<PAGE>
As filed with the Securities and Exchange Commission on July 30, 1999
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
under
The Securities Act of 1933
---------------------
VASCULAR SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
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<CAPTION>
<S> <C> <C>
Minnesota 3841 41-1859679
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
2495 Xenium Lane North
Minneapolis, Minnesota 55441
(612) 553-2970
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Howard C. Root
Vascular Solutions, Inc.
2495 Xenium Lane North
Minneapolis, Minnesota 55441
(612) 553-2970
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
-------------------------------
Copies to:
Timothy S. Hearn, Esq. David J. Kaufman, Esq.
Dorsey & Whitney LLP Ernest W. Torain, Jr., Esq.
220 South Sixth Street Katten Muchin Zavis
Minneapolis, Minnesota 55402-1498 525 West Monroe Street, Suite 1600
(612) 340-2600 Chicago, Illinois 60661
(312) 902-5200
------------------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
------------------------
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, 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, check the following box and list the Securities Act
registration statement number of the earliest effective registration statement
for the same offering:[_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earliest 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:[_]
<TABLE>
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CALCULATION OF REGISTRATION FEE
===========================================================================================================================
Titles of Each Class of Maximum Aggregate Amount of
Securities to be Registered Offering Price (1) Registration Fee
- ---------------------------------------------------------------------------------------------------------------------------
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Common Stock, par value $.01 per share.................................. $40,000,000 $11,120
===========================================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(o).
------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this 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.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ The information in this prospectus is not complete and may be changed. We +
+ may not sell these securities until the registration statement filed with +
+ the Securities and Exchange Commission is effective. This prospectus is not +
+ an offer to sell these securities and it is not soliciting an offer to buy +
+ these securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JULY 30, 1999
PROSPECTUS
_________ Shares
[LOGO OF VASCULAR SOLUTIONS]
Common Stock
Vascular Solutions, Inc. is offering __________ shares of its common
stock.
This is our initial public offering and no public market currently
exists for our shares. We expect the initial public offering price will be
between $___________ and $__________ per share. We will list the common stock
on the Nasdaq National Market under the symbol "VASC."
Investing in our common stock involves risks. For more information,
see "Risk Factors" commencing on page 4.
___________________
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities, or
determined that this prospectus is truthful or complete. Any representation to
the contrary is a criminal offense.
================================================================================
Per Share Total
- --------------------------------------------------------------------------------
Public Offering Price....................... $ $
Underwriting Discount....................... $ $
Proceeds to Vascular Solutions, Inc......... $ $
================================================================================
The underwriters may also purchase up to an additional __________
shares at the public offering price, less the underwriting discount, within 30
days from the date of this prospectus to cover over-allotments.
William Blair & Company
Dain Rauscher Wessels
a division of Dain Rauscher Incorporated
Stephens Inc.
The date of this prospectus is , 1999
<PAGE>
- Inside Front Cover -
[Duett sealing device logo]
The Vascular Solutions Duett(TM) sealing device offers:
1. Vascular Solutions Duett sealing device completely seals
the puncture site - both the arterial puncture and the tissue tract
between the skin surface and the artery.
2. The powerful procoagulant works effectively, even in
patients receiving powerful anti-clotting medications.
3. Nothing is left behind that could cause infection or
interfere with accessing the puncture site again, if that becomes
necessary.
4. Rapid deployment of an easy-to-use, one-size-fits-all
device through the existing introducer sheath.
5. By minimizing the amount of manual compression and immobile
bed rest, improves patient comfort and increases provider efficiency.
[Drawing of a human lying down, with a puncture in the groin and showing
arteries running to the heart. Expanded insert shows the Duett sealing device
being deployed.]
A premarket approval, or PMA, application for the Vascular Solutions Duett
sealing device has been filed with the United States Food and Drug
Administration. We have not received approval from the FDA for sale of the Duett
sealing device in the United States, and we can make no assurance of when, if
ever, the Duett sealing device will be approved by the FDA.
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
Because this is only a summary, it does not contain all of the information that
may be important to you. You should read the entire prospectus carefully. You
should consider the information under "Risk Factors" and in our financial
statements and the notes relating to these financial statements, together with
the information included elsewhere in this prospectus, before deciding to invest
in our common stock.
Our Business
We manufacture, market and sell the Vascular Solutions Duett(TM) sealing
device, which enables cardiologists and radiologists to rapidly seal the
puncture site following catheterization procedures such as angiography,
angioplasty and stenting. Our product combines a simple balloon catheter
delivery mechanism with a powerful, proprietary procoagulant (blood clotting)
mixture, which we believe offers advantages over both manual compression and the
existing FDA-approved devices used to seal the puncture site following the
catheterization procedure. We began selling our product in Europe in February
1998. On June 30, 1999, we completed the submission of our PMA application to
the FDA. If we receive approval of our application we will commence selling our
Duett sealing device in the United States. Over 6,000 deployments of our device
have been performed worldwide. While the vascular sealing device market has
developed quickly from less than $20 million in sales in 1996 to $110 million in
1998, it represents less than 15% of the $1 billion potential annual market,
based on the current number of catheterization procedures performed.
We believe our product addresses the current demand for a sealing device
that (1) improves patient comfort and is more efficient than manual compression,
and (2) compared to currently available FDA-approved sealing devices, offers a
better combination of a complete seal of the puncture site with nothing left
behind in the artery in an easy to use system. Our product uses a balloon
catheter, a device already familiar to cardiologists and radiologists, which is
inserted through the introducer sheath that is already in the patient. The
inflated balloon serves as a temporary mechanical seal, preventing the flow of
blood from the artery. Our procoagulant, which is a proprietary mixture of
collagen, thrombin and diluent, is then delivered to the puncture site,
stimulating rapid clotting and creating a complete seal of both the arterial
puncture and the tissue tract from the artery to the skin surface. The blood-
clotting speed and strength of thrombin enable the use of the Duett sealing
device even in the presence of the powerful anti-clotting medications, such as
ReoPro(R), increasingly used in therapeutic catheterization procedures. With our
Duett sealing device, nothing is left behind in the artery, so immediate
reaccess of the site, if necessary, is possible, and the potential for infection
is minimized.
The primary factors underlying the market opportunity for vascular sealing
devices are that (1) there are a significant and growing number of
catheterization procedures being performed, and (2) the substantial majority of
the resulting puncture sites are still being sealed using manual compression. In
1998, over seven million catheterization procedures were performed. This number
is expected to grow by 10% to 12% each year for the next three years principally
due to the increasing incidence of cardiovascular disease. Prior to 1996,
virtually all of the puncture sites created by catheterization procedures were
sealed by a healthcare professional applying manual pressure. Vascular sealing
devices were introduced in the United States in late 1995 and have rapidly been
adopted by physicians, as evidenced by the $110 million of these devices that
were sold worldwide in 1998. Nonetheless, over 85% of the arterial punctures
created in 1998 still were sealed using manual compression. We believe that our
device offers benefits that position it well to capture a significant share of
the market opportunity for vascular sealing devices.
-1-
<PAGE>
Since July 1997, five clinical studies of our Duett sealing device,
reporting on over 2,000 deployments, have been performed. The most recent of
these studies, completed in March 1999, was a randomized, controlled study to
support our PMA application with the FDA. In this study, which involved 695
patients in 15 catheterization centers in the United States and Germany, our
product demonstrated (1) reduced time to the cessation of bleeding, (2) reduced
time to ambulation of the patient and (3) no statistically significant increase
in major complications compared to manual compression.
The Offering
Common stock offered................................. _____ shares
Common stock to be outstanding after the offering.... _____ shares. This number
is based on shares
outstanding on June 30,
1999. It excludes
676,531 shares of common
stock issuable upon
exercise of options
outstanding under our
stock option plan and
553,715 shares of common
stock issuable upon
exercise of other
outstanding stock option
and warrant agreements.
Use of proceeds...................................... We intend to use the net
proceeds of this offering
to hire, train and deploy
a direct United States
sales force, for working
capital and for general
corporate purposes. See
"Use of Proceeds."
Proposed Nasdaq National Market symbol............... VASC
-2-
<PAGE>
Summary Financial Data
(in thousands, except per share amounts)
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Year Ended Six Months Ended
December 31, June 30,
---------------------------------- --------------------------------
1997 1998 1998 1999
------------- ---------------- ------------ ---------------
(unaudited)
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Statement of Operations Data:
Net sales................................................ $ -- $ 494 $ 133 $ 514
Gross profit............................................. -- 52 7 72
Total operating expenses................................. 1,724 5,467 2,213 3,788
Operating loss........................................... (1,724) (5,415) (2,206) (3,716)
Net loss................................................. (1,652) (5,141) (2,045) (3,533)
Pro forma basic and diluted net loss per share........... $ (.89) $ (.47)
Shares used in pro forma net loss per share calculation.. 5,767 7,480
</TABLE>
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June 30, 1999
-----------------------------------
As
Actual Adjusted
------------------ -------------
(unaudited)
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents........................................................... $ 9,201 $
Working capital..................................................................... 9,681
Total assets........................................................................ 10,674
Long-term debt...................................................................... -- --
Total shareholders' equity.......................................................... 10,330
</TABLE>
For information regarding the determination of the number of shares used in
computing pro forma basic and diluted net loss per share amounts, see note 2 of
notes to the financial statements.
The balance sheet data as of June 30, 1999, as adjusted, reflects our
receipt and application of the estimated net proceeds from the sale of _________
shares of common stock offered at an assumed initial public offering price of
$___ per share, after deducting the underwriting discount and estimated offering
expenses that we will pay.
_________________
We were incorporated in Minnesota in December 1996 and commenced operations
in February 1997. Our facility is located at 2495 Xenium Lane, Minneapolis,
Minnesota 55441 and our telephone number is 612-553-2970.
Unless otherwise specifically stated, the information in this prospectus
has been adjusted to reflect the automatic conversion of all outstanding shares
of our preferred stock into shares of common stock, but does not take into
account the possible sale of additional shares of common stock to the
underwriters pursuant to the underwriters' right to purchase additional shares
to cover over-allotments.
-3-
<PAGE>
RISK FACTORS
You should carefully consider the risks described below before deciding to
purchase our common stock. The risks and uncertainties described below are not
the only ones facing our company. Additional risks and uncertainties not
presently known to us or that we currently deem immaterial may also impair our
business operations. If any of the following risks occur, our business,
financial condition or results of operations could be seriously harmed. In such
case, the trading price of our common stock could decline, and you could lose
all or part of your investment.
We must receive approval from the FDA prior to selling our Duett device in the
United States
Before we are able to sell our Duett sealing device in the United States,
we must receive approval from the FDA of our PMA application. We submitted our
PMA application to the FDA on June 30, 1999. Under the Federal Food, Drug and
Cosmetic Act, or FDC Act, the FDA has 180 days to review a PMA application,
although the review time is often significantly extended by the FDA. Prior to
granting approval, the FDA may require clarification of information provided in
the submission, more information or further clinical studies. Also, a review
panel is often convened by the FDA to review and evaluate the application and
recommend whether the device should be approved. We are unable to estimate when,
if ever, we will receive approval and be able to commence sales of the Duett
sealing device in the United States. The PMA application approval process can be
expensive, uncertain and lengthy. A number of devices for which premarket
approval has been sought have never been approved for marketing. In addition,
the FDA will inspect our manufacturing facility to ensure compliance with the
FDA's requirements regarding good manufacturing practices prior to approval of
our application. If granted, the approval of our PMA application may include
significant limitations on the indicated uses for which our product may be
marketed. Should we experience delays or be unable to receive approval from the
FDA, our business will be seriously harmed.
We have a limited operating history on which to evaluate our potential for
future success
We began product development in February 1997 and began to generate
international sales in February 1998. We have not received and may never receive
the necessary FDA approval to sell our Duett sealing device in the United
States. Accordingly, we have only a limited operating history upon which you can
evaluate our business and prospects. You must consider the risks and
uncertainties frequently encountered by early stage companies like ours in a new
and evolving market, such as vascular sealing devices. If we are unsuccessful in
addressing these risks and uncertainties, our business will be seriously harmed.
We have been named as the defendant in a patent infringement lawsuit and may
face additional intellectual property infringement claims in the future
On July 23, 1999, we were named as the defendant in a patent infringement
lawsuit brought by Datascope Corp. in the United States District Court for the
District of Minnesota. The complaint requests a declaratory judgment that our
Duett sealing device infringes and, following FDA approval will infringe, a
United States patent held by Datascope and asks for relief in the form of an
injunction that would prevent us from selling our product in the United States
as well as an award of attorneys' fees, costs and disbursements. It is not
possible at this time to predict the outcome of the lawsuit, including whether
we will be prohibited from selling our Duett sealing device in the United
States, or to estimate the amount or range of potential loss, if any.
The interventional cardiology industry is characterized by numerous patent
filings and frequent and substantial intellectual property litigation. Companies
in the interventional cardiology industry in general, and in vascular sealing in
particular, have employed intellectual property litigation in an attempt to gain
a competitive advantage. We are aware of many United States patents issued to
other companies in the vascular sealing field which describe vascular sealing
devices. Each of the three vascular sealing products with which our Duett
sealing device competes has been subject to infringement litigation. It is
likely that we will become the subject of additional intellectual property
claims in the future related to our Duett sealing device. Intellectual property
litigation in recent years has proven to be very complex, and the outcome of
such litigation is difficult to predict.
-4-
<PAGE>
Our defense of the Datascope claim and any other intellectual property
claims filed in the future, regardless of the merits of the complaint, could
divert the attention of our technical and management personnel away from the
development and marketing of the Duett sealing device for significant periods of
time. The costs incurred to defend the Datascope claim and other future claims
could be substantial and seriously harm us, even if we are ultimately
successful. An adverse determination in the Datascope matter or in other
litigation or interference proceedings in the future could prohibit us from
selling our product, subject us to significant liabilities to third parties or
require us to seek licenses from third parties. The costs associated with these
license arrangements may be substantial and could include ongoing royalties.
Furthermore, the necessary licenses may not be available to us on satisfactory
terms, if at all. Adverse determinations in a judicial or administrative
proceeding or failure to obtain necessary licenses could prevent us from
manufacturing and selling our product.
The vascular sealing device market must adopt our new sealing methodology
We have sold only a limited number of our Duett sealing devices to date.
We have not commercialized our product in the United States, which we believe
represents the largest market for vascular sealing devices because we do not yet
have approval from the FDA to do so. Our success will depend on the medical
community's acceptance of our Duett sealing device. We cannot predict how
quickly, if at all, the medical community will accept our Duett sealing device,
or, if accepted, the extent of its use. Our potential customers must (1) believe
that our device offers benefits compared to the methodologies and/or devices
that they are currently using to seal vascular punctures, (2) believe that our
device is worth the price that they will be asked to pay and (3) be willing to
commit the time and resources required to change their current methodology. If
we encounter difficulties introducing our Duett sealing device into the United
States market or expanding our presence in markets outside the United States,
our business will be seriously harmed.
We currently rely on the Duett sealing device as our sole source of revenue
We have developed only one product which is being sold only in a limited
number of countries in the foreign market. Even if we were to develop additional
products, FDA approval would be required in order to sell them in the United
States. Preparation of the requisite materials to seek FDA approval and the
approval process itself require a substantial amount of time and money.
Therefore, we do not expect to be in a position to sell additional products in
the foreseeable future. As a result, our success is solely dependent on the
success of our Duett sealing device. If our Duett sealing device is not
successful, our business will be seriously harmed.
We have incurred losses and we expect future losses
Since we commenced operations in February 1997, we have incurred net losses
from costs relating to the development and commercialization of our Duett
sealing device. At June 30, 1999, we had an accumulated deficit of $10.3
million. We expect to continue to significantly increase our sales and
marketing, research and development and general and administrative expenses. In
particular, we intend to hire, train and deploy a direct sales force to sell our
Duett sealing device in the United States. Because of our plans to invest
heavily in sales and marketing, hire additional employees and expand our
commercialization, we expect to incur significant net losses through at least
December 31, 2000. Our business strategies may not be successful and we may not
be profitable in any future period. If we do become profitable, we cannot be
certain that we can sustain or increase profitability on a quarterly or annual
basis.
It is difficult for us to predict our future operating results
The relatively recent international introduction of our Duett sealing
device and history of losses make prediction of future operating results
difficult. You should not rely on our past revenue growth as any indication of
future growth rates or operating results. Our future operating results will
depend on many factors, including:
-5-
<PAGE>
. when, if ever, we receive FDA approval to sell our Duett sealing device;
. the timing of the introduction of our Duett sealing device into the
United States market;
. the effect of intellectual property disputes;
. the demand for and acceptance of our Duett sealing device;
. the success of our competition and the introduction of alternative means
for vascular sealing;
. our ability to command favorable pricing for our Duett sealing device;
. the growth of the market for vascular sealing devices;
. the expansion and rate of success of our direct sales force in the
United States and our independent distributors internationally;
. actions relating to ongoing FDA compliance;
. the size and timing of orders from independent distributors or
customers;
. the attraction and retention of key personnel, particularly in sales and
marketing, regulatory, manufacturing and research and development;
. unanticipated delays or an inability to control costs with respect to
our Duett sealing device;
. our ability to introduce new products and enhancements in a timely
manner;
. general economic conditions as well as those specific to our customers
and markets; and
. seasonal fluctuations in revenue due to the elective nature of some
procedures.
For the foregoing reasons, we believe our operating results are likely to
vary significantly from quarter to quarter making quarter-to-quarter comparisons
of our operating results an unreliable indication of our future performance. It
is likely that in one or more future quarters, our operating results may not
meet the expectations of analysts and investors. In this event, the price of our
common stock will likely fall.
We need to hire, train and deploy a direct sales force to sell our Duett sealing
device in the United States
Because we have not yet received regulatory approval to sell our Duett
sealing device in the United States, we have not hired a direct sales force and
have no operating history with a direct sales force. We need to hire a direct
sales force, including clinical specialists to perform physician training, to
commercialize our Duett sealing device in the United States. We currently
anticipate spending approximately $12 million during the period from July 1,
1999 through December 31, 2000 to hire, train and deploy our direct sales force.
We believe that our new salespeople and clinical specialists will require
approximately three months from their hiring date to become productive selling
and training physicians to use our Duett sealing device. Furthermore, we believe
that there is significant competition for direct sales personnel and clinical
specialists with the advanced sales skills and technical knowledge we need. We
-6-
<PAGE>
may not be able to obtain, train and retain direct sales personnel and the
future sales efforts of our direct sales force may not be successful.
We may face product liability claims that could result in costly litigation and
significant liabilities
The manufacture and sale of medical products entail significant risk of
product liability claims. The medical device industry in general has been
subject to significant medical malpractice litigation. Any product liability
claims, with or without merit, could result in costly litigation, reduced sales,
cause us to incur significant liabilities and divert our management's time,
attention and resources. We cannot be sure that our product liability insurance
coverage is adequate or that it will continue to be available to us on
acceptable terms, if at all.
The market for vascular sealing devices is highly competitive and will likely
become more competitive
The existing market for vascular sealing devices is intensely competitive.
We expect competition to increase further as additional companies begin to enter
this market and/or modify their existing products to compete directly with ours.
Our primary competitors are Perclose, Inc., which has agreed to be acquired by
Abbott Laboratories, Datascope Corp. and St. Jude Medical, Inc., which sells a
product developed by Kensey Nash Corporation. These companies have:
. FDA approval of their products;
. better name recognition;
. broader product lines;
. greater sales, marketing and distribution capabilities;
. significantly greater financial resources;
. larger research and development staffs and facilities; and
. existing relationships with some of our potential customers.
We may not be able to effectively compete with these companies. In
addition, broad product lines may allow our competitors to negotiate exclusive,
long-term supply contracts and offer comprehensive pricing for their products.
Broader product lines may also provide our competitors with a significant
advantage in marketing competing products to group purchasing organizations and
other managed care organizations that are increasingly seeking to reduce costs
through centralized purchasing. Greater financial resources and product
development capabilities may allow our competitors to respond more quickly to
new or emerging technologies and changes in customer requirements that may
render our Duett sealing device obsolete.
We currently depend solely on international sales and the marketing and sales
efforts of our independent distributors
All of our sales to date have been outside of the United States, and we
anticipate that substantially all of our revenue will be derived from
international sales until our Duett sealing device is approved, if ever, for
sale in the United States. Our Duett sealing device is sold internationally
through independent distributors, and our international sales are largely
dependent on the marketing efforts of, and sales by,
-7-
<PAGE>
these distributors. Sales through distributors are subject to several risks,
including the risk of financial instability of distributors and the risk that
distributors will not effectively promote our Duett sealing device. Loss or
termination of these distribution relationships could seriously harm our
international sales efforts and could result in our repurchasing unsold
inventory from former distributors by virtue of local laws applicable to
distribution relationships, provisions of distribution agreements or negotiated
settlements entered into with our distributors.
Our international sales also are subject to other risks, including:
. the impact of recessions in economies outside the United States;
. greater difficulty in collecting accounts receivable and longer
collection periods;
. unexpected changes in regulatory requirements, tariffs or other trade
barriers;
. weaker intellectual property rights protection in some countries;
. potentially adverse tax consequences; and
. political and economic instability.
The occurrence of any of these events could seriously harm our future
international sales and our ability to successfully commercialize our Duett
sealing device or any future product in any international market.
We have limited manufacturing experience and may encounter difficulties in
expanding our manufacturing operations
We have limited experience in manufacturing our Duett sealing device. We
currently manufacture the Duett sealing device in limited quantities for
international sales and clinical studies in the United States. We do not have
experience in manufacturing our Duett sealing device in substantial commercial
quantities. We may encounter difficulties in expanding our production of our
Duett sealing device and new products, including problems involving production
yields, quality control and assurance, component supply and shortages of
qualified personnel, compliance with FDA regulations and requirements regarding
good manufacturing practices, and the need for further regulatory approval of
new manufacturing processes. Difficulties encountered by us in expanding our
manufacturing capabilities could seriously harm our business.
Our business and results of operation may be seriously harmed by changes in
third-party reimbursement policies
In the United States, healthcare providers, including hospitals and clinics
that purchase medical devices such as our Duett sealing device, generally rely
on third-party payors, principally federal Medicare, state Medicaid and private
health insurance plans, to reimburse all or part of the cost of catheterization
procedures. We anticipate that in a prospective payment system, such as the
system used by Medicare, and in many managed care systems used by private
healthcare payors, the cost of the Duett sealing device will be incorporated
into the overall cost of the procedure and that there will be no separate,
additional reimbursement for our product.
We could be seriously harmed by changes in reimbursement policies of
governmental or private healthcare payors, particularly to the extent any
changes affect reimbursement for catheterization procedures in which our Duett
sealing device is used. Failure by physicians, hospitals and other users of
-8-
<PAGE>
our Duett sealing device to obtain sufficient reimbursement from healthcare
payors for procedures in which our Duett sealing device is used or adverse
changes in governmental and private third-party payors' policies toward
reimbursement for such procedures would seriously harm our business.
In international markets, acceptance of our Duett sealing device is
dependent in part upon the availability of reimbursement within prevailing
healthcare payment systems. However, in general, hospitals do not receive
specific, cost-based, direct reimbursement for the use of our Duett sealing
device. Reimbursement and healthcare payment systems in international markets
vary significantly by country. Our failure to receive international
reimbursement approvals could have a negative impact on market acceptance of our
Duett sealing device in the markets in which these approvals are sought.
Our Duett sealing device and our manufacturing activities are subject to
extensive governmental regulation
Our Duett sealing device and our manufacturing activities are subject to
extensive regulation by a number of governmental agencies, including the FDA and
comparable international agencies. We are required to:
. obtain the approval of the FDA and international agencies before we can
market and sell our Duett sealing device;
. satisfy these agencies' content requirements for all of our labeling,
sales and promotional materials; and
. undergo rigorous inspections by these agencies.
These regulatory agencies may also limit the indications for which our
Duett sealing device is approved. Even if we receive approval of our Duett
sealing device, these regulatory agencies may restrict or withdraw approval if
additional information becomes available to support this action.
We are also required to demonstrate compliance with the FDA's quality
system regulations before we can receive FDA approval of our Duett sealing
device. The FDA enforces its quality system regulations through pre-approval and
periodic post-approval inspections. These regulations relate to product testing,
vendor qualification, design control and quality assurance, as well as the
maintenance of records and documentation. If we are unable to conform to these
regulations, we will be required to locate alternative manufacturers that do
conform. Identifying and qualifying alternative manufacturers may be a long and
difficult process and could seriously harm our business.
Compliance with the regulations of the FDA and international agencies may
delay or prevent us from introducing our Duett sealing device in the United
States or introducing any new or improved products. Furthermore, we may be
subject to sanctions, including temporary or permanent suspension of operations,
product recalls and marketing restrictions if we fail to comply with the laws
and regulations pertaining to our business.
We rely on key vendors, including single source suppliers, to supply components
for our Duett sealing device
We purchase components used in our Duett sealing device from various
suppliers and rely on single sources for the collagen and thrombin components of
our Duett sealing device procoagulant. There are currently no FDA-approved
alternative suppliers of thrombin and very few FDA-approved alternative
suppliers of collagen. Because it requires FDA approval, establishing additional
or replacement suppliers
-9-
<PAGE>
for thrombin would require a lead-time of at least two years and would involve
significant additional costs. Any supply interruption from key vendors or
failure by us to engage alternative vendors may limit our ability to manufacture
our Duett sealing device and could therefore seriously harm our business.
We need to expand our management systems and controls to support our anticipated
growth
Our operations are growing rapidly and we expect this expansion to continue
as we execute our business strategy. Our total number of employees grew from 19
on June 30, 1998 to 48 on June 30, 1999. We anticipate further increases in the
number of our employees. Sustaining our growth has placed significant demands on
management and our administrative, operational, personnel and financial
resources. Accordingly, our future operating results will depend on the ability
of our officers and other key employees to continue to implement and improve our
operational, client support and financial control systems, and effectively
expand, train and manage our employee base. We may not be able to manage our
growth successfully and inability to sustain or manage our growth could
seriously harm our business.
Our executive officers and key personnel are critical to our business and these
officers and key personnel may not remain with us in the future
Our success is highly dependent upon the continued service and skills of
our executive officers and key regulatory, research and development and sales
and marketing personnel. If we lose the services of any of these officers or key
personnel, it may have a negative impact on our business. Our success will
depend on our ability to attract and retain additional highly qualified
management and technical personnel. We face intense competition from medical
device, pharmaceutical and healthcare companies, universities and non-profit
institutions for qualified personnel, and we may not be able to attract and
retain qualified personnel. In addition, we rely on medical advisors and other
consultants to assist us in formulating our research and development activities.
These advisors and consultants are employed by other parties and may have
commitments to, or agreements with, other entities, which may limit their
availability to us.
We may require additional funding to satisfy our future capital expenditure
needs
We plan to continue to spend substantial funds to expand our sales and
marketing activities, our research and development activities and our inventory
requirements. Our future liquidity and capital requirements will depend upon
numerous factors, including actions relating to regulatory matters, the costs
and timing of expansion of sales and marketing, manufacturing and research and
development activities, the extent to which our Duett sealing device gains
market acceptance and competitive developments. Any additional required
financing may not be available on satisfactory terms, if at all. If we are
unable to obtain financing, we may be required to delay, reduce or eliminate
some or all of our research and development activities or sales and marketing
efforts.
Our ability to operate our business may be subject to Year 2000 risks
Many currently installed computer systems and software products store dates
using only the last two digits of the calendar year. As a result, such systems
may not be able to distinguish whether "00" means 1900 or 2000, which may cause
system failures or erroneous results. Our greatest potential exposure with
respect to the Year 2000 problem stems from the possibility that some computer
systems used by us and third parties with whom we do business will not be Year
2000 compliant, which may significantly delay or limit our ability to operate
our business.
-10-
<PAGE>
Concentration of ownership of our company may give some shareholders substantial
influence and may prevent or delay a change in control of our company
We anticipate that our executive officers and directors, together with
their affiliates, will, in the aggregate, own approximately 4,730,255 shares, or
______%, of our outstanding common stock following the completion of this
offering. These shareholders may be able to exercise substantial influence over
all matters requiring shareholder approval, including the election of directors
and approval of significant corporate transactions. This concentration of
ownership may also have the effect of delaying or preventing a change in control
of our company.
Our articles of incorporation and Minnesota law may discourage an acquisition of
our company
Provisions of our articles of incorporation and Minnesota law could make it
more difficult for a third party to acquire us, even if doing so would be
beneficial to our shareholders.
Management could spend or invest the proceeds of this offering in ways with
which the shareholders may not agree, including the possible pursuit of other
market opportunities
Our management can spend or invest the proceeds from this offering in ways
with which the shareholders may not agree. The investment of these proceeds may
not yield a favorable return. Furthermore, because the market for vascular
sealing devices is new and emerging, we may in the future discover new
opportunities that are more attractive. As a result, we may commit resources to
these alternative market opportunities. This action may require us to limit or
abandon our current focus on developing, manufacturing and marketing our Duett
sealing device. The risks associated with other markets may be different from
the risks associated with the vascular sealing device market.
The price of our common stock could be highly volatile due to a number of
variables
An active trading market for our common stock may not develop or be
sustained after completion of this offering. The initial public offering price
of our common stock may not be indicative of the prices that will prevail in the
public market after the offering, and the market price of our common stock could
fall below the initial public offering price.
The trading price of our common stock may fluctuate widely as a result of a
number of factors, including:
. delays in obtaining regulatory approvals, specifically the approval by
the FDA of the PMA application for our Duett sealing device;
. quarterly variations in our operating results;
. market perception and customer acceptance of vascular sealing devices;
. increased competition;
. litigation concerning intellectual property rights;
. the loss of significant orders;
-11-
<PAGE>
. general conditions in the medical device industry; and
. changes in earnings estimates by analysts.
In addition, the stock market for medical device companies has experienced
extreme price and volume fluctuations, which have often been unrelated to the
operating performance of the companies experiencing these fluctuations.
Future sales of our common stock in the public market could cause our stock
price to fall
If our shareholders sell substantial amounts of our common stock in the
public market following this offering, the market price of our common stock
could fall. Upon completion of the offering, we will have ___________________
outstanding shares of common stock, assuming no exercise of outstanding options
or warrants after June 30, 1999. Other than the shares sold in this offering
which will be freely tradeable, ______ shares will become freely tradeable as of
the date of this prospectus, an additional ____ shares will be freely tradeable
90 days after the date of this prospectus and the remaining shares will become
freely tradeable at varying dates beginning 180 days after the date of this
prospectus upon the expiration of lock-up agreements between our existing
shareholders and the underwriters.
If holders of our common stock that have registration rights require us to
register a large number of their shares for sale into the public market, the
market price of our common stock and our ability to raise needed capital could
be significantly harmed
One hundred eighty days after the date of this prospectus, the holders of
3,777,777 shares of our common stock, which represent ______% of our outstanding
common stock after this offering, and the holders of warrants to purchase
168,000 shares of our common stock will be entitled to have the resale of their
shares registered under the Securities Act of 1933. If these holders cause a
large number of shares to be registered and sold in the public market, such
sales could seriously harm the market price for our common stock. In addition,
if we include in a company-initiated registration shares held by these holders
pursuant to the exercise of their registration rights, such sales may have a
negative impact on our ability to raise needed capital.
-12-
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that are based on
our current expectations, assumptions, estimates and projections about us and
our industry. When used in this prospectus, the words "expects," "anticipates,"
"estimates" and "intends" and similar expressions are intended to identify
forward-looking statements. These statements include, but are not limited to,
statements under the captions "Risk Factors," "Use of Proceeds," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business" and elsewhere in this prospectus concerning, among other things:
. our future operating results;
. the comparative clinical performance of the Duett sealing device;
. the ability to obtain regulatory and reimbursement approvals for the
Duett sealing device;
. our ability to compete against existing and future competition;
. litigation or other unplanned future events;
. the future market for vascular sealing devices;
. our future capital expenditures and cash resources, and
. the use of the net proceeds from this offering.
These forward-looking statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
projected. The cautionary statements made in this prospectus should be read as
being applicable to all related forward-looking statements wherever they appear
in this prospectus. We assume no obligation to update such forward-looking
statements publicly for any reason, or to update the reasons actual results
could differ materially from those anticipated in such forward-looking
statements, even if new information becomes available in the future.
TRADEMARKS
We have filed a trademark registration application for Vascular
Solutions Duett(TM). All other trademarks, service marks or trade names
referred to in this prospectus are the property of their respective owners.
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<PAGE>
USE OF PROCEEDS
We estimate the net proceeds to us from the sale of the _________ shares of
our common stock offered pursuant to this offering to be approximately $________
million, or approximately $__________ million if the underwriters' over-
allotment option is exercised in full, based on an assumed initial public
offering price of $__________ per share (less the underwriting discount and
estimated offering expenses we expect to pay).
We intend to use the net proceeds from this offering primarily for
operating expenses, including increased sales and marketing expenses associated
with the anticipated commercial launch of our Duett sealing device in the United
States. We currently anticipate spending approximately $12 million during the
period from July 1, 1999 through December 31, 2000 to hire, train and deploy a
direct sales force in the United States. Any remaining proceeds will be used for
working capital and other general corporate purposes. The amounts that we
actually spend for each of these purposes will vary significantly depending on a
number of factors, including the amount of cash we generate from operations and
the progress of our regulatory and sales and marketing efforts. As a result, we
will retain broad discretion in the allocation of the net proceeds from this
offering.
Pending these uses, we intend to invest the net proceeds from this offering
in short-term, investment-grade, interest-bearing securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock and
do not anticipate paying any cash dividends in the foreseeable future. We
currently intend to retain future earnings to fund the development and growth of
our business.
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<PAGE>
CAPITALIZATION
The following table sets forth (1) our actual capitalization as of June 30,
1999 (2) our capitalization on a pro forma basis to give effect to the
conversion of all shares of preferred stock into an aggregate of 3,777,777
shares of common stock upon the closing of this offering and (3) our
capitalization on a pro forma basis as adjusted to give effect to our receipt of
the estimated net proceeds from the sale of ________ shares of our common stock
offered by this prospectus at an assumed initial public offering price of $_____
per share (less the underwriting discount and estimated offering expenses we
expect to pay). You should read this information in conjunction with our
financial statements and the related notes that appear elsewhere in this
prospectus.
<TABLE>
<CAPTION>
June 30, 1999
-------------------------------------------------------
(in thousands)
Pro Forma
Actual Pro Forma As Adjusted
------------ -------------- -------------
<S> <C> <C> <C>
Long-term debt...................................................... $ -- $ -- $ --
Shareholders' equity:
Series A preferred stock, $.01 par value, 2,000,000 shares
authorized, 2,000,000 shares outstanding, actual; no
shares outstanding, pro forma and pro forma as adjusted.......... 20 -- --
Series B preferred stock, $.01 par value, 1,777,777 shares
authorized, 1,777,777 shares outstanding, actual; no
shares outstanding, pro forma and pro forma as adjusted.......... 18 -- --
Common stock, $.01 par value, 16,222,223 shares authorized,
4,313,057 shares outstanding, actual; 20,000,000 shares
authorized, 8,090,834 shares outstanding, pro forma;
20,000,000 shares authorized; __________ shares
outstanding, pro forma as adjusted............................... 43 81
Additional paid-in capital......................................... 20,703 20,703
Deferred compensation.............................................. (128) (128) (128)
Accumulated deficit................................................ (10,326) (10,326) (10,326)
------------ ----------- ----------
Total shareholders' equity....................................... 10,330 10,330
------------ ----------- ----------
Total capitalization........................................... $ 10,330 $ 10,330 $
============ =========== ==========
</TABLE>
The number of shares of common stock issued and outstanding, pro forma, as
adjusted, is based on shares outstanding on June 30, 1999. It excludes 676,531
shares of common stock issuable upon exercise of options outstanding under our
stock option plan and 553,715 shares of common stock issuable upon exercise of
other outstanding stock option and warrant agreements.
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<PAGE>
DILUTION
If you invest in our common stock, your interest will be diluted to the
extent of the difference between the public offering price per share of our
common stock and the pro forma as adjusted net tangible book value per share of
our common stock after this offering. Net tangible book value dilution per
share represents the difference between the amount per share paid by purchasers
of shares of common stock in this offering and the pro forma, adjusted net
tangible book value per share of common stock immediately after completion of
this offering.
Our pro forma, net tangible book value as of June 30, 1999, after giving
effect to the conversion of our outstanding preferred stock into common stock in
connection with this offering, was $10,330,105 or $1.28 per share of common
stock. Net tangible book value per share as of a specified date is determined
by dividing our tangible book value (total tangible assets less total
liabilities) by the number of outstanding shares of common stock at such date.
After giving effect to our sale of the ___________ shares of common stock
offered hereby (based upon an assumed initial public offering price of
$_________ per share (less the underwriting discount and estimated offering
expenses we expect to pay), our pro forma, adjusted net tangible book value as
of June 30, 1999 would have been $________ or $________ per share of common
stock. This represents an immediate increase in pro forma, adjusted net
tangible book value to existing shareholders of $________ per share and an
immediate dilution to new investors of $_______ per share. The following table
illustrates the per share dilution:
<TABLE>
<CAPTION>
<S> <C>
Assumed initial public offering price per share............................... $
Pro forma, net tangible book value per share at June 30, 1999............. $ 1.28
Increase attributable to this offering....................................
----------
Pro forma, adjusted net tangible book value per share after this offering.....
----------
Net tangible book value dilution per share to investors in this offering...... $
==========
</TABLE>
The following table summarizes, on a pro forma basis as of June 30, 1999,
after giving effect to the conversion of all outstanding shares of our preferred
stock into shares of our common stock in connection with this offering, the
difference between the number of shares of common stock purchased from us, the
total consideration paid to us and the average price per share paid by existing
shareholders and new investors in this offering at an assumed initial public
offering price of $_____ per share:
<TABLE>
<CAPTION>
Average
Shares Purchased Total Consideration Price
------------------------------ --------------------------------
Number Percent Amount Percent Per Share
-------------- ------------ ---------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Existing shareholders..... 8,090,834 % $20,268,810 % $2.51
New investors.............
-------------- ------------ ---------------- ------------
Total 100% 100%
============== ============ ================ ============
</TABLE>
This discussion and table assumes no exercise of options outstanding under
our stock option plan or other outstanding options or warrants to purchase
shares of our common stock. On June 30, 1999, there were options outstanding to
purchase 676,531 shares of common stock under our stock option plan and 553,715
shares of common stock issuable upon exercise of outstanding stock option and
warrant agreements. To the extent that any of these options or warrants are
exercised, there will be further dilution to new investors.
-16-
<PAGE>
SELECTED FINANCIAL DATA
The selected statement of operations data shown below for the years ended
December 31, 1997 and 1998 and the balance sheet data as of December 31, 1997
and 1998 are derived from our financial statements, which have been audited by
Ernst & Young LLP, independent auditors. The selected financial data for the
six months ended June 30, 1998 and 1999 and as of June 30, 1999 has been derived
from our unaudited financial statements which, in the opinion of management,
include all adjustments, consisting solely of normal recurring adjustments,
necessary for a fair presentation of the financial information shown in these
statements. The results for the six months ended June 30, 1998 and 1999 are not
necessarily indicative of the results to be expected for the full year or for
any future period. When you read this selected financial data, it is important
that you also read the historical financial statements and related notes
included in this prospectus, as well as "Management's Discussion and Analysis of
Financial Condition and Results of Operations." Historical results are not
necessarily indicative of future results.
<TABLE>
<CAPTION>
Year ended December 31, Six Months Ended June 30,
------------------------------------------ ------------------------------------------
1997 1998 1998 1999
------------------- ------------------- ------------------- -------------------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Statement of Operations Data:
Net sales......................... $ - $ 494 $ 133 $ 514
Cost of goods sold................ - 442 126 442
------------------- ------------------- ------------------- -------------------
Gross profit...................... - 52 7 72
Operating expenses:
Research and development......... 766 2,348 1,129 1,647
Clinical and regulatory.......... 259 1,376 414 882
Sales and marketing.............. 273 1,075 352 850
General and administrative....... 426 668 318 409
------------------- ------------------- ------------------- -------------------
Total operating expenses.......... 1,724 5,467 2,213 3,788
------------------- ------------------- ------------------- -------------------
Operating loss.................... (1,724) (5,415) (2,206) (3,716)
Interest income................... 72 274 161 183
------------------- ------------------- ------------------- -------------------
Net loss.......................... $ (1,652) $ (5,141) $ (2,045) $ (3,533)
=================== =================== =================== ===================
Pro forma basic and diluted net
loss per share.................. $ (.89) $ (.47)
=================== ===================
Shares used in pro forma net loss
per share calculation........... 5,767 7,480
</TABLE>
<TABLE>
<CAPTION>
December 31, June 30,
-----------------------------------------
1997 1998 1999
------------------- ------------------- -------------------
(in thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents.......................... $7,299 $ 9,897 $ 9,201
Working capital.................................... 7,031 9,933 9,681
Total assets....................................... 7,559 11,007 10,674
Long-term debt..................................... - - -
Total shareholders' equity......................... 7,216 10,546 10,330
</TABLE>
For information regarding the determination of the number of shares
used in computing pro forma basic and diluted net loss per share amounts, see
note 2 of notes to the financial statements.
-17-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations should be read in conjunction with the financial statements and the
related notes included elsewhere in this prospectus. This discussion contains
forward-looking statements that involve risks and uncertainties. Our actual
results may differ significantly from those anticipated in these forward-looking
statements as a result of various factors, including, but not limited to, those
described under "Risk Factors" and elsewhere in this prospectus.
Overview
Since we commenced operations in February 1997, we have been engaged in the
design, development, clinical testing and, more recently, the manufacture and
sale in international markets of the Vascular Solutions Duett sealing device.
Our Duett sealing device is designed to seal the puncture site following
catheterization procedures such as angiography, angioplasty and stenting. We
have received regulatory approvals to market the Duett sealing device in several
international markets, principally in Europe. On June 30, 1999, we completed
the submission of our PMA application to the FDA for approval to sell our Duett
sealing device in the United States.
We have a limited history of operations and have experienced significant
operating losses since inception. As of June 30, 1999, we had an accumulated
deficit of $10.3 million. We commenced international sales in February 1998.
To date, we have generated all of our revenue from sales to international
distributors who resell the device to hospitals. We anticipate that
substantially all of our revenues will be derived from sales to our independent
international distributors until we receive approval to market our Duett sealing
device in the United States, if ever. Upon FDA approval, we plan to sell our
product in the United States with a direct sales force.
Although we have experienced revenue growth in recent periods, this growth
may not be sustainable and, therefore, these recent periods should not be
considered indicative of future performance. We may never achieve significant
revenues or profitability, or if we achieve significant revenues they may not be
sustained in future periods.
Results of Operations
Six months ended June 30, 1999 compared to six months ended June 30, 1998
Net sales increased 288% to $514,500 for the six months ended June 30, 1999
from $132,750 for the six months ended June 30, 1998. This increase in net
sales was the result of increased shipments of our Duett sealing device to our
existing independent international distributors and shipments to new independent
international distributors covering other territories. International sales of
our Duett sealing device commenced in February 1998. Sales to our German,
Norwegian, Italian and Austrian distributors accounted for approximately 25%,
22%, 16% and 15% of net sales for the six months ended June 30, 1999.
Cost of goods sold consists primarily of direct material component costs,
personnel expenses and manufacturing equipment and overhead related to the
production of our Duett sealing device. Cost of goods sold as a percentage of
net sales decreased to 86% for the six months ended June 30, 1999 from 95% for
the six months ended June 30, 1998. This decrease as a percentage of net sales
resulted from
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<PAGE>
improvements in manufacturing efficiencies and increases in the number of Duett
sealing devices manufactured. We expect cost of goods sold as a percentage of
net sales to continue to decline as our manufacturing volume increases and we
improve our manufacturing processes.
Research and development expenses increased 46% to $1,646,978 for the six
months ended June 30, 1999 from $1,129,205 in the six months ended June 30,
1998. This increase was primarily a result of additional personnel required for
the continued development of the Duett sealing device. The increase is also
attributable to prototyping costs, legal costs related to patent applications
and costs of materials associated with the development of our next generation
sealing device. We expect our research and development expenses to continue to
increase as we continue work on product improvements and explore new product
opportunities.
Clinical and regulatory expenses increased 113% to $882,303 for the six
months ended June 30, 1999 from $413,478 for the six months ended June 30, 1998.
These expenses consist of payments to clinics for participation in clinical
studies, company personnel related to clinical study administration and payments
to regulatory agencies as part of the product approval process. This increase
was the result of costs associated with the 695-patient multi-center clinical
study of our Duett sealing device which commenced in August 1998 and was
completed in March 1999. In addition to the payments to the clinical centers
for patient enrollment and data collection, we contracted with a third party to
perform data analysis and computation for the study. We also contracted with a
third party to perform a cost outcomes study of the patient data from this
multi-center study. We expect our clinical and regulatory expenses to decrease
over the next year as additional clinical studies are expected to be smaller in
scope than the completed 695-patient multi-center clinical study.
Sales and marketing expenses increased 141% to $849,429 for the six months
ended June 30, 1999 from $351,935 for the six months ended June 30, 1998. This
increase was due primarily to increases in personnel and costs associated with
travel, marketing and physician training for the international distribution of
the Duett sealing device. We currently anticipate spending $12 million during
the period from July 1, 1999 through December 31, 2000 to hire, train and deploy
a direct sales force in the United States. These increases will be principally
related to hiring additional sales and marketing personnel, expanding marketing
efforts and training new physicians.
General and administrative expenses increased 29% to $409,460 for the six
months ended June 30, 1999 from $317,465 in the six months ended June 30, 1998.
This increase was primarily the result of the costs associated with additional
personnel and the expansion of our facilities. We anticipate that general and
administrative expenses will increase for the foreseeable future as we continue
to add administrative personnel and infrastructure.
Interest income increased to $183,036 for the six months ended June 30,
1999 from $161,095 for the six months ended June 30, 1998 primarily as a result
of higher cash balances resulting from our private equity financing completed in
the fourth quarter of 1998.
Year ended December 31, 1998 compared to the year ended December 31, 1997
Net sales of $494,150 in 1998 were the result of shipments to international
distributors, with 65% of the sales attributable to our German distributor and
16% of the sales attributable to our Austrian distributor. We commenced
international sales in February 1998 and, accordingly, had no revenues in 1997.
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<PAGE>
Cost of goods sold were $442,565, or 90%, of net sales, in 1998. These
costs reflected the commencement of manufacturing and assembly operations as
well as manufacturing, engineering and support functions.
Research and development expenses increased 206% to $2,348,281 in 1998 from
$766,176 in 1997. This increase was primarily a result of the hiring of
additional personnel required to develop our Duett sealing device, legal costs
related to patent applications and costs of materials associated with the
development of our Duett sealing device.
Clinical and regulatory expenses increased 430% to $1,375,595 in 1998 from
$259,503 in 1997. The increase was primarily the result of costs associated
with our clinical studies that commenced in January 1998.
Sales and marketing expenses increased 294% to $1,075,250 in 1998 from
$273,089 in 1997. The increase was due primarily to the international
commercial launch of our Duett sealing device in February 1998, resulting in
increases in costs associated with travel, marketing and physician training.
General and administrative expenses increased 57% to $667,522 in 1998 from
$425,596 in 1997. The increase was primarily the result of additional
administrative personnel and facilities costs.
Interest income increased to $273,877 in 1998 from $72,546 in 1997
primarily as a result of higher cash balances resulting from our December 1997
private equity financings.
Income Taxes
We have not generated any pre-tax income to date and therefore have not
paid any federal income taxes since inception in December 1996. No provision or
benefit for federal and state income taxes has been recorded for net operating
losses incurred in any period since our inception.
As of December 31, 1998, we had $5,615,000 of federal net operating loss
carryforwards available to offset future taxable income which begin to expire in
the year 2013. As of December 31, 1998, we also had federal and state research
and development tax credit carryforwards of $306,300 which begin to expire in
the year 2013. Under the Tax Reform Act of 1986, the amounts of and benefits
from net operating loss carryforwards may be impaired or limited in certain
circumstances, including significant changes in ownership interests. Future use
of our existing net operating loss carryforwards may be restricted due to
changes in ownership or from future tax legislation.
We have established a valuation allowance against the entire amount of our
deferred tax asset because we have not been able to conclude that it is more
likely than not that we will be able to realize the deferred tax asset, due
primarily to our history of operating losses.
Liquidity and Capital Resources
We have financed all of our operations since inception through the issuance
of equity securities. Through June 30, 1999, we have sold common stock and
preferred stock generating aggregate net proceeds of $20.3 million. At June 30,
1999, we had $9.2 million in cash and cash equivalents on-hand. During the six-
month periods ended June 30, 1998 and 1999, we used $2.7 million and $3.7
million of cash and cash equivalents and for the years ended December 31, 1997
and 1998, we used $1.5 million and $5.8 million of cash and cash equivalents.
The increase in cash used in operations is due primarily to higher expenses
associated with increased research and development activities, clinical study
costs,
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<PAGE>
initiation of sales and marketing activities in international markets, increased
general and administrative expenses to support increased operations and
purchases of inventory to support international sales.
We currently anticipate that we will continue to experience significant
growth in our expenses for the foreseeable future and our expenses will be a
material use of our cash resources. We anticipate that our operating losses
will continue through at least December 31, 2000, because we plan to spend
substantial amounts hiring and training a direct United States sales force,
funding sales and marketing activities and creating and expanding research and
development initiatives. We believe that current cash balances along with cash
generated from the future sales of products and the proceeds of this offering
will be sufficient to meet our operating and capital requirements for at least
the next 12 months. Our future liquidity and capital requirements will depend
on numerous factors, including progress on the FDA approval process of our PMA
application, the extent to which our Duett sealing device gains market
acceptance and competitive developments.
If cash generated from operations is insufficient to satisfy our cash
needs, we may be required to raise additional funds. If we raise additional
funds through the issuance of equity securities, our shareholders may experience
significant dilution. Furthermore, additional financing may not be available
when needed or, if available, financing may not be on terms favorable to us or
our shareholders. If financing is not available when required or is not
available on acceptable terms, we may be unable to develop or market our
products or take advantage of business opportunities or respond to competitive
pressures.
Year 2000
Many currently installed computer systems and software are coded to accept
only two-digit entries in the date code fields. These date code fields will
need to accept four-digit entries to distinguish whether "00" means 1900 or
2000. This problem could result in system failures or miscalculations causing
disruptions of business operations (including, among other things, a temporary
inability to process transactions, send invoices or engage in other similar
business activities). As a result, many companies' computer systems and
software will need to be upgraded or replaced in order to comply with Year 2000
requirements. The potential global impact of the Year 2000 problem is not
known. If Year 2000 problems are not corrected in a timely manner, they could
affect us.
We have formed a project team to address internal Year 2000 issues. Our
internal financial and other computer systems are being reviewed to assess and
remediate Year 2000 problems. Our assessment of internal systems includes our
information technology systems as well as other systems which include embedded
technology in equipment containing microprocessors or other similar circuitry.
Our Year 2000 compliance program includes the following phases:
. identifying systems that need to be modified or replaced;
. carrying out remediation work to modify existing systems or convert to
new systems; and
. conducting validation testing of systems and applications to ensure
compliance.
The amount of remediation work required to address internal Year 2000
problems is not expected to be extensive. We have installed most of our
operational systems and personal computers in the last 18 months. We believe
that this equipment and software substantially addresses Year 2000 issues.
However, we will be required to modify some of our existing hardware and
software in order for our computer systems to function properly in the year 2000
and thereafter. We estimate that we will complete
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<PAGE>
our Year 2000 compliance program for all of our significant internal systems no
later than October 31, 1999, at minimal costs. There can be no assurance that
these estimates are correct or that actual costs will not be materially greater
than anticipated.
In addition, we are in the process of surveying our major suppliers and
evaluating their plans to address potential Year 2000 issues. We anticipate
that this evaluation will be completed by October 31, 1999. We will rely
primarily on our suppliers' commitments to accomplish this task but have no
contractual commitments from the suppliers regarding Year 2000 issues. It is
impossible to fully assess the potential consequences in the event interruptions
from suppliers occur or in the event that there are disruptions in
infrastructure areas such as utilities, communications, transportation, banking
or government.
Based on our assessments to date, we believe we will not experience any
material disruptions as a result of Year 2000 problems in internal processes,
information processing, and interfaces with major customers or with processing
orders and billing. However, our ability to timely ship products to our
customers would be disrupted if suppliers or other third-party providers, such
as those providing electricity, water or telephone services, experience
difficulties in providing products or services to us. These difficulties could
seriously harm our business. In addition, if our information technology systems
are not Year 2000 compliant, we would have to devote significant resources to
correct such problems and we may be unable to process customer orders, which
could lead to shipment delays. We have not yet developed a contingency plan to
address these potential issues, but we will assess the need to develop such a
plan based on the outcome of our Year 2000 review. Assuming no major disruption
in service from suppliers or other third parties, we believe that we will be
able to manage our total Year 2000 transition without any material effect on our
results of operations or financial condition.
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<PAGE>
BUSINESS
Overview
We manufacture, market and sell the Vascular Solutions Duett sealing
device, which enables cardiologists and radiologists to rapidly seal the entire
puncture site following catheterization procedures such as angiography,
angioplasty and stenting. A catheterization procedure involves the insertion of
a catheter through a patient's skin and into an artery to perform minimally
invasive medical procedures. Our product combines a simple balloon catheter
delivery mechanism with a proprietary, biological procoagulant mixture, which we
believe offers advantages over both manual compression and the existing FDA-
approved vascular sealing devices. We began selling our product in Europe in
February 1998. On June 30, 1999 we completed the submission of our PMA
application to the FDA. If we receive approval of our application we will
commence selling our Duett sealing device in the United States. Over 6,000
deployments of our device have been performed worldwide. While the vascular
sealing device market has developed quickly from less than $20 million in sales
in 1996 to $110 million in 1998, it represents less than 15% of the $1 billion
potential annual market, based on the current number of catheterization
procedures performed.
We believe that we are well-positioned to capture a substantial share of
the vascular sealing device market opportunity as our Duett sealing device
offers the following benefits:
. complete closure of the entire puncture site, consisting of the
arterial puncture and the tissue tract--the tissue between the skin
surface and the artery;
. compatibility with anti-clotting medications, such as ReoPro(R), which
are increasingly used in therapeutic catheterization procedures,
through the use of thrombin in our biological procoagulant;
. nothing is left behind in the artery to cause an infection or to
interfere with accessing the site again, if that becomes necessary;
. rapid deployment of an easy-to-use, one-size-fits-all device through
the existing introducer sheath; and
. improved patient comfort and increased provider efficiencies by
minimizing the amount of manual compression and the period of immobile
bed rest.
Industry Background
Over 60 million Americans have one or more types of cardiovascular disease-
diseases of the heart and blood vessels. Cardiovascular disease is the number
one cause of death in the United States and is replacing infectious disease as
the world's pre-eminent health risk. Advances in medicine have enabled
physicians to perform an increasing number of diagnostic and therapeutic
treatments of cardiovascular disease using minimally invasive methods, such as
catheters placed inside the arteries, instead of highly invasive open surgery.
Cardiologists and radiologists use diagnostic procedures, such as angiography,
to confirm, and interventional procedures, such as angioplasty and stenting, to
treat, diseases of the coronary and peripheral arteries. Based on industry
statistics, we estimate that cardiologists and radiologists performed over seven
million diagnostic and interventional catheterization procedures worldwide in
1998. The number of catheterization procedures performed is
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expected to grow by 10% to 12% each year for the next three years as the
incidence of cardiovascular disease continues to increase.
Each procedure using a catheter requires a puncture in an artery (usually
the femoral artery in the groin area) of the patient to gain access for the
catheter, which is deployed through an introducer sheath. Upon removal of the
catheter, the physician must seal this puncture in the artery and the tissue
tract that leads from the skin surface to the artery to stop bleeding. The
standard method for sealing the puncture site has been a manual process whereby
a healthcare professional applies direct pressure to the puncture site,
sometimes using a sand bag or a large C-clamp, for 20 minutes to an hour in
order to form a blood clot. The healthcare professional then monitors the
patient, who must remain immobile in order to prevent dislodging of the clot,
for an additional four to 48 hours.
Patients subjected to manual compression generally experience significant
pain and discomfort during compression of the puncture site and during the
period in which they are required to be immobile. Many patients report that
this pain is the most uncomfortable aspect of the catheterization procedure. In
addition, patients usually develop a substantial coagulated mass of blood, or
hemotoma, around the puncture site, limiting patient mobility for up to six
weeks following the procedure. Finally, the need for healthcare personnel to
provide compression and the use of hospital beds during the recovery period
results in substantial costs to the institution which, under virtually all
current healthcare payment systems, are not separately reimbursed.
In addition to this discomfort and cost, manual compression can result in
major complications at the puncture site. These major complications can include
a pseudo-aneurysm (blood continuing to flow from the artery into the coagulated
blood mass at the puncture site), collapse of the femoral artery or femoral
nerve damage from the extended compression. Additional procedures may be
required to correct these major complications.
The increasing use of medications to prevent blood clot formation during
interventional catheterization procedures has increased the difficulty in
sealing the puncture site using manual compression. During and following the
catheterization procedure, physicians are concerned with the formation of blood
clots in the coronary or peripheral arteries. To prevent clots from forming,
the physician typically administers heparin (an anticoagulant) during the
interventional catheterization procedure. More recently, drugs which prevent
blood clotting by inhibiting platelet aggregation, such as ReoPro(R), are also
being used in interventional catheterization procedures. Because these platelet
inhibitor drugs limit the ability of blood to clot, they also increase the
difficulty of sealing the puncture site using manual compression and the natural
clotting process following the catheterization procedure.
Until 1996, manual compression was used following virtually all
catheterization procedures. In late 1995, the first vascular sealing device
which did not rely on compression was introduced in the United States. Three
devices have received FDA approval and are currently being marketed around the
world.
. One device places a dry collagen plug in the tissue tract adjacent to
the puncture in the artery. The plug seals the tissue tract, however,
the clotting effect of collagen at the puncture in the artery is
limited, particularly if anticoagulants or platelet inhibitors are
present in the bloodstream. As a result, manual pressure may be
required for an additional period of time in order to achieve closure
of the puncture in the artery.
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<PAGE>
. The second device inserts a collagen plug into the tissue tract
connected by a suture to a biodegradable anchor which is inserted into
the artery. This device is held in place for approximately 20 minutes
to seal the puncture in the artery. The presence of the anchor
prohibits reaccess to the puncture site for up to 90 days. The
reliance on collagen as the clotting agent limits the effectiveness of
this device in patients being treated with anticoagulants or platelet
inhibitors.
. The third device is a mechanical device that enables a physician to
perform a minimally invasive replication of open surgery. This device
employs remotely controlled needles to suture the puncture in the
artery but leaves the tissue tract unsealed. The non-absorbable
suture permanently remains at the arterial puncture. This device is
more complicated to learn and use than the collagen-based devices.
In aggregate, $110 million of these three FDA-approved devices were sold
worldwide in 1998 compared to less than $20 million in 1996. Based on the
number of catheterization procedures performed annually by cardiologists and
radiologists, industry sources report that the total market opportunity for
vascular sealing devices is approximately $1 billion. Accordingly, the market
opportunity for vascular sealing devices is less than 15% penetrated.
The Vascular Solutions Duett Sealing Device
We believe our product addresses the current demand for a sealing device
that (1) improves patient comfort and is more efficient than manual compression,
and (2) compared to currently available FDA-approved sealing devices, offers a
better combination of a complete seal of the puncture site with nothing left
behind in the artery in an easy-to-use system. Our product uses a balloon
catheter, a device already familiar to cardiologists and radiologists, which is
inserted through the introducer sheath that is already in the patient. The
inflated balloon serves as a temporary mechanical seal, preventing the flow of
blood from the artery. Our biological procoagulant, which is a proprietary
mixture of collagen, thrombin and diluent, is then delivered to the puncture
site, stimulating rapid clotting and creating a complete seal of both the
arterial puncture and the tissue tract from the artery to the skin surface. The
blood-clotting speed and strength of thrombin enable the use of the Duett
sealing device even in the presence of the powerful anti-clotting medications,
such as ReoPro(R), increasingly used in interventional catheterization
procedures. With our Duett sealing device, nothing is left behind in the artery,
so immediate reaccess of the site, if necessary, is possible, and the potential
for infection is minimized.
Business Strategy
Our primary objective is to establish our Duett sealing device as the
leading product in the rapidly growing vascular sealing device market. The key
steps in achieving this objective are the following:
. Obtain FDA Approval for Sale of the Duett Sealing Device in the United
States. On June 30, 1999, we completed the submission of our PMA
application to the FDA for approval to sell our Duett sealing device
in the United States. Included in this application were the results
of our 695-patient multi-center clinical study in which our Duett
sealing device demonstrated (1) reduced time to the cessation of
bleeding, (2) reduced time to ambulation of the patient and (3) no
statistically significant increase in major complications compared to
manual compression. The pursuit of FDA approval of our Duett sealing
device for sale in the United States is our top priority.
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. Promote the Duett Sealing Device's Clinical Benefits. We believe that
the primary clinical benefits of the Duett sealing device are improved
patient outcomes and provider efficiencies through:
. complete closure of the entire puncture site, consisting of the
arterial puncture and the tissue tract;
. compatibility with anti-clotting medications, such as ReoPro(R),
through the use of thrombin in our biological procoagulant;
. leaving nothing behind in the artery to cause an infection or to
interfere with accessing the site again, if that becomes
necessary;
. rapid deployment of a one-size-fits-all device through the
existing introducer sheath with minimal physician training time
required; and
. minimizing the amount of manual compression and the period of
immobile bed rest.
We intend to use our existing and growing body of clinical results to
initiate use of our Duett sealing device by physicians currently using
manual compression and to convert physicians from other vascular
sealing devices to our product. We plan on building market awareness
of our Duett sealing device through a wide range of programs,
materials and events, including conference and trade show appearances
and the dissemination of sales literature and promotional materials.
. Capitalize on the Large and Growing Vascular Sealing Market. While the
market for vascular sealing devices has developed quickly, from less
than $20 million in sales in 1996 to $110 million in 1998, it
represents less than 15% of the $1 billion potential annual market,
based on the current number of catheterization procedures performed.
The primary factors underlying the market opportunity for vascular
sealing devices are the significant and growing number of
catheterization procedures being performed and the substantial
majority of the resulting puncture sites still being sealed through
manual compression. The growth in catheterization procedures by
cardiologists and radiologists reflects an increasing incidence of
cardiovascular disease and the growing number of catheterization
laboratories worldwide. In 1998, over seven million catheterization
procedures were performed. This number is expected to increase by 10%
to 12% each year for the next three years. Although the market for
vascular sealing devices has grown rapidly, 85% of the arterial
punctures in 1998 were sealed using manual compression. We believe
that our device offers benefits that position it well to capture a
significant share of the market for vascular sealing devices.
. Hire, Train and Deploy a Direct Sales Force in the United States. Upon
FDA approval of our PMA application, we intend to sell our Duett
sealing device in the United States through a direct sales force that
will include clinical specialists who will train interventional
cardiologists, radiologists and catheterization laboratory
administrators on the use of our product. We believe that effective
training is a key factor in promoting use of our Duett sealing device.
We have created and will continue to work to improve an in-the-field
training and certification program for the use of our Duett sealing
device. We anticipate that our initial direct sales force will be
substantially in place prior to our receiving FDA approval of our PMA
application. We currently anticipate spending approximately $12
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million during the period from July 1, 1999 through December 31, 2000
to hire, train and deploy our direct sales force.
. Develop Duett Sealing Product Line Extensions and Explore New
Product Opportunities. In addition to developing next generation
versions of our Duett sealing device, we are evaluating enhancements
that will allow our product to be used in interventional procedures
that result in larger (greater than nine French or three millimeters
in diameter) arterial punctures. Furthermore, we intend to leverage
our knowledge and experience in the vascular sealing market into other
interventional cardiology and radiology products.
Clinical Results and Regulatory Status
On June 30, 1999, we completed the submission of our PMA application to the
FDA for approval to sell our Duett sealing device in the United States. To date,
over 6,000 deployments of our Duett sealing device have been performed
worldwide. A total of 14 scientific publications and presentations have been
made on our Duett sealing device at interventional cardiology and radiology
meetings, reporting the results of over 2,500 deployments.
Five separate clinical studies of our Duett sealing device have been
performed to date, each of which produced very favorable clinical results.
Duett Sealing Device Clinical Studies
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Study Time Frame Patients Enrolled Number of Centers
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
European Feasibility July 1997 24 1
- --------------------------------------------------------------------------------------------------------------
European Multi-Center October 1997 - January 1998 48 2
- --------------------------------------------------------------------------------------------------------------
U.S. Feasibility January 1998 - February 1998 43 2
- --------------------------------------------------------------------------------------------------------------
European Registry June 1998 - January 1999 1,587 25
- --------------------------------------------------------------------------------------------------------------
SEAL Multi-Center August 1998 - March 1999 695 15
- --------------------------------------------------------------------------------------------------------------
</TABLE>
The most recent clinical study of our Duett sealing device was our Simple
and Effective Arterial cLosure ("SEAL") clinical study which was performed
between August 1998 and March 1999. The SEAL study was a randomized, controlled
study to support our PMA application with the FDA. As part of this study, we
contracted with The Cardiovascular Data Analysis Center of the Beth Israel
Medical Group to perform data analysis and computation and Emory University to
perform a cost outcomes study of the patient data. In the SEAL study, the Duett
sealing device demonstrated (1) reduced time to the cessation of bleeding, (2)
reduced time to ambulation of the patient and (3) no statistically significant
increase in major complications compared to manual compression. These were the
three primary endpoints we submitted to the FDA with our PMA application.
Sales, Marketing and Distribution
Our initial sales and marketing strategy has been to sell to interventional
cardiologists and radiologists through established independent distributors in
major international markets, subject to required regulatory approvals. Our
Duett sealing device is currently marketed through independent distributors in
Germany, Austria, Switzerland, Norway, Denmark, Finland, the Netherlands, the
United Kingdom, Taiwan, Italy and Hong Kong. We intend to add independent
distributors in other countries as our sales and marketing efforts are expanded.
Under multi-year written distribution agreements with each of our independent
distributors, we ship our Duett sealing device to these distributors upon
receipt of purchase orders. Each of our independent distributors has the
exclusive right to sell our Duett sealing device within a defined territory.
These distributors also market other medical products, although they
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<PAGE>
have agreed not to sell other vascular sealing devices. Our independent
distributors purchase our Duett sealing device from us at a discount from list
price and resell the device to hospitals and clinics. Sales to international
distributors are denominated in United States dollars. The end-user price is
determined by the distributor and varies from country to country.
All of our revenues through June 30, 1999 were derived from sales to
international distributors, primarily in Europe, none of which is affiliated
with us. Sales in Europe constituted 94% of our net sales for each of the year
ended December 31, 1998 and the six months ended June 30, 1999. Sales to
Cardiologic G.m.b.H., our German distributor, accounted for 65% of our net sales
for the year ended December 31, 1998 and sales to Moderne Medizintechnik m.b.H,
our Austrian distributor, accounted for 16% of net sales for the same period.
Sales to our German, Norwegian, Italian and Austrian distributors accounted for
approximately 25%, 22%, 16% and 15% of net sales for the six months ended June
30, 1999.
As of June 30, 1999, our sales and marketing staff consisted of 11 people.
Upon receiving FDA approval of our PMA application, we plan to market our Duett
sealing device in the United States through a direct sales organization. We
believe that the majority of interventional catheterization procedures in the
United States are performed in high volume catheterization laboratories, and
that these institutions can be served by a focused direct sales force. While we
intend to initially focus on these high volume laboratories, we believe that our
Duett sealing device's ease of use and relatively short training time will also
make our product attractive to lower volume laboratories.
As part of our sales force, we intend to hire clinical specialists to train
physicians and other healthcare personnel on the use of the Duett sealing
device. We believe that effective training is a key factor in encouraging
physicians to use our Duett sealing device. We have created, and will continue
to work to improve an in-the-field training and certification program for the
use of our Duett sealing device. We will seek to develop and maintain close
working relationships with our customers to continue to receive input concerning
our product development plans.
We are focused on building market awareness and acceptance of our Duett
sealing device. Our marketing organization provides a wide range of programs,
materials and events that support our sales force. These include product
training, conference and trade show appearances and sales literature and
promotional materials. Members of our medical advisory board also aid in
marketing our Duett sealing device by publishing articles and making
presentations at physicians' meetings and conferences.
Product Technology
The components of our proprietary Duett sealing device consist of a very
thin balloon catheter and a procoagulant mixture. The balloon catheter consists
of a balloon made of polyethylene connected to a wire, covered by a sleeve. The
procoagulant is a proprietary mixture of collagen, thrombin and a diluent. Both
collagen and thrombin have been approved for use as blood clotting agents in the
human body by the FDA for over ten years. The mixture of thrombin (which is a
very rapid blood clotting agent) and collagen (which allows the procoagulant to
assume a gel-like viscosity) provides a highly effective clotting agent when
delivered directly to the puncture site. The diluent is a liquid used to create
the desired viscosity and neutralize the pH of the mixture. The procoagulant is
mixed before use and the Duett sealing device is deployed in the following
steps:
[Schematic drawing of introducer sheath in artery labeling the items listed
below:]
Artery
Arterial puncture
Tissue tract
Introducer sheath
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<PAGE>
The Duett catheter can be deployed through any commonly used introducer
sheath from five French to nine French in diameter. Therefore, the sheath that
is already in the femoral artery is left in place and no replacement of the
sheath is required.
[Schematic drawing of Duett catheter in the artery labeling the items listed
below:]
Duett catheter
Duett procoagulant
Sidearm of introducer sheath
The Duett catheter is then inserted through the introducer sheath and into
the femoral artery and the syringe containing the Duett procoagulant is attached
to the sidearm of the introducer sheath.
[Schmatic drawing of Duett catheter inflated and creating a temporary seal;
labeling the item listed below:]
Inflated Duett balloon catheter
Using a syringe, the balloon is inflated and positioned against the inner
surface of the artery where the arterial pressure and gentle traction result in
the balloon acting as a temporary seal of the puncture.
[Schematic drawing of Duett procoagulant being delivered]
Next, the procoagulant is delivered directly to the top of the arterial
puncture and the tissue tract through the sidearm of the introducer sheath. The
procoagulant stimulates rapid clotting through the powerful action of thrombin
and collagen. The introducer sheath is removed from the body as the
procoagulant agent is being delivered.
[Schematic drawing of Duett catheter being deflated labeling the item listed
below:]
Duett catheter sleeve
Immediately after the delivery of the procoagulant to the tissue tract, the
balloon is deflated and covered by the sleeve. The slippery nature of the
sleeve as well as its low profile (approximately one millimeter in diameter)
allows for removal of the balloon catheter from the artery without disruption of
the procoagulant.
[Schematic drawing of artery labeling the item listed below:]
Complete seal of puncture site
After removal of the Duett catheter from the artery, manual pressure is
maintained for a short time (usually two to five minutes) to assure the seal.
We recommend ambulation of patients generally one to two hours after diagnostic
catheterizations and two to four hours after interventional catheterization
procedures.
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Research and Development
Our eight person research and development staff is currently focused on
improving our Duett sealing device to include the use of a modified procoagulant
designed for improved patient comfort and to reduce our cost of goods sold. To
further reduce our costs, our research and development group is in the process
of developing some of the component manufacturing steps currently performed by
outside vendors.
We intend to research and develop new sealants in the future for use in our
Duett sealing device as well as to apply our core closure technology to other
catheterization procedures, including cardio-pulmonary support procedures,
treatment of abdominal aortic aneurysms and treatment of pseudo-aneurysms. The
large size of the punctures in these procedures makes closure of the puncture
site very difficult using conventional compression methods. We believe that
modifications of our delivery system will allow our sealing technology to be
useful in larger, greater than nine French, punctures of the femoral artery as
well as in cases of abnormalities such as pseudo-aneurysms.
We expect our research and development activities to expand to include
evaluation of new concepts and products beyond vascular sealing in the
interventional cardiology and radiology field. We believe that there are many
potential new interventional products that would fit within the development,
clinical, manufacturing and distribution network we have created for our Duett
sealing device.
Manufacturing
We manufacture our Duett sealing device in our facility in a suburb of
Minneapolis, Minnesota. The catheter manufacturing and packaging processes
occur under a controlled clean room environment. Our manufacturing facility and
processes have been certified as compliant with the European Community's ISO
9001 standards and will be audited for compliance with the FDA's good
manufacturing practices.
We purchase components from various suppliers and rely on single sources
for several parts of the Duett sealing device. In September 1998, we entered
into a ten year supply agreement with our collagen supplier that provides for a
fixed price based on volume purchases which is adjusted annually for increases
in the Department of Labor's employer's cost index. In June 1999, we entered
into a five year supply agreement with our thrombin supplier that provides for a
fixed price with a price adjustment formula based on increased costs and
wholesale price increases. To date, we have not experienced any significant
adverse effects resulting from shortages of components.
Competition
We believe that competition in the vascular sealing market is intense and
will increase. We believe that the primary bases of competition in the vascular
sealing market are clinical efficacy, ease of use, patient comfort, minimization
of complications and cost-effectiveness. On these bases, we believe that our
product is well-positioned.
Because the substantial majority of vascular sealing is performed through
manual compression, this represents our primary competition. Manual compression
usually requires a healthcare professional to manually apply pressure to the
puncture site for 20 minutes to one hour following which the patient is confined
to bed rest for between four and 48 hours. Often manual compression involves the
use of mechanical devices, including C-clamps and sandbags, or pneumatic
devices. Manual compression is considered to be uncomfortable for the patient.
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Our Duett sealing device also competes with three vascular sealing devices,
none of which had over 40% of the vascular sealing device market in the three-
month period ended March 31, 1999. These three competitive devices are:
. The VasoSeal device, manufactured and marketed by Datascope Corp.,
places a dry collagen plug in the tissue tract adjacent to the
puncture in the artery. The plug seals the tissue tract, however, the
clotting effect of collagen at the puncture in the artery is limited,
particularly if anticoagulants or platelet inhibitors are present in
the bloodstream. As a result, manual pressure may be required for an
additional period of time in order to achieve closure of the puncture
in the artery.
. The Angio-Seal device, sold by the Daig division of St. Jude Medical,
Inc. and developed by Kensey Nash Corporation, inserts a collagen plug
into the tissue tract connected by a suture to a biodegradable anchor
which is inserted into the artery. This device is held in place for
approximately 20 minutes to seal the puncture in the artery. The
presence of the anchor prohibits reaccess to the puncture site for up
to 90 days. The reliance on collagen as the clotting agent limits the
effectiveness of this device in patients being treated with
anticoagulants or platelet inhibitors.
. The third device, developed and marketed under the ProStar(TM) and
TechStar(TM) names by Perclose, Inc., which has agreed to be acquired
by Abbott Laboratories, is a mechanical device that enables a
physician to perform a minimally invasive replication of open surgery.
This device employs remotely controlled needles to suture the puncture
in the artery but leaves the tissue tract unsealed. The non-
absorbable suture permanently remains at the arterial puncture. This
device is more complicated to learn and use than the collagen-based
devices.
We believe that several other companies are developing arterial closure
devices, however, we are unaware of any new sealing device or company that has
entered U.S. clinical studies. The medical device industry is characterized by
rapid and significant technological change as well as the frequent emergence of
new technologies. There are likely to be research and development projects
related to vascular sealing devices of which we are currently unaware. A new
technology or product may emerge that results in a reduced need for vascular
sealing devices or results in a product that renders our product noncompetitive.
Regulatory Requirements
United States
Our Duett sealing device is regulated in the United States as a medical
device by the FDA under the FDC Act, and requires premarket approval by the FDA
prior to being sold. In May 1997, the FDA determined that the review of the
Duett sealing device would be delegated to the Center for Devices and
Radiological Health area of the FDA, with a consulting review by the Center for
Biologic Evaluation and Research. In the past two years, we have submitted and
received approval of our investigational device exemption, or IDE, application
to start our feasibility clinical study, filed our IDE Supplement to begin our
multi-center clinical study, completed the SEAL multi-center clinical study and
submitted our PMA application to the FDA.
The FDA classifies medical devices into one of three classes based upon
controls the FDA considers necessary to reasonably ensure their safety and
effectiveness. Class I devices are subject to general controls such as
labeling, premarket notification and adherence to good manufacturing practices.
Class II devices are subject to the same general controls and also are subject
to special controls such as
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<PAGE>
performance standards, postmarket surveillance, patient registries and FDA
guidelines, and may also require clinical testing prior to approval. Class III
devices are subject to the highest level of controls because they are used in
life-sustaining or life-supporting implantable devices. Class III devices
require rigorous clinical testing prior to their approval. Our Duett sealing
device is classified as a Class III device.
Manufacturers must file an IDE application if human clinical studies
of a device are required and if the device presents what the FDA considers to be
a significant risk. The IDE application must be supported by data, typically
including the results of animal and mechanical testing of the device. If the
IDE application is approved by the FDA, human clinical studies may begin at a
specific number of investigational sites with a maximum number of patients, as
approved by the FDA. The clinical studies must be conducted under the review of
an independent institutional board at the hospital performing the clinical
study. Our Duett sealing device is subject to the IDE requirements. We
received approval of our IDE application and performed our feasibility clinical
study at two United States centers in January to March 1998. Based on the
results of this feasibility clinical study, we received approval and performed
our 695 patient multi-center SEAL clinical study from August 1998 through
March 1999.
Generally, upon completion of these human clinical studies, a manufacturer
seeks approval of a Class III medical device from the FDA by submitting a PMA
application. A PMA application must be supported by extensive data, including
the results of the clinical studies, as well as literature to establish the
safety and effectiveness of the device. The FDA has allowed us to submit our
PMA application in segments prior to completion of our clinical studies. Upon
completion of the follow up and data analysis of the SEAL clinical study, we
submitted the final two segments of our PMA application to the FDA on June 30,
1999. Under the FDC Act, the FDA has 180 days to review a PMA application,
although the review of such an application more often occurs over a longer time
period and may require additional information. The PMA application approval
process can be expensive, uncertain and lengthy. A number of devices for which
premarket approval has been sought have never been approved for marketing and
sale. Also, a review panel is often convened by the FDA to review and evaluate
the application and recommend whether the device should be approved. In
addition, the FDA will inspect our manufacturing facility to ensure compliance
with the FDA's requirements regarding good manufacturing practices prior to
approval of our application. If granted, the approval of our PMA application may
include significant limitations on the indicated uses for which our product may
be marketed.
