable upon demand. The date and amount of each loan made under this
Agreement and each payment made on account of principal and/or interest
outstanding shall be recorded by Baxter on its books, as appropriate. All such
recordations shall be conclusive absent manifest error.
<PAGE> 3
4. Prepayments. MMS shall have the right to prepay, in whole or
in part, the principal balance then outstanding under the Note plus accrued
interest at any time and without any premium or penalty. Such prepayment shall
be first applied to accrued interest and other sums then due under the Note
with the balance then being applied against the outstanding principal balance
of the Note.
5. Due Date. The Note shall be due upon demand by Baxter.
6. Interest. Interest on loans and advances evidenced by the Note
shall accrue at the rate of six percent (6%) per annum or such lesser rate as
shall be the maximum rate applicable on legal contracts. Interest shall be paid
annually on December 31.
7. Payments. All payments of principal, interest and other
amounts to be made by MMS under this Agreement or the Note shall be made in
U.S. dollars, in immediately available funds, without deductions, offsets or
counterclaim.
8. Miscellaneous.
(a) Notices. Any notice or any communication required or
permitted to be given shall be in writing, and may be personally served,
telecopied, telexed or sent by United States mail, and shall be deemed to have
been given and delivered in person, upon receipt of telecopy or telex or four
(4) business days after deposit in the United States mail, registered or
certified with postage prepaid and addressed as indicated in the introductory
paragraph of this Agreement.
(b) Amendments. Except as otherwise expressly provided in
this Agreement, any provision of this Agreement may be amended and modified
only by an instrument in writing signed by Baxter and MMS.
(c) Entire Agreement. This Agreement (including the Note)
constitutes the entire contract between the parties relative to the subject
matter hereof. Any previous agreement among the parties with respect to the
subject matter hereof is superseded by this Agreement and the Note.
(d) Successors and Assigns. This Agreement shall be
binding and inure to the benefit of the parties hereto and their respective
successors or permitted assigns.
(e) Counterparts. This 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 Agreement by
signing any such counterpart.
(f) Governing Law. This Agreement and Note shall be
governed by, and construed in accordance with, the laws of the State of
California.
2
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date written above.
BAXTER HEALTHCARE CORPORATION, a
Delaware corporation
By: /s/ Jay P. Wertheim
---------------------------------
Jay P. Wertheim
Its: Vice President, Law
Cardiovascular Group
--------------------------------
MEDICAL MEDIA SYSTEMS, a
General Partnership
By: Baxter Medical Media Holdings,
Inc., its general partner
By: /s/ Michael A. Mussallern
--------------------------------
Michael A. Mussallern
Its: Authorized Agent
------------------------------
<PAGE> 1
Exhibit 10.55
<PAGE> 2
$550,000.00
Irvine, California
April 10, 1996
DEMAND PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned promises to pay, in lawful money of
the United States, to the order of Baxter Healthcare Corporation ("Holder"), at
17221 Redhill Avenue, Irvine, California 92714, or such other place as the
Holder may hereof designate in writing, the principal sum of Five Hundred Fifty
Thousand Dollars ($550,000) or such lesser amount as may then be due to Holder
together with interest at the rate of six percent (6%) per annum. This
promissory note (this "Note") shall be paid immediately upon demand by the
Holder.
If default be made in any payment when due, at the option of the Holder
of this Note, without prior notice, the entire indebtedness hereby represented
shall become immediately due and payable.
If suit is brought on this Note, or if it is placed in the hands of an
attorney after any default in any payments, the undersigned promises and agrees
to pay all costs of collection, including attorneys' fees incurred thereby.
The undersigned and all endorsers and all persons liable or to become
liable on this Note waive presentment, demand, protest, and notice of demand,
protest and nonpayment and consent to any and all renewals and extensions of
time of payment hereof.
This Note shall be construed according to the laws of the State of
California.
MEDICAL MEDIA SYSTEMS, a
General Partnership
By: Baxter Medical Media Holdings,
Inc., its general partner
By: /s/ Michael A. Mussallern
--------------------------------
Michael A. Mussallern
Its: Authorized Agent
-------------------------------
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Ixion, Inc.
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated April 25, 1996, except as to Notes 1
and 10, which are as of June 27, 1996, relating to the financial statements of
Ixion, Inc., which is contained in that Prospectus. Our report contains an
explanatory paragraph regarding uncertainties as to ability of the Company to
continue as a going concern.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
BDO SEIDMAN, LLP
Seattle, Washington
June 27, 1996
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Medical Media Systems
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated February 16, 1996, except as to Note
7 which is as of June 13, 1996, relating to the financial statements of Medical
Media Systems which is contained in that Prospectus.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
ROBERT E. MOSES
Certified Public Accountants
Lebanon, New Hampshire
June 27, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
IXION, INC. FINANCIAL STATEMENTS AT DECEMBER 31, 1995 AND FOR THE YEAR THEN
ENDED AND AT MARCH 31, 1996 AND FOR THE 3 MONTHS THEN ENDED AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN THE
INTERACT MEDICAL TECHNOLOGIES CORPORATION REGISTRATION STATEMENT ON FORM S-1
</LEGEND>
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<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
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