We also will be subject to FDA regulations concerning manufacturing
processes and reporting obligations. These regulations require that
manufacturing steps be performed according to FDA standards and in accordance
with documentation, control and testing standards. We also will be subject to
inspection by the FDA. We will be required to provide information to the FDA on
adverse incidents as well as maintain a documentation and record keeping system
in accordance with FDA guidelines. The advertising of the Duett sealing device
also will be subject to both FDA and Federal Trade Commission jurisdiction. If
the FDA believes that we are not in compliance with any aspect of the law, it
can institute proceedings to detain or seize products, issue a recall, stop
future violations and assess civil and criminal penalties against us, our
officers and our employees.
International
The European Union has adopted rules which require that medical products
receive the right to affix the CE mark, an international symbol of adherence to
quality assurance standards and compliance with applicable European medical
device directives. As part of the CE compliance, manufacturers are required to
comply with the ISO 9000 series of standards for quality operations. We
received the CE mark approval for our Duett sealing device and ISO 9001
certification in July 1998.
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International sales of the Duett sealing device are subject to the
regulatory requirements of each country in which we sell our product. These
requirements vary from country to country but generally are much less stringent
than those in the United States. Our Duett sealing device is currently marketed
in Germany, Austria, Switzerland, Norway, Denmark, Finland, the Netherlands, the
United Kingdom, Taiwan, Italy and Hong Kong. We have obtained regulatory
approvals where required. Through our Japanese distributor, we are pursuing the
regulatory approval for commercial sale in Japan.
Third Party Reimbursement
In the United States, healthcare providers that purchase medical devices,
such as vascular sealing devices, generally rely on third-party payors,
principally the Health Care Financing Administration and private health
insurance plans, to reimburse all or part of the cost of therapeutic and
diagnostic catheterization procedures. We believe that in the current United
States reimbursement system, the cost of vascular sealing devices is and will be
incorporated into the overall cost of the catheter procedure. We do not
anticipate that a separate, additional reimbursement for the Duett sealing
device will be required.
As a result, we are working to establish the cost benefit of the Duett
sealing device, relying on shortened hospital stays and decreased use of
healthcare professionals, to justify the increased cost of using our Duett
sealing device in the United States. As part of our 695-patient, 15-center SEAL
clinical study, we retained the Emory Cost Outcomes Research Center to perform
an analysis of the costs and benefits of the use of the Duett sealing device in
a randomized, controlled comparison to manual compression. While the results of
this study are not complete, we believe that we will be able to demonstrate that
the use of our Duett sealing device can result in cost savings in healthcare
personnel and hospital resources. Before entering the United States market, we
intend to further document the cost benefit of our Duett sealing device.
Market acceptance of the Duett sealing device in international markets is
dependent in part upon the availability of reimbursement from healthcare payment
systems. Reimbursement and healthcare payment systems in international markets
vary significantly by country. The main types of healthcare payment systems in
international markets are government sponsored healthcare and private insurance.
Countries with government sponsored healthcare, such as the United Kingdom, have
a centralized, nationalized healthcare system. New devices are brought into the
system through negotiations between departments at individual hospitals at the
time of budgeting. In most foreign countries, there are also private insurance
systems that may offer payments for alternative therapies.
We have pursued reimbursement for our Duett sealing device internationally
through our independent distributors. We have initially focused on the markets
of Germany, Austria, Switzerland, Norway, the Netherlands, the United Kingdom,
Taiwan and Italy. While the healthcare financing issues in these countries are
substantial, we have been able to sell the Duett sealing device to private
clinics or nationalized hospitals in each of these countries.
Patents and Intellectual Property
We file patent applications to protect technology, inventions and
improvements that are significant to the development of our business, and use
trade secrets and trademarks to protect other areas of our business.
Prior to the formation of our company, Dr. Gary Gershony filed a number of
patent applications in the United States and other countries directed to
proprietary technology used in our Duett sealing device. Upon the commencement
of our operations in February 1997, Dr. Gershony assigned all patents
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<PAGE>
and patent applications relating to the Duett sealing device to us on a
worldwide, perpetual, royalty-free basis. At the time of assignment, there
existed one United States patent issued which is directed to a balloon catheter
sealing device and method, three United States patents pending and an
international patent application pending which designated numerous foreign
countries and regions.
Since commencing operations, we have continued the prosecution of the
pending United States patent applications and filed new patent applications. A
second United States patent has issued which is directed to a balloon catheter
and procoagulant sealing device and method. A third United States patent has
also been filed and issued which contains method claims concerning the use of a
balloon catheter and flowable procoagulant. We currently have eight additional
United States patents pending concerning aspects of our Duett sealing device and
other interventional products. We also have pursued international patent
applications, which designate the key developed nations with substantive patent
protection systems.
The interventional cardiology market in general, and the vascular sealing
device field in particular, is characterized by numerous patent filings and
frequent and substantial intellectual property litigation. Each of the three
vascular sealing products with which our Duett sealing device competes has been
subject to infringement litigation. We are aware of many United States patents
issued to other companies in the vascular sealing field which describe vascular
sealing devices. After consultation with our intellectual property counsel, we
believe that our Duett sealing device does not infringe any of these existing
United States issued patents. The interpretation of patents, however, involves
complex and evolving legal and factual questions. Intellectual property
litigation in recent years has proven to be complex and expensive, and the
outcome of such litigation is difficult to predict.
On July 23, 1999, we were named as the defendant in a patent infringement
lawsuit brought by Datascope Corp. in the United States District Court for the
District of Minnesota. The complaint requests a declaratory judgment that our
Duett sealing device infringes and, following FDA approval will infringe, a
United States patent held by Datascope and asks for relief in the form of an
injunction that would prevent us from selling our product in the United States
as well as an award of attorneys' fees, costs and disbursements. We believe this
claim is without merit and intend to defend the lawsuit vigorously. It is not
possible at this time to predict the outcome of the lawsuit, including whether
we will be prohibited from selling our Duett sealing device in the United
States, or to estimate the amount or range of potential loss, if any.
It is likely that we will become the subject of additional intellectual
property claims in the future related to our Duett sealing device. Our defense
of the Datascope claim and any other intellectual property claims filed in the
future, regardless of the merits of the complaint, could divert the attention of
our technical and management personnel away from the development and marketing
of the Duett sealing device for significant periods of time. The costs incurred
to defend the Datascope claim and other future claims could be substantial and
adversely affect us, even if we are ultimately successful. An adverse
determination in the Datascope matter or in other litigation or interference
proceedings in the future could prohibit us from selling our product, subject us
to significant liabilities to third parties or require us to seek licenses from
third parties.
We also rely on trade secret protection for certain aspects of our
technology. We typically require our employees, consultants and vendors for
major components to execute confidentiality agreements upon their commencing
services with us or before the disclosure of confidential information to them.
These agreements generally provide that all confidential information developed
or made known to the other party during the course of that party's relationship
with us is to be kept confidential and not disclosed to third parties, except in
special circumstances. The agreements with our employees also provide that all
inventions conceived or developed in the course of providing services to us
shall be our exclusive property.
We also intend to register the trademarks and trade names through which we
conduct our business. To date, we have applied for registration in the United
States of the mark "Vascular Solutions Duett" and the Duett logo.
Facilities
Our principal offices are in approximately 24,000 square feet of leased
space in a suburb of Minneapolis, Minnesota. These facilities include
approximately 8,200 square feet used for manufacturing activities, approximately
3,300 square feet used for research and laboratory activities, with the
remainder used for administrative offices. Our lease for these facilities
expires March 31, 2003 and includes both an option to renew for an additional
five-year term and an option to terminate after April 1, 2001. We believe that
these facilities will be adequate to meet our needs through at least the end of
2000.
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<PAGE>
Employees
As of June 30, 1999, we had 48 full time employees. Of these employees, 17
were in manufacturing activities, 11 were in sales and marketing activities,
eight were in research and development activities, six were in regulatory,
quality assurance and clinical research activities and six were in general and
administrative functions. We have never had a work stoppage and none of our
employees are covered by collective bargaining agreements. We believe our
employee relations are good.
Legal Proceedings
On July 23, 1999, we were named as the defendant in a patent infringement
lawsuit brought by Datascope Corp. in the United States District Court for the
District of Minnesota. The complaint requests a declaratory judgment that our
Duett sealing device infringes and, following FDA approval will infringe, a
United States patent held by Datascope and asks for relief in the form of an
injunction that would prevent us from selling our product in the United States
as well as an award of attorneys' fees, costs and disbursements. We believe this
claim is without merit and intend to defend the lawsuit vigorously. It is not
possible at this time to predict the outcome of the lawsuit, including whether
we will be prohibited from selling our Duett sealing device in the United
States, or to estimate the amount or range of potential loss, if any.
Other than the Datascope claim, there are no legal proceedings pending
against us.
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<PAGE>
MANAGEMENT
Executive Officers and Directors
The following table provides information concerning our executive officers
and directors:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Howard Root............... 38 Chief Executive Officer and Director
Gary Gershony, M.D........ 43 Medical Director and Director
Michael Nagel............. 37 Vice President of Sales & Marketing
Charmaine Sutton.......... 39 Vice President of Regulatory Affairs
Robert Assell............. 46 Vice President of Research & Development
James Quackenbush......... 40 Vice President of Manufacturing
David Christofferson...... 62 Chief Financial Officer and Secretary
Gabriel Vegh.............. 60 Director
Gerard Langeler........... 48 Director
Daniel Sullivan........... 44 Director
James Jacoby, Jr.......... 36 Director
</TABLE>
Howard Root has served as our Chief Executive Officer and a director since
he co-founded Vascular Solutions in February 1997. From April 1996 through
February 1997, Mr. Root was the Vice President of Gateway Alliance, LLC, a
provider of management services to start-up businesses. From 1990 to 1995, Mr.
Root was employed by ATS Medical, Inc., a mechanical heart valve company, most
recently as Vice President and General Counsel. Prior to joining ATS Medical,
Mr. Root practiced corporate law, specializing in representing emerging growth
companies, at the law firm of Dorsey & Whitney for over five years. Mr. Root
received his B.S. in Economics and J.D. degrees from the University of
Minnesota.
Gary Gershony, M.D., is the principal inventor of the Duett sealing device
and has served as our Medical Director as well as a director since he co-founded
Vascular Solutions in February 1997. Dr. Gershony also is in private practice
as an interventional cardiologist with John Muir Hospital in Walnut Creek,
California. From 1997 through March 1998, Dr. Gershony was associated with Los
Angeles Cardiology Associates. From 1993 through 1997, Dr. Gershony was the
Director of the Cardiac Catheterization Laboratories and Interventional
Cardiology at the University of California Davis Medical Center and an Assistant
Professor of Medicine (Cardiology) at the University of California Davis School
of Medicine. From 1989 to 1993, Dr. Gershony served as Clinical Assistant
Professor of Medicine at the University of Oklahoma College of Medicine and
Associate Director of Research Cardiology at Hillcrest Medical Center. Dr.
Gershony is a Fellow of the American College of Cardiology, the American Heart
Association, the Society for Cardiac Angiography and Interventions and the
American Society for Lasers in Medicine and Surgery. Dr. Gershony received his
M.D. degree from the University of Toronto and performed his interventional
cardiology fellowship at Emory University.
Michael Nagel has served as our Vice President of Sales & Marketing since
June 1997. Prior to joining us, Mr. Nagel was the Director of Sales & Marketing
at Quantech, Ltd., a developer of point of care medical diagnostic testing
products since July 1996. From 1992 though July 1996, Mr. Nagel was the mid-
west division sales manager of B. Braun Cardiovascular, a manufacturer of
cardiovascular devices and catheters. From 1991 through 1992, Mr. Nagel was the
Director of Worldwide Sales for the Medical Products Division of Angeion
Corporation, a manufacturer of angioplasty accessories and pediatric catheters.
Prior to 1991, Mr. Nagel performed a variety of sales and marketing functions
with
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<PAGE>
Abbott Labs Diagnostic Division for over five years. Mr. Nagel received
his B.A. and M.B.A. degrees from the University of St. Thomas.
Charmaine Sutton joined us as manager of regulatory compliance in February
1997, became director of regulatory affairs and quality assurance in January
1998 and was named our Vice President of Regulatory Affairs in June 1998. Ms.
Sutton has performed regulatory compliance, quality system development and
clinical study design for medical companies on a contract basis since 1992.
From 1990 to 1992, Ms. Sutton was manager of regulatory, clinical and quality
assurance with AngeLase, Inc., a subsidiary of Angeion Corporation. Previously,
Ms. Sutton was a physicist with the Lawrence Livermore National Laboratory. Ms.
Sutton received a B.S. in Applied Physics/Quantum Optics from the University of
California Davis.
Robert Assell has served as our Vice President of Research & Development
since September 1998. Prior to joining us, Mr. Assell was the Vice President of
Operations of RayMedica, Inc., a development stage spinal implant medical device
company, since January 1995. From October 1992 to January 1995, Mr. Assell was
the Director of Research & Development of Lake Region Manufacturing Co., an
original equipment manufacturer of medical devices including guidewires and
pacing leads. From March 1990 to October 1992, Mr. Assell was the Director of
Research & Development and Pilot Plant for Schneider USA, an interventional
cardiology company. Mr. Assell received a B.S. in Mechanical Engineering from
the University of Minnesota and an M.B.A. from the University of St. Thomas.
James Quackenbush has served as our Vice President of Manufacturing since
March 1999. Prior to joining us, Mr. Quackenbush served as Vice President of
Manufacturing and Operations with Optical Sensors, Inc., a diagnostic medical
device company, where he worked since October 1992. From March 1989 through
October 1992, Mr. Quackenbush served as operations manager with Schneider USA's
stent division. Prior to this time, he was an advanced project engineer with
the 3M Medical Products Division. Mr. Quackenbush received a B.S. in Industrial
Engineering from Iowa State University.
David Christofferson joined us as Chief Financial Officer and Secretary in
July 1999. Prior to joining Vascular Solutions, Mr. Christofferson was a
financial consultant since April 1998. From 1991 through 1998, Mr.
Christofferson was Vice President, Chief Financial Officer and Secretary for
Angeion Corporation, a manufacturer of products that treat irregular heartbeats.
From 1986 to December 1990, Mr. Christofferson was a branch manager for Excel
Office Products, a company he founded in 1986, which was acquired by General
Office Products in 1988. From 1987 through 1989 he served as Chairman and Chief
Financial Officer of Medical Wellness Technologies, Inc., a distributor of pain
control devices. Prior to 1986, Mr. Christofferson was employed by Medtronic,
Inc., a medical device company, for over 13 years in various financial
management positions. Mr. Christofferson received a B.S. in Finance from the
University of Minnesota.
Gabriel Vegh has been a member of our board of directors since May 1997.
Mr. Vegh is the founder, Chief Operating Officer and a director of Cardima,
Inc., an electrophysiology medical device company, where he has worked since
1993. From 1985 through 1993, Mr. Vegh was Vice President of Operations of
Target Therapeutics, Inc., a manufacturer of therapeutic micro-catheters. From
1983 through 1984, Mr. Vegh was General Manager of Advanced Cardiovascular
Systems, Inc., a manufacturer of angioplasty catheters.
Gerard Langeler has been a member of our board of directors since February
1997. Mr. Langeler has been a General Partner of Olympic Venture Partners, an
operating venture capital company, since 1992. Prior to joining Olympic Venture
Partners, Mr. Langeler was an officer and co-founder of Mentor Graphics, a
manufacturer of software for computer-aided design of electronics. Mr. Langeler
also is a director of Preview Systems, Inc. and 800.com, Inc.
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<PAGE>
Daniel Sullivan has been a member of our board of directors since October
1998. Mr. Sullivan is the President and Chief Executive Officer of Vascular
Science, Inc., a Minneapolis based development stage medical device company he
founded in 1996 that is unaffiliated with Vascular Solutions. Prior to 1995,
Mr. Sullivan was Vice President of Sales and Marketing at SCIMED Life Systems,
Inc., an interventional cardiology company, where he also served as the General
Manager of the company's Ancillary Division. Mr. Sullivan also is a director of
Applied Biometrics, Inc. and several privately held companies.
James Jacoby, Jr. joined our board of directors in February 1999. Mr.
Jacoby has been Vice President, Corporate Finance Department of Stephens Inc.,
an Arkansas-based investment banking firm, since 1994. From 1990 through 1994,
Mr. Jacoby was Vice President, Mergers and Acquisitions Department of Chemical
Banking Corporation in New York and London.
There are no family relationships among any of our directors or executive
officers. All directors hold office until the next annual meeting of our
shareholders and until their successors have been elected and qualified or until
their earlier resignation or removal. Executive officers are appointed to serve
at the discretion of our board of directors. Mr. Langeler and Mr. Jacoby have
been elected to our board of directors pursuant to the terms of an amended and
restated voting agreement dated December 9, 1998 among Vascular Solutions and
certain of our shareholders, including affiliates of Olympic Venture Partners
and Stephens Inc. This voting agreement will terminate upon the closing of this
offering.
Board Committees
Our board of directors has established a compensation committee and an
audit committee.
The compensation committee consists of Messrs. Langeler and Sullivan and
Dr. Gershony. The compensation committee's responsibilities include
establishing salaries, incentives, and other forms of compensation for our
directors and officers; administering our incentive compensation and benefits
plans; and recommending policies relating to such incentive compensation and
benefits plans.
The audit committee consists of Messrs. Langeler, Sullivan and Jacoby. The
audit committee's responsibilities include facilitating our relationship with
independent auditors; reviewing and assessing the performance of our accounting
and finance personnel; communicating to the board the results of work performed
by and issues raised by our independent auditors and legal counsel; and
evaluating our management of assets and reviewing policies relating to asset
management.
Director Compensation
We do not currently pay any compensation to directors for serving in that
capacity, but we reimburse directors for out-of-pocket expenses incurred in
attending board meetings. Each unaffiliated director receives an option to
purchase 10,000 shares of our common stock with an exercise price equal to fair
market value on the date of the first board meeting held after his or her
election to our board.
Compensation Committee Interlocks and Insider Participation
Messrs. Langeler and Sullivan and Dr. Gershony currently serve on the
compensation committee. None of these individuals has at any time been an
officer or employee of Vascular Solutions. Prior to formation of the
compensation committee, all decisions regarding executive compensation were made
by the full board of directors. No interlocking relationship exists between the
board of directors or the compensation committee and the board of directors or
compensation committee of any other company, nor has any such interlocking
relationship existed in the past.
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<PAGE>
We have sold shares of common stock, Series A and Series B preferred stock
to entities affiliated with Olympic Venture Partners and shares of Series B
preferred stock to entities affiliated with Stephens Inc. Mr. Langeler, one of
our directors and a member of our compensation committee, is a general partner
of Olympic Venture Partners and has voting control of the affiliated entities.
Mr. Jacoby, one of our directors and a member of our audit committee, is a Vice
President of Stephens Inc.
Indemnification Matters and Limitation of Liability
Minnesota law and our bylaws provide that we will, subject to limitations,
indemnify any person made or threatened to be made a party to a proceeding by
reason of that person's former or present official capacity with us. We will
indemnify such person against judgments, penalties, fines, settlements and
reasonable expenses, and, subject to limitations, we will pay or reimburse
reasonable expenses before the final disposition of the proceeding.
As permitted by Minnesota law, our articles of incorporation provide that
our directors will not be personally liable to us or our shareholders for
monetary damages for a breach of fiduciary duty as a director, subject to the
following exceptions:
. any breach of the director's duty of loyalty to us or our
shareholders;
. acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
. liability for illegal distributions under section 302A.559 of the
Minnesota Business Corporation Act or for civil liabilities for state
securities law violations under section 80A.23 of the Minnesota
statutes; or
. any transaction from which the director derived an improper personal
benefit.
In his role as one of our directors, Mr. Jacoby may be entitled to
indemnification by Stephens Inc.
Presently, there is no pending litigation or proceeding involving any of
our directors, officers, employees or agents where indemnification will be
required or permitted. We are not aware of any threatened litigation or
proceeding that might result in a claim for indemnification.
Employment and Consulting Agreements
We have entered into employment agreements with each of our executive
officers. The employment agreements provide for employment "at will" which may
be terminated by either party for any reason upon ten working days' prior
written notice. The base salary and any discretionary bonus for each of the
executive officers is determined by the compensation committee of our board of
directors. During 1998, no bonuses were paid to any executive officer. During
the term of his or her employment agreement and for a period of one year after
its termination, each executive officer is prohibited from competing with us in
the vascular sealing device field.
Upon the commencement of our operations in February 1997, we entered into a
consulting agreement with Dr. Gershony to serve as our Medical Director. In
June 1999, the agreement was revised. Under the revised agreement, Dr. Gershony
receives $8,333 on a monthly basis for his services to us in clinical research,
product development and medical review. The relationship under the agreement is
on an "at will" basis. Either party may terminate the relationship for any
reason at any time by giving ten
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<PAGE>
working days written notice to the other party. During the term of the agreement
and for one year after its termination, Dr. Gershony is prohibited from working
on a competitive vascular sealing device.
Executive Compensation
The following summary compensation table indicates the cash and non-cash
compensation earned by each our executive officers whose total compensation
exceeded $100,000 during the fiscal year ended December 31, 1998.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Long Term
Compensation Compensation
------------------------------- --------------
Shares
Underlying All Other
Name and Principal Position Salary ($) Bonus ($) Options (#) Compensation ($)(1)
- ---------------------------------------- -------------- ----------- -------------- -----------------------
<S> <C> <C> <C> <C>
Howard Root............................. $115,000 $ -- -- $1,510
Chief Executive Officer
Michael Nagel........................... 100,000 -- 10,000 5,078
Vice President, Sales &
Marketing
</TABLE>
__________________
(1) Consists of amounts we pay for health insurance benefits.
The following table provides information concerning the stock option grants
we made to each of the above named executive officers during the year ended
December 31, 1998:
Stock Options Granted in 1998
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
of Stock Price
Indiviual Grants Appreciation for Option
Term(4)
----------------------------------------------------------------------------- --------------------------
% of Total
Number of Securities Options Granted Exercise
Underly Options to Employees in Price Per Expiration
Name Granted (1) 1998(2) Share(3) Date 5% 10%
- --------------------- -------------------- ---------------- ---------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Howard Root.......... -- -- % $ -- -- $ -- $ --
Michael Nagel........ 10,000 4.6 3.00 7/19/08 18,867 47,812
</TABLE>
______________
(1) Options vest in equal monthly installments over a four-year period
beginning on the grant date.
(2) Based on options to purchase an aggregate of 217,000 shares of common stock
granted to our employees during the year ended December 31, 1998.
(3) All stock options were granted with an exercise price equal to the fair
market value of the common stock as determined by our board of directors on
the grant date.
(4) Assumes increases in the fair market value of the common stock of 5% and
10% per year over the ten-year option period mandated by the rules and
regulations of the Securities and Exchange Commission and does not
represent our estimate or projection of the future value of the common
stock. The actual value realized may be greater or less than the potential
realizable values set forth in the table.
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<PAGE>
The following table sets forth information concerning stock option
exercises during 1998 by the named executive officers and the number and value
of unexercised options held by them. There was no public trading market for our
common stock as of December 31, 1998. Accordingly, the value of unexercised
options has been calculated by subtracting the exercise price from the fair
market value of the underlying securities on December 31, 1998 as determined by
our board of directors, which was determined to be $3.25 per share.
Aggregate Option Exercises in 1998 and Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Unexercised Options In-the-Money Options
at December 31, 1998 at December 31, 1998
-------------------------------- -----------------------------------
Shares
Acquired on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------- -------------- ----------- ------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Howard Root.. -- $ -- 6,485 9,726 $11,349 $17,021
Michael Nagel -- -- 19,400 35,600 31,850 49,400
</TABLE>
Benefit Plans
Stock Option and Stock Award Plan
Our stock option and stock award plan was approved by our board of
directors and shareholders and provides for the granting of the following to
employees and non-employees of Vascular Solutions:
. stock options, including incentive stock options and non-qualified
stock options;
. stock appreciation rights; and
. restricted stock.
We have reserved 900,000 shares of common stock for issuance under the
stock option and stock award plan. The plan is administered by the compensation
committee of the board of directors. The committee has the discretion to select
the optionees and grantees and to establish the terms and conditions of each
stock option and award, subject to the provisions of the plan. The exercise
price for an incentive stock option granted under the plan must not be less than
the fair market value of our common stock on the date the option is granted.
The exercise price of a non-qualified option granted under the plan must not be
less than 50% of the fair market value of our common stock on the date the
option is granted. The term of each incentive stock option is determined by the
committee but may not exceed ten years from the date the option is granted.
Options may be exercised by tendering cash, by tendering shares of our common
stock already owned by the optionee or, in the discretion of the committee, by
the issuance of a promissory note. The plan may be amended or discontinued by
our board of directors at any time.
In connection with any option granted under the plan, the committee may
grant a stock appreciation right. A stock appreciation right is a right to
receive, in lieu of the exercise of an option, the difference between the fair
market value of the common stock subject to the option and the exercise price of
the option. A stock appreciation right may be exercised as an alternative, but
not in addition to, the exercise of the option. A stock appreciation right may
be paid in cash or shares of our common stock, in the discretion of the
committee. The committee has not granted any stock appreciation rights.
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<PAGE>
The stock option and stock award plan also permits the award of restricted
stock to employees or non-employees who perform valuable services for us.
Restricted stock awards are a grant to an individual of a fixed number of shares
of our common stock which vest over a specific period of time. The committee
has the authority to determine the amount of any award and the conditions and
timing of the vesting of the shares. No restricted stock awards have been made.
As of June 30, 1999, options to purchase an aggregate of 676,531 shares of
common stock, at an average exercise price of $2.66 per share, were outstanding
under the stock option and stock award plan and a total of 183,329 shares were
available for future option grants.
401(k) Plan
We have established a tax-qualified employee savings and retirement plan
(the "401(k) Plan") for all of our employees who satisfy eligibility
requirements, including requirements relating to age and length of service.
Pursuant to the 401(k) Plan, employees may elect to reduce their current
compensation by up to the lower of 18% or the statutorily prescribed limit and
have the amount of such reduction contributed to the 401(k) Plan. The 401(k)
Plan permits us to make additional discretionary matching contributions. The
401(k) Plan is intended to qualify under Section 401 of the Internal Revenue
Code so that contributions by employees or by us to the 401(k) Plan, and income
earned on plan contributions, are not taxable to employees until withdrawn from
the 401(k) Plan, and so that our contributions, if any, will be deductible by us
when made. We did not make any matching contributions to the 401(k) Plan for
the year ended December 31, 1998. Beginning April 1, 1999, we began matching
25% of the employee's contribution up to 5% of current compensation.
Medical Advisory Board
We have assembled a medical advisory board consisting of practicing
interventional cardiologists to assist in the review of the Duett sealing
device, formulation of appropriate clinical studies and future product
developments. In addition to our Medical Director, Dr. Gary Gershony, our
medical advisory board is comprised of:
Dr. Donald Baim, who is Professor of Medicine at Harvard Medical School and
Chief of the Interventional Cardiology Section of Beth Israel Deaconess Medical
Center in Boston, Massachusetts.
Dr. Stephen Ellis, who is the Director of the Sones Cardiac Catheterization
Laboratory at The Cleveland Clinic Foundation in Cleveland, Ohio.
Dr. Martin Leon, who is the Director of Cardiovascular Research at the
Washington Cardiology Center and Chief Executive Officer of the Cardiology
Research Foundation in Washington, D.C.
Dr. Michael Mooney, who is the Director of Interventional Cardiology at the
Minneapolis Heart Institute in Minneapolis, Minnesota.
Prof. Dr. Sigmund Silber, who is an interventional cardiologist at Muller
Hospital in Munich, Germany and performed the first clinical study of the Duett
sealing device.
Dr. Arne Tofte, who is an interventional radiologist with The National
Hospital of the University of Oslo in Norway.
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<PAGE>
Dr. James Wilentz, who is an interventional cardiologist at the Beth Israel
Medical Center in New York City, New York.
CERTAIN TRANSACTIONS
In December 1998, we issued 1,777,777 shares of Series B preferred stock at
$4.50 per share. Of this amount, Stephens Vascular Preferred, LLC, an affiliate
of Stephens Inc., purchased 1,221,466 shares. Mr. James Jacoby Jr., one of our
directors, is a Vice President of Stephens Inc. Affiliates of Olympic Venture
Partners, a 5% beneficial shareholder, purchased a total of 100,000 shares of
Series B preferred stock. Mr. Langeler, one of our directors, is a general
partner of Olympic Venture Partners and possesses voting control of the entities
noted above. TGI Fund II, LC, an affiliate of Tredegar Investments and a 5%
beneficial shareholder, purchased a total of 100,000 shares of Series B
preferred stock.
In connection with the Series B preferred stock purchase agreement, we
entered into a put and option agreement with Stephens Vascular Preferred, LLC.
Under this agreement, we have the right to sell to Stephens Vascular Preferred,
LLC, and Stephens Vascular Options, LLC has the right to purchase from us, up to
$3,000,000 of our common stock at $5.00 per share. On June 30, 1999 we exercised
our right under this agreement and issued 600,000 shares of common stock to
Stephens Vascular Preferred, LLC in exchange for $3,000,000. The right of
Stephens Vascular Options, LLC to purchase $3,000,000 of our common stock will
terminate upon the effectiveness of this offering.
Also in connection with the Series B preferred stock purchase agreement, we
granted Stephens Vascular Options, LLC the option to purchase from us up to
$2,000,000 of our common stock. The option expires on December 31, 2000. Prior
to the expiration date, Stephens Vascular Options, LLC has the right to convert
this option into shares of common stock under a conversion formula specified in
the put and option agreement.
All shares of our preferred stock will convert into shares of common stock
upon the closing of our initial public offering. Some of these shares were sold
or issued to 5% shareholders and entities affiliated with directors. We sold
these shares pursuant to preferred stock purchase agreements on substantially
similar terms as were sold to nonaffiliated purchasers. We believe that the
shares issued in these transactions were sold at the then fair market value of
the shares and that the terms of these transactions were no less favorable than
we could have obtained from unaffiliated third parties. The following table
summarizes the Series A and Series B preferred stock purchased by 5%
shareholders and entities affiliated with our directors and their affiliates:
<TABLE>
<CAPTION>
Common Stock Issuable Upon Conversion
of Preferred Stock
--------------------------------------
Shareholder Series A Series B
- ----------- -------- --------
<S> <C> <C>
Entities affiliated with
Olympic Venture Partners (1)......... 1,200,000 100,000
Stephens Vascular Preferred, LLC.......... - 1,221,466
TGI Fund II, LC........................... 800,000 100,000
</TABLE>
___________________
(1) Consists of 724,000 shares purchased by Olympic Venture Partner IV, L.P.;
512,000 shares purchased by Olympic Venture Partners III, L.P.; 25,053
shares purchased by OVP III Entrepreneurs Fund, L.P. and 38,947 shares
purchased by OVP IV Entrepreneurs Fund, L.P.
-43-
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table provides information concerning beneficial ownership of
our common stock as of June 30, 1999 for (1) each person or group that we know
owns more than 5% of our outstanding common stock, (2) each of our named
executive officers, (3) each of our directors, and (4) all of our directors and
executive officers as a group.
The following table lists the applicable percentage of beneficial ownership
based on 8,090,834 shares of common stock outstanding as of June 30, 1999, as
adjusted to reflect the conversion of the outstanding shares of preferred stock
upon completion of this offering. The table also lists the applicable
percentage of beneficial ownership based on _____ shares of common stock
outstanding upon completion of this offering, assuming no exercise of the
underwriters' overallotment option.
Beneficial ownership is determined in accordance with rules of the
Securities and Exchange Commission, and generally includes voting power and/or
investment power with respect to the securities held. Shares of common stock
subject to options currently exercisable or exercisable within sixty days of
June 30, 1999 are deemed outstanding for purposes of computing the percentage
beneficially owned by the person holding such options but are not deemed
outstanding for purposes of computing the percentage beneficially owned by any
other person. Except as otherwise noted, the persons or entities named have sole
voting and investment power with respect to all shares shown as beneficially
owned by them.
<TABLE>
<CAPTION>
Percentage of Shares
Number of Beneficially Owned
Shares ----------------------------------
Beneficially Before the After the
Name of Beneficial Owner Owned Offering Offering
- ---------------------------------------------------- ------------ -------------- -------------
<S> <C> <C> <C>
Entities affiliated with Stephens Inc. (1).......... 2,107,181 25.2%
James Jacoby, Jr. (1)............................ 2,107,181 25.2
Entities affiliated with Olympic Venture Partners(2) 1,800,000 22.2
Gerard Langeler (2).............................. 1,800,000 22.2
TGI Fund II, LC (3)................................. 900,000 11.1
Gary Gershony, M.D. (4)............................. 757,000 9.4
Howard Root (5)..................................... 292,867 3.6
Michael Nagel (6)................................... 96,200 1.2
Gabriel Vegh (7).................................... 10,000 *
Daniel Sullivan (7)................................. 4,800 *
All directors and executive officers as a group
(11 persons) (8)................................. 5,114,148 60.3
</TABLE>
_______________
*Less than 1%
-44-
<PAGE>
(1) Consists of 1,821,466 shares held by Stephens Vascular Preferred, LLC
and 285,715 shares issuable to Stephens Vascular Options, LLC pursuant
to an option exercisable within 60 days of June 30, 1999. The address
is 111 Center Street, Suite 2500, Little Rock, AR 72201. Mr. Jacoby is
Vice President of Stephens Inc. Mr. Jacoby disclaims beneficial
ownership of these shares.
(2) Consists of 724,000 shares held by Olympic Venture Partners IV, L.P.;
988,190 shares held by Olympic Venture Partners III, L.P.; 48,863 shares
held by OVP III Entrepreneurs Fund, L.P. and 38,947 shares held by OVP IV
Entrepreneurs Fund, L.P. The address of all of these entities is 2420
Carillion Point, Kirkland, Washington 98033. Mr. Langeler is a general
partner of Olympic Venture Partners and possesses shared voting control of
the entities noted above. Mr. Langeler disclaims beneficial ownership of
these shares other than his interest in the funds.
(3) An affiliate of Tredegar Investments. The address is 6501 Columbia Center,
Seattle, WA 98104.
(4) Mr. Gershony's address is 2495 Xenium Lane North, Minneapolis, Minnesota
55441.
(5) Includes 9,078 shares issuable pursuant to options exercisable within 60
days of June 30, 1999.
(6) Includes 28,200 shares issuable pursuant to options exercisable within 60
days of June 30, 1999. Includes an aggregate of 18,000 shares registered in
the name of Mr. Nagels' three minor children's irrevocable trusts.
(7) Consists of shares issuable pursuant to options exercisable within 60
days of June 30, 1999.
(8) Includes 383,893 shares issuable pursuant to options exercisable within
60 days of June 30, 1999.
-45-
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 20,000,000 shares of capital
stock, par value $.01 per share. Unless otherwise designated by our board of
directors, all issued shares are deemed common stock with equal rights and
preferences.
Common Stock
As of June 30, 1999, there were 4,313,057 shares of common stock
outstanding, held by 124 shareholders of record.
Holders of our common stock do not have cumulative voting rights and are
entitled to one vote for each share held of record on all matters submitted to a
vote of the shareholders, including the election of directors. Holders of our
common stock are entitled to receive ratably such dividends, if any, as may be
declared by the board of directors out of funds legally available therefor,
subject to the prior rights of any preferred stock then outstanding. See
"Dividend Policy."
Upon a liquidation, dissolution or winding up of Vascular Solutions, the
holders of our common stock will be entitled to share ratably in the net assets
legally available for distribution to shareholders after the payment of all
debts and other liabilities of Vascular Solutions, subject to the prior rights
of any preferred stock then outstanding. Holders of our common stock have no
preemptive or conversion rights or other subscription rights and there are no
redemption or sinking funds provisions applicable to the common stock. All
outstanding shares of common stock are, and the common stock outstanding upon
completion of this offering will be, fully paid and nonassessable.
Preferred Stock
Upon the closing of this offering, all of our outstanding shares of
preferred stock will convert into 3,777,777 shares of common stock. These
shares of preferred stock will no longer be authorized, issued or outstanding
after completion of this offering.
Our board of directors has the authority, without further action by the
shareholders, to issue from time to time shares of preferred stock in one or
more series and to fix the number of shares, designations and preferences,
powers and relative, participating, optional or other special rights and the
qualifications or restrictions thereof. The preferences, powers, rights and
restrictions of different series of preferred stock may differ with respect to
dividend rates, amounts payable on liquidation, voting rights, conversion
rights, redemption provisions, sinking fund provisions and purchase funds and
other matters.
The issuance of preferred stock 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 common stock.
It may have the effect of delaying, deferring or preventing a change in control
of Vascular Solutions. We currently do not plan to issue any shares of preferred
stock.
Registration Rights
After this offering, the holders of 3,777,777 shares of common stock will
be entitled to rights with respect to the registration of these shares under the
Securities Act as follows:
-46-
<PAGE>
Demand Registration Rights: At any time after six months from the date of
this prospectus, the holders of at least 51% of these shares of common
stock can request that we register all or a portion of their shares. Upon
such a request, we must, subject to restrictions and limitations, use our
best efforts to cause a registration statement covering the number of
shares of common stock that are subject to the request to become effective.
The holders may only require us to file two registration statements in
response to their demand registration rights.
Piggyback Registration Rights: The holders of these shares can request
that we register their shares anytime we are filing a registration
statement to register securities for our own account. These registration
opportunities are unlimited but the number of shares that can be registered
may be cut back in limited situations by the underwriters.
S-3 Registration Rights: The holders of over 20% of these shares can
request that we register their shares if we are eligible to file a
registration statement on Form S-3. The holders may only require us to
file one registration statement on Form S-3 per twelve-month period.
In addition, the holders of warrants to purchase 168,000 shares of common
stock are entitled to rights with respect to the registration of the shares
underlying their warrants under the Securities Act. At any time after the
closing of our initial public offering, the holders of at least 51% of these
warrants can request that we register the shares of common stock underlying
these warrants. In addition, the holders of these warrants can request that we
register the shares underlying these warrants anytime we are filing a
registration statement to register securities for our own account. The
registration rights of the warrant holders are subject to restrictions and
limitations.
All of these registration rights terminate when the shares may be sold
under Rule 144(k) under the Securities Act.
Warrants and Stock Options
We currently have outstanding warrants to purchase 268,000 shares of
common stock. Of this amount, warrants to purchase 100,000 shares of common
stock have an exercise price of $1.50 per share and expire in January and
February 2007, warrants to purchase 68,000 shares of common stock have an
exercise price of $3.00 per share and expire in December 2007, and warrants to
purchase 100,000 shares of common stock have an exercise price of $5.00 per
share and expire in June 2004.
In addition, we currently have outstanding an option to purchase up to
$2,000,000 of our common stock held by Stephens Vascular Options, LLC. This
option is exercisable at $7.00 per share at any time prior to our receipt of
approval by the FDA of our PMA application for our Duett sealing device, and
$8.00 at any time thereafter. This option expires on December 31, 2000.
Provisions of our Articles and State Law Provisions with Potential Antitakeover
Effects
The existence of authorized but unissued preferred stock, described
above, and certain provisions of Minnesota law, described below, could have an
anti-takeover effect. These provisions are intended to provide management with
flexibility, to enhance the likelihood of continuity and stability in the
composition of our board of directors and the policies of our board and to
discourage an unsolicited takeover of Vascular Solutions, if our board of
directors determines that such a takeover is not in the best interests of
Vascular Solutions and our shareholders. However, these provisions could have
the effect of discouraging attempts to acquire Vascular Solutions, which could
deprive our shareholders of opportunities to sell their shares of common stock
at prices higher than prevailing market prices.
-47-
<PAGE>
Section 302A.671 of the Minnesota Business Corporation Act applies, with
exceptions, to any acquisition of our voting stock from a person other than us,
and other than in connection with certain mergers and exchanges to which we are
a party, that results in the beneficial ownership of 20% or more of the voting
stock then outstanding. Section 302A.671 requires approval of any such
acquisitions by a majority vote of our shareholders before its consummation. In
general, shares acquired in the absence of such approval are denied voting
rights and are redeemable at their then fair market value by us within 30 days
after the acquiring person has failed to give a timely information statement to
us or the date the shareholders voted not to grant voting rights to the
acquiring person's shares.
Section 302A.673 of the Minnesota Business Corporation Act generally
prohibits any business combination by us, or by any of our subsidiaries, with
any shareholder that purchases ten percent or more of our voting shares within
four years following that interested shareholder's share acquisition date. The
business combination may be permitted if it is approved by a committee of all of
the disinterested members of our board of directors before the interested
shareholder's share acquisition date.
Listing
We have applied for quotation of our common stock on the Nasdaq National
Market under the symbol "VASC."
Transfer Agent and Registrar
The transfer agent and registrar for our common stock will be Norwest Bank
Minnesota, N.A.
-48-
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon the closing of this offering, we will have ________________ shares of
common stock outstanding, assuming no exercise of the underwriters' over-
allotment option and no exercise of outstanding options or warrants to purchase
common stock after June 30, 1999. Of these shares, the ________________ shares
of common stock being sold in this offering will be freely tradeable without
restriction or further registration under the Securities Act, except for shares
held by our "affiliates," as such term is defined in Rule 144 under the
Securities Act, which may generally only be sold in compliance with the
limitations of Rule 144, described below.
The remaining _____________ shares were issued and sold by us in private
transactions, are restricted securities and may be sold in the public market
only if registered under the Securities Act or if exempt from registration under
Rules 144, 144(k) or 701 under the Securities Act, which rules are summarized
below. Subject to the agreements between our shareholders and the underwriters,
described below, and the provisions of Rules 144, 144(k) and 701, additional
shares will be available for sale in the public market, subject in the case of
shares held by affiliates to compliance with volume restrictions, as follows:
. ____________ shares will be available for immediate sale in the public
market on the date of this prospectus;
. ____________ shares will be available for sale beginning 90 days after
the date of this prospectus; and
. ____________ shares will be available for sale upon the expiration of
agreements between our shareholders and the underwriters at varying
dates beginning 180 days after the date of this prospectus.
In general, under Rule 144, beginning 90 days after the date of this
prospectus, a person or persons whose shares are aggregated, including an
affiliate, who has beneficially owned restricted shares for at least one year,
is entitled to sell within any three-month period a number of shares that does
not exceed the greater of 1% of the then outstanding shares of common stock,
approximately ______ shares immediately after this offering, or the average
weekly trading volume of our common stock on the Nasdaq National Market during
the four calendar weeks preceding the date of such sale. Sales under Rule 144
also are subject to requirements pertaining to the manner and notice of such
sales and the availability of current public information concerning Vascular
Solutions.
Under Rule 144(k), a person who is not deemed to have been an affiliate of
Vascular Solutions at any time during the 90 days before a sale and who has
beneficially owned the shares proposed to be sold for at least two years would
be entitled to sell these shares without regard to the requirements described
above. To the extent that shares were acquired from an affiliate of Vascular
Solutions, the transferee's holding period for the purpose of effecting a sale
under Rule 144(k) commences on the date of transfer from the affiliate.
Rule 701 provides that, beginning 90 days after the date of this
prospectus, persons other than affiliates may sell shares of common stock
acquired from us in connection with written compensatory benefit plans, such as
our stock option plans, subject only to the manner of sale provisions of Rule
144. Beginning 90 days after the date of this prospectus, affiliates may sell
these shares of common stock subject to all provisions of Rule 144 except the
one-year minimum holding period.
-49-
<PAGE>
Approximately six months after the date of this prospectus, we intend to
file a registration statement on Form S-8 under the Securities Act to register
all shares of common stock issuable under our stock option and stock award plan.
See "Management--Benefit Plans." This Form S-8 registration statement is
expected to become effective immediately upon filing and shares covered by that
registration statement will then be eligible for sale in the public markets,
subject to the Rule 144 limitations applicable to affiliates.
Prior to this offering there has been no public market for our common
stock, and no predictions can be made regarding the effect, if any, that sales
of shares in the open market or the availability of shares for sale will have on
the market price prevailing from time to time. Nevertheless, sales of
substantial amounts of our common stock in the public market could adversely
affect the prevailing market price.
All of our directors and executive officers and some of our shareholders
have agreed that they will not, without the prior written consent of the
representatives of the underwriters, sell or otherwise dispose of any shares of
common stock or options to acquire shares of common stock during the 180-day
period following the closing of this offering. See "Underwriting."
After the closing of this offering, the holders of 3,777,777 shares of our
common stock will be entitled to rights with respect to the registration of such
shares under the Securities Act. See "Description of Capital Stock--Registration
Rights." Registration of these shares under the Securities Act would result in
these shares becoming freely tradeable without restriction under the Securities
Act, except for shares purchased by affiliates, immediately upon the
effectiveness of registration.
-50-
<PAGE>
UNDERWRITING
The several underwriters named below, for which William Blair & Company,
L.L.C., Dain Rauscher Wessels, a division of Dain Rauscher Incorporated, and
Stephens Inc. are acting as representatives, have severally agreed, subject to
the terms and conditions set forth in the underwriting agreement by and among
Vascular Solutions, and the underwriters, to purchase from Vascular Solutions,
and Vascular Solutions has agreed to sell each of the underwriters, the
respective number of shares of common stock set forth opposite each
underwriter's name in the table below.
<TABLE>
<CAPTION>
Underwriter Number of Shares
-----------------
<S> <C>
William Blair & Company, L.L.C...........................
Dain Rauscher Wessels....................................
Stephens Inc.............................................
---------------
Total..................................................
===============
</TABLE>
This offering will be underwritten on a firm commitment basis. In the
underwriting agreement, the underwriters have agreed, subject to the terms and
conditions set forth in the agreement, to purchase the shares of common stock
being sold at a price per share equal to the public offering price less the
underwriting discounts and commissions specified on the cover page of this
prospectus. According to the terms of the underwriting agreement, the
underwriters will either purchase all of the shares or none of them. In the
event of default by any underwriter, in certain circumstances the purchase
commitments of the non-defaulting underwriters may be increased or the
underwriting agreement may be terminated.
The representatives have advised us that the underwriters will offer the
shares of common stock to the public initially at the public offering price
specified on the cover page of this prospectus. The underwriters may also offer
the shares to certain dealers at the public offering price less a concession of
up to $________ per share. The underwriters may allow, and these dealers may
re-allow, a concession of up to $________ per share to certain other dealers.
The underwriters will offer the shares subject to prior sale and subject to
receipt and acceptance of the shares by the underwriters. The underwriters may
reject any order to purchase shares in whole or in part. The underwriters
expect that we will deliver the shares to the underwriters through the
facilities of the Depository Trust Company in New York, New York, on or about
________, 1999. At that time, the underwriters will pay us for the shares in
immediately available funds. After the commencement of the initial public
offering, the representatives may change the public offering price and the other
selling terms.
The underwriters have the option to purchase up to an aggregate of ________
additional shares of common stock from us at the same price they are paying for
the shares offered hereby. The underwriters may purchase additional shares only
to cover over-allotments made in connection with this offering and only within
30 days after the date of this prospectus. If the underwriters decide to
exercise this over-allotment option, each underwriter will be required to
purchase additional shares in approximately the same proportion as set forth in
the table above. The underwriters will offer any additional shares that they
purchase on the terms described in the preceding paragraph.
-51-
<PAGE>
The following table summarizes the compensation to be paid by us to the
underwriters:
<TABLE>
<CAPTION>
Total
-------------------------------------------
Without With
Per Share Over-Allotment Over-Allotment
--------- -------------- --------------
<S> <C> <C> <C>
Public offering price.................. $ $ $
Underwriting discount paid by us....... $ $ $
</TABLE>
We estimate the expenses of this offering payable by us (excluding
underwriting discounts and commissions) to be $________.
We have agreed to indemnify the underwriters and their controlling persons
against certain liabilities, including liabilities under the Securities Act.
We and all of our existing shareholders have agreed not to sell or transfer
any shares of common stock, or to engage in certain hedging transactions with
respect to the common stock, for a period of 180 days from the date of this
prospectus without the consent of William Blair & Company, L.L.C., except in
certain limited circumstances. Shareholders who have agreed to this lock-up
arrangement hold an aggregate of ________ shares of capital stock or ____% of
our capital stock outstanding as of June 30, 1999. For a more detailed
discussion of shares available for sale following this offering, please refer to
"Shares Eligible for Future Sale."
In connection with this offering, the underwriters and other persons
participating in this offering may engage in transactions which affect the
market price of the common stock. These may include stabilizing and over-
allotment transactions and purchases to cover syndicate short positions.
Stabilizing transactions consist of bids or purchases for the purpose of
pegging, fixing or maintaining the price of the common stock. Over-allotment
involves selling more shares of common stock in this offering than are specified
on the cover page of this prospectus, which results in a syndicate short
position. The underwriters may cover this short position by purchasing common
stock in the open market or by exercising all or part of their over-allotment
option. In addition, the representatives may impose a penalty bid. This allows
the representatives to reclaim the selling concession allowed to an underwriter
or selling group member if common stock sold by such underwriter or selling
group member in this offering is repurchased by the representatives in
stabilizing or syndicate short covering transactions. These transactions, which
may be effected on the Nasdaq National Market or otherwise, may stabilize,
maintain or otherwise affect the market price of the common stock and could
cause the price to be higher than it would be without these transactions. The
underwriters and other participants in this offering are not required to engage
in any of these activities and may discontinue any of these activities at any
time without notice. Neither Vascular Solutions nor any of the underwriters
makes any representation or prediction as to whether the underwriters will
engage in such transactions or choose to discontinue any transactions engaged in
or as to the direction or magnitude of any effect that these transactions may
have on the price of the common stock.
The representatives have advised us that the underwriters do not intend to
confirm, without client authorization, sales to any account over which they
exercise discretionary authority.
Prior to this offering, there has been no public market for our common
stock. Consequently, we and the representatives negotiated to determine the
initial public offering price. The initial public offering price was based on
current market conditions, our operating results in recent periods, the market
-52-
<PAGE>
capitalization of other companies in our industry, estimates of our potential
and other factors that we and the representatives deem relevant.
The underwriters have reserved for sale, at the initial public offering
price, up to ________ shares of common stock in this offering for our employees
and certain other individuals. Purchases of the reserved shares would reduce
the number of shares available for sale to the general public. The underwriters
will offer any reserved shares which are not so purchased to the general public
on the same terms as the other shares.
LEGAL MATTERS
Dorsey & Whitney LLP, Minneapolis, Minnesota, will pass upon the
validity of the issuance of shares of common stock offered by this prospectus
for Vascular Solutions. Certain legal matters will be passed on for the
underwriters by Katten Muchin Zavis, Chicago, Illinois.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial
statements as of December 31, 1997 and 1998 and for the years then ended, as set
forth in their report. We have included our financial statements in the
prospectus and elsewhere in the registration statement in reliance on Ernst &
Young LLP's report, given on their authority as experts in accounting and
auditing.
The matters of law discussed under the headings "Risk Factors--We have
been named as the defendant in a patent infringement lawsuit and may face
additional intellectual property infringement claims in the future" and
"Business--Patents and Intellectual Property" have been reviewed by Patterson &
Keough PA, and have been included herein in reliance upon the authority of such
firm as an expert in such matters.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a
registration statement on Form S-1 with respect to the common stock offered by
this prospectus. This prospectus, which constitutes a part of the registration
statement, does not contain all of the information set forth in the registration
statement or the exhibits and schedules which are part of the registration
statement. For further information on Vascular Solutions and our common stock,
you should review the registration statement and exhibits and schedules thereto.
You may read and copy any document we file at the Commission's public reference
room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the
Commission at 1-800-SEC-0330 for further information on the public reference
room. Our filings are also available to the public from the Commission's web
site at http://www.sec.gov.
Upon completion of this offering, we will be required to file periodic
reports, proxy statements and other information with the Commission. These
periodic reports, proxy statements and other information will be available for
inspection and copying at the Commission's public reference rooms and the web
site of the Commission referred to above.
-53-
<PAGE>
VASCULAR SOLUTIONS, INC.
INDEX TO FINANCIAL STATEMENTS
Report of Independent Auditors............................ F-2
Balance Sheets............................................ F-3
Statements of Operations.................................. F-4
Statement of Changes in Shareholders' Equity.............. F-5
Statements of Cash Flows.................................. F-6
Notes to Financial Statements............................. F-7
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Vascular Solutions, Inc.
We have audited the balance sheets of Vascular Solutions, Inc. as of December
31, 1997 and 1998, and the related statements of operations, changes in
shareholders' equity and cash flows for the 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 referred to above present fairly, in
all material respects, the financial position of Vascular Solutions, Inc. at
December 31, 1997 and 1998, and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Minneapolis, Minnesota
January 20, 1999
F-2
<PAGE>
VASCULAR SOLUTIONS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
Pro forma
December 31, June 30, June 30,
-----------------------------
1997 1998 1999 1999
------------- -------------- -------------- ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................... $ 7,299,130 $ 9,897,053 $ 9,201,407 $ 9,201,407
Accounts receivable..................................... - 125,000 283,000 283,000
Inventories............................................. 59,710 318,811 475,546 475,546
Prepaid expenses........................................ 15,110 53,174 64,830 64,830
------------- -------------- ------------- ------------
Total current assets............................ 7,373,950 10,394,038 10,024,783 10,024,783
Property and equipment, net................................ 184,926 612,577 649,386 649,386
------------- -------------- ------------- ------------
Total assets.................................... $ 7,558,876 $11,006,615 $ 10,674,169 $ 10,674,169
============= ============== ============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................ $ 327,583 $ 273,816 $ 264,833 $ 264,833
Accrued clinical trial costs............................ - 140,705 - -
Accrued expenses........................................ 15,778 46,318 79,231 79,231
------------- -------------- ------------- ------------
Total current liabilities....................... 343,361 460,839 344,064 344,064
Shareholders' equity:
Series A preferred stock, $.01 par value;
2,000,000 shares authorized; 2,000,000 shares
issued and outstanding.......................... 20,000 20,000 20,000 -
Series B preferred stock, $.01 par value;
1,777,777 shares authorized; 0, 1,777,777 and
1,777,777 shares issued and outstanding in
1997, 1998 and 1999, respectively............... - 17,778 17,778 -
Common stock, $.01 par value;
18,000,000, 16,222,223 and 16,222,223 shares
authorized in 1997, 1998 and 1999, respectively
20,000,000 pro forma shares authorized;
3,553,250, 3,699,617 and 4,313,057 shares
issued and outstanding in 1997, 1998 and 1999,
respectively, 8,090,834 pro forma shares issued
and outstanding................................. 35,533 36,996 43,131 80,909
Additional paid-in capital................................. 8,811,800 17,264,006 20,702,726 20,702,726
Deferred compensation...................................... - - (127,555) (127,555)
Accumulated deficit........................................ (1,651,818) (6,793,004) (10,325,975) (10,325,975)
------------- -------------- ------------- ------------
Total shareholders' equity.............................. 7,215,515 10,545,776 10,330,105 10,330,105
------------- -------------- ------------- ------------
Total liabilities and shareholders' equity...... $ 7,558,876 $ 11,006,615 $ 10,674,169 $ 10,674,169
============= ============== ============= ============
</TABLE>
See accompanying notes.
F-3
<PAGE>
VASCULAR SOLUTIONS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31, Six Months Ended June 30,
----------------------------------- --------------------------------
1997 1998 1998 1999
----------------- ---------------- --------------- ---------------
(unaudited)
<S> <C> <C> <C> <C>
Net sales .............................. $ - $ 494,150 $ 132,750 $ 514,500
Cost of goods sold ..................... - 442,565 126,335 442,337
----------------- ---------------- --------------- ---------------
Gross profit ........................... - 51,585 6,415 72,163
Operating expenses:
Research and development............ 766,176 2,348,281 1,129,205 1,646,978
Clinical and regulatory............. 259,503 1,375,595 413,478 882,303
Sales and marketing................. 273,089 1,075,250 351,935 849,429
General and administrative.......... 425,596 667,522 317,465 409,460
----------------- ---------------- --------------- ---------------
Total operating expenses...... 1,724,364 5,466,648 2,212,083 3,788,170
----------------- ---------------- --------------- ---------------
Operating loss................ (1,724,364) (5,415,063) (2,205,668) (3,716,007)
Interest income......................... 72,546 273,877 161,095 183,036
----------------- ---------------- --------------- ---------------
Net loss...................... $ (1,651,818) $ (5,141,186) $ (2,044,573) $ (3,532,971)
================= ================ =============== ===============
Basic and diluted net loss per share.... $ (.62) $ (1.40) $ (.57) $ (.95)
================= ================ =============== ===============
Shares used in computing basic and
diluted net loss per share.......... 2,667,612 3,660,136 3,588,187 3,702,387
================= ================ =============== ===============
Pro forma net loss per share:
Basic and diluted net loss per
share............................ $ (.89) $ (.47)
================ ===============
Shares used in computing basic and
diluted net loss per share....... 5,767,290 7,480,164
================ ===============
</TABLE>
See accompanying notes.
F-4
<PAGE>
VASCULAR SOLUTIONS, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Series A Series B Additional
Preferred Stock Preferred Stock Common Stock Paid-in
---------------------- ---------------------- ----------------------
Shares Amount Shares Amount Shares Amount Capital
---------- -------- ---------- -------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 20, 1996
(inception).......................... - $ - - $ - - $ - $ -
Original issuance of common stock at
$.001 per share in December 1996..... - - - - 1,366,250 13,663 (12,297)
---------- -------- ---------- -------- ---------- ---------- ------------
Balance at December 31, 1996............ - - - - 1,366,250 13,663 (12,297)
Sale of common stock at $1.50 per share
in January and February 1997, net of
offering costs....................... - - - - 1,500,000 15,000 2,064,499
Value of options granted for
services............................. - - - - - - 25,440
Exercise of stock options............... - - - - 7,000 70 10,430
Sale of Series A preferred stock at
$2.50 per share in December 1997,
net of offering costs................ 2,000,000 20,000 - - - - 4,940,954
Sale of common stock at $3.00 per share
in December 1997, net of offering
costs................................ - - - - 680,000 6,800 1,782,774
Net loss................................ - - - - - - -
---------- -------- ---------- -------- ---------- ---------- ------------
Balance at December 31, 1997............ 2,000,000 20,000 - - 3,553,250 35,533 8,811,800
Sale of common stock at $3.00 per share
in March and April 1998.............. - - - - 126,667 1,266 378,734
Exercise of stock options............... - - - - 19,700 197 32,353
Value of options granted for
services............................. - - - - - - 78,400
Sale of Series B preferred stock at
$4.50 per share in December 1998,
net of offering costs................ - - 1,777,777 17,778 - - 7,962,719
Net loss................................ - - - - - - -
---------- -------- ---------- -------- ---------- ---------- ------------
Balance at December 31, 1998............ 2,000,000 20,000 1,777,777 17,778 3,699,617 36,996 17,264,006
Exercise of stock options............... - - - - 613,440 6,135 3,027,735
Value of options granted for
services............................. - - - - - - 13,360
Value of warrant granted related
to supply agreement.................. - - - - - - 257,000
Deferred compensation related
to option grants..................... - - - - - - 140,625
Amortization of deferred compensation... - - - - - - -
Net loss................................ - - - - - - -
========== ======== ========== ======== ========== ========= ============
Balance at June 30, 1999 (unaudited).... 2,000,000 $ 20,000 1,777,777 $ 17,778 4,313,057 $ 43,131 $ 20,702,726
========== ======== ========== ======== ========== ========= ============
<CAPTION>
Deferred Accumulated
Compensation Deficit Total
-------------- ------------- ------------
<S> <C> <C> <C>
Balance at December 20, 1996
(inception).......................... $ - $ - $ -
Original issuance of common stock at
$.001 per share in December 1996 .... - - 1,366
-------------- ------------- ------------
Balance at December 31, 1996............ - - 1,366
Sale of common stock at $1.50 per share
in January and February 1997, net of
offering costs....................... - - 2,079,499
Value of options granted for
services............................. - - 25,440
Exercise of stock options............... - - 10,500
Sale of Series A preferred stock at
$2.50 per share in December 1997,
net of offering costs................ - - 4,960,954
Sale of common stock at $3.00 per share
in December 1997, net of offering
costs................................ - - 1,789,574
Net loss................................ - (1,651,818) (1,651,818)
-------------- ------------- ------------
Balance at December 31, 1997............ - (1,651,818) 7,215,515
Sale of common stock at $3.00 per share
in March and April 1998.............. - - 380,000
Exercise of stock options............... - - 32,550
Value of options granted for
services............................. - - 78,400
Sale of Series B preferred stock at
$4.50 per share in December 1998,
net of offering costs................ - - 7,980,497
Net loss................................ - (5,141,186) (5,141,186)
-------------- ------------- ------------
Balance at December 31, 1998............ - (6,793,004) 10,545,776
Exercise of stock options............... - - 3,033,870
Value of options granted for
services............................. - - 13,360
Value of warrant granted related
to supply agreement.................. - - 257,000
Deferred compensation related
to option grants..................... (140,625) - -
Amortization of deferred compensation... 13,070 - 13,070
Net loss................................ - (3,532,971) (3,532,971)
============== ============= ============
Balance at June 30, 1999 (unaudited).... $ (127,555) $ (10,325,975) $ 10,330,105
============== ============= ============
</TABLE>
See accompanying notes.
F-5
<PAGE>
VASCULAR SOLUTIONS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31, Six Months Ended June 30,
---------------------------------------- ----------------------------------------
1997 1998 1998 1999
------------------- ------------------ ------------------- -----------------
Operating activities (unaudited)
<S> <C> <C> <C> <C>
Net loss...................................... $(1,651,818) $(5,141,186) $(2,044,573) $(3,532,971)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation................................ 12,832 154,272 55,747 113,471
Value of options granted for services....... 25,440 78,400 - 13,360
Value of warrant granted related
to supply agreement........................ - - - 257,000
Deferred compensation expense............... - - - 13,070
Changes in operating assets and liabilities:
Accounts receivable......................... - (125,000) (98,250) (158,000)
Inventories................................. (59,710) (259,101) (86,463) (156,735)
Prepaid expenses............................ (15,110) (38,064) (16,377) (11,656)
Accounts payable............................ 327,583 (53,767) (4,904) (8,983)
Accrued clinical trial costs................ - 140,705 - (140,705)
Accrued expenses............................ 15,778 30,540 15,631 32,913
----------- ----------- ----------- -----------
Net cash used in operating activities...... (1,345,005) (5,213,201) (2,179,189) (3,579,236)
Investing activities
Purchase of property and equipment............ (197,758) (581,923) (493,996) (150,280)
----------- ----------- ----------- -----------
Net cash used in investing activities...... (197,758) (581,923) (493,996) (150,280)
Financing activities
Net proceeds from sale of common stock........ 3,869,073 380,000 380,000 -
Net proceeds from exercise of stock options... 10,500 32,550 22,550 3,033,870
Net proceeds from sale of preferred stock..... 4,960,954 7,980,497 - -
----------- ----------- ----------- -----------
Net cash provided by financing activities.. 8,840,527 8,393,047 402,550 3,033,870
----------- ----------- ----------- -----------
Increase (decrease) in cash and cash
equivalents............................... 7,297,764 2,597,923 (2,270,635) (695,646)
Cash and cash equivalents at beginning of
period....................................... 1,366 7,299,130 7,299,130 9,897,053
----------- ----------- ----------- -----------
Cash and cash equivalents at end of period.... $ 7,299,130 $ 9,897,053 $ 5,028,495 $ 9,201,407
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
F-6
<PAGE>
VASCULAR SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
1. Description of Business
Vascular Solutions, Inc. (the "Company") manufactures, markets and sells
the Vascular Solutions Duett sealing device, which enables cardiologists and
radiologists to rapidly seal the puncture site following catheterization
procedures such as angiography, angioplasty and stenting. The Company was
incorporated in December 1996 and began operations in February 1997. Prior to
1998, the Company was considered to be a development stage company.
2. Summary of Significant Accounting Policies
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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a remaining
maturity of three months or less to be cash equivalents. Cash equivalents
consist of money market funds and are carried at cost which approximates market.
Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or
market and are comprised of the following at:
<TABLE>
<CAPTION>
December 31,
----------------------------------
1997 1998
----------------- -------------
<S> <C> <C>
Raw materials................... $ 59,710 $ 273,027
Finished goods.................. - 45,784
----------------- -------------
$ 59,710 $ 318,811
================= =============
</TABLE>
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided on a
straight-line basis over the estimated useful lives of the assets as follows:
Manufacturing equipment......................... 3 to 5 years
Office and computer equipment................... 3 years
Furniture and fixtures.......................... 2 to 5 years
Leasehold improvements.......................... Remaining term of the lease
Research and development equipment.............. 3 to 5 years
F-7
<PAGE>
VASCULAR SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Impairment of Long-Lived Assets
The Company will record impairment losses on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. The amount of impairment loss recorded will be measured as the
amount by which the carrying value of the assets exceeds the fair value of the
assets.
Pro Forma Shareholders' Equity
Upon the closing of the Company's planned initial public offering, all
outstanding shares of Series A and B preferred stock will automatically convert
into 3,777,777 shares of common stock. The pro forma effects of these
transactions are unaudited and have been reflected in the accompanying pro forma
balance sheet at June 30, 1999.
Revenue Recognition
Revenue is recognized at the time the product is shipped.
Research and Development Costs
All research and development costs are charged to operations as incurred.
Stock-Based Compensation
The Company follows Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees ("APB 25"), and related interpretations in
accounting for its stock options. Under APB 25, when the exercise price of stock
options equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized.
Income Taxes
Income taxes are accounted for under the liability method. Deferred income
taxes are provided for temporary differences between the financial reporting and
the tax bases of assets and liabilities.
Net Loss Per Share
Under Financial Accounting Standards Board Statement No. 128, Earnings per
Share, basic earnings per share is based on the weighted average shares of
common stock outstanding during the period. Diluted earnings per share includes
any dilutive effects of options, warrants and convertible securities. Diluted
loss per share as presented is the same as basic loss per share as the effect of
outstanding options, warrants and convertible securities is antidilutive.
Pro Forma Net Loss Per Share
Pro forma net loss per share for the year ended December 31, 1998 and the
six months ended June 30, 1999 is computed using the weighted average number of
common shares outstanding, including the pro forma effects of the automatic
conversion of the Company's Series A and B preferred stock into shares of the
Company's common stock as if such conversion occurred on January 1, 1998, or at
the date of original issuance, if later. The resulting pro forma adjustment
F-8
<PAGE>
VASCULAR SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
includes an increase in the weighted average shares used to compute basic and
diluted net loss per share of approximately 2,107,154 shares for the year ended
December 31, 1998 and 3,777,777 shares for the six months ended June 30, 1999.
The pro forma effects of these transactions are unaudited.
Interim Financial Statements
The interim financial statements for the six months ended June 30, 1998 and
1999, are unaudited and have been prepared pursuant to the rules and regulations
of the Securities and Exchange Commission. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles. In the opinion of the Company's management, the unaudited interim
financial statements contain all adjustments, consisting of normal recurring
adjustments, considered necessary for a fair presentation. The results of
operations for the interim periods are not necessarily indicative of the results
of the entire year.
Reclassifications
Certain prior years' balances were reclassified to conform to the current
year presentation.
3. Property and Equipment
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
December 31,
---------------------------------------
1997 1998
----------------- -----------------
<S> <C> <C>
Property and equipment:
Manufacturing equipment................ $ 64,866 $ 393,565
Office and computer equipment.......... 78,892 175,584
Furniture and fixtures................. 47,878 85,623
Leasehold improvements................. - 67,234
Research and development equipment..... 6,122 57,675
----------------- -----------------
197,758 779,681
Less accumulated depreciation.......... (12,832) (167,104)
----------------- -----------------
Net property and equipment........... $ 184,926 $ 612,577
================= =================
</TABLE>
4. Leases
In February 1998, the Company entered into an operating lease agreement for
a 16,700 square foot office and manufacturing facility, which expires in March
2003. Prior to February 1998, the Company leased a 5,500 square foot facility
under a noncancelable operating lease which expired in December 1998. The
Company was required to make rental payments on its previous facility until
December 1998. The Company subleased this facility to another entity from June
1998 through December 1998. Rent expense related to the operating leases was
approximately $36,600 and $152,300 for the years ended December 31, 1997 and
1998, respectively. Rent expense for the year ended December 31, 1998 has been
reduced by approximately $32,000 for rental income received under the sublease
of the previous facility.
F-9
<PAGE>
VASCULAR SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Future minimum lease commitments under the existing operating lease as of
December 31, 1998 are as follows:
<TABLE>
<S> <C>
1999............................... $ 95,232
2000............................... 98,868
2001............................... 100,080
2002............................... 100,080
2003............................... 25,020
-----------
$ 419,280
===========
</TABLE>
5. Income Taxes
At December 31, 1998, the Company had net operating loss carryforwards of
$5,615,000 for federal income tax purposes that are available to offset future
taxable income and begin to expire in the year 2013. At December 31, 1998, the
Company also had federal and Minnesota research and development tax credit
carryforwards of $306,300 which begin to expire in the year 2013. No benefit has
been recorded for such carryforwards, and utilization in future years may be
limited under Sections 382 and 383 of the Internal Revenue Code if significant
ownership changes have occurred.
The components of the Company's deferred tax assets and liabilities are as
follows:
<TABLE>
<CAPTION>
December 31,
-----------------------------------------
1997 1998
----------------- --------------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards....................... $ 571,500 $ 2,245,800
Tax credit carryforwards............................... - 306,300
Depreciation and amortization.......................... 71,400 328,700
Accrued compensation................................... 13,600 52,800
----------------- --------------------
656,500 2,933,600
Less valuation allowances.............................. (656,500) (2,933,600)
----------------- --------------------
Net deferred taxes.................................. $ - $ -
================= ====================
</TABLE>
6. Common Stock
In January and February 1997, the Company issued 1,500,000 shares of common
stock at $1.50 per share, from which the Company received net proceeds of
$2,079,499. In connection with the sale of common stock, the Company granted
warrants to the placement agent to purchase a total of 100,000 shares of common
stock at an exercise price of $1.50 per share. The warrants expire in January
and February 2007.
In December 1997, the Company issued 680,000 shares of common stock at
$3.00 per share, from which the Company received net proceeds of $1,789,574. In
connection with the sale of common stock, the Company granted warrants to the
placement agent to purchase a total of 68,000 shares of common stock at an
exercise price of $3.00 per share. The warrants expire in December 2007.
On December 31, 1998, the Company had 168,000 warrants outstanding at a
weighted average exercise price of $2.11 per share.
F-10
<PAGE>
VASCULAR SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
7. Preferred Stock
In December 1997, the Company issued 2,000,000 shares of Series A preferred
stock at $2.50 per share, from which the Company received net proceeds of
$4,960,954. The Series A preferred stock has certain voting and registration
rights, has preference over common stock upon liquidation and automatically
converts to common stock upon the closing of an initial public offering. The
holders of Series A preferred stock are also entitled to receive dividends prior
and in preference to the common stock at the rate of $.20 per share per annum
when, as and if declared by the Board of Directors. Such dividends shall not be
cumulative.
In December 1998, the Company issued 1,777,777 shares of Series B preferred
stock at $4.50 per share, from which the Company received net proceeds of
$7,980,497. The Series B preferred stock has certain voting and registration
rights, has preference over common stock upon liquidation and automatically
converts to common stock upon the closing of an initial public offering. The
holders of Series B preferred stock are also entitled to receive dividends prior
and in preference to the Series A preferred stock and the common stock at the
rate of $.36 per share per annum when, as and if declared by the Board of
Directors. Such dividends shall be cumulative.
In connection with the Series B preferred stock Purchase Agreement, the
Company entered into a Put and Option Agreement (the "Agreement") with one of
the Series B preferred stock investors (the "Investor"). The Company shall have
the right to sell and the Investor agrees to purchase, up to $3,000,000 of
common stock at $5.00 or $6.00 per share based on the Company attaining certain
milestones. On June 30, 1999, the Company exercised its right and sold to the
Investor 600,000 shares of common stock at $5.00 per share.
Also, the Investor shall have the right to buy and the Company agrees to
sell, up to $3,000,000 of common stock at $5.00 or $6.00 per share based on the
Company attaining certain milestones. The right of the Investor to purchase
common stock under the Agreement expires upon the earlier of December 31, 2000
or the effective date of a registration statement for a public offering of
securities of the Company as specified in the Agreement.
Additionally, the Investor has the right to buy from the Company, and the
Company agrees to sell, up to $2,000,000 of common stock at $7.00 or $8.00 per
share based on the Company attaining certain milestones. The Investor's right to
give notice to the Company expires on December 31, 2000. Prior to the expiration
date, the Investor has the right to receive the net shares of common stock, on a
cashless basis, based on the fair market value of the common stock at the time
of exercise.
As of December 31, 1998, the Company had reserved an aggregate of 1,985,715
shares of common stock for future issuance pursuant to the Agreement.
8. Stock Option Plan
The Company has a stock option and stock award plan (the "Stock Option
Plan") which provides for the granting of incentive stock options to employees
and nonqualified stock options to employees, directors and consultants. As of
December 31, 1998, the Company reserved 900,000 shares of common stock under the
Stock Option Plan. Under the Stock Option Plan, incentive stock options must be
granted at an exercise price not less than the fair market value of the
Company's common stock on the grant date. The exercise price of a non-qualified
option granted under the Stock Option Plan must not be less than 50% of the fair
market value of the Company's common stock on the grant date. The options expire
on the date determined by the Board of Directors but may not extend more than
ten years from the grant date. The Stock Option Plan also permits the granting
of
F-11
<PAGE>
VASCULAR SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
stock appreciation rights; restricted stock and other stock based awards. The
incentive stock options vest monthly over four years of continued employment and
non-qualified stock options generally vest monthly over two years.
Option activity is summarized as follows:
<TABLE>
<CAPTION>
Plan Options Outstanding
---------------------------------------------------
Shares Weighted
Available Non- Average Exercise
for Grant Incentive Qualified Price Per Share
------------- ------------ --------------- ----------------
<S> <C> <C> <C> <C>
Balance at December 31, 1996.... - - - $ -
Shares reserved................ 500,000 - - -
Granted........................ (456,011) 371,211 84,800 1.71
Exercised...................... - (7,000) - 1.50
Canceled....................... 47,600 (47,600) - 1.50
------------- ------------ ---------------
Balance at December 31, 1997.... 91,589 316,611 84,800 1.74
Shares reserved................ 400,000 - - -
Granted........................ (259,500) 217,000 42,500 3.01
Exercised...................... - (19,700) - 1.65
Canceled....................... 108,080 (108,080) - 1.84
------------- ------------ ---------------
Balance at December 31, 1998.... 340,169 405,831 127,300 $ 2.34
============= ============ ===============
Exercisable at December 31, 1998................ 104,545 77,500 $ 2.03
Exercisable at December 31, 1997................ 39,594 29,000 $ 1.64
</TABLE>
The Company accounts for stock options under APB 25, under which no
compensation cost has been recognized. Had compensation cost for these options
been determined consistent with Statement of Financial Accounting Standards No.
123, Accounting for Stock-Based Compensation, the net loss and net loss per
common share would have been increased to the following pro forma amounts for
the years ended December 31, 1997 and 1998:
<TABLE>
<CAPTION>
1997 1998
------------------- ------------------
<S> <C> <C>
Net loss:
As reported................................................. $ (1,651,818) $ (5,141,186)
Pro forma................................................... (1,696,141) (5,306,547)
Basic and diluted net loss per share:
As reported................................................. $ (.62) $ (1.40)
Pro forma................................................... (.64) (1.45)
</TABLE>
For purposes of calculating the above required disclosure, the fair value
of each option grant is estimated on the date of grant using the Black-Scholes
option pricing model with the following weighted average assumptions used for
grants in 1997 and 1998 respectively, risk-free interest rate of 5.02% and
4.78%, no expected dividend yield, expected life of seven years and expected
volatility of .70 and .62.
The weighted average fair value of options granted during 1997 and 1998 was
$1.21 and $1.97 per share. Options issued during 1997 and 1998, which remain
outstanding at December 31, 1997 and 1998, have a weighted average exercise
price of $1.74 and $2.34 per share, respectively, and a weighted average
remaining contractual life of 9.0 and 8.5 years, respectively. As of December
31, 1998, the range of options outstanding was 280,011 at $1.50 to $2.00 per
share and 253,120 at $3.00 to $3.25 per share.
F-12
<PAGE>
VASCULAR SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
For the years ended December 31, 1997 and 1998, the Company recorded
compensation expense of $25,440 and $78,400 in connection with non-qualified
stock options granted to board of directors members, medical advisory board
members and outside consultants.
9. Employee Retirement Savings Plan
In February 1998, the Company implemented an employee retirement savings
plan (the "401(k) Plan") which qualifies under Section 401(k) of the Internal
Revenue Code. The 401(k) Plan provides eligible employees with an opportunity to
make tax-deferred contributions into a long-term investment and savings program.
All employees over the age of 21 are eligible to participate in the 401(k) Plan
beginning with the first quarterly open enrollment date following start of
employment. Employer contributions are made solely at the Company's discretion.
No employer contributions were made for the year ended December 31, 1998.
10. Acquisition of Technology and Patents
In February 1997, the Company acquired all rights, title and interest in
the Duett sealing device, including all issued and pending patents, in exchange
for $150,000 paid to the inventor, who is a founder of the Company. In addition,
the Company agreed to assume the obligation to pay $40,000 to an unaffiliated
third party for certain prior development work related to the Duett sealing
device. The acquisition resulted in the Company recording an expense of $190,000
during the year ended December 31, 1997 related to in-process research and
development of the Duett sealing device. Beyond the foregoing, the Company
incurred no additional payments or obligations related to the acquisition of the
Duett sealing device.
11. Concentrations of Credit and Other Risks
The Company operates in a single industry segment and sells its product to
distributors who, in turn, sell to medical clinics. The Company sells its
product in foreign countries through independent distributors denominated in
United States dollars. Loss, termination or ineffectiveness of distributors to
effectively promote the Company's product could have a material adverse effect
on the Company's financial condition and results of operations.
Sales to significant customers as a percentage of total revenues are as
follows for the year ended December 31, 1998:
German distributor.......................... 65.0%
Austrian distributor........................ 15.8%
The Company performs ongoing credit evaluations of its customers but does
not require collateral. There have been no losses on customer receivables.
12. Dependence on Key Suppliers
The Company purchases certain key components from single source suppliers.
Any significant component delay or interruption could require the Company to
qualify new sources of supply, if available, and could have a material adverse
effect on the Company's financial condition and results of operations.
F-13
<PAGE>
INSIDE BACK COVER
[Duett sealing device logo]
Vascular Solutions Duett sealing device. The dual-approach sealing device that
seals the puncture left by arterial catheterizations.
1. DUETT CATHETER
[Picture of Duett catheter]
1. Duett catheter: A one-size-fits-all balloon catheter that creates a
temporary seal.
2. DUETT PROCOAGULANT
[Picture of collagen syringe, thrombin vial, diluent vial and empty syringe]
2. Duett procoagulant: A flowable mixture of thrombin, collagen and diluent
that creates a complete seal of the puncture and tissue tract.
<PAGE>
- --------------------------------------------------------------------------------
You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide you with information different from that which
is set forth in this prospectus. We are offering to sell shares of common stock
and seeking offers to buy shares of common stock only in jurisdictions where
offers and sales are permitted. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of the time of
delivery of the prospectus or of any sale of common stock.
______________________
TABLE OF CONTENTS
Page
----
Prospectus Summary............................. 1
Risks Factors.................................. 4
Forward-Looking Statements..................... 13
Trademarks..................................... 13
Use of Proceeds................................ 14
Dividend Policy................................ 14
Capitalization................................. 15
Dilution....................................... 16
Selected Financial Data........................ 17
Management's Discussion and Analysis
of Financial Condition and
Results of Operations........................ 18
Business....................................... 23
Management..................................... 36
Certain Transactions........................... 43
Principal Shareholders......................... 44
Description of Capital Stock................... 46
Shares Eligible for Future Sale................ 49
Underwriting................................... 51
Legal Matters.................................. 53
Experts........................................ 53
Where You Can Find More
Information.................................. 53
Index to Financial Statements.................. F-1
Until , 1999 (25 days after the date of this prospectus), all dealers
effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a prospectus.
This 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.
__________ Shares
[LOGO OF VASCULAR SOLUTIONS]
Common Stock
_______________
PROSPECTUS
________, 1999
_______________
William Blair & Company
Dain Rauscher Wessels
a division of Dain Rauscher Incorporated
Stephens Inc.
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
Except as set forth below, the following fees and expenses will be paid by
Vascular Solutions, Inc. (the "Company") in connection with the issuance and
distribution of the securities registered hereby and do not include underwriting
commissions and discounts. All such expenses, except for the SEC registration,
NASD filing and Nasdaq listing fees, are estimated.
SEC registration fee........................................ $ 11,120
NASD filing fee............................................. $ 4,500
Nasdaq National Market listing fee.......................... $ *
Legal fees and expenses..................................... $ *
Accounting fees and expenses................................ $ *
Transfer Agent's and Registrar's fees....................... $ *
Printing and engraving expenses............................. $ *
Miscellaneous............................................... $ *
----------
Total....................................................... $ *
==========
- ---------
* Such amounts will be filed by amendment.
Item 14. Indemnification of Directors and Officers
Section 302A.521 of the Minnesota Statutes provides that a corporation
shall indemnify any person made or threatened to be made a party to a proceeding
by reason of the former or present official capacity of such person against
judgments, penalties, fines (including, without limitation, excise taxes
assessed against such person with respect to any employee benefit plan),
settlements and reasonable expenses, including attorneys' fees and
disbursements, incurred by such person in connection with the proceeding, if,
with respect to the acts or omissions of such person complained of in the
proceeding, such person (1) has not been indemnified therefor by another
organization or employee benefit plan for the same judgments, penalties or
fines; (2) acted in good faith; (3) received no improper personal benefit and
Section 302A.255 (with respect to director conflicts of interest), if
applicable, has been satisfied; (4) in the case of a criminal proceeding, had no
reasonable cause to believe the conduct was unlawful; and (5) in the case of
acts or omissions in such person's official capacity for the corporation,
reasonably believed that the conduct was in the best interests of the
corporation, or in the case of acts or omissions in such person's official
capacity for other affiliated organizations, reasonably believed that the
conduct was not opposed to the best interests of the corporation. Section
302A.521 also requires payment by a corporation, upon written request, of
reasonable expenses in advance of final disposition of the proceeding in certain
instances. A decision as to required indemnification is made by a disinterested
majority of the Board of Directors present at a meeting at which a disinterested
quorum is present, or by a designated committee of the Board, by special legal
counsel, by the shareholders or by a court.
Provisions regarding indemnification of officers and directors of Vascular
Solutions to the extent permitted by Section 302A.521 are contained in Vascular
Solutions' bylaws.
Item 15. Recent Sales of Unregistered Securities
Since December 20, 1996 (inception), the Company has issued and sold the
following securities that were not registered under the Securities Act:
1. On December 20, 1996, the Company sold 1,366,250 shares of common
stock at $.001 per share to the founders of the Company. The Company received
proceeds of $1,366 from the sale of common stock.
2. At various times during the period from December 20, 1996 through June
30, 1999, the Company has granted stock options to employees, consultants,
directors and other individuals providing services to the
II-1
<PAGE>
Company under its stock option plan covering an aggregate of 928,511 shares of
the Company's common stock, at exercise prices ranging from $1.50 to $5.00 per
share. At various times during the period from July 1997 through June 30, 1999,
a total of 40,140 shares of common stock were issued by the Company upon the
exercise of stock options under its stock option plan.
3. In January and February 1997, the Company sold 1,000,000 shares of
common stock at $1.50 per share, from which the Company received net proceeds of
approximately $1,329,000, to various individuals. In connection with this sale
of common stock, the Company granted warrants to the placement agent to purchase
a total of 100,000 shares of common stock at an exercise price of $1.50 per
share. The warrants expire in January and February 2007.
4. In February 1997, the Company sold 500,000 shares of common stock to
two entities affiliated with Olympic Venture Partners at $1.50 per share. Mr.
Gerard Langeler, a director of Vascular Solutions, is a general partner of
Olympic Venture Partners.
5. In December 1997, the Company sold 2,000,000 shares of Series A
preferred stock at $2.50 per share to entities affiliated with Tredegar
Investments and Olympic Venture Partners.
6. In December 1997, the Company sold 680,000 shares of common stock at
$3.00 per share, from which the Company received net proceeds of approximately
$1,790,000, to various individuals. In connection with this sale of common
stock, the Company granted warrants to the placement agent to purchase a total
of 68,000 shares of common stock at an exercise price of $3.00 per share. The
warrants expire in December 2007.
7. Between March and April 1998, the Company sold a total of 126,667
shares of common stock at $3.00 per share to a total of three individuals who
are unaffiliated with the Company.
8. In December 1998, the Company sold 1,777,777 shares of Series B
preferred stock at $4.50 per share to 18 entities and individuals, including
1,221,466 shares to an entity affiliated with Stephens Inc., 100,000 shares to
an entity affiliated with Tredegar Investments, and 100,000 shares to entities
affiliated with Olympic Venture Partners. In connection with the Series B
preferred stock purchase agreement, the Company entered into a put and option
agreement with Stephens Vascular Preferred, LLC and Stephens Vascular Options,
LLC giving the Company the right to sell to Stephens Vascular Preferred up to
$3,000,000 of common stock at $5.00 or $6.00 per share based on the Company
attaining certain milestones. On June 30, 1999, we exercised our right and
issued 600,000 shares of common stock to Stephens Vascular Preferred in exchange
for $3,000,000. The put and option agreement also gives Stephens Vascular
Options the right to buy from the Company up to $3,000,000 of common stock at
$5.00 or $6.00 per share based on the Company achieving certain milestones.
Stephens Vascular Options' right expires upon the earlier of December 31, 2000
or the effective date of a registration statement for a public offering of the
Company. In addition, under the put and option agreement, Stephens Vascular
Options has the right to purchase up to $2,000,000 of common stock at $7.00 or
$8.00 per share based on the Company attaining certain milestones. As an
alternative to exercising the option, Stephens Vascular Options has the right to
convert the option into shares of common stock representing the net value of the
option. This option expires on December 31, 2000.
9. In June 1999, the Company issued a warrant to purchase 100,000 shares
of common stock at $5.00 per share to Jones Pharma, Incorporated, who is a
supplier of thrombin for the Company's Duett sealing device.
The sale and issuance of securities described above were deemed to be
exempt from registration under the Securities Act in reliance on Section 4(2) of
the Securities Act or Regulation D promulgated thereunder as transactions by an
issuer not involving a public offering, where the purchasers represented their
intention to acquire securities for investment purposes only and not with a view
to or for sale in connection with any distribution thereof, and received or had
access to adequate information about Vascular Solutions, or Rule 701 promulgated
thereunder in that they were offered and sold either pursuant to written
compensatory benefit plans or pursuant to a written contract relating to
compensation.
II-2
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
Number Description
- ------ -----------
1.1 Form of Underwriting Agreement
3.1 Articles of Incorporation of the Company, as currently in effect
3.2 Bylaws of the Company, as currently in effect
4.1* Specimen of Common Stock certificate
4.2 Form of warrant dated January 31 and February 14, 1997 issued to
representatives of Miller, Johnson & Kuehn, Incorporated
4.3 Form of warrant dated December 29, 1997 issued to representatives of
Miller, Johnson & Kuehn, Incorporated
4.4 Amended and Restated Investors' Rights Agreement dated December 9, 1998,
by and between the Company and the purchasers of Series A and Series B
preferred stock
4.5 Amended and Restated Right of First Refusal and Co-Sale Agreement dated
December 9, 1998
4.6 Put & Option Agreement dated December 9, 1998 by and among the Company,
Stephens Vascular Preferred, LLC and Stephens Vascular Options, LLC
4.7* Stock Purchase Warrant dated June 10, 1999 by and between the Company and
Jones Pharma, Incorporated
5.1* Opinion of Dorsey & Whitney LLP
10.1 Vascular Solutions, Inc. Stock Option and Stock Award Plan
10.2 Lease Agreement dated February 11, 1998 by and between Massachusetts
Mutual Life Insurance Company as Landlord and the Company as Tenant.
10.3 First Lease Amendment dated June 9, 1999 by and between Duke Realty
Limited Partnership as Landlord and the Company as Tenant
10.4 Bill of Sale and Assignment dated January 31, 1997 by and between the
Company and Dr. Gary Gershony
10.5 Mutual and General Release dated November 9, 1998 by and between the
Company, Dr. Gary Gershony and B. Braun Medical, Inc.
10.6 Clinical Trial Services Agreement dated July 1, 1998 by and between the
Company and The Cardiovascular Data Analysis Center of the Beth Israel
Medical Group
10.7 Economics Substudy Contract dated September 1998 by and between the
Company and Emory University
10.8 Purchase and Sale Agreement dated September 17, 1998 by and between the
Company and Davol Inc.**
10.9* Purchase and Sale Agreement dated June 10, 1999 by and between the
Company and Jones Pharma, Incorporated
10.10 Consulting Agreement dated June 10, 1999, between the Company and Gary
Gershony, M.D.
10.11 Form of Employment Agreement by and between the Company and each of its
executive officers
10.12 Form of Distribution Agreement
23.1 Consent of Ernst & Young LLP
23.2* Consent of Dorsey & Whitney LLP (included in Exhibit No. 5.1 to the
Registration Statement)
23.3 Consent of Patterson & Keough PA
24.1 Powers of Attorney (included on signature page)
27.1 Financial Data Schedule
_______________
* To be filed by amendment
** Confidential information has been omitted from this exhibit and filed
separately with the Securities and Exchange Commission accompanied by a
confidential treatment request pursuant to Rule 406 under the Securities
Act of 1933, as amended.
II-3
<PAGE>
(b) Financial Statement Schedules
Not applicable.
Item 17. Undertakings
The undersigned registrant 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
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, 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 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of 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 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
of 1933, 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 of 1933, 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-4
<PAGE>
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 Minneapolis, State of
Minnesota, on July 29, 1999.
VASCULAR SOLUTIONS, INC.
By: /s/ Howard Root
-----------------------------------
Howard Root
Chief Executive Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Howard Root and David
Christofferson, and each of them, his true and lawful attorneys-in-fact and
agents, with full powers of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all (i)
amendments (including post-effective amendments) and additions to this
registration statement and (ii) registration statements, and any and all
amendments thereto (including post-effective amendments), relating to the
offering contemplated pursuant to Rule 462(b) under the Securities Act of 1933,
as amended, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, and hereby
grants to such attorneys-in-fact and agents and each of them full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them or his or their 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 on Form S-1 has been signed by the following persons in
the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Howard Root Chief Executive Officer July 29, 1999
- -------------------------------
Howard Root and Director
(principal executive officer)
/s/ David Christofferson Chief Financial Officer July 29, 1999
- -------------------------------
David Christofferson (principal financial officer and
principal accounting officer)
/s/ Gary Gershony Director July 29, 1999
- -------------------------------
Gary Gershony
/s/ Gerard Langeler Director July 29, 1999
- -------------------------------
Gerard Langeler
/s/ Gabriel Vegh Director July 29, 1999
- -------------------------------
Gabriel Vegh
/s/ Daniel Sullivan Director July 29, 1999
- -------------------------------
Daniel Sullivan
/s/ James Jacoby, Jr. Director July 29, 1999
- -------------------------------
James Jacoby, Jr.
II-5
<PAGE>
EXHIBIT INDEX
Number Description
- ------ -----------
1.1 Form of Underwriting Agreement
3.1 Articles of Incorporation of the Company, as currently in effect
3.2 Bylaws of the Company, as currently in effect
4.2 Form of warrant dated January 31 and February 14, 1997 issued to
representatives of Miller, Johnson & Kuehn, Incorporated
4.3 Form of warrant dated December 29, 1997 issued to representatives of
Miller, Johnson & Kuehn, Incorporated
4.4 Amended and Restated Investors' Rights Agreement dated December 9, 1998,
by and between the Company and the purchasers of Series A and Series B
preferred stock
4.5 Amended and Restated Right of First Refusal and Co-Sale Agreement dated
December 9, 1998
4.6 Put & Option Agreement dated December 9, 1998 by and among the Company,
Stephens Vascular Preferred, LLC and Stephens, Vascular Options, LLC
10.1 Vascular Solutions, Inc. Stock Option and Stock Award Plan
10.2 Lease Agreement dated February 11, 1998 by and between Massachusetts
Mutual Life Insurance Company as Landlord and the Company as Tenant
10.3 First Lease Amendment dated June 9, 1999 by and between Duke Realty
Limited Partnership as Landlord and the Company as Tenant
10.4 Bill of Sale and Assignment dated January 31, 1997 by and between the
Company and Dr. Gary Gershony
10.5 Mutual and General Release dated November 9, 1998 by and between the
Company, Dr. Gary Gershony and B. Braun Medical, Inc.
10.6 Clinical Trial Services Agreement dated July 1, 1998 by and between the
Company and The Cardiovascular Data Analysis Center of the Beth Israel
Medical Group
10.7 Economics Substudy Contract dated September 1998 by and between the
Company and Emory University
10.8 Purchase and Sale Agreement dated September 17, 1998 by and between the
Company and Davol Inc.**
10.10 Consulting Agreement dated June 10, 1999, between the Company and Gary
Gershony, M. D.
10.11 Form of Employment Agreement by and between the Company and each of its
executive officers
10.12 Form of Distribution Agreement
23.1 Consent of Ernst & Young LLP
23.3 Consent of Patterson & Keough PA
24.1 Power of Attorney (included on signature page)
27.1 Financial Data Schedule
_______________
** Confidential information has been omitted from this exhibit and filed
separately with the Securities and Exchange Commission accompanied by a
confidential treatment request pursuant to Rule 406 under the Securities
Act of 1933, as amended.
II-6
<PAGE>
Exhibit 1.1
VASCULAR SOLUTIONS, INC.
_______ Shares Common Stock/1/
Underwriting Agreement
______________, 1999
William Blair & Company, L.L.C.
Dain Rauscher Wessels, a division of
Dain Rauscher Incorporated
Stephens Inc.
As Representatives of the Several
Underwriters Named in Schedule A
c/o William Blair & Company, L.L.C.
222 West Adams Street
Chicago, Illinois 60606
Ladies and Gentlemen:
1. Introductory. Vascular Solutions, Inc. ("Company") a Minnesota
corporation, has an authorized capital stock consisting of 20,000,000 shares, of
which 2,000,000 have been designated as Series A Preferred Stock, $.01 par
value, and are outstanding as of ___________, 1999, 1,777,777 have been
designated as Series B Preferred Stock, $.01 par value, and are outstanding as
of ____________, 1999, and ___________ shares of Common Stock, $.01 par value,
("Common Stock"), are outstanding as of ______________, 1999. The Company
proposes to issue and sell ________ shares of its authorized but unissued Common
Stock ("Firm Shares") to the several underwriters named in Schedule A
("Underwriters") pursuant to the terms of this Agreement as it may be
supplemented by the Pricing Agreement hereinafter defined, who are acting
severally and not jointly. In addition, the Company proposes to grant to the
Underwriters an option to purchase up to __________ additional shares of Common
Stock ("Option Shares") as provided in Section 3 hereof. The Firm Shares and,
to the extent such option is exercised, the Option Shares, are hereinafter
collectively referred to as the "Shares."
You have advised the Company that the Underwriters propose to make a public
offering of their respective portions of the Shares as soon as you deem
advisable after the registration statement hereinafter referred to becomes
effective, if it has not yet become effective, and the Pricing Agreement
hereinafter defined has been executed and delivered.
Prior to the purchase and public offering of the Shares by the several
Underwriters, the Company and the Representatives, acting on behalf of the
several Underwriters, shall enter into
___________________
/1/ Plus an option to acquire up to _____ additional shares to cover
overallotments.
<PAGE>
an agreement substantially in the form of Exhibit A hereto (the "Pricing
Agreement"). The Pricing Agreement may take the form of an exchange of any
standard form of written communication between the Company and the
Representatives and shall specify such applicable information as is indicated in
Exhibit A hereto. The offering of the Shares will be governed by this Agreement,
as supplemented by the Pricing Agreement. From and after the date of the
execution and delivery of the Pricing Agreement, this Agreement shall be deemed
to incorporate the Pricing Agreement.
The Company hereby confirms its agreement with the Underwriters as follows:
2. Representations and Warranties of the Company. The Company represents
and warrants to the several Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-_____) and a
related preliminary prospectus with respect to the Shares have been
prepared and filed with the Securities and Exchange Commission
("Commission") by the Company in conformity with the requirements of the
Securities Act of 1933, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "1933 Act;" all references herein
to specific rules are rules promulgated under the 1933 Act); and the
Company has so prepared and has filed such amendments thereto, if any, and
such amended preliminary prospectuses as may have been required to the date
hereof. If the Company has elected not to rely upon Rule 430A, the Company
has prepared and will promptly file an amendment to the registration
statement and an amended prospectus. If the Company has elected to rely
upon Rule 430A, it will prepare and file a prospectus pursuant to Rule
424(b) that discloses the information previously omitted from the
prospectus in reliance upon Rule 430A. There have been or will promptly be
delivered to you three signed copies of such registration statement and
amendments, three copies of each exhibit filed therewith, and conformed
copies of such registration statement and amendments (but without exhibits)
and of the related preliminary prospectus or prospectuses and final forms
of prospectus for each of the Underwriters.
Such registration statement (as amended, if applicable) at the time it
becomes effective and the prospectus constituting a part thereof (including
the information, if any, deemed to be part thereof pursuant to Rule 430A(b)
and/or Rule 434), as from time to time amended or supplemented, are
hereinafter referred to as the "Registration Statement," and the
"Prospectus," respectively, except that if any revised prospectus shall be
provided to the Underwriters by the Company for use in connection with the
offering of the Shares which differs from the Prospectus on file with the
Commission at the time the Registration Statement became or becomes
effective (whether or not such revised prospectus is required to be filed
by the Company pursuant to Rule 424(b)), the term Prospectus shall refer to
such revised prospectus from and after the time it was provided to the
Underwriters for such use. If the Company elects to rely on Rule 434, all
references to "Prospectus" shall be deemed to include, without limitation,
the form of prospectus and the term sheet, taken together, provided to the
Underwriters by the Company in accordance with Rule 434
2
<PAGE>
("Rule 434 Prospectus"). Any registration statement (including any
amendment or supplement thereto or information which is deemed part
thereof) filed by the Company under Rule 462(b) ("Rule 462(b) Registration
Statement") shall be deemed to be part of the "Registration Statement" as
defined herein, and any prospectus (including any amendment or supplement
thereto or information which is deemed part thereof) included in such
registration statement shall be deemed to be part of the "Prospectus", as
defined herein, as appropriate. The Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder are
hereinafter collectively referred to as the "Exchange Act."
(b) The Commission has not issued any order preventing or suspending
the use of any preliminary prospectus, and each preliminary prospectus has
conformed in all material respects with the requirements of the 1933 Act
and, as of its date, has not included any untrue statement of a material
fact or omitted to state a material fact necessary to make the statements
therein not misleading; and when the Registration Statement became or
becomes effective, and at all times subsequent thereto, up to the First
Closing Date or the Second Closing Date hereinafter defined, as the case
may be, the Registration Statement, including the information deemed to be
part of the Registration Statement at the time of effectiveness pursuant to
Rule 430A(b), if applicable, and the Prospectus and any amendments or
supplements thereto, contained or will contain all statements that are
required to be stated therein in accordance with the 1933 Act and in all
material respects conformed or will in all material respects conform to the
requirements of the 1933 Act, and neither the Registration Statement nor
the Prospectus, nor any amendment or supplement thereto, included or will
include any untrue statement of a material fact or omitted or will omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that the Company
makes no representation or warranty as to information contained in or
omitted from any preliminary prospectus, the Registration Statement, the
Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by or on
behalf of any Underwriter through the Representatives specifically for use
in the preparation thereof.
(c) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Minnesota,
with corporate power and authority to own its properties and conduct its
business as described in the Prospectus; the Company is duly qualified to
do business as a foreign corporation under the corporation law of, and is
in good standing as such in, each jurisdiction in which it owns or leases
substantial property, has an office, or in which substantial business is
conducted and such qualification is required except in any such case where
the failure to so qualify or be in good standing would not have a material
adverse effect upon the Company; and no proceeding of which the Company has
knowledge has been instituted in any such jurisdiction, revoking, limiting
or curtailing, or seeking to revoke, limit or curtail, such power and
authority or qualification. The Company has no subsidiaries.
3
<PAGE>
(d) The issued and outstanding shares of capital stock of the Company
as set forth in the Prospectus have been duly authorized and validly
issued, are fully paid and nonassessable, and conform to the description
thereof contained in the Prospectus.
(e) The Shares have been duly authorized and when issued, delivered
and paid for pursuant to this Agreement, will be validly issued, fully paid
and nonassessable, and will conform to the description thereof contained in
the Prospectus.
(f) There is no contract or other document of a character required
pursuant to the 1933 Act and the related published rules and regulations
with respect to Form S-1 to be described in the Registration Statement or
Prospectus, or to be filed as an exhibit thereto, which is not described or
filed as required; and the statements in the Prospectus under the headings
"Business - Clinical Results and Regulatory Status," "Business - Sales,
Marketing and Distribution," "Business - Manufacturing," "Business -
Regulatory Requirements," "Business - Patents and Intellectual Property,"
and "Business - Facilities" fairly summarize the matters therein described.
(g) The making and performance by the Company of this Agreement and
the Pricing Agreement have been duly authorized by all necessary corporate
action and will not violate any provision of the Company's charter or
bylaws and will not result in the breach, or be in contravention, of any
provision of any agreement, franchise, license, indenture, mortgage, deed
of trust, or other instrument to which the Company is a party or by which
the Company, or its property may be bound or affected, or any order, rule
or regulation applicable to the Company of any court or regulatory body,
administrative agency or other governmental body having jurisdiction over
the Company or any of its property, or any order of any court or
governmental agency or authority entered in any proceeding to which the
Company was or is now a party or by which it is bound. No consent,
approval, authorization or other order of any court, regulatory body,
administrative agency or other governmental body is required for the
execution and delivery of this Agreement or the Pricing Agreement or the
consummation of the transactions contemplated herein or therein, except for
compliance with the 1933 Act and blue sky laws applicable to the public
offering of the Shares by the several Underwriters and clearance of such
offering with the National Association of Securities Dealers, Inc.
("NASD"). This Agreement has been duly executed and delivered by the
Company.
(h) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that: (A) transactions are
executed in accordance with management's general or specific authorization;
(B) transactions are recorded as necessary in order to permit preparation
of financial statements in accordance with generally accepted accounting
principles and to maintain accountability for assets; (C) access to assets
is permitted only in accordance with management's general or specific
authorization; and (D) the recorded accountability for assets is compared
with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
4
<PAGE>
(i) The accountants who have expressed their opinions with respect to
the financial statements and schedules included in the Registration
Statement are independent accountants as required by the 1933 Act.
(j) The financial statements and schedules of the Company included in
the Registration Statement present fairly the financial position of the
Company as of the respective dates of such financial statements, and the
results of operations and cash flows of the Company for the respective
periods covered thereby, all in conformity with generally accepted
accounting principles consistently applied throughout the periods involved,
except as disclosed in the Prospectus; and the supporting schedules
included in the Registration Statement present fairly the information
required to be stated therein. The financial information set forth in the
Prospectus under "Selected Financial Data" presents fairly on the basis
stated in the Prospectus, the information set forth therein.
(k) The Company is not in violation of its charter or in default
under any consent decree, or in default with respect to any material
provision of any lease, loan agreement, franchise, license, permit or other
contractual obligation to which it is a party; and there does not exist any
state of facts which constitutes an event of default as defined in such
documents or which, with notice or lapse of time or both, would constitute
such an event of default, in each case, except for defaults which neither
singly nor in the aggregate are material to the Company.
(l) There are no material legal or governmental proceedings pending,
or to the Company's knowledge, threatened to which the Company is or may be
a party or of which material property owned or leased by the Company is or
may be the subject, or related to environmental or discrimination matters
which are not disclosed in the Prospectus, or which question the validity
of this Agreement or the Pricing Agreement or any action taken or to be
taken pursuant hereto or thereto.
(m) There are no holders of securities of the Company having rights
to registration thereof or preemptive rights to purchase Common Stock
except as disclosed in the Prospectus. Holders of registration rights have
waived such rights with respect to the offering being made by the
Prospectus.
(n) The Company has good and marketable title to all the properties
and assets reflected as owned in the financial statements hereinabove
described (or elsewhere in the Prospectus), and such properties and assets
are not subject to any lien, mortgage, pledge, charge or encumbrance of any
kind except those, if any, reflected in such financial statements (or
elsewhere in the Prospectus) or which are not material to the Company. The
Company holds all of its material leased properties under valid and binding
leases.
(o) The Company has not taken and will not take, directly or
indirectly, any action designed to or which has constituted or which might
reasonably be expected to cause
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or result, under the Exchange Act or otherwise, in stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or resale of the Shares.
(p) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, and except as
contemplated by the Prospectus, the Company has not incurred any material
liabilities or obligations, direct or contingent, nor entered into any
material transactions not in the ordinary course of business and there has
not been any material adverse change in its condition (financial or
otherwise) or results of operations nor any material change in its capital
stock, short-term debt or long-term debt.
(q) The Company agrees not to sell, contract to sell or otherwise
dispose of any Common Stock or securities convertible into Common Stock
(except Common Stock issued pursuant to currently outstanding options,
warrants or convertible securities) for a period of 180 days after this
Agreement becomes effective without the prior written consent of the
Representatives. The Company has obtained similar agreements from each of
its officers and directors and shareholders listed on Schedule B.
(r) There is no material document of a character required to be
described in the Registration Statement or the Prospectus or to be filed as
an exhibit to the Registration Statement which is not described or filed as
required.
(s) The Company owns, possesses, licenses or, to its knowledge,
otherwise has sufficient rights to use, all patents, patent applications,
trade and service marks, trade and service mark registrations, trade names,
copyrights, licenses, inventions, trade secrets, technology, know-how and
other intellectual property which it deems necessary for the conduct of the
Company's business as currently conducted or as described in the Prospectus
(collectively, the "Intellectual Property"). (a) There are no rights of
third parties to any such Intellectual Property; (b) there is no
infringement by third parties of any such Intellectual Property; (c) there
is no pending or, to the Company's knowledge, threatened action, suit,
proceeding or claim by others challenging the Company's rights in or to, or
the validity or scope of, any such Intellectual Property, and the Company
is unaware of any facts which would form a reasonable basis for any such
claim except where the Company has requested and obtained a non-
infringement opinion from its intellectual property counsel; (d) there is
no pending or, to the Company's knowledge, threatened action, suit,
proceeding or claim by others alleging that the Company infringes or
otherwise violates any patent, trademark, copyright, trade secret or other
proprietary rights of others, and the Company is unaware of any other fact
which would form a reasonable basis for any such claim except where the
Company has requested and obtained a non-infringement opinion from its
intellectual property counsel; and (e) the Company has requested and
arranged for Lyon & Lyon LLP, its special intellectual property counsel,
to render an opinion letter as to certain intellectual property matters in
the form set forth in Section 6(f)(iii) hereto.
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(t) To the best of the Company's knowledge, the issued patents owned
by, or licensed to, the Company and described in the Registration Statement
and Prospectus are valid and enforceable patents. Except as described in
the Registration Statement and Prospectus and in the agreements referred to
therein, no other entity or individual has any right or claim in any of
such issued patents. The patent applications owned by, or licensed to, the
Company and described in the Registration Statement and Prospectus have
been properly prepared and filed and are being diligently pursued on behalf
of the Company, and each of such patent applications is owned or controlled
by the Company, and no other entity or individual has any right or claim in
any of the patent applications or any patent to be issued therefrom, except
as described in the Registration Statement and Prospectus and in the
agreements referred to therein. To the best of the Company's knowledge,
each patent application owned by or licensed to the Company and described
in the Registration Statement and Prospectus discloses patentable subject
matter.
(u) The human clinical trials conducted by the Company or in which
the Company has participated that are described in the Registration
Statement and Prospectus or the results of which are referred to in the
Registration Statement and Prospectus, and, to the best of the Company's
knowledge, such studies and tests conducted on behalf of the Company, were
and, if still pending, are being conducted in accordance with experimental
protocols, procedures and controls pursuant to accepted professional
scientific standards for the clinical study of new medical devices; the
descriptions of the results of such studies, tests and trials contained in
the Registration Statement and Prospectus are accurate and complete in all
material respects, and the Company has no knowledge of any other trials,
studies or tests, the results of which reasonably call into question the
results described or referred to in the Registration Statement and
Prospectus; and the Company has not received any notices or correspondence
from the Food and Drug Administration ("FDA") or any other governmental
agency requiring the termination, suspension or modification of any
clinical trials conducted by, or on behalf of, the Company or in which the
Company has participated that are described in the Registration Statement
and Prospectus or the results of which are referred to in the Registration
Statement and Prospectus.
(v) The Company holds all franchises, licenses, permits, approvals,
certificates and other authorizations from federal, state and other
governmental or regulatory authorities, including, but not limited to the
FDA and any foreign regulatory authorities performing functions similar to
those performed by the FDA, necessary to the ownership, leasing and
operation of its properties or required for the present conduct of its
business, and such franchises, licenses, permits, approvals, certificates
and other governmental authorizations are in full force and effect and the
Company is in compliance therewith in all material respects except where
the failure so to obtain, maintain or comply with would not have a material
adverse effect upon the condition (financial or otherwise) or results of
operations of the Company. All of the descriptions in the Registration
Statement and Prospectus of the legal and governmental proceedings by and
before the FDA or any
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foreign state or local government body exercising comparable authority are
true, complete and accurate in all material respects.
(w) The Company is (A) in compliance with any and all applicable
foreign, federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants applicable to its
business as described in the Prospectus ("Environmental Laws"), (B) has
received and is in compliance with all permits, licenses or other approvals
required under applicable Environmental Laws to conduct its business and
(C) has not received notice of any actual or potential liability for the
investigation or remediation of any disposal or release of hazardous or
toxic substances or wastes, pollutants or contaminants, except as set forth
in or contemplated in the Prospectus (exclusive of any supplement thereto).
The Company has not received notice that it has been named as a
"potentially responsible party" under the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended.
(x) The conduct of the business of the Company is in compliance in
all respects with applicable federal, state, local and foreign laws and
regulations, except where the failure to be in compliance would not have a
material adverse effect upon the condition (financial or otherwise) or
results of operations of the Company.
(y) All offers and sales of the Company's capital stock prior to the
date hereof were at all relevant times exempt from the registration
requirements of the 1933 Act and were duly registered with or the subject
of an available exemption from the registration requirements of the
applicable state securities or blue sky laws.
(z) The Company has filed all necessary federal and state income and
franchise tax returns and has paid all taxes shown as due thereon, and
there is no tax deficiency that has been, or to the knowledge of the
Company might be, asserted against the Company or any of its properties or
assets that would or could be expected to have a material adverse effect
upon the condition (financial or otherwise) or results of operations of the
Company.
(aa) The Company maintains insurance of the types and in the amounts
which it deems adequate for its business, including, but not limited to,
product liability, general liability insurance and insurance governing all
real and personal property owned or leased by the Company against theft,
damage, destruction, acts of vandalism and all other risk customarily
insured against, all of which insurance is in full force and effect.
(bb) The Company has filed a registration statement pursuant to
Section 12(g) of the Exchange Act to register the Common Stock thereunder,
has filed an application to list the Shares on the Nasdaq National Market,
and has received notification that the listing has been approved, subject
to notice of issuance or sale of the Shares, as the case may be.
8
<PAGE>
(cc) The Company is not, and does not intend to conduct its business
in a manner in which it would become, an "investment company" as defined in
Section 3(a) of the Investment Company Act of 1940, as amended ("Investment
Company Act").
(dd) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter 92-
198, An Act Relating to Disclosure of Doing Business with Cuba, and the
---------------------------------------------------------
Company further agrees that if it commences engaging in business with the
government of Cuba or with any person or affiliate located in Cuba after
the date the Registration Statement becomes or has become effective with
the Commission or with the Florida Department of Banking and Finance (the
"Department"), whichever date is later, or if the information reported in
the Prospectus, if any, concerning the Company's business with Cuba or with
any person or affiliate located in Cuba changes in any material way, the
Company will provide the Department notice of such business or change, as
appropriate, in a form acceptable to the Department.
(ee) Neither the Company nor any of the Company's officers, employees,
agents or any other person acting on behalf of, at the direction of, or for
the benefit of the Company has, directly or indirectly, (A) used any
corporate funds for unlawful contributions, gifts, entertainment, or other
unlawful expenses relating to political activity, (B) made any unlawful
contribution to any candidate for foreign or domestic office, or to any
foreign or domestic government officials or employees or other person
charged with similar public or quasi-public duties, other than payments
required or permitted by the laws of the United States or any jurisdiction
thereof or to foreign or domestic political parties or campaigns from
corporate funds, or failed to disclose fully any contribution in violation
of law, (C) violated any provision of the Foreign Corrupt Practices Act of
1977, as amended, or (D) made any other unlawful payment which, if not
given in the past or if not continued in the future would have a material
adverse effect upon the condition (financial or otherwise) or results of
operations of the Company.
(ff) The Company is in compliance with the Commission's revised staff
legal bulletin No. 5 dated January 12, 1998, related to Year 2000
compliance to the extent described in the Prospectus.
3. Purchase, Sale and Delivery of Shares. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell to the
Underwriters named in Schedule A hereto, and the Underwriters agree, severally
and not jointly, to purchase the Firm Shares from the Company at the price per
share set forth in the Pricing Agreement. The obligation of each Underwriter to
the Company shall be to purchase from the Company that number of full shares
which (as nearly as practicable, as determined by you) represents the same
proportion as the number of Shares set forth opposite the name of such
Underwriter in Schedule A hereto bears to the total number of
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<PAGE>
Firm Shares to be purchased by all Underwriters under this Agreement. The
initial public offering price and the purchase price shall be set forth in the
Pricing Agreement.
At 9:00 A.M., Chicago Time, on the fourth business day, if permitted under
Rule 15c6-1 under the Exchange Act, (or the third business day if required under
Rule 15c6-1 under the Exchange Act or unless postponed in accordance with the
provisions of Section 11 of this Agreement) following the date the Registration
Statement becomes effective (or, if the Company has elected to rely upon Rule
430A, the fourth business day, if permitted under Rule 15c6-1 under the Exchange
Act (or the third business day if required under Rule 15c6-1 under the Exchange
Act), after execution of the Pricing Agreement), or such other time not later
than ten business days after such date as shall be agreed upon by the
Representatives and the Company, the Company will deliver to you at the offices
of counsel for the Underwriters or through the facilities of The Depository
Trust Company for the accounts of the several Underwriters, certificates
representing the Firm Shares to be sold by it against payment of the purchase
price therefor by delivery of federal or other immediately available funds, by
wire transfer or otherwise, to the Company. Such time of delivery and payment
is herein referred to as the "First Closing Date." The certificates for the Firm
Shares so to be delivered will be in such denominations and registered in such
names as you request by notice to the Company prior to 10:00 A.M., Chicago Time,
on the second full business day preceding the First Closing Date, and will be
made available at the Company's expense for checking and packaging by the
Representatives at 10:00 A.M., Chicago Time, on the business day preceding the
First Closing Date. Payment for the Firm Shares so to be delivered shall be
made at the time and in the manner described above at the offices of counsel for
the Underwriters.
In addition, on the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set forth, the
Company hereby grants an option to the several Underwriters to purchase,
severally and not jointly, the Option Shares, at the same purchase price per
share to be paid for the Firm Shares, for use solely in covering any
overallotments made by the Underwriters in the sale and distribution of the Firm
Shares. The option granted hereunder may be exercised in whole or in part at
any time (but not more than once) within 30 days after the date of the initial
public offering upon notice by you to the Company setting forth the aggregate
number of Option Shares as to which the Underwriters are exercising the option,
the names and denominations in which the certificates for such shares are to be
registered and the time and place at which such certificates will be delivered.
Such time of delivery (which may not be earlier than the First Closing Date),
being herein referred to as the "Second Closing Date," shall be determined by
you, but if at any time other than the First Closing Date, shall not be earlier
than three nor later than 10 full business days after delivery of such notice of
exercise. The number of Option Shares to be purchased by each Underwriter shall
be determined by multiplying the number of Option Shares to be sold by a
fraction, the numerator of which is the number of Firm Shares to be purchased by
such Underwriter as set forth opposite its name in Schedule A and the
denominator of which is the total number of Firm Shares (subject to such
adjustments to eliminate any fractional share purchases as you in your absolute
discretion may make). Certificates for the Option Shares will be made available
at the Company's expense
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for checking and packaging at 10:00 A.M., Chicago Time, on the first full
business day preceding the Second Closing Date. The manner of payment for and
delivery of the Option Shares shall be the same as for the Firm Shares as
specified in the preceding paragraph.
You have advised the Company that each Underwriter has authorized you to
accept delivery of its Shares, to make payment and to receipt therefor. You,
individually and not as the Representatives of the Underwriters, may make
payment for any Shares to be purchased by any Underwriter whose funds shall not
have been received by you by the First Closing Date or the Second Closing Date,
as the case may be, for the account of such Underwriter, but any such payment
shall not relieve such Underwriter from any obligation hereunder.
4. Covenants of the Company. The Company covenants and agrees that:
(a) The Company will advise you promptly of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or of the institution of any proceedings for that
purpose, or of any notification of the suspension of qualification of the
Shares for sale in any jurisdiction or the initiation or threatening of any
proceedings for that purpose, and will also advise you promptly of any
request of the Commission for amendment or supplement of the Registration
Statement, of any preliminary prospectus or of the Prospectus, or for
additional information.
(b) The Company will give you notice of its intention to file or
prepare any amendment to the Registration Statement (including any post-
effective amendment) or any Rule 462(b) Registration Statement or any
amendment or supplement to the Prospectus (including any revised prospectus
which the Company proposes for use by the Underwriters in connection with
the offering of the Shares which differs from the prospectus on file with
the Commission at the time the Registration Statement became or becomes
effective, whether or not such revised prospectus is required to be filed
pursuant to Rule 424(b) and any term sheet as contemplated by Rule 434) and
will furnish you with copies of any such amendment or supplement a
reasonable amount of time prior to such proposed filing or use, as the case
may be, and will not file any such amendment or supplement or use any such
prospectus to which you or counsel for the Underwriters shall reasonably
object.
(c) If the Company elects to rely on Rule 434, the Company will
prepare a term sheet that complies with the requirements of Rule 434. If
the Company elects not to rely on Rule 434, the Company will provide the
Underwriters with copies of the form of prospectus, in such numbers as the
Underwriters may reasonably request, and file with the Commission such
prospectus in accordance with Rule 424(b) by the close of business in New
York City on the second business day immediately succeeding the date of the
Pricing Agreement. If the Company elects to rely on Rule 434, the Company
will provide the Underwriters with copies of the form of Rule 434
Prospectus, in such numbers as the
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Underwriters may reasonably request, by the close of business in New York
on the business day immediately succeeding the date of the Pricing
Agreement.
(d) If at any time when a prospectus relating to the Shares is
required to be delivered under the 1933 Act any event occurs as a result of
which the Prospectus, including any amendments or supplements, would
include an untrue statement of a material fact, or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend the
Prospectus, including any amendments or supplements thereto and including
any revised prospectus which the Company proposes for use by the
Underwriters in connection with the offering of the Shares which differs
from the prospectus on file with the Commission at the time of
effectiveness of the Registration Statement, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) to comply with
the 1933 Act, the Company promptly will advise you thereof and will
promptly prepare and file with the Commission an amendment or supplement
which will correct such statement or omission or an amendment which will
effect such compliance; and, in case any Underwriter is required to deliver
a prospectus nine months or more after the effective date of the
Registration Statement, the Company upon request, but at the expense of
such Underwriter, will prepare promptly such prospectus or prospectuses as
may be necessary to permit compliance with the requirements of Section
10(a)(3) of the 1933 Act.
(e) The Company will not, prior to the earlier of the Second Closing
Date or termination or expiration of the related option, incur any
liability or obligation, direct or contingent, or enter into any material
transaction, other than in the ordinary course of business, except as
contemplated by the Prospectus.
(f) The Company will not acquire any of its capital stock prior to the
earlier of the Second Closing Date or termination or expiration of the
related option nor will the Company declare or pay any dividend or make any
other distribution upon the Common Stock payable to stockholders of record
on a date prior to the earlier of the Second Closing Date or termination or
expiration of the related option, except in either case as contemplated by
the Prospectus.
(g) Not later than ____________, 2000 the Company will make generally
available to its security holders an earnings statement (which need not be
audited) covering a period of at least 12 months beginning after the
effective date of the Registration Statement, which will satisfy the
provisions of the last paragraph of Section 11(a) of the 1933 Act.
(h) During such period as a prospectus is required by law to be
delivered in connection with offers and sales of the Shares by an
underwriter or dealer, the Company will furnish to you at its expense,
subject to the provisions of subsection (d) of this Section
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4, copies of the Registration Statement, the Prospectus, each preliminary
prospectus and all amendments and supplements to any such documents in each
case as soon as available and in such quantities as you may reasonably
request, for the purposes contemplated by the 1933 Act.
(i) The Company will cooperate with the Underwriters in qualifying or
registering the Shares for sale under the blue sky laws of such
jurisdictions as you designate, and will continue such qualifications in
effect so long as reasonably required for the distribution of the Shares.
The Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any such jurisdiction where
it is not currently qualified or where it would be subject to taxation as a
foreign corporation.
(j) During the period of five years hereafter, the Company will
furnish you and each of the other Underwriters with a copy (i) as soon as
practicable after the filing thereof, of each report filed by the Company
with the Commission, any securities exchange or the NASD; (ii) as soon as
practicable after the release thereof, of each press release in respect of
the Company; and (iii) as soon as available, of each report of the Company
mailed to stockholders.
(k) The Company will use the net proceeds received by it from the sale
of the Shares being sold by it in the manner specified in the Prospectus.
(l) If, at the time of effectiveness of the Registration Statement,
any information shall have been omitted therefrom in reliance upon Rule
430A and/or Rule 434, then immediately following the execution of the
Pricing Agreement, the Company will prepare, and file or transmit for
filing with the Commission in accordance with such Rule 430A, Rule 424(b)
and/or Rule 434, copies of an amended Prospectus, or, if required by such
Rule 430A and/or Rule 434, a post-effective amendment to the Registration
Statement (including an amended Prospectus), containing all information so
omitted. If required, the Company will prepare and file, or transmit for
filing, a Rule 462(b) Registration Statement not later than the date of the
execution of the Pricing Agreement. If a Rule 462(b) Registration
Statement is filed, the Company shall make payment of, or arrange for
payment of, the additional registration fee owing to the Commission
required by Rule 111.
(m) The Company will comply with all registration, filing and
reporting requirements of the Exchange Act and the Nasdaq National Market
and shall report the use of proceeds of the offering pursuant to Item 701
of Regulation S-K as required by Rule 463 and will furnish you copies of
any such reports as soon as practicable after the filing thereof.
5. Payment of Expenses. Whether or not the transactions contemplated
hereunder are consummated or this Agreement becomes effective as to all of its
provisions or is terminated, the
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Company agrees to pay (i) all costs, fees and expenses (other than legal fees
and disbursements of counsel for the Underwriters and the expenses incurred by
the Underwriters) incurred in connection with the performance of the Company's
obligations hereunder, including without limiting the generality of the
foregoing, all fees and expenses of legal counsel for the Company and of the
Company's independent accountants, all costs and expenses incurred in connection
with the preparation, printing, filing and distribution of the Registration
Statement, each preliminary prospectus and the Prospectus (including all
exhibits and financial statements) and all amendments and supplements provided
for herein, this Agreement, the Pricing Agreement and the Blue Sky Memorandum,
(ii) all costs, fees and expenses (including legal fees not to exceed $5,000 and
disbursements of counsel for the Underwriters) incurred by the Underwriters in
connection with qualifying or registering all or any part of the Shares for
offer and sale under blue sky laws, including the preparation of a blue sky
memorandum relating to the Shares and clearance of such offering with the NASD;
and (iii) all fees and expenses of the Company's transfer agent, printing of the
certificates for the Shares and all transfer taxes, if any, with respect to the
sale and delivery of the Shares to the several Underwriters.
6. Conditions of the Obligations of the Underwriters. The obligations of
the several Underwriters to purchase and pay for the Firm Shares on the First
Closing Date and the Option Shares on the Second Closing Date shall be subject
to the accuracy of the representations and warranties on the part of the Company
herein set forth as of the date hereof and as of the First Closing Date or the
Second Closing Date, as the case may be, to the accuracy of the statements of
officers of the Company made pursuant to the provisions hereof, to the
performance by the Company of its obligations hereunder, and to the following
additional conditions:
(a) The Registration Statement shall have become effective either
prior to the execution of this Agreement or not later than 1:00 P.M.,
Chicago Time, on the first full business day after the date of this
Agreement, or such later time as shall have been consented to by you but in
no event later than 1:00 P.M., Chicago Time, on the third full business day
following the date hereof; and prior to the First Closing Date or the
Second Closing Date, as the case may be, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or shall be pending
or, to the knowledge of the Company or you, shall be contemplated by the
Commission. If the Company has elected to rely upon Rule 430A and/or Rule
434, the information concerning the initial public offering price of the
Shares and price-related information shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) within the prescribed period
and the Company will provide evidence satisfactory to the Representatives
of such timely filing (or a post-effective amendment providing such
information shall have been filed and declared effective in accordance with
the requirements of Rules 430A and 424(b)). If a Rule 462(b) Registration
Statement is required, such Registration Statement shall have been
transmitted to the Commission for filing and become effective within the
prescribed time period and, prior to the First Closing Date, the Company
shall have provided evidence of such filing and effectiveness in accordance
with Rule 462(b).
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(b) The Shares shall have been qualified for sale under the blue sky
laws of such states as shall have been specified by the Representatives.
(c) The legality and sufficiency of the authorization, issuance and
sale or transfer and sale of the Shares hereunder, the validity and form of
the certificates representing the Shares, the execution and delivery of
this Agreement and the Pricing Agreement, and all corporate proceedings and
other legal matters incident thereto, and the form of the Registration
Statement and the Prospectus (except financial statements) shall have been
approved by counsel for the Underwriters exercising reasonable judgment.
(d) You shall not have advised the Company that the Registration
Statement or the Prospectus or any amendment or supplement thereto,
contains an untrue statement of fact, which, in the opinion of counsel for
the Underwriters, is material or omits to state a fact which, in the
opinion of such counsel, is material and is required to be stated therein
or necessary to make the statements therein not misleading.
(e) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred any change, or any development involving a
prospective change, in or affecting particularly the business or property
of the Company, whether or not arising in the ordinary course of business,
which, in the judgment of the Representatives, makes it impractical or
inadvisable to proceed with the public offering or purchase of the Shares
as contemplated hereby.
(f) There shall have been furnished to you, as Representatives of the
Underwriters, on the First Closing Date or the Second Closing Date, as the
case may be, except as otherwise expressly provided below:
(i) An opinion of Dorsey & Whitney LLP, counsel for the Company
addressed to the Underwriters and dated the First Closing Date or the
Second Closing Date, as the case may be, to the effect that:
(1) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Minnesota with corporate power and authority to own its properties
and conduct its business as described in the Prospectus; and the
Company has been duly qualified to do business as a foreign
corporation under the corporation law of, and is in good standing as
such in, every jurisdiction where the ownership or leasing of
property, or the conduct of its business requires such qualification
except where the failure so to qualify would not have a material
adverse effect upon the condition (financial or otherwise) or results
of operations of the Company;
(2) the authorized capital stock of the Company, of which
there is outstanding the amount set forth in the Registration
Statement and Prospectus
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(except for subsequent issuances, if any, pursuant to stock options or
other rights referred to in the Prospectus), conforms as to legal
matters in all material respects to the description thereof in the
Registration Statement and Prospectus;
(3) the issued and outstanding capital stock of the Company
has been duly authorized and validly issued and is fully paid and
nonassessable;
(4) the certificates for the Shares to be delivered
hereunder are in due and proper form, and when duly countersigned by
the Company's transfer agent and delivered to you or upon your order
against payment of the agreed consideration therefor in accordance
with the provisions of this Agreement and the Pricing Agreement, the
Shares represented thereby will be duly authorized and validly issued,
fully paid and nonassessable;
(5) the holders of the Company's outstanding Common Stock
are not entitled to any preemptive rights or other rights to
subscribe for Common Stock arising by operation of law, under the
Certificate of Incorporation or Bylaws or under any agreement. Except
as included in the Registration Statement and Prospectus, no options,
warrants or other rights to purchase, agreements or other obligations
to issue, or rights to convert any obligations into or exchange any
securities for, shares of capital stock of or ownership interests in
the Company are outstanding.
(6) the Registration Statement has become effective under
the 1933 Act, and, to the best knowledge of such counsel, no stop
order suspending the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose have been instituted
or are pending or contemplated under the 1933 Act, and the
Registration Statement (including the information deemed to be part of
the Registration Statement at the time of effectiveness pursuant to
Rule 430A(b) and/or Rule 434, if applicable), the Prospectus and each
amendment or supplement thereto (except for the financial statements
and other statistical or financial data included therein as to which
such counsel need express no opinion) comply as to form in all
material respects with the requirements of the 1933 Act; such counsel
have no reason to believe that either the Registration Statement
(including the information deemed to be part of the Registration
Statement at the time of effectiveness pursuant to Rule 430A(b) and/or
Rule 434, if applicable) or the Prospectus, or the Registration
Statement or the Prospectus as amended or supplemented (except as
aforesaid), as of their respective effective or issue dates, contained
any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading or that the Prospectus as amended or
supplemented, if applicable, as of the First Closing Date or the
Second Closing Date, as the case may be, contained any untrue
statement of a material fact or omitted to state any material fact
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necessary to make the statements therein not misleading in light of
the circumstances under which they were made; the statements in the
Registration Statement and the Prospectus summarizing statutes, rules
and regulations are accurate and fairly and correctly present the
information required to be presented by the 1933 Act or the rules and
regulations thereunder, in all material respects and such counsel does
not know of any statutes, rules or regulations required to be
described or referred to in the Registration Statement or the
Prospectus that are not described or referred to therein as required;
and such counsel does not know of any legal or governmental
proceedings pending or threatened required to be described in the
Prospectus which are not described as required, nor of any contracts
or documents of a character required to be described in the
Registration Statement or Prospectus or to be filed as exhibits to the
Registration Statement which are not described or filed, as required;
(7) the statements under the captions "Business - Clinical
Results and Regulatory Status," "Business - Sales, Marketing and
Distribution," "Business - Manufacturing," "Business - Regulatory
Requirements," "Business - Patents and Intellectual Property,"
"Business - Facilities," "Management -- Indemnification Matters and
Limitation of Liability," "Management -- Employment Agreements,"
"Management - Benefit Plans," "Certain Transactions," "Description of
Capital Stock" and "Shares Eligible for Future Sale" in the Prospectus
and Items 14 and 15 of Part II of the Registration Statement, insofar
as such statements constitute a summary of documents referred to
therein or matters of law, are accurate summaries and fairly and
correctly present, in all material respects, the information called
for with respect to such documents and matters;
(8) this Agreement and the Pricing Agreement and the
performance of the Company's obligations hereunder have been duly
authorized by all necessary corporate action and this Agreement and
the Pricing Agreement have been duly executed and delivered by and on
behalf of the Company, and are legal, valid and binding agreements of
the Company, except as enforceability of the same may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights and by the exercise of judicial
discretion in accordance with general principles applicable to
equitable and similar remedies and except as to those provisions
relating to indemnities for liabilities arising under the 1933 Act as
to which no opinion need be expressed; and no approval, authorization
or consent of any public board, agency, or instrumentality of the
United States or of any state or other jurisdiction is necessary in
connection with the issue or sale of the Shares pursuant to this
Agreement (other than under the 1933 Act, applicable blue sky laws and
the rules of the NASD) or the consummation by the Company of any other
transactions contemplated hereby;
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(9) the execution and performance of this Agreement will
not contravene any of the provisions of, or result in a default under,
any agreement, franchise, license, indenture, mortgage, deed of trust,
or other instrument known to such counsel, of the Company or by which
its property is bound and which contravention or default would be
material to the Company; or violate any of the provisions of the
charter or bylaws of the Company or, so far as is known to such
counsel, violate any statute, order, rule or regulation of any
regulatory or governmental body having jurisdiction over the Company;
(10) such counsel does not know of any contracts or
documents required to be filed as exhibits to the Registration
Statement or described in the Registration Statement or the Prospectus
which are not so filed, or described as required, and such contracts
and documents as are described in the Registration Statement or the
Prospectus are accurately described in all material respects.
(11) there is no legal action, suit or proceeding pending
or, to such counsel's knowledge, threatened against the Company of a
character required to be disclosed in the Registration Statement or
the Prospectus pursuant to the 1933 Act or the Exchange Act, as
applicable; the Company is not a party or subject to provisions of any
injunction, judgment, decree or order of any court, regulatory body,
administrative agency or other governmental body or agency the effect
of which could be material and adverse to the condition (financial or
otherwise) or results of operations of the Company.
(12) all offers and sales of the Company's capital stock
since February, 1997 were at all relevant times exempt from the
registration requirements of the 1933 Act and were duly registered or
the subject of an available exemption from the registration
requirements of the applicable state securities or blue sky laws;
(13) no holder of any security of the Company has any right
to require registration of shares of Common Stock or any other
security of the Company; and
(14) the Company is not an "investment company" or a person
"controlled by" an "investment company" within the meaning of the
Investment Company Act.
In rendering such opinion, such counsel may state that they are relying
upon the certificate of Norwest Bank Minnesota, N.A., the transfer agent for the
Common Stock, as to the number of shares of Common Stock at any time or times
outstanding, and that insofar as their opinion under clause (5) above relates to
the accuracy and completeness of the Prospectus and Registration Statement, it
is based upon a general review with the Company's representatives and
independent
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accountants of the information contained therein, without independent
verification by such counsel of the accuracy or completeness of such
information. Such counsel may also rely upon the opinions of other competent
counsel and, as to factual matters, on certificates of officers of the Company
and of state officials, in which case their opinion is to state that they are so
doing and copies of said opinions or certificates are to be attached to the
opinion unless said opinions or certificates (or, in the case of certificates,
the information therein) have been furnished to the Representatives in other
form.
(ii) The Representatives shall have received on the Closing
Date or the Option Closing Date, as the case may be, the opinion of Dorsey
& Whitney LLP, special international regulatory counsel for the Company
dated the Closing Date or the Option Closing Date, as the case may be,
addressed to the Underwriters, to the effect that the statements in the
Registration Statement and the Prospectus under the caption
"Business--Regulatory Requirements--International," insofar as such
statements purport to summarize applicable provisions of international
regulatory requirements have been reviewed by such counsel and are accurate
summaries in all material respects of the provisions purported to be
summarized under such captions in the Registration Statement and the
Prospectus. In rendering such opinion, such counsel may state that they
have not independently verified nor do they take any responsibility for nor
are they addressing in any way any advents of fact, any statements
concerning state or foreign law or any legal conclusions or statements of
belief attributable to the Company.
(iii) Representatives shall have received on the Closing Date or
the Option Closing Date, as the case may be, the opinion of Lyon & Lyon
LLP, special patent counsel for the Company, dated the Closing Date or the
Option Closing Date, as the case may be, addressed to the Underwriters to
the effect that:
(1) the statements in the Registration Statement under the
captions "Risk Factors--We May Face Intellectual Property Infringement
Claims" and "Business--Patents and Intellectual Property" and other
statements in the Registration Statement and Prospectus that discuss
patents, patent rights and other proprietary rights, to the extent
that they constitute matters of law, summaries of legal matters,
documents or proceedings, or legal conclusions, are accurate and
complete statements or summaries of the matters therein set forth.
(2) other than as described in the Prospectus and the
Registration Statement, such counsel is not aware of any patent,
patent right or other proprietary right of others which would prevent
the conduct of the business of the Company now being or currently
proposed to be conducted by the Company as described in the
Prospectus; and such counsel is not aware of any rights of third
parties to, or any infringement by third parties of, any of the
Company's patents, patent rights or other proprietary rights.
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(3) to such counsel's knowledge, there is no pending or
threatened action, suit, proceeding or claim by others, either
domestically or internationally, that the Company is violating any
patents, patent rights, rights thereto or other proprietary rights of
others; or otherwise challenging the validity or scope of any such
patents, patent rights, rights, patent rights and other proprietary
rights thereto of others or other proprietary rights.
In addition, such counsel shall state that, although they have not verified
the accuracy or completeness of the statements contained in the Registration
Statement or the Prospectus, nothing has come to the attention of such counsel
that caused them to believe that, at the time the Registration Statement became
effective the description of the Company's patents, patent rights and other
proprietary rights matters and the statements made under the captions "Risk
Factors--We May Face Intellectual Property Infringement Claims" and
"Business--Patents and Intellectual Property" in the Registration Statement and
Prospectus contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading, or at the Closing Date or the Option Closing
Date, as the case may be, the description of the patent, patent rights and other
proprietary rights, situation of the Company and the statements made under the
captions "Risk Factors--We May Face Intellectual Property Infringement Claims"
and "Business--Patents and Intellectual Property" in the Registration Statement
and Prospectus contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(iv) Such opinion or opinions of Katten Muchin & Zavis, counsel
for the Underwriters, dated the First Closing Date or the Second Closing
Date, as the case may be, with respect to the incorporation of the Company,
the validity of the Shares, the Registration Statement and the Prospectus
and other related matters as you may reasonably require, and the Company
shall have furnished to such counsel such documents and shall have
exhibited to them such papers and records as they request for the purpose
of enabling them to pass upon such matters.
(v) A certificate of the chief executive officer and the
principal financial officer of the Company, dated the First Closing Date or
the Second Closing Date, as the case may be, to the effect that:
(1) the representations and warranties of the Company set
forth in Section 2 of this Agreement are true and correct as of the
date of this Agreement and as of the First Closing Date or the Second
Closing Date, as the case may be, and the Company has complied with
all the agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to such Closing Date; and
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(2) the Commission has not issued an order preventing or
suspending the use of the Prospectus or any preliminary prospectus
filed as a part of the Registration Statement or any amendment
thereto; no stop order suspending the effectiveness of the
Registration Statement has been issued; and to the best knowledge of
the respective signers, no proceedings for that purpose have been
instituted or are pending or contemplated under the 1933 Act.
The delivery of the certificate provided for in this subparagraph shall be
and constitute a representation and warranty of the Company as to the facts
required in the immediately foregoing clauses (1) and (2) of this subparagraph
to be set forth in said certificate.
(vi) At the time the Pricing Agreement is executed and also on
the First Closing Date or the Second Closing Date, as the case may be,
there shall be delivered to you a letter addressed to you, as
Representatives of the Underwriters, from Ernst & Young LLP, independent
accountants, the first one to be dated the date of the Pricing Agreement,
the second one to be dated the First Closing Date and the third one (in the
event of a second closing) to be dated the Second Closing Date, to the
effect set forth in Schedule C. There shall not have been any change or
decrease specified in the letters referred to in this subparagraph which
makes it impractical or inadvisable in the judgment of the Representatives
to proceed with the public offering or purchase of the Shares as
contemplated hereby.
(vii) Such further certificates and documents as you may
reasonably request.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are satisfactory to you and
to Katten Muchin & Zavis, counsel for the Underwriters, which approval shall not
be unreasonably withheld. The Company shall furnish you with such manually
signed or conformed copies of such opinions, certificates, letters and documents
as you request.
If any condition to the Underwriters' obligations hereunder to be satisfied
prior to or at the First Closing Date is not so satisfied, this Agreement at
your election will terminate upon notification to the Company without liability
on the part of any Underwriter or the Company, except for the expenses to be
paid or reimbursed by the Company pursuant to Sections 5 and 7 hereof and except
to the extent provided in Section 9 hereof.
7. Reimbursement of Underwriters' Expenses. If the sale to the
Underwriters of the Shares on the First Closing Date is not consummated because
any condition of the Underwriters' obligations hereunder is not satisfied or
because of any refusal, inability or failure on the part of the Company to
perform any agreement herein or to comply with any provision hereof, unless such
failure to satisfy such condition or to comply with any provision hereof is due
to the default or omission of any Underwriter, the Company agrees to reimburse
you and the other Underwriters
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upon demand for all out-of-pocket expenses (including reasonable fees and
disbursements of counsel) that shall have been reasonably incurred by you and
them in connection with the proposed purchase and the sale of the Shares. Any
such termination shall be without liability of any party to any other party
except that the provisions of this Section 7, Section 5 and Section 9 shall at
all times be effective and shall apply.
8. Effectiveness of Registration Statement. You and the Company will use
your and its best efforts to cause the Registration Statement to become
effective, if it has not yet become effective, and to prevent the issuance of
any stop order suspending the effectiveness of the Registration Statement and,
if such stop order be issued, to obtain as soon as possible the lifting thereof.
9. Indemnification. (a) The Company agrees to indemnify and hold
harmless each Underwriter, its partners, its directors, its officers and each
person, if any, who controls any Underwriter within the meaning of the 1933 Act
or the Exchange Act against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter or such controlling person may become subject
under the 1933 Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise (including in settlement of any
litigation if such settlement is effected with the written consent of the
Company, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration Statement,
including the information deemed to be part of the Registration Statement at the
time of effectiveness pursuant to Rule 430A and/or Rule 434, if applicable, any
preliminary prospectus, the Prospectus, or any amendment or supplement thereto,
or arise out of or are based upon 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; and will reimburse each Underwriter and each
such controlling person for any legal or other expenses reasonably incurred by
such Underwriter or such controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any such case to the extent that (i) any
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
the Registration Statement, any preliminary prospectus, the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Underwriter through
the Representatives, specifically for use therein; or (ii) if such statement or
omission was contained or made in any preliminary prospectus and corrected in
the Prospectus and (1) any such loss, claim, damage or liability suffered or
incurred by any Underwriter (or any person who controls any Underwriter)
resulted from an action, claim or suit by any person who purchased Shares which
are the subject thereof from such Underwriter in the offering and (2) such
Underwriter failed to deliver or provide a copy of the Prospectus to such person
at or prior to the confirmation of the sale of such Shares in any case where
such delivery is required by the 1933 Act. In addition to its other obligations
under this Section 9(a), the Company agrees that, as an interim measure during
the pendency of any claim, action, investigation, inquiry or other proceeding
arising out of or based upon any statement or omission,
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or any alleged statement or omission, described in this Section 9(a), it will
reimburse the Underwriters on a monthly basis for all reasonable legal and other
expenses incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the absence
of a judicial determination as to the propriety and enforceability of the
Company's obligation to reimburse the Underwriters for such expenses and the
possibility that such payments might later be held to have been improper by a
court of competent jurisdiction. This indemnity agreement will be in addition to
any liability which the Company may otherwise have.
(b) Each Underwriter will severally and not jointly indemnify and hold
harmless the Company, each of its directors, each of its officers who signed the
Registration Statement and each person, if any, who controls the Company within
the meaning of the 1933 Act or the Exchange Act, against any losses, claims,
damages or liabilities to which the Company, or any such director, officer or
controlling person may become subject under the 1933 Act, the Exchange Act or
other federal or state statutory law or regulation, at common law or otherwise
(including in settlement of any litigation, if such settlement is effected with
the written consent of such Underwriter), insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue or alleged untrue statement of any material fact contained in
the Registration Statement, any preliminary prospectus, the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon 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, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in the Registration
Statement, any preliminary prospectus, the Prospectus, or any amendment or
supplement thereto in reliance upon and in conformity with any written
information furnished to the Company by such Underwriter through the
Representatives specifically for use in the preparation thereof; and will
reimburse any legal or other expenses reasonably incurred by the Company, or any
such director, officer or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action. In addition to
their other obligations under this Section 9(b), the Underwriters agree that, as
an interim measure during the pendency of any claim, action, investigation,
inquiry or other proceeding arising out of or based upon any statement or
omission, or any alleged statement or omission, described in this Section 9(b),
they will reimburse the Company on a monthly basis for all reasonable legal and
other expenses incurred in connection with investigating or defending any such
claim, action, investigation, inquiry or other proceeding, notwithstanding the
absence of a judicial determination as to the propriety and enforceability of
the Underwriters' obligation to reimburse the Company for such expenses and the
possibility that such payments might later be held to have been improper by a
court of competent jurisdiction. This indemnity agreement will be in addition
to any liability which such Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section 9 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under this
Section 9, notify the indemnifying party of the commencement thereof; but the
omission to so notify the indemnifying party will not relieve it
23
<PAGE>
from any liability which it may have to any indemnified party except to the
extent that the indemnifying party was prejudiced by such failure to notify. In
case any such action is brought against any indemnified party, and it notifies
an indemnifying party of the commencement thereof, the indemnifying party will
be entitled to participate in, and, to the extent that it may wish, jointly with
all other indemnifying parties similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party; provided, however,
if the defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, or the indemnified and indemnifying parties may have
conflicting interests which would make it inappropriate for the same counsel to
represent both of them, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defense and otherwise to
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of its election so to assume the defense of such action and approval by
the indemnified party of counsel, the indemnifying party will not be liable to
such indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed such counsel in
connection with the assumption of legal defense in accordance with the proviso
to the immediately preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel, approved by the Representatives in the case of paragraph (a)
representing all indemnified parties not having different or additional defenses
or potential conflicting interests among themselves who are parties to such
action), (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of commencement of the action or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability arising out
of such proceeding.
(d) If the indemnification provided for in this Section 9 is unavailable
to an indemnified party under paragraphs (a) or (b) hereof in respect of any
losses, claims, damages or liabilities referred to therein, then each applicable
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Underwriters from the offering of the Shares or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company and the Underwriters in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The respective relative benefits received by the
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Company and the Underwriters shall be deemed to be in the same proportion in the
case of the Company as the total price paid to the Company for the Shares by the
Underwriters (net of underwriting discount but before deducting expenses), and
in the case of the Underwriters as the underwriting discount received by them
bears to the total of such amounts paid to the Company and received by the
Underwriters as underwriting discount in each case as contemplated by the
Prospectus. The relative fault of the Company and the Underwriters 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 Company or by the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The amount paid or payable by a
party as a result of the losses, claims, damages and liabilities referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 9, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to this
Section are several in proportion to their respective underwriting commitments
and not joint.
(e) The provisions of this Section shall survive any termination of this
Agreement.
10. Default of Underwriters. It shall be a condition to the agreement and
obligation of the Company to sell and deliver the Shares hereunder, and of each
Underwriter to purchase the Shares hereunder, that, except as hereinafter
provided in this Section 10, each of the Underwriters shall purchase and pay for
all Shares agreed to be purchased by such Underwriter hereunder upon tender to
the Representatives of all such Shares in accordance with the terms hereof. If
any Underwriter or Underwriters default in their obligations to purchase Shares
hereunder on the First Closing Date and the aggregate number of Shares which
such defaulting Underwriter or Underwriters agreed but failed to purchase does
not exceed 10 percent of the total number of Shares which the Underwriters are
obligated to purchase on the First Closing Date, the Representatives may make
arrangements satisfactory to the Company for the purchase of such Shares by
other persons, including any of the Underwriters, but if no such arrangements
are made by such date the nondefaulting Underwriters shall be obligated
severally, in proportion to their respective commitments hereunder, to purchase
the Shares which such defaulting Underwriters agreed but failed to purchase on
such date. If any Underwriter or Underwriters so default and the
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aggregate number of Shares with respect to which such default or defaults occur
is more than the above percentage and arrangements satisfactory to the
Representatives and the Company for the purchase of such Shares by other persons
are not made within 36 hours after such default, this Agreement will terminate
without liability on the part of any nondefaulting Underwriter or the Company,
except for the expenses to be paid by the Company pursuant to Section 5 hereof
and except to the extent provided in Section 9 hereof.
In the event that Shares to which a default relates are to be purchased by
the nondefaulting Underwriters or by another party or parties, the
Representatives or the Company shall have the right to postpone the First
Closing Date for not more than seven business days in order that the necessary
changes in the Registration Statement, Prospectus and any other documents, as
well as any other arrangements, may be effected. As used in this Agreement, the
term "Underwriter" includes any person substituted for an Underwriter under this
Section. Nothing herein will relieve a defaulting Underwriter from liability
for its default.
11. Effective Date. This Agreement shall become effective immediately as
to Sections 5, 7, 9 and 12 and as to all other provisions at 10:00 A.M., Chicago
Time, on the day following the date upon which the Pricing Agreement is executed
and delivered, unless such a day is a Saturday, Sunday or holiday (and in that
event this Agreement shall become effective at such hour on the business day
next succeeding such Saturday, Sunday or holiday); but this Agreement shall
nevertheless become effective at such earlier time after the Pricing Agreement
is executed and delivered as you may determine on and by notice to the Company
or by release of any Shares for sale to the public. For the purposes of this
Section, the Shares shall be deemed to have been so released upon the release
for publication of any newspaper advertisement relating to the Shares or upon
the release by you of telegrams (i) advising Underwriters that the Shares are
released for public offering, or (ii) offering the Shares for sale to securities
dealers, whichever may occur first.
12. Termination. Without limiting the right to terminate this Agreement
pursuant to any other provision hereof:
(a) This Agreement may be terminated by the Company by notice to you
or by you by notice to the Company at any time prior to the time this
Agreement shall become effective as to all its provisions, and any such
termination shall be without liability on the part of the Company to any
Underwriter (except for the expenses to be paid or reimbursed pursuant to
Section 5 or Section 7 hereof and except to the extent provided in Section
9 hereof) or of any Underwriter to the Company.
(b) This Agreement may also be terminated by you prior to the First
Closing Date, and the option referred to in Section 3, if exercised, may be
cancelled at any time prior to the Second Closing Date, if (i) trading in
securities on the New York Stock Exchange or the Nasdaq National Market
shall have been suspended or minimum prices shall have been established on
such exchange, or (ii) a banking moratorium shall have been declared by
Illinois, New York, or United States authorities, or (iii) there shall have
been
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any change in financial markets or in political, economic or financial
conditions which, in the opinion of the Representatives, either renders it
impracticable or inadvisable to proceed with the offering and sale of the
Shares on the terms set forth in the Prospectus or materially and adversely
affects the market for the Shares, or (iv) there shall have been an
outbreak of major armed hostilities between the United States and any
foreign power which in the opinion of the Representatives makes it
impractical or inadvisable to offer or sell the Shares. Any termination
pursuant to this paragraph (b) shall be without liability on the part of
any Underwriter to the Company or on the part of the Company to any
Underwriter (except for expenses to be paid or reimbursed pursuant to
Section 5 or Section 7 hereof and except to the extent provided in Section
9 hereof).
13. Representations and Indemnities to Survive Delivery. The respective
indemnities, agreements, representations, warranties and other statements of the
Company, of its officers and of the several Underwriters set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation made by or on behalf of any Underwriter or the Company or any
of its or their partners, principals, members, officers or directors or any
controlling person, as the case may be, and will survive delivery of and payment
for the Shares sold hereunder.
14. Notices. All communications hereunder will be in writing and, if sent
to the Underwriters will be mailed, delivered or telegraphed and confirmed to
you c/o William Blair & Company, L.L.C., 222 West Adams Street, Chicago,
Illinois 60606, with a copy to Katten Muchin & Zavis, 525 West Monroe Street,
Chicago, Illinois 60661, Attention: David J. Kaufman; and if sent to the Company
will be mailed, delivered or telegraphed and confirmed to the Company at its
corporate headquarters with a copy to Dorsey & Whitney LLP, Pillsbury Center
South, 220 South Sixth Street, Minneapolis, Minnesota 55402, Attention: Timothy
S. Hearn.
15. Successors. This Agreement and the Pricing Agreement will inure to the
benefit of and be binding upon the parties hereto and their respective
successors, personal representatives and assigns, and to the benefit of the
officers and directors and controlling persons referred to in Section 9, and no
other person will have any right or obligation hereunder. The term "successors"
shall not include any purchaser of the Shares as such from any of the
Underwriters merely by reason of such purchase.
16. Representation of Underwriters. You will act as Representatives for
the several Underwriters in connection with this financing, and any action under
or in respect of this Agreement taken by you will be binding upon all the
Underwriters.
17. Partial Unenforceability. If any section, paragraph or provision of
this Agreement is for any reason determined to be invalid or unenforceable, such
determination shall not affect the validity or enforceability of any other
section, paragraph or provision hereof.
27
<PAGE>
18. Applicable Law. This Agreement and the Pricing Agreement shall be
governed by and construed in accordance with the laws of the State of Illinois.
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return to us the enclosed duplicates hereof, whereupon it will
become a binding agreement among the Company and the several Underwriters
including you, all in accordance with its terms.
Very truly yours,
VASCULAR SOLUTIONS, INC.
By:____________________________________
Howard C. Root
Chief Executive Officer
The foregoing Agreement is hereby
confirmed and accepted as of the date first
above written.
WILLIAM BLAIR & COMPANY, L.L.C.
DAIN RAUSCHER WESSELS, A DIVISION OF
DAIN RAUSCHER INCORPORATED
STEPHENS INC.
Acting as Representatives of the several
Underwriters named in Schedule A.
By William Blair & Company, L.L.C.
By______________________________________
Principal
28
<PAGE>
Schedule A
<TABLE>
<CAPTION>
Number of Firm Shares
Underwriter to be Purchased
- ----------- ---------
<S> <C>
William Blair & Company, L.L.C. ..................................
Dain Rauscher Wessels.............................................
Stephens Inc...................................................... -----------------
Total =================
</TABLE>
29
<PAGE>
Schedule B
List of Shareholders
Lock-Up Agreements are to be delivered by the following persons and
entities who are shareholders of the Company at the time the Underwriting
Agreement becomes effective:
30
<PAGE>
Schedule C
Comfort Letter of Ernst & Young LLP
[To Come]
31
<PAGE>
Exhibit A
VASCULAR SOLUTIONS, INC.
____________ Shares Common Stock/2/
Pricing Agreement
____________, 1999
William Blair & Company, L.L.C.
Dain Rauscher Wessels, a division
of Dain Rauscher Incorporated
Stephens Inc.
As Representatives of the Several
Underwriters
c/o William Blair & Company, L.L.C.
222 West Adams Street
Chicago, Illinois 60606
Ladies and Gentlemen:
Reference is made to the Underwriting Agreement dated ____________, 1999
(the "Underwriting Agreement") relating to the sale by the Company and the
purchase by the several Underwriters for whom William Blair & Company, L.L.C.,
Dain Rauscher Wessels, a division of Dain Rauscher Incorporated and Stephens
Inc. are acting as representatives (the "Representatives") of the above Shares.
All terms herein shall have the definitions contained in the Underwriting
Agreement except as otherwise defined herein.
Pursuant to Section 3 of the Underwriting Agreement, the Company agrees
with the Representatives as follows:
1. The initial public offering price per share for the Shares shall be
$__________.
2. The purchase price per share for the Shares to be paid by the several
Underwriters shall be $__________, being an amount equal to the initial public
offering price set forth above less $__________ per share.
- ----------------
/2/ Plus an option to acquire up to ____ additional shares to cover
overallotments.
32
<PAGE>
Schedule A is amended as follows:
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return to us the enclosed duplicates hereof, whereupon it will
become a binding agreement among the Company and the several Underwriters,
including you, all in accordance with its terms.
Very truly yours,
VASCULAR SOLUTIONS, INC.
By:___________________________________
Howard C. Root
Chief Executive Officer
The foregoing Agreement is hereby
confirmed and accepted as of the date first
above written.
WILLIAM BLAIR & COMPANY, L.L.C.
DAIN RAUSCHER WESSELS, A DIVISION OF
DAIN RAUSCHER INCORPORATED
STEPHENS INC.
Acting as Representatives of the several
Underwriters named in Schedule A.
By William Blair & Company, L.L.C.
By________________________________
Principal
33
<PAGE>
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
VASCULAR SOLUTIONS, INC.
To form a Minnesota business corporation under and pursuant to the Minnesota
Business Corporation Act, the following articles of incorporation are adopted:
ARTICLE 1. NAME
The name of the corporation is "Vascular Solutions, Inc."
ARTICLE 2. REGISTERED OFFICE
The address of the registered office of the corporation is 127 Third Avenue
North, Minneapolis, MN 55401.
ARTICLE 3. AUTHORIZED SHARES
The aggregate number of authorized shares of capital stock of the corporation is
20,000,000 shares of $.01 par value per share. The shares shall be divisible
into classes and series, have the designations, voting rights, and other rights
and preferences, and be subject to the restrictions, that the board of directors
may from time to time establish, fix, and determine, consistent with these
articles of incorporation. Unless otherwise designated by the board of
directors, all issued shares shall be deemed common stock with equal rights and
preferences.
ARTICLE 4. INCORPORATOR
The name and address of the incorporator, who is a natural person of full age,
is:
NAME ADDRESS
Howard Root 127 Third Avenue North
Minneapolis, MN 55401
ARTICLE 5. CUMULATIVE VOTING
There shall be no cumulative voting by the shareholders of the corporation.
ARTICLE 6. NO PREEMPTIVE RIGHTS
The shareholders of the corporation shall not have preemptive rights to
subscribe for or acquire securities or rights to purchase securities of any
kind, class, or series of the corporation.
ARTICLE 7. BOARD OF DIRECTORS
<PAGE>
The names of the members of the first Board of Directors are:
Howard C. Root
Wendell King
ARTICLE 8. WRITTEN ACTION BY DIRECTORS
An action required or permitted to be taken at a meeting of the Board of
Directors of the corporation may be taken by a written action signed, or
counterparts of a written action signed in the aggregate, by all of the
directors unless the action need not be approved by the shareholders of the
corporation, in which case the action may be taken by a written action signed,
or counterparts of a written action signed in the aggregate, by the number of
directors that would be required to take the same action at a meeting of the
Board of Directors of the corporation at which all of the directors were
present.
ARTICLE 9. DIRECTOR LIABILITY
A dirsctor of this corporation shall not be personally liable to the corporation
or its shareholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of director's duty of loyalty
to the corporation or its shareholders: (ii) for acts of omissions not in good
faith or which involve intentional misconduct or a knowing violation of law:
(iii) under Sections 302A.559 or 80A.23 of the Minnesota Statutes; (iv) for any
transaction from which the director derived an improper personal benefit; or (v)
for any act or omission occurring prior to the date when this Article 9 became
effective.
Any repeal or modification of the foregoing provisions of this Article 9 by the
shareholders of the corporation shall not adversely affect any right or
protection of a director of the corporation existing at the time of such repeal
or modification.
Dated: December 26, 1996 /s/ Howard C. Root
--------------------------------
Howard C. Root
<PAGE>
STATEMENT OF CHANGE
OF
REGISTERED OFFICE
OF
VASCULAR SOLUTIONS, INC.
Vascular Solutions, Inc., a Minnesota corporation, in accordance with section
302A.123 of the Minnesota Business Corporation Act, hereby states that it is
changing its registered office in Minnesota to 2495 Xenium Lane North, Plymouth,
Minnesota 55441 and that such change was authorized by resolution approved by
the affirmative vote of a majority of the directors of the corporation.
Dated: September 2, 1998
/s/ Howard C. Root
- ------------------------
Howard C. Root, CEO
<PAGE>
CERTIFICATE OF DESIGNATION
OF SERIES A PREFERRED STOCK
OF
VASCULAR SOLUTIONS, INC.
The undersigned, being the Chief Executive Officer of Vascular Solutions,
Inc. (the "Corporation"), a corporation organized and existing under the
Minnesota Business Corporation Act, in accordance with the provisions of
Minnesota Statutes, Section 302A.401, Subd. 3(b), does hereby certify that:
Pursuant to the authority vested in the Board of Directors of the
Corporation by the Articles of Incorporation of the Corporation, the Board of
Directors on December 17, 1997, in accordance with Minnesota Statutes, Section
302A.401, Subd. 3, duly adopted the following resolution establishing a series
of Preferred Stock of the Corporation to be designated as its Series A Preferred
Stock.
RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Corporation (the "Board of Directors") by the Articles of Incorporation
of the Corporation, the Board of Directors hereby establishes the Series A
Preferred Stock of the Corporation as follows:
RIGHTS, PREFERENCES, PRIVILEGES AND RESTRICTIONS
OF SERIES A PREFERRED STOCK
The Preferred Stock authorized hereby shall be designated "Series A
--------
Preferred Stock" and shall consist of Two Million (2,000,000) shares. The
- ---------------
rights, preferences, privileges, and restrictions granted to and imposed on the
Series A Preferred Stock are as set forth below.
1. Dividend Provisions. The holders of shares of Series A Preferred Stock
-------------------
shall be entitled to receive dividends, out of any assets legally available
therefor, prior and in preference to any declaration or payment of any dividend
(payable other than in Common Stock or other securities and rights convertible
into or entitling the holder thereof to receive, directly or indirectly,
additional shares of Common Stock of the Corporation) on the Common Stock of the
Corporation, at the rate of $0.20 per share per annum on each outstanding share
of Series A Preferred Stock, payable quarterly when, as and if declared by the
Board of Directors. Such dividends shall not be cumulative.
2. Liquidation
-----------
(a) Series A Preferred Stock. In the event of any liquidation,
------------------------
dissolution or winding up of the Corporation, either voluntary or involuntary,
the holders of the Series A Preferred Stock shall be entitled to receive, prior
and in preference to any distribution of any of the assets of the Corporation to
the holders of Common Stock by reason of their ownership thereof, an amount per
share equal to $2.50 per share for each share of Series A Preferred Stock then
held by them, plus declared but unpaid dividends. If, upon the occurrence of
such event, the assets and funds thus distributed among the holders of the
Series A Preferred Stock shall be insufficient to permit the payment to such
holders of the full aforesaid preferential amounts, then
<PAGE>
the entire assets and funds of the Corporation legally available for
distribution shall be distributed ratably among the holders of the Series A
Preferred Stock in proportion to the preferential amount each such holder is
otherwise entitled to receive.
(b) Common Stock. Upon the completion of the distribution required
------------
by Section 2(a) above, the remaining assets of the Corporation available for
distribution to shareholders shall be distributed among the holders of the
Common Stock pro rata based on the number of shares of Common Stock held by each
until the holders of the Common Stock shall have received an aggregate of (i)
$8,700,000 and (ii) an amount equal to the proceeds to the Company from the
sale of Common Stock pursuant to the Confidential Private Placement Memorandum
dated December 8, 1997 (net of discounts, commissions and expenses).
(c) Remaining Assets. Upon the completion of the distributions
----------------
required by Sections 2(a) and (b) above, the remaining assets of the Corporation
available for distribution to shareholders shall be distributed among the
holders of the Series A Preferred Stock and the Common Stock pro rata based on
the number of shares of Common Stock held by each (assuming conversion of all
such Series A Preferred Stock) until the holders of Series A Preferred Stock
shall have received an aggregate of $5.16 per share (including amounts paid
pursuant to Section 2(a) above); thereafter, if assets remain in the
Corporation, the holders of the Common Stock of this Corporation shall receive
all of the remaining assets pro rata based on the number of shares of Common
Stock held by each.
(d) Certain Acquisitions
--------------------
(i) Deemed Liquidation. For purposes of this Section 2, a
------------------
liquidation, dissolution or winding up of the Corporation shall be deemed to
occur if the Corporation shall sell, convey, or otherwise dispose of or encumber
all or substantially all of its property or business or merge into or
consolidate with any other Corporation (other than a wholly-owned subsidiary
Corporation) or effect any other transaction or series of related transactions
unless, after such sale, merger or other event, the shareholders of the
Corporation immediately prior to such event own a majority of the outstanding
shares of the surviving corporation or the corporation or other entity holding
such property or business.
(ii) Valuation of Consideration. In the event of a deemed
--------------------------
liquidation as described in Section 2(d)(i) above, if the consideration received
by the Corporation is other than cash, its value will be deemed to equal its
fair market value as reasonably determined in good faith by the Board of
Directors; provided, that any securities shall be valued as follows:
(A) Securities not subject to investment letter or
other similar restrictions on free marketability:
(1) If traded on a securities exchange or the
Nasdaq National Market, the value shall be deemed to be the average of the
closing prices of the securities on such exchange over the thirty-day period
ending three (3) days prior to the closing;
(2) If actively traded over-the-counter, the value
shall be deemed to be the average of the closing bid or sale prices (whichever
is applicable) over the thirty-day period ending three (3) days prior to the
closing; and
-5-
<PAGE>
(3) If there is no active public market, the value
shall be the fair market value thereof, as reasonably determined in good faith
by the Board of Directors.
(B) The method of valuation of securities subject to
investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a shareholder's status as an affiliate
or former affiliate) shall be to make an appropriate discount from the market
value determined as above in Section 2(d)(ii)(A) to reflect the approximate fair
market value thereof, as reasonably determined in good faith by the Board of
Directors.
(iii) Notice of Transaction. The Corporation shall give each
---------------------
holder of record of Series A Preferred Stock written notice of such impending
transaction not later than ten (10) days prior to the shareholders' meeting
called to approve such transaction, or ten (10) days prior to the closing of
such transaction, whichever is earlier, and shall also notify such holders in
writing of the final approval of such transaction. The first of such notices
shall describe the material terms and conditions of the impending transaction
and the provisions of this Section 2, and the Corporation shall thereafter give
such holders prompt notice of any material changes. The transaction shall in no
event take place sooner than ten (10) days after the Corporation has given the
first notice provided for herein or sooner than ten (10) days after the
Corporation has given notice of any material changes provided for herein;
provided, however, that such periods may be shortened upon the written consent
of the holders of Series A Preferred Stock that are entitled to such notice
rights and that represent at least a majority of the voting power of all the
outstanding shares of Series A Preferred Stock.
(iv) Effect of Noncompliance. In the event the requirements
-----------------------
of this Section 2(d) are not complied with, the Corporation shall forthwith
either cause the closing of the transaction to be postponed until such
requirements have been complied with, or cancel such transaction, in which event
the rights, preferences and privileges of the holders of the Series A Preferred
Stock shall revert to and be the same as such rights, preferences and privileges
existing immediately prior to the date of the first notice referred to in
Section 2(d)(iii) hereof.
3. Redemption
----------
(a) At any time after December 19, 2002, but within thirty (30)
days (the "Redemption Date") after the receipt by this Corporation of a written
---------------
request from the holders of not less than a majority of the then outstanding
Series A Preferred Stock that all or some of such holders' shares be redeemed,
and concurrently with surrender by such holders of the certificates representing
such shares, this Corporation shall, to the extent it may lawfully do so, redeem
the shares specified in such request by paying in cash therefor a sum per share
equal to $2.50 per share of Series A Preferred Stock (as adjusted for any stock
dividends, combinations or splits with respect to such shares) plus all declared
but unpaid dividends on such shares (the " Redemption Price"). Any redemption
----------------
effected pursuant to this Section 3(a) shall be made on a pro rata basis among
the holders of the Series A Preferred Stock delivering such notice in proportion
to the number of shares of Series A Preferred Stock then held by such holders.
(b) At least fifteen (15) but no more than thirty (30) days prior
to each Redemption Date, written notice shall be mailed, first class postage
prepaid, to each holder of record (at the close of business on the business day
next preceding the day on which notice is given) of the Series A Preferred Stock
to be redeemed, at the address last shown on the records of this
-6-
<PAGE>
Corporation for such holder, notifying such holder of the redemption to be
effected, specifying the number of shares to be redeemed from such holder, the
Redemption Date, the Redemption Price, the place at which payment may be
obtained and calling upon such holder to surrender to this Corporation, in the
manner and at the place designated, his, her or its certificate or certificates
representing the shares to be redeemed (the "Redemption Notice"). Except as
-----------------
provided in subsection (3)(c) on or after the Redemption Date, each holder of
Series A Preferred Stock to be redeemed shall surrender to this Corporation the
certificate or certificates representing such shares, in the manner and at the
place designated in the Redemption Notice, and thereupon the Redemption Price of
such shares shall be payable to the order of the person whose name appears on
such certificate or certificates as the owner thereof and each surrendered
certificate shall be canceled. In the event less than all the shares represented
by any such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.
(c) From and after the Redemption Date, unless there shall have
been a default in payment of the Redemption Price, all rights of the holders of
shares of Series A Preferred Stock designated for redemption in the Redemption
Notice as holders of Series A Preferred Stock (except the right to receive the
Redemption Price without interest upon surrender of their certificate or
certificates) shall cease with respect to such shares, and such shares shall not
thereafter be transferred on the books of this Corporation or be deemed to be
outstanding for any purpose whatsoever. Subject to the rights of series of
Preferred Stock which may from time to time come into existence, if the funds of
the Corporation legally available for redemption of shares of Series A Preferred
Stock on any Redemption Date are insufficient to redeem the total number of
shares of Series A Preferred Stock to be redeemed on such date, those funds
which are legally available will be used to redeem the maximum possible number
of such shares ratably among the holders of such shares to be redeemed based
upon their holdings of Series A Preferred Stock. The shares of Series A
Preferred Stock not redeemed shall remain outstanding and entitled to all the
rights and preferences provided herein. Subject to the rights of series of
Preferred Stock which may from time to time come into existence, at any time
thereafter when additional funds of the Corporation are legally available for
the redemption of shares of Series A Preferred Stock, such funds will
immediately be used to redeem the balance of the shares which the Corporation
has become obliged to redeem on any Redemption Date but which it has not
redeemed.
(d) On or prior to each Redemption Date, this Corporation shall
deposit the Redemption Price of all shares of Series A Preferred Stock
designated for redemption in the Redemption Notice, and not yet redeemed or
converted, with a bank or trust corporation having aggregate capital and surplus
in excess of $100,000,000 as a trust fund for the benefit of the respective
holders of the shares designated for redemption and not yet redeemed, with
irrevocable instructions and authority to the bank or trust corporation to
publish the notice of redemption thereof and pay the Redemption Price for such
shares to their respective holders on or after the Redemption Date, upon receipt
of notification from the Corporation that such holder has surrendered his, her
or its share certificate to the Corporation pursuant to Section (3)(b) above. As
of the date of such deposit (even if prior to the Redemption Date), the deposit
shall constitute full payment of the shares to their holders, and from and after
the date of the deposit the shares so called for redemption shall be redeemed
and shall be deemed to be no longer outstanding, and the holders thereof shall
cease to be shareholders with respect to such shares and shall have no rights
with respect thereto except the rights to receive from the bank or trust
-7-
<PAGE>
corporation payment of the Redemption Price of the shares, without interest,
upon surrender of their certificates therefor, and the right to convert such
shares as provided in Section 4. Such instructions shall also provide that any
moneys deposited by the Corporation pursuant to this Section (3)(d) for the
redemption of shares thereafter converted into shares of the Corporation's
Common Stock pursuant to Section 4 hereof prior to the Redemption Date shall be
returned to the Corporation forthwith upon such conversion. The balance of any
moneys deposited by this Corporation pursuant to this Section (3)(d) remaining
unclaimed at the expiration of two (2) years following the Redemption Date shall
thereafter be returned to this Corporation upon its request expressed in a
resolution of its Board of Directors.
4. Conversion. The holders of the Series A Preferred Stock shall have
----------
conversion rights as follows (the "Conversion Rights"):
-----------------
(a) Right to Convert. Subject to Section 4(c), each share of
----------------
Series A Preferred Stock shall be convertible, at the option of the holder
thereof, at any time after the date of issuance of such share, at the office of
the Corporation or any transfer agent for such stock, into such number of fully
paid and nonassessable shares of Common Stock as is determined by dividing $2.50
by the Conversion Price applicable to such share, determined as hereafter
provided (the "Conversion Price"), in effect on the date the certificate is
surrendered for conversion. The initial Conversion Price per share of Series A
Preferred Stock shall be $2.50. Such initial Conversion Price shall be subject
to adjustment as set forth in Section 4(d). Notwithstanding the foregoing, if a
holder of Series A Preferred Stock does not elect to convert pursuant to this
Section 4(a) prior to any distribution of any of the assets of the Corporation
pursuant to Section 2(a), then such holder of Series A Preferred Stock shall not
be entitled to convert pursuant to this Section 4(a) until after any
distribution of any of the assets of the Corporation required pursuant to
Section 2(b) is completed.
(b) Automatic Conversion. Each share of Series A Preferred Stock
--------------------
shall automatically be converted into shares of Common Stock at the Conversion
Price at the time in effect for such share, except as provided below in Section
4(c), immediately upon the Corporation's sale of its Common Stock in a firm
commitment underwritten public offering pursuant to a registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), the public
--------------
offering price of which is not less than $8.50 per share (as adjusted to reflect
subsequent stock dividends, stock splits or recapitalizations occurring after
the date of issuance of the Series A Preferred Stock and prior to the closing of
such public offering) and which results in an aggregate public offering price of
at least $20,000,000.
(c) Mechanics of Conversion. Before any holder of Series A
-----------------------
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, he shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Corporation or of any transfer agent for the
Series A Preferred Stock, and shall give written notice to the Corporation at
its principal corporate office, of the election to convert the same and shall
state therein the name or names in which the certificate or certificates for
shares of Common Stock are to be issued. The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such holder of
Series A Preferred Stock, or to the nominee or nominees of such holder, a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled as aforesaid. Such conversion shall be deemed to
have been made immediately prior to the close of
-8-
<PAGE>
business on the date of such surrender of the shares of such Series A Preferred
Stock to be converted, and the person or persons entitled to receive the shares
of Common Stock issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such shares of Common Stock as of such date.
If the conversion is in connection with an underwritten offering of securities
registered pursuant to the Securities Act the conversion may, at the option of
any holder tendering such shares of Series A Preferred Stock for conversion, be
conditioned upon the closing with the underwriters of the sale of securities
pursuant to such offering, in which event the person(s) entitled to receive
Common Stock upon conversion of such Series A Preferred Stock shall not be
deemed to have converted such Series A Preferred Stock until immediately prior
to the closing of such sale of securities.
(d) Conversion Price Adjustments of Series A Preferred Stock for
------------------------------------------------------------
Certain Dilutive Issuances, Splits and Combinations. The Conversion Price of
- ---------------------------------------------------
the Series A Preferred Stock shall be subject to adjustment from time to time as
follows:
(i) Issuance of Additional Stock below Purchase Price. If
-------------------------------------------------
the Corporation shall issue, after the date upon which the shares of Series A
Preferred Stock were first issued (the "Purchase Date"), any Additional Stock
-------------
(as defined below) without consideration or for a consideration per share less
than the Conversion Price for such series in effect immediately prior to the
issuance of such Additional Stock, the Conversion Price for such series in
effect immediately prior to each such issuance shall automatically be adjusted
as set forth in this Section 4(d)(i), unless otherwise provided in this Section
4(d)(i).
(A) Adjustment Formula. Whenever the Conversion
------------------
Price is adjusted pursuant to this Section 4(d)(i), the new Conversion Price
shall be a price equal to the quotient obtained by dividing the total computed
under clause (x) below by the total computed under clause (y) below as follows:
(x) an amount equal to the sum of
(1) the aggregate purchase price of the
shares of Series A Preferred Stock issued on the Purchase Date (the "Series A
--------
Purchase Price") (i.e., $5,000,000), plus
- --------------
(2) the aggregate consideration, if any,
received by the Corporation for all Additional Stock issued on or after the
Purchase Date;
(y) an amount equal to the sum of:
(1) the Series A Purchase Price for such
series divided by the initial Conversion Price (or such higher or lower
Conversion Price as results from the application of Sections 4(d)(ii) and (iii)
hereof), plus
(2) the number of shares of Additional Stock
issued on or after the Purchase Date (as adjusted pursuant to Sections 4(d)(ii)
and (iii) hereof, if applicable).
(B) Definition of "Additional Stock". For purposes
--------------------------------
of this Section 4(d)(i), "Additional Stock" shall mean any shares of Common
----------------
Stock issued (or deemed
-9-
<PAGE>
to have been issued pursuant to Section 4(d)(i)(E)) by the Corporation after the
Purchase Date) other than
(1) Common Stock issued pursuant to a
transaction described in Section 4(d)(ii) hereof,
(2) Shares of Common Stock issuable or
issued to employees, consultants or directors of the Corporation directly or
pursuant to a stock option plan, stock purchase plan or other stock plan
approved by the Board of Directors of the Corporation,
(3) Capital stock, or options or warrants to
purchase capital stock, issued to financial institutions or lessors in
connection with commercial credit arrangements, equipment financings or similar
transactions approved by the Board of Directors of the Corporation,
(4) Shares of Common Stock or Preferred
Stock issuable upon exercise of warrants outstanding as of the Purchase Date,
(5) Capital stock or warrants or options to
purchase capital stock issued in connection with bona fide acquisitions, mergers
or similar transactions, the terms of which are approved by the Board of
Directors of the Corporation,
(6) Shares of Common Stock issued or
issuable upon conversion of the Series A Preferred Stock, and
(7) Shares of Common Stock issued or
issuable in a public offering prior to or in connection with which all
outstanding shares of Series A Preferred Stock will be converted to Common
Stock.
(C) No Fractional Adjustments. No adjustment of the
-------------------------
Conversion Price for the Series A Preferred Stock shall be made in an amount
less than one cent per share, provided that any adjustments which are not
required to be made by reason of this sentence shall be carried forward and
shall be either taken into account in any subsequent adjustment made prior to
three years from the date of the event giving rise to the adjustment being
carried forward, or shall be made at the end of three years from the date of the
event giving rise to the adjustment being carried forward.
(D) Determination of Consideration. In the case of
------------------------------
the issuance of Common Stock for cash, the consideration shall be deemed to be
the amount of cash paid therefor before deducting any reasonable discounts,
commissions or other expenses allowed, paid or incurred by the Corporation for
any underwriting or otherwise in connection with the issuance and sale thereof.
In the case of the issuance of the Common Stock for a consideration in whole or
in part other than cash, the consideration other than cash shall be deemed to be
the fair value thereof as determined by the Board of Directors irrespective of
any accounting treatment.
(E) Deemed Issuances of Common Stock. In the case of
--------------------------------
the issuance (whether before, on or after the applicable Purchase Date) of
options to purchase or rights to subscribe for Common Stock, securities by their
terms convertible into or exchangeable for Common Stock or options to purchase
or rights to subscribe for such convertible or
-10-
<PAGE>
exchangeable securities, the following provisions shall apply for all purposes
of this Section 4(d)(i):
(1) The aggregate maximum number of shares of
Common Stock deliverable upon exercise (assuming the satisfaction of any
conditions to exercisability, including without limitation, the passage of time,
but without taking into account potential antidilution adjustments) of such
options to purchase or rights to subscribe for Common Stock shall be deemed to
have been issued at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the manner provided in
Section 4(d)(i)(D)), if any, received by the Corporation upon the issuance of
such options or rights plus the minimum exercise price provided in such options
or rights (without taking into account potential antidilution adjustments) for
the Common Stock covered thereby.
(2) The aggregate maximum number of shares of
Common Stock deliverable upon conversion of or in exchange (assuming the
satisfaction of any conditions to convertibility or exchangeability, including,
without limitation, the passage of time, but without taking into account
potential antidilution adjustments) for any such convertible or exchangeable
securities or upon the exercise of options to purchase or rights to subscribe
for such convertible or exchangeable securities and subsequent conversion or
exchange thereof shall be deemed to have been issued at the time such securities
were issued or such options or rights were issued and for a consideration equal
to the consideration, if any, received by the Corporation for any such
securities and related options or rights (excluding any cash received on account
of accrued interest or accrued dividends), plus the minimum additional
consideration, if any, to be received by the Corporation (without taking into
account potential antidilution adjustments) upon the conversion or exchange of
such securities or the exercise of any related options or rights (the
consideration in each case to be determined in the manner provided in Section
4(d)(i)(D).
(3) In the event of any change in the number of
shares of Common Stock deliverable or in the consideration payable to the
Corporation upon exercise of such options or rights or upon conversion of or in
exchange for such convertible or exchangeable securities, including, but not
limited to, a change resulting from the antidilution provisions thereof, the
Conversion Price of the Series A Preferred Stock, to the extent in any way
affected by or computed using such options, rights or securities, shall be
recomputed to reflect such change, but no further adjustment shall be made for
the actual issuance of Common Stock or any payment of such consideration upon
the exercise of any such options or rights or the conversion or exchange of such
securities.
(4) Upon the expiration of any such options or
rights, the termination of any such rights to convert or exchange or the
expiration of any options or rights related to such convertible or exchangeable
securities, the Conversion Price of the Series A Preferred Stock, to the extent
in any way affected by or computed using such options, rights or securities or
options or rights related to such securities, shall be recomputed to reflect the
issuance of only the number of shares of Common Stock (and convertible or
exchangeable securities which remain in effect) actually issued upon the
exercise of such options or rights, upon the conversion or exchange of such
securities or upon the exercise of the options or rights related to such
securities.
-11-
<PAGE>
(5) The number of shares of Common Stock deemed
issued and the consideration deemed paid therefor pursuant to Sections
4(d)(i)(E)(1) and 4(d)(i)(E)(2) shall be appropriately adjusted to reflect any
change, termination or expiration of the type described in either Section
4(d)(i)(E)(3) or 4(d)(i)(E)(4).
(F) No Increased Conversion Price. Notwithstanding any
-----------------------------
other provisions of this Section (4)(d)(i), except to the limited extent
provided for in Sections 4(d)(i)(E)(3) and 4(d)(i)(E)(4), no adjustment of the
Conversion Price pursuant to this Section 4(d)(i) shall have the effect of
increasing the Conversion Price above the Conversion Price in effect immediately
prior to such adjustment.
(ii) Stock Splits and Dividends. In the event the
--------------------------
Corporation should at any time or from time to time after the Purchase Date fix
a record date for the effectuation of a split or subdivision of the outstanding
shares of Common Stock or the determination of holders of Common Stock entitled
to receive a dividend or other distribution payable in additional shares of
Common Stock or other securities or rights convertible into, or entitling the
holder thereof to receive directly or indirectly, additional shares of Common
Stock (hereinafter referred to as "Common Stock Equivalents") without payment of
------------------------
any consideration by such holder for the additional shares of Common Stock or
the Common Stock Equivalents (including the additional shares of Common Stock
issuable upon conversion or exercise thereof), then, as of such record date (or
the date of such dividend distribution, split or subdivision if no record date
is fixed), the Conversion Price of the Series A Preferred Stock shall be
appropriately decreased so that the number of shares of Common Stock issuable on
conversion of each share of such Series shall be increased in proportion to such
increase of the aggregate of shares of Common Stock outstanding and those
issuable with respect to such Common Stock Equivalents with the number of shares
issuable with respect to Common Stock Equivalents determined from time to time
in the manner provided for deemed issuances in Section 4(d)(i)(E).
(iii) Reverse Stock Splits. If the number of shares of Common
--------------------
Stock outstanding at any time after the Purchase Date is decreased by a
combination of the outstanding shares of Common Stock, then, following the
record date of such combination, the Conversion Price for the Series A Preferred
Stock shall be appropriately increased so that the number of shares of Common
Stock issuable on conversion of each share of such Series shall be decreased in
proportion to such decrease in outstanding shares.
(e) Other Distributions. In the event the Corporation shall
-------------------
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by the Corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in Section 4(d)(ii), then, in
each such case for the purpose of this Section 4(e), the holders of Series A
Preferred Stock shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of Common
Stock of the Corporation into which their shares of Series A Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the Corporation entitled to receive such distribution.
(f) Recapitalizations. If at any time or from time to time there
-----------------
shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 4 or Section 2) provision shall be made
-12-
<PAGE>
so that the holders of the Series A Preferred Stock shall thereafter be entitled
to receive upon conversion of the Series A Preferred Stock the number of shares
of stock or other securities or property of the Corporation or otherwise, to
which a holder of Common Stock deliverable upon conversion would have been
entitled on such recapitalization. In any such case, appropriate adjustment
shall be made in the application of the provisions of this Section 4 with
respect to the rights of the holders of the Series A Preferred Stock after the
recapitalization to the end that the provisions of this Section 4 (including
adjustment of the Conversion Price then in effect and the number of shares
purchasable upon conversion of the Series A Preferred Stock) shall be applicable
after that event and be as nearly equivalent as practicable.
(g) No Impairment. The Corporation will not, by amendment of its
-------------
Articles of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 4 and in the taking of all such action as may
be necessary or appropriate in order to protect the Conversion Rights of the
holders of Series A Preferred Stock against impairment.
(h) No Fractional Shares and Certificate as to Adjustments
------------------------------------------------------
(i) No fractional shares shall be issued upon the
conversion of any share or shares of the Series A Preferred Stock, and the
number of shares of Common Stock to be issued shall be rounded to the nearest
whole share. The number of shares issuable upon such conversion shall be
determined on the basis of the total number of shares of Series A Preferred
Stock the holder is at the time converting into Common Stock and the number of
shares of Common Stock issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or
readjustment of the Conversion Price of Series A Preferred Stock pursuant to
this Section 4, the Corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of such Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Series A Preferred Stock, furnish or cause
to be furnished to such holder a like certificate setting forth (A) such
adjustment and readjustment, (B) the Conversion Price for the Series A Preferred
Stock at the time in effect, and (C) the number of shares of Common Stock and
the amount, if any, of other property which at the time would be received upon
the conversion of a share of the Series A Preferred Stock.
(i) Notices of Record Date. In the event of any taking by the
----------------------
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of Series A Preferred Stock, at least ten (10) days
prior to the date specified therein, a notice specifying the date on which any
such record is to be taken for the purpose of such dividend, distribution or
right, and the amount and character of such dividend, distribution or right.
-13-
<PAGE>
(j) Reservation of Stock Issuable Upon Conversion. The
---------------------------------------------
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series A Preferred Stock, such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of Series A Preferred Stock; and if at any
time the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of Series A
Preferred Stock, in addition to such other remedies as shall be available to the
holders of Series A Preferred Stock, the Corporation will take such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purposes, including, without limitation, engaging in best
efforts to obtain the requisite shareholder approval of any necessary amendment
to the Articles of Incorporation.
(k) Notices. Any notice required by the provisions of this
-------
Section 4 to be given to the holders of shares of Series A Preferred Stock shall
be deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of the
Corporation.
5. Voting Rights. The holder of each share of Series A Preferred Stock
-------------
shall have the right to one vote for each share of Common Stock into which the
Series A Preferred Stock could then be converted, and with respect to such vote,
such holder shall have full voting rights and powers equal to the voting rights
and powers of the holders of Common Stock, and shall be entitled,
notwithstanding any provision hereof, to notice of any shareholders' meeting in
accordance with the bylaws of the Corporation, and shall be entitled to vote,
together with holders of Common Stock, with respect to any question upon which
holders of Common Stock have the right to vote. Fractional votes shall not,
however, be permitted and any fractional voting rights available on an as-
converted basis (after aggregating all shares into which shares of Series A
Preferred Stock held by each holder could be converted) shall be rounded to the
nearest whole number (with one-half being rounded upward).
6. Protective Provisions. So long as any shares of Series A Preferred
---------------------
Stock are outstanding, the Corporation shall not without first obtaining the
approval (by vote or written consent, as provided by law) of the holders of at
least two-thirds of the then outstanding shares of Series A Preferred Stock,
voting together as a class:
(a) effect a transaction described in Section 2(d)(i) above;
(b) alter or change the rights, preferences or privileges of the
shares of Series A Preferred Stock so as to affect adversely the shares of such
series;
(c) amend the Corporation's Articles of Incorporation or Bylaws
or change the authorized number of directors of the Corporation;
(d) authorize or issue, or obligate itself to issue, any other
equity security, including any other security convertible into or exercisable
for any equity security, having a preference over, or being on a parity with,
the Series A Preferred Stock with respect to preference, redemption or
dividends;
-14-
<PAGE>
(e) issue, or obligate itself to issue, any equity security, or
any security convertible into or exercisable for any equity security, if, after
such issuance, the Company would have outstanding more than 9,400,000 equity
securities (assuming for this purpose the issuance of all securities reserved
for issuance under stock option plans, stock purchase plans and other stock
plans approved by the Board of Directors of the Company, and exercise of all
then outstanding rights to acquire equity securities).
(f) redeem, purchase or otherwise acquire (or pay into or set
funds aside for a sinking fund for such purpose) any share or shares of
Preferred Stock or Common Stock; provided, however, that this restriction shall
-------- -------
not apply to the redemption of Series A Preferred Stock pursuant to Article 3
hereof; or
(g) declare or pay any dividends or other distributions on
outstanding capital stock of the Corporation.
7. Status of Redeemed or Converted Stock. In the event any shares of
-------------------------------------
Series A Preferred Stock shall be redeemed pursuant to Section 3 hereof or
converted pursuant to Section 4 hereof, the shares so redeemed or converted
shall be canceled and shall not be issuable by the Corporation. Upon redemption
pursuant to Section 3 hereof or conversion pursuant to Section 4 hereof of all
outstanding shares of Series A Preferred Stock, all provisions of this
Certificate of Designation shall cease to be of further effect. Upon the
occurrence of such event, the Board of Directors shall have the power, pursuant
to Minnesota Statutes, Section 302A.135, Subd. 5 or any successor provision and
without shareholder action, to cause restated articles of incorporation of the
Corporation or other appropriate documents to be prepared and filed with the
Secretary of State of the State of Minnesota which reflect the removal of all
provisions relating to the Series A Preferred Stock and the cancellation of this
Certificate of Designation.
8. Par Value; No Cumulative Voting; No Preemptive Rights. The Series A
-----------------------------------------------------
Preferred Stock shall have a par value of $0.01 per share. Holders of Series A
Preferred Stock shall not be entitled to cumulate their votes in any election of
directors in which they are entitled to vote and shall not be entitled to any
preemptive rights under the Corporation's Articles of Incorporation to acquire
shares of any class of series of capital stock of the Corporation.
-15-
<PAGE>
IN WITNESS WHEREOF, Vascular Solutions, Inc. has caused this certificate to
be executed by its Chief Executive Officer this 18/th/ day of December, 1997.
VASCULAR SOLUTIONS, INC.
By: /s/ Howard Root
----------------------------------------
Howard Root
Chief Executive Officer
-16-
<PAGE>
CERTIFICATE OF DESIGNATION
OF SERIES B PREFERRED STOCK
OF
VASCULAR SOLUTIONS, INC.
The undersigned, being the Chief Executive Officer of Vascular Solutions,
Inc. (the "Corporation"), a corporation organized and existing under the
Minnesota Business Corporation Act, in accordance with the provisions of
Minnesota Statutes, Section 302A.401, Subd. 3(b), does hereby certify that:
Pursuant to the authority vested in the Board of Directors of the
Corporation by the Articles of Incorporation of the Corporation, the Board of
Directors on December 8, 1998, in accordance with Minnesota Statutes, Section
302A.401, Subd. 3, duly adopted the following resolution establishing a series
of Preferred Stock of the Corporation to be designated as its Series B Preferred
Stock.
RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Corporation (the "Board of Directors") by the Articles of Incorporation
of the Corporation, the Board of Directors hereby establishes the Series B
Preferred Stock of the Corporation as follows:
RIGHTS, PREFERENCES, PRIVILEGES AND RESTRICTIONS
OF SERIES B PREFERRED STOCK
The Preferred Stock authorized hereby shall be designated "Series B
--------
Preferred Stock" and shall consist of One Million Seven Hundred and Seventy-
- ---------------
Seven Thousand Seven Hundred Seventy-Seven (1,777,777) shares. The rights,
preferences, privileges, and restrictions granted to and imposed on the Series B
Preferred Stock are as set forth below.
1. Dividend Provisions. The holders of shares of Series B Preferred
-------------------
Stock shall be entitled to receive dividends, out of any assets legally
available therefor, prior and in preference to any declaration or payment of any
dividend (payable other than in Common Stock or other securities and rights
convertible into or entitling the holder thereof to receive, directly or
indirectly, additional shares of Common Stock of the Corporation) on the Series
A Preferred Stock or the Common Stock of the Corporation, at the rate of $0.36
per share per annum on each outstanding share of Series B Preferred Stock,
payable quarterly, when, as and if declared by the Board of Directors in its
sole and absolute discretion. Such dividends shall be cumulative, shall be paid
upon a liquidation, dissolution or winding-up of the Corporation as set forth in
Section 2 hereof and shall expire upon conversion of the Series B Preferred
Stock as set forth in Section 4 hereof.
2. Liquidation
-----------
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<PAGE>
(a) Series B Preferred Stock. In the event of any liquidation,
------------------------
dissolution or winding up of the Corporation, either voluntary or involuntary,
the holders of the Series B Preferred Stock shall be entitled to receive, prior
and in preference to any distribution of any of the assets of the Corporation to
the holders of the Series A Preferred Stock or the Common Stock by reason of
their ownership thereof, an amount per share equal to $4.50 per share for each
share of Series B Preferred Stock then held by them, plus unpaid dividends due
thereon (the "Series B Liquidation Preference"). If, upon the occurrence of
such event, the assets and funds thus distributed among the holders of the
Series B Preferred Stock shall be insufficient to permit the payment to such
holders of the full Series B Liquidation Preference on each share held by them,
then the entire assets and funds of the Corporation legally available for
distribution shall be distributed ratably among the holders of the Series B
Preferred Stock in proportion to the preferential amount each such holder is
otherwise entitled to receive.
(b) Series A Preferred Stock. Upon the completion of the distribution
------------------------
required by Section 2(a) above, the holders of the Series A Preferred Stock
shall be entitled to receive, prior and in preference to any distribution of any
of the remaining assets of the Corporation to the holders of the Series B
Preferred Stock or Common Stock by reason of their ownership thereof, the
amounts described in Section 2(a) of the Certificate of Designation of Series A
Preferred Stock of the Corporation (the "Series A Certificate") as in effect on
the date hereof.
(c) Common Stock. Upon the completion of the distributions required
------------
by Sections 2(a) and (b) above, the holders of the Common Stock shall be
entitled to receive, prior and in preference to any distribution of any of the
remaining assets of the Corporation to the holders of the Series B Preferred
Stock by reason of their ownership thereof, the amounts described in Section
2(b) of the Series A Certificate as in effect on the date hereof.
(d) Remaining Assets. Upon the completion of the distributions
----------------
required by Sections 2(a), (b) and (c) above, the remaining assets of the
Corporation available for distribution to shareholders shall be distributed
among the holders of the Series B Preferred Stock, the Series A Preferred Stock
and the Common Stock pro rata based on the number of shares of Common Stock held
by each (assuming conversion of all such Series A Preferred Stock and Series B
Preferred Stock) until the holders of Series A Preferred Stock shall have
received an aggregate of $5.16 per share (including amounts paid pursuant to
Section 2(b) above and this Section 2(d)); thereafter, the remaining assets of
the Corporation available for distribution to shareholders shall be distributed
among the holders of the Series B Preferred Stock and the Common Stock pro rata
based on the number of shares of Common Stock held by each (assuming conversion
of all such Series B Preferred Stock) until the holders of Series B Preferred
Stock shall have received an aggregate of $9.00 per share (including amounts
paid pursuant to Section 2(a) above and this Section 2(d)); thereafter, if
assets remain in the Corporation, the holders of the Common Stock of this
Corporation shall receive all of the remaining assets pro rata based on the
number of shares of Common Stock held by each.
(e) Certain Acquisitions
--------------------
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<PAGE>
(i) Deemed Liquidation. For purposes of this Section 2, a
------------------
liquidation, dissolution or winding up of the Corporation shall be deemed to
occur if the Corporation shall sell, convey, or otherwise dispose of or encumber
all or substantially all of its property or business or merge into or
consolidate with any other corporation (other than a wholly-owned subsidiary
corporation) or effect any other transaction or series of related transactions
unless, after such sale, merger or other event, the shareholders of the
Corporation immediately prior to such event own a majority of the outstanding
shares of the surviving corporation or the corporation or other entity holding
such property or business.
(ii) Valuation of Consideration. In the event of a deemed
--------------------------
liquidation as described in Section 2(e)(i) above, if the consideration received
by the Corporation is other than cash, its value will be deemed to equal its
fair market value as reasonably determined in good faith by the Board of
Directors; provided, that any securities shall be valued as follows:
(A) Securities not subject to investment letter or other
similar restrictions on free marketability:
(1) If traded on a securities exchange or the Nasdaq
National Market, the value shall be deemed to be the average of the closing
prices of the securities on such exchange over the thirty-day period ending
three (3) days prior to the closing;
(2) If actively traded over-the-counter, the value
shall be deemed to be the average of the closing bid or sale prices (whichever
is applicable) over the thirty-day period ending three (3) days prior to the
closing; and
(3) If there is no active public market, the value
shall be the fair market value thereof, as reasonably determined in good faith
by the Board of Directors.
(B) The method of valuation of securities subject to
investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a shareholder's status as an affiliate
or former affiliate) shall be to make an appropriate discount from the market
value determined as above in Section 2(e)(ii)(A) to reflect the approximate fair
market value thereof, as reasonably determined in good faith by the Board of
Directors.
(iii) Notice of Transaction. The Corporation shall give each
---------------------
holder of record of Series B Preferred Stock written notice of such impending
transaction not later than fourteen (14) days prior to the shareholders' meeting
called to approve such transaction, or fourteen (14) days prior to the closing
of such transaction, whichever is earlier, and shall also notify such holders in
writing of the final approval of such transaction. The first of such notices
shall describe the material terms and conditions of the impending transaction
and the provisions of this Section 2, and the Corporation shall thereafter give
such holders prompt notice of any material changes. The transaction shall in no
event take place sooner than fourteen (14) days after the Corporation has given
the first notice provided for herein or sooner than fourteen (14) days after the
Corporation has given notice of any material changes provided for herein;
provided, however, that such periods may be shortened upon the written consent
of the holders of
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<PAGE>
Series B Preferred Stock that are entitled to such notice rights and that
represent at least a majority of the voting power of all the outstanding shares
of Series B Preferred Stock.
(iv) Effect of Noncompliance. In the event the requirements of
-----------------------
this Section 2(e) are not complied with, the Corporation shall forthwith either
cause the closing of the transaction to be postponed until such requirements
have been complied with, or cancel such transaction, in which event the rights,
preferences and privileges of the holders of the Series B Preferred Stock shall
revert to and be the same as such rights, preferences and privileges existing
immediately prior to the date of the first notice referred to in Section
2(e)(iii) hereof.
3. Redemption
----------
(a) At any time after December 19, 2002, but within thirty (30) days
(the "Redemption Date") after the receipt by this Corporation of a written
---------------
request from the holders of not less than a majority of the then outstanding
Series B Preferred Stock that all or some of such holders' shares be redeemed,
and concurrently with surrender by such holders of the certificates representing
such shares, this Corporation shall, to the extent it may lawfully do so, redeem
the shares specified in such request by paying in cash therefor a sum per share
equal to $4.50 per share of Series B Preferred Stock (as adjusted for any stock
dividends, combinations or splits with respect to such shares) (the "Redemption
----------
Price"). Any redemption effected pursuant to this Section 3(a) shall be made on
- -----
a pro rata basis among the holders of the Series B Preferred Stock delivering
such notice in proportion to the number of shares of Series B Preferred Stock
then held by such holders.
(b) At least fifteen (15) but no more than thirty (30) days prior to
each Redemption Date, written notice shall be mailed, first class postage
prepaid, to each holder of record (at the close of business on the business day
next preceding the day on which notice is given) of the Series B Preferred Stock
to be redeemed, at the address last shown on the records of this Corporation for
such holder, notifying such holder of the redemption to be effected, specifying
the number of shares to be redeemed from such holder, the Redemption Date, the
Redemption Price, the place at which payment may be obtained and calling upon
such holder to surrender to this Corporation, in the manner and at the place
designated, his, her or its certificate or certificates representing the shares
to be redeemed (the "Redemption Notice"). Except as provided in subsection
-----------------
(3)(c) on or after the Redemption Date, each holder of Series B Preferred Stock
to be redeemed shall surrender to this Corporation the certificate or
certificates representing such shares, in the manner and at the place designated
in the Redemption Notice, and thereupon the Redemption Price of such shares
shall be payable to the order of the person whose name appears on such
certificate or certificates as the owner thereof and each surrendered
certificate shall be canceled. In the event less than all the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares.
(c) From and after the Redemption Date, unless there shall have been
a default in payment of the Redemption Price, all rights of the holders of
shares of Series B Preferred Stock designated for redemption in the Redemption
Notice as holders of Series B Preferred Stock (except the right to receive the
Redemption Price without interest upon surrender
-20-
<PAGE>
of their certificate or certificates) shall cease with respect to such shares,
and such shares shall not thereafter be transferred on the books of this
Corporation or be deemed to be outstanding for any purpose whatsoever. Subject
to the rights of series of Preferred Stock which may from time to time come into
existence, but in preference to shares of the Corporation's Series A Preferred
Stock, if the funds of the Corporation legally available for redemption of
shares of Series B Preferred Stock on any Redemption Date are insufficient to
redeem the total number of shares of Series B Preferred Stock to be redeemed on
such date, those funds which are legally available will be used to redeem the
maximum possible number of shares of Series B Preferred Stock ratably among the
holders of such shares to be redeemed based upon their holdings of Series B
Preferred Stock. The shares of Series B Preferred Stock not redeemed shall
remain outstanding and entitled to all the rights and preferences provided
herein. Subject to the rights of series of Preferred Stock which may from time
to time come into existence, but in preference to shares of the Corporation's
Series A Preferred Stock, at any time thereafter when additional funds of the
Corporation are legally available for the redemption of shares of Series B
Preferred Stock, such funds will immediately be used to redeem the balance of
the shares of Series B Preferred Stock which the Corporation has become obliged
to redeem on any Redemption Date but which it has not redeemed.
(d) On or prior to each Redemption Date, this Corporation shall
deposit the Redemption Price of all shares of Series B Preferred Stock
designated for redemption in the Redemption Notice, and not yet redeemed or
converted, with a bank or trust corporation having aggregate capital and surplus
in excess of $100,000,000 as a trust fund for the benefit of the respective
holders of the shares designated for redemption and not yet redeemed, with
irrevocable instructions and authority to the bank or trust corporation to
publish the notice of redemption thereof and pay the Redemption Price for such
shares to their respective holders on or after the Redemption Date, upon receipt
of notification from the Corporation that such holder has surrendered his, her
or its share certificate to the Corporation pursuant to Section (3)(b) above.
As of the date of such deposit (even if prior to the Redemption Date), the
deposit shall constitute full payment of the shares to their holders, and from
and after the date of the deposit the shares so called for redemption shall be
redeemed and shall be deemed to be no longer outstanding, and the holders
thereof shall cease to be shareholders with respect to such shares and shall
have no rights with respect thereto except the rights to receive from the bank
or trust corporation payment of the Redemption Price of the shares, without
interest, upon surrender of their certificates therefor, and the right to
convert such shares as provided in Section 4. Such instructions shall also
provide that any moneys deposited by the Corporation pursuant to this Section
(3)(d) for the redemption of shares thereafter converted into shares of the
Corporation's Common Stock pursuant to Section 4 hereof prior to the Redemption
Date shall be returned to the Corporation forthwith upon such conversion. The
balance of any moneys deposited by this Corporation pursuant to this Section
(3)(d) remaining unclaimed at the expiration of two (2) years following the
Redemption Date shall thereafter be returned to this Corporation upon its
request expressed in a resolution of its Board of Directors.
4. Conversion. The holders of the Series B Preferred Stock shall have
----------
conversion rights as follows (the "Conversion Rights"):
-----------------
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<PAGE>
(a) Right to Convert. Subject to Section 4(c), each share of Series B
----------------
Preferred Stock shall be convertible, at the option of the holder thereof, at
any time after the date of issuance of such share, at the office of the
Corporation or any transfer agent for such stock, into such number of fully paid
and nonassessable shares of Common Stock as is determined by dividing $4.50 by
the Conversion Price applicable to such share, determined as hereafter provided
(the "Conversion Price"), in effect on the date the certificate is surrendered
for conversion. The initial Conversion Price per share of Series B Preferred
Stock shall be $4.50. Such initial Conversion Price shall be subject to
adjustment as set forth in Section 4(d). Notwithstanding the foregoing, if a
holder of Series B Preferred Stock does not elect to convert pursuant to this
Section 4(a) prior to the day prior to the shareholder's meeting relating to any
distribution of any of the assets of the Corporation pursuant to Section 2(a),
then such holder of Series B Preferred Stock shall not be entitled to convert
pursuant to this Section 4(a).
(b) Automatic Conversion. Each share of Series B Preferred Stock
--------------------
shall automatically be converted into shares of Common Stock at the Conversion
Price at the time in effect for such share, except as provided below in Section
4(c), immediately upon the Corporation's sale of its Common Stock in a firm
commitment underwritten public offering pursuant to a registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), the public
--------------
offering price of which is not less than $9.00 per share (as adjusted to reflect
subsequent stock dividends, stock splits or recapitalizations occurring after
the date of issuance of the Series B Preferred Stock and prior to the closing of
such public offering) and which results in an aggregate public offering price of
at least $20,000,000.
(c) Mechanics of Conversion. Before any holder of Series B Preferred
-----------------------
Stock shall be entitled to convert the same into shares of Common Stock, such
holder shall surrender the certificate or certificates therefor, duly endorsed,
at the office of the Corporation or of any transfer agent for the Series B
Preferred Stock, and shall give written notice to the Corporation at its
principal corporate office, of the election to convert the same and shall state
therein the name or names in which the certificate or certificates for shares of
Common Stock are to be issued. The Corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Series B
Preferred Stock, or to the nominee or nominees of such holder, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled as aforesaid. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
shares of such Series B Preferred Stock to be converted, and the person or
persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock as of such date. If the conversion is in connection
with an underwritten offering of securities registered pursuant to the
Securities Act, the conversion may, at the option of any holder tendering such
shares of Series B Preferred Stock for conversion, be conditioned upon the
closing with the underwriters of the sale of securities pursuant to such
offering, in which event the person(s) entitled to receive Common Stock upon
conversion of such Series A Preferred Stock shall not be deemed to have
converted such Series B Preferred Stock until immediately prior to the closing
of such sale of securities.
-22-
<PAGE>
(d) Conversion Price Adjustments of Series B Preferred Stock for
------------------------------------------------------------
Certain Dilutive Issuances, Splits and Combinations. The Conversion Price of
- ---------------------------------------------------
the Series B Preferred Stock shall be subject to adjustment from time to time as
follows:
(i) Issuance of Additional Stock below Purchase Price . If the
--------------------------------------------------
Corporation shall issue, after the date upon which the shares of Series B
Preferred Stock were first issued (the "Purchase Date"), any Additional Stock
-------------
(as defined below) without consideration or for a consideration per share less
than the Conversion Price for such series in effect immediately prior to the
issuance of such Additional Stock, the Conversion Price for such series in
effect immediately prior to each such issuance shall automatically be adjusted
as set forth in this Section 4(d)(i), unless otherwise provided in this Section
4(d)(i).
(A) Adjustment. Whenever the Conversion Price is adjusted
----------
pursuant to this Section 4(d)(i), the new Conversion Price shall be the greater
of $2.50 or the price per share at which such Additional Stock is issued;
provided that, if at the time of such adjustment or as a result of such
adjustment the new Conversion Price shall be $2.50, then thereafter the new
Conversion Price pursuant to this Section 4(d)(i) shall be equal to the then
applicable conversion price of the Series A Preferred Stock under Section
4(d)(i) of the Series A Certificate (notwithstanding any redemption, conversion
or other elimination of the Series A Preferred Stock and not taking into account
the issuance and sale of the Series B Preferred Stock).
(B) Definition of "Additional Stock". For purposes of this
--------------------------------
Section 4(d)(i), "Additional Stock" shall mean any shares of Common Stock issued
----------------
(or deemed to have been issued pursuant to Section 4(d)(i)(E)) by the
Corporation after the Purchase Date) other than:
(1) Common Stock issued pursuant to a transaction
described in Section 4(d)(ii) hereof,
(2) Shares of Common Stock issuable or issued to
employees, consultants or directors of the Corporation directly or pursuant to a
stock option plan, stock purchase plan or other stock plan approved by the Board
of Directors of the Corporation,
(3) Capital stock, or options or warrants to purchase
capital stock, issued to financial institutions or lessors in connection with
commercial credit arrangements, equipment financings or similar transactions
approved by the Board of Directors of the Corporation,
(4) Shares of Common Stock or Preferred Stock issuable
upon exercise of warrants outstanding as of the Purchase Date,
(5) Capital stock or warrants or options to purchase
capital stock issued in connection with bona fide acquisitions, mergers or
similar transactions, the terms of which are approved by the Board of Directors
of the Corporation,
-23-
<PAGE>
(6) Shares of Common Stock issued or issuable upon
conversion of the Corporation's Series A Preferred Stock or Series B Preferred
Stock, and
(7) Shares of Common Stock issued or issuable in a
public offering prior to or in connection with which all outstanding shares of
Series B Preferred Stock will be converted to Common Stock.
(C) No Fractional Adjustments. No adjustment of the
-------------------------
Conversion Price for the Series B Preferred Stock shall be made in an amount
less than one cent per share, provided that any adjustments which are not
required to be made by reason of this sentence shall be carried forward and
shall be either taken into account in any subsequent adjustment made prior to
three years from the date of the event giving rise to the adjustment being
carried forward, or shall be made at the end of three years from the date of the
event giving rise to the adjustment being carried forward.
(D) Determination of Consideration. In the case of the
------------------------------
issuance of Common Stock for cash, the consideration shall be deemed to be the
amount of cash paid therefor before deducting any reasonable discounts,
commissions or other expenses allowed, paid or incurred by the Corporation for
any underwriting or otherwise in connection with the issuance and sale thereof.
In the case of the issuance of the Common Stock for a consideration in whole or
in part other than cash, the consideration other than cash shall be deemed to be
the fair value thereof as determined by the Board of Directors irrespective of
any accounting treatment.
(E) Deemed Issuances of Common Stock. In the case of the
--------------------------------
issuance (whether before, on or after the applicable Purchase Date) of options
to purchase or rights to subscribe for Common Stock, securities by their terms
convertible into or exchangeable for Common Stock or options to purchase or
rights to subscribe for such convertible or exchangeable securities, the
following provisions shall apply for all purposes of this Section 4(d)(i):
(1) The aggregate maximum number of shares of Common
Stock deliverable upon exercise (assuming the satisfaction of any conditions to
exercisability, including without limitation, the passage of time, but without
taking into account potential antidilution adjustments) of such options to
purchase or rights to subscribe for Common Stock shall be deemed to have been
issued at the time such options or rights were issued and for a consideration
equal to the consideration (determined in the manner provided in Section
4(d)(i)(D)), if any, received by the Corporation upon the issuance of such
options or rights plus the minimum exercise price provided in such options or
rights (without taking into account potential antidilution adjustments) for the
Common Stock covered thereby.
(2) The aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange (assuming the satisfaction
of any conditions to convertibility or exchangeability, including, without
limitation, the passage of time, but without taking into account potential
antidilution adjustments) for any such convertible or exchangeable securities or
upon the exercise of options to purchase or rights to subscribe for such
-24-
<PAGE>
convertible or exchangeable securities and subsequent conversion or exchange
thereof shall be deemed to have been issued at the time such securities were
issued or such options or rights were issued and for a consideration equal to
the consideration, if any, received by the Corporation for any such securities
and related options or rights (excluding any cash received on account of accrued
interest or accrued dividends), plus the minimum additional consideration, if
any, to be received by the Corporation (without taking into account potential
antidilution adjustments) upon the conversion or exchange of such securities or
the exercise of any related options or rights (the consideration in each case to
be determined in the manner provided in Section 4(d)(i)(D)).
(3) In the event of any change in the number of shares
of Common Stock deliverable or in the consideration payable to the Corporation
upon exercise of such options or rights or upon conversion of or in exchange for
such convertible or exchangeable securities, including, but not limited to, a
change resulting from the antidilution provisions thereof, the Conversion Price
of the Series B Preferred Stock, to the extent in any way affected by or
computed using such options, rights or securities, shall be recomputed to
reflect such change, but no further adjustment shall be made for the actual
issuance of Common Stock or any payment of such consideration upon the exercise
of any such options or rights or the conversion or exchange of such securities.
(4) Upon the expiration of any such options or rights,
the termination of any such rights to convert or exchange or the expiration of
any options or rights related to such convertible or exchangeable securities,
the Conversion Price of the Series B Preferred Stock, to the extent in any way
affected by or computed using such options, rights or securities or options or
rights related to such securities, shall be recomputed to reflect the issuance
of only the number of shares of Common Stock (and convertible or exchangeable
securities which remain in effect) actually issued upon the exercise of such
options or rights, upon the conversion or exchange of such securities or upon
the exercise of the options or rights related to such securities.
(5) The number of shares of Common Stock deemed issued
and the consideration deemed paid therefor pursuant to Sections 4(d)(i)(E)(1)
and 4(d)(i)(E)(2) shall be appropriately adjusted to reflect any change,
termination or expiration of the type described in either Section 4(d)(i)(E)(3)
or 4(d)(i)(E)(4).
(F) No Increased Conversion Price. Notwithstanding any other
-----------------------------
provisions of this Section (4)(d)(i), except to the limited extent provided for
in Sections 4(d)(i)(E)(3) and 4(d)(i)(E)(4), no adjustment of the Conversion
Price pursuant to this Section 4(d)(i) shall have the effect of increasing the
Conversion Price above the Conversion Price in effect immediately prior to such
adjustment.
(ii) Stock Splits and Dividends. In the event the Corporation should
--------------------------
at any time or from time to time after the Purchase Date fix a record date for
the effectuation of a split or subdivision of the outstanding shares of Common
Stock or the determination of holders of Common Stock entitled to receive a
dividend or other distribution payable in additional shares of Common Stock or
other securities or rights convertible into, or entitling the holder thereof to
-25-
<PAGE>
receive directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "Common Stock Equivalents") without payment of any consideration
------------------------
by such holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record date is fixed),
the Conversion Price of the Series B Preferred Stock shall be appropriately
decreased so that the number of shares of Common Stock issuable on conversion of
each share of such Series shall be increased in proportion to such increase of
the aggregate of shares of Common Stock outstanding and those issuable with
respect to such Common Stock Equivalents with the number of shares issuable with
respect to Common Stock Equivalents determined from time to time in the manner
provided for deemed issuances in Section 4(d)(i)(E).
(iii) Reverse Stock Splits. If the number of shares of Common
--------------------
Stock outstanding at any time after the Purchase Date is decreased by a
combination of the outstanding shares of Common Stock, then, following the
record date of such combination, the Conversion Price for the Series B Preferred
Stock shall be appropriately increased so that the number of shares of Common
Stock issuable on conversion of each share of such Series shall be decreased in
proportion to such decrease in outstanding shares.
(e) Other Distributions. In the event the Corporation shall declare a
-------------------
distribution payable in securities of other persons, evidences of indebtedness
issued by the Corporation or other persons, assets (excluding cash dividends) or
options or rights not referred to in Section 4(d)(ii), then, in each such case
for the purpose of this Section 4(e), the holders of Series B Preferred Stock
shall be entitled to a proportionate share of any such distribution as though
they were the holders of the number of shares of Common Stock of the Corporation
into which their shares of Series B Preferred Stock are convertible as of the
record date fixed for the determination of the holders of Common Stock of the
Corporation entitled to receive such distribution.
(f) Recapitalizations. If at any time or from time to time there
-----------------
shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 4 or Section 2), provision shall be made so that the holders of the
Series B Preferred Stock shall thereafter be entitled to receive upon conversion
of the Series B Preferred Stock the number of shares of stock or other
securities or property of the Corporation or otherwise, to which a holder of
Common Stock deliverable upon conversion would have been entitled on such
recapitalization. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 4 with respect to the rights of
the holders of the Series B Preferred Stock after the recapitalization to the
end that the provisions of this Section 4 (including adjustment of the
Conversion Price then in effect and the number of shares purchasable upon
conversion of the Series B Preferred Stock) shall be applicable after that event
and be as nearly equivalent as practicable.
(g) No Impairment. The Corporation will not, by amendment of its
-------------
Articles of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to
-26-
<PAGE>
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 4 and in the
taking of all such action as may be necessary or appropriate in order to protect
the Conversion Rights of the holders of Series B Preferred Stock against
impairment.
(h) No Fractional Shares and Certificate as to Adjustments
------------------------------------------------------
(i) No fractional shares shall be issued upon the conversion of
any share or shares of the Series B Preferred Stock, and the number of shares of
Common Stock to be issued shall be rounded to the nearest whole share. The
number of shares issuable upon such conversion shall be determined on the basis
of the total number of shares of Series B Preferred Stock the holder is at the
time converting into Common Stock and the number of shares of Common Stock
issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment of
the Conversion Price of Series B Preferred Stock pursuant to this Section 4, the
Corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of such Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of Series B Preferred Stock, furnish or cause to be furnished
to such holder a like certificate setting forth (A) such adjustment and
readjustment, (B) the Conversion Price for the Series B Preferred Stock at the
time in effect, and (C) the number of shares of Common Stock and the amount, if
any, of other property which at the time would be received upon the conversion
of a share of the Series B Preferred Stock.
(i) Notices of Record Date. In the event of any taking by the
----------------------
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of Series B Preferred Stock, at least ten (10) days
prior to the date specified therein, a notice specifying the date on which any
such record is to be taken for the purpose of such dividend, distribution or
right, and the amount and character of such dividend, distribution or right.
(j) Reservation of Stock Issuable Upon Conversion. The Corporation
---------------------------------------------
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series B Preferred Stock, such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of Series B Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of Series B Preferred Stock, in
addition to such other remedies as shall be available to the holders of Series B
Preferred Stock, the Corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but
-27-
<PAGE>
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purposes, including, without limitation, engaging in best efforts to
obtain the requisite shareholder approval of any necessary amendment to the
Articles of Incorporation.
(k) Notices. Any notice required by the provisions of this Section 4
-------
to be given to the holders of shares of Series B Preferred Stock shall be deemed
given if deposited in the United States mail, postage prepaid, and addressed to
each holder of record at such holder's address appearing on the books of the
Corporation.
5. Voting Rights. The holder of each share of Series B Preferred Stock
-------------
shall have the right to one vote for each share of Common Stock into which the
Series B Preferred Stock could then be converted, and with respect to such vote,
such holder shall have full voting rights and powers equal to the voting rights
and powers of the holders of Common Stock, and shall be entitled,
notwithstanding any provision hereof, to notice of any shareholders' meeting in
accordance with the bylaws of the Corporation, and shall be entitled to vote,
together with holders of Common Stock, with respect to any question upon which
holders of Common Stock have the right to vote. Fractional votes shall not,
however, be permitted and any fractional voting rights available on an as-
converted basis (after aggregating all shares into which shares of Series B
Preferred Stock held by each holder could be converted) shall be rounded to the
nearest whole number (with one-half being rounded upward).
6. Protective Provisions. So long as any shares of Series B Preferred
---------------------
Stock are outstanding, the Corporation shall not without first obtaining the
approval (by vote or written consent, as provided by law) of the holders of at
least two-thirds of the then outstanding shares of Series B Preferred Stock,
voting together as a class:
(a) effect a transaction described in Section 2(e)(i) above;
(b) alter or change the rights, preferences or privileges of the
shares of Series B Preferred Stock so as to affect adversely the shares of such
series;
(c) amend the Corporation's Articles of Incorporation or Bylaws or
change the authorized number of directors of the Corporation;
(d) authorize or issue, or obligate itself to issue, any other equity
security, including any other security convertible into or exercisable for any
equity security, having a preference over, or being on a parity with, the Series
B Preferred Stock with respect to preference, redemption or dividends;
(e) issue, or obligate itself to issue, any equity security, or any
security convertible into or exercisable for any equity security, if, after such
issuance, the Company would have outstanding more than 12,000,000 equity
securities (assuming for this purpose the issuance of all securities reserved
for issuance under stock option plans, stock purchase plans and other stock
plans approved by the Board of Directors of the Company, and exercise of all
then outstanding rights to acquire equity securities);
-28-
<PAGE>
(f) redeem, purchase or otherwise acquire (or pay into or set funds
aside for a sinking fund for such purpose) any share or shares of Preferred
Stock or Common Stock; provided, however, that this restriction shall not apply
-------- -------
to the redemption of Series B Preferred Stock pursuant to Article 3 hereof and
provided further, however, that any such redemption, purchase or other
- ---------------- -------
acquisition of any shares of Series A Preferred Stock pursuant to Article 3 of
the Series A Certificate shall require either such approval of the Series B
Preferred Stock or the expiration of ten (10) days after notice of such
redemption, purchase or other acquisition is given to the holders of the Series
B Preferred Stock (during which ten (10) day period the holders of the Series B
Preferred Stock may exercise their right to redemption pursuant to Section 3
hereof prior to and in preference to the holders of the Series A Preferred
Stock); or
(g) declare or pay any dividends or other distributions on
outstanding capital stock of the Corporation.
7. Status of Redeemed or Converted Stock. In the event any shares of
-------------------------------------
Series B Preferred Stock shall be redeemed pursuant to Section 3 hereof or
converted pursuant to Section 4 hereof, the shares so redeemed or converted
shall be canceled and shall not be issuable by the Corporation. Upon redemption
pursuant to Section 3 hereof or conversion pursuant to Section 4 hereof of all
outstanding shares of Series B Preferred Stock, all provisions of this
Certificate of Designation shall cease to be of further effect. Upon the
occurrence of such event, the Board of Directors shall have the power, pursuant
to Minnesota Statutes, Section 302A.135, Subd. 5 or any successor provision and
without shareholder action, to cause restated articles of incorporation of the
Corporation or other appropriate documents to be prepared and filed with the
Secretary of State of the State of Minnesota which reflect the removal of all
provisions relating to the Series B Preferred Stock and the cancellation of this
Certificate of Designation.
8. Par Value; No Cumulative Voting; No Preemptive Rights. The Series B
-----------------------------------------------------
Preferred Stock shall have a par value of $0.01 per share. Holders of Series B
Preferred Stock shall not be entitled to cumulate their votes in any election of
directors in which they are entitled to vote and shall not be entitled to any
preemptive rights under the Corporation's Articles of Incorporation to acquire
shares of any class or series of capital stock of the Corporation.
-29-
<PAGE>
IN WITNESS WHEREOF, Vascular Solutions, Inc. has caused this certificate to
be executed by its Chief Executive Officer this 9/th/ day of December, 1998.
VASCULAR SOLUTIONS, INC.
By: /s/ Howard Root
--------------------------------------
Howard Root
Chief Executive Officer
-30-
<PAGE>
EXHIBIT 3.2
BYLAWS
OF
VASCULAR SOLUTIONS, INC.
ARTICLE I.
OFFICES, CORPORATE SEAL
Section 1.01. Registered Office. The registered office of the
-----------------
corporation in Minnesota shall be that set forth in the Articles of
Incorporation or in the most recent amendment of the Articles of Incorporation
or resolution of the directors filed with the Secretary of State of Minnesota
changing the registered office.
Section 1.02. Other Offices. The corporation may have such other
-------------
offices, within or without the State of Minnesota, as the directors shall, from
time to time, determine.
Section 1.03. Corporate Seal. The corporation shall have no seal.
--------------
ARTICLE II.
MEETINGS OF SHAREHOLDERS
Section 2.01. Place and Time of Meetings. Except as provided
--------------------------
otherwise by Minnesota Statutes Chapter 302A, meetings of the shareholders may
be held at any place, within or without the State of Minnesota, as may from time
to time be designated by the directors and, in the absence of such designation,
shall be held at the registered office of the corporation in the State of
Minnesota. The directors shall designate the time of day for each meeting and,
in the absence of such designation, every meeting of shareholders shall be held
at ten o'clock a.m.
Section 2.02. Regular Meetings.
----------------
(a) A regular meeting of the shareholders shall be held on such date
as the Board of Directors shall by resolution establish.
(b) At a regular meeting the shareholders, voting as provided in the
Articles of Incorporation and these Bylaws, shall designate the number
of directors to constitute the Board of Directors (subject to the
authority of the Board of Directors thereafter to increase or decrease
the number of directors as permitted by law), shall elect qualified
successors for directors who serve for an indefinite term or whose
terms have expired or are due to expire within six months after the
date of the meeting and shall transact such other business as may
properly come before them.
Section 2.03. Special Meetings. Special meetings of the shareholders
----------------
may be held at any time and for any purpose and may be called by the President,
Treasurer, any two or
<PAGE>
more directors, or by one or more shareholders holding 10% or more of the shares
entitled to vote on the matters to be presented to the meeting.
Section 2.04. Quorum, Adjourned Meetings. The holders of a majority
--------------------------
of the shares entitled to vote shall constitute a quorum for the transaction of
business at any regular or special meeting. In case a quorum shall not be
present at a meeting, those present may adjourn the meeting to such day as they
shall, by majority vote, agree upon, and a notice of such adjournment and the
date and time at which such meeting shall be reconvened shall be mailed to each
shareholders entitled to vote at least 5 days before such reconvened meeting. If
a quorum is present, a meeting may be adjourned from time to time without notice
other than announcement at the meeting. At adjourned meetings at which a quorum
is present, any business may be transacted which might have been transacted at
the meeting as originally noticed. If a quorum is present, the shareholders may
continue to transact business until adjournment notwithstanding of the
withdrawal of enough shareholders to leave less than a quorum.
Section 2.05. Voting. At each meeting of the shareholders every
------
shareholder having the right to vote shall be entitled to vote either in person
or by proxy. Each shareholder, unless the Articles of Incorporation or statute
provide otherwise, shall have one vote for each share having voting power
registered in such shareholder's name on the books of the corporation. Jointly
owned shares may be voted by any joint owner unless the corporation receives
written notice from any one of them denying the authority of that person to vote
those shares. Upon the demand of any shareholder, the vote upon any question
before the meeting shall be by ballot. All questions shall be decided by a
majority vote of the number of shares entitled to vote and represented at the
meeting at the time of the vote except if otherwise required by statute, the
Articles of Incorporation, or these Bylaws.
Section 2.06. Closing of Books. The Board of Directors may fix a
----------------
time, not exceeding 60 days preceding the date of any meeting of shareholders,
as a record date for the determination of the shareholders entitled to notice
of, and to vote at, such meeting, notwithstanding any transfer of shares on the
books of the corporation after any record date so fixed. The Board of Directors
may close the books of the corporation against the transfer of shares during the
whole or any part of such period. If the Board of Directors fails to fix a
record date for determination of the shareholders entitled to notice of, and to
vote at, any meeting of shareholders, the record date shall be the 20th day of
preceding the date of such meeting.
Section 2.07. Notice of Meetings. There shall be mailed to each
------------------
shareholder, shown by the books of the corporation to be a holder of record of
voting shares, at his address as shown by the books of the corporation, a notice
setting out the time and place of each regular meeting and each special meeting,
except where the meeting is an adjourned meeting and the date, time and place of
the meeting were announced at the time of adjournment, which notice shall be
mailed to all shareholders of record, whether entitled to vote or not, at least
fourteen days prior thereto. Every notice of any special meeting called pursuant
to Section 2.03 hereof shall state the purpose or purposes for which the meeting
has been called, and the business transacted at all special meetings shall be
confined to the purpose stated in the notice.
2
<PAGE>
Section 2.08. Waiver of Notice. Notice of any regular or special
----------------
meeting may be waived by any shareholder either before, at or after such meeting
orally or in writing signed by such shareholder or a representative entitled to
vote the shares of such shareholder. A shareholder, by his attendance at any
meeting of shareholders, shall be deemed to have waived notice of such meeting,
except where the shareholder objects at the beginning of the meeting to the
transaction of business because the time may not lawfully be considered at that
meeting and does not participate in the consideration of the item at that
meeting.
Section 2.09. Written Action. Any action which might be taken at a
--------------
meeting of the shareholders may be taken without a meeting if done in writing
and signed by all of the shareholders entitled to vote on that action.
ARTICLE III.
DIRECTORS
Section 3.01. General Powers. The business and affairs of the
--------------
corporation shall be managed by or under the authority of the Board of
Directors, except as otherwise permitted by statute.
Section 3.02. Number, Qualification and Term of Office. Until the
----------------------------------------
first meeting of shareholders, the number of directors shall be the number named
in the Articles of Incorporation or, if no such number is named therein, the
number elected by the incorporator. Thereafter, the number of directors shall be
established by resolution of the shareholders (subject to the authority of the
Board of Directors to increase or decrease the number of directors as permitted
by law). In the absence of such shareholder resolution, the number of directors
shall be the number last fixed by the shareholders, the Board of Directors, the
incorporator or the Articles of Incorporation. Directors need not be
shareholders. Each of the directors shall hold office until the regular meeting
of shareholders next held after such director's election and until such
director's successor shall have been elected and shall qualify, or until the
earlier death, resignation, removal, or disqualification of such director;
provided, however, that no director shall be elected to a term in excess of five
years.
Section 3.03. Board Meetings. Meetings of the Board of Directors may
--------------
be held from time to time at such time and place within or without the State of
Minnesota as may be designated in the notice of such meeting.
Section 3.04. Calling Meetings; Notice. Meetings of the Board of
------------------------
Directors may be called by the Chairman of the Board by giving at least twenty-
four hours' notice, or by any other director by giving at least five days'
notice, of the date, time and place thereof to each director by mail, telephone,
telegram or in person.
Section 3.05. Waiver of Notice. Notice of any meeting of the Board
----------------
of Directors may be waived by any director either before, at, or after such
meeting orally or in a writing signed by such director. A director, by his
attendance at any meeting of the Board of Directors, shall be deemed to have
waived notice of such meeting, except where the director objects at the
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beginning of the meeting to the transaction of business because the meeting is
not lawfully called or convened and does not participate thereafter in the
meeting.
Section 3.06. Quorum. A majority of the directors holding office
------
immediately prior to a meeting of the Board of Directors shall constitute a
quorum for the transaction of business at such meeting.
Section 3.07. Absent Directors. A director may give advance written
----------------
consent or opposition to a proposal to be acted on at a meeting of the Board of
Directors. If such director is not present at the meeting, consent or opposition
to a proposal does not constitute presence for purposes of determining the
existence of a quorum, but consent or opposition shall be counted as a vote in
favor of or against the proposal and shall be entered in the minutes or other
record of action at the meeting, if the proposal acted on at the meeting is
substantially the same or has substantially the same effect as the proposal to
which the director has consented or objected.
Section 3.08. Conference Communications. Any or all directors may
-------------------------
participate in any meeting of the Board of Directors, or of any duly constituted
committee thereof, by any means of communication through which the directors may
simultaneously hear each other during such meeting. For the purposes of
establishing a quorum and taking any action at the meeting, such directors
participating pursuant to this Section 3.08 shall be deemed present in person at
the meeting; and the place of the meeting shall be the place of origination of
the conference telephone conversation or other comparable communication
technique.
Section 3.09. Vacancies; Newly Created Directorships. Vacancies in
--------------------------------------
the Board of Directors of this corporation occurring by reason of death, or
resignation, removal or disqualification shall be filled for the unexpired term
by a majority of the remaining directors of the Board although less than a
quorum; newly created directorships resulting from an increase in the authorized
number of directors by action of the Board of Directors as permitted by Section
3.02 may be filled by a majority vote of the directors serving at the time of
such increase; and each director elected pursuant to this Section 3.09 shall be
a director until such director's successor is elected by the shareholders at
their next regular or special meeting.
Section 3.10. Removal. Any or all of the directors may be removed
-------
from office at any time, with or without cause, by the affirmative vote of the
shareholders holding a majority of the shares entitled to vote at an election of
directors except, as otherwise provided by Minnesota Statutes Section 302A.223,
as amended, when the shareholders have the right to cumulate their votes. A
director named by the Board of Directors to fill a vacancy may be removed from
office at any time, with or without cause, by the affirmative vote of the
remaining directors if the shareholders have not elected directors in the
interim between the time of the appointment to fill such vacancy and the time of
the removal. In the event that the entire Board or any one or more directors be
so removed, new directors shall be elected at the same meeting. In addition to
the foregoing, any director may be removed at any time by the affirmative vote
of a majority of the remaining directors if the remaining directors determine
that the director to be removed is engaged in an activity that is competitive
with any business of the Company. A director may be determined to be engaged in
an activity if he or she is an employee, director, partner, consultant, owner,
representative, agent or shareholder (other than a shareholder
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beneficially owning less than 1% of the outstanding stock) of a company,
partnership, sole proprietorship or other organization. An activity may be
deemed to be competitive with the Company if the product or service created by
the activity is the same as or an alternative to any of the products or services
of the Company. The Board of Directors shall determine whether a director is
engaged in a competitive activity utilizing the guidelines described in the
previous two sentences as well as any other guidelines it determines to be
relevant. The Board's decision shall not be overturned by any court unless the
decision is shown to be clearly erroneous.
Section 3.11. Committees. A resolution approved by the affirmative
----------
vote of a majority of the Board of Directors may establish committees having the
authority of the board in the management of the business of the corporation to
the extent provided in the resolution. A committee shall consist of one or more
persons, who need not be directors, appointed by affirmative vote of a majority
of the directors present. Committees are subject to the direction and control
of, and vacancies in the membership thereof shall be filled by, the Board of
Directors, except as provided by Minnesota Statutes Section 302A.243. A majority
of the members of the committee present at a meeting is a quorum for the
transaction of business, unless a larger or small proportion or number is
provided in a resolution approved by the affirmative vote of a majority of the
directors present.
Section 3.12. Written Action. Any action which might be taken at a
--------------
meeting of the Board of Directors, or any duly constituted committee thereof,
may be taken without a meeting if done in writing and signed by all of the
directors or committee members, unless the Articles provide otherwise and the
action need not be approved by the shareholders.
Section 3.13. Compensation. Directors who are not salaried officers
------------
of this corporation shall receive such fixed sum per meeting attended or such
fixed annual sum as shall be determined, from time to time, by resolution of the
Board of Directors. The Board of Directors may, be resolution, provide that all
directors shall receive their expenses, if any, of attendance at meetings of the
Board of Directors or any committee thereof. Nothing herein contained shall be
construed to preclude any director from serving this corporation in any other
capacity and receiving proper compensation therefor.
ARTICLE IV.
OFFICERS
Section 4.01. Number. The officers of the corporation shall consist
------
of a Chairman of the Board (if one is elected by the Board), the President, one
or more Vice Presidents (if desired by the Board), a Treasurer, a Secretary (if
one is elected by the Board) and such other officers and agents as may, from
time to time be elected by the Board of Directors. Any number of offices may be
held by the same person.
Section 4.02. Election, Term of Office and Qualifications. The Board
-------------------------------------------
of Directors shall elect or appoint, by resolution approved by the affirmative
vote of a majority of the directors present, from within or without their
number, the President, Treasurer and such other officers as may be deemed
advisable, each of whom shall have the powers, rights, duties, responsibilities,
and terms in office provided for in these Bylaws or a resolution of the Board of
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Directors not inconsistent therewith. The President and all other officers who
may be directors shall continue to hold office until the election and
qualification of their successors, notwithstanding an earlier termination of
their directorship.
Section 4.03. Removal and Vacancies. Any officer may be removed from
---------------------
his office by the Board of Directors at any time, with or without cause. Such
removal, however, shall be without prejudice to the contract rights of the
person so removed. If there be a vacancy among the officers of the corporation
by reason of death, resignation or otherwise, such vacancy shall be filled for
the unexpired term by the Board of Directors.
Section 4.04. Chairman of the Board. The Chairman of the Board, if
---------------------
one is elected, shall preside at all meetings of the shareholders and directors
and shall have such other duties as may be prescribed, from time to time, by the
Board of Directors.
Section 4.05. President. The President shall be the chief executive
---------
officer and shall have general active management of the business of the
corporation. In the absence of the Chairman of the Board, he shall preside at
all meetings of the shareholders and directors. He shall see that all orders and
resolutions of the Board of Directors are carried into effect. He shall execute
and deliver, in the name of the corporation, any deeds, mortgages, bonds,
contracts or other instruments pertaining to the business of the corporation
unless the authority to execute and deliver is required by law to be exercised
by another person or is expressly delegated by the Articles or Bylaws or by the
Board of Directors to some other officer or agent of the corporation. He shall
maintain records of and, whenever necessary, certify all proceedings of the
Board of Directors and the shareholders, and in general, shall perform all
duties usually incident to the office of the President. He shall have such other
duties as may, from time to time, he prescribed by the Board of Directors.
Section 4.06. Vice President. Each Vice President, if one or more
--------------
are elected, shall have such powers and shall perform such duties as prescribed
by the Board of Directors or by the President. In the event of the absence or
disability of the President, the Vice President(s) shall succeed to his power
and duties in the order designed by the Board of Directors.
Section 4.07. Secretary. The Secretary, if one is elected, shall be
---------
secretary of and shall attend all meetings of the shareholders and Board of
Directors and shall record all proceedings of such meetings in the minute book
of the corporation. He shall give proper notice of meetings of shareholders and
directors. He shall perform such other duties as may, from time to time, be
prescribed by the Board of Directors or by the President.
Section 4.08. Treasurer. The Treasurer shall be the chief financial
---------
officer and shall keep accurate financial records for the corporation. He shall
deposit all moneys, drafts and checks in the name of, and to the credit of, the
corporation in such banks and depositaries as the Board of Directors shall, from
time to time, designate. He shall have power to endorse, for deposit, all notes,
checks and drafts received by the corporation. He shall disburse the funds of
the corporation, as ordered by the Board of Directors, making proper vouchers
therefor. He shall render to the President and the directors, whenever
requested, an account of all his transactions as
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Treasurer and of the financial condition of the corporation, and shall perform
such other duties as may, from time to time, be prescribed by the Board of
Directors or by the President.
Section 4.09. Compensation. The officers of this corporation shall
------------
receive such compensation for their services as may be determined, from time to
time, by resolution of the Board of Directors.
ARTICLE V.
SHARES AND THEIR TRANSFER
Section 5.01. Certificates for Shares. All shares of the corporation
-----------------------
shall be certificated shares. Every owner of shares of the corporation shall be
entitled to a certificate, to be in such form as shall be prescribed by the
Board of Directors, certifying the number of shares of the corporation owned by
such shareholder. The certificates for such shares 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 and by the Secretary or an Assistant Secretary or
by such officers as the Board of Directors may designate. If the certificate is
signed by a transfer agent or registrar, such signatures of the corporate
officers may be by facsimile if authorized by the Board of Directors. Every
certificate surrendered to the corporation for exchange or transfer shall be
canceled, and no new certificate or certificates shall be issued in exchange for
any existing certificate until such existing certificate shall have been so
canceled, except in cases provided for in Section 5.04.
Section 5.02. Issuance of Shares. The Board of Directors is
------------------
authorized to cause to be issued shares of the corporation up to the full amount
authorized by the Articles of Incorporation in such amounts as may be determined
by the Board of Directors and as may be permitted by law. No shares shall be
allotted except in consideration of cash or other property, tangible or
intangible, received or to be received by the corporation under a written
agreement, of services rendered or to be rendered to the corporation under a
written agreement, or of an amount transferred from surplus to state capital
upon a share dividend. At the time of such allotment of shares, the Board of
Directors making such allotments shall state, by resolution, their determination
of the fair value to the corporation in monetary terms of any consideration
other than cash for which shares are allotted.
Section 5.03. Transfer of Shares. Transfer of shares on the books of
------------------
the corporation may be authorized only by the shareholder named in the
certificate, or the shareholder's legal representative, or the shareholder's
duly authorized attorney-in-fact, and upon surrender of the certificate or the
certificates for such shares. The corporation may treat as the absolute owner of
shares of the corporation, the person or persons in whose name shares are
registered on the books of the corporation.
Section 5.04. Loss of Certificates. Except as otherwise provided by
--------------------
Minnesota Statutes Section 302A.419, any shareholder claiming a certificate for
shares to be lost, stolen, or destroyed shall make an affidavit of that fact in
such form as the Board of Directors shall require and shall, if the Board of
Directors so requires, give the corporation a bond of indemnity in form, in an
amount, and with one or more sureties satisfactory to the Board of Directors, to
indemnify
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the corporation against any claim which may be made against it on account of the
reissue of such certificate, whereupon a new certificate may be issued in the
same tenor and for the same number of shares as the one alleged to have been
lost, stolen or destroyed.
ARTICLE VI.
DIVIDENDS, RECORD DATE
Section 6.01. Dividends. Subject to the provisions of the Articles
---------
of Incorporation, of these Bylaws, and of law, the Board of Directors may
declare dividends whenever, and in such amounts as, in its opinion, are deemed
advisable.
Section 6.02. Record Date. Subject to any provisions of the Articles
-----------
of Incorporation, the Board of Directors may fix a date not exceeding 120 days
preceding the date fixed for the payment of any dividend as the record date for
the determination of the shareholders entitled to receive payment of the
dividend and, in such case, only shareholders of record on the date so fixed
shall be entitled to receive payment of such dividend notwithstanding any
transfer of shares on the books of the corporation after the record date. The
Board of Directors may close the books of the corporation against the transfer
of shares during the whole or any part of such period.
ARTICLE VII.
BOOKS AND RECORDS, FISCAL YEAR
Section 7.01. Share Register. The Board of Directors of the
--------------
corporation shall cause to be kept at its principal executive office, or at
another place or places within the United States determined by the board:
(1) a share register not more than one year old, containing the names
and addresses of the shareholders and the number and classes of shares
held by each shareholder; and
(2) A record of the dates on which certificates or transaction
statements representing shares were issued.
Section 7.02. Other Books and Records. The Board of Directors shall
-----------------------
cause to be kept at its principal executive office, or, if its principal
executive office is not in Minnesota, shall make available at its registered
office within ten days after receipt by an officer of the corporation of a
written demand for them made by a shareholder or other person authorized by
Minnesota Statutes section 302A.461, originals or copies of:
(1) records of all proceedings of shareholders for the last three
years;
(2) records of all proceedings of the board for the last three years;
(3) its articles and all amendments currently in effect;
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(4) its bylaws and all amendments currently in effect;
(5) financial statements required by Minnesota Statutes Section
302A.463 and the financial statements for the most recent interim
period prepared in the course of the operation of the corporation for
distribution to the shareholders or to a governmental agency as a
matter of public records;
(6) reports made to shareholders generally within the last three
years;
(7) a statement of the names and usual business addresses of its
directors and principal officers;
(8) any shareholder voting or control agreements of which the
corporation is aware; and
(9) such other records and books of account as shall be necessary and
appropriate to the conduct of the corporate business.
Section 7.03. Fiscal Year. The fiscal year of the corporation shall
-----------
be determined by the Board of Directors.
ARTICLE VIII.
LOANS, GUARANTEES, SURETYSHIP
Section 8.01. The corporation may lend money to, guarantee an
obligation of, become a surety for, or otherwise financially assist a person if
the transaction, or a class of transactions to which the transaction belongs, is
approved by the affirmative vote of a majority of the directors present, and:
(1) is in the usual and regular course of business of the
corporation;
(2) is with, or for the benefit of, a related corporation, and
organization in which the corporation has a financial interest, an
organization with which the corporation has a business relationship,
or an organization to which the corporation has the power to make
donations;
(3) is with, or for the benefit of, an officer or other employee of
the corporation or a subsidiary, including an officer or employee who
is a director of the corporation or a subsidiary, and may reasonably
be expected, in the judgment of the board, to benefit the corporation;
or
(4) has been approved by the affirmative vote of the holders of two-
thirds of the outstanding shares.
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The loan, guarantee, surety contract or other financial assistance may be with
or without interest, and may be unsecured, or may be secured in the manner as a
majority of the directors approve, including, without limitation, a pledge of or
other security interest in shares of the corporation. Nothing in this section
shall be deemed to deny, limit or restrict the power of guaranty or warranty of
the corporation at common law or under a statute of the State of Minnesota.
ARTICLE IX.
INDEMNIFICATION OF CERTAIN PERSONS
Section 9.01. The corporation shall indemnify such persons, for such
expenses and liabilities, in such manner, under such circumstances, and to such
extent as permitted by minnesota Statutes Section 302A.521, as now enacted or
hereafter amended.
ARTICLE X.
AMENDMENTS
Section 10.01. These Bylaws may be amended or altered by a vote of
the majority of the whole Board of Directors at any meeting, provided that
notice of such proposed amendment shall have been given in the notice given to
the directors of such meeting. Such authority in the Board of director is
subject to the power of the shareholders to change or repeal such Bylaws by a
majority vote of the shareholders present or represented at any regular or
special meeting of shareholders called for such purpose, and the Board of
Directors shall not make or alter any Bylaws fixing a quorum for meetings of
shareholders, prescribing procedures for removing directors or filling vacancies
in the Board of Directors, or fixing the number of directors or their
classifications, qualifications, or terms of office, except that the Board of
Directors may adopt or amend any Bylaw to increase their number.
ARTICLE XI.
SECURITIES OF OTHER CORPORATIONS
Section 11.01. Voting Securities Held by the Corporation. Unless
-----------------------------------------
otherwise ordered by the Board of Directors, the President shall have full power
and authority on behalf of the corporation (a) to attend any meeting of security
holders of other corporations in which the corporation may hold securities and
to vote such securities on behalf of this corporation; (b) to execute any proxy
for such meeting on behalf of the corporation; or (c) to execute a written
action in lieu of a meeting of such other corporation on behalf of this
corporation. At such meeting, the president shall possess and may exercise any
and all rights and power incident to the ownership of such securities that the
corporation possesses. The Board of Directors may, from time to time, grant such
power and authority to one or more other persons and may remove such power and
authority from the President or from any such other person or persons.
Section 11.02. Purchase and Sale of Securities. Unless otherwise
-------------------------------
ordered by the Board of Directors, the President shall have full power and
authority on behalf of the corporation
10
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to purchase, sell, transfer or encumber any and all securities of any other
corporation owned by the corporation, and may execute and deliver such documents
as may be necessary to effectuate such purchase, sale, transfer or encumbrance.
The Board of Directors may, from time to time, confer like powers upon any other
person or persons.
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EXHIBIT 4.2
COMMON STOCK WARRANT
To Purchase 10,500
Shares of Common Stock of
Vascular Solutions, Inc.
February 14, 1997
THIS CERTIFIES THAT, for payment to Vascular Solutions, Inc. (the
"Company"), a Minnesota corporation, and for other good and valuable
consideration received, David Johnson or her registered assigns is entitled to
subscribe for and purchase from the Company at any time after the date hereof to
and including February 14, 2007, Ten Thousand Five Hundred (10,500) fully paid
and nonassessable shares of the Company's Common Stock, $.01 par value, at a
price of $1.50 per share:
This Warrant is subject to the following provisions, terms and conditions:
1. Exercise; Transferability. The rights represented by this Warrant
-------------------------
may be exercised by the holder hereof, in whole or in part (but not as to a
fractional share of common stock), by written notice of exercise delivered to
the Company and by the surrender of this Warrant (properly endorsed if required)
at the principal office of the Company and upon payment to it by certified or
bank check or wire transfer of the purchase price for such shares.
This Warrant may be transferred subject to the following conditions and
the restrictions contained in Section 7 hereof: (i) during the first year after
the date of this Warrant, it may not be sold, transferred, assigned or
hypothecated except to persons who are (x) both officers and shareholders of
Miller, Johnson and Kuehn Incorporated ("MJK"), or (y) both officers and
employees of MJK, and (ii) after such period, the Warrant shall be transferable
without restriction.
2. Issuance of Shares. The Company agrees that the shares purchased
------------------
hereby shall be and are deemed to be issued to the record holder hereof as of
the close of business on the date on which this Warrant shall have been
exercised by surrender of the Warrant and payment for the shares. Subject to the
provisions of the next succeeding paragraph, certificates for the shares of
stock so purchased shall be delivered to the holder hereof within a reasonable
time, not exceeding ten (10) days after the rights represented by this Warrant
shall have been so exercised, and, unless this Warrant has expired, a new
Warrant representing the number of shares, if any, with respect to which this
Warrant shall not then have been exercised shall also be delivered to the holder
hereof within such time.
Notwithstanding the foregoing, however, the Company shall not be required
to deliver any certificate for shares of stock upon exercise of this Warrant,
except in accordance with the provisions, and subject to the limitations, of
paragraph 7 hereof.
<PAGE>
3. Covenants of Company. The Company covenants and agrees that all shares
--------------------
which may be issued upon the exercise of the rights represented by this Warrant
will, upon issuance, be duly authorized and issued, fully paid, nonassessable
and free from all taxes, liens and charges with respect to the issue thereof,
and, without limiting the generality of the foregoing, the Company covenants and
agrees that it will from time to time take all such action as may be required to
assure that the par value per share of common stock is at all times equal to or
less than the then effective purchase price per share of the common stock
issuable pursuant to this Warrant. The Company further covenants and agrees
that, during the period within which the rights represented by this Warrant may
be exercised, the Company will at all times have authorized, and reserved for
the purpose of issue or transfer upon exercise of the subscription rights
evidenced by this Warrant, a sufficient number of shares of its common stock to
provide for the exercise of the rights represented by this Warrant.
4. Anti-Dilution Adjustments. The above provisions are, however, subject
-------------------------
to the following:
(a) In case the Company shall at any time hereafter subdivide or
combine the outstanding shares of common stock or declare a dividend payable in
common stock, the exercise price of this Warrant in effect immediately prior to
the subdivision, combination or record date for such dividend payable in common
stock shall forthwith be proportionately increased, in the case of combination,
or decreased, in the case of subdivision or dividend payable in common stock.
Upon each adjustment of the exercise price, the holder of this Warrant shall
thereafter be entitled to purchase, at the exercise price resulting from such
adjustment, the number of shares obtained by multiplying the exercise price
immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment and dividing the product
thereof by the exercise price resulting from such adjustment.
(b) No fractional shares of common stock are to be issued upon the
exercise of this Warrant, but the Company shall pay a cash adjustment in respect
of any fraction of a share which would otherwise be issuable in an amount equal
to the same fraction of the market price per share of common stock on the day of
exercise as determined in good faith by the Company.
(c) If any capital reorganization or reclassification of the capital
stock of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of common stock shall
be entitled to receive stock, securities or assets with respect to or in
exchange for common stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby the holder hereof shall thereafter have the right to
purchase and receive, upon the basis and upon the terms and conditions specified
in this Warrant and in lieu of the shares of common stock of the Company
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby, such stock, securities or assets as may be issued or
payable with respect to or in exchange for a number of outstanding shares of
such common stock equal to the number of shares of such stock immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby had such reorganization, reclassification, consolidation,
merger or sale not taken place, and in any such case appropriate provisions
shall be made with respect to the rights and interests of the
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holder of this Warrant to the end that the provisions hereof (including without
limitation provisions for adjustments of the Warrant purchase price and of the
number of shares purchasable upon the exercise of this Warrant) shall thereafter
be applicable, as nearly as may be, in relation to any shares of stock,
securities or assets thereafter deliverable upon the exercise hereof. The
Company shall not effect any such consolidation, merger or sale unless prior to
the consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger, or the corporation purchasing such
assets, shall assume by operation of law or written instrument, the obligation
to deliver to such holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
purchase. Notice of such assumption shall be promptly mailed to the registered
holder hereof at the last address of such holder appearing on the books of the
Company.
Notwithstanding any language to the contrary set forth in this
paragraph 4 (c), if an occurrence or event described herein shall take place in
which the shareholders of the Company receive cash for their shares of common
stock of the Company and a successor corporation or corporation purchasing
assets shall survive the transaction then, at the election of the record holder
hereof, such corporation shall be obligated to purchase this Warrant (or the
unexercised part hereof) from the record holder without requiring the holder to
exercise all or part of the Warrant. If such corporation refuses to so purchase
this Warrant then the Company shall purchase the Warrant for cash. In either
case the purchase price shall be the amount per share that shareholders of the
outstanding common stock of the Company shall receive as a result of the
transaction multiplied by the number of shares covered by the Warrant, minus the
aggregate exercise price of the Warrant. Such purchase shall be closed within 60
days following the election of the holder to sell this Warrant.
(d) Upon any adjustment of the Warrant purchase price, then, and in
each such case, the Company shall give written notice thereof, by first class
mail, postage prepaid, addressed to the registered holder of this Warrant at the
address of such holder as shown on the books of the Company, which notice shall
state the Warrant purchase price resulting from such adjustment and the increase
or decrease, if any, in the number of shares purchasable at such price upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
(e) If any event occurs as to which in the good faith determination of
the Board of Directors of the Company the other provisions of this paragraph 4
are not strictly applicable or if strictly applicable would not fairly protect
the purchase rights of the holder of this Warrant or of common stock in
accordance with the essential intent and principles of such provisions, then the
Board of Directors shall make an adjustment in the application of such
provisions, in accordance with such essential intent and principles, so as to
protect such purchase rights as aforesaid.
5. Common Stock. As used herein, the term "common stock" shall mean
------------
and include the Company's presently authorized shares of common stock and shall
also include any capital stock of any class of the Company hereafter authorized
which shall not be limited to fixed sum or percentage in respect of the rights
of the holders thereof to participate in dividends or in the distribution,
dissolution or winding up of the Company; provided that the shares purchasable
pursuant to this Warrant shall include shares designated as common stock of the
Company on the
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date of original issue of this Warrant or, in the case of any reclassification
of the outstanding shares thereof, the stock, securities or assets provided for
in Section 4 above.
6. No Voting Rights. This Warrant shall not entitle the holder hereof to
----------------
any voting rights or other rights as a stockholder of the Company.
7. Transfer of Warrant or Resale of Shares. In the event the holder
---------------------------------------
of this Warrant desires to transfer this Warrant, or any common stock issued
upon the exercise hereof, the holder shall provide the Company with a written
notice describing the manner of such transfer and an opinion of counsel
(reasonably acceptable to the Company) that the proposed transfer may be
effected without registration or qualification (under any Federal or State law),
whereupon such holder shall be entitled to transfer this Warrant or to dispose
of shares of common stock received upon the previous exercise hereof in
accordance with the notice delivered by such holder to the Company; provided,
--------
that an appropriate legend may be endorsed on this Warrant or the certificates
for such shares respecting restrictions upon transfer thereof necessary or
advisable in the opinion of counsel satisfactory to the Company to prevent
further transfers which would be in violation of Section 5 of the Securities Act
of 1933.
8. Registration Rights. (a) If the Company proposes to claim an
-------------------
exemption under Section 3(b) for a public offering of any of its securities or
to register under the Securities Act of 1933 (the "Securities Act") (except by a
claim of exemption or registration statement on a form that does not permit the
inclusion of shares by its security holders) any of its securities, it will give
written notice to all registered holders of Warrants, and all registered holders
of shares of common stock acquired upon the exercise of Warrants, of its
intention to do so and, on the written request of any such registered holders
given within twenty (20) days after receipt of any such notice (which request
must be made within ten (10) years from the date of this Warrant), the Company
will use its best efforts to cause all such shares, the registered holders of
which shall have requested the registration or qualification thereof, to be
included in such notification or registration statement proposed to be filed by
the Company; provided, however, that (i) the Company shall not be required to
include any such shares of Common Stock in any such registration for any holder
who is able to sell all shares of Common Stock owned by such holder (or issuable
to such holder upon exercise of this Warrant), and which benefit from the
registration rights granted hereunder, during the three-month period beginning
on the date such notice is received by such holder, without compliance with the
registration requirements of the Securities Act pursuant to Rule 144(k) under
the Securities Act; (ii) the Company shall not be required to give such notice
with respect to, or to include such Warrant or Common Stock in, any such
registration which is primarily (A) a registration of a stock option plan or
other employee benefit plan or of securities issued or issuable pursuant to any
such plan such as a registration on Form S-8, or (B) a registration of
securities proposed to be issued in exchange for securities or assets of, or in
connection with a merger or consolidation with, another corporation such as a
registration on Form S-4; (iii) the Company may, in its sole discretion,
withdraw any such registration statement and abandon the proposed offering in
which any such holder had requested to participate; (iv) if the offering to
which the registration statement relates is to be distributed by or through an
underwriter, each such holder shall agree, as a condition to the inclusion of
such holder's securities in such registration, to sell the securities held by
such holder through such underwriter on the same terms and conditions as the
underwriter agrees to sell securities on behalf of the Company and not to sell,
transfer, pledge, assign or otherwise dispose of
4
<PAGE>
any shares of Common Stock not sold by such holder in such offering for such
period (up to (90) days after the effective date of the registration statement)
as may be required by the underwriter; and (v) if the offering to which the
registration statement relates is to be distributed by or through an underwriter
and a greater number of securities is offered for participation in the proposed
underwriting then, in the opinion of the Company's underwriter, can be
accommodated without significantly adversely affecting the proposed
underwriting, the amount of such securities otherwise to be included in the
underwritten offering on behalf of all persons other than the Company may be
reduced pro rata, in accordance with the number of shares of Common Stock
proposed to be sold by each such holder, or may be eliminated entirely from such
underwritten public offering. The costs and expenses of such offering, including
but not limited to legal fees, special audit fees, printing expenses, filing
fees, fees and expenses relating to qualifications under state securities or
blue sky laws and the premiums for insurance, if any, incurred by the Company in
connection with any registration made pursuant to this Section 8(a) shall be
borne entirely by the Company; provided, however, that any holders participating
-------- -------
in such registration shall bear their own underwriting discounts and commissions
and the fees and expenses of their own counsel or accountants in connection with
any such registration. The foregoing provisions of this Section 8(a) shall not
apply to the Company's initial public offering, provided that MJK is the
underwriter or a co-managing underwriter of such offering.
(b) Further, on one occasion only, at any time during the period
beginning on the closing of the Company's initial public offering and ending ten
(10) years from the date hereof, upon request by the holders of Warrants and/or
the holders of shares issued upon the exercise of the Warrants who collectively
(i) have the right to purchase at least 50% of the shares subject to the
Warrants, (ii) hold directly at least 50% of the shares purchased hereunder, or
(iii) have the right to purchase or hold directly an aggregate of at least 50%
of the shares purchasable or purchased hereunder, the Company will promptly take
all necessary steps, at the option of such holders, to register or qualify the
sale of the Warrants or such shares by the holders thereof, or to register the
issuance by the Company of shares upon the exercise of Warrants, under the
Securities Act of 1933 (and, upon the request of such holders, under Rule 415
thereunder) and such state laws as such holders may reasonably request;
provided, however, that (i) the Company shall not be required to include any
such shares of Common Stock in any such registration for any holder who is able
to sell all shares of Common Stock owned by such holder (or issuable to such
holder upon exercise of this Warrant), and which benefit from the registration
rights granted hereunder, during the three-month period beginning on the date
such registration is requested by such holder, without compliance with the
registration requirements of the Securities Act pursuant to Rule 144(k) under
the Securities Act; and (ii) the Company may, on not more than one occasion,
delay the filing of any registration statement requested pursuant to this
Section 8(b) to a date not more than 90 days following the date of such request
if in the reasonable opinion of the Company at the time of such request such a
delay is necessary in order not to significantly adversely affect financing
efforts then underway at the Company (in which case the expiration date of this
Section 8(b) shall be extended by a period equal to the period of such delay).
The costs and expenses directly related to any registration requested pursuant
to this section, including but not limited to legal fees of the Company's
counsel, audit fees, printing expense, filing fees and fees and expenses
relating to qualifications under state securities or blue sky laws incurred by
the Company shall be borne entirely by the Company; provided, however, that the
persons for whose account the securities covered by such registration are sold
shall bear the underwriting commissions applicable to their
5
<PAGE>
shares and fees of their legal counsel. If the holders of Warrants and the
holders of shares of Common Stock underlying the Warrants are the only persons
whose shares are included in the registration pursuant to this section, such
holders shall bear the expense of inclusion of audited financial statements in
the registration statement which are not dated as of the Company's normal fiscal
year or are not otherwise prepared by the Company for its own business purposes.
The Company shall keep effective and maintain any registration, qualification,
notification or approval specified in this paragraph for such period as may be
necessary for the holders of the Warrants and such common stock to dispose of
such securities and, from time to time shall amend or supplement, at the
holder's expense, the prospectus or offering circular used in connection
therewith to the extent necessary in order to comply with applicable law.
If, at the time any written request for registration is received by
the Company pursuant to this Section 8(b), the Company has determined to proceed
with the actual preparation and filing of a registration statement under the
Securities Act in connection with the proposed offer and sale for cash of any of
its securities by it or any of its security holders, such written request shall
be deemed to have been given pursuant to Section 8(a) hereof rather than this
Section 8(b), and the rights of the holders of Warrants and or shares issued
upon the exercise of the Warrants covered by such written request shall be
governed by Section 8(a) hereof.
The managing underwriter of an offering registered pursuant to this
Section 8(b), if any, shall be selected by the holders of a majority of the
Warrants and/or shares issued upon the exercise of the Warrants for which
registration has been requested and shall be reasonably acceptable to the
Company. Without the written consent of the holders of a majority of the
Warrants and/or shares issued upon the exercise of the Warrants for which
registration has been requested pursuant to this Section 8(b), neither the
Company nor any other holder of securities of the Company may include securities
in such registration if in the good faith judgment of the managing underwriter
of such public offering the inclusion of such securities would interfere with
the successful marketing of the Warrants and/or shares issued upon the exercise
of the Warrants or require the exclusion of any portion of the Warrants and/or
shares issued upon the exercise of the Warrants to be registered. Subject to the
preceding sentence, shares to be excluded from an underwritten public offering
shall be selected in the manner provided in Section 8(a) hereof.
(c) If and whenever the Company is required by the provisions of
Sections 8(a) or 8(b) hereof to effect the registration of Warrants and/or
shares issued upon the exercise of the Warrants under the Securities Act, the
Company will:
(i) prepare and file with the Commission a registration statement
with respect to such securities, and use its best efforts to cause
such registration statement to become and remain effective for such
period as may be reasonably necessary to effect the sale of such
securities;
(ii) prepare and file with the Commission such amendments to such
registration statement and supplements to the prospectus contained
therein as may be necessary to keep such registration statement
effective for such period as may be reasonably necessary to effect the
sale of such securities;
6
<PAGE>
(iii) furnish to the security holders participating in such
registration and to the underwriters of the securities being
registered such reasonable number of copies of the registration
statement, preliminary prospectus, final prospectus and such other
documents as such underwriters may reasonably request in order to
facilitate the public offering of such securities;
(iv) use its best efforts to register or qualify the securities
covered by such registration statement under such state securities or
blue sky laws of such jurisdictions as such participating holders may
reasonably request in writing within 30 days following the original
filing of such registration statement, except that the Company shall
not for any purpose be required to execute a general consent to
service of process or to qualify to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified;
(v) notify the security holders participating in such
registration, promptly after it shall receive notice thereof, of the
time when such registration statement has become effective or a
supplement to any prospectus forming a part of such registration
statement has been filed;
(vi) notify such holders promptly of any request by the
Commission for the amending or supplementing of such registration
statement or prospectus or for additional information;
(vii) prepare and file with the Commission, promptly upon the
request of any such holders, any amendments or supplements to such
registration statement or prospectus which, in the opinion of counsel
for such holders (and concurred in by counsel for the Company), is
required under the Securities Act or the rules and regulations
thereunder in connection with the distribution of the Warrants or
shares by such holder;
(viii) prepare and promptly file with the Commission and promptly
notify such holders of the filing of such amendment or supplement to
such registration statement or prospectus as may be necessary to
correct any statements or omissions if, at the time when a prospectus
relating to such securities is required to be delivered under the
Securities Act, any event shall have occurred as the result of which
any such prospectus or any other prospectus as then in effect would
include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light
of the circumstances in which they were made, not misleading;
(ix) advise such holders, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance of any stop order
by the Commission suspending the effectiveness of such registration
statement or the initiation or threatening of any proceeding for that
purpose and promptly use its best efforts to prevent the issuance of
any stop order or to obtain its withdrawal if such stop order should
be issued;
7
<PAGE>
(x) not file any amendment or supplement to such registration
statement or prospectus to which a majority in interest of such
holders shall have reasonably objected on the grounds that such
amendment or supplement does not comply in all material respects with
the requirements of the Securities Act or the rules and regulations
thereunder, after having been furnished with a copy thereof at least
five business days prior to the filing thereof, unless in the opinion
of counsel for the Company the filing of such amendment or supplement
is reasonably necessary to protect the Company from any liabilities
under any applicable federal or state law and such filing will not
violate applicable law; and
(xi) at the request of any such holder, furnish on the effective
date of the registration statement and, if such registration includes
an underwritten public offering, at the closing provided for in the
underwriting agreement: (i) opinions, dated such respective dates, of
the counsel representing the Company for the purposes of such
registration, addressed to the underwriters, if any, and to the holder
or holders making such request, covering such matters as such
underwriters and holder or holders may reasonably request; and (ii)
letters, dated such respective dates, from the independent certified
public accountants of the Company, addressed to the underwriters, if
any, and to the holder or holders making such request, covering such
matters as such underwriters and holder or holders may reasonably
request, in which letter such accountants shall state (without
limiting the generality of the foregoing) that they are independent
certified public accountants within the meaning of the Securities Act
and that in the opinion of such accountants the financial statements
and other financial data of the Company included in the registration
statement or the prospectus or any amendment or supplement thereto
comply in all material respects with the applicable accounting
requirements of the Securities Act.
(d) The Company hereby indemnifies the holder of this Warrant and of
any common stock issued or issuable hereunder, its officers and directors, and
any person who controls such Warrant holder or such holder of common stock
within the meaning of Section 15 of the Securities Act of 1933, against all
losses, claims, damages and liabilities caused by any untrue statement of a
material fact contained in any registration statement, prospectus, notification
or offering circular (and as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) or any preliminary prospectus
or caused by any omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading except
insofar as such losses, claims, damages or liabilities are caused by any untrue
statement or omission contained in information furnished in writing to the
Company by such Warrant holder or such holder of common stock expressly for use
therein, and each such holder by its acceptance hereof severally agrees that it
will indemnify and hold harmless the Company and each of its officers who signs
such registration statement and each of its directors and each person, if any,
who controls the Company within the meaning of Section 15 of the Securities Act
of 1933 with respect to losses, claims, damages or liabilities which are caused
by any untrue statement or omission contained in information furnished in
writing to the Company by such holder expressly for use therein.
8
<PAGE>
9. Additional Right to Convert Warrant.
-----------------------------------
(a) Subject to the provisions of Section 7 hereof, the holder of this
Warrant shall have the right to require the Company to convert this Warrant (the
"Conversion Right") at any time prior to its expiration into shares of Common
Stock as provided for in this Section 9. Upon exercise of the Conversion Right,
the Company shall deliver to the holder (without payment by the holder of any
Exercise Price) that number of shares of Common Stock equal to the quotient
obtained by dividing (x) the value of the Warrant at the time the Conversion
Right is exercised (determined by subtracting the aggregate Exercise Price for
the Warrant Shares in effect immediately prior to the exercise of the Conversion
Right from the aggregate Fair Market Value for the Warrant Shares immediately
prior to the exercise of the Conversion Right) by (y) the Fair Market Value of
one share of Common Stock immediately prior to the exercise of the Conversion
Right.
(b) The Conversion Right may be exercised by the holder, at any time or
from time to time, prior to its expiration, on any business day by delivering a
written notice in the form attached hereto (the "Conversion Notice") to the
Company at the offices of the Company exercising the Conversion Right and
specifying (i) the total number of shares of Stock the Warrantholder will
purchase pursuant to such conversion and (ii) a place and date not less than one
nor more than 20 business days from the date of the Conversion Notice for the
closing of such purchase.
(c) At any closing under Section 9(b) hereof, (i) the holder will
surrender the Warrant and (ii) the Company will deliver to the holder a
certificate or certificates for the number of shares of Common Stock issuable
upon such conversion, together with cash, in lieu of any fraction of a share,
and (iii) the Company will deliver to the holder a new warrant representing the
number of shares, if any, with respect to which the warrant shall not have been
exercised.
(d) "Fair Market Value" means, with respect to the Company's Common
-----------------
Stock, as of any date:
(i) if the Common Stock is listed or admitted to unlisted trading
privileges on any national securities exchange or is not so listed or admitted
but transactions in the Common Stock are reported on the Nasdaq National Market
System, the reported closing price of the Common Stock on such exchange or by
the Nasdaq National Market System as of such date (or, if no shares were traded
on such day, as of the next preceding day on which there was such a trade); or
(ii) if the Common Stock is not so listed or admitted to unlisted
trading privileges or reported on the Nasdaq National Market System, and bid and
asked prices therefor in the over-the-counter market are reported by the Nasdaq
system or National Quotation Bureau, Inc. (or any comparable reporting
service), the mean of the closing bid and asked prices as of such date, as so
reported by the Nasdaq System, or, if not so reported thereon, as reported by
National Quotation Bureau, Inc. (or such comparable reporting service); or
(iii) if the Common Stock is not so listed or admitted to unlisted
trading privileges, or reported on the Nasdaq National Market System, and such
bid and asked prices are
9
<PAGE>
not so reported by the Nasdaq system or National Quotation Bureau, Inc. (or any
comparable reporting service), such price as the Company's Board of Directors
determines in good faith in the exercise of its reasonable discretion.
IN WITNESS WHEREOF, Vascular Solutions, Inc. has caused this Warrant to be
executed by its duly authorized officers and this Warrant to be dated as of
February 14, 1997.
VASCULAR SOLUTIONS, INC.
By /s/ Howard C. Root
--------------------------------------
Howard C. Root
Chief Executive Officer
By /s/ Michael P. Nagel
---------------------------------------
Michael P. Nagel
Secretary
10
<PAGE>
EXHIBIT 4.3
COMMON STOCK WARRANT
To Purchase 25,500
Shares of Common Stock of
Vascular Solutions, Inc.
December 29, 1997
THIS CERTIFIES THAT, in consideration for its payment of $50.00 to Vascular
Solutions, Inc. (the "Company"), a Minnesota corporation, and for other good and
valuable consideration received, Paul R. Kuehn or his registered assigns is
entitled to subscribe for and purchase from the Company at any time after the
date hereof to and including December 28, 2007, Twenty-Five Thousand Five
Hundred (25,500) fully paid and nonassessable shares of the Company's Common
Stock, $.01 par value, at a price of $3.00 per share:
This Warrant is subject to the following provisions, terms and conditions:
1. Exercise; Transferability. The rights represented by this Warrant may
-------------------------
be exercised by the holder hereof, in whole or in part (but not as to a
fractional share of common stock), by written notice of exercise delivered to
the Company and by the surrender of this Warrant (properly endorsed if required)
at the principal office of the Company and upon payment to it by certified or
bank check or wire transfer of the purchase price for such shares.
This Warrant may be transferred subject to the following conditions
and the restrictions contained in Section 7 hereof: (i) during the first year
after the date of this Warrant, it may not be sold, transferred, assigned or
hypothecated except to persons who are (x) both officers and shareholders of
MJK, or (y) both officers and employees of MJK, and (ii) after such period, the
Warrant shall be transferable without restriction.
2. Issuance of Shares. The Company agrees that the shares purchased
------------------
hereby shall be and are deemed to be issued to the record holder hereof as of
the close of business on the date on which this Warrant shall have been
exercised by surrender of the Warrant and payment for the shares. Subject to
the provisions of the next succeeding paragraph, certificates for the shares of
stock so purchased shall be delivered to the holder hereof within a reasonable
time, not exceeding ten (10) days after the rights represented by this Warrant
shall have been so exercised, and, unless this Warrant has expired, a new
Warrant representing the number of shares, if any, with respect to which this
Warrant shall not then have been exercised shall also be delivered to the holder
hereof within such time.
Notwithstanding the foregoing, however, the Company shall not be required
to deliver any certificate for shares of stock upon exercise of this Warrant,
except in accordance with the provisions, and subject to the limitations, of
paragraph 7 hereof.
<PAGE>
3. Covenants of Company. The Company covenants and agrees that all
--------------------
shares which may be issued upon the exercise of the rights represented by this
Warrant will, upon issuance, be duly authorized and issued, fully paid,
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, and, without limiting the generality of the foregoing, the
Company covenants and agrees that it will from time to time take all such action
as may be required to assure that the par value per share of common stock is at
all times equal to or less than the then effective purchase price per share of
the common stock issuable pursuant to this Warrant. The Company further
covenants and agrees that, during the period within which the rights represented
by this Warrant may be exercised, the Company will at all times have authorized,
and reserved for the purpose of issue or transfer upon exercise of the
subscription rights evidenced by this Warrant, a sufficient number of shares of
its common stock to provide for the exercise of the rights represented by this
Warrant.
4. Anti-Dilution Adjustments. The above provisions are, however,
-------------------------
subject to the following:
(a) In case the Company shall at any time hereafter subdivide or
combine the outstanding shares of common stock or declare a dividend payable in
common stock, the exercise price of this Warrant in effect immediately prior to
the subdivision, combination or record date for such dividend payable in common
stock shall forthwith be proportionately increased, in the case of combination,
or decreased, in the case of subdivision or dividend payable in common stock.
Upon each adjustment of the exercise price, the holder of this Warrant shall
thereafter be entitled to purchase, at the exercise price resulting from such
adjustment, the number of shares obtained by multiplying the exercise price
immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment and dividing the product
thereof by the exercise price resulting from such adjustment.
(b) No fractional shares of common stock are to be issued upon the
exercise of this Warrant, but the Company shall pay a cash adjustment in respect
of any fraction of a share which would otherwise be issuable in an amount equal
to the same fraction of the market price per share of common stock on the day of
exercise as determined in good faith by the Company.
(c) If any capital reorganization or reclassification of the capital
stock of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of common stock shall
be entitled to receive stock, securities or assets with respect to or in
exchange for common stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby the holder hereof shall thereafter have the right to
purchase and receive, upon the basis and upon the terms and conditions specified
in this Warrant and in lieu of the shares of common stock of the Company
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby, such stock, securities or assets as may be issued or
payable with respect to or in exchange for a number of outstanding shares of
such common stock equal to the number of shares of such stock immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby had such reorganization, reclassification, consolidation,
merger or sale not taken place, and in any such case appropriate provisions
shall be made with respect to the rights and interests of the
2
<PAGE>
holder of this Warrant to the end that the provisions hereof (including without
limitation provisions for adjustments of the Warrant purchase price and of the
number of shares purchasable upon the exercise of this Warrant) shall thereafter
be applicable, as nearly as may be, in relation to any shares of stock,
securities or assets thereafter deliverable upon the exercise hereof. The
Company shall not effect any such consolidation, merger or sale unless prior to
the consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger, or the corporation purchasing such
assets, shall assume by operation of law or written instrument, the obligation
to deliver to such holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
purchase. Notice of such assumption shall be promptly mailed to the registered
holder hereof at the last address of such holder appearing on the books of the
Company.
Notwithstanding any language to the contrary set forth in this
paragraph 4 (c), if an occurrence or event described herein shall take place in
which the shareholders of the Company receive cash for their shares of common
stock of the Company and a successor corporation or corporation purchasing
assets shall survive the transaction then, at the election of the record holder
hereof, such corporation shall be obligated to purchase this Warrant (or the
unexercised part hereof) from the record holder without requiring the holder to
exercise all or part of the Warrant. If such corporation refuses to so purchase
this Warrant then the Company shall purchase the Warrant for cash. In either
case the purchase price shall be the amount per share that shareholders of the
outstanding common stock of the Company shall receive as a result of the
transaction multiplied by the number of shares covered by the Warrant, minus the
aggregate exercise price of the Warrant. Such purchase shall be closed within
60 days following the election of the holder to sell this Warrant.
(d) Upon any adjustment of the Warrant purchase price, then, and in
each such case, the Company shall give written notice thereof, by first class
mail, postage prepaid, addressed to the registered holder of this Warrant at the
address of such holder as shown on the books of the Company, which notice shall
state the Warrant purchase price resulting from such adjustment and the increase
or decrease, if any, in the number of shares purchasable at such price upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
(e) If any event occurs as to which in the good faith determination
of the Board of Directors of the Company the other provisions of this paragraph
4 are not strictly applicable or if strictly applicable would not fairly protect
the purchase rights of the holder of this Warrant or of common stock in
accordance with the essential intent and principles of such provisions, then the
Board of Directors shall make an adjustment in the application of such
provisions, in accordance with such essential intent and principles, so as to
protect such purchase rights as aforesaid.
5. Common Stock. As used herein, the term "common stock" shall mean
------------
and include the Company's presently authorized shares of common stock and shall
also include any capital stock of any class of the Company hereafter authorized
which shall not be limited to fixed sum or percentage in respect of the rights
of the holders thereof to participate in dividends or in the distribution,
dissolution or winding up of the Company; provided that the shares purchasable
pursuant to this Warrant shall include shares designated as common stock of the
Company on the
3
<PAGE>
date of original issue of this Warrant or, in the case of any reclassification
of the outstanding shares thereof, the stock, securities or assets provided for
in Section 4 above.
6. No Voting Rights. This Warrant shall not entitle the holder
----------------
hereof to any voting rights or other rights as a stockholder of the Company.
7. Transfer of Warrant or Resale of Shares. In the event the holder
---------------------------------------
of this Warrant desires to transfer this Warrant, or any common stock issued
upon the exercise hereof, the holder shall provide the Company with a written
notice describing the manner of such transfer and an opinion of counsel
(reasonably acceptable to the Company) that the proposed transfer may be
effected without registration or qualification (under any Federal or State law),
whereupon such holder shall be entitled to transfer this Warrant or to dispose
of shares of common stock received upon the previous exercise hereof in
accordance with the notice delivered by such holder to the Company; provided,
--------
that an appropriate legend may be endorsed on this Warrant or the certificates
for such shares respecting restrictions upon transfer thereof necessary or
advisable in the opinion of counsel satisfactory to the Company to prevent
further transfers which would be in violation of Section 5 of the Securities Act
of 1933.
8. Registration Rights. For purposes of this Section 8 only, the
-------------------
term "Warrants" shall include this Warrant and those Warrants issued to MJK or
its assignees pursuant to the provisions of that certain Selling Agency
Agreement, dated January 14, 1997, between the Company and MJK. (a) If the
Company proposes to claim an exemption under Section 3(b) for a public offering
of any of its securities or to register under the Securities Act of 1933 (the
"Securities Act") (except by a claim of exemption or registration statement on a
form that does not permit the inclusion of shares by its security holders) any
of its securities, it will give written notice to all registered holders of
Warrants, and all registered holders of shares of common stock acquired upon the
exercise of Warrants, of its intention to do so and, on the written request of
any such registered holders given within twenty (20) days after receipt of any
such notice (which request must be made within ten (10) years from the date of
this Warrant), the Company will use its best efforts to cause all such shares,
the registered holders of which shall have requested the registration or
qualification thereof, to be included in such notification or registration
statement proposed to be filed by the Company; provided, however, that (i) the
Company shall not be required to include any such shares of Common Stock in any
such registration for any holder who is able to sell all shares of Common Stock
owned by such holder (or issuable to such holder upon exercise of this Warrant),
and which benefit from the registration rights granted hereunder, during the
three-month period beginning on the date such notice is received by such holder,
without compliance with the registration requirements of the Securities Act
pursuant to Rule 144(k) under the Securities Act; (ii) the Company shall not be
required to give such notice with respect to, or to include such Warrant or
Common Stock in, any such registration which is primarily (A) a registration of
a stock option plan or other employee benefit plan or of securities issued or
issuable pursuant to any such plan such as a registration on Form S-8, or (B) a
registration of securities proposed to be issued in exchange for securities or
assets of, or in connection with a merger or consolidation with, another
corporation such as a registration on Form S-4; (iii) the Company may, in its
sole discretion, withdraw any such registration statement and abandon the
proposed offering in which any such holder had requested to participate; (iv) if
the offering to which the registration statement relates is to be distributed by
or through an underwriter, each such holder shall agree, as a condition to the
inclusion of such holder's
4
<PAGE>
securities in such registration, to sell the securities held by such holder
through such underwriter on the same terms and conditions as the underwriter
agrees to sell securities on behalf of the Company and not to sell, transfer,
pledge, assign or otherwise dispose of any shares of Common Stock not sold by
such holder in such offering for such period (up to (90) days after the
effective date of the registration statement) as may be required by the
underwriter; and (v) if the offering to which the registration statement relates
is to be distributed by or through an underwriter and a greater number of
securities is offered for participation in the proposed underwriting then, in
the opinion of the Company's underwriter, can be accommodated without
significantly adversely affecting the proposed underwriting, the amount of such
securities otherwise to be included in the underwritten offering on behalf of
all persons other than the Company may be reduced pro rata, in accordance with
the number of shares of Common Stock proposed to be sold by each such holder, or
may be eliminated entirely from such underwritten public offering. The costs and
expenses of such offering, including but not limited to legal fees, special
audit fees, printing expenses, filing fees, fees and expenses relating to
qualifications under state securities or blue sky laws and the premiums for
insurance, if any, incurred by the Company in connection with any registration
made pursuant to this Section 8(a) shall be borne entirely by the Company;
provided, however, that any holders participating in such registration shall
- -------- -------
bear their own underwriting discounts and commissions and the fees and expenses
of their own counsel or accountants in connection with any such registration.
The foregoing provisions of this Section 8(a) shall not apply to the Company's
initial public offering, provided that MJK is the underwriter or a co-managing
underwriter of such offering.
(b) Further, on one occasion only, at any time during the period
beginning on the closing of the Company's initial public offering and ending ten
(10) years from the date hereof, upon request by the holders of Warrants and/or
the holders of shares issued upon the exercise of the Warrants who collectively
(i) have the right to purchase at least 50% of the shares subject to the
Warrants, (ii) hold directly at least 50% of the shares purchased hereunder, or
(iii) have the right to purchase or hold directly an aggregate of at least 50%
of the shares purchasable or purchased hereunder, the Company will promptly take
all necessary steps, at the option of such holders, to register or qualify the
sale of the Warrants or such shares by the holders thereof, or to register the
issuance by the Company of shares upon the exercise of Warrants, under the
Securities Act of 1933 (and, upon the request of such holders, under Rule 415
thereunder) and such state laws as such holders may reasonably request;
provided, however, that (i) the Company shall not be required to include any
such shares of Common Stock in any such registration for any holder who is able
to sell all shares of Common Stock owned by such holder (or issuable to such
holder upon exercise of this Warrant), and which benefit from the registration
rights granted hereunder, during the three-month period beginning on the date
such registration is requested by such holder, without compliance with the
registration requirements of the Securities Act pursuant to Rule 144(k) under
the Securities Act; and (ii) the Company may, on not more than one occasion,
delay the filing of any registration statement requested pursuant to this
Section 8(b) to a date not more than 90 days following the date of such request
if in the reasonable opinion of the Company at the time of such request such a
delay is necessary in order not to significantly adversely affect financing
efforts then underway at the Company (in which case the expiration date of this
Section 8(b) shall be extended by a period equal to the period of such delay).
The costs and expenses directly related to any registration requested pursuant
to this section, including but not limited to legal fees of the Company's
counsel, audit fees, printing expense, filing fees and fees and expenses
relating to qualifications under state securities or blue sky laws incurred by
the Company shall be borne
5
<PAGE>
entirely by the Company; provided, however, that the persons for whose account
the securities covered by such registration are sold shall bear the underwriting
commissions applicable to their shares and fees of their legal counsel. If the
holders of Warrants and the holders of shares of Common Stock underlying the
Warrants are the only persons whose shares are included in the registration
pursuant to this section, such holders shall bear the expense of inclusion of
audited financial statements in the registration statement which are not dated
as of the Company's normal fiscal year or are not otherwise prepared by the
Company for its own business purposes. The Company shall keep effective and
maintain any registration, qualification, notification or approval specified in
this paragraph for such period as may be necessary for the holders of the
Warrants and such common stock to dispose of such securities and, from time to
time shall amend or supplement, at the holder's expense, the prospectus or
offering circular used in connection therewith to the extent necessary in order
to comply with applicable law.
If, at the time any written request for registration is received by
the Company pursuant to this Section 8(b), the Company has determined to proceed
with the actual preparation and filing of a registration statement under the
Securities Act in connection with the proposed offer and sale for cash of any of
its securities by it or any of its security holders, such written request shall
be deemed to have been given pursuant to Section 8(a) hereof rather than this
Section 8(b), and the rights of the holders of Warrants and or shares issued
upon the exercise of the Warrants covered by such written request shall be
governed by Section 8(a) hereof.
The managing underwriter of an offering registered pursuant to this
Section 8(b), if any, shall be selected by the holders of a majority of the
Warrants and/or shares issued upon the exercise of the Warrants for which
registration has been requested and shall be reasonably acceptable to the
Company. Without the written consent of the holders of a majority of the
Warrants and/or shares issued upon the exercise of the Warrants for which
registration has been requested pursuant to this Section 8(b), neither the
Company nor any other holder of securities of the Company may include securities
in such registration if in the good faith judgment of the managing underwriter
of such public offering the inclusion of such securities would interfere with
the successful marketing of the Warrants and/or shares issued upon the exercise
of the Warrants or require the exclusion of any portion of the Warrants and/or
shares issued upon the exercise of the Warrants to be registered. Subject to the
preceding sentence, shares to be excluded from an underwritten public offering
shall be selected in the manner provided in Section 8(a) hereof.
(c) If and whenever the Company is required by the provisions of
Sections 8(a) or 8(b) hereof to effect the registration of Warrants and/or
shares issued upon the exercise of the Warrants under the Securities Act, the
Company will:
(i) prepare and file with the Commission a registration
statement with respect to such securities, and use its best efforts to
cause such registration statement to become and remain effective for
such period as may be reasonably necessary to effect the sale of such
securities;
(ii) prepare and file with the Commission such amendments to
such registration statement and supplements to the prospectus
contained therein as may
6
<PAGE>
be necessary to keep such registration statement effective for such
period as may be reasonably necessary to effect the sale of such
securities;
(iii) furnish to the security holders participating in such
registration and to the underwriters of the securities being
registered such reasonable number of copies of the registration
statement, preliminary prospectus, final prospectus and such other
documents as such underwriters may reasonably request in order to
facilitate the public offering of such securities;
(iv) use its best efforts to register or qualify the
securities covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as such
participating holders may reasonably request in writing within 30 days
following the original filing of such registration statement, except
that the Company shall not for any purpose be required to execute a
general consent to service of process or to qualify to do business as
a foreign corporation in any jurisdiction wherein it is not so
qualified;
(v) notify the security holders participating in such
registration, promptly after it shall receive notice thereof, of the
time when such registration statement has become effective or a
supplement to any prospectus forming a part of such registration
statement has been filed;
(vi) notify such holders promptly of any request by the
Commission for the amending or supplementing of such registration
statement or prospectus or for additional information;
(vii) prepare and file with the Commission, promptly upon
the request of any such holders, any amendments or supplements to such
registration statement or prospectus which, in the opinion of counsel
for such holders (and concurred in by counsel for the Company), is
required under the Securities Act or the rules and regulations
thereunder in connection with the distribution of the Warrants or
shares by such holder;
(viii) prepare and promptly file with the Commission and
promptly notify such holders of the filing of such amendment or
supplement to such registration statement or prospectus as may be
necessary to correct any statements or omissions if, at the time when
a prospectus relating to such securities is required to be delivered
under the Securities Act, any event shall have occurred as the result
of which any such prospectus or any other prospectus as then in effect
would include an untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein, in the
light of the circumstances in which they were made, not misleading;
(ix) advise such holders, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance of any stop order
by the Commission suspending the effectiveness of such registration
statement or the initiation or threatening of any
7
<PAGE>
proceeding for that purpose and promptly use its best efforts to
prevent the issuance of any stop order or to obtain its withdrawal if
such stop order should be issued;
(x) not file any amendment or supplement to such
registration statement or prospectus to which a majority in interest
of such holders shall have reasonably objected on the grounds that
such amendment or supplement does not comply in all material respects
with the requirements of the Securities Act or the rules and
regulations thereunder, after having been furnished with a copy
thereof at least five business days prior to the filing thereof,
unless in the opinion of counsel for the Company the filing of such
amendment or supplement is reasonably necessary to protect the Company
from any liabilities under any applicable federal or state law and
such filing will not violate applicable law; and
(xi) at the request of any such holder, furnish on the
effective date of the registration statement and, if such registration
includes an underwritten public offering, at the closing provided for
in the underwriting agreement: (i) opinions, dated such respective
dates, of the counsel representing the Company for the purposes of
such registration, addressed to the underwriters, if any, and to the
holder or holders making such request, covering such matters as such
underwriters and holder or holders may reasonably request; and (ii)
letters, dated such respective dates, from the independent certified
public accountants of the Company, addressed to the underwriters, if
any, and to the holder or holders making such request, covering such
matters as such underwriters and holder or holders may reasonably
request, in which letter such accountants shall state (without
limiting the generality of the foregoing) that they are independent
certified public accountants within the meaning of the Securities Act
and that in the opinion of such accountants the financial statements
and other financial data of the Company included in the registration
statement or the prospectus or any amendment or supplement thereto
comply in all material respects with the applicable accounting
requirements of the Securities Act.
(d) The Company hereby indemnifies the holder of this Warrant and of
any common stock issued or issuable hereunder, its officers and directors, and
any person who controls such Warrant holder or such holder of common stock
within the meaning of Section 15 of the Securities Act of 1933, against all
losses, claims, damages and liabilities caused by any untrue statement of a
material fact contained in any registration statement, prospectus, notification
or offering circular (and as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) or any preliminary prospectus
or caused by any omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading except
insofar as such losses, claims, damages or liabilities are caused by any untrue
statement or omission contained in information furnished in writing to the
Company by such Warrant holder or such holder of common stock expressly for use
therein, and each such holder by its acceptance hereof severally agrees that it
will indemnify and hold harmless the Company and each of its officers who signs
such registration statement and each of its directors and each person, if any,
who controls the Company within the meaning of Section 15 of the Securities Act
of 1933 with respect to losses, claims, damages or liabilities which are caused
by any untrue statement or
8
<PAGE>
omission contained in information furnished in writing to the Company by such
holder expressly for use therein.
9. Additional Right to Convert Warrant.
-----------------------------------
(a) Subject to the provisions of Section 7 hereof, the holder of this
Warrant shall have the right to require the Company to convert this Warrant (the
"Conversion Right") at any time prior to its expiration into shares of Common
Stock as provided for in this Section 9. Upon exercise of the Conversion Right,
the Company shall deliver to the holder (without payment by the holder of any
Exercise Price) that number of shares of Common Stock equal to the quotient
obtained by dividing (x) the value of the Warrant at the time the Conversion
Right is exercised (determined by subtracting the aggregate Exercise Price for
the Warrant Shares in effect immediately prior to the exercise of the Conversion
Right from the aggregate Fair Market Value for the Warrant Shares immediately
prior to the exercise of the Conversion Right) by (y) the Fair Market Value of
one share of Common Stock immediately prior to the exercise of the Conversion
Right.
(b) The Conversion Right may be exercised by the holder, at any time
or from time to time, prior to its expiration, on any business day by delivering
a written notice in the form attached hereto (the "Conversion Notice") to the
Company at the offices of the Company exercising the Conversion Right and
specifying (i) the total number of shares of Stock the Warrantholder will
purchase pursuant to such conversion and (ii) a place and date not less than one
nor more than 20 business days from the date of the Conversion Notice for the
closing of such purchase.
(c) At any closing under Section 9(b) hereof, (i) the holder will
surrender the Warrant and (ii) the Company will deliver to the holder a
certificate or certificates for the number of shares of Common Stock issuable
upon such conversion, together with cash, in lieu of any fraction of a share,
and (iii) the Company will deliver to the holder a new warrant representing the
number of shares, if any, with respect to which the warrant shall not have been
exercised.
(d) "Fair Market Value" means, with respect to the Company's Common
-----------------
Stock, as of any date:
(i) if the Common Stock is listed or admitted to unlisted
trading privileges on any national securities exchange or is not so listed or
admitted but transactions in the Common Stock are reported on the Nasdaq
National Market System, the reported closing price of the Common Stock on such
exchange or by the Nasdaq National Market System as of such date (or, if no
shares were traded on such day, as of the next preceding day on which there was
such a trade); or
(ii) if the Common Stock is not so listed or admitted to
unlisted trading privileges or reported on the Nasdaq National Market System,
and bid and asked prices therefor in the over-the-counter market are reported by
the Nasdaq system or National Quotation Bureau, Inc. (or any comparable
reporting service), the mean of the closing bid and asked prices as of such
date, as so reported by the Nasdaq System, or, if not so reported thereon, as
reported by National Quotation Bureau, Inc. (or such comparable reporting
service); or
9
<PAGE>
(iii) if the Common Stock is not so listed or admitted to
unlisted trading privileges, or reported on the Nasdaq National Market System,
and such bid and asked prices are not so reported by the Nasdaq system or
National Quotation Bureau, Inc. (or any comparable reporting service), such
price as the Company's Board of Directors determines in good faith in the
exercise of its reasonable discretion.
IN WITNESS WHEREOF, Vascular Solutions, Inc. has caused this Warrant
to be executed by its duly authorized officers and this Warrant to be dated as
of December 29, 1997.
VASCULAR SOLUTIONS, INC.
By /s/ Howard C. Root, CEO
---------------------------------------
Howard C. Root, Chief Executive Officer
By /s/ Michael Nagel
---------------------------------------
Michael Nagel, Secretary
10
<PAGE>
EXERCISE FORM
(TO BE SIGNED ONLY UPON EXERCISE OF WARRANT)
VASCULAR SOLUTIONS, INC.
The undersigned, the holder of the within warrant, hereby irrevocably
elects to exercise the purchase right represented by such warrant for, and to
purchase thereunder ___________________ shares of the Common Stock, $.01 par
value, of Vascular Solutions, Inc. and herewith makes payment of
$_________________therefor, and requests that the certificates for such shares
be issued in the name of ___________________________and be delivered
to___________________, whose address is
_________________________________________________________________.
Dated: ________________ _____________________________________
(Signature must conform in all respects to
the name of holder as specified on the face
of the warrant)
(Address)
[Signature Guaranteed]
(City - State - Zip)
11
<PAGE>
ASSIGNMENT FORM
(TO BE SIGNED ONLY UPON TRANSFER OF THE WARRANT)
For value received, the undersigned hereby sells, assigns and transfers
unto________________________________ the right represented by the within warrant
to purchase _____________________ of the shares of Common Stock, $.01 par value,
of Vascular Solutions, Inc., to which the within warrant relates, and appoints
____________________ attorney to transfer said right on the books of Vascular
Solutions, Inc., with full power of substitution in the premises.
Dated: ________________ ______________________________________
(Signature must conform in all respects to
the name of holder as specified on the face
of the warrant)
(Address)
[Signature Guaranteed]
(City - State - Zip)
In the presence of:
12
<PAGE>
CONVERSION NOTICE
(TO BE SIGNED ONLY UPON EXERCISE OF CONVERSION RIGHT
SET FORTH IN SECTION 9 OF THE WARRANT)
TO VASCULAR SOLUTIONS, INC.:
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the Conversion Right set forth in Section 9 of such Warrant
and to purchase________________shares of the Common Stock, $.01 par value, of
Vascular Solutions, Inc. The closing of this conversion shall take place at the
offices of the Company on _________________. Certificates for the shares to be
delivered at the closing shall be issued in the name of ______________________,
whose address is ________________________________________.
Dated: ________________ ______________________________________
(Signature must conform in all respects to
the name of holder as specified on the face
of the warrant)
(Address)
[Signature Guaranteed]
(City - State - Zip)
13
<PAGE>
EXHIBIT 4.4
VASCULAR SOLUTIONS, INC.
AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
December 9, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Registration Rights................................................. 1
1.1 Definitions................................................... 1
1.2 Request for Registration...................................... 2
1.3 Company Registration.......................................... 4
1.4 Form S-3 Registration......................................... 4
1.5 Obligations of the Company.................................... 5
1.6 Furnish Information........................................... 6
1.7 Expenses of Registration...................................... 7
1.8 Underwriting Requirements..................................... 8
1.9 Delay of Registration......................................... 8
1.10 Indemnification............................................... 8
1.11 Reports Under Securities Exchange Act of 1934................. 11
1.12 Assignment of Registration Rights............................. 11
1.13 Limitations on Subsequent Registration Rights................. 12
1.14 "Market Stand-Off"Agreement................................... 12
1.15 Termination of Registration Rights............................ 13
2. Covenants of the Company............................................ 13
2.1 Delivery of Financial Statements.............................. 13
2.2 Inspection.................................................... 14
2.3 Right of First Offer.......................................... 14
2.4 Board Observation Right....................................... 15
2.5 Termination of Covenants...................................... 16
3. Miscellaneous....................................................... 16
3.1 Successors and Assigns........................................ 16
3.2 Governing Law................................................. 16
3.3 Counterparts.................................................. 17
3.4 Titles and Subtitles.......................................... 17
3.5 Notices....................................................... 17
3.6 Expenses...................................................... 17
3.7 Amendments and Waivers........................................ 17
3.8 Severability.................................................. 17
3.9 Aggregation of Stock.......................................... 17
3.10 Complete Agreement............................................ 17
</TABLE>
<PAGE>
VASCULAR SOLUTIONS, INC.
------------------------
AMENDED AND RESTATED
--------------------
INVESTORS' RIGHTS AGREEMENT
---------------------------
This Amended and Restated Investors' Rights Agreement (the "Agreement")
---------
is made as of the 9th day of December, 1998, by and between Vascular Solutions,
Inc., a Minnesota corporation (the "Company") and the holders of shares of
-------
Series A Preferred Stock (the "Series A Preferred Shareholders") and Series B
-------------------------------
Preferred Stock (the "Series B Preferred Shareholders") listed on Exhibit A
------------------------------- ---------
hereto (collectively, the "Investors" and individually, an "Investor").
--------
RECITALS
--------
On December 19, 1997 the Company and the Series A Preferred
Shareholders entered into a Series A Preferred Stock Purchase Agreement (the
"Series A Purchase Agreement") pursuant to which the Company sold to the Series
---------------------------
A Preferred Shareholders and the Series A Preferred Shareholders purchased from
the Company shares of the Company's Series A Preferred Stock. On the date
hereof, the Company and the Series B Preferred Shareholders have entered into a
Series B Preferred Stock Purchase Agreement (the "Series B Purchase Agreement")
---------------------------
pursuant to which the Company desires to sell to the Series B Preferred
Shareholders and the Series B Preferred Shareholders desire to purchase from the
Company shares of the Company's Series B Preferred Stock. A condition to the
Investors' obligations under each of the Series A Purchase Agreement and the
Series B Purchase Agreement is that the Company and the Investors enter into an
investors' rights agreement in order to provide the Investors with (i) certain
rights to register shares of the Company's Common Stock issuable upon conversion
of the Series A Preferred Stock and the Series B Preferred Stock held by the
Investors, (ii) certain rights to receive or inspect information pertaining to
the Company, and (iii) a right of first offer with respect to certain issuances
by the Company of its securities. On December 19, 1997 the Company and the
Series A Preferred Shareholders entered into such an investors' rights agreement
(the "Original Investors' Rights Agreement"), which the parties thereto now
desire to amend and restate as provided herein. The Company, the Series A
Preferred Shareholders and the Series B Preferred Shareholders each desire to
agree to the terms and conditions set forth herein.
AGREEMENT
The parties hereby agree as follows:
1. Registration Rights. The Company and the Investors covenant and agree
-------------------
as follows:
1.1 Definitions. For purposes of this Section 1:
-----------
(a) The terms "register," "registered," and "registration" refer
-------- ---------- ------------
to a registration effected by preparing and filing a registration statement or
similar document in
<PAGE>
compliance with the Securities Act of 1933, as amended (the "Securities Act"),
--------------
and the declaration or ordering of effectiveness of such registration statement
or document;
(b) The term "Registrable Securities" means (i) the shares of
----------------------
Common Stock issuable or issued upon conversion of the Series A Preferred Stock
and the Series B Preferred Stock, and (ii) any other shares of 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 listed in (i); provided, however, that the foregoing definition shall
exclude in all cases any Registrable Securities sold by a person in a
transaction in which his or her rights under this Agreement are not assigned.
Notwithstanding the foregoing, Common Stock or other securities shall only be
treated as Registrable Securities if and so long as they have not been (A) sold
to or through a broker or dealer or underwriter in a public distribution or a
public securities transaction, or (B) sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(1) thereof so that all transfer restrictions, and restrictive legends
with respect thereto, if any, are removed upon the consummation of such sale;
(c) The number of shares of "Registrable Securities then
---------------------------
outstanding" shall be determined by the number of shares of Common Stock
- -----------
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities;
(d) The term "Holder" means any person owning or having the
------
right to acquire Registrable Securities or any assignee thereof in accordance
with Section 1.12 hereof;
(e) The term "Form S-3" means such form under the Securities Act
--------
as in effect on the date hereof or any successor form under the Securities Act;
and
(f) The term "SEC" means the Securities and Exchange
---
Commission.
1.2 Request for Registration.
------------------------
(a) If the Company shall receive at any time after the earlier
of (i) December 31, 2000, or (ii) 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 option, stock purchase or
similar plan or an SEC Rule 145 transaction), a written request from the Holders
of a majority of the Registrable Securities then outstanding that the Company
file a registration statement under the Securities 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 $7,500,000), then the
Company shall, within ten (10) days of the receipt thereof, give written notice
of such request to all Holders and shall, subject to the limitations of
subsection 1.2(b), use its best efforts to effect within ninety (90) days of the
receipt of such request, the registration under the Securities Act of all
Registrable Securities which the Holders request to be registered
-2-
<PAGE>
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 this Section 1.2 and the Company
shall include such information in the written notice referred to in subsection
1.2(a). The underwriter will be selected by a majority in interest of the
Initiating Holders and shall be reasonably acceptable to the Company. In such
event, the right of any Holder to include such Holder's 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 (unless otherwise mutually agreed by a majority in interest of
the Initiating Holders and such Holder) to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company as provided in subsection 1.5(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by a majority in interest of the Initiating
Holders. Notwithstanding any other provision of this Section 1.2, 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 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 1.2, 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 shareholders 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 such filing
for a period of not more than one hundred twenty (120) days after receipt of the
request of the Initiating Holders; provided, however, that the Company may not
-------- -------
utilize this right more than once in any twelve-month period.
(d) In addition, the Company shall not be obligated to effect,
or to take any action to effect, any registration pursuant to this Section 1.2:
(i) After the Company has effected two (2) registrations
pursuant to this Section 1.2 and such registrations have been declared or
ordered effective;
(ii) During the period starting with the date sixty (60)
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 1.3 hereof;
-3-
<PAGE>
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 1.4 below.
1.3 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 shareholders other than the Holders) any of its
stock under the Securities 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 or a transaction
covered by Rule 145 under the Securities Act, a registration in which the only
stock being registered is Common Stock issuable upon conversion of debt
securities which are also being registered, or any 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), 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 1.8, cause to be registered under the Securities Act all of the
Registrable Securities that each such Holder has requested to be registered.
1.4 Form S-3 Registration. In case the Company shall receive from
---------------------
any Holder or Holders of not less than twenty percent (20%) of the Registrable
Securities then outstanding 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 Holder
or 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 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 1.4: (i) if
Form S-3 is not available for such offering by the Holders; (ii) 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 shareholders
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 1.4;
-4-
<PAGE>
provided, however, that the Company shall not utilize this right more than once
- -------- -------
in any twelve month period; or (iii) if the Company has, within the twelve (12)
month period preceding the date of such request, already effected a registration
on Form S-3 for the Holders pursuant to this Section 1.4.
(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. Registrations effected pursuant to this
Section 1.4 shall not be counted as demands for registration or registrations
effected pursuant to Sections 1.2 or 1.3, respectively.
1.5 Obligations of the Company. Whenever required under this Section
--------------------------
1 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 up to one hundred twenty (120) days.
(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 Securities Act with respect to the disposition of all
securities covered by such registration statement for up to one hundred twenty
(120) days.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities 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 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
-5-
<PAGE>
under the Securities 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, such obligation to
continue for one hundred twenty (120) days.
(g) Cause all such Registrable Securities registered pursuant
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 pursuant to this Section 1 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 1, on the date that such Registrable Securities are delivered to the
underwriters for sale in connection with a registration pursuant to this Section
1, 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.
1.6 Furnish Information. It shall be a condition precedent to the
-------------------
obligations of the Company to take any action pursuant to this Section 1 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such 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. The Company shall have no obligation with respect to any
registration requested pursuant to Section 1.2 or Section 1.4 of this Agreement
if, as a result of the application of the preceding sentence, 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
1.2(a) or subsection 1.4, whichever is applicable.
1.7 Expenses of Registration.
------------------------
(a) Demand Registration. All expenses other than underwriting
-------------------
discounts and commissions incurred in connection with registrations, filings or
qualifications
-6-
<PAGE>
pursuant to Section 1.2, 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 selected by them with the approval of the
Company, which approval shall not be unreasonably withheld, 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 1.2 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 one
demand registration pursuant to Section 1.2; provided further, however, that if
at the time of such withdrawal, the Holders have learned of a material adverse
change in the condition, business or prospects of the Company from that known to
the Holders at the time of their request and have withdrawn the request with
reasonable promptness following disclosure by the Company of such material
adverse change, then the Holders shall not be required to pay any of such
expenses and shall retain their rights pursuant to Section 1.2.
(b) Company Registration. All expenses other than underwriting
--------------------
discounts and commissions incurred in connection with registrations, filings or
qualifications of Registrable Securities pursuant to Section 1.3 for each Holder
(which right may be assigned as provided in Section 1.12), 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 Holder or
Holders selected by them with the approval of the Company, which approval shall
not be unreasonably withheld, shall be borne by the Company.
(c) Registration on Form S-3. All expenses other than
------------------------
underwriting discounts and commissions incurred in connection with a
registration requested pursuant to Section 1.4, including (without limitation)
all registration, filing, qualification, printers' and accounting fees and the
reasonable fees and disbursements of counsel for the Company and reasonable fees
and disbursements of one counsel for the selling Holder or Holders selected by
them with the approval of the Company, which approval shall not be unreasonably
withheld, shall be borne by the Company.
1.8 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 1.3 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 shareholders 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 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
-7-
<PAGE>
be apportioned pro rata among the selling shareholders according to the total
amount of securities entitled to be included therein owned by each selling
shareholder or in such other proportions as shall mutually be agreed to by such
selling shareholders) but in no event shall (a) 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 shareholders may be excluded if the underwriters make the
determination described above and no other shareholder's securities are included
or (b) notwithstanding (a) above, any shares being sold by a shareholder
exercising a demand registration right similar to that granted in Section 1.2 be
excluded from such offering or (c) any securities held by any other
securityholder be included if any securities held by any selling Holder are
excluded. For purposes of the preceding parenthetical concerning apportionment,
for any selling shareholder which is a holder of Registrable Securities and
which is a partnership or corporation, the partners, retired partners and
shareholders 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 shareholder," and any
pro-rata reduction with respect to such "selling shareholder" shall be based
upon the aggregate amount of shares carrying registration rights owned by all
entities and individuals included in such "selling shareholder," as defined in
this sentence.
1.9 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 1.
1.10 Indemnification. In the event any Registrable Securities are
---------------
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, any underwriter (as defined in the Securities
Act) for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Securities Act or the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), against any losses, claims,
------------
damages or liabilities (joint or several) to which they may become subject under
the Securities Act, the Exchange Act or other federal or state law, 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 Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law; and the Company will pay to each
such Holder, underwriter or controlling person, as incurred, 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 1.10(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability
or action if such
-8-
<PAGE>
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.
(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 Securities 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 Securities Act, the Exchange Act or other
federal or state law, 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, as incurred, any legal or other expenses reasonably incurred by
any person intended to be indemnified pursuant to this subsection 1.10(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 1.10(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
--------
1.10(b) exceed the net proceeds from the offering received by such Holder,
except in the case of willful fraud by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 1.10 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 1.10, 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 reasonable 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 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
1.10, 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 1.10.
-9-
<PAGE>
(d) If the indemnification provided for in this Section 1.10 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; provided, that in no event shall any contribution by a Holder
--------
under this Subsection 1.10(d) exceed the net proceeds from the offering received
by such Holder, except in the case of willful fraud by such Holder. 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 1.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.11 Reports Under Securities Exchange Act of 1934. With a view to
---------------------------------------------
making available to the Holders the benefits of Rule 144 promulgated under the
Securities 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:
(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 so long as the
Company remains subject to the periodic reporting requirements under Sections 13
or 15(d) of the Exchange Act;
(b) take such action, including the voluntary registration of
its Common Stock under Section 12 of the Exchange Act, as is necessary to enable
the Holders to utilize Form S-3 for the sale of their Registrable Securities,
such action to be taken as soon as practicable after the end of the fiscal year
in which the first registration statement filed by the Company for the offering
of its securities to the general public is declared effective;
-10-
<PAGE>
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(d) 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 Securities Act and the
Exchange 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.
1.12 Assignment of Registration Rights. The rights to cause the
---------------------------------
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of at least ten percent (10%) of such Holder's Registrable Securities,
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 Securities Act. For the
purposes of determining the number of shares of Registrable Securities held by a
transferee or assignee, the holdings of transferees and assignees of an Investor
who are partners, members or shareholders of an Investor or an affiliate of such
Investor (i.e. an entity controlled by, under common control with or controlling
such Investor), including spouses and ancestors, lineal descendants and siblings
of such persons or their spouses who acquire Registrable Securities by gift,
will or intestate succession, shall be aggregated together and with the
Investor; provided that all assignees and transferees who would not qualify
individually for assignment of registration rights shall have a single attorney-
in-fact for the purpose of exercising any rights, receiving notices or taking
any action under Section 1.
1.13 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 66-2/3% 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 1.2 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 either of the dates set forth in subsection 1.2(a) or within one
hundred twenty (120) days of the effective date of any registration effected
pursuant to Section 1.2.
-11-
<PAGE>
1.14 "Market Stand-Off" Agreement. Each Holder hereby agrees that,
----------------
during the period of duration (up to, but not exceeding, 180 days) 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 Securities 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 be applicable only during the two-year
period following the date of the final prospectus distributed pursuant to 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; and
(b) all officers and directors of the Company, all one-percent
securityholders, 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
Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period, and each Holder agrees
that, if so requested, such Holder will execute an agreement in the form
provided by the underwriter containing terms which are essentially consistent
with the provisions of this Section 1.14.
Notwithstanding the foregoing, the obligations described in this
Section 1.14 shall not apply to a registration relating solely to employee
benefit plans on Form S-1 or Form S-8 or similar forms which may be promulgated
in the future, or a registration relating solely to an SEC Rule 145 transaction
on Form S-4 or similar forms which may be promulgated in the future.
1.15 Termination of Registration Rights. No Holder shall be entitled
----------------------------------
to exercise any right provided for in this Section 1 after the earlier of (a)
seven (7) years following the consummation of the sale of securities pursuant to
a registration statement filed by the Company under the Securities Act in
connection with the initial firm commitment underwritten offering of its
securities to the general public or (b) such time as Rule 144 or another similar
exemption under the Securities Act is available for the sale of all of such
Holder's shares during a three (3)-month period without registration.
2. Covenants of the Company.
------------------------
2.1 Delivery of Financial Statements. The Company shall deliver to
--------------------------------
each Investor holding, and to transferees of, at least 100,000 shares of
Registrable Securities:
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<PAGE>
(a) as soon as practicable, but in any event within ninety (90)
days after the end of each fiscal year of the Company, an income statement for
such fiscal year, a balance sheet of the Company and statement of shareholder's
equity as of the end of such year, and a statement of cash flows for such year,
such year-end financial reports to be in reasonable detail, prepared in
accordance with generally accepted accounting principles ("GAAP") and audited
----
and certified by an independent public accounting firm of nationally recognized
standing selected by the Company;
(b) as soon as practicable, but in any event within forty-five
(45) days after the end of each of the first three (3) quarters of each fiscal
year of the Company, an unaudited profit or loss statement, a statement of cash
flows for such fiscal quarter and an unaudited balance sheet as of the end of
such fiscal quarter;
(c) within forty-five (45) days of the end of each month, an
unaudited income statement and a statement of cash flows and balance sheet for
and as of the end of such month, in reasonable detail;
(d) as soon as practicable, but in any event thirty (30) days
prior to the end of each fiscal year, a budget and business plan for the next
fiscal year, prepared on a monthly basis, including balance sheets and sources
and applications of funds statements for such months;
(e) with respect to the financial statements called for in
subsections (b) and (c) of this Section 2.1, an instrument executed by the Chief
Financial Officer or President of the Company and certifying that such
financials were prepared in accordance with GAAP consistently applied with prior
practice for earlier periods (with the exception of footnotes that may be
required by GAAP) and fairly present the financial condition of the Company and
its results of operation for the period specified, subject to year-end audit
adjustment, provided that the foregoing shall not restrict the right of the
Company to change its accounting principles consistent with GAAP, if the Board
of Directors determines that it is in the best interest of the Company to do so;
and
(f) such other information relating to the financial condition,
business, prospects or corporate affairs of the Company as the Investor or any
assignee of the Investor may from time to time reasonably request; provided,
--------
however, that the Company shall not be obligated under this subsection (f) or
- -------
any other subsection of Section 2.1 to provide information which it deems in
good faith to be a trade secret or similar confidential information.
2.2 Inspection. The Company shall permit each Investor to visit and
----------
inspect the Company's properties, to examine its books of account and records
and to discuss the Company's affairs, finances and accounts with its officers,
all at such reasonable times as may be requested by the Investor; provided,
--------
however, that the Company shall not be obligated pursuant to this Section 2.2 to
- -------
provide access to any information which it reasonably considers to be a trade
secret or similar confidential information.
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<PAGE>
2.3 Right of First Offer. Subject to the terms and conditions
--------------------
specified in this Section 2.3, the Company hereby grants to each Investor a
right of first offer with respect to future sales by the Company of its Shares
(as hereinafter defined). An Investor who chooses to exercise the right of first
offer may designate as purchasers under such right itself or its partners or
affiliates in such proportions as it deems appropriate.
Each time the Company proposes to offer any shares of, or securities
convertible into or exercisable for any shares of, any class of its capital
stock ("Shares"), the Company shall first make an offering of such Shares to
------
each Investor in accordance with the following provisions:
(a) The Company shall deliver a notice by certified mail
("Notice") to the Investors stating (i) its bona fide intention to offer such
------
Shares, (ii) the number of such Shares to be offered and (iii) the price and
terms, if any, upon which it proposes to offer such Shares.
(b) Within fifteen (15) calendar days after delivery of the
Notice, the Investor may elect to purchase or obtain, at the price and on the
terms specified in the Notice, up to that portion of such Shares which equals
the proportion that the number of shares of Common Stock issued and held, or
issuable upon conversion and exercise of all convertible or exercisable
securities then held, by such Investor bears to the total number of shares of
Common Stock then outstanding (assuming full conversion and exercise of all
convertible or exercisable securities). The Company shall promptly, in writing,
inform each Investor that purchases all the shares available to it (each, a
"Fully-Exercising Investor") of any other Investor's failure to do likewise.
-------------------------
During the ten (10) day period commencing after receipt of such information,
each Fully-Exercising Investor shall be entitled to obtain that portion of the
Shares for which Investors were entitled to subscribe but which were not
subscribed for by the Investors that is equal to the proportion that the number
of shares of Common Stock issued and held, or issuable upon conversion and
exercise of all convertible or exercisable securities then held, by such Fully-
Exercising Investor bears to the total number of shares of Common Stock then
outstanding (assuming full conversion and exercise of all convertible or
exercisable securities).
(c) The Company may, during the 90-day period following the
expiration of the period provided in subsection 2.3(b) hereof, offer the
remaining unsubscribed portion of the Shares to any person or persons at a price
not less than, and upon terms no more favorable to the offeree than those
specified in the Notice. If the Company does not enter into an agreement for the
sale of the Shares within such period, or if such agreement is not consummated
within 60 days of the execution thereof, the right provided hereunder shall be
deemed to be revived and such Shares shall not be offered unless first reoffered
to the Investors in accordance herewith.
(d) The right of first offer in this paragraph 2.3 shall not be
applicable (i) to the issuance or sale of up to 900,000 shares of Common Stock
(or options therefor) to employees, consultants and directors, pursuant to plans
or agreements approved by the Board of Directors for the primary purpose of
soliciting or retaining their services, (ii) to or after consummation of a bona
fide, firmly underwritten public offering of shares of Common Stock,
-14-
<PAGE>
registered under the Securities Act pursuant to a registration statement, (iii)
to the issuance of securities pursuant to the conversion or exercise of
convertible or exercisable securities, (iv) to the issuance of securities in
connection with a bona fide business acquisition of or by the Company, whether
by merger, consolidation, sale of assets, sale or exchange of stock or otherwise
or (v) to the issuance of securities to financial institutions or lessors in
connection with commercial credit arrangements, equip`ment financings, or
similar transactions approved by the Board of Directors of the Company.
2.4 Board Observation Right.
-----------------------
(a) So long as TGI Fund II, LC ("Tredegar") holds at least
--------
100,000 shares of Preferred Stock (or Common Stock issued upon conversion
thereof and as adjusted for subsequent stock splits, recombinations or
reclassifications), the Company shall invite one (1) designated representative
of Tredegar to attend all meetings of its Board of Directors in a nonvoting
advisory capacity. The Company shall give such designated representative copies
of all notices, minutes, consents, and other materials that it provides to its
directors at the same time as such materials are provided to the directors;
provided, however, that the Company reserves the right to withhold any
- -------- -------
information and to exclude such representative from any meeting or portion
thereof if the Company believes, upon advise of counsel, that such exclusion is
reasonably necessary to preserve the attorney-client privilege.
(b) So long as Kirlan Venture Partners II, L.P. ("Kirlan") holds
------
at least 100,000 shares of Preferred Stock (or Common Stock issued upon
conversion thereof and as adjusted for subsequent stock splits, recombinations
or reclassifications), the Company shall invite one (1) designated
representative of Kirlan to attend all meetings of its Board of Directors in a
nonvoting advisory capacity. The Company shall give such designated
representative copies of all notices, minutes, consents, and other materials
that it provides to its directors at the same time as such materials are
provided to the directors; provided, however, that the Company reserves the
-------- -------
right to withhold any information and to exclude such representative from any
meeting or portion thereof if the Company believes, upon advise of counsel, that
such exclusion is reasonably necessary to preserve the attorney-client
privilege.
2.5 Termination of Covenants. The covenants set forth in Sections 2.1
------------------------
through Section 2.4 shall terminate as to each Investor and be of no further
force or effect immediately prior to the consummation of the Company's initial
public offering of shares of its Common Stock registered under the Securities
Act. The covenants set forth in Sections 2.1 and 2.2 shall terminate as to each
Investor and be of no further force or effect when the Company first becomes
subject to the periodic reporting requirements of Sections 13 or 15(d) of the
Exchange Act, if this occurs earlier than the events described in (a) or (b)
above.
3. Miscellaneous.
-------------
3.1 Successors and Assigns. Except as otherwise provided herein, the
----------------------
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any of the Series A Preferred Stock
-15-
<PAGE>
or Series B Preferred Stock or any Common Stock issued upon conversion thereof).
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or persons or their respective successors
and assigns any rights, remedies, obligations or liabilities under or by reason
of this Agreement, except as expressly provided in this Agreement.
3.2 Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto shall be governed, construed and interpreted in accordance with
the laws of the State of Minnesota, without giving effect to principles of
conflicts of laws.
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 by this Agreement shall be in writing and shall be deemed sufficient
upon delivery, when delivered personally or by overnight courier or sent by
telegram or fax, or forty-eight (48) hours after being deposited in the U.S.
mail, as certified or registered mail, with postage prepaid, and addressed to
the party to be notified at such party's address or fax number as set forth
below or on Exhibit A hereto or as subsequently modified by written notice.
---------
3.6 Expenses. If any action at law or in equity is necessary to
--------
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
3.7 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), only
with the written consent of the Company and the holders of 66-2/3% of each of
the Series A Preferred Stock and the Series B Preferred Stock consenting
separately each as a class. Any amendment or waiver effected in accordance with
this paragraph shall be binding upon each holder of any Registrable Securities
then outstanding, each future holder of all such Registrable Securities and the
Company.
3.8 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (a) such
provision shall be excluded from this Agreement, (b) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (c) the
balance of the Agreement shall be enforceable in accordance with its terms.
-16-
<PAGE>
3.9 Aggregation of Stock. All shares of the Preferred Stock held or
--------------------
acquired by affiliated entities or persons shall be aggregated together for the
purpose of determining the availability of any rights under this Agreement.
3.10 Complete Agreement. This Agreement contains the complete
------------------
agreement between the parties and supersedes any prior understandings,
agreements or representations by or between the parties, written or oral, which
may have related to the subject matter hereof in any way, including, without
limitation, the Original Investors' Rights Agreement.
[Signature Page Follows]
The parties have executed this Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY:
VASCULAR SOLUTIONS, INC.
By: /s/ Howard Root, CEO
-------------------------------------
Howard Root
Chief Executive Officer and President
Address: 2495 Xenium Lane North
Minneapolis, MN 55441
-17-
<PAGE>
SERIES A PREFERRED SHAREHOLDERS:
OLYMPIC VENTURE PARTNERS III, L.P.
By: OVMC III, L.P.
Its:General Partner
By: /s/ Gerard Langeler
------------------------------------
Gerry Langeler
General Partner
Address: 340 Oswego Pointe Drive, Suite 200
Lake Oswego, OR 97034-3230
OVP III ENTREPRENEURS FUND, L.P.
By: OVMC III, L.P.
Its:General Partner
By: /s/ Gerard Langeler
------------------------------------
Gerry Langeler
General Partner
Address: 340 Oswego Pointe Drive, Suite 200
Lake Oswego, OR 97034-3230
OLYMPIC VENTURE PARTNERS IV, L.P.
By: OVMC IV, L.L.C.,
Its:General Partner
By: /s/ Gerard Langeler
------------------------------------
Gerry Langeler
Managing Member
Address: 340 Oswego Pointe Drive, Suite 200
Lake Oswego, OR 97034-3230
-18-
<PAGE>
OVP IV ENTREPRENEURS FUND
By: OVMC IV, L.L.C.
Its:General Partner
By: /s/ Gerard Langeler
-------------------------------------
Gerry Langeler
Managing Member
Address: 340 Oswego Pointe Drive, Suite 200
Lake Oswego, OR 97034-3230
By: TGI Fund II, L.C.
Its: TREDEGAR INVESTMENTS, INC., Manager
By /s/ Steven M. Johnson
------------------------------------
Name:_Steven M. Johnson
President
Address: 701 5/th/ Ave., 65/th/ Floor
Seattle, WA 98104
-19-
<PAGE>
SERIES B PREFERRED SHAREHOLDERS:
STEPHENS VASCULAR PREFERRED, LLC
By: /s/ Jackson Farrow, Jr.
------------------------------------
Vice President, Stephens Group, Inc.
Manager
Address: 111 Center Street, Suite 2500
Little Rock, AR 72201
OLYMPIC VENTURE PARTNERS IV, L.P.
By OVMC IV LLC
Its General Partner
By: /s/ Gerard Langeler
------------------------------------
Gerry Langeler
Managing Member
Address: 340 Oswego Pointe Drive, Suite 200
Lake Oswego, OR 97034-3230
OVP IV ENTREPRENEURS FUND
By OVMC IV LLC
Its General Partner
By: /s/ Gerard Langeler
------------------------------------
Gerry Langeler
Managing Member
Address: 340 Oswego Pointe Drive, Suite 200
Lake Oswego, OR 97034-3230
OLYMPIC VENTURE PARTNERS III, L.P.
By OVMC IV LLC
Its General Partner
By: /s/ Gerard Langeler
------------------------------------
Gerry Langeler
General Partner
Address: 340 Oswego Pointe Drive, Suite 200
Lake Oswego, OR 97034-3230
-20-
<PAGE>
By: TGI Fund II, L.C.
Its: TREDEGAR INVESTMENTS, INC., Manager
By /s/ Steven M. Johnson
------------------------------------
Name: Steven M. Johnson
President
KIRLAN VENTURE PARTNERS II, L.P.
By /s/ Daniel C. Regis, President
------------------------------------
Of Kirlan Venture Capital, Inc.
------------------------------------
Name: Daniel C. Regis
General Partner
Address: 221 - 1/st/ Avenue West
Suite 108
Seattle, WA 98119
/s/ Eldon C. Miller
----------------------------------------
Eldon C. Miller
Address: 5820 Long Brake Trail
Edina, MN 55439
/s/ David B. Johnson
----------------------------------------
David B. Johnson
Address: 5500 Wayzata Blvd., #800
Minneapolis, MN 55416
/s/ Paul K, Kuehn
----------------------------------------
Paul K. Kuehn
Address: Miller, Johnson & Kuehn, Inc.
5500 Wayzata Boulevard, Suite 800
Minneapolis, MN 55416
-21-
<PAGE>
/s/ Stanley D. Rahm
----------------------------------------
Stanley D. Rahm
Address: 5500 Wayzata Blvd., #800
Minneapolis, MN 55416
/s/ Jeffrey D. Rahm
----------------------------------------
Jeffrey D. Rahm
Address: Miller, Johnson & Kuehn
5500 Wayzata Blvd., Suite 800
Minneapolis, MN 55416
/s/ Gunnar M. Pah
----------------------------------------
Gunnar M. Pah
Address: AM Boggen 3
8552 Otto Brunn
GERMANY
/s/ Arne J. Tofte, M.D.
----------------------------------------
Arne J. Tofte, M.D.
Address: Bogstadveien 6
0355 Oslo
NORWAY
-22-
<PAGE>
/s/ Tor Ole Kjellevand
----------------------------------------
Tor Ole Kjellevand
Address: Sagveien 110
1414 Trollasen
NORWAY
/s/ John Parkey
----------------------------------------
John Parkey
Address: 2425 60th Ave. S.E.
Mercer, Island, WA 92040
/s/ Dennis LaValle
----------------------------------------
Dennis LaValle
Address: 1201 Yale Place #1409
Minneapolis, MN 55403
/s/ Andrew O'Connell
----------------------------------------
Andrew O'Connell
Address: 2710 Ashbourne Rd.
Wayzata, MN 55391
/s/ Marlin Torguson
----------------------------------------
Marlin Torguson
Address: 1073 Hillsboro Mile
4/th/ South
Hillsboro Beach, FL 33062
<PAGE>
EXHIBIT A
---------
SERIES A INVESTORS
------------------
Name/Address/Fax No. No. of Shares
- -------------------- -------------
Olympic Venture Partners III, L.P. 476,000
340 Oswego Pointe Drive, Suite 200
Lake Oswego, OR 97034-3230
OVP III Entrepreneurs Fund, L.P. 25,053
340 Oswego Pointe Drive, Suite 200
Lake Oswego, OR 97034-3230
Olympic Venture Partners IV, L.P. 664,000
340 Oswego Pointe Drive, Suite 200
Lake Oswego, OR 97034-3230
OVP IV Entrepreneurs Fund, L.P. 34,947
340 Oswego Pointe Drive, Suite 200
Lake Oswego, OR 97034-3230
Tredegar Investments, Inc. 800,000
-------
Market Place One
2003 Western Avenue, Suite 360
Seattle, WA 98121-2140
TOTAL 2,000,000
=========
<PAGE>
SERIES B INVESTORS
------------------
Name/Address/Fax No. No. of Shares
- -------------------- -------------
Stephens Group 1,221,466
[Address]
Olympic Venture Partners 100,000
[Address]
Tredegar Investments 100,000
[Address]
Kirlan Investments 222,000
[Address]
Eldon C. Miller 10,000
[Address]
David B. Johnson 25,000
[Address]
Paul K. Kuehn 25,000
[Address]
Stanley D. Rahm 7,500
[Address]
Jeffrey D. Rahm 2,500
[Address]
Gunnar M. Pah 15,500
[Address]
Arne J. Toffe, M.D. 6,611
[Address]
<PAGE>
Tor Ole Kjellevand 2,200
[Address]
John Parkey 10,000
[Address]
Dennis LaValle 17,700
[Address]
Andrew O'Connell 2,300
[Address]
Marlin Torguson 10,000
[Address]
<PAGE>
EXHIBIT 4.5
VASCULAR SOLUTIONS, INC.
AMENDED AND RESTATED
--------------------
RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT
--------------------------------------------
This Amended and Restated Right of First Refusal and Co-Sale Agreement (the
"Agreement") is made and entered into as of December 9, 1998, by and among
---------
Howard Root, Gary Gershony and Mike Nagel (the "Founders"), Vascular Solutions,
--------
Inc., a Minnesota corporation (the "Company") and the holders of shares of
-------
Series A Preferred Stock (the "Series A Preferred Shareholders") and Series B
-------------------------------
Preferred Stock (the "Series B Preferred Shareholders") listed on Exhibit A
------------------------------- ---------
hereto (collectively, the "Investors" and individually, an "Investor").
--------- --------
RECITALS
--------
On December 19, 1997 the Company and the Series A Preferred Shareholders
entered into a Series A Preferred Stock Purchase Agreement (the "Series A
--------
Purchase Agreement") pursuant to which the Company sold to the Series A
- ------------------
Preferred Shareholders and the Series A Preferred Shareholders purchased from
the Company shares of the Company's Series A Preferred Stock. On the date
hereof, the Company and the Series B Preferred Shareholders have entered into a
Series B Preferred Stock Purchase Agreement (the "Series B Purchase Agreement")
---------------------------
pursuant to which the Company desires to sell to the Series B Preferred
Shareholders and the Series B Preferred Shareholders desire to purchase from the
Company shares of the Company's Series B Preferred Stock. A condition to the
Investors' obligations under each of the Series A Purchase Agreement and the
Series B Purchase Agreement is that the Company, the Founders and the Investors
enter into a right of first refusal and co-sale agreement in order to provide
the Investors the opportunity to purchase and/or participate, upon the terms and
conditions set forth in such agreement, in subsequent sales by the Founders of
shares of the Company's Common Stock. On December 19, 1997 the Company and the
Series A Preferred Shareholders entered into such a right of first refusal and
co-sale agreement (the "Original Right of First Refusal Agreement"), which the
-----------------------------------------
parties thereto now desire to amend and restate as provided herein. The
Company, the Series A Preferred Shareholders, the Series B Preferred
Shareholders and the Founders each desire to agree to the terms and conditions
set forth herein.
AGREEMENT
---------
The parties hereby agree as follows:
1. Sales by Founders
-----------------
(a) Right of First Refusal.
----------------------
(i) Should any Founder propose to accept one or more bona fide
offers (collectively, a "Purchase Offer") from any persons to purchase shares of
--------------
the Company's Common Stock (the "Shares") from such Founder (other than as set
------
forth in subsection 1(e) hereof), such Founder shall promptly deliver a notice
(the "Notice") to the Company and each Investor stating the
------
<PAGE>
terms and conditions of such Purchase Offer including, without limitation, the
number of shares of the Company's capital stock to be sold or transferred, the
nature of such sale or transfer, the consideration to be paid and the name and
address of each prospective purchaser or transferee. For a period of thirty (30)
days following receipt by the Company of the Notice, the Company shall have a
right to purchase such Shares upon the same terms as (or terms as similar as
reasonably possible to) the terms contained in the Notice (the "Right of First
--------------
Refusal"). If the Company desires to exercise the Right of First Refusal, it
- -------
shall so notify the Founder in writing within such thirty (30) day period.
(ii) In the event that the Company declines to exercise in full
the Right of First Refusal between such Founder and the Company, the Company
will provide each Investor with notice of such determination at least fifteen
(15) days prior to the end of the period in which the Right of First Refusal
expires under Section 1(a)(i). Each Investor shall then have the right,
exercisable by notice prior to the end of such period, to exercise such Right of
First Refusal as the Company's assignee on a pro rata basis (based upon the
number of Conversion Shares (as defined below) held by such Investor relative to
the aggregate number of Conversion Shares held by all Investors); provided that
if fewer than all Investors elect to participate, the Shares that would
otherwise be allocated to non-participating Investors shall be allocated to each
participating Investor in a manner such that each participating Investor is
entitled to purchase at least such Investor's pro rata portion of such
unallocated Shares (based upon the number of Conversion Shares held by all
participating Investors) or such different number of shares as the participating
Investors shall mutually agree. Upon expiration or exercise of the Right of
First Refusal, the Company will provide notice to all Investors as to whether or
not the Right of First Refusal has been exercised by the Company or the
Investors. In the event the Shares are not disposed of on the terms proposed in
the Notice within thirty (30) days following the lapse of the Right of First
Refusal, or if at any time the Founder proposes to change the price or other
terms to make them more favorable to the buyer, then the Shares shall once again
be subject to the Right of First Refusal.
(b) Co-Sale Right. To the extent that the Right of First Refusal is
-------------
not exercised by the Company or the Investors, each Investor shall have the
right (the "Co-Sale Right"), exercisable upon written notice to the Company
-------------
within fifteen (15) business days after the expiration of the Right of First
Refusal, to participate in such Founder's sale of Shares pursuant to the
specified terms and conditions of such Purchase Offer. To the extent an
Investor exercises such Co-Sale Right in accordance with the terms and
conditions set forth below, the number of Shares which such Founder may sell
pursuant to such Purchase Offer shall be correspondingly reduced. The Co-Sale
Right of each Investor shall be subject to the following terms and conditions:
(i) Calculation of Shares. Each Investor may sell all or any
---------------------
part of that number of shares of Common Stock of the Company issued or issuable
upon conversion of Preferred Stock or Common Stock received in connection with
any stock dividend, stock split or other reclassification thereof (the
"Conversion Shares") equal to the product obtained by multiplying (x) the
-----------------
aggregate number of shares of Common Stock covered by the Purchase Offer by (y)
a fraction, the numerator of which is the number of Conversion Shares at the
time owned by such Investor and the denominator of which is the combined number
of shares of Common Stock of the Company at the time owned by all Investors and
all Founders participating in such sale, including
-2-
<PAGE>
shares transferred by such Founder to Permitted Transferees (as hereinafter
defined) in accordance herewith. The provisions of this Agreement do not confer
any Co-Sale rights with respect to any shares of Common Stock or other
securities held by an Investor that are not Conversion Shares.
(ii) Delivery of Certificates. Each Investor may effect its
------------------------
participation in the sale by delivering to the selling Founder for transfer to
the purchase offeror one or more certificates, properly endorsed for transfer,
which represent the number of shares of Preferred Stock, or Common Stock issued
upon conversion thereof, which such Investor elects to sell.
(c) Transfer. The stock certificate or certificates which the
--------
Investor delivers to the selling Founder pursuant to Section 1(b) shall be
delivered by such Founder to the purchase offeror in consummation of the sale
pursuant to the terms and conditions specified in the Notice, and such Founder
shall promptly thereafter remit to such Investor that portion of the sale
proceeds to which such Investor is entitled by reason of its participation in
such sale. To the extent that any prospective purchaser or purchasers prohibits
such assignment or otherwise refuses to purchase shares of capital stock of the
Company from an Investor exercising its Co-Sale Right hereunder, the selling
Founder or Founders shall not sell to such prospective purchaser or purchasers
any shares of Company stock unless and until, simultaneously with such sale, the
selling Founder or Founders shall purchase such shares from such Investor for
the same consideration and on the same terms and conditions as the proposed
transfer described in the Notice (which terms and conditions shall be no less
favorable than those governing the sale to the purchaser by the Founder or
Founders).
(d) No Adverse Effect. The exercise or non-exercise of the rights of
-----------------
the Investors hereunder to participate in one or more sales of Shares made by a
Founder shall not adversely affect their rights to participate in subsequent
sales of Common Stock by a Founder.
(e) Permitted Transactions. The provisions of Section 1 of this
----------------------
Agreement shall not pertain or apply to:
(i) Any repurchase of Common Stock by the Company;
(ii) Any bona fide gift;
(iii) Any transfer to a Founder's ancestors, descendants or
spouse or to a trust for their benefit;
(iv) any sale or transfer by a Founder of up to ten percent
(10%) of the total number of shares of Common Stock held by such Founder on the
date of this Agreement; or
(v) In the event that a Founder shall die or become disabled
(within the meaning of Code Section 22(e)(3)), any sale or transfer by a Founder
or by his personal representative, administrator or guardian, as applicable, or
by any person or persons to whom any of the Shares are transferred by will or
the applicable laws of descent and distribution.
-3-
<PAGE>
provided, that (x) the Founder(s) shall inform the Investors of such transfer or
- --------
gift prior to effecting it, and (y) the transferee or donee (collectively, the
"Permitted Transferees") shall furnish the Investors with a written agreement to
---------------------
be bound by and comply with all provisions of this Agreement applicable to the
Founders.
(f) Notwithstanding the foregoing and any other provision hereof and
notwithstanding the failure of any holder of Series B Preferred Stock to
exercise any of its rights under this Section 1, except as set forth in
Subsection 1(e) hereof, a Founder must obtain the written consent of the holders
of a majority of the Series B Preferred Stock prior to accepting any Purchase
Offer.
2. Prohibited Transfers. Any attempt by a Founder to transfer shares of
--------------------
the Company in violation of Section 1 hereof shall be void and the Company
agrees it will not effect such a transfer nor will it treat any alleged
transferee as the holder of such shares without the written consent of the
holders of a majority of the Series A Preferred Stock and a majority of the
Series B Preferred Stock.
3. Legended Certificates. Each certificate representing shares of the
---------------------
Common Stock of the Company now or hereafter owned by the Founders or issued to
any Permitted Transferee pursuant to Section 1(e) shall be endorsed with the
following legend:
"THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE
TERMS AND CONDITIONS OF A CERTAIN RIGHT OF FIRST REFUSAL AND
CO-SALE AGREEMENT BY AND BETWEEN THE SHAREHOLDER, THE
CORPORATION AND CERTAIN HOLDERS OF COMMON AND PREFERRED
STOCK OF THE CORPORATION. COPIES OF SUCH AGREEMENT MAY BE
OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE
CORPORATION."
The foregoing legend shall be removed upon termination of this Agreement in
accordance with the provisions of Section 4(a).
4. Miscellaneous Provisions.
------------------------
(a) Termination. This Agreement shall terminate upon the earliest to
-----------
occur of any one of the following events (and shall not apply to any transfer by
a Founder in connection with any such event):
(i) The liquidation, dissolution or indefinite cessation of the
business operations of the Company;
-4-
<PAGE>
(ii) The execution by the Company of a general assignment for
the benefit of creditors or the appointment of a receiver or trustee to take
possession of the property and assets of the Company;
(iii) The closing of the Company's initial public offering of
securities; provided that all shares of the Company's Preferred Stock are
--------
converted into shares of Common Stock prior to or in connection with such
offering; or
(iv) The closing of any acquisition, merger, reorganization or
other transaction which results in the shareholders of the Company immediately
prior to such transaction owning less than 50% of the Company's voting stock
immediately after such transaction.
(b) Notices. Any notice required or permitted by this Agreement shall
-------
be in writing and shall be deemed sufficient on the date of delivery, when
delivered personally or by overnight courier or sent by telegram or fax, or
forty-eight (48) hours after being deposited in the U.S. mail, as certified or
registered mail, with postage prepaid, and addressed to the party to be notified
at such party's address as set forth below or on Exhibit A hereto, or as
---------
subsequently modified by written notice.
(c) Successors and Assigns. This Agreement and the rights and
----------------------
obligations of the parties hereunder shall inure to the benefit of, and be
binding upon, their respective successors, assigns and legal representatives.
The rights of the Investors hereunder shall be assignable only (i) by each of
such Investors to any other Investor or (ii) an assignee or transferee who
acquires not less than 100,000 Conversion Shares (as adjusted for stock splits,
stock dividends and the like, and assuming conversion of all Preferred Stock
held by such Investor); provided that such limitation shall not apply to
--------
transfers by an Investor to partners, members or shareholders of such Investor
or an affiliate of such Investor (i.e. an entity controlled by, under common
control with or controlling such Investor), including spouses and ancestors,
lineal descendants and siblings of such persons or their spouses who acquire the
Preferred Stock or Common Stock issued upon conversion thereof, if all such
transferees or assignees irrevocably agree in writing to appoint a single
representative as their attorney in fact for the purpose of receiving any
notices and exercising their rights under this Agreement.
(d) Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(e) Modifications and Amendments. Any term hereof may be amended or
----------------------------
waived with the written consent of the Company and of holders of a majority of
the shares of Common Stock held by the Founders and the holders of a majority of
each of the Series A Preferred Stock and the Series B Preferred Stock (or their
respective successors and assigns). Any amendment or waiver effected in
accordance with this Section 4(e) shall be binding upon the Company, the
-5-
<PAGE>
holders of Series A Preferred Stock and Series B Preferred Stock and any holder
of Founders' Shares, and each of their respective successors and assigns.
(f) Attorney's Fees. If any action at law or in equity (including
---------------
arbitration) is necessary to enforce or interpret the terms of any of the
Agreements, the prevailing party shall be entitled to reasonable attorney's
fees, costs and necessary disbursements in addition to any other relief to which
such party may be entitled.
(g) Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
Minnesota, without giving effect to principles of conflicts of law.
(h) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
(i) No Employment Rights. Nothing in this Agreement shall affect in
--------------------
any manner whatsoever the right or power of the Company, or a parent or
subsidiary of the Company, to terminate the Founder's employment, for any
reason, with or without cause.
(j) Complete Agreement. This Agreement contains the complete
------------------
agreement between the parties and supersedes any prior understandings,
agreements or representations by or between the parties, written or oral, which
may have related to the subject matter hereof in any way, including, without
limitation, the Original Right of First Refusal Agreement.
[Signature Page Follows]
-6-
<PAGE>
The parties have executed this Amended and Restated Right of First Refusal
and Co-Sale Agreement as of the date first written above.
COMPANY:
VASCULAR SOLUTIONS, INC.
By: /s/ Howard Root
------------------
Howard Root
Chief Executive Officer and
President
Address: 2495 Xenium Lane North
Minneapolis, MN 55441
-7-
<PAGE>
COMMON HOLDERS:
HOWARD ROOT
/s/ Howard Root
-------------------------------
Address: 25 Farihope Avenue
-----------------------
Tonka Bay, MN 55331
-------------------------------
GARY GERSHONY
/s/ Gary Gershony
-------------------------------
Address: 3131 Roundhill Road
-----------------------
Alamo, CA 94507
-------------------------------
MIKE NAGEL
/s/ Mike Nagel
------------------------------
Address: 9495 Woodbridge Drive
----------------------
Eden Prairie, MN 55397
------------------------------
-8-
<PAGE>
SERIES A PREFERRED SHAREHOLDERS:
OLYMPIC VENTURE PARTNERS III, L.P.
By: OVMC III, L.P.
Its: General Partner
By: /s/ Gerard Langeler
-----------------------------------
Gerry Langeler
General Partner
Address: 340 Oswego Pointe Drive, Suite 200
Lake Oswego, OR 97034-3230
OVP III ENTREPRENEURS FUND, L.P.
By: OVMC III, L.P.
Its: General Partner
By: /s/ Gerard Langeler
-----------------------------------
Gerry Langeler
General Partner
Adddress: 340 Oswego Pointe Drive, Suite 200
Lake Oswego, OR 97034-3230
OLYMPIC VENTURE PARTNERS IV, L.P.
By: OVMC IV, L.L.C.,
Its: General Partner
By: /s/ Gerard Langeler
------------------------------------
Gerry Langeler
Managing Member
Address: 340 Oswego Pointe Drive, Suite 200
Lake Oswego, OR 97034-3230
-9-
<PAGE>
OVP IV ENTREPRENEURS FUND
By: OVMC IV, L.L.C.
Its: General Partner
By: /s/ Gerard Langeler
------------------------------------
Gerry Langeler
Managing Member
Address: 340 Oswego Pointe Drive, Suite 200
Lake Oswego, OR 97034-3230
By: TGI Fund II, L.C.
Its: TREDEGAR INVESTMENTS, INC., Manager
By /s/ Steven M. Johnson
------------------------------------
Name: Steven M. Johnson
President
Address: 701 5/th/ Ave., 65/th/ Floor
Seattle, WA 98104
-10-
<PAGE>
SERIES B PREFERRED SHAREHOLDERS:
STEPHENS VASCULAR PREFERRED, LLC
By: /s/ Jackson Farrow, Jr.
-------------------------------------
Vice President, Stephens Group, Inc. Manager
Address: 111 Center Street, Suite 2500
Little Rock, AR 72201
OLYMPIC VENTURE PARTNERS IV, L.P.
By OVMC IV LLC
Its General Partner
By: /s/ Gerard Langeler
------------------------------------
Gerry Langeler
Managing Member
Address: 340 Oswego Pointe Drive, Suite 200
Lake Oswego, OR 97034-3230
OVP IV ENTREPRENEURS FUND
By OVMC IV LLC
Its General Partner
By: /s/ Gerard Langeler
------------------------------------
Gerry Langeler
Managing Member
Address: 340 Oswego Pointe Drive, Suite 200
Lake Oswego, OR 97034-3230
OLYMPIC VENTURE PARTNERS III, L.P.
By OVMC IV LLC
Its General Partner
By: /s/ Gerard Langeler
------------------------------------
Gerry Langeler
General Partner
Address: 340 Oswego Pointe Drive, Suite 200
Lake Oswego, OR 97034-3230
-11-
<PAGE>
By: TGI Fund II, L.C.
Its: TREDEGAR INVESTMENTS, INC., Manager
By /s/ Steven M. Johnson
-------------------------------------
Name: Steven M. Johnson
President
KIRLAN VENTURE PARTNERS II, L.P.
By /s/ Daniel C. Regis, President
-------------------------------------
Of Kirlan Venture Capital, Inc.
-------------------------------------
Name: Daniel C. Regis
General Partner
Address: 221 - 1/st/ Avenue West
Suite 108
Seattle, WA 98119
/s/ Eldon C. Miller
----------------------------------------
Eldon C. Miller
Address: 5820 Long Brake Trail
Edina, MN 55439
/s/ David B. Johnson
---------------------------------------
David B. Johnson
Address: 5500 Wayzata Blvd., #800
Minneapolis, MN 55416
/s/ Paul K, Kuehn
---------------------------------------
Paul K. Kuehn
Address: Miller, Johnson & Kuehn, Inc.
5500 Wayzata Boulevard, Suite 800
Minneapolis, MN 55416
-12-
<PAGE>
/s/ Stanley D. Rahm
--------------------------------------
Stanley D. Rahm
Address: 5500 Wayzata Blvd., #800
Minneapolis, MN 55416
/s/ Jeffrey D. Rahm
--------------------------------------
Jeffrey D. Rahm
Address: Miller, Johnson & Kuehn
5500 Wayzata Blvd., Suite 800
Minneapolis, MN 55416
/s/ Gunnar M. Pah
--------------------------------------
Gunnar M. Pah
Address: AM Boggen 3
8552 Otto Brunn
GERMANY
/s/ Arne J. Tofte, M.D.
--------------------------------------
Arne J. Tofte, M.D.
Address: Bogstadveien 6
0355 Oslo
NORWAY
/s/ Tor Ole Kjellevand
-------------------------------------
Tor Ole Kjellevand
Address: Sagveien 110
1414 Trollasen
NORWAY
/s/ John Parkey
------------------------------------
John Parkey
Address: 2425 60/th/ Ave. S.E.
Mercer, Island, WA 92040
-13-
<PAGE>
/s/ Dennis LaValle
---------------------------------------
Dennis LaValle
Address: 1201 Yale Place #1409
Minneapolis, MN 55403
/s/ Andrew O'Connell
---------------------------------------
Andrew O'Connell
Address: 2710 Ashbourne Rd.
Wayzata, MN 55391
/s/ Marlin Torguson
---------------------------------------
Marlin Torguson
Address: 1073 Hillsboro Mile
4th South
Hillsboro Beach, FL 33062
-14-
<PAGE>
COMMON HOLDERS:
HOWARD ROOT
/s/ Howard Root
-------------------------------------------
Address: 25 Farihope Avenue
-----------------------------------
Tonka Bay, MN 55331
-------------------------------------------
GARY GERSHONY
/s/ Gary Gershony
-------------------------------------------
Address: 3131 Roundhill Road
----------------------------------
Alamo, CA 94507
-------------------------------------------
MIKE NAGEL
/s/ Mike Nagel
------------------------------------------
Address: 9495 Woodbridge Drive
---------------------------------
Eden Prairie, MN 55397
------------------------------------------
-15-
<PAGE>
Exhibit A
---------
SERIES A INVESTORS
------------------
Name/Address/Fax No. No. of Shares
- -------------------- -------------
Olympic Venture Partners III, L.P. 476,000
340 Oswego Pointe Drive, Suite 200
Lake Oswego, OR 97034-3230
OVP III Entrepreneurs Fund, L.P. 25,053
340 Oswego Pointe Drive, Suite 200
Lake Oswego, OR 97034-3230
Olympic Venture Partners IV, L.P. 664,000
340 Oswego Pointe Drive, Suite 200
Lake Oswego, OR 97034-3230
OVP IV Entrepreneurs Fund, L.P. 34,947
340 Oswego Pointe Drive, Suite 200
Lake Oswego, OR 97034-3230
Tredegar Investments, Inc. 800,000
---------
Market Place One
2003 Western Avenue, Suite 360
Seattle, WA 98121-2140
TOTAL 2,000,000
=========
<PAGE>
SERIES B INVESTORS
------------------
Name/Address/Fax No. No. of Shares
- -------------------- -------------
Stephens Group 1,221,466
[Address]
Olympic Venture Partners 100,000
[Address]
Tredegar Investments 100,000
[Address]
Kirlan Investments 222,000
[Address]
Eldon C. Miller 10,000
[Address]
David B. Johnson 25,000
[Address]
Paul K. Kuehn 25,000
[Address]
Stanley D. Rahm 7,500
[Address]
Jeffrey D. Rahm 2,500
[Address]
Gunnar M. Pah 15,500
[Address]
<PAGE>
Arne J. Toffe, M.D. 6,611
[Address]
Tor Ole Kjellevand 2,200
[Address]
John Parkey 10,000
[Address]
Dennis LaValle 17,700
[Address]
Andrew O'Connell 2,300
[Address]
Marlin Torguson 10,000
[Address]
<PAGE>
EXHIBIT 4.6
VASCULAR SOLUTIONS, INC.
PUT & OPTION AGREEMENT
----------------------
THIS PUT & OPTION AGREEMENT (this "Agreement") is made and entered into as
of December 9, 1998, by and among VASCULAR SOLUTIONS, INC., a Minnesota
corporation (the "Company"), STEPHENS VASCULAR PREFERRED, LLC, an Arkansas
limited liability company ("Preferred, LLC") and STEPHENS VASCULAR OPTIONS, LLC,
an Arkansas limited liability company ("Options, LLC") (each of Preferred, LLC
and Options, LLC are referred to individually as the "Investor" and collectively
as the "Investors").
RECITALS
A. Upon the terms and subject to the conditions set forth in that certain
Series B Preferred Stock Purchase Agreement dated as of the date hereof by and
between the Company, Preferred, LLC and certain other investors (the "Purchase
Agreement"), Preferred, LLC has purchased shares of the Series B Preferred Stock
of the Company ("Series B Stock").
B. The Company is desirous of having access to additional capital, and
Preferred, LLC and Options, LLC are willing to make such access available in
exchange for the right to acquire additional interests in the Company.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
of the parties hereto, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. Definitions. A glossary of the definitions of the capitalized terms
-----------
used in this Agreement is set forth in Appendix A which is attached hereto and
incorporated therein.
2. Obligation of Investor to Purchase Common Stock.
-----------------------------------------------
(a) At any time after PMA Submission, the Company shall have the right
to sell to Preferred, LLC, and Preferred, LLC hereby agrees to purchase, subject
to the terms and conditions herein, up to $3,000,000 of Common Stock. The
Company may exercise its rights under this Section 2(a) one or more times,
provided that Preferred, LLC's aggregate obligation under this Section 2(a)
shall not exceed $3,000,000 of Common Stock. If at the time that the Company
gives the notice specified in the following paragraph PMA Approval has occurred,
the issue price of the Common Stock that Preferred, LLC is obligated to buy
pursuant to such notice will be $6.00 per share; otherwise the issue price will
be $5.00 per share.
(b) The Company shall exercise its rights under Section 2(a) by giving
notice to Preferred, LLC setting forth (i) the dollar amount of Common Stock as
to which it is exercising its rights, (ii) the number of shares of Common Stock
that such amount represents in accordance with Section 2(a) above, and (iii) the
closing date for such purchase which shall not be less than twenty (20) days
after the effective date of such notice.
<PAGE>
(c) The Company's right to give the notice in Section 2(b) shall
expire upon the earlier of (i) December 31, 2000 and (ii) the effective date of
a registration statement for a public offering of securities of the Company that
satisfies the requirements of Section 4(b) of the Series B Certificate.
(d) If at any time prior to December 31, 2000, the Company incurs
Indebtedness, the number of shares of Common Stock that Preferred, LLC shall be
obligated to purchase under Section 2(a) above shall be reduced by an amount
(rounded to the nearest whole number) equal to the principal amount of such
Indebtedness divided by $4.50.
3. Right of Investor to Purchase Common Stock.
------------------------------------------
(a) At any time after PMA Submission, Options, LLC shall have the
right to buy from the Company, and the Company hereby agrees to sell, subject to
the terms and conditions herein, up to $3,000,000 of Common Stock. Options, LLC
may exercise its rights under this Section 3(a) one or more times, provided that
the Company's aggregate obligation under this Section 3(a) shall not exceed
$3,000,000 of Common Stock. If at the time that Options, LLC gives the notice
specified in the following paragraph PMA Approval has occurred, the issue price
of the Common Stock that the Company is obligated to sell pursuant to such
notice will be $6.00 per share; otherwise the issue price will be $5.00 per
share.
(b) Options, LLC shall exercise its rights under Section 3(a) by
giving notice to the Company setting forth (i) the dollar amount of Common Stock
as to which it is exercising its rights, (ii) the number of shares of Common
Stock that such amount represents in accordance with Section 3(a) above, and
(iii) the closing date for such purchase which shall not be more than twenty
(20) days after the effective date of such notice.
(c) Options, LLC's right to give the notice in Section 3(b) shall
expire upon the earlier of (i) December 31, 2000 and (ii) the effective date of
a registration statement for a public offering of securities of the Company that
satisfies the requirements of Section 4(b) of the Series B Certificate.
4. Additional Right of Investor to Purchase Common Stock.
-----------------------------------------------------
(a) Options, LLC shall have the right to buy from the Company, and the
Company hereby agrees to sell, subject to the terms and conditions herein, up to
$2,000,000 of Common Stock. Options, LLC may exercise its rights under this
Section 4(a) one or more times, provided that Options, LLC's aggregate rights
under this Section 4(a) shall not exceed $2,000,000 of Common Stock. If at the
time that Options, LLC gives the notice specified in the following paragraph PMA
Approval has occurred, the issue price of the Common Stock that the Company is
obligated to sell pursuant to such notice will be $8.00 per share; otherwise the
issue price will be $7.00 per share.
(b) Options, LLC shall exercise its rights under Section 4(a) by
giving notice to the Company setting forth (i) the dollar amount of Common Stock
as to which it is exercising its
-2-
<PAGE>
rights, (ii) the number of shares of Common Stock that such amount represents in
accordance with Section 4(a) above, and (iii) the closing date for such purchase
which shall not be more than twenty (20) days after the effective date of such
notice.
(c) Options, LLC's right to give the notice in Section 4(b) shall
expire on December 31, 2000.
(d) Options, LLC shall have the right (the "Conversion Right") to
require the Company to convert such Investor's right under Subsection 4(a)
hereof (the "Option Right") at any time prior to December 31, 2000 into shares
of Common Stock as provided for in this Subsection (d). Upon exercise of the
Conversion Right, the Company shall deliver to Options, LLC (without payment by
Options, LLC of any issue price) that number of shares of Common Stock equal to
the quotient obtained by dividing (i) the value of the Option Right at the time
the Conversion Right is exercised (determined by subtracting the aggregate issue
price for the shares subject to the Option Right in effect immediately prior to
the exercise of the Conversion Right from the aggregate Fair Market Value for
the shares subject to the Option Right immediately prior to the exercise of the
Conversion Right) by (ii) the Fair Market Value of one share of Common Stock
immediately prior to the exercise of the Conversion Right. The Conversion Right
may be exercised by the Investor, at any time or from time to time, prior to its
expiration, by giving notice to the Company specifying (x) the total number of
shares of stock the Investor will purchase pursuant to such conversion and (y) a
date not more than 20 days from the date of the conversion notice for the
closing of such purchase.
5. Mechanics of Stock Sales.
------------------------
(a) Place, Time and Date. The closing of any sale and purchase of
--------------------
shares of Common Stock pursuant to this Agreement (a "Closing") shall take place
at the offices of the Company on the date that is (a) set forth in the notice of
exercise pursuant to Section 2(b), 3(b), or 4(b), whichever is applicable, or
(b) such other place, time, and date as the parties may agree.
(b) Closing Items. At the Closing, the Company shall deliver to the
-------------
Investor, as the case may be, certificates representing the Common Stock, and
the Investor, as the case may be, shall deliver to the Company the aggregate
purchase price of such shares being purchased by the Investor, as the case may
be, by wire transfer of same-day funds or cashier's or bank-certified check
payable to the order of the Company.
6. Independent Agreements. The right of the Company to sell under Section
----------------------
2 and the right of Options, LLC to buy under Section 3, and the right of
Options, LLC to buy under Section 4, are independent, and the exercise, in full
or in part, or the non-exercise by a Party of its rights under any of the
foregoing Sections shall not have any impact upon any Party's rights under any
other Section.
7. Covenants re PMA Submission and Approval. The Company shall give the
----------------------------------------
Investors notice of the occurrence of PMA Submission or PMA Approval within
three (3) business days after each such occurrence. The Company will update the
directors as to the progress of the Company's
-3-
<PAGE>
PMA Submission to the United States Food & Drug Administration at each meeting
of the Board and will respond to inquiries from members of the Board on this
topic between meetings.
8. Adjustment for Stock Splits, Dividends, and Combinations. The number
--------------------------------------------------------
and type of shares issuable by the Company upon exercise of any Party's rights
hereunder shall be equitably adjusted in the event of any stock split,
combination, stock dividend or recapitalization, or conversion or exchange for
other securities or property as a result of a merger, sale, liquidation or
reorganization of the Company, or other similar change in capital structure of
the Company or as a result of any other disposition or conversion affecting the
Common Stock occurring during the period from the date of this Agreement to the
applicable Closing.
9. Representations and Warranties of Investor. The Investors each
------------------------------------------
represent and warrant to the Company, which representations and warranties shall
be true in all material respects on and as of the date of any Closing as though
such representations and warranties had been made as of the date of such
Closing, as follows:
(a) Authorization. This Agreement, when executed and delivered by the
-------------
Investors, will constitute the valid and legally binding obligations of the
Investors, enforceable in accordance with its terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, and any other laws of general application affecting enforcement of
creditors' fights generally, and as limited by laws relating to the availability
of a specific performance, injunctive relief or other equitable remedies.
(b) Restricted Securities. The Investors understand that the
---------------------
Securities have not been, and will not be, registered under the Securities Act,
by reason of a specific exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of each Investor's representations as
expressed herein. The Investors understand that the Securities are "restricted
securities" under applicable U.S. federal and state securities laws and that,
pursuant to these laws, the Investors must hold the Securities indefinitely
unless they are registered with the Securities and Exchange Commission and
qualified by state authorities, or an exemption from such registration and
qualification requirements is available.
(c) No Public Market. The Investors understand that no public market
----------------
now exists for any of the securities issued by the Company and that the Company
has made no assurances that a public market will ever exist for the Securities.
(d) Legends. The Investors understand that the Securities may bear
-------
one or both of the following legends:
(i) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY
NOT BE TRANSFERRED WITHOUT (I) THE OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER OF SUCH SECURITIES THAT SUCH
TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION OR
-4-
<PAGE>
QUALIFICATION UNDER THE FEDERAL SECURITIES ACT OF 1933, AS
AMENDED, AND APPLICABLE STATE SECURITIES LAWS; OR (II) SUCH
REGISTRATION OR QUALIFICATION."
(ii) Any legend required by the blue sky laws of any
state to the extent such laws are applicable to the shares
represented by the certificate so legended.
(e) Purchase Entirely for Own Account.
---------------------------------
(i) This Agreement is made with the Investors in reliance upon
each Investors's representation to the Company, which by each Investors's
execution of this Agreement, each Investor hereby confirms, that the Securities
to be acquired by the Investors will be acquired for investment for each
Investor's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and that each Investor has no
present intention of selling, granting any participation in or otherwise
distributing the same. By executing this Agreement, the Investors further
represent that each Investor does not presently have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, any of the Securities.
Each Investor represents that it has full power and authority to enter into this
Agreement.
(ii) Each Investor hereby represents and warrants that (A) it is a
limited liability company formed under the laws of the State of Arkansas and
that (B) its members consist of not more than 30 individuals and trusts each of
whom is (x) a resident of or domiciled in the State of Arkansas, (y) an
accredited investor as defined in Rule 501(a) of Regulation D promulgated under
the Securities Act and (z) affiliated with Stephens, Inc.
(f) Disclosure of Information. The Investors have had an opportunity
-------------------------
to discuss the Company's business, management, financial affairs and the terms
and conditions of the offering of the Securities with the Company's management
and have had an opportunity to review the Company's facilities. The Investors
understand that such discussions, as well as the Company's business plan and any
other written information issued by the Company, were intended to describe the
aspects of the Company's business which the Company believes to be material.
10. Representations and Warranties of Company. The Company represents and
-----------------------------------------
warrants to the Investors, which representations and warranties shall be true in
all material respects on and as of the date of any Closing as though such
representations and warranties had been made as of the date of such Closing, as
follows:
(a) Organization, Good Standing and Qualification. The Company is a
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Minnesota and has all requisite corporate power and authority to
carry on its business.
-5-
<PAGE>
(b) Authorization. All corporate action on the part of the Company,
-------------
its officers, directors and stockholders necessary for the authorization,
execution, and delivery of this Agreement, the performance of all obligations of
the Company hereunder and the authorization, issuance and delivery of shares of
Common Stock pursuant to the terms hereof has been taken or will be taken prior
to Closing, and this Agreement, when executed and delivered by the Company,
shall constitute a valid and legally binding obligation of the Company,
enforceable against the Company in accordance with its terms except as limited
by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, and other laws of general application affecting enforcement of
creditors' rights generally, and as limited by laws relating to the availability
of specific performance, injunctive relief, or other equitable remedies.
(c) Valid Issuance of Securities. The Common Stock that will be
----------------------------
issued to the Investors hereunder, when issued, sold and delivered in accordance
with the terms hereof for the consideration expressed herein, will be duly and
validly issued, fully paid, and nonassessable and free of restrictions on
transfer other than restrictions on transfer under this Agreement and applicable
state and federal securities laws. Based in part upon the representations of
the Investors in this Agreement, the Stock will be issued in compliance with all
applicable federal and state securities laws.
11. Notices.
-------
(a) Method of Notice. Any notice required to be given pursuant to
----------------
this Agreement shall be deemed to have been given (i) on the date of delivery or
transmission thereof if given in person or by facsimile transmission, (ii) one
day after dispatch if sent by overnight courier, receipt of which has been
verified, or (iii) three days after deposit in the official government mail by
registered or certified mail, postage prepaid, addressed to the party being
notified at the address specified below or at such other address of which the
addressee may notify the other party in writing.
(b) Addresses. Until otherwise notified, notices shall be directed as
---------
follows:
If to the Company:
Vascular Solutions, Inc.
2495 Xenium Lane North
Minneapolis, MN 55441
Attention: Chief Executive Officer
With a copy to:
Dorsey & Whitney LLP
Pillsbury Center South
220 South Sixth Street
Minneapolis, MN 55402
Attention: Timothy S. Hearn
-6-
<PAGE>
If to the Investor:
Stephens, Inc.
111 Center Street
Suite 2500
Little Rock, AR 72201
Attention: Jackson Farrow
12. Miscellaneous.
-------------
(a) Survival of Warranties. The warranties, representations and
----------------------
covenants contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing.
(b) Entire Agreement. This Agreement contains the entire agreement
----------------
and understanding between the parties with respect to the subject matter hereof
and supersedes all prior understandings and representations.
(c) Specific Performance. The Investors expressly agree that the
--------------------
Company will be irreparably damaged if this Agreement is not specifically
enforced. Upon a breach or threatened breach of the terms, covenants or
conditions of this Agreement by the Investors, the Company, in addition to all
other remedies, shall be entitled to a temporary or permanent injunction,
without showing any actual damage and without posting bond, and a decree for
specific performance, in accordance with the provisions of this Agreement.
(d) Applicable Law. This Agreement shall for all purposes be governed
--------------
by and construed in accordance with the laws of Minnesota, without regard to the
choice of law provisions thereof.
(e) Successors and Assigns. Except as otherwise set forth herein, the
----------------------
provisions of this Agreement shall inure to the benefit of and be binding upon
the parties hereto, their successors and assigns.
(f) Amendment. Except as otherwise provided herein, no amendment,
---------
waiver, interpretation, alteration or modification of any provision of this
Agreement shall be binding unless in writing and signed by the Company and the
Investors.
(g) Waivers. Any failure of either party hereto to insist upon or
-------
enforce strict performance of any of the provisions of this Agreement or to
exercise any rights for remedies under this Agreement shall not be interpreted
or construed as a waiver or relinquishment to any extent of such party's right
to assert or rely upon any such provision, right or remedy in that or any other
instance.
(h) Headings. The headings of the sections of this Agreement are for
--------
convenience of reference only and shall not by themselves determine the
interpretation of this Agreement.
-7-
<PAGE>
(i) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall constitute an original, but all of which
together shall constitute one and the same instrument.
(j) Severability. If any provision of this Agreement shall be held to
------------
be illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
[Signature Pages Follow]
-8-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed as of the date and
year first above written.
VASCULAR SOLUTIONS, INC.
By: /s/ Howard C. Root, CEO
--------------------------------------------
Howard C. Root, Chief Executive Officer
STEPHENS VASCULAR PREFERRED, LLC
By: /s/ Jackson Farrow, Jr.
-------------------------------------------
Its Vice President, Stephens Group, Inc.,
----------------------------------------
Manager
-------
STEPHENS VASCULAR OPTIONS, LLC
By: /s/ Jackson Farrow, Jr.
-------------------------------------------
Its Vice President, Stephens Group, Inc.,
----------------------------------------
Manager
-------
<PAGE>
APPENDIX A
"Closing" shall have the meaning ascribed to it in (S)5(a).
-------
"Common Stock" shall mean the $.01 par value common stock of the Company.
------------
"Company" shall have the meaning ascribed to it in the preface.
-------
"Fair Market Value" shall mean, with respect to the Company's Common Stock,
-----------------
as of any date:
(i) if the Common Stock is listed or admitted to unlisted trading
privileges on any national securities exchange or is not so listed or admitted
but transactions in the Common Stock are reported on the Nasdaq National Market
System, the reported closing price of the Common Stock on such exchange or by
the Nasdaq National Market System as of such date (or, if no shares were traded
on such day, as of the next proceeding day on which there was such a trade); or
(ii) if the Common Stock is not so listed or admitted to unlisted
trading privileges or reported on the Nasdaq National Market System, and bid and
asked prices therefor in the over-the-counter market are reported by the Nasdaq
system or National Quotation Bureau, Inc. (or comparable report service), the
mean of the closing bid an asked prices as of such date, as so reported by the
Nasdaq System, or, if not so reported thereon, as reported by National Quotation
Bureau, Inc. (or such comparable reporting service); or
(iii) if the Common Stock is not so listed or admitted to unlisted
trading privileges, or reported on the Nasdaq National Market System, and such
bid and asked prices are not so reported by the Nasdaq system or National
Quotation Bureau, Inc. (or any comparable reporting service), such price as the
Company's Board of Directors determines in good faith in the exercise of its
reasonable discretion.
"Indebtedness" shall mean, without duplication, (i) obligations for
------------
borrowed money, (ii) obligations evidenced by bonds, debentures, notes, or
similar instruments, (iii) any indebtedness on which interest charges are
customarily paid or accrued, (iv) any guarantees, and (v) any obligations
secured by lien on any property or asset of the Company regardless of whether
the indebtedness secured thereby has been assumed by the Company, but shall not
include (A) any obligations under capital leases or with respect to deferred
purchase price for assets which are incurred in the ordinary course of business,
or (B) a line or lines of credit in the aggregate principal amount of up to $3.0
million.
"Investors" shall have the meaning ascribed to it in the preface.
---------
"Party" shall mean either the Company or the Investor.
-----
<PAGE>
"PMA Approval" shall mean receipt by the Company of a written communication
------------
from the United States Food & Drug Administration granting approval to begin
commercial distribution of the Vascular Solutions Duett sealing device in the
United States.
"PMA Submission" shall mean written evidence of submission of all required
--------------
modules of the Company's premarket approval application to the United States
Food & Drug Administration for the approval to begin commercial distribution of
the Vascular Solutions Duett sealing device in the United States.
"Purchase Agreement" shall have the meaning ascribed to it in the recitals.
------------------
"Securities" shall mean any shares of Common Stock acquired by Investors
----------
pursuant to this Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended.
--------------
"Series B Certificate" shall mean the Certificate of Designation of Series
--------------------
B Preferred Stock of the Company.
"Series B Stock" shall have the meaning ascribed to it in the recitals.
--------------
-11-
<PAGE>
EXHIBIT 10.1
As Amended July 28, 1997
VASCULAR SOLUTIONS, INC.
STOCK OPTION AND STOCK AWARD PLAN
1. Purpose of Plan
---------------
This Plan shall be known as the "Vascular Solutions, Inc. Stock Option and
Stock Award Plan" and is hereinafter referred to as the "Plan". The Plan shall
provide for the issuance of shares of common stock, par value $.01 (the "Common
Stock"), of Vascular Solutions, Inc. (the "Corporation"). The purpose of the
Plan is to aid in maintaining and developing a mutually beneficial relationship
with employees and non-employees of the Corporation who perform valuable
services for or on behalf of the Corporation, to offer such persons additional
incentives to put forth maximum efforts for the success of the business, and to
afford them an opportunity to acquire a proprietary interest in the Corporation.
It is intended that this purpose be effected through the granting of stock
options, the awarding of Common Stock subject to restrictions (the "Restricted
Shares") and the awarding of stock appreciation rights to such persons as
hereinafter provided. Options granted under the Plan may be either incentive
stock options ("Incentive Stock Options") within the meaning of the Internal
Revenue Code of 1986, as amended (the "Code"), or options which do not qualify
as Incentive Stock Options.
2. Stock Subject to Plan
---------------------
Subject to the provisions of Section 11 hereof, the stock to be subject to
options and which may be awarded as Restricted Shares under the Plan shall be
shares of the Corporation's authorized Common Stock. Such shares may be either
authorized but unissued shares or issued shares which have been reacquired by
the Corporation. Subject to the adjustment as provided in Section 11 hereof, the
maximum number of shares on which options may be exercised or which may be
awarded as Restricted Shares under this Plan shall be 500,000. Any shares
subject to an option under the Plan which, for any reason, expires or is
terminated unexercised, shall be available for options or awards thereafter
granted during the term of the Plan. If any award of Restricted Shares is
forfeited in accordance with the terms and conditions of such award, the
Restricted Shares so forfeited shall also become available for further grants or
awards under the Plan.
3. Administration of Plan
----------------------
(a) The Plan shall be administered by the Board of Directors of the
Corporation. The Board of Directors may authorize, at any time, the formation of
a Stock Option Committee (the "Committee"), consisting of two or more members
who shall be appointed from time to time by the Board of Directors. The Stock
Option Committee will, if formed, have authority to exercise the powers
conferred on the Board of Directors under the Plan, other than the power under
Section 11 herein to terminate or amend the Plan or to accelerate the
exercisability of any option or lift the restrictions on any Restricted Shares
granted or awarded under the Plan.
<PAGE>
(b) The Board of Directors shall have plenary authority in its discretion,
subject to the express provisions of this Plan, to: (i) determine the purchase
price of the Common Stock covered by each option and the terms of exercise of
each such option, (ii) determine the persons to whom and the time or times at
which options (a person receiving an option is hereinafter referred to as an
"Optionee") or awards of Restricted Shares (a person receiving an award of
Restricted Shares is hereinafter referred to as a "Grantee") shall be granted or
made and the number of shares to be subject to each such option or award (iii)
determine the period during which Restricted Shares shall remain subject to
restrictions and the nature and type of restrictions that may be imposed on
Restricted Shares (iv) interpret the Plan, (v) prescribe, amend and rescind
rules and regulations relating to the Plan, (vi) determine the terms and
provisions (and amendments thereof) of each option and Restricted Share
agreement under this Plan (which agreements need not be identical), including
the designation of those options intended to be Incentive Stock Options, (vii)
the form of payment to be made upon the exercise of an SAR (as hereinafter
defined) as provided in Section 16, which payment may be either cash, common
stock of the Corporation or a combination thereof, and (viii) make all other
determinations necessary or advisable for the administration of the Plan.
(c) The Committee shall select one of its members as its Chairman and
shall hold its meetings at such times and places as it may determine. A
majority of its members shall constitute a quorum. All determinations of the
Committee shall be made by not less than a majority of its members. Any
decision or determination reduced to writing and signed by a majority of the
members of the Committee shall be fully effective as if it had been made by a
majority vote at a meeting duly called and held.
(d) The granting of an option or an award pursuant to the Plan shall
be effective only if a written agreement shall have been duly executed and
delivered by and on behalf of the Corporation and the Optionee or Grantee to
whom such right is granted.
4. Eligibility
-----------
(a) Incentive Stock Options (as determined pursuant to Section 14 herein)
may be granted only to employees of the Corporation and its subsidiary
corporations. Options which do not qualify as Incentive Stock Options and awards
of Restricted Shares may be granted or made to both employees and to individuals
or other entities (including but not limited to consultants) who perform
services for the Corporation but who are not employed by the Corporation, when
granting an option or award to such person would be of benefit to the
Corporation.
(b) Notwithstanding any other provision in the Plan, if at the time an
option is otherwise to be granted pursuant to the Plan the Optionee owns
directly or indirectly (within the meaning of Section 425(d) of the Code (as
hereinafter defined) Common Stock of the Corporation possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Corporation or its parent or subsidiary corporations, if any, (within the
meaning of Section 422(b)(6) of the Code) then any Incentive Stock Option to be
granted to such Optionee pursuant to the Plan shall satisfy the requirements of
Section 422A(c)(6) of the Code, and the option price shall not be less than 110%
of the fair market value of the Common Stock of the Corporation,
<PAGE>
determined as described in Section 5, and such option by its terms shall not be
exercisable after the expiration of five (5) years from the date such option is
granted.
5. Price
-----
The option price for all Incentive Stock Options granted under the
Plan shall be determined by the Board of Directors but shall not be less than
100% of the fair market value of the Common Stock at the date of granting of
such option, as determined in good faith by such Board. The option price for
options granted under the Plan that do not qualify as Incentive Stock Options
shall also be determined by the Board of Directors but shall not be less than
50% of the fair market value of the Common Stock at the date of granting of the
option. The option price shall be payable at the time written notice of exercise
is given to the Corporation. An Optionee shall be entitled to pay the exercise
price in cash, by tendering to the Corporation shares of Common Stock,
previously owned by the Optionee, having a fair market value on the date of
exercise equal to the option price, or, with the consent of the Board of
Directors, by the issuance of a promissory note to the Corporation. The fair
market value of such shares shall be (i) the closing price of the Common Stock
as reported for composite transactions if the Common Stock is then traded on a
national securities exchange, (ii) the last sales price if the Common Stock is
then traded on the NASDAQ National Market System, or (iii) the average of the
closing representative bid and asked prices as reported on NASDAQ if the Common
Stock is then traded on NASDAQ. If the Common Stock is not so traded, the Board
of Directors shall determine in good faith the fair market value.
6. Term
----
Each option and each Restricted Share award and all rights and
obligations thereunder shall (subject to the provisions of Section 8) expire on
the date determined by the Board of Directors and specified in the option
agreement or agreement relating to the award of the Restricted Shares. The
Board of Directors shall be under no duty to provide terms of like duration for
options or awards granted under the Plan; provided, however, that the term of
any Incentive Stock Option shall not extend more than ten (10) years from the
date of granting of the option.
7. Exercise of Options and Awards
------------------------------
(a) The Board of Directors shall have full and complete authority
(subject to the provisions of Section 8) to determine, at the time of granting
or making, whether an option or Restricted Share award will be exercisable in
full at any time or from time to time during the term of the option or award, or
to provide for the exercise or receipt thereof in such installments and at such
times during the term of the option or award as Board may determine.
Notwithstanding any provision of the Plan or the terms of any option granted or
award of Restricted Shares made under the Plan, no option granted or Restricted
Share awarded under the Plan may be exercised until at least six months from the
date of grant or award.
(b) Notwithstanding any provision of the Plan or the terms of any
option granted or award of Restricted Shares made under the Plan, the exercise
of any option or the transferring of any shares of Common Stock on the books and
records of the Corporation pursuant to a Restricted
<PAGE>
Share award may be made contingent upon receipt from the Optionee or Grantee (or
other person rightfully exercising the option or receiving certificates for the
shares granted pursuant to a Restricted Share award) of a representation that,
at the time of such exercise or receipt, it is their then intention to acquire
the shares so received thereunder for investment and not with a view to
distribution thereof. Certificates for shares issued or transferred pursuant to
the exercise of any option or the granting of any Restricted Share award may be
restricted as to further transfers upon advice of legal counsel that such
restriction is appropriate to comply with applicable securities laws.
(c) Notwithstanding any provision of the Plan or the terms of any
option granted or award of Restricted Shares made under the Plan, the Company
shall not be required to issue any shares of Common Stock, deliver any
certificates for shares of Common Stock or transfer on its books and records any
shares of Common Stock if such issuance, delivery or transfer would, in the
judgment of the Board of Directors, constitute a violation of any state or
Federal law, or of the rules and regulations of any governmental regulatory body
or any securities exchange.
(d) An Optionee electing to exercise an option shall give written
notice to the Corporation of such election and of the number of shares subject
to such exercise. The full purchase price of such shares shall be tendered, in
accordance with the provisions of Section 5, with such notice of exercise.
Until such person has been issued a certificate or certificates for the shares
subject to such exercise, he shall possess no rights as a stockholder with
respect to such shares.
(e) Nothing in the Plan or in any agreement thereunder shall confer
on any employee any right to continue in the employ of the Corporation or any of
its subsidiaries or affect, in any way, the right of the Corporation or any of
its subsidiaries to terminate his or her employment at any time.
8. Effect of Termination of Employment or Death
--------------------------------------------
Unless otherwise stated in the option agreement, the following
provisions shall govern the treatment of an option upon termination of
employment:
(a) In the event that the optionee shall cease to be employed by the
Corporation or its subsidiaries, if any, for any reason other than such holder's
gross and willful misconduct or death or disability, such optionee shall have
the right to exercise the option at any time within three months after such
termination of employment to the extent of the full number of shares such holder
was entitled to purchase under the option on the date of termination, subject to
the condition that no option shall be exercisable after the expiration of the
term of the option.
(b) In the event that an optionee shall cease to be employed by the
Corporation or its subsidiaries, if any, by reason of such holder's gross and
willful misconduct during the course of employment, including but not limited to
wrongful appropriation of funds of the Corporation or the commission of a gross
misdemeanor or felony, the option shall be terminated as of the date of the
misconduct.
(c) If the optionee shall die while in the employ of the Corporation
or any
<PAGE>
subsidiary, if any, or within three (3) months after termination of employment
for any reason other than gross and willful misconduct, or become disabled
(within the meaning of Section 105(d)(4) of the Code) while in the employ of the
Corporation or a subsidiary, if any, and such optionee shall not have fully
exercised the option, such option may be exercised at any time within twelve
months after such holder's death or such disability by the personal
representatives, administrators, or, if applicable, guardian, of the optionee or
by any person or persons to whom the option is transferred by will or the
applicable laws of descent and distribution to the extent of the full number of
shares such holder was entitled to purchase under the option on the date of
death, disability or termination of employment, if earlier, and subject to the
condition that no option shall be exercisable after the expiration of the term
of the option.
9. Nontransferability of Options
-----------------------------
No option granted under the Plan shall be transferable by an Optionee,
otherwise than by will or the laws of descent or distribution or pursuant to a
qualified domestic relations order as defined by the Code.
10. Dilution or Other Adjustments
-----------------------------
If the number of outstanding shares of the Common Stock of the
Corporation shall, at any time, be increased or decreased as a result of a
subdivision or consolidation of shares, stock dividend, stock split, spin-off or
other distribution of assets to shareholders, recapitalization, merger,
consolidation or other corporate reorganization in which the Corporation is the
surviving corporation, the number and kind of shares subject to the Plan and to
any option, SAR or Restricted Share award previously granted or made, as well as
the option price or amount payable upon the exercise of any previously granted
option or SAR, shall be appropriately adjusted in order to prevent the dilution
or enlargement of rights of holders of outstanding options, SARs or Restricted
Share awards. Any fractional shares resulting from any such adjustment shall be
eliminated.
11. Amendment or Discontinuance of Plan
-----------------------------------
The Board of Directors may amend or discontinue the Plan at any time;
however, no amendment of the Plan shall, without shareholder approval, amend the
Plan in a way which would cause the Plan to no longer comply with Rule 16b-3
under the Securities Exchange Act of 1934 or any successor rule or other
regulatory requirements. Except as provided in Section 10, the Board of
Directors shall not alter or impair any option, SAR or Restricted Share award
thereto granted or made under the Plan without the consent of the holder of the
option, SAR or award; provided, however, that the Board of Directors may
accelerate the exercisability of options (and any related SARs) or lift any
restrictions imposed on Restricted Shares at any time during the term of such
options or awards without the consent of the holder thereof.
12. Time of Granting
----------------
Nothing contained in the Plan or in any resolution adopted or to be
adopted by the Board of Directors or by the shareholders of the Corporation, and
no action taken by the Board of
<PAGE>
Directors (other than the execution and delivery of an option or the making of
an Award Agreement (as hereinafter defined)), shall constitute the granting of
an option or the making of a Restricted Share award hereunder. The granting of
an option or the making of a Restricted Share award pursuant to the Plan shall
take place only when a written option or Award Agreement shall have been duly
executed and delivered by or on behalf of the Corporation to the Optionee or
Grantee to whom such option or award is granted or made.
13. Termination of Plan
-------------------
Unless the Plan shall have been discontinued as provided in Section 12
hereof, the Plan shall terminate on December 22, 2006. No option or Restricted
Share award may be granted or made after such termination, but termination of
the Plan shall not, without the consent of the Optionee or Grantee, alter or
impair any rights or obligations under any option, SAR or Restricted Share award
theretofore granted or made.
14. Determination of Incentive Stock Option
---------------------------------------
The Board shall determine, upon the granting of each option, whether
such option shall be an Incentive Stock Option or an option that does not
qualify as an Incentive Stock Option.
15. Restricted Share Awards
-----------------------
Each award of Restricted Shares under the Plan shall be evidenced by
an instrument (an "Award Agreement"). Each Award Agreement shall be subject to
the terms and conditions of the Plan but may contain additional terms and
conditions (which terms and conditions may vary from Grantee to Grantee) that
are not inconsistent with the Plan as the Board of Directors may deem necessary
and desirable. Each Award Agreement shall comply with the following terms and
conditions:
(a) The Board of Directors shall determine the number of Restricted
Shares to be awarded to a Grantee.
(b) At the time of the award of Restricted Shares, a certificate
representing the appropriate number of shares of Common Stock awarded to a
Grantee shall be registered in the name of such Grantee but shall be held by the
Corporation or any custodian appointed by the Corporation for the account of the
Grantee subject to the terms and conditions of the Plan. The Grantee shall have
all rights of a stockholder as to such shares of Common Stock, including the
right to receive dividends and the right to vote such Common Stock, subject to
the following restrictions: (i) the Grantee shall not be entitled to delivery of
the stock certificate until the expiration of the Restricted Period (as
hereinafter defined); (ii) the Restricted Shares may not be sold, transferred,
assigned, pledged, or otherwise encumbered or disposed of during the Restricted
Period; and (iii) all or a specified portion of the Restricted Shares shall be
forfeited and all rights of the Grantee to any forfeited Restricted Shares shall
terminate without further obligation on the part of the Corporation unless the
Grantee remains in the continuous employment of the Corporation for
<PAGE>
the period in relation to which all or such portion of the Restricted Shares
were granted (the "Restricted Period"). No Restricted Shares shall have a
Restricted Period of less than six (6) months from the date of award. The Board
of Directors shall have the power to determine which portion of an award of
Restricted Shares shall be forfeited in the event of a Grantee's failure to
remain in the continuous employment of the Corporation during the Restricted
Period relating to such award. In addition, the Board of Directors may specify
additional restrictions or events which must occur during the Restricted Period
or the Restricted Shares, or a portion thereof, shall be forfeited as stated in
the award thereof. Any shares of Common Stock received as a result of a stock
distribution to holders of Restricted Shares shall be subject to the same
restrictions as such Restricted Shares.
(c) At the end of each applicable Restricted Period or at such
earlier time as otherwise provided by the Board of Directors, all restrictions
contained in an Award Agreement and in the Plan shall lapse as to such portion
of the Restricted Shares granted in relation to such Restricted Period, and a
stock certificate for the appropriate number of shares of Common Stock, free of
restrictions, shall be delivered to the Grantee or the Grantee's beneficiary or
estate, as the case may be.
(d) There shall be no limitation on the number of shares of Common
Stock which a Grantee may be awarded except that no Grantee may be awarded
shares of Common Stock in excess of the number of shares remaining available for
option grants and awards of Restricted Shares under the Plan.
16. Alternative Stock Appreciation Rights
-------------------------------------
(a) Grant. At the time of grant of an option under the Plan (or at
-----
any time thereafter as to options which are not Incentive Stock Options), the
Board of Directors, in its discretion, may grant to the holder of such option an
alternative Stock Appreciation Right ("SAR") for all or any part of the number
of shares covered by the holder's option. Any such SAR may be exercised as an
alternative, but not in addition to, an option granted hereunder, and any
exercise of an SAR shall reduce an option by the same number of shares as to
which the SAR is exercised. An SAR granted to an Optionee shall provide that
such SAR, if exercised, must be exercised within the time period specified
therein. Such specified time period may be less than (but may not be greater
than) the time period during which the corresponding option may be exercised. An
SAR may be exercised only when the corresponding option is eligible to be
exercised. The failure of the holder of an SAR to exercise such SAR within the
time period specified shall not reduce such holder's option rights. If an SAR is
granted for a number of shares less than the total number of shares covered by
the corresponding option, the Board of Directors may later (as to options which
are not Incentive Stock Options) grant to the Optionee an additional SAR
covering additional shares; provided, however, that the aggregate amount of all
SARs held by any Optionee shall at no time exceed the total number of shares
covered by such Optionee's unexercised options.
(b) Exercise. The holder of any option which by its terms is
--------
exercisable who also holds an SAR may, in lieu of exercising their option, elect
to exercise their SAR, subject, however, to the limitation on time of exercise
hereinafter set forth. Such SAR shall be exercised by
<PAGE>
the delivery to the Corporation of a written notice which shall state that the
Optionee elects to exercise their SAR as to the number of shares specified in
the notice and which shall further state what portion, if any, of the SAR
exercise amount (hereinafter defined) the holder thereof requests be paid in
cash and what portion, if any, such holder requests be paid in Common Stock of
the Corporation. The Board of Directors shall promptly cause to be paid to such
holder the SAR exercise amount either in cash, in Common Stock of the
Corporation, or any combination of cash and stock as the Board of Directors may
determine. Such determination may be either in accordance with the request made
by the holder of the SAR or in the sole and absolute discretion of the Board of
Directors. The SAR exercise amount is the excess of the fair market value of one
share of the Corporation's Common Stock on the date of exercise over the per
share option price for the option in respect of which the SAR was granted
multiplied by the number of shares as to which the SAR is exercised. For the
purposes hereof, the fair market value of the Corporation's shares shall be
determined as provided in Section 5 herein. An SAR may be exercised only when
the SAR exercise amount is positive.
(c) Limitation on Date of Exercise. A cash settlement of an SAR by
------------------------------
an officer or director of the Corporation may only be accomplished in compliance
with Rule 16b-3(e) of the Securities Exchange Act of 1934 as presently in effect
or as subsequently modified by amendment.
(d) Other Provisions of Plan Applicable. All provisions of this Plan
-----------------------------------
applicable to options granted hereunder shall apply with equal effect to an SAR.
No SAR shall be transferable otherwise than by will or the laws of descent and
distribution and an SAR may be exercised during the lifetime of the holder
thereof, only by such holder.
17. Tax Indemnification Payments
----------------------------
The Board shall have the authority, at the time of the grant of an
option or the making of a Restricted Share award under the Plan or at any time
thereafter, to approve tax indemnification payments to designated Optionees and
Grantees to be paid upon their exercise of stock options which do not qualify as
incentive stock options or recognition of a taxable gain by reason of their
receipt of an award of Restricted Shares, as the case may be. The amount of any
such payments shall not exceed the amount of tax generally payable by an
Optionee or Grantee by reason of such exercise or recognition, and shall not, in
any case, exceed sixty percent of the amount imputed as taxable income to a
particular Optionee or Grantee by reason of either of the above-described
events. The Board of Directors shall have full authority, in its discretion, to
determine the amount of any such payment, the terms and conditions affecting the
exercise, vesting and payment of any payment, and whether any payment shall be
payable in cash or other property.
18. Income Tax Withholding
----------------------
In order to assist an Optionee or Grantee in paying federal and state
income taxes required to be withheld upon the exercise of an option or receipt
of a Restricted Share award granted or made hereunder, the Board of Directors,
in its discretion and subject to such additional terms and conditions as it may
adopt, may permit the Grantee or Optionee to elect to satisfy such income tax
withholding obligation by delivering previously owned shares or by having the
<PAGE>
Corporation withhold a portion of the shares otherwise to be delivered upon
exercise of such option or award with a fair market value, determined in
accordance with the provisions of Section 5 hereof, in an amount up to the
Optionee's maximum marginal tax rate. Any such election by an officer or
director of the Corporation must comply with the provisions of Rule 16b-3 under
the Securities Exchange Act of 1934 or any successor rule.
<PAGE>
EXHIBIT 10.2
STANDARD FORM COMMERCIAL AND INDUSTRIAL LEASE
Landlord: Massachusetts Mutual Life Insurance Company
Project: Plymouth Office/Tech Center
Tenant: Vascular Solutions, Inc., a Minnesota corporation
with an address at 2495 Xenium Lane North,
Plymouth, Minnesota 55441
Lease Date: February 11, 1998
Lease Term: April 1, 1998 to and including March 31, 2003
Occupancy: Landlord shall deliver possession of the Premises to
Tenant upon the complete execution of this Lease for
purposes of allowing Tenant to commence leasehold
improvements to the Premises. If Tenant takes occupancy
of the Premises prior to April 1, 1998 for the conduct
of business, such early occupancy of the Premises shall
be subject to all of the terms and provisions of this
Lease and Tenant shall pay Base Rent at the rate of
$7,936.64 per month and Additional Rent under Paragraph
3 of this Lease (at the monthly rate therein stated)
for the period prior to April 1, 1998 during which
Tenant so occupies the Premises (prorated for the
number of days in such period).
Base Rent: See Exhibit F, payable in advance on or before the 1st
day of each month during the Lease Term, at
Massachusetts Mutual Life Insurance Company, c/o United
Properties Corporation, 3500 West 80th Street, #200,
Minneapolis, Minnesota 55431, or such other place as
Landlord may from time to time designate in writing.
Security - Deposit / Fifteen Thousand Dollars and 00/100 ($15,000.00), as
Letter of Credit: described in Exhibit A attached hereto.
Premises: The space cross-hatched on Exhibit B attached hereto
(the "Premises"), consisting of approximately 16,743
square feet of rentable area in the building (the
"Building") constructed on the tract of land (the
"Land") located in the City of Plymouth, County of
Hennepin, State of Minnesota, (the "Land") legally
described on Exhibit C attached hereto.
<PAGE>
WITNESSETH THAT, in consideration of the Lease for the Premises, the rents
agreed to be paid, and of all the other mutual covenant and agreements herein
contained,
IT IS AGREED:
1. PREMISES AND USE. Landlord hereby leases to Tenant and Tenant hereby
accepts and leases from Landlord, for the term set forth above, the Premises,
together with the right to use, in common with Landlord and other tenants of the
Building and their agents, employees and invitees, the parking areas, walkways,
driveways and any other areas, facilities or improvements located in or on the
Building or land and designed or intended to be used in common (the "common
areas").
The Premises shall be used by Tenant for the manufacturing of medical
devices and or office, and or warehouse purposes, (provided, however, that
Landlord does not hereby make any warranty or representation, expressed or
implied, that the Premises may be used for such purposes under applicable
Building and zoning and other laws, ordinances and codes), and for no other
purpose, in compliance with all applicable federal, state and local laws,
ordinances, codes, rules, regulations and orders, and also in compliance with
the rules and regulations of Landlord which are attached hereto as Exhibit D, as
the same may from time to time be supplemented or amended. Tenant shall, at its
expense, make any and all alterations and improvements to the Premises required
at any time in order for the Premises and the use thereof to comply with such
laws, ordinances, codes, rules and regulations and orders. No part of the
Premises shall be used for any purpose which constitutes a nuisance or which is
dangerous, illegal or offensive, or which interferes with the general safety,
comfort and convenience of the Landlord and other tenants of the Building.
2. ACCEPTANCE OF PREMISES. Tenant acknowledges that it has inspected the
Premises and accepts them in their present condition as suitable for the
purposes for which they are leased, and further acknowledges that no
representations as to the repair of the Premises, nor promises to alter, remodel
or improve the Premises, have been made by Landlord, except as may be provided
on the attached Exhibit E.
If Landlord does not complete leasehold improvements, if any, to be
completed by Landlord, and deliver possession of the Premises on or before the
commencement date of this Lease, or if Landlord is unable for any other reason
to deliver possession of the Premises by such date, Landlord shall not thereby
be deemed to be in default hereunder, and shall not thereby be liable to Tenant
for any loss, damage, cost or expense suffered or incurred by Tenant, nor shall
the commencement date or the Term of this Lease be affected or changed thereby,
and Tenant agrees to accept possession of the Premises at such time as Landlord
is able to tender the same.
3. ADDITIONAL RENT. In addition to Base Rent set forth above, Tenant
agrees to pay Landlord, at the time and place that the payments of Base Rent are
due and payable, Tenant's prorata share of (1) all real estate taxes and
installments of special assessments levied or assessed against the land and the
Building, due and payable in any calendar year falling in whole or in part
within the Lease Term, (2) premiums for casualty, rent loss and public liability
insurance which Landlord maintains with respect to the land
2
<PAGE>
and the Building, and (3) all expense for or on account of (i) lighting,
cleaning, removing snow from, policing and otherwise properly operating,
maintaining and repairing the parking area and other common areas, (ii)
providing water and other utilities to common areas and providing water or other
utilities to tenants which are not separately metered, (iii) maintaining and
repairing the structural portions and exterior of the Building, including
painting of the same, and landscaped portions of the land, (iv) window washing,
(v) making repairs and replacements to and of the heating, cooling, ventilating,
electrical and plumbing systems serving the Building, and (vi) management fees
(all of the items listed in clauses (1), (2) and (3) above being hereinafter
referred to as the "Shared Expenses." If Landlord makes any special improvements
during the term of this Lease in order to comply with any federal, state or
local law or governmental regulation, or to save energy or reduce maintenance
costs, the reasonable annual amortization of the cost thereof, with interest at
the lesser of twelve percent (12%) per annum or the highest rate permitted by
law, shall be deemed a Shared Expense in each of the calendar years during which
such amortization occurs. Tenant's prorata share of the Shared Expenses shall be
based on the number of square feet of rentable area in the Premises bears to the
total number of square feet of rentable area in the Building, including space
occupied by Landlord. "For purposes hereof, rentable area shall be computed by
measuring to the outside finished surface or permanent outer Building walls. The
rentable area of a Building shall be the sum of the rentable area of all
enclosed floors of the Building, including mechanical equipment floors,
penthouses, and the like." Tenant's prorata share of the Shared Expenses shall
be adjusted as of each January 1 during the Lease Term, based on Landlord's
estimate of the Shared Expenses for the ensuing calendar year, and on each such
January 1 and the first (1st) day of each month during such calendar year,
Tenant shall pay Landlord one-twelfth of Tenant's prorata share of such
estimated Shared Expenses. Within ten (10) days after Landlord shall have
determined the actual Shared Expenses for such calendar year, appropriate
adjustments shall be made between Landlord and Tenant. Tenant's prorata share of
Shared Expenses for the years in which this Lease commences and terminates shall
be prorated on a per diem basis. Shared Expenses shall be determined in
accordance with generally accepted accounting principles.
In addition to the Base Rent set forth above, Tenant also agrees to pay to
Landlord, as additional rent, upon demand, all management fees, attorneys' fees
and other fees, and out-of-pocket costs and expenses if any, incurred by
Landlord in connection with this Lease, including without limitation, any such
fees, costs and expenses payable by Landlord to others for dealing with or
handling inquires by Tenant, for dealing with or handling delinquencies or
defaults by Tenant hereunder and for enforcing the provisions hereof, but
specifically excluding any such fees, costs and expenses payable by Landlord to
others for negotiating or preparing this Lease.
4. UTILITIES. Tenant shall pay for all utilities that are now or in the
future shall be separately metered to the Premises, including gas, electricity,
water and sewer and any other utility service used within the Premises during
the Term of this Lease.
5. MAINTENANCE BY LANDLORD. Subject to the provisions of paragraph 3
hereof, Landlord shall, at its expense, keep the structural parts of the
Building in good order, safe condition and repair, including the exterior walls,
roof, floor, foundation and
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interior support column except as otherwise herein and more specifically
stated in paragraph 7 of this Lease.
6. MAINTENANCE BY TENANT. Tenant shall be solely responsible for providing
and paying for its own interior (i.e. within the Premises) janitorial services,
including without limitation window washing, for the Premises. Further, Tenant
shall be solely responsible for the maintenance and repair of the following
items: the interior of the Premises; entrance and interior doors; overhead doors
entering the Premises; heating, cooling, ventilating, sprinkler, electrical and
plumbing fixtures and equipment located in or serving the Premises; the
replacement of broken glass located in or forming a part of the perimeter of the
Premises; and the interior of the loading dock area portion of the Premises.
Tenant shall maintain in full force and effect during the Lease Term, and
provide Landlord with a copy of, a service contract with respect to any utility
fixtures and equipment which Tenant is required to maintain and repair pursuant
hereto, or, in the alternative, shall provide Landlord with periodic
certifications, as requested by landlord, that Tenant has performed all such
required maintenance and repair. If Tenant does not provide such certificate
indicating a satisfactory maintenance program, Landlord shall notify Tenant in
writing of such breach of contract and Tenant shall within fifteen (15) days
provide such certificate or proof of maintenance acceptable to Landlord. In the
event Tenant does not notify landlord in writing within specified time period
Landlord shall provide such maintenance and bill Tenant therefore, which costs
shall be payable upon receipt of invoice.
7. GENERAL REPAIR. In the event that any act or omission resulting in the
necessity for maintenance or repair of the land, Building and/or Premises
involves the negligence, gross negligence or deliberate act of a party to the
Lease, not normally obligated to perform such maintenance or repair, or any
agent, employee or invitee of such party, then such party shall be responsible
for performing the maintenance or repair or paying for the same. Nothing in this
paragraph 7 is intended or shall be construed as negating or modifying the
waiver of subrogation provisions contained in paragraph 9 below as to acts or
omissions covered by fire and extended risk or personal property insurance
policies.
8. INSURANCE BY TENANT. Landlord, and Landlord's agents and employees,
shall not be liable to Tenant, or those claiming through or under Tenant, for
injury, death, property damage, burglary, theft or disappearance occurring in,
on or about the Premises, the Building, and the land and appurtenances thereto,
and Tenant shall indemnify and hold them harmless from any claim, damage, cost
and expense (including attorneys' fees) or liability arising out of any injury,
death, property damage, burglary, theft or disappearance occurring in, on or
about the Premises to Tenant or any agent, employee or invitee of Tenant, unless
due to Landlord's gross negligence or willful misconduct.
The Tenant, at the Tenant's sole cost and expense, shall maintain for the
mutual benefit of the Landlord and the Tenant, general public liability
insurance against claims for personal injury, death or property damage occurring
upon, in or about the Premises, such insurance to afford protection in a
combined single limit of not less than $2,000,000.00. All policies of insurance
shall be in form and substance satisfactory to Landlord, shall be written with
companies satisfactory to the Landlord, and shall provide for at least ten (10)
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business days written notice to Landlord prior to cancellation. Such policies,
or certificates thereof, shall be delivered to landlord prior to the
commencement of the Lease Term; and evidence of any renewal of such insurance
shall be delivered to Landlord not less than thirty (30) days prior to the
expiration of the term of such coverage.
The Tenant covenants that it will not do or permit to be done, nor keep nor
permit to be kept upon the Premises, anything that will contravene the policy or
policies of insurance against loss by fire or other causes, or which will
increase the rate of fire or other insurance on the Building. Should any act of
the Tenant so increase said rate, then, in addition to the rentals hereinabove
provided for, the Tenant shall be liable for such additional premium, which
shall be payable when billed as additional rent, collectible in the same manner
as the rents hereinabove provided for. Tenant covenants that under no
circumstances will it keep or permit to be kept, do or permit to be done, in or
about the Premises, anything of a character so hazardous as to render it
difficult, impracticable or impossible to secure such insurance in companies
acceptable to the Landlord, and further, immediately upon notice, to remove from
the Premises and/or to desist from any practice deemed by the insurance
companies or the Association of Fire Underwriters as so affecting the insurance
risk.
Anything contained in this Lease to the contrary notwithstanding, Tenant
agrees that it shall look solely to the estate and property of Landlord in the
Land and Building of which the Premises form a part, for the collection of any
judgment (or other judicial process) requiring the payment of money by Landlord
for any default or breach by Landlord of any of its obligations under this
Lease, subject, however, to the prior rights of any ground or underlying
landlord or the holder of any mortgage covering the Building or of Landlord's
interest therein. No other assets of Landlord shall be subject to levy,
execution or other judicial process for the satisfaction of Tenant's claim. This
provisions shall not be deemed, construed or interpreted to be or constitute an
agreement, express or implied, between Landlord and Tenant that Landlord's
interest hereunder and in the Building shall be subject to impressment of an
equitable lien or otherwise. Nothing herein contained shall be construed to
limit any right of injunction against Landlord, where appropriate.
9. WAIVER OF SUBROGATION. Landlord, on its own behalf and on behalf of
anyone claiming through or under it, hereby waives and releases all claims,
liabilities and causes of action against Tenant and the agents, employees and
invitees of Tenant, and Tenant, on its own behalf and on behalf of anyone
claiming through or under it, hereby waives and releases all claims, liabilities
and causes of action against Landlord and the agents, employees and invitees of
Landlord, for loss or damage to, or destruction of, the Premises or any portion
thereof, the Building and other improvements situated on the land, as well as
the improvements, fixtures, equipment, supplies, merchandise and other property
located in, upon or about the Premises, resulting from fire, explosion or other
perils included in standard fire and extended coverage insurance, whether caused
by the negligence of any of said persons or entities or otherwise.
10. IMPAIRMENT OF USE. In the event of damage to the Premises during the
term hereof by fire, the elements or other casualty, Landlord shall restore the
Premises, at its cost, with reasonable dispatch unless Landlord shall, within
sixty (60) days of the date of the occurrence of such fire or casualty, elect
not to rebuild. In the event Landlord elects
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not to rebuild as above set forth, then this Lease shall cease and terminate as
of the date of such damage and destruction, any rental prepaid for the period
after such date shall be refunded to Tenant, and Tenant shall have no claim
against Landlord for the value of any unexpired Term of this Lease. During any
such restoration, to the extent the Premises shall be untenantable or it shall
be impracticable to conduct business therein, the rent shall abate
proportionately. In the event of such damage to the Premises, Landlord shall not
be responsible for repairing or restoring leasehold improvements, personal
property, machinery or equipment of Tenant.
11. ASSIGNMENT. Tenant shall not assign, sublease, mortgage, pledge or in
any manner transfer the Premises or any part thereof or this Lease without the
prior written consent of Landlord. If the Tenant is a partnership, corporation
or other legal entity, any change in the partnership interest, stock or legal or
beneficial ownership of such partnership, corporation or other entity shall be
deemed an assignment of this Lease for purposes of this paragraph 11. Landlord
agrees that Landlord's consent to a proposed assignment or sublease shall not be
unreasonably withheld or delayed. Tenant acknowledges that Landlord may withhold
such consent if (a) the proposed assignee or subtenant intends to use the
Premises for a use which is not permitted under paragraph 1 of this Lease, or
(b) the financial condition and reputation of the proposed assignee or subtenant
is not reasonably satisfactory to Landlord. If Landlord consents to a proposed
assignment or sublease, Tenant shall remain fully liable for and shall not be
released from any or all of its obligations and liabilities under this Lease.
12. ALTERATIONS AND MECHANIC'S LIENS. Tenant shall not make any
alterations or improvements to the Premises without prior written approval of
the Landlord, which approval may be conditioned on the Tenant's compliance with
such requirements with respect to such alterations as Landlord may impose,
including without limitation the furnishing of a bond or other security
satisfactory to Landlord against mechanics' liens and claims therefore. Any such
work approved by Landlord shall be done in good, workmanlike manner in
conformance with applicable Building codes, free and clear of mechanics' liens
and claims therefore. Any alterations and improvement shall become the property
of Landlord upon being affixed to the Premises and all right, title and interest
of the Tenant therein shall immediately cease, provided, however, that if
directed by Landlord, Tenant, at its expense shall remove any such alterations
and improvements from the Premises at the expiration of the Lease Term, and
repair any damage to the Premises or the Building caused by the installation or
removal of such alterations and improvements. Tenant may remove from the
Premises at the expiration of the Lease Term, the trade fixtures purchased and
installed by Tenant. Tenant shall be required to leave the Premises in as good
as, or better condition. However the removal of any and all fixtures shall be
approved by Lessor prior to Lessee commencing such removal, provided Lessee, at
its expense, repairs any and all damage associated with said removal. Landlord
hereby specifically approves the installation of the Tenant's sign shown on
Exhibit F attached hereto. Landlord at its discretion during the Term of this
Lease shall have the right to change or modify all sign criteria approved herein
or otherwise adopted during the Term of this Lease.
13. SURRENDER. Upon the expiration or termination of this Lease, Tenant
shall peaceably surrender the Premises broom-clean, in good condition and
repair, fire and other casualty, reasonable wear and tear (which term shall not
include wear and tear resulting
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from acid, salt or other substances used by Tenant in the operation of its
business, or installations made by Tenant) excepted. Tenant shall, at its
expense, leave the Premises as required in paragraph 12 hereof and shall also
remove all of its trade fixtures, personal property, equipment and signs from
the Premises. Any property not removed on or before the expiration or
termination of this lease shall be deemed to have been abandoned. Any damage to
the Premises caused in the removal of such items shall be repaired by and/or at
the expense of Tenant.
14. DEFAULT OF TENANT AND REMEDIES.
A. Events of Default and Remedies. If Tenant fails to pay any monies
due hereunder or to perform any other of the terms, covenants, conditions
or obligations of this Lease to be performed by Tenant, or if any
proceeding is commenced by or against Tenant for the Purpose of subjecting
the assets of Tenant to any law relating to bankruptcy or insolvency or for
an appointment of a receiver of Tenant or any of Tenant's assets, or if
Tenant makes a general assignment of Tenant's assets for the benefit of
creditors, then in any such event, Tenant shall be in default hereunder,
and Landlord shall have the right, at its option, in addition to any other
rights and remedies it may have hereunder, or at law or in equity or by
statue or otherwise, to terminate this Lease as to all future rights of
Tenant, and have, regain, repossess and enjoy the Premises. Should Landlord
at any time terminate this Lease for any such default, in addition to any
other remedies Landlord may have, Landlord may recover from Tenant and
Tenant shall indemnify Landlord against, all loss of rents and other
damages Landlord may incur by reason of such default, including the cost of
recovering and reletting Premises, and reasonable attorneys' fees.
B. Right of Landlord to Cure Default of Tenant. Landlord may, at its
option, instead of exercising any other rights or remedies available to it
in this Lease or otherwise, spend such sums of money as is reasonably
necessary to cure any default of Tenant herein and the amount so spent, and
cost incurred, including reasonable attorneys' fees in curing such default,
shall be paid by Tenant, as additional rent, upon demand.
C. Legal and Other Expenses. In the event suit shall be brought for
recovery of possession of the Premises, for the recovery of rent or any
other amount due under the provisions of this Lease, or because of the
breach of any other covenant herein contained on the part of Tenant to be
kept or performed, Tenant shall pay Landlord all expenses incurred
therefore, including reasonable fees of attorneys.
D. Cumulative Remedies. No remedy herein or elsewhere in this Lease
or otherwise by law, statue or equity conferred upon or reserved to
Landlord shall be exclusive of any other remedy, but shall be cumulative,
and may be exercised from time to time and as often as the occasion may
arise.
E. Overdue Payments. If Tenant fails to pay an installment of rent
or any other sum due and payable to landlord on or before the first fifth
day of the
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calendar month when such installment becomes due and payable, Tenant
shall pay to Landlord a late charge (to cover Landlord's administrative and
overhead expenses of processing late payments) equal to the greater of one
hundred dollars ($100.00) or five percent (5%) of the amount of such
installment and, in addition, such unpaid installment shall bear interest
at the rate of twelve percent (12%) per annum from the date such
installment became due and payable to the date of payment thereof by
Tenant; provided, however, that nothing herein contained shall be construed
or implemented in such a manner as to allow Landlord to charge or receive
interest in excess of the maximum legal rate then allowed by law. Such
late charge and interest shall constitute additional rent hereunder due and
payable with the next monthly installment of rent. Tenant shall be granted
one (1) five (5) day grace period per calendar year without late fees or
interest charges.
15. SUBORDINATION. At the option of the holder or holders of any such
mortgage, ground lease or other security, this Lease shall be subordinate to any
and all mortgages, ground leases, or other security covering the Premises,
including any renewal, modifications, consolidations, replacements and
extensions thereof, now or hereafter recorded against the Premises, the Building
or land. Tenant agrees to execute any instruments which may be deemed by the
Landlord or such holder or holders as necessary or desirable to further effect
the subordination of this Lease to any such security.
Tenant shall, from time to time, and within ten (10) days after receipt of
a request from Landlord therefore, execute and deliver to Landlord, or to any
holder or proposed holder of a security interest in the Premises or to any
proposed purchaser of the Premises, a certificate in recordable form, certifying
that this lease is in full force and effect, and that there are no offsets
against rent nor defenses to performance of Tenant under this Lease, or setting
forth any such offsets or defenses claimed by Tenant, as the case may be, and
certifying as to such other matters as is reasonably requested. Tenant shall
make no charge for executing and delivering such certificate.
In the event the original Lease hereunder, or any successor owner of the
Building, shall sell or convey the Building, all liabilities and obligations on
the part of the original Landlord, or such successor owner, under this Lease
accruing thereafter shall terminate, and thereupon all such liabilities and
obligations shall be binding on the new owner. Tenant agrees to attorn to such
new owner in writing if requested by Landlord to do so.
Landlord hereby reserves the right to sell, assign or transfer this Lease
upon the condition that in such event this Lease shall remain in full force and
effect, subject to the performances by Tenant of all the terms covenants and
conditions on its part to be performed. In the event that such purchaser,
assignee or transferee agrees to perform all the terms, covenants and conditions
of Landlord pursuant to this Lease which are to be performed by Landlord from
and after the effective date of such sale, assignment or transfer then, upon any
such sale, assignment or transfer, other than merely as security, Tenant agrees
to look solely to the purchaser, assignee or transferee with respect to all
matters in connection with this Lease and the transferor Landlord shall be
released from any further obligations hereunder.
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Notwithstanding anything in this paragraph 15 to the contrary, Landlord
agrees to use reasonable efforts to procure a non-disturbance agreement in favor
of Tenant from any future first mortgagee or ground lessor of the Building.
Tenant understands that (a) Landlord shall not be obligated to expend any funds
to procure such agreement and (b) Tenant's obligations under this Lease are not
conditioned on Landlord's obtaining such agreement from any such mortgagee or
ground lessor and Tenant's sole and exclusive remedy for Landlord's failure to
use such efforts shall be a claim for actual damages directly caused as a result
of such breach (excluding any indirect, consequential or punitive damages),
which damages shall not exceed the amount of Rent payable under this Lease from
and after the date of said default, and in no event shall Tenant be entitled to
terminate this Lease or to any abatement of Rent as a result of such breach.
Such non-disturbance agreement shall be in such mortgagee's or ground lessor's
customary form.
16. HOLDING OVER. In the event Tenant remains in possession of the
Premises after the expiration of this Lease, it shall be deemed to be occupying
the premises as a tenant from month-to-month, subject to all the conditions,
provisions and obligations of this Lease insofar as the same can be applicable
to a month-to-month tenancy; provided, however, that the Base Rent required to
be paid by Tenant during any holdover period shall be 150% of the amount of the
Base Rent set forth above. Any holding over, however, pursuant to this Article
shall not be considered as constituting a renewal or extension of this Lease.
17. NOTICES. Any notice required or permitted under this Lease shall be
deemed sufficiently given or served if sent by recognized national overnight
delivery service or by registered or certified mail, return receipt requested,
postage prepaid, to Tenant at its address set forth above and to Landlord in
care of Cornerstone Real estate Advisers, Inc., 311 South Wacker Drive, Suite
980, Chicago, Illinois 60606, with a copy to the address then fixed for the
payment of rent, and either party may by like written notice at any time
designate a different address to which notices shall subsequently be sent. Such
notices shall be deemed received by the party to whom they are sent on the fifth
day following the date of delivery to the United States Post Office Department.
18. ENTRY BY LANDLORD. Upon reasonable notice, Tenant agrees to permit the
Landlord and any authorized representatives of the Landlord to enter the
Premises at all times during usual business hours or at any other time in case
of emergency, to inspect the same and to make any repairs or perform any work
deemed necessary or desirable by the Landlord. During the progress of any such
work, the Landlord may keep and store upon the Premises all necessary materials,
tools and equipment. The Landlord shall not in any event be liable for
inconvenience, annoyance, disturbance, loss of business or other damage to the
Tenant.
The Tenant further agrees to permit the Landlord and any authorized
representatives of the Landlord to enter the Premises at all times during usual
business hours to exhibit the same for the purpose of sale or mortgage, and to
display on the Premises usual "For Sale" or "To Let" signs.
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19. SUCCESSORS AND ASSIGNS. The terms, covenants and conditions hereof
shall be binding upon and inure to the benefit of the parties hereto, and their
respective heirs, legal representatives, successors and assigns.
20. HAZARDOUS WASTE. Tenant shall not (either with or without negligence)
cause or permit the escape, disposal or release of any biologically or
chemically active or other hazardous substances, or material. Tenant shall not
allow the storage or use of such substances or materials in any manner not
sanctioned by law for the storage and use of such substances or material, nor
allow to be brought into the Building any such materials or substances except to
use in the ordinary course of Tenant's business, and then only after written
notice is given to Landlord of the identity of such substances or materials.
Without limitation, hazardous substances and materials shall include those
described in the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et seq., the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901 et seq., any
applicable state or local laws and the regulations adopted under these acts. If
any lender or governmental agency shall ever require testing to ascertain
whether or not there has been any release of hazardous material, then the
reasonable costs thereof shall be reimbursed by Tenant to Landlord upon demand
as additional charges if such requirement applies to the Leased Premises. In
addition, Tenant shall execute affidavits, representations and the like from
time to time at Landlord's request concerning Tenant's best knowledge and belief
regarding the presence of hazardous substances or materials on the Lease
Premises. In all events, Tenant shall indemnify Landlord in the manner elsewhere
provided in this lease from any release of hazardous material in or about the
Land, the Building, or the Premises, or elsewhere if caused by Tenant, its
officers, employees, contractors, suppliers, invitees, or persons acting under
or on behalf of Tenant. This Section shall survive the expiration or earlier
termination of the Lease Term.
21. LIMITATION OF LIABILITY. Notwithstanding any provision in this Lease
to the contrary, under no circumstances shall Landlord's liability or that of
its directors, officers, employees and agents for failure to perform any
obligations arising out of or in connection with the Lease or for any breach of
the terms or conditions of this Lease (whether written or implied) exceed
Landlord's equity interest in the Building. Any judgments rendered against
Landlord shall be satisfied solely out of proceeds of sale of Landlord's
interest in the Building. No personal judgment shall lie against Landlord upon
extinguishment of its rights in the Building provided that the new landlord
assumes the Landlord's obligations under this Lease, and any judgments so
rendered shall not give rise to any right of execution or levy against
Landlord's assets. The provisions hereof shall inure to Landlord's successors
and assigns including any Lender. The foregoing provisions are not intended to
relieve Landlord from the performance of any of Landlord's obligations under
this Lease, but only to limit the personal liability of Landlord in case of
recovery of a judgment against Landlord; nor shall the foregoing be deemed to
limit Tenant's rights to obtain injunctive relief or specific performance or
other remedy which may be accorded Tenant by law or under this Lease.
22. GENERAL.
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A. No waiver of any default of either party hereunder shall be
implied from any omission by the other party hereunder to take any action
on account of such default if such default persists or is repeated, and no
express waiver shall affect any default other than the default specified in
the express waiver and that only for the time and to the extent therein
stated. One or more waivers by Landlord or Tenant shall not be construed as
a waiver of a subsequent breach of the same covenant, term or condition.
B. This Lease and signed Exhibits known as A, B, C, D, E, F, G, H &
I and attached hereto forming a part hereof set forth all the covenants,
promises, agreements, conditions and understandings between Landlord and
Tenant affecting the Premises and there are no covenants, promises,
agreements, conditions or understandings, either oral or written, between
them other than are herein set forth.
C. The singular of all terms used herein shall include the plural,
the plural shall include the singular, and the use of any gender herein
shall include all other genders, where the context so requires.
D. If Tenant vacates or abandons the Premises and is not in default
under this Lease, Landlord shall have the right to terminate this Lease
(without payment of any termination fee or penalty by or to Landlord or
Tenant) by giving Tenant written notice of termination at any time
thereafter, which notice shall specify the actual effective date of
termination. If Landlord exercises such termination right, all rent shall
be paid through and apportioned as of the effective date of termination and
neither party shall have any further rights or obligations under this Lease
for the period accruing after the effective date of termination.
IN WITNESS WHEREOF, the Landlord and Tenant have caused this Lease to be
duly executed as of the Lease Date set forth above.
LANDLORD: TENANT:
MASSACHUSETTS MUTUAL LIFE VASCULAR SOLUTIONS, INC.
INSURANCE COMPANY a Minnesota corporation
By: CORNERSTONE REAL ESTATE
ADVISERS, INC., ITS AGENT
By: /S/ T. FLEMING BY: /S/ HOWARD C. ROOT
--------------- ------------------
ITS: VICE PRESIDENT ITS: CEO
--------------- ------------------
Date: 2/15/98 DATE: FEBRUARY 12, 1998
--------------- ------------------
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EXHIBIT A
LETTER OF CREDIT
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EXHIBIT B
FLOOR PLAN
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EXHIBIT C
LEGAL DESCRIPTION
East 300 feet of North 726 feet of NE 1 & 4, Unplatted 27 118 22.
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EXHIBIT D
BUILDING RULES AND REGULATIONS
All words used herein shall have the same meaning as established in the Lease to
which these Rules have been attached.
1. TRASH: Tenant shall be responsible for contracting and paying for
trash removal, including the cost of rental or purchase of suitable trash
receptacles, which trash receptacles shall have been approved by Landlord. Such
trash receptacles shall be stored inside the Premises or at such other location
as is designated by Landlord. Tenant shall not leave or store any materials,
trash, refuse or litter on the land or common areas.
2. DISTURBANCE: No noise, conduct or process shall be permitted at any
time which shall, in the reasonable opinion of Landlord, serve to annoy or
disturb any other tenants of the Building.
3. PARKING: Use of the parking area shall be subject to such rules as
Landlord may promulgate from time to time. Tenant shall not use or permit the
use of the parking area for the overnight storage of automobiles or other
vehicles without prior written approval of Landlord. Lessee shall have the non-
exclusive use of forty-six (46) stalls on the property, as per the building's
current parking ratio. All future parking ratios are subject to governmental
rights of eminent domain.
4. SIGNS: No sign, advertisement or other visual aid shall be painted,
affixed or otherwise exposed on the windows, doors or any part of the exterior
of the Building, on the land or on the parking area, without the prior written
approval of the Landlord. All identification signs shall be in accordance with
the Building standards and submitted to Landlord for written approval and shall
be incorporated herein and made a part hereof. Interior illuminated signs must
also be submitted to Landlord for written approval.
5. LOCKS: No additional locks will be placed on any of the doors of the
Premises without the prior written approval of the Landlord.
6. FIXTURE MOVEMENT: Any and all furniture, fixtures and goods will be
moved by Tenant and at Tenant's expense whenever such moving is necessitated for
the purpose for Building repair or maintenance to be performed by Landlord.
7. WASTE; OVERLOADING FLOORS; DANGEROUS SUBSTANCES: Tenant shall not do
or suffer any waste or damage, disfigurement or injury to the Premises or the
Building, or permit or suffer any overloading of the floors of the Premises. If
Tenant stores any dangerous substance or material on the Premises, Landlord
shall have, in addition to any other rights and remedies it may have under the
Lease, the right to remove and store the same, all at the cost and expense of
the Tenant .
8. WASTE OF UTILITIES: Tenant shall not overload any utility lines, pipes
or systems serving the Premises, nor waste or overuse any utilities furnished to
the Premises
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which are not separately metered, and that in case of any excessive use or
consumption of any such utilities Tenant will pay the cost thereof.
9. RULES AMENDMENT: These Rules may be added to or reasonably amended by
Landlord for the benefit of all tenants of the Building, and such amendments
will become effective immediately upon notification.
Tenant hereby acknowledges receipt of and agrees to be bound by and comply
with these Rules and any amendments hereto, and further agrees that any
violations of these Rules or any amendments hereto shall be deemed to constitute
a default under the Lease, of which these Rules and any amendments hereto shall
be considered to be a part.
2
<PAGE>
EXHIBIT E
LEASEHOLD IMPROVEMENTS
1. Tenant accepts the Premises in an "as-is" condition, without any
representation, warranty, allowance or build-out from Landlord with respect to
the condition or improvement thereof; provided, however, that (a) Landlord
represents to Tenant that as of the date Landlord delivers possession of the
Premises to Tenant the mechanical systems serving the Premises, such as rooftop
HVAC units, plumbing, lights and all electrical outlets shall be in operable
condition, and (b) Landlord agrees to reimburse Tenant for certain space
planning and construction management fees as set forth in Paragraph 8 below.
2. Tenant, at its sole expense, shall perform all work (the "Work")
necessary to make and install all leasehold improvements to the Premises desired
by Tenant for Tenant's initial occupancy thereof. The Work shall be performed in
accordance with Paragraph 12 of the Lease.
3. Prior to commencing the Work, Tenant shall submit to Landlord
appropriate plans, drawings and descriptions for the Work (the "Plans",
collectively). The Plans shall be subject to the written approval of Landlord.
4. Tenant shall be allowed to use a licensed contractor of choice.
However, such contractor and all associated work shall be approved in writing by
Lessor, prior to commencement of any and all construction.
5. Prior to commencing the Work, Tenant, at its expense, shall obtain or
cause the contractor to obtain all building permits and other governmental
approvals required for the Work and furnish Landlord with copies of same.
6. Prior to commencing the Work, Tenant shall cause the contractor to
obtain and furnish to Landlord certificates of insurance evidencing Worker's
Compensation Insurance, Commercial General Liability Insurance and Builder's
Risk Insurance (in form, content and amounts satisfactory to Landlord) covering
the Work and endorsed to include Landlord as an additional insured.
7. Landlord agrees to reimburse Tenant in an amount (the "Allowance")
equal to the actual, documented, out-of-pocket costs paid by Tenant for space
planning and construction management services provided to Tenant in connection
with the Work, but in no event shall the Allowance exceed $5,000. Landlord shall
pay the Allowance to Tenant within 30 days after Tenant takes occupancy of the
Premises for the conduct of business and submits a written request therefor to
Landlord, together with invoices and full and final lien waivers for the work
completed from the contractor and all sub-contractors, suppliers and others
providing lienable services in connection with the work supporting the amount of
the Allowance.
1
<PAGE>
8. Tenant agrees to indemnify, defend and hold Landlord harmless from and
against all claims, liabilities, losses, damages and expenses of whatever nature
arising out of or in connection with the Work or the entry of Tenant or Tenant's
contractors or subcontractors into the Building and the Premises, including,
without limitation, mechanic's liens, the cost of any repairs to the Premises or
Building necessitated by activities of Tenant or Tenant's contractors or
subcontractors, bodily injury to persons or damage to property. It is
understood and agreed that the foregoing indemnity shall be in addition to the
insurance requirements set forth above and shall not be in discharge of or in
substitution for same or any other indemnity or insurance provision of the
Lease.
9. There shall be no deferral or extension of the commencement date of
the Lease Term nor any deferral or extension of the rental commencement date by
reason of any delays in the commencement or completion of the Work.
2
<PAGE>
EXHIBIT F
=========
BASE RENT SCHEDULE
==================
MONTHS MONTHLY BASE RENT
01-24 $7,935.64
25-60 $8,340.26
1
<PAGE>
EXHIBIT G
ADDITIONAL PROVISIONS
Tenant's Right to Early Termination
- -----------------------------------
Tenant may cancel the Lease at any time after the 36th month of the Lease.
1. Tenant will give Landlord at least six (6) months prior written notice of
Tenant's election to terminate this Lease.
2. Tenant may terminate this Lease only as of the last day of a month (the
"Termination Date"). The Termination Date will be stated in Tenant's written
notice to Landlord. With Tenant's six (6) months written notice and as a
conditions of Tenant's termination, Tenant will pay Landlord as a
termination fee in bank funds, the sum of the following items (I) one months
gross rent based on monthly billing at the time notice is given, plus (ii)
the unamortized portion of the leasing commissions ($36,584.58) paid by
Landlord to United Properties Corporation in connection with this Lease, and
(iii) the unamortized cost of the improvements ($5,000.00) (without
consideration of any salvage value) made by Landlord pursuant to the Lease,
as of the Termination Date. The amortization of the $41,584.58 total will be
on a straight-line basis, using a 12% interest rate over the initial sixty
(60) month term of the Lease. See Exhibit H for the amortization schedule.
3. All payments due to Landlord under the terms of the Lease must continue to
be made up through and including the Termination Date. Landlord may reject
Tenant's election to terminate this Lease if there is an uncured Event of
Default at the time of the notice to terminate or any time thereafter.
4. Landlord may reject Tenant's election to terminate this Lease if there is an
uncured event of default at the time of the notice to terminate or any time
thereafter.
5. On or prior to the Termination Date, Tenant will surrender possession of the
Leased Premises to Landlord in accordance with the provisions of the Lease,
as if the Termination Date were the expiration date of the Lease.
6. Upon termination Landlord and Tenant will be relieved of their obligation
under this Lease, except for those accruing prior to the Termination Date.
7. Tenant's Right to Early Termination is exercisable during the initial term
only and shall become null and void should Tenant exercise its Option to
Extend as described in this Exhibit G.
1
<PAGE>
EXHIBIT G-1
ADDITIONAL PROVISIONS
Right of First Offer
- --------------------
During the Term of this Lease, but subject to the existing prior rights of any
other party, if any, Tenant is hereby granted a Right of First Offer on the
space contiguous to the Premises and shown on the attached Exhibit B, which may
from time to time become vacant (the "ROFO Space"). Before Landlord markets any
portion of the ROFO Space to any party other than the then current occupant, if
any, or those having a prior right, Landlord will notify Tenant of the
availability and description of the ROFO Space and the basic terms under which
Landlord is going to market the ROFO Space and Tenant will have the first
opportunity to lease such ROFO Space prior to the other third parties. Within
five (5) days of such notice, time being of the essence, Tenant shall give
Landlord a notice that it either does or does not wish to enter into a lease
with Landlord for the ROFO Space. In the event that Tenant's notice provides
that it does not wish to enter into a lease for the ROFO Space of if Tenant
fails to give Landlord the notice it desires respecting the ROFO Space within
the foregoing required five (5) day period, then Landlord shall be entitled to
proceed to market and / or lease the ROFO Space to a third party free and clear
of Tenant's right of first offer and such right shall be deemed forever
terminated with respect to the ROFO Space described in the notice from Landlord.
In the event that Tenant gives Landlord a notice are required in the preceding
paragraph that it wishes to lease the ROFO Space from Landlord, then Tenant
shall have thirty (30) days from the date of the notice within which to sign a
new lease covering the ROFO Space or to sign an amendment to this Lease adding
the ROFO Space. In the event Tenant fails to sign such a lease or amendment to
this Lease within said thirty (30) day period, time being of the essence, then
Landlord shall be entitled to proceed to market and / or lease the ROFO Space to
a third party free and clear of such right and such right shall be deemed
terminated with respect to the ROFO Space described in the notice from Landlord.
Option to Extend
- ----------------
Tenant shall have one (1) option to extend this Lease in accordance with the
provisions of this paragraph for an additional term of five (5) years on all of
the same terms and conditions of this Lease with the exception of base rent
payable under Base Rent hereof which shall be Landlord's then prevailing base
rent being charged by Landlord for space in the building reasonably comparable
to the Premises. If Tenant elects to exercise the foregoing option to extend, it
shall give Landlord written notice of its election to do so on or before
September 1, 2002 but not prior to July 1, 2002, time being of the essence,
which notice shall also request that Landlord shall furnish Tenant with the base
rent figure for the term extension within ten (10) days of receipt of Tenant's
notice of exercise. Provided, however, in the event Landlord and Tenant have not
signed an amendment to this Lease for any reason confirming the extended term of
the Lease and setting forth the base rent for the term by January 1, 2003, time
being of the essence, then Tenant's extension of the Lease shall be deemed null
and void and this Lease shall expire on its
1
<PAGE>
initial expiration date as if the above extension option had not been exercised.
Tenant has no other options to extend this Lease except as set forth in this
paragraph.
2
<PAGE>
EXHIBIT 10.3
FIRST LEASE AMENDMENT
---------------------
THIS FIRST LEASE AMENDMENT (the "Amendment") is executed this 9th day of
June, 1999, by and between DUKE REALTY LIMITED PARTNERSHIP, an Indiana limited
partnership ("Landlord"), and VASCULAR SOLUTIONS, INC., a Minnesota corporation
("Tenant").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Massachusetts Mutual Life Insurance Company, as predecessor in
interest to Landlord, and Tenant entered into a certain lease dated February 11,
1998 (the "Lease"), whereby Tenant leased from Landlord certain premises
consisting of approximately 16,743 rentable square feet of space (the "Original
Premises") located in an office/warehouse building commonly known as Plymouth
Office/Tech Center, 2495 Xenium Lane North, Plymouth, Minnesota 55441;
WHEREAS, Landlord and Tenant desire to expand the Original Premises by
approximately 7,248 rentable square feet (the "Additional Space").
Collectively, the Original Premises and Additional Space shall hereinafter be
referred to as the "Premises"; and
WHEREAS, Landlord and Tenant desire to amend certain provisions of the
Lease to reflect such expansion;
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants herein contained and each act performed hereunder by the parties,
Landlord and Tenant hereby enter into this Amendment.
1. Incorporation of Recitals. The above recitals are hereby incorporated
-------------------------
into this Amendment as if fully set forth herein.
2. Amendment of Cover Page to Lease. Commencing July 1, 1999, the cover
--------------------------------
page of the Lease is hereby amended as follows:
Landlord: Duke Realty Limited Partnership, an Indiana limited
partnership
Occupancy: Reference to Base Rent "at the rate of $7,936.64 per month" is
deleted and replaced with "at the rate identified in Amended Exhibit
-------
F".
-
<PAGE>
Base Rent: See Amended Exhibit F, payable in advance on or before the 1st
-----------------
day of each month during the Lease Term at NW 7210, P.O. Box 1450,
Minneapolis, Minnesota 55485-7210, or such other place as Landlord may
from time to time designate in writing.
Premises: The space cross-hatched on Amended Exhibit B attached hereto
-----------------
(the "Premises") consisting of approximately 23,991 rentable square
feet in the building (the "Building") constructed on the tract of land
(the "Land") located in the City of Plymouth, County of Hennepin,
State of Minnesota (the "Land").
3. Amendment of Section 2. Acceptance of Premises. Section 2 of the
---------------------- ----------------------
Lease is hereby amended by adding the following:
Tenant has personally inspected the Additional Space and accepts the same
"as is" without representation or warranty by Landlord of any kind and with
the understanding that Landlord shall have no responsibility with respect
thereto except to construct in a good and workmanlike manner the
improvements designated as Landlord's obligations as per mutually agreed
upon plans and specifications and which shall be attached hereto as Amended
-------
Exhibit E in an amount not to exceed Seven Thousand Two Hundred forty-eight
---------
Dollars ($7,248.00) ("Landlord's Allowance"). Landlord and Tenant hereby
agree that all costs for tenant finish improvements which exceed Landlord's
Allowance shall be amortized over the term of the Lease at eleven percent
(11%) per annum. Landlord and Tenant agree that all work on the initial
and any subsequent tenant finish improvements may, at Tenant's option, be
performed by Duke Construction Limited Partnership or a subsidiary or
affiliate of Landlord ("Duke") which shall receive a construction
management fee as Landlord's construction manager or general contractor.
In the event Tenant elects to use another contractor other than Duke,
Tenant hereby agrees to pay Landlord a construction management fee equal to
five percent (5%) of the total project cost.
4. Amendment of Section 17. Notices. Section 17 of the Lease is hereby
----------------------- -------
amended to provide that Landlord's notice address is 1550 Utica Avenue South,
Suite 120, Minneapolis, Minnesota 55416.
5. Amendment of Exhibit G. Tenant's Right to Early Termination. The
---------------------- -----------------------------------
third and fourth sentences of Paragraph 2 of
-2-
<PAGE>
Tenant's Right to Early Termination are hereby deleted and the following
substituted in lieu thereof:
With Tenant's six (6) months' written notice and as a condition of Tenant's
termination, Tenant will pay to Landlord as a termination fee in bank
funds, the sum of the following items (i) one month's gross rent based on
monthly billing at the time notice is given; plus (ii) the unamortized
portion of the leasing commissions Thirty-six Thousand Five Hundred Eighty-
four Dollars and Fifty-eight Cents ($36,584.58) paid by Landlord to United
Properties Corporation in connection with the Lease; plus (iii) the
unamortized portion of the leasing commissions in connection with this
Amendment in the amount of Two Thousand Five Hundred Forty-nine Dollars and
Seventy-three Cents ($2,549.73); plus (iv) the unamortized cost of the
tenant finish improvements Five Thousand Dollars ($5,000.00) (without
consideration of any salvage value) made by Landlord pursuant to the Lease;
and (v) the unamortized cost of the tenant finish improvements Seven
Thousand Two Hundred Forty-eight Dollars ($7,248.00) for the Additional
Space, as of the Termination Date. The amortization of the total costs as
set forth above will be on a straight-line basis, using an eleven percent
(11%) interest rate over the initial sixty (60) month term of the Lease
with respect to subparts (ii) and (iv) and over the balance of the Lease
Term remaining with respect to subparts (iii) and (v). See Amended Exhibit
---------------
H for the amortization schedule.
-
6. Financial Statements. During the Lease Term and any extensions
--------------------
thereof, Tenant shall provide to Landlord on an annual basis, within ninety (90)
days following the end of Tenant's fiscal year, a copy of Tenant's most recent
certified and audited financial statements prepared as of the end of Tenant's
most recent fiscal year. Such financial statements shall be prepared in
conformity with generally accepted accounting principles, consistently applied.
7. Tenant's Representations and Warranties. The undersigned represents
---------------------------------------
and warrants to Landlord that (i) Tenant is duly organized, validly existing and
in good standing in accordance with the laws of the state under which it was
organized; (ii) all action necessary to authorize the execution of this
Amendment has been taken by Tenant; and (iii) the individual executing and
delivering this Amendment on behalf of Tenant has been authorized to do so, and
such execution and delivery shall bind Tenant. Tenant, at Landlord's request,
shall provide Landlord with evidence of such authority.
-3-
<PAGE>
8. Examination of Amendment. Submission of this instrument for
------------------------
examination or signature to Tenant does not constitute a reservation or option,
and it is not effective until execution by and delivery to both Landlord and
Tenant.
9. Definitions. Except as otherwise provided herein, the capitalized
-----------
terms used in this Amendment shall have the definitions set forth in the Lease.
10. Incorporation. This Amendment shall be incorporated into and made a
-------------
part of the Lease, and all provisions of the Lease not expressly modified or
amended hereby shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
on the day and year first written above.
LANDLORD:
DUKE REALTY LIMITED PARTNERSHIP,
an Indiana limited partnership
By: Duke Realty Investments, Inc.,
its general partner
By: /s/ Robert H. Johnson
-----------------------------------
Robert H. Johnson
Vice President and General Manager
Minnesota Industrial Group
TENANT:
VASCULAR SOLUTIONS, INC.,
a Minnesota corporation
By: /s/ Howard C. Root
----------------------------------------
Printed: Howard C. Root
-----------------------------------
Title: CEO
------------------------------------
-4-
<PAGE>
STATE OF MINNESOTA )
) SS:
COUNTY OF HENNEPIN )
Before me, a Notary Public in and for said County and State, personally
appeared Howard C. Root, by me known and by me known to be the CEO of Vascular
Solutions, Inc., a Minnesota corporation who acknowledged the execution of the
foregoing "First Lease Amendment" on behalf of said corporation.
WITNESS my hand and Notarial Seal this 4th day of June, 1999.
/s/ Carla L. Puckett
----------------------------------
Notary Public
Carla L. Puckett
----------------------------------
(Printed Signature)
My Commission Expires: 1-31-00
------------------
My County of Residence: Carver
-----------------
-5-
<PAGE>
AMENDED EXHIBIT F
-----------------
Base Rent Schedule
------------------
Original Premises:
- ------------------
Term Monthly Base Rent
---- -----------------
04/01/98 - 03/31/00 $7,935.64
04/01/00 - 03/31/03 $8,340.26
Additional Space:
- -----------------
Term Monthly Base Rent
---- -----------------
07/01/99 - 04/30/01 $4,097.17
05/01/01 - 03/31/03 $4,299.01
<PAGE>
EXHIBIT 10.4
BILL OF SALE AND ASSIGNMENT
KNOW ALL MEN BY THESE PRESENTS, that Gary Gershony, M.D. ("Gershony"), in
consideration for the payment of the following consideration received from
Vascular Solutions, Inc., a Minnesota corporation (the "Company"):
A. The sum of $150,000 by bank check;
B. The assumption of $40,000 in obligations owed to B. Braun Medical Inc.
pursuant to Section (3) of the Termination Agreement dated February 1,
1996 between Gershony and B. Braun Medical Inc.; and
C. The entering into a consulting agreement with the Company dated
January 31, 1997 providing for the continuing services of Gershony to
the Company in exchange for a minimum compensation of $50,000 per
year.
does hereby grant, bargain, sell, convey, assign, transfer and set over to the
Company, its successors and assigns, all right, title and interest, including
all prototypes, products, drawings, designs, test results and other tangible
property associated with the vascular sealing device as generally described in
U. S. Patent No. 5,383,896, U. S. Patent Appln. No. 08/549,430 and U.S. Patent
Appln. No. 08/549,332 and associated Patent Cooperation Treaty patent
applications, wherever located (the "Property").
TO HAVE AND TO HOLD THE SAME unto the Company, its successors and assigns,
forever. Gershony has good right to sell, transfer and assign the Property to
the Company and Gershony agrees to execute and deliver to the Company such
specific assignments and other documents as may be reasonably requested by the
Company to further document, for filing purposes or otherwise, the sale,
assignments and transfers made pursuant to this Bill of Sale and Assignment.
IN WITNESS WHEREOF, Gershony has executed and delivered this Bill of Sale
and Assignment immediately after the closing on the receipt of a minimum of
$750,000 in subscriptions pursuant to the Company's initial private financing on
the 31st day of January, 1997.
VASCULAR SOLUTIONS, INC.
By: /s/ Howard C. Root, CEO /s/ Gary Gershony, M.D.
----------------------- -----------------------
Howard C. Root, CEO Gary Gershony, M.D.
<PAGE>
EXHIBIT 10.5
MUTUAL AND GENERAL RELEASE
This Mutual and General Release is entered into as of the 9th day of
November, 1998 by and among Vascular Solutions, Inc., a Minnesota corporation
("VSI"), B. Braun Medical Inc. ("Braun"), and Gary Gershony, M.D. ("Gershony").
In exchange for the payment of Forty Thousand Dollars ($40,000) from VSI to
Braun, the receipt of which is hereby acknowledged, Braun hereby releases,
acquits and forever discharges Gershony, VSI, and their respective successors
and assigns from any and all manner of action or actions, suits, claims,
demands, judgments, levies of execution, whether direct or indirect, liquidated
or unliquidated, fixed or contingent, which Braun ever had, has or ever can,
shall or may have or claim to have upon or by reason of any manner, fact or
thing occurring prior to the date of signing this release.
VSI and Gershony, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, for themselves and their successors
and assigns, hereby release, acquit and forever discharge Braun and its
successors and assigns from any and all manner of action or actions, suits,
claims, demands, judgments, levies of execution, whether direct or indirect,
liquidated or unliquidated, fixed or contingent, which Braun ever had, has or
ever can, shall or may have or claim to have upon or by reason of any manner,
fact or thing occurring prior to the date of signing this release.
It is hereby specifically understood and agreed that this release is in
full and final compromise, settlement and satisfaction of all claims arising
under the Development and License Agreement dated May 1, 1993 between Braun and
Gershony and the Termination Agreement dated February 1, 1996 between Braun and
Gershony.
Each of the parties to this Release represents that they have had the
opportunity to consult with legal counsel in connection with this matter and
this Release.
IN WITNESS WHEREOF, the parties hereto have executed this Release, each
intending to be legally bound thereby on the date listed above.
VASCULAR SOLUTIONS, INC. B. BRAUN MEDICAL, INC.
By: /s/ Howard C. Root By: /s/ Robert Albert
------------------------- --------------------------------
Its: CEO Its: Dir. Of International Sales
------------------- -------------------------------
/s/ Gary Gershony
- ---------------------------------
Gary Gershony, M.D.
<PAGE>
EXHIBIT 10.6
CLINICAL TRIAL SERVICES AGREEMENT
This Agreement is made and entered into this 1st day of July, 1998 by and
between:
The Cardiovascular Data Analysis Center of the
Beth Israel Medical Group (the "CDAC")
a Massachusetts nonprofit corporation having its principal office at:
900 Commonwealth Avenue
Boston, Massachusetts 02215-3410
Tel.: 617-632-1515
and
Vascular Solutions, Inc. (the "Sponsor")
a Minnesota corporation having its principal office at:
2495 Xenium Lane North
Minneapolis, Minnesota 55441
Tel.: 612 553-2970
1
<PAGE>
Whereas, the Sponsor has developed Vascular Solutions Duett(TM) sealing
device;
Whereas, the Sponsor desires to have a clinical trial (the "Trial") carried
out that is designed to evaluate the safety and effectiveness of the Vascular
Solutions Duett sealing device;
Whereas, the CDAC and its professionals have experience in the development
and administration of clinical trials of various cardiovascular medical devices
or drugs; and
Whereas, the Sponsor desires to engage the CDAC for the purpose of
providing the Clinical Trial Services, as defined below.
NOW, THEREFORE, in consideration of the mutual covenants and premises
herein contained, the CDAC and Sponsor agree as follows:
1. Definitions
"Clinical Sites" shall mean the hospitals and other medical institutions
that are participating as clinical study sites in the Trial.
"Clinical Trial Data" shall mean data provided to CDAC by the Clinical
Sites during the Trial and may include, but shall not be limited to, information
contained in case report forms, taken at baseline and at follow-up, as
appropriate, as well as any request by CDAC for additional information or
information clarifying, confirming or correcting any previous information
received by CDAC from a Clinical Site.
"Clinical Trial Services" shall mean the Services described in Section 4 of
this Agreement.
"Device" shall mean the Vascular Solutions Duett sealing device.
"Intellectual Property" means all proprietary rights, including patents,
copyrights, mask works, trade secrets and proprietary information.
"Manual" shall mean the Investigational Plan and Manual of Operations for
the Trial.
"Principal Investigators" shall mean collectively the investigator who
functions as overall principal investigator for the Trial and the investigators
who function as principal investigators at the Clinical Sites.
"Protocol" shall mean the investigational plan developed pursuant to this
Agreement for performing the Trial described in the Manual.
2
<PAGE>
"Related Materials" shall mean any substances, materials or written
information related to the use of the Device.
"Trial" shall mean the clinical trial described in the Protocol.
2. Sponsor Liaison.
The Sponsor shall designate a person who shall be the Sponsor's primary
liaison (the "Sponsor Liaison") with the CDAC for all purposes pursuant to this
Agreement. The Sponsor Liaison's duties shall include responding promptly and
fully to all reasonable requests from the CDAC. The Sponsor Liaison may consult
informally with the CDAC's representatives, both in person and by telephone,
regarding the Trial. All notices and approvals to be made by the Sponsor
pursuant to this Agreement shall be made by or through the Sponsor Liaison, and
the CDAC shall be entitled to look solely to the Sponsor Liaison for such
notices and approvals. Initially, the Sponsor Liaison shall be Paul Fischer,
Clinical Research Manager.
3. Primacy of Health Care Mission.
The Sponsor acknowledges that the primary mission of the CDAC is health
care, education and the advancement of knowledge and, consequently, all Clinical
Trial Services provided by CDAC under this Agreement shall be performed in a
manner best suited to carry out that mission. Furthermore, the CDAC does not
guarantee specific results of the Trial.
4. Clinical Trial Services
a. Reasonable Efforts. The CDAC shall use reasonable efforts to perform
------------------
the Clinical Trial Services set forth in this Section 4.
b. Clinical Trial Services.
-----------------------
1). Development of Protocol. The CDAC shall assist the Sponsor
-----------------------
in developing the Protocol for performing the Trial.
2). Identification of Clinical Sites. The CDAC shall assist
--------------------------------
Sponsor in identifying institutions to participate in the Trial
as Clinical Sites. The Sponsor and each Clinical Site shall
enter into a Clinical Trial Agreement in substantially the form
of Exhibit A. The Sponsor agrees that it, and not the CDAC,
shall have the responsibility for performing any necessary
monitoring of the Clinical Sites.
3). Administration. The CDAC shall assist the Sponsor in
--------------
administering the Trial.
3
<PAGE>
i. The CDAC shall assist the Sponsor in administering
the Trial.
ii. As coordinated with the Sponsor Liaison, the CDAC
will communicate directly with the Clinical Sites
to resolve Trial-related issues (i.e. Protocol
questions, reportable adverse events).
iii. The CDAC shall coordinate the services of the Core
Lab providing ultrasound assessment.
4). Data Receiving, Analysis and Reporting.
i. Data Receiving.
--------------
1. The CDAC shall be responsible for developing
and implementing procedures for receiving the
Clinical Trial Data generated by the Clinical
Sites.
2. CDAC shall develop and maintain a database
designed to facilitate the provision of
Clinical Trial Data to the Sponsor.
3. CDAC shall institute quality control measures
for Clinical Trial Data entry verification.
ii. Data Analysis. The CDAC shall perform the data
-------------
analyses described in the Manual.
iii. Reporting.
---------
1. Confidentiality. The CDAC shall not disclose to
---------------
the Sponsor any confidential information
including, but not limited to, the identity of
participants in the Trial, their medical
records and other related confidential medical
information.
2. Progress Reports. CDAC shall provide Sponsor
----------------
with periodic progress reports every week.
3. Final Written Report and Computer File. CDAC
--------------------------------------
agrees to provide Sponsor with a final written
report setting for the CDAC's analysis of the
Clinical Trial Data and conclusions, if any, no
later than two (2) months after
4
<PAGE>
receipt of all the Clinical Trial Data. At such
time as the final written report is delivered
to Sponsor, CDAC shall also provide Sponsor
with a computer file of the Clinical Trial
Data.
4. Primacy of Accurate Data. Notwithstanding any
------------------------
of the foregoing, CDAC may request additional
time to complete the reports for the purposes
of assuring the accuracy of the data embodied
in such reports. Under such circumstances,
Sponsor agrees that it shall not unreasonably
deny such requests.
5. Letters Accompanying Reports. All reports
----------------------------
provided to Sponsor by CDAC shall be
accompanied by a letter in substantially the
form of that at Exhibit B herein.
5). Record Keeping. CDAC shall prepare and maintain written
--------------
records, notes, reports, report forms and other
information related to the Clinical Trial Data to the
extent required by law or for two (2) years after
regulatory approval is obtained or until the Trial is
terminated by Sponsor, whichever is longer.
6). CDAC Oversight Responsibilities.
-------------------------------
i. CDAC shall assemble a Clinical Events Committee to review selected
Clinical Trial Data forms reporting complications associated with the
Trial, which committee shall convene as deemed necessary by the parties.
ii. CDAC shall assemble and conduct conferences among members of a
Data Safety Monitoring Committee assembled by the Sponsor at agreed upon
intervals or ad hoc to review progress of the Trial with respect to patient
safety.
7). Other. Other Clinical Trial Services to be performed, if any, shall
-----
be set forth at Exhibit C.
c. Suspension of Trial. The Operations Committee, as defined in the
-------------------
Manual, may suspend the Trial at any time if the Operations Committee determines
that it is medically appropriate to do so.
5
<PAGE>
5. Data Ownership
CDAC agrees that it shall have no ownership rights in any data not
generated by CDAC or by CDAC's employees, agents, or assigns including Clinical
Trial Data. The CDAC shall own all rights to the procedures, methodologies,
computer programs, analytic tools, know how and work papers used and/or
generated by CDAC in conducting such analyses relating to the Trial. The Sponsor
shall have ownership rights in the Clinical Trial data and content of copies of
analyses and reports relating to the Trial which are delivered to Sponsor by
CDAC and shall be free to use them for its own business purposes.
6. Device
a. Supply of Device. The Sponsor shall be responsible for providing to
----------------
the Clinical Sites a sufficient number of Devices and Related Materials to
conduct the Trial. The Sponsor and the CDAC shall work together prior to the
commencement of the Trial to estimate the number of Devices and the amount of
any Related Materials that shall be required to carry out the Trial. Thereafter,
the Sponsor shall, at the request of the Clinical Sites, provide to the Clinical
Sites such additional Devices in quantities sufficient to support the Trial.
b. Costs of Providing Device. The Sponsor shall be responsible for all
-------------------------
costs of the Device for use in the Trial, and for all costs of supplying the
Device to the Clinical Sites. CDAC shall not be responsible for the cost of
providing the Device.
c. Representations Concerning the Device. The Sponsor represents,
--------------------------------------
warrants and agrees that the Device and Related Materials are produced in
accordance with all applicable laws and regulations. The Sponsor further
represents, warrants and agrees that appropriate federal and state government
authorization has been or will be obtained for the use of the Device and Related
Materials for the Trial.
d. Training on Use of Device. The Sponsor, and not CDAC, shall be wholly
-------------------------
responsible for training Principal Investigators and Clinical Site staff on the
use of the Device.
7. Sponsor Obligations.
a. Compensation. Sponsor shall pay CDAC by the hour at the rates set forth on
------------
Exhibit D which is attached hereto and made a part hereof. In addition, Sponsor
shall pay to CDAC a monthly fee of $9,875 for overhead expenses associated with
this Trial and a fee equal to 10% of all hourly charges for the Department of
Medicine and shall reimburse CDAC for any and all reasonable expenses associated
with the Trial, including but not limited to, the cost of printing the case
report forms and other related materials, postage, overnight shipping, Clinical
Events Committee Charges and Data Safety and Monitoring Committee costs and
reasonable travel expenses. Upon
6
<PAGE>
execution of this Agreement, Sponsor shall advance the sum of $100,000 to CDAC,
which will be applied toward all charges and expenses that become due and
payable under this Agreement. CDAC shall provide to Sponsor monthly bills which
will detail the charges, including professional time and expenses. Sponsor shall
pay such bills within thirty days of receipt; provided that all fees and
expenses incurred by CDAC following the receipt of all the Clinical Trial Data
will be paid within 15 days of the receipt by Sponsor of the final written
report.
b. Adverse Reactions. The Sponsor agrees that CDAC is not responsible for
-----------------
the costs of diagnosis, care and treatment of any undesirable side effects,
adverse reactions, illness or injury to a participant in the Trial which result
from participation in the Trial, except to the extent such costs arise directly
from the CDAC's gross negligence, or reckless or intentional misconduct of the
CDAC or any of its employees, agents, or assigns. This section is not intended
to create any third-party contractual benefit for any participants in the Trial.
c. Immediate Notification of Adverse Reactions. The Sponsor shall
-------------------------------------------
immediately transmit to the CDAC any information regarding any side effects or
adverse reactions associated with the use of the Device or the Related
Materials. The CDAC shall immediately transmit to the Sponsor any information
regarding side effects or adverse reactions of participants in the Trial.
d. No Responsibility for Work of Clinical Sites or Core Laboratories.
-----------------------------------------------------------------
Sponsor agrees and acknowledges that the quality of the data and analysis
produced by the CDAC is critically dependent upon the quality of the work
performed and data generated by the Clinical Sites and the Core Laboratories
participating in the Trial, and that the CDAC has no ability to control or
influence the quality of such work or data.
e. Sponsor Obligation to Arrange for Data Submission. The Sponsor shall
-------------------------------------------------
use best efforts to ensure that the Clinical Sites provide CDAC with all
Clinical Trial Data in order for CDAC to perform its obligations under this
Agreement.
8. Confidentiality; Publication
a. Sponsor Confidential Information Defined. "Sponsor Confidential
----------------------------------------
Information" shall mean information provided to CDAC by Sponsor which is marked
"Confidential" when disclosed or, if not in tangible form, is identified by
Sponsor as confidential when disclosed and confirmed in writing to be
confidential within thirty (30) days of such disclosure. Notwithstanding the
foregoing, "Sponsor Confidential Information" shall not include information or
materials that: (i) were in the possession of the CDAC before receipt from the
Sponsor; (ii) were or become available to the public through no fault of the
CDAC; (iii) have been received in good faith by the CDAC from a third party who
does not owe a duty of confidentiality to the Sponsor; (iv) have been
independently developed by the CDAC without any use of Sponsor Confidential
Information; or (v) are required to be disclosed by law.
7
<PAGE>
b. Limited Delivery of Sponsor Confidential Information. The free
----------------------------------------------------
dissemination of information is an important policy of the CDAC. To minimize
questions concerning the confidentiality of disclosures, trade secrets, or
proprietary data or information, the Sponsor agrees to limit to the extent
possible the delivery of Sponsor Confidential Information to the CDAC, the
Principal Investigators and the Clinical Sites.
c. Publication. In accordance with this subparagraph (c), the CDAC shall
-----------
have the right to publish or otherwise publicly disclose information gained in
the course of this Agreement. During the term of this Agreement and for a period
of one (1) year following the termination or expiration of this Agreement, to
protect patent rights and Sponsor Confidential Information, CDAC shall submit
manuscripts, abstracts and similar material generated by CDAC as a result of
this Agreement ("Publications") to the Sponsor for review and comment thirty
(30) days prior to the planned publication or disclosure date.
Sponsor will advise CDAC within thirty (30) days of receiving any such
Publication of: (i) any disclosure of information that will result in a loss of
patent rights ("Patentable Material"), and (ii) any disclosure of Sponsor
Confidential Information. If the Sponsor informs CDAC that it is desirable to
file patent applications on Patentable Material disclosed in the Publication,
CDAC may, at its option: (i) delete the Patentable Material and publish or
disclose the Publication; or (ii) postpone Publication for not more than sixty
(60) days beyond the date on which the Publication was provided to the Sponsor
to provide time to file patent applications. Upon mutual agreement that the
Publication contains Sponsor Confidential Information, CDAC will delete such
information.
9. Publicity
No press release, advertising, promotional sales literature or other
promotional written statements or promotional oral statements to the public in
connection with or alluding to work performed under this Agreement or the
relationship between the parties created by it, having or containing any
reference to the CDAC, the Beth Israel Deaconess Medical Center or any of its
affiliates or the Sponsor, shall be made by either party without the prior
written approval of the other party. The CDAC shall, however, have the right to
acknowledge the Sponsor's support of the investigations under this Agreement in
CDAC's brochure, web site, scientific publications and other scientific
communications.
8
<PAGE>
10. Inventions
The CDAC acknowledges that the Sponsor, and not the CDAC, owns all
Intellectual Property in the Device and the Related Materials. The CDAC agrees
to take no action inconsistent with the Sponsor's ownership of such Intellectual
Property.
The Sponsor agrees that all Intellectual Property, if any, conceived or
reduced to practice by the CDAC during the course of the Trial shall be the
property of The Beth Israel Medical Group.
The parties agree that nothing in this Agreement by implication or
otherwise shall constitute a grant of rights to any Intellectual Property owned
or developed by either party before, during and after the Trial.
11. Indemnification
a. The Sponsor shall indemnify, defend and hold harmless the CDAC and its
trustees, officers, medical and professional staff, employees, and agents and
their respective successors, heirs and assigns (the "Indemnitees"), against any
liability, damage, loss, or expense (including reasonable attorneys' fees and
expenses of litigation) incurred by or imposed upon the Indemnitees or any one
of them in connection with any claims, suits, actions, demands or judgments: (i)
arising out of any theory of product liability (including, but not limited to,
actions in the form of tort, warranty, or strict liability) concerning the
Device and Related Materials or any modification thereof; (ii) arising out of
any side effect or adverse reaction, illness or injury resulting from
Indemnitees' performance under this Agreement and occurring to any person
involved in the Trial; or (iii) arising out of damage to any property resulting
from and occurring during the Indemnitees' performance of this Agreement.
b. The Sponsor's indemnification under 11(a) shall not apply to any
liability, damage, loss or expense to the extent that it is attributable to the
grossly negligent activities, or reckless or intentional misconduct of the
Indemnitees.
c. The Sponsor agrees, at its own expense, to provide attorneys
reasonably acceptable to the CDAC to defend against any actions brought or filed
against any party indemnified hereunder with respect to the subject of indemnity
contained herein, whether or not such actions are rightfully brought.
9
<PAGE>
d. The Sponsor agrees, at its own expense, to provide attorneys
reasonably acceptable to CDAC to represent CDAC and its trustees, officers,
medical and professional staff, employees, and agents and their respective
successors, heirs and assigns, in connection with any disputes between Sponsor
and third parties arising from the Trial.
e. This section 11 shall survive expiration or termination of this
Agreement.
12. Insurance
a. The Sponsor shall, at its sole cost and expense, procure and maintain
comprehensive general liability insurance in amounts not less than $2,000,000
per incident and $2,000,000 annual aggregate. Such comprehensive general
liability insurance shall provide (i) product liability coverage and (ii) broad
form contractual liability coverage for the Sponsor's indemnification under the
preceding section. If the Sponsor elects to self-insure all or part of the
limits described above (including deductibles or retentions which are in excess
of $250,000 annual aggregate) such self-insurance program must be acceptable to
the CDAC and the CDAC's insurance carrier. The minimum amounts of insurance
coverage required under this section shall not be construed to create a limit of
the Sponsor's liability with respect to its indemnification under the preceding
section of this Agreement.
b. The Sponsor shall provide the CDAC with written evidence of such
insurance upon request of the CDAC. The Sponsor shall provide the CDAC with
written notice at least fifteen (15) days prior to the cancellation, non-renewal
or material change in such insurance.
c. The Sponsor shall maintain such comprehensive general liability
insurance during (i) during the continuance of the Trial or the term of this
Agreement, whichever is longer, and (ii) for a reasonable period after the
period referred to in (c)(i) above which in no event shall be less than three
(3) years.
d. This section 12 shall survive expiration or termination of this
Agreement.
13. Limitation of Liability and Remedies
10
<PAGE>
a. THE MAXIMUM AGREED LIABILITY OF THE CDAC SHALL NOT EXCEED THE FEES
PAID TO THE CDAC. IN NO EVENT SHALL THE CDAC BE LIABLE TO SPONSOR FOR ANY
SPECIAL, INDIRECT, EXEMPLARY, INCIDENTAL OR CONSEQUENTIAL DAMAGES INCLUDING BUT
NOT LIMITED TO ANY DAMAGES RESULTING FROM LOSS OF DATA, DELAY IN THE STUDY, LOSS
OF PROFITS OR LOSS OF BUSINESS ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT OR ANY PRODUCTS, SERVICES OR MATERIALS FURNISHED HEREUNDER. EVEN IF
THE CDAC HAS BEEN ADVISED OR SHOULD KNOW OF THE POSSIBILITY OF SUCH DAMAGES.
b. EXCEPT AS EXPRESSLY STATED TO THE CONTRARY, THE LIMITATIONS STATED IN
SECTION 13 (a) SHALL APPLY WHETHER THE ASSERTED CLAIM, LIABILITY OR DAMAGES ARE
BASED ON CONTRACT (INCLUDING BUT NOT LIMITED TO BREACH OF WARRANTY), TORT
(INCLUDING BUT NOT LIMITED TO NEGLIGENCE AND STRICT LIABILITY) OR ANY OTHER
LEGAL OR EQUITABLE GROUNDS, AND REGARDLESS OF WHETHER THE ASSERTED CLAIM,
LIABILITY OR DAMAGES ARISE FROM PERSONAL INJURY, PROPERTY DAMAGE, ECONOMIC LOSS
OR ANY OTHER KIND OF INJURY, LOSS OR DAMAGE. EACH OF SUCH LIMITATIONS IS
INTENDED TO BE ENFORCEABLE REGARDLESS OF WHETHER ANY OTHER EXCLUSIVE OR NON-
EXCLUSIVE REMEDY UNDER THIS AGREEMENT FAILS OF ITS ESSENTIAL PURPOSE.
c. The Sponsor acknowledges that the fees described in Section 7 and the
other economic terms of this Agreement and its Exhibits reflect the allocation
of risks and the limitations of the CDAC's liability hereunder.
14. Term; Termination
a. Term. This Agreement shall continue in full force and effect until the
----
earliest of (i) 48 weeks from the date hereof; or (ii) until all of the work to
be performed under the Protocol is completed, or (iii) the Study is terminated,
or (iv) at any time by the mutual consent of the CDAC and Sponsor. Termination
of this Agreement, however, shall not relieve the obligations undertaken by the
parties in Sections 8, 9, 10, 11, 12, and 13.
b. Termination for Bankruptcy/Insolvency. The Sponsor may immediately
-------------------------------------
terminate this Agreement if the CDAC files a petition in bankruptcy or is
adjudicated as bankrupt or insolvent, or makes an assignment for the benefit of
creditors, or an arrangement pursuant to any bankruptcy law, or if the CDAC
discontinues its business or if a receiver is appointed for the CDAC or the
CDAC's business who is not discharged within thirty (30) days. The CDAC may
immediately terminate this Agreement if the Sponsor files a petition in
bankruptcy or is adjudicated bankrupt or insolvent, or makes an assignment for
the benefit of creditors, or an arrangement pursuant to any bankruptcy law, or
if the Sponsor discontinues its business or if a
11
<PAGE>
receiver is appointed for the Sponsor or the Sponsor's business who is not
discharged within thirty (30) days.
c. Termination for Cause. Either party may terminate this Agreement for
---------------------
cause after providing the breaching party with written notice of breach in
accordance with Section 19 and sixty (60) days from the date of such notice to
cure. In the event of such breach the nonbreaching party's sole remedy shall be
to seek damages through arbitration pursuant to Section 17.
d. Effect of Termination. Upon termination of this Agreement for any
---------------------
reason, the Sponsor shall promptly pay the CDAC all amounts due at the effective
date of termination including, without limitation, amounts due for all non-
cancelable commitments incurred through that date, hourly payments, fees, and
payments for reasonable expenses. Upon termination or expiration of this
Agreement, the CDAC shall retain title to all equipment purchased or fabricated
by it with funds provided by the Sponsor under this Agreement.
15. Compliance with Laws and Policies
a. Compliance with Law. The Sponsor and the CDAC shall comply with all
-------------------
applicable federal, state and local laws, regulations and guidelines, including
but not limited to any such laws, regulations or guidelines concerning human
subject research.
b. Adherence to Policies. The Sponsor recognizes that in performing
---------------------
services under this Agreement, the CDAC is bound by and all rights of the
Sponsor will be subject to the Faculty of Medicine of Harvard University's
Faculty Policies on Integrity in Science and the policies of the Beth Israel
Deaconess Medical Center and CDAC.
16. Non-Solicitation; Financial Interest in the Sponsor
a. The Sponsor shall not solicit for employment, or employ (which shall
include services as an independent contractor), at any time during the term
hereof or for a period of one (1) year thereafter, any person employed by the
CDAC at any time during the term hereof, without the prior written consent of
the CDAC.
b. Neither the Sponsor nor any affiliate or subsidiary of the Sponsor
shall grant, issue or provide or agree to grant, issue or provide any financial
interest, including any consulting or other fee or stock or other equity, to any
person employed by the CDAC or any immediate family member of any person
employed by the CDAC without the prior written consent of the President and
Chief Executive Officer of the Beth Israel Medical Group and the Beth Israel
Deaconess Medical Center.
12
<PAGE>
17. Arbitration
a. The parties shall settle by arbitration any controversy or claim
between them arising directly or indirectly under this Agreement, whether based
on contract, tort, fraud, misrepresentation or other legal theory, and whether
or not arbitration has been expressly referenced elsewhere in a particular
section or a particular subsection of this Agreement. The arbitration shall
occur in Boston, Massachusetts under the then current rules and supervision of
the American Arbitration Association. If the dispute involves a claim for money
in the amount of $500,000 or less and does not involve any claims relating to
ownership, use, or disclosure of intellectual property, the arbitration shall be
before a single arbitrator whom the parties shall select from a panel of persons
knowledgeable in cardiology and clinical studies; otherwise, the arbitration
shall be before three arbitrators, one selected by the Sponsor, one selected by
the CDAC, and the third selected by the two arbitrators so selected. The
arbitrator or arbitrators shall not have the power to award punitive or
exemplary damages. The decision and award of the arbitrator or arbitrators shall
be final and binding and the award rendered may be entered in any court having
competent jurisdiction. The parties shall each pay their own attorneys' fees
associated with the arbitration, and shall pay the other costs and expenses of
the arbitration as the rules of the American Arbitration Association or the
arbitrator provide.
b. Any party may request arbitration to resolve any controversy or claim,
between them, as provided above, by written notice to the other proposing an
arbitrator. The other party receiving such written notice shall have thirty (30)
days in which to agree with such choice of arbitrator or, if three arbitrators
are required, to propose its arbitrator.
18. Force Majeure
a. Neither party shall be liable for any unforeseeable event beyond its
reasonable control not caused by the fault or negligence of such party, which
causes such party to be unable to perform its obligations under this Agreement,
and which it has been unable to overcome by the exercise of due diligence.
b. In the event of the occurrence of such a force majeure event, the
party unable to perform shall promptly notify the other party. It shall further
use its best efforts to resume performance as quickly as possible and shall
suspend performance only for such period of time as is necessary as a result of
the force majeure event.
19. Miscellaneous
This Agreement constitutes the entire agreement among the parties, and all
prior negotiations, representations, agreements and understandings are
superseded hereby. No agreements amending, altering or supplementing the terms
hereof may be made except by means of a written document signed by the duly
authorized representatives of the parties. Any notice required by this Agreement
shall be given by prepaid, first class, certified mail, return receipt
13
<PAGE>
requested, to the parties at their addresses set forth above. This Agreement
shall be governed by and construed in accordance with the laws of The
Commonwealth of Massachusetts. The invalidity or unenforceability of any term or
provision hereof shall not affect the validity or enforceability of any other
term or provision hereof. The headings in this Agreement are for convenience of
reference only and shall not alter or otherwise affect the meaning hereof. This
Agreement shall be binding upon and inure to the benefit of each of the parties
hereto and their successors and permitted assigns; provided, however, this
Agreement may not be assigned by either party without the prior written approval
of the other party. For the purposes of this Agreement, the parties shall be
deemed to be independent contractors and not employees or agents of the other.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives.
Vascular Solutions, Inc. Beth Israel Medical Group
By: /s/ Howard C. Root, CEO By: /s/ Robert C. Moellering, MD
-------------------------------- --------------------------------------
Name: Howard C. Root Name: Robert C. Moellering, MD
------------------------------ ------------------------------------
Title: CEO Title: President
----------------------------- -----------------------------------
14
<PAGE>
EXHIBIT 10.7
Vascular Solutions, Inc.
Duett Sealing Device
Economics Substudy Contract
Privileged and Confidential
Not to be Used Beyond the Intended Committee Function
<PAGE>
The Duett Economic, Quality of Life and Cost
Effectiveness Substudy Investigators
William S. Weintraub, M.D., PI & Study Director
Christi Deaton, Ph.D.
Leslee Shaw, Ph.D.
Elizabeth Mahoney, Sc.D.
Andrzej S. Kosinski, Ph.D.
Steven Culler, Ph.D.
David Feeny, Ph.D.
Edmund Becker, Ph.D.
Emory University, Atlanta
<PAGE>
This Agreement, effective as of the date fully executed, is between Emory
University (Emory), Atlanta, GA, USA and Vascular Solutions, Inc. (VSI).
VSI agrees to engage Emory to perform an economic analysis as a substudy
(Economic Study) of the Duett Vascular Sealing Device Trial (Duett). Dr.
William Weintraub will be the Prinicpal Investigator of the Economic Study.
SCOPE:
Emory agrees to conduct the Economic Study as a portion of Duett as outlined in
the attached protocol. VSI will be responsible for data collection,
verification and completion. Emory will be responsible for the analytic work in
determining costs, quality of life, and cost-effectiveness for the two treatment
arms.
OBJECTIVES:
1) The protocol is as per the attachment. Any amendments to the protocol will
be as agreed to by Emory and VSI.
2) Data Collection: Data collection will be performed for economic and quality
of life data by the clinical investigators and will be managed by Emory.
3) Data Quality Reports: VSI may elect to provide Emory with data completion
reports of clinical data over the course of the trial. If VSI does provide
such reports, Emory will respond within 1 week as to the quality of the
data. Emory agrees to work with VSI to try to improve data quality, but
Emory will not be accountable for data quality.
4) Data Collection Forms: The forms to be used are specified in the protocol
for the main Duett trial and in the Economic Study protocol. Any changes to
these forms will require the agreement of Emory and VSI.
5) Data Management: Emory agrees to manage the data for the Economic Study
until the completion of data collection for the Duett trial. At that time a
copy of the entire clinical database, or subset of the database as
necessary, for the Economic Study will be transferred to Emory in agreed to
format, probably as an Access Database. This database to be transferred will
be used by Emory for the Analytic work of the Economic Study. Emory will
work with VSI to maintain referential integrity between the clinical and
economic databases.
6) Economic Committee: An economic committee for the Economic Study will be
organized by Emory and VSI with Dr. Weintraub as chair.
7) Publication: Emory agrees to provide VSI with at least 1 manuscript for peer
reviewed publication. No abstract of manuscript will be submitted from the
Economic Study without being reviewed by VSI. VSI shall have thirty (30)
days to
<PAGE>
respond to Emory with any requested revisions. Emory agrees to act upon the
requested revisions in good faith and to delete any proprietary information
prior to submission for publication.
8) Economic Study Investigators: The study investigators will include the
personnel on the second title page above as well as any other personnel
agreed to by Emory and the VSI.
TERM AND TERMINATION:
1) This agreement will be effective as of the data fully executed and shall
remain in effect until December 31, 2000 or until it has been agreed to by
Emory and the VSI that the scope of work is complete.
2) This agreement may be terminated by either party with 30 days written
notice. In the event of early termination by VSI, VSI agrees to pay Emory
for actual fees and expenses incurred by the University since the last
payment period for which Emory was paid.
PAYMENT:
The study is to cover a one year period. VSI agrees to pay Emory a total
of $104,325. The payment schedule will be $10,000 when the contract is signed,
$16,325 when the protocol is completed (for IRB submission) and all necessary
data collection forms are delivered to VSI, $26,000 after 6 months, $26,000
after the data are complete, $26,000 when a manuscript has been prepared for
publication. If data collection is not complete after 1 year, then VSI and Emory
agree to renegotiate the budget.
<PAGE>
Signature of the parties to the Economic Study which is part of Duett
Emory University:
/s/ Jane O'Connor
- --------------------------------
Jane O'Connor
Associate Director of Research
/s/ William S. Weintraub, M.D.
- --------------------------------
William S. Weintraub, M.D.
Principal Investigator, Economic Study
Vascular Solutions, Inc.:
/s/ By Howard C. Root
- --------------------------------
Howard C. Root
CEO
<PAGE>
EXHIBIT 10.8
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT is entered into by and between Davol Inc.
("Seller"), having a principal place of business at 100 Sockanossett Crossroad,
Cranston, Rhode Island 02920, and Vascular Solutions, Inc. ("Buyer"), having a
principal place of business at 2495 Xenium Lane North, Minneapolis, MN 55441.
This Agreement sets forth the terms and conditions for the sale of the
Product (as hereinafter defined) by Seller and the purchase of such Product by
Buyer for incorporation into its vascular sealing device.
1. Purchase Terms. During the Term of this Agreement, Seller agrees to
--------------
sell and Buyer agrees to purchase, on the terms and conditions herein stated,
the product more specifically described on Schedule 1 attached hereto and
----------
incorporated herein by reference (the "Product"). Buyer shall purchase the
Product solely for inclusion and subsequent resale as part of its vascular
sealing device and shall not sell the Product in a separate form for any use
other than its vascular sealing device.
2. Product Specifications. The Product sold to Buyer hereunder shall meet
----------------------
the specifications listed on Schedule 1 (the "Specifications" and shall be
manufactured in accordance with all applicable Good Manufacturing Practices
("GMP") of the U.S. Food & Drug Administration (the "FDA") for medical devices.
If at any time during the term of this Agreement Seller finds it necessary or
desirable to change the specifications, and such change could, in Seller's sole
discretion require notification or approval of the FDA or any international
regulatory agency for the Buyer's vascular sealing device, Seller shall not
effect such change with respect to the Product until giving Buyer sixty (60)
days prior written notice of such change. In the event Seller changes the
Specifications at Buyer's request or in order to accommodate any changes to
Buyer's Tooling, then notwithstanding anything to the contrary contained herein,
Seller shall be entitle to immediately adjust the purchase price for Product in
an amount equal for Seller to promptly
<PAGE>
recoup up to * in making such changes to the Specifications.
3. Tooling. As used in this Agreement, "Tooling" shall mean that certain
-------
Tooling and machinery described on Schedule 2 attached hereto and incorporated
----------
herein which is owned by Buyer, together with all replacements thereof. Buyer
shall purchase the Tooling described on Schedule 2 and will assure that the
----------
Tooling is delivered to, or is otherwise on-site at, Seller's facility. Title
to such Tooling shall vest in Buyer, and Buyer shall be solely responsible for
the payment of taxes thereon and insurance premiums relating thereto. Seller
shall provide Buyer with general guidance to the best of its knowledge, as to
the suitability of the Tooling, but in no way shall Seller guaranty the adequacy
or performance of the Tooling. Seller shall take reasonable steps to ensure
that Buyer's ownership of the Tooling is evident, which may include the
placement of identification tags on the Tooling. Seller hereby covenants that,
during the term of this Agreement: (I) Seller shall not encumber any of the
Tooling, nor shall Seller permit the Tooling to become encumbered as a result of
any act or omission of Seller, and (ii) Seller shall take reasonable steps to
assure the routine repair and maintenance of the Tooling in accordance with the
manufacturers' specifications; provided that repairs of Tooling other than
--------
routine maintenance and repairs shall be the sole responsibility of Buyer, and
Buyer shall pay for repairs other than routine maintenance and repairs within
thirty (30) days following receipt of an invoice relating thereto. Within
thirty (30) days following termination or expiration of this Agreement for any
reason Seller agrees to properly pack and return to Buyer, or cause to be
properly packed and returned to Buyer, F.O.B. point of shipment, all Tooling,
the same to be shipped to such facility as Buyer directs.
4. Purchase Price. During the first year from the date of this
--------------
Agreement, (i) Seller agrees to sell the Product to the Buyer at the prices set
forth in Schedule 3, attached hereto and incorporated herein by reference, and
----------
(ii) Buyer agrees to issue firm purchase orders for a minimum of 10,000 units of
Product. In the event Buyer breaches the minimum purchase agreement set forth
in the immediately preceding sentence, Seller shall provide notice thereof to
Buyer.
* Denotes confidential information that has been omitted and filed separately,
accompanied by a confidential treatment request, with the Securities and
Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
<PAGE>
Buyer shall, within thirty (30) days following receipt of such notice pay to
Seller an amount equal to the amount of such shortfall times * of the then-
current purchase price. The period of time from the date of this Agreement
through one year from the date of this Agreement shall be referred to as the
First Contract Year. The subsequent one year period shall be referred to as the
Second Contract Year, progressing through the Tenth Contract Year, if this
Agreement is still in effect at such times. The prices for each Contract Year
subsequent to the First Contract Year shall be adjusted for inflation, effective
the first day of such Contract Year. The adjusted price will be the price for
the prior Contract Year plus an inflation factor equal to the 12-month average
percentage increase in total compensation for private industry workers for the
period ending June 30 as indicated on Table 3 of the Employment Cost Index
published by the Bureau of Labor Statistics of the United States Department of
Labor or, if the Employment Cost Index should cease to be published, any
comparable category in a comparable index agreeable to both parties, in any case
multiplied by the prior Contract Year's prices. Seller shall invoice Buyer on
each shipment of the Product, and payment shall be made in all cases net 30 days
from the date of shipment. Any invoiced amounts due but not paid from and after
the date due shall accrue a service charge of 1% per month of the maximum rate
allowed by law, whichever is lower. Such prices do not include, and Buyer shall
pay for, any excise, sales, use or like taxes resulting from the sale of the
Product to Buyer.
5. Delivery, Shipping, Title:
-------------------------
(a) Delivery. All purchases shall be FOB Seller's facility at
--------
Woburn, Massachusetts. Seller will use its commercially reasonable efforts to
deliver the Product in accordance with a specified delivery date contained in a
firm purchase order for Products which is issued by Buyer and accepted by
Seller. If Seller failed to deliver the Product within thirty (30) days
following the specified delivery date, Buyer reserves the right to cancel that
portion of any purchase order which remains undelivered at the date of
cancellation.
(b) Shipping. All shipments will be shipped by Seller freight
--------
prepaid and Buyer will reimburse Seller for
* Denotes confidential information that has been omitted and filed separately,
accompanied by a confidential treatment request, with the Securities and
Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
<PAGE>
the actual costs of such shipping. All shipments will be made as specified by
Buyer, or, if Buyer does not so specify, by appropriate and reasonable method of
transportation in keeping with the Product and the particular delivery date. At
Buyer's option, Seller will procure insurance on the shipments against damage to
or loss of the Product. Any such shipping insurance so provided by Seller will
be subsequently billed to Buyer, and Buyer will reimburse Seller for the actual
costs of such insurance. Unless otherwise specified by Buyer, packaging of
shipments shall be in accordance with Seller's customary practices.
(c) Title. Seller shall retain title and bear the risk of loss until such
-----
time as a shipment has been delivered to the carrier designated by Buyer or, if
no such designation has occurred, Seller's regular carrier. Upon such delivery,
title and risk of loss shall pass to Buyer. Title to the Tooling and Equipment
listed on Schedule 2 shall remain with Buyer during the Term of this Agreement.
----------
(d) Alternate Vendor. Notwithstanding anything to the contrary contained
----------------
herein, in the event Buyer elects to use another vendor to supply bovine
collagen material for commercial sale in the vascular sealing device for any
reason other than the failure of Seller to perform under the terms of this
Agreement, Buyer shall provide ninety (90) days prior written notice of such
decision. During the ninety (90) day period following such notice, Buyer shall
continue buying Product from Seller at a volume which is at least equal to the
average purchase volumes made by Buyer during the previous historical 90-day
periods. In the event Buyer fails to make such purchases during the ninety (90)
day period, Seller shall provide notice thereof to Buyer. Buyer shall, within
thirty (30) days following receipt of such notice pay to Seller an amount equal
to the amount of such shortfall times * of the then-current purchase price.
6. Quality Standards. Upon reasonable advance written notice to Seller,
-----------------
Buyer shall have access for purposes of reviewing and auditing Seller's Quality
Assurance Manual and all quality systems employed by Seller in connection with
the manufacture and packaging of the Product. In addition, upon written request
of Buyer, Seller shall provide the documentation necessary to allow Buyer to
reference Seller's
* Denotes confidential information that has been omitted and filed separately,
accompanied by a confidential treatment request, with the Securities and
Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
<PAGE>
relevant Master File(s) in any submissions with the FDA and any international
regulatory filings or approvals in connection with the approval of the Buyer's
vascular sealing device. Seller shall cooperate with Buyer's reasonable requests
for information and assistance in all FDA and international regulatory filings,
audits and approvals and Seller shall cooperate with Buyer to address any GMP
deficiencies noted during any FDA audit. Any and all expenses incurred by Seller
in rendering such assistance shall be reimbursed by Buyer.
7. Ordering Procedures.
-------------------
(a) Purchase Orders. Sales of the Product will be made pursuant to
---------------
firm purchase orders issued by Buyer to Seller, specifying quantities, prices
(based on Schedule 3 hereof), delivery dates and method of shipment. Buyer shall
----------
be entitled to use its standard form of purchase order; provided, however, that
such purchase orders shall not impose any terms not contained in this Agreement
or alter any of the terms contained in this Agreement. In the event of any
conflict between the terms of any purchase order and the terms of this
Agreement, the terms of this Agreement shall control.
(b) Annual Forecasts. Prior to the beginning of each Contract Year,
----------------
Buyer will submit to Seller a purchase forecast whereby Buyer will reasonably
forecast its purchases of the Product during the Contract Year. Such forecast
will be done in good faith but will not bind Buyer to the purchase of any
specific amount of the Product. The forecast will be used to determine the
volume purchase price for the Contract Year, which shall be adjusted immediately
if the actual amount of purchases during such Contract Year exceeds or is less
than the forecasted amount. Buyer shall issue firm purchase orders at times
within its discretion throughout the Contract Year (but not more frequently than
twice a month) requesting delivery no sooner than four weeks from the date of
the purchase order. Seller shall accept firm purchase orders to the extent that
the aggregate amount of such firm purchaser orders in any given quarter do not
exceed twenty-five percent (25%) of the annual forecasted volume. Firm purchase
orders which exceed such 25% aggregate in a given quarter of a Contract Year
will be subject to approval by the Seller of the amount over such
<PAGE>
25% level based on Seller's supply limitations. Any amount rejected by Seller
due to its supply limitation may, at Seller's option, be delivered in the next
quarter of the Contract Year.
(c) Year One Minimum. During the initial Contract Year, Buyer will
----------------
purchase a minimum of 10,000 units of Products. In the event Buyer fails to meet
such minimum purchase requirement Seller shall have the right, in addition to
any other remedies it may have at law or in equity, to terminate this Agreement
upon thirty (30) days written notice to Seller.
8. Inspection and Acceptance. Upon receipt by Buyer of a shipment of the
-------------------------
Product, Buyer will have the right to inspect each Product shipped and to submit
the Products to the agreed quality control procedures and tests listed on
Schedule 1. Buyer has the right to reject Product which fails to conform to the
- ----------
Specifications and, upon receipt of a return authorization from Seller which
shall not be unreasonably withheld, return same to Seller at Seller's expense
with a written explanation of the reason for the rejection. If the Product
fails to meet the Specifications, Seller will issue a credit or refund of the
total purchase price for such rejected Product together with reimbursement of
actual shipping costs to and from Buyer. For purposes of this Agreement, Buyer
shall be deemed to have accepted all Product shipped which is not affirmatively
rejected by Buyer within 30 days of receipt. Assumed acceptance of the Product
shall not limit rights if it is subsequently determined that the Product did not
meet the Specifications at the time of shipment to Buyer.
9. Warranties. Seller warrants that it has all rights to sell the Product
----------
and that the Product, when sold, will be free and clear from all liens and
encumbrances. Seller warrants that the Product will meet the Specifications and
will be free from defects in material and workmanship at the time of shipment
from Seller's facility. Seller further warrants that the manufacture of the
product will be in conformity with Good Manufacturing Practices of the FDA for
medical devices and in compliance with ISO 900 series guidelines, and that no
Product delivered under this Agreement will be adulterated or misbranded within
the meaning of the United States Food, Drug and Cosmetic Act.
<PAGE>
No substitution of Product may be made by Seller without the express prior
written consent of Buyer. Seller's sole responsibility hereunder, and Buyer's
exclusive remedy for a breach by Seller of this Section 9, will be the
replacement or issuance of a full refund respecting any Product failing to meet
this warranty, and Seller shall not be responsible for any incidental or
consequential damages arising from its breach of said warranty.
THE FOREGOING SHALL BE THE SOLE AND EXCLUSIVE REMEDY WHETHER IN CONTRACT,
TORT OR OTHERWISE. THERE ARE NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, EXCEPT AS
SPECIFICALLY SET FORTH HEREIN.
10. Indemnification.
---------------
(a) Buyer's Indemnification. Seller will have no control over
-----------------------
the uses to which the Product will be devoted within Buyer's vascular sealing
device, or over the circumstances of its use, storage, handling, distribution or
application after shipment from Seller's facility. Buyer will assume full
responsibility with respect to the use of the Product, and it is mutually agreed
that Seller assumes no liabilities of any kind with respect to the use by Buyer
or any third party of the Product in any vascular sealing device. Buyer agrees
to indemnify and hold harmless Seller, its successors, assigns, directors,
officers, agents and employees, from and against any and all losses, damages or
expenses, including court costs and reasonable attorneys' fees, resulting from
or arising out of the design, manufacture, marketing, sale or use of any
vascular sealing device incorporating the Product unless such loss, damage or
expense is the direct result of the Product failing to meet the Specifications
set forth herein at the time of shipment from Seller's facility.
(b) Seller's Indemnification. Seller agrees, at its own expense
------------------------
to defend, indemnify and hold harmless Buyer, its successors, assigns,
directors, officers, agents and employees, from and against any and all losses,
damages or expenses, including court costs and reasonable attorneys' fees,
resulting from or arising out of the failure of the Product to meet the
Specifications at the time of shipment to the Buyer or resulting from or arising
out of a claim
<PAGE>
that the Product, used alone and not in combination with any other product
infringes the patent, trade secrets or other intellectual property of any third
party.
(c) Indemnification Procedures. In the event that any demand or claim
-------------------------
is made or suit is commenced against an indemnified party, the indemnified party
shall give prompt written notice to the indemnifying party and the indemnifying
party shall have the right to compromise such claim to the extent of its own
interest and shall undertake the defense of any such suit. An indemnified party
may engage its own counsel, at its own expense, to monitor the defense of any
such matter.
11. Term of Agreement. This Agreement shall commence on the date hereof
-----------------
and shall terminate on the date ten years from the date hereof, unless sooner
terminated in accordance with the terms hereof or by the mutual written consent
of the parties (the "Term").
12. Confidentiality. During the term of this Agreement, the parties
---------------
hereby expressly agree that all Confidential Information made available by one
party to the other shall be held in strict confidence by the receiving party
during the term of this Agreement and for five (5) years thereafter and shall be
utilized by the receiving party solely in furtherance of the objectives of this
Agreement. Promptly after the expiration or termination of this Agreement, each
party shall promptly return to the other all Confidential Information disclosed
to it hereunder, including all copies thereof, provided, however, that each
party shall have the right to retain one (1) copy of all such Confidential
Information under lock and key for archival purposes in the event any dispute
should arise between the parties with respect to the same. This Section 12
expressly supersedes and replaces any prior confidentiality agreements, written
or unwritten, between the parties relating to the subject matter of this
Agreement. As used in this Agreement, "Confidential Information" shall mean any
information of a confidential and/or proprietary nature as to which Seller or
Buyer, as the disclosing party, prior to or during the term of this Agreement,
develops or acquires any interest, including but not limited to, all
discoveries, inventions, improvements, and ideas relating to any process,
formula, machine, device,
<PAGE>
manufacture, composition of matter, plan or design, whether patentable or not,
or relating to the conduct of business by the disclosing party, which, prior to
or during the term of this Agreement, was or is disclosed to the other party, as
the receiving party, exclusive of data or information: (I) which, at the time of
disclosure hereunder, was in the public domain or which, subsequent to
disclosure hereunder, becomes part of the public domain by any means other than
the breach by the receiving party of its obligations hereunder, or (ii) which
was known to the receiving party, at the time of disclosure hereunder, as
evidenced by the receiving party's business records maintained in the ordinary
course of business, or (iii) which is, at any time, disclosed to the receiving
party by any person or entity not a party hereto whom the receiving party
believes, after reasonable inquiry, has the right to disclose the same, or (iv)
which is developed by an employee of the receiving party who is shown, by
competent proof and by clear and convincing evidence, not to have been privy to
information disclosed by the disclosing party, or (v) which is disclosed
verbally, except where the disclosing party reduces the verbal disclosure to
writing, marks the same as confidential and proprietary and furnishes the
receiving party with the reduction to writing within thirty (30) days of the
verbal disclosure.
13. Use of Trademark. Solely for the purpose of filing regulatory
----------------
submissions and facilitating discussions with regulatory agencies in those
countries where Buyer intends to sell its vascular sealing device, Buyer shall
have the right to use the "Avitene(R) Microfibrillar Collagen Hemostat"
trademark (the "Trademark") on such regulatory submissions and correspondence
relating to such regulatory submissions. Buyer shall have no other rights to use
the Trademark, and Buyer specifically agrees that it will not use the Trademark
on its packaging, labeling, package inserts or promotional literature. Nothing
contained in this Section 13 is intended to transfer to Buyer any ownership
interest in the trademark. Buyer shall not contest, or join any third party in
contesting, the validity of the Trademark.
14. Termination. Either party may terminate this Agreement immediately
-----------
and cancel any purchase orders hereunder if the other party (a) assigns this
Agreement or any of its rights hereunder in violation of the terms of
<PAGE>
this Agreement and without the prior written consent of the other party, (b)
makes an assignment for the benefit of creditors, or a receiver, trustee in
bankruptcy or similar officer is appointed to take charge of all or part of its
property, (c) is adjudged a bankrupt, or (d) breaches any term of this Agreement
and such breach is not remedied within thirty (30) days after written notice
thereof has been given to the breaching party. Any such termination shall not
release Seller or Buyer from obligations arising under this Agreement prior to
the effective date of termination.
15. Force Majeure. Neither party hereto shall be considered in default in
-------------
performance of its obligations hereunder if performance of such obligations is
prevented or delayed by acts of God or government, labor disputes, failure or
delay of transportation, or by vendors or subcontractors, or any other similar
cause or causes beyond its reasonable control. Time of performance of either
party's obligations hereunder shall be extended by the time period reasonably
necessary to overcome the effects of such force majeure occurrence.
Notwithstanding anything to the contrary contained herein, in no event shall
Seller be considered in default in performance of its obligations hereunder if
performance of such obligations is prevented or delayed by Buyer's failure to
timely deliver materials necessary to fulfill such obligations or the breakdown
of tooling and equipment owned by Buyer not caused by lack of proper maintenance
by Seller.
16. Entire Agreement. This Agreement sets forth the entire and only
----------------
agreement between Buyer and Seller concerning the subject matter hereof. No
provision of this Agreement can be modified or amended except by an explicit
written amendment signed by both Buyer and Seller.
17. Assignment. Neither party will have the right to assign this
----------
Agreement, in whole or in part, to any third party without the prior written
consent of a duly authorized officer of the other party, which consent shall not
be unreasonably withheld. Notwithstanding the foregoing, either party may
freely assign this Agreement to any company controlling, controlled by or under
common control with that party or succeeding to the entire business of the
party. This Agreement will be binding upon and inure to the benefit
<PAGE>
of the parties and their successors and assigns to which such consent, if
necessary, is given.
18. General.
-------
(a) Waivers. No waiver of any right or remedy hereunder will be
-------
effective unless based upon a writing signed by the party against whom it is
sought to be enforced.
(b) Notices. All notices required or permitted under this
-------
Agreement must be made in writing and delivered in person or by certified or
registered mail, postage prepaid, addressed to the attention of the Chief
Executive Officer of the Buyer, to the attention of the President of the Seller
with a copy to the General Counsel - C. R. Bard of 730 Central Avenue, Murray
Hill, NJ 07974 of the Seller at the respective address first written above, or
such other address as may be given by notice.
(c) Relationship. The parties are independent contractors and
------------
shall not be deemed to have formed any partnership, joint venture or other
relationship. Neither party shall make, or represent to any other person that it
has the power or authority to make any financial or other commitment on behalf
of the other party.
(d) Severability. If any provision of this Agreement is
------------
declared invalid or unenforceable by a court of competent jurisdiction, such
provision will be severed from this Agreement and the remaining provisions will
be unaffected thereby. The parties will promptly meet and negotiate a substitute
provision, meeting as closely as possible the intent of the invalid or
unenforceable provision and, with reasonable precision, avoiding the defects of
the original provision.
(e) Governing Law. This Agreement has been entered into under
-------------
the laws of the State of Rhode Island and will be governed by and construed in
accordance with those laws as they apply to contracts entered into and carried
out solely within the State of Rhode Island.
(f) Exclusiveness of Remedies. Except as specifically provided
-------------------------
otherwise and subject to the terms of
<PAGE>
this Agreement, all rights accorded either of the parties hereunder shall be
cumulative of all other rights so granted as well as any rights and remedies
either of them may have at law or in equity.
(g) Headings. The Section headings in this Agreement are for
---------
convenience only and shall not affect the construction hereof.
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
representatives to execute this Agreement the day and year first written above.
DAVOL INC.
BY: /s/ Brian P. Schulz
--------------------------------------
Its: President
--------------------------------
VASCULAR SOLUTIONS, INC.
By: /s/ Howard C. Root
--------------------------------------
Its: CEO
--------------------------------
<PAGE>
Schedule 1 - Specifications
---------------------------
Not more than * of Avitene microfibrillar bovine collagen (Buyer to
determine the precise amount) packed in a standard 10 ml Class 6 medical grade
syringe with a male luer lock. Buyer to supply the syringe, a mixing luer, end
cap foil pouch for packaging and labeling. The pouch with syringe to be
delivered sterile per MP1000-Y001 (current rev.) with a minimum sterile shelf
life of one year.
Each lot shipped to Buyer shall be accompanied by a certificate of
analysis.
* Denotes confidential information that has been omitted and filed separately,
accompanied by a confidential treatment request, with the Securities and
Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
<PAGE>
Schedule 2 - Tooling and Equipment
----------------------------------
As of the date of this Agreement, no special tooling or equipment is
required. If and when the Buyer's purchases under this Agreement exceed *
annually, Buyer and Seller will jointly work toward implementing an automated
syringe filling machine capable of weighting and dispensing collagen into the
syringe at Buyer's expense.
* Denotes confidential information that has been omitted and filed separately,
accompanied by a confidential treatment request, with the Securities and
Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
<PAGE>
Schedule 3 - Pricing
--------------------
The price for the Product during the first Contract Year shall be as
follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Contract Year Quantity Price Per Unit
- --------------------------------------------------------------------------------
<S> <C>
0 - 10,000 $ +
- --------------------------------------------------------------------------------
10,001 - 50,000 $ +
- --------------------------------------------------------------------------------
*50,001 - 200,000 $ +
- --------------------------------------------------------------------------------
*200,001 - 400,000 $ +
- --------------------------------------------------------------------------------
*Over 400,000 $ +
- --------------------------------------------------------------------------------
</TABLE>
Prices for subsequent Contract Years shall be determined according to the
formula described in Section 4 hereof.
*Pricing includes use of automated equipment described in Schedule 2 for
annual quantities above + units.
+ Denotes confidential information that has been omitted and filed
separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.
<PAGE>
EXHIBIT 10.10
CONSULTING AGREEMENT
THIS AGREEMENT made this 10/th/ day of June, 1999, is by and between
Vascular Solutions, Inc., a Minnesota corporation (the "Company"), and Gary
Gershony, M.D., a resident of the State of California (the "Consultant").
WHEREAS, Consultant and the Company mutually desire to revise and
supercede the existing Consulting Agreement dated February 3, 1998 relating to
the provision of the Consultant's services to the Company; and
WHEREAS, Consultant and the Company desire to specify all benefits
payable to Consultant in connection with his consulting services.
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the Company and the Consultant, each intending to be legally bound,
agree as follows:
1. Consulting Arrangement. Subject to all of the terms and conditions
----------------------
of this Agreement, the Company appoints Consultant as the Medical Director of
the Company and Consultant agrees to serve in such position.
2. Duties. The Consultant will make the best use of his energy,
------
knowledge and training in advancing the Company's interests . He will diligently
and conscientiously perform the duties of his position as well as such other
duties as are directed by the Company's management. The Consultant will make
every effort to avoid using any trade secrets or confidential information that
he may have in his possession from any previous employer in connection with his
services to the Company. In particular, the Consultant shall perform the
following tasks:
a) Consult with the Company and its employees, customers and
consultants on the design aspects of the Company's existing
and future products;
b) Assist the Company in documenting and preparing the
intellectual property protection covering the Company's
existing and future products;
(b) Assist in selecting, recruiting and training physicians and
medical centers for the clinical studies and commercial sale
of the Company's new and future products;
(c) Assist in the regulatory submissions and approval process
for the Company's existing and future products;
(d) Design, invent and review future product refinements and new
product opportunities as part of the Company's R&D
department; and
(e) Assist in other functions as necessary and desireable.
1
<PAGE>
3. Term. This Agreement shall become effective on May 1, 1999 and shall
----
replace and supercede in its entirety the Consulting Agreement dated February 3,
1998. The relationship created by this agreement shall continue on an "at will"
basis. Either party may terminate the relationship created by this Agreement for
any reason by giving 10 working days prior written notice to the other party.
Because the relationship is "at will," the Consultant shall have no right to
continued services, and the Company may terminate the Consultant's services for
any reason (other than because of Consultant's race, sex, age or other legally
protected category) at any time. No document or statement (oral or written) by
the Company or its officers or Board of Directors will create a right to
continued services.
4. Compensation.
------------
(a) Cash Compensation. The Company shall pay the Consultant a
-----------------
monthly retainer in the amount of $8,333, to be reviewed and adjusted on May 1,
2000 and no less frequently than annually thereafter.
(b) Expenses. The Company shall reimburse the Consultant for all
--------
ordinary and necessary business expenses the Consultant incurs while performing
his duties under this Agreement, provided that the Consultant accounts properly
for such expenses to the Company in accordance with the general corporate policy
of the Company as determined by the Company's Board of Directors and in
accordance with the requirements of Internal Revenue Service regulations
relating to substantiation of expenses.
5. Inventions.
----------
(a) "Inventions," as used in this Section 5, means any discoveries,
----------
designs, improvements or software (whether or not they are in writing or reduced
to practice) or works of authorship (whether or not they can be patented or
copyrighted) that the Consultant makes, authors, or conceives (either alone or
with others) and that:
(i) concern directly the Company's products, research or
development;
(ii) result from any work the Consultant performs for the Company;
or
(iii) use in any significant respect the Company's equipment,
facilities, or trade secret information.
(b) The Consultant agrees that all inventions he makes during the
term of this Agreement will be the sole and exclusive property of the Company.
The Consultant will, with respect to any such invention:
(i) keep current, accurate, and complete records which will belong
to the Company and be transferred to the Company's premises as
requested;
2
<PAGE>
(ii) promptly and fully disclose the existence and describe the
nature of the invention to the Company and in writing (and
without request);
(iii) assign (and the Consultant does hereby assign) to the Company
all of his/her rights to the invention, and applications he
makes for patents or copyrights in any country, and any
patents or copyrights granted to him in any country; and
(iv) acknowledge and deliver promptly to the Company any written
instruments, and perform any other reasonable acts necessary
in the Company's opinion and at its expense to preserve
property rights in the invention against forfeiture,
abandonment, or loss and to obtain and maintain letters
patent and/or copyrights on the invention and to vest the
entire right and title to the invention in the Company,
provided that the Consultant makes no warranty or
representation to the Company as to rights against third
parties hereunder.
6. Confidential Information.
------------------------
(a) "Confidential Information," as used in this Section 6, means
------------------------
information that is not generally known and that is proprietary to the Company
or that the Company is obligated to treat as proprietary. This information
includes, without limitation:
(i) trade secret information about the Company and its products or
services;
(ii) "inventions," as defined in subsection 5 (a) above;
(iii) information concerning the Company's business, as the Company
has conducted it or as it may conduct it in the future; and
(iv) information concerning any of the Company's existing or
possible future products, including (without limitation)
information about the Company's research, development,
engineering, purchasing, manufacturing, servicing, finances,
marketing or selling.
Any information that reasonably can be expected to be treated as Confidential
Information will be presumed to be Confidential Information (whether the
Consultant or other originated it and regardless of how he obtained it).
(b) Except as required in his duties to the Company, the
Consultant will not, during the term of his services to the Company or for a
period of three (3) years after termination of his services to the Company, use
or disclose Confidential Information to any person not authorized by the Company
to receive it, excluding Confidential Information:
(i) which is or becomes publicly available by a source other than
the Consultant;
3
<PAGE>
(ii) which is received by the Consultant after termination of his
services hereunder from a source who, to the Consultant's
knowledge, did not obtain the information directly or
indirectly from employees or agents of the Company; or
(iii) for which disclosure thereof the Company has consented in
writing.
When the Consultant's services to the Company terminate, he will promptly turn
over to the Company all records and any compositions, articles, devices,
apparatus, and other items that disclose, describe, or embody Confidential
Information, including all copies, reproductions, and specimens of Confidential
Information in his possession, regardless of who prepared them.
7. Competitive Activities. The Consultant agrees that during the term
----------------------
of his services to the Company and for a period of one (1) year after his
services to the Company end:
(a) He will not alone, or in any capacity with another firm:
(i) directly or indirectly engage in the manufacture or
distribution of products directly competetive with the
Company's, nor will he participate in the management or
operation of, or become a significant investor in, any venture
or enterprise of whatever kind as a principal, officer,
director, employee, consultant, representative, agent or
shareholder of any entity whose business is directly
competetive with the Company's;
(ii) solicit for competitive business or in any way intentionally
interfere or attempt to interfere with the Company's
relationships with any of its current or potential customers;
or
(iii) employ or attempt to employ any of the Company's employees
on behalf of any other entity competing with the Company;
provided that nothing in this Section 7(a) shall restrict the
Consultant's employment by or association with any entity,
venture, or enterprise which engages in a business with a
product or service competitive with any product or service of
the Company so long as the following conditions are complied
with: (a) the Consultant's employment or association with such
entity, venture or enterprise is limited to work which does
not involve or relate to the design, development, production,
marketing or servicing of a product or service which is
directly competitive with any product or service of the
Company, and (b) the Consultant's employer takes reasonable
measures to insure that the Consultant is not involved with or
consulted in any aspect of the design, development,
production, marketing, or servicing of such competitive
product or service.
(b) Consultant will, prior to accepting employment with any
employer, inform that employer of this Agreement and provide that employer with
a copy of Section 7 of this
4
<PAGE>
Agreement, provided that he reasonably believes his new position is or may be
contrary to this Agreement.
8. Conflicting Business. The Consultant agrees that he will not
--------------------
transact business with the Company personally, or as agent, owner, partner, or
shareholder of any other entity without the prior approval of the Board of
Directors. The Consultant further agrees that he will not engage in any business
activity or outside employment that is likely to conflict with the Company's
proprietary or business interests during the term of this Agreement. The Company
understands that Consultant will be engaged in the full time practice of
medicine during the term of this Agreement.
9. No Adequate Remedy. The Consultant understands that if he fails to
------------------
fulfill his obligations under Sections 5, 6, 7 or 8 of this Agreement, the
damages to the Company would be very difficult to determine. Therefore, in
addition to any other rights or remedies available to the Company at law, in
equity or by statute, the Consultant hereby consents to the specific enforcement
of Sections 5, 6, 7 or 8 of this Agreement by the Company through an injunction
or restraining order issued by any appropriate court.
10. Miscellaneous.
-------------
(a) Successors and Assigns. This Agreement may not be assigned by
----------------------
the Consultant. Except as provided in the next sentence, this Agreement may not
be assigned by the Company without the Consultant's consent, which consent shall
not be unreasonably withheld. In any event, the Company may assign this
Agreement without the consent of the Consultant in connection with a merger,
consolidation, assignment, sale or other disposition of substantially all of its
assets or business or the assets or business of a division of the Company.
(b) Modification. This Agreement may be modified or amended only by
------------
a writing signed by each of the parties hereto.
(c) Governing Law. The laws of the State of Minnesota shall govern
-------------
the validity, construction, and performance of this Agreement.
(d) Construction. Wherever possible, each provision of this
------------
Agreement shall be interpreted so that it is valid under applicable law. If any
provision of this Agreement is to any extent invalid under applicable law in any
jurisdiction, that provision shall still be effective to the extent it remains
valid. The remainder of this Agreement also shall continue to be valid, and the
entire Agreement shall continue to be valid in other jurisdictions.
(e) Non-Waiver. No failure or delay by any of the parties hereto in
----------
exercising any right or remedy under this Agreement shall waive any provision of
this Agreement. Any single or partial exercise by either of the parties hereto
of any right or remedy under this Agreement shall not preclude the party from
otherwise or further exercising its rights or remedies, or any other rights or
remedies granted by any law or any related document.
5
<PAGE>
(f) Captions. The headings in this Agreement are for convenience
--------
only and shall not affect the interpretation of this Agreement.
(g) Notices. All notices and other communications required or
-------
permitted under this Agreement shall be in writing and hand delivered or sent by
registered first-class mail, postage prepaid. Such notices and other
communication shall be effective upon receipt if hand delivered and shall be
effective five (5) business days after mailing if sent by mail to the following
addresses, or such other addresses as either party shall have notified the other
party:
If to the Company: Vascular Solutions, Inc.
2950 Xenium Lane North Suite 138
Minneapolis, Minnesota 55441
Attention: Chief Executive Officer
If to the Consultant: Dr. Gary Gershony
3131 Roundhill Road
Alamo, California 94507
IN WITNESS WHEREOF, the Company and the Consultant have executed this
Agreement as of the date first above written.
VASCULAR SOLUTIONS, INC.
By: /s/ Howard C.Root
----------------------------------------
Its: CEO
------------------------------------
CONSULTANT
/s/ Gary Gershony
-------------------------------------------
Dr. Gary Gershony
6
<PAGE>
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
THIS AGREEMENT made this ____ day of _________, 1998, is by and between
Vascular Solutions, Inc., a Minnesota corporation (the "Company"), and
_______________, a resident of the State of Minnesota (the "Employee").
WHEREAS, Employee and the Company mutually desire to enter into an
employment relationship whereby Employee will devote his/her substantially full-
time efforts to the success of the Company; and
WHEREAS, Employee and the Company desire to specify all benefits payable to
Employee in connection with the employment.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the Company and the Employee, each intending to be legally bound, agree as
follows:
1. Employment. Subject to all of the terms and conditions of this
----------
Agreement, the Company agrees to employ the Employee as ________________________
of the Company and the Employee accepts this employment.
2. Duties. The Employee will make the best use of his/her energy,
------
knowledge and training in advancing the Company's interests on a substantially
full-time basis. He/she will diligently and conscientiously perform the duties
of his/her position as well as such other duties as are directed by the
Company's management. The Employee will make every effort to avoid using any
trade secrets or confidential information that he/she may have in his/her
possession from any previous employer in connection with his/her employment by
the Company.
3. Term. The Employee shall be employed beginning on ______________, 1998.
----
The employment relationship created by this agreement shall continue on an "at
will" basis. Either party may terminate the employment relationship created by
this Agreement for any reason by giving 10 working days prior written notice to
the other party. Because the employment relationship is "at will," the Employee
shall have no right to continued employment, and the Company may terminate the
Employee for any reason (other than because of Employee's race, sex, age or
other legally protected category) at any time. No document or statement (oral
or written) by the Company or its officers or Board of Directors will create a
right to continued employment.
4. Compensation.
------------
(a) Salary. The Company shall pay the Employee an initial annual base
------
salary of $________, payable not less frequently than twice-monthly, to be
reviewed and adjusted by January 1, 1999 and no less frequently than annually
thereafter.
(b) Benefits. Upon the commencement of employment, the Employee shall
--------
receive an incentive stock option to purchase ______ shares of the Company's
common stock at $_____
Initials:
Company_______
Employee______
1
<PAGE>
per share vesting upon continued employment over four years. The Employee will
be entitled to participate in benefit and stock option plans which may be
established by the Board of Directors of the Company for the employees of the
Company generally. Other than as specified above, the Employee shall not have
any entitlement to any benefits or options.
(c) Expenses. The Company shall reimburse the Employee for all
--------
ordinary and necessary business expenses the Employee incurs while performing
his/her duties under this Agreement, provided that the Employee accounts
properly for such expenses to the Company in accordance with the general
corporate policy of the Company as determined by the Company's Board of
Directors and in accordance with the requirements of Internal Revenue Service
regulations relating to substantiation of expenses.
5. Inventions.
----------
(a) "Inventions," as used in this Section 5, means any discoveries,
----------
designs, improvements or software (whether or not they are in writing or reduced
to practice) or works of authorship (whether or not they can be patented or
copyrighted) that the Employee makes, authors, or conceives (either alone or
with others) and that:
(i) concern directly the Company's products, research or development;
(ii) result from any work the Employee performs for the Company; or
(iii) use in any significant respect the Company's equipment,
facilities, or trade secret information.
(b) The Employee agrees that all inventions he/she makes during the
term of this Agreement will be the sole and exclusive property of the Company.
The Employee will, with respect to any such invention:
(i) keep current,accurate and complete records which will belong to
the company and be kept and stored on the company's premises while
the Employee is employed by the Company;
(ii) promptly and fully disclose the existence and describe the nature
of the invention to the Company and in writing (and without
request);
(iii) assign (and the Employees does hereby assign) to the Company all
his/her rights to the invention, and application he/she makes for
patents or copyrights in any country; and
(iv) acknowledge and deliver promptly to the Company any written
instruments, and perform any written instruments, and preform any
other reasonable acts necessary in the Company's opinion and at
it's expense to preserve property rights in the invention against
forfeiture, abandonment, or loss and to obtain and
Initials:
Company_______
Employee______
2
<PAGE>
maintain letters patent and/or copyrights on the invention and to
vest the entire right and title to the invention in the Company,
provided that the Employee makes no warranty or representation to
the Company as to rights against third party hereunder.
6. Confidential Information.
------------------------
(a) "Confidential Information," as used in this Section 6, means
------------------------
information that is not generally known and that is proprietary to the Company
or that the Company is obligated to treat as proprietary. This information
includes, without limitation:
(i) trade secret information about the Company and its products or
services;
(ii) "Inventions," as defined in subsection 5 (a) above;
(iii) information concerning the Company's business, as the Company has
conducted it or as it may conduct it in the future; and
(iv) information concerning any of the Company's past, current, or
possible future products, including (without limitation)
information about the Company's research, development,
engineering, purchasing, manufacturing, servicing, finances,
marketing or selling.
Any information that reasonably can be expected to be treated as Confidential
Information will be presumed to be Confidential Information (whether the
Employee or other originated it and regardless of how he/she obtained it).
(b) Except as required in his/her duties to the Company, the Employee
will not, during his/her employment or for a period of three (3) years after
termination of his/her employment with the Company, use or disclose Confidential
Information to any person not authorized by the Company to receive it, excluding
Confidential Information:
(i) which is or becomes publicly available by a source other than the
Employee;
(ii) which is received by the Employee after termination of his/her
employment hereunder from a source who, to the Employee's
knowledge, did not obtain the information directly or indirectly
from employees or agents of the Company; or
(iii) for which disclosure thereof the Company has consented in
writing.
When the Employee's employment with the Company ends, he/she will promptly turn
over to the Company all records and any compositions, articles, devices,
apparatus, and other items that disclose, describe, or embody Confidential
Information, including all copies, reproductions, and specimens of Confidential
Information in his/her possession, regardless of who prepared them.
Initials:
Company_______
Employee______
3
<PAGE>
7. Competitive Activities. The Employee agrees that during his/her
----------------------
employment with the Company and for a period of one (1) year after his/her
employment with the Company ends:
(a) He/she will not alone, or in any capacity with another firm:
(i) directly or indirectly engage in the manufacture or
distribution of products directly competetive with the
Company's, nor will he/she participate in the management or
operation of, or become a significant investor in, any venture
or enterprise of whatever kind as a principal, officer,
director, employee, representative, agent or shareholder or any
entity whose business is directly competetive with the
Company's;
(ii) solicit for competitive business or in any way intentionally
interfere or attempt to interfere with the Company's
relationships with any of its current or potential customers;
or
(iii) employ or attempt to employ any of the Company's employees on
behalf of any other entity competing with the Company, provided
that, nothing in this Section 7 shall restrict the employee's
employment by or association with any entity, venture, or
enterprise which engages in a business with a product or
service competitive with any product or service of the Company
so long as the following conditions are complied with: (a) the
Employee's employment or association with such entity, venture
or enterprise is limited to work which does not involve or
relate to the design, development, production, marketing or
servicing of a product or service which is directly competitive
with any product or service of the Company and (b) the
Employee's employer takes reasonable measures to insure that
the Employee is not involved with or consulted in any aspect of
the design, development, production, marketing, or servicing of
such competitive product or service.
(b) Employee will, prior to accepting employment with any new
employer, inform that employer of this Agreement and provide that employer with
a copy of Section 7 of this Agreement, provided that he/she reasonably believed
his/her new position is or may be contrary to this Agreement.
8. Conflicting Business. The Employee agrees that he/she will not
--------------------
transact business with the Company personally, or as agent, owner, partner, or
shareholder of any other entity without the prior approval of the Board of
Directors. The Employee further agrees that he/she will not engage in any
business activity or outside employment that is likely to conflict with the
Company's proprietary or business interests during the term of this Agreement.
9. No Adequate Remedy. The Employee understands that if he/she fails to
------------------
fulfill his/her obligations under Sections 5, 6, 7 or 8 of this Agreement, the
damages to the Company would be very difficult to determine. Therefore, in
addition to any other rights or remedies available to the Company at law, in
equity or by statute, the Employee hereby consents to the
Initials:
Company_______
Employee______
4
<PAGE>
specific enforcement of Sections 5, 6, 7 or 8 of this Agreement by the Company
through an injunction or restraining order issued by any appropriate court.
10. Miscellaneous.
-------------
(a) Successors and Assigns. This Agreement may not be assigned by
----------------------
the Employee. Except as provided in the next sentence, this Agreement may not be
assigned by the Company without the Employee's consent, which consent shall not
be unreasonably withheld. In any event, the Company may assign this Agreement
without the consent of the Employee in connection with a merger, consolidation,
assignment, sale or other disposition of substantially all of its assets or
business or the assets or business of a division of the Company.
(b) Modification. This Agreement may be modified or amended only by a
------------
writing signed by each of the parties hereto.
(c) Governing Law. The laws of the State of Minnesota shall govern
-------------
the validity, construction, and performance of this Agreement.
(d) Construction. Wherever possible, each provision of this Agreement
------------
shall be interpreted so that it is valid under applicable law. If any provision
of this Agreement is to any extent invalid under applicable law in any
jurisdiction, that provision shall still be effective to the extent it remains
valid. The remainder of this Agreement also shall continue to be valid, and the
entire Agreement shall continue to be valid in other jurisdictions.
(e) Non-Waiver. No failure or delay by any of the parties hereto in
----------
exercising any right or remedy under this Agreement shall waive any provision of
this Agreement. Any single or partial exercise by either of the parties hereto
of any right or remedy under this Agreement shall not preclude the party from
otherwise or further exercising its rights or remedies, or any other rights or
remedies granted by any law or any related document.
(f) Captions. The headings in this Agreement are for convenience only
--------
and shall not affect the interpretation of this Agreement.
(g) Notices. All notices and other communications required or
-------
permitted under this Agreement shall be in writing and hand delivered or sent by
registered first-class mail, postage prepaid. Such notices and other
communication shall be effective upon receipt if hand delivered and shall be
effective five (5) business days after mailing if sent by mail to the following
addresses, or such other addresses as either party shall have notified the other
party:
If to the Company: Vascular Solutions, Inc.
2495 Xenium Lane North
Minneapolis, Minnesota 55441
Attention: Chief Executive Officer
Initials:
Company_______
Employee______
5
<PAGE>
If to the Employee:
_________________________
_________________________
IN WITNESS WHEREOF, the Company and the Employee have executed this
Agreement as of the date first above written.
VASCULAR SOLUTIONS, INC.
By:__________________________________________
Its:______________________________________
EMPLOYEE
_____________________________________________
Initials:
Company_______
Employee______
6
<PAGE>
EXHIBIT 10.12
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT ("Agreement") is made this ____ day of
__________________, ______, (the "Effective Date") by and between Vascular
Solutions, Inc. a Minnesota corporation with its principal place of business
located at 2495 Xenium Lane North, Minneapolis, Minnesota 55441 USA (hereinafter
referred to as "COMPANY") and _______________________________________-with its
principal place of business located at _________________________________________
_____________________(hereinafter referred to as "DISTRIBUTOR") in consideration
of the mutual covenants and conditions hereinafter stated.
1. DEFINITION OF TERMS
1.1 "Party" or "Parties":
"Party" or "Parties" shall mean COMPANY or DISTRIBUTOR, individually and
collectively.
1.2 "Products":
"Products" shall mean COMPANY's vascular sealing device incorporating a balloon
catheter and biological procoagulant combination as listed in Schedule 1, as
amended from time to time together with all line extensions, modifications and
improvements thereto.
1.3 "Territory":
"Territory" is the entire country of _____________________.
2. APPOINTMENT OF DISTRIBUTOR
2.1 APPOINTMENT AS DISTRIBUTOR.
COMPANY hereby appoints DISTRIBUTOR as its DISTRIBUTOR of the Products for the
Territory, and DISTRIBUTOR hereby accepts such appointment on the terms and
conditions set forth in this Agreement. DISTRIBUTOR shall not seek customers or
establish or maintain a branch or distribution warehouse for the Products
outside the Territory.
2.2 RESALE OF PRODUCTS BY DISTRIBUTOR.
All sales of the Products by DISTRIBUTOR will be in its own name and for its own
account, and DISTRIBUTOR shall have no authority to represent COMPANY in the
Territory or elsewhere as agent, nor to bind COMPANY by any contract,
representation, act or deed. DISTRIBUTOR shall not appoint subdistributors or
outside agents to make sales of the Products in the Territory or outside of the
Territory
================================================================================
Distribution Agreement 7/13/99
Vascular Solutions, Inc. Initial ________ page-1
Initial ________
<PAGE>
without the prior written approval of COMPANY. Any such appointment
of a subdistributor or agent shall not relieve DISTRIBUTOR from any and all
obligations hereunder.
3. TERM OF DISTRIBUTORSHIP.
This Agreement and the rights conferred on DISTRIBUTOR hereunder shall come into
effect on the Effective Date mentioned in the preamble hereto and shall remain
in effect until ____________________________unless earlier terminated in
accordance with provisions of this Agreement. This Agreement may not be renewed
under any circumstances.
4. REPRESENTATIONS AND DUTIES OF DISTRIBUTOR.
4.1 Representations and Warranties of DISTRIBUTOR.
DISTRIBUTOR represents and warrants that neither DISTRIBUTOR nor any of its
employees, affiliates or owners are subject to a non-competition agreement or
any other agreement that would prevent DISTRIBUTOR from selling the Products in
the Territory. DISTRIBUTOR further represents and warrants to COMPANY that the
execution and performance of this Agreement by DISTRIBUTOR will not violate any
law or other agreement to which DISTRIBUTOR or any of its employees, affiliates
or owners are subject.
4.2 Duties of DISTRIBUTOR.
DISTRIBUTOR represents that it has adequate facilities, financing, and personnel
to perform, at its own expense, its obligations under this Agreement.
DISTRIBUTOR covenants to do each of the following:
(i) to use commercially reasonable efforts to promote and sell the
Products in the Territory and to maintain and enhance the goodwill of the
Products;
(ii) to comply with the United States Foreign Corrupt Practices Act, and,
specifically, to not directly or indirectly offer anything of value to a
government official in return for obtaining or retaining business relating to
the Products; and
(iii) not to solicit the sale of, promote the sale of, sell, exhibit for
sale, distribute or manufacture in the Territory any product directly
competitive with the Products.
5. DUTIES OF COMPANY.
5.1 Duties of COMPANY.
COMPANY covenants and agrees to do each of the following:
(i) to provide DISTRIBUTOR with materials necessary to obtain and
maintain import approvals and health registrations required to import and sell
the
================================================================================
Distribution Agreement 7/13/99
Vascular Solutions, Inc. Initial ________ page-2
Initial ________
<PAGE>
Products within the Territory by furnishing to DISTRIBUTOR, at COMPANY's cost,
such technical descriptions, specifications, data, drawings, information,
service manuals, quality control audits, facility inspection reports issued by
governmental regulators or international quality control auditors, and so forth
regarding the Products, in the English language, as DISTRIBUTOR may reasonably
request.
(iii) to promptly notify DISTRIBUTOR of any actions taken with respect to
COMPANY or the Products by regulators in other jurisdictions, including (i) any
facility inspection resulting in any notice of infraction, warning or other
action regarding the Products, (ii) voluntary or mandatory recalls or withdrawal
of the Products, (iii) administrative or court proceedings regarding the
Products, and (iv) any material changes of the method of sterilization,
packaging, materials, design or other specifications of the Products. COMPANY
will promptly provide DISTRIBUTOR with copies of any correspondence with
regulators regarding any of the foregoing.
(iv) to inform DISTRIBUTOR, from time to time, of the technical and other
developments regarding the Products as these may occur.
(v) to furnish to DISTRIBUTOR at COMPANY's cost, a reasonable quantity of
such advertising and other promotional literature for the Products.
(vi) to provide reasonable Product training, at COMPANY'S expense, to
DISTRIBUTOR at such times and places as the Parties mutually agree. Each Party
shall bear its own employee's expenses for attending such training, unless
mutually agreed otherwise; and
(vii) to provide DISTRIBUTOR samples of the Products upon terms and
conditions as mutually agreed to.
6. EXPENSES
6.1 DISTRIBUTOR'S Expenses.
DISTRIBUTOR shall be responsible for all expenses incurred by it in connection
with the implementation of this Agreement, including without limitation
salaries, office and travel expenses of its employees, advertising and trade
shows within the Territory and any and all taxes which may be imposed on
DISTRIBUTOR within the Territory. COMPANY shall bear only such of these
expenses as to which it has, by written agreement, given advance approval.
6.2 COMPANY'S Expenses.
COMPANY shall be responsible for payment of all expenses incurred by it
including any taxes imposed on it for the manufacture of the Products and shall
also pay those expenses incurred in connection with the implementation of this
Agreement for which it has given prior written approval.
================================================================================
Distribution Agreement 7/13/99
Vascular Solutions, Inc. Initial ________ page-3
Initial ________
<PAGE>
7. RECORDS and REPORTS
7.1 Records and Reports.
DISTRIBUTOR shall maintain complete and accurate records of aggregate purchases
and resales of the Products and all other information received by or relating to
the Products and shall permit, or cause to permit, COMPANY or its agents at any
time during regular business hours to examine such records for purposes related
to the performance of the Agreement. The duty of DISTRIBUTOR to preserve and the
right of the COMPANY to examine all such records shall not cease until
termination of this Agreement and shall survive until all moneys have been paid,
all inventory sold or returned and no disputes exist.
8. SALES OF PRODUCT TO DISTRIBUTOR
8.1 Purchase Prices and Terms.
COMPANY shall sell the Products to DISTRIBUTOR at the prices to be determined in
accordance with Schedule 1. Payments shall be due sixty (60) days after date of
placement with the carrier for delivery to DISTRIBUTOR. If DISTRIBUTOR is not
current on its payments or has exceeded its credit limit, COMPANY may, in its
sole discretion require prepayment or letter of credit prior to any additional
shipments of Product. Payment shall be made by wire transfer in U.S. funds to
an account designated by COMPANY. COMPANY reserves the right to revise its
prices upwards or downwards at any time in its sole discretion, but the prices
stated on an accepted order shall not be revised even though the prices are
amended prior to shipment. COMPANY shall provide DISTRIBUTOR with 60 days prior
notice of any price change.
8.2 Risk of Loss, Deliveries.
DISTRIBUTOR shall purchase the Products from COMPANY F.O.B. place of manufacture
with risk of loss passing to DISTRIBUTOR upon delivery of the Products to the
carrier at the F.O.B. point. DISTRIBUTOR shall be responsible for taxes and
import duties imposed in the Territory and for shipping fees and any transit
insurance selected by DISTRIBUTOR. COMPANY shall deliver accepted orders within
the acknowledged time of shipment stated in COMPANY's acceptance of the order.
Furthermore, COMPANY shall package the Products suitable for export.
8.3 Acceptance and Cancellation of Orders.
All orders for Products by DISTRIBUTOR shall be initiated by DISTRIBUTOR's
issuance of a written purchase order sent via Facsimile or U.S. mail. Such
orders shall state unit quantities, unit descriptions, requested delivery dates,
and shipping instructions. The acceptance by COMPANY of an order shall be
indicated by written acknowledgment thereof by COMPANY within five (5) business
days following receipt of each order. This Agreement shall control orders of
Products by DISTRIBUTOR. All different or additional terms or conditions in
DISTRIBUTOR's purchase order, acknowledgment or other similar document shall not
add to or modify
================================================================================
Distribution Agreement 7/13/99
Vascular Solutions, Inc. Initial ________ page-4
Initial ________
<PAGE>
terms of this Agreement. COMPANY shall have the right to cancel any order placed
by DISTRIBUTOR or to refuse or delay the shipment thereof if DISTRIBUTOR shall
fail to meet any payments as provided herein or otherwise agreed to by the
COMPANY. DISTRIBUTOR may cancel an order which COMPANY has accepted only by
providing written notice to COMPANY prior to the shipment of any part thereof
and by paying such reasonable cancellation charge requested by COMPANY.
8.4 Product Specifications.
COMPANY shall be obligated to deliver Products of the specifications and quality
standards in effect therefore and a minimum shelf life of six months at the time
COMPANY accepts an order. COMPANY reserves the right to change the design or
specifications of any of the Products or part thereof at any time and with prior
written notice to the DISTRIBUTOR. COMPANY also reserves the right to
discontinue the manufacture and distribution of any of the Products at any time
in COMPANY'S sole discretion. In the event COMPANY discontinues the manufacture
or distribution of any Product or in the event of a Product specification
change, DISTRIBUTOR's minimum purchase obligations under Section 8.6 herein
shall be amended and adjusted accordingly.
8.5 Taxes.
DISTRIBUTOR shall be responsible for all taxes levied and/or imposed by the
government or taxing authority in the Territory. COMPANY shall be responsible
for all taxes levied and/or imposed by the United States government or any
taxing authority in the United States.
8.6 Minimum Purchases.
DISTRIBUTOR agrees to place orders for the Products in the amount as described
in Schedule 2 attached hereto and thereafter to order at least the quantity of
Products as also set forth in Schedule 2, (Minimum Purchases). In the event that
DISTRIBUTOR fails to meet the Minimum Purchase amounts agreed by the Parties as
shown in Schedule 2 hereto for any calendar quarter during the term of this
Agreement, the Parties shall meet at a mutually agreed upon place and time to
discuss remedying this situation. In the event a remedy is not available or
agreed upon by the COMPANY, then the COMPANY may, at its sole discretion
immediately and without further notice terminate this Agreement. Failure of
DISTRIBUTOR to meet the Minimum Purchase amounts due to supply limitations of
COMPANY in any period shall not be deemed to constitute a violation of this
Section.
8.7 Product Inspection and Acceptance.
Upon receipt, DISTRIBUTOR shall have the right to inspect each order to
determine that it conforms to the quantity of Products listed on the invoice.
DISTRIBUTOR is deemed to have accepted as listed on the invoice all Products
which are not affirmatively rejected by written notice to COMPANY within five
(5) calendar days of physical receipt of the Products by DISTRIBUTOR.
================================================================================
Distribution Agreement 7/13/99
Vascular Solutions, Inc. Initial ________ page-5
Initial ________
<PAGE>
9. WARRANTY POLICY
9.1 Warranties.
COMPANY warrants that the Products sold to DISTRIBUTOR are free from any defects
in material, design, workmanship, manufacture, treatment, packing, instruction
manuals, labeling, warning or otherwise and shall at all times comply with the
stated Product specifications. COMPANY'S SOLE OBLIGATION UNDER THE FOREGOING
WARRANTY SHALL BE, AT COMPANY'S SOLE ELECTION, TO EITHER REPLACE THE RELEVANT
PRODUCT OR REFUND DISTRIBUTOR'S PURCHASE PRICE FOR SUCH PRODUCT. Such
obligation shall be subject to COMPANY being granted the reasonable opportunity
to inspect, at COMPANY'S expense, the defective Product at the location of its
use or storage and, upon request in accordance with the COMPANY'S instruction,
return of the Product to COMPANY at COMPANY'S cost. No return of any Product
will occur until the COMPANY has issued a Return Authorization Number together
with instructions for packaging and delivery. Any such replacement of PRODUCTS
may be made by substitution of any similar Product meeting quality
specifications and payment by the COMPANY of all freight, handling and duty
charges incident thereto. NOTWITHSTANDING THE FOREGOING, COMPANY MAKES NO
WARRANTY, NOR SHALL IT HAVE ANY OTHER OBLIGATION TO DISTRIBUTOR WITH RESPECT TO
ANY PRODUCT SOLD HEREUNDER, IF SUCH PRODUCT HAS EXPIRED ACCORDING TO PRODUCT
LABELS OR HAS NOT BEEN USED, HANDLED OR STORED IN ACCORDANCE WITH COMPANY
GUIDELINES AS COMMUNICATED BY COMPANY.
EXCEPT AS EXPRESSLY PROVIDED ABOVE AND IN SECTION 11.1 BELOW, COMPANY GRANTS
DISTRIBUTOR NO OTHER WARRANTIES OR CONDITIONS, EXPRESS OR IMPLIED, BY STATUTE,
IN THIS AGREEMENT OR IN ANY COMMUNICATION BY COMPANY, REGARDING THE PRODUCTS,
THEIR FITNESS FOR ANY PARTICULAR PURPOSE, THEIR QUALITY, THEIR MERCHANTABILITY
OR OTHERWISE.
10. PATENTS, TRADEMARKS, COPYRIGHTS;
PROPRIETARY AND CONFIDENTIAL INFORMATION
10.1 Trademark License.
COMPANY hereby grants to DISTRIBUTOR a non-exclusive license to use the
trademarks, trade names and copyrights of COMPANY as communicated to DISTRIBUTOR
from time to time (hereinafter referred to as the "Trademarks") in connection
with its sales, promotion, and distribution of the Products under this
Agreement. DISTRIBUTOR has no permission to and will not adopt, use or register
as trademark, trade name, business name, or corporate name or part thereof,
whether during the term of this Agreement or after its termination, any word, or
symbol the same as or similar to any Trademarks. Furthermore, upon request,
DISTRIBUTOR shall discontinue the use of any and all Trademarks utilized and
registered by
================================================================================
Distribution Agreement 7/13/99
Vascular Solutions, Inc. Initial ________ page-6
Initial ________
<PAGE>
DISTRIBUTOR in connection with the Products prior to or after the execution of
this Agreement.
10.2 Duty to Preserve Confidentiality.
Without the prior written consent of the supplying Party, no receiving Party,
its officers, agents, or employees shall, in any manner whatever for use in any
way for its own account or for any third party disclose or communicate to a
third party, any technical, engineering, manufacturing, business, financial, or
other information and know how (hereinafter referred to as the "Confidential
Information") generated by any Party hereto and acquired directly or indirectly
by any other Party. Nothing in this section 10.2 shall prevent disclosure or
use of information (i) already known to any Party; (ii) which is or becomes
public knowledge without the fault of any Party; (iii) which is properly
acquired by any Party from a third party having the legal right to such
information; or (iv) is required to be disclosed by a proper governmental or
judicial authority. No receiving Party shall, in any manner whatever for use in
any way for its own account or for the account of any third party, disclose or
communicate to a third party, any Confidential Information for any purpose
except for the purpose of for which such Confidential Information was supplied,
and such receiving Party will take every reasonable precaution to protect the
confidentiality of such information. Each Party acknowledges that any breach of
any obligation under this section 10.2 is likely to cause or threaten
irreparable harm to the other Party, and accordingly, each Party agrees that in
such event the non-breaching party shall be entitled to equitable relief to
protect its interests, including, but not limited to, preliminary and permanent
injunctive relief.
10.3 Proprietary.
DISTRIBUTOR acknowledges that the Products are proprietary to COMPANY and may
not be copied and that all rights of design and invention are reserved to
COMPANY.
11. INDEMNITIES.
11.1 Indemnity.
Each Party agrees to indemnify, defend and hold the other Party and its
officers, directors, employees, agents, successors and assigns harmless from and
against any and all claims made by any third party arising out of the
manufacture, processing, marketing, distribution and sale of the Products, where
and to the extent such damages are alleged to have been caused by the fault of
such indemnifying Party or its officers, directors, employees, agents,
successors and assigns. The indemnifying party under this article 11.1 shall be
relieved of its obligation unless the indemnified party: (i) gives the
indemnifying party written notice of such claim as soon as reasonably
practicable; (ii) cooperates in the defense of such claim at the expense of the
indemnifying party, and (iii) gives the indemnifying party the sole control of
defense and/or settlement of such claim. No settlement shall take place without
the consent of the indemnified Party.
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<PAGE>
COMPANY shall defend, hold harmless and indemnify DISTRIBUTOR and its officers,
directors, employees, agents, successors and assigns against any damages,
disbursements, expense, liability, penalty or loss of any kind or nature
(including reasonable attorneys' fees) incurred in connection with any suit,
claim, or proceeding brought against COMPANY and/or DISTRIBUTOR for an alleged
patent or trademark infringement or for bodily injuries or death to any person
caused by a defect in a Product or its design or manufacture sold hereunder, and
COMPANY shall pay any such costs and damages finally awarded against DISTRIBUTOR
in any such suit, claim or proceeding (including judgments, court costs and
reasonable attorneys' fees), provided that: (i) Such Product has not been
modified or tampered with by DISTRIBUTOR; (ii) such Product has not been misused
as a result of DISTRIBUTOR'S unauthorized representation about the Product;
(iii) DISTRIBUTOR gives COMPANY reasonable written notice of any such claim as
soon as is reasonably practicable; and (iv) COMPANY has the sole control of the
defense and/or settlement of such claim; however, COMPANY agrees that it will
not control or settle the same without the prior consultation with DISTRIBUTOR.
12. TERMINATION
12.1 Termination for Cause.
COMPANY or DISTRIBUTOR may terminate this AGREEMENT, immediately upon the giving
of written notice to the defaulting Party, in the event that any of the
following events occur:
(i) COMPANY or DISTRIBUTOR becomes insolvent or is unable to pay its
debts as they mature or ceases to pay in the ordinary course of business its
debts as they mature; or either Party makes an assignment for the benefit of its
creditors; or a receiver, liquidator, custodian, trustee or the like is
appointed for the Party or its property; or either Party commences a voluntary
case under any applicable bankruptcy or insolvency law or consents to the entry
of an order for relief in any involuntary case, or with jurisdiction enters a
decree for relief in any involuntary case involving either party.
(ii) COMPANY or DISTRIBUTOR defaults in the performance of any obligation
under this Agreement and fails to cure such default within thirty (30) days
after written notice thereof from the non-defaulting Party.
(iii) _____________________________ shall no longer be regularly involved
in the day to day management and sales activities of DISTRIBUTOR for any reason.
(iv) COMPANY is merged or purchased or otherwise experiences a change in
control of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A promulgated under the Securities Exchange Act of 1934, as
amended (whether or not COMPANY is then subject to such reporting obligatioins)
and the
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<PAGE>
terminating party gives the other party prior written notice not less than 12
months in advance of the date of termination.
(v) Pursuant to Section 8.6 hereof.
12.2 Obligations upon Termination.
Upon the termination of this Agreement for cause and after the allowance for any
applicable cure periods, DISTRIBUTOR and COMPANY promises to do each of the
following immediately:
(i) DISTRIBUTOR shall pay to COMPANY all amounts which are payable by
DISTRIBUTOR to COMPANY under this Agreement less any such amounts payable on the
grounds of a dispute arising out of this Agreement against any claim or damages
sought by DISTRIBUTOR;
(ii) Each Party shall return to the other Party all of the Confidential
Information in the possession or under the control of the respective Party
holding the Confidential Information, together with a statement signed by an
officer or duly empowered representative of the Party to the effect that all of
the Confidential Information has been returned to the Party;
(iii) DISTRIBUTOR shall cease to use any of the Trademarks and to return
to COMPANY all materials supplied to DISTRIBUTOR by COMPANY which contain any of
the Trademarks. Furthermore, upon receipt of written notice from COMPANY,
DISTRIBUTOR shall dispose of all packaging, labels, brochures, lists, and other
similar materials containing any of the Trademarks in accordance with COMPANY'S
instructions. COMPANY shall reimburse DISTRIBUTOR for the direct costs
(exclusive of overhead) of such material and their disposal;
(iv) DISTRIBUTOR shall return to COMPANY all of the Products in
DISTRIBUTOR'S possession or under DISTRIBUTOR'S control and unsold on the date
of termination. COMPANY shall pay DISTRIBUTOR for the Products so returned at a
price equal to DISTRIBUTOR'S direct costs therefore (exclusive of overhead) for
each Product which is returned unopened in its original packaging with in excess
of six months sterile shelf life remaining and in the same condition as when
received by DISTRIBUTOR. Any product returned within its last six months of
sterile shelf life shall be reimbursed at 50% of such amount. DISTRIBUTOR shall
furnish to COMPANY promptly after the date of termination an inventory of the
Products which DISTRIBUTOR will return to COMPANY. COMPANY shall pay DISTRIBUTOR
within thirty (30) days of shipment of returned Product by DISTRIBUTOR by wire
transfer to an account designated by DISTRIBUTOR at that time
(v) DISTRIBUTOR shall immediately assist in the process to transfer any
necessary import licenses to COMPANY or its designee.
Upon termination of this Agreement in accordance with its terms (whether at the
end of its scheduled term or earlier), neither party shall be liable to the
other for any damages or amounts whatsoever sustained or arising out of, or
alleged to have arisen
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out of, such termination. DISTRIBUTOR HEREBY EXPRESSLY IRREVOCABLE WAIVES ANY
RIGHTS AND CLAIMS TO ANY COMPENSATION (FOR GOODWILL OR OTHERWISE) OR INDEMNITY
RESULTING FROM THE TERMINATION OF THIS AGREEMENT OR ITS STATUS AS A DISTRIBUTOR,
WITH OR WITHOUT CAUSE, UNDER ANY APPLICABLE LAW.
13. GENERAL PROVISIONS
13.1 Force Majeure.
Neither Party to this Agreement is responsible to the other Party for
nonperformance or delay in performance of the terms and conditions herein due to
any force majeure, including without limitation acts of God, acts of government,
wars, civil disturbances, strikes, and other labor unrest, accidents in
transportation or other cause beyond the control of its Parties. The Party
whose performance is prevented under this paragraph shall immediately inform the
other Party of the state of affairs.
13.2 Relationship Between Parties.
DISTRIBUTOR'S relationship to the COMPANY shall be that of independent
contractor. Nothing contained in this Agreement shall make DISTRIBUTOR a
partner, joint venturer, employee, or agent of COMPANY for any purpose
whatsoever. DISTRIBUTOR shall not sign any contract in the name of the COMPANY,
shall not purport to bind COMPANY in any way to any obligation, and shall not
hold itself out or purport to act as COMPANY'S legal partner or legally
empowered agent or representative for any purpose whatsoever. In particular,
but without limiting the generality of the foregoing, DISTRIBUTOR shall not
purport to give, or assume on behalf of COMPANY, any other or different
guarantee, warranty, obligation or liability whatsoever, including without
limitation liability for loss or damage to person or property resulting from
default or defect in design, workmanship or material or goods of any kind,
other than stipulated in such warranties as COMPANY may specify from time to
time. Furthermore, DISTRIBUTOR shall not give such other or different
warranties or guarantees on its own behalf unless DISTRIBUTOR obtains the prior
written consent of COMPANY on each such occasion.
13.3 Successors, Nonassignability.
This Agreement and each and every covenant, term and condition hereof is binding
upon and inures to the benefit of the Parties hereto and their respective
successors and assigns, but neither this Agreement nor any rights hereunder may
be assigned by DISTRIBUTOR directly, indirectly, voluntarily or by operation of
law, without first receiving the prior written consent of COMPANY. In the event
of a sale or transfer of all or substantially all of the stock or Product device
assets of COMPANY, COMPANY shall assign its rights and obligations under this
Agreement to the purchaser of such stock or assets
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<PAGE>
13.4 Survival of Obligations.
Both Parties agree that the obligations described in Articles 9, 10, 11, 12 and
13 of this Agreement shall survive any termination or expiration of this
Agreement.
13.5 Remedies.
The rights and remedies of each Party under this Agreement are not exclusive but
shall be in addition to all of the rights and remedies to which that Party is
entitled against the other Party under the law governing this Agreement.
13.6 Notices.
Unless otherwise specified, any notice required by this Agreement shall be made
in a writing sent by prepaid certified mail, overnight courier or any means of
electronic communications with confirmation copy sent by certified mail to the
addresses first listed above, until notice of another address shall be given in
the manner provided herein. All notices, consents or requests shall be
effective from the date of mailing if sent by facsimile, seven days if sent by
certified mail and when received if sent by international courier.
13.7 Disputes.
In the event there arises a dispute between the Parties as to the performance or
interpretation of any of the provisions of this Agreement, or as to matters
related to but not covered by this Agreement, the Parties shall first attempt to
find a mutually agreeable solution by consultation in good faith. If the matter
has not been resolved in within thirty (30) days of their first meeting to
resolve a dispute, then any such dispute shall be determined finally by
arbitration in accordance with the International Arbitration Rules of the
American Arbitration Association. The place of arbitration shall be Minneapolis,
Minnesota USA and the language of the arbitration shall be English. The arbitral
tribunal shall consist of a single arbitrator. If the Parties shall not have
agreed upon an arbitrator within thirty (30) days of the notice of arbitration,
then the Administrator of the American Arbitration Association shall appoint
one. The unsuccessful Party in an arbitration shall pay and discharge all
reasonable costs and expenses (including reasonable attorneys' fees) which are
incurred by the other Party in enforcing this Agreement.
Judgment upon the award of the arbitrator may be entered in any court having
jurisdiction thereof. The Parties acknowledge that this Agreement and any award
rendered pursuant to it shall be governed by the 1958 United Nations Convention
on the Recognition and Enforcement of Foreign Arbitral Award.
Pending the submission to arbitrators and thereafter until the single arbitrator
renders the award, the Parties shall, except in the event of termination,
continue to perform all their obligations under this Agreement without prejudice
to a final adjustment in accordance with the award.
Nothing herein shall prevent any party from seeking injunctive relief from any
court of competent jurisdiction, in order to preserve assets, prevent
irreparable harm or as otherwise appropriate.
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<PAGE>
13.8 Unenforceable Terms.
In the event any term or provision of this Agreement shall for any reason be
invalid, illegal or unenforceable in any respect, it shall be deemed separate
and shall not affect any other provisions hereof or the validity hereof. The
Parties agree to re-negotiate in good faith any term or provision held invalid
and to be bound by the mutually agreed substitute term or provision.
13.9 Waivers.
No waiver of any of the terms and conditions of this Agreement shall be
effectual for any purpose, unless expressed in a writing and signed by the Party
hereto giving the same, and any such waiver shall be effective only in the
specific instance and for the purpose given.
13.10 Governing Law.
This Agreement shall be governed by and construed in accordance with substantive
law of the State of Minnesota, excluding that body of law applicable to choice
of law. The headings to the paragraphs of this Agreement are for the
convenience of reference only, do not form a part of this Agreement, and shall
not in any way affect the interpretation hereof.
13.11 Entire Agreement, Modification.
This Agreement constitutes the entire and final agreement between the Parties on
the subject matter hereof and supersedes any and all prior oral or written
agreements or discussions on the subject matter hereof. This Agreement may not
be modified in any respect except in a writing which states the modification and
is signed by both Parties hereto.
13.12 Further Assurances.
The parties agree to execute any and all such further agreements, instruments or
documents, and to take any and all such further action as may be necessary or
desirable to carry out the provisions hereof and to effectuate the purposes of
this Agreement.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been prepared in two (2) original
copies and the Parties and/or their duly authorized representatives have placed
their signatures here below.
VASCULAR SOLUTIONS, INC.
By: _________________________________
Name: Howard C. Root
Title: Chief Executive Officer
______________________________________
By: _________________________________
Name:
Title:
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<PAGE>
Schedule 1.
-----------
Products and Prices
DESCRIPTION: The Vascular Solutions Duett sealing device utilizing a balloon
catheter and a biological procoagulant to achieve hemostasis following
percutaneous catheterization procedures by cardiologists and radiologists,
together with all line extensions, modifications and improvements thereto, as
amended from time to time.
Prices: Shall be based on COMPANY'S Price List in effect for the Territory on
the date on which COMPANY accepts an order, less any discounts or special
pricing programs established and offered by COMPANY from time to time.
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<PAGE>
Schedule 2.
-----------
Minimum Annual Purchases
The following sales from the COMPANY to the DISTRIBUTOR expressed in units
represent the minimum purchase amounts that have been mutually established that
reflect an acceptable performance by DISTRIBUTOR
YEAR QUANTITY
---- --------
From the date of this Agreement to December 31, 1999:
Year 2 (January 1, 2000 through December 31, 2000):
Year 3 (January 1, 2001 through December 31, 2001):
DISTRIBUTOR shall purchase these minimum purchase amounts in roughly
equivalent percentages throughout the year. If DISTRIBUTOR has not purchased
20%, 45% and 65% of the annual minimum purchase amounts by March 31, June 30 and
September 30, respectively, of the year starting in 2000, DISTRIBUTOR will be in
violation of the minimum purchase requirements established in section 8.6 of the
Agreement and COMPANY may take all actions specified thereunder.
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<PAGE>
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the reference to our firm under the captions "Selected Financial
Data" and "Experts" and to the use of our report dated January 20, 1999 in the
Registration Statement (Form S-1) and related Prospectus of Vascular Solutions,
Inc.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
July 28, 1999
<PAGE>
Exhibit 23.3
[Patterson & Keough PA Letterhead]
The Board of Directors
Vascular Solutions, Inc.:
2495 Xenium Lane
Plymouth, MN 55441
Board of Directors:
We hereby consent to the reference of our firm under the heading "Experts"
in this prospectus constituting part of the Registration Statement on Form S-1
relating to the issuance and sale of common stock by Vascular Solutions, Inc.
Very truly yours,
/s/ Steven J. Keough
Steven J. Keough
Dated: July 29, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF VASCULAR SOLUTIONS, INC. FOR THE SIX MONTHS ENDED JUNE
30, 1998 and 1999 AND FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998 DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1997 JAN-01-1998 JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-01-1997 DEC-31-1998 JUN-30-1998 JUN-30-1999
<CASH> 7,299,130 9,897,053 0 9,201,407
<SECURITIES> 0 0 0 0
<RECEIVABLES> 0 125,000 0 283,000
<ALLOWANCES> 0 0 0 0
<INVENTORY> 59,710 318,811 0 475,546
<CURRENT-ASSETS> 7,373,950 10,394,038 0 10,024,783
<PP&E> 197,758 779,681 0 929,961
<DEPRECIATION> (12,832) (167,104) 0 (280,575)
<TOTAL-ASSETS> 7,558,876 11,006,615 0 10,674,169
<CURRENT-LIABILITIES> 343,361 460,839 0 344,064
<BONDS> 0 0 0 0
0 0 0 0
20,000 37,778 0 37,778
<COMMON> 35,533 36,996 0 43,131
<OTHER-SE> 7,159,982 10,471,002 0 10,249,196
<TOTAL-LIABILITY-AND-EQUITY> 7,558,876 11,006,615 0 10,674,169
<SALES> 0 494,150 132,750 514,500
<TOTAL-REVENUES> 0 494,150 132,750 514,500
<CGS> 0 442,565 126,335 442,337
<TOTAL-COSTS> 1,724,364 5,466,648 2,212,083 3,788,170
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 0 0 0 0
<INCOME-PRETAX> (1,651,818) (5,141,186) (2,044,573) (3,532,971)
<INCOME-TAX> 0 0 0 0
<INCOME-CONTINUING> (1,651,818) (5,141,186) (2,044,573) (3,532,971)
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> (1,651,818) (5,141,186) (2,044,573) (3,532,971)
<EPS-BASIC> (1) (1) 0 0
<EPS-DILUTED> (1) (1) 0 0
</TABLE>